Telstra-NBN deal a Christmas gift for the Coalition

NBN Co chief executive Bill Morrow says NBN Co is making steady progress in its quest to get a million or so premises ready to be connected to the National Broadband Network (NBN) by the end of fiscal 2015.

Whether it hits that target hinges heavily on when the $11.2 billion deal with Telstra is renegotiated and Morrow has some good news on that front, saying that a deal will be ready for cabinet and regulatory approval before the end of this year.

NBN Co and Telstra are mostly on the same page when it comes to transferring the ownership of the telco's copper network, but Mr Morrow said that there was still some work required on clarifying the ‘language' surrounding the deal.

NBN Co's recent moves to extend the Fibre-to-the-Node (FTTN) and hive out a separate FC division have been seen as indicators that the renegotiations were close to completion.

However, both Telstra and NBN Co chairman Ziggy Switkowski recently pointed out that there were quite a few details that needed to be ironed out.

Mr Thodey said at Telstra's annual general meeting in Brisbane that while most of the contractual issues had been resolved there will still some major issues around long-term considerations covering issues that could occur in 30 years' time

“It's stuff like if there's policy changes in the future what would happen and we need to just go back through the government and determine how they want to handle it,” Mr Thodey said.

“(Issues like) fibre-to-the-node, who owns the copper and considerations to the long-term future, 20-30 years, that sort of stuff.”

Meanwhile, Mr Switkowski told an industry event this month that the idea was to get an early agreement on the higher-level issues and then “work out the details.”

The Coalition's stipulated multi-technology NBN can't fully take form until the deal with Telstra and Optus are done and dusted.

The Optus deal, by Morrow's own admission, is a relatively straight forward affair although Optus' HFC network is entirely going to be put to sleep and will play its part in the overall NBN footprint.

The Telstra deal is a far knottier matter and, while there's plenty of goodwill on both sides, David Thodey's comments would indicate that the telco is keen to get an ironclad agreement in place. One that not only protects Telstra from any changes to the NBN process but also locks in all the extra value it stands to extract from the shift to the multi-technology NBN.

These considerations will continue to exert a significant amount of pressure on the deal as it looks to gain cabinet and regulatory approval.

NBN Co and Telstra may have a deal by the end of the year but, as Morrow points out, “The ACCC must consider a whole lot more than we do.”

For a process that has been hamstrung by heroic assumptions and targets, the length of the time taken to hammer out the Telstra deal makes a mockery of Communications Minister Malcolm Turnbull's forecast that a deal would be done by the middle of 2014.

Still Morrow's confidence isn't misplaced, with industry sources confirming that the Telstra-NBN Co deal is almost there. And as far as NBN Co is concerned that's all that matters.

The regulatory tangle is so profound that delving into its complexities will only prove to distract NBN Co from its core objective -- to get people connected to the NBN.

And NBN Co is making progress on that front.

The company's first quarter financial results highlight steady growth of serviceable premises, active end-users and revenue since June 30.

The number of serviceable homes is up 16 per cent in the quarter to 640,000 -- more than double the figure for the corresponding quarter last year.

The percentage increase in active users is up 27 per cent in the period to 267,000 and the revenue of $29 million is up 32 per cent for the quarter, and triple what it was a year ago. 

“These results reflect the improvements we are making in construction, product development and the end user experience. They represent solid progress towards our FY15 targets of 1 million serviceable homes and 480,000 end users,” Morrow said.

The improved numbers are entirely predictable and much of it is on the back of the fibre to the premises (FTTP) deployment.

The next shift will see the that give way to FTTN and HFC and NBN Co is currently furiously getting ready for the final green light that the Telstra and the Optus deals will provide.

It's useful to view the fiscal performance of NBN Co in context of the obstructions and challenges the previous NBN Co regime had to tackle.

As NBN Co chairman Switkowski mused recently, living with the legacy of heroic forecasts has been the biggest challenge for the company.

“The fact that it's in the condition it's in is a remarkable achievement,” he said.