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Address to Australian Financial Review : Broadband Australia 2007, Sydney.



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Senator the Hon Helen Coonan Minister for Communications, Information Technology and the Arts

Deputy Leader of the Government in the Senate

Address to Australian Financial Review : Broadband Australia 2007

Sydney 20 August 2007

Thank you

z It is a pleasure to be here again.

z It has certainly been a rollercoaster ride over the last six months. The debate has probably

generated more ‘heat’ than ‘light!’ z Announcements, claims and counter claims, from all sides.

z Perhaps now we have time to catch our breath and take stock of how that will fundamentally alter

the telecommunications landscape.

The rise and rise of broadband

z To the lay person broadband went from geek speak to barbeque stopper overnight. The level of

hype now seems to have subsided somewhat and some commentators are questioning the real underlying drivers. z Undoubtedly there are fundamental technical and market changes at play. Convergence and the

digitisation of networks has commoditised data and led to a growth of platforms, all capable of delivering essentially the same generic content. z As a result, new players have entered the markets, from the media and broadcast sectors offering

movie downloads, to mobile carriers enticing customers to cut the landline and go wireless. z At the same time, the traditional telcos are challenged by the decline of high margin revenue

sources and some are fighting back by looking to new markets to supplement revenue and new platforms to deliver innovative services. z Overall consumers are benefiting from lower prices both for telephone services and broadband,

as well as more choice and new applications like Voice over IP. z The rapid pace of change and the complexity of the market also highlight the fact that broadband

policy cannot be one dimensional. z Broadband is not just about access it’s also about maintaining a safe and secure online

environment and encouraging new and innovative uses of the technology, from small business to the resource sector and from e-health to education. z Only the Howard Government has a clear track record of ensuring Australians have access to

world-class telecommunications, wherever they live. z And only the Howard Government has a broadband policy that is comprehensive, technology

neutral, deliverable, and due to start supplying new high speed services to customers within weeks.

Sound Economic Management

z Over the last 10 years, the Australian economy has gone from strength to strength.

z The Howard Government is proud of its record that has led to unprecedented economic growth

and the lowest unemployment figures in 30 years. z Because of this economic prosperity, Australian business and consumers can look toward the

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future, with confidence in the Government’s economic credentials, strength and ability to lead. z The same sound economic management has delivered tangible benefits in the communications

sector. z In 1997, this Government set about fundamentally redesigning the communications policy

landscape by focussing on competition, consumer protection and targeted investment in under-served areas. z As part of this process, the Howard Government introduced telecommunications specific sections

into the Trade Practices Act, thereby underpinning the introduction of the open access regime by opening up the customer access network to full competition. z The Government has built on and enhanced this framework over the last ten years - but most

importantly, and despite all the rhetoric and hysteria, has stuck to the principles set down in 1997. z As a result of the ‘97 reforms the Australian economy has grown by $15.2 billion since 1997.

z Consumers have received the real benefits of competition through falling prices, with fixed line

prices falling by almost 19 per cent and mobile service prices having fallen by a whopping 36 per cent. z With technology evolving and converging so fast, there are always new challenges being faced by

government - policy in this area is never a ‘set and forget’ exercise - no-one has written the script, it is truly a portfolio without borders. z In this environment more than most others, it is important to have experienced hands at the

wheel, who know when to step in, know when to hold the line, and know when competition has reached the point when some further relaxation of regulation is warranted and necessary. z The regulatory regime is all about understanding market drivers, encouraging industry to innovate

and take advantage of what new and emerging technology offers while ensuring that consumers are protected and able to get the benefits of a thriving, competitive environment. z The Howard Government is committed to maintaining these principles.

Australia Connected

z We shouldn’t forget the particular challenges we face in this country, with the sixth largest

landmass and the third lowest population density in the OECD. z The Government has built a record of providing broadband service to all Australians, regardless of

where they live. z Since 2004, the Howard Government has encouraged the commercial market to extend further

and further into regional Australia through more than $440 million dollars in targeted per customer subsidies. z As a result more than one and a half million Australians have already been provided with access

to affordable broadband for the first time. z I recognised early on in this portfolio that whilst per customer subsidies had played a crucial role

in broadband uptake in underserved communities, a new approach was needed to mop up the remaining hard to reach black spots and to put in place infrastructure that could deliver high quality services now and in the future. z Thus in September 2006 the decision was taken to embark on a competitive grants process to

deliver Australia a new national, wholesale broadband network. z This was long before Labor recognised the importance of broadband and hopped on the

broadband band-wagon of Telstra’s ‘hotwiring the nation’ proposal, which the Government quite rightly rejected prior to the full sale of Telstra. z Rather, the Government decided that a strategic national approach should be used to create a

new wholesale access network. This approach was designed to build on the investment already made in competitive broadband infrastructure through a more coordinated and strategic approach to infrastructure investment. z The objective was to make a long-term sustainable investment in scalable telecommunications

infrastructure that would extend affordable high speeds broadband coverage to as many underserved premises as possible, including through leveraging commercial contributions to upscale the network into the future. z Australia Connected is the result - almost nine months of assessment, technical deliberation,

coverage mapping, costing and negotiations with the successful applicant - to deliver a new high speed broadband network for Australia.

OPEL Network for Consumers

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z The centrepiece of Australia Connected is the immediate roll-out of a new competitive state-of-the-art broadband network that will extend high speed broadband services out to 99 per cent of the population and provide speeds of 12 megabits per second by mid 2009. z These speeds are 20 to 40 times faster than those in use by most consumers today and will be

delivered in the country at city comparable prices. z The remaining 1 per cent of the population are able to access subsidies of up to $2750 through

the Australian Broadband Guarantee. z And unlike Labor’s flawed and incomplete proposal, Australians won’t have to wait five years to

receive improved services. z The new national high speed network will be rolled out by OPEL—a joint venture between rural

group Elders and Optus. z The Government awarded OPEL the $600 million under the Broadband Connect Infrastructure

Program, plus an additional $358 million to enable OPEL to extend the footprint and services available on the new network. z OPEL will make its own commercial contribution of $917 million to significantly upscale this

network. z OPEL will roll-out 1,361 new WiMAX sites covering 9.5 million premises across the country.

z On top of this, OPEL will deliverer 1.9 million premises in regional Australia access to even faster

speeds of up to 20 megabits per second by enabling 312 exchanges across the country with ADSL2+, with a further 114 exchanges being enabled by Optus on a fully commercial basis. z There were genuinely no preconceptions by the Government about this process.

z OPEL was selected simply because it was an outstanding bid when matched against the

Government’s objectives. z Some of the criticisms made about the OPEL network I find quite astounding.

z Independent testing by Enex Testlab has confirmed that OPEL’s proposed network is capable of

delivering the performance requirements to which OPEL has committed for coverage, speed and service quality. z I was interested to see reports of comments made by Dr Mohammad Shakouri, Vice President,

WiMAX Forum, who said the Opel project is far from unique and up to US$300 million has already been spent on 5.8GHz WiMax for rural deployments globally. z The same spectrum is also used by the majority of wireless broadband providers in Australia and

surprisingly my Office has not been inundated by complaints about:

{ Automatic garage doors opening and closing without cause; or

{ Microwave ovens not defrosting when required; or

{ The curtains fading.

z And there’s a good reason for this, microwave ovens generate radio waves of about 2.45 GHz,

not 5.8GHz as claimed, and similarly, a utomatic garage door remote openers primarily use class licensed 433 MHz band, not 5.8GHz as claimed by Labor. z In regards to the claims about duplication, most of you will know the technical limitations of the

existing infrastructure mean that under-served premises are not conveniently grouped in one location, but are scattered throughout Australia. z While we didn’t set out to build a new customer access network, the nature of the problem we

were seeking to solve, has meant that is effectively what has been required.

OPEL Network for Industry

z The extensive coverage of the OPEL network represents also represents a great outcome for

competition in regional Australia. z In line with the Government’s core objective, OPEL will be a ‘wholesale only’ company ,

structurally and operationally independent of the joint venture partners Optus and Elders. z OPEL will sell services to all Internet service providers in the market, including its parent entities,

on a transparent and equivalent basis. z Further, OPEL will provide other wholesale broadband services to the market, including business-grade DSL services. z This will significantly enhance competition in regional broadband provision, and consumers will

see the benefits. z OPEL will also greatly improve backhaul pricing for regional carriers and Internet service

providers.

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z There are 15,000 kilometres of fibre optic backhaul to extend the broadband highways that link

rural areas back to major city centres. z Base pricing for regional to metropolitan transmission routes is proposed to be set at metropolitan

rates, and OPEL has committed to provide a 30 per cent discount on current regional backhaul pricing. z This is a landmark achievement for Australia and will see us entering a whole new broadband era.

Communications Fund & Regional Telecommunications Review - the future of broadband

z A critical point of the Howard Government’s vision for broadband in Australia is our plan for future

upgrades funded by interest earned from the $2 billion Communications Fund. z Implicit in this future plan is the knowledge that technology available today will not be sufficient to

meet tomorrow’s requirements. z That is why the Government has moved to lock in the Communications Fund, to preserve it from

Labor’s threat to drain the fund to help pay for the commercial upgrade to fibre-to-the-node that industry has stated requires no taxpayer funds. z Last week, together with the Deputy Prime Minister the Hon Mark Vaile MP, I announced the

members of the Regional Telecommunications Independent Review Committee. z Dr Bill Glassen will Chair the Committee that will determine how the interest earned from the $2

billion Communications Fund - around $400 million - will be spent next year. z The review will commence immediately and all stakeholders will have an opportunity to make a

submission or speak directly with the committee during their consultations. z The Communications Fund provides a guaranteed income stream to fund hard infrastructure and

services for regional communities such as additional mobile phone towers, broadband provision and even backhaul fibre capabilities. z Despite the huge and recurring benefits that this fund will deliver, Labor wants to deprive regional

Australia and spend it on a network that everyone knows will be lucky to reach 75 per cent of premises.

Expert Taskforce process — high-speed broadband infrastructure

z The Government is also getting on with the job of delivering a new high speed broadband network

in commercial areas. z Two weeks ago the Expert Taskforce released draft Guidelines of the assessment process for a

new commercial high speed open access broadband network to capital cities and major regional centres. z I encourage review the draft guidelines by all interested parties and to submit comments for

consideration by the Expert Taskforce. z After this consultation, the guidelines will be finalised and industry will then have four months to

develop their proposals for a high speed broadband network. z The Government will then legislate to provide the regulatory settings that are necessary to enable

the network build. z The Government is committed to a sustainable and competitive telecommunications market that

ensures that industry gets a fair return on investments in next generation infrastructure so they will continue to invest in Australia’s future be built. z The draft guidelines are consistent with the Government’s approach of ‘technology neutrality’.

z Unlike the Labor Party, we are not in the business of nominating the technology winner and

discarding the rest. z Unlike Labor we have not ruled out taking action against overbuild of a new fibre network.

z We all remember the debacle of the Pay TV dual rollout under the previous Labor Government in

the early 90’s. z Yet we don’t know how Labor would deal with a possible non-Telstra consortium accessing the

existing Telstra network? z It would appear that competitors have little chance of winning Labor’s tender - but there will be an

open field under the Coalition Government.

Assessment process

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z As I have said in the past, sometimes a little bit of light can be the best disinfectant.

z Bringing proposals for new broadband infrastructure into the public arena will provide a powerful

motivation for proponents — whether they be Telstra, the G9 or others — to be reasonable and forthright in the regulatory settings required to deliver that infrastructure, as well as proposed prices and conditions of access. z Any resulting legislation will provide certainty that the successful proponent can earn a fair return

on investment, while also supporting competition in the broadband and wider telecommunications sector and ensuring the long term interests of consumers can be met.

Labor turns back the clock

z So, Australia will have new a national high speed WiMAX and ADSL2+ broadband network

commencing immediately and fully completed by 2009. z Two weeks ago we also learnt that there will also be further upgrades of the existing pay TV cable

networks for the provision of high speed broadband. z And innovative broadband applications are already being used to improve service delivery for

educators, doctors other essential service providers throughout Australia thanks to the Government’s $113 million Clever Networks program. z Investment in high speed broadband infrastructure in Australia is now occurring at a rapid rate and

this investment will continue to grow in the coming years, including with a new fibre network for capital cities and major regional centres. z When it comes to fibre it is no longer a question of ‘ if’ or ‘ when’. The questions are now ‘ who’

and ‘ how’. z Broadband is used by Kevin Rudd when he is reaching for an example of productivity

improvement - in fact he doesn’t seem to know any other example. z But in reality Labor has fallen at the first hurdle of economic irresponsibility.

z Wasting $5 billion dollars of taxpayer’s money on a Fibre-to-the Node network that industry has

said unequivocally it will fund itself simply shows that Labor fails to understand how the market works and highlights the risk Labor pose to the Australian economy. z Labor’s first and only response is to slug the taxpayer without even asking the obvious question -

how much of this infrastructure will be commercially viable. z Of all the undeliverable promises that have been made by Labor in an attempt to slide past the

election without any serious questions being asked broadband gets the prize. z As one analyst said recently, the only certainty if there was a change of government is that it

would be back to square one on broadband. z So, what do we know about Labor’s proposal?

z It has been about five months since Labor’s announcement and they are yet to improve on their

single press release. z Labor’s claim that it can rollout fibre-to-the-node to 98 per cent of the population is patent

nonsense to anyone with a modicum of knowledge about broadband infrastructure. z 98 per cent of the population do not live within 1.5 kilometres of a node or an exchange which is

key to achieve the reach and speed Labor claims it can deliver. z We also know Labor is set to re-establish a fundamental conflict of interest between Government

as owner, whose dividends rely on access prices, and as regulator of access. z But we don’t know what anti-competitive protections Labor will give up in its desperation to strike a

deal on fibre. Anyone other than very large industry players should be afraid, very afraid, of a Labor Government that lacks the strength and experience to stand up for competition. z Labor has not ruled out winding back competition and consumer safeguards or re-entrenching a

monopoly market. z Labor has not been able to say how it will deliver broadband choice to those thousands of

Australians who will clearly miss out on their fibre build. z Labor has not been able to say what it will do for people who will have to wait until 2013 to

experience Labor’s broadband nirvana.

Conclusion

z I have set out for you this morning the Australian Government’s comprehensive strategy for

ensuring that no Australians are left behind as broadband becomes more and more integral to everyday life.

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z The Australia Connected initiative really is a co-ordinated broadband solution and is further proof

of this Government’s commitment to providing world class communications to all Australians regardless of where they live. z Most importantly the Government recognises that all Australians need to fast internet access

today and should not have to wait until 2013, which is the only alternative Labor have offered. z The Howard Government knows that Australians deserve better and we will deliver the services

without delay. z I very much look forward to hearing the results of your discussions over the next two days.

Thank you

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