NBN Co wants to retain discretion over pricing
- 20 June, 2012 16:20
NBN Co will lodge a revised Special Access Undertaking (SAU) with the Australian Competition and Consumer Commission (ACCC), following feedback from customers and the ACCC.
The ACCC has suspended its assessment of the current SAU lodged with the watchdog in anticipation of receiving a revised SAU.
The initial SAU NBN Co lodged with the ACCC was criticised by ISPs. It was designed to guarantee fixed wholesale prices over the next five years to service providers and provide a regulatory framework for NBN wholesale services over 30 years. It has also been created to work in conjunction with the wholesale broadband agreement (WBA), which defines commercial arrangements between NBN Co and ISPs over shorter time spans.
NBN Co has stated that its revised SAU will provide more flexibility for terms to evolve over time and more certainty over its long-term cost recovery arrangements.
While the revised proposal is a back down from its initial SAU, an NBN Co outline of design principles for the new agreement states: "NBN Co will have discretion to set initial prices for new products and ongoing prices for existing products (with no conferral of powers on the ACCC to determine such prices), subject to compliance with SAU commitments."
The company's initial SAU garnered fierce opposition from telcos such as Telstra, which previously voiced concerns over NBN Co’s flexibility over pricing.
“The limited scope of the price controls and the degree of flexibility the NBN Co SAU gives NBN Co over the pricing of new products and ancillary charges should be a key focus of the ACCC’s consideration of the SAU,” Telstra said in its submission to the ACCC on the SAU.
“Given the proposed term of the NBN Co SAU of some 30 years, it may be anticipated that within that term many new products will be introduced as technology evolves and end-user preferences change.”
However, Jim Hassell, NBN Co head of product management and industry relations, said in a statement that its revised approach will maintain affordable prices.
“The approach continues to lock in the prices of key products for five years, maintains price controls over all products, and in addition now confirms NBN Co’s intention to decrease the price of the connectivity virtual circuit as demand increases,” he said.
NBN Co's revised SAU will encompass four modules, with 'Module 0' covering the entire 30-year life of the SAU and including foundation terms for the undertaking.
Module 1 covers a 10-year duration and includes price controls, product development, non-price terms and conditions and the operation of the long-term revenue constraint mechanism.
Module 2 would apply from year 11 to the end of the undertaking and cover long-term cost recovery and pricing.
Finally, Module 3 would comprise detailed terms and would be used in conjunction with Module 2 after Module 1 has been completed. During Module 3, NBN Co would submit a varied SAU to the ACCC for assessment, a process that would be repeated every three to five years.
NBN Co lodged its initial SAU to the ACCC in December last year.
In its supplementary consultation paper in response to NBN Co’s initial SAU, the ACCC highlighted a number of issues, including NBN Co retaining sole power to vary the SAU over its 30-year term; the lack of service level commitments in the SAU; and pricing oversight.
NBN Co stated in an outline of a new SAU that its revised proposal “does not necessarily represent NBN Co’s final position”.
The SAU will be further revised by NBN Co, in consultation with the ACCC, with the ACCC to approve the document in the coming months.
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