RURAL INTERNET BROADBAND SCHEME NIXED

UNCLAS CANBERRA 000375

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR

E.O. 12958: N/A
TAGS: ECPS ECON AS
SUBJECT: RURAL INTERNET BROADBAND SCHEME NIXED

REF: 07 CANBERRA 449


1. (SBU) Summary: The former Howard Government's rural
broadband scheme was jettisoned by Communications Minister
Conroy, who was critical of its technology and inadequate
coverage. The main reason for the decision is simple: it
duplicates in part the ALP national broadband initiative.
End summary.

SCRAPPING A POLITICAL DEAL
--------------


2. (SBU) On April 2, Communications Minister Stephen Conroy
announced the Government was scrapping the A$960 billion
rural broadband deal, announced by his predecessor Helen
Coonan last June. Conroy cited the failure by the Opel
consortium (Optus and Elders) to hit the mandated benchmark
of reaching 90% of underserved premises, saying that
Department of Broadband, Communications, and the Digital
Economy (DBCDE) analysis showed it would only reach 72% of
those premises.


3. (SBU) Industry insiders and analysts were not surprised
by the decision. The rural broadband deal was seen as a
hasty and primarily political response by the Howard
Government to the Australian Labor Party,s (ALP) massive
A$4.7 billion national broadband initiative, announced with
much fanfare (and to the surprise of the Coalition) in March

2007. Further, the grant of the contract to the Opel group
was seen by many as Coonan and the Howard Government getting
back at telecom giant Telstra, which had been involved in
vicious public battles with the Government over the direction
of telecom policy and regulation.

CONROY CRITICAL FROM BEGINNING
--------------


4. (SBU) Conroy, then the ALP,s shadow communications
minister, opposed the Opel plan from the beginning. He was
in particular skeptical about the plan to use WiMax wireless
technology, and was critical of both the award procedure and
the coverage claims Opel made at the time of the contract's
awarding. A representative of a telecom industry association
that does not include Optus, Elders, or Telstra in
conversation with econoff was "not disappointed or surprised"
by the decision. He agreed that the whole process as run by
Minister Coonan was non-transparent, and said that the
competition elements were inadequate, noting that Opel had
never come forward with wholesale arrangements.

REDUNDANT
--------------


5. (SBU) Comment: The media immediately dubbed Telstra (who
crowed over the decision publicly) the winner of this
decision, on the assumption that they are the likely winner
of the ALP broadband sweepstakes. But DBCDE insists they
want a competitive process with as many submissions as
possible, and that no winners have been selected. Minister
Conroy's concerns about the award process, coverage, and the
wisdom of using WiMax wireless technology were real,
according to DBCDE officials. And in a cost-cutting
budgetary atmosphere, the chance to slash A$960 from the
budget by nixing the former government's "me-too" broadband
plan was too good to pass up. However, the primary reason
for tossing the Opel scheme overboard is a quite simple one -
with the election of the Rudd Government and the planned
implementation of the ALP's national broadband plan, the Opel
rural broadband project had simply become redundant. End
comment.

MCCALLUM