Conroy pulls the plug on $1 billion OPEL broadband project

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Conroy pulls the plug on $1 billion OPEL broadband project

Communications Minister, Stephen Conroy, has pulled the plug on the OPEL consortium’s billion dollar regional broadband network after the Government found the group had failed to meet the original terms of its contract.

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 that 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 in a sign that potential litigation may be looming, SingTel and Futuris, the parent companies of Optus and Elders respectively, have disputed the government's claim, stating the OPEL consortium met all of its contractual agreements.

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

"The joint venturers, Optus and Elders, maintain that all conditions precedent to the funding agreement have been satisfied."

Singtel said it has already spent $9 million in capital on the project, while Futuris has spent approximately $15 million. Both companies plan on writing off the expenses for the March quarter if they fail to recover money from the Government.

Meanwhile, Telstra has welcomed the news, saying the Government’s decision to scrap the OPEL network was the correct one.

“It’s a billion dollar waste of tax payers' dollars that would have put the wrong technology in the wrong places,” said Telstra spokesperson Peter Taylor.

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, he said.

Cancelling the OPEL network has now cleared the way for the Rudd Government’s proposed $4.7 billion high-speed, open access, fibre based National Broadband Network which Conroy says will provide 98 percent of Australian homes with high-speed internet services in the next five years.

And although the Government is hoping to attract proposals for the FTTN network from a number of companies, including Telstra and Singtel, Telstra’s Taylor was non committal when responding to whether the cancellation of the OPEL network would strengthen Telstra’s bid.

“We have a goal in mind and plan to work towards it but it is a bit preemptive right now to discuss our plans,” Taylor said.

Tell us how you think Conroy's decision will affect Australia's telecommuncations industry by participating in our online poll
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