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This report covers recent developments related to a range of regulatory, infrastructural and competition issues in Australia’s telecom market. It provides statistics from operators as well as data from a number of surveys undertaken in 2015 and 2016. The report includes updates on recent progress with the build-out of the NBN, as well as updates on proposals governing wholesale access to NBN infrastructure, pricing, and revenue structures aimed at expanding services in rural areas. It also assesses plans to amend spectrum allocations and usage in a bid to improve broadband availability.
The report also rovides updated financial and operating data on the main telcos as well as the second-tier players.
Australia’s telco market grows slowly with mobile broadband driving growth
The overall telecoms services revenue reached over $42 billion in 2016, a growth of under 1% for the 12 months to June 2016. The overall market is predicted to grow at a stronger rate in 2017. The strongest growth is coming from the second tier providers, which grew at over 10% during that time period. The market incumbent Telstra still dominates the local telco landscape with well over 50% market share, however this market share is gradually declining. Prices for fixed-line and mobile voice services are being driven down by competition among operators, and by consumer reluctance to tolerate price increases, which engenders higher churn to other providers. Thus opportunities to drive revenue growth through higher consumer and business spend in the short term are limited to mobile data services.
Revenue for Public Switched Telephone Network (PSTN, fixed-line voice and local access) services continue to decline for all telcos. This reflects changing consumer habits. On the one hand, operators are switching their legacy PSTN infrastructure to VoIP, while consumers are also making fewer fixed-line calls in preference to mobile calls and calls through platforms such as Skype. As the NBN progresses, the majority of voice traffic will be IP-based. Fixed-line broadband on the copper network will also decline gradually as fibre and fixed-wireless broadband services become more widely available, though the Coalition’s multi-technology NBN architecture, with its emphasis on VDSL with Fibre-to-the Node (FttN), will make greater use of copper than did Labour’s plan for a national Fibre-to-the-Premises(FttP) network.
While fixed-line telephony traffic and revenue is declining, the mobile broadband market is growing steadily. Though far outpaced by mobile data traffic, mobile data revenue is becoming a significant revenue stream for providers. While mobile voice remains the dominant source of revenue for Mobile Network Operators (MNOs), it will soon be overtaken by mobile data revenue. In time, much of the voice traffic will be data packet via technologies such as Voice over Long-term Evolution (VoLTE).
The release of spectrum for LTE mobile broadband use, as well as and increased uptake by consumers and businesses, is easing helping to offset the decline in revenue from fixed-line services, though as user uptake increases so will the amount of bandwidth consumed. This requires additional investment among operators in spectrum assets and in upgraded mobile infrastructure.
From 2017 Telstra and Optus are better placed to capitalise on spectrum assets, having been able to make use of their 700MHz concessions since a year prior and so further develop their LTE subscriber base. Vodafone remains under some strain though it has seen encouraging revenue growth in recent quarters, supported by a revival of its subscriber base following a long period of decline. This change of fortune is a reflection of optimism among the company’s management as well as a return of consumer confidence following network upgrades. By early 2017 the operator claimed to provide 96% population coverage with its LTE infrastructure, and had deployed VoLTE services across its LTE network. It also aimed to add more than 100 base stations to its LTE network during 2017, focussed on underserved areas.
Pressure on pricing will continue to place a strain on operator revenue into fiscal 2017, with revenue from mobile data services failing to offset the sharpening decline in revenue from voice services. This is being exacerbated by the popularity of OTT services which has led to a fall in SMS traffic and revenue. In addition OTT services are helping to reduce voice traffic volume, while with VoLTE technologies voice traffic is rendered as data.
The three LTE networks operated by Optus, Telstra and Vodafone have developed rapidly during the past two years as these players strive to provide an infrastructure capable of meetings customer demand for mobile broadband services. Telstra continues to be a global leader in mobile services, being a partner with Ericsson in developing 5G. The two companies have demonstrated 1Gb/s capabilities over a commercial LTE network using carrier aggregation technology, and will use the 2018 Commonwealth Games in Queensland to trial a range of technologies including a prototype 5G.
Australia’s broadband sector is making improved progress in its migration to a multi-technology NBN. This has left considerable room for further development in the DSL and cable sectors, both of which are benefiting from the deployment of new technologies. The DSL sector is showing resilience as operators make greater use of VDSL, while the company responsible for the national rollout, nbn (NBN Co) has trialled G.fast technology and expects to provide services based on this upgrade during 2017. HFC is also gaining a new lease of life, with nbn also preparing to trial DOCSIS3.1 technology with a view to commercialising services by mid-2017.
- The overall telecoms services revenue reached over $42 billion in 2016.
- The overall market is predicted to grow at a stronger rate in 2017.
- Strongest market growth is coming from the second tier providers.
- Telstra still dominates the local telco landscape with around 60% overall market share.
- Telstra’s market share is however gradually declining.
- Prices for fixed-line and mobile voice services are being driven down by competition among operators.
Companies mentioned in this report:
SingTel, VHA, Optus, Telstra, iiNet, TPG, Vocus, Macquarie Telecom