SPEECH - ADDRESS TO COMMSDAY SUMMIT 2018 - 10 APRIL 2018

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Values and priorities

The opening ceremony has become a key feature of major sporting events like the Olympic and Commonwealth Games.

There, nations project their values and identity to the world: Who they are and who they want to be.

Like opening ceremonies, communications policies and networks also express a nation’s values and priorities. 

The 5G trials at the Gold Coast Commonwealth Games show Australia is competitive both on and off the sports field, and reflect our early-adopter embrace of new technology.

Our mobile operators are top contenders in the global race to deploy 5G services. As a nation we have a strong track record and are in good form when it comes to mobile connectivity.

Similarly, the rollout of our national broadband network speaks to the value we place on economic growth and prosperity – as well as inclusion – when it comes to the digital economy.

But it also shows that, in the land of the fair go, fairness is not self-executing.

As one ABC News report on Sunday night said, of NBNCo’s launch of fibre to the curb:

“[C]ustomers connected and those in regional areas will miss out, prompting some to raise concerns about a digital divide”

and

            “Just how you fare in the NBN lottery is still a matter of luck”.

Generally the idea that something is unfair offends the sensibility of most Australians – whether in sports, or communications.

With the scale and pace of change in communications, we must be wary about ‘what Ross Garnaut and others have labelled our country’s “great complacency” – the “she’ll be right” attitude that assumes because we have prospered in the past, it must inevitably continue’.

Digital divide

Inequality in the 21st century has a new dimension – a digital one.

Over the course of history, cycles of inequality have oscillated with the upheavals wrought by new technology, from the steam engine, to electrical power, to electronics and digitisation.

New faultlines are emerging with the advent of 5G, because of the range of new services it enables.

The Department of Communications is not yet settled on whether mobile wireless technology itself, or 5G in particular, is a ‘general purpose technology’ typically associated with industrial revolutions.

But the Information Age has equipped us to recognise and respond to inequality as it emerges, and it is imperative that we take steps to promote fairness when we do.

According to the 2017 Australian Digital Inclusion Index, undertaken by Telstra, RMIT and Roy Morgan, a substantial digital divide exists in Australia – and the gap between digitally included and excluded Australians is widening.

For all the celebration of indigenous culture at the Commonwealth Games opening ceremony last week, the sad reality is that indigenous Australians are particularly digitally excluded.  

The same goes for our older Australians, aged 65 plus, and Australians with a disability.

The Australian Household Use of Information Technology report, published by the Australian Bureau of Statistics in March 2018, also shows a digital divide reflective of larger social and economic inequality in our country.

Across the nation, Australians with low levels of income, education and employment are significantly less digitally included, and the gap between the city and the bush hasn’t narrowed over time.

The troubling irony is that the very people in greatest need of the benefits 5G promises, risk being the most likely to be excluded.

A recent report out of the UK found that the rollout of 5G-enabled smart grids will save British households £450 a year on energy, council tax, and food bills – allowing consumers to choose where they buy energy, for example. Yet we know that low income households are significantly digitally excluded.

Similarly, the Department’s 5G paper, released yesterday, focuses on the potential benefits of digitally delivered healthcare but notes a key barrier is the cost of providing 5G access to those in rural and remote areas.

Moreover, analysis by academics at RMIT and Canberra Universities finds that people over 65 years of age are the heaviest users of health care, yet currently, just over one in five people in this age category access online health services – substantially below the national average of two in five.

New measures are needed to address these problems, lest the Have Nots continue to miss out.

Just as Medicare and superannuation were once radical concepts, which later became mainstream, so too will measures needed to address the digital divide evolve.

But we need to act now, in view of the coming technological shift.

Digital inclusion

Labor’s view is that inequality is not just immoral – it is economically irresponsible. However the Turnbull Government has only recently caught up on the need for a digital inclusion strategy.

Now more than halfway through its fifth year in office, the Liberal Government does not have a digital economy strategy to call its own – but has committed to “launch” one in the first half of 2018. 

Based on the consultation paper, which does mention ‘digital skills’, one would hope a suitable strategy will soon emerge.

After I challenged the Government to articulate its vision for 5G at the CommsDay Melbourne Congress, last year, the Minister released a 12 page 5G Directions paper which, unlike the UK’s 5G Strategy, for example, does not mention digital inclusion or the digital divide once.

It does – however, mention the non-existent national Digital Economy Strategy which is on the way, as I’ve just mentioned.

Since then, the UK Government has updated its Strategy and summarised progress made to deliver against the goals it outlined.

Meanwhile, the Australian Government confirmed at Senate Estimates recently that the 5G Working Group does not have any deliverables and no plans to provide transparency on its work in progress.

Seven years ago, Labor delivered the National Digital Economy Strategy in 2011 and updated it in 2013 – setting the goal of Australia becoming a leading digital economy and laying out the roadmap for delivering Labor’s 2020 vision.

This strategy prioritised ‘Digital skills’, second only to ‘Infrastructure’ as one of the key enablers of a leading digital economy. It noted the need for a comprehensive approach to build digital literacy.

A few years later, in May 2016, the Liberal Government followed Labor’s lead and published an update, but there was a marked shift in the approach.

No longer a ‘strategy’, a paper called ‘Australia’s digital economy update’, dropped any reference to digital skills or digital literacy and didn’t include any sort of roadmap or plan.

Not surprisingly, a focus on ‘digital skills’ does appear to be returning, but precious time has been wasted.

5G and audiovisual media

While they are playing catch-up, there are other areas where this Government hasn’t so much as commenced a dialogue on the program of work needed to adapt our policies and frameworks to 21st century conditions.

As a nation that values the power of the broadcast platform to promote social inclusion, cohesion and diversity, it is way past time the Federal Government commenced a public dialogue to promote these outcomes in the multimedia environment.

As Professor Julian Thomas and others argue, “we shouldn’t focus only on the economic and efficiency gains of [digital] inclusion: the social benefits of connection and access to entertainment and information are considerable, especially for those who are isolated and lonely”.

The broadcast platform remains the anchor to community – not least because of its ubiquity and stability and because it is free to receive – but broadcasters across Australia also utilise a suite of online services and apps to engage their audiences.

With 4G well-established and 5G on the near horizon, we need a sensible dialogue about the future of our media and how best to serve our ethnic and multicultural communities, our indigenous communities, with the suite of complementary platforms that may be available.

Policy and practice divide

There isn’t just a digital divide in this country.

There is also a wide gulf between what this Government says it’s going to do and what it actually does, or fails to do, as the case may be.

A gap between policy and practice; between rhetoric and reality.

Only yesterday, in his speech to this forum, the Minister repeatedly said he was going to discuss communications ‘Beyond 2020’ yet repeatedly he didn’t. 

The year 2020 is only 20 months away.

While 2020 should mark a shift in the landscape – both in terms of technology deployment and the policy and regulatory framework – any thinking beyond the process steps between now and then was light on the ground from the Minister.

If we want a reform agenda that maximises benefits across the economy and society, for citizens and consumers, I submit that the Minister needs to form a longer term view than 2020 and needed to get started yesterday.

This Government’s record in communications is characterised by neglect and delay.

This Minister has utterly failed to produce a Communications Policy Roadmap to guide the transition of the sector in this time of change, despite acknowledging the need for one some time ago.

The ACMA Review talked up the need for efficiency and a more defined role for the regulator at a time of radical change in the communications sector, but the Government took two long years to release the report, and over two years to finalise ongoing appointments to the roles of Chair, Deputy Chair and CEO.

The Spectrum Reforms present an opportunity for a fundamental rethink of pricing and allocation – yet after all this time, it remains to be seen what meaningful re-evaluations and adjustments are to be achieved. 

For all the talk of flexibility, competition and sharing in the brave new world of spectrum management, there are valid concerns that interests of WISPs in regional Australia have not been adequately addressed in the 3.6 GHz allocation process. Though the transition package is substantial, what of the ultimate outcome for consumers?

Broadcast policy. Content policy.  Digital inclusion. The list goes on.

If the Government can’t articulate a vision for what comes after 2020, or lay the groundwork to get one, it suggests they simply don’t know what they stand for or what they value.

Competition and the NBN

I would now like to turn to the subject of competition and the NBN.

The Labor Party gave Australia competition policy.

We introduced the Trades Practices Act.

We opened up capital markets.

We floated the exchange rate.

We removed tariffs, despite the challenging near-term impact this had on working people.

We developed a national access regime to ensure businesses could access significant infrastructure such as airports, electricity, gas pipelines and railway lines.

Yes — we did do all these things – and we did it because promoting competition is in our DNA.

It is not a stretch to assert the flexibility and dynamism of our modern economy is a testament to structural reforms undertaken by the Hawke and Keating Labor Governments.

And these past lessons are not lost on us today.

Central to the efforts of policy makers since that time has been the desire to promote robustly competitive industry structures.

The policy and regulatory environment is a set of signals to business, which responds accordingly.

I want to focus on this today because of the evolving dynamics of competition in the telecommunications sector remain an important issue.

The fault lines of today are not those of two decades ago.

It is important for both the public and industry to understand how Labor thinks about these issues.

Over the past few months, we have seen various headlines proclaim that next generation 5G services will render the NBN redundant.

These arguments have been made in spite of recent ABS statistics reporting that fixed-line networks still carry 92 per cent of internet traffic in Australia – nearly 3.5 million terabytes over the December quarter.

Furthermore, nearly three fifths of the fixed-line footprint — 5 million of the expected 8.6 million active services — are yet to connect to the NBN.

It is a fact that the mobile networks we have today are not built to handle the volumes of traffic supported by the fixed network.

Nor are they designed to handle the peak hour demand seen in the residential home broadband market.

For these networks to carry 20 per cent of the total domestic traffic load, it would likely require a material increase in capital investment that would, presumably, have the effect of increasing prices.

So the claim that 5G is going to replace the NBN, or render it unnecessary, is simply not a useful, factual or relevant frame for policy discussion.

My view has always been that the two are complementary and will create value for society in different ways.

This does not mean wireless networks won’t present a significant challenge to the NBN.

Mobile will present a value proposition to particular segments of consumers.

This includes consumers who have modest usage requirements, people in the inner cities and those who receive poor speeds or reliability over the copper network.

Some have suggested Labor should be worried about 5G.

We aren’t.

As I’ve made clear, including at this forum in the past – we are very excited about 5G.

We are obviously dismayed the multi-technology mix has reduced the competitiveness of the NBN, as any potential shareholder would be.

Nearly 1 in 3 consumers in the copper footprint can’t achieve over 50 megabits per second.

And NBNCo’s competitors know where most of these homes are.

If wireless were to take an extra 5 per cent of market share relative to assumptions in the current NBN Corporate Plan, it would — all things being equal — reduce $4 billion in revenue streams to NBN, at present value, over the course of the current business plan from 2020 out to 2040.

Notwithstanding these challenges, the competition NBN will receive from wireless is, on the whole, a good thing.

That is because infrastructure-based competition, when oriented towards the long term interests of end-users, is a good thing.

That is the principle.

The NBN has never been an end in and of itself.

It was always a means to an end.

That end being the consumer: the student, the entrepreneur, the small business owner, and the broader social and economic benefits to the nation at large.

Whilst NBN will have an ability to control its operations, it may not necessarily be able to control its own destiny.

Competition, and the cost recovery arrangements that have potential to distort it, will take place within whatever parameters, incentives and structures, governments devise.

This is why the task of constructing policy is important and why it needs to be managed carefully.

We recognise that in the end, markets will function, and consumers will make choices based on value.

For this reason there needs to be a more substantive discussion about how we deal with the economics of the multi-technology mix.

Delaying discussion until completion of the rollout risks another two years of policy drift which I do not believe we can afford.

The sooner we can begin clarifying the balance of trade-offs the faster and more effectively a set of long-term arrangements can be implemented.

In order to form these assessments our policy discourse needs to move beyond conceptual debates.

We need modelling and analysis that provides tangible insight into the trade-offs policy makers need to consider.

We are yet to see any public financial analysis of what implications would follow for entry level prices, consumers, and the NBN business case if there were changes to pricing design – such as moving to a flat access fee or a rebalancing between AVC and CVC.

The Government’s approach to Universal Service Obligation reform remains uncertain in both trajectory and substance.

And there is no public analysis about the distributional impact of how a structured write-down — which has been called for in some quarters — might flow through.

This is where I believe that pricing design, price levels, competition settings, funding of regional services, the ownership structure of the last seven per cent and USO reform all begin to join up.

We may be foregoing creative possibilities because of an unwillingness to consider reform in a more holistic manner.

There may be a modest grand bargain of sorts — and there may not.

In any event I am optimistic something better is within our grasp if we are prepared to match lateral thinking with tough decisions.

That does not mean we should make bold decisions for the sake of it.

Such exuberance needs to be avoided — but we shouldn’t be afraid to be bold if the public interest warrants it.

Labor is steadily working through these issues with the modest resources available to us in Opposition.

Several of the key questions we are working through are as follows:

What are consumers willing to pay?

And by extension, where would benefits from any changes in wholesale pricing actually flow? To consumers? To shareholders of retail providers? Or some combination of the two?

What is the relationship between the sustainability of retail profit margins on the NBN and investment in competing wireless networks?

If competition to NBN is indeed robust, is the market best placed to organically temper wholesale prices on its own?  

What synergies exist between the assets NBN will own at rollout completion, USO reform and broader public interest objectives?

And would the realisation of these synergies be constrained under particular ownership structures?

A Government does not need to have a precise answer to all these questions.

But it should have a view.

In this context, I felt that whilst the wide-ranging ACCC communications market study was certainly useful in parts, it was also, perhaps, a missed opportunity to join up the pieces.

I want to deal briefly with recommendation five which proposed the future disaggregation of NBN into competing fixed-line businesses.

As I outlined earlier, 4G and 5G are going to give NBN enough to think about.

My view is that NBN and wireless broadband are the future of infrastructure-based competition for residential broadband in the Australian market.

The market should be designed to encourage competition along this dimension.

Labor does not want to see fixed-line networks duplicating each other because we do not consider this to be efficient investment.

We saw this with the cable wars, and it was simply not productive.

We do not want to see uneven competition in inner city residential basements.

I want to be very clear on this point.

We are comfortable for NBN to be a ubiquitous fixed-line provider because that was always the policy intent.

This is not a religious argument.

It is simply borne out of what has and has not worked over the past twenty five years, and why the NBN was set up.

As Geoff Dixon, the former CEO of Qantas once noted, it is often easy to pronounce oneself in favour of pure competition.

To declare that the more competitors you have, the healthier any given industry will be.

This equation is a simple one, and the economists will usually cheer you most of the way.

However this is often an overly simplistic view of what is a more complex world.

For particular sectors to flourish, and the long-term interests of consumers to be maximised, they need more than competition, they need sustainable competition.

Where market failure exists the Government needs to have a coherent view about the price and quality dimensions along which they want competition to occur.

There is no scientific formula, but as a Member of Parliament my conversations with the community in every corner of this country are helping to form my views.

The public has a far better instinct for these issues than they are often given credit for.

The ACCC market study recommendation for NBN to be broken up into several separate fixed-line entities — contesting each other at the margins — on the basis that it would improve competition.

I should caution, however, this does not mean it stacks up in the real world.

Consumers are the core of our policy focus.

But it would not be wise for any Government to throw taxpayers under a bus in the name of competitive purity.

A leap of faith, in that sense, is not fiscally responsible — particularly if the long-term benefits to consumers, if any, remain highly uncertain.

The fiscal implications of the multi-technology mix are already serious enough.

In the lead-up to the development of the Corporate Plan in 2015, NBN was skilful in persuading the Government that $49 billion was needed to deploy the multi-technology mix.

Once that figure was signed off the incentive for cost discipline went out the window.

The current level of excess is apparent everywhere you look.

We now have a multi-technology mix which, according to NBNCo’s own analysis, will cost $200 million more per annum in steady state to maintain and operate — and generate $300 million less per annum in revenue, relative to a fibre to the premises network.

That is a $500 million earnings gap.

That is enough to subsidise two thirds of the losses in the non-commercial footprint.

That is nearly 10 times what the Government’s proposed regional broadband levy will raise.

On top of this, in August 2017 there were roughly 300,000 homes, of which 220,000 would have been revenue generating, that disappeared off the NBN business plan.

Yet cumulative capital expenditure forecasts increased by $1.4 billion from the year before.

This would suggest taxpayers are spending the same, or possibly more, for the NBN to serve fewer connected homes.

That is another $140 million per annum that isn’t coming back.

Yesterday Andy Penn observed that 1 million more consumers could substitute from NBN to wireless.

If that number materialised at some point in the future, it would reduce NBN’s market share to 65 per cent.

There are some big challenges here, and as the Australian Financial Review recently observed, the scale of the iceberg remains unknown.

I spent most of 2017 focusing on the lived experience of consumers.

In my address at this forum last April and October I outlined a series of priorities:

  • Seeing fibre to the curb to be deployed in areas where design and construction on fibre to the node had not begun.
  • Stopping the practice of consumers being sold speeds that NBN infrastructure could not deliver.
  • A greater alignment of accountability with responsibility in terms of the end user experience.
  • Putting the speed monitoring program in place as quickly as possible to ensure consumers had the information they needed to make choices.
  • I also made clear that pricing needed to change because the deteriorating economics of the NBN and price-based competition were combining to deliver a poor peak hour experience.

There was progress on a few of these issues, and less progress on others.

What I hope is clear is that whilst we are in Opposition, we are not an Opposition who is idle.

In 2018 we will continue to focus on improving outcomes for consumers, but we will increasingly focus on the economics of the NBN and the medium term settings.

In terms of the NBN it is clear that at every juncture policy makers face difficult trade-offs between consumers, the budget, stakeholder interests and an efficient market design.

It is my view that communications policy over the past four years has been dealt with a piecemeal manner.

At its core, it has been lacking in creativity, vision and a coherent narrative.

I am not making any assumptions about the next election.

It will be a very hard fought contest that could go either way.

I offer that in sincerity.

But if the Labor Party is fortunate enough to be elected by the Australian public, we will be ready to tackle these issues.

We won’t be the dog that caught the car.

We will be rigorous in our approach, we will make choices, and we will explain the trade-offs to the public.

We have done this on negative gearing.

We have done this on the recently announced dividend imputation policy.

And we will do this on communications policy.

Conclusion

In closing, I want to note that addressing inequality and improving the lives of working people is Labor’s defining mission.

We need to promote fairness and prosperity in the broadband enabled world. The two are not mutually exclusive.

We need to foster growth and innovation along with inclusion.

On the cusp of the fourth industrial revolution, Australia deserves a Government with ambition for all of its people.

With communications services the ‘key foundation for the digital transformation of the economy’, it is imperative we embed fairness in our communications policies and their implementation.

Otherwise the notion of the ‘Land of the fair go’ will be nothing more than empty rhetoric; something we trot out for sporting ceremonies and speeches – rather than a value we guard, prioritise and realise in future. 

Thank you.