Telstra has signed definitive agreements with NBN Co and the government for its participation in the rollout of the National Broadband Network (NBN) worth AUD 11 billion. The agreements remain subject to the satisfaction of a number of conditions, including the critical step of ACCC acceptance of Telstra’s structural separation undertaking and approval of its migration plan. Shareholders are scheduled to vote on the plan on 18 October.
The agreements provide Telstra with replacement revenue, through disconnection payments as the rollout of the NBN occurs, and new revenues, through access payments for the use of Telstra’s infrastructure over an assumed average thirty year period.
Key components of the definitive agreements with Telstra are as follows:
- Telstra has agreed to disconnect, progressively, copper-based customer access network services and broadband services on its HFC cable network (but not pay-TV services on the HFC) that are provided to premises in the NBN fibre footprint, and will migrate its services onto NBN-based services, over the expected ten year build period of the NBN;
- Telstra will provide NBN Co with large scale access to certain infrastructure – dark fibre, exchange space, lead-in-conduits and ducts - at prices based on committed large volume levels of usage and availability. The term of the infrastructure agreement will be between 35 and 40 years from commencement, plus two 10 year options to extend exercisable by NBN Co. The infrastructure will be taken over the course of the NBN rollout and payments made for an assumed average period of 30 years. In order to maximise the availability of this infrastructure, Telstra will undertake necessary work on the infrastructure. Telstra retains ownership of all infrastructure assets, except for those lead-in-conduits used by NBN Co which will become NBN Co property once used;
- The government has agreed to a package which includes increased funding for the delivery of the Universal Service Obligation (USO), clarification of Telstra’s USO responsibilities for the supply of infrastructure in new developments in the NBN environment, and the avoidance of certain costs to Telstra through various funding measures such as funding of a public information campaign, and for employee retraining; and
- Telstra and NBN Co have also agreed to key product feature and price commitments relating to NBN Co’s basic voice and data offering. These will be addressed in NBN Co’s full product terms, which remain subject to further development and industry consultation.
Meanwhile, Optus also reached an agreement with NBN Co on the migration of its HFC customers to the NBN. Under the agreement, Optus will begin the progressive migration of its customers to the NBN once the network is rolled out in an area and is ready to provide services to customers currently served by Optus’ HFC network. Optus estimates the total value of the agreement as approximately AUD 800 million. Optus and NBN Co expect that the initial migration of customers to NBN infrastructure will commence in 2014 and the programme is expected to take up to four years to be completed across Optus’ entire HFC footprint.
