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Wednesday, 9 February 2011
Page: 252


Mr HARTSUYKER (5:48 PM) —I welcome the opportunity to speak on the National Broadband Network Companies Bill 2010 and the access arrangements bill, because the government is racing both of these pieces of legislation through the parliament in order to continue the rollout of its wasteful National Broadband Network. The companies bill is designed to outline the ownership, operations and legal status of the NBN, and outlines arrangements for its potential privatisation. The access arrangements bill amends competition policy laws to require the NBN to provide open and non-discriminatory access to retail carriers using its wholesale services. The bill also places similar rules and technical requirements on non-NBN fibre rollouts.

We are told that these bills must pass through parliament quickly so that Telstra can put its deal to shareholders and to enable the government’s $13.8 billion purchase of the wholesale copper network to go through. We know that the National Broadband Network will be the biggest government infrastructure project in Australia’s history. But it is also becoming clear that the NBN is the most unscrutinised infrastructure project in Australia’s history, and this legislation we are debating here today confirms the government’s intention to avoid scrutiny and analysis at all cost.

The NBN Companies Bill formally exempts the NBN project from the provisions of the Public Works Act. Exempting NBN Co. means that the Parliamentary Standing Committee on Public Works will not be able to conduct oversight of the NBN rollout. It is just another stage in Labor’s pattern of deception and avoidance of scrutiny at all cost. Just a few weeks ago, we had it confirmed that the NBN would be exempt from freedom of information requests—on top of the government refusing parliamentary scrutiny by a joint committee. We are going to have a sham committee established, which of course will not start its operations until the middle of the year—hardly the type of scrutiny that the taxpayer is entitled to, given the length, breadth and cost of this project.

So the parliament, the Productivity Commission and now the public are being refused any direct information about the project that the government does not wish to release voluntarily. If the government really intended to improve broadband services across Australia, then surely independent analysis would be the best way to ensure we had the right plan to provide the best services at the best prices available. The lengths to which the government is going to prevent potential criticism of this project are unprecedented. I have said before that any reasonable analysis of the government’s actions to avoid scrutiny suggests that Labor and NBN Co. have something to hide. They have a great deal to hide. As we slowly receive more information, as more legislation is introduced, as we continue to analyse the government’s unbelievable business case, it is becoming clear that the government does have a great deal to hide.

The big danger for taxpayers is the probability that we are seeing only the tip of the iceberg. Reports suggest that the Department of Broadband, Communications and the Digital Economy has been working around the clock to finalise its $13.8 billion deal with Telstra so that NBN can acquire the copper network. But the parliament is being asked to consider this legislation and to approve the safeguards legislation without the details of what the deal will contain. We do not know what the Commonwealth is gaining, we do not know what the liability of the Commonwealth to Telstra will be. There is just more and more hiding of the facts from the Australian people.

At the same time as we have that elaborate web of deception, we see that Telstra’s revenue from the copper network is declining rapidly. Deutsche Bank analyst Andrew Anagnotellis forecasts that Telstra’s half-yearly results are expected to show:

… underlying earnings before interest, tax, depreciation and amortisation will decline by as much as 12.5 per cent … as growth in mobile and data revenues is offset by the continued decline in its fixed-line telephony revenues.

So Telstra are experiencing big declines in revenue from fixed-line telephony, which are being offset by strong growth in mobile data.

Yet this government is in denial that revenue from fixed-line services is in decline and that the demand for wireless services is growing rapidly. Not only are they in denial but the NBN business case is modelled upon the basis that the growth in wireless services will dramatically decline. Wireless-only households currently account for 13 per cent of the market and these penetration rates have grown 225 per cent since 2003. Ignoring these trends, the NBN’s business case estimates that wireless-only households will increase to just 16.3 per cent by 2025. That is, despite the future release of 4G spectrum and the possibilities created by Long Term Evolution technology, the government believes that wireless penetration will only increase by a total of 25 per cent over the next 14 years.

The business case estimates that 12.4 per cent of households will not have a fixed-line connection and that 70 per cent will be connected to the NBN. This assumes that the growth in demand for wireless will slow and that more households will choose to access fibre services. Yet less than one year ago, the minister recognised the growth in wireless services. The minister told the AMTA in March last year: ‘Looking to the future, in terms of demand for wireless broadband, it looks like there will be exponential growth for some years to come.’ Why isn’t it in the business case if there is ‘exponential growth for some years to come’? Now forced to sell the NBN during and after the election, the minister is arguing that wireless is no longer a substitute for fibre, but the statistics show that there is exponential growth in the number of households substituting wireless for fixed-line services.

What does this say about the market? What greater feasibility study does the minister need than the market’s comparative growth between fixed-line services and wireless services? He only needs to look at the market in relation to young people, the consumers over the long term and into the future. They want the freedom of wireless devices. They do not want to have to plug into the wall when they want to operate their devices. They want the freedom; they want high-speed broadband where they are. They do not want to have to plug into the wall.

On Monday of this week, the company Vividwireless were testing download speeds for their 3G spectrum using new technologies soon to become available to customers. The tests undertaken by Vividwireless achieved peak download speeds of 128 megabits a second, which is faster than the 100 megabits a second apparently available under the NBN. These speeds and opportunities will only increase with the release of 4G spectrum. The government is simply denying that these technological advances will exist and that customers will substitute them for fibre.

Unlike this Labor government, other countries are not in denial about their broadband policies. India is following a plan to connect 60 million customers—almost three times the population of Australia—to wireless broadband, offering speeds of about 100 megabits per second at a fraction of the cost of the NBN rollout. In the United States, President Barrack Obama announced in his State of the Union address just two weeks ago that he will be investing in wireless technology to provide high speed broadband to 98 per cent of the American population over the next five years. President Obama said in June last year:

… we are now beginning the next transformation in information technology: the wireless broadband revolution …

He continued:

Expanded wireless broadband access will trigger the creation of innovative new businesses, provide cost-effective connection in rural areas, increase productivity, improve public safety, and allow for the development of mobile telemedicine, telework, distance learning, and other new applications that will transform Americans’ lives.

Yet the Gillard government is refusing to even consider the possibility that technologies such as wireless can compete with a fixed-fibre network. The government is in denial and that denial is going to cost $50 billion.

The coalition believes that it should not be the government’s intent to push one technology over another. The coalition believes that we should be using competition to determine the best outcome. But this government is systematically trying to prevent competition through its monopolistic fibre network. By decommissioning Telstra’s copper network, they are destroying a valuable asset that currently provides high-speed broadband at acceptable speeds for many people around the country. They will also prevent Telstra and Optus providing competition through their HFC network, which can deliver 100 megabits per second using DOCSIS 3 technology, and that currently passes 2.9 million homes. Why would you bypass an existing technology that will service, or potentially service, one-third of your market and just junk it, effectively, just ignore its existence and overbuild and duplicate that service at great cost to the taxpayer? And today’s legislation further entrenches the NBN monopoly by forcing other fibre owners—potential competitors—from offering services at different levels to those provided by the NBN. The bill forces people to provide access for level 2 bit stream services.

But the real concern in this is the viability. The business plan is an elaborate deception. There has been much talk about the IRR of seven per cent and we see the government crowing about the fact that the seven per cent IRR is going to provide an appropriate return to government to cover the cost of the interest payments on the debt. Let me tell you that the reality is that the majority of the value contained in that IRR of seven per cent does not come from the marginal income derived from spending $35.7 billion on fibre. It actually comes from the existing copper network. That is where the value is. They are going to spend $35.7 billion and get marginal revenue for a typical subscriber equivalent to the value of about a cappuccino a month.

The reality is that any company director that was going to acquire the Telstra copper network and effectively abandon it and then spend another $35.7 billion to overbuild it would probably be thrown in jail for destroying shareholders’ funds, because the marginal IRR of the additional expenditure over and above the copper network is actually negative. It is a negative IRR on the marginal funds invested, which is the appropriate analysis. It is in fact the copper network that is buttressing the business case, not the value generated by the fibre network. You will actually see a massive capital loss to the taxpayer. For the Australian people there will be an incredible opportunity lost, an opportunity forgone, through investing $35.7 billion to gain only a marginal revenue per subscriber of around a cappuccino a month. It is a pretty stark figure: a negative marginal IRR and a loss to the taxpayer for the benefit of a service that many people would want to use over wireless.

Just today the Economist Intelligence Unit released their report on broadband and it said that, out of 16 developed countries, despite spending the $50 billion, the Australian National Broadband Network would still be ranked 10th. One of the major arguments for the NBN is to make us roar up the rankings and to make us top tier in relation to the internet. The government are going to blow $50 billion, they are going to make a massive capital loss and, at the end of all of that, we are still going to be ranked 10th.

It is interesting to see who was ranked No. 1. It was South Korea. It is interesting to note that in South Korea there were 24.84 million households who have subscribed to wireless. How many do you think would have subscribed to their version of the NBN? If 24.84 million households in a country that is ranked No. 1 in the world for broadband have subscribed to wireless, is it 30 million households? Is it 40 million households? The fact is that in South Korea, according to the reports given to me, only 11.6 million households have subscribed to fixed line services—less than half. This is the flagship country that is quoted by Senator Conroy as being a leading light. Less than half the households are actually connected to a fixed line service as compared to mobile wireless. What we see is that the NBN project is a massive illusion. It is a political fraud. It is an economic fraud on the Australian people. We will see a massive destruction of value. We will see a massive capital loss.

We have debated in this House in the last two days the terrible floods and the natural disasters that have occurred around the country. Many of the losses and the impact of those losses on the Australian economy have been chronicled in this place. When you look at the sort of capital loss we are facing by investing $35.7 billion to receive a negative internal rate of return, the capital loss that will be imposed on the taxpayer as installed by this bungled and wasteful project is going to make the losses to the Australian economy as a result of these natural disasters seem cheap, because we are facing a massive capital loss. The marginal revenue on the $35.7 billion does not justify the additional funds invested. It is a loss that will be borne by the taxpayer to try and prop up Labor’s failed political project.