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Thursday, 22 September 2011
Page: 11294


Mr FLETCHER (Bradfield) (11:32): I am very pleased to follow the member for Chifley in this debate concerning the recent report provided by the Joint Select Committee on the National Broadband Network. I have a number of comments to make about the report, but before I do that I feel I should address a number of the comments made by the member for Chifley, who informed the House that I had been told to run a line on the National Broadband Network and in my heart it is not what I believe. This is a fairly rich claim in the week when Labor have introduced legislation to introduce offshore processing after years of telling us it was not what they believed in.

The question of what is in my heart, I feel, I am best placed to inform the House about. What is in my heart is very much the same as what is in the heart of the member for Wentworth and of the coalition generally when it comes to the question of broadband. We are firmly in favour of upgrading Australia's broadband infrastructure. We are in favour of doing that in a rational and cost-effective way in which the private sector takes the maximum degree of load and where government spending concentrates on areas of market failure. By contrast, the member for Chifley has sought to portray this issue as some kind of class struggle and argue that in the coalition we are asserting that areas represented by him and others in this place which have inadequate services should remain and suffer those inadequate services while we, it would seem in his view of the world, swan around in Rolls Royces, eating caviar and enjoying the high-speed broadband which festoons our seats.

I venture to suggest that that picture is a simplistic one, but I do make the substantive point: there are areas of this country that have deeply inadequate broadband. That is not in question at all. There are many areas, including outer suburban areas, where Telstra has put in pair gains systems for what were good operational reasons at the time and people in those areas simply cannot get DSL today. There are plenty of areas where people do not get adequate broadband—that is not in question for a second—but it is one reason why we have argued that it makes sense to closely analyse the strategy underlying the National Broadband Network, announced in such haste in April 2009, under which a gold-plated, Rolls Royce fibre-to-the-premises network would be built to 10 million premises.

That raises the question, amongst many others: is it the most sensible and cost-effective strategy to address the areas of need and to get Australia's overall broadband infrastructure to a level which provides the social and economic benefits that we seek but which is also as cost effective as possible? These are serious questions. That is why the coalition have consistently called for a cost-benefit analysis, because it is a respected and well-understood methodology for dealing with the questions of how much money ought to be spent on particular projects, what the design of those projects should be and, in turn, what the benefits are that are obtained as a result and therefore does it make sense to proceed with the project and allocate scarce government funds to it, in a world where, as we all know, there are many more claims on the government purse than can all be met?

The coalition have repeatedly pointed out that the process which led up to the announcement in April 2009 gravely failed to meet the standards set by this government for itself. It failed to meet the standards set by Infrastructure Australia and it failed to comply with the principle articulated by the Rudd-Gillard government that major infrastructure projects should be preceded by a cost-benefit analysis. One consequence of the strategy that has been adopted is that, in many areas where there is inadequate broadband today, Australians in those areas could well be waiting up to nine or 10 years before they get a new service because of the strategy which has been adopted, which is to build a brand-new network from scratch.

In the balance of the time available to me here today I want to turn to the substantive question of the report produced by the Joint Committee on the National Broadband Network, Rollout of the National Broadband Network: first report. Let me start by reminding the House that the purpose of the joint committee is to engage in parliamentary oversight of the work being undertaken by the National Broadband Network Co. executing on the policy mandated by this government.

We on this side of the House do not think the policy is a good one. But there is a second and quite distinct perspective that we bring to this issue, which is a concern to ensure that to the extent the policy is being pursued we want to understand how it is being pursued, the operations of NBN Co., the strategy it is following and its performance against the objectives which have been set for it. More importantly, that is what the parliament wants the committee to be doing. That is why the parliament has established this joint committee so that NBN Co. can be subject to proper scrutiny, bearing in mind, as we are repeatedly told, that this is the largest infrastructure project in Australia's history and that, notwithstanding the various assertions and promises that were made at various stages of the long and convoluted broadband policy debate, all of the money that is being spent on this massively expensive project is coming from taxpayers. Not one cent is coming from the private sector, despite the fact that Labor took a policy to the 2007 election, which involved a joint venture between government and the private sector, with private sector paying at least 50 per cent and despite the fact that when the April 2009 announcement was made to move to a fibre-to-the-premises policy we were told that there would be private sector investment from the start. None of that has happened and the substantive reason is that the advice the government received from McKinsey and KPMG when they produced the implementation report, at a cost of $25 million, could be paraphrased as follows. The private sector would not touch this with a barge pole. This is a very bad investment. That is not of itself, I would readily agree, the same question as whether it would pass a cost-benefit analysis. It is certainly true that when you do a cost-benefit analysis you take account of benefits which may not be captured by the company that builds the network. But it certainly raises the very obvious question: if the private sector thinks this is such a disastrously bad investment, why on earth are we not at least going through the exercise of weighing up, of quantifying, those benefits and assessing them compared to the costs?

Let me therefore come back to the question of whether the committee is working effectively as an oversight mechanism of this enormously expensive project. I have to report, with regret, that the committee is not working very effectively. We have had an unsatisfactory and an uncooperative attitude from the National Broadband Network company and from the government. We saw that at the committee's hearing on Tuesday night. The committee had asked, through its chairman, that regular key performance indicators be provided. A jointly signed letter was sent to the chairman by the Minister for Finance and Deregulation and the Minister for Broadband, Communications and the Digital Economy noting that these key performance indicators would not be available until mid-September.

The committee therefore advised the government that a meeting would be scheduled for 20 September to allow time for the key performance indicators to be provided to the committee and to allow the committee to ask questions of NBN Co.'s management against the backdrop of these key performance indicators. When we assembled for the committee meeting on Tuesday night, we were told that the key performance indicators were not available. We further learned that they had been provided to the Department of Broadband, Communications and the Digital Economy on 19 August—more than one month before the date of the committee's hearing—but the department, presumably following a direction from the minister or his office, had declined to provide them to the committee. There is no other word for it; this is a farcical state of affairs when it comes to a committee which is supposed to be overseeing the operation of the National Broadband Network company.

I make a point based upon my own experience on the senior leadership team of a major telecommunications company. In my years on the senior leadership team of Optus, every week there was a weekly trading meeting attended by the chief executive, the heads of major business units and the heads of key corporate functions, including me. Each business unit provided a written report on key metrics—actual, forecast and budget; metrics, such as sales performance by week and cumulatively; new connections and new cancellations; churn; average revenue per user; acquisition costs; and customer service metrics such as call answer rates and abandonment rates. This data also went to the board on a monthly basis. These are the basics of running a telecommunications company.

I have no doubt that Mr Quigley has such data when it comes to the National Broadband Network company, or at least an analogous version of the data, having regard to the fact that NBN is a wholesale and not a retail operator. It would be a very straightforward exercise to provide a report on key performance indicators to the committee and it is deeply disappointing that the government has failed to facilitate the provision of that information. It is unclear where the responsibility lies between the government and NBN Co., but it is just an extraordinary proposition that, with several months notice, this information was not provided.

Let me note, secondly, a failure in this report to engage with any of the competition issues which arise when it comes to the National Broadband Network. The member for Chifley spoke about the fact that Telstra was subject to price regulation by the ACCC to prevent it from using its market power to gouge customers. The NBN Co. is similarly to be subject to such regulation. It is required to lodge a special access undertaking with the ACCC to obtain approval for the wholesale prices it is going to charge. In the documents lodged by the NBN Co. with the ACCC it has proposed that, for services other than the entry-level service, it will be allowed to increase its prices by CPI plus five per cent each year for a period of more than 20 years. When you do the maths and work out the compound rate of growth that represents, if you plug in an inflation rate of two per cent or three per cent, you get to an enormous multiple. An enormous price increase is permitted. This is a very important issue.

One of the challenges with this market structure is that we are establishing a new monopoly. The government is taking active steps to shut down services on other networks, such as the Telstra network and the Optus network, and indeed the government has legislated to prevent other companies building new networks and being permitted to operate high-speed services over those networks. This is, frankly, an extraordinary way in which to deal with the issue of telecommunications competition. Two very well respected international economists—Joshua Gans and Jerry Hausman, the latter a professor at MIT, Massachusetts Institute of Technology—have made a submission to the ACCC in relation to these matters and have very strongly criticised the policy model which is being pursued by this government as dangerous to competition. It is troubling indeed that the report which has been provided is silent on this point.

The third point I wish to raise very briefly is that there is a very confusing discussion about private equity in paragraph 2.101 of the report. I think this means equity to be obtained from the private sector. The committee is in no position to make any progress in investigating this, because the National Broadband Network Companies Act, section 45, explicitly says that only the Commonwealth may hold shares in NBN Co. and all of the paid-up share capital must be held by the Commonwealth. There is no scope for private equity and it is somewhat mystifying why the committee thinks that this matter is worth pursuing. This is a report which is a testament to a poor policy, an anticompetitive policy and a policy which is not exposed to the degree of scrutiny the government says it is committed to. (Time expired)

Debate adjourned.