When Developers think about contracting for the supply, installation and operation of a Fibre-to-the-Premises (FTTP) network in a new development, here are ten tips to consider:
1. Who to contract
My previous article, “Compliance with NBN Laws for new developments”, explained why Developers should contract with a carrier that complies with the new laws and are wholesale only, network operators that supply a Layer 2 bitstream services on an open-access and non-discriminatory basis.
Whilst there are several compliant carriers like NBN Co Limited, there are excellent commercial alternatives like OPENetworks, RedTrain Networks and Opticomm.
Apart from weighing the experience and reputation of the potential carriers, Developers should also consider whether there several independent retailer service providers (RSPs) accessible to end uses via each carrier’s network or whether there is a limited choice or only retailers related to the carrier operator. Developers contracting operators that only offer services by related RSPs should consider the market reaction to that “limited choice of service” problem being left with an Owners Corporation or Body Corporate and the possibility of future litigation arising if buyers in the Development are looking to terminate their sale contracts or seeking compensation post completion for that problem or for pre-contractual representations that may have been made about the broadband services.
Whether the terms of contracts are reasonable or unreasonable should also be carefully evaluated.
2. Contract Price or Contribution
The amount of contribution or price that is required of a Developer is an obvious point for comparison. Since 1 March 2015, NBN Co Limited charges:• The Developers, a Deployment Charge of $600/premises in single dwelling developments or $400/premises in multi dwelling developments;
• The Developers, a Backhaul Contribution, where it does not have backhaul available between 50% and 100% of the cost of construction of the backhaul; and
• The RSPs/End Users on each new order, a Connection Charge of $300 per premises.
• The Developers, if requirements for any Stage are varied and NBN Co thinks these can be accommodated, then there may be additional charges.
What other compliant carriers, like OPENetworks, charge will vary and can be less than NBN Co Limited, so the only way to compare is to get them to provide a costed proposal or quote.
However, as explained in the recent article, “The Case for Integrating Community and Building Services onto a FTTP Network”, savings achievable by integrating building and community services (such as TV, Foxtel, Intercom, access controls, security, building and community management systems, utility metering, embedded power services, Public Wifi and signage) onto the FTTP network, can be substantial and deserve close study. So, what the price includes is a relevant consideration.
3. Pits and Pipes
The standard NBN Co Developer Agreement provides that if Developers:
• design, trench and install pits and pipes to NBN Co design specifications in each stage and at the cost of Developer;
• provide safe and timely access for NBN Co and its suppliers to the site;
• pays NBN Co Charges; and
• transfers the ownership of the Pits and Pipes to NBN Co in Stages,
then NBN Co will install the FTTP Network in Stages. This seems reasonable, but there is a design and consequential cost difference between NBN Co design specifications and those of alternative reputable carriers, like OPENetworks and others. Arguably NBN Co specifications are more expensive because, in places, they have additional pits and pipes, redundant conduit looping, costly Fibre Distribution Hubs (FDHs), triple lid P9 Pits and excessively deep P8 Pits, instead of shallower less expensive but functionally appropriate P6 Pits with double lids. In zero lot line and developments with restricted service areas, NBN Co often requires pits on both sides of the street instead of only on one side and, in Multi Dwelling Units (MDU), NBN Co insist on excessively sized cable trays, riser trays and riser cupboards and does not offer integrated building and community services that can save a fortune by having those systems on the same single optical fibre cable.
Whilst NBN Co insist that Developers must transfer ownership and title for pits and pipes to it, alternative commercial carriers are more flexible and for MDU developments and community title schemes, where collective management and maintenance of community assets is now possible and adequately funded, retention of title by the community owners to the pits, pipes and access pathways gives those communities greater comfort that they are not going to be held hostage by the carrier controlling the network gateway into their development, as Telstra did and NBN Co is now doing.
4. Exclusivity
NBN Co’s “New Development Agreements” usually acknowledge that NBN Co does not have exclusive rights of access to a new development, but a monopoly is clearly what NBN Co prefers, so there’s the problem. If an alternative FTTP or any other fixed broadband network has access to the Development, then under the NBN Co Agreements, NBN Co simply does not deploy their networks.
However, NBN Co may be so disappointed by a disloyal Developer wanting to terminate the agreement, as to threaten legal action. Fortunately for a Developer signed up by NBN Co before 1 March 2015, NBN Co would arguably suffer no loss when the Developer terminates or cancels and therefore it would not have any legal remedy against the Developer who chooses to exercise its rights to contract with another carrier that is perceived to offer better value.
For those Developers that sign up after 1 March 2015 and who agreed to contribute to NBN Co for its network deployment charges, it may still be quite difficult and embarrassing for NBN Co to prove loss that would entitle it to remedies (such as damages, injunction or specific performance of the agreement), because it still contemplates non-exclusive access to the development. As every NBN Co connection is so heavily subsidized, it actually saves NBN Co money if some other carrier decided to fund deployment and operation of the network. Indeed, as NBN Co is the instrument of the government’s Telecommunications in New Development (TIND) policy, government and NBN Co will still achieve the objects of the TIND policy if a fast broadband network is provided to end user residents at affordable prices but by another carrier. Developers wanting to cancel or terminate an NBN Co Agreement should seek their own professional legal advice.
5. Process
Any contract for deployment of an FTTP network needs to outline the processes for dealings between Developer and the carrier which:
• easily fits with Developer’s staged works;
• readily allows variations that may become necessary without unfair penalties; and
• delivers a quality FTTP network that meets Developer’s requirements and which can be reliably promoted to potential buyers/end users.
6. Application for Stages
The NBN Co process requires that a Developer to submit an Application for each Stage at least 3 months before commencement of civil works for that Stage. Failure to do that is a breach triggering rights of termination, delays in network deployment or for NBN Co to charge extra costs for wireless, Wifi or Mobile broadband network deployed by NBN Co. It seems very harsh for termination or a change of technology and compensation charges to follow a reduced notice period in a later stage of a development.
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7. Development Delays
If a Stage fails to meet the Estimated First Service Connection Date for that Stage for development reasons, then NBN Co can deploy "alternative infrastructure" (eg Wifi or Mobile Broadband) to service unserviced premises in the Stage and the cost is to be paid by Developer. Developer should carefully consider whether that possibility might risk having to amend any disclosures or representations to end user/buyers in the new development.
However, if NBN Co fails to install the FTTP network infrastructure in a Stage by the Estimated First Service Connection Date for that Stage (for whatever reasons), then Developer has no remedy other than to require NBN Co to deploy "alternative infrastructure" like Wifi or Mobile Broadband to service the unserviced premises in the Stage at the cost of NBN Co. While this may be OK for a short period, as this is the Developer's sole remedy for the failure by NBN Co, there is no assurance that this breach will ever be remedied by it providing the FTTP network, even if the Developer meets its Practical Completion targets, pays all Deployment and Backhaul Charges, does the pit and pipe works and locks out other FTTP network carriers.
8. Defect Liability
NBN Co requires Developers to transfer ownership of the Pits and Pipes to NBN Co on Practical Completion of those works and provide a 4 month defect liability period. Most of the alternative carriers like OPENetworks that provide FTTP networks do not require defect liability period post completion.
9. Security
NBN Co also may require a Developer to pay or provide a bank guarantee or insurance bond for the performance by Developer of the obligation in each Stage in an amount being the lesser of $25000 or the number of premises in a Stage times the sum of $160. Again, the alternative carriers are unlikely to require such securities.
10. Termination
Whilst failure of NBN Co to deploy their FTTP network does not entitle Developer to terminate, NBN Co usually has a special right of termination if NBN Co notifies Developer of the need to amend the Agreement and the Developer fails to agree on terms within a fixed period or if Developer does not reach Practical Completion by the designated date or by a Sunset Date or if the Developer fails to complete the Pit and Pipe Network when it is scheduled for completion in the Construction Program. NBN Co can also terminate the Agreement or terminate a Stage, if Developer disposes of all or any interest in a Stage. Alternative reputable carriers usually do not have such onerous rights of termination.
Legal Advice
This article is not meant to be legal advice and Developers should seek their own legal advice when considering any contract for deployment of FTTP networks in their developments.
About the Author
Michael Sparksman is the Managing Director of OPENetworks and is a solicitor of the Supreme Courts of Queensland who has over 30 years of legal experience and specialises in telecommunications law and regulation.
