ACCC Challenges the Size of the ‘Broadband Tax

Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), is reviewing potential changes to the structure and application of the regional broadband scheme (RBS) levy, commonly known as the “broadband tax.” This levy, which is currently set at $8.26 per month, is charged to broadband services that rely on non-NBN fixed-line infrastructure, and the revenue generated from this tax is used to fund NBN Co’s loss-making fixed wireless and satellite services. These services are considered non-commercial, as they are deployed in rural and regional areas where the cost of providing broadband services is significantly higher than in urban areas. The aim of the scheme is to ensure that NBN Co can continue providing these services, even if they are not financially sustainable on their own.

The ACCC’s recent consultation, launched at the end of last week, is part of an ongoing process to evaluate whether the RBS levy should continue to be used to cover not only current or future losses incurred by NBN Co but also historical losses related to these fixed wireless and satellite services. Specifically, the consultation seeks feedback on the proposal to exclude NBN Co’s historical losses from the levy’s calculation, which has been used to recover costs dating back to the start of the NBN build phase in 2010.

At the heart of the consultation is the question of whether it remains appropriate for the levy to continue funding historical losses. The ACCC has raised concerns that recovering past losses through the broadband tax may lead to unintended consequences, particularly in terms of market competition. If the levy continues to fund historical losses, it could mean that non-NBN fixed-line broadband providers—those who do not use the NBN network—are contributing more than is necessary to cover NBN Co’s losses. This could place these private broadband companies at a competitive disadvantage, as they would be paying higher costs through the levy, which would, in turn, make it more difficult for them to compete with NBN Co in offering broadband services. The ACCC has pointed out that this could skew the playing field in favor of NBN Co, which has an implicit advantage by being able to recover its historical losses from the broadband tax.

Furthermore, the ACCC has emphasized that continuing to use the levy for historical losses may result in higher-than-necessary costs being passed on to consumers. Since the RBS levy is ultimately paid by end-users, this could mean that consumers are unfairly burdened with higher charges for their broadband services. The commission has noted that the amount levied could be reduced if the recovery of historical losses is excluded from the tax calculation, which would ultimately benefit both consumers and broadband providers.

In addition to excluding historical losses from the levy calculation, the ACCC is also considering changes to the underlying modelling and methodology used to determine the amount of the RBS levy. This review could lead to a reduction in the overall levy rate, though it may also expand the pool of individuals and companies required to pay the levy. Earlier this year, the ACCC softening its stance on whether cellular fixed wireless broadband users should be subject to the levy. This could potentially broaden the levy’s scope, meaning that a greater number of broadband users would contribute to the fund, helping spread the cost more widely across the population, albeit with the trade-off of a lower individual levy.

The ACCC is working to balance the competing interests of maintaining NBN Co’s ability to fund its non-commercial services, promoting competition in the broadband market, and protecting consumers from unnecessary charges. One of the major concerns is ensuring that the RBS levy does not place undue financial pressure on non-NBN providers, which could hinder their ability to offer competitive services in the market, particularly in rural and regional areas where the demand for broadband services is high, but the costs of delivering them are steep.

At the same time, the ACCC must also consider the financial needs of NBN Co, which relies on the RBS levy to support the provision of broadband in areas that would otherwise be underserved by market-driven broadband providers. NBN Co has various other ways to recover its losses, including special access undertaking (SAU) mechanisms that allow it to raise the prices of its broadband services over time. These mechanisms could potentially help NBN Co mitigate the financial burden of its non-commercial services without relying solely on the RBS levy.

As the consultation process continues, industry stakeholders have until December 13 to submit their feedback on the proposed changes. The ACCC is expected to use this input to shape its final advice to the communications minister, which will likely include recommendations on adjusting the levy’s structure, scope, and the calculation of NBN Co’s losses. These adjustments could have significant implications for the broadband market in Australia, potentially lowering the tax burden for consumers while ensuring that NBN Co remains financially viable and able to provide broadband services in areas that are otherwise not commercially sustainable.

The outcome of this review is crucial for shaping the future of broadband taxation in Australia, with implications for both consumers and providers. The goal is to create a more competitive and fair market while ensuring that the needs of underserved regions are met, and the financial stability of NBN Co is maintained.