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The 5G answer to the second-rate NBN

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(Image via @Iam_Dan_ / Twitter)

For as long the NBN has been under development we have heard comments that the NBN is not needed as the world will go wireless. 

In the early days, this was an argument from, among others, Former Prime Minister Malcolm Turnbull. However, while he didn’t often repeat this argument of fear, uncertainty and doubt, the issue did receive wide media coverage and, to a certain extent, this political argument worked.

Interestingly, none of the telcos ever used this argument but if it was true, they would profit from it to some degree. The NBN became a monopoly while still completely in charge of the mobile networks, so if they could indeed offer wireless as a valid alternative, they most certainly would do it.

However, with the 5G hype all around us they issue was taken out of the closet again and given a bit of a new life. Not as a fully-fledged competitor to the NBN, but as Telstra’s CEO Andy Penn suggests, perhaps as an alternative broadband service, for as much as 30% of the market.

Personally, I don’t believe that the opportunity will be that big — perhaps more like 15-20%. But the more interesting aspect here is that you don’t need 5G for that. The current 4G LTE service is more than capable of doing exactly that and this technology has been available for many years. The question, then, that should be asked is, if a mobile solution is an opportunity for 15-20-30% of the market, why not grab it now?

Furthermore, the fixed wireless solutions by dozens of wireless internet service providers are a far more cost-effective alternative to the NBN. While, on a smaller scale, there are hundreds of apartment buildings, businesses, university campuses and regional communities connected to technologies based on what is known as WiFi. By mid-2019, it is estimated the total number of connected premises will be close to a quarter of a million. This technology has not stood still and is very successful in niche markets.

So I am puzzled as to why 5G would suddenly make such a huge difference as an alternative to the NBN. The technologies currently used will, for a long time, be far more cost-effective than a fixed wireless 5G broadband solution. It looks more like the mobile network operators are using the argument to threaten NBN Co and the Government in an attempt to get changes to the current wholesale process charged by NBN Co, which has seen a massive squeeze on their margins.

The telcos also seem to have taken a lead from Verizon in the USA. This company is also using 5G as a fixed-wireless broadband product. But in Verizon's case, it is used to avoid rolling out ubiquitous, fixed high-speed broadband networks. By using mobile this company hopes to be able to bypass telecoms regulations. Using mobile will allow Verizon a much freer rein to ignore the national interest and employ fibre-based fixed networks only for the more affluent areas in its footprint. So, again, the reasons Verizon uses 5G doesn’t apply to Australia since our market and regulatory system is totally different.

Overall, I observe that the 5G hype is slowly being dampened. Optus recently mentioned that it would take two to three years for it to be of sufficient scale to start becoming a more serious product in the market. At this point, I stick to my prediction that it will take a long time for 5G to mature and that there is no immediate business case for it to speed it up.

There is no immediate large-scale demand for 5G and it will be interesting to see if the mobile network operators are going to spend billions of dollars on a very uncertain return on investment, based on new revenues. As I have mentioned before, there is a network opportunity with 5G as it can improve the efficiency of the overall mobile networks by 30% or more — so that means a serious cost saving.

But on the retail side, customers are happy with 4G and not in a rush to get 5G. Regarding the promise of those catchy IoT services, systems such as Narrowband-IoT, LoRaWAN and Sigfox are just doing fine and their customers are certainly not waiting for 5G.

Interestingly, the telcos themselves are also not waiting for 5G. They are happily using their current mobile networks together with dedicated IoT networks for their own customers. On the broadband side, there are plenty of fixed-wireless alternatives to the NBN for those organisations that are able to concentrate on the niche markets where these products most certainly have a role to play.

Paul Budde is managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.

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