Telstra has dropped a bombshell on the Australian broadband market by abandoning its top tier 100Mbit/s service for its biggest customer segment and hinting at a move to 5G fixed wireless.

The company, which has 47% of the NBN broadband market, has told customers using NBN's hybrid fiber-copper networks that from now on the 50Mbit/s service will be its fastest.

Australia's A$51 billion (US$33.5 billion) NBN, expected to complete in the middle of the year, is built on a "mixed-technology" model. Fiber runs to approximately 17% of premises, while 22% are served by HFC, 36% by FTTN, 12% by FTTC and the remainder by satellite or fixed wireless.

Telstra's decision means that FTTN and FTTC households, or nearly half the NBN rollout, will be able to access no more than 50Mbit/s. Only those on FTTP and HFC will be able to take up the 100Mbit/s service.

Telstra says it made the decision because it could not guarantee delivery of the higher bandwidth.

It said NBN Co was unable to confirm to Telstra the performance level ahead of the customer being connected, and so the company had no choice but to cut the top tier service.

"It is often the case that customers that sign up to these plans will be subsequently notified that they cannot achieve top speed and end up downgrading to a lower plan or leaving," a Telstra spokesperson told IT News.

In contrast to Telstra's claims of uncertainty, rivals Optus and Vodafone both said they would continue to offer 100 Mbit/s to NBN customers. Vodafone said it was able to confirm the service performance for each customer in advance.

While Telstra's move is a blow to NBN Co, the latest broadband performance measurement by competition regulator ACCC finds its network performance is slowly improving – 69.9% of tests achieved 90% of maximum bandwidth, up from 65.2% in the previous quarter.

But with the NBN decision in mind, analysts are paying close attention to remarks by Telstra CEO Andy Penn on 5G fixed wireless today.

Penn told a media conference that 5G was not going to replace the NBN, yet "there will be customers for which 5G is entirely appropriate."

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Telstra has signed a non-compete agreement with NBN Co but Penn and colleagues clearly think they can skirt that in the same way Optus already does, offering 5G for home broadband.

Penn made similar points about the NBN in blunter fashion six months ago, warning that its high wholesale prices would drive people away.

"A number of operators today are already very publicly considering strategies to compete directly with NBN using 5G," he said.

Penn also revealed today Telstra had acquired a trial license to test out mmWave 26GHz 5G.

The ACCC has just begun a consultation over the allocation of mmWave spectrum for 5G. It expects to hold an auction in early 2021.

— Robert Clark, contributing editor, special to Light Reading