The social costs of this option would be reduced were the legacy copper network broadband services kept in service in FTTx deployment areas for so long as the copper was not being used in FTTx deployments, and in HFC areas. This would involve some continuing costs for maintaining the copper, and may not be possible under the disconnection provisions of the Definitive Agreements. Moreover, even were it possible, RSPs using these services would run the risk of the service being terminated, reducing their willingness to invest. This possibility is therefore far from being a complete solution. Retaining the status quo prevent competition developing. This would have implications for the regulatory settings, as the more limited is the extent of competition, the stronger and more intrusive must be the regulatory safeguards. In particular, as set out in the panel’s Statutory Review and in the other chapters of this report, under this option: The ACCC should be more vigilant in administering the panel’s proposed revisions to the anti-discrimination rules; With only narrowly defined exceptions, all of the NBN Co’s services should remain declared services; Competitive neutrality requirements in respect of NBN Co’s decisions about entry and expansion should be given legislative form; Since any subsidies NBN Co might seek could not be market tested there could be no assurance that those subsidies were reasonable. As a consequence no levy-funded subsidy mechanism to support the cost of NBN Co’s universal service obligations should be considered at this stage; and finally, The ACCC should take account of NBN Co’s very substantial and enduring market in considering applications from potential competitors for exemptions from the provisions of Part 8 of the Telecommunications Act. 6.4 Conclusions and recommendations Overall, the panel sees great merit in the commitments successive governments have made to the underlying principles of the Competition Principles Agreement – principles the Commonwealth quite rightly demands that the States and Territories respect. Despite the many complexities involved, there is a significant opportunity to place infrastructure competition on a viable and effective basis. Conversely, should the status quo be entrenched, there is a risk of locking in a structure that will prove as resistant to change as were its predecessors.
but replace an existing implicit tax of the same amount (that is, through NBN Co charges on customers to fund the internal crosssubsidy). Without knowing the specific base of a new levy, changes to NBN Co’s charges and the amounts involved, it is impossible to assess the extent of any likely distortion and so be confident about such a scheme’s merits. Notwithstanding these concerns, it would be far better to have some form of levy scheme than to continue restrictions on the development of competition so as to protect any NBN Co cross-subsidy. As for the design of such a levy, were one to be required, the panel believes it should cover both voice and broadband services. As network deployment proceeds, there is no policy justification for treating voice and broadband differently, though the constraints imposed by the existing Telecommunications Universal Services Management Agency (TUSMA) contract may mean separate arrangements are required for a period of time. Combining these levies and pooling the resulting funds should be accompanied by moves over time to make the services being acquired contestable (that is, open to any provider willing to deliver the designated services), be it through competitive bidding to provide those services or by implementing a customer rebate or voucher scheme. Though in implementing such a process to change how lossmaking service provision was funded, it would be important to ensure that broadband customers understand what is occurring and that costs overall were not increasing. In short, the panel concludes that: Any subsidy scheme be designed to evolve into a scheme on targeted subsidies to consumers, rather than directly funding providers. However, the panel recognises that there is a tension between relying on demand-side subsidies and the thrust of policy as it stands, and hence assumes that for some period of time, any subsidies would flow to the supply side; Where pricing constraints mean the value-in-use of the assets being deployed falls short of their acquisition cost, those assets should be written down to value-in-use as they come into service, subject to that value being market-tested; NBN Co not be allowed to impose any form of access deficit contribution or bypass charge on network competitors; and Were an ongoing subsidy required that could not be funded through consolidated revenue, a new levy be imposed, that combines the funding of broadband and legacy universal service obligations. These conclusions, however, are subject to the future market structure arrangements, which are discussed below.