ACCAN Submission to the ACCC’s Consultation on the Draft Replacement Module Determination

Background

ACCAN has submitted to the Australian Competition and Consumer Commission (ACCC)’s consultation on its draft replacement module determination for NBN Co's second regulatory cycle. As part of its Australian Government grant to represent consumer voices and interests in the development and regulation of the National Broadband Network, ACCAN presents this submission as the concluding piece to our work in the current NBN regulatory reset cycle.

This submission sets out ACCAN's views on the ACCC's consultation paper and our final position on the matters arising from this regulatory reset. The submission includes several attachments, including economic analysis produced by FTI Consulting and ACCAN’s consumer engagement report 'The Future of Australia's NBN' produced by Cred Consultancy.

Summary 

The ACCC’s draft Replacement Module Determination will promote the efficient operation of the National Broadband Network (NBN) and advance the long-term interest of end users. ACCAN is pleased to report that the ACCC has, in substance, adopted the recommendations stipulated in our submission to the RMA consultation. The draft has addressed many of the concerns ACCAN raised in our submission to the Replacement Module Application consultation in July. The ACCC highlights its key decisions within the draft RMD as:

• Proposing lower values for NBN Co’s Building Block Model (BBM), as some of NBN Co’s proposed expenditure was not regarded as prudent or efficient. This includes a 17.5% cut to allowable capital expenditure

• Adopting a Weighted Average Cost of Capital (WACC) consistent with the advice of CEPA Consultancy, at a lower rate than proposed by NBN Co.

• Proposing uplifts to Benchmark Service Standards expanding beyond NBN Co’s proposal, with specific concern for the experience of consumers in regional, rural and remote (RRR) areas.

• Proposing to lift the Entry Level Offer (ELO) from 25/5Mbps to 25/10Mbps.

• Committing to a three-year cycle for the second regulatory cycle (FY27-29).

ACCAN considers that the approach of the ACCC and its draft determination will contribute to a more competitive marketplace and improve the reliability of NBN services and future investment governance of its expenditure, driving stronger consumer outcomes and delivering on the long-term interest of end users. However, there are key areas in which ACCAN considers that the draft RMD could be strengthened to ensure that consumers’ access to the network is appropriately uplifted and NBN Co's investment governance framework are robust and in line with best practise. In this submission, ACCAN recommends the ACCC:

Entry Level Offer 

• Hold a mid-cycle review of the Entry Level Offer to ensure it continues to deliver a sufficiently fast and affordable service.

LEO Satellite Services

• Ensure that appropriate safeguards and regulations are implemented for nbn’s new LEO satellite services.

Benchmark Service Standards 

• Implement its proposed revisions to ensure service standards are modernised, strengthened and aligned more closely to consumer preferences.

• Revise its proposal for priority assistance connections, to strengthen service outcomes for vulnerable consumers.

• Strengthen timeframes for maintenance orders in isolated areas.

Expenditure and Demand

• Enforce strong requirements on NBN Co to improve the rigour of future business cases by demonstrating evidence of willingness-to-pay assessments, consumer preferences, and accurate demand forecasts.

• Defer or reject expenditure, where investment proposals are not substantiated by consumer preferences or demand at that point in time to ensure investment are prudent and efficient.

Weighted Average Cost of Capital 

• Adopt a WACC based on the parameters set out in the draft RMD.

Please see ACCAN’s full submission for a detailed list of recommendations and our full analysis on NBN Co’s RMA.