One of the great promises of the NBN is innovation and there is no doubt that this indeed will happen. The first small-scale examples of some of the digital economy pilot projects on the NBN are already showing good results; however at this stage they are most likely to remain small-scale only.
The reason for this is linked to the concern that BuddeComm has expressed ever since the current NBN Co business model was introduced – that the current design of the NBN will hamper innovation at least in the first 3-5 years of the project.
This is because the current design is basically a replica of the present telecoms model, which is a ‘me-too’ model. As it is very difficult for companies to develop national digital economy retail services on top of the NBN perhaps only three or four telcos can actually afford to make the necessarily large investment; and Telstra is without a doubt the most dominant of these. Through a second level of wholesale these few players, in a variety of (wholesale) arrangements, offer their services to another 40 or so smaller telcos and ISPs.
And most of these players offer ‘me-too’ products – much the same as the products they are currently offering, based on the DSL and mobile networks. The differences relate to what broadband capacity (speed) and (download and upload) conditions are packaged around a particular price point.
This is certainly not what BuddeComm calls innovation. History tells us that it is also most unlikely that these companies will in fact come up with truly innovative services – not now, and not in the foreseeable future. As we have seen throughout the history of the industry, disruptions from the outside are bringing in new companies who deliver true innovation to the telecoms market.
There are, of course, always exceptions to the rule and AARNet in particular deserves to be singled out as a provider of a whole range of innovative services. Others, such as Macquarie Telecom, are differentiating themselves with additional data centre and cloud computing facilities. But both of these organisations operate in the corporate and government markets, not the consumer market.
The problem for the true innovators is that the design of the NBN makes it far too costly for them to enter the market unless significant market penetration has occurred – hence my prediction of the 3-5 year period before we expect innovation to begin over the NBN. Once that happens the telcos will get a run for their money – similar to the developments that took place when the internet became available to the general public, and to what happened when smartphones and apps broke open the mobile market.
There is still time and room to change the NBN Co business model to allow the company to better attract innovative new players, but at this stage neither side of parliament seems to be interested in making the changes necessary for this to happen.
Once the wholesale entry barrier to the NBN has been lowered more non-telco companies will start exploring their opportunities. Another positive development here would be the provision of Layer 3 services on a wholesale basis. This would significantly increase the number of players on the NBN. At this stage, however, NBN Co has indicated that it doesn’t really want to have to deal directly with a potentially large number of wholesale costumers. It prefers to use the current telcos as middlemen (hopefully, as well as other middlemen – eg, in healthcare, smart grids, etc).
True service innovation over the NBN is indeed still some years away but it will happen eventually, and it will by then that we will finally get rid of the already far too many ‘me-too’ services on the NBN.
We invite your comments: Please click here to commentTagged in: Analysis, Australia, Broadband, Digital Economy, NBN, NBN Co