Q&A: Communications Minister, Senator Stephen Conroy, on NBN Co business case

Q&A: Communications Minister, Senator Stephen Conroy, on NBN Co business case

ARN speaks with the Communications Minister about NBN Co's controversial business plan about issues that affect the tech world

David Ramli (DR): How confident are you that investors will jump at the 7.04 per cent rate of return? And what information would you give to prospective investors?

Communications Minister, Senator Stephen Conroy (SC): Once people see the cash flow that will be generated by this it will become a very attractive and stable long-term purchase/investment. If you look at the fact that we are closing down the copper and that we’re closing down the HFC (hybrid coaxial network) and that this will be a monopoly fixed-line to the home it’s a very stable and secure investment. And if you have a look at the cash that’s being generated in the forecasts it’s very, very substantial.

DR: How soon can we see the shutdown of HFC and Copper networks?

SC: Well we’d have to finalise all the aspects of the Telstra deal and it’s indicated they’ve said they’ll approve it some time towards the April/May/June timetable. Providing that all happens then the rollout can start in conjunction with Telstra after that. But we have to get all those financial details, the shareholders have to approve that and then you can start a process of identifying areas where you can connect the fibre and decommission the copper.

DR: But a rough idea – when would you like to see HFC and Copper start getting decommissioned?

SC: I’m not an engineer and I haven’t actually had a lengthy conversation about this (with NBN Co). I’ve been talking more about when we can connect and how many premises will be connected to…there’s an engineering aspect that I wouldn’t want to speculate on about how simple it is (to decommission networks) and I’m sure it’s not as simple as it sounds to cut the copper off.

DR: And you’ll be going ahead with the shutdown despite the Organisation for Economic Development’s (OECD) belief those networks should remain?

SC: Absolutely. If the OECD wants to believe you can deliver the next generation of innovations on copper technology then they can cut off the OECD from all fibre and start using wireless. This is a ludicrous proposition, it’s an economist’s concept that tries to make assumptions that all these things are equal – well it’s not. You can’t get innovations or applications or the sort of bandwidth they need on copper if you live more than 15km away from an exchange.

If everyone in the OECD wants to live within 1500 metres of an exchange then they can get the sort of promise that ADSL 2+ offers but if you look at the report there are some very straightforward numbers on how many people live within the actual ADSL2+ footprint, rather than the claimed footprint.

DR: One assumption is that there will be no wireless-only businesses. Is that sensible given the increasing speed of wireless broadband solutions?

SC: I don’t think there are any wireless-only businesses now. I think that’s a very sensible assumption and I haven’t met anyone who has cut off their fibre connection to go pure wireless in the business world.

There’s a couple of really good pages that deal with this and if you look at the actual capacity of wireless, rather than the headlines, then the distance from tower combined with the number of people using at a given time shows wireless will always be complimentary to fibre. Even Malcolm Turnbull won’t cut off the fibre to his home or office.

DR: The 400-page business case has been cut to 160-pages for the public. Does commercial in confidence content really run for an entire 240-pages?

SC: The information that has been held back…allows prospective tenderers for various things like satellite and fibre to make an estimate on what they think we think they should pay and it’s like a house auction – you don’t announce before an auction what the reserve is. The whole purpose of a tender is to get the best possible, cheapest product for taxpayers to maximise outcomes. So we’re very comfortable and it would be an act of commercial insanity to reveal the information.

If you have a look through the 160-odd pages you’ll actually find there’s a fairly substantial amount of information there so before you jump to wanting to claim there’s some sort of information missing I’d invite everyone to actually read what’s been released because it is bloody comprehensive.

DR: How has NBN Co managed to maintain profitability despite increasing the number of PoIs from 14 to 120 when the summary claimed it may not?

SC: The issue was that if there were higher prices in regional areas there would be a smaller takeup there. But the ACCC has indicated it would be prepared to regulate a price for backhaul if necessary. Providing they do that, there should be a minimal impact on actual takeup rates because the prices would be comparable.

DR: Internode CEO, Simon Hackett, has complained about the number of Points of Interconnect (PoIs) and said the high number will damage smaller ISPs chances as opposed to larger ISPs. Would you agree with that? Should the NBN be helping smaller ISPs by having fewer PoIs?

SC: One of the things the ACCC took into account was Simon Hackett’s views and people like himself who consider that a smaller number was better than a larger number. It became this quite absurd argument that more PoIs meant a cheaper price, which is incorrect.

What the ACCC did was it balanced all these things. It’s not Government that should make a decision like that, it’s not the NBN’s. We went to the competition regulator and they looked at this themselves and this is their recommendation we’ve adopted.

DR: In terms of pricing, is $24 per month for the most basic plan the lowest price available to ISPs? Will dial-up Internet be available?

SC: People who are just using voice services and don’t want broadband will still be able to get a line for the same price and make the switchover…(for dialup) it’ll be up to people whether they want to use it anymore given the capacity they’ll have available to them for a very, very modest price.

DR: Does this mean the cheapest price anybody can pay is $24 per month for broadband? Would ISPs offer below wholesale prices?

SC: You would have to ask the ISPs. If you look at the pricing some have offered in Tasmania, they’ve offered and advertised clearly 6-12 month plans to attract customers. It’s like any new business – you get new offerings and a whole range of ISPs will now be able to compete.

This is a better product than most Australians dream of getting at the moment. It’s better than what the majority of people using ADSL 2+ get in truth so this is not a ‘basic’ product.

DR: The Government’s investment in the NBN has increased by $200 million between the business plan summary and the full business plan from $37.5 to $37.9 billion. Is this due to the PoI increase from 14 to 120?

SC: You shouldn’t draw any one individual reason. There’s a whole range of reasons from battery backups being included to a decision on greenfields that has a more significant impact than the PoIs. I think NBN Co CEO, Mike Quigley, says in the document the PoI decision has a relatively small impact in the overall changes.

But there are two sides to PoIs. One is they don’t build as much backhaul so there’s a saving there as well as an extra cost in having to access more buildings that Telstra currently own.

DR: With labour shortages in ICT already a major issue, is the Government or NBN Co going to do anything to fix that?

SC: Mike (Quigley) talked specifically about that as a risk and he indicated they’re in discussions. He said this morning that it isn’t so much the trained, skilled side of the debate that’s the problem but it’s a general labour issue and they’ve been talking about it to people. But this will be done over a very long period of time and we’re retraining copper techs to become fibre techs and the Government’s putting money into that.

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Tags NBNTelstranbn conational broadband networkSenator Stephen ConroyCommunications Ministerbusiness casepoints of interconnectPoIs


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