- Building Block Model reveals that the NBN Co’s true cost per location is $40 per month and per TC-4 residential broadband service is just $30-35 monthly.
- The new ‘building block model’ is outlined in a short position paper prepared by Telstra, Optus, TPG, Vocus, and Aussie Broadband as part of ACCC group discussions.
- According to the report, the model was based on NBN Co’s own building block model that encapsulates all regional and metro costs.
According to the output of a ‘building block model’ prepared by NBN Co’s five leading retailers, the NBN Co’s true cost per location is $40 per month. On the other hand, the cost per TC-4 residential broadband service is just $30-35 monthly.
The new ‘building block model’ is outlined in a short position paper prepared by Telstra, Optus, TPG, Vocus, and Aussie Broadband. The retailers came together to prepare the paper as part of the Australian Competition and Consumer Commission-led working group discussions on variations to NBN Co’s special access undertaking. The model is a regulatory concept that is widely used in energy markets. It seeks to determine the underlying costs of the provision of a utility service, which includes capital and depreciation.
Several guiding principles behind its preferred model are outlined in the paper. According to the report, the model was based on NBN Co’s own building block model that encapsulates all regional and metro costs. The paper also claims to enable the government “a fair return on its investment in NBN”, “achieved by openly distinguishing between NBN Co’s efβicient and commercial costs and NBN Co’s inefficient and non-commercial costs.”
It further details that the “average costs for NBN Ethernet services are determined transparently – costs are allocated transparently between all NBN Co’s future revenue opportunities, to protect against inefficient cross-subsidisation, and to determine the average cost of NBN Ethernet services including TC-4 services.”
A spokesperson of the NBN Co said that: “We are engaging constructively with the ACCC process in line with the Minister’s Statement of Expectations to the ACCC, and we will continue to observe the ACCC’s governance structures on confidential submissions and discussions prior to the public release of information.”
“We do want the position that we’ve got to be well-understood. And so that’s why we were putting it forward. I expect NBN will be doing something similar,” said the author of the report, who declined to be identified out of deference to the collegiate sensitivities of the five RSPs.
“We aim to be reasonable because I think that one of the things this submission does honestly and does well is connect the broader ambitions that we all have about digitisation with a reasonable approach to what to do about NBN costs and pricing. Because the alternative would be an ambitious claim. A negotiation based on ambit claims would see us as retailers coming out and trying to low-ball everything. I don’t think that's what’s happening with our proposed model.”