In the fourth instalment of my series on the recently signed Telstra/NBN Co deal, I will highlight what I believe are the interesting and/or important parts of the fourth of the eight individual agreements – the Access Deed (AD).
All descriptions are taken from the Telstra release to the ASX.
As a summary, the AD as described is:
“The AD documents the high-level commitments made by NBN Co to Telstra in respect of the terms of supply for NBN Co’s Basic Service Offering (BSO) and the charging for certain wholesale supply services. As NBN Co’s product and service offering remains under development, and will be subject to industry consultation, the complete terms of supply are not yet able to be agreed and documented. Nothing in the AD prevents NBN Co from complying with its legislative obligations not to discriminate between access seekers.”
The AD is interesting straight out of the box, in that it appears to currently not to be technically complete – the statement that it is not yet able to be agreed and documented in its entirety makes this clear.
Should we be worried about that?
I don’t think so – it is a statement that does allow for the fact that the exact final form of NBN Co’s product set is not set in stone, and that the agreement has come together on the basis of how that product suite stands at the moment.
Given the rollout is still in the trial phase, and minor changes might still be made to the product set which might have an effect on some terms of the agreement, that appears to be all they are catering for with that statement.
What they are ultimately saying is that any potential changes – (albeit minor) – are not expected to materially affect the entire agreement between the two parties – merely the potential that some minor details might change have been taken into account.
Looking now at the detail, the first point is that the AD will only apply for five years from the commencement date – (yet to be confirmed) – of the agreement. This is a simple declaration that the terms under which the AD was agreed only apply for those five years, rather than the twenty or more year terms of some of the clauses in the other agreements.
Whilst the length of some of those earlier terms appear primarily designed to support the NBN Co business case – as released last December – the AD gives Telstra and NBN Co a little more leeway on how the pricing structure evolves over time.
Why?
I think it is not much more than a case of making sure the pricing terms between NBN Co and Telstra are not locked into for an extended period of time, just in case it turns out that the pricing terms are not working as expected.
It’s a “get out of jail early” card so it is not locked in for the twenty years or more that some other parts of the various agreements stipulate, and I think that’s sensible.
Moving on, the AD states that once NBN Co starts to supply wholesale products to Telstra, it must offer to supply the BSO within the fibre footprint.
At first glance this appears to be a “duh” statement – of course that’s would happen – but this might be a tie-in to the Subscriber Agreement, where Telstra made the commitment to offer NBN fibre as the default fixed premises connection for a period of twenty years.
This clause could simply be a case of NBN Co making sure that Telstra will be able to meet that commitment, by ensuring by contract that NBN Co supply them the BSO to do so. The clause also is specific to the “fibre footprint” only, thereby allowing Telstra to continue to offer wholesale xDSL services outside of the fibre footprint.
Crossing all the T’s and dotting all the I’s.
The BSO is also specifically defined in the agreement as a “12Mbps/1Mbps PIR” service, with best effort, no quality of service commitments for internet data. NBN Co must not charge Telstra more than the already announced $24.00pcm price for the BSO, or make any submission to the ACCC in a Special Access Undertaking (SAU) that would see Telstra charged more than this.
Confused?
Basically this means that the current price of $24.00pcm must be charged to Telstra for the BSO – nothing more, nothing less – but in the case of an SAU where the ACCC may agree that to service certain locations it may be reasonable to expect NBN Co to charge more than $24.00pcm, Telstra would still only be charged $24.00pcm.
This might mean that Telstra has a slight pricing advantage in SAU cases. If I am reading that correctly, this is a concern – however the ACCC has already stipulated that the conditions under which an SAU would be granted to an NBN Co service would be difficult to meet, and I would expect these cases to be very few and far between.
NBN Co also commits to in such circumstance any of their wholesale products become available on more favourable terms than agreed to in these agreements, those new terms must be offered to Telstra, guaranteeing that no other access seeker will have a more favourable arrangement for the supply of the BSO.
Given that the AD summary states that “nothing in the AD prevents NBN Co from complying with its legislative obligations not to discriminate between access seekers”, I would not expect other access seekers to not get the same deal. This is just Telstra “making absolutely sure”.
In relation to the installation of a service, NBN Co must not charge Telstra for “standard installations”, and in the case of “non-standard installations” may only charge Telstra for the difference between the cost of a standard installation and the non-standard installation in question. Fairly simple, and largely similar to how Telstra operates now with its monopoly copper network at the wholesale level.
As with the other agreements, the standard sorts of termination clauses are also included.
Over the range of the four agreements Telstra and NBN Co have signed between them, Telstra offers a lot to NBN Co to assist the rollout and support its business plan. This AD appears to me to be the “cream” on the surface to sweeten the deal for Telstra towards the other three agreements.
Given that Telstra are agreeing to give up their fixed line monopoly in 93% of the nation, that definitely seems fair enough.