NBN Co told to 'reset' its pricing model

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NBN Co told to 'reset' its pricing model

New instructions and expectations from the new government.

NBN Co will withdraw its special access undertaking from ACCC review and make “substantive changes” to it in line with a revised set of expectations coming from the new federal government.

The government has written to both NBN Co [pdf] and the ACCC seeking a new path forward on the bogged-down SAU process, a major review set to determine price and non-price terms for NBN access through to 2040.

Federal communications minister Michelle Rowland said the change of government had “created space for problem-solving”.

She backed the SAU revision process to continue, but with a firmer timeline of “early 2023” for agreement, and implementation on July 1 2023. There has previously been no deadline.

Rowland also said that any interim price measures introduced between now and then should not leave RSPs or end users worse off.

“A varied SAU should reflect the changes in the policy landscape and operating environment since the current variation was lodged,” Rowland wrote to NBN Co.

“The government has stated that it will retain NBN Co in public ownership for the foreseeable future, expand full-fibre access to more homes and businesses, and ensure the NBN delivers for consumers and facilitates productivity.”

The SAU before the ACCC has been widely criticised by retail service providers (RSPs), because it would lock in price rises every year between now and 2040.

The current review process started because RSPs said NBN Co’s pricing is too expensive and that reselling services is increasingly unprofitable.

NBN Co said it would withdraw the redrafted SAU and “submit a revised SAU variation as soon as possible.”

NBN Co said it would “take into account all submissions to the ACCC consultation paper, which NBN Co understands may be made public later this week.”

A “discussion paper” on the new SAU could be released early next month.

“The policy landscape has changed since we submitted our original proposal. Therefore, we are pleased to be able to withdraw our earlier submission and submit a revised proposal that takes this into account,” NBN Co CEO Stephen Rue said.

Rowland said that NBN Co would be issued with a new statement of expectations.

She also said the government will “work with NBN Co through the corporate plan to settle a realistic expectation about future returns to shareholders”.

That opens the distinct possibility that difficult conversations about NBN Co’s costs - and the portion of costs it tries to claw back through its pricing - could be on the horizon.

Rowland said that while “any variation to the SAU will need to have some regard to the past”, the government wanted to see NBN Co “develop a proposal that reflects a reset in the process”.

It is not clear if the company has been given some informal parameters to work within as it now sets about redrafting the SAU variation.

NBN Co was unable to provide additional comment beyond a prepared statement.

RSPs welcome change

Telstra welcomed the potential reset of NBN Co's pricing.

"We are pleased NBN Co is reviewing its position following the advice from the new government and we look forward to a wholesale pricing and service regime which provides a better experience for customers and a more successful industry," a Telstra spokesperson said.

Aussie Broadband managing director Phillip Britt also backed the intervention, saying he was "pleased" to see the government "defend Australians from rising internet bills."

“Minister Rowland is right when she says NBN Co’s proposals had unrealistic revenue expectations,” Britt said.

“As modern infrastructure that is owned by everyday Australians, NBN Co should be focusing on committing to future network investment and better reseller incentives, not paying down debt.

"We understand and appreciate NBN Co’s need to deliver a return on its initial investment, but with the removal of NBN Co’s debt requirements, this would allow the network to focus on quality and service, the two things that matter most to end users.”

Britt added that NBN Co "should commit to a firm one-to-three year timeline to phase" variable bandwidth charges - known as connectivity virtual circuit or CVC - entirely.

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