NBN Co’s use of temporary discounts to implement new product offerings has drawn renewed scrutiny from the Australian Competition and Consumer Commission (ACCC), which says it is concerned about pricing uncertainty for retail service providers (RSPs).
The special access undertaking (SAU) lodged by NBN Co with the ACCC outlines key details of the government-owned company’s operation as a wholesale-only network operator. It sets out access principles for NBN Co’s network through to June 2040, and includes restrictions on the company withdrawing products as well as maximum prices for NBN access (AVC) and capacity (CVC).
NBN Co in late 2018 announced it was going back to the drawing board to come up with proposed changes to the SAU, after the ACCC indicated it wasn’t sold on some revisions put forward by the company.
Increasingly, however, NBN Co has turned to discount notices that sit outside the SAU to vary its prices and develop new product constructs.
The ACCC has previously expressed its concern over the approach and in a discussion paper published today, the competition watchdog noted that the prices outlined in the SAU and the actual prices charged by NBN Co have “diverged substantially” thanks to a range of discounts introduced by the wholesaler.
The ACCC said that as a result of NBN Co relying on discount notices outside of the SAU to set the effective prices of its services, RSPs (the telcos that sell NBN-based services to consumers and businesses) face a considerable level of pricing uncertainty.
An additional result of the reliance on discounts is that NBN pricing and product constructs are “increasingly complex” with the “potential for access costs to vary considerably where the various discount conditions are not satisfied”.
The ACCC discussion paper seeks input on whether changes to NBN Co’s pricing approach are required in order to “provide pricing certainty for access seekers and to safeguard the interests of end-users”.
“This lack of certainty creates unnecessary risks that may ultimately be passed on to consumers, who may face higher prices and reduced quality and product offerings as a result,” ACCC chair Rod Sims said.
An NBN Co spokesperson said that to increase future certainty for retailers and end users the company would publish a “rolling two-year roadmap of future pricing across all wholesale speed tiers.”
Also canvassed in the ACCC paper is the issue of transfer fees charged when an NBN service is transferred between RSPs. NBN Co charges $22.50 to shift an active service from one RSP to another but currently does not generally charge for installing or reactivating an NBN service.
“As a consequence the service transfer fees can represent a cost that incumbents did not face when migrating end-users to the NBN,” the ACCC paper states. (NBN Co plans to implement from 1 December a discount that will reduce to $5 the effective service transfer fee.)
A particular focus of the ACCC is the pricing of ‘ASDL equivalent’ 12/1Mbps services on the NBN.
“We have concerns that NBN Co’s wholesale pricing has resulted in unfair outcomes for those consumers who have no need for, or do not want, higher speed plans,” Sims said in a statement.
“Most consumers have no choice but to migrate to the NBN if they want to keep their home service active, but are at risk of not being able to obtain a comparable NBN service at a similar price to their ADSL service.”
Sims in April said he was concerned that NBN Co’s pricing structures meant that the wholesale cost of an unlimited 12/1 service could be substantially higher than ADSL services. NBN Co in September revealed it planned to make it significantly more economical for RSPs to offer 12/1 services.
The new ACCC inquiry enables the competition regulator to potentially step in and issue a final access determination (FAD) to lock-in default prices and access conditions that will apply if an RSP can’t reach agreement with NBN Co.
“We welcome any additional options the ACCC may identify through its Access Pricing Inquiry to promote competition and the interests of customers, while allowing NBN Co the opportunity to grow its revenues and re-invest in the network,” NBN Co's spokesperson said.
“NBN Co has been working cooperatively with the ACCC, retail service providers (RSPs) and industry groups to ensure our entry level wholesale pricing provides a smooth transition for customers migrating from legacy phone and internet services to the NBN.
“As part of our strong commitment to the entry level, price-sensitive segment, we introduced a modified 12/1 Entry Level Bundle (mELB) discount on 1 October 2019. The discount provides retail service providers (RSPs) with the flexibility to develop affordable 12/1 broadband plans for a similar price to legacy products, with either capped or uncapped data inclusions.”