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TPG wants NBN tax on all connections along with Google and Facebook

The telco believes the base for rural NBN tax is too low, and everyone should pay, including over-the-top service providers.
Written by Chris Duckett, Contributor

Australian telecommunications provider TPG has hit out at the proposed AU$7 monthly charge to fixed-line broadband customers that would subsidise NBN's fixed wireless and satellite networks, labelling the move as anti-competitive and failing to take into account competition from wireless and mobile operators.

In a submission to the Senate Standing Committee on Environment and Communications investigating the Regional Broadband Scheme (RBS) dubbed the NBN tax, TPG said the draft legislation was a direct attack on fixed networks that compete with NBN.

"Though it is possibly an unintended consequence, it is clear that the RBS Charge will economically damage the small number of carriers that the DOCA [Department of Communications] has defined as competing with NBN Co in broadband markets," the company said.

According to TPG, the government should fund the unprofitable rural areas covered by NBN from general taxation, and failing that, a broad levy imposed across much of the industry that includes wireless and mobile operations. TPG's reasoning is that low-data customers may forgo a fixed connection and switch to mobile internet if the monthly charge was imposed.

"The cost will be passed on to consumers and risks consumers shifting their buying preference to other technologies such as fixed wireless or mobile that become comparatively cheaper because they are not subject to the tax," it said.

"For the vast majority of consumers low-speed broadband is easily sufficient for their requirements and they see no benefit in paying more for higher speeds that they don't need. For example, the introduction of Netflix resulted in large increases in data usage and it remains one of the largest sources of data consumption despite only requiring a transmission speed of 3Mbps."

The telco said over-the-top (OTT) services such as Microsoft, Google, and Facebook should also stump up and pay the charge, since they will benefit from the NBN without having to pay for it.

"We consider that this is fair as OTT players derive more financial benefit from NBN Co's services in regional areas than the carriers operating competing networks in other geographic areas, who do not actually derive any benefit from the NBN," TPG said. "The OTT players' contribution could be collected by a specific levy, such as the [Telecommunications Industry Levy], or via company tax or the Diverted Profits Tax with an associated contribution from general tax revenue subsequently being allocated to the NBN fund."

In its submission, Opticomm said the AU$7 charge would make up over 25 percent of the wholesale cost for broadband, and is over 100 times the contribution for the Universal Service Obligation.

"The new tax will be larger than our staff costs, larger than our backhaul costs, and larger than our rent costs," it said. "This will result in significant price hikes in retail broadband, particularly for the cheaper, lower speed fixed line broadband services commonly favoured by budget conscious families."

To back up its argument for a wider base, Opticomm cited NBN previously seeking to extend the charge to mobile users.

In this latest round of submissions, NBN wanted the charge extended to business users.

"It is illogical that a residential connection in a low cost area will pay the RBS but a business connection in the same low cost area will not," NBN said.

"Failure to include business services will mean that the contributions of residential services would be required to fund the losses NBN incurs to serve regional and rural Australia. This is not desirable, efficient, or sustainable relative to the outcomes of the proposed arrangements."

First floated in December, the RBS is needed to cover the net cost of AU$9.8 billion to NBN over the next 30 years due to running non-profitable fixed wireless and satellite services, while still needing to compete in some metropolitan areas, the Department of Communications said at the time.

The initial AU$7.10 per month charge will raise AU$370 million from NBN and AU$40 million from other broadband providers.

"The proposed funding arrangement does not represent a new cost for the industry -- or consumers -- as a whole, although the distribution of the cost would now extend to fixed line networks competing with the NBN," the department said.

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