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Standing Committee on Infrastructure and Communications
05/05/2011
Role and potential of the National Broadband Network

BUCKINGHAM, Mr David, Chief Financial Officer, iiNet

DUNSTAN, Mr Matthew, General Manager Retail, iiNet

Committee met at 13:00

CHAIR ( Ms S Bird ): I declare open this public hearing of the House Standing Committee on Infrastructure and Communications in Perth. The inquiry was referred by Minister Albanese on 16 November last year. To date we have received around 228 submissions and have conducted 11 public hearings around Australia. This is the first of two public hearings we will be conducting in Western Australia. This inquiry has a different focus to other NBN inquiries that have occurred in the past, that are underway presently or that will commence shortly. While those inquiries focus primarily on technical matters, either to do with the design of the NBN or the corporate plans and governance of NBN Co., this inquiry is focused on how the NBN will be utilised across Australia.

As is evident from the inquiry's terms of reference the committee has a broad range of areas to investigate, including the capacity of the NBN to contribute to health, education, business efficiencies and regional development. While the inquiry is less technically focused than others, dot point (i) in the terms of reference requires the committee to consider the optimal capacity and technological requirements for the NBN to deliver the benefits that are outlined in the other areas of focus.

Before asking the witnesses to introduce themselves I remind members of the media who may be present or listening to the broadcast on the web of the need to fairly and accurately report the proceedings of the committee. I now welcome representatives of iiNet to today's hearing. Although the committee does not require you to give evidence under oath I 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 but we would be interested if you would like to make some opening comments to the terms of the inquiry and then we will have a question and answer session.

Mr Buckingham : We have prepared something fairly short, so if I could read that we could then begin questions and answers from the committee.

CHAIR: That would be great, thanks.

Mr Buckingham : Probably the best place for us to start is with a little bit of background on iiNet. iiNet is a national provider of internet, telephone and subscription television services. We are headquartered here in Perth. We commenced operations in 1993 and in the subsequent years have grown rapidly and have opened offices in Sydney, Melbourne, Auckland and Cape Town, where many of our 2,000 staff now work. We also employ contract staff in Indonesia for software development and also in the Philippines for customer support. We have been frequently recognised for our commitment both to innovation and customer service, and these are our driving strategic principles. We have been recognised for those principles and delivering on them in the marketplace with many awards and repeated recognition. We have been on the record as active industry participants in a number of areas and have willingly engaged in ongoing public debate around customer service; the competitive environment; the regulatory framework; the provision of legal online content; cyber-safety, including internet filtering; and of course the evolution and development of the NBN. We are a strong supporter of the NBN in its current format. However, we see the NBN as a much more important step than just the technological improvement in telecommunications services and internet services. For us, the accompanying legislation which allows for the restructuring of the industry, including the separation of Telstra, the creation of an open access, wholesale-only national network and revised ACCC regulatory powers are welcome and as important as the significant improvements in technology that will come. In fact, the regulatory and structural changes provide immediate benefits to the community, while the network itself will provide a gradual benefit to Australians as the construction takes place over a long period of time.

Together with the backhaul black spot funding program, market failures that have been poorly addressed for many years are now being focused on. For example, the backhaul fibre into Geraldton that was only lit up in February this year is finally giving 2,000 households access to competition through iiNet ADSL2+ superfast broadband for the first time. Thousands of customers living in Tasmania can now access high-speed broadband at competitive prices on the NBN. Soon customers in Armidale in New South Wales will be switched on to the NBN. These are real, tangible examples of benefits immediately flowing back to our communities and consumers.

In addition, NBN Co. promised us openness and a chance of input into the design phase of this project, and they have delivered this for us as an organisation. Our engineers have worked closely with NBN Co. over the past two years and we are very happy with the technical specifications that have been delivered to date. With our strategic focus on customer service and innovation, we see the changed industry structure improving the competitive regime in a high performance network as both a great opportunity for our business and also culturally satisfying.

Can I tell you right now what Australians will use the NBN for in 10 years time? I am afraid not, but history shows that when you provide infrastructure, innovation transpires and usually very fast. Five years ago, Twitter and YouTube did not exist. It is barely 10 years since Google and peer to peer became part of the internet and they have revolutionised the way we and businesses and consumers access our information. As construction continues, we now need to turn our eyes to application. What is coming next? The power of NBN is not just about speed and reliability; the huge advantage for us is that it offers ubiquity.

When the world knew that all the homes had power sockets, it was able to mass produce electrical appliances. When we know that every home has a grey NBN box attached to the wall, what will start being created? If we have more certainty then our academics, researchers, hackers and businesses will turn their eyes to that vision. As attractive as it might be for us as a company and our customers, the NBN network is not the objective; the potential use is the real objective. For iiNet, the fibre network is an important enabler of improvements in the way personal, commercial and government transactions will drive communications over the next five, 10 or 15 years. It will be intrinsic to our way of life just as electricity is or any other utility that we use.

What do we ask? We ask what is it that we want to achieve? What are our national objectives? What will be the measure of our success in this project? We are of the opinion that the missing component in the debate is a national online or digital economy strategy. We would like to see the debate switching fast to fundamental questions like: where does Australia wish to be in a global digital economy or does Australia want to create jobs, improve domestic productivity, increase exports and advance its competitive position in a global digital economy? iiNet is a strong supporter of the NBN, but we are also of the opinion that a national online strategy should be a matter of priority and it should be developed in order to give the NBN, government agencies and the economy at large transparency, purpose and direction.

CHAIR: Thank you. You have encapsulated exactly what it is that we are looking at with this inquiry. As you would appreciate a separate joint standing committee is looking at the issues of technology and governance. This committee's focus is to look at increasing the utilisation of the NBN in order to break down some the issues around tyranny of distance and isolation. You have encapsulated that well in your introduction. You talked about the backhaul issue. Can you give us an idea of the extent of ADSL black spots that you are dealing with when you are trying to provide retail services to people—how extensive they are in this state or indeed anywhere else?

Mr Buckingham : I guess the way to quickly summarise that is to say that iiNet currently is on record publicly as having its infrastructure in about 350 exchanges around Australia, and that is climbing, slowly. There are about 2½ thousand exchanges in Australia and we have not been able to access many of these because, predominantly, backhaul is too expensive.

CHAIR: So you are actually going and putting your own infrastructure into the exchanges?

Mr Buckingham : We did that in Geraldton.

CHAIR: You have clearly come across some fairly significant issues. We have had a lot of evidence from regional areas. In Wollongong, three kilometres from the university, two company owners presented to us saying they could not even get ADSL at home that far away. So this is not uncommon for you when you try and provide retail services?

Mr Buckingham : Absolutely, and it is not just regional. My CEO would not forgive me for not mentioning that he lives in Burswood, just down the road in the CBD here in Perth, and he cannot get it.

CHAIR: Some of the written evidence we have had for the WA hearings indicates that 50 per cent of the area of Perth is unable to access it, because of the state of the old copper networks. You talked about the importance of ubiquity. I had a wry smile, because you are quite correct in that one. People knew there were power points; but I understand from builders that the big issue now is that there are never enough power points in a house. As we all arrive in these places, we are all looking for somewhere to plug the mobile in to recharge it and plug our other technology in as well. So I do understand the point you are making about ubiquity.

The other issue that has been raised with us is the importance of upload, not just download, and how that will change the types of services that people are looking for. I would be interested in your observations and experience to date with the growth in upload demand and the types of usages that that might be being put to. And perhaps you could do a little bit of crystal ball gazing about what you think might be the future in that area.

Mr Buckingham : I am not a technical wizard. We have many technical wizards in our company, but unfortunately I am not one of them. I cannot honestly say whether restrictions on upload capabilities have stopped things from happening. That is crystal ball gazing, I think, but it is certainly something that, as applications and the use of the internet have developed over the last several years, has been absolutely critical in the capability for people to access information. As ever, technology finds a way round some of that problem. The NBN offers a massive step up in that respect—that becomes more two-way. I am sure that will release a raft of applications and services that cannot even be envisaged right now.

Mr Dunstan : One of the key things that we are moving into in terms of content, in a retail sense, is directly related to the ability to upload and download, from a small business or a business point of view. These things have been discussed previously in other forums. The ability in education or health to be able to use both upload and download to be able to deliver or receive information is becoming really important, whether that is remote schooling or remote health, as much as people being able to share and upload and download content that is becoming quite common as an IP technology.

Mr Buckingham : I think that video will probably be the first driver of the sheer capacity use of NBN, and there is a perfect example; multicast on-demand video in high definition or, hopefully one day, 3-D for the mass market will require huge upload capability as well as download.

CHAIR: A lot of the expansion in video based content is actually not for provided stuff but for uploading your own stuff onto it. Is that the sort of thing you are talking about there?

Mr Dunstan : Yes.

CHAIR: You mentioned health and education, but some of the applications that we have seen in the research stage—not in the commercial research area but in universities and so forth—is really about high-definition observation for remote doctors and specialists. Is that the sort of area you are talking about with the video connection, Matthew?

Mr Dunstan : Yes.

Mr Buckingham : If I took our head office in Perth up to Geraldton and took it off DSL2+ as a business we would come to a grinding halt, just for the sheer amount of data that my finance team sends around its finance function on a daily basis over pipes and the speed that we do it at.

CHAIR: Yes, this certainly affects some of the small businesses, employing about 20 people. The fellow we spoke to in Wollongong said it takes him 12 hours to send something to Brisbane, so it is a fairly unsustainable model over the longer term. You mentioned the national digital economy strategy. I think there was an announcement only a week or so ago about developing that. I will have to go back and have another look. It is evidence that we have had consistently raised about the importance of that area. Do you want to give us a bit more of a picture of what you as an organisation would be looking to see encompassed in such a national strategy?

Mr Buckingham : Our business does well or it does not because our consumers buy our product. We are facilitators of access to information; essentially that is what our business runs off. I heard the word 'economy' there. Just reflecting on what I said, we are looking for an online strategy essentially. Some thought is required now in this country around how it wants to operate, what it wants to drive as goals over the next 30 to 40 years and what can be better delivered from an online world—education, health—

CHAIR: Are you looking at service delivery areas being developed?

Mr Buckingham : Predominantly, yes. I think that will naturally drive the first wave of use of an NBN, personally. But I think you can go broader than that. Our business will thrive off the back of that or it will not. The more that people require access to information the better our business does and the more enjoyment our consumers get from our products.

CHAIR: One of the things that have been said to us is that this is really just about faster entertainment. To the contrary, much of the evidence has been talking about the fact that, while entertainment might be the leading innovator, there is actually a whole lot of translation of that in Tasmania. You were describing health and education services and so forth, but you need the infrastructure to be able to deliver those. So you would be saying that we need to broaden that conversation beyond the entertainment functions?

Mr Buckingham : Absolutely, yes.

Mr Dunstan : And I think it is a fair point David made before that, because this industry is moving so quickly, we honestly do not know, in 24 months or 12 months, what the product will be selling. From an iiNet point of view when we are working on a 2+ network, often the six months previously is very different to the six months after. It is just so significantly changeable that the analogy of building a road network is that you need to build it knowing what might be running down that road or be using that infrastructure in five years from now, and from a digital point of view it can be so significantly different from what we even see now. So it is hard to know what to put it for, but I think we have to make sure the scope is broad enough that we do allow for all this innovation to come off the back of really smart infrastructure.

CHAIR: There have been international developments that are a bit ahead of us. I am wondering whether, as an organisation, you have seen and can describe to us some of the good practice you might have seen internationally that we could learn from.

Mr Buckingham : We debated this internally. The Singapore example I think is a good one, where SARS hit Singapore really badly. One of the things they added to their online strategy was to enable home education to keep children at home for one day a week, I believe, to reduce the rate at which SARS spread. There is a perfect example of the government using an online strategy to enhance the way that the country performs. So it is that mind-set of deciding whether it is increased productivity, increased exports, whatever. We are not here to tell you what those things need to be.

CHAIR: No, but that should be the conversation.

Mr Buckingham : That should be the conversation—what are those things that need to be identified? When you identify them you can then tackle them and you can then put them into play, and inevitably businesses do well out of providing that to customers.

CHAIR: You are an organisation that was created in Western Australia and you have chosen to stay here. One of the significant areas of evidence we have had is about the capacity for regional development. It is great that we see organisations stay here. We have had lots of evidence of the pull towards basing themselves internationally and so forth. Do you want to tell us why you are keen to stay here? What models do you use? Do you do much teleworking? Do you use contract workers from around the country online? Do you use those sorts of opportunities that the new economy might create?

Mr Buckingham : I will start with our customer base. Roughly 50 per cent of it is in Western Australia. The ability to market and grow our customer base in Western Australia is hampered at the moment. These are some of the things we have discussed. So there is an immediate commercial impact on us running a business.

Mr Dunstan : We have call centres in four countries. We have a percentage of our call centre people who work from home, so they need remote access to be able to do their jobs. It is a real benefit for us as a business, but the connectivity is crucial for those guys to be able to do their basic jobs.

CHAIR: That is a good model for businesses—the capacity to link into people who can work from home?

Mr Dunstan : Absolutely.

Mr Buckingham : We directly measure the productivity of our workforce at home versus in the office, and it is higher.

CHAIR: We have had some evidence from other organisations that you can measure productivity improvement from working at home, which is really interesting and perhaps breaks down a myth that might be out there about home based work.

Mr Buckingham : Our call centres are all virtually connected, as Matthew just said. We rely on that. We rely on customers being able to access the next available person for our business to give them the best service they need.

CHAIR: Is that productivity work publicly available? Is there a version of it you could submit subsequently to the committee? If it is in-confidence we understand, that is fine.

Mr Dunstan : I am sure there would be a version of it that we could publicly provide.

CHAIR: If you could have a look, even if it is just an executive summary of what you found, I think that would be very useful to us.

Mr NEVILLE: In your media blurbs you say that you are the second-largest DSL provider. You have about 50 per cent of the Western Australian market. What percentage do you have of the national market?

Mr Buckingham : On DSL broadband, about 15 per cent. So we have 650,000 broadband DSL customers.

Mr NEVILLE: And is it all sold under the badge of iiNet?

Mr Buckingham : At the moment we multi-brand. The biggest component is iiNet, but we have a regional brand called Westnet and we have also bought a couple of businesses in the last year that have their own brands that we are effectively integrating into iiNet and Westnet.

Mr NEVILLE: I presume you are talking about either existing fibre or copper, but you say that of the fixed line connections four companies control 83 per cent. What are the other three companies?

Mr Buckingham : Sorry?

Mr NEVILLE: You say there are four fixed line companies, including yourselves presumably, that provide 83 per cent of Australian coverage. What are the other three companies?

Mr Buckingham : There are actually more than three; I am not sure where you got the three from.

Mr NEVILLE: From your publicity.

CHAIR: I should just indicate that the secretary did some research and provided us with some press releases.

Mr Buckingham : There are several hundred ISPs in Australia.

Mr NEVILLE: I realise that, but you say in one of your own press releases that of the fixed line providers four of them provide 83 per cent of the coverage.

Mr Dunstan : Telstra, Optus, iiNet and TPG.

Mr NEVILLE: That is what I was after.

Mr Buckingham : Sorry, that was a simple question. Telstra would be 45 per cent of the market.

Mr NEVILLE: In your opening remarks, you talked about the great godsend of fibre being its ubiquity. Yet we are only proposing in this first eight-year period to cover 93 per cent of Australia. Is that really ubiquity if a big slice of rural Australia is not included in it? When it comes to things like education, data going to remote industries and health, wouldn't you think it possible that that seven per cent would contain quite a few of the sorts of people who would require high-speed broadband? As was demonstrated to us at the University of Melbourne, if you want to be able to instruct doctors in country areas or bush nursing centres and the like out of Sydney, Melbourne or Brisbane hospitals, is the ubiquity that you talk about really ubiquity or is it ubiquity on commercial terms, in that you have got to all of the people who you may be able to make a dollar off, with that last seven per cent being too hard? I am not directing that purely at your company; I am talking broadly.

Mr Dunstan : The general talk previously about an outside-in build would at some level hopefully identify geographically the greater percentage of those seven first. Within WA, our example of Geraldton, which is having an outside-in build—Geraldton into Perth—has delivered some of the benefits that you discussed to people who previously did not have them.

Mr NEVILLE: Who funded the fibre to Geraldton?

Mr Buckingham : That came out of the black spot program. We then funded our own equipment in the local area as a result.

Mr NEVILLE: So you have taken not exactly a wholesale role and not just a provider role but a technical role as well in Geraldton.

Mr Buckingham : Absolutely.

Mr NEVILLE: Does that conflict at all with any of the principles of the NBN when it comes to having a wholesale and retail separation?

Mr Buckingham : The NBN replaces the last piece of copper. There is still a big network that you would need to run behind that to be a telecom service provider. That is unchanged from what we do now. Getting back to your question, we would love full ubiquity. We would love that seven per cent to have access to the fastest broadband possible. But we recognise that we are running the business and it needs to be balanced with the commercial requirements of running a business. Therefore, it will inevitably depend on cost.

Mr NEVILLE: When we were in Tasmania, we were shown the connection of the junction boxes to the homes. We were told that in the north-eastern corner of Tasmania about 70 per cent of people agreed to take the boxes on their houses. But only 15 per cent had signed up with an ISP. Is that your experience in the areas that you have gone into so far?

Mr Buckingham : We have only been in Tasmania in terms of the NBN.

Mr NEVILLE: Are you mixed up with Armadale, for example?

Mr Buckingham : We are involved in Armadale. We will be there. I cannot report anything.

Mr NEVILLE: And Willunga in the McLaren valley?

Mr Buckingham : We will be involved in that, but neither of those are up and running yet. I can confirm that that is our experience in Tasmania. Geraldton is different.

Mr NEVILLE: For many people, that is their first contact with any sort of broadband. Based on your experience as an ISP, what do the prices look like under the NBN compared with ADSL and ADSL-2 plus and the like in terms of services?

Mr Buckingham : I will refer to the business case released prior to Christmas from NBN Co. It depends on the comparisons to the various wholesale products that we use right now. Some are higher; some are lower. But generally speaking, if we were to migrate our entire business across to the NBN Co. right now iiNET would either be net neutral or slightly up.

Mr NEVILLE: Much of a muchness. Thank you.

Mr SYMON: I have a couple of pieces of paper that the secretariat has dragged up. One of them is the NBN fibre plans for customers from September 2010. It has a range of figures there. The bit that I was interested in was the fact that your upload and download speeds are asynchronous. If it is in fibre, why is that the case? Why is the upload speed eight megs if you can get a download speed of 100? What is the limitation on that at the moment? Or is this the past? Have we already moved beyond this? This was September 2010.

Mr Dunstan : The answer is that those plans were specific to that geographic area. I do not know why those were different, but those plans were specifically for that area and possibly will not be replicated in other areas where the NBN rolls out.

CHAIR: So it was like a trial?

Mr Dunstan : Yes.

Mr SYMON: Obviously one of the key points of the fibre rollout is it is symmetrical rather than asymmetrical. I was looking at that and thinking that, although it is faster, it is just operating asymmetrically over a different network. Obviously, as I seem to be picking up from you, Matthew, that is a limitation further up.

Mr Dunstan : I assume—I am not 100 per cent sure—that that is a limitation of the trial. I do not know off the top of my head, but I know that those plans were specifically developed for that isolated trial on its own.

Mr SYMON: I understand that. You spoke about the 350-odd exchanges you have equipment in out of 2,000-odd. Do you have issues at the moment with Telstra getting access to more exchanges or is that just a case of the company growing as you can?

Mr Buckingham : Just to be clear on your question: do we have issues in accessing Telstra's exchanges?

Mr SYMON: Yes, to put your equipment in.

Mr Buckingham : We have had them for 10 years or longer. The list has got smaller and smaller.

Mr SYMON: So if you, for instance, would like to go to a new area where Telstra has an exchange, you can put your equipment in and service that area? Is it as easy as that?

Mr Buckingham : Typically, with the new exchanges we are accessing now it is a lot easier than it was when we first started our business because we focussed on metro exchanges, which were more competitively accessed, if you like.

Mr Dunstan : Some of the exchanges can be physically limited in terms of the exchange building. If there is no space to put another rack, some of them can be physically limiting as to what you can do in some of those areas. There are some limitations in terms of that as well.

Mr SYMON: Do you expect there will be any difference with the changeover to NBN Co. operating that side of things?

Mr Buckingham : I do not know we can answer that until we know what the points of interconnect are going to be. If they are existing exchanges, there will be more of the same.

Mr SYMON: You service with ADSL2+ at the moment, but what happens to areas that cannot get that, like Birdsville, which you mentioned before? Do you still send a lower service into those areas?

Mr Buckingham : Yes, we will typically wholesale Telstra—to us it is our off network; it is not our own network.

Mr SYMON: So it is not through your own equipment—

Mr Buckingham : Correct. We will rent Telstra from end to end.

Mr SYMON: So the implementation of the NBN is a commercial opportunity for your company to take that service from where the wholesale ends all the way through to the consumer?

Mr Buckingham : Correct, and with a better product.

Mr Dunstan : And potentially deliver to some of those people that we cannot at the moment some additional products—some of the IPTV types of products that we cannot deliver to some of the ADSL1 customers right now.

Mr Buckingham : We offer a better product to our on net customers on IPTV than we do off net because of the technical limitations of what we can get through the end to end wholesale product we rent from Telstra.

CHAIR: Can you give a brief picture of your IPTV service?

Mr Buckingham : Now we are getting technically out of our depth.

Mr SYMON: We are quite interested in IPTV because it is one of the drivers and we have not come across much of it yet.

Mr Buckingham : You need five megs or around that kind of speed to download in a reasonable amount of time—in other words, what you as a consumer would be willing to accept as video material. A lot of the network does not do that right now.

Mr SYMON: What are the upload requirements of that?

Mr Buckingham : I do not know off the top of my head.

CHAIR: It is designed at the moment as a delivery service rather than as a two-way service.

Mr Buckingham : Correct.

CHAIR: Is it the FetchTV model, which we are going to see?

Mr Dunstan : Yes.

Mr Buckingham : We get around it by delivering the content to the box, cache it locally and then cache it on the box in the periods you are not using the box.

Mr Dunstan : Our product is FetchTV. We were the provider to launch that with FetchTV in Australia.

CHAIR: But you are butting your head against the serious limitations of rolling that out as a model?

Mr Dunstan : We cannot sell the good product to X per cent of our customer base.

Mr Buckingham : Video can be used for anything. Video does not need to be entertainment; it can be used for lots of things.

CHAIR: We saw some examples at the university of lecture delivery and so forth over internet based services.

Mr Buckingham : You can run a video conference.

Mrs PRENTICE: I was wondering what industry sector the majority of your clients are from currently? Is it mining, government or education?

Mr Dunstan : From a business point of view, traditionally, we have played in the smaller end of the SME market. The nature of our business is that we have skewed to people that are more technically savvy. Graphic designers and people that use technology is the nature of the type of customers that we have attracted, organically. Given our brand strategy it has been those sorts of customers, so we have quite a strong skew to small businesses that use a lot of technology. Our retail base is also quite high.

Mr Buckingham : With one to 10 employees; very small.

CHAIR: Following up on that, we have had a lot of evidence about home based business. Companies like Rising Sun Pictures in Adelaide talk to us about employing musicians, designers and so forth from around the country. But they really need good quality broadband. I am wondering, as a company, whether you are able to identify whether your clients are home based businesses, professionals working from home, and so forth? Are there any?

Mr Buckingham : Many.

CHAIR: Do you have a way of identifying that or giving us statistics on that, because it is really hard to get a picture on how big the slice of the economy actually is?

Mr Dunstan : Quite possibly.

CHAIR: Would you mind having a look. I do not want you to do a whole lot of a research but if there is something, just give us a picture of the size of that sector, because we are desperately keen. The ABS did some stuff in 2006 and is about to roll out with another census, but in between times we get the feeling through the evidence that there has been an explosion in the home based type area and it is hard to get good data on it.

Mr Dunstan : You would assume that would continue to grow when people could get more access and could do more at home. That is a multiplier effect if you give people the possibility to do it at home.

CHAIR: Plus it means they stay in the regions and are not relocating to the cities which has some interesting benefits from a national perspective.

Mrs PRENTICE: You mentioned graphic designers and technically oriented companies. Obviously video is one product, but what are the sorts of services that they will be able to deliver or use that they cannot do now?

Mr Dunstan : As David said, most of this stuff we still do not know. I have seen in small businesses the ability for a small business photographer to share wedding photos with people over the internet becomes a difficulty because they need a shared source or they do not have the bandwidth to push or pull the information down the pipe. To be honest I do not know of anything else. A lot of this is limited by the current potential, and innovation might deliver stuff I could not even tell you about.

Mrs PRENTICE: You mentioned and acknowledged our concerns in Scottsdale in Tasmania where there was not the take-up that we would have hoped for. Whose role do you see as promoting the importance of take-up? Is that something you as a retailer should be involved in?

Mr Dunstan : I think both pillars are very important and the ability of NBN to continue to build the brand and build the education is really important. ISPs on their own will find it difficult to build the education about what, how and why of the NBN. I think that needs to continue. I think there is a role post that for the ISP to provide the tactical promotions off the back of those services.

Mr Buckingham : We could be hypocritical, sit here and say we need it, and then not have to take the responsibility of the migration process.

Mr Dunstan : One without the other, I think, will limit the success.

Mr Buckingham : We pride ourselves on service. We have been hampered for many, many years in the ability for customers—and this is as much about the regulatory regime of our sector as it is the technology—to choose much more easily and readily who they use for provision of the telecom services. We would like to take the opportunity to see that challenged if it could get a lot easier. It is a side point, but one of the most important things for us, for example, is seeing in the business case, which was issued before Christmas, that the termination of the NBN is going to be on the inside of the house on the wall. That is fantastic for us, because what that means is the customer just has to plug it in and it has to work. There is no down time as there is right now between connection and disconnection, which can be up to two weeks. Imagine that in your business, if you are moving offices. That all goes away, in theory, assuming NBN Co., of course, operates efficiently. That for us is very exciting: for customers to be able to seamlessly choose between their providers, for a business that is based on innovation and service, you would like to think you would do well. So we will absolutely grab that opportunity to handle the migration process. Of course, we are running a business, so we have to balance that with the cost and what comes from it.

CHAIR: Can I follow on from that and then I will come to the deputy chair's other question. There is quite a bit of work being done by many providers in terms of partnering with research organisations in application development and so forth. Are you doing anything like that at the moment?

Mr Buckingham : Yes, we have a core product set and then we are looking at expanding that all the time. We have invested a lot of money in trying to build service loyalty and brand loyalty with customers. That naturally leads us from a business perspective to want to be or to share more applications with them and provide more of their telecommunications needs.

CHAIR: I was going to ask about the telephony side of it as well.

Mr Buckingham : Our core products at the moment are not just broadband; we sell telephony both over the fixed copper line or through IP—very successfully. We are now selling mobile too, both broadband and voice.

CHAIR: A chemist we met in Tasmania made the point to us that he had tried VoIP previously and found the quality quite poor and had never pursued it but, having now been connected up with a fibre, was astounded that the quality was as good as what you would get over copper and there were significant business savings for him in having a packaged product.

Mr Buckingham : Absolutely. We have done very well in the last two or three years with a product that is essentially a broadband connection with our own voice over IP. I will not go into technical network terms but it is effectively a service-grade quality of service VoIP that we offer that we offer. We spent a lot of money investing in building that capability and customers have consumed it in huge amounts.

CHAIR: At the moment you offer that in a package with ADSL2?

Mr Buckingham : Correct.

CHAIR: Is there a limit to where you can offer it? Is the quality a problem below ADSL2? I am just trying to picture it: this fellow had tried it previously—

Mr Buckingham : No, we can offer IP phone in non-ADSL2 areas. The quality of the IP phone is more dependent on the quality of the IP voice network that you have built.

CHAIR: That must be what he was reflecting.

Mr Dunstan : It is still speed dependent. If you are on a low-grade ADSL1 plan, you are more likely to have issues that you would on a reasonable ADSL2+ plan.

Mr Buckingham : Typically, for most VoIP offerings at the moment there is a low level of quality of service because the traffic is not prioritised. It is the prioritised traffic on our network, apart from TV, which is now taking out over. But we always prioritise it.

Mr Dunstan : New product development right now is limited. When we sit around looking at new product development the question is: what can we use on the infrastructure we currently have? If we have got something amazing—and I do not have an example—it is limited by what we can actually deliver.

CHAIR: In terms of telephony bundling, one of the constant issues—and as MPs we get it all the time—with people is STD call costs, particularly for businesses, but also for the population accessing specialists or businesses or whatever. It is a real issue. This gentleman was saying that those issues went away in this model.

Mr Buckingham : It is a fundamental reason why our small business customers come to us, because we offer a bundle of very attractive high-speed broadband and phone communications, essentially. We are investing a lot of our time and effort, now that we have built brand loyalty and service loyalty, in additional applications. I cannot obviously talk about those, but NBN will allow us to thrive in that respect and offer customers more and more and more.

Mr NEVILLE: What speed do you deliver for your $29.95 package—or what do you anticipate you will provide in terms of speed?

Mr Buckingham : For our ADSL2+ service?

Mr NEVILLE: No, for fibre service. What are you providing at present on ADSL?

Mr Buckingham : It is a mixture, depending on how far you are from the exchange, et cetera. On average, 50 per cent of our customers access about 12 megs on our ADSL2+ services.

Mr NEVILLE: Twelve megs?

Mr Buckingham : Or over.

Mr NEVILLE: In this chart that you sent us—

CHAIR: I should just clarify that the iiNet people have not provided that to us. The committee secretariat went to your website and got your most recent press releases.

Mr NEVILLE: We have been poking around in your files!

Mr Buckingham : We are very open.

Mr NEVILLE: We have no connection to WikiLeaks, I can assure you. In your peak and off-peak quota stats—

Mr Buckingham : I was about to get my iPhone out and look it up myself—if there is fast enough broadband in the building, of course.

Mr NEVILLE: You have 100 plus 100 for $49.95 bundled. But unbundled, for the same 100 plus 100, you are talking about $79.95. What sort of bundling do you do that nearly doubles the price of the thing?

Mr Buckingham : Unfortunately, this is a part of our business that is not just ourselves; it is common across the whole of the industry.

Mr NEVILLE: I realise that but I am just interested in your philosophy.

Mr Buckingham : If you look at our cost base in terms of our network, most of it is per customer driven and based on, effectively, the amount of network we either have to rent ourselves or invest in. But there is a large element related to the ability to access bandwidth or IP from the US, predominantly. We have to spend a sizeable amount of money each year on bandwidth.

CHAIR: I think the deputy chair is not so much concerned with how the price is structured, to be achieved, but with the bundled services you are providing within that cost structure. You are providing TV, you are providing telephony and you are providing broadband.

Mr Buckingham : Sorry, that is broadband and phone; the bundle there means phone.

Mr NEVILLE: A broadband speed of 100, plus phone.

Mr Buckingham : Plus a phone service.

Mr NEVILLE: Would there be more if you had a fax line as well, for example?

CHAIR: Does anybody want a fax line?

Mr Buckingham : Our small business customers do. We treat that as an additional phone line extension.

Mr NEVILLE: What is your charge for a phone line, in round figures?

Mr Buckingham : It depends on the type as to whether we rent the network or not. If we rent the network it is a $29.99 line-rental charge and then calls, obviously, come at a cost. If we do not rent the network from Telstra, as we do with some of our broadband on the unbundled local loop, we do not have to pay anything to Telstra so we do not charge customers for it; it is free. But it depends on where the customer is and the ability of our—

Mr NEVILLE: I am talking in the context now of the NBN, which, presumably, in most instances, will be fibre.

Mr Dunstan : In an IP world right now, we charge $9.95 for an additional IP line under the current framework. We do not currently have a product that is priced—it does not even exist yet—that would preclude it being $9.95, zero or anything in between. Right now, on our existing network, an additional IP line for a retail customer would be $9.95. It does not mean that is what we will charge under this framework.

Mr Buckingham : We have different arrangements for business customers. We offer more lines at slightly discounted prices for businesses that need more.

Mr NEVILLE: Do people on your network have free STD calls or do you have those sorts of packages within the package?

Mr Dunstan : That $9.95 would offer people free local and national calls as of today.

CHAIR: If it is over the internet you are not paying a per-call cost, you are just paying for the initial service, the $9.95. Is that the structure?

Mr Dunstan : Yes.

Mr Buckingham : We have invested in a VoIP network that effectively allows us to offer a lot of it for free.

Mr NEVILLE: It has been suggested in recent weeks that facilities might be made available to the NBN, to sell to selected government departments and corporate entities, to allow them to do their own internal retailing, so to speak. How does your company view that, given the earlier plans by the government to keep a very strict separation between wholesale and retail?

Mr Buckingham : That is a difficult one. On the one hand, we want NBN to come as fast as it can, and if that is an enabler, a benefit, I can understand it. But, as a business, that is not good for us. We provide services to some government departments right now, and being precluded from that opportunity is not good.

CHAIR: Thanks, everybody. Thank you very much for your evidence today. I should perhaps thank you in particular given that we had a look at some of your recent comments publicly and perhaps should have alerted you to that first up so that you knew what we were referring to. We thank you for your attendance today. Could you just forward the additional information you have been asked to provide—as you can; we understand that—to the secretary of the committee. 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. It was very useful and interesting information for the terms of our inquiry, and we appreciate your participation today.

Mr Buckingham : Thank you.

Mr Dunstan : Thank you.