Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Hansard source

I rise to speak on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 in my capacity as the shadow handling the bill in the chamber and also as the former shadow minister for communications. The opposition will be opposing this bill. We do so for a whole range of reasons but principally it is because it is quite an extraordinary attack on a major publicly listed company by the Australian government. This is no ordinary company, as my colleague, Senator Back, said. This is a substantial Australian company, now publicly listed, with 1.4 million shareholders—I think the widest shareholding of any Australian company—30,000 employees and nine million customers.

This bill also has been quite obviously drafted in order to maximise the discretionary power of the minister. It hands largely unfettered discretionary powers to the ACCC to set upfront access terms and conditions as well as binding rules of conduct with absolutely no regard to procedural fairness or provision for merit review of decisions made.

Despite what the government has been saying, this bill, as it stands, has absolutely everything to do with the $43 billion NBN mark 2 proposal. This is a proposal recklessly committed to on the run without any business plan, as Senator Back has said, and absolutely no cost-benefit analysis whatsoever. The government’s first attempt at the NBN ended in complete humiliation for the government and the minister, and we then had the Auditor-General’s damning assessment of the RFP process. That was a process fatally flawed and doomed from the beginning. It wasted 18 months as well as $30 million of taxpayers’ and bidders’ money. What we have seen here is a slow-motion train wreck from Senator Conroy in his handling of this policy area. For more than two years the telco sector, consumers and taxpayers have had to endure this sorry saga of incompetence from this minister.

We have not had a single new broadband service delivered under the guise of an NBN since this minister came into office, now more than two years ago. We know the minister, apart from the bungling of this and the establishment of this extraordinary proposal for up to $43 billion of taxpayers’ money to be put at risk, is using it in a quite naked way to reward mates. The Mike Kaiser appointment, quite frankly, is a scandal. We have millions and millions of dollars of taxpayers’ money being spent on wages, consultants and the leasing of luxurious office space for a company set up by this government that has not earned any revenue at all and which has not delivered a single service to anyone. We await with great trepidation a future audit on the NBN mark 2 process. Despite Senator Conroy’s claims that the NBN can be built with or without Telstra, we all know that without Telstra, its customers and its network the NBN is dead in the water.

Part 1 of this extraordinary piece of legislation is nothing more than a mechanism to exert maximum pressure on Telstra to prop up the complete absence of any business case for NBN mark 2. It is nothing more than a legislative gun to the head of a major Australian company. Nobody is fooled that this bill is anything but directly and implicitly about the NBN. We have as evidence for that contention comments by David Forman of the Competitive Carriers’ Coalition. He told the Senate inquiry into this bill:

If you suggested to me that the NBN was likely to succeed in the absence of this legislation—

that is, the legislation before us—

then I would suggest that was a pretty big bet.

Stockbrokers Maple-Brown Abbott, described the bill as follows:

... a high risk strategy to deliver the NBN.

That is exactly what it is.

The Minister for Infrastructure, Transport, Regional Development and Local Government, Mr Albanese, in the House gave the game away when he introduced the bill last year and outlined one of the government’s dubious options for Telstra. He said:

Telstra progressively migrating its fixed-line traffic to the NBN over an agreed period and under set regulatory arrangements and for it to sell or cease to use its fixed-line assets

It is utterly naked in its intent.

While the minister is engaged in a charade claiming the bill is all about improving the lot of consumers, in truth, if passed in its current form, consumers could well be worse off. In the supposed interest of consumers, Senator Conroy told us last year that this bill had to be passed through the parliament by the end of 2009 even though these measures for consumers do not come into effect until July of this year. The urgency of the bill was such that the minister chose to go to Egypt for a week during a sitting week last November when we could have dealt with the bill. The government failed to bring this bill on in the final two sitting weeks of last year, having been preoccupied with their CPRS. So we are not going to take any lectures about the urgency of dealing with this bill for the sake of consumers because of the nonsense that has come from this government. Despite this reality, the minister has been going to great pains to claim that the opposition is responsible for this delay, which, of course, is also a nonsense.

The coalition has consistently said that the government should be engaged in proper commercial negotiations with Telstra, free from this sort of legislative gun to the head. But we have not seen the outcome of those negotiations. Telstra thinks that we still have potentially months to go. On 2 March, Telstra advised its shareholders and the ASX:

Telstra’s position on this Bill has not changed.

                        …                   …                   …

We have always said this legislation is likely to destroy shareholder value and makes an agreement with NBN Co and the government harder to achieve.

Why on earth is this government intent on proceeding with the legislation now? We do maintain that major structural change to the telecommunications sector, as contemplated in this bill, should not be considered until the government releases and formally responds to its taxpayer funded $25 million implementation study into the NBN. We are all expecting that this will answer a lot of the questions about the NBN. The minister has consistently referred to the NBN at every opportunity to dodge scrutiny about his proposal. He uses the implementation study to avoid questions on everything to do with the NBN. When I asked him last May a whole series of questions about the NBN, the minister said, ‘The implementation study is examining most of these issues’. We were told that we would get this NBN study in February. It is now the middle of March and we are yet to see it. But we should not be considering this legislation until we get that study and the government’s response.

We are not opposed to sensible reform. We have made that clear and we are happy to consider sensible proposals put before us. The government, if it was sincere, would have put forward the parts of this bill which relate to the existing telecoms’ access regime and consumer measures separately from the evil encased in part 1 of this bill.

The government’s inconsistency here is extraordinary. We have now had the government saying that the NBN Co., which we were told would only ever be a wholesale company, now may well consider offering retail services. That of course has alarmed the rest of the industry, which thought only Telstra would be the victims of this creation. If these provisions were used, as respected business commentator Stephen Bartholomeusz said:

NBN Co’s monopoly, once the network is built, would be even stronger than Telstra’s.

So we think that what is on hand here is the potential for the re-creation of a government monopoly business.

The bill before us inserts a new part 33 in the Telecommunications Act which provides for Telstra to structurally separate. But, if Telstra does not voluntarily submit to the ACCC an enforceable undertaking to structurally separate, the bill then requires the functional separation of the company. In an update to shareholders on 2 March, Telstra maintained:

• functional separation could cost Telstra $1 billion—

that is $1 billion that shareholders would have to pay—

and take five years to implement, damaging customer service and providing no real benefits to consumers.

The bill allows the minister to prevent Telstra from acquiring specific bands of spectrum for advanced wireless broadband service unless it structurally separates and divests itself of its hybrid fibre coaxial cable network and its interests in Foxtel. The bill contains amendments to increase the powers of the ACCC and to make changes to the USO, customer service guarantee and priority assistance arrangements. To sell the government’s case for breaking up Telstra, the government is relying largely on the lobbying efforts of Telstra’s competitors, who of course have a vested interest in breaking up a major competitor. But it is nakedly the government relying on their service in this matter.

But there is a fiction here. The fact is that the telecommunications market, which the coalition opened up to competition, is now much more competitive. The Labor Party are living in the past when they talk about the current state of the market. This is what the ACCC said about the state of competition in this sector, as recently as November 2007, when the Rudd government first came to office:

Since the introduction of the telecommunications-specific provisions in 1997 the industry has developed substantially. Consumers have benefited through improvements in service quality, the introduction of new services, an expansion in service coverage, and the reduction of prices. ACIL Tasman recently estimated that the Australian economy was around $15.2 billion larger than it would have been had the 1997 reforms—

brought in by the Howard government—

and other subsequent developments not occurred. A key reason for this has been the 31 per cent reduction in the price of telecommunications services since 1997-98.

Recent developments demonstrate that competition policy is continuing to produce significant consumer benefits.

That was the ACCC’s description of the telecommunications market in 2007, when we left office. A more recent review of the telecommunications landscape suggests there continues to be strong competition within the sector. The ACMA telecoms report most recently shows we have 175 licensed carriers, 391 fixed voice service providers, 638 ISPs, six mobile networks and four HFC cable networks. There are an extraordinary range of services available to consumers now.

While this debate focuses on the supposed continued market dominance by Telstra, revenue growth trends show Telstra now being outstripped by its major competitors. Last year Telstra lost 30,000 broadband customers in that reporting period, fixed line revenues are down seven per cent and revenue is down 2½ per cent. This extraordinary attack on Telstra by the government is such that the share price has been so depressed that yesterday the Financial Review revealed that Optus is now the biggest telecommunications company in Australia by market capitalisation. And this attack is led by a minister who had the audacity to say in 2006, in reference to our government:

… the childish and unedifying public warfare the government is pursuing against the Telstra board and management will serve only to undermine investor confidence in the company.

Well, here he is doing exactly what he falsely accused us of doing back in 2006.

I want to look at Labor’s apparent position, which is its ‘clear desire for Telstra to structurally separate’. This is a massive policy backflip on the part of the Labor Party. Their telecommunications policy platform of 2007 stated:

Labor supports fair, third-party access arrangements for communications infrastructure. Labor will ensure that Telstra’s wholesale and retail functions are clearly distinct within—

I repeat, ‘within’—

the company.

There is no suggestion at all of separation. As recently as last May, during Senate estimates, I asked Senator Conroy directly about his position on structural separation, and he said in reply:

I am not advocating it. I have never advocated it.

Minister Tanner said in a 2002 paper, when he was the shadow minister, I think:

Any sensible discussion of Testra’s future must consider the possibility of full structural separation, although this idea may not be viable as its time may have passed.

So, even eight years ago, Minister Tanner was honest enough to admit this was something that might no longer be worthy of consideration. In 2005, he said:

Certainly, we are strong believers in a genuine internal separation of Telstra between wholesale and retail, so we can have fair-dinkum, level-playing-field …

This is a policy for which the government has no mandate whatsoever. In fact, it said to Telstra shareholders at the 2007 election that it would not be seeking the formal structural separation of the company.

This really goes to a major issue, the future of privatisations in this country. Who is going to buy shares in a government privatisation—and the government says it is going to privatise NBN Co.—if Mr Rudd and his minister use this sort of legislation to break up Telstra and destroy shareholder value in the way contemplated here? Those who did buy Telstra shares in good faith, in T1, T2 and T3, have every right to feel utterly betrayed by this government, which did not say before the last election that it would seek to break up their company. The message is: buy shares in government privatisations under the Labor Party at your peril. The government’s attack on Telstra also puts at risk years and years of hard work by previous governments to convince the international investment community that Australia is a safe, secure and reliable place to invest. In its submission to the Senate committee inquiry, the Australian Shareholders Association said:

International investors in particular will consider Australia to have a much higher level of sovereign risk if this Bill is passed and the Government allowed to impose its will on a private company.

Australia’s largest listed investment company, AFIC, said:

If the Parliament passes this legislation we think Australia’s investment standing could be significantly diminished. Investors, particularly international investors, will perceive substantially heightened sovereign risk if the Australian Government can act arbitrarily in this way.

Our government sensibly got out of the telecommunications business, allowing competition to drive the sort of investment and innovation that government owned utilities simply do not. Telstra’s scale and capacity as a national, vertically integrated incumbent enables it to make the margins necessary to support the provision of services in the many uneconomic areas of rural and regional Australia which would not receive the services otherwise. It is a reality conveniently ignored by the government, which is making sweeping and unsubstantiated claims that structurally separating Telstra will somehow result in a new wave of investment in rural and regional Australia.

Frankly, you only have to look at the low level of investment by Telstra’s competitors in fixed line services in rural, regional and remote areas to see the nonsense of the government’s claims. As of March last year just 537 of Telstra’s 5,300 telephone exchanges across Australia contained broadband equipment owned by Telstra’s competitors. These 537 exchanges cover some 13.2 million people, or 67 per cent of the population. The rest, while the exchanges are all open to the competitors, do not have any competitors’ equipment in them. The ones that do are located in the major cities and towns because that is where the access seekers can generate a commercial return on the investment. In the other 4,700 exchanges, while Telstra does not deny access to its competitors and there is no technical barrier to the investment, none of its competitors have installed equipment there. So there is no evidence whatsoever that the structural, or indeed the functional, separation of Telstra or any of the other provisions in this bill will result in a sudden surge of new infrastructure investment and affordable service provision—no evidence whatsoever.

In relation to functional separation, the government holds up British Telecom as a successful model. But that process, which commenced nearly five years ago and is yet to be fully finalised, resulted in significant consumer disruption and has produced no significant enhancement in service provision in rural areas. In fact the UK government is said to be considering the introduction of a broadband levy to fund the enhancements in rural and other underserved parts of Britain as a result of what they have done. So structural or even functional separation of Telstra would take years to fully implement and would be very disruptive to the Australian telecommunications market and all the customers that Telstra has.

The government has produced this legislation clearly and obviously as a mechanism for forcing Telstra to the table. The government knows that this extraordinary proposition to spend up to $43 billion of taxpayers’ money to cover the disaster of the failed implementation of its first NBN policy can only succeed if the government effectively gets a hold of Telstra’s customer base, its access network, to make the NBN viable. This is an outrageous attack on a major Australian company. It is not owned by the government anymore, but by 1.4 million Australian shareholders. They are disgusted by the actions of this government, which is behaving almost like some Third World government that comes in and expropriates property of the shareholders of a company with no mandate whatsoever. I accept that it would be different if the government had gone to the last election and said, ‘Our policy will be to force the break-up of Telstra into two separate companies, wholesale and retail.’ At no stage was there any such warning to the Australian people or the shareholders of this great company. The government’s actions are a disgrace. The Senate should reject this bill completely.