The nation's biggest telecommunications provider is urging the competition watchdog to consider whether NBN Co should adopt an alternative pricing model to its controversial two-tariff pricing plan, under which internet service providers are charged a baseline connection fee and usage-based fees for the amount of data carried through the network. Telstra says a different model could be better for consumers.
Under the two-tariff pricing model, Telstra says, the usage charge that an internet service provider pays to NBN Co for each of its customers on the basic 12-megabit a second service could rise from $1 a month to $50 by 2025. It is expected usage charges, which form a part of a wholesale customer's monthly bill, will be passed on to retail customers.
Taking a hard line against several aspects of NBN Co's pricing strategy in a submission to the Australian Competition and Consumer Commission, Telstra also declares that, over the long term, the government's return would likely exceed the cost of its investment, that NBN Co would more than recover its costs and that wholesale prices would be "unnecessarily high".
Higher wholesale costs could result in fewer incentives for internet service providers to compete through investment, innovation and service development, Telstra says.
The warnings undermine some of Labor's main arguments for the $36 billion project. Communications Minister Stephen Conroy has insisted that the creation of the NBN as a wholesale broadband backbone would unleash new competition between retail service providers and bring on pricing pressures that would benefit consumers.
NBN Co insisted it was "confident that as a wholesale-only open access network, we're opening up competition in retail telecommunications in Australia".
Telstra's critique of NBN Co's "special-access undertaking" that outlines its price and non-price terms is all the more surprising because Telstra is set to reap $11bn under a deal with NBN Co and the government that will mean it becomes NBN Co's biggest customer, not its rival.
NBN Co has promised to freeze wholesale prices for the next five years, then increase them at only half the rate of inflation - making internet access cheaper in real terms.
Under NBN Co's plans, the maximum monthly usage charge would remain at $20 per megabit per second until mid-2017, rising to $24/Mbps by 2033.
Telstra argues that while these price increases may appear small, they will be much more acutely felt on a per-customer basis.
This is because NBN Co's business plan assumes that usage per customer will grow massively as consumers purchase higher-quality services such as internet-based television.
On that basis, the monthly usage cost a wholesale customer would pay for each "service in operation" could increase from $1 to $50 monthly by 2025. The government's corporate adviser, Greenhill Caliburn, has already warned that a consumer backlash against the usage-based pricing model is one of the key risks to NBN Co's revenue assumptions.
Internode founder Simon Hackett last night blasted Telstra as "the pot calling the kettle black", saying that it was imposing "massively more expensive" usage charges for rivals providing internet access over its copper telephone lines.
"It would seem disingenuous at best for Telstra to be arguing for NBN Co to modify their charging regime when Telstra itself are so flagrantly overcharging the industry today using the very same pricing mechanism," Mr Hackett said.
In the submission to the ACCC, Telstra bases its warning that prices could be unnecessarily high on NBN Co's claim that its weighted average costs of capital - a key influence on NBN Co's profitability and prices - should be about 8.6 per cent over the long term. This level is akin to what a private sector company would seek.
"Government has changed legislation and policy to reduce the risk faced by NBN Co, presumably including systematic or non-diversifiable risks - the same risks that continue to be faced by private firms such as Telstra," Telstra states.
It concludes that a private sector-style rate of return would be more appropriate when NBN Co is privatised.
NBN Co spokesman Andrew Sholl said last night its special-access undertaking "strikes the appropriate balance between the interests of NBN Co and its customers".
He said an independent consultant's report had backed NBN Co's approach and found that it was reasonable to set a figure that included a margin over the the long-term government bond rate.
Late yesterday, opposition communications spokesman Malcolm Turnbull said that NBN Co's undertaking "lacks the necessary concrete commitments on price or standards of service".
He called on Senator Conroy "to immediately ensure that NBN Co does not . . . avoid the scrutiny of the ACCC".
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