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NBN rural broadband tax should be passed: Senate committee

The Bill that would levy broadband providers with a AU$7 a month charge per premises to subsidise NBN's satellite and fixed-wireless networks should be passed by Parliament, a Senate committee has recommended.

The Australian government has welcomed a report by the Senate Environment and Communications Legislation Committee recommending that the proposed Regional Broadband Scheme (RBS) charge subsidising the National Broadband Network (NBN) loss-making satellite and fixed-wireless services be passed.

The Telecommunications (Regional Broadband Scheme) Charge Bill 2017 proposes a AU$7 monthly charge to fixed-line broadband customers to subsidise those connecting to NBN's regional offerings.

"The two Bills in the package will ensure all Australians can access sustainably funded high-speed broadband services, regardless of where they live," Communications Minister Mitch Fifield said.

"NBN's fixed-wireless and satellite networks provide critical broadband services to regional and remote Australia; however, these networks are not commercially viable, and are expected to incur losses of AU$9.8 billion over 30 years."

Fifield added that the RBS is already built into existing NBN pricing today, with the Bill simply extending the cost to non-NBN competing wholesale broadband networks -- something approved by the Australian Competition and Consumer Commission (ACCC) earlier this year.

"The committee considers it is critically important to establish a scheme for adequately and transparency funding the much-needed infrastructure for rural and regional Australia that cannot be provided on a commercial basis. Of the various options available for funding these non-commercial services, the proposed RBS most clearly fulfils this objective," the committee said in its report, tabled earlier this week in Parliament.

The Bill had come under criticism from multiple telcos, with TPG arguing that the proposed levy would be anti-competitive.

"Though it is possibly an unintended consequence, it is clear that the RBS charge will economically damage the small number of carriers that the DOCA [Department of Communications] has defined as competing with NBN Co in broadband markets," TPG said.

TPG said the levy should be funded by the government through general taxation or a broad levy imposed across all broadband services including wireless providers, mobile operators, and over-the-top (OTT) services that will benefit from the NBN, such as Microsoft, Google, and Facebook.

The Electrical Trades Union (ETU) similarly said in its submission that NBN is placing economics ahead of consumers, arguing that the government should pay the AU$7 levy.

"The government has admitted that the costs associated with the rural levy will be entirely or substantially passed onto consumers, and the providers that would be subject to the levy have expressed serious concern about how the levy will affect their ongoing financial viability," the ETU said.

"We do not believe that cost should be simply passed on to consumers. Government should directly fund the difference, as happens with electricity prices in many jurisdictions."

According to the committee's report, Telstra and Optus additionally argued that the RBS should not apply to enterprise networks, wholesale data services, and services that are only "technically capable" of providing superfast broadband but are not being used to do so.

"Telstra explained that it supported the RBS when it was first announced, however, it considers the RBS proposed in the Bills 'applies far too broadly' to services that are not competitive with, or an economic threat to, NBN Co," the committee detailed.

Telstra hence claimed that the RBS had "transformed from its original intention as a 'anti-cherry picking measure' into an industry tax", and argued that telcos might not be able to determine the nature of services or the number of premises being supplied at a retail level, and that the government should change the metric to services in operation instead.

"Optus also shared Telstra's concerns about the application of the RBS to fibre networks that provide services to enterprise and government customers," the committee noted.

"However, given the higher service prices involved in these services (an estimate of the range in the price of these services given at the public hearing 'hundreds of dollars to maybe tens of thousands of dollars'), representatives of Optus acknowledged that the AU$7.10 levy would be a small component of these services."

NBN, however, called Telstra and Optus' arguments on extending the levy to enterprise services "misleading", saying its corporate plans and product mix have reflected that the network will serve both consumer and business customers, something also shown in its Definitive Agreements and the Telstra Migration Plan.

"On the inclusion of business services in the funding base for the RBS, NBN Co commented that this is a 'critical component' of the proposed arrangements for ensuring the loss-making rollout of satellite and fixed-wireless networks are adequately subsidised," the committee added in its report.

"NBN Co argued: 'Failure to include business services will mean that the contributions of residential services would be required to fund the losses [NBN Co] incurs to serve regional and rural Australia. This is not desirable, efficient, or sustainable relative to the outcomes of the proposed arrangements.'"

The Department of Communications further said that it should not change premises to services in operation for the Bill, "due to concerns about different ways services in operation can be interpreted".

While the committee said it considered all arguments put forward by industry, it noted that "the introduction of an industry charge is unlikely to receive universal stakeholder support" and said it found NBN's responses more "compelling".

"The committee, therefore, supports the overall approach taken to drafting the RBS as outlined in the bills," it concluded.

However, it also suggested that the commencement of the regime be delayed for a short time in order to provide industry with certainty.

The Bill vests the communications minister with the power to change the cost above the current AU$7-a-month amount, with the upper limit capped at AU$10 for the first financial year of its operations "and for future years would be indexed to the consumer price index", the report said.

The Senate committee also proposed that the ACCC be given the power, alongside the Australian Communications and Media Authority (ACMA) to disclose information obtained from the RBS' operation to the Department of Communications, the Regional Telecommunications Independent Review Committee, the Department of Finance, the Treasury, and any "authorised government agency" -- the last of which it said should be defined more clearly in the Bill's explanatory memorandum.

The committee also recommended passing proposed changes under the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017, which would place new statutory infrastructure provider (SIP) obligations on NBN to ensure that the company has a legislated obligation to connect all Australian premises, and passing new level playing field requirements to allow carriers to operate wholesale and retail businesses where they are functionally separated.