Conroy pulls the plug

Optus and Elders are mad as hell after having their broadband building contract cancelled by the Communications Minister – but they'd be mad to sue.

Communications Minister Stephen Conroy has been sweating on Optus and Elders, a subsidiary of Futuris, to slip up in their OPEL regional broadband joint venture. Finally, they did (he says) so he has chopped them off.

In fact OPEL has been a sitting duck ever since the Coalition lost the election and Labor won.

The $958 million Broadband Connect subsidy they won from the former Communications Minister Helen Coonan was a political response to Labor’s $4.7 billion national broadband plan designed purely to get John Howard through the election campaign with something to say on the subject of broadband.

But the two plans directly conflicted. Conroy is offering $4.7 billion for someone to build a national fibre to the node (FTTN) or fibre to the home (FTTH) network covering 98 per cent of Australian homes and businesses; Optus and Futuris got nearly $1 billion to cover the regional parts of the country with a combination of fibre and wireless. If both went ahead, it would be an expensive, pointless, overbuild.

So it’s with some relief that Conroy finds he can now cancel the contract because the OPEL group has, he says, failed to meet the coverage promises.

Optus and Elders maintain, however, that all conditions have been satisfied, and the consortium was capable of "meeting the objectives of the Government’s Broadband Connect Infrastructure Program…”

Wrong government, unhappily. This Government has something called the National Broadband Network program, which is not same thing at all. Broadband Connect has been disconnected.

What Optus and Elders don’t say is that they will sue for breach of contract, since they have satisfied the conditions.

That might be a tad unwise with bids going in for the NBN $4.7 billion and, in any case, a general desire to be in the new minister’s good books. Optus is part of the G9 consortium which is bidding for the $4.7 billion, and the other eight wouldn’t appreciate one of their members serving a writ on the minister.

Elders, meanwhile, will get on with life, although according to the ASX announcement from Futuris this morning, a provision of $15 million will be made "in the absence of any recoveries from the Commonwealth". I’d say they’d be whistling for that.

The other company affected is Austar, which sold wireless spectrum to Optus earlier this year for $65 million, after OPEL realised that the unlicensed spectrum they’d been planning to use for their network wouldn’t work.

That deal’s now off and Austar is looking for a dance partner.

And although Conroy has been saying that the NBN must be 98 per cent fibre to the node (not wireless), it’s up to the operator how the signal gets from the nodes to the homes.

There are three options for that "last mile”: the existing Telstra copper; wireless spectrum such as Austar’s WiMAX; and fibre all the way.

If any bidder wants to use wireless, Austar is manning the phones waiting for your call.

Follow @AlanKohler on Twitter

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