ACCC accepts NBN Co Special Access Undertaking

13 December 2013

The Australian Competition and Consumer Commission has accepted the varied Special Access Undertaking (SAU) lodged by NBN Co on 19 November 2013. The varied SAU incorporates all of the changes in the ACCC’s notice to vary and replaces the undertaking submitted by NBN Co in December 2012.

The SAU will form a key part of the framework for governing prices and other terms upon which NBN Co will supply services to telecommunications companies over the National Broadband Network (NBN) until 2040.

“The acceptance of this SAU is a key milestone in establishing regulatory arrangements for the NBN,” ACCC Chairman Rod Sims said.

“It is part of a broader set of regulatory and structural reforms that have occurred across the industry in recent years.”

“The SAU will form the basis for how NBN Co can set its prices and change its product offerings over time. It will also form the basis for ACCC oversight of NBN Co’s allowable revenues and prices.”

The SAU will operate until June 2040 and includes the following key features:

  • A ‘modular’ structure that allows for different matters to be ‘locked in’ for different periods of time – this means a balance can be struck between providing certainty about long term cost recovery and allowing for flexibility to respond to changing circumstances;
  • A set of initial prices that are likely to allow for a smooth transition to the NBN from existing telecommunications networks without significant price shocks;
  • Price controls that prevent NBN Co from raising prices for any of its products by more than CPI-1.5 per cent in any year over the SAU period, which will provide significant price certainty, and create incentives for NBN Co to operate and invest efficiently;
  • Pricing mechanisms that allow the ACCC to rebalance NBN Co’s prices in a revenue neutral manner over the SAU term and to determine prices for new products introduced over the SAU term – this means that prices can be adjusted in light of changing circumstances, which will promote the efficient use of the NBN;
  • ACCC oversight over the withdrawal of products and protections against NBN Co making variations to an existing product that reduces the functionality, performance or features of the product;
  • An explicit role for the ACCC to determine NBN Co’s allowable revenues over the SAU period – this will provide NBN Co with the opportunity, subject to efficient investment and adequate demand for its services, to earn a reasonable return on its investment and provide incentives to innovate and invest to offer improved services/capacity over time in response to customer demand; and
  • A limited number of non-price terms and conditions, which will facilitate effective commercial negotiations on matters such as service levels.

The decision to accept the SAU follows two years of extensive consultation and assessment by the ACCC. In April this year, the ACCC released a draft decision indicating that the SAU submitted by NBN Co in December 2012 did not meet the relevant criteria for acceptance. The ACCC then consulted on a draft notice to vary in July on the detailed changes required to address the ACCC’s concerns. The ACCC gave its final notice to vary to NBN Co in October 2013.

This process followed the submission and withdrawal of two previous undertakings dating back to December 2011.

“This is a vastly different SAU than the version first submitted by NBN Co two years ago. Through the changes the ACCC requested and NBN Co has made, it is now a much more balanced instrument,” Mr Sims said.

The acceptance of the SAU by the ACCC provides the broad regulatory framework to facilitate effective engagement between NBN Co and access seekers to negotiate commercial agreements. The ACCC understands that a Wholesale Broadband Agreement (WBA) is currently under negotiation in the expectation of the SAU being accepted by the ACCC.

The ACCC recognises that there is some uncertainty around the NBN, especially in light of the upcoming reviews of the NBN. While this may have implications for the SAU, most of the commitments in the SAU are technology neutral and will apply even with a significant change in network design.

“If, however, NBN Co wishes to vary the undertaking in the future in light of any new directions from the government, this can be accommodated,” Mr Sims said.

NBN Co may also withdraw the SAU at any time, by giving 12 months’ notice.

The SAU and the ACCC’s final decision are available on the ACCC website.

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