The two major problems with the National Broadband Network business model are the pricing structure and the future level of prices.
In November 2016, the nbn conducted its third secret consultation on CVCs; a controversial aspect of its pricing structure. It is still fiddling with a hopeless construct. The pricing structure is too complex, does not lead to affordable retail prices and will not lead to the transformational outcomes expected from this broadband project.
Worse, the nbn clings to the hope that it can turn a profit on a very expensive project which was priced initially to smooth migration from legacy copper networks. This will mean increasing wholesale revenues per line (ARPU) over time; which has not been the case historically for broadband ARPU.
For more on the latest consultation, read economuse-2016-11-30
In my previous column, I said I would explain how the discount rate might be set for a company with neither debt nor equity. The NBN is not quite the same but the same solution was used for it both by the ACCC and the BCR. Combining that information with the BCR’s estimate of the economic loss that the NBN incurs in supplying fixed wireless and satellite services, I find that that there is some evidence that the NBN is breaching competitive neutrality – i.e. competing unfairly. This issue was first raised by the NBN’s competitors in greenfield fibre sites and the issue is likely to arise again.
The most logical solution, it seems to me, is to write-down assets (and the corresponding amounts in the ICRA) so that the overall internal rate of return becomes commercial.
For more, see Economuse 2016-06-06
The Bureau of Communications Research at the Department of Communications is tasked with finding out how to fund non-commercial services on the NBN. An industry levy seen as the prime mechanism that will sustain these services in the presence of infrastructure competition (as I argued in my 2010 submission to the Senate).
This submission is a response to the request for comments on the Bureau’s first consultation paper.
To access the submission, click USO-Levy-JdR
In the previous column, I argued that the TPG-iiNet merger would cause an alarming increase in industry concentration and less price competition. But with or without this merger the competitive process can still be strengthened with a few changes that will shore-up both competition and NBN Co.
To read how, click Economuse 2015-04-02
If iiNet’s shareholders accept the TPG offer and the ACCC approves this take-over (neither of which is certain), the prospect of vigorous retail competition in the fixed network is dim. The extent of price competition currently is debateable and increased industry concentration is irrefutable.
To read this column, click Economuse 2015-04-01
The next column will examine how the competitive process can still be strengthened, with or without this merger.