PM Agenda with David Speers
Sky Studios Canberra
Monday 23 October 2017
E & OE
With me now is
Communications Minister Mitch Fifield, thank you very much for your time.
Good to be with
So Bill Morrow today, speaking with Fran Kelly on
radio this morning, said and I quote: ‘the reality is the price people are paying
today and the price retailers are paying the NBN is not enough to recover even
the $49 billion we’re intending to spend.’ Is that right that taxpayers are not
going to get their money back, unless something changes?
this is a new model for retailers and it’s a new product environment for
consumers. Retailers are obviously competing for market share. They’re obviously competing on the basis of
price. But what they should also be doing is competing on the basis of quality.
We want to see retailers delivering what it is that they promise their
consumers that they will. We also want retailers to explain the full benefits
of the NBN. And
from the consumer perspective; consumers haven't before had to consider speed
as a variable. So, these are things that consumers are getting used to. They're
also things that retailers are getting used to. But I've got to say, myself and
the ACCC are reaching a point where patience will run out. Retailers have got
to deliver what they promise. They've got to provision their customers
according to their contracts and the products that they promise.
So what do you mean by that?
That patience is running out? Retailers need to spell out a lot more clearly
what people are getting for what they're paying?
That’s right. And the ACCC have given very clear direction
to retailers as to how they should advertise their products. And the ACCC have made it clear that they're
not satisfied with the clarity of advertising that there’s been before.
What's an example of that? Is
it a retailer saying ‘get the NBN for only 30 bucks a month', but not saying
what they're actually getting?
right. The other important task that
we’ve given the ACCC is to embed four thousand probes in people’s premises
around the country. So that the ACCC can report what the speeds are that people
are experiencing, by retailer. So, I
think transparency is going to be very important when it comes to how retailers
But isn’t the
problem, if you said to a customer, you were very clear and said you were going
to get 12 mbps or you are going to get 25 mbps, most don’t really know what
that is and what they need?
right. For high definition Netflix,
you’ll probably need about 5 mbps. In
the pre-NBN world no-one thought in terms of speeds because you didn’t have an
option when it came to speed tiers. So,
this is something that the community will come to understand better. But look we absolutely recognise as a government
that people don’t always get the experience that they’re expecting, that they
want and that they deserve. That’s why we have the ACCC embarking upon a couple
of important exercises.
back to that initial point. Will taxpayers ever see a return on the NBN?
I guess there
are three parts to the answer to that. The first is that the NBN will become
cash flow-positive in 2021. So what comes in will be greater than what goes
out. Also NBN have an $19.5 billion loan
from the Government, which will be refinanced when it comes to 2021. So that
will be returned. We entered the loan
agreement on behalf of NBN because we could borrow at better rates than they
could. They had the capacity to, and
could have done it commercially, but that was a decision that we took. Then you talk about the $29 billion of
Government equity, and the rate of return out to 2040 will see a modest return
on that. But the reality is…
Will we get the
The reality is
whether it’s us in government or if the Labor Party still have this view, which
they did in government, the NBN will be sold well before that point in time.
the answer then? Are tax payers going to take a bath on this or are we going to
get the money back?
answer to that is partly, it depends.
When it comes time to sell the NBN we don’t yet know what the proceeds
will be for that.
Alright, so at
the moment it’s not making much of a return by the sounds of it. It’s not
certainly something that a commercial buyer would be interested in.
NBN is still,
in a sense, a start-up. It’s still in the build and rollout phase, so its costs
are still greater than the revenue that comes in. So every person who’s hooked
up to the NBN increases the revenue. And
by 2021 NBN will become cash flow positive.
then maybe we’ll have a better idea of what sort of return it’s delivering and,
I mean, when would it be put up for sale. I mean are we talking a long way down
the track? What are your plans on that?
It can’t be
sold according to the Act until the rollout is complete. The Act also requires –
Which is when?
2020. The Act
also requires that there be a Productivity Commission Review before any action
is taken to move towards sale. But it
was the intent of our predecessors…
intent though, would you like to sell it?
absolute intent to sell NBN. Has been since we’ve been in government. And that
was also the position of our predecessors.
And would you
do that in the next term of parliament?
Well, we can’t
do anything until it’s fully rolled out.
But it could be
the next term of parliament – 2020?
intention to not keep NBN as a government entity. And that is a bipartisan
So it could be sold in the next
Look, that's possible. As I
say, we've got to roll it out first according to the Act, and we've got to have
the Productivity Commission enquiry undertaken.
And you'd want to get the best
price for it too, that's for sure and might take some time before it's very
attractive to the market. Look, the other point Bill Morrow made this morning,
he said 'the NBN has to pay Telstra a heap of money the way this has been
structured. And then NBN has to recover
that money’. That equates to $15 a month for every consumer to pay those fees
to pay Telstra. Is there anything the Government can now do about that?
This is a function of the
model that we have. New Zealand embarked upon the approach of incrementally
upgrading the existing network using the incumbent telcos, on a structurally
separated basis, and using a mixture of public and private money. So you have
incumbent telcos who are able to upgrade their network and able to use their
existing pits and pipes. The Labor Party decided 'no, no, no, no. We're not
going to pursue that approach. We
are going to set up a brand new, government owned, bespoke organisation, to
build a new network and to essentially close the old network’. So when you have got that situation NBN has
to make payment to telcos who have those sorts of assets like pits and pipes to
access them. So that’s a function of
Okay so there nothing that can be done about that. They will all have, we will all have to keep
paying $15 a month to the NBN for the privilege to use Telstra’s pits and
Look as much as we think that we might like to wind the clock back, have
a clean sheet of paper, and embark upon a more sensible approach. That is not the path that Labor committed us
to. But, the good news is, we have been
able to do a number of things to help improve upon Labor’s flawed model. Which was unaffordable. It was unachievable. And it was
Some of the things you’ve done is to go with copper connections from the
node to the house, for example. We’ve all heard the complaints about how on one
street they have got fibre to the premises and terrific NBN. And on another other street where it’s fibre
to the node and the rest is on copper.
They don’t and you end up with this digital divide.
Well no the digital divide would be if we had persisted with Labor’s
approach. You would have had people
waiting until 2026 – 2028 to get fast broadband. So the digital divide that existed in the pre
NBN world, particularly between metro and regional areas, would have continued
for longer. We are addressing the
digital divide by seeing the NBN completed by 2020, six to
eight years sooner than would have been the case. And the interesting stat, and
I think you might have touched on this earlier when you were talking to PVO, is
that whether you are talking fibre to the node or fibre to premise, about the
same percentage of people opt for packages of 25 mbps or less, about 80%. And it doesn’t matter whether you are talking
fibre to the prem or fibre to the node.
That is the empirical evidence.
Is there a problem too with the rate of return that the NBN has to pay
the government? This gets back to
whether it is going to make money for taxpayers or not. But the rate of return means they do have to
charge the retailers more than they otherwise would.
Well the rate of return is a pretty modest one. It’s 1% above the long term inflation rate. And that allows NBN to cover their costs and
also to make provision, so in the future as and when it’s required, they can
upgrade the network. Now Labor talk a lot about reverting to full fibre or more
fibre. Now that would be additional
cost. If there was additional cost Labor
would need to have a higher rate of return.
And in fact when Labor were in office their original rate of return was
7%. Ours is 3.2 to 3.7%. So Labor’s
internal rate of return was predicated on Australians paying $500 more a year
for their internet. So whenever you hear
Labor talking about more fibre. Whenever you hear Labor talking about changing
their approach. What you should hear is more cost for the build, and more cost for
consumers. And that was their plan when
they were in government.
Now can you clear up for us this argument about 5G the emerging wireless
technology? It will to some degree put more competitive pressure on NBN because
if people can go with that for fast broadband rather than having a hook up to
the NBN. Bill Morrow mentioned some sort
of levy on 5G users is the government interested in that at all?
Look we are not considering a levy on mobile or wireless. What we have before the Parliament at the
moment is legislation to establish a Regional Broadband Scheme. Now what that will do is make transparent the
current internal cross subsidy that NBN has to support the non-profitable services
in rural and regional areas fixed wireless and satellite. Now the way that the internal cross subsidy
will become more transparent is that there will be a levy, placed on NBN and
other fixed line competitors. Now it
won’t mean additional cost for NBN customers because they are already
effectively paying that. What it will
mean is that couple of percent of the market of fixed broadband will have this
levy attached. But we’re not examining
applying that to mobile or wireless network.
Those networks are not substitutable for NBN. If you just look at the cost. It’s about $6 on average per gigabyte of data
when you are talking about mobile versus 55 cents when you are talking NBN.
Just finally Mitch Fifield before we go.
As you know consumers, quite a lot of them, are complaining more and
more as more get connected, as the government points out. But you are getting a lot of complaints about
this and we still don’t know if this is going to deliver a return for
taxpayers. Is it becoming a political
headache for you?
Well I am focused on the delivery of the NBN. I know Labor are focussed very much on the
politics of this. We want to deliver
it. We want Australians to have fast
broadband. They will by 2020. Six to eight years sooner than would have been
the case under or predecessors. But we
recognise that people do have experiences that aren’t all that we want them to
be and we are working hard to improve that.
Communications Minister Mitch Fifield Mitch Fifield.