No more room for fixed line consolidation: Hackett

Internode's MD, Simon Hackett, said four major players now occupy 90 per cent of the market

The period of consolidation in the Australian fixed line market has concluded, ahead of the Federal Government's National Broadband Network (NBN) rollout, according to Internode managing director, Simon Hackett.

Speaking at the 2012 Commsday Summit, Hackett said that while the telco industry had talked about the prospect of consolidation for some time the market had happened “in a hurry”, with the non-integrated players making up just 10-12 per cent, as opposed to 22 per cent, previously.

Hackett said the market now consisted of just four major players in Optus, Telstra, iiNet and TPG, following iiNet’s acquisition of Internode, AAPT and TransACT.

“The strange thing is that suddenly we are post-consolidation in the fixed line market. We have 88 per cent of the retail market sitting in four players and there isn’t much national consolidation left to happen,” he said.

“The fixed operators have had to get around the fact that suddenly customers don’t just fall out of trees like apples, you actually had to do something else in the market rather than just expect constant growth and increase in numbers” he said. “At this point in the market if you can get fixed broadband and you want fixed line broadband you’ve probably already got it, it’s about keeping the customers you’ve got and selling your existing customers more stuff.”

However, there is still plenty of room for players in the rest of that market to consolidate outside of the fixed line industry, he said, noting potential unions between fixed operators and mobile operators could make a lot of sense. His comments follow the announcement from M2 Telecommunications Group yesterday that it has acquired Primus for $192.4 million.

Hackett noted the other driver behind the rapid market consolidation is NBN Co’s pricing structure for services over the National Broadband Network (NBN), which he argued will squeeze smaller players out of the market.

“Unfortunately the problem is they [NBN Co] didn’t invent it, they copied the Telstra wholesale ADSL access model and the problem with that is it’s a 1990s access model for a 21set century network,” he said. “It’s actually the wrong model and that cost model… advantages large players over small ones and particularly advantages large players who are national above a certain threshold size.”

“There are some players, like Adam [Internet] etc, who are very strong in particular states and they are not impacted by the challenges this model creates, providing they remain in their regions.

“It’s too late to become national from scratch and if you do become national you’ll be doing it by reselling one of the other four guys’ products,” he said. “Whereas In your own regional market it’s perfectly sustainable as it is.”

“In my view, the NBN Co pricing model drives the reality that if a directly connected NBN player is going to be one of those four or they’re just going to be subscale, they won’t become large enough for the economics on a completely national basis to make sense, they’re going to have to wind up acquiring some of their services across at least some of their terrain through one of these guys and pay them a margin to do it.”

According to Hackett, NBN Co continues to tackle numerous challenges which are “frightening” to industry, which arise from the advent of new business deals and regulation laws being put in place.

“There may well be more laws as regulators discover what does and does not necessarily work well in this realm.

“When you throw new laws, new regulations, and new business deals that none of us know the details of, together… you may build something whose shape and size you did not expect and there’s a mildly concerning sense of randomness about the exact way we’re going to get this network to come together.”

Hackett said the three year rollout plan has given the public the impression the outlined premises will be built within this timeframe, but is instead a promise of what will be commenced not completed.

“It’s a promise of what will be commenced in the next three years and will probably be finished in the next four years, that’s assuming there isn’t a federal election in the middle.”

Follow Chloe Herrick on Twitter: @chloe_CW

Follow Computerworld Australia on Twitter: @ComputerworldAU

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about AAPTAAPTACTAPTetworkFederal GovernmentIinetInternodeOptusPrimus AustraliaTelstra CorporationTPG Telecom

Show Comments