NBN addresses competition by cutting jobs

NBN Co has become the latest industry player to announce job cuts, revealing to staff that 500 will go as competition bites.

Australia’s state-owned broadband network company faces increasing competition from alternative forms of connectivity, like satellite and fixed wireless access (FWA), and is under pressure to cut prices, while at the same time dealing with a large cost base. With consumers facing economic pressures, as well as wanting faster Internet speeds, it can come as little surprise that NBN Co is looking at drastic measures.

NBN Co chief executive Stephen Rue told staff about the impending job losses on Tuesday, according to the Australian Financial Review, which broke the story.

“The competition NBN faces to win and retain customers is intensifying,” Rue said, in a follow-up email to employees, a copy of which was obtained by the paper. “Continuing to deliver on our purpose of lifting the digital capability of Australia means navigating these changes.”

Rue is alluding to the competitive changes in the market. 5G rollouts have enabled retail telcos to offer FWA-based home Internet products, without having to pay for access to the NBN, while the development of satellite-based services – Starlink being the first name on most people’s lips – covering remote areas is also providing additional competition. NBN Co’s retail partners have been complaining about wholesale prices on the NBN for years; they were always going to look for alternatives.

As Australian industry analyst Paul Budde pointed out in the wake of NBN’s first half financial report last month, NBN’s average revenue per user is well below expectations. Projections from five years ago put ARPU at around the A$52-A$54 mark by now, but NBN reported a 1% hike in its six-monthly figures to A$47.

“This clearly confirms my long-standing position that uptake of the NBN and its higher speeds have more to do with affordability than with technology,” Budde wrote.

But market competition and pricing pressures are only part of the story. NBN also needs to look at its own costs before it can consider competing on price.

Speaking to the AFR, Budde highlighted the fact that NBN is not getting the same protection from the Albanese administration as it did from the previous government. The paper notes that NBN Co wrote off recovering A$31.5 billion in regulatory costs related to the build-out of its infrastructure late last year, a move designed to help it lower prices, but that it still has A$12.5 billion to recover from its retail partners.

Budde explained that it would still struggle to claw back even that amount, due to pricing pressure, adding that a commercial business would not have incurred such a large cost base to start with.

But the fact is that NBN Co does have those costs to contend with, and with retailers unlikely to stop looking for ways to reduce their own costs, it needs to do something. Hence the job cuts.

The headcount reduction, which amounts to just over 10% of its workforce, will help to simplify the company, reduce duplication, and make it more commercially and operationally efficient, Rue told staff, according to the AFR. “This will make NBN leaner,” he said.

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