NBN study prompts deadline for Telstra involvement

7 May 2010

Australia’s Federal Government has given fixed line incumbent Telstra until the end of June 2010 to finalise a deal relating to its participation in the National Broadband Network (NBN) project, according to The Australian. The deadline has been set following the release of an independent implementation study examining the NBN venture, compiled by consultancy firms McKinsey and KPMG, which found that the cost of constructing the nationwide fibre-optic infrastructure could be reduced significantly if the state and Telstra could reach a deal to allow NBN Company to utilise parts of the incumbent’s existing network. The study also stated that the NBN could be built for some AUD5 billion (USD4.49 billion) less than the original AUD43 billion quoted as being the total cost for the project. Discussions between Telstra and the state have been ongoing since September last year, with the stumbling block to a deal believed to stem from a disagreement over the value of the telco’s assets. Communications Minister Stephen Conroy noted: ‘We are in lengthy and very complex negotiations with Telstra. If both parties felt there was no point in those discussions, we would terminate them.’

Other key elements of the study included a recommendation that the original fibre-to-the-home (FTTH) footprint, which was to cover 90% of the population, should be extended to 93% and the claim that the state will need to increase initial equity investment of AUD4.7 billion to AUD26 billion over the eight-year construction period to fund the project.

The government will take public comments on the study until 27 May, following which it may take some months to issue an official response.