NBN faces new competitive threat

Australia’s $52 billion National Broadband Network (NBN) is facing competitive threats on multiple fronts.

Over recent months, both Telstra and the merged TPG / Vodafone flagged plans to launch 5G mobile products that would compete head-to-head with the NBN in lucrative capital city areas.

NBN Co’s corporate plan initially projected that only 20% of households would choose mobile-only internet over broadband. Thus, if competition from 5G heats up, and the technology delivers as promised, then mobile’s market share could rise significantly, thereby eating into NBN Co’s subscription numbers and revenue base.

Indeed, Telstra chairman, John Mullen, threatened that it could steal 10% to 30% of existing NBN customers in capital city areas:

“There is no doubt that the fixed wireless alternative will take share from the traditional fixed-line operators, it’s happening all around the world…

“[NBN] is going to have a tough time, I feel for them. It is going to be a migration of somewhere between 10 and 30 per cent probably.”

Now, veteran telecommunications analyst, Paul Budde, warns that some cities in Australia are rolling-out competing high-speed broadband services to the NBN:

ADELAIDE WAS one of the first cities to build a gigabit fibre optic network but soon others followed. Newcastle, Wollongong, Launceston and the NSW Central Coast Council are now all developing their own gigabit infrastructure.

Now, the NSW Government is putting $100 million dollars aside for the provision of “innovative systems” to improve the price, quality of service and internet access services in Wagga Wagga, Parkes, Dubbo and a corridor west to Cobar, along with a fibre access system for residents in Sutton, Bywong and Wamboin…

This will bring it in direct competition with the NBN. To highlight that situation, it further wants to see wholesale and retail prices significantly lower than the ones provided by NBN co.

Proposed monthly wholesale access charge excluding GST should not be higher than:

As an example, the NBN 500Mbs retail service costs $400. The retail price mentioned in the Gig City Expression of Interest (EOI) cannot be higher than $90…

Duplicating natural monopoly essential infrastructure is obviously bad from an economic efficiency perspective. It also highlight how badly the Coalition Government failed to deliver a world-class NBN.

This failure is certain to see NBN Co lose market share, meaning it will fail to meet its lofty revenue targets and will need to be written-down heavily by the federal government.