Will the NBN limit competition?

Will the NBN limit competition?

Summary: There's little doubt that the NBN will reduce the number of internet service providers (ISPs) in Australia. Smaller ISPs will disappear as the need for local infrastructure will disappear and larger ISPs dominate. We saw it with the arrival of broadband, now it will happen again.

TOPICS: NBN, Broadband, Telcos

There's little doubt that the National Broadband Network (NBN) will reduce the number of internet service providers (ISPs) in Australia.

Smaller ISPs will disappear as the need for local infrastructure will disappear and larger ISPs dominate. We saw it with the arrival of broadband, now it will happen again.

That doesn't mean there will be less competition. The NBN's levelling of the playing field should mean there will be more ISPs to choose from throughout the country, keeping prices down and driving innovation in service offerings.

The main opportunity rests with new types of retail service provider (RSP), which will provide services directly to homes. Pay TV, device connectivity and health are examples of the sorts of services we could see.

There's a fear, however, that this will not happen. In this program I examine whether the NBN approach is focusing too much on the old way of doing things. As you'll hear there's no steadfast commitment to this multi-RSP approach.

On the program you'll hear from:

  • Graeme Dollar, COO at Engin
  • Geof Heydon, director of Market development and the digital economy for Alcatel-Lucent
  • Michael S Cox, independent telecommunications consultant

It all gets back to the question of Layer 2 vs. Layer 3. You could argue that enough intermediaries will be available to offer Layer 3 services, but will any of them be wholesale only and, if so, for how long?

Topics: NBN, Broadband, Telcos


Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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  • Phil, you are missing one very important aspect of this whole affair. Once the new network is up and running we will no longer be gripped by the ravenous clutches of Telstra. I think you will find NBN Co. a more independent wholesaler than Telstra could ever hope to be.
    Mel Sommersberg
  • Agreed - but my point in the podcast is that by not being a layer 3 player, content or application providers who want to be retailers will probably have to work through existing ISPs, who bring their own self-interests. I won't be able to buy NicheTV, for example, unless I buy it as part of an Optus bundle. So, while NBN Co will be entirely impartial, it's the structure of the industry that emerges around it that concerns me.

    The other point I raised was that if everyone does have to deliver through ISPs it means VoIP players, as an example, are still stuck with the dependence of their service on the performance of the ISP and its associated CPE. A layer 3 offering from NBN Co would have provided a chance for new independent players to establish without this requirement. My point last week was that the NBN CO consultation process focused on old-style providers (ISPs) and not with prospective new RSPs.

    The other point I made was that the notion of multiple RSPs is being entertained by NBN Co, but is only seen as a potential outcome. I really think it needs to be written in stone otherwise it probably won't happen. Just watch!

    So it's not the independence of the wholesaler - it' the motives of the larger retail ISPs who, quite rightly, want to diversify into new services. They will not want to see any new entrants come along and have a direct relationship with the customer if they can clip the ticket along the way.

    There, I've said it all. No need to listen to the podcast!
  • I like listening to your articles, so I tried to subscribe to the podcast. Sadly for articles all about Australia, I was told that your podcast isn't available in the Australian iTunes store...
  • Hi Julia,

    We're having an issue with that at the moment, but we're looking into it. Hopefully we can get it back on line.

    Suzanne Tindal, News Editor.
  • Fascinating discussion on Layer 2 vs Layer 3. There is one thing that is not clear to me in all the reading i have done - as I don't have a technical background.

    Can somebody explain what precisely and specifically is this "Layer 3" everyone talks about that would be a barrier to new RSPs? What exactly woud new RSPs have to invest in? Are we talking about buying some sort of expensive switching machinery or circuits or some such? If so, how hard is it really to buy and operate these?