Thursday, October 14, 2010

Australia - Incumbent operator Telstra wanrs deal with govt could unrave

[the australian] TELSTRA has warned that its $11 billion deal with Labor's National Broadband Network company threatens to unravel.

The telco says the deal will fall apart if it is forced to maintain its ageing copper network for people who refuse to connect to the fibre network.

Under the terms of the non-binding deal, Telstra will be paid $9bn to transfer its traffic on to the NBN and to gradually shut down its copper network as customers move to the new fibre network.

But fresh concerns over the sluggish NBN take-up rates in Tasmania, coupled with the disparate methods used by state governments to connect the new fibre cable to premises, could see large parts of Telstra's copper network maintained past its use-by date and in parallel with the new NBN.

Yesterday, Telstra chief executive David Thodey exposed the fragility of its agreement -- a deal which industry experts say underpins the success of the ambitious NBN project -- by describing the need to continue maintaining its network while servicing customers on the NBN as a value-destroying proposition.

"The commercial terms must be such that we are not left to maintain the copper in that period, otherwise the value is destroyed, so it's got to be done in commercial terms and that is why it's the government's prerogative to decide how to incent people to move across," Mr Thodey said.

Telstra spends $300 million a year in capital expenditure on its copper network and, according to analysts, as much as $1bn a year in operating costs to maintain its far-reaching asset. It's expected the vast majority of its customers will move to the NBN, but even if a fraction remain on the copper network, the costs to maintain it would continue to be high.

Under the terms of the $11bn deal, the government is supposed to relieve Telstra of its universal-service obligation to provide a fixed-line service to premises, but it is not clear if that provision will be extended to premises within the NBN's fibre footprint.

A spokeswoman for Communications Minister Stephen Conroy said no decision had yet been made in relation to switching off Telstra's copper or cable networks, but she said the NBN Co would not carry the burden of maintaining the copper network.

The NBN Co has eight years to connect 93 per cent of the nation, but a sluggish rate of activations in Tasmania -- about 50 per cent -- suggests this target will be difficult to achieve. This week, Tasmania announced it would introduce laws so homes and businesses would automatically be connected to the NBN unless they refused in writing.

NSW and Victoria have refused to follow Tasmania's legislative lead and adopt an opt-out system, which has prompted new fears that the first mainland sites could be subject to the same lowly take-up numbers.

If there are poor connection rates on the mainland, then it could become essential for Telstra to continue maintaining its copper network. The alternative would be to switch its fixed-line internet to a wireless service.

Telstra's warning over NBN deal

No comments: