NBN Co scales back 30-year regulation

Second crack at undertaking.

NBN Co is preparing to significantly scale back plans to lock in regulation surrounding the National Broadband Network for 30 years in a bid to have the framework approved by the competition watchdog.

The network builder said Wednesday it would submit a revised version of its access undertaking to the Australian Competition and Consumer Commission, after receiving strong warnings that the initial document – submitted in December last year – would be rejected.

NBN Co has heavily lobbied the watchdog to pass the undertaking on the grounds that it solidified price and non-price terms for access to the network, and provided confidence for investors it intends to court to fund part of the network.

But service providers and the ACCC have continually pointed to the 30-year term as onerous, cementing unrealistic price and product terms and diminishing the scope of ISPs to appeal to the watchdog to resolve potential further disputes.

The ACCC missed its six-month deadline on June 5 to accept or reject the undertaking. Commissioner Ed Willett could not tell iTnews whether it had requested an extension to the deadline, as required under legislation, but would do so in future.

Instead, the commission said it had suspended consideration of the undertaking while it worked with NBN Co on a revised version, to be submitted in late July or August.

A consultation paper released by NBN Co this week (pdf) indicated it intended to keep the 30-year term only as a bare framework for product and service descriptions, legal terms, as well as long-term cost recovery on the network.

All other matters contained in the undertaking would be subject to a ten-year term, after which NBN Co said it would submit revisions every three to five years.

The company said the revised undertaking would provide ISPs with additional recourse for regulatory intervention during the first ten years, including the establishment of an "open and multilateral forum" with access seekers to resolve disputes, and the ability to implement any access determinations made by the ACCC into the undertaking.

If NBN Co failed to have future variations of the undertaking approved, it would allow the competition watchdog to directly regulate price and other terms for the network, providing NBN Co with "strong incentives to ensure that it renewed the detailed terms in a way that appropriately addressed the prevailing needs of the industry at the relevant time".

NBN Co product and industry relations manager Jim Hassell said the revised approach "reflects that as a wholesale-only provider, we need to develop solutions that will work for our customers as well as for NBN Co".

The revised undertaking would be subject to a further six-month statutory timeframe for consideration, but the commission said it intended to come to a decision by the end of the year.

"It's not necessarily the whole process starting all over again but it will be a new process, including the issue of some sort of consultation document before we go to final [decision]," the ACCC's Willett told iTnews.

"In the meantime we'll work with NBN Co to draft a revised undertaking and feed in any industry consultation from the high-level principles into that re-drafting."

But the continued deliberation has provided no certainty for ISPs, who have continued to complain of NBN Co throwing its weight around on regulatory issues.

"Given our core concern about insufficient regulatory oversight, any term is insufficient," iiNet chief regulatory officer Steve Dalby said.

The extended timeframe will also conflict with the expiry of wholesale broadband agreements between NBN Co and ISPs, which have a one-year term set to end in October. NBN Co had initially sought five-year terms.

"That will be a serious issue for NBN Co given their dependence on the ISPs to sell their product," Dalby said.

Willett suggested NBN Co could choose to extend the extended broadband agreements for a period of less than a year as a stop-gap, until a final decision is made on the undertaking.

NBN Co hoped to establish two-year agreement terms once the undertaking was in place.

But he said direct regulation was never off the table.

"The view we've always taken is that if NBN Co comes to the table with an appropriate undertaking, we'll consider that and we're obliged to consider that," he said.

"The high-level principles that they've provided to us are promising in that regard, so we'll be pursuing in that regard.

"If it fails – we're not expecting it to and we're hoping it won't – but if it does we have the ability to move to direct regulation through access determinations."