Telstra strikes $12B deal on Australian broadband

By ROD McGUIRK | June 22, 2011 | 8:44 PM EDT

CANBERRA, Australia (AP) — Telstra Corp., Australia's largest telecommunications company, said Thursday that it has reached an 11 billion Australian ($12 billion) deal with the government to participate in the rollout of a fiber optic national broadband network that will be among the world's fastest.

Telstra, a former government-owned monopoly that still owns the nation's aging copper wire communications infrastructure, which it leases to competitors, has agreed to progressively disconnect that infrastructure and participate in the rollout of the AU$36 billion national broadband network, known as the NBN.

Telstra said in a statement the agreement will deliver AU$11 billion over decades in replacement revenue through disconnection payments, and new revenues through payments for access to its infrastructure.

Telstra services will migrate to the NBN over its expected 10-year construction.

Telstra will also provide NBN Co., the project's government-owned builder, with access to its infrastructure — such as exchange space, conduits and ducts — for a period of 35 to 40 years.

Telstra chief executive David Thodey said the deal, which was negotiated over two years, would not have any material impact on the company's fiscal 2012 financial results, because the AU$11 billion will be paid over decades.

"These agreements represent an important milestone in addressing much of the uncertainty for Telstra associated with the NBN and government regulation and allow us to focus intently on our customer service and simplification strategy," Thodey said in a statement, referring to separate agreements with the government and NBN Co.

The government has already begun rolling out the network, which will deliver broadband speeds of 100 megabits per second to 90 percent of Australian homes, schools and businesses through fiber-optic cables connected directly to buildings.

The new speeds are 100 times faster than most Australians currently get — enough to watch multiple high-quality downloads of movies or television shows at once from the same connection.

A handful of countries — South Korea, Japan, France and Germany among then — currently have comparable speeds.

The plan to make Australians one of the most wired people in the world with uniform Internet access is made more challenging by the vast and scarcely populated Outback, which separates the major coastal cities.

Without Telstra's cooperation, the government planned to proceed by duplicating Telstra's infrastructure.

The conservative opposition argues the plan is too expensive.

The opposition Liberal party went to elections in August last year promising to deliver a smaller, slower — but much less expensive — AU$6 billion network with a range of technologies, including optical fiber, wireless and DSL.