UPDATE 1-Australia government to build broadband network

CANBERRA, April 7 - Australia's government will build a new A$43 billion ($30.7 billion) national high-speed fibre-optic broadband network, rejecting bids in a controversial tender involving some of the country's largest telecommunications firms.

Prime Minister Kevin Rudd said on Tuesday the government would ask private companies join a new private-public firm to build the network. The government would sell its majority stake after five years when the network was fully operational.

"The initiative announced today is a historic nation-building investment focused on Australia's long-term national interest," Rudd said, announcing the surprise decision.

Australia has slower and more expensive Internet services than many developed countries, raising concerns about competitiveness, but the project will be made more difficult by the country's vast distances and inhospitable terrain.

The government had been set announce the winner of a tender to build the network, which was a centrepiece of Rudd's winning election campaign.

But the tender process was enveloped in controversy after the country's largest phone company, Telstra Corp , was dumped from the running in December, after the government panel reviewing bids said its proposal did not comply with the requirements.

Rudd said the new network would be built with money from a national infrastructure fund and the sale of bonds, following an initial government investment of A$4.7 billion.

The fibre-to-the-home scheme would be the largest infrastructure project in Australia's history, Rudd said, and would support 37,000 jobs as the country teeters on the edge of an expected recession that is likely to push the jobless rate above 7 percent next year.

The network would connect 90 percent of homes to a network with speeds of up to 100 megabits per second.

($1=A$1.40)