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ACCC’s confirms approval of NBN Co’s SAU among a raft of announcements

13 Dec 2013

The Australian Competition and Consumer Commission (ACCC) has made a number of announcements, chief among them being that it has accepted the varied Special Access Undertaking (SAU) lodged by NBN Co on 19 November 2013. With the SAU forming a key part of the framework for governing prices and other terms upon which NBN Co will supply services to telecommunications companies over the National Broadband Network (NBN) until June 2040, the newly approved version replaces the undertaking previously submitted in December 2012.

Among the key features of the SAU are: a ‘modular’ structure allowing for different matters to be ‘locked in’ for different periods of time, with this ensuring ‘a balance can be struck between providing certainty about long term cost recovery and allowing for flexibility to respond to changing circumstances’; a set of initial prices aimed at ensuring a smooth transition to the NBN from existing telecommunications networks without significant price shocks; price controls that prevent NBN Co from raising prices for any of its products by more than CPI-1.5% in any year over the SAU period; pricing mechanisms that allow the ACCC to rebalance NBN Co’s prices in a revenue neutral manner over the SAU term and to determine prices for new products introduced over the SAU term; ACCC oversight relating to the withdrawal of products, and protections against NBN Co making variations to an existing product that reduces the functionality, performance or features of the product; an explicit role for the ACCC to determine NBN Co’s allowable revenues over the SAU period; and a limited number of non-price terms and conditions designed to facilitate effective commercial negotiations on matters such as service levels.

While the SAU provides the broad regulatory framework to facilitate effective engagement between NBN Co and access seekers to negotiate commercial agreements, the ACCC has also said that it understands that a Wholesale Broadband Agreement (WBA) is currently under negotiation. Further, the regulator noted that, although there remains some uncertainty around the NBN in light of upcoming reviews of the project, it expects that implications for the SAU will be mitigated by the fact that most of the commitments are technology neutral and thus would be applicable even if there were a change in network design. Commenting on the development, ACCC chairman Rod Sims said: ‘The acceptance of this SAU is a key milestone in establishing regulatory arrangements for the NBN … It is part of a broader set of regulatory and structural reforms that have occurred across the industry in recent years. The SAU will form the basis for how NBN Co can set its prices and change its product offerings over time. It will also form the basis for ACCC oversight of NBN Co’s allowable revenues and prices.’

Alongside the NBN-related announcement, the ACCC has also released draft reports in which it proposes to largely maintain the existing regulation of wholesale services supplied using fixed line incumbent Telstra’s copper network, other fixed line infrastructure and transmission routes. The existing declaration for transmission services (known as the Domestic Transmission Capacity Service [DTCS]) expires in March 2014, while declarations for the six fixed line services – unbundled local loop (ULL), Line Sharing Service (LSS), PSTN Originating and Terminating Access (OTA), Local Carriage Service (LCS) and Wholesale Line Rental (WLR) – expire in July 2014. Under its proposals the ACCC has said it aims to continue regulating transmission services and all six fixed line services for another five years, until 2019. ‘Regulating these services has promoted competition over bottleneck infrastructure and contributed to lower prices and greater choice for Australian consumers,’ Mr Sims noted, adding: ‘The regulation of these services will support continuing competition and efficient investment.’ However, a number of adjustments to the scope of the regulation has been suggested, with the ACCC saying that for DCTS it plans to adopt a ‘more comprehensive methodology for assessing competition on particular routes’. Having applied new criteria for assessing whether competition on transmission routes is effective, the watchdog has proposed that 112 additional metropolitan exchange service areas and eight additional regional routes will be removed from regulation, while three presently unregulated regional routes will be re-regulated. For the six fixed line services, the ACCC has set out its stall to implement changes to clarify that the resale voice services that are provided using the National Broadband Network (NBN) are not regulated. Additionally, there are proposals to regulate resale voice services supplied in Central Business District (CBD) areas where ‘infrastructure-based competition has proven not to be sufficiently effective.’ A discussion paper on pricing issues for the fixed services is expected to be published in the second quarter of 2014.

Finally, the ACCC has also published a report of its draft decision to continue regulating the termination of calls on mobile phone networks, while also proposing to regulate the termination of SMS messages for the first time. Such a development comes as the regulator is required to review the scope of its regulation of the mobile terminating access service (MTAS) before June 2014, with the last review having been carried out back in 2009. With regards to its plans, it has said that extending regulation of the MTAS for another five years will help promote competition. Meanwhile, the decision to consider extending regulation to SMS termination services comes on the back of information received by the ACCC during its examination of the sector, with it noting that the wholesale charge for sending SMS between networks has not changed for a number of years. ‘The ACCC is concerned that mobile network operators may be exercising monopoly power over access to their networks to keep wholesale SMS rates significantly above costs,’ the regulator’s chairman noted. Having released its full report online, the ACCC has said it aims to release a discussion paper on pricing issues in 2Q 2014, while it will receive submissions on its report until 14 February 2014.

Australia, Australian Competition and Consumer Commission (ACCC), NBN Co

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