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Standing Committee on Infrastructure and Communications
10/03/2011
Role and potential of the National Broadband Network

CHAIR —Welcome. The committee does not require you to give evidence under oath, although I should advise you that the hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. We have not got a written submission from you. Would you like to make an opening statement to the committee before we go to a question and answer session?

Mr Connor —Thank you.

Mrs PRENTICE —Will you be making a written submission or not?

Mr Connor —Not at this point in time. Thanks for the invitation to appear and thanks for coming down to Tasmania to have these hearings and to see the NBN installation for yourselves. It may be something to be believed to see it in action, but I am sure you have had some good feedback about it.

I will just tell you a little bit about Digital Tasmania. We have been around for about three years. We first arced up about the Basslink problem. Tasmania was serviced by just two cables from the one operator, with no competition. The Basslink power cable included a fibre cable that was sitting there for three years before it was lit up. During that time the state government was paying $2 million a year for that facility. We thought that was wrong, so we brought it to prominence. After some time, negotiations and work it was finally put to use. It has been five years since the power went active and the universities are finally on it in Tasmania.

DigiTas is the consumer group for digital issues here in Tasmania—digital television, radio and some internet election laws that do not really mesh with the world these days. We have become the go-to organisation for these sorts of issues in Tasmania to provide comment on the consumer’s behalf. We appeared before the previous Senate NBN committee on three occasions, as well as an ACMA inquiry a little while ago. We were also represented on the Tasmanian Digital Industries Advisory Council, until the council was dissolved late last year. We have not made a submission, but we support the submission made by the Australian Communications Consumer Action Network, which is the umbrella body for our types of groups in Australia.

I would like to concentrate on the awareness of the NBN, or lack there of, outside of these first three towns and also on the uncertainty of what people are going to get, whether it’s fibre based NBN, wireless or satellite NBN. I am happy to address questions in that regard.

I will give you an introduction to the situation here in Tasmania. First of all, we very much support the NBN. It has been said that we do not support it, but we do. In our submission to the NBN Senate inquiry a few years ago we called for Tasmania to be first and to have a fibre based NBN when we were still talking about fibre to the node.

Awareness has been rather lacklustre outside the first three towns. NBN and fibre-optic are sort of name dropped at every opportunity by the state and federal governments, but people are not really told what that means to them and what it is going to do for them in the real world in real terms. That is getting down to the cost of it as well. Earlier today you talked about take-up. Maybe I will come back to that when the deputy chair is here. There are various reasons why take-up and actual use of the service are at the levels they are at the moment, and I can address that a little later.

CHAIR —That is really useful. Obviously of great interest to us are the points you raised around people’s awareness of it, its capacity and purpose. Certainly the terms of reference the minister has given this committee include looking at that. It has been interesting to hear from the council representatives and the business chamber in those areas that some of the non-take-up could be linked to people not being aware of what is available and what it will provide to them. You are a Tasmania wide organisation; is that right?

Mr Connor —Correct.

CHAIR —Do you want to give us a snapshot of the current usage across Australia from a consumer perspective?

Mr Connor —For the internet broadly or just the NBN?

CHAIR —For the internet broadly.

Mr Connor —We have the ABS figures to go on, which I am sure are available to you as well. They are quite dated. The most recent ones have not come out yet. Over the last two periods, internet usage has actually declined in Tasmania, which is a little odd. There may be some statistical aberrations there.

People in Tasmania do want to use the internet, but up until a couple of years ago there was very limited choice at the infrastructure level. Certainly there were 100 or so ADSL resellers through the incumbent’s network, but they were still hamstrung in getting their data in and out of Tasmania. The mobile operators, for example, have to use the incumbent’s cables across Bass Strait still. It is the only relatively recent addition of Basslink that has provided a lot more capacity and lowered prices across the board, but for those to provide a reliable service they need to use the incumbent’s cables. So Tasmania has been hamstrung by the lack of choice there, which has led to higher prices.

CHAIR —How much of it is a chicken and egg situation from your experience or perspective? You heard in the previous evidence about a lack of service, meaning that they do not know what they do not know—I am sure I can steal that great statement from across the sea—and therefore are not engaging with the potential in the way that you indicated. How much of it is that it is not needed? What is your perspective on that?

Mr Connor —Perhaps the historical part is that we just have not had that competition at the infrastructure level. You go to the mainland and see massive billboards for other providers saying they have got great deals and that is coming off their infrastructure. Here, until about a year ago, you only saw advertising from one provider. When Basslink came online, a couple of other providers put in their own DSLAMs in about a dozen exchanges but still they only covered 100,000 out of 240,000 premises. Then you started seeing the advertising for those providers so that would have opened some people’s eyes to choice and better value. That is hopefully opening the eyes of people to their options.

Additionally, in the mobile space, we are seeing one of the other providers ramp up their number of towers in the state. They have been edging up their advertising of that to tell people they have got a choice, and there will probably be more of that in the months to come.

CHAIR —Has there been some controversy around that? It is my experience generally that tower construction can create some controversy.

Mr Connor —Certainly with new towers going up there is apprehension in the community over the unsightliness of them and potential radiation hazard, but the radiation hazards are managed by standards. They do not look great, but if you want a service that is the one downside of it.

CHAIR —So that is a conversation going on at the same time.

Mr Connor —Yes. Over the last couple of years as this rollout has expanded.

CHAIR —As a consumer group, do you get much feedback from your membership about their experiences with being on the receiving end—if you like, their awareness of fast services, entertainment capacity; whatever it is they are interested in—about what is available but they are aware they cannot utilise because of the speeds they have got in their home, business?

Mr Connor —The experience here is that you are very much limited with the connection you have got at the moment. Those that are on the NBN have said they are very, very happy with the speeds, as you have probably heard. They can download whatever they need, watch YouTube at the highest quality video settings, whereas that is very hard on an average ADSL2 speed which is about 10 megabits. Below that, it becomes really difficult to watch those high-quality feeds, for example, from YouTube.

Mr FLETCHER —In your 2008 submission to the Senate committee, you talked about the existing ADSL2+ infrastructure in Tasmania and said it would be unfortunate if that were stranded by the NBN operator. What is your perspective therefore on the deal that has been announced between Telstra and NBN Co. under which Telstra will be required to shut down its infrastructure?

Mr Connor —When that submission was made the proposal on the table for the NBN was a fibre-to-the-node process, which would have definitely stranded their equipment. It is perhaps a similar situation in that Telstra will be obliged to shut down the copper network, which then cuts off the third-party providers in their exchanges. We need to wait and see a little longer—and I am not totally across the details of that agreement. That infrastructure should not be cut off. The copper network should not be cut off until people have an adequate alternative. We believe that if someone has an ADSL service now, they should be getting a fibre service in the future.

Mr FLETCHER —If I can put the question to you another way: would you think from first principles that it would make sense even if a new fibre infrastructure was coming along to leave alternative copper based services there so as to maximise the amount of competition and choice in the marketplace?

Mr Connor —The fibre network, the NBN network, as we are led to believe, should be a wholly open network to any provider where none is favoured over another. That is not the situation in the ADSL space at the moment. We believe that is an improvement to the fibre network—and it is only the fibre network—but you should not lose your ADSL service, if you have one at all, until you have a fibre based service. We understand there are certain economies of scale in running an ADSL service if it is only available in some small places. It is clearly uneconomical to run then, but it is potentially going from a service of 10-20 megabits then back to what is promised at the moment of 12 megabits on a fixed wireless service that we do not find very appealing. Whereas some communities may have 100 megabit or more fibre, others, quite a short distance away, will have far inferior service even if it is over wireless.

Mr FLETCHER —On wireless, what do we know right now about the likely timing of the arrival of wireless based NBN services in Tasmania?

Mr Connor —I am afraid we do not have any information on that.

Mr FLETCHER —Am I right that much of Tasmania would have been covered by the OPAL network if that had gone ahead?

Mr Connor —I think a large part of it. But that was also inferior technology at that stage of the time of its development. It also relied on ADSL2.

Mr FLETCHER —No, I am talking about OPAL wireless.

Mr Connor —I am not overly familiar with exactly what technology it would use, but we still have a preference for fibre connections where available. Where someone has got an ADSL service at the moment they should get a fibre service.

Mr FLETCHER —Sure, but just on wireless I want to check this, given your knowledge of the Tasmanian situation: is it correct that the consequence of what is now proposed with wireless is that it will be several years before a new wireless service is introduced in the areas that are to be served by wireless and at least some of those areas could have expected to get wireless much more quickly had OPAL gone ahead?

Mr Connor —It could have been but across the board it would have been an inferior service provided to the country. As for those areas that are now waiting for wireless again, hopefully they will still have ADSL up until that point in time. Fibre will probably be a long way off being rolled out around the country, so then we could also look at further expanding the fibre rollout to at least cover those areas that have ADSL.

Mr FLETCHER —So I can understand one particular thing you are saying, is this a fair statement? You are not supporters of ADSL services being withdrawn in areas that are scheduled to get wireless.

Mr Connor —Correct.

Mr FLETCHER —On the backhaul issues which, as you have talked about, are very distinctive in Tasmania, what was your organisation’s view about the proposal that there only be 14 points of interconnect from NBN Co.? Did that raise any concerns for you?

Mr Connor —I believe under that proposal there was not a point of interconnect in Tasmania. There are various pros and cons of having a point here. By not having one in Tasmania all the traffic would be trunked back to Melbourne, for example, by the NBN and then ISPs can connect in there. That saves the ISPs. ISPs are footing the bill of getting across Bass Strait, whereas of today there are still not competitive and reliable connections across the strait. That would then be the benefit, that we would be on an even footing with the rest of the country. I believe they are now maybe tending towards having POIs in Launceston and Hobart, so then the ISPs and RSPs would be responsible for getting that connection across. On some of the NBN maps released during the election campaign by the government there was another fibre cable pencilled in at the western side of Bass Strait. Presumably, that would provide a competitive and reliable service across Bass Strait in some form. We are yet to see any more details of what has happened with that. We understand there are two- to four-year time frames from purchase to activation on those sorts of systems. But we are almost two years down the path of the NBN in its fibre form and we would really like to know where that other fibre cable has got to.

Mr FLETCHER —Do you have any concerns about the fact that NBN Co. is going to, as it were, cover the field? In other words, we have talked about the fact that it is going to replace existing ADSL infrastructure. We also now know that NBN Co. will own and operate the wireless network whereas it had previously been proposed that that be done by a separate player rather than being NBN Co. alone. Do you have any concerns there is a risk that that effectively centralises all the decision making in North Sydney and every relevant network decision that affects any consumer in Tasmania is being made in North Sydney?

Mr Connor —I hope that some consultation is done on the ground. As you have heard, NBN Co. has just employed a community consultation representative in Tasmania. We feel that is long overdue. It should have happened a lot earlier on. As for having one company operating the network, they have their set goals to provide a wholesale network without the complication of also being a retail provider. We feel that is enough separation of their powers for them to provide an equitable network across the country. We hope we do have an input as to where they put fibre and wireless networks. For example, there are a few townships to the north of here, about 15 kilometres away, being Dilston, Hillwood and Windermere, with about 750 premises altogether in a 20-kilometre area. They are facing the prospect of going from ADSL1 and ADSL2 services to a fixed wireless solution.

Technically, it is about the same or a little worse. For ADSL2 it is getting worse, but they are so close to the edge of the city here that they are denied the possibility of using fibre networks. This is where we need the input into the decision making of NBN Co., either through the business channels or through the political side, so that these sorts of townships, which are so close, do get the proper service they deserve.

Mr FLETCHER —On the pricing to end users, has your organisation had any discussions with the ISPs about what is likely to happen once they start having to pay a wholesale price to NBN Co.?

Mr Connor —No, we have not.

Mr FLETCHER —Do you have a view on that issue?

Mr Connor —We have seen that there has been a wholesale price set of, I think, $54—correct me if I am wrong—for the basic service.

Mr FLETCHER —I think it is $24.

Mr Connor —I am sorry. The ISPs and RSPs have to add something to that, so you may see the basic service go above what it is now—say, $29 to $39. But that is still far below what you are paying for an ADSL service in some places which, if you are lucky, gets to 20 megabits. You practically cannot buy a 100-megabit service as a residential customer—or, if you do, you are paying a serious amount of money. To see a 100-megabit service at, say, $50-$60 a month is still a bargain, and to take away the fixed line rental that you are paying of $20-$30 a month for a service that many people do not use—they have it just so they can get an ADSL service—is clearly a saving in the long run.

Mrs PRENTICE —We heard earlier that the North East Tasmanian Chamber of Commerce felt that their members had a wait-and-see approach and only now are getting interested. Does Digital Tasmania believe that perhaps other places are better suited to get fibre rollout first—anxious for it, needing it—and perhaps one of the issues that NBN needs to look at is when and how they roll it out?

Mr Connor —The decision of where to go next, and then next, really could be done at random—a toss-up in the air, throw the cards and see where they lie—because in the end we are all going to get a better service, predominately fibre and then wireless satellite for others. So there is perhaps no real advantage of one town over another; we are all going to get it eventually. Many areas of Tasmania have had a rather even level of ADSL service and quite a number of the exchanges, 130-odd, have ADSL and can get a number of providers through that one wholesale provider. But it is the additional level of choice and competition through the NBN and the added capacity that provide the real advantage. It is just going to take until we get that critical mass where a majority of towns, cities, residents and businesses have it. Then you will see the benefits of people being able to send their files very quickly across the state and across the country.

Mrs PRENTICE —You commented before about the need for a competitive and reliable connection across Bass Strait. We heard earlier today that there is certainly no problem with capacity, reliability and size and that it is merely a matter of making it available. Do you disagree with that?

Mr Connor —It is just a matter of money, really. Cable has been estimated at about $40 million.

Mrs PRENTICE —But it exists there now.

Mr Connor —There are two cables by the incumbent and one by Basslink. A fourth one was pencilled in by the government during the election on their NBN maps, and I think that was also in the OPEL maps in a very similar position. Tasmania needs that fourth cable.

Mrs PRENTICE —Do you think they need the four cables even though the ones that are there now are not at capacity?

Mr Connor —Certainly they have got capacity, but it is about who owns them and the competitive nature of that ownership.

Mrs PRENTICE —What style of unreliability is there at the moment? Is it at different times of the day?

Mr Connor —If a cable is cut you are up the creek. For example, during recent storms on the east coast of Tasmania a whole section of highway shifted sideways by two lanes. That took out the cable running down the east coast from Melbourne to Hobart. Because there was a backup link through the middle of Tasmania, everything stayed online. If the other one went down, almost everything would be offline in Tasmania—mobile phone calls, banks, many ISPs. It could be all ISPs because a lot of authentication and switching still goes through those two incumbent cables. That is why we have redundancy.

Mrs PRENTICE —Why start Digital Tasmania three years ago when you had existing organisations like ATUG and AIIA, which have been campaigning for competition for many years?

Mr Connor —We felt something was needed on a state-wide basis, on a more local basis than those national organisations.

Mrs PRENTICE —You did not open up chapter for them down here?

Mr Connor —No.

Mr NEVILLE —I will try to keep my questions short. I hope you did not answer this question while I was outside. What is the theoretical limit of the fibre going outside the existing towns? How far is it likely to go—two, three, 10 kays? What is the experience so far? What is the story there?

Mr Connor —The figure we have been told, to reliably provide 100 megabits at the moment, is 15 kilometres.

Mr NEVILLE —Then they will go wireless, will they?

Mr Connor —Presumably.

Mr NEVILLE —Beyond wireless, satellite?

Mr Connor —Correct.

Mr NEVILLE —Do you say that the government, in its original pitch to Tasmania, talked about a fourth crossing of Bass Strait?

Mr Connor —Yes, I can provide you with that information.

Mr NEVILLE —Can you provide the committee with that?

Mr Connor —Sure.

Mr NEVILLE —We can have it as an exhibit. Finally, what is your take on the difference between those who have accepted boxes on their houses and those who have actually taken up the fibre broadband service?

Mr Connor —Our take is that a large percentage took it up because of the awareness in those towns—it was done sufficiently or in a satisfactory way there; it was free so that was a main incentive—versus the 15 per cent who have currently signed up with a paying service. We believe and we have heard through anecdotal evidence that many customers in those towns were sales slammed by other RSPs in the months leading up to and during that period. That is, they got locked into a 24-month contract, with a free bit of hardware. So they are locked into that provider for the duration. When that provider gets on the NBN they can then go back to the customer and say, ‘We can swap you over for no cost. Just sign up for another 24 months—stay with us.’ It is clever business. Unfortunately, the people did not—

CHAIR —So they do not show up in the 15 per cent; is that what you are saying?

Mr Connor —Correct. The ones who have a contract with a current provider on ADSL or wireless are stuck, for lack of a better word, until that provider comes on to the NBN.

Mrs PRENTICE —So you are saying you cannot have a different product from a different provider. You are stuck with the one provider?

CHAIR —You pay out your contract.

Mrs PRENTICE —It is hardly an open network, is it?

Mr Connor —These people are stuck on their existing ADSL or wireless, so they could very well buy two connections. But why pay twice for something you only need once?

Mr NEVILLE —On that point—correct me if I am wrong—of the existing NBN provided linkages, are they coming direct from NBN and not through an ISP?

Mr Connor —The linkages—

Mr NEVILLE —You told us earlier in evidence that when the ISPs become fully active in Tasmania and NBN wholesales its product you will be paying a minimum of, I think, $54. I think that was the figure you used—

CHAIR —$24.

Mr NEVILLE —No, $54 wholesale.

Mr Connor —No, I was incorrect.

Mr NEVILLE —You said $54—that is what excited my interest—not $24. Of that 15 per cent who are linked up, are all of those buying through an ISP?

Mr Connor —Correct, or RSPs in new terminology.

Mr NEVILLE —And the NBN does not provide any direct services?

Mr Connor —No, they are just the wholesaler.

Mr NEVILLE —Even in this initial phase?

Mr Connor —Correct.

Mrs PRENTICE —Can you buy different products from different providers?

Mr Connor —There are four retail providers. The thing I mentioned before is that they were stuck with their existing ADSL or wireless—

Mrs PRENTICE —I understood that. Paul fixed me up on that one. But can you now buy a different product from a different provider?

Mr Connor —We have a choice of four on the NBN, and I am sure they will expand to 100 or 150 in the coming years to match current provider levels.

Mr SYMON —Andrew, I would like to also go back to your organisation’s submission to the 2008 Senate inquiry. I particularly want to ask you about the TasCOLT fibre-to-the-premises trial. I have not seen much on it. I suppose it probably was not commented on that much outside of Tasmania. Could you give us a brief overview of what that was, its capacity and its take-up.

Mr Connor —Certainly. There was a report done by the Tasmanian Electronic Commerce Centre. I think you will hear from them tomorrow. They did a report at the end of that trial. You could ask them for it or I could supply it to you. It will correct me if I am wrong on anything. I think the state government and a couple of partners put about $10 million into this in 2003 to provide a proof of concept of a fibre-to-the-premises network. It was concentrated in Newtown, North Hobart near the CBD and also in the Devonport CBD. I think it passes about 1,250 premises. I cannot recall the exact number of connected customers it had at the peak—maybe about 300. Late 2009 they conducted a TiVo type trial over it and they acknowledged they had 130 remaining active customers on it. That is because the TasCOLT service as a service provider just could not compete with the then ADSLs. The other ADSL2 providers that are coming to Tasmania in those areas just blew it away for cost. Speed was rather congested because they did not have the buying power to get their connection in from mainland Australia. It is definitely a good concept. It is probably what won the NBN for Tasmania—at least to be the first cab off the rank to show that this technology does work. I think it is very similar technology, but it was kind of a neglected network in the end. It is underutilised at the moment. It may well have hooked onto the NBN very easily, because 90 per cent of the gear is probably very compatible with the NBN. We are disappointed that has not happened because that would have been an instant couple of hundred or even 1,000 customers for the NBN. But TasCOLT has served its purpose well and we hope that it does not get ripped out and that is reused when those suburbs get connected to the NBN.

Mr SYMON —What speed did that fibre to the premises operate at?

Mr Connor —I will have to check in the report. It could have been up to eight megabits.

Mr SYMON —So against ADSL it has not got much chance.

Mr Connor —When it was put up, though, we had ADSL at 1.5 megabits.

Mr SYMON —That was in 2003. We have moved a long way. Was it competitively priced at the time?

Mr Connor —I am not familiar with how it was priced back then, but it is not at the moment.

CHAIR —I want wrap up and give you a chance to make one observation. I will take it to RDA Tasmania, who are coming here shortly too. You mentioned things like YouTube quality video and so forth and the consumer perspective. I am conscious in the tourism industry that the capacity to have video linked to your product online internationally seems basic. I am just wondering if your organisation has had much comment or feedback from people about those issues locally.

Mr Connor —Video is often hosted somewhere out in the clouds. So you actually hosting it is not the problem. It is you getting the video up to that cloud that is the issue. That is where a wireless service which still has asymmetrical speed characteristic of 12/1 makes it a little slower to upload decent video. But also for the tourism industry it is them having that connection so that guests can use it when they come on holiday. Some people want to get away from it all, but some people still want to stay connected to everything. They want to upload their holiday videos and pictures to their friends so they can see them instantly.

CHAIR —So you get feedback that that is an issue?

Mr Connor —Yes. That is where a fibre based NBN would be superior over a wireless one.

CHAIR —I was just commenting on the flight down that I was looking at a travel book talking about a new company doing a cloud based upload for your photos and videos as you travel.

Mr Connor —Just in closing, could I also submit to you some work done by the communities of Hillwood, Dilston and Windermere on their disappointment at being tagged to get wireless rather than fibre?

CHAIR —Sure. That is fine. Thank you very much. Thanks for your attendance here today. If you have been asked to provide any additional information just forward it to the secretary. You will be sent a copy of the transcript of your evidence to which you can make corrections of grammar or fact. Thanks once again. It was very useful.

Proceedings suspended from 3.14 pm to 3.27 pm