NBN controversy? We know nothing: Government

The Federal Government is trying to distance itself from a controversy attached to the company building the National Broadband Network (NBN).

NBN Co has suspended its tendering process, telling 14 companies vying for a contract that their proposals are too expensive.

The government business enterprise has blamed inflated charges for its decision to postpone a key stage of the NBN's second-stage rollout.

With the controversy threatening to become another political liability, Communications Minister, Stephen Conroy, has tried to distance himself from the matter.

"Procurement processes are commercial matters for NBN Co which occur at arm's length from government," Senator Conroy said.

"The government supports NBN Co striving to get the best deal from contractors."

Opposition communications spokesman, Malcolm Turnbull, has called on Senator Conroy to guarantee the $36 billion project would be completed on schedule and within budget.

"Does the admission that none of the major Australian construction groups in the tender were willing to do the work at NBN Co's target price indicate that the network's economics and business case are unrealistic and unachievable?" Mr Turnbull asked.

Talks are reportedly being held with a major Australian construction company.

The Communications Electrical and Plumbing Union, which represents NBN workers, fears its members will lose out from a new tendering process.

"Traditionally, when they want to cut prices, it's the labour prices they reduce," the union's NBN project co-ordinator Allen Hicks said.

"In a commercial market, the project administrators say, `Your tender's too high'.

"They normally revisit labour costs because prices of materials are normally fixed."

Mr Hicks said NBN Co should reveal what other project agreements it was comparing tenders against.

NBN Co's head of corporate services, Kevin Brown, said construction groups were charging too much.

"I wouldn't describe it as price-gouging but we're not satisfied we're getting fair value for money so we're going to go about this in a different way," Mr Brown told ABC Radio.

The Australian Constructors Association has criticised NBN Co for changing its procurement strategy so late in the process.

"The NBN Co has suggested that the bids it received did not represent value for money," the group's executive director, Jim Barrett, said.

"This criticism is surprising given that the bids received were the result of a vigorously competitive tender process involving 14 bidders."

The NBN business model involves supplying 93 per cent of Australian homes with optical-fibre cables by December 2020.

While the government insists fixed-line optical fibres are the way of the future, take-up for wireless internet jumped by 50 per cent in 2010, pushing access numbers to 4.2 million, official figures show.

The news from the Australian Bureau of Statistics comes only weeks after a government-commissioned report said competition from wireless technology could pose a threat to the NBN.

Wireless now comprises 40 per cent of Australia's internet service market and was the fastest-growing technology last year.

NBN Co is aiming to build a network with speeds of 100 megabits per second, which is five times faster than existing speeds.

But the latest data show broadband speeds of more than 24 megabits a second made up less than nine per cent of the market.

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