After a thorough assessment of NBN Co’s proposed variation to its Special Access Undertaking (SAU), and informed by constructive and extensive engagement with NBN Co, Retail Service Providers, consumer representatives and other stakeholders, the ACCC has today released a draft decision to reject the proposed variation.
“The ACCC can only decide to accept or reject NBN Co’s variation proposal, and our draft decision today is to reject this proposal. However, in making our decision, we have identified a number of aspects of it that reflect issues raised in the ongoing industry consultation process and which represent a significant improvement on the current SAU and earlier variation proposals,” ACCC Commissioner Anna Brakey said.
“We have also outlined some specific issues NBN Co could address to accelerate the pathway to an acceptable variation.”
Alongside its draft decision, the ACCC has published a letter received in March from NBN Co in which NBN Co outlines a number of changes it would be willing to make in a further variation proposal in response to concerns raised with the November proposal. The ACCC welcomes NBN Co’s preparedness to make changes that could result in a revised SAU variation that is capable of acceptance.
The SAU is a key part of the economic regulation of the NBN. It sets the rules for broadband providers to access the NBN over the coming decades, which can include minimum service standards and wholesale price controls.
Today’s draft decision explains why the ACCC is not at this time satisfied that the November proposed variation would result in access terms that promote the long-term interests of consumers over the duration of the variation, due to limitations in the processes under which those terms of access are periodically reset. Further, the ACCC considers the proposal would require revenue allowances from 1 July 2032 that would not create incentives for a regulated entity to act efficiently.
The ACCC also considers that NBN Co’s proposed access terms for the first three years following acceptance of the variation would pose risks to efficiency and competition. This is because the cost of services supplied using the standard wholesale offer would fall over a very wide range, and the variation would not commit NBN Co to providing suitable measures to assist retailers with this residual cost uncertainty.
A commitment to consult with retailers and consumer advocates over planned service improvements would also assist NBN Co in more effectively resolving issues that drive poor consumer sentiment, including through reprioritising its investment and work programs.
The ACCC is now seeking stakeholder submissions on its draft decision, as well as industry views on the further changes NBN Co has proposed in its March letter.
Should NBN Co withdraw its current variation proposal and resubmit a revised one, the ACCC would then publish and call for submissions on this new proposal.
“Australia needs an efficient, reliable and affordable national broadband network to be a world-leading digital economy. We are acutely aware that the process to vary the current NBN Special Access Undertaking has been running for two years and we appreciate the open and ongoing engagement by the sector through that time. This is critical, national infrastructure and to accept a variation we must be satisfied it promotes the long term interests of Australians,” Ms Brakey said.
The ACCC’s draft decision and the NBN Co letter are available at: NBN Co SAU variation (November 2022) Draft Decision
Stakeholder submissions in response to the ACCC’s draft decision are due by 30 May 2023.
Background
NBN Co’s services are taken to be declared under Part XIC of the Competition and Consumer Act (CCA), which enables the ACCC to regulate the terms and conditions of access, such as price, to apply where the terms of access cannot be agreed.
The CCA allows NBN Co to submit to the ACCC a variation to a Special Access Undertaking which is currently in operation. The ACCC must then decide whether to accept or reject the variation to the undertaking, in accordance with criteria set out in section 152CBD(2) of the CCA.
The CCA requires the ACCC to publish a proposed variation to an undertaking and invite and consider submissions on it.
The current undertaking provides a long-term regulatory framework for the supply of NBN Co’s services. It has been in place since 2013 and is scheduled to operate until 2040.
However, the current undertaking only applies to a subset of network technologies, namely fibre-to-the-premises, fixed wireless and satellite. This accounts for approximately one quarter of NBN’s services assets. Extending the undertaking to cover the other technologies would bring the majority of NBN assets into this regulatory framework.
In March 2022, NBN Co proposed a variation to its undertaking following extensive pre-lodgement engagement with its customers and other stakeholders that the ACCC facilitated. NBN Co withdrew this proposal in July 2022.
Since that time the ACCC has helped to facilitate NBN Co’s consideration of a revised proposal, including by convening an additional industry forum in August 2022. NBN Co lodged its revised Special Access Undertaking variation in November 2022.
The ACCC must either accept or reject the variation to the undertaking. The ACCC must not accept a proposal to vary an undertaking unless it is satisfied that it meets the statutory criteria, which includes assessing whether certain aspects will promote the long-term interests of end users, and whether the terms and conditions are reasonable.
If accepted, the transition to the new pricing arrangements under the variation to the undertaking would commence by three months after acceptance.
