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

Let me say right at the very outset that every member of the coalition is passionately committed to the rollout of the availability of fast broadband to all Australians at affo­rdable prices. The debate about the National Broadband Network, of which this bill is a subset, is not a debate about the end. We agree on the end. We agree that all Austr­alians should have access to the benefits of broadband, of fast broadband and of access to the benefits of a digital economy. Our point of difference with the government lies in the means it is employing to achieve that end. In particular, with the way it is establishing the National Broadband Network.

The National Broadband Network is the largest infrastructure project in our country's history. Yet, despite coming into government in 2007 with a very clear and prominent pledge that no major infrastructure project would be undertaken without a rigorous cost-benefit analysis and with an equally prominent pledge that a specialist agency, Infrastructure Australia, would be set up to conduct those cost-benefit analyses, this government with this—the biggest infrast­ructure project in our history—continues to refuse to undertake any cost-benefit analysis. Again and again it shows itself to be utterly hypocritical on this issue. If the government were serious about rigorous economic analysis and dealing with taxpayers' dollars responsibly it would undertake that cost-benefit analysis and pose this question: what is the fastest and most cost-effective way to deliver fast broadband to all Australians and do so in a way that makes broadband more affordable?

I stress the point of affordability because naturally in this place we focus, quite properly, on the burden on the taxpayer: is the taxpayer getting value for money and could the objective of fast broadband across the nation be delivered at a lower cost to the taxpayer—could the taxpayer get more bang for their buck, in other words? But an equally important issue, and one that I would say is, if anything, of more importance, is whether broadband will be affordable so that those Australians who are not able to afford it today will be able to afford it in the future. The reality is—and we rely on the ABS, the Australian Bureau of Statistics, for this—that the largest group of Australians who do not have access to the internet today are those in households earning $40,000 or less a year. The biggest barrier to internet access is not technology; it is not some issue of network design. Sure, there are issues of network design that impact on the speeds people can achieve. But, in terms of basic access to the internet at any speed, the biggest barrier is income. Too many Australians cannot afford it. That is a fact.

Mr Husic interjecting—

The honourable member opposite shakes his head. He should have another look at the ABS statistics. The reality is that the NBN will not deliver more affordable broadband. If anyone doubts my contention, they do not have to rely on my remarks or indeed on the remarks of the many competitive telcos who make the point that this is going to result in more expensive broadband because it is a big government monopoly, heavily capitalised, which will inevitably not be subject to the price pressures of competition because it will have no competitors; they have only to look at page 105 of the NBN corporate plan and see there the forecast retail prices, which are equal to or indeed higher than many of the plans that are available today.

Of course it stands to reason. We know the factor that has brought down broadband costs over the last five years—by as much as half, according to the OECD, as I recall—has been the growing competition in the telecommunications sector. That competition at the facilities level, at the level of physical access into the premises, is going to be eliminated because the government not only is legislating to constitute the NBN as an effective fixed line monopoly but has paid billions of dollars of taxpayers' money to Telstra and to Optus not to use their HFC networks, their pay television hybrid fibre coaxial networks, to offer broadband or voice in competition with the NBN. Yet we know that those networks are capable of providing broadband services today, are providing broadband services today and are providing in some markets—in Melbourne in particular—broadband services at speeds of 100 megabits per second. When you look at other markets around the world—South Korea is always a good example; the United States is another—you see that HFC cables, pay TV cables, are being used to provide broadband services and in those markets provide the competition with the ADSL services provided over the copper networks owned by the telephone companies—or indeed competition with the fibre networks owned by telcos and other broadband providers, as is the case in Korea, where the fastest growth in broadband penetration has been over the HFC networks belonging to SK Telecom and LG.

This whole NBN scheme is going to be, tragically for the people of Australia, a lose-lose. It is more expensive than it needs to be. The government say we are not right on that score, but if they had the courage of their convictions they would have done the cost-benefit analysis which, if they are right, would demonstrate that this was in fact the most cost-effective way to set up a national broadband network. But, because they are afraid of asking the question, the Australian people can only reasonably assume that they fear what the answer will be and that they know it will be that they are spending tens of billions of dollars more than they need to. On the other side of the coin, we know that this network is going to provide not cheaper and more affordable broadband access but broadband access that is either just as expensive as current services or indeed more expensive, particularly for the higher speeds. This is an important point. I will not delay the House with the material that I published recently about the South Korean market, but it is very instructive to analyse the exper­ience there. Consumers in South Korea, which is arguably the most advanced economy in terms of broadband penetration and use of information technology, are not prepared to pay any significant sort of premium for higher speeds. When you look at the NBN corporate plan you see that a fundamental premise there is that Australians will pay very substantial premiums to go from 12 to 25, 50 and up to 100 megabits per second and higher. When you match that against experience in this market—indeed, Telstra's experience with its HFC cable in Melbourne and in particular the experience in South Korea or the comparable experience in the United States—you see that consumers are not prepared to pay significant premiums or, indeed, any premium in many cases for faster speeds. Why is that? It is because speed in and of itself—that is to say, 50 megabits per second, 100 megabits per second—is of no value to a consumer whatsoever. The value comes from the applications that run on it and that the speed enables to be run on it. If there are applications that can be run on a higher speed that can be run on a lower speed—that is to say, if everything a consumer wants can be run adequately, effectively, satisfactorily at a lower speed and at a lower price—that is the product they will take, and that is exactly what has happened.

This bill is all of a one with the goal of the government in creating this big monopoly, the NBN. It is designed to deal with the situation, the deployment of fibre, into greenfields developments. The coalition does not object to the policy objective of greenfields developments being, wherever possible, rolled out with fibre to the home. There is an incremental cost, as we have acknowledged in the dissenting report of the Joint Standing Committee on the National Broadband Network that was tabled today, but it is not a substantial incremental cost compared to the enormous cost of rolling out fibre to the home in brownfields areas. I should note, however, that much to my surprise when I was visiting South Korea recently I saw that, in some very new and very large residential greenfields develop­ments, fibre had not been cabled into the premises; in fact, the fibre network terminated in the basement and the buildings themselves were cabled with copper. I just offer that to the House and to those listening to this debate today as an example of the Korean experience, which, as I say, is very instructive because they have been further down this track than us.

Nonetheless, assuming we are going to go down this line of installing fibre in greenfields premises, I think ensuring that rollout is efficient and timely has a very important impact on Australia's telecomm­unications environment. The NBN estimates that 1.9 million greenfields premises—that is to say, households in new developments—will have to be connected to the NBN by 2020 and a quarter of a million by June 2013. The government has long argued that the greenfields market for fibre deployment is competitive. Given this competitiveness, even this government recognised that it would be ludicrous to do away with that market entirely and that private operators, it said, should be encouraged to roll out fibre to new developments. In its first policy consultation paper released in May 2009 on greenfields estates, the Department of Broadband, Communications and the Digital Economy stated:

The installation of FTTP is taking place in a competitive context, with developers typically contracting out the provision of infrastructure and services in developments. In areas where the FTTP infrastructure provider does not provide retail services, arrangements are increasingly being put in place to ensure partnerships exist with retail providers to deliver services to consumers.

In that paper, the department estimated that, at the time, around 120 greenfields estates were being prepared for fibre deployments, with more than 10 operators reaching an estimated 150,000 homes.

In 2009, Senator Conroy, the Minister for Broadband, Communications and the Digital Economy, set up a stakeholder reference group and his department held one-on-one consultations with operators to understand how to implement its greenfields policy. As late as a December 2010, the minister was still telling the industry it would be an integral part of a fibre rollout. The minister said:

It has been a consistent feature of the Government’s policy in new developments that there should be room for competing providers. This continues to be the case.

…   …   …

Providers can compete to provide infrastructure in new developments, for example, by offering more tailored solutions to developers or more expeditious delivery.

Sadly, those fine intentions have not been reflected in this bill. In common with every other aspect of this NBN project, it will see an effective market completely scrapped and all of the inherent risks and liabilities involved with rolling out fibre transferred to the taxpayer. The NBN Co. has said that once it has rolled out the optical fibre line it will take up ownership not just of the network but also of the pits and pipes that the developers have installed. Down the track this will take the cost of maintenance off the hands of developers and place it with the taxpayers, but the cost of providing the pits and the pipes lies with the developers. The NBN Co. are offering no upfront cost to developers when installing the optical fibre network. That is important because smaller fibre-to-the-premises developers do not have the luxury of spending taxpayers' money in the hope that 10 years down the track they may actually begin to recoup some of the money that has been invested. As OPENetworks stated in their submission to the joint committee:

NBN Co is the obvious first choice for Developers because NBN Co is the only provider that can fund the network build costs (that may otherwise have been paid by Developers to OPENETWORKS ...) and that funding is then able to be recovered by NBN Co charging RSPs higher operational prices.

OPENetworks have argued that this policy is in fact a violation of the competitive neutrality policy for government owned businesses, which holds that they should not exercise unfair advantage by reason of their government ownership over their private sector competitors. An appropriate applic­ation has been made to the Productivity Commission in that regard. What this legislation will do is make greenfields property developments more expensive and slower to bring to market, and stifle competition. The department said before the committee that a developer has the choice. He has to put in the pits and pipes, but he has the choice of going to a private sector fibre company or waiting for the NBN. The reality is that there is no choice because the NBN will provide the fibre for no cost to the developer whereas the developer would obviously have to pay a price to a private fibre company. Each of the representatives of the property sector and the greenfield operators have made the point to us that the business of putting in the pits and pipes and then waiting around for the NBN Co. to turn up is going to place considerable delays and expense on property developments. We have heard many complaints from the property sector about the delays occasioned by this. I am foreshadowing amendments that we will be moving later in this debate which will seek to rectify that particular problem.

The amendment we are going to move—and this has been detailed at some length in the dissenting report—will mean that a property developer, having dug the pits and pipes, can choose to have a private sector fibre provider to lay the fibre as long as it is done in accordance with the specifications, which should be stipulated by the industry, not by NBN. NBN obviously will have a big input into that but it should not be dictated by the NBN for exactly the same reason that, when telecommunications reform began some decades ago, Telstra's ability to set technical standards was taken away and moved to the regulator. The developer can employ this private sector company or what are called greenfield fibre operators. As long as they have installed that fibre in accordance with those specifications, the developer will be entitled to be remunerated by the NBN Co—in other words, it will require NBN Co. to buy that fibre setup from the developer for a tariff which will be set by the minister on a per residence basis, taking into account the relevant factors such as the cost of construction, NBN's costs and so forth.

What is the object of this amendment? This does not undermine in any way the objectives of the NBN. This means that a developer can get on with the job, get the fibre installed and be paid for it without having to wait around for the great big government monopoly to deign in its magnificence and wisdom to get around to this developer's problems. The reality is that a new development which does not have the fibre installed will be at an enormous disadvantage from a marketing point of view to another development that does have that fibre installed. So it is important that developers are able to get on with the job and get the fibre installed. This amendment will enable them to do just that.

We flagged this issue with the various developer's organisations and with the greenfield operators in the course of the joint standing committee inquiry. All of them supported it and welcomed it. We flagged it also with the department. Their response was essentially equivocal. It was not really a responsive answer at all. They did not seem to have a particularly strong view on it either way. The bottom line is that will make it easier for developers to get on with the job. It may well save the NBN Co. cost and expense and, if it encourages NBN Co. to move things along and be more timely in its construction of these networks, then that would be a very good thing as well.

The other amendment that we will move a little later in the course of this debate—and which we flagged in the dissenting report—would enable the private sector cable companies, greenfield operators, to be exempted from the cherry-picking provisions of this act if the fibre network they seek to build meets the following conditions: it is not owned or operated by NBN Co. or Telstra; it is installed in a new development; it is owned and operated by the same entity which builds it; and it delivers retail services only to the persons who reside in the development.

The purpose of this amendment is to enable the private sector greenfield cable operators to stay in business, to be able to put in a network they would then be able to operate as a small private network. They should be exempt from those cherry-picking provisions because of their scale. As we have said in the report, it would effectively maximise the options available to developers and to the greenfield operators. They could contract on the basis that the greenfield operator would build the network and operate it until such time as it was sold to the NBN Co. or they could contract on the basis that the greenfield operator would continue to operate it and there would be no sale to the NBN Co. at all. They would no doubt be under some risk that the NBN Co. might choose to overbuild them but one would hope that, when the rush of blood to the head of NBN Co. settles down a little, they will not be overbuilding brand new fibre optic networks, given the expense of doing so.

This amendment, coupled with the first amendment, will mean that a developer is in the position where he or she can employ the same company—and this is, as TransACT said in the inquiry, clearly the most efficient way to do it—to put in the pits and pipes, put in the cable and then either be paid for that cable by NBN Co. and, in effect, sell it to NBN Co. or for that cable-laying company to operate it as an independent cable network. That gives the developer a range of options. It does not put the developer at a disadvantage and it does not give the developer a disincentive from using the private sector. It means that the greenfields companies can continue in existence and can provide some real competition to the NBN.

I imagine that honourable members opposite will oppose this because they are opposed to competition, but at some point they have to match the rhetoric with the reality of the bill that is before the House. Their rhetoric has been that there is nothing in this bill that impedes competition in the greenfields developments. But a greenfields operator under the scheme in this legislation is at an insuperable disadvantage to the NBN Co. because the NBN Co.'s cable will be laid for free, at no cost to the developer, and the cost presumably will be recovered from charges made to retail service providers over time, whereas if the developer goes to hire somebody else to put in the fibre network they will have to pay them to do so. Naturally the preference bias will be in favour of the NBN Co.

I imagine that many developers would not be too troubled by that. Obviously the owners of the operators of these greenfields cable networks are very threatened by that. Many people in the industry have said that this bill will have the effect of putting them as an industry right out of business. In the absence of these amendments, I fear that that would be the case. Many developers might be quite happy just to let the NBN get on and do the job, but the experience has been of inordinate delays. All of us in this House who have been involved in the development sector or observed people in the development sector or are familiar with the conduct of big government owned monopolies or indeed big private companies know that they take their time. Many developers will be left waiting and waiting for the cable to be laid. The longer they wait, the longer it will be before the development is complete and the longer it will be before they can get it to market. All of them said to us in their evidence that they believe that the private sector can put in the infrastructure at a considerably lower cost than the NBN is likely to. The department turned up their nose at that and said they could not see any evidence for that. It really is not a question of evidence. One way or the other, let the market decide. If the private sector can do a better and cheaper job than NBN then no doubt developers will see that as an opportunity.

The amendments that we are proposing here will give developers real choice. They will ensure that cable is rolled out in greenfields developments in a more timely and efficient fashion. They will ensure that developers are not put in a 'Hobson's choice' situation where they can either wait and wait for the NBN to show up and lay cable at no cost to them or pay somebody else to do it out of their own pocket with no reimbursement to get it done sooner. And they give the greenfields cable operators—TransACT, Opticom and others—the chance to stay in business and to provide some competition. To honourable members opposite whose approval of these amendments we in the committee sought, but to no avail, I say to them once again that if they are serious about competition this is the opportunity to support amendments—which we will move later—which will provide some real competition.

There are many things that are unique about the NBN. The government members may regard this as a compliment. One is that there is no country in the world spending as much on a national broadband network as we are. Our spending, on any measure, is off the charts. There is no other country in the world that is establishing a new government owned monopoly to deliver broadband. Again, that is a world first—and not one that we should be too proud of. But just as importantly and most ominously there is no other country in the world that is seeking to eliminate facilities based competition. Take your pick. Anywhere else in the world governments are very anxious—and this is particularly the case in Korea and the United States—to ensure that there is always real competition among the fixed line services and that they are available to as many households as possible. The amendments I have foresh­adowed will go some way at least in new developments to achieving that. After the amendments are debated later, we will be commending them to the House and trust they will get the support of the House. (Time expired)

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