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'Flawed' decision killed AU$1bn OPEL deal: Optus

Optus believes that Communications Minister Stephen Conroy's decision to scrap plans for an AU$1 billion WiMax network, set to be built by Optus-Elders (OPEL), was "flawed" and the telco has left the door open for legal action.
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Written by Marcus Browne on

Optus believes that Communications Minister Stephen Conroy's decision to scrap plans for an AU$1 billion WiMax network, set to be built by Optus-Elders (OPEL), was "flawed" and the telco has left the door open for legal action.

Optus chief executive Paul O'Sullivan hit out at the federal government in response to its cancellation of OPEL's contract to build the network, claiming the project was scrapped under flawed pretences.

Optus CEO Paul O'Sullivan

"In our view, the Department of Broadband, Communications and the Digital Economy has made a flawed recommendation to the Minister," said O'Sullivan in a statement. He also accused the Department of presenting Senator Conroy with figures that under represented the number of households who would have benefited from the network.

"Optus has made an offer to the Government which I repeat publicly today: we are quite happy to have a respected independent expert audit OPEL's coverage database and the Department's coverage database," he said.

The Optus CEO said OPEL and its shareholders spent millions of dollars preparing to build the network after assurances from the then incumbent Labor government that it would honour the contract.

"Optus is considering all of its options, in consultation with its fellow OPEL shareholder Elders," said O'Sullivan.

Senator Conroy said this "was the final failed broadband plan produced by the former Coalition Government.

"The Rudd Government has committed up to AU$4.7 billion to build a high-speed, open access, fibre based National Broadband Network. The new network will deliver minimum speeds 12Mbps to 98 percent of Australian homes and businesses," he said.

According to the Minister, the remaining two percent will continue to receive support through the government's AU$95 million investment in the Australian Broadband Guarantee.

Robert Neely, technology and regulatory lawyer and partner at Henry Davis York, told ZDNet.com.au that the possibility of OPEL taking legal action against the government was real enough, but a number of factors may keep the dispute out of court.

"If the Minister was wrong somehow in his decision then they [OPEL] would presumably have a right to claim for their costs," he said, but noted that it was unlikely the consortium would seek any more in compensation given that the network was to be funded with a federal government grant, which differs from a standard commercial contract.

He also said the consortium may be able to pursue Commonwealth intervention to ensure that the decision was not made on misleading information. However, Neely pointed out that Optus would have to consider what's in its best commercial interest ahead of the government's national FTTN network rollout, before going ahead with any legal action.

"I can't imagine Optus would want to deal itself out of that completely," added Neely.

Optus's CEO O'Sullivan seemed to agree: "The implications of this decision for confidence in future competitive selection processes conducted by this Government will need careful consideration."

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