Has Conroy got the numbers for reforms?

Getting Senator Stephen Conroy's regulatory reform for the telecommunications industry through the parliament would need support from the Senate. On Twisted Wire we ring around to see which parties are supportive and which are against.

A couple of weeks ago Senator Stephen Conroy announced regulatory reform for the telecommunications industry. It encouraged Telstra to voluntarily structurally separate its wholesale and retail divisions, or be forced to functionally separate and relinquish their shares in Foxtel.

This would require changes to telecommunications legislation, so it is dependent on getting bills through parliament. Nick Minichin has made it clear the Opposition is not behind the reforms, so getting them through the Senate depends on the support of the Greens, independents and, perhaps, the Nationals.

So, has he got the numbers? On this week's Twisted Wire I do a ring around to see which parties are supportive and which are against. You'll hear from:

  • Senator Nick Xenophon, Independent senator for South Australia
  • Senator Scott Ludlum, the Australian Greens
  • Senator Barnaby Joyce, leader of the Nationals in the Senate

I've also been through the Twisted Wire archives to grab sound bites from Stephen Conroy, Nick Minichin and the Liberal party's newest member.

A transcript of this week's edition of Twisted Wire can be found on page two.

Phil Dobbie: Hello once again. It is Phil Dobbie with another edition of Twisted Wire and a couple of weeks ago we heard from a very excited Stephen Conroy.

Stephen Conroy: So we believe that there is 20 years of policy fighting.

Dobbie: Telecommunications reform is just around the corner, provided he can get the members to pass the legislation. Will he do it?

Barnaby Joyce: Yes, I think he will, I think these are the days it will probably get through.

Dobbie: Well not without more committees and submissions, of course.

Scott Ludlum: The committee that it has been referred to is called to for submissions. We have got hearings coming up in a couple of weeks.

Dobbie: But there does seem to be a grand swell of support.

Joyce: Broadly supportive means simply just that.

Dobbie: Although we know Nick Minchin is not excited.

Nick Minchin: It's unlikely to achieve anything.

Dobbie: So I do a bit of a ring round to see whether there is enough support from other members of the Senate, including the Greens, the Nationals and Independent Nick Xenophon. Has Senator Conroy got the numbers? We will find out in this week's Twisted Wire.

Dobbie: Well you remember, if you were paying attention, a couple of weeks ago that I spoke to Senator Stephen Conroy about his plans to split up Telstra. They can choose to structurally separate or the government will make them functionally separate with changes to the Telecommunications Act. If they do that, they will also ask Telstra to shed their part ownership of Foxtel and deny them access to 4G spectrum. He is wanting to clearly rip Telstra and the industry into shape.

Conroy: We believe we are correcting what was initially a policy mistake by the Holt government, perpetuated and made worse once Telstra was privatised by the Howard Government. So we believe that there is 20 years of policy failure that needs to be addressed and now is the right time.

Dobbie: And the time that he said that was about quarter to four, if you are interested. But all of this realised, of course, on changes to the Telecommunications Act and that has to be passed in both houses of Parliament and we know one man who won't be keen to see the legislation go through.

Minchin: Whether you like Telstra or you don't like it, it is a major Australian owned corporation employing thousands of Australians with millions of Australians being shareholders in it and it is the owner, operator and deliverer of the current copper network. Why this sort of belligerence towards it from the government, when the government is sort of leap frogging, saying it is going to leap frog the issue of separation by building a whole new government company to operate a new standalone, separate network. I don't understand why the government is now revisiting the issue of separation, which to my mind, is unlikely to achieve anything and cause considerable disruption to the company whether you like it or not does supply the majority of telecommunication services to Australia.

Dobbie: That was Nick Minchin, of course, the opposition communications minister talking back in April, but it could have just been yesterday, couldn't it? I don't think he has changed his mind. So given the opposition for the Liberal Party and perhaps the whole coalition, will Senator Conroy have the numbers to pass amendments to the legislation, particularly through the Senate? Well on the day he made the announcement of regulatory reform he seemed pretty confident, for example:

Conroy: If I could just to you, Nick Xenophon was on the radio this morning, one of the key independent Senators indicating that he believed we were going down the right path.

Dobbie: So there is an independent on his side at least apparently, well let's just check, Nick Xenophon are you broadly supportive?

Nick Xenophon: Well in terms of broadly supportive means simply just that, it means that I think it is time that we had some fundamental reform to the telecommunications in this country. It is a concern about the market dominance of Telstra, of the access to broadband service and access to telecommunications, controlled by Telstra. A lot of third-party providers are concerned that they haven't had access. And what these reforms indicate as flagged by the government would go a long way in being more consumer friendly, having more accomplished in the marketplace and that actually means lower prices, which is a good thing.

Dobbie: Well that sounds good that sounds like a nod of approval from Nick Xenophon, whereas the liberals if they agree with Nick Minchin:

Minchin: Why would you then be talking about separation?

Dobbie: That doesn't sound good, you have to assume that is a no, which presumably means that 31 Liberal senators will vote against it and Stephen Conroy has the support of 32 Labor senators and Nick Xenophon. So who else is he going to get support from?

Ludlum: The Greens yesterday indicated they were broadly supportive.

Dobbie: Well, Senator Scott Ludlum is the communications specialist over at the Greens. Let's ask him where he sits on the subject, surely Stephen Conroy does need the support of the Greens.

Ludlum: It may be the case that the government may need the support of the Greens, certainly mentioned on behalf of the opposition was pretty hostile at the outset and so I think that will give us the opportunity to improve the legislation on the way through.

Dobbie: He might want to amend it, I don't know, split Telstra to four perhaps, who knows, but it is looking pretty good for getting the legislation through the Senate, but don't forget the four National Party senators and they tend to stick with the coalition, don't they? Well, Stephen Conroy actually doesn't seem to think so.

Conroy: We have seen Senator John Williams from the National Party indicate today that he is broadly supportive.

Dobbie: Wow, so let's ask the leader of the Nationals in the Senate, where do you stand on all of this Barnaby Joyce?

Joyce: Well you can never say what you are supporting and what you aren't supporting until you see the paperwork, but there is a sense of structural separation of something you should have done from the word go and if I had my time again, I certainly would have been calling structural separation on the Telstra enabling legislation.

Dobbie: Right, so it sounds like you are taking a different avenue than the Liberal Party. Nick Minchin, I would imagine, is pretty adamant that he won't be supporting it.

Joyce: Well for a very good reason, Nick obviously has grave concerns for the shareholders, and so he should be. In the National Party, we have got to see through the eyes of what is right for regional Australia and really that is the means of how we deal with this issue. It doesn't allow a better outcome for regional Australia. One thing we must be aware of, it is in a structurally separated entity that we don't have the obligations that Telstra currently has being passed aside and sort of left in no man's land. The universal service obligation network with liability scrambler, they all must still be held by a responsible entity that has the capacity to fulfil them, but away from that we will be looking very closely at it and saying which is a better outcome for regional Australia and the one that delivers the better outcome for regional Australia is more than likely the one we should be supporting.

Dobbie: That sounds pretty good, and seems to indicate that it could sail through Parliament with a few provisos of course, like the Senate Committee process that just got underway to whip it all into shape.

Here is the Green Scott Ludlum again.

Ludlum: The committee that it is being referred to has called for submissions. We have got hearings coming up in a couple of weeks and will be reporting right before that legislation is tabled in the Senate, so it is all coming on fairly rapidly.

Dobbie: Now do you think anything new is going to come out of those submissions? There have been a lot of submissions hasn't there, the department called for its own submissions. It received a lot. They are all online. They supposedly led to this decision, but is anything else going to really emerge.

Ludlum: I think what is new is that we are not talking about a theory anymore. In the Select Committee, that I am also a member of, we have been hearing from people in the telco industry for more than 12 months that some form of functional or structural separation of Telstra is urgently required and was effectively demanded on the spot to fix this extraordinary market failure we have seen over the last couple of years, but we have always been operating in a vacuum and now we actually have a proposal on the table to attempt to do that, and so that is what we are going to need to evaluate is how effectively that will make the government's objectives.

Dobbie: So you are behind it in principle, it is just a question of how it is done.

Ludlum: Yes and only in the very broadest principle, but we have seen the response again from other players in the industry over the last couple of weeks since the announcement that have been generally supportive. I am still a bit frustrated that we haven't yet left the competition realms of the debate and talk about the equity, the access issues, what people will actually use this network for, whether we would be able to bridge the digital divide and so on. We are still really hung up on this rather antique debate about the competition and the structure of the telecommunications market. It is important to get it right, obviously, but there are other equally important aspects of this proposal for the National Broadband Network that we have barely even scratched the surface of.

Dobbie: Well there are two issues here, obviously isn't there? There are the changes of the regulation of the industry, but then as you mentioned also, the NBN. So you are broadly supportive of both counts of both issues, but you want to see the details in both cases. Is that what you are saying?

Ludlum: Yes, we were definitely supportive of the announcement of the NBN, I think I share many of the concerns of the coalition about the fact that no cost-benefits analysis has been done and nothing like that is forthcoming, but overall I think it is likely to be a very important piece of infrastructure and a piece of great infrastructure if we get it right in terms of aiding people in telecommuting and so on. So it is certainly a very important project and we recognise also that the government feels that it has got the market structure right before the NBN rolls out and that is why we are seeing the Bills and all of it that is coming through.

Dobbie: Scott Ludlum, sounding even more positive now for the Greens, so back to Barnaby Joyce, perhaps this is a chance for him to right the wrongs of the past. He voted to support the sale of Telstra. Did he get that wrong and even more so, should Telstra's infrastructure always remain in public hands?

Joyce: Well I think it should have, we put aside a two-billion-dollar trust fund that the National Party had bargained out and it was 2.4 billion dollars when that was handed back to Labor and obviously we lost the capacity for the money to help out regional Australia and now we are going to be spending that money on the regional telecommunications, 2 billion dollars or 2.4 billion dollars when interest was added in. So therefore we have a vested interest in seeing how it is spent and where it is spent and so we must remain engaged on the structural separation debate because our funds are in there.

Dobbie: Now do you think this structural separation is essential for the build of the NBN? Do you think the NBN just couldn't proceed without it?

Joyce: It would be absolutely ridiculous to have duplicate services in metropolitan Australia or metropolitan capitals. If there is one optics fibre, then there is no point in squandering the public curse in putting another optic fibre beside it that is owned by the public. We have got to make sure that doesn't happen, because every dollar they spend in metropolitan Australia, or putting extra optic fibres between capitals when optic fibres already exist, is a dollar that is not spent in regional Australia. We will be looking at how we make sure the maximum amount of dollars are spent on the people who don't have a service. We want this money to go towards upgrading services or providing services where services don't exist, not duplicating services where they are already present.

Dobbie: Now a structurally separated Telstra, assuming Telstra does choose that option — cause otherwise, it will be forced down the functional separation route — but if they choose to structurally separate, in effect, they will have to sell their infrastructure to somebody and I guess the only game in town is going to be the NBN Co, which would ultimately mean that we are seeing that infrastructure falling back into public hands. Would that be a good result, do you think?

Joyce: It is essential that if you have a monopoly or virtual monopoly on crucial infrastructure that it has to be tied up in regulation. Regulation takes the place of where the market doesn't exist and the market doesn't exist when you are left with one, two, three or four major players and between themselves they can extract an unreasonable premium off the consumer, so this definitely is an area where you have a virtual monopoly and in that instance you need regulation and if the public has a share in that virtual monopoly then I suppose that is not a bad idea. We want to encourage competition, but we can do that at a retail level, but it is the hardware, it is the optic fibre in the ground that is what the retail level is hung off. So if there is only one of them, then that person is immensely powerful in the marketplace.

Dobbie: He is sounding more and more like a Labor senator by the minute. What about a Labor National coalition, maybe that would work better. So meanwhile, what does Nick Xenophon think about the idea that government may be trying to coerce Telstra into selling its infrastructure to the NBN and if it does manage to get away with that is that necessarily a bad thing?

Xenophon: I think that we need to look at the big picture here. A mistake was made by Kim Beasley when he was the administer back in '91, '92, when Telstra was corporatised. There should have been a breaking up of Telstra back then, so that when the OTC and Telecom merged, there actually should have been a desegregation of the assets in terms of the various assets.

Dobbie: Yes, the assets.

Xenophon: The assets.

Dobbie: Yes, got the assets bit.

Xenophon: I think it is important that the historical context is that we got this wrong almost 20 years ago and successive Labor and Liberal governments have made a mistake by not tackling this full on. Now I think this approach is generally the right way to go, I think we need to be mindful of experts such as Professor Allan Fels, the former head of the ACCC, who has in a P&P in the Sydney Morning Herald not so long ago has basically said you have to be careful that you don't end up with the NBN having too much power and in a sense almost replacing Telstra in a market dominating position. So I think it is all about competition. There is an opportunity here to get it right. It is an opportunity that we need to seize and ensure that consumers and small operators that want to break into the telecommunications market have a chance to do so with a fair playing field.

Dobbie: It is difficult to have competition at the infrastructure level; otherwise we end up having two very elaborate and very expensive networks traversing the country.

Xenophon: And I have never suggested that, but the important thing is that the traditions of the Trade Practices Act that relate to access to infrastructure, I think they need to be stronger. I think the fact that we are now looking at this government policy is at the Trade Practices Act competition laws in this country have been simply too weak. We have a situation in an entirely different section where you have Coles and Woolworths controlling close to 80 per cent of the grocery market. That is not healthy for competition, but it is indicative of how weak competition laws have been and that weakness is pretty evident in our telecommunications sector and I think the government is making a genuine attempt to shake things up for the benefit of consumers. But you are right in terms of infrastructure access, there is no point in putting two lots of fibre optic cables down every street. What you need to do is to ensure that there is fair access to the infrastructure without duplicating it.

Dobbie: You mentioned the mistakes of the past, if Telstra had been split up originally, do you think the asset should have stayed in public hands?

Xenophon: Look you are talking to someone who when I was in the state parliament in South Australia, I voted against the sale of our electricity assets back a decade ago because I think when it comes to essential community infrastructure, you need to ensure that it is held in public hands. So that debate has been long gone, but if you go down the path of having, if it is privatised, then you at least need to ensure that there is fair access to that and that you have a number of other tests in place and those tests need to consider that this is an essential piece of community infrastructure. It is an essential service, telecommunications, and that is why you need to ensure that you have some pretty open access to it.

Dobbie: So if in the course of events, if Telstra did split and did sell its infrastructure to the NBN, which in effect places it back into public hands, you wouldn't necessarily see that as being a bad outcome?

Xenophon: No, I wouldn't see it as being a bad outcome. I think that taxpayers want to make sure that there is the best value for the use of their assets and also that consumers get a good deal as well and obviously taxpayers and consumers are one and the same, but I think we need to have a highly efficient broadband network. It needs to be open to competition, so we get it for the best possible price, because what is clear is that Australia has been lagging behind in terms of telecommunications. I think that is in part because of the market dominance of Telstra, they will probably deny that, but I think we have an opportunity here to set things right.

Dobbie: That is Nick Xenophon again, clearly a believer in the approach being taken by the government.

So if the game is to get Telstra to sell its assets to the NBN, we would end up with just one network, not two and everyone so far seems to think that is a good outcome. What about Scott Ludlum from the Greens?

Ludlum: No, I think one of the things that we proved on the way through last year was the wholesale infrastructure is effectively a monopoly infrastructure and you don't want to see two of those competing with each other. I think that would be a great shame and we would wind up overbuilding and producing a lot of unnecessary overbuild I think.

Dobbie: Right, so if we overbuild, we end up with what again?

Ludlum: Overbuild, I think.

Dobbie: Right, I thought so. Now if Senator Conroy doesn't come out with this cost-benefit analysis are you still going to be supporting the NBN or are you just going to keep on pushing for it?

Ludlum: I recognise the argument, I suppose that it would be like conducting a cost-benefit analysis on the electricity network when we first rolled it out 100 years ago that some of these things are intangible, because many uses of the network haven't even been invented yet. But there are some really serious questions to ask in the short term, particularly if the government really does intend to privatise the NBN Co down the track, as to what the value of the corporation would be, what it will be charging, is what the wholesale rates it will be charging and what financial assumptions the government have used and that work must have been done and it is just a bit odd that none of it has been shared with the public.

Dobbie: Yes, perhaps Stephen Conroy accidently deleted it or just put it down somewhere and he is still looking for it you know, it can happen when you get to a certain age. It is bound to show up eventually. In the meantime, does Nick Xenophon think that Stephen Conroy will get the amendments through the Senate?

Xenophon: I think that there is a general consensus that something needs to be done. The status quo just can't be maintained. It is not tenable for that. I think it is fair enough for the coalition, Senator Minchin in particular, to ask what they are asking, to put the government to proof if you like, to make them accountable for their policies. At the end of the day, I want to see a policy outcome that actually leads to a faster, more efficient broadband network and our telecommunications in this country to be open to more competition, because that would mean lower prices for consumers.

Dobbie: So what would you like to see before you put your vote behind it?

Xenophon: What I would like to see is that the inquiry process be thorough. That we have submissions from a wide cross section, obviously we need to hear from Telstra and those that oppose what the government is doing to test the assertions made by the government, I think is essential. We need to have a robust committee process and that committee process I think will shed some light on the debate and that is what the Senate I think prides itself in a sense that there is a committee process. That it is about fact finding, it is about getting to the core of issues and I would like to think that this inquiry process is to do with the Telstra legislation will be no different.

Dobbie: Yes as Nick Xenophon says there, those Senate committees are very good at fact finding and getting to the core of the issues.

Does Barnaby Joyce think that the legislation is going to get through the Senate?

Joyce: Yes, I think it will. I think at the end of the day it will probably get through. I'm just being a realist here, the information I think is there for something to happen and I think that is what will happen. It is alright to be worrying and saying I will fight this thing to the death, but the reality is I don't think there is the attitude in the Senate to really block it. I don't think the numbers will be present there to block it.

Dobbie: So it is all looking like bad news for Telstra and good news for Stephen Conroy?

Conroy: So I think there is a capacity to engage in meaningful discussion with everyone other than the opposition at the moment. They are locked in the past when it comes to the telco sector. The Liberal Party just do not understand the modern needs of small business and families for better broadband and better communications. They are just out of touch.

Dobbie: But wait there is one man, not quite an elected Liberal representative yet, who might be more in support of these amendments.

Paul Fletcher: As we look at the telecommunications landscape, in particular the broadband landscape, well into the 21st century, we asked ourselves how could it be that one company, Telstra, is so dominant, because that has led to quite obviously broadband being taken up more slowly in Australia than other countries and it has led to lower speeds, higher prices and so on.

Dobbie: Now there is a man who seems to be across the issue of Telstra's dominance in the market. Who is he? Well I spoke to him back in April, he is the author of Wired Brown Land and former Optus spin doctor, Paul Fletcher, who last week won pre-selection for the safe Liberal seat of Bradfield on Sydney's leafy north shore. It will be interesting to see how he influences the views of the Liberal Party on this subject, but then again does the Labor Party really care what they think if they have got the numbers without them.

And that is Twisted Wire for this week.


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