Industry rejoices over Telstra-NBN Co deal

Analysts and industry groups see the $11 billion deal as a positive outcome for NBN Co, Telstra and Australian businesses

Industry groups and analysts have seen the finalisation of the $11 billion deal between Telstra and NBN Co as a positive outcome for both companies and Australian businesses.

The deal was finalised today but still hinges on the approval by Telstra shareholders and decisions from the ACCC.

Ovum consulting director, Nigel Pugh, called the agreement a “historic event for the industry and Telstra” though he acknowledged the deal contained very little surprises.

Pugh noted the definitive agreement was very similar in structure to the financial heads of agreement announced in June 2010.

“Telstra has a very clear strategic direction for its retail business and we think this is a positive outcome for the telco and NBN Co as key hurdles in terms of the nationwide rollout of the NBN has been overcome,” he said.

Ovum found the cessation clause from Telstra a noteworthy part of the agreement.

Under the deal, if the NBN rollout is scrapped or is too slow, NBN Co will have to compensate Telstra should the fibre footprint hit the 20 per cent coverage threshold. NBN aims to have fibre reach 93 per cent of premises.

The maximum compensation is set at $500 but is set to diminish to zero once the NBN fibre reaches 93 per cent of premises.

If NBN fibre does not hit the 20 per cent threshold, Telstra does not receive any compensation.

“Should there be a change in Government, we don’t think NBN Co, by that time, would have rollout out to 20 per cent of the 93 per cent coverage,” Pugh said. “It’s not like we don’t believe it but we just think it’s a stretch to achieve that target by that time.”

The next federal election must be held before November 30, 2013.

“If there is a change of Government in the next election and NBN Co hasn’t reached 20 per cent fibre coverage then there will be no compensation payment to Telstra,” he said.

But the telco will still receive the $5 billion portion of the $11 billion which is for infrastructure services.

The deal is seen by the Australian Information Industry Association (AIIA) as an impetus for businesses to act swiftly to prepare of opportunities that come from a ubiquitous high-speed broadband network.

Vertical sectors across the country have been seeking certainty to plan for their digital future, according to outgoing AIIA CEO, Ian Birks.

Through the agreement with Telstra, NBN Co can now expedite the NBN’s rollout which will be beneficial for businesses, he said.

“In some areas of the country, the NBN can be switched on very quickly. In others, the rollout time will be massively reduced,” Birks said in a statement. “Either way, there is a powerful incentive for individual businesses to act now.”

He urged all sectors, even those outside of ICT, to take an active role in assessing how business planning will be changed by access to the NBN which can lead to better return of investments.

Communications Alliance has lauded the Telstra as well as Optus agreements with NBN Co. The industry group has been a huge participant in developing NBN technical standards with the help of 70 telco-related companies.

“Today’s agreements are a very welcome boost to those efforts, and bring one step closer the benefits Australian businesses and consumers can derive from having a ubiquitous high-speed network for our nation,” Communications Alliance CEO, John Stanton, said in a statement.

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Tags telecomsovumnbn coNational Broadband Network (NBN)Communications AlliancefibreAustralian Information Industry Association (AIIA)telecommunciationsoptusTelstrabroadbandICT

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