Govt warns ACCC against NBN price tinkering

The department of one of NBN Co's shareholder ministers has warned the ACCC against over-zealous intervention in NBN Co's affairs.

The warning comes as the competition watchdog and NBN Co edge closer to finalising the special access undertaking (SAU) that sets out key terms and conditions for services supplied over the NBN.

The ACCC sought changes to the latest iteration of the SAU on April 4, which would effectively give the watchdog far greater powers to intervene in a range of matters.

Specifically, the ACCC wants a regular "opportunity" to review whether NBN Co's "price structures and relative price levels should be re-balanced". (pdf)

It also wants other ancillary powers such as a role in the future withdrawal of any NBN products, and the power to "declare services and set terms and conditions for new services".

But the Department of Broadband, Communications and the Digital Economy's (DBCDE) acting first assistant secretary for telecommunications, Mark Heazlett, raised several concerns in a letter to the ACCC dated May 6. (pdf)

He said that while the department "understands the Commission's concern to ensure that it has a role in the future to scrutinise NBN Co's prices through its proposed price review and rebalancing mechanism", handing it such powers would be "of considerable significance".

"In the event of concerns about NBN Co pricing levels ... NBN Co as the network operator should first be afforded the opportunity to review and restructure its own pricing, with an NBN Co pricing proposal then being subject to ACCC review and decision," Heazlett wrote.

"This recognises that it is NBN Co that is engaging directly with its customers and is best positioned to understand the impact of price changes on the demand for its services, and to balance these with its operational needs and revenue plans."

Heazlett added: "The balance of pricing between different products for a company is closely related to its operational needs.

"The ACCC would need to be assured that there was a material distortion of the market before intervention in these operational matters was warranted".

ISPs back plan, NBN Co qualifies support

Heazlett raised the example of the balance between access and connectivity virtual circuit prices — the two main backhaul/transit charges levied on ISPs.

Telstra is among the hopefuls backing the price rebalancing mechanism as a way to keep a lid on any future blowouts in connectivity virtual circuit (CVC) costs. It also wants more transparency on CVC price setting which it says "may reduce the need for ACCC intervention to rebalance prices in the near term". (pdf)

AAPT, Vodafone Hutchison Australia and Optus also backed the ACCC's request for periodic price rebalancing powers, though not specifically to keep a lid on transit costs.

"It is important to provide the ACCC with flexibility so that it can determine the timing of rebalancing," Optus stated.

"As such, there should be no restriction on the ability of the ACCC to start an investigation".

NBN Co is offering only partial support for the price review mechanism, and only for "well specified reserve powers in relation to new product pricing and price rebalancing". (pdf)

Importantly, NBN Co proposes not to allow any such rebalancing mechanism until at least 30 June 2023, when the initial regulatory period expires.

NBN Co says that imposing such powers before then would be unnecessary, "not useful" and "inconsistent with NBN Co's legitimate business interests", such as achieving "revenue sufficiency".

Thresholds for intervention

The DBCDE's concerns with ACCC intervention go beyond pricing. Heazlett raised the issue of the ACCC's presence as a "regulatory safety net" potentially discouraging ISPs from negotiating commercial terms directly with NBN Co, the Government's favoured approach.

"While maintaining reserve powers for the ACCC to intervene where necessary will provide positive incentives for NBN Co and its customers to engage with each other in good faith, access seekers should not negotiate on the basis that if they are not wholly satisfied with the outcome then they can seek and automatically receive ACCC intervention," Heazlett wrote.

He called on the ACCC to set thresholds for when it would intervene in an NBN-related stoush.

These would have to be set outside the SAU process.

"We do not consider this should be a matter for the SAU but rather something to be reflected in the ACCC's normal mode of operation," Heazlett wrote.

"In this regard the ACCC could consider whether it would be useful for it to issue guidelines that would assist in establishing an appropriate environment".