Bills Digest No. 24, Bills Digests alphabetical index 2024-25

National Broadband Network Companies Amendment (Commitment to Public Ownership) Bill 2024

Infrastructure, Transport, Regional Development, Communications and the Arts

Author

Owen Griffiths

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Key points


Introductory InfoDate of introduction: 2024-10-09

House introduced in: House of Representatives

Portfolio: Infrastructure, Transport, Regional Development, Communications and the Arts

Commencement: the day after Royal Assent

 

Purpose of the Bill

The purpose of the National Broadband Network Companies Amendment (Commitment to Public Ownership) Bill 2024 (the Bill) is to repeal provisions in the National Broadband Network Companies Act 2011 (NBN Co Act) which would facilitate changes to the ownership of NBN Co and to legislatively affirm the policy that NBN Co should remain in public ownership.

Minor consequential amendments will also be made to the Telecommunications Act 1997.

Introducing the Bill, the Minister for Communications, Michelle Rowland stated:

Through this bill, the [NBN Co Act] will be amended to remove conditions enabling a future government to privatise NBN Co. These changes reinforce in legislation the government's commitment.
The bill provides certainty to stakeholders, including broadband consumers, the wider telecommunications industry, broadband retailers, and NBN Co, that the Commonwealth will continue to retain ownership of NBN Co. This certainty supports the government commitment for NBN Co to provide high-speed and reliable broadband connectivity for Australians.
 

Background

Key events

On 7 April 2009, the Rudd Labor Government announced ‘the establishment of a new company (NBN Co) to build and operate a new super fast National Broadband Network’. It was anticipated that the Government would be the NBN Co’s majority shareholder but there would also be ‘significant private sector investment in the company’:

The Government will make an initial investment in this company but intends to sell down its interest in the company within 5 years after the network is built and fully operational, consistent with market conditions, and national and identity security considerations.
This company jointly owned by the Government and the private sector will invest up to $43 billion over 8 years to build the national broadband network.
The Government's investment in the company will be funded through the Building Australia Fund and the issuance of Aussie Infrastructure Bonds (AIBs), which will provide an opportunity for households and institutions to invest in the national broadband network.

A more flexible approach to the ownership of NBN Co was adopted when the National Broadband Network Companies Bill 2011 was passed in March 2011. In his second reading speech, the then Minister for Infrastructure and Transport, Anthony Albanese, stated:

The first bill in the package, the NBN companies bill … also sets out arrangements for the eventual sale of the Commonwealth’s stake in the company once the NBN rollout is complete, including provisions for independent and parliamentary reviews prior to any privatisation, and for the parliament to have the final say on the sale. The bill also creates a power for the Governor-General to make regulations concerning future private ownership and control of NBN Co. Ltd, and establishes other relevant reporting, governance and enforcement mechanisms. As such, the bill deals with arrangements for both today and into the future…
Taking into account the recommendations of the implementation study on the NBN, the Commonwealth will retain full ownership of NBN Co. Ltd until the rollout of the NBN is complete. This will ensure that during the rollout NBN Co. Ltd remains focused on achieving the government’s policy aims, and not on the different risks and rewards that private sector equity investors would require….
There is no longer a requirement that NBN Co. Ltd must be sold within five years of it being declared built and fully operational. Rather the time frame for any sale is left to the judgment of the government and parliament of the day, enabling due regard to the role the NBN is playing, market conditions and any other relevant factors.

On 11 December 2020, the then Minister for Communications, Cyber Safety and the Arts, Paul Fletcher, declared that the NBN should be treated as ‘built and fully operational’ (p. 1). The declaration was one of the steps required under the NBN Co Act (see section 48) before further steps towards the privatisation of NBN Co could commence. However, the declaration did not require further steps to be taken.

In December 2022, the shareholder ministers (the Minister for Finance Senator Katy Gallagher and the Minister for Communications Michelle Rowland) issued a new statement of expectations to NBN Co. The statement provided that the ‘Government will keep NBN Co in public hands for the foreseeable future to provide the Company with the certainty needed to continue delivering improvements to the network while keeping prices affordable’ (p. 1).

About NBN Co

NBN Co Limited (NBN Co) is a unlisted public company limited by shares incorporated under the Corporations Act 2001 and is a Commonwealth company for the purposes of the Public Governance, Performance and Accountability Act 2013. As noted above, NBN Co was established in 2009 as a Government Business Enterprise by the Australian Government, which is its sole shareholder.

The NBN Co Annual Report 2024 highlighted a number of key facts (pp. 6–7, 228):

  • 8.6 million homes and businesses are connected to the network
  • $5.5 billion revenue (2023–24)
  • $1.2 billion loss after tax (2023–24)
  • 4,354 on-going employees (2023–24).

A recent Australian National Audit Office (ANAO) performance audit considered the effectiveness of NBN Co’s ‘strategies to manage its transition from building to operating the national broadband network’. The audit found that NBN Co’s strategies and arrangements to oversee and manage the transition were ‘largely effective’. Recommendations were made to ensure ‘specific requests from shareholder ministers were adequately responded to, the Australian Government’s expectations were reflected in strategy and performance monitoring and mandatory requirements were met’ (p. 6).

Part of the rationale for the ANAO audit included the $51.4 billion which the Australian Government had committed to NBN Co since 2011 (p. 8):

In June 2011, the Australian Government and NBN Co entered into an Equity Funding Agreement, whereby equity funding of $29.5 billion was provided. In addition, in 2016–17 the Australian Government entered into a loan agreement with NBN Co for $19.5 billion which is required to be repaid by 30 June 2024. In 2022–23 the Australian Government and NBN Co entered into an Equity Funding Agreement for an additional $2.4 billion in equity funding to expand full-fibre access to an additional 1.5 million premises by December 2025.

The NBN Co Annual Report 2024 noted that it had raised ‘just under $6.5 billion from debt capital markets and bank facilities during FY24, which enabled NBN Co to repay the remaining $5.5 billion of the $19.5 billion Commonwealth loan in June 2024’ (p. 85). The report listed contributed equity as $30.5 billion and company debt as $26.9 billion (p. 85).

The Department of Infrastructure, Transport, Regional Development, Communications and the Arts Annual Report 2022–23 gave a ‘fair value measurement’ of the investment in NBN Co as $19.5 billion (p. 208).

In 2016, the Parliamentary Budget Office’s report on the potential impact of NBN on the Budget stated that the ‘final cost of the Commonwealth’s financing of NBN Co will not be known until NBN Co is privatised and the market places a value on the NBN’ (p. vi). It observed that ‘[i]f the sale price [of NBN Co] is less than the cumulative cost of financing the Commonwealth’s investment in NBN Co up to the point of the sale, then the NBN will continue to have an enduring cost to the budget’ (p. 9).

 

Policy position of non-government parties

Coalition

David Coleman, the Shadow Minister for Communications, characterised the Bill as a ‘sad stunt’ designed to create ‘confected debate’. He stated the ‘nobody is talking about changing the ownership of the NBN, not the Coalition and not anyone’. However, he did not indicate that the Coalition would support the Bill, stating that ‘we will review this in the normal way’.

Australian Greens

Senator Sarah Hanson-Young’s media release on the Bill stated:

The Greens will consider the NBN Bill introduced by the Government this morning and we will seek a Senate Inquiry so it can be examined in detail.
Last time there was a minority government it was the Greens who protected the NBN from being sold off by securing amendments that have kept the NBN in public hands.
The NBN is a critical piece of infrastructure that should be affordable and accessible for everyone and it's why the Greens have long fought to protect the NBN from privatisation.
 

Interest groups and commentators

The Communication Workers Union (CWU), which represents telecommunications workers, welcomed the legislation. The CWU National President Shane Murphy stated:

We are pleased to see the Government’s commitment to keep Australia’s connectivity in public hands, especially during the cost-of-living crisis that continues to deeply impact millions across the country.
NBN workers and their families will also breathe a sigh of relief knowing their jobs won’t be on the chopping block because of privatisation.

Industry analyst Paul Budde has questioned the viability of a privatisation of the NBN at the current time:

The landscape has changed in a geopolitical and a cybersecurity sense... Privatisation would limit certain investors and the amount of regulation and legislation would again limit the price somebody will pay for it. The financial reality will make that politically impossible… For the government, offloading the NBN at a time when the market is sluggish would likely mean accepting that they won’t fully recoup their investment.
 

Key issues and provisions

Schedule 1 of the Bill contains the proposed amendments to the NBN Co Act and the Telecommunications Act. Many of these changes are minor consequential amendments.

Objects, simplified outline and definitions

Existing section 3 of the NBN Co Act outlines the objects of the legislation including paragraph 3(1)(b) which provides that NBN Co is to remain in Commonwealth ownership until certain preconditions are met. These preconditions are:

  • the Communications Minister has declared that, in his or her opinion, the NBN should be treated as built and fully operational (this occurred on 11 December 2020)
  • the Productivity Minister (the Treasurer) has caused to be tabled in both Houses of Parliament a report of an inquiry by the Productivity Commission
  • the Parliamentary Joint Committee on the Ownership of NBN Co has examined the Productivity Commission’s report
  • the Finance Minister has declared that, in his or her opinion, conditions are suitable for the entering into and carrying out of an NBN Co sale scheme, and the declaration has taken effect.

Paragraph 3(1)(c) also states it is an object of the legislation ‘to provide a framework for restrictions on private ownership or control of NBN Co’.

Item 1 would repeal paragraphs 3(1)(b) and (c) and substitute new paragraph 3(1)(b) to specify that it is an object of the legislation ‘to ensure that NBN Co remains in Commonwealth ownership’.

Item 2 would repeal the paragraph containing the summary of these preconditions in the simplified outline in section 4. Item 3 would also repeal the paragraph stating ‘NBN Co must take all reasonable steps to ensure that an unacceptable private ownership or control situation does not exist in relation to NBN Co’ in the simplified outline.

Items 6 and 8 repeal a number of definitions contained in section 5 which explain key terms relevant to the potential approval of privatisation of NBN Co under Part 3 of the NBN Co Act.

Ownership and control

Part 3 of the NBN Co Act (sections 43 to 76) concerns the ownership and control of NBN Co. In particular, Divisions 2 to 4 of Part 3 set out the Commonwealth ownership provisions, including the steps to be taken to cease Commonwealth ownership (as mentioned in the objects clause).

Item 12 repeals and replaces section 43 to revise the simplified outline of Part 3. New section 43 would state:

Parliament’s intention is that the national broadband network is operated by NBN Co.
Under provisions called the Commonwealth ownership provisions, the Commonwealth must retain ownership of NBN Co.

Item 13 would insert new section 43A under new Subdivision AA—Infrastructure of national significance of Division 2 of Part 3. New section 43A would provide:

It is the Parliament’s intention, in recognition of the importance of the national broadband network as nation-wide infrastructure, that:
                     (a) the national broadband network is operated by NBN Co; and
                     (b) NBN Co remains wholly owned by the Commonwealth.

Items 16 and 17 repeal the other components of Division 2 and all of Division 3 of Part 3 which relate to the processes for ceasing Commonwealth ownership of NBN Co (sections 47–74).

Part 4 imposes certain reporting obligations on NBN Co which apply when it ‘is not a wholly‑owned Commonwealth company’. Item 19 repeals Part 4.

Consequential amendments to the Telecommunications Act

Part 8 of the Telecommunications Act deals with local line access. Section 143E addresses exceptions for certain real estate development projects under certain conditions. One of these conditions references a declaration made by the Minister under section 48 of the NBN Co Act which will be repealed by the Bill (a declaration whether the national broadband network should be treated as built and fully operational).

Item 27 will amend subparagraph 143E(2)(b)(ii) to reflect that section 48 would be repealed by item 16. Item 28 will insert a note under subsection 143E(2) to clarify that a declaration under the repealed section was made on 11 December 2020.

 

Concluding comment

The Bill would amend the NBN Co Act to state that it is ‘Parliament’s intention… NBN Co remains wholly owned by the Commonwealth’. It is a general principle of parliamentary sovereignty that one Parliament cannot legislate to bind a future Parliament. Accordingly, it would still be open to a future Parliament to amend the NBN Co Act to change this expression of intention and reinsert provisions which would facilitate the privatisation of NBN Co. Nonetheless, the Bill’s changes will create an additional hurdle as any future legislative amendment to alter the ownership provisions of the NBN Co Act would need the agreement of both Houses of the Parliament.