PM Agenda with David Speers > Mitch Fifield, Liberal Senator for Victoria

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23-October-2017

 

PM Agenda with David Speers

Sky Studios Canberra

Monday 23 October 2017

3:30pm

E & OE

 

SPEERS:

With me now is Communications Minister Mitch Fifield, thank you very much for your time.

FIFIELD:

Good to be with you.

SPEERS:

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?

FIFIELD:

Well 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.

SPEERS:

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?

FIFIELD:

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.

SPEERS:

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?

FIFIELD:

That’s 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 conduct themselves. 

SPEERS:

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? 

FIFIELD:

Well, that’s 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. 

SPEERS:

But, coming back to that initial point. Will taxpayers ever see a return on the NBN? 

FIFIELD:

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…

SPEERS:

Will we get the lot back?

FIFIELD:

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.

SPEERS:

Alright, what’s the answer then? Are tax payers going to take a bath on this or are we going to get the money back?

FIFIELD:

Well, the 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.

SPEERS:

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.

FIFIELD:

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.

SPEERS:

Alright and 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?

FIFIELD:

It can’t be sold according to the Act until the rollout is complete. The Act also requires –

SPEERS:

Which is when?

FIFIELD:

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…

SPEERS:

What’s your intent though, would you like to sell it?

FIFIELD:

It’s our absolute intent to sell NBN. Has been since we’ve been in government. And that was also the position of our predecessors.

SPEERS:

And would you do that in the next term of parliament?

FIFIELD:

Well, we can’t do anything until it’s fully rolled out.

SPEERS:

But it could be the next term of parliament – 2020?

FIFIELD:

It’s our intention to not keep NBN as a government entity. And that is a bipartisan approach.

SPEERS:

So it could be sold in the next term?

FIFIELD:

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.

SPEERS:

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?

FIFIELD:

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 Labor’s model.

SPEERS:

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 pipes.

FIFIELD:

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 undeliverable.

SPEERS:

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.

FIFIELD:

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.

SPEERS:

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.

FIFIELD:

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.

SPEERS:

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?

FIFIELD:

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.

SPEERS:

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?

FIFIELD:

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. 

SPEERS:

Communications Minister Mitch Fifield Mitch Fifield.

FIFIELD:

Thanks David.

 

[ends]