Future NBN pricing may have more options and constraints

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Future NBN pricing may have more options and constraints

As ACCC reveals its own thinking ahead of roundtable today.

NBN Co may be required to offer internet retailers more ways to differentiate the services they resell, and may also be prevented from withdrawing products or making them more expensive, under ideas to be canvassed at a roundtable today.

The Australian Competition and Consumer Commission released a discussion paper [pdf] on Thursday afternoon that will help guide discussions at the roundtable event with NBN Co and retail service providers today.

NBN Co has separately released its own discussion paper and set of proposals, which are also set to be debated.

These include simplified wholesale pricing that would partially or fully remove variable connectivity virtual circuit (CVC) bandwidth charges, and replace them with indexed price increases once a year.

The ACCC has confirmed that NBN Co’s models will be discussed; however, it also raises additional points for discussion, specifically around how NBN Co’s pricing construct might support a broader range of user needs.

The commission said it wants to see more levers offered to RSPs to create different types of broadband products, and constraints placed on NBN Co to prevent certain products becoming unfavourably specified or priced.

Rather than the current situation, where RSPs effectively compete on ‘busy hour’ speeds, the ACCC has suggested different pricing options that could “reward consumers that are willing to tolerate some performance reductions in the very busiest hours of the week”.

“One way this could be achieved is to make additional product features such as busy hour speed selectable within the access product description, and potentially to introduce additional AVC ‘speed bolt-ons’ to allow further differentiation of off–peak speeds,” the ACCC said.

“Unlike the situation under volumetric CVC pricing, these product features could be offered for a fixed monthly fee.”

The ACCC added: “These arrangements can better militate against the potential for over-investment in the network to meet unexpected demand peaks.”

NBN Co could also be required to commit “to offer a range of specified wholesale products, and to not effectively withdraw them from the market.”

“One way a product offer can effectively be withdrawn is for its price to be increased relative to alternatives so that it no longer represents value to the purchaser,” it noted.

Additionally, the ACCC proposed that certain products “could be placed under tighter controls than others in order to achieve specific outcomes.”

“For instance, the access products used to supply consumers with basic speed requirements could be the subject of more direct controls so that those consumers are protected from higher prices in return for unwanted product features,” the ACCC proposed.

“At the same time, more flexibility could be provided over very high speed and value added access products where efficient pricing levels are less certain and are more likely to change over time.”

Also up for discussion today, and more broadly as part of the consideration of a new special access undertaking (SAU) - the key regulatory document that sets NBN price and non-price terms through 2040 - is the incredibly complex modelling it houses that allows NBN Co to recover its efficiently-incurred costs.

The ACCC said the present model risked “potential price shocks” being experienced by RSPs - and therefore by end users - in future.

Reforming the model “would likely provide NBN Co with more flexibility on its pricing,” the ACCC added.

The roundtable discussion runs all day today.

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