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Joint Committee on the National Broadband Network
Rollout of the National Broadband Network
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Joint Committee on the National Broadband Network
CHAIR (Mr Oakeshott)
Senator IAN MACDONALD
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Content WindowJoint Committee on the National Broadband Network - 20/09/2011 - Rollout of the National Broadband Network
QUIGLEY, Mr Mike, Chief Executive Officer, NBN Co. Ltd
QUINLIVAN, Mr Daryl, Deputy Secretary, Infrastructure Group, Department of Broadband, Communications and the Digital Economy
Committee met at 18:26
CHAIR ( Mr Oakeshott ): Welcome. I declare open this public hearing of the Joint Committee on the National Broadband Network. Is it the wish of the committee that the media be allowed to film the proceedings today in accordance with the rules set down for committees, which include not taking footage or still images of members' papers or laptop screens? It is so ordered. The hearing tonight intends to cover a range of issues but has been convened principally to examine the performance information on the rollout from the government. That advice was provided in writing to the stakeholder ministers on 17 August. Regrettably, the performance information has so far been not provided to the committee. In our first report tabled on 31 August, the committee reiterated the need to have this material in a timely fashion, otherwise, quite obviously, it makes it very difficult for the committee to undertake its review function properly. While I expect shortly that Mr Quigley will provide us with an update on the progress of the NBN, the committee still requires in writing the performance and rollout information relating to the NBN. I expect that other members of the committee will have something to say on this matter.
Witnesses, while 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. Mr Quigley, would you like to make an opening statement to the committee?
Mr Quigley : Yes, thank you, Chair, I would. I will provide an update on the progress that NBN Co. has made since the last time I spoke with you, which was on 5 July. Perhaps before I get to that I will give you a sense of what we are experiencing in NBN Co. on the ground as we talk to communities around Australia. There does appear, frankly, to be somewhat of a disconnect between the media reporting of the NBN and the reaction we are getting from the people in these communities. As you have no doubt seen, while some of the media are accusing us of putting fake cables in the ground, of running into billions of dollars in overspending and of having our network hacked, we hear a very different story when we talk to people in communities around Australia. The question we hear most is not, 'Should we have an NBN?' but, 'How soon can NBN get into our town?' We have close to 300 local councils right across Australia who have expressed an interest in working with NBN Co. on the rollout. These communities know what the NBN will mean for them: economic growth, population growth, better education opportunities for their young people and better health outcomes, particularly for our elderly or less mobile citizens.
The Cairns Post recently reported that nine local councils in Far North Queensland are promising full political and operational support for the NBN as they bid to be amongst the first places to be included in the rollout. This is part of what we are seeing as a groundswell of support from ordinary people who recognise the opportunities of the NBN for them. The Broadband Today Alliance is another group of local governments who are pushing to make their communities ready for the NBN rollout. According to their website, in August this year there were 105 local governments and 35 affiliate organisations who joined up. It points out that these 105 councils represent a population of approximately 6½ million Australians. In addition to all of this the president of the Local Government Association of South Australia is urging regional councils to be better prepared for the next round of the NBN rollout. I think the deputy mayor of the Gladstone Regional Council put it quite well when he said:
Anyone who doesn't think the NBN is important for the future of the Gladstone region … obviously doesn't understand it.
We welcome this enthusiasm and completely understand why these communities want and need the NBN as soon as possible. Of course, the reality is that we cannot build the network everywhere at once.
We also get feedback on things we need to better and we are certainly listening to that feedback. We listened to the industry, for example, on CVC pricing, and we made the appropriate changes to ensure a smoother transition to fibre services for our customers and to lower barriers to entry and promote retail competition and service innovation, which is one of the greater benefits to consumers.
People are also telling us they want to know more about what they need to do to get ready for the NBN. Some people just want to know what it all means for them. As requested by government we are undertaking public information and education activities to enable the smooth migration of customers. We will develop that information campaign in consultation with the government, with Telstra, as a the owner of the existing copper network, and with the wider industry. It will cover fundamental questions relating to continuity of service, such as when and how to migrate, what equipment is required and what wiring is needed. It will also educate Australians about the nature of services available and what these will enable. This is a major undertaking for us and a core activity for NBN Co. It will inform more than 13 million households from now until the rollout is completed.
I turn now to a couple of points that have been in the media. There have been some recent events within the company related to restructure. That happened on 24 August and involved some senior management changes. There has been a lot of media speculation about this, but I want to emphasise that the reason the restructure took place is because NBN Co. has grown from a start-up—literally from nothing—to now having over 1,000 employees in locations across Australia. We have completed testing in a number of areas and have incorporated those lessons into our detailed planning in preparation for volume rollout. Basically, we are entering a new phase of our business and the structure of the company needs to reflect that. The changes that I announced in the restructure were driven by the move from a planning, testing and refining design phase to an implementation and construction phase. We are preparing the company for the rollout across Australia. I also want to mention the serious allegations that NBN was hacked. I want to be very clear with you: the NBN was not hacked, it has not been compromised, it has not been placed at risk, and our security has not been breached. The incident related to a commercial customer of NBN Co. that has not yet connected to services over the NBN. We take seriously, have controls on our processes in place and we are working with government agencies—telcos, ISPs, and the broader industry—in security scenario planning. Of course, no-one can ever give a guarantee that they will not be hacked, but I can assure you we are taking that possibility very seriously.
The last point I want to mention that has been recently raised in the media is related to scam installers. There have been some reports of scams in first-release sites, where unscrupulous door-to-door salespeople are claiming to represent NBN Co. It is quite true that certified RSPs may be legitimately active in first- and second-release sites and we are of course urging customers and consumers to check the validity of these door-to-door salespeople who they are claiming to represent. We would suggest and recommend that people ask for identification, get a copy of the offer in writing and do not sign up or provide payment without first checking with the company's head office or consumer affairs. This will be one of the issues that we will pay serious attention to in our education campaign as we roll out to make sure people are alert to this possibility.
If I can now return to the rollout update. As I mentioned, we are gearing up for the challenge of volume rollout, which will mean passing some 6,000 homes a day when we are at full capacity. We have recently seen the completion of construction works in the five first-release mainland sites, the testing of the network in those locations, the launch of our interim satellite service in July and we let a major contract for our fixed wireless project in June. We have switched on services in Armadale on 18 May, Kiama on 29 July, Brunswick on 4 August, Townsville on 1 September and then just recently announced Willunga on 16 September. Commercial services are set to begin on 1 October in those sites—that is less than two weeks from now.
On the overall brownfields rollout, of which does first-release sites are part, our corporate plan, which we submitted last December, projected that we would have passed some 13,000 brownfields premises by the end of June. In fact, as I reported I think when I was here on five July, we had passed more than 14,000 premises at that time and we have now passed more than 18,000 premises in brownfields.
Following on from the agreement entered with Silcar, NBN Co. has this month signed agreements for the large-scale deployment of the NBN in Victoria with Transfield Services, and in WA with Syntheo—that is the joint venture between Lend Lease and Service Stream. The signing of these agreements will lead to the rollout of another six of the second-release sites previously announced by NBN Co. The six sites are: Geraldton, Victoria Park and Mandurah in Western Australia; Bacchus Marsh and South Morang in Victoria; as well as the extensions of the existing first release site in Brunswick. Work will be undertaken on a rolling schedule with the first site starting next month in Geraldton. We estimate that the average time from the start of network design in each of these sites to activation of the first services is on average 12 months. We are now working on finalising contracts for South Australia and Northern Territory and we expect to be in a position to make an announcement on that in the near future.
On satellite, we launched our interim service on 1 July. Over 2,000 end-users have registered for this service and within the next week or so, as we work through the applications, we expect we will have close to 1,000 services that are either active or awaiting activation. So services are growing quite fast on that satellite service. The interim satellite service is scheduled to run until 2015 when we plan to launch our own two high-capacity satellites to provide what we call the long-term satellite service. We went out to tender for this for the space segment of this service on 6 September and we will be going out to tender for the ground segment fairly soon.
On greenfields, on 7 September we switched on the first NBN greenfield site, which was constructed in the Bunya estate in Western Sydney. You may have read the media report about how NBN Co. chose to fibre-up an empty display home in a ghost town. I just wanted to point out, in case there is any confusion: that is what greenfields sites are—they have not been built yet. The display homes do not in fact have people in them—they are display homes—and the houses do not have people in them because they are not finished yet. But our intention was that, as water, electricity and gas are connected to these homes as they are built, we do the same thing with broadband. We are connecting them so that when residents move in the services can be turned on. We estimate that more than 1.9 million new premises will be constructed across Australia during the life of the NBN rollout. As I mentioned, we have received more than 2,200 new development applications for fibre infrastructure nationally. This represents some 176,000 premises. We continue to receive about 50 new applications each week. Simultaneously with Bunya, as part of our new development rollout, we have rolled out fibre in two other new developments in New South Wales and we plan to switch on fibre in new developments in Victoria, Queensland, Western Australia and South Australia this month.
On the regulatory front, in July we released the third edition of the wholesale broadband agreement, and that was designed to try and give retail customers greater clarity and transparency on pricing and the regulatory terms. The WBA is the result of extensive consultation with our customers and potential customers. It sets out the arrangements for the delivery of the commercial services over the NBN encompassing such matters as products and price, service levels, technical information, credit policies and future product development. We also have released a discussion paper providing an overview of NBN Co.'s planned special access undertaking, which outlines our longer-term approach to price setting and cost recovery. That sets out a 30-year role for the ACCC in regulating the NBN, including five-year review periods. It also sets out NBN Co.'s commitments to reporting to the ACCC at regular intervals to provided with sufficient information to determine if NBN Co. is meeting its SRU commitments. We continue to work closely with the ACCC and of course we will be guided by their requirements and will make sure we continue to work with retail service providers so we end up with a set of special access undertakings and a WBA that the industry is comfortable with.
We are continuing to work on the longer term rollout as we build momentum. While we have some 650 trial users now in the mainland first-release sites and an estimated total of close to 2,000 people receiving services over the NBN, including in Tasmania and on our interim satellite service, we obviously need to be planning now for the next stage. It is our intention to release a 12-month rollout schedule in the very near future. The aim there is to provide as much detail as we can to local communities, local councils and politicians from both sides of the House who are asking when the NBN will be coming to their area. Our intention is to make that 12-month rollout plan available in the coming weeks and also early next year to release a three-year indicative rollout plan, which will give the community even greater visibility. Thank you.
CHAIR: Thank you, Mr Quigley. As you would know, we made our first report as a committee on 31 August. There were five recommendations in the report. I hope you have read it, including the recommendations. As a kick-off to the questions, would you like the opportunity to respond to any of those recommendations that were made by the committee?
Mr Quigley : I certainly have read the recommendations and noted the ones that we need to take some action on—recommendation 1, 3 and 5, in particular. So certainly we have those in hand in terms of provision of information. Recommendation 5 was what I was referring to in that last statement I made about publishing time frames and as much information as we possibly can on the rollout.
But I should say, Chair, that, being realistic, it is simply not possible to specify down to the level of street and premises until we do the detailed design on the ground in the area. We can give indications of the places we will be going by suburb. What is very difficult to do is to specify a long time ahead down to the street level. We will be able to specify, I think, on average about 12 months ahead down to that street level before services are turned on, but we cannot do it several years ahead.
CHAIR: So just to clarify this point, because in your presentation you are talking about increasing interest and everyone wanting to know how soon they are going to get it, there would be considerations at your end and the department's end as to whether to do continued staged announcements or whether to say, 'Here is the ten-year roll-out. Postcode 2444,' which is mine, 'is going to get it now, 3720 is going to get it,' so everyone has their expectations met for good or for bad over that 10-year timeframe. Is that the process you are going to go down and sometime soon and, if so, when? Or is it going to be a continued good news in stages type exercise?
Mr Quigley : What we will probably try and do is announce things as soon as we have reasonably confidently finalised them. As I said, within the next couple of weeks, we will be releasing information on everything that is going to be started within the next 12 months. Then there is a lead time of course until it is finished, so it will be closer to 24 months till all of those sites are completed. So everything that is going to be started in the next 12 months we will release that information. We will then look at everything that is going to be started in the next three years, but the latter two years of that are not as certain. They are indicative—they are our plans at this point in time—but we want to make sure people understand those latter two years are indicative. It is not our intention to try to release the whole 10 years at this point in time, because we simply have not got that far in the planning.
CHAIR: With that in mind, how do you manage the expectations? The point you make is that there is this 'How soon are we getting it as a community?' bubbling pretty well everywhere in Australia. How do you manage that. If we are only going to be talking in the next 12 months about the next three years, we are really only talking about a third of the project, so that would suggest two-thirds of Australian communities are going to be left wondering.
Mr Quigley : To some extent, yes. What they will know is that they are not in the first three years. That is unfortunate. We wish we could do everywhere at once, but it is simply physically impossible.
CHAIR: But is there some thought going into expectation management?
Mr Quigley : There is in the sense that the best thing we can do is provide people with information and a rationale for going to the places that we are going. This is, as you can imagine, a complex issue. We are in getting literally inundated with requests and demands. I presume, on what I read of submissions to the committee, there are lots of places that are asking you to try to do something about getting us to come sooner.
CHAIR: Yes. On that same recommendation there were some issues around transition and making sure no service that is currently in place is downgraded. This came out loud and clear from our visit to Broken Hill, where there were some concerns about some possible downgrade in service that is currently used on the transition through the build. It was evidence, from memory, from the Flying Doctor Service and the School of the Air—the satellite service. Did you pick up on that in our report and has there been any considerations that you want to respond to?
Mr Quigley : Yes. I did in fact read the testimony from Mr Wilson—was it?—who was a consultant to the Northern Territory.
CHAIR: That was the School of the Air.
Mr Quigley : School of the Air, that is right. I was a little puzzled, frankly, by some of the observations he made. The interim satellite service that we released in July was in fact intended as an upgrade to the ABG. It was a replacement for the Australian Broadband Guarantee. The School of the Air service is a business-like bespoke service that was not part of the ABG. So it was never the intention for this interim satellite service to try to meet that need. That was met in another way. We have, I believe, made some inquiries with the Northern Territory government, who have made it clear that it was not their intention to use the interim satellite service. They understand it was meant for another purpose. So there seemed to be a bit of confusion between what Mr Wilson was saying and what the Northern Territory government had intended. I understand, from Mr Wilson's testimony, he was not representing the Northern Territory government.
CHAIR: The point of raising it is to take the opportunity to clarify, if you can within the NBN Co. brief, that within your scope there is no downgrading of any service that you are aware of through transition. I will ask the same question of the department later. But from what you are seeing at your end, those sorts of allegations anywhere are simply either a misreading of what is going on or—
Mr Quigley : misinformed, I believe. I think, just to put the committee's mind at rest, there was also something I read that the long-term satellite service, which the Northern Territory government are interested in looking at for the School of the Air, is a very capable service. There are satellites we are going to launch that can do videoconferencing and multicast so it is a full-functional service. The interim satellite service was put in place, at the request of the government, to upgrade the existing Australian broadband guarantee and I think it is fair to say, Daryl, it is a big step forward. The response we are getting is very positive.
CHAIR: Working back through those recommendations, we also have received so far a lot of evidence around competition and the point of interconnect came up a lot. We seem to be getting some competing evidence around which was the more competitive option, and that is why there was the recommendation we made to government but there is the opportunity now for you to comment, if you want to, just on the productivity, jobs and competitive angle of the NBN rollout and how as an asset it is going to contribute to productivity, jobs and competitiveness in Australia. We are looking for as explicit statements as we can possibly get to try and engage on this question of what is the point of what we are doing. It is whether you want to take the opportunity now or whether you are still considering it.
Mr Quigley : We are doing some work in that area. We understand that our main job is to design and build a network but, obviously, it would be helpful in the information campaign, which will be providing to you as we roll the network out, to be able to tell people those sorts of things. So I think, on that work we are doing, we would be delighted to share that with the committee as soon as we are sufficiently far advanced on it.
CHAIR: Is that the same with the third recommendation, which is around timing and cost implications in detail? Have you got anything for us tonight or are you still working on it?
Mr Quigley : I think we are still working on that. I think that on the timing and costs as we progressively provide information to the committee some of that will become more obvious. We will provide as much information as we can as we develop it.
CHAIR: Okay. Are you comfortable with six-month reports? Is there anything that you wish to comment on as to that?
Mr Quigley : No, that is fine. We provide regular reports to the shareholder, the government, who will then, no doubt, be providing those to the committee.
CHAIR: Where are we at NBN Co.'s end in regard to the measurement tools and KPIs that we as a committee are looking for?
Mr Quigley : We have a range of metrics that we have agreed with government and which we will be providing related to 'financial' and 'rollout'. There is a range of them and we are providing those progressively as we bring them up.
CHAIR: So are we going to get them from the department later or are we going to get them from you?
Mr Quinlivan : You do not have the report, obviously, so you do not have the detailed accounting against those KPIs but the government and the company have agreed on a detailed list of KPIs and, as Mr Quigley said, the company will be progressively building a story against those KPIs. They include most of the outputs of the company and the inputs and measurements over time, so the committee will be able to see trends and measurements as those things come in.
CHAIR: Sorry, I thought the committee had agreed with the department and NBN Co. to establish a set of measurement tools and KPIs, and we are awaiting those measurement tools and KPIs to be given to the committee. We were expecting them to be given tonight.
Mr Quigley : We provide information to the shareholder. It is then up to our shareholder to provide those to the committee.
CHAIR: Okay. I imagine that is a conversation we will be having later.
Mr Quinlivan : We can have it now if you like.
Mr TURNBULL: Let's have it now. Could I—
CHAIR: Hang on—I just want to hear the answer to this.
Mr Quinlivan : The minister's letter talked about the provision of that material, in the form of a report, in mid-September. That report is not finalised but it is very close. The last issue is to ensure alignment of the financial information in the report with the audited financial information which has become available from the company. My expectation is that the ministers will be providing it to the committee in the not-too-distant future.
CHAIR: What does that mean, in detail? Today is 20 September and that is pretty close to mid-September. Are we talking about days?
Mr Quinlivan : I will not be the one signing the letter conveying it to the committee, but it is very close.
CHAIR: But are we going to be close to mid-September? There have been a couple of delays in this exercise, and I am conscious that we have a committee that wants to do its work.
Mr Quinlivan : As I said, I understand that the last issue to be outstanding was ensuring that the financials in the report are the same as the audited financials the company has provided. We were doing that today, so my expectation is that the ministers will sign the letter conveying the report very soon.
Mr FLETCHER: Is it just a coincidence that it ended up slipping to be a few days after this hearing, because this is mid- to late September?
Senator LUDLAM: The 20th is mid- to late September.
Mr Quinlivan : I cannot comment on that. We were working on the financials today.
Mr TURNBULL: Chair, you had a letter from the ministers in July saying that this report, which was going to include the information we are talking about—KPIs, performance measures and all of that material—would be available in mid-September. We are now past mid-September, in the second half of September. You wrote back in August saying we were going to have a hearing on 20 September in order to consider that report. The ministers did not see fit to let you know that the report would not be forthcoming in advance of this meeting. Really, we have had a brief, 15-minute oral account from Mr Quigley about some of his achievements and his unhappiness with the cruel cuts of the media, which we all sympathise with. Is there any reason we should not adjourn now and come back when we actually have that report? The whole purpose of this meeting was to have received and read the report and then talk to Mr Quigley. I was hoping that if they actually arrived with the report we could at least read it as we went, but we have nothing to go through.
CHAIR: As you can see, it is very unhelpful that this information is not available tonight. I still have a series of questions I would like to ask whilst we have the gentlemen at the table. I am sure there are others who also have questions. But I think the point is noted that there was an expectation that has not been met, and that this is on the back of delays that have already taken place.
Mr TURNBULL: Can we schedule another public meeting for the first week we get back? I think it is the week of 11 October?
CHAIR: We do have a public hearing on the 11th.
Senator CAMERON: Chair, can I have the call?
CHAIR: Is it on this point? Because I have some other questions then I will go to everyone else.
Senator CAMERON: Yes, it is on this point. I have to say I find it quite hypocritical that the coalition is arguing that a witness comes here without a written statement. I have just spent the last several months on the Senate Select Committee on Scrutiny of New Taxes, chaired by Senator Cormann, who has done things in such a rush that we never get any documentation from witnesses. It is not unusual for witnesses to come to an inquiry with no documentation and no submissions. It seems to happen all the time in the committee for new taxes.
Mr FLETCHER: Read the letters from the two ministers and the commitment they made.
Senator CAMERON: If I want to talk to you I will talk to you. Don't just wave things at me.
CHAIR: As you can see it is unhelpful in not providing that information tonight and if we can get that information as a committee as soon as possible, as close to mid-September as agreed, that would be helpful at the least.
Mr Quigley : If I can be clear on this, Chair, our job in NBN Co. is to deliver a report to the government, our shareholders, as I understand it—not to the committee but to our shareholders, who then pass that on to the committee.
CHAIR: I wasn't actually looking at you, Mr Quigley, when I said that. So the department can basically lift on this one and it will help the committee do its job on behalf of taxpayers. I think on behalf of the committee I record its disappointment that that mid-September agreement is rapidly slipping—so the sooner the better.
Senator CAMERON: As a member of the committee I do not want my disappointment recorded. I want it clear that I am not disappointed. Mr Quigley has got a company to run as well and if he gets it in in a reasonable time I am happy, so I do not want my name documented against any disappointment, thanks.
CHAIR: Senator Cameron, you have now got it on the record.
Senator CAMERON: I am very seldom disappointed in politics!
CHAIR: Anyway, I am trying to agitate for an outcome that works for everyone, which is: let's get these measurement tools so we can measure. I still have a couple of other questions in regard to your opening statement, Mr Quigley. You said that there are 300 councils that have actively engaged with NBN Co. That leaves about 250 who have not. What is the process for engagement with those that, for one reason or another, have yet to get excited by the NBN? Or is it an exercise of just waiting for them to come?
Mr Quigley : Largely. Clearly, if we are going into first- and second-release sites we engage directly with those councils but we have many other councils who have contacted us. We are running a group of people whose job it is to answer questions from any council or from any member of parliament or any constituent on what is going on—it is to the best of our ability. So our intention will be to engage with all councils throughout Australia but, once again, it is just a priority and it is about the time taken to do that, which is in short supply at the moment.
CHAIR: I do not ask that to be frivolous. It is in response—and thanks for it—to the Julia Creek work and response. It is to follow up that to the next step, which is this: if they, for example, want to take up the offer of trying to value-add at their end, as I would imagine 550 councils around Australia should be considering in their options, how is that process, the one we talked about either last time or a couple of times ago, going in regard to that process of how a council—
Mr Quigley : or an individual—
CHAIR: can value-add to the rollout at what looks to be cost recovery?
Mr Quigley : We are proceeding with that trial. In fact, we trialled it in November and we called it network extension. But I would like to distinguish here. There are two different types of network extension. What I mentioned last time was a network extension for premises that are outside the footprint. That is the case we had in a few places in Tasmania where there were residents who would normally receive a wireless service who perhaps were several hundred metres or half a kilometre outside the fibre footprint, in which case we would extend. That trial has gone reasonably well. It is a trial and we are going through the process. We have had an individual who wanted an extension. They thought the quote we gave them was very reasonable so they placed a deposit with us and we are proceeding to 'fibre' their premises, which would have otherwise been in the wireless footprint. That is a different extension from the exercise, for example, in Julia Creek, where it is not a question of just extending a little bit beyond the fibre footprint but of putting down a whole new fibre access node because in some cases you are at least dozens of kilometres away from the fibre footprint. So it is not just a question of extending it; you need to put down a new fibre access node. That is a different process. We have not trialled that process at this point in time, but we would have to take that one on notice and discuss it with our shareholder because that would be starting to really materially increase the percentage of the continent that is going to be fibred.
CHAIR: Progress on the Telstra shareholders meeting: is it still right for 18 October as far as you are aware? Rumours are going through the market that 18 October might be slipping. Do you want to comment on that at all?
Mr Quigley : I cannot comment on that. That is really a matter for Telstra. We are working—
CHAIR: But as far as you are aware, all is on track for 18 October?
Mr Quigley : There are two separate processes. One is the process we are undertaking with the ACCC and then there is the structural separation undertaking which is going on and which we are supporting. But it is really in Telstra's court, I think, to comment on their shareholder meeting date.
CHAIR: Okay. Are there implications to NBN Co. though if it does slip?
Mr Quigley : I think we will just take that on board and work through the process. I do not see it as an issue that we cannot deal with.
Mrs D'ATH: Thank you for the information that you did provide in your opening statement. That gave us a bit of a good snapshot of where we are. I am interested in a couple of issues. You have answered the one that came out of the hearings in Broken Hill in relation to the satellite services. What also came out in Broken Hill—and we have not had the opportunity to have you before us since then—is really an issue of communication. As the chair has said, I think especially that everyone around the country wants to know 'when can we have it?' As members of parliament we hear those questions all the time.
What we did identify out in the regions is that there is some misunderstanding of what is occurring. The School of the Air certainly were of the belief that the interim satellite was going to affect their service. What is NBN doing to communicate with the regions? I understand you cannot answer their main question, which is 'when are we getting it?' but as far as explaining to them what is happening? What mechanisms are in place as far as communication with the regions is concerned?
Mr Quigley : Thank you for the question. That is something, as I mentioned, that we are now gearing up to do. It is quite a responsibility for us to undertake. Shareholders may declare that they expect us to undertake that public information and migration campaign. We will be doing that. We will put an increasing number of resources into providing educational material and information. We will probably be able to show people; we plan, in fact, to have a mobile facility which we can bring to different places and demonstrate to people what the equipment looks like and what the plans look like. We will provide as much information as we possibly can.
And, of course, we will also have information available on our website. We have tried to use, and we will continue to try to use as much as we can, factual information into the media. Believe me, it does not cause me any concern what the media writes other than the fact that they are misinforming people in some instances. That is what I want to bring to the committee's attention. There is misinformation that is being put into the media. It would be very nice if the facts were put into the media. I guess that that is the point I want to make: there is a fair degree of misinformation.
I think you all see it happening. It is a pity, because it is unnecessary that we do get misinformation but it is what we see happening.
Mrs D'ATH: I appreciate your comments about electronic tools and references to websites. I am particularly concerned about just making sure there are appropriate tools for those who are the main reason that this needs to be done. There are areas out there which just cannot get internet, and we heard some of the examples. It is making sure the NBN is turning its mind to appropriate ways to communicate with those regions out there that cannot access the great electronic tools that are available.
Mr Quigley : Yes. As part of the restructure I did we are putting in place inside the company a unit where that is its job, to go out ahead of the rollout and hold town hall meetings, meetings in local libraries and information days. We are mobilising many councils, universities and other people who are very keen for this rollout to take place. It is quite encouraging to see how many people external to NBN Co. are keen to try to get the message out. We will be leveraging as much of that as we can, so as well as the electronic means we will actually have people with feet on the street talking to local councils, holding town hall meetings and doing similar things.
Mrs D'ATH: That is great. I was going to say, with all that interest from councils, I think that would be a good starting point. Making sure the councils are armed with accurate information may ensure that those regions that they are looking after are getting that information disseminated out to them as well.
Senator LUDLAM: I would like to register my disappointment that the committee is meeting here empty handed. We have been tasked, among other things, with a job that is essentially quantitative, which is to hold the company to the account of what it said it would do in terms of premises passed, lit up and so on—but we are empty handed. So I share Mr Turnbull's frustration. I have a couple of questions that are unrelated to the material. If the dog has eaten somebody's home work, I am just keen to work out whether it was NBN Co.'s or the department's. Can we just clarify that first. Has that material been submitted, Mr Quigley, by you to the department?
Mr Quigley : Yes.
Senator LUDLAM: Is that where the block is?
Mr Quigley : The material was submitted on 19 August.
Senator LUDLAM: What is the department doing with it? You folk are not running the company; Mr Quigley is. So what is the hold-up exactly?
Mr Quinlivan : It was a report to government, and the government had to consider that report, which it is doing. As I mentioned before, there was one last outstanding issue which was being attended to today. So we are expecting that the report will be finalised and able to be provided very soon.
Senator LUDLAM: We will be able to have a crack at it during estimates, which are coming up in October, but that effectively disenfranchises the House members of this committee. Can you just tell us what the nature of the last little item was that was not handled in time?
Mr Quinlivan : The company's audited financial material became available and so there was a concern that the material in the quarterly report be consistent with the audited financials. That was happening today.
Senator LUDLAM: When had Mr Quigley sent that material to the department?
Mr Quinlivan : Are you talking about the audited financials?
Senator LUDLAM: Let us start with that.
Mr Quinlivan : I would have to take that on notice. I am not too sure of the precise time.
Senator LUDLAM: What about the rest of the data about premises served? You would not even know what the KPIs are. You would not even know what you are measuring against.
Mr Quinlivan : I do not know the precise date when the remainder of the material was provided but it was several weeks ago.
Senator IAN MACDONALD: It was 19 August.
Senator LUDLAM: If it was 19 August then the department has been sitting on it for a month. Today one of the last items was not quite ready to sign off on and so we are sitting here this evening lacking the same information that we wrote up in this report that we lacked. I just wonder whether there was any intention to do that or whether you were actually trying to meet the committee's deadline to have that material available.
Senator IAN MACDONALD: Chair, can I just clarify—
Senator LUDLAM: Sorry, Senator Macdonald. I would not mind an answer first, if that is possible.
Senator IAN MACDONALD: You are asking the department. Perhaps you should be asking, 'Is it the department or the minister?'
Senator LUDLAM: I will get to that.
Mr Quinlivan : I can assure you that the department had no intention not to finalise the report until after today. I have just been informed that the audited financial information was provided today.
Senator LUDLAM: Does it have to go through the minister's office or does the department just hand it, effectively, to the secretariat or the chair of this committee? What is the process?
Mr Quinlivan : The quarterly report was a report from the company to the shareholder ministers, and the government has considered the report.
Senator LUDLAM: That did not answer my question at all. It did not go anywhere near it. Does it go through the minister's office?
Senator IAN MACDONALD: He said the minister.
Senator LUDLAM: It does?
Mr Quinlivan : It was a report to the government, not to the department.
Senator LUDLAM: I suspect some of my coalition colleagues are going to take this up in a bit of detail, but in the interests of time I wondered if I could put to you, Mr Quigley, a statement that came from the Indigenous Remote Communications Association on 11 July 2011. I do not want to go into too much detail, but I gather NBN Co. had a representative at the broadband for the bush forum that IRCA and Desert Knowledge Australia ran in Alice Springs. Are you familiar with that one?
Mr Quigley : I am not.
Senator LUDLAM: That is going to be a little bit tricky then. I will just tell you quickly what they are concerned about. From memory, in the maps that you have published about where the satellite footprint goes and who will get wireless and who will get fibre, as you would expect, Central Australia is more or less entirely served, apart from Alice Springs and a few other communities, with the satellite solution. Telstra has an east-west fibre link from Western Australia right across to the east coast. The essence of that forum was in part: can we get at least terrestrial wireless even if we are not going to be served with fibre to the premise in these remote Aboriginal communities? That fibre link effectively hopscotches through some of the larger communities in the APY lands in Central Australia. I am wondering what the thinking is. It is obviously a Telstra asset which NBN Co. has chosen not to include in the $11 billion package.
Mr Quigley : I would not say that is the case. If you look at the map published on our website you will see what we call a transit network, which connects what are called fibre aggregation nodes from which the fibre fans out for about 15 kilometres back to points of interconnect, where we hand traffic back off to retail service providers—there are 121 of those as per the ACCC's decision. We are using a large amount of fibre around Australia to connect those. What is more for resilience and redundancy purposes we are using rings. So we are going through most major centres in Australia. The best analogy I can draw is that this is like a 230 KV high-tension cable. To bring it back down then so that you can provide 220 volts a lot of equipment is required. It is the same thing. To bring it down to where you can drive a wireless base station or an optical line terminal you have to bring it down from the hugely aggregated traffic which is on the fibre and you have to do that locally. There is a huge cost in doing that.
Senator LUDLAM: For a community of 400 or 500 people out at Warburton, say, what is the cost? If those folk put their hands up and said, 'We've got a 16-lane freeway shooting past our community, we'd like some of the traffic from—
Mr Quigley : 'We'd like an off ramp.'
Senator LUDLAM: 'We'd liken off ramp, please.' How much is an off ramp going to cost at somewhere like at Warburton?
Mr Quigley : That is an exercise we just did with Julia Creek and submitted it—
Senator LUDLAM: How many people are in Julia Creek?
Mr Quigley : It depends on how many of these are going to be done. We could consume the company in doing these theoretical exercises. It is not an easy job. You have to really think about planning for what you are going to do and then there is the issue: are you going to do it in fibre, are you going to do it in fixed wireless? It is not an easy job. We spent quite some time doing a huge planning exercise to meet the objectives of the government set for us which was at least 93 per cent fibre. That is what we have done—and four per cent fixed wireless and three per cent satellite. As you have seen from the corporate plan, the cost curves crossover at those points. It is quite an undertaking to adjust the plan. The fear I have is that the more of the 'What ifs?' we do, the more of the company we consumed by doing 'What if?' analysis instead of building the network—
Senator LUDLAM: Yes, but about 1 million bucks for an off ramp in a remote community?
Mr Quigley : In Julia Creek, but it depends on what is there and you really have to look at it.
Senator LUDLAM: I wonder whether you could take on notice for us, because you had somebody there, Duncan Bremner, I understand—whether you could provide the committee with an indication of what advice you provided to that community meeting out in Alice.
Mr Quigley : I can tell you what I think Mr Bremner should have said. He should have said that if they are in satellite footprint that the satellite service will be a very good service. I repeat, we are trying to provide a service is close to what people in the cities will get with the limitations of speed and while we have committed to a 12/1 service on satellite that does not mean we are not looking at faster speeds if it is technically possible. We are doing that on both fixed wireless and satellite. We have always said we would take every advantage of advances in technology as they become available. I would also like to mention one other thing: the dimensioning we have done on that existing 12 month service in terms of capacity and throughput is much, much greater than people can get on today's existing satellite services or on mobile services, so these will be very good services.
Senator LUDLAM: I think the one that they are concerned with is the asymmetry. My understanding is that you will start at these fans—at these central points—and the network will branch out until they mesh together. You will start from a finite number of those and then the network branches out, and that is what the release sites are.
Mr Quigley : Not quite—
Senator LUDLAM: Not strictly?
Mr Quigley : We are starting from building. We put the priority on building the transit network, which is that backbone that connects the POIs to the fan sites but is built in rings for redundancy. We are building that out, hopefully, in 3½ to four years, and then we will have no limitations in terms of access and where we can build out. So we will establish the fan sites and the points of interconnect, and then it is a matter of filling those out. We need that transit also to do the fixed wireless, which we were asked by the government to accelerate if we could—and we have done that—and also to provide the earth stations for the satellite service.
Senator LUDLAM: How many of those release sites—the retail level; the little cables that go through the streets and so on—will you be creating where you stick a fan in the middle of a network and start branching outwards?
Mr Quigley : There are approximately 1,000 fan sites.
CHAIR: I just want to do some logistics in light of some of the evidence that has been given with the committee. I am reading that we would like to have both the department and NBN Co. back on 11 October for our public hearing, and I just want to clarify that you are both available for 11 October for the public hearing so we can clarify this point about performance measures and KPIs.
Mr Quinlivan : The two departments will certainly be available, Chair.
CHAIR: Okay—and, if people go to page 5 of their notes, the plan was to have NBN Co. before us until 8 o'clock tonight and then the Department of Broadband, Communications and the Digital Economy and the Department of Finance and Deregulation from 8 o'clock until 9.30. But I think a more valuable use of time tonight would be for people ask any questions they have of the two gentlemen at the table and for us to send home the eight others who were going to appear before us at 8 o'clock and then—hopefully—to have them available on 11 October, when we can talk about what we thought we were going to talk about: performance measures and KPIs. Is the committee okay with that as an approach?
Senator IAN MACDONALD: But Mr Quinlivan is from the department.
CHAIR: I understand that, Senator Macdonald. But there are also eight other witnesses, who, at 8 o'clock, were going to be available to give evidence. What I am saying is that they can go home and we will just wrap up this evening with the two gentlemen at the table, who can provide us with answers to any questions about NBN Co. I do not think we need to drag out tonight without the performance measures and the KPIs—
Senator IAN MACDONALD: It might be for Mr Quinlivan to say which of his departmental officials he needs with him if he is going to stay here until nine.
CHAIR: I do not think we are going to be here all night.
Mr Quinlivan : Chair, I have people from the department here dealing with the main subject areas that I expect the committee to be interested in.
CHAIR: Is there anybody who is interested in performance measurement tools?
Mr Quinlivan : There are other issues that the committee has expressed interest in, so they are here if you have questions. If not, we will go. We are in your hands.
CHAIR: So, essentially, we are going to bundle in tonight if everyone is okay with that.
Senator CAMERON: What time are we going to with Mr Quigley and Mr Quinlivan?
CHAIR: Hopefully, if people do not have too many questions, we can wrap it up relatively shortly. My understanding, and I think it is the committee's understanding, is that tonight is about performance measurement tools and KPIs. We have not got them, so I do not think we should waste everyone's time. But if anyone wants to drag it out, just say.
Mr TURNBULL: I do not want to drag it out. Can I ask one question?
CHAIR: Yes. There is still room for questions.
Senator IAN MACDONALD: I do not want to drag it out but I do have a couple of questions on the material that we have been given tonight from NBN Co. and the department.
CHAIR: Actually Paul Fletcher was next on my list and then you and then Mr Turnbull, so feel free to ask questions, Senator Macdonald.
Senator CAMERON: Can I get some clarity. If we are going to cut this short, can we set a time so people will know a time that we will finish by? We can finish before it, but we should set a time for the witnesses and for us so we know what we are doing. I do not want it to drag out.
CHAIR: Senator Macdonald, how many questions have you got?
Senator IAN MACDONALD: It depends how quickly they are answered, Mr Chairman. I have about four questions.
CHAIR: Senator Xenophon, I think you have got none.
Senator XENOPHON: Yes.
CHAIR: Paul, you have got—
Mr FLETCHER: eight or nine questions.
Mr TURNBULL: I have got some questions but they could be answered very quickly.
CHAIR: Less than half a dozen?
Mr TURNBULL: Yes, absolutely.
CHAIR: I think that is manageable. If we tick through them we will be out of here relatively quickly.
Mr FLETCHER: Mr Quigley, I think you said there were about 1,800 services in operation right now.
Mr Quigley : Plus a few thousand.
Mr FLETCHER: How does that decompose then? You gave us a mainland figure. Can we have the Tasmanian figure and the satellite figure?
Mr Quigley : Centred on satellite about 750 on fibre on the mainland and about 650 in Tasmania.
Mr FLETCHER: Thank you. I refer to the fibre services. Are they all still on trial pricing? So that is to say NBN is not charging the RSPs?
Mr Quigley : Yes. As I said, we have agreed with the ACCC we will commence commercial services on 1 October.
Mr FLETCHER: And that means that is when NBN starts charging a wholesale price.
Mr Quigley : For the fibre. We are already charging a wholesale price for the satellite service.
Mr FLETCHER: As for the special access undertaking, when do you expect that to be lodged?
Mr Quigley : When I think we believe we are at an appropriate point with the ACCC. They have had a lot to do, obviously, with the SSU that has been done and the Optus authorisation process so they are very busy and we have been working closely with them.
Mr FLETCHER: Is it your feeling that it is a week away, a month away or three months away?
Mr Quigley : That is an issue I would not like to speculate on. I think it is more important that we get it right and that the industry is comfortable and the commission is comfortable.
Mr FLETCHER: I refer to the wholesale prices that you will be charging in advance of the special access undertaking being approved. Can you explain how that all works?
Mr Quigley : They are precisely the prices that we published last December in the corporate plan.
Mr FLETCHER: I am just trying to understand the regulatory basis on which those prices are being charged.
Mr Quigley : We have a trial agreement signed by a number of the retail service providers, agreed with the ACCC.
Senator IAN MACDONALD: What was the price—just remind me?
Mr Quigley : The prices are in the corporate plan.
Senator IAN MACDONALD: Yes, what was it though just to remind me?
Mr Quigley : There is a range of prices starting from $24 for a 12/1 service up to a 100/40 service and then there is a CVC charge.
Mr FLETCHER: What probability do you attach to the prospect of the SAU being either rejected or modified through the ACCC approval process?
Mr Quigley : Well, that is a very difficult question to answer. I can't look at frequency data and put an estimate on it. All I can tell you is we will work through the process and our intention is to agree and there is an SAU which we would then lodge with the commission. We have been at this process for some time but, as I mentioned, the commission have a lot of other things with which it has to deal and we will continue to work with them until we are comfortable that they are comfortable.
Mr FLETCHER: Under your contract with Telstra what options and capacity do you have to restrict it from using wireless to compete with your network?
Mr Quigley : The wireless clause that we agreed with Telstra in the definitive agreements was merely to say that they would not represent the wireless service as a fibre substitute—nothing more. So we do not see any restrictions at all, apart from that. One could almost say it is truth in advertising; it is not intended in any way to restrict the marketing of wireless services. In fact, as I have said several times, and perhaps to this committee as well, we are very enthusiastic about the growing use of wireless, because the more wireless grows, the more iPads are used, the more Wi-Fi is needed, the more fixed line access is required.
Mr FLETCHER: Under your contract with Telstra, if the service is terminated on the Telstra network but the customer does not take up a service on the NBN, does Telstra receive the payment?
Mr Quigley : There are quite a number of scenarios. Subject to the definitive agreements, we worked those cases through with Telstra. Likewise, we work some cases through in the Optus agreement. They are in the definitive agreements. I think as I have mentioned before, they are confidential agreements at this point in time.
Mr FLETCHER: Let me turn to another matter. The advice that you gave to Senate estimates on 22 February you said:
We have an arrangement with Telstra whereby we are making sure that we look after people with a voice only service.
What is the progress on that arrangement?
Mr Quigley : The progress is as it was agreed in terms of our basic service offering at $24. Clearly that creates an issue if there is a special service that is below $24. So we came to a commercial arrangement with Telstra to ensure that those people who were on those special services can continue to have those special services provided to them at no increasing cost on the fibre network.
Mr FLETCHER: When will the arrangements for that be formally disclosed?
Mr Quigley : There is not much to arrange. It is just a simple as the migration takes place and the copper is disconnected and a service is migrated onto the fibre then Telstra will provide a continuation of that voice service. For the end user, if they have a voice-only service, they probably will not notice the difference. It was on copper, it is now in fibre, it is still a voice service and they will continue to pay the same amount.
Mr FLETCHER: In terms of your plans to build overhead cables, when will you be in a position to disclose the areas that will have overhead as opposed to underground?
Mr Quigley : We will only do that on a region-by-region basis as we go out and do our detailed design. In fact, before the detailed design. We produce what we call a network design document. That gives the outlines of the actual boundaries of what we call the fibre-serving access module, which is the point at which people will absolutely no whether a premises is in the fibre footprint or not. That will be about 12 months before the service is activated. During that process of preparing the network design document we will be making the assessment of whether there will be some overhead used or whether it will be underground. Part of that will be, when we produce that network design document, confirmation by Telstra that the underground duct is available not, because they have to do almost certainly some remediation of the duct. So whether we have to do some underground boring ourselves or trenching or using aerial will depend on the availability of that duct.
Mr FLETCHER: Just back on the voice-only services, does that arrangement only apply to services that are in operation as at the time of the changeover?
Mr Quigley : That is one I think you would have to refer to Telstra. I am not sure exactly of their policy, but I imagine their policy is to continue to provide special services to those people who need special services. I imagine that that is an obligation that they have.
Mr FLETCHER: In terms of the deal between NBN Co. and Telstra, I am interested to know whether that is confined to voice-only services at the time of switchover or not?
Mr Quigley : Perhaps I can answer that question in another way. I would not anticipate that Telstra would be refusing to provide somebody with a special voice service if they qualified for it. I would not imagine that they would be coming back to us in so doing and saying, 'We want to adjust things.'
Mr FLETCHER: When you say 'a special voice service', are you envisaging that the customer would have to meet certain requirements?
Mr Quigley : I believe that is the situation as of today. In other words, when we are talking about this special service, we are talking about a lower than normal retail price. I presume Telstra does not provide a lower than normal retail price without some qualification process.
Mr FLETCHER: I am interested in the standard home line budget service of $22.95 which is available, as I understand it, to anybody who calls up Telstra and says, 'This is the product I would like.'
Mr Quigley : That I do not know about. That is a question you will have to refer to Telstra. Their retail pricing is their business.
Mr FLETCHER: I just want to make sure I am understanding you correctly. You said there is a deal between NBN and Telstra which facilitates them continuing to provide that service. Is that a correct statement?
Mr Quigley : Yes, for special services. But my understanding is that these were for pensioners or people with a disability—a defined number.
Mr FLETCHER: I have a last area I want to ask you about. Is it right that once you get beyond the trial period or the first and second release period you then organise your rollout on the basis of fibre-serving areas? Is that the term or have I got that wrong?
Mr Quigley : Yes. The fibre-serving areas are around the fibre access node. Those fibre-serving areas can satisfy a maximum of 76,800 premises. We break a fibre-serving area down into a fibre-serving area module, which is 3,200 premises, and you break that down into a fibre distribution hub, which is 200 premises. So there is a modular structure and there are about 1,000, as I mentioned, fibre access nodes, which means that there are about 1,000 fibre-serving areas.
Mr FLETCHER: And those are the ones in respect of which NBN Co. will at a certain point make a determination that the area is ready for service; is that right?
Mr Quigley : It is not by fibre-serving area; it is by fibre-serving area module. When we declare that module done—roughly 3,000 premises—then a migration can take place.
Mr FLETCHER: Once that determination is made in respect of a module, does that then trigger the 18-month period?
Mr Quigley : That is correct.
Mr FLETCHER: When do you expect that you will get to the first ready-for-service declarations?
Mr Quigley : The very first is not just a fibre-serving area module. There are other things that have to take place in terms of the ability of the portals to interface between service providers and us, particularly between Telstra and us when it comes to the copper-to-fibre migration. So the very first one is a little different from the ongoing ones. On an ongoing basis, once we have completed a fibre-serving area module and declared it ready for service, an 18-month window starts in which migration then takes place.
Mr FLETCHER: Sure, but I am interested in knowing when you will get to the first one of those.
Mr Quigley : The first one is a much more complicated question. There are a number of prerequisites that have to be met so that you are ready to do that related to business support systems and operational support systems.
Mr FLETCHER: Indicatively, do you envisage that happening in, for example, the first half of calendar year 2012?
Mr Quigley : I will take that one on notice, if I can, because that is part of the migration plan which we are working through at the moment.
Senator IAN MACDONALD: In the last day or so, and I think Senator Conroy mentioned it in question time, a number of retail service providers—I seem to recall iiNet and Internode and one other—were giving prices for 20-megabit services. Would those RSPs be charged a minimum of $24 for those services by NBN? Is that correct?
Mr Quigley : We do not offer a 20-megabit per second service.
Senator IAN MACDONALD: You would charge them $24 minimum per connection for the service that they are offering at 20-megabits per second?
Mr Quigley : We charge them $24 for a 12-megabit per second downstream and a 1-megabit per second upstream, and $3 more for a 25-megabit per second downstream and 5-megabit per second upstream.
Senator IAN MACDONALD: Okay. So if they were offering 25-megabits you would be charging—
Mr Quigley : $28.
Mr Quigley : I believe that is the number.
Mr Quinlivan : Yes.
Mr Quigley : I think that is correct, yes.
Senator IAN MACDONALD: Thanks for your information on Julia Creek. I see your final paragraph and you have mentioned it again, saying that it is costly to do this. Just let me confirm: government direction was for 1,000 premises in a town, they get fibre; and for 500 premises in a town, where the backhaul went through the town, they would get fibre?
Mr Quigley : Yes.
Senator IAN MACDONALD: Anything less than that would get a fixed wireless access—correct?
Mr Quigley : For the next four per cent, and then after that satellite for the final three.
Senator IAN MACDONALD: But in the case of Julia Creek, the main line passes through the town. They are under 500 so they are going to be given free a fixed wireless access, eventually?
Mr Quigley : Free? I think the retail service providers will charge them for it.
Senator IAN MACDONALD: As far as you are concerned?
Mr Quigley : It will not be free, no. We are going to be charging.
Senator IAN MACDONALD: You will still charge your $24?
Mr Quinlivan : The Senator means rather than the $1.4 million for fibre.
Mr Quigley : Of course, yes! That is quite right.
Senator IAN MACDONALD: What will happen then is that the fixed wireless access will come off the front line, if I can call it that, and then people in Julia Creek will get their connections via wireless?
Mr Quigley : Yes. And it will be a very good service.
Senator IAN MACDONALD: And it will be a very good service, thank you. And you will charge the RSPs $24 per service and the RSPs will do the rest?
Mr Quigley : That is correct.
Senator IAN MACDONALD: The alternative to that in Julia Creek is that everyone could be connected—I assume the 271 geocoded national address file means houses in town—
Mr Quigley : Roughly.
Senator IAN MACDONALD: So if the council or someone paid $1,140,000 or, according to my calculation, $4,206 per residence, they could get fibre-to-the-home?
Mr Quigley : We have not established a process for that circumstance. As I mentioned to the chair, in agreement with the government we are trialling a process to what we call a network extension. So if the premises is just outside a fibre footprint then we can offer—for an additional cost, but basically at cost—to extend that fibre footprint a little further.
Julia Creek is an instance in which there is no FAN site that covers it. We would have to establish a new one and we have not discussed with the government that possibility. We can do so, but we have not done it.
Senator IAN MACDONALD: Mr Quigley, as you have worked out over the long period of time that we have known each other, I am not technical. I do not know what you are talking about by 'FAN sites'. Julia Creek is a small town and fairly compact. If someone—a benefactor, the council, individuals: Kerry Packer or someone—wanted to make a gift to them, they would pay $1,140,000 to NBN and you would connect them? Or are you saying, 'Well, whether we would or we wouldn't is up to the government as a matter of policy'?
Mr Quigley : If it were a one-off instance, then it probably would not be such a difficult decision for us but I suspect it is not going to be a one-off instance. I suspect there is a large number of Julia Creeks in Australia—
Mr Quigley : So if we are going to do it we need to get the agreement of our shareholder to say, 'Look, this is a change in the way in which we are going to roll out the network'.
Senator IAN MACDONALD: Okay. But my assumptions are correct, I think you have confirmed that?
Mr Quigley : Yes.
Senator IAN MACDONALD: Thank you for that; I will not pursue that further.
I noticed in the paper about your high-profile government relations person, who we have had discussions about before and who was appointed without competition in a casual conversation with the minister. I see you have appointed someone else to that position.
Mr Quigley : That is correct.
Senator IAN MACDONALD: Who is the new person?
Mr Quigley : The new person is a gentleman called Kieran Cooney, who has recently been with Telecom New Zealand.
Senator IAN MACDONALD: Was that position advertised?
Mr Quigley : I know that we used—which is not uncommon for such positions—a search firm.
Senator IAN MACDONALD: And just one name came to you and you appointed him?
Mr Quigley : No. As is usual in these circumstances, they provide a rather large list. You sit down with them. You go through the pros and cons. You come up with a short list. You then approach those people. You go through a range of interviews.
Senator IAN MACDONALD: So it was quite a different arrangement from the arrangement employed when the first incumbent held the job, for which, as I recall, there was no assessment and no list of names. He was appointed following a passing comment by the minister—
Mr Quigley : In the circumstances of being a start-up—when the company does not exist or it is obviously different from, say, our process now where we have an established company—we were appointing people who we thought could do the job and get on with it quickly.
Senator IAN MACDONALD: What is Mr Kaiser now doing? I see he has another job.
Mr Quigley : Mr Kaiser is now the head of quality.
Senator IAN MACDONALD: And what is his experience with quality?
Mr Quigley : Mr Kaiser is a qualified engineer. He is numerically, verbally and orally articulate. He is a very intelligent gentleman. He also has quite a high—
Senator CAMERON: Chair, can I raise a point of order here. I am not sure that the qualifications of an individual employee of NBN falls within our terms of reference. I do not mind a bit of give and take but this is a joke.
Senator IAN MACDONALD: I do not know if you want me to reply to that, Mr Chairman, but Mr Kaiser was a very political appointment. He was the subject of a lot of—
Senator CAMERON: His politics is not in our terms reference. He is entitled to be a member of a political party. It is not part of our terms of reference.
Senator IAN MACDONALD: He is more than a member of a political party.
CHAIR: Can you wrap it up, Senator Macdonald, because we are going to be hit by a bundle of divisions soon.
Senator IAN MACDONALD: I am. Before Senator Cameron intervenes: we knew what Mr Kaiser was being paid before for the role. Can you tell me whether his salary is the same, more or less?
Senator CAMERON: Again, I raise a point of order. This is not within our remit.
CHAIR: Senator, you do not have to take a point of order. This is the way I will play it, and I have played it: Mr Quigley, you can feel free to answer it or not answer it; it is at your discretion.
Mr Quigley : Mr Kaiser will now be reporting to me. Just by way of background: during my career, I did spend some four years running a quality function, so I know what attributes are needed to run a good quality function. Mr Kaiser has those. As to Mr Kaiser's salary, as he will directly report to the CEO, I am sure his salary will be published in due course in our annual report, and that will answer your question.
Senator IAN MACDONALD: We will be asking again at estimates, so please be prepared.
CHAIR: And that is the appropriate place.
Senator IAN MACDONALD: Mr Chairman, thank you. Finally, Mr Quinlivan, we heard that on 19 August the material was sent by NBN Co. to the department. Can you tell us, Mr Quinlivan, what date it was that the department sent the material to the minister?
Mr Quinlivan : I would have to take that on notice. I do not have the precise dates to hand.
Senator IAN MACDONALD: Knowing how efficient your department is, I take it that it would not have been more than a week later.
Mr Quinlivan : I will come back to you on notice.
Senator IAN MACDONALD: You said, I think, the audited reports only arrived today.
Mr Quinlivan : That is my understanding but I will confirm that.
Senator IAN MACDONALD: Perhaps also on notice, can you explain why, if they only arrived today, we did not get the material yesterday. You did not get this new stuff until today so the committee might have expected that yesterday the minister would have sent it to the committee. Perhaps on notice you might explain how you knew the audited reports were coming today, if you did know, or what the sequence was.
Mr Quinlivan : I am happy to do my best to explain the sequence.
Mr TURNBULL: Mr Quigley, just on the question of the report: when did you give the minister the report that was intended to be presented to this committee before its meeting today?
Mr Quigley : We provided the report to government on 19 August.
Mr TURNBULL: So they have sat on it for over a month. Very good. Well, very bad actually. Can I ask you about voice-only services. You answered some questions on that from Mr Fletcher. About a third of households, I think, have voice-only services. Is that right?
Mr Quigley : That sounds rather high.
Mr TURNBULL: Is that a bit high? Nonetheless, what is going to be the package that NBN Co. will offer RSPs who want to offer a voice only service? At the moment, as Mr Fletcher was saying, it is a very low, very affordable price. Then obviously there is a call charge. The wholesale charge you are proposing would not seem to enable an RSP to offer a competitive voice only product? You were talking about getting the facts out there. There is a lot of anxiety that we as members of parliament hear from people who say: 'What about me? I do not need broadband, I do not have a computer. I just want to have a phone line. Am I going to have to pay for broadband as well?'
Mr Quigley : Obviously, by far the greatest proportion of voice only services come from Telstra. We have, as I said, an arrangement with Telstra to look after those people, especially if you are on the special subsidised rate, the lower rate. We have taken care of that in the negotiations we had with Telstra. It is up to the—
Mr TURNBULL: Yes, but you were very unclear about that. Any Australian can buy a voice only service today, correct?
Mr Quigley : Yes, from Telstra.
Mr TURNBULL: Will they able to do that in the NBN future?
Mr Quigley : We do not provide voice services; we provide a wholesale service to retail service providers. What they then do with the carriage of those bits is their business. We have a basic service offering at $24.
Mr TURNBULL: Well, so far no RSP has offered a voice only product.
Mr Quinlivan : Perhaps I can add a little bit here. Telstra have not announced their pricing schedule yet, and neither have Optus. You would assume that they would be the two firms that would be most prominent in the voice only service market. The government has arrangements with Telstra, which we have discussed previously, to provide voice only services for the seven per cent outside the fibre footprint. They have a regulated responsibility nationally which progressively become a contractual obligation on them to provide those voice only services. I might be corrected by my colleagues behind me, but they have also got an obligation—and I think it is a carriers license obligation—to provide voice only products to low income households in accordance with recommendations made by a committee called the Low Income Management Advisory Committee. Telstra have indicated to us that they see all of those arrangements continuing into an NBN world, but they have not released prices yet, so we are unable to point towards to the definitive evidence of that. We are not anticipating any of those existing arrangements, or the ability of Telstra to offer those products, being disturbed by the transition to the NBN and wholesale pricing that NBN Co. will be charging.
Mr TURNBULL: Are you able to give an assurance that Australians who currently have a voice only service will be able to continue to have such a voice only service in an NBN world at no greater cost than they are currently paying?
Mr Quinlivan : That is certainly our expectation and we have a high level of confidence that that level of expectation will be confirmed when Telstra announces its pricing. But it would be premature of me to anticipate that. I do not know quite where Telstra is in settling its pricing for the future.
Mr TURNBULL: In your special access undertaking discussion paper, Mr Quigley, that you lodged with the ACCC, NBN Co. proposes to keep prices for its basic entry product, the 12 megabit product, fixed at $24—this is for the AVC—for five years, while seeking to have the right to raise the prices for the higher speed products by up to five per cent above CPI for up to 30 years. In New Zealand, however, Telecom New Zealand—which, of course, is splitting into a network business and the continuing retail business—through its Chorus wing has proposed setting prices at NZ$38 for its basic 30-down/10-up megabits per second product, rising to NZ$43 in 2029, with the 100-down/40-up meg product starting at NZ$55 and falling to NZ$50 in 2019. There is a very good graph in their roadshow presentation which shows that. It shows the higher speeds coming down and, in fact, the only product that is going up, and not by a great deal, is the entry level one, whereas the comparable graph for your business shows the entry speed staying fairly flat and the higher speeds going up.
Mr Quigley : Which graph is that?
Mr TURNBULL: I am saying a comparable graph, were one to draw it.
Mr Quigley : Which graph? We drew one in the corporate plan. Have you looked at the corporate plan?
Mr TURNBULL: I have looked at it extensively.
Mr Quigley : You will see the comparable graph in the corporate plan. What does it show?
Mr TURNBULL: You tell me what it shows.
Mr Quigley : It shows the prices going down.
Mr TURNBULL: Why are you seeking permission from the ACCC to put them up?
Mr Quigley : As you said right up front, there is a difference between the company's intention and predictions in the corporate plan and a special access undertaking.
Mr TURNBULL: Let me make this observation to you: the New Zealanders are committing themselves to making the higher speeds cheaper; you are seeking the permission of the regulator to increase the prices of the higher speeds very substantially.
Mr Quigley : Can I just clarify something. What did you say their basic price was?
Mr TURNBULL: For the 30/10 meg product—
Mr Quigley : That is their lowest speed?
Mr TURNBULL: That is their entry level price. It is NZ$38.
Mr Quigley : Ours is $24.
Mr TURNBULL: I appreciate that. I am not talking about the absolute prices; I am really focused on the fact that you have sought permission from the regulator to be able to increase very substantially the higher speed products, and yet—
Mr Quigley : We could certainly make quite some changes if we started with an entry level of $38 and brought it down over time. The whole business case would look different.
Mr TURNBULL: Please, there is no point having an acrimonious debate here. I am asking you a very simple—
Mr Quigley : I am not having an acrimonious debate, Mr Turnbull; I am answering your questions.
Mr TURNBULL: You are, Mr Quigley, really. You are treating this committee with contempt.
Mr Quigley : I certainly am not.
Mr TURNBULL: You are treating it with contempt, now please—
Mr Quigley : I do not believe so.
Senator CAMERON: This is a point of order. You cannot just make assertions against Mr Quigley. We know what you are about. You have been told by your boss—
Mr TURNBULL: We know what you're about—that is very obvious.
Senator CAMERON: to go out and destroy the NBN.
Mr TURNBULL: Oh, rubbish.
Senator CAMERON: You are making a ham-fisted job of it. So don't attack Mr Quigley. Get on with your smart questioning but stop attacking Mr Quigley.
Mr TURNBULL: Mr Quigley, the only point I am trying to get at is that the New Zealanders are committing to bring the prices for the higher speed products down, whereas you have gone to the ACCC and sought permission to be able to increase them every year for 30 years by CPI plus five per cent.
Mr Quigley : Could I refer you to page 101 of our corporate plan, which is our intention.
Mr TURNBULL: I will get it now.
CHAIR: While you do that, Senator Xenophon, do you have a question?
Mr TURNBULL: No, seriously, I will have it here in a minute. Mr Quigley has referred me to it, and I think we can deal with it. Okay. Now, Mr Quigley, what did you want to refer me to?
Mr Quigley : I wanted to point out that the prices per month are decreasing over time.
Mr TURNBULL: I acknowledge that that is what you have there. But the point I am making is that this is what you put in your corporate plan as your expectation. Is that right?
Mr Quigley : Yes.
Mr TURNBULL: But what startled people—and it startled me—was that in your special access undertaking discussion paper that went to the ACCC you sought permission from them to increase the cost of those high-speed products by CPI plus five per cent every year for 30 years.
Mr Quigley : I do not think that is correct, Mr Turnbull.
Mr TURNBULL: Then what did you ask for in the special access undertaking?
Mr Quigley : I am, frankly, surprised that you are startled. Surely you would understand that there is a difference between the plan of the company, which is outlined in our corporate plan, and the regulatory framework we would like to put in place. We know we are going to be subject to regulation. It is, I think, up to the ACCC to decide what all those trade-offs are, and that is what we are discussing with them. I will reiterate again that our intention in the company is what we have documented in the corporate plan.
Mr TURNBULL: I am not challenging what you have said in the corporate plan as a statement of what your current intention is. The simple point I am trying to make is that whereas the New Zealanders are making a commitment—and you would say it is comparable to yours, I suppose—they are not, as far as I am aware, seeking permission from their regulator to be able to increase their prices for all but their entry product for every year by the CPI plus five per cent, which would obviously work out to a huge number over time.
Mr Quigley : But Mr Turnbull, I am sure you know that in the arrangements with the ACCC we are seeking a return for the government on prudently incurred costs, and we put that in our discussion paper. There is going to be a revenue ceiling on the company, as you would expect with a company such as this. So the ACCC will manage that. They are the competition regulator. They are the discussions we are having at the moment. It is not a simplistic picture. It is a complex picture, and I am sure you would trust Mr Sims and the ACCC to do their job properly.
Mr TURNBULL: I am sure they will do their job properly. I must say, I am disappointed that you have reacted to this question in this way.
Senator CAMERON: It was you who reacted, because you were getting nowhere. It was you who reacted, because you were getting taken to pieces. What a joke you are.
CHAIR: Let us keep it to the questions.
Mr TURNBULL: As I understand it, the objective of the NBN is to transition users to higher speeds. You would not build a network with this capacity if you thought everybody was going to stay at the entry level. Is that correct?
Mr Quigley : That is correct.
Mr TURNBULL: So one would anticipate that the higher speeds will become cheaper, or more affordable, over time. The NBN is going to be a monopoly, plainly—really with virtually no fixed-line competition. It seems odd to us that, given that the objective is to get people up to higher speeds and given that it is a monopoly with the ability to pretty much set whatever price it likes, it is seeking from the regulator—
Mr Quigley : I have to disagree at this point.
Mr TURNBULL: Please, disagree. What have I got wrong?
Mr Quigley : To say that we can set whatever prices we like is simply not factual. We cannot set whatever prices we like. The whole purpose of the undertaking is to make commitments. By the way, as I said, the business cases would be much simpler for us if we set the entry-level price at $38. Then we could almost guarantee that it would go down. But we did not do that. We set it out $24 in order to make sure that we looked after the people we expect to be on the lower speed. There are going to be quite a number of people for quite a period of time who are going to be on the lower speed; that is sufficient for them. Over time, it will increase.
We have also made a commitment that we will use any returns above the seven per cent projection to lower the prices. We expect that that is what we will be working with the ACCC and the commission to do. They will put a revenue cap on us on the basis of prudently incurred costs. That is the aim of the company. That is what the government has asked us to do—in other words, build a network; get a satisfactory return, which I think we have agreed is seven per cent; and keep prices as low as we possibly can. What motivation would we have for doing otherwise?
Mr TURNBULL: The motivation you would have, I would suggest, would be to achieve a return on a very substantial—enormous—capital investment. To achieve even that regulated return—that seven per cent of which you were speaking—you are going to need to generate a very high level of revenue. But you are reserving the right—what you are saying, I think, is that the fact you are reserving the right does not mean you will exercise it—
Mr Quigley : Precisely.
Mr TURNBULL: You are reserving the right to be able to increase the price of the higher speeds by CPI plus five per cent. That is giving you an enormous amount of scope within that envelope of the regulated return to charge much higher prices for the higher speeds.
Mr Quigley : But our prices will be regulated.
Mr TURNBULL: But that is true, isn't it?
Mr Quigley : But our prices will be regulated.
Mr TURNBULL: Let us see if we can agree and then we can wrap it up.
CHAIR: And, if you cannot, we will wrap it up.
Mr TURNBULL: I think what you are saying is that you have an overall revenue cap so that you cannot generate more revenue in such a way as to result in your earnings delivering more than the seven per cent return to the government. Correct?
Mr Quigley : In simple terms, yes.
Mr TURNBULL: Okay. But, given the scale of the investment and the amount of capital that is invested, the revenue figure that would deliver that return when the network is built is a very large one, isn't it?
Mr Quigley : Yes, and we are doing our best to keep that number within bounds. But, as you have seen, your colleagues, such as Senator Macdonald, would like us to go to places that are very expensive. So we are trying to make sure we prudently spend taxpayers' money.
Mr TURNBULL: In a competitive environment—it does not matter whether it is telcos, cafes or whatever—if you overcapitalise your business and you want to earn a seven per cent, or even a 17 per cent, return on it, you are constrained by your competitor. That is correct, isn't it? You may feel you should be able to charge $100 per unit cost but, if your competitor can charge $50, you have to meet the market?
CHAIR: Is there a question? This is not a market economic—
Mr TURNBULL: Please.
CHAIR: It has to be relevant to NBN Co.
Mr TURNBULL: It is very relevant to the NBN. That is right, isn't it?
CHAIR: You cannot ask him to reflect on market economics.
Mr Quigley : For one thing, it is not my area of specialisation; I am a telecommunications engineer. Also, this is a policy issue. The question of building the NBN is a policy issue. It is really better directed to the government.
Mr TURNBULL: I understand that, but this is the simple point I am trying to make. I think that, in summary, what we have agreed is that, yes, there is a global cap but, nonetheless, to meet that return will require the NBN to generate very substantial revenues. Within that very large envelope, notwithstanding the graph you pointed out to us on page 101 of the corporate plan, with which we are all very familiar, you have sought from the ACCC the ability to increase those higher speed prices by CPI plus five per cent in each and every one of the next 30 years, without any constraint other than the global revenue envelope—or profit envelope, I suppose we should call it—from the ACCC.
Mr Quigley : I want to be very clear: I do not agree with that statement.
Mr TURNBULL: What was wrong?
Mr Quigley : It is too simplistic a view of the complex process that the ACCC and we are going through. It is not a reasonable representation of it. So I do not agree with it.
Mr TURNBULL: Just tell me: what was not correct? Please correct me, Mr Quigley, if I have made an error.
Mr Quigley : If you have a great deal of time. That is what the SAU, the special access undertaking, is all about. It is a complex set of factors. Our intentions are clear in the corporate plan, and I certainly trust the ACCC to do their job properly as the competition regulator and make sure we are properly regulated. We expect to be properly regulated.
Mr TURNBULL: I have just one more question. If that is right, why did you not, in your special access undertaking, offer to the ACCC a commitment to keep the prices of the higher speed products at the relatively flat line that you committed to with respect to the entry-level product.
Mr Quigley : Because when you are entering into a 30-year special access undertaking you want to have some flexibility. We do not know what year. There could be some particular elements of our total offering that we may want to vary up under certain circumstances. It is possible. What we are doing is just not closing off that option, but that is a part of a much bigger picture which the competition regulator will regulate.
Mr TURNBULL: So, despite the graph on page 101, it is possible that within the SAU that you hope to negotiate with the ACCC prices for the high speed products will increase, not decrease?
Mr Quigley : What I say to you is that there could also be some new products that we introduce which we do not know about yet—some variant of multicast products, for example, that we find that people put a lot of value on—and it allows us to lower faster basic services. We need that flexibility to do that if we think it is in, or if the ACCC thinks it is in, the long-term interests of end users.
Mr TURNBULL: But the answer to my question is yes, isn't it?
Mr Quigley : I gave you the answer to the question. It is not yes or no. That is the answer. It is a complex process.
Senator XENOPHON: I have just one question referring to Senator Ludlam's line of questioning about remote areas; he mentioned the APY lands. I have been approached by—
Mr Quigley : Sorry, Senator?
Senator XENOPHON: Senator Ludlam asked a line of questions about remote areas, including the APY lands in South Australia, earlier on this evening. The question that I put relates to representation—
CHAIR: Do you want to explain the acronym 'APY' to us?
Senator XENOPHON: It is the Anangu Pitjantjatjara Yankunytjatjara lands in the far north of northern South Australia—in other words, particularly remote Indigenous communities. That related to Senator Ludlam's line of questioning. I have been approached by medical practitioners that work in rural and remote areas and are concerned that the full benefits of e-health with the NBN will not be able to be accessed by them, because they will have to rely on satellite in those areas—that three per cent—that you cannot get to. To what extent are you taking those issues into account? There is the potential for e-health to deliver better health services, but you need that reliable, fast broadband through satellite.
Mr Quigley : Very seriously, Senator. We are looking at it very hard now as we are trying to finalise our satellite. We are negotiating with space segment providers about what we can do to make sure we get a good, high-speed service—a kind of equivalent business service—that is capable of high-definition videoconferencing, and to dimension that so that, as well as the 12/1 service, if you like, we also have a service that can do higher speeds with higher capacities for just such applications.
Senator XENOPHON: But for medical applications it also involves not just videoconferencing, which is important, but also sending some medical data and scans through.
Mr Quigley : Absolutely. These are scans, radiographs, high-definition radiographs—all of that. So, yes, that is exactly what we want to try and make sure—
Senator XENOPHON: Perhaps you could take that on notice. It is just that I promised to get back to those constituents that were concerned about that.
Mr Quigley : In fact, I think I can undertake for the committee to try and summarise what it is we are doing on the satellite service to make sure that we look after those special needs of rural health and remote health.
CHAIR: I hope it is something that I could speak on half of the whole committee on in urging you to pursue that, because I think there is a lot of interest across party lines in that regard.
Senator XENOPHON: Yes.
Mr Quigley : We will try to summarise that in a page which will present to the committee.
Senator XENOPHON: If I can just elaborate very briefly, Chair, I think the concern was that it has to be of a sufficient quality and speed; otherwise it will not be worth doing, and the potential for having those, particularly, Indigenous Australians having access to that—
CHAIR: Indeed, that is the whole point of the exercise.
Mr Quigley : We absolutely understand.
Senator XENOPHON: Yes.
Senator XENOPHON: Thank you.
CHAIR: Senator Macdonald just wanted to correct the record, I understand, in a comment that he made.
Senator IAN MACDONALD: No, a comment Mr Quigley made, but knowing—
Senator CAMERON: You mean to correct Mr Quigley?
Senator IAN MACDONALD: Knowing how Senator Conroy and Senator Cameron sometimes misunderstands these things, Mr Quigley—
CHAIR: As did both the chair and the deputy chair.
Senator IAN MACDONALD: Mr Quigley indicated that people like me had been petitioning for Julia Creek. Just to make the record correct if you look at Hansard, I have not petitioned for anyone. I have simply asked questions in relation to Julia Creek. I have not petitioned for anything for them.
CHAIR: Okay, it is now on the Hansard. Thank you for attending today. Obviously you have been asked to provide additional information—the department has been—so could you please forward it to the secretariat as soon as possible. Is it the wish of the committee to authorise for publication, including publication on the parliamentary database, the transcript of the evidence given before it at public hearing this day? There being no objection, it is so resolved. Thank you to colleagues and witnesses for your time today.
Committee adjourned at 20 : 15