NBN CEO issues profit warning

Business model threatened by wireless broadband services

NBN may be unable to deliver a profit unless it is protected from the threat of wireless broadband, CEO Bill Morrow has said.

In a bombshell interview with Fairfax Media ahead of a Four Corners report on the National Broadband Network, Morrow said in response to questioning about the threat of 5G cellular technology that in some areas even 4G is a “viable alternative” to the NBN.

The CEO warned “enhanced antenna technology” would eat into NBN’s margins.

The federal government is currently seeking to introduce a new subsidy scheme for NBN that will slug operators of 25Mbps+ fixed-line networks with a $7.09 per connection monthly fee.

The Regional Broadband Scheme (RBS) is intended to help subsidise the rollout of non-commercially viable NBN services in rural areas and protect the new network from telcos that seek to deliver competing infrastructure in low-cost or high-margin regions such as inner metropolitan areas.

However in his interview with Fairfax, Morrow noted that the RBS excludes wireless services.

“The government has two options: to regulate to protect this model, or to realise that the NBN won't have the finances it thought and might require some off-budget monies to go in to make it happen,” Morrow said.

The CEO also indicated he wouldn’t speculate whether NBN would deliver the profit required of it even if it benefited from a levy on mobile broadband connections.

The National Broadband Network has been treated as an investment by federal governments since its inception. Because it has been classed as an investment that will eventually deliver a profit to the Commonwealth, successive governments have been able to avoid treating it as a budget expense.

The government is sinking at least $49 billion into the rollout of the network, including a $19.5 billion loan.

Morrow has previously dismissed calls for a write-down by the government of all or part of its investment in the NBN as a “silly discussion”.

A write-down would reduce the return NBN needs to deliver, potentially having a flow-on impact on the pricing of retail services delivered over the National Broadband Network.

The heightened scrutiny of the economics of the National Broadband Network comes on the heels figures released by the Telecommunications Industry Ombudsman that revealed complaints about services delivered over the network grew by 159.3 per cent in FY17.

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