The Morrison Government is facing increasing pressure to write-down the value of the National Broadband Network (NBN) in order to lower wholesale costs for both downstream telecommunications retailers and Australian consumers.
Only last week, the head of the Australian Competition and Consumer Commission (ACCC), Rod Sims, stated that the government “must ignore those who worry about the value of assets that are sunk, and focus on how the NBN can best contribute to Australia”, which follows previously aired concerns that “prices of low-speed NBN plans offered to new customers… are at least $10 per month higher than what consumers paid for equivalent plans on the ADSL network”.
The major barrier to lowering wholesale prices and writing-down the value of the network is that it would slug Australian taxpayers up to $20 billion. However, Australia’s finance minister, Mathias Cormann, yesterday played down the impact on the federal budget, insisting that it would not place the surplus at risk:
“A write-down would not impact surplus goal. NBN equity investment was classified as such when it was made,” Cormann tweeted on Monday morning.
“A write-down would not cause retrospective re-classification into a grant.”
Cormann added that a write-down is the responsibility of the NBN board, and such action would shift the cost on taxpayers instead of customers.
“Those pushing for a political decision to write-down the value of NBN to facilitate lower prices and higher margins for other businesses are arguing that the taxpayer rather than customers should carry more of the cost burden of services provided by NBN and accessed by NBN customers,” Cormann said.
It is irrelevant whether a write-down shifts the costs to taxpayers instead of customers, since they are one and the same. The NBN is a natural monopoly technology and an essential service. If priced correctly, it would be used by almost every taxpayer in the country. Therefore, taxpayers will pay one way or another – either through higher user charges or via their taxes.
What is most important here is ensuring both efficiency and access. Wholesale prices for the NBN must not be set so exorbitantly high that it forces some users off the system and/or onto less efficient alternatives such as 5g. Given the NBN investment is sunk, pricing must be lowered to maximise usage of the asset.