The dust has settled a little since the surprise announcement yesterday of the $11Bn deal between the National Broadband Network Company (NBN Co), and Telstra, that will see the NBN rolled out using predominantly passive Telstra infrastructure. Namely, this is Telstra’s network of pits, ducts, and some cabling infrastructure.
The deal will see the gradual decommissioning of two Telstra networks – the ageing copper network, and the Hybrid Fibre-Coaxial (HFC) broadband and pay-tv cable network. The HFC network will get some reprieve while existing contracts with Foxtel are played out, but will also eventually be decommissioned.
What does the deal mean overall? Well, firstly, this is only what is called a “heads of agreement” – basically, an agreement to work towards reaching an agreement within the scope of the details released yesterday. However, the benefits of getting the final deal over the line will be massive.
- The long desired “structural separation” of Telstra’s retail and wholesale arms will finally become reality. Evidence from all over the world has demonstrated that the separation of retail and wholesale mechanisms is a massive plus for consumers, because all retail service providers will be able to compete with each other on a level playing field. Telstra has long used its monopoly over the copper network to drive home a massive anti-competitive advantage in the wholesale market.
- The NBN itself is now basically guaranteed to receive at least 10 million customers via Telstra, with the telco agreeing to migrate existing fixed line telephony and broadband customers onto the network as the fibre-to-the-premise (FttP) system is rolled out across the country. At the end of this migration process, the copper network will be decommissioned.
- Given the impending decommissioning of the copper network – (albeit in 8 to 10 years) – every other ISP running xDSL services to their customers will have to transfer to the NBN also, because Telstra will be effectively pulling the copper network out from under them. This drags the NBN from what some say is questionnable viability, into the realms of almost obvious ubiquity.
- At the time of the decommissioning of the copper network, Telstra is suddenly relieved of a massive cost burden – the upkeep of the copper network. Although the physical copper cabling will almost certainly remain in the ground, not having to maintain it will release financial resources for other projects. The potential would also be there for the copper network to be sold or leased to someone else for other infrastructure projects.
- Though NBN will be leased access on a long-term-basis to Telstra’s underground infrastructure, this deal is not exclusive. Though Telstra will lose out from the loss of fixed copper line revenues – (somewhat offset by the maintenance savings) – the potential to lease space in the underground pits and ducts to bodies other than the NBN for other services, could see new revenue streams flowing into Telstra, with little or no outlay required to achieve it.
Should the finer details be worked out – and it would be highly surprising that they wouldn’t – the NBN has suddenly taken a massive step forward, and Australians should be excited at the economic possibilities. Under the leadership of Sol Trujillo, Telstra could not have been further from reaching the kind of agreement reached yesterday. New CEO David Thodey has allowed more vision toward to the future to flavour his thinking – (and that of the Telstra board) – and has effectively created a whole new Telstra.
Whether or not that is a good thing, or whether the final form of the agreement can be reached quickly remains to be seen. I have to think that there is a lot more good to come of this than bad.
Time alone will now tell.