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

At the outset, let me restate our position on the National Broadband Network, the construction of which is the context for almost all of the provisions in the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. The coalition is committed to making fast and affordable broadband available to all Australians, regardless of where they live. We believe that the achievement of this goal will be assisted by a competitive telecommunications sector and recognise that competition would be enhanced by the separation of Telstra’s customer access network from its retail business. Those apparently then are the objectives of all members. The challenge is to realise them in a way that minimises the expense to taxpayers and ensures Telstra shareholders are treated fairly and equitably.

This bill involves a number of changes to the legislation which are objectionable and a number of changes which are desirable. While there are many things in this bill that we agree with, it is, like the curate’s egg, good only in parts. The NBN scheme involves the overbuilding and dismantling of the entire Telstra customer copper access network. It involves $43 billion of taxpayers’ money being invested to create a government owned fixed line monopoly. This monopoly will be reinforced by contractual agreements that prevent Telstra from using its HFC network—that is its pay television network, which is not going to be decommissioned—in other voice and data services in competition with the NBN. So part of the deal is that, purely for the purpose of underpinning the already dodgy economics of the NBN, the government is entering into a contract with Telstra which will preclude Telstra from competing with the NBN using its HFC network. The government looks forward, we know—because it said so—to doing a similarly anticompetitive deal with Optus.

The objective is to not only create a government owned business monopoly but entrench it using the power of the parliament to eliminate and inhibit competition. That is turning back more than 20 years of economic reform in Australia. It is a reversion to the pattern of state governments in particular owning businesses and using their governmental and political muscle to protect those inefficient monopoly businesses. That is one of many reasons why this proposal needs to be carefully analysed and why it should, as we have recommended and indeed as the OECD has recommended, have a cost-benefit analysis of it undertaken by the Productivity Commission.

Telstra shareholders are going to get $11 billion of after tax value for this. As a consequence, the Telstra board supports the deal. But our responsibility here is to the taxpayers of Australia. I have said a number of times that in many respects this NBN proposal represents a conspiracy against the taxpayers. We have vendors that want to sell equipment. We have contractors who want to dig ditches and lay fibre. We have telcos—some of them, not all of them—who see this as a great business opportunity and certainly support the end to the vertical integration of Telstra. We have Telstra’s management seeing this as a home run for their shareholders. David Thodey, the chief executive of Telstra, sees Stephen Conroy as playing Alan Bond to Thodey’s Kerry Packer. It is an absolute home run for him. No doubt, he hopes that at some point the NBN will fail for whatever reason and he might be able to, like Kerry Packer, buy it back for a fraction of the price.

Our job here is to protect the interests of the taxpayers. The policy objective should be as follows: to deliver universal and affordable broadband across Australia. That is number one. We should do so in a way that imposes the lowest net cost to Australian taxpayers. We need to ensure that we have an industry that is truly competitive. Thus we need to end the vertical integration of Telstra, but we need to do so in a way that is fair to Telstra shareholders. The primary objective is for universal and affordable broadband and the other secondary objectives support the primary one.

The question is: is this the best way to achieve that objective? It is certainly the most expensive way. In fact, it is difficult to imagine a means to a policy objective that could be more burdensome on the taxpayer than the one proposed here with the NBN. A more prudent approach, and one that has been recognised as entirely feasible for many years, would be to see the Telstra customer access network transferred into a separate company owned initially perhaps by Telstra’s current shareholders.

This new network company would provide wholesale carriage services to all retail carriers on equal terms. Vertical integration would be at an end. This new network company would be a regulated utility with pricing guarantees that ensured that it received a reasonable return on its capital investment. It would know that as it invested more in its network it would receive an appropriate return. This is the model used for utilities used in other sectors such as water, gas and rail. This new network company would be mandated to rectify black spots in the cities and underserviced areas in regional and remote areas to ensure that all Australians had at least 12 megabits per second broadband. Schools and hospitals would be delivered faster broadband where it is not already available. As honourable members know, for the most part it is. Where this could not be done economically because of geography or historical network design choices, a transparent subsidy would be provided.

Such an approach would achieve all of the policy goals referred to earlier. It would minimise the financial burden on taxpayers. It would ensure that our existing network was upgraded and improved over time in line with the demand for faster broadband. It would ensure that all Australians had access to broadband at a speed that is more than capable of handling the available applications. The government will say that anything less than fibre-to-the-home at 100 megabits per second is inadequate. Picking technologies is hard enough if you are in business. If you a government, you are sure to fail. Our policy for universal and affordable broadband should be technology agnostic. As for higher speeds, where they can be provided, no doubt they will be. And they already are being provided by the market. There is no evidence that households will pay a significant or any premium for such higher speeds, however. That has been the experience of telecommunications companies here and around the world.

I note that in the United States the minimum broadband target is four megabits per second. We should never forget that speed is only of value to a customer to the extent that it enables that customer to use the particular applications that they want to. The 100 megabit per second fibre-to-the-home objective of the government has become little more than a religious devotion utterly unconnected from economics or market reality. To justify a $43 billion taxpayer investment, as the minister has done, on the basis that it will be used ‘in 20 years time for things that we do not know about’ is reckless in the extreme. In 20 years time most of the equipment in the NBN will have been replaced, some of it several times.

The refusal of the government to subject this NBN to a rigorous, independent cost-benefit analysis represents one of the most disgraceful abdications of fiscal responsibility in our nation’s history. Never has so much money been spent with so little scrutiny. I will not repeat to the House the many statements made by Labor ministers about the need for rigorous cost-benefit analysis of projects, but I remind the House that only two years ago the government established Infrastructure Australia with the express purpose of assessing major infrastructure projects. As part of that process of assessment, Infrastructure Australia stated in its 2009 guidelines for better infrastructure decision making:

… all initiatives proposed to Infrastructure Australia … should include a thorough and detailed economic cost-benefit analysis … In order to demonstrate that the Benefit Cost Analysis is indeed robust, full transparency of the assumptions, parameters and values which are used in each Benefit Cost Analysis is required.

Let me now turn to the detail of the legislation. As I said earlier, like the curate’s egg it is good in parts, but it also seeks to utterly subvert the normal operation of the Competition and Consumer Legislation Act, better known as the Trade Practices Act—the key national law protecting the interests of consumers with regard to this proposed $11 billion NBN-Telstra deal. It places a gun at the head of Telstra shareholders in the crudest possible fashion, with the government threatening to pull the trigger unless the firm separates the retail business and customer access network and migrates its customers to NBN Co. in the way the government has demanded. We oppose those measures. Therefore, we will be seeking to amend the bill in six areas, which I will discuss in greater detail shortly.

Firstly, there is the matter of the separation of Telstra. One of the key objectives of the bill is a proposal by the government to require Telstra to voluntarily bring forward to the ACCC a plan to structurally separate its network and retail businesses. If it does not, or if the structural separation undertaking is not accepted, the current form of the bill requires Telstra to functionally separate—that is, divide its network and retail business units so that they operate at arm’s length. The bill essentially provides ministerial discretion to prevent Telstra from bidding for next-generation 4G wireless spectrum via a disallowable instrument. It also provides ministerial discretion to compel Telstra to divest its HFC pay television cable network and/or 50 per cent interest in the Foxtel pay TV business. The gradual decommissioning of the Telstra copper customer access network and migration of Telstra customers to services provided over the NBN, contemplated in the agreement, would be accepted by the minister and the ACCC as a valid structural separation plan. The minister would have, under this legislation, the discretion to direct the ACCC as to the criteria to be used in deciding whether to accept a separation plan.

As we all understand, Telstra’s vertical integration has been a contentious issue since the 1990s. Various options for separating Telstra’s fixed line network from its retail and wireless businesses have been canvassed, and I discussed that earlier in my remarks. We support separation. We recognise that it would enhance competition. We have seen separation work effectively in other utility industries, such as energy and railways. We have also seen it improve telecommunications outcomes in other countries, including the UK and Sweden. Many people, both inside and outside Telstra, have argued for more than a decade that it was actually in the interests of Telstra shareholders to allow this to happen in order to promote greater shareholder value for Telstra. The decision of Telstra management over a long period of time to oppose this root and branch was, in the views of many, unwise. Given Telstra’s current share price, it is hard to argue that the existing approach or the previous approach has worked well for the company’s 1.4 million shareholders or for its thousands of employees and millions of customers.

So, as I said earlier, we welcome in principle Telstra separating into retail and network businesses. But we do not believe that such a separation should occur under duress or via a deal that is possibly in breach of the nation’s competition laws or via the creation of a new and vastly wasteful government monopoly. Any such restructuring should be on terms such as those I described earlier which are fair to Telstra shareholders and impose no greater costs on taxpayers than are necessary. The NBN policy of the government does achieve structural separation, but at enormous and unnecessary cost to the taxpayer and via the establishment of a new government owned fixed line monopoly with which there will be no competition. One of the paradoxes of the current debate is that this structural separation of Telstra’s network is cited by its competitors and the government as the greatest benefit of the NBN, yet there is absolutely no need to build a new network to achieve it. If vertical integration is the problem, then the NBN is using a sledgehammer—an extraordinarily expensive and elaborate sledgehammer at that, paid for by the taxpayer—to crack a nut.

The second key objective of the bill is to exempt the proposed NBN-Telstra agreement—and no doubt NBN deals with other carriers such as Optus—from the normal operation of the Competition and Consumer Act, formerly known as the Trade Practices Act. This statutory authorisation for what otherwise would very likely be viewed as an anticompetitive arrangement is based on the government’s argument that the proposed NBN-Telstra agreement is in the national interest. I say ‘anticompetitive’ because the deal envisages Telstra being contractually required to decommission its copper network, an asset that still has substantial if lessening economic value, as the NBN is rolled out to ensure that the latter enjoys a fixed line monopoly. It also envisages Telstra—and potentially Optus—being contractually forbidden from offering broadband and voice services over their pay TV networks, which pass about 30 per cent of Australian homes and could be tuned up to deliver speeds of over 100 megabits per second today—as, indeed, the HFC network of Telstra in Melbourne already has been tuned up to deliver.

I recognise that it will be argued that, as the fibre-to-the-home overbuild progresses, the economics of the copper network will deteriorate to the point where it makes more sense to decommission it. That may be so, but the HFC network will not be decommissioned and will continue to provide pay TV services for many, many years to come. There is absolutely no justification for the ban on competition from the HFC network, other than to protect the economics of the NBN fixed line monopoly. The government’s approach here is without precedent anywhere in the world.

I was reading today a discussion delivered by one of the telco partners of Gilbert and Tobin, Mr Pascoe, whom at least one honourable member would be familiar with. He said, ‘The reaction of other countries to the NBN proposal was one of raised eyebrows and growing concern.’

Indeed, only the other day one New Zealand businessman who is involved with that government’s fibre rollout, where the government is spending $1.5 billion in total to support a public-private partnership to deliver fibre around New Zealand, said to me that the big difference between New Zealand’s approach and Australia’s was that, in New Zealand, the business plan came before the investment, whereas we seem to have made the investment decision and still have not got the business plan together. It is really becoming quite an embarrassment. The strictures we saw in the OECD report just underline how unprecedented the government’s approach is. Nowhere else in the world is the government proposing to force a carrier to dismantle its copper network just to maximise revenues and eliminate competition for a government owned monopoly, regardless of the economic value of the existing network.

Nowhere else in the world is broadband over copper, such as ADSL or VDSL, effectively being banned, regardless of whether it provides service of a quality and price that customers want. Nowhere else in the world is competition for fibre from HFC being banished, again, simply to prop up a government owned monopoly. On the contrary, broadband and voice delivered over HFC cables is the main form of facility based competition for copper and optical fibre in most countries in the world. Why on earth would this parliament believe the Australian government has this right and every other country in the world has it wrong? The OECD, as I have noted, is also critical of the way in which the NBN will be structured so as to be the sole provider of fixed-line communications to Australian households. ‘Facilities based competition is of great value,’ the OECD writes in its economic survey of Australia, and I quote:

Multiple empirical studies have stressed the value of competition between technological platforms for the dissemination of broadband services …

And further:

Moreover, such a monopolistic incumbent—

such as the NBN—

could forestall the development of, as yet unknown, superior technological alternatives …

Passage of this bill is not essential to completion of the Telstra-NBN Co. deal. It is not essential to the completion of the NBN. In fact, there is no need to do a deal with Telstra to have the NBN. That was certainly the government’s policy and, indeed, what the McKinsey implementation study also claimed. Telstra clearly believes it has pulled off an excellent deal here on the effective sale of its customer access network to the government. But the competition laws are not about protecting the interests of Telstra’s shareholders or about maximising the revenues of the NBN Co.—a government owned monopoly—or about permitting the Labor Party to turn back more than 20 years of economic reform; they are about protecting consumers and promoting competition. This deal, and the competition laws, should be dealt with by the ACCC, just like any other. It is also important to bear in mind that, when we talk about universal affordable broadband, there is a digital divide in Australia. Overwhelmingly, that divide is marked by income. Forty-three per cent of households with an income under $40,000 a year have internet at home. That figure rises to 76 per cent in households with an income of between $40,000 and $80,000 a year. In households with an income of between $80,000 and $120,000, 89 per cent have the internet and, in households with an income over $120,000, 95 per cent have the internet.

The difference between the number of metro households and regional households having internet access at home is considerable—76 per cent in the cities, 64 per cent in the regions. But, overwhelmingly, the biggest marker of the digital divide is household income. The NBN will not bring down prices; it will put them up. It is going to be a massively overcapitalised, government owned monopoly with no competition. There will be an inevitable pressure on the management of the NBN to charge more. Indeed, notwithstanding that, over many years, we have seen prices of telecommunications come down again and again year after year, in the McKinsey study we see, as expected, that the wholesale price for access to the NBN will increase in real terms every year for the next decade.

That is a reversal. We have had telecommunications costs coming down, increased access to the internet but not enough to deliver anything near ubiquitous penetration among low-income households. So affordability is a big issue. What the government is doing is creating a scheme which will actually make the internet less affordable, so it is defeating one of the key objectives.

The reality is that if you have an investment of this kind you will get one of two things or, more likely, both. You will get an inadequate return to the shareholder—in this case, the Australian taxpayer—or you will get the monopoly extracting monopolistically high prices for its services as a means of recovering on the investment. The truth is that, given the scale of this investment and the nature of the monopoly, you will probably get a bit of both. It will be a classic lose, lose—a lose for taxpayers and a lose for consumers.

The third key area that the bill addresses is the regime governing competitive access to facilities such as Telstra’s customer access network. This is really designed to deal with the interim stage before the NBN is built. The existing telecommunications access regime is widely seen to have been only partly effective, since Telstra has frequently been able to use the negotiate-arbitrate framework to delay and, in some cases, frustrate seekers of access. Telstra’s board and management have responded to the regime in ways they believed maximised value to their shareholders, although in this regard I note and welcome the, if you like, less abrasive approach, the less confrontational approach of the current management. Telstra’s competitors have accused the company of gaming the access regulations and, as a result, have sought a more predictable and less contentious regime.

The bill amends the access regime included in the Competition and Consumer Act away from ‘negotiate/arbitrate’ as a model for declared services to a new one where the ACCC sets upfront price and non-price terms for declared services for periods of three to five years. This has been described as a ‘set and forget’ model to provide increased certainty for access seekers and carriers. But, in providing more certainty for Telstra’s competitors, we need to be careful not to tip the balance too far and unfairly limit the scope for the company to appeal if the ACCC gets it wrong. Therefore we will be moving amendments which would restore merit reviews of ACCC part XIC decisions and reinstate the ACCC’s procedural fairness obligations when issuing a competition notice under part XIB.

Finally, the bill reinforces the existing consumer protection safeguards in the industry, including the universal service obligation and the customer service guarantee. While these changes place an increased burden on carriers, the coalition supports them and will not be moving amendments in this area. In particular, we believe it is critical for consumer protections to be meticulously upheld in rural and regional areas, where, as we all know, access to reliable communications services is critical.

In summary, the coalition amendments would ensure that the normal operation of the Competition and Consumer Act, the key legislation in this country protecting the interests of consumers and promoting competition, applies to the NBN-Telstra deal. In other words, our amendments would ensure that this, the biggest merger in the telecommunications sector in our history—and the establishment of a government monopoly—is not excluded from consideration by the ACCC under its powers under section 51. We would ensure that the parliament is able to disallow ministerial directions to the ACCC regarding the NBN-Telstra deal. We would restore merit reviews to ACCC enforcement of the new access pricing regime. We would restore procedural fairness to the ACCC enforcement of the new access regime. We would remove the ‘gun at the head’ provisions which threaten Telstra with losing access to next-generation 4G wireless spectrum and remove the ‘gun at the head’ provisions of the bill which threaten Telstra with being forced to dispose of its HFC pay television cables and/or 50 per cent interest in Foxtel if it does not structurally separate in a way acceptable to the government. These last two amendments will be moved as a single group of changes.

The support for the coalition’s position in this matter is growing all the time. I have referred to the remarks of the OECD. They are worth dwelling on because the OECD’s report is normally—I think invariably—written with the closest possible collaboration with the Treasury. It is very unusual for an OECD report of this kind to be as critical of a government’s domestic policy as was the report published yesterday. It is quite common for the OECD to issue all sorts of exhortations to greater efforts in terms of economic reform, but to actually challenge a government policy is very rare. What the OECD has challenged most clearly and repeatedly is the way in which a monopoly is being created here. Its concern is considerable—and that, of course, is reflected in the advice the Treasury gave the incoming government in the red book, where it highlighted two major concerns. One was the obvious risk to the public balance sheet of investing $43 billion with no business case, no cost-benefit analysis and no attempt ever to ask, ‘What are we trying to achieve?’ and then, having defined that as universal and affordable broadband, ‘Is there a cheaper, speedier, more cost-effective way of achieving it, one that better promotes competition?’ Those questions have never been asked by the government because they fear that the answer will not be to their liking.

We have seen only today that the Alliance for Affordable Broadband, a group of leading competitive telcos including AAPT, PIPE Networks, Vocus, Ipera Communications and Allegro Networks—all leading players in the competitive telecommunications industry—have written an open letter to the Independent members of the House of Representatives which they have published. This is what they say, and it is a very pithy summary of the concerns that are being more and more shared across the country. The Alliance for Affordable Broadband write:

We recognise that as a nation we already have some catching up to do to bring broadband services to many areas of Australia, particularly regional and remote areas. But, policy of this magnitude which carries with it fundamental changes to the entire fabric of the national telecommunications landscape and re-creates a new government-owned monopoly requires Members of Parliament to ensure such a policy is the best policy for the future development of the country, and in particular the delivery of the most efficient investment by the Australian taxpayer. Past delays cannot justify panic or cut corners now. Mistakes we make in the design and/or policy settings for the proposed NBN, particularly in the areas of structure, affordability and accessibility, will not be easily fixed down the track and could be disastrous for our international competitiveness. You find yourselves in the position of being able to ensure the Government’s policy is sound and that taxpayers’ money is spent well and wisely.

The Productivity Commission is experienced in doing this kind of analysis. It is well respected and credible because it is independent and rigorous and conducts its review transparently. It will approach the question independently and dispassionately, and present the facts. Facts are what is missing from this debate.

This is a vast project that the government is undertaking. We support the objective of universal and affordable broadband, but we must achieve it in a way that protects and enhances competition and in a way that does not impose an utterly unnecessary burden on the Australian taxpayer and ultimately the households that will seek to access the internet through this network.

Michelle Rowland (Greenway, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to rise and speak in support of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. I will address, firstly, some of the issues that have been raised by the member for Wentworth, who has come in here again and said that we all have the same objective. We do not, because on this side our objective is not a solution that would have been great in the year 2000, not 12 megabits per second. Our objective is universal, ubiquitous broadband that will last and that will drag us into the 21st century. I will say in relation to his notion that he has a new plan that it is very interesting. Yet again, I point out that this is the coalition’s policy—it is still on their website—and, if it is such a great idea to have the separate network company that he is proposing to set up, they had 12 years to do it. They had 12 years and they specifically dodged the issue, and all of a sudden it is a great idea.

I will address some of the other issues at a later time with respect to the amendments and I look forward to reviewing those proposed amendments very closely. But one thing that made my ears prick up first of all was some ideas of reinstatement of merits review. If I recall, in 2002 the removal of merits review from a number of aspects of the negotiate-arbitrate model was specifically Howard government policy, enacted and supported by this side, because of the continual gaming of the regulatory system, locking things up in merits review in the Competition Tribunal for years. For years, things were banked-up in the Competition Tribunal. We never had lower prices. At times they should have been delivered because of this level of gaming, and yet we hear about merits review being reinstated.

On the issue of the United States and some of the other countries that the member for Wentworth has mentioned, the last country I am going to take advice from on this point is the US. Here is a country with a minimum broadband target of four megabits per second and they have a regulator that has stepped back from wholesale regulation. When the rest of the world is pursuing wholesale regulation to ensure a competitive level playing field, the FCC is stepping back. It is a basket case in terms of competition. You go to regions in the US and you find they have no competition in broadband whatsoever. They have got a USO system that went bankrupt. The last people that I am going to take advice from is them—or maybe the second last, because New Zealand is a country that only a couple of years ago finally established telco-specific competition law. Do you know what they used to do when they had disputes? They used to go to the Privy Council—the Privy Council for God’s sake! So the last people I am going to take advice from are these countries that the member for Wentworth has mentioned.

He talks about what technology is going to be here in 20 years time. Well, unless someone wants to prove me wrong, in 20 years time, nothing is going to get faster than the speed of light. Once you lay the fibre networks the only things you need to replace are the electronics on the end. You have the backbone there that will last far more than 20 years, far more than this mishmash of a bit of wi-fi, a bit of copper. It is still copper—you can keep upgrading it but it is still copper.

The member for Wentworth talks about facilities based competition. Hasn’t that worked in Australia! The market really has delivered on that point. The member for Bradfield came in here the other week and said that the market should be able to deliver competition. Note to self: it has not. If you look at any report in Australia about the state of competition, facilities based competition has been nonexistent for years. Yet he comes into this place and says that the market will deliver and that, yes, we have a digital divide. We do have a digital divide but, yet again, what did the opposition do when they were in government to address it? Enlighten me. I wish to be enlightened because I know the answer is sweet nothing. I say to members opposite: do not come in here and preach to me about affordability; do not come in here and preach to me when we have got whole areas of the Blacktown local government area that are white on maps of internet penetration—where there is simply no internet. That is what was delivered under the previous government. The way that you deal with this is through retail competition delivered only through a wholesale open-access model, delivering pricing that actually drives competition at the retail level.

As a former practitioner in this area, I was involved in countless inquiries into how the regulatory system in Australia works, countless inquiries into parts XIB and XIC of the Trade Practices Act. At the end of it, even after all the reforms that occurred since 1991, the thing that we have to deal with is that it is still an inadequate system to deal with a broadband future. ICT, being the driver of total factor productivity, needs fundamental reform of the telco sector in order to work. This is an historic piece of legislation that addresses some of the fundamental problems that have plagued the telco sector since liberalisation of the industry commenced in 1991. There are many parts to this bill, and I will provide some context, but in the time I have I will concentrate on some specific aspects.

In 2001, the Productivity Commission released its report into telco-specific competition law. It investigated the need to establish a regulatory regime that would be relevant and robust for the future telecommunications environment and that would enhance overall community welfare. This was a two-year, very wide-ranging process and, as members would be aware, this led to the implementation of the Telecommunications Competition Bill 2002. Although the Productivity Commission recommendations and the subsequent legislative changes were significant, one cannot help but lament that this was a lost opportunity to implement reforms that would have led to the structural separation of Telstra’s wholesale and retail sectors. At the time, I did indeed lament that this was a lost opportunity.

As I noted in 2004 when I discussed ICT policy in Australia—A failure to converge, a failure to recognise convergence or a failure to care?following on the conference of the World Summit on the Information Society, which was held in Geneva in late 2003, I questioned whether Australia actually had an ICT policy that was comparable with the WSIS outcomes. It led me to the conclusion that Australia did not have an ICT strategy at all at a federal level. I concluded by arguing that Australia’s failure to adopt a coherent ICT strategy resulted in ICT policy settings that were inappropriate and unsustainable. I was proved right that these were wasted years. These were years when we should have been laying the policy ground work for a high-speed broadband network to actually make sure that Australia did not fall behind other countries in our region.

I mentioned that the opposition, when in government, specifically dodged the issue of structural separation. Do not take it from me, take it from the Productivity Commission’s terms of reference. The terms of reference specified that, in line with government policy, the inquiry would not encompass the structural separation of Telstra. So the Howard government failed to enact, failed to even look at, a much needed microeconomic reform that would have laid the foundation for the rollout of a national broadband network. That is just one example of the total disregard for broadband by the government of that time. They did not believe in it then, they do not believe it now and their failure to act on regulatory reform and broadband policy has hurt Australia’s global performance. Do not take it from me, take it from the facts. The member for Wentworth talks about the OECD. We are ranked 17th out of 31 OECD countries in terms of fixed broadband uptake; we are ranked 50th for broadband speeds. We do not even have one city in all of Australia in the top 100 in the world for broadband speeds. Unless we build the NBN, there is absolutely no way we will be able to increase our international competitiveness. We will just keep falling behind. Only recently a broadband quality survey saw Australia fall from 18th to 21st in the world broadband rankings.

As I said, what we really need to do is to understand what the NBN is: a fibre network which, once laid, will enable smart electronics at each end to use those pipes in a way that we cannot predict. We have not even imagined yet what those things will be able to do, but the most important thing is that the backbone will be there so that when these applications are invented you can use the pipes for whatever purpose you seek. When we talk about being technically agnostic, I agree we should be talking about being technically agnostic—at the ends. Who am I to argue with the physics of the speed of light, of an electromagnetic pulse going down this conduit?

What frustrates me, and what I know frustrates people all over my electorate—and I know so many people who have been following this debate—is how Australia is constantly not held up as one of the countries that can boast about what it has done in broadband. I refer to a report in the Sydney Morning Herald last Wednesday, 10 November, which talked about Korea. Korea, of course, has been in the news, and I think this is an excellent article. As it says:

We can learn a lot about broadband networks from this Asian powerhouse …

…            …            …

While Australia debates the merits of the broadband network, South Korea resolved to provide widespread high-speed internet more than a decade ago and now tops the world in broadband access. Just like education or high-speed rail, broadband is viewed as another type of infrastructure that gives the economy an edge.

It gives the economy an edge. It is not good enough for a modern, innovative and competitive economy that Australia is doing so badly.

Essentially, we got liberalisation right in the late eighties and early nineties. We had an independent regulator. We set up the current policy settings to be able to have different pieces of legislation to enable competition, to let in new players and to ensure that in the end we had an open carrier model here in Australia. But one thing we did not get right was that, from the mid-nineties onwards, it was as though convergence never happened. It is as though we did not end up thinking we needed an ICT policy. This progress that we see in our region is not going to happen in Australia of its own accord. We need to execute fundamental reform, and that is why this legislation is so important. It is overdue. It has been discussed for nearly two decades, but this is reform that will transfer Australia from the deficiencies of the 20th century regulatory structure to a regulatory structure for the 21st century. It will create much-needed infrastructure competition in the telco sector—infrastructure competition that simply has not happened and will not happen. It is reform that ensures we do not commit the mistakes of the past when it comes to the regulation of telecommunications in Australia.

This bill will be part of shaping the regulatory regime that will be applied to the NBN. By implementing structural separation of Telstra, this legislation deals with the greatest outstanding reform of our telco sector whilst providing the basis for the NBN to operate as an open access model. The open access model is essential for the delivery of faster, more affordable broadband services. I do not just speak as a former practitioner in this area. I also speak as an effective representative of my residents, and I would like to mention Mr Glen Meeves, who lives in Kings Park in my electorate of Greenway. He is well aware of the benefits of the NBN. In a letter recently published in the Sydney Morning Herald, he noted:

… lightning-fast broadband … is also a matter of social justice and equity. We cannot build the finest educational and medical facilities in every population centre, but world’s best practice in internet makes the physical absence irrelevant.

I totally agree with that.

I would also like to talk about the inability of the previous government to keep up with what has been needed for so long by new residents in greenfields estates. I have recently received this email from a resident who has moved into a new development in the north of my electorate called The Ponds. She wrote:

We are new residents in the new development of The Ponds and have been told by Telstra, Optus, iiNet and TPG that we cannot get broadband internet at all … It also baffles me that my house has been built next to a house in Kellyville Ridge which has been there for 5 years now, yet I cannot get broadband internet even though I am literally next door!

It is a disgrace that, as with so many forms of critical infrastructure that have bypassed greenfield developments in the past, policymakers in Australia have to date failed to undertake proper planning for the future communications needs of residents in our growth suburbs. What did those opposite do to address this when in government? What forward planning did they do? Again, it was sweet nothing. There was no ICT policy. It was 12 years in the digital backwaters. The convergence debate came and went and we just watched it go by.

I also note that the reforms in this bill are supported by Telstra. I refer the House to a media release issued by Telstra’s CEO, David Thodey, in which he states:

… we support the passage of the Bill …

We believe the interests of Telstra shareholders would be best served by the Bill being passed this year so that a definitive agreement on our involvement in the NBN can be reached quickly.

I am happy to take that on board as well. It is certainty that the sector needs. Indeed, this is the level of certainty that the sector needs in order to ensure that we have broadband delivered in a ubiquitous manner on a level playing field.

In the time allotted to me, I cannot go into all the details of many of the other very important elements of this bill such as reforms to the USO, the CSG or the infringement penalty regime. Certainly they are very important. I have been in touch with consumer groups on many occasions on these points. They should be very well received and I commend the bill to the House.

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I welcome the opportunity to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. This bill has three aspects to it. Firstly, its provisions will allow the structural separation of Telstra by providing for the legislative changes required to allow the separation. The bill also details how the government will impose sanctions against Telstra if it fails to voluntarily structurally separate. Secondly, the legislation makes a number of provisions in the Competition and Consumer Act which relate to the telecommunications access regime. In particular, the ACCC will be provided with the power to declare minimum prices and non-price terms in access agreements, which the parties may fall back on until the parties to an access agreement can negotiate different terms.

The third aspect of the bill relates to the consumer protection regulation. Given that Telstra are migrating their fixed line customers to the NBN, there will be a transitional period with regard to the universal service obligation. The government will create a new service corporation called USO Co. to deliver the universal service obligation. This bill provides that the USO provider must supply, on request, standard telephone services with characteristics and to performance standards determined by the minister. These performance standards are intended to include maximum periods for new connections, fault rectification and reliability standards. However, like the majority of telecommunications legislation introduced by this government, the minister is given excessive freedom to implement standards without the scrutiny of parliament.

This legislation was first introduced in the last parliament and sought to force the structural separation of Telstra by denying it from acquiring specific bands of spectrum and requiring Telstra to divest itself of its HFC cable network and its interest in Foxtel. That bill demonstrated the extent to which the government is willing to disrupt the telecommunications industry in order to force through its National Broadband Network. Labor was willing to use strongarm tactics against one of the largest companies in Australia in order to push through its flawed broadband policies. Telstra is now a publicly listed company. It has 1.4 million shareholders, 30,000 employees and 9 million customers. Attempts by the government to pressure Telstra were nothing more than an attack on the interests of those Australians who have invested in or purchased Telstra services in good faith. Against this backdrop, and with a gun to their head, Telstra negotiated an $11 billion deal with the government that will see Telstra’s fixed line customers migrate to the NBN and will provide NBN Co. with access to Telstra’s passive infrastructure such as pits, ducts and backhaul fibre.

The agreement will eliminate Telstra as a fixed line wholesale competitor to the NBN. As such, this bill has been modified to allow the voluntary separation of Telstra’s wholesale interests to proceed after shareholder approval. The bill still allows the minister to deny spectrum to Telstra if the proposed $11 billion agreement is not finalised. If the agreement fails, Telstra will be forced to functionally separate by conducting its network operations and wholesale functions at arm’s length from the rest of Telstra under threat of loss of access to 4G spectrum.

The coalition recognises that Telstra is now committed to the migration of fixed line customers, which amounts to a structural separation for the purposes of this bill. However, we do not agree with the government’s use of strongarm tactics against Telstra in order to force structural separation. Any separation must occur on terms that balance the interests of Telstra’s shareholders with the public interest. The willingness of Labor to completely remove competition to the NBN and to avoid scrutiny of the NBN’s operations is a dangerous approach to the industry that will not result in the most efficient services for broadband users. After more than a decade of government policy encouraging infrastructure based competition, the Gillard government is systematically preventing any competitive threats to NBN Co.’s wholesale network. The industry recognises that Labor is setting up a monopoly and that this will destroy competition in the wholesale fixed line market.

In its submission to the ACCC on NBN Co.’s points of interconnect proposals, Optus said:

It will not be economically viable for alternate last mile fibre based networks to be deployed in competition to the NBN … policy settings are likely to need to be re-set to discourage alternate investments in last mile fixed fibre access. This fact is implicitly recognised in the recent Telstra/NBN Co heads of Agreement which effectively removes the opportunity for Telstra to compete with the NBN either on its HFC or copper networks.

The current copper network is able to provide broadband speeds of up to 24 megabits per second to around 93 per cent of the population. Telstra’s HFC cables can provide speeds of up to 100 megabits per second. The majority of regular households in Australia only require a fraction of those speeds. NBN Co.’s first release sites in Tasmania are only experiencing an 11 per cent take-up of speeds of higher than 25 megabits per second. Labor’s solution to decommission or effectively prevent alternative broadband infrastructure from competing with fibre is simply unbelievable and flies in the face of the principle that competition is a key driver for better services and lower prices.

Both sides of the House recognise that broadband services need to be improved in regional and rural areas in Australia. However, only the coalition believes that instead of ripping up existing networks across Australia we should be targeting those regional areas first and improving their services first. We should be hitting the black spots in those areas where broadband is delivered at high cost to consumers. If Labor continued the coalition’s OPEL scheme when the government took office, those regional areas would currently be serviced by broadband speeds comparable with the rest of Australia. It is the Labor government who has delayed improved broadband services for regional Australia through its communications policy failures and still they have not been able to find a solution that is acceptable to the market, which will be left with a wholesale company far more monopolised than Telstra’s copper network.

In its report on Australia issued yesterday, the OECD was very critical regarding the market impacts of the NBN. The OECD said that the heads of agreement signed with Telstra eliminated competition between the new fibre optic network and the existing technological platforms, and that this:

… implies a de facto restoration of a public monopoly over the supply of access to wholesale internet services.

The OECD report goes on to say that:

… such a monopolistic incumbent could forestall the development of, as yet unknown, superior technological alternatives.

These comments are similar to those made by the company rolling out the government’s backhaul black spots Program—Nextgen Networks—in response to the government’s plans on locating NBN points of interconnect only in the capital cities. Nextgen told the ACCC last week:

• In the short term, competition will be impacted immediately.

RSPs are already reassessing their business models and deciding whether to operate within cost structures based on maintaining network assets or adopting a resale only model where they rely entirely on the NBNCo facilities.

           …         …         …

In the long term, competition will be structurally and irreversibly undermined.

I will repeat that: ‘structurally and irreversibly undermined’.

The explanatory memorandum for this bill argues that Telstra has been the main impediment against the competitive telecommunications sector. The memorandum states that:

… Telstra has been able to maintain a dominant position in virtually all aspects of the market, despite more than 10 years of open competition. It is the Government’s view that Telstra’s high level of integration has hindered the development of effective competition in the sector.

Given these concerns, it is worrying that the government’s solution is to create a monopoly with far more market power in the fixed line wholesale sector than Telstra currently enjoys. As Telstra pointed out to the ACCC last week:

… access seekers, in effect, swap Telstra as the sole supplier of backhaul for NBN Co as the sole supplier of backhaul. As limited as the prospects might seem today, access seekers also forfeit future competition because NBN Co’s bundling of its monopoly access product with the backhaul will foreclose any future competition.

Surely a better approach would be to encourage the structural separation of Telstra in order to improve competition, rather than creating a new monopoly shielded from market forces.

This is why the coalition believes that all aspects of the NBN must be scrutinised by independent experts and by parliament. In its pattern of avoiding scrutiny, the government has excluded the $11 billion deal between Telstra and NBN Co. from investigation by the ACCC. This comes after Labor’s exclusion of the NBN from the Parliamentary Standing Committee on Public Works and its refusal to complete a cost-benefit analysis. The coalition is currently attempting to ensure that the rollout is overseen by a joint standing committee of parliament. Refusing to allow the ACCC to examine Telstra’s deal will prevent an informed debate around the future competitive environment of broadband and allow the industry to raise any concerns about the deal.

Importantly, the parliament needs a better understanding of what the deal will mean for competition and broadband services in rural and regional areas. If we are serious about improving services in regional areas, the coalition believes that NBN Co. must provide as much detail about how it is rolling out its regional services as possible and what that rollout means for regional markets. As we all know, the Rudd-Gillard government has a long list of failed interventions in markets. Given its history, how can anyone trust how this government will spend $43 billion on a national broadband network? After so many failures, Labor is so worried about the NBN’s viability that it is removing competitive threats and refusing independent and parliamentary scrutiny. The forced migration of Telstra’s copper network contained in this bill, the blackmail against Telstra and the exemption of Telstra’s agreement with NBN Co. are further examples of this government’s efforts to shield the NBN from competition. Therefore, the coalition will move a number of amendments in an attempt to ensure that the migration of Telstra’s copper network to NBN Co. proceeds in a responsible and fair manner. These amendments build on the constructive approach the coalition is taking on the NBN. We have also introduced legislation and moved a motion to provide parliamentary scrutiny about the NBN’s rollout and to ensure that an independent cost-benefit analysis is completed with a business plan.

The amendments to be moved by the coalition aims to improve four areas of the legislation. Firstly, we will ensure that the Competition and Consumer Act applies to the proposed deal between NBN Co. and Telstra. Secondly, we will ensure that parliament is able to disallow any ministerial directions to the ACCC regarding the NBN Co. and Telstra deal. Thirdly, merit reviews and procedural fairness will be restored to the ACCC enforcement of the new access-pricing regime. Finally, the coalition will remove the ‘gun to the head’ provisions of this bill which threaten Telstra with losing access to 4G wireless spectrum, as well as its interests in the HFC television cables and Foxtel. The coalition strongly believes that this transparency can help ensure the NBN rollout targets regional areas first and ensures that services are improved in these areas first.

As I have outlined, it is critical for the industry and taxpayers that the sector benefits from the efficiency that maximum competition provides. Ensuring ACCC oversight of the Telstra deal will improve transparency. Parliament must also be able to disallow ministerial directions given to the ACCC with regard to this deal. The powers being given to the minister on communications policy by this government are extraordinary and parliament must exercise some oversight. Attempts to structurally separate Telstra must proceed with fairness to its shareholders, employees and customers. This is why the coalition will remove the provisions which place a gun to the head of Telstra unless it structurally separates.

As with the coalition’s other attempts to improve the NBN rollout process, we believe that broadband is too important to Australia, and to regional areas in particular, for it to be left in the hands of this Labor executive that has rolled out programs so poorly in its first term. The whole NBN process has been one of the government’s avoiding scrutiny at all costs. The disastrous policy failures of this government’s first term demonstrate the need for as much scrutiny as possible. Our amendments to this bill will improve scrutiny by protecting the role of the ACCC and will ensure that Telstra’s structural separation is not left in the hands of this Labor government. I urge the Senate to accept the coalition’s amendments and improve this legislation to encourage a fairer and more transparent NBN rollout in which the Australian people can have confidence.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

My poor old heart bleeds for poor old Telstra. Poor old coalition: too little for too long and now it is too late. This feigned interest by the coalition in bringing us to scrutiny, in having the parliament as the chamber of expertise to look through every clause and subclause of this legislation, beggars belief. I think those opposite are on to telecommunications plan No. 20, and that tells a story of its own. We on this side have a plan and we are actually getting on with it. Believe it or not, even Telstra believes that this is the way to go. It finally understands that this is the way to go if it is to have a future.

Twelve months ago I rose in this place to speak on the previous version of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. A lot has changed on the issue in that time, except of course the negativity of those opposite towards our vision of the fibre future, a vision shared by many thousands of Australians. Indeed, this negativity has intensified with the member for Wentworth being specifically assigned with the job of ‘destroying the NBN’. That is the coalition’s idea of policy development. At the time, I said this was about the ability of people, businesses and institutions of all sorts to have universal and comprehensive access to 21st century communications systems—and that remains unchanged. In that year we also saw some tremendous progress on the ground, particularly in my electorate, with the rollout of the first stage of the National Broadband Network, starting as it did at Smithton in the Circular Head region. Let me remind those opposite that this was the pioneering of the rollout. People do indeed have contractual obligations to other providers, but I remind those opposite that people are interested in signing up for the NBN and, as it rolls out, it will gather its own momentum.

Equally important was the landmark heads of agreement between Telstra and the NBN Co. made in June this year, which will encourage a much more cooperative approach to the future of telecommunications in Australia. Indeed, this legislation is specifically designed to allow this to happen. Another factor is that with the return of the Gillard Labor government comes the continued resolution to roll out its visionary NBN plan. It is worth reiterating this at this stage because its characteristics are at the heart of the legislation.

First and foremost, the NBN is a fibre-to-the-premises network. The Australian government has established a government business enterprise—NBN Co. Ltd—to design, build and operate an open access network, providing download speeds of up to one gigabit per second to 93 per cent of Australian homes and businesses, for which it is offering to contribute an initial cash injection of up to $43 billion. The remaining homes and businesses will be supplied using wireless and satellite technologies.

The National Broadband Network will be built with the following characteristics. The network is to be operational progressively over eight years as a government business enterprise. It must be able to provide high-quality voice data and video services, including symmetric services such as high-definition video conferencing. The network is expected to cost about $26 billion, with the government issuing infrastructure bonds to allow private investment in the network. This will be capped at 49 per cent. The network is to be open access and have a uniform pricing structure regardless of customer location. The Australian government will hold a 51 per cent share and will operate the network for at least 10 years once completed before selling down their stake, although there is debate about whether the network should be sold. It is estimated that it will create 47,000 new jobs over the next eight years and will support 25,000 jobs every year until completed. The NBN will be the largest single infrastructure investment in Australia’s history.

Work on the rollout in my home state began in July 2009 and the first services went live on 1 July 2010. Indeed, the Circular Head Christian School in my electorate was part of the very first transmission. Crucially, on 20 June 2010 Telstra signed a non-binding agreement to participate in the National Broadband Network rollout, and the revamped legislation before us gives effect to this.

As I say, the National Broadband Network will be the largest single infrastructure investment in Australia’s history, with enormous potential benefits for the nation. Better, faster and cheaper internet services will allow Australia to be at the forefront of the digital economy in the digital world. The new network will have a profound importance for Australia’s productivity and the ability of Australian businesses to thrive in a fiercely competitive world. It will help transform the way governments and non-government agencies deliver services, especially in health and education, and the way we communicate and entertain ourselves in our personal lives.

I am excited about its potential, for example, for families with autistic children. Burnie in my electorate is one of six sites chosen throughout the nation to network intensive autistic services in Tasmania and is already underway in doing so. The NBN will allow families to video access the centre from their own living rooms and hence access early, intensive therapy and services so vital in giving autistic children the start they need to tackle their individual needs. The NBN can also eliminate the communications disadvantages of country and regional areas and render them more attractive as business and employment locations.

However, as this legislation bears out, it is imperative that Australia get it right and get it right from the start. Getting it right is not just about getting the best technology, as important as that is; the real challenge will be in putting in place the right rules to govern how the network will operate. Those rules must ensure the network is run in a way that encourages competition and innovation in the downstream services provided by communications retailers.

I mentioned earlier that the NBN is opposed by the coalition. A week prior to the 2010 Australian federal election, the coalition released a $6.25 billion alternative policy, relying on a combination of public and private funding to build a primarily wireless network delivering a minimum peak speed of 12 megabits per second to 97 per cent of the Australian population. The plan included $3.5 billion to be spent developing an open access, optical fibre backhaul network. It was not long before the so-called alternative policy was criticised by the general telecommunications industry, with executives describing it as one that ‘harked back to an earlier era’, ‘lacked vision’ and was ‘muddy and unclear’. As one ISP CEO put it, ‘What policy?’

After the 2010 election, the member for Wentworth was appointed opposition communications spokesman, with the mission ‘to destroy the NBN’. I notice too that the opposition’s spokesperson on telecommunications was promptly sacked after the election and plonked on the back bench. That is how much integrity those opposite placed on their policy during the last election. The Australian people woke up to it, particularly further south and in rural and regional Australia.

Apart from the opposition and some naysayers in the conservative commentariat, there is overwhelming support for Labor’s NBN policy across a whole array of sectors and the Australian population. David Thodey, for example, the CEO of Telstra, was reported in the Australian on 20 October as saying:

We believe the interests of Telstra shareholders would be best served by the bill being passed this year so that a definitive agreement on our involvement in the NBN can be reached quickly.

On 19 August 2010, the Australian Internet Industry Association issued a statement supporting the NBN, outlining the problems of a proposed alternative based on wireless networks and criticising the comparative speed of broadband in Australia, saying it is:

… not a ‘nice to have’, it’s an essential part of a modern economy.

I do not need to remind this House, as I have at other times, about our poor record on internet services, delivery, speeds and expansiveness, or lack of it, compared to our overseas competitors.

In the past decade Australia’s internet use has grown by a staggering 12,000 per cent, with the rate quickly accelerating. Yet despite this, as the association pointed out, Australia is ranked 50th in the world for our average broadband speeds. I noticed on 21 September this year that Telstra announced that it was signing on to be a provider of services under the NBN, launching a trial in Tasmania to test the compatibility of its broadband service and digital products with the NBN.

Within this parliament itself, the NBN has the support of the Greens and a number of the Independents. Indeed, the members for Lyne and New England cited the NBN as one of the key reasons they decided to back the Gillard government. I remind those listening to this debate that on 7 September during negotiations concerning who might form a minority government, the member for New England, Tony Windsor, said of the NBN, ‘You do it once, you do it right and you do it with fibre.’ The member for Kennedy, the Independent Mr Bob Katter, was similarly reported as agreeing that the national grid and NBN ‘are a good thing for this country, a great thing for this country’. And support is also relatively strong amongst the technology sector.

Optus has viewed Labor’s win at the last election as an endorsement for the long-term NBN solution, as well as endorsement for the need for an overhaul of the current regulatory structure in Australia. Optus supports the legislation before us. Indeed, as Optus’s Director of Government and Corporate Affairs, Mr Krishnapillai, asserts:

We believe that the telco reform bill—including the structural separation of Telstra and the greater power for the ACCC to enforce a level playing field in the fixed line market—must be a priority for the new government.

Hence this legislation before the House. In an interview with the radio station 2UE in Sydney on 13 October, Mr Krishnapillai made it very clear that the NBN would be affordable to customers, saying:

We have done a lot of modelling on this, we’ve been through NBN Mark 1, we’ve been through years of modelling and work on this with the government and we know that the NBN, as it is characterised now, is commercially viable.

He went on to say:

… in the longer term the NBN is the right solution for the sector, it’s the right solution to deliver broadband and transform, if you like, how communications are delivered to customers and businesses.

I think Google Engineering’s Alan Noble put it best when he wrote Opportunities of the NBN for the ABC on 18 October 2010. He said:

The National Broadband Network will be the digital equivalent of the Trans-Australian Railway: linking towns small and large, bringing new life and new opportunities to our economy and our communities.

He further said:

… so too will a super-fast broadband network bring a freight train of innovation to our shores.

The legislation before us seeks to overcome the restrictions created by the dominance of one player in the telecommunications market. If passed, this will represent the most significant reform of the telecommunications regime since open competition was introduced in 1997. I know everyone in this House fully understands the need for that change.

Structural reform is clearly in the national interest. The bill includes provisions to authorise, for the purposes of section 51 of the Competition and Consumer Act, conduct by Telstra and NBN Co. relating to Telstra’s structural separation undertaking. However, the Australian Competition and Consumer Commission will make the final decision on acceptance of Telstra’s undertaking to structurally separate. Amongst other provisions the bill provides for Telstra’s structural separation undertaking to include a migration plan. There will be significant consultation on the migration plan, which will deal with the processes and timing of migrating Telstra’s customers from its copper network to the NBN. The bill now provides more legislative certainty for Telstra in the transition to a retail company. (Time expired)

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 and I do so with a great deal of interest, having been fortunate to work in the field of communications policy since the mid-nineties, starting with a number of years working for the Howard government’s first communications minister, Senator Richard Alston. I well remember the furious round of work involved in passing the 1997 legislation. The bill that is before the House today seeks to in some ways continue the theme of reform which underpinned the 1997 legislation, but in other ways regrettably very much reverses that direction of reform.

This bill is a mix of good and bad. I want to make three key points in the time that is available to me. The part of this bill that deals with changes to the current arrangements for setting wholesale access prices in the telecommunications sector is, in my view, sensible. The approach that it takes is one that I support and I will talk about that at more length.

The second area of this bill grants in effect a legislative authorisation of the proposed deal between Telstra and NBN Co. The bill includes the powers under which the minister can visit a whole series of undesirable consequences upon Telstra if that deal is not given effect to. I am somewhat curious to wonder why those provisions are actually included when you look at the triumphant press release issued by the minister earlier this year giving the impression that a deal had been done and all was agreed. It does rather raise the question why this set of draconian powers is required. What is particularly troubling is the strong impression which is given that Minister Conroy has an Orwellian belief that competition is so precious that we must destroy it, because that is the clear impression that emerges when you consider what is contemplated.

The third set of comments I wish to make concerns the provisions I have mentioned that give the minister the power to visit some very detrimental consequences upon Telstra if it does not voluntarily put forward a structural separation undertaking. I put to the House that this is a clumsy, thuggish and unnecessary tool to achieve the stated objectives of the Labor government’s telecommunications policy.

I will start with the changes that this bill includes to current price regulation in the telecommunications sector. I bring to my appraisal of these provisions the experience of having spent eight years on the senior leadership team at Optus. Optus is the largest purchaser of services from Telstra, spending over $1 billion a year on such services as PSTN originating and terminating access, mobile terminating access, local carriage service and the unconditioned local loop service. It formed part of my responsibilities at Optus to manage the process by which we sought to negotiate with Telstra and, then, should the negotiations fail, go to the ACCC to seek to have the matter arbitrated. This is what is referred to as the negotiate/arbitrate model. There is a fundamental problem with the negotiate/arbitrate model, which is that Telstra does not like selling these services. The company takes the view, I think correctly, that its market position would be considerably stronger if it were not required to sell these services and it therefore drags its feet at every opportunity.

I would like to share with the House a quote from Dr Phil Burgess, the former American senior regulatory executive, who blazed across the telecommunications night sky like a comet—a comet which fortunately has now blazed all the way back to the United States of America. While he was here throwing out provocative quotations in every direction, he had this to say:

If McDonald’s … has to go to a regulator before it goes into business and declare what it’s going to do on its ovens … and Hungry Jacks comes across the street and says, “I want to buy those fish sandwiches, by the way, at a discounted price, and, by the way, I get the first batch. I’m going to sell a lot of them and if you want more, you’ve got to build another oven. By the way, you build the oven at your own expense. By the way, the cost of the air-conditioning and the gas and the electricity and the lights, those don’t go into the price.”

I have not captured the fierce intensity, the passion, with which Dr Phil Burgess expressed the intense dislike of Telstra for the access provisions. But the fact is the company strongly disliked those provisions and the economic reality is, I believe, that it did so because it considered that those provisions weakened its market power. And of course those provisions were expressly designed to weaken its market power.

I had this to say when I wrote a book about this topic, called Wired Brown Land:

The 1997 laws were fine in theory. Subjecting Telstra to an access regime was a good idea. But in practice there was a very big problem: the laws were simply not tough enough in the way that they dealt with the giant of the sector, Telstra.

The laws established a process for Telstra’s competitors to use Telstra’s network, but the process is fundamentally flawed. It assumes—incorrectly—goodwill and a willingness to negotiate on the part of both parties.

But Telstra has no such willingness. Its interest is best served by charging the highest possible prices for access, by denying access wherever possible and by delaying for as long as possible the agreement of terms on which access will be provided.

That is my considered view, having worked for eight years as the executive at Optus—the largest customer of Telstra—responsible for exercising the rights of that company under the access regime to purchase services from Telstra.

I have mentioned that I was working for the Howard government when those laws were introduced and I simply say that all of us have learnt from experience. The laws were introduced with very good intentions and I certainly believe that the 1997 legislation moved the position forward considerably. But experience showed us that those price-setting provisions in the 1997 legislation were not sufficient. What was in fact required, we learnt over time, was a capacity for the regulator to set prices upfront—what is known in other markets as a reference interconnect offer. I have no hesitation in congratulating the present government on including within this legislation provisions that will now give the regulator that power. I believe they will significantly advance the cause of telecommunications competition.

Turning to the second area that I want to address, unfortunately, what I cannot congratulate this government on is the deeply regrettable parliamentary tactic of linking the provisions about which I have just spoken—the provisions that will modernise and reform the price-setting process—to a set of wholly unrelated provisions. The unrelated provisions are aimed at implementing and legalising Labor’s deeply flawed vision of establishing a new government owned monopoly network, forcing Telstra to exit the field, destroying its existing network and establishing a legally binding contract between Telstra and NBN under which this will happen. That legally binding contract, extraordinarily, would be illegal under the Trade Practices Act were it not for the fact that the government proposes to specifically authorise it under the piece of legislation that is now before this House. For example, section 45 of the Trade Practices Act says:

(2)

A corporation shall not:

(a)

make a contract or arrangement, or arrive at an understanding, if:

                          …            …            …

(ii)

a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; …

And that is precisely the likely effect of the deal that the Labor Party is proposing in the broadband sphere. It is a deal under which a new entrant into this sector, funded by the government, funded by taxpayers, the National Broadband Network Company, is going to build a new access network and at the same time do a deal with the owner of the existing ubiquitous access network, Telstra, under which Telstra will decommission its existing network—Telstra will trash its existing access network. That existing access network will no longer be available as a vehicle over which competitive services are delivered.

Labor does not want to put this grubby deal to the normal scrutiny which would be required, of having the ACCC consider it and determine whether it is compliant with the Trade Practices Act. Why is that? Because this government knows full well that it would not be compliant. We have the extraordinary scenario in which this government is abandoning the direction of policy of the last two decades in telecommunications, abandoning two decades of commitment to increasing competition and instead is establishing the National Broadband Network Co. as a monopolist and thereby doing fundamental damage to competition, all so it can preserve its stated policy that the National Broadband Network Co. will generate a positive financial return.

The third area of this bill I want to address is the provisions which encourage Telstra to come forward with a structural separation undertaking. These provisions are troubling on many fronts. They are troubling because of the duplicity we have seen from the Minister for Broadband, Communications and the Digital Economy, who in May 2009 said to a Senate estimates committee that he had never advocated the structural separation of Telstra. Senator Conroy said:

I have certainly never advocated structural separation, I do not believe.

Yet suddenly late last year provisions appeared in the legislation which were designed to elicit structural separation. I am on the record as being a supporter of structural separation. The Prime Minister has seen fit to quote extracts from a work I wrote about this very topic. She failed, I might add, to quote later parts of the very same book in which I suggested:

The third option is to stop negotiating and to exercise the government’s legislative powers. Under this option the government would pass legislation to separate Telstra into two companies.

There is no mention of $43 billion, no mention of the grubby deals under which legislation is required to give this new government-owned company a special free pass protecting it from competition. Let me be perfectly clear: I am certainly a supporter of structural separation, but, as Malcolm Turnbull, the member for Wentworth, the shadow minister for communications, has repeatedly made the point, there is no reason to spend $43 billion if your objective is to secure the outcome that you prevent vertical integration by separating Telstra into two entities under different ownership.

What we have here is a set of provisions which are designed in a thuggish way to force Telstra into agreeing to structural separation arrangements and at the same time to pay $11 billion of taxpayers’ money to give Telstra incentive to do that. We have the remarkable spectacle of a minister for broadband and communications rejoicing in the fact that he is going to have a monopoly. In Senate estimates just the other week, what did Senator Conroy say? He said:

We will, as I have said—particularly following the heads of agreement with Telstra—ultimately have the overwhelming majority of if not the monopoly on the supply of the wholesale network within the fibre footprint, unless people decide they do not want a fixed line.

What a tragic outcome for telecommunications competition in Australia this is, that after two decades of bipartisan work towards greater competition in telecommunications, which has delivered manifest benefits in mobile communications, which has delivered significant, albeit lesser, benefits in fixed-line communications, we now have a minister for communications in this country who has reversed that direction and who is positively rejoicing, positively rubbing his hands in glee, at the prospect that he is going to be the controlling shareholder of a monopoly, a company which has, by force of legislative power, the right to exclude any competitor. My prediction is this: based upon all the experience of a wholly owned government monopolist in telecommunications that Australia has had, this flawed scheme will serve Australian consumers very, very badly.

This bill is a mix of the good and the bad. It has provisions which markedly improve the telecommunications wholesale price-setting provisions, and they have my firm support based upon 15 years of experience in this sector. But those are what is required. To combine them with this grubby deal creating a monopoly broadband company and squandering $43 billion of taxpayers’ money is a truly bad mistake. (Time expired)

Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. This bill will enhance competition in the Australian telecommunications industry and strengthen consumer safeguards. The Australian telecommunications market is characterised by a very strong and highly integrated incumbent, Telstra. That is no accident. That has happened over many years. Prior to it being Telstra, it was Telecom. Prior to that, it was the PMG. It was a monopoly service. In many ways, a lot of that has stayed. If you have a look at a suburban street or a suburban office block or shop and see how the phone cable actually gets into the business or the home, there is only one way and there is only one cable. It will come down the street either on poles or underneath the footpath, maybe in a conduit, through a few pits, maybe from a local exchange; but it all comes back to one point, and that point is Telstra.

Competition is hard when you cannot use the infrastructure. We have seen it over many years when phone companies have sprung up and tried to do things. Optus did do some things. They installed their HFC and they were able to do some local phone hook-ups. It is still not easy for competitors to break into that market. When we talk about competition in telecommunications, we really need to have a good look at the way that Australia has done it, because it has not worked. We have some of the most expensive communications in the world. There is no need for it to be so expensive. What we are talking about with this bill will start to change that so that we are up there with the world—and not only in terms of cost but also in terms of speed and availability of access.

Telstra owns the only copper network, connecting almost every house; it owns the largest HFC cable and mobile networks; and it owns a 50 per cent stake in Foxtel, which is Australia’s largest subscription television provider. The Australian telecommunications market is unique in its structure and the Australian Competition and Consumer Commission has a role of investigating the state of the market. In its recent reports into the telecommunication industry of 2007 and 2008, the ACCC noted:

The competitive markets anticipated in 1997 do not appear to be emerging. The major downstream services continue to exhibit high levels of concentration, regulatory mechanisms are still heavily relied upon for promoting and maintaining competitive outcomes and the levels of consumer complaints about the industry reached new heights in 2007-08.

The report continued, noting ‘the industry continues to have an extremely high level of disputation and litigation’. In 2007-08, the ACCC was notified of 28 new access disputes and had 18 of its arbitral determinations subject to judicial review by the Federal Court. The ACCC report continued:

… the level of disputation and litigation in the telecommunications sector far outstrips that in any other regulated sector and is contributing to some frustration of competitive outcomes.

Separate to the official reports, the Chairman of the ACCC, Graeme Samuel, has made his views on the separation of Telstra well known. In a recent statement he said:

We have been debating this issue for years and years and years. The ACCC, the National Competition Council and many experts in the area have said the only way to infuse true competition into Australian telecommunications is to remove that vertically integrated structure existing with Telstra, and to structurally separate.

It is obvious from the ACCC reports that Australia’s telecommunications market is not functioning as well as it could.

Telstra’s level of horizontal integration across the different delivery platforms—HFC, copper, cable and mobile—is in contrast to many countries, where there are restrictions on incumbents owning both cable and traditional fixed-line telephone networks. Telstra’s horizontal integration has significantly contributed to Telstra’s ongoing dominance in the Australian telecommunications market. Since 1997 Telstra has continued to hold a significant share of the telecommunications market and has been able to block new entrants and competitors from gaining traction in the market.

And what has been the impact of this type of market here in Australia? As I mentioned before, it means higher prices for consumers. It means less choice. In many cases, it means lower speeds. Australia currently has the 5th most expensive broadband charges amongst OECD countries. It is estimated that Telstra enjoys profit margins of about 60 per cent on fixed line services—that is according to analysts at JP Morgan. And Australians face the world’s highest prices for sending a text message. You would not think so with the amount of text messaging that goes on now. But competition in this area is still not what it should be.

This bill is about breaking open the telecommunications market and enabling real competition to deliver lower prices and better services for all Australians. This bill will force Telstra to voluntarily separate its businesses by denying the company its ability to bid for valuable future spectrum if it does not undertake that separation. It is envisaged that Telstra will negotiate a transfer of its fixed line assets to the new National Broadband Network. On 20 June this year Telstra and the NBN Co. announced that they had entered into a financial heads of agreement to move its fixed-line asset to the new National Broadband Network. The agreement will deliver structural separation by providing for the progressive migration of customer services from Telstra’s copper and pay TV cable networks to the new wholesale only network to be built and operated by the NBN Co. Such an approach will ultimately lead to a national outcome where there is a wholesale only network not controlled by any retail company. This is critical to fostering greater competition in the telecommunications market. Again, it is about choice. This company, NBN Co., will on-sell its capacity to all competitors in the market. This type of competition is currently not possible as the holder of the majority of the fixed line assets, Telstra, is a profit-making competitor to the companies to whom it is selling capacity to.

The way things are going at the moment is just not working. The government’s key objective is to promote an open, competitive telecommunications market to provide Australian consumers with access to innovative and affordable services. This legislation will amend the Competition and Consumer Act 2010 to clarify the role of the ACCC in determining the price that competitors will pay to access the NBN. Under the proposed changes to the Competition and Consumer Act 2010, the ACCC will set price and non-price terms of access for declared services in an access determination to apply to all parties. The bill will also remove the right to seek merits reviews of the ACCC’s regulatory decisions. The removal of this right to review is due to an excessive amount of disputes and litigation, which has had the effect of delaying and suppressing competition in the telecommunications market.

In addition to seeking the separation of Telstra’s business and generating a changed market for telecommunications, this bill will enhance and strengthen Australia’s consumer protection legislation. The bill strengthens existing legislative requirements to better protect consumers, address falling service quality and ensure continued access to basic voice services in the lead-up to the NBN. There are measures to improve the effectiveness of the regulating body, the Australian Communications and Media Authority, through enhanced regulatory powers. And this bill amends the Consumer Protection Act to include new requirements for the customer service guarantee. That covers the universal service provider and ensures that they supply on request standard telephone services with characteristics and to performance standards determined by the minister. It is intended that performance standards will include maximum periods of time for new connections and fault rectification and reliability standards.

We, as members of this place, all hear stories about our constituents having to wait extended periods of time to have faults fixed, to get new services installed or, even worse, to request a broadband connection to a suburban house and find out that, for whatever reason, they are not allowed to have broadband even though their neighbours may well have it.

The universal service obligation will include the provision of payphone services. There will also be public consultation and notification of proposals to remove payphones. That is another ongoing problem that many members of this place have spent a lot of time dealing with. Payphones are a simple issue and one that many people regard as a community asset anyway—even if it is at the local railway station. It is always in use but, in recent years, has always been under threat of removal because a profit motive is put behind it.

Mr Ciobo interjecting—

Those on the other side may actually not know how to use a payphone, but many of us on this side have spent years and years having to use such devices and having to catch the train to and from work.

ACMA will have new powers to direct the universal service provider not to remove payphones. Under this bill, new requirements will be imposed on service providers to ensure that statutory performance benchmarks are met. If they are not, the service provider will be subject to civil penalties. These enhanced penalties and the broad powers that this bill grants ACMA to issue infringement notices or on-the-spot fines for breaches of the civil penalty provisions will help ACMA effectively enforce this consumer safeguard.

This bill is about delivering for Australia an important reform in the telecommunications industry. Telecommunications, as we know, are central to an innovative and modern economy. Communications such as high-speed broadband can generate economic growth and create jobs. The current market, as we know, is dominated by Telstra, which has consistently protected its market share at the expense of new entrants.

This reform is supported by the Chairman of the ACCC and many informed experts. Reforming markets can make a substantial difference to quality and pricing. You only need to look at the changes in the airline industry with the dismantling of the previous oligopoly, the substantial drop in pricing and the rise in use of airline travel. The benefits that flowed to regional tourism as a result of that move are huge. The same can happen in telecommunications—especially for those on the other side who do not like to use payphones. This bill will enhance competitive outcomes in the Australian telecommunications industry and strengthen consumer safeguards. I commend the bill to the House.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

Before I call the member for Moncrieff, I draw members’ attention to the presence in the gallery of the Australian Golf Industry Council, in particular Stuart Appleby, the Australian Masters Champion, and Rachel Hetherington, one of Australia’s leading female golf professionals.

Honourable Members:

Hear, hear!

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. This is an interesting debate about how this nation addresses telecommunications issues. This has been an industry with perhaps the most rapid convergence and evolution of telecommunications, digital media, entertainment and various components that, in an increasing fashion, are coming together through a variety of mediums and through a variety of technologies. What we see in telecommunications is a difficulty from a policymaking perspective—and this applies both to coalition members and to members of the Labor Party in government—about the framework that we put in place to best deal with the issues and the policy responses required to do effectively two things. The first is to ensure that safeguards are in place—that there is a framework that enables a competitive environment across a range of currently separate but related industries. For example, pay television was once the domain of easily definable television operators and broadcasters but is now increasingly also the domain of mobile telephony and of fixed line broadcasting over, for example, pay TV. Increasingly, there is the ability to use the internet—in particular, high-speed bandwidth—to access, on demand, the kinds of media that people would like to watch on their computer screens or through streaming on their television screens.

Likewise, take radio: only a matter of a decade or so ago radio was discrete. It was something that could be pointed at, something transmitted wirelessly, by broadcasters. In our respective electorates across Australia, we had radio stations that we could listen to. But, increasingly, with the convergence of technology and the convergence of media, we see that radio can now be accessed both wirelessly—in the traditional sense of the word ‘wireless’—and over the internet. It is possible with a few simple clicks to start listening to a radio station effectively anywhere around the world.

This is an exciting period of time. Part of what this bill is directed towards is the grappling with a policy challenge that all parliamentarians face about the way in which we establish the framework that enables the ongoing convergence, development and deployment of new technology—the ongoing investment in research and technology and the ongoing commercial imperative that will drive what is required from the marketplace as we trial and error new technologies, new broadcasters, new approaches and new policy frameworks. By the same token, we also need to be mindful that there are at stake some legacy issues. That is the second limb that I referred to earlier. We know that Telstra—Telecom, as it was—was the monopoly supplier of telecommunications in this country. We know that Telstra was the behemoth of the Australian government that over the years has been increasingly subjected to a competitive tempo and to different competitors entering the marketplace.

With the convergence of technology, there is no doubt that Telstra’s competitors are now many more in number and also, in the delivery mechanism, quite profoundly different to what they were, for example, only 10 years ago. Part of the bill that is before the House today is the government’s attempted policy response to dealing with this convergence issue and to a rapidly evolving marketplace.

The coalition has some concerns about this bill. Although we are supportive, subject to the amendments that we have moved, the coalition’s concerns come down to several key factors, which in essence can be summarised by the fact that for all intents and purposes it would appear the government is holding a gun at the head of Telstra—and, in particular, through Telstra Telstra’s shareholders—with the bill that is currently before the House. The coalition has in the past opposed this bill. We now look at supporting the bill, subject to the amendments that I mentioned, because we recognise that the government has made changes which have improved the bill and has incorporated some of the concerns that the coalition has raised. But we still have amendments that, frankly, the government should look at adopting if it does not want to be political about this matter.

I have the privilege of representing around 100,000 people, many of whom are retirees, both self-funded and pensioners. A large number of these retirees, and people more broadly across my community in Moncrieff, are Telstra shareholders. They may have purchased Telstra shares in the first, second or third tranche of the sale of Telstra and they are looking for a return on the capital that they have invested in that company. Many of them have contacted me, concerned about this government’s plans to erode the market value of the asset that they used their hard-earned money to purchase when Telstra was privatised. That is the reason that, in some respects, the coalition sought to force the government to make changes, because we did not like their approach.

We know that intimidation is a stock standard operating process for many of the trade union movements in this country. We know that there are even elements of that intimidation that flow in the Australian Labor Party today. But, frankly, we should not accept the same kind of intimidation when it comes to one of Australia’s corporate players and to this government’s approach in dealing with what is a very important company, and one of the most widely held companies, in Australia today. That is why the coalition resolutely and steadfastly adopted the view that we would not kowtow to this government’s attempts to intimidate Telstra with respect to its structural separation.

I believe as a matter of economic policy that there are benefits to structural separation; I have always held that view. But the question, as always, is how, once the egg is scrambled, you then go back to making changes. When it comes to the wholesale retail network of Telstra, and when it comes to a rapidly evolving marketplace with myriad technologies and, importantly, myriad delivery mechanisms, it is crucial that the mechanism and the policy approach that government adopts are the correct ones.

There are a number of aspects to this bill that I believe do not achieve the outcomes that are sought. Streamlining access and anticompetitive provisions in the Competition and Consumer Act to promote competition in the telecommunications industry is a noble goal, one I am supportive of, but the amendments that we seek to make will improve the bill. It is up to the Labor government to recognise that we are not overreaching with the changes that we are asking for. We are not overreaching in any way, shape or form and, in fact, the amendments that the coalition is moving in this particular piece of legislation will help to enhance the competitive framework that will apply to Telstra in the retail separation from the wholesale which is sought. While the Labor government insists that the Telstra and NBN Co. arrangement is subject to review by the Australian Competition and Consumer Commission, a central component of this piece of legislation, the coalition remains concerned that the bill, and in particular section 577BA, explicitly excludes the deal that the government is attempting to achieve from the usual scrutiny of the Competition and Consumer Act. What is more, the bill allows for ministerial interference in the ACCC’s handling of the deal, which in my view further undermines the integrity of the process.

The government claims that this bill will provide Telstra with access to the wireless spectrum required for the next generation of wireless systems but does so only if the separation of Telstra is done to the absolute satisfaction of government. This goes to the very matter that I raised at the outset of my speech—that is, that it is, effectively, akin to the government holding a gun to the head of Telstra and, I believe more importantly, to the shareholders and owners of Telstra, many of whom live on the Gold Coast in my electorate of Moncrieff.

We have proposed four amendments which we believe, effectively, guarantee the integrity of the separation process by reducing opportunities for government interference in the decision-making processes of the ACCC. Subject to approval by Telstra shareholders, the proposed separation should be delivered in a manner that is cost effective, promotes competition and imposes no greater cost on taxpayers than is absolutely necessary. That is a relatively straightforward proposal which is worthy of support in this chamber. Telstra, like other regulated utilities such as gas, electricity and water, should of course be left free to charge prices that deliver a reasonable rate of return on its assets. This can be achieved through the amendments that have been put forward, which will place taxpayer interests ahead of those of Telstra, NBN Co. and the government.

We know that this government is obsessed with the need to roll out its NBN Co. It is a linchpin for this government, whose members wander round Australia trumpeting NBN Co. as the great new, almost Soviet-era style project of this government, promising rapid broadband to everyone, with no mention of the asterisks and all the associated costs and no mention of the debt that this government has racked up as part of its grand vision for broadband in this country. That is why we say, through the amendments that we have put forward: let us put the interests of taxpayers first and foremost.

The amendments will explicitly ensure that the Competition and Consumer Act applies to the NBN Co. and Telstra deal. The amendments will allow parliament to disallow ministerial directions to the ACCC regarding the NBN Co. and Telstra deal. The amendments will remove the threat of cable television sell-off or limited access to wireless spectrum should Telstra not separate in a way that the government approves, which goes back to the issue about there being a gun at the head of Telstra management and, importantly, Telstra shareholders. And the amendments will restore merit reviews and procedural fairness to the ACCC’s enforcement of the new access pricing regime.

These amendments ought to be supported by the government. They are amendments that place taxpayers’ interests at No. 1 on the list. They are amendments that protect the capital that has been invested by those million-plus shareholders across Australia and, importantly, they dilute this government’s complete absorption when it comes to the political pursuit of its NBN Co. at basically any cost. It should be watered down. It should be diluted. And it should be replaced by a primary interest that is more concerned with taxpayers’ outcomes and shareholders’ outcomes over and above the political outcomes sought by government. I certainly urge the House to support the amendments to this bill that the coalition will put forward.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

The primary aims of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 are, firstly, to tackle long-overdue industry reform by providing a legislative framework for Telstra to voluntarily structurally separate by migrating its customers to the National Broadband Network, as agreed in the financial heads of agreement between Telstra and NBN Co.; secondly, to strengthen the telecommunications-specific access regime to provide more certain and quicker outcomes for telecommunications companies; thirdly, to streamline the anticompetitive conduct regime by removing procedural impediments that in the past have restricted the effective operation of the telecommunications-specific competition regime in this country; and, finally, to significantly strengthen consumer safeguards.

The bill deals with the issue of structural separation by setting out a legislative framework for Telstra to voluntarily structurally separate by migrating its customers to the NBN. The bill will finally deliver what is long overdue for Australia’s telecommunications industry—that is, competition. That is because the fundamental structural impediments to competition that have existed in this country since the transition of Telstra from a fully government owned telecommunications company to a fully privatised company are dealt with once and for all in this bill.

The bill recognises that, despite nearly two decades of deregulation in the telecommunications industry, which has delivered some benefits in the rollout of infrastructure, mainly in mobile and radio based technology, competition in infrastructure has not occurred in the fixed line network. The market, quite simply, has failed to deliver real competition in the provision of this infrastructure. There is a very simple reason for this: it is massively expensive and the returns on investment are very low outside the major capital cities and the significant trunk routes down the east coast of Australia.

There is no doubt that Telstra has rolled out broadband services in the past decade in a highly selective manner, focusing primarily on the profitable urban markets and neglecting the rest of Australia. Who could blame it? There was very little incentive to do otherwise. Telstra continued to cut back its capital investment in the fixed line network and, as a result, investment in the Telstra Customer Access Network stagnated. The result was that Telstra’s degraded network was wholly unsuited to the provision of anything but the most basic broadband services. The near-monopoly of Telstra in the fixed line market meant that the company had no incentive to invest in upgrading its network to provide services until it was forced to do so. This meant that Australians were held back from access to decent broadband services for too long.

The structural separation measures in this bill are understandably welcomed by Telstra’s competitors—and indeed by Telstra itself since the financial heads of agreement between Telstra and the Australian government were signed in June this year. And the really big winners from this legislation will be the Australian consumers, who will finally be on their way to getting cheaper and faster broadband services.

The NBN will be Australia’s first truly national wholesale-only network. No retail company will be able to control the network in its own interests. This is important for consumers and the prices they will pay because the discipline of genuine competition and competitive pressures in the market drive lower prices, innovation and greater choice of different services and price points.

The lack of competition has held Australia back from moving into a broadband future. It is no wonder that the structural separation of Telstra has been described as a ‘landmark change’ by Australia’s second and third largest telcos, Optus and iiNet. Until the advent of the Gillard government’s policy to create a National Broadband Network, competition in the fixed line network was, in effect, stymied. It was frustrating for government, frustrating for Telstra’s competitors and frustrating for consumers. It was even frustrating for Telstra as the company struggled under the heavy hand of government regulation that vainly attempted to provide competition in the fixed line retail telephone services in the face of these structural issues. And it was not their fault that they did not succeed in this regard. They were battling real structural issues.

It is disappointing that the member for Wentworth is still clinging to the idea that these structural issues can be dealt with through a functional separation of Telstra, with both the wholesale and retail networks still owned by the one company, Telstra. Let me assure him—as he enters the chamber—and members opposite that this approach has been tried and has failed. He needs just to ask former ministers for communications Senator Alston and Senator Coonan. It was clear to all that the coalition government was hopelessly compromised as it tried to both maximise the sale price as part of Telstra’s privatisation and at the same time deal with the difficult competition issues raised by such a large incumbent company that was both vertically and horizontally integrated.

So instead of clinging to the failed policy positions of the past decade, the shadow minister would be better to get on board with the NBN and to stop throwing up spurious diversions to detract from the progression of this important project. This legislative framework will provide some measure of certainty for Telstra going forward into the NBN era. That is good news for all. Given all of this, you would think that those opposite would welcome the government’s plan for a national broadband network and the opportunity for Australians to move forward into a digital economy without any impediments such as those that I have just described.

I turn now to the regulatory reforms in the bill. The government has considered the important regulatory measures that will be necessary during the transition to the NBN to ensure that the consumer service regime is maintained. The government has rightly taken this opportunity to examine the current regulatory framework as a result of representations, mainly from Telstra’s competitors, that the current regime is inadequate. Changes to part XIC of the Competition and Consumer Act 2010 mean that the ACCC will have an enhanced and streamlined role, allowing it to set price and non-price terms for access to declared services in access determinations to apply to all parties. This will put Telstra and its competitors on a level playing field for the first time.

There is no doubt that this regulatory review was much needed. The extremely high number of telecommunications access disputes that have been notified since the commencement of the regime in 1997 point to a failing system. Telstra’s highly litigious approach might have been good for its lawyers, but it was not good for other telecommunications companies struggling to compete in such an uncertain and frustrating regulatory environment.

Another important measure in this regard is that this bill will remove the right to seek merits review of ACCC regulatory decisions. This approach is being pursued because Telstra has continually used every regulatory and legal avenue available to frustrate regulatory outcomes and cause uncertainty for its competitors. By providing the ACCC with the power to issue binding rules of conduct, the ACCC will be able to take action immediately to address problems relating to the supply of declared services. The telecommunications industry will at last have a greater degree of certainty in relation to regulatory outcomes and this certainty will encourage investment.

I turn now to the consumer protection measures contained within the bill. The big winners from this bill will be consumers. That is because the measures in this bill are focused on retaining and strengthening existing regulation to better protect consumers’ access to, and the reliability of, basic telephone services and to address concerns with the removal of payphones.

The measures in this bill reflect the government’s decision to retain the existing universal service obligation on Telstra for voice telephony and payphones in the lead-up to the NBN and the new universal service obligation company, and to require improvements to service quality by introducing new minimum performance benchmarks in meeting the customer service guarantee. The new universal service arrangements will make explicit, for consumers and for Telstra, the services—both voice telephony and payphone—Telstra must supply in fulfilment of the universal service obligation. This provision is incredibly important for consumers in regional Australia, including those in my electorate of Throsby where we still rely on the important services provided by payphones. It is incredibly important to ensure that people of low socioeconomic background have access to those payphone services.

So Telstra must supply the services, which include reliability standards and repair requirements, specified in the new universal service arrangements to fulfil its universal service obligation—this is instead of leaving these decisions to the sole discretion of Telstra. This measure will address the concerns raised in the report of the Regional Telecommunications Independent Review Committee—that the universal service obligation arrangements are both vague and difficult to enforce.

In conclusion, the measures in this bill are a landmark for the Australian telecommunications industry. After nearly 20 years of reform to this sector, this Gillard Labor government is finally getting the measures right to ensure that we have genuine competition within the industry, not only in mobile telecommunications services—critical services for households and for industry—but in fixed-line services and in fast, reliable, affordable, high-speed broadband services. The bill also provides enhanced consumer protections. Given this, it is hard to comprehend why the opposition cannot bring themselves to support it. They are out of touch with their own electorates—this is particularly so for those members opposite who represent regional electorates—and with the national interest on this. I commend the bill to the House.

Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

in reply—I thank members for their significant contributions to the debate on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010, which is so important to Australia’s current and future economic prosperity. Measures put forward in this bill were originally debated in the previous parliament. It is fair to say that they have been the subject of considerable discussion over the past year. The government has taken note of the many constructive comments provided and changes have been made to the legislation to address those of them that were worthy of support.

The NBN is a historic nation-building investment which will help transform the Australian economy and create the new businesses and jobs of the 21st century. This is a view shared by the OECD. The OECD concludes in its recently released economic survey of Australia that the NBN has the potential to yield substantial benefits, especially in terms of productivity, and that it will improve internet services for the entire Australian population. It also concludes that it will promote fairer competition between private firms on retail services.

Through the NBN the Gillard government is ensuring that every Australian, no matter where they live, has access to affordable high-speed broadband. The NBN will be a wholesale-only, open access network. It will introduce competition to the telecommunications market, and this will open up genuine choice of services and drive highly competitive prices for consumers, whether they live in a capital city or in rural and regional areas. This acknowledges that Australia has fallen further and further behind the rest of the world since the Liberals and their National coalition colleagues voted to privatise Telstra without any review and without ever putting in place the arrangements to properly protect competition and services in regional areas. It also acknowledges that current infrastructure based competition in Australia has failed. This is in light of the most recent OECD statistics which show that Australia is now ranked 17th out of 31 countries for fixed-broadband subscribers. Australians also pay more for broadband than most OECD countries. For average subscription prices, Australia is the fifth most expensive overall.

People across the country are crying out for faster, more affordable broadband and the Gillard Labor government is getting on with the process of delivering it. The rollout in Tasmania is progressing on time and under budget. On the mainland, in four of the first release sites NBN Co. has received requests to connect on average about 75 per cent of premises with a fibre connection. The government does not require a cost-benefit analysis to know that this is a piece of infrastructure that Australia needs. To do a formal cost-benefit analysis of the NBN would take many years, require many heroic assumptions and would tell us something we already know—that Australia needs greater investment in high-speed broadband infrastructure.

The implementation study confirms the NBN can be built on a financially viable basis with affordable prices for consumers. The government released this study in full on 6 May 2010. After eight months of detailed analysis, the implementation study confirmed that under a range of realistic scenarios NBN Co. will have a strong and viable business case. It also confirmed that the project can be expected to generate a return of six to seven per cent, and that the government could expect to generate a return on its investment to cover its cost of funds.

That said, during the rollout the existing telecommunications regulatory regime will remain important for delivering services in the interests of Australian consumers and businesses. The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010is designed to reshape that regime. The measures proposed will streamline the regulatory framework to enhance competition and better protect consumers. Structural reform of the industry will be implemented with the transition to the NBN in line with the government’s vision for a wholesale-only, open access network. Incentives will be created for Telstra and other telecommunications operators to transform the way they do business and to become more innovative and customer focused. These changes to the telecommunications access regime will underpin greater investment by giving all parties regulatory certainty. The bill will also safeguard consumers by strengthening the current universal service obligation, customer service guarantee and priority assistance arrangements.

On 20 June 2010 Telstra and NBN Co. announced that they had entered into a financial heads of agreement. That agreement provides for the progressive migration of customers from Telstra’s copper and pay TV cable networks to NBN Co’s new wholesale-only, fibre network as it is rolled out. This will deliver the ultimate structural reform of the telecommunications sector. This legislation will create a framework to deliver this important reform.

The coalition are putting forward a number of amendments to the legislation. It follows, of course, the 20 different broadband plans that they have had. First, they want to remove the provisions designed to exempt any agreement between Telstra and NBN Co. from the provisions of the Competition and Consumer Act on the grounds that they might allow anticompetitive outcomes. First and foremost, the opposition fail to acknowledge that the structural reform to be delivered is in the national interest. However, the ACCC will consider the competitive impacts of any agreement between Telstra and NBN Co. as part of its scrutiny of Telstra’s structural separation undertaking, or SSU. Any agreement will need to be reviewed in the context of considering the SSU that Telstra lodges with the ACCC in order for the SSU to be approved and the arrangements authorised. Once approval is given the agreement and associated conduct will be authorised for the purposes of trade practices law. This removes any need for separate authorisation inquiry, while still ensuring appropriate scrutiny of the arrangements. The bill relies on the authorisation provisions in section 51 of the Competition and Consumer Act. This is a well-established mechanism which has been used extensively by Australian governments. The ACCC website currently lists 80 separate pieces of Commonwealth, state and territory legislation where section 51 authorisations are in use.

Secondly, the opposition proposes that certain ministerial instruments be subject to disallowance by parliament. The government’s strong view is that these instruments should not be disallowable as the risk of disallowance would cause uncertainty for Telstra. The bill requires that certain instruments must be in place to permit Telstra to lodge its SSU with the ACCC. Disallowance would threaten this outcome and could have the perverse effect of forcing Telstra to undertake functional separation even when its preferred option is structural separation.

Thirdly, the opposition calls for the removal of the so-called guns to Telstra’s head by denying it wireless spectrum and forcing it to divest its interests in Foxtel unless it voluntarily agrees to separate. These so-called provisions have been removed. There is no longer an automatic prohibition on the acquisition of spectrum if Telstra does not structurally separate and divest its interests in its cable network and Foxtel. The bill has been amended to give Telstra sufficient regulatory certainty to take a firm proposal to its shareholders to structurally separate by allowing Telstra to acquire specified bands of spectrum, unless the minister determines otherwise in a legislative instrument. The bill does not require Telstra to divest its interests in Foxtel but still provides a framework for Telstra to voluntarily divest its interests in Foxtel and its hybrid fibre-coaxial cable network. In the event that Telstra does not proceed with structural separation, the minister could take into account Telstra’s ownership of Foxtel and its cable network in determining whether to use the powers in the bill to prevent Telstra from acquiring certain spectrum to address Telstra’s power in telecommunications markets.

Fourthly, the opposition want to subject ACCC decisions to merits review. This is despite the fact that in 2002, when they were in government, they repealed merits review for ACCC arbitration determinations because it was hindering the development of competition. It is the government’s view that the notional accountability benefits of merits review within the current system are strongly outweighed by the delays, the regulatory uncertainty and the outright gaming that have occurred. Furthermore, it is an inappropriate provision. Under paragraph 4.53 of the Administrative Review Council guidelines about what kinds of administrative decisions are suitable for merits review, decisions which involve extensive public inquiries or consultations are not suitable for merits review. ACCC access determinations which involve extensive public consultation fall into this category. Omitting merits review from the proposed arrangements reflects a majority of industry submissions on how best to improve the telecommunications access regime, and this aspect was almost universally welcomed by non-Telstra industry participants when the original bill was introduced last year. If the ACCC makes an error of law or process when it makes an access determination, any party affected by the decision will be able to apply to the Federal Court for judicial review of the decision just as they can now.

Finally, the opposition want to restore the requirement for procedural fairness. The requirement for the ACCC to accord procedural fairness will apply to all of the ACCC’s regulatory decisions under part XIC, except in relation to interim access determinations and binding rules of conduct. The salient point of introducing binding rules of conduct is to allow swift regulatory responses to urgent matters that may arise. According procedural fairness would inevitably delay such actions—hardly a desirable outcome in matters where speed is of the essence. In reality, procedural fairness will not be absent for long in this circumstance. Within 30 days after making binding rules of conduct, the ACCC will have to commence a public inquiry to vary the access determination or make a new access determination. Parties will be accorded procedural fairness in the public inquiry process. The opposition amendments are unnecessary and would serve only to complicate the proposed streamlining of the regulatory framework.

In conclusion, I once again thank members for their contributions to the debate on this bill. These wide-ranging reforms address problems across the whole Australian telecommunications sector and represent the most significant reforms to the telecommunications legislative framework since 1997. The task of undertaking such difficult but necessary reform in an industry that is fundamental to Australia’s long-term national interests is one which this government embraces wholeheartedly and one which the government encourages the parliament to embrace. The series of amendments put up by the opposition are once again an attempt by them to delay reform; it is to delay what is required to build a truly national broadband network that is suitable for the 21st century. We know that the National Broadband Network is absolutely vital to Australia’s economic future but also in providing social equity due to the revolution that can occur through access to telecommunications. The NBN is indeed a historic nation-building investment. I commend this bill to the House and urge the parliament to reject the amendments that have been put forward.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

The question is that this bill be now read a second time. There being more than one voice calling for a division, in accordance with standing order 133(b) the division is deferred until 8 pm.

Debate adjourned.