Thursday, 22 October 2009
Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009
I am pleased to have the opportunity to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009, not in this instance because I think it is good legislation. On the contrary, I think that a number of questions have been asked and more questions ought to be asked about this piece of legislation. Peter Swan put it very nicely in an article in the Australian on 16 September this year when he said shareholders will be the biggest losers from the government’s unconstitutional moves against the telco. He pointed out that it is in Latin-American dictatorships that we would expect to see this kind of behaviour from a government. He said:
Latin-American dictatorships and the failed Soviet Union are notorious for thuggery in which private assets would be expropriated in the name of the state.
While that might sound dramatic, there is no doubt that this bill has elements of that. Peter Swan went on to say:
As a nation, we love a fair go and, aside from Ned Kelly, we are disinclined to worship theft.
So there are two elements to this. It is about how Australia is going to be viewed by the business community, particularly the international community who traditionally have seen Australia as a great place to invest, when there is a risk that the government can come in and pass an act of parliament and take away your asset without just compensation. But, worse still, in this case we are talking about 1.4 million Australian shareholders who are affected by this action.
The bill, in amending the Telecommunications Act, seeks to prevent Telstra from acquiring specified brands of spectrum which could be used for advanced wireless broadband services unless it structurally separates and divests its hybrid fibre-coaxial cable network and its interests in Foxtel. The bill also contains amendments to increase the powers of the ACCC—and that is a concerning element of this—under the Trade Practices Act and changes to the USO and the consumer service guarantee. Essentially, the bill amends the Telecommunications Act to require that Telstra must conduct its network operations and wholesale functions at arm’s length from the rest of Telstra, provide the same information and access to regulated services on equivalent price and non-price terms to its retail business and non-Telstra wholesale customers, and put in place and maintain strong internal governance structures that provide transparency for the regulator and access seekers that equivalence arrangements are effective.
No-one would want to pretend that Telstra’s reputation was pure white particularly during this last decade. Nevertheless, while Telstra has not been perfect, overall it has been a great Australian company and it is delivering an important service to the community, and there are quite strong community service obligations. I think it can be said that the plan put forward by the coalition when we were in government, in the lead-up to the last election, made a lot of sense. Rather than demolish the whole set-up, there were practical ways in which to actually improve the delivery of broadband services to the nation and to make sure that there were service obligations to those areas, many of which I represent, which it would perhaps have been not profitable for a service provider to provide services to. The provisions are contained in a new part 9 of schedule 1 to the Telecommunications Act to be inserted by the bill’s part 1 of schedule 1. These telecommunications reforms, as I said to begin with, need very close scrutiny and the coalition intends to ensure that that happens. Why should we be concerned? Why should we require there to be scrutiny? I think there have been some extremely good media reports on this issue to draw from. I refer to an article that appeared on 9 September in Communications Day headed ‘NBN about as high risk as it gets’ and written by Luke Coleman. He says:
The national broadband network is about as risky as it gets for potential investors, according to one financial analyst. BBY telecoms analyst Mark McDonnell told the Telecoms World conference in Sydney that the NBN policy debate had become “politically charged” and “lacking in any measure of financial or commercial rigour.” He estimated NBN wholesale service will cost well upwards of $113 per month.
McDonnell said the NBN’s $43b price tag “does not appear to have been based on any kind of detailed study … specifically there is no clarity around the underpinning assumptions or about the kind of network and industry arrangements implied.
… … …
“Similarly, there is no clarity around whether the punitive $43b is simply the construction and deployment cost, or does it also make some allowance for the start-up operating losses of an entirely new venture we have all come to refer to as NBNCo.
He goes on to talk about the financials, which I will not go into. He finishes by quoting Mark McDonnell saying:
“But doing so under a government led process devoid of any real detail or definition, without any kind of business plan, is unlikely to generate substantial direct investments from the capital markets. Unless these basic limitations are overcome it appears the NBN will proceed mainly through reliance on government funding, sourced ultimately from taxpayers.”
I think that is a sobering warning. Yesterday in the House my colleague the member for Herbert raised a very interesting point, and I am sure taxpayers all over the country will be very interested in this when I repeat what the member said in his speech addressing this bill. He said:
… in April of this year Labor announced a new NBN, NBN mark 2. That is the $43 billion unplanned program—one costed on the back of an envelope—that will see the government own at least a 51 per cent share.
chief executive officer—
and the board an astonishing $43,000 of taxpayers’ money each week.
… … …
That is to run a company that has no customers and provides no services. What a good deal that is for the taxpayer! This is the Labor way.
I thought those words were worth repeating given that there have been delays in setting this up. I think it is fair to say that some of those delays are due to the disinterest of the private sector in buying into this folly known as NBN Co.
The legislation has also been referred to a Senate committee for examination with almost 100 submissions made. This provides an opportunity for all stakeholder views to be heard about the proposed changes, and they have been heard. These changes are causing a great deal of disquiet within the community. Many Telstra customers and shareholders have contacted my office on this issue. Following the government’s failed implementation of its 2007 election promise to provide $4.7 billion towards the upgrade of Telstra’s network to fibre to the node, it now has to break up Telstra in order to implement its new policy of spending $43 billion to create a government owned fibre-to-the-premises network—and people are rightly worried. From one account that I saw it seems it is likely to take 18 years before people can connect. It is clear to me that this action is an admission by the Minister for Broadband, Communications and the Digital Economy that the government’s new NBN policy cannot be implemented without effectively re-nationalising fixed-line telecommunications in this country. The government simply does not want its NBN to have to compete with Telstra; it wants its NBN to be a government monopoly. What a dangerous situation this is, and I will be putting one or two quotes in relation to this.
There have been shareholder concerns, there has been anxiety by the unions and there have been people who question the implications for foreign investment in Australia into the future, because there is simply no guarantee that this will not happen to other businesses, with the government simply deciding that it wants to take over something when it does not want to compete. As was pointed out in Peter Swan’s article, this is the kind of action one would expect in Latin America or in a non-democratic polity. There were issues raised of sovereign risk, and the Australian Foundation Investment Co. had this to say about the sovereign risk aspect:
If the parliament passes this legislation we think Australia’s investment standing could be significantly diminished. Investors, particularly international investors, will perceive substantially heightened sovereign risk if the Australian Government can act arbitrarily in this way.
The Australian Shareholders Association were also concerned about the sovereign risk aspect when they said:
The ASA is concerned not just about the value destroying nature of the proposal for Telstra shareholders, but also about the implications of investment generally. International investors in particular will consider Australia to have a much higher level of sovereign risk if this Bill is passed and the Government allowed to impose its will on a private company. Investors, both small and large will consider that the level of risk of Government or regulator intervention when investing in highly regulated industries is increased by this decision. In addition the decision is likely to impact on the confidence the market will have in future privatisations.
So the concerns are very widespread, and with good reason. It has never been coalition policy to force the break-up of Telstra and until the parliament can be satisfied about the feasibility of the NBN, its final costs and its business plan, Telstra should not be forced to split in order to make way for the NBN and indeed to make it viable. While the government claims that these proposed reforms are about enhancing competition there is no evidence to suggest that they will, in fact, result in better and more affordable telecommunications services for Australians. In fact, an OECD working group and the Productivity Commission has determined that the costs associated with structural separation are likely to outweigh the benefits.
One just has to look at some of the submissions received by the Senate Standing Committee on Environment, Communications and the Arts. For example, David Forman of Competitive Carriers Coalition told the public hearing on 14 October 2009:
We consider structural separation to be a poor policy option. It adds little to competition in the fixed line sector. It adds considerable cost to Telstra and so destroys value for shareholders. We believe the Government has proposed it because it improves the commercial prospects for the NBN, and because it is popular with Telstra’s competitors.
It is definitely not in the best interest of the constituencies. One has to ask why Labor has not bothered to even canvass more practical, realist and cost-effective alternatives to its $43 billion NBN—options consistent with the sensible approaches adopted by other governments. The government’s priority must remain with those parts of Australia that do not currently enjoy affordable access to decent broadband services. I highlighted those parts of my electorate being ignored by Labor when I previously spoke on the Telecommunications Legislation Amendment (National Broadband Network Measures—Network Information) Bill 2009 in this place.
Some 21 communities in the Pearce electorate will miss out as part of this NBN proposal. This means 12,142 persons living in the communities of Bakers Hill, Beverley, Bindoon, Boddington, Brookton, Chidlow, Cuballing, Gingin, Herne Hill, Hovea, Lancelin, Lower Chittering Valley, Muchea, Pingelly, Sawyers Valley, Sovereign Hill, Tuart Rise and Williams have all been dumped in the too-hard basket by this Labor government. That is what this bill does. It dumps these communities—and communities like this right across Australia—into the too-hard basket, leaving them without decent broadband services and without any guarantee they will have them any time in the near future. The interesting thing is, a lot of these communities in my electorate are 30 minutes to one hour’s drive from the CBD. It is not as though you can exactly put them in the remote category, and yet they will be denied these services.
The coalition believes in working towards parity between residents living in cities and those living in rural and regional areas—and, indeed, outer metropolitan areas—and this plan simply cannot deliver that. We as an opposition do not support attempts by governments to ‘pick winners’ in the rapidly changing technology sector. Nor do we believe, in this economic environment, that taxpayers should be made to carry most of the risk in a large-scale speculative broadband venture.
Our approach remains realistic and pragmatic and we are not afraid to acknowledge that for a continent as vast and sparsely populated as ours Australians are generally well served when it comes to telecommunications. That is not to say that there are no gaps. The coalition is a strong believer in competition as a key driver of service expansion and innovation. We also believe the government can use various levers to encourage investment in broadband services and to ensure provision in under-served areas.
It is also important that a safety net be in place for those Australians who do not have affordable access to metro-equivalent broadband services. The unnecessary duplication of telecommunications infrastructure in well-served areas is unrealistic, and we heard about that in speeches made in this place yesterday by members of the coalition. It is unrealistic and it is also proof of a minister seriously out of his depth.
The coalition recognises the importance of universal access to fast, affordable and reliable broadband. We also fully support the continued enhancement of broadband services, including the deployment of next generation networks and services. In fact, the coalition government was set to invest $958 million in its rural and regional broadband network project, OPEL, with the private sector contributing a further $1 billion. This would have included the rollout of 15,000 kilometres of new open access fibre optic backhaul into regional and rural centres. Our plan would have been delivering services right now and would have been completed by the end of this year. Instead, Labor’s proposal to starve Telstra of spectrum will actually erode competition for this highly competitive and growing sector.
The fact that this government has a minister for deregulation is a joke. Since 2007 we have seen constant government interference in private enterprise and a raft of new regulations introduced. It is important that we have appropriate regulation and legislation in the business sector, but we have to be very careful that we do not overdo it, that we manage those tensions between our obligations in this parliament to the community and the opportunity for businesses to operate in a competitive environment. Frankly, this plan belies the Prime Minister’s claims of being an economic conservative.