NBN pricing unrealistic, leaving consumers behind: Vocus chief Kevin Russell

Kevin Russell has reprimanded NBN Co for sacrificing consumer needs to ‘unrealistic financial returns’.

Vocus CEO Kevin Russell. Picture:Hollie Adams/The Australian

Vocus boss Kevin Russell has urged the competition regulator to step in and force NBN Co to provide wholesale prices that allow telcos to deliver cheaper plans to vulnerable Australians.

According to Mr Russell, the NBN’s business model is underpinned by high wholesale prices, which in turn are being passed on to households.

“Put simply, the real market value of the NBN is far, far less than what it cost to build”. As a result, “NBN’s decision-making is driven as a monopoly targeting unrealistic financial returns, rather than consumer needs and market reality,” Mr Russell will say in a speech at the Australian Communications Consumer Action Network (ACCAN) conference on Thursday.

It will be first public speech by the former Telstra and Optus senior executive since joining Vocus 18 months ago; and according to Mr Russell, the Australian Competition and Consumer Commission has the ability to change the status quo.

Under the current the regulatory regime, only NBN’s fibre-to-the-premises (FTTP) network is covered by the Special Access Undertaking accepted by the ACCC, which gives it the power to directly regulate pricing.

NBN’s fibre to the node, fibre to the basement, fibre to the curb and HFC networks are not covered by the SAU.

“These networks account for 70 per cent of NBN services available today – around 7 million premises, so if NBN won’t set prices which are fair for people on low incomes, the ACCC has the fallback option of making an access determination,” Mr Russell says.

“Speaking on behalf of our NBN customers, if NBN isn’t prepared to act, I do hope that the ACCC is.”

Mr Russell will also argue that NBN has been given far too many free kicks by successive federal governments, with “protectionist barriers” put in place to assist NBN Co in recovering this cost.

“Part of this problem is the original policy intent of the NBN which mandated uniform national wholesale prices, later amended to wholesale price caps.”

“This approach baked-in the expectation that NBN’s profitable metropolitan networks would cross-subsidise its loss-making regional networks. As a result, NBN had to be protected from competition in profitable metro markets, or its ability to cross-subsidise its unprofitable regional networks would be affected.”

Mr Russell wants the cross-subsidy model to be replaced with direct federal government funding into regional broadband.

“If we, as a country, believe that there is a social benefit in regional connectivity – even when there is no commercial case – these networks should be funded from the Federal Budget, rather than a market-distorting cross-subsidy.”