Last month, the chief financial officer of NBN Co, Philip Knox, dismissed the emerging competitive threat of 5G mobile broadband, which offers the prospect of significantly faster data transfer speeds and lower latency:
“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”…
This dismissal came as Telstra, Optus and TPG are in the process of rolling out comparatively affordable, fast 5G wireless broadband to compete directly against the NBN.
Indeed, Telstra already offers a lightening fast 4.2 gigabits per second (Gbps) on its nascent 5G network, about four times quicker than the fastest NBN plan currently available to Aussie households.
Australia’s Communications Minister, Paul Fletcher, also last month announced that the government will in April 2021 hold 5G spectrum auctions, thereby facilitating the rapid expansion of 5G across the nation.
These developments are noted in the ACCC’s annual Communications Market Report 2019-21, which noted that the NBN is becoming increasingly price uncompetitive with 5G wireless broadband:
In 2019–20 advertised prices for fixed line NBN broadband increased by 6.1% for entry-level plans and 1.2% for a mid-range plan. The advertised price for premium plans was unchanged…
In contrast, for mobile phone services, the entry-level advertised price fell by 3.6%, while the advertised price for mid-range and higher usage plans remained steady…
Mobile network operators (MNOs) continued to implement their rollout plans for fifth generation (5G) technology over 2019–20 with a view to providing new and improved mobile services…
The investment in 5G technology will enable the supply of new products and services, such as supporting applications that require higher speed and lower latency connectivity…
The investment will also allow carriers to remain competitive in consumer mobile markets…
The rollout of 5G also brings the potential for greater competition with fixed line services. Until now, this competition was limited to home broadband offered over 3G or 4G wireless technologies. MNOs are now able to offer 5G home broadband services on their mobile network, albeit in a limited number of areas currently, which offer comparable speeds, data allowances and price to fixed line services…
5G improves the quality of mobile services for consumers by providing faster speed and lower latency…
The market for home broadband services has traditionally been heavily reliant on fixed line networks, such as Telstra’s customer access network and now the NBN. While the MNOs have been offering wireless broadband services for some time, these services are typically not able to provide the same speed, reliability and data allowances at comparable prices with those offered on fixed line networks. As such, broadband services provided over mobile networks have so far only been able to meet the home internet needs of a small proportion of consumers.
With 5G, the MNOs can now use their mobile networks to provide home broadband services that are comparable to those offered on the NBN, in terms of speed, data allowance and price. Optus was the first to offer a 5G home broadband product with unlimited data and speed guarantee. Telstra followed with its 5G home internet plans, on an initial invitation-only basis. TPG Telecom has also recently announced that it will launch its own 5G fixed wireless product in the first half of 2021. While there has been speculation about the implications of 5G for NBN bypass, these product offerings from the MNOs provide the first real indication that there are commercial incentives for MNOs to build a stronger presence in the home broadband market.
At this stage, the impact of 5G home broadband services is likely to be small due to the limited 5G footprint of the MNOs. This means only a very small proportion of households currently have choice in terms of the access infrastructure on which their home broadband services could be provided. However, as the MNOs continue to expand their 5G networks, and as more spectrum is allocated for 5G use over time24, the MNOs will be able to provide improved 5G home broadband services to more households…
Blind Freddy can see that the NBN will facing intense competition from 5G over this decade. In turn, the NBN’s dominance of the broadband market will weaken as 5G steals market share, resulting in downward pricing pressure, reduced subscriber targets, and ultimately lower profits (or bigger losses).
The NBN’s “fair value” (or saleable value) was valued at only $8.7 billion at the start of the year, which was less than one-third of the federal government’s equity investment.
This valuation is looking increasingly vulnerable now.
