Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
STANDING COMMITTEE ON INFRASTRUCTURE AND COMMUNICATIONS
11/03/2011
Role and potential of the National Broadband Network

CHAIR — Welcome to today’s hearing. The committee does not require you to give the evidence under oath, but 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 do not have a written submission from you to the inquiry. Would you like to make some opening remarks and then we will have a question and answer session?

Mr Wallace —Thank you, Chair, and thank you for inviting me along and giving me the opportunity to be able to put some points of view across with regard to the NBN here in Tasmania. I will cover several areas. One will obviously be from a business perspective, but I am equally happy to comment on some of the liveability and well-being features because that would impact directly on being able to attract and retain workers in this state. We have a significant shortage of skilled labour here and so the more that we can provide a place which is comfortable for people to live and still remain connected with their families, if they come from the mainland, then the better it is for business.

I will quickly mention a couple of quick areas. The opportunity basically is that by being an island state we are in a position where something like the NBN would allow us to access global markets. I can give some examples a bit later if we have time about how this can impact on bringing business partners together from a long distance and in a very physical sense being able to share products and services. The other area that we see is the improvement of productivity. This state is diversified in industry sectors. If you take out government services—which are the biggest employer in this state—then there is retail, but then it moves to agribusiness and then into mining and tourism. In agribusiness there is forestry and food processing, so I have lumped all those together.

Higher productivity would mean less travel time. For example, for people from Burnie to go to Hobart it is approximately a four to 4½ hour trip. It is about the time, the costs and if you can do it in a day and back safely—those sorts of things. The population in Tasmania, as you would be aware, is very well spread with about half in the south, mainly in and around the hub of the greater Hobart area. The Launceston area has about 120,000 people. In fact, 115,000 live within about a 40-minute drive from Launceston. Once you get to Devonport there is this long narrow strip all the way to Wynyard, which is mostly composed of suburbs, hamlets and towns. So there is a great spread. This causes lots of problems and I will try not to digress too much.

To give you an example that relates to education and training for young people, apart from the cities in Tasmania, there are very few schools that actually go through to year 12. At year 10 young people have to leave or travel quite long distances to attend colleges and do years 11 and 12. This has had significant impacts. We are the state that has one of the lowest flow-ons of people going from year 10 into years 11 and 12.

Again, something like an NBN which can deliver education services et cetera in a virtual classroom would be quite attractive. The same thing applies equally to business. In Tasmania about 87 per cent of all businesses employ less than five people. Someone may need to be doing a course or some program—they may be part of the EET program—and they may work in Wynyard but the course may be delivered in Launceston or Devonport, and they would have to take significant time off to attend. Whereas, if there was a video conferencing screen in their lunch room or in the town where they worked, then they would be able to link into that.

We see the opportunity for new employment opportunities. We have one thing in the state, particularly in the south and in the north where we have some excellent university campuses which interface very strongly with business. We have a lot of IP in some of those key areas I mentioned before. Another area where we have a lot of IP is in Antarctic and Southern Ocean facilities, with research, science and product development for products and services to serve those sectors, along with the Australian Maritime College based at UTAS in Launceston. If we had faster and reliable speed connectivity there would be opportunities to link not only within the state as an intrastate operation but also externally. There are a few threats but I will not touch on those unless we need to.

CHAIR —Please outline what the concerns are. That would be good.

Mr Wallace —One of the threats in Tasmania is that if you are a small operator in retail, for example, or even in manufacturing and you are servicing a local or domestic market, suddenly you have opened yourself to the world. As we saw in January, the Harvey Normans of the world highlighted how people can go offshore to buy. It really opens up a market. To use Victoria as an example, you might be an operator in Geelong but people can get in their car or on a train and go to Melbourne to buy. Although people do enjoy their weekends away shopping, when you are an island it does not happen so much.

There are some competitive threats that do need managing and in the past the cultural attitude of businesses here has been very protective. This is something that they would need to start to understand and look at the opportunities. There could be, and indeed we believe there will be, a higher cost burden on businesses and taxpayers. Again, as an island, most of the things we bring here are more expensive because of freight and logistics costs. There is also the increased risk of lack of productivity in the work place—be it in private enterprise or in government.

CHAIR —The distraction factor?

Mr Wallace —Correct. I know some companies who say you can only go on to Facebook between 12 pm and 2 pm. It is something that as a society we need to learn how to manage. That is not unique to Tasmania of course. Some of the areas of advantage that we see would mean that the people in the state would perhaps need to improve their skills. Because of the lack of education, as I mentioned before, some of the statistics are quite horrifying. For example, 42 per cent of all people in the workplace in Tasmania are considered illiterate. There are real issues.

Mr NEVILLE —Say that again please?

Mr Wallace —Forty two per cent of all people in the workplace are technically illiterate.

Mr NEVILLE —Technically?

Mr Wallace —Yes.

CHAIR —Those are the workplace literacy levels? Not whether you can read or write; it is workplace literacy.

Mr Wallace —It means that if they go online to fill in a government form they do not have the skills to do it. It could even be if they went into Centrelink and got a hard copy, they still could not fill it in. We are not talking about keyboard skills; it is actually their cognitive thinking and ability. It is much more prevalent in the north and north-west. Hobart is a city that has one of the highest levels of degrees in the working population. We have the university, a teaching hospital, and the majority of the 25,000 state government employees in the state at the moment are in the south. Local government employs another three or four thousand and there is also federal government, and a lot of those people are highly qualified.

Because of the disbursement of the population in the north, in places like Scottsdale, St Helens, Bridport, along the north-west coast it was easy for people to leave school at 16 and get a job in the local mills, such as the paper mills or McCains food plants, which are now closing. They were factory jobs and those jobs in the state are declining. Manufacturing here is around 14 per cent. It dropped to nine per cent but it is starting to creep back up. Another quick statistic is that only approximately 33 per cent of people in the Tasmanian workforce have the skills to apply for jobs that are advertised. Eighty six per cent of all jobs advertised in Tasmania at the moment require a post year 12 qualification and only 33 per cent of our workforce actually has that. That is not university; this is about VET training and other skills.

The other area where we believe we have a problem is the way the NBN was selected to be rolled out in the state. I am raising this because you might have some questions. For three regional areas, although Midway Point, which is halfway to the airport, is not considered regional but it is a dormitory town. We used to cringe every time we heard it, but it will allow households to download videos fast. When you look at the uptake in that town statistically, it is absolutely pathetic. A lot of people who live there are from a lower socioeconomic group; it would be middle to lower middle class, if I can use those tags. They are good, hardworking people but many of them would not have even gone beyond year 10 at school. Smithton and Scottsdale are similar.

We believe that to gain productivity there should have been a higher priority in Hobart and Launceston, where there are already some areas of optic fibre in the ground, particularly connecting health, education, business and government. Again, if every government department in Hobart was wired we would see a huge improvement in productivity because they would not spend as much time waiting for programs to download.

From a regulatory framework, I would like to quickly touch on another thing. When NBN Co. went to the three communities to get people to sign up for the NBN, because a lot of people in those areas do not have a lot of education they thought they were signing up for connectivity to the NBN into their lounge room. At the time the debate was going it was talking about the massive cost of the NBN, whereas the signup was to allow the connection of the box to the premise. We pushed and it was legislated late last year that it was an opt-out, not an opt-in. Under legislation somebody had to opt-in to have somebody come on to their property to put the box on the outside of the wall. The government changed that legislation last year. Equally, because we do support the NBN, we were out there trying to explain to people through the media that they were not signing up for a retail provider but that it was like getting the water out on to the front of your block.

CHAIR —You are not just talking about households; you are also talking about businesses there? We had some evidence yesterday about landlords not having signed up for business.

Mr Wallace —Exactly. I am talking about all premises.

CHAIR —We might go to some questions. Thanks very much. The evidence you have presented is fascinating for the terms of inquiry that we are looking at. There are some interesting opportunities there. What we are looking to do is to provide feedback to the federal government on if you want the take-up to occur, these are the sorts of other supports—whether they are programs, regulations or whatever—that need to be put in place to support that.

One of the things I am particularly interested in talking with you about, and one that is particularly identified as important, is the NBN to the home and the capacity for teleworking. I come from Wollongong and it is a big commuter area. You have talked about a dispersed population. We have had some evidence of professionals relocating to some of the regional areas of Tasmania, such as in Scottsdale, because they can now stay connected. I am interested if you have a perspective on this. I am sure there are cultural issues around adaptation to teleworking for businesses. Are there regulatory issues around that? Have you any experience in that area that you would like to share with us?

Mr Wallace —As far as I am aware there are no regulatory requirements other than the typical governance that a business would operate with its employees. I am not aware of any other requirements, such as local governments having regulations that say you cannot run a business from your house because you are not actually running a business. I am not aware of that.

CHAIR —You do not have members who have hit problems with that sort of thing?

Mr Wallace —No, we have not. We think it would be an excellent growth area. Again, one of the problems we have is the availability of skills in this state. I will touch on a couple of things. Last year was the first year—and these figures are developed by Skills Tasmania, which is the main provider or buyer of training in the state—that more people exited the workforce than entered it. This was not meant to occur until 2017. As a state, we are ageing faster than any other state. This was the first indication that this was speeding up.

A lot of those people who are exiting may be active retirees, who still may want to work two or three days a week on consultancy—be it with a company in Sydney but living here—or it could be young mothers or fathers who are at home looking after their children as there is job sharing between couples these days. There is no problem with this. It is not necessary that both have to go out at the same time if they can teleport into their work, which most of us can.

With regard to Professor Nixon’s comments—and you were dragging the comments out of him, which is good and I am pleased you were—one of the problems is that final connectivity to your apparatus. When you have copper, you have copper and that is it. If it was fibre to every premise then that would be ideal. But again, there could be a two-tiered structure. I do not want to get into too much detail—but it could be that down each road could be a cable, but if you actually want to hook into it you may pay the speeds. I think he referred to before, that for a lesser speed you pay extra connection with the retailer. If you did want to work from home, if you had a hobby or an interest, if you were studying for a postgraduate degree or if you were home and wanted a faster speed then you should perhaps be able to pay for that. In other words, the user pays.

There is a lot of debate in this state about why you should build a six-lane highway when you only need a two-lane highway into the regional areas. In this state—and you may have the figures in front of you—in rough figures, around 65 to 75 per cent of the state premises were going to be connected by fibre. The balance would be by either wireless or satellite. When we look at the west coast, there are very few people down there but it is a very important area for tourism and for mining. Again, it could be that if there is a mining company there operating equipment built in Italy, the technician could be in Italy working on the machine that is sitting in Strahan or Rosebery on the west coast. That would need very good connectivity.

CHAIR —Before we go to the rest of the committee for questions, I want to ask if you have any information on home based businesses in Tasmania, such as their existence, their size, what sectors they are in and what opportunities might be there for them?

Mr Wallace —Unfortunately I do not have any statistical data on it. We know that it is quite significant.

CHAIR —Do you know if anyone collects this data?

Mr Wallace —I believe they do not, often because people do not want to run a business from their home for tax reasons or capital gains tax. Personally, I ran a business from home for 10 years, and we made sure that we did not move into that space.

But there are a couple of quick things I will touch on. One is that it is a growing sector, as more people are developing their own businesses. As I said before, 87 per cent of businesses here employ fewer than five people. There are approximately 34,000 registered businesses in this state—that is, with ABNs. We believe there are about 26,000 or 27,000 operational businesses, which could be down to one person who may only be working part time. They may have another full-time job but they work a part-time job from home.

It is an interesting area. I was hesitating before because we would certainly like to see that data, and there may be some ways that we can achieve the data. The Australian Innovation Research Centre here did an audit three years ago on all businesses, on innovation, but unfortunately it only looked at businesses employing five people and more. It was very intense. It is a very good body of work that has been done. It is published on their website. They are going back now and revisiting that same work to come in with another benchmark. We have been trying to encourage them to get to all businesses because we believe that, particularly with innovation, a lot of these are one- or two-person businesses.

CHAIR —It would be very interesting. It is certainly something that has been a frustration to me in trying to find the numbers of people in home based businesses, because I suspect the growth rate is quite phenomenal in that sector just from my own knowledge of my own community, yet it is not well recorded anywhere. Thanks for that.

Mr NEVILLE —Yesterday we received evidence that a lot of the tourist industry is not really engaged in e-commerce, which surprised me. I think I made the comment that I used to be in tourism and, in the days when I was active, after the Gold Coast, the Whitsundays and Cairns, Tasmania was far and away the leading region in tourism promotion. What factors caused the industry to drop the ball when it came to e-commerce?

Mr Wallace —I will just declare a hand here. For five years I have sat on the Tourism Industry Council board in Tasmania. Also, in a role prior to the one I have now, in part of our work we were the regional tourism authority, along with social and economic development. There are about 2,700 tourism businesses in Tasmania. About a third have a website and internet, about a third have email and a third have a fax.

CHAIR —There is only a third, fundamentally. Is that what you are saying? Yes.

Mr Wallace —We are looking at a project right now, and we had meetings on it yesterday, to increase that quite significantly. TCCI and the Tourism Industry Council along with two other bodies—the TFGA, the Tasmanian Farmers and Graziers Association; and the Tasmanian Small Business Council—were all given $250,000 each last year, a million dollars in total, of state money to promote the NBN. We have rebadged it because of all the debate and the negativity that started, and we are referring to it as the digital economy. The four of us are working collectively in stage 1, which is education and awareness. Stage 2 is doing demonstration areas. Through the contacts and products that we have, we are going to be assisting the Tourism Industry Council and their members and the Small Business Council, helping them with their own websites which are tradeable websites. They are not just information; people will be able to book online. It could be a hairdresser at Sorell and someone could log in and see they have a space at 2.30. You could book your space in there and you could actually even pay for it there and then if you wanted to. It is that type of digital economy that we are trying to move to the fore.

To answer your question specifically, the majority of tourism businesses in Tasmania are small mum-and-dad businesses. They could be B&Bs, and they may have bought a lifestyle as opposed to a business. Therefore, for someone to spend $3,000 to $5,000 to put a website together, which some of them did—but then they found that they had to maintain it or if they wanted to adjust it they had to go back to the provider, so it was easier to keep the fax machine.

When we were the RTA in northern Tasmania, which is why I mentioned that before, we took a commercial decision as a body that we would provide the services for everyone, but if they were not on email we did not correspond with them. We would not fax and we would not post or mail. We soon got people who were on the fringe, if you like. They may have had a B&B running for 15 or 20 years. They were thinking of retiring: ‘Why should we spend money on the facility?’ That is the reason we believe it is not anecdotal; it has been measured by the TICT.

The other thing I should say is that Tourism Tasmania have been very good over the last four years in providing funds and a digital support system for people who want to move into the space. There are online training packages for people if you want to move into that space. They have workshops. They have spent a lot of money, millions of dollars over the last three or four years, encouraging people, because four years ago only about 10 per cent had a website. That has grown quite dramatically in the last few years.

We feel as though the momentum is there and people are moving, even people with their own buying habits for travel. Once, of course, you would go to a travel agent; now you get online to Wotif or see what airflights there are. So people who are travelling, and these are operators themselves, are realising, ‘Gosh, actually that’s why we need to be online as well.’

Mr NEVILLE —Yes, because people now book, buy and pay all electronically. The other thing is that obviously you have been out to some of the test areas. As a chamber, are you happy with the methodology of taking a box to each home that wants it? Does that fit well with your chamber? Also, what is the mechanism if the landlord or the owner of the commercial premises declines to take the box? How do other businesses in that building connect? Could you just give us that flavour?

Mr Wallace —Yes, sure. There are two sides to what you have just said; that is why I was shaking my head this way and then that way. We are very unhappy with the way it has progressed here in this state. We were engaged by the state government to interface with NBN Co. and Tasmania NBN Co., and there were significant cultural problems within the two organisations and across organisations. For example, collectively—I mentioned that group of four—we proposed 17 information sessions around the state which we would do jointly. We engaged professional IT people to run those information workshops and we invited Tasmania NBN Co. to come along. We ran five to start with. We had approximately 140 people who attended those five. At the end of each presentation—which was really good, with graphic presenters talking about what you could do in a digital economy—as soon as we finished the questions started, and they were about, ‘Will I get the cable? Will it go past my house?’ These were in places like Strahan. They were very strong tourism sectors. To each of those we had invited Tasmania NBN Co. along, and they did not turn up.

Smithton was a town where only 10 people turned up. This was a town where everyone in the town should have known about it. Ten people turned up to an evening meeting. Eight of them were ultra-negative because they were, for example, a dairy farmer 20 kilometres out of town so they were not going to get cable, so it was, ‘Why should we have to put up with only 10 per cent of the speed that you get if you are in town?’ Other people claimed they did not know anything about it.

Again, it all got back to the infrastructure questions that you were pulling out before from Professor Nixon. Therefore, on the education and the information given to people both in business and—because we were talking of it—small business: they just did not get it. So we were very disappointed on that.

To come to the other part of your question, yes, we believe that every premise of business, education, health and government should be hardwired to cable unless it is a business that is a long way away, such as mines, be it in the north-east or the north-west.

CHAIR —You said that you supported the opt-out legislation. Is that right?

Mr Wallace —Yes. What should have happened was that legislation should have been changed so that the technician could have come up to any premise and start bolting it on the outside of the premise.

Mr NEVILLE —So if you choose not to use it, that is your business.

Mr Wallace —Correct. Therefore if the owner of a building which might have five tenants said, ‘Well, actually, I don’t want it’, but the five tenants said, ‘Yes, but we do’, because there was no physical cost to the owner—

Mr NEVILLE —If it went to the landlord?

Mr Wallace —No, even if it went—

Mr NEVILLE —If it went initially to the landlord?

Mr Wallace —Yes. Every building was going to be connected at no cost. When I say ‘building’, I mean premise.

Mr NEVILLE —What happens now if businesses subsequently ask to be connected?

Mr Wallace —That’s correct. Now it becomes, ‘Sorry, you’ve got to pay a commercial rate’, and the service provider may say, ‘Well, actually we can’t be there for months.’

Mr NEVILLE —What is that commercial rate, in round figures?

Mr Wallace —We do not know yet. It has not actually occurred.

Mr NEVILLE —We also got evidence yesterday that 15 per cent of people signed up—one or two witnesses said 17 per cent, but say 15 for round figures. Seventy per cent have accepted the boxes on their premises, but only 15 per cent are actively engaged with the service. What do you put that down to? That seems an extraordinary gap, that 55 per cent.

Mr Wallace —It is.

Mr NEVILLE —Is that part of an education or is there another problem there as well?

Mr Wallace —I think it is on two sides. One is education for general information to the broader community and the other is the very slow engagement of retailers who can actually retail. What was happening—and this is where it was confusing for us and for the broader community—was that in the beginning Tasmania NBN Co. was out there promoting almost like a retailer. But it could not retail, of course.

Mr NEVILLE —No.

Mr Wallace —So then once it got to the point where it started rolling out—and there are a lot of other issues in the infrastructural and development applications with local government—these things were not managed at all well. I understand that in Scottsdale, for example, they pulled up to dig up the road and the council said, ‘Well, where is your development application?’, and they said, ‘We don’t need one, we’re the NBN.’ ‘Well, guess what? You do need one. Go away!’ So there is that sort of lack of understanding. Therefore, retailers were engaged and I think there are only three retailers in Tasmania.

CHAIR —There are six now.

Mr Wallace —Six, but there is very little advertising. I am yet to see advertising in the press or on radio or television, that they are out there in the space selling this connectivity. Now I guess it is because it is the chicken and the egg: if only a few houses or businesses have it, why would they—

CHAIR —Spend.

—Quite right.

Mr NEVILLE —Whose job is it to stimulate?

—If someone is going to spend the money to put the infrastructure in, one would expect that they would have either a fair degree of resources put aside to promote it and/or with the retailers they license, there should be a condition that is going to be dead space for the first year or two, but we believe this is what the results will be further on and in this dead space you will need to spend a certain amount of money in certain areas to try to educate people.

CHAIR —Obviously, these are test sites so one would expect that there would be problems. We had evidence yesterday that there have been some significant improvements around the community relations and connections. I want to know from you whether that would be your observation or not?

Mr Wallace —I believe so in Scottsdale. Scottsdale has an organisation which may have presented to you yesterday—the Dorset Economic Development Group for the Dorset municipality. The chair of that organisation is the local pharmacist and he is also very much into this space.

CHAIR —Yes, we met before.

Mr Wallace —So that sort of helped that. At Scottsdale and Midway Point I believe it has not improved at all.

CHAIR —So you would say that it is as important to look at the lessons that were learnt from that Scottsdale one into the future roll-outs? That is why you have a test site; if you do not learn the lessons then it is pointless.

Mr Wallace —Correct. The next rollout will include Deloraine, a town of about 3,000 or 4,000 people halfway between Devonport and Launceston. As an organisation, we are going to try to support that move in there. We do not have many members there, but it is a classic town. It has tourism, it has agribusiness, it has financial services, it has education, it has arts and it has health. It is a classic town of a full model. The three that they chose, we believe were totally wrong. They were chosen for purely political reasons. All three were marginal seats.

CHAIR —Although I would say that it is not all that different from the Kiama-Minnamurra site near my own place, so I think some of the things are around geography and issues like that. We will go to Mike for questions.

Mr SYMON —Robert, do you see a role for the chamber in promoting to business the benefits of the NBN? Let us go back to the opt-in versus the opt-out problems that we heard of yesterday. I know you have spoken about the lack of understanding of individuals in households, but obviously it extends across to business as well because they are some of the same set of people. What can the chamber do to say, ‘This is potentially a very good thing for your business?’ How do you get the message across, at a level that your members understand, where maybe NBN Co. cannot?

Mr Wallace —That is a really good question. Before I came here I was at an internal meeting with TCCI, just scoping this year’s business expo. We have an annual business expo, and this year we are going to build it around the digital economy. I mentioned before that we had 17 forums that we were going to do around the state. We actually pulled the pin in October after five because we thought we were just wasting money. It was when the federal election was on, there was this debate between the two parties and people were saying, ‘Why should I turn up? If Liberal win, I’m not going to need to know the information anyway.’ So we pulled the pin on it. We are about to deliver another five forums in Hobart, Launceston, Burnie, St Helens and Campbell Town; we are going to take the NBN name off those five. We have developed a website called NBN4Business; we are going to rebadge that as well, and we are going to focus purely on the digital economy. Our whole theme for our business expo in August will be about the digital economy. We will be bringing in commercial partners who will have products and services they can demonstrate that you can use today. You can buy them today, plug them into your business and get improved productivity or connectivity with your markets or your educational needs, today. Then, later, if and when cable comes, it will be faster, bigger, brighter and with more sparkles on it.

We are actually putting our own money and some of the money we got from the state government into exactly that space. In Tasmania, as I said, we have mainly small businesses, and the best way they learn is from their peers. We are going to identify eight or 10 businesses that will move in. We will take the commercial partners with us. We may, for example, put in a video conference. There may be, say, a logistics company, with a depot in Hobart, Launceston and Devonport or Burnie. They may employ 80 or 100 people and have X number of trucks. We will go into a business like that and then we may put in video conferencing. It is coming from the service provider. We may have to put a few dollars in it, but then we can use that as a demonstration to other businesses in and around those three regions that may not be in logistics. So it is that type of physical, peer-group education program. To just go out and do mass advertising, I think, would be a waste of money. It should be coming more from the position of: ‘Okay, here is a business; this is what they’ve done.’ ‘Gosh, we could do that too.’

Mr SYMON —I think you have a very good point with that. That also probably leads back to your earlier statement about threats and the global market—that some businesses may see that as competition they do not want to compete against, whereas the other side of it is that it opens up a much larger market for them. Is that also part of the same process, or are you running a parallel education process there?

Mr Wallace —No, we are not, because that is mainly retailers. With some manufacturers here it is more likely that it would not be. If we can have a quick minute I will give you a very quick, classic example of a digital business. There is a person in this state who works at a full-time job. He was a collector of hunting knives. On eBay he bought a few hunting knives, mainly from America. He ended up with four or five of the same so he thought, ‘I’ll keep two and sell two.’ This was about three years ago. He now has a business turning over $400,000 a year. He trades in hunting knives—just in America; they do not even come here. That is what I call a digital business. Unfortunately, we cannot use him as a case study because he is a public servant and he is not meant to have another job. Not even his wife knows.

CHAIR —So there are some regulatory issues that we should look at!

Mr Wallace —That is a classic example. He does not need the NBN, but we know that business can be done electronically.

Mr SYMON —My point is that you have to overcome that attitude to be able to then go out and use the facilities that will be on offer. So there are two barrels to that.

Mr Wallace —There definitely is.

Mr FLETCHER —You talked about the basis on which the three sites were chosen and expressed your concerns that it was political. Is it a fair summary that you think so far the approach that has been taken to try to win customers and generate traffic on the network is not a very commercial approach?

Mr Wallace —Yes. I will also just quickly declare that we are an apolitical organisation. I believe that in Bass, for example, which was a very marginal seat, it was good to have that there. But at the end of the day too much time has been spent on those three sites and not getting it into where there are people and lots of business. I am sorry, but could you repeat the last part of your question.

Mr FLETCHER —I am interested in the approach that is being taken to generate customers and traffic onto the network.

Mr Wallace —That is what I started to refer to before about whose space it is. Is it the infrastructure space or the retailer space? I honestly think that the way it will work is that, as we move through what we just described a moment ago, people will start asking for it. They will start asking, ‘Who can provide me?’ There are now six retailers. Obviously at these expos we will invite the retailers to come along, have their booths and stands and do their spruiking and that sort of thing. We see that is where the market is. But, again, if it had been in Launceston and Hobart to start with, there would be a much larger number of people. I am thinking, for example, of a three-person plumbing business who really run a virtual office from their ute. There is no reason they cannot have an iPad or a mobile phone from which they can do all their billing, changing of times and ordering of parts while they are out. That is the sort of thing we want to demonstrate where people can use it. Hopefully then it will be a draw-through rather than a push. Before, it was very much a push.

Mr FLETCHER —What has your organisation been told or managed to learn about the rollout schedule for the future for when it will move from being a series of demonstration sites to a mass-market service rolled out on a wide basis?

Mr Wallace —In the last eight months we have had no connection with Tasmanian NBN Co. or NBN Co. simply because we became frustrated, as did a lot of other organisations. The information we know is on the government website, so we can see where the rollout is. We had to be proactive. We had no-one coming to us.

Mr FLETCHER —I understand. Just to pick up one point you have made there: what is your understanding of the respective roles of Tasmania NBN Co. and NBN Co., and have those changed over time?

Mr Wallace —It was very much a secret society. I know the CEOs and chairs of both, and I intimated before that there were some cultural differences between the two of them. In fact, it was not just cultural differences but some antagonism. It was hard to get information out of Tasmanian NBN Co. They have an office up here and I think 40 or 50 people work in it, but you never get to hear or see anything. My understanding is that their role is actually to do the infrastructure rollout, so they will engage with whoever their contractors are.

CHAIR —And your frustration is that that is all—

Mr Wallace —Yes. That is literally it. There is nothing past that.

Mr FLETCHER —In terms of the nature of the service that is going to be delivered and what will motivate the decision by homes and businesses to take it up, how important do you think price and other aspects of the commercial offering are?

Mr Wallace —If you take homes out, if it is education, health and business, I do not think price is a problem. What will occur is that the retailers will start setting their own price. It is like mobile phones: when you first bought them, they were expensive, but the commercial reality was, as the requirement or the volume increased, people wanted to buy into the market, so they were discounted. For businesses, education and health, where the price can be absorbed, I do not think it is an issue. We believe that some of the figures that are being bandied around are completely wrong. Talking to some of the retailers, it would be much less. It will be very achievable for businesses and institutions to afford it. For homes, that is different.

Mr FLETCHER —Given that NBN Co. is going to own what broadband minister, Senator Conroy, keeps describing as monopoly infrastructure, what is your level of confidence about decisions being taken in North Sydney that will affect the delivery of service in Tasmania?

Mr Wallace —I am not aware of what is happening in North Sydney.

Mr FLETCHER —What I mean by that is that you have got a national company with a broadband infrastructure operating everywhere, including Tasmania. Do you have any views about the effectiveness of that arrangement for decision makers being aware of the implications on the ground for services in Tasmania?

Mr Wallace —I would have thought that that was exactly what Tasmanian NBN Co. should have been doing—feeding that information to NBN Co. And the chair and CEO of NBN Co. have been down here, I would suggest, 10 or a dozen times in the last year—every time there was a public release. Senator Conroy has been down here; I have met him here at least eight or 10 times in the last 12 months. Julia Gillard has been down, of course, at the launch at Midway Point, which was very successful and it connected Smithton schools to that presentation. So I would have thought that there should have been a lot of information. If Tasmanian NBN Co. are the local voice, that is what they should have been feeding back.

Mrs PRENTICE —The chairman spoke about telecommuting and working from home and increasing opportunities for learning at home. Have you got many companies in the area of cloud computing who can provide more efficient services for people in that area?

Mr Wallace —Telstra, of course, have been promoting this for some time now. There are a couple of other companies, including Primus. There is a company here called Saturn, which is basically the distributor for Primus. There are businesses now who are starting to look at it. In our case, for example, we have an IT provider and we have a small room that has got all the bits and pieces and the air-conditioning running all the time. It is expensive and we need to upgrade it. A lot of businesses are in that space, which they have perhaps been in for five years. Now they are saying: ‘Do I really need this equipment? Can I move into the cloud?’ The short answer is yes. We see a massive growth in that, particularly with the cost of data storage.

At the moment in Tasmania it is basically all on the mainland, so there are time delays, there are feedback delays and it is expensive. We see that data storage here is important. If it can be done in the cloud, then that removes us from having great banks of buildings here with data storage. It is really a critical area. The other thing is the area of security. With cloud you are not as vulnerable. For here, we have one fibre optic cable, which is Basslink 1. That can go down or break. There was an accidental break in the cable about two months ago. There were some roadworks that dug up the cable. Fortunately they were able to divert it the other way. I am not a technician, but it could have been disastrous. So, when I say security, it is all sorts of physical security as well.

CHAIR —Thanks very much. That was fascinating and very useful evidence for us. It is certainly appreciated. Thank you for your attendance here today. If you have been asked to provide any additional information, please 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 and fact. Thanks again. It was very, very useful information.

Proceedings suspended from 10.40 am to 10.52 am