Telstra, Optus continue to lose ground to smaller telcos

Small internet retailers such as Aussie Telco are slowly gaining on the market’s big names.

Small internet retailers such as Aussie Telco are slowly gaining on the market’s big names. Photo: TND/Getty

Australian customers are continuing to trickle away from the country’s biggest telcos in pursuit of better prices and broader product range.

A report released last month by the Australian Competition and Consumer Commission shows in the June quarter smaller retail service providers increased their market share in the NBN wholesale market by 0.8 percentage points to 12.6 per cent.

This represents a year-on-year market share increase of 4.4 per cent, with Aussie Broadband taking the lead.

The gains of the smaller companies have come at the expense of the nation’s top four telcos (Telstra, TPG, Optus and Vocus).

The big providers similarly lost ground over the previous quarter as consumers turn away from more established companies seeking better plan options and price points.

Laurie Patton, former Internet Australia chief executive and prominent NBN critic, said the results show consumers are looking for more choice – and an increasingly competitive landscape is giving it to them.

Small telcos setting the standard

RMIT Associate Professor Mark Gregory said more competition in the telco sector is a good thing for consumers, especially as NBN Co. is currently charging high prices for wholesale plans.

He said while the larger companies appear reluctant to offer a wider range of plans, instead focusing on maintaining profit margins and maximising returns, smaller telcos are picking up the slack.

A driving factor behind smaller telcos’ 0.8 per cent increase in market share is the fact they are offering the product range consumers seek,  such as Aussie Broadband’s 100/40 Mbps plan.

‘‘Consumers are looking more broadly now in with regards to what they expect from telecommunication companies,’’ Dr Gregory said.

‘‘It’s really factors including the price, the plan offering [such as] download and upload speed, and also what bundled services are provided to the consumers.’’

Mr Patton said small companies are also benefitting from being more accessible to their customers – something larger entities may also be trying to emulate.

‘‘It’s interesting that [Telstra CEO] Andy Penn has finally made the fairly obvious decision to bring their call centres back to Australia, because the smaller operators tend to have call centres in Australia and they tend to be able to deal with issues more efficiently,’’ he said.

‘‘Telstra has always been a very, very difficult organisation to deal with as a consumer.’’

Slow response from big names

Although some of the bigger companies are starting to put more effort into matching bundles being offered at the lower end of the market, as seen with Telstra’s recent acquisition of Fetch, their size means they’re slower to react to changes in the market than smaller telcos, Dr Gregory said.

He said while it’s understandable wholesale internet costs are expensive, he doesn’t understand the rationale from big telcos behind not offering plans with higher upload speeds.

‘‘If I was a shareholder of one of the larger companies, I would be asking the question, ‘Why are they not offering what consumers are looking for?’,’’ he said.

Mr Patton said large companies may lack the agility of small telcos to make big changes quickly, but they did have an advantage when it came to NBN access.

The NBN has 121 Points of Interconnect (POIs), which are the physical locations where providers can connect to the NBN, and Mr Patton said many small companies can’t afford to connect directly to all of these POIS, forcing them to use an intermediary which in turn increases their operating costs.

The steadily rising success of smaller telcos comes despite the fact the structure of the NBN has them at a slight disadvantage compared to cashed-up competitors.

But the ACCC report shows the tide is turning, with a record 17 providers directly acquiring NBN services at all 121 POIs, compared to 13 providers in the March quarter.

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