Conroy rejects Telstra's NBN bid - but is he bluffing?

Telstra's arrogance has seen it kicked out of the race to build Australia's National Broadband Network, but have we heard the last of Sol?

The telco giant made the surprise announcement to the Australian Stock Exchange this morning that its proposal has been rejected because it didn't meet the conditions of the Request For Proposals. Telstra already knew this, but thought it could bully the government and Communications Minster, Senator Conroy, into accepting the bid - making a mockery of the process and putting Telstra back in the driver's seat. It seems Conroy might be a tougher opponent that Telstra thought.

Telstra isn't keen to give up its stranglehold on Australia's telecommunications and it wants to build the NBN on its own terms. The telco has been throwing around threats for a long time, especially once a bully like Sol Trujillo took the reigns. The Howard government didn't have the balls to stand up to Telstra, but it seems Conroy has grown a pair, calling Sol's bluff and kicking Telstra out of the race to build the NBN.

The telco called a phone briefing for analysts and press this morning with only three minutes notice. Telstra chairman, Donald McGauchie, claimed Conroy, has "ample powers" to accept Telstra's bid. If this is the case, it would seem Conroy is playing the biggest game of chicken of his life.

Rather than calling Conroy's bluff and threatening legal warfare, McGauchie was more diplomatic at today's press briefing;

"The decision to exclude us from the RFP is the Commonwealth's decision to make. But Telstra is the only company to have submitted a proposal with a real financial commitment - of $5 billion. And Telstra is the only company with the existing technical know-how, world-leading vendor, skilled workforce, established wholesale systems and proven track record of building world-class networks."

McGauchie says Telstra will now put its efforts into DSL and cable, leaving Conroy to build his precious NBN with someone else.

Conroy is currently the villain of the internet community thanks to his mandatory internet filtering proposals, but today he also finds himself the hero for standing up to Telstra. After a lot of grandstanding, I'd expect to see a somewhat more humble Telstra back at the NBN negotiating table early next year.

While Conroy's determination not to back down may have saved the NBN from falling into Telstra's clutches, it's perhaps bad news for those hoping he will back down on mandatory internet filtering.