The Exabyte: It’s Big
What is an Exabyte, exactly? It’s 1 million terabytes or, if you’d prefer; 1 billion gigabytes. According to the Australian Bureau of Statistics, Australians have downloaded nearly 1 exabyte of data in just three months from April to the end of June 2014.
The ABS monitors Australia’s downloading activity twice a year: from April to the end of June, and October to the end of December. Below, I’ve compiled the results of their analysis in a time series so you can see just how fast our demand is growing.
Naturally, data demand is a function of how fast a user can download files. For example, you wouldn’t stream TV on an old dial-up, but you might on a fibre connection that can maintain 50MBps download speeds. This changing behaviour, coupled with exponentially increasing demand for data, provides a lucrative opportunity for many players in the telecommunications space; particularly internet service providers.
Of course the question is, which ISPs? This is where it gets murky because the fixed broadband landscape of the future will largely be made up of those companies that resale services off NBN Co’s National Broadband Network. Resellers typically operate from a model that’s more exposed to variable costs, particularly variable costs from growing data demand. In a competitive environment where price increases are a difficult proposal, this can constrain gross margins; hence profitability.
Competing directly with NBN Co as a rival network owner is not currently allowed under law, apart from those such as TPG Telecom Limited (ASX: TPM) who are expanding off networks established prior to 2011. The outlook for this enterprise isn’t clear, largely due to uncertainty over whether the Government will allow TPG’s expansion to continue.
As always in business, the firms that hold translatable competitive advantages on both our current copper network and the future NBN network, will most likely be successful and better equipped to take advantage of the great data demand wave coming our way.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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