Malcolm Turnbull (Wentworth, Liberal Party, Shadow Minister for Communications and Broadband) Share this | Hansard source

We have seen an extraordinary demonstration of defensiveness, incoherence and confusion from the government as it attempts to explain to the Australian people why it refuses to allow this massive infrastructure investment—$43 billion—to be scrutinised by the public by the publication of a business plan and business case or, indeed, by the Productivity Commission in a rigorous cost-benefit analysis.

We have had one misrepresentation after another. We have just heard in question time the Prime Minister saying that it was outrageous, false, lies to suggest that the NBN will put up internet prices. And yet I was able to quote from the McKinsey implementation study—$25 million worth—stating that that is exactly what the plan is: to increase prices in real terms every year for the next decade. These are very big issues, because the object of policy should be to deliver universal and affordable broadband. But the question is: what is the most cost-effective way of getting there? To understand that, you need to have real insight into the economics of this proposal and, indeed, into the economics of alternative proposals.

The government says that anybody who asks for financial information is a wrecker and just wants to stop the NBN. Well, John Morschel, the chairman of the ANZ, said only a month ago:

… the lack of a business case and full publicity of that business case is throwing a lot of doubt in people’s minds about the level of expenditure.

Is he just a wrecker—another Luddite?

What about the chairman of Wesfarmers, Bob Every, who said:

I’m not convinced, and feel it needs a cost-benefit analysis.

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We have under-invested in infrastructure for the last 30 years, in road, rail, water. I just see this as another part of infrastructure that we need to go through, stocktake and prioritise. And I don’t know if it will rank in priority.

What about the Productivity Commission itself. Dr Michael Kirby from the Productivity Commission was asked recently about how they would proceed to look at a project like the NBN. He was not phased at all—this is their job; they do analyses of these kinds. He said:

The key steps are considering the objectives you want to achieve, considering the full range of options that might help, considering the impacts and the costs and benefits of the various alternatives, and then making a selection that leads to the greatest net benefits to the Australian community. That is the way to go.

We say he is right. We also agree with Treasury Secretary Ken Henry, who said, famously, in September of last year:

Government spending that does not pass an appropriately defined cost-benefit test necessarily detracts from Australia’s wellbeing. That is, when taxpayer funds are not put to their best use, Australia’s wellbeing is not as high as it otherwise could be.

Our job as members of parliament is to protect the interests of the Australian people. And, relevantly here, there are two great interests: there are the interests of the Australian people, as taxpayers—to see that their $43 billion is well spent, to see that the policy objective of universal and affordable broadband is being achieved in the most cost-effective way—and then there is the interest of consumers and users of the internet and businesses that use the internet, to ensure that it is an effective universal system and, above all, that it is affordable, because if it is not affordable you defeat the whole purpose. If you spend billions of dollars running a broadband system past millions of homes and the people who live in those homes, or a substantial percentage of them, cannot afford to buy the service, then you have created a massive white elephant.

There is no point in the Prime Minister trying to fool the House—standing up here and complaining about high internet prices today, when in fact her proposal is going to put those prices up. And she talks about competition. This is a critical part of the analysis that we have to take into account. For years—decades—there has been criticism of Telstra as a vertically integrated telecommunications company and of the fact that Telstra’s customer access network is a fixed line monopoly in large measure, which other retail providers of telecommunications services have to get access to. The member for Bradfield wrote an excellent book about this, describing the challenges that telco competitors faced. He argued compellingly the case for structural separation, and he was right. Governments from both our side and the Labor side should have done that years ago, and it would have been in the best interests of Telstra as well.

But that is now in the past. We are looking at the present and the future. The single most important issue on the structural side is competition. Yes, you can end the vertical integration, but you do not need to build a completely new network to do it. You simply need to separate, on terms that are fair to the shareholders of Telstra and in a satisfactory way, the customer access network. That had been the policy of those who advocated that for many years. If you establish a monopoly over a fixed line to the home, even if you have equivalent pricing to the retailers that use that monopoly network, the monopoly network will have the extraordinary power to charge higher and higher wholesale prices. The Prime Minister seems to overlook this point.

We know that prices will go up and we know that, around the world, the ideal is to have what is called facilities based competition—that is, competition between two or more fixed line providers. Of course, this is exactly the point that the Treasury and the OECD made in that recent report. Far from praising the NBN for increasing competition, the OECD report says—and I am quoting from page 108—that ‘multiple studies have stressed the value of competition between technological platforms’. It expresses concern that a monopolistic incumbent like the NBN could forestall the development of as yet unknown superior technological alternatives. Far from endorsing this business-plan-free NBN, it recommends an alternative: ‘to let the market guide choices between the various Internet service options’. The report goes on to say that ‘to that end, it would be desirable to maintain competition between technologies’.

Part of the NBN plan and part of the economics that will no doubt, we hope, be revealed in this business plan—if we ever see it and see enough of it to be able to understand what they are planning to do—is to contractually prevent Telstra from competing with the NBN on its HFC cable network. The argument of the plan, as honourable members know, is that the fibre optic network will replace the copper customer access network, which will be decommissioned. The HFC network, on which pay television, broadband and voice are carried at the moment, is going to be there for many years, probably decades. It is available there as a real competitor with the NBN, potentially. It passes 30 per cent of Australian homes. Because it is there, it would provide real discipline for this great big new monopolist—the NBN—and ensure that we had lower prices. But, for no reason other than the economic interests of the NBN, that competition is being taken out of play. In order to make sure that the ACCC cannot interfere with that, the legislation that was regrettably passed by the House this week but that is yet to get through the Senate actually prevents the Trade Practices Act’s authorisation procedure from applying to that agreement.

The government claims to be interested in markets. The Prime Minister has talked about markets and competition. She has recently discovered a devotion to those things, which came as a surprise to us. She expressed her interest in competition and markets, yet she is creating the biggest telecommunications monopoly we have seen and one in which the power of the government, the power of the parliament and the power of legislation are being used to prevent competition.

If this project were being undertaken by the private sector—a public company, for example—the management, or the board would have to present a detailed business case to their shareholders. They would have to persuade their shareholders that the project was going to add value to their shareholdings, that it was going to increase dividends and that it was going to be a wise investment of the shareholders’ funds. They would be accountable to the analyst community. There would be conference calls, meetings and presentations, and they would have to answer a lot of questions. They do that in the real world. In the world of business, that is what happens. But here in Labor land—the fantasy world that the Prime Minister and the Minister for Broadband, Communications and the Digital Economy seem to be occupying—under this government you can commit to a $43 billion project without a business plan. Normally you have the business plan first.

Indeed, today I downloaded from the internet an application for a small business loan from one of our leading banks. It has a list of the things you have to bring along to the bank manager. We have all been through this. For a company, you have to bring the articles of association and all that stuff. One of the things on the list is a business plan. If you want to borrow $20,000, $30,000 or $40,000 from a bank for a small business, you have to produce a business plan. But this government believes that it can take $43 billion from the taxpayer and not provide any business information at all.

The consequences of this overinvestment are potentially catastrophic. We are talking about a massive excess investment well beyond what is actually needed. Honourable members on the other side have said, ‘Broadband is good’—we agree with that—‘therefore the NBN is good.’ But that is like saying, ‘Roads are good, therefore any road investment is good,’ or ‘It’s good to have bridges over a river, therefore we should build bridges anywhere.’ You cannot argue from the general to the particular in this way. They have confused the means—the means being a fibre-to-the-home network across 93 per cent of Australia, and wireless and satellite for the rest—with the end. The end, the goal, is not a national fibre-to-the-home network. The goal is universal and affordable broadband.

They point to deficient areas of service, including in the suburbs. The honourable member for Greenway talked about areas in her electorate which are poorly served, and she said that my electorate is better served. That may be the case, but the answer therefore is to address and rectify the areas of underservice, whether they are in the cities or in the bush. That can be done for a tiny fraction of $43 billion, because nobody seriously suggests that there is nowhere in Australia where broadband access is inadequate.

We talk about 100 megabits per second as being a goal. Honourable members should try this experiment. Get access to internet at that speed and compare it with internet access at 10 or 20 megabits per second. They will find it very difficult to tell the difference, frankly. That is one of the reasons telcos have been unable to effectively charge substantial premiums for increased speeds. But in Melbourne the Telstra HFC network has been upgraded to DOCSIS 3.0 and is running at 100 megs now. So why would we overbuild that network? There is 30 per cent of Australia covered by the HFC network that can run at 100 megs or better now. Why in heaven’s name would we be spending billions and billions of dollars to overbuild network assets that are capable of delivering connectivity at the very speed—the very high speed—the government says is desirable?

This is so poorly thought through. They have gone from one bad policy to another and they have ended up with the single most expensive way to deliver a national broadband network. It may well be universal, in the sense that everyone will have access to broadband through one technology or another, but it will not be affordable. The government cannot run away from that. This network will not only cost the taxpayers of Australia and cause future generations to pay higher taxes to pay it off but it will make broadband more expensive, and therefore it is a self-defeating policy. (Time expired)

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