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Telstra dominates NBN retail, but less than you might think

Incumbent's NBN conversion rate only so-so, but will accelerate

Telstra's been accused of putting a stranglehold on National Broadband Network (NBN) connections. Our take: not quite yet.

The criticisms stem from Murdoch organ The Daily Telegraph, which in an otherwise unremarkable story about the incumbent bulking up its technical staff for the NBN, included this unattributed, unsourced statement:

"Telstra currently commands a 50 per cent market share of the NBN, which equates to about 250,000 customers, but the telco is looking to significantly increase that as the rollout of the infrastructure project gathers pace."

The latest weekly rollout report for the NBN, here, says there are more than 740,000 premises activated. At 250,000, Telstra would hold just 34 per cent of NBN services. Nor does the calculation work out for June 30, 2015 (for which both Telstra and NBN have published financial data).

In this investor presentation (PDF), Telstra puts its end-of-financial 2015 position as 211,000 NBN connections. At the same time, the NBN reported 486,000 services activated, giving Telstra a 43 per cent share, not 50 per cent.

There's an extra layer of nuance in Telstra's data, however: because it's the only entity subject to the Universal Service Obligation, it has voice-only connections, something no other retailer provides.

The Telstra investor briefing gives the breakouts: "As at 30 June 2015, we had 211,000 NBN connections made up of 161,000 voice and data bundles, 9,000 data-only services and 41,000 voice-only services."

Its broadband services – 170,000 in total – make up 35 per cent of the NBN, not 50 per cent. Compare that to Telstra's position in the overall fixed broadband market. At June 30 2015, its 3.1 million services represented nearly 48 per cent of the market.

In other words, while Telstra is almost certainly the largest retailer on the NBN, its performance in that market lags far behind the footprint it has in other key telecommunications sectors.

During 2016 and 2017, however, Telstra's shadow will loom much larger than it does today: the progressive handover of Telstra's HFC network and customers to the NBN will bulk up its share considerably.

That's because, unlike the ADSL market, Australia's two cable broadband networks have always been vertically integrated. The country's competitive internet service providers have no presence on the cables owned by Telstra and Optus, and there's no real incentive for a customer to switch retailers merely because ownership of the infrastructure changed. ®

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