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Monday, 14 September 2009
Page: 9366


Mr RAMSEY (12:21 PM) —I rise today to speak on the Telecommunications Legislation Amendment (National Broadband Network Measures—Network Information) Bill 2009. This government’s policy on the provision of new broadband network would be laughable if it were not such a serious, knee-jerk policy made up as we go along, with empty election commitments and no practical idea on how to deliver them. It was almost like a cartoon strip unfolding as we saw the Prime Minister come up with a thought bubble, making an announcement telling us how lucky we all are to have a man of such vision leading the nation and then starting to wonder whether the idea was feasible or not and to try and work out how to back away from that commitment when it proves not to be. Then we suffered the empty spin on how this defeat and miscalculation was in fact a great victory.

Let us have a look at the recent history on this subject, and when it comes to broadband all we have is recent history because on any timescale it is a new and evolving technology. The robotic lines delivered by the government on this subject imply that the coalition government did nothing for 12 years. This is a total misrepresentation of the facts. The concept of a broadband super highway 14 years ago was as fanciful as robotic nurses and doctors. The technology then was incapable of delivering what we are discussing today, but as the technology evolved the government then acted to roll out the next wave as it came on stream.

In fact, at the time of the last election we had in Australia a telco—that is, Telstra—which was ready to roll out a new high-speed service to urban Australia at the company’s own cost. The government—that is, the coalition government at that time—had committed to a wireless network which was to service regional Australia. It was to deliver speeds of 12 megabits and it was going to cost the taxpayer just $958 million. The contract was signed with OPEL, who was proposing to put in $1 billion dollars and, if the government—that is, the incoming government—had not cancelled the arrangement, more than half of this network would be operating by now.

At the time of the last election the coalition government had invested $2 billion in a trust fund, the telecommunications fund, which was to provide a permanent income stream to enable regional Australia to be provided for as new technologies were inevitably developed. The cost of providing these services to rural and regional Australia is inevitably higher than in urban Australia. Then in the same period Kevin Rudd, in one of his ‘good idea at the time’ statements, said none of this would be good enough. A private company providing high-speed broadband to urban Australia at its own expense, a $1 billion investment on behalf of the taxpayer matched by $1 billion from a private consortium to provide for rural and regional Australia and $2 billion in the bank to provide for future services to rural Australia were not good enough. We should have a new super network.

The now Prime Minister proposed at that time that the government would build a 12-megabit, fibre-to-the-node network for 98 per cent of Australians, operating by the end of 2008. I thought at the time this seemed like little more than an uneducated guess, that its proponents had no understanding of the difficulties and challenges in rural Australia. I am not a telecommunications expert but I would have thought this outcome was extremely unlikely. I remember the great Telecom copper rollout to rural Australia in the seventies and eighties—the years and years of watching large caterpillar tractors drag cable into the ground.

Coming from rural Australia, I could not believe we had any chance of delivering the fibre-to-the-node network to 98 per cent of Australians for the $10 billion the government suggested this network could be built for. The government seemed, to me at least, not to have any understanding of how big Australia is, how many small communities there are and how many people live on rural properties. The plan was to steal the $2 billion telecommunications fund and add another $2.7 billion of taxpayers’ money and private enterprise would fall over itself to find another $5 billion to build this new fibre-to-the-node network.

This was when it became obvious we had policy on the run. They had not planned, they had not consulted with industry and they had not commissioned a business case, because after 18 torturous months the process collapsed. Despite interest from six parties, no-one could deliver the goods for the money; no-one could find a business case that would work—surprise, surprise. So it went from a situation where the wireless network proposed by the previous government, which would be over half-built by now, which had the contracts let and which would have given 12 megabits to all of regional Australia had been scrapped. A network which would have provided 15,000 kilometres of new, open-access, fibre-optic backhaul into rural and regional areas at an extremely low cost to the taxpayer has been completely abandoned. Instead we have had 18 months with no action.

So does the government have the intestinal fortitude to come out and admit their complete failure, to admit they got a bit over enthusiastic and overstepped the mark? Do they even try and conceal their mismanagement and lack of knowledge? No, they proudly proclaim their failure as an outstanding success and commit the government not to a $10 billion network but to a $43 billion fibre to the house and business network for 90 percent of Australians. Had they learned anything? Had they consulted with industry? Had they commissioned a business case? Is anyone going to be interested in building and operating this new network? Will private enterprise come up with the $20 billion the government seems to think they will and be falling over themselves to invest?

We should also remember at this point there are fewer potential customers in this new $43 billion project to 90 per cent of Australia than the last—the $10 billion model to 98 per cent of Australia—and that industry could not make the sums stack up on that program. So why does the minister think he can get private enterprise to part with four times as much money for a smaller customer base? There are no more customers and it is at four times the price, and it seems almost inevitable that this bid will collapse as well. ‘No problem,’ says the Prime Minister, ‘We’—that is the taxpayer—‘will fund the entire network’. There is still no business case, just the realisation that this pig is not going to fly, so the taxpayer will have to fund it because no-one else is likely to—the taxpayer will fund the full $43 billion. If within five years we as taxpayers sell off the network as the government has suggested, then the price will be governed by the revenue stream. The value will not be decided by what the government has spent on it but by how many consumers will subscribe and what they are prepared to pay for the service.

There are some lessons here for us to learn from overseas. In Finland, for instance, a nation which has been quite aggressive in its broadband rollout, government was planning to guarantee delivery of 100 megabits of capability with fibre optic to every house and business. In reality this has meant the supplying telco has planned to deliver fibre to within two kilometres of the home. This is proving to be enormously expensive because, the further you move away from population density, the process becomes exponentially dearer. If Finland is being challenged by its vast remote areas—and I have my tongue firmly planted in my cheek—you can only start to imagine what this will mean for Australia.

What is happening in Finland is that the telco is now revising the target to deliver fibre to within 20 kilometres of the home—effectively, a fibre-to-the-node or a wireless based technology. That is interesting, isn’t it? Having said that, 100-megabit broadband is currently available to 40 per cent of homes and businesses in Finland. One hundred megabits costs about 2½ times as much per month as what is generally available, which is 10 megabits. So how many Finns are signing up for this service? The take up rate is 1½ per cent, just 1½ per cent! How can anyone make a business case if your total market is just 1½ per cent, surely something has to give. Even in Helsinki, the place with the highest population density, it is proving difficult to sell the service.

In Singapore, surely one of the most technologically advanced nations in the region at least, where 100 megabits is available to all by cable, take-up rates of the 100-megabit service are as low as one per cent. It must be pondered what take-up rates like this would mean for the government’s planned network. If there were 10 million potential users in Australia, and we were to achieve a 1½ per cent uptake, that would be 150,000 customers. A network costing the $43 billion the minister proposes would equate to a debt of $286,000 for each connection. That is clearly an absurd amount.

It just goes to show how important a business plan is. How could any government make such a monumental decision as this, not knowing what its customer base is likely to be, not knowing whether it will be possible for the network to break even, let alone make a return on capital. If the government builds its super network, it is highly likely it will have to fund the whole thing itself and in the end, far from being saleable, it could well be stuck with an enormous white elephant.

The government appears also not to have considered what the effect of building a new network will have on the marketplace. Firstly, at a time when the challenge I have just detailed will be to get enough customers to subscribe, we can be sure that the price of internet access on current networks will fall significantly. The owners of those networks will not give up customers willingly. It is certain the price will fall; speeds will increase and this will bring the viability of any new network even further into doubt.

For all those Australians who have invested in Telstra—and remember most superannuation funds have serious investments in the telco—a government owned and subsidised competitor will erode their investment. Even more fundamentally we will be returning to an era where the government is the major competitor, the owner and the regulator of our telecommunications industry. In the past this has been a handbrake on innovation and private investment.

Telecommunications will always need innovation and here we are running the fundamental risk of turning back the regulatory tide and stifling that innovation and investment. And what of rural and regional Australia, the constituency that I represent in this place? What is the government proposing? Well, even if Senator Conroy manages to roll out this network, regardless of what it costs and then what it might be worth, even if he manages to establish this network, what will my constituents receive? The member for Oxley was on his feet a few minutes ago in this place and he told me that I should welcome the move to a government network because my farmers will be able to participate in the new broadband technology. If the member for Oxley had checked the government’s own plan, his own plan, he would know that most farmers live on farms, they are currently on satellite technology and their access will not change at all.

The government has said that any community under 1,000 will not receive the fibre-to-the-house network; 10 per cent of Australia will operate on a lesser service. In towns in my electorate such as Booleroo Centre, Cleve, Yorketown, Wudinna, Gladstone, Kimba, Minlaton, Cummins and Stansbury, to name but a few, more than 18,000 people will miss out on fast broadband. And that does not include the farmers, that is only the people who live in the towns of less than a thousand. But they will not be entirely forgotten, they will certainly qualify for their full share of the $43 billion debt, of that they can be absolutely certain.

Along with the more than $200 billion-plus debt that this government is committing all of Australia to, there will be the $43 billion for their broadband adventure—and every Australian will get their full share, including those who get the B-grade service. This side of the House has constantly criticised the government for its financial management of the economy and its overspending of borrowed funds. This project slips in on top of the $200 billion already proposed.

Now we have this legislation aimed at trying to belatedly collect some of the information to try and work out how the government can make some kind of a fist of delivering on its extravagant promises to supply the super network to the marketplace. The legislation will compel industry over an extended period to deliver confidential market information to someone building a competitor. It is true the government needs the information—indeed, they should have had it and commissioned a business case before their grand announcements—but what if, as I suspect, the bid falls over? Why will the government then retain the right to harvest future information? That is why I support the amendment that has been put forward. We need a business case before taking the economy into the unknown and those in industry need protection from future governments which may be sourcing information from them for no good reason.

We have come to this because of the ‘thought bubble’ process the now Prime Minister constantly indulges in. During the last election campaign, responding to the previous government’s broadband projects, Mr Rudd was compelled to say, ‘We will build a bigger, better one than yours.’ Certainly not much different to a number of other thought bubbles such as GroceryWatch, Fuelwatch, and the Pacific economic community—whatever happened to that one? They are projects mining The Hollowmen ‘wow’ factor. It does not matter what the plan is, just make sure we have a big enough announcement.

We certainly got a big commitment on broadband, robbing regional Australia to fund it, but it was undeliverable, so now we get the bigger wow factor—the $43 billion model. No consultation with industry, no idea on how to deliver, certainly no understanding of Australia outside the city. Now the chickens are coming home to roost and it seems this may be no more deliverable than the other thought bubbles, but I am not sure whether the government knows that yet.