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Tuesday, 23 November 2010
Page: 1915


Senator BIRMINGHAM (3:35 PM) —I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The purpose of the National Broadband Network Financial Transparency Bill 2010 is to require the publication of a 10-year business case for the NBN and equally importantly, to refer the NBN project to the Productivity Commission for a thorough cost-benefit analysis.

This bill is not intended to delay or hold back the NBN’s rollout of test sites and passage of it would in fact have no impact on this timing. It is simply an attempt to establish the facts to provide parliament with an appropriate level of financial understanding of this, the largest expenditure of taxpayers’ funds on an infrastructure asset in our nation’s history and to separately permit the Productivity Commission, an independent and expert source of advice on economic and regulatory issues to make an assessment of this investment.

The first part of the bill requires NBN Co., the Government-owned company that is rolling out the broadband network, to produce and publish a detailed 10-year business plan, including key financial and operational indicators. In addition to the normal financial information that one would expect to find in a business plan, it also requires the NBN Co. to make explicit its assumptions about how many premises it will pass each year, how many households and businesses it anticipates will purchase communication services carried over its networks and what average retail and wholesale prices it anticipates that they will pay. All of this is critical information for the parliament to understand given our role as custodians of taxpayers’ money.

That such a massive project, without precedent in either this country or abroad, has been allowed to commence without parliament being provided with this sort of financial data is quite extra-ordinary. In the United States the federal Government is spending $7 billion to support broadband rollout in that country. This project, the NBN, involves federal Government money in Australia 100 times more per capita than is being spent in the United States. This is a truly unprecedented expenditure anywhere in the world, as well as in our history.

This bill seeks the publication of both forecasts and projections for the NBN Co. This wording recognises that there will necessarily be less certainty in the various financial and operational metrics sought where they are offered for periods further into the future. Nevertheless, this is a vast project that the Government has stated will continue to be constructed for most of this decade. So it is entirely reasonable for the parliament to be provided with a 10-year business case rather than a business case over any shorter period.

I note that the Government has stated that it intends to release much of the financial information discussed in this bill in the very near future.  However, it will give parliament much greater comfort if that transparency is a statutory requirement rather than simply a promise from the executive.

The second part of the bill requires the Productivity Commission to conduct a comprehensive cost-benefit analysis of the NBN and report back to parliament by 31 May 2011. The Productivity Commission inquiry will include but not be limited to an analysis of the current availability of broadband across Australia, including the identification of suburbs and regions where services are of a lower standard or higher price than in the capital cities; consideration of the most cost-effective and speedy options by which fast broadband services can be made available to all Australians, particularly those in regional and remote areas and underserved areas in the cities, such as black spots where legacy network design choices or exchange capacity constraints mean that ADSL2 is not available to some households; consideration of the economic, productivity and social benefits likely to flow from enhanced broadband around Australia and the applications likely to be used over such networks; and a full and transparent economic and financial assessment of the proposed NBN by the commission.

It is difficult to think of an organisation better than the Productivity Commission to look at the NBN and these issues and to thoroughly examine both its direct and indirect implications for Australia’s economy, economic productivity and society. The commission’s chairman, Gary Banks, is a distinguished public servant who has been at the Productivity Commission or its predecessor, the Industry Commission, for the past 20 years. He has carved out its role as a source of rigorous and fearless advice on microeconomic issues. He has presided over several important inquiries into our national competition laws. The deputy chair, Mike Woods, presided over Productivity Commission into the market for international telecommunications services in 1999 and into the regulation of competition in telecommunications in 2001. A third commissioner, Patricia Scott, was secretary of the department of communications from 2007 to August 2009, serving both coalition and Labor Governments.

The commissioners are supported by a first-rate staff of economists with extensive experience in assessing not only the financial costs and benefits of policies and regulations but also their broader economic and social implications. We are not talking about an organisation that is new to this industry or these issues. The Productivity Commission’s recent work in areas such as gambling and the provision of assistance to people with disabilities is evidence of its ability to look carefully at not just the dollars and cents but also the socioeconomic implications of various policy options.

The Government has already acknowledged that the Productivity Commission is the most able body to assess the benefits of ultimately privatising the National Broadband Network.  Indeed, the Government has already conceded there should be an inquiry.  This bill simply requires that inquiry to be undertaken by the Productivity Commission.

The terms of reference differ in some respects to those contained in a similar Bill introduced in the other place, reflecting some of the views provided by Independent Members.

The breadth of the terms of reference should satisfy those who, with some legitimacy, point out that the economic costs and benefits of the NBN will extend beyond the revenues, expenses and rate of return for the NBN Co. So, for example, the Productivity Commission will be able to explore the positive externalities such as productivity gains from faster broadband and negative externalities such as the economic losses and vastly diminished competitive environment in fixed line telecommunications that will result if the Government is successful in preventing Telstra and Optus, for example, from offering broadband over their HFC pay television cables in the future. But it is also important for us to understand the core financial viability of the NBN Co., given that the Government has grounded its support for this project in the claim that while it will not generate a commercial return it will nonetheless produce a return in excess of the bond rate for taxpayers.

It is important to reflect on that for a moment. When the NBN Co. was announced by the former Prime Minister, Mr Rudd, he said that it would be a thoroughly commercial project, that the private sector would invest up to half of the total amount—in other words, there would be shareholders in it—and that mums and dads would be wise to invest. Indeed, he had urged them to do so. The Government has retreated from that position since then and is now saying it will produce a return slightly better than the Commonwealth’s cost to funds. That is not an acceptable commercial return and it is not an acceptable basis for Governments to be engaged in business ventures. But it is the basis upon which the Government has made its claim that, because the expenditure in the construction of the NBN is being matched by an asset that is being created of equal value, it should not be included in the budget’s expenditures and therefore add to the Government’s already very substantial deficit.

Seeking a cost-benefit analysis is simply holding the Government to account. It is holding the Government to account to its own standards. This is a Government that established Infrastructure Australia for the express purpose of identifying, prioritising and analysing through a rigorous cost-benefit analysis major infrastructure projects of national importance, yet the Government has refused to allow Infrastructure Australia to look at this project. This is a Government whose leading economic adviser, Dr Ken Henry, said:

“Any major infrastructure project must be subject to a rigorous cost benefit analysis and if it does not pass a rigorous cost benefit analysis then it necessarily detracts from Australia’s wellbeing.”

So, in seeking that the Government refer this matter to the Productivity Commission, there is no delay to the construction of the test sites for the NBN and there is no frustration of any policy objective of providing broadband across Australia. But there is certainty that we will get the very best financial and economic advice, and the social and economic cost benefits from the most expert body available to advise this parliament and the people of Australia whose taxes are about to be deployed in building this massive piece of infrastructure.


Senator BIRMINGHAM —I seek leave to continue my remarks later.

Leave granted; debate adjourned.