[LINK] Fibre Networking - Transact sells to iiNet

Paul Brooks pbrooks-link at layer10.com.au
Wed Nov 23 15:50:48 AEDT 2011

On 23/11/2011 2:13 PM, kim holburn wrote:
> Seems to me that this - ownership of the last mile by a company was
> what NBN was created to avoid.  This is a strange thing.  Transact is
> not FTTH/FTTP, it is FTTN nor does it have full coverage even in the
> suburbs it covers.
Thats not quite what the NBN was created to avoid. The NBN was created to avoid
vertically-integrated monopolisation of the last mile. Under the initial
justifications for the NBN, privately owned last mile infrastructures are fine,
provided they are wholesale only and open-access to all wholesale customer service
providers who wish to use it. Also, the infrastructure didn't have to be FTTP, it just
had to be capable of delivering equivalent services to those specified for the NBN -
as long as it could deliver 100 Mbps downstream, it could be technology agnostic.

The current management seems to have strayed somewhat from those ideals though.

The TransACT-owned-by-iinet model fails the wholesale-only criteria (and arguably has
done since the Grapevine RSP was established), but iinet didn't buy it for the FTTX
infrastructure in any case, and at only $40 mil they aren't valuing the network at much.

> Does this mean NBN is giving up FTTP for transact suburbs or does this
> mean that TransACT has given up and has realised that it can't sell to
> NBN because NBN doesn't want it?
Possibly a smidge of the latter, Mostly None of the above. Nothing much to do with NBN
Co. At least some of the shareholders of TransACT have written down their book value
investments in TransACT to nil and been looking for an exit for years. Also remember
that the 'TransACT network' includes the HFC infrastructure in regional Victoria built
by Neighbourhood Cable, its not just a Canberra network any more.

It means iinet gets a good sized residential customer base, and the corporate&
government customer base, and the corporate-and-government fibre infrastructure around
Canberra which is not subject to anti-cherry-picking/NBN-competition issues. And at
only $40 million, iiNet gets the residential FTTx access network infrastructure for
effectively nothing, so the residential revenue stream is very cheap to service for
the next roughly 5 years (or whenever the NBN would normally be scheduled to build in
those areas over the next decade). And for cream on top, there is an outside chance
the customers will be deemed 'already adequately serviced' and not overbuilt, if iiNet
can convince the relevent powers that the open-access-wholesale criteria is being met,
saving the taxpayer some money.

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