National broadband bypass

Australia's most profitable telecommunications company is living proof that you don't need government subsidies to build a commercially viable high speed broadband network.

While broadband minister Stephen Conroy prepares to announce the winner of the $4.7 billion National Broadband Network, Sydney based BigAir Group is getting on with the job of supplying an alternative to fixed line local access.

Using Wimax fixed wireless technology, BigAir is offering broadband speeds that put Conroy's 12Mbps NBN requirement in the shade. BigAir's core Wimax service offers speeds up to 100Mbps while its top line product, which uses microwave wireless, offers speeds up to 1,000 Mbps or one gig per second.

The company started in Sydney and now operates in Melbourne, Brisbane, Perth and on the Gold Coast. It is the most profitable telco in Australia measured by its gross profit margin of 85 per cent in its fixed wireless business.

BigAir is fulfilling one of the key objectives of the telecommunications policy reforms of the 1990s. It is providing competition to Telstra and Optus while financing investment in new technology.

It is one of the few companies among the country's 264 licensed carriers that is not a reseller of Telstra or Optus. Instead of piggy backing off others' network infrastructure it has built its own.

The success of BigAir makes it clear that, in densely populated areas, there are commercially viable alternatives to copper and fibre networks. It shows you can get high speed local access without spending billions.

Also, Wimax fixed wireless can work over distances up to 30 km so it would be suited for use in regional centres. The BigAir product should not be confused with the mobile Wimax offered by the Kerry Stokes-owned Unwired.

A typical BigAir installation involves putting a radio receiver on the roof of the building and running a cable down to the customer's premises. It has customers in 30 buildings in Sydney.

BigAir is a micro-cap stock with a market capitalisation of $4 million. But its size has not proved a barrier to success.

It has $2 million in cash and will make about $500,000 in net profit this year. It invests about $1 million a year in capital expenditure, which is covered by free cash flow.

BigAir chief executive Jason Ashton has been in the telco industry for about 15 years. He started selling internet services to business through Magna Data, which was later sold to Davnet.

After Davnet imploded and was taken over by Japan's NTT, Ashton set up and floated BigAir. It launched the Wimax service on the 5.8 GHz band in early 2007.

He says BigAir would be able to offer its services in regional centres if there was reasonably priced backhaul, which is a fixed lined connection back to the city exchanges.

He says government funding of backhaul connections that provided an alternative to Telstra's infrastructure would be a spur to competition.

Ashton says BigAir's only recent link with Telstra was when both companies bid for the mobile wireless business called iBurst owned by collapsed telco group Commander Communications.

Telstra won the tender and then sat on the spectrum. BigAir closed its iBurst reseller business which was targeted at laptop carrying 'road warriors'.

Ashton is proud of the fact that BigAir does not spend a dollar with Telstra or Optus.

An analyst familiar with the company says BigAir has shown that wireless can bypass the fixed line local access bottleneck.

He also notes that fixed wireless stands out as an interesting solution to providing the connection between cabinets or nodes in the street to households. The NBN involves fibre links to street nodes.

The analyst says a difficult competitive question will arise if the government guarantees the NBN winner protection from rivals who build alternative infrastructure. He asks whether over-build protection clauses would limit the ability of companies such as BigAir to offer fixed wireless services in competition with the winner of the NBN.

Although BigAir is 10,000 times smaller than Telstra it has been able to build from scratch a business quality broadband product that is 50 times faster than the incumbent's product, costing 40 per cent less.

Entrepreneurship, it would seem, is alive and well in Australia's mollycoddled telco world.