NBN Co urges 16-year regulatory break

Forced review could risk investment, economic analysis warns.

NBN Co has urged the competition watchdog not to subject it to a major regulatory review until after it commences privatisation sometime in 2028.

The network operator commissioned an independent economic analysis [pdf] that predicts dire consequences should a regulatory review be forced on it while the network is still being rolled out.

Attempts to review regulatory constraints on the NBN before the late 2020s would severely impact investment opportunities in the network, the analysis warned.

"Any regulatory review triggered at the discretion of the Commission (as opposed to a voluntary review requested by NBN Co) prior to a stable period of operation would affect investor confidence," the report, from economic consultancy Synergies, states.

NBN Co hopes the Australian Competition and Consumer Commission will instead allow a special access undertaking (SAU) it has submitted to operate without review for longer than the standard five years.

The SAU intends to establish a regulatory oversight framework for the network for the next 30 years.

NBN Co cites precedents set for gas pipeline projects, where reviews are not enforced every five years, and says its extenuating circumstances may be even greater.

"It will take much longer [for the NBN] to achieve economic profitability than is the case for the gas pipeline projects for which longer undertakings have been accepted," the company said.

A review in 2028 would come about halfway into the proposed 30-year term that the undertaking would be enforced.

Until then, the report backed safeguards proposed by NBN Co for self-regulation, including fixed pricing until 30 June 2017 with caps on subsequent increases.

Though the length of the undertaking could "provide incentives to over-invest and to incur excessive operating costs", the report suggests NBN Co will "rely upon expertise in its downstream markets" to ensure that this does not occur.

However, the proposal could sit poorly with the competition watchdog, which has continually voiced concerns around any attempts to block regulatory oversight.

Previous concerns around the length of NBN Co's contracts with service providers led the network wholesaler to reduce the initial term of its wholesale broadband agreement from five years to one, allowing further time for the SAU to be considered, accepted or rejected.

The ACCC will finish public consultation on the undertaking by the end of March, with a final decision expected by June.

However, in a parliamentary committee last year, ACCC head of communications Michael Cosgrave threatened to implement interim access arrangements should the undertaking be deemed unacceptable.

In the past decade, the watchdog has only accepted one special access undertaking of the three put before it.

Synergies' submission was commissioned by law firm Webb Henderson, which has consulted NBN Co on regulatory issues surrounding the wholesale broadband agreement and special access undertaking.