TPG Telecom will be forced to split up part of its company with separate staff, executives and technology systems under a draft government proposal if it continues plans to build a fibre-to-the-basement broadband network in competition against NBN Co.

TPG is using its fibre network to connect high-rise apartment buildings with lucrative customers to high-speed internet services.

The directive seeks to protect NBN Co from possibly damaging competition. Credit:Rob Homer

If followed by other telcos, it could render NBN Co unprofitable and put billions of dollars in expenses on to the federal budget because the government-funded company needs profits from the cities to pay for broadband in the bush.

Communications Minister Malcolm Turnbull last month said he would introduce new directives to cover TPG-style moves for the sake of boosting regulatory certainty and has moved quickly to fulfil his pledge.