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Tuesday, 26 October 2010
Page: 1553


Mr TURNBULL (3:21 PM) —The National Broadband Network is the largest investment of taxpayers’ money in infrastructure in our nation’s history. It has been subject to no financial scrutiny and, remarkably, the government continues to refuse to submit it to a cost-benefit analysis. In question time, the minister insulted the intelligence of this House and insulted the Australian people by pretending to suggest—or attempting to suggest—that Infrastructure Australia somehow or other endorsed his government’s haphazard, reckless approach to the National Broadband Network. In fact, the reverse is the case. In October last year, Infrastructure Australia published a paper on how to make better decisions for investing in infrastructure. This is what they said:

… all initiatives proposed to Infrastructure Australia … should include a thorough and detailed economic cost-benefit analysis. …

… In order to demonstrate that the Benefit Cost Analysis is indeed robust, full transparency of the assumptions, parameters and values which are used in each … Analysis is required.

And then Infrastructure Australia went on to describe that in some considerable detail.

If this project is going to make the outstanding contribution to productivity, to our national economy, that the government claim it will, they have nothing to fear from submitting it to the Productivity Commission. There will be no delay in the construction of the test sites, no delay at all, no interruption at all. There will be, however, real accountability and real, rigorous analysis of the kind that the government have repeatedly said they are committed to but in respect of this, the biggest infrastructure project in our history, they have refused to undertake.

There is so much that we do not know about this project. We do not know how much it will cost Australians to get access to voice or broadband services over it. We do not know what its costs or revenues will be. We do not know whether it will be commercially viable as a business. One broking firm suggested that it would have a net present value of minus $9 billion. Let us hope that is overly gloomy, but it is not a very promising prognosis. We do not know whether it will ever achieve the heroic take-up rates that McKinsey assumed in its implementation study—rates without precedent anywhere else in the world. And we do not know what positive or negative economic or social spillovers the construction of the NBN will bring with it.

The fact is that everybody in this House, I am sure, is committed to the availability of fast broadband at affordable prices across Australia. We all recognise that there are areas where that is not the case, in particular in regional and remote Australia. Only this week I met with two mayors from shires in the electorate of Maranoa, the shires of Barcoo and Diamantina. The NBN is not going to give them fast broadband—they have apparently been left out—and yet, when you think of an appropriate destination for Commonwealth funds, an appropriate destination for Commonwealth investment in this area, surely those remote regions are the ones that should be prioritised. But they apparently are not going to be.

The Minister for Broadband, Communications and the Digital Economy, Senator Conroy, has frankly acknowledged that he has no idea what applications typical households would use over the 100-megabit-per-second connection that he is promising, a vastly greater amount of broadband connectivity than there is any use for at the household level today. This is an important point because, if we are building, at vast taxpayer expense, capacity for which there is not an application or a need, what we are doing is making an enormous overinvestment.

Nobody argues that there is nowhere in Australia where there is adequate broadband. No-one is saying that broadband is inadequate everywhere. The argument has always been that there are areas where it is inadequate and areas where it is not available. A more prudent approach would be to deal with those areas of underservice and then, as time progresses and if demand progresses and if other technologies are not overtaking fixed line connectivity, greater connectivity can be built. ‘Build it and they will come’ is a proven recipe for losing billions of dollars and, in this case, losing it without any study or any analysis.

I note that earlier this year the Federal Communications Commission of the United States published a national broadband plan. It targets as the minimum broadband speed that should be available across America download speeds of at least four megabits per second. From our side of the House, we believe that the target in Australia should be not less than 12 megabits per second, but in the United States, the home of the internet, they are talking about four megabits per second. Senator Conroy is talking about 100. Why are we so confident that he is right and the Americans are wrong, as he keeps on contending? In that same report, which I would commend to honourable members, at page 17, the FCC observes that speeds of less than eight megabits per second are sufficient to deal with most uses, including two-way videoconferencing. Again, where is the need, the applications, that will consume 100 megabits per second to the household?

We have heard the Prime Minister give lectures as recently as last night and again today in the House about the perils of what she describes as ‘economic Hansonism’, and yet here we are with a government that is proposing to overthrow 20 years of telecommunications reform and 20 years of competition policy by creating a new government owned monopoly over fixed line communications in complete contravention of the existing competition laws. So far in breach of the existing competition laws are these arrangements, arrangements that will prevent any competition at the fixed line basis with the NBN, that the government is proposing that the parliament pass a law to exempt the creation of this massive government owned monopoly from the scrutiny of the ACCC.

The lack of scrutiny to this point of the NBN has been remarkable and, I am afraid to say, unique, anywhere in the world. The scale of this investment is without any precedent, not just in our own history. The United States is spending $7 billion of federal government money to support broadband initiatives. On a per capita basis, we are spending 100 times more. Why are we so confident that we are so right and the Americans, in the home of the internet, are so wrong?

The government has claimed from time to time that the McKinsey-KPMG implementation study, which Senator Conroy is proud to tell us repeatedly that he paid $25 million for, really is all you need. Yet McKinsey at least had the candour to say that they were not asked to examine alternative options, they were not asked to examine the merits of the policy; it was given to them as a fait accompli and they were simply asked to advise on its implementation.

We know that Infrastructure Australia, the expert body that the Rudd government set up, has not been allowed to review the project, even though its whole mission is to identify, prioritise and rigorously assess infrastructure projects of national importance. We know that until a couple of weeks ago the NBN, embarking on a $43 billion project, had not even delivered a business plan to its board, much less to its shareholder, the Commonwealth government. So for substantially more money than it would cost to buy all of Telstra this government has committed to building a new telecommunications monopoly from scratch before even receiving a business case from the management it has tasked to do so. I remind the House again of what the Treasury secretary, Dr Ken Henry, said last year:

Government spending that does not pass an appropriately designed cost-benefit analysis necessarily detracts from Australia’s well-being.

That lack of rigour and scrutiny in this project is why on Monday I introduced a private member’s bill, the National Broadband Network Financial Transparency Bill 2010. It requires the publication of a 10-year business case for the NBN and, equally importantly, refers the NBN to the Productivity Commission for a thorough cost-benefit analysis.

There is so little known about this project. There has never been so much money spent with so little scrutiny. But what little we do know, the fragments of information we have, should give all of us great cause for concern. We know the take-up rates in Tasmania have been poor, even though NBN Co. have entirely subsidised the wholesale cost of the line and is paying internet service providers $300 for every customer they sign up. They left early customers unaware of whether they would have to buy and install a battery back-up to ensure their phone line would work during a power blackout. It was only after pressure from the media that NBN Co. revealed they would provide a battery back-up. Some customers in the early rollout sites have reported they have had to wait up to three months for the NBN to connect them to the network.

In Singapore, we learned the authorities have fined a partnership headed by Alcatel-Lucent S$5 million for failing to achieve on-time delivery of equipment to a broadband network in Singapore. In Australia, our NBN Co. has also selected Alcatel-Lucent for its rollout and is apparently unable to confirm or deny whether similar delays are likely to be the case here.

When the government rejects calls for a proper cost-benefit analysis it often points to a study done by Access Economics in March 2009 on the economy-wide impacts of a high-speed broadband network. This study has very little relevance to the NBN. It is not a cost-benefit analysis. It was commissioned by Telstra in support of its proposal to build a 12 megabytes per second fibre-to-the-node network to 90 per cent of the Australian population costing $12.64 billion over 11 years. It concluded that there was a net benefit to GDP of $9½ billion, as against a reference case which conservatively and unrealistically assumed:

… technology and bandwidth would continue to increase but at a noticeably greatly reduced rate than trends seen over the past few years.

We only have to look at what is happening in the wireless space to see that the increase in bandwidth is going at an accelerating pace.

It is worthy to reflect on this: if the GDP benefit—the net benefit—from a 12 megabytes per second network costing $12.6 billion is $9½ billion, how could there be a positive GDP benefit from a $43 billion fibre-to-the-home rollout to 93 per cent of the population at 100 megabytes per second unless there was a massive and proportionate increase in productivity by increasing the speed—the connectivity—from 12 to 100 megabytes per second? This defies both common sense and experience. From a household point of view, there are few applications that will not run satisfactorily on 12 megabytes per second. Plainly, there are diminishing returns from increasing levels of bandwidth, and that is reflected in the universal experience in the telecom sector that people will not pay a premium, if any, for an increase in bandwidth.

So, even if one were to accept this Access Economics report at face value, it should give us very serious cause to reflect whether there is any prospect of there being a net benefit to our economy from this project. Everything we learn about this project gives us cause for concern. Everything we know about good government and prudence tells us that a cost-benefit analysis is required. We have a minister who misled the House by suggesting Infrastructure Australia approved of this project and yet failed to draw to the House’s attention—


Mr Albanese —Mr Deputy Speaker, on a point of order: the member cannot say that.


The DEPUTY SPEAKER (Hon. BC Scott)—The member for Wentworth did not use the word deliberately. The member for Wentworth has the call for the last few seconds.


Mr TURNBULL —The one thing that is absolutely clear is that Infrastructure Australia requires a rigorous cost-benefit analysis, and that is why this project will never go near Infrastructure Australia. (Time expired)