Analysis: Telstra Velocity faces uncertain future

Telstra will be forced to lose its Velocity fibre business if it comes to a definitive agreement with NBN Co, according to NBN Co chief Mike Quigley.

Telstra's Velocity service provides fibre connectivity in select new housing estates around Australia.

Telstra and NBN Co signed a financial heads of agreement earlier this month. It sets out draft terms under which NBN Co would be granted access to Telstra's passive network assets, whilst customers would be migrated from Telstra's copper and cable networks to NBN Co's fibre network.

Velocity's future will come down to the wording of the final agreement - if one can be reached.

Quigley has confirmed the wording of the heads of agreement as it stands will force Telstra to act on Velocity.

Telstra, meanwhile, is adopting a "wait and see" policy on Velocity's future while a final agreement is under negotiation.

NBN Co's "last resort" role

NBN Co revealed yesterday that it will actively pursue deals with housing developers to deploy fibre in greenfields estates from next year - not just deploy fibre in estates where the private sector is unwilling to invest.

That will please developers, who will now have another option to meet the Federal Government's fibre mandate, due to take effect in the same timeframe.

"We have an obligation to provide a wholesale service in new estates if there's no one else who is willing to do that job," NBN Co chief executive Mike Quigley told iTnews.

"Now, even if people do put their hands up and want to do it, we may [still] be going in and doing that [offering our services].

"It's not a question of [NBN Co] only going into those places where [developers] say ‘I can find no one else' [to deploy fibre].

"We'll be actively going out promoting the national broadband network in greenfields estates."

The financial heads of agreement between NBN Co and Telstra includes a clause denoting NBN Co as the "wholesale supplier of last resort to greenfields estates".

Quigley's comments provide the first glimpse into how this will work in practice.

Essentially, it will pit NBN Co as another fibre builder available to developers alongside the likes of Opticomm, OPENetworks, Pivit and Comverge - but not Telstra Velocity, according to Quigley.

"Velocity from Telstra is a different story because that's something that's subject to the heads of agreement," he said.

"Clearly, the deal which we've written up in a heads of agreement - which is yet to be converted into a definitive agreement - is one in which Telstra see us as their wholesale network provider."

Quizzed by iTnews on whether that meant Telstra would be forced to hand over its Velocity fibre, Quigley said: "They wouldn't be running a fibre network of that sort in competition with us [under the agreement]."

What Telstra says

A spokesman for Telstra told iTnews that "at this stage, knowing what we know, there's no impact" on the Velocity business.

But the spokesman conceded that a definitive agreement - combined with other factors - could alter Velocity's future.

"If you look at NBN Co becoming the wholesale supplier of last resort, obviously that will have an impact on the development industry and the provision of fibre into those estates," the spokesman said.

"It's up to developers to decide whether to tender [fibre jobs] competitively or rely on NBN Co.

"We [Telstra] need to wait and see what the definitive agreement includes when we get there, and how the wholesale supplier of last resort requirement looks once we see the [draft] legislation."

Telstra was last week forced to deny reports that it had withdrawn its Velocity fibre business from the market.

The business has drawn criticism from parts of the industry and homeowners in Telstra Smart Community estates over the way it locks them into buying services only from Telstra.