The government's Department of Communications estimates that TPG Telecom Ltd's (ASX: TPM) plans to install fibre across Australia could reach 1.8 million homes and businesses across Australia.
That could transform the junior telco into a major competitor for both the National Broadband Network (NBN) and the giant of the sector, Telstra Corporation Ltd (ASX: TLS).
TPG plans to install fibre optic cable to the basement (FTTB) to around 500,000 premises in Australia's capital cities initially.
Laws introduced to protect the NBN from competition limit companies such as TPG from installing fibre beyond 1 kilometre of their existing networks that were built before 2011. But it seems those laws have underestimated the location and reach of third-party fibre networks until now – and TPG plans to utilise its advantage and the loophole in the law, to roll out its own fibre network.
Under the initial NBN plan, the government probably assumed that telcos would cede their fibre networks, and not compete with the NBN. Of major concern now is that other telcos and network providers such as Telstra and Optus –owned by Singapore Telecommunications Ltd (ASX: SGT), would follow TPG's lead and offer FTTB services in capital cities.
Just yesterday the government drafted a plan to force companies offering FTTB services to split up their company into wholesale and retail services, with separate staff, executives and systems. Without that, telcos could plunder the most profitable parts of the NBN, which is using profits from urban users to pay for fibre services outside the cities.
But telcos are unlikely to be too worried about that. They can split their companies, but at least they then have control over the infrastructure, rather than having to pay the NBN to use theirs. But Telstra has already agreed not to compete with the NBN, forcing it into a difficult position, and handing its competitors an advantage.
The Department of Communications does say that if other telcos do choose to follow in TPG's path, superfast broadband could be offered to more Australians sooner – which could also cut the cost of the NBN rollout to taxpayers.
Sounds like a win-win to me.
