Government Must Write Down NBN to End Silly Debate

The public spat about whether NBN’s prices made gigabit broadband unaffordable, or whether Australians were uniquely uninterested in superfast broadband was a silly, circular argument showing the Federal Government must write down its NBN investment, the CCC said today.

NBN CEO Bill Morrow was right on one point in his comments this week – there is no residential demand for NBN’s wholesale gigabit broadband service at the prices retailers would need to charge for the service, a CCC spokesman said.

But this was not because Australian consumers would not take gigabit speeds at any price – or even for free – as Mr Morrow reportedly went on to say.

The real problem was that the NBN pricing model – designed to satisfy the Government’s demand for a “return on investment” – is unsustainable, self-defeating and was creating a vicious cycle that ultimately could undermine the viability of the NBN.

NBN’s wholesale price model put retailers in a ‘price squeeze’.

Retailers’ costs for using NBN rise unsustainably as users consume more data, but their revenue does not, forcing them to push their customers toward lower download speed products.

But this in turn means less revenue growth per user for NBN, putting pressure on its return on investment.

NBN has recognised this was a problem with some price cuts and a marketing campaign, launched late last year, to encourage more people to buy higher speed plans.

But much more profound actions were needed.

“It doesn’t matter how much NBN spends on marketing, if selling higher speeds services will send retailers broke, they simply can’t and won’t do it,” a CCC spokesman said.

The only way to break the cycle was to restructure NBN’s balance sheet by writing off some of the value of the money the Government has invested.

“This is exactly what would happen in a private company, and exactly what the CCC and others have been saying for 18 months,” the CCC spokesman said.

“Clearly, the chopping and changing of the NBN business plan as the Government has ordered it to change technologies stalled NBN’s rollout, slowed take-up, and created costs.

“If the Government recognised this and wrote-off part of the wasted investment, NBN could restructure and lower its prices, and would then benefit from kick-starting sales growth in higher speed products,” he said.

However, trying to argue that Australians, uniquely in the world, were not interested in gigabit broadband was absurd and insulting, and was creating divisions between NBN and its retailer customers.

“Australian consumers’ passion for high speed broadband is easily seen in the mobiles market where the race for 3G to 4G and now 5G is all about meeting the download speed demands of mobile users.  Does the NBN really think customers are happy with speeds on fixed lines below those emerging for mobiles?”

“NBN was created to give universal access to 21st century broadband, and encourage Australians to embrace the digital age,” the CCC spokesman said.

“At the moment, an inflated balance sheet is driving unaffordable prices and pushing Australia in the opposite direction.

“It is up to the Government to fix the mess.”