Inefficient NBN roll-out won't push up prices: ACCC

Inefficient NBN roll-out won't push up prices: ACCC

Summary: The Australian Competition and Consumer Commission has said that any rise in the cost of rolling out the NBN won't impact prices due to price caps put in place.

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TOPICS: NBN
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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.

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(Image: Screenshot by Josh Taylor/ZDNet)

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."

Topic: NBN

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Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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9 comments
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  • Meet ROI - Hah !

    There was never any doubt NBN Co would never meet its ROI. In its ruling against NBN Co/ Conroy, the Competition and Neutrality Commission highlighted this as something that would unfortunately only be apparent after many years and they thus only had a prima facia case. It looks like they will not need to wait that long ..... Maybe they can now put a stop to established industry having to compete against taxpayer subsidised funding.

    Still battling to understand why the union movement have supported this project. As I understand the teams working in the street are pretty much from overseas - little English.
    Rossyduck
    • Poor old Rossy

      ""If the NBN is rolled out inefficiently, maybe it'll bump against those price caps, and it won't meet its rate of return.""
      Note the IF and the Maybe
      Strange, considering a range of possibilities - how foolish

      Maybe consider why there are delays - care to identify reasons with links and evidence.
      Care to identify the extent of Pit, duct and conduit remediation that is necessary, and most importantly why that is so and the impact of that on rollout (supposed inneficiency)

      Waiting for your comprehensive evidence based response Rossyduck
      Abel Adamski
  • Wow...

    Anti-NBN and racist... nice Rossy
    RS-ef540
    • At this stage are you honestly surprised RS? That sort of bigotry goes hand in hand and keep in mind that is sort of thing the coalition appeal to in order for them to thrive during election time.
      Hubert Cumberdale
      • And still they abuse and apologise

        $40b min taxpayer debt, risks growing with the incompetence of NBNCo and their labor masters. Still they abuse.

        "Quigley must go because NBN is failing
        PAUL FLETCHER
        March 28, 2013 12:00AM
        IF NBN Co were a private company, chief executive Mike Quigley would be gone by now.
        Last Thursday afternoon, NBN Co put out an announcement confirming what everybody already knew -- it will hopelessly miss its June 30 target for the number of premises to be passed by the fibre network."
        http://m.theaustralian.com.au/business/opinion/quigley-must-go-because-nbn-is-failing/story-e6frg9if-1226608008370

        Obvious you'd think, but for the clowns who continue to apologise. NB "everyone" didn't include most of the ZDNet posters unsurprisingly.
        Richard Flude
        • Speaking of clowns do you have that page number yet?
          Hubert Cumberdale
        • We Accept

          Australia and its economy will be crippled over the medium to long term for the sake of short term profit and fantasy land ideology after September.
          However we will hold them and the media and commentators such as yourself accountable for the disaster to come which they will of course whitewash and blame everyone else but themselves for.

          Horses for courses, practical reality - the subject is essential National Infrastructure, not the merits of football teams
          Abel Adamski
  • it is silly

    for minister Conroy and NBN Co to keep pretending the NBN will deliver a financial return as promised. Perhaps we should all agree the NBN is public utility and as such will remain in public ownership and be funded by subscription and subsidy.
    Knowledge Expert
    • Interesting

      KE
      You repeat a consistant theme, one that is either directly or overtly in all the anti GBE NBN
      IMO this is the major factor, with the massive profits of the threatened Pay TV MONOPOLY a distant second.
      First Australia used to have excellent National Communications infrastructure profided by first a Govt. Department which then morphed into a GBE before being flogged as a private sector vertically integrated monopoly from whence nationally it was all downhill for communications as a national utility.

      As the PMG it was a Department along with postal, not a GBE to simplify it was seed funded by govt/taxpayer funds from Consolidated Revenue with ALL income being returned into CR. The financing was complicated as The PMG had no money of it's own and was unable to borrow except from CR, so CAPEX and OPEX was all borrowed from CR with interest being charged against borrowings, by the 60's the PMG was returning amongst the highest profits of any organisation in Australia. The governments (Pre mid 70's all LNP ) however tended to allow the "debt and interest" to accrue and used the income (Profits plus repayments) for their own porkbarelling and other programmes, as every year the PMG had to reborrow its annual Capex and Opex for the next year
      The point there is that we are being led to believe that ONLY the private sector and competition can deliver the essential National Communications infrastructure admittedly with massive taxpayer subsidies.
      People state the taxpayer paid for Telstra's infrastructure - completely false, Telstra and all it's assets plus profits paid to the taxpayer via Consolidated Revenue were paid for by the profits from the users over the years. Strangely familiar proven concept.

      Economies do best when they are reasonably balanced achieving the best from both worlds, too far out of balance either way can be disastrous. However the essential national communications infrastructure is a prize investor plum, secure with guaranteed income especially with taxpayer subsidies. Our GBE NBN is a worldwide first and a potential example to other countries especially developing ones.
      Powerfull forces are arrayed against it that have no wish to have their nudity exposed to all
      Abel Adamski