Conroy's OPEL decision gets thumbs down from Liberal's Billson

Previously, the Rudd Government had publicly committed to honouring the contract between the Commonwealth and OPEL consortium as long as it could provide coverage equivalent to 90 percent of under-served premises within its coverage area.

However, analysis performed by Conroy’s ministerial Department of Broadband, Communications and the Digital Economy (DBCDE), found the OPEL network would cover only 72 percent of identified under-served premises. The Government was also concerned that the OPEL network would create an overbuild with its own planned fibre-to-the-node broadband plan.

“On the basis of DBCDE’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.

However Senator Billson believes Labor’s alternative national broadband plan is little other than a “vague, city-centric fibre broadband network” which provides no detail or explanation on how it will deliver high-speed services to remote Australia.

“The OPEL network was to utilise a combination of technologies, including state-of-the-art WiMAX and fibre backhaul to deliver broadband services to about 900,000 households over 638,000 square kilometres,” he said.

Labor's planned fibre-to-the-node broadband network will result in the duplication of Internet services in and around Australia’s capital cities claimed Billson. He was more concerned that so far there had been no clear indication of how Labor’s broadband plan would deliver Internet services to the people of the bush.

“This lack of clarity and contempt for the people of rural, regional and remote Australia is all the more disturbing in light of the termination of the OPEL contract,” he said. “It comes at a time when Labor is moving to raid the $2 billion Communications Fund to help buy its way out if the ‘broadband muddle’; the fund established by the former government to address telecommunications needs of the bush in perpetuity,” Billson said.

In contrasting comments to Billson, Telstra country wide group managing director, Geoff Booth said it was a commonsense decision as the OPEL plan failed to meet the fundamental requirements of the funding and would have done nothing to increase the availability of broadband access in rural and remote Australia.

"The previous Government's decision was made as a result of poor process and delivered little for regional Australia,” he said. “It's now time to put this mess behind us and move on. Telstra, the Federal Government and the industry as a whole need to look forward and come up with a realistic and achievable holistic solution for getting broadband to all Australians with 21st century technology."As a result of the Federal Government's decision Telstra's legal proceedings to access documents relevant to the previous Government's decision on the Broadband Connect tender will now come to an end.

However IT and telecommunications analyst Nathan Burley from Ovum said OPEL could have hardly been more controversial with numerous lawsuits, political positioning, public discussion and attacks. Telstra, which had the most to lose, led the chorus, but it was far from alone. Many commentators deriding the funding award procedure, technical performance or coverage claims, government funded duplication of existing networks, competitive risks, poor use of taxpayers money, and lack of focus on real problem areas such as backhaul capacity.

“In our view, this announcement is very significant but not too surprising. We are more surprised that it took so long. The new minister for Broadband, Communications and the Digital Economy, Stephen Conroy, had attacked the funding, the award procedure, OPEL coverage claims and its chosen WiMAX technology when he was in Opposition. Instead, he advocated an FTTx network to 98 percent of Australia households,” said Burley. “This included $4.7billion in government funding and much duplication of the planned OPEL network. Since the change of government in November 2007, he has launched a $4.7 billion tender process for this network. Optus will be a bidder as part of the G9 consortium, in opposition to incumbent Telstra.”

Burley claimed the loss of the competitive backhaul capacity may be the largest blow, the termination will have the biggest ramifications on the WiMAX Industry. WiMAX has received considerable bad press recently in Australia, and this will not help.

“Optus had also stated that it was able to leverage OPEL funding for its HSPA rural network deployment, with use of backhaul, tower sharing and the like. This will no longer be the case, but it can now focus more attention on its HSPA 900MHz deployment,” he said. “However, it may need to rely on this network to deliver more services than previously planned. Additionally, sale of Austar spectrum to the OPEL consortium will not proceed.”

In addition, Optus can now focus on its bid for the Government’s FTTN tender. Along with its G9 consortium partners, Optus has much more at stake on the FTTN decision than it did in the Opel project. The upside for Optus is that it will now be able to deploy its technical and management resources on, frankly, the main game, said Burley.

According to Burley OPEL did have its supporters as well, and some potential access seekers will now need to pursue alternatives.

“If the companies involved are unable to recover money from the government, lawyers may also be winners of this announcement. Though they might disagree with the decision neither Optus nor Elders have yet stated they will challenge it,” said Burley.

The previous federal government had committed $958 million in public funds towards the project as part of a comprehensive plan to ensure that all Australians, regardless of where they live, have access to reliable and affordable high-speed broadband services.

OPEL partners Futuris and Optus have told the ASX that the Rudd Government cancelled the agreement because the plan did not satisfy contract conditions.
However, the joint venturers maintain "that all conditions precedent to the funding agreement have been satisfied".

Optus chief Paul O'Sullivan reportedly said at the telco's third-quarter earnings presentation in February that the $958 million in OPEL funding was expected to arrive by the end of March.