news Telstra this week said it had already taken a 50 percent market share of National Broadband Network customers and wanted to push to achieve even more, in news set to call into question controversial NBN decisions made by the Government and the ACCC meant to advance broadband competition.
The specific market share make-up of retail Internet service providers on the NBN network is not currently known, as the NBN company does not break out usage of its network along company lines.
However, up until this point, it has been assumed by many in Australia’s telecommunications market that ISPs such as iiNet had been able to steal large chunks of the NBN market share, due to their early engagement with the network.
In early 2013, iiNet stated that it had taken the lion’s share of new NBN customers at that point, due to the fact that it had engaged with the NBN process strongly and early, familiarising itself with the NBN company’s technical processes and marketing itself actively to customers.
In February 2014, iiNet reiterated the comments, noting that it was “leading the pack” in terms of connecting customers to the NBN and had a 25 percent market share of NBN customers at that point. In comparison with iiNet, rivals such as Telstra, Optus and TPG have been relatively slow to fully engage with the NBN process over its early years.
However, comments made by Telstra this week appeared to indicate that the trend has reversed, with the nation’s incumbent telco having regained the lead in terms of NBN market share.
The Daily Telegraph reported the following this week, based on an interview with Telstra head of customer service delivery Brian Harcourt:
“Telstra currently commands a 50 per cent market share of the NBN, which equates to about 250,000 customers, but the telco is looking to significantly increase that as the rollout of the infrastructure project gathers pace.”
Telstra and the NBN company have been contacted in an effort to ascertain whether the figure is correct.
The news appears set to call into question a number of controversial decisions which the Federal Government and the NBN company have made with respect to the NBN project in general.
The original version of the NBN policy initiated by Labor in April 2009 had a number of aims. Principally, the policy aimed to provide a mechanism to upgrade Australia’s ageing broadband networks, setting an infrastructure foundation which would help to bolster the nation’s digital economy and boost productivity.
However, the policy also aimed to deal with the long-term dominance of Australia’s telecommunications market by Telstra. The telco’s position as Australia’s dominant telco stems from its history as the incumbent (only) Australian telco for much of the past century.
The policy aimed to separate Telstra from its network assets — assets which it had used to disadvantage competitors in the past. This would theoretically help to create a level playing field for competitors which would help to rein in Telstra’s overwhelming market dominance.
However, the news about Telstra’s market share this week reveals that the policy of reining in Telstra on the NBN appears to be broadly failing.
One of the key decisions made by the ACCC which appears to have impacted on this process is the decision to force ISPs to connect their own networks to a total of 121 Points of Interconnect with the NBN network if they want to provide a national service.
The NBN company itself had argued for a much more limited model involving 14 Points of Interconnect, as this would allow smaller ISPs to compete with large ISPs such as Telstra on the NBN. This was a view backed by smaller ISPs such as Internode (since bought by iiNet).
However, the ACCC ultimately went with a model supported by larger telcos such as Telstra and Optus which would see almost all POIs located in Telstra’s telephone exchanges, where the larger telcos already largely had their own networks connected.
In 2010, as the decision was being made, Internode managing director Simon Hackett warned that the ACCC’s 121 POI model was “insane” and would lead to strong consolidation of the ISP industry, as smaller players would not be able to compete with telcos such as Telstra on the 121 POI model.
Hackett similarly warned that the Connectivity Virtual Circuit model used by the NBN company to charge ISPs for usage of its network would lead to a “valley of death” for small ISPs, as the model would not allow small ISPs to successfully make the transition to the NBN network.
True to Hackett’s predictions, that consolidation has taken place since the POI and CVC models were introduced, with only a handful of ISPs left in Australia’s broadband industry.
Since that time, it appears Telstra has been able to leverage the situation to take the majority of the NBN market share, mirroring its dominant market situation for existing technologies such as ADSL and 4G mobile broadband.
Image credit: Telstra