NBN: The RFD and the ICMD Agreements

In this the sixth and penultimate 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 second and third of the agreements between Telstra and the Commonwealth – the Retraining Funding Deed (RFD) and the Information Campaign and Migration Deed (ICMD).

I’ve chosen to do these two agreements as a single article, because they are both quite short in their detail.

All descriptions are taken from the Telstra release to the ASX.

In part, the RFD as described is:

“The Retraining Funding Deed sets out the terms on which the Commonwealth will provide funding for Telstra to retrain certain staff over an 8 year period.”

And the ICMD as described is:

“The Information Campaign and Migration Deed sets out residual commitments by the Commonwealth relating to the valuation of the proposal and migration of customers to the NBN.”

Straight off the bat, both the RFD and ICMD are largely deal sweeteners for Telstra.

We have to remember that Telstra are being asked – (and have in principle agreed) – to give up a great deal of competitive edge in the marketplace by moving to come to the terms of this entire suite of agreements regarding its participation in the NBN project as a whole.

They have built up substantial goodwill within their business operations – both before and after they were privatised – and relinquishing their monopolistic hold over telecommunications infrastructure in this country deserves a substantial return for doing so.

Obviously, approximately eleven billion dollars is a “substantial return” – but there’s more to it than money, and these two agreements go towards looking after the non-financial aspects to agreeing to get out of the wholesale business.

The RFD seeks to ensure that Telstra staff – predominantly, field engineers/linespersons – are not just dumped on the employment scrap heap.

Telstra employs a huge workforce of these engineers, and if they are to no longer be responsible for the network, under normal circumstances they would be out of a job. As such, the Department of Broadband, Communications and the Digital Economy (DBCDE) has agreed to pay Telstra $100M over eight years for the retraining of staff.

This retraining is designed to “support the availability of an appropriately trained workforce for the NBN” and to “establish a retraining agreement for Telstra staff who may otherwise have faced redundancy due to the rollout of the NBN.”

Given the small amount included in the description of the RFD, it is not exactly clear what this means.

This could mean that all of these engineers will remain on the Telstra payroll, with government funding for training in skills relating to optical fibre networks, and that NBN Co will subcontract field engineering works to Telstra over the life of the NBN.

It could also mean that all of these engineers will be progressively transferred, region by region, to the NBN Co payroll as the network rolls out region by region – which begs the question “why pay Telstra money to train staff who then move to NBN Co, when you could just move them to NBN Co and have the training done there?”

Admittedly the first scenario seems the most likely, but if it were to be the second, the $100M might make it easier for Telstra to look after employee benefits for people who are technically leaving the company.

Perhaps reading between the lines a little too much, but because there is so little information available on the RFD, we can only speculate.

Onto the ICMD, which is equally “thin” on detail, and represents another cherry on top of the NBN cupcake for Telstra.

The Commonwealth has agreed to set up a public education program to be run by NBN Co to make sure that end users understand how the migration will affect them. It is quite reasonable to expect that Telstra will incur costs notifying existing customers that their services will be moving to the NBN fibre network.

As such the Commonwealth will make residual payments to Telstra – (amount not specified at this stage) – to allow Telstra to cover those costs “in certain circumstances”. These circumstances are not mentioned at all, and the full agreement will be required to understand exactly what this means, and how much it might cost.

Vague and vaguer, but I am sure the full details will come to light in the coming weeks and months as the Telstra shareholder vote approaches.

As I said at the start, not a lot in these two agreements – just some more housekeeping. It is concerning in regards to the lack of real detail, and I’ll be keeping an eye out for more.

That will bring me to the final agreement, the Commonwealth Guarantee, which I will discuss in the final part of my series.