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Friday, 16 October 2009 14:16

NBN's small footprint a big opportunity for Telstra

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Three months old and 40 employees strong, the NBN Company's strategic thinking is starting to emerge. And while it might be driving the biggest infrastructure project in the nation's history, NBN Co is intently focused on keeping its footprint small.

That focus is on the last mile – from premises to the nearest point of interconnect – and on backhaul in geographies that have been underserved by the market. Where there is contestable infrastructure, such as inter-city backhaul fibre, that’s up to market: NBN Co doesn't need to build it and doesn't need to own it.

And that presents enormous opportunities for Telstra's wholesale operation, regardless of the outcome of its discussions with Government.

NBN Co is, of course, building an open access, wholesale-only fibre to the home network. This will be universal, delivered to all homes and business (90 per cent of the population gets fibre, the rest some other broadband technology)

But its fibre will connect homes to the nearest interconnect point. It focus is giving retailers open access to a fat pipe into homes and businesses, replacing the last-mile choke point that has bedevilled the industry.

And it will certainly not be the only wholesale provider of services.

As a clearer picture of the NBN Co's place in the industry starts to emerge, it is in what the company won't do that is most telling.

The NBN will not build international capacity: That's for the market to undertake, based on demand and where that market thinks it can turn a profit.

It will not deploy backhaul fibre all over Australia as a sole backbone provider. While NBN Co will clearly build backhaul services to geographies and markets inadequately served by commercial infrastructure, it will largely rely on the market for this infrastructure.

The NBN Co will not provide services beyond a Level 2 bitstream. It wants to remain as low down on the value chain as possible – leaving actual contestable service delivery to retailers and managed service providers.

Aside from providing the premises to the point of interconnect fibre (or satellite/wireless,) the NBN Co thinking is straight-forward: Where there is a contestable market for services or infrastructure, it will rely on the market.

This still leaves an almighty task.

There is a well-worn path to the company's executive chairman Mike Quigley's door from people and companies seeking to get involved in the company. The queue that has formed includes the biggest multinational companies, it includes governments, councils, utility companies, railway interests, construction firms – and not a small number of individuals who want to get involved.

CONTINUED Page 2


The project is so layered in complexity that the technical side of things start to look relatively easy. From the political, to the regulatory and commercial, there are still many unknowns facing the projects. But they are starting to come together and much of it will become clearer should the legislative reform bill get through.

This network is going to get built, one way or another. While NBN Co is not involved in the legislative discussion, it is understood to be keen to see the reforms passed this year – if only because it provides certainty in a sector that has been floating.

In fact, the company says it would be hard to imagine any outcome at all of talks between Telstra and Government in the absence of a legislative framework. Without the passage of the bill, the thinking goes, it would be impossible for Telstra management to make an informed decision about how to respod to the NBN world on behalf of its shareholders.

NBN Co has quietly been moving around the industry, briefing and listening. It is sorting out its technical specifications; it is investigating the useful national infrastructure that’s already in place – whether it belongs to a state government, a utility, or a potential telco partner – and its working to get the architectural model right.

The NBN will get built, and it will get built whether Telstra is directly engaged or not, and whether Telstra assets are vested in or not. That's the dispassionate view that seems to be coming from Australia’s newest telco.

There's more than one way to skin a cat. The company has been given a clear set of objectives, and it has been given rock solid political support and committed resources to get it done.

Access to Telstra ducts and the some infrastructure would be great. But it's not critical, the NBN will roll-out regardless. And Telstra will have an enormous role in the provision of broadband services in Australia, regardless.

Keeping a focus on a small footprint hasn't made the project any smaller. It's not Australia's Man on the Moon, but it's definitely Three Gorges big.

And while the Minister has set an aggressive timetable, NBN Co still reckons it'll be done and dusted in eight years.

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