Conroy's Conundrum

In the various analyses of the first year of the Rudd Labor government, a common observation was that it has been relatively free of accidents, cries and scandals, as compared with the first year of the Hawke and Howard governments. That may be about to change very quickly with the tendering process for the National Broadband Network.

TELSTRA has set a challenge for the Rudd Government, refusing to put in a detailed bid for the $10billion plus national broadband network unless it gets a range of guarantees, including that there be no further split of its operations.

But as the Government has refused to give any such guarantees ahead of tenders closing for the project yesterday, the telecommunications giant is effectively asking the Government to force tough regulations on it or give in to its demands.

A range of other bidders, led by Singtel Optus, have lodged bids for either national or state-based networks as part of a competitive process started in April. Optus said a new entity called Optus Networks Investments, backed by the Terria consortium of Telstra's rivals, had lodged a bid for the national network, alongside Acacia Australia and Axia NetMedia.

The Government has promised to commit $4.7billion -- its biggest single election commitment after tax cuts -- as a subsidy to get top-grade broadband services to regional and rural areas.

In a continuation of its anti-regulation stance, Telstra lodged a "non-compliant" bid in the form of a 12-page letter to Communications Minister Stephen Conroy, from its chairman Donald McGauchie. Optus Networks Investments' proposal is said to run close to 1000 pages.

"We need a clear statement on separation or we can't bid, it is an uneconomic proposition if we don't get that," Mr McGauchie told The Australian.

Several issues are set in play by Telstra's desultory response to the NBN tender process, and its demands being palced on the Rudd government as a condition for being involved. The NBN is difficult to deliver without Telstra, and the Government would have established a very powerful corporate enemy. Moreover, Opposition communications spokesman Senator Nick Minchin is one of the wiliest players, and will use this opportunity to maximise damage on the government.

On the other hand, to accept Telstra's demands now leaves the Minister, Senator Stephen Conroy, open to the charge that he is a puppet of Telstra, as well as the possibility of legal action by the Optus-led consortium, who have put forward a proper bid document of 1,000 pages, as compared to the 12-page letter from Telstra.

Clearly what the Rudd government were seeking was a clean and transparent process for awarding the NBN tender. What they now have is a clear-cut political power play, of the sort that have more commonly characterised Australian media policy, during both the Hawke-Keating years and the Howard years. The issues are accentuated precisely by the dual public/private ownership status of Telstra, and its role as both the core infrastructure provider and a competing service provider.

What looms is a protracted and difficult dispute, where it will be hard for the Government to get an early win. It marks a moment where the preference for administrative solutions has come hard up against the "friends and enemies" approach to media polciy that has more commonly prevailed in Australian history.