Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Joint Committee on the National Broadband Network
16/05/2011

APPLEBY, Mr Steven John, Member, Greenfield Fibre Operators of Australia

SEAMAN, Mr Benjamin Edward, Chief Technology Officer, Service Elements

SPARKSMAN, Mr Michael John, Chairman, Greenfield Fibre Operators of Australia

THOMPSON, Mr Peter, Member, Greenfield Fibre Operators of Australia

YELLAND, Mr Donald Malcolm Ross, Market Development, Comverge Networks

[15:06]

CHAIR: Welcome. Although the committee does not require you to give evidence under oath, I advise you that these hearings are formal proceedings of the parliament and warrant the same respect as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. Before we proceed to questions would you like to make an opening statement to the committee?

Mr Sparksman : Greenfield Fibre Operators of Australia believe that the current approach of the government to deliver the NBN is misguided and will unfortunately result in higher prices in both construction costs and operational costs. As far as that is concerned, those costs will be passed on to end users—the mums and dads of Australia—and that has arisen because of basically five factors. The first of which is that it appears it is the intent of this government and NBN Co. that NBN Co. needs to be a monopoly provider of fibre to the home networks in greenfield developments. I pause there to mention networks because, in fact, NBN Co. is presently planning to build 120 separate networks.

The second point is that NBN Co. is promoting itself as the provider of first choice and not as the provider of last choice, as described by the minister in the explanatory memorandum to the bill. The Australian government is also ignoring its own competitive neutrality policy that the government has for government owned enterprises like NBN Co. That policy dictates that no competitive advantage should be given to the government owned business over private sector competitors by virtue of its public sector ownership or by using fiscal or regulatory powers. The fibre deployment bill should not aid to prevent or inhibit private sector competition; impose unknown costs or time burdens on the development industry; or impose NBN Co. network design standards or specifications on the telco industry itself, such as we represent today. The government should also fund the deployment of fibre networks that meet industry standards and specifications for performance and, if they are operated by carriers, on an open-access, wholesale-only basis. It should not just be funding the NBN Co. but providing the fibre, the pits and pipes, preferably to be vested at the end of the build stage in the USO Co., in local authorities or in some other public institution, and preferably not sold off at some point in the not-too-distant future through NBN Co. I would happily take any questions you have at this point, or I am happy to continue.

CHAIR: Sure. I might lead off.

Mr Sparksman : I can tell you more about us.

CHAIR: No, you are right. I am sure you will over the course of this discussion. In relation to the actual fibre deployment bill itself, what is your advice to this committee on particular issues of concern?

Mr Sparksman : The bill fails to address a number of issues which I have just mentioned. It also compounds that felony by allowing the minister to make determinations in relation to conditions on the deployment of fibre installations or fibre-ready requirements: in other words, the deployment of the passive network—the pits and pipes—and the active network—namely, the fibre and the equipment. By setting conditions that will be only NBN Co. conditions or NBN Co. standards and specifications rather than the customary industry codes or industry specifications and standards, the minister would effectively eliminate certainly our competitive edge and our market. The minister could also do so by doing what he has been doing for the last 12 months, and that is to say nothing about the standards and specifications, because if he does nothing then the industry as it is today—that is, the property industry as it is today and our industry—is simply unaware of what the standards and specifications are for the deployment of FTTP networks in the Australian greenfield market.

In addition, as I have said, that is a specific concern about the legislation. We actually do applaud much of the legislation. We see no harm in compelling the deployment of fibre—the preference of fibre over copper networks. We see no harm in much of the legislation, and indeed we applaud most of it. But the most significant failing, of course, is the failure to address the fundamental difficulty with greenfields and indeed brownfields in Australia for the last 20 years. Fibre deployment requires backhaul. The Australian government started in 2009 with the black spot backhaul program, with funding of $250 million, by way of a contract awarded to Nextgen Networks to build 6,000 kilometres of network line around Australia to various remote and regional parts. That was a step in the right direction. It was to be one of many, but there have not been many. For some reason of which we are unaware, there is no further funding available, but it appears that there is plenty of funding available for NBN Co. to compete at the other end, where there was never a problem. There has been plenty of competition in the greenfield marketplace for over a decade. All of my companions here, and some who are unable to make it because they are in other states and because of the short notice, have been competing with one another, with Telstra Velocity and with our friends from Opticom, who are represented in the gallery behind us, for over a decade. It is indeed, I understand, a question which I put to the government: why is it that the fundamental problem of backhaul is not being addressed when there is plenty of money to go around to build what has never been a problem?

Senator FISHER: For clarification, I wonder if Mr Sparksman has a copy of his opening statement that he might like to table.

CHAIR: It will be in Hansard.

Mr Sparksman : For convenience, I do have a copy. I am happy to table that now.

Senator FISHER: I would welcome a copy. Thank you.

CHAIR: I am pretty sure you were all in the room when the ACCC discussed this issue at the end of their evidence. Without verballing them, they seemed to be indicating that they either were unaware of competition issues in relation to this or really had not considered them and were going to come back to the committee with some more advice. Would you like to comment on any contact you have had with and any responses you have had from the ACCC—anything at all from what is supposedly the government arm—to deal with the issues you have just raised.

Mr Sparksman : First of all, I will just clarify that the document which I have tabled is more than simply my opening address. It contains submissions more broadly about subject matters concerning the bill and, indeed, the NBN more broadly, and specifically about the effects of the NBN policy in greenfields and the NBN Co.'s conduct in the marketplace. So I direct your attention to that and now I will address your question.

As to the ACCC, I do not believe that a formal approach has been made, although I know that for my own company's part we have alluded to the fact that we are looking at whether or not we can and should make a complaint to the ACCC in respect of the conduct of the NBN Co. Indeed, we may yet do so. I cannot speak for the others, but we are certainly looking at that.

More particularly, we have made a complaint to the Australian Government Competitive Neutrality Complaints Office about the conduct of the NBN Co., a government owned enterprise conducting a significant business—which were the two tenements of the threshold issues—and the competitive advantage afforded it in the marketplace, specifically in the greenfield marketplace. The details of the competitive neutrality complaint have been made available in summary to members of the Senate when they were making inquiries about the earlier legislation, the access measures bill. They are available and I am quite happy to provide this joint committee with a copy of our complaint.

A further complaint has been made by Comverge Networks, and I understand that Service Elements and Pivit will be also making complaints of a similar nature in respect of the various aspects of NBN Co.'s dealings in Greenfields. We say that they are indeed breaches of the competitive neutrality policy, which has been the policy of government since 1994.

CHAIR: From an administrative point of view, for the exercise of the committee's work on this bill, if you want those complaints considered as part of this process they would have to be in pretty quickly. On another matter, are you happy for these documents to be released publicly?

Mr Sparksman : We are.

CHAIR: Is it the wish of the committee that the submission from Mr Sparksman dated today be accepted as evidence and authorised for publication? There being no objection it is so resolved.

Senator CAMERON: I am looking to see what businesses your organisation comprises. I do not need a detailed list now, but do you have a list of members?

Mr Sparksman : Yes I do, it is quite succinct, so it is easy to tell you about now. We are an alliance of leading fibre to the home operators and carriers in the greenfields across Australia. Our members are OPENetworks, Service Elements, TransACT, Comverge, Broadcast Engineering Services Australia and Pivit—that is, six of the 10 providers that were asked by NBN Co. to express interest in being appointed to their panel of experts and experienced operators and builders of networks in December 2010 when NBN Co. advised that it did not and would not have capacity to build in the greenfields for up to 18 months.

Senator CAMERON: If I want you to answer that, I will ask you a question. I have limited time, so I would appreciate you just answering my questions and trying to keep it as succinct as possible. You say the government is committing a felony—what is your definition of a felony?

Mr Sparksman : I think a felony is an indictable offence.

Senator CAMERON: You are wrong. I just think you should be accurate in your submissions here. I hope you are not going to be over the top in all your submissions because a felony is a serious issue.

Mr Sparksman : We are taking this matter very seriously.

Senator CAMERON: I am not saying that you are not taking it seriously but you should be accurate in what you say here.

Mr Sparksman : Thank you, Senator, I will endeavour to be so.

Senator CAMERON: That is good. How many employees does your organisation have?

Mr Sparksman : I do not have the exact figures of all of the GFOA memberships. There are, I would say, quite a large number, there are 400,000 homes connected, 250,000 of them approximately in Canberra, in the ACT region. They would have hundreds of employees. There would be hundreds across the entire group. In addition to that there are contractors who work for each of our organisations permanently retained. My own organisation retains BSA which has 4,000 employees to do fibre rollouts. We each have various numbers. It depends on the business model.

Senator CAMERON: Can you take it on notice and provide the committee with details of your various employees. If you could give us details of the various classifications of employees that you employ and their qualifications, that would be handy as well. I am wondering where you have been for the last 10 to 12 years in terms of providing this broadband network that you think you can provide now. The issue I think—

Mr Sparksman : Is that a question, I am sorry?

Senator CAMERON: Yes, take that on notice as well.

Senator IAN MACDONALD: I want to raise a point of order on that. I am not quite sure how big an operation the Greenfield Fibre Operators group in Australia is. If it is a group that has its own secretariat—

Senator CAMERON: What is the point of order?

Senator IAN MACDONALD: It seems to me to be a very unreasonable question to ask these people who are out there trying to make a living to sit down and detail and add up every single employee, their classification—

Senator CAMERON: That is not a point of order.

Senator FISHER: It is a question as to reasonableness.

Senator CAMERON: If they cannot tell us, they cannot tell us but that is not a point of order.

Senator FISHER: It is not their business, Chair, it is contractors and subcontractors.

CHAIR: But they will know in their business model. What is unnecessary is any reflections that say people have been missing for the last 10 years when they have probably been building a business.

Senator FISHER: Accuracy, Senator Cameron.

CHAIR: If we can get to a question.

Senator IAN MACDONALD: Do they know when questions are supposed to come in by? If I were them, I would tell you to get lost.

Senator CAMERON: But you are not them.

CHAIR: If we can get to the question.

Senator CAMERON: And they are probably not as rude as you are.

Senator FISHER: It takes one to know one, Senator Cameron.

CHAIR: Everyone will get their chance to ask some questions.

Senator CAMERON: I think I am entitled to ask what you have been doing for the last 10 or 11 years. That is a reasonable question. That goes to your capacity to be able to challenge the government when there is a clear market failure. I am interested in what you have been doing for the last 10 or 11 years. I would like to know if there are business plans in place from each of your member companies to be able to provide broadband services across the country.

Senator IAN MACDONALD: Outrageous.

Senator CAMERON: Is okay to be critical, Senator Macdonald. As you say, this is outrageous. It might be outrageous from your point of view—

CHAIR: No, your question is to the witnesses.

Senator IAN MACDONALD: Clearly your problem is that you are not employing unionists; you are employing contractors.

Senator FISHER: That will be the next question.

Senator IAN MACDONALD: You are offside with Senator Cameron, for a start.

Senator FISHER: No ticket, no start.

CHAIR: This is not the Senate.

Senator CAMERON: I would not have a clue who they employ.

CHAIR: Is there a question? If there is not a question, I will move on to Mr Turnbull.

Senator CAMERON: I will come back.

Mr Sparksman : Might I answer the question?

CHAIR: I am not sure that there was a question.

Mr Sparksman : I think there certainly was. I might just address what I think the question was alluding to, which is: where have we been in the last 10 years? Is that a good place to start, Senator?

CHAIR: Yes.

Mr Sparksman : Since 2000, the GFOA members have been designing, building and operating advanced broadband networks in greenfields. Some have even designed optical fibre equipment that is still used throughout the world in optical fibre networks today. GFOA members connect or pass over 400,000 homes. We have a further 350,000 homes, potentially, either under development contracts or within the footprint of our existing networks capable of being connected. The members deliver high-speed data, internet, voice, free to air, pay TV and many other digital services, including CCTV, security services, building services, building management, utility management and community management services as well as a raft of other wi-fi and other forms of services. That, Senator, is one of the fundamental differences between GFOA, for example, and the NBN Co., which chooses not to provide those additional services. It is simply a last mile network operator.

In the early days of NBN, GFOA members were in fact the raft of experts that the minister called upon to represent task forces and working groups to provide substance to the then dream of the NBN. As I said earlier, we have been invited to assist the NBN Co. with their proposal to build whilst it is unable to do so over the next year or so.

It is interesting that, without having to tap into the USO funds, we have been able to spread our networks throughout the greenfields, whilst there has been no encouragement by government to address the fact that Telstra was running around using the USO funds to provide a copper network, a very antiquated network, throughout that same decade.

Senator CAMERON: An antiquated network, I agree.

Mr Sparksman : So, in order to give some further direction to this conversation, I would suggest that what we have been doing is what no-one else in this country has been doing in respect of fibre-to-the-home networks, and I would suggest to you that it is our expertise and experience that were most valuable to NBN Co. when last Friday they decided to close down the expert panel because they had obtained what they thought were all our prices and all of our intellectual property and decided that it was a good idea to scrap the expert panel and go with some subcontractors. So, Senator Cameron, I think you will find that the Greenfield Fibre Operators are in fact the only people who have been building fibre networks in this country. One of our former members represented in the gallery, Opticomm, was the contractor engaged by NBN Co., and before that, the Tasmanian government, to deploy fibre in Tasmania. They were the principal contractors and managers, and I am sure that their managing director, Phil Smith, who is here today, would be more than happy to be sworn in to tell you more about that.

Senator CAMERON: His head is going to fall off nodding in a minute. He agrees with everything you say. I have two questions on this. You indicated TransACT is one of your members. They are one of the biggest members, aren't they?

Mr Sparksman : They are.

Senator CAMERON: If you take them out, that would be a big lump of your membership, wouldn't it?

Mr Sparksman : It is not a matter of the size of the membership; it is only a matter of how they are funded as to whether or not they are able to capture more premises or pass more homes with their fibre. The members here all represent different businesses and different business models. We treat them equally whether they have 250,000 homes passed or whether they have 10,000 homes passed.

Senator FISHER: What is your definition of 'large', Senator Cameron?

Mr Sparksman : These are very sophisticated networks. Some are much more complex than others.

Senator IAN MACDONALD: No ticket, no start—that is what it is all about.

Senator CAMERON: In relation to your capacity to challenge NBN and provide a service, how many homes could your whole group add to a national broadband network in the next five years or so?

Mr Sparksman : It would be quite within our grasp easily to do 150,000 per annum which is the exact number that is annually connected to residential networks.

Senator CAMERON: How many does NBN foreshadow connecting?

Mr Sparksman : I understand on Friday it was advised in the press that there is a backlog of 133,000 connections that have registered with NBN Co. for connection since 1 January this year.

Senator CAMERON: That is not what I asked you.

Mr Sparksman : I am sorry.

Senator CAMERON: I asked you how many connections NBN will make over the build of the NBN?

Mr Sparksman : In greenfields?

Senator CAMERON: No, the whole lot.

Mr Sparksman : I would refer you to the business case for more accuracy, but my understanding of the business case of NBN is that there are 10 million brownfield connections, and during the life of the NBN, whenever they start it, there will be a further 1.7 million greenfields homes added to that.

Senator CAMERON: So you could make a contribution but you could not displace NBN, could you?

Mr Sparksman : No, we would not displace NBN Co.

Mr TURNBULL: At the moment, a developer has the option of either waiting for the NBN to install fibre at no cost to the developer other than providing the infrastructure—the passive pipes, pits and so forth—or paying one of your members to do it. Correct?

Mr Sparksman : That is correct.

Mr TURNBULL: So that basically puts your members in quite an uncompetitive position, doesn't it?

Mr Sparksman : It does.

Mr TURNBULL: Does it put you out of business?

Mr Sparksman : It does, yes.

Mr TURNBULL: So it is not a fine issue of competitive neutrality. It seems you are just run out of town, basically, by the government dollar, aren't you?

Mr Sparksman : That is correct.

Mr TURNBULL: We had the department in here a little while earlier and we asked Peter Harris, the head of the department, about this and he essentially agreed. He did not cavil at that. But he said there had been an opportunity for your members to effectively subcontract to the NBN. I was not entirely clear about what he was trying to say. I did not follow the narrative he described. Can you just describe what happened? What has gone wrong? It seems incredible that well-established businesses like yours are going to be flattened, put out of business, by a new government monopoly.

Mr TURNBULL: That is Senator Conroy?

Mr Sparksman : Yes. In the middle of 2010 we raised the issue of concerns. We wrote to the minister and sought to explain to the minister our broader concerns. Unfortunately, because of the timing of the election, the government went into caretaker mode and we were contacted by the chief of staff to advise that the minister would see us after the election, if he was elected, which he did. Then, after some discussion, we were invited first of all to put a business model to the department and to the minister. In fact we provided the department with a business model that suggested in short that we would be quite happy to build and operate the new advanced broadband networks to the standards required by the NBN. At the same time we would convey to either the USO Co., or such other body as the minister dictated, the pits and pipes and passive network, being the fibre, because you need to replace and repair and upgrade active equipment over the life of networks.

We asked the minister for funding in the order of the amounts, for example, provided to do fibre in greenfields equivalent to the NBN Co. and the department advised, because the minister directed them to do so, that that was not a model that accorded with the government's then direction. The minister then invited us, after further discussion, to consider taking a position on a panel, which was yet to be announced by NBN Co., he understood, of expert and experienced providers in greenfields whilst NBN Co. lacked capacity over the next year and a half, or more.

On or about 17 December that request for proposal was sought of 11 providers. The six existing members and Opticomm, who are represented here, Fujitsu, who are not a carrier and who are really consultants; and other providers, including Telstra, VicUrban, and I believe that Broadband Multinet may have been the other provider. Of those 10 or 11 providers, the 'GFOA' members comprised the majority. The requests were to provide our response by 7 January. Whilst the NBN had Christmas, we did not. We provided our response on time and after a series of further extensions and changes to the panel requirements, ultimately in or about the end of February the NBN Co. decided that they would give us four days to put forward a proposal for up to four sites each and provide backhaul solutions, which we did. We costed it, we located the backhaul for them, we provided the business models and the build costs to them, and it is fair to say that after discussion with my friends and colleagues here today there was very little between us in terms of the overall price. We basically can build a FTTP broadband network in greenfields for about $1,500 per lot. That excludes the cost of backhaul and, as I have already indicated to you, the fundamental problem—

Mr TURNBULL: To hold you up for a second, does that include the pits and the pipes?

Mr Sparksman : No, it does not include the pits and pipes, because the NBN Co. requirement is for the developer to do pits, pipes and trenches.

Mr TURNBULL: So what is included in that $1,500 per premises cost?

Mr Sparksman : At that time, the NBN Co. was going to provide all of the equipment as well as the pits and pipes, of course, through a separate contract and, as part of our arrangement, we were simply to build it initially.

Mr TURNBULL: You were going to roll out fibre or pull fibre through the pits and pipes?

Mr Sparksman : Yes.

Mr TURNBULL: Were you going to provide the optical network terminal in the premises?

Mr Sparksman : Yes, using equipment of our selection and specification.

Mr TURNBULL: What other electronic equipment would you provide?

Mr Sparksman : We would provide the optical termination units that ultimately would be deployed in the homes.

Mr HARTSUYKER: Given that you were a doing subdivision, for instance, would they be held in store and rolled out as needed?

Mr Sparksman : Yes, and we would also provide the management software and equipment back at various points of presence, in all of our cases in the CBD or metro areas to enable the interconnection of retail service providers back at the central CBD—unlike the NBN Co. which is providing its interconnection to 120 different places at least out at the community.

Mr TURNBULL: That is what you proposed to them. What was the response? Obviously it was negative.

Mr Sparksman : There were a number of changes. I will not take you through all of the changes to the requirements, but after the four days the tenders were deemed to have closed and after a further period of assessment, I believe up to about a month or so, the various members of our organisation were all advised that we were no longer required.

Mr TURNBULL: What has happened subsequently?

Mr Sparksman : Last Friday, the NBN Co. announced that it has appointed our former subcontractors, Fujitsu, to do network management and activation, which is really a consulting management job, and for Service Stream, who were the former deployment contractors for Telstra, to do the physical deployment of fibre networks directly to the NBN Co. So they have engaged contractors to do the build.

Mr TURNBULL: Is Service Stream the company Mr Flannigan is working for?

Mr Sparksman : Yes, I believe so.

Mr TURNBULL: So he has left NBN and gone back to Service Stream. Did he come from Service Stream originally? There is a gentleman at the back who is nodding his head.

Mr Sparksman : I imagine Mr Smith would know the answer to that better than me.

Mr TURNBULL: Thank you. So that means that the rest of you are basically out of the fibre deployment business henceforth in Australia?

Mr Sparksman : Unless we can persuade developers to buy what NBN Co. is giving away, that would be the case.

Mr Appleby : And there are some of those.

Mr TURNBULL: Are there?

Mr Sparksman : There are some sceptics who do not believe that the NBN Co. will survive in its current form past the election and therefore will not be able to complete the developments. There are those who believe that they need to have a deployment now and not wait—

Senator CAMERON: They are not sceptics; they are political partisans.

ACTING CHAIR ( Mrs D'Ath ): We have a very short period of time left, so one at a time, please.

Mr Seaman : I think it is fair to say also that there are some services that NBN is refusing to deploy on its networks that these property developers are interested in.

Mr TURNBULL: What are they like?

Mr Seaman : They would be free to air TV, pay TV and certain community services.

Mr Sparksman : Those are very important services. If you were a local planner, for example, much less a resident of an estate in an NBN Co. land, you would find that having a satellite dish and an aerial on every home would be an unsightly matter for the community to consider about its amenity. I would also be concerned if I were the emergency service operators in remote and regional Australia, because, of course, NBN Co.'s solution in those areas seems to be a very vague footprint. No-one seems to know where the 93 per cent is. It seems to be drifting in and out and can be wherever it wants now, if this bill comes about, because the NBN Co. can simply disclaim it. If you look at what the landscape would be in remote and regional Australia, you see that the NBN Co. services would be completely inadequate because they do not offer anything but wireless and satellite, and those of course are affected by all sorts of climatic, terrestrial and solar activities and are not as reliable. If you are in the remote and regional areas and a bushfire, flood or natural disaster occurs, those services would be completely inadequate. I believe that emergency services in Victoria are most concerned to hear that towns with under 1,000 connections, which is the vast majority of towns in Australia, will not receive a fibre connection; they will be wireless and satellite.

Mr TURNBULL: Mr Sparksman, I am trying to get a clear idea of what your argument is. You would say that the government should make available to you a sum of money equal to the NBN's cost per premise of connecting fibre to a greenfield site as long as the fibre network you deploy meets the technical specifications which enable it to be connected to the NBN; is that right?

Mr Sparksman : That is essentially correct. The standards we urge, through this bill, the government to consider are the standards of industry which the department has funded for over two years and mysteriously in the last little while have stalled. They are the Comms Alliance standards for deployment of fibre networks in Australia—and I am quite happy to table those. There has been dead silence in the government about what standards would prevail. Of course, this bill does nothing to address that silence but, if it were to address it, it should address it in the usual way, which is the way that most countries address the issue of interconnection, by setting industry standards not the standards of one provider. We do not intend to go out of business. Our unfortunate circumstance, Mr Turnbull, is that we have over 400,000 customers now. We are not going out of business; it is just that we simply cannot continue to grow our business and we have legacy networks that need to be upgraded and improved over time.

Mr TURNBULL: Does NBN intend, as far as you are aware, to overbuild the existing fibre networks?

Mr Sparksman : We are not aware of that, but it is a possibility that the NBN Co. could overbuild. If there is no competitor network in Australia, you will see NBN Co.'s engineers dictate it has to be a ubiquitous network that only they can operate, design and do well at. It would not suit them to have a competitor network or networks. It also, however, is completely unnecessary. All around the world standards of interconnection and network deployment by industry have been developed for a very long time.

Mr Appleby : I want to make a point on Malcolm's earlier question. You asked if we want equal access to the funding. No, we do not. We believe we can build an equivalent product based on the standards—with similar service levels—at half the price. One thing we wanted originally was to get access to the USO funding that Telstra gets so we could build the whole network and you do not need NBN Co. funding. The other thing we would mandate to the industry is that from a RSP perspective there is going to be a repricing of internet in Australia from about $35 on average up to about $75, which I am not sure the public are aware of. The NBN Co. funding at a wholesale port rate is vastly more expensive than what we currently charge the iiNets and the TPGs of the world. I think, whilst it is probably not part of this fibre bill, something that has been lost on the Australian public is that not only are we going to pay for it through taxpayer dollars but we are going to pay for it for the next 30 years as they wipe out all competition and innovation, and Australian homes will pay a lot for internet.

Mr TURNBULL: Monopolies are not noted for undercharging.

Mr Sparksman : They have no reason to change that practice. Our concern is that we are currently charging, for a symmetrical 25 meg by 25 meg service—that is 25 meg up and 25 meg down—$15 a port. That is the standard industry rate. The NBN's rate—

Mr TURNBULL: What about the backhaul? Who pays for that?

Mr Sparksman : In addition to the backhaul. Backhaul is charged in this country on a distance and capacity basis. In other words, you pay for the size of the pipe and for how far the pipe goes.

Mr TURNBULL: But you are saying, for '25 meg up and 25 meg down', that is what you generally charge. And that is the equivalent—

Mr Sparksman : Of the local area connection fee only. Let us say their start-up pack is a 12 X 1 service: 12 meg down and one meg up. And, as a result, the difference between our service—a symmetrical service is more than double their capacity—is, for the local area connection, leaving aside backhaul for a moment, $15 compared with $24 plus the CVC.

Mr TURNBULL: Well, this is a very—

CHAIR: No, I have three more people, we have 10 minutes to go—

Mr TURNBULL: Sure. My apologies.

CHAIR: and I am sure if there are any outstanding questions they would be happy to take them on notice and provide feedback to the committee.

Mr Sparksman : Yes, we would.

Mrs D'ATH: I just want to clarify: in the statement that you provided to us, it says that your members have been designing, building and operating advanced broadband networks in greenfieldssince well before 2000.

Mr Sparksman : Yes, that is so.

Mrs D'ATH: And you stated, in answer to one of the questions earlier, that you believe that the capacity of your members is to connect—was it to connect, or to pass over?—150,000 premises a year; is that accurate?

Mr Sparksman : Yes.

Mrs D'ATH: You have said that you have 400,000 residents you have either connected or passed over; is that over the last 10 years? And how does that fit with you stating that you can deliver 150 a year?

Mr Sparksman : Thank you for that. That is a good question. The issue of capacity drills down into experience and ability, and resources. The fundamental resource that is missing in our equation is funding. And that, I might add, is a very modest number for only 400,000. When you think that 150,000 a year come on stream, that is a very small, a minute number. But if you fund $1,000 per connection—because the fund of the USO was $145 million in 2010—for 150,000 connections, it is fairly close to about $970 per connection. So if you deploy $970 per connection to put copper in, instead of fibre, and therefore it appears to a developer to be free, it is not a surprise that a developer would choose the cheap—free—copper service over a more expensive fibre service, which we provide. So the felony—and I use that expression not in connection with the government's conduct—is that the USO fund has been deployed and wasted whilst fibre optics services have withered on the vine for lack of funding. So it is not a question of our capacity or inability to provide those additional connections; it is a question of funding.

Mrs D'ATH: Can I ask one other question before I pass over? You have said that 250 of the 400,000 are in Canberra. Coming from Queensland—specifically, South-East Queensland—and being aware that most of our major black spots have been in greenfield developments over the last 10 years; they are our worst problems—have you had any presence in South-East Queensland?

Mr Sparksman : Yes. In fact two of our members, Pivitand OPENetworks, and, I believe, one of our former members, Opticomm, have considerable footprints in South-East Queensland. At the moment, for example, we have a network deployed in Varsity Lakes, which is a development by Lend Lease. Lend Lease being one of the largest community developers in this country, certainly one of the most experienced and respected, selected us to deploy a pilot program initially in Varsity Lakes where there is, as you quite rightly point out, a new development where homes did not have adequate access to broadband. The university students, when they went home to their units and dwellings, did not have adequate broadband and certainly new residents did not. So Lend Lease entrusted us with the responsibility to deliver those services there. There are many other examples. I know that our friends at Opticom are providing similar networks in a new development—relatively new, but evergreen—in Springfield, which you would know. We have had many other areas in South-East Queensland which have been serviced or provided by different operators. In the case of Pivit, they have networks at Brisbane airport, they have Kelvin Grove urban development estates at Coomera Waters and Sanctuary Cove.

Mrs D'ATH: The 150,000 is outside Canberra, spread out across the country?

Mr Sparksman : It is in all states. I am not aware of any in the Northern Territory, although it is not a state.

Mr SYMON: I would like to swing the questioning back to standards. I know you mentioned the comms alliance standards before and they are going to be tabled up. What are NBN Co. Asking for that is different from the standards you have been working to? Do all your members work to that same standards document?

Mr Sparksman : The standards currently in place are those which are the Australian Communications and Media Authority standards. There are no standards other than that.

Mr SYMON: There are various standards related to cable and so forth which fit into building codes and so forth.

Mr Sparksman : They are not really [for] network deployment. We consider network deployment to be the non-customer cabling component. There are standards certainly about customer cabling and equipment and they are regulated also by ACMA. Our standards are beyond the customer cabling and for the network operation.

Mr SYMON: I suppose where I am coming from is interoperability between different providers, different networks. Where are those standards at the moment? Do they exist? If your companies do things one way and someone else does them another way, what happens?

Mr Seaman : To answer that question, if we talk about the internet as it is today, those standards exist to support that interoperability throughout the internet. The retail service providers, the wholesale service providers in this market today work by those standards, whether they be industry standards or others. There is no one company which dominates telecommunication standards in the world.

Mr SYMON: Are your pit and pipe installed to a standard and is that the same for all your members?

Mr Sparksman : The standards for pit and pipe design are those the developer will require in compliance with the local authority because the local authority sets the development approval that the developer must adhere to. They also must adhere to separation requirements in respect of other public utilities—power, water, et cetera. There are standards in respect of that, which are agreements between utilities and carriers. In fact, I know that Telstra and Jemna, for example, in New South Wales, reached an agreement in 2010. That agreement has since failed to be observed and Jemna and Telstra have decided to go their own way. But the councils are still looking for guidance in respect of an agreed standard—as are all the developers.

Mr SYMON: I have some experience in this area. You would therefore be subject to the various standards affecting gas, electricity and water suppliers, because you are trying to be within the same space. What I am hearing is that there is no overall document that can apply Australia wide.

Mr Sparksman : At the moment, the only documents that has been forward that all of our members are prepared to adhere to are the Communications Alliance documents. Nine committees have been working with the department and various government instrumentalities. Committee members from almost all of the major carriers in Australia have provided their expertise free of charge to produce these documents. A lot of work has gone into them. But at the moment the industry standards that the Communications Alliance had put forward have stalled, because the government have not taken them further.

Mr SYMON: So they exist as a draft document.

Mr Sparksman : As it stands, they are drafts. But they are drafts that the industry and certainly our members would adhere to.

Mr Yelland : There are various working groups. We are all working on trying to get various standards put together. At the moment, it seems to have come to a halt. We would obviously much prefer to continue developing those standards and come up with some sort of overall encompassing industry standard as opposed to having an NBN Co dreamt up standard imposed on it. There are obviously some real competitive issues if we then have to go ahead and build to a standard that suits their equipment and their operations.

Mr SYMON: My final question on this, then, is: where does this reside with Telstra at the moment? Telstra have their own standards for just about everything imaginable. How do you interface with the current provider?

Mr Sparksman : Telstra has in fact withdrawn, Mr Symons. I do not know whether you are aware, but Telstra used to have a business unit called Velocity. I went to the website yesterday to see whether they still exist, and there is still a product called Velocity but it refers to all sorts of other things. They were our competitor in the greenfields for the last several years. Telstra had standards for pits and pipes and generally fibre deployment by our operators would have adopted standards similar to the Telstra standards prior to the Communications Alliance standards. But Telstra have withdrawn from the greenfields market, having presumably done some deal with the NBN Co. As a result, they are not providing, as I understand it, fibre services anywhere in Australia. They are directed under this bill to provide copper services to new developments of less than 100 lot infill and small developments. But those specifications would not be relevant to us. We are fibre operators of advanced broadband networks. We would not be deploying copper networks in greenfields.

Senator FISHER: Mr Sparksman, you have six members, although they are not all represented at the table today. Earlier on, you said that there are about 10 or 11 in your part of the industry. You have also said that your organisation represents the majority. How did you determine that you have the majority? Is it that six is more than half of 10 or 11?

Mr Sparksman : I cannot recall in what context it was—I think that I was addressing the question about whether it was the number of the connected homes, and 400,000 homes have been connected. My point was that our group includes six of the 10 organisations that NBN Co. identified as being the most experienced and qualified providers of network services and advanced broadband networks in Australia.

Senator FISHER: So you represent the majority of those.

Mr Sparksman : I represent the majority of those. I do not represent some of those who were asked, obviously; Fujitsu was one of those. I should just qualify that. We do have a contract with Fujitsu for them to provide some services to us.

Senator FISHER: Thank you. So, nonetheless, you are saying that if NBN Co. knew who was in town in terms of greenfield operators then, of those 10 or 11, you represent the majority, six.

Mr Sparksman : That is right.

Senator FISHER: Okay, thank you. The greenfields fibre bill itself was introduced in the House of Reps on 23 March. When did your organisation find out about the bill?

Mr Sparksman : The first bill, I believe, was introduced in 2010.

Senator FISHER: I mean this bill, the bill that we are inquiring into today.

Mr Sparksman : I would have discovered a copy of the fibre deployment bill shortly after it was introduced initially, in 2010. More recently, a few days ago, I was given a copy when I was asked on Friday to appear and give testimony today.

Senator FISHER: Yes, of course, because the bill that we are inquiring into today is different from the bill in respect of which you made submissions at the end of last year.

Mr Sparksman : That is so.

Senator FISHER: This bill that we are inquiring into today was referred to this committee on Tuesday last week. Your submission says you were invited last Friday to appear here today. Correct?

Mr Sparksman : Yes.

Senator FISHER: So when are you saying you became aware of the existence and the terms of this bill?

Mr Sparksman : It would have been on Friday.

Senator FISHER: Up until that time, you had understood that the minister's commitment to involve your organisation on a panel of experts stood, and it was only on Friday, you say in your submission, that NBN Co. decided to discount the minister's publicised view and toss out the notion of an expert panel of providers and appointed subcontractors. That is correct?

Mr Sparksman : That is correct.

Senator FISHER: Basically, on Friday, you found out about this fibre deployment bill and you found out that the minister has aborted what was up until then his publicly disclosed commitment and publicly stated intent to involve your organisations as part of a panel of experts, and not even all of your members are represented at the table here today; I think you said in your earlier statement that some people were interstate. Do you consider that your organisation has had adequate opportunity to consider the bill that we are inquiring into today, and are your members happy with their opportunity to say what they think of the bill?

Mr Sparksman : Can I answer that by first correcting a slight error in your recounting of my statement.

Senator FISHER: Please.

Mr Sparksman : It is correct that the minister encouraged us to go into that process with NBN Co., but it was in fact NBN Co. that aborted the panel of experts—

Senator FISHER: Yes, your submission does say that.

Mr Sparksman : and therefore discounted the minister's views on it. Going then to your question, if I may, I know that, in the case of two of our members, they would have liked to have the opportunity to more closely examine the bill, and indeed they are obviously disappointed not to be able to be here. We have just done what we can with it.

Senator FISHER: Given that you found out about it on Friday.

Mr Sparksman : Yes. So, to the extent that our members would like more time to consider the ramifications of the legislation, that is certainly an issue for us.

Senator FISHER: Okay. They were operating under different rules, or the understanding of different rules, until Friday in any event.

Mr Sparksman : They would have been.

CHAIR: Thank you. For the committee, we have some choices to make. If we want to finish at 4.30, we either take further questions on notice from the three more members who want to ask GFOA some questions and have the remaining time with Telstra, or we go over now and completely limit the time with Telstra. The third option is to go over time. I am comfortable with any one of those three, but I am aware that there are committee members with travel arrangements.

Mr TURNBULL: I have to head off. I have to be out of here by 4.30.

CHAIR: So it is choice time: it is GFOA or Telstra.

Mr TURNBULL: I have to go at 4.30.

CHAIR: Yes, so I think that limits going over time. Shall we have further questions on notice? Are you happy with that?

Senator IAN MACDONALD: No, I am not. Could I suggest we limit those who wish to ask questions to, say, three minutes each. Others, like Senator Cameron, had 20 minutes.

CHAIR: Even though it will only leave 10 minutes for Telstra?

Senator FISHER: Telstra have made the effort to be here. I do not see how we can fairly not hear from them. You have to manage it, Chair.

CHAIR: I am throwing it open to everyone here.

Senator CAMERON: All I can see is Telstra smiling!

CHAIR: Will you able to keep your answers as close to yes and no as possible?

Senator IAN MACDONALD: Can I at least put my questions on notice?

CHAIR: Thanks.

Senator IAN MACDONALD: But perhaps Mr Sparksman could answer this one. Do you have a secretariat?

Mr Sparksman : That would be me. I am both the chair and the secretary.

Senator IAN MACDONALD: I repeat my urging to you not to accept Senator Cameron's earlier request and to speak to the secretariat on whether you are obliged to or not. My three questions all relate to money. Thank you for putting this together. Someone has been working over the weekend, obviously. You will have to take this question on notice. Regarding the penultimate paragraph on the first page—'Whilst the wholesale prices are far less than those by NBN'—I want to know how you know that and what they are likely to be in dollar terms. Secondly, Mr Appleby mentioned that $35 is what people currently pay and that it will go up to $70. I have been trying to alert people to this for three years, but unfortunately nobody takes too much notice of me. Can you tell me what the $35 represents and how you know it is going to be $70?

Mr Appleby : Yes.

Senator IAN MACDONALD: On the next page, under the heading 'Fibre deployment bill', you say: 'NBN is an obvious first choice for developers because NBN Co. can fund and build network costs that are otherwise paid by developers to private providers and the funding is recovered from NBN.' But the ultimate buyer will eventually pay. If you do it and charge the developer, they pass that on to the ultimate buyer of the property; whereas, if they do it NBN's way, it will go into all the operating costs and eventually come back to their dealers anyhow.

Mr Appleby : What if we provide you with some costing models?

Senator IAN MACDONALD: Could you, and just explain that? Thank you.

CHAIR: Thank you, Senator MacDonald, for placing those questions on notice. Senator Cameron has kindly said he will place some questions on notice. Mr Hartsuyker.

Mr HARTSUYKER: In relation to standards, you said: 'GFO believes the minister wants NBN Co. to be a monopoly and that he will therefore set standards and specifications that only suit NBN Co. network design.' And you were saying that they have not said what that is yet. Is that correct?

Mr Sparksman : That is correct.

Mr HARTSUYKER: So there are some standards out there, but you do not know what they are.

Mr Sparksman : NBN Co. standards?

Mr HARTSUYKER: Yes.

Mr Sparksman : There are some standards by NBN Co., yes.

Mr HARTSUYKER: That have been advised to you?

Mr Sparksman : They are in the marketplace and we have seen what those standards are, yes.

Senator XENOPHON: Perhaps you can give me a yes or no answer on this. Your submission expresses concern about the substantial disclosure of intellectual property and price sensitive information by GFO. Firstly, is this a matter that you will be raising with the ACCC? Secondly, are you seeking as to whether you have any legal redress for that disclosure and what has occurred subsequently?

Mr Sparksman : Yes.

Senator XENOPHON: Yes to both?

Mr Sparksman : Yes.

Senator XENOPHON: Both to legal action and to the ACCC?

Mr Sparksman : We are seeking legal advice in relation to these matters and certainly in relation to the ACCC.

CHAIR: Thank you for assisting the committee today. It is appreciated and it is acknowledged it was short at notice. The questions on notice will be sent by the secretariat. If your answers are specific to the bill itself, we would appreciate receiving that feedback by 23 May, because there are some critical dates.