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The NBN and competitive neutrality

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