NBN – Subscriber Agreement

In the second instalment of my series on the recently signed Telstra/NBN Co deal, I will highlight what I believe are the interesting and/or important parts of the second of the eight individual agreements – the Subscriber Agreement (SA).

All descriptions are taken from the Telstra release to the ASX.

As a summary, the SA as described is:

“The SA deals with the disconnection by Telstra of copper-based Customer Access Network services and broadband services on its HFC cable network (but not Pay TV services on the HFC) that are provided to premises in the NBN fibre footprint as the NBN is rolled out, and the maintenance of the parties’ structural and network alignment during that process.”

Firstly, taking a look at just this initial description, the clear indication is that subscription television services – (such as the part-Telstra-owned Foxtel) – will continue to be delivered, as far as described in these documents, over the existing Telstra HFC network in areas where that network is deployed.

This should kill this argument from some quarters that Telstra are being paid to shut down their HFC network – this is simply not true.

To quote directly from the media release:

“The disconnection obligations in relation to the Telstra HFC cable broadband network do not require Telstra to stop the use of the Telstra HFC cable for the supply of Pay TV services (such as by Foxtel).”

Certainly, internet services will be removed from the cable network – but this should be considered a win for consumers, as more bandwidth for more channels and/or better bit rates – (meaning better picture quality) – would then be available for those Foxtel subscribers connected via the HFC network.

It should also now be clear from the base description of the SA, that Telstra’s commitment to the disconnection of the copper network encompasses only that network within the 93% NBN fibre footprint.

If you’re in the 94% to 97% areas, you’ll have the choice of the NBN wireless component, or any existing copper-based services. If you’re in the 98% to 100% areas, you’ll have the choice of the NBN satellite component, or any existing copper-based services.

Reading further down the agreement, we come to an important declaration of when existing copper-based services are disconnected in individual areas.

As the network is rolled out, it has been agreed that as each “region” – (defined as approximately 3,000 premises) – has its fibre rollout completed, Telstra will disconnect copper services and any HFC-based broadband services to that region no later than 18 months after a declaration from NBN Co that the rollout is completed in that region.

What that could mean for many people is that even if you don’t use Telstra as your existing copper-based ADSL broadband supplier, your ISP would have up to (but not necessarily) 18 months to onboard themselves with the NBN, or they may lose you to another ISP who is NBN-ready.

All ISPs will need to be aware of the fibre rollout schedule, and in which of the defined regions each of their customers exist – after which they must make sure that they are NBN-ready in that region before Telstra yanks the copper network(s) in that region.

Some people and ISPs might get caught out here – so this will be one to watch.

Now we get down to some of the serious restrictions placed on Telstra, that has earned them this entire $11b deal in the first place.

Under the agreement, Telstra must not use the existing Copper Access Network (CAN) or their HFC cable to provide fixed line services to any premise, except in limited specific circumstances.

They must also not allow anyone else to do so using these existing networks, and as such Telstra have been limited in their ability to dispose of those assets. This of course locks the NBN fibre into all premises as the primary premises access infrastructure.

Presuming ACCC and Telstra shareholder approval, that’s it. Done, kaput, no more copper.

On the question of the “limited specific circumstances” in which connections are allowed to be made using the CAN or the HFC network, this can only be done on a temporary basis due to “material NBN unavailability”, and only for a specified period of time, presumably until the NBN again becomes available in that circumstance.

Telstra may only permanently reconnect subscribers using their networks if NBN Co becomes insolvent, or permanently ceases operation.

Fairly clear cut that these agreements effectively rule Telstra out of the wholesale fixed line market – as expected and already understood.

Now comes the really interesting stuff!

Telstra must – (for its retail sales) – exclusively use the NBN fixed fibre as the fixed line connection to premises for a period of twenty years – again with a few specific exclusions, such as connections between Telstra network elements, and similar. Assuming the deals reach the commencement date – (after Telstra shareholder approval) – Telstra is committed to using the NBN fibre for this period of time for all fixed line connections.

Full stop.

Femtocells provided by Telstra must also be connected to the network via the NBN fibre.

Moving on – Telstra – (also for a period of twenty years from the commencement date) – must not promote wireless services as a substitute for fibre based services. This does not mean they cannot promote wireless services, but as I understand it, must only deliver premises-based services using the NBN fibre.

Telstra also cannot build its own Passive Optical Network (PON) infrastructure as the primary premises access means – also for a period of twenty years from the commencement date.

See what eleven billion dollars gets you?

Basically, at least twenty years of being the default – (and in most cases, the only) – means of access to premises in the so-called last mile. This is the last-mile monopoly that Telstra has enjoyed since the Postmaster General’s Department rolled out the CAN in the 1950’s. The PMG eventually became Telecom Australia, and then of course Telstra.

Full circle.

The $11b that Telstra receives is partly accounted for in this agreement, with a payment they receive for each and every premise that is disconnected from the copper or HFC network – and they can also be compensated if the NBN ceases the rollout which would see these ongoing disconnection payments cease.

They would be paid on a sliding scale from $500m in the event of the fibre rollout reaches 20% of the planned 93% fibre footprint – (to save you the maths, that’s about 21% coverage) – down to zero, naturally, if the 93% coverage target is met by NBN Co. In the event that the rollout does not reach that 21% mark, Telstra would receive no compensation for a cessation of the NBN rollout.

Finally, there are also fairly standard termination rights regarding the cease of trade or insolvency of either party to the agreement.

Overall, the SA is most interesting to say the very least – with a clear statement of intent from Telstra that they completely agree to get out of the wholesale fixed line market, and that they don’t have the right to use any infrastructure that remains – (for the most part, the HFC network) – to provide retail fixed line services.

I, like many others, thought such a time might never come. It seems however, that hell might just be about to become frozen over.

  • Pingback: The NBN Deal – What Just Got Signed?()

  • Anonymous

    What do you think the likelyhood of the ACCC and the Telstra shareholders playing ball when the time comes?

    • To be honest, I would be surprised if the Telstra shareholders don’t vote with it. The financial benefits alone – (in terms of the payments from NBN Co, and money they won’t have to outlay themselves over time for network upkeep) – will pretty much take care of that.

      As for the ACCC, it may be a slightly less certain process, but I doubt that the ACCC would summarily dismiss the entire set of agreements. They might seek amendments to some clauses throughout the eight separate agreements, but I wouldn’t it expect it to all fall in a heap.

      Given what is at stake, it’s pretty likely that all the parties involved – (Telstra, NBN Co, and the Commonwealth) – have been particularly careful about how this has been put together, and would have done their very best to keep anything that might be controversial to a minimum.