NBN: Will Optus shut down its HFC network?


blog The Financial Review reports this morning that Optus is very close to finalising a deal with NBN Co worth between $500 million and $1 billion to shut down its HFC cable network and transfer customers from that network and its ADSL network onto the NBN. Click here for the full article online. One key paragraph:

“Optus, which is expected to sign a simultaneous deal to use the NBN Co for fixed line carriage, is known to be anxious that it does not get unfavourable terms to those which Telstra is about to strike with NBN Co.”

Your writer has asked Optus chief executive Paul O’Sullivan point blank about an NBN Co deal several times, but the executive has always refused to comment directly on what, when, why or how his company is talking to the National Broadband Network Company, and we note that Optus declined to comment again in the AFR’s article. We’ll try again this morning, but it seems kind of ironic for a company which is insisting that there is as much transparency around Telstra’s deal with NBN Co as possible. Pot calling the kettle black, Optus?

Image credit: Delimiter


  1. You have to assume Optus (and Telstra) will continue to deliver multicast pay tv over cable alongside the fibre, so when you say shutting it down you mean no more broadband.

    The lack of provision for multicast on the NBN seems to me to suggest that they anticipate the market ultimately moving to on-demand services, but I would imagine pay tv will exist for some time for existing cable customers.

      • Correct.

        Their current product roadmap sees internet and voice at the start of commercial service date – (September?) – followed by multicast IPTV six months later – (and working off memory) – small business focussed products six months after that, and enterprise focussed solutions (including symmetrical data) six months after that.

        (I’d have to yank out my notes at home to confirm how good my memory is in regards to the order of these roadmap steps!)

      • There are some pricing bugs yet to be sorted;

        “In the “Advanced” user NBN Co show a household with a total of 34Mpbs peak demand including SDTV x 2 (8Mbps), HDTV x 1 (9Mbps).

        If this were to be provided in an “uncontended” manner ie with dedicated CVC capacity would the wholesale cost to the RSP to deliver that to the customer be:

        Tail (50/20) $34
        CVC 34Mbps x $20 = $680
        Total $714

        lol @ “uncontended” manner

        Of course not
        Who in their right mind is going to pay $714+ per month”


        • Which is why CVC pricing is stupid and should be completely nixed. You’re building a giant LAN across all of Australia. Why the devil do you need “contention pricing”?

      • Uhhm yeah, sorry I meant RF overlay or however they pump data down cable these days. I just don’t believe they’ll try and switch over to an IP based solution straight away.

        To my mind only broadband will be switched initially, but what happens with cable subscriptions depends on the terms of the deals being done with Telstra/Optus.

        To my mind the structure of existing Pay TV and IPTV/on-demand services will be quite different, so it’s not a matter of just transitioning someone off cable.

        • RF overlay would only be useful if the intention was to keep all the coaxial cables up and running, while rebuilding the backhaul that sits behind those coaxial cables. What would be the point? The existing HFC backhaul already does it’s job, and NBN is planning to rip out the last mile of copper anyhow.

          I can’t imagine any possible purpose for RF overlay in the NBN design.

          BTW: has anyone noticed that Foxtel are suddenly getting aggressive to signup new customers at low prices? I can’t help thinking that Telstra wants to have good uptake stats just before handing those customers over to NBN (just my suspicious mind I guess).

          • I’d say you are 100% correct in relation to your last paragraph Tel.

            Why do you think broadband prices (even Telstra) all of a sudden dropped dramatically soon after a certain announcement…coincidence?

            I think not…!

  2. Senator Conroy, who in this case is the custodian of funds owned by the Australian taxpayer (via the NBN Co) must calculate that any compensation to be paid to Optus must be a very small fraction to that paid to Telstra.

    Telstra has the capacity to compete with the NBN Co., Optus does not.

    Telstra has a huge number of customers to deliver making the the NBN Co viable.

    Telstra has ownership of Ducts and Pipes of enormous advantage to the NBN Co., Optus does not.

    Telstra is vital to the success of the NBN. Optus is not.

    Certainly if Optus decides to abandon its equipment because of its inability to compete with the NBN Co some compensation may be expected but an Optus agreement is not vital to the NBN Co while the NBN Co/Telstra agreement is absolutely critical.

    • Sydney, there’s one more thing I like to add to your comment:

      Telstra was once a government-owned Monopoly, Optus wasn’t.

      And one more thing, NBN Co can simply buy up the HFC network and convert it into a FTTH network covering all of Melbourne (Although I believe Optus has HFC networks in other cities, not sure). I think that the amount of compensation given to Optus should be roughly a quarter of what Telstra’s gonna be getting if the NBN deal is finalised.

    • Syd, please…

      In another thread you cried “personal attack” and asked “me to move on” from our previous unpleasantness (once again ignoring that the unpleasantness was initiated by you) and leave the past behind. But yet here, YOU AGAIN rehash the “same old NWAT rubbish and do anything but move on, your self”?

      Anyway to the topic…

      NBNCo will do the best deal, if any, for Australia/the NBN, with Optus, and really it has SFA to do with Telstra…

      You earlier made mention of me always quoting your TLS shares. Well don’t make your share bias so blatant. Seriously, how many people sans TLS shares, would comment as you did above?

      I’d suggest none!

      So Syd, once you accept that Australia’s comms does not exclusively revolve around Telstra and (heaven forbid) one’s own TLS portfolio and stop commenting as such (in other words you move on) I will too.

      Until then…

      (continues shaking head)

  3. This is an interesting question to me.

    If I had to jump on one of the fence, I would guess that Optus would certainly prefer to close down their HFC network if they signed on to move customers to the NBN.

    The vast majority – (if not all) – of their Optus TV subscribers are already migrated over to “Optus TV featuring Foxtel Digital”, and to the best of my knowledge, there is little or no TV traffic left on their cable – (I seem to remember they were offering access to some small players for “TV” distribution, but can’t see that being a significant amount – I mean, who is watching these?)

    That leaves them with basically only internet and telephony on that cable – something that the NBN would continue to allow them to do, leaving them with what might be called “superfluous” infrastructure that wouldn’t be driving any significant revenue.

    It’d be worth something, and they might be able to sell it – but who to?

    And as long as it’s sitting there, they have to pay access fees to the power companies to have the thing hanging off all those poles, and pay to maintain it in a working condition if they hope to sell it.

    Ultimately, I can see it withering on the vine, so to speak – once the NBN is completed, and all of their customers are migrated over.

    Telstra can still drive value and revenue out of their HFC – (Foxtel) – but I bet they’d love to close it down eventually too.

    • Michael, in case you’re unaware, the “Optus TV featuring Foxtel” service contract has been renewed this year and Optus has almost the full complement of Foxtel DVB-C channels on their own HFC network similar to the Telstra HFC network. They were never migrated over to the Telstra HFC network by Optus. Sure some customers that had the choice of competing HFC could have changed over but that wasn’t done by Optus.

      As for some people claiming that Foxtel broadcast channels will move over to multicast NBN IPTV services, that is highly unlikely to happen given that it is far more expensive in ongoing circuit charges than converting all Foxtel cable network customers over to a single satellite platform for broadcast channel delivery. Foxtel have stated that this is their long term intention (to move exclusively to sat delivery for all customers) during negotiations with the takeover of Austar, whilst still using the internet only for unicast on demand content delivery. It’s just not cost effective to multicast stream the regular broadcast channels on IPTV when it won’t reach all customers across the country and satellite delivery already achieves universal coverage at a much cheaper cost.
      Multicast NBN IPTV might be used by the new smaller competitors like Fetch TV, but Foxtel won’t bother with it.

      • agreed.

        I don’t think the terms of the agreements with Optus and Telstra will cover Foxtel delivery, since it was never part of the original NBN plan to provide those services. Rather the agreement might be to join both cables to the NTU and let Foxtel decide when it wants to phase out it’s pay tv service.

        More likely is that Optus or Telstra will not be able to deliver broadband services down those same cables, and they’ll gradually phase out the pay tv services as they ramp up their IP based offerings.

        Foxtel will want to retain existing services for as long as is financially viable if only because that’s what people are comfortable with and it’s hard enough getting people to subscribe let alone trying to get them to change equipment and packages. It’s quite a different proposition to voice and broadband.

      • I am aware – but the fact remains that their numbers are still falling, and nationally they have less than 100,000 customers. As their numbers continue to dwindle – (a presumption, yes) – a tipping point must eventually be reached where the costs of serving those numbers will be greater than the generated revenue, rendering the business financially unviable.

        For both Foxtel and Optus, it would be far cheaper to shut down the network because they won’t have to operate and maintain it, taking a big line item off the red side of the balance sheet.

        Sure, there are technical barriers – I’m not pretending there aren’t. Telstra’s HFC is far more viable than is Optus’ in this current climate, but both would ultimately still love to get rid of it, and pass the costs of maintaining the delivery mechanism off to someone else – (ie: NBN Co).

        • Both Optus and Foxtel already have an alternative delivery network, the Optus C1 and D3 satellites. There is no need for the HFC networks or the NBN for Foxtel, but Telstra as a major shareholder of Foxtel is forcing their hand in insisting they keep using the cable network to gain network rental income.
          If it wasn’t for greedy Telstra, Foxtel could have substantially lower operating costs using a single satellite delivery platform. Those savings could be passed on to consumers.

  4. RL I do not understand how the fact that Telstra was once a Government owned monopoly could have any application to the present situation. Telstra was sold for full dollar value to the Australian people and is now a private company. Do you think the fact that Optus is wholly owned by the Singapore Government is at all relative? I would think not.

    Your guess that Optus should be reimbursed one quarter of that paid to Telstra may be, in my estimation, (which is no more valid than yours) too high. As the HFC cable is an entirely different type of cable to Optic Fibre I do not think the NBN Co would have any use for it and therefore no desire to purchase it. Optus could compete with it if it wished but that would be a very dangerous gamble.

    One thing I do call for is an abandonment of the continual call, by Telstra opponents, for their own advantage, for special regulation on Telstra now that the vertical integration of Telstra is about to be a thing of the past with the Telstra Wholesale division being sold to the NBN Co. It may be a fact that the ACCC disallows the sale of Optus assets to the NBN Co as this action would remove the last hope of competition to the NBN Co.

    • Optus might scare up a deal for $1b, but I see that as very much the high upper limit. If they manage more, they should probably congratulate themselves.

      I can see it being around the $750m mark – but that’s just “gut” number.

  5. Sydney…

    As “RL” stated Telstra equipment you listed was all built but “Telecom Australia”
    Their Pits, Ducts, Copper, Exchange buildings etc All Payed for and built by the Australian Public.

  6. Justin with due respect what the hell has who built the Telstra facilities got to do with the present debate????

  7. Well in terms of history it exactly the same as the NBN, ‘built by the Australian public’, the only thing missing is it is called the NBN Co not the PMG.

    There is a major difference though, the PMG didn’t have to pull down existing working infrastructure and pay billions to their owners to ensure its viability.

    • Yep, the Howard Govt decision to privatise Telstra without splitting it was a monumental mistake. They should have split it and just sold off the retail part.

      To think that there would be adequate wholesale commercial competition in regional and rural Australia was just delusional.

      Instead they put a commercial monopoly out there to wreak havoc. Commercial monopolies never do good things for consumers. The NBN is fixing this up, and unfortunately because of these mistakes it is now very costly.

      • Well the intention of the NBN is to fix this up, the jury is well and truly out as to what ‘fixing it up’ will mean.

        I see the NBN further intrenching the already overwhelming dominant position of the two largest Telco’s in Australia Telstra and Optus, I’m not sure you would call this a good outcome of a public purse fed NBN build.

  8. Steve I notice your disdain for monopolies. Do you not know that the NBN is a monopoly, and worse, one that has Government regulation to ban all future competition to it.

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