TPG Telecom turns to mobile after fixed broadband investment blocked

TPG Telecom has acquired 2x10MHz of national 700MHz spectrum in Australia for $A1.26 billion. The unit price is approximately twice that paid by Telstra and Optus to acquire similar spectrum in 2013. TPG Telecom have announced they will spend an additional $A600 million to build a mobile broadband network to cover 80% of Australia’s population.

This development is no surprise. I wrote back in August 2016 that TPG Telecom, after being blocked by the Coalition’s crack down on competitive fixed infrastructure to NBN Co, would consider moving to wireless broadband. This would avoid the regulatory imposition to split wholesale and retail operations and also the NBN tax of approximately $7 per month flagged by the government.

The cost of this has been significant¬†to TPG Telecom and in-directly to Australia’s telco consumers. The planned $A1.86 billion investment in wireless broadband will likely still only achieve relatively slow speeds compared to a fixed network investment.¬†TPG will have effectively 40MHz of spectrum in capital city areas (20MHz in 700MHz band and 20MHz in 2.5GHz from an earlier auction). This will be sufficient to provide good mobile broadband speeds. More competition in mobile is a good thing for consumers but Australians already receive some of the best mobile broadband services in the world.

 

 

 

 

 

 

 

 

 

 

 

However, this new investment comes at the expense of investment in fixed broadband due to the Government’s desire to protect NBN Co from competition.

Australian fixed broadband customers will continue to rely on NBN Co which has steep financial mountains to climb in order to pay back the Government’s equity and debt investment. This is leading to higher prices for fixed broadband at slower speeds.

The Government has achieved a windfall price for the spectrum it has sold to TPG Telecom. But a win for the Government coffers is a loss for consumers and taxpayers who have missed an opportunity for private investment in fixed broadband.

This is all while Australia slips further down the international broadband rankings.