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Monday, 15 November 2010
Page: 2249


Mr HARTSUYKER (5:28 PM) —I welcome the opportunity to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. This bill has three aspects to it. Firstly, its provisions will allow the structural separation of Telstra by providing for the legislative changes required to allow the separation. The bill also details how the government will impose sanctions against Telstra if it fails to voluntarily structurally separate. Secondly, the legislation makes a number of provisions in the Competition and Consumer Act which relate to the telecommunications access regime. In particular, the ACCC will be provided with the power to declare minimum prices and non-price terms in access agreements, which the parties may fall back on until the parties to an access agreement can negotiate different terms.

The third aspect of the bill relates to the consumer protection regulation. Given that Telstra are migrating their fixed line customers to the NBN, there will be a transitional period with regard to the universal service obligation. The government will create a new service corporation called USO Co. to deliver the universal service obligation. This bill provides that the USO provider must supply, on request, standard telephone services with characteristics and to performance standards determined by the minister. These performance standards are intended to include maximum periods for new connections, fault rectification and reliability standards. However, like the majority of telecommunications legislation introduced by this government, the minister is given excessive freedom to implement standards without the scrutiny of parliament.

This legislation was first introduced in the last parliament and sought to force the structural separation of Telstra by denying it from acquiring specific bands of spectrum and requiring Telstra to divest itself of its HFC cable network and its interest in Foxtel. That bill demonstrated the extent to which the government is willing to disrupt the telecommunications industry in order to force through its National Broadband Network. Labor was willing to use strongarm tactics against one of the largest companies in Australia in order to push through its flawed broadband policies. Telstra is now a publicly listed company. It has 1.4 million shareholders, 30,000 employees and 9 million customers. Attempts by the government to pressure Telstra were nothing more than an attack on the interests of those Australians who have invested in or purchased Telstra services in good faith. Against this backdrop, and with a gun to their head, Telstra negotiated an $11 billion deal with the government that will see Telstra’s fixed line customers migrate to the NBN and will provide NBN Co. with access to Telstra’s passive infrastructure such as pits, ducts and backhaul fibre.

The agreement will eliminate Telstra as a fixed line wholesale competitor to the NBN. As such, this bill has been modified to allow the voluntary separation of Telstra’s wholesale interests to proceed after shareholder approval. The bill still allows the minister to deny spectrum to Telstra if the proposed $11 billion agreement is not finalised. If the agreement fails, Telstra will be forced to functionally separate by conducting its network operations and wholesale functions at arm’s length from the rest of Telstra under threat of loss of access to 4G spectrum.

The coalition recognises that Telstra is now committed to the migration of fixed line customers, which amounts to a structural separation for the purposes of this bill. However, we do not agree with the government’s use of strongarm tactics against Telstra in order to force structural separation. Any separation must occur on terms that balance the interests of Telstra’s shareholders with the public interest. The willingness of Labor to completely remove competition to the NBN and to avoid scrutiny of the NBN’s operations is a dangerous approach to the industry that will not result in the most efficient services for broadband users. After more than a decade of government policy encouraging infrastructure based competition, the Gillard government is systematically preventing any competitive threats to NBN Co.’s wholesale network. The industry recognises that Labor is setting up a monopoly and that this will destroy competition in the wholesale fixed line market.

In its submission to the ACCC on NBN Co.’s points of interconnect proposals, Optus said:

It will not be economically viable for alternate last mile fibre based networks to be deployed in competition to the NBN … policy settings are likely to need to be re-set to discourage alternate investments in last mile fixed fibre access. This fact is implicitly recognised in the recent Telstra/NBN Co heads of Agreement which effectively removes the opportunity for Telstra to compete with the NBN either on its HFC or copper networks.

The current copper network is able to provide broadband speeds of up to 24 megabits per second to around 93 per cent of the population. Telstra’s HFC cables can provide speeds of up to 100 megabits per second. The majority of regular households in Australia only require a fraction of those speeds. NBN Co.’s first release sites in Tasmania are only experiencing an 11 per cent take-up of speeds of higher than 25 megabits per second. Labor’s solution to decommission or effectively prevent alternative broadband infrastructure from competing with fibre is simply unbelievable and flies in the face of the principle that competition is a key driver for better services and lower prices.

Both sides of the House recognise that broadband services need to be improved in regional and rural areas in Australia. However, only the coalition believes that instead of ripping up existing networks across Australia we should be targeting those regional areas first and improving their services first. We should be hitting the black spots in those areas where broadband is delivered at high cost to consumers. If Labor continued the coalition’s OPEL scheme when the government took office, those regional areas would currently be serviced by broadband speeds comparable with the rest of Australia. It is the Labor government who has delayed improved broadband services for regional Australia through its communications policy failures and still they have not been able to find a solution that is acceptable to the market, which will be left with a wholesale company far more monopolised than Telstra’s copper network.

In its report on Australia issued yesterday, the OECD was very critical regarding the market impacts of the NBN. The OECD said that the heads of agreement signed with Telstra eliminated competition between the new fibre optic network and the existing technological platforms, and that this:

… implies a de facto restoration of a public monopoly over the supply of access to wholesale internet services.

The OECD report goes on to say that:

… such a monopolistic incumbent could forestall the development of, as yet unknown, superior technological alternatives.

These comments are similar to those made by the company rolling out the government’s backhaul black spots program—Nextgen Networks—in response to the government’s plans on locating NBN points of interconnect only in the capital cities. Nextgen told the ACCC last week:

  • In the short term, competition will be impacted immediately.

RSPs are already reassessing their business models and deciding whether to operate within cost structures based on maintaining network assets or adopting a resale only model where they rely entirely on the NBNCo facilities.

…           …           …

In the long term, competition will be structurally and irreversibly undermined.

I will repeat that: ‘structurally and irreversibly undermined’.

The explanatory memorandum for this bill argues that Telstra has been the main impediment against the competitive telecommunications sector. The memorandum states that:

… Telstra has been able to maintain a dominant position in virtually all aspects of the market, despite more than 10 years of open competition. It is the Government’s view that Telstra’s high level of integration has hindered the development of effective competition in the sector.

Given these concerns, it is worrying that the government’s solution is to create a monopoly with far more market power in the fixed line wholesale sector than Telstra currently enjoys. As Telstra pointed out to the ACCC last week:

… access seekers, in effect, swap Telstra as the sole supplier of backhaul for NBN Co as the sole supplier of backhaul. As limited as the prospects might seem today, access seekers also forfeit future competition because NBN Co’s bundling of its monopoly access product with the backhaul will foreclose any future competition.

Surely a better approach would be to encourage the structural separation of Telstra in order to improve competition, rather than creating a new monopoly shielded from market forces.

This is why the coalition believes that all aspects of the NBN must be scrutinised by independent experts and by parliament. In its pattern of avoiding scrutiny, the government has excluded the $11 billion deal between Telstra and NBN Co. from investigation by the ACCC. This comes after Labor’s exclusion of the NBN from the Parliamentary Standing Committee on Public Works and its refusal to complete a cost-benefit analysis. The coalition is currently attempting to ensure that the rollout is overseen by a joint standing committee of parliament. Refusing to allow the ACCC to examine Telstra’s deal will prevent an informed debate around the future competitive environment of broadband and allow the industry to raise any concerns about the deal.

Importantly, the parliament needs a better understanding of what the deal will mean for competition and broadband services in rural and regional areas. If we are serious about improving services in regional areas, the coalition believes that NBN Co. must provide as much detail about how it is rolling out its regional services as possible and what that rollout means for regional markets. As we all know, the Rudd-Gillard government has a long list of failed interventions in markets. Given its history, how can anyone trust how this government will spend $43 billion on a national broadband network? After so many failures, Labor is so worried about the NBN’s viability that it is removing competitive threats and refusing independent and parliamentary scrutiny. The forced migration of Telstra’s copper network contained in this bill, the blackmail against Telstra and the exemption of Telstra’s agreement with NBN Co. are further examples of this government’s efforts to shield the NBN from competition. Therefore, the coalition will move a number of amendments in an attempt to ensure that the migration of Telstra’s copper network to NBN Co. proceeds in a responsible and fair manner. These amendments build on the constructive approach the coalition is taking on the NBN. We have also introduced legislation and moved a motion to provide parliamentary scrutiny about the NBN’s rollout and to ensure that an independent cost-benefit analysis is completed with a business plan.

The amendments to be moved by the coalition aims to improve four areas of the legislation. Firstly, we will ensure that the Competition and Consumer Act applies to the proposed deal between NBN Co. and Telstra. Secondly, we will ensure that parliament is able to disallow any ministerial directions to the ACCC regarding the NBN Co. and Telstra deal. Thirdly, merit reviews and procedural fairness will be restored to the ACCC enforcement of the new access-pricing regime. Finally, the coalition will remove the ‘gun to the head’ provisions of this bill which threaten Telstra with losing access to 4G wireless spectrum, as well as its interests in the HFC television cables and Foxtel. The coalition strongly believes that this transparency can help ensure the NBN rollout targets regional areas first and ensures that services are improved in these areas first.

As I have outlined, it is critical for the industry and taxpayers that the sector benefits from the efficiency that maximum competition provides. Ensuring ACCC oversight of the Telstra deal will improve transparency. Parliament must also be able to disallow ministerial directions given to the ACCC with regard to this deal. The powers being given to the minister on communications policy by this government are extraordinary and parliament must exercise some oversight. Attempts to structurally separate Telstra must proceed with fairness to its shareholders, employees and customers. This is why the coalition will remove the provisions which place a gun to the head of Telstra unless it structurally separates.

As with the coalition’s other attempts to improve the NBN rollout process, we believe that broadband is too important to Australia, and to regional areas in particular, for it to be left in the hands of this Labor executive that has rolled out programs so poorly in its first term. The whole NBN process has been one of the government’s avoiding scrutiny at all costs. The disastrous policy failures of this government’s first term demonstrate the need for as much scrutiny as possible. Our amendments to this bill will improve scrutiny by protecting the role of the ACCC and will ensure that Telstra’s structural separation is not left in the hands of this Labor government. I urge the Senate to accept the coalition’s amendments and improve this legislation to encourage a fairer and more transparent NBN rollout in which the Australian people can have confidence.