Now turning to the NBN, everyone here in the room will have heard my old joke about the lost tourist in Ireland seeking directions to Dublin — if you haven’t, you’re obviously very new to the industry!
Suffice to say, we wouldn’t be starting from here.
Everywhere else in the world, the norm has been for Governments and regulators to promote infrastructure based competition.
The experience has been that the best way to ensure incumbents face enough pressure to invest and upgrade their networks is from very intense competition from cable companies in particular, but also from smaller altnets.
Almost invariably, where cable companies have upgraded users to superfast broadband, for instance with Docsis 3.0, they have tended to do so without charging users any premium at all. When Virgin in the U.K. for instance upgraded its customers to 50mbps speeds in 2009, they actually reduced prices[1]. And other examples are legion.
Many studies have shown that competition leads to more innovation and choice for consumers[2]. A recent European study showed markets with widespread cable deployments are more dynamic and have much greater penetration of superfast[3].
Indeed the Vertigan panel recognised the value of competition. In recognising that competition will lead to some duplicative costs, increasing them by 20 per cent, it modelled that a one-year acceleration in broadband deployment and a 2.5 per cent increase in the rate of productivity growth would ensure that those costs were offset.
But as the Vertigan panel acknowledged – and indeed as I noted in a recent speech[4] – there are still very large risks to the delivery of this project. In the words of the panel’s report: “Any decision to deviate from the current development path for NBN Co will inevitably involve cost and delays, potentially exacerbating community dissatisfaction with the current progress of the rollout.”[5]
While the Government is yet to deliver its full response to the Vertigan Panel, it is important to note that we acknowledge the importance of the panel’s work and indeed we recognise why they made these recommendations in the first place.
Firstly, while any attempt to force a disaggregation of the NBN Co in the short term would lead to large costs and would be an unacceptable distraction as the network is rolled out, we are very alert to the need to to give future Governments optionality.
While the NBN Co continues its transition towards the Multi Technology Mix, the company has resolved to maintain its HFC operations in a distinct business unit thus making a future disaggregation as recommended by the Vertigan Panel feasible if a future Government resolves to do so.
I have said that the privatisation of the NBN Co is a priority for Wyatt Roy’s second term as Prime Minister – however the 23 year old Member for Longman is such a formidable parliamentarian I am not sure that eventuality is as far off as many imagine! Nonetheless, while privatisation is, if ever, a long way off, it is also important to recognise that decisions made now can lead to huge and potentially irreversible costs in the future.
Secondly, the company faces a competitive threat in servicing multi-dwelling units in metropolitan areas and it is now well advanced in its accelerated program, with 10 out of 12 multi dwelling units identified in the first limited deployment now ready for service.
Those multi dwelling units are in:
· Fortitude Valley in Queensland
· Haymarket and the Sydney CBD in NSW, and
· Docklands and South Melbourne in Victoria.
But I have made it clear that the company is to have full flexibility and be innovative in its deployment and this is particularly true in areas identified as being vulnerable to competitive threat.
The company has said that it expects its fibre-to-the-basement product ready for widespread deployment in the first quarter of 2015 and this should see the continued acceleration of the program.
And thirdly, we are working with the NBN Co and consulting with private companies in the greenfields sector to ensure that there is a more level playing field.
We will have a discussion paper out soon on greenfields to canvass potential changes because we will not do what the previous Government did in imposing huge costs on the industry with very little analysis.
However, as I outlined a few weeks ago, while we will not seek full cost recovery from developers in the provision of greenfield infrastructure, we will continue to work towards a model where more of the NBN’s costs are transparent and private providers are not at a competitive disadvantage.
And finally, in terms of the public spectrum, the Government is committed to creating a framework that reduces costs to businesses, facilitates innovation, and enables businesses to respond quickly to changes in technologies and consumer preferences and enter new markets.
It is estimated that mobile data will grow by 265 per cent over the four years to 2017, increasing from an estimated 22.2 petabytes in 2013 to 81.1 petabytes in 2017[6].
The growth in wireless data services presents significant economic and social benefits to all Australians. For instance, a report commissioned by the ACMA found that mobile broadband contributed $33 billion to the economy over a six-year period to 2013, largely through productivity gains[7].
Australia was one of the first countries to reduce constraints on spectrum use through the introduction of market-based mechanisms for the allocation of spectrum. This approach enables licensees to determine how they utilise spectrum and respond to changing technologies and consumer demand, if certain conditions are met.
The benefits of a liberalised approach to spectrum management have been clearly demonstrated in the Australian mobile telecommunications sector, including:
In May this year, I announced a review of the Australia’s spectrum policy and management framework. The purpose of the review is to modernise and simplify the framework to improve its efficiency and flexibility.
The Department will be releasing a consultation paper shortly that outlines a number of proposals for change, including those I identified in my speech at the ACMA’s Radcomms 2014 Conference in September.
One of the proposals the review will consider is the introduction of a single licensing framework. A single licensing framework will likely increase the flexibility of spectrum users to respond to changes in spectrum use and facilitate the introduction of more efficient technologies.
Stakeholder feedback is encouraging and the introduction of a flexible single licensing framework received support at the Radcomms Conference 2014.
The review will also consider the creation of a clearer and simplified policy framework to ensure transparency and accountability in decision making. This would involve Government policy statements being issued to the ACMA as well as specific powers of Ministerial intervention to direct major policy initiatives, and the ACMA providing an annual work program to the Minister identifying key priorities over a 3 to 5 year timeframe.
The spectrum review will also consider reforms to television broadcasting to increase flexibility, promote efficient use of spectrum and move spectrum to its highest value use.
Television broadcasters should be able to use spectrum more flexibly and more efficiently in providing services. In practice, there are a number of ways in which this principle could be implemented.
For instance, commercial and national broadcasters should commence their transition to MPEG-4 only broadcasting, which uses spectrum much more efficiently. To allow for this transition, in the short term, the Government will free up the spectrum known as the sixth channel to assist in the testing and migration to MPEG-4. The sixth channel remains substantially vacant but is currently being used by community television in mainland capitals.
The best outcome for community television is that in future it uses the internet as its distribution platform which is why the Government is extending current licensing arrangements for community television until the end of December 2015.
Coincident with the spectrum review, the Department of Communications will shortly release a discussion paper seeking industry’s views on future arrangements for digital television broadcasting.
So in conclusion, competition is the lifeblood of this dynamic and rapidly evolving industry, an industry in which the only real constant is continual innovation and change.
The reform measures we are working to implement are absolutely essential to allow the telecommunications sector to continue to innovate and compete.
I thank you for your contributions and efforts to date and look forward to continue working together in ensuring this exciting industry continues to deliver consumers the widest possible choices and the best service.
Thank you
This transcript was originally published on Malcolm Turnbull’s blog.
