The National Broadband Network (NBN) was designed as a wholesale network: access to it is sold by dozens of providers. But the news today that TPG and iiNet are planning a merger underscores a stark reality: you’re almost certainly going to end up buying your NBN broadband access from one of just three providers — and for customers, that sucks.
Cable hand picture from Shutterstock
Presuming the TPG/iiNet merger goes through — which seems likely, given that all the board members are in favour — there will be three utterly dominant broadband providers in Australia: Telstra, iiNet/TPG and Optus. Underneath them sit a handful of vaguely-known brands, many of them owned by M2 Telecommunications (iPrimus, Dodo), others trickling along as independents (Exetel). But when the third and fourth-largest providers think it makes commercial sense to merge, it’s hard to imagine many of the smaller players surviving in the long term.
The existence of the NBN is one of the main reasons why consolidation is happening. The announcement of the merger plans for iiNet and TPG specifically calls it out, noting the merger “delivers scale benefits in an NBN environment”.
This makes sense. When the product you’re selling (access to the NBN) is essentially identical, you can differentiate yourself either through exceptional service or exceptional scale. The majority of ISPs appear to favour the scale approach. iiNet has long prided itself on having better customer service, but the mere fact of the merger suggests it is now heading in a different direction.
Why does this suck for customers? Firstly, because it means that the generally abysmal quality of customer service from ISPs in Australia will continue and accelerate. Large listed companies might spout off in press releases about the importance of customer service, but the endless shrikes calling for “shareholder value” will inevitably see service options cut, sent offshore and otherwise diminished. Add in that fixing network-level problems will have to be routed via NBN Co and we can expect a continuation of the current poor approach. We can look forward to long wait times, endlessly repeating the same details and buck-passing galore.
Secondly, because if there are only three main providers, there is not going to be much incentive to compete on price. Telstra has achieved its dominant position despite offering broadband plans that are considerably more expensive than any of its rivals. TPG sells itself on being cheap, but at the expense of what’s generally deemed to be abysmal customer service.
Thirdly, because one common factor across all these providers is that they want to lock you into long-term contracts for multiple bundled products: your broadband, your mobile phone, your landline and some form of TV service, all locked down for 24-months and set at a single price that makes direct comparison with rival services more difficult. For a business, this makes sense, because you lock in a higher monthly spend for a longer period of a time. For a customer, it’s infuriating and confusing and inflexible and generally just painful.
I really hope that as the NBN expands, we’ll continue to see decent plans from providers who aren’t trying to sell you loads of other products as part of a bundle. We’ll certainly keep trying to seek out and highlight those options here at Lifehacker. But history suggests they’ll be increasingly hard to come by.