Op-Ed: Explaining the justification for the RBS charge

Late last year the Morrison Government introduced into the Federal Parliament, two bills which make important changes to the delivery and funding of fixed line broadband services. The Telecommunications Competition Reform Bill and Regional Broadband Scheme Bill aim to further boost competition in broadband - and give a solid legislative foundation for the way that broadband services are funded in regional and remote Australia.

To boost competition, the first bill will relax today's very strict rules about carrier separation. Today, companies which supply superfast broadband have to choose to be either wholesale or retail; they are not allowed to do both. This means a business cannot benefit from the economies of scale that come from being in both retail and wholesale. Under the new rules, subject to oversight by the Australian Competition and Consumer Commission, businesses can operate in both markets, as long as there is ‘functional separation' between their retail and wholesale businesses.

To give greater certainty about broadband services in regional and remote Australia, the bill requires that there must be a ‘Statutory Infrastructure Provider' in each area of Australia. In most cases this will be NBN Co, but if another business has a fixed line broadband network in a particular area, that business could be the Statutory Infrastructure Provider for that area.

The Statutory Infrastructure Provider arrangements will underpin the Universal Service Guarantee announced in December 2018; these require that there must be a broadband service with a peak speed of at least 25 Mbps available to every home or business, regardless of where in Australia it is located.

Government modelling has estimated the cost of this commitment to be $10 billion over 30 years.

The Regional Broadband Scheme will provide certainty that funding for essential broadband services provided by NBN Co to regional Australia is locked in.

The RBS will recover the cost of providing regional and remote broadband services over the NBN fixed wireless and satellite networks. Delivering services over these networks is loss-making, whereas delivering services over the NBN fixed line network is (or will ultimately be) profitable.

The RBS works by imposing a charge which applies to all premises which have an active fixed line broadband service - whether it is delivered by NBN Co or by another operator. The charge is set to a level which covers the loss incurred in operating the fixed wireless and satellite networks.

Today, 95 percent of premises with an active fixed line broadband service are served by the NBN - and they are already paying the RBS charge. It is included in what they pay for their service.

The effect of the RBS, then, will be to spread the recovered amount over a slightly larger number of premises. For the great majority of premises, it will allow a slight reduction in the amount they are asked to pay towards the cost of NBN's fixed wireless and satellite services.

For the remaining 5 percent of premises, it will be a matter for non-NBN carriers as to whether they choose to absorb the RBS charge into their pricing, or pass on the cost to their customer. Many of these non-NBN carriers supply services to big business and enterprise customers, who will contribute directly to regional broadband costs for the first time.

The RBS therefore allows competition on its merits to occur in metropolitan Australia whilst providing a subsidy to allow those who live in regional and remote Australia to receive broadband services comparable to those provided in metropolitan areas. The RBS has been designed so that new, small broadband network operators do not pay the charge until they reach a certain minimum scale. It will not be payable by new operators for their first 2,000 premises; and it will not be payable for the first 55,000 premises connected by an operator in greenfield areas for 5 years. This pro- competitive measure was agreed between the Government and Labor when the bill was first introduced during the last Parliament. (Because it did complete passage during the last Parliament, the process must begin again in this Parliament.)

When the RBS was being designed, the government considered very carefully whether it should be applied to mobile services as well as fixed services - and decided that it should not. A key reason for this decision was that most households and businesses would not regard a mobile broadband service as substitutable for a fixed-line broadband service, mainly due to the higher cost for data use over mobile networks.

On this point, consumer behaviour is telling. Most of what consumers download is carried over the fixed broadband network not over mobile networks. The fixed broadband network accounts for 88 per cent of all data downloaded on the internet in Australia. The two bills are an important step forward for the way we deliver and fund fixed line broadband in Australia. Now that they have been introduced, the Government will be working to secure their passage through the Parliament before the end of the year.