Fletcher statement diminishes ACCC authority on NBN

Communications minister Paul Fletcher. Picture: Getty Images

The Australian Competition and Consumer Commission will have to provide a formal response to Communication Minister Paul Fletcher’s statement of expectations, lodged with the regulator this week.

The statement made clear Fletcher wants better lines of communication between the government and the watchdog on telecommunications issues and is also keen on the ACCC applying a more formal building block approach to regulation.

The statement, the first such statement for telecommunications regulation, was published on Thursday by telecoms news and analysis newsletter Communications Day after being delivered to ACCC chief Rod Sims earlier this week.

ACCC Chair Rod Sims will have to formally respond to Fletcher. Picture: Zak Simmonds

The statement borders on specific government directions to the ACCC, which tramples on its rights as an independent regulator and as such diminishes its authority.

The way the big telcos see the world the government-owned monopoly the NBN is only lightly regulated and there is more on Telstra and Optus than the NBN.

Fletcher has formal responsibility for two parts of the competition law so the statement of expectations is within his rights. But, still, it is rare for a government minister to provide specific details in his recommendations to the ACCC.

The federal treasurer periodically delivers a statement of expectations to the ACCC but this is more general in nature and usually comes only at times like a change in government or treasurer.

Fletcher, who before entering parliament was a senior Optus executive with responsibility for regulatory affairs, acknowledges the importance of the ACCC’s independence.

He is also well aware of the inherent conflicts in the government owning the NBN, which is the critical monopoly infrastructure provider for the industry.

The ACCC has concentrated its efforts with the NBN on low speeds of 12Mbdps maximum download speed, and 1Mbps upoad, even though most users are on a 25 to five service and more.

Its attitude is that the basic service equates to the service delivered pre-NBN and, as it was imposed on users, it made sense to concentrate on the basic level, with those wanting higher speeds responsible for their own decisions.

The retail providers led by Telstra and Optus are keen for the ACCC to also regulate higher speeds particularly the so-called CVC charge which varies with demand.

The retailers claim the NBN charges are too high and uneconomic and want the ACCC to step in to help.

Ironically pre-NBN Telstra was the monopoly and wanted the ACCC to lay off. Now it is the retailer and wants the ACCC to step in.

Fletcher, as an Optus representative, wanted the ACCC to take up the attack on Telstra but as NBN ninister is urging a more hands-off approach.

The NBN rollout.

The ACCC has also taken a keen interest in NBN rebates to customers for poor service delivery.

In regulating infrastructure assets the ACCC tends to use a building block approach adding up costs then setting a reasonable rate of return.

This couldn’t be applied to the NBN before now, because it wasn’t built, but Sims is now building an NBN model.

The NBN regulation originally only applied to fibre-to-the-premises, which was the original plan, but has not operated under the government’s multi-technology strategy.

Now the rollout is complete the government has reverted to a fibre-to-the-curb model.

In his letter to the ACCC, Fletcher said: “In developing an agreed SAU (special access undertaking) variation with NBN Co, the ACCC could have regard to the Vertigan Panel‘s Recommendation 19 that the ACCC should use a “building block” cost model. In my view, work could begin on such a model immediately in accordance with the framework under the SAU and the ACCC could include NBN technologies not currently covered by the SAU in this building block cost model. The cost model could be based on NBN Co’s actual prudently incurred costs in accordance with the methodology set out in the existing SAU.”

Fletcher also called for more warning of ACCC actions, saying: “I expect the ACCC will inform me prior to any significant regulation or intervention in the telecommunications markets. I also expect the ACCC to provide me with sufficient advance notice in relation to major announcements, public submissions, media releases and major speeches relevant to my portfolio responsibilities.”