Telstra, Optus and TPG control 83 percent of NBN market

Three internet service providers have taken hold of over 80 percent of the NBN market, confirming fears raised over five years ago that the network would entrench power in the hands of a few big players.

Figures provided by Telstra, Optus and TPG during the current financial reporting season show just how many of NBN’s 1.1 million active users as at June 30 they service.

Telstra revealed in its annual report that it “had 500,000 NBN network connections” at the end of June, “with a market share of 50 percent” – or 45.5 percent based on actual NBN-provided numbers.

The incumbent telco said its 500,000 active users consisted of “407,000 voice and data bundle [customers], 34,000 data only and 59,000 [consuming] voice only services".

Optus reported a base of 136,000 NBN broadband customers at the end of June. That would give it a market share of about 12.4 percent.

Despite being late to market with NBN plans, TPG has quickly established itself with 119,000 active users as at July this year. That gives it an 11 percent share of all active connections – or 10 percent if considered as a percentage of NBN’s active user base at the end of July.

TPG-owned iiNet had 157,000 of its own customers with NBN connections, giving it a market share of between 13.4 and 14.1 percent.

Combined, that sees Telstra, Optus and TPG (including iiNet) commanding between 81.3 percent and 83 percent of all active NBN connections.

It all but confirms a prediction made by former Internode managing director Simon Hackett in March 2011 that only a handful of ISPs would have the scale to compete nationally in an NBN world.

Hackett believed the NBN’s price models favoured ISPs with more than 250,000 customers nationally, and that smaller ISPs would be priced out of taking a direct wholesale feed from NBN Co if they wished to service a national audience, relying on sub-wholesalers instead.

It isn’t clear to what extent this has occurred.

An NBN Co spokesperson said there were “over 50” retail service providers taking a direct wholesale service from NBN. This figure does not include sub-wholesalers, which service a band of smaller providers.

However, while there are a sizable number of small players offering NBN services, it’s unclear how many of the “over 50” providers taking direct service from NBN Co are competing nationally for customers, versus in specific parts of Australia.

Hackett picked the winners in 2011 as “Telstra, Optus, iiNet, TPG and Internode”. 

Smaller ISPs have been relegated to fight over the remaining 17 percent to 19 percent of market share, and there is potential that the largest three NBN resellers can secure even greater market share in future.

Telstra indicated that its low-cost challenger brand Belong was gaining market share through its NBN offerings, though it did not break out specific numbers for the business.

“Throughout FY16, the low cost data-focused offering and hassle free approach of Belong has seen it secure more than 250 percent growth in the NBN network consumer market helping new broadband customers get connected,” Telstra said in its annual report.

The NBN rollout is also entering a new phase of upgrading and folding in the hybrid fibre coaxial (HFC) networks of Telstra and Optus, offering new, large-scale opportunities to secure retail connections.