The stand-off between Telstra and the Federal Government over the national broadband network has intensified, endangering the promised roll-out of broadband to 98pc of the population.
Telstra and five competitors yesterday staked claims for the contract to build the $10 billion-plus network.
But Telstra said it could not meet the Government's stipulation that the network service 98pc of homes and businesses, instead nominating 80-90pc as a target.
Although Telstra will invest $5 billion, on top of the $4.7 billion promised by the Government, chairman Donald McGauchie said the lower coverage target was due to the credit crisis and the plunging Australian dollar.
However, Broadband Minister Stephen Conroy said Labor would honour its promise of 98pc coverage and would not loosen the purse strings to do so.
"We have got up to $4.7 billion on the table. That's it.
"If we were to vary that, it would completely and utterly undermine the 'request for proposal' process," he said.
"It's our election commitment to deliver 12 megabits to 98pc of Australians, homes and businesses … we'll deliver on our election promise."
Continuing a long-running game of brinkmanship, Mr McGauchie said the telecommunications giant would not submit a formal bid until the Government agreed to a number of demands.
The main one is that Telstra's retail and infrastructure arms should not be separated if it wins the contract to build the network.
"Separation would be extremely damaging for Telstra's shareholders, for our customers and for the Australian telecommunications industry.
"With separation, the NBN cannot and and simply will not be built," Mr McGauchie said.
"I have no doubt others will claim that they can build the NBN, but I submit to you that this is neither the time nor the project to take such a blind leap of faith as that would require."
Telstra's highest-profile competitor for the contract, Optus, attacked its rival's refusal to submit a formal bid and claimed it had the will and means to build a network that reached the Government's 98pc benchmark.
"We would be working in many ways with some of the same vendors and equipment suppliers and people that actually roll out networks that Telstra would," said Optus' director of government and corporate affairs, Maha Krishnapillai.
"I think it's the height of arrogance to claim, as Telstra does, that they're the only one in the world that could possibly build the network."
Mr Krishnapillai said the Government should disqualify Telstra from the process because it had failed to submit a formal bid, unlike Optus and the other bidders, Axia, Acacia, TranACT and the Tasmanian Government.
Senator Conroy said Telstra's proposal would be considered but deferred the question of whether it was acceptable to the expert committee that will assess the six bids within the next few months.
With DAN HARRISON
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