Chapter 3 Regulatory and Pricing Issues
The first and second reviews included examination and discussion of key
regulatory matters affecting and enabling the rollout of the National Broadband
Network (NBN). Matters reviewed included the: Binding Definitive Agreements
between Telstra Corporation (Telstra) and Optus, the NBN Co Special Access
Undertaking (SAU) and Wholesale Broadband Agreement (WBA).
This chapter provides an update on the regulatory components enabling
the NBN rollout as outlined above. In addition, e-readiness of small business is
The Shareholder Ministers’ Performance Report (the performance report)
includes an update on the status of regulatory matters pertaining to the NBN
rollout for the period ended on 31 December 2011. The Performance Report also
includes an update of these matters for the period from 1 January to
31 March 2012. Where relevant the updated information has been included in
Binding Definitive Agreements with Telstra and Optus
In addition to including interim arrangements for immediate access to
Telstra infrastructure, the Binding Definitive Agreement between NBN Co and Telstra
(the Telstra Agreement) assists the NBN rollout in two other main ways. These are,
it assists to:
n Avoid infrastructure
duplication and ensure the efficient fibre network rollout, it grants NBN Co
access to Telstra facilities and infrastructure over a minimum period of 35
n Provide for the
progressive disconnection of Telstra’s copper and Hybrid Fibre Coaxial (HFC)
customers (excluding HFC pay television customers), and NBN Co will be
Telstra’s preferred fixed line network.
To take effect, the Telstra Agreement was required to satisfy
nine conditions precedent (CP). These CP included: Telstra shareholder
approval, and the Australian Competition and Consumer Commission (ACCC)
acceptance of the Telstra Structural Separation Undertaking (SSU) and an
accompanying final Migration Plan.
The Telstra Agreement received shareholder approval on 18 October 2011.
Under the Telecommunications Act 1997 (Cth), the ACCC was tasked with
consideration of Telstra’s draft Migration Plan. Given its significance in
facilitating structural reform in the Telecommunications Sector, although not
required, the ACCC also reviewed Telstra’s SSU.
The ACCC consideration and approval of the SSU and accompanying (customer)
migration plan was the final CP remaining to be satisfied before the Telstra
Agreement could come into force.
To meet the terms of the Telstra Agreement, ACCC consideration of the
SSU and draft Migration Plan would have to be completed before 20 December
2011 or otherwise extended by agreement.
As the ACCC consideration of the Telstra SSU was delayed beyond 20 December
2011, the terms of the Telstra Agreement were extended until 30 March 2012 by
agreement with the respective parties.
Telstra’s Structural Separation Undertaking and Draft Migration Plan
Telstra’s SSU was lodged with the ACCC on 29 July 2011. On 30 August
2011, the ACCC issued a discussion paper and sought industry comment.
In addition to outlining the terms of the SSU and draft migration plan,
the discussion paper highlighted concerns about the SSU which centred on
interim equivalence and transparency measures, both of which were required
On release of the discussion paper, Telstra ‘engaged in constructive
discussions with the ACCC and industry’, to resolve ACCC concerns in regard to
The timeframe for the completion of the Agreement was made by the
respective parties before the expiry date. Telstra lodged a revised SSU with
the ACCC on 9 December 2011. The revised SSU included ‘substantially improved
interim equivalence and transparency commitments intended to address ACCC and
The ACCC released a discussion paper on the revised SSU and sought industry
comment by 13 January 2012.
Following industry consultation, on 28 February 2012, the Prime Minister
and the Minister for Broadband, Communications and the Digital Economy
announced that the ACCC had approved the Telstra SSU.
Approval of the Telstra SSU would enable the NBN Co to use existing
Telstra infrastructure and migrate Telstra customers onto the NBN, thereby
reducing the costs and time taken to rollout the NBN.
The structural separation of Telstra would also require Telstra to
change its corporate structure. This would have the effect of reducing the
market power of Telstra and together with the construction of the NBN deliver
microeconomic reform to the Australian telecommunications industry.
The aim of the Government’s reform to the telecommunications sector is
to deliver greater competition for industry. Through improvements in economic
efficiency, sector reform would deliver better outcomes for the end consumer in
regard to price and service of telecommunication products than previously
available under Telstra.
Under the Financial Heads of Agreement and the Telstra Agreement,
(between Telstra and the NBN Co), in the longer term, Telstra’s copper and HFC
networks will be progressively decommissioned and customers migrated to the
NBN, with the NBN Co the wholesale provider of services over the NBN.
Timeframe for Completion
The NBN rollout targets in the NBN Co 2011-2013 Corporate Plan are based
on the assumption that negotiations and regulatory processes relating to the
Telstra Agreement would be completed by the end of June 2011.
The Telstra Agreement came into force on 7 March 2012, just over eight
months after the expected date.
In response to the committee’s recommendation to publish a detailed
account of the impacts on timing and cost of the NBN, as a result of the time
taken to complete the Telstra and Optus Agreements,
the Government stated:
While the agreement with Telstra was extremely complex and
took longer than first anticipated, the government is confident that these
agreements will protect the interests of Australian taxpayers and support the
NBN rollout by providing access to existing infrastructure, minimising overhead
cabling and reducing the overall costs of the NBN. Further, NBN Co will
proactively manage the construction timetable over the life of the project to
minimise and overcome any delays.
NBN Rollout Progress since Telstra Agreement Approval
Since the Telstra Agreement ‘became unconditional and commenced’, the
following milestones in support of the NBN rollout have occurred:
n ‘Delivery of the
transit schedule in line with the initial roll out plan, with 26 Fibre Access
Nodes... and aggregation node sites handed over from Telstra as of 31 December
n Development of
processes, systems and methodology to implement the Telstra Definitive
n Completion of [operation]
and maintenance manuals and technical specifications for each infrastructure
type under the Infrastructure Services Agreement with Telstra.
n The required joint
governance committees, and associated forums, meet at least once per month.
n Significant work has
been undertaken on end‐to‐end processes for the
The $800 million Binding Definitive Agreement between the NBN Co and Singtel
Optus (the Optus Agreement) was not included under the NBN Co 2011-2013
The Optus Agreement, like the Telstra Agreement, requires the
decommissioning of the Optus HFC network and migration of its customers to the
NBN in line with the pace of the NBN rollout.
During the second review, Optus advised that it would retain only that
component of its fibre network used for its mobile backhaul and other corporate
Also at the time of the second review, finalisation of the Optus
Agreement was dependent on ACCC approval and confirmation of tax treatments.
The Shareholder Ministers provided an update on matters being progressed
as part of the Optus Agreement. The following key matters were progressed over
the review period were:
n ‘ACCC Approval
(condition precedent): The application to the ACCC for authorisations
for the implementation of the Optus HFC Subscriber Agreement.
n Implementation Plan: On
the 17 November 2011, NBN Co and Optus agreed the Optus HFC Subscriber
Agreement Implementation Plan.’
The ACCC commented that consideration of the Optus Agreement was one of
two major pieces of regulatory work relating to the NBN, yet to be completed.
The ACCC stated that it was in a position to finalise its consideration of the
Optus Agreement in the specified period.
On 28 May 2012, the ACCC ‘issued a draft determination proposing to
grant authorisation’ for the Optus Agreement.
The ACCC outlined the main public benefits of the Optus Agreement. The
ACCC stated the Optus Agreement will:
n ‘Avoid the cost of
operating the Optus HFC network to provide a service the NBN is also able to
n Deliver a lower cost
HFC subscriber migration to the NBN.’
In making its determination, the ACCC took into consideration ‘a number
of unique factors’ serving to reduce the competition and performance detriments
which it also outlined.
The ACCC stated theses unique factors are:
n The Optus HFC
footprint is unlikely to be extended beyond its current 1.4 million homes,
so its subscriber base is unlikely to also grow beyond 400 000 broadband
n Optus is unlikely to
provide the same large investment to enable its subscribers a faster broadband
product through its HFC network than is currently available. ‘The Optus HFC
network will, therefore, only provide a close substitute to the NBN for
customers seeking broadband services that will be at the lower end of the range
of services that the NBN will support’.
n ‘Over time, HFC
customers demanding higher speed services are likely to be migrated by Optus to
the NBN. There are a range of views on how quickly Optus’ current HFC
customers will want such higher speeds. While the ACCC did not form a view on
the future need for high speed broadband, it did accept that the Optus HFC
network would be uneconomic to operate once a critical mass of customers were
Further, the ACCC stated:
...the HFC Agreement removes a potentially significant fixed
line competitor to the NBN in Brisbane, Sydney and Melbourne. Competitive
pressure from the Optus HFC network may have resulted in positive outcomes
notably prompting NBN Co to improve its performance.
However, the ACCC also commented that:
...the regulatory approach which will ultimately apply to the
NBN is intended to provide strong incentives for NBN Co to promote utilisation
of the NBN and to be responsive to customer needs concerning speeds and other
aspects of service quality.
Future Use of Remaining Copper Network
For both Telstra and Optus, the question of the possible use of any
existing infrastructure network arose throughout the Second and Third reviews.
As part of the second review, Optus stated that as part of its agreement
with the NBN Co, that it had ‘effectively made a sale of ... [its]...HFC
network and capacity to NBN Co and agreed a migration strategy across to NBN
Alternatively, Telstra still owns a proportion of the existing copper
network (copper access network) which has not been included under the Telstra
Agreement and so will not be decommissioned. This network has been valued at between
$20 and $33 billion. Telstra would not
confirm the value of its copper network and stated ‘we do not disclose ... the
valuation of our copper network.’
Telstra also commented that in the interest of its shareholders and a
possible change in Government policy that it would again be prepared to
negotiate for the sale of its existing copper network in the future. Telstra
Telstra has shown in the last couple of years that it is able
to deal with the government policy of the day and negotiate in a way that I
think helps the government get its objectives while protecting shareholders,
customers and employees' interests. If there is a change in policy... we would
do exactly the same thing. We would sit down and seek to negotiate in a way
that protected shareholder, employee and customer interest but also allowed the
government to achieve the policy objectives that it specifies.
The Australian Communications Consumer Action Network (ACCAN) was
concerned about the initial NBN-based Telstra offers, where consumers will keep
a copper line for telephone services and also receive internet services through
a fibre network. The ACCAN stated that this arrangement would have a cost
implication and create an inconvenience for consumers. The ACCAN stated:
This on the whole is likely to inflate the price of a service
because consumers would continue to pay a line rental fee to Telstra, when both
phone and internet services could potentially be operating through the NBN box.
It also means customers who take up these offers will have the inconvenience of
doing a ‘switch-over’ twice – once when the NBN box is installed for their internet,
and again at a later date when they need to connect their phones to the NBN
NBN Co’s Special Access Undertaking
Following a two-year industry engagement process, the NBN Co’s SAU was
lodged with the ACCC for review on 5 December 2011.
The SAU covers the 30-year period of the NBN Co Corporate Plan (2040)
with a mid-term review.
Under the SAU, wholesale prices for key products would be fixed for a
five year period ending on 30 June 2017. Price increases after this timeframe
would be less than inflation ‘to ensure real wholesale price reductions over
On 19 and 20 December 2011, and 17 January and 3 March 2012, the
NBN Co provided supporting documentation to its SAU, (outlining the
context and rationale for commitments made in the SAU) to the ACCC. This
included: ‘Advice on NBN Co Ltd’s Special
Access Undertaking’ by Synergies Economic Consulting and Analysis Mason’s
Review of the Efficiency and
prudency of NBN Co’s fibre and wireless network design.
In its Second Report, the committee urged the NBN Co to lodge its SAU
with the ACCC for consideration without further delay. The committee also suggested
that retail service providers (RSPs) not be asked to sign a WBA
until the SAU is lodged with the ACCC. The impetus of this suggestion was to
provide a level of certainty for RSPs for various conditions provided under
each WBA, especially price and
recourse to the ACCC.
While the NBN Co is not required to submit an SAU to the ACCC, the ACCC
stated that it is in the NBN Co’s interest to do so. The ACCC explained:
... we have a legislative scheme that sets precedents in
order of conditions and terms of access first of all being set by commercial
agreement, secondly under an SAU, as you described, and thirdly under
determinations that we make or binding rules of conduct that we make. So I
think it is in NBN Co's interest. We certainly see some advantages in them
settling with us an undertaking to set at least a framework of terms and
conditions for the provision of their services. That would not necessarily rule
out determinations on matters that are not covered under that SAU in future
but, for the terms and conditions that are actually covered by that SAU, the
SAU would determine how those terms and conditions are provided.
Recourse to the Australian Competition and Consumer Commission
At the time of the second review, concerns were raised about ACCC
recourse to capture pricing terms and conditions under the SAU and its 30-year
Special Access Undertaking Terms and Conditions
As part of the Third Review, Vodafone Hutchison Australia (Vodafone)
raised concerns about when the ACCC may be able to intervene if there is
disagreement between industry and the NBN Co. Vodafone stated:
It is very important that ACCC plays a key role when industry
and NBN have a disagreement about what the appropriate arrangements should be.
At the moment that is still a work in progress. There are some ambiguities
about when and how the ACCC can play a role. We understand NBN's point that
there should be some certainty about the way the ACCC plays a role but when
there are disagreements, when the industry has new sets of needs and the NBN
disagrees with the way that industry wants to take things, then the ACCC with
its pro-competition focus should play a role in overseeing and making, in some
cases, the final call about what is the appropriate commercial arrangement.
That again is a work in progress. We are engaging with NBN about that. They
have set up quite an extensive consultation program over the next six months
about the terms and conditions of supply.
In regard to the SAU component of the ACCC’s role in monitoring
NBN Co prices, the ACCC stated that it was in negotiation with the
NBN Co to ensure there is sufficient regulatory oversight of key products.
Following this negotiation, the ACCC would then consult with industry on the
agreed terms of the SAU. The ACCC stated:
This is one area that I think is the subject of quite deep
and intensive discussions with NBN Co. The broad framework that we are looking
to apply is one where there is sufficient regulatory oversight of key products
that NBN Co is disciplined by that regulation to provide all its services on
reasonable terms and conditions. We think there is some work to do on the
current undertaking to get to that position, but we will need to pursue those
discussions first and then engage in some industry consultation on whether what
we are proposing or what NBN Co is proposing is sufficient to achieve
30-year Term of Special Access Undertaking
Although consideration of the SAU is still underway, the ACCC commented
that recourse to the commission would not be prevented under the 30-year term
of the SAU. The ACCC stated:
...the very nature of trying to set in place arrangements
that will extend over a 30-year period proposes its own challenges; there is no
doubt about that. It is not an easy thing to do. At this stage we are leaving
open the possibility that the things that are set in place for 30 years might
be broad and sweeping in terms of principles rather than actual specific terms
and that, within that framework, terms and conditions can be set or revisited
on a more regular basis.
The ACCC also commented that the 30 year lifespan of the SAU is not
unusual. The ACCC explained:
This proposal has a long duration, but can I say at the
outset that it is not usual for a greenfields start-up service provider to
submit undertakings of this kind. I think this is probably the first one the
commission has had to deal with, although we have in the past considered the
possibility of greenfields applications being made by gas pipelines under the gas
pipeline code. We have actually issued a greenfields gas pipeline code
guideline for that eventuality. Rather than compare the approach that is being
taken here with our usual course of business with access determinations or
access undertakings or the like—and the usual course of business is an
incumbent service provider with an established network that seeks or is obliged
under the various legislation to submit to us terms and conditions for approval
on how they will provide services—here we have a business who is seeking to
invest in a new network and to set those terms and conditions before that
network is complete. I think the relevant comparison would be with the sorts of
approaches envisaged in our greenfields gas pipeline guideline, for example, which
does envisage the sorts of approaches that are being adopted here—in other
words, a long-term, at least, framework undertaking with perhaps more regular
consideration of some aspects of those terms and conditions and seeking to
establish upfront ways in which efficient costs for the provision of service
will be established and how prices will be set.
On the possibility of the SAU not receiving ACCC approval and what
options would be available to the NBN Co if this occurred, the ACCC stated:
It is hard to say exactly what the commercial implications
for NBN Co. would be. That would be a question for them, I think. But there
would be some choices for NBN Co. at that point. They could resubmit their
undertaking, seeking to address whatever concerns we expressed about their
existing draft. Otherwise it would be likely, I think, that the commission
would move to implement an access determination inquiry and as part of that
process set interim terms and conditions through binding rules of conduct.
Wholesale Broadband Agreement
Term of Wholesale Broadband Agreement
The NBN Co’s WBA is a contract between it and RSPs which sets out the
‘terms and conditions, for the delivery of commercial services over the NBN
In response to industry concerns surrounding regulatory uncertainty in
the absence of a SAU, the NBN Co announced that its interim WBA would change
from a five-year to a 12-month term. The ACCC commented:
That was done at our instigation because there were concerns
in the market that retailers might be in a position to, or be obliged to, enter
into longer term agreements with NBN Co prior to regulatory settings being
fully established—in particular, through setting of the SAU. So we expressed
our concern to NBN Co. They agreed—as an interim measure, until we have time to
go through the SAU processes—to offer 12-month services. That provides
retailers with the opportunity to renegotiate those contracts after regulatory
settings are established.
In addition, the ACCC stated that the 12-month term of the WBA enables:
... retailers to enter into those agreements, knowing that,
if there is a change or adoption of regulatory settings that might cause them
to rethink whether that deal is the deal they want to be in with NBN Co, they
have the opportunity to renegotiate that agreement.
Following several rounds of industry consultation over a 12-month
period, NBN Co released the final version of its WBA on 30 November 2011.
As at 16 April 2012, 40 RSPs had signed a WBA with the NBN Co.
Bundling and Pricing of Services
The NBN Co outlined a number of the NBN pricing plans that have been
released by RSPs and stated:
Since the commercial launch of NBN Co’s first product, a
range of retail products and pricing options have been released by retail
service providers (RSPs) for example including from $29.95 per month (with
Skymesh) for an entry level service of 12/1 Mbps and $45.00 per month (with
Exetel) for a 100/40 Mbps service. RSPs are also delivering quality telephony
over the network across both the data and voice ports. As at 31 December 2011,
125 customers are using existing handsets to make calls over the NBN Co voice
Vodafone stated that the current pricing of service bundles was
comparable to the pricing for digital subscriber line (DSL) and that there was
innovation in the types of services being offered. Vodafone stated:
...you are seeing comparable pricing to their DSL type
pricing. You are also seeing innovation in the types of services they are
offering. They are offering different types of bundles of services—voice, data,
pay TV—and I think it is the bundling that is the innovation that NBN brings.
At the moment, they are focusing on the 12-megabit service and 25-megabit
services—those are the services that consumers are buying. I think that, on the
whole, the pricing there is appropriate. The bundling is where you are seeing price
innovation and you are not seeing increases in pricing for the standard
The ACCC commented that bundling of services by RSPs benefitted the
customer and was the current industry trend. The ACCC stated:
We think the industry is probably heading towards retailers
offering a sort of 'everything you need in communications' bundle. And that
bundle might include not only fixed line voice services and broadband; it might
also include pay television services, IPTV services and perhaps mobile services
as well. The industry is already heading in that direction. From a consumer
point of view, you can see some advantages in just dealing with one retailer
for all those services. The NBN is likely, in our view, to boost that sort of
trend. I think we are likely to see expanding bundles of services being offered
In regard to regulatory issues associated with bundling of services by
RSPs the ACCC stated:
... the commission is well and truly on record expressing
some concerns about the availability of key content that might form an
essential element of those bundles and what the implications of that is for
competition in those services. ...If you are going to have competition between
retailers providing bundles, you want to make sure that all aspects of the
bundles are at least competitively available and, if there are opportunities
for some service providers to lock up key content, like sporting content, then
that might limit competition. We have expressed some concerns about that. We
are certainly monitoring that issue very closely. Otherwise, we think retail
services are likely to be competitive and regulatory issues are likely to be
fairly limited at the retail level.
The ACCAN advocated for the inclusion of items under the Customer
Service Guarantee (CSG) to continue in the NBN environment. This would required
the legislated consumer protection arrangements such as the maximum timeframes
for new [telephone] connections and fault reports which are currently included
under the CSG to be included in the WBA.
The ACCAN stated that inclusion of the CSG was important as it provided
that ‘consumers can receive compensation if there is a failure to meet CSG
timeframes. The ACCAN stated:
The CSG obligations on telco retailers may therefore need to
be an element in, for example, NBN Co’s wholesale broadband agreements with
telcos. ACCAN believes that some form of appropriate service guarantee from NBN
Co as wholesaler is needed to allow the CSG to remain a viable consumer
protection measure. If such guarantees are not available to retailers, there
exists a risk that retail service providers will have no choice but to seek
exemptions from the CSG regulatory obligations.
Small Business e-Readiness
In the recent Australian Industry Group (AIG) National CEO Survey:
Business Investment in New Technologies, it was concluded:
n ‘Ubiquitous broadband
promises important opportunities for Australian businesses to build competitive
n Australian businesses
recognise the benefits of online technologies, with a near unanimous view
amongst businesses surveyed that the internet has had a positive impact on productivity
level (especially for
financial activities, data exchange and placing and receiving orders). 
n However, individual
business awareness of, and preparedness for, faster broadband varies considerably.
n In particular, [small
and medium enterprises (SMEs)] report lower levels of information about the
benefits of faster broadband compared with larger businesses. SMEs also tend to
have less confidence that they have the skills /capabilities to take advantage
of a new broadband network.’ 
The AIG stated that as a consequence of these findings, to enable
communities to take advantage of the opportunities offered by faster broadband
‘initiatives to improve the e-readiness of business must accompanying the
rollout of infrastructure.’
In a similar vein, the Australian Retailers Association (ARA) stated
that as most online growth can be attributed to SMEs, increasingly SMEs are looking
to the Government for information on ways to take advantage of what the NBN may
offer. The ARA stated:
As we have seen, with a lot of the information technology
changes coming in at an even greater pace in recent years, it has become very
clear that the retail sector, and retail where it touches on tourism and
hospitality, has been significantly impacted by those changes. We can see that
in many of the trade figures—within the ABS figures, as accurate as they
are—with the massive growth in the unidentified sector of retail, which holds a
number of elements including gaming and the like, but most of that growth,
anecdotally and from what evidence we have been able to pool, has been coming
through the online sector. Having said that, retailers and our association do
not believe that online competition is a threat. It is something that should be
embraced and we look forward to working closely with government at state, local
and national levels to embrace new technologies and better education to inform
our retail members and non-retail members on how to utilise things like the
National Broadband Network as they reach out across the country.
The ARA commented that the NBN would be especially useful for SMEs
located in regional and remote areas, but that many small business operators
lack the knowledge to establish an online presence. The ARA further stated that
to remedy this situation, it had been in discussion with major information
technology (IT) companies and state governments about putting place programs to
educate and assist rural and remote SMEs. The ARA explained:
We are working with some of the major IT companies in
programs such as Driving Business Online—eBay is a member of ours and is
working quite closely with us on trying to encourage retailers to use its
e-commerce platform. We have also been talking to Australia Post, I have had a
brief conversation with Google and with some of the other major technology
companies as well as with major state governments. In fact, we have a pilot
program being rolled out in regional Victoria under Victoria's Regional Growth Fund to help educate SMEs to
get online. I think that program will get underway in Ballarat. In New South
Wales the government has approached us to assist in education, starting out in
regional New South Wales. I have spoken to a large proportion of the current
government's ministry on how the government can assist as part of the NBN
rollout. We have put in a couple of submissions on plans on how to do that.
The ARA stated that as there had been rapid growth of businesses with an
online presence, there were no accurate statistics on identifying the amount of
retail sales generated. The ARA explained:
There are no accurate statistics. I think the best stats you
will find were in the Productivity Commission report late last year. The
problem is that each report you read has a different figure. It can be anything
from five to 20 per cent. It depends what is counted. Is it your Qantas ticket
sales; is it your hotel sales? All of that can be counted in some of the
evidence. The ABS, after the recent PC report, has been told to look at better
reporting systems for collection. ... We are missing accurate statistics in
this area [and] ...it is the rapid growth that has caused it.
The ARA further commented that there three main inhibitors for SMEs
embracing an online platform. These were identified as the:
n high cost in setting
up a business to have an online presence
n limited internal
knowledge in how to set up and maintain an online presence
n time investment
involved in arranging or creating an online presence.
The AIG also highlighted that 50 per cent of SMEs it had surveyed had a
low perception of their ability to take advantage of the NBN. The AIG found:
Small businesses had the least confidence in their ability to
take advantage of a new broadband network. Just under 50% of small businesses
surveyed rated their business readiness for a new broadband network as low –
none, while the figure was closer to 40% for both medium and large businesses.
The most common strategies that businesses are considering to prepare for a
national broadband network are training existing staff (80%) and employing new
To improve SMEs preparedness for and ability to take advantage of the
NBN, the AIG identified the following policy options:
n ‘Improving the
dissemination of information about new technologies;
n Government programs
to boost understanding of SMEs of the opportunities provided by a national
n Developing better
industry-driven mechanisms for collaboration between publicly funded research
organisations and businesses; and
n Improving the
competitiveness of tax arrangements by lowering the company tax rate or through
more targeted measures.’
In its response to the First Report, the Government stated
that SMEs would greatly benefit from the NBN by enabling them to better compete
where previously geographically impractical. Further, increased on line
business competition would likely ‘deliver lower prices and other benefits to
consumers’ while improving operational efficiency for SMEs with an online
The Government also commented that the NBN will enable SMEs to expand
into new export markets and ‘promote greater remote collaboration between
In support of Australian Businesses, the Government announced the
Digital Enterprise Program (DEP). The DEP is intended to:
... enable more Australian businesses and not-for-profit
organisations in communities which will first benefit from the NBN,
particularly those located in non-metropolitan areas, to leverage the benefits
of broadband-empowered online engagement. This initiative will assist these
organisations to achieve cost savings, productivity enhancements and improved
marketing through greater online engagement.
The committee understands that the Telstra Agreement was finalised and
came into force on 7 March 2012. This represents a period of just over eight
months longer to finalise the Telstra Agreement than envisaged in the NBN Co
2011-2013 Corporate Plan.
The committee also notes the NBN Co’s comment that the NBN rollout was
dependent on a number of key assumptions, one of which was the finalisation of
the Telstra Agreement by 30 June 2011.
Taking into consideration the expected timeframe for finalising the
Telstra Agreement, this would mean that the NBN rollout has been delayed at
least eight months.
Telstra’s Remaining Copper Network
The committee notes Telstra’s comments that it is prepared to negotiate,
if the situation arises, for the sale of its remaining copper network. Given
that the Government will pay $11 billion to Telstra for the decommissioning of
the copper network and migration of customers, Telstra may receive an
additional payment for any future sale of its copper network.
The committee understands the $800 million Optus Agreement was not
originally planned for under the NBN Co 2011-2013 Corporate Plan. The Optus
Agreement allows for the existing Optus HFC network to be subsumed with its
customers required to be migrated to the NBN.
The committee acknowledges the factors affecting the ACCC’s draft
determination and notes the possible resulting negative impact on competition.
The committee also notes the ACCC comment in relation to the regulatory
framework underpinning the NBN which should ‘provide strong incentives for NBN
Co to promote utilisation of the NBN and to be responsive to customer needs’.
NBN Co’s Special Access Undertaking
The committee has received evidence that the 30-year term of the SAU
will not inhibit recourse to the ACCC for the monitoring and adjustment of
prices over that period.
The committee understands and accepts the comments made by the ACCC that
the 30 year term of the SAU is made in the interest of the NBN Co.
Further, the 30-year SAU sets in place broad sweeping terms of principles
rather than actual specific terms, and within that framework terms and
conditions can be set or revisited on a more regular basis.
Wholesale Broadband Agreement
In its Second Report, following industry comment, the committee was
concerned about the duration of the WBA. The initial five year term of the WBA,
on the ACCC’s advice, was later changed by the NBN Co to 12 months.
The committee agrees with the interim term of 12 months for the WBA and
notes that 40 RSPs have signed up to offer internet services over the NBN.
The committee also acknowledges and understands the importance and
appropriateness of preserving the Customer Service Guarantee as described by
ACCAN and recommends the NBN Co take into consideration the inclusion of the
CSG within its WBA.
Small Business e-Readiness
The committee acknowledges the evidence given by the AIG and the ARA
that SMEs are not in a position to take full advantage of the opportunities the
NBN may offer.
The committee acknowledges the improved competition and efficiency
outcomes for the local and national economies, which can be achieved by greater
SME IT knowledge and use of faster broadband offered through the NBN.
The committee understands the Government has launched its DEP. However,
further coordination with the IT industry and assistance from government
agencies is needed to provide assistance in education and training to reach
those resource and time challenged SMEs who would greatly benefit from an
The committee acknowledges the issues presented by ACCAN that the
initial consumer telephone and broadband package offered by Telstra may present
a higher cost through rental fees and may inconvenience customers who will be
later connected to fibre for telephony services.
The committee believes this issue requires further investigation and will
examine NBN pricing in its fourth review.
||The committee recommends that NBN Co include the consumer
protection components of the Customer Service Guarantee in its Wholesale
||The committee recommends the Government more effectively
deliver its Digital Enterprise Program to small and medium sized enterprises
(SMEs) with the aim of improving SME access to online resources and enabling
interested SMEs to achieve an online presence.