NBN Co pushes back against ACCC pricing intervention

Warns of ‘unintended consequences’

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Martyn Williams/IDGNS

NBN Co has strongly pushed back against a suggestion by the Australian Competition and Consumer Commission (ACCC) that it could regulate the pricing of the NBN entry-level broadband offering.

In October, the ACCC launched an inquiry into the prices NBN Co charges retail service providers (RSPs). The commission said at the time that a particular concern was the pricing of basic ‘ADSL equivalent’ broadband services based on the slowest NBN wholesale speed tier of 12/1Mbps.

The ACCC’s chair, Rod Sims, has repeatedly expressed concern over the pricing of entry-level NBN services when compared to the pricing of legacy ADSL offerings.

A month before the ACCC kicked off its inquiry, NBN Co announced it would revamp its 12/1Mbps pricing, significantly cutting the effective price for RSPs to offer services based on the speed tier. The company also made changes to the fees charged when a service transfers from one RSP to another, which was another issue the ACCC said it would examine.

In November, NBN Co revealed further details of planned pricing changes, including allowing RSPs to pool unused data capacity (CVC) at a national level (rather than within a single ‘Connectivity Service Area’).

The ACCC today made public the submissions it received as part of the inquiry, including NBN Co’s.

NBN Co said the changes it has made to its prices as well as other moves including a commitment to a rolling two-year discount bundle roadmap “far outweigh the likely outcomes of any mandated pricing determinations that would be enforced by the ACCC”.

“NBN Co strongly opposes the prospect of ACCC regulation on the pricing of entry level services or any other higher speed nbn services on the grounds that there is no market failure requiring regulatory intervention,” a spokesperson for the company said in a statement.

“In fact, many NBN retail plans provide higher speeds and ‘unlimited’ data at a comparable or lower cost compared to legacy ADSL/ADSL+ plans, providing greater value for money for customers, including at the entry level.”

An underlying issue for the consultation is that most of NBN Co’s pricing decisions are taking outside of the Special Access Undertaking (SAU) between the company and the ACCC.

The SAU gives the ACCC a measure of oversight. However, the ACCC’s discussion paper for the consultation notes that since it initially accepted the SAU from NBN Co, the company “has typically chosen to develop product and pricing offers by way of discount notices which sit outside the price control mechanisms (including MRPs [maximum regulated prices]) set out in the SAU”.

“That is,” the paper states, “instead of gradually bringing down its prices and in turn the MRPs, NBN Co has taken the approach of setting effective prices by extensively deploying temporary discounts.”

“Any proposed regulatory determinations on pricing by the ACCC could have unintended consequences to the detriment of customers, anchoring pricing and incentives around retrospective views of internet usage, and unfavourably and disproportionately skew the business case for future network investment towards entry level broadband plans,” NBN Co’s spokesperson said.

The company’s submission to the ACCC inquiry argued that if any “intervention” on the pricing of entry-level services would “create artificial incentives for end users to remain on 12/1 nbn entry level services that are unlikely to satisfy their changing usage habits as many more devices run concurrently and puts at risk the ability for Australia to realise the full benefit of the investment in the nbn™ Network.”

“Price regulation would also impede NBN Co’s ability to recover its costs and repay the taxpayers of Australia,” the NBN Co spokesperson said.

“It would also undermine NBN Co’s ability to support the cross-subsidy required to support non-commercial services in regional and remote Australia. It also weakens our ability to invest in network upgrades in the future as demand for data increases.”

The company also argued that a move to further cut the cost of basic broadband services would undermine one of the key NBN operating principles: The revenue from the company’s fixed-line footprint subsidising the ‘non-commercial’ fixed-wireless and satellite services it uses to deliver connectivity to regional and remote communities.

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