NBN Co has painted its plan to bring fibre internet to millions of Australian homes as a natural evolution, but analysts increasingly see it as a defensive move to ensure the network’s relevance against 5G-based alternatives from telcos including Telstra, which has launched a 5G fixed-wireless service just days before Apple debuts its long-awaited 5G-capable iPhone 12.

Telstra’s newly launched 5G Home Internet – initially available as a “targeted, invitation-only launch” given the spotty coverage of the company’s 5G network – promises customers 500GB per month of data, at speeds of between 50Mbps and 300Mbps, using a fixed 5G wireless connection.

It takes on a similar service from Optus, which debuted late last year and was last month upgraded to offer unlimited-data plans to rival fixed NBN services.

On paper, at least, 5G fixed services offer an NBN-comparable service free of the vagaries of the last-mile connectivity that has proven to be so problematic for the NBN rollout.

The only constraint on service quality is the density of 5G antennae installed near the customer’s house.

Coverage of 5G services is set to increase steadily as 5G demand ramps up – particularly as Apple next week launches what is widely expected to be its first 5G-capable iPhone.

The new device will challenge current 5G contender Google Pixel, with inevitable customer upgrades driving network demand that will, in turn, encourage carriers to increase their 5G network spending considerably.

Australian carriers have failed to keep up with 5G’s growth in many other countries, with analyst firm Omdia recently ranking Australia 13th out of 22 countries in March – down from 12th in December – in terms of the number of 5G networks, network coverage, subscriber take-up, spectrum availability, and regulatory environment.

The new competitive threat

Telstra is deploying 5G in 53 cities and regional towns and coverage will reach 75 per cent of Australia’s population by mid next year, CEO Andrew Penn recently confirmed as the company brought forward $500m in capital expenditure to accelerate its rollout.

“We are already a long way ahead of our competitors due to our increased investment, technology leadership and because our competitors have historically made the wrong choices on their suppliers of network technology from a security perspective,” Penn wrote in a reference to the problems Optus and Vodafone have faced after the government’s ban on major 5G supplier Huawei.

While some experts have questioned whether fixed 5G services will be a viable alternative to NBN services, others believe NBN Co’s new fibre rollout is being planned at least in part to contain potential competition that could compromise its tenuous business case.

Doubling down on fibre-to-the-premises shows that the government “has now clearly committed to reinforcing NBN Co’s domination of Australia’s fixed broadband market,” former NBN chief technology officer Gary McLaren wrote in a recent blog in which he argues the rise of fixed 5G alternatives has put NBN on the back foot.

Dominating delivery of fibre services to bandwidth-hungry businesses “will be important because it will need these lucrative cashflows to balance its problems in the residential market,” McLaren writes, noting that NBN Co’s recent Corporate Plan 2021-24 mentions 5G competition “for the first time”.

Price sensitivity is a problem for NBN Co, since many of the residential most needing upgrades aren’t necessarily able or willing to pay premium prices for faster NBN Co fibre services.

Fixed-5G services, by contrast, are being priced against much-slower NBN services – with Optus, for one, offering unlimited data at average peak-hour speeds of 214Mbps for $90 per month.

NBN Co can’t reduce the prices of its faster services, since its financial viability depends on increasing revenues over time and fibre is its last option to do this.

NBN Co, that corporate plan says, “must actively manage the impact of infrastructure competition and mass market offerings for business and residential segments through competitive products and pricing constructs.”

The company will, it says, “optimise its strategy for future 5G deployment” and “continues to explore the next generation of access technologies (eg ngPON, DOCSIS 4.0, 5G) in real-world environments…. Pressure on industry revenues is likely to result in alternate fixed and mobile infrastructure providers competing more aggressively as the economy recovers”.

Telstra’s capped plans won’t compete with Optus’s unlimited plans in the short term, but its larger capital budget, rapidly-expanding footprint and much-larger customer base may well compensate – and prove to be a thorn in NBN Co’s side as its pivots towards a new identity in 5G’s brave new world.