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Monday, 05 December 2011 17:56

NBN Co lodges SAU, claims 30 year price certainty

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NBN Co has lodged its special access undertaking (SAU) with the ACCC saying it commits the company to keeping prices for its key wholesale services frozen for five years and limits future increases to be less than the rate of inflation.

The SAU sets out a regulatory framework that, once accepted by the ACCC will govern the price and non-price terms and conditions for NBN Co wholesale services for the next 30 years. It covers all wholesale Layer 2 services provided over NBN Co's fibre, wireless and satellite networks and provides the framework in which NBN Co delivers uniform national wholesale prices across Australia.

It follows publication last week of NBN Co's Wholesale Broadband Agreement  that sets out the detailed terms for telephone and Internet service providers who want to sign up to operate over the FTTH component of the NBN, and which commits them to a contract term of only 12 months.

Jim Hassell, NBN Co head of product development and industry engagement said: "Our corporate plan does not envisage that prices will need to rise to achieve our long-term financial objectives, and the SAU formally commits us to limits on the prices we set in the future. This includes that prices for individual NBN wholesale products will not increase by more than half of CPI in a given year, and possible increases in one year can't be carried to the next if not taken.

According to NBN Co, the SAU also contains a mechanism that allows NBN Co to recover only its prudently incurred costs, and no more. "This includes a regulatory rate of return on its assets of 350 basis points above government bond rates," it says.

Industry has been critical of early versions of the SAU and the WBA claiming they left loopholes through which NBN Co would be able to escape from full regulatory oversight by the ACCC. However, Hassell claimed that in the SAU as lodged, those loopholes had been closed.

"We have also included a provision in the SAU that should address the concerns of industry regarding recourse to the ACCC, while still maintaining the certainty of our contractual arrangements," he said.

"Where commercial agreement can't be reached on non-price terms not covered in the SAU, or where NBN Co introduces new prices after the SAU commences, the ACCC can be called upon to settle an outcome. Once the ACCC has made its decision, NBN Co will make the outcome available to all our customers."

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Lodgement of the SAU initiates a formal review by the ACCC to assess the reasonableness of the proposal. This will involve consultation by the ACCC with industry on the SAU's terms.

NBN Co says: "While there is no requirement that NBN Co should provide information other than through that formal process, today we are publishing the complete draft of the SAU on our website, to provide our customers and other interested parties with an early view of our proposal. Also published today is a short Overview Paper, a short Overview Paper, which outlines some of the key features of the SAU and the rationale behind the approach we have taken."

It adds "While the SAU contains the detailed commitments that NBN Co is making in relation to the service description, price and non-price terms for the NBN Access Service, it does not describe the context and rationale for those commitments. NBN Co intends publishing detailed supporting material that provides this context in coming weeks."

The 151 page SAU consists of a short core body that contains the key terms of the SAU, with the detailed commitments being contained in 12 schedules, each covers a discrete set of commitments. According to NBN Co, "the schedules cannot and do not operate in isolation from each other. Rather, commitments made in one schedule interact with and support commitments made in others, and the SAU should be viewed as an integrated proposal."

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