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Optus responds to Government's termination of OPEL contract
02 Apr 2008

The Government yesterday advised Optus that it had terminated its contract with OPEL Networks Pty Limited (OPEL), a 50 per cent subsidiary of Optus, claiming a failure to meet coverage requirements.

Optus Chief Executive Paul O'Sullivan said the decision, which OPEL believes is based on flawed data, was bad news for rural and regional Australia and for competition in the telecommunications industry.

"Under the previous Government, the Department of Communications recommended OPEL as the winning bidder under the Broadband Connect competitive selection program - a recommendation it made after it assessed OPEL's bid as serving 526,474 underserved premises.

"OPEL lodged an Implementation Plan in early January this year which showed that it would meet the coverage requirements in the contract.

"Our Implementation Plan showed, based on detailed field testing, that the OPEL network would have delivered broadband coverage to almost 900,000 underserved households in rural and remote Australia - 70 per cent more than the Department had assessed.

"In our view, the Department of Broadband, Communications and the Digital Economy has now made a flawed recommendation to the Minister - reflecting serious errors in its database of 'underserved premises' which led it to underestimate the number of underserved premises which would benefit.

"We believe the Department's process was flawed: information was not provided to OPEL in accordance with its contract, and there was little dialogue with OPEL after it lodged the Implementation Plan in early January.

"The Government's decision to accept the Department's advice means that around 900,000 households, which were to have been offered a competitive choice of high bandwidth broadband services from the OPEL roll out, will now be denied that.

"Optus has made an offer to the Government which I repeat publicly today: we are quite happy to have a respected independent expert audit OPEL's coverage database and the Department's coverage database.

"We believe this would confirm that our claimed coverage accurately reflects the definitions in the Department's Guidelines issued in September 2006, and delivers within the agreed 90 per cent tolerance levels upon the coverage we committed to provide in our winning bid.

"We call on the Government to take up this offer of independent expert advice and reconsider its decision.

"As things stand, the 15,000 kilometres of new backbone optical fibre, which would have been available to other operators at wholesale prices 30 per cent lower than existing levels, will also now not be delivered.

"The OPEL access network, which was to be wholesaled to other telcos and internet service providers, will now not be built.

"The incumbent monopolist, which has protested violently at the prospect of facing significant additional competition in rural Australia, has been generously protected by this decision.

"The implications of this decision for confidence in future competitive selection processes conducted by this Government will need careful consideration," Mr O'Sullivan said.

Acting in reliance on the assurance from the incoming Government that it would honour the OPEL contract, OPEL and its shareholders have spent millions of dollars in preparing to provide services.

"Three successive written requests from OPEL to meet with the Departmental Secretary were ignored.

"OPEL stands ready to deliver the contract and deliver new broadband services.

"Optus is considering all of its options, in consultation with its fellow OPEL shareholder Elders.

"In the meantime, Optus will get on with delivering competition and choice to millions of Australians every day," Mr O'Sullivan said.

Media contact:
Melissa Favero
Optus Corporate Affairs
Tel: (02) 8082 7850