NBN Co inks updated definitive agreement with Telstra; agrees to acquire Optus’ HFC network

15 Dec 2014

Australian fixed line incumbent Telstra and NBN Co, the company overseeing the National Broadband Network (NBN) project, have inked revised definitive agreements which the latter claims ‘will pave the way for all Australians to have access to fast broadband by 2020’. Under the terms of the deal, NBN Co will progressively take ownership of elements of Telstra’s copper and hybrid-fibre coaxial (HFC) networks at ‘no overall additional cost to the taxpayer’. As per the original definitive agreements between NBN Co and Telstra, which were signed back in June 2011, the former gave the latter access to certain assets such as ducts, pits and exchanges to use in the NBN rollout, though notably it did not agree to provide access to its copper or HFC assets. With Telstra having previously been required to progressively disconnect premises connected to its copper and HFC broadband networks as the NBN was rolled out, the updated deal will see it continue to disconnect premises, though in those areas where NBN Co uses the incumbent’s infrastructure to deliver an NBN service the operator will transfer ownership, and the operational and maintenance responsibilities for the relevant copper and HFC assets, to NBN Co. These latest changes to the agreements are, however, subject to a number of conditions precedent, including approval by the Australian Competition and Consumer Commission (ACCC) of a revised Migration Plan and receipt of acceptable rulings by the Australian Taxation Office.

According to Telstra, meanwhile, the estimated net present value (NPV) which the revised agreements are expected to deliver is equivalent, on a like for like basis, to the estimated NPV of the original agreements, with the telco’s CEO David Thodey stating: ‘We have achieved the key principle, agreed to by the parties, of maintaining the overall value of the original agreements.’ The payment structure reportedly remains linked to the rollout of the NBN, while it has also been confirmed that Telstra will continue to deliver Foxtel pay-TV services through continued access to the HFC network negotiated with NBN Co. Mr Thodey also pointed out that it will now be necessary to make changes to the Migration Plan to adapt it to the state’s multi-technology mix model for the NBN rollout, saying: ‘The customer experience and continuity of service for retail and wholesale services moving from Telstra’s networks to the NBN has been front of mind throughout the negotiation, and we will now work through these with industry and the ACCC … Importantly, we do not foresee any necessary changes to our Structural Separation Undertaking as we will continue to meet this commitment through the progressive disconnection of premises and transfer of ownership of our copper and HFC networks to NBN Co over time.’

In separate but related news, NBN Co has also confirmed a deal to acquire elements of the HFC network belonging to Optus, in a move which it also claims will help hasten the rollout of the NBN. In a similar fashion to its updated deal with Telstra, NBN Co’s updated agreement with Optus will see it progressively take ownership of the latter’s infrastructure ‘in those parts of the country where it represents the fastest and most cost effective way to deliver fast broadband to families and businesses’. With NBN Co again claiming that the updated deal involves no additional overall cost to the taxpayer, the company’s chief executive Bill Morrow said: ‘This deal will bring down the overall cost of building the NBN and enable us to complete the rollout much earlier than originally anticipated with less disruption to residents and communities … What’s more, making use of technologies such as HFC – rather than decommissioning them – enables Australia to capitalise on the significant investments being made globally in broadband technology.’

In line with announcing the updated agreements, NBN Co noted that planning for the multi-technology NBN, which will incorporate copper and HFC alongside fibre, fixed wireless and satellite technologies, is already underway. Construction of the NBN is expected to be completed for around 3.3 million Australian homes and businesses by June 2016. With more than 309,000 premises across Australia already connected to the NBN, the company managing the network development said its goal was to make all homes and businesses serviceable by 2020, with access to downlink speeds of at least 25Mbps.

Australia, NBN Co, Optus, Telstra (incl. Belong)