Optus talking to NBN Co, but who's courting whom?

Stuart Corner
Wednesday, 06 October 2010 16:12

Opinion and Analysis

Net news sites have been running hot today regurgitating a Financial Review report that Optus is in advanced stages of negotiations with NBN Co to scrap its HFC network, transfer its half million or so customers onto the NBN and contribute network assets to NBN Co in a deal similar to the $11b deal now being negotiated between Telstra and the Government.

The AFR is reported to have said that the deal is critical to the success of the NBN because it will eliminate a competing network that already offers broadband speeds of 100 megabits per second (Mbps).

It could also be that a deal is critical to Optus - because it could well face declining customer numbers on an aging network with inferior capabilities to the NBN and one which is becoming increasingly costly to maintain.

Let's not forget that by the time the NBN rollout really gathers momentum in three or four years time the Optus HFC network will be close to two decades old. It was conceived and built because of the high cost of gaining access to Telstra copper and Optus got into the pay TV business because the only way to make the thing economically viable was to offer telephony, Internet access and pay TV.

It never expected Telstra to follow the same strategy, but Telstra did, and Telstra won: Optus now only resells Foxtel, it does not have its own pay TV service and the network which passes 1.6 million homes in Sydney, Melbourne and Brisbane has about half a million customers taking broadband and/or telephony and pay TV services.

Like numerous other commentators, (including Malcolm Turnbull in an editorial in the Sydney Morning Herald today) the AFR equates the 100Mbps of HFC with the 100Mbps of the NBN's fibre network. The two are not equivalent: every user on the NBN FTTH network gets 100Mbps. All the users on a coax run in the HFC network, upgraded to DOCSIS 3.0, share 100Mbps.

Neither Optus, nor Telstra - which upgraded its Melbourne HFC network to DOCSIS 3.0 - will say what the sharing ratio is, but it's perhaps significant that Telstra's DOCSIS 3.0 upgrade budget was an order of magnitude greater than Optus'.

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