Telstra CEO attacks ‘unsustainable’ NBN pricing

Providing an NBN service is uneconomic, Andy Penn argues

Telstra CEO Andrew Penn

Telstra CEO Andrew Penn

Telstra CEO Andrew Penn has called for further changes to NBN wholesale pricing, arguing that current levels are placing an unsustainable burden on retail service providers (RSPs).

In a speech today at the CommsDay Summit in Sydney the telco CEO said that “it is critical that in the long term NBN wholesale prices are set at a level which ensures affordability of fixed broadband for all Australians”.

“In the migration to the NBN, wholesale broadband prices have more than doubled and are set to increase even further,” Penn said.

RSPs have so far absorbed the increase but to the point where “providing an NBN service is uneconomic for the industry”.

“This is unsustainable and ultimately the model has to change otherwise it will lead to higher long-term prices for customers,” the CEO said. “This is bad for NBN, bad for the industry but most of all it is bad for customers because it will impact affordability and Australia’s competitiveness.”

In February, Penn told a briefing on Telstra’s results for the six months to 31 December that the “trajectory for the industry on fixed margins is obviously quite negative in the transition to the NBN”.

That trajectory was predominantly a consequence of NBN’s “very significant wholesale broadband prices”, despite the pricing revamp announced by NBN in December.

In August last year Penn said that Telstra was expecting a $3 billion hit to its EBITDA from the transition to the new network.

That is despite figures released by the Australian Competition and Consumer Commission (ACCC) that show that, as of 31 December, Telstra had around half of the NBN market.

Last year NBN CEO Bill Morrow argued that telcos were engaged in a “land grab” price war in an effort to capture early market share on the new network, arguing that the process was impacting both telco margins and end user experience.

In his address Penn also backed the introduction of regulated wholesale service standards for NBN.

“It is critical that the service commitments of the RSPs to customers are matched with supporting and enforceable service commitments from NBN to the RSPs,” Penn said.

The ACCC is currently considering regulatory action to enforce NBN wholesale service standards.

Support for regulation is “virtually unanimous across the industry,” Penn said.

 

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