Telstra, Optus want NBN Co's price-setting power reined in

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Telstra, Optus want NBN Co's price-setting power reined in

Retailers unhappy at more lopsided treatment.

NBN Co’s ability to set prices and withdraw offers with little consultation is set to be tested after the practice drew heavy criticism from Telstra and Optus.

The criticism opens a new front in what is becoming a protracted battle between NBN Co and its retail service provider (RSP) customers over the way the government-backed network builder does business.

The existing front is the competition watchdog’s inquiry into the wholesale broadband agreement (WBA), the commercial arrangement between NBN Co and RSPs.

RSPs have accused NBN Co of offering no real input or negotiation; NBN Co denies this to be the case. The inquiry has been running since November 2017.

But now a new front is set to open with RSPs challenging NBN Co’s price-setting power as well as the closed-door Product Development Forum (PDF) used to consult RSPs on NBN Co’s plans.

Very little has been said about the PDF over the years but it appears even RSPs are fed up with the secret manner in which it is being run, and the lack of transparency over how NBN Co uses it for decision-making.

Telstra said NBN Co was “not obliged to use the PDF to consult with industry on price proposals”, though NBN Co had “chosen to do so.”

“However, in using the PDF in its current form, Telstra is concerned that the process gives NBN Co ultimate discretion in the setting of prices including the Maximum Regulated Price for NBN Offers (and price levels for Discounts, Credits and Rebates),” said Iain Little, economic regulation executive within Telstra’s legal and corporate affairs unit.

The Maximum Regulated Price or MRP is a price ceiling set according to rules in the special access undertaking. NBN Co must report annually to the ACCC to ensure it doesn’t charge fees past this ceiling.

Little said that allowing NBN Co as much power as it currently had over price-setting would “further exacerbate affordability issues” that have materialised as ‘class wars’ now across all access technologies, and have the ACCC pondering intervention.

Telstra called for a review of the way “NBN pricing is set and the approach taken to change price levels.”

“RSPs and end users NBN Co ultimately serves deserve to at least understand more about how NBN Co goes about setting its own regulated price and have more input into and transparency of the factors that nbn takes into account,” Little said.

Optus was even more blunt, saying that changes to NBN Co’s Discounts, Credits and Rebates List appeared to “be subject to no oversight at all.”

“There are no formal processes or oversight governing the Discounts, Credits and Rebates which means that NBN Co can change these quickly, without consultation, to the detriment of RSPs and ultimately their customers,” Optus said.

This was demonstrated recently when NBN Co decided at short notice to dump a discount for connectivity virtual circuit (CVC) that had enabled RSPs to sell affordable internet services to cost-conscious users.

NBN Co wound up delaying the cancellation of the discount for a few months as it became clear that RSPs could not react quickly enough to withdraw or amend their in-market offers.

RSPs in general have been tightly squeezed by NBN Co over the past 18 months on margin from NBN sales. Optus has been twice forced to raise its prices; other major RSPs aren't even bothering to actively market NBN services anymore.

Telstra, meanwhile, has been pressing the case for a dramatic double-digit cut to NBN Co's wholesale prices.

PDF on notice

More broadly than price, NBN Co is now firmly on notice over its product development forum.

The forum is often where NBN Co floats its new product plans - such as the planned transition of NBN fixed wireless to a ‘best effort’ service.

But in a first, major RSPs have savaged the way the forum is being run and called for an ACCC-led review.

Both Telstra and Optus say they have submitted proposals through the forum, only to never hear of them again.

Optus claimed NBN Co had tried to deflect proposals to the commercial wholesale broadband agreement (WBA) negotiation process, which RSPs also don’t trust.

“It is easy for NBN Co to defer matters to WBA negotiations rather than address them more promptly, when, in fact, it is not clear this should be a matter for WBA negotiations,” Optus said.

Telstra argued for “greater transparency” in the forum’s processes.

“It remains unclear to Telstra to what extent feedback through the PDF is taken into account by NBN Co and feedback from industry is not routinely shared with PDF members,” Little said.

“A requirement for NBN Co to share industry feedback (recognising that some respondents may wish to provide confidential feedback) would lead to better outcomes by enabling RSPs to better understand and address other viewpoints when making submissions, and build on and enhance ideas.”

An NBN Co spokesperson defended the forum's track record in a statement to iTnews.

"NBN Co believes the Product Development Forum is a valuable industry forum and allows all services providers – big and small – to have their say on how we can improve the way we work together," the spokesperson said.

"We value all the feedback we receive from the PDF.

"NBN Co is working to strike the right balance between meeting the needs of retailers, enabling a good experience for consumers using the network, and generating a modest economic return on the investment in the NBN."

The spokesperson also noted that Telstra and Optus' comments were outside of the scope of issues directly being canvassed by the ACCC.

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