Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
ENVIRONMENT AND COMMUNICATIONS LEGISLATION COMMITTEE
09/03/2011
National Broadband Network Companies Bill 2010; Telecommunications Legislation Amendment (National Broadband Network Measures—Access Arrangements) Bill 2011

CHAIR —Welcome, thanks for joining us today. The committee has received your submission—submission 11. Do you wish to make any amendments or alterations to your submission?

Ms Corbin —No, Senator.

CHAIR —Do you wish to make a brief opening statement before we go to questions?

Ms Corbin —I do. First of all, I want to thank the committee for the opportunity to appear and share ACCAN’s perspective on the bills. Obviously, for the purposes of the record and not for your purposes directly, I would like to explain what ACCAN is. We are a peak body, the Australian Communications Consumer Action Network, and we represent residential and small business consumers in the area of communications access. Our mission is affordable, available and accessible communications for all Australians. It is also worth mentioning that as a peak body we have a large membership of over 100 organisations and just over 40 individuals who include academics and interested Australian consumers and citizens.

ACCAN’s approach to these bills is along the lines of the four principles of our broadband future for policy work that we have put out prior to this inquiry. The principles cover four very important areas for Australian consumers. The first is high-quality, affordable and accessible broadband. The second—and I know I have discussed this particular principle with this committee before—is that consumers should not be worse off because of any policy changes. The third is that there should be consumer protection rules built into policy relating to broadband. The final one is that services should be provided in the context of a competitive and fair market.

ACCAN believes that these bills are very important and represent a significant achievement. We are finally looking at the creation of a communications marketplace that will serve the interests of consumers and enable retail-services competition to flourish right across both metropolitan and regional Australia. The National Broadband Network will deliver structural separation in this industry for the first time. We think the strong regulatory framework for NBN Co. provided by the bills demonstrates that we have learnt the lessons from the Telstra experience and are moving to arrangements where consumers can really exercise choice and where customer service can become the focal point of retail competition.

We welcome the wholesale only supply obligations and the line of business restrictions on NBN Co., which we believe will help to ensure a healthy retail competition. We also welcome safeguards such as allowing the minister to require NBN Co. to supply a specified telecommunications service and allowing the ACCC to declare a service and thereby have NBN Co. supply a service that will be in the long-term interests of end users. We join with ATUG in supporting minimum technical standards and open access obligations for other superfast networks to ensure that all Australians experience at a minimum NBN-grade choice between multiple services and multiple service providers.

Given the views of some in the industry, in our submission we thought it was important to show that we have thought about and considered carefully the possible downsides to a level playing field in the arrangements but that ultimately we believe these are theoretical issues that are unlikely to come into play for consumers, whereas the benefit of the NBN overall now to all Australians is real. We are heartened by the fact that recently NBN Co. have approached us and we are in the process of setting up a direct dialogue with them and that we will be having further consultation along the way. We believe that this consultation will help us address any concerns, particularly whether any consumer might be worse off with the introduction of the National Broadband Network.

Senator FISHER —Thank you for appearing today. You talk in your submission about the dangers of privatisation and you say that there should be full flexibility for the government. Is your suggestion of flexibility for the minister so that he or she can then ensure that there is no takeover of NBN for private sector interests, or is your concern something different or deeper than that?

Ms Corbin —There are a number of considerations with privatisation of NBN Co. in the future. Obviously a decision about privatisation is going to be up to the government and the parliament of the day, and that is made clear by the way the legislation is structured. But our submission draws attention to the fact that the bills are laying out a road map towards privatisation. We know from our Telstra experience that the public cares a great deal about public utilities being privatised, whether it is good or not, and in every circumstance and at every time it is different, mostly because of the fact that the Australian public really wants to make sure that there is full transparency and accountability in the debates about privatisation. This is exactly why, despite the fact that there are safeguards in the bill, ultimately it is absolutely crucial that the Productivity Commission does its inquiry. Another vital element is the joint parliamentary committee.

Senator FISHER —Indeed.

Ms Corbin —Obviously there are all sorts of commercial imperatives and commercial realities that will be judged at the time, seven or eight years down the track; they are impossible to comment on now. But the test for us will be about whether a full privatisation has an impact on affordable broadband or whether it will have implications for equity and social inclusion. Those are the things that we will come back to judge. We think it is very important that that inquiry go ahead and explore those elements of privatisation. That is not to say that your concern is not also warranted but that our focus is more on the social implications and implications for consumers generally.

Senator FISHER —I am really just trying to get you to expand more on your concern; I did not mean to put it as mine. In advocating that the government of the day get more flexibility in attempted privatisation, are you confident that that is sufficient to take care of those social equity concerns, for example?

Ms Corbin —I think it will very much depend on the political circumstances at the time. A lot of elements will come into the debate and discussion. Ultimately, what we are doing now is putting a stake in the sand and saying that we think this is still a matter of great public concern. We have our experience of the Telstra privatisation, which, really, in effect is going to be small compared to this experience—the privatisation of NBN Co. is going to be a much larger exercise than the privatisation of Telstra over a much shorter period of time, as predicted by this legislation. We need to learn from that experience and make sure that there are fulsome debates and proper discussion with all sorts of opportunities to bring forward evidence to have that debate and discussion.

Senator FISHER —My final area of questioning is around your support for the exemptions—for example, for utilities. You say in your submission:

By helping to keep the prices paid by utilities for network services down, these provisions may encourage new and innovative uses of the NBN …

On what are you basing that contention? That may well not be the case, particularly if the exemptions prevent the market from tendering.

Ms Corbin —I would like to hand over to my colleague Mr Gadir to answer that question.

Mr Gadir —Yes, Senator, you are quite right: it may not happen. Where we can, we seek industry experts to advise us on things that are beyond our direct expertise. What we have heard is that, if the prices are kept down, if the utilities are allowed to and if they are given these exemptions which are already in the Telecommunications Act, more innovative uses may eventuate.

Senator FISHER —So your support for the exemptions is based on that hearsay or anecdotal evidence that there may be the prospect for utilities to keep their prices down, is it?

Mr Gadir —No. There is also the other advantage of simply having services that are provided in the public interest, which is what utilities generally do, provided at a better price for consumers.

Senator FISHER —But surely that is dependent on the legislation? Are you able to say that allowing the utilities the exemption will result in that scenario?

Mr Gadir —Sure. It is a reasonable piece of crystal ball gazing that if they do not have to pay the middleman, the telecommunications provider, then maybe it will be cheaper. It is a possibility.

Senator FISHER —You are speculating at the moment, aren’t you? I am sure that the retail service providers would be saying, ‘We want the opportunity to provide those services better and cheaper.’

Mr Gadir —Sure.

Senator FISHER —All right. Thank you.

Senator LUDLAM —Given that it is crystal ball gazing, in that context how is a retailer able to provide services at a lower price than the wholesale price that they are getting from NBN Co.? Isn’t that where this is going?

Mr Gadir —I think we are getting into areas that are beyond my expertise, but we take advice from people in the industry who say that it is going to be a benefit overall.

Senator LUDLAM —I do not know how much of the previous witnesses’ evidence you heard. Folk in the industry have said, ‘We want that to be contestable. We want to be in there. We do not want to be eliminated from providing the services.’ It is in the long-term benefit of competitive market for them to be able to do that, even though I think people have considered that it may be cheaper in the short term to simply bypass the retailer altogether, the middleman, as you put it. If a utility, why not a university offering education services in the public interest?

Mr Gadir —It is not an area that we have given much consideration to, so I would not be able to answer that. I can certainly research it and come back to you with something.

Senator LUDLAM —You have brought an argument that is different from what we have heard so far. So far we have heard mainly from folk with a commercial interest in being a retailer and providing a service and sticking themselves into that market. They would like it to be contestable. In fact, they would like NBN Co. to be excluded. They think that NBN Co. should not be able to play in that space at all. I understand why they take that view. You seem to be arguing here that there could well be a public interest argument that says, in the interests of somebody not sticking themselves in the middle and putting on a 15 per cent mark-up or whatever, there might be an opening for allowing NBN Co. to supply directly.

Mr Gadir —Sure, yes.

Senator LUDLAM —So I am reading that correctly.

Mr Gadir —Yes.

Senator LUDLAM —You raised issues around privatisation. You have put up a couple of concerns over the privatisation provisions, which I feel a bit precious about since I helped draft them. Do you think we would be better off just not selling the network in the first place and keeping this thing running in the public interest rather than in the interest of shareholders?

Ms Corbin —We have put out a position statement that says we are concerned about the privatisation of NBN Co. We are concerned that, even forward-gazing now and setting it out so that we know that it is going to be privatised, that will affect the bill, pricing and all sorts of things. We recognise the work that you and others have done to put in some specific public interest tests. We welcome that. We just think it is important, from our membership’s perspective, to highlight that there are still significant groups in Australia who have some great concern about the privatisation of public utilities. That is not debatable. We know that that is the case. We think it is important that that be stated. We are happy to move on and discuss the public interest tests that have now been put in place and the transparency and accountability measures that are there to assist any future debates. We are not suggesting that there be any additional consumer safeguards; we are simply saying that we think it is absolutely vital that we do have that debate at that time and that we have as much independent information from a productivity inquiry as possible.

Senator LUDLAM —You have not directly addressed the cherry-picker provisions in your submission, but I wonder if we can take you back to the principle on which that is based, which is as with the electricity and water service provision when the government rolls these networks out. We cross-subsidise services in regional areas by charging a little bit more in the cities. Is ACCAN comfortable with that principle applying with regard to the NBN?

Mr Gadir —Yes, we are. Just to correct something you mentioned, we do have a segment at the end of the submission which deals with the level-playing-field arrangements broadly, but we have not used the term ‘cherry picking’.

Senator LUDLAM —Okay. I just scanned that.

Mr Gadir —So, yes. We would look favourably on that principle—a metro to regional subsidy.

Ms Corbin —The reason is that we actually believe that that increases the value of the network to all Australians, not just people living in rural and regional areas. If rural and regional people have equal access, then it is likely that people in metropolitan areas also benefit, so there is a very good argument for making sure that those cross-subsidies exist.

Senator LUDLAM —That is a nice line of argument that I do not think has been put very strongly so far. But that gives rise to the question of: why shouldn’t wholesale competitors to the NBN be allowed to cherry pick and carve out niches in the inner cities where it is cheaper to provide the services? We have heard a few points of view around that today.

Mr Gadir —We welcome any private sector investment, but experience does suggest that in Australia so-called facilities based competition is not a realistic prospect, at least not for the consumer market. We do not see the evidence that supports that there are lots of players out there willing to roll out superfast access infrastructure for consumers. I think that is a theoretical and far-off prospect and the benefits on the other side of having a sustainable NBN are really in the here and now.

Senator LUDLAM —Telstra were here this morning saying, ‘Why don’t we just abolish this cherry-picker business so that we can carry on working in the inner cities?’ I suppose it is a fairly active area of—

Ms Corbin —I think also, given that we know that the broadband network is not going to be available just for voice services or internet but also for e-health, et cetera—many other services that we probably cannot even predict now—it is pretty important that we do not create a two-tiered system, particularly when it comes to standards and making sure we have got baseline for price, speed and quality.

Senator IAN MACDONALD —Your submission and your opening statement indicate that one of your pillars of interest was that the consumers will not be worse off with the introduction of the NBN. Do you include price in that? Cost?

Ms Corbin —Yes. Obviously we have got further ground to go through yet before we understand how the wholesale price actually gets applied across the whole of Australia to multiple different types of services. We are obviously very concerned about what the retail price will ultimately be, and we also really want to put on the record that we expect that there must be some low-income measures. There are at the moment, in relation to voice services. We are looking forward to the debate and discussion and being involved in that debate and discussion as to the future of those low-income measures and how they will apply in a broadband world.

Senator IAN MACDONALD —I notice you say you have got direct dialogue with NBN, which is good. Bearing in mind that for most Australians cost will be the determiner of whether they hook up they do not, and bearing in mind that there is, we say, $55 billion investment which the government has said it is going to get a return on, and you are going to pay back the capital at some time, it just defies mathematical logic to think that you could get a return, pay back the capital and deliver the service at a price that most consumers are going to be able to afford.

Ms Corbin —I think at this stage we still do not have enough information—

Senator IAN MACDONALD —Your direct dialogue does not go to that extent?

Ms Corbin —Not to that point yet, but I do expect that it will—that we will get to the point of having discussions about pricing and that we will also have discussions about what areas of the market need to have some extra measures and whether they be specifically for low-income consumers or other areas. We expect to have that discussion also with the government, and with Telstra and USO Co. So we expect that these discussions are going to be quite multilateral.

Senator IAN MACDONALD —You talk about low-income Australians; I always talk about remote-area Australians, who must be subsidised by a government. It has always been the case, and you cannot do it otherwise. Have you had a look at the Tasmanian pricing, which for over a year was a bit of a secret? I think the Tasmanian prices have come out recently, and my preliminary look at them shows that, once you add in the charge for the NBN—which until 1 July is being given away free—it is not going to be anywhere near cost effective or cost competitive, compared to what it used to be.

Ms Corbin —This is probably a question that my colleague and I would both like to comment on. I think two important factors come in initially. One is that we are heartened by the fact that there will be one, uniform wholesale price, so we have a good starting point even for rural and remote consumers, which we have not had to this point. The second is that we have welcome statements by the government that people paying for a telephone service, a plain old telephone service, will not pay more. So they are fairly important base points to start from. But, obviously, we are watching what is happening in Tasmania quite carefully.

Senator IAN MACDONALD —Does it make sense to you that they will not pay more, yet we have $55 billion to pay off?

Ms Corbin —I think there are other things that we do not fully know about—that is, the commercial realities that are at play here. We have been calling for a lot more information about pricing for quite some time, and as soon as that comes out into the public domain we will be very open and ready to participate in those discussions. I do not know if Jonathan wants to pick up the point about the Tasmanian experience.

Senator IAN MACDONALD —We are running out of time. Good on you. Let us hope your direct dialogue with NBN can nail those things down, because that has always been my concern—that you cannot spend $55 billion—

Ms Corbin —Yes.

Senator IAN MACDONALD —and provide a cheap service if you are going to get a commercial return, which is the whole principle underlying this sorry fiasco. I mean that in a political sense, not in a technical sense!

Ms Corbin —Yes. And, looking towards the future, we realise that there will be people who will still want just a phone service and may not use any other services for some time, and we absolutely cannot have a situation where we are going backwards, not forwards.

Senator IAN MACDONALD —Okay. Thank you very much.

CHAIR —Senator Wortley.

Senator WORTLEY —I was going to ask some questions regarding the privatisation provisions; however, I think they were mostly covered by Senator Ludlam. Can I just clarify, though, that you would acknowledge that there are stronger checks and balances in place now than there were in the exposure draft of the bill?

Mr Gadir —I think, with the way those provisions are now, we can see it is a reasonable compromise. Obviously, there are commercial realities that should not be given out willy-nilly. I think that is what we would say.

Senator WORTLEY —Ms Corbin, in your opening statement, you said that the NBN ‘will deliver structural separation’. Can you explain what you meant by that—the benefits of that?

Mr Gadir —Sorry, could you please repeat the question?

Senator WORTLEY —In the opening statement, Ms Corbin said that the NBN will deliver structural separation, and that is something that a lot of people actually lose sight of.

Ms Corbin —Sure.

Senator WORTLEY —So can you explain what you mean?

Ms Corbin —Maybe I will start, and then perhaps Jonathan might want to pick up. In the past, consumers have argued quite strongly for the structural separation of Telstra. The reason for that was the belief that there was a major conflict of interest when you had a retail service provider also owning the network and providing the services. This resulted in many, many years of arguments in courts, to the detriment of consumers as far as price goes in the long term. That is a very simplistic analysis. There are also other areas of consumer protection that have been affected by the fact that we have not had structural separation. So we welcome the fact that not only is this an open-access network but also it is a wholesale network. We welcome the changes made to the original legislation, which actually removed some possibility of there being direct services to some end users; we agreed that that muddied the waters somewhat. So we think that this approach is much better. Jonathan, did you want to add anything?

Mr Gadir —I think the whole problem that has been widely discussed—a vertically integrated incumbent exercising its market power—will continue to be a problem during the rollout of the NBN for the next eight or nine years. I think it is going to provide us with a lot of work because it is still the case that Telstra does not treat people who are retail customers of other competitors in the same way as it treats its own customers.

CHAIR —In relation to the issue Senator Macdonald has raised about the viability of the network, have you read the NBN business plan? Are you aware of it?

Ms Corbin —I have not read it cover-to-cover but my colleague has—in fact, I think he has read it more than once.

Mr Gadir —I cannot claim that it is cover-to-cover.

Ms Corbin —He is our broadband guy, that is why.

CHAIR —After reading the business plan, is there any reason that the NBN would not be viable and provide a return to the taxpayer?

Mr Gadir —That is beyond my expertise. What I have been looking for are statements about how those most vulnerable in our community are going to be looked after. I was heartened to hear Mr Quigley before this committee saying that he is talking to Telstra about looking after people who only have a phone and only want a phone, and making sure they are not worse-off. Looking at the wholesale prices that NBN Co. has published in their corporate plan, we are pretty positive that that can be achieved.

CHAIR —I am not sure if this has been asked before, but are you comfortable with the checks and balances in the legislation on the NBN moving to a retail platform?

Mr Gadir —I think the protections and wholesale-only obligations are quite strong.

CHAIR —Did you hear any of the evidence this morning from Optus and Telstra?

Mr Gadir —I did not, but I have heard Optus speak on this issue.

CHAIR —Have you read their submissions?

Mr Gadir —Yes.

CHAIR —Do you think there is some rent-seeking going on between Optus and Telstra over their carve-out proposals?

Mr Gadir —I could not comment on what they are doing. Obviously they have businesses to run and they have their priorities.

CHAIR —Thanks very much.

Proceedings suspended from 11.43 am to 11.49 am