TPG Telecom wants yearly NBN price rises blocked

TPG Telecom wants NBN Co prevented from raising its prices every year until at least 2032, with only periodic price rises possible every three-to-five years.

In a submission to the ACCC, sighted by iTnews, TPG argues that NBN Co should not be able to increase its prices every year of a “regulatory cycle”, which covers a period of three-to-five years.

The telco also said the current special access undertaking (SAU) draft gives NBN Co too much leeway to make material changes to pricing.

“One potentially very destructive outcome… is an RSP [retailer] could sell a lot of a particular product today, yet find it will receive lower margins, or potentially negative margins, the following year when NBN Co releases an updated tariff list,” TPG Telecom wrote.

“More detrimentally, this proposal does not provide medium-term price certainty for consumers. 

“For instance, if NBN Co’s revenue targets are not tracking to expectations, NBN Co will have significant incentives to simply increase prices at the product level to remediate any top line revenue shortfalls. 

“It is not in the long-term interests of end users for NBN Co to have the incentive and ability to exercise this kind of pricing power.”

TPG Telecom argues that prices should only be allowed to be discounted or decreased during a regulatory cycle.

“This structural constraint would ensure NBN Co is discouraged from simply raising prices at the product level to meet top line revenue shortfalls,” the telco wrote.

“This constraint will also stimulate innovation, as the only other opportunities available to NBN Co to increase revenue is by upselling to existing customers, on-boarding end-users who have chosen to not use the NBN, or by continuing to innovate on the product side. 

“For clarity, we believe NBN Co should have the freedom to decrease prices to stimulate demand, but it should not have the ability to increase prices unilaterally on an annual basis. 

“This constraint needs to be in place until at least 2032, at which point in time the ACCC will undertake a review of the SAU.”

Pay dearly, yearly

TPG Telecom said that if the SAU is approved, it would mean immediate price increases for many users, “and all consumers should expect to pay more every year.”

Users could also expect “potential price shocks and no certainty on the cost of their NBN service beyond 12 months, regardless of whether they are an existing or new customer”, as well as fewer choices, particularly in the sub-100Mbps space.

In the 100Mbps-plus space, meanwhile, TPG Telecom said promised cost reductions “could be rolled back within two-to-three years” under a complicated price cap mechanism that NBN Co has proposed introducing.

The cap is among measures in the SAU that TPG Telecom says introduce unnecessary complexity.

Downplaying increases

The telco said NBN Co had tried to convince it that price changes “will not be as drastic as suggested” but that it didn’t put weight in NBN Co’s modelling assumptions, “which we do not believe are robust”.

NBN Co provided similar commentary to iTnews yesterday after Vocus shared concerns about the price rises enabled by the SAU.

TPG Telecom argued the simplest way to price NBN services is flat-rate pricing on all services immediately.

ACCC stance

It also asked the ACCC to adopt a tougher approach to dealing with NBN Co, given repeated SAU drafts over several years have now failed to gain industry support.

“We support the ACCC approaching NBN Co’s claims with scepticism and toughness, as it would for any other monopoly provider,” TPG Telecom wrote.

“The regulation of the NBN has been approached with uncharacteristic passivity for the past decade. 

“It would be a gross injustice for the status quo to continue for the next two decades.”