Telstra again threatens to cancel NBN deal

news Telstra has reportedly threatened to walk away from its $11 billion deal with the Federal Government and the National Broadband Network Company, with its pricing and access arrangements with other smaller telcos again becoming the sticking point with the potential to scuttle the landmark contract.

According to a little-reported article published in the Advertiser newspaper in Adelaide on 16 September, Telstra chief executive David Thodey (pictured, above) told a group of shareholders in Perth that week that the telco could withdraw its support for the NBN deal if it couldn’t win Australian Competition and Consumer Commission approval for its plan to structurally separate its operations and provide wholesale services to competitors in the meantime.

Telstra filed two documents with the ACCC on 1 August, the Structural Separation Undertaking and the Migration plan. The pair will will guide in the separation of the company’s wholesale and retail divisions, with its copper network to be shut down and customers migrated onto the NBN over the next decade. In addition, they set out how Telstra will fairly deal with its wholesale customers (many of whom are also competitors) in the interim period.

However, a number of Telstra’s competitors have already complained about details of the plans, and the ACCC has asked Telstra to make several key changes to the plans. At the shareholder meeting, Thodey appeared to object to the changes, alleging the ACCC had “changed the rules of the game” for Telstra.

“I don’t mind playing a game when I know what the rules are, but when the rules change every couple of years it makes it nigh on impossible, and I am not willing to agree to it,” Thodey reportedly said. Telstra may ask shareholders at its AGM on 18 October to vote on the NBN proposal nonetheless.

The comments represent the second time over the past few months when Telstra has publicly threatened to scuttle its deal with NBN Co and the Government. Doing so would result in harsh sanctions being placed on the telco — including potentially limiting its ability to acquire needed spectrum for its flagship Next G mobile network, force it to separate its operations into separate organisations and more. The collapse of the deal would also result in a drastic overhaul of the Government’s NBN project, as it would limit NBN Co’s access to Telstra’s infrastructure and customers and add a great deal of expense to the project’s construction cost.

In May, AAP reported that telco industry sources and the Greens had said Telstra lobbyists had told the office of Communications Minister Stephen Conroy that the telco would dump the NBN deal unless amended powers being considered for the ACCC at that stage were taken off the drawing board. The powers would have allowed the ACCC additional control over pricing on Telstra’s existing copper network.

In a statement published today, the Competitive Carriers’ Coalition, a lobby group representing Internode, iiNet, iPrimus, Macquarie Telecom, NextGen Networks, TransACT and Vodafone, told Telstra to “go ahead, make our day” in cancelling the NBN deal.

“The undertaking Telstra presented last month is so deficient that the ACCC has already told Telstra it is unacceptable,” said a CCC spokesperson. “It should be remembered that consumers were told all along that one of the benefits of the NBN is that Telstra would no longer be vertically integrated, resulting in lower prices.”

“As it stands now, that will not happen for 10 years, until the NBN is complete. The danger of a deficient Telstra undertaking is that during that time Telstra will be able to take advantage of its dominant position in both wholesale and retail markets, to the ultimate detriment of consumers.”

The CCC pointed out that the ACCC has said in judging Telstra’s plan, it would be guided by a “with/without” test, meaning it would consider if Australians would be better off with Telstra’s plan or without it. However, the CCC said it would this week send the ACCC expert analysis that would show that consumers and competitors would be better off without Telstra’s undertaking in its current form, “even if the Telstra/NBN Co deal does not go ahead”.

opinion/analysis
I do not expect Telstra’s deal with the Government and NBN Co to collapse at this point … everyone involved in the process is aware that there is simply too much riding on this arrangement for it to just fall in a heap. I view Thodey’s comments, as I have previously written about Telstra’s undertaking, as a bargaining ploy to try and get as favourable a situation for Telstra as possible in this regulatory minefield.

However, this is very tough talk and very close to a dangerous line. If Telstra’s NBN deal falls though, Australia’s telecommunications industry faces an even more chaotic future than it does at present. And that can only be bad for everyone — including Telstra. As I have previously opined, what Australia needs right now in telecommunications is stability.

Image credits: Telstra