Telstra will need to add fresh usage rights and a cutover mechanism to the definitive agreements it holds with NBN Co in order to make them fit-for-purpose under the revised National Broadband Network project.
Speaking in detail for the first time since the change of federal government, the man responsible for renegotiating the agreements, Tony Warren, told investors in Sydney there were also opportunities to add value to the deal Telstra has with NBN Co beyond the promised $11 billion under the existing definitive agreements (DAs).
Warren said NBN Co's move to fibre-to-the-node would "undoubtedly necessitate changes or variations to the definitive agreements".
"Most importantly we'll need to vary the DAs to give NBN Co some kind of usage right over the underlying copper," Warren said.
"We'll also need to specify how we cut services over to the NBN. Under the existing DAs, it's all about disconnection. We'll need to get some kind of cutover mechanism involved in the new DAs."
Warren said the existing agreements had a large focus on disconnecting "the capability of the underlying copper or broadband component of the HFC" networks, essentially as a non-compete mechanism.
"Of course if you move to a fibre-to-the-node construct, the copper is not being completely overbuilt — it's only being overbuilt to the node — and then from the node to the home copper is utilised, so we will need to have some kind of transfer of the copper out of the existing complete path into the NBN network," he said.
"Whether that ends up being part of a transfer of ownership or some other mechanism is really part and parcel of the discussions [with NBN Co] and I don't want to go into that. But I think importantly from a contractual purpose you do need to build that in [to the agreements]."
Warren said while a cutover mechanism needed to be added, the disconnection clauses would still be retained, as they would still likely be needed in the unknown footprint still to be served by fibre-to-the-premises.
He expected the negotiations to be easier than the first time around.
"Remember we're not starting from a blank screen," Warren said.
"We have the contracts and these are variations so I think that is a completely different starting point to where we were several years ago."
Still making money
He noted a transit network that Telstra is building for NBN Co, linking a large portion of the 121 points of interconnect, is progressing and is expected to be complete by July next year.
"It's a significant project that's on time and in line with what was originally agreed," he said.
"The backhaul network that links many of NBN's points of interconnect ... is needed regardless of the underlying access technology [used by NBN Co]."
Warren saw opportunities in the renegotiation to add to the value that Telstra is already set to derive from the NBN project.
"There's been a bit of talk about an additional role Telstra could play in the NBN build," he said.
"The Government has said publicly that it makes sense for Telstra to do more of the design and construction work for NBN, and of course we're happy to consider these opportunities and play a much greater role should they become available and should they be commercially attractive.
"But to be clear we see these possibilities as additional to and separate from the current DAs."
Warren was uncertain about where existing hybrid fibre-coaxial (HFC) networks would fit in the revised NBN world, but indicated there was "no rush" to understand.
"Whether or not NBN wants to have HFC in its technology mix or not ... will take a while to work out," he said.
"The nice thing about this though is the way the Coalition have stated the build will happen. They're going to focus on under-served areas first, so HFC will be clearly in the later part of their build schedule — at least thats what their policy says.
"That suggests we've got some time work out what's going to happen with the HFC. We're of course open to discussing any options. The nice thing is there's no rush."