Telstra bids for NBN, but on its own terms

Robert Clark
18 Dec 2008

The Australian government's national broadband network (NBN) officially began last month, but not without more controversy from Telstra.

After months of attacks on the project, and after refusing to say whether it would take part, the incumbent submitted a bid just on the November 26 deadline.

But its offer to deploy a network to some 90% of Australia's population falls well short of the 98% target set down in the government RFP.

In return Telstra has sought a government guarantee that it will not be broken up, and assurances over commercial terms of the NBN project.

Telstra's was one of four responses received to the NBN tender, which aims to provide a minimum 12 Mbps to urban and regional households.

The NBN is one of the country's biggest ever infrastructure projects. The winning bid will be backed by A$4.7 billion ($3.06 billion) of taxpayer funds into the project.

As late as its annual general meeting five days before the deadline, Telstra CEO Sol Trujillo and chairman Donald McGauchie refused to say whether the carrier would take part in the tender.

They see the NGN as a stalking horse for Communications Minister Stephen Conroy to force a break-up of the carrier, which still dominates the Australian telecom sector.

In its 12-page bid, issued in a form of a letter to the minister, Telstra said it would spend A$5 billion of its own money and deploy the A$4.7 billion government funds in the form of a loan. Rival Optus said its network would reach 98% of premises and would separate its wholesale and retail arms.

Bids were also received from Acacia Australia, chaired by former Telstra deputy MD Doug Campbell, and Canadian firm Axis Media, which successfully bid with SingTel for the Singapore broadband contract.

'By lodging a short, non-compliant bid, Telstra has kept itself in the running for the government's funding, but at the same time has kept its options open,' said David Kennedy, research director at Ovum.

He said Telstra's offer was an invitation to the government to negotiate a deal.

'The real question is, what next‾' he said. 'It's hard to see the other bids being competitive against the strength of Telstra's financial and technical capabilities in the current economic climate.'

Minister Conroy said he welcomed the response to the RFP. 'The stage is now set for an extremely competitive assessment process.'

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