Telstra, NBN Co tussle on pit-and-pipe ownership

Greenfields developers are caught in the crossfire of an unfolding spat between Telstra and NBN Co over pit and pipe ownership that threatens fibre rollout in new housing estates.

The problem affects housing developers that allowed Telstra to roll out passive infrastructure in their estates to meet the Government's 'NBN-ready' mandate that came into effect January 1.

Last year, Telstra offered to deploy free pit-and-pipe but retained ownership of the infrastructure, according to Robin Russell & Associates managing director Robin Russell.

The free offer was allegedly withdrawn last month and replaced with an offer to deploy the NBN-ready conduits for $950 plus GST per lot; however, it appeared that Telstra still claimed ownership rights to the passive infrastructure.

UPDATE 10.39AM: A Telstra spokesman confirmed the arrangement to iTnews.

"Where Telstra is engaged commercially to provide pit and pipe, we currently retain ownership of that infrastructure as a means of managing and minimising potential risk," the spokesman said.

"Telstra may need to provide additional plant to provide service, and we also take on the maintenance of the pipe network including all the cost and risk that goes with that.

"We are up front about this and see it as a way of reducing risks for developers and Telstra."

Russell claimed to have received correspondence from NBN Co indicating estates that had conduits built by Telstra this year may find them ineligible for NBN fibre due to the passive ownership issue.

"NBN Co's Developer Agreement claims ownership of new conduits and pits for NBN Co immediately upon practical completion," Russell said in an advisory note to clients.

"On the other hand, Telstra's contract to design and install NBN conduits and pits claims ownership for Telstra, until such time as NBN Co is ready to start installing fibre.

"Neither side will budge. NBN Co recently upped the ante by warning developers that it might not install greenfield fibre in these conduits."

An NBN Co spokesman told iTnews the company "only requires the transfer of ownership of pit and pipe for new developments (approved after 1 January) where NBN Co has entered an agreement with the developer to install fibre."

Developers that had engaged Telstra this year to deploy conduits risk being caught out by this ownership clause.

NBN Co's spokesman said that estates with pre-2011 Telstra conduits were ineligible to apply for NBN greenfields fibre; however, they would be considered a 'brownfields' site if the estate was within the planned 93 percent of Australia to be serviced by NBN fibre.

"For pre-existing developments which have had pit and pipe installed by Telstra before 1 January 2011, Telstra is responsible for providing services in these estates," the NBN Co spokesman said.

It was unlikely that Telstra would give those estates fibre. The telco generally serviced estates with fixed wireless and, in rare cases, with copper.

Telstra's spokesman said the telco was open to varying ownership clauses in construction agreements.

"We will consider alternative commercial constructs as a result of customer feedback and market competition," he said.

Why Telstra?

Developers were choosing Telstra to design and construct the NBN-ready conduits – even after it imposed fees for construction - because the incumbent was seen as best placed to interpret NBN Co's "incomplete" specifications, which last underwent revisions in the past fortnight, according to Russell.

He said housing developers were "too scared" to design and install pits and pipes themselves or to outsource the job to someone other than Telstra because they were in no better position than Telstra to make sense of NBN Co's requirements.

Developers were also attracted to Telstra as a passive infrastructure supplier because it meant they were not responsible for repairing pit covers and other infrastructure damaged during housing construction works.

Russell said that Telstra "usually" paid to repair any damage caused by heavy machinery such as concrete trucks.

"Usually it is not possible to identify the culprit, so in the past, Telstra would simply repair the damage at Telstra's expense," he said in another advisory note.

"But that will not be the case under NBN's agreement. That agreement will hold the developer responsible for third party damage. Such damage will not be the responsibility of the contractor who installed the conduits and pits, because it does not fall into the category of defective workmanship. The cost of repairs will rest solely with the developer."

However, future reliance on Telstra as a supplier of pit-and-pipe infrastructure remained under a cloud as the ownership spat went unresolved.

"Why Telstra is digging their heels in, I don't know," Russell said. "It's like an arm wrestle over ownership of conduits."

Greenfields RFP

The timing of this latest friction could not be worse for NBN Co as it battles allegations from all sides over the handling of requests for proposals (RFPs) for network construction work.

The Australian newspaper yesterday aired concerns by OPENetworks into the RFP to assemble a panel of incumbent fibre builders to deploy fibre in greenfields estates over the next 18 months.

A number of bidders confirmed to iTnews privately that they had been excluded from the process over the past fortnight.

Although there had been anger at the exclusions and talk of legal threats, none had materialised over the past fortnight – and allegations that NBN Co had "duped" tenderers into handing over swathes of commercial information could not be independently verified.

At least one of the companies excluded from the process – other than OPENetworks – indicated they had been "a little bit careful about how much information [they] gave away."

While some sources told iTnews a decision on the interim greenfields panel make-up could occur this week, a more likely timeframe was by the end of the month.

The housing industry lobby, meanwhile, has continued to raise fears of fibre rollout delays caused by continued uncertainty in greenfields.

The latest round of concerns reportedly prompted NBN Co's greenfields director Archie Wilson to blame some housing developers for the delays they faced.

In a report by the Sydney Morning Herald, Wilson was quoted as saying that some developers had not followed proper process.

Outside of greenfields, NBN Co also faced allegations from the construction industry that capital works costs on the project could blow out.

NBN Co last week suspended an RFP process for second-release sites, saying the quotes were too expensive. The decision was widely reported to have cost NBN Co its head of construction.

Do you know more? Email rcrozier (at) itnews (dot) com (dot) au