NBN wholesale pricing still up in the air

Potential revenue inflow for the company charged with rolling out Labor’s National Broadband Network (NBN) remains up in the air as it continues to negotiate final wholesale pricing with the industry watchdog.

NBN Co chairman, Mike Quigley, told the Senate select committee on the NBN in April that negotiations with the Australian Competition and Consumer Commission (ACCC) over wholesale access pricing would begin in June.

"We believe the consultation process is important because we are currently preparing the documentation necessary to lodge a special access undertaking with the ACCC,” he said. “We plan to lodge the undertaking in June this year. As part of the ACCC undertaking we will have to establish our wholesale prices.”

When asked what the prices might look like by Liberal senator, Ian McDonald, Quigley took the question on notice.

The final answer from the company, provided to the senator this week, confirmed that “the overall national pricing structure is yet to be finalised and is part of our Special Access Undertaking (SAU) to the Australian Competition and Consumer Commission (ACCC).”

However, a spokesperson for the company confirmed with NBN Co that the undertaking was still under development and several months away from completion or finalisation.

“We are yet to lodge the undertaking, but when we do the ACCC will carry out an industry consultation process and seek submissions,” they said. “We expect the ACCC will take some time to give all material detailed consideration before making a determination, and therefore the process may take several months to complete.”

NBN Co has continued to insist that its wholesale pricing would be competitive to the current industry standard, with some analysts forecasting potential pricing of $20-30 per month for each user. Until a final pricing was determined, however, the wholesaler committed to providing the service to access seekers for $300 per premises.

This includes the four service providers - Internode, iiNet, iPrimus and Exetel - currently serving approximately 2,000 premises in the stage one sites of Midway point, Smithton and Scottsdale in Tasmania. If a wholesale price is not determined by the time the first mainland trial sites are launched early next year, access seekers there would also be able to provide NBN services to customers without paying a wholesale price.

“How is NBN Co ever going to pay interest on its borrowings, let alone pay a dividend on its $43 billion investment, if it receives no income?” Senator McDonald said in a statement, in response to NBN Co’s answer.

A minimal costing of the project was initially made available in the pre-election fiscal outlook released by the Labor party in July, but was notably missing from the Treasury costings of the party’s policies released by independent MP, Rob Oakeshott, this week.

Quigley recently indicated the project would require a peak government equity investment of $27 billion - $1 billion more than the figure estimated by consultants in the NBN Implementation Study - with additional debt funding of approximately $10 billion. He also pointed to potential operational revenue as a result of wholesale access the company would charge for over time, but indicated this would be a small portion of the total revenue and would likely be used to fund the rollout rather than pay back debts.

The government has already committed $662 million of equity to the project so far in both operational expenditure and capital expenditure, setting up the wholesaler and completing the first stage of rollouts in Tasmania, which was reported to have come five to ten per cent below its $37 million budget.

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