What is the future for our mobile network operators?

‘Wireless is just one wire less’ or ‘Wireless is just spectrum wrapped around a  fibre core”

The Australian mobile telecommunication industry is continuing to resist structural changes, but the reality is that if they don’t transform, technology will do it for them. We have seen the fixed telecom operators slowly being pushed back into the infrastructure utility market, consequently we have seen an ongoing drop in their market valuations.

Mobile networks are moving in that same direction– that is, the largest part of their network will be a utility, with three mobile infrastructure providers and little economic sense for overbuilding the basic infrastructure, the industry is facing serious problems.

The major use of mobile phones is in data (95%+) and the use of data will only increase. That means that in order to be able to handle all of this broadband traffic the underlying backbone network needs to be fibre-based.  Already most mobile base stations in cities are linked to fibre optic networks, with more towers connected to fibre year by year, 5G will only speed up that development as only a fibre network will be able to handle the increased broadband traffic that will be collected from these access points that then needs to be send back through the network.

Independent mobile tower operators are increasingly taking over more and more of these towers, as it doesn’t make economic sense for every mobile operator to deploy its own towers and build its own fibre network to these towers.

With mobile towers closer and closer to the end user there is an opportunity for the mobile operators to offer effective high-speed broadband competition with the NBN.

Most NBN connections are fibre-to-the-node only, rather than to the premises, and this creates an opportunity for mobile operators with deep fibre networks and, for example, a last mile 5G connection to directly compete with the NBN. This could also open up more market opportunities for MVNOs.

The next step for the NBN will be to decide how to proceed after 2020. Fibre-to-the-home and fibre-to-the-curb are the most likely options here, and 5G is certainly one of the options to drive proper high-speed broadband into people’s homes.

So a convergence is taking place. Increasingly the backbone networks for the mobile operators will mimic the NBN and there will be little room for duplication of these networks, 4G and 5G access points are their ‘nodes’ in the mobile networks. So wireless will increasingly be a last-mile retail element rather than a basic network.

This changing market situation is already reflected in the evaluation of some of the mobile network operators (MNOs) and mobile tower operators in the USA. Valuations of the MNOs are going down while those of the tower operators are going up. This is a clear indication of where the financial market sees the market moving to.

So, rather than resisting change the MNOs should take a leadership role in the transformation of the industry, especially with the inevitable changes that are going to occur in the post-NBN 2020 period. A holistic approach will be needed instead of one that is aimed at protecting a sharp divide between mobile and fixed networks.

Paul Budde



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