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'Balance the scales to save the Telco industry'

Mon, 4th Apr 2016
FYI, this story is more than a year old

It's time for the playing field to be levelled (somewhat) for the mid-sized Telco in Australia, according to Rene Sugo, CEO at MyNetFone.

How? By reducing the 121 POIs required to reach directly, removing the outdated CVC usage-based cost model and also writing off the government network build cost.

Sugo outlined why these measures were necessary (for not just the industry, but the country as a whole) at the recent 2016 Tech Leaders conference summit, as he affirms they will stimulate NBN uptake and deliver on the promise of a healthy competitive telecommunications industry.

“The NBN wholesale pricing model business case is currently usage-based and relies on reaching a certain percentage of service activations to generate sufficient revenue to repay the investment of building the network,” says Sugo. “In order to reach this activation target, NBN has to be the ‘number one choice' for data services for consumers, and be available at a viable price point for service providers of all sizes to resell – and as it stands this is not going to be realistic.

According to Sugo, the NBN business case faces two serious challenges.

NBN bypass alternatives

Sugo says the various mixes of 4G, future 5G, and FTTB services pose a threat to NBN because they can be delivered at a better margin and at more competitive pricing, while playing into the global ‘mobile-first' usage trend.

“These NBN bypasses will eat away at the NBN market share, posing a major barrier to reaching activation and revenue targets,” says Sugo.

Sugo affirms that for the mid-sized Telco, the proposed ‘level playing field' is nothing more than a mirage as they will have to fight an uphill battle in order to be competitive with the NBN bypasses.

Pricing snowball

The second challenge is based around an unrealistic target for NBN activation, which is 80% of all Australian households by 2020. According to Sugo, this target is in fact over 100% of the current fixed broadband market.

As such, any shortfalls in activation numbers and resulting revenue will have to made up by increasing usage CVC and per port costs, which will in turn reduce margins and finally, increase retail prices. This means NBN will become less attractive for providers to sell and for consumers to buy.

This could potentially see mobile broadband become cheaper than home connections.

“As retail prices rise, NBN will become less and less attractive to consumers, driving them more to bypass services, further decreasing NBN uptake, leading to further NBN cost increases in a vicious cycle,” Sugo says. “The end result - the NBN business case falls short of recovering its massive build cost.

Save the Industry

According to Sugo, to save the Australian Telco industry, then the NBN model should be made more viable to the second-tier players.

“A fair model would allow middle players to step up and effectively compete in the market, driving NBN uptake and balancing out the challenge of the NBN bypass services,” Sugo says. “Australia needs its promised level playing field, and a healthy, competitive telecommunications industry, for this ambitious network build to succeed.

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