Telstra and Turnbull's tricky NBN parlay

Malcolm Turnbull's plan hinges on the assumption that Telstra will be open to a swift re-negotiation of its NBN terms. But with the semantics of both the telco's copper and HFC networks back on the table, is his confidence misplaced?

Less than a week after lifting the lid on the Coalition’s NBN the shadow communications minister, Malcolm Turnbull, has again reiterated the message that his $30 billion network won’t be stopped in its tracks by a recalcitrant Telstra.

With the comparisons of the two NBN’s still underway - an exercise that has invariably favoured the Labor NBN to Turnbull’s fibre to the node vision -  it might be just as worthwhile to consider just how the Coalition will build its NBN when it comes to power.

Speaking to ABC’s Inside Business, Turnbull repeated that the Coalition’s NBN is a “mild positive” for Telstra shareholders and he is almost looking forward to the cut and thrust of negotiating copper access with the telco.

"I am very confident that we'll achieve speedily the slight rearrangements to the agreements we're talking about," Turnbull told ABC TV.

Turnbull’s confidence may or may not be misplaced but it certainly highlights just how dependant the Coalition’s plan is on the whims of Telstra.

That was also true of Labor’s NBN, but post-election it will be Coalition that will find itself in the firing line of the vitriol directed towards NBN Co’s failure to get the NBN rolled out efficiently.

After all, achievability is one of the cornerstones of the Coalition’s NBN pitch and it’s the parlay between Telstra and Turnbull that will determine the fate of the new NBN.

Under the Labor NBN, Telstra was being paid to shut down its networks, while Turnbull needs to convince Telstra to provide access to its sub-loop for a good price. The complications will come with regards to who retains the copper, who maintains it and let’s just keep in mind that unlike the Coalition, Telstra won’t be subject to any electoral timetable or the vicissitudes of public opinion polls.

A recent report by Allen & Overy and Venture Consulting also states that the Coalition’s NBN negotiations will still need to resolve how voice services will be provided: through copper back to the exchange or through an IP based solution over VDSL?

“The former would require a more complex deal or for Telstra to provide voice services, neither of which is likely to be attractive to the Coalition. Therefore, maintaining a hard cutover of services is a more likely outcome,” the report states.

Telstra will keep a close eye on the compensation for an earlier hard cut over, which means it gets quicker returns on its copper. As far as the HFC networks are concerned, Allan and Overy partner Michael Reede reckons there is an option where they can be potentially folded into NBN Co. The Coalition hasn’t spelled that out in its policy document and rather pushes the line that the HFC networks will be allowed to operate, subject to the same non-discriminatory wholesale access regime as the core fibre of the fibre to the node NBN.

However, Reede says that rather than Telstra restricting its HFC network to pay television and Optus shutting its HFC network down, NBN Co could acquire Optus’ network and upgrade it to provide broadband in its coverage areas and leave the Telstra HFC arrangements in place.

Given that much of Turnbull’s rhetoric has been directed towards how slowly the Labor NBN has been rolled out, timing is going to be sensitive issue for the Coalition. The last thing Turnbull will want is fronting the media to explain the extended delays in negotiations between Telstra and a renewed NBN Co. 

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles