NBN will change the competitive landscape but I think its too early to say whether it'll be for better or worse. That there are only 4 ISPs who offer services over the NBN in Tasmania is not due to lack of competition but lack of interest in the small number of potential customers.
As far as big vs small goes ...
Small ISPs today typically rent their DSL ports from Telstra, Optus, AAPT/Powertel, and optionally have a small DSLAM footprint of their own. Examples of small regional DSLAM networks include OnTheNet on the Gold Coast, QLD, and TSN.cc around the NSW mid-north coast. These ISPs can continue to service their regional areas in an NBN world.
Medium/large ISPs who have built out a national transmission network would obviously resell NBN services nationally.
Arguably the 500 or so ISPs that we had in the dialup days was far too many. Even today I believe there are still 200+ ISPs, yet if you asked a random group of 100 people to name as many ISPs as they could, you'd struggle to get a distinct group of 20 IMHO. In reality customers can't reasonably compare more than a handful of offerings so 200 doesn't offer any more "competition" than 5 or 10.
WRT iiNet's prospects, Michael Malone has said in the past that the costs between themselves and a cut-price ISP like TPG are not hugely different. What is different is their product positioning. iiNet chooses to offer quality, customer service oriented products (and now with added content frills), whereas TPG aims at the budget conscious consumer. Both offerings have their place today, and in an NBN future.
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