Telstra almost strikes deal to upgrade fixed network

Australian incumbent Telstra will be a major participant in the national broadband network roll out after all. Over the weekend the carrier struck a deal worth approximately A$11bn with the Australian Government, almost cementing its involvement in the wade reaching project.

But the agreement is non-binding, and given the turbulent relationship between the Government and Telstra, there’s every chance it might fall apart. But if it doesn’t, the deal will see the Government pay for the decommissioning of Telstra’s copper network and cable broadband service to be replaced by fibre; use of Telstra’s infrastructure; whilst Telstra avoids costs related to Universal Service Obligation (USO).

Under the agreement, Telstra would progressively migrate its voice and broadband traffic from its copper and cable networks to NBN Co’s – the government formed next generation network body -network as it is rolled out. Telstra will continue to use its cable network to meet its pay TV contract with Foxtel.

Things have been pretty quiet on this front for almost a year, since the government proposed to break Telstra up and build out its own fibre network, but Telstra chairman Catherine Livingstone said the most recent movement was encouraging after a year of complex negotiations.

Telstra CEO David Thodey appeared more reserved, adding: “We will continue to work with the Government and NBN Co on the detail required to implement the principles agreed today. While today’s agreement is an important step, a very significant amount of work must still be done on many complex issues.”

The deal provides the framework for definitive agreements to be negotiated over the coming months and put to Telstra shareholders in the first half of 2011.