Anna Brakey (Australian Competition and Consumer Commission)
The Australian Competition and Consumer Commission (ACCC) has rejected NBN Co’s proposed variation to its Special Access Undertaking (SAU).
The draft decision was reached following a thorough assessment and extensive engagement with NBN Co, retail service providers (RSPs), consumer representatives and other stakeholders.
“The ACCC can only decide to accept or reject NBN Co’s variation proposal and our draft decision today is to reject this proposal. However, in making our decision, we have identified a number of aspects of it that reflect issues raised in the ongoing industry consultation process and which represent a significant improvement on the current SAU and earlier variation proposals,” ACCC Commissioner Anna Brakey said.
“We have also outlined some specific issues NBN Co could address to accelerate the pathway to an acceptable variation.”
Alongside its draft decision, the ACCC also revealed a letter received in March from NBN Co outlining a number of changes it would be willing to make in a further variation proposal in response to concerns raised with the November proposal.
The watchdog said it welcomed NBN Co’s preparedness to make changes that could result in a revised SAU variation that is capable of acceptance.
The SAU is a key part of the economic regulation of the National Broadband Network (NBN). It sets the rules for broadband providers to access the NBN over the coming decades, which can include minimum service standards and wholesale price controls.
The ACCC explained it was “not at this time satisfied that the November proposed variation would result in access terms that promote the long-term interests of consumers over the duration of the variation, due to limitations in the processes under which those terms of access are periodically reset.”
Additionally, the ACCC considered the proposal would require revenue allowances from 1 July 2032 that would not create incentives for a regulated entity to act efficiently.
The ACCC also considered that “NBN Co’s proposed access terms for the first three years following acceptance of the variation would pose risks to efficiency and competition”.
“This is because the cost of services supplied using the standard wholesale offer would fall over a very wide range and the variation would not commit NBN Co to providing suitable measures to assist retailers with this residual cost uncertainty,” the ACCC said in a statement.
“A commitment to consult with retailers and consumer advocates over planned service improvements would also assist NBN Co in more effectively resolving issues that drive poor consumer sentiment, including through reprioritising its investment and work programs.”
The watchdog is now seeking stakeholder submissions on its draft decision, as well as industry views on the further changes NBN Co has proposed in its March letter.
NBN Co acknowledged the ACCC’s decision and chief legal and regulatory affairs officer Jane van Beelen said it will work quickly and constructively to deliver a revised SAU variation proposal in June 2023, which will be subject to further consultation.
“Once the SAU variation is accepted and implemented through our new Wholesale Broadband Agreement [WBA], which is being developed in parallel, we look forward to delivering new wholesale prices, additional data inclusions and certainty to RSPs, customers and the industry as a whole,” Beelen said.
NBN Co’s letter to the ACCC outlined a number of adjustments the company was planning to make to its proposed SAU variation, which the NBN builder claimed provide a pathway to acceptance.
This included wholesale pricing of the 50/20 Mpbs bundle, plans to remove CVC (capacity) charges and introduce AVC-only pricing for the nbn Home Fast (100 Mbps) and above wholesale speed tiers within three months of SAU Variation acceptance.
NBN Co also intends to offer all RSPs a number of additional monitoring and reporting tools, as well as continue to maintain high levels of direct engagement, which will provide insights into bandwidth consumption at individual customers.
The company is also planning to extend a CVC TC-4 overage waiver threshold for RSPs that are sub-scale at a Connectivity Serving Area (CSA), effectively removing CVC TC-4 overage charges for such CSAs and promoting the expansion of services to customers in areas where that RSP has previously had minimal or no market presence.
The proposed overage waiver threshold has been adjusted to 700Mbps or less of CVC use, measured daily, which accounts for the NBN Home Fast (100Mbps) and above wholesale speed tiers moving to AVC-only wholesale pricing and the introduction of a utilisation-based billing approach under the proposed SAU variation.
NBN Co is also proposing to incorporate a new commitment for the first regulatory cycle (FY24 - FY26) to publish an annual service improvement plan and conduct an annual service performance review against set WBA service levels and performance objectives.
The service performance review will provide a structured review of WBA service standards, NBN Co’s performance against these over the prior 12-month period and related RSP feedback.
NBN Co will publish a service performance review by the end of FY24 and FY25, including any service standards changes considered in response to the review.
These are in addition to the benchmark service standards commitments.
NBN Co also considered feedback from RSPs and plans to amend the definition of what was previously described as a ‘voice-only bundle’ to accommodate and enable basic broadband usage.
The builder reaffirmed its plans – subject to acceptance of the SAU variation – to reduce the Initial Cost Recovery Account (ICRA) from an estimated $44 billion to $12.5 billion and forgo the recovery of any further regulatory losses in the period after FY23.
The company proposes to make a number of changes to address the ACCC’s concerns relating to post-2032 arrangements.
The changes seek to establish an appropriate drawdown profile of the Module 3 ICRA, over the period from 2032 to 2040, that affords the company an opportunity to transition to a position in which it can satisfy quantitative financial metrics consistent with achieving and maintaining a standalone investment grade credit rating with a stable outlook.
NBN Co plans to retain the proposed SAU variation provisions that substantially expand the ACCC’s role under the SAU from 2032 onwards, which will give the ACCC the power to reset NBN Co’s revenue and pricing regulation framework from 2032.
A new clause will also make it clear the ACCC can require NBN Co to provide specific information when it lodges a replacement module application.
The second clause gives the ACCC the ability to extend its decision-making period for a replacement module determination by up to six months, which effectively extends deliberation time to up to 24 months in total.
