Telcos are putting too many NBN customers on a speed tier originally designed as an entry-level product, according to Bill Morrow the chief executive of the government-owned network.
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Mr Morrow accused internet service providers of using low prices to chase market share, but then providing those customers with only very low speeds.
That meant too many customers were being put onto the lowest 12 megabits per second (Mbps) product, which was originally designed in 2010 as an entry-level product for light internet users. However, NBN Co later described this speed as adequate for video streaming.
"This is a huge volume game for [telcos] and economy of scale for all of us," Mr Morrow told a parliamentary committee hearing in Sydney on Tuesday.
These comments are the latest in an increasingly tense battle between the NBN and telcos over who is responsible for the rising level of disappointment from customers connected to the NBN.
He said the relationship between NBN Co and industry is "reasonable", but there is too much competition among 100 companies trying to sell the same product.
"It may be that they want a cheaper price and we could afford to give them a cheaper price....but most of those retailers are already acknowledging there is a price war," he said.
"I don't think there is as much conflict as maybe hyped in the media," he added.
He also told the committee NBN Co is aware there may be an "infrastructure ceiling" in years to come for the 4 million premises due to get fibre-to-the-node (FTTN) connections, but the company will upgrade their connections when it is confident of a financial return.
According to the competition watchdog's latest market report, nearly 30 per cent of people on the NBN are on the lowest speed product.
One telco, TPG has the second-highest market share of NBN connections and 42 per cent of its customers were on 12 Mbps plans. Market leader Telstra has about 20 per cent of its NBN customers on the 12 Mbps service. Figures for the quarter ending June 30 are due later this week.
Potentially many of these customers are voice-only, but Telstra's cut-price subsidiary Belong also sells unlimited NBN data plans at 12 Mbps speeds for $65 per month.
TPG's chief operating officer, Craig Levy, has said NBN's wholesale pricing makes it hard to deliver high speed internet.
"Unless pricing at a wholesale level is addressed to encourage usage and speed, the NBN will continue to suffer negative press and reluctant adoption," he told Fairfax Media recently.
Meanwhile the government has responded to increasing concerns about NBN Co's performance and service on Tuesday by commissioning the Australian Communications and Media Authority (ACMA) to conduct market research on fault handling, connection timeframes, whether technicians keep appointments, and if consumers can keep fixed telephone numbers.
Opposition communications spokeswoman, Michelle Rowland, criticised the delay in researching systemic consumer problems on the NBN. "The Turnbull Government's initiatives appear to simply follow the media cycle – there is no authenticity or integrity in the commitment to consumers," she said.
