7 Telco Stocks At The Frontier Of Growth
Although its many critics point to its somewhat rocky start, the National Broadband Network is underway. Opponents cry out that governments should leave such ambitious infrastructure projects to the private sector. The plan to make a broadband network linked by fibre optic cable – not old technology copper – reaching about 93% of Australian consumer dwellings, educational and medical institutions, and commercial businesses is nothing more than a costly boondoggle, they say.
What is worse in the critics’ eyes is the even costlier plan to bridge the gap to the remaining 7% through a combination of satellite and wireless connections. In their view, the promised speeds of 100 megabits (MBS) per second may never materialise and even if that dramatic increase of 18 times the current broadband speed in Australia is reached, why should taxpayers pay the price?
Proponents liken the creation of the NBN (National Broadband Network) to the development of a national road and rail system over the last two hundred years. In truth, not all Australians are aware the ambitious NBN undertaking is part of a national strategy towards developing a 21st century digital economy, with economic sectors sharing the NBN infrastructure.
The FTTP (fiber optic cable to the premises) technology underpinning this effort is, in the eyes of most experts, a truly transformative technology, just as copper wire was in its day. Expert opinion from scientists and academic researchers has not been enough to mute the controversy over the NBN, but what do leading private sector technology companies have to say?.
IN 2010 shortly after it became obvious the votes were there to pass the controversial NBN legislation, executives from tech juggernauts Google, Intel, and Microsoft extolled the long term benefits of the undertaking. Google’s head of engineering envisions “a world of opportunities for all Australians,” and went on to say the NBN will spur innovation, economic growth, and entrepreneurship in the same way the electric grid did in the 20th century.
Intel and Microsoft both see NBN as vital to Australia’s global competitiveness in an increasingly digital economy. More recently, Google Chairman Eric Schmidt cited a Deloitte study showing the Internet already accounts for 3.6% of Australia’s GDP, with a five year growth forecast averaging 7% -- a growth rate twice as fast as the rest of our economy.
Transformative technologies can be delayed and deferred, but history says they always win out in the end. The early phase of the NBN rollout is in the hands of the government created NBN Company; and is to a great extent positioned as a telecom network. Although history also tells us the existence of network infrastructure spurs the creation of additional products and services enabled by the network, no one can as yet predict what they will be, or the companies that will create them. Investors will have to watch and wait for those opportunities.
Right now, the opportunity lies in the Telco sector, where the NBN will change the face of the competitive landscape. Australia’s giant, Telstra, faces loss of market share from smaller providers unable to compete without the new network, but it remains to be seen which companies may emerge as winners, and how Telstra will fare in the new NBN environment.