NBN Co pings Telstra for higher charges amid wholesale pricing battle

NBN Co has pinged Telstra for contributing to higher charges as a battle to overhaul pricing rages.

Telstra is partially responsible for the high NBN charges, says NBN Co boss Stephen Rue

NBN Co boss Stephen Rue has fired back at Telstra’s call for dramatic cuts to wholesale prices, saying that the incumbent telco is, in part, responsible for the high charges.

The high prices charged by NBN Co are crucial to it staying economically viable said Mr Rue, noting that the telco received around $2 billion in payments this year and will consume up to 20 per cent of its future revenue.

“Our corporate plan points to a continuing payment to Telstra for access to ducts, dark fibre and facilities of $1bn annually from FY21, representing 20 per cent of forecast revenues, and continuing for decades after the build is completed.”

“This has an obvious impact on wholesale prices.”

NBN Co’s riposte comes in response to the latest sortie by Telstra and its industry peers to force the company’s hand on wholesale prices.

The CVC charges, imposed by NBN Co to let telcos shift data from the NBN to their networks, is firmly on the radar of the telcos who say that it’s an artificial tax that’s stopping them from offering better NBN services to consumers.

However, Mr Rue has ruled out any changes to the pricing model, saying that NBN Co has already provided substantial price relief.

“Criticisms that our business model creates an unsustainable industry are unfounded.”

“We understand that companies have an obligation to be profitable, and that requires doing what they can to lower their costs.”

“But among these criticisms it’s worth remembering that customers continue to sign up to the NBN, CVC prices continue to fall and more internet providers continue to enter the market,” he said.

Telstra boss Andrew Penn is expected to reiterate the telco’s position this afternoon as he takes the stage at the National Press Club in Canberra.

According to Mr Penn, superficial changes to NBN Co’s model won’t save the $50bn project.

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

As part of its 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, $20 cheaper than the current wholesale price. It also wants the CVC charge removed entirely.

Mr Penn has also warned that without lower prices on offer telcos will be forced to bypass the NBN altogether, a situation that could potentially further destabilise NBN Co’s economic model.

“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 in a blog post on Tuesday.