NBN seeks regulatory amendment to support fibre, copper, HFC network mix

The Australian Competition and Consumer Commission (ACCC) has published the proposed variations submitted by the National Broadband Network (NBN) company to its Special Access Undertaking (SAU) in order to take into account the multi-technology mix.

The SAU, originally submitted to the ACCC in 2013, governs the pricing and regulatory terms facing the NBN until 2040.

"The SAU provides an overarching framework for the regulation of access to the NBN," ACCC Commissioner Cristina Cifuentes said.

"The SAU currently does not capture the additional network technologies that NBN Co has introduced since the SAU was accepted. NBN Co is now seeking to address this through the SAU variation."

The MTM NBN model involves a mix of technologies including fibre to the premises (FttP), fibre to the node (FttN), fibre to the basement (FttB), and hybrid fibre-coaxial (HFC); the former SAU took into account only FttP.

According to the ACCC, NBN already offers FttN, FttB, and HFC technologies in an SAU-consistent manner, with the SAU variation to simply formalise the process. However, several other amendments would see NBN forced to provide rollout progress information to access seekers, as well as changing the dispute resolution mechanism to allow a body corporate to be appointed as a resolution adviser.

"None of the changes which NBN proposes alter the underlying regulatory principles, structure, and incentives embedded in the SAU, which the ACCC has previously accepted as being reasonable, including being in the long-term interests of end users," NBN said in its supporting submission [PDF].

"NBN's changes are limited in scope and mechanical in nature; they represent an incremental change to reflect current policy settings.

"Fundamentally, the change to the MTM model does not change the underlying regulatory principles, structure, or incentives embedded in the SAU and they apply equally to the MTM as they do currently to the services and products under the SAU."

NBN submitted the proposed variation [PDF] on May 27 alongside prolific independent evaluations from professor Janusz Ordover and Dr Allan Shampine [PDF], Analysys Mason [PDF], and Dr Steven Bishop and professor Bob Officer [PDF].

The report by Ordover and Shampine found the characteristics and economics in the present SAU are applicable to the other network technologies; Analysis Mason decided the process and methods used by NBN for deciding which network technology to use for a premises is "prudent and efficient", as is its design of those networks; and Bishop and Officer found that the principles for rate of return were reasonable when applied to the other technologies.

"The new structure with the MTM -- where some parts of the legacy networks are transferred to NBN rather than retired, and NBN is directed to utilise existing infrastructure to achieve the specified expectations in a cost efficient manner -- does not alter our conclusions. The SAU can and does adequately deal with the relevant concerns," Ordover and Shampine said.

"Analysys Mason believes that the methodology and processes used by NBN for determining which type of MTM network it will deploy in a particular geographical area is prudent and efficient," Analysis Mason added.

"NBN's design of its FttN/FttB network reflects an efficient and prudent network design, notwithstanding the fact that certain components of the design and industry initiatives to support the competitive deployment of these networks are still in a state of development.

"NBN's design of its HFC network reflects an efficient and prudent network design on the whole, although there are potential issues that NBN recognises and is addressing."

"We are of the view that the cost of capital principles for the subsequent regulatory period of the SAU are appropriate principles for recognising a required return on investment to incorporate in a building-block approach as contained in the SAU. These principles are quite general and are unaffected by the variations to the SAU to capture the new technologies, associated new products, and the amended agreements," Bishop and Officer concluded.

The ACCC is accepting submissions on the proposed variation until August 26, after which it will decide whether to accept or reject it.

The regulator last month also gave draft approval for NBN's revenue control alteration proposal, and deemed the company to have been compliant with pricing controls during 2014-15.

It is due to release its final determination in regards to the Long Term Revenue Constraint Methodology (LTRCM) proposal on June 30.