NBN Co retreats on price-hike clause

After harsh criticism from the coalition, the National Broadband Network Company (NBN Co) has announced that it will limit wholesale price increases to half of the yearly inflation, and will freeze all wholesale prices for the first five years of the operation of the network.

After harsh criticism from the coalition, the National Broadband Network Company (NBN Co) has announced that it will limit wholesale price increases to half of the yearly inflation, and will freeze all wholesale prices for the first five years of the operation of the network.

The company's special-access undertaking (SAU), submitted to the Australian Competition and Consumer Commission (ACCC) yesterday, sets out the pricing and regulatory framework, which the NBN will operate in for the next 30 years. The SAU gives the ACCC powers to intervene in disputes between access seekers and NBN Co over pricing or non-pricing conditions on the network.

The document is designed to work hand in hand with the wholesale broadband agreement, which sets out arrangements between NBN Co and access seekers over a shorter period of time; at this point, one year. NBN Co published the final executable version of the agreement last week, but was met with anger from the likes of iiNet and Optus, who are holding out on signing the document, subject to changes around liability.

In the SAU released yesterday, NBN Co replaced a controversial proposed price hike clause that would have allowed the wholesale network company to increase prices on existing products by CPI plus 5 per cent. Shadow Communications Minister Malcolm Turnbull had argued that the clause would have allowed NBN Co to raise prices every year by that amount, despite indications from NBN Co that it saw prices coming down over time.

Instead, NBN Co will only be able to increase prices by half of that year's CPI, and it has promised to freeze the prices for the existing NBN wholesale products until June 2017.

NBN Co's head of product development and industry engagement Jim Hassell said that the SAU commits NBN Co to limit the prices it sets in the future.

"This includes that prices for individual NBN wholesale products will not increase by more than half of CPI in a given year, and possible increases in one year can't be carried to the next if not taken," he said.

However, NBN Co has built a clause into the arrangement so that it "can request ACCC approval for an exception to the CPI/2 annual price increase limit subject to satisfying certain criteria", and NBN Co can also set the prices for new products it offers in any one year.

Hassell said that the SAU also had a provision that would allow the ACCC to intervene when NBN Co and an access seeker couldn't reach an agreement on non-price terms not covered in the SAU, or where NBN Co introduces new prices after the SAU commences.

"Once the ACCC has made its decision, NBN Co will make the outcome available to all our customers," he said.

The SAU now rests in the hands of the ACCC, which, NBN Co indicated, will now commence consultation with industry before approving the SAU.