In September 2013, TPG launched its own fibre-to-the-basement (FTTB)
network that would service approximately 500,000 premises. The company’s
move capitalised on a regulatory loophole to extend its established network to
apartment buildings, and in so doing prompted a response from the NBN. The
NBN Co was tasked to act as the exclusive wholesaler of the National
Broadband Network, as it aims to promote healthy competition for the local
telecommunication sector. In the apartment buildings equipped with this
technology, TPG announced its plans to offer speeds approximately four times
faster than those currently offered. It also plans to offer the same price as
existing copper broadband services, which is purportedly testing the economic
argument for NBN Co. TPG revealed FTTB construction in the CBD of
Sydney, Melbourne and Brisbane.

The NBN Co is the government-owned company in charge of implementing
the National Broadband Network. In March 2014, NBN Co revealed plans to
roll fibre to apartment blocks partly as a response to TPG’s FTTB rollout. NBN
Co revealed it was undertaking trials in conjunction with iiNet, M2, Optus and
Telstra.

Shifting gears

The entry of vertically integrated carriers such as TPG to lucrative populous
areas such as apartment buildings serves to weaken this dynamic. The move by
TPG is seen as a way to target the high value customers from the NBN, and in
the process effectively reduces the financial viability of the NBN Co,
particularly as it relates to the more remote areas. The universal wholesaling
function supposedly under the control of NBN Co will ensure the viability of
remote areas, as the larger margins of metropolitan areas will serve to partly
subsidise regional areas with a smaller client base. TPG has consequently
responded by indicating the benefits of its move as a means to promote healthy
competition. Contingent on the outcome of TPG’s foray into its FTTB
construction, other major telecommunication carriers are closely evaluating
similar initiatives.