NBN Co wholesale pricing too high: Telstra

Telstra has criticised NBN Co for having too much flexibility over pricing of National Broadband Network (NBN) wholesale services in a submission to the Special Access Undertaking (SAU) consultation paper.

The SAU was submitted to the Australian Competition and Consumer Commission (ACCC) in December 2011 and is designed to guarantee fixed wholesale prices for the next five years to service providers. It also sets out a 30-year regulatory framework via which the company will set price and non-price terms and recover rollout costs, subject to ACCC regulation.

In its submission, Telstra argued that there appeared to be no “definitive commitments” made for initial pricing of future NBN products and services.

“The limited scope of the price controls and the degree of flexibility the NBN Co SAU gives NBN Co over the pricing of new products and ancillary charges should be a key focus of the ACCC’s consideration of the SAU,” the submission reads.

“Given the proposed term of the NBN Co SAU of some 30 years, it may be anticipated that within that term many new products will be introduced as technology evolves and end-user preferences change.”

Telstra also wrote that the SAU period of 30 years was “too long” and there was insufficient provision for review of the SAU.

It also criticised the weighted average cost of capital (WACC). According to Telstra, the 8.6 per cent WACC would be too high and could lead to high broadband prices for consumers. “Wholesale prices would be higher than necessary, which would likely result in less incentives for retail service providers to compete with one another,” the submission reads.

Optus has also raised concerns about the NBN Co's capital costs. In November 2011, chief executive, Paul O'Sullivan, said that NBN Co asked for limits on the ACCC’s ability to scrutinise its initial capital build. “I’m sorry, but as an infrastructure monopoly, someone has to make sure this thing’s spending is efficient or consumers will end up paying for it,” he said at the time.

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Copyright © 2012 IDG Communications, Inc.

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