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Monday, 4 July 2011
Page: 7353


Mr FLETCHER (Bradfield) (16:44): I am pleased to speak on the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2011, which is part of the overall policy architecture underlying the National Broadband Network and its specific objective is to ensure that new developments receive a fibre connection rather than a copper connection. In the broad, this is a sensible objective. But typical of the way the Rudd-Gillard government approaches virt­ually every policy issue, including those in the telecommunications sector, they have done an absolutely hopeless job of seeking to implement this objective because they have come up with a mechanism which is heavy handed, intrusive, damaging to competition, bureaucratic and unnecessarily expensive. They have done this through key provisions in this bill, which, amongst other things, specifically mandate that property develop­ers must meet certain requirements to install so-called fibre-ready infrastructure and also give the minister the power to impose technical standards, upsetting the long-established arrangements in the industry in which technical standards are set by agreement through the industry repres­entative body, the Communications Alliance.

In the brief time available to me I want to make three central points. Firstly, it does make sense, if your objective is to improve Australia's broadband infrastructure—an objective shared by all of us on all sides of this House—to focus your policy attention on new developments. The second point I want to make is that the particular method which this government has chosen to focus on this area is unfortunate in terms of its consequences for housing policy because it makes the process of building new housing developments slower and more complex than it otherwise needs to be. Thirdly, I want to make the point that these measures are very bad in terms of their consequences for competition in telecommunications—consi­stent with every other aspect of telecom­munications policy which this government has touched.

Let me turn firstly to the central point that it does make sense to focus on new developments. It is uncontentious between the major political parties and it is uncontentious amongst all who have looked into this issue that the marginal cost of installing a fibre connection over a copper connection is much lower in greenfields sites in new developments than it is in existing homes and buildings. It costs a lot more to go back and retrofit existing homes and buildings, ones which currently have a copper connection, with a fibre connection than the incremental cost of fibre over copper in new developments. It therefore makes sense, as we have been happy to acknowledge in a dissenting report, to encourage the building of fibre connections in new developments. It is a sensible thing to do. Indeed, housing stock in Australia increases by around one per cent each year, so simply by encouraging fibre in new developments you begin to achieve a gradual and steady increase in the percentage of homes which are connected to fibre. Indeed, even Telstra—not known to be a friend of competition—acknowledged, in its submi­ssion to the inquiry conducted by the Joint Select Committee on the National Broadband Network, that there is a growing competitive market for the delivery of fibre networks in new developments. They remarked as follows:

Traditionally as the USO provider we have been deploying copper based infrastructure at the request of developers. More recently a competitive fibre deployment industry had arisen and a number of providers, including Telstra, deployed fibre in many new developments under contract to the developer.

In other words, what we have is the market responding to demand and increasingly installing fibre infrastructure in new developments around Australia without the intervention or assistance of government. The Gillard government would no doubt find this an extraordinary proposition, but the market is, in fact, efficiently responding to demand and fibre is already being built in a material number of new developments around Australia. And what has been the response of the Gillard government? As usual they have rushed in to clamp the dead hand of government upon this nascent market. Their central planning instincts have been spurred by these developments and their policy settings choke off the market response, as I will come to in more detail in a moment.

Let me turn to make the second point I want to make. This bill is a bad idea when it comes to the question of housing policy. We all know that there is a looming housing shortage in Australia, and the last thing that we ought to be doing is imposing new complex bureaucratic requirements upon property developers. Unfortunately, that is precisely what the arrangements mandated by this bill do. They add expense and delay for those wishing to build new housing estates. Notwithstanding the government's rhetoric, in practical terms this bill gives developers a very strong financial disin­centive to deal with operators other than NBN Co. In turn, this leaves developers at the mercy of NBN Co.'s responsiveness and timeliness. NBN Co. will become a bottle­neck through which all property develop­ments must pass before they can be completed and brought to market. I confidently predict that the downstream consequences for Australians wishing to purchase new housing are likely to include increased delay and expense. Let me note the comments of the Housing Industry Assoc­iation when they appeared before the committee's inquiry:

The legislation needs to make it very clear who is responsible for the delivery and that there are certain obligations on the provider to do that in a very timely way, otherwise it will delay development.

The Housing Industry Association went on to say:

It should not take more than a couple of phone calls and a meeting to sort out it being put into the critical path of the development, otherwise those projects will be delayed whilst certain things are waiting for a provider to provide that infrastructure.

Unfortunately, the complex arrangements in this bill do not give the certainty that the Housing Industry Association is seeking. The unfortunate consequence is that there is likely to be a bottleneck as projects queue up to get the tick from the National Broadband Network Co.

Thirdly, let me turn to the most substantive point I want to make, which is that the approach in this bill is a very poor approach when it comes to the question of competition policy in telecommunications. The practical effect of this bill is to minimise competition and choice as to who will build fibre networks in greenfields locations in new developments. As a consequence, this bill represents a missed opportunity to impose effective, competitive and cost discipline on the National Broadband Network Co. If there is one thing we have seen in spades to date, it is that the National Broadband Network Co. certainly requires a healthy dose of competitive pressure. If it were the case that developers had a viable option to use a party other than NBN Co. to build out fibre networks in their develop­ments, then developers would be likely to choose parties other than NBN Co. if those parties were able to build a network for them more cheaply, more quickly and more conveniently. That, in turn, would produce a more efficient outcome if it meant that infrastructure in new developments were built at a lower cost than if all fibre in new developments were installed by NBN Co. under a monopoly. It would also have the incidental and not trivial benefit of getting live and operational fibre networks into new developments as they were being built rather than developers and, in turn, the people who will live in those developments, being forced to wait until a connection can be made at a time of NBN Co.'s convenience. Let me remind you, Madam Deputy Speaker D'Ath, that NBN Co.'s stated build time frame goes out to 2020. They are already months behind their plans.

So, under the model chosen by this government in which all paths run to NBN Co. unfortunately many Australians are going to be waiting a very long time to get a fibre connection, and it is richly ironic that there is already in place a private sector market which is successfully delivering fibre connections in new developments. Yet, this government's policy approach is to specific­ally impede, slow down and put hurdles in the way of the operation of that private market. The consequence is that many Australians moving into new developments will be waiting longer to get fibre connections than they would be if this meddling government had left the matter alone. Despite the empty commitments and despite the vapid rhetoric from the minister for broadband who claimed, 'Developers will be able to source fibre from competing fibre providers if they wish', the economic reality is that he and his government have set up arrangements under which developers are given a very strong financial incentive to deal with NBN Co. and a very strong financial disincentive to deal with anybody else.

According to the explanatory memor­andum, installing the fibre-ready infrastr­ucture, which is mandated by this legislation, costs around $800. There was also evidence provided to the committee that the full cost of installing a fibre connection is $1,500. Put these two numbers together and what you see is that the developer is up for an additional incremental cost of at least $700 per lot if the developer chooses to contract with a competitor to NBN Co. rather than, as the government wants it to do, just leave it and wait until NBN Co. comes along. Unfortun­ately those who will suffer will be Australians moving into new premises who would have expected, had the private sector market continued to operate, to have received a fibre connection. They will now be waiting a very long time in many cases, given the very long period over which NBN Co.'s operations are scheduled to occur.

Fundamentally the regime established by this bill is damaging to competition in the market for the provision of new fibre infrastructure and there are three reasons for that. Firstly, it exposes existing non-NBN operators, who are already in the marketplace providing fibre connections in new developments, to competition from a government funded competitor with enorm­ously deep pockets, which is prepared to install fibre at zero cost to any developer which has incurred the expense of building trenches and other fibre-ready facilities. In effect that makes it impossible for those competitors of NBN to continue to operate competitively with it.

Secondly, this bill is damaging to competition because the standards as to what constitutes a 'fibre-ready facility'—for example, a pit to be built in a new development—will in practical terms be set by the National Broadband Network Co. For example, proposed section 372W of the bill says that a fibre-ready facility is one which amongst other things satisfies such condit­ions as are specified by the minister. It is clear from the statement of expectations issued by the government last year that NBN Co. will be in the driver's seat in determining what the minister specifies because it says:

The Government expects NBN Co to provide guidance on technical specifications as early as possible.

The statement of expectations also says that NBN Co. would consult with the Comm­unications Alliance. But let us be absolutely clear and lay to rest this misleading claim being made by government members today that, in some way, the existing industry process will continue. That is absolutely not the case. Under the existing process the Communications Alliance makes the decisions. Under the new process NBN Co. will make the decisions and the Commun­ications Alliance will be required to rubber stamp them. There is plenty of experience as to the damage to competition that occurs when the dominant player is able to set technical standards. It was for that precise reason that, in 1989, the power to set technical standards was transferred from Telecom Australia to an independent body. This government in this bill, as in so many other ways, is going backwards in a very bad way when it comes to competition.

Thirdly, this bill is very damaging to competition in the market for the provision of fibre because it fundamentally undermines business models used by greenfield fibre operators today.

This bill needs profound amendment if it is not to seriously damage competition, and I commend to you the amendments that the coalition has moved.