The government’s proposed broadband tax on telcos expected to hike internet prices

AUSTRALIANS will face higher internet prices due to a new plan from the government, which is desperate to raise more cash.

Communications Minister Mitch Fifield has announced the government’s intention to introduce a telco tax to help pay for regional NBN services. Picture: Ray Strange

AUSTRALIANS will likely face higher internet prices as the government looks to introduce a levy on the telco industry to help pay for the continued rollout and service of the NBN in regional areas.

Even the government has admitted the move will result in higher internet prices.

On Monday the government announced plans to legislate a Regional Broadband Scheme (RBS) which will slug certain fixed-line broadband providers with a monthly charge depending on the number of users they service.

Communications Minister Mitch Fifield wants to forge ahead with the plan despite a panel of experts picked by the government warning against the levy saying it would cause “greater distortions than it is intended to remedy”.

The government says the levy is necessary to pay for the commercially “unsustainable” fixed wireless and satellite NBN services that cater to rural Australians and currently require a cross-subsidy from NBN Co’s more commercial fixed-line services.

Super fast broadband networks that rival the NBN will be required to pay a charge of $7.30 per month for each fixed-line connection they supply capable of providing average downloads speeds of 25Mbps, and the fee will be indexed to the CPI.

By its own estimations the Communications Department believes the program will deliver about $40 million from eligible non-NBN networks in its first year.

It still needs to be approved by parliament, but as expected, the telcos that would be hit with the tax such as NBN’s main competitor TPG (who also own iiNet) and Opticomm have slammed the idea as anti-competitive.

“This could cripple companies like us,” Opticomm chief regulatory officer Paul Smith told Fairfax.

“This is a terrible instrument to enforce on a small number of players — it’s so anti-competitive it’s not funny.”

Melbourne broadband start-up DGtek which currently provides super fast internet to apartment buildings on St Kilda road has also slammed the move.

“We think it’s anti-competative. We do not understand why we need to pay for our competitors,” DGtek’s head of operations Eli Bekker told news.com.au. “I would think the ACCC would want to investigate something like this.”

The company does not yet have enough end users for it to be required to pay the levy, but DGtek has long-term plans to expand and says it will provide a submission to the government condemning the levy.

Mr Bekker complained that for small providers in the market it feels like Telstra and the NBN have legally monopolised the telco industry.

“We want to build our network out to Geelong as soon as possible to prove that you don’t need all this money,” he said.

The current NBN rollout map.

Much of the criticism is aimed at the perceived narrowness of the levy.

Exemptions for the tax will be granted to providers with fewer than 2000 users on their service a month, and for those transitioning their network to the NBN like Telstra and Optus.

A government review of the NBN involving a panel of experts led by Michael Vertigan and handed down in October 2014 expressed weariness of introducing a levy to pay for the NBN’s regional rollout unless the company was broken up into separate business entities.

If not, the introduction of such a tax could cause “greater distortions than it is intended to remedy,” the report warned.

“The government should wait to see whether any intervention is required to deal with concerns that competition may threaten NBN Co’s ability to cross subsidise service provision in loss making areas.”

In a joint statement released Monday by Senator Mitch Fifield and Regional Communications Minister Fiona Nash, the government said the reforms will “provide a strong structural framework for superfast broadband” across the country.

“Regional and rural users of NBN’s fixed wireless and satellite services will benefit from the RBS which will require all eligible fixed-line superfast broadband networks to make a proportionate contribution to the long-term cost of these services,” the statement said.

“Non-NBN fixed-line networks are currently estimated to provide 10 per cent of fixed-line services in operation. NBN, as the largest network, will continue to be responsible for the overwhelming majority of funding for regional and rural services and will make around 90 per cent of RBS contributions.”

Beginning in the next financial year, broadband providers will be required to report figures about the number of services they provide to the ACCC.

Sadly for Aussie netizens, the government has admitted the scheme will result in higher prices for internet customers.

Both NBN Co and non-NBN “providers would pass the charge on to their end user base,” the Communications Department said.

Consultation on the draft legislation is open until February 3, 2017 while the government intends for the legislation to commence from July 2017.

A spokesperson from Senator Fifield’s office told news.com.au “the reform package as a whole encourages competition to keep downward pressure on prices, and will ensure sustainable funding arrangements for fixed wireless and satellite networks serving regional Australia.

“The Regional Broadband Scheme takes an existing cost being met by NBN (the net costs of NBN’s fixed wireless and satellite networks) and spreads that cost more fairly across all high speed fixed line broadband networks.”

The government recently gave the NBN a $20 billion loan to pay for the continued rollout.