NBN treads on big telco toes with business fibre offer

NBN Co has unveiled a new A$700 million investment plan to provide fibre to businesses that could shake up competition in the Australian enterprise services market.

The national network provider has pledged to create 240 Business Fibre Zones across Australia, covering more than 700,000 business premises. The aim is that businesses within the zones will have access to lower cost, high-speed broadband connections to support unified comms, collaboration, remote file-storage and cloud-based applications, in much the same way as businesses located in city centres.

Essentially, NBN is offering its wholesale Enterprise Ethernet service – which offers speeds of between 100 Mbps and just shy of 1 Gbps – to retailers at lower prices; in some areas prices will be cut by as much as 67%. In addition, the wholesaler says that in 90% of cases it will not charge for building out the fibre connection when a retailer orders Enterprise Ethernet, and if the retailer signs up for a three-year plan there will be no upfront connection cost.

Good news all round, for both retail service providers and business customers, right?

Sort of.

Obviously businesses have to rely on retailer service providers to pass on the savings to them, but in a competitive market there’s no reason to assume that would not happen.

It’s the competitive market element that is key here. Lower cost wholesale services from NBN could give a boost to smaller telcos looking to increase their presence in the business services market. An already fairly dynamic segment could become more competitive.

But that’s not necessarily good news for the biggest players in the market, which in this case means incumbent operator Telstra.

A Telstra spokesperson told the Sydney Morning Herald that the plan raises concerns about the possibility of unnecessary network overbuild. You could argue that Telstra’s fears are more for its own market share than an altruistic worry over inefficient investment plans, but it was not the only operator to express such a sentiment. TPG Telecom also noted that it hopes NBN will look to roll out infrastructure in under-served areas, rather than displace exsiting privately-funded networks.

Other operators though said the move should be good for competition, and that’s probably the biggest take-away here.

“Working with our industry partners, we believe these new initiatives will help open up the market for all internet providers – both existing and new, small and large – driving competition so that businesses can thrive right across Australia,” said NBN Co CEO Stephen Rue, in a statement.

NBN shared the locations of the first 130 planned Business Fibre Zones, including 67 in what it described as regional locations. It also noted that 14 of the zones will cover healthcare facilities, 11 of which are included in the first wave.