NBN Co may pay Telstra to maintain Telstra copper network

NBN Co could potentially pay Telstra to maintain the copper network that Telstra has now sold to NBN Co.
Written by Josh Taylor, Contributor

Over and above the AU$11 billion deal renegotiated between Telstra and NBN Co to hand over the copper network to NBN Co, Telstra may also be paid to maintain the copper network for NBN Co.

The original AU$11 billion deal saw Telstra retain ownership of its networks as customers were migrated onto the fibre-to-the-premises NBN. Under the new deal, signed between NBN Co, Telstra, and the Australian government on Sunday, Telstra progressively hand over its copper and hybrid fibre-coaxial (HFC) networks to NBN Co to become part of the new multi-technology mix NBN.

As NBN Co takes over the copper access network for the fibre-to-the-node (FttN) network, the company will also bear responsibility for maintaining the legacy copper, which will be much more expensive to maintain than fibre under the previous model of the NBN.

Speaking to investors on Sunday, Telstra's head of corporate affairs Tony Warren said that NBN Co will not get Telstra's existing copper maintenance capability as part of the deal, and will need to build its own, or could potentially contract it out to Telstra.

"They will progressively take over the maintenance of the assets as the assets transfer to them. As the asset transfers to NBN Co, they get the full ownership benefits, but also the obligations that go with that," he said.

"We will look to provide some commercial arrangements around that in the future should that prove to be something they want and we find to be profitable."

NBN Co has not yet determined the cost for maintaining the copper network, but it is estimated to be much lower than Telstra's current maintenance cost, because NBN Co will use much less copper for fibre to the node.

If the company decides to contract out the maintenance of the copper, there will be a competitive tender process that Telstra will have to participate in before any contract is awarded.

Telstra may already be up for some additional design and construction work as part of the new fibre-to-the-premises rollout. The company is handling the design work for the FttN rollout so far, Thodey said, but that will be limited after the 1,000-node trial has been completed.

"We are doing the design for the FttN, but that's for a certain period. We are in discussions with NBN on further design work and that is based for us getting an acceptable return on work, and for NBN Co and the government, it must conform to due probity," he said.

"Until it happens, you can never bank it."

Telstra's participation in construction will depend on how much construction the company can take on, Thodey said.

For the HFC deal, as with Optus' revised agreement, Telstra retains ownership of the fibre links for the HFC services, which it will then lease back to NBN Co.

"We retain ownership of the fibre. We haven't transferred that fibre, but we do provide NBN Co with access on an as-is-where-is basis," Warren said.

Thodey said that Telstra has not ruled out using this fibre to roll out fibre to the basement in direct competition with NBN Co, but said that as with the government's new rules, Telstra would have to offer it as a wholesale service.

"If they want more infrastructure competition, I'm happy to participate. We already build fibre to the basement, and have done for many years. We will continue to do so if we see commercial value off the HFC," he said.

"That's not a big deal to us, but we would have to offer it on a wholesale basis like everyone else. It's in the noise, but there are some principles there."

After the signing of the deal, Telstra and NBN Co will need to get the Australian Competition and Consumer Commission (ACCC) to sign off on an amended migration plan to account for the switch to the multi-technology mix, as well as a ruling from the Australian Taxation Office.

Warren said he believes the regulators would want to get the deals approved as soon as possible in 2015.

"The objective is to get the ball rolling as soon as possible. Because we need this regulatory assessment, and the regulatory certainty it brings, I think everyone is really, including the commission, I suspect wanting to ensure this happens expeditiously," he said.

"My perspective is that once we get through this, it'll ramp up pretty quickly," Thodey said.

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