Chapter 3 - The Access Bill
3.1
The Telecommunications Legislation Amendment (National Broadband Network
Measures – Access Arrangements) Bill 2010 (the Access Bill) amends the Competition
and Consumer Act 2010[1]
and the Telecommunications Act 1997 to introduce new access,
transparency and non-discrimination obligations relating to the supply of
wholesale services by NBN Co and any of its corporations. The bill also extends
technical and open access obligations to owners of other superfast networks.[2]
3.2
The Access Bill operates in conjunction with the National Broadband
Network Companies Bill 2010 which establishes the regulatory framework covering
the establishment, ownership and eventual sale of NBN Co. Details of this latter
bill are covered in Chapter 2.
3.3
In announcing the NBN initiative, the government indicated that NBN Co
would operate on an open and equivalent access basis, subject to clear
oversight by the Australian Competition and Consumer Commission (ACCC). The
Explanatory Memorandum states that:
Amongst other things, this approach responds to longstanding
concerns about barriers to competition in the Australian telecommunications
market flowing from Telstra's control of the access network and its vertical
integration.[3]
3.4
In order to increase competition in the telecommunications
sector, in November 2010 the Parliament passed the Telecommunications
Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 (the CCS
Bill).[4]
These amendments require Telstra to functionally separate its operations if it
does not voluntarily implement structural separation. As noted in chapter 1, NBN Co is currently
negotiating arrangements for the use of Telstra's copper network and for the
migration of customers from Telstra's copper and hybrid fibre-coaxial (HFC)
networks to the NBN as contemplated in the Explanatory Memorandum for the CCS
Bill.[5] The amendments also streamline
the access and anti-competitive conduct regimes.[6]
3.5
The Access Bill seeks to expand on these reforms to the
telecommunications competition regime:
The CCS Bill is intended to reform the access regime in Part
XIC of the CCA to reduce delays and opportunities for gaming and provide
upfront certainty on access prices and terms and conditions. NBN Co will be
subject to this reformed access regime, but with additional measures being
introduced by the Access Bill to reflect the unique wholesale-only nature of
the company. The amendments in the Access Bill need to be read together with
the CCS Bill.[7]
3.6
An exposure draft of the bill was released for public comment on 24
February 2010 for which 21 submissions were received.[8]
Several submissions to this inquiry noted the various amendments that flowed
from the exposure draft process. For example Optus stated that the government 'positively
responded to the feedback it has received from the industry and that a number
of important amendments have been made to the Bills.'[9]
3.7
The key provisions of the Access Bill are:
-
it makes all services provided by NBN Co 'declared' and thereby
subject to supply and equivalence requirements and Australian Competition and Consumer
Commission (ACCC) oversight;
-
it establishes the mechanisms to ensure that the terms and
conditions relating to the supply of services by NBN Co are transparent;
-
it requires NBN Co to offer services on an equivalent basis, with
discrimination only allowed where it aids efficiency and in other limited
circumstances, subject to ACCC oversight;
-
it requires the ACCC to publish details of non-standard access
agreements to provide a high level of transparency;
-
it establishes a level regulatory playing field for carriers who
build or upgrade certain fixed-line superfast access networks after the introduction
of the bill into Parliament; and
-
it makes provision to simplify industry codes and standards for
fibre infrastructure services.
3.8
Contentious aspects of the bill that were raised in submissions to this
inquiry are elaborated on below.
Supply of services on a non-discrimination basis
3.9
A core provision of the bill, and one of the underlying principles of
the NBN, is that it '...will
offer open and equivalent access to wholesale services, at the lowest levels in
the network stack...'[10]
Proposed section 152AXC of the Consumer and Competition Act 2010
sets out the main non-discrimination provisions.
3.10
Proposed section 152AXC provides that:
(1) An NBN Corporation
must not, in complying with any of its...standard access obligations,
discriminate between access seekers.
3.11
This statement however is qualified and allows an NBN corporation to
discriminate in certain circumstances:
(4) The rule in subsection (1) does not prevent
discrimination if:
(a) the discrimination aids
efficiency; and
(b) all
access seekers with like circumstances have an equal opportunity to benefit
from the discrimination; and
(c) in
a case where the discrimination involves a discount, allowance, rebate
or credit given or allowed, or offered to be given or allowed, on the condition
that the access seeker acquires, or agrees to acquire, a particular volume,
number, quantity or amount of goods, services or other things:
(i) a
special access undertaking given by the NBN corporation is in operation; and
(ii) the
discount, allowance, rebate or credit is in accordance with terms and
conditions specified in the undertaking.
(5) The
rule in subsection (1) does not prevent discrimination on grounds specified in
a written instrument made by the [ACCC].
(6) The
rule in subsection (1) does not prevent discrimination in circumstances
specified in a written instrument made by the [ACCC].[11]
3.12
Submitters raised two key concerns from this proposed provision: 'aids
efficiency' and 'volume discounts' – both of which are italicised above and
discussed below.
'Aids efficiency'
3.13
Submissions on the exposure draft called for a clearer definition of
conduct that 'aids efficiency'. As a result proposed section 152CJH of the Competition
and Consumer Act 2010 would require the ACCC to publish guidance material
on non‑discrimination within six months of the bill taking effect.[12]
3.14
Several examples of arrangements that may aid efficiency were given
during the committee's hearings:
There are a range of different things ranging from technical
and operational efficiencies in billing or ordering and provisioning or
potentially there could be things like lowering our risk profile and that may
result in a lower cost of capital for us somewhere down the track, immediately
or even further...[13]
3.15
The majority of submissions to the inquiry agreed with the non‑discrimination
principle, however many believed the exemptions that are allowed are ill
defined and not specific. In particular many submitters were concerned with the
exemptions in subsection 4(a) which allow discrimination if the discrimination
aids efficiency.
3.16
The Internet Society of Australia contended that 'efficiency' is too
broad and imprecise a word to be used on its own in justifying discrimination
between access seekers:
The current wording does not identify whether the NBN
Corporation, the access seeker(s), or end-users should be the beneficiary of
the extra efficiencies for the discrimination to be permitted.[14]
3.17
Optus also raised concerns about the lack of detail contained in the
exemptions:
The current provisions of the NBN Access Bill give NBN Co
wide discretion to determine the circumstances in which 'aid efficiency' and
'like circumstances' are to apply. This is not acceptable. It opens the risk
for price terms to be offered in a way that tilts the playing field in favour
of one access seeker.[15]
3.18
Both Optus and the Internet Society of Australia suggested changes to
the 'aids efficiency' clause. The Internet Society of Australia argued that a
new efficiency test be adopted that instead puts the onus on allowing
discrimination only in cases where it does not result in decreased competition.[16]
Optus called for the ACCC to have a greater role in determining what aids
efficiency.[17]
3.19
The Competitive Carriers Coalition (CCC) objected outright to the
principle of allowing discrimination on the basis of efficiency. The CCC
believed:
...that attempting to apply a principle that measures efficiencies
and attempting to translate those efficiencies into price reductions on the
acquisition of specific services would be such an imprecise art and would
create such a burden on the regulator, access seekers and the NBN Co. that it
would likely be a path to disputation and potential discrimination over time.[18]
3.20
The Australian Telecommunications Users Group (ATUG) called for greater
transparency in permitting discrimination that aids efficiency. According to
their argument, any aids to efficiency should be investigated by the ACCC and
made transparent so that any benefits of the economies of scale should be
shared by all retailers.[19]
3.21
The Department of Broadband, Communications and the Digital Economy explained
that discrimination based on efficiency grounds is a long recognised principle
in competition policy:
Price discrimination that aids efficiency is permitted under
the general access regime in Part IIIA of the Competition and Consumer Act
2010 as well as the telecommunications-specific access regime in Part XIC.[20]
3.22
The ACCC also advised the committee that discrimination that aids
efficiency is a well established practice in the telecommunications industry as
well as across the broader competition regime:
...we have already considered those concepts in a number of
other sectors such as aviation and railways—albeit I suspect not with the
degree of scrutiny that we may get in this sector, so I would not suggest that
our analysis in those sectors is highly developed. What I would expect is that
the ACCC will approach the concept of efficiency in the existing legislation in
the same way that it does in all its regulatory roles, which is that it will
consider efficiency as an economic concept and not a more loosely defined
concept. The impact of that is that it is unlikely that we will be looking at
what individual parties might see as the efficiencies for their individual
business cases as a determinant of whether a particular arrangement aids
efficiency. In other words, we are likely to do a substantial competition analysis
and we are likely to be highly cognisant and cautious about the impact of any
arrangement upon competition in any downstream market.[21]
Committee comment
3.23
The committee acknowledges the concerns raised by submitters regarding
price discrimination. However, the committee notes that the bill's default
position is that NBN Co must offer the same terms and conditions to all access
seekers. Only in a limited range of circumstances can price discrimination be
contemplated, and then only if all access seekers with like circumstances have
an equal opportunity to benefit from the varied terms and conditions.
3.24
The committee is satisfied that the bill strikes the right balance in
allowing price discrimination in limited and generally accepted circumstances
where it 'aids efficiency'. If NBN Co reaches an agreement with different terms
from the standard terms, it must advise the ACCC and the ACCC must publish the
agreement on its website. This process offers both robust regulatory oversight
as well as full public transparency.
Volume discounts
3.25
Submissions on the exposure draft and to this inquiry expressed concern
that under the proposed amendments, NBN Co. could offer volume discounts that
would favour the largest service providers, thereby granting them an unfair
competitive advantage over smaller players.
3.26
The Explanatory Memorandum to the bill explains why volume discounts are
permitted by the bill:
Given that differentiation of standard price terms can aid
efficiency, the Access Bill does not prohibit volume discounts. However,
recognising the concerns of smaller players, the Access Bill provides that,
should NBN Co choose to offer volume discounts, it would not be able to do so
unless proposed volume discounting agreements are consistent with those set out
in a SAU [Special Access Undertaking] that has been approved by the ACCC and is
in operation.[22]
3.27
The increase in oversight powers of the ACCC in relation to volume discounts
has been welcomed by a number of submitters, however many still argued that the
discounts will have 'the un-intended outcome of transferring the existing
Telecom monopoly situation from the 'last mile' monopoly to the new emerging
'Layer 3' market'.[23]
3.28
Many submitters believed that volume discounts would have the effect of
creating a monopoly in the broadband industry. Optus posited the following
scenario that was typical of number of submissions:
This raises a clear opportunity for Telstra to be given a
price discount on the basis that the arrangement will help to underpin the
long-term viability of the NBN thereby 'aiding efficiency'. Whilst the same
terms might be made available to other access seekers in 'like circumstances',
in practice no other access seeker is likely to qualify for the discounted
access terms because it will not be in a position to provide the same services
to NBN Co that Telstra can. Such an outcome would undermine the principle of
equivalence and significantly tilt the NBN playing field in favour of Telstra.[24]
3.29
Peak telecommunications bodies and retail service providers submitted
that volume discounts will have a negative impact on competition. The
Communications Expert Group (CEG) stated:
...discounts could damage the NBN Co, because the NBN Co
would have to make up the value of the discounts by surcharging smaller RSPs. This
will lead to further reductions in competition as well as increasing pressure
on the NBN CO and Legislators to provide additional protection, and reduce scrutiny
of the NBN Co.[25]
3.30
AUSTAR also commented on this point:
Virtually all of the scenarios that we have considered where
we believe this principle could be put into practice only serve to benefit the
largest, incumbent RSPs. Implementing this provision will lead directly to
anti-competitive outcomes for the rest of the industry, as the current market
conditions will simply prevail, a situation that not only contradicts the NBN's
stated policy, objectives, but will also not meet LTIE [Long-Term Interests of
End-users].
3.31
Telstra in its submission argued that discrimination in order to aid
efficiency should be permitted:
Non-discrimination should not be an end in itself, but rather
a means to promoting competition. In many circumstances, differential treatment
of customers (i.e. discrimination) will be economically efficient and welfare
enhancing, particularly where end-user preferences are heterogeneous.[26]
3.32
The consumer body ATUG called for greater transparency and the
publishing of terms and conditions if discriminatory pricing occurred to aid
efficiency:
ATUG's view is that NBN economies of scale should be captured
by NBN Co and reflected in the uniform national wholesale price. Efficiencies
that come from the internal operations of RSPs should be reflected in their
retail price.[27]
3.33
One recommendation put forward by AAPT to overcome the possibility of
creating a monopoly in the market, whilst still maintaining volume discounts, is
to place a limit on the discount allowed if discrimination does aid efficiency:
...AAPT expressed concern about a situation arising where,
for example, the two largest Retail Service Providers (RSPs) were
afforded discounts in excess of say 20% (or perhaps even higher, eg 40% or
50%)...
If price discrimination is considered to be beneficial on
economic grounds (and AAPT accepts that many economists do argue in favour of
it) then AAPT considers that the simplest and safest way to avoid the negative
outcome detailed above is to impose a 5% cap on the extent of the
discrimination permitted.[28]
3.34
The Competitive Carriers Coalition (CCC) argued outright against volume
discounts. The CCC stipulates that:
...it is an IP world, and with the traffic on the network the
cost of providing the service is not increased by the volume of traffic going
through the pipes...These networks are always on. Whether the pipe is full or
just a trickle is going through it, the costs associated with the provision of
that pipe do not change – and if they do change they change immaterially.[29]
3.35
The CCC also raised concerns that the ACCC's process of investigating
whether discrimination aids efficiency could be mired by disputation, delay,
cost and confusion. It is argued that any potential benefit for the consumer could
be greatly outweighed by the side effects of working in a regulated system.[30]
3.36
In its appearance before the Committee, the ACCC responded to
submitters' concerns about the application of volume discounts that 'aid
efficiency':
At the conceptual level we would probably think in terms of
an overall competition analysis or efficiency where the volume discount was
allied to other factors. We have undertaken, for purposes of preparing
ourselves for whatever regime comes, a comparative analysis of some external
regimes, domestically and internationally, and have also examined our past
practices not only in this sector but across sectors. We are struggling to find
an example where we have effectively ticked off on a volume discount by itself.
I guess we are saying we would expect in the event that such arrangements were
put to us that there would be a fairly high hurdle for people to convince us
that they would aid efficiency.[31]
Committee comment
3.37
The committee acknowledges the concerns raised by submitters regarding
volume discounts. However, the committee notes that a volume discount cannot be
offered by NBN Co unless it is in accordance with the arrangements set out in a
Special Access Undertaking which has been approved by the ACCC. This process will
ensure that all concerned parties have an opportunity to comment on any volume
discount proposals and that approved discounts aid efficiency and do not have
an adverse impact on competition.
3.38
The committee is satisfied that the oversight provisions of the bill
will only allow volume discounts in specific circumstances where the ACCC is
convinced that genuine efficiencies can be made. The committee also notes that the
availability of volume discounts occurs in other sectors and that, to date, the
ACCC has not identified any instances where volume discounts have aided
efficiency on their own.
Level playing field arrangements
3.39
Part 3 of the bill relates to level playing field arrangements. These proposed
amendments to the Telecommunications Act 1997 seek to impose 'specific
technical and open access requirements on carriers who build or upgrade
fixed-line superfast access networks after 25 November 2010, the date the of
the Access Bill's introduction into the Parliament.'[32]
3.40
The level playing field amendments are intended to ensure that NBN Co
will remain commercially viable whilst meeting its stated objective of
providing fixed-line fibre access to 93 per cent of Australian homes.[33]
The Implementation Study for the National Broadband Network identified
that:
If, as proposed, NBN Co charges a uniform wholesale access
price across its fibre footprint, this implies providing an implicit
cross-subsidy to higher cost-to-serve areas from lower cost-to-serve areas. In
effect, NBN Co will be charging an averaged price across the FTTP footprint...
This raises the risk that carriers other than NBN Co might
construct fixed-line superfast access networks...only in high-income and
low-cost, high-density areas and then undercut NBN Co's average price due to the
lack of any need to subsidise operations in higher-cost areas. This
cherry-picking approach could undermine Government's affordability policy by
enabling the cherry-picker to undercut NBN Co's pricing based on its lower
costs...
3.41
NBN Co's Corporate Plan outlines the importance of the level playing
field amendments to its economic viability:
If NBN Co were to be 'cherry picked' by competitors in the
most lucrative regions, and it resulted in a decrease of 50% of Greenfields
connections...then the NBN projected returns would reduce to 5.4% [down from
7.0%]...The effect on total funding (levered) would be an extra
$1.2 billion in total funding and $1.7 billion additional requirement in
Government equity...In addition to the impact of cherry picking in Greenfields,
there would be an impact in the most commercially attractive areas of
Brownfields. This would take the returns well below 5%. As a consequence,
equity funding would be significantly increased.[34]
3.42
The Implementation Study recommended that the government look at implementing
wholesale and open-access arrangements for any future fixed-line superfast
access network and consider the introduction of a universal service levy on
owners of all such networks.[35]
3.43
Submissions to the inquiry concerning the level playing field
arrangements were divided as to whether the provisions would have positive or
negative effects on the industry and NBN Co's services.
3.44
Peak groups such as the Australian Telecommunications Users Group (ATUG)
and the Internet Society of Australia believed that the arrangements would be
in the best interest of the end users and the NBN as a whole.[36]
The Australian Communications Consumer Action Network supported the
arrangements on balance, but urged that they be regularly reviewed.[37]
3.45
Some existing network operators and telecommunications service providers
disagreed in principle with the provisions, arguing that they would create a
new monopoly in the emerging broadband market.[38]
Other established network operators recognised the intent of the provisions for
the sake of NBN Co's commercial viability, but stated that the arrangements
were not well defined and are open to interpretation.[39]
3.46
The Competitive Carriers' Coalition argued in favour of the level
playing field arrangements, believing that they would stop Telstra or another
provider selecting the most valuable parts of the markets and building
profitable islands of vertical integration surrounded by an NBN.[40]
Interpretation of an 'altered or
upgraded' network
3.47
A number of submitters, particularly existing network operators,
requested that the terminology 'altered or upgraded' in proposed section 141 be
better defined so as to make clear the intention of the provisions. NEXTDC, for
example, argued that the definitions were ambiguous:
What is an upgrade or an existing network? Is it the
upgrading of switches and equipment as is the case in the normal whether it be
for maintenance or improvement in technology? What is an extension? Is it
having a 1,000km network and extending it a further 10km? Is an extension
having fibre out the front of a building and later installing a leadin to a
customer?...[41]
3.48
iinet suggested that the level playing field provisions could be more
clearly interpreted if amended to specifically refer to 'network units' rather than
the broader and indefinite term 'networks':
A discrepancy appears in the Access Bill where the term
“networks” is referred to in some of the proposed sections of the Telco Act and
Competition Act, when the correct term should be “network units”...[42]
3.49
By providing a narrower definition of 'network units' (as defined in section
26 of the Telecommunications Act 1997)[43],
iinet believes the intent of the provisions would work more effectively as existing
network owners could not '...cherry-pick NBN Co’s high-value markets by
upgrading relatively small or distinct sections of their networks...'[44]
Possible impact on established
networks
3.50
Established network operators raised concerns that the level playing
field arrangements would have an adverse impact on their current operations:
It must be remembered that many network builds are built with
some future planning considerations. Therefore the cherry picking and technical
standards sections of the proposed legislation have the effect of denying
infrastructure based carriers the ability to extract revenue from their
investments without any compensation.[45]
3.51
TransACT in particular expressed concern about how the level playing
field provisions would impact on its business model:
TransACT is now contracted or under agreement to provide FTTP
to approximately 15,000 premises across the ACT providing the residents and
businesses with state-of-the-art telecommunications infrastructure.
The addition of the wholesale-only requirement,
announced on 20 December 2010, makes it even more difficult for TransACT
to continue deploying new fibre networks and competitively compete against NBN
Co. The cost to TransACT to separate its wholesale and retail arms would be
significant while also creating a major disruption to TransACT's normal
business operations.[46]
3.52
TransACT has indicated that it will continue to consult with the Government
to ensure that its vision for the NBN does not unduly affect TransACT's
business.[47]
Officials from the Broadband department also told the committee that 'the
government has been consulting industry and is considering whether amendments
are required to clarify the operation of the provision.'[48]
3.53
Submitters have also raised concerns about the effects that the level
playing field provisions will have on competition in the fibre deployment
industry. Internode asserts that:
This provision will have the effect of stagnating the
development of the online content industry let alone ensuring that people
moving into new housing developments face another decade of uncertainty as to
the availability of high speed Internet services...
As written, these amendments will have the effect of ensuring
no new fibre is deployed in Australia other than by NBN Co and to their
unspecified multi-year roll out schedule.[49]
3.54
PIPE Networks also picked up on this point:
Retailers – those who supply to the end user – will have
no-one from whom they can obtain those services but NBN Co. In our submission,
this is not going to be in the long-term interests of end users or of the
development of competition in the telecommunications industry in general.[50]
3.55
Telstra submitted that it should not be necessary for the government to
legislate such obligations:
In a competitive or properly regulated market, competitive
entry will only occur to the extent that it is efficient – that is, where the
market can bear a new entrant.[51]
3.56
PIPE Networks suggested that there would also be substantial segments of
the market for which NBN Co services would be unsuitable. They explain that
some corporate and government customers will want to acquire services from
multiple networks so as to 'not put all of their eggs in the one basket'.[52]
Some customers will also require specific dark fibre, low latency fibres that will
not be provided by NBN Co.
3.57
PIPE Networks argued that the principles of the level-playing field
provisions could still be achieved by less harmful means:
For example, a maintenance or continuation of the universal
service obligation levy or something very much like it or, as the opposition
have advocated recently in the lower house, a subsidy provided by the
government from the budget.[53]
Committee comment
3.58
The committee acknowledges the concerns of submitters regarding the
level playing field provisions and the possible impact on existing networks and
businesses. However, the committee notes that some concerns have been
overstated as the requirements do not prevent other companies from rolling out
fibre networks. Furthermore the provisions do not require network operators to
mirror NBN Co's operations or match its terms and conditions. They do however
legitimately require them to operate within a comparable regulatory framework
so that end-users have access to the same quality services regardless of the
network provider.
3.59
The committee recognises that the intent of these provisions is to
ensure that companies cannot target lucrative markets to deploy networks whilst
leaving the high‑cost, low-revenue segments of the market to NBN Co to
service. If this cherry picking of the market were to occur, this would
undermine NBN Co's ability to meet its objective of providing affordable and
uniform access to high speed broadband, to all metropolitan, regional, rural
and remote areas.
3.60
The committee notes that the government has been consulting with
industry and is considering whether amendments are required to clarify that the
focus of these provisions is on the mass market networks.[54]
Given the degree of uncertainty perceived by submitters – in particular in
relation to the circumstances in which these provisions apply – the committee
would expect that the government will be able to give more certainty to the
operation of the level playing field provisions.
Technology standards
3.61
Two submitters to this inquiry raised concerns about specifying
technological standards in the bill. According to the bill a Layer 2 bitstream service
must be an Ethernet bitstream service and a superfast carriage service is
defined in technological terms as providing a download speed normally more that
25 megabits per second.[55]
3.62
The Internet Society of Australia submitted that given the pace of
technological change in the ICT industry, it is never appropriate to legislate
for specific changes as '...technical detail in legislation...may drag on
innovation in the future'.[56]
According to the Society, Ethernet technologies have only become available and
preferred for consumer broadband access in the past few years. They point out
that in the future a new successor to Ethernet may be developed that is more
preferable.
3.63
HaleNET posited the possibility that specifying a particular technology
choice will severely affect competition and innovation in the retail fibre
market.[57]
3.64
Both submitters recommended amending Part 3 of Schedule 1 of the bill to
remove the technological specifications. The Internet Society of Australia also
calls for a clearer definition of the amendments to Division 5A of Part 21 of
the Telecommunications Act 1997.[58]
3.65
The Department of Broadband, Communications and the Digital Economy explained
that the issue of technical standards:
...is an issue that we are looking at more closely. There is
reason to provide some specificity so that there is certainty in the sector,
but there are also arguments for flexibility.[59]
Committee comment
3.66
The committee notes the concerns of some submitters about specifying
strict, inflexible technical standards in legislation, in particular the
requirement concerning layer 2 Ethernet. The committee suggests that the
government give further consideration to introducing some flexibility into
those requirements.
Other matters
Application of Freedom of
Information Act to NBN Co
3.67
NBN Co is an incorporated company established under the Corporations
Act 2001. Corporations Act companies are not normally subject to the Freedom
of Information Act 1982 (FOI Act).[60]
Some submissions argued that NBN Co ought to be subject to FOI.[61]
3.68
In this regard the House of Representatives has passed an amendment to
the Access Bill proposed by the Australian Greens. The amendment makes NBN Co
subject to the FOI Act with a targeted exemption to protect the confidentiality
of its commercial activities.[62]
The committee supports this amendment.
Cost of the NBN
3.69
Professor Green of the Communications Expert Group suggested in evidence
that the NBN could be built at significantly less cost than current estimates.[63]
However it should be noted that Professor Green's estimates were based on his
experience of developments of up to 3000 premises in Western Australia. In the
committee's view, Professor Green is not comparing like with like. It is not
possible to extrapolate the cost structures of this one example to the NBN as a
whole, for example providing broadband services to regional and remote areas of
the country.
3.70
The committee notes that the government's assessment of the cost of
building the NBN at around $43 billion (on the assumption of no deal with
Telstra) was confirmed by the McKinsey/KPMG Implementation Study that the
government released in May 2010.[64]
Furthermore, the detailed NBN Co Corporate Plan, released in December 2010,
assessed the required capital expenditure for the NBN, assuming a deal with
Telstra, at $35.9 billion.[65]
3.71
An independent assessment of the NBN Co Corporate Plan by Greenhill
Caliburn validated the key assumptions made by NBN Co and found that the plan
provides the government with a reasonable basis on which to make commercial
decisions about NBN Co. The report found that NBN Co's Corporate Plan...
... has been completed to high professional standards,
providing the level of detail and analytical framework that would be expected
from a large listed public entity evaluating an investment opportunity of
scale.[66]
3.72
Against this background the committee considers that Professor Green's
observations about the cost of the rollout of a network need to be confined to
networks of a scale with which he has direct experience.
Recommendation 2
3.73 Subject to the amendment passed by the House of Representatives
regarding the application of the Freedom of Information Act 1982 to NBN
Co, the committee recommends that the Access Bill be passed.
Senator Doug Cameron
Chair
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