Amid the turmoil and brouhaha surrounding the sweeping board changes at NBN Co prior to reviews of the National Broadband Network (NBN) commencing, some of the telcos have been diligently looking for new opportunities.
Telstra has setup a Fibre to the Node (FTTN) trial site using equipment from Alcatel-Lucent with the obvious goal of capturing some of the anticipated $6 billion in rollout contracts. Telstra will be in a prime position to benefit from the FTTN rollout because its knowledge of the copper tails to be used will be vital.
Optus must be mulling over what it will do with its HFC network, now that it might have to look at building fibre infrastructure.
Perhaps the most intriguing positioning is that of TPG Telecom, which has announced its intention to ramp up its fibre rollout and concentrate on fibre to high value apartment and office buildings in inner urban areas.
In fact, TPG just might be in a position to engineer a scenario that could well make it a major beneficiary of the post-election telecom landscape.
Digital Dividend auction
Completing the Fibre to the Node (FttN) NBN rollout is going to keep the communications minister Malcolm Turnbull busy but at some point he will also have to allocate time to decide what to do with the remaining digital dividend spectrum.
A major surprise at the first Digital Dividend auction results was TPG Internet taking a small allocation of spectrum in the 2.5 GHz band. The auction also saw 30 MHz of the 700 MHz band remain unsold.
The Labor government achieved $2 billion from the auction but missed out on up to $1 billion for the unsold spectrum, partly because of the high reserve price of $1.36 per MHz per POP set for the 700 MHz spectrum.
Optus purchased less than the maximum allowed 700 MHz spectrum and Vodafone opted against participating in the auction at all.
Second Digital Dividend auction
Turnbull will need to decide if a second Digital Dividend auction should proceed and what the reserve price for the remaining 700 MHz spectrum should be. The spectrum will not become available for use until 2015 so it is likely an auction, if it is to occur, will commence in early 2014 rather than towards the end of 2014 as planned by the former government.
The calls from emergency services for the unused 700 MHz spectrum and the opportunity to utilise the spectrum to build a public Fi-Wi network are unlikely to be taken seriously by a government that will be look to maximise the financial return on the spectrum.
The competition factor
By carefully setting the parameters for the sale of the 700 MHz spectrum Turnbull can achieve one of his often stated goals – to increase competition in the telecommunications sector.
Turnbull will be looking at TPG’s purchase of 2.5 GHz spectrum and wondering if TPG can be enticed to purchase the remaining 700 MHz spectrum which would be sufficient for TPG to build an inner urban mobile network.
At the same time Vodafone must be wondering if it will find itself in a perfect storm. Electing not to participate in the first Digital Dividend auction Vodafone could be forced to participate in a subsequent auction just to ensure that TPG does not secure the 700 MHz spectrum.
Vodafone is fighting to rebuild its customer base after severe haemorrhaging due to several factors which include a failure to grow a resilient reliable network and an even larger failure to move beyond being a mobile only company.
It is only a matter of time before a competitor enters the inner urban market and if the competitor is able to bundle low cost home internet and mobile, things could get pretty uncomfortable for Vodafone.
TPG versus Vodafone
Could TPG replace Vodafone as the budget mobile phone provider?
If TPG purchased the remaining 700 MHz spectrum and piggy backed onto Turnbull’s commitment to allow mobile phone providers to utilise NBN Co infrastructure including the NBN fixed wireless towers it’s likely that TPG could build a mobile network rapidly and at significantly lower cost than that incurred by Telstra, Optus or Vodafone.
TPG’s management team has demonstrated a canny ability to spot opportunities, act quickly and build market share.
Moving to become a mobile provider would cost TPG up to $1 billion for the spectrum and another $500 million for the network, but with Vodafone’s ongoing woes it should not be an insurmountable problem for TPG to find an investor, especially if it looks towards Asia.
TPG would present investors with a balanced portfolio of products and services including big ticket items such as a fibre network, significant investment in ADSL (soon to be VDSL), internet television and telephony and a mobile network targeting Vodafone’s budget minded customers.
The government will be the winner out of any perceived threat to Vodafone by one of the customer focused and rapidly growing internet service providers. While the changing telecommunications landscape will not be known until later this year, there is every possibility that 2014 could be a bumper year for TPG’s CEO David Teoh.
Mark Gregory is a Senior Lecturer in Electrical and Computer Engineering at RMIT University