- Parliamentary Business
- Senators & Members
- News & Events
- About Parliament
- Visit Parliament
Joint Committee on the National Broadband Network
Rollout of the National Broadband Network
- Parl No.
- Committee Name
Joint Committee on the National Broadband Network
Oakeshott, Robert, MP
Husic, Ed, MP
Xenophon, Sen Nick
Macdonald, Sen Ian
Turnbull, Malcolm, MP
Cameron, Sen Doug
D'Ath, Yvette, MP
- System Id
Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Table Of ContentsDownload PDF
Previous Fragment Next Fragment
Joint Committee on the National Broadband Network
(Joint-Monday, 24 October 2011)
Cameron, Sen Doug
Turnbull, Malcolm, MP
Oakeshott, Robert, MP
D'Ath, Yvette, MP
Husic, Ed, MP
Macdonald, Sen Ian
Senator IAN MACDONALD
CHAIR (Mr Oakeshott)
Xenophon, Sen Nick
D'Ath, Yvette, MP
Macdonald, Sen Ian
Husic, Ed, MP
Xenophon, Sen Nick
Cameron, Sen Doug
Turnbull, Malcolm, MP
Senator IAN MACDONALD
D'Ath, Yvette, MP
Macdonald, Sen Ian
Cameron, Sen Doug
Turnbull, Malcolm, MP
Senator IAN MACDONALD
Macdonald, Sen Ian
Xenophon, Sen Nick
Cameron, Sen Doug
Turnbull, Malcolm, MP
Senator IAN MACDONALD
D'Ath, Yvette, MP
Macdonald, Sen Ian
Xenophon, Sen Nick
Cameron, Sen Doug
Turnbull, Malcolm, MP
Senator IAN MACDONALD
Turnbull, Malcolm, MP
Senator IAN MACDONALD
Cameron, Sen Doug
Macdonald, Sen Ian
- Mr Harris
Content WindowJoint Committee on the National Broadband Network - 24/10/2011 - Rollout of the National Broadband Network
BUETTEL, Mr Rohan, Acting First Assistant Secretary, Networks Policy and Regulation Division, Department of Broadband, Communications and the Digital Economy
HALL, Ms Stacie, First Assistant Secretary, Government Business, Special Claims and Land Policy Division, Department of Finance and Deregulation
HARRIS, Mr Peter, Secretary, Department of Broadband, Communications and the Digital Economy
QUIGLEY, Mr Michael, Chief Executive Officer, NBN Co. Ltd
QUINLIVAN, Mr Daryl, Deputy Secretary, Infrastructure Group, Department of Broadband, Communications and the Digital Economy
SMITH, Mr Philip, Assistant Secretary, Government Business, Special Claims and Land Policy Division, NBN Policy and Shareholder Branch, Department of Finance and Deregulation
SPENCE, Ms Pip, First Assistant Secretary, NBN Implementation Division, Department of Broadband, Communications and the Digital Economy
Committee met at 10:03
CHAIR ( Mr Oakeshott ): I declare open this public hearing of the Joint Committee on the National Broadband Network. Before calling the first witnesses, I ask a committee member to move that the media be allowed to film the proceedings today in accordance with the rules set down for committees, which include not taking footage or still images of members' papers or laptop screens. Thank you, Mr Husic; it is so ordered. I know that a few members will be in and out today, so would a member move that we can form, for quorum purposes, a sub-committee consisting of all the members of the Joint Committee on the National Broadband Network to take evidence at hearings on 24 and 25 October 2011. Thank you, Ms D'Ath; it is so ordered. Also, would someone move that the committee authorises for publication, and that they be included in records of evidence, the submissions that have been received since 13 October 2011, which have been circulated and details of which will be recorded in the minutes? Thank you, Senator Xenophon; it is so ordered.
We have a long list of witnesses and a large agenda to get through. Recent days have seen another milestone passed on the road towards a national broadband network—namely, the vote by Telstra shareholders which will allow structural separation to occur, the decommissioning of the copper network and the handing over of Telstra customers to the NBN. In recent days NBN Co. has announced its roll-out plans for the next 12 months for 28 new locations and the end of the trial in the first mainland release sites. We will be exploring some of these and other issues throughout the day. The committee is dealing with a diverse agenda at the moment. We will be considering our views and making our conclusions in the coming weeks and expect a report to parliament before the end of November.
I thank the witnesses for coming. Although the committee does not require you to give evidence under oath, I advise you that these hearings are formal proceedings of the parliament and warrant the same respect as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. Mr Quigley and/or Mr Harris, would you like to make an opening statement to the committee?
Mr Quigley : Yes, I will make a few comments to start with. Perhaps before answering questions I would like to provide the committee with an update on the status of the definitive agreements. While an agreement by Telstra shareholders for Telstra to participate in the NBN was, as you mentioned, a significant milestone, there are still some important steps before final agreements come into force. The ACCC has to accept Telstra's SSU and approve the migration plan and then NBN Co's shareholder, the Australian government, has to endorse the deal before the agreements become binding. Before these approvals can happen, as Telstra noted in its advice to the ASX, Telstra has to submit a revised SSU, which it expects to do in coming weeks following its current discussions with the ACCC.
While Telstra expects that the issues raised by the ACCC can be addressed without a material impact on shareholder value, it has indicated that if any material change does occur, shareholders will have an opportunity to vote on such changes. In any case we will not know the outcomes and what they mean for the shareholder approval process until these issues are resolved. While the focus of industry has been on Telstra's transparency and equivalence arrangements set out its SSU, the definitive agreements are also the subject of scrutiny by the ACCC.
Against this background, until all the conditions precedent have been met and the final agreements are available to the Telstra and NBN Co. boards and to the government, no further documentation regarding agreements can be released. I note that the material provided to Telstra's shareholders was a succinct summary of the package and the content was discussed with NBN Co. and the government before public release. At the point that the agreements become binding, the government and the parties will consider the release of additional material, although it is still likely there will be redactions to ensure commercially sensitive material is not released. Thank you.
CHAIR: Mr Husic will commence questions.
Mr HUSIC: Mr Quinlivan, as you are familiar from previous hearings, I have an active interest in the retraining fund—the $100 million that has been set aside for Telstra to help Telstra employees transition over into the sector to meet the expected 25,000 jobs that this project will generate. I have been told that Telstra is currently in the process of offshoring 300 cable assigner jobs within its organisation. It is blaming the rollout of the NBN but not providing for any use of the funds to retrain those employees. Those employees could have a role in the activation centre used by NBN. If the cable assigners are making a connection in either an existing or a new estate, they assign pairs so that people can actually get a telephone service, so there are some competencies and skill sets that can be picked up. Are you aware that Telstra is offshoring 300 of these cable assigners to India, and how is it that those types of people will not be able to get access to that fund?
Mr Quinlivan : I have no knowledge of the particular circumstances that you mention and I do not think that any of us at the table have either. So I cannot comment on the particular details that you have mentioned. As Mr Quigley said, the agreements have not yet come into force and will not do so until the conditions precedent are met, so the capacity for Telstra to access those training funds in any circumstances does not exist at present. It will exist when the agreements come into force, which we anticipate will be quite soon. At that time Telstra will be able to access those funds for a whole range of approved purposes. Without knowing more about the context or the circumstances that you mentioned, I cannot say whether the people involved in those particular jobs would be capable of being retrained under the program. On the face of it, I cannot see why not. We would have to know more about the specifics to say for sure. The main point at present is simply the timing one—the agreement is not in force, the program has not started and those funds are not available to Telstra for that purpose yet.
Mr HUSIC: I have seen the ads that have been used in India where they ask people if they are fluent in English and what their skill sets are? Those ads have been around since June, so Telstra has been working on this for a while. You indicated in your response to my earlier questions that you expected that this 'will come into effect soon'. Do you have any broad time frame as to when that might be executed?
Mr Quinlivan : That was the very issue that Mr Quigley was talking about in his opening statement—that there are a number of processes that have to be completed, mainly the approvals by the ACCC. We are hoping that it will occur by the end of the year but we cannot nominate a date with any certainty at the moment.
Mr HUSIC: Are you saying that until the agreement kicks in the $100 million is not formally activated to help retrain people and stop this offshoring?
Mr Quinlivan : That is correct. All of the agreements that we are talking about today will come into force at the same time when those conditions precedent have been met.
Mr HUSIC: In broad terms, can you tell me how you imagine the retraining agreement will operate—that is, the way in which Telstra will liaise with you to inform you about how the $100 million will be spent and then how it is spent in retraining employees?
Ms Spence : I can provide a bit more detail. Within six months of the conditions precedent being met Telstra has to submit to the department a three-year training plan, which I think we have advised you about previously. That will be the basis for understanding what it is that Telstra will be doing and then ensuring that the government's contribution to this is delivering on the intended objectives.
Senator XENOPHON: Mr Quigley, I think your prepared statement is a little different from what you gave on the record and you cannot give a copy of it, is that right?
Mr Quigley : I can provide you with a copy later on but what I said was not what is written down here.
Senator XENOPHON: Are you saying that you need to be circumspect in terms of the discussions about the SSU?
Mr Quigley : The totality of the agreements proposed with Telstra are still not finalised. They are still subject to ACCC approval. So we do not have a deal in place yet.
Senator XENOPHON: When the ACCC appeared before Senate estimates on Thursday night, I asked them questions about the SSU. They said that they have asked for a new undertaking from Telstra. There is a deadline of 20 December. Is that your understanding?
Mr Quigley : A deadline has been agreed by which the definitive agreements have to be signed unless both parties agree to extend them.
Senator XENOPHON: The ACCC was not certain as to whether it would be satisfied or have its inquiries completed by that time. To what extent would any delay of ACCC approval affect the overall agreement and the rollout?
Mr Quigley : It obviously has an effect on the rollout. As I have said before, the fact that the agreements took somewhat longer than we expected certainly has an impact on the rollout. Regarding the agreement itself, if both parties agree to extend the deadline then both parties agree and it can be extended.
Senator XENOPHON: You are not overly worried at this stage? If the ACCC were to say, 'There's no way we are going to do this by 20 December; it might be January or February,' would that cause you any concern?
Mr Quigley : Yes, of course, it would cause me concern. I am keen to have the deal done so we can get on with it and have some surety. We are working at the moment under an interim agreement. That interim agreement is not the final agreement. There are certain restrictions on it. We are not free to do all the things that we would like to do to get on with the job.
Mr Harris : If I could add to Mr Quigley's answer. The testimony that the ACCC chair gave last week to estimates committees indicate that they recognised the deadline. They could not guarantee that they would meet it but they recognised it. In those circumstances, we are reasonably hopeful that we might be able to get there.
Senator XENOPHON: Is there any concern from the department's point of view as to whether Telstra is being fully cooperative with the ACCC? Do you have a view on that?
Mr Harris : The nature of undertaking something as significant as the structural separation undertaking is the sort of document that I would have expected would take more than one iteration to satisfy the regulator and the interested parties and the remainder of the industry.
Senator XENOPHON: You aware that some of the industry, Vodafone and Optus, have expressed real concerns about the nature of the SSU, saying that this could well replace one gorilla in the room with another one.
Mr Harris : I am very much aware of the industry's views. They have been put to us apparently with the same strength as they have been put to the ACCC. I think it would be unlikely for an undertaking of this nature to have gone through in a single iteration. It is a particularly powerful and important document. As we have made clear throughout this, it is an astonishingly important objective from the department's perspective for the overall long-term public interest of this whole project that structural separation is achieved. This is the mechanism by which we achieve it—this and the migration plan. It is a particularly important level of responsibility that now exists between Telstra and the ACCC to get this done properly, and it would be remarkable if it had been achieved in a single iteration.
Senator XENOPHON: Sure, but there are concerns from Optus, Vodafone and other players that if you do not get this right, it could embed structural imbalances in telecommunications—a different sort of imbalance in terms of lack of competition—giving a favoured status to Telstra which goes against the grain of the whole purpose of structural separation.
Mr Harris : That is quite right.
Senator XENOPHON: To what extent can you assure us that the final iteration will deal comprehensively with those issues from Optus, Vodafone and others and that they will be satisfied that we will have a competitive telecommunications industry?
Mr Harris : I do not know that you could ever say that Optus or Vodafone will be satisfied—
Senator XENOPHON: Less dissatisfied.
Mr Harris : We have a high level of confidence that the ACCC is not going to allow through a document of the kind that might have been suggested in some of the more colourful remarks that have been made in this process. Processes like these are very prone to colourful remarks. The ACCC, as you know and as I think all committee members know, has been very powerfully interested in this area for a long time. The concept of structural separation is particularly important to them. I do not think you are going to see that kind of outcome here.
Senator XENOPHON: Mr Quigley, you have appeared before so many committees. At a hearing of this committee I asked you some questions in relation to procurement and you were going to take some issues on notice. Can you indicate whether you are in a position to? I am not sure if you have actually responded on notice.
Mr Quigley : Probably not at this stage.
Senator XENOPHON: Are you in a position to comment on that further in terms of the procurement processes?
Mr Quigley : I think it would be better if I respond on notice.
Senator XENOPHON: Can you give me an idea of what the time frame may be?
Mr Quigley : Off the top of my head, no; I do not know. But we will endeavour to make sure we get all of the answers to questions on notice back in good time.
Senator XENOPHON: Another month or so?
Mr Quigley : I would anticipate before then.
Senator IAN MACDONALD: I am following on from Senator Xenophon's questions. What happens if the ACCC do not approve the undertaking? Have you got a plan B?
Mr Harris : Which undertaking are you referring to?
Senator IAN MACDONALD: The SSU.
Mr Harris : The version of plan B would not be solely in the hands of any one of the parties. It would be in the hands of all of the parties if the ACCC did 'not approve'—and I am using your words. It seems to me unlikely, having gone down this path, that the SSU would remain permanently unapproved, which is what would suggest a plan B would be necessary. It is always likely when the parties meet for them to have different aspirations for inclusion in the document, and it is likely that negotiation could resolve all of those things in time. So I do not think a plan B is something that has been invited but if there had to be a plan B it would obviously be a matter for all of the parties, Telstra being the primary party because it is their undertaking and they would need to replace it with something. Ultimately the legislation does require, effectively, functional separation and I think comments have been made about the cost and the time frame and the impact of functional separation by Telstra. Those remarks stand on their own. But I am trying to express a reasonable level of confidence that the parties are capable of negotiating this to a conclusion because, as I have said, it has been a very strong aspiration for many of us in public policy in this area that structural separation is actually achieved.
Senator IAN MACDONALD: Obviously, delays would occur. How are they being factored in by NBN Co.? I suppose it would be NBN.
Mr Harris : It is NBN but in their agreements the parties have allowed themselves the ability to renegotiate if they wish but it has got to be a shared responsibility. But the legislation stands on its own, and that is quite important as well.
Senator IAN MACDONALD: You say the legislation requires structural separation.
Mr Harris : It requires functional separation, as the forced requirement, versus structural separation, as the voluntary requirement.
Senator IAN MACDONALD: So if it does not—and this is hypothetical—
Mr Harris : We are treating this committee as being more of an open forum and we are not going to use hypotheticals as—
Senator IAN MACDONALD: But I am really interested in what NBN's plans might be. Obviously, they would have plans if for some reason that did not happen. Can you tell me where the legislation kicks in if this does not get to first base?
Mr Harris : We have here the living and breathing expert on the legislation in Mr Buettel.
Mr Buettel : The legislation provides for functional separation arrangements that are set out in it. Those arrangements are turned off if a structural separation undertaking comes into force. There is a period within which those functional separation arrangements do not apply and the minister can extend that period—from memory it is around 18 months, from around March of this year.
Senator IAN MACDONALD: So there are likely to be no triggers if approval is not given at an early stage, as is hoped.
Mr Buettel : I suppose it would depend upon the actual circumstances in which structural separation did not proceed. If it looked like, as the secretary was suggesting, there was opportunity for further negotiation to reach an outcome then the minister could further extend the time frame for functional separation to fall into place and that would give further time for those negotiations to occur.
Senator IAN MACDONALD: I guess others will have questions about that. I want to quickly move to a couple of other what I hope will be brief questions and answers. At estimates we were talking about batteries, and I think we ended up with the conclusion that the first one would be paid for by NBN and the second one would be paid for by someone else, by the householder-that is correct?
Mr Quigley : The householder or the RSP—retail service provider?
Senator IAN MACDONALD: If the RSP do it, they will pass it on to the householder; they are not in the charity business. They will pass it on in some way, I assume—that is correct; NBN first? An interested constituent has sent me a battery back-up user's guide and it suggested to me that the original brochure—they sent me the current brochure—said that the UPS needed to be installed in a temperature and humidity controlled container or the battery may explode. It does not seem to be in the second one. Can you comment on that?
Mr Quigley : I am afraid, I cannot.
Senator IAN MACDONALD: Mr Harris thinks it is funny so he must have an answer.
Mr Harris : I am just thinking about exploding batteries.
Mr Quigley : I have not heard that statement made before. It would certainly be a surprise to me.
Senator IAN MACDONALD: Which statement.
Mr Quigley : The statement that the battery would explode if it wasn't in a container.
Senator IAN MACDONALD: It was suggested to me that the original NBN—I must say I have not checked this out, but the source would have no purpose for being inaccurate—installation brochure stated—
Mr Quigley : Are you reading from the original installation brochure or is someone saying this?
Senator IAN MACDONALD: I have been told this, but you can clarify it.
Mr Quigley : I can; I will take that on notice and have a look at it.
Senator IAN MACDONALD: Let me get to the crux of it: do they require temperature and humidity controlled containers?
Mr Quigley : Not to my knowledge.
Senator IAN MACDONALD: Not anywhere in Australia?
Mr Quigley : No, I do not believe so.
Senator IAN MACDONALD: Could you let us know about that?
Mr Quigley : Indeed.
Mr Quinlivan : I think you referred to it as a user's guide.
Senator IAN MACDONALD: I am only quoting from what an interested member of the public has emailed me: 'The original NBN installation brochure stated that the UPS itself needed to be installed in a temperature and humidity controlled container or the battery may explode. This requirement seems to be absent from the latest documentation.' It may not be accurate, but you are the experts.
Mr Quigley : I will take it on notice . It sounds to be rather wrong. I would be surprised.
Senator XENOPHON: Maybe the easiest way to resolve this is if we could get copies of any documents relating to the installation of these batteries where there has been a change or whatever.
Mr Quinlivan : We have agreed to take it on notice.
Senator IAN MACDONALD: Particularly in the original.
CHAIR: Do you have any more questions?
Senator IAN MACDONALD: Yes, one. Your agreement with RSPs—are they exactly the same for every RSP?
Mr Quigley : Yes, only for a WBA, a wholesale broadband agreement, that has to guarantee equivalents. We have the same agreement with all RSPs.
Senator IAN MACDONALD: Are they exactly the same except for the names?
Mr Quigley : Exactly the same, yes.
Senator IAN MACDONALD: Is that a public document?
Mr Quigley : That I am not sure of. I am not sure that WBA is a public document.
Senator IAN MACDONALD: Bearing in mind that there would be no commercial sensitivity because they are all the same, could we, on notice, if it is possible—
Mr Quigley : I think a version 4 of our WBA has been released publicly for comments, so it is certainly public in that sense. When the document is actually signed, if you are talking about any individual document with any RSP, I would have to take that one on notice.
Senator IAN MACDONALD: When do you expect them to be finalised? How are you operating now with the RSPs if there is no formal agreement? Is it just a wing and a prayer sort of thing?
Mr Quigley : No, we have what is called an SFAA, an interim agreement which we have signed with the RSPs. Those of them who wanted to get onto the trial site signed an interim agreement with us, with the understanding that it would be replaced in due course by a WBA.
Senator IAN MACDONALD: Are the interim agreements available for disclosure to this committee?
Mr Quigley : I am not sure we have made public the interim agreements; they are interim agreements.
Senator IAN MACDONALD: But they would all be the same for every RSP?
Mr Quigley : I believe so; I would have to check on that.
Senator IAN MACDONALD: On the assumption that they are all the same, and therefore there are no commercial sensitivities involved—
Mr Quigley : I cannot see any commercial sensitivities, but I will check on that.
Senator IAN MACDONALD: I would like to have a look and see what the arrangements are. Are the prices in every agreement exactly the same?
Mr Quigley : The prices will be exactly the same.
Senator IAN MACDONALD: Can you take that on notice, thank you. I will come back with more questions if there is time later, Chair.
CHAIR: Mr Turnbull, do you have some questions?
Mr TURNBULL: Can I ask about the legislation's scheme. If the structural separation undertaking is not concluded with the ACCC, then the statutory provisions relating to functional separation are effective—correct?
Mr Buettel : Correct, yes.
Mr TURNBULL: What would happen if the NBN were not completed? The structural separation undertaking obviously presupposes that the NBN is going to be completed and that structural separation will occur, not by reason of Telstra separating anything in the way that, say, the New Zealanders have done, but rather because its customer access network will be built over and decommissioned.
Mr Harris : Can I ask a question, to be clear? You are asking what happens if the ACCC has accepted a structural separation undertaking but, part of the way through the completion of the NBN, it stops or there is some deferral, and so structural separation as envisaged under the original document accepted by the ACCC cannot proceed because the migration option is not there.
Mr TURNBULL: Correct.
Mr Harris : I just want to make sure we have got the parameters.
Mr TURNBULL: Yes, that is well summarised, Mr Harris; thank you.
Mr Harris : Rohan, I think that is a question for you, because it is not one for me!
Mr Buettel : The way the structural separation framework works is that Telstra is required to cease to supply services progressively, as the National Broadband Network is rolled out. There is a progressive rollout across the country. After a certain period of time in a particular area. Telstra is required to cease providing services over copper and cease providing broadband services over HFC in that area, so the structural separation process is, I suppose, in a sense ambulatory.
Mr TURNBULL: It occurs piecemeal.
Mr Buettel : It occurs as the rollout occurs. It occurs progressively, following the rollout.
Mr TURNBULL: I understand that. Let me step back, in the spirit of this discursive sort of meeting, and enlarge on that a little bit. The sort of nirvana for those ensuring maximum competition in this industry is full structural separation, and the New Zealanders are doing the full monty in that respect. A halfway house is functional separation, and the British are a good example of that. Jump in and correct me if you disagree with any of this. In the legislation, in the event of there not being a structural separation undertaking agreed, functional separation would occur, and the closest analogy to that, I imagine, would be what has happened with BT. Again, correct me if you want to disagree with or qualify that.
Mr Harris : In a legal sense, that would be true but not necessarily in a performance sense.
Mr TURNBULL: Why is that, Mr Harris?
Mr Harris : Because competitive circumstances in the UK are different to competitive circumstances in Australia.
Mr TURNBULL: Yes, that is true.
Mr Harris : So in a legal sense—
Mr TURNBULL: No, that is a good qualification, and we can come back to that. With the structural separation undertaking in place, Telstra's obligation, as you said, is to decommission its copper as the NBN rolls out. So it is structural separation by a thousand cuts, in the sense that as each precinct is connected to the NBN Telstra disconnects its copper and therefore there is structural separation. What I want to explore are the circumstances where that rollout ceases, for example, or takes a lot longer to be completed. What are the options under the legislation to fall back to structural separation? Once the SSU is accepted, does that mean that the legislative door on functional separation has closed forever?
Mr Buettel : Once the SSU is in force and structural separation is proceeding, if the rollout of fibre services ceases, at that point Telstra will be required to remain separated in relation to where the fibre rollout has occurred. There will not be an obligation for it to separate beyond the cessation of the fibre rollout, but Telstra will continue to remain subject to the interim suppression requirements that are currently being settled, involving the ACCC, the industry and Telstra, in its structural separation undertaking. So those interim transparency and equivalence arrangements would continue to apply.
Mr TURNBULL: But they fall far short of structural separation, don't they?
Mr Buettel : They are not as extensive as the requirements of structural separation. Under the current legislation, functional separation would not apply. If the government wished to consider applying functional separation arrangements after cessation of rollout, that would require further legislation.
Senator CAMERON: Mr Quigley, I am not sure if you will answer this question again, but I suppose I have to ask the question. Mr Turnbull raised at the last hearing the issue of technology choices. I think you offered Mr Turnbull a briefing on the technology choices. Has that offer been taken up?
Mr Quigley : No.
Senator CAMERON: It has not been taken up. So that leads us—
Mr TURNBULL: Can I say I would be delighted to sit down with you, Mr Quigley, and talk to you about that. I am very happy to do so. We can do that at lunchtime today if you like, if you are free. Do you want to have Senator Cameron present to make sure you don't say anything indiscreet?
CHAIR: This is the inquiry about the NBN. Next question, Senator Cameron.
Senator CAMERON: I will just ignore that rubbish. I must say your reputation diminishes every time I come here.
CHAIR: Well ignored! Next question.
Mr TURNBULL: Your impeccable charms are consistently high all the time.
Senator CAMERON: That is good. I was just asking a question. If we are all settled—
Mr TURNBULL: I think he would struggle if he had a constituent—
Senator CAMERON: You're struggling now, I think. That is your problem.
CHAIR: I will hand the questions to someone else if you will not ask one.
Senator CAMERON: So Mr Turnbull did not take up the offer. We have seen now this argument that fibre to the node is a better alternative than fibre to the premises. You have dealt with that issue on a number of occasions at hearings I have been involved in. It seems that Mr Turnbull has dropped Korea off the horizon a little bit now—UK and New Zealand are the flavour of the month. Has there been an analysis done by NBN to try and nail these arguments so that we do not keep coming back to them? What have you done rather than just report to the hearing?
Mr Quigley : In the beginning when we were looking at planning we needed to look at different alternatives. We looked at a range of technologies not in any level of detail and we certainly have not done a comprehensive type of analysis recently. In fact I am not sure that it would be appropriate for a GBE to start looking at alternatives. Maybe Mr Harris could comment on the rules around GBEs.
Mr Harris : In the circumstances I think it is amazing that anybody would consider that the public sector would sit there and examine policies of somebody aspiring to be in government and say, 'It's our job inside government to alter circumstances to address them.' The Public Service is not set up for such a purpose. The public sector is set up to implement the policies of the government of the day having advised the government of the day of the benefits and the risks of the course that they choose. There are degrees to which you can put in safeguards for circumstances in those risks or benefits that you can absolutely anticipate will occur, but as the public sector you cannot design policy for an alternative government. You can only design policy for the government of the day. That is our responsibility.
I am very surprised that anybody would imagine that anything to the contrary could occur because if you take that template and then start applying it to policy in other areas or in other circumstances you are effectively ending up with a public sector that is anticipating the results of a democratic process. From my perspective that is something that in 30 years in the public sector no-one has ever told me would be reasonably expected of us—quite the contrary. We do anticipate in the pre-election period potentials for alternative policies to be introduced and we examine and attempt to have those in place for a government if the government changes. People are aware of the red book and the blue book—quite a lot of effort went into those last time and will go into them in the future when an election is held. But it is not plausible and in fact in my view it is quite dangerous to expect the public sector to start anticipating a change in a government designed policy for the party which is not the government of the day.
Senator CAMERON: I think that is fair and reasonable. In terms of the criticism that NBN is facing constantly from Mr Turnbull about fibre to the node, you have not done any analysis on the implications of the different technology mix.
Mr Quigley : We certainly have, but I would like to draw a distinction between doing an analysis and keeping ourselves very aware of alternative technologies that are available to implement objectives that have been set for us. When you are going to design a network and provide broadband there are a lot of questions that need to be answered and you need to be quite precise about those questions. Technology choices depend on the objectives that are set. To implement the government's objectives as set out to us to provide 100 megabits per second to more than 90 per cent of the population, fibre to the node is not much of a prospect technically to be able to do that. It raises all sorts of issues. We also have the other objective, as we have spoken about recently, which is the whole industry structure. We have to take that into account as well in how we went about negotiating the deal. It really is quite difficult to do an analysis unless you have a clear set of objectives and know what it is you are trying to achieve.
Senator CAMERON: Companies as I understand it do not just do an analysis of their objectives. They look at what is out there to inform them about any challenges or any threats that may be there for the business plan. Have you done any of that?
Mr Quigley : We certainly looked at different technology choices. Obviously we looked at wireless LTE technologies and various types of what I call FTGX type technologies. Yes, we certainly did an examination of those to see what would be the most efficient way to build the network that the government has directed us to build.
Senator CAMERON: Is there a paper that could be tabled so that we can nail this?
Mr Quigley : There is. I will have a look at what we have produced. It was a little while ago, but perhaps there is something that we could table.
Senator CAMERON: That would be good. I see in my papers that the issue of wireless and wireless technology is raised again—and I suppose we have to keep asking these questions if they are raised in the papers that the committee receives—and about wireless technology becoming more effective than NBN's technology. Has anything happened since the last time you spoke about this that would make you change your mind?
Mr Quigley : No, we are using the same wireless technology that people keep talking about, which is a long-term evolution of 4G. It is exactly the same technology that we are using for the four per cent, between the 93 and 97 per cent. That technology, as you would expect, continues to evolve and the peak speeds will continue to go up.
The issue with wireless technologies is not peak speed. The issue is capacities—how much can you download per subscriber in the busy hour? That is the issue that you have to face when you are looking at wireless technologies and, if you want to get a reasonable amount of download capacity then wireless in fact becomes more expensive than fibre. You cannot do too much with wireless and those sorts of capacities without it becoming very expensive, which is why the crossover took place between fibre and wireless.
To answer your question directly, yes, we keep looking at wireless. Just repeating once again—the biggest wireless vendor in the world told me just a couple of weeks ago that by 2016 they expect the amount of data downloaded on wireless networks will be half of one per cent of the total download on fixed-line networks. I think there is no better statistic. It gives you an indication of the relative capacities of wireless and fixed line. Wireless is very good for mobility and fixed line is very good for high-capacity download and video and that is why you need both technologies.
Senator CAMERON: In relation to the issue that Senator Macdonald raised about batteries and fires in batteries, is there any analysis that you have undertaken about the long-term position with battery backup in the NBN?
Mr Quigley : No, we await a government analysis of the policy position on battery backup overall. I can tell you that we are just trying to find out some information. The battery we use is in fact within a sealed box. That is the way the batteries are made. But they have a finite lifetime, as you would expect.
Mrs D'ATH: I just want to follow up on a couple of things that have been talked about today and also some information you have provided in response to questions on notice at previous hearings. Firstly, following on from the questioning to the department from Mr Husic in relation to Telstra and funding being provided for training or retraining of staff, have any similar arrangements been entered into with Optus?
Mr Quinlivan : No.
Mrs D'ATH: Can you explain why? Is it because the arrangement with Optus does not relate to their workers as it does with Telstra's? Can you just walk us through the process and explain the difference between the Telstra and the Optus arrangements?
Mr Quinlivan : The Telstra arrangement with the company is almost in the nature of a joint venture and is to last for the duration of the rollout. It is a permanent relationship there. In the course of the negotiations with Telstra, the government was very keen to find areas in which we were able to create extra value for Telstra in the transaction, where there was a clear public benefit. This was one such area where it was possible to reach an agreement with Telstra to retrain staff through the provision of public grants, and that created additional value for Telstra because the value of the avoided redundancies was significantly more than the value of the grants we provided to Telstra. So there was a very big dividend to the Commonwealth and to NBN Co.'s side of the transaction. There was no such issue with Optus, because it was a purely commercial deal between Optus and NBN Co.
CHAIR: I can read between the lines about what you are saying, but Optus also has a field workforce as well that would be affected by this. So why wouldn't there be retraining funds extended to them? Theirs is significantly lower than Telstra's, but they still have a field workforce.
Mr Harris : I think perhaps Mr Quinlivan's answer is the answer that we would have to give. The negotiations with Telstra were designed to develop both something that was in the public interest and had value for them. We were not at any point negotiating with Optus on a similar basis. So the Optus negotiation is entirely conducted between NBN Co. and Optus. The Telstra negotiation was effectively a tripartite arrangement. It involved the government negotiating as well as NBN Co. with Telstra. It had a different objective, which was the migration, the overall agreement, to structurally separate and migrate. So the purpose behind obtaining sufficient value for Telstra to agree to do that, in a public policy sense, was not just the ability to retrain workers—which we think is quite an important public policy interest in its own right—but was the structural separation outcome from the ability for Telstra to accept a certain price for a certain set of functions in order to free up its network for a competitive-neutral telecommunications industry for the future.
The negotiation with Optus was an NBN negotiation entirely of a commercial nature around migration, so the issue that you are now suggesting, which is retraining for Optus, would be clearly not a matter for Mr Quigley. It would be a matter for ministers to consider should they believe there is a need to do so.
Mrs D'ATH: There are a number of witnesses before the committee today, some of whom have made reference to what they perceive is going to be the costs of accessing broadband under the NBN. I am just wondering if the department or NBN can update the committee on what are some of the expected costs as far as the start-up or basic plan availability on NBN.
Mr Quigley : The prices that we had proposed, which have been considered by the ACCC, have been published. It is a basic service of $24 wholesale, for 12 megabits down, one megabit up. There are a number of other elements of charges but for a basic service—for example, if you just want to provide a voice service—that will do the job. There is a capacity component, what we call a 'connectivity virtual circuit' in addition to the access part, with different speeds, and there is a connectivity virtual service where there is a charge for that. All of this is in the public domain and has been in the public domain for quite some time. It is the basis for which we are charging now on services we are providing to retail service providers.
What I can tell you is what have now seen from at least half a dozen retail service providers, which is that the retail pricing is where we had hoped it would be, which is very comparable to ADSL2+ for both our 12/1 service and our 25/5 service, which is obviously clearly superior to an ADSL2+ service. The retail service providers seem to be quite happy with the pricing structure that we have put in place.
Mrs D'ATH: Do you know—and I appreciate we are talking about the retail service providers now—what some of that start-up rate is for the basic packages?
Mr Harris : We had a set of numbers which I had done for estimates, which I do not think I have brought along here. The order of magnitude of the comparisons was something like this. For $40 to $60 on the plans announced I think you get up to a 20 gigabyte allowance, a faster speed and, effectively, if you are prepared to go to Skype or the equivalent, your calls. That is versus about $70 to $90 for the equivalent package on a separated basis as it is currently marketed—that is, you pay $29 a month for your line rental, plus your calls, plus about the same amount again for your basic broadband package and then more again, depending on your gigabyte allowance. I will update the committee properly, but on the numbers announced you are looking at that order of magnitude—$40 to $60 versus $70 to $90 for about the same package. We did this order of magnitude comparison because it is very hard to make the packages each line up and that is particularly true while we do not have retail packages from the two big suppliers at the moment.
Mrs D'ATH: I have two other questions. Firstly, thank you for the information provided on e-health in response to Senator Xenophon's question on satellite services. I believe your response has provided a fair bit of information and clarity on the long-term satellite opportunities in relation to e-health. I have a question about the interim satellite service. I want to clarify that the interim satellite service replacing the Australian Broadband guarantee is capable, in relation to videoconferencing and some of those e-health opportunities, of providing exactly the same if not better service than the Australian Broadband Guarantee. I am seeking clarification that people will still be able to access something that they could access under the broadband guarantee, that there will be that capability under the interim satellite service.
Mr Harris : [inaudible] quality product that NBN Co. is offering significantly exceeds the quality of the product that we were able to offer under the ABG. There is no doubt about that. The orders of magnitude that our average busy-hour throughput number—I remember it as 3,300, but Mike probably—
Mr Quigley : Once again, the average busy-hour throughput is about, as far as we can tell, on the measurements we did, about four times that on the ABG. But in addition it is generally also a higher speed service. Given that, on the interim satellite service there is still a finite amount of capacity and you are limited in terms of videoconferencing. With the long-term satellite service we were aiming to try to meet those requirements for rural Australia for videoconferencing.
Mrs D'ATH: I appreciate there are still limitations, but I just wanted to clarify that it is still equal if not better than the Australian Braodband Guarantee. My last question goes to a lot of the questions that have been put to you this morning in relation to the structural separation. Mr Turnbull has mentioned before that the structural separation would occur incrementally, by a thousand cuts—I think those were his words—as the copper is progressively decommissioned. Are there any other elements to structural separation set out in the SSU—for example, those that occur in the interim that are not dependent on the NBN rollout?
Mr Harris : That is an answer that is going to be difficult. Can you restate the question?
Mrs D'ATH: Are there other elements to the structural separation set out in the SSU, for example, that occur in the interim that are not dependent on the NBN rollout?
Mr Buettel : The short answer is yes, but just to go into a little more detail, the SSU will contain a number of measures in relation to transparency and equivalence. At this stage there is still discussion as to what those measures will contain but, at an initial level, what Telstra is proposing so far is for new price equivalence arrangements; to establish a service level rebate scheme for the payment of service level rebates to wholesale customers in the event that Telstra does not meet a particular service level in its supply of regulated services; improved ring-fencing arrangements, including rules about how Telstra's retail, wholesale and network business units deal with each other, including controls on retail marketing activities by field staff who support retail and wholesale services; improved information security arrangements to protect wholesale customer information; improved access to Telstra exchange buildings and external interconnect facilities; a new fast-track dispute resolution process to deal with complaints regarding operational equivalence matters, including the establishment of an ACCC approved independent telecommunications adjudicator to resolve non-price equivalence issues; and, finally, a reporting and governance framework to monitor Telstra's compliance with the SSU. So there is quite a lot of detailed proposals, but the actual detail of those proposals is still being settled in the process involving the ACCC.
CHAIR: I have a couple of questions. Mr Quigley, you made some comments in your opening statement about some aspects of commercial in confidence. I just want to clarify for the Australian community what is public now and what is still bound around your perception of commercial in confidence. Can the public access the wholesale broadband agreement?
Mr Quigley : Yes, version IV and the latest one. Mr Quinlivan tells me—
CHAIR: Anyone can answer. I just want to clarify this.
Mr Quigley : Not only version IV but the final version has to be, according to Australian law, made public. So it will be made public.
CHAIR: It is public?
Mr Quigley : It will be.
CHAIR: It is not yet?
Mr Harris : Not yet.
Mr Quinlivan : It does not exist yet.
Mr Harris : The current draft that is circulating is a public document. The final will again be a public document.
Senator IAN MACDONALD: So you do not need to take that on notice now. You were taking it on notice for me, but you have now confirmed it.
Mr Quinlivan : That was the interim.
Mr Harris : You were asking about the interim one.
Senator IAN MACDONALD: I was also asking about the final one.
Mr Quinlivan : We have clarified that, Senator, so the latest you have got is right.
Senator IAN MACDONALD: Thank you.
CHAIR: Special access undertaking is still not public?
Mr Quigley : No, we have put a discussion paper out. We are in discussions with the ACCC. I believe that one is likely also to be public. I do not know for sure.
Mr Quinlivan : Yes, it will be.
CHAIR: Do we have any time frames attached to both of those?
Mr Quigley : We do not at this stage. Those discussions are still taking place with the ACCC and they are going well. We will publish those just as soon as we can.
CHAIR: And the Telstra agreement? How much of that is public now?
Mr Harris : Are you talking about the SSU—the structural separation undertaking from Telstra—or the definitive agreements?
CHAIR: The definitive agreements.
Mr Quigley : There has been an explanatory memorandum published by Telstra.
Mr Harris : The ones given to the stock exchange effectively and on to shareholders are publicly released documents.
CHAIR: I am just trying to clarify it for someone sitting at home on a saddleback 100 kilometres outside Broken Hill. What can they access and what can they not access? You are saying that they have version IV but soon will have the wholesale agreement. They will soon have the SAU. They have an EM and are still waiting for further details on the particular agreements.
Mr Quigley : Yes, I think that is correct.
Mr Quinlivan : Perhaps we can just clarify it. Telstra's structural separation undertaking will be a public document and the version that has been submitted to the commission is available now. It is probably on the ACCC's website. That just leaves the definitive agreements—the final documents. I cannot answer for that. It is a matter between Telstra and NBN Co. as to which of those agreements are made public. I do not know what the arrangements are for making part or all of them available to the public once they are completed. Mike might be able to answer that or take it on notice.
CHAIR: Mr Quigley, do you want to answer that because that was my obvious next question?
Mr Quigley : As I said, there has already been information released by Telstra as part of its explanatory memorandum. The point I was making in my opening statement is that until we get to what is called commencement—until the documents become unconditional—they are not totally finalised. Until that happens I do not anticipate releasing any additional information, nor do I anticipate Telstra being willing to do so either.
CHAIR: Is that a judgment call on your behalf?
Mr Quigley : Yes, that is a judgment call on my behalf. I cannot speak for Telstra. It is up to them what they choose to release, but I would say that even once the documents are finalised and commencement has happened—the documents become unconditional—there will still be some commercially sensitive information in those documents which neither party would want to see released.
CHAIR: What would be your advice to this committee, which is here on behalf of the parliament and on behalf of the Australian people, on this question of what is commercial-in-confidence and what is the public interest and value-for-money question for taxpayers? Is your advice that we should meet with you in confidence as a committee to do the public interest test or are you saying that we will not have access at all and nor will my unofficial friend from Southpac.
Mr Harris : I do not think it is a matter for Mr Quigley to tell you what the government would or would not give you access to were it a matter for the government. Clearly, in a circumstance where there are commercial agreements in place, Telstra would also have to be happy for us to undertake a discussion of the kind you are talking about. They would have to be consulted at least. In other words, commercial-in-confidence is not just a matter for the government or even for NBN Co. as a government-owned instrumentality to say that it will or will not give the committee access in those circumstances. We would have to bring Telstra into this as well. That said, everything we have done to date has been designed to maximise the transparency of documents. I know people have been frustrated saying they cannot get access to it and asking why they cannot get access to it now. We have attempted to make these things as transparent as we can. I see no reason why that attitude will not continue, but we would have to consult with Telstra to be sure that they too were satisfied. They have, as you know, obligations to update the Australian Stock Exchange should information be made available to some people—information which then could, I am sure, accidentally or otherwise, be transmitted to everybody else. They would have to consider that sort of disclosure issue in whatever arrangements they agreed to. I am not saying that any of the information in the DA is or is not market-shifting information, but you would have to give them the chance to consider that.
CHAIR: Mr Harris, can you take on notice the question of whether Telstra or any of the other parties who have entered into agreements and are now being bound by the question of commercial-in-confidence would be interested in having either further consideration of the public interest test in those commercial-in-confidence questions or in meeting with the committee in confidence to allow us, on behalf of the taxpayers, to run that value-for-money question over any of the agreements?
Mr Harris : I am happy to do so.
CHAIR: Thank you.
Senator IAN MACDONALD: Mr Harris, did I understand you to say that the decision on commercial sensitivity was the responsibility of government rather than of the NBN?
Mr Harris : Answering on behalf of the government primarily because, if NBN Co. wanted, for example, to release something that was considered a significant event, the government would expect, under GB arrangements, to be informed of that. We would think in these circumstances that it would ultimately be referred to the government for review. It may not be. It depends on how material the matter is; but this is a material matter, I would consider.
Senator IAN MACDONALD: If the reason for not leaving it is commercial sensitivity and NBN Co. say, 'We're happy for it to be released,' are you saying that the government could then come in over the top and say, 'No, even though NBN Co. and Telstra are happy, we're not going to release it?'
Mr Harris : No, I was saying the exact opposite.
Senator IAN MACDONALD: That is good. I misunderstood you. I will have a look at the transcript.
CHAIR: On the Telstra vote of last week, the EM that I read was in regard to the Grant Samuel work.
Mr Quinlivan : It was part of it.
CHAIR: Has anyone described that as a cost benefit analysis by Telstra?
Mr Harris : Not to my knowledge.
CHAIR: Would it be incorrect to do so on behalf of Telstra shareholders?
Mr Quinlivan : I think it would be better to describe it as an analysis with alternative options for Telstra.
CHAIR: For the greatest convenience?
Mr Quinlivan : No, that is what it was. It was assessing the relative merits from a shareholder point of view of the options available to Telstra.
CHAIR: Is that what a cost benefit analysis is?
Mr Harris : Analysis on a commercial basis would be different from an analysis on an economic basis, and a cost benefit analysis tends to take both economic and social factors into account. For example, Grant Samuel would not consider the benefits to the Australian economy on a wider basis that a cost benefit analysis would. They would consider the commercial benefits to the parties and particularly in this case the shareholders involved, so there would be a wider suite of benefits and, similarly, there would be a wider suite of costs. With a cost benefit analysis, depending on how far you want to take it, you may well want to consider other potential uses for funds, for example. Telstra and Grant Samuel would have considered that in terms of their own funds but not in terms of the government's funds.
CHAIR: Is there any reflection on the work that was done by Grant Samuel in regard to its importance for the 1.4 million shareholders—it was make a pretty strong statement last week—of 'yes' compared to the last couple of years where there has been some muddy waters in the conversation between the Australian community and everyone else in trying to get some public engagement as well as public support for the NBN rollout? Is there any reflection at all on a comparison between the two?
Mr Harris : I think it is very hard to say, Chairman. There is no doubt at all that what Grant Samuel was saying to Telstra shareholders was that this is a positive outcome for you in the circumstances as they applied, given the options available to you and that, in future, shareholders should be able to benefit significantly from entering into this deal. The cost benefit analysis would consider, as I said, the wider economic and social costs and benefits of such a proposition. I think what the shareholder vote does do is give a level of confidence that structural separation—which inherently, in our view, has a very substantial public benefit—can proceed and can proceed efficiently under such an outcome and that that competitively neutral underpinning telecommunications infrastructure, which can be put in place as a result of this project, is likely to provide significant spin-off benefits. But that analysis is an economic analysis and is separate to this analysis which is a commercial one.
CHAIR: In a couple of other questions the issue of condition precedence has come up as far as what is being described as option B or plan B in some forms and risk managing beyond two years. I understand the point that decisions have to be made based on the law of the day and the policies of the day. I fully accept that, but there has not been in any of the contracts signed to date any risk management either through compensation or other means of any potential change on policy direction in regard to what is essentially a 10-year rollout of the NBN
Mr Harris : No, that is not the case. What I said in my earlier answer is that we can—NBN Co. as a government instrumentality, the public sector—in designing both policy and legislation take into account both the risks and the benefits of the process involved, and risk management has definitely been applied. Commercial, powerful risk management mechanisms have been put in place by the NBN Co. board and by agreement with the government under the stated expectations to deal with those things that we can reasonably anticipate. What I was commenting on separately was the idea that we could design for multiple potential agendas put into the public arena by different parties. We cannot do that. We work for the government of the day. Bear in mind that NBN Co.—this is relevant to Senator Macdonald's original question earlier—works ultimately to a statement of expectations put in place by the government, translated by NBN Co. into a corporate plan, given back to the government and then endorsed by the government and becomes their template for what they are doing.
CHAIR: I fully understand that, but because this is a ten-year rollout and several agreements and contracts are being entered into now of a substantial nature for a period of time longer than the next two years, the question is how that is risk-managed in a commercial sense in what is quite obviously a charged political environment.
Mr Harris : The answer is that we employ a very well credentialled CEO and board to apply their best judgment of the commercial circumstances applying to those contracts at the point in time they must enter into them if they are to deliver the government of the day's policy prescription. That in my view has occurred and we have been as mindful as we can be of the need to have those commercial protections in place in contracting. Nevertheless, at the point the contracts must be entered into in order to deliver the policies of the government of the day, they are entered into, for that reason, to deliver the policies of the government of the day.
CHAIR: Less, though, as a question of government. I would imagine other parties would want to have that clarity around risk. Are you saying to me there are agreements or contracts entered into on which other parties to those agreements with government or NBN Co. are comfortable that it is non-compensatable any of the policy risk due to the politics of the day?
Mr Harris : It is quite leading question, if I could say, in its own right. Mr Quigley is better placed because they are his contracts, but I can say from the government direction-setting perspective that the parties that have entered into those contracts have done so with their eyes wide open and have managed their own risks in entering into those contracts as much as we have managed the risks from the taxpayers' perspective, or in Mr Quigley's case from the corporation's perspective. That has been done to the best of anybody's ability and we have, as I said, quite an exceptional quality board and management team in place for that purpose.
CHAIR: I am not questioning anyone's personal qualifications in any way, but if I am going to enter into an agreement with NBN Co. on the NBN rollout I am either going to charge more or I am in the contract or agreement going to be asked for compensation if things substantially change in regards to agreements reached on the terms and conditions arranged. So the question is, what is going on in the commercial world with regard to what is obviously now a choice of two different policy options with some different foundation blocks attached to them? I do not know of any other policy that is talking about 93 per cent 100 megabits per second to the home. Correct me if I am wrong. So the question in a commercial sense, not in a political sense, is how is that being dealt with in the contracts entered into? Are people charging more or are people writing in compensation for that risk? I am trying to establish how you are doing business in that environment.
Mr Quigley : Not radically different from the way you would do business in a normal commercial environment. Almost all projects I have ever been associated with—often when I am selling equipment—you understand, for example, that large telcos can change plans and terminate contracts often at will. That is not uncommon when you are supplying equipment or services. That can happen. Obviously, if you are entering into contracts, once you have ordered material and material is in the production line you have an obligation to take that. Our contracts are no different in that regard. In other words, once we have placed orders for material and a supplier has taken on board costs, they need to be compensated for those costs.
If we are coming back to the situation with Telstra in particular, which I think is where the question is mostly directed, I think some of the information has been released—there has been a termination clause that was negotiated of $500 million once we get to a point where 20 per cent or greater of the access network has been built. That clause will not be triggered for some years at least, so that $500 million will not be payable—and it is a peak that then runs down to the end of the contract period. That is not an issue over the next couple of years.
It is the case that we will be placing orders particularly for transit infrastructure which is building out between fibre access nodes and points of interconnect and dark fibre between. Our view is that we will be placing those orders and the company will be committed to build that. We need it to build the network—the fixed wireless network, the greenfields policy, the overall access of build—but that is an asset that the company will carry on its books. It is a useful piece of national infrastructure. That will take place.
We have gone about the contracts in the usual way you would when doing a commercial negotiation and tried to protect our shareholders' interest to the maximum extent possible but if you try to write a contract in which you disown any responsibility for anything even if the other parties incurred costs then they will obviously put those costs up, so a balance has to be struck. We believe we have struck an optimum balance with those two factors.
CHAIR: I am trying to get clear guidance on this question of compensation. There is the letter from the shareholder ministers. Can I confirm that, if that policy changes in any way, there is nothing you have written into any contracts or agreements now that is compensable based on any changes to those terms and conditions from shareholder ministers to you as CEO of NBN Co.?
Mr Harris : I think it is probably better if I try to answer this. Mr Quigley can comment on additional specific contracts. The circumstances are such that each contract contains within it, as it always would as a commercial contract, the ability to renegotiate should circumstances change. I am particularly referring to the Telstra agreements here. You can see this in their public statements. They have the ability to choose to withdraw, as does NBN Co. in certain circumstances, or to renegotiate if circumstances change. Commercially it would give yourself that ability as your best defence. In other words, both those options would be available to you as your best defence for the subsequent discussion with the party with whom you have contacted—between Telstra and NBN Co.—so both options are available to you at the table when you come back should circumstances change. That has been allowed for, generally speaking, in contracts. Obviously when you are down at the level of contracting for cable, for switching or for those sorts of things—and I am not familiar with the details of those contracts—generally in the circumstances commercial parties would give themselves the ability to renegotiate or to withdraw if circumstances materially changed. That is in effect what would happen I think as a general statement. There will be specific exceptions to that. I would assume depending on the length of a contract. For example, for a one-year contract you possibly would not need to bother with such an arrangement because within sight circumstances are unlikely to change. I really do not know and Mike could probably comment on that better.
CHAIR: So it is less about compensation; it is more about the ability to renegotiate if circumstances change?
Mr Harris : The ability to renegotiate in the circumstances, which does potentially trigger then demand for more money—
CHAIR: Yes, it is a version of compensation.
Mr Harris : Yes, it is a version, but it tends to go like that. There have been claims made—and I saw this in some of the media comment that came out immediately after the documentation was released when we did obtain definitive agreements—about poison pills. That has been quite clearly answered by Mr Quigley's earlier answer here and put on the record. They are not designed in any event as a poison pill but are primarily designed because of the destabilisation that occurs if you change a contract midstream, parties will incur significant cost that may or may not be compensatable in the normal circumstances of a contract, so incentive payments are put in place to continue good performance. That is quite traditional commercial behaviour from my experience from the government perspective dealing with the private sector but not otherwise.
CHAIR: The message in Catherine Livingstone's letter of last week to the 1.4 million shareholders was that the reason Telstra strongly advocates for an agreement being entered into is the underlying policy issues of the April 2009 decision to build and operate the NBN with over 90 per cent of homes being reached—and that has subsequently been increased to 93 per cent—and also the November 2010 passage of legislation requiring Telstra to choose between voluntary structural separation or mandatory functional separation in relation to fixed-line business. If there was a change in any way to either of those two underlying policies, does the answer you just gave still apply—that is, whether the ability to renegotiate from this particular party, in this case, Telstra, would still apply if there was any change whatsoever to those two underlying policy considerations?
Mr Harris : I should take that on notice to give you a definitive answer because you asked about 'any', and I am not sufficiently well briefed to say 'any'. But I would say the general intention is that that is the case. Let me have something written for you on that.
CHAIR: I would appreciate that.
Mr HUSIC: Those 300 Telstra employees who have had their jobs moved offshore to India will not have the chance to access this fund in the next six months that you indicated earlier it would take Telstra to prepare that retraining plan.
Ms Spence : I do not know whether there would be scope to revisit, so I would have to talk to Telstra on that.
Mr HUSIC: What could be done to get those people retrained so that they have a future in the industry? Could you take on notice to advise the committee what could be done for those employees to get some access to that retraining?
Ms Spence : Yes, we will come back to the committee on that question.
Mr HUSIC: I am interested in the governance and operating arrangements of that plan and when Telstra goes to executive the plan and access those funds. What oversight arrangements are being set in place within the department? Is the department in a position to pressure-test the plans put forward by Telstra on retraining to ensure that we are getting value for money out of that $100 million?
Mr Harris : 'Pressure test' is an unusual term.
Mr HUSIC: I cannot claim copyright for the term.
Mr Harris : But it is easily interpretable in multiple directions. The arrangement in place is that they have to give us a plan. Also, I believe they are going to discuss this plan with the unions. Quarterly meetings with the unions have been designed and we will be present at those quarterly meetings as observers. As an ongoing working relationship, we will not be absent from the field. I do not want to mislead you, however, I do not think that that would necessarily give the minister the option of ordering, if you like, that Telstra use the fund to support a particular category of workers in the way that the structure is put in place. We have set it up because the incentives are reasonably clear for Telstra to work with this fund. The money will be available and must be spent on these purposes—it cannot be spent on something unrelated—and redundancies avoided, as we referred to earlier, is the substantial incentive in place here. Thus, there is every good reason for Telstra to try and work with this program to avoid making those redundancy payments by retraining workers and using them.
Mr HUSIC: Mr Harris—if I could quickly interrupt—is it the understanding, in terms of the operation of this plan, where you use the term 'avoided redundancies', that those employees would be redeployed within Telstra to carry out work associated with the rollout?
Mr Harris : They would have the skills to be able to do that. 'Redeployed within Telstra' to be able to conduct the rollout implies that Telstra has won contracts in the rollout, and I do not want to attach Mr Quigley to such an outcome.
Mr Quigley : There is work that Telstra have to do—remediating their ducts, pits and exchanges—as a consequence of the infrastructure deal they have. That is potentially a sizeable chunk of work to be done.
Mr HUSIC: My attention was captured by use of the term 'avoided redundancies'. There is obviously an expectation that people will not be laid off and that they will be used—
Mr Harris : That is collectively the understanding between—
Mr HUSIC: in a productive sense elsewhere within the corporation.
Mr Harris : In the negotiation, that was the understanding between us. When I say 'understanding', again I am not trying to have my meaning misunderstood. It was that you have every reason for Telstra to enter into this and make it work, and they agreed they had every reason to enter into it and make it work.
Mr HUSIC: I have other questions on notice. I want to ask NBN about the selection of suburbs for the rollout and the criteria, especially within nominated release sites where there are clear black spots, and whether NBN takes into account network black spots in making decisions. I will put those questions on notice because I understand that a number of colleagues want to ask questions.
Senator XENOPHON: This question is perhaps for Mr Harris. I go to the issue of TUSMA—the Telecommunications Universal Service Management Agency. Further to Mr Husic's line of questioning about the $100 million retraining fund, the Grant Samuel document to Telstra shareholders refers to the government package, at page 3, and makes reference to this:
The effect of these arrangements—
to do with TUSMA—
is expected to be a net increase in payments to Telstra under the USO ...
Why is Telstra going to be better off under these arrangements?
Mr Harris : This will not just be the retraining; this will be the overall USO arrangement. The bottom line is, as I think the minister has said a number of times at Senate estimates, that the valuation done at the time of privatisation on what the USO would cost Telstra was a 'wet finger in the air' job. I think that was his term. No-one was certain of the valuation. In addressing this issue left over from the privatisation, we put forward the proposition that the government would put $100 million towards whatever the cost of this would be on an ongoing basis to Telstra—that is, in the financial heads of agreement phase of the negotiations—and, in turning that into a definitive agreement style contract, we had to determine what the actual USO costs were that were being addressed here. Most people's general view—and I think this included the ACCC—was that it was higher than the $145 million that we were collecting for that purpose. We determined the number by negotiation with Telstra in moving from the financial heads of agreement to a definitive agreement. That is basically the basis for that statement.
I think the ongoing cost is $270 million for continuing the USO, which includes, I might say, a more comprehensive version of what the USO is, because it is driven by, inter alia, the maintenance of copper in the seven per cent parts of the Australian telecommunications network that will not be converted to fibre. We had the benefit, I guess, by comparison with people who are doing the privatisation process, of at least being able to reverse-engineer this from saying, 'What would it cost to maintain the copper in the seven per cent?' plus the remaining USO obligations that are included in there, some of which are driven by Mr Quigley's NBN rollout and some of which are driven by, historically, always being part of the USO.
Senator XENOPHON: Sure. I understand—
Mr Harris : Increased function, greater specificity, 'wet finger in the air'—those are the three outcomes.
Senator XENOPHON: Let's go back to the 'wet finger in the air'. Doesn't that mean that, as a result of Grant Samuel's analysis, the net result is that, because there will be a net increase to payments to Telstra on the USO, Telstra is getting a benefit out of this that was not otherwise anticipated? They are doing a little bit better out of it.
Mr Harris : They are. But as I explained earlier to the committee, this was a tripartite negotiation in order to get Telstra to settle on a price at which it would structurally separate.
Senator XENOPHON: Sure. I am not—
Mr Harris : I am explaining why there is a benefit to Telstra. There must be a benefit to Telstra in including this in part of that commercial negotiation.
Senator XENOPHON: But Telstra is doing a bit better out of it than they initially thought.
Mr Harris : They are doing better out of this by comparison to what they were previously getting as compensation for running the USO, yes.
Senator XENOPHON: Okay. That is fine. I am just trying to understand.
Mr Quinlivan : I do not think that it would be correct to say that they are doing better out of it than they initially thought, which is what you just said. The opposite is the case.
Mr Harris : They put a much higher number to us, if you really want to know that, than the number we agreed on—a very much higher number.
Mr Quinlivan : They always believed—and others, such as the ACCC, also believed—that if the number was established through a more rigorous process it would be higher.
Senator XENOPHON: Between what they asked for and what they got, what their independent analyst, Grant Samuel, are saying is that they are pretty happy with it.
Mr Harris : And we hope so.
Mr Quinlivan : They agreed to it.
Mr Harris : We hope so because we are getting—
Senator XENOPHON: They agreed to it and they have advised shareholders that there will be a net increase in payments. Has the special access undertaking been lodged with the ACCC?
Mr Quigley : No.
Senator XENOPHON: When will that be lodged?
Mr Quigley : We are hoping that it will be lodged shortly. We are still in discussions with the ACCC on that. I flagged at estimates that we have shifted certain parameters around that agreement. I am looking to simplify it somewhat. That drafting is underway now. I continue to have discussions with the ACCC.
Senator XENOPHON: And there will be a changing of the pricing policy. Is that right?
Mr Quigley : No, there is no changes to the pricing policy. The prices are as we have announced them for quite some time. What I have done is withdraw what was called the price shock mechanism.
Senator XENOPHON: Changing the price shock mechanism is significant, though.
Mr Quigley : It is not significant from the point of view of the NBN Co.
CHAIR: I want to clarify something: are you bound to lodge with the ACCC?
Mr Quigley : No.
CHAIR: So you are doing it for market certainty?
Mr Quigley : Yes. We absolutely do not have to lodge an SAU. But the commission is keen for us to lodge one, we are keen to lodge one and the industry is keen to have a degree of certainty.
CHAIR: And the ACCC has said that it will take about 12 months to determine?
Mr Quigley : No, I do not believe that they have said that.
CHAIR: We have them before us tomorrow, so I can clarify it. But my understanding is that they said that it would take 12 months.
Mr Quigley : We have been in discussions with the ACCC for quite some time. I am not sure when they spoke about the start and end date.
Senator XENOPHON: I want to come back to the USO—to TUSMA. Will the USO be delivered in the same way with the same value? Looking at a media release from the Prime Minister and other ministers, including the Minister for Finance and Deregulation, it talks about pay phones, the emergency call service and appropriate safety net arrangements. Are we going to have the same USO that is currently in place?
Mr Harris : We are going to maintain the standards that are in place. If we improve them, generally speaking we will have to pay more through TUSMA to do so—and by 'we', the industry will be contributing to this as much as the government will.
Senator XENOPHON: So we are going to be paying more for the USO overall?
Mr Harris : No. You may well pay less, because there are specific provisions there to encourage change. There will be a technology review at 10 years but there is also a proposition that the parties will continue at any point time how to more efficiently deliver a USO at an earlier point than 10 years, which cannot be unreasonably rejected. We have structures and incentives in place—there is more that I could describe, but obviously I do not want to take up more time—to encourage this.
Senator XENOPHON: I have a couple of more questions. What is the purpose of the provisions in the agreement for Optus and Telstra not to criticise the NBN fibre against their wireless networks for periods of 15 and 20 years respectively. Have I got that right?
Mr Quigley : No, you have not. It is not an agreement to not criticise. It is an agreement to not present it as a replaceable—substitutable—service.
Senator XENOPHON: So there is a constraint, then, on what they can say.
Mr Quigley : The constraint is only one that makes good sense. We are using taxpayers' funds to execute structural separation, which involves decommissioning the copper network. Given that, it makes perfectly good sense to make sure that Telstra continues to use the fixed line service.
Senator XENOPHON: But there is an agreement—this is very important to me—that basically constrains to some degree Telstra and Optus in what they can say for a period of 15 or 20 years respectively about NBN fibre as against their wireless networks. Is that correct?
Mr Quigley : Yes, to not advertise it as a substitution.
Senator XENOPHON: But why would you need that if you already have the ACCC if there are any misleading comments made? Why would you need that in addition to the safeguards in place for any false or misleading representations?
Mr Quigley : Because to go through those legislative processes is a complex, time-consuming thing to do. It is easier when you are negotiating such a deal to—
Senator XENOPHON: We do not have much confidence then in the ACCC or the regulatory framework around the ACCC?
Mr Quigley : No.
Senator XENOPHON: Any other business in this country that is faced with misrepresentations by a competitor has to go through this process.
Mr Quigley : But when negotiating a deal it makes good sense to look after taxpayers' interests. It is what we are paid to do.
Senator XENOPHON: But isn't that an admission that our regulatory framework to deal with these issues in terms of misleading statements is fundamentally flawed? You have to bypass the ACCC
Mr Quigley : I am not qualified to comment on our regulatory arrangements in other areas.
Senator XENOPHON: But you have just said you do not want to go through the process of the ACCC. It is cumbersome.
Mr Quigley : No, I am just saying, if we went to litigation, that is a slow, cumbersome process. It seems to me it is perfectly reasonable in looking after taxpayers' interests, since it is taxpayers' money that is being spent, to price such accords.
Senator XENOPHON: But are you talking about the process in terms of how quickly a dispute can be resolved? I think you are actually saying that the rules will be different so that the constraints placed on Telstra and Optus will be quite different from the constraints placed on any other company or corporation in this country because you will not have the rules that the ACCC operates under and the competition consumer laws of this country.
Mr Quigley : No, I am not qualified to comment on rules concerning other industries. I would not agree that is the effect of it. All I am trying to do is write a clause into a document that protects the shareholders' interests. As I have said repeatedly, we are all in favour of as much mobile penetration as can possibly happen because we are seeing an increasing number of mobile devices in use driving up our usage on fixed line networks which makes our business case a little more secure.
Senator XENOPHON: But that agreement is basically a special deal for NBN Co. bypassing existing competition consumer laws.
Mr Quigley : No, we are not trying to bypass any competition consumer laws.
Senator XENOPHON: That is the effect of it, though. The effect of it is that you are bypassing competition consumer laws.
Mr Quigley : That is certainly not the legal opinion I got in terms of that from the other party's side. Other party's side did not have any problems.
Senator XENOPHON: Mr Harris, is the department able to provide us with any detail on that because it seems, on the face of it, that there is a special deal? Can you provide on notice any further details on that?
Mr Harris : If there are any we are happy to do that. I think probably the most important consideration here is to note that it is still under examination by the ACCC and, clearly that therefore if they have the sorts of concerns that you have outlined, then undoubtedly they will deal with them. My earlier answers were designed in fact to express confidence that the ACCC would treat this as they have throughout the process as being a particularly important outcome. The SSU and its supporting documents -
Senator XENOPHON: We will ask the ACCC tomorrow.
Senator IAN MACDONALD: Is the wording of the clause that says that Telstra and Optus will not criticise the NBN fibre publicly available?
Mr Harris : There is a summary in the—
Senator IAN MACDONALD: No, I mean the actual agreement. Mr Buettel, what constitutes not criticising? You are changing your enforcement mechanism from an administrative law issue to a contractual law issue, I assume. I am just wondering what is in the contract that says what criticising means. Perhaps you could take that on notice.
Mr Harris : It is probably a matter for NBN Co. to comment on. They can take it on notice for you or Mr Quigley already has the answers.
Mr Quigley : I would just like to be quite precise with the wording of 'criticism'—I do not think anywhere in the clause there is the word 'criticism'. It says that the wireless services are not substitutable for fibre today. That is what we are trying to make clear: that they are not substitutable.
Senator IAN MACDONALD: Yes, but if Telstra says, 'Our wireless service is absolutely brilliant; it's the best you will get in Australia'?
Mr Quigley : That is no problem.
Senator IAN MACDONALD: 'Best communication you will get in Australia'—that could be?
Mr Quigley : That could be—if they are saying it is the best wireless service available; if they are saying it is better than a fibre service, we would take issue with that.
Senator IAN MACDONALD: What I am asking for is the actual wording of the agreement, if you would not mind. My real question was this, and I do not think we have touched on this too much today: since we last met, which I think was in estimates last week when you were defending the CPI plus five per cent, did I read in the papers somewhere that you had dropped that plus five per cent?
Mr Quigley : On the price-shock mechanism, yes. That clause, as I tried to explain, is not part of a corporate plan to put prices up, as it was being represented in some quarters; it is a price-shock mechanism. But in fact when I looked at the clause and had further discussions with the ACCC, we agreed it really is not of much value to us, so we are dropping it.
Senator IAN MACDONALD: My question really was: why did you think it was necessary at one stage and in the last week you thought it was not; what caused you to change your mind?
Mr Quigley : I reviewed again the SAU and tried to simplify the SAU itself. And remember: these things are negotiated by two regulatory teams, which are full of lawyers and they always try to look after worst-case scenarios.
Senator IAN MACDONALD: Make us feel good and say it was as a result of the inquiry at this committee!
Mr Quigley : I wish I could, but I am afraid that is not the case.
Senator IAN MACDONALD: So the exposure of that in this committee—or was it at estimates?—had no influence on your decision to withdraw the five per cent?
Mr Quigley : We have ongoing discussions with the ACCC. Just by the way, can I clarify an earlier point very quickly. The words that are in the brochure about the battery backup say that to prevent the risk of fire or electric shock your power supply unit should be installed in a reasonably warm, dry, indoor area free from condensation and excessive dust. We can find no document that talks about 'explosions'.
Mr TURNBULL: Mr Quigley, in answer to a question from Senator Cameron I think you said that you were given a direction from the government to deliver 100 megabits per second to 90 per cent of the population.
Mr Quigley : To at least 90 per cent.
Mr TURNBULL: To at least 90 per cent, and part of that direction was that that should be delivered over fibre to the home, wasn't it?
Mr Quigley : Fibre to the premises, yes.
Mr TURNBULL: So were you ever asked by the government what other technologies could deliver 100 megabits per second to the premises?
Mr Quigley : Not that I can recall.
Mr TURNBULL: So were you ever asked by the government whether 100 megabits per second was the appropriate bandwidth target to provision for?
Mr Quigley : No, but that is not surprising. If you are looking at—
Mr TURNBULL: Just because we have not got a lot of time—the answer to that question is no? You have said you were told 100 megs to at least 90 per cent by fibre to the premises—that was your brief?
Mr Quigley : Yes, but I made it clear subsequently to the government that with this technology there is nothing special about 100 megs; you could do a gigabit per second.
Mr TURNBULL: Of course; I understand that. That is the answer to the question. Thank you.
Senator CAMERON: Mr Quigley, at estimates last week I raised with you the report on news.com.au from WhistleOut—
Mr Quigley : Yes.
Senator CAMERON: where they indicated that users would pay 43 per cent less for an NBN connection than they would pay for an equivalent ADSL2 plan; you had heard of that one. I also raised with you the ZDNet report with the heading, 'Libs' credibility spent on NBN pricing'.
Mr TURNBULL: That sounds like you wrote that!
Senator CAMERON: No; it is David Braue; apparently he is quite an eminent writer on this stuff! Is he here?
Mr Quigley : He is eminent.
Senator CAMERON: Given that you are casting aspersions, I have put on record what you said when I asked you the question. It says:
We now know that, despite years of Opposition bleating that the NBN was going to bleed us dry, NBN services will cost between $34.50 and $99.95 per month. That is so similar to current ADSL2+ pricing that it casts a pallor over the Liberal Party's entire strategy of blasting the NBN as a high-priced white elephant. In fact, with just around 1800 customers online, the NBN has already emerged as a highly competitive marketplace.
Given you hadn't seen that one and haven't had a chance to look at that, is that a reliable report?
Mr Quigley : Frankly, I have not looked at it again but it does sound correct, yes.
CHAIR: We can hand a copy to you. Is there anything else, Senator Cameron?
Senator CAMERON: On the issue of costs to taxpayers that has been raised here again this morning, the reality is that the taxpayers will have their money refunded with interest—is that correct?
Mr Quigley : Yes. Our aim is to produce a long-term and internal rate of return above the government bond rate.
Senator CAMERON: My last question is: Mr Turnbull raised the issue of the rollout and the rollout being incremental with the removal of the copper. Are there other elements of the structural separation that do not rely on rollout?
Mr Quigley : No. I will have to take that one on notice but I think that is largely it. The overall construct is: structural separation is executed by the copper infrastructure being retired as the fibre is rolled out.
CHAIR: Just following on from that before I put a question on notice, are you aware of any jurisdiction in the world that are either maintaining either the copper or an HFC network as part of a rollout and, if so, where? If not, whether—
Mr Quigley : A variety of different scenarios have been played out around the world.
CHAIR: But an equivalent to a wholesale platform being put in.
Mr Quigley : There are not a lot of places in the world in which this type of construct is being used.
Senator IAN MACDONALD: A bit like carbon tax.
Mr TURNBULL: They do not have enough money in North Korea, otherwise they would do it.
CHAIR: But South Korea is probably a good example in competition. Can you take on notice—just a bit of a jurisdictional comparison—where wholesale platforms are being rolled out on a monopoly basis or as close to equivalent, what is happening to the retiring of networks alongside of that?
Mr Quigley : Yes.
CHAIR: The other, which is a question on notice for the long term, is a question of private engagement in the wholesale platform. The committee at some point is going to have to start to look at this question of where the entry point on this private engagement in the wholesale platform is going to be, if at all. There are some who think it should remain a public utility for the long term. It is a question that I think we need to consider, particularly for the two departments—and I know finance and dereg has got off the hook again very lightly, so whether this is a question on notice for you is this question of: what options to date have been considered for private engagement in the wholesale platform? If so, when; and what approaches have been made to date by anyone in the private sector to engage in the wholesale platform, by whom and when?
Ms Hall : I will briefly address the question in two ways. Firstly, as you would be aware, in the NBN corporate plan, they contemplate private involvement in the context of introducing debt funding. That would be the first step and about 2015-16 would be the first point. Then, as you would also be aware, the NBN Companies Act provides for the selldown of the government's interest in the NBN once the network is fully built and operational. So we have to get through the build first, and the broadband minister needs to table a notice that the network is built and operational within five years. There are a couple of review mechanisms there as well, including a review to the productivity committee prior to any sale. Subsequent to those processes taking their course then there is a mechanism in that same act for the finance minister to table a notice in parliament indicating the market conditions would be right for sale and so there would be a whole range of analysis that would be undertaken to get to that point. So that is some point off into the future, as you have observed in framing your question.
CHAIR: So are you suggesting there is no consideration of private engagement in the wholesale platform until that point in the future when the wholesale platform is built?
Ms Hall : The legislation provides that there can be no private equity investment in the NBN until such time—
CHAIR: There is a difference between what the legislation says and what the consideration of policy says as far as that but there cannot be any engagement until it is built versus whether departments are considering their options for when that eventuality occurs.
Ms Hall : I could defer to Mr Harris on that question. But the policy of the government at the moment relates—
CHAIR: It is just to park the issue.
Ms Hall : It indicates that it will be sold following the complete build of the network. As that is some eight years off, no, we are not doing, and have not done, any work to contemplate—
CHAIR: But I do not build a house without consideration of what its sale price and value and potential market are. I would have hoped it would be the same story, that there is consideration of options even though I understand those options may not be triggered until the so-called metaphorical house is built.
Mr Harris : We have not done any active work at all on this question of privatisation of the network. The debt management issues have been addressed, as Ms Hall said, but I do not think so on privatisation. The focus has been on getting in place a structure that would determine the parliament's role and the Productivity Commission's role in privatisation rather than on looking at this. That said, I think there are parties that would probably be interested in this if there were a certainty to the rollout. As increasingly the shareholder vote and, hopefully, the SSU passage through the ACCC and the access undertaking from NBN Co. get in place I think parties will be interested in this, but the processes are pretty much structured in legislation now and would have to be followed in all circumstances.
CHAIR: Did you have a point, Senator Macdonald.
Senator IAN MACDONALD: I was just going to say, Mr Chair, by way of being helpful, that we went through this at estimates last week and we had there the minister and we noted in passing he was disappointed he had never been invited to appear before this committee—so it should be some fun for the future. But we did discuss this sort of thing, about when they would make a profit and who would want to buy it and why they would want to buy it.
CHAIR: Senator Xenophon.
Senator XENOPHON: Mr Harris, in terms of the whole issue of the Productivity Commission's role as to the value of NBN Co. in privatisation, has any analysis been done as to what the value would be if it were a rollout of fibre to the kerb rather than fibre to the home in terms of any eventual privatisation pricing? I am happy for you to take that on notice.
Mr Harris : I would probably prefer not to take it on notice, because I think the answer will look about as bland as this answer is going to look. No, we have not done that form of analysis for the purposes of privatisation. Perhaps I should make sure the committee is aware of the Productivity Commission's role. I think everybody is conscious that in the history of how we have done telecommunications reform there have been some missed opportunities. One of them potentially was at the time of the privatisation of Telstra: should the network have been separated? This is to ensure that in future, in any other privatisation of the network that takes place, that issue is reviewed in an objective and transparent manner—and about locking it in today. So going back to my last period doing telecommunications reform in the late eighties or early nineties, I guess you could say with the benefit of hindsight we should have locked in the proposition then—or certainly the government should have done it prior to the privatisation in 1996 or 1997 or at some point somebody should have done this. The legislation has the Productivity Commission's role locked in now because of that and because we learned from what we did not do. In this case we put that in place for just that reason.
Mr Quigley : I will add one other thing. The whole question about fibre to the node versus fibre to the home is that achieving structural separation is integral to that. Most people building fibre to the node tend to be incumbents. It is pretty difficult to square the circle now. It requires quite some effort.
Mr TURNBULL: We have been around that bush 1,000 times. We can discuss that when we have our tete-a-tete.
Mr Quigley : I look forward to it.
Mr TURNBULL: It will be interesting to see how long it takes for Senator Conroy to allow you to do that. I suspect that there will be quite a few officials in the room. It will be a challenge for you to see how independent you are.
CHAIR: We have a lunch break in an hour; we might all catch up then. Thank you for coming today to assist the committee. If you have been asked to provide additional information—and there have been several questions on notice—could you please forward them to the secretariat by 27 October, which will allow us to consider the information in our report that will be tabled a few weeks later.