It’s hard to avoid the conclusion that the Government’s cancellation of the regional broadband contract with Optus and Elders it inherited from Helen Coonan was inevitable.

As late as last week, Broadband Minister Stephen Conroy was committing to honour the contract – but with the significant caveat that he would only do so if the OPEL implementation plan met the commitments specified by the previous Government. That caveat was always going to be the basis on which Labor abandoned the $958m deal.

The contract formed part of the Howard Government’s hurried response to Labor’s broadband proposal called “Australia Connected”. Rudd had caught the Government – on broadband as on many other things – on the hop with his own proposal to roll out broadband to 98% of Australians.

Howard and Coonan, stuck in a poisonous relationship with Telstra, belatedly realised that Rudd had turned broadband into a BBQ stopper, and in June announced a slate of measures, mostly aimed at the Government’s core rural and regional constituency. The regional/remote broadband network, for which Optus and Elders won the contract, was at the heart of it. The OPEL proposal was to rely on a mixture of fibre, ADSL2+ and WiMax.

Labor derided the package, but could hardly promote its image as economic conservatives by promising to axe a signed government contract, so Conroy committed to pay up if in government, although it at least in part duplicated Labor’s own multi-billion dollar fibre-to-the-node proposal.

Meanwhile, Telstra, having by then contracted what appeared to be a corporate form of rage virus, sued Coonan over its failure to win the contract.

However, the Opel approach almost immediately started drawing fire, particularly over the coverage of WiMax, which plenty of experts reckoned wouldn’t do anything like the job necessary to provide adequate coverage in rural areas. And as it turned out, coverage was the basis for the Government nixing the contract.

In a statement this afternoon, Conroy said that the OPEL implementation plan would have only produced 72% coverage of the required regional areas, rather than the 90% that was a contract pre-condition.

In reality, if it hadn’t been coverage, it would’ve been something else. Government procurement exercises with highly-technical requirements are difficult for companies to fully comply with, and implementation plans, which have to address the real world, make full compliance even more difficult. A Government unwilling to fork out nearly a billion dollars was always going to find a way.

The cancellation won’t harm the Government’s relationship with Telstra, either, although the latter has been bending over backwards to make nice since the election (repeatedly losing in court has probably also helped there). The tender process for the Government’s fibre-to-the-node proposal is proceeding, despite being recently delayed until later this year, and Telstra has already said it fancies its chances.

Whether the cancellation of the OPEL contract, ostensibly unrelated to that process, prompts Telstra to find ways to lessen its objections in such areas as access to its copper network, remains to be seen. But on previous form, if Telstra doesn’t get the nod to build the Government’s own broadband solution, there’ll be plenty more action in court.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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