Communications Minister Michelle Rowland has called for a “reset” around NBN Co policy, rejecting an NBN Co pricing proposal that would have increased broadband prices by nearly 10 per cent per year.
“The change of government has created space for problem solving,” Rowland wrote in a letter to ACCC chair Gina Cass-Gottlieb, advising that proposed changes to NBN Co’s pricing regime – encapsulated in its special access undertaking (SAU) – were “not acceptable”.
“The enduring purpose of the NBN should be to provide fast, reliable and affordable connectivity,” Rowland said, warning that the proposal “would have allowed NBN price increases of inflation plus three per cent a year on some products [and] was underpinned by unrealistic expectations and reflected a view to privatisation.”
The SAU framework sets pricing policy for NBN Co, and the current version was introduced in late 2013, after the Abbott Government was elected partly on a promise to “demolish” the then-nascent NBN.
It set out an inflexible pricing strategy designed to bolster NBN Co revenues so the government-backed telecommunications company could pay off the many billions it borrowed for the network’s construction, paving the way for it to be privatised.
As average broadband usage increased over the years, those policy settings had made it harder for retail service providers (RSPs) to turn a profit.
Many complained that the SAU’s fixation on paying off NBN Co debt meant the prices for basic NBN services were too high, and that it didn’t allow enough differentiation of higher-speed services that have emerged in recent years.
The process of updating the SAU began last June, when NBN Co published a discussion paper and the ACCC organised an industry roundtable to explore ways the NBN’s pricing structure could be adjusted to meet industry goals.
The company lodged a consultation paper in May, eliciting largely negative feedback from across the telecommunications industry.
After receiving notice of Rowland’s letter and the ACCC’s decision to reject its proposed SAU variation, NBN Co withdrew its proposal and expects to restart the consultation process by lodging initial consultation documents later this month.
The ACCC will review the new proposal “as quickly as possible,” ACCC commissioner Anna Brakey said in announcing the withdrawal, noting that “we are fully aware that broadband providers face commercial uncertainty without a variation to the undertaking in place.”
Telecommunications industry unimpressed
NBN Co’s now-withdrawn proposal drew fire from across the industry.
“It looks like with the new Government onboard, the industry felt confident to start opposing the current NBN regime,” wrote telecommunications analyst Paul Budde, who slammed the industry’s former lack of engagement as “very frustrating”.
“Bad policies are hurting these companies,” he wrote, saying that “what is happening is disastrous not only for customers but also for the companies involved.”
A Telstra-commissioned Link Economics report warned that NBN Co’s proposed wholesale prices for 50Mbps, 100Mbps and 1000MBps broadband services are among the most expensive when compared to countries like Germany, Canada, Singapore, Denmark, the Netherlands, and Italy.
Despite NBN Co’s argument that Australia has not been an “international outlier in speed requirements… over the past decade,” the Link Economics report found Australia also had the lowest adoption of 100Mbps broadband services of any of the countries studied.
Industry complaints-handling body, the Telecommunications Industry Ombudsman (TIO), reported that the majority of complaints about NBN services comes from end users that “are not getting the speeds they were promised, and were told that the available speeds are reasonable and cannot be improved.”
But with current surging inflation meaning that the proposed policies would push the prices of those broadband services up by as much as 10 per cent per year, Rowland dropped the hammer.
Rather than building an economic model that would make the NBN more attractive to potential purchasers, she said, the focus of NBN pricing policy had to be on providing “pricing certainty for retail providers…. and providing equitable and affordable access to high-speed broadband.”
“The Government has stated that it will retain NBN Co in public ownership for the foreseeable future,” she wrote, calling on the ACCC and NBN Co to work together “to deliver long-term outcomes for consumers by supporting continued efficient investment in the NBN”.