Vocus chief says NBN stifling investment by smaller telcos

More debate has erupted over the National Broadband Network with Vocus chief James Spenceley saying the huge project has led to a reduction in the level of investment being made by other telcos.

His comments come as NBN chief Mike Quigley defended the company’s strategy in lieu of wireless alternatives, telling a Senate Estimates Committee hearing that the government made the right choice in using fibre.

The coalition, led by opposition communications spokesman Malcolm Turnbull, has said wireless would be a better choice.

Spenceley commented yesterday after the company’s results were announced, saying the amount of uncertainty around the NBN is stifling investment.

He claimed smaller telcos weren’t constructing wireless or fibre networks because they fear the NBN will make them redundant.

“Maybe in two or three years’ time the NBN will be a net positive for the industry but certainly right now the uncertainty is halting any serious investment and is detrimental,” he told the Australian Financial Review.

Ovum research director David Kennedy says while it is true that the NBN has halted some investment in DSLAM networks some of it would have occurred anyway.

“I think it is true we’ve seen a slowdown in DSLAM investment since the NBN was announced – and that goes back to the original version of the NBN which was fibre to the node. It would have stranded those networks,” Kennedy says.

“I think the slowdown in DSLAM investment is partly due to that and partly due to market saturation. A lot of ISPs had built their networks … there is now a natural element of the slowdown there.”

Kennedy says it is true that companies are holding off on investment because of the network but that is because the nature of the industry is moving to a “resale model”.

“Clearly the incentive to invest in fixed infrastructure is clearly in decline but I think that decline would have occurred anyway. Most of the commercial investment has already happened and the NBN really sealed the deal,” he says.

NBN chief Mike Quigley specifically addressed an announcement from Telstra that it would roll out a 4G mobile network for its mobile customers – the decision sparked a wide-ranging debate about whether wireless should be used for the NBN rather than fibre cables.

The Telstra announcement, along with an announcement from US president Barack Obama saying wireless would be used to provide coverage to 90% of his country, was used by the coalition as ammunition against the NBN.

Quigley said wireless services could not deliver the same type of household services as fixed wires.

”Far from proof that fibre will be redundant the 4G announcement is very good news for the NBN rollout,” Quigley said.

”While people like the convenience of their wireless devices, fixed networks are and will continue to be the workhorse of data download.”

The coalition argues that constructing a network of wireless services will be cheaper and more in tune with customer demand but some analysts argue that constructing such a network would be expensive and would not deliver home services as well as fixed lines.

Quigley directly attacked some of the commentary being used on the issue of fixed networks versus wireless, saying that many comments were “uninformed” and “ignored the physics and economics of how networks actually work”.