What Telstra’s $11 Billion NBN Deal Means For Consumers

Coverage of Telstra’s $11 billion deal to migrate its customers to the National Broadband Network has been rampant in the last few days, but much of that has focused on the business and political implications for the company. What will it actually mean for the mug punter?

Picture by andrew_ashton

In the spirit of our earlier discussions of why the government wanted Telstra to split, why backhaul is important to the NBN and why the NBN itself matters, here’s the key things to understand about the deal. If you’re not up to speed on NBN matters generally, those guides might be a good place to start.

The government has long wanted Telstra to be an active participant in the NBN process, and one reason is because Telstra already controls access to a huge network of cabling ducts, pits, pipes and other underground infrastructure. Even if the NBN eventually replaces all the current copper networking, it would be much cheaper to utilise the existing spaces it sits in than to have to go through a complex process of getting permits to dig and then going through that construction work. Telstra, unsurprisingly, doesn’t want to offer access to those resources for nothing.

Last September, the government announced plans to force Telstra to structurally separate, making its wholesale and retail business entirely distinct. While that decision itself had big potential benefits for consumers, since it would stop widely-documented abuse of network ownership by Telstra, it was also widely interpreted as a means of trying to persuade Telstra to take part in the NBN.

That’s effectively what has happened with the “heads of agreement” between Telstra and NBN Co (the company which is building the network) announced on Sunday. Under that deal, Telstra will move all its voice and data customers from its own copper network to the NBN as that network is built out. (While it won’t move its current Foxtel customers off the existing cable network, the NBN should be equally capable of handling video traffic, and will have a much wider reach than the cable service.) It will also allow access to its existing network. In return, it will receive a series of payments over several years which Telstra has valued at $11 billion. It will also effectively shift the current “universal service obligation” requirements that currently guarantee a basic phone service to all Australians from Telstra to the NBN.

The NBN has always been a long-term proposition, and much of the detail hasn’t yet been worked out. The agreement is “non-binding”, so if major technical snags appear, the whole deal could collapse and consumers could be as badly off as ever. However, if that happens, the sanctions proposed in last September’s Telstra split plan also kick in, which Telstra certainly doesn’t want, since it would restrict its ability to bid for mobile spectrum used for voice and data services.

The Telstra deal comes just as we’ve seen the first actual NBN plans announced, though they only apply to a small area of Tasmania. The deals offered by iiNet, Internode and are very different, which certainly suggests that the NBN should be capable of producing competitive pricing. It will be fascinating to see how Telstra, which has never enjoyed any kind of reputation for decently-priced broadband services, chooses to price its own services on the network.

While the range of choice will be good for consumers, a staged migration is bound to cause some confusion, and there’ll inevitably be horror stories of customers told to move off one network only to find the other isn’t available. In the big picture, however, the deal seems like good news. The biggest question mark? The Liberals have already said they would cancel the entire NBN project if elected, a decision which if nothing else suggests that neither major party can be rated as technology-friendly when the inevitable election comes around.

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