Companies

Feb 10, 2011

Telstra deal puts more momentum behind the NBN

The Telstra-NBN deal announced this morning puts more weight behind the broadband network, leaving the Coalition ever further behind.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

The government further built on the momentum behind the National Broadband Network with Stephen Conroy announcing this morning that Telstra and NBN Co had agreed to terms on the latter’s access to Telstra infrastructure, and a process to move Telstra customers from its decaying copper network to the NBN. The agreement caps seven months of detailed negotiation after Kevin Rudd, in the last days of his prime ministership, announced last June that in-principle agreement had been reached between the companies on an $11 billion deal. Access to Telstra infrastructure for NBN Co will speed up and reduce the cost of the NBN roll-out, while the transfer of Telstra customers to fibre will make Telstra NBN Co’s biggest customer and establish a future growth path for the once dominant, now troubled telco, which revealed a substantial six-month profit downgrade this morning. That transfer will mean NBN Co’s costs will increase initially, as it brings users onto the network faster than would have otherwise been the case, but will also generate greater revenue for the company. The deal will also, crucially, see the Universal Service Obligation brought fully onto government, having traditionally been a responsibility of Telstra. The extent to which Telstra was complying with its USOs has been a regular source of friction as the company went through an extended privatisation under the Howard government. The agreement still faces a Telstra shareholder vote at an extraordinary AGM and will be scrutinised by the Australian Competition and Consumer Commission as it forms a crucial part of Telstra's government-ordered structural separation process. Broadband Minister Stephen Conroy also used this morning’s press conference to laugh off a report from the Economist Intelligence Unit purporting to show the NBN was costing 24 times the cost of a similar network in South Korea. The report, reproduced verbatim by apparently innumerate local News Limited and Fairfax journalists, contained basic errors of fact and appeared to assume equivalence between South Korea, one of the world’s most densely-populated nations, and Australia, which is close to the least densely-populated. This morning's announcement follows the passage of the crucial legislation on NBN and Telstra's structural separation at the end of last year’s parliamentary sittings that ensured Labor finished 2010 strongly. A deal was needed reasonably early this year to ensure the Telstra AGM can be held by the middle of the year. The opposition, which is committed to "wrecking the NBN", opposed even the structural separation bill last year despite Telstra and the telco industry supporting it. It used an array of procedural motions to delay that bill, requiring an expensive extra sitting day for the House of Representatives to pass the bill at the end of November.

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