At a cost of $70 a month, and with guaranteed minimum download speeds of 50Mbps per second, the plan costs the same as Optus’ NBN plan, which offers slightly inferior peak-time download speeds of 40Mbps.
Mr Lew said Optus would be able to get better margins out of this product than it can out of reselling NBN plans, even though the government’s ban on Huawei equipment from 5G networks has made the construction costs higher than they would otherwise have been.
“We needed to make sure we give our shareholders a proper return for the capital invested, and we were able to achieve our target price [of $70 a month] even without Huawei equipment,” he said. Optus is using Nokia equipment to build the new network.
The NBN has largely shut telcos out of the fixed-line broadband infrastructure business, consigning them to the role of retailers. But the comparatively high NBN wholesale price – almost $30 more than it was when Telstra was the main fixed-line wholesaler – has left telcos struggling to make a margin out of reselling NBN plans.
Industry sources say the potential to make a better margin out of fixed wireless broadband is driving investment and innovation in this area.
Optus’ announcement will heighten concerns that the controversial multi-technology policy, which was overseen by then-communications minister Malcolm Turnbull to replace Labor’s fibre to the premises policy, has created a substandard network that is vulnerable to competition from the mobile sector.
NBN Co has said it expects about 25 per cent of premises in Australia not to connect to the NBN, with 15 per cent bypassing the NBN with mobile or fixed wireless connections. But Mr Lew said he believes Optus has enough spectrum bandwidth to support a greater take up than that.
If true, that could leave NBN Co struggling to make enough revenue to meet its targeted 3.2 per cent internal rate of return, which would increase the chances of a write-down.
But an NBN Co spokesman downplayed such concerns, saying NBN Co welcomed innovation.
“We have long stated we believe the NBN access network and 5G will be complementary technologies in the future. Mobile operators continue to acknowledge the NBN access network will serve the vast majority of the market for broadband and will play a critical role in meeting consumer needs for high-speed data.”
Labor has ramped up its criticism of the Coalition’s multi-technology mix in recent weeks, accusing NBN Co’s chairman of “misleading” comments that the network is worth its book value of $50 billion.
“No amount of misleading spin can hide from the fact the flawed decision to use copper and HFC has severely damaged the long-term economics of the NBN and destroyed taxpayer value,” communications spokeswoman Michelle Rowland said last week.
NBN Co chair Ziggy Switkowski answered these claims in a letter to the Financial Review, saying it was too early to value the NBN.
Optus is the first of the three mobile network operators to launch a fixed wireless product, but both Vodafone and Telstra have signalled they are looking seriously at the possibility of using their newly acquired spectrum for that purpose. Mobile virtual network operators such as Vocus – which will have access to Optus’ 5G network – are also understood to be looking at the possibility.
Optus has an advantage over its competitors because, thanks to its acquisition of Vividwireless in 2012, it has more spectrum in the 5G bands than its competitors. Mr Lew said this would allow Optus to deliver fibre-optic-level speeds over a wireless network.
“In Sydney and Melbourne we have more spectrum that anybody else, with 100MHz of bandwidth spectrum, whereas our major competitors only have 60. So I think certainly from that perspective we certainly have enough spectrum,” he said.
However, he added that Optus would also have to ensure there was enough bandwidth to support a full 5G mobile network alongside the fixed wireless services.
The Optus 5G Home Broadband will be available in around 50 suburbs in Canberra, Adelaide, Brisbane, Perth and Sydney by April, with plans to roll it out in other regions over the next year.
While Optus is calling the plan “fixed wireless”, no installation of equipment on the customer’s house is required, as it is with the NBN’s fixed wireless service.
Customers will simply have to plug a modem into the wall, as they do with Optus’ previous 4G Vividwireless product. Unlike Vividwireless, which used Huawei modems, Nokia is providing all the technology for the new products – a result of the federal government ban on Huawei equipment from Australia’s 5G network.
Commenting on the Huawei ban, Mr Lew said: “At the end of day we have a multi-vendor strategy. We don’t rely on one particular vendor. Even with 3G and 4G we’ve used multiple vendors. So that has stood us in good stead as we’ve moved to 5G, unlike one of our other competitors.”
Mr Lew was referring to TPG, which cancelled the construction of its Huawei-built 4G network in response to the ban, on the grounds that upgrading it to 5G would be impossible.