Lyn Allison (Victoria, Australian Democrats) Share this | Hansard source

It is not an overstatement to say that telecommunications is vital for the national security and economic and social development of Australia. Australians now rely on e-commerce, e-health, e-education and e-banking. E-communications now dominate the lives of people everywhere, particularly in this place. The way we communicate with one another and the outside world now compared to five years ago is dramatically different. For many businesses, especially small businesses, efficient and effective communication systems are absolutely critical. High-speed internet is a prerequisite for engagement with the modern economy and society. A cost-effective, reliable communications system is critical for Australians living in rural and regional areas and particularly in remote areas. In fact, their only chance of overcoming the tyranny of distance, of isolation and of lack of services, particularly transport, comes down to the internet. The Australian Industry Group told the 2004 Senate broadband inquiry:

Broadband technologies will be the roads and railways of the 21st century, generating the next wave of economic expansion. Just as transport opened up new economic horizons in the last century, advanced communication networks will pave the way for productivity gains across global economies …

The Institution of Engineers told the same committee:

Assuming that broadband is adopted as universally as the telephone over the next 25 years, it has been estimated that broadband technology could produce economic benefits of $12 billion per annum to Australia.

And yet Australia still lags behind the OECD average for broadband penetration. According to the 2005 OECD communications outlook, Australian broadband subscribers jumped 41 per cent, with an average of 10.9 broadband subscribers for every 100 people—up from 7.7 last December. However, that is still well below the OECD average of 11.8 subscribers per 100 people. The increase did lift Australia’s ranking for broadband penetration among 30 OECD countries by four slots, to 17th position. But topping the league table was Korea, with 25.5 subscribers per 100 people, followed by the Netherlands, with 22.5; Denmark, with 21.8; Iceland, with 21.7; and Switzerland, with 20.3. Some would argue that this is all because of our large land mass. However, when you look at countries like Canada and the United States, they are well above our level. International Telecommunications Union statistics from 1 January this year only rank the top 15, and Australia is not in there, so very little has changed in the year since the OECD report. The Senate committee tabled its report in August 2004. This report said:

… many parts of the country, particularly in rural and regional areas but also in some suburban areas on the fringes of the major urban centres, do not have access to broadband Internet services …

Little has changed since that time. While some metropolitan customers are accessing broadband speeds of 1.5 megabits per second, as provided by Telstra ADSL, to 24 megabits per second, as claimed by those offering ADSL2+, plenty living five or six kilometres beyond the exchange and in regional areas cannot access these speeds.

While competition has improved in the telecommunications markets over the years—particularly in mobile phones—Telstra, with its ownership of the copper network and the HFC cable, is still the dominant player in most other telecommunications markets. As a result of the ownership of both the copper wire and the HFC cable, plus the lack of competition and Telstra’s strategy to maximise shareholders’ value, there has been no incentive for Telstra to invest in its infrastructure, including in high-speed broadband. Evidence shows that since privatisation began there has been a steady decline in infrastructure spending as a percentage of Telstra’s sales revenue. As a result of the government’s obsession with privatising Telstra and hence the infrastructure, the government has been forced to spend billions of dollars on encouraging competitors to invest in broadband infrastructure. However, those initiatives, such as Networking the Nation, were considered by many to be very poorly targeted, poorly implemented and largely a waste of resources.

The Democrats believe the major problem, and the reason why Australia is so far behind on broadband uptake, is the government’s light touch regulation and its failure to control Telstra. This government failure has resulted in one of Australia’s largest companies continuously putting up barriers to competition and reducing its investment in infrastructure. So it is a very sad and pathetic story, I am afraid.

Telstra’s pulling out of negotiations on fibre to the node was disappointing but not critical. In fact, Telstra’s fibre-to-the-node proposal, as you would expect, lets them keep their monopoly on the unbundled local loop. But, in the context of a long line of failures, like dragging their feet on ADSL 2 access and installation, stalling ACCC negotiations on the unbundled local loop, putting up barriers to competitor access to that loop and undercutting retail broadband price, we have a problem—a very big problem—in this country. Self-operational separation and self-regulation have monumentally failed. The government has been too weak and too ideologically driven to intervene, despite being a major shareholder. Now it is going to have to take some action. The Democrats have argued for the last five years that, if the government was going to sell Telstra, at the very minimum Telstra should be required to divest its ownership of the HFC cable. This has to happen to open up more competition in the market. The ACCC argued that, in protecting the revenue of both the copper wire and the HFC networks, investment will not be made, or will be delayed, in services that would cannibalise the revenue of the other network.

As predicted, the operational separation of Telstra is not working and is unlikely to. There is support in the industry for the aims of operational separation—there is no doubt about that—but not for the wishy-washy model that the government insisted on last year. The ACCC complained; the industry said it would be useless and, indeed, it was. Then Telstra is allowed to develop the plan itself. The minister and not the ACCC will oversee the development and implementation of the plan; the operational separation plan is not a licence condition; enforcement of a breach of operational separation by the ACCC is not available until after a rectification plan has been developed; there is no requirement that the ACCC be involved in the development of the draft plan, nor that the minister take advice from the ACCC with respect to that plan; the legislation does not allow the minister to designate new services; and the absence of a formal advisory role for the ACCC in the internal wholesale pricing and pricing equivalence regime, and the possible length of time involved in setting prices—these are just some of the criticisms that were levelled at the government at the time. And they have turned out to be appropriate.

The Democrats moved a raft of amendments to address those concerns but they were, of course, not supported by this government. We say that, if we want fair and transparent competition in the Australian telecommunications system, the government has to move down the path of structural separation—that is, it must separate the wholesale from the retail. The government has continually argued that the cost of structural separation would outweigh the benefits, but there is no real evidence for that and the government has not investigated whether or not this is the case—or, if it has, it has not told us.

The OECD recommended that its members consider structural separation as a means of promoting competition in utilities as an alternative to regulation. This was also supported by the National Competition Council. The Democrats do not always agree with everything that those bodies say but, on this issue, they are right. Another important reason why the government should, at a minimum, own the infrastructure is to guarantee fair access and some sort of parity for regional users. It is time, we say, for the government to bite the bullet, to structurally separate Telstra, to keep the infrastructure in government hands, to divest the HFC cable and to use the funds to roll out fibre.