Malcolm Turnbull (Wentworth, Liberal Party, Shadow Minister for Communications and Broadband) Share this | Hansard source

This is the second report on the progress of the National Broadband Network, and it is fair to say that it has not progressed very far. There are 4,000 active customers of the NBN, of which less than half are actually connected to the fibre network, which was, of course, the centrepiece of the whole project. We were advised by the company—and it is reported here in this report back in September—that as at 30 June, the NBN Co. had passed 18,000 premises with its fibre rollout. In January the company published a press release in which it said that as at December 30 it had passed 18,000 premises, which can only lead us to conclude that in the intervening six months between the end of June and the end of December it had passed no additional premises.

The progress seems very slow. That is being too kind—it seems to have been nonexistent. There is also a very unsatisfactory standard of reporting the progress from the company. It treats this committee as though it is an enemy. It treats the committee as though its objective is to avoid giving it any information. It is a matter of immense regret and disappointment to me that here we have a telecommunications company wholly owned by the Australian taxpayer and the largest infrastructure investment in Australia's history, and yet the level of its accountability to the public through the NBN committee in this parliament is much less than the level of accountability of a publicly listed company to its shareholders and, of course by that medium, to the whole of the world. It does seem ironic that the telco which the Commonwealth government no longer owns—Telstra—is more forthcoming, more transparent and more accountable than the telco which it owns 100 per cent and is pouring tens of billions of dollars into.

There are many examples of the unsatisfactory nature of the information that is being provided, and I will not delay the committee with every example, but take the area of greenfields. These are essentially areas of new housing developments as opposed to brownfields areas, which are already built up. On page 17 of this progress report there is a statement referenced from the NBN Co.'s chief executive, Michael Quigley, saying that the company has passed 65,000 lots. Five dot points further down the page there is a reference to the shareholder ministers saying that the NBN Co. has exceeded its expected target with 75,000 lots passed. You would think from those two numbers that the rollout in the greenfields area was going along very well.

However, the department has subsequently had to correct this and said that instead of passing 75,000 lots—and by 'passing', what we mean is that the cable has actually gone down the street and is passing, literally, the premises concerned and is available to be connected, so it is just a question of hooking it up—that these two figures are in fact wrong. They have written to the committee and said that instead of passing 75,000 lots, the real state of progress was that the NBN Co. has:

… received approximately 1700 applications from developers … with 1188 active applications covering—

not passing—

approximately 75 000 lots …

So that means that they have had 1,188 letters from developers saying, 'We'd really like you to come and roll out fibre in my brand new housing development,' and the sum total of all those letters is 75,000 lots. Those are two completely different things. We were given the impression they had actually rolled the fibre past 75,000 lots, but, no, all they have is letters from developers saying, 'Please come and roll fibre out at some point in the future.'

All of this raises more questions than answers. What is the difference between an application and an active application? When are contracts actually signed? How long are people having to wait between putting in an application and signing a contract? How long does it take for the contractors of the NBN to actually turn up to somebody's house to deploy the infrastructure? When you look at the spreadsheets of the forward schedule for the NBN rollout, published on its website, it is hard to know where all these premises are actually coming from. The spreadsheet for the greenfields rollout, under the heading 'expected date of ready for service', shows 2,000 premises for before June 2012—in other words, passing just over 330 premises a month. The idea that the NBN is rolling out to thousands of greenfields premises a week is clearly delusional.

When you speak to people living in greenfields estates, to developers or to the private sector greenfield broadband operators, such as OptiComm, Pivot and so forth, the story is very different. Rod Binedell, a developer in the town of Beveridge, north of Melbourne, recently told the Herald Sun that he could not afford to wait for the government to deliver fibre to the premises, so he hired an existing fibre company—OptiComm—to deliver it at his own expense. Phil Smith from OptiComm told that newspaper:

There is a lot of frustration out there about NBN's responsiveness and delivery to new estates.

I think my friend the member for Chifley has complained about this himself—it shows how unsatisfactory it is when the NBN is being complained about by Labor members.

We need to remember that NBN Co. had to pass off to Telstra all greenfields estates under 100 premises, which accounts for the majority of such estates. That was done solely because NBN Co. was chronically unable to meet orders in the greenfields market. Because of the anticompetitive nature of the NBN—its monopoly over fibre rollouts—Telstra is unable to deploy fibre, so in many such cases it is deploying copper networks. It is a very disappointing situation and, as I say, we have very inadequate levels of information. We moved some amendments—regrettably they were not acceptable to the Independents and the Labor Party—which would have made a big difference here. Our amendments would have ensured that the private sector broadband companies—OptiComm and others—would have stayed in business and that a developer would have been able, if he or she chose, to appoint a private sector company to do the rollout and then that company would have been remunerated by NBN Co. at an agreed tariff per household. The work could thus have been done at a time and in a manner convenient to the developer. These amendments were rejected.

NBN Co. is increasingly looking like a very big, nasty monopolist. You see this in their interaction with the ACCC. The SAU, which is the instrument which should govern the manner in which NBN Co. deals with its customers, has not yet been determined by the ACCC. NBN Co. decided that it was going to get its customers to sign up to wholesale broadband agreements one at a time—to pick them off one by one. It decided to do so because the wholesale broadband agreements trump any instruments approved by the ACCC and therefore would effectively put NBN Co.'s dealings with its customers outside the jurisdiction of the ACCC. To their great credit, the ACCC arced up about that and was able to put a lot of pressure on the NBN Co., supported by the industry and indeed by the coalition. As a consequence, the wholesale broadband agreements that the NBN Co. is getting signed have a life of only one year, which should give enough time for the structural access undertaking to be considered and approved by the ACCC. At every step this company is acting in a way that is monopolistic. It has the arrogance and the muscle of knowing that it has a government and for the time being a parliament that is prepared to give it the power and the means to exert its influence over the industry.

One of the issues that has been a matter of controversy in some sections is the question of whether the NBN Co. is going to make broadband prices cheaper or dearer. I have made the point that the NBN Co. inevitably will result in access prices being dearer than they otherwise would be and some people have criticised me for saying that. I just want to say to the House that we really do need to get real about this issue of the economics of the NBN. We are all in violent agreement about the need for all Australians to have access to very fast broadband on an affordable basis. We all agree about that. The debate about the NBN is not about the joys of broadband; the debate about the NBN is about whether the approach the government is taking is the most cost effective, the most timely and delivers the best value both to the taxpayer and the consumer. That is the sum total of the debate. Our objection is that because they did not do their homework and because they have not done the cost-benefit analysis, whether it is buying the satellites as announced today or the fibre-to-the-home rollout, they are not in a position to say this is the most cost effective way of delivering the outcome upon which we are all agreed.

In terms of cost to the consumer we really do need to get real. When you are committing tens of billions of dollars to replacing the entire existing infrastructure of a vital industry, you cannot be sentimental or self-deluding. There are no fairies at the bottom of the NBN garden that can suspend the laws of economics. By any measure, this is a massive investment. The government says the direct capital cost will be $37 billion and its peak funding will be $41 billion. Most industry experts expect the eventual cost to be significantly higher. Some estimates exceed $60 billion. Let's face it: what was the last big government infrastructure project finished on time and on budget? Telstra are rolling out a fibre-to-the-premises network in South Brisbane. They are actually doing it and their experience is that it is taking longer and costing more than they had anticipated. So there is every reason for this project to become even more expensive.

The simple fact of life is that if you overcapitalise your business in a competitive world—let's say it is a restaurant and you go mad and put in a really flash fit-out—you will not be able to charge prices for meals that you are selling to your customers sufficient to get you a return on that investment if your competition, being better managed, is charging less. You have to meet the market. You might just have to write down your investment. Your banker might have to do some of his dough. The shareholders might do their dough. If you are a monopoly you are not so constrained. The difficulty that we have got with the NBN is that we know it is massively overcapitalised. They say we are only going to seek to get a seven per cent return on the capital investment. But that is no comfort because if the capital investment is two, three or four times more than was needed, that is still going to be an enormously high price. We must not forget—and Rod Sims has made this point many times, as have others—that one of the reasons why we have seen this massive increase in electricity prices, particularly in my state of New South Wales, is what has arguably been an overinvestment in infrastructure by the electricity companies, a gold plating partly driven by the companies and partly driven by regulation, upon which capital investment they are entitled to a regulated return. We cannot suspend the laws of economics. The NBN Co.—overcapitalised, monopolistic—is a bad deal for taxpayers and a very bad deal for consumers.

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