iiNet to NBN Co on fibre overbuild: bring it on

iiNet to NBN Co on fibre overbuild: bring it on

Summary: iiNet has warned NBN Co that it will compete fiercely in areas where iiNet has a fibre network, but the government-owned company is building its own fibre.

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TOPICS: NBN, Telcos
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iiNet CEO Michael Malone has issued NBN Co with a challenge: either buy up iiNet's existing fibre-to-the-premises (FttP) and hybrid fibre-coaxial (HFC) networks, or be prepared to compete with a company that has half the cost base of the National Broadband Network (NBN) company.

The acquisition of TransACT in 2011 gave iiNet 4,500km of fixed infrastructure across the country, including a 200km fibre network in the ACT, as well as an HFC network in Geelong, Mildura, and Ballarat. The acquisition of Internode also gave iiNet a substantial fibre-to-the-premises network in the CBD of Adelaide.

Under legislation passed by the government to ensure a level playing field across the country, fibre providers are banned from building out new high-speed, fixed-line broadband networks in profitable places that could undercut the prices offered on the NBN, unless the provider is willing to offer open-access layer 2 services on the fibre.

Although iiNet will not be able to build out its network farther than 1km from where it is today, it is still able to compete with the NBN in those areas where it already has the infrastructure. Speaking to shareholders at the company's annual general meeting (AGM) today, Malone said that if NBN Co is not willing to buy out iiNet's networks at AU$1,050 per premises — in line with what he said Telstra and Optus are being paid to shut down their respective networks — then NBN Co can expect to compete with iiNet in those areas.

"NBN can't force us to turn it off; they would have to buy it off us or compensate us to shut it down," he said. "At the moment, they have announced that they are going to overbuild us in Geelong and Ballarat. They're going to build NBN side by side."

Malone said that when Telstra's copper network has been shut down in those two areas, it will only be iiNet and NBN Co competing on the infrastructure level.

"Our cost base is about half of NBN's, if they really want us to stay there and compete for that; bring it on," he said. "If they would like to do a deal with us to shut that down as they have with Telstra and Optus, then we stand ready, and so do our bankers."

He said that if NBN Co were to strike a deal with iiNet, it would cost AU$200 million for the TransACT network alone.

"We would be delighted to do a deal with NBN for AU$1,050 per premises passed. That would put the value of the TransACT network at over AU$200 million. That is approximately the replacement cost of that network," he said.

ZDNet has asked for a response from NBN Co.

Topics: NBN, Telcos

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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13 comments
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  • Out of curiosity

    What speeds does iiNet offer on its network? If the network is currently slower, is it upgradeable to faster speeds?
    Wakemewhentrollsgone
    • 100Mbps on HFC

      Sorry, I meant to include that but it didn't fit in where I wanted to include it. Malone said they can get up to 100Mbps speeds on the HFC in Geelong and Ballarat where NBN Co is building at the moment.
      Josh Taylor
      • Thankyou Josh

        I had a quick look at the iiNet website and they seem to offer competitive speeds. Perhaps, in the interest of equity, their network should be bought.
        Wakemewhentrollsgone
  • For the HFC areas NBNco should do exactly what they should have done with Optus and their HFC: Overbuild them. The fibre in ACT is a different story but I think the best option is to simply overbuild here too. No use wasting time negotiating with iiNet because is TransACT equipment even capable of 1000/400mbps??? IIRC no, so NBNco are still going to have to do some work to bring it up to standard if that is the case.
    Hubert Cumberdale
  • Keeps getting better

    Half the cost base, offer to sell to the govt monopoly.

    The pigs have never fed from such a trough.
    Richard Flude
    • Until...

      MT's subsidies (gifts) start, that is...

      Funny though - Mr. I'm not biased, is now typically (seemingly) pointing the finger at NBNCo for Michael Malone's comments!

      That's private enterprise for you Richard, they will kill their own grandma for a few extra $'s and you want us to trust them with our nations comms 'again'... ooookkkk :/
      RS-ef540
    • Half the cost base of a cherry-picked area?

      Is the iinet HFC and fibre network equivalent to the average complexity and distance of the installs that the NBN will do across the nation?

      Or, like the Telstra and Optus HFC networks, were they cherry picked, higher density areas with maximal return for the buck?

      If they are not equivalent networks, then you'd expect the cost base to differ.
      markDZD
  • Options

    Rather than pay iiNet $200Mill, that would be better spent where more needed, a new Bass Strait Fibre cable to improve the cost of Tassie Backhaul
    Abel Adamski
  • Transact

    While I'm not 100% certain on the cost that iinet paid to purchase Transact in 2011 (I believe it was on the order of $60 million) I think they are a little optimistic to expect 200 million now.

    80,000 customers is not 200 million at $1000 each. Perhaps iinet wants to count every possible connection rather then every actual connection?

    And another difference between The Telstra/Optus deals is that they were built before the NBN was announced, where as iinet picked up Transact in 2011 (after the original investors lost ~200 million). In addition, Telstra is supplying dark fibre access.

    Best of luck looking for that $200 million. I'd suggest that the NBN will do whatever makes the best financial sense. As the Optus deal was part of the microscopic increased cost of the NBN (which drew screams of blow-out from you know who) I suspect there isn't much will to pay an inflated price. Why announce it in the media instead of negotiating with the NBN?
    Paul Krueger
    • MM=FOOL

      Completely agree Paul, talk about inflating the price of that crappy network...
      GENIII
  • Why ..

    Why would they want to overbuild the IINET network. Surely there are places with no or little service thst our money would be better spent on ?
    Rossyduck
    • Why?

      A Ubiquitous National Business capable communications network, the NBN will be offering up to 1Gb capacity.
      iiNet HFC has limited business capability. To not provide NBN fibre would be crippling over the longer term to business including home business in the iiNet footprint. Look at it's upload capability, also being shared medium how many per node?. Put simply HFC has not been and still is not truly business capable unless a direct link with no sharing, in which case as it is fibre to the node, without the node it will be FTTH
      Abel Adamski
  • How much ??

    Can't wait for the NBN to cable up my suburb. The Transact VDSL1 network was advanced when it first went in, but throttled back on speeds for reasons unknown. Now it's simply old and irrelevant with discontinued hardware and a maximum speed of 8Mbit down 450Kbit up that came very late into the scheme of things. Anyone who stays on this network would want to be paying peanuts for the service.
    Mind you it was superbly reliable. Have always said, if they came out with these speeds from the beginning, 2Mbit was the max for residential VDSL1 early on, not the 8 available now, they could have had the income to keep expanding, upgrading, competing and really given Telstra a hard time.
    rocconfm