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OPEL loses AU$1bn contract, Telstra reins in lawyers

The national carrier has said the federal government's decision to cancel the Optus-Elders (OPEL) consortium's rural WiMax network contract was a matter of "common sense", after Communications Minister Stephen Conroy gave indications as late as yesterday that he was still considering the proposal.
Written by Marcus Browne, Contributor and  AAP , Contributor

The government says it pulled the plug on OPEL's AU$1 billion contract to build a national wireless network because it would only cover 72 percent of rural Australia instead of the agreed figure of 90 percent, a decision that has pleased Telstra.

Broadband and Communications Minister Stephen Conroy officially cancelled the contract today, which was initially signed off by the Howard government and due to be built by OPEL — a joint venture project by Optus and Elders.

Senator Conroy said his department had determined the network would cover only 72 percent of "identified under-served premises" and so failed to meet the terms of the contract.

"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," Senator Conroy said in a statement.

However, just a day before making the announcement, a spokesperson for Communications Minister, Senator Stephen Conroy said the government was "still considering the plan" but hinted it was looking for flaws in the agreement.

"The government has always said it would honour the contracts it inherited from the previous government, and the OPEL implementation plan is being considered as to whether or not it meets the commitments of that contract," the spokesperson said yesterday.

Conroy's spokesperson added that regardless of the outcome, the federal government was still committed to providing high-speed broadband access to rural and regional Australia through its national FTTN network. In the meantime, it had contributed an extra AU$95 million in funding to the Australian Broadband Guarantee to ensure that services remain adequate.

Opposition Communications spokesperson, Bruce Billson said today in a statement that rural Australia will suffer because of the decision.

"Labor has proposed a vague, city-centric fibre broadband network, with no detail or explanation on how this network will deliver high-speed services to remote Australia ... This scandalous redirection of public funding away from areas of service disadvantage demands a full and frank explanation from Stephen Conroy," said Billson.

Conroy's decision has also removed the threat of potentially costly legal action that was being pursued by Telstra, which had kicked off proceedings after claiming OPEL has secretly been offered an extra AU$358 million on top of the original contract offer of AU$600 million.

Telstra, which welcomed Conroy's decision, denied having a closer working relationship with the present government compared to the Howard coalition.

"Telstra's got a good working relationship with the government and we're working on a number of fronts, just like we attempted to do with the previous government," Telstra country wide group managing director Geoff Booth told reporters today.

Booth said the OPEL plan would have failed to increase broadband availability across the country and he had doubts about the technology being used.

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