Telstra Kicked Out of $15bn Broadband Project

An anonymous reader writes "Australia's largest telco and ISP, Telstra, has been kicked out of the bidding process to build a national broadband network (NBN) estimated to be worth $15 billion. The Aussie government had earlier given assurances that the proposal would be considered, however it now won't even be evaluated by the expert panel, which will make the recommendations to the Senator for Broadband and Communications. The government may now take steps to legislate so that Telstra can't build a network that competes with the NBN — leaving the incumbent to focus on wireless HSPA+ technology instead."

non compliant

They submit a non-compliant bid, really what did they expect.

Bid Rejected - http://www.australianit.news.com.au/story/0,24897,24800767-15306,00.html [news.com.au]
Govt hits back at Telstra - http://www.australianit.news.com.au/story/0,24897,24802044-15306,00.html [news.com.au]

Of particular interest is this snippet form the above stories:
"The independent expert panel charged with assessing the bids obtained five separate pieces of legal advice which said it could not consider Telstra's bid.

That advice was from internal government lawyers; the Australian Government Solicitor; respected private law firm Corrs Chambers Westgarth; senior counsel appointed by Corrs; and finally, the Solicitor-General, the Government's top legal advisor."

There were four conditions that RFP documents had to meet:
* The document must be written in English.
* The measurements used within must meet Australian standards.
* The proposal must be signed.
* The document must include a plan for how SMEs will be involved.

Telstra didn't submit anything for point 4. Now for a multi billion dollar proposal, you should at least submit a compliant bid. Instead they submitted a document with their own terms and promised "more information" if the Govt agreed to THEIR terms.

Re:non compliant

Mod parent up. This is all part of Telstra's brinkmanship with the government here. They tried the same thing with ADSL2, where they wanted permission to exclude/charge higher prices to competitors (despite having a monopoly on the 'last mile', so delayed making ADSL2 available to the public. In the end, the main competitors got together and put their own ADSL2 DSLAMS in place, so Telstra were forced to start allowing users onto their ADSL2 network after all.

In this case Telstra claim no one else can do it other than them, so have refused to put a proper bid in in the hope they can get more out of the government.

Telstra tried to pull a Microsoft

They're afraid of being broken up (because they're a monopoly) so they tried to put conditions on their bid. The government slapped 'em back into their place. Now they're crying about it.

Re:Nope. Telstra was anti-censorship.

FFS, get back to work Sol...

Re:Nope. Telstra was anti-censorship.

Dear Mr. Rudd,

Could I have 4.7bn AUD please? kthxbye.

All or nothing bet

Sol gambled and the shareholders lost. A triumph of greed over common sense. Has his reality distortion field finally shattered?

The current Telstra management seemed to have brought a lot of anti-regulation baggage with them from the US. They seemed unable or unwilling to adapt their management style to the realities of operating in Australia.

A lower return to shareholders would still have been a return but they had to be greedy. Now they might be a footnote in the countries broadband history.

Re:All or nothing bet

"Trujillo's final dramatic quote to the analysts was "Nothing Stops Telstra"." (Business Spectator [businessspectator.com.au])

The man reeks of arrogance. Nothing good can come of letting the incumbant monopoly. I hope that Australia ends up with the network it really needs, rather than the one that Telstra has given them.

As usual headline is totally wrong.

No where does it say they are making laws to keep telstra out. they did however reject telstra's non compliant bid, and i didn't suprise me in the slightest they are sick of Trujillo's bullshit. he keeps trying to claim telstra are the only company that can build a national network. seriously who does he think he is fooling. there is a dozen companies in oz that could build a better network than telstra. this along with constant hollow threats of not building the new network, when no one wants them to be involved to begin with are enough to make anyone sick to death of them.

IMHO Trujillo needs to get it through his thick head that 15 billion in tax payers money is going to come with strings attached, like it or not.

Re:Senator Conroy's handiwork

Plenty of other ISP's have refused to participate. ISP's who have like iiNet have publically bagged the entire process.

I think you are really reaching if you think the two are related.

Re:Senator Conroy's handiwork

No. Sol has been playing politics on this broadband plan from the start. The trick to win the bid without putting in a proper bid would let him set his own terms.

Re:Senator Conroy's handiwork

... Sol has been playing politics on this broadband plan from the start. The trick to win the bid without putting in a proper bid would let him set his own terms.

Aye.

Sol, we've given you every break. We've bent over backwards to give you a chance. What we don't want to do at this point is grab our ankles.

The esteemed Mr. Trujillo is of the "everything's negotiable when you're this big" school. I think, personally, that he has mis-read the Australian psyche.

Re:Senator Conroy's handiwork

Or rather:

3) Telstra submitted a non-conforming tender and the Government had no choice but to reject it.

Being a Government employee myself, when it comes to tendering you have to apply the same rules to everyone. If the Government had accepted Telstra's tender, even though it did not comply with the requirements in the RFT (and this was well publicised [news.com.au], they would have left themselves open for all sorts of problems, e.g. being sued by other applicants.

Optus was right to say that Telstra's submission was a joke: a 12 page letter to the Minister in lieu of a serious tender for a $4.7bn project is brinkmanship of the worst sort and the Government was right to call their bluff.

Re:Senator Conroy's handiwork

I'll quote this from ABC earlier on as it shows a different tack:

Prime Minister Kevin Rudd says the decision to exclude Telstra from bidding to build the national broadband network was made at arm's length from the Federal Government.
Telstra submitted a brief proposal instead of a full bid because it was not satisfied there was enough detail from the Government on regulatory requirements.
Telstra says it has been excluded because it did not say how it would include small and medium businesses in the network's construction.
The telco has accused the Government of using a peripheral issue to block it from winning the tender.

But Mr Rudd has said the decision was made by an independent panel assessing all of the bids and the project is still on track.

"We've regarded this as a necessary investment in the nation's infrastructure and we would do so on the basis of a competitive tender process," he said.
"That panel that's been at work has been full at arm's length from Government and has reached its own conclusions.

*snip*

Still optimistic
However Telstra remains hopeful it still has a chance to build the national broadband network despite being excluded from formal consideration.
A media analyst from stockbroker BBY, Mark McDonnell, has told ABC Radio's The World Today the exclusion is a dramatic development for the telco.
"It potentially spells the end of Telstra's aspirations for re-eingineering its network to provide high-speed broadband," he said.
But in a briefing with analysts, Telstra chief executive Sol Trujillo has argued it is not the end of the road for the company.
He says the Government may decide to reengage with Telstra if the other three national bids are inadequate.
Mr McDonnell says there could be more to the Government's decision than has been publicly disclosed.
"The question then is whether this is really part of some sort of gaming process, trying to soften up Telstra with a plan to ultimately reengage with them," he said.
"That is probably the most optimistic view you could take from a Telstra perspective on this, or in fact whether there is some other agenda."
Telstra shares have fallen more than 7 per cent in an overall strong day for the market.

This was earlier on and has fallen out of the RSS feeds.
http://www.abc.net.au/news/stories/2008/12/15/2446644.htm [abc.net.au]

Re:Senator Conroy's handiwork

I loathe Conroy, and everything national internet filtering involves, but in this case, it's more than just a technicality.

Whereas all the other major contenders submitted official proposals in the tender process, Telstra instead submitted an "informal" proposal that lacked significant details that the other official proposals had, not to mention vague estimations on things as minor as "network coverage". Further, many of these estimations fell far short of the government requirements in the first place. Add in the fact that Telstra wanted their flawed and half-baked proposal to be considered with the same standing as the detailed official tenders their rivals had submitted, and you being to realise that Telstra is just a joke.

Today it emerged that they didn't submit details on how they intended to liase with and include small business in the construction and development process; which is oh-so-fitting keeping in mind this is a giant telecom monopoly.

These articles better explain how absurd Telstra's position and conduct regarding the tender process has been to date. I challenge you to read them and not agree that they should have been kicked out of the evaluation process. Frankly, I'd have kicked them out some time ago.

Telstra bends the rules on internet bid [smh.com.au]

Telstra excluded from broadband network tender [abc.net.au]

Re:Senator Conroy's handiwork

"Senator Conroy's handiwork?" - I wish politics was that simple...

1) Conroy rarely comments on the filter because he does not support it. The only reason a filter is being "trialed" is to placate senator Fielding from the "Family First" party who under certain circumstances can hold the balance of power in the senate. (ie: the govt of the day is buying his vote by spending ~$100K on his pet project). It's political theater that most people expect to see die in the senate (including Telstra, who called it a 'pipedream'). One of the IPS's who is taking part in the trial is iiNet who's CEO wanted to take part in order to "prove it was unworkable".

2) The NBN has been in the works longer than Conroy has been in his position. When Telstra leaned it was not going to be handed the contract on a silver platter they very publicly refused to play by the rules of the tender. Personally I applaud both our current and previous governments for refusing to bend over for a large corporation.

How does a religious nutter like fielding get elected in the first place? - Culled from wikipedia: "In Victoria, Family First, the Christian Democrats and the DLP allocated their senate preferences to Labor, in order to help ensure the re-election of the number three Labor Senate candidate, Jacinta Collins, a Catholic who has conservative views on some social issues such as abortion. In exchange, Labor gave its Senate preferences in Victoria to Family First ahead of the Greens, expecting Family First to be eliminated before these preferences were distributed. In the event, however, Labor and Democrat preferences helped Family First's Steve Fielding beat the Green's David Risstrom to win the last Victorian Senate seat and become Family First's first Federal parliamentarian."

In otherwords Fielding was a pawn that nobody expected to win, let alone hold the balance of power! Now that he does, both sides of the house come knocking on his door in an attempt to sway his vote.

Re:Senator Conroy's handiwork

"The policy for the mandatory clean feed was written and put in place after he was given the portfolio."

That was my point, combined with fact that the NBN was "in the works" under Howard it debunks the OP's "coincidence" idea.

"What evidence do you have to support your claim?"

Conroy maybe the altar boy but Fielding is the rabid preacher who has got labor by the short and curlys (Hanson did pretty much the same thing to the liberals). The greens and the liberals have both stated they will not support a mandatory filter and they intend to block it in the senate - so it's not going anywhere fast. - That, the balance of power thing and the preference deals are all public knowledge but are certainly not proof positive.

Perhaps I've watched to much "Yes Minister" but the test of my armchair theory will be if Fielding consistently votes with Labor on the big ticket items that are opposed by the liberals but supported by the greens. I don't hear Conroy personally supporting a mandatory filter (especially recently), what I hear is another Peter Garrett, ie: someone going through the motions of demonstrating party loyalty. Here is a random article [news.com.au] from a quick "fielding filter" search on google, try and find where Conroy personally supports it, go to the end and read what Fielding said.

"He's a headkicker - a politician who is in it for the politics"

I agree wholeheartedly but you have to get close to someone to kick them in the head, why else would he be forging ahead with what he knows will not pass the senate other than to kick someone's head? - Have any Machevellian theories as to who that someone is?

Re:What about competition?

You say eliminating the biggest provider will reduce competition? Eliminating a virtual monopoly is bad for competition? Wow.

I think it's a bit silly not even reviewing their proposal, but that's ridiculous.

Re:What about competition?

Their proposal was 12 pages long, compared to serious proposals of hundreds of pages. Telstra were threatening not to bid at all, unless the government gave them some guarantees that no matter who won, they would be involved in the projects.

Telstra were pushing themselves, and the government called their bluff. They have been punished in the markets, dropping 12%, and they should be punished by the government as well.

Re:What about competition?

Telstra was simply overdoing it. In the US you can ask for 700 billion with only 3 pages [wikipedia.org].

Re:What about competition?

They wanted to prove that they were not bound by the same rules as everyone else by not putting in a bid but expecting to be chosen anyway. If that had happened they would get to dictate their own terms. No government with even half of a clue would let this happen. The previous government dealt with it by pretending that it was not their problem even when they owned all and then most of Telstra. The current government still owns a lot of it (future fund) but their is some weird arrangement where they are not allowed to vote as if they are a shareholder left over from the previous government.

For those outside Australia Telstra can best be summed up as a combination of some of the worst aspects of the government organisation which it was and the worst aspects of a private telecommunications monopoly that it has become. Add to that a fully imported management team of executative with spectacular failures behind them of the sort that think slavery is a good idea and experise in anything is for the peasants. One was infamous for repeatedly refering to the remaining Australian management and the Australian staff as "savages".

If it wasn't close to a monopoly it would have gone the way of Enron long ago due to being run the same way.

Re:What about competition?

I beg to differ.

Consider that the competitor may (yeah, I know, work with me) be able to provide a tender for a FTTH solution, as opposed to the rather short-sighted FTTN solutions bandied about. (Axia has been talking about [news.com.au] FTTH for their bid.)

Suddenly there's no issue with Telstra - the whole legacy copper network is leapfrogged. Competition on pricing and/or quotas rages. Australia is future-proofed and Telstra has to come up with another (distinguishable) technology to stay in the game.

I realise this is not an overnight solution, but we should all be thinking further than ten years into the future. I am very hopeful that FTTH becomes a reality with the new Australian NBN, and now that Telstra is out, it's just that little bit more likely...

Re:No Competition?

Govt hits back at Telstra - http://www.australianit.news.com.au/story/0,24897,24802044-15306,00.html [news.com.au]

Of particular interest is this snippet form the above story:
"The independent expert panel charged with assessing the bids obtained five separate pieces of legal advice which said it could not consider Telstra's bid.

That advice was from internal government lawyers; the Australian Government Solicitor; respected private law firm Corrs Chambers Westgarth; senior counsel appointed by Corrs; and finally, the Solicitor-General, the Government's top legal advisor."

Long story short- Telstra screwed themselves becuase they submit a non-compliant bid. They CAN'T accept the bid because if they do, the other parties that did submit compliant bids could possibly sue them.

Re:No Competition?

They submitted a 13 page 'proposal' at the last minute while (apparently) even the smallest of the bids were throughly detailed.

I bet when each bidder had to front the 'expert panel' on the weekend the panel decided not to waste their time entertaining a 'proposal'. Being a 13-page 'proposal' the lawyers would've had no trouble finding missing bits.

Besides, the process is pretty lame. The goal was to build the exact same proposal that Telstra came out with in 2005 - $4billion AUD for FTTN(which will be obsolete in 10 years anyway), and only do FTTH in brand new developments.

Its been pointed out [mac.com] by the head of another ISP (Internode, who I use) that Telstra could simply build a FiOS-style FTTH network and keep it to themselves, with no strings attached while the older PSTN remains. Keep in mind that Telstra's entire goal throughout this process has been to decimate the competitive environment that exists. There are ADSL2+ plans which offer 100x more value than the proposed wholesale FTTN port price!

Re:No Competition?

They submitted a 13 page 'proposal' at the last minute while (apparently) even the smallest of the bids were throughly detailed.

Having been in The Machine before (what Australian contractor hasn't been that hungry at least once?) I suspect they simply couldn't get it together to make the bid. Sol decimated the Telstra bureaucracy. This is both good and bad; the latter because they have utterly no clue how to communicate internally any more. No way is that executive team going to do any bid work to that level any more, they just don't have it in them. Big isn't necessarily muscular. That dog is too old to go hunting.

Re:

If I may interject here for a second - your Stralyin is lacking in authenticity...

That last phrase should have been should have been: GARNGIT FARKED!