ACCC wary of NBN price shock for telcos, consumers

NBN Co CEO Stephen Rue

NBN Co has gone back to the drawing board in an effort to come up with changes to a key agreement governing its wholesale operations that will offer it flexibility but be acceptable to Australia’s competition and consumer watchdog.

NBN Co has withdrawn a series of proposed changes to the Special Access Undertaking (SAU) after the Australian Competition and Consumer Commission (ACCC) expressed concern over some of the revisions.

The SAU is a key document governing NBN Co’s role as a wholesale-only network operator and sets out price and non-price terms relating to access to the company's infrastructure.

NBN Co in 2016 lodged proposed changes to the SAU that would have reflected its shift to a multi-technology mix (MTM) model for the NBN rollout (the SAU was originally lodged with the ACCC in 2013). In March 2017 the ACCC expressed concern over some of NBN Co’s proposals, which the competition watchdog said may have the effect of eroding its oversight of parts of the new network.

In October 2017, the ACCC pressed pause on its assessment of the SAU revisions while NBN Co looked at possible pricing changes.

In a letter to the ACCC sent late last month, NBN Co CEO Stephen Rue said that since the company had lodged its proposed changes to the SAU, it had undertaken “several pricing and discounting initiatives”.

Those have included its dimension-based discounting scheme, a ‘Focus on 50’ discount for 50Mbps services, the launch of bundled fixed-line and fixed-wireless bundled products,  and a new entry-level offering.

Rue said that the pricing initiatives have had a “very positive” impact and have promoted “the long-term interests of end users”.

The NBN Co CEO said that in light of the pricing and discount changes, feedback from retail service providers and feedback from the ACCC during the LTRCM process, the company would withdraw the proposed SAU variation.

Rue wrote that the company “plans to re-lodge a new SAU variation, and will seek to do so as soon as practicable.”

That variation will cover a range of issues including “affording additional price certainty to RSPs regarding NBN’s pricing and discounting approach going forward, while also providing a reasonable degree of flexibility to NBN to price experiment and introduce innovative and efficient pricing arrangements to promote the long-term interests of end-users.”

The SAU constrains NBN Co revenue, allowing it to recover “only its prudent and efficient costs, and no more, for the duration of the SAU,” the ACCC said in its update on the SAU variation process.

“The use of discounts also allows NBN Co the flexibility to respond to market demands or changes in a timely way,” the ACCC said.

“However, implementing price changes through the discount mechanism means that the bundled offers or promotions are outside of the SAU framework and the price controls... do not apply. This means that NBN Co is able to increase the discounted prices (up to the price caps) at any time, subject to the notice period listed in the relevant discount notice.”

“We are concerned that this undermines a central objective of the SAU which is to ensure certainty for access seekers and to minimise price shocks for consumers and businesses using the NBN,” the ACCC said.