Australia / Press Releases
NBN vs. 5G: Internet War Heats Up as Government Extends Fibre

What information do you want to see from IBISWorld on COVID-19? We'd love to hear from you

by Liam Harrison
Oct 07 2020

The Federal Government has announced an additional $3.5 billion investment into the National Broadband Network, which will enable thousands more Australians to access faster, more reliable internet. The expansion of Fibre-to-the-Premises and Fibre-to-the-Curb portions of the network is anticipated to be a significant boon for the construction sector. Revenue for the Telecommunications Infrastructure Construction industry totalled $8.2 billion in 2019-20, having declined from a high of $11.2 billion in 2016-17.

‘The rollout of additional fibre connections will require thousands of contractors, providing stimulus to a struggling Australian economy,’ said IBISWorld Senior Industry Analyst Liam Harrison.

One important feature of the network upgrades is the significantly increased footprint of eligible properties for higher-tier internet speeds, such as 250Mbps and 1,000Mbps, currently only available to a small number of NBN subscribers.

‘Typical internet usage has been relatively limited, with most users not needing connections beyond 100Mbps. However, as features such as 4K streaming become more common, and cloud computing gains traction in the consumer space, the average consumer is likely to require higher speeds,’ said Mr Harrison.

Fibre vs 5G

The Federal Government’s recent pivot to an expanded fibre network brings the NBN closer to the original network design provided by the Rudd government in 2009. This decision is likely in response to the rise of 5G wireless broadband, which offers extremely fast internet speeds and is a serious competitive threat for the NBN.

‘As 5G fixed wireless has begun to roll out in select areas, particularly those with underperforming NBN connections, this has presented a significant threat to NBN Co’s long-term sustainability. Without an upgrade to their infrastructure, NBN Co is vulnerable to fixed line bypass in these underperforming areas, which may erode their revenue performance to a point where they become unprofitable as a business,’ said Mr Harrison.

As a sign of the impending threat to the NBN, Telstra launched a new 5G home service on a limited basis last week, offering an $85 plan with a 500GB data cap and expected download speeds of between 50Mbps and 300Mbps.

NBN Co has ultimately found itself in a standoff with the major telecommunications providers, which pay wholesale fees to utilise network capacity. Excessively high network fees have spurred major players in the Wireless Telecommunications Carriers industry to invest in 5G networks, enabling higher profit margins through bypassing expensive NBN fees.

‘5G services offer more reliable and higher speeds than underperforming areas of the NBN. However, the recently announced upgrade plan appears to be a strong market signal from NBN Co to the major telecommunication providers that they won’t accept having these markets captured from them without a fight,’ said Mr Harrison.

The number of mobile internet connections in Australia has risen at an annualised 2.8% over the past five years.

Write-down threat looms over the industry

One of the largest unknowns in the battle between NBN Co and 5G providers is the potential for the Federal Government to exert its influence on the Wired Telecommunications Network Operation industry. By writing-down the value of the NBN, the Federal Government could significantly cut NBN Co’s debt repayment obligations, and thereby enable it to offer lower prices in the market. However, the Federal Government has been so far unwilling to do so, and Telstra and Optus are both betting on this position remaining fixed over the longer term.

‘The threat of a potential write-down of the NBN is a mixed bag for the firms that have invested in 5G fixed wireless. On the one hand, it increases the margins on their NBN products sold. However, it also significantly diminishes the value of the investment into 5G fixed wireless in the first place,’ said Mr Harrison.

Consumer benefit from the Fibre vs 5G battle

The expansion of the NBN is expected to benefit the industries that have heightened their remote working capabilities in response to the COVID-19 pandemic. The Professional Services and Financial Service industries have both become well positioned to benefit from high-speed internet, with the high level of information technology usage among employees allowing for high volumes of remote working. Telehealth services will also be more accessible, particularly for video conferencing, strongly benefiting health services such as those in the General Practice Medical Services industry.

Price-wise, consumers are not expected to strongly benefit in the short term, as 5G fixed wireless plans are largely either on-par, or only slightly cheaper, than current NBN offerings. However, 5G fixed wireless may present an opportunity for telecommunication firms to also capture the lower income market, which has been largely priced out of the NBN, with even entry-level plans typically costing around $50 per month. Overall, 5G fixed wireless presents a significant threat to the NBN operating model, and the enhancement of the network could become either the network’s saving grace, or dying breath.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647