NBN Co needs to slash wholesale prices: Telstra

Telstra is pushing for big cuts to NBN Co’s wholesale pricing and the removal of data usage charges.

As part of Telstra’s proposed overhaul the telco wants NBN Co to create a single pricing structure that offers a 50 megabits per second (Mbps) and a 100 Mbps service at a significantly cheaper price point.

Telstra is calling for dramatic cuts to what the National Broadband Network charges internet service providers, warning superficial changes to its pricing model won’t save the $50 billion project.

In addition to the price cuts, Telstra wants the NBN to offer a $10 a month voice only service for customers wishing only to operate landlines and a discounted service for low income and vulnerable Australians.

Telstra has not detailed exact numbers for the low-income plans but consumer lobby group ACCAN recently suggested a wholesale price of $20 a month for internet service providers with vulnerable and low-income Australians as customers.

Telstra has also asked the NBN to abolish its CVC charge — which is essentially a usage charge which rises with the amount of data telcos have to offer to their customers.

As part of Telstra’s proposed overhaul the telco wants NBN Co to create a single pricing structure that offers a 50 megabits per second (Mbps) and a 100 Mbps service at a significantly cheaper price point.

Telcos currently pay NBN Co $45 and $65 respectively for a 50mbps and 100mbps service bundle. Both bundles have some CVC capacity attached to them, 2Mbps per customer for the 50 service and 3Mbps for the 100 service.

Number of premises that can connect to NBN

Telstra is calling for an all-inclusive wholesale price of $35 for a 50 plan and $50 for a 100 plan.

NBN Co maintains that it’s looking to give telcos better options as part of its latest pricing review.

“This process is about generating the best possible industry outcomes for customers.”

“The last consultation process we ran with industry in 2017 generated a number of significant and important customer improvements, including the wholesale pricing bundle discounts,” a NBN Co spokesman told The Australian.

Telstra peers, Vodafone, Optus and Vocus, are also calling for the CVC charge that they are required to pay to offload traffic from the NBN to their respective networks to be abolished.

NBN Co had initially mitigated the CVC issue through discounting, which saw telcos receive CVC at half price. While the discounts prompted telcos to move customers to higher speed plans, Telstra says they offered temporary reprieve given that consumer usage of data continued to rise.

“The introduction of NBN bundles were at best a temporary solution to addressing the cost risks faced by RSPs from CVC being used as a pricing element.”

“Ongoing growth in data use means that RSPs will increasingly incur wholesale coverage charges on nbn bundles.

According to Telstra, the CVC charge looks set to make retail NBN plans unaffordable within the next three years.

“In the case of the bundles, growth in CVC coverage will increase the effective price per customer between $5 and $10.”

“By the end of the NBN migration period, Telstra expects the effective price per customer for 50mbps bundles to be between $52 and $55, and the effective per customer price for 100mbps bundles to reach $73 to $75,” it said.

Telstra boss Andrew Penn said that the fundamental overhaul of the pricing model was critical to keeping the NBN alive.

“An industry where wholesale prices result in zero margins for the downstream retail providers is unsustainable.”

“It will result in higher retail prices, reduced competition and retail providers looking for ways to bypass the NBN altogether — which is bad for customers and bad for the industry.”

“This ultimately means fewer customers will connect to the NBN and an increasing number of customers will switch away — undermining the potential social and economic benefits the investment in the network was designed to deliver,” he said.