Senate debates

Tuesday, 26 August 2014

Adjournment

Broadband

9:44 pm

Photo of Stephen ConroyStephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | | Hansard source

Another sitting of parliament and there are yet more politically motivated coalition reviews of the NBN that need to be repudiated. As the Senate is already aware, the coalition has, since the election, commissioned six different reviews into the NBN at an outrageous cost of more than $10 million to the taxpayer. That is $10 million being funnelled into the back pockets of Minister Turnbull's mates. That is right—those on the other side may well gasp—$10 million for no other purpose than to try and smear the Labor Party and the reputations of hardworking Australians who supported the National Broadband Network.

Tonight I want to focus on the two latest political witch-hunts, the Scales review, which looked at the NBN policy development process, and the Korda Mentha review, which looked at NBN Co's governance. Let me start with the Scales review. I have known Bill Scales for a long time. He has been a fine public servant. But I wrote to him when I heard he had accepted this job to express my disappointment that he would sully himself in such an overt political attack with such little merit. Unfortunately, that is what happened. The Scales review into the National Broadband Network was deeply flawed from the outset. It set out to denigrate the NBN and ignored considerable achievements, focusing simply on attacking the Labor government. Its findings were, quite simply, wrong.

Mr Scales chose to ignore that NBN Co built from scratch a company of close to 3,000 people, a company with all of the processes and systems needed to function as a wholesale telecommunications company. He chose to ignore that it had successfully launched an interim satellite service which was so popular that it effectively sold out faster than anyone could have anticipated. He chose to ignore that it had designed and constructed a long-term satellite solution that was on schedule and on budget for services beginning in mid-2015. Further, it designed and was deploying a 4G fixed wireless network. It designed and was deploying a transit network to support all of the access technologies in this massive project, this project worth billions of dollars—and that transit network was on budget and on schedule for completion by 2015. NBN Co developed a 27-year special access undertaking which was subsequently accepted by the ACCC. This was unprecedented. All of that was ignored and Mr Scales also ignored the fact that NBN Co preserved the integrity of its financial plan while overcoming difficulties in the brownfields fibre rollout.

To come to his conclusions, Mr Scales also had to disagree with all of the advice given to the Labor government by numerous independent government agencies and policy experts. Let me just list them for the Senate and those listening. Mr Scales disagrees with the Australian Competition and Consumer Commission. Mr Scales disagrees with the NBN Panel of Experts, which included Ms Patricia Scott, Secretary of the Department of Broadband, Communications and the Digital Economy; Dr Ken Henry, Secretary of the Treasury; Reg Coutts, Professor Emeritus of Communications at the University of Adelaide; John Wiley, CEO of Lazard Carnegie Wiley; Rod Tucker, Laureate Professor at the University of Melbourne and one of the world's foremost experts in fibre technology; Tony Mitchell, then chairman of Allphones; and Tony Shaw, a former chairman of the Australian Communications Authority.

But it does not stop there. Mr Scales absolutely rejects the advice of the Australian National Audit Office. This advice found that the advice provided by that panel of experts I have just listed was appropriate for the government to act upon. The ANAO's report said:

The conclusions and recommendations in the Panel's Evaluation Report are supported by appropriate evidence.

So on the one hand we have Mr Scales, a former executive of Telstra, whose paid job was to ensure that we could not get reform of the telecommunications sector in this country, who was hired by Mr Turnbull and who is a close friend of Ziggy Switkowski. On the other hand, we have the independent National Audit Office.

But he does not stop there. Mr Scales disagrees with technology experts such as CSIRO and National ICT Australia, who rated fibre to the home as the best broadband technology available to Australia. I could go on—Google and Cisco, for example. I could list endless support for fibre as 'the endgame', as Dr Hugh Bradlow, Telstra's chief technology officer, called it. But, no, Mr Bill Scales knows better than all of those people. According to Mr Scales, all of these Australian and some overseas institutions and experts are wrong and he is right. He very much reminds me of the minister who paid him to do this review. All the experts say fibre-to-the-home is the broadband endgame; but, oh no, Minister Malcolm Turnbull knows best—copper is the future for telecommunications in this country.

As Graeme Samuel has said, this review is nothing more than 'political payback'. As the former head of the ACCC, I am not surprised Mr Samuel feels this way. One of Mr Scales' key findings was that the ACCC gave advice to the expert panel that it was not qualified to give and the expert panel did not question. What was this advice? That the upgrade pathway from fibre to the node to fibre to the home was not cost effective. Mr Scales claims that the panel of experts did not properly test this advice from the ACCC and that the panel relied heavily on it in making recommendations to the government about the NBN. What is the truth?

The truth is simple. Mr Scales is completely wrong—and it is not just me standing here today who says this.

Professor Rod Tucker, a member of that expert panel, has made this clear in a recent article repudiating the findings of Mr Scales. Professor Tucker says:

… all of these assertions are incorrect, and this taints the credibility of the audit.

That is right—'taints the credibility of the audit'. He goes on to say:

In reality, the panel spent many hours discussing and analysing the technology options and the upgrade paths … The panel also independently evaluated other models for upgrades.

…   …   …

Simply put the panel did not rely heavily on the ACCC advice.

Professor Tucker's view has been backed up by another member of the expert panel. In a letter to the publication Communications Day, Professor Reg Coutts from the University of Adelaide, said:

I can only strongly echo Rod's comments that we thoroughly considered the options for the NBN particularly FTTN and the possible scenarios to transition to a FTTP solution which is accepted worldwide as the final solution … as Telstra chief scientist Dr Hugh Bradlow has said publicly several times.

Professor Coutts goes on to say—and these next quotes are the most damning indictment of Mr Bill Scales and his political witch-hunt:

Our conclusion … that FTTN could not be assumed as a transition to FTTP … was reached before the ‘unsolicited’ report by the ACCC was received literally at the 11th hour of the process and certainly did not influence our conclusion.

Professor Coutts finishes by making clear that Mr Scales knew this before he wrote his report. Professor Coutts said:

Rod, I and Tony Shaw each individually told Bill Scales that the ACCC ‘bombshell’ as it has been termed was NOT a major influence (let alone a ‘bombshell)’ on our conclusion re FTTN transition to FTTP.

So here we have two people with full knowledge of the process shooting down one of the key findings of the coalition commissioned report. Worse, Mr Scales knew this finding was false but he made it an important part of his audit's conclusions anyway. It tells you all you need to know about the credibility of this audit.

Professor Tucker's response also makes another very important point. He says:

A fundamental flaw with the audit process was that Scales, by his own admission, did not have access to key information, with limited access to documents associated with the panel of experts' activities.

In other words, he was not privy to what the panel of experts considered. Let's not let information and facts get in the way of Mr Bill Scales. So, with limited information, nothing like the full facts, the man paid for by Mr Turnbull comes up with the findings, surprisingly, of exactly what the minister asked him and what he wanted to hear. What a shock. What an indictment and a waste of taxpayers' money.

Mr Scales also ignores or dismisses further work that was undertaken to implement the government's NBN policy, following the government's decision. He just dismisses it. The development of the NBN business case, which shows that the NBN will generate a return for taxpayers, is something that even Malcolm Turnbull's own shonky strategic review does not refute. The implementation study conducted by McKinsey and Company and KPMG found that the $43 billion rollout estimate was conservative and that the government could expect a return on its equity investment sufficient to fully recover its funding; and steps taken to enact legislative changes to govern NBN Co and facilitate the NBN rollout.

I am immensely proud of everybody involved in getting NBN Co off the ground and ensuring that we stopped the likes of Mr Sol Trujillo at Telstra from bullying the government, from bullying the telecommunications sector and from running telecommunications policy in this country. Mr Scales, in a truly mind-blowing argument, suggests that after Telstra sabotaged the NBN mark I tender process, the government should then have gone back and sat down with Telstra to negotiate with them. That's right—reward Telstra for its disgraceful conduct when it was kicked out of the tender process.

If the government were to have followed Mr Bill Scales' advice, more than 240,000 Australians today would not have faster or cheaper broadband today. There are 240,000 Australians today using the National Broadband Network and getting faster and cheaper broadband than they did after 11 years of kowtowing to Telstra and letting Telstra run the sector and the policy in this country. I am proud to have been part of a government that oversaw the structural separation of Telstra and delivered fast and affordable broadband to hundreds of thousands of Australians.

Before I conclude my remarks I want to mention the KordaMentha governance review into NBN Co. That is right—another review. It does not take long to realise why the NBN rollout is stalling and crawling today. Since Mr Turnbull became the minister, all we have had is lots of politically motivated reviews—no action and $10 million of taxpayers' money funded to his mates like Henry Ergas. The KordaMentha Review is yet another vindictive attempt by Minister Turnbull to smear the reputations of highly respected executives that are leaders in their industries.

Mr Turnbull has form on this. Before the election he threatened the NBN Co board with a judicial inquiry. He also made a string of wild claims about the governance of NBN Co, including a lack of accountability as well as whether timely and accurate information was provided to the parliament at all times by NBN Co. All of these claims were false and they have not been supported by the KordaMentha review. When he was shadow minister, Mr Turnbull also questioned the capacity of the chair of NBN Co to do her job. He claimed management was 'tearing itself to pieces' and 'the board is opposed to the chief executive.' The governance review into NBN Co found this not to be the case.

The review, however, did make other findings critical of members of the NBN Co board. I think on this occasion it is better to outline how the directors themselves have responded. It is, after all, their reputations that the minister has smeared in this process. A total of nine directors, including one who is still serving on the board, wrote a response. It is that they disagreed with most of the findings and considered many of them to be 'unsupported by the facts'. They also made it clear that all key strategic risks were considered on a timely basis and that the board promptly disclosed information regarding NBN Co to shareholder ministers and their departments.

One director hit the nail on the head when they told the Australian Financial Review that the KordaMentha review was nothing more than a 'witch hunt'. In his response to the review, former NBN Co CEO Mike Quigley raised his frustration with the 'deliberate distortion of facts' when it came to NBN Co. I want to put on the record my thanks to Mr Quigley and the directors of NBN Co, all of whom I worked with during my time as communications minister. We may not have always agreed, but they always performed their duties with care and diligence. Their records and the board positions that they have held and continue to hold speak for themselves. I also want to say that it is profoundly troubling that we have a minister whose intent is always to smear those he disagrees with. It does not help recruit people to join government business enterprises when they know that a minister can behave so disgracefully.

But we have one more report being released this very night. I will speak on that—it will not come as a surprise—in the future. It is their cost-benefit analysis. I have made comments in the past about this review and I intend to make further ones.

If we look past these politically motivated reviews, we see the NBN rollout stalling and the prospect of the government buying the copper network back off Telstra. You can play the game and pretend that they have given it to you for free, providing you do the maintenance, and you can pretend that that means the capex maintenance cost is going to be hundreds of millions of dollars, if not a billion dollars, a year. That is a farce. But let me say this: Malcolm Turnbull recommending the buying of the copper from Telstra will have the same effect on NBN Co as his recommendation to Ray Williams at HIH to buy FAI had on the insurance industry and the company, HIH. It went bankrupt.