New NBN Co chief executive Bill Morrow.

New NBN Co chief executive Bill Morrow. Photo: Chris Pearce

NBN Co’s new chief executive Bill Morrow will push the federal government to charge a levy against its rivals in densely populated urban areas to pay for building broadband in the bush.

The new charge, which would effectively be a tax on telcos who challenge NBN Co’s telecommunications monopoly, would come alongside the company’s decision to bring forward construction spending to tackle TPG Telecom’s plans for a rival network head-on.

The current NBN plan relies on the high-revenues generated by densely-populated urban areas to pay for construction in the bush. But TPG Telecom’s plan to connect 500,000 premises to a competing network using its own infrastructure threatens to damage NBN Co’s profitability.

“If there’s infrastructure competition that comes in to cherry-pick within these premium areas the cost overall of building the network goes up,” he said.

“So if, for example, there’s a company like TPG going into a certain area they can do whatever cost model they can come up with but there [could be] a levy much in the same way (Universal Service Obligations) currently works . . . to partly offset the costs of getting broadband to the rural areas.

“That way everybody gets a broadband connection and there’s a degree of competition. This is something we hope the Vertigan panel considers in the deliberations.”

The government-appointed Vertigan Committee, headed by Dr Michael Vertigan, is considering whether or not companies such as TPG should be allowed to use a legal loophole to extend their networks and offer fibre-to-the-basement services in competition with NBN Co.

“There can also be a tax-subsidy component where taxpayers are paying for the difference of the higher cost in the rural areas,” Mr Morrow added.

Mr Morrow was reluctant to call the proposal a tax and said he preferred to think of it as a levy or a universal service obligation.

But iiNet chief regulatory officer Steve Dalby said the proposal would be difficult to enforce and should not be compared to the USO, which takes a percentage of revenue from all Australian telecommunications providers.

“The USO is a simple formulae whereas you’d need to get much more granular with this,” he said. “We would certainly be uncomfortable with being taxed twice and . . . if I’m going to bring FTTB to one site where TPG connects 100 . . . how is a levy across my total revenue pool going to be equitable?

“I’d like to see much more detail but just comparing it to the existing USO doesn’t work.”

Despite ongoing concern over TPG’s construction plans, NBN Co continues to rollout out its fibre optic network with 512,659 fixed line and fixed wireless premises passed by the network as of March 31, up 96,000 from the previous quarter.

But 94,883 existing homes and businesses, known as “brownfield premises”, could not order a service because they were in multi-dwelling units, such as apartment buildings, that had not been connected.

“To address this . . . we’re changing our delivery model,” NBN Co chief operating officer Greg Adcock said. “We are now moving to a model that pro-actively installs a lead in and connection box on the outside of the home during the roll-out [and] this ‘do it right first time’ approach will remove the single largest root cause of failure during installation.”

Mr Morrow made the comments as part of NBN Co’s third-quarter financial results, which revealed the company had made a a $1.12 billion loss with revenue of just $69.8 million during the nine months ending March 31.

NBN Co has so far spent $4.4 billion in capital costs and $2.2 billion in operating costs. It has received $7.28 billion in funding from the federal government and $57 million from its customers.

Mr Morrow also said the company’s renegotiation of its $11.2 billion deal with Telstra was going well and remained on track to be signed by August 2014.

But he warned the company would not trade time for value and that the cost-benefit analysis and review of regulations by the government-appointed Vertigan committee would have a significant impact on any deal.