Fed: Telstra, govt relations wallow at new lows

AAP General News (Australia)
12-15-2008
Fed: Telstra, govt relations wallow at new lows

By Karlis Salna

CANBERRA, Dec 15 AAP - Relations between Telstra and the federal government are wallowing
at new lows after the telco was dumped from the bidding process to build a national broadband
network (NBN).

Communications Minister Stephen Conroy confirmed Australia's largest telco had been
excluded from the process after it failed to include a plan about how to involve small
and medium enterprises in the project.

But Telstra has accused the government of shutting it out on the most trivial of grounds.

Senator Conroy on Monday insisted Telstra only had itself to blame for being shut out
of the race to build the network, expected to cost more than $10 billion, of which the
government will contribute $4.7 billion.

"Telstra's behaviour throughout this process clearly shows that the conflict and regulatory
manipulation within the Australian telecommunications sector has reached an intractable
point," he said.

He said there was nothing to stop Telstra from submitting a complete proposal and competing
vigorously with others vying for the project.

"Instead, the Telstra board failed to comply with the mandatory requirements of the
request for proposals," the senator said.

Other proponents, including Acacia, Axia, Optus Networks Investments, TransACT and
the Tasmanian government, had all met the requirements and conditions for participation.

Telstra chairman Donald McGauchie said the government had used a peripheral and "trivial"

issue to exclude Telstra.

"This is a process that seemingly excludes bidders on such trivial and legally questionable
technicalities but doesn't take any action on material issues such as financing and having
the technical capability to build the network," he said.

"What is even stranger is that the minister has ample powers to accept Telstra's SME
(small and medium enterprises) plan under the RFP (request for proposal) and have his
expert panel get on with a process that includes Telstra."

Senator Conroy said the only way that Telstra's SME plan could have been accepted was
to extend a deadline that all other contenders had met.

"This would have been manifestly unfair to other NBN proponents who did meet the mandatory
requirements of the RFP," he said.

"And, importantly, it presented an unacceptable level of risk, both legally and financially,
for the commonwealth."

The expert panel had received legal advice from various sources, including from the
solicitor general, that Telstra could not be considered for the project.

"Telstra's board will have to explain to its shareholders why it has decided to sideline
itself from a process that will shape the Australian communications sector for the next
decade."

Telstra's share price plunged on the news, finishing the day down almost 12 per cent,
wiping $6 billion off the company's market value.

However, industry analysts suggested Telstra was not yet out of the running for the project.

EL&C Baillieu director Richard Morrow said the idea that Telstra could be excluded
from rolling out the network "is an act of fantasy".

"They are the 800 pound gorilla in the sector and it is not going to happen without
them in some way, shape or form," Mr Morrow told The Australian.

Opposition Communications spokesman Nick Minchin said the government had made a shambles
of the broadband tender process from the start.

"This is just the latest instalment in an extraordinary saga of ineptitude, delay and
confusion in the government's management of a $4.7 billion project," Senator Minchin said.

"From the beginning this process has been based on the flimsiest of foundations.

"The tender documents are so vague and open to multiple interpretations, they are not
worth the paper they are written on."

The government-appointed expert panel is expected to name a preferred bidder in March.

AAP kms/tnf/cdh

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