SUBJECTS: Earthquake in Italy; National Broadband Network
On behalf of the Australian Government can I express my condolences to the Government and people of Italy and the families of the deceased as a result of the terrible earthquake overnight just 100km north of Rome. Official recorded deaths at this stage are less than 30 but regrettably estimates of further casualties are high and they could run, we're advised, into the hundreds.
To date no foreigners are being reported as being amongst the deceased, at this at our officials in Rome have no indication of any Australians being caught up in this terrible tragedy. Given the extensive people to people contact between Italy and Australia it will almost certainly be the case that members of the Australian-Italian community will have family or friends adversely affected by these terrible events and our thoughts and our prayers are with those families as they await the news of their loved ones.
Today we are here to make an historic announcement about broadband, jobs and the future of the Australian economy. Just as railway tracks laid out the future of the nineteenth century, and electricity grids the future of the twentieth century, so broadband represents the core infrastructure of the twenty-first century.
Slow broadband is holding our national economy back. Let's consider some of the facts. Australia is in the bottom half of the OECD countries for broadband take up; 16 out of 30 in 2008. Australians pay more for broadband than most OECD countries, we come in at 20 out of 29 in the OECD in 2007. And thirdly, Australian small business pay more than all but two other countries for fixed line services. Years of failed policy have left Australia as a broadband backwater.
As you know the former Australian Government failed to deliver fast broadband for Australia, in fact over a twelve year period there were some 18 failed plans. The previous Government never understood the fundamental economic importance of broadband in turbo-charging Australia's economic future. They failed to build for our nation's future economic prosperity beyond the mining boom.
As you are also aware prior to the last election we committed to build a National Broadband Network in partnership with the private sector. Last year Minister Conroy issued a challenge to the private sector to come forward with proposals to partner with us, the Government to build a National Broadband Network. These proposals were scrutinised by a panel of experts and they provided a report to the Minister. The Minister has considered the report and accepted the advice contained within it that none of the national proposals offered value for money to the Australian tax payer. The panel noted the rapid deterioration of the global economy had a significant impact on this process. The Minister therefore has formally terminated the request for proposals process.
What this process has shown is that no company, none of the proponents and not Telstra, have been willing or able to meet the National Broadband Network that meets the Government's requirements in Australia's long-term national economic interest. So what's the alternative? We can either choose to continue to neglect the future of Australia's future infrastructure needs, we can do nothing, leaving us on the sidelines of the twenty-first century global economy or instead we can seize the opportunity.
We believe that fast broadband is absolutely essential for our nation's economic future. It is essential for long-term productivity growth, essential for our global economic competitiveness and for creating jobs for the future.
That is why I announce today the single largest infrastructure decision in Australia's history.
Today I am announcing that the Australian Government will move ahead to establish a company in partnership with the private sector that will build and operate a fibre-to-the-home National Broadband Network to deliver super-fast broadband to Australian homes and businesses up to one hundred times faster than what many people use now.
This new super-fast National Broadband Network is the single largest nation building infrastructure project in Australia's history. It is the most ambitious far reaching and long term nation-building infrastructure project ever undertaken by an Australian Government. Like the building of Snowy-Hydro, like the building of the Sydney Harbour Bridge, this is an historic act of nation building.
What the Government is demonstrating today is our confidence in our nation's future. This announcement sets a path for economic recovery and for building a twenty-first century economy with twenty-first century jobs.
The new network will connect 90 percent of schools, homes and workplaces with optical fibre known as fibre-to-the-premises. It will provide fibre-optic transmission links connecting cities, major regional centres and rural towns. It will deliver affordable broadband services with speeds of up to 100 megabits per second, 100 times faster than those currently used by most people. It will connect all other houses and businesses in Australia with next generation wireless and satellite technologies that will deliver broadband speeds of 12 megabits per second.
What are the advantages of going in this direction? High speed broadband has many benefits, high speed broadband will create jobs, high speed broadband will spur innovation and enhance our economy's growth and productivity in the long-term. High speed broadband will make businesses more efficient and make them better able to serve their customers both at home and abroad. Small businesses will be major beneficiaries as high speed broadband allows them to compete on a level playing field. High speed broadband will revolutionise teaching in our classrooms. High speed broadband will revolutionise health care in our medical centres and our hospitals. High speed broadband will help our regional towns grow and stay connected and high speed broadband will plug our nation into the global economy and help us overcome the tyranny of distance.
What about the impact on jobs, on the here and now. This is a major nation building project that will support 25,000 jobs every year on average, over the life of the project.
At its peak it will support 37,000 jobs. This investment is expected to generate additional economic activity worth some $37 billion over the life of the project. An additional quarter per cent of GDP every year for the life of the project. Given the productivity gains associated with this investment the full benefits will continue to flow for decades beyond the projects' completion.
It has also been estimated that innovation from information and communications technology is the single biggest driver of business productivity. It drives 78 per cent of productivity gains in service businesses and 85 per cent in manufacturing.
What about the cost of implementation? The Government proposes to be the majority shareholder of this company but significant private sector investment in this company is anticipated.
The Government will make an additional investment in this company but intends to sell down its interest in the company within five years after the network is built and fully operational, consistent with market conditions and national and identity security considerations.
This company, jointly owned by the Government and the private sector will invest up to $43 billion over eight years to build a national high speed broadband network.
Regulatory changes: today's decision also injects a new competitive force in the Australian telecommunications market. The broadband network will be Australia's first national wholesale only open access broadband network not controlled by Telstra.
This solves once and for all the core problem created when the previous Prime Minister privatised Telstra a decade ago without ever resolving the conflict of a private monopoly, owning the network infrastructure and dominating the retail market.
That decision has blocked competition and investment for a decade. Today we draw a line under a decade of policy error and neglect. In developing this proposal, our source of advice on the National Broadband Network has been informed by a range of experts, the panel of experts, including the Secretary of the Treasury, and the ACCC have encouraged the Government to invest in optical fibre technology, supplemented by next generation wireless and satellite technologies.
To conclude, some critics might say, that just let broadband be sorted out by the markets, it will all fix itself up in the end. Well that hasn't occurred over the last decade, it is time we bit the bullet on this. What the Government says is that we need a nation building Government, we need nation building infrastructure. We are getting on with the job.
Good for jobs. Good for the economy. Good for Australia's future.
Over to you Minister.
Well good morning everyone and thank you Kevin. As Kevin has mentioned, broadband is a vital nation building infrastructure. It will drive productivity, create jobs and help small businesses.
It will provide a platform for innovative health and education applications and connect our regional areas to the digital economy. For business it means reduced travel costs and broader trade opportunities.
For small business, it means better access to services, information, partners and customers.
For the frail and unwell it means remote diagnosis and care, reducing the need for hospitalisation.
For the environment, it means better planning and control of energy and water supplies.
For industry it means more efficient production and distribution.
For schools, it means classrooms connected to the globe.
As you have just heard the Government will establish a new company to build and operate an enhanced National Broadband Network, investing in fibre to the premises broadband puts Australia among the world leaders, such as Japan, Singapore, New Zealand, Korea and Malaysia, all driving the roll out of fibre based high speed services.
We have also announced a comprehensive review of the current regulatory framework to improve competitive outcomes while the network is being rolled out.
These actions represent a historic moment for the telecommunications sector. In addition we are moving to immediately improve the competitive markets in regional Australia.
We will make an immediate $250 million investment in backbone fibre optic transmission links. These are the broadband highways that connect our towns, our cities and rural areas to the wider world.
In parts of Australia, particularly links connecting our rural and regional areas, competition is limited. There is only a single provider of these services. The ACCC has confirmed this includes connections to places like Geraldton in Western Australia, Mount Gambia in South Australia, Broken Hill in New South Wales, Mildura in Victoria, Mount Isa in Queensland and Darwin in the Northern Territory.
This is an indicative list. We will be consulting and conducting a competitive process before making final funding and roll out decisions for our immediate investments. However it demonstrates how serious we are about immediate improvement for services in regional and rural Australia. It also contributes to the immediate stimulus impact of the National Broadband Network.
This is a historic moment for Australia's telecommunications sector. It sets the scene for our broadband future, and the growth of the digital economy.
Before I take questions, can I just say this to all those good Australians out there who are wanting a future for Australia which has competitive price and competitive access to high speed broadband services of the type that you will be able to get elsewhere in the world, that this is the decision for the times.
Going beyond fibre optic to the node, to fibre optic to the premises, is the right way to go. It puts us in the slot, when it comes to being competitive with the world economy of the 21st Century.
(inaudible) how much extra money is the Government going to have to chip in to get this (inaudible)?
Well the figure that I referred to before which is that the National Broadband Network Corporation will invest up to $43 billion, is a significant investment.
We have also indicated very plainly that we wish to do this in partnership with the private sector.
The Government proposes that it would have some, it would welcome private sector participation up to 49 per cent. We have also indicated that once this National Broadband Network Corporation is up and running for a period of five years, that we would then sell it.
Our objective is this, to make sure Australia has this technology for the future. Right now under market conditions it is not possible to deliver this through pure market mechanisms, so either you sit back and wait and hope that something happens or you get on and do it. We are going to do it.
It is a nation building decision, but once it is up and running in delivering those services then we would within that five year period, sell it to the private sector.
(inaudible) what makes you confident that you will even get the private sector investment and is there a role that Telstra could play here?
We are inviting all companies in the Telco sector to join us and partner in this. So there is an invitation to all, Telstra included, to be a participant in this network. What the conditions are is that it is open access and that it is wholesale only.
So individual companies, there will be caps, we will be having an implementation study over the next eight to nine months to work through all of those sorts of issues in terms of the cap sizes.
And in terms of our initial contribution it is the $4.7 billion which we have talked about at length over the last few years. So we believe that we are able to deliver this project very responsibly and we believe that there is genuine interest in being a partner in this proposal.
Plainly at present we're in a capital constrained world. We understand that. That's why the Government's putting its best step forward, because we don't want the Australian economy to suffer a comparative disadvantage, relative to other economies in the world.
But, we believe that with an implementation study to be rolled out during the course of this year, and with companies looking at what will be a first-class investment opportunity for the future, and with the possibility of the Australian public being able to invest through Aussie infrastructure bonds, that we will have an opportunity for all Australians, institutional and individual, to have a stake in the country's future.
(inaudible) this stage of the game and taxpayers' are going to have to do it. What's the risk to public money here?
Well, we believe this is a first-class solid investment for the nation, and because the nation's economy will need this infrastructure for the future, that is the first thing.
Secondly, absent the taxpayer investing in this corporation, this technology would not be provided, it would not be laid out.
Thirdly, we are dead set serious about the prospect, what we've said in our statement today, that once this is up and running, we have no long term interest as a Government in retaining public ownership of this. In other words, it would then be on sold to the private sector within, at the five year point, within the five year point, of the business being operated.
Obviously right now we are dealing with a capital constrained world. But we have acted on the advice of an expert panel, containing within it the Secretary of the Treasury, expert advice also from the ACCC about this thing being the right way to go.
Otherwise, we wouldn't be here. We've actually tested the market through the exercise we've been through, shaped by the current state of the global economy. That has not produced an outcome which we believe and we've been advised, makes the best use of the taxpayers' dollar. This does, and at the same time provides a fundamental reform for the way in which broadband services are delivered to the economy at large, to the country at large, by achieving the separation between the wholesale and retail networks. And I draw your attention in detail to the Policy Discussion Paper which is being issued at the same time today, which goes to proposed reform for the rest of the telco sector.
This is a big day, not just in terms of a National Broadband Network, high speed, up to a hundred times faster than what current users may have available to them - but a big day in fundamental reform in the separation business.
When do you plan to start building?
The Tasmanian Government put a proposal into the expert panel and we believe it's a very exciting proposal. We'll be negotiating with Tasmania in the next 24 hours to be able to start rolling out. We understand that they've been ready to go for a considerable period of time, so we believe that the Tasmanian roll out of the National Broadband Network can actually be commenced by the middle of the year, June-July.
This scoping study, the implementation study that we're going to be engaged in will map out the rest of the process, but we're able to start in Tasmania, we're able to start what we call the black spots (inaudible) we're able to start all of those this year.
Tasmania, we believe can be up and running, it's ready to go with its proposal. It will be an augmented proposal, that is what the discussions will be about in the next 24 hours, and we believe we'll be able to say something very positive about that very shortly.
(inaudible) will the Government be putting in initially more than the $4.7 billion you've already said you were putting in, and what do you expect out of the course of the program before the sell down starts, the quantum of taxpayer investment will be?
The Government intends to invest $4.7 billion as our initial equity investment. That will be drawn primarily from the Building Australia Fund, because it's a national infrastructure investment.
Secondly, the purpose of the implementation study is of course to define the precise likely scope of private sector participation in the project, and of course we will be refining also the most appropriate equity and debt mix within the project. But the initial investment is as you've described.
We believe it's necessary to do this. We've tested the market. Our expert advisers have said that this doesn't deliver value for the taxpayers' dollar. So as I said there are two big options – sit back, hope it all sorts itself out in the end, the guiding philosophy of the Howard Government for 12 years. Result, nothing happened. Or you get on and do it. And we intend to do that.
(inaudible) the timeframe though, when will all Australians be expected to have access to –
Yes, well this is a very large project as you can imagine. It goes right out across the country. Tasmania, the plan is that we start as of around about the middle of the year. For the nation at large, we are looking at a build which will take something in the order of seven to eight years.
Now, it will be rolled out progressively across the country. And we'll be aiming to roll it out, not just in the cities but in the regional centres as well, so that we connect all Australians with this vital communications technology for businesses across the nation, for health providers across the nation, for education providers across the nation, and for individual Australians who want to link themselves to the global economy of the 21st Century.
On the question about that, given the –
On the question about that, we have based the projected construction period of seven to eight years on the advice available to Government, including our conclusions from the work done by the expert panel, which has been working on this for some time.
(inaudible) $1 billion of debt a week at the moment and now you're looking at issuing Aussie Bond infrastructure. How confident are you that there is a market for more debt in this current (inaudible)?
The Australian public, I believe, would have a bit of an interest in investing in Aussie Infrastructure Bonds because this is a very good proposal. It is solid infrastructure for the future. And if you look at what's happening around the world and what governments are doing around the world in order to equip their economies and their communities with this enabling technology of the 21st Century, let me tell you we're not Robinson Crusoe on this. There are a few others doing it as well.
Secondly, I don't intend to be a Prime Minister of Australia which consigns our 21st Century to a 20th Century technology. I just don't intend to do that. It requires action.
Now, on the question that you raise, I might invite the Treasurer and the Finance Minister.
I just want to say there couldn't be a better time for a more important investment than this one in the middle of a global financial crisis. There's no better time to lift our productive capacity. There is no better time to invest in the future of the nation. And I think there'll be a lot of interest, particularly from retail investors, in Aussie Bonds. I believe this is a responsible investment. We are establishing a commercial entity. We are putting it together on commercial terms and it should give a return over time to the Australian people. So, there couldn't be a better investment. I don't believe it has implications of the nature that you raised.
The body that we're establishing will be for the first phase of its life a government business enterprise with a minority private sector stake, broadly equivalent to something like Australia Post. Australia Post borrows on its own account and so we would anticipate that the National Broadband Network company would borrow on its own account.
We, in order to establish the initial equity stake on the part of the Government, will be contributing $4.7 billion – which is of course the figure that was committed from our election commitment – and will be drawn essentially from the Building Australia Fund. The additional equity that will be required will be financed by Aussie Infrastructure Bonds that we are indicating. I believe that that is entirely sustainable. And the key thing here is Australia can't afford not to do this. We are in a capital-constrained world where we've got significant difficulties economically. We have to move ahead with this productivity-enhancing investment for the future, and the Government is taking the lead in doing that. It is a sustainable framework that will enable us to do that.
Will the bonds be guaranteed by the Government?
The Aussie Bonds will be issued by the AOFM, okay. So, they're certainly guaranteed. The entity will borrow in its own right but the Aussie Bonds will be issued by the AOFM to fund our equity.
But on the broader point about quantum, we still believe over time there will be significant private sector investment which can come in in terms of either debt or equity in its own right.
Prime Minister, the national broadband was of course a key election commitment. We've now got 18 months, or 16 to 18 months or whatever it is, into the Government's term, and we've had, effectively, (inaudible) now you're going a different way. Isn't this really a lot of time wasted to get this point?
We have tested the market and that's what we said we'd do. Remember when we originally put forward our proposal for a national broadband network, we were going to do so in partnership with the private sector. We've tested the market in an entirely proper, professional manner. That has been the subject of deliberation by an expert panel, including the sustained participation of the Secretary of the Treasury and others. The conclusions have been reached.
Secondly, the recommendation from the panel is that we move to the next generation, not fibre optic to the node, but fibre optic to the home, fibre optic to the business, fibre optic to the premises. That's where the 21st Century economy is. So, we've decided, given the current state of the global economy, to step over this stage of broadband network development to where the economy would need to land anyway. This is a huge enabler for the Australian economy for the 21st Century.
This is a very big project and this Government is proud of it. It's the right thing for the future, great for jobs, great for infrastructure and I'd encourage all Australians to get behind it.