Prime minister responds to NBN Co chief’s concerns the network may never pay its way, due to competition from 4G network

This article is more than 2 years old

This article is more than 2 years old

Malcolm Turnbull has labelled the national broadband network a mistake and blamed Labor for leaving the Coalition a “calamitous train wreck” of a project while responding to concerns from the NBN Co chief executive that it may not pay its own way.

Bill Morrow has suggested that competing technologies may hamper the commercial viability of the NBN in the lead-up to an ABC Four Corners investigation, airing Monday night, into the digital divide between premises that get faster fibre-to-the-premises rather than fibre-to-the-node connections.

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In an interview with Fairfax Media, Morrow said the NBN Co collected $43 a month from retailers who sold the NBN into homes but needed $52 to recover its costs.

“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,” he is quoted as saying.

But 4G wireless networks compete with the NBN and do not attract a $7.09 a month levy that the government charges fixed-line NBN competitors.

“As soon as competitors eat into these margins through enhanced antenna technology, we’ve got a problem,” he said, suggesting that the government may have to subsidise the NBN or “regulate to protect this model”.

In the 2018 NBN corporate plan, the NBN is predicted to make a return of between 3.2% and 3.7% in the long term.

Labor seized on Morrow’s comments, calling on the government to launch an independent audit of the NBN’s forecast return and using question time to accuse the government of mismanagement of the NBN.

“The Australian public deserves to know whether the multi-technology mix can stand on its own two feet,” the shadow finance minister, Jim Chalmers, and shadow communications minister, Michelle Rowland, said in a statement. “If today’s comments are any guide, the NBN CEO is not so sure.”

At a press conference in Canberra, Rowland said Labor was concerned the financial troubles may result in “new taxes on wireless broadband users” and called on the government to be upfront if it would impose taxes or increased protections for NBN.

Earlier, Turnbull claimed Labor had wasted billions on the NBN and the Coalition had “done the best we can getting that project on track”.

“If we had gone down Labor’s route of fibre to the premises, it would have taken, say, another eight years to complete and another $30bn,” he said.

“Now, it is challenging. At the moment, it is estimated to deliver a return of around 3% [which] is enough to keep it … as a government asset, but it certainly is not a commercial return that the stock market would expect.”

Asked if the project was a mistake, Turnbull said “yes”, adding that it was a “big mistake” for Labor to have set up a new government company rather than splitting Telstra’s retail and network operation and have the private network company build the NBN.

In question time, Bill Shorten shot back that Turnbull was “blaming everybody else” for his “second-rate copper NBN”.

Turnbull noted Bill Morrow’s comments about apartment buildings using enhanced antennas to get wireless internet, but did not address whether the fixed line levy would be extended to these services. He said there was “no plan” to impose any restrictions on mobile data.

Turnbull acknowledged a spike in consumer complaints about the NBN, and accepted there have been “real problems both with the installation experience and with people not getting the speeds that they believe they’re paying for, or that they have paid for”.

“One complaint is one complaint too many,” he said, promising to aim for “100% satisfaction” despite the fact it cannot be achieved.

Turnbull said that Australian Competition and Consumer Commission will put 4,000 monitors in place to monitor broadband performance.

At a separate press conference communications minister, Mitch Fifield, said the government has legislation before parliament to impose a levy on fixed-line broadband, which NBN customers will be exempt from, to make clear the size of the subsidy to the regional network.

“When it comes to the mobile network, that is not something that’s readily substitutable for the NBN, in terms of the costs of data, [people] ... will still need a fixed line network,” he said. “We don’t have a proposition to apply that levy to the broader mobile network.”

On Monday the NBN released figures showing that the most expensive premises to connect to the network could cost tens of thousands of dollars, which Morrow told ABC’s AM illustrated “how difficult it is” to run the NBN without taxpayer subsidies.

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Morrow said he NBN faced the “paradox” of being a user-pays financial model despite the fact that some premises were more expensive than others and 2m of 11m “will never make a financial return”.

He said the NBN’s business model relied on cross-subsidising the cost of connecting 2m difficult-to-wire premises with more profitable connections in low-cost city areas.

Morrow said that cross-subsidy allowed NBN to make “a very modest return yet still get everybody access to fast broadband and keep the prices reasonable”. He said he was confident the NBN would stay within its $49bn funding.