|CommsDay Summit Address|
Tuesday, March 31, 2009
Address to the CommsDay Summit, Sydney
Senator Nick Minchin, Shadow Minister for Broadband, Communications and the Digital Economy
(Check against delivery)
I appreciate the opportunity to speak today before such an important audience and congratulate CommsDay for not only providing the forum, but also for the important contribution it makes to keeping people like me informed about latest developments in the sector.
Considering the date and Senator Conroy's stated ambition to sign a contract for the National Broadband Network by the end of March, I was half expecting an announcement from the Minister in his speech today. But of course Kevin is still overseas solving the Global Financial Crisis, and there's no way Stephen would be allowed to give away $4.7b without Kevin by his side.
And no one believes the Government can actually sign a binding contract until all the loose ends associated with this project are sorted out, which may well take most of this year.
Most likely, when an announcement comes, it will be simply the Government naming a preferred network builder, which will provide enough /files/includes/content.css for the media event the Prime Minister wants and buy the Minister more time to try and sort out the big issues.
Several months ago, ITWire's Stuart Corner said this process had all the look of a 'let's make it up as we go along' exercise and nothing that's occurred since contradicts his assessment.
It should go without saying, but let me say it anyway - the Coalition remains committed to doing what it reasonably can to ensure that all Australians have access to fast, reliable and affordable broadband and telecommunications services generally.
And despite Labor's best efforts to talk down the status of broadband and telecommunications in this country, I think we are in relatively good shape, in large part because of all of you here today and the companies and organisations you represent.
There has been a remarkable growth in the use of broadband internet by Australians in the past few years, to levels among the highest in the world.
While we share with Labor the ambition to see further enhancements and improvements in broadband, we certainly have a very different view on how those ambitions can best be realised.
Our experience in Government and from watching Labor's NBN RFP process play out for almost 18 months, underlies our realistic and pragmatic approach.
As Liberals we are naturally suspicious of 'one-size-fits-all' approaches, centrally orchestrated by Government and showered with taxpayers' money.
Despite the obvious difficulties our economy is facing, the Coalition continues to maintain great faith in the free market and the private sector.
As Liberals we also believe that taxpayers' money shouldn't be used to displace viable private sector investment in broadband or anything for that matter, or to unnecessarily replicate existing infrastructure.
As is well known, Labor's NBN policy was based on a direct lift of the proposal Telstra pitched to our Government, back in 2005, to upgrade its existing network with fibre to the node.
Telstra's original proposal was never costed to reach 98 per cent of the population, more likely the 70 or so per cent living in and around our capital cities and on the Gold Coast. Nor did Telstra want taxpayers' money do to it.
Regrettably, agreement in relation to pricing, access and regulation, could not be reached and the project of course did not proceed.
So after Labor re-badged the Telstra proposal as its own and Kevin Rudd and Senator Conroy spruiked it to good effect throughout 2007, reality and spin collided.
In tempore Advisory economic consultant Mark Christensen wrote recently that: "Labor's sketchy policy detail failed to mention that an NBN roll-out by someone other than Telstra would be dependent on Telstra’s cooperation."
If this tender process, as many suspect, was to simply give the impression of a rigorous and competitive process, it degenerated into farce when Telstra was entirely excluded, for what I maintain was a trivial and bureaucratic reason in the context of this project – not submitting a small business plan with its proposal.
It was not even Senator Conroy or the Government for that matter which made the ultimate call on Telstra. It was left to the head of DBCDE and chair of the expert panel Patricia Scott.
During recent Senate Estimates hearings, Senator Conroy said this was one area of the process he had no discretionary power over. An extraordinary admission, from a Minister who from the beginning, said this process was designed to ensure flexibility to maximise competitive tension.
In fact at this very summit last year, Senator Conroy stood before you and boasted: "We'll accept non-complying bids, so you have a capacity to actually put forward a bid in any structure you want so we’ve actually tried to make this as flexible as we can."
Clearly Senator Conroy was aghast at the exclusion of Telstra by his bureaucrats, but given that company's evident unpopularity he managed to turn a practical disaster into a short-term political victory.
With Telstra out, Mark Christensen noted that we are now in the perverse position where the company that was considered the "best bet" for the NBN is out of the running and the Government runs the risk of committing $4.7 billion to a "second best alternative that requires protection from overbuild, a greater subsidy and years to work through the resulting operational and legal intricacies."
If the Government, as expected, does make an announcement about a preferred bid in the very near future, the Opposition will be demanding the release of the full detail of what is being proposed, including the fine print.
Announcing a preferred network builder or consortium is the comparatively easy part and it has taken this Government almost 18 months to do that, despite the big promises about the first NBN services actually coming online before the end of 2008.
The reality is, the Rudd Government, could find itself in the humiliating position of having failed to get this project underway by the end of this year – 2 years after it came to office.
Most likely it will attempt to cobble together some type of outcome in a bid to get sods turning. It will no doubt quickly try and claim NBN ownership of a range of existing broadband infrastructure, including fibre optic cable and service offerings in a bid to point to progress.
The devil of any announcement will of course be in the detail and the Opposition will be armed with a long list of questions that will have to be answered before we will have any faith in this Government.
We will be asking things like:
How will the project be financed and on what terms?
On what basis is the Government providing taxpayers' money?
What are the network's technical specifics and the roll out schedule?
Will the roll-out occur in underserved rural and regional areas first?
What existing infrastructure will be incorporated into the project and how will this be accessed or acquired?
Can the network be up-scaled, at what cost and who will pay?
What will be the regulatory regime for the network?
What will the access and pricing terms be?
What will consumers pay to use it?
How will the Government ensure sufficient numbers of users are migrated across?
The Australian people will be wanting immediate confirmation that the project will deliver, what Labor promised - Fast and affordable, new fibre to the node broadband services to 98 per cent of homes and businesses with minimum download speeds of 12 megabits per second.
There is huge doubt over Labor's ability to deliver what it promised.
The bidders themselves have said fibre to the node to 98 per cent is neither realistic nor viable.
But as recently as the 18th March Senator Conroy again stressed that satellite and wireless technologies would only be used to serve the 2 per cent outside the reach of fibre to the node.
We have all heard speculation about the prospect of an Acacia-led bid getting the nod on 7 April or thereabouts.
In November last year, in an extensive interview with Alan Kohler, Acacia chairman Doug Campbell, made it perfectly clear that Acacia had no intention of meeting the Government's key objectives.
He said the company would use fibre to the node to service about 90 to 92 per cent and satellite to service the remaining 8-10 per cent.
Mr Campbell also said WiMAX would be part of the Acacia solution, the very technology Senator Conroy dismissed when in Opposition as a "dog of a solution".
Despite the Minister's continued charade, Campbell said Acacia did not even price fibre to the node to 98 per cent, as prescribed by Labor, because they know it's too expensive.
And from what we know about the Optus proposal, it too would not be able to deliver on the Government's objectives without a substantially larger taxpayer subsidy and Telstra said the same.
Given the inflexible RFP rules which excluded Telstra, you could be forgiven for thinking that any bid that does not involve 98% FTTN coverage should also be excluded as non-complying. The fact that hasn't occurred highlights the bizarre nature of this whole process.
In reporting on the views of analysts on the 12th March CommsDay used the rather provocative headline that what the Government might actually announce will be 'OPEL 2.'
And that rather than deliver what it has repeatedly promised, it will place strong emphasis on the roll out of new, alternative fibre backhaul into the regions, as a catalyst for retail competition.
Under the Coalition Government's contract with OPEL, we would have seen around 15,000 kilometres of new open access backhaul rolled out across rural and regional Australia this year; not by 2014.
And despite the mixed debate surrounding the OPEL project, which Senator Conroy abandoned on rather spurious grounds, it was based on sound public policy principles.
A targeted, $958 million Government investment in areas of regional and rural Australia that are under serviced.
It purposely had a relatively quick roll out target to bring new and affordable services online as soon as possible, to those who needed them most.
Under Labor's plan, areas that would have gained new services under OPEL are left waiting and hoping they might see something within the next five years.
Senator Conroy stands condemned for cancelling that project so quickly, despite having no alternative to it. A project which would have delivered new services to around 989,000 under serviced premises according to Optus.
Optus to this day insists with considerable credibility that it would have fulfilled its coverage obligations under the OPEL contract and is keeping its legal options open. At an NBN Senate Select Committee hearing in February Optus accurately described the Government's decision as "a lost opportunity for Australian businesses and consumers, particularly in the bush".
Another major short-coming in Labor's NBN policy is the Government's total failure to commission any of its own economic modelling or cost-benefit analysis in relation to this project, including its planned $4.7 billion spend.
Instead, it is happy to rely on anecdotal evidence and the piecemeal contributions of others to justify a $4.7 billion investment. In this economic environment the Opposition believes this is simply unacceptable.
While it is of course the case that enhanced broadband services will help drive economic activity and innovation, the Rudd Government can't and won't tell us the extent to which that will occur and the basis for spending $4.7b of taxpayers' money.
Nor will we taxpayers ever know whether we'll get more bang for our buck from this expenditure rather than the many alternatives on offer.
This is a fundamental issue that the Opposition has been questioning for many months and the onset of the Global Economic Crisis has brought a sharper focus on this glaring deficiency.
At a time when Governments face rapidly eroding revenues, taxpayers have every right to expect that any attempts at economic stimulus using vast sums of taxpayers' money are evidenced- based.
Complicating the economics of this project is the Rudd Government's clearly stated ambition to receive a commercial rate of return on its investment, yet it has never explained how this will be achieved.
Common sense suggests that to get the quickest rate of commercial return, initial focus would be on areas of high population density, where the most customers could be signed up.
In his submission to the NBN Senate Select Committee analyst Kevin Morgan said: "If the Government genuinely wants a commercial return on its $4.7 billion then it is relegating rural coverage to the last phases of the project and it is not interested in giving priority to underserved areas."
In relation to assessing other investment priorities, the Rudd Government has Infrastructure Australia on the case, but in relation to its biggest planned project spend of all, the NBN, this same commitment to rigour does not apply.
When questioned about this previously, Senator Conroy‟s feeble answer was that the $4.7 billion spend is non-negotiable because it was an election promise. An election promise made in a vastly different economic environment to the one we are now in.
As Grahame Lynch rightly wrote in CommsDay: "If the NBN is going to be all about providing economic benefits, then, as a nation, we also must quantify the costs it entails, so we can actually construct a balance sheet on its utility."
A snaphot of some significant unanswered questions he floated include:
What private investment might be crowded out or stranded by the NBN?
Has the billions of dollars wiped off Telstra's share price and hence national and private wealth, as a result of its exclusion from the tender, been factored in when assessing the economic benefits of the NBN?
Will building a utilities-based wholesale network, with no scope for alternative revenue generation increase the project's financial risk?
Will taxpayers and network users be expected to prop-up an underperforming NBN indefinitely?
What affect will Government stimulated higher-speed broadband have on traditional media ie will it accelerate the decline of newspapers or television?
Lynch noted that Labor would have been better served had it gone to the last election promising an NBN tender, but only after running its ideas through a substantive Productivity Commission analysis.
Instead, the Rudd Government has been bogged down in an overly bureaucratic process, in a bid to demonstrate its bona-fides, but without being able to actually demonstrate, by any of its own analysis, the net economic benefits the project will deliver.
"The process has become more important than the problem it was supposed to solve," Lynch concluded.
I also note that if the Federal Government becomes an equity partner in the NBN, it will be hopelessly conflicted because it will also be the regulator of the NBN.
The Opposition also maintains that the NBN expert panel's report as well as that of the ACCC on regulatory issues should have been made public, with an opportunity for comment.
Based on the Department's recent refusal of an FoI request to obtain these reports by online reporter/blogger Ben Grubb, it would seem Senator Conroy has no intention of releasing any of this material, despite the strong public interest in it.
At my instigation the Senate moved a motion obliging Senator Conroy to release these reports the day after a successful bidder is announced.
At the time the Minister "welcomed" this motion, but now it seems he will attempt to have these reports buried for the next 30 years, arguing they are protected by Cabinet document provisions.
If this is the case the Australian public will never know whether the decisions made by the Government reflect the advice it was given by its expert panel or the ACCC.
Soon after any preferred tenderer(s) are selected the Coalition believes that the full details of planned regulatory changes, including proposed legislative changes, should be made public, with the opportunity for consultation and comment.
The Government should then release any Exposure Draft(s) for public comment also.
The Coalition will move to have any NBN-related legislation or regulatory-related instruments vigorously scrutinised by the Parliament.
Considering the secrecy surrounding this process and the vast amounts of taxpayers' money at risk, the Opposition will also refer any legislation to a Senate committee for a comprehensive inquiry.
The Government's handling of this whole issue has arguably left Australia's broadband services in a worse state than they'd otherwise be.
After nearly 18 months the Government is yet to name a preferred tenderer for its NBN; it cancelled the Opel project which would be about to deliver much better services to non-metropolitan Australia; and the overhang of $4.7b of Government money is no doubt resulting in deferred private sector investment in broadband infrastructure.
The Coalition’s approach
Not unreasonably, I am occasionally asked about the Coalition's policy on broadband.
But until the Rudd Labor Government's protracted process runs its course it is impossible to know what the broadband landscape will look like come the time of the next federal election.
While we will have a comprehensive policy to put before the people at that election, it would be a pointless and premature exercise for the Coalition to articulate a specific alternative that could be made redundant by any binding decisions taken by this Government.
Just 16 months ago the Coalition in Government was committed to the implementation of the OPEL project.
I maintain that the public policy merits of this project were sound and while it is purely hypothetical to speculate whether the Coalition would revive OPEL, I think that type of targeted solution in relation to bringing new affordable services quickly to rural and regional areas continues to have merit.
The Coalition also remains totally committed to the Australian Broadband Guarantee, the program we of course started and would continue to support innovative projects which can deliver new services to disadvantaged consumers.
The Coalition will also lift the bar in relation to what is considered a metro-equivalent broadband services in rural, regional, remote and black-spot areas.
Under current ABG guidelines, despite Senator Conroy's talk of the importance of speeds beyond 12 megabits per second, he is satisfied that rural and regional Internet users who have access to a broadband service offering speeds of just 512 kilobits per second, are receiving a metro equivalent service and therefore should not receive a subsidised service.
Labor has raided the $2 billion Communications Fund to pour into its NBN project, with no alternative funding source to support telecommunications enhancements in rural and regional Australia in the years ahead.
The Coalition established this fund to future proof the telecommunications needs of the bush and that means more than just a one-off broadband project.
Unlike Labor the Coalition will set aside $100 million in the Budget, each and every year to be invested in improvements in rural and regional telecommunications.
We also call on the Government to provide clarity and leadership in relationship to the USO review (Universal Service Obligation) which has been buried since it was started by the Coalition, and outline what resources will be committed to ensuring that rural and regional Australians have equitable access to telecommunications services, including fixed line phones, pay phones, mobiles and broadband.
The Coalition remains committed to providing funding support for innovative projects such as WiMAX on the Yorke Peninsula in my state of South Australia and other wireless, satellite or fibre optic solutions for under served areas.
What the Coalition will not do is actively invest large sums of taxpayers money into projects which ignore the capacity of existing infrastructure and services or the activities of the private sector.
We see great merit in supporting local solutions for local problems and this requires a realistic, technology-neutral approach.
The Coalition is also committed to conducting a timely review of both the Telecommunications Act and also of the telecommunications specific competitions provisions under Parts XIB (anti-competitive conduct) and XIC (access) of the Trade Practices Act.
This would include reviewing the role and function of the ACCC in relation to telecommunications regulation.
This will be done openly and transparently in consultation with all key stakeholders. The Coalition would certainly be open to necessary reform which encourages continued private sector investment in telecommunications infrastructure and services.
Unlike Labor which scrapped the popular and important Commercial Ready program, the Coalition remains committed to innovation in the communications sector and will support R and D activities, as well as new research in telecommunications, which Senator Conroy no longer appears to support.
In finishing, can I just say this Government's plan to introduce mandatory Internet filtering at ISP-level is looking more shambolic by the day.
The Coalition has consulted widely on this subject and all of the available evidence and advice suggests this is a bad and simply unworkable idea.
We have said the onus is squarely on Senator Conroy to demonstrate through credible trials how this can possibly work without adversely affecting the online experiences of law abiding Australians and without placing unreasonable new burdens on industry.
His trials were meant to start last December and here we are in April and they are yet to commence and do not involve the nation's three largest ISPs.
Judging by its bungling and failure to even get trials underway, it's almost impossible to see how this Minister could be trusted to implement an acceptable national filtering regime on a mandatory basis.
Thank you for the opportunity to speak here today.