NBN boss Bill Morrow says business needs a bailout or protection to survive

NBN chief Bill Morrow. (Source: NBN)

NBN chief executive Bill Morrow has admitted the government needs to do something to protect the organisation from the threat of new competing mobile technologies or face never making a profit for taxpayers.

In an interview with Fairfax Media preempting Monday night’s Four Corners report “What’s wrong with the NBN?”, the former Vodafone boss said the NBN’s obligation to pay back its costs to the government meant it could not lower the fees charged to retailers and hence consumers.

The NBN collects about $43 each month per home from retailers, but in order to cover costs it needs to ramp that up to $52.

“We, NBN and the board, are betting that future applications are going to bring more value into homes, that they are going to need more bandwidth or more data and that the retail service providers will pay us more,” Morrow said.

“It’s a bet we’ve taken. If it doesn’t come together, we’ve got a problem.”

Mobile internet has emerged in recent years as an alternative to fixed line connections. Such rival technologies cherry-pick business from the profitable urban areas, which puts the NBN under tremendous pressure because its model uses city revenue to subsidise expensive rollouts to rural areas.

“It’s a threat that wasn’t envisaged by this government or the last when the business plans were put together,” Morrow told Fairfax.

“As soon as competitors eat into these margins through enhanced antenna technology, we’ve got a problem.”

To level the playing field, the government is planning to charge a broadband levy of about $7 a month for each premises from fixed-line rivals to the NBN. The funds will then be handed to the national network for deployment in commercially difficult rural areas – but the tax doesn’t cover mobile network providers.

With the NBN obliged to pay back the government through dividends and profits, the chief executive admitted something has to be done to help the organisation.

“I think government moves are going to be inevitable,” he said.

“Things are going to have to happen. The government has two options: to regulate to protect this model, or to realise that the NBN won’t have the finances it thought and might require some off-budget monies to go in to make it happen.”

Morrow declined to speculate whether the NBN would ever make a profit, saying fortunes can change quickly in the telecommunications industry.

“It’s too early. I’ve been around the telco industry for 40 years and things have ebbed and flowed quite a bit. Companies have crashed and burned and later emerged as super-valuable – it’s too premature to think about.”

Morrow’s admissions came as the NBN announced it had completed its first trials of new fibre-to-the-kerb technology, which it is betting as a higher peforming alternative to the much-maligned fibre-to-the-node. The company revealed trials in a home in northern Melbourne had achieved speeds of 109Mbps downstream and 44Mbps upstream.

Read the full story in Fairfax Media.

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