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Wednesday, 9 February 2011
Page: 243

Mr TURNBULL (5:03 PM) —The National Broadband Network Companies Bill 2010 and related bill are the second large pieces of legislation relating to the establishment of the National Broadband Network, which is the government’s plan to have a Commonwealth government owned, monopoly telecommunications provider of last-mile, fixed telecommunications to every home and business in Australia. It is intended to be a monopoly. Elaborate steps have been taken to this end in the legislation passed last year, in this legislation and indeed in the contractual arrangements with Telstra already announced and those with Optus which have been foreshadowed. The purpose of all of those is to eliminate any prospect of fixed-line competition with the National Broadband Network so that Australians who want to access the internet or simply want to make a telephone call on a fixed line will have no alternative but to use the government owned monopoly.

The opposition is fully committed, as I think all Australians are, to there being universal availability of fast broadband at an affordable price. We are all committed to that. The most important issue of difference between the coalition and the government on this is the fact that the government is proceeding to achieve this goal, so it says, without any effort or attempt to determine whether the approach it is taking is the most cost-effective one.

This is a government that came into office led by the honourable member sitting opposite, the current Minister for Foreign Affairs. When he was Prime Minister he said, as did his Minister for Finance and Deregulation, Mr Tanner, that no major infrastructure project would be undertaken or funded by the government without the benefit of a rigorous cost-benefit analysis. The Secretary to the Treasury, Dr Henry, has written and spoken extensively and repeatedly about the need for rigorous cost-benefit analyses of government infrastructure.

The fundamental question here is not what the object is, which is getting everybody access to fast broadband, but what is the most cost-effective way of delivering it. We know there are a variety of technologies—wireless, DSL, HFC cable, the fibre-optic system and many other systems—that are available to deliver broadband and which are being used by Australians and indeed people all around the world to access broadband. The question is: what is the most cost-effective way of delivering it? What is the way that can get Australians access to fast broadband as quickly and as cheaply as possible? That is why the coalition has argued that there should be a Productivity Commission inquiry to look into this and determine the most cost-effective approach.

Were the government to take up that invitation—and, of course, it has refused to do so—it would be doing no more than honouring the principles that it stated as being fundamental to its approach to the management of public finances when it came into government. Not only did the then Prime Minister and the then finance minister say that no major infrastructure project should be undertaken without a rigorous cost-benefit analysis; they went further and established Infrastructure Australia, a specialist expert body whose job it is to identify, prioritise and analyse through cost-benefit analysis major infrastructure projects. Yet this one, the NBN, the biggest in our history, is not being looked at by Infrastructure Australia—they are not allowed to examine it—and it certainly is not going anywhere near the Productivity Commission.

The absurdity and the recklessness of the government’s approach were brought home to the members of the Parliamentary Standing Committee on Public Works very vividly only last week. We were in Brisbane considering, as is our duty as members of the Public Works Committee, a proposal by the Department of Defence to spend about $50 million on a variety of hangars for the reception, distribution and maintenance of wheeled vehicles for the Army at a number of locations. We considered that $50 million investment proposed by the defence department and we heard from an official of the department about how he and his colleagues had conducted a cost-benefit analysis. They had looked at this from every angle: should they be leasing premises; should they be building these facilities at other locations? They justified everything on the basis of a cost-benefit analysis. In other words, they knew what they wanted to do—have facilities to receive and distribute a certain number of thousands of new wheeled vehicles over a decade and, of course, train people to operate them—and then they looked at the most cost-effective way of doing that. That was being done in respect of a $50 million project, and the Public Works Committee, solemnly assembled there in Brisbane, was considering that.

Yet the government, who presumably believe that a cost-benefit analysis and the scrutiny of the Public Works Committee are appropriate for $50 million worth of vehicle hangars, are not prepared to perform a cost-benefit analysis on a project that will see the expenditure of around $50 billion of taxpayers’ money. Furthermore, they have taken steps—and it will be up to this House to determine whether those steps are successful—to prevent the Public Works Committee, which was established to monitor and investigate infrastructure paid for by the Commonwealth, considering that $50 billion project. If the government have their way, the largest infrastructure project in our history will not be subject to a cost-benefit analysis, it will not be scrutinised by the Public Works Committee and, of course, in the most recent example of their efforts to prevent any proper scrutiny of this project, the government have even sought to exempt it from the provisions of the Freedom of Information Act. So the public are to be locked out from scrutinising this project and there is to be no effort to ascertain whether this is the most cost-effective way of achieving this goal. These are all in the interests of politics and the government’s desire to build this massive fibre-to-the-home network without any scrutiny.

The double standards here are extraordinary. I have talked about the contrast between the former Prime Minister’s very responsible rhetoric when he came into government about performing cost-benefit analyses on major infrastructure projects and the failure to do one on this. Now, turning to the current Prime Minister, we see that she has announced that there will be a reconstruction inspectorate to oversee the public spending on the reconstruction in Queensland with a view to minimising waste. She said:

… it’s appropriate to have these mechanisms to ensure that every dollar is a dollar that is spent effectively, and that every dollar spent from taxpayers’ money goes to do work that is necessary to rebuild the nation

…            …            …

It’s my determination to get value for money for every taxpayer dollar spent.

She has appointed a former coalition finance minister and Premier of New South Wales, the Hon. John Fahey, to chair that reconstruction inspectorate, and I think that is a very eloquent vote of confidence in the financial acumen and financial responsibility of the coalition as opposed to the members of her own party.

Nonetheless, this level of scrutiny has been established to oversee $5 billion of spending which, in large measure, will be to repair roads, railways and other pieces of public infrastructure, yet there is no comparable body, no comparable effort, to oversee or monitor in any way the NBN $50 billion—the expenditure of 10 times the $5 billion. It is as though the government has developed an extraordinary blind spot with respect to this project and all of the principles of financial and fiscal responsibility are cast aside when it comes to the NBN. The thing that puzzles all Australians, and particularly members of this House, is that one can well understand a government saying to the people of Australia, ‘We will ensure that everybody has access to fast broadband. We recognise there are some parts of Australia that do not. There are many parts that do, but there are some that do not for a range of reasons: distance, the history of the network architecture laid out by Telstra in years past—a range of reasons. But we, the government, will ensure that all of those inadequately served areas are served adequately and that all Australians get access to broadband at the fast speeds that are available in the adequately and well-served areas in our capital cities.’ That would be a reasonable, respectable, responsible promise from a government.

But then, having made that promise, the taxpayers of Australia would expect the government to say, ‘And we will deliver on that promise in the most cost-effective way possible, and we will make sure that the big vision—the big promise—is delivered at the least cost to you, the taxpayers.’ Of course, that will not only mean there will be less burden in terms of the cost to the taxpayer and there will be more money available for all the other claims for public infrastructure; it will also mean that the less investment there is to deliver the service the less pressure there will be on prices. The more heavily capitalised any piece of infrastructure is, the more pressure the owner of that infrastructure will be under to raise prices. If, like the NBN, it is a monopoly, it will have very little disincentive or restraint in terms of raising prices.

It is a matter of public knowledge that the approach the government is taking here in Australia is unique in the world. There is no government in the world that is spending as much on broadband as Australia. Indeed, on my calculations a few months ago I estimated that the per capita differential between what the federal government is spending on broadband here in Australia and what the American federal government is spending is 100 to one. That is to say we are spending, on a per capita basis, 100 times as much as the Americans are spending. I saw an article in the Australian earlier in the week which suggested that the differential was only 65 times or thereabouts. Whether it is 65 times or 100 times, the difference is gigantic. Right around the world this project is being criticised as fiscally irresponsible. The most recent criticism is laid out in the report of the Economist intelligence unit published today: ‘Australia’s broadband plan fares poorly in new international ranking. Cost to taxpayer is exorbitant,’ says the study. That is just one of many objective reports that have questioned the responsibility of this project.

This legislation is designed to provide some rules as to how the NBN Co. will operate. One of the principles that it is designed to achieve is to define it as not a public authority. Of course, by defining it as not a public authority it is exempt from the statutory requirements to comply with the freedom of information legislation and means that it would not be subject to the normal parliamentary oversight of public works defined in the Public Works Committee Act 1969. I foreshadow that we will be seeking to amend the legislation. I look forward to the support of the members of the crossbenches, who are committed, as they have often said, to financial responsibility and accountability. We will be seeking to amend the legislation to make it subject to both the freedom of information laws and also the Public Works Committee Act.

The other principle the legislation is designed to achieve is to restrict the NBN Co. to business activities which are directly related to its core function of supplying wholesale communication services—that is, prevent it from operating as a retailer. That certainly is an admirable objective and one that we support, but we do not believe the proposed legislation will adequately achieve that. We will seek to amend the legislation in a number of ways to make it quite explicit that the supply of services by the NBN can only be on a wholesale basis and, in particular, to prevent the NBN getting around this provision to provide that it must not supply services to another person unless that other person is a carrier or service provider and is a carrier or service provider which will use its service to supply services to the public. That is to prevent, for example, a large corporation establishing its own bespoke carrier whose only job is to provide services to the corporation concerned. This is of considerable importance because the NBN, being so heavily capitalised, having such a crippling interest bill—as it will—and having so many billions of taxpayers’ money invested in it, will be under enormous pressure to use its monopoly power to generate additional income. One obvious way of doing that is creeping further and further into the retail space.

We will also seek to amend the provisions of the legislation relating to the ownership of the NBN. The Gillard government is effectively a coalition, consortium or alliance with the Greens, and one of the prices that the Prime Minister has paid for the support of the Greens is the agreement to make the NBN virtually impossible to sell. The way the legislation works is that it cannot be sold until such time as it is complete. It cannot be sold when it is part built; it must be absolutely complete. Looking around the room, there are a few of the younger members that may still be here when it is built, but I suspect those of us here around the table probably will not be here by that time. That really fetters the future governments in a completely irresponsible way, and we will seek to amend the legislation to enable a future government to sell the NBN, if that is what it considers to be the appropriate course of action, subject to having a Productivity Commission inquiry and a review by a parliamentary committee. We do not have any objection to that.

We will also seek to amend the legislation to make sure there are no loopholes in terms of the NBN creeping into the retail space. In the legislation at the moment there is a provision, for example, that would enable the NBN to acquire and own a retail company in the telecommunications area but have an obligation to dispose of it within 12 months. There is no reason for that grace period. I think most members have either participated in or observed transactions where restructuring of a company to be acquired is a condition of the completion of the acquisition. There should simply be a prohibition on the NBN acquiring retail businesses and, if it seeks to buy some infrastructure which has a retail business attached to it, the disposition of that retail business should be a precondition of completion. That is neither a complex nor a difficult thing to achieve, but it will maintain the principle of ensuring that the NBN is not in that retail space.

One of the big issues that the government has to face with the NBN is that because it is a monopoly, because it is so heavily capitalised and because it belongs to the government it naturally now wants to maximise its revenues and it wants to do so in a way that inhibits competition. So it has reached an agreement with Telstra to prevent Telstra offering broadband services on its HFC network. The absurdity and the wastefulness of that arrangement, which was supported by the legislation that was carried through the parliament last year, is worth reflecting on for a moment.

The government tells us the object of the NBN is to deliver 100 megabits-per-second broadband to 93 per cent of homes in Australia. Let us assume that that is a worthy and a necessary objective. The HFC cable network passes 30 per cent of Australian households now. All of it can be—and, indeed, in Melbourne already has been—upgraded to deliver broadband at 100 megabits per second. So where is the market failure? Where is the crying need for an upgrade in service? If the government were going to spend scarce resources to deliver 100 megabits-per-second broadband, surely it would focus on areas that were not served at all. But no, it is going to overbuild and render obsolete, for broadband purposes, a cable system that passes 30 per cent of Australian households.

Then we see the issue of competition from new cable systems. As the McKinsey implementation study set out very clearly and graphically, there is a risk to the NBN that the private sector might build cable systems in more densely settled areas and offer services at lower prices than the NBN in those areas, which would cause the NBN to lower their prices across the country and undermine the economics of the NBN.

But wasn’t the NBN designed to enhance competition? Wasn’t the NBN designed to ensure Australians get access to broadband at affordable prices or at lower prices? Apparently not. Apparently having created this government owned monopoly, this monolith—having made that mistake—the object of the government now is to compound it and prevent anybody from competing with it. So, as recommended by the implementation study, for no reason other than protecting the economics of the NBN, the government is proposing in this legislation to inhibit the building of any competitive cable networks, fast broadband networks, by providing that they must offer a layer 2 bitstream service on the same terms and conditions as the NBN. That is an entirely objectionable restraint on competition and it is designed to do one thing and one thing only. It is a product of the recommendation of the implementation study and it is designed, as McKinsey wrote in that study, to underwrite and underpin the economics of the NBN itself. We will seek to amend that as well.

The other issue related to the question of wholesale versus retail is the nature of the parties, the companies or the persons, to whom the NBN can sell its services. In clauses 10 to 16 of the National Broadband Network Companies Bill 2010—the first of the two bills—there are provisions to enable the NBN to sell directly to a range of utilities: electricity utilities, water utilities, sewerage utilities, transport utilities and others. There is no restriction on the nature of telecommunications services the NBN can deliver to those entities. A number of those entities have said to us and to others, ‘We would rather just deal with the NBN. We don’t want to deal with a middleman. We don’t want to deal with Telstra, Optus, iiNet or Macquarie Telecom. We want to deal directly with the NBN.’ They want to cut out the retailer. So would all major customers for telecommunications services.

If that principle were to be supported by this parliament it would in effect be saying the NBN can move further and further into the corporate and institutional telecommunications business and perhaps not provide services directly to residences, to mums and dads at home, but move into providing telecommunications services directly to large institutions and large corporations—in other words, to become a large retail telco: a government and corporate retail telco and a wholesale telco for the rest of the market. So the government is either serious about the NBN being a wholesale-only telecommunications provider—in which case there should be a very clear limitation along the lines that we are proposing with no exceptions—or not.

Once this broadband network is operating, the temptation—and this will apply to any government—will be for it to creep further and further into the more valuable areas of telecommunications services, further and further onto the retail turf of other privately owned telecommunications companies. It will be under pressure to do that because of the massive amount of debt that it is carrying. You can imagine bureaucrats in the Department of Finance and Deregulation and Treasury saying to people running the NBN: ‘Can’t you find some additional revenue? You are bleeding red ink. This is an enormous expense. Why can’t you find some revenue?’ The only way they can do that is by moving out of the wholesale-only business into providing telecommunications services directly to end users—in other words, becoming a retailer. We intend to hold the government to account there.

In terms of the threads of principle that run through our amendments, it is really a function of holding the government to account. We have amendments to ensure that the NBN is strictly a wholesale business. We have amendments to ensure that the NBN is truly, properly and thoroughly accountable to the Public Works Committee and to the public through freedom of information legislation. We have amendments to ensure that future governments are not fettered, as the Greens have demanded as the price of this deal, so the NBN is impossible to sell under almost any circumstance.

Finally, the other item consistent with that is that we will seek to amend the legislation, as recommended by the Senate Select Committee on the National Broadband Network, to provide that the NBN must not discriminate between access seekers—that is to say its customers, its retail service providers—on the basis of volume. There is a very real concern that the NBN, which is currently able to offer volume discounts under this legislation, will offer big volume discounts to the larger retail service providers—Telstra in particular—and give those companies an enormous competitive advantage over their rivals in the retail space.

So those are the amendments that I foreshadow. I look forward to debating them with honourable members opposite.