Telstra warns of network cost rises if NSW plan proceeds

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Telstra warns of network cost rises if NSW plan proceeds

Telstra has warned the cost of operating its mobile networks will rise if a draft plan by NSW to raise rents levied on telcos proceeds.

Mike Packett, national transactions manager in Telstra’s global business services group, told a NSW Independent Pricing and Regulatory Tribunal (IPART) inquiry last week that NSW’ plans were already fanning out to other states and local councils.

IPART has proposed to tie rents for towers and other infrastructure hosted on Crown land to prices paid by telcos to private landowners. [pdf]

Under the proposal, rents would rise for towers on Crown land located outside of Sydney or outside a radius of “urban centres”.

NSW is also proposing rents be charged for every 5G small cell hosted on an electricity pole or similar existing infrastructure, outraging telcos given the expected increase in cell numbers required to meet the promise of the next-generation mobile standard.

Packett warned that IPART’s final decision was “very important because it has cause and effect throughout the whole market.” 

“People are referencing [the draft decision] from Queensland to South Australia. They should not be, but they are,” he said.

“We are often hearing of councils that pass motions to use the IPART draft report, as if it is set in gold and that you did an amazing analysis of it.

“It has cause and effect. Everything that comes out from this report reflects back into the market, and it has affected the market in raising rent.”

IPART’s proposals encompass both towers on Crown land as well as small country automated exchanges (SCAXs) that Telstra operates.

Packett said that in one example, Telstra could go from paying 11 cents a square metre for a SCAX on Crown land to $124 a square metre under IPART’s draft pricing.

More worrying for Telstra is that it could wind up in a similar court battle over rent to that which it won against the Queensland government in mid-2017.

In that case, the Queensland government argued that the rent it charged telcos was equivalent to market rates in private land leases, though it charged other land users differently.

Packett - and others at the inquiry - warned NSW risked straying into similar territory as Queensland.

“In that case, the court gave specific direction that state authorities are not permitted to reflect the private market when looking at the rental of Crown land,” said Jane Pollard, director of property and asset management at Axicom, which owns a portfolio of 2000-plus telco towers.

“Even without the benefit of this decision, we feel that the private market is not the correct market to look at.”

Optus economic regulation director Luke van Hooft, meanwhile, questioned what - if anything - utilities paid to have poles on Crown land.

IPART is proposing to charge 5G operators a minimum rental amount to host small cells on poles that are already on Crown land, even if the small cells take up no extra land space.

“We need a larger discussion on the impact of charging for small cells on electricity poles,” van Hooft said.

“How is that compliant with discrimination or non-discrimination when the pole owners - transmission poles or electric poles - are not charged rents, or are they charged rents on Crown land? Interesting question there.”

The inference appears to be that if utilities are not charged or are charged less than telcos, it could open the door for claims of discrimination that either fuel court cases or allow telcos to rely on federal legislation instead to avoid oversized rental payments to NSW.

IPART’s final decision is expected in September.

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