Turnbull tells NBN Co's CEO he should back down

While Malcolm Turnbull has attacked NBN Co's revised SAU proposal, industry analysts agree it is a step in the right direction

Malcolm Turnbull has attacked NBN Co CEO, Mike Quigley, stating NBN Co’s backdown with its recently revised SAU proposal means the CEO can no longer claim a government-run “communications monopoly” will be friendlier than a private sector option.

NBN Co released its revised Special Access Undertaking (SAU) on Wednesday this week.

Turnbull, shadow minister for communications and broadband, said having to revise the SAU indicates Quigley should back down from his claim that the NBN was being built for the public good and not to maximise profit.

Quigley has previously stated the NBN "is being built as a public good. It's not being built to maximise profit. The way in which we've approached the network design and the network build is to provide the Australian public with the best possible utility network we can at the lowest cost as a public good."

However, Turnbull said there are three significant problems with NBN Co’s proposed SAU which refutes Quigley's assertions. For example, pricing constraints that are not applicable to all situations. This would allow NBN Co to increase prices and its returns with its CVC charge, Turnbull said.

NBN Co has also failed to provide service level assurances to RSPs, which would mean telcos such as Telstra and Optus would be unable to guarantee a set level of quality to end users, according to Turnbull.

Finally, he believes NBN Co could go unassessed by the Australian Competition and Consumer Commission (ACCC) over whether its planned investment in the network is prudent.

“All of this boils down to one elementary flaw of the NBN. A monopoly given unchecked power to recoup its capital expenditure will always charge consumers more than an enterprise which has invested wisely,” Turnbull said.

He also stated: “Instead of going back to the drawing board to find new ways to gouge consumers, NBN Co should be given the freedom to explore new ways to invest its capital more cost-effectively.”

However, industry analysts have been less critical of NBN Co’s revised SAU proposal.

Paul Budde, communications analyst at BuddeComm, said the review is a clear indication that a new regulatory regime is now in place and “No longer bullied by a vertical integrated telco as we had in the past”.

He said it is in NBN Co’s interests to have happy customers. However, NBN Co also needs to ensure the NBN stays economically viable.

“Another major difference with the past is that NBN Co, the industry and the ACCC are all talking to each other. Trying to solve these problems requires co-operation, something that again is rather new to the industry,” Budde said. “Players will have to learn to trust each other, and that is a slow process.”

Budde said once this trust is established and the adversarial positions of the past have ceased, it will be easier to manage the NBN over the next 30 years.

Chris Coughlan, director research consulting at Telsyte, said it is not surprising that NBN Co’s initial SAU was rejected – submitting entities typically submit proposals weighed more in their favour with the expectation it will be rejected by the ACCC.

“Then through discussion and negotiation with the ACCC, lobbied by industry through submissions, the entity will establish what will be the minimal acceptable position. This is what played out with Telstra's SSU submissions,” he said.

“In this case NBN Co has submitted a new SAU framework as the ACCC had signalled that the current submission was unlikely to be accepted. It would appear to be a better format and provides more certainty and flexibility for industry and the ACCC in the longer term as Module 1 only has a 10-year life[span].”

Follow Stephanie McDonald on Twitter: @stephmcdonald0

Follow Computerworld Australia on Twitter: @ComputerworldAU

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