TPG Telecom fibre optic plan not threatened by ACCC

The regulator will allow TPG to lock out rivals.

a woman

As I reported in this article, TPG Telecom (ASX: TPM) has announced plans to start rolling out fibre to the basement (FTTB). The brilliance of this plan is that now that the NBN is not going to be fibre to the premises, there is no reason that customers would ever bother switching to the NBN.

TPG has some major competitors that could also roll out optical fibre to buildings. Telstra (ASX: TLS), Singapore Telecommunications’ (ASX: SGT) Optus and iiNet (ASX: IIN) all own fibre infrastructure. However, once a building is connected to fibre, there is little reason why another company would duplicate the connection. That’s why some commentators suggested the Australian Competition and Consumer Commission (ACCC) might have an issue with the plan.

Speaking to the Australian Financial Review, chairman of the ACCC, Mr Rod Sims said, “If you have a number of players doing TPG-like things then they in a sense self-regulate because if I clobber you here the other guy will get you back over there,” he said. “It’s less of a ­problem compared to having a ubiquitous bottleneck as Telstra has with its copper wire.”

TPG doesn’t need to lock out its rivals to profit from being a first-mover. Once it connects a building to fibre, it’s likely that most if not all of the residents will switch to the fibre plan eventually. As Mr Sims points out, owning parts of the fibre network will be a useful bargaining chip in the future.

It’s likely that companies without much fibre will still be able to grow (the threat of regulatory action will see to that), but in this Fool’s opinion, the companies that own the fibre infrastructure will have the upper hand. In any event, the CEO of TPG, David Teoh, has already promised to provide wholesale access to the network.

Ironically, existing government legislation designed to protect NBN Co will limit competition in the fibre race. As part of the NBN package, the Telecommunications Act 1997 was amended to require that any fibre networks provide open and equivalent access to the network. This was designed to prevent companies like TPG from building a fibre network to high-density areas before NBN Co. However, the Act provides a few exceptions, including for networks that do not extend more than 1 kilometre beyond fibre that was in existence prior to 2011.

This would allow TPG to connect hundreds of thousands of residences and not be subject to the equivalent access provisions for those residences. However, there is a credible argument that private companies should be allowed to (profitably) roll out fibre to metropolitan areas. Due to the change of government, it is possible that these laws will be amended.

Foolish takeaway

TPG is perfectly positioned to take advantage of this public policy mess. In my opinion, it is likely that TPG will end up owning a significant chunk of Australia’s communications infrastructure. TPG shares are up over 80% in the last few months, but this stock still deserves a spot on your watchlist.

Looking for another company with plenty of growth ahead of it? Discover two stellar small-cap opportunities now, in our brand-new research report, “2 Small Cap Superstars” — simply click here to download your FREE copy.

More reading


Motley Fool contributor Claude Walker does has an interest in TPG Telecom through a managed fund. Find him on Twitter @claudedwalker.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »