Transcript – Doorstop Interview – Launch of OptiComm Network

TRANSCRIPT OF THE HON MALCOLM TURNBULL MP

DOORSTOP INTERVIEW

LAUNCH OF OPTICOMM FIBRE NETWORK, DROUIN VICTORIA

 

Subjects: NBN Rollout and Competition Issues; Foreign Investment in Australia; Public Service; Twitter

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MALCOLM TURNBULL:

It’s a pleasure to be on this beautiful estate, and on the network that OptiComm have installed. And it’s great to be here with my colleague Russell – Russell come over here. This is your – all the people in this estate are going to be among your voters.

RUSSELL BROADBENT:

Well we have a lot of visitors. But you’re all welcome.

MALCOLM TURNBULL:

Hopefully they’ll all vote for you. Now can I just say, this is a great example of what the private sector can do. Only yesterday, I was in a new housing estate, not dissimilar to this, up in Brisbane, north of Brisbane. But the contrast was very stark. Because there the developer had dutifully put in the pit and pipe, in accordance with the NBN specifications, but the NBN Co. hadn’t shown up — eight months ago. And they think they might get connected by Christmas, if they’re lucky.

So you’ve got a whole growing community, again very similar to this, just at the other end of the country, north of us here up in Brisbane, and people have no telecommunications other than what they can get on their mobile phones. What the NBN Co. has sought to do is to basically exclude private fibre deployment companies like Opticomm from this market, they’ve tried to effectively insist that they should be the only provider, and the consequences being that only a handful of Greenfield sites have actually been connected to the NBN, to broadband through fibre to the premises, by NBN Co. 

And at the same time, OptiComm, and other private sector companies are forging ahead. Now what’s interesting is that as everyone knows, we are totally committed to a broadband network, our criticism is the way in which the Government has gone about it. We say its too much of a Government monopoly, it’s costing far too much, and it’s taking too long. Telling someone you’re going to get broadband in 10 years time is pretty pathetic really, if you’re the school boy or the school girl that can’t get access to the materials they need online will have left home and may be off living somewhere else by the time the broadband arrives.

So you need action, and what OptiComm’s demonstrating here is that it can deliver quickly, and cost-effectively. Now I’m just going to ask you, Paul, about the relative costs of what you’re providing here to this developer, versus the cost that the NBN Co. is in effective charging the tax payer to do its service.

PAUL CROSS, CEO OPTICOMM:

Well our understanding from the developers that we’ve spoken to, and the pricing that we’ve heard that it’s been indicated that NBN Co. are at, would be at about 50% of cost.

MALCOLM TURNBULL:

But that’s 50%, your cost is 50% including the pit and pipe and all of the electronics?

PAUL CROSS:

That’s true.

MALCOLM TURNBULL:

And where as in a — as if this estate were using the NBN Co.’s approach, the developer would have to put in the pit and pipe at their own expense?

PAUL CROSS:

Correct.

MALCOLM TURNBULL:

So they’d have money out the door for that, and then of course the NBN I think it’s claim is that it is costing it $3000 per premise per Greenfield sites. And you’re doing the whole package for about half?

PAUL CROSS:

For about $1500.

MALCOLM TURNBULL:

Now why is it, why are you more cost effective than the NBN? Than the NBN Co. I should say.

PAUL CROSS:

Look we are far more in tune, I think, that was is required in the estates. We’ve spent a long time in the planning for this, we’re not working towards a design that NBN are using, which we believe is cost inhibitive.  So we’ve selected more efficient ways of delivering the network.

MALCOLM TURNBULL:

And that’s really from our point of view, from Russell and my point of view, that’s what it’s all about because the more cost effectively broadband solutions can be delivered, the less burden on taxpayers – or indeed developers like you – and of course the more affordable it is for our customers. Well that is very good. Now is there are other questions from any – I think we’ve got some scribes there, anyone else got some questions from the other end

RUSSEL BROADBENT:

Does anyone want to ask about the detail of the announcement?

REPORTER:

I’ve still got a question about that costings. Perhaps we’ll move on to some other issues soon. For Paul maybe, can you explain to me how the cost broke down, how you get down to 50%? Particularly can you explain how you account for the backhaul costs?

PAUL CROSS:

That’s true. What we’re talking about is the physical deployment within the developments. The backhaul costs are independent of that, and they are subject to each individual sites being different.

MALCOLM TURNBULL:

But your backhaul is not funded by NBN Co?

PAUL CROSS:

No, and that’s one of the impediments that we have to overcome as well. As we have to provide our own backhaul to every estate.

MALCOLM TURNBULL:

Can you tell us how you’ve done that here, Paul ?

PAUL CROSS:

Well this was quite an extensive, deep level that was required to — we’re using an Optus service here, where the backhaul comes in from. The nearest back hall was over 5km away for us, so we’ve had to bring a 5km lead-in fibre into this estate.

REPORTER:

But the total cost for the customer, how does that stack up against the NBN?

PAUL CROSS:

Well the NBN would have still had to have brought in a backhaul link – a fibre to this estate. Because the fibre does not go past this estate. So they would have had to have done the same as we have.

REPORTER:

The cost to the punter per house, when you’re talking about the actual pit and the pipe, the actual cost to the customer as per Mr Turnbull’s policy, would it be greater or less than under the NBN, once you factor in all the costs?

PAUL CROSS:

Ah definitely less.

MALCOLM TURNBULL:

And I think the logic is there, that you get a lot of spin from politicians – not Russell and me of course! Present company excepted. But you get a lot of spin from the Labor politicians on these things, and they try to suggest that you have a big government monopoly that’s going to result in lower prices. Well I mean the reason we’ve got all of these things like the ACCC and competition laws because we know monopolies result in higher prices. It’s really competition that drives lower prices.

The feedback I’ve had from Paul and from others in the industry is that the way the NBN is going about building its fibre to the premises network, particularly in these Greenfields sites – of course it has done very little so far – it is imposing specifications which are unnecessarily expensive and are adding to costs. And that is the feedback that I’ve had from TransAct in Canberra, for example who’ve got a huge fibre and HFC network in that city, they’ve given us exactly the same feedback.

So again this is the problem when you have a Government monopoly that is established, and cost is no object. You know, when the cheque book is just open, because it’s the poor old tax payers who are picking up the tab, and no body cares about actually getting a good result value for dollar, value for money.

REPORTER:

Can I ask, there is a story in the Australian today, about Huawei, complaining about their exclusion from the NBN. Do you have any comment to make on that? Mr Turnbull?

MALCOLM TURNBULL:

Huawei? Sorry I thought you said by-way. Not that’s alright, that’s my hearing. Huawei, yes that’s – the position we – the only thing I can say about that is this: Huawei are being used in the broadband roll out in the UK for example, and the UK has looked into the security aspects very carefully. And obviously they’ve got very similar security concerns that we do.

And a lot of people have been surprised that Australia would take a different approach. Having said that, we have not been privy to the security intelligence advice that the Government has had. So I think we can, we are — all I can say is that we will review that decision, in the light of all the advice in the event of us coming into Government. That’s as far as I can go.

REPORTER:

Sort of linked to that, there’s some broader comments recorded in the AFR from John Howard about the merits of Chinese investment. He seems to be saying we should be very open to them. Did you see those comments?

MALCOLM TURNBULL:

Well yes I did. I think we should be, and we are. I mean, obviously when the Foreign Investment Review Board and the Treasurer are assessing a foreign takeover, they have to take into account all of the circumstances, such as if a company is a State-owned corporation, and there is a concern that its objectives may be as much strategic as they are commercial, that is a factor to take into account. The fact that a company is State-owned, or has a foreign government shareholding in it, does not preclude it from being an investor in Australia. You can leave the Chinese aside for one minute and look at Optus – that belongs to SingTel. Look at our biggest defence contractor —that belongs to Thales, which I think has a 27 or 30 per cent holding from the French government.

You’ve got the Canadian pension funds, which are ultimately controlled by the government, on behalf of Canadian public servants  — their pensions for the most part. That’s a massive investor in Australia nowadays.  Look at the big investments in the bloodstock industry from the Emirates. So I think we need foreign investment, we should welcome it, and any suggestion that the Coalition does not do that is simply wrong. And I refer anyone who doubts what I just said to the discussion paper recently published.

REPORTER:

I will do my best to faithfully report that. . .(inaudible).  I think I got the gist of it, and I wonder how that squares with Mr Abbott’s comments in China when he suggested his position was that it wouldn’t be in the national interest to allow that sort of investment.

MALCOLM TURNBULL:

Well I think those remarks have been misinterpreted. Our position is as set out in the discussion paper. The level of state ownership or government control of foreign companies is something that everyone should be transparent about but we are not proposing any ban or barrier to government-owned or government-influenced foreign companies acquiring assets in Australia. And as I said, there are so many examples from so many different countries you really would be trying to lock the stable door after the horse had bolted.

REPORTER:

Under Coalition policy, would an area like East Gippsland be getting wireless coverage; fibre to-the-home; or fibre to-the-node even?

MALCOLM TURNBULL:

Well, new developments should all get fibre-to-the-premises, and the reason for that is that the cost difference between connecting a new development like this with fibre versus copper is not that great, and so the logic for going for fibre-to-the-premises is pretty compelling. Can you guys hear us, there?

Just generally, the approach we will take is firstly we will target areas that have got poor broadband connectivity as a matter of priority. The NBN is not doing that, so the NBN is currently proposing to overbuild areas where, for example in Canberra where they’ve actually got fibre-to-the-premises which TransACT has put in and which is hard to believe that you would do that, but they’re doing that in the suburb of Crace. A

nd they’re proposing to overbuild areas that have got very good services from the HFC network. . .(technical recording interruption) So I’m saying we will prioritise poorly served areas.

REPORTER

On that note, do you consider this area to be a high priority area for broadband connection, or is this presently well-connected enough under Coalition considerations?

MALCOLM TURNBULL:

The objective has got to be to ensure that all Australians have access to very fast broadband. The point I was going to make about country towns to use a generic term, is that under NBN Co’s plan, only towns or communities with 1000 premises or more, will get fibre-to-the-premises, and everywhere else will get wireless — fixed wireless or satellite.

Now the difference between fibre-to-the-premises and fixed wireless is gigantic. You’re talking about very high speeds, upwards of 100Mbps down to 12 megs. Now that’s just not satisfactory. There are quite a few, and when I say quite a few, I mean very many country towns with less than 1000 premises that would be ideally suited to the solution we’re proposing should be part of the brownfield answer, which is fibre-to-the-node. What that would mean, simply speaking, is as long as the exchange in that town is connected to a fibre backbone then it’s very feasible to then have a VDSL network in that country town which would deliver very high speeds.

And for premises within 1000 metres, you’re talking about not less than five megs and most of them would get 50 megabits per second or better. Many of them would get 80 megabits per second. So under our approach we could very cost-effectively, and arguably more cost-effectively than fixed wireless, deliver fast wire line broadband to a lot of smaller country towns, and in particular a lot of regional towns, particularly Gippsland.

 Of course, New England is another area which I’m familiar with, where there are a lot of communities like that. I just want to emphasise, this is not an ideological issue, it is a political issue because we’re all in politics — at least, Russell and I are, and Senator Conroy is. But what it’s really about, is being business-like and using the technology that is most cost-effective in the particular location, and delivers you the solution that you need quickly, and as cheaply as possible, because that’s in everybody’s interest.

So that’s why we want to encourage competition so companies like OptiComm can become more active again. We don’t want to have the NBN as a monopoly, when we can use alternative technologies, deploy them quickly, at less cost — that’s a win for everybody. So this is the difference — yes we will deliver broadband for all Australians sooner, cheaper and more affordably, but the ‘one-line’ difference between us and Labor is that we will be business-like about it, as opposed to just writing a blank cheque.

REPORTER:

(Question inaudible).

MALCOLM TURNBULL:

Very much so, yes, particularly if there is an exchange in that town, and I imagine that in most of them there would be, or an exchange can be provisioned there readily, then a fibre-to-the-node solution is very feasible. And you’d agree with that Paul, wouldn’t you? I’m not ruling out fibre-to-the-premises in brownfield areas.

Where that is cost-effective, that should be done. You know, just about everywhere else in the world, telecom companies and governments are approaching this problem in a cost-effective way which doesn’t discriminate as between one technology or another but just weighs up the cost, the time and the service delivered and then forms a judgement.

You know, the mistake that Labor has made is to go for one-size-fits-all and of course, it’s hugely expensive and incredibly slow — as people are finding out. I mean, the contrast between here, where we are today, and where we were yesterday at Mango Hill in Brisbane is very, very stark. And the difference is private enterprise and the role of OptiComm.

REPORTER:

Why didn’t those developers that are not getting any luck with NBN Co, why don’t they go to the private sector, especially when the cost is comparable?

MALCOLM TURNBULL:

Maybe Paul should answer this rather than me, because he is in the competitive marketplace, but I’ll tell you what the developers say to us.  They say they have no choice, they’re obliged to go for the NBN and of course they’re told that the NBN will then do the installation for free to the developer, obviously not free for the taxpayer, but the developer’s got to put in the pit and pipe. But the pit and pipe is a very expensive part of the equation in and of itself, and of course the way the NBN specifies it is very expensive.

But Paul, how would you answer that question as a participant?

PAUL CROSS:

Well I think you touched on the exact points. There is a belief I think within the development community that the NBN is a free network. Obviously we’ve shown there are significant costs of rolling out this free network and that the private sector can compete competitively in that area. As far as why aren’t they coming to us now, they are actually coming to us. We’ve had a number of developers who have previously looked at going with the NBN and have now changed their minds and have come back to private providers because they can guarantee a date that they will be online and they can guarantee the services that will be provided.

REPORTER:

Sorry, so can I just clarify that? So are you saying that the reasons it’s hard to compete with the NBN are, private sector to compete with the public NBN, is really that miscommunication, that they don’t understand that that’s not the only option?

PAUL CROSS:

Well I mean that’s part of it. There’s also a government paying for part of that installation that we have to provide ourselves.

MALCOLM TURNBULL:

So there are basically two parts to this deployment here, well here and anywhere else. There is what’s called the pit and pipes, which is the conduits if you like. And then there’s the fibre and the electronics that make it all happen.

Under the NBN model the developer has to pay for the pit and pipes herself and then the NBN comes along and puts in the electronics without charge to the developer, although of course they say that’s costing them $3000 per premise which is a very high number, costing the NBN. And what Paul has done is, he has covered the cost of the pit and pipe himself and the cost of the electronics and the cost to him, to OptiComm is around half of that $3000 figure at this estate here.

Now as he said the backhaul varies obviously from place to place but the point is that I think a lot of developers feel that they have to go with the NBN because they’re getting something for nothing but there is a sense of the you know, the great big government leviathan there pushing people, pushing the private sector out of the way. But was is interesting for me and for Russel as members of the Opposition is here is, we say the NBN is not cost-effective, we say it’s too slow and it’s over-expensed.

People say well you would say that, you’re opposition politicians. Here is a concrete example. A concrete example in reality here on the ground where a fibre-to-the-premises network is delivered much faster and much less expensively and that’s competition and the private sector.

REPORTER:

One of the key issues that is raised in the construction costs which are applicable [INAUDIBLE]…but is the constructions costs is IR. There’s basically been a pretty ugly protest in Melbourne today, does this further underscore a need for a reform of the nation’s industrial relations system do you think?

MALCOLM TURNBULL:

Well I mean, Paul do you want to say something about labour relations in your industry here? Is that an issue for you?

PAUL CROSS:

On this site?

MALCOLM TURNBULL:

Yes.

PAUL CROSS:

No, we have excellent relationships with our contracting providers.

REPORTER:

Mr Turnbull, do you have a view?

MALCOLM TURNBULL:

Sorry David Spence who is here on my left, David come into the shot, David’s Director of Hills which is the parent company has said that they’re not having problems on this site about it.

REPORTER:

And what about the issue more generally Mr Turnbull? Mr Howard based on remarks, again which were reported in The Financial Review about the need to rebalance the industrial system. That’s been given sort of another nudge by the events in Melbourne. Do you think there is a need?

MALCOLM TURNBULL:

Look I don’t want to start generalising about industrial relations given that’s not my portfolio and I see Tony Abbott’s had some remarks about it in the press today so I don’t want to run the risk of providing a story for you by contradicting something he said.

But I would just say this, the reality that we have to confront is that the cost of construction, the cost of doing business in many sectors in Australia is very, very high and getting higher. The cancellation, well not the cancellation, the postponement, the shelving I guess of the Olympic Dam project in South Australia is in large consequence a function of those increasing costs.

In a converging and much more competitive world if we want to remain a high-wage economy we have to be more productive and more competitive because every industry is open to competition, many more industries are open to competition now than ever were before.  And a lot of these projects, particularly mining projects of course, are producing goods that are sold at world prices. So a tonne of iron ore is the same value whether it’s you know mined in Western Australia or mined somewhere else in the world. So productivity is absolutely key and that means we have to keep a very keen eye on labour relations, industrial relations, and unions. And the Labor Party have to remember that you can engage in all the rhetoric about supporting jobs but if the jobs are insufficiently productive to be competitive then they won’t exist anymore.

REPORTER:

Can you, just going back to the NBN, you say that the NBN is unable to meet demands in connections. Do you have any figures on that? Is there a certain amount of houses that people are moving into without phone lines, without broadband connections?

MALCOLM TURNBULL:

Well last year I understand and I’ll be corrected if I’m wrong, I understand that they only connected 500 premises in Greenfield sites. And as of end of May which is the last figure we had they had overall connected less than 4000 premises to the fibre network. So that means OptiComm has more than twice as many premises connected to fibre-to-the-premises than the NBN has.

Now this is one of the emerging problems for the NBN — you know, Labor thought they pulled off a great political masterstroke by scheduling lots of locations in Labor marginal seats to be connected to the NBN but of course then they haven’t been able to connect them. So the resentment of those people is all the greater because they’ve been told they’re getting something soon and it hasn’t arrive.  And the people at Mango Hill in Brisbane where I was yesterday are very good examples of that.

We should maybe just have one more question and then we can, anything else or are you guys all done? I don’t want to do a Julia Gillard here and go for an hour.

REPORTER:

I’ve got two more distinct ones.

MALCOLM TURNBULL:

OK, let’s just do two more and then wrap it up.

REPORTER:

One’s about the public service and the other’s about Twitter, so we’ll best finish on twitter. The question is what do you make of the idea that the idea that Commonwealth public service sector [INAUDIBLE]…

MALCOLM TURNBULL:

Sorry, just say that again.

REPORTER:

Do you think that the Canberra public service needs to have a scythe put through it?

MALCOLM TURNBULL:

Well no of course not. You don’t put scythes through people, it’s ridiculous. And you know people who use that sort of language are very disrespectful of, I mean public servants work hard, they are very committed you know I’ve got a lot of respect for public servants.

However every organisation including public service departments have got to look to their costs. It’s very easy in the public sector for overheads to blow out because you don’t have that constant KPI that you have in the private sector of profit. You know when you’re over-expensed when the profit dries up.

So it is easy for public service departments to get overmanned and you know over-expensed and I think there are a lot of savings we can achieve in government. Particularly in IT I might say. There’s a lot more the public service, the public sector, can deliver its services to the public much more efficiently with a much more creative use of the digital platforms and if you just compare the way the public sector interacts with its customers versus the private sector you’ll see what I mean. The private sector’s embraced the digital world in the way the public sector, with a few noble exceptions, has not.

REPORTER:

And just on Twitter then. I know your comments the other day, was it a piece by Tony Boyd there about extent that CBA had to go to get a damaging anonymous Twitter account shutdown?

MALCOLM TURNBULL:

Yeah well it is hard, it’s hard. The anonymity of twitter does make it hard to deal with defamatory remarks and it’s a rather anarchic medium. But I think I’m a freedom of speech person so I’m not suggesting that anyone should be free to defame anyone on Twitter but I’m more inclined to freedom and openness in the digital world than restrictions I can tell you.

ENDS