Telstra talks up copper as it prepares for NBN negotiations

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.
Written by Josh Taylor, Contributor

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.

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