How much revenue can the channel expect from NBN?

For those in the channel anxiously waiting to see who wins the bid to build the federal government’s National Broadband Network (NBN), the good news is that the wait is almost over.

The bad news is that it’s likely some equipment vendors and their partners will miss out completely.

The deadline for bids ended at noon on 26 November 2008.

The federal government said it will take eight weeks for the panel of experts, chaired by secretary of the Department of Broadband, Communications and the Digital Economy, Patricia Scott, to deliberate and make its recommendations to Communications Minister, Senator Stephen Conroy.

Fingers crossed that by February, the Australian telecommunications industry will have a better idea about who, if any of the five remaining bidders – Acacia, Axia, Optus-Terria, TransACT or the Tasmanian Government – will have a stake in the government’s $4.7 billion fund to build what is claimed to be a new open access, fibre-based broadband network that reaches 98 percent of Australians.

At this stage, it appears neither Telstra nor its immediate partners will have a direct association with the project after the government dismissed the telco from the tender process for failing to submit a Small and Medium Enterprise (SME) Participation Plan, one of five mandatory requirements of the RFP.

Their dismissal created by far the biggest shockwave since the request for proposals began in April 2008.

However, unlike other applicants, it seems improbable that Telstra can be kept out of the NBN process, at least according to David Kennedy, a research director at Ovum Research.

He believes that Telstra will have to be involved in final arrangements in some way.

“An alternative operator will want to get access to Telstra’s sub-loops as cheaply as possible, but Telstra will likely want a higher price. Even if the government requires Telstra to provide access to its sub-loops, there’s going to be a huge argument over price,” said Kennedy.

For the channel, business could boom, especially for those with existing partner arrangements with bidders, but will it?

Damian Kay
Managing director, Telcoinabox

The National Broadband Network (NBN) presents an interesting situation for players in the $40 billion telecommunications industry and to some degree it will level the playing field between network operators and resellers.

Telcoinabox is a wholesale aggregator, supplying more than 110 retail resellers in the industry.

It relies on its relationships with the major networks to wrap up value-adds and onsell to its resellers’ network access.

Regardless of the network (Telstra, Optus and AAPT), we find we end up competing against their retail divisions which in many situations is at pricing less than we can buy from their wholesale channels.

So where am I going with this?

The NBN opportunity levels the playing field, and depending on how wholesale access pricing is determined, everyone has the same opportunity for access and revenue.

This effectively means that say Telstra wins the right to build the network, Optus, AAPT and other networks will access the network on the same terms as other resellers.

Then it comes down to what each provider chooses to put down the network, e.g. converged voice and data which theoretically should be cheaper than supplying a fixed-wire service (copper) and a “2nd lined”/fixed DSL service that are separate.

What an opportunity!

The added opportunities are the value-adds such as ‘hosted voice’ which removes the need for in-office CPE/PABX hardware and expenditure.

It does not get any better than that.

Paul Budde
Analyst, Paul Budde Communication

The NBN will be an enormous boost to the industry.

We are talking about a new infrastructure that is going to deliver many opportunities for value-add services and applications and this will lead to improved margins in the telecoms wholesale and resale industry.

A doubling or more of the current, admittedly low, margins are easily achievable on this new network, as it will be an open network, giving participants far greater freedom about the products and services they can deliver on it.

This will allow for much more specialisation and niche markets, which can of course attract even higher margins.

The key to success is what I call ‘valued-added infrastructure services’.

They include data centres, billing, network management, hosting and security etc.

Far more sophisticated applications (Web 2.0) will become common among businesses and other organisations operating on the web.

This will necessitate a significant increase in system integration services, particularly at the front-end, the edge of the network.

The key here will be integrating connectivity with content.

All of these new developments and opportunities, however, will require the industry to move away from one-size-fits-all solutions and commodity services; companies will have to lift their game around customer services, innovations and responsiveness.

Those who have the right attitude and the right skills will be able to participate in this NBN bonanza.