He told Thodey: "The NBN is purely a layer 2 wholesale network and I imagine a lot of your 14 percent capex to sales ratio will be accounted for in the investment you need make in layers 3,4,5,6 and 7 in the new network and how that network needs to change.
"I am thinking about things like local caching and deep packet inspection; not in the core but closer to the periphery when you start overlaying policy and enforcement initiatives associated with the Telecom Interception Act and related copyright issues.
"All of these things will impact your capex very materially. I would assume your capex will not be flat out will be heavily geared to the extent of NBN rollout."
Thodey said: "You are absolutely right about your supposition about the importance of Layer 3 and above to differentiate ourselves going forward," but said that the level of investment needed was not as closely tied to the extent of NBN rollout and customer uptake as McDonnell suggested.
McDonnell was unconvinced. He told iTWire later: "What happens if Telstra wants to introduce a new service like video telephony that requires new CPE, that they might have to subsidise to encourage take-up?"
In summary: Telstra faces a significant challenge meeting shareholder demands for returns in the short term with making the investments needed to secure its long term future, while being heavily focussed over the next several years of managing the transition to becoming a retail and whole provider on the NBN.
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