NBN v 5G: The broadband battle is about to heat up

The idea of the National Broadband Network being made redundant by mobile technology is about to be put to the test as Australian telcos get their skates on to offer customers 5G-powered alternatives to the NBN.

NBN Co’s $3.5 billion fibre upgrade plan, announced to much fanfare this week, adds more fuel to the fire. Far from being a pipe dream, the likes of Telstra, TPG and Optus are confident they can use 5G technology to lure a significant chunk of homes away from the NBN.

Just how big a slice the telcos end up stealing from NBN Co will come down to price. Not just the price charged for 5G services by the telcos but also the bitterly contested wholesale price the telcos have to pay to NBN Co to resell fixed-line NBN plans.

The 5G equipment, tested by Telstra, uses hundreds of small antenna.
The 5G equipment, tested by Telstra, uses hundreds of small antenna.Credit:Bloomberg

Critics of the NBN have long touted fixed wireless broadband, delivered via signals beamed from mobile towers to equipment attached to homes, as a viable alternative to the NBN. And the local telcos have already shown what’s possible, at least in lab conditions.


Telstra this week delivered peak download speeds of 4.2 gigabits per second (Gbps), four times faster than the fastest NBN plan available to homes, using 5G technology.

Meanwhile, Optus is gearing up to launch two 5G wireless services priced at $75 a month and $90 a month respectively that on paper can easily go toe-to-toe against fixed-line NBN plans in the market.

The $75 a month plan promises maximum download speeds of 100 megabits per second (Mbps) and an average download speed of 85Mbps between the busy 7pm-11pm time slot. The $90 a month plan, according to Optus, “currently delivers an average download speed of 214Mbps (between 7pm-11pm)”.

With the rollout of the NBN now 99 per cent complete, almost 90 per cent of homes connected to the network are on 50Mbps plans.

Most of these homes have so far been reluctant to sign-up to the faster 100Mbps plans, held back either by high prices or the technical limitations of the NBN.

Telstra head of networks, Nikos Katinakis, says 5G fixed-wireless services can compete with the NBN on quality and speed. But there’s one crucial caveat.

“From a mobile perspective, 2021 will be a year of choice because every smartphone maker will have a 5G handset out in the market….and if the devices are there we need to have the network ready as well.

“On the fixed-wireless side, Optus has already launched and we have publicly said we are going to have an offer out in the market, but it’s not going to be a wholesale replacement of the NBN,” Katinakis says.

Telstra head of networks Nikos Katinakis
Telstra head of networks Nikos Katinakis Credit:James Brickwood

The reason for that, according to Katinakis, is that the average data consumed by users on the NBN is between 250 and 300 gigabytes (GB) a month, far greater than the 16 to 20GB a month of data consumed over mobile networks on average.

However, the patchy performance of the NBN offers Telstra and its peers an opportunity.

“There are cases where NBN customers aren’t getting the best experience and here 5G can potentially offer an alternative… 5G will be first time when we truly concentrate on fixed-wireless but we will be very targeted about who we think is the right customer for it,” Katinakis says.

“If you are getting a 12Mbps service over the NBN right now, I am pretty sure we can give you a better service through 5G…our cost structure will have to be competitive because that will let us make more margins compared to what we make reselling the NBN.”

Telecommunications analyst Ian Martin says the percentage of homes that will choose to bypass the NBN will likely continue to rise. “We are at a 20 per cent bypass at the moment and that could go to 30 per cent over three years.

“Most people will stay on the fixed fibre network but there’s enough of them there that could be attracted by price if they are not big broadband users and that would make a dent in NBN’s eventual penetration rate.

“Even after a year – or 18 months – Optus has about 5 per cent coverage of the broadband market with 5G. But that’ll more than double over three years and the question is will they step it up because Telstra is going to move into that space and TPG is as well,” Martin adds.

‘In Australia you can actually stack up a business case of using 5G to compete against the NBN.’

Gary McLaren, former NBN Co chief technology officer

The issue of providing ultra-fast wireless internet to lots of homes is the biggest problem for the telcos. However, that could change from next year once the three mobile operators get their hands on mmWave (millimetre wave) spectrum.

The mmWave spectrum, expected to be put up for auction by late March 2021, can be used to deliver lightning fast mobile and fixed-wireless. It cannot travel long distances but telcos can counter that deficiency through the use of denser small cell networks that bring the kit much closer to homes.

“(This spectrum ) is a really big deal for all of us because with mmWave we are talking about putting a lot more spectrum into play,” Katinakis says.

“Spectrum translates into speed and bandwidth, which ultimately means we can do a lot more with it…mmWave fixed-wireless devices already exist, most mobile makers will have it on their handsets, so 5G and mmWave is not going to be about us building a network and then waiting for the devices to come around, it’s all going to happen pretty much at the same time.”

That convergence of 5G spectrum and devices, according to Martin, is working in the favour of the telcos.

“You will see a big increase in contestability in the market over three years, where we are at the moment they can contest 20 to 30 per cent of the broadband market but with mmWave and related developments in three years time they may be able to contest up to 40 per cent.”

NBN Co is acutely aware of the threat, as seen by its decision to inject more fibre into its overall footprint, but as long as it continues to impose high wholesale prices the telcos will keep looking for ways to bypass the NBN altogether.

Selling fixed-wireless broadband directly to homes means the telcos can pocket the charge (between $22.50 to $80 ) per connection that they have to pay to NBN Co. Former NBN Co chief technology officer Gary McLaren says if the telcos are successful in selling their 5G fixed-wireless wares selectively they should be able to put NBN Co on its toes.

“There’s no way Telstra or anyone elese for that matter can sell these services at a massive scale, so they will have to be careful about that and there will be some artful balancing required there.

“But the main thing here for the telcos will be to force NBN Co into a price war.

“What’s really interesting is that in the rest of the world the idea of using 5G and mmWave to compete against a fixed-line network just doesn’t work because it’s all fibre.

“But in Australia you can actually stack up a business case of using 5G to compete against the NBN,” McLaren says.

And a big part of that business case is the reluctance of the telcos to hand over their margins to NBN Co.

“We expect fixed wireless services, particularly 5G, to be attractive where providers can offer a service to compete with the NBN at a lower cost,” TPG’s group executive legal and external
affairs Trent Czinner says.

“That is likely to remain the case unless a significant change in NBN pricing is made.”

Business Briefing

Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up for the Herald‘s here and The Age‘s here.

Most Viewed in Business

Source: Thanks smh.com