Telstra-NBN Co agreement no surety: ISPs

By Ry Crozier, Mahesh Sharma on Jun 21, 2010 2:41 PM
Filed under Communications

Mixed reaction to $11 billion agreement.

Internet service providers including iPrimus, Internode and Exetel labelled yesterday's $11 billion agreement between NBN Co and Telstra everything from a victory to a backwards step for the industry.

A poll of ISPs conducted by iTnews revealed the difference in opinions, underscored in part by the lack of detail surrounding the financial heads of agreement.

Telstra have conceded that it will be at least the "first half of 2011" before definitive deals are reached and put to shareholders.

"The heads of agreement provides the framework for definitive agreements to be negotiated over the coming months," Telstra said in a statement.

Analyst group Ovum noted today that while an agreement might be good news for Telstra, it wasn't necessarily so for competing ISPs.

"For the rest of the industry, this makes the future of the NBN Co more secure, but also makes Telstra into the NBN Co's most important customer," said Ovum analyst David Kennedy.

"Telstra and the NBN Co's interests are lining up, and Telstra's competitors should be wary."

Critics

Exetel chief John Linton told iTnews that if the ALP wasn't re-elected at the next federal election - something he believed to be "at least a possibility" - then the agreement meant "nothing at all."

"If it does go ahead, then it would appear to be a good thing on the basis that it’s difficult to believe that any national infrastructure wholesaler could be as bad as Telstra," Linton said.

"However it also means there is no fibre choice in Australia just as there was no copper choice and, I thought Australia privatised Telecom Australia because a government monopoly was horrendously inefficient. So... back to where Australian communications was 20 years ago?"

"We would have preferred Telstra to have remained as a competitor to NBN Co."

Internode chief Simon Hackett called the announcement a "press release, not a real agreement".

Hackett also criticised the Government's decision to allow Telstra to bid for Long Term Evolution (LTE) spectrum, even without committing to structurally separate.

"That seems, to me, to be a pretty big backdown from the Government, that calls into question the Government's resolve to ensure that Telstra do separate as part of the NBN being built," he said.

"It is vital that this happens to ensure the results are competitively positive for consumers."

Telstra told journalists earlier today that it had not managed to have structural separation moved off the table completely.

"Functional separation is not entirely off the table," the telco's chief financial officer John Stanhope said.

"It may be a condition that is necessary later on but in this current financial heads of agreement it's not one of the current points [required of Telstra]."

Commendations

Ravi Bhatia, chief executive at iPrimus was more positive, noting that the agreement paved the way to pass legislation required to build the national broadband network.

“At the end of the day the legislation is stuck in parliament as Telstra and the Liberal party opposed it," Bhatia said.

"At least Telstra's opposition [now] goes away.”

The agreement also represented a "huge positive for Telstra's bottom line", Bhatia said.

But it was "essential the money is used to recompense Telstra shareholders, especially the T2 shareholders, who paid a very high price for the Telstra stock, which is now languishing," he said.

Earlier today, ISP iiNet welcomed the agreement.

"iiNet has always believed [the national broadband network] would be better served by having Telstra involved rather than not," iiNet chief Michael Malone said.

Other ISPs have also been contacted by iTnews for comment.

 
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