Telstra Set To Strip Billions In Revenue Away From NBN

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COMMENT: Telstra it appears is in a win-win situation. On one hand they are set to pocket up to $11 Billion dollars from the Federal Government, while on the other hand they will be offering NBN potential customers in core metropolitan areas a fast LTE 4G wireless service that runs on their own network and not the Federal Governments $35 Billion dollar NBN.A new report prepared by Greenhill Caliburn urges the Federal government to fix early problems with the NBN network or face losing customers to wireless.

Last night Telstra said that they are set to launch a new LTE Wireless network, or Long-Term Evolution standard, which is capable of peak download speeds as high as 150 megabits a second.

The new network, which has the potential of stripping billions in revenue away from the NBN, has enormous upside with speeds of up to 1.2GB per already being delivered in trials by LTE network manufacturers.

The Federal Government has based their costing on an average NBN speed of 100mbs and up to 70% of Australians signing up to the National Broadband Network.

The NBN revenue projections are based on assumptions that while 13 per cent of residential premises are wireless-only today that this will increase to 16.3 per cent by 2025 and 16.4 per cent by 2040.

Last week Telstra said that 12% of Telstra’s existing customer base are already wireless only households, with Telstra CEO David Thodey claiming that he is confident that this can be lifted to 24% “Fairly quickly”.

In the USA the Federal Government is looking at 98 per cent of US homes using wireless technology as opposed to fibre which is what is currently being rolled out by the NBN in Australia.

“Trends towards ‘mobile-centric’ broadband networks could have significant long-term implications for NBN Co’s fibre offerings, to the extent that some consumers may be willing to sacrifice higher speed transmissions for the convenience of mobile platforms,” the Greenhill Caliburn report warns.

Opposition spokesman Malcolm Turnbull who has been pushing for a wireless network vas a means to save billions in roll out costs claims that the document “fails to address the single most important issue: what is the most cost-effective way to ensure all Australians have access to high-speed and affordable broadband? It beggars belief any responsible government would embark on such massive expenditure without answering that question,” he said.

 

In response Communications and Broadband Minister Stephen said that the report showed the NBN’s business plan was on a par with what a blue-chip company would deliver.

The NBN Co is pinning its hopes on forecasts that 56 per cent of homes it passes will take up subscriptions by 2015 and 63.4 per cent will do so by the end of 2020, when the rollout is close to completion.

On the other hand private Telstra research which was conducted while the company was negotiating with the Federal Government reveals that there is the potential of a “Big” wireless market in Australia.

They believe that they can use new LTE wireless technology and the money from the NBN to deliver high speed broadband to millions of users in metropolitan markets in a move that will generate significant revenue for their mobile network which will remain 100% owned by Telstra.

As well as the potential impact of competition from Wireless, the report identifies other risks to NBN Co’s revenues. These include the potential for NBN Co to have to lower its prices to overcome an initially low uptake.

Conroy said: “As with any infrastructure project, there are always risks, contingencies and external factors, and the government will work closely with NBN Co to put in place agreed performance indicators to track its performance and adjust strategies or operations as needed”.

The report urged the government to nominate an “investment committee” – modelled on those used by many professional investors – to oversee the project.

It proposes that the NBN Co be required to make detailed, regular disclosures to the government every three months on uptake rates, usage levels, the costs to connect premises to the project and trends in competing technologies.

 

NBN Co spokeswoman Rhonda Griffin said the government-owned company was “conscious of the competition provided by wireless technologies and has therefore taken independent advice on potential market scenarios”.

Ms Griffin said the company had made provisions for a 13 per cent “leakage” from wireless-only users.
While the review said NBN Co’s corporate plan and its assumptions were ”reasonable”, it also said competition from wireless technology was a ”key risk” to the revenue raised by the NBN Co.

Amid predictions of ballooning use of mobile devices such as new Android tablets and iPads, it said trends towards ”mobile-centric” broadband networks could affect the number of people who connected to the network.

Other comments in the report said ”some consumers may be willing to sacrifice higher-speed fibre transmissions for the convenience of mobile platforms”.

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