NBN Co to split 30-year undertaking

NBN Co has bowed to pressure from the telecommunications industry, and will release a revised access undertaking to address issues that the industry has been raising since last year.
Written by Josh Taylor, Contributor

NBN Co has bowed to pressure from the telecommunications industry, and will release a revised access undertaking to address issues that the industry has been raising since last year.

NBN Co's original special access undertaking (SAU), submitted to the Australian Competition and Consumer Commission (ACCC) late last year, set out the pricing and regulatory framework for the operation of the National Broadband Network (NBN) for the next 30 years, and was 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.

Telcos objected to how little oversight the ACCC would have of the WBAs, once agreements were signed by the telcos. They also raised concerns with the 30-year period for which the SAU would be in operation, given how much the telecommunications industry had already changed over the past 30 years.

NBN Co today advised the ACCC that it will lodge a revised undertaking to break up the 30-year SAU into modules in an attempt to address these concerns. This new SAU is, however, still in development.

According to an outline of the revised SAU (PDF), published on the ACCC's website this afternoon, there will be three modules initially lodged with the ACCC to cover the 30-year SAU.

  • Module 0 will be the foundation of the SAU for the full 30 years, and will include a service description, and "boilerplate" legal terms required by the SAU

  • Module 1 will cover the first 10 years of the SAU, and will include terms and conditions for NBN services; commitments about pricing controls, like the controversial connectivity virtual circuit (CVC) charge; product development; what regulatory recourse will be available to access seekers; and how the long-term revenue-constraint mechanism will operate

  • Module 2 is an overview for years 11 to 30, which lays out how NBN Co plans to achieve cost recovery, and also details pricing commitments to limit increases in prices "that would result in real price decreases over time".

Prior to the expiry of Module 1, NBN Co will begin to develop Module 3, which will be built on the basis of Modules 0 and 2, and will be submitted to the ACCC for approval. If the ACCC approves the new module, it will run for the following three to five years after Module 1. This process will be continually repeated until the end of the 30-year SAU.

The SAU will also be modified to allow access seekers to ask the ACCC to make an access determination, even after they have entered into a WBA with NBN Co. Any determination made by the ACCC will be then passed on to all access seekers under the SAU, once their existing agreement with NBN Co has expired. The WBA will also be shorter — two years, instead of five years — and will be renamed the "Standard Form Access Agreement" (SFAA).

NBN Co's head of product management and industry relations Jim Hassell said that the new SAU will strike a better balance between providing certainty on cost recovery for NBN Co, while also leaving enough flexibility to change regulatory terms as required over the 30 years, and giving the ACCC the power to intervene during the course of the SAU.

Hassell also noted that the SAU confirms NBN Co's intention to decrease the price of the CVC "as demand increases".

ACCC chair Rod Sims said that the watchdog sees merit in the new SAU.

"The proposed modular design balances NBN Co's requirement for certainty on long-term cost recovery with the need to undertake regular reviews of the detailed terms of access," he said in a statement. "Similarly, the proposal that the revised SAU will specify reference offers and use a building-block model to determine revenue constraints on NBN Co appears to provide some reasonable constraints on NBN Co's pricing over time."

Sims said that the ACCC will work with NBN Co to get the new SAU lodged in a timely fashion with appropriate consultation, but said that it is "optimistic" to expect the ACCC to have completed an assessment of the new SAU by the end of the year. He said that with the current WBAs due to expire by the end of the year, there will need to be another interim contractual agreement signed by NBN Co and the access seekers before then.

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