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NBN Co submitted its revised SAU on 28 September after the ACCC, and the rest of the industry expressed serious concerns with the initial version, submitted to the ACCC in December 2011.

Ergas takes issue with NBN Co's wholesale pricing structure - a uniform price right across Australia regardless of location or technology (fibre, wireless or satellite) - and argues that, even though NBN Co has been directed to apply such a pricing, the ACCC is under no obligation to accept it. Rather, he says NBN Co wholesale prices should reflect costs, or the cost of subsidising uniform prices should be met by direct government subsidies.

"...the Commission should disallow NBN Co from recouping any subsidies to high cost areas from its overall allowed revenues. Instead, NBN Co should be required to set prices in low cost areas at levels that reflect costs in those areas. If it chooses to set prices in high cost areas at levels that match those in low cost areas, the consequent losses should be recouped through a charge on government. Such a charge would obviously be reflected in the government's budget process and hence would be subject to the disciplines, transparency and public accountability that process involves."

However, in a statement of expectations issued to NBN Co in December 2010 the minister for finance and deregulation, Penny Wong, and communications minister, Stephe Conroy said: "In support of the Government's objective of enabling uniform national wholesale prices, NBN Co will be required to charge access seekers uniformly for services across its network for all technologies and for the basic service offering."

Ergas argues that the ACCC can either overrule this edict on the grounds that it is not in the long term interest of end users - a requirement of the Competition and Consumer Act against which the ACCC must assess the SAU - or if it decides that the uniform wholesale price does meet this requirement "there is no reason the government's pursuit of uniform pricing should be financed through a tax on NBN Co's consumers."

The ACCC cannot request modifications to the SAU to make it acceptable, it can only accept or reject it in its entirety. This requirement lead to NBN Co, after much discussion with the ACCC, withdrawing the initial version of the SAU in early September.
In the submission Ergas also comes out against more general aspects of government NBN policy that are outside the scope of the SAU. In particular he dislikes the oft repeated justification for the NBN, namely that will bring economic benefits across a wide range of industries. He argues that any such gains must be identifed and quantified and the cost of achieving them met by the beneficiaries, or by Government directly.

"To the extent to which there are such benefits, the full incremental costs associated with making them available should be charged to the entities that will enjoy the claimed savings. This is crucial to ensure that those entities in fact value these benefits at more than their cost... In practice, recoupment of these costs may best be achieved by mandating that they be recovered directly from the Commonwealth."

When it received the revised SAU the ACCC said it intended "to consult with stakeholders and industry by releasing a consultation paper in early November 2012, as well as hosting an industry forum."

Interested parties have until January 2013 to lodge submissions, and the ACCC hopes to release a draft decision on the SAU by March 2013.

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