Federal Budget missed opportunity to tackle nbn black hole: MNF Group

Expresses its disappointment in the Federal Budget

Hosted voice and data communications services company, MNF Group (ASX: MNF), has expressed its disappointment that the Federal Government did not take the opportunity to write off part of the nbn network build cost in the recent federal budget.

It noted that inaction by the Turnbull Government on this front threatens the feasibility of the nbn business model.

MNF Group CEO and co-founder, Rene Sugo, said the current nbn model threatens to reduce competition, squeezing out mid-tier telco companies.

According to Sugo, the nbn wholesale pricing model business case is currently usage-based and relies on reaching an unrealistic target of 80 per cent of all Australian households having an active nbn service by 2020 to generate sufficient revenue to repay the investment of building the network.

As such, he mentioned that shortfalls in activation numbers and resulting revenue will need to be recouped via an increase in retail prices, making it unattractive for providers to sell or for consumers to buy.

“The nbn business case is under serious threat. Failure for the scheme to reach a critical mass of activations could ultimately affect the viability of the whole telco industry and leave consumers worse off,” he said.

“In order to reach its targets, nbn has to be the ‘number one choice’ for data services for consumers and be available at a viable price point for service providers of all sizes to resell. As it stands, this is not going to be realistic.”

Sugo also addressed that a fair model would allow middle players to step up and effectively compete in the market, driving nbn uptake and balancing out the challenge of the nbn bypass services.

“Australia needs a healthy, competitive telecommunications industry for this ambitious NBN build to succeed,” Sugo added.