Yesterday, NBN Co announced that it had successfully renegotiated its $11 billion deal with Telstra to acquire its existing copper network, as well as setting up contracts to buy and continue using the cable (HFC) networks owned by Telstra and Optus. While we’re seeing lots of high-fiving going on about the deal and how it might speed up the rollout of the National Broadband Network, there are still lots of uncertainties — especially in terms of when consumers will actually get to enjoy the fruits of these arrangements.
Champagne picture from Shutterstock
These are the basic details, announced yesterday (I suspect that was a ploy to get onto the Sunday night TV news, invariably the highest-rated news broadcast of the week):
- The renegotiated deal with Telstra retains the same value it had under the previous deal: $11 billion. Telstra was never likely to agree to anything other than this, given its obligation to “maintain shareholder value”. As before, the payment will be made in tranches, dependent on the rollout of the NBN itself.
- Rather than acquiring and then shutting down the existing cable networks from Telstra and Optus and the existing Telstra copper network, NBN Co will acquire those and use them to service premises where they are available and viable. Telstra will continue to have the right to use that cable to deliver Foxtel.
- Telstra is also negotiating with NBN Co to help provide services to roll out the NBN. However, the details of those plans haven’t been finalised. Those would involve additional payments to Telstra — but that is money that (arguably) would need to be spent somewhere.
The basic plan for NBN Co hasn’t changed. Most premises will be serviced by fibre-to-the-node, with either a cable or copper connection to that node. Sites which already have fibre-to-the-premises get to keep it, and it’s possible (but unlikely) that might also be necessary in areas where the copper isn’t up to the task. Remote areas will be serviced by satellite.
The big unknowns
While the deals represent progress, it is still a major backdown on the Coalition’s pre-election NBN pledge that every household would have some form of access to the NBN by the end of 2016, with a minimum download speed of 25 megabits per second. By 2019, 90 per cent of households were predicted to enjoy minimum download speeds of 50 megabits per second.
The first speed promise remains, but the time frame is much flabbier. We’re now told that two million households will be connected by mid-2016, and that everyone will be connected by 2020.
The second promise — that 90 per cent of premises will have 50Mbps downloads — remains in place, but has no time frame attached to it. This isn’t surprising, since there’s no clear way just yet that existing copper lines served from a local node can be upgraded to those speeds. And of course, when the original deadline to connect everyone has slipped by four years under the Coalition plan, it’s hard to stick to that kind of commitment.
It’s also worth bearing in mind that there are two potential legal roadblocks to the deals as announced. Firstly, the Australian Competition and Consumer Commission (ACCC) has to approve the deals. With a 200-page contract to consider, that won’t be a speedy process (especially bearing in mind we’re about to hit the Christmas break). The Australian Taxation Office (ATO) also has to approve Optus’ financial interpretation of its sell-off.
Add in the uncertainty over what kind of deal Telstra might make to help build the network, the highly variable nature of the copper network, and the list of reasons for delays NBN Co has already discussed, and 2020 seems like a very ambitious date. I’ll stick my neck out and suggest there will definitely be delays.
And finally there’s the biggest unknown of all — what upload speeds we’ll actually get to enjoy. The Coalition’s stated intention is that speeds will be “proportionate”, which tells us precisely nothing. While upload speeds will inevitably be slower than download, the ratio can vary a lot. Under the previous NBN plans, there were four ratios: 12:1, 25:5, 50:20 and 100:40. For any customers on a copper wire connected to a local node, life’s not likely to be much better than 12:1.
The bottom line? Progress is being made at NBN Co, but it still isn’t time for anyone with a currently-poor connection to break out the champagne. You may well have five or more years to wait for any improvements.