War is brewing between Aussie internet service providers (ISPs) and NBN Co over the latter’s exorbitant wholesale prices, which ISPs then pass onto customers.
This week, NBN Co lodged a submission with the Australian Competition and Consumer Commission (ACCC) on proposed changes to its wholesale pricing model, which suggested basic broadband prices could double over the coming decade.
ISPs have hit back, begging the ACCC to set prices instead:
NBN Co’s top five retail service providers – Aussie Broadband, Optus, Telstra, TPG Telecom and Vocus – have asked the ACCC to directly intervene and set prices for NBN services.
The five want to see NBN Co regulated by an access determination – either on an interim or final basis – by the end of the year…
In a joint letter sighted by iTnews, the five RSPs wrote that NBN Co “has chosen to make no material compromise” on its earlier price proposals, despite the ACCC’s involvement.
“We request the ACCC undertake a Part 25 inquiry and urgently develop an access determination that will establish a regulatory regime which promotes the interests of end users,” the five wrote.
“Such an access determination could prevent year-on-year wholesale price increases worsening cost of living pressures, encourages the future investment needed by the market, contributes to growth of Australia’s digital economy, and protects RSPs from monopolistic behaviour.
“If this cannot be achieved by November 30 or thereabouts, we request the ACCC consider issuing an interim access determination to ensure end users do not suffer from the effects of NBN Co’s proposal to significantly increase wholesale prices.”
The former Labor Government’s decision to classify the NBN as an “investment” required NBN Co to deliver a commercial return to the government. This meant the NBN must recoup its $60-plus billion of costs as well as earn a margin.
In turn, NBN Co has been forced to charge ISPs high wholesale prices, which they then pass onto Australian consumers. But customers don’t want to pay the exorbitant access fees required for that to happen, so here we are.
The ultimate solution to the NBN’s wholesale pricing conundrum is for the federal government to write down the NBN’s value to reflect its true worth.
The Parliamentary Budget Office reported that the “fair value” (or saleable value) of the NBN was just $8.7 billion. This is less than one-third of the federal government’s equity investment. In turn, the NBN likely requires a write down of some $20 billion.
Doing so would significantly lower the project’s required rate of return and allow NBN Co to cut wholesale prices for ISPs, which would be passed onto consumers.
A reform along these lines would require the federal government to treat the NBN as an essential utility service, instead of a commercial project seeking a required rate of return.
Put simply, Australians will continue to be gouged for broadband internet unless the federal government writes the NBN’s value down.
Hopefully, the new Albanese Labor Government will finally fix the NBN’s wholesale pricing mess.
