Australian regulator again knocks back NBN Co proposal

The saga to create new rules for access to Australia's national broadband network is set to run on even longer.

For the second time, competition regulator ACCC has rejected a draft offer from NBN Co, declaring that it was unlikely to promote the long-term interests of consumers. In its 104-page decision the ACCC also said NBN Co's proposal to periodically reset terms of access were not reasonable and would not promote efficiency and competition.

It said the rules for the initial three-year period, starting from July 1 this year, would be "unlikely to efficiently address existing drivers of poor consumer sentiment towards NBN services, remove inefficient costs from the NBN supply chain, and promote retail competition."

That said, ACCC Commissioner Anna Brakey acknowledged in a statement that some aspects of the NBN proposal were "a significant improvement" on earlier drafts.

Figure 1: ACCC again rejects NBN offer on new broadband access rules.
(Source: STRINGER Image/Alamy Stock Photo)

NBN Co said it would withdraw the proposal and lodge an amended version by early next month.

For the past two years, the ACCC has been running an industry consultation to agree a new pricing and service framework for retail service providers accessing the NBN.

It says the NBN Co commitments, which are known in the jargon as special access undertakings (SAU) and include minimum service standards and price caps, are a critical part of the regulation of the broadband industry.

NBN Co's viability

It says the access framework, established in 2013 and with another 17 years to run, required a fundamental overhaul to be effective.

One of the big flaws of the current regime is, incredibly, that it only covers access technologies such as FTTH and fixed-wireless that account for around a quarter of all connections. The most widely-used technologies, HFC and copper, are not included.

Additionally, retail ISPs have complained bitterly that the current model is unviable because it is heavily weighted to usage-based charging. But the deeper problem, in the eyes of many analysts, is the viability of NBN Co itself.

It is a government-funded entity with accumulated debts of 36 billion Australian dollars (US$24.1 billion) and, in this view, was kneecapped by a conservative government makeover that replaced the vast bulk of the planned fiber rollout with copper and coax.

As the ACCC noted in its decision, "NBN Co's revenues are materially below efficient cost levels, and that growth in demand alone could not reasonably be anticipated to make good this shortfall."

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Commissioner Brakey said the regulator was "acutely aware that the process to vary the current NBN SAU has been running for two years and we appreciate the open and ongoing engagement by the sector through that time."

"This is critical, national infrastructure and to accept a [SAU] variation we must be satisfied it promotes the long-term interests of Australians."

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— Robert Clark, contributing editor, special to Light Reading