NBN Co taking shot in the dark risk with broadband charges: Fletcher

Stan Beer
Tuesday, 25 October 2011 16:40

IT Policy - Government Tech Policy

NBN Co is taking a big risk building the National Broadband Network without knowing how much it will be allowed to charge users by the ACCC, according to one of the Federal Opposition's leading NBN head kickers.

 

 

According to former senior Optus executive turned Liberal MP Paul Fletcher, spending tens of billions of dollars to build a telecommunications network - without knowing how much you can charge customers to use the network - is an extremely risky move.

"But it is clear from today's hearing of the NBN parliamentary committee - that is exactly what NBN Co is doing," says Fletcher in his latest email Broadband Briefing Note detailed below:

"When the ACCC appeared at today's hearing, it was asked about the 'special access undertaking' (SAU) to be lodged by NBN Co.

"This is the legal document, to be lodged with the ACCC by NBN Co, which will set out the prices NBN Co intends to charge. If the ACCC approves the SAU, then NBN will be permitted by law to charge these prices.

"We learned today that the ACCC has not yet approved the SAU.  In fact, the ACCC has not even received it - because NBN Co has not yet lodged it (even though, in NBN Co's December 2010 corporate plan, the company said it would lodge the SAU by March 2011.)

"With NBN Co going full steam ahead with building the network - it announced last week plans to connect another 485,100 premises - it is taking an extraordinary risk.

"NBN Co has announced the prices it plans to charge. For example, it will charge a wholesale price of $24 per line per month for the entry level service (12 Mbps down and 1 Mbps up.)

"But these prices have not been approved by the ACCC - and there is no guarantee that they will be. Since the SAU mechanism was introduced for telecommunications networks, there have been three SAUs lodged with the ACCC - and it rejected two of them.

"The SAU will not set just one price, it will set prices for multiple services - the entry level 12 Mbps service, and a range of higher speed services.  It will also set a 'price path' - that is, how those prices will change over a period of up to thirty years.

"It is quite possible that the ACCC might decide it is comfortable with the 12 Mbps price - but not with the 100 Mbps price. Or it might find that the opening prices are acceptable, but not the price path over time.

"Unless the ACCC is comfortable with every substantial aspect of the SAU, it cannot approve it. The law does not allow the ACCC to accept some parts of the SAU and reject others. (All it can do is reject the whole document while indicating the changes it would need to approve a modified document.)

"All of this takes time - and the clock has not yet even started ticking because NBN Co has not yet lodged its SAU.

"The Act gives the ACCC at least six months to consider the SAU, with a power to extend the timeline if required.

"Allowing for the various steps in the process - including for example issuing a discussion paper and seeking comment - in practical terms it is likely to take six to twelve months before a final decision is handed down.

"Unless and until the SAU is accepted, NBN Co is facing major commercial risk.  It does not know whether its proposed wholesale prices will be accepted.
 
"The risk is compounded by the fact that the SAU is not the only way of setting pricing.  Another approach is for the ACCC to make an access determination which will set the prices NBN Co may charge."