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.
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.
NBN-Market-and-Regulatory-Report.docx