Telstra out of the NBN blocks

Telstra is wasting no time in preparing for the commencement of the NBN and, as it loses its natural dominance through the copper network, there is a new-found aggression from the telco.

With the ink barely dry on the final structural separation undertaking Telstra lodged with the Australian Competition and Consumer Commission last week the industry behemoth is putting its considerable weight behind the roll-out of the national broadband network, which should now accelerate.

While there are still some 'Is’ to dot and ’Ts’ to cross – the ACCC has to formally accept the undertakings and federal cabinet has to sign off on them – Telstra is wasting no time in getting out of the block for a post-NBN environment.

At the weekend it became the last of the big telcos to sign a deal with NBN Co to start marketing NBN services to its customers – and competing for the 15,000 customers within the initial five trial NBN sites that have been signed by other retailers.

Today it released new pricing for its bundled plans, including new bundles of products for Telstra customers on the NBN which include single-billing for home phone and broadband access, with professional installation and a Wi-Fi modem. About 5000 Telstra technicians have received specialised training to prepare them for NBN installations.

After protracted delays, Telstra appears to have been galvanised in the past week. While there is a general desire within Telstra to get the NBN roll-out rolling so that it can lock in the $11 billion of net present value it will ultimately receive from its deals with NBN Co and the government – a big slab of it in the first few years – there was a sense of extra urgency in the lead-up to today’s Labor leadership contest because of the possibility, however remote, that it might lead to an early election and the truncation of the roll-out if the Coalition won.

That prospect might have receded but Telstra is committed to helping NBN Co accelerate the roll-out to maximise its own receipts of NBN Co cash ahead of the next election in case there is a change of government and the roll-out is halted.

The new bundles, as they apply to the NBN, are designed to protect Telstra’s customer base – and the payments it will receive from NBN Co as they are transferred off the copper network and onto the NBN – and allow it to compete aggressively for its competitors’ customers as they migrate to the fibre network.

Telstra has also re-introduced an offer that bundles its fixed line services – whether copper, cable or fibre – with its post-paid mobile services. That’s another example of the ‘defend and attack’ strategy adopted last year where it re-priced its mobile plans, began aggressively bundling its services with its T-Hub and T-Box devices and ignited a massive surge in its customer base. It has also been investing significantly, and with some success, in improving its customer service.

The group is acutely aware that as it loses the natural dominance associated with its ownership of the copper network as that network is progressively displaced by the NBN, it will increasingly be competing purely as a retailer with its smaller competitors.

Telstra's new-found pricing aggression is designed to ensure that it retains the bulk of its customers as the NBN rolls out and uses its range of non-copper assets to lock those customers in and its competitors out.