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Thursday, 25 August 2011
Page: 5499

Senator LUDLAM (Western Australia) (10:11): I am really pleased to be able to speak on this bill this morning. The Australian Greens will not be supporting it, for the same reason that we have not suppor­ted various iterations of identical proposals over the last year or two. I am glad Senator Birmingham has joined us; good morning, Senator Birmingham. I am wondering whether when you rise to speak you could tell us how many times in both chambers of this parliament you have served up a proposition to subject NBN Co. to a cost-benefit analysis, because I have actually lost track.

Senator Birmingham interjecting

Senator LUDLAM: Could you take that one on notice. I admire the perseverance, and I will just speak briefly about why we will not be supporting this bill.

Firstly, we have nothing against the Productivity Commission or the instrument of a cost-benefit analysis where it is applied in an appropriate context. You would be aware that the Productivity Commission pop up pretty regularly in the carbon price agree­ment, performing various studies and checks and balances. We were quite pleased, in our agreement with the government to make it more difficult for a future government to sell NBN Co. back into the private market, that the Productivity Commission will be the ones doing the analysis of whether or not it is in the public interest to sell NBN Co. in a decade or so's time. So we have nothing against the PC.

The problem, of course, is with applying a cost-benefit analysis to a project such as this—and this has been well canvassed on many occasions. Seeing as how the coalition have bolded up again, I am happy to describe again why we think it is the wrong instrument. There are the costs. How do you assess the costs of the NBN? How do we look at the cost side of the balance sheet? NBN Co. has published its business case; that has been peer-reviewed, and now it is the job of the Joint Committee on the National Broadband Network—which is chaired by Mr Rob Oakeshott, of which I am a member and which was an initiative of Senator Xenophon, who has just joined us—to watchdog the process and the project on a month-by-month basis to keep track of costs. The problem is that it is cost positive. It is a business; it provides revenue to the govern­ment. So how do we assess what the cost of the project is when in fact it is going to be generating revenue for the government and will in time pay its costs back? What does Senator Birmingham propose that we put on the cost side of the ledger?

Senator Birmingham interjecting

Senator LUDLAM: The glass is still half full, Senator Birmingham, just as it was last night. On the benefit side, how on earth do you calculate the benefits? What you need to do is monetise an entire range of quite intangible propositions about the benefits of NBN Co. and then add them up—monetise them and add them up for all future benefits for all time, for a network of fast fibre that does not yet exist. I have no idea how the coalition would propose to do that.

But let us say that it were done. You would then need to provide a sensitivity analysis to show how the variables you threw into the cost side and the benefit side influence the results that fell out of your spreadsheet. Of course, a sensitivity analysis, if it is done with any degree of honesty and rigour at all, will show you that you can make the benefit side of the equation say pretty much whatever you like, depending on your degree of hostility to the project. What benefits will fall out depend on what variables you plug in. If we had done a cost-benefit analysis of the electricity grid we would not have built it because we would not have been able to monetise the benefits but we would have been able to estimate the future costs and say, 'That's going to be expensive; what are the benefits of that going to be?' How should we total up the benefits of having electricity, running water, roads, railways? We would not have built these things. Fortunately, we have a bit of an idea of what a cost-benefit analysis of the NBN would look like because somebody actually did one. Professor Henry Ergas and his colleagues attempted one in 2009 and they presented it to what was then a select committee on the NBN. They acknowledged that it was pretty rough, that it was a bit back-of-the-envelope, but at least they had a go.

What did that cost-benefit analysis find? It found that it was inefficient to proceed with the NBN if costs exceed $17 billion. Of those intangible variables that you plug into the spreadsheet, they decided $17 billion was the figure; that there would be no utility in building the NBN if it cost more than $17 billion to produce. They estimated, actually, that the costs outweighed the benefits by something in the order of $14 billion to $20 billion in net present value terms, which means you have got to pay very careful attention to the kinds of discount rates that they apply and all the bizarre mathematical formulas that they have to come up with to decide what the benefits of this network that does not yet exist will be. That is why we think it is an inappropriate mechanism. We know why the coalition have been so persistent: they want a rerun of that. They want to be able to stand up and wave around a stack of figures and say, 'Because it costs more than $17 billion, we'll be better off going and spending the money on more roads or more coal fired power stations'—or whatever it is that the coalition would prefer to see the public money spent on. I think on both the cost and benefit sides of the equation we would be wasting the Product­ivity Commission's time, even though it would potentially provide quite a useful political tool to the coalition.

There is a second strand of argument that says, 'Don't build it because there might be some future technology coming down the road that will make the NBN obsolete.' I think that is just basic ignorance of the laws of physics. And I wonder how long the coalition would propose that we hang around in that posture. They hung around in that posture—'Don't build anything just in case something better comes along'—for 12 or 13 years. It beggars belief that that has become the alternative policy position: 'Don't put in this network because something better might come along.' Something better than elect­ricity might come along as well, that is true. Something better than road transport might come along. Something better than retic­ulated water might come along. But we built that infrastructure, and at some point you have to say: 'It's time to build the infrastruct­ure for the 21st century.'

Mr Turnbull, by way of alternative, is providing a fibre-to-the-node model that was rejected by the government's expert panel two or three years ago. He is proposing a diabolically awkward, hybrid model that I think will lead us straight back into the swamp of policy paralysis that we spent most of the term of the Howard government in. The coalition when they held the Treasury and government benches told us, against the will of just under half of the numbers in the chamber in this parliament, that all we had to do was privatise the national carrier and the markets would take care of everything. How well did that work out? You sold a vertically integrated, state owned monopoly into the market and then walked away and watched as it squashed its competitors and leveraged its monopoly power into new markets. That is why it was so important that this parliament took the step that it did late last year to disaggregate Telstra, to separate out the wholesale arm so that NBN Co. could get on with the build out and actually repair some of the damage that was caused when Telstra was flogged.

I do occasionally feel a little bit sorry for Senator Birmingham and, indeed, for the member for Wentworth because they are MPs who are technologically literate. They use the technology, they know how it works, they know of the benefits—unlike Mr Abbott and some of the trolls that get wheeled out to just run the party line to destroy the NBN. I think the people who represent through Senator Birmingham and the member for Wentworth must sometimes lie awake at night wondering how on earth it is that they have been tasked with wrecking this project. It still beggars belief that the National Party get wheeled in here every now and again to try and ruin a proposal to bring rapid world-class broadband to regional areas. I have no idea how their party room accommodated that point of view, but somehow they have managed to, and they come in here to try and smash this thing up. To be completely honest, I have had enough with the trolling of the project, because that is what it has become. Some of the arguments have become pretty marginal. I think the member for Wentworth is doing a reasonably good job, under direction of a technologically illit­erate Leader of the Opposition, to at least try and condition some of the arguments to a degree, to provide the watchdogging that this project badly needs, but some of the arguments are so way off beam that they should simply be dismissed.

We tend to be a little bit inward looking in Australia and I think that is actually going to be one of the benefits of the project, that it will hook us up with the rest of the planet as it comes online. But let us just for a moment take a look at what some voices are saying about the project from outside the fishbowl of Australian politics. Dr Vint Cerf, who, along with a team of scientists, is said to have invented the internet in the 1970s and so is one of the real pioneers of the tech­nology, was awarded the US national medal of technology and is a member of the National Academy of Engineering. Here is what he said about the NBN:

I am so envious that you have a government that is willing to make the long term infrastructure investment of this magnitude and of this type. I will be pushing very hard for similar activities in the US but quite frankly you guys are way ahead of us.

And, of course, as the United States teeters ever closer to bankruptcy I think Australia will be in a position to get further ahead. He says:

I consider this to be a stunning investment in infrastructure that in my view will have a very long term benefit. Infrastructure is all about enabling things and I see Australia is trying to enable innovation.

That is a reasonably positive report from Vint Cerf. Eric Schmidt, who senators might know is the CEO of Google, has said:

Australia is leading the world in understanding the importance of fibre. Your new Prime Minister as part of her campaign and now … as part of her prime ministership, has announced that roughly … 93 per cent of Australians … will have gigabit or equivalent service using fibre. And the other 7 per cent will be handled through wireless services of a nature of LTE. This is leadership. And again, from Australia, which I think is wonderful.

Of course, he is in the technology sector and he has probably got a direct interest, you would say, in world-class rapid broadband in Australia. But, still, I think if they thought the project was a dud they would be saying so.

Since opposition senators frequently wheel in motor vehicle metaphors I was interested in this one that I spotted from Jim McKerlie:

"The Opposition is saying the proposal is like building a Bentley when we can only afford a Commodore," McKerlie said. The trouble with aiming to just build a Commodore is you will probably end up with a Go-Cart.

"… I don't think we can afford to end up with that."

Mr Paul Budde, who has given evidence at many of the inquiries that have tracked this project since its inception, is the managing director of one of the world's largest telco research and consultancy firms. Here is what he said:

There are many countries who at this point in time cannot afford to make this investment, and this gives Australia the chance to leap ahead and give the people and the businesses of our country a head-start in the digital economy. Think about what that can do for job creation and productivity …

Alan Kohler said:

Not only will the NBN not be a white elephant it will almost certainly prove to be a great investment … it could represent, on its own, a huge national savings plan.

I do not know how you fit that into a cost-benefit analysis. He continued:

When it’s finished the asset will be worth several times the government’s investment of $27.5 billion.

That is one of the reasons why the Australian Greens believe that this project should not be privatised—to avoid repeating the mistakes of the full privatisation of Telstra. It should remain in public hands, where we can get the directors of the company in front of esti­mates committees to be cross-examined by people like me and Senator Birmingham and asked what they are doing with the taxpayers' money. I do not often quote the Australian Chamber of Commerce and Industry, but I am going to this morning. CEO Peter Anderson said:

The instinct in the business community is that there can be a real productivity kick and benefit …

That, to me, seems common sense.

The executive director of Australia's peak body representing the interests of small business, COSBOA, said the NBN:

… is an equal playing field. You don’t get that too often … We want it, we need it.

So I do not really understand to which constituency the coalition are speaking when they bowl up in here either with well-meaning-sounding amendments like propos­als for a cost-benefit analysis or with some of the more elaborate attempts at sabotaging and bringing the project down that we have seen over the last 18 months or so. I do not understand who the constituency is.

I think it is high time we simply got on with not just building the National Broad­band Network but also our role as senators in this parliament, which is to make sure it does not cost any more than it needs to. We can do that in this chamber. We can do it in estimates committees. We can do it in the Joint Committee on the NBN, which Mr Oakeshott chairs, which I think is the perfect forum for identifying problems and tracking the rollout of the project.

I look forward to the network coming to Western Australia. If I have any criticism of the NBN project—and it certainly has not been perfect, but, for any project with this degree of risk, this scale of investment and this scale of rollout, there certainly will be risks attached—it is that it is running probably a year behind schedule. That is partly the fault of this chamber and the coalition's blocking tactics. We had Senator Minchin, the Senator for Telstra, running an elaborate series of blocking tactics to prevent the chamber even debating the legislation. Coalition member for Brisbane, Teresa Gambaro, obviously takes a different view. She was complaining that the NBN should be rolled out in her electorate—and that is the extent of my complaint: when is it coming to Fremantle? When is it coming to Kalgoorlie? When is it coming to Albany? I would like to see this network rolled out. I would like to see this parliament doing its job as a watchdog on this proposal and making sure that it is a smooth build. I wonder if Senator Birmingham, when he rises to speak, can maybe tell us whether this is the last time that we will see an amendment such as this.