Turnbull warns ACCC against undermining Telstra NBN agreement

Communications minister warns ACCC over any steps that could 'undermine the integrity' of NBN Co's deal with Telstra

Communications minister Malcolm Turnbull and finance minister Mathias Cormann have warned the Australian Competition and Consumer Commission that cutting wholesale pricing for services over Telstra's copper network could negatively affect the National Broadband Network rollout.

The ACCC is currently examining pricing for seven fixed line services that rely on Telstra's copper network.

Taking into account National Broadband Network-related payments being made to Telstra when determining pricing for those services may affect the agreements the telco signed with NBN Co in 2011, Turnbull and Cormann warned in a letter to the ACCC.

The letter (PDF) was received by the ACCC on 17 July and published today.

Under the Definitive Agreements, which were approved by Telstra shareholders in October 2011, the telco will progressively shut down its copper network and migrate customers to the NBN and allow NBN Co access to pits and ducts.

The ministers said that the ACCC should "be mindful of the valuable role that stability, regulatory consistency and adherence by all parties to jointly agreed commitments".

Telstra rivals, including Optus, TPG and iiNet have advocated that NBN-related payments to Telstra be incorporated into the ACCC's price setting formula for the fixed line services regulated by the competition watchdog.

It will "undermine the integrity of this deal [the DAs] if Telstra shareholders are deprived of the benefit of arrangements they did not initiate but negotiated in good faith. This may weaken Telstra's commitment to current reforms," the letter states.

In a "worst-case scenario", it "may even prevent proposed amendments to the Das [sic] which provide NBN Co with access to existing infrastructure that enables the overall cost of the NBN to be reduced by an estimated $30 billion."

NBN Co and Telstra are currently in protracted negotiations over the use of the telco's copper network for the revamped 'multi-technology mix' approach favoured by the Coalition government for the NBN rollout.

Under the original vision for the NBN, the copper network would be completely shut down in favour of fibre-to-the-premises. However, the government's support for fibre-to-the-node, which relies on copper for the 'last mile' connection to end users, means that the DAs must be renegotiated.

Cuts in wholesale pricing for services relying on the copper network may also affect the migration of end users to the NBN, the letter states.

"If payments under the DAs are subject to a regulatory treatment which temporarily reduces access prices for carriers to use Telstra's network, this may constitute ... a price shock," the ministers wrote.

"Reductions in access charges passed to consumers as lower retail prices will open a gap between entry-level broadband prices on the Telstra network and equivalent offerings on the NBN. While most consumers would prefer lower broadband prices while they wait for the NBN, price differentials that favour legacy networks will delay migration, and mislead consumers about the prices they should expect in the future."

The ACCC today released a discussion paper (PDF) addressing pricing for services over the copper network.

"The ACCC is seeking views on several complex pricing issues it will consider during the FAD [final access determinations] inquiry," ACCC commissioner Cristina Cifuentes said in a statement.

"These issues include an assessment of Telstra’s expenditure and demand forecasts, approaches to the allocation of costs to access services, the impacts of declining demand and the impact of Australia’s transition from Telstra’s copper network to the NBN."

The organisation is accepting submissions on the paper until 26 September.

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