Things are not looking good for Telstra. If rumors are to be believed the TelCom giant could be looking at losing some of its network arm to the national broadband project.

According to an article in International Herald Tribune Telstra could be left out of the building of this new broadband network due to demands it put on the government. Telstra wanted to be assured that it would not be broken up and the Australian Government responded by saying they could build the network without them. A Government Panel recommended against using Telstra on the 18th of December because Telstra wanted to keep all the goodies to itself.

The problem there is that technically the new network cannot be built without Telstra (or at least without some of their infrastructure). The other companies in consideration for the project do not have the resources to build a national network and would need to take some of Telstra's to get the job done. This means that Telstra would either need to willingly allow another company to use parts of its infrastructure or legislation would have to be used to force them.

The International Herald Tribune has more here.

Australia has slower and more expensive Internet than many other developed countries, and the government has pledged 4.7 billion Australian dollars, or $3.2 billion, to help build a national broadband network, with the successful bidder expected to provide approximately the same amount.