The proposal could result in significant price hikes and present the new Government with an immediate challenge in redefining the direction of the NBN
A change that has been in the making for some time: Following extensive discussions during 2021, the new regulatory framework for Australia’s NBN Co is one step closer. On 23 May, the ACCC opened a public consultation on the variation of the NBN’s Special Access Undertaking (SAU), which sets the conditions at which retail broadband providers access the NBN. The current SAU is not set to expire until 2040, however the NBN called for its variation for some time arguing that it was developed on the assumption that the NBN would be a monopoly. The NBN now sees mobile and other technologies as a competitive threat, noting that about 4m out of 12m households are not using the NBN.
What are the main changes? The NBN’s proposal relates mainly to product scope and pricing regime. The SAU currently applies only to FTTP, fixed-wireless, and satellite, which account for approximately a quarter of the NBN’s assets. The NBN is seeking to include FTTN to create a single regulatory framework that covers all technologies. With regard to pricing, the NBN would discontinue its ‘bundle discounts’ approach it has adopted since 2018, and replace it with direct product offers subject to maximum price and minimum connectivity virtual circuit (CVC) or shared network capacity inclusions.
A significant risk of price hikes: In theory, the retail ISPs should welcome the move away from bundle discounts, which they’ve found to have resulted in significant cost uncertainty as discounts are conditional and can be withdrawn. However, the NBN is also proposing price increases across its most popular speed tiers (50/20Mbps, 100/20Mbps, and 250/25Mbps). Its entry level product would also be more expensive, in return for a higher speed (25/10Mbps up from 12/1Mbps). The ACCC notes that the NBN’s pricing is set independently of its cost base and of the revenue cap to which it is subject. This would result in escalating costs for retailers, while the NBN would have little incentive to develop new products. Retailers would continue to be exposed to price shocks, and consumers would face prices that do not represent fair value to them. The ACCC estimates that the cost for the entry level speed tier would double by around 2033, and continue to increase towards AUD104 (£59) per month by 2040, with an impact on broadband affordability and product differentiation between retailers.
Retail ISPs are unhappy and want the Government to step in: Stakeholders will have until 8 July to submit their responses, although their initial reaction shows their disappointment and will leave the ACCC with a difficult balance to strike. The three largest retail providers have all hit out at the NBN’s initial proposal, which would be a “slap in the face” for those relying on affordable broadband, and would result in “price hikes without any improvements”. Smaller providers are likely to be aligned with these views, seeing as many of them saw the existing pricing regime as a barrier to market entry. As industry calls for a new model that encourages take up through affordability and innovation rather than historical cost recovery, the newly elected Australian Government could face an immediate challenge in redefining the direction of the NBN.
Source: https://www.accc.gov.au/media-release/consultation-commences-on-future-regulation-of-the-nbn
