Australian Competition and Consumer Commission (ACCC) chair Rod Sims has ruled out NBN Co being able to make up for potential cost blow-outs due to construction delays on the National Broadband Network (NBN) through the wholesale product prices.
The price cap limits NBN Co from raising prices on its products any higher than inflation minus 1.5 percent, and the current products have a freeze on their price until June 2017 under the revised Special Access Undertaking (SAU) that NBN Co submitted for ACCC approval in September last year.
The SAU sets out the pricing and regulatory framework for the operation of the NBN for the next 30 years, and is designed to work hand in hand with the wholesale-broadband agreement (WBA), which sets out arrangements between NBN Co and access seekers over a shorter period of time; at this point, one year.
The progress on the rollout of the NBN has been slower than expected, and NBN Co has revised down its expected June 30 target for premises passed by fibre from 341,000 to between 190,000 and 220,000.
While the company has said the current delays will not increase the cost of rolling out the network, Sims told the National Press Club on Wednesday that the price-control measures built into the SAU would prevent the company from passing on the cost in higher prices for wholesale products.
"Because this is a new build, we think it is appropriate that there be some price controls," he said. "We're working on how best to have effective price caps."
"If the NBN is rolled out inefficiently, maybe it'll bump against those price caps, and it won't meet its rate of return."
The draft decision on whether to accept or reject the proposal is due by the end of March, but Sims said the ACCC's decision will be released next week.
There has been concern within the telecommunications industry over the 30-year timeframe for the SAU. Sims said that while certain aspects of the undertaking need to be locked in for the network to be built and paid off, the decision made by the ACCC would focus on flexibility within the undertaking to change as the industry changes.
"We are very alive to the need for flexibility, and I think you'll see that in next week's decision," he said.
The Communications Workers' Union last week told members that the rollout delays for NBN Co were "sobering", and pointed to "fundamental commercial and operational problems" with the project.
"The CWU has for many years supported the policy objective of creating a national broadband network capable of delivering modern services equitably to all Australians. However, it cannot support an approach that creates uncertainty for the project's workers, whether employees or sub-contractors, and that relies on unacceptable labour rates in order to meet cost targets."