House of Representatives Committees

| Parliamentary Joint Committee on National Broadband Network

Preliminary pages

Chair’s Foreword

This is the First Report of the Joint Committee on the National Broadband Network, one of the largest committees in Australian parliamentary history, with currently 57 participating and full voting members. The sizeable membership of the committee demonstrates the commitment to better information communication technology (ICT) for all Australians amongst parliamentary colleagues, as well as a high degree of political interest in the National Broadband Network (NBN) more specifically.

There is a broad consensus in both the Parliament and the community on the importance of better ICT. A recent report by Deloitte Access Economics titled The Connected Continent: How the internet is transforming the Australian economy found that the direct contribution of the internet to the Australian economy “is set to increase by $20 billion over the next five years from $50 billion to roughly $70 billion.” The report estimates that approximately 80 000 more Australians will be employed in areas directly related to the internet as a result.[1]

How to deliver better ICT is a hotly contested issue and one of the political divides of the moment. With this in mind, this committee has worked hard to focus on its parliamentary oversight responsibility of the rollout of the NBN, and to emphasise that it is not a “clearing house” for policy differences. I thank all Members of the committee for respecting the role that we have as a committee.

The committee is guided by three basic documents in the performance of its oversight and scrutiny role of the NBN. These are the:

Government commissioned NBN Implementation Study, dated 6 May 2010;
NBN Co Corporate Plan 2010-2013, dated 17 December 2010; and
Government’s Statement of Expectations for NBN Co, dated 17 December 2010 (issued on behalf of the Government by the Shareholder Ministers, Senator the Hon Stephen Conroy, Minister for Broadband, Communications and the Digital Economy and Senator the Hon Penny Wong, Minister for Finance and Deregulation).

These key documents are available at:

www.nbnco.com.au/assets/documents/nbn-co-3-year-gbe-corporate-plan-final-17-dec-10.pdf

www.dbcde.gov.au/broadband/national_broadband_network/national_broadband_network_implementation_study

These documents need to be read alongside the ongoing work schedule for the NBN. To understand the time flow, the committee has included a diagram from the NBN Co Corporate Plan in Figure 2.7.

In its next review period, the committee intends to pursue a number of issues raised in these foundation documents, including when and how private equity will be engaged in the wholesale platform.

Many Australians are under the misconception that NBN Co is building a Government-owned monopoly to own and run the wholesale platform at taxpayers’ expense, indefinitely, with no return to the Government on its very large initial capital expenditure. This is an incorrect assessment of what the final product will look like, and what the true return to the taxpayer really is. The end product will, more than likely, be a privately-owned and operated wholesale platform, with a return on revenue through engagement with retail providers as the platform is built, and then the opportunity for a significant private sale once the NBN is complete.

As a consequence, a very important question the committee will be pursuing is the question of when and how private equity and finance will be engaged in the wholesale platform, and at what financial return to Government, and ultimately taxpayers. The political debate is obscuring the fact that what is being built will be an asset on the financial books of the taxpayer. And as with all assets - everything from a house to a business investment - if it is built efficiently and effectively, and if private equity is engaged in the right way at the right time, an initial spend can lead to a much larger return in the future. With that in mind, this report flags that this committee will be exploring this question further: the committee will seek to satisfy itself about the Government’s view of where the points of entry are for private investment alongside public investment, and to make sure maximum return on the Government’s investment is secured on behalf of Australian taxpayers.

Recommendation 4 reflects this intent, by calling on the Government to publish a detailed statement outlining the productivity, jobs and competitive benefits of the impact of the NBN on competition (at the wholesale and retail levels) including the impact of the Australian Competition and Consumer Commission’s ruling to increase the number of points of interconnect for the NBN from 14 to 121.

In terms of performance scrutiny, if the committee is to properly provide parliamentary oversight of the NBN it needs to have at hand some agreed Key Performance Indicators (KPIs) and measures to examine. The committee was expecting to have received these by its mandated reporting date of 31 August 2011, so that it could report against them.

On 7 July 2011, the Shareholder Ministers wrote to the committee advising that these performance measures will be provided by mid September 2011. This timing is unfortunate because it means the committee is unable to report against NBN rollout performance in its First Report. The committee asks for this performance information to be provided as a matter of priority and in future, in a timely manner to allow full and more adequate parliamentary oversight of Australia’s largest infrastructure project.

When the range of performance indicators are finalised by the Department of Broadband, Communications and the Digital Economy together with the NBN Co, the committee will be seeking a biannual report on these KPIs so that it can report against these agreed measurements. Some committee Members were keen for the committee to be given quarterly or monthly reports from NBN Co, arguing the committee is akin to a board of directors. The majority of committee Members, however, recognised that the committee is not a board of directors and that its parliamentary oversight role is broader; and its reporting requirements are twice yearly, as a consequence, performance measure reporting by NBN Co should be likewise.

Recommendation 1 therefore calls on the Government and the NBN Co to provide the committee with NBN rollout progress reports every six months, no later than three months before the committee is due to report to the Parliament.

In the absence of a formal performance reporting document, the committee has relied on the public hearing evidence of 5 July 2011 from NBN Co CEO, Mr Mike Quigley. At the hearing Mr Quigley reported to the committee that as at the end of June 2011, the NBN Co had passed some 14 256 Brownfields premises (more than the 13 000 forecast in the NBN Co Corporate Plan). Mr Quigley added that the interim satellite service was launched on 1 July 2011 which is expected to cover some 200 000 premises (more than the 165 000 forecast in the NBN Co Corporate Plan). However, progress with Greenfields sites has been delayed, due to the policy discussions and the need to ‘bed-down’ legislative amendments in the first half of 2011.[2]

Based on Mr Quigley’s statements, NBN Co has exceeded several performance targets as per the schedule on page 15 of the NBN Co Corporate Plan. However, as previously stated, the committee is very keen to have a broader set of KPIs and measures made available to it, to enable it to provide proper oversight of the NBN rollout, so that issues in the NBN Co Corporate Plan, the Government’s Statement of Expectations, and related issues (i.e. Workforce issues) can receive further scrutiny.

A final theme to emerge in evidence received to date is the question of just how “NBN ready” Government and its agencies are. This was also a key theme of the recent report about the role and potential of the NBN by the House of Representatives Infrastructure and Communications Committee titled Broadening the Debate (tabled in the Parliament on 25 August 2011). This committee agrees with its Infrastructure and Communications committee colleagues on this consideration.

While the focus of many has been on a nine-year, complex engineering build of the NBN or on the size of the capital expenditure for the NBN, a number of critical, secondary policy considerations need to be prioritised by the Government for the NBN to deliver maximum value. Many of these were addressed in the Infrastructure and Communications Committee’s report and will continue to be pursued by this committee. These include issues such as: Australian content and copyright law, individual privacy and national security, taxation administration, Government use of the internet, and timely and relevant data collection opportunities.

The committee’s Resolution of Appointment requires it to report once only this year, by 31 August 2011. Due to the full range of issues, including the many mentioned above, the committee will again report to the Parliament before the end of the year. The second report will examine the agreed performance information pending from the Government, further work on private sector engagement for the NBN in both the wholesale and retail sectors, workforce issues, and the NBN-readiness of Government generally. As well, with several critical agreements due to be resolved in the coming months– such as the NBN Co agreement with Telstra which is expected to go to Telstra shareholders on 18 October– the committee can address these matters in more detail.

I thank the Secretariat for their work to date on what is a very challenging public policy oversight role. And once again, I thank all committee Members for, above all else, focusing on Australia’s need for speed in the development of ICT over and above all other policy or political considerations.

Robert Oakeshott MP

Chair

Committee Membership

Chair	Mr Robert Oakeshott MP
Deputy Chair	Mrs Yvette D’Ath MP
Members	Mr Paul Fletcher MP	Senator Simon Birmingham
	Mr Luke Hartsuyker MP	Senator Carol Brown
	Mr Ed Husic MP	Senator Doug Cameron
	Hon Sussan Ley MP	Senator Mary Jo Fisher
	Ms Michelle Rowland MP	Senator Scott Ludlam
	Mr Mike Symon MP	Senator the Hon Ian Macdonald
	Hon Malcolm Turnbull MP	Senator the Hon Ursula Stephens

Participating Members

Senator the Hon Eric Abetz	Senator Steve Hutchins (from 24.3.2011 until 30.6.2011)
Senator Judith Adams	Senator the Hon David Johnston
Senator Chris Back	Senator Barnaby Joyce
Senator Guy Barnett (until 30.6.2011)	Senator Helen Kroger
Senator Cory Bernardi	Senator Gavin Marshall (from 24.3.2011)
Senator Catryna Bilyk (from 24.3.2011)	Senator the Hon Brett Mason
Senator Mark Bishop (from 24.3.2011)	Senator Anne McEwan (from 24.3.2011)
Senator the Hon Ronald Boswell	Senator Julian McGauran (until 30.6.2011)
Senator Sue Boyce	Senator the Hon Nick Minchin (until 30.6.2011)
Senator the Hon George Brandis SC	Senator Claire Moore (from 24.3.2011)
Senator David Bushby	Senator Fiona Nash
Senator Michaelia Cash	Mr Paul Neville MP (from 10.5.2011)
Senator the Hon Richard Colbeck	Senator Kerry O’Brien (from 24.3.2011 until 30.6.2011)
Senator the Hon Helen Coonan (until 22.8.2011)	Senator Stephen Parry
Senator Mathias Cormann	Senator Marise Payne
Senator Trish Crossin (from 24.3.2011)	Senator Helen Polley (from 24.3.2011)
Senator Alan Eggleston	Senator Louise Pratt (from 24.3.2011)
Senator the Hon John Faulkner (from 24.3.2011)	Senator the Hon Michael Ronaldson
Senator the Hon Alan Ferguson (until 30.6.2011)	Senator Scott Ryan
Senator Concetta Fierravanti-Wells	Hon Bruce Scott MP (from 26.5.2011)
Senator Mitch Fifield	Senator the Hon Nigel Scullion
Senator Michael Forshaw (from 24.3.2011 until 30.6.2011)	Senator Glenn Sterle (from 24.3.2011)
Senator Mark Furner (from 24.3.2011)	Senator the Hon Judith Troeth (until 30.6.2011)
Senator the Hon Bill Heffernan	Senator Russell Trood (until 30.6.2011)
Senator Gary Humphries	Senator John Williams
Senator Annette Hurley (from 24.3.2011 until 30.6.2011)	Senator Dana Wortley (from 24.3.2011 until 30.6.2011)
	Senator Nick Xenophon

Committee Secretariat

Committee Secretary	Mr Peter Stephens
Inquiry Secretary	Ms Stephanie Mikac
Principal Research Officer	Dr Bill Pender

Terms of Reference

The resolution of appointment establishing the Joint Committee on the National Broadband Network was passed by the House of Representatives on 1 March 2011 and by the Senate on 3 March 2011 and provides:

(1)That a Joint Committee on the National Broadband Network be appointed to inquire into and report on the rollout of the National Broadband Network (NBN);

(2) That every six months, commencing 31 August 2011, until the NBN is complete and operational, the committee provide progress reports to both Houses of Parliament and to shareholder Ministers on:

The rollout of the NBN, including in relation to the Government’s objective for NBN Co Limited (NBN Co) to:

(i) connect 93 per cent of Australian homes, schools and businesses with fibre-to-the premises technology providing broadband speeds of up to 100 megabits per second, with a minimum fibre coverage obligation of 90 per cent of Australian premises; and

(ii) service all remaining premises by a combination of next-generation fixed wireless and satellite technologies providing peak speeds of at least 12 megabits per second;

(b)The achievement of take-up targets (including premises passed and covered and services activated) as set out in NBN Co’s Corporate Plan released on 20 December 2010 as revised from time to time;

(c) Network rollout performance including service levels and faults;

(d) The effectiveness of NBN Co in meeting its obligations as set out in its Stakeholder Charter;

(e) NBN Co’s strategy for engaging with consumers and handling complaints;

(f) NBN Co’s risk management processes; and

(g)Any other matter pertaining to the NBN rollout that the committee considers relevant.

List of Abbreviations

ACCC	Australian Competition and Consumer Commission
ACMA	Australian Communications and Media Authority
ACT	Australian Capital Territory
BOT	Build-Operate-Transfer
committee	Joint Committee on the National Broadband Network
CAC ACT	Commonwealth Authorities and Companies Act 1997
CAN	Customer Access Network
CEO	Chief Executive Officer
CSO	Community Service Obligations
CVC	Customer Virtual Circuit
Cwlth	Commonwealth
DBCDE	Department of Broadband, Communications and the Digital Economy
EPOS	Electronic Point of Sale
Fibre Deployment Bill	Telecommunications Legislation Amendment (Fibre Deployment) Bill 2011
FMA Act	Financial Management and Accountability Act 1997
GBE	Government Business Enterprise
HFC	Hybrid Fibre Coaxial
ISP	Internet Service Provider
KPI	Key Performance Indicator
FTTN	Fibre-to-the-Node
FTTP	Fibre-to-the-Premise
Mbps	Megabits per second
NBN Co	NBN Co Limited
NBN	National Broadband Network
NSW	New South Wales
PC	Productivity Commission
POAAL	Post Office Agents Association Limited
POI	Points of Interconnect
RBBP	Regional Backbone Blackspots Program
RDS Far West NSW	Regional Development Australia Far West New South Wales
RFDS	Royal Flying Doctor Service
RSP	Retail Service Provider
SAU	Special Access Undertaking
SoE	Government’s Statement of Expectations
USO	Universal Service Obligations
WBA	Wholesale Broadband Agreement

Recommendations

1 Reporting on the Rollout of the National Broadband Network

Recommendation 1

The committee recommends that the NBN Co together with the Department of Broadband, Communications and the Digital Economy, commencing for the first quarter 2011-2012, provide a six-monthly report on the progress of the rollout of the National Broadband Network, using established Key Performance Indicators and performance measures, no later than three months before the committee is due to report to the Parliament.

2 Rollout of the National Broadband Network

Recommendation 2

The committee recommends that Government agencies take measures to ensure they are ready for the rollout of the National Broadband Network (NBN), prior to receiving and working with the NBN for service delivery.

Recommendation 3

The committee recommends that NBN Co Limited publish a detailed account of impacts on timing and cost of the National Broadband Network as a result of the time taken and resources used to complete the Binding Definitive Agreements between NBN Co and Telstra and NBN Co and Optus, and the decision to increase the number of Points of Interconnect from 14 to 121.

Recommendation 4

The committee recommends that the Minister for Broadband, Communications and the Digital Economy publish a detailed statement outlining the productivity, jobs and competitive benefits of:

the overall rollout of the National Broadband Network for the cost-efficient provision of basic broadband infrastructure for all Australians;
how competitive markets will operate at the wholesale and retail levels, with particular reference to the impact on small, existing internet service providers and other fibre deployment companies; and
the impact on wholesale and retail competition of the increase of the Points of Interconnect from 14 to 121.

Recommendation 5

The committee recommends that NBN Co:

publish timeframes for the rollout of National Broadband Network (NBN) services to regional and remote areas and communicate these to the areas to which they apply;
investigate the impact of the transition to the NBN on currently available levels of service for satellite technology; and
taking into consideration findings of this investigation, formulate contingency plans against potential reduction of capacity in regional and remote areas as a consequence of the NBN rollout, if required.

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