Telstra will recommend to its shareholders that the deal be accepted.
Telstra and NBN Co have also agreed to product features and pricing for voice and data services, but these are yet to be released.
As part of the deal, Telstra has promised to spend $2 billion on upgrading infrastructure and migrating customers to the NBN.
Telstra's CEO, David Thodey, said the agreement ended the uncertainty surrounding Telstra's possible association with NBN Co and would allow his company to focus on customer service.
The agreement remains subject to approval by the Australian Consumer and Competition Commission as well as the shareholder approval which will go to a vote on October 18.
Telstra chairman Catherine Livingstone described the two-year negotiations as "complex", but said the decision to participate was made because Telstra could recover more value for the business "given the loss of value after NBN policy announcements".
The Government has signed off on the deal, which means the NBN will rent Telstra's underground network and start taking over its fixed-line phone customers.
But Coalition communications spokesman Malcolm Turnbull says it could be done more cheaply.
Mr Turnbull is critical of part of the deal that means Telstra and Optus will both agree not to use their pay TV cables to provide broadband services.
He said the NBN should use some of Telstra's copper phone lines to deliver the broadband more cheaply - but the deal makes no provision for that.
"What it is doing is wiping out any potential competition with the NBN," he said.
"Now these HFC cables, pay TV cables, pass well over 30 per cent of Australian households and they would be able to provide real competition with the NBN network and of course keep prices low."
Mr Turnbull said the deal was risky for taxpayers, who ultimately own the NBN.
"If it were decided, as it should be, to use a mix of technologies to deliver fast broadband to all Australians and to use a portion of the copper network, the Government will have to go and pay Telstra even more billions. Pay twice for the same copper network," he said.
Mr Turnbull said it would be too expensive for many of those who currently do not have internet access.
"It is poverty that is denying people access to the digital economy, not technology," he said.
"So you've got to have as a key priority making your access to broadband more affordable. The NBN, because they're wasting so many billions of dollars unnecessarily, will make it less affordable."
Telstra's NBN deal - what it means
The federal government's $36 billion plan to wire up the nation to high-speed broadband cleared one of its last major hurdles today when Telstra agreed to an $11 billion deal to rent its infrastructure to the operator of the state-owned network.
What is the NBN and why is it being built?
The National Broadband Network is a high speed internet network, which is expected to deliver speeds of about 100 megabits a second to more than 90 per cent of Australian homes.
The majority of the network will be constructed of fibre-optic cables, using the cable ducts of Telstra, with more remote areas being connected with wireless and in some cases satellite services.
The network is run by a state-owned company, NBN Co. It cannot sell retail phone services and will provide services on the same basis to all retail companies, such as Telstra and its main competitor, Optus, a unit of Singapore Telecommunications, as well as smaller rivals such as iiNet.
Private investment in infrastructure has been largely limited to the cities due to the country's vast distances and rugged terrain, combined with a low population density.
The network will require total capital expenditure of $35.9 billion and will need $40.9 billion in debt and equity funding. The government plans to put up $27.5 billion in funding, while NBN Co will borrow $13.4 billion from markets.
Why did the government and Telstra do a deal?
Telstra, the former telecoms monopoly, owns the most comprehensive phone network in the country.
NBN Co wanted access to that nationwide system of cables, ducts, phone exchanges and other infrastructure to form the basis of its network as it would make the build faster, cheaper and avoid duplicating assets.
Telstra wanted to avoid being left with a largely "stranded asset", a network that would be superseded by a better, faster state-owned one, and achieve some return for shareholders.
The deal between Telstra and NBN Co still needs to be approved by the phone company's shareholders, but it is not expected to face major investor opposition.
What are the political risks of the deal?
The network was a centrepiece of Prime Minister Julia Gillard's election campaign last year which resulted in a dead-heat vote and eventual minority government.
Since then Ms Gillard has struggled to implement her agenda and has suffered in opinion polls, which put support for her leadership at record lows and indicate that her Labor party would be wiped out if she were to call an election now.
But progress on the network could give her government a badly needed policy achievement and enable her to move onto her next major reform - a carbon-reduction plan.
The opposition has opposed the network as a giant waste of taxpayer money, and has promised to review the project if and when it comes to power. Depending on the outcome of such a review, parts of the rollout could be abandoned.
What impact will the NBN have on Telstra and its rivals?
Telstra has been spending heavily to arrest a decline in its market share and sacrificing short-term earnings to transform itself from a network-driven company to retail-driven one.
Many analysts believe Telstra will retain its position of market dominance, even after handing over its fixed-line network to NBN Co, and that the cash from that deal will enable it to expand into new areas such as Internet-based businesses and in new markets such as Asia, where it already has investments.
Telstra's opponents say the broadband network would encourage a level playing field, leaving phone companies to compete on pricing and product quality. Telstra's smaller rivals believe the company will in the short term be distracted by the task of separating the network out of the company.
What happens now?
The deal still requires the approval of Telstra shareholders, expected on October 18, while laws clarifying the structure of the network have yet to be passed by the Senate.
NBN Co has in any case forged ahead with its plans, rolling out fibre-optic cable in of Tasmania and, in May, starting to do the same on the mainland.
The process will be a long and is fraught with execution risk as millions of homes and businesses are migrated to the new network. How successfully the transition is handled, and how much market share Telstra retains, will be among the closely watched factors as the network is developed.
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