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STANDING COMMITTEE ON INFRASTRUCTURE AND COMMUNICATIONS
11/03/2011
Role and potential of the National Broadband Network

CHAIR —Welcome the representative of TAS ICT to today’s hearing. Although the committee does not require you to give evidence under oath, I should advise 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 to the inquiry from you but would you like to make some opening statements?

Mr Alexander —Thank you for the opportunity to speak at the hearing today. I am here in my capacity as President of TAS ICT and I am representing over 100 members of our industry group in Tasmania, which in turn represents around 80 per cent of the local ICT industry in Tasmania. We as an industry are very excited about the national broadband rollout in Australia, particularly in Tasmania since we are the first state to experience the superfast broadband.

In Tasmania we have had some of the most expensive telecommunications costs out of all the states of Australia. Most will understand that competition brings a competitive landscape and unfortunately this has not happened until now. From our industry point of view, this is the single most important piece of infrastructure in the country’s history. I do not say that lightly. I will use four simple evidenced based reasons for saying that.

The first reason is that Australia has continued to fall well behind other OECD countries with investment in telecommunications and broadband technology. This is a proven fact and a quick example is that there is a free iPhone app that you can download from the iTunes store called ‘check tubes’ that you can use to test speeds. I have done that test, and I can do it right here in front of you, and currently Australia is ranked 29th in the world and is falling well behind countries like New Zealand and other Asia-Pacific countries.

The second fact is that regional centres in Australia have not had private investment in broadband infrastructure to date because there is no return on investment. No companies have invested in backhaul infrastructure or other ICT infrastructure in Tasmania, and they will not without a return on investment. This alone has caused major issues in regional centres not only in Tasmania but right across Australia. Without this technology, banks and industries will suffer, local businesses will close and that will dramatically change the fibre of these towns. This is the first time that these centres will have investment that allows for business growth and provides an opportunity for younger people to stay in these regional centres. Effectively, the NBN technology will breathe life back into regional centres and allow them to operate more on par with the metropolitan areas.

Thirdly, the technology we currently have operating in the ICT industry is a hybrid mess of networks of ADSL, broadband and wireless that does not really work. Allowing the NBN will bring all the new concepts like cloud computing, which also assist in streaming many industries including, but not limited to, the banking and health sectors.

My fourth and final point is that Australia has around 1.2 million small businesses. In Tasmania, over 96 per cent of all businesses are classified as small. These SMEs have an opportunity to increase markets through high-tech and high-value telecommunications and ICT infrastructure. This technology will allow them to be competitive in intrastate, interstate and international markets. As the globes moves further into the digital economy, Australia cannot afford to be left behind, considering most of our international trade allies and closest neighbours are investing in this new technology now. In regional centres where health and education pose critical policy decisions that local, state and federal governments are faced with, this infrastructure investment will particularly empower these sectors to thrive in the new digital economy.

However, with opportunities come threats. It is important to advise and educate the SME market in Australia about how important this infrastructure will be and what it will do for businesses in opening up new markets and opportunities. After all, there is no point putting a five-lane freeway between two small towns if no-one is going to drive on it. Skills are an area of development. An increase in digital literacy and a global transfer of skill sets may attract investment in new skills in Tasmania and other parts of Australia. There are newer opportunities in high-tech industry. Countries like India, China and Korea have invested heavily in NBN infrastructure, and they are now prospering due to the increase in skills, programs and opportunities for available external investment and they have increased the GDP of those countries.

Tasmania has the lowest aggregate of skills, around 33 per cent, yet 86 per cent of all jobs require post-year 12 qualifications. Areas around regulatory framework: the NBN should be designed to support systems-wide applications such as health, smart grid, smart transport, regulation and content, media regulations and opt-in and opt-out options. The economic and cost benefits with ageing population, demographics, education—how low it is in Tasmania—and health and population, overcoming traditional barriers to regional economics, such as isolation. The price of the trade-off between access change and take-up rates will complete the whole program.

CHAIR —Thank you. You are probably one of the first to give us some hard focus on the regional economic development aspect of the National Broadband Network, which is of particular interest to me and is one of our references. Can you give us a practical picture of a typical regional town in Tasmania and what you would see the rollout creating in those towns and the difference it might make?

Mr Alexander —If you look like areas like Scottsdale, Smithton and those areas that are currently part of that rollout, you will see that that there are issues in those regional places around getting GPs or doctors and health experts. If you look at small business, I believe I read some statistics where around 80 per cent are not even compliant when it comes to the regulations of running a small business. So in those areas alone I can see the opportunity for regional centres connecting with major metropolitan cities where they could actually have educational classrooms around not just health, which is the obvious one, but certainly around the SME market, where they can have occupational health and safety training and all those sorts of things where you do not necessarily have to drive the four hours to get to those places.

CHAIR —It is interesting. We spoke to the chemist at Scottsdale who said that online education opportunities are important to a large extent because of the time factor.

Mr Alexander —There is no reason a child in Strahan should not have the same opportunity to go to university in Hobart. The problem is that they cannot, because they would have to pack up, their families have got to pack up, and you would have to relocate them, so we need to have our universities look at flexible learning options. That flexible learning, with the NBN infrastructure, will allow people to have online access centres in small regional towns or access from home computers. I am not suggesting that they just do not go to school at all, but I think you need to look at it, like they did with the building industry about five or seven years ago, when they started having on-the-job training as well as off-site training. There is no reason why students could not, three or four times a year, be billeted out to families in places like Hobart and Launceston, where the universities are, to allow them to participate in a class activity, but there is no reason why they cannot have education on line.

In the area of health, I would use King Island as an example because it is offshore and it has probably one GP if you are lucky, or they may call in on a monthly basis or something like that. The problem is the confusion in the media. I blame the media, to be honest. They are very uneducated when it comes to understanding what the NBN can actually do. They are looking more at making it political than making it factual. The factual truth is that when you are talking about digital packages, or the data, being transmitted across current technology, it is not sufficient to have high-definition scans of eyes, for instance. If a child hurt their eye and the GP had to make a decision about whether they needed to go to a specialist straight away, there is no reason they could not go straight into a consultation with a specialist in Sydney who says, ‘No, that’s okay,’ or ‘This needs urgent attention.’ So I can see in that would have benefits to rural areas and it would have a huge impact. I think that is the problem. Some of the people in those communities do not see that because it has not been discussed. All we are talking about is how much it costs and who is going to take it up. I think that is a real shame, because there are a lot of benefits.

CHAIR —Could you give us a picture about your own business life? I see in our notes that you are a design house. Do you want to give us a picture of what you do?

Mr Alexander —I was in Malaysia yesterday and I flew back specially to come back to this.

CHAIR —Thank you for that.

Mr Alexander —I did not ask for anyone to thank me. It is more because I really believe in it and I want to make sure that people have educated choices when they make their decisions or their input. My business is based in Launceston and we basically export our products and services all around the world. Last year we won the regional exporter of the year, which is the first time a Tasmanian company has won it. I won the G’Day USA Innovation Shootout in New York in 2007, and the Wall Street Journal chose us as the most innovative company in Australia.

CHAIR —For the record, for the people who have not got the written submission in front of them, tell us what you do.

Mr Alexander —We develop visualisation applications for the design market. Let me put in simple terms: we specialise in the area of colour—for instance, the decorative industry like paint companies all around the world. Around 50 per cent of our products are exported around the world. Yesterday I was in Malaysia because one of our clients based in Norway currently has around 22 countries where they have got offices or companies. All of them are using our technology based in Tasmania. We developed it here in house. Now it is all rich media stuff, and this is my problem. I have had 75 trips to the US because I have to travel. Being a small business, it is very difficult to convince people to do business with Tasmanian companies, let alone Launceston. When you do business in the US market, they expect to see you and you have to build relationships. When you are small, you cannot grow because you need more work, so you physically have to travel all the time. I reckon I will save $100,000 alone just in videoconferencing when I will be able to do that. I do not mean $6 million videoconferencing; I mean high-definition, real videoconferencing that will allow me to interact with our customers and deliver services.

We also make education programs. I can see these two ladies here wearing make-up. L’Oreal use our educational software in New York to teach women how to apply make-up to become qualified applicators. Again, it is all rich media content. We do a lot of visualisation applications for the building and construction industry. If you are going to design a home, like Metricon builders in Victoria—if anyone knows who they are; they are a big firm—and go to their website, you will see all that content belongs to us. We have developed it all here in Tasmania. We have just signed a new deal with a company in South Australia called Hickinbotham. They are another big builder, and we are about to sign National Tiles and a few others like that. Again, this is all instore, kiosk type applications.

Right now, which is a poor example for people who think the NBN is not important, we currently have four servers that had to be set up in four different parts of the world. We cannot do it here in Tasmania, because we do not have the capability. We have four servers set up and we access them and control them here but, if the NBN comes in, and I can have a data centre set up here, there is no reason I cannot do it all over Tasmania.

CHAIR —What has kept you here, Darren?

Mr Alexander —I love the place. I am born and bred here. I am not leaving. I have travelled around the world. I have had three passports and I kiss the ground every time I get off the plane. The reason the NBN is being rolled out is purely because of Tasmania, I can assure you. We have been screaming for years that the backhaul issue across Bass Strait has been a major concern. The other reason people ask me why I am so passionate about it—this is with no disrespect to any politicians—is you do not very often see somebody that has a long-term vision of what the country needs. I believe that this policy direction is going to give Australians a real chance to be competitive in a global market. If we do not do this now and we try to do it in five years time, we will be 25th or 95th around the world, Australia will never catch up. As we all know: the longer it takes, the more it costs; the more it costs, the more it is going to blow out, and we just do not want that.

CHAIR —One of the issues that we are looking at in terms of applications and services is fibre to the home. Have you got any experience or examples you would like to put on the record about the to-the-home option?

Mr Alexander —For instance, I have an iPad in front of me, which is running on the 3G network. A lot of people think—and I noticed, without naming people, there are a lot of politicians who carry them around and say, ‘I’m already on the NBN.’ That just shows you how uneducated they are because they are not; they are using a different technology altogether. If we were all to walk into this room and try to use it at the same time, we would be draining the system. Clearly, it is not understood.

Fibre to the home, while it may seem expensive, by far is the right decision now because this is a 50-year plan that will allow this country to have the technology for the next 50-year period. I look at it like ports and roads: this is a big investment in infrastructure. It is not an investment in some backhaul arrangement; it is an infrastructure investment. You have to have a long-term view of what the benefits will be. I will give you an example of the challenge: I was in Vegas about a year ago. I have a very good friend at Dell whom I rang and complained to because I was sitting in a hotel in the Wynn Casino and I needed to download a file that I needed to approve for a major project in Europe. I was in the hotel room and I rang my office and said, ‘Send it now. I’ll come back in about three hours and I’m sure it will be ready to be downloaded.’ By the time I got to the door, it was there. It was a 70-megabyte file. I thought there was something wrong but when I looked there was nothing wrong with it at all. I checked with the Wynn Casino and they said they were running it with fibre and they were getting about 50 megabytes per second.

I could not believe we did not have that in Australia. Then I investigated to find out what we have compared to other countries and I was mystified to see how bad we have actually turned out. I do not blame any one particular party; I blame them all. I believe some of the decisions they have made over the last 20 years have put Australia so far behind that we just cannot afford to keep going.

CHAIR —And from your industry sector that your organisation represents, we have had some evidence about the importance of home-based businesses. In your sector I think it is particularly prominent.

Mr Alexander —Let us look at small business. If you talk about micro-business versus small business, a lot of these businesses are family oriented and they are working from home, so they are currently using what they have now. If you look at cloud computing you see what benefits that would have for the SME market. Instead of going to buy all this hardware and all this software and actually using it, having to update it and regularly use it, they will be able to have a one-monthly fee service that they can run. Cloud already exists now but part of the problem is that Tasmania does not have the backhaul, so we do not have the infrastructure that allows us to do that in the high-capacity area.

So from an SME market point of view one of the biggest problems SMEs have is the capital cost of investing in ICT: going out and spending $10,000 to make a website, $5,000 to have the hardware to do it, another $5,000 to have the mobile devices to make them all interconnected. It is a very big cost. With cloud computing services it could be less than $100 a month and you can have a number of things like backup data and all the rest of it off-site, recovery data and all those sorts of things. I see that as an advantage for the SME market. VOIP phones: if I were sitting here in a wi-fi situation and had access I could be talking to my office in Launceston for free because I am using the wi-fi as a connection. So there are VOIP and Skype and those sorts of things.

Unfortunately Australians take a little bit longer to adapt to it. I think the problem is that it is change and a lot of people do not like change. I think they get confused with it. My mum, God bless her, I bought her a mobile phone two years ago and she did not realise you had to turn it on. I wondered why she did not answer the phone when I rang. I am trying to explain the change that needs to happen. I think it is critical to think about long term, that with the rollout we do need to educate consumers out there, and especially the SME market, to understand what the real importance of this will be. Like I said, there is no point building it unless we have people using it, so it is critical.

Mr NEVILLE —You mentioned just in the last couple of minutes or so that we have a problem with backhaul. Is this the fourth link to the mainland you are talking about?

Mr Alexander —Yes. I would suggest, while I do not know and I am making the assumption, that the current two that are owned by Telstra and one which is owned by another company, I as a business would not put all of my content on the two so that the price cannot change. If I put it onto the other one I do not have any redundancy if something went down. That is part of the problem. I am assuming that they are waiting because the Telstra deal could happen with the federal government so there will not be an issue then because you have the three cables going across, which allows you to have redundancy if something happened. I believe that when the fires were in Victoria a number of years ago they had to turn the Basslink off because the power station could have exploded. In that circumstance if I was running all my data for all my customers around the world I would have lost everything. So I have no choice but to use Telstra, and that is the problem. That is where you do not have competition. Who is going to spend $30 million put a cable in? I can assure you none of the other independent suppliers are going to do that. They are not going to invest in something when you have got a small state of less than half a million people.

Mr NEVILLE —It is costed into the NBN, is it?

Mr Alexander —I do not exactly know but I am assuming it is.

Mr NEVILLE —You are a board member, aren’t you?

Mr Alexander —I am here representing Tas ICT.

Mr NEVILLE —But you are a board member.

Mr Alexander —But I need to separate that conversation. It is not my place to be talking outside of those.

Mr NEVILLE —Anytime you do not feel comfortable with a question—

Mr Alexander —I will tell you.

Mr NEVILLE —I was not trying to—

Mr Alexander —No, Paul, I did not suggest you were. I was saying that I cannot speak on behalf of the board.

Mr NEVILLE —We had some criticism in evidence that that area around Scottsdale was not the best area to have tested this, that perhaps it would have been better to go for a town of 3,000, 4,000 or 5,000 people where you would have got a better cross-section of industries, car dealers, agricultural businesses, a larger hospital and so on. What is your comment on that?

Mr Alexander —I would have liked it outside my house. Unfortunately it is not there.

Mr NEVILLE —That is not the question.

Mr Alexander —Could it have actually been somewhere else? In hindsight, you could probably say yes. I do not really have any comment other than to say that it would not matter where it is, what we should be focused on now is what to do in those three towns to highlight the benefits of this. The decision was made and you cannot go back, you cannot pull the fibre out of the ground.

Mr NEVILLE —I suppose the question I am leading to is whether the choice was sufficiently well focused to get the best result. We have also been told in evidence that, although 70 per cent of people opted to have boxes connected to their houses, only 15 per cent have taken up active connectivity with high-speed broadband. There is a huge gap between 15 per cent and 70 per cent. Some people have told us that they think it is due to ignorance borne in insufficient explanation of the network. What is your take on it?

Mr Alexander —I think there is a number of factors. Let us look at Midway Point as an example. On average, I believe there was a take-up of over 50 per cent between the three towns. I think that is roughly the number. If that is the case it is clearly a good exercise, because you are talking about changing something straightaway.

Mr NEVILLE —I have never heard that figure.

Mr Alexander —Between the three towns there are 4,000 connections and I believe that, over those three towns, there were 2,000 who took up the connections. I suggest you check that, but I am pretty sure that is correct. If that is correct, that is a good number. It may be that some areas were 15 per cent and some areas might have been 45 per cent, and if you average it out that is what it may have been. Midway Point is a good example. In that area, a lot of those places are rental properties and they cannot do anything because the owners did not actually receive the information. It would have been the households who received the information. So it could be said that perhaps some better research could have been done in those areas.

I would say that anything that is above 10 per cent for something brand new is a very good outcome to start with. We need to be focused on making the application developments in those three towns to show people the benefits. When we do that, people will jump on it straightaway. But right now there is so much miscommunication in the political sphere, with both sides arguing about whether this is the right thing. What we should be focused on is showing real examples of what it can do to actually drive the economy in different areas, especially in the SME market. That is the one area where I am very confident people will see.

Remember the noise when we went from analog to digital with Telstra. The conversation was never about what the technology was going to do; it was about the handset cost and the fact that we had to buy something new. So the noise is different. This is exactly the same. A lot of people said it was going to be $1,000 a household. Who is going to sign up for something that is $1,000 a household? No-one is going to. Clearly, market forces will drive this and the price will be set for people to use it; otherwise, they will not take it up.

I think a lot of the noise that we are hearing is incorrect and irrelevant. The decision was made for those three towns. What we have to focus on now is getting the people in those three towns using it and looking at the key benefits. The first thing I would do if it was my project is digitally map each of those towns because I want to know how many SMEs are in it and how many people with chronic disease are in it. Then what I would do is go out to the market in Australia and say, ‘We have 4,000 connections here in this state that are now on the NBN and we have the data that tells us what is in those towns.’

Mr NEVILLE —I do not doubt what you are saying, but whose job is it?

Mr Alexander —Unfortunately, it is not my job.

Mr NEVILLE —No; but whose job is it? We have had all sorts of witnesses over the last two days but no-one has put their hand up to say that it should have been costed into the NBN or it should have been the responsibility of whomever.

Mr Alexander —I have heard the NBN Co.’s line is that their role and responsibility is to build the infrastructure. That is what their line has been. If you are asking me whether I think there should have been a separate area that looked at application development, my answer would be yes. I think that something should have been done

Mr NEVILLE —There is a lot at stake but no sizzle.

Mr Alexander —I do not see it that way. I would say that their clear focus is around building the infrastructure. This is the single biggest piece of infrastructure in this country’s history. It is a major job. You do not want to do something half wrong because the costs will completely blow out. So I can understand the time that it is taking—even though I would like it to be faster. I am assuming that they are smart people and they are building it around the way they want to. What I would like to see is more focus around the application development and what the possibilities will be and how we can actually educate the people about the benefits.

Mr NEVILLE —Do you think we should be writing something like that in our report?

Mr Alexander —Yes.

CHAIR —Just taking up that point: there have been some funded initiatives around e-health. Is that the sort of thing you are talking about—government departments, perhaps, initially driving some pilot-type projects? I am interested in this e-modelling of the towns that you were talking about.

Mr Alexander —I am talking about digitally mapping them. What I am saying is: from a statistical data point of view, you could go to a company that had some software that could run on this and say, ‘We actually know that, in this town of 2,000 people, 16 per cent have diabetes, 22 per cent have high blood pressure, and so on; do you have an application that could assist in that area? Here is a chance to showcase it, in a place like Scottsdale or Smithton.’ That is the benefit, I think, long term, because then you have actually got the possibilities of other companies coming in and investing as well.

CHAIR —I think the deputy chair’s point is: do you have a view on who might be best placed to do that? Would it be a particular government department like the department of health?

Mr NEVILLE —At least three or four witnesses have said that this is badly sold.

Mr Alexander —And that could certainly be said. I am not actually saying that. But it could certainly be said that there is an issue around how we demonstrate something. It is very difficult. The media have a tendency to take a story and go with it, regardless of whether it is right or wrong, because they have an opinion around it and someone might say it. What we do should be evidence based. I am suggesting that we look at those three towns and digitally map them, and then you would have the facts.

CHAIR —What we are trying to get to is: when you say, ‘you,’ who do you mean—a government department, an industry body?

Mr Alexander —I think perhaps it is the role of a government department—and maybe it is something like DBCDE; it is probably their role to be looking at these things in the future.

CHAIR —I am sorry, Paul; it was an important point.

Mr NEVILLE —I will finish on this point. I was in regional development for many years. Lots of people would come to me with inventions and products. They did not have a clue about the marketing. If we take your words—that this is the biggest infrastructure investment in Australia’s history—then for God’s sake shouldn’t we have a comparable and commensurate selling mechanism? If people are not going to take it up, it is going to be an exercise in futility, is it not?

Mr Alexander —I agree. I made the comment that there is no point in building a five-lane highway between two small towns if no-one drives on it. I think the role that the federal government needs to play is in educating the small-business market as well as the community to understand the critical things that this could do in the future. We are not just talking about now; we are talking about the long term. The problem we have is that we are struggling to get over the first two years; we have not even got past that. I would imagine that a committee such as this would not even be around in three, four or five years time, when this is actually working and flourishing. We need to make sure we do it right. And I agree with you.

CHAIR —I am sure the committee will be around, but perhaps not with the same players!

Mr Alexander —Sorry, I did not mean that.

Mr FLETCHER —You made the comment that, as a regional area, Tasmania has suffered because the telcos have not seen a commercial ROI in building improved network infrastructure here.

Mr Alexander —Yes.

Mr FLETCHER —Is it your view that therefore the NBN needs to come in, because effectively you are never going to get a commercial return and you need to justify the expenditure in other ways?

Mr Alexander —No, I think it is the government’s role to do it, and that is what they have done by announcing that NBN Co. is building the infrastructure. A good example is a small place like Tullah on the west coast of Tasmania. If I were a shareholder in Telstra and they were putting towers in there—though they would not put in towers because there are only 15 people in the town; you cannot expect them to invest that money if there is only that small number of people. But those people, as taxpayers and citizens of Australia, have as much right as anyone else who lives in any other area. That is why I think it is the government’s role. That is why I am a big supporter of the rollout of the NBN, because what they are doing is taking away the barrier and building the backhaul, allowing for a national network to be run, so that then other players can come in buy those services without being restricted. That is why I think it is the right decision.

Mr FLETCHER —I suppose my question is: do you think it is appropriate that we expect NBN Co. to deliver a return on investment, or do you think that that is the wrong way to go?

Mr Alexander —No. I think there should be a return. I think the KPMG report said clearly there would be a return over a period of time. That is why I said that this is like infrastructure. If you were going to build a hospital or a road, you would not necessarily get a return on it now; it might take 20 years to get that return in the cost-benefit analysis. This is exactly the same—it is simply a piece of infrastructure that we are building, allowing for something like the digital economy to change the way that this country runs, and not only in Australia. It could also make this country more competitive globally, and that is what we need—especially in our Asia-Pacific region.

Mr FLETCHER —So what is it about NBN Co. that you think will allow it to get a return on that investment when you say you do not believe the private sector telcos could?

Mr Alexander —It is clear the private telcos do not. That is why they are not down here. We have only one of the major players here in the state. Over the 25 years, or whatever it has been here, it is proven: no-one else has come, because clearly there is not the return on investment or it is not attractive. What they might do is cherry-pick and go to Brisbane, Sydney and places like that where there is a market to penetrate.

Mr FLETCHER —I am just trying to understand. If I heard you correctly, you said that NBN Co., you believe, will generate a return.

Mr Alexander —Yes.

Mr FLETCHER —What is it about the NBN model that you think allows them to secure a return when the private sector telcos have not?

Mr Alexander —It is because I understand the return is a moderate return of six or seven per cent, I believe—do not quote me the exact numbers, but I think it might be that low—where, clearly, the private sector do not talk in that language. They are looking at 30 and 40 per cent returns.

Mr FLETCHER —I see. On the question, then, of take-up, what is your perspective as a businessman on what is required to drive take-up in Tasmania?

Mr Alexander —I would suggest it is like any purchase you would make: you make a decision based on what you are going to get for what you are going to pay. As an ISP, I would be selling the benefits and the services of what will be on an application development for people to use. If you went right now to Bridgewater, which is a lower socioeconomic area of the state, knocked on the door and said, ‘If I could give you 335 TV channels for $10 a week, would you take it?’ I guarantee you would get just about all of them signing up for it. That is what could happen with IPTV. If you said, ‘By the way, it is $40 extra and I can give you phone calls and they will be free as well’ would they take it? You would say a high percentage of them would take it because the benefit is there. But if you knocked on the door and said, ‘It’s $100 a month and I’m not sure what you’re going to get’ I cannot imagine anyone taking it.

Mr FLETCHER —To put that another way, you are saying that there needs to be a good healthy dose of, frankly, commercial sales and marketing expertise brought to bear.

Mr Alexander —Correct. If I was an ISP and I was actually going to be a participant on the network, I would be making sure that I maximised the opportunity I would have of dealing with those customers. Clearly, as we speak, I do not think that has been done.

Mr FLETCHER —Yes. You talked a bit about the importance of NBN for businesses like yours and those of your members. For businesses in your position today, what is available to you? For example, are there business parks that are fibred?

Mr Alexander —In some areas there is fibre but there is not a network that runs it. It is like having keys to the car but no car: at the end of the day you cannot actually use it. It is not attractive enough. I do not know exactly where the fibre prints are in all parts of the state. All I can say to you is I wish it was outside my business, because I would be using it as we speak. I probably would not even have come here; I would have videoconferenced with you from Launceston instead of driving the car down and polluting the earth.

Mr FLETCHER —With your experience from your involvement with Tasmanian NBN, can you describe to us what the thinking was behind the Tasmanian government involving itself in the rollout and whether that thinking has evolved.

Mr Alexander —The reason I am pausing is that I have been a member for only three meetings, so it is a little difficult for me to make assumptions.

CHAIR —Just from your own experience through the organisation.

Mr Alexander —I would suggest that perhaps the reason was the role that Aurora played at the start of it. If that has changed, I still think a board at NBN Tasmania would play a major role in assisting the state. There needs to be a regional approach with this. Part of the problem is that you are talking about educating locals around doing something that they have not done before and understanding what the key benefits are. I am going to use the analogy of seagulls. They have a lot of seagulls that will fly out there and tell them how great it is and then leave. They need a localism around it to understand. In my role as the industry person, I have continually gone around the state and spoken on a number of forums and shown what the benefits will be, and once I have done that there is a better understanding. But if you do not, they have a tendency to listen to their neighbours, to their friends or to someone who says, ‘I’ve read this—or ‘I’ve heard it on the news’—so it must be true.’

I will give you an example of one of the issues that could be seen to be a mistake. In Smithton, where the rollout was, people in this forum had a letter that said it was not going to cost them any money to have it connected, but they still asked the people how much it was going to cost to have it connected. For some reason there is this misunderstanding of what they key benefits are.

Mr FLETCHER —In terms of the infrastructure, particularly the backhaul to the mainland, is it your view and your organisations view that you would like to see diversity of infrastructure ownership—that is, infrastructure spread amongst multiple players?

Mr Alexander —If you look at the Tasmanian example, you can see selling Telstra was a very bad decision, because when they sold Telstra they sold the assets with it and now the assets are gone. If it could be asked, ‘Was there a free market for competition?’ the answer is no, because there was not. The price was set and that is what it was. I cannot quote the exact figures, but I will make this statement: I believe that the cost of telecommunications through the Bass Strait compared to other parts of the state used to be 10 times more expensive. Now it is five times since the competition has come in. So clearly it has been cost prohibitive for other players to come down here, because you are buying the backhaul services off the supplier who is competing with you in the same market.

Mr FLETCHER —To make sure I am drawing the right understanding of your conclusion from this experience, what I am hearing you say is that, once there was diverse ownership of paths across Bass Strait, things improved.

Mr Alexander —Yes, because once the NBN and what was going to happen were announced it improved.

Mr FLETCHER —Though once the Basslink—

Mr Alexander —Correct—once the Basslink came in as well.

Mr FLETCHER —But that is unrelated to NBN.

Mr Alexander —Correct.

Mr FLETCHER —So I presume you would not be enamoured of a model in which every piece of infrastructure ends up owned by NBN. If that were to happen you would not see that as a good thing.

Mr Alexander —No, if NBN owned the backhaul and then allowed the retailers to purchase the service then there would be a free enterprise market to allow that to happen.

Mr FLETCHER —So it would not concern you if, for example, all three of those links ended up owned by NBN Co.?

Mr Alexander —No, because I would suggest that their role is not as a retail service provider. They are providing the backhaul and then the retail service providers—

CHAIR —So it is the competition from being both in infrastructure and in retail.

Mr Alexander —Correct.

Mr NEVILLE —So they could go to NBN or they could go to Telstra or whoever?

CHAIR —Correct, but the concern would be if NBN were a retailer as well.

Mr Alexander —Yes, then it would be different.

Mrs PRENTICE —That was where I was going too. You mentioned the need for competition. Whilst NBN are pulling together government funding, we hope it will be a nice, level playing field, but NBN have said they are going to sell at the end of the day. Doesn’t that mean we could repeat the problems of the past?

Mr Alexander —I do not feel that it is going to be worse off. I think it is going to be better off because, while they have said they are going to sell it and the services they are going to provide, it allows all of the ISPs to buy at commercial rates compared to where they are buying it now. Right now, if you are buying the services from Telstra and as an ISP you are going to provide those services to a client like me, you are buying at a rate higher than they can resell it to me in the first place, so it makes no sense for anyone else to come here. That was the problem. At least now, if NBN Co. has it and it is up to the individual to buy, it is no different from buying fuel. If someone buys a bulk amount of fuel, it is a different price. It does not matter what it is in a commercial aspect; the volume dictates the price. I would assume that would be the same way.

Mrs PRENTICE —So you would also support NBN Co.’s role in building over existing fibre in their determination to have that monopoly?

Mr Alexander —As long as the monopoly is not the way it was previously. My understanding is that it is not. That is all I can say.

Mr SYMON —I would like to go back a little bit. You were speaking about catching up to the rest of the world and the opportunity having a countrywide rollout gives Australia. You have already said that if we delay this or do not do it we will go back so far. In terms of delay, I figure these are years we can never get back.

Mr Alexander —No.

Mr SYMON —So if we delay for five years we are always going to be five years behind everyone else.

Mr Alexander —Yes. To think that New Zealand has surpassed Australia just shows you. Not that there is anything wrong with New Zealand, but it is a smaller country. It is an issue that there are smaller countries in the Asia-Pacific region and even the Pacific region that are going to surpassing Australia. If we are talking about global economies and how we are going to access them—remember that one of the biggest things Australia has is exports, and we cannot export just raw materials anymore; we need to export our technical services and intellectual property as well. That is not going to happen unless we have the advantages the NBN will bring in moving forward. My final comment on that is that the decision has been made; let’s just get on with it.

Mr SYMON —I could not agree more. Therefore, the excuse of remote geography or large distances does not stack up when you are competing against the globe.

Mr Alexander —No. That is why I am saying that, for example, Tasmania’s distance from the mainland is one of the biggest problems we have. That water is between us. This can break down the barrier. There is no reason now why people could not relocate to Tasmania and live in the lifestyle they want to live but be given access to markets outside of their own state. That is a positive for the state. If you look at regional centres all around the country, over the last 20 years towns have been shrinking because communities are losing banks or services in all those areas because of infrastructure—not always telecommunications, but that plays a role as banks become more globalised. If they do not have the right tools to do that, it changes when there is fibre. I am saying that something like the NBN allows those regional centres to come back and use fibre as a way of attracting people, not losing people, which has been the problem. Even GPs, health and education have problems, and they are three fundamentals, but if you start talking about business, which is critical, businesses just cannot stay in those places. They do not have access to the right communication to allow them to trade.

Mr SYMON —You were talking about your business before. I was interested in the data requirements that you have to deal with for your customers. What type of speeds and capacity do you need to do that synchronous communication? Do you need synchronous communication?

Mr Alexander —I would love it tomorrow because then I could relocate the servers and have everything back here, but we cannot do it now. A good example that I use in my business—it has only been 12 years since this has happened—is that I had one of my talented programmers leave the state because his wife is a teacher and got a promotion, so she had to leave. This was in the old days of dial-up, which was not that long ago as people seem to forget. What we used to have to do, because we did not want to lose his services, was have our programmers here work during the week and, as he was our head guy, we would burn everything onto a disc for him. We could not send it across the Bass Strait with telecommunications via dial-up because it would take two days to get across. So we burned it onto discs. Ansett Air Freight would pick it up on a Friday to freight to him. He would work on the weekend and Ansett Air Freight would pick it up and bring it back on Monday morning. You laugh, but it cost my business $25,000. For less than $100 a month I can do the same thing now.

CHAIR —What year was this? Give us an idea of what you meant by ‘not that long ago’.

Mr Alexander —I am going to guess it was only 10 years ago and that is how it used to happen. We used to have to do that. So now, when ADSL or ADSL2+ came in, that allowed us to synchronise our staff and do it that way. But it is still slow. One of the things I do when I go around to demonstrate the benefits is have three pictures on a screen. Those three pictures have 10 10-megabyte files, which is 100 megabytes. It shows in 2003, 2008 and 2012. By the time I have explained that, 2012 is finished. I talk for another 20 minutes, and 2003 has just downloaded one picture. It is simple: time equals money. Small business operators understand that. It does not matter if they have a webpage, they are sending a catalogue or interactive video or they are showing their bed and breakfast in some small town; the access to data and allowing people to see it is going to allow those businesses to understand where the benefits are.

Mr SYMON —The important part of that, then, is obviously the customer at the retail end. If the customer does not have that fibre connection, you are back a number of years, as you just explained.

Mr Alexander —Absolutely, and it will get worse. If you go to India, you will see that in some parts they do not even have roads, yet they will have satellite and fibre set up in certain areas. If you go to Vietnam, you will see exactly the same thing. I walk into a five-star hotel, and outside there will be a slum in the corner, but they still have fibre going around. In Australia we are lucky, because our country allows us to have roads, hospitals and all the rest of it. This allows us to catch up to other countries that are surpassing us in telecommunications because they are going the faster way. This gives us an opportunity, and not just now. We keep talking about now, but I keep talking about the future. It is about what the future benefits are going to be. Unfortunately, a lot of people will say, ‘There’s no cost-benefit analysis, there’s none of this and there’s none of that.’ It is very difficult to measure what is going to happen in the future without allowing that free market enterprise to create it. That is what will happen. You will find that entrepreneurs will come out and develop things that we will not even have thought of yet, but we need the infrastructure. All we are asking is for the government to empower the private sector to come in and develop their stuff and grow the economy in their own way.

Mr SYMON —To me it is a bit like asking for a new bus service without there being a road in place.

Mr Alexander —Correct.

CHAIR —Particularly useful, I think, was the point you were making about the rate of change. You talk about the future, but the future you are talking about may actually only be only five to 10 years down the track, at the current rate of change. So that was very useful information for us. We have only gone a little bit over time. We very much appreciate your presentation. Thanks so much for taking the time to come here, particularly as, clearly, you are very busy. If we have asked you to provide any additional information, just pass that through to that secretary. You will be sent a copy of the transcript of your evidence, to which you can make corrections of grammar and fact. Once again, thank you very much, and best wishes.

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