TPG Telecom Warns The Federal Govt. It Might Compete Against The NBN

Intro – 60 second guide

Here are our findings on the recent news that TPG might consider competing against the NBN if the federal government pushes ahead with adding a tax to high speed internet users. There are more key details in the following article below.

  • TPG Telecom is one of three national carriers which paid for wireless spectrum, during the government auction back in 2013
  • In the future the majority of Australian home and business owners could be directly connected to 5G networks, instead of the current fixed-line internet connections.
  • Optus is investing in their Home Wireless Broadband service, which provides mobile plans with large data allowances as direct broadband plan competition.

In recent news reports TPG Telecom, which recently made a deal with Vodafone Australia to port their 300,000 mobile customers to their network, has warned the Federal Government that any attempts to try and levy an internet tax on users, would encourage them to compete directly against the NBN, by funding competing mobile networks.

The Federal Government has proposed an internet tax of around $6 per user, per month, to fund the construction of building internet infrastructure in the bush and remote areas of Australia.

In 2014 the Bureau of Communications Research (BCR) was established by now Prime Minister, Malcolm Turnbull.

The BCR was set up with the goal of researching the best ways of creating remote, regional and rural infrastructure, including the costings of delivering fixed internet services, which also includes satellite and wireless.

What TPG Telecom has to say about the proposal

The problem is that the proposal is facing stiff opposition from telecommunication companies Vocus and TPG Telecom, which both want to invest in and construct infrastructure to support high speed broadband networks, as direct competition to the NBN.

In a written statement to the media, the BCR said that the tax to be levied on end users, could force the networks competing against the NBN to add on an additional 22 percent to their wholesale prices, which would naturally be passed onto their customers.

TPG Telecom submitted a statement to the general public which said that it would consider investing in more mobile network infrastructures, if the government went ahead and imposed the tax as planned. This could end up resulting in a move which could potentially lead to lowered mobile set costs and larger download caps.

TPG is currently Australia’s second largest carrier

Currently in Australia TPG is the countries second largest service provider when it comes to fixed line broadband with over 1.7 million subscribers nation wide and around 300,000 mobile users, due to their new partnership with Vodafone.

In a statement by TPG Telecom, they said :

“The tax proposed by the BCR recommendation will be such a distorting incentive.”

“If the cost of supplying fixed-line services is artificially inflated by a tax, there is every reason to believe that spectrum owners will seek to increase their returns by selling mobile services in more strident competition to fixed-line.”

“If the position is that the tax will not be on wireless services, TPG may choose to make greater investments into the wireless service market.”

TPG went on to further say :

“There is no reason to believe that, given an incentive to do so, the mobile network operators will not be able to increase their effectiveness as a substitute for fixed-line broadband, particularly with technological developments progressing rapidly.”

BCR proposes end users pay a tax to fund infrastructure

With a $9 billion cost of connecting the bush with first class infrastructure, the budget for the project should come out of the Federal Budget, rather than being collected in a punitive manner as yet another tax on end users.

As an alternative TPG Telecom has suggested that both mobile and fixed line customers should share the burden, rather then slugging broadband internet users.

Executive chair of TPG Telecom, David Teoh, has demonstrated an aggressiveness to compete against all potential competition in the broadband market, having recently completed a FTTB (Fibre To The Basement) service, which allows lucrative apartment buildings to connect to similar NBN like services.

Optus and their Home Wireless Broadband service

In a similar move this month, Optus also launched a “Home Wireless Broadband” mobile plan with a large data allowance of 50 GB per month, for $70 each month. In doing so Optus is now offering comparable deals to which broadband only providers are offering, while ensuring that they grow their own market share.

Vodafone, Optus and Telstra as the three main Australian carriers, are each planning to prepare, invest and construct their 5G networks, which will be designed to cut the fixed costs of transmitting data, while increasing at the same time download speeds.

In a statement to the BCR’s proposal, Optus said :

“This is consistent with both economic theory and the commercial rationale for the levy.”

“It will ensure that NBN Co can continue to fund the loss making fixed wireless and satellite networks in the face of wholesale network competition from alternate superfast fixed networks since services provided over the access lines of those networks will make a levy contribution that would otherwise have been recovered in NBN Co’s access charges.”

“The alternative approach proposed by NBN Co to apply a broad based levy cannot be justified as it would result in costs being loaded onto services that do not compete with the wholesale fixed line NBN. Such a levy would in effect act as an NBN-tax on mobile and corporate end users.”

In Summary

TPG and their recent partnership with Vodafone Australia are banking on infrastructure investment in dark fibre and 5G networks, to ensure that they remain competitive in the future.

With the NBN being rolled out all over the nation, any further threats to their business model in the form of taxes on their users, or through trying to make them less competitive, will result in further threats from the national carrier.

At this point in time though it remains to be seen if the Federal Government will implement the findings of the BCR proposals. We will keep you informed of any updates to this article, as news comes to hand.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.