Telstra talks up copper as it prepares for NBN negotiations

Telstra talks up copper as it prepares for NBN negotiations

Summary: Telstra CEO David Thodey has again talked up the value of the copper network as the company begins to lay out what it wants out of a renegotiated deal with NBN Co.

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TOPICS: NBN, Telstra
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Telstra has flagged that the changes to the AU$11 billion National Broadband Network (NBN) deal would focus more on getting value from the copper network asset, rather than pushing for relaxed regulatory changes, or more work on the construction of the government's network project.

NBN Co, under the lead of new executive chairman Ziggy Switkowski and review head JB Rousselot, is preparing to advise the new Coalition government in December on potential changes to the NBN rollout that will likely include a switch to fibre to the node (FttN) for many premises, instead of the existing plan of fibre to the premises (FttP) for 93 percent of Australian premises.

The change will require the government and NBN Co to renegotiate with Telstra over access to the last mile of copper between the node and the premises. Telstra currently has a definitive agreement in place with NBN Co and the government for AU$11 billion that only provides access to the pit and duct infrastructure, and pays Telstra to disconnect customers from the copper network after construction of the NBN has been completed in a certain area.

The separation of those two parts of the deal seems to be highest in the mind of Telstra's chief negotiator Tony Warren as he prepares to sit down with NBN Co and the government for renegotiation.

Communications Minister Malcolm Turnbull has indicated that he doesn't expect to pay Telstra much more for access to the copper network, because those disconnection payments could be delivered faster under an FttN plan, but Warren said yesterday that accessing the copper would have to be a separate agreement to the disconnect agreement.

"If you move to a fibre-to-the-node construct, the copper is not being completely overbuilt to the node, and then from the node to the home, the copper is utilised, so we will need to have some kind of transfer of the copper out of the existing complete path into the NBN network," he told investors in Sydney yesterday.

"To be clear, we're not replacing the disconnection component, because fibre to the premise will be a significant part, we anticipate, at least in greenfields. We need to keep that part there, but we will also need to have a cutover mechanism built into some of the arrangements," he said.

The definitive agreements will need to be changed to account from simply disconnecting customers under the current arrangements to cutting off the copper network service and transferring them onto the NBN, Warren said. But he predicted that it would take far less time to negotiate with the government than the original agreement did.

"Remember, we're not starting from a blank screen; we've got the existing contracts and these are variations. Telstra's priority in negotiating such variations is first and foremost to protect shareholders' interests," he said.

"We will enter formal discussions with NBN Co as soon as they are in a position to negotiate these variations, and given those strong statements, we think there is line of sight to getting those changes done and dusted."

Telstra CEO David Thodey indicated that the company does not yet have a view on whether the new deal would transfer ownership of the copper network to NBN Co, or whether it would be in some sort of leasing arrangement, but said that the company would seek to retain the value of the copper asset.

"The copper itself has an asset value. But within the transaction we did, we've not specifically drawn that out, but the copper is worth a lot of money. Copper is worth a lot of money, and I think that's more the point," Thodey said.

Thodey said that this was partly taken into account with the original deal, but said that much of the new deal would depend on how much of the copper NBN Co requires.

"The [copper access network] has a lot of systems around it managing that, so there are a lot of puts and takes. You've got to get in under the detail and that's what we've got to do, depending what the government and NBN Co decide to do."

Turnbull also flagged that Telstra could take on construction work for NBN Co as part of new contracts, but Warren flagged that in Telstra's view, any construction work undertaken by Telstra on the NBN would be in addition to the existing NBN agreement.

"We think we need to make the [definitive agreements] fit for purpose, as the purpose changes we will need to make those variations, but we will do this in a way that will seek to retain shareholders' interest the whole way through."

The company would also not be seeking any changes to regulation, with a Telstra spokesperson telling ZDNet yesterday that no regulatory change would be needed to enable renegotiations.

Topics: NBN, Telstra

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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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Talkback

9 comments
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  • Let's see how much more Telstra can milk out of the copper. I'm sure there is an inverse correlation between the condition of the copper and how many millions Telstra expect for it. Coalition clowns more than willing to waste taxpayer money for garbage it seems. Imagine someone trying to sell you a second hand 386DX based computer for $4000 in 2013 when you can get a brand new and much more powerful Core i3 for a quarter of the price. Imagine the type of customer who would opt for the 386DX even after you've explained to them they are getting ripped off. That's Turnbull... 1163 days to go!
    Hubert Cumberdale
  • There's (C)opper and there's (c)opper

    I'm on a Telstra copper connection and the best broadband speed I can get is about 6 Mbps. I also regularly lose connectivity due to poor quality connections in the 500m of copper between me and the local Telstra exchange. (c)opper needs to be upgraded to (C)opper before you'll convince me that copper will deliver high speed broadband.
    DeeCee-4fcc5
  • Deja Vu

    Telstra is just buttering up their Alan Bond
    Abel Adamski
  • $30 billion to buy the copper?

    Tony Warren effectvely confirms that the deal approved by 99.25% of shareholders to accept $11 billion to make pits and ducts fit for purpose and hand them over to NBNCo effectively wrote off the ten million copper drops on private property.

    Telstra has already largely restructured itself as a service company, soon to be freed from costly maintenance woes of infrastructure on private property between the kerb and a house or business. It will of course still operate and upgrade mobile towers and backhaul as well, but wants to wash its hands of copper pairs entirely.

    So, how much will Telstra expect for the copper? In 2007 it sought $20 billion, which scuppered Rudd's FTTN plan that was NBN Mark I. Because it really does not want to maintain copper pairs any more, I expect it will ask an unreasonably high price to avoid being forced to maintain copper pairs, and because it wants customers to have fibre, in order to purchase higher value services from the market, including from Telstra.

    Expect a round figure of about $30 billion.
    umbria
  • cancel the NBN

    save the Goverment lots of money. telstra can build the FTTN, out of its our pocket. they were going to do it in the first place before the Ruddy came along with his Grandoise plan.
    ex-te
    • Cereal?

      The point is, FTTN isn't what we want, so who cares if hellstra was going to make it available to city slickers at cheap prices whilst gouging regional customers. Thanks to the system you seem to be pleased with, i PAY 29.95 a month for a phone line, 59.95 a month for an 8mb line speed with 100gb on peak/100gb off peak, thats 89.90 a month...... and the maximum i can get on the line is 6.5mb, whilst most of the time i get 3-4mb because some idiot decided being able to build exchanges every 2km without resulting in drops of speed was a bad idea, why not build them every 3km and fuck over a 1/3 of our customer base..... said somebody evil..... was it you ex-te?
      Daniel Walker
  • Yeh cause that will work

    @ex-te cause that worked out so well with cable tv. Only the areas of maximum profit get connected there. So areas like rural australia miss out.... You know where most of Australia's actual GDP comes from. Thank god your not in charge
    DavidFTurner
  • can someone clarify...

    ...whether fibre is cheaper than copper to implement? from what I remember, the reason why the government is opting for copper is because of the lack of a qualified workforce for such implementation and this a longer construction time --> higher overall price at the me of the project?
    colintso
    • If you were going to lay it down "fresh"....

      No company would use copper. The only reason Malcolm is considering using it, is because of companies like BT doing it in the UK.

      The problem with using them (BT) as an example of how to do FTTN, is that as the incumbent, they already own the copper. Here, NBNCo doesn't own the copper, Telstra does, so you can add whatever the copper will cost on top of Malcolm's $29.5b.

      At the end of the day, if Telstra want even a few billion more than on top of the deal they did previously, Malcolm's plan will actually cost the government more than the full fibre plan would have (Gov input on the FTTP one was $30.4b, the rest was coming from private investment).
      Tinman_au