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Australia cancels plans for speedy Internet network

The Australian government said yesterday it has cancelled a multimillion dollar deal with telco Optus and rural finance business Elders to build a broadband Internet network across the vast nation.

Broadband and Communications Minister Stephen Conroy said the government had scrapped the A$958 million (US$871 million) funding agreement because the Optus/Elders joint venture body OPEL failed to provide the required coverage.

Former Australian prime minister John Howard had announced the deal last year, saying OPEL would supply fast and affordable wireless broadband to hundreds of thousands of Australians living in remote areas.

But Conroy, a minister in the newly elected Labor government of Prime Minister Kevin Rudd, said the proposed network would only reach 72 percent of those premises now "under-serviced" by telco companies, instead of the 90 percent required.

"On the basis of [the department's] assessment, the government determined that OPEL's implementation plan did not satisfy the condition precedent of the funding agreement, and as a result the contract has been terminated," Conroy said in a statement.

Optus, the Australian off-shoot of Singapore telco Singtel, and Elders' parent company Futuris dispute the government's assertion.

"The OPEL network is capable of meeting the objectives of the Broadband Connect Infrastructure Program and delivering improved broadband services to 889,322 underserved premises in rural and regional Australia within two years and at metro-comparable prices," Futuris said in a statement.

Optus chief executive Paul O'Sullivan said the government has used imperfect data for its assessment and called for an audit by an independent expert.

"We call on the government to take up this offer ... and reconsider its decision," O'Sullivan said in a statement.

Conroy told reporters there would not be an external review and that the maximum compensation payable under the contract was A$2.5 million, but declined to comment on the prospect of legal action from OPEL.

Optus' main rival, Australia's largest telco company Telstra, welcomed the news as a "commonsense decision."

"The previous government's decision was made as a result of poor process and delivered little for regional Australia," Telstra's national group managing director Geoff Booth said in a statement.

The Howard government had planned for the OPEL network to deliver affordable broadband access to 99 percent of Australia's population of 21 million by next year.

Labor has vowed to supply 98 percent of homes with high-speed Internet services within the next five years and is hoping to attract proposals from a number of companies, including Telstra and SingTel, for the FTTN network.

"The new network will deliver minimum speeds of 12Mbps to 98 percent of Australian homes and businesses," Conroy said.
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