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Tuesday, 23 November 2010
Page: 1949


Senator TROETH (5:38 PM) —I too rise to comment on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010. The government has continually characterised the opposition as having no principle and no policies, but nothing could be further from the truth. We have taken a very principled stand on this and, with acknowledgement of the Parliamentary Library, we have verified this. On 14 October 2010, our shadow communications minister, Mr Turnbull, verified that the coalition would back the government’s telecommunications sector reform legislation subject to key amendments being passed. My colleagues Senators Ryan and Bernardi have outlined some of them. These amendments are intended to remove the gun-to-the-head provision relating to spectrum determinations, ensure that the regulatory oversight applies to the NBN Company-Telstra deal and give parliament the power to disallow ministerial directions. They aim also to restore merit review and procedural fairness to the ACCC’s enforcement of the new access pricing regime.

Mr Turnbull stated that the coalition was committed to policies that were aimed at the delivery of fast, affordable broadband to all Australians. That is our aim, but this should be delivered in a manner that is cost effective, promotes competition and imposes no greater cost on taxpayers than is absolutely necessary. This is where the government’s proposal falls down. Mr Turnbull added that these goals would be assisted by a more competitive telecommunications industry and, in that context, the separation of Telstra’s fixed line customer access network from its retail business would be a welcome development. Mr Turnbull went on to say:

The Coalition therefore has no objection to Telstra separating its retail and network businesses, but does not believe such a separation should occur under duress, or via a deal that is in breach of the nation’s competition laws.

Any such restructure should be on terms which are fair to Telstra shareholders.

The shadow communications minister also proposes a regulatory environment where the separated network company would be given regulatory certainty and the knowledge that as a regulated utility it would be able to charge prices aimed at delivering a reasonable amount of return on its assets, noting that this is the regime that is applied to other utilities such as gas, electricity and water.

The bill facilitates at least two significant outcomes. Firstly, the threat of a spectrum determination preventing Telstra from acquiring bands of spectrum for advanced wireless broadband services should it not provide an undertaking that is accepted by the ACCC to structurally separate and divest its HFC cable network and its interest in Foxtel. Secondly, the bill allows the ACCC to accept such an undertaking, which is currently likely to be in contravention of the Trade Practices Act. Were the ACCC to accept such an undertaking and were that undertaking to be performed, Telstra would effectively be compensated by the taxpayer in order to make redundant existing operational network infrastructure, such as copper line network subscribers and HFC cable network for internet subscribers, thus limiting the infrastructure choices available to retailers and ultimately consumers.

This would act to improve the commercial viability of the NBN but simultaneously move the telecommunications sector in the direction of the identified core impediment to competition—namely, the concentrated ownership of the network infrastructure. In the Bills Digest put out by the Parliamentary Library, the OECD warns against such action. It states that the government:

… should not trigger a weakening of competition in wholesale broadband services to protect the viability of the government project. An alternative to this picking-the-winner strategy would be to let the market guide choices between the various Internet service options on the basis of prices that reflect costs, factoring in externalities that ought first to be evaluated. To that end, it would be desirable to maintain competition between technologies and, within each technology, between Internet service providers. This would be consistent with the planned vertical separation of Telstra and with other aspects of the reform that seek to promote competition.

In those remarks the OECD states that maintaining competition between technologies is consistent with the vertical separation of Telstra. The vertical separation of Telstra and subsequent divestiture of its fixed-line copper and HFC cable networks’ subscribers, with a view to nationwide, fixed-line optic fibre telecommunications infrastructure—outside of the approximately seven per cent of premises in Australia already with next generation wireless and satellite technology connections—is not consistent with competition between access technologies. This approach is identified by the OECD as a picking-the-winner strategy.

Apart from relative academic theorising, we need to look at the track form of the government in its three years of thinking about and operating these reform capabilities in order to bring better services to Australians. So far, we have seen the pink batts scandal, where it took $1 billion to dream up and implement a scheme for putting insulation in people’s houses. Such was the failure of that scheme, and at such a level, that it then took $1 billion to dismantle the scheme and make reparations to all the people who had suffered—in some instances, tragically—because of the implementation of that scheme. If you multiply that by 43 times the fiscal amount, if this scheme takes $43 billion to put in place, what happens if it ultimately falls over? The taxpayer is going to be the person who actually bears the brunt of that, and to put the level of debt and reparation that would be needed on the taxpayer is simply not thinkable in this day and age. Not only that, the implementation of the NBN will waste literally billions of dollars in fibre backhaul investment that has already been by companies such as Telstra, Optus, AAPT, Pipe and others over the past decade, and this will be an astonishing destruction of economic value.

The NBN’s plan to limit the number of points of interconnect on its network to as few as 14, all located in the major capital cities, would strand hundreds of the already existing fibre links between Australian towns and cities. So we would bypass competitive infrastructure that has already been built by numerous private companies, and we would exclude those links from carrying fixed-line traffic. Not surprisingly, the owners of these networks have demanded that the NBN offer compensation and, regardless of how that question is resolved, in the meantime, further private investment in communications infrastructure in Australia will be reduced because of uncertainty and perceptions of sovereign risk.

The government should know better than this. In October 2009 it released Better infrastructure decision-making: guidelines for making submissions to Infrastructure Australia’s infrastructure planning process, through Infrastructure Australia’s reform and investment framework, from which I quote:

... all initiatives proposed to Infrastructure Australia—

the body that is set up with the express purpose of assessing major infrastructure projects—

should include a thorough and detailed economic cost-benefit analysis.

                         …                   …                   …

In order to demonstrate that the Benefit Cost Analysis is indeed robust, full transparency of the assumptions, parameters and values which are used in each Benefit Cost Analysis is required.

Where do we see that here? We see a blanket refusal by the minister to give out publicly any details of the business plan, a refusal to undertake a cost-benefit analysis and a refusal to send it to the Productivity Commission, and all of the members and senators in this place, representing the taxpayers of Australia, as well as many other constituents, are simply invited to take this in good faith and not raise any questions. We would not be doing our work properly if we did that.

The Prime Minister, Julia Gillard, would leave us to understand that what she would normally do in these circumstances is subject this to the sort of analysis that we really need. But, yesterday, in the House of Representatives, the shadow minister for communications and broadband, Mr Turnbull, recalled the election leak—if I can call it that—which suggested that Prime Minister Gillard had opposed increasing pensions. She had defended herself at the time by saying that all expensive programs should be scrutinised carefully. This is what she said in her own defence:

I am the person who will say let’s look at it, let’s cost it, let’s think about it, let’s question it, let’s turn it upside down, let’s hold it up to the light, let’s ask a billion questions: does it add up? Is it affordable?

When Mr Turnbull asked the Prime Minister this question and asked her to justify that if such scrutiny were good enough for pension increases why wasn’t it good enough for the $43 billion NBN, the Prime Minister’s response was:

It is good enough for the NBN and it is happening.

Why cannot the parliament, the ultimate legislative body in this country, be allowed to know what is going on? I see that Senator Xenophon has entered the chamber, and I do admire his resolution and resolve in refusing to accept such a ridiculous scheme as to be allowed a briefing but then not to be allowed to talk publicly about any details of it for, at first, seven years, then reduced to three years and then reduced to two weeks. As I remarked after question time today, this sounds like something out of Grimm’s fairy tales—and we are all way too grown up for that.

My colleague Senator Ryan mentioned some of the other public criticism that has been made. He also mentioned the article by Ross Gittins, a respected economic journalist, in yesterday’s Age and yesterday’s Sydney Morning Herald. Mr Gittins asked why we would not send it to the Productivity Commission. He said:

I don’t have an in-principle objection to a network with natural-monopoly characteristics being owned publicly rather than privately, provided governments don’t use their powers to shore up or abuse that monopoly in a way any private owner would and should be prevented doing.

I might add that Mr Gittins began his article by saying:

I am starting to get a really bad feeling about Labor’s plan for a national broadband network. The more it resists subjecting the plan to scrutiny, the more you suspect it has something to hide.

He suggested, for example:

The Productivity Commission could be required to ensure its cost-benefit analysis ranged far more widely than a mere commercial evaluation, taking account of present and potential “social” benefits … and acknowledging those whose value it can’t quantify.

For instance, the presence of an accessible high-speed broadband network would enable many people who at the moment live in the cities of Australia not because they want to but because that is where their business is. With a proper network in the rest of rural and regional Australia, many people would be able to live in localities that suited them and their families far better and to telecommute—that is, run their businesses from home. If Labor were prepared to acknowledge this and put the view to the Productivity Commission that it wanted to look at the social benefits, I am sure that we could come up with many good things that would happen if we had a suitably costed broadband network in this very large country of ours. Geoffrey Blainey’s book many years ago was entitled The Tyranny of Distance, and that is what we all live with, but a high-speed, properly costed broadband network would go a long way to relieving some of that tyranny of distance.

Mr Gittins also says:

… it’s false economy to build something today without allowing for reasonable growth in your use of the item.

But he agrees that the idea of building a gold-plated broadband network up to eight times faster than any present application needs so we are ready for anything that might come along one day is all very well but that we cannot possibly anticipate what the needs are going to be in 10, 20 or more years. He says:

… it’s false economy to build something today without allowing for reasonable growth … But there comes a point where allowing for more growth than you’re likely to see in ages becomes a waste of money.

Private businesses that do this—such as home owners who overcapitalise their properties—do their dough. Government businesses survive either by overcharging their customers or falling back on the taxpayer.

The final worry is the way that—notwithstanding the break-up of Telstra—the plan involves deliberately reducing competition from other networks in the telecommunications market. Why’s that a good idea?

We on this side of politics believe that competition is a good thing because it ultimately brings down the price of goods and makes them more affordable for consumers to pay for. If we are not going to see that in this present scheme, I would like to know why we have to adopt it.

The government’s approach is without precedent anywhere in the world. Nowhere else in the world is the government proposing to force a carrier to dismantle its copper just to maximise revenues and eliminate competition for a government owned monopoly regardless of its economic value. Nowhere else in the world is broadband over copper, such as ADSL or VDSL, being effectively banned regardless of whether it provides service of a quality and at a price that consumers want. Nowhere else in the world is competition for fibre from HFC being banished—again, simply to prop up a government owned monopoly. On the contrary, broadband and voice delivered over pay TV cables is the main form of facilities-based competition for copper and fibre in most of the world. Why on earth would the parliament believe Australia has this right and every other country in the world has it wrong? I believe, having read it somewhere, that the sorts of speeds we are looking at in this scheme are way above anything that, for instance, is achieved or indeed necessary in the United States, one of the world’s most advanced countries.

We have had several eminent people commenting on this, and even the Treasury secretary, Ken Henry, stated in September 2009 on the whole scheme:

Government spending that does not pass an appropriately defined cost-benefit test necessarily detracts from Australia’s wellbeing. That is, when taxpayer funds are not put to their best use, Australia’s wellbeing is not as high as it otherwise could be.

We have many public agencies such as the Productivity Commission prepared to look at the NBN, but the project is being rushed through, the way the government rushed through its home insulation scheme, the Green Loans scheme and the school halls scheme, all of which left schools, communities, individuals and small entrepreneurs out of pocket and very sorry that they had ever heard of the schemes in the first place. So, as the shadow minister has recommended, we need to have our amendments in place and we need to have a public scrutiny process for this very important piece of legislation.