Telstra Abandons FTTN Plan

Australian incumbent carrier Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) has abandoned its plan to build a new fiber-to-the-node (FTTN) network after it failed to reach an agreement with the country's regulator, the Australian Competition and Consumer Commission (ACCC) , about competitive access.

In November 2005, the carrier announced a US$8 billion transformation project to migrate to an all-IP network, a move that would involve building a new IP core network, a new FTTN network, and installing the latest mobile radio access network infrastructure. Cisco Systems Inc. (Nasdaq: CSCO), Alcatel (NYSE: ALA; Paris: CGEP:PA), and Ericsson AB (Nasdaq: ERIC) were chosen as the primary contractors, respectively. (See Telstra Unveils Switch to IP.)

Now the A$4 billion (US$3 billion) fiber access part of that plan is in tatters.

In statements issued today to the Australian Stock Exchange (ASX), the carrier notes that talks with the ACCC "over a fibre-to-the-node broadband network have reached an impasse. Telstra sought an outcome that would assure Telstra shareholders that their investment in the network would not be used to subsidise network access by Telstra's competitors. The negotiations have not produced this outcome."

Telstra's managing director of public policy and communications, Phil Burgess, said in a prepared statement: "The FTTN investment will be made if we are permitted by the ACCC to price the service at commercial rates, rates that reflect all of our costs and under regulatory conditions that protect our shareholders' $4 billion investment from being pillaged by competitors."

Burgess added that the decision was the result of "confused, inconsistent and ultimately counterproductive telecommunications policies and regulations that discourage investment, including investment in new digital infrastructure." In a question and answer session with the Australian media, Burgess said he couldn't say if Telstra has an alternative plan to deliver high-speed access services to Australians. He also said that Telstra intends to re-engage in talks with the regulator regarding its FTTN plans, but that there is no timetable for those discussions: "I don't know if it is going to be sooner or later, but at some point we want to revisit these issues."

Telstra's decision to scrap its FTTN project comes just days before the Australian government is due to decide whether it will sell its 51.8 percent stake in the national carrier in a public flotation.

Opposition to Telstra's FTTN plans have been vocal, especially from main rival SingTel Optus Pty. Ltd. , which has led a group of competitive operators in proposing an alternative fiber-based access network that could be used by all service providers and that "avoids the anti-competitive problems of Telstra’s FTTN model."

SingTel Optus and eight other competitive operators believe that, under Telstra's plans, there would be no way of unbundling the FTTN infrastructure, thus leaving the incumbent with a monopoly in fiber-based access.

Telstra's decision is a blow to Alcatel, which has already had a rough ride this year regarding its relationship with Telstra. (See Alcatel Under Fire Down Under .)

Alcatel's slice of the action, which included Ethernet equipment, VOIP technology (softswitches and media gateways), and a range of integration, support, and maintenance services, as well as the FTTN and IP DSLAM equipment for the access network, was believed to be worth about US$2.55 billion.

But the vendor isn't divulging the value of what remains of its engagement. A spokesman says Alcatel isn't breaking down any specifics, and notes that from the time the two parties signed a MOU (memorandum of understanding) regarding the FTTN portion of Telstra's network transformation, Alcatel knew the project required "a positive regulatory framework, and has planned accordingly."

He notes that Alcatel continues to provide Telstra with a broad range of design, support, and integration capabilities, and adds that the vendor's business with the carrier "is growing."

Alcatel's share price fell €0.24, nearly 3 percent, to €8.53 on the Paris exchange today. Telstra's stock closed down A$0.08, about 2 percent, at A$3.80 on the Australian exchange.

— Ray Le Maistre, International News Editor, Light Reading

firstmiler 12/5/2012 | 3:45:31 AM
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