Stupidity reigns with broadband ban on TelstraFont Size:...

Stupidity reigns with broadband ban on TelstraFont Size: Decrease Increase Print Page: Print Bryan Frith | December 16, 2008
Article from: The Australian
THE omission of Telstra from the short list to build the national broadband network (NBN)) is a triumph of stupidity.

Telstra is the logical and natural builder of the fibre-to-the-node NBN. It already has the existing fixed-line copper network which connects to houses, as well as the workforce and technical capability and, importantly, it has deep pockets -- in fact it had already earmarked $5 billion, the only one of the contenders to have submitted a proposal with a real financial commitment -- which should have been a big plus given the difficulty in finding banks prepared to fund projects in the current global economic and financial crisis.

Telstra says the Government has decided to "exclude" it from the RFP (request for proposals) process. The Government says it had no option and that it had to leave Telstra out of the process because Telstra's proposal did not comply with the legal requirements. That leaves three others in the running, SingTel's local offshoot Optus, Canadian telco Axia Netmedia and the Melbourne-based Acacia consortium, which includes billionaire Solomon Lew.

Analysts and observers are still speculating that, somehow or other, Telstra will be brought back into the process, perhaps on the reasoning that it's unthinkable that it can be kept out.

But both sides are now pointing the finger at each other and making intemperate statements, which could entrench their positions and make any rapprochement more difficult to achieve.

It's difficult to say just how this affair will pan out, and whether the Government may yet engage with Telstra, as Telstra and the Government are giving out mixed messages.

Telstra's head honcho Sol Trujillo seemed to be suggesting there was a possibility that Telstra may be able to get back into the action. Noting that it was "a very long process", he said that RFP process leads only to the Minister getting a recommendation. "It is open to the Government to re-engage with Telstra if and when it wishes," he added.

But the Communications Minster Stephen Conroy countered that Telstra was deluding itself if it reckoned the Government may reconsider its exclusion.

He said Telstra's board would have to explain why it had decided to sideline itself from a process that would shape Australia's communications sector for the next decade.

But he then confused matters by declining to comment on what role Telstra could have in building the network after the RFP process is completed. "Telstra is excluded from the RFP process and we will be awaiting now the outcome of the expert panel and we are not going to pre-empt or comment on the potential outcomes," he said.

But while it's through a glass darkly, it's more likely than not that this latest development will set back the timetable for the completion of an NBN network, particularly if, as seems likely, Telstra will seek every opportunity to launch legal challenges, particularly if there is any attempt to access its existing network.

Trujillo warned yesterday that Telstra reserved its rights regarding future action. "It's too early to rule anything in or out," he stated.

Telstra claims it has been excluded on a triviality -- that its proposal neglected to include a plan as to how to involve small and medium enterprises (SMEs) in the building of the NBN.

Telstra chairman Don McGauchie claimed the Government "could hardly have dreamed up a more trivial reason to exclude Telstra from the NBN. This is a process that seemingly excludes bidders on such trivial and legally questionable technicalities but it doesn't take any action on material issues such as financing and having the technical capability to build the network".

It remains to be seen whether the other contenders do have the capacity to arrange the funding in the current financial climate, even with the benefit of the $4.7 billion which the Government proposed to kick in.

The proposals were lodged on November 26. Trujillo says Telstra did submit an SME plan in early December -- that is after the deadline -- and thinks the Government was wrong in the way it reached its conclusion.

But Telstra really only has itself to blame. The RFP process reportedly had four non-negotiable requirements -- that it be in English, that the measurements used conform to Australian standards, that the proposal be signed by the provider and that it include a plan about how to involve SMEs.

Quite simply Telstra didn't do so and for that it must take responsibility. From the outset there has been doubt as to whether Telstra submitted a complying proposal. Telstra had been threatening not to participate unless the Government caved in to its demands, including commercial terms set by Telstra for access by other telcos, 100 per cent ownership (Telstra wanted the $4.7 billion as a loan) and a guarantee from the Government that the Government would not use the NBN project to force structural separation on Telstra.

But this was an issue that was created by Telstra. The Government has never suggested that structural separation would be the outcome of the NBN, but it was never going to give Telstra the guarantee that it demanded.

Under Trujillo, Telstra has had an acrimonious and confrontationist approach to government -- firstly with the former Howard government and now the Rudd Government. It has consistently failed to understand that playing the schoolyard bully is counterproductive.

Telstra claims that it acts in the interests of shareholders and that that is the case with the latest fiasco, its self-imposed "exclusion" from the RFP process.

Investors gave their judgment yesterday, slashing Telstra's share price by a thumping 48c, or 11.6 per cent, to $3.65.

It must be wondered whether some of the larger shareholders consider its time to try to pressure the board into dumping Trujillo, and perhaps to seek board changes, including the departure of McGauchie