Optus makes sure there will be competition in 5G

After lots of talk about 5G being a potential competitor to the NBN, Optus is throwing the cat among the pigeons. Its announcement of a fixed wireless product is challenging the NBN head-on. It will be interesting to see what the reaction from the national broadband company will be, as it has already hinted at the need for extra regulations to protect itself from activities such as the one Optus will be launching.

Optus is starting with a relatively low-speed service, indicating that it is aiming at the sweet spot in the market where 5G can compete effectively against the NBN.

A key element here is capacity. 5G can offer this over short distances, especially in the high-density metro markets, and this will allow it to deliver good quality broadband at an affordable price. In the end this 5G capacity needs to be split over the number of customers that are within one of its 5G areas; and that dictates the end performance of the service for the individual. Theoretically 5G could be 50 times faster but this depends on many other factors within the footprint of a 5G area, such as the number of users, the number of 5G antennas, the lay of the land, building obstructions, distance between customers and the antennas, and so on.

So what will happen is that Optus will configure an area where it will deploy 5G, put all those factors into the equation, and then design the network on which it can offer products and services. Higher speeds will be sold at higher prices but at this stage Optus has only announced a low end of the market product of 25Mb/s.

The sweet spot for 5G is indeed at the bottom end of the broadband market – the group of customers who don’t download movies every night and have relatively moderate broadband usage. This is where 5G will be able to deliver a similar or better performance than the NBN, theoretically at least, and at a competitive price. Optus will most certainly make this as attractive as possible by bundling 5G products with their existing mobile service. Fixed wireless means that the 5G service will be delivered to a fixed spot in the premises – like current fixed modems – so it is not a mobile service on a smartphone.

5G at higher speeds will not be as competitive with the NBN, but there are opportunities for those potential customers who are less worried about the price of the service but who want a better service than the NBN is offering. Such products would typically have to be around 100Mb/s.

Over time 5G will also be used for the IoT range of services, but for that you do need a deep deployment of 5G and this could easily take 5-10 years to develop. And we still don’t know how this will work out in relation to roaming. Very few organisations will want to rely on the coverage of only one operator for their IoT offerings. Furthermore, there needs to be an internationally accepted technical 5G standard before mass production of 5G equipment will occur in any cost-effective way, and it could take another two years before this step-by-step process is fully finalised.

Other issues, such a privacy, security, reliability, insurance, legal responsibilities etc, will need to be sorted out before many of these new IoT services can be deployed. 5G is relatively expensive in comparison with other IoT technologies (LoRa, Sigfox etc) and so that will be another area where we will see some fierce competition. Therefore, in relation to 5G we will initially see some pilots and small-scale projects involving cities, utility companies, campus networks, car manufacturers, etc. Costs are critical as we are talking about millions or billions of sensors and devices that need to be linked to the network. So it will be interesting to see if 5G can deliver on that in a cost-effective way. In relation to IoT, 5G might initially fit better in niche markets that require a higher quality of IoT service and might therefore attract business customers that are willing to pay the higher costs.

Optus is looking at a first-mover’s advantage, but there is still plenty of time before the real action begins. Telstra is also clearly well advanced in 5G and it will still end up the leader in this market. Nevertheless it is great to see Optus taking the lead here. And it is also important because we will see competition right from the start, which means good prices for customers.

Paul Budde