ACCC suggests Budget funding for non-commercial NBN services

The ACCC has said NBN's cost-recovery process should be addressed through direct government budget funding for its non-commercial networks, debt-relief measures, or re-evaluating assets.
Written by Corinne Reichert, Contributor

The Federal Budget should fund the non-commercial satellite and fixed-wireless National Broadband Network (NBN) services in an attempt to recover the costs of delivering broadband to uneconomic areas, the Australian Competition and Consumer Commission (ACCC) has recommended.

Following questions last week over NBN's commercial viability, the ACCC said the government could instead directly fund the satellite and fixed-wireless networks through the Budget; introduce debt-relief measures; or re-evaluate NBN's assets instead of extending the rural broadband scheme (RBS) charge to non-NBN mobile services.

"We do not consider this [RBS] charge should be extended to other substitute networks in the future; indeed, we have a preference that all non-commercial services be funded directly from the Budget," the ACCC said in its Communications Sector Market Study: Draft report [PDF] published on Monday.

"Given the social objectives it is required to fulfil by supplying services to uneconomic parts of Australia, and depending on future developments, the government could consider whether NBN Co should continue to be obliged to recover its full cost of investment through its prices via ... direct Budget funding arrangements for non-commercial services, debt relief measures, or an asset re-evaluation.

"The latter step is consistent with that usually taken by private sector enterprises if and when business plans are not met ... our preference is for direct Budget funding, as it would be the least distortionary alternative and not serve as a means of protecting the NBN from network competition."

NBN should additionally have greater flexibility in terms of both technology and pricing in order to deal with competition, the ACCC said.

The commission also used its examination of Australia's telco market to argue that "immediate measures" are needed to address dissatisfaction with speeds and consumer complaints about the migration process -- which it said also tie into NBN's cost-recovery model.

Migration and experience issues "stem from failures in retail and wholesale markets that could largely be overcome through more accurate information, improved information flows, and better coordination", the ACCC said, while speed issues can be addressed by improved information from retailers such as abiding by its recently released guidance on how RSPs should advertise NBN speeds.

Speed advertising compliance should be enforced through Australian Consumer Law as of 2018, it added.

"There are a number of aspects to this issue, the most significant of which are the choice of speed tier made by a consumer when migrating to the NBN and the provisioning of connectivity virtual circuit (CVC) capacity by service providers to deliver the speed and user experience appropriate to that speed choice during the busy hours," the ACCC said in its draft report, adding that the capacity for fibre-to-the-node (FttN) networks to deliver higher-speed services is "limited".

"A potentially significant factor contributing to these outcomes is that current average revenues per user for NBN services may not be sufficient to meet NBN Co's long-term cost-recovery requirements."

NBN is currently dealing with the wholesale pricing model through consultation with retailers on CVC, which the ACCC earlier this month declined to step into, saying an industry-led decision would be preferable. However, its draft report on Monday said it would "consider exercising our regulatory powers where this would support these market outcomes being realised sooner".

The commission also pointed to the Australian Communications and Media Authority (ACMA) research on NBN migration issues, and said it is now proposing to examine NBN's service standards, particularly in regards to "incentives in place along the supply chain", along with ensuring customers are informed about the benefits of short-term or no contract options when migrating to the NBN.

Also needing examination is the NBN wholesale aggregation market, the ACCC said, with smaller providers currently unable to connect to all 121 points of interconnect (POIs) themselves. The ACCC suggested that NBN offer transitional products and pricing measures while the rollout is taking place in order to assist smaller retailers to enter the market, and said it will examine the supply of transmission services to POIs as part of the Domestic Transmission Capacity Service (DTCS) declaration and Final Access Determination.

Also needing investigation is the "allocation of responsibility" for faults between NBN and RSPs, the regulator said, along with whether there are incentives for repairing faults and compensation for consumers.

"As NBN Co is moving from the rollout phase to delivery of services, risk allocation must also shift to ensure services are delivered to consumers that meet expectations of quality. We will consider whether the proposed allocation of responsibility is appropriate and whether regulatory intervention is necessary, for example, by including service level terms within NBN Co's regulated terms of access," the ACCC said.

The ACCC said it also supports recent amendments made to the Telecommunications Industry Ombudsman (TIO) terms of reference requiring NBN and RSPs to cooperate on resolving consumer complaints, and said the TIO should collate NBN complaint data according to technology type.

The commission also used its draft report to discuss the overall fixed and mobile market across the nation; the advent of 5G; and emerging issues such as the Internet of Things (IoT), cloud computing, and over-the-top (OTT) services.

According to the ACCC, the telco market in Australia is well provided for through its existing economic regulatory framework. It last week similarly declined to declare wholesale mobile domestic roaming, saying there is sufficient competition.

"Notwithstanding considerable concentration in both fixed and mobile retail markets, there is evidence of competition between the major service providers of broadband and voice services. Smaller providers and new entrants have the potential to provide additional competitive tension by constraining the larger providers," the ACCC said.

Acknowledging that the deployment of 5G mobile networks could "disrupt" current broadband business models, the ACCC said the amount of substitution for mobile services instead of fixed-line broadband would depend on how well NBN services perform.

The ACCC said there are no regulatory issues on "emerging services" needing immediate handling. However, it did say it would look into how OTT services are treated on networks, and whether broadband providers discriminate for OTT services through blocking, throttling, prioritising, and unmetering traffic.

"Should broadband service providers fail to fully disclose to new and existing customers how their traffic management policies may impact their services, we will consider the need to develop appropriate principles and industry guidance as well as consider enforcement action where appropriate," the ACCC said.

Its proposed actions also include examining whether to continue regulating SMS termination services; consulting on the need to gain information on wholesale aggregation and dark fibre services to consider intervention; assessing the supply of downstream services to corporate customers; reviewing telco comparison websites to consider intervention; and monitoring consumer complaints on unfair contract terms.

The ACCC further proposes reviewing email retention offerings from service providers to assess an email portability regime; monitoring complaints about bundling; working with the TIO, the ACMA, and other agencies on complaints data; assessing whether to open access to small cells; monitoring the uptake of broadband technologies; following developments in the cloud, datacentre, and Content Delivery Network (CDN) markets; recommending the radiocommunications regime do more to promote competition; and encouraging the Productivity Commission's proposals on data availability and use be implemented.

Telstra, Optus, TPG, and Verizon should also "maintain on their website a comprehensive set of criteria and any other relevant policies to which they have regard when assessing peering requests from other networks", the ACCC said, also encouraging the Telecommunications Consumer Protection (TCP) Code review.

The ACCC will lastly continue consulting with the Internet of Things Alliance Australia (IoTAA), the ACMA, NBN, and other government departments and agencies on IoT issues, including the emerging embedded-SIM (eSIM) market.

The Communications Alliance welcomed the draft report, calling it a "pro-competitive stance" by the regulator.

"Without commenting on the respective merits of potential actions to achieve this, the objective of providing NBN Co with 'greater flexibility regarding its cost recovery' is certainly an issue worth exploring," Comms Alliance CEO John Stanton said.

Submissions from industry on the draft report are due by December 8, with the final report to be released in early 2018.

Previous ACCC Coverage

Mobile domestic roaming not declared by ACCC

Finding that a declaration of wholesale mobile domestic roaming might actually reduce competition, the ACCC has confirmed its draft decision while also publishing a paper on regional telecommunications issues.

ACCC leaves CVC decision to NBN and retailers

The ACCC has said it will not add FttN, FttB, and HFC services to the special access undertaking until NBN finishes consulting with retail service providers and decides whether to amend its CVC pricing structure.

RSPs should advertise based on busy evening speeds: ACCC

RSPs should adopt a labelling system for 'typical busy period' broadband speeds across the categories of basic evening speed, standard evening speed, standard plus evening speed, and premium evening speed, the ACCC has advised.

ACCC seeks submissions on competition effects of OTT, NBN, mobile data

New telco trends including OTT apps, the NBN rollout, Wi-Fi, IoT, M2M, cloud services, SDN, and NFV have spurred the ACCC to examine competition and the effectiveness of current market regulation.

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