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Monday, 28 February 2011
Page: 1610


Mr FLETCHER (4:57 PM) —The National Broadband Network Companies Bill 2010 and the Telecommunications Legislation Amendment (National Broadband Network Measures—Access Arrangements) Bill 2010 form a further part of the legislative scheme dealing with the National Broadband Network, building on the bill that went through the House last year. The key purposes of these bills are to establish NBN Co. and regulate how it operates and how it may be sold; and to regulate the terms on which retailers can get access to NBN Co.—by making further amendments to Parts XIB and XIC of what was the Trade Practices Act but is now known as the Competition and Consumer Act.

In commenting about the legislation that is before the House today, I want to make three fundamental points: firstly, the legislative scheme is a fundamentally bad one; secondly, the provisions incorporated in this bill that make NBN Co. hard to sell are bad policy and essentially intellectually dishonest; and, thirdly, the provisions contained in this legislative scheme to impose, by statute, barriers to entry on players wishing to enter the market to compete with NBN Co. are an atrociously bad idea and should be removed.

Let me turn to the first point. This legislative scheme, of which the two bills before the House today form a part, is a fundamentally bad one. Let there be no doubt that it is well accepted by those on this side of the House that the telecommunications sector in Australia faces two serious problems: firstly, fixed line competition is weak because of Telstra’s vertical integration; and, secondly, Australia’s broadband infrastructure needs to be upgraded. These two propositions are not contentious, but the solution which the Labor Party is putting forward to these problems is contentious in the extreme. We say it is a bad solution; in fact, it is no solution.

Let us remind ourselves of the elements of this solution. Labor is proposing to spend $41 billion of taxpayers’ money, including $27 billion on providing 100 per cent equity funding to a completely government owned company. Secondly, Labor will use that money to effectively renationalise a large part of the telecommunications sector, reversing a policy direction that has been followed in Australian telecommunications for at least 15 years—a policy direction consistent with that followed in many countries around the world.

Thirdly, Labor’s policy exposes government to the very conflict between its interest as regulator and its interest as taxpayer which was faced for many years, and which was a powerful rationale for privatising Telstra in the first place. Fourthly, this scheme will have the government owned NBN Co. enter into a deal with Telstra for Telstra to effectively stop competing and to exit the market. Telstra will no longer operate an access network but will instead use the new access network to be built by NBN Co. Fifthly; Labor’s scheme will see $11 billion of taxpayers’ money spent to secure Telstra’s agreement to this outcome.

Next, once that money is spent, this government is going to take the existing Telstra network and trash it. It is going to completely destroy it, even though that network is more than capable of continuing for many years to deliver both voice and broadband services to millions of Australian homes and businesses. Further, as part of this vandalism, this government will completely destroy the existing hybrid fibre co-ax network operated by Telstra, which passes 2.5 million homes in five cities and is already able to deliver 100 megabits per second. That is the speed which we are told is one of the great selling points of Labor’s NBN. We have a network which can already deliver this speed in Melbourne and could readily deliver it in other cities with some upgrading, and that network is to be trashed.

Further, Labor’s scheme involves putting taxpayers’ money at risk in a business venture which is fundamentally challenged, a business venture which relies on wholly unrealistic assumptions such as a dramatic tapering off in the growth of wireless penetration. Wireless penetration, as NBN Co.’s own corporate plan makes clear, has risen from four per cent to 13 per cent in the last six years. Yet NBN Co.’s operating plan now assumes it will not exceed 16.3 per cent in the 14 years to 2025—a fundamentally unrealistic assumption which you could only arrive at if you were desperate to indicate that your plan was worth pursuing. Even with this fundamentally unrealistic assumption, this plan in which $41 billion of taxpayers’ money is risked will still only able to produce a pathetic seven per cent rate of return. No investor with free will would touch this proposition with a barge pole. Sadly, every Australian taxpayer is a forced participant thanks to the policy of this government, in one of the worst business propositions every promoted in the history of trade and commerce in this country.

The worst aspect of this scheme is that Labor is so desperate to shore up the very dim commercial prospects of NBN Co. that it is legislating to deliberately suppress competition in telecommunications networks by imposing additional burdens on companies which are contemplating entering the market to build networks in competition with NBN Co. My first proposition to this House is that this legislative scheme is a fundamentally bad one. My second proposition is that the provisions contained in this bill which are designed to make NBN Co. particularly hard to sell are exceptionally poor policy and are fundamentally intellectually dishonest.

Those provisions require the following steps to be carried out before NBN Co. can be sold: firstly, a declaration by the communications minister via a disallowable instrument that the NBN is ‘complete’ and ‘fully operational’; secondly, a Productivity Commission inquiry and report on the competitive and financial implications of NBN Co, the privatisation and appropriate post-sale ownership limitations and regulatory arrangements; thirdly, a joint parliamentary committee inquiry and response to the PC report; and, fourthly, a declaration by the finance minister via a disallowable instrument that market conditions are suitable for a sale. Until all of this happens, 100 per cent of NBN Co. will stay in public hands.

This is part of the deeply disingenuous approach of the Labor Party to broadband policy. I remind the House that the original policy, which the Labor Party took to the 2007 election, was that only $4.7 billion of public money would be allocated and it would be allocated in a joint venture with a private sector company. By April 2009, that plan was dead. It was on its back, gasping for breath. It was deceased. By April 2009, we had a $43 billion project. But then Prime Minister Rudd assured us:

The Government will be the majority shareholder of this company, but significant private sector investment in the company is anticipated.

The government proposes that it would welcome private sector participation of up to 49 per cent—that’s all right then! Where is it? Nowhere to be seen. Yet again that aspect of Labor’s policy has been junked.

When the implementation study appeared in May 2010, we learned that 100 per cent of the cost of this venture would be borne by taxpayers. Further, in this legislation, despite the government’s stated commitment to sell NBN Co back into private hands, the government deliberately introduces all kinds of detailed restrictions to make this as difficult as possible. It is no secret why this has happened—this is all about accommodating the Greens, who are opposed to NBN Co. returning to private hands. While Labor may be in government, the Greens are in power.

This bill is also about leaving a ‘poison pill’ designed to tie the hands of a future government when Labor loses power. As we have seen with the grubby conduct of New South Wales Labor, when it comes to the dreadful deal they have done on power this is standard Labor behaviour—you burn the villages as you retreat! That is exactly what has happened in this bill. This is the same Labor which in a fit of hypocrisy steadfastly opposed the privatisation of Telstra for 11 years from 1996 to 2007, even though the previous Labor government had enthusiastically privatised Qantas, the Commonwealth Bank and CSL. Those were good policy decisions. But when it came to telecommunications, unfortunately, we have seen a sad history of bad policy and rank political posturing.

The third objectionable element of this package of bills is the provisions which would impose by statute barriers to any player wishing to enter to build networks in competition with NBN Co.. These are the so-called ‘anti-cherry-picking’ provisions. That rang alarm bells for me when I saw those words, because there is no code word used by a monopolist more frequently than ‘cherry picking’. We have heard those words regularly from Telstra for two decades: ‘This must not be allowed to occur because it is cherry picking.’ I will tell you what it is, Deputy Speaker D’Ath: it is a red flashing light warning signal ‘monopolist behaviour occurring’. That is exactly what we are seeing.

We are seeing a National Broadband Network Company being established and protected by a series of exceptionally objectionable provisions deliberately designed to put lead in the saddle bags of anybody wishing to come in and compete with NBN Co. and build a competing network. They will be required to give automatic access to their network under this legislation. Extraordinarily, they will be required to do so under ‘access rules based on those applying to services supplied by NBN Co.’. In other words, NBN Co.’s competitors will largely be in the hands of NBN Co.; whatever NBN Co. decides to do in terms of pricing or other terms and conditions of supply will bind competitors.

This is an exceptionally radical policy departure for two reasons: firstly, it has always been the case under the telecommunications access regime in Australia that you are only required to give access to your network if it delivers a service which had been determined by the ACCC to be a ‘declared service’, and in turn a threshold condition for this was that, in essence, you had to have market power. It has never previously been the case that a small player, a new entrant, has been required to grant access to its network. But that is what this bill now proposes. The first time you come in and build even a few kilometres of network in competition with NBN Co., you will be obliged to provide access. That is a radical policy departure designed to make it as hard as possible for new entrants, designed to nobble competition, designed to be part of this grubby stitch-up in which competition is sacrificed so that Labor’s ailing, hopeless NBN business plan can be given even the smallest chance of gasping into life.

Secondly, it has never previously been the case that the access terms and conditions committed to by one company in the telecommunications industry automatically binds other companies in the industry. Indeed, it gets worse, because if you are building a so-called ‘fixed-line superfast access network’ you are required to conform with technical standards specified by NBN Co. This is a throwback to the days when Telecom Australia set technical standards and you could be fined for plugging a phone into a jack which did not meet Telecom’s standards. The reality is that for many years the use of so-called technical standards was a standard weapon of anticompetitive conduct by Telecom. It is, frankly, Orwellian that the explanatory memorandum on page 13 calls these the ‘Level playing field arrangements’ and disapprovingly says that competing providers might ‘ignore technical specifications employed by NBN Co.’. Why on earth should competitors be required to comply with NBN Co.’s technical specifications? We do not require Virgin Blue to comply with Qantas’s technical specifications, we do not require Optus to comply with Telstra’s technical specifications and we do not require Woolworths to comply with Coles’ technical specifications. This is a complete perversion of the way that competition should work.

These bills before the House today form part of an overall legislative scheme which is a bad scheme. These are bad bills. Nobody disputes that broadband infrastructure needs to improve. This is a very bad way to do it.