Australia's NBN Co has reached an agreement with Telstra on the roll out of the National Broadband Network (NBN). The parties reached a financial heads of agreement that would provide NBN Co access to Telstra facilities and the progressive migration of Telstra traffic onto the National Broadband Network, subject to regulatory approval. The agreement for these terms will have an approximate value of AUD 9 billion. Separately, the government has agreed to progress public policy reforms with an attributed value of approximately AUD 2 billion. NBN Co was established in April 2009 by the Australian government to design, build and operate a wholesale-only national high-speed broadband network. In the fibre footprint, the network will deliver broadband speeds of up to 100 Mbps, subject to the retail plan chosen. The heads of agreement covers the migration of subscriber traffic and the decommissioning of Telstra’s copper network and its cable broadband service. NBN Co will pay Telstra for migration of traffic on to the NBN and the decommissioning of its network. The agreement also provides for NBN Co’s use of Telstra’s existing fit-for-use infrastructure, such as ducts, pits and conduit and a right to acquire Telstra backhaul services and space in Telstra exchanges. In a letter to its shareholders Telstra said it had received a letter from the government confirming the company would be allowed to bid for LTE spectrum should the transaction be completed. The government also told the company that sufficient regulatory certainty would be provided on a range of matters for both Telstra and NBN Co to enable the transaction to proceed. Telstra, NBN Co and the Commonwealth agencies will now move to negotiate detailed definitive agreements, which is expected to take some months. Telstra said it expects its shareholders to vote on the proposal in the first half of 2011.
In support of the agreement, the Australian government will progress public policy reforms to support the transition to NBN to which Telstra attributes a value of approximately AUD 2 billion. The government will:
- Establish a new entity, USO Co with Commonwealth funding of AUD 50 million in 2012-13 and 2013-14, increasing to AUD 100 million per annum thereafter. The remaining funding that USO Co requires will be contributed by industry, as it is now with final arrangements subject to industry and stakeholder consultation;
- Provide AUD 100 million to Telstra to assist in the retraining and redeployment of Telstra staff that will be affected by this very significant reform to the structure of the telecommunications industry; and
- Require NBN Co to be the wholesale supplier of last resort for fibre connections in greenfield developments from 1 January 2011.
USO Co will assume responsibility for most of Telstra's Universal Service Obligations for the delivery of standard telephone services, payphones and emergency call handling from 1 July 2012.
