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  • News, Telecommunications - Written by on Thursday, April 4, 2013 11:39 - 14 Comments

    ACCC knocks back NBN Co contract

    rod-sims

    news The Australian Competition and Consumer Commission has issued a draft decision rejecting the ‘Special Access Undertaking’ (SAU) which will guide NBN Co’s long-term relationship with the regulator and retail ISPs, noting that the contract had a great deal of merit but still needed work.

    “Having given this matter detailed consideration, and after considerable consultation with relevant parties, the ACCC is providing its views on the SAU submitted by NBN Co. We are today proposing a number of changes, and consulting on the precise form of those changes,” ACCC Chairman Rod Sims (pictured) said in a statement issued this morning.

    “… the ACCC’s preliminary view is that it is not satisfied that the SAU meets the relevant criteria for acceptance,” Sims said. “The SAU is a complex undertaking that NBN Co proposes will operate until 2040. It is therefore important that the rights or obligations the SAU imposes on NBN Co, access seekers and the ACCC are reasonable, in the long-term interests of end-users and clearly expressed so that they are well understood by all parties.”

    The regulator has issued a consultation paper with a list of proposed changes to NBN Co’s agreement, with the key amendments being:

    • Specific drafting amendments to provide certainty about how NBN Co will comply with its obligations under the telecommunications access regime; specifically any ACCC regulatory rulings;
    • Amendments allowing for periodic price re-balancing through review by the ACCC, with the outcomes of these reviews to be constrained on the basis that any changes to price structures or relative prices must be “revenue neutral” in their effect;
    • Amendments to clarify that the ACCC could have a role in overseeing the withdrawal of products and the introduction of new products and their prices, should the need arise, “mainly to support an effective price cap regime”;
    • Amendments which allow a greater degree of flexibility in the approach that will be adopted at various points in time throughout the SAU, to mirror usual regulatory practice and so encourage efficient investment in and operation of the network; and
    • The removal of a number of proposed non-price terms from the SAU, including those relating to service levels, in order to facilitate effective commercial negotiation.

    A number of the proposals, according to the ACCC, are directed towards ensuring that, for matters not directly dealt with in the SAU, the access regime would continue to operate in the ordinary way. They would, the regulator said, also preserve the primacy of commercially negotiated access agreements in the regime.

    “An SAU varied in line with the ACCC’s proposals would provide considerable certainty to NBN Co that it will be able to recover the prudent costs of its investment, subject, of course, to demand for its services meeting expectations. NBN Co’s assets would not be subject to re-valuation once the NBN is built, and any changes to price structures would be revenue neutral,” Sims said.

    However, the regulator also praised many of the existing features of the SAU as having “merit”. For example, the ACCC said that the ‘modular’ design of the SAU as submitted by NBN Co allowed for different matters to be ‘locked in’ for different periods of time. This meant a balance could be struck between providing certainty about long term cost recovery and allowing for flexibility to respond to changing circumstances.
    In addition, the regulator said that the initial prices set out in the SAU were generally likely to allow for a smooth transition from existing telecommunications networks and the revenue constraint providesdNBN Co with the opportunity to recover its prudent costs over the term of the SAU.

    Long term commitments not to raise prices above the CPI-1.5% (consumer price index) price control provided significant price certainty, according to the ACCC, and had the potential to create incentives for NBN Co to efficiently operate and invest in the NBN; and commitments to consult with customers on various matters had the potential to reduce “information asymmetries” between NBN Co and its customers.

    Following feedback on the proposed changes, the ACCC expects that the next step it would take in the process is to issue to NBN Co a formal notice to vary the SAU. If the ACCC proceeds to formally issue such a notice, NBN Co may make changes to the original SAU within the time period set by the ACCC without having to lodge a new SAU. However, there is no obligation on NBN Co to vary the SAU. The ACCC will aim to issue the notice to vary to NBN Co around May 2013. If NBN Co submits a varied SAU in response to the ACCC’s notice to vary, the ACCC will consult on the varied SAU.

    Communications Minister Stephen Conroy welcomed the ACCC’s decision.

    “The ACCC’s draft decision demonstrates that the fundamental framework of NBN Co’s SAU is acceptable to the Commission,” Conroy said in a statement. “The ACCC is generally satisfied with NBN Co’s proposed long term cost recovery arrangements. This will enable NBN Co to recover the government’s investment and earn a fair rate of return. The ACCC is also satisfied with a range of mechanisms that provides certainty for NBN Co’s customers and end-users. In particular, I welcome the ACCC’s support for NBN Co’s initial prices and its ongoing price cap that will ensure prices decrease in real terms until 2040.”

    “I encourage NBN Co and access seekers to engage constructively in the coming weeks to finalise the SAU,” Conroy added. “The Commission’s draft decision clearly demonstrates that NBN Co is subject to effective regulatory oversight. “The SAU model is exactly the type of transparency and rigour the government had in mind when the legislative framework around the National Broadband Network was established.”

    NBN Co is expected to issue a statement on the decision shortly.

    opinion/analysis
    This all appears to be normal boring regulatory back and forth between the regulator and the future wholesale telco monopolist; nothing here really stands out as controversial.

    Image credit: ACCC

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    14 Comments

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    1. RocK_M
      Posted 04/04/2013 at 12:07 pm | Permalink |

      WRONG RENAI!

      Can’t you see this is further proof on how horrible and anti competitive the NBN is? ACCC knocked back a request on something rather I can’t be bothered to read so IT MUST BE BAD! And if ACCC says its BAD then NBN MUST BE BAD! DESTROY THE NBN!

      (sorry couldn’t help it xD)

      • Zwan
        Posted 04/04/2013 at 12:18 pm | Permalink |

        Isn’t the whole point of the NBN to BE a monopoly that’s anti competitive…

        • GongGav
          Posted 04/04/2013 at 1:09 pm | Permalink |

          Well, yes. But why does that need to be a bad thing? If people remember when Telstra was effective, and gave good value for service, it was when they were known as Telecom. It was only after they STOPPED being a monopoly that they went bad.

          Monopolies work in the right circumstances, and thats generally at the wholesale level, which is where NBN sits.

          Not reading that your pro or anti monopoly, just tossing the comment out there. Far too many people preach that monopolies are bad as if its some self fulfilling mantra, when thats not always the case.

          • alain
            Posted 04/04/2013 at 3:42 pm | Permalink |

            ‘ It was only after they STOPPED being a monopoly that they went bad.’

            umm what? – when did they STOP being a monopoly?

            • Posted 04/04/2013 at 3:47 pm | Permalink |

              Hey alain,

              Telstra is no longer a retail monopoly in the Australian market; nor do they have a wholesale monopoly, given the HFC cable footprint and the existence of mobile broadband.

              I remind you of our comments policy:

              http://delimiter.com.au/comments-policy/

              “Comments which display a lack of rationality or reasonableness. For example, a number of commenters on Delimiter over the past year have engaged in the debate, but consistently avoided acknowledging substantive issues raised by other commenters in relation to their argument. Instead, they have deliberately diverted the discussion down another path, annoying many other commenters.”

              Cheers,

              Renai

          • Northern Blue
            Posted 04/04/2013 at 6:16 pm | Permalink |

            “effective, and gave good value for service,”. Telecom?!! You are kidding right? Telstra is a light year ahead on service and product support compared to the equivalent Telecom offerings and costings of the time. The primary argument AGAINST the NBN delivery is that it MIGHT end up being another Telecom.

            • GongGav
              Posted 05/04/2013 at 9:27 am | Permalink |

              My argument is that of all the publicly owned companies that went private, pretty much none of them got better afterwards. My memories of Telecom were that they at least maintained the network, charged $5/month for line rental, and you could generally call and get an Australian on the other end of the line. They werent perfect, but they were better than what we have today.

              Today, Telstra does maintenence as a last resort, charges $20/month for no additional benefits, and has outsourcedits call centres to India. All moves intended to maximise their profit margin for shareholders, which at the end of the day is the source of their changes. And if you want face to face service, have you tried going into one of their stores these days?

              Nothing will change while private companies run necessary utilities at the wholesale level.

              If there were problems with Telecom, it was at the retail level, not the infrastructure level and the sad thing is that this could have largely been avoided if the retail and wholesale arms were separated in the first place.

              • TechinBris
                Posted 05/04/2013 at 11:54 am | Permalink |

                +1

        • Woolfe
          Posted 04/04/2013 at 2:17 pm | Permalink |

          That’s a good question. Is it anti-competitive tho. Ok I understand by just existing it basically puts out of action any competing infrastructure of similar nature. Except that you will still have some other options. For example Telstra’s wireless etc.

          But the key difference is that they are not actively preventing future competition are they. Except for the Wireless stuff with Telstra, but that is a stop against Telstra using its incumbent current monopoly to coerce people IMO.

          If once the network is built, someone came along and created a different type of network, they wouldn’t be actively stopping this would they? Its not like the wholesale price would change… Would it???

          • Karl
            Posted 04/04/2013 at 2:58 pm | Permalink |

            Right, anybody can lay competing infrastructure as long as it is open access (any provider can sell services over it).

            Competition is a bad thing in the case of natural monopolies. One of the main reasons for the existence of government, at the most basic level, is to regulate natural monopolies. There’s really no issue here.

      • Posted 04/04/2013 at 12:19 pm | Permalink |

        :D

    2. TrevorX
      Posted 04/04/2013 at 12:39 pm | Permalink |

      The scope of the SAU protects consumers from a profit hungry privatised NBN Co, which is entirely possible (if not likely) under a Liberal Government. The ammendments suggested by the ACCC are all very positive – the staff they have working on this issue and the groups consulting to them should be commended IMO.

      If only they could protect the NBN from being stopped or dismantled with a regulatory framework ;-)

    3. Posted 04/04/2013 at 12:55 pm | Permalink |

      NBN Co’s media release:


      ACCC outlines process to finalise NBN Co’s Special Access Undertaking

      Clarity provided on the remaining issues for refinement

      NBN Co welcomes today’s draft decision by the ACCC on NBN Co’s Special Access Undertaking (SAU) as it sets out a clear path towards a final SAU, providing certainty for industry and NBN Co.

      The ACCC’s draft decision on the SAU is the necessary and anticipated next step in the iterative process of developing the new regulatory framework for the operation of the National Broadband Network.

      NBN Co Head of Regulatory Affairs and Industry Analysis, Caroline Lovell said: “We appreciate that the ACCC has a challenging task in balancing the views of a range of stakeholders in order to achieve a framework that is in the long-term interests of end users. We will continue to engage with industry and the ACCC as the remaining issues are resolved to ensure that an appropriate balance is achieved.

      “Importantly, the draft decision indicates the ACCC is minded to accept fundamental elements of the Special Access Undertaking,” Ms Lovell said.

      These elements include:
      -The long-term commitments not to raise prices above CPI-1.5%;
      -A flexible, modular SAU, with different timeframes for different matters within a 27-year framework;
      -The opportunity for NBN Co to recover its prudently incurred costs over the term of the SAU including a reasonable return on its investment; and
      -The initial pricing for products, which allow a smooth transition from existing telecommunications network.

      The SAU also contains a commitment to freeze the wholesale price of NBN Co’s key consumer and business products until mid 2017 and to peg any future price rises to below the rate of inflation, which is a major feature of the undertaking.

      “At the same time, the ACCC identifies the last remaining issues for refinement, and potential solutions in respect of these issues, for NBN Co to finalise the SAU,” Ms Lovell said.

      The ACCC’s draft decision is accompanied by a consultation paper, seeking submissions to assist the ACCC to draft a variation notice.

      NBN Co remains committed to working with the ACCC and industry to finalise the Special Access Undertaking as soon as possible now that the ACCC has undertaken its detailed analysis.

      • Posted 04/04/2013 at 3:57 pm | Permalink |

        And here’s a comment from the Competitive Carriers’ Coalition:


        ACCC paves way for workable NBN arrangements

        The ACCC’s draft decision on the changes needed to NBN Co’s access undertaking was a well-considered list and should result in a workable model for the industry, the Competitive Carriers’ Coalition said today.

        The CCC looks forward to seeing the precise changes proposed by the Commission when it releases the notice to vary the undertaking in the next month.

        “The Commission has clearly listened carefully to industry concerns about the need to balance certainty for NBN Co with the need to allow the industry to adapt and change over the next 30 years,” CCC chairman Matt Healy said.

        “Competitors have consistently said this requires the ability for the Commission to be asked to provide a judgment on areas of dispute between NBN Co and retailers.

        “It is pleasing to see that the Commission has acknowledged that providing such a dispute resolution option would make it easier for commercial agreements to be reached as customers of NBN Co would be less concerned that they had no choice but to accept prices, terms and conditions offered by NBN Co,” Mr Healy said.

        Another important point in the Commission’s paper was that NBN Co’s commercial risks and uncertainty would probably reduce over time. This meant that while it was appropriate that NBN Co had price certainty in the first few years, it was reasonable that prices be re-examined in future and not locking in for the 27 year term of NBN Co’s undertaking.

        “The Commission notes that NBN Co becomes more like a standard utility over time and the regulation of it should therefore move closer to the accepted models for other utilities as that occurs,” Mr Healy said.

        The CCC is greatly encouraged by these principles.




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