The farce gets deeper: Now Telstra sues NBN Co



news Telstra has commenced legal action against NBN Co due to a disagreement between the two telcos over when consumer price index adjustments should kick in that will affect NBN Co’s payments to Telstra under the pair’s $11 billion deal to cooperate on transferring customers to the NBN infrastructure and giving NBN Co access to Telstra’s ducts.

The pair signed a landmark deal in June 2011 that will see Telstra transfer its customers off its copper and HFC cable networks and onto the NBN’s fibre infrastructure, as well as giving NBN Co access to roll fibre through Telstra’s pits, pipes and ducting infrastructure. All up, the deal is worth some $11 billion, and Telstra has already started receiving payments under the contract.

However, in a statement issued this morning, Telstra confirmed it had started legal proceedings against NBN Co over when consumer price index adjustments should kick in with respect to the payments. In Australia, Consumer Price Index rates are published by the Australian Bureau of Statistics. Broadly, the statistic measures changes in the overall price level of markets based on consumer goods and services consumed by households.

The news comes as NBN Co and Telstra have recently re-opened negotiations with regard to modifying the deal to potentially allow NBN Co direct access to Telstra’s copper for usage in alternative Fibre to the Node-based rollout scenarios.

“We have one take on the contract and NBN Co has another,” said a Telstra spokesperson this morning. “We have not been able to reach agreement through a long mediation process so, as provided for in the contract and as the next step, Telstra is asking the [Federal] Court to decide. The impact to us over the term of the agreement is significant, but not material from a market perspective.”

“The timing of this action has nothing to do with a re-negotiation of the NBN deal, although resolving this disagreement will help provide greater certainty and as such may assist future policy discussions.”

It is believed that Telstra believes the CPI calculations should come into effect on 1 January 2012, because the NBN definitive agreements were signed in June 2011. It is believed that NBN Co is in favour of using 1 January 2013 as the date because of the fact that Telstra’s Structural Separation Undertaking was accepted by the Australian Competition and Consumer Commission in March 2012. Various media outlets have pegged the sum in dispute as being approximately $100 million.

The SSU (and its accompanying Migration Plan) commits Telstra to full structural separation of its wholesale and retail business units by July 2018. In practice, this separation will take place through the progressive disconnection of fixed voice and broadband services on Telstra’s copper and HFC networks and migration of those services onto the NBN.

In addition, the SSU sets out the measures which Telstra will put in place to provide transparency in the supply of services to its wholesale customers during the NBN transition period over the next decade, as well as providing equivalence in the delivery of services — for example, allocating the same terms to rival ISPs such as Optus, iiNet, Internode and TPG as it does its own retail division, which typically operates under the ‘BigPond’ brand.

Look, I have to say I find this whole situation farcical. Very few Telstra customers have been transferred onto NBN Co’s network under the current definitive agreements between the two companies … because NBN Co has proven itself to be extraordinarily incompetent at building fibre telecommunications networks.

Because of this, and because we now have a new government which, largely for political reasons, has settled on an alternative FTTN NBN rollout schema (despite Turnbull’s ‘technology agnostic’ protestations, we all know we’re really headed for FTTN), NBN Co and Telstra are now re-negotiating those “definitive” agreements, in talks which may actually see Telstra construct vast portions of the NBN.

Despite this, Telstra is now suing NBN Co on minor, but still substantial point of the original definitive agreements, for money which it may never be able to collect in quite the way it originally planned, because the definitive agreements are set to be changed.

Could this process get any more farcical? Because right now, it has to look to anyone with an ounce of rationality like a complete and utter joke. Just so you know, Australia is rapidly becoming the laughing stock of the global telecommunications industry over our sheer inability to get our shit together when it comes to upgrading our national copper network. We really are the pits. I am actually ashamed that Telstra and NBN Co can’t even get this basic level of stuff right from the get-go.

Image credit: Jim Crossley, Creative Commons


  1. And this is the company who owns the copper ‘we’ depend on and who will gladly hand it over for not 1c extra?

  2. “The timing of this action has nothing to do with a re-negotiation of the NBN deal, although resolving this disagreement will help provide greater certainty and as such may assist future policy discussions.”

    Pathetic. I love the way Telstra play it down as a perfectly reasonable situation. ‘Everything with the re-negotation is going great! (apart from the fact we’ve started the negotiation by suing the company we are supposed to be working with)’.

    • The company that will simply hand over a going-concern network — is currently suing NBNco because it’s not content with $11 billion, it’d like to gain an additional $100 million due to a difference over a contractual term (which it had apparently already accepted and and has now changed it’s mind over).

      So acquiring the Copper Network should be a doddle, right?

      • Based on that cash grab, the $29.5B for the FTTN deployment, including access to the copper, looks a rather shaky number.

        Watching to see the impact on the TLS share price if this gets up!

  3. “Australia is rapidly becoming the laughing stock of the global telecommunications industry”
    Spot on. I can imagine the future with Telstra and NBN Co “working together” is now going to be toxic as hell.

  4. What do you expect from Telstra?

    Put in “cost of living” adjustments to a commercial contract (which IMHO should not be allowed in this sort of deal), not specify applicable dates, then start suing.

    All the while making hundreds of staff redundant. I’ll bet all those ex-staff would just like a pay packet, let alone any pay increases!

  5. Why was this date not explicitly stated?

    As people have said, it is worth a huge amount of money atleast a couple lawyers (law firms) worth so why wouldnt they pursue it.

  6. I… i just don’t know what to say anymore. Why can’t we do anything about this?

  7. Coming on the day I receive a bill from Telstra for a service that was switched to iinet 2 months ago and for which Telstra were notified of the switch over date. Telstra is like a disease you just can’t shake.

    I agree that the situation is embarrassing.

    Despite all Malcolm’s placating about technological agnosticism and continuing the idea of NBNCo’s charter the actions just don’t match his words.

    First actions:
    Replace board with Telstra cronies and other mates of Malcolm.
    Stitch up the review with consultants (more friends of the LNP) whose prior views are well known and not independent.
    Guess what’s coming next …
    Malcolm will say things like “it is far worse than thought, the only reasonable pathway is to make Telstra central to the function of NBNCo”
    LNP and cronies get theirs.
    Australia get’s screwed by Telstra for the next few decades.

  8. As clearly specified in the actual contract signed, any failed mediation of unresolved issues on contract interpretation defaults to Federal Court jurisdiction. You mean both contractual parties are actually using the court system to resolve legal issues? SHOCKING.

    • I wonder what your reaction had have been pre-election…

      I’d suggest very different.

      Hmm curious.

  9. Well, it has come to this because we have been predominantly governed by conservative governments over the past 20 years. Their mantra of “wait and see” which basically means do nothing is exactly what they want to happen.

    Howard did nothing but talk about broadband during his reign, then once the ALP set up NBN to start the process it is going to be destroyed by Turnbull.

    Of course, Turnbull “doesn’t know (ala Peter Reith)” that he will destroy the NBN, but don’t worry, the LNP will destroy the NBN – I just hope that they don’t institute a set of “reforms” that will stop future Governments from reconstituting the FTTP dream…

    • They don’t need to do any such thing – simply by forcing NBN Co to adopt FTTN and allowing infrastructure competition, Telstra get given the green light to overbuild the FTTN NBN with FTTP in high value areas. Guess who will have the larger customer base, the 50/5mbps NBN or the 1000/400 capable Telstra FTTP? Once they start chewing into NBN Co’s market share the economics no longer work from NBN Co to be profitable, let alone pay back the construction debt. NBN Co’s assets will be sold to Telstra for a fraction of what they cost to build and Telstra ends up with the nation’s fibre network. Given the lifespan of fibre cable, that would mean Telstra would own and control the Australian telecommunications network until it is superceded and requires wholesale replacement, which isn’t likely to be measured in decades, more like centuries.

      Oh and before some idiot argues that we would still end up with FTTP even if Telstra owns it, remember Telstra aren’t a publicly owned company, they are a commercial entity with an incentive to return maximum profit to their shareholders. So sure, they will have a fibre network, but it will cost 30 to 40% more for access than it would have under the original NBN Co.

      No, the LNP don’t need to legislate to kill the original goals of the NBN and a future with cheap, ubiquitous access to high speed, reliable fibre for most Australians, they just need to push the FTTN changeover and allow infrastructure competition. Telstra and economic realities will do the rest, with no option to redirect that train once we’re on it without Nationalising Telstra’s assets (yea right). And there’s no longer a &#@$ing thing we can do about it.

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