Industry Trend Analysis - Telecoms Reform Package Gives NBN More Weight - AUG 2017

BMI View: Australia's proposed telecoms reform package reinforces the NBN's monopoly in selling advanced fixed services and will support the deployment of its services, allowing for greater coverage in rural and remote areas of the country. The clearer separation between service and infrastructure will boost the uptake of more advanced technologies, and we expect the broadband market to continue to outperform.

The Australian government has introduced a new telecoms reform package on 22 June 2017, which, if passed by the Parliament, will be implemented from July 2018. The stated objective of the reform is to promote competition and improve access to broadband services. We lay out the implications of the reform's three key measures.

Regional Broadband Scheme (RBS): The new scheme will make the National Broadband Network ( NBN)'s funding transparent in order to ensure that long-term funding is in place for coverage of broadband services in rural and remote areas. The NBN currently uses an internal cross-subsidy system from its profitable fixed-line networks in urban areas to fund other parts of the country.

  • Implications: Competing fixed line networks will need to contribute to the cost of funding broadband for regional Australia, ensuring a fairer playing field for all players. This does not create a new cost for NBN users as it is already built into NBN prices.

Reform To Support Expansion
Australia - NBN Premises & Users (mn), 2015-2016
Source: BMI, NBN

Statutory Infrastructure Provider (SIP) obligations: This makes the NBN the default SIP provider, as it will be under legal obligation to connect premises to its network and provide wholesale high-speed broadband services to retail service providers. This will be progressive as the NBN rolls out its network, with it covering the entire country by the time it is fully operational. At the same time, other operators can still be SIPs where appropriate (i.e. if they have a contract with new premise developments), provided standard requirements for broadband services, such as 25Mbps download and 5Mbps upload speeds, are met.

  • Implications: This will support the deployment of the NBN's services and ensure it meets its objective of connecting 8mn premises by 2020/21 (from 4mn in February 2017). Combined with the NBN's greater technological flexibility (allowing satellite, cable and vectoring to full fibre), it could pose a greater threat to wireless-based alternatives. With a strengthened monopoly in selling of advanced fixed services, broadband will continue to outperform in the Australian telecoms market, reaching 15.3mn subscribers in 2021, according to our forecast.

Wholesale and retail rules: Amendments to existing structural separation arrangements, which require broadband network owners to separate whole and retail businesses, will ensure that broadband networks operate on a level playing field.

  • Implications: We believe the clearer separation of service and infrastructure will boost the uptake of more advanced technologies, and we expect the number of broadband subscribers to reach 15.3mn in 2021. However, we note that dedicated mobile broadband services continue to represent a high share of the total broadband market and any cannibalisation between dongles and NBN connections will impact the overall market and represent a downside risk to our forecasts.

Broadband Outperforms
Australia - Wireline Market
e/f = BMI estimate/forecast. Source: National sources, BMI