Telstra hands over copper, HFC in new $11bn NBN deal

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Telstra hands over copper, HFC in new $11bn NBN deal

Value of 2011 deal remains intact.

Telstra will hand over ownership of its copper and hybrid fibre-coaxial networks while remaining committed to its structural separation under renegotiated definitive agreements with NBN Co that retain the $11 billion value of the 2011 deal.

Telstra and Communications Minister Malcolm Turnbull today announced the re-signing of the landmark deal, which will see NBN Co continue to pay Telstra $5 billion in infrastructure payments, $4 billion in disconnection payments and $2 billion in Commonwealth agreements.

Telstra CEO David Thodey has repeatedly stated that the carrier would be seeking equivalent value at the minimum from any renegotiated deal.

The new agreement will continue to see Telstra disconnect premises from its copper and HFC broadband networks within the NBN footprint, but rather than decommission the networks, NBN Co will take over ownership of the copper and HFC for the purpose of using them where it sees fit in for its multi-technology NBN rollout.

NBN Co will also become responsible for the operations and maintenance of the two assets. 

It will similarly take over remediation of Telstra's pits, pipes and ducts. Telstra will provide a "remediation credit" to NBN Co in exchange for its reduced obligations to remediate ducts and pits at the same value as Telstra's original remediation cost considerations.

Despite previously highlighting its desire to retain ownership over copper and HFC, Telstra opted to hand over the assets in exchange for rights to continue to use the HFC network to deliver pay TV services.

Under new continuity deeds in the agreement, Telstra will remain able to use the copper and HFC networks to serve its retail and wholesale customers while the assets are progressively transferred to NBN Co.

Licenses for the HFC network will be in place until Telstra no longer provides pay TV services.

Telstra did not seek any changes to its structural separation undertaking, which it will continue to meet through the disconnection of premises on its copper and HFC assets, and through transferring their ownership to NBN Co as the network rolls out.

Telstra has also secured asset disposal restrictions should NBN Co sell the HFC or copper network after ownership is transferred.

The restrictions would in certain circumstances require an acquirer - such as another large retail service provider - to enter into a direct agreement with Telstra to purchase the assets.

The new agreements also amend a provision in the old deal which stipulated that Telstra would be entitled to a $500 million break free should the Government cancel the NBN after it had reached over 20 percent of premises.

The amendment will allow Telstra to terminate the new definitive agreements and claim compensation from NBN Co should the rollout be cancelled once between 75 and 92 percent of premises had been passed.

NBN Co will also be required to reimburse Telstra for any costs it incurs to support the MTM rollout, the companies said today.

Telstra will need to submit a new migration plan to the Australian Competition and Consumer Commission (ACCC) which takes into account the Coalition Government’s multi-technology mix NBN to enact the new agreements.

The new deal will take effect once the ACCC approves the plan, and the Australian Tax Office provides a private ruling for NBN Co and Telstra on the definitive agreements.

“[The former Government] paid billions to switch off copper and HFC but never reserved the right to use any part of those legacy assets. The mix of technology that NBN Co will use are the leading, cutting-edge technologies and techniques being used by the leading telcos around the world,” Turnbull said today.

NBN Co CEO Bill Morrow said the new agreement allowed NBN Co to "shave years off the rollout schedule and save billions of dollars at the same time".

"While we all benefit from the lower cost, the majority of homes across the country will no longer need to have their gardens dug up, their driveways broken apart or equipment mounted on their homes,” he said.

Opposition Communications Minister Jason Clare said the Government had repurchased the "old, out of date copper network" that former Prime Minister John Howard sold last century.

"The Government and Telstra have both got everything they wanted in this deal. The Government has got its old copper network back and Telstra has got its $11.2 billion plus more - more construction work on the NBN," Clare said in a statement.

"The losers in this deal are millions of Australians. They end up with a second rate NBN."

New deal with Optus inked

NBN Co will also take over ownership of Optus' HFC cable as part of a renegotiation of the pair's $800 million 2011 deal.

Under the original agreements, Optus had consented to migrate its fixed-line customers over to the NBN and decommission its HFC network in areas where it wasn’t being used to service the telco’s mobile or business customers.

As part of the new deal, announced today, NBN Co will take over elements of the Optus HFC network in areas of the country where it decides to use it as part of the NBN.

The value remained “substantially the same” as the original $800 million agreement, Optus said, though the timing, nature and purpose of NBN Co’s payments to Optus would vary under the new agreement.

The telco will share spectrum within its HFC network with NBN Co before the network builder takes ownership of the asset.

New carrier licence for TPG

 Carriers who compete with the NBN will from next month need to offer non-discriminatory wholesale access to their networks, and by July structurally separate their retail and wholesale businesses, as part of a new carrier licence released today.

The Government today stuck to its promise to introduce a new carrier licence condition for those fibre networks competing with the NBN.

The condition - targeting TPG, which took advantage of a loophole in anti-cherry picking laws to extend its existing network in metropolitan areas to build a fibre-to-the-basement network - will enforce wholesale access to competing fibre connections by January 1 next year.

By July 1, such carriers will also need to structurally separate their retail and wholesale arms.

The ACCC will be given the power to monitor such separations, and will also have the ability to allow functional - rather than structural  - separation for carriers in certain conditions.

Under the Carrier Licence Conditions (Networks supplying Superfast Carriage Services to Residential Customers) Declaration 2014, TPG will need to offer rival service providers a Layer 2 wholesale service for $27 per month.

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