Senator LUNDY —I would like to ask some questions about the current negotiations on the US free trade agreement and obviously the significant amount of public comment that has been occurring around the future of copyright and intellectual property under the FTA and, in particular, the issues relating to Australian content and the protection of Australian content.

Dr Hart —As you know, Senator, with the US FTA arrangements, negotiations are taking place in a number of chapters. So there are a number of different officers involved in different areas. We may need to bring some other people to the table.

Senator Kemp —Which particular areas do you wish to discuss, Senator? Some of this probably will relate better to what is appearing tomorrow, under arts and sport, I suspect.

CHAIR —Some of it might also relate to policy issues, I suspect, but we will see how it goes.

Senator LUNDY —Yes, that is true.

Senator Kemp —Just tell us what you want to do and we will see what we can accommodate.

Senator LUNDY —I think you are absolutely right, Minister. In relation to some of the cultural content industries that would be for tomorrow. But the other issue discussed is the extension of copyright, as I understand it, to be extended from 50 years to 70 years. Is that correct?

Senator Kemp —We can deal with copyright here.

Senator LUNDY —Can someone update me as to what the government's policy is currently in relation to the possible extension of copyright from 50 years to 70 years?

Senator Kemp —Senator, the brief I have here from the minister indicates the government's objectives in the US FTA negotiations include ensuring that Australia remains free to determine an appropriate legal regime for implementing internationally agreed intellectual property standards, maintain a balance between the holders of intellectual property rights and the interests of users, consumers, communications carriers and distributors and the education research sectors. That is the objective.

Senator LUNDY —Is that the official policy?

Senator Kemp —That is the objective.

Senator LUNDY —Is the issue of the extension of the copyright regime from 50 years to 70 years an item for negotiation as part of the discussions in the US FTA?

Dr Hart —It has not been discussed to date, but to the extent that it has been an issue which has come up in other agreements that the US has signed, it is something which is there in the background.

Senator LUNDY —I am trying to establish the public status of this issue in the context of the FTA. Are you saying that the US have not requested that Australia make that extension as yet?

Dr Hart —I understand it was mentioned in the first round because, again, it had come up in the US-Chile text. But it has not been a focus of the negotiations.

Senator LUNDY —No, I appreciate that; that is why I am interested, because I have not read much about it. Perhaps, Minister, you can tell me whether or not the government has articulated a public view on this matter?

Senator Kemp —As has been said, it really has not been raised in the recent rounds. We have a policy in place. If I take what the officers have said as being reasonably all-encompassing, the issue has not been raised. I do not know what else I can add.

Senator LUNDY —I understand that. The problem is, though, if it comes out—as the negotiations are finalised—that this is something Australia has agreed to, then I think that will surprise a lot of people.

Senator Kemp —We can all raise a whole host of hypothetical questions, but I do not think it is the role of a minister at this table, nor officers, to respond to every hypothetical question. We have a policy in place; it has been a reasonably longstanding policy. As I understand it the Americans have not pursued this to any substantial extent and so I do not propose to comment on a hypothetical issue. I do not know whether the officers feel—

Senator LUNDY —I am not after a hypothetical issue. I am trying to see if there is anything on the public record I have missed and then I will ask you specifically about the directions of the government policy.

Senator Kemp —I do not know if there is anything anyone else can add, but, Senator, I cannot assist.

Senator LUNDY —All we know is that it was mentioned in the first round of negotiations. We also know that it is a feature of other US free trade agreements and a point of negotiation, or an element that the US pursues, but at this stage the coalition government has not either agreed or rejected that proposition. Is that a fair reflection on the state of things?

Senator Kemp —I think Dr Hart or Ms Browne may correct me if I am wrong, but in the latest discussions we are having with various chapters, this was not raised as an issue. There is not much we can add, Senator.

Senator LUNDY —That tells me, if it has not been raised, because of the nearness of the conclusion of the FTA if the press reports are to be believed, that in fact it will not be a condition insisted upon by the US as part of the negotiations.

Senator Kemp —Senator, I am not at the table. I am not dealing with this on a day-to-day matter. It rests outside my particular ambit and I do not think I can go further than the briefing I have received. I do not think public servants can either. In fact, I think they have already been remarkably frank.

Senator LUNDY —Thank you. We will move on to IT in the department. I have a few questions about the computer data tape backups. One is the issue of the location of the tapes, which was mentioned before with Telstra, that it was in fact at TES's facility in Bruce in Canberra. Can the department shed any more light than what has already been shed on the process of the tapes going missing? In particular, the authority—that the department is aware of—that is still investigating or was investigating this matter. Who did you notify as a department and what was the process of investigation into the loss of the tapes?

Ms Williams —Senator Lundy, I do not know, I am afraid, any more than we have already discussed this morning. I will see if Mr Nicholas or Mr Morton know any more.

Mr Nicholas —We advised DSD of the incident, but it had already been advised by TES when it occurred.

Senator LUNDY —All right. When does DCITA's contract with Telstra Enterprise Services expire?

Mr Nicholas —On 30 June 2004.

Senator LUNDY —What is the status of the negotiations, or perhaps otherwise, of continuation or termination of that contract on that date?

Mr Nicholas —We have been through a market testing process and have signed new contracts with KAZ Technology for provision of IT services from 1 July.

Senator LUNDY —So you won't be re-signing Telstra Enterprise Services.

Mr Nicholas —No.

Senator LUNDY —Does that make you unique in the Group 5, or have other Group 5 departments joined with you in the contract with KAZ Computing?

Mr Nicholas —No, all agencies are undertaking their own market testing arrangements.

Senator LUNDY —Group 5 will be no more.

Mr Nicholas —That is correct.

Senator LUNDY —I bet you will give a big sigh of relief. How much has it cost you?

Mr Nicholas —To?

Senator LUNDY —Let us put some parameters around that. What is the value of service credits or financial penalties attributed to Telstra Enterprise Services over the life of their contract with DCITA? And how much is it going to cost you to get your IT assets back?

Mr Nicholas —I will answer that first. Our assets are in a mixed situation at the moment. We have the lease on all of our desktop equipment already. That is under the control of the department. From the TES side they currently have the back-end server environment and some of the printers. The bulk of the assets are already under the department's management.

Senator LUNDY —So you have been negotiating that with Telstra Enterprise Services as the current contract proceeds.

Mr Nicholas —We are getting information on the current equipment and we will make decisions then.

Senator LUNDY —So you will then make an assessment on its market value and perhaps negotiate a transfer.

Mr Nicholas —Its market value and its ongoing usefulness.

Senator LUNDY —When was the contract with Kaz signed?

Mr Nicholas —In September.

Senator LUNDY —Last month—two months ago.

Mr Nicholas —Yes.

Senator LUNDY —Was Telstra's outrageous security debacle involving the loss of computer tapes a factor in your decision?

Mr Morton —No, Senator, we in fact decided to test the market prior to the loss occurring.

Senator LUNDY —Are you able to give the committee an insight into what motivated you to do that? Were you dissatisfied with TES?

Mr Nicholas —The contract was coming up to its conclusion in June 2004 and we looked at the options that were available to us and market testing was the most appropriate option.

Senator LUNDY —Could you take on notice the question about the financial penalties or service credits?

Mr Nicholas —Yes.

Senator LUNDY —I have some questions about the Building on IT Strengths program. Could you give me an update on the status of all aspects of BITS funding as allocated and what proportion of the funding has been spent to date of each program funded under BITS?

Mr Allnutt —The BITS program has three components. There is the incubator program, which has $76 million allocated to it. The ANP program has $40 million allocated to it and the Intelligent Island program has $40 million.

Senator LUNDY —What proportion has been expended in each case.

Mr Allnutt —First of all I will deal with the Intelligent Island program. The $40 million has been entirely expended in the sense that it has been passed to the Tasmanian government. It is held in trust by the Tasmanian government. In terms of the actual expenditure, the figure we have is $7.5 million up until 30 June.

Senator LUNDY —Isn't a proportion of that $40 million in another fund—a development fund?

Mr Allnutt —The entire $40 million is in a trust fund.

Senator LUNDY —And only $7.5 million—

Mr Allnutt —has been expended, yes.

Senator LUNDY —How much of that has been expended on the ELAB, or is that different again?

Mr Allnutt —That is a different program. That was the Launceston broadband program. With the Advanced Network Program, the amount expended to date is $32.7 million.

Senator LUNDY —Is the remaining funding in the ANP program yet to be allocated as opposed to yet to be spent?

Mr Allnutt —No, the money has been entirely allocated. The correct figure is $37.2 million for the ANP program. So $32.7 has been spent and $37.2 has been allocated. That has been done with funding deeds with the three organisations.

Senator LUNDY —Will all of that funding have been expended by 30 June?

Mr Allnutt —By 30 June, 2004.

Senator LUNDY —But that is not the case with Intelligent Island, is it? That is in a trust and that can be expended over a longer period.

Mr Allnutt —Yes.

Senator LUNDY —The incubators—I thought the original allocation was $78 million, not $76 million?

Mr Allnutt —The $78 million includes $2 million dollars running costs.

Senator LUNDY —With the issue of the future of the BITS program, I understand there have been two reports. The government's initial pilot report by Allen Consulting and the subsequent report by Econtech on the incubator program. I wanted to ask the Minister a question in relation to the future of the BITS incubator program, particularly in the context that you can only describe both reports as being favourably disposed to the role the BITS incubator program has played. What is the government's current consideration about the future of the BITS program and are you able to rule out cutting this program, come the end of funding next year?

Senator Kemp —The government is considering the future of the program and obviously those two reports you mentioned will be taken into consideration.

Senator LUNDY —Minister, can you tell the committee whether or not there is a possibility that the BITS incubator program will have continued funding?

Senator Kemp —I don't think I can go further than I have, Senator. I think that is the appropriate answer. I don't have direct responsibility in that area.

Senator LUNDY —I understand that, Minister. I am just relying on the fact that your officers may be able to shed some light, through you, on the issue.

Senator Kemp —If the officers can fill in any blank spaces, they are entitled to do it.

Senator LUNDY —Minister, can I interpret by that that you are not therefore prepared to definitively rule out future funding for the BITS program?

Senator Kemp —Senator, you should not interpret anything from what I said. The words speak for themselves.

Senator LUNDY —I am trying to get you to answer a question. I should know better.

Senator Kemp —You have tried for three years. You have always failed. I think it is far too late at night to be trying new initiatives.

Senator LUNDY —Is Allen Consulting doing a final evaluation now, given that they were the authors of the pilot evaluation?

Dr Hart —Yes, they are.

Senator LUNDY —Can you tell me when that final evaluation is due to be delivered to government and whether the government is planning on making that a public document.

Mr Allnutt —It is due to be delivered to the government in the next week or so.

Senator LUNDY —Can the Minister give some indication as to what will be the status of that report; whether it will be made public or what will be the timing of the government's response?

Senator Kemp —Senator, the advice I have is that the government will consider releasing the evaluation report when it is finalised, subject to the protection of any commercial-in-confidence issues.

Senator LUNDY —Minister, I am sure you are aware of a newspaper report recently which said that one of the prominent and successful programs—certainly I would consider them so, given they did have some successful graduates emerging—Item 3, is reported as saying they have ceased operating and shut down two of their technology start-ups because of the uncertainty about future funding. Obviously this has been a problem for a while with many of the incubators concerned that without knowing what their funding future will be, they are forced to start winding down their operations in the lead up to the end of this current financial year. I think that places the onus on the government to make decisions about funding sooner rather than later. Because, chances are, if you do fund them some of them will have closed down as a result of your timing. Can you respond to that, please?

Senator Kemp —Senator, I am sure that the responsible minister and the public servants are very well aware of these issues and they will always act in a responsible manner.

Senator LUNDY —Are you concerned that Item 3 has had to cease operating?

Senator Kemp —No-one likes anyone to have to find themselves with difficulties and problems, Senator. I would not like to comment on the particular reasons for that. I am not aware of them.

Senator LUNDY —But you would agree it is unfortunate if all the incubators were shut down and then you decided that they deserved more funding?

Senator Kemp —Maybe Dr Hart can shed some light on this issue.

Dr Hart —I think it is perhaps worth saying, as you know, Senator, that the BITS incubator program was an experimental program. There are lots of different kinds of models. There are 10 different kinds of incubators and 10 different kinds of business plans and 10 different kinds of approaches. There has been quite a lot of movement across the incubators as they have developed, as they have got to know each other, as they have got to compare their different approaches. Item 3 arguably was slightly more vulnerable than some of the other incubators because of its particular approach. That is just one of the things that has happened as the program as progressed.

Senator LUNDY —Why has the final evaluation been delayed, given that originally it was expected in September? That was evidence we heard in this committee.

Dr Hart —Yes, we did say that. Basically it is because it was a complex piece of work and we wanted to make sure that we could get the best possible product.

Senator LUNDY —Is the future of the BITS incubators being considered in the context of future Backing Australia's Ability initiatives and the second tier of those initiatives?

Ms Williams —There are obvious things that would join it to that, but at this stage really that decision has not been made.

Senator LUNDY —From my sums, the ticking around of the five-year Backing Australia's Ability arrives in the financial year after this current financial year. This is going to be a little bit hypothetical just for a minute, Minister, so bear with me.

Senator Kemp —I have warned you about being hypothetical!

Senator LUNDY —Is one of the problems that consideration of what happens with the second tier of Backing Australia's Ability? You have one more year to work with, as opposed to this particular aspect of the BITS program, which reaches its conclusion at the end of the next financial year? Is that contributing to a difficulty in getting an early decision on future funding for the BITS program?

Ms Williams —No, I do not think that is the case, Senator Lundy.

Senator LUNDY —I do not think I can go any further with that. In terms of the Econtech report prepared in relation to BITS, what involvement has the department had—that is, can you tell me if the department has considered that report in your consideration of the future of the BITS program?

Mr Allnutt —Yes, that has informed consideration of the program.

Senator LUNDY —One of the particularly strong points of that program is that it filled a gap where there was market failure. Is that a significant factor for the government's consideration, regarding the future of the BITS program?

Dr Hart —It was a comment made by Econtech. It is also a comment that has been made in the draft Allen Consulting Group report. Certainly it would be a consideration which would be factored into any decision about future funding.

Senator LUNDY —The other argument put forward was that with all of the lessons learnt from these incubators over the years—and like many people I have always thought that funding lots of different incubators was a good idea, even though they performed differently and have had different challenges through their time—what is now a very important body of knowledge about the function of incubators in Australia could be lost if they are either allowed to fold because of delays in funding or, indeed, the program is not funded in the future. Is the department concerned about that?

Dr Hart —The incubators themselves have said on the record, I think, that they got funding on the understanding that there was no certainty about ongoing funding and we proceed from that basis. Clearly there are some things that would support an argument for ongoing funding, some of which you have mentioned. One of the facts is that the conditions, when the program started, were not exactly the ones that were anticipated when the program was designed. They are some of the factors which the government will need to weigh in making any decisions about whether it should continue. What the government has always said is that the incubators should not proceed on that premise. When the program was announced, it was announced as a one-off round.

Senator LUNDY —The Econtech report was on a DEST web site. Why did the department not put it on the BITS web page, or the BITS incubators web page?

Dr Hart —I did not know it was. It is also on ours, is it not?

Mr Allnutt —The Econtech? No.

Dr Hart —It is not?

Senator LUNDY —It is?

Mr Allnutt —The Econtech report was prepared by the incubators, of course, so it is their report.

Senator LUNDY —I was just curious, because that is where I found it. So you have not got it on the government's web site?

Mr Allnutt —I do not think so.

Senator LUNDY —Why not?

Mr Allnutt —It was the incubators' report. It was prepared by them and it belongs to them.

Senator LUNDY —But if it forms part of your—

Mr Allnutt —If they requested us to put it on, we would have put it on, but there was no request from them, as far as I know.

Senator LUNDY —Okay. Can we expect a commitment from the government, one way or the other, on the BITS incubators this side of Christmas?

Ms Williams —We cannot say that, Senator Lundy, because we do not know.

Senator LUNDY —I would like to ask some questions about IT outsourcing and the monitoring of industry development provisions. Will the new IT outsourcing monitoring system referred to in the DCITA annual report accompany the existing annual industry development progress reports system?

Mr Allnutt —The answer to your question is that the report for the five IT outsourcing contracts will be prepared separately from the report on the commitments under the new arrangements.

Senator LUNDY —And will the new system have an annual public reporting mechanism?

Mr Allnutt —Our current plan is that we would place the results on our web site in that public way, and that we would do that on an annual basis.

Senator LUNDY —By what date each year?

Mr Allnutt —We are still finalising the details but I imagine we would do a report probably at the end of each financial year.

Senator LUNDY —Perhaps to accompany the annual report of the department?

Mr Allnutt —It could be timed with that, yes.

Senator LUNDY —I am sure you appreciate my wanting to be specific, given the appalling record of the progress reports for the other aspect of industry development. That is not just the fault of the department. I know you have had problems getting that data in from the outsourcers themselves, but can you take on notice providing the details of the public reporting mechanism associated with the government's new IT outsourcing monitoring system. Will this system apply to all government ICT outsourcing contracts or ones that are currently in place at the moment, whether they are clustered or whether they are stand-alone contracts, for example, the new one with Kaz Computing with the department.

Mr Allnutt —It will apply for new contracts. It will not apply to the five IT outsourcing contracts because they have their own reporting mechanism. It will apply to any other contracts taken into account after June 2002, so it will be new contracts after 2002, and contracts over the size of $20 million.

Senator LUNDY —Why June 2002?

Mr Allnutt —That was the date of the announcement of the new policy.

Senator LUNDY —Are there any contracts that fall prior to that date that are not the clustered contracts, that therefore have no system of IT industry development attached to them at all?

Mr Allnutt —Yes, there are a few contracts before that period.

Senator LUNDY —Which ones are they?

Dr Hart —This was the subject of a question on notice, I think, Senator.

Mr Allnutt —I think I have the reference here.

Senator LUNDY —What number?

Mr Allnutt —Number 232.

Senator LUNDY —So we are talking about—

Mr Allnutt —Those four contracts.

Senator LUNDY —Computer Associates at Customs, Acer at Centrelink, Dell at Centrelink and Optus for cluster 3?

Mr Allnutt —Yes.

Senator LUNDY —And that is all?

Mr Allnutt —Yes, they are the only contracts we are aware of.

Senator LUNDY —That is about $170 million worth of IT work. Has the government any plans to require industry development obligations for those contracts or is that opportunity gone?

Mr Allnutt —No formal requirements have been imposed on those contracts.

Senator LUNDY —What happened to SPIDA? Wasn't that the interim plan between the old system and June 2002?

Mr Allnutt —The SPIDA program was replaced in June 2002 with the new arrangements.

Senator LUNDY —What did SPIDA require of those particular contracts? Anything?

Dr Hart —They did require a monitoring for commitments over a certain figure. I think it was $10 million.

Mr Allnutt —Yes, $10 million dollars.

Senator LUNDY —Can you tell me what monitoring has been done of those contracts because they are all over $10 million.

Mr Allnutt —The intention was that they would be monitored in terms of the commitments of the companies under the SPIDA arrangements. When the SPIDA arrangements were superseded by the new arrangements, then the obligation ceased.

Senator LUNDY —The obligation ceased. Once SPIDA fell apart, these companies were not obligated to do anything. Did they do anything while the SPIDA agreements were in place that you can demonstrate?

Dr Hart —The SPIDA agreements were not in place. The arrangements were out for consideration but it was never formally instituted as a program.

Senator LUNDY —There was never an obligation on these companies? Is that what you are telling me?

Dr Hart —It was never formally established.

Senator LUNDY —I think there is a difference there. Was there an expectation or any discussion with the department and these companies that there would be industry development—

Dr Hart —During that interim period when the guidelines were being developed and we were in discussion with people about the possible arrangements, we were actively seeking advice from agencies on developments, and that is how we came to be aware of these five contracts that were being let at the time. We were tracking them.

Senator LUNDY —But nothing was ever stitched up. Can you clarify with me when that void period was. Obviously it was prior to August 2001.

Dr Hart —It was between January 2001 and June 2002.

Mr Allnutt —Yes.

Senator LUNDY —Have any of the IT outsourcing companies breached their ID requirements in the last financial year, and when will we be seeing that progress report?

Mr Allnutt —We are currently receiving the reports from the five contractors.

Senator LUNDY —You have them?

Mr Allnutt —We are currently receiving them. We have received two, and there are three in draft form we expect to get.

Senator LUNDY —Are there any breaches there?

Mr Allnutt —We are still analysing the reports.

Dr Hart —I think overall, the trend is very positive.

Senator LUNDY —You have always said that, though. When will that report be released?

Mr Allnutt —We would expect early in the new year.

Senator LUNDY —So it will be late again.

Mr Allnutt —We collect the reports around September. It takes us a few months to write the report and clear the report with the—

Senator LUNDY —But if you only have three out of the five—

Dr Hart —I think we are still on track to have something by the end of the year.

Senator LUNDY —A progress report by the end of the year?

Dr Hart —No, to actually have the full report.

Mr Allnutt —We will have the final report.

Senator LUNDY —Sorry. The full report is the progress report.

Dr Hart —Sorry, yes.

Senator LUNDY —So you are hoping to have the progress report on industry development published by the end of the year?

Dr Hart —The actual report as opposed to the interim, yes.

Senator LUNDY —I will look forward to that. I will place the rest of my questions on notice and call NOIE, thank you, Chair.

CHAIR —Thank you. We thank the officers for appearing. We now call NOIE.

[9.02 p.m.]