Telstra and NBN Co fail to reach commercial agreement

Telstra and NBN Co have failed to reach commercial terms before Christmas in their negations over the National Broadband Network (NBN).

In statements, Telstra (ASX:TLS) and NBN Co announced they had formalised "Terms of Engagement" to facilitate the telco's possible role in the NBN. The terms include a preferred model for a potential agreement between the parties "that would see a progressive transition from Telstra's copper access network to a fibre to the premises NBN".

Commercial wholesale arrangements for NBN Co's use of Telstra's extensive infrastructure including ducts and exchanges are also being discussed under the terms.

No further information on the Terms of Engagment were forthcoming from either party.

However, Telstra will also upgrade its network to fibre in the Melbourne suburb of Point Cook immediately as a field trial to evaluate the "practical issues" associated with moving to a fibre network and provide NBN Co with the resulting information.

Around 1500 customers will have the option of migrating to the fibre network once the rollout is complete around May, 2010, or retain their copper connection.

The telco will also offer an interim wholesale offering on the fibre network and provide details of the retail and wholesale offerings when the construction is near completion.

"These are complex discussions and many issues remain to be addressed," NBN Co said in a statement. "In particular, no commercial terms have yet been agreed. NBN Co remains committed to ensuring Australia is broadband-enabled for the future and we will continue to assess any proposed agreement with Telstra against available alternatives."

Similarly, Telstra noted an agreement was not guaranteed between the parties.

"Given the importance and complexity of the issues being discussed, it is too early to determine whether any final agreement between the parties will be reached or approved by all relevant stakeholders and regulators," it said in a statement.

The announcement represents some progress in the Telstra and NBN Co negotiations, but it is also another delay for Communications Minister, Senator Stephen Conroy.

Conroy has been careful not to say there would be an agreement reached before Christmas in recent weeks, although he told Computerworld there would be quot;a very positive announcement as we get closer to Christmasquot;.

The Federal Government's push to split Telstra's wholesale and retail arms has been forced to wait until the Senate sits again next year, after the lengthy debate over the emissions trading scheme (ETS). Conroy has said he wanted the legislation passed by the end of the year but with the ETS and Liberal party shake up overshadowing the rest of the agenda, he will have to wait until February 2 when both houses of parliament resume.

In a statement, Conroy said the government remained optimistic Telstra and NBN Co could reach an acceptable agreement.

"The Government remains committed to ensuring that any agreement reached by the parties is subject to necessary oversight, including approval by the ACCC as envisaged under the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009," the statement reads.

"While the legislation remains an important reform in its own right, the Government has always said that it also provides a framework within which any agreement with Telstra can be independently evaluated by the ACCC. The Government remains determined to debate and pass this Bill as a matter of priority early in the new year."

The NBN was voted into second place in the Computerworld Top 10 Most Influential for 2009. Voting in the Readers Choice Award is still open.

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Copyright © 2009 IDG Communications, Inc.

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