Telstra pushes for a full breakdown of NBN Co's costs

Telstra wants NBN Co to break down its costs “by technology type and customer type”, a move that would expose the presence of any cross-subsidies between internet products.

The telco indicated in a letter [pdf] dated March 6 - but only published last week - that a detailed financial breakdown was needed to allay industry concerns around NBN Co’s enterprise market play and the way NBN Co finances the regional portion of the network.

The Australian Competition and Consumer Commission (ACCC) said in December last year that additional “reporting and transparency requirements” may be imposed on NBN Co to address cross-subsidisation concerns.

These concerns primarily relate to whether NBN Co is undercutting existing commercial operators in the enterprise and government markets using a cross-subsidy from its residential network.

But they also encompass another issue: the extent to which a cross-subsidy funding the regional and rural parts of the NBN is baked into NBN Co’s prices.

The latter is an issue because some telcos may eventually be forced to pay a levy on high-speed services they operate over their own fixed-line infrastructure.

The Government has always maintained that the levy amount is already embedded into NBN Co’s existing prices - meaning they will not increase - but this has never been properly confirmed, and the way this has worked in the past is relatively complex.

Telstra is hoping a yearly examination of NBN Co’s capital expenditure and operating expenditure will prove the right vehicle for a more granular view of the network builder’s costs.

By the same token, Telstra said it would be “inappropriate” if NBN Co relied on the same vehicle to mask any cross-subsidy that was occurring.

“For a number of reasons, there should be increased transparency regarding NBN Co’s activities,” Telstra said.

“Telstra believes segment level reporting by technology type and customer type is necessary. 

“This will provide transparency regarding commercial and non-commercial activities and where potential cross subsidies exist. 

“Importantly, greater transparency could provide assurance to NBN Co’s competitors in the enterprise market that its entry is commercial and efficient, and its entry is not being cross-subsidised by its consumer and small business activities.”

On the levy - known colloquially as the broadband tax - Telstra said that “some fixed line network operators will be required to pay the regional broadband scheme levy in order to subsidise NBN Co’s non-commercial fixed wireless and satellite services.

“It is inappropriate if competitors were funding NBN Co’s losses for non-commercial activities if NBN Co’s prices were not similarly providing for the subsidy.”

Telstra is hoping to see a breakdown of capex, opex, revenue and profitability “by residential and enterprise; product – unbundled (e.g. this would include AVC and CVC so we can understand the efficiency of NBN’s bundling activities); technology type; and geographic areas (e.g. those profitable vs non-profitable geographic areas to identify whether and to what extent, there is a cross subsidy).”

It also wants to see “‘building block’ cost components for each category (e.g. residential and enterprise); and details of direct and indirect (shared) costs for each category (e.g. residential and enterprise).”

NBN Co largely neutralised criticism of its enterprise and government (E&G) play earlier this year, ceding to several industry demands after a tumultuous back half of 2019.