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NBN-Telstra negotiations keeping customers in the dark

Australian consumers won’t have clarity on just what kind of internet access they will have in the future until the NBN resolves its ongoing negotiations with Telstra over access to its copper and HFC networks, analysts claim.

ISP iiNet yesterday released a survey claiming that a vast majority of Australians are clueless over what they will actually be getting from the NBN.

A depressing number of people think they can buy internet directly from the NBN, a perception that couldn’t be more wrong. The report said:

“More than two thirds of Australians believe that connecting to the NBN is a choice despite thousands of people nationwide facing today’s deadline for the first compulsory cut-offs from the traditional copper telephone network.”

The survey also found that 67 per cent of Australians thought that connecting to the NBN was optional and that they would be allowed to keep their existing broadband connection.

Certainly the survey read somewhat as a plug for iiNet, but regardless it does make a valid point about how communication over the NBN is being handled.

The NBN’s response to iiNet’s research also strikes me as troubling.

Andrew Sholl, General Manager of External Communications at the NBN, told Techly it was “untroubled by iiNet’s research.”

“As disconnection looms, more and more people are becoming aware,” Mr Sholl said.

“Where copper is going to be disconnected starting today, the awareness level is at 90 per cent, our research shows.”

However, independent telco analyst Chris Coughlan said iiNet’s survey matched previous research he had conducted regarding customer awareness.

“I believe the data is right about awareness of the disconnection issue,” Mr Coughlan said.

“I did some research back in 2011-ish. At that time, it was like around 90 per cent of people had an expectation they would retain their copper connection. That number will obviously have moved on since then, there is probably a bit more awareness, but at the end of the day, the responsibility for informing customers lies with retail service providers (RSPs).”

Whose job is it to inform Australians?

Australians need to be educated about exactly what kind of technology is available in their area before walking into a store or picking up the phone to arrange internet access.

Right now, most of what we hear about the NBN comes through Malcolm Turnbull, and through the Federal Opposition. Politicians are currently bankrupt in terms of trust from the general populous. As faith in the Government continues to erode, surely Australians would be better to hear from the national wholesaler itself.

A simple map outlining who gets what where and when wouldn’t go astray.

Mr Sholl said: “Once we strike the right deal with Telstra and Optus we will have maps showing customers what technology mix is available in their areas.”

When asked whether the NBN should be let off its leash to allow it to speak directly to Australian consumers, particularly as the government extricates itself from funding the network, Mr Sholl said its jobs is to execute policy of the government of the day, “to roll out nationwide broadband”.

That being said, Mr Sholl did concede that the NBN had an obligation to disclose how taxpayers’ money was being spent.

“We are in the middle of rolling out a fibre optics entity at the cost of $41 billion of which $29.5 is coming directly from the tax payer,” Mr Sholl said.

“We have a job to tell people how we are spending that money.”

Part of the reason the NBN was setup as a corporation, rather than as a government department was to insulate workers from changes in government and cabinet and to allow it to work as a corporate wholesaler.

Given the government is in the process of extricating itself from the NBN, it would be nice to hear more from the national wholesaler and less from Minister Turnbull.

When asked if the NBN would like the ability to speak for itself, rather than being filtered through the mouths of politicians, Mr Sholl said: “We are a government business enterprise; as Popeye used to say ‘I am what I am’”.

The General Manager of External Communications at the NBN made clear who is boss.

“We are answerable to our share holders, that is the Minister for Communication and Minister for Finance,” he said.

“It’s not a matter of wishing we were a different type of corporate entity, our job is to do what the government says on behalf of the taxpayer to ensure everyone gets access to the NBN.”

“Are we going to stop the Malcolm Turnbulls and Jason Clares from talking about the NBN? No, because it was born of politics. That’s just a fact of life.”

A bit of background: NBN stuck in negotiation quagmire

Part of the reason Aussies still don’t know what they’re going to be getting is that neither does the NBN, as it is still in negotiations with Telstra over access to its copper and HFC networks.

The original agreement struck in 2011 was to replace all copper entirely with fibre. The agreement therefore only negotiated access to Telstra’s pits, pipes, manholes and exchanges. Access to copper and HFC was not covered by the original contract.

In fact, NBN is going to pay Telstra to decommission its HFC network to the tune of $700 million according to Mr Sholl. How much it will pay for Telstra’s copper is unclear at this stage.

iiNet’s NBN manager Rachel McIntyr told Techly that “we still don’t have sufficient information about what the rollout is going to look like” and that until retailers have a fully revised corporate plan outlining the changes for retail service providers, Australians will remain confused.

What will it take to make Telstra happy?

Getting hold of Telstra’s copper and HFC assets will save the NBN some 23 billion dollars. While there has been a lot of positive spin about the state of negotiations, Mr Coughlan suggested that there may still be a significant gap in perceptions of value.

“Getting hold of these assets will save the NBN $23 billion, but in doing that it won’t have much hold over Telstra,” he said.

“Telstra would see there being a lot of money being left on the table.

“How they close that deal will be to give more of its business to Telstra to add value and make up for some of that $23 billion in value that they get from Telstra’s copper and HFC network.”

Given the announcement by communications minister Malcolm Turnbull last week that the NBN’s funding will be handed over to the private sector by 2017-18, the analyst said he wouldn’t be surprised to see Telstra being given equity in the NBN as a way to seal-the-deal.

“All we’ve done is created a further delay in NBN Co with this change of policy frankly,” he said. “There have already been multiple delays because of the last government’s handling of the issue.”

“The liability that NBN Co has to Telstra in building its network will go up every day. Every time they run fibre down a duct they kick off a 20-year lease on duct space and different assets that Telstra owns.

“Ongoing liabilities are going up as NBN Co rolls out. At some point you’ve got to think its biggest outgoing payment will be to Telstra. In essence, setting up a Telstra / NBN Co public company would allow self-funding of the NBN Co build-out.”

A Telstra / NBN wholesale merger would make Telstra retail its biggest client, along with every other RSP that might be buying services, Mr Coughlan explained.

“That revenue allows them depths. By separating Telstra into two companies with two distinct boards and putting regulatory controls in place, you are creating a publicly managed wholesaler that would run pretty much the same way NBN Co is run now but with access to a revenue stream they can afford to then invest back into the network.”

Mr Coughlan said Telstra joining NBN’s wholesale unit would allow the company to make decisions on the best technology to use in any given location.

“The other thing too is all of a sudden you’d have man power and expertise behind the project which will allow the roll-out to kick along better.”

Whether this happens or not, NBN must find some way to close the $23 billion value gap or else face an uncertain future.

“If they can’t meet somewhere in the middle, then that will kick off the next step – NBN will need to figure out what to do next. That’s a Turnbull problem, “ he said.

About the author

Claire Porter is an award-winning journalist. Previously the tech editor of news.com.au, Claire has had her work published in some of Australia’s biggest websites and newspapers.

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