news Leighton subsidiary Visionstream has won a $300 million contract from the National Broadband Network Company for the rollout of the National Broadband Network (NBN) in Tasmania.

A media release from Visionstream stated that the company had been awarded three work packages comprising Passive Fibre Network Construction, Field Services Delivery and Network Augmentation and Restoration to bring high speed, fibre-optic broadband to Tasmania. The project set to commence within the next few months, is expected to continue for four years with the possibility of extensions. The team is currently implementing the process of design and survey.

Peter McGrath, Managing Director, Visionstream, said: “We are thrilled to have secured this important and exciting contract to deliver broadband to Tasmania.” He added that Visionstream was looking forward to building a long-term, sustainable presence in Tasmania and to create a substantial number of new employment opportunities for local Tasmanians.

The media release stated that since July 2011, Visionstream had secured more than $750 million worth of work including NBN contracts, to provide better broadband access to communities across Australia. This latest deal is similar to Visionstream’s existing contracts to build NBN’s Transit Network and the construction of the fixed wireless network. Visionstream is a ‘concept to completion’ provider of telecommunication infrastructure and operations services across wireline, wireless, equipment installation, relocation and integration. The company also provides maintenance related services.

Meanwhile, the office of Senator Stephen Conroy, Australia’s minister for broadband, communications and digital economy corroborated the development and welcomed the announcement by NBN Co that it had finalised an agreement with Visionstream for the construction of the NBN in Tasmania. According to a media release from the Senator’s office, the contract would connect the remaining premises in Tasmania by 2015. The contract also includes provisions for ongoing maintenance of the NBN in Tasmania.

The NBN rollout is already underway in Tasmania, with NBN fibre services available in Scottsdale, Smithton and Midway Point. NBN Co anticipates that services would be available in Triabunna in the coming weeks followed by Deloraine, Sorell, St Helens, Kingston Beach, George Town and South Hobart in the coming months.

Senator Conroy said “Today’s announcement means NBN Co has now established a program of construction work for the entirety of the NBN fibre rollout in Tasmania. It will establish a permanent NBN maintenance workforce in Tasmania, creating more job opportunities for Tasmanians.”

NBN Co’s 12-month fibre rollout schedule (as per a Feb 2012 update) covers 758,100 homes and businesses in 66 locations across Australia where the network is active, where work is underway, and where work is expected to start by the end of this year. This includes three new locations in Tasmania: Bellerive, Claremont and South Launceston. NBN Co is expected to issue its first three-year indicative rollout plan shortly. This will be updated annually until the rollout is complete.

Image credit: NBN Co

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1. Conroy slams Libs’ Tassie NBN “scaremongering”
2. NBN: Is Conroy telling ‘porkies’ on Tassie schools?
3. NBN launch: Gillard, Conroy pack Armidale bags

news The Federal Department of Defence has revealed that it renewed a major IT hardware and software contract with IBM in late 2008 to the tune of $342 million, despite not having put the work out to public tender since 1999.

The contract appears to have been first reported by analyst house and technology media outlet Intermedium, which first published detailed of the deal in 9 December. Intermedium quoted a Defence spokesperson as stating that the five-year agreement, which will now be in force until September 2016, covers:

“Major Defence Systems including our Personnel, Finance and Military Logistics systems and Defence Information Communications Technology Reform Initiatives, including Service Oriented Architecture, Single Secure Desktop and Data Centre Migration and Consolidation.”

Brief details of the contracts are also available publicly on the AusTender website here and here.

Shortly after, time technology media outlet iTNews filed a Freedom of Information request with the Department of Defence to request details of why the department merely renewed the arrangement with IBM, instead of putting the contract out to public tender. We recommend you click through to read iTNews’ full coverage of the issue, as it is comprehensive. Several weeks ago, Defence has published its response to the Freedom of Information request publicly on its website (PDF). It has also published a letter explaining its rationale in responding to the FoI request (PDF), as is common with FoI requests.

The majority of that document has been censored, with eleven pages completely blacked out, with Defence defending the blackout as containing information which was “reasonably regarded as irrelevant to the scope of the [FoI] request. However, one section was not blacked out.

In that section, Defence stated that a decision had been made between the Defence’s Chief Information Officer Group, its Chief Financial Officer Group and the Department of Finance and Deregulation to allow the contract to proceed without going out to tender, with it being classified as a “sustainment activity”.

“A change of supplier would compel Defence to procure hardware and software that does not meet requirements of compatibility with existing equipment or services,” Defence noted in the document. “The requirement for IBM was determined as part of the Market Testing of the Defence Computing Bureau in 1999. Until such time as that decision is revisited, the requirement to sustain our existing IBM infrastructure will remain.”

“IBM is the only entity that can agree to changes to IBM’s terms and conditions of supply and use.”

Defence also noted that clauses of government regulations allowed direct sourcing where “additional deliveries” were taking place that were intended “either as replacement parts, extensions or continuing services for existing equipment, software, services or installations where a change of supplier would compel the agency to procure property or services that do not meet requirements of compatibility with existing equipment or services”.

The news is the second time over the past year or so which a major Federal Government agency has successfully worked around tendering guidelines to renew a decade-old arrangement with IBM.

Two days before Christmas in December 2010 and just 24 hours after publicly denying it had renewed its long-running comprehensive IT outsourcing arrangement with IBM, which has been in place since 1999, the Federal Department of Health and Ageing (DOHA) reversed its statement and confirmed the arrangement.

opinion/analysis
If you examine IBM’s lines of business closely, it is hard to make a case that Defence needed to renew its long-standing software and hardware outsourcing arrangement with IBM through 2016.

On the hardware side, IBM’s lines of business in server, storage and mainframe infrastructure all have direct rivals which provide similar solutions. In a number of cases, those solutions are regarded as being technically more capable than IBM’s (although IBM is also regarded as having the edge in a large number of areas).

For example, when it comes to servers, IBM has major competitors such as HP, Dell and even more integrated solutions from the likes of Oracle (especially through its acquisition of Sun Microsystems). In storage, it is common for major organisations to also look at solutions from EMC, NetApp and Hitachi Data Systems. In mainframe, companies like Fujitsu and CSC play a strong role.

When it comes to software, things are a lot more complicated, especially when you start discussing high-end concepts such as service oriented architecture, where few companies aside from IBM are really capable of providing enough pieces of the puzzle so that everything fits together. However, when major organisations such as the National Broadband Network Company are standardising many different systems on software from Oracle, and German giant SAP also has a comprehensive portfolio which is powering much of the Commonwealth Bank, it is hard to make an argument that the IBM work couldn’t be put out to market. When it comes to secure desktop, I’m sure VMware and Citrix would have a view about that.

And of course, all of these companies have major partner/system integrator ecosystems in Australia. Heck, IBM itself is one of those key partners for quite a few of those players.

Of course, there are two sides to every story. And as I have previously written, the Federal Government’s tendering regulations are onerous and often prevent quick and efficient outcomes from being reached in IT procurement. Defence chief information officer Greg Farr is one of the IT executives who I most respect in Australia’s technology sector — and I’m not the only one. Farr just won a Public Service Medal for his efforts at Defence and the Australian Taxation Office. I’m sure are there very good reasons for Defence to re-sign its contract with IBM.

However, Defence has not yet provided those reasons publicly. In fact, it very explicitly chose not to — releasing the bare minimum amount of information needed to satisfy iTNews’ Freedom of Information request.

Whatever the truth is about this situation, one fact remains. In our fast-changing IT environment, where major new technology products and solutions are released every year, no public sector organisation should sign a single supplier up for a 17-year contractual span without testing the market for that spend several times during that period. I, and I’m sure IBM’s competitors, would like to see some acknowledgement of that fact from Defence.

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news Funnelback has renewed its long-running contract with the Australian Government Information Management Office (AGIMO) to provide whole of government search services. A blog post last week by Marcel Gabriel, acting Assistant Secretary at AGIMO’s Online Services Branch, disclosed that work had been finalised on arrangements providing for the search service.

Funnelback is a local search specialist and a spin-off of the Commonwealth Scientific and Industrial Research Organisation (CSIRO). The contract has an initial term of three years, with a provision for extension by AGIMO for three additional one-year periods. The Government Search Services enables users to find information on public-facing government websites utilising keywords and various refinements to search patterns.

The service is managed by the Department of Finance and Deregulation of AGIMO, the central IT decision-making body for the Australian Government. Any Australian Government agency can use the search service, which performs the following functions:

• Web search
• Harvesting and indexing
• Administration and maintenance
• Subscriptions to search results (email/RSS updates)

AGIMO described the contract for the provision of government search services in May 2011 in the Request for Tender (RFT). Funnelback has been involved with the federal Government’s main online portal and its other websites since January 2004; it had won the formal tender process starting in September 2007 to provide search services until 2009.

The Government Search Service crawls and indexes each Australian Government website every weeknight to keep updating content accessible for search by Australian citizens. According to the contract, Funnelback will be in charge of the procurement, development and functioning of the service; the Department of Finance and user agencies will take up only the responsibility of ensuring that the functionality of the service is accessible to users.

According to its website, Funnelback currently boasts an extensive client list with a number of big names — ranging from the Australian Government, the Queensland Government, Westpac, the Australian Stock Exchange, Oxfam and even internet telephony giant Skype.

Image credit: Fernando Mengoni, royalty free

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news The maverick owner of national broadband provider Exetel has speculated that Telstra may be planning to provide wholesale access to its flagship Next G mobile network to get around the clause in its contract with NBN Co that will prevent it advertising its mobile broadband services as an alternative to the NBN fibre.

Unlike Optus and Vodafone, Telstra has previously proven reluctant to provide wholesale access to its mobile network, seeing the infrastructure as a competitive advantage. However, over the past several months it has softened its stance, confirming this week that it was planning to open up the network over the past six months. Speculation has thus far focused on the idea that the company will provide wholesale access to the normal HSPA+ sections of its network — but not the higher-speed sections based on the Long-Term Evolution (LTE) areas it is currently building, also referred to as fourth-generation mobile or 4G.

However, in a blog post yesterday, Exetel chief executive John Linton speculated Telstra may have ulterior motives for opening up access to its infrastructure.

“If I was a conspiracy theorist, which I’m not by any definition of that term, I would say that the only reason that Telstra would wholesale a high speed mobile service should be taken in the context of the strange clause in the “break up agreement” that forbids Telstra from “advertising its high speed mobile service in competition with the ‘NBN2′,” wrote Linton.

When Telstra unveiled its NBN contract in late June, it revealed a segment of the contract stated that part of the NBN deal is that it “may not promote wireless services as a substitute for fibre-based services for 20 years” from the commencement date of the contract. The Australian Competition and Consumer Commission believes the clause has the potential to harm competition. Optus has similar constraints in its own contract with NBN Co, although the terms of its arrangement are different.

Linton also questioned why it would take six months “to do something that requires no thought at all” beyond the decision to wholesale the service, and noted that he did not expect Telstra’s prices to be reasonable. Exetel currently wholesales 3G mobile broadband access from Optus.

“Does anone seriously think that Telstra will provide ‘real wholesale’ pricing for 4G mobile any more than it provides “real wholesale” pricing for any other product?” Linton asked. “If you do then perhaps you need to change your medication for something less mind-transforming.”

So far, Telstra is only known to have approached cut-rate ISP Dodo to re-sell Next G, although a number of other ISPs, such as iiNet and Internode, have also expressed their interest in gaining access to the company’s infrastructure.

Linton, however, didn’t appear to be confident that the opening up of Telstra’s network would generate positive outcomes for competition in the telecommunications sector. “… a ‘wholesaled’ Telstra high speed mobile service will be as effective in generating competition as a currently ‘wholesaled’ Telstra ADSL2 or PSTN service … totally ineffective,” he added.

opinion/analysis
This may sound strange, but I believe both Telstra chief executive David Thodey and NBN Co chief executive Mike Quigley when they say the wireless marketing clause in Telstra’s NBN contract won’t be a huge deal for the company in terms of Telstra’s ability to go to market with mobile broadband over the next decade.

As the Australian Competition and Consumer Commission noted yesterday as it released its annual report into the telecommunications sector, wireless broadband is becoming increasingly popular, but fixed-line broadband dominated the actual amount of downloaded data via broadband in Australia. In short, mobile broadband is primarily for light internet use at the moment, while fixed-line is for heavy downloading.

It will make sense for telcos — especially those which operate their own mobile networks — to focus on ‘bundled’ plans in future — offering a combination of fixed broadband over the NBN alongside mobile broadband through 3G and 4G.

However, it must be said that Linton’s question is a very interesting one — and one I was planning to raise this week myself. If another telco markets a re-badged Telstra Next G mobile service as an alternative to the NBN fibre, does that place Telstra in breach of its contract with NBN Co? I would think surely not … as the contract only binds Telstra. But it would be a fascinating situation that would highlight just how foolhardy that particular clause of Telstra’s NBN deal is.

Kudos to Linton — constantly an out of the box thinker — for raising the idea.

Image credit: Telstra

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The Federal Opposition has accused Communications Minister Stephen Conroy of telling “porkies” over the extent to which NBN-connected schools in Tasmania are actually using their new broadband service, more than 12 months after the infrastructure was rolled out in select locations in the state.

In mid-June, the Tasmanian State Government was forced by its own Opposition to concede that no public school in the early stage release towns of Scottsdale, Midway Point and Smithton had actually been connected to the next-generation fibre Internet the project will provide, despite the fact that the physical infrastructure was in place to allow connections to go ahead.

The delay appears to be due to the fact that Internet service to schools is provided through the state whole of government Networking Tasmania contract, which is held by Telstra and is currently being tested in the market. Like other providers, Telstra is currently trialling NBN services in Tasmania.

However, in a statement, the Opposition pointed out that during the launch of the NBN in Kiama in New South Wales last week, Conroy had told assembled media that schools in Tasmania were now using the NBN and “reporting their enthusiasm”.

“The fact is, Senator Conroy’s comments couldn’t be further from the truth,” said Liberal Senator Eric Abetz. “Of the limited number of schools in Tasmania that actually have access to the NBN, only a couple of private schools are willing and able to pay for the expensive NBN connection,” Abetz added. “As far as Government schools are concerned only one, Smithton High, has a limited trial, which is delivering a low speed connection to just a single classroom.”

Conroy has previously answered criticism on the issue by re-affirming the Federal Government’s commitment to bringing the NBN to Austrailan schools, and directing enquiries on the matter to the details of the Networking Tasmania contract.

In June, Shadow Communications Minister Malcolm Turnbull did not respond to a request for comment on the matter.

The Federal Government, in addition the Tasmanian State Government, have repetitively touted the ability to bring high-speed broadband to schools as a benefit of the NBN, holding demonstrations of the fibre-optic technology in schools in both Tasmania and other early stage release sites such as Armidale over the past year.

For example, in mid-May, groups of school children in Armidale and Tasmania were filmed in a joint rendition of ‘Waltzing Matilda’ sung over a videoconference link over what appeared to be a NBN link between the two states. School students using next-generation broadband services have also been regularly featured in NBN Co advertisements highlighting the benefits of the NBN to the national education system.

Last week, Abetz accused Conroy of misleading the public.

“Thanks to State Labor’s bungling, none of the other Government Schools in the NBN rollout areas are even able to connect to the service due to State Government contractual obligations with other providers,” the Liberal Senator said.

“This is typical of Labor’s bungling and its over-enthusiastic spin, tell the story sprinkled with half truths, throw in a few porkie-pies and hope the Australian people buy it. Despite Senator Conroy’s comments today, there’s not much “enthusiasm” in Tasmania at all.”

Image credit: Laihiuyeung Ryanne, Creative Commons

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Perth-headquartered telco Amcom has won a $9 million deal to provide hosted services to the University of Western Australia, in a deal which will see the telco deliver hundreds of servers and over 400 terabytes of storage to the institution.

Amcom operates a fibre network in a number of states, including in Western Australia, with the services to the university to be provided over its network directly between UWA’s Perth campus and Amcom’s own datacentres in the city. The value of the contract is $9 million over three years, according to a statement issued by Amcom this morning, with additional extension options.

UWA librarian and director of information managament Dr Mary Davies said Amcom had been able to provide the university with a “cost-effective, secure, reliable and dedicated product” that would give it capacity and capability across all of its faculties. “It is both simple for us to manage and user-friendly for our staff,” she added.

“Amcom is ready to deliver the hosted services we require now, and most important, our data is stored in Perth using dedicated infrastructure (single tenant) under a private hosted services agreement,” Davies added. “This puts us in the forefront of hosted compute and storage and frees us to concentrate on value-added support for teaching, learning and research.”

It is unclear whether the services that Amcom will provide to UWA would technically constitute ‘cloud’ computing services as the organisation has stated, or whether they would come under the banner of traditional hosted or managed services.

The IT industry usually defines cloud computing services as a set of highly virtualised services that can be easily extended in terms of storage and processing capability, with multiple organisations often accessing the same infrastructure. However, there are some sub-sets of cloud services which may fit into the UWA definition — such as ‘private cloud’, which sees a company use cloud computing services devoted to just a single tenant.

“Today we offer a comprehensive suite of IT solutions hosted in the cloud to both new and existing customers, and being chosen as a partner to one of Australia’s top universities to provide a dedicated, secure and reliable cloud solution validates our services-driven strategy,” said Amcom chief executive Clive Stein.

Other Australian telcos like Telstra and Optus are also increasingly moving into providing cloud computing services, placing themselves squarely in competition with existing IT services players like CSC, Fujitsu, HP and more. However, analyst firm Ovum has recently stated that telcos face considerable challenges when it comes to supporting and selling cloud services.

“Much has been made of the potential for telcos to leverage existing assets, such as their communications networks, data centres, OSS and BSS systems and existing customer relationships, to offer cloud services to enterprises, said Ovum analyst Mark Giles in a statement this morning.

“However, while telcos’ assets do provide them with some key advantages over other cloud providers, there are a number of significant challenges that they face. Aside from a perceived lack of brand identity in the supply of IT services, obstacles such as bringing internal network and IT teams together, enabling sales teams, and ensuring that OSS and BSS systems can deliver on cloud’s on-demand nature must be overcome.”

Giles said the pace of innovation required for cloud services was very different from that of traditional network services — requiring telcos to speed up their operations. Giles recommended that telcos partner with existing market players — such as how Telstra has partnered with Accenture and Microsoft — in their venture into the cloud.

Image credit: Nicolas Raymond, royalty free

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opinion No matter how hard the Australian Labor Party tries, when it comes to the telecommunications sector it just keeps on shooting itself in the foot — a fact demonstrated starkly by Prime Minister Julia Gillard’s appalling comments on the NBN over the past week.

It was hard to ignore the sense of triumphalism in the air last Thursday morning when the Federal Government finally announced its long-awaited National Broadband Network contract with Telstra. The symbolism of the moment, after all, was writ large.

If you watch the video of the event, you can see its careful choreography in action. As support staff open the door to the Prime Minister’s Courtyard at Parliament House, Gillard exits, looking both young but also reserved in a black suit and dark mauve top. She proceeds to the speaking podium.

Behind Gillard file out Communications Minister Stephen Conroy, whose presence is of course essential, but also Finance Minister Penny Wong, who doesn’t give her own speech at the event, but is only present to lend an air of financial credibility to the proceedings. She’s less a shareholder minister of the NBN and more like some kind of trained prudential poodle.

And then come the real big guns.

With what appears to be a quiet exchange of words, the chief executives of Australia’s current and future telecommunications monopolies follow the ministers. Leaving the side of his NBN Co counterperart, Telstra boss David Thodey takes a stand next to Conroy, indicating Telstra’s now submissive attitude towards the Government. For his own part, NBN Co leader Mike Quigley stands on the other side next to Wong, making it clear he will always take a measurable and responsible approach to managing the tens of billions of dollars the Government is ploughing into the NBN.

From here on, events flow smoothly.

Churchill-like, Gillard repeats several times that that she is “determined” that the NBN will go ahead, “determined” to bring super-fast broadband to Australia, and “determined”, it appears, to look as though Labor is capable of sticking with one policy, at least, until the bitter end. Conroy, for his own part, shows off his ‘special occasion’ red Labor tie, reiterating the nation-building aspects of the NBN with his trademark overenthusiastic diction.

Wong looks serenely on — staunchly safeguarding the public purse — while first Thodey and then Quigley step forward to vouchsafe the sacred trust that has been placed in them in maintaining telecommunications services to every Australian … or words to that effect. It’s a publicity extravaganza that glistens with production values only otherwise found in the most high-profile stage events … Andrew Lloyd Webber should take note. But of course, there was a shadowy phantom waiting in the wings.

It should have been enough for Gillard and her supporters to stop here. To justly accept plaudits for a deal which represents — after a decade — a final outcome to the botched deregulation of Australia’s telecommunications sector. The holy grail — the separation of Telstra — is within reach, and better yet, we’re getting universal fibre to boot.

But Gillard just couldn’t help herself. Her gutter instincts rose to the fore and she indulged them, taking the opportunity to stick the boot into the Opposition. “The Opposition is determined to destroy the NBN,” the Prime Minister said. “I anticipate the Opposition will go to the next election saying they’ll dig the cables out of the ground.”

Taken alone, Gillard’s comments might be seen as just an isolated example of a Prime Minister who didn’t quite understand what she was talking about. After all … nobody in their right mind would rip up brand new infrastructure once it had been laid — whether that infrastructure is a road or a fibre cable. You make use of it — or, in the worst case, sell it.

But Gillard blithely ploughed on.

Facing questions on the matter from one brave journalist, who pointed out that Shadow Communications Minister Malcolm Turnbull had just that very morning stated that a Coalition Government would not dig up the NBN fibre, Gillard reiterated her comments.

The Prime Minister claimed Opposition Leader Abbott had given Turnbull instructions to “destroy” the NBN. “You destroy the NBN by ripping up this agreement, ripping the fibre out of the ground and keeping this nation in the past,” she said.

And then, later in Parliament that same day, Gillard continued (PDF). “If you are in the business of ripping the National Broadband Network out of the ground, then your relentless negativity is costing Australian families,” she told the Coalition. Then later: “They want to rip the NBN out of the ground.” The quote was repeated many times in that session of parliament — and Gillard continues to use the exact same words, again and again. Just this week, at an NBN launch in the Northern Territory, Gillard accused Abbott of wanting to “rip the fibre out of the ground”.

Now there’s just one problem with Gillard’s claim: Both logic and, less importantly, the Coalition itself indicate that it is simply and obviously untrue. There is no reason that a Coalition Government would order fibre-optic cable to be physically torn out of the ground if it took Government. Quite aside from the fact that it would be a monumental waste of money to do so, it would involve a major construction effort.

Nextgen Networks, for example, has already constructed thousands of kilometres of fibre links across Queensland, Western Australia and South Australia as part of the $250 million NBN backhaul project. It would be, as Turnbull has pointed out, “ludicrous” to suggest that that infrastructure should be torn up, just as it would be ludicrous to tear up a major highway once it had been built.

It gets even more ludicrous when you consider the scale which the NBN will have achieved by the time the next election comes around … with several million premises in cities around Australia having received fibre to their front door. To suggest that any politician would want to physically disconnect millions of Australians from their fledgling fibre connection — and with the previous copper network having likely already been removed in many cases — is worse than a bad joke. It’s simply untrue.

Now, opinions vary as to what extent Prime Minister Gillard is or is not a fool in general. However, it is clear, given the ongoing nature of her “rip it up” comments targeted at the Coalition, that these remarks in particular are not coming off the cuff. They are a deliberate strategy designed to take advantage of the NBN’s populism and undermine the Coalition’s broadband credibility.

With a whole department full of broadband experts and a Minister who is speedily becoming a walking encyclopedia on the subject, there is no doubt that our Prime Minister has the resources to understand that no Government, nay, nobody in their right mind, would “rip up” brand new telecommunications infrastructure.

The fact that she is publicly making statements that run contra to that expertise and understanding means she is comfortable misleading the Australian public. To label it as it should be labelled: Gillard’s claims regarding the Coalition’s plans for the NBN are a lie: A lie told deliberately and consciously in public with the aim of attacking her rivals.

The difficulty with this is that you simply cannot use a bald-faced lie to publicly undermine someone else’s credibility. Ultimately, and as the ABC’s word chat disastrously showed Gillard last week, the only credibility you will undermine is your own.

Image credit: NBN Co

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Confused about what Telstra’s $11 billion deal with NBN Co means? You’re not alone. It’s a complex agreement which took the best part of several years to develop. Happily, NBN Co has provided us with this handy infographic to clear it all up — click to get it enlarged. We hope it all makes sense now.

Image credit: NBN Co

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Not content to be left out of the limelight by big brother Telstra, the nation’s number two telco Optus has also this morning announced a significant deal with NBN Co, with the arrangement to see parts of its HFC network shuttered and its customers progressively migrated onto the fibre NBN infrastructure at a total cost to NBN Co of $800 million.

“Optus was born in competition,” said the telco’s chief executive Paul O’Sullivan in a statement this morning. “This deal supports the NBN to create a level playing field for all telcos. Australian consumers will be the winners. This agreement represents a fair deal for Optus. We intend to use the NBN to turbo-charge competition and to deliver the full potential fo a 21st century digital life to customers.”

Optus and NBN expect that the initial migration of customers onto the NBN fibre will kick off in 2014, with the program expected to take up to four years from that point to affect all of Optus’ customers across its HFC footprint — currently extending through area of most of Australia’s major capital cities. Until they are migrated, Optus will continue to provide customers with services over the HFC network.

Telstra’s own $11 billion deal announced this morning will also see it stop providing broadband services over its own HFC network. However, unlike Optus, Telstra has not announced plans to decommission the infrastructure, as it will still use it to provide pay TV services through its joint venture Foxtel.

In its statement, Optus said it would progressively decommission the parts of its network that did not provide ongoing support for mobile infrastructure and business customers. However, like Telstra, it has agreed to solely use the NBN for fixed-line services in relevant areas.

“Optus agrees to use only the NBN for the supply of fixed line services to residential and small business premises previously served by the HFC network,” Optus said. No mention was made of the fate of Optus customers using Telstra’s copper network to receive services, instead of its HFC network — which make up the bulk of its customer base.

Like the Telstra deal, there are conditions to the Optus agreement — it is conditional on approval by the Australian Competition and Consumer Commission, as well as “satisfactory rulings” from the Australian Taxation Office. It also contains various termination rights, including “rights relating to agreeing an implementation plan and the market environment in which the NBN is expected to operate.

The Optus deal was also hailed by NBN Co chief executive Mike Quigley. “A definitive agreement with Optus, Australia’s second largest ISP, represents a significant step towards a true level playing field for retail broadband services,” said Quigley in Optus’ statement.

In a separate statement issued by NBN Co directly, Quigley added that the agreement with Optus was expected to enhance the take-up rates on the NBN, thereby “improving NBN Co’s revenue plan” and its internal rate of return. As with the Telstra deal, payments to Optus will be made progressively. The payments will be made based on the actual numbers of customers that migrate from Optus’ HFC network to the NBN.

Image credit: Delimiter

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As expected, Telstra this morning revealed it had signed what it described as ‘Definitive Agreements’ with NBN Co and the Federal Government which will make its infrastructure available to the fledgling broadband company and its customers progressively migrated onto the growing NBN fibre network over the next decade, at a cost to NBN Co of $11 billion.

The telco published an extensive statement to the Australian Stock Exchange (PDF) on the matter this morning, as well as a document summarising key aspects of the agreement. Telstra chief executive David Thodey and CFO John Stanhope will take questions from the media in a teleconference this morning.

In her company’s statement, Telstra chairwoman Catherine Livingstone said the deal was still contingent on the approval of a majority of Telstra shareholders, with a vote currently scheduled to be held at Telstra’s annual general meeting in Sydney on 18 October. In addition, the competition regulator will need to approve Telstra’s related structural separation undertaking as well as its customer migration plan.

However, the executive hailed the signing of the agreements as “another important step”, following two years of “complex” negotiations between the trio of parties. “The decision to participate was made on the basis that the proposed transaction is expected to provide us with the ability to recover more value for the business than the available alternatives, given the loss of value after the NBN policy announcements,” said Livingstone.

“After rigorously assessing the options before it, including the regulatory and commercial implications of each, the Telstra Board expects to recommend that shareholders approve a proposal to participate in the NBN rollout, subject to the conditions precedent being satisfied.”

The key components of the deal are as follows:

• Telstra will progressively disconnect customers from its copper and HFC fibre networks as the NBN is rolled out (although it will still be able to provide cable TV services over HFC)
• NBN Co will get access to certain Telstra infrastructure, such as dark fibre, telephone exchange space, lead-in conduits and ducts, in an infrastructure agreement with a term of between 35 and 40 years, plus two potential ten year extension options. The assumed average term for payments for this access will be 30 years. The lead-in conduits will eventually become NBN Co’s property.
• Funding will be allocated towards the delivery of the Universal Service Obligation — which sees Telstra deliver remote services to regional Australia
• In addition, Telstra and NBN Co have agreed to “key product feature and price commitments” with regards to NBN Co’s basic voice and data offering

Telstra will itself incur substantial cash expenditure to support the deal — $0.9 billion in infrastructure and customer migration costs, $0.6 billion on infrastructure maintenance and $0.5 billion on incremental operational expenses. It appears that these costs will mainly be offset by other areas or come from existing Telstra budgets.

The $11 billion value of the deal will not be paid to Telstra in one lump sum — but in amounts over “many years”. The figure is also subject to “a range of dependencies and assumptions over the life of the agreements”.

Telstra CEO David Thodey also hailed the deal.

“These agreements represent an important milestone in addressing much of the uncertainty for Telstra associated with the NBN and Government regulation and allow us to focus intently on our customer service and simplification strategy,” he said this morning. “The Government will achieve its desired industry structure and the arrangements for the USO and associated social obligations will be reformed to ensure that funding for these public interest services is secured.

“Within this new environment, we look forward to continuing to focus on customer service, content and innovation.”

Further coverage to come throughout the day.

Image credit: Telstra

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