NBN argues against price setting by ACCC

NBN Co and the telcos are once again at loggerheads over wholesale pricing and how it affects consumers.

Telstra has also taken aim at NBN Co’s reliance on temporary discounts. Picture: Lawrence Machado

NBN Co and the telcos are once again at loggerheads over wholesale pricing and how it affects consumers on entry level broadband plans over the National Broadband Network, with the industry taking aim at the company’s reliance on temporary discounts.

The Australian Competition and Consumer Commission (ACCC) is mulling the need for a regulatory intervention to ensure consumers do not end up paying more for NBN plans that are no better than their existing ADSL/ADSL+ services.

One measure in the ACCC’s arsenal is for it to step in and dictate the wholesale price of entry level plans.

With the regulator keen to see the basic NBN plans anchored at $60 for consumers, NBN Co has warned that sticking to the $60 figure could destabilise its business model.

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“The ACCC’s proposed benchmark retail price point of $60 cannot be shown to be the single ‘efficient’ price point and too much weight has been placed by the ACCC on this $60 price point,” it said in its submission.

“Any proposed regulatory determinations on pricing by the ACCC could have unintended consequences to the detriment of customers, anchoring pricing and incentives around retrospective views of internet usage, and unfavourably and disproportionately skew the business case for future network investment towards entry level broadband plans.”

“Price regulation would also impede NBN Co’s ability to recover its costs and repay the taxpayers of Australia.”

“It would also undermine NBN Co’s ability to support the cross-subsidy required to support non-commercial services in regional and remote Australia, it also weakens our ability to invest in network upgrades in the future as demand for data increases,” the company said.

The ACCC and NBN Co have agreed to a regulatory agreement, the special access undertaking (SAU), which sets out the terms, under which the company rolling out the NBN must operate until 2024. The SAU gives the regulator oversight on how NBN Co sets its wholesale prices.

According to NBN Co, its recent changes to wholesale prices already offer retail telcos the ability to offer higher speeds at better prices compared to legacy ADSL/ADSL+ plans.

“NBN Co is confident that its recent approach to pricing and proven track record of progressive wholesale pricing changes and additional data inclusions comprehensively address any concerns the ACCC may have.”

However, the view from the other side of the fence is markedly different, with Telstra saying NBN Co is yet to deliver the “step-change” in broadband experience for consumers.

Calling for a more ambitious approach from NBN Co, Telstra wants the entry level service to be upgraded from 12 megabits per second (Mbps) download speed to 50 Mbps.

Permanent, predictable pricing

“The 50/20 Mbps service should be made the entry level anchor product at $35 per month (wholesale cost), the same price being proposed by the ACCC for the 12/1 Mbps service,” it said in its submission.

“We are concerned that setting a $35 price for a 12/1 Mbps entry level product will generate a poor customer experience and not optimise competition.”

Telstra is an outlier on this front, with the rest of the industry pushing for 25/5 Mbps to be set as the entry level plan.

According to Telstra, the ACCC should get involved in pricing and mandate a NBN’s voice-only service priced at $10 per month (wholesale cost).

“This will ensure RSPs [retail service providers] can provide the service on a more viable basis, acknowledging that the majority of customers taking this service are older and/or vulnerable members of the community.”

Temporary discounts

Telstra has also taken aim at NBN Co’s reliance on temporary discounts.

“Temporary discounts and offers should be replaced with permanent, predictable pricing that provides RSPs with certainty and the incentive to compete.”

Vocus, which operates Dodo and iPrimus, is even more scathing on NBN Co’s use of discounts, labelling it a significant hurdle to delivering better customer experience.

“The significant ‘con’ of NBN Co implementing changes by way of a partial waiver/discount is the uncertainty.”

“There is always an end date to the discounts and this date is often changed, compounding the challenge for RSPs in planning and managing costs,” it said in its submission to the ACCC.

According to Vocus, NBN Co’s habit of shifting goalposts needs to be replaced by a fundamental reform of pricing.

“NBN Co’s wholesale pricing model needs to be affordable, predictable and simple.”

“These objectives can be met by the elimination of the connectivity virtual circuit (CVC) construct; the introduction of flat rate speed tiers and the elimination of discounts, non-recurring charges and rebates,” Vocus added.

The CVC is the price telcos pay to move data from the NBN to their networks. The amount of CVC a telco buys affects the internet speed, particularly at peak usage times from 7pm to 11pm.

The controversial charge, according to Optus’s submission, needs to be reviewed.

“Irrespective of which speed tier is selected, it is more likely the associated CVC that will determine the benefit of any NBN product or bundle.”

“Optus therefore considers the focus for this NBN pricing inquiry should be to review the CVC arrangement.”

The telco isn’t impressed by NBN Co’s discount policy either.

“While we acknowledge the use of the discounts, credits and rebates has enabled positive price movements, there continues to be transparency and certainty issues relating to the development, introduction and withdrawal of discounts.”