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ACCC rejects NBN 30-Year Terms

By Oonagh Reidy | Thursday | 04/04/2013

'Not satisfied': That's the ACCC verdict of NBN Co proposed 30 year regulatory framework which governs operations until 2040.

"The ACCC's preliminary view is that it is not satisfied that the SAU meets the relevant criteria for acceptance,"Australian Competition and Consumer Commission  Chairman Rod Sims said today.

The body wants to change key parts of the NBN Co's already revised Special Access Undertaking (SAU) which governs the price and other terms upon which NBN Co will supply fibre, wireless broadband services to telcos like Telstra, iiNet until 2040.

Among the bug bears the ACCC has with the SAU includes issues on pricing, is calling for greater flexibility to encourage "efficient investment in and operation of the network" and removal of service terms to allow for better commercial negotiations with telcos.

ACCC is calling for "periodic price re-balancing" review (to be conducted by the body), and also wants to clarify that the competition watchdog could have a role in overseeing the "introduction of new products and their prices."

The Commission are consulting on the changes, Chairman Sims said.

The competition watchdog says it wants adequate regulation of NBN Co's services to allow for "vigorous retail competition" among telcos and 'provide NBN Co with "incentives to not be wasteful."

The ACCC will issue a notice to NBN Co suggesting variations to the SAU.

The key amendments proposed are:

.   Specific drafting amendments to provide certainty about how NBN Co will comply with its obligations under the telecommunications access regime; specifically any ACCC regulatory rulings;

.    Allowing for periodic price re-balancing through review by the ACCC - the outcomes of these reviews would be constrained on the basis that any changes to price structures or relative prices must be revenue neutral in their effect;

.    Amendments to clarify that the ACCC could have a role in overseeing the withdrawal of products and the introduction of new products and their prices, should the need arise, mainly to support an effective price cap regime;

.    Amendments which allow a greater degree of flexibility in the approach that will be adopted at various points in time throughout the SAU, to mirror usual regulatory practice and so encourage efficient investment in and operation of the network; and

.    The removal of a number of proposed non-price terms from the SAU, including those relating to service levels, in order to facilitate effective commercial negotiation.

However, it didn't reject all SAU proposals and said many features of the SAU have merit including long term commitments not to raise prices above the CPI-1.5% price control which it says will increase price certainty of NBN services over time. 

"The initial prices set out in the SAU are generally likely to allow for a smooth transition from existing telecommunications networks" ACCC said in a statement.

"The SAU is a complex undertaking that NBN Co proposes will operate until 2040. It is therefore important that the rights or obligations the SAU imposes on NBN Co, access seekers and the ACCC are reasonable, in the long-term interests of end-users and clearly expressed," said Sims.

Following feedback on the proposed changes, the ACCC expects that the next step it would take in the process is to issue to NBN Co a formal notice to vary the SAU.

The ACCC will aim to issue the notice to vary to NBN Co around May 2013. If NBN Co submits a varied SAU in response to the ACCC's notice to vary, the ACCC will consult on the varied SAU.

The ACCC's draft decision is available here.

Interested parties have until 2 May to make submissions to the ACCC on the draft decision and the consultation paper on the notice to vary.

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