Business Analysis

NBN Co negotiating with ACCC for better and cheaper broadband options

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NBN Co is aiming to provide better and more affordable internet options in response to pressure on the company (Screenshot via YouTube)

In a significant development for Australia's broadband landscape, NBN Co and the Australian Competition and Consumer Commission (ACCC) have re-engaged in negotiations, following NBN Co's submission of an amended Special Access Undertaking (SAU) Variation.

This new proposal finally reflects a paradigm shift in wholesale pricing, aiming to bolster internet speeds, accommodate surging data demands, and offer enhanced cost predictability to retailers and consumers alike.

Better late than never, as alternative infrastructure developments such as 5G and the new low Earth orbit (LEO) satellites are putting significant pressure on the company. As mentioned in a previous article, if they continue to hang on to their current pricing and conditions model, they risk further decline and irrelevance.

NBN Co's effort to address the ACCC's concerns and garner industry-wide support has led to a comprehensive set of changes. The proposed amendments advocate for the removal of capacity charges and the introduction of user capacity pricing, a transformative move particularly targeting the 100 Mbps services and above. While this is recommendable, it favours the high-end of the market rather than the majority middle and low-end of the market.

With the aim of ensuring equitable access, NBN Co is also advocating for a minimum floor price for various wholesale speed tiers, including 12, 25 and 50 Mbps. Furthermore, a ceiling price not exceeding $55 per month is set to be instituted in the coming year, irrespective of data consumption.

The $50 bundle floor price, established in the previous SAU Variation in November, remains intact for the popular 50 Mbps service. As part of its ongoing commitment to enhance customer experiences, NBN Co plans to augment the capacity inclusions for the 50 Mbps service by an impressive 40 per cent.

Concurrently, the wholesale bundle price for the 25 Mbps service is poised to undergo a reduction to $26, while the 12 Mbps service is set to witness a decline to $24.40 for both fixed line and fixed wireless products.

The company has expressed its dedication to effectuating these substantial revisions to wholesale prices through the introduction of a new Wholesale Broadband Agreement (WBA5) by December. The fruition of this effort hinges on the ACCC's endorsement of the new proposals. Importantly, NBN Co's outreach has extended to include key stakeholders, such as internet retailers, consumer advocacy groups and government entities, reflecting a collaborative approach to shaping the future of Australia's broadband landscape.

NBN Co's latest manoeuvre follows a history of negotiations and consultations with the ACCC. Notably, the company had previously encountered challenges with its November 2022 SAU Variation proposal, which was met with scepticism from both the regulator and industry players. In response, NBN Co has painstakingly revamped its approach, seeking to balance the interests of all stakeholders involved.

The ACCC's involvement in this process underscores the importance of the SAU in shaping the regulatory framework for the National Broadband Network (NBN). This framework, a cornerstone of Australia's telecommunications landscape, encompasses various aspects such as wholesale price controls and minimum service standards. The ACCC's role in evaluating and accepting these proposals ensures that they meet statutory criteria and serve the long-term interests of end users.

NBN Co's latest submission has prompted the ACCC to initiate a new round of consultations, extending over a four-week period. This approach is aimed at expediting the regulatory process while providing industry players with ample opportunity to voice their perspectives. Acknowledging the complexity and time-intensive nature of these deliberations, the ACCC emphasised the need for a well-rounded and effective regulatory framework to guide the NBN's evolution well into the future.

Key to NBN Co's revised proposal is the introduction of a pricing model that has stirred industry discussions. This model pertains specifically to services with speeds of 50 Mbps and below, and its centrepiece is a nuanced “floor” and “ceiling” pricing structure. The goal is to cap wholesale costs at $55 per month, ensuring affordability and accessibility for consumers and retailers.

NBN Co's proposal revolves around what is referred to as “option two” within the industry, a choice that has garnered support from prominent players like Aussie Broadband, Vocus, Superloop and Launtel. This option emphasises increased bundled bandwidth per service, reducing excess bandwidth charges and fostering price predictability over a three-year horizon.

While option two has gained traction among some industry stakeholders, it hasn't found favour with major players like Telstra and Optus. Telstra has expressed concerns about cost increases and potential impacts on its service delivery, while Optus has raised the possibility of shifting consumer preferences toward lower-tier services. The industry awaits the responses of these significant players, with their reactions poised to shape the direction of the ongoing negotiations.

It would be amazing if there will be industry consensus on this latest proposal. In essence, the foundations of the SAU have been questioned since they were conceived. Tinkering with them is not going to deliver the outcome the industry is looking for. So, it will be interesting to see what their replies to the proposal will be.

A key point of all players is that the Government should stop providing NBN Co with any further regulatory favours and instead give the industry a chance to compete at sustainable levels.

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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