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Telstra has written a strongly worded submission criticising the NBN Co pricing and controls over the new broadband network.

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Sparks will fly: Telstra hits out at NBN Co SAU.

Among the key holes Telstra has picked within the NBN Co’s Special Access Undertaking (SAU), which delineates the terms and conditions of wholesale broadband in Australia for the next 30 years, are its pricing, ability to control price and the 30 years length of the framework.

The SAU is the new framework under which all telcos will have to operate in a NBN high speed fibre broadband world for the next 30 years.

Telstra says its sees “no basis” for the NBN Co’s proposed price increases after 2017 and the lack of cost modelling appears to be further proof the proposals lack reason, it believes.

The undertaking also guarantees fixed wholesale pricing for the next five years, until 2017, after which the NBN Co will have discretion to alter prices as it sees fit, under the SAU, which is still subject to approval from Australian Competition and Consumer Authority.

It also fears fibre broadband prices for the end consumer may end up being far too high, thus going against the social premise of the “broadband for all” NBN project, costing the taxpayer $36bn.

But this isn’t the only aspect of pricing Telstra is worried about – it also criticised the calculation of the weighted average cost of capital (WACC), which is currently 8.6% – meaning (end) broadband prices would be “unnecessarily high” and government as the sole investor would make high returns on the public project.

“Retail prices would also be higher than necessary leading to economically inefficient social losses,” the submission notes.

Telstra has also questioned the public vs private ownership of the $36bn NBN project, considering what it sees to be the (too – high) WACC for a public project.

“The ACCC should consider whether the Government ownership of NBN Co has particular implications for the determination of the appropriate WACC,” Telstra says in its 27 page submission to the competition watchdog, ACCC, dated January 20th.

However, the telco recognised “a private sector WACC (certainly before privatisation) may not be appropriate.”

Telstra appear to have major worries about the NBN Co’s power over price controls it intends to place over broadband products sold to wholesale customers, which includes the likes of Optus, iiNet and Primus, something which it should be worried about considering it will probably be its biggest single customer.

“The price controls appear to provide too much flexibility for the NBN Co ..particularly for new products.”

 

And the fact that these price controls are to be set in place for the next 30 years is also something unsettling David Thodey & Co. The 30 years term is “too long” and lacks provision for review, its submission also states.

It has also criticised the non-price aspects of the SAU, saying many of these provisions are of “limited value” as they allow the NBN Co too much discretion and not enough scope for the ACCC to intervene:

“The effect of this is to “lock-in” significant discretion for NBN Co to determine the non-price terms of supply (through its WBA) and exclude the ACCC from providing ongoing oversight of NBN Co?s conduc.t”

Other key terms, including supply and regulatory oversight of cost inputs and reporting are also up for criticism.

The SAU is subject to ACCC approval after submissions from all telcos are considered.

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