NBN Co’s new CEO Bill Morrow has suggested the Federal Government apply a levy onto NBN infrastructure competitors like TPG in order to ensure a sustainable economic model in the provision of broadband services to rural customers.
Morrow this morning gave an insight into the company’s upcoming submission to the Vertigan review, revealing it would suggest either a levy on infrastructure providers competing with the NBN or a tax subsidy to support the rollout of the NBN to rural and regional areas.
“The current structure today cannot support competition in the infrastructure level without saying ‘I’m going to allow it in a free marketplace and I’ll use a tax subsidy for rural areas to keep costs down or [a levy for infrastructure providers]',” Morrow said.
“We don’t have a preference either way, we’re relaxed about it, all we can do it point out that things will change from the original intent of NBN.”
He said TPG’s efforts to build a competing fibre-to-the-basement network, cherry picking off lucrative metropolitan areas for connectivity, would push the overall cost of building the national broadband network up.
“If you’re still going to build the regional areas - which people like TPG aren’t going to do - it means we have to get more subsidies from the metropolitan areas we are going into, which means we have to charge in them greater, and then you get a non-sustainable economic model,” Morrow said.
“If there is infrastructure competition, we need to consider whether the Government imposes a cross-subsidy component on the infrastructure competition. So if TPG goes into a certain area, they can implement whatever cost model they want, but there [should be] a levy to be able to partly offset the cost of getting a broadband solution to rural areas.
“That way NBN Co can still build in the area and the economic model stays intact. Everyone can get broadband, and there’s still competition.”
TPG last year revealed plans to roll out fibre-to-the-basements of an extra 500,000 apartments across metropolitan Sydney and Melbourne, using loopholes in anti-cherry picking legislation governing the NBN. It has started construction in a number of sites across NSW, Victoria and Brisbane, and is live trialling the service.
Morrow’s comments come as the company reported a $1.1 billion operating loss for the last nine months - a result Morrow admitted signalled NBN Co's need to lift its game.
The operating loss accompanied revenue of just $69.8 million for the nine months ended March 31, according to unaudited quarterly results released today.
Most of the company’s capital expenditure went towards expanding the national broadband network. It reported life to date increases to CapEx and OpEx, now $4.9 billion and $2.4 billion respectively.
It claimed a quarterly increase of 27 percent of premises with an active NBN service, now sitting at 166,642, and a 23 percent increase in passed fixed line and fixed wireless premises, standing at 512, 659 premises as at the end of March.
It is continuing its efforts to attack service class zero orders, admitting one third - or 94,883 - of existing connected homes and businesses are unable to access services despite being passed by fibre.
NBN Co outgoing chief operating officer Gred Adcock said the company is combating the issue by instructing contractors to install lead-ins and connection boxes to premises while fibre is being laid in the street, which had previously been done separately.
Reducing a backlog of held service orders has been a priority for NBN Co since the start of the year. It beefed up its field force to reduce the number of NBN service orders that had become held due to technical issues and contractors missing appointments.
"It is essential we tackle what has effectively become a brand issue," Adcock said.
“There are a range of issues we need to address. The primary focus for management has been on building the network rather than connecting families and businesses,” Morrow said.
“We need to do both and we need to do them better.”
Morrow took the top job two weeks ago and is already attempting organisational reform. Last week he announced CTO Gary McLaren, CFO Robin Payne and head of corporate services Kevin Brown would depart the company.