Economist backs NBN's undertaking

NBN Co has urged the competition regulator to accept its 30-year undertaking for running the National Broadband Network (NBN), with analyst group Synergies Economic Consulting giving the undertaking the thumbs up.

The company's special-access undertaking (SAU), submitted to the Australian Competition and Consumer Commission (ACCC) late last year, sets out the pricing and regulatory framework, which the NBN will operate in for the next 30 years. The SAU gives the ACCC powers to intervene in disputes between access seekers and NBN Co over pricing or non-pricing conditions on the network.

The document is designed to work hand in hand with the wholesale broadband agreement, which sets out arrangements between NBN Co and access seekers over a shorter period of time; at this point, one year.

This week NBN Co lodged an analysis of the agreement by Synergies Economic Consulting with the ACCC that broadly approves NBN Co's methodology for determining how the government-owned company will recover the $35.9 billion associated with rolling out the network over the next 30 years.

On the length of the undertaking, Synergies found that there was "regulatory precedent in Australia for long-term undertakings with review intervals that are considerably longer than five years" and longer terms are desirable for infrastructure projects where there needs to be sufficient time for there to be built up drivers for demands for the services offered by that infrastructure project.

There were also sufficient safeguards in place, Synergies noted, to ensure against "inefficient outcomes" of having such a long undertaking, in particular having fixed wholesale prices until 2017, and limited increases there after. This was a key concession NBN Co made following criticism from Shadow Communications Minister Malcolm Turnbull over so-called "price hike" clauses.

NBN Co should have flexibility over setting prices for new products, Synergies said, because there were clauses in the SAU to constrain prices, prevent NBN Co from earning a "monopoly profit" and prevent price changes that were adverse to the interests of access seekers.

The company would also not have any conflict of interest in setting prices like other vertically integrated companies, Synergies noted, and flexibility would mean NBN Co would be able to offer higher value, as well as expanded ranges of services.

In light of Synergies' findings, NBN Co's principal of regulatory affairs Caroline Lovell urged the ACCC to accept NBN Co's SAU.

"Synergies' conclusions add weight to NBN Co's previous submission that the ACCC should accept the SAU," she said in a letter to the regulator.