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Monday, 21 March 2011
Page: 1227


Senator XENOPHON (11:58 PM) —We live in a rapidly changing world, and the government’s desire to create a national broadband network is a response to this speed of change. Globally, we are more interconnected than we have ever been. I believe it is essential that Australia prepares itself for the future. That said, the NBN would be an extraordinary investment into a technology that has its supporters and also its critics. Because the investment will require tens of billions of taxpayer dollars, it is not going to be like any other business. Nor should it behave like any other business.

This brings me to an area I have significant problems with. We need to remember NBN Co. will be equally owned by all Australians, and I believe it should treat all customers equally. That is why I do not believe NBN Co. should be allowed to provide some carriers with preferential pricing, terms or conditions. Under the current arrangements telcos which showed the ability to provide a quantifiable efficiency may be entitled to a better price or service from NBN Co. I believe this is fundamentally wrong. Governments should not be providing sweeter deals to one retail business over another. I understand the ACCC will prepare ‘guidelines’ for any exemptions to the non-discriminatory provisions, but I do not believe this is good enough. Individual cases will not be scrutinised and any breaches will only come before the ACCC if they are raised and, by then, it may be too late. After all, how do you prove ‘efficiency’? How do you quantify ‘efficiency’? I think it is very important that we do not make the mistakes that were made with the privatisation of Telstra, where we had a vertically integrated monopoly, in effect. I think it is very important that in the context of this legislation we set the framework very clearly in ensuring that there is not discrimination in pricing.

Under the legislation, exemptions may be provided under a very broad term which currently has no framework for how it would be applied. I am concerned that the companies that will be best suited to demonstrating efficiency will be the larger established telcos. We should not be setting up arrangements which favour the large telcos at the expense of small or newer players. It would entrench the big telcos’ positions and set up barriers for smaller telcos who often are so crucial for providing innovation and new products and services. They are so critical in driving competition in the marketplace.

I understand that in business wholesalers provide goods or services at different rates depending on the retailer, but NBN Co. is not like any other business. It is owned, in effect, by the taxpayer, and governments should not be playing favourites. Is it not inevitable that the big telecommunications providers, such as Telstra and Optus, will be the ones who will benefit most from such an exemption? I note that the CEO of NBN Co., Mr Mike Quigley, has publicly stated that volume discounting will not occur; however, the provision for it still exists within the legislation. I think that is highly problematic. Volume discounting means that the Telstras and Optuses of this world could be able to access the NBN at different rates or terms and conditions based purely on the fact that they hold the majority of the market. This is my concern: the big players will continue to dominate the telecommunications market and the smaller providers will be pushed out. The end result will be bad for consumers. For too long Telstra has dominated the industry and consumers have paid the price.

I note the opposition’s concerns around the potential for the intention of NBN Co. to be wholesale-only to be undermined by some aspects of this legislation—the National Broadband Network Companies Bill 2011 and the Telecommunications Legislation Amendment (National Broadband Network Measures—Access Arrangements) Bill 2011. I can see the opposition’s argument that allowing utilities direct access to NBN Co. means that the role of NBN Co. will go beyond that of a wholesaler. However, my understanding is that the legislation will enable utilities wholesale access to NBN Co. for ‘necessary and desirable’ uses only—for example the road network and rail system monitoring. More details are needed about the process which determines what is ‘necessary and desirable’ and to have sufficient safeguards to ensure that it does not cover such things as the telephones and internet in the head office. Further, any cost savings to utilities by allowing them to access NBN Co. as a wholesaler rather than having to go through a retail service provider would, I suspect, result in lower costs for their customers.

Similarly, I understand the opposition has concerns about provisions which allow corporations who are willing to invest in their infrastructure and obtain a carrier’s licence wholesale access to NBN Co. The issue of scope creep is something I am concerned about and will continue to consider as we go into the committee process.

Finally, on the issue of cherry picking, I note the opposition’s concerns that it may be anticompetitive, but I do also note that this is a significant taxpayer funded investment which must be protected to some extent. I believe that the removal of price discrimination provisions and volume discounting may provide the competition needed at the retail end which will allay any need utilities and corporates have to access NBN Co. directly. After all, if the retail service providers offer competitive deals to the Westpacs, Australia Posts and Origins of this world, they will not see any need to invest and become carriers themselves.

I believe the NBN is a good idea. We need to invest in broadband technology that will allow Australia to stay in line with telecommunications developments internationally, allow businesses to be able to compete internationally and allow households to have access to the internet at speeds we once thought out of this world but which are now mainstream in so many countries. But the legislation that supports this technology needs to be watertight. We need to ensure the system works profitably but also fairly. I cannot accept that preferential pricing or conditions are fair.

There is a lot at stake here, and Australian governments do not have a good track record when it comes to telecommunications. There was AUSSAT, which was later described by former Prime Minster Paul Keating as ‘a billion-dollar piece of space junk’, and there is no doubt that the privatisation of Telstra created a vertically integrated monopoly in our telecommunications market. That is not just my view; it is also the view of the OECD, which found:

… despite an enviable record of deregulation, Australia stands almost alone in allowing an historic monopoly to continue to dominate its telecommunications.

That is one reason why we need to break that up. That is why I supported the structural separation of Telstra. I believe that was the right thing to do because it has so simply constrained our telecommunications industry and allowed the domination of Telstra in telecommunications.

It is worth referring to the explanatory memorandum for this legislation. Page 1 says:

Structural separation may, but does not need to, involve the creation of a new company by Telstra and the transfer of its fixed-line assets to that new company. Alternatively it may involve Telstra progressively migrating its fixed-line traffic to the NBN over an agreed period of time and under set regulatory arrangements, and sell or cease to use its fixed-line assets on an agreed basis. This approach will ultimately lead to a national outcome where there is a wholesale-only network not controlled by any retail company—in other words, full structural separation in time. Such a negotiated outcome would be consistent with the wholesale-only, open access market structure to be delivered through the National Broadband Network.

I note that other senators—and I am sure Senator McEwen will shout me down if I am wrong—made reference to the importance of having open access with the National Broadband Network. My interpretation of ‘open access’ means ensuring that there is not price discrimination. That is quite critical.

The explanatory memorandum is in black and white but it seems that some of the provisions of these bills go against the very grain of the fundamentals of this legislation. The NBN will structurally separate Telstra and nothing that happens through preferential pricing or some other measure should be allowed to benefit the big telcos at the expense of smaller players.

I note that there are provisions in these bills concerning privatisation. This is an important issue. We do not want a repeat of history where a short-term political decision is made that ends up costing us all dearly in the longer term, as I believe we saw with the privatisation of Telstra. In summary, it is possible to have a good idea but to execute it badly. My concern when it comes to preferential pricing and conditions is that we are seeing just that.