I have noted previously how Australia’s National Broadband Network (NBN) is facing multiple competitive threats.
First, the roll-out of high speed 5G mobile services by Telstra and TPG / Vodaphone threatens to slice the NBN’s market share amongst casual users seeking fast speeds but low download limits.
Indeed, Telstra chairman John Mullen recently flagged plans to use 5G to steal between 10% to 30% of existing NBN customers in major metropolitan areas:
“[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.”
We also learned last month that some Australian cities are are rolling-out high-speed broadband services to compete head-to-head with the NBN.
Now, The AFR reports that niche companies like Melbourne internet infrastructure provider DGtek are seeking to cherry-pick the NBN’s most profitable networks to provide faster broadband at lower prices:
DGtek, which has set its sights on a national rollout, is only available in some suburbs of Melbourne… [It] is faster, cheaper and more reliable than the NBN…
Independent telecommunications analyst Paul Budde says that while companies such as DGtek are able to keep their prices low by cherry-picking the most cost-effective areas to install their fibre networks, they do make the point that the NBN is too expensive for the service it offers.
“NBN is one of the most expensive broadbands in Western economies,” he says…
“If you look at the more competitive countries, the prices charged by DGtek are not that exceptionally cheap,” Budde told The Australian Financial Review.
Losing market share to these types of competitors spells financial doom for NBN Co. This is because it will lose its most profitable customers, while still being required to cross-subsidise its high-cost (loss making) users in regional areas.
It will also mean that NBN Co will fail dismally to meet its lofty revenue targets, thereby resulting in an even bigger write-down by the federal government.
