The Australian Public Service revolted against its political bosses the last time an attempt was made to sell its secure communications system in Canberra, former insiders have revealed.

The Howard government made a second attempt to sell off the ICON network in 2001, under intense lobbying from private sector telcos led by Telstra, who believed the system was depriving them of more than $100 million in bills each year to government departments.

The current proposal to sell off the Intra-Government Communications Network is the third time offloading ICON has been on the agenda in the system's 20-year life. A privatisation scoping study is under way on the instructions of Finance Minister Mathias Cormann.

The minister's office would not answer questions about private sector lobbying in the latest move for a sale.

But in 2001 Canberra's public service agencies, with Defence prominent among them, told then Communications Minister Richard Alston that for reasons of value-for-money and security they would not accept a privatised system.

Representations by the departments made it clear that if ICON was sold, they would simply use their departmental funds and in-house public service expertise to establish a new network, sources close to the process say.

The Howard government had looked closely four years earlier at farming out the public service's networked communication system, a proposed expanded version of ICON called FedLink, but no business case could be made for outsourcing the system.

According to source close to process, the 2001 showdown was the culmination of years of pressure from Telstra, which had been part-privatised in 1997 and 1999 and had watched with increasing dismay as ICON grew from a temporary fix for the Department of Foreign Affairs linking two of its buildings in the capital into a network that most other departments were clamouring to join.

By 2001, a former senior public servant says, some Telstra executives were desperate to put the network, which they believed was depriving them of up to $105 million each year in government telecoms contracts, out of business.

"Telstra were ready to write a cheque," one former official told Fairfax Media.

But the privatisation push, which was backed by the work of a private sector consultant hired by the government and who recommended a sale, faltered when the departments dug in their heels.

Telstra declined to comment on the events of 14 years ago and would not discuss whether or not it would be interested in buying ICON if a new sale went through.

Today, ICON links 88 government agencies and 400 buildings in the ACT through 150,000 fibre kilometres.

Senator Cormann says the scoping study currently under way for the network is part of the "Smaller Government" reforms aimed at eliminating waste and duplication in the public sector.

Accounting giant KPMG has been appointed as business adviser and King & Wood Mallesons hired as legal advisers for the study.

According to terms of reference for the study, its recommendations must treat any affected ICON employees fairly, and minimise any impact on the service and quality levels.

The recommendations must also "optimise net proceeds and the financial outcome for the Commonwealth".