Tuesday, 1 March 2011
Telecommunications Legislation Amendment (National Broadband Network Measures — Access Arrangements) Bill 2010
Consideration in Detail
Bill—by leave—taken as a whole.
by leave—I move Australian Greens amendments (1) and (2):
(1) Clause 2, page 3 (at the end of the table), add:
5. Schedule 1, Part 4
The day after the end of the period of 60 days beginning on the day this Act receives the Royal Assent.
(2) Schedule 1, page 69 (after line 4), at the end of the Schedule, add:
Part 4—Amendments relating to freedom of information
115 Subsection 4(1)
116 Subsection 4(1) (at the end of paragraph (a) of the definition of prescribed authority)
117 Subsection 4(1) (after paragraph (a) of the definition of prescribed authority)
(aa) NBN Co; or
118 Subsection 4(1) (at the end of paragraph (b) of the definition of prescribed authority)
119 Subsection 4(1) (after paragraph (b) of the definition of responsible Minister)
(ba) in relation to the prescribed authority referred to in paragraph (aa) of that definition—the Minister administering the National Broadband Network Companies Act 2011; or
120 Subsection 7(3)
Before “means”, insert “(except when used in relation to NBN Co)”.
121 After subsection 7(3)
(3A) In Part II of Schedule 2, commercial activities, when used in relation to NBN Co, means:
(a) activities carried on by NBN Co on a commercial basis; or
(b) activities, carried on by NBN Co, that may reasonably be expected in the foreseeable future to be carried on by NBN Co on a commercial basis.
NBN Co, in relation to documents in respect of its commercial activities
The Greens have been big supporters of faster broadband and of the nation-building project that is the National Broadband Network. On current estimates the NBN will see one of the largest sums of public money invested in one of the largest infrastructure projects in our history. Accordingly, the Greens believe that the public does have a legitimate interest in how the project proceeds and should have access to all relevant information through the FOI regime as well as through parliamentary mechanisms such as Senate estimates, the committee process and questions to ministers.
The Greens are not prepared to see the continuation of a long-term trend of gradually corporatising government services and then claiming information is commercial-in-confidence. That trend has to be rolled back and NBN Co. is the place to start. We also believe that maximum transparency is in fact the best way to build public confidence in the NBN. Senator Ludlam announced in mid-January our intention to take action to make NBN Co. subject to the Freedom of Information Act, and it is that announcement that these amendments implement today. The amendments provide that the NBN Co. is subject to the freedom of information regime under the Freedom of Information Act. The amendments seek to have the NBN Co.—and this is an important point, because it has been raised in the debate so far—subject to the same level of transparency as Medibank or Australia Post, while affording NBN Co. a level of protection for material that is genuinely commercially sensitive.
I have listened to the contribution from the member for Wentworth, who has suggested that this is somehow a deviation from our original intention. The point that we made at the start was very, very clear—that is, we always wanted the FOI regime to apply but not in such a way that it would put NBN Co. at a commercial disadvantage. I understand from what the member for Wentworth has said that he does accept that it is appropriate for trade secrets and other commercially valuable information to be outside the reach of FOI as it applies to the NBN Co. However, the approach that has been taken by the opposition is that, rather than treating the NBN Co. similar to other government business enterprises such as Australia Post, they would rather apply FOI to the NBN Co. in the same way that it applies to departments of state or public sector agencies. That would force NBN Co. to defend trade secrets and other commercially sensitive information on a case-by-case basis as each request is received, which in turn would lead to a significant risk that NBN Co.’s competitors would gain access to its trade secrets and would also significantly divert its resources.
There has been a lot of talk about ‘pups’ and suggestions that the Greens have been sold one. The member for Wentworth seems keenly able to identify a pup when he sees one. I would ask him or his colleagues, if he believes that is the case, to raise these matters when the amendment to the bill comes before the Senate inquiry, because it is something that we will consider in good faith. Our intention behind these amendments is to have a narrow definition of commercial activity that essentially puts the NBN Co. on the same footing as Australia Post or a similar government business enterprise. Information is central to knowing how our elected representatives are exercising their power and to holding our representatives to account. Transparency and accountability is particularly pertinent in the expenditure of taxpayers’ money. The Greens believe that open and transparent government is a prerequisite to an effective democracy.
I was touched to hear the member for Melbourne say that the Greens were committed to open and transparent government! I was interested to hear the member for Melbourne say that this amendment would ensure that the NBN was subject to the Freedom of Information Act but was able to keep protected only those documents that were really commercially sensitive. This is where the member for Melbourne does his party, this House and this country a great disservice moving this amendment, because it is, as I said, a con.
I will take the member for Melbourne through this. His amendment will include the NBN in division 1 of part II of the Freedom of Information Act—this is on page 173 of the Freedom of Information Act. His amendment will say that its documents are exempt if they are in relation to its commercial activities. His amendment also adds an additional subsection to section 7—that is at page 17 of the Freedom of Information Act. I am sure that the member has got that at his fingertips! That new section 3A defines commercial activities in respect of the NBN as being activities that are carried out ‘on a commercial basis’.
I ask the member for Melbourne—and he has the opportunity to speak as often as he likes in these debates—to give the House one example, just one, of a document or a class of document that would not be exempt under the amendments he has moved. The NBN is a commercial enterprise. It is a business—not a particularly well-constituted business and it is not, certainly, going to be a profitable one, but it is a business—so all of its activities are conducted on a commercial basis.
He said that this would be similar to Australia Post, but it won’t, because the definition of commercial activities that applies to it are activities which are carried on in competition with persons other than governments or authorities of governments. So the NBN, which will be a monopoly on a fixed-line basis but will nonetheless be in competition in some parts of its business and not in competition in others, will nonetheless be exempt in respect of documents right across its entire business. I would invite the member for Melbourne to give us an example of a document or a class of document which his amendment will enable to be produced under the Freedom of Information Act and will not be exempt under his amendments.
The government supports the amendments moved by the member for Melbourne. They get the balance right between transparency and accountability whilst also making sure that we provide appropriate protection for the confidentiality of NBN Co.’s commercial activities. The member for Wentworth, of course, always thinks he knows better, which is maybe why he is the member for Wentworth and not the Leader of the Opposition. The fact is that we have received advice from the appropriate departments, including the Department of the Prime Minister and Cabinet, that the amendments do indeed create the effect that is intended by the member for Melbourne. They are therefore supportable because they do get that balance right and do not undermine the effectiveness of the National Broadband Network. I commend the amendments to the House.
Thank you, Madam Deputy Speaker. I respond to the minister by noting that neither he nor the member for Melbourne, despite my invitation, has been able to nominate one document or one class of documents that would be disclosable or discoverable under the Freedom of Information Act by the NBN after these amendments are enacted. They have not been able to do that, because there are not any. Every document of the NBN is in relation to ‘commercial activities’, which is defined to mean activities carried out on a commercial basis. It does not carry on activities, one hopes, other than on a commercial basis. So this amendment is a solemn farce. The minister says that the member for Wentworth thinks he knows best. I am inviting him and the member for Melbourne, whose amendment it is, to correct me and to demonstrate the types of documents that will be disclosable under the Freedom of Information Act following the passage of this bill as amended in these amendments.
I hesitate to rise to the bait, but I have two points. The same classes of documents that can be FOIed from Australia Post, Medibank Private or similar government business enterprises will still be able to be FOIed under this amendment. It puts them on an equal footing, and that is a very square and clear answer to the member for Wentworth. Secondly, the member for Wentworth seems far better able to identify a pup than anyone else, and I invite him or his colleagues to bring their dog identification skills to the Senate committee that is looking at this, because, if he is able to give more persuasive advice than we have received or than has come from the Department of the Prime Minister and Cabinet, we will look at it. But so far we are convinced that this amendment gets the balance right: it makes sure that the NBN Co. is not subject to an unfair situation which would put it at a commercial disadvantage, but still ensures that it is subject to the FOI regime.
Question agreed to.
by leave—I move amendments (1) and (2) circulated in my name together:
(1) Schedule 1, item 50, page 21 (lines 20 to 32), omit subsection 152AXC (4), substitute:
(4) NBN must not discriminate between access seekers on the basis of the volume, number, quantity or amount of goods, services or other things that access seekers acquire or agree to acquire.
(2) Schedule 1, Part 3, page 47 (line 1) to page 69 (line 4), omit the Part.
Amendment (1) is a very important amendment. It really deals with a critical issue of fairness. Members in this House have complained often and loudly about the dominance of Telstra—or, indeed, other big telcos, such as Optus. What we are seeking to do here is to ensure that the NBN cannot discriminate between access seekers—retail service providers, whether big, small or medium-sized—on the basis of volume, number, quantity or amount of goods, services or other things that access seekers acquire or agree to acquire. It will come as no surprise to the House that Telstra do not support this amendment, because naturally, as they will be the biggest foundation customer of the NBN, they no doubt look forward to discounts based on volume or other services that are being exchanged or transacted between the NBN and themselves. So this is the first amendment. I ask the government: are they serious about a level playing field? Do they seriously believe they are creating a level playing field in the NBN? If they do then we should delete proposed subsection (4) of proposed section 152AXC—which, of course, basically permits types of discrimination—and insert a new provision which provides that there cannot be any discrimination on the basis of volume.
The second amendment deals with what has been called ‘cherry picking’. This is a matter of white-hot concern to many players in the telecommunications sector, large and small. This amendment involves part 3, and we are proposing to delete all of it. What this is designed to do is to ensure that any other broadband service or facility comparable to the NBN that can provide fast broadband services must offer its services on exactly the same terms as the NBN. Let us make no mistake: this is an anti-cherry-picking device. What this is designed to do is to prevent other companies from having infrastructure in cities or more densely settled areas or for particular corporate customers and, if you like, cherry picking the better parts of the Australian fixed-line broadband business. The government justifies this extraordinary restriction on competition on the basis that it needs to protect the economics of the NBN. That has been made quite clear in the explanatory memorandum, in the McKinsey study and in the business case. So, having set up this massive, overcapitalised, government-owned monopoly—which it should not have set up in the first place—the government is now restricting competition from other telcos in order to preserve the economics of that body. It says, ‘If PIPE Networks, Internode or Optus competes and offers services in the cities, it will stream off some of the profitable areas and that will make it harder for us to provide services in the bush.’ We say that if broadband services are going to be provided in the bush—and they should be—and they cannot be provided on a commercial basis then the subsidy should be absolutely explicit, and it should come out of the budget. There is no reason to impose higher telecommunications charges on people in urban and metropolitan Australia to cross-subsidise the bush. (Time expired)
Defending the interests of his electorate against regional Australia is an interesting position for the member for Wentworth. One thing the National Broadband Network is aimed at is overcoming the tyranny of distance, by providing access to people in regional Australia, who have been denied access by the failure of the previous government.
The government does not support these amendments. With regard to volume discounts, the Telecommunications Legislation Amendment (National Broadband Network Measures—Access Arrangements) Bill 2010 as drafted provides the default position that NBN must not discriminate in the terms and conditions on which it provides access. In order to provide opportunities for innovation and differentiation by service providers, the bill allows for different treatment by NBN Co. but only where it aids efficiency.
The ability to discriminate to reflect demonstrable efficiencies is well accepted in economics. It is already provided for under part XIC of the Competition and Consumer Act 2010. While stakeholders have been generally supportive of the principle of this kind of discrimination, there have been some concerns about the possibility that it will favour Telstra in particular, which it is feared could benefit from volume discounts. The bill, therefore, includes appropriate safeguards.
Under the bill, volume discounts would also have to satisfy the efficiency test and, as an added safeguard, NBN Co. will not be able to offer a volume discount unless it is in accordance with an undertaking that has been approved by the ACCC. Any differentiated deals must be published, so there will be full transparency and the ACCC and access seekers can take action if they consider that the rules have been breached.
The government’s view is that the discrimination permitted by the bill is good policy and that there are strong protections against preferential treatment based on volume that does not aid efficiency. This amendment is unnecessary and, in fact, goes well beyond the stated intention of banning volume discounting. In fact, it prevents NBN Co. from offering any sort of differentiated terms to aid efficiency. Further, this amendment would reduce the opportunities for service differentiation and innovation that increases productivity and efficiency, which is why the government will not be supporting it.
I now address amendment (2) that has been moved by the member for Wentworth. The government also does not support this amendment. Under the proposed rules, new, upgraded or significantly extended fixed line access networks offering speeds in excess of 25 megabits per second and servicing residential and small business customers will need to offer a wholesale layer 2 service on an open access basis. The provisions do not prevent firms entering the market; they simply require them to comply with supply and access requirements comparable to those applying to NBN Co. when they do. The provisions do not require competitors to match NBN Co.’s actual terms and conditions; they simply subject them to comparable layer 2 open access requirements.
The object of these requirements is to ensure that end users have access to the same kinds of service outcomes available on the NBN regardless of the network provider. Moreover, the rules will mean NBN Co. is not hindered in delivering its objectives, particularly uniform national wholesale pricing, by strict regulatory requirements while competing against other less regulated providers of superfast broadband.
NBN Co. indicated in its corporate plan that it intends to implement the government’s uniform national wholesale pricing objective through subsidising high-cost, low-revenue regions with revenue raised from low-cost, high-revenue regions. It is not fair to simply allow competitors to opportunistically target lucrative markets while leaving the challenging high-cost, low-revenue ones to NBN Co. The requirement is forward looking and will have minimal impact on existing providers and their operations. Exemption and transitional mechanisms have also been included in the bill to provide sensible flexibility.
The opposition’s amendment has the potential to leave some communities’ service outcomes below those available on the NBN and to undermine the government’s policy that NBN Co. deliver uniform national wholesale prices. The government does not support this amendment and the government believes that this amendment is contrary to the objectives of the National Broadband Network and contrary to the government’s view that equitable delivery of NBN is vital for Australia and vital particularly for those who live in regional Australia. (Time expired)
I welcome this opportunity to speak on opposition amendments (1) and (2) to the Telecommunications Legislation Amendment (National Broadband Network Measures—Access Arrangements) Bill 2010. Certainly it is of concern that we are going to create potential discrimination between telcos when we are really keen to encourage as much competition in the market as possible. The offering of volume discounts, on whatever basis, does have the potential to create an advantage for the larger telecommunication companies over the smaller ones.
Cherry picking is an important concept. The Minister for Infrastructure and Transport referred to the fact that regional and rural Australia is of concern in this area. Where there is market failure that is where the government should be stepping in. That is the role for the government. What we do not want is government interfering where there is no market failure. These cherry-picking provisions have the potential to discourage innovation and new services. It is vital that the free market has the opportunity to compete right across the spectrum.
We see highlighted here the very concerns that the opposition has been putting forward about this bill and this project—that we are going to have a subsidy being provided to the NBN. We have a massive financial subsidy through massive investment of government funds that would not be available to other competitors in the market. On top of that we have a distortion of the market through anticompetitive legislation that prevents competition. What will that result in? It will result in consumers paying more. So Australian consumers will be paying an effective subsidy to prop up the NBN project, as well as paying the massive capital cost that they are actually incurring.
So, whilst we believe very much that there is a role for government in regional and rural areas to ensure that there is high-speed broadband, that role should not be achieved through artificially propping up the cost of broadband in metropolitan areas or on high-volume markets. It is a very important concept. If we are going to make Australia a 21st century superpower, we need highly efficient broadband services, and the way to do that is not to put restraint on competition and not to artificially stop innovation. We should be encouraging those things and we should be encouraging competition in every area of the market. In fact, the very cherry-picking provisions that you refer to as providing some form of subsidy for regional and rural areas, effectively at this point in time are retarding the rollout of fibre in a range of regional centres. People are concerned about the impact and suppliers are concerned about the impact of these very same cherry-picking provisions. So, contrary to what the minister has said in relation to the fact that this is somehow going to be the panacea to the problems of regional Australia, the reality is quite different. It is going to drive up the cost in metropolitan areas and, at the same time, it is retarding the rollout of fibre in some regional centres.
Our two leading telecommunications companies have made very good submissions to the Senate committee on this subject—PIPE Networks, which is a smaller company, and obviously Telstra itself. I want to refer the House to the submission of PIPE in particular. It states:
Cherry-picking … is simply put the practice of a competing network operator building its network in areas where it is profitable to do so, and not building its network in unprofitable areas. Notwithstanding the pejorative terms used to describe this behaviour, such as ‘opportunistic cherry-picking’, this behaviour in fact reflects the simple commercial reality that businesses—in telecommunications or in any other market—will only compete in a particular area if it is profitable to do so.
It goes on to say:
If building fixed-line networks in metropolitan areas but not regional areas constitutes cherry-picking, then PIPE and every other telecommunications carrier with infrastructure in the ground in Australia is guilty of cherry-picking.
As the PIPE Networks’ submission points out, what the government claims to be doing is creating a level playing field, but there is no level playing field. The NBN is a massively advantaged corporation. It has tens of billions of dollars of free capital provided by the taxpayer. Nobody else has got that. It has got an exclusive deal in respect of Telstra’s infrastructure. Their conclusion is—and this is PIPE’s submission, and indeed it is Telstra’s too, substantially:
… the proposed anti ‘cherry-picking’ regime will give NBN Co a de facto monopoly on future competition in fixed-line telecommunications networks in Australia.
The very purpose, they say, of the anti-cherry-picking regime is to deny network owners the benefits that flow from network ownership. It will require network owners to supply wholesale services to third parties on the same terms that they supply them to themselves and, in that way, disincentivise investment in competing fixed line telecommunications networks, leaving NBN with a de facto monopoly. That is exactly what the NBN implementation report says is the object of the policy.
The Telstra submission makes a very powerful point by saying that Telstra has a monopoly fixed line business because of its historic background. Telstra has had to put up with cherry picking in the past. As it says:
If by ‘cherry picking’ the Government means competitive entry in areas where this is efficient, then it is not clear why this should be discouraged. This type of so-called ‘cherry picking’ has been a feature of telecommunications markets in Australia and around the world for the past two decades. Telstra’s competitors have been able to enter in precisely this fashion, without access obligations being directly imposed by legislation.
In other words, Telstra has been able to cope with cherry picking but the NBN, with all of the billions of dollars of additional free capital behind it, will not be able to do so.
As far as regional and rural Australia are concerned—and the honourable minister talked about Marrickville in his electorate and Kempsey in my colleague’s electorate—the simple fact is this: the people of Marrickville should be able to get access to telecommunication services at the lowest cost the market will deliver and insofar as people in Kempsey or any other regional centre are not able to get comparable services because of distance then there should be a clear, transparent subsidy through a USO or some other provision that comes out of the budget. Cross-subsidising by preventing competition in the city is anathema to anybody who believes in markets, in economic efficiency and indeed in a competitive approach to telecommunications. This cherry-picking legislation is another example of how this NBN is designed to suppress and subvert competition and promote monopoly instead of fostering the competitive market we should all be supporting. (Time expired)
The issue of cherry picking is a very important one insofar as what it actually says about this project. The fact that we have these provisions at all should sound a warning bell to the taxpayers of Australia, a very loud warning bell, in fact, because we have a situation where we have a business plan, much of it kept secret, but in that business case that we have had published—the small section of the total document—we see an internal rate of return of only seven per cent, a very, very low rate of return indeed. It is not a rate of return which would encourage investment in a project of this magnitude, not a rate of return that would provide the required return on capital. It really is a financial disaster for the taxpayers of Australia.
But when we look at the issue of why we have these cherry-picking provisions, it is to prop up that very poor and feeble rate of return. When we start factoring in real, live competition—competition that the businesses of Australia have to meet every day—then the project goes from abysmal failure to something far worse than that. We get to a situation where, when we factor in competition at an arms length without the protection of cherry picking, the IRR falls to a point where you cannot even cover the cost of the interest on the project.
It should be of great concern to the taxpayers that this government is going to invest in a project that is only kept viable through anticompetitive legislation. I wonder what the response of the government would be if one of our major corporates came to them and said, ‘Business is a bit tough. We are not really achieving the return we want for our shareholders, so we want you to put in a bit of legislation that is going to hamstring our competition, to prevent the competition from competing on a level playing field.’
This is a very bad outcome for Australia. It is a bad outcome because Australian consumers are being denied the benefits of a fully competitive market. Australian consumers are being denied the benefits of a market that would be encouraging innovation. Instead, we have a situation where the government has, through legislation, created a massive monopoly, a big fat monopoly. Competitive pressures are the way that we provide a better outcome for consumers, not through creating a massive monopoly. We have a situation where the government is propping up this monopoly through anticompetitive legislation. This legislation is going to effectively drive up the cost to consumers, drive up the cost to business and eliminate innovation. That is a bad thing for this country.
If the government is keen to ensure that we have the very best technologies and communications available to the people of this country then it should be encouraging innovation and competition. It should not be deterring it. If the government was really serious about providing the maximum return on funds invested, it would not be investing in a project that was only viable by virtue of anticompetitive legislation. It is an absolute outrage that the government would be investing in a project that requires not only a massive investment of taxpayers’ funds but an incredible anticompetitive regime to keep it vaguely commercially viable.
An IRR of seven per cent is far from commercially viable. It is not the rate of return that would encourage commercial investors to invest in the project. You would have to look in amazement at anyone who would commit $50 billion to a project on this basis. But, then again, if you look at the money that was poured into pink batts and if you look at the money that was poured into the BER, I guess the same sorts of decision-making processes apply. If there is a good outcome that can be spun, it is worth the risk to the taxpayer.
Bill, as amended, agreed to.