“Reasonable question mark” hangs over the profitability of the NBN, admits Prime Minister

NBN

Malcolm Turnbull has indicated that the National broadband network (NBN) was a “mistake” and confessed there is a “reasonable question mark” over whether the project will ever provide taxpayers with a return.

The admission was made by the Prime Minister in a doorstop interview, today, following comments NBN Co CEO Bill Morrow made to Fairfax Media.  In an exclusive interview, Morrow told Fairfax that the money being collected from retail service providers, for each home they sell into, is insufficient to cover the company’s costs.  He also said that if the NBN Co is to ever to make a profit, the government must either provide it with ‘off-budget monies” or introduce protections against competition from ultrafast mobile broadband, which is exempt from a forthcoming levy on fixed-line NBN competitors.

Turnbull told the press that NBN was a ‘calamitous train wreck’ when the Coalition inherited the project from Labor and that his government has “done the best [it] can getting that project on track” despite being “dealt a very, very bad hand of cards” by the opposition. He added, “Now, it is on track in terms of the rollout. They are activating many more households and premises a fortnight than Labor did in six years.”

Although Turnbull admitted there have been “real problems”, both in terms of the installation experience and “people not getting the deals they paid their retail service providers for”, he said the rollout would have been more expensive and drawn out under Labor.

“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 $30 billion,” he said.

“So, if you think the commercial criteria are challenging now, imagine what they would be if you loaded another $30 billion of cost onto it. Now, it is challenging. At the moment, it is estimated to deliver a return of around 3 per cent, which is… enough to keep it on the government’s balance sheet, as a government asset, but it certainly is not a commercial return that the stock market would expect.”

Asked by a journalist if the NBN project could, in hindsight, be considered a mistake, the Prime Minister replied “Yes”.

“[T]he way Labor set it up was hugely expensive and there are many billions of dollars wasted – and I’ve said this many times, it’s a fact of life – that we can’t recover,” Turnbull said.

“[I]t was a mistake to go about it the way they did – setting up a new government company to do it was a big mistake. If you want to look at a country that did this exercise much better, it’s New Zealand, and what they did there was they basically ensured the incumbent telco, the Telstra equivalent, split its network operations away from retail operations and then that network company which is called Chorus became, in effect, the NBN.

“The virtue of that was you had a business that knew what it was doing, that was up and running, that had 100 years of experience getting on with the job and the Kiwis have done this at much less cost.”

Turnbull noted that the ACCC will, in light of customers not getting what they paid for, put in place 4000 monitors around Australia to monitor NBN performance. When asked whether mobile data users would be penalised to pay for the NBN,  the Prime Minister said the government had “no plan to impose any restriction on… mobile data”.