ACCC: NBN must be written down to lower prices

In an upcoming speech leaked to The Guardian, ACCC head Rod Sims will reportedly call on the value of the $50 billion National Broadband Network (NBN) to be written-down in order to lower prices:

In a speech Sims will give to the ACCC and Australian Energy Regulator conference in Brisbane on Thursday, he will say that as the NBN nears completion next year the focus should be less on recouping the investment the government has made and more on how best to use the network.

“We must ignore those who worry about the value of assets that are sunk, and focus on how the NBN can best contribute to Australia,” he will say.

Sims told Guardian Australia in an interview before the speech that with the NBN almost completed, the question becomes what is the best use of the NBN for the Australian economy…

“If, when you consider that question, you come to the view you want to price it in a way that is much less than the cost of the build, then fine, it’s a sunk cost, in economic terms. It just doesn’t matter.”

This isn’t the first time that the ACCC has attacked the NBN.

In April, Rod Sims claimed that many households are paying more for worse internet:

“We are now observing prices of low-speed NBN plans offered to new customers that are at least $10 per month higher than what consumers paid for equivalent plans on the ADSL network.”

NBN wholesale prices for the 12-megabit plan will increase from $12.75 to $17.50 a megabit per second, but many consumers are already paying more for basic NBN plans than existing ADSL services.

And in 2017, the ACCC called for the Federal Government to write down the value of the NBN in order to narrow the gap between the amount NBN Co receives from retail ISPs each month and the actual cost incurred by NBN Co:

The competition regulator has urged the federal government to rescue NBN Co, by either writing down its value so it can charge lower prices, offering relief on its debt repayments, or paying for hard-to-connect households directly through budget handouts…

NBN Co currently collects an average $43 a month from retail service providers for each home they sell in to, but needs $52 just to recover costs, let alone fulfil the government’s expectations of a 3 per cent annualised return on its $50 billion investment in the network…

Crucially, a write-down would give NBN Co breathing space to reduce its access and bandwidth charges to retail telcos, which the ACCC partly blames for the 159 per cent rise in complaints against the NBN lodged by the telco ombudsman in 2016-17.

The regulator’s interviews with consumers revealed many felt their internet speeds were slower than the ADSL or cable broadband connections that the NBN had forced them off, even where they were paying higher monthly charges.

I’m with the ACCC here. The government might as well take the Budget hit now – which seems inevitable anyway – and allow the NBN to lower its access charges. It should also open the NBN to competition in capital city areas where it is not a natural monopoly.

Low cost and reliable internet is now an essential service, just like electricity, water and gas. So it makes little sense for Australians to be charged excessive user fees, in turn dragging on Australia’s productivity.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith is an economist and has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Latest posts by Unconventional Economist (see all)

Comments are hidden for Membership Subscribers only.