By business reporter Stephen Letts
Updated 15 Oct 2019, 5:00pm
Telstra chair John Mullen has savaged the NBN as a massively expensive waste of resources that has entrenched a slow, state-owned monopoly, rather than a competitive high-speed broadband network.
- Telstra chair John Mullen warns that if the NBN doesn’t cut its wholesale prices retailers will go broke and broadband competition will be eroded
- Mr Mullen says in hindsight, taxpayers could have been saved $50b if it had been left to private enterprise and says Telstra must carry some of the blame
- Retailers are being forced to flee broadband and look at investing in alternative technologies such as wireless 5G
Speaking at Telstra’s Annual General Meeting, Mr Mullen said the NBN was simply too expensive for many retail service providers (RSPs) who were now looking at other technologies, or facing the prospect of going broke.
Mr Mullen noted most retailers were unable to cover the costs of selling NBN products.
“Clearly losing money is unsustainable for all the 180-odd RSPs out there and is why we have seen some companies already starting to withdraw from reselling the NBN,” Mr Mullen told shareholders.
“In addition, these economics are leading many companies to invest in 5G fixed wireless and other technological solutions to allow them to offer competitive broadband without using the NBN, which just makes the situation worse.
“The bottom line of this is that Australia already has some of the highest wholesale broadband pricing in the world, and if this trend continues, over time most resellers of the NBN will withdraw or go broke.”
Waste of resources
Mr Mullen added the NBN had gone well beyond its original mandate by now being an active player in the market.
“It certainly wasn’t envisaged that NBN Co would negotiate contracts directly with customers and encourage them to seek special deals from certain RSPs,” he said.
“That, however, is what we are seeing today. Instead of remaining a wholesaler, the NBN is now going outside this mandate and is targeting our customers directly.”
He said, with the benefit of hindsight, this could have been avoided, given the competitive pressure between the likes of Telstra, Optus, TPG and others, would have seen fast 100Mbps broadband delivered to the majority of the population of Australia, in an ongoing competitive landscape and at no cost whatsoever to the taxpayer.
He suggested the government of the day could then have decided how much subsidy they were willing to provide the industry to extend this coverage to regional and rural areas where private sector economics were unattractive.
“This would have been at a fraction of the cost of today’s NBN. Instead, however, in the NBN we have created a state-owned monopoly that is going to cost the country more than $50 billion,” he said.
Mr Mullen noted, while Australia’s mobile speed was world-class, ranked second behind South Korea on one survey, fixed broadband speeds languish at 58th behind the likes of Moldova, Belarus and Panama.
“The original intent of the NBN was to bring high-speed internet at competitive pricing to those without such access,” he said.
“It seems a waste of collective resources to be delaying investment in the consumer rollout to people yet to be connected, and instead be focusing investment in the enterprise market where the NBN is duplicating existing high-speed fibre for no service or speed advantage.”
Telstra shares the blame
The NBN rollout has had a brutal impact on Telstra, creating a $3 billion earnings “black hole” in the company’s one-time dominance in broadband infrastructure.
That in turn has seen more than a third of its workforce cut, while profits — down 40 per cent last year — and dividends have also tumbled.
Mr Mullen conceded some of that has been self-inflicted, but the industry’s only sustainable way out of the mess was slashing NBN’s wholesale charges.
“This said, however we got here, Telstra too must bear part of the blame for this due to its recalcitrance in helping government at the time,” he said.
“Whether we like it or not the NBN is here to stay.”
He dismissed suggestions that hauling the NBN back to its original mandate, while cutting wholesale prices were “self-serving” and “whinging”, arguing Telstra was still well placed to compete in the current pricing regime, or in a cheaper market.
“Surely a reduction in the wholesale price, a competitive market, and lower prices for consumers has to be a better outcome than a high-priced oligopoly, both for the industry and for Australia,” he said.