Prime Minister Malcolm Turnbull says NBN was a mistake and it may never make money

PRIME Minister Malcolm Turnbull says it was a mistake to build the NBN and it may never make money. So who’ll be left footing the bill?

AUSTRALIANS were once sold the dream of a super fast internet connection that would transform their lives and propel the country into a hi-tech future.

But fast forward seven years and the massively expensive project has become a source of disappointment, frustration and complaints.

In its heyday, the holy grail for the NBN was to deliver download speeds of one gigabit per second. It was a lofty goal that has well and truly been brought down to Earth.

Instead economic compromises have delivered a service that is much, much slower.

After the Abbott Government changed the way the NBN was to be delivered from Fibre-to-the-Premises (FTTP) to Fibre-to-the-Node (FTTN), the speeds that consumers were guaranteed dropped to 25 megabits per second (Mbps).

To put this into perspective, some consumers can achieve broadband speeds of up to 24 Mbps using the current ADSL2+ network.

Some lucky households using NBN will be able to get a maximum of 100 Mbps if their home is directly connected to the network or they live within 400m of one of the connection nodes.

Even then, this speed can be much slower during peak periods if the service provider selected (such as Telstra, Optus and iiNet) does not buy enough bandwidth to consistently deliver the fastest speeds.

Slower speeds during what’s being labelled the “Netflix hours” between 7-11pm has been identified as the number one consumer issue with the NBN.

Many customers have also complained about unexplained drop-outs, making it even more frustrating.

It’s no wonder that complaints about the NBN have rocketed in the past financial year, rising by 159.3 per cent.

But on Monday, NBN Co chief executive Bill Morrow told ABC that what consumers were paying was not enough to even recover the $49 billion cost of rolling out the network.

“If the (retail service providers) RSPs cannot get the consumers to pay more, then we have a problem,” he said.

NBN users frustrated at slow speeds during “Netflix hours”.

About 85 per cent of premises that have access to NBN are only signing up to speeds of 25 megabits or less.

Mr Morrow said as retailers aggressively competed for market share, they were unable to charge consumers what he believed they should be paying for increased bandwidth.

Consumers were led to believe they could access broadband speeds of between 12-25 megabits a second for the same price they were paying for a pre-NBN service (5 megabits a second).

During a press conference in Canberra today, Prime Minister Malcolm Turnbull was asked whether he thought in hindsight the NBN was a mistake and a “massive waste of money”.

“Yes,” he said. “Well, it was a mistake to go about it the way they (Labor) did.”

Mr Turnbull said the way Labor had set up the NBN was too expensive and New Zealand’s model had worked better because its telco (that was the equivalent of Telstra) had split its network operations from retail operations to deliver its project.

“There are many billions of dollars wasted ... that we can’t recover,” he said.

“What we are doing is ensuring that we deliver it as quickly and cost effectively as possible.”

When asked whether he thought taxpayers would likely ever recoup the money spent on the NBN, Mr Turnbull said: “I think there’s a reasonable question mark over that”.

He said the NBN was currently estimated to deliver a return of about 3 per cent.

“It certainly is not a commercial return that the stock market would expect,” he said.

The Prime Minister said he was aware many people were not getting what they had paid for and “one complaint is one complaint too many”.

“There have been real problems - both with the installation experience and with people not getting the speeds that they believe they’re paying for, or that they have paid for,” he said.

“We are very, very focused on improving on both of those counts.”

THE REALITY OF THE NBN

The maximum speed offered on the NBN is currently 100 megabits per second.

But this is the best case scenario if you are either directly connected to the network (via FTTP) or you live within 400m of a connection node (via FTTN).

For those unlucky souls located further away, the speed can drop dramatically to 50 Mbps or even 25 Mbps.

The other thing that can slow your speed is which retail service provider you chose. If you select a cheaper plan you may find this comes at a cost, as they may be skimping on buying bandwidth, which will make speeds slower during peak times.

Some unhappy NBN users have told news.com.au of getting speeds of 20 Mbps, only slightly higher than the 15 Mbps they could achieve on ADSL.

“It is not a constant speed,” NSW resident Ben Wilson told news.com.au earlier this year. “We get constant slow downs below 10Mbps ... so we pretty much had a more reliable connection on ADSL.”

About one-in-four Australians are unhappy with the speed of their NBN connection, with the NBN and retailers blaming each other for the confusion.

The Australian Competition and Consumer Commission (ACCC) has now been given funding to monitor broadband speeds and to determine typical speeds at different times of the day.

“The reality is ... about one-in-four people are unhappy with the way their service is being produced,” Mr Morrow said.

“That number is far too high to see that many dissatisfied people in the nation.”

RELATED: Things to consider when making the switch to NBN

100 megabits per second? How about 20 instead?.

HOW DO WE RATE GLOBALLY?

Despite the huge investment in the broadband network, the latest State of the Internet report shows Australia is still lagging behind other countries.

About 85 per cent of premises that have access to NBN are only signing up to speeds of 25 megabits or less and this has contributed to keeping average speeds down.

Before the NBN began rolling out, in the first quarter of 2010, Australia had an average speed of just 2613 Kbps and only 10 per cent above 2 Mbps.

Since then it has jumped to an average internet speed of 11.1 Mbps and about 35 per cent of the population could get speeds higher than 10 Mbps in the first quarter of 2017.

But when Australia’s stats are compared to other countries, it doesn’t seem that impressive.

In three years, Australia dropped from 30th in the world for internet speeds in 2013 to 60th despite the NBN rollout. Last year speeds improved, and Australia is now ranked 50th.

To put this in perspective, Australia’s average speed of 11.1 Mbps is still not as high as the average 12 Mbps that South Korea achieved in 2010 — seven years ago.

Since then South Korea’s average speed has jumped to 28.6 Mbps.

New Zealand’s average speed is also higher than Australia’s at 14.7 Mbps.

No wonder cities like Adelaide, which are interested in positioning themselves as “smart cities”, are looking to go it alone and introduce 10 Gbps connections.

IS THIS THE FIX?

The new hope of the NBN is a new connection method that is cheaper than FTTP but will hopefully provide a better service.

Fibre-to-the-curb (FTTC) takes cable to telecom pits outside premises, which is closer than FTTN and cheaper and less complex than FTTP.

NBN Co has connected FTTC in the Melbourne suburb of Coburg as part of ongoing trials, with speeds of 109 Mbps downstream and 44 Mbps upstream recorded.

NBN Co expects to serve an initial one million premises with FTTC and estimates the technology will cost about $2900 per premises to deliver compared to $4400 for FTTP.

Commercial FTTC services are expected to be launched in the second half of next year.

The cost is a lot lower than installing FTTP. Today NBN released data revealing the most expensive FTTP connections, with a remote residential property and bowling club in Tasmania topping the charts at a whopping $91,196 and $86,533 respectively.

Four of the five dearest FTTP installations were in the Apple Isle, while a business in the Victorian regional centre of Ballarat also topped $50,000.

The information was released ahead of an investigation from ABC’s Four Corners into the government-run network that will air tonight.

The speed of your internet varies depending on how far away from the node you are if you’re being connected via FTTN.

WILL WE HAVE TO PAY MORE?

Despite optimism about the new connection method, Mr Morrow believed his company may still struggle to compete with mobile networks as new concerns over costs and connection wait times emerge.

Increasing competition from ultra fast mobile networks will stop the NBN from turning a profit, he said.

Mr Morrow told Fairfax Media that low-cost city connections were subsidising the more difficult-to-wire homes, but margins would be squeezed if city customers turned to mobile networks for their internet connections.

“We are kind of fighting the competitive fight with one hand tied behind our back,” he said.

There is now talk of a levy to help pay for the NBN.

Mr Morrow conceded a levy would be unpopular, but said the government could either regulate to protect the current model or shell out more money to ensure the network can compete with the ultrafast mobile broadband.

During a press conference held today Mr Turnbull said his government had no plans to impose a levy or penalty on people who connect to the internet using mobile data connections, rather than the fixed line network.

He said he was talking with NBN Co and Australian Competition and Consumer Commission about the problems with the network.

“We are doing everything we can to ensure the NBN delivers a great service,” he said. “We’re doing everything we can to ensure that the telcos, the retail service providers, deliver to their customers what they promise.”

— With AAP