Full nbn cost recovery a "difficult proposition"

The ACCC has expressed concern that nbn co may be unable to meet its financial targets and may need government funding to ensure it can deliver effective services.

In its final version of the telecommunications sector market report, the regulator noted that recent pricing initiatives including the temporary reduction in connectivity virtual circuit prices and discounts to its 50 Mbps wholesale tier product are having the desired effect in terms of uptake of higher tier services.

These price cuts are temporary, but the regulator said that nbn co plans to introduce longer-term pricing changes.

“However, notwithstanding these developments, the willingness to pay additional charges for increased throughput remains uncertain, and we are concerned that nbn co may continue to have difficulty meeting its financial targets... The multiple and complex objectives that nbn co has been tasked with achieving make full cost recovery a potentially difficult proposition,” the report states.

“If demand for nbn services does not increase at the rate currently expected by nbn co, this may continue to create uncertainty for access seekers and has the potential to constrain the delivery of efficient pricing of the nbn infrastructure. While recognising that nbn co does have a degree of flexibility to lower its prices, there may ultimately be a need for pricing relief measures to be taken by the government, such as debt payment concessions or direct budget funding of non-commercial services.”

But ACCC Chairman Rod Sims also noted that since the draft report was published in October, there has been “encouraging progress” on key issues such as nbn speeds, pricing and work towards improved service standards.

He said current regulatory arrangements have been shown to be promoting effective competition in the markets for broadband and voice services, despite significant market concentration.

“Competition will increase further as Vodafone expands its nbn footprint and TPG deploys its wireless network, bringing additional choice to consumers in terms of quality and pricing of telecommunications services,” Sims said.

“It is important, however, that progress on nbn speeds, pricing and service standards issues is sustained.”

Image credit: ©stock.adobe.com/au/Exentia

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