Senator the Hon Helen Coonan
Minister for Communications,
Information Technology
and the Arts
Deputy Leader of the Government
in the Senate
"Australia Connected"
Broadband for all Australians
Address to the National Press Club
Canberra
Wednesday 27 June 2007
Thank you.
It is a pleasure to be here addressing the National Press Club once again.
With the politics of broadband front of mind in my portfolio and the tenth anniversary of competition, it is an opportune time to take a look through the rear vision mirror at the momentous journey we have travelled to achieve the deregulation of Australia’s telecommunications sector.
From the closed shop arrangements of 1990, through to the vibrant, open and competitive framework we enjoy today, the earlier reforms of the Howard Government have laid the groundwork for last week’s landmark broadband announcement with the Prime Minister which will provide the biggest boost for competition since our nascent reforms of 1997.
But while we all know the adage, ‘a week is a long time in politics’, I have to say that a week is an even longer time in ‘broadband’!
A quick Google of the words, ‘broadband’ and ‘experts say’ brings forth a slew of responses well into the hundreds of thousands.
There is certainly no shortage of new and emerging broadband prophets out there and I am sure that this barrage of (and I will generous here) ‘expert advice’ has been a constant for Governments since 1990, when debates regarding the reform of the telecommunications sector first started in earnest.
In 1990, there were just three companies in Australia’s telecommunications marketplace – Telecom – the domestic carrier, the Overseas Telecommunications Commission, or OTC- the carrier for international calls, and Aussat – a small satellite entity.
And of course, there were heated debates around the Cabinet table as to what the appropriate market structure for telecommunications should be going forward.
On the score of heated debates regarding telecommunications around the Cabinet table, I am pleased to report that nothing much has changed but back to where I was…
Labor’s then Treasurer, Paul Keating, favoured a pro-competition arrangement that would have seen Telecom remain as our domestic carrier with OTC sold off to a new entrant.
Labor’s Communications Minister Kim Beazley however held out and eventually won the day with a market structure that rolled the domestic and international carriers into an all encompassing single entity, with the small satellite provider, Aussat, sold to Optus.
Even from this minimalist outline, you can see that Australia was set on a course in 1990 that from the outset, mitigated against a highly competitive market structure.
Indeed, when the Howard Government came to office in 1996, little had changed - with the unbalanced duopoly of Telstra and Optus still entrenched and the mobile phone network in disarray with agreements already underway for the analogue switch-off, and no replacement network in place.
Ten years of competition
So in 1997, this Government set about fundamentally redesigning the telecommunications policy landscape by focussing on competition, consumer protection and targeted investment in under-served areas.
Designing an appropriate regulatory regime is a keen balancing act and demands an understanding of market drivers.
As part of this process, the Government introduced telecommunications specific sections into the Trade Practices Act, thereby underpinning the introduction of the open access regime by opening up the exchanges and customer access network to full competition.
The open access regime introduced by this Government was premised on our fundamental belief that strong infrastructure and service-based competition produces real benefits including significant price reductions, service choice and flexibility, and greater levels of efficiency.
Since the advent of these landmark reforms in 1997, I am pleased to report that there are now over 167 licensed carriers and over 1000 service providers vigorously competing in Australia’s telecommunications marketplace.
Consumers have received the real benefits of competition through falling prices, with fixed line prices falling by almost 19 per cent (at 18.9 per cent) and mobile service prices having fallen by a whopping 36 per cent.
In fact, since 1997, the overall average price of telecommunications services has fallen by 26.2 per cent – that’s well over a quarter.
Since 1997, the telecommunications sector has also delivered $15.2 billion dollars of growth to Australia’s economy and there have been dramatic changes to the market structure, with fixed telephony now joined by new mobile, internet and broadband services.
But this is a market of continuous evolution, and services innovate at an exponential rate.
Voice over Internet Protocol—VoIP—services were not on any consumers radar in 1997.
Yet the number of VoIP providers has risen from around 25 in 2004-05 to over 240 providers at present with 750,000 services in operation.
Of course with technology evolving so quickly, there are always new challenges being faced by government – and as I have said before, communications policy is never a ‘set and forget’ exercise.
Enter broadband
We live in a nation challenged by an expansive geography, small population and widely varying terrain and climate.
The tyranny of distance, so much a part of Australia’s history, is one of the reasons we have always been a people of technology adoption and in many instances, technology adaptation.
Technology has a significant and profound influence on Australian society, underpinning Australia’s productivity gains and playing a pivotal role in growing our economic prosperity and social well being.
Technology’s contribution to Australia’s strong productivity growth accounted for some 40 to 70 per cent of total productivity growth in manufacturing and service industries between 1984-85 and 2001-02.
Broadband also supports Australia’s new workplace paradigm, as broadband allows organisations both small and large to adopt more flexible and productive ways of working.
It is not what broadband is but what broadband can do that makes it such a critical economic enabler across the board – from small business to the resource sector and from e-health to education.
As a result, the Australian Government has long recognised that broadband is a key element of our critical national infrastructure but our response has never been one dimensional or static.
Our objective has always been for affordable, always-on high speed broadband access for all Australians regardless of where they live.
But most importantly, Australia’s broadband network must be flexible, industry driven and scaleable to ensure that as technology evolves, we are not stuck with obsolete infrastructure and we can deliver the services and speeds demanded in the future.
The Broadband Revolution
In fact, the Howard Government was already out in front delivering targeted assistance to enable broadband access back when Labor was pushing for a mandated dial-up rollout, with speeds of 40 kilobits per second (over 100 times slower than the network speeds I announced with the Prime Minister last week).
And by any measure, our initiatives have vastly improved broadband access with well over 1.3 million households receiving equitable and affordable access to broadband services since 2004.
And we have not done this in a vacuum devoid of broader economic principles.
This Government understands how the market works and has carefully crafted policy settings to best use taxpayers’ funds to leverage contributions from the private sector.
For instance, in 2004, we instituted the $23.7 million Coordinated Communications Infrastructure Fund and more recently funding through the $113 million Clever Networks program.
Just weeks ago, I visited one facility in Port Macquarie where an Australian company is using Australian qualified radiologists based in Israel to support the North Coast Area Health Service by receiving patient scans overnight and providing expert diagnosis while Australia sleeps.
Whilst the 24 hour a day, seven day a week digital age makes examples like this commonplace, it was somewhat amusing to see a recent press release from Lindsay Tanner suggesting that ‘a night shift digital economy’ was a concept that he had just discovered – albeit about five years too late.
What these sorts of examples highlight is the increasingly global nature of Australia’s workplaces and indeed, our national economy.
And to this end, the innovative use of broadband is quite simply transforming the way we work, the way we interact, the way we are entertained and the way we learn.
But just as with the adoption of mobile phones by Australian consumers, our relationship with broadband has evolved from an access story to one of ever increasing bandwidth.
I recognised early on in this portfolio that whilst per customer subsidies had played a crucial role in broadband uptake in underserved communities, a new approach was needed to deliver high speed broadband to the widest population as possible.
Thus in September 2006, the decision was taken to embark upon a competitive grants process to deliver Australia a new, national, high speed and wholesale broadband network.
And last week’s Australia Connected announcement is the result - almost nine months assessment, technical deliberation, coverage mapping, costing and negotiation - to deliver a new high speed broadband network for Australia.
The Next Chapter - Australia Connected
Australia Connected is a far reaching package that provides what Australians will need for tomorrow, today.
Nowhere else in the world has a Government met the kind of challenges associated with having the sixth largest landmass and the third lowest population density whilst still being able to guarantee access to broadband for all consumers at metro comparable prices.
Australia Connected will be delivered by:
- a new commercial fast fibre network in all capital cities and major regional centres to be built by the private sector – for the benefit of some scribes and the Opposition I repeat, all capital cities and major regional centres;
- a new, competitive, open access, wholesale network in regional Australia to extend high speed broadband coverage to 99 per cent of the population;
- a safety net which ensures Australians living in the most remote or difficult to reach areas (the remaining 1 per cent) are entitled to a broadband subsidy of $2,750 per household under the Australian Broadband Guarantee.
- Legislation to protect the $2 billion capital in the Communications Fund thereby ensuring the funds are preserved in perpetuity for the future generations of regional and rural Australians and ensure the bush has an ongoing, targeted funding source for technological upgrades in the future; and finally,
- BroadbandNow - a new one-stop consumer help centre with a telephone hotline and web information to provide ready information about broadband services in their local area.
Competitive Bids Process
This package is entirely consistent with my fundamental approach that you simply cannot justify to the Australian taxpayer, the waste of $5 billion dollars of their money, to deliver a fast fibre network in areas where the commercial market will go.
Instead, the Government will facilitate commercial investment and undertake a competitive bids process, with purpose built legislation, to facilitate the rollout of a high speed fibre broadband network.
The competitive bids process will call for industry bids that detail price, and non-price terms and conditions, as well as identify the regulatory conditions that would accompany a commercial build.
Last week, the Government has also announced the establishment of an Expert Taskforce to provide advice on the framework for the competitive bids process and to undertake public consultation.
I am pleased to advise that the Expert Taskforce convened its first meeting in the same week it was formed and already work is well underway.
The debate regarding the conditions under which Australia’s new fibre network would be built has now matured, with two well developed commercial proposals on the table. There may well be more and I note that a similar process in Singapore saw 12 proposals brought forward for consideration.
And In terms of timing, I expect the Government will be publishing draft guidelines for this competitive bids process shortly.
Broadband Connect
And whilst the fibre process is now underway, the real centrepiece of Australia Connected is the new national wholesale network that will ensure that 99 per cent of the population will be able to enjoy the benefits of high speed broadband by mid 2009.
This is a world leading example of an innovative way to use Australian Government funding to support the provision of services in previously underserved areas, whilst leaving the risk and choice of most appropriate technologies to the market.
The Australian Government is providing $600 million of Broadband Connect funding, supplemented with an additional $358 million appropriation – to a total of $958 million - to enable the rollout of the new network.
This high speed broadband network is a mix of technologies including WiMAX, ADSL2+, fibre and satellite.
The WiMAX network will deliver broadband speeds of 12 mega bits per second, scaleable into the future, whilst ADSL2+ will provide speeds of up to 20 mega bits per second.
Additionally, the OPEL network comprises 15,000 kilometres of backhaul fibre optic cable, providing the broadband highways that link regional areas back to major cities.
Like the entire network, the backhaul will be open access, providing a boost to competitive broadband service providers in hundreds of regional towns, with a committed price reduction of at least 30 per cent on existing backhaul charges.
This new wholesale network will be a joint venture between Optus and Elders, to be known as OPEL, who between them are committing over $900 million of their own capital towards this rollout.
As OPEL is a structurally separated wholesale company, regional and rural Australia will benefit significantly for the first time from genuine infrastructure competition, as providers will access the network on equal terms.
The WiMAX component of the new network is purpose built to provide high speed broadband, especially in regional areas.
It will provide an affordable and fast broadband service that is capable of being upgraded to meet future demands of higher bandwidth, providing the scalability so necessary to any infrastructure deployment.
OPEL will build 1361 state-of-the art WiMAX base stations, with each base station providing high speed broadband out to a reach of 20 kilometres.
At 12 megabits per second coverage, this new network will provide speeds that are between 20 to 40 times faster than most Australians are on today.
WiMAX is a proven technology that is already supplying high speed broadband in many countries around the world, including the US, Canada, Denmark, Austria, South Africa, the United Kingdom and India.
Just one example is in the United States, where Sprint, their third largest mobile carrier, is investing $3 billion in a national WiMAX network that will cover 100 million people when it is completed by the end of 2008.
And far from being a second rate solution, not only will the minimum speed of the WiMAX network match the maximum speed of Labor’s plan, it be full deployed by 2009, instead of Labor’s 2013.
As OPEL has clearly indicated, recent criticisms of the capabilities of the WiMAX technology are not supported by the evidence.
OPEL has a choice of spectrum options and the encoding technology means that it is very resilient to interference from other devices using the spectrum.
The network design and rollout has addressed topography and local weather conditions and all equipment and installation costs will be metro equivalent, thereby ensuring country people don’t pay more for the same service as available in our cities.
Indeed, I read with interest over the weekend that the New Zealand Government is preparing for a WiMAX rollout in one of the hilliest countries in the world putting paid to concerns about topography raised by some commentators!
So for the benefit of those who might have given credence to Labor’s carry-on last week, yes - you will be able to use the WiMAX network whilst simultaneously defrosting a chook in the microwave, conversing on a cordless phone and closing the automatic garage door without any interference.
And in this ultra-competitive pre-election atmosphere, you will not be surprised if I offer some comments about Labor’s broadband announcement which after more than three months, has not proceeded beyond a single press-release.
I have often heard Opposition Leader Kevin Rudd refer to his broadband press release as “Labor to its bootstraps.”
And on this point, I completely agree with him – it is indeed Labor to its bootstraps as it wastes taxpayers’ money where none is needed, completely misunderstands the key policy issues, and ignores regional and rural Australia.
Wasting $5 billion dollars of taxpayers’ funds on a Fibre-to-the-Node network that industry will fund itself simply shows that Labor does not understand how the market works and highlights the risk Labor pose to the Australian economy.
Their plan means that the Australian taxpayer, and not industry, would assume the capital risk of a fibre investment that would not be completed until 2013 at best.
Stripped to its bones, there are at least another four critical areas regarding Labor’s broadband announcement that must be addressed and put under proper public scrutiny.
Firstly, as access to fibre-to-the-node depends upon proximity to a node, I ask what percentage of the population lives within 1.5 kilometres of a node? Will Mr Rudd guarantee that 98 percent of the population lives close enough to a node to get a wireline service?
Secondly, if Telstra has costed their fibre network proposal to 4 million premises in five major cities at $4 billion, how is it possible to deliver fibre to 98 per cent of Australia’s 11 million premises for $8 billion?
The answer is simple - you can’t. At best, you will only reach about 75 per cent of the population, leaving 25 per cent of Australians stranded and without access to high speed broadband. Australians deserve to know who will miss out.
Thirdly, given that the Government has moved to protect the $2 billion Communications Fund with legislation introduced last Thursday, how does Labor propose to fill the $2 billion black hole in their fibre to the node rollout costing?
And as a final point, what will consumers and competing retailers be charged for accessing Labor’s network? Will Labor guarantee metro comparable pricing?
This point is particularly relevant given Mr Tanner’s comments reported today that Labor will be seeking to make a profit from this exercise.
Therefore, I think it is entirely reasonable to call on Mr Rudd to show us all how he plans to deliver fibre to 98 per cent of Australians - providing full costing for his multi billion dollar plan and all technical backing - to substantiate his press release.
As I remind Australians again, Labor plan to spend $4.7 billion of your money with little more than a press release to back up their proposal and not even Tirath Khemlani could borrow money on those terms.
The way forward – Regulatory reform
Whilst we wait for further details from Labor, I will be getting on with the job of delivering our new high speed broadband network.
Whilst regulation can be an inevitable part of achieving important Government policy objectives, care needs to be taken not to unnecessarily burden industry with excessive red tape and regulatory requirements.
With this in mind, I launched a review of telecommunications regulatory red tape last year.
And as a result of the review, I can today announce extensive cuts to regulations that impose a substantial compliance burden on industry from out dated minimum Internet speeds to Telstra’s accounting separation
Accounting Separation
Telstra has estimated that it currently spends about 8,000 annual staff hours and about $1.1 million in annual labour and audit costs in meeting its accounting separation requirements.
Operational separation addresses more effectively the issues that accounting separation dealt with and as such, I intend to revoke most of the requirements in accounting separation and will shortly consult industry on the arrangements.
Digital Data Service Obligation
I have also decided to remove a range of regulations including the Digital Data Service Obligation which has been a requirement on Telstra to ensure all Australians have access to a 64 kilobit per second data service – basically, a dial-up Internet service.
Clearly, this regulatory obligation has been superseded by the Australian Broadband Guarantee – a guarantee that every Australian can access to a much faster broadband service via a Government subsidy of up to $2750.
USO review
I am also announcing today the commencement of a review of the Universal Service Obligation.
The Government remains fully committed to all Australians having access to basic telecommunications services and we will not be rolling back essential consumer protections provided by the USO.
Rather, this review will look at the obligations on industry and determine whether the load is being shared equitably as was its intention.
Unlike some jurisdictions, such as the UK, all telecommunications carriers in Australia are required to make a proportionate contribution, based on market share, towards the cost of providing the USO.
Telstra has argued that the amount its competitors contribute to the USO does not reflect their costs incurred providing the obligation.
This USO Review will test this argument and inform my decision on setting the next round of USO subsidy levels.
The USO review will also consider whether it is appropriate for Telstra to be the USO provider in all circumstances.
For example, should Telstra be required to be the Universal Service Provider in a greenfield estate where another company wins the development contract to be the infrastructure provider for that estate?
Or should the company that wins that contract also bear the responsibility for the provision of a telephone service in that new estate?
A discussion paper for public comment on the USO Review will be released shortly.
Conclusion
Taking forward these issues and implementing Australia Connected are just some of the work ahead in coming months.
Australia Connected is a major, nation-building undertaking to create equity of access to affordable high speed broadband for all Australians, regardless of where they live.
But no one should be surprised by the level of our commitment, we are a Government that takes the tough decisions in Australia’s national interest and Australians have rightly come to expect results, not rhetoric, from the Howard Government.
Thank you.