Telecommunications Legislation Amendment (Access Regime and NBN Companies) Bill 2015

I rise to speak on the Telecommunications Legislation Amendment (Access Regime and NBN Companies) Bill 2015. This bill’s moniker or informal title is ‘Vertigan One’. It is the first of two bills that we understand the Government will introduce to implement the recommendations of the Vertigan Panel, which conducted a series of reviews of the NBN in 2014.

Before I get into the detail of this bill, I will give bit of background on this Vertigan Panel.

Before the last election Malcolm Turnbull, the now Prime Minister, made a lot of promises – and he has broken most of them.

He promised that he would build his second-rate NBN for $29.5 billion. We now know that it will cost almost double that, up to $56 billion. He also promised that Australians would get access to the NBN by 2016, that all Australians would get access to this second-rate NBN this year. That has blown out now to the end of this decade, more than double the original time frame.

He also promised that, if elected, he would get Infrastructure Australia to do a cost-benefit analysis of the NBN. In August 2013 Mr Turnbull said:

“We are going to do a rigorous analysis, we will get Infrastructure Australia to do an independent cost benefit analysis.”

He broke that promise as well.

Instead of getting Infrastructure Australia to conduct this cost-benefit analysis—an organisation that the Prime Minister only a few weeks ago described as ‘an independent statutory body with a board of recognised industry experts’—Malcolm Turnbull instead appointed some old mates, some former advisers and some of the biggest and most outspoken critics of the NBN.

It was not what he promised. It was not an independent review. It was a review by people who he knew have the same view about this project as him.

This legislation that we are now debating is based on their work, work that has since been found to be hopelessly wrong and has been largely discredited. The Competitive Carriers’ Coalition—that represents much of the telecommunications industry, including Macquarie Telecom, Nextgen and Vocus—said this when the Vertigan report was released, in a press release headed ‘Vertigan Recommendations should be Binned’: 

“After deliberating all year, the Vertigan panel has recommended that Australia look to emulate 1970s US telephone industry policy to promote investment in 21st century broadband networks… Most of the Vertigan recommendations represent nothing more than rehashed, discredited theoretical arguments promoted by opponents of regulatory reform and the NBN.

The inquiry has been an expensive distraction that has done little more than create uncertainty and disquiet across the industry during a crucial period of the transition to a new broadband network.”

The Senate Select Committee on the NBN subjected the Vertigan Panel’s ‘independent’ cost-benefit analysis to rigorous scrutiny in early 2015. They identified a number of fatal shortcomings in the cost-benefit analysis. One of the best was the absurdly pessimistic forecast that, by 2023, the median bandwidth required by Australian households would be 15 megabits per second. It was an absurd conclusion. According to NBN Co’s own results, their latest results, 67 per cent of homes connected to the NBN are already ordering higher speeds than that. This forecast was so absurd that even NBN Co Chief Executive Officer Bill Morrow criticised it when it came out.

The Senate Select Committee concluded:

“The Cost-Benefit Analysis is a deeply flawed and overtly political document. It is not credible and is not a reliable basis upon which to make decisions about the NBN.”

Since that report came out, in March last year, there has been even more evidence to prove that the Vertigan panel got it wrong.

The Vertigan Panel based its cost-benefit analysis on cost assumptions from another dodgy report written by the Prime Minister’s mates, the 2013 Strategic Review.

In August of last year the cost assumptions in the Strategic Review were also proven to be hopelessly wrong. That is when we found out that the cost of building this second-rate version of the NBN was not going to be $41 billion as assumed in the Strategic Review but had blown out to up to $56 billion. That is not the only cost assumption that the Strategic Review got wrong. Virtually all of its forecasts were wrong.

It forecast that fibre-to-the-node could be built for $600 a home. This cost has now nearly tripled, to $1,600 a home. It also forecast that it would cost $55 million to patch up Telstra’s old copper network to make the fibre-to-the-node network operate. That cost has blown out by more than 1,000 per cent. It also forecast that 2.61 million homes would be connected to the NBN via HFC, via pay TV cables, by December of this year. NBN Co now forecasts that only 10,000 homes will be connected by June of this year and only 875,000 homes by June of next year.

So we have got a bunch of different reports here, written by the Prime Minister’s mates and former advisers that are full of mistakes and wrong assumptions. And this bill that we are now debating implements their recommendations.

Many of those recommendations attempt to roll back the competition and consumer benefits delivered by the former Labor government in this sector. We do not support this, and nor does most of the telco industry.

Let’s start with part 3 of the Bill, which proposes to relax the non-discrimination obligations on NBN Co in relation to pilots or trials. The non-discrimination provisions prohibit NBN corporations from discriminating between access seekers in the supply of services. They are an important part of the level playing field introduced by Labor’s NBN reforms. And industry agrees.

Optus, calls the principle of non-discrimination ‘an important foundation principle’ in their submission to the Environment and Communications Legislation Committee that reviewed this bill.

Macquarie Telecom, in its submission, called these obligations ‘absolutely fundamental’ and ‘non-negotiable’.

The Competitive Carriers’ Coalition called them a ‘core element’ in restraining market power which ‘should not be changed’.

It is unclear why the government wants to relax these provisions. Worse, the risks posed by relaxing non-discrimination provisions far outweigh any imagined benefits. As the Competitive Carriers’ Coalition puts it in their submission:

“The proposal to dilute the non-discrimination requirements in order to allow NBN to do exclusive deals for “pilots and trials” is highly risky, unnecessary and supported by no persuasive evidence that there is a problem in existing rules.”

If you want to understand just how unfriendly the government’s proposed changes are to consumers, look no further than at the submission by ACCAN, which says that these proposed amendments ‘do not appear to add any benefit to consumers’ and ‘may result in anti-competitive behaviour in the industry’.

So this is a solution in search of a problem. The government has not done its homework here. They have not spoken to the telco industry—or, if they have, they have not listened to them. They have not spoken to ACCAN and consumer groups here—because it is obvious from the submissions that the Senate committee has received that there is enormous opposition to them. That is just one example in the bill—that is part 3.

Parts 4 and 5 of the bill add to the matters the ACCC is required to consider when making access determinations and restrict the ACCC’s decision-making powers in relation to special access undertakings. The effect of these measures will be to add complexity and delay to the ACCC’s decision-making processes, to the detriment of consumers. Once again, we are faced with proposed changes which are intended to roll back Labor’s consumer friendly reforms and replace them with unnecessary red tape that will benefit incumbents at the expense of competition.

Not surprisingly, a lot of telecommunications providers are also opposed to these provisions. Optus notes that in relation to the part 4 changes, ‘it is possible to envisage circumstances in which these provisions interfere with or constrain the decision making of the ACCC to the detriment of consumers’.

ACCAN is also concerned about this. In its submission it says that parts 4 and 5 ‘appear to restrict the ACCC’s ability to make markets work for consumers’. ACCAN also noted that it was:

“… not convinced that the problems triggering these proposed amendments currently, or will in the future, exist. The amendments are likely to add further complexity to the telecommunications regime and increase the amount of time it takes for the regulator to arrive at, and implement, decisions.”

Once again, this looks like a solution in search of a problem. Once again, the government has not done its homework and has not satisfactorily consulted with industry or consumer groups to address their concerns.

Part 7 of this bill is one of those rare creatures that is completely friendless. Everyone is opposed to this, and it is not difficult to see why. Telstra nailed the government’s motive for these provisions when it said in its submission:

“NBN Co’s latest corporate plan suggests that there will be a larger than anticipated funding gap between the build costs and the capped funding commitment by the Government.”

I could not agree more.

Remember, when Malcolm Turnbull, our Prime Minister, first announced his second rate NBN he said that it would cost $29.5 billion in required funding and it would be funded entirely out of public equity. In December 2013, when he revealed his first $11 billion blowout—from $29.5 billion to $41 billion—he said that that extra $11 billion would be funded out of private debt. In August of last year, when he admitted to the latest blowout—a $26.5 billion blowout—he said that that $26.5 billion would potentially be sourced from private debt markets. Telstra is right to point out this massive cost blowout and to be concerned about whether the government is trying to use this bill to stem this haemorrhaging by giving NBN Co the power to enter into other markets.

Part 7 of the bill proposes an open-ended power which allows the government to bypass the line of business restrictions set out in the NBN Companies Act. The opposition will not support this open-ended power.

The NBN is signature Labor policy that was designed to upgrade Australia’s communications network for the 21st century and fix decades of failure in the wholesale monopoly that is Australia’s fixed-line access network. The government has not made a case to extend NBN Co’s remit beyond the access network. It is unclear what the government is proposing to achieve with these proposed reforms. But one thing is clear: the entire telco industry does not support this, and neither do we.

Part 7 also attempts to reflect in legislation the government’s policy of axing universal national wholesale pricing and replacing it with wholesale price caps. Universal national wholesale pricing is a reform we introduced and that we are particularly proud of. It means that Australians living in regional and rural Australia pay the same wholesale price for equivalent services as people in our big cities.

The Vertigan panel recommended getting rid of universal national wholesale pricing, and it is now clear that the Liberal Party is moving to axe these important reforms. Once again, the perennially impotent National Party is doing nothing to stand up for Australians living in the bush. But Labor will not stand for it and we will not support those changes either.

All of what I have just said is set out in the Opposition’s dissenting report of the Senate Environment and Communications Legislation Committee’s investigation of this bill. We said in that report that we do not support Parts 3, 4, 5, 7 and 8 of this bill, because these measures are:

“…unnecessary, retrograde and/or add complexity to regulatory decision-making processes. Worse, many of the proposed measures compromise fundamental elements of the level playing field underpinning the NBN, and may have a detrimental impact on competition and consumer outcomes.”

We also said in that dissenting report that Parts 1, 2 and 6 of the bill are non-contentious and that the government has the option of splitting these measures out of this bill and introducing them separately, if it wants them passed.

Interestingly, at 5.30pm on Friday night, my office got an email from the Minister for Communications office advising that they had drafted a number of amendments to this bill and were removing Parts 3, 4, 5, 7 and 8.

What a humiliating back down. After two and a half years of report after report that cost millions and millions of dollars, the government is now saying they not going to go ahead with these recommendations.

What a mess, but at least they are doing this now: better late than never.

I look forward to the government moving these amendments in consideration in detail. I look forward to watching the government gut this bill like a fish when we get there. I also flag that we will move our own amendments to this bill in the Senate.

This project under Malcolm Turnbull’s watch has become an absolute mess.

The story in today’s Sydney Morning Herald is just the latest example of that. Today it has been revealed in leaked documents from NBN Co that Malcolm Turnbull’s second-rate copper NBN is hopelessly delayed and over budget.

These documents reveal that NBN Co has met less than a third of its internal rollout target for Malcolm Turnbull’s second-rate copper NBN. The delays are due mostly to problems with connecting mains power to the Prime Minister’s street-side copper cabinets, and these problems are all of this Prime Minister’s making. Fibre to the premises is a passive network that does not require mains power. These leaked documents also reveal that Malcolm Turnbull’s copper NBN is coming in over budget, despite NBN Co’s recent assurances that the cost was tracking as expected in NBN Co’s Corporate Plan 2015.

Malcolm Turnbull’s chickens are final coming home to roost. He promised in 2013 that his second-rate copper NBN would be rolling out ‘at scale’ by mid-2014, that fibre to the node would be rolling out at scale by the middle of 2014. It is now 2016, and it is still not being rolled out at scale. As these leaked documents today reveal, NBN Co has only completed 29,000 homes under its own steam—that is, 65,000 homes short of their internal target.

The cost of Malcolm Turnbull’s second-rate NBN has doubled. The time it is going to take to build this second-rate NBN has more than doubled. The cost of this second-rate fibre-to-the-node technology has tripled. The cost of fixing up Telstra’s old copper network to make this work has blown out by 1,000 per cent. In places across the country where they are switching it on, it is not working properly. Some people are getting slower speeds with the copper NBN than they were getting under ADSL and now this. What a mess. It is a complete failure. The front page of the Sydney Morning Herald could not have said it better: ‘Turnbull’s NBN plan in crisis.’