This report covers recent developments related to a range of regulatory, infrastructural and competition issues in Australia’s telecom market. It provides statistics from operators as well as data from a number of surveys undertaken in 2014 and 2015. The report includes updates on recent progress with the build-out of the NBN, as well as updates on proposals governing wholesale access to NBN infrastructure, pricing, and revenue structures aimed at expanding services in rural areas. It also assesses plans to amend spectrum allocations and usage in a bid to improve broadband availability.
The report also rovides updated financial and operating data on the main telcos as well as the second-tier players.
Researchers:- Paul Budde, Henry Lancaster
Current publication date:- November 2015 (28th Edition)
Despite pressures on pricing, revenue is expected to show continued growth for fiscal 2016. M&A activity during 2015 has seen telcos such as TPG begin to realise the benefits of scale, propelling them to the main stage in terms of broadband market share. Positive growth is also anticipated from wholesale access to the NBN, with broadband providers such as Optus planning to provide services to up to eight million premises, or double the company’s existing footprint.
Optus recovered from revenue the decline reported in FY2014 to record a 6.7% increase in FY2015. VHA, which has been dogged by steep revenue declines for a number of years on the back of customer disaffection with service offerings, reported a 2.9% increase in revenue for the first half of 2015, supported by a 2.1% increase in its retail and MVNO subscriber base. The operator’s investments are clearly beginning to deliver rewards, resulting in a change in customer sentiments as it addresses popular concerns over poor network quality and stability.
Dominance of the triopoly players undermined by consolidation among second-tiers
Telstra continues to dominate the overall Australian telecom market, holding about 62% market share by revenue. Yet the company’s share in some sectors, such as broadband, has been falling steadily. TPG has been propelled to the fore in the provision of broadband following its acquisition of iiNet in late 2015. Telstra advantage in being the first telco to deploy LTE has also diminished as Optus and Vodafone now nearly match population coverage. Operator fortunes are now less in attracting new customers as in retaining existing ones, which is being achieved by more generous data caps and the reliability of network infrastructure. Just as Optus and Vodafone have begun to emerge from several difficult financial quarters, second-tier players including Macquarie Telecom, M2 Telecom and TPG (having recently acquired iiNet) continue to report strong revenue growth.
NBN slowly developing structure
Australia’s broadband sector is migrating to a multi-technology NBN, though with a considerable emphasis on fibre access. This has left room for further growth in the DSL and cable sectors, both of which are benefiting from the deployment of new technologies. The DSL sector is showing resilience as operators make greater use of VDSL and extend trials of G.fast technology, which can deliver far greater data capacity on legacy copper infrastructure. Much of the HFC network operated by Telstra and Optus, which for long suffered from underinvestment, is now being incorporated within the NBN, and with commercial DOCSIS3.1 technology likely to be deployed in 2017 investment in cable is again underway.
Wholesale measures to deliver improved network access
The pace of the NBN roll out also quickened during the second half of 2015. Recent proposals for FttP, FttB and copper-based services to come under Superfast Broadband Access Service (SBAS) regulations should benefit customers in rural areas.
NBN incorporating new technologies
While the NBN is not proceeding with the best-in-service FttP architecture, instead having adopted a multi-technology mix incorporating copper plant, there are some promising developments being undertaken by NBN Co and Telstra. Alongside DOCSIS3.1 trials, G.fast is being trialled with a view to incorporating the technology within the mix. Trials in Melbourne have achieved data rates of up to 600Mb/s, though the short loops remain a challenge for wide deployments.
Spectrum review to benefit rural customers
To address the shortage of spectrum, the ACMA has reallocated available spectrum in several bands for LTE use. In June 2015 the government formally announced that spectrum in the 1725–1785MHz and 1820–1880MHz ranges in regional Australia would be reallocated through new licences. The auction for licences is aimed at improving LTE services in regional Australia.
Mobile broadband subscribers shifting to LTE and the future 5G
In Australia, the number of mobile subscribers reached about 31.4 million at the end of 2015, giving a penetration of around 133%. There were just over six million mobile broadband subscriptions in June 2015, representing about 20% of the total. About a quarter of mobile broadband subscribers are now on LTE networks, a proportion which will grow rapidly into 2016 and beyond. LTE remains a relatively nascent technology, with regular improvements entering the market aimed at optimising network capabilities. While much investment remains in LTE, there is also a surge in interest in 5G, designed less to manage traffic as to connect billions of devices. By 2017 Telstra plans to begin closing down its 2G infrastructure, which now accounts for only about 1% of total network traffic. By 2025 it is expected that Australian MNOs will begin the process of closing down 3G infrastructure as well, leaving investments concentrated on LTE and 5G.
Companies mentioned in this report:
BigAir, vividwireless, Unwired, Optus, Telstra, NBN Co, VHA, TPG, Vodafone, Exetel, M2, Nextgen, iiNet, Macquarie Telecom, Pipe Networks, Amcom, Internode, My Net Fone.
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David Brown, Ventura Team
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