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'This could cripple companies like us': Government announces new 'NBN tax' on broadband companies

Matthew Knott

The Turnbull government will seek to introduce a new levy on telecommunications companies to help pay for the roll-out of the NBN in regional areas, a change it admits will lead to higher prices for internet consumers.

The move goes against the advice of the government's own hand-picked expert panel, which warned such a levy "causes greater distortions than it is intended to remedy".

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Communications Minister Mitch Fifield announced on Monday that the government would legislate to create a new Regional Broadband Scheme that is estimated to raise $40 million a year. The Department of Communications has found the cost of the scheme would largely be passed on to consumers through higher prices.

The scheme would see NBN's rival super-fast broadband networks pay a levy of $7.30 for each fixed-line connection, with the contribution indexed to increase each year. By 2022 the levy would rise to $8 per connection.

The change, if approved by Parliament, would affect rival companies such as TPG and Opticomm.

Exemptions would be granted for telcos with fewer than 2000 customers or companies such as Telstra and Optus, which are transitioning their networks to the NBN.

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Phil Smith, Opticomm's chief regulatory officer, said the change would force the company to increase its prices or it could go out of business.

"This could cripple companies like us," Mr Smith said.

"This would take 30 per cent of our revenue straight off our bottom line.

"This is a terrible instrument to enforce on a small number of players - it's so anti-competitive it's not funny."

Mr Smith said Opticomm could support a levy applied across the telecommunications sector but not the narrow levy proposed by the government.

In a statement released on Monday, the government said the scheme would benefit NBN users in the bush by requiring "all eligible fixed-line super-fast broadband networks to make a proportionate contribution to the long-term cost of these services".

"The RBS is estimated to raise around $40 million from eligible non-NBN networks in its first year," the statement said.

"Non-NBN fixed-line networks are currently estimated to provide 10 per cent of fixed-line services in operation."

The government's Vertigan review of the NBN, handed down in October 2014, recommended a levy to help pay for the NBN's regional roll-out but only if NBN Co was broken up into separate business units - an idea that was quickly ruled out by the government.

The Vertigan panel warned such a levy could be the the "means by which powerful suppliers extract benefits at the public's expense" and could "cause greater distortions than it is intended to remedy".

"As a result, it is the panel's conclusion that if NBN Co remains structured as it currently is, the Government should wait to see whether any intervention is required to deal with concerns that competition may threaten NBN Co's ability to cross‐subsidise service provision in loss‐making areas," the panel said.

"The panel therefore recommends that absent disaggregation, no specific mechanism for funding any subsidies within NBN Co be put in place, subject to review in five years' time."

The review also recommended a broad levy on both voice and broadband services rather than the narrow scheme adopted by the government.

A subsequent report by the Department of Communications and the Arts recommended a narrow levy.

It found "the incidence of the levy would fall on consumers, rather than significantly affecting industry profitability and investment".

But it said: "Consumers should not be disproportionately affected as a result of the introduction of NBN non-commercial service arrangements."

A spokesman for the NBN said: "NBN supports, in principle, the need for a level playing field for like-services of super-fast broadband carriers to ensure we are all contributing to universal connectivity.

"This should be looked at as a package of legislation that works together to provide a level playing field for carriers. NBN is currently assessing the detail within the draft legislation and its implications on our business."

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