The future of NBN – Privatisation in a changing market landscape
Oct 10, 2024This week, the government announced its intention to introduce new legislation that would keep the National Broadband Network (NBN) in public hands, reinforcing its election promise.
The proposed law, expected to be tabled in federal parliament, aims to prevent any future sale of the NBN, pushing the Coalition to clarify whether it would seek to privatise the network—especially after taxpayers have already funded the $51 billion build over more than a decade. This move forces a timely debate on the NBN’s future and the role of privatisation in a sector that has undergone significant transformation.
I’ve long been a cautious supporter of privatisation, provided it’s accompanied by strict regulatory controls that protect consumers. A completely free-market approach is neither feasible nor desirable for critical infrastructure. If managed under stringent oversight, I generally view privatisation as a positive force for innovation and efficiency.
Yet, the telecommunications market has shifted profoundly over the past decade, reaching a point where growth appears to be stalling. Telcos worldwide are under increasing financial pressure, with shrinking profits and stagnant revenues. Cost-cutting measures, facilitated by new technologies, are becoming the only sustainable strategy for these companies. Consider 5G, which has failed to deliver the revenue boost once promised. The same will likely apply to 6G and beyond; at best, these technologies will maintain revenue stability. In broadband, too, we’re approaching a plateau as most users settle into speeds of 50-100 Mbps, curtailing growth in demand.
This raises a critical question: How will telcos continue investing heavily in new technologies without substantial revenue growth to justify those investments? This dilemma will undoubtedly influence any potential NBN sale. For the government, offloading the NBN at a time when the market is sluggish would likely mean accepting that they won’t fully recoup their investment. As I’ve mentioned before, the success of any sale may ultimately depend on the government’s willingness to write off a significant portion of the network’s cost.
The current financial realities at NBN Co highlight these challenges. The company recently reported a $1.4 billion net loss, up from $1.1 billion the previous year, driven by the heavy cost of maintaining and upgrading the network. As of June, NBN Co was carrying $42.5 billion in liabilities, including $26.9 billion in debt for network construction. Meanwhile, cost increases have led some consumers to look for cheaper alternatives, further complicating the financial picture.
Under these market conditions, a rushed privatisation of the NBN would be politically and financially fraught. The government would struggle to recoup its investment, and any financial failure associated with a privatisation effort could damage its standing. A delay is likely the most sensible approach, providing time to assess market trends and make informed decisions about the NBN’s future.
The government’s proposed legislation signals an important turning point for the NBN and raises broader questions about the role of privatisation in telecommunications. As we move forward, finding a balanced approach that considers public investment, private efficiency, and consumer protection will be key to building a robust digital infrastructure for Australia.