Thursday, 22 October 2009
Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009
Thank you, Mr Deputy Speaker, but at that time he was Mr Rudd; he was not the Prime Minister. I couched it in terms of the time frame, but I am happy to correct myself. At that time, the now Prime Minister, Mr Rudd, was looking for some big ideas, some broad vision stuff, so he committed the Labor Party to the National Broadband Network. It was to cost $4.7 billion and private industry was to match that amount. The government was to build a 12-megabyte fibre-to-the-node network for 98 per cent of Australians. Work was to commence before the end of 2008. That time is well past. At the time I thought this outcome extremely unlikely. I remembered the great Telecom rollout to rural Australia of the seventies and eighties. That was years and years of work and involved thousands and thousands of kilometres of deep ripped cables. I could not believe any government or private operator could possibly hope to duplicate that network for a sum somewhere near the proposed total of $10 billion.
The plan was to steal the $2 billion Communications Fund, which had been put in place to protect regional and rural Australia, and add another $2.7 billion of taxpayers’ money. The idea was that private enterprise would fall over itself to find another $5 billion to build this fibre-to-the-node network. Incidentally, the only part of this deal ever delivered was the stealing of the $2 billion—a great example of the decisive, effective action that the Prime Minister is so proud of trumpeting. Unfortunately, nothing else happened.
It became obvious that we had policy on the run. The government had not planned or consulted with the industry, and they most certainly had not commissioned a business case, because after 18 tortuous months the process collapsed. Despite interest from six parties, not one could deliver the goods for the money. Not one could find a business case that worked. But, not to be daunted, the Prime Minister proudly announced this total failure as a victory and committed the government to not a $10 billion network but a $43 billion fibre-to-the-house network for 90 per cent of Australians. We know that this was once again policy on the run. The government had not commissioned a business case and, once again, they had no idea how they were going to deliver on this grand promise. The government must have been alarmed at informed public criticism and industry scepticism about the chances of this network ever being viable.
We should remember at this point that there are fewer potential customers for this $43 billion project that will service 90 per cent of Australia than there were for the $10 billion model that was proposed to service 98 per cent of Australia, and the industry could not make the sums stack up on that model. So the Prime Minister and his minister for telecommunications had an enormous problem: high public expectation, a financial disaster on their hands and no plan for delivery. I remind the House that the last time I spoke on this issue I predicted that this plan would collapse as well. That is exactly what has happened.
So now we have the next impromptu plan. We have the effective nationalisation of Telstra, which for all intents and purposes will see a forced break-up of the company. I am almost certain this plan has had no more consideration than the last few but is seen as a get-out-of-jail card for the government. It is no more than propaganda for the government to say Telstra has a choice on this issue, but by denying extra bandwidth for mobile services they are holding a gun at the head of the company. Mobile services are the growth part of the industry. Telstra will have to have the bandwidth to roll out its 4G technology, for if they do not then customers will be forced to move to other providers when their 3G handpieces, which we all have now, reach their use-by date. So to pretend that Telstra has a choice in this game is rubbish! The only choice they have is Hobson’s.
Some would ask why we should feel any compassion for Telstra, but there are a number of messages here which do not sit comfortably with me. National takeovers of private industry are not something which happen in free-market economies. The message to investors is particularly bad, and in the case of Telstra we are looking at the biggest shareholder base on the Australian stock market, with over 1½ million investors, and a far bigger holding indirectly through our superannuation funds. They all stand to get a haircut with this deal.
The costs of structural separation to Telstra will be enormous. How do you pull apart a company which, as the core part of its business model, has strands running from top to bottom? Billing systems, overlapping maintenance workers, transport systems—all designed to service the whole company. Will the shareholders or taxpayers pick up this bill? The challenge for Telstra, the owners and operators of the copper network and the major player in the fibre network around Australia, has been to try to remain competitive with the fast-evolving mobile network. This has seriously eroded the company’s profitability. After all, we all know hundreds of people who have disconnected their fixed services. So this legislation attacks Telstra’s efficiencies and then will shift the risk of the ageing copper network to the new company, which ultimately will be owned and controlled by the taxpayers.
To keep in business, Telstra has made enormous efficiencies. To be fair, many—particularly those who live in electorates like mine—have not been happy about some of the changes as local work crews have been disbanded. However, no-one should ever think there are free lunches out there. If Telstra were to put back all the work crews, either the prices of all the services would rise significantly or they would have to start closing down networks. As always, we can all long for the idyllic bliss of our youth, but we cannot bring it back. I remember the local wars in the 1980s as my friends and neighbours were faced with bills worth thousands and thousands of dollars when the then government owned Telecom was asked to connect copper network to their farms. It caused an enormous ruction in my district; people were asked to pay bills of $8,000 and $10,000 to get a phone connected. Memories can be funny things sometimes. It is a part of human nature to remember the good times and sometimes forget the bad. But I return to the issue of the day: significantly increasing the price of access is simply not an option as all it will do is accelerate the abandonment of the network in favour of mobile services.
So what will happen once the government takes control of this network? The government will be the regulators and will set the price for access to the network. We must question the new company’s ability to raise the cost of access which, when given the input of capital that the government is planning to pump in, will provide for an unprofitable company. The problem they will face will be the continual improvement and competitiveness of the mobile network which will limit their ability to compete in the marketplace. So, unless the government has once again changed its policy on this—and who would know?—the plan is to sell off the company five years after completion of the National Broadband Network. If it is not profitable, the price will be discounted until it is, at great loss to the taxpayer. Or perhaps they will not sell and will continue to operate the network themselves—that is, the government and the taxpayers—and taxpayers will pick up the bill for any losses that this company is likely to incur.
Let me return to some of the issues I raised in this place last month. I spoke earlier about Finland, a nation that has been quite aggressive in its broadband rollout. The government was planning to guarantee delivery of 100-megabyte capability, with fibre-optic to every house and business. In reality they have been able to get 100 megabytes to about 40 per cent of homes and business because—this really is worth noting—of the vast cost of delivering services to its remote areas. If Finland is having trouble with its remote areas, you can only imagine what it is like in the electorate of Grey, where I come from, which is an area bigger than New South Wales. In Finland, the cost of access to a 100-megabyte service is about 2½ times as much as the generally available 10 megabytes. So how many Fins are signing up for this service? The take-up rate is just 1½ per cent, so how can anyone make a business case if your total market is just 1½ per cent? Clearly something has to give. Even in Helsinki, the place with the highest population density, it is proving difficult to sell the service. In Singapore, where 100 megabytes is available, the take-up rates are as low as one per cent.
Following the Prime Minister’s thought-bubble commitments, you can imagine how horrified they must have been as the reality of what they had committed to sunk in. There are 10 million potential users in Australia, and if we were to achieve a 1½ per cent uptake that would be 150,000 customers. A network costing $43 billion, as the Prime Minister had proposed, would equate to a debt of $286,000 for each connection. So now, in panic, the next idea is to nationalise the Telstra network and force anyone who wants fixed-line services on to that network. I have no more confidence that they know anymore about the mark 3 version than they have done with anything else in that field, and so after two years of abandoning policy and announcing new ones and no action, it is now an emergency that we force this legislation through the parliament in the next few weeks. It was introduced in the House two days ago and is likely to be rammed through today.
What will be the effect of all this on my constituency—the 130,000 people spread over the part of South Australia that is, as I said, bigger than New South Wales? You can be sure it does not look good. One of the earlier government plans, if it is fair to call it that, committed to a fibre-to-the-node network for 98 per cent of Australians. That electoral commitment went out the window a few months ago and now we are down to a premium service for 90 per cent of Australians, You do not have to guess who the losers are: it is regional Australia. Towns with fewer than 1,000 people will miss out; they will stay on the current satellite service. I am probably the only member of this place who has no mobile phone service at my home and accesses the internet on a satellite signal. I know what the capabilities are like. Towns in my electorate like Booleroo Centre, Cleve, Yorketown, Wudinna, Gladstone, Kimba, Minlaton, Cummins, Stansbury and a host of others will be the losers. I estimate that more than 18,000 people will miss out on fast broadband in Grey. But they will not be entirely forgotten; they will certainly qualify for their full share of the $43 billion debt.
We do not know what the government has planned for country Australia. It really has just put it in the too-hard basket. What kind of service will the nationalised telco be required to provide to those of us who live in rural and regional areas? Unfortunately, we do not know, because this legislation is being forced through in such haste. The compulsory takeover of Telstra by the government has tried to hide the reality of what they are doing by claiming that Telstra has a choice in this structural separation. We are in a totally open-ended position where neither we, nor Telstra nor the government have any real idea where we are heading: what kinds of services will be offered, particularly to my constituency, and in fact what kind of liability the taxpayer will be faced with in the longer term. Yet the government demands we make a decision on the forced break-up of a public company in the next few weeks—I would suggest even perhaps this afternoon in this place. (Time expired)