Ditch CVC charges and slash wholesale prices, Telstra urges NBN Co

Telstra has used NBN Co’s wholesale pricing review to urge the network operator to dump its current pricing structure that involves retail service providers (RSPs) paying access (AVC) and capacity (CVC) charges.

Australia’s largest telco has previously indicated it expects a $3 billion hit to EBITDA from the rollout of the NBN and Telstra chief executive Andy Penn has described NBN Co’s prices as “unsustainable”.

NBN Co in June began a new round of consultation with RSPs on its wholesale pricing.

Telstra in its submission to the consultation argued that the predicted growth in household downloads will help drive up NBN prices significantly over the next three years.

The telco said that a previous revamp of NBN Co’s product lineup that saw the introduction of new products bundling access charges with a portion of capacity was “at best a temporary solution to addressing the cost risks faced by RSPs from CVC being used as a pricing element”.

“Ongoing growth in data use means that RSPs will increasingly incur wholesale overage charges on nbn bundles,” Telstra argued. “More fundamentally, an industry built around a single, legislated wholesale provider that sets prices in a way that results in zero margins for the downstream retail providers is unsustainable, and can only result in higher retail prices, reduced retail competition, and network bypass.”

Earlier this year Telstra rival Optus launched fixed wireless home broadband services based on 5G with an identical price to the nearest equivalent fixed line NBN services it offers. Penn has previously indicated that although Telstra doesn’t see 5G as an alternative to fixed line in all circumstances, it expects the new wireless standard to significantly boost the portion of households ditching wired broadband.

Telstra said it believes “fundamental changes” to the NBN Co’s pricing framework are required, including ditching a separate CVC charge.

“Under the current price constructs, predicted growth in data use will significantly increase the effective per customer price over the next three years,” the telco’s submission to NBN Co said. “In the case of the bundles, growth in CVC overage will increase the effective price per customer between $5 and $10. By the end of the NBN migration period, Telstra expects the effective price per customer for 50Mbit bundles to be $52 - $55, and the effective per customer price for 100Mbit bundles to reach $73 - $75.”

Telstra said wholesale prices should be cut by around $20 and “simplified so the all-inclusive wholesale price is $35 for a 50/20 plan and $50 for a 100/40 plan, with CVC and excess usage no longer part of the pricing construct”

Cutting prices and simplifying the pricing structures could help boost the sale of 100Mbps+ services, Telstra believes, with the telco calling for NBN Co to lower the price of superfast services to under $100. In addition, Telstra said NBN Co should introduce a voice-only product at $10 per month, replacing the existing 12/1Mbps broadband service.