Telstra's NBN deal unlikely to count in regulated prices

NBN Co's payments to Telstra won't factor in to the ACCC's determination for the price of regulated services, the watchdog has indicated.
Written by Josh Taylor, Contributor

The AU$11 billion deal between NBN Co and Telstra will not factor in to a determination of the price that the Australian Competition and Consumer Commission (ACCC) sets for wholesale services on the network while the National Broadband Network (NBN) is being rolled out.

Telstra's wholesale customers, such as iiNet, have argued that the deal currently being renegotiated between NBN Co and Telstra should be a factor in determining the access price they pay. Under the current arrangement, NBN Co is paying Telstra as customers move from the copper network to the National Broadband Network (NBN); however, under the new arrangement, it is likely that ownership of the copper network will transfer to NBN Co to use in a fibre-to-the-node network.

In the meantime, the ACCC will still need to set Telstra's prices to ISPs to sell services on the existing copper network.

ACCC chairman Rod Sims said in a positioning statement on Wednesday that to include the NBN payments in the pricing would not be practical.

"The ACCC's position involves the same regulatory principles as arise when one business buys regulated assets from another. If regulated prices were adjusted up to reflect an asset sale price above the regulatory value of the assets, this would result in price increases due solely to ownership change and not to changes in underlying costs. This outcome would clearly not be in consumers' interests," Sims said.

"Further, if values in excess of regulatory values were deducted from a business' cost base, as some stakeholders have suggested, we could reach a future point where regulated asset values become negative. This would clearly be a nonsensical outcome."

As a result, the ACCC's current position is to use the "regulatory value" of Telstra's assets in determining price settings, but Sims said this would be adjusted, as parts of the company's network were decommissioned during the NBN rollout.

A spokesperson for Telstra welcomed the statement, but said the ACCC needs to clarify its position on the price it will set.

"We welcome the clarity from the ACCC on this one point, but there is still a lot of uncertainty on where they will land on final prices," the spokesperson said.

"We agree with the government and others that in the transition to the NBN, real price stability is fundamental. We look forward to the ACCC making its final determination as soon as possible."

The ACCC will release a draft decision for consultation on the matter in early 2015, and the regulator is expected to make a decision by mid-2015.

It comes as Telstra is seeking to increase the wholesale price for services on its copper network to account for the declining customer base as end users move onto the NBN.

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