NBN/Govt. strikes landmark deal with Telstra

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The Federal Government and Telstra have announced that both parties have come to an $11 billion deal that would see NBN able to access Telstra’s infrastructure and Telstra moving its clients to the new fibre optic network after its roll out.

The Government will pay $9 billion in order to access Telstra’s infrastructure – including pits, ducts and wires. It is also a win-win situation for NBN as it will have a large amount of clients using the new network, and Telstra becoming the largest customer. That cost will also be used for decommissioning of Telstra’s own copper network for internet.

“This is a sound outcome for NBN Co because when finalised it can maximise the use of existing infrastructure and accelerate the roll out of its network,” Mike Quigley, the CEO of NBN Co, said.

“This Heads of Agreement represents more than nine months of detailed and complex negotiations and is a foundation for the work on specific binding terms and conditions that lies ahead.”

The new arrangement will also see NBN Co becoming the wholesale supplier of last resort for all fibre connections in greenfield developments at the beginning of next year.

It will also establish a new USO Co that will meet Telstra’s universal service obligations for delivering standard telephone services, payphones and emergency call handling from July 1, 2012. Remaining funding of USO Co will be contributed by the industry, though that is subject to the consultation process with the industry and stakeholders.

This is part of an overall $2 billion package that will accomplish the Government’s plan of structural separation of Telstra.

“This has been a very difficult, tough, hard negotiation; but it has also been an honest set of negotiations,” Prime Minister Kevin Rudd said in a joint press conference with Telstra’s chief executive David Thodey.

Negotiations of such an arrangement had been going since late last year, after Communications Minister Stephen Conroy announced that he planned to structurally separate Telstra by force if they did not come voluntarily, and threatened to bar them from buying new spectrum or force them to sell their stake in cable provider Foxtel.

Telstra will still be able to keep its cable network and will be allowed to bid for wireless spectrum in the future, allowing it to upgrade to LTE, after news that both Telstra and Nokia Siemens Networks achieved downlink speeds of 100Mbps over a 75km distance in its trials.

The future of its stake in Foxtel is currently unknown, but most likely will not be forced to sell its stake.

This is a huge win for the Rudd Government as it brings to an end of Telstra’s dominance of the telecommunications industry.

Another $100 million will be given to assist in retraining and redeployment of staff affected by the changes.

The deal needs to be approved by shareholders by Telstra and the ACCC.

Image Credits: Kainet/Flickr