Is NBN ready to face the 5G threat?

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Mobile Broadband is already threatening fixed broadband connections, offering better speeds, quicker connections and near price parity. The Australian Competition and Consumer Commission(ACCC) published their Communications sector market study, and NBN’s future already looks shaky.

The report, which focuses on the fixed broadband service and the threat they are under from cheaper mobile alternatives, assesses that more customers might make the switch from NBN to 5G in 2020, leading to severe losses that the company could potentially not recover from. The NBN needs to pull its socks up, pretty quickly, especially regarding service speed and customer satisfaction or the largest infrastructure project in Australian history is undoubtedly doomed.

5G can disrupt existing business models

The ACCC report acknowledges the disruption and uncertainty that technical evolution brings. For example, the advent of smartphones not only drove certain mobile companies out of business but also disrupted the personal computing industry because they fundamentally changed the way people interacted with machines. The upcoming launch of 5G might turn out to be a similar game changer for telecommunication, and NBN is woefully underprepared.

 

Is NBN ready to face the 5G threat

 

The massive change here is that customers will prefer mobile data broadband over fixed line broadband, simply because it will be much faster, affordable and reliable. Customers don’t care what powers their Internet; all they want is to stream movies and television more quickly. Video consumption remains the bulk usage of fixed broadband in most homes, and no one wants long buffering wait times to spoil their evening show. Unfortunately, NBN has just not delivered the promised speed, nor has the service been consistent; lags, dropouts and black spots are common complaints in most homes. Already 20% Australians rely on mobile broadband service and ACCC expects this figure to rise once 5G arrives in 2020.

Why is NBN Not Bloody Necessary?

3.2 million households have signed up for the NBN since its launch. But many are finding themselves in NBN limbo or worse off than before. NBN was marketed as the Rolls Royce of Internet services, and customers are angry that they have been saddled with a rusty bicycle instead. Some of the major complaints against NBN include:

Improper plan pricing

NBN services are being sold on speed tiered plans, with faster speeds costing more. NBN wholesales these tiers at 12 Mbps, 25Mbs, 50Mbs and 100 Mbps, but an overwhelming 84% of customers have signed up for the lowest 12-25 speed range only. While a price jump in tiers is a deterrent, the actual reason why many haven’t signed up for the highest speeds include:

  • Retailers refusing to offer the highest tiers. Retailers (like Vodafone and Optus) have to pay NBN more to access higher speed services and are expected to pass on the costs to their customers. However, they don’t think their customers are ready for this.
  • Lack of education among customers about the speed tiers and what the different prices indicate. Many are signing up for the lowest available plan and expecting to receive the highest speeds. This confusion is understandable because till date no Internet services (mobile or fixed line) have ever been priced on speed.

Absence of Consumer Redress

Telecommunications Industry Ombudsman (TIO) data for the financial year 2017 revealed that complaints regarding the NBN surged 159% to over 27,000. Most of these are due to connection delays, and customers are left with little option for redress. NBN contracts for customers are binding and penalties to quit are high. Customers are finding themselves paying hefty monthly charges for a service that they are just not receiving, and cannot cancel without paying more.

This leaves customers stuck in the endless cycle of dealing with call centre employees, who can only offer platitudes. What makes the situation worse is that no one is willing to accept responsibility for the issues:

  • NBN is blaming retailers for selling higher tiered plans to customers in areas where those plans are not available.
  • NBN is blaming retailers for poor customer service and inability to support customer migration.
  • Retailers are blaming NBN for inability to deliver on promised speeds.
  • Retailers are blaming NBN for incorrect information of network capacities and network irregularities.

With no one willing to clean up the mess, customers are left frustrated.

Will 5G Be the Knight in Shining Armour?

5G network trials and technology specifications indicate that 5G speeds could be anywhere from 500Mbps to 10Gbps. This is 5-20 times more than what NBN could ever offer. Speed is the most important factor for broadband service users, but this could become moot after a certain point. After all, would you care if you could download a movie in 30 seconds or 5 seconds? Once speed crosses a certain threshold – other factors would come into play. Prime among these would be affordability, which is mainly determined by monthly data limits.

If telcos want more customers to make the switch to 5G, they would need to significantly increase monthly data limits. Most Australians will use 285 GB of data per month in five years’ time, according to estimates by NBN co. Mobile data allowances will have to hold their significant growth rate if they are to compete with NBN’s unlimited data plans. However, the ACCC report is optimistic.

  • Average mobile data limits have grown by 60% from 2012-2016.
  • The average mobile data plan will be able to satisfy the average Australian download demand if this growth rate is maintained.
  • A few mobile operators are already offering high range data plans – with OVO at 100 GB/month, Optus at 200 GB/month, and Vividwireless at unlimited monthly data. All these plans are being offered over the Optus 4G plus network and all are under the $100 mark.
  • The Vividwireless plan at $90/month for 100 GB data is comparable in price to Start NBN 50Mbps at $85/month and TPG NBN 100Mbps at $100/month. All these plans are unlimited data, and the only edge the NBN plans currently have is of speed, which will no longer hold true once 5G arrives.

The deadline is 2020. The clock is ticking. The race between 5G and the NBN is on and my bets are on 5G. I guess its time to make the broadband switch?

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