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.