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Monday, 15 November 2010
Page: 2159


Mr TURNBULL (10:56 AM) —I move:

That this bill be now read a second time.

This bill concerns the largest infrastructure investment in our nation’s history—$43 billion, 3¼ per cent of GDP. It beggars belief that a government could be so reckless as to allow such a massive investment to proceed without the publication of a business case, without the ongoing scrutiny of a parliamentary committee and, above all, without a rigorous cost-benefit analysis. Again and again, this government has stated the vital importance of major projects being the subject of a cost-benefit analysis. In the words of its leading economic adviser, the Treasury Secretary, Dr Henry:

Any major infrastructure project must be subject to a rigorous cost benefit analysis and if it does not pass a rigorous cost benefit analysis then it necessarily detracts from Australia’s wellbeing.

This government even set up Infrastructure Australia for the express purpose of prioritising and analysing major infrastructure projects. An essential element in Infrastructure Australia’s process is a rigorous cost-benefit analysis of the projects being considered, but the largest infrastructure project will not be scrutinised by Infrastructure Australia or anybody else.

Everybody agrees on the core policy objective of universally available and affordable broadband. We believe that this should be achieved in a manner which delivers structural reform to the telecommunications sector and promotes greater competition which is fair to Telstra shareholders and, above all, which imposes the lowest cost on taxpayers. A prudent government would have sought an objective analysis of the various ways and means of achieving those objectives—but not this one. Some people have argued that while the NBN is surely the most expensive way of delivering universal broadband—and I would challenge honourable members to think of a more expensive way—it does at least achieve the objectives I have described. That, of course, is an argument that is only attractive to people to whom cost is no object and who fail to recognise that every billion dollars spent unnecessarily on this infrastructure project is a billion dollars that cannot be spent wisely on an infrastructure project that is of greater real need—be it a road, a school, a hospital, a railway line or a water project. But even the assumption that the NBN achieves those objectives is questionable. How do we deliver a more competitive telecom sector by establishing a gigantic government owned, fixed-line monopoly with which owners of other fixed-line networks will be prevented from competing? Let us not forget this: under the NBN scheme, Telstra will not be permitted to compete for broadband or voice services over its HFC network, which passes 30 per cent of Australian households. That vital piece of competitive infrastructure, which could be deployed to keep prices low from the NBN, will be eliminated purely to support the economics of this government owned monopoly.

Already the NBN is under fire from other telco companies and, most significantly the Western Australian, South Australian and Tasmanian governments for its plan of limiting the points of interconnect to its network to as few as 14—all in capital cities—overbuilding billions of dollars of fibre backhaul infrastructure and essentially rendering it worthless and, as a consequence, reducing the amount of competition in those regional areas which were supposed to be the primary beneficiaries. You do not have to take the opposition’s word for this. This is the Tasmanian Labor government, the South Australian Labor government and, of course, the coalition government in Western Australia making precisely these points, as do a range of other telco companies.

Why do we imagine a new monopoly network costing $43 billion will not seek to recover a return on its investment by using its monopoly power to increase internet access costs? We know they have been coming down year on year for well over a decade, but the McKinsey implementation study states that internet access costs under the NBN will increase in real terms year after year. So we are spending $43 billion of taxpayers’ money to provide universal broadband which will be more expensive than it is today.

This issue of affordability is a critical one. One would have thought that the members on the government side of the chamber would be more alert to this. Only 43 per cent of households with incomes less than $40,000 use the internet at home, according to the latest ABS numbers. There is the digital divide. It is based on income, it is based on affordability, it is based on poverty. Yet the government is proposing to create a government owned monopoly which will be massively capitalised and which will actually increase the cost of internet services, thereby worsening the digital divide and reducing the affordability of internet access to Australian households. I might say that households with incomes of $120,000 a year or more have about 95 per cent internet access at home. There is a massive gulf in terms of income and that is the single biggest fault line in the digital divide in internet access. This government’s plan is going to make that worse.

Only yesterday the OECD expressed its real concern about the way in which the NBN will close out facilities based competition in fixed-line broadband services. Their report states:

Multiple empirical studies have stressed the value of competition … Moreover, such a monopolistic incumbent—

such as the NBN—

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

The OECD expressly recommends that competition between technologies be maintained, not suppressed, as is the plan with the NBN. The OECD also criticises the government for its failure to conduct a cost-benefit analysis and expressly recommends that the planning and coordination of public infrastructure be improved by independent, rigorous published cost-benefit analyses.

What is the argument against the cost-benefit analysis that we are seeking, through this bill, to have conducted by the Productivity Commission? What is the objection that Senator Conroy provides? He says that cost-benefit analyses are subjective. If that is a fatal flaw, why does the government advocate their use for all other infrastructure projects? Put another way, if the government believes a cost-benefit analysis is needed for $100 million worth of road infrastructure, why is it not needed for a $43 billion NBN? He says it will be expensive. The most expensive study done by the Productivity Commission last year cost $2 million. It has a $36 million budget. It can well accommodate this study within that budget and yet this minister, Senator Conroy, spent $25 million of taxpayers’ money not doing a cost-benefit analysis with McKinsey. It was something so extraordinary that McKinsey actually flagged in the opening paragraphs of their report that it was not a cost-benefit analysis. Of course, this is a $43 billion project.

He says it will hold things up—absolutely untrue. The Productivity Commission’s work would continue while the building of the network in its experimental demonstration sites goes on. He points to the importance of ending the vertical integration of Telstra’s customer access network with its retail business. That is one of the outcomes of the NBN, but surely this is the most expensive way of achieving it. If vertical integration is the problem, then separation—be it functional or structural—is the answer and it is plain that you do not need to trash the existing customer access network and build a completely new one to deliver that.

Finally, he points to other studies which have extolled the virtues of universal broadband. We all agree with that, but that is like pointing to the general virtues of better public transport as a means to justify any particular investment that has anything to do with public transport. But the case he is putting privately to Independent members is a very different one. He is saying that the Productivity Commission will not give the NBN a tick. He says that he knows the NBN does not stack up economically and that it will fail the Productivity Commission’s test. There is a vital interest in us having real accountability on this project and that is why the objects of this bill—a business case, a Productivity Commission cost-benefit analysis and ongoing parliamentary scrutiny—are absolutely critical if this House is to fulfil its duty of safeguarding the interests of the taxpayers of Australia.