Australia's top RSPs say NBN ARPU is already $15 too high

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Australia's top RSPs say NBN ARPU is already $15 too high

Telstra, Optus, TPG, Vocus and Aussie Broadband give first indication of NBN price negotiation position.

Australia’s top retail service providers (RSPs) are approaching the renegotiation of NBN pricing with a jointly-held view that NBN Co’s average revenue per user (ARPU) is already $15 above where it should be.

A joint paper by Telstra, Optus, TPG Telecom, Vocus and Aussie Broadband, submitted to the Australian Competition and Consumer Commission (ACCC) on September 1 and sighted by iTnews, proposes a restructure of how NBN Co accounts for its costs and of the charges it levies to recover them.

Industry flagged the need for a new model back in July, one that would separate the costs to build the NBN to date into ‘efficient’ and ‘inefficient’ categorisations, and limit NBN Co to recovering only those costs deemed to have been efficiently incurred.

RSPs have wanted a breakdown of NBN Co’s costs for several years now but have so far been thwarted in their attempts to access figures.

Providers suspect that NBN Co has incurred excessive costs that it must now try to recoup in the form of high - and ever-increasing - broadband fees.

NBN Co counters that it is “currently under-recovering its prudently incurred costs”, meaning it could - or should - be charging even more than it does now.

The latest joint paper does not directly shed light on what proportion of the $27.3 billion worth of assets that NBN Co says represent its efficient, commercially-incurred costs to date, do in fact meet that definition.

However, the five RSPs effectively pass judgment that a large amount of money has been poorly spent, resulting in NBN Co chasing inflated ARPU numbers from residential customers.

NBN Co’s residential ARPU was $45 per user per month at the end of June this year.

The five RSPs argue that ARPU should actually be between “$30-$35/service/month” from FY21 to FY25 - $10-$15 below where it is today, and up to $25 below where Telstra believes NBN ARPU might end up in a few years, if NBN Co has its way.

Clearly, a downgraded ARPU of $30-$35 per user per month could lead to substantial reductions in retail prices - effectively meeting the “more than $20” a month price cut that Telstra, in particular, has been chasing for several years.

The calculations that sit behind this ARPU reduction - and other calculations in the joint submission - are missing from the copy sighted by iTnews.

That may be for confidentiality reasons; while there is considerable public interest in the outcome of the NBN price negotiation, which is being pursued via a revision of the NBN special access undertaking (SAU), much of the process is set to remain secret, owing to strict confidentiality settings that impact the various working groups set up to deal with the different aspects of NBN pricing.

The joint submission states that even with a much lower ARPU target, NBN Co would still be allowed to incur up to $19 billion of additional costs between FY21 and FY25, or $33 billion over the next decade, to “deliver a baseline quality of service” and make improvements to it over time.

The RSPs argue NBN Co could choose to spend even more than that to chase “a higher quality of service” that they could also charge more than the baseline for.

The providers also say that their proposed model would also still allow the government and shareholders to make “a fair return” on their investment in the NBN project - given an eventual sale of NBN Co is likely.

They add that a reduction in wholesale charges, to the quantum that they are proposing, would increase takeup and participation in broadband services in Australia.

“The [cost model] solution developed must be one that can be endorsed by all stakeholders, providing a stable basis for pricing well into the future,” the five RSPs said.

“The measure of success should be how many more Australians can we connect to the NBN and how much more can we encourage them to use the NBN.”

The top five RSPs, which collectively account for over 96 percent of all active fixed-line users, have increasingly presented themselves as a unified front when seeking changes from NBN Co.

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