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Wednesday, 24 August 2011
Page: 5396

Senator CORMANN (Western Australia) (16:19): This bill we are debating is part of the government's NBN fiasco. Consistent with its modus operandi it seeks to minimise or remove competition and to put the government in control—government knows best irrespective of the additional cost, irrespective of the inefficiency or the waste. This government has a scary disregard for the value of taxpayers' money. Of course we know that. We well remember that, in relation to the NBN, the government did not conduct even as much as a cost-benefit analysis. We well remember that the minister, Senator Conroy, and the then Prime Minister, Kevin Rudd, designed the NBN policy on the back of an envelope in an aircraft. They came up with 'sort of an appropriate figure that we should put to it'. To make it sound scientific they did not want to come up with a round figure so they came up with a figure of $43 billion. There was no science to it. It was back-of-an-envelope type stuff. Of course, ever since, they have been playing catch-up, trying to come up with some sort of justification for that very inappropriate way to deal with taxpayers' dollars.

In this bill the government equally has made no attempt whatsoever to maximise value for money with the arrangements that it is proposing to put in place to bring fibre to greenfield sites. The coalition supports the principle of encouraging fibre to greenfield sites, of course. I am referring here to the dissenting report that was put forward in June by the member for Wentworth, the Hon. Malcolm Turnbull, as part of the advisory report on the Telecommunications Legisla­tion Amendment (Fibre Deployment) Bill 2011, where he noted:

While it costs more to install fibre than copper in a new development, the incremental cost is much less than the cost of installing fibre in brownfields sites. The Government’s stated policy is that in developments of 100 homes or less Telstra will install copper. The Coalition members believe this approach risks wasteful duplication with copper presumably being overbuilt within a few years if it is within the fibre footprint. On any view connecting greenfields developments to fibre must be a key priority given the cost advantage over brownbuild fibre overbuilds referred to above.

We agree with the principle of encouraging fibre onto greenfield sites. However, it is important to do it right, and that is where this government has significant difficulties—it does not think things through. It takes a very ideological approach to government and has a complete disregard for the value of taxpayers' dollars. It does not come to this with a view to making sure that we stretch the value of the dollar as far as possible and that we maximise the efficiency, the impact and, ultimately, the affordability for con­sumers. That is not the approach of this government. This is a government which is focused on putting government at the centre of all things, irrespective of whether that is the appropriate way to go. We are really concerned that this bill would further destroy broadband competition, because it would make it preferential to use the NBN. It would make it artificially cheaper for developers to use the NBN, rather than existing fibre installers, to lay fibre on greenfield estates. It would give NBN a competitive advantage in the marketplace, yet again, when there is no proper justification for doing so.

Labor is actually doing the opposite of what it promised. Senator Conroy, the Minister for Broadband, Communications and the Digital Economy, said in December last year that he would preserve the role of private fibre installers and operators. Instead he has structured this bill in a way which would further entrench his monopoly, NBN Co., which is very clearly not in the national interest. For the benefit of the Senate and for senators who might be considering their position on this bill, I will quote what Senator Conroy said in December 2010:

It has been a consistent feature of the government’s policy in new developments that there should be room for competing providers. This continues to be the case.

…   …   …

Providers can compete to provide infrastructure in new developments—for example, by offering more tailored solutions to developers or more expeditious delivery.

That is exactly the opposite of what the government is now doing with this legislation. Why is the government so intent, through the power of legislation, to give its monopoly provider every single additional advantage in the marketplace that it possibly can? It is not appropriate, but that is the modus operandi of this government.

This bill and the way the arrangements have been put together demonstrate that the government has not learnt from the mistakes it has made on NBN policy more generally. The NBN is of course a government owned company which was created to build the network. It is going to cost taxpayers billions and billions of dollars. It will have monopoly powers. The government thinks that this company should do everything. It should be in control of the whole shooting match—the whole shebang. Of course, that makes it way too expensive. It is bad for competition and it is largely unnecessary, as the private sector can do the job faster, more efficiently and cheaper, as long as the parliament and the government have set the appropriate ground rules for all of that to happen. But, no, this government thinks government has to be in charge of everything. This government does not believe in the benefits of competition. This government does not believe in the benefits, efficiency and value for money that can come from having the private sector compete appropriately with each other—and with NBN Co., for example.

I will go to the dissenting report by the member for Wentworth on behalf of coalition members of the Joint Committee on the National Broadband Network, because it raises a series of very important issues. It makes the point that the arrangements in this legislation are:

… unnecessarily slow and bureaucratic for property developers.

In evidence to the inquiry, the Housing Industry Association made the observation that:

… 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. I appreciate that there are negotia­tions in the feasibility and planning arrangements, but there needs to be that level of certainty for developers so they know who is going to do it, who is going to pay for it and when it can be done. 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.

This bill will put in place significant additional burdens that are completely unnecessary.

The other observation made in this report is that this bill is a 'missed opportunity to impose competitive and cost discipline on NBN Co.' As presently drafted, the bill does not allow us to take advantage of the existence of competitive greenfield opera­tors, which would impose effective compet­itive and cost discipline on NBN Co. I recommend the report to Senator Farrell, the minister at the table, if he is still thinking about how he is going to vote on this legislation. He should have a very close look at the report by the member for Wentworth. It is very good reading; I think he would learn a bit.

It would be way better if we had a regime where developers had a viable option to use competitive greenfield operators to build out fibre networks in their developments, because that would mean they could build the network more cheaply, quickly and conveniently. That would:

… produce a more efficient outcome if it meant that infrastructure in new developments were built at lower cost than if it were done by NBN Co under a monopoly.

It is very simple. If NBN Co. can provide the service at the lowest cost then clearly it should be providing the service. But the market should be free to test whether there is a cheaper, quicker, more efficient way to do it. Why does the government not want us to have the cheapest, most efficient way of bringing fibre to greenfield developments? Why does it want to inflate the cost? Why does it want that additional cost to be passed through the whole economy? This, of course, is on top of the carbon tax and all the other taxes. This is a government that does not mind imposing additional cost-of-living pressures on people across Australia. The approach of this government, whether with NBN Co. or with anything else they touch and stuff up, is to spend too much, to borrow—

Senator Williams: It is waste.

Senator CORMANN: And it is waste, as Senator Williams just pointed out—spending too much, waste, borrowing money. And then of course there is taxing: introducing one new multibillion ad hoc new tax after another. That is because we have this waste, because we have inflated costs, because this government wants to put government in charge of everything and because the government does not believe in the benefits of competition and because the government does not want these sorts of services to be provided at the most affordable cost.

It would be very simple to fix. All the government needs to do is go back to the policy statement the minister made back in December 2010: that he is happy to have competition. Competition is good. Compet­ition keeps providers honest. If they know they are going to face competition they know they have to be as good as they can be. NBN Co. would know that it has to perform, because if it does not perform there is going to be a private provider that might be able to do it quicker, faster and with better service. If there is that threat, it might keep NBN Co. on its toes. This government is obviously worried that NBN Co. will not be competitive. This government is worried that NBN Co. will not be able to provide value for money. So what does this government do? It puts a fence around NBN Co. It says, 'No, we don't want pesky private providers to be out there showing us up.'

If we allowed competition, people might actually realise that this white elephant we have set up is not delivering value for taxpayers' dollars. People would realise that it is just another example of waste of taxpayers' dollars and they would be even more upset about all these new taxes they face as a result of this government's persistent incompetence.

As the member for Wentworth, the Hon. Malcolm Turnbull, very astutely observed, this bill is damaging to competition in the market for the provision of new fibre infrastructure, and on this point I quote him:

The regime established by the Bill is damaging to competition in the market for the provision of new fibre infrastructure. Today, as is clear from evidence provided by GFOA there is a nascent but increasingly active market in which CGOs compete to secure contracts from developers to build out fibre networks in their developments. In some cases, the CGO builds the network and then also operates as a retail service provider, providing services over the network to residents in the development.

That is a very good thing. He goes on:

The regime established by the Bill damages competition for several reasons. First, by exposing CGOs to competition from a government funded operator which is prepared to install fibre at zero cost to a developer (once the developer has incurred the expense of building trenches and other ‘fibre ready facilities’), the regime will effectively make it impossible for such CGOs to compete.

CGOs will be at a fundamental cost disadvantage because NBN Co is prepared to install fibre at zero cost, incurring a loss on the installation which it presumably hopes to recoup over time from service revenues.

This is typical monopoly-type behaviour. So you have a company, like NBN Co., which is getting not only the advantage of a 100 per cent taxpayer investment but also the advantage of the government muscle and the legislative muscle protecting its market position. Then, once everybody is sucked in, once everybody is locked in to this arrangement, nobody is going to be in a position to keep the company on its toes to provide the most affordable price and the most competitive service.

That is what this is all about. This is about locking in NBN Co. as the only viable provider, courtesy of significant taxpayer subsidies—multibillion-dollar taxpayer subsidies—and courtesy of protecting its position in the marketplace through legisla­tion like this. Why is that in the national interest? It is a question Senator Mason asked earlier in relation to the carbon tax. Why is that in the national interest? And, I might say, that was a very eloquent contribution in the context of this debate.

With so much of what this government does, there is a real question mark as to why they are doing it, as to why it would be in the national interest to force people to pay more for the services that are going to be provided through initiatives like NBN Co. They would have to pay if the private sector and the competitive market out there were allowed to do its job. Through competition, within the context of an appropriate framework, you do get better value for money—better value for taxpayers' money and better value for the private money people have to pay for services they might choose to access, or might not choose to access. If there is no provider out there that can provide a service at a price people are prepared to pay, maybe there is not sufficient demand to justify the expense in the first place.

The coalition, as constructive as we are, is proposing some amendments to make sure that the current flaws in this bill are addressed. Hopefully the government will see fit to support those amendments. Senator Birmingham, on behalf of the coalition, will be moving amendments to remove the disincentives for developers to use CGOs to install fibre infrastructure. The reason we want to do this is that we want to give developers an incentive to use competitive greenfields operators in the knowledge that, if they pay a CGO on a per connection basis, they will be able to recoup that cost by selling the connection to NBN Co. We want to ensure that developers have additional choices beyond the government's default option so that when they build a new development they will install fibre-ready facilities but there will be no live network installed. We do not want people to be locked into just one option. We want there to be a series of options.

This will impose a cost discipline on NBN Co. because it will require them to purchase connections at a reasonable price, which will be set at a price no greater than NBN Co.'s own average cost of installing a connection. This will mean that, if there are competitors that can build connections at a lower charge than NBN Co., there will be a cost saving to NBN Co. and ultimately to the taxpayer. Surely that would be a good thing. I am hopeful that Senator Farrell will make it his business to recommend to the government that they seriously consider this amendment.

There will be a second coalition amendment to this bill which will seek to address the damaging effects on competition in the market for the provision of new fibre infrastructure.

The overall point is that the government has not learned from its failure around the NBN. It is wasting a lot of money. Because it wastes so much money, it has to borrow more and tax more. It is not good for Australia. It is high time that this government started to learn the value of taxpayers' money and stopped wasting so much of it.