Operators of networks considered to compete with the NBN are divided on whether to try to absorb the broadband tax or pass it through to their customers.
Both TPG and Opticomm are set to be impacted by the broadband tax, if it passes the senate. Neither has made a concrete call on how they would handle its introduction, but already their early thinking differs.
TPG’s general counsel Tony Moffatt said it was “likely” that TPG would “need” to pass on the tax directly to its 115,000 fibre-to-the-basement (FTTB) customers.
“For our FTTB customers obviously we’d have to pass through any levy which was directly attributable to their services,” Moffatt told a senate inquiry.
“We haven’t formed a view at this stage about what we would do. We’d form a view once the final form of the legislation was passed, so there’s no decision that’s been made by TPG in relation to that question.
“I can only give you a view that it’s likely that we would need to [pass it through].”
Opticomm – which builds and operates fibre networks in new housing estates – said the broadband tax, if passed, would become a “commercial issue” for the company.
“The only choices we have are to absorb it or pass it on,” CEO Paul Cross said.
“The difficulty is that as NBN Co won’t be increasing their retail costs, to be commercial in the market place we would have to look very seriously about trying to maintain our current pricing in the market place to be competitive with the NBN.”
The government has said it already considers the broadband tax to be built into NBN Co’s existing wholesale price. Other operators do not have that luxury, and will need to work out how to accommodate the extra $7.10 per line per month charge.
Cross said that like TPG, no decision had been made on whether to absorb the cost or try to pass it on. However, early thinking had Opticomm leaning toward the former.
“Our first approach would be to try and absorb it,” Cross said.
Should it decide to pass on some or all of the cost of the tax instead, Opticomm’s chief regulatory officer Phil Smith said at least one of the retail ISPs operating on its network had indicated the tax would land up with the end user.
“I have had one retailer say to me that if we pass any further charge on because of this tax they will put a line item on their bills to customers to say ‘$7.10 government tax’,” Smith said.
A ruling by the ACCC in May gave carriers affected by the broadband tax permission to pass on the charge to customers.
It had earlier been expected they would simply absorb the tax into their margins, but several argued that would result in a large impost on the profitability of their services.
Other telcos that appeared before the senate inquiry last night, such as Telstra, argued that any broadband tax should come into effect later than currently planned to enable carriers to gear their IT systems to collecting the new charge.