Broadband tax model review questions cost clawback

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Broadband tax model review questions cost clawback

Levy would be as low as $2.94 - not $7.10 - if it covered only future losses.

NBN-like operators subject to the regional broadband levy will be mostly subsidising past losses incurred by NBN Co on its fixed wireless and satellite networks, with new advice estimating future losses to 2040 could be covered by a $2.94 charge.

The levy, which is colloquially known as the broadband tax, comes into effect next year and requires residential and business users of "NBN-equivalent" fixed line services to contribute $7.10 to NBN Co’s regional costs.

NBN users are already deemed to be paying for the regional portion of the rollout via an internal cross-subsidy.

Under legislation passed for the levy, the Australian Competition and Consumer Commission (ACCC) was required to estimate NBN Co’s fixed wireless and satellite losses “and the levy required to offset the losses.”

This was inserted into the legislation due to fears that the levy amount is based on outdated modelling, given it took many years and iterations to finally pass.

For this one-off review [pdf], the ACCC had to use the government’s existing model; in future, it will have an opportunity to challenge the model, which it said had some “threshold issues”.

Among these issues is whether “historical losses, calculated on the basis of economic costs during the period, are relevant for calculation of the levy”.

That relevance is starkly illustrated by the ACCC’s analysis.

If the levy has to recoup total net losses on fixed wireless and satellite - that is, between July 2009 and 2040 - then the current base amount of $7.10 per chargeable premises per month is right.

However, the ACCC estimates NBN Co’s forward-facing losses - that is, between July 2020 and 2040 - are likely to be $5.424 billion out of a total $12.949 billion.

If only future losses could be recouped by the levy, then the ACCC estimates the charge would be $2.94 a month, not $7.10.

The ACCC questioned whether the current modelling used by NBN Co just allowed the company “to recover both the losses that are causally related to the supply of non-commercial services and also recover an arbitrary proportion of NBN Co’s shared costs.” 

“Such an outcome is not competitively neutral since …[it] is likely to increase the profitability of NBN Co,” the ACCC argued.

The ACCC said it was able to update the government’s existing cost calculation methodology that was used to determine the levy amount.

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