ACTING CHAIR (Senator Tchen) —I open today’s inquiry into the telecommunications regulatory regime and welcome everyone here today. The committee is a little bit light today because other members have other engagements, but Senator Conroy and I can assure you that the quality is not diminished in any way. This is the third day of hearings. The committee met to hear evidence on Monday in Canberra and yesterday in Sydney, and it will be hearing further evidence later in Townsville, Melbourne and Perth. The reporting date for this inquiry is 23 June 2005. Copies of today’s program and terms of reference for this inquiry are available from the secretariat staff, and published submissions are on the committee’s web site. In accordance with our usual practice, the transcript of today’s proceedings will also be available on the committee’s web site.

For the benefit of all our witnesses today, I point out that the committee prefers all evidence to be given in public. But should you, at any stage, wish to give your evidence, part of your evidence or answers to specific questions in private, you may ask to do so and we will consider your request. I note also that, after the last witnesses on today’s program have finished giving evidence, we have allowed half an hour to hear from anyone who would like to make a short statement about matters that are relevant to the inquiry. If you wish to do so, please register your name with the secretariat staff so that Hansard has your details and we can call people in an orderly manner. I now welcome our first witness, Mr Caldbeck. Thank you for giving us your time today; it is much appreciated. You are reminded that evidence given to the committee is protected by parliamentary privilege and that the giving of false or misleading evidence to the committee may constitute a contempt of the Senate. I now invite you to make an opening statement. I know you do not have a written submission, but we look forward to hearing your comments. We will then move to questions.

Mr Caldbeck —Thank you for the opportunity to address the Senate committee. I represent Dubbo City Development Corporation, which represents the business and economic development unit for the city. Dubbo is a city of 40,000 people. We have a strong business community and a strong small business community, in particular, that grows. Telecommunication is obviously of paramount importance when one lives regionally and remotely from the major capital cities because it adds a burden, obviously, of extra cost to any sort of service delivery from the high cost of telecommunications, particularly in phone services and especially for STD charges.

I will talk briefly about that and also the issues with ADSL and the proliferation of broadband throughout regional Australia, in particular in regional Orana, and the impact that has on opportunities for potential business exporters. The corporation holds a contract with the federal government for TradeStart services, so we are well aware of the issues with exporters or potential exporters needing access to not only the Australian market but also to the world market as such. They find that idiosyncrasies or unequal levels of service delivery can jeopardise any sort of sustainable exporting.

One example is the mining community in Lightning Ridge. We service that area through our TradeStart adviser. Without the broadband widths and service delivery there, a lot of the miners would not have the opportunity to promote and market their products on the web. Obviously there is a need to provide written statements or statements that indicate the value of the gems that they are selling et cetera, and that all takes bandwidth. It tends to muzzle their operations as such. Whilst Lightning Ridge does have ADSL, there is a limit to that, as you are aware.

The new generations of technology are obviously of paramount importance to people who wish to market and promote their product on the web. I suppose from the corporation’s point of view, we would like to see an openness within the register providing access to cable, for example. Fibre exists at the moment. You may or may not be aware of the issues around black cable and where it has been laid and then not been identified except for the organisation that laid that cable.

But when we talk about other forms of technology such as cable against wireless, a wireless operator could come in to provide a service in a particular area only to be outgunned by the fact that cable was already installed and is now operational—switched on. So those are some issues that we would like to see resolved that are more to do with more transparency in the availability of access to where this infrastructure is actually laid. For example, we believe that in some areas of Dubbo cable has already been laid into some housing estates, but access to that information is not readily available.

Obviously, the cost of providing telecommunications infrastructure is quite high. We do choose to live in this regional area although in places like Dubbo, for example, there are idiosyncrasies when we are talking about broadband or ADSL whereby certain parts of the city cannot actually have ADSL services. I have had experience with people from regional towns who have moved into a particular part of Dubbo and do not have access to ADSL yet have come from what one would call a small town of, say, 4,000 people and had ADSL there. So it seems quite ludicrous that you could move from Coonabarabran to Dubbo and have ADSL in Coonabarabran but not in Dubbo because you moved into a particular suburb within the city. I live in one of those suburbs—I cannot get access to ADSL yet in my office downtown I can. So I suppose all the bush is asking for in real terms is a fair go and equality of service delivery. I know it takes time to roll these services out. Country people are eternal optimists; we are going to wait and we are used to waiting. If we are talking about T3 we would probably like to see things brought up to scale before there were any thoughts of that happening.

The other issue, I suppose, has to do with the poor quality of the infrastructure at times. We have anecdotal evidence in the corporation whereby people have had multiple dropouts in their internet service delivery, which then obviously adds to their bill, which could increase by at least $2 or $3 a day because of local call charges equating to at least 10 or 12 dropouts per session. Also, when you go outside of the local call rate and you go into things like ISDN you have issues where people are not logging on. They have the service but they do not log on because of the high cost of the service delivery. So that seems a bit ludicrous as well.

In closing, I would like to raise the issue of HiBIS. As you are aware, the Department of Communications, Information Technology and the Arts has a HiBIS scheme for infrastructure development. I suppose the corporation would look at areas remote from Dubbo—the regional country towns where the opportunity might come up for an upgrade to the local exchange under the HiBIS scheme or the payment of a wireless operator to set up a tower to service an area within a 30-kilometre radius as compared to 4.5 kilometre distance from the exchange. I suppose there needs to be some transparency on service delivery there. Who would get it if both applications were lodged at the same time?

Thank you so much for the opportunity to make a presentation. I am not here to bash the service delivery. All I am saying is that we would like to see equality of service delivery across not only Dubbo but the region. It is important: business does have to operate and you will hear from witnesses how business battles with that.

ACTING CHAIR —Before I call on Senator Conroy, I note in your statement that you said you are not here to ‘bash’ anybody, but can you tell the committee how you feel about the level of service that Dubbo is now receiving and whether you find it satisfactory. Can you enlarge on that a little?

Mr Caldbeck —Obviously, there are multiple service deliveries, but we do not have the range here. In fact, especially with regard to internet services, we tried to make contact with industry—we tried to make contact with as many service delivery organisations as we could—and we found that there were only two or three located here in Dubbo, which means that there is a remoteness issue. There is a Sydney sign-up type thing. I would suggest that, if some of the city has ADSL and some of the city does not—and I know there is a cost to upgrade exchanges—it is unacceptable because home based businesses in those particular areas, such as where I live, cannot operate effectively. I am aware of one business that had to relocate because it could not get the service delivery.

ACTING CHAIR —Is Telstra the only service provider in Dubbo or are there other operators as well?

Mr Caldbeck —There are multiple service deliveries but probably not the plethora that Sydney or Melbourne experience.

ACTING CHAIR —Do you know of any instances where Telstra or any of those operators may have behaved in an anticompetitive manner?

Mr Caldbeck —I could cite a case that I personally took on board for a client of the corporation, who asked for assistance. The gentleman was relocating from Coonabarabran to Dubbo. He was with Telstra for his ADSL. He had identified a house in Dubbo to move into and had an address, and Telstra provided a telephone number for that residence. He had indicated that if he did not transfer the service with Telstra from Coonabarabran across to the new residence in Dubbo then he would be obliged to pay out the full contract. That was fine.

The problem was that he could not find out from Telstra whether there was a service delivery to his new house. So we took the matter on board for him. I personally rang Telstra and they asked for the street number and the telephone number, which I gave them. I asked whether a service delivery was available. I was told, ‘We believe it is.’ I said, ‘Does that mean a yes or a no?’ They replied, ‘If you are willing to continue with this call and sign up, we will tell you whether it is available.’ I have a witness to that conversation. It gives you an indication that it was somewhat of a game and that if I wanted to go further then I would have been told whether the service was available, but by then I had already signed. I know there is probably a cooling-off period or something like that. But the attitude was a bit deceptive.

ACTING CHAIR —Was that Telstra Country Wide?

Mr Caldbeck —It was whoever we rang on behalf of this gentleman in connection with the service delivery for his broadband service.

Senator CONROY —I am interested in the client you mentioned earlier who had to relocate because they could not get a level of service. Are you in a position to tell us the name of the company?

Mr Caldbeck —I would prefer not to, but off record I could. I would rather check with the client.

Senator CONROY —That is fair enough.

Mr Caldbeck —The corporation is under a confidentiality agreement.

Senator CONROY —That is quite all right. Will you take us through in detail what happened? Did they decide to establish a new business, or were they moving and suddenly realised that they could not move there? What was the detail?

Mr Caldbeck —It was a home based business that really needed fairly substantial bandwidth to operate. Because of the inability for ADSL services to be provided, this family—both husband and wife worked in the business—relocated to Wollongong. It was not only because of the inability to access broadband services—but it was a contributing factor—that the two of them made the decision to actually relocate to Wollongong and set up there in a suburb where they received broadband. They could have gone to a different suburb in Dubbo and been able to receive it.

Senator CONROY —Is there any explanation as to why some suburbs cannot receive broadband?

Mr Caldbeck —It is because of the RIM upgrade that needs to happen. Basically as you progress out from an exchange the RIM has to be upgraded.

Senator CONROY —Have they given any indication when they are going to finish the upgrade?

Mr Caldbeck —I had another gentleman ring me about that. We had just undertaken a telecommunications survey throughout the region and this gentleman rang me regarding service delivery. He rang a service delivery company—not Telstra but another company—and was told that he was in line to get broadband in 2008.

Senator CONROY —You talked a little about the quality of the internet and indicated that many of your clients have suffered multiple drop-outs.

Mr Caldbeck —Yes, they suffer multiple drop-outs using dial-up. I go through it in my own home. One of the last things I ever want to do is get onto the computer when I go home, but I do do it at times. You are not aware of those drop-outs. The machine will basically drop out, redial and reconnect—it is seamless in a way until you get your account. I know with the corporation itself that we moved from that dial-up style of internet service delivery to ADSL when it became available and reduced our telephone bill down to zero because we did not need it anymore. That is the other good thing: the issue of having to have two telephone lines for a consumer in a residential house is now extinct because ADSL sits on top.

Senator CONROY —You said that many of your clients have experienced this problem.

Mr Caldbeck —I can tell you that one particular client, a family, would wait until Saturday and then the whole family would do half an hour of internet. Basically it is a case of ‘do not touch the internet’ for the rest of the week because of the high charges because they are on ISDN. As such, they sort of splurge on Saturday and that is it. Business complains bitterly about this.

Senator CONROY —It is hard to run a business if you are dropping out all the time.

Mr Caldbeck —Correct. So the issue is there. I suppose one of the understated quantifiables is the amount of small home based businesses that we have. Sometimes they are a bit slow to come out and put their hand up to say that they are actually working from home because (1) they could be in contravention of a building code or (2) they might be doing it on the side as such.

Senator CONROY —A couple of weeks ago you might have seen the CEO of Telstra, Ziggy Switkowski, indicating that he believed Telstra’s services were world-class. Would you like to send a message to Mr Switkowski?

Mr Caldbeck —All I would suggest is that my readings and the research that I have undertaken—and the company that we are in partnership with on a project that we are doing in this region—indicate that Australia is obviously at a higher level than some of the nations of the world but a lot lower than some of the highly economically developed countries in the world, such as the US and the EU. Take, for example, the use of power lines for internet service delivery and the issues of VOIP telephone calls. Around 30 per cent of the telephone calls in the world now are VOIP. Yet, of our clients and the members who we interact with, very few use it in regional New South Wales.

Senator CONROY —I want to come to the question of the variety of services; you mentioned this in your introduction. In the submission of the Small Enterprise Telecommunications Centre Limited, SETEL—you may have heard of them—they noted that commercial activities to date have seen too many new service offerings limited to metropolitan areas. Would you agree with that statement?

Mr Caldbeck —As a general rule I would. Telstra, in their defence, have initiated new services—Xband et cetera—across other mediums. But, obviously, the biggest issue for remote and regional Australians is the choice between satellite—which, again, is inherently faced with issues of cloud and things like that—and wireless technology. I strongly support wireless technology from the point of view that the infrastructure development costs are far less than for cable. We have Dubbo City Council on the corporations board, and we have had discussions with the general manager of council about whether they would be interested in putting in the conduit on new subdivisions for at least, say, cable so that new subdivisions would be classed as being ADSL capable in years to come. Obviously, the introduction of sustainable wireless services supersedes all that need for infrastructure development. Therefore, it is probably a far better option for regional and remote areas, given the issues with satellite.

Senator CONROY —We had a presentation last night in Sydney from an organisation called Unwired, who indicated that they have plans to expand into regional Australia over the next 12 months or two years, so you may see that technology finally coming available to you.

Mr Caldbeck —The big issue there has been—and we have had contact from several operators in the wireless field—the backhauls out of remote areas to Sydney and the availability of alternative supplies on backhaul. It is only just recently, with the introduction of companies such as SPTel with backhaul, that wireless operators are getting their confidence level up that they are not going to be subjected to any issues by having an alternative choice.

Senator CONROY —It is that issue about confidence level that I want to go on to. You have mentioned black cable—I am not familiar with that particular expression, so I was hoping that you would expand on it a little.

Mr Caldbeck —My understanding is that black cable is where cable has been laid but it is not available to the market because it is not connected. Once it is connected it becomes available, and it is then open to the market, as you are aware, under the Telecommunications Act.

Senator CONROY —Is it Telstra that is laying black cable?

Mr Caldbeck —It has been a combination. There has been quite a lot of cable laid. You may have had states where developers have laid cable in anticipation of technology advancing. I would not say directly that it was only Telstra, put it that way, but I am aware that there are certain areas where black cable exists. The technology in the industry, I suppose, makes it aware that the cable exists, but it is not publicly available as yet.

Senator CONROY —Why would they not bring it online as soon as they have laid it? Don’t they think that there is the demand for it?

Mr Caldbeck —For reasons of service delivery, I suppose, or demand.

Senator CONROY —We have had many submissions now from the smaller providers, and one of the great complaints is about this certainty issue you raised earlier, where, if they announce they are moving to roll out a particular product in a particular area, Telstra immediately follow them into the area and try to do them over with cheap specials. Yesterday, we were told about a $2.95 special offer for the first six months of a broadband service. Is that a practice that you have seen here?

Mr Caldbeck —I am not totally aware of that; people do not come to me and say that. But I am aware that, on the issue of backhaul again, the fibre back route back to Sydney, for example, has not been available in the options of service providers. I think that is what you will find: there will be more of a comfort level with service providers. I am aware, and I have been told anecdotally, of service providers paying Telstra in excess of the $29.95 the service provider is advertising and hoping to pick it up on the alternative services that they deliver. That has not come from the company; that has come from—let us call it—gossip.

Senator CONROY —You mentioned that you are a contractor to the government for trade advice and TradeStart. How important is it for these broadband services to be available for small businesses in your area to be able to become export competitors?

Mr Caldbeck —It is a critical issue. Whilst the federal government provides Austrade services overseas through the embassies and consulates, not only is communicating from here in Dubbo with our TradeStart adviser to the companies or potential exporters important but also, once they have established their export market, being able to communicate with their market is so critical.

Senator CONROY —So this really holds back the region.

Mr Caldbeck —I think it just inhibits its ability. We have had the contract now for three years and we have signed up 34 new exporters under the program, which is quite rewarding and quite exciting. The range and diversity of those exporters has been quite remarkable. But there are obviously inhibiting factors because other people have not actually done it. That is because telecommunications, or especially telephone, as a medium is quite expensive. If you said to someone at Lake Cargelligo who makes hospital beds that they need to be able to ring Hong Kong, they will say: ‘The cost to ring Sydney is bad enough. I’m not going to ring Hong Kong.’ So email and internet services become so critical because of the high cost of offshore phone calls. But the introduction of technology such as VOIP would provide a whole new service for those people, which would be quite remarkable if it can happen.

Senator CONROY —Has VOIP not arrived or are you not aware of it being prevalent here?

Mr Caldbeck —No, it is here. I am saying that it is technology that has not really been embraced effectively here because of whatever—ignorance, arrogance, people saying, ‘I’m fine’ or ‘How do I do it?’ There probably needs to be a lot more education to make a more effective service delivery. But I would suggest it is the way of the future, to keep costs as low as possible for business. If it is a good service delivery then it is a great medium that should be explored fully.

Senator CONROY —Many of the submissions that have been put to us are concerned about the regulatory regime that will be in place and whether or not it will be sufficient to cope with a company the size of Telstra once it is fully privatised. A lot of the submissions have centred around whether they will be able to get a fair go up against what they have described as the 600-pound gorilla. Given your experiences with Telstra as it stands at the moment, do you think there is a need to increase or improve the regulatory system to guarantee that you can get competition in regional and rural areas to increase those services and keep those prices down?

Mr Caldbeck —Speaking personally, I believe that Telstra Country Wide in this area and probably in the rest of Australia—but I cannot talk about that—attempts to provide the best it can with what it has got. Obviously there are people in the bigger scheme of things who are the regulators of price control and service delivery within the Telstra organisation. I would suggest that as an organisation the local guys who live in this community try to do the best for us. I would say that there are some issues obviously that the general public has with Telstra’s management.

Senator CONROY —The view that it provides world-class services might be something you could take up.

Mr Caldbeck —It could be questionable.

ACTING CHAIR —Mr Caldbeck, I have some questions. Earlier when you mentioned HiBIS operating here you raised a particular concern about it. I wonder if you could actually expand on your experience of HiBIS and on whether you think it is the right way to go so that it will deliver what a provincial city like Dubbo and the regional area around it need. Perhaps you could also expand on what you feel are the particular concerns associated with it.

Mr Caldbeck —As you are aware, HiBIS is a scheme that provides infrastructure. My understanding is that 60 or 70 per cent of the HiBIS funding can be through Telstra as a registered supplier and that the other 40 per cent or so can go to other service delivery. If it is not expended totally, Telstra can actually have access to the additional 40 per cent. What it means on the ground is that people can have a tower and actually receive satellite downloads if they are outside the range of standard ADSL service delivery. I know there are some wonderful things in the offing, but at this point in time 4.5 to five Ks extends the limit of an ADSL type of delivery and then the RIM has to be upgraded to actually get the additional distance. HiBIS is a very important tool for regional Australia, particularly this area. It is not as good as ADSL service delivery, but it is better than dial-up. It has better service delivery than dial-up once you can have satellite downloads.

The concern we have is to do with the emerging opportunities that exist for wireless operators—and they include Telstra if it wants to get into that game as well. The wireless operators would obviously try to access funding through HiBIS. At the same time, Telstra would try to access funding for exchanges that had not been upgraded to ADSL. I suppose there will come a time when there will be a competition on whether or not there should be HiBIS money for a tower to provide 30-kay radial distance delivery or an exchange that provides 4.5-kay radial distance delivery. I suppose I am raising issues and concerns that should be looked at because the HiBIS bucket is not unlimited. The government has put it in place, and while it is an excellent scheme it is not unlimited. A proliferation of wireless operators could see the funds go quickly.

ACTING CHAIR —Earlier I asked you whether you knew of any instances of anticompetitive behaviour, and I thank you for your answer. There is another type of anticompetitive behaviour between operators. This committee has heard on a number of occasions that quite often one operator moves into an area proposing to develop a certain service and the next thing you know another operator has suddenly come in and dropped their price or announced that they will be providing a service as well. In fact, a witness said to us that with a small country town, for example, the best way to actually get Telstra to come in and provide some service is to get Optus or some other operator involved. Can you throw any light on that from your experience?

Mr Caldbeck —Today I was really addressing Dubbo and some parts of the export work that we are doing throughout the region. I would suggest that today you are going to talk to people who would have far more direct information. They are from regional organisations that actually cover the 13 shires within the region. So I would have to answer that, whilst I am aware of it, I could not particularly quote a case.

My understanding of Dubbo per se is that it is such a large market that we have a proliferation of other companies that actually compete strongly in the marketplace here. It is far different in regional towns, where Telstra may be the only service provider, with maybe one other. I think that people here today will give you advice as to that. I am not trying to get out of your question. I am not as qualified as the other regional people are to provide that information to you.

Senator CONROY —I have a final question. Many of the submissions have argued that the USO should include broadband, with a minimum speed and quality. Do you have a view on that?

Mr Caldbeck —If I look at the US, the EU, Japan and Singapore then I would say yes. In Australia we should be entitled to a minimum service delivery for internet services.

Senator CONROY —Thank you very much.

ACTING CHAIR —Mr Caldbeck, thank you for your time today. I draw your attention to the fact that the minister recently announced not so much an inquiry but that the department is seeking views and discussions on the telecommunications regulatory regime. A lot of people in the public are not aware that what the government does and what the parliament does are not always the same thing. Even though the submissions to this inquiry are available to the government department, it is up to the department whether they use them or not. Since you were good enough to give evidence to us, could I encourage you to look at the possibility of looking at that discussion paper and perhaps making your views and your experience known to the department as well. That particular inquiry closes on 5 May, I think.

Mr Caldbeck —I have a copy of that. Thank you very much. I appreciate your confidence that I could give something positive to that inquiry.

ACTING CHAIR —I am sure you can, and you have to this committee.

Mr Caldbeck —Thank you very much.

 [10.27 a.m.]