ACCC's NBN access noose

A roller coaster week for NBN Co has ended with the company once again failing to surmount the final regulatory hurdle, after the Australian Competition and Consumer Commission (ACCC) expressing its misgivings with the revised structural access undertaking (SAU). ACCC boss Rod Sims wasn’t particularly averse to NBN Co’s commitments but there is obviously some room for improvement, as far as regulatory oversight is concerned.

After three attempts NBN Co is yet to appease the ACCC and while the regulator did highlight a number of positives – the modular design of the SAU, the promise to cap price increases 1.5 per cent lower than the annual inflation rate – its dissatisfaction was unequivocal.

"The ACCC's preliminary view is that it is not satisfied that the SAU meets the relevant criteria for acceptance," ACCC boss Rod Sims said in a statement.  

The current bone of contention appears to be the ACCC’s desire to exercise greater control over the introduction and withdrawal of new products by NBN Co, so that the price caps stay in place. It also wants the capacity to review usage charges and allow wholesale customers to negotiate directly with NBN Co over non-price terms.

For the moment, both NBN Co and the retail service providers (RSP) will be satisfied with the outcome. NBN Co really has little choice but to acquiesce and the RSPs are happy that the ACCC is paying heed to their misgivings.

According to the Competitive Carriers’ Coalition’s chairman Matt Healy, the ACCC’s undertaking was a well-considered list and should result in a workable model for the industry.

“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,” Healy said in a statement.

“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.”

While the telcos revel in their victory and NBN Co gets ready to refine the SAU, all eyes will be on the precise changes the ACCC will propose when it releases the notice to vary the undertaking in May. NBN Co will then get another chance to convince the ACCC that retail service providers will not bear the brunt of cost blowouts. The protracted regulatory affair could be seen as another indication of the scepticism the ACCC and the critics of the Labor NBN have had, fuelled by the absence of a cost benefit analysis and the very long term of the SAU (to 2040).

According to Ovum analyst David Kennedy, the process has so far reflected the inevitable tensions between NBN Co and the ACCC. While NBN Co seeks to lock in certainty the ACCC is keen to insure it can intervene in the future.

Having said that, any outcome on the current SAU is largely irrelevant given the change of government looming over the horizon. A Coalition victory will require the entire process to start afresh and the time and money spent on the current process could potentially provide the Coalition with another stick to pummel Labor with.

While it embarks on its fibre to the node (FttN) agenda, the Coalition will no doubt highlight the enormous waste of time and money, including the protracted regulatory rigmarole, under the auspices of Labor. It will be a self-serving tactic but it might provide the ammunition Tony Abbott & Co need to neutralise the popularity of the fibre to the home (FttH) model.

The Coalition NBN will also be subject to an SAU, and it will probably have a similar structure. However, the details will invariably be different given the Coalition’s desire to dismantle the NBN Co monopoly. Ovum’s Kennedy says the Coalition’s alternate business plan would affect things like wholesale pricing guarantees, therefore ensuring that the regulatory merry-go-round begins again.