The NBN again

Alan Kohler writing in Business Spectator thinks he has found the solution to the NBN conundrum.

He thinks he needed a speech by David Quilty to get to it. He didn't he could have read my evidence to the Senate committee on the separation bill. Kohler gets close here but has a confusing journey on the way.

One example of the confusion is when he writes;

Telstra could probably sell its ducts and trenches to the NBN because it would only involve the transfer of a monopoly asset, but that simply means Telstra would be renting access to them from the NBN instead of the other way around. Telstra would still own a national copper network, in competition with a national fibre network, which would be less than ideal for both.

And as for “selling customers” … what does this mean? Would I get a letter one day from Telstra explaining that as a result of a deal with the new fibre network, in which Telstra has received payment of a ransom, I am now a customer of the NBN Co? If anyone’s getting any cash for transferring my business, it’s me thanks very much, not my previous supplier.

The NBN Co won't be "buying" Telstra's customers caiuse NBN Co is not a retailer.

Kohler's short version of the solution is;

So the only solution is the first: build the NBN but underpin its business model with a network supply contract with Telstra that would mean the company would migrate its customers gradually to fibre at a lower cost, increasing its profits and ensuring that private capital could help fund the NBN.


This is close to the right and simplest transaction. The absolutely simplest transaction is as follows;

1. NBN Co enters into a special access agreement with Telstra for access to ducts and exchange buildings. Under this agreement Telstra retains the assets but NBN Co becomes full facilities manager and pays to Telstra rental for any facility it uses.

2. Telstra agress to migrate its customers across to NBN Co as the network is turned on. Fixed line voice only customers get their voice service through an analogue socket on the ONT. Telstra pays NBN co the same rental charge for each line as anuy other telco (note these charges WILL be complicated as up to six service providers could eassily be using the one fibre to provide service to a premise).

Under this structure no asset changes hands, and there is no "upfront" payment. Everything is done through cash streams that ultimately link back to users buying services. The fact NBN Co doesn't "buy" the ducts avoids the problem of not knowing how usable the ducts are ( a problem identified by Richard Dammery).

It also provides NBN Co with the maximum possible revenue stream from day 1 - much better than Dammery's other idea of a ballot which does not force migrate customers. The only "issue" left is whether Telstra should be subsidised for the one off cost of cutover - my short view is this is a capuital cost NBN Co needs to bear and amortise in its access fees.