Viewed 778 times
Speech to the 2019 CommsDay Melbourne Congress
It is a pleasure to once again speak at this important CommsDay conference.
After four and half months as Minister for Communications, it is timely to take stock of the largest single project within the portfolio, the National Broadband Network.
I want to start with what has been achieved – comparing the broadband landscape today with 2010.
Next I will review how we got to this point – after our Liberal National Government inherited a colossal mess in 2013.
Thirdly, I will touch on some enduring problems — thanks to poor policy decisions we inherited from Labor.
Last, I want to sketch out the way forward on NBN. With the rollout due to complete next year, what happens next?
How the broadband landscape has improved since 2010
Let me start with where we are today: 10.2 million premises are able to connect to NBN and over 6 million are connected.
9.1 million premises can connect to the fixed line network – where 90 per cent of premises can receive at least 50 Mbps and all can receive 25 Mbps.
600,000 can connect to fixed wireless with peak speeds between 25 and 50 Mbps and 445,000 can be served by satellite with a minimum peak speed of 25 Mbps.
Ten years ago the picture was much more patchy. About a quarter of Australians were served by modern networks designed as broadband from the outset. The 2.6 million premises in our six biggest cities on the Telstra or Optus HFC networks could get download speeds of up to 30Mbps. Some other smaller networks such as TransACT in Canberra also offered higher speeds. 
But most Australians received their fixed-line broadband over ADSL. It worked well for some, but speeds were very patchy depending on how far you were from the exchange.
Quite a lot of homes could not get fixed-line broadband at all. In 2008, the ACCC estimated 11 per cent of homes had no access to ADSL broadband. They might have been too far from the exchange; or there were ‘broadband blockers’ in the network– such as pair gain systems, remote integrated multiplexers and sub exchanges.
In turn, many people got quite poor speeds. Of active Australian internet subscriptions in 2008, 77 per cent were likely to deliver 8 Mbps or lower download speeds; only 4 per cent of services were likely to exceed 24 Mbps download speeds.
Yet for these very patchy ADSL services, the typical price was $110 a month (in 2019 dollars) — including line rental, which was a compulsory payment if you wanted broadband.
And in a very big difference from today’s broadband plans, 10 years ago fixed-line broadband plans had download limits. A typical 2009 plan was capped at 45 gigabytes and if you went over this you paid extra.
Broadband costs significantly less today than in 2009 in real terms, with a typical 50 Mbps plan costing about $80 a month. And unlike the plans of ten years ago, plans today typically do not have download limits. As a result, people are using much more data.
In June 2019, the average NBN customer used 255 GB of data and purchased an unlimited plan. In December 2009 the typical downloaded allowance for a fixed-line plan was around 45 GB per month.
Quite simply, thanks to the NBN, fixed-line broadband services today cost significantly less — and deliver very substantially more — than 10 years ago. A big part of this has been changes to Telstra’s retail broadband pricing, as the ACCC noted in its Communications Market Report 2017-18:
Telstra’s fixed broadband retail plans are showing a marked increase in value over the past three years, as Telstra has transitioned its business to meet heightened competition.
How we delivered these improvements
Now if I were speaking to you in October 2013, shortly after our Liberal National Government was elected, the picture would have been very different. At that point, there was very little to show for the six and a half billion dollars Labor had already spent on the NBN.
Time after time Labor’s soaring rhetoric had been followed by dismal failure to perform.
In November 2007, Labor said the NBN would be rolled out to every Australian home and businesses within five years of the completion of a competitive assessment process – in other words, by around 2013. Eighteen months later, they had achieved nothing.
So in 2009, Labor dumped their first plan and announced a new plan – fibre to the premises. It was going to cost $43 billion – but there was going to be “significant private sector investment in this company”. Within a year, Labor had dumped this commitment too – after the Implementation Study done by McKinsey and KPMG revealed the reality that the private sector were not going to touch it.
NBN’s first Corporate Plan in 2010 said that by 2013 the fibre network would pass 1.27 million premises; what was actually achieved was 207,000 premises passed which was around sixteen per cent of that.
When we came to government, we set about methodically turning things around. Communications Minister Malcolm Turnbull and Finance Minister Mathias Cormann asked the new leadership of NBN Co to conduct a Strategic Review.
The Review's findings stand as an enduring testament to the managerial incompetence of the Rudd and Gillard Governments. It showed that three years into the rollout, it was already two years behind schedule. The network had reached less than three per cent of households and businesses, with barely 50,000 premises actually connected to the fixed line network.
When NBN released its Corporate Plan in 2014, it adopted the approach recommended by the Strategic Review: a multi-technology mix that would be delivered five years faster than the original plan and would save taxpayers $30 billion.
Then Shadow Minister for Communications Jason Clare derided the 3-year rollout plan, saying it was a ramp Evil Kneivel wouldn’t be able to jump.
In fact, NBN Co achieved and exceeded the promised numbers. In September 2018, NBN exceeded its target of 9.5 million with 10.2 million premises ready to connect, in build or connected.
NBN has also worked hard to improve the customer experience. I recognise that there is still more work to do – but the latest data show the company is meeting installation time frames 96 per cent of the time and fault repair time frames 92 per cent of the time.
Network congestion has dropped significantly, download performance continues to improve during the busy hours, and changes to wholesale pricing mean more Australian homes and businesses are taking up higher speed plans.
Some enduring problems
While we have been able to turn around a lot of the mess left by the previous Government, the sad fact is that some of Labor’s poor decisions have left an enduring legacy. Dealing with this legacy is going to be a policy challenge for Government for quite some time.
Scrapping of existing networks
The first problem was that Labor deliberately set out to scrap existing networks. Under Labor NBN Co signed agreements with Telstra and Optus for those companies to withdraw their HFC and other networks from service; and it set out on a path of overbuilding networks such as TransACT.
Labor’s plan to scrap the HFC networks and then to overbuild them with new fibre networks was extraordinarily wasteful. The HFC networks were only about fifteen years old at the time of this decision. They were capable of delivering 100 Mbps – and with fairly modest upgrades they can deliver speeds of up to one Gigabit per second.
Thankfully Malcolm Turnbull as Communications Minister was able to secure an amendment to the Definitive Agreements so that NBN was able to use the HFC networks. This was a critical change – allowing a quicker and more cost effective rollout.
Sharp reduction in infrastructure based competition
Quite apart from the sheer wastefulness of the way Labor dealt with these networks, it also meant a sharp reduction of infrastructure based competition in fixed line broadband services. The approach was to establish NBN Co as a near ubiquitous network. It crushed infrastructure-owning competitors by overbuilding networks, and made it near impossible for emerging infrastructure providers to compete.
As I said when I spoke about this issue at the CommsDay conference in 2014:
The focus of telecommunications policy for twenty years had been to stimulate the building of new networks to deliver increased competition – so called ‘facilities-based competition.’ The Rudd-Gillard-Rudd Government specifically reversed direction on this policy….
I know TPG and Telstra have retained some competing fixed line networks. I also take my hat off to companies like OptiComm, OPENetworks, Redtrain and LBN Co who are still out there vying for business and supplying non-NBN fibre.
But last year the ACCC confirmed what we knew to be true — NBN Co is by far the dominant player in the fixed line market.
Just to be abundantly clear, the Government has no plans to revisit the commercial agreements or migration arrangements in the fixed line footprint. That train has well and truly left the station.
But it is equally clear, the decisions originally made to support a monopoly broadband network have had significant consequences for market structure and competition.
Since the NBN was announced, investment in fixed-line last-mile infrastructure by the private sector has fallen sharply.
A Government owned start-up was a bad idea
The third big set of legacy problems we are left with flows from Labor’s decision to create a government-owned start-up company to build an infrastructure project of this scale.
If I can again quote from an earlier speech, Labor’s plan was:
…to build three brand new networks using brand new equipment and the very latest generation technology to pass almost fourteen million premises by 2025; to do so with a brand new company, established from scratch with no existing track record; to force some ten million households off their existing network onto the new network; and incidentally to underpin all of this with brand new billing systems, operational support systems, customer support systems and all of the other IT apparatus of a huge telecommunications enterprise.
This approach made the project vastly more expensive than it needed to be. Consider the substantial stream of payments NBN Co must make to Telstra and Optus, under the Definitive Agreements signed in 2011.
In nominal terms NBN Co’s Corporate Plans show around $10 billion in subscriber payments will be paid to Telstra and Optus by June 2022.
The nominal value of the annual lease payments reaches $1.1 billion in June 2022. These will continue for at least 35 years from commencement, and there are two ten year optional extensions.
Of course the actual number will depend on many variables such as NBN customer numbers – but by any measure Labor committed this taxpayer-owned entity to bearing very heavy and continuing costs.
These costs were locked in when we came to government in 2013 – as were a whole range of other contractual commitments made by NBN. These included a $1.1 billion contract with Ericsson for the fixed wireless network; a $200 million contract with Optus for managed satellite services for an initial five year period; a $100 million contract with IPStar for more satellite capacity;
a $620 million contract with Space Systems /Loral to build two satellites;
a $280 million contract for satellite ground equipment and services; and $300 million contract with Arianespace to launch the satellites.
Labor’s decision to use a Government owned start-up to build this network foisted the cost and risks involved in deploying the NBN on taxpayers, foregoing opportunities to secure private investment in parts of the network.
It created new barriers to alternative network operators. And, in so doing, it weakened private sector competition as a force driving innovation and efficiency across the industry.
The way forward on NBN
Let me now turn to the way forward on NBN and telecommunications policy. This necessarily includes building on what we have achieved; and continuing to tackle some of the enduring challenges of the model we inherited from Labor.
Complete the Rollout
Our first priority is to complete the rollout. Thanks to the focus of the NBN board and management, and my predecessor Ministers Malcolm Turnbull and Mitch Fifield, NBN Co is on track and on budget to complete the rollout next year within the peak funding of $51 billion and with an internal rate of return of 3.2 per cent.
By the time the rollout is completed we will have near ubiquitous availability in the fixed line footprint of 50 Mbps speeds, and all premises will have access to a minimum peak speed of 25 Mbps.
Completing the roll out is one thing; getting as many Australians as possible using the network, and using it more and more, is our next priority.
We want to maximise traffic over the NBN – and leverage this national asset to the economic and social benefit of our nation.
More than 40,000 premises are signing up for an NBN service every week and NBN Co forecasts take-up of 73-75 per cent in fixed-line areas by FY23.
Of course a key lever to influence take up and usage is pricing. That is why NBN Co has steadily evolved its approach to pricing. Just three weeks ago NBN issued a pricing consultation paper, proposing some changes it intends to make, after receiving feedback from retail service providers.
The paper proposes a 12/1 Mbps entry-level bundle that could retail at $60 a month with uncapped data inclusions. I hope this will make the NBN more accessible for half a million budget conscious households – who may otherwise be holding back on upgrading or connecting to the NBN.
NBN Co is also making higher speed tiers more affordable to suit growing data needs. And, in parallel, it plans to increase CVC across these speed tiers to further boost capacity in 2021.
NBN Co’s new higher speed products (100/20, 250/25 and 1000/50 Mbps) give retailers better opportunities to market these products and gain access to higher CVC inclusions.
Upgrade and extend the Network
Another priority is continuing to drive upgrades of the network. As the Corporate Plan shows, NBN plans to invest more than $4.5 billion over the next few years on continuing to improve the network.
Next year NBN will begin trials of the G.fast protocol – which holds real potential across the Fibre-to-the-Node (FTTN) and Fibre-to-the-Curb (FTTC) footprints. For short copper runs, G.fast is able to deliver speeds up to 1 Gbps and beyond.
NBN is also looking at HFC upgrades with DOCSIS 3.1 technology. Earlier this year, NBN held successful field trials which demonstrated Gigabit potential. This is important news for around 2.5 million homes and businesses on the NBN HFC network.
Another way we are extending the network is through NBN’s growing presence in the enterprise market – often linked to significant new fibre builds.
In March this year, Coles announced a multi-year partnership with Optus Business and NBN to connect fibre to over 2,400 sites.
The other big retailer, Woolworths, informed the market of a deal that will improve its connectivity by converting retail sites onto NBN fibre through its existing provider, Telstra.
Australia Post has partnered with the NBN and managed service provider Comscentre with a five-year contract to help the organisation upgrade its telecommunication network at over 4,000 sites.
Our next priority is to foster competition in broadband.
In the fixed line telecommunications sector we need to be serious about competition — not fear or resist it.
We only need to look to Australia’s world-leading mobile sector to see just how effective competitive forces have been.
The mobile operators – all privately owned – have successfully deployed four successive generations of mobile services and are well underway on delivering a fifth. Today mobile networks cover 99 per cent of the population.
I am often asked what 5G means for the NBN. The short answer is they are complementary technologies.
NBN can deliver huge volumes of data at low cost per gigabyte, while 5G will provide lower latency and more bandwidth when people are on the move.
Data from the ACCC shows 91 per cent of all data downloaded is on fixed line networks.Average mobile data consumption is just 10 gigabytes a month compared to 240 gigabytes of fixed line data consumption.
But I want to make it clear that the Government welcomes the fact that the mobile networks provide competition to the NBN. In New Zealand mobile operator Spark is using mobile data services to compete against fixed broadband services; we may see more of that in Australia over 4G or 5G networks.
I suspect if Labor were in Government they would be plotting ways to restrict the operations of 5G networks lest they pose a threat to the NBN. This Government sees things very differently. If 4G and 5G wireless networks compete with NBN Co, that competitive pressure will help NBN to get its products and pricing practices right.
In other areas too this Government believes competition is a positive force. Investment in competing fixed-line, particularly fibre, networks will be important in providing choice for end users, particularly in the business sector.
The market has already improved considerably since we implemented our Telecommunications in New Developments policy in March 2015. A number of alternative network providers are now competing with NBN Co to service new developments and competition from mobile and wireless is also providing discipline for carriers and other options for consumers.
We have more changes coming with the Telecommunications Reform Package, which I will re-introduce in the Parliament in coming months after it lapsed with the end of the last Parliament.
This will bring changes to the carrier separation rules, designed to promote competition and investment, and create more opportunities for new networks to service small business customers and potentially residential customers.
The Regional Broadband Scheme, which is part of the Telecommunications Reform Package, is designed to provide a clear and transparent framework for the funding of essential broadband services in regional and remote Australia. It imposes a levy on all metropolitan providers – to ensure that we have competitive neutrality.
Our Longer Term Regulatory Direction
The legislative package to be introduced shortly implements the recommendations of the Vertigan Review which reported in 2014. This is important work to repair some of the most immediate damage done by Labor to pro-competitive policy settings.
At the same time, we need to work on longer term priorities for our regulatory settings – particularly in considering the eventual privatisation of NBN.
I have been clear in my public comments since coming into this portfolio that it is far too premature to speak about the terms for that privatisation.
But what will be very important, as we work towards NBN privatisation at a future point, is that we have in place a regulatory framework which supports competition.
It will also be critical to establish appropriate arrangements for the provision of fixed and mobile voice and broadband services in regional and remote Australia.
Let me expand on this last point. I spoke earlier about the many legacy problems which Labor’s NBN has left. A whole class of those problems concerns regional and remote telecommunications, where I work with my friend and colleague, Minister for Regional Services Mark Coulton.
What do we do about the future of the Universal Service Obligation (USO), which today involves the subsidised provision of voice services over the Telstra network in regional and remote Australia?
How is this to be aligned with the provision of subsidised broadband services in regional and remote Australia, given that these are delivered by a different company using different networks?
Is there any scope to better co-ordinate policies for fixed line voice and broadband services with our Mobile Black Spots Program which is successfully stimulating the rollout of mobile coverage to the nearly seventy per cent of Australia’s land mass which does not presently have it?
At this early stage as Minister for Communications I am better equipped to ask these questions than to answer them. The Morrison Government has certainly not reached any decisions in these areas. But they are all areas that will need to be addressed in the lead up to any privatisation of NBN – in addition, of course, to the various steps laid out in the NBN legislation passed by the previous Government.
Let me conclude, then, where I started.
The rollout of the NBN has been a massive turnaround exercise – after we inherited a colossal mess.
We have made pretty good progress – but Labor’s poor policy design has left some significant legacy issues that will take considerable work to address.
We have a clear short and medium term agenda when it comes to the NBN – get more people using it; continue to upgrade it; and leverage it for economic and social advantage.
But we also have a broader policy agenda – which goes beyond what NBN Co does. That includes encouraging competition, including from 5G networks – and making progress on some complicated issues in regional and remote communications.
As ever in the communications sector – there is plenty to do!
 https://www.accc.gov.au/system/files/Optus%20HFC%20investment.PDF Advances were also being made at the time with DOCSIS standards to allow for higher speeds, this saw progressive upgrades being rolled out to Telstra’s HFC network to deliver 100Mbps services.
 ACCC and ACMA, Communications Infrastructure and Services Availability in Australia 2008, pp. 2-13.
 The ACCC’s estimate used a radial distance of 3.4km from the exchange. ADSL and in particular ADSL2+ speeds fall-off markedly as copper length increases. Copper lengths of 3.5km or more are likely to see maximum ADSL download speeds in the order of 2-6Mbps.
 As one example of the impact of this problem, in 2008 the South Australian Government called for private sector proposals to serve households in Adelaide which could not get a broadband service. The request for proposal documentation stated that 55,000 homes in Adelaide could not get DSL because of pair gain systems. P Fletcher, Wired Brown Land: Telstra’s Battle for Broadband, UNSW Press, 2009, p 163.
 ACCC and ACMA, Communications Infrastructure and Services Availability in Australia 2008, p. 16.
 Based on analysis of representative sample of 26 ADSL plans by major providers from between January 2009 and June 2010 sourced from internet archiving website Way Back Machine at https://archive.org/web/. The figure of 45GB was derived from calculating the median data offering.
 Joint Media Release, The Hon Malcolm Turnbull MP and Senator the Hon Mathias Cormann, 14 Dec 2014, https://www.financeminister.gov.au/media-release/2014/12/14/nbn-co-and-telstra-sign-revised-definitive-agreements
 Paul Fletcher, Kickstart Forum Keynote Address February 2012: "The right role for Government in ICT Policy"
 NBN Co media release 6 May 2011 –“Remote Australians the priority for new NBN Interim Satellite Service”