Competition boss Rod Sims has questioned whether NBN has genuinely dealt with internet retailer complaints of the monopoly over-charging for fast speed broadband, less than three months after it initiated a review into a growing consumer backlash.
NBN chairman Ziggy Switkowski ruled out material cuts to wholesale pricing on the national broadband network, at the Communications Day summit on Tuesday, saying it would only fuel a “land grab” and take value away from taxpayers and the government, transferring it to retail service providers (RSPs).
Australian Competition and Consumer Commission chairman Mr Sims said he was surprised NBN has ruled out cuts to its controversial pricing model, which is causing discontent in the telecommunications sector because the costs for RSPs are much higher than traditional internet connections,
“I did find the comments a bit surprising in the sense that we had understood that NBN was going through a consultation process with the access seekers on its pricing and we are wondering whether that consultation process is real or not real,” Mr Sims told The Australian Financial Review.
“We often deal with companies who are monopolies. Sometimes you are a bit sceptical of a monopoly actually entering into genuine discussions. But, we had thought these were genuine discussions.”
In July, NBN chief executive Bill Morrow announced a pricing review in an interview with the Financial Review, conceding the company had an image problem over its high prices and slow internet speeds.
Earlier this week, Mr Sims warned he would not make a decision on updating the NBN’s special access undertaking, a key part of the way the ACCC regulates pricing, until NBN’s pricing consultation progressed further. The update needs to be made to accommodate new technologies as part of the rollout of the Coalition’s model for the NBN.
“We certainly thought their shareholder [the federal government] was interested in there being genuine negotiations. We’re still expecting genuine discussions, genuine consultation. Our definition of consultation is not one-way. Consultation means you listen, respond and react,” Mr Sims said.
For some time, many players have viewed the costs to access the NBN as too expensive, which is leading to retail service providers not purchasing large amounts of capacity, resulting in congestion and consumer frustration in peak usage periods.
The CVC charge has been a long-running and well-documented issue for the telco industry – the newest iteration was rolled out on June 1, with the level of discount based on individual retail service providers’ average purchased capacity each month, rather than the previous version, which was a based on a total industry average. The charge is part of the price the NBN sells access to the network to RSPs.
Complaints are increasing as the NBN rolls out to metropolitan areas and RSPs refuse to buy more capacity because it sharply cuts their margins compared to DSL connections. The frustration is only amplified by RSPs advertising top speeds that are not being achieved in peak times, and in some cases is worse than pre-NBN speeds.
In August, the ACCC gave RSPs three months to clean up their “terrible” NBN advertising. The consumer watchdog will also begin publishing speeds achieved, versus advertised speeds, on plans from RSPs in an attempt to create better engagement and education of the customer.
The costs of the NBN threaten the profitability of the telecommunications sector, but it’s a problem that stems from the government’s original business plan, both in the Labor and Coalition iterations of the project, not the technology that is being used to deliver internet, which requires the NBN to make a certain rate of return on the $50 billion infrastructure project.
Industry experts believe if the government wrote off a significant chunk of the NBN, its investment is $29.5 billion, and didn’t require it to deliver the returns it does now, NBN could slash the CVC charge.
However, despite growing pressure to remove the commercial return requirements, the government has repeatedly ruled out bringing the NBN back onto the budget.
This puts NBN between a rock and a hard place. On one side, the government is forcing it to achieve a rate of return, a third of which it is trying to recoup via CVC charges, but on the other side RSPs aren’t budging on how much capacity they will buy because they want to entice customers with cheaper plans.
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