ACCC accepts rule changes on 'more flexible' NBN technologies

A KEY change in how the National Broadband Network Company (NBN Co) is allowed to introduce new network technologies - part of the Federal Government's plan to speed up access to the NBN - has been accepted by the Australian Competition and Consumer Commission (ACCC).  

The ACCC has accepted the varied Special Access Undertaking (SAU) lodged by NBN Co on November 19, replacing the undertaking submitted by NBN Co in December 2012. It now guides prices and other terms upon which NBN Co will supply services to telecommunications companies until 2040.

"The acceptance of this SAU is a key milestone in establishing regulatory arrangements for the NBN," ACCC chairman Rod Sims said. "It is part of a broader set of regulatory and structural reforms that have occurred across the industry in recent years.

"The SAU will form the basis for how NBN Co can set its prices and change its product offerings over time. It will also form the basis for ACCC oversight of NBN Co's allowable revenues and prices."

What the SAU does is offer a ‘modular' structure that allows for different matters to be ‘locked in' for different periods of time. Mr Sims said this meant a balance could be struck between providing certainty about long term cost recovery and allowing for flexibility to respond to changing circumstances.

The SAU also allows a set of initial prices that are likely to allow for a smooth transition to the NBN from existing telecommunications networks without significant price shocks.

There are also price controls that prevent NBN Co from raising prices for any of its products by more than 1.5 percent of the Consumer Price Index (CPI)  in any year, which should help to provide significant price certainty and create incentives for NBN Co to operate and invest efficiently.

The SAU also provides pricing mechanisms that allow the ACCC to rebalance NBN Co's prices in a revenue neutral manner over the SAU term and to determine prices for new products introduced over the SAU term. Mr Sims said this meant prices could be adjusted in light of changing circumstances, which should promote the efficient use of the NBN.

ACCC also has oversight on the withdrawal of products and protections against NBN Co making variations to an existing product that reduces the functionality, performance or features of the product.

The agreement also provides an explicit role for the ACCC to determine NBN Co's allowable revenues until 2040. This feature is aimed at providing NBN Co with the opportunity, subject to efficient investment and adequate demand for its services, to earn a reasonable return on its investment and provide incentives to innovate and invest to offer improved services and capacity over time in response to customer demand.

The SAU also contains a limited number of non-price terms and conditions, expected to facilitate effective commercial negotiations on matters such as service levels.

NBN Co's head of Regulatory Affairs and Industry Analysis, Caroline Lovell said NBN Co welcomed the certainty provided by the ACCC's decision.

"Having an accepted SAU in place establishes a baseline from which future regulatory decisions can be made," Ms Lovell said. "It also provides a settled basis for finalising the next set of commercial arrangements with our customers.

"While the SAU was developed in the context of previous government policy, NBN Co considers - and the ACCC acknowledges - that the SAU should be flexible enough to be varied to respond to future technology changes that may be required.

"The process has taken some time, but it was important to make sure the SAU delivered a workable approach that would serve the needs of all parties, including consumers, over an extended period."

The decision to accept NBN Co's SAU follows two years of extensive consultation and assessment by the ACCC. In April this year, the ACCC released a draft decision indicating that the SAU submitted by NBN Co in December 2012 did not meet the relevant criteria for acceptance.

The ACCC then consulted on a draft notice to vary in July on the detailed changes required to address the ACCC's concerns. The ACCC gave its final notice to vary to NBN Co in October 2013.

This process followed the submission and withdrawal of two previous undertakings dating back to December 2011.

"This is a vastly different SAU than the version first submitted by NBN Co two years ago. Through the changes the ACCC requested and NBN Co has made, it is now a much more balanced instrument," Mr Sims said.

The acceptance of the SAU by the ACCC provides the broad regulatory framework to facilitate effective engagement between NBN Co and access seekers to negotiate commercial agreements. The ACCC understands that a Wholesale Broadband Agreement (WBA) is currently under negotiation in the expectation of the SAU being accepted by the ACCC.

The ACCC recognises that there is some uncertainty around the NBN, especially in light of the upcoming reviews of the NBN. While this may have implications for the SAU, most of the commitments in the SAU are technology neutral and will apply even with a significant change in network design.

"If, however, NBN Co wishes to vary the undertaking in the future in light of any new directions from the government, this can be accommodated," Mr Sims said.

NBN Co may also withdraw the SAU at any time, by giving 12 months' notice.

The SAU and the ACCC's final decision are available on the ACCC website.

www.nbnco.com.au

 

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