The ACCC last week finalised its inquiry into the declaration of a “Superfast Broadband” wholesale access service. This inquiry was prompted by TPG Telecom’s plans to rollout Fibre to the Building (FTTB) technology to cover approximately 500,000 households in apartment buildings in the major capital cities around Australia.

TPG Telecom made this announcement soon after the election of the Abbott Government in September 2013 with many observers highlighting it was an attempt to “front-run” the build of the NBN with VDSL vectoring technology while NBN Co grappled with a change of policy and technology mix.

Some commentators called out the immediate threat to NBN Co’s business model and the need for NBN Co to respond to the competitive threat.

“It [NBN Co] will have a revenue impact … and NBN Co will have to respond competitively to this” – David Kennedy of Ovum in the Australian Financial Review on 17 September 2013.

At the outset NBN Co did signal speeding up its own FTTB rollout and taking on TPG in the market.

“A building that signs up to TPG runs the risk of being left with only one retail service provider.

The NBN levels the playing field for Australian telecommunications and creates real and vibrant competition.

We believe the NBN represents the superior solution for building owners and families and businesses they house” – Bill Morrow, CEO of NBN Co, in the Sydney Morning Herald on 15 April 2014.

But the early competitive zeal soon waned and the murky, complex world of telco regulation and policy took up the challenge of seeing off this threat.

Firstly, the Vertigan Panel of Experts recommended ¹ that the ACCC commence a public inquiry with a view to declaring vectored DSL services and making wholesale bitstream services available to access seekers. This was despite the same Vertigan Panel stating in its Market and Regulatory Report the following :

“…preventing alternative superfast network providers from entering the retail market could seriously compromise the incentives for investment in competitive infrastructure. By discouraging that investment and strengthening a de facto NBN Co monopoly, the rules would then deprive end-users of services that might otherwise be provided or, if those services are provided, might cause them to be provided less promptly and efficiently than they could be” ²

Secondly, while the ACCC conducted its inquiry, the Coalition Government imposed carrier licence conditions on TPG Telecom that effectively required it to separate its wholesale and retail businesses for broadband service delivery on the FTTN network. This licence condition and extra regulation on new infrastructure investors was put in place despite the Coalition Government promoting its “de-regulation” credentials in the telco sector via the repeal of “red-tape” regulations. ³

Thirdly, NBN Co itself commenced legal proceeding against TPG Telecom alleging misleading and deceptive conduct with the rollout of the FTTB infrastructure.  The NSW Supreme Court ruled in favour of TPG Telecom in April 2015.

Finally, the ACCC made a final decision on 29 July 2016 to declare a Superfast Broadband wholesale access service that would apply to all fixed line connections with a downstream rate that is normally more than 25 Mbps. Interestingly, the declaration goes well beyond vectored VDSL services technologies to capture all fixed line technologies include HFC, G.Fast and Fibre to the Premise. This was on the basis of the ACCC preferring the service description to be “technology neutral”.

In effect, what started as a concern about TPG Telecom monopolising in-building apartment copper infrastructure due to vectoring technology issues has now captured all fixed line technologies on three different cable types – copper, coaxial cable and fibre networks. It would certainly be interesting to hear from the Vertigan Panel of Experts if this is what they intended when they made their initial recommendations.

So has NBN Co won the day? Has it been able to leverage the enormous power of its government shareholder in such a way that it is now a safe, secure fixed asset monopoly with nothing to fear from TPG Telecom or anyone else?

In the short term the answer is probably yes. No new competitors are going to try and take on NBN Co in the fixed-line broadband market. TPG Telecom will probably limit its rollout to less than the 500,000 apartments it originally projected.

However, in the long run, NBN Co may have just brought forward its biggest threat – wireless broadband. All of the protection measures for NBN Co’s monopoly are exclusively restricted to fixed line broadband connections. Mobile broadband and fixed wireless are not captured in this regulatory net – and probably never will be because of the growth of mobile broadband.

Significant investment is being placed into wireless technology that enable more spectrum and more fibre connected cell sites to be deployed for mobile and fixed wireless broadband. The 5G technology roadmap is likely to mature around 2020. But even 4G with more cell sites can deliver more capacity before then.

Even today large telcos like Verizon in the USA are advocating what they call “fibre wireless” for launch in 2017. On 27 July 2016 DSL Reports, a broadband website, reported this from Verizon’s CEO :

“I think of 5G, initially as, in effect, wireless fiber,” McAdam said. “With wireless fiber, the so-called last mile can be a virtual connection dramatically changing our cost structure.” The CEO added that the company sees the “stars aligning very quickly when it comes to the 5G future,” noting that the company’s recent $1.8 billion XO acquisition will help create a “clear spectrum path for 5G deployment.”

There is no doubt that TPG Telecom, and more importantly Telstra, will be following these trends and assessing the opportunity. The most important asset they both have to enable this is a “deep fibre” network that will allow many small cells to be deployed to provision the capacity necessary for fixed wireless broadband to compete with fixed networks.

So NBN Co and policy makers needs to think deeply about this – it is unlikely to be able to pull off a regulatory coup this time around – especially if TPG Telecom and Telstra are on the same side of the argument.

The incentive to bypass NBN Co is huge for the likes of TPG Telecom and Telstra – its two largest customers by far. It could be that NBN Co has just started to focus the minds of these two players on what could be a massive disruption to its business model – far greater than the threat of FTTB to 500,000 apartments.