Telstra gets two more years to upgrade or sell its residential fibre networks

Users in Telstra fibre areas face up to two more years with limited retail choices and service quality issues after the government decided Telstra could stay exempt from rules that would otherwise force it to make its fibre areas wholesale only and open access.

The move represents a reprieve for Telstra, one that was largely opposed by NBN Co and also - it seems - by the government, which rebuked Telstra over its inaction.

Telstra either needs to upgrade its fibre networks - branded ‘Velocity’ estates and the South Brisbane exchange area - or sell them, most likely to NBN Co.

It was meant to have done so by July this year, but applied to the government in April for more time, adding that it would “be the last time we seek an extension.” [pdf]

The government will make sure of that, confirming that once the new extension expires in July 2022, there will be no more time. 

“In deciding to extend the exemption, the [Communications] Minister noted weak competition on Telstra’s Velocity networks,” new exemption documents state.

“The decision to grant the exemption reflects that Telstra’s continued operation of Velocity networks is required to prevent service disruption to end-users in these areas. 

“The Minister acknowledged the frustrations about service quality apparent in public submissions received, but noted that maintaining services to end-users was of utmost importance.”

The government was worried that Telstra would simply switch off its fibre networks if they couldn’t be upgraded or sold, “which would represent a poor outcome for end users.”

Telstra had sought an extension out to July 2023, but the government gave it two years instead, and now requires six-monthly checkups on status.

“The limited duration of the exemption is intended to provide Telstra with a final window of opportunity to either become compliant ... or sell the network to an operator who can comply,” the government said.

“In this context, the Minister took into account advice from Telstra that it intends to make no more extension requests.”

Telstra’s reprieve is more generous than NBN Co had believed fair. 

NBN Co took a decidedly dim view of the need to give Telstra more time to sort out its residential fibre assets.

“While there were valid reasons for the exemptions to be granted in 2012, it is important that the exemptions expire within a reasonable timeframe,” NBN Co had said. [pdf]

NBN Co noted Telstra had already been granted extensions in 2013, 2015 and 2018.

It argued a further exemption “is to the detriment of end users connected to those networks who are not currently receiving the benefit of greater retail competition afforded by ... government policy.”

“It has been clear government policy since 2011, and from when the exemptions were first granted in 2012, that Telstra would have to sell the networks or otherwise comply with the regulatory framework,” NBN Co argued. 

“An additional extension of three years should not be required given the 10 years that has already been had to prepare for this event.”

NBN Co had supported only an extension of up to 12 months.

Telstra said its South Brisbane fibre network was only ever designed as a public switched telephone network (PSTN) replacement, and would require significant upgrades to be able to support NBN-equivalent services.

Its Velocity estates are designed for internet and phone services. Fibre was deployed when the areas were newly-built.

Telstra disputed that there is "weak" competition in Velocity estates, stating in its own submission that "there are a number of active RSPs offering services in the Velocity estates other than Telstra."