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Monday, 22 November 2010
Page: 1718

Senator MINCHIN (1:44 PM) —I rise to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 as the former shadow minister for communications throughout 2009 when most of these developments took place, and also of course as the last shareholder minister for Telstra and the minister responsible for T3. The first version of this bill appeared when I was the shadow minister and we made clear then our profound concerns about it. This second version really is no better than that first one. We indicated over a year ago that we could support parts 2 and 3 of this bill but that we were fundamentally opposed to part 1, and we still are.

This bill is in many ways a complete con. It is just a clumsy camouflage for the government’s true objective of creating a new government owned telecommunications monopoly in the form of this NBN Co at massive cost to the taxpayer. This is in fact a radical leap into the dark of telecommunications policy to create this new government monopoly and, as a result of another sleazy deal between the Labor Party and the Greens, we now know this company will probably never be privatised. So taxpayers will have billions tied up in this company forever.

This bill proposes to allow the government to use the force of law to break up a great Australian company owned by millions of ordinary Australians in order that this NBN can operate as a government monopoly without any competition, simply to prop up the shaky finances of this company. It really is an admission that this NBN would be completely unviable unless, as this bill proposes, competition law is suspended and Telstra is bought off. So the passage of this, frankly, quite offensive bill would pave the way for the government to use taxpayers’ money to buy off Telstra. What is on the table is an $11 billion bribe to buy Telstra’s agreement to cooperate in the creation of this new government monopoly. The government wants taxpayers to hand over $9 billion in cash to Telstra—and that is presumably on top of the $26 billion that they were going to hand over to this company—to rip up its copper and close down its HFC network, and then give Telstra on top of that a $2 billion gift by relieving it of its universal service obligation.

We learned just last week from the minister’s statement on the NBN that this USO deal that they have cooked up is going to cost taxpayers $100 million in the first two years—and this is on top of the $11 billion—and $100 million every year for at least a further eight years. The government has got itself in a position now where it has got to create yet another new quango—they are calling it USO Co—which, believe it or not, is going to rent copper from Telstra to ensure that the seven per cent of Australians not getting a fibre service under this wonderful NBN can still get a fixed-line service. The minister said:

... USO Co will have responsibility for delivering—

among other things—and this is not English; this is the minister—

ensuring the continuity and ongoing maintenance of the copper network for premises in the last 7%—in effect, those premises that are not connected to the fibre network;

                   …              …              …

USO Co will deliver these responsibilities through contracts, initially with Telstra.

So we are paying Telstra on the one hand to rip out its copper. On the other hand we are going to pay them $100 million a year to keep the copper for the seven per cent of Australians who will not be getting the fibre.

And we all know why this happened. It is a consequence of questions we raised at estimates with Senator Conroy last year, when we said, ‘Minister, how are you going to guarantee that every Australian who currently gets a fixed-line phone service is going to get one under your NBN?’ He clearly did not have a clue as to how that was going to be achieved. The question stunned him. He looked like a rabbit in the spotlight, and now he has come up with this extravaganza that is going to cost taxpayers $100 million a year to keep the copper in the ground for the remaining seven per cent.

The worst thing about this bill, frankly, is its cynical disguise as being virtuous in seeking to break up a great Australian company, Telstra. The government is really only doing this to prop up its $43 billion NBN. This is looming as Australia’s greatest ever white elephant. I place on the record—and I ask anyone to demur—Labor has never before formally advocated the structural separation of Telstra. It has never been a policy of the Labor Party before this bill was dreamed up. Labor created Telstra as a fully integrated telco and, while Labor quite hypocritically opposed privatisation, having sold the Commonwealth Bank and Qantas, at no stage did it advocate breaking up Telstra. Only last year when pressed on this question at Senate estimates, Senator Conroy said he was not an advocate of breaking up Telstra and the coalition quite properly has not been an advocate of breaking up Telstra. The coalition quite deliberately and properly and without criticism from Labor, retained Telstra as a fully integrated telecommunications company.

I remain completely opposed to the structural or functional separation of Telstra by force of law. It is an outrage that this is being perpetrated. The structure of the company is a matter for its millions of shareholders and our government was absolutely right to sell Telstra as a fully integrated telco. We followed sound international practice. We maximised the return to taxpayers to help pay off the $96 billion debt that Labor left us, and we ensured that Australia has a strong, financially viable, major public company able to invest billions of dollars—which it does—in our telecommunications network.

Extensive studies here and overseas make very clear the virtues for consumers and national economies of fully integrated incumbent telecommunications companies and the very considerable risks there are in trying to break them up. Study after study shows the substantial benefits for investment, efficiency and innovation from the existence of fully integrated telcos. That is why most incumbent telcos around the world actually remain fully integrated. As the Productivity Commission noted in a 2005 report on telecommunications, only a few countries have ever proceeded with separation initiatives and, at least in the United States, those structural changes have since been reversed. The Productivity Commission noted that the OECD has made an exception to the general position on vertical separation in relation to network infrastructure—in other words, telecommunications—and the OECD, which was, I must say, quite critical of this NBN proposal concluded that full vertical separation was unlikely to deliver a net benefit to telecommunications markets. That is the position of the OECD. The Productivity Commission in that paper that I am referring to did not support either the vertical or horizontal separation of Telstra, and that is one of the reasons why the coalition and the Labor Party have not previously supported such separation. The Productivity Commission, in relation to the telecommunications market, said:

… liberalisation has delivered a much more competitive environment. For example, since 1997, the number of carriers has increased from 3 to over 100, with new players significantly eroding Telstra’s market share in the long distance and mobile call markets …

And, of course, that market share has continued to erode since this report.

One of the world’s leading experts in this field, Eli Noam, Professor of Finance and Economics at Columbia University, published a very significant paper on this subject last year in which he recanted his previous support for separating telecommunications companies. As Professor Noam said:

In the past, I strongly supported divestiture.

But after a detailed study of the actual outcome of divestiture in the United States he concluded that it had comprehensively failed to achieve its objectives. The empirical evidence is in, and it does not work. As he stated:

… structural separation may have made sense in theory, but the numbers do not substantiate the benefits in practice.

                   …              …              …

Separation is a tool, not a goal. There are other tools to achieve the same legitimate objectives, and they would be simpler and cheaper.

So separation is certainly not the international norm. It is not supported by our leading analyst, the Productivity Commission. I, for one, certainly believe that Australia derives a net benefit from Telstra’s current structure. I strongly oppose this bill to force the break-up of Telstra and to use $11 billion of taxpayers’ money to buy Telstra’s silence simply to prop up this $43 billion outrage. Frankly, worst of all is that this government is insisting on this parliament passing this radical and extraordinary piece of legislation in the absence of either the business case for this $43 billion extravaganza or a decent cost-benefit analysis of the NBN. This bill simply should not proceed, at least until the business case is made public.