Economists give NBN Co's undertaking the thumbs up

Stuart Corner
Thursday, 19 January 2012 15:44

IT Policy - Regulation

NBN Co has submitted to the ACCC a report commissioned from economics consultancy Synergies that recommends the ACCC accept NBN Co's special access undertaking, which sets out the price and non-price terms and conditions under which access seekers will gain access to NBN Co wholesale services.

In a covering letter accompanying the Synergies report, NBN Co says "Synergies' conclusions add weight to NBN Co's previous submission that the ACCC should accept the SAU." It adds: "Synergies was required to approach the exercise on the basis of 'constrained optimism'."

It explains: "Synergies was instructed by Webb Henderson, on behalf of NBN Co, to provide independent advice on whether particular mechanisms in the SAU are efficient. In considering efficiency, Synergies was instructed to consider the following three aspects of efficiency as conventionally understood by economists: productive efficiency; allocative efficiency; and dynamic efficiency."

The 'constraints' to Synergies' optimism were those set out in the 'Statement of Expectations' - a 14 page document issued to NBN Co in December 2010 by minister for finance and deregulation, Penny Wong, and communications minister, Stephen Conroy that provides the overarching guidance for the way NBN is developing its network and its business, and which represented the Governments' final response to the NBN implementation study.

These constraints were: recover costs plus a rate of return; adopt uniform national wholesale pricing; and rollout a nationwide network with a specified mix of technology, coverage and speed.

NBN Co says: "In this context, Synergies has confirmed that, in its view, the following SAU mechanisms can reasonably be expected to be efficient'¦"

The report is the second of several NBN plans to submit in support of its SAU. The first, lodged in September was prepared by Value Advisor Associates and covered  the weighted average cost of capital component of the SAU.