Telecommunications Legislation Amendment (Fibre Deployment) Bill 2011

Posted on August 24, 2011 19:19

(11:10): Thank you, Mr Acting Deputy President Furner. I think this is the first time I have spoken while you have been in the chair and I congratulate you on your appointment to this position. I rise to speak on the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2011. The coalition is strongly committed to providing Australians with fast and reliable broadband services. However, we believe that the provision of these services should be at the lowest possible cost and certainly should not come via the wasteful destruction of competing platforms. Those opposite, by contrast, seek to construct a $50 billion monopoly provider which locks out competition and locks Australia into a new National Broadband Network, with little regard for emerging and future technologies. It is a grand, shiny promise, but under the facade it is, quite frankly, a disaster that we cannot afford and a burden for the future of Australia.

As we all know, the NBN is a financial black hole funded by debt with completely implausible underpinnings, which will never live up to the scant financial details that have been published by this government. That is little wonder; this is one of the most secretive projects this country has seen. I suspect once, or if, Australians ever get to know the whole financial truth about the NBN they will be horrified. Labor promised of course, before the 2007 election, to 'let the sun shine in' on government. The shutters have been well and truly locked shut on this one. The sun does not shine in on the NBN, which is being provided with all means and all manner of ways to keep its operations and expenses as secret as possible. The NBN seems to be beset by problems, but the government take the three monkeys approach to this one: they see no evil, they hear no evil and they speak no evil about the NBN. Instead, day after day in question time Senator Conroy comes in here and reads an email he has had from an occasional constituent telling us how wonderful they think the opportunity for faster broadband may be. That is not the debate; the debate is whether this the best way to provide faster broadband.

As Labor look the other way—and I guess they do have so many debacles on their hands—they just do not admit that there could be alternative or better approaches to this back-of-the-envelope NBN cooked up by Senator Conroy and the former Prime Minister Mr Rudd. But this is an issue that certainly will not go away, because the problems will become more and more obvious as the rollout continues. Senator Conroy disagrees. He argues that this is the best way to do it. But of course in having the courage of his convictions he has failed to subject the NBN to a fair, thorough and independent cost-benefit analysis—to test it and to see whether indeed this is the best way, the most efficient and cost-effective way, to deliver faster broadband services to Australians. He will not do that because he knows that it just does not stack up. Instead, he tries to deflect all attention by continually attacking the opposition.

Senator Conroy, like the opposition, knows Australians want affordable, fast and reliable broadband services. That is something I think everybody in this place is in agreement with. As a coalition we are committed to delivering that, but Labor seem to have forgotten the affordable component. Fast and reliable is one thing; affordable for consumers is another. What we are going to see, it seems, under this NBN are dramatically escalating price rises for consumers when it comes to very fast connections. Yes the government may be trying to put caps in place for the base level connection, but the base level connection is not the premise on which they have sold this policy. It is the very fast connections with which they have sold this policy, and yet we are seeing those very fast connections subject to significant price rises. Just this week it has been exposed that NBN Co. want to have price rises of five per cent above inflation for those peak speeds. They have said they need this feasibility because they are subject to 'considerable demand uncertainty'. They are NBN Co.'s own words, and they go on:

Demand uncertainty remains in relation to issues such as the price payable by end-users for broadband services over time ...

Certainly Labor has forgotten the issue of affordability when it comes to consumers. Of course they have also forgotten the issue of affordability when it comes to taxpayers. Taxpayers face a cost of some $50 billion in the end, either through government generated debt or NBN Co. generated debt—and NBN Co. is a 100 per cent government-owned entity so, whichever way you look at it, 100 per cent of the debt that NBN Co. will raise will be attributable to the government. We have a government that out of this $50 billion is going to pay Telstra and Optus to shut down their existing fibre networks. Think about the logic of that—existing networks will be paid to be shut down so we can build something else. This country will be paying for something that already exists so that we can build right over the top of it. Frankly, when you hear logic like that, it is little wonder so many Australians have lost confidence in this government.

Competition at the platform level is equally important to ensure consumers see the low prices that competition usually brings. As I and others have mentioned many times before, consumers are already voting increasingly with their feet, moving to wireless broadband services. With the rollout of 4G services in major cities that is planned and underway, I expect this trend to continue and it will continue to undermine the bizarre take-up assumptions on which the NBN was built and which they now seem to concede are subject to such uncertainty.

This bill specifically deals with the rollout of fibre into new housing developments. We all know that the rollout of fibre is incredibly expensive, and the question in this bill is why would the government seek to again destroy competition in the broadband sector, this time by locking competitors to the NBN Co. out of the greenfield installation market. You would have thought the government should be seeking the most efficient and cost-effective ways to roll out its monolithic NBN. But, considering the regard it holds taxpayers in, it is no surprise that it seems to be happy to simply waste billions of dollars.

The government has previously said that the greenfield market should be competitive. Indeed, it has said it is competitive—the Department of Broadband, Communications and the Digital Economy is on the record as stating in regard to the greenfield market:

The installation of FTTP is taking place in a competitive context, with developers typically contracting out the provision of infrastructure and services in developments.

Even Senator Conroy himself said just last December:

Providers can compete to provide infrastructure in new developments—for example, by offering more tailored solutions to developers or more expeditious delivery.

Yet the government seems to want to change all of the ground rules and tear up the competition that exists in this marketplace. The government's figures suggest that by 2013 some 250,000 houses on greenfield sites will be built, growing to 1.9 million by 2020. They will have to be connected to the NBN under this government's plan. Many companies currently offer fibre deployment services in greenfield developments. So, we have a situation where we have demand—there are greenfield developments constantly underway and they are forecast for the future; and we have supply—we have companies already providing and building broadband services on these greenfield sites. We have suppliers eager and able to compete to fulfil the demand. But, as is often the case, this government, which acknowledges that this competitive market exists, is saying one thing—that it wants to keep a competitive market—but when it comes to how this legislation will operate it is doing quite the opposite. It is just another example of our not being able to trust this government's word.

This bill provides developers with a choice but, when you look at the operation of it, it is really a Clayton's choice. Developers, in establishing greenfield housing developments, can either fund the fibre deployment in those housing developments through a private provider or they can wait for the NBN Co., as the provider of last resort, to do it for free. With the NBN Co. as a provider of last resort, which will see it pay for key services to be delivered—a cost traditionally borne by the developers—many of those developers will seek to offload those costs on to taxpayers and the NBN Co. Far from being a provider of last resort, because the NBN Co. is offering the cheapest deal to developers, it will of course become the first choice for many of these greenfield sites and developers. Make no mistake, the result of this will be the decimation of the existing greenfield fibre deployment sector. This is Labor's bizarre version of competition—you compete but we the government will offer it for free. We all know what the outcome of that will be. Perhaps Senator Conroy would have realised this anti-competitive bill would kill Australian businesses if he had actually listened to the stakeholder reference group. Senator Conroy promised to listen to stakeholders while developing this policy, but if he did listen he certainly paid no attention to what they said.

On behalf of the coalition I will be moving amendments to address some of the very serious problems, and particularly the anti-competitive problems, in this bill. I will be moving to ensure that industry can establish specifications for the laying of fibre and not simply have to meet NBN Co. specifications, and that NBN Co. provide pits, pipes and fibre on a competitive basis. This will enable private providers to compete and to continue to offer their services to developers, knowing there is an industry specification that suits all in the industry that they need to meet and, equally, that NBN Co. will not have an unfair competitive advantage over them. This is a sensible amendment which will ensure that Senator Conroy's nice words about competition are matched in this legislation and with NBN Co. in reality.

The amendment we are pursuing will speed up the provision of fibre, with developers not being forced to wait for NBN Co. to do it for free when they finally get around to it. It will allow developers to get on with the job of providing fibre-ready premises and developments to purchasers. You would think this is something the government would want—to get the job done as quickly as possible in as many developments as possible, not to provide the potential backlog that comes with waiting for the monopoly service provider to be the sole provider of last resort service.

While the government should support this, the industry and stakeholders actually do. The Urban Development Institute of Australia said, in relation to the coalition's alternative approach, that this is a 'pragmatic suggestion'. It said:

Whatever brings around greater certainty for purchasers of those properties that all the utilities are actually there and are available and can be handed over to them and the greater that certainty is, the better it will be.

In relation to the coalition's alternative approach, OptiComm stated:

… there would be some advantages in what you are saying to what is currently proposed. That allows diversity in the greenfield.

Transact, one of the major providers of such services already operating right here in the ACT, said that they would support that type of amendment to the legislation. We want private sector greenfield cable operators to be able to stay in business and continue to provide services to their customers. That is why I will also be moving an amendment to enable these operators to stay in business by exempting them from the government's anticompetitive, so-called cherry-picking rules.

We would like to see fibre deployments in new developments not owned or operated by NBN Co. or Telstra but instead owned and operated by the same entity who built them, and an entity able to have and provide retail services by such a competitive greenfield operator to people living in that development. This will provide developers with maximum flexibility and will maintain their important existing business models. This, of course, is not anticompetitive. It will not shut other retail service providers. Such competitive greenfield operators would continue to be subject to the other access requirements which apply under the telecommunication specific provisions of the Competition and Consumer Act. Other retail service providers wishing to serve such residents in a development would have the legal right to access the network of these greenfield operators and to obtain access over their network. It is simply a sensible change to make sure that these operators will not have their business model, which involves being able to build and provide services in these greenfield sites, shut down by virtue of being forced to comply with requirements that the NBN Co. is having to comply with—a much larger, much bigger national entity that is being established in a vastly different way from these smaller and often localised entities. This approach will certainly improve efficiency and flexibility, and I hope that both of these amendments will be supported by all sides of this chamber.

The coalition believe that it is quite sensible and quite logical that this legislation seeks, in greenfield services, to provide for the rollout of fibre. We understand that. Whilst it may be marginally more expensive than a copper rollout, in the long term we think that in greenfield sites it does make sense. But we think it is vitally important that you preserve the competition that can exist in these greenfield sites. It is absolutely critical that private companies that have been rolling out, are rolling out and would like to continue to rollout their own fibre services in these greenfield sites are able to do so and are not effectively shut out of doing so because of an anticompetitive regime that makes its cheaper and easier for developers to simply opt for NBN Co. to do the work instead. It is a fundamental point of difference. Whilst the government are saying they are standing up for competition in this regard, they are far from standing up for competition in this regard. While saying that they do not want NBN Co. to have a monopoly in greenfield developments, they are in effect setting up a situation where, by default, NBN Co. will end up with a monopoly in greenfield developments. It is just a constant case of this government saying one thing and in effect doing another and, in doing so, having serious adverse consequences that Australia will pay for for many years to come.

The real risk with NBN Co., and the NBN as it is proposed, is that it will limit innovation, limit diversity and limit competition in the provision of broadband services around Australia. The very model has the potential to limit that, but this legislation, in particular, dealing as it does very specifically with greenfield sites, with new developments, quite transparently has the potential to limit innovation, competition and best practised most affordable standards in those developments. I hope that senators, especially senators on the crossbenches, will see the sense in preserving competition in this sector. While the NBN has a solid anticompetitive track record, hopefully this is one area where the Senate and the parliament can stop it from killing off competition. The amendments the coalition will move will deliver flexibility and efficiency for developers, speed up the rollout and take some of the burden of rolling out fibre in new developments off NBN Co. so that they can concentrate on other areas and so that householders and those who purchase land get the benefits of having fibre-ready properties sooner and, hopefully, cheaper as well. NBN Co. can perhaps get on with making this dog of a plan that it has at least work as best it possibly can and, hopefully, at the lowest cost to both consumers and taxpayers.

(17:47): by leave—I move opposition amendments (2) to (11) on sheet 7133:

(2) Schedule 1, item 10, page 4 (after line 23), after the second dot point, insert:

If a compliant optical fibre network is installed in such a fibre-ready facility, NBN Co will pay the cost of installation.

(3) Schedule 1, item 10, page 6 (line 18), omit "the conditions (if any)", substitute "any technical standards and other conditions".

(4) Schedule 1, item 10, page 6 (line 25), after "specify", insert "technical standards and other".

(5) Schedule 1, item 10, page 6 (after line 26), after subsection 372B(4), insert:

(4A) The Minister must consult the ACMA and relevant industry bodies before making an instrument under subsection (4).

(6) Schedule 1, item 10, page 6 (line 28), after "paragraph (1)(b)", insert "or subsection (4)".

(7) Schedule 1, item 10, page 8 (line 10), omit "the conditions (if any)", substitute "any technical standards and other conditions".

(8) Schedule 1, item 10, page 8 (line 17), after "specify", insert "technical standards and other".

(9) Schedule 1, item 10, page 8 (after line 18), after subsection 372C(4), insert:

(4A) The Minister must consult the ACMA and relevant industry bodies before making an instrument under subsection (4).

(10) Schedule 1, item 10, page 8 (line 20), after "paragraph (1)(b)", insert "or subsection (4)".

(11) Schedule 1, item 10, page 9 (after line 4), after section 372C, insert:

372CA Purchase by NBN Co of installed optical networks

Scope

(1) This section applies in relation to the project area, or any of the project areas, for a real estate development project:

(a) that is compliant with Division 3; and

(b) in which a compliant optical network is installed by a person other than NBN Co.

NBN Co to purchase network if requested

(2) The person or persons responsible for the real estate development project may apply to NBN Co for NBN Co to purchase the network in accordance with this section.

(3) An application for the purchase of a network must be made within 3 months after the completion of the network.

(4) The person or persons responsible for the real estate development project must provide NBN Co with such information and access as NBN CO requires to satisfy itself that the network is a compliant optical network.

(5) NBN Co must purchase the network within 30 days after receiving the application.

Amount of payment

(6) The amount of the purchase payment must be in accordance with a scale of payments determined by the Minister for this subsection and published in the Gazette.

(7) The Minister must determine a scale of payments for the purposes of subsection (6) as soon as practicable.

(8) In determining a scale of payments, the Minister must take into account:

(a) the typical costs of providing such networks or elements of such networks, including significant regional variations in costs; and

(b) the costs that NBN Co would have incurred had it undertaken to provide such networks itself.

Interpretation

(9) For this section, a project area of a real estate development project is compliant with Division 3 if:

(a) section 372E or 372F applied to installation of a fixed-line facility in the project area; and

(b) any fixed-line facilities installed in the project area that were subject to subsection 372E(2) or 372F(2) complied with those subsections.

Note: These subsections require that the facilities be fibre-ready and that the installation comply with an instrument under subsection 372E(4) or 372F(4), subject to exemptions under section 372K.

(10) For this section, a compliant optical network of a project area of a real estate development project is a collection of optical fibre lines in the project area, each of which:

(a) is wholly or primarily used, or wholly or primarily for use, to supply one or more carriage services to either or both of the following:

(i) one or more end-users (whether or not identifiable) in one or more building units;

(ii) one or more prospective end-users (whether or not identifiable) in one or more building units; and

(b) is not on the customer side of the boundary of a telecommunications network; and

(d) for a line being deployed to a building lot—was installed in compliance with the conditions for such lines in an instrument under subsection 372B(4); and

(e) for a line being deployed to a building unit—was installed in compliance with the conditions for such lines in an instrument under subsection 372C(4).

As we proceeded to these amendments the Minister for Broadband, Communications and the Digital Economy asked why not move all the amendments together. That would have suited the minister because he wants to bundle all of the arguments against the opposition's amendments together. That was obvious in the pitch that he made to Senator Madigan in particular as he argued vehemently that all of the opposition amendments were about undoing the NBN's business case, that all of the opposition amendments were somehow about ensuring that the best parts of Australia could be cherry-picked, that all of this was purely about destroying the NBN. That is not true, and it is not true for either set of amendments.

It is particularly noteworthy that this first set of coalition amendments, amendments numbered (2) to (11) inclusive, tries to look at the best possible way to actually get the NBN built, or fibre laid, in greenfield sites. These first amendments do not touch on cherry-picking in terms of retail delivery; they do not touch in that sense on the actual retail side of operations. The first set of amendments proposes, along with a number of consequential changes, a new section 372CA that will provide for the purchase of installed optical networks by NBN Co., and would insert that in division 2. This proposed section is intended to enable developers, whose development project has an installed fibre network that is compliant, to have the option of requiring NBN Co. to purchase that network at a reasonable price. The government's system has been set up to provide for this default arrangement whereby NBN Co. operates as the provider of last resort for fibre in new greenfield developments, but it is a default version that is very encouraging, it is a default provision that is very attractive, because if developers do not go with NBN Co. as the provider of last resort they will have to pay more for the facilities to be provided to the properties they are developing. So NBN Co. will come along and, as it is doing across the country at taxpayers' expense, lay the fibre up and down the ducts and pits that have been installed in new developments, or they can, at their own expense—or of course at the expense passed onto those purchasing properties in the development—pay someone else to lay the fibre up and down the ducts and pits. This first set of opposition amendments seeks to provide a capacity for developers to use existing or new, if they wanted to start up, private competitive greenfields operators—people who install fibre in those greenfields developments—and do so in the knowledge that if they have them lay out the fibre in their communities then they can recoup the cost of that by selling on a per connection basis the service that has been laid out to NBN Co., not an unlimited sale or price but simply selling at an agreed price.

Importantly, in this construction space, it is not the retail space, it seeks to preserve some modicum of competition. The opposition heard consistently during the inquiry into this legislation concerns from many people in the business of laying fibre that the government ran the risk of putting in place a system in which developers had the choice either to pay somebody to lay fibre or wait until NBN Co. does it for free. Guess what most of us do when we are given that choice? We will take the option of getting it for free.

The result is the monopoly that NBN Co. already has over laying fibre on brownfield sites—up and down all of our streets and homes in existing developments—is extended to this greenfields space where there is an already existing market. As the minister acknowledged, people are already laying fibre up and down the streets of new housing developments at the instigation of those developers. There is a market there. This bill, if passed unamended, will change and distort that market in a way where it will become far, far more attractive for developers to simply leave it to the last resort provider, to NBN Co., to come along and do it itself.

So what have we done if we allow that to occur? There are several consequences. We have enhanced the NBN monopoly into these greenfield sites. In doing so, we have put a number of existing businesses out of the business of laying fibre because their business opportunities will have dried up. We will also create the perverse effect whereby the provision of fibre to these new developments will take longer than may otherwise occur. The developers will wait and trigger the last-resort provisions rather than take the opportunity to get the fibre installed into the ducts and pits of these new developments at the first available opportunity.

The coalition's amendments seek to ensure that developers have additional choices beyond the default option that the government has established, which over time would become the only option in many instances. When developers want to build a new development with fibre-ready facilities, they have a choice to go to the market and find complying businesses which will lay a compliant network that can be sold on to the NBN Co., hopefully at costs cheaper than the NBN Co. would be able to deliver it itself. Certainly, it would be at agreed regulated prices to ensure that there is not price gouging in this space, but hopefully to also apply some level of cost discipline upon NBN Co. by requiring it to purchase connections at reasonable prices which will be set at a price no greater than the NBN Co.'s own average cost of installing a connection. What it costs NBN Co. to install a connection is the maximum price that these private operators would be able to operate under. This would mean that if NBN Co.'s competitors can build connections at a lower charge than NBN Co. then there is a cost saving that can hopefully flow through to all.

As I indicated, there is a benefit to end users as well. The likelihood of incoming residents of new developments having active fibre services connected to their premises is increased by pursuing this approach. This approach was canvassed during the inquiry into this legislation. It was canvassed widely with a number of the witnesses who appeared. I highlighted during my contribution on the second reading of the bill that the Urban Development Institute of Australia, when asked about the proposed amendments that I have just moved on behalf of the opposition, said that it was a pragmatic suggestion. It said:

... that is a pragmatic suggestion. In relation to the certainty question you asked me before, that is what is confronted by developers—how and when are things actually going to be done? Whatever brings around greater certainty for purchasers of those properties that all the utilities are actually there and are available and can be handed over to them and the greater that certainty is, the better it will be.

This amendment increases the certainty that all of those utilities, all of those services, will be there. In particular, the fibre service will be there for them rather than waiting until a last-resort provision is triggered and NBN Co. eventually gets around to rolling it out up and down their street.

One of the businesses in this sector, OptiComm, when asked about the proposed amendment, told the Senate inquiry that it would provide advantages. OptiComm said:

... there would be some advantages in what you are saying to what is currently proposed. That allows diversity in the greenfield. As I have said, we have been successful. Not only do we offer broadband and voice but we offer a number of other services that some developers find attractive. It would still allow them to do that and allow them to keep that network operating through companies like ourselves or allows them the offer to transfer that ownership to NBN Co. I think that is what you are suggesting. We would never love to build a network and see it go to someone else, but I think the concept is better than where we stand today.

This is one of the existing developers going to greenfields sites, to new developments, laying out networks there and, as part of their business model, selling on a retail product, as well as having to comply with provisions which make that available elsewhere.

The amendments we are considering now do not impact on the retail side of things. They would see Opticom sell that service, that network, to NBN Co. but utilise their expertise, their skills and their capacity for competitive delivery of this fibre and utilise it in a way that will actually allow NBN Co. to hopefully access fibre laid in greenfields developments in the fastest possible way at the lowest possible cost. In relation to these greenfields developments that should surely be exactly what we all want to see.

TransACT, a large provider in the ACT of fibre to greenfields developments, equally indicated their support for this amendment and the approach it takes. They commented that a situation where different parties are responsible for installing a fibre network does not necessarily provide the best outcome. Essentially, TransACT said, 'We believe that where the developer puts pit and pipe into the development creates a situation where we have a tripartite type arrangement. You have the developer putting in pit and pipe. You have a fibre operator coming in subsequent to that. What we typically provide to the developments is a turnkey solution. We deploy the fibre and the pit and the pipe all together to the developer. We believe that having a situation where it is pip and pipe only is not necessarily the best outcome overall.'

So TransACT believe that the best outcome overall is to have the pits and the pipes built by the same person who lays the fibre and to provide a complete solution to developers in greenfields sites. It sounds like a logical approach. They indicated their support for this amendment as a good way of ensuring that you have that complete package provided. You get maximum efficiency from doing so and in this scenario the taxpayer gets maximum efficiency from doing so.

I will shortly move subsequent amendments that do go to the potential for retail service provision by these companies. The amendments look at the opportunities for these companies to maintain existing business models that see them not just build the networks but provide a retail service as well. However, those are separate amendments. This amendment is really to do with and focused very much on the actual building of the network. We believe that it provides good strong advantages to the operation of this bill. We believe that, rather than allowing this bill to end up having the effect of destroying many companies that currently roll out fibre in greenfields spaces, this would in fact enhance the opportunity for them to do so and, hopefully, potentially improve the outcomes for the NBN as a result of it.

One of the things I really like about Senator Ludlam is that, compared to some of his colleagues in the Greens, he is an optimist. When I hear contributions from some of his colleagues in the Greens, especially in some of the climate change and environment debates that I also have carriage of in this place, I find myself leaving rather depressed, concerned that the world is going to come to an end, possibly as early as tomorrow morning.

Senator Ludlam has a glass-half-full approach to things and his optimism about the take-up rate and about how wonderful the NBN is going to be is an admirable thing. We have an argument that it might be misplaced optimism, but I respect the fact that Senator Ludlam brings that optimism into this place. I want to turn to his questions, but before I do—otherwise I will forget—I do find it remarkable that the minister could offer no answer to Senator Nash's questions at the end of her contribution—

Yes, in particular her question of timing about when the provider of last resort trigger is triggered. When actually is it the case that a determination occurs that on this greenfields site fibre has not been laid and rolled out and so it is now up to NBN Co. to assume responsibility? There is a separate question which Senator Nash also asked which went to how long it will take NBN Co. to fulfil that responsibility. That may require separate advice, Minister, but I would have thought and hoped that you would be able to answer both of those questions during the conduct of this debate, because I think that is perfectly sensible and reasonable.

Senator Ludlam asked questions earlier and then repeated some of them about pricing and standards in relation to the amendments that the opposition are proposing. If I can tackle those—and he is right—this amendment sets up a situation where NBN Co. can be compelled to purchase the network off the developer. It is not a case of NBN Co. negotiating each individual purchase with each individual developer on those individual terms. It is in fact that, as proposed section 372CA(6) states:

The amount of the purchase payment must be in accordance with a scale of payments determined by the Minister for this subsection and published in the Gazette.

It then goes on in parts (7) and (8) in particular to outline how the minister determines the scale of payments. Part (8)(a) indicates that the minister must consider 'the typical costs of providing such networks or elements of such networks, including significant regional variations in costs'. That is an important point given the minister's allegations that this would enable cherry-picking of the cheapest places in which to do business. In fact, the minister would have in his power and at his discretion the capacity to indicate that, yes, it is more expensive to lay the fibre in some locations than in other locations. Part 8(b) states that the minister would take into account 'the costs that NBN Co. would have incurred had it undertaken to provide such networks itself', which again of course would provide for regional variations and the like, but they are of course explicitly provided for in part (a).

The really obvious area of competitive tension or opportunity here is that you would hope that the more this work occurs the more it is keeping NBN Co. and providers honest in terms of laying out the fibre in these developments. But of course the best argument here is that it ensures you get the best result for the developer. The developer and the people who purchase premises within the development get their fibre; they get it as fast as the developer can find somebody who can lay it and who can do so on terms that they find profitable enough to operate on according to the scale of payments that the minister has scheduled.

With this whole NBN construct we are in a world of regulated payments. I know that Senator Ludlam appreciates that. In terms of access to the network, payments are regulated. This is providing for an element of regulated payments at the construction point and the construction end. With regard to the standards that would be set—and I think this is an important point to make—we are attempting through these amendments to provide a greater level of independence from NBN Co. of what those standards are. We are attempting to ensure that there is some level of independence, and our amendments (5) and (9) identify the ACMA as having a role in setting the standards and doing so in consultation with relevant industry bodies and—yes, absolutely—at a standard that is compliant with what NBN Co. needs. But, by having the ACMA play a role, what we hope to get away from is where NBN Co. demand a gold-plated system, where NBN Co. set any unreasonable level of standards for how it is done. Obviously, what we want are speeds that are required for the network. What we would expect are the standards to be correct. However, the minister seems to be quite happy to have a situation where NBN Co. can require such standards in these developments that would just render it utterly unprofitable for anybody else to provide the services, with not the slightest independent check on what it is that they demand or what it is that they want. We do not think that is reasonable. We think that, if you are going to have standards, obviously they need to meet the requirements and specifications of what NBN Co. need, but there needs to be—

Minister, either you can snipe away in the corner there or, occasionally, you could actually provide a constructive contribution. I have heard you speak in the committee stage to date and, more often than not, it has been to rehash the history of Telstra as a vertically integrated monopoly, to rehash the coalition's policy position—to rehash everything. It has never been to argue the case for the bill that you have presented before this chamber. If you want to get into some detail and start arguing the case for your bill, then feel free to do so. But all you want to do is snipe from the bench over there, without providing any arguments or details of your own or anything substantive to refute the concerns. These are not just concerns the opposition has made up. Mr Turnbull and I did not just sit down in a corner, and say, 'Geez, I wonder how we can invent some concern here.' Senator Ludlam and Senator Xenophon, as well as the other members of the committee, heard evidence from concerned businesses. That evidence is reflected in the Senate committee inquiry and it is evidence that we have tried to act upon by developing these amendments.

So to return to Senator Ludlam's question, we believe the approach we have laid out ensures there will be standards that meet the specifications that NBN Co. needs. They will be standards, however, with a level and a modicum of independent oversight that the ACMA will provide and they will be standards that are developed with industry consultation.

We believe the pricing can be set in a way that avoids the type of cherry-picking fears that the minister has been trying to create and that provides some level of certainty for businesses going in and that, most importantly, provides developers and households with the opportunity to ensure they can get the fibre laid in a timely manner.

I will finish by, again, reminding the minister of Senator Nash's question about timeliness. Minister, perhaps it would really help this debate if you could actually tell us how long we would have to have no fibre laid in the pits and ducts before NBN Co. considered it was their responsibility to do so and, once they acknowledged that responsibility, how long it will take them to do so. Why don't you try answering those two questions?

(18:14): I am hoping that the minister will deign to respond to these amendments and will outline to the Senate his view on this matter. If I boil it all down very briefly, our concern and the concern of many businesses operating in this space is that, passed in its current form, the government's legislation will simply see a number of businesses go to the wall, unable to provide their type of service to developers because you are setting up NBN Co. as the default provider of fibre services in greenfield sites. The difference, you will know, Minister, is that today Telstra's default requirement is to lay copper. There is at least a value add for developers to think about by having fibre providers come in. There is a value add for the fibre providers as well because they are able to try to sell services through those developments.

Your proposal is that NBN Co. will be the fibre provider. What is the value add for a developer to get anybody else in to do it aside from it happening a little quicker? There is no value add. The value for the developer is to leave it for NBN Co. to deliver the fibre because they get it cheaper. If the minister can demonstrate that somehow they will not get it cheaper under his default provision then that would be a great illumination for the chamber. I doubt very much that he will be able to demonstrate to us that they will get it cheaper through an existing competitive greenfield operator. The government have already sent many other businesses to the wall when they have interfered in market spaces—and it is not your fault, Minister; they were not in your policy area—particularly home insulation, on which I spent a lot of time making inquiries. So many home insulation businesses happily operated effective and successful businesses in the Australian economy. They provided jobs, opportunities, good services and good workmanship to their clients but they have gone to the wall because this government's judgment is flawed on matters of policy and on how they should involve themselves in the operations of business. There is a price to pay for their errors of judgment—people lose money, people lose businesses, people lose jobs and Australia is worse off as a result.

Passed unfettered this bill will see those who lay fibre in greenfield sites lose parts of their market—potentially lose all of their market. In the process we will see a contraction of competition in that space and an enhancement of the NBN, which is already one giant monopoly. We will see a loss of private investment, of private jobs and private businesses. For years businesses have done the innovation and the hard yards, developing their own businesses model which allows them to lay fibre in a competitive way in greenfield sites. They have provided a good service to developers and purchasers alike.

The government are going to pull the rug out from under them and provide a default-free service that will ensure there is no business for the private operators and it will all fall back to you new government monopoly, your 100 per cent government own, 100 per cent debt funded and 100 per cent monopolistic enterprise, the NBN Co.

You did not subject the NBN Co. to a cost-benefit analysis. Minister, I noted in your second reading speech that you wondered why on earth I would want to see it go to the Productivity Commission. I would think they could ask better questions or to a better analysis of the NBN Co.

I am flattered by your questions, Minister, but the difference between the minister sitting over there, the government he represents and this opposition is that we do not think all wisdom resides among us. We do not believe that we simply know best. You do. It is the minister sitting at the table who, when his $4.7 billion fibre to the node proposal fell over, when he could not manage to get tenderers to meet the requirements for each and could not manage to get that much vaunted proposal, his key policy for the 2007 election of the ground—

A very popular one that you couldn't even deliver! So a very popular policy that is another demonstration of the flawed judgement of your government and of the flawed policymaking of your government! You spent millions of dollars in attempting to deliver that policy, on the processes of going out to tender, and in the end it fell over. So what did you do? Well the then Prime Minister, Mr Rudd, said, 'I've got a plane trip. Come and talk to me about this disaster of the fibre to the node policy. Come and talk to me about it.' So you hopped on a plane with Mr Rudd and you pulled out an envelope like this, which somebody has helpfully left here sitting on the desk next to me, and you said, 'Well, double or nothing doesn't quite work on this. Double or nothing of $4.7 billion doesn't work. But why don't we just shift the decimal point across one? Why don't we just blow it all and put it all on fibre to the premise instead?' There was no decent study of it, there was no decent analysis of it and no clear argument as to why this was the best, most cost-effective, most efficient proposal to provide fibre broadband in the most cost-effective way to all Australians. There was no rigour and no analysis and no real scrutiny of it, and you have ducked and dodged and avoided any effective scrutiny of it ever since.

If you had such confidence in this proposal that you are putting forward, Minister, you would have accepted the opposition's call for a cost-benefit analysis a long time ago. For all of the millions of dollars that you have spent on reports, studies and getting this thing off the ground, it would have been a pittance along the way to say, 'Do you know what? I take up that challenge and I will subject it to a cost-benefit analysis. I take it up because I have confidence that the cost-benefit analysis will come down on my side of the ledger.' But you do not have that confidence, Minister, and that is why you have not taken up the challenge that the opposition has reiterated again and again to you in this regard.

Most of the significant legislation to allow you to create your $50 billion debt funded monopoly has passed through this place, but this is an important piece of legislation that deals with the niche part of the proposal. It is an important niche part, the part that relates to greenfield sites, to new developments. And, of course, because it is a niche part it has niche impacts. But to the businesses who are concerned and will be affected they are not niche impacts; they are real impacts. To the people who have invested money in building up those businesses, they are not niche impacts; they are real impacts. And you are not proposing that you are going to come along to those businesses and pay them billions of dollars, like you are to Telstra or to Optus to migrate customers across and to compensate them for the loss of their cable networks. No, you are not proposing any compensation for these businesses. You are just changing the ground rules for them; that is what you are doing. So you are changing the ground rules for these businesses and if the new business model of the NBN does not work for them it is too bad, too sad—as is the attitude of you and your government. What we will see instead is a situation where their businesses are threatened and the jobs of those businesses are threatened. Ultimately, it will be a combination of Australians, customers, consumers, people purchasing the properties in question, developers and those involved in the development industry and taxpayers who will cop the impact. The taxpayers will cop it because your stripping of competitiveness out of this sector will see prices go up and we will see the NBN Co. as a giant monopoly simply become a giant, fat, sluggish monopoly, as all monopolies ultimately do. We will see developers lose out because they will not have choice, because eventually the choice will just not be there. The developers just will not have the choice of who to go to.

Minister, you want to talk about amnesia? Honestly! Look at the disasters that you and your entire government run away from. Day after day after day you run away from these disasters. I talked about home insulation and we can go to many other places or we can just rehash the fact that you were the one who developed a policy that you could never get off the ground and took to the 2007 election and, to get yourself out of trouble on that, you simply had to spend not just a little bit more but around $45 billion or $46 billion more, when it is all tallied up, to manage to get your new policy off the ground. That is a remarkable feat, Minister, something that I am sure future taxpayers will look back on and shake their head in wonderment at how a minister got away with such a tactical manoeuvre. I congratulate you for the tactics there, the tactics of getting a policy so wrong but being able to convince the Prime Minister of the day to go along with you on something even bigger, even grander and even less proven. It is a remarkable accomplishment in a political sense but a terrible accomplishment in a policy sense and in a budgetary sense for Australia.

As I was saying, there will be losers under this bill if it is allowed to pass. Among the losers will be the taxpayers, who will be paying more, and the developers, who will lose choice. Householders and others will also be among the losers, who will find that they are waiting around because there is not the competitive tension, the competitive dynamism, within the industry.

I am not suggesting at all, Minister, that NBN Co. will not manage to build it to some people. It is a question of whether that is the best way to do it. You have this blinkered approach that NBN Co. seems to be the only way. We believe that there is a better way especially with these greenfield sites and that for these greenfield sites you can maintain a level of competitive tension in the construction approach. That is all this amendment seeks to do, but it is important because it will preserve those businesses who have gone out there and done the things that you used to highlight and praise. Minister, you used to point to some of these businesses as shining of people who were delivering the type of technology that you are encouraging everyone to embrace. Yet, with this bill you will go down as the minister who pushed those businesses out of business as a result of the freebie that you are offering everyone, ultimately, with the NBN Co.

(18:35): Minister, there is a remarkable inconsistency in what you say and in what you argue. Do you stand by the statements you have made previously? On 9 December last year you said:

It has been a consistent feature of the Government’s policy in new developments that there should be room for competing providers. This continues to be the case.

Developers will be able to source fibre from competing fibre providers if they wish. Providers can compete to provide infrastructure in new developments, for example, by offering more tailored solutions to developers or more expeditious delivery.

Do you stand by that and, if you do, isn't that somehow allowing the type of cherry-picking you are suggesting, in that it will be only the easier and cheaper ones delivered? The ones where there are better returns available will see developers and providers go in and provide the fibre services in those greenfield sites. Isn't that just what you were railing against? Yet that is what you said would be the case and is what in other places you and the department have indicated is what this legislation provides for.

In addition to responding on whether you still think there should be room for competing providers, which is all the opposition is attempting to facilitate through these amendments, can you make it equally clear—and I will put this as simply as possible—whether it will be cheaper for developers to use the provider of last resort that is NBN Co. to get fibre laid than it will be for them to use anybody else? Will it be cheaper for them to do that than to go to anybody else? It is a simple question and would demonstrate whether your belief that there will still be some competing market and some room for other providers is the case, or whether, as we and many others contend, you are setting up a system where the provider of last resort becomes the default provider because it is going to be significantly cheaper for developers to use it and it alone.

(18:39): I will put it a different way then. What will NBN Co. charge as the provider of last resort?

(18:41): Grudgingly, the minister found a way to at least sort of answer the question. He said that NBN Co. would provide and lay the fibre, but would recover the costs on a national basis over a longer time horizon. Private providers providing the services would not be able to do that; they would have to recover their costs by charging the developer, which of course would be put into the costs of the land that is sold.

Minister, you said the very nice words that you could not talk about the business models of—

Minister, you are not going to catch me on that, because, while you have tried to proclaim me as an expert on things, I made the point very clearly before that I do not propose or pretend that we are experts on everything. I can, if you want. I can quote some of the evidence received by the Joint Standing Committee on the National Broadband Network about the costs of developing these things, of installing the fibre and so on, if you want. We can go through the submission of Greenfield Fibre Operators of Australia, which stated that:

NBN Co Agreements with Developers, who have already applied for 133,000 new lot connections in Greenfield developments since 1 January 2011, evidences that the cost of each connection is currently averaging over $3000 per lot (excluding any back haul construction costs).

Current prices for GFOA networks that equal or exceed the current functional performance of NBN Co networks are up to $1500 per lot (excluding any back haul construction costs). FTA TV and Pay TV may add $300 per lot.

That was from the submission made by GFOA to the committee's inquiry into this legislation. If you want to talk about costs, TransACT said, according to the committee's dissenting report, that:

… the approximate cost depending on choice of provider and specification used, of installation of a fibre network per premise is up to $3500. TransACT stated:

The ballpark type numbers indicate that pit and pipe is somewhere in the order of $500 to $1,000 a premise and a turnkey solution is anywhere up to $3,500 a premise depending on who deploys it and what the specification is.

They are fairly valid points, but none of them get away from the reality of what you have just said and made quite clear to the chamber in this debate—that is, that the first of two models that will be available to developers is that they can use a private provider to have fibre laid. Of course, that private provider, as a private business provider, is going to have to recoup its costs somehow. The only place it can recoup them under your model is to charge the developer, which costs the developer more. Or, the provider can let NBN Co. do it and recoup the costs 'on a national basis', to use your words, over a longer time horizon, charging the developer nothing.

Minister, I cannot believe that you, of all people, who love to come in here and give these lectures to everybody else, want to try to draw this comparison between Telstra laying a copper wire and developers getting a private business provider to lay fibre. I cannot believe you want to draw that comparison. This is a changed dynamic. This is a different approach that you are pushing through, and that is your right. But you are now talking about a situation whereby it is not Telstra laying copper against a private provider laying fibre. It is not Telstra offering copper for free against a private provider offering fibre at a cost. It is NBN Co. offering fibre for free against a private provider offering fibre at a cost. It is the same product, but one person—your government owned monopoly—is offering it for free. This is a fairly emphatic difference. You cannot keep drawing this comparison, making this argument that it is the same as with Telstra, because we are looking at a different situation here.

We are looking at businesses that have evolved over a period of time, businesses that have filled a space in the market that was not being filled. By changing the ground rules, as you are doing, you are going to transparently disadvantage those businesses. Your notion of provider of last resort is very clearly a flawed notion. You are very clearly setting up a situation whereby NBN Co. becomes the default provider. It will become the default provider because it will be hundreds if not thousands of dollars cheaper to use it. Per premise, developers will save hundreds or thousands of dollars to go with NBN Co. instead.

For most developers operating in a market where margins are tight, particularly right now, there is not a lot out there at present—not a lot of money to be made on residential or other property developments. Every dollar they can get counts. Every dollar on the margin is important. They are going to take the cheapest option. I cannot believe that you will not recognise and accept that. You see this concern of the opposition's as illegitimate and reject out of hand this sensible amendment of the opposition's that seeks to simply preserve the right, the role and the capacity of these private providers to keep doing the business they are currently doing: laying fibre in greenfields developments and ensuring that in those greenfields developments there is competitive tension, as Senator Xenophon acknowledged, between the potential providers of fibre to those developments. It baffles me that you reject that.

But I am pleased that at least you have acknowledged, even if you will not put it in these words, that there will be a very distinct cost differential. People can go with the private provider and pay, or they can go with NBN Co. and not have to pay. That is the situation that will confront developers. In the overwhelming majority of cases one would expect that anybody who is given what is a fairly rational economic choice—do you pay for something or do you get it for free?—will go with 'get it for free' on almost any day of the week.

That is what will happen. You cannot continue to mount this argument that what is happening with these fibre providers is somehow comparable to where we are at with Telstra and copper. I am not aware that anybody is out there providing competition in the marketplace over who is laying copper in the ground. I am aware that there are plenty of businesses providing competition over who is laying fibre in the ground, and I am aware that those businesses fear this legislation and fear what it will do to their future.

(19:08): One of the things I really like about Senator Ludlam is that, compared to some of his colleagues in the Greens, he is an optimist. When I hear contributions from some of his colleagues in the Greens, especially in some of the climate change and environment debates that I also have carriage of in this place, I find myself leaving rather depressed, concerned that the world is going to come to an end, possibly as early as tomorrow morning.

The amount of the purchase payment must be in accordance with a scale of payments determined by the Minister for this subsection and published in the Gazette.

Posted in: Speeches

Senator Simon Birmingham

Liberal Senator for South Australia

Shadow Parliamentary Secretary for the Murray-Darling Basin

Shadow Parliamentary Secretary for the Environment

Welcome

Telecommunications Legislation Amendment (Fibre Deployment) Bill 2011