TECHNOLOGY SPECTATOR: Turnbull's tired treatise

With the final NBN regulatory framework now out in the open, Malcolm Turnbull and the telcos need to rethink their approach to the project.

NBN Co has released the second half of the regulatory blueprint that lies at the heart of how the network will be governed over the next three decades. The unveiling of the fifth, and presumably the final, incarnation of the Wholesale Broadband Agreement has been promptly followed by the release of the Special Access Undertaking and despite the apparent concessions from NBN Co on a couple of issues, the telcos aren’t exactly jumping with joy. Then again, they were never really expected to.

The SAU lays down the regulatory and pricing framework for the next 30 years and the agreement lodged with the Australian Competition and Consumer Commission this week has had a bit of a tune-up since the publication of the discussion paper in August. Prices for the key wholesale services are to stay on ice for the first five years of operations and wholesale price increases will be limited to half of the yearly inflation (CPI). What that means is that prices for services provided by NBN Co are either going to stay flat or fall over time.

This is an important concession, because there were concerns that NBN Co was looking to cement a position that would have allowed it to raise wholesale prices on existing products by CPI plus five per cent. The proposed price hike clause has been given the boot in the new undertaking which also proposes that NBN Co’s revenue will be capped to a point where it only recovers its incurred costs. The plan involves a regulatory rate of return on its assets of 3.5 percentage points above government bond rates. Government 10-year bonds are currently hovering around the 3.95 per cent mark.

There are, however, a couple of caveats in the revised document. There is the provision for a clause that will allow NBN Co to request ACCC approval for an exception to the annual price increase limit in certain specific cases and it can also set the prices for new products it offers in any one year.

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