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NBN’s 1Gbps promise

After years of speculation and set-backs to the government’s proposed national broadband network (NBN), Australians are now being told that by the end of the year, those households and businesses that are linked to the NBN will be capable of downloading content at speeds of up to 1 gigabit per second (Gbps), according to NBN Co.

Currently, people with an ADSL2+ connection are limited to a maximum speed of around 24Mbps, whilst most experience much less than that. This is because an ADSL2+ connection requires the user to be within a close proximity of the nearest interchange to obtain highest speeds.

Whilst Sony (NYSE: SNE) has installed a fibre-based internet service that reaches download speeds of 2Gbps in Japan, Australians under the NBN will still enjoy speeds up to 80-100x faster than what we currently receive using ADSL2+ – a speed equivalent to what Google (NASDAQ: GOOG) provides in several US cities.

However, very few Internet users will realise the true benefits of the new network for a period of up to 10 years – where most households are expected to see very little difference until then. According to independent telecommunications analyst Paul Budde, the primary short- to medium-term beneficiary of the increased speeds will be small businesses.

Whilst NBN Co’s chief executive Mike Quigley faced parliamentary figures on Friday regarding ongoing delays to the project, the purpose of the company’s announcement of 1Gbps downloads for the year’s end has to be questioned. If the speeds will not be realised by the vast majority of Australians until 2020 or later, the question has been raised by Peter Lee – chief executive of Internet Industry Association – as to whether or not the announcement was simply a “political ploy” to increase pressure on the Coalition, according to The Sydney Morning Herald.

Currently, the wholesale price for 1Gbps service will be set at $150 per month, with providers such as Telstra  (ASX: TLS) and Singapore Telecommunications (ASX: SGT) – owner of Optus – adding their own margin on top.

Foolish takeaway

With a federal election looming around September, NBN Co is looking to speed up the rollout of the network around the country, having contracted companies such as Leighton Holdings (ASX: LEI), Transfield Services Limited (ASX: TSE) and Downer EDI (ASX: DOW) to get the job done.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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