In the next 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 third of the eight individual agreements – the Infrastructure Services Agreement (ISA).
All descriptions are taken from the Telstra release to the ASX.
As a summary, the ISA as described is:
“The ISA contains the detailed terms for the long-term provision of access to three types of infrastructure and related service by Telstra to NBN Co: dark fibre links, rack spaces in exchanges, ducts and associated duct infrastructure (pits and manholes). Telstra retains property in all the infrastructure except for those Lead in Conduits (“LICs”) used by NBN Co, which become NBN Co’s property once used.”
The ISA is a relatively straightforward agreement in comparison to the SA, but also has some interesting points that reflect on the length of time the ramifications of the whole deal apply for.
For instance, the term under which NBN Co leases access to Telstra’s “pit and pipe” infrastructure is already slated to run for up to 60 years from the commencement date. This is defined by an initial term of 35 to 40 years, after which NBN Co has two 10 year options to extend the leasing arrangement.
The “35 to 40 year” variable aspect of the initial term is due to “a number of factors including NBN Co’s rollout schedule – this says to me that NBN Co and Telstra have agreed that there is a five year leeway on the expected construction timetable.
This is a little bit of a concern – (that so much leeway is in there) – but since the successful conclusion of this entire deal should actually take time pressures off the rollout, this is more than likely a “worst case scenario” issue, rather than any real expectation or fear that it will take five years longer than planned.
Certainly something to keep an eye on – though this is most likely consideration for major natural disasters holding up the rollout.
This agreement also provides for NBN Co to access much of Telstra’s existing infrastructure for the purposes of building this network. Namely, access to existing dark fibre assets, rack space within existing telephone exchanges, the physical “pit and pipe” running up and down just about every street in the country, and the “Lead in Conduits” (LICs) running from the pits and into premises to carry the copper inside.
For dark fibre access, Telstra retains responsibility for the upkeep and agreed service levels of such links. Similarly, Telstra is responsible for maintenance/general upkeep of the exchange facilities being used by NBN Co.
Telstra gives NBN Co the right to occupy their “pit and pipe”, and must also continue to maintain that infrastructure. In each case, Telstra is responsible for any remediation work required to bring any of these facilities up to “fit for purpose” standards for NBN Co to use under the terms of the agreement.
The LICs are treated slightly differently than the other infrastruture mentioned above, with Telstra having no responsibility for the remediation or required service levels from them. This is because at such time that NBN Co provisions a fibre connection from the pit to a premises, NBN Co takes over ownership of the LIC.
Indeed, in the process of rolling out the fibre connections, the existing piece of copper will in most cases be used to pull the fibre through from the pit to the premises being connected.
This alone will be a massive time – (and therefore, cost) – saving exercise in rolling out the fibre. In return, NBN Co must make the LIC available for use by Telstra at no cost, to maintain premises access for their underground HFC network.
Network rollout schedules also play a part in the ISA, with NBN Co retaining full discretion over the timing of when the rollout passes through particular regions and past particular premises.
Telstra is obliged to make available to NBN Co, all necessary Telstra-owned infrastructure to complete the rollout in a given region to NBN Co’s timetable.
In particular, this relates to the transit backbone of the NBN – with this expected to be completed by the end of 2014 – with only “force majeure” being cause for the slippage of this date.
Telstra is also obliged to not dispose of any of the infrastructure specified within the agreements with the knowledge and consent of NBN Co. This is to prevent Telstra from offloading infrastructure NBN Co has earmarked for use in the build of the network, to a third-party with whom NBN Co might then need to negotiate with to access that infrastructure as planned.
As with the SA, there are some fairly standard performance – (fault repair times, etc) – and early termination clauses, including allowing the 35 to 40 year infrastructure lease to continue on completed parts of the NBN, should the network not reach the full 93% rollout. This would allow continuation of services for premises where the rollout was completed, if it actually stopped completely.
Much like the SA does for mainly competitive issues in regards for Telstra in the coming NBN world, the ISA delivers a certainty to infrastructure access issues to make sure that the NBN can be built as closely as possible to the intended schedule.