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Does the NBN need an Optus deal too?

Optus seems to have much to gain by putting a formal agreement into place with the government around customer migration to the National Broadband Network (NBN). But does the government?
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Written by Suzanne Tindal, News Editor on

Optus seems to have much to gain by putting a formal agreement into place with the government around customer migration to the National Broadband Network (NBN). But does the government?

Today a report surfaced in the Australian Financial Review that Optus and the government were nearing the end of hammering out a deal similar to Telstra's $11 billion heads of agreement for asset use and transferring its customers to the NBN.

Questions on the veracity of the report, which doesn't mention a source, were met by a no comment from NBN Co and a statement from Optus saying the article was "purely speculative".

"The article in today's AFR is purely speculative. Like all retail service providers, Optus is engaged in ongoing discussions with NBN Co, DBCDE and the industry more broadly around next steps for the NBN," Optus said.

Of course, a purely speculative report could still be right.

Especially since Optus would probably love to be paid to migrate customers to the National Broadband Network, something which customers could decide to do themselves anyway.

But I wonder what the government would see in it.

To me, such a deal would need to be supplied with another payout for the use of assets and transfer of customers. Although it likely wouldn't amount to $11 billion, it would be a significant portion of it.

As at 31 March 2010, Optus had 980,000 consumer and small- to medium-sized business broadband customers. Of these, 920,000 were on its own network. Telstra had 2,255,000 retail fixed broadband services operating as of June 2010. It then also had 1,739,000 wholesale services in operation.

Out of the Telstra deal, $9 billion was for providing access to infrastructure and decommissioning networks.

For argument's sake, let's say that to agree to a deal, Optus would want a third of what Telstra's getting. That would be $3 billion. Perhaps the government would see that as a bargain to kill an NBN competitor with large numbers of customers.

But, does it need to make the expenditure?

If Telstra doesn't come on board, the incumbent telco could compete with the NBN and starve it of revenues from its customers — both retail and wholesale. Optus could too, but with fewer customers and a smaller network in its arsenal.

Telstra playing along has been considered by many as essential to the success of the NBN. Optus, in my opinion, is more like a "nice to have".

Considering that, Optus will need to offer a low enough price for the "nice to have" to be worthwhile.

Naturally, Telstra won't like a competitor running riot with an infrastructure domination it once considered its own. So it might lean on the government hard enough to take out its competitor.

And there's another consideration. The deal with Telstra is only preliminary and is by no means set in stone. Telstra could still pull out. Perhaps the government wants Optus as a knife behind Telstra's back. Although that too might be playing right into Telstra's hands.

Imagine a world with a functioning Telstra where Optus' assets were decommissioned.

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