The NBN has to pay Telstra $15 each month for every customer

Source: NBN

Prime minister Malcolm Turnbull said this week that the NBN was “a mistake” in the way it was setup as a brand new company.

Both he and the ABC TV’s Four Corners programme cited the New Zealand fibre broadband experience as a better model – take the existing dominant telco, structurally split out the network infrastructure team, then commission it to build a national network.

That way, the company responsible already has the know-how of building and maintaining a national-scale telecommunications network. But perhaps more importantly, it already owns all the physical assets like underground pits, telegraph poles and exchanges.

In Australia, the NBN organisation has to pay regular fees to Telstra (and to a smaller extent, Optus) to gain access to existing infrastructure like underground ducts and equipment racks.

At a senate estimates hearing on Tuesday night, NBN chief executive Bill Morrow and chief financial officer Stephen Rue revealed this leasing arrangement added $15 each month to the bill of every NBN customer.

“Because the decision was taken back in 2009 to have a completely separate company than what the incumbent Telstra was, NBN is obligated to pay Telstra a lot of money to lease their ducts, to have rack space in the exchanges and to have access to the pits,” Morrow told the hearing.

“That amount of money that we need to recover, actually does lift up the price up we have to [charge] to consumers.”

In addition, the NBN is obliged to cover Australians in remote and uneconomical areas that were previously not even served broadband by Telstra – adding another $7 per month to everyone’s bill.

“We bring a degree of equality in giving everybody access by this business model. But those loss-making homes is why the investors never went there. It’s why Telstra never went there and Optus never went there.”

That total of $22 contributes to the threshold of $52 average revenue per user (ARPU) per month that the NBN must achieve in order to pay back its costs to the government, which has been criticised as too expensive.

“If we didn’t have that, we’re talking about a $30 cost base that now is better than what you see in New Zealand, better that what you see in the UK or Germany. And in fact, comparable to what many people were paying for ADSL2 services before.”

NBN’s ARPU for the 2017 financial year was at $43, with the organisation hoping that increased data consumption and apps in the future will grow this figure.

Morrow also expressed frustration to the senate estimates hearing that he was wedged between the argument that NBN should build more expensive fibre and that the NBN was too expensive as it is.

“The cheaper MTM [multi-technology mix] model that’s faster to build, keeps that internet price down. There’s a conflict — if we have to spend more money on the network that means the price has to go up.”

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