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Conroy defends Telstra's NBN bid

Panel to fight hard-nosed commercial negotiators.

The federal government has defended its acceptance of Telstra's "non-compliant" National Broadband (NBN) proposal and said its expert panel will thrash out the details with the telco.

Telstra outraged many within the telecommunications industry this week after submitting a watery 12 page bid to address the government's strict 18-point criteria for the design and operation of Australia's largest telecommunications network.

Telstra would deploy fibre to the node to 90 percent of Australia, 8 percent short of the government's coverage requirements which it had staunchly enforced.

Communications Minister Stephen Conroy said the compliance of Telstra's bid will be assessed during the initial expert panel negotiations over the next eight weeks.

“Telstra have indicated that they believe that it's a proposal that can be considered... and the expert panel will now test it against the 18 objectives,” Conroy said.

“[Telstra is] absolutely not [calling the shots], let's be clear. Telstra have been demanding concessions, as have others... we're not going to be pushed around on this, we're not going to deviate from what we've set down,” he said.

“Is it any surprise that any of the bidders might say, give us more government money, and we might be able to reach your objectives? These are hard-nosed, commercial negotiators, and this will be a tough, hard-nosed negotiation between the expert panel, and there's some very tough, hard-nosed commercial people on the expert panel.”

The government received six NBN bids, including national proposals from Telstra, Terria-Optus, Acacia and Axia NetMedia, and state bids from TransACT, and the Tasmanian government. Canadian-based company Axia NetMedia has an equal stake in Singapore's national fibre network which is owned by Optus parent company SingTel.

The members on the expert panel are John Wylie, Lazard Carnegie Wylie CEO; Tony Mitchell, Allphones Chairman; Laureate Professor Rod Tucker, University of Melbourne; Professor Emeritus of Communications, Reg Coutts, University of Adelaide; Tony Shaw, former Australian Communications Authority Chairman and Dr Ken Henry, Treasury Secretary.

Speaking on Telstra's $25 billion costing of the NBN in a previous article, spokesman Jeremy Mitchell said supply of fibre to regional areas would account for the final $15 to $25 billion portion.

“Our estimated price range depends on what you do in regional areas; our initial plan covering Australia's five largest cities cost $5 billion,” Mitchell said.

“The costs rise dramatically in the cities and that last $15 to $25 billion really determines what you can do in those areas.”

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A Fibre-to-the-Home (FttH) network model may still be possible according to Conroy's department. The Acacia group submitted a proposal to cover 100 percent of Australia with a wholesale network of fibre to the home and node, and wireless and satellite for remote communities.

An FttH network model suggested by telco veteran Stephen Davis could cover 85 percent of households with fibre, connecting half of all premises in Australia's top 30 cities, and bypassing the remaining 50 percent premises. He said the connections would satisfy immediate demand for fibre and allow others to link in later.

“There are huge backhaul costs in trying to bring fibre out to all the small regional towns with 50 to 100 people,” Davis said.

Telecommunications analyst Paul Budde said Telstra's rivals will have to collaborate to improve their bids.

There is a vested interest for the others to look for collaboration in order to grow their total position... that is not an issue for Telstra,” Budde said.

“Some of the ides coming from Axia Net Media and Acacia could well be included [in the NBN]. Different approaches could well be adopted by the government if the expert group sees it as beneficiary for the country.”

Budde said Acacia's open-access network model will gain traction as pressure increases on government to emulate open-access networks developing in other countries.

IBRS analyst Guy Cranswick said the economic crisis is the biggest problem facing NBN bidders.

“I don’t think 98 percent [coverage] is feasible for any period of time — even in the United Kingdom they still can't make 98 percent reach,” Cranswick said.

-Andrew Hendry contributed to this report