NBN Co chief eases fears network will become a telco retailer

The head of the Government-owned company designed to manage and construct the National Broadband Network has attempted to ease fears the network could break away from its wholesale-only roots.

Mike Quigley, chief executive of the NBN Company, also said it would take up to 30 years for the NBN to see a financial return, fuelling critics’ claims that the network itself is financially unviable.

It comes as several large telcos, including Telstra, Optus and AAPT, have criticised the Government’s draft legislation for the NBN saying it could allow the network to operate as a retail entity, effectively competing with the market.

Quigley told a Senate Select Committee yesterday that the network is designed to offer a “plain vanilla” wholesale service that would encourage retailers to think of their own products.

Additionally, comments from Communications Department representatives indicated the network would remain wholesale-only.

“I think Mr Quigley made it pretty clear what kind of services he envisaged NBN Co delivering and they weren’t retail services,” deputy secretary Daryl Quinlivan said.

The comments come after the draft framework legislation for the NBN included provisions for the communications minister to have the company operate as a retail entity in certain circumstances.

Also at the committee, Quigley said the scope for seeing capital returns for the project is long-term and that viable results may not be seen for up to 30 years.

“The board’s role is to get a satisfactory long-term return on the capital the government invests,” Quigley said. “Now it’s up to the government to determine what that return rate is, but we would hope to generate a return.”

“This is a long-term project, so for this type of nation-building infrastructure I’d imagine you’d be looking at a 20- to 30-year timeframe.”

He also said the NBN Co had not begun to discuss how to attract private investment. “We are nowhere near that point yet,” he said. “It’s simply not practical for a company such as NBN Co any time soon to go to private equity or private debt markets, so we’re not even thinking about that at this point.”

Currently the company is being funded by the Government, but private investment is expected to bring the $43 billion price tag down considerably with the contribution of physical assets. However, its main negotiations with Telstra regarding the acquisition of its copper networks are up in the air, as both parties disagree on an appropriate price.

Also in the committee, Quigley confirmed that wholesale pricing for the network will be announced by the Australian Competition and Consumer Commission in June as part of an undertaking.

“We’ll be offering wholesale prices that aren’t competitive,” Quigley told the hearing. “We’ve been developing a wholesale product for some time now, and we’ve been involved in a range of industry consultations over the past four months.”

He also added that national pricing will be determined once regulatory issues are cleared, and that the NBN Co is “on track for the July connection of the first operational services” in Tasmania.