news Telstra chief executive David Thodey has congratulated the Coalition on its Federal Election weekend over the weekend and noted that the telco wanted to finalise negotiations over planned changes to its agreements with NBN Co “quickly” with a view to minimising “uncertainty”.
Labor’s previous National Broadband Network policy had seen the Government and NBN Co sign an $11 billion deal with Telstra through which Telstra agreed to migrate its customers onto the NBN infrastructure as it was rolled out, as well as giving NBN Co access to Telstra’s ducting, pits and pipes infrastructure, with a view to deploying its own fibre cables.
However, the Coalition’s revised policy will see NBN Co focus on a more limited fibre to the node rollout, which will see parts of Telstra’s existing copper network reused instead of shut down, and its HFC cable network maintained and possibly opened to wholesale competition, instead of the telco halting the provision of broadband services over the network.
Shadow Communications Minister Malcolm Turnbull, who is expected to take over the portfolio for the Coalition, has stated that he believes Telstra would give a Coalition Federal Government its copper network for nothing under its existing contract with NBN Co, casting skepticism on critics of the plan who believe the telco could charge billions for the infrastructure.
In response to the Coalition’s election win on Saturday, Thodey issued a statement this morning noting that Telstra congratulated the Coalition on the win and looked forward to working with the new Government on a number of important policy areas.
“The NBN will obviously be a focus for us, but we’re also interested in engaging on telecommunications more broadly as well as innovation, regional economic development, trade and digital economy policies among others,” said Thodey. “We will engage constructively with the Coalition Government on how we can best help them deliver their NBN policy commitments.”
“The new Government has committed that they will seek to renegotiate our NBN agreements and keep Telstra shareholders whole. We will look to help facilitate this quickly with a view to minimize uncertainty. While any negotiation takes place – our priority will remain to be focussed on meeting our existing commitments and winning customers on the NBN where it is available.”
The previous agreement between Telstra and NBN Co took substantial time to negotiate. NBN Co was formed in April 2009, but it was not until June 2010 that the pair signed a heads of agreement deal on the big issues related to their relationship, and it wasn’t until March 2012 that the deal was finalised.
The Coalition does not have a great deal of time to kickstart its rival NBN policy. Turnbull has consistently stated that he expects it to take around nine months to a year to turn around NBN Co to the extent that it could start deploying fibre to the node throughout Australia.
Turnbull’s frequently asked questions document on the matter states: “The Coalition will not stop the NBN rollout. The NBN Co has signed a number of construction contracts which cannot simply be cancelled. We will honour those contracts and seek to maximize value from them. The Coalition will also conduct a cost-benefit analysis and an audit of the current rollout to establish how long it will really take and how much it will really cost to complete the rollout on Labor’s current policy. We will also conduct a similar analysis to show what savings in time and money can be achieved if the network is redesigned along the lines of our policy document.”
“It is forecast that the large scale rollout of any changes to the network design – such as implementing fibre to the node – would commence in mid 2014. We will however endeavor to get under way sooner than that.”
I really wouldn’t read too much into Thodey’s comments this morning, apart from the fact that neither the Telstra CEO nor Turnbull himself want there to be obvious public tensions between them. I would expect that behind the scenes, when the negotiations kick off, there will be fierce arguments on both sides, and that it won’t take less than six to nine months for things to get finalised. This is one of the most complex corporate agreements in Australia’s history, after all, with tens of billions of dollars at stake. The headline statements by Thodey on the issue don’t really indicate much about the whole deal.
There is also the issue of whether Telstra will actually want more than $11 billion for its copper network. Turnbull doesn’t think so, but most other people do. As I wrote several weeks ago:
Will Turnbull turn out to be correct? … While it’s hard to know, I personally suspect that the Shadow Minister’s comments here will turn out to be quite naive. I’ve reported on Telstra for a decade now, and I’ve never yet seen the company roll over when someone wanted something for something it had. Gentleman’s agreement or not, I think Telstra will play hard ball on this one. It has a responsibility to ensure it gets value for money for its shareholders. The Coalition NBN plan clearly goes beyond Labor’s current vision in terms of the use of Telstra’s network. And I very strongly suspect the Federal Government will need to pay something for that.
In addition, we must also remember that Turnbull does not have access to the text of the extremely complex agreement between the Government, NBN Co and Telstra. It was never released publicly, despite the best attempts of Simon Hackett. Turnbull has given no signal that he has had access to the document under the Caretaker Conventions, or via any other method. Without such access to the legal contract here, Turnbull’s comments can represent nothing more than informed speculation — even if he does have a gentleman’s agreement with Telstra on the issue.
Image credit: Telstra