ACCC’s draft decision to reject NBN Co’s proposed variation to its SAU framework good for the industry

Commpete commends ACCC’s decision to reject NBN Co's SAU

Commpete, Australia’s leading alliance for fostering competition in digital communications, has jubilantly responded to the Australian Competition and Consumer Commission’s (ACCC) draft decision to out-rightly reject NBN Co’s proposed variation to its Special Access Undertaking (SAU), the framework outlining pricing and service standards through to 2040.

Commpete commends the Australian Competition and Consumer Commission’s progress in identifying amendments to expedite regulatory approval, while bringing attention to other areas that could move the needle on challenger providers occupying more market share.

Why is the draft decision a positive for the industry?

In May, the ACCC decided to reject NBN Co’s revised SAU, which was put to the regulator in November 2022. It claimed aspects of the proposal were not in the long-term interests of Australian consumers, particularly the claim of no service level improvements before 2026.

The ACCC has shown admirable leadership in helping the industry distil and resolve many of the larger issues involved in the regulation of monopolies, which is critical for the long-term operation of infrastructure of national significance. Commpete is pleased with the progress the industry has made towards the resolution of many of the major issues identified.

For its part, NBN Co has indicated it’s prepared to make further amendments should the ACCC reject the current proposed SAU variation. This is the kind of progress we need to bring affordable and reliable broadband access to Australians. For instance, we applaud the work with the government to reach a resolution regarding the recovery of costs incurred in building the NBN. This has now shifted from 100% to 28%, and is capped at 12.5b.

While the move is positive, there is still more that could be done to help further even the playing field for smaller providers. Around the time of NBN Co’s inception, a recently released JP Morgan report for government claimed with an effective competition policy and a healthy advanced economy, smaller businesses would move to occupy 30% of market share.

And whereas it’s encouraging industry challengers occupy 22.5% of market share, making certain changes, such as removing administrative taxes levied each time an end-user switches retail providers, would steer us faster towards achieving this goal.

NBN Co’s 50Mbps price ceiling falls short

NBN Co’s offer to ‘cap’ wholesale prices for 50Mbps users, meaning this service wouldn’t cost over the proposed $55 tariff. While Commpete did not advocate for a change in the price point, any movement in Connectivity Virtual Circuit (CVC) pricing is better than none. Now the rollout and take-up of service is complete, NBN Co’s prices must be a function of its incurred costs and not indexed to matters—like capacity—that aren’t cost drivers.

Commpete commends ACCC’s decision to reject NBN Co's SAU

The original proposal to retain a Connectivity Virtual Circuit component for speed tiers <100 Mbps, while removing it for those tiers ≥100 Mbps, was unlikely to promote the efficient use of the Long-term Interests of End Users (LTIE) test, as it will tend to force end-users to move up speed tiers and potentially well beyond their actual usage requirements

This tinkering may be better, but falls short. But it’s Commpete’s position that it comes a time when we need to accept, at least for now, the balance on these matters that the ACCC is prepared to accept. The charges that should be removed include the “Service Transfer” and “Non-Infrastructure Transfer” fees that NBN Co. levies on each AVC transfer between RSPs.

These charges negatively impact smaller providers. They are unjustified taxes on electronic, zero cost transactions for end users switching retail service providers. The reduction in network-to-network interface fees supports market entrants, but now the NBN is built, we believe retail competition across players will be enhanced by removal of these switching fees.

Michelle Lim is the Chair at Commpete.

Michelle Lim, Chair at Commpete
Michelle Lim, Chair at Commpete