Australia's two most powerful rugby clubs will oppose the formation of the new national competition.

Sydney University and Randwick will fight the introduction of the eight team Australian Provincial Championship which will start in July next year with three teams from NSW, two from Queensland and one each from the ACT, Melbourne and Perth.

Both argued to be included as stand alone entities in a national club competition rather than contribute to the creation of new teams.

"I don't think the debate is over by a long shot," Sydney University president David Mortimer said.

Randwick has formed a committee to challenge the ARU's decision.

"I can tell you we're very disappointed, we're looking at getting together to form some sort of solution," said one senior Randwick figure.

The ARU had been contemplating a third tier competition below Test and Super rugby for a decade and came to its decision following a three-day summit this week involving 70 key rugby identities including clubs, players and officials.

ARU chief executive Gary Flowers said the decision was based on unity at the summit.

Flowers believes the new competition will actually reinvigorate the clubs while providing greater depth for the national team.

"We believe it will breathe life into club rugby," Flowers said.

"It will restore club rugby to the pathway for club players through to the new national competition, then the Super 14 and then the Wallabies."

But while many clubs were pleased with the process and outcome - Manly president Frank Ellis said it was a "win-win" - Uni and Randwick vehemently disagreed with Flowers.

Mortimer said the ARU could revive the fading club rugby scene by finding a way to allow Test and Super 14 players to turn out for their clubs in a national club competition.

"Club rugby has suffered for some years from a lack of players," Mortimer said.

"Our players are not allowed to play for us, club rugby would be invigorated if the players were allowed to play for us."

He said a national club competition including the top three or four clubs from Sydney and Brisbane was better than artificially creating teams from Melbourne and Perth.

"The same players would be available for a national club competition, only they'd be playing in a strip they're used to playing in," Mortimer said.

While Mortimer believed the new competition would put an end to ARU funding of club rugby, Flowers said there was a commitment to continued investment at the grass roots.

The APC will cost up to $3million to get off the ground and will run at a loss in its first year as the ARU looks for broadcasters and sponsors.

But it will find it difficult to attract either on a large scale with the APC's July-October season clashing with Australia's domestic Test series and World Cup in France.

The competition's structure is in its infancy with much work to be done in organising team locations, administration and staff.

The three NSW teams are likely to be based in Sydney's north, central-west and south-east, although the Illawarra and central coast are possibilities.

At least one of the Queensland teams would be in Brisbane while north Queensland and the Gold Coast were potential sites.

There will be no draft to start with and players will be free to choose their team, although there will be a salary cap.

Flowers said it was essential Australian rugby provided a better standard competition for its players after the Super 14 season in order to keep pace with New Zealand and South Africa.

The APC will unashamedly mimic the New Zealand model in which fierce rival clubs come together to form a regional team.

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