House debates

Thursday, 13 February 2020


Telecommunications Legislation Amendment (Competition and Consumer) Bill 2019, Telecommunications (Regional Broadband Scheme) Charge Bill 2019; Second Reading

11:43 am

Photo of Michelle RowlandMichelle Rowland (Greenway, Australian Labor Party, Shadow Minister for Communications) Share this | Hansard source

I rise to speak on the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2019 and the Telecommunications (Regional Broadband Scheme) Charge Bill 2019. I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) notes that:

(a) evidence provided to the Senate indicates that NBN Co reduced regional investment by $200 million between 2018 and 2022 relative to the 2019 Corporate Plan;

(b) this decrease in regional investment was concealed in the 2020 NBN Co Corporate Plan; and

(c) NBN Co has given three contradictory and unsatisfactory explanations as to why investment in regional networks was reduced;

(2) further notes significant concerns that the Government is introducing a broadband tax in the name of regional funding, while reducing regional investment in broadband networks in the NBN 2020 Corporate Plan; and

(3) calls on the Government to restore the funding allocation for investment in regional NBN networks".

Labor supports the establishment of a statutory infrastructure provider regime outlined in this bill. The proposed framework will provide additional certainty that, as we move beyond the initial rollout of the National Broadband Network, every Australian premise can continue to access a high-speed broadband connection. This is a natural extension of the arrangements Labor put in place nearly 10 years ago through a statement of expectations issued to the NBN board. The statement of expectations required NBN Co to make high-speed broadband available to all Australians regardless of where they live or work. This will continue to happen and this bill provides that certainty.

It is not lost on anybody that after more than a decade in power through the 1990s and 2000s the Liberal-National Party had left Australia in a broadband backwater. It was Labor who carved out the principle that all Australians should have access to modern communications infrastructure. It was Labor who stood up for the regions not with rhetoric but with a considered policy to deliver universal access to high-speed broadband, universal pricing and investment to make that a reality. The Liberals and Nationals tried to prevent it. They did nothing to promote competition. They did nothing to promote investment. They privatised Telstra as a vertically integrated monopoly. The only thing promoted by the Liberals over that sorry period was stagnation and higher prices in our regions. Labor, in government, put an end to that mediocrity.

One of the things that galls me is that the government is today seeking to progress a broadband tax—supposedly, in the name of regional funding. Yet we recently learned that in the 2020 corporate plan, regional investment in the NBN was actually reduced by $200 million. This is despite NBN Co incorporating revenues from this unlegislated levy into their corporate plan. It raises a legitimate question: why is this government progressing a broadband tax in the name of regional funding while cutting regional NBN investment at the same time? Why did the government try to conceal this funding reduction in the NBN corporate plan? The fact is that the information that would've revealed this funding reduction was left out, despite it being regularly published in the previous corporate plans. We only found out because the Senate sought access to the data, which clearly shows a $200 million reduction of capital expenditure in the fixed wireless network.

The legislation we in the House are considering today seeks to introduce a new broadband tax on the telecommunications sector. On 28 November 2019, the Senate referred the Telecommunications (Regional Broadband Scheme) Charge Bill to the Senate Environment and Communications Legislation Committee for inquiry. But before I go into the bill, it's important we cover some of the history.

Prior to the 2013 election, Malcolm Turnbull and others were encouraging private companies to compete directly with the government owned entity. They didn't do this out of principle; they did this because they wanted to wreck the NBN. They wanted it to fail because it was a Labor conception. Then, 10 days after the 2013 election, TPG announced it wanted to expand a fibre-to-the-basement network in inner city areas to up to half a million homes. As you would expect, this created alarm, both within NBN Co and subsequently within the government. They understood—as anyone with common sense understood—that if TPG began cherrypicking profitable parts of the fixed-line NBN footprint, then the economics of the project would come unstuck. This was not in the interests of taxpayers, and it was not in the public interest, given that the NBN ship had already sailed. The concept of what was to become the proposed broadband levy was given to the government initiated Vertigan review in 2014, which examined different options to offset NBN's losses in fixed-wireless and satellite networks.

The Minister for Communications, Cyber Safety and the Arts claimed that the government adopted this levy because it was a recommendation of the Vertigan review. He said:

The legislative package to be introduced shortly implements the recommendations of the Vertigan Review which reported in 2014.

That is not entirely accurate. Allow me to quote what the Vertigan review actually said:

By far the best option for funding any ongoing subsidy would be through consolidated revenue. Among other advantages, that would allow Parliament and the public to assess in an ongoing way the benefits of using taxpayer funds for this purpose rather than others. However, should that option not be adopted, the panel recommends that, if an ongoing subsidy is required and its minimum amount can be reliably determined, a single, annual, broad‐based industry levy, covering both voice and broadband services, be imposed to fund that subsidy. This would be similar to the current arrangements for the Universal Service Obligation (USO), which are outlined in Appendix 3.

So let's make two things clear. First, the Vertigan review did not recommend a levy on the industry and consumers as its first preference. Its preference was funding from consolidated revenue. Second, the levy recommended by the review was a broad based levy. The bill before us does not propose a broad based levy. What the government have done is design a levy with a narrow base in order to produce a high charge. They have done this for the purpose of preventing competition. Then the industry has had to put up with the unedifying spectacle of the minister writing an op-ed pretending that this bill is about being pro-competition. This brings me to an important point.

The coalition has built an inferior NBN for $51 billion. It has cost more to build than the original fibre network. It costs more to operate. It offers slower speeds. It's less reliable. It requires more funding to upgrade. It would not have been necessary under the original plan. It is more exposed to competition. As of a fortnight ago, Australia had fallen to 68th in the world for broadband speeds and fourth-last in the OECD, according to the Speedtest Global Index.

Even as recently as yesterday, the ACCC took what can only be described as a direct swing at the performance of fibre to the node, following its latest broadband speed monitoring report. I point out that fibre to the node is actually the most prevalent fixed-line technology in regional Australia. The ACCC stated—and it wasn't subtle; it was very direct:

… many high speed fibre to the node (FTTN) connections still don't come close to performing as promised. The results show that about a quarter of those consumers on FTTN connections, who are paying for high-speed 50 Mbps and 100 Mbps plans, still did not receive anywhere near their full plan speeds, at any time.

Mr Sims, the ACCC chairman, went on to say:

This Measuring Broadband Australia data clearly shows that too many consumers with FTTN connections are not receiving the speeds they are paying for.

So the very valid question that Australian consumers should be asking, including those in rural and regional Australia is: why has this government built a $51 billion network that is still not delivering the speeds that Australians are paying for?

I note that at a speech to CEDA last year the minister said:

We are going to need to rely on and boost competition to make sure that our fixed networks continue to upgrade and stay in tune with world developments.

Yet the legislation proposed by the minister directly contradicts that statement. It actually achieves the opposite. It's the sort of doublespeak that the industry is sick and tired of and that consumers are sick and tired of. The industry expects better than this.

The government is asking this sector to believe this legislative package, headlined by a new broadband tax, should be seen as a gift to improve competition. While it might be inconvenient to concede that the primary reason the government instigated the levy was to deter TPG from cherrypicking inner-city basements, given the negative impact this would have on the economics of the NBN, most of industry and Labor support that objective. I've always been upfront about that. I believe it's in the interests of taxpayers and in the long-term interests of the project. Yet, from the outset, the government have been too insecure to acknowledge this as an objective of their policy. Instead, to give the appearance of having a more neutral purpose, the levy was expanded into greenfields networks.

The greenfields networks don't cause revenue leakage to NBN Co. In fact, if it wasn't for operators like OptiComm, peak funding for the NBN build would be higher than it is today because the NBN would have had to fund construction in those areas by itself. How does this supposedly pro-market, pro-investment Liberal Party reward them? With a tax on their operations and on their customers. Furthermore, the levy was also extended to enterprise markets. Not only is there no revenue leakage for NBN Co but we have a situation where NBN Co often causes revenue leakage to the incumbent. This was captured well in a submission by Optus, which noted:

… the provision of services to enterprise and government customers over non-NBN networks does not displace any NBN Co revenue or preclude NBN Co from making sufficient revenue from its metro connections to internally cross-subsidy the fixed wireless and satellite networks.

Labor's focus was on introducing a legislative amendment to help grandfather existing greenfields networks built before 1 July 2019 until the policy could be revisited at a later time. We did not consider the retrospective application of the levy to be fair, as greenfields did not pass the test of causing revenue leakage to NBN Co.

So, as I recently noted, I was surprised to see the minister, in an opinion piece, characterise this exemption as a pro-competitive measure agreed between the government and Labor. It is almost as though the government, which has no credibility on this matter, is trying to cling to Labor and claim that we're on some sort of unity ticket when it comes to competition policy. The fact is this: the greenfield exemption was a Labor amendment that had the backing of crossbench senators. To imply that it was worked up and somehow agreed between the major parties is a disingenuous description of what occurred. The government chose to adopt this amendment because Labor had secured the votes to pass it. Further, if the government considers the ALP amendment to be pro-competitive then what does that say about the original bill?

On that note, I'll run through some of the comments made by the industry itself—firstly, from Vodafone:

Not only will the RBS perpetuate the trend of opaque and anticompetitive telecommunications policy, it will chill investment in both fixed and mobile telecommunications infrastructure …

Senator Urquhart, at the Senate committee's public inquiry on the bill, asked Opticom:

… Will the broadband levy increase or decrease the incentives that you have to invest?—


… It would decrease.

Again, Senator Urquhart, at the hearing, asked of Telstra:

… will the proposed levy increase or decrease the incentives that private sector carriers have to invest in their own fibre infrastructure?—


… I think logically it would decrease those incentives …

In its submission to the Senate inquiry, Vocus stated:

The likely effect of limiting the RBS charge base exclusively to fixed-line high-speed broadband services will be to further incentivise private-sector investment in mobile and fixed-wireless services (which will increasingly be capable of undercutting NBN prices, as they will not be subject to the RBS levy), and to further disincentivise investment in fixed-line services …

Internet Australia, in its submission, stated:

In many respects the new RBS is anti-competitive in structure and scope, and designed more to prop-up the NBN funding regime than to enable open and transparent infrastructure competition to improve and advance broadband service availability in regional and remote areas.

I now want to run through Labor's position on the bills.

For starters, Labor supports the Telecommunications Legislation Amendment (Competition and Consumer) Bill. By and large, it's sensible, and, for the reasons I outlined earlier, Labor will support it. The broadband levy that is being proposed by this government is highly regrettable. The criticisms levelled at the government's levy design by the ACCC, the Productivity Commission and industry are fair criticisms. It is distortionary. It is anti-competitive. It has been poorly designed. It does present legitimate implementation issues. It is all of those things. That is why Labor pursued an amendment—which has been incorporated into the bill—to reduce the impact of the levy on greenfield consumers. But I want to put on the record that we do have outstanding concerns about the levy, as do many others in the sector.

Our first concern is a lack of transparency in relation to the modelling upon which this levy is based. Explanations given by public officials about why the model has not been updated have been unsatisfactory. I genuinely do not understand why the government simply don't do this. There's broad agreement that the modelling on which the levy is based is out of date. They've had two solid years to update it, and at every opportunity that reasonable request has been ignored. The BCR issued its first consultation in May 2015, with the government responding in December 2016. As a result, the legislation we are now debating is based on work performed half a decade ago when NBN's fixed-wireless and satellite network rollouts were still in their infancy. Today, some five years later, the fixed-wireless and satellite networks are largely complete. The real-world costs are better understood, particularly in relation to fixed wireless, which has been more expensive than originally envisaged. The existing costings are out of date, and there is general agreement that they should be updated.

Taking all this into account, Labor will introduce an amendment in the Senate to require an updated RBS model to be produced. We will consider putting this exercise in the hands of the ACCC. The modelling should be independent, transparent and based on the best available data. Stakeholders have a right to expect the highest standard of transparency in relation to a taxation bill. There was broad support for this additional transparency during the public inquiry.

The second concern relates to the grant-making mechanism. Both NBN and non-NBN networks will be subject to a levy that is collected by the ACMA and then paid back to NBN Co through a departmental grant. In accounting terms, we are not talking a trivial amount of money. All up, the levy is $800 million per annum. The question is: what happens when that $800 million flows into NBN? What we do know is that NBN Co does not need $800 million a year to operate and upgrade the fixed-wireless and satellite network going forward. It does not even need close that to that amount. The question is: where does that access money go? The answer is that the surplus, in effect, goes wherever NBN Co wants it to go. The money comes in and likely will be washed through an account with an endless pool of historical non-commercial losses. An NBN accountant, presumably, then takes out a pen, signs a piece of paper and declares the excess revenue offset a historical loss that NBN Co probably never intended to recover anyway. Then the money goes straight back into the core business.

There is no requirement to spend the surplus tax revenue on regional networks, even though that is the impression this bill has created for some stakeholders. If NBN Co wants to direct it towards the HFC cost blowouts, then that's where it will go. If they want to spend it on IT systems, that's where it will go. In practice, this all appears to be permitted.

This is not a criticism of NBN Co itself. Rather, it is an observation that the bill before the House is not a regional funding mechanism. It is an administrative charade. It deters cherrypicking and raises a bit of new revenue. Yet look at how much legislative complexity and red tape has been created to give the illusion that it is a funding mechanism. How did the government manage to develop such a nonsense? This is the same directionless overreach that undid the spectrum review. It's the same mediocrity that plagued the USO review, whose only output was a new acronym. The sector deserves better than this. Consumers deserve better. Regional Australia deserves better.

The final concern I have is about who bears the burden of the enterprise levy. This government is imposing a wholesale tax on telecommunications providers supplying enterprise markets. Enterprises are arguably the only bunch getting a good deal out of the NBN under the multi-technology mix. Prices for enterprises are coming down because of NBN having entered an already crowded market of competitors, yet the best idea this government could come up with was a levy on the incumbent telcos. The competition in the enterprise market means that providers are strongly competing to win customers or to avoid losing them. This makes it difficult for the levy to be passed through to enterprises, which have more of a capacity to pay it. NBN Co stated before the public inquiry that they do not price the levy into their enterprise products because their pricing is dictated by the market. This suggests that the industry will likely bear the brunt of this levy. So we have a situation where consumers will pay higher prices as a result of the government's tax, whereas the telecommunications industry will likely take the brunt on behalf of large enterprises. That simply doesn't seem right. In my view the industry should not have to absorb the government's enterprise tax from their bottom line. We can't see an immediate or effective legislative solution to this, but it's an issue that the government is urged to give consideration to.

In conclusion, as I have noted, for Labor to oppose the levy outright would hurt the long-term economics of the NBN, which is not in the public interest, and this is consistent with our position in the previous term of the parliament. That is why Labor pursued an amendment to reduce the impact of the levy on greenfield consumers, which has been incorporated into the bill, and will continue to reserve the right to pursue other measures, as I've indicated, when this matter comes before the Senate.


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