If the Coalition wins the September federal election, the changes to the rollout plan for the National Broadband Network (NBN) have significant implications for Telstra's copper network, requiring new negotiations between the telco and the government.
As part of Labor's NBN plan, Telstra has agreed to migrate its customers to the NBN and decommission its copper network and give NBN Co access to its pits, pipes and ducts to deliver fibre to Australian homes and businesses.
This landmark $11 billion agreement between Telstra and NBN Co represents a major financial windfall for the telco and followed two years of protracted negotiations.
However, under the Coalition’s alternative NBN policy, fibre-to-the-node (FTTN) will be used instead of fibre-to-the-premises, requiring the retention of part of Telstra's copper network for the last mile from nodes in the street to the doorstep of premises.
Shadow communications minister Malcolm Turnbull has said Telstra may be better off under a Coalition NBN due to faster payments.
Internode founder Simon Hackett has said that a shift to an FTTN rollout would be “entirely at the whim of Telstra” and that it could take years and extra cash to Telstra for the Coalition to revamp the NBN into a FTTN scheme.
But Michael Reede, partner at law firm Allen and Overy, which prior to Turnbull's policy announcement produced a paper on the NBN options open to a new government, doesn't believe Telstra holds all the bargaining power.
He said the slower the NBN rolls out, the slower Telstra receives payments and it has an economic incentive to “adjust” to a new environment.
Key elements of the Telstra contract would also remain unchanged if the Coalition wins the election, such as the customer transfer to the NBN.
“Around the periphery of the deal there’s lots of changes, but it should be possible on a give and take basis for the overall economic value of the deal to remain largely intact,” Reede said.
“The government always reserves the power as regulator to make changes to the regulatory environment and it’s able to push on and change the access regime and do a number of things that would apply significant pressure to Telstra,” Reede said.
“By the same token … the incoming government will want to have a positive engagement with Telstra and Telstra’s co-operation is essential to a smooth deployment of the current or a new NBN. So it’s in both side’s interests to ensure that the adjustment of the deal can be concluded.”
While the initial $11 billion agreement took two years to negotiate and approval from the Australian Competition and Consumer Commission (ACCC), Reede said a revised agreement could possibly be worked out in as little as two to four months, but would more likely take six to nine months.
Revised agreements between Telstra and NBN Co may require sign-off by the regulatory body, but an ACCC spokesperson said they could not speculate as to how long the process might take.
“Whether the ACCC need to approve a renegotiated contract would depend on the nature of the renegotiated terms,” a spokesperson from the competition watchdog said.
“However, in order for the parties to continue to benefit from the legislative anti-competitive conduct authorisation (in section 577BA of the Telecommunications Act), Telstra and NBN Co would need to provide the ACCC with any substantive proposed amendments to the existing commercial arrangements under the definitive agreements.”
Reede said how long it takes to sign a new agreement could also depend on how willing both party's are to negotiation.
Telstra has made it clear that it will not agree to a contract that reduces the value of the agreement.
“Should the government or policy approach change we will sit down with the government to renegotiate if that is needed – our position is that we must maintain the value of the current deal for our shareholders,” a Telstra spokesperson said.
Turnbull has said new negotiations with Telstra could be achieved “speedily” and has said his experience with Telstra deals would help.
“I would expect there would be initial high-level discussions that could happen quite early about the elements that would have to change and looking at the big picture value conclusions and that could happen relatively early,” Reede said.
“If both sides come to the table with a willing attitude and they’re happy to work within the four corners of the economics of the existing transaction and just vary the elements of it ... there’s no reason why you couldn’t revise the contractual provisions in two months.”
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