ACCAN submitted to the ACCC’S draft determination of NBN’s Long-Term Revenue Constraint Methodology (LTRCM) 2018-19. The LTRCM determines NBN’s allowed annual regulated revenue by examining various components such as operating expenditure, depreciation and return on capital.

One of the components used to estimate NBN’s allowed revenue is the cost of capital. ACCAN has concerns that the cost of capital may be overestimated, which would cause NBN to have greater leeway regarding its revenue constraint. If NBN does not have an appropriate revenue constraint imposed on it, NBN may be able to inflate wholesale prices. This is a concern for ACCAN as affordability of the service continues to be an issue.

Additionally, as NBN moves into other, more competitive markets, ACCAN believes the methodology should be adapted, and the reporting should be separated by market type. This will increase transparency and prevent cross subsidising between markets. Cross subsiding the enterprise market with the residential market will ultimately dampen competition and harm the long-term interests of end users.

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