Telstra sits pretty over key access OF the eight agreements detailed in the 42-page summary released by Telstra yesterday, the key one for investors and the NBN Co is the so-called Infrastructure Services Agreement (ISA). This is the agreement that allows NBN Co access to critical Telstra infrastructure to build the core network and is the honey pot for the telco from which cash payments will flow. To build the necessary backhaul infrastructure in the first three to four years, NBN Co will need access to Telstra's dark fibre and exchanges. It's over this period that most of the lease-style payments will be made that make up the $5 billion in value to Telstra. This is why Telstra chief finance man John Stanhope describes the payments as "front-end loaded." But it's also key for NBN Co and will be the linchpin in the volume rollout, which the government enterprise hopes to exceed 5000 homes a week. Valued by Telstra at $5bn on pre-tax, net present value terms, it's the biggest chunk of the $11bn which covers all the agreements. It's understood that the negotiations between NBN Co and Telstra over the terms of this agreement was the main reason for the months of delay on the signing and finalisation of the deal, which is now more than six months delayed from the original timeline. This is because there needed to be terms that would ensure that Telstra, as owner of the assets, would not act in a way that would make access difficult for NBN Co. Structured so that NBN Co gets access for a preliminary 35-year term -- regardless of who may own the asset after the 10-year build of the NBN -- the agreement also allows for two extensions of 10 years each. Potentially the agreement is for a lengthy 55-year period, which NBN Co would argue is necessary for certainty and which Telstra would likely be happy to provide as it guarantees an ongoing stream of annuity-style payments for assets it has likely written down to zero on its books. It all sounds like a win-win situation, but there are almost none of these in business and so it's hard not to be sceptical of what lies behind the succinct six pages that summarise the ISA. As the incumbent telco, Telstra has not enjoyed a great reputation in providing access to its existing copper network to other carriers, so there is a natural concern that it may do the same to NBN Co. Arguably the natural hedge for this is the ongoing payments it receives for access which would surely cease if it decided to be cute. But there is also the possibility of a disincentive once NBN Co reaches 20 per cent of its planned fibre footprint. At this point fees of up to $500m become payable to Telstra if NBN Co's deployment is significantly slowed. The lengthy nature of the access arrangement does seem to point to a sweet deal for Telstra given it will reap billions -- perhaps more than the NPV of $5bn -- for giving NBN Co access to infrastructure worth little to nothing. Never mind that Telstra's ongoing ownership of these critical ducts, pipes and exchanges can still be bundled off and sold at a later date (maybe to an infrastructure fund), allowing a further windfall. Potentially, for a company with a market capitalisation of $36.8bn, the ISA itself would represent near 20 per cent of its current sharemarket value. Of course NBN Co could very well have built into the agreement its own options and it's likely it would have first right of refusal to buy out those assets.