I am going to utter three letters that cause a huge amount of elation and frustration and glee and anger among Australians. NBN.
With premises receiving a variety of different technologies and some users not able to access the technology at all, it is no surprise that it has created a range of emotions.
If we leave aside the different technologies, there is one aspect of the NBN that the various telecommunication providers (telcos) are slowly coming to grips with. With the Government providing the back-end infrastructure, to a large extent the telcos are no longer competing on technology. That is not strictly correct as telcos still purchase varying amounts of data and they have different contention ratios but these aspects are not always immediately obvious to end-users. The competitive aspect of fixed broadband and fixed telephones has now moved to a customer relationship focus with customer service, pricing, branding and loyalty all important aspects of that focus.
The mobile landscape is completely different. In October last year, the Australian Competition and Consumer Commission (ACCC) ruled that the telcos would not be forced to share their towers. The ACCC said that sharing mobile phone towers would be a disincentive for future investment and that mobile roaming would risk coverage in regional areas. I will leave you to decide whether the ACCC got it right but ultimately the decision has been made so the telcos can move on.
What we have seen this week is a major development in the progression of telcos in Australia. Subject to regulatory approval, Vodafone and TPG have announced they will merge. This will leave Australia with three major telcos. Telstra, Optus and the new merged entity. Competition is good for consumers and I see much of this competition will focus on technology in the mobile space. This is the obvious way for the competitors to prove their point of difference along with the all-important mobile coverage.
At the moment, Telstra leads the way. With a total of 13,899 active and proposed towers, they cover over 2.4 million square kilometres of Australia. Optus has the second-best coverage with 10,733 towers and over 1 million square kilometres. Vodafone currently sits behind Optus with 7,301 towers and 800 thousand square kilometres. Although TPG has a market capitalisation similar to Vodafone, their strength is in fixed services with mobile only making up a tiny part of their customer base. The marrying of Vodafone – with their focus on mobile – and TPG makes perfect sense and will put pressure on the top two to continue to perform. Telstra believes that superior technology will see them come out on top and they have already turned on 5G in one area. Adding a range of Internet of Things (IoT) devices to their line-up, they are hoping that the consumer thirst for technology will continue to keep them in the dominant position.
Vodafone has typically had a reputation for being low on price with a focus on the capital cities with the lowest regional coverage of the three providers. It remains to be seen what the focus on the new merged entity will be but, with past behaviour pointing to future direction, I can only guess that the likely focus will be on increasing the pressure on the competition through pricing and using additional economies of scale with the merged entity. Optus will no doubt look at the mobile landscape and decide where they will see their competitive advantage – either in technology or pricing or maybe even a different focus.