Telecoms & Broadband Business Newsletter - October 2014

Editorial:- Lucky Telstra and the NBN

In August Telstra and NBN Co signed an interim deal that will see Telstra handing over its copper network to NBN Co. In its original deal with the NBN and the Labor government Telstra agreed to progressively turn off its copper wire network as the NBN overran it.

But the switch off is now not going top happen. The deal is therefore another brilliant strategic move from Telstra, turning what was a cost element into a new money-spinner. After selling the pipes and the ducts for a very handsome price (with the attached plan to basically write off the copper after the customers were transferred) the company now finds itself handing over this already unwanted copper to NBN Co without incurring any cost for ripping it up. And at the same time it is at the head of the queue to get the maintenance contract for that written-off copper from NBN Co.

However it is to be hoped that the ongoing deals with Telstra are not all just about the rivers of gold flowing in Telstra’s direction. The company also needs to be strategic about its future.

Since 2009, the company has launched several diversification strategies, especially into the healthcare market. David Thodey personally started this move early in his tenure, and Telstra will no doubt lead the market during the next decade and beyond. It has been estimated that as much as 25% of total telecoms-related business will come from e-health systems and services and Telstra is well-positioned to capture the lion’s share of that market. It also gives the company a great knowledge base and experience that will allow it to move into other verticals such as education, energy and environmental services. This can be done through connected homes and businesses, monitoring and management activities, as well as through activities in other digital economy markets.

None of the other major telco competitors have entered these new markets in a serious way.

However, by moving deeper and deeper into this market Telstra will obviously have a vested interest in ensuring that they can indeed deliver these services to the market. All of these activities require the need for infrastructure that is robust and ubiquitous in nature, has a high capacity, low latency and high levels of security and privacy protection. I assume that in their negotiations with the Minister the company is focusing not just on the money, but also on the certainty that the multi-technology mix (MtM) will actually be able to deliver these requirements.

This must be a real headache, as the MtM is a political concoction rather than a sound engineering construct. Telstra is also on record as a supporter of a nationwide FttH network as it was envisaged by the previous government.

So it will be interesting to see what the company will finally sign off on. It has already indicated that signing contracts on this matter will not happen any time soon; and we are sure that in these negotiations Telstra will not just keep in mind the financial benefits to its shareholders but will also consider carefully the long-term capability of the company to deliver the new services it is developing over a ubiquitous first-class infrastructure.