Broadband consolidation almost done: Hackett

Summary:The Australian fixed broadband market is now in a "post-consolidation" world, according to Internode managing director Simon Hackett, with just four big players.

The Australian fixed broadband market is now in a "post-consolidation" world, according to Internode managing director Simon Hackett, with just four big players.

Speaking at the 2012 Communications Day Summit in Sydney this morning, Hackett said that the fixed broadband market a year ago reached saturation point.

"The fixed operators have really had to get a hang of the fact that some customers didn't fall out of the tree like apples," he said.

"At this point in the market, if you can get fixed-line broadband and you want fixed-line broadband, you've probably already got it," he said. The saturation had driven a period of consolidation. For example, in the last year, iiNet acquired Internode and TransACT.

Hackett said that the industry is now in a place where there wouldn't be much more consolidation, and just four big players: Telstra, Optus, iiNet and TPG.

"What this means in the fixed-line market is that there are really four players. And they really are bigger," he said. "We've been talking about that coming for years. The sudden thing is that we are post-consolidation. There isn't much national consolidation left to happen."

The other big consolidation driver, apart from saturation, is the pricing model for the National Broadband Network (NBN). Hackett said it is a 1990s access model for the 21st century, and it favours bigger players who can get national reach.

He said that smaller regional players like Adam Internet will survive in their local areas, but he said it is too late for those internet service providers (ISPs) to go national without simply wholesaling from one of the bigger ISPs.

More broadly, Hackett said that there are still a number of problems with NBN Co. Firstly, he said that the main problem in NBN Co is the "don't mention the war" factor, in terms of NBN Co being behind on the roll-out. He said that NBN Co has grown its employee base considerably, but added that he cannot figure out what 90 per cent of those employees do, given that most of the construction is handled by contractors.

"Solving a problem by throwing more people at it is not a good example of cost control," he said.

The three-year roll-out plan released last month is not an indication of where the NBN will be connected, he said, but more a promise that construction will commence in those areas in the next three years.

"[And that's] assuming there's not an election in the next three years," he said, adding that the 2013 election will be one to watch.

"Gee whiz, this one looks like it'll be entertaining."

He said if he "had a magic wand and could tell Malcolm Turnbull what to do" should he become the next communications minister, he would ask him to repeal the government's cherry-picking laws designed to prohibit fixed network operators from building out networks to compete against the NBN.

"The reason why you prohibit innovation ... can only be because that there's a very clear and present danger that the NBN will be economically destroyed if people keep doing it."

Yet, Hackett said that since Optus and Telstra have signed deals to move their customers from their fixed networks onto the NBN, the laws would only affect smaller businesses, which wouldn't have had an impact on the NBN's business model.

The law is flawed, too, he said, because a company like BigAir could deliver a 1 gigabit radio link to a small business without breaching the law, while Internode would be hit with a $2 million fine for delivering the same service via a non-NBN fibre network.

"Neither BigAir or me are going to bust the NBN by bothering to make the day of small businesses while they're waiting 10 years [for the NBN]," he said.

"This law is busted, it needs to go away."

Topics: NBN, Broadband, Telcos

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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