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Australia - The National Broadband Network

Attention: There is an updated edition available for this report.

First projects nearing completion ; NBN here to stay

Several things became clear during the privatisation process of Telstra in the 00s. Broadband quality was below the international benchmark ; end-user and wholesale prices were above that mark ; and there was no economically viable business case for high-speed broadband infrastructure for regional and rural Australia.

At that time both sides of government were in favour of government intervention to rectify this situation. Telstra, however, was determined to maintain its monopoly and in the end the government had to step in. At the same time, because of the GFC, the government decided to change its broadband infrastructure plan from a regional to a national one. They also linked that to the development of the digital economy and launched supporting policies in e-commerce, e-health, e-education and smart grid, all aimed at utilising the NBN for those purposes.

The $36 billion plan includes a government investment of $27 billion and needs to be seen in the context of the $60 billion raised by the privatisation of Telstra.

The start of 2012 saw the conclusion of the structural separation and other regulatory issues associated with the rollout of the NBN. The ACCC also issued its wholesale conditions for the transitional period. Two months later NBN Co launched its rollout plan for the next three years, which showed that by the end of that period the NBN will be within the reach of close to four million households and businesses across the country.

This report provides financial and operational information regarding NBN Cos corporate plan, including forecasts covering the three years up to 30 June 2013. The plan outlines competitive pricing for wholesale broadband, including a basic service offering with a uniform national wholesale access price.

There is now also more detailed information becoming available from the Opposition and, while strong areas of disagreement remain, the reality is that, despite the possibility of a change of government in late 2013, the NBN is here to stay.

The Opposition certainly has some valid points of criticism. There is still a misalignment between the social and economic benefits of the NBN and NBN Co&rsquo ; s business plan. However the Opposition has not so far revealed its own NBN policy. Does it see this as essential infrastructure for the emerging digital economy, e-health, tele-education, internet of things, etc? Only when a vision has been arrived at can a strategic plan be generated. Without such a vision it is difficult to discuss technologies such as FttH, FttN, HFC, wireless, etc. You first need to know what you want to do with it.

Australia is extremely reliant on its income from natural resources and, like other resource-rich countries, it needs to diversify its economy. Interestingly, it is these resource-rich countries that are leading the rollout of FttH around the globe.

Affordable price is the key to a successful uptake of NBN services. Early indications are that a 12Mb/s entry level service will be priced at around $39 per month, and a telephone service will be added for an extra $10. IPTV add-ons are also priced at $10. Voice-only services are around $25 per month. Compared with similar services available over the current telecoms networks these offerings are most competitive, and this should easily lead to a 70%+ commercial uptake over the longer term.

The report includes overviews of the latest activities of the RSPs.

The actual rollouts of both the FttH and the fixed wireless networks are now well and truly underway and an interim satellite operation is operating. Tasmania will be the first state that will see the completion of the rollout and Armidale will be the first city to have full coverage. In all, rollouts are now underway in over 40 areas. Overviews of these rollouts are provided in the report.

With the national broadband network becoming a reality cities, regions and communities are starting to become involved in developing strategies that will see them taking advantage of the social and economic benefits that it can bring. A proactive local government is a vital element in the deployment of broadband to the point where it can begin to deliver community benefits in education, healthcare, community services, job creation and export.

The Regional Backbone Blackspots Program has also been completed, which saw the construction of 6,000 kilometres of high-speed infrastructure covering just under 400,000 people in regional Australia.

Australia is the first country in the world where the whole industry will adopt a new plan for the future. The process that led to the NBN started around 2005 and became a key government policy in 2007. Its visionary character attracted the attention of many governments around the world, including the Obama Administration and the European Union ; and it became a catalyst for the UN Commission for Broadband.

Of course these changes will not happen overnight, and there will be a transitional period during which Telstra and its competitors will have to cooperate, and this will require give and take. However the NBN will change the industry forever. Companies will have to reinvent themselves and totally revise the business models in order to benefit from these game-changing developments.

A key element of the success of the NBN has been the cooperation of Telstra. The company accepted that changes were inevitable, and once it had accepted this it reacted swiftly. In 2012 Telstra finalised an $11 billion contract with the government, which saw the company making infrastructure assets available to NBN Co and agreeing to switch off its copper network after the NBN becomes available.

These massive changes propelled the company into a process of transformation which saw it competing aggressively with its rivals, particularly in the mobile market. It has ramped up its customer service and introduced innovative new services. So far so good, as the company has become one of the most financially successful telcos in the developed economies.

Of course, the market will change dramatically for the whole Australian telecommunications industry over the next ten years. A complete overhaul of the industry will take place, and developments such as cloud computing and the internet of things (IoT) will be accelerated.

The NBN will become the predominant infrastructure and, as a utilities-based network, it will also provide its services to other sectors, such as healthcare, education and business. With these sectors involved we will see the industry developing specific new business models around infrastructure, ICT and retail. IPTV and other media and entertainment applications will start to play a more important role as well.

For this purpose the government also developed its national digital economy strategy. Based on the trans-sector model the NBN will become the shared infrastructure for a range of these sectors. The first release sites are playing a key role in testing this concept. Overviews of the initiatives within these projects are provided in the report.

This approach will most likely result in economic and social benefits worth many billions of dollars and, as we are already seeing, it will create significant new business opportunities for Australian companies. In healthcare alone there is talk of savings worth more than $10 billion ; and $2 billion in smart grid.

Telcos will have to decide where they want to play. Infrastructure will largely move to NBN Co, its contractors (eg, Telstra) and a few backhaul providers. Companies also have the opportunity to become the ICT providers to those other sectors. The larger sectors in particular will create a sizeable demand for value-added infrastructure services. The first of such contracts signed in the healthcare industry offers glimpses of such a future.

All of this will help the industry to double its size to around $80 billion by 2020.

1. Analysis 2012
1.1 The NBN and the opportunity for ‘virtual’ players
1.2 Will infrastructure constrain the digital entertainment market?
1.3 Waiting for the Coalition’s vision for Australia’s future
1.4 Will the half-built HFC disaster be repeated?
1.5 Four million households within reach of the NBN by 2015
1.6 Digital infrastructure essential to manage the transition to the e-world
1.7 increased support for the NBN
2. Introduction and Overview
2.1 General overview of the plan
2.2 How Australia got its NBN
2.3 National interest utility
2.4 NBN national infrastructure, not just telecomms
2.5 Economic reforms
2.5.1 Fundamental change to the economy
2.5.2 People issues
2.5.3 Business modelling - the key to success of the NBN
2.5.4 Recommendations of the 2009 Implementation Study
2.6 Where is the user in all of this?
2.7 Why wireless broadband is no alternative to FttH
3. NBN Co
3.1 An infrastructure company
3.2 The role of NBN Co
3.3 Governance and management of NBN Co
3.4 NBN co business plan
3.4.1 Key highlights
3.4.2 Rollout plan
3.4.3 Introduction and costings
3.4.4 Pricing and market assumptions
3.4.5 Product offerings
3.5 Analysis
3.5.1 Can NBN Co do the job?
3.5.2 NBN Co’s position needs to be clarified
3.5.3 NBN Co’s trans-sector role questioned
4. Infrastructure Developments
4.1 Infrastructure Plans and Contracts
4.1.1 The network plan
4.1.2 External analysis of the Australian Fibre-to-the-Home (FttH) architecture
4.1.3 NBN Co contracts
4.1.4 Infrastructure Sharing and Coordination
4.1.5 Other Technology Issues
4.1.6 FttH Greenfield Market
4.2 The FttH Rollout
4.2.1 Introduction
4.2.2 National roll out
4.2.3 Rollout progress early 2012
4.2.4 Tasmania
4.2.5 The First Release sites
4.2.6 The rollout
4.2.7 Rollout issues - Analysis
4.2.8 First fixed wireless rollouts
4.2.9 Regional Backbone Blackspots Program (RBBP)
4.2.10 Fibre-to-the-apartment
4.2.11 Other quick-win areas
4.2.12 NBN initiatives NSW
4.3 Fixed Wireless and Satellite Networks
4.3.1 Introduction
4.3.2 NBN Co’s Fixed Wireless Network
4.3.3 The NBN Satellite Network
5. Legislative and Regulatory Environment
5.1 New Policies and Regulations
5.1.1 Regulatory Framework
5.1.2 Joint Committee on the National Broadband Network
5.1.3 Regulatory reforms for the transition period
5.1.4 Government to fund NBN voice migration
5.1.5 Budget funding for the National Broadband Network
5.1.6 Telstra Structural Separation Undertaking
5.1.7 Sale of NBN Co
5.1.8 Special access for smart utility services
5.2 Analysis of the Opposition’s position
5.2.1 The need for vision and policy
5.2.2 NBN Co’s delays so far
5.2.3 Global Slowing investments in fibre
5.2.4 Killer applications
5.2.5 The costs of the NBN
5.2.6 FttH and HFC solutions
5.2.7 In-house connections
5.2.8 Ongoing finetuning
5.2.9 Greenfield telcos
5.2.10 A different NBN?
5.2.11 Questions and assumptions
5.2.12 Conclusion
6. Industry Developments
6.1 Wholesale and Competition
6.1.1 Telecoms competition carnage in 2012?
6.1.2 The NBN wholesale and POI debate
6.1.3 NBN Co’s multicast service
6.1.4 Pricing Strategies
6.1.5 Do we need infrastructure-based competition?
6.2 RSPs Pricing and Products
6.2.1 Retails Service Providers (RSPs) and the NBN
6.2.2 NBN Penetration Forecasts
6.2.3 RSP Products and Prices
6.2.4 Other developments
6.2.5 Telstra to trial copper-fibre transfer
6.3 Industry in Transition
6.3.1 Tough year for 2nd tier telecoms companies
6.3.2 Industry Transformation
6.3.3 Telstra made the first move (separate report)
6.3.4 Market analysis
6.4 Telstra
6.4.1 Telstra is winning retail market share
6.4.2 Telstra and government agree on NBN future
6.4.3 Telstra Structural Separation Undertaking
6.4.4 Transforming the company (Analysis)
6.4.5 Telstra’s e-health initiatives
7. Municipal and Community Networks
7.1 Local councils need to be more active in NBN development - analysis
7.2 Case studies
7.2.1 The NBN for Central Victoria
7.2.2 Wagga Wagga
7.2.3 Port Macquarie
7.2.4 Fibre revives Woodstock in central New South Wales
7.3 Trans-sector thinking and municipal broadband
7.3.1 Local government
7.3.2 What is trans-sector thinking?
7.4 The role of local councils
7.4.1 Infrastructure comes natural to local councils
7.4.2 Why should local government be involved?
7.5 Cities are taking charge
7.5.1 Introduction
7.6 How to get started
7.6.1 A city broadband agenda
7.6.2 The local community model
7.6.3 Framework for local government policies
7.6.4 Steering committees
7.6.5 Broadband education
7.7 Broadband development phases
7.7.1 Quality and affordability
7.7.2 The development of quality broadband demand
7.7.3 Industry is ready to deliver applications
7.8 City marketing
7.8.1 The concept of telemetric
7.8.2 Three strategic elements of telematica
7.9 Examples of tele-cities
7.10 Communities left behind because of NBN party politics (Analysis)
8. Market Forecasts 2015, 2020
8.1 Industry transformation
8.2 Fixed infrastructure market
8.3 Wholesale market
8.4 The retail market
8.5 Penetration forecasts
8.5.1 Roll out penetration
8.5.2 Broadband access penetration
8.5.3 Fibre to connect 4.2 million in 2015
8.6 The mobile market
8.7 The digital economy - trans-sector market
8.7.1 Forecasts – 2015; 2020
8.7.2 The digital media market
8.7.3 Business market survey
8.8 Business models and mergers and acquisitions (M&A)
8.8.1 Fixed market scenarios
8.8.2 Mobile market scenarios
9. Digital Economy
9.1 The issue is the digital economy, not broadband - analysis
9.2 National Digital Economy Strategy
9.2.1 Introduction
9.2.2 Other specific initiatives
9.2.3 The Digital Hubs and Digital Enterprise programs
9.2.4 Local e-government initiative
9.2.5 The NBN-Enabled Education and Skills Services program
9.2.6 Tuition for new migrants using the NBN
9.2.7 E- health services
9.2.8 Teleworking
9.2.9 NBN Regional Legal Assistance Program
9.2.10 High-definition videoconferencing pilot program
9.3 NBN Art grants
9.4 Business participation on the NBN
9.4.1 Broadband – a key digital driver
9.4.2 Broadband boost
9.4.3 Network driver
9.4.4 Utility features
9.5 More education required to sell the NBN to business users
9.6 Digital Inclusion
10. Glossary of Abbreviations
Table 1 – Deployment schedule 2011 - 2021
Table 2 – NBN pricing schedule for access virtual circuit
Table 3 – NBN take up rates first release sites
Table 4 - NBN Co 2012 rollout schedule
Table 5 – NBN budgeted and actual expenditure – 2008 - 2015
Table 6 – NBN* uptake scenario forecasts – 2015 – 2020 (household penetration)
Table 7 – Selected second-tier telco revenues by service – 2003 - 2011
Table 8 – Total payments to be made to Telstra – 2012 - 2020
Table 9 - NBN deal valuation cash flows
Table 10 – NBN take up rates first release sites
Table 11 – Broadband uptake* scenario forecasts – 2015; 2020 (household penetration)
Table 12 – Impacts of the NBN on industry output at 2020 (% change)
Table 13 – What does a better broadband service look like?
Table 14 – Will better broadband increase your digital economy participation?
Table 15 – What do you value in a broadband service?
Chart 1 – Market share size of NBN trans-sector market – 2020
Chart 2 – NBN services revenue share estimates by market share – 2015
Chart 3 – NBN services revenue share estimates by market share – 2020
Exhibit 1 – Economic benefits of broadband – overview of surveys
Exhibit 2 – Action plan, 2011 - 2012
Exhibit 3 - Demo centre and demo truck
Exhibit 4 – The Regional Backbone Blackspots Program – overview of rollout and status – 2011
Exhibit 5 - Key elements of Telstras SSU
Exhibit 6 - International NBN service
Exhibit 7 – Trans-sector benefits
Exhibit 8 – The social and economic benefits of broadband – case study
Exhibit 9 – Key broadbanding steps
Exhibit 10 – Some application bit rates
Exhibit 11 – Key applications of a digital economy
Exhibit 12 – Round 1 funding recipients Digital Hubs and Digital Enterprise
Exhibit 13 – Eligible round 2 communities Digital Hubs and Digital Enterprise
Exhibit 14 – Digital local government program projects – round 1
Exhibit 15 - Local councils added to the project in May 2012

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