Telstra submits non-compliant NBN bid

update Telstra this morning submitted what appeared to be a non-compliant mini-bid to build the National Broadband Network, in what appeared to be a 'middle-ground' approach after receiving no certainty on whether a successful bid would force it to separate its operations.

Telstra chairman Donald McGauchie
(Credit: Telstra)

The full Telstra bid can be downloaded here (PDF). Telstra had been threatening not to bid because of the looming spectre of structural separation of the network's operator, where the network arm would be operated as a separate business to that of the retail and wholesale arms.

The government had been unable to provide clarity on whether the telco would be required to separate if it won. Telstra had held a last minute board meeting today to decide. A few minutes after 12 noon, the company published its bid documents, consisting of a mere 13 pages, compared to rival Terria's approximately 1,000.

"Unfortunately these issues [such as separation] have not yet been able to be addressed in a manner that would enable Telstra to submit its fully detailed bid under the RFP today," Telstra said.

Telstra was also concerned about other issues such as the use of its information and the contract terms issued by the Commonwealth.

The telco's bid documents included what appeared to be non-compliant components, such as building a network which would not reach 98 per cent of the population. Telstra said its current bid would reach 90 per cent.

"Telstra has spent very considerable time and effort attempting to find a way to reach coverage of 98 per cent of the population that is the target in the RFP. However, three factors have made that unreachable at this time," the bid said.

They were that the cost rose exponentially as the population coverage reached 98 percent and that current economic conditions had increased build costs and the cost of capital. The telco also mentioned the possibility of slower customer take-up rates in a sluggish economy.

However, the coverage could turn out to be even less, according to the bid, perhaps sinking as low as 80 per cent.

"The actual population coverage will depend on a range of factors relating to Commonwealth funding, forecast build costs at the time contractual commitments are made, take-up levels and the suite of regulatory settings," the bid said.

Telstra would commit $5 billion of its own cash to building the network, according to the document, with which it said it could even roll out to five of the capital cities without the government's $4.7 billion, in the case that the government required the money for something else in the current economic environment. However, to reach 80 to 90 per cent population coverage, it would need the government's money, preferably as a loan at favourable interest rates, Telstra said.

The details
In 65 to 75 per cent of the footprint, downlink speeds would be 25Mbps to 50Mbps, according to the company, with speeds of 12Mbps to 20Mbps for the rest of the footprint.

Entry-level access to the network would be at 1Mbps/256Kbps for retail users, the company said, with a 200MB download quota costing $29.95 with an "NBN telephone service" and $39.95 without one. Business users would have access to 1GB at speeds of 1Mbps/1Mbps for $65 with a phone service and $75 without one.

Telstra would try and reach as many people as quickly as possible with the roll-out, according to the company's bid, which would steer it towards starting in metropolitan areas.

"Because Australia is highly urbanised, the majority of those currently without fast broadband are located in the major cities, where homes and businesses located more than 1.5 km from their local telephone exchange cannot currently get fast fixed broadband using Telstra's existing telephony network," the documents said, saying that the roll-out priority shouldn't be based on geography for its own sake. The build could be "well underway next year" according to the bid.

The company confirmed that Alcatel-Lucent was its chosen vendor partner, to supply the equipment and know-how for the roll-out of the network.

Despite the shortness of the bid, Telstra reiterated its beliefs that it was the prime bidder, saying it had the right experience, the workforce and the wherewithal to finance the investment, especially since it claimed the work would only be an upgrade of the company's own network.

"Telstra believes the Government can consider its proposal under the existing terms of the RFP and should agreement be reached on outstanding concerns a possibility exists for more detailed dialogue."

The company did not seek any protection against competitive networks, according to the documents.