Opel cancellation splits ISPs

Smaller internet service providers are divided over the cancellation of the Opel regional wireless broadband program, with some labelling it “disappointing” and others “good news.”

Communications Minister Stephen Conroy yesterday announced the Government has cancelled its $968 million contract with the Elders/Optus consortium, blaming a failure to meet promised coverage standards.

The decision has met with mixed views from the second generation of smaller ISPs, with some lamenting it as a blow to competition and others applauding what they see as an expensive infrastructure duplication avoided.

Iinet, one of the larger of Australian ISPs after Telstra and Optus, believes the decision has removed the opportunity to inject some much needed competition into regional internet services.

“The decision is disappointing,” iinet spokesman Stephen Dalby says. “We were looking at Opel as potentially providing competition that would have produced reasonably priced backhaul services to enable broadband in the bush, and now it’s gone.”

Fellow Western Australian ISP Ocean Broadband takes a different view. Chief executive Paul Ostergaard told The Australian Financial Review that, overall, he sees the cancellation as good news.

“In our situation the Opel network would have overbuilt a network that we’ve now constructed over the past three years… [Opel] would probably overbuilt around 80% of that network.”

The different perspective of the two companies reflects their contrasting market positions. Iinet is largely concerned with providing broadband by fixed line services, and so saw Opel as a source of competition that could drive down the price that Telstra charges it for wholesale access to its regional broadband infrastructure.

Ocean Broadband, by contrast, is primarily a wireless broadband provider for whom Opel that threatened to undermine the value of its regional broadband infrastructure.