Telstra won't cop blame from NBN Co CEO over price war

Telstra has expressed surprise after being singled out for criticism by NBN Co CEO Bill Morrow for allegedly being the instigator of a retail price war on NBN services.

Morrow used a position paper to today call out Telstra for allegedly cutting its prices drastically to increase market share, forcing other ISPs to follow suit.

He argued that the retail price pressure was forcing ISPs to “cut corners” on broadband quality by purchasing too little bandwidth from NBN Co to guarantee performance and speed.

“Historically, Telstra is the price setter. Over the last 6 months, they have reduced their retail price by over 20 percent on the most popular 25Mbps product,” Morrow said.

“As a result, we have seen their market share jump over 2 percentage points to now be over 50 percent from 12 months ago.

“Others have had to follow on price reductions to remain competitive.”

However, a Telstra spokesperson expressed surprise at the figures and sentiment.

“We set our fixed broadband services apart based on network quality, service and included extras like Telstra TV and Telstra Air wi-fi data that Australians won’t find anywhere else – as well as value for money,” the spokesperson said.

“We want our customers to have the best possible network experience on the NBN and we’re careful to purchase the right level of bandwidth to support speeds.”

The spokesperson declined to comment on the specific retail price reduction claims made by Morrow.

The allegations come after a fortnight of attacks on NBN Co from all sides over its network performance and future ability to serve the internet needs of Australians.

NBN Co has found itself under sustained pressure to drop the price of its connectivity virtual circuit (CVC) charge further, particularly to make high-end plans such as gigabit speeds an economic reality.

However, Morrow warned today that more cuts to CVC charges were unlikely as they would endanger NBN Co’s ability to generate any financial return on the government's investment by 2020.

NBN Co has also not endeared itself to industry after revealing it wants enterprise internet services subjected to the proposed broadband tax, even those that don’t compete with NBN Co’s offerings.

The senate is set to hand down its findings on the broadband tax in its current form by early next week; the tax’s passage through the senate is not yet assured, particularly as most of the internet industry no longer supports the tax due to its scope creep.