There is a likelihood that the federal government's fresh partnership with Telstra on the National Broadband Network project could be derailed as the telco giant announced today that it can scrap the deal once its demands embodied in the agreement do not materialise.

In order to cut the cost of the NBN projects, the federal government has agreed to pay Telstra $11 billion for use of its existing communication infrastructure instead of building its own.

Company chief executive David Thodey said that the Rudd government has given them assurance that a fully-operational NBN would not compete with Telstra's retail services and "if that was to change we would not in all likelihood proceed, but that would depend on all the other factors that would be together."

Mr Thodey revealed that Telstra's agreement with the government has been greatly influenced by two core issues and one of that is to ensure that the best interest of its shareholders were upheld and protected.

He added that Telstra requested the government to grant the company regulatory certainty, which would enable "this company to allow us to compete in a more unfettered way and to allow this company to grow the way we want to do it."

On the other hand, National Senator Fiona Nash is doubtful that regional Australia would actually benefit from the deal made by the government with Telstra, expressing pessimism that there are no indications that far-off regions could get and enjoy reasonable access.

Senator Nash said that no signs were being seen so far that the broadband service would be delivered to the regions and at this time, "it is much focused on the cities and the regions will just get some of the scraps at the end."