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Government-backed NBN monopoly flexes its muscles

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Communications Minister Paul Fletcher and Scott Morrison (image via YouTube)

The monopoly NBN Co enjoys adversely affects the wider public, writes Paul Budde

OVER THE last year, we have discussed the unsustainably high wholesale charges that NBN Co is raking in. They need this just to recoup the blowout of the investments in their second-rate multi-technology mix (MtM) infrastructure.

The Government, following its election win in 2013, handpicked a new NBN team. They were favourable to their policies, so the new NBN team went into this new direction with their eyes wide open. We now see that the foreshadowed problems of this policy are emerging left right and centre.

The investments have now reached a staggering $57 billion, against the $25 million that former Prime Minister Malcolm Turnbull had stipulated it would cost.

So, who is paying for the shortfall? The Government want the taxpayers – the NBN users and the industry – to cough up the money for their mistakes.

The NBN is a government-backed wholesale monopoly and all the retail service providers (RSPs) are at its mercy for access to the national fixed broadband infrastructure. A monopoly is of course an ideal way to print money as the RSPs have no alternative whatsoever and there is no punishment for mistakes. The country suffered for more than 25 years of the misuse of the telecommunications monopoly Telstra had for all those years.

We are now seeing a repeat of that situation with the NBN.

The Government is adamant that it will need to recoup its money and is now trying to use the monopolistic position of the NBN to make that happen.

Last week, I reported on the Government's initiative to try and muscle the ACCC into changing their price regulations and to allow for the inclusion of the high costs that the NBN has raked up. The ACCC was set up to look after the users and has indicated that it is looking at the market situation, that is, what users should be paying.

A week later, NBN Co announced that it will stop providing the extra capacity that it had been providing to the RSPs to pass that on to the users during the COVID-19 crisis. They will now start turning the broadband tap down. This will result in further deterioration of the service. By doing so, they have tried to force people towards the higher-priced broadband services.

None of this has anything to do with market-based policies. If there was competition, the market would set the prices, based on the quality of the service and on what customers are willing to pay.

In a monopoly, the RSPs and the users do not have a choice.

Another aspect of monopolistic behaviour is complexity: make everything so difficult to understand that nobody comprehends how the system works.  At the height of the Telstra monopoly, it had over 2,500 different price plans with different terms and conditions. On average, something like 20 per cent of plans changed monthly.

There were only a very few people in the industry who could unravel that complexity and for them keeping track of this was a full-time job.

It looks like NBN Co got it hands of a copy of Telstra’s handbook of those tricks and they have already developed the most complex pricing structure in the industry. They are going to make this even more convoluted. And by putting lipstick on the pig, they have tried to make it more palatable.

Rather than addressing this issue where those higher prices hurt most – the bottom and middle end of the market – they are going to provide a rebate system for the top end of the market. While it is great for those people, those who can afford the current 100 Mbs services do not need to be provided with a rebate system.

Obviously, NBN Co’s monopolistic behaviour has the full support of the Government, which fails to recognise the importance of the need for a high-quality, high-speed broadband network for all Australians.

In the end, the Government is the owner of the network. It is up to them to tell NBN Co what the Government’s NBN policy is so that NBN Co can base its plans on those policies.

Is the core of the policy to maximise profits or maximise the social and economic benefits?

The Government is getting itself into even bigger knots as it has admitted that the NBN needs further upgrades — which obviously will cost more money.

Under their current policy, this would make the NBN even more expensive for its users.

This saga continues. For as long as the government fails to bite the bullet and address these problems structurally, we will keep muddling on.

Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.

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