2014 Australia - Broadband Market - Insights, Statistics and Forecasts

Broadband market enters a new era following the NBN strategic review

The National Broadband Network continuing evolution

Since being implemented in 2012, Australia’s NBN has undergone significant changes. The late-2013 strategic review of the NBN, commissioned by a newly elected government, established a very different framework. Instead of 93% of the population being covered by FttP, the new architecture has called for a hybrid network incorporating FttP and FttN, and utilising existing DSL and HFC plant.

Overall, the initial development of the NBN reflected a serious response to the relatively poor quality of Australia’s broadband infrastructure. It was also a response to the intransigence of the dominant telco, Telstra. The government was minded to change its broadband infrastructure plan from a regional to a national focus, which to a degree has been linked to the development of the digital economy supporting policies relating to e-commerce, e-health, e-education and smart grid infrastructure. These are all aimed at utilising the NBN for a myriad of purposes beyond broadband.

Residential and business broadband markets: growing adoption of faster services

Although the business market in Australia was quick to embrace broadband, mainly to access faster data speeds, a significant proportion of smaller operators has yet to establish an online presence, and by early 2014 only about 38% had a business website.

The government’s ‘Broadband Availability and Quality’ report, published in December 2013, showed that 1.4 million premises (13% of the total) across many areas of the country had no adequate broadband infrastructure. These areas include regional and remote regions but also pockets within urban communities. Given the state of broadband availability and speeds, many businesses still depend on mobile rather than fixed-line broadband. A growing number in areas where access to the NBN has been made available have switched to fibre broadband services, which enable these companies to compete in the global economy more effectively. The faster speeds of fibre infrastructure will see the rapid adoption by businesses of services such cloud computing, online interaction, and media conferencing.

Business broadband has also allowed greater choices in working environments, with the ability for employees to tele-work, either from home or on the road while making use of improved mobile broadband. As such, smartphones and tablets form an increasing part of the business ICT environment.

DSL and HFC markets: stable growth as copper plant survives within the NBN

The DSL sector continues to show resilience in the marketplace, bolstered in recent years by operators adopting new technologies which can deliver greater data capacity on legacy copper infrastructure. In conjunction with Telstra’s unbundled local loop service, which provides a platform for competitors to offer broadband services, the slow-down in the rollout of the NBN has also meant that the number of customers expected to migrate from copper to fibre-based services is far lower than initial NBN Co forecasts. Many telcos have installed their own DSLAM infrastructure, enabling them to provide fairly high-speed internet services via ADSL2+.

Following the strategic review of the NBN, which emphasised a combination of FttN and HFC architecture, the transition from DSL to fibre-based infrastructure is likely to be on a far smaller scale than formerly envisaged.

The cable sector has been stable in recent years, and though Telstra and Optus have upgraded parts of their cable networks with DOCSIS3.0 technology, there has been little investment in expanding network footprint given that operators expected these networks to be incorporated within the NBN and then superseded by FttP. The new NBN has placed a greater emphasis on existing hybrid fibre coax plant being part of the national broadband plan. As such, many cable customers in NBN areas will not be migrated to the new fibre network.

In early 2014 there are fewer than one million cable broadband subscribers, accounting for less than to 8% of the total broadband market in Australia. However, most of these subscribers are high-end users providing relatively high ARPU for the cablecos.

Mobile broadband growth supported by Australia’s globally impressive LTE infrastructure

By the end of 2014 about a third of Australia’s mobile subscribers will be on LTE networks. Telstra took the lead in this market, followed by Optus and Vodafone which launched services during 2013. These MNOs have invested in spectrum and network upgrades to bolster network capacity, while the geographic extension of LTE will see wider take-up from consumers in coming years. Although the MNOs will be expecting a greater return on their investments, partly by charging a premium for LTE services, price competition will keep revenue growth low.

This report provides key data and in-depth analysis on trends in the Australian broadband market. It reviews the NBN since its inception in 2007, as provides insights into the steps that have been taken subsequently. It assesses the ISP market, detailing the number of operators in each sector as well as the strategies of the major players. Comparisons with international markets are included to present an overview of the broadband landscape. It also analyses the drivers behind internet adoption among Australian households, supported by a range of surveys and statistical overviews from sources including the ABS, ACMA and the government’s Broadband Availability and Quality Report.

Key developments:

iiNet to deploy up to 30,000 WiFi hotpots in capital cities; Victorian government looks to offer free WiFi in three cities; Optus trials TD-LTE broadband using the 2300MHz band; m-payment and m-banking developments; NBN transition developments; DOCSIS standard upgrade to 3.1; VDSL2 and vectoring DSL developments; ACCC sets wholesale DSL prices to mid-2014; tablet penetration among households reaches 44%; iiNet acquires Adam Internet, sells TransACT fibre infrastructure to NBN Co; interim satellite service reaches capacity; Foxtel’s anticipated launch of triple play services to affect broadband market share among key players; includes ACMA reports for 2013, surveys to end-2013, company results for FY2013; ABS data to June 2013; analysis of the NBN strategic review; market developments to March 2014.

Companies covered in this report include:

Telstra, Optus, NBN Co, VHA, BigAir, vividwireless, Unwired, TPG, Vodafone, AUSTAR, FOXTEL, Neighbourhood Cable, M2, iiNet, Primus, TransACT.

Data in this report is the latest available at the time of preparation and may not be for the current year