Pricing uncertainty makes ACCC press pause on key NBN agreement

The Australian Competition and Consumer Commission says that won’t make a decision on changes proposed by NBN to the company’s Special Access Undertaking (SAU), at least for now.

The SAU is a key document that outlines NBN’s operations as a wholesale-only network operator. In 2016 NBN submitted proposed changes to the SAU to reflect the shift away from a fibre-only network to a ‘multi-technology mix’ (MTM) approach.

In March this year the ACCC rejected a number of proposals by NBN, including language in the SAU defining NBN’s network that the competition regulator said could erode its oversight of the National Broadband Network.

The ACCC today said that because NBN is undertaking a consultation with telcos (retail service providers or RSPs) that deliver services over NBN’s network about its pricing model, it would not make a decision on the proposed variation to the SAU.

“There has been a lot of discussion about NBN Co’s pricing, particularly around capacity issues and whether it is impacting consumers’ experiences on the NBN,” ACCC chairperson Rod Sims said.

“We think an industry outcome on NBN pricing is the best solution and preferable to a regulatory outcome. We welcome NBN Co’s initiative here and will let the process run its course.”

“We do not think it is appropriate to make a decision on the SAU variation until the pricing consultation is further progressed,” Sims said in a statement.

Changes to the pricing model could result in the need to submit further changes to the SAU, the ACCC said.

NBN’s pricing model has come under intense scrutiny, particularly the company’s Connectivity Virtual Circuit (CVC) charge.

NBN doesn’t deal directly with consumers; instead its customers are the RSPs that sell services to households. RSPs pay two key charges: CVC — a charge for capacity shared between an RSPs’ customers — and Access Virtual Circuit (AVC), which is a per end user charge based on the theoretical maximum speed of a connection (25/5Mbps, 100/40Mbps etc.)

The CVC element of NBN’s pricing structure has sometimes been blamed for pushing telcos to minimise the amount of bandwidth they purchase for end users, potentially resulting in poor network performance during peak usage periods. NBN CEO Bill Morrow has said that it is not CVC per se that is resulting in poor performance.

“The CVC – like the cost of marketing, customer service, labour, their own network and others – is just one of many variables that make up the cost base of RSPs when delivering broadband to their customers,” Morrow argued earlier this year.

“To suggest the CVC affects the quality of service would also be saying the cost of every other expense item does the same. It is a conscious decision to save money in this area versus others.”

However in a position paper the CEO said that NBN knows “we need to evolve our pricing structure even further in a way that allows for a triple win solution for nbn, RSPs, and end-users”.

“This is a focus for the board and management and we will be working closely with our RSP partners and relevant stakeholders to address these issues and solve for the problem at hand,” Morrow said.

NBN has previously undertaken two major revisions of pricing. The most recent was this year when it introduced a ‘dimension-based discount’ scheme that worked on an individual RSP basis. Under the system, RSPs receive steeper CVC discounts as their capacity per end user ratio increases.