The Australian Government today welcomed the announcement by Telstra and NBN Co that they had entered into a Financial Heads of Agreement.
This agreement paves the way for a faster, cheaper, more efficient rollout of the National Broadband Network, with faster take-up.
This is an important step in the delivery of the single largest nation building infrastructure project in Australian history, which will increase national productivity and help build a stronger economy.
The Agreement between NBN Co and Telstra, worth an expected value of $9 billion, provides for:
* The reuse of suitable Telstra infrastructure, including pits, ducts and backhaul fibre, by NBN Co as it starts to rollout its new network - avoiding unnecessary infrastructure duplication; and
* The progressive migration of customers from Telstra's copper and pay-TV cable networks to the new wholesale-only fibre network to be built and operated by NBN Co.
The Agreement means that:
* Taxpayers benefit because it reduces the overall cost of building the network and will result in higher take-up rates and revenue for NBN Co.
* A greater proportion of the NBN rollout will be underground, with less overhead cabling.
* Australia's largest telecommunications company, Telstra, will become a participant in the rollout of the NBN, and is likely to become NBN Co's largest customer.
Combined with Australian Government public policy reforms, Telstra estimates that the agreement announced today will deliver Telstra a post-tax net present value of approximately $11 billion. The payments by NBN Co to Telstra would be made over a number of years as the rollout progresses.
Through the migration of Telstra customers to the NBN, Australia will benefit significantly from a national wholesale-only broadband network, delivering structural separation of Telstra.
This historic microeconomic reform will ensure Australia finally has a genuinely competitive telecommunications industry which works for all Australian households and businesses, and helps to drive long-term productivity growth in our economy.
The Australian Competition and Consumer Commission will review the competition aspects of this agreement as envisaged in the Telecommunications Competition and Consumer Safeguards Bill, which the Government still hopes to pass to provide greater certainty to industry.
In support of the Agreement, the Australian Government will progress public policy reforms to support the transition to NBN to which Telstra attributes a value of approximately $2 billion. It will:
* Establish a new entity, USO Co - with Commonwealth funding of $50 million in 2012-13 and 2013-14, increasing to $100 million per annum thereafter. The remaining funding that USO Co requires will be contributed by industry, as it is now with final arrangements subject to industry and stakeholder consultation;
* Provide $100 million to Telstra to assist in the retraining and redeployment of Telstra staff that will be affected by this very significant reform to the structure of the telecommunications industry; and
* Require NBN Co to be the wholesale supplier of last resort for fibre connections in greenfield developments from 1 January 2011.
These important contributions were provided for in the 2010-11 Budget.
USO Co will assume responsibility for most of Telstra's Universal Service Obligations for the delivery of standard telephone services, payphones and emergency call handling from 1 July 2012. This will ensure that essential communications services are protected and assist the structural reform of the industry.
Telstra, NBN Co and the Commonwealth agencies will now move to negotiate detailed Definitive Agreements, which is expected to take some months.
When these negotiations are concluded the Definitive Agreements will be put to Telstra's shareholders and the Government, for final approval.
While today's announcement is a significant step in the rollout of the NBN, as confirmed by the NBN Implementation Study, this project would still be financially viable even without the participation of Telstra.
The NBN is critical to securing Australia's international competitiveness. It is central to Australia's economic future because it will deliver universal superfast broadband to all Australian households and businesses no matter where they live or do business.