Telstra must take part of the blame for NBN creation: Chair

The chair of Telstra, John Mullen, said at the company’s annual general meeting that the company must take its share of the blame for not working with the government in the 2000s, as it has resulted in the creation of the NBN as a fibre-to-the-premise based network.

At the height of tension between the government and the then Trujillo-led Telstra, the company had submitted a non-compliant bid as it was worried about structural separation. The bid resulted in Telstra being booted out of the issued NBN tender at the time.

“It is my view that over the last 10 years private sector competition between strong players such as Telstra, Optus, TPG, and others were always going to build 100MB broadband access and speed to the majority of the population of Australia in an ongoing competitive landscape, and at no cost whatsoever to the taxpayer,” Mullen said at the AGM on Tuesday.

“Governments 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.”

Mullen claimed this would have been “a fraction of the cost” of the NBN, but instead, the country has been lumped with a state-owned monopoly that is set to cost AU$50 billion.

“However we got here, and Telstra too must bear part of the blame for this due to its recalcitrance in helping government at the time, whether we like it or not the NBN is here to stay,” he said.

NBN complained in its recent financial results that it would have to pay around AU$2 billion in payments to Telstra and Optus. However, Mullen stated that the payments do not keep NBN’s wholesale pricing high, but keeps it lower since NBN does not have to set up a network of exchanges, fibres, ducts, and pits.

Last month, Telstra downgraded its revenue projections by AU$400 million following NBN’s corporate plan that was released the week prior.

“Telstra no longer anticipates FY20 being the year of peak NBN headwind and now estimates this will occur in FY21,” Telstra said at the time.

Mullen revealed on Tuesday where those payments are going.

“Telstra has in part been compensated by the government for this [NBN headwind], the majority of which is being returned to shareholders, but after the end of the NBN rollout, Telstra will be worse off by more than AU$3 billion of EBITDA per year into the future.”

Mullen claimed that while Telstra has cut its workforce by 6,000 jobs this year, employment in the industry was up due to NBN employing 6,400 employees.

Echoing the sentiment expressed by Vocus CEO Kevin Russell last week, that NBN should stick to its original wholesale remit, Mullen said it is not fair that the government-owned wholesaler is allowed to move outside its remit, while retailers are prevented by regulation from building their own infrastructure to compete.

“There is little doubt in my mind that were the NBN opened to competition, wholesale broadband prices in Australia would fall materially,” he said.

“Let me be clear that we are not recommending that the nation’s policy settings be changed, but we are just saying that if policy settings are not to change, then both sides should respect their original mandates.”

The Telstra chair further warned that resellers of NBN would go broke or stop selling NBN-based services unless the NBN wholesale price is reduced.

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