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Environment and Communications Legislation Committee
NBN Co Limited

NBN Co Limited

CHAIR: We'll recommence with NBN Co. Mr Rue, there was a request, given the time pressures we have, that you table your opening statement and we proceed straight to questions. Are you okay with that?

Mr Rue : What I would like to do is read it very quickly. It's not long. I think it just helps put the session in context—if that's okay.

CHAIR: Sure. If you can be as brief—

Mr Rue : I assure you, it will not take long. I'm joined tonight by Karina Keisler, our corporate affairs officer, and Peter Ryan, our chief engineering officer. Bill Morrow is travelling overseas and not available to attend.

I would like to start with a quick overview of where the rollout is up to. It's important to remember, please, that we're on track to complete the build in 2020, within our $49 billion peak funding envelope. In fact, 6.3 million Australian homes and businesses are now ready to connect to the NBN, and 3.6 million are using it today. We continue to build and connect at a rapid pace, but of course on this unprecedented scale there will be issues to identify and address quickly, while also building processes that predict and prevent them.

For the last years, NBN has followed a program of business process excellence which drives continuous improvements for the business. As a result, technologies tend to have fewer issues the longer they have been in operation. We've seen this trend in all technologies, with the exception of HFC, which is why we decided to pause activations on the network until incremental field work is undertaken to raise the quality of service for customers.

We've just completed a series of trials that refined remediation processes and addressed the issues we are seeing in the HFC network. I'm pleased to say these trials have been successful and we are now rolling improvements out in the RFS areas and at the same time baking them into the construction processes in areas not ready for service. I can assure the committee we're progressing quickly and remain confident we will begin releasing areas before the end of the financial year. This is also a very important point: while we have temporarily paused new activations on the HFC network, we continue construction in HFC areas. This is why we'll be able to add new areas to the footprint quite quickly.

I can also provide an update on changes to our wholesale pricing. Again, this change was in the name of customer experience. We noticed that some retail providers were focused almost exclusively on market share and we're therefore competing on price. We saw many new customers move to retail plans for NBN's lowest wholesale tier, 12 megabits per second, regardless of what speed they had previously or what their usage demands may be. We also noticed that some RSPs were not purchasing the capacity needed in the busiest hours of the day. So we made the decision to offer retailers a discount on the 50 megabits per second wholesale product as well as allowing retailers to boost their CVC dimensioning by 50 per cent. These offers were designed to fit with the long-term bundles we plan to introduce next quarter.

Since this change we have seen a large increase in customers coming onto retail plans for the 50 megabits per second wholesale speed tier, and we've seen congestion drop significantly. Just yesterday Telstra said they will move 850,000 premises up from 12 to 15 megabits per second, and this morning Vodafone reported that 80 per cent of their NBN customers are on 50 megabit per second plans. This is very good news. Last year fewer than five per cent of premises were on our 50 megabits per second product. We're now seeing around one third of RSP weekly orders being for the 50 tier. All of this is very positive and we're monitoring both the HFC improvements and the pricing changes very carefully.

As I've already said, our overriding concern is to make sure people are having a great experience in the NBN. This of course is a challenge for the entire industry, and we are continually working with our retail stakeholders to address this. On our end, we're improving the customer experience across all stages of an end user's interaction with NBN. This means increasing our endeavour to connect end users right first time. It means playing our part in lifting people's broadband experience, where possible, up to the standards they expect, which is why the impact of our pricing change is so positive. It means that, if there's a problem with someone's service, we endeavour to get out and fix it right first time without having to go back multiple times. Together this forms a significant program of activity, which is already leading to positive changes in customer experience. In the coming weeks, we'll speak more about how we plan to share our progress, report more detail and keep track of these initiatives. I would like to make just a few more points.

There's been a lot of discussion about 5G in terms of competitive threat to NBN. NBN has always been aware of the threat of wireless substitution. We built these assumptions into our take-up models and continue to monitor developments. We see no reason to change these assumptions at this stage. Fundamentally, NBN's best defence against any form of competition is to have a network that is built, and to provide excellent service. This is another reason we build quickly and provide great customer service.

Turning to fixed wireless: as we have said before, the network was originally dimensioned to provide three megabits per second in a fully loaded cell at busy hour. This was before Netflix, Stan and other streaming services became an everyday part of the Australian entertainment diet. Usage patterns on the network have changed a lot, and we're seeing greater load being placed on the network. This is why we've initiated a substantial upgrade program to lift cells to a higher performance threshold. The committee will also be pleased to know that we're on track to launch our FTTC product this financial year, and again we'll have more to say about this in coming months.

Finally, we recently announced that we are about to embark on a trial to assist with the cost of updating unmonitored medical alarms when connecting to the NBN network. I know this is an issue many in this committee have followed closely and one we take extremely seriously. Over the next few months we will work with leading manufacturers and a trial group of medical alarm users before announcing full details of a new assistance program. The trial will help identify specific alarm suppliers and devices eligible to participate in the scheme, as well as confirming the eligibility criteria for participants. This is important because we know people use these devices for many different purposes. We want to make sure we're targeting the scheme correctly and meeting the needs of this important group of users. So, with that, Karina, Peter and I will hand back to you, Chair, and answer any questions you or the committee may have.

CHAIR: Thank you very much, Mr Rue, that was great. Senator O'Neill.

Senator O'NEILL: Ms Keisler, could you please restate your title and position?

Ms Keisler : Chief Corporate Affairs Officer, NBN.

Senator O'NEILL: Who do you report to, Ms Keisler?

Ms Keisler : Bill Morrow, the CEO.

Senator O'NEILL: Ms Keisler, on 17 March 2017, you tweeted, 'We're paying for dumb decisions,' with a link to an article in The Australian which has the same title. The article in question was written by Terry McCrann and it attacked fibre-to-the-premises broadband and pricing carbon as the two worst decisions ever made by an Australian government. I would like to read to you the opening passage. This is what it said:

The two worst decisions ever made by an Australian government were the commitment to the all-fibre National Broadband Network and the embrace of the carbon tax.

Ms Keisler, out of curiosity, do the NBN Co management have a policy stance on carbon pricing?

Ms Keisler : No. I've been asked this question before in the Senate by Sam Dastyari, and I explained that the relevance of the article was relating to NBN, not carbon neutral pricing.

Senator O'NEILL: Do you consider the carbon tax personally to be one of the worst decisions ever made by the Australian government?

Ms Keisler : I don't have a view on it.

Senator O'NEILL: Do you consider deploying a fibre National Broadband Network to 93 per cent of the population to be one of the two worst decisions ever made by an Australian government?

Ms Keisler : I'm not sure if you're familiar with the processes and engagements on Twitter, but my retweet does not suggest an endorsement, nor a relationship with my own opinion. I retweet many articles of varying degrees of information relating to the NBN.

Senator O'NEILL: Ms Keisler, you're the Chief Corporate Affairs Officer of the NBN, you report directly to Mr Morrow, as you indicated in your opening answers, and you're asking us to believe that you didn't think twice about how it would be received when you retweeted the article in question?

Ms Keisler : I clearly state on my profile on Twitter that retweets are not to be seen as endorsements. That is part of my profile description.

Senator O'NEILL: Seriously?

Ms Keisler : Yes.

Senator O'NEILL: And you expect people to believe that? Given the nature of your position, don't you see that this is an extremely unprofessional thing to do?

Ms Keisler : It's in line with a very common practice, which is to share information. I have also written an article about the importance of not only reading information that supports your personal views but considering various opinions in making your opinions.

Senator O'NEILL: Why did you retweet that article?

Ms Keisler : There is a term, the echo chamber, which refers to a predicament where people do only listen to views that support their own. I am a firm believer, and have written accordingly, that it is important to consider a variety of opinions. This article pertained to the NBN. It was the view of a respected columnist and commentator from News Limited, and I shared it, as I have many other politicians, commentators, public, members of the public, family. There's no delineation between title and opinion. It is a course of information sharing through social media.

Senator O'NEILL: You actually included a comment with it; you didn't just retweet it.

Ms Keisler : I don't believe that would be the case, but I'd have to have a look at the particular tweet. Can you remind me of the date?

Senator O'NEILL: I think you said 17 March. Ms Keisler, your Twitter ID indicates that you are actually the—it identifies your position.

Ms Keisler : I make it very clear who I am.

Senator O'NEILL: And you retweeted the article regardless.

Ms Keisler : As I stated, the process by which I use Twitter and anyone who has followed me or chooses not to follow me is aware that I share information. I don't necessarily agree with everything that I share. It is quite a standard approach to the use of social media, be it Facebook, Instagram, Twitter or otherwise.

Senator O'NEILL: Your comment was:

We're paying for dumb decisions.

Ms Keisler : I doubt very much that I made that comment. If it's the heading of the article—I'd need to have a look at the tweet. To be honest, I have tweeted—I don't have the number—more than tens of thousands of tweets over a period of time. I'd have to delve in and take that on notice.

Senator O'NEILL: Ms Keisler, what salary are you on in your role at the NBN?

Ms Keisler : Senator, you've asked me the question before, and Mr Morrow made it clear that it would be inappropriate to share that information, particularly at this time, in light of the fact that we're undergoing recruitment for my replacement.

Senator O'NEILL: We did get it on the public record, as I recall.

Ms Keisler : No. No we didn't.

Senator O'NEILL: Is it the same amount as was last time indicated?

Ms Keisler : As last indicated, it would be inappropriate to divulge my salary, especially in the light of the fact that we're currently undergoing a recruitment process to replace me when I depart the company in August.

Senator O'NEILL: It's a significant amount, though. It's hundreds of thousands of dollars, isn't it?

Ms Keisler : Do you want to chime in?

Mr Rue : We have in our annual report a remuneration report which is consistent and as good as any Australian listed company. We outline remuneration of senior executives and we outline the remuneration policy of the board. I think that we are very pleased with the information we provide the public. I don't think it's appropriate to go further than what is in our annual report.

Senator O'NEILL: We know Ms Keisler is on hundreds of thousands of dollars and is retweeting these sorts of articles. Ms Keisler, on 17 October 2017, the day of the Four Corners report into the superiority of New Zealand's fibre NBN compared to our inferior multitechnology mix, you retweeted another comment from another Twitter user, which reads: 'People bitching about the NBN shouldn't be on the internet. Their network isn't slow; they are. They bought cheap plans from cheap providers.' You posted this message without comment. Why did you post that?

Ms Keisler : I'd have to look at my Twitter account, but typically the rule I apply is that I share information relevant to the NBN as I stated. In light of the echo chamber, I try to provide diverse views. In the past I've been accused of being partisan. I'm trying to demonstrate that I am not partisan; nor do I have a particular view. My personal view is that we have a strong strategy in place to deliver an NBN—eight million connections by 2020. We're on track to do that. I promote all the company announcements to demonstrate our progress outside of that. I try to share news and views. I don't recall that particular tweet or the one of 17 March. I'm happy to consider both of them. But in light of comments provided, I typically—and I'll confirm this if I can find the tweets—don't necessarily repeat comments made. When you press 'Re-tweet', it's how it's formatted by the social sphere and presented and passed on.

Senator O'NEILL: I think we all know how Twitter works, but you've got, on your ID, 'Corporate Affairs at NBN Co Broadband News'—

Ms Keisler : I also have on the same line a clear message that says that re-tweets are not endorsements.

Senator O'NEILL: Is it the view of the head of NBN Corporate Affairs that Australians who complain about the NBN are slow? Is that the view you express within the company?

Ms Keisler : Sorry—complainers about the NBN are slow?

Senator O'NEILL: Yes, that's what you said: 'People bitching about the NBN shouldn't be on the Internet'—

Ms Keisler : No, that's not what I said. That may have been in an article, but it's not what I said.

Senator O'NEILL: 'Their network isn't slow; they are. They bought cheap plans from cheap providers.' You could choose to retweet or not retweet. This is what you chose to retweet as—

Ms Keisler : I'd argue that out of 10,000-odd tweets you're being very selective. I also retweet a lot of information regarding a variety of opinions and views on the NBN.

Senator O'NEILL: As the chief of corporate affairs—is it the view of the head of NBN Corporate Affairs that Australians who complain about the NBN are slow?

Ms Keisler : Absolutely not.

Senator O'NEILL: Is that the view that you express within the company?

Ms Keisler : Absolutely not.

Senator O'NEILL: With respect to the HFC halt, in how many conversations between the minister and Mr Morrow did you personally participate?

Ms Keisler : I participate in a regular fortnightly briefing with the minister and members of the department.

Senator O'NEILL: I'm asking you in particular, in respect of the HFC halt—

Ms Keisler : I couldn't tell you in particular how many meetings there have been in relation to the HFC discussion. I think Bill Morrow has tabled that there have been a variety of discussions and the minister has stated that we'd provide regular updates. We meet fortnightly. A lot of things are discussed. I'm privy to all of those conversations in our fortnightly briefing.

Senator O'NEILL: Right, so let's go back to 20, 21 and 22 November. We're talking about the HFC halt. My question is specifically about that. As the director of corporate affairs, I'm sure you would have been engaged in the conversations. My question is: in how many conversations between the minister and Mr Morrow did you personally participate?

Ms Keisler : I participated in every conversation that I was invited to join. On 20, 21 and 22 November—

Senator O'NEILL: Yes.

Ms Keisler : I understand that we had a meeting on 20 November.

Senator O'NEILL: Yes, there was a meeting, but the minister has indicated that there were a number of conversations that followed that meeting in the course of the next two days. How many conversations between the minister and Mr Morrow did you personally participate in?

Ms Keisler : As far as my recollection goes, I participated in a single meeting on 20 November, which is our standard fortnightly catch-up. Beyond that I don't recall any other meetings with the minister and the CEO.

Senator O'NEILL: So, despite the scale of what was being announced, HFC was going to be paused, impacting a million people. You as the director of corporate affairs were not engaged in any other conversations with the minister and Mr Morrow.

Ms Keisler : I was engaged in whatever meetings to obtain the necessary information to provide to stakeholders through the process of communication. You'd have to ask the minister, and I'm not aware of other meetings that took place, so you'd have to direct that question to the minister and Mr Morrow.

Senator O'NEILL: How many of the discussions were you part of that didn't involve officials with regard to the HFC pause?

Ms Keisler : You'd have to clarify 'officials'. I spoke to a lot of people about the HFC clause in the throes of my role. For example, I briefed people within my team. Are they considered officials?

Senator O'NEILL: Yes. Are there any officials from the department who you were involved in discussions with?

Ms Keisler : The department were part of the fortnightly meeting on 20 November.

Senator O'NEILL: Did you have any other discussions with them?

Ms Keisler : Not to my recollection.

Senator O'NEILL: Do you want to double-check that?

Ms Keisler : No. Not to my recollection. My team were briefed—members of my team who regularly engage with members of the department to ensure that they have the necessary information to brief the minister beyond what we have given directly to him as part of this standard process. But no—that's all the information I have.

Senator O'NEILL: How many discussions did you participate in with the minister and Mr Morrow where public servants were not on the call?

Ms Keisler : None, to my recollection.

Senator O'NEILL: Are you absolutely sure about that? We expect you to tell the truth, the whole truth and nothing but the truth, as they say.

CHAIR: I have no doubt that Ms Keisler is doing exactly that.

Ms Keisler : Thank you. My role includes participation in a regular fortnightly catch-up. Outside of that, apart from occasionally bumping into the senator in the halls of Parliament House, we don't have reason to meet.

Senator O'NEILL: So, despite the fact that you were putting a pause on a million houses, you did not have any conversations by telephone or other means with the minister and Mr Morrow on the line about the HFC pause?

Ms Keisler : There was no need.

Senator O'NEILL: Do you sit on board meetings?

Ms Keisler : No. I have attended and presented at board meetings, but I'm not a regular participant or seat on the board.

Ms Keisler : So, since you were promoted to the executive committee, did you increase your attendance at board meetings?

Ms Keisler : I'd say it's just as regular as it had been prior. The change of my title did not mean an increase in my participation at the board. I've continued to present when it's relevant to my portfolio and when the board has questions relating to that.

Mr Rue : If I could assist, Senator: executives often will be asked by Mr Morrow to present in an area of their expertise. It may be once every three meetings, maybe, on average, if even that. Other than myself, no members of the executive attend board meetings, and I don't attend for all the time of a board meeting.

Senator O'NEILL: Ms Keisler, based on the evidence we have from the minister today that he didn't know about the pause of the HFC until the 20th, my question is—

Senator Fifield: Just to repeat what I said earlier today, on the 20th the CEO advised that it was likely that there would be a recommendation to the board that there be a pause. There had not been a decision on the 20th to pause. That was taken by the board on the 21st and advised on the 22nd by way of a section 91 notification.

Senator O'NEILL: So, Ms Keisler, you've got the context, but why did NBN Co ambush the minister and the department with the proposal to halt the HFC rollout?

Senator Fifield: Can I add that that is not a characterisation that I have used. In fact, I was very clear earlier today to say that in indicating that on the 20th NBN advised there would likely be a recommendation going to the board in relation to a pause that—

Senator O'NEILL: That's right, Senator, but that's one day's notice. You got one day's notice.

Senator Fifield: If I can continue: what I said this morning is that that should not be taken to mean that NBN, as they do across all technology types, didn't periodically brief on challenges—possible mitigations. And NBN of course do a range of scenario planning.

Mr Rue : And if I could support the minister, many of the meetings that Ms Keisler is talking about I also attend. We have regular discussions with the minister on a range of technologies or issues relating to NBN, and certainly the issues we were seeing in HFC are something that we have discussed with the minister on an ongoing basis. So, to characterise a meeting as an ambush—there were ongoing discussions, Senator.

Senator O'NEILL: Well, the minister's a major shareholder, and you advised him one day before the proposal went to the board. That's not very much time for him to respond. I'd call it an ambush.

Mr Rue : As I said and as the minister has reiterated, we have ongoing discussions on many issues. Once we had reached a stage where we believed that it was something that management should recommend to the board, of course we informed the minister. That's what you would expect.

Senator O'NEILL: Minister, you're creating the impression that you were well prepared for this news that arrived on the 20th. I ask you: are you disputing that you and Mr Morrow had a heated discussion about the notice you received?

Senator Fifield: I can't recall ever having had a heated discussion with Mr Morrow.

Senator O'NEILL: Despite the fact that he only gave you one day's notice about the HFC being paused?

Senator Fifield: I've answered the question.

Senator O'NEILL: Ms Keisler, are you sure that you didn't hear any conversations between Mr Morrow and the minister with regard to the HFC pause where there was some concern about the timing of the minister's advice on this?

Ms Keisler : Absolutely.

Senator O'NEILL: Absolutely what?

Ms Keisler : Absolutely sure. I've answered your question.

Senator O'NEILL: Ms Keisler, could I ask: how many interactions did the NBN Co have with the Department of the Prime Minister and Cabinet regarding the NBN connection to Mr Turnbull's Point Piper mansion?

Ms Keisler : I'd have to take that on notice. None that I'm aware of, but it's possible. I'd have to take that on notice.

Senator O'NEILL: NBN Co have to have interactions when they're going to put the service in. You're not aware of any interactions with the Department of the Prime Minister and Cabinet?

Ms Keisler : I'm sure there would have to have been in that the retailer would have raised our awareness to the fact that a request had been placed for a property that requires particular security protocols et cetera and that we'd have to deal with those. So we would have been advised. When it happened and who they spoke to, I have no idea.

Senator O'NEILL: Could you take on notice to provide all the dates and a description of each interaction around the service provision that NBN Co undertook for Mr Turnbull's Point Piper mansion?

Ms Keisler : We can take that on notice.

Senator O'NEILL: The Department of the Prime Minister and Cabinet indicated they negotiated to ensure the connection at Mr Turnbull's residence proceeded smoothly. The Prime Minister also appeared to agree with this assessment. Was the NBN Co broadly happy with how the installation went?

Mr Rue : Mr Ryan is probably the best person to answer that.

Mr Ryan : Part of my organisation did the work. Yes, we were happy that it went smoothly. Yes.

Senator O'NEILL: Do you know how many interactions occurred regarding the connection to Mr Turnbull's Point Piper—

Mr Ryan : No. I think it's a fair one for us to take on notice.

Senator O'NEILL: Ms Keisler, which part of NBN Co was handling the engagement with the Department of the Prime Minister and Cabinet on this matter?

Mr Rue : I'm not sure. Mr Ryan, do you know the answer to that?

Mr Ryan : Again, I don't know.

Mr Rue : Let us take that on notice, Senator.

Senator O'NEILL: Did it have anything to do with you, Ms Keisler? Were you involved as the communications person?

Ms Keisler : No, Senator. I'd imagine that the Department of the Prime Minister and Cabinet would have raised a service order with their retailer and the retailer would have contacted us through the usual processes. It would have gone into the system.

Mr Rue : It's not something that would have gone through Ms Keisler. Let us take that on notice and let us see if we can—

Senator O'NEILL: Yes: which part of the NBN Co was handling it? Ms Keisler, has the status of the NBN connection to Mr Turnbull's Point Piper mansion been a point of discussion at any of the NBN board meetings that you attended?

Ms Keisler : No.

Senator O'NEILL: It's never come up?

Ms Keisler : No.

Senator O'NEILL: Mr Rue?

Mr Rue : Again, Ms Keisler doesn't attend all the board meetings. I don't recall any discussion at a board meeting on that.

Senator O'NEILL: Never?

Mr Rue : I don't recall any discussion.

Senator O'NEILL: Could you please take on notice to provide, Ms Keisler, the date of the connection request for Mr Turnbull's residence—when that was received?

Ms Keisler : I will take that notice.

Senator O'NEILL: The date or dates on which technicians were sent out, when the service at the premises was actually activated and any other relevant dates for interactions around the delivery of that service to the Prime Minister's residence at Point Piper.

Ms Keisler : We can take your questions on notice.

Senator O'NEILL: I'd like to quickly move on to the Prime Minister's Lodge. The Department of the Prime Minister and Cabinet has confirmed that the Prime Minister's Lodge in Canberra is due to get fibre to the curb. Are you aware of this?

Mr Ryan : Personally, I became aware of this literally before coming in. Up until that point, I wasn't aware.

Senator O'NEILL: So it appears that, whilst the Prime Minister's Lodge is getting fibre to the curb, the surrounding areas are receiving fibre to the node, the second-rate service.

Mr Ryan : Yes.

Senator O'NEILL: Why is that?

Mr Ryan : I honestly couldn't tell you. As I said, up until an hour ago, I wasn't aware.

Senator O'NEILL: Doesn't it strike you as unusual that all the areas around the Prime Minister's residence are receiving fibre to the node, and the Prime Minister is getting fibre to the curb?

Mr Rue : I think, Mr Ryan, you only heard that through newspaper reports. It's not something that the three of us are aware of, Senator. Let us take your question on notice. You can pursue the line of questioning, but we would have to take it all on notice.

Senator O'NEILL: I'm looking at an NBN rollout map—that's your map, from your organisation.

Mr Ryan : Yes.

Senator O'NEILL: That indicates the Lodge and premises a little bit north of it are getting fibre to the curb, but to the east and to the west it's fibre to the node. Is that just a happy accident?

Mr Rue : As I just said, we heard the information through newspaper reports. It's not something we can answer. Let us take that away, Senator.

Senator O'NEILL: Mr Rue, you're trying to indicate that this is subject to some questioning. The reality is that it's your own maps that indicate that that's the case.

Mr Rue : That may be the case, Senator. I'm sure you're reading the maps correctly. But your following question was why, and we'll have to take that on notice.

Senator O'NEILL: Will the NBN Co will be reviewing this decision, or will the homes be receiving copper for certain?

Mr Rue : Again, this is new information for us. Let us take away your question, which is around the maps and around the Lodge, and we will come back to you with an answer.

Senator O'NEILL: Thank you. Mr Ryan, would you be able to run me through the engineering causes for service class 0 on the fibre-to-the-node network?

Mr Ryan : When we're designing the fibre-to-the-node network and connecting from a node to a pillar, generally the only time that we would declare a service as service class 0 in fibre to the node is if the distance from the pillar to the premises is too long and we are unable to provide a speed that meets our requirements. In that case we have to provide a different solution, and in that situation we typically declare them as service class 0, allow the rest of the footprint to go live, and, following that, deploy a solution that allows that premises to get the speeds that they need. That's typically the only service class 0 scenario that I can recall for FTTN. We often refer to them as long copper lines.

Senator O'NEILL: I understand that there are some homes where NBN has deployed fibre to the node in an area and then identified the existing copper line for certain premises doesn't go back to the pillar which connects to the node. Is that correct?

Mr Ryan : I cannot think of a scenario where that would happen. Especially when you get outside the urban areas, there has been a practice in the past in some certain areas where they have connected premises straight into the mains cable. We don't own the mains cable. The mains cable then often bypasses the pillar. We have to declare that as service class 0 and then build the network out and connect the premises. You're still using the fibre-to-the-node technology. As I said, it's one of those things where we bring up the rest and resolve that afterwards.

Senator O'NEILL: Resolve that afterwards?

Mr Ryan : We just have to deploy a solution that connects that home using the fibre to the node.

Senator O'NEILL: So for the homes that have a copper lead-in, it doesn't connect into the node and cannot be made to connect to a node without drawing out new cables. Is that correct?

Mr Ryan : Depending on the proximity of that premise back to the node, we have a number of solutions we can deploy. One is we can to pull a copper cable out to that premise. Alternatively, if there's a cluster of houses in an area that are experiencing similar problems, sometimes we deploy a compact sealed DSLAM. In other words, we take fibre a bit deeper into the network and deploy a compact sealed DSLAM, which is, effectively, a micronode, and we put that closer to the premise.

Senator O'NEILL: What does it cost to pull a new copper cable out?

Mr Ryan : I couldn't tell you off the top of my head the cost to deploy some copper cable per metre. I'd have to get that.

Senator O'NEILL: Could you get somebody to look that up while we're here this evening?

Mr Ryan : Yes.

Mr Rue : We can.

Senator O'NEILL: That would be great.

Mr Ryan : It's a very rare occurrence. Genuinely, of all the work that we do, it's an extreme fringe case that we would encounter a scenario where there is a house or premise with a lead-in and that copper cable path bypasses the pillar.

Senator O'NEILL: But it is one of the clauses for service class 0 assessments of particular houses.

Mr Ryan : It is one, but an extremely fringe case.

Mr Rue : A small one.

Senator O'NEILL: Along with other engineering causes that cause service class 0.

Mr Ryan : Yes. As I've said before, typically, the only occurrence is where the distance from the pillar to the premise is beyond the distance that allows us to deliver an adequate service speed. As a result, we need to deploy the fibre network deeper and stand up the micronode. We declare those premises as service class 0, bring up the rest of the footprint and then follow through with the construction that allows those premises to get service via the micronode.

Senator STEELE-JOHN: I don't know about you guys, but I'm not particularly feeling that energetic this time of the evening, so I'll try and keep my questions short and hasten your escape from this torture, if I can.

Mr Rue : Good evening. I didn't see you sneak in.

Senator STEELE-JOHN: I'm quiet on the carpet. I'll take you to what I'm sure is your favourite aspect of the NBN at the moment: the HFC rollout. I was very kindly briefed by the department a couple of weeks back, in relation to the HFC rollout. I was informed at the time that the approach that was being taken, in resolution to the issues, involved sending as many technicians as necessary to resolve as many issues in the network as necessary. Is there a threshold at which this approach to the HFC becomes prohibitively or comparatively too expensive in a particular SAM that it would make it more cost effective to use an alternative technology?

Mr Rue : Let me answer that question. Mr Ryan might like to jump in with some technical details. The answer to that is no. There is clearly work that we're doing, which Mr Ryan can outline, to bring the HFC network up to a level, and then we will be very happy to release it for sale again. It is not, in the scheme of building out to a premise, a significant amount of money. Indeed, it is, to a large extent, money that we had set aside in our corporate plan anyway for remediation, except we anticipated it to occur post an area being made ready for service, but we're now doing that work in advance. In the scheme of the cost per premises, it is not a significant amount of money.

Senator STEELE-JOHN: Forgive me, Mr Rue, but surely there must be a point at which the amount of money you would invest in a HFC would outweigh the benefit of using any other technology. I'm not trying to lead you down the fibre-to-the-premises route. You must have a point, at some point, where it wouldn't—

Mr Rue : Sorry, you're absolutely correct. We look at each area on an area by area basis, and we look at the best technology to deploy in those areas. Cost is one determinant of that decision. The fact that we are doing additional remediation work does not change any of the decisions that we've taken in those areas to build HFC. You're absolutely right: if it had been an exorbitant amount of money, of course we would have looked to alternative technologies going forward. But, in this case, it is a small amount of money in the scheme of things and not enough to change a decision on cost. I'd also say—you missed the opening statement, I think—we are very pleased with the work that we've done to date on the HFC network, and we're very confident that it's going to be a terrific technology as well.

Senator STEELE-JOHN: I do understand that, and I'm not talking broadly about the HFC technology. I'm talking about within an individual SAM. You've identified that you'll need to hire as many people as necessary to fix as many problems as necessary with the rollout. Surely there must be a threshold at which you send your team down the street, identify a certain problem, which costs a certain amount of money—and therefore it is cheaper to do that SAM in a different technology than it would be to repair the HFC.

Mr Rue : You're talking specifically about HFC, but let me take you through the process. We look at an area at a strategic level and we see what we think is the best technology to build in that area. We will then build designs and, as part of the process, we do walkouts in the street and we have a look at the exactly the sorts of issues you're talking about. As part of that process we confirm the technology decision, and also a lot of the designs that we're doing. From that information, we continue to build out according to those designs. The process that you're talking about is exactly a process that we take into account all the time, and HFC doesn't actually change that.

Senator STEELE-JOHN: But there would be a cost threshold somewhere in there. I hate to keep bringing it up, but could you give us an idea of what that could be?

Mr Rue : Part of the consideration of an area would be the cost of building out to a specific area. Mr Ryan was talking earlier about long lines, for example. There are areas where we are building out fibre to the kerb where there are long lines, because, in fact, it's cheaper and more effective to do that in those areas. So, yes, we make decisions based on cost to build and also speed to build, and we look long term as well at the economic viability of the right technology to build in each area.

Senator STEELE-JOHN: Again, you've currently got, what it is, 540 SAMs across the entire—you divided the HFC network into 540 SAMs.

Mr Rue : It's approximately that.

Senator STEELE-JOHN: And you've got six which are your test cases to see how this works.

Mr Rue : That's correct.

Senator STEELE-JOHN: You're not sure currently how many people you will have to hire to undertake—

Mr Rue : No, I think we have—Mr Ryan can jump in here—completed proof of concept in those six areas. Based on that work, we now have a good knowledge of what we need to do in each of the other areas, so we have a good understanding now of the level of work and the number of technicians that we need to deploy over the coming months, going forward.

Senator STEELE-JOHN: Do you have a definite additional personnel estimate? When I was briefed it was 'a couple of thousand'. So I want to know if it's got—

Mr Ryan : If we're talking specifically about the 540-odd SAMS that have been what we refer to as 'frozen'—in other words, where we ceased sale—there are two different types of technicians. There are the higher qualified technicians who work on the network in the street. Of those, we estimate we need around a couple of hundred to be able to do that—somewhere between 150 and 200 is our current estimate at peak. We're confident that we're able to assemble them, both from our internal workforce as well as through our partners. Then we have work that's more inside the premises, or from the street back into the premises. They are lower qualified technicians, and there are no problems in terms of the numbers available.

Senator STEELE-JOHN: Thank you very much for that. Given the nature of the issues with HFC and the susceptibility of the technology to interference, isn't it true that it will never be resolved and that ongoing maintenance of the HFC network will be a considerable expense, compared with other technologies? Isn't it just time to kind of admit that as the reality?

Mr Rue : No, that's not true.

Senator STEELE-JOHN: Even your best PR people couldn't really sell it as anything other than a bit of a dud and they were really trying.

Mr Rue : No, quite the opposite. HFC is a technology that's used around the world. For example, companies like Virgin and Comcast use it significantly. It is a well-proven technology that works extremely well throughout the world to provide high-quality, high-speed services to end users.

Senator STEELE-JOHN: Could you just tell me, then, how much it is going to cost to assess, fix and redeploy the HFC network.

Mr Rue : We're continuing to work through that. As I said, we've completed the proof of concept. I'm now working on a remediation program to the areas where there are already customers on the HFC network. We are continuing to build, of course. We are looking at an area-by-area schedule for the next couple of years to complete the HFC rollout. The actual costs are still being worked through. They're part of our normal annual planning cycle that happens over the coming weeks and months. Certainly, when the corporate plan is released, we'll be able to tell you our costs at that time.

Senator STEELE-JOHN: Do you have a projection? Do you have initial costings?

Mr Rue : That's still being worked through. I'm sorry, you'll need to be patient on that. As for maintenance costs, yes, you are correct in the sense that there are maintenance costs required going forward for the HFC network—indeed, for all networks—but they are low compared to the cost of building the network and the speed of building the HFC network.

Senator STEELE-JOHN: Let's leave the sorry smoking mess of HFC, because it just makes me feel too sad—

Mr Rue : Sorry, Senator, can I assure you that the HFC network—

Senator STEELE-JOHN: It was a pithy comment, Mr Rue.

Mr Rue : But it will be a terrific network for Australians who have HFC.

Senator Fifield: And I should observe that there's an awful lot of HFC in the United States. HFC is used around the world for high-speed broadband.

Senator STEELE-JOHN: We don't need to burn up time debating that. That's for question time, Minister. I take you now to the fixed satellite and fixed wireless lines. You've increased fixed wireless from four per cent coverage to six per cent coverage with a related decrease in satellite and fixed wireless line services. Is it true that this has necessitated the upgrade of about 2,000 towers and, if so, what are the costs and performance implications of this change?

Mr Rue : I'm not sure what change you're referring to. The fixed wireless and satellite home area has been in our corporate plans at around one million homes, or about eight per cent of Australians, for a long time. There hasn't actually been a change. I'm not familiar with what—

Senator STEELE-JOHN: So you haven't increased the fixed wireless coverage within your overall plan from four per cent to six per cent?

Mr Rue : No. If I can refer you to the various corporate plans, you will see that there has been virtually no change whatsoever in the fixed wireless and satellite home area. The fixed wireless will be just over 600,000 homes and satellite will be around 400,000 homes. Between them, it's one million homes. I don't think there's been a change ever, actually.

Senator STEELE-JOHN: I'll just give a chance to double-check that because—

Mr Rue : Can you tell me when you're referring to? You may be referring to the take-up—the homes connected, maybe.

Senator STEELE-JOHN: No, my understanding was different to that, but I'm happy to provide you with additional detail. I'm just aware that we're burning the clock down and I've got a couple of other questions.

Mr Rue : Let me assure you that the number of homes being served by fixed wireless and satellite hasn't changed.

Senator STEELE-JOHN: Within any aspect of the NBN?

Mr Rue : No.

Senator STEELE-JOHN: Okay. The ACCC is pursuing RSPs, as you know, in relation to their advertising of speeds. What responsibility does NBN Co claim for slow speeds being experienced on the network that it owns, operates and maintains?

Mr Rue : NBN is one chain in the network. If you think about the World Wide Web—

Senator STEELE-JOHN: I do understand that, Mr Rue. I'm wondering what you accept as your responsibility for your part in that chain.

Mr Rue : Our responsibility is to provide a network that is able to serve the traffic that the RSPs wish it to serve, and to ensure that the network is reliable.

Senator STEELE-JOHN: Partial responsibility, surely?

Mr Rue : We have a responsibility for our link in the chain—so from when a RSP connects to us at a point of interconnect, or at a POI, all the way through until the end service in the home. The RSP has accountability for the CVC, for its own network, for the modems that it supplies, and so on. That is the RSP's accountability. Our accountability is the chain that we are building. Our accountability is to provide a network that is not congested and provides RSPs with the ability to meet their end users' expectations.

Senator STEELE-JOHN: Let me take you to the CVCs. To what extent is the pricing structure employed by NBN Co, including the CVC charge that is levied on RSPs, contributing to the quality of services experienced by end users, including reliability, speed and congestion, as well as the affordability of these services?

Mr Rue : The pricing doesn't impact reliability. In terms of the changes that we've made, which I think you're alluding to—which, again, you missed in the opening statement—what we were finding was that retailers were competing on price. Over 80 per cent of Australian homes were connecting to either a 12 or a 25 service. The pricing changes that we have made have enabled retailers, at no additional cost to them, to be able to market, sell or upgrade the existing service to 50 speed. We're very pleased that, in fact, we're going to see over a million homes moving to the 50 speed from the 12 and the 25. Plus, we're seeing about a third of new orders being at the 50 speed. In addition to that, those RSPs that participate in the scheme have been able to see an increase in CVC that they've provisioned. As a result of that we have seen not just an uplift in customers on the 50 speed, but also the uncongested experience they've had dramatically improve—which is really good over the Christmas period, when it's a high usage period.

Senator STEELE-JOHN: Can I take you to the ACCC's Communications sector market studydraft report. The ACCC recommended, and I will quote them here:

… the Government could consider whether NBN Co should continue to be obliged to recover its full cost of investment through its prices—

and that other options should be examined, including direct budget funding. To what extent is the requirement on NBN Co to make a commercial return compromising its ability to deliver the network?

Mr Rue : We see ongoing demand from end users for high-quality broadband experience. We anticipate over future years that we will see an ongoing demand for both capacity for speed and business-grade services. As a result of that, we see strong revenue growth in our business. The model, as you know, has always been a user-paid model. From our point of view, the end users will continue to demand high-quality services. We think there's every evidence that they will pay for those services. As a result, the profitability of the NBN will be very strong going forward.

Senator STEELE-JOHN: So you don't feel that it in any way compromises your ability to deliver the network, particularly in relation to speed, reliability and affordability across the entire footprint—that you are required to try and do all of this while making a profit in a way that keeps it off the government's—

Mr Rue : No. We believe that end users will be willing to pay for a service that provides them with a great experience in the home.

Senator STEELE-JOHN: It's not about willingness to pay for it but willingness and ability to pay for it in a way that keeps it off the government's books. Essentially, you disagree with the recommendations of the ACCC.

Mr Rue : We obviously will be making submissions to the ACCC, but what I'm saying is that we have confidence in our long-term model that we will continue to see a growth in average revenue per user. We've seen it in the past, we believe we'll continue to see that and we believe our model is very sustainable economically.

Senator Fifield: And I should just point out that it's not as though taxpayers haven't made a contribution to the NBN to date. There's $29½ billion of taxpayer equity into the NBN.

Senator STEELE-JOHN: And a damn sight more than that will be spent before it's done properly. I'm well aware of—

Senator Fifield: I was going to add that, if we had continued with the approach of our predecessors, the NBN would have cost about $30 billion more.

Senator STEELE-JOHN: Yes, I know the talking point.

Senator Fifield: These aren't talking points. Our predecessors had an internal rate of return of about seven per cent, which would have seen prices per year about $500 more.

Senator STEELE-JOHN: Again, I think this is something we should leave for question time.

Senator Fifield: I did need to pick up that point of affordability. Our approach will see what consumers pay being significantly less than would have been the case if we persisted with the approach of our predecessors.

Senator STEELE-JOHN: Minister, with respect, many elements of what you've just outlined are disputable and highly disputed by people far more technically qualified than either of us.

Senator Fifield: No-one is disputing that our predecessor's approach would have cost more.

Senator STEELE-JOHN: They are, but, again, for the sanity of the chair we'll leave that for the chamber. Mr Rue, I think this probably will be best for you, but anyone is welcome to chip in. This morning I had a crack and asked some questions to the department in relation to a working paper that they released today on the demand of fixed-line broadband in Australia. The paper suggested that the maximum demand for bandwidth will increase from 20 megabits per second as of 2016 to 49 megabits per second as of 2026. These projections are not based on direct measurements, which the department suggested were not available. I'm assuming, Mr Rue, that you have access to the maximum bandwidths of your network, and I would ask you for your opinion on whether you would agree with the department's maximum bandwidth requirements of 20 megabits per second in 2016 and projections of only 49 megabits per second as of 2026.

Mr Rue : I only had the opportunity to read that report today and I only briefly read it, so I'm not an expert on that report you're talking to. What I would say is simply that our own experience is that we're seeing just under 200 gigabits of capacity on our network per user. It's a little bit under that now. It was around that at Christmas time and it's come down slightly, as you'd expect. It always done in the February month. But what we've also seen is a growth of data relatively consistently as about two per cent per month. That's about 25 per cent per annum. I would anticipate that we will continue to see growth rates of about around that on our network. I believe, from a brief read of the report, that they were talking about the whole service, so they were also talking about fixed wireless and satellite. I'm talking about the fixed-line service.

Senator STEELE-JOHN: Sorry; I missed that bit. What were you saying they were talking about?

Mr Rue : I think the report dealt with the whole service. I think it also dealt with fixed wireless and satellite capacity. I'm just talking fixed-line here. But we've continued to see growth on our network at around about those rates consistently.

Senator STEELE-JOHN: Which rates consistently?

Mr Rue : They are consistently at two per cent per month over the last two to three years.

Senator STEELE-JOHN: And in an annual sense?

Mr Rue : It is around 20 to 25 per cent.

Senator STEELE-JOHN: Per year?

Mr Rue : Per annum, yes. The projection as to what will be the usage of households five, six or 10 years in the future is always one of great debate amongst people. Again, I don't know, but I'm sure this report was written with great experts assisting them and certainly would have looked at things like size of households, compression technology and things like that that impact daily usage going forward. What I can say to you is that we're building a network that will have 90 per cent of the fixed-line with 50 megabits per second or more capability. On top of that, we have looked and continued to look at upgrade paths going forward. In the event that the projections in the report turn out to be correct then, as I said, 90 per cent of the fixed-line network will have 50 megabits per second or more. In fact, 40 per cent will have gigabit capacity. In the event that more capacity is needed, we have upgrade plans that we can put in place to upgrade our network further.

Senator STEELE-JOHN: Just to be clear: you do have monthly measurements of the growth in bandwidth demand on the NBN, and they increase by a factor of two per cent per month and—

Mr Rue : About 20 to 25 per cent—

Senator STEELE-JOHN: That suggests that a simple doubling in 10 years—

Mr Rue : and we have that in our corporate plan as well.

Senator STEELE-JOHN: would be unlikely.

Mr Rue : Again, we're talking about our NBN. I think that the report was dealing with ADSL lines, fixed wireless and satellite. It was beyond just the NBN.

Senator STEELE-JOHN: This is what confuses me, Mr Rue. I imagine that, if anybody came to you and said, 'We have to do a report in this area, but we can't find any data; therefore, we'll just kind of make it up using a data-free process,' it would be slightly strange to you, particularly because I'm sure you're as able to find this as I am. My team spent 10 minutes using a search engine and found the Cisco Visual Networking Index: Forecast and Methodology, 2016-2021, which is from September, and they note that the peak-hour internet traffic growth is growing more rapidly than average internet traffic and that it will probably increase by a factor of about 4.6 by 2021.

Mr Rue : But you've got to take lots of things into account in this. You've got to take into account households, how they behave, the size of households and people working from home. You've got to take into account compression technology, but you've also got to take into account busy-hour experience. You can have data growth outside of the busy hour. Of course, the job of the people like NBN is to provision networks for busy hour or for the most that people are going to consume in a day. There are many, many factors to take into account. As I said, I can't really comment on the report other than the observations we have in terms of the data growth in our network.

Senator STEELE-JOHN: Thank you very much for your time. I release you as is within my power to do. Have a good evening. Run for the hills!

CHAIR: Don't go anywhere! Senator O'Neill.

Senator O'NEILL: I asked Mr Ryan what the engineering causes for service class 0 are. This is really important because there are a lot of people where it's rolled out. Other people on their street have got it, and they're stuck there. They've got no idea. We talked about one type of technology where you get a line out, and you were going to get me a cost of the copper lead-in. Have you got that?

Mr Ryan : It hasn't popped up yet.

Senator O'NEILL: As soon as you get that, can you let me know?

Mr Ryan : We'll encourage them a bit more.

Senator O'NEILL: Quickly take me through what service class 0 is. They can't get a lead-in cable?

Mr Ryan : We have four service classes, typically.

Senator O'NEILL: I just want to know about service class 0. Why do we have service class 0? What are the problems?

Mr Ryan : Service class 0 is where the network is not available at the front of a premise. For example, in FTTP, it's where the fibre network is not running past the front of a premise and is therefore unable to connect. For example, we have some service class 0s in the FTTP world where we are in negotiations with a body corporate—

Senator O'NEILL: Can I bring you back to fibre to the node because that's what I was asking about. I don't need examples; I just want to know what the four or five things are that stop people getting service. Why are they not getting any service?

Mr Ryan : In fibre to the node the primary reason is that the length of the copper from the pillar to the premise is too long. When we do the initial build and just interconnect between our node and the pillar and light up that SAM, there are some premises where the copper length is too long. We cannot, over that distance, offer an adequate service, so we declare them a service class 0 and the build machine then builds out a solution to enable them to get the service with the right speeds.

Senator O'NEILL: Where they still haven't got it, they just have to hope that it's coming?

Mr Ryan : They'll continue to have a live service with whatever they've got today until we are able to deliver them the NBN service.

Senator O'NEILL: One of the other things is, when the civil works are resource intensive, you sometimes don't do it; it's just too hard and you leave it.

Mr Ryan : No. It would be fair to say that there was a period there where we let the number of service class 0s in the FTTN build up and that was because we knew that the technical situation was this micronode.

Senator O'NEILL: We've discussed that at other times.

Mr Ryan : Yes. We're still developing that technical solution. Now we're absolutely out there building as fast as we can to make as many of these service class 0s serviceable. We've actually got quite an aggressive program to make it happen.

Mr Rue : We've actually made some good inroads into those in recent months.

Senator O'NEILL: Good, thank you. For some people though there's no signal on the line. That's inexplicable, and that's a service class 0 too, isn't it?

Mr Ryan : No. If NBN has declared that premise serviceable, I can't imagine a scenario in which they didn't have a signal.

Senator O'NEILL: You should come and take calls in my office, Mr Ryan. I hear from these people quite frequently. Can I just go to the fact that there are service class 0s out there—of all the different kinds and probably a few others that we won't have time to discuss. How do you plan to get all these service class 0 homes connected to the NBN?

Mr Ryan : As Mr Rue mentioned, we have a dedicated team of people who are running a program to go back to these premises and make them serviceable. In the FTTN footprint that means building fibre from the node out closer to the premises, standing up a micronode and interconnecting there onto the local copper network. Then we can declare those premises serviceable. As I've said, we've done a lot of good work lately to accelerate converting those premises to serviceable.

Senator O'NEILL: What happens when you have a copper household that's been service class 0 for 18 months? Is the existing Telstra copper circuit kept open?

Mr Ryan : Yes.

Senator O'NEILL: What does Telstra pay NBN to keep the circuit open?

Mr Rue : Sorry, what is your question?

Senator O'NEILL: What does Telstra pay NBN Co to keep the circuit open to provide service to the service class 0 properties in the NBN fibre-to-the-node build?

Mr Rue : We'll try and answer that question, but I'm not sure—

Senator O'NEILL: The whole idea is to roll it out and then in 18 months chop it off; it's all done. But for the people who still have got nothing you have the Telstra connection still in there, so how much do you pay them to keep that line open?

Mr Ryan : In that scenario we don't chop that person off at the 18-month mark. If you're still not declared serviceable within six months of the 18 months—that is, after 12 months of declaration of the footprint—we and Telstra agree that that premise gets an extension of the period of time. We feel it would be unreasonable to suddenly make someone serviceable and say, 'You've got to make a decision to join an RSP within a week or two or a month.' We always try and give that customer about a six-month window once we've made them serviceable. During that period of time, we have—

Mr Rue : I don't understand your question.

Senator O'NEILL: Do you pay Telstra to keep the line open?

Mr Rue : They pay us on a disconnection, rather than us paying them.

Senator O'NEILL: They pay you on a disconnection?

Mr Rue : Yes, as part of the subscriber costs and when a premise disconnects from Telstra, that's a payment from us to them, if that's what you're relating to, but other than that there's no payment.

Senator URQUHART: But Mr Rue, in this example, the property is a service class 0. It's been that for more than 18 months—this is the example. The existing Telstra copper circuit is kept open, as I understand it; Mr Ryan said definitely yes.

Mr Rue : That's correct.

Senator URQUHART: And there may be an extension of time. If an extension of time is granted, does NBN pay Telstra to keep the circuit open?

Mr Ryan : I'm not aware of any—

Mr Rue : Not to my knowledge. As I said—sorry, I might have got my words mixed up—the only payment is from us to them on a disconnection, which is part of the subscriber costs. The question's with our room behind, but I'm not—

Senator URQUHART: But that connection could stay open for another maybe 12 months—after the 18 months—

Mr Rue : It sometimes does.

Senator URQUHART: and you don't pay Telstra anything for that?

Mr Ryan : No.

Senator URQUHART: There's a head shaking in the background there. Thank you.

Senator O'NEILL: What are the usual reasons that prevent the NBN from being able to get that connection working within 18 months?

Mr Ryan : What's the usual reason?

Senator O'NEILL: Yes.

Mr Ryan : It is simply because of it's service class 0 on the day that we declare the footprint ready for service—and depending on which technology it is, there'll be a range of reasons, and we've discussed FTTN.

Senator O'NEILL: Does NBN have a program or projects specifically aimed at addressing this service class 0 on the copper network.

Mr Ryan : Yes, we do.

Senator O'NEILL: Has it got a name? What's it called? Who runs it?

Mr Ryan : I'm not 100 per cent sure—

Senator O'NEILL: Take that on notice?

Mr Ryan : The name of the program?

Senator O'NEILL: Yes, to redress the service class 0 on the copper network.

Mr Rue : We won't take it on notice; we'll get you an answer before the end of the hearing.

Senator O'NEILL: Mr Rue, does this project have a cost centre—the service-class-0 resolution?

Mr Rue : A cost centre? I'm not sure, but it certainly has a team from both the bill team and the finance team who look at those very closely. Whether you call that a cost centre I'm not sure, but it certainly is looked at from a cost point of view, if that is what you're asking.

Senator O'NEILL: Does it have a standard cost?

Mr Rue : It doesn't have a standard cost, no. Because of its very nature, each of these are very different.

Senator O'NEILL: Okay, so if a fibre-to-the-node household is a service class 0, and it subsequently has to be converted to a different technology, does it get classed as a fibre-to-the-node related cost, or not?

Mr Rue : If it got moved to a different technology—which is not normal, but if it did—it would get classed as the new technology.

Senator O'NEILL: If it got converted to fibre to the kerb, for example?

Mr Rue : It would form part of the fibre-to-the-kerb costs.

Senator O'NEILL: Or if it went to HFC?

Mr Rue : Yes.

Senator O'NEILL: Or are there any other technologies that you would employ that you would shift it to another cost?

Mr Rue : Yes, although, again, that is a very rare instance. But if it got moved to a new technology it would form part of the cost base of new technology.

Senator O'NEILL: We were talking before about houses that are not connected to the pillar and you have to remediate by putting in a copper. We're still waiting for the cost of the copper per metre—

Mr Rue : I do apologise.

Senator O'NEILL: What's that cost? Is that an FTTN cost?

Mr Ryan : Yes.

Senator O'NEILL: That would be part of the FTTN?

Mr Ryan : Yes.

Mr Rue : Yes it would, but as Mr Ryan said earlier, it's a very unusual case.

Senator O'NEILL: What's the solution where the copper length is too long?

Mr Ryan : That's where we have to take fibre deeper. We take fibre from the node further out to reduce that copper length, to stand up—typically—a micronode.

Senator O'NEILL: Which is a DSLAM? Is that what you said before?

Mr Ryan : Yes. Whereas a node takes about 384 lines, a micronode, from memory, takes about 60. It's a smaller version of the same thing. You just deploy closer and you connect it by fibre.

Senator O'NEILL: What's the cost per premise when you do that?

Mr Rue : What was the question? I'm sorry.

Mr Ryan : What's the cost per premise—

Senator O'NEILL: You were having a look at Ms Keisler's Twitter, maybe—you were a bit distracted?

Mr Rue : I was looking to see if someone could answer your question.

Senator O'NEILL: My question concerns the engineering solution Mr Ryan just described when the copper length is too long—it is extending the fibre out and putting a DSLAM in. What is the average cost per premises to do that?

Mr Rue : I don't have that. We don't break that out separately. That is part of, again, those technologies' overall cost per premises. I don't have a break-up specifically of those premises.

Senator O'NEILL: How do you reconcile what you just said to me with the fact that you told me that you have a cost centre when you're doing—

Mr Rue : No, I didn't say that. That's why I paused when you said about a cost centre. I said we have a team both within the build program and within the commercial finance team who would monitor the costs of the programs to look and see what is being done from an engineering point of view. That's different from saying there's a cost centre.

Senator O'NEILL: You can't tell me how much it costs to do the service class 0 fibre-to-the-node general solution—which you say—as a separate thing from the general cost of fibre to the node? You just put it all in together and average it all out even though other ones presumably would be cheaper?

Mr Rue : The issue with cost per premises is that cost per premises, as I've always said—sorry for repeating myself—is an average of an average of averages. So, within any cost per premises there are many different costs. It depends on the cost of how far you pull fibre from an exchange. It will depend on the number of homes that come off a node within the HFC area. It will depend on whether it's an existing lead-in or new lead-in has to be built. It can never be anything but an average of averages.

Senator O'NEILL: I will probably have more questions on that.

Mr Rue : In terms of the project name, there are multiple projects, I understand, so I'm not sure there is a project name for all the service class 0s as you call them. We actually call them zero, 10, 20, depending on the technology.

Senator O'NEILL: Zero 10, zero 20?

Mr Rue : Zero is FTTP, 10 is FTTN and 20 is HFC. If they eventuate in FTTC, they will be 30. Within the build team there is a great desire to get the number of service class 0s, 10s and 20s down. Service class 0s and FTTPs have fallen I think to around about half in the last year. We continue to work on it.

Senator URQUHART: I want to go back to August 2017, when we talked, Mr Rue, about the 300,000 homes that had disappeared off the rollout map. You haven't found them yet, have you?

Mr Rue : Is this what we call the diluted premises?

Senator URQUHART: Yes. I don't know what your language is, but anyway, I just want to confirm your previous statements that NBN currently maintains the ARPU projections up to financial year 2022, and then extrapolates revenue out at 2.5 per cent from 2022 onwards. Is it correct that that is what you said previously?

Mr Rue : Yes. I'm not sure they are diluted premises. You started with diluted premises and then you went to average revenue per user.

Senator URQUHART: I'm talking about the 300,000 homes that were on the rollout map and then disappeared. We had a discussion in August, I think it was, about the fact that the cost of those didn't impact, I think your words were 'very little', in terms of—

Mr Rue : I see what you're saying. Unfortunately, believe it or not, there is not a set database of homes in Australia. That is why—

Senator URQUHART: I understand that.

Mr Rue : That's why the 300,000—

Senator URQUHART: Disappeared.

Mr Rue : They never existed in the first place, unfortunately.

Senator URQUHART: I've been there on that. I just want to—

Mr Rue : I think your question was: does that relieve your significant costs?

Senator URQUHART: No, let me put the question to you. I wanted to confirm what your previous were around that, and that was that NBN currently maintains ARPU projections up to financial year 2022 and extrapolates revenue out at 2.5 per cent from 2022 onwards. That was your previous statement.

Mr Rue : That's correct. There is another piece to that as well, and that is that we anticipate that there will continue to be new developments built. And, to the extent that we win the opportunity to serve NBN to those new developments, there will also be a growth in revenue from new developments that go forward. If you're talking about existing homes, you're correct, but what I'm trying to say is revenue will grow by more than that because of the new developments piece.

Senator URQUHART: Can you also confirm that steady state capital expenditure is roughly 15 per cent of revenue?

Mr Rue : That's correct.

Senator URQUHART: And what is the steady state operating expenditure as a proportion of revenue?

Mr Rue : I think I may have also said this. You will see in our corporate plan an operating expenditure. Again, in the long-term model—I wouldn't call it a plan; I'd call it a long-term model—we grow that by inflation, which is assumed at 2.5 per cent.

Senator URQUHART: Can you provide information about how many active users the 2016 and 2017 corporate plans assumed there would be in financial year 2021 and financial year 2022?

Mr Rue : In our corporate plan, we laid out—

Senator URQUHART: Which corporate plan?

Mr Rue : In the 2017 plan, we laid out up until fiscal year 2020; in 2018, we laid out another year. So it would be approximately what was in the fiscal year 2021 plan.

Senator URQUHART: Yes, but can you tell me what they were? How many active users did the 2016 and 2017 corporate plans assume there would be in financial year 2021 and 2022?

Mr Rue : Those corporate plans only went to the years I've just stated. They were a three-year plan in fiscal year 2016 and a four-year plan in 2017, so they didn't incorporate fiscal year 2022 at that stage.

Senator URQUHART: And why didn't they incorporate that?

Mr Rue : Because the requirement of our corporate plan in 2016 was a three-year plan. The PGPA Act changed either that year or the next year. I can't remember exactly when it changed, but that then required us to lay out a detailed four-year plan. So we had three-year numbers in the 2016 corporate plan and then that went to a four-year plan. When we do our next corporate plan, that will be a four-year plan that will go to fiscal year 2022.

Senator URQUHART: So you haven't got that figure?

Mr Rue : I don't.

Senator URQUHART: If you haven't got that figure for 2022, what was the figure for 2021?

Mr Rue : The number of active users?

Senator URQUHART: Sorry?

Mr Rue : Are you asking me the number of active users? If you refer to the corporate plan, you'll see there were 8.6 million at June—

Senator URQUHART: So that I've got it clear, the 2016 corporate plan—

Mr Rue : No, the 2018-21 corporate plan—

Senator URQUHART: 2018-21?

Mr Rue : on page 39 lays out the projected premises activated in 2021—at June 2021, 8.6 million active premises. Senator, maybe I can also help you. We've always talked about a penetration rate of 73 to 75 per cent, so you can use that—

Senator URQUHART: I understand that. Sorry—8.6 million active, is that correct, in the 2018-21?

Mr Rue : In the most recent corporate plan, Senator, which I'm holding up for you, page 39 talks about, in fiscal year 2021, total premises activated or active users of 8.6 million.

Senator URQUHART: And then you don't have a 2022 financial year figure?

Mr Rue : I don't, but what you could use is what we've talked about—a penetration rate of 73 to 75 per cent of the premises ready for service. That will give you an indication of where we think that will finish, plus of course there are new developments on top of that, which continue to grow.

Senator URQUHART: You've given me the 2018 projected in the corporate plan. In the 2016 and 2017 corporate plans, what are the numbers for those years?

Mr Rue : Once again—I'm sorry to be repetitive—the 2016 corporate plan only gave projections out to fiscal 2018.

Senator URQUHART: Okay, so what were they?

Mr Rue : At the end of fiscal 2018—I'm sorry; I know you want me to do this quickly—we had active end users of—

Senator URQUHART: Sorry; you're talking about 2016?

Mr Rue : The 2016 corporate plan. At June 2018: 4,395,000. Call it 4.4 million active premises.

Senator URQUHART: And in the 2017 corporate plan?

Mr Rue : As I said earlier, that's a four-year plan, so that went to June 2020, and that had, at June 2020, 8.1 million active premises. That's on page 50 of the corporate plan, if that helps you.

Senator URQUHART: Would we expect, then, the 2016 and 2017 corporate plans to have more active users than the 2018 corporate plan? You had 300,000 more premises ready for service.

Mr Rue : On face value, yes, but the penetration of 73 to 75 per cent may have moved by a small amount, so maybe a few smaller.

Senator URQUHART: When you say 'a few smaller', what sort of figure?

Mr Rue : Again, I don't have it in front of me, so I wouldn't like to speculate. But we have looked to those penetration rates, and if they move by a small percentage that can actually add quite a lot of homes. I think the broad answer to your question is yes, but maybe not by 300,000 multiplied by 75 per cent.

Senator URQUHART: So a yes and a no? Predominately you're saying—

Mr Rue : Yes, I think it would have had fewer active end users. I think it's likely.

Senator URQUHART: What I'm after is the activation figure in the 2016, and that is 4.4 million; is that correct?

Mr Rue : It was 4,395,000 at the end of June 2018. If I can just help you, that's on page—

Senator URQUHART: Let me tell you clearly, because I'm not sure whether or not—

Mr Rue : It's on page 63.

Senator URQUHART: we're at cross-purposes. I want the activation figures in the 2016 and 2017 corporate plans for the financial year 2021 and financial year 2022 periods.

Mr Rue : As I said, the corporate plan, unfortunately, for 2016, is a three-year plan, so it only goes to 2018, which is why I gave you the 2018 numbers. The 2017 plan is a four-year plan.

Senator URQUHART: So you can't provide them?

Mr Rue : I don't have them. They weren't published. They're not there.

Senator URQUHART: But do you have them?

Mr Rue : The corporate plan only goes for those years.

Senator URQUHART: So you don't have them going up to financial year 2022?

Mr Rue : We would have had projections. That's what I'm trying to help you with. I think the best way for you to think about it is a 73 per cent penetration rate of premises ready for service.

Senator URQUHART: It may not be in the corporate plan, because there are a lot of figures that aren't in the corporate plan, but what I'm asking you is to provide them.

Mr Rue : Again, let me try to help you. If we turn to page 49—

Senator URQUHART: Which plan are you looking at?

Mr Rue : Apologies: the 2016 corporate plan. We talk about penetration growing to 73 per cent, as I said earlier.

Senator URQUHART: But that's not a figure. I want an activation figure.

Mr Rue : Again, Senator, I don't have that. All I'm trying to do—I don't have that answer—is guide you towards what it could have been, which is the penetration times the premises ready for service. I don't have the answer.

Senator URQUHART: Is there somebody that can provide that, as we're here?

Mr Rue : We can certainly look but, as I said, the plans that I have in front of me are a three-year plan and a four-year plan. We will have the fiscal year 2022 numbers next year.

Senator URQUHART: Mr Rue, I don't quite understand why you can't provide those figures.

Mr Rue : I don't have them; that's why.

Senator URQUHART: Is there someone there behind you who does?

Mr Rue : As I said, we will look to see. Let me, for the sake of time, take it on notice.

Senator URQUHART: I'd prefer to actually have it.

Mr Rue : I understand.

Senator URQUHART: I don't understand the sensitivity around it. You've provided a whole heap of other numbers, so I don't understand why you can't take it now and come back with a specific response.

Mr Rue : As I said, we will look to see, but otherwise we will take it on notice for you.

Senator URQUHART: So can you undertake that you'll actually provide the figures on notice?

Mr Rue : We will take the question on notice, and look to see if we can help you.

Senator URQUHART: And then you'll provide the figures?

Mr Rue : We'll take it on notice.

Senator URQUHART: Have you formed any expectations about what a market rate on interest will look like when the NBN loan is refinanced?

Mr Rue : Market rates of interest move, and that is something that certainly we will consider at the time when we come to refinance. It's something that we will start to think about somewhere between 12 and 18 months before the refinance date, and the refinance date, as you would know, is June 2021. So it's an exercise that we will participate in, somewhere between 18 and 12 months—don't hold me to that time line, but around about then.

Senator URQUHART: So there's—

Mr Rue : At this stage I can't answer your question. The market rates depend on many, many things that move daily.

Senator URQUHART: So would it be somewhere around—I don't know—three to four per cent?

Mr Rue : I wouldn't like to speculate. Certainly, as you know, the current interest rate that we pay on our loan, which was a market rate from the Commonwealth, is 3.96 to be precise, so call it four per cent for the sake of simplicity; an interest fixed loan interest rate. That certainly was the appropriate market rate at the time of taking the loan out. As to what it will be going forward, I would sincerely hope it will be lower. But that's just my hope. It will be whatever it will be at the time.

Senator URQUHART: So if you wanted to estimate how much revenue a particular group of homes would be generating in financial year 2022, and I take it, from what you've described, that we could make a group of premises that are ready for service, multiply it by the market rate—let's say around 75 per cent—because you talked about that earlier—

Mr Rue : Penetration rate.

Senator URQUHART: Yes, sorry, and then multiply that by the projected ARPU for that year. Is that how—

Mr Rue : It depends. That's one way of doing it. There are other, smaller revenue streams that we generate as well, but they're only small. But it also depends upon the take-up in any individual year. So, for example, if all the premises got activated at the start of the year, you'd have higher revenue. If they all happened at the end of the year, you'd have smaller revenue. It's a good estimation.

Senator URQUHART: A good estimation.

Mr Rue : In our corporate plan in fiscal 2021, you will see that we have revenue—

Senator URQUHART: If I can just keep rolling: so then, if we wanted to estimate how much revenue those same homes would be generating in financial year 2023, a reasonable estimate would be to take the aggregate of the financial year 2022 revenues, and increase that by 2.5 per cent, year on year?

Mr Rue : As we said, our model for the long-term revenue—it is a model—was to do a detailed plan to 22 and then do an inflation growth of that, but we've also got new developments, as I tried to say earlier, coming in.

Senator URQUHART: But is that the sort of process that you would go through?

Mr Rue : That's a process—we're doing a model. When you actually come to look at the average revenue per user, when it gets closer to the time, there are other factors that you would take into play. For clarity: the plans that we do are detailed up to a point in time, and then, as I've explained, hopefully, before, we grow our revenue and we grow our cost by inflation. We apply a pretty well-known benchmark of 15 per cent of capital expenditure on revenue. We look at new developments. And then, ultimately, in 2040 we take an EBIT and multiply it by—

Senator URQUHART: Okay. So—

Mr Rue : Sorry, Senator; that is just a model. When you actually come to do, let's call it a budget, for 2023, you would look at a lot of different factors. You'd look at market factors, you'd look at actual take-up, you'd look at growth rates—lots of things.

Senator URQUHART: Mr Rue, can I keep going on. Won't the Telstra network be switched off by financial year 2022—

Mr Rue : Will the what, sorry?

Senator URQUHART: the Telstra network—and the NBN migration be complete?

Mr Rue : As I said earlier, we're pleased we're still on track to complete the build by 2020, so therefore 18 months past that would mean that's the case, yes.

Senator URQUHART: And therefore the take-up rate would be around 73 to 75 per cent?

Mr Rue : That's our current expectation. I certainly would hope it could even be higher than that, but that's our current expectation, yes. That's what we're seeing at the moment: a take-up of around 75 per cent.

Senator URQUHART: In relation to the figures that I asked for, you'll take those figures on notice. You said you'd do that earlier.

Mr Rue : I said I will take those figures on notice.

Senator URQUHART: They obviously exist within NBN Co. I'm not aware that they're sensitive, so you will give your undertaking to supply those figures on your closest estimate.

Mr Rue : Let me take the question on notice. That's the undertaking I'll give you.

Senator URQUHART: But you will come back with the figures at your closest estimate.

Mr Rue : I will take that question on notice. Let me have a look at what the information is.

Senator URQUHART: Why won't you just agree to take the question and then supply the figures?

Senator Fifield: Mr Rue has indicated that he'll take it on notice and he'll take a look at what there is.

Mr Rue : I need to look to see what there is, as the senator said.

Senator URQUHART: Will you give an undertaking to supply the figures or your closest estimate?

Mr Rue : I will look at the information. I will take it on notice to and look to see if I can answer your question.

Senator URQUHART: So you won't give a guarantee that you'll supply the figures?

Mr Rue : I need to see what information there is.

Senator URQUHART: Mr Rue, if you wanted to estimate a net present value from future NBN cash flows, what would you consider an appropriate discount rate to be?

Mr Rue : I'll have to come back to you on that. I wouldn't like to give you a number off the top of my head. That's something I'd have to work on.

Senator URQUHART: I understand the NBN Special Access Undertaking has the cost of capital at the risk-free rate plus 3.5 per cent.

Mr Rue : I think that's correct.

Senator URQUHART: Which probably comes out of there around six per cent or so—is that is correct?

Mr Rue : That sounds about right.

Senator URQUHART: So that's a reasonable figure. You don't use a reason different one.

Mr Rue : As I said, I don't want to give you an answer off the top of my head on that. Discount rates to calculate NPV is always a source of great work—and opinions, actually—so I wouldn't like to proffer an opinion that you may use for some reason. I'd like to think about that before I answer you.

Senator URQUHART: You are the CFO, Mr Rue.

Mr Rue : That's correct.

Senator URQUHART: So how come you don't know the discount rate?

Mr Rue : You asked me what an appropriate discount rate is to value the business. That's not an exercise I have done. To do that exercise is not something that anyone in my position would just proffer a very quick answer to. It's something where you would look at myriad factors before you answer. I simply don't want to give you a misleading answer. There's no other reason for that.

Senator URQUHART: Mr Rue, what's the sensitivity of the NBN business case to a 2.5 per cent loss in market share?

Mr Rue : A 2.5 per cent loss in market share would see a decline in revenue. I'm not sure I understand your question in terms of sensitivity. Can you clarify what you mean by the question? If market share were lost—without doing other actions, I should point out—we would lose revenue, but it would be management's job, like it is any management team's, to look at ways to countervail that. That can be done through new revenue opportunities or cost management. There are myriad things.

Senator URQUHART: What impact would it have on revenue?

Mr Rue : If one did nothing, a loss in market share would reduce revenue.

Senator URQUHART: But what impact would that have on the business?

Mr Rue : There would be a loss in revenue.

Senator REYNOLDS: Point of order. Senator Urquhart, are you asking Mr Rue a hypothetical question here?

Senator URQUHART: No.

Senator REYNOLDS: It sounds very hypothetical to me.

Senator URQUHART: Mr Rue is actually answering it.

Mr Rue : I'm trying to say—and the senator is right, because it depends on what management did—that a loss of market share, without any management actions, would obviously lead to a reduction in revenue. But management's job would be to look for ways to countervail that—to seek to not lose that market share in the first place and then, secondly, to build new revenue streams or reduce its cost base. I can't answer what the impact on the business plan would be because management would seek to enter activities to deal with that issue.

Senator URQUHART: Can you take on notice what impact a 2.5 per cent loss of market share would have on revenue if management actually did nothing?

Mr Rue : I can do that, but I don't know what that will get you because management would not do nothing. I don't think it's a particularly helpful answer.

Senator REYNOLDS: I think it's pretty obvious. If your market share goes down and you do nothing, your profit goes down.

Senator URQUHART: I understand Mr Rue said he'd take it on notice.

Senator Fifield: He has answered the question, but obviously Mr Rue wants to be careful to not, through an answer to such a question, give the impression that NBN would take no action in that circumstance.

Senator URQUHART: I understand what you said, but my question was further to that, if you could provide that.

Mr Rue : I'm not sure what the provision of that information is going to do, because as I said management is paid and has an obligation and a duty to shareholders and the Commonwealth to seek to maximise the business opportunities. You say 'if we did nothing', but we wouldn't do nothing.

Senator URQUHART: The current take-up rate in areas which are switched off is 73.5 per cent. That's correct, isn't it?

Mr Rue : I think it's higher than that. Let me see if I can get you that. I think it is closer to 75 per cent, which I said earlier. Let me confirm that, but I believe it's 75 per cent. I can be corrected if necessary.

Senator URQUHART: I understand the corporate plan provides for a range between 73 and 75 per cent.

Mr Rue : That's correct.

Senator URQUHART: What is the take-up rate if it's built into the forward projections for financial year 2022? Is it 73, 74 or 75 per cent?

Mr Rue : It's between 73 and 75 per cent. I'm not actually sure. I think it's close to 74 per cent from memory, but we're seeing numbers higher than that.

Senator URQUHART: The 2016 and 2017 corporate plans projected 11.9 million premises RFS by completion. Is that correct?

Mr Rue : So 2016 saw 11.9 million premises at the end of the rollout—that's correct—and 2017, I believe, was the same number. Let me just check if I can find it. Yes, it also said 11.9. That's correct.

Senator URQUHART: The 2018 corporate plan has adjusted that to 11.6 million due to the premises in the geospatial databases which were found not to exist. That's correct, isn't it?

Mr Rue : That's correct. Can I answer one of your other questions? I believe the current take-up rate is 74.8 per cent.

Senator URQUHART: Okay. Based on that, we would expect the financials underpinning the 2016 and 2017 corporate plans to have 220,000 more active users in the financial year 2022 than in the 2018 corporate plan.

Mr Rue : I was trying to answer you earlier with that 300,000 premises. If you apply the 75 per cent penetration rate, I think your math is correct. That will come to 225,000, if I do that math quickly in my head. What I said earlier is it depends on the penetration assumptions that we had in 2016 compared to 2018. We have been seeing in recent times that there has been an increase in the penetration rate for those areas which are post-disconnection. As I said, we originally had it budgeted at 73 per cent and we're now seeing 74.8 per cent, so that math won't be quite correct. Directionally, though—yes, you're correct.

Senator URQUHART: So a drop in ARPU has a rough impact of around $100 million on annual earnings that roll out completion—is that correct?

Mr Rue : A drop in ARPU of what, Senator?

Senator URQUHART: A rough impact of $100 million on annual earnings—a $1 drop?

Mr Rue : Is that one of the sensitivities in the corporate plan?

Senator URQUHART: A drop in the dollar in ARPU.

Mr Rue : Can you tell me where you're seeing that? I'm not sure of the answer to that, Senator, but a reduction in ARPU would certainly—it sounds about correct.

Senator URQUHART: It's not in the corporate plan.

Mr Rue : I think you're thinking eight million homes multiplied by a dollar multiplied by 12 is about 100 million—yes, you're correct.

Senator URQUHART: So a one per cent reduction in take-up appears to have roughly a $75 million impact on annual revenue—is that correct based on those figures?

Mr Rue : A one per cent reduction in take-up?

Senator URQUHART: Yes. If you take one per cent of 11.6 million homes, that's roughly 116,000 premises, and assuming they no longer generate any revenue, that's how—

Mr Rue : Can I just do a quick calculation? So what you're saying is 11.9 million multiplied by one per cent—is that what you're saying? So, 119,000 homes at 52 times—

Senator URQUHART: It's 11.6 million homes.

Mr Rue : About $74 or $75 million is what you said?

Senator URQUHART: Yes, roughly $75 million. I just want to go to some quick questions around fixed—

Mr Rue : But Senator, again, just to be clear: firstly, because there are fewer homes that would have been built into the 2018 to 2021 corporate plan, plans move and change—things occur.

Senator URQUHART: I understand that, Mr Rue. I need to—

Mr Rue : But, when they occur, don't just assume nothing happens. The management does operate to a plan.

Senator URQUHART: Last estimates you briefly mentioned how NBN monitors speeds on the fixed line network. Can you briefly describe how that monitoring is done and how it's reported?

Mr Ryan : The monitoring of speeds on the—

Senator URQUHART: Fixed line network.

Mr Ryan : We are able to run a test at a service level on the fixed wireless network to a single premise to test the line.

Senator URQUHART: How is that reported—what's the process for that?

Mr Ryan : You mean internally?

Senator URQUHART: Yes, internally.

Mr Ryan : Typically, we respond to a service incident: a customer complains to an RSP and an RSP complains to us or passes that on to us as a ticket. If part of our investigations requires a diagnostic to run the test, we would use that to determine the root cause of the problem and, as a result, we would take whatever action is required based on what we gleaned from that information.

Senator URQUHART: What's the average speed performance level of the fixed wireless network?

Mr Rue : What are you trying to ascertain, Senator? It depends on the time of the day, for example.

Senator URQUHART: The average speed performance level. I want to know what the average speed performance level of the fixed wireless network is. I know it varies over the day, but surely you have an average—you don't?

Mr Rue : No.

Senator URQUHART: Really?

Mr Rue : It depends on a range of things: whether you're operating at a busy hour, on the area, the take-up in the area, the concurrency of users in the area.

Senator URQUHART: What is the average busy hour speed over the fixed wireless network?

Mr Rue : It depends on the area, and I don't know if we have that.

Mr Ryan : I'd have to take on notice what the average busy hour speed is across the entire fixed wireless network.

Senator URQUHART: You do do that?

Mr Ryan : We can get that piece of information. What we focus our energies on is those sites where we see the performance during busy hour slow down to a level that we find unacceptable.

Senator URQUHART: Is it easier if I work on peak and off-peak? Is that an easier way to do it for you to give me a figure?

Mr Ryan : We don't really have an off-peak time to zero in on. We have a time of day where we zero in on the peak so we can get that.

Senator URQUHART: What does your monitoring of fixed wireless cells show is the percentage of cells that offers speeds below 25 megabits at peak periods?

CHAIR: Just as you prepare to answer that, I want to know, given we are supposed to break now, whether Labor senators want to continue on with NBN at the expense of ABC time or would you like to break and return to the ABC?

Senator URQUHART: Let's do another five minutes.

CHAIR: Five minutes and then we will break and we will conclude with NBN.

Mr Ryan : I was going to answer the question but I can do that at the end.

Senator URQUHART: Do you want to deal with the monitoring of the fixed wireless cells? What does your monitoring of fixed wireless cells show is the percentage of cells that offer speeds below 25 megabits per second in peak periods? Are you able to break that up into three to six, six to 12 and 12 to 25 megabits per second?

Mr Ryan : We are. I don't have the number here for the 25.

Senator URQUHART: Have you got the others?

Mr Ryan : We can take that on notice and provide the information.

Senator URQUHART: In answer to question on notice 218 on fixed wireless congestion, you provided a list of nine towers with unacceptable levels of congestion and where upgrades were scheduled. Can you tell me what the cause of congestion for these towers was given they all appear to be in very rural and remote areas. I'll give you some examples: Bees Creek and Humpty Doo in the Northern Territory. Is that a problem with backhaul? What's the issue there?

Mr Ryan : The issue there is that the number of customers that have taken up the service and the amount of data they are using is causing one of the cells on that tower to go into congestion.

Senator URQUHART: In places like Humpty Doo?

Mr Ryan : Yes.

Senator URQUHART: Really? They're very active out there!

Mr Ryan : Yes is the answer. The reason why we have a specific problem here is not so much the customer dynamics to deploy the capacity. We can see the congestion arriving so we take action to deploy the capacity but we have to reticulate that traffic back through an existing third carrier tower; therefore we have to approach them to upgrade it. And for this particular tower at Bees Creek, we need to almost rebuild the tower to get enough extra strength to put the extra antennas up there to deploy the capacity.

Senator URQUHART: Maybe Mr Ryan, if you could take on notice in response to those nine towers in question 218, and if you could just give us some detail about what is the issue with the congestion on each of those towers.

Mr Ryan : Yes we can.

Mr Rue : Senator, sorry to interrupt, I want to correct a statement I made earlier. We talked about 2.5 per cent growth; it's actually 2.2 per cent. I'm sorry, I want to make sure you have the right information. Sorry for interrupting.

Senator URQUHART: Thank you for that. Can you confirm it's only those nine towers that have got the congestion problem?

Mr Ryan : Currently we have about 30 cells sitting on about 23 towers that are, in busy hour, dropping below three megabits per second.

Senator URQUHART: On notice can you give us the detail for all of those?

Mr Ryan : For all those 23, yes.

Senator URQUHART: That would be great.

Mr Rue : That's what I alluded to in the opening statement around we are busy working on those as fast as we can, I assure you.

Senator URQUHART: I heard that but I wanted more detail around it. How does the provision of six megabits per second in fixed wireless meet the government's statement of expectations that requires 25 megabits per second?

Mr Rue : The statement of expectations doesn't talk about a busy hour experience.

Senator URQUHART: What was that?

Mr Rue : Busy.

Senator URQUHART: I am just trying to clarify. It's nothing to do with your accent.

Mr Rue : I think it may be sometimes. The original spec of the fixed wireless was done way back in 2010, 2011, at a time when there wasn't as much video penetration. There wasn't as much concurrent use and, in fact, the busy hour was not as long.

CHAIR: That was the last one. That was an additional five minutes. Mr Ryan, did you have additional information?

Mr Ryan : I did. The cost per metre to supply the copper cable is $20 and the cost to install that is $10 a metre.

CHAIR: We will now move to the ABC.