NBN should fear 5G competitive threat

Last week, NBN Co chief financial officer, Philip Knox, flippantly brushed off the emerging competitive threat from 5G wireless broadband on the NBN’s viability:

“We spend virtually zero time thinking about it or talking about it. We’ve always said it’s a complementary technology. It’s highly optimised for mobility and less so for fixed wireless”…

Roger Montgomery believes this is a mistake, pointing to New Zealand where 5G is already stealing market share from the country’s superior NBN-equivalent infrastructure:

We are currently on the cusp of a generational shift in mobile communication technology with the introduction of the fifth generation of wireless phone technology. 5G can deliver significantly higher data transfer speeds and, probably even more important, much lower latency (the delay before data transfer begins).

In New Zealand, Spark NZ, the telecom provider that has been a long term holding for The Montgomery Fund has done a very good job in setting up a Fixed Wireless Access (FWA) business where households bypass the New Zealand equivalent of the NBN, Chorus, and connect to Spark’s mobile network via a modem in their homes which then distributes internet to devices in the home through wifi or local LAN cables.

The benefit for Spark is a significant cost saving as they bypass the fiber access fee payable to Chorus (about NZD43/month) with very marginal additional operating costs through channeling the traffic through their mobile network. They can therefore either make higher margins or offer a more compelling price to customers. Spark has currently about 150,000 customers signed up for FWA and it is growing quickly and we should note that that this is despite only being able to offer 4-4.5G wireless access technology and Chorus network being significantly faster than the NBN (it is indeed ranked number 22 in the world with average speed 2.4x the NBN at 135Mbps vs. NBN’s 55.97).

Telstra, TPG and Optus are rolling out relatively cheap, fast Fixed Wireless Access 5G broadband to compete directly against the NBN.

Telstra is already offering 4.2 gigabits per second (Gbps), which is four times faster than the fastest NBN plan available currently to homes.

Further, Australian Communications Minister, Paul Fletcher, yesterday announced that the government will hold 5G spectrum auctions next year, thus facilitating the rapid expansion of the technology across the nation:

In April 2021, the Government will allocate high band 5G spectrum (in the 26 GHz band), which will enable extremely fast, high-capacity services. In the second half of 2021, the Government will allocate low band 5G spectrum (in the 850/900 MHz band), which will be crucial for broader geographic coverage of 5G services…

“Low band spectrum can carry the 5G mobile signal longer distances, and is best for wide coverage indoors and outside. The mid band spectrum provides broad coverage and fast speeds and the high band spectrum will allow blazing fast speeds over shorter distances.”

“We are making the low, mid and high bands available so that the telcos can provide better, faster and stronger 5G in Australia,” Minister Fletcher said.

Clearly, competition from 5G will only intensify over the next decade. This will steal market share from the NBN’s fixed broadband service, in turn reducing the likelihood of NBN Co ever hitting its subscriber targets or breaking a profit.

The NBN’s “fair value” (or saleable value) was valued at just $8.7 billion at the beginning of this year – less than one-third of the federal government’s equity investment.

Even this valuation is now looking wildly inflated.

Unconventional Economist
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Comments

  1. Anyone with a terrestial based wireless system, needs to be well looking over their shoulder at what Elon Musk is up to with his spacebased wireless comunications.
    Looks to me like that the need for a terrestial based comms system will be about 1/4 of what we have currently.

        • Never said they were. All satellites are vulnerable to an electric shock from a flare and being pushed down into the atmosphere. More so since the Earth’s magnetic field is weaker then normal as I understand. They could put all these sats up and along comes nature to wreck it all. Might be a good think.

  2. WobbegongMEMBER

    From the Dicker Data (DDR) Q3 update…
    “Looking forward 12-24 months, the rollout of 5G connectivity is going to have a revolutionary effect within the technology industry
    driving the explosion of data and strong acceleration of Artificial Intelligence (AI) and machine learning technologies. Through our
    speciality in servicing the SMB market, we see tremendous opportunity with all our hardware and software vendors to continue
    assisting and supporting customers through this ongoing wave of digital transformation. Dicker Data will continue to evolve and
    differentiate its offerings and value proposition to both vendors and our extensive reseller partner base”

    • No doubt that AI is currently smart enough to roll out guff like this for tech companies to paste on their website…

    • I saw a recent article espousing how 5G was going to replace all of the internal ethernet networking in factories as well…

      There is so much fantasy drooling governing the spread of 5G…. A couple of things, No sane business person is going to connect their equipment to the internet directly, first of all in 99% of cases the equipment is not even network connected secondly there is no advantage and huge security risks….

  3. “We spend virtually zero time thinking about it or talking about it. ”

    This is the sign of an excellent CEO — of the caliber of Eastman Kodak (Digital photography will never take off…!)

  4. WobbegongMEMBER

    DDR earns about $1.8bn revenue PA and employees about 500 people,,are one of Australia’s biggest technology distributors selling products from all the globally significant technology companies to over 5000 resellers…it might just be possible that their view is worth noting.

  5. In technology there’s a commonly held belief that “Only the paranoid survive”
    yet here we have Australia’s NBN CFO going on record saying
    “We spend virtually zero time thinking about it or talking about it. “ (“it” being 4G/5G technology)
    I didn’t read beyond that line, I honestly don’t care how he qualifies the statement the fact that these words left his mouth in this order is all that I need to know.
    …like lambs to the slaughter

  6. Switched to 5G (Optus). Works good. And it is mobile, so we can holiday with it.
    Cancelled the fixed line to avoid the unfriendly Govt tax.

  7. I still don’t know why telstra being priced like it hasn’t got any growth or future dividend. They cut to invest in growth and now 5G would likely add a fair bit. Can’t find any info on Elon taking over internet from space yet, so I can’t see a good reason for Telstra to be on the nose so bad.

    • it is and it isn’t.

      Technically, 5g shouldn’t be able to compete with NBN but because we’ve rolled out NBN-lite, it quite possibly can – in the short term that is.

    • within the decade, many will have a connection to starlink via their tesla power supply.
      ie the comms will be matrixed into the power supply, Distributed system.

    • I’m involved with a project that leans on satellite for coms across the country. Starlink will be a very big deal. It will also offer many other opportunities for positioning tech, like automated vehicles. Add in the lower cost of dual frequency gnss devices and the improved batteries and there is the potential for a geospatial productivity boom across the board.

      • Starlink will be huge, assuming it’s not priced out of reach for anyone other than business.

      • the updates to the tesla vehicle allow for all the comms to the vehicle, including streaming media, to be via starlink
        that is going to be a major differentiator and a huge bonus for Tesla.

        • Vehicles have been shipping with built-in 4G hotspots for years already, and trivially DIY-able (USB dongle in the lighter socket) for probably a decade.

    • a military article out today tells us the US MArines are using starlink to assist wiht the detection of submarines via space launched sonobuoys ans space launched deterrents,
      Seems the Marines are losing huge chunks of their clumsy equipment like tanks and field guns and are getting a drone or space launched assistance.

      • pyjamasbeforechristMEMBER

        Starlink essentially is a phased array radar ie what’s been used in the nose of fighter jets to detect thier enemy for a while. Should be perfect for tracking military targets if needed too.

        I think people will be surprised how cheap it’ll get internet access down too though. Especially once Starship gets to orbit and drops the cost to orbit down to about $100 per kg

        Won’t be too far away at the current development rate
        https://youtu.be/1ip2f9LL3nw