The new Labor government has decided to intervene in the affairs of NBN Co and asked the company to withdraw its special access commitment (UAA) change.

As I mentioned before, the only way to stop the rot is for the government to step in and tackle NBN’s financial situation. This should lead to a structural change in NBN’s business model that will allow it to truly become a national asset for all Australians, not just those who can afford it.

I don’t know if removing the SAU will really be enough, but at least it’s a good first step. In the last decade, NBN Co started to show monopolistic behavior and any changes would also mean cultural changes within the organization.

In a statementcommunications minister Michelle Rowland mentioned:

‘…the SAU amendment filed in March 2022 under the former government would have allowed NBN price increases of inflation plus 3% per annum on certain products. This was underpinned by unrealistic revenue expectations and reflected a prospect of privatization.

The fact that the Minister of Finance has also signed the declaration is for me an indication that the financial strategy/policy will be adjusted over the next six to twelve months. This would relieve pressure on NBN Co to raise prices and may even lead to lower prices for true high-speed services.

The latter is the key issue for me – in the future all Australians need good quality broadband service, not cheap crappy service.

The minister also hinted at potential changes to the way the company operates financially, with the possibility of removing or modifying some of the financial burdens imposed on the company by the previous government. Under him, the company saw increased losses pile up to $3.8 billionthat the previous government wanted NBN Co to recover.

A significant proportion of these losses are the direct result of political decisions made by the Coalition and do not reflect the true costs if the network had been built without the interference of political parties. The only way for NBN Co to recover these additional losses would be to raise prices considerably; see below. These losses do not disappear with a wave of a magic wand, however, and this will complicate any change to the current complex situation.

The changes that need to happen will also affect shareholders and obviously this needs to be taken into account. However, at the same time, the company made its investment decisions based on what has always been clear – a politically motivated and therefore unsustainable business model and it took this risk at its own peril.

The fact that NBN Co immediately agreed to the application and withdrew its SAU also tells me that over the past month, good discussions have taken place, behind closed doors. This collaborative approach bodes well for future discussions with government, NBN, the regulator and industry.

While this intervention was expected/hoped for from this new government, it also follows significant lobbying by the industry. They joined forces in March when the Australian Competition and Consumer Commission (ACCC) announced its review of future regulations of the NBN and they have all since become increasingly vocal about the dire situation of the NBN.

NBN Co asks the ACCC for increased protection against mobile operators

Let’s go back to why, in the first place, we decided to develop the NBN.

First, the market situation in the early 2000s was a monopoly will who basically did not want to cooperate with government policies to build affordable high quality NBN. That’s why he bypassed Telstra and started NBN Co.

I was in the birthplace of the NBN and helped the government of the day develop policies for a nationwide NBN. I argued that the government should consider the national social and economic benefits of such a national infrastructure in a world that is becoming very rapidly digital. He agreed with this and viewed the NBN as a nation-building policy.

Although obviously – also at that time – government policy was never far from their mind, in general we were able to come up with a good policy which resulted in the strategy of building a wholesale NBN based on an infrastructure 96% fiber optic. .

Of course, if this plan had not been torpedoed by the new coalition government in 2013, we would also have encountered problems, adjustments and even backflips. But the overall long-term policy and strategy was sound. None of the big players in the industry had a problem with this — on the contrary, they all backed a national fiber-based NBN.

We now see the results of not doing it right in the first place, or like Tony Windsor deputy said in 2016: “Do it once, do it well, do it with fiber.”

With government intervention, it is clear that we have wasted almost a decade creating a national broadband network suitable for all Australians.

Telstra recently released a report this shows what would happen if we continued with the previous diet. It says NBN Co’s pricing threatens to harm Australia’s digital economy and would result in wholesale price increases of up to 20%, as set out in its ACCC submission.

The Labor Government must step up and fix our NBN

It will become a network only for those who can afford it. In order to avoid NBN’s high prices, customers are already switching to other services, such as mobile and fixed wireless. However, these technologies are less efficient and not in the interest of users.

The company argues that customers will generally be much worse off under NBN Co’s proposal from March, with continued price increases. Customers in need of basic connectivity, vulnerable customers or low spenders are most at risk. These customers simply cannot afford to access quality broadband NBN services.

Once disconnected from the old copper-based telecommunications network, 25% of people refuse to migrate to the NBN. Another large number can only afford to subscribe to basic broadband service, which does not provide them with the full benefits of a broadband network. This undermines social and economic policies in our rapidly digitizing world.

The effect of this is that to recoup the huge debts, with fewer users and many taking only the cheapest subscriptions, the company’s financial situation deteriorated and as a result it wanted to raise prices. This downward spiral makes the situation worse as more people will not be able to afford NBN and more people will only be able to use the lowest subscription service.

With the government now having pressed the reset button and with its collaborative policy, it hopes to find a solution that will work for all Australians. If he doesn’t, the end result will be more losses for NBN Co because more people can’t afford it. The NBN becomes a white elephant because it will be underutilized. It wouldn’t be a good result.

Ultimately, this will point to a solution that will include a write-off of some of the losses. It will be a bitter political pill to swallow.

Paul Budde is an Australian freelance columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organization. You can follow Paul on Twitter @PaulBudde.

Government urged to accept 'sunk' NBN costs

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