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Telstra stirs NBN pot with 4G/LTE deployment announcement

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For predictable, spiritless repetition, Australia’s broadband network debate beats Groundhog Day hands down.

It’s like being condemned to spend eternity on tour with a geriatric opera: the same actors for each performance croak out the same parts with the same orchestra in the pit, the chorus limply recites its lines, and everybody gets ready to do it again tomorrow.

Today, Telstra made a network announcement, the government released a document, the Opposition made a statement attacking the National Broadband Network (NBN), and Australia’s political and technical journalists wrote it up in line with whatever slant they’ve already adopted.

The details? Oh, very well.

Telstra, which has been trialling 4G mobile technology since last year, has leapfrogged its competitors by detailing deployment plans for 4G/LTE with Ericsson. CEO David Thodey told the Mobile World Congress at Barcelona that the central business districts of a few regional centres and all Australian capitals will have the technology by the end of this year.

This deployment will use Telstra’s 1800 MHz spectrum (not, it must be noted, the 850 MHz spectrum used by more-widespread NextG network). It will use Ericsson’s RBS 6000 base stations, and will upgrade its existing mobile backhaul network to an Enhanced Packet Core (EPC) design.

(At this point, the chorus takes its place on the stage to let the audience know that the Telstra network will be in direct competition with the Australian government’s NBN).

The Federal Government, which is funding the NBN rollout to the tune of around $27bn, yesterday released the executive summary of a review of NBN Co’s (the company established to build and operate the network) corporate plan by Greenhill Caliburn.

The nine-page document includes the statement that “trends towards ‘mobile-centric’ broadband networks could also have significant long-term implications for NBN Co’s fibre offerings, to the extent that some consumers may be willing to sacrifice higher speed fibre transmissions for the convenience of mobile platforms”.

Australia’s Opposition spokesperson for communications, Malcolm Turnbull, has responded to these two events with a statement that wireless “could seriously undermine the economic viability of the Gillard Government’s $50bn National Broadband Network”.

In his announcement to the Mobile World Congress, Telstra’s CEO re-stated a position put to media and analysts last week when Telstra announced its half-year results: fixed fibre and mobile networks are complementary, he said. “We’re ... driving both wireless takeup and fixed takeup; we really do honestly believe they can co-exist.”

Analysis

Australia’s media consensus is that Telstra’s 4G/LTE announcement puts in direct competition with the NBN (which doesn’t yet exist beyond pilot sites) rather than with Telstra’s existing mobile competitors Optus and Vodafone (which already compete for mobile customers).

Telstra’s hidden jab at its competitors is in the announcement that it will upgrade its mobile backhaul networks to cope with the base station upgrade. A mobile network offering up to 42 Mbps speeds (depending on the plan purchased, contention in the cell, device capabilities and so on) needs fast, fibre-based backhaul to cope with demand.

Telstra’s mobile network is already supported by the largest number of fibre-connected base stations. To match the 4G network, its competitors need to upgrade both their mobile base stations and their backhaul.

Thodey’s statements about complementary networks need to be tempered with some skepticism. After all, Telstra is in the business of selling both fixed and mobile networks, and it will do so (as a retail service provider) even after the NBN is built (if it is).

However, a hypothetical household of the future may have multiple network-connected devices: a TV that can draw down content from the Internet as well as from the broadcast spectrum; the desktop whose dominant application is online gaming; the games console; plus multiple smartphones and/or tablets that roam to Wi-Fi whenever it’s available. The extra cost of maintaining a fixed network connection may well be a good deal – if it means saving the mobile plan caps for when you’re away from home.

Who drives the market?

There are two other considerations left out of the assumption that mobile networks automatically compete with the NBN: the needs of Optus and Vodafone, and the industry’s power to influence consumer behaviour.

Fibre connections are good for mobile carriers. Their customers are mobile – but the base stations are fixed, and increasingly those base stations need Ethernet service delivered over fibre (it’s an architectural assumption of the Enhanced Packet Core).

While Telstra’s aggressive rollout schedule will put immediate pressure on its mobile competitors in cities – where fibre is at its most pervasive – Optus and Vodafone will already have an eye to how and when they can fibre-connect the maximum number of non-metropolitan base stations. If it’s delivered in reasonable time, and if it offers good wholesale terms, the NBN will be a highly attractive wholesale network to both mobile carriers.

Consumer behaviour is also highly amenable to influence by the industry. To the extent that customers are using wireless as a replacement for the fixed network – a phenomenon that exists, but is poorly analysed – they do so partly in response to the available plans and pricing.

There’s no better example of this than the saga of Vodafone’s “Infinite” plans, launched last year. Vodafone wanted to influence consumer behaviour, specifically to encourage mobile substitution for the fixed line.

The strategy succeeded spectacularly – so well, in fact, that it contributed to network congestion dubbed “Vodafail”, followed by a class-action lawsuit against the carrier by disgruntled customers.

Telstra says it wants both fixed and mobile customers. It can do so by offering fixed-mobile bundles that span fixed (copper today, the NBN in the future) and mobile services. As Thodey emphasized last week when discussing Telstra’s financial results, bundled customers churn less than single-product customers.

If a Telstra of the future successfully attracts customers to “whole-of-household” bundles, with high speed access at home, automatic device roaming to cheap “at home” voice calls, and Internet access over the NBN, its competitors will surely follow. ®

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