Australia’s telco industry an essential service on weakening foundations

Australia’s telecommunications sector faces risks of rising prices, superficial competition and increasing resilience as policy regulations lag behind its core national infrastructure role. Paul Budde reports.

AUSTRALIA’S TELECOMMUNICATIONS sector is entering a period of structural tension.

It has become an essential national service supporting connectivity, emergency response, banking, energy systems, healthcare, transportation and democratic participation. However, the industry is still largely regulated and structured as a competitive consumer market.

Australian Competition and Consumer Commission (ACCC)’s latest status Communication Market Report It highlights a sector that remains operationally stable but remains economically and strategically exposed.

Lately Optus outage this must be understood in the broader context. This was not just a technical incident, but a governance failure in critical infrastructure. When a network outage can affect emergency services, payments, transportation and millions of households simultaneously, telecommunications can no longer be considered a standard retail service. However, policy settings have not fully captured this reality.

Prices are rising in mature markets

According to the ACCC report, the mobile market is indicative of this challenge. Average mobile prices increased by about 6-7% last year, although total service numbers remained broadly the same. While growth is concentrated in prepaid services, the postpaid contract market remains mature and saturated.

At the same time Telstra, optus And KPIIt continues to control approximately 87% of the mobile market, including its sub-brands.

This is not a market without competition at the retail level, but a market with limited structural competition. Rather than financing step-change investment, price increases are used to maintain revenue in a low-growth environment. Network sharing regulations did not materially constrain pricing behavior, reinforcing the conclusion that competitive pressure remains superficial.

Fixed broadband and limited investment

The fixed broadband shows similar stress points. NBN Company It currently operates approximately 8.7 million active services and carries close to 80% of total data traffic. Retail prices continue to rise across most speed tiers, but NBN Co itself is tightly constrained by wholesale pricing caps and regulated yields. The ability to flexibly respond to rising costs or accelerate investments in durability and redundancy is limited by design.

Service growth has slowed and actual connections have lagged behind forecasts. As upgrade programs continue, the main issue is economics, not access. Revenue growth remains limited while network operators face rising costs due to energy, cybersecurity, redundancy requirements and ongoing upgrades. This combination increases the risk of underinvestment in long-term resilience.

MVNOs and the limits of retail competition

Australia’s experience with mobile virtual network operators (MVNOs) Underlines the limits of the current competitive model. After more than 20 years, MVNOs collectively account for only about 13% of the mobile market. Most individual operators have 1-2% at best. While they offer retail diversity and niche offerings, they do not offer infrastructure competition.

MVNOs remain commercially and technically dependent on major mobile network operators. Pricing, quality and innovation are ultimately shaped by wholesale terms. The continuation of price increases despite a crowded retail environment confirms that MVNOs have not significantly changed their market power or investment incentives.

Profitability pressure and essential service risk

Expectations continue to rise as profitability remains under pressure in both mobile and fixed markets. Telecommunications networks are expected to provide near-perfect reliability, resilience to extreme events, and continuous capacity upgrades. But margins are tightening and returns are becoming increasingly uncertain.

This creates a structural risk. In an essential service, underinvestment does not immediately manifest as failure. It silently accumulates in the form of delayed upgrades, reduced redundancy, and increased operational fragility. The Optus outage should be seen as an early warning of what happens when business pressures collide with essential service obligations.

The growing influence of global technology platforms

These pressures are exacerbated by the increasing dominance of American technology giants. While Australian telcos carry the capital burden, regulatory obligations and flexibility expectations, much of the economic value generated on their networks flows offshore. Cloud services, digital advertising, streaming platforms and AI workloads drive traffic growth but contribute little to funding underlying infrastructure.

The result is that the profit pool is shifting away from network operators, even as demands for these networks continue to grow.

Starlink as a warning signal

It is in this environment starlink has emerged as a competitor on a national scale. By mid-2025, Starlink had reached approximately 375,000 Australian broadband services, making it the largest single broadband platform outside the NBN. Along with home wireless, non-NBN broadband now accounts for around 14% of national connections.

Starlink’s importance lies in what it represents rather than the volumes of data available. It operates at scale without wholesale access obligations, local infrastructure regulations, or universal service requirements. Its growth highlights a regulatory asymmetry in which the most tightly regulated networks bear the greatest public liability, while the fastest-growing competitors bear virtually no liability.

An inevitable policy question

Taken together, these trends indicate that the sector is drifting towards strategic fragility. Telecommunications is treated rhetorically as an essential issue, but economically as optional. Competition exists, but largely at retail margins rather than at the infrastructure level. Profitability is declining, but expectations for reliability and durability continue to rise.

The key policy question that Australia can no longer avoid is whether its telecommunications framework is fit for an era where connectivity is critical national infrastructure. If investment incentives remain incompatible with public responsibility, underinvestment will become systematic rather than incidental.

The cost of this failure will be measured not in market share or quarterly earnings, but in national resilience when the system is tested again.

Paul Budde IA is a columnist and managing director of independent telecommunications research and consultancy. Paul Budde Consulting. You can follow Paul on Twitter @PaulBudde.

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