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

I want to commence by congratulating the committee on its work in producing this report and in particular the coalition members, whose dissenting report, written by the members for Hinkler, Ryan and Bradfield, is an outstanding analysis pointing to the defects in the arguments given in favour of the NBN. It goes to the very heart of the problem here—that we have a gigantic infrastructure project being undertaken by the federal government with inadequate planning, inadequate preparation and, above all, no cost-benefit analysis. At no point did the federal government, the Gillard government or the predecessor Rudd government, address this question, which is surely the core question: what is the fastest and most cost-effective way to ensure that all Australians can have access to very fast broadband? How do we do that in a way that ensures it is affordable, recognising that the biggest barrier to internet access is not technology, nor indeed is it geography, but lack of household income? Households with incomes of $40,000 a year or less are eight times more likely not to have access to broadband, to the internet indeed, than higher income households.

Yet with the way the NBN is being undertaken we see a heavily capitalised, overcapitalised government monopoly which by reason of it being a monopoly will have both the incentive and the means to charge higher prices. We know from the OECD that over the last five years or so broadband prices in Australia have declined by 69 per cent. Why was that? It was because of competition. There is no other reason. Businesses do not reduce their prices out of a caring generosity towards their customers; they reduce their prices to respond to competition, because somebody else is trying to get their business by offering a better deal. So they cut their prices in response. That is what has driven lower prices. And yet we see with the NBN an end to competition because the NBN will be, as conceived by this government, the only fixed-line connection for voice and broadband to households. So the HFC cable which currently passes 30 per cent of households will not be able to be used by Optus or Telstra, the owners of the two HFC networks, to offer broadband, let alone voice services, in competition with the NBN. There is no reason to do that other than to protect the already dodgy economics of the NBN.

In every other country in the world, governments, wherever they can, promote facilities based competition, and around the world the industry and governments and regulators alike are absolutely aghast that Australia not only is spending an extraordinary amount of government money on this broadband initiative but is actually setting out to eliminate competition. The Korean Communications Commission emphasised this to me most emphatically when I was visiting them in Seoul not so long ago. They said, 'Our policy is to promote facilities based competition.' If you want to have a rather bitter laugh, Mr Deputy Speaker, when I was in Shenzhen in the People's Republic of China speaking to telecommunications executives about broadband in Australia and broadband in China, I explained what was going on here. They listened carefully and respectfully and then said, 'We couldn't do that. We're actually committed to competitive markets here in China.' Really! The Gillard government is taking effectively a Cuban or North Korean approach to telecommunications; it is rolling back generations of reform.

Going back to the report, and the coalition's response to it, one of the points that the minority make, and it is a very powerful one, is that there has not been a case made for the need for, or the desire for or the readiness to pay for very-high-speed broadband of 100 megabits and higher to residential premises. Indeed, around the world telecoms firms have been unable to secure any sort of meaningful premium, if any premium, for people to upgrade to those higher speeds. The reason for that is pretty straightforward: geeks and internet aficionados love to talk about so many megabits per second, but for the vast majority of the population that is an abstraction. What they want to know is: what can I do with it? 'Don't tell me how many bits per second I'm getting. I want to know what I can download and what services are available to me.'

The difficulty that telecoms firms face is not the difficulty that advocates of this project face; it is that you cannot identify the applications that are available at 100 megabits per second but are not available at lower speeds—20, 25 or 40 megabits per second—that can be achieved with a much smaller investment. Remember, the most recent research out of Europe by Analysys Mason is that fibre to the home—that is to say, taking the fibre right into people's homes, as is proposed here for 93 per cent of the population—is in the European experience 3.4 times more expensive than a fibre-to-the-node deployment, where the fibre is brought into the field to such a point that the copper loop is sufficiently short—it might be 500 or 800 metres or less—that very high speeds in the order of 40 megabits per second and indeed much higher, as BT is finding in the UK, can be achieved. So the cost argument is pretty basic. It is to say: if, for a third or less of the cost of fibre to the home, you can achieve speeds and connectivity that is well in excess of what people need today and are prepared to pay for, why would you not do that and, then, if there is a market for fibre to the home at a later date, spend the money there. In other words, pay regard to the time value of money.

But the advocates for fibre to the home—and Senator Conroy is a good example of this—will often say things like, 'We are building this to enable us to use in 25 years time the applications that we are not able to dream about today.' I do not know whether Senator Conroy and I are on the same planet, but it is really incredible that a minister of the crown would be talking about spending $50-plus billion for an objective as absolutely ethereal as that.

Senator Ludlam, the Greens' media and communications spokesman, was at an ACAM conference in Sydney recently, at which I was also present, where he made the case for the NBN and the provision of this very high-speed bandwidth. It is important to repeat it here, because it really sums up the recklessness in a lot of the advocacy here. Everybody in the business—and the NBN is included in this—argues that the application this very-high-speed bandwidth will use is in fact lots and lots and lots of video, because high-definition streaming video involves the big files. It is the only application that one could conceivably imagine, other than some very special cases, would occupy very large amounts of bandwidth like this. That has been the experience elsewhere. Those telecoms companies, whether they are in Korea or Japan, that have tried to promote very-high-speed products have sought to bundle them with lots of video. You may well ask whether the taxpayers of Australia should be subsidising this channel to provide more video, but that is what those advocates have said is the killer.

Mr Husic interjecting—

Senator Ludlam said that he did not think that the killer app for broadband was video. He said:

'It is something that will be new—Google-augmented reality, cyberspace bleeding across into the real world, a merging of worlds.

That is the basis upon which the Greens apparently have supported this project. It is extraordinary, and at the time it made me think about the great lines from the opening number in the Rocky Horror Show where the cigarette girl comes out and says:

"But when worlds collide," said George Pal to his bride, "I'm going to give you some terrible thrills."

So we have worlds colliding and worlds merging. Of course, the chorus to that song was 'science fiction', and I fear that that is what the good senator was talking about.

The member opposite who was so angrily interjecting a little while ago was talking about Western Sydney, which he represents. There are many areas in our cities—and, indeed, in our regions—where there are inadequate broadband services. The need to upgrade those services to a very fast speed is undoubted, but a government which was responsible and members of parliament who were careful and thoughtful about taxpayers' money and recognised that their constituents have infrastructure needs over and above better broadband would surely argue for a technological solution that not only delivered the upgrade more quickly but also delivered it at the lowest cost. The answer for Western Sydney is, to the areas that have been poorly served—

Government members interjecting—

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