Senator the Hon Helen Coonan
Minister for Communications,
Information Technology
and the Arts Deputy Leader of the Government
in the Senate

CEDA Business Luncheon Briefing 2007

Sydney

6 June 2007

Thank you very much; it is my pleasure to address the CEDA Business Luncheon today.

I would like to take this opportunity today to discuss the telecommunications industry in Australia and to put in context the on‑going broadband debate.

Ten years of competition

But first, the historical settings.

Ten years ago the Howard Government spearheaded the liberalising of the telecommunications sector and encouraged competition.

This focus on competition has produced enormous benefits for the Australian economy as well as for consumers.

When the Government was elected in 1996, it inherited an industry structure that consisted of just two providers, Telstra and Optus.

Back then people were just embracing dial-up internet. Broadband was a distant concept.

Competition was limited and consumers were the loser.

Since the Government’s telecommunication reforms of 1997, there are now 167 providers vigorously competing on the telecommunications field.

And there can be no argument that consumers have been the major beneficiary of competition reforms. Fixed line prices have fallen by 18.9 per cent and mobile service prices have 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.

But of course with technology evolving so fast, there are always new challenges being faced by government - policy in this area is never a ‘set and forget’ exercise.

But the direction the Government has taken has been justified. The regulatory regime is all about understanding market drivers, encouraging industry to innovate and take advantage of what new and emerging technology offers while ensuring that consumers are protected and able to get the benefits of a thriving, competitive environment.

Government’s broadband plan

Broadband, particularly to residences and small businesses, continues to be front of mind in Australia at the moment.

And for good reason, as it is communications technology and broadband that are transforming the way we work, the way we interact and the way we learn.

They are critical for all sectors to operate in a modern economy, whether it is the government, private or the not-for profit sector.

Of particular interest to CEDA is the proposition that it is broadband and information technology that will underpin Australia’s productivity gains and help to lock-in Australia’s continuing economic prosperity.

The Australian Government is tackling the challenges facing industry on a national level.

Our national broadband policy is not one dimensional nor static and most importantly it is fully costed and deliverable.

The Australian Government has an integrated strategy that will provide all Australians with access to high speed broadband regardless of where they live.

It will continue to promote the development and use of smart communications technologies in key areas such as health, research and education.

And it will provide a secure and safe online environment with consumers’ interests at the forefront.

The Australian Government will be taking a responsible and measured approach.

We will not make policy decisions based on half the facts, nor political expediency and we will not be stampeded into making decisions that could lock industry into an uncertain future or take the market backwards.

The facts are that 90 per cent of Australian premises can access speeds of between 2Mbps and 8Mbps and more than 50 per cent of metropolitan areas can access even faster speeds through ADSL2+ and cable broadband platforms.

In addition, many more Australians are accessing high speed broadband through an expanding wireless broadband market.

However, in a fast paced environment we need to be ahead of the game, and well placed to scale up, so that Australians can connect wherever they want to use the Internet to meet their ever increasing needs.

Clearly the objective is to reach the right balance between achieving regulatory certainty and a fair return on investment while maintaining the vigorously competitive market structure that consumers have benefited from.

It is well known that there are at least two competing commercial proposals for a new high-speed fibre to the node network in capital cities and major regional centres. There may be others.

Until now, consideration of the Telstra and G9 proposals has been a matter for the regulator and government but ultimately, it will be the level of consumer take-up that will determine the business case for any new high speed broadband service.

To date there has been little scrutiny of the prices that would be charged for accessing a new fibre and the impact on consumers.

If high speed broadband in Australia becomes unaffordable, then it won’t matter if it is widely available.

People won’t buy what they can’t afford.

The healthy future of Australia’s competitive communications market and the need to maintain choice and affordability for consumers is a key requirement in the broadband challenge that Australia faces.

There has been some criticism of the time it has taken to address how this new fibre build will occur and who will build it.

But this criticism ignores, and indeed is ignorant of, the enormous complexities of the respective business cases of the two proponents and the regulatory settings that will facilitate such a build.

Neither needs money from the Government nor do we need to rob from future generations to fund this build. But they do require appropriate regulatory settings. No one doubts that the regulatory issues around access and pricing for a new fibre to the node network are challenging, no matter who builds it.

No matter who builds the network an adequate commercial return will be required as, by its very nature, this large investment is inherently risky.

There are also fundamental regulatory conditions that have been requested to better enable a fibre to the node network to proceed.

If access prices are set too low there will simply be no incentive to build a new terrestrial network.

If prices are set too high, consumers will simply not be able to afford the services. Clearly there must be a balance.

Therefore, I support the detail of the competing proposals being put into the public arena so that everyone has an opportunity to consider the merits of each proposal, including the proposed non-price terms and conditions and an opportunity to assess the impact on both wholesale access and retail prices so that the process has broad support.

CEDA’s Broadband Research

But there is much more to the Broadband story in Australia than a new Fibre to the Node network.

At this point I would like to commend the work that CEDA has done in the telecommunications sector which is of relevance to this new regional and rural network.

CEDA is widely known as a pre-eminent independent think tank in Australia.

Since its formation in 1960 CEDA has harnessed ideas and provided an avenue for economists and others to express their views on the nation’s economic development.

And more recently, CEDA has provided significant input into the broadband debate in Australia.

In November last year, CEDA released the report by Professor Joshua Gans, “The Local Broadband Imperative”, which argued that Australia will get the best possible broadband service by creating an environment that delivers a wide variety of local solutions.

And broadly speaking, this is the fundamental philosophy behind the Government’s on-going broadband work, allowing the market to invest in commercial areas and targeting taxpayer funds at underserved areas.

The Government has been funding the rollout of broadband infrastructure across Australia since 2004.

The Government has already extended broadband coverage to a further 1.3 million premises with more than $500 million in subsidies.

In August 2006, we announced the $600m Broadband Connect Infrastructure Program, a significant new policy approach that changed focus from a customer subsidy for a broadband connection to an investment toward building a new competitive national wholesale network.

The Government’s aim was to leverage a high level of commercial contribution towards building the new national wholesale network, with the Government’s contribution assisting the business case for rolling out to non commercial areas and premises.

The Government is strongly committed to the proposition that all Australians, regardless of where they live, should have access to high speed broadband.

We will not be picking technology winners, but allowing the industry to put forward the best mix of technologies to meet the varying needs across Australia’s vast land mass.

It is a very brave person who would say that they knew all the technological answers for Australia over the next 5 years. Just a couple of years ago Labor’s only foray into the internet was a policy to mandate a dial-up rollout for $5 billion.

But the reality is that a mix of technologies will be the most effective means to deliver the services that Australians need.

For instance, for built up areas, VDSL running off fibre to the node may well be the best solution. That is a commercial decision for a builder of a new fibre network.

However, when you get out into the more regional and remote areas, there are a limited number of nodes and even less kerbs for fibre to run to, so a wireless solutions may be the appropriate solution.

Indeed I noticed one commentator, Mr Grahame Lynch writing in CommsDay, suggested that it was “bizarre” that wireless solutions were so often dismissed as a viable substitute.

The Government has a coordinated national solution for Australia’s broadband needs that ensures we will not be leaving regional and rural Australia behind.

In Rural and Regional Australia the Broadband Connect Infrastructure program will leverage private sector investment to transform the way communities access broadband. An announcement on this will be made shortly.

In Remote Australia – and anywhere a commercial broadband service is not currently available – affordable subsidised broadband is already available via the $163 million Australian Broadband Guarantee.

Indeed, the Government’s comprehensive broadband policy will be a new leap forward for regional Australia.

It will break down distance barriers.

It will open up access to the latest communications technology on the farm, for small businesses and in the home for education.

Our objective is to build a new wholesale national broadband network that will enable rural Australians to access high speed broadband at prices equivalent to metropolitan Australia.

The network will be open access so that it promotes competition and provides a choice of services for regional Australians.

ICT

And the Australian Government is directly contributing to further improve Australia’s position as a world leader in the development and use of communications technologies.

The Government has a comprehensive strategy that deals with: providing access to broadband to the remotest parts of Australia, right through to supporting clever learning and state of the art research and development networks.

The $113 million Clever Networks program is revolutionising the use of broadband for the delivery of health, education and other essential services in regional Australia.

Clever Networks provides funding to roll-out smart solutions such as interactive distance education and real time medical diagnosis to improve patient care and help to attract and retain professional people in regional Australia.

I recently announced that 16 projects had been successful in receiving funding under Round 1 of Clever Networks.

Contrary to what some would have you believe, the Australian Government has overseen a rapid expansion of telecommunications infrastructure and is committed to capitalising on future advancements.

Many of those who criticise are simply unaware of the significant, forward thinking initiatives that the Government uses to create both supply and demand for advanced, high capacity communications in Australia.

Take for example the Advanced Networks Program (ANP) we established in 2001.

The $60m ANP initiative has ensured Australia’s active participation in global development of advanced networking technologies, applications, services and content.

So back in 2001 we were already thinking about Broadband not only as we now know it, but as we will know it many years from now.

The ANP has worked to create a demand for advanced infrastructure in the future through research into practical applications in fields such as e-health, enterprise systems, training and media.

ANP delivered the first high capacity network – 10 gigabits per second - in the southern hemisphere.

The ANP projects CeNTIE, GrangeNet and m.Net demonstrated what these networks were capable of delivering and in doing so ensured demand for super high speed, high capacity broadband infrastructure.

In it’s six years of operation GrangeNet has explored and developed the potential for high capacity networks, connecting over fifty sites and made significant contributions through research into data grids, authentication frameworks and atmospheric science to name a few.

Concurrently, the Australian Government has allocated $380m to National ICT Australia (NICTA).

Our ICT research body is working on networking technologies, training and research. By supplying high quality researcher training and high quality research and products, NICTA is working on both supply and demand of high speed communications networks.

Indeed, NICTA has for some time been working on ‘Super’ 3G and 4G mobile wireless technology which will provide faster data rates, larger coverage, low cost terminals and reduced network deployment costs.

With 4G, it will be possible to achieve high speed internet access to mobiles.

Conclusion

This, Ladies and gentlemen is just the flavour of the broadband communications landscape we are working in.

And in this competitive election atmosphere I am sure you would expect me to provide some critique of why Labor’s single broadband announcement is an inferior and incomplete answer to Australia’s broadband needs.

And I will do this in detail when I make the Government’s announcement.

What I can say is that the Government will not be chucking $5 billion of taxpayer’s funds into building a Fibre-to-the-Node network that industry will fund itself.

This is fiscal irresponsibility of the highest order and highlights the risk that Labor poses to the Australian economy.

If Labor can’t even manage a broadband rollout without helping themselves to $5 billion of public funding then every taxpayers must ask s, how can you risk Labor with the really big decisions Australia’s trillion dollar economy?

By contrast, the Government remains firmly committed to investing taxpayer dollars where the market does not invest and we will ensure that high speed broadband is available to all Australians, regardless of where they live.

We will not stop at just 98 per cent coverage leaving the neediest Australians in rural and regional Australia without a fast and scaleable broadband service.

We will not be limiting FTTN speeds to just 12Mbps as Mr. Rudd reaffirmed yesterday.

We will be able to offer affordable and metro comparable prices to all Australians regardless of where they live.

Labor has refused to make any commitment on affordability at all.

We will have a comprehensive but appropriate plan, but not a one size fits all solution.

Our proposal will be fully costed.

Labor’s has been estimated by industry to be out by a lack of $8 billion dollars and likely to cost somewhere in the order of $16 billion.

We will be investing significantly on a new comprehensive wholesale regional network.

We will not be treating rural and regional Australia as some second class backwater that will have to wait until the Labor Party figures out how to go backwards into the teleco business in a highly risky and likely loss-making joint venture and deals with the thorny issues of how to access Telstra’s last mile in a fair and equitable way.

The Government has already done the hard yards and understands the business case of both proposals for building a fibre network.

The discussions I have had with Telstra, the G9 and the ACCC and the competitive grants process for the Broadband Connect Infrastructure funding have all been invaluable – allowing me to craft a far reaching and comprehensive broadband plan that will make fast, affordable broadband a reality for all Australians.

I look forward to making the announcement shortly.

Thank you