Major milestone for NBN 2.0 as NBN Co and Telstra sign new deal

New agreement paves way for FTTN network; NBN Co signs agreements on Optus and Telstra HFC networks

NBN Co and Telstra today announced the signing of revised definitive agreements, clearing the major hurdle for the company rolling out the National Broadband Network as it shifts to the ‘Multi-Technology Mix’ favoured by the Coalition government.

The two companies announced they had signed the revised agreements this afternoon at a ceremony in Sydney.

Under the original agreements with NBN Co, Telstra was obliged to progressively migrate its customers off its copper network and onto the fibre-to-the-premises (FTTP) NBN and shut down the copper network.

However, the mixed deployment favoured by the federal government will be based primarily on a combination of fibre-to-the-node (FTTN) and hybrid-fibre coaxial (HFC). FTTN relies on copper for the ‘last mile’ connection to homes and businesses.

Under the new agreements, instead of disconnecting the copper network as the NBN is rolled out, Telstra will progressively transfer ownership and the operational and maintenance of the copper network to NBN Co, a statement issued by the telco said.

Similarly, in areas covered by Telstra’s HFC network, the assets will be progressively transferred to NBN Co. Continued access for the HFC network for Foxtel will be negotiated with NBN Co, Telstra said.

“The progressive disconnection of premises connected to the Telstra copper and HFC broadband networks, the progressive transfer of the relevant copper and HFC assets to NBN Co and the completion of the NBN under the revised Definitive Agreements will still result in the structural separation of Telstra that Telstra committed to in its Structural Separation Undertaking,” a briefing paper prepared by the telco on the new agreements states.

“The progressive nature of the MTM rollout will ensure that Telstra retains the ‘natural hedge’ of copper and HFC revenues in areas where NBN Co has yet to rollout the NBN.”

The transfer of Telstra’s copper and HFC assets won’t incur additional costs above the original $11 billion deal, NBN Co said. However, in its statement NBN Co did not reveal details of any projected maintenance costs for the aging copper network.

"Telstra continues to work with NBN Co on the delivery of its FTTN trial and remains in discussion with NBN Co on the provision of planning, design, construction and maintenance services by Telstra to NBN Co on commercial terms," Telstra said. "These services would be separate and in addition to the revised agreements."

“We have achieved the key principle, agreed to by the parties, of maintaining the overall value of the original agreements," Telstra CEO David Thodey said in a statement.

“As a result, our shareholders have been kept whole in terms of the transaction they approved in October 2011.”

“Telstra shareholders will be kept whole as the estimated net present value (NPV) which the revised Definitive Agreements are expected to deliver is equivalent, on a like for like basis, to the estimated NPV of the original Definitive Agreements, and as NBN Co has agreed to reimburse Telstra for any direct, reasonable, substantiated and incremental costs it incurs as a result of the move by NBN Co from the FTTP rollout to the MTM rollout,” Telstra’s briefing paper on the deal states.

“Under the original Definitive Agreements, while Telstra was obliged to permanently disconnect premises connected to its copper and HFC broadband networks, it still retained ownership of them, and retained the ability to continue to operate and use the HFC network for the supply of Pay TV services.

“Given the progressive transfer by Telstra of relevant copper and HFC assets to NBN Co, Telstra has negotiated a series of new protections in relation to the disposal by NBN Co of those assets, and in relation to rollout cessation should that occur after 75% of premises in Australia have been passed or adequately served by the NBN.”

“We have retained existing shareholder protections and also negotiated new protections for shareholders in lieu of the protection that our continued ownership of the copper and HFC network assets provided under the original agreements,” Thodey said.

“We have also improved and simplified the agreements based on what we have learned working with the original agreements over the last three years, including removing some of the complexity and reporting processes.”

Read more: Government wants NBN Co ready for potential break-up

“This deal will bring down the overall cost of building the NBN and enable us to complete the rollout much earlier than originally anticipated with less disruption to residents and communities,” NBN Co’s CEO, Bill Morrow, said in a statement.

“What’s more, making use of technologies such as copper and HFC – rather than decommissioning them – enables Australia to capitalise on the significant investments being made globally in broadband technology.

“In short, this transaction is an essential step to spur Australia’s greater participation in the digital economy and help close the digital divide.”

NBN Co picks up Optus HFC network

NBN Co today also announced it had struck an agreement with Optus to acquire the telco’s HFC network. The value of the agreement was “comparable” to the agreement the telco had originally struck to migrate its customers to the original FTTP NBN, Optus said.

“The timing, nature and purpose of payments will vary under this agreement, although the effective outcome remains substantially the same,” a statement issued by the telco said.

“These commercial arrangements recognise Optus’ historical investment in its HFC network and the cost of providing services to customers using NBN infrastructure.”

Optus HFC customers will be progressively migrated to the NBN once NBN Co has integrated the HFC network, the telco said.

As with the original set of agreements with Telstra, NBN Co had previously negotiated for Optus to migrate customers then decommission the HFC network.

“Optus has been a vocal advocate for fixed line competition for many years. The NBN offers the potential to provide more choice and competition for all Australians and puts us a step closer to creating a level playing field in Australia’s retail broadband market,” Optus’ CEO, Allen Lew, said in a statement

“Anything that speeds up the rollout of the NBN and increases the size of the contestable national broadband market is good for innovation and competition.

“We now have clear agreement on incorporating Optus’ HFC network into the NBN architecture. This can provide real benefits for all.”

The new deals with Telstra and Optus are subject to Australian Competition and Consumer Commission approval.

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