NBN may never make a profit, warns CEO

NBN may never make a profit, warns CEO


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The national broadband network is losing money on each suburb it connects.

The national broadband network is losing money on each suburb it connects and believes that unless it is protected from competition due to data delivered by ultrafast mobile networks it will never make a profit.

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The company's concerns have been detailed by chief executive Bill Morrow in an exclusive interview ahead of a Four Corners report on Monday that it fears will suggest "the whole thing is a mess".

"We collect about $43 per month from retail service providers for each home they sell into," Mr Morrow said. "In order to recover costs we need $52."

At present, the NBN is required to make a profit.

At present, the NBN is required to make a profit.

"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."

"It's a bet we've taken. If it doesn't come together, we've got a problem."

Asked whether NBN could withstand competition from data delivered by new ultrafast 5G networks that didn't need connections to houses, Mr Morrow said: "Forget about 5G for a moment, even the antenna technology using 4G is a viable alternative to NBN where the towers are already up."

"Think about the NBN business model. The only reason we are able to get connections into those 2 million difficult-to-wire homes that are cost prohibitive is because we are taking margin from low-cost city areas. As soon as competitors eat into these margins through enhanced antenna technology, we've got a problem."

Fixed-line competitors to the NBN will soon have to pay a levy beginning at $7.09 a month to help subsidise delivery to hard-to-connect customers.

"The problem is the levy excludes wireless, even where people never take the modem outside of the house," Mr Morrow said. "It's a threat that wasn't envisaged by this government or the last when the business plans were put together."

Conceding that a levy on mobile broadband would be unpopular, Mr Morrow said: "Things are going to have to happen. 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."

At the moment the NBN is required to make a profit, repaying government loans and returning the government's investment through dividends.

"I think government moves are going to be inevitable," Mr Morrow said. "It all depends on how serious this competitive threat is, but being an old wireless guy I can guarantee you I would have had my team seriously looking at this."

In April, internet service provider TPG spent $1.3 billion on wireless spectrum in what was widely interpreted to be a move into mobile data. Telstra, Optus and Vodafone already have substantial mobile data networks.

Asked how much subsidy the NBN would need if it wasn't protected from competition, Mr Morrow said it was too early to predict how much mobile competition would eat into its margins.

Asked whether NBN would ever make the profit required of it even with protection from competition, Mr Morrow said he wouldn't speculate.

"It's too early. I've been around the telco industry for 40 years and things have ebbed and flowed quite a bit. Companies have crashed and burned and later emerged as super-valuable - it's too premature to think about."

The story NBN may never make a profit, warns CEO first appeared on The Sydney Morning Herald.

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