Calls for Optus fine to reach $500m in wake of triple-0 outage tragedy, CEO to lose job
Experts in the industry are calling for not only the Optus CEO to lose his job but also a board spill and fine of up to $500 million.
Veteran telecommunications expert Mark Gregory has spent 35 years in the industry and says the fallout from the Optus triple-0 catastrophe should not only cost the CEO his job but trigger a board spill and fine of up to $500 million.
Dr Gregory knows his stuff – he’s worked with clients across Australia, Indonesia and North America, is associate professor at the School of Engineering at RMIT University in Melbourne, and has extensively published on the sector.
His opinion on the update failure which led to an Optus outage disaster linked to the deaths of three people is delivered with exasperation given the business was rocked by a similar scandal just two years ago.
Former chief executive Kelly Bayer-Rosmarin departed in the wake of the 2023 outage and, despite Optus’ Singapore-based owner Singtel backing her successor Stephen Rue to stay in the job after the latest calamity, Dr Gregory argued his position as CEO was “clearly untenable”.
He said further analysis of the root cause for the outage was required after Mr Rue blamed human error. “They got a $12 million fine last time, a slap on the wrist … and did a review that was never made public,” Dr Gregory said. “When this CEO came in he gave a guarantee it wouldn’t happen again.
“What should be asked is: ‘was there automated testing before, during and after the update?’
“The conclusions you could draw are that Optus are running old update procedures and practices and don’t have appropriate people and systems in place.
“What about the failover system where, as soon as something goes wrong with an update, everything immediately switches back to its previous state, which means triple-0 would have been available?”
Dr Gregory claimed Optus were “slow learners” and Mr Rue was “not the right person for the job” but said the buck should not stop with him.
“This is also a governance fail because … they’ve had time to fix these problems,” he added. “What’s happened here should make the Optus board untenable as well. But I have no confidence any of them will do the right thing and resign.”
The Australian Communication and Media Authority (ACMA) has the power to issue infringement notices to Optus or prosecute the company through the Federal Court for contraventions of the Telecommunications Act.
ACMA has already announced a review into the latest calamity.
Under current legislation, it is understood the penalties have potential to reach $300m.
Law firm Bird & Bird head of technology and communications Thomas Jones said: “I wouldn’t underestimate the options available to ACMA.
“A lot of people are extremely angry and it’s absolutely tragic what’s happened,” Mr Jones said. “There have been people pushing for more oversight of the telecommunications sector. This will only add weight to that.”
Dr Gregory believes the Australian Competition and Consumer Commission (ACCC) – with a successful $100m action against Optus confirmed in the Federal Court on Wednesday – should enter the fray again to hold the company accountable for its latest drama.
The ACCC sued Optus last October alleging the telco had offered unaffordable or needless services to vulnerable customers.
Optus admitted in June to “engaging in unconscionable conduct”. The Federal Court three days ago ordered the company to pay the nine-figure penalty.
“The ACCC needs to get back in the game and charge Optus with unconscionable conduct again,” Dr Gregory said. “If the end result is collective fines of $200m to $500m that would be warranted.”
Optus are under fire not only for the outage but its handling of the affair and the late notice provided to key agencies and governments, including ACMA, the premiers of Western Australia and South Australia – where people reportedly died – and Federal Communications Minister Anika Wells.
Ms Wells was due to fly out of Sydney on Saturday morning to the United Nations General Assembly in the US. She took a plane from Brisbane late Friday as the extent of the Optus dramas emerged. Her plans were urgently revised on arrival in the Harbour City.
The minister had what has been described to this masthead as “a robust discussion to say the least” with Mr Rue on Saturday morning before heading back to Queensland where she held a media conference.
The reputational damage for Optus will be considerable, according to Mark Gell, a former government policy adviser who later held senior PR and corporate affairs roles with Telstra, Lend Lease, TNT and Boral.
“In terms of quantifying it, that’s going to take some time because you measure damage to a brand on what impact it has on customer numbers,” he said. “So that will take some time to filter through.
“But it will be a challenge to recover people’s confidence … it’s the third incident in a short space of time (after a 2022 cyberattack on Optus and its 2023 outage).”
As the firestorm continues, Optus prepares to on-board the company’s first Chief Legal Officer on Monday. Betty Ivanoff was appointed to the leadership team on September 1 and will start after a brief June-to-August tenure at the Insurance Council of Australia (ICA).
Ms Ivanoff is better remembered for her appearance at the second inquiry into The Star Entertainment Group, where she gave evidence of feeling “a little … undermined or excluded” during her time as Chief Legal Officer at the stricken ASX-listed casino company.
The Optus announcement confirming Ms Ivanoff’s recruitment failed to mention her time at The Star, or her stint at ICA. It only listed earlier positions with Crown Resorts, Coca-Cola Amatil and GrainCorp.
In the September 1 release, Mr Rue said it was essential the company “embed the highest standards of legal, compliance and privacy controls and rigour across our business”, resulting in the newly created CLO role which will house all three functions and answer to the CEO.
The previous legal counsel reported to Chief Financial Officer (CFO) Michael Venter.
An Optus insider told Saturday Xtra “they want someone to build our compliance function”, claiming it was an area needing more specialist skills.
Another insider suggested it was time for Optus to go back to basics, saying: “Alerts from customers that weren’t escalated ... that is a breakdown in training … business continuity 101.
“There’s a need to build the picture from the ground up. ‘What are the focus priorities’ and ‘where do resources need to be diverted’.”
Industry observers, meantime, say key figures on the Optus leadership team must be fatigued by corporate crises.
Mr Venter and Chief Information Officer Mark Potter both worked at CBA when AUSTRAC commenced civil proceedings against the bank in 2017 for “serious and systemic noncompliance” with anti-money laundering and counter terrorism financing (AML/CTF) laws.
The Federal Court in 2018 ordered CBA to pay $700m.
The bank was also subject to a 2017 inquiry into its governance, culture and accountability by the Australian Prudential Regulation Authority (APRA), which announced in 2018 “a number of shortcomings … particularly in dealing with non-financial risks”.
Ms Bayer-Rosmarin is also ex-CBA, running the institutional banking business from 2013 until leaving the company in 2018.
She joined Optus as deputy CEO in 2019, and in April 2020 was appointed the telco’s CEO, a role she held before resigning in 2023 after the cyberattack the year before and the first outage issue.
Mr Venter departed CBA and was appointed CFO at Optus in March 2021, joining Ms Bayer-Rosmarin at the telco. Mr Potter resigned from the bank in 2020 and was appointed Chief Information Officer at Optus in October 2021.
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Originally published as Calls for Optus fine to reach $500m in wake of triple-0 outage tragedy, CEO to lose job
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