Telco Price War Looms Over $16 Broadband

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They’re at it again. Telco rivals Telstra and Optus have gone head to head over NBN pricing strategy, allowing Telstra charge $16 wholesale to rivals telcos for unconditioned local loop service.Telstra has furiously argued against the price, set by the ACCC as part of its  transition to a building block model for the fixed line broadband services, saying it will negatively hit its business interests.

The pricing scheme will lead to “a substantial and irreversible reduction in the value of Telstra’s investment” in its customer access and exchange network and will cause it to lose money as it seeks to recovering “the economic value of its fixed line investments,” it said in its submission as part of its response to the ACCC’s discussion paper.

The telco is calling for a “DORC valuation” (which refers to ascribing the full value of an asset to a company) to be applied and has condemned “such an outcome based merely on the change from one regulatory methodology to another, without other independent justification, is of itself unreasonable.”

Optus, on the other hand, feel $16 is more than adequate and believe the price will allows arch rivals Telstra “recoup revenue substantially greater than its actual expenditure, leaving its wholesale customers to pay the difference,” in its submission to the ACCC.

The Singapore based giant also argues that UULS asset was “overvalued from the outset.”

It also claims the proposed changes “denies consumers the opportunity to benefit from lower access prices and does nothing to encourage further ULL roll-out in advance of the NBN,” according to ZDNet.

A consortia consisting of Internode, Adam Internet , iiNet, and Aussie Broadband aren’t happy either and have called for the Consumer and Competition Commission to go back to the drawing board and reassess Telstra’s claimed costs, citing “significant concerns”.

 

“Our Clients submit that the ACCC needs to revisit its approach to setting the initial value of the RAB, and, in particular, ensure that it gives sufficient consideration to the extent of any past over-recovery by Telstra,” lawyers on behalf of the group wrote in its submission to the ACCC.

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