Update - Feds rule Telstra out of NBN bid

3:45 PM UPDATE: Stephen Conroy says the government will not be "held to ransom" by any corporation in a new statement on Telstra's exclusion from the NBN RFP process that says current regulatory arguments are "intractable".

The federal government has disqualified Telstra from bidding to build the national broadband network, according to a statement issued by Telstra to the Australian Stock Exchange today.

The statement says the government has disqualified Telstra on the grounds that its plan did not include details of how it would include small and medium business in the rollout process. Telstra refutes that claim and says it submitted a small business plan in December and that this element of its proposal was fully compliant with the government’s requirements and the bid process.

The deadline for submissions was November 26th.

Telstra Chair Donald McGauchie said the government could not have “… dreamed up a more trivial reason to exclude Telstra … ” and said the company will continue to invest in its other networks.

CEO Sol Trujillo has since told analysts that he believes the government may yet to turn to Telstra to build the network, as the expert panel assessing proposals will make a non-binding recommendation of a builder. Trujillo says the government is free to choose a provider that is not recommended to it and that Telstra will be happy to become involved in discussions about its role in an NBN build at that time.

2:00PM Update

The Minister for Broadband Communications and the Digital Economy, Senator Stephen Conroy has issued a statement about the decision to exclude Telstra from the request for proposal (RFP) process.

The statement says  "Telstra excluded itself from the NBN process for failing to submit a Small and Medium Enterprise (SME) Participation Plan, which is one of five mandatory requirements of the RFP."

“There was nothing to stop Telstra from submitting a complete proposal and competing vigorously with other proponents in this process,” the statement added. “Instead, the Telstra Board failed to comply with the mandatory requirements of the RFP.”

“Industry was offered the chance to compete on a level playing field under the RFP. However, the Telstra Board sought special treatment by proposing its own process.”

The Minister also offered his strongest rhetoric yet on Telstra's behaviour, saying that  “Telstra’s Board will have to explain to its shareholders why it has decided to sideline itself from a process that will shape the Australian communications sector for the next decade," and adding that “The Government’s NBN process has always been bigger than Telstra.”

3:45 Update

Stephen Conroy has issued a further statement about Telstra's exclusion from the NBN and ratcheted up his language again, saying that 'Telstra’s behaviour throughout this process clearly shows that the conflict and regulatory manipulation within the Australian telecommunications sector has reached an intractable point.'

"Industry was offered the chance to compete on a level playing field under the RFP," he says. "However, the Telstra Board sought special treatment by proposing its own process. In their 12 page submission, Telstra noted they would submit their full proposal only on the condition that  “Discussions between the Government and Telstra should occur at senior levels."

"In other words, Telstra wanted its own process. It wanted to circumvent the Expert Panel. The Expert Panel was appointed in March 2008, and the rules for the NBN process were set down 8 months ago.

The rules are publicly available and are exactly the same for all parties. I am sure Telstra’s legal team had sufficient time and resources to fully understand what was required of proponents in this process."

"Telstra’s behaviour throughout this process clearly shows that the conflict and regulatory manipulation within the Australian telecommunications sector has reached an intractable point."

The Minister added that "The Government will not allow Labor’s Nation Building agenda to be held to ransom by any corporation."

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