Telstra and the NBN have signed a new $1.6 billion deal today for the telco to provide planning, design, construction, and construction management services within its existing HFC footprint.

The contract had been on the cards since December last year after the NBN awarded Telstra a series of contracts worth around $280 million to fix and maintain the copper phone line network as part of the Coalition’s multi-technology NBN.

As part of the new contract, Telstra will be responsible for the design and upgrade of the HFC network rolling out to 3.6 million homes by 2020. The upgrades to the HFC network will only apply within Telstra’s existing network footprint, meaning there won’t be a further HFC rollout, simply an upgrade to what’s already there.

However, Telstra will also be responsible for a handful of homes within the existing HFC footprint that are going to be delivered different technology such as fibre-to-the-node or fibre-to-the-premises NBN if it’s deemed more suitable.

The contract win is the second biggest for Telstra with the NBN after the initial $11.2 billion it received for its HFC and copper networks. Due to Telstra’s knowledge of the HFC network, the contract was not an open tender.

“Telstra has enormous experience in HFC design and construction, and the rollout will be greatly assisted by having them as a key partner in the delivery of this part of the network,” NBN CEO Bill Morrow said.

Telstra’s HFC is the old pay-TV network from the 1990s and has slowly been receiving upgrades over its 20-year history.

In very basic terms, it works by using a single cable that serves one area, whether a street, apartment building or a bunch of streets. Each house is joined to the cable, meaning the data speeds are shared between each of the premises and varies depending on who is using the network.

Currently maximum plans offered by Telstra are 120Mbps for each household, but those speeds can only realistically be achieved in the middle of the night when no one else is using the network. In peak periods, if there are lots of houses using the connection at once, it can all but grind to a halt and become unusable.

The upgrades Telstra will deploy are aimed at combatting this, with the NBN rolling out technology called DOCSIS 3.1 to bring download speeds up to a consistent level of around 100Mbps, even in peak periods. This is expected to be rolled out in the second half of 2017.

However, the condition of the Telstra cable network is still not known, given its age. Early reports seem to indicate that it’s fine, but Optus’ HFC network which will be provided to around 500,000 homes isn’t believed to be quite up to scratch. Similar negotiations are in place with Optus too, however the contract size will be worth much less to reflect the smaller footprint.

The NBN expects 10,000 homes to be on its HFC network by the end of 2016.

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