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Tuesday, 18 June 2013
Page: 6195


Mr FLETCHER (Bradfield) (13:12): I am very pleased to rise to speak on the fifth report of the Joint Parliamentary Committee on the National Broadband Network. When you look at this report, the thing that is most striking is the contrast between a view of the world as some would wish it to be—including, I note particularly, the chair of the committee, the member for Lyne—and the view of reality. There is quite a disparity between the two. The member for Lyne is an unashamed true believer in the marvels of the National Broadband Network in the present form in which it is being implemented by the Labor government, which he helped bring to power. In his chair's foreword, he said about the National Broadband Network:

It will make a big difference in many lives. It will strengthen our economy. It will promote our cultural identity in a flattening global culture … it will create opportunity and deliver equity for all Australians.

He repeats the claim that it will 'promote Australian culture to the world', 'show respect to sectors like education as our second biggest export market'. The powers of the NBN appear to be almost limitless in the faith of the member for Lyne. He says it will 'play to our strengths by unlocking entrepreneurship as a nation'. He says:

What an opportunity to promote Australia and expand our export economy by getting this build right.

The chair of this committee, the member for Lyne, is a true believer in the capacity of the National Broadband Network to do all of these things.

But I have to say, when I hear these overblown claims about what the NBN will do, my response is: no it won't. At the very highest, you could put the argument as follows. You could argue that the NBN is a necessary but not sufficient condition to achieve these marvellous outcomes—to promote Australia's cultural identity to the world, to unleash entrepreneurship. But to claim that building the NBN will 'deliver equity for all Australians' or will 'unlock entrepreneurship as a nation' is, I would suggest, an example of the kind of dangerously woolly thinking that is causing us to splash away so much money without being careful in our analysis of what we are getting for the money. It may be possible to argue—and it is a contentious proposition—that if you build and deliver an effective national broadband network it will encourage economic activity, it will encourage entrepreneurship. But there is that distinction that was hammered home in first-year philosophy: it may be a necessary but it is certainly not a sufficient condition. It is not enough to argue, as we repeatedly hear from the member for Lyne and other advocates for the NBN in its present form, that the mere construction of this network will lead 1,000 flowers to bloom. That is not true. There is much more that needs to happen. It may be that the NBN will assist in a range of outcomes, but it will not do it by itself. And to suggest, as the rhetoric in the chair's forward suggests, that it is sufficient to achieve these objectives, is misleading and is an indicator of the kind of fuzzy and woolly thinking that sadly has bedevilled far too much political commentary about NBN Co.

So, if the first objection that I have to the particular philosophy that is articulated in those introductory comments is to say that, even if you believe all of these claims, at best the NBN can be a condition towards achieving the outcomes and much more needs to happen, then the second—and even more substantial—objection I have is this: before any of these wonderful claimed outcomes can be expected, you need to get the thing built, and you need to get it done quickly, cost-effectively and efficiently. And if there is one thing that is clear, as we look at the state of progress with the National Broadband Network, when you turn your eye away from the lofty claims about the marvels that this network is going to deliver, and get on to the more prosaic level of what is actually happening now—how much money has been spent, what we are getting for it, whether the rollout is on time and whether the network been well designed—the answer to all those things is: this is a mess.

So the coalition makes no apologies for turning our eyes away from the wafting vision of the sunlit uplands, which the member for Lyne has once again been all too eager to lay before us. We make no apology for turning away and looking at the detail—and the detail is a very, very troubling picture. The proper role of this committee—on behalf of the Parliament of Australia and in turn on behalf of taxpayers who are compulsorily investors in this badly designed and ill conceived project—is to ask: how is it going? How much money is being spent? What is happening with the rollout? What confidence can we have that the project as presently conceived is going to be completed? All of that must necessarily and logically come before turning our minds to the marvels that the credulous member for Lyne appears to believe are just over the horizon.

I am a very strong believer in broadband. I am a very strong believer in the economic and social benefits of broadband. I have worked in the telecommunications sector, both in government and in the private sector, for many, many years. In fact, I am so interested in broadband that I wrote a book about it—and what a festival of pointy headedness that was, if I may say! But I would make the point that it is simply not good enough to have these wafting generalities in the report that we have before us. We need to get into the detail on behalf of the parliament and on behalf of the Australian people to ask the detailed question, how is the rollout going? And when we turn to that question, the answer is unambiguous. The rollout is going very, very badly. Let us start by looking at some of the numbers. By 30 June 2013, according to NBN Co.'s first corporate plan released in December 2010, this network was supposed to pass 1.3 million premises. In fact, on the most recent numbers, as at May this year—so there is only a month to go—it had passed around 103,000 premises. We also see that the estimates of usage of the network are well behind what is forecast and we also see, extremely troublingly, that the build of the fixed wireless network is running into difficulty and is behind schedule and at the same time we see that NBN Co. continues to burn through cash and spend lavishly on headcount.

Let me make this particular comment, coming as I do from a background in the telecommunications sector for many years. It is an open and notorious joke within the telecommunications sector that people are leaving existing telcos, particularly Telstra and Optus, and have been doing so for several years to go to roles at NBN Co. where they are paid very substantially in excess of what they were previously paid by their previous private sector employer. There is no question that NBN Co. is spending in a profligate fashion and is spending on staff and on other things in a way that no private sector telco would do.

At the same time, the rollout is scandalously behind schedule and the performance which has been delivered is absolutely hopeless if you compare it to any benchmarks of what has been done. I cite, for example, the rollout within one year of the 3G network, the Next G network, under Sol Trujillo at Telstra. I have been critical of Sol Trujillo on many occasions, but Telstra's delivery of the Next G network within a very short period of time was an impressive engineering achievement. Or you could look at the rate at which both Telstra and Optus rolled out their HFC networks, their hybrid fibre-coaxial networks, across many cities of Australia during the mid-90s. If you look at the rate at which those networks were rolled out and you compare it to what has been achieved by NBN Co., it is chalk and cheese. Or you could look across the Tasman and you could have a look at what is being done in New Zealand. By December 2012, the Kiwis, with their fibre rollout, had passed 134,000 homes. Bear in mind that at that time NBN Co. in Australia had passed 72,400. The two rollouts began at roughly the same time. Australia is a country five times as large. If we had matched the performance of New Zealand, we would have been at several hundred thousand by December last year.

Wherever you go, if you look at the private sector and its history of rollouts, both fixed and mobile in Australia, and if you look across the Tasman at an analogous rollout of a fibre broadband network, you see that NBN Co. is doing a very poor job against those benchmarks. Indeed, if you are looking for tangible evidence that the rollout is well behind where it was expected to be, you could look at the fact that funding in the budget in 2014 was reduced by $3.5 billion compared to what had originally been proposed as recently as the October Midyear Economic and Fiscal Outlook. Why is that? It was not a conscious cost reduction strategy or fiscal discipline by the Treasurer, because that is not the kind of Treasurer that we have. It is because the rollout is running well behind time. Those budget cuts are a consequence of a delay in the rollout.

So when we look at the very basis, the very centre of what this committee should be focused on, on behalf of the taxpayers of Australia, in having oversight of this rollout and determining whether taxpayers' money is being spent well, whether the project is being managed efficiently and cost effectively, there is no conclusion which can be reached other than that there are very serious red flashing lights here. This rollout is in a mess and it is in a mess, unsurprisingly, because we have a government which is absolutely atrocious at implementation. We have seen that with school halls, we have seen that with the home insulation program and we are seeing it as well with the National Broadband Network. I mentioned the fact that the fixed wireless rollout is a long way behind schedule. According to the Australian Financial Review, even in the best case scenario by the end of June the wireless network will cover just 31,291 premises, which is only 45 per cent of the target of 70,000 that the fixed wireless network was supposed to reach.

I come now to a question I have touched on already and will deal with in a bit more detail: the question of the NBN's management of human resources. There is no more important task in running a company than in managing your human resources efficiently. That means getting the right people in to do the job. It means paying them what you need to attract them, but no more—I have already talked about the extent to which NBN Co. has paid well in excess of market levels. It also means maintaining a capable team in place rather than churning through executives, senior management and directors on a regular basis. Unfortunately, from NBN Co. we have seen a very substantial amount of churn amongst senior management and indeed amongst directors.

We are also seeing a very rapidly growing head count for NBN Co. As at the end of February there were 2,477 employees. That is an increase of nearly 50 per cent on staff numbers in June 2012. So this company is continuing to grow without restraint. It is continuing to add people even though the rollout, the core job it is there to do, is running very badly behind plan. This is a very significant contributor to the overall cost of this project, a cost that taxpayers are funding. It is another indicator of the way in which basic financial disciplines that you would see in a similar private sector investment project have been troublingly absent.

On the question of churn of employees, since October 2009 some 14 senior executives and 55 executive level employees have left the company. There does appear to be significant evidence of unusually high levels of churn amongst the senior management team and amongst directors.

I will close by referring to one other point that is touched on in this report, which is the meandering discussion about whether more private equity should be sought for NBN Co. This is something of an interest of the chair. It is a ridiculous interest that makes no sense, because the legislation says that you cannot have private sector equity until the build is finished, and five years later. The chair voted for that legislation, so he should know that.

Debate adjourned.