Last Friday, Dale Clapperton and Nicolas Suzor appeared on behalf of EFA to give evidence to the Commonwealth Senate Select Committee on the National Broadband Network. EFA had previously provided a written submission to the Senate, voicing concerns about the increased cost to users and the potential anti-competitive effects of the proposal.
EFA was asked to expand on its opposition to the National Broadband Network. We explained why we thought that the current proposal would result in increased costs to users and very little if any increase in performance:
Senator STERLE—You said that the rollout of the national broadband network is not a good one in your words. Not a good one for whom?
Mr Clapperton—Certainly not for the end users whose interests EFA represents. Neither would we submit it is a particularly good outcome for the internet service provider industry. They are currently labouring under a regulatory regime surrounding access to the local loop infrastructure, which was denounced by the previous speaker as fundamentally flawed and ineffective. Nonetheless, the other ISPs in this country who are engaging in infrastructure based competition with Telstra are struggling to do so. They are providing a good competitive constraint on Telstra’s pricing, product offerings and behaviour in the market to the extent that they are able to do so, but the introduction of the NBN would change all of the ground rules that they are operating under and would largely seem to exclude them from infrastructure based competition, so they would end up being resellers in some way, shape or form of a Telstra offering.
Senator STERLE—I will make it as simplistic as possible, because the whole purpose of the policy of the rolling out of the national broadband network is to reach 98 per cent of Australians. Are you saying your couple of hundred members plus upwards you represent would be disadvantaged if 98 per cent of Australia received high-speed broadband?
Mr Clapperton—We are saying that least some of that 98 per cent of Australians would be disadvantaged, not only our members. In the market people can already get internet services of approximately the same speed as would be available under the NBN and can get it so much cheaper. Certainly that proportion of the market would be worse off under the NBN because they would be in a position of either paying more for what they currently have or having less than they currently have because they cannot afford to pay more. I do not have any firm statistics on the number of people who currently have access to what you might call NBN-grade services, but it is certainly a non-trivial number. Those people would be disadvantaged. For the people who cannot currently get what you might call an NBN grade service the question is going to be: they might be able to get it under the new environment but can they afford it? There is really only so much that your average household might be willing to pay for internet access. I am currently paying $50 a month. Under the NBN environment the most recent pricing that I have seen, a suggestion by Telstra, is that their wholesale price for a service of comparative speed to a reseller would be more than I am paying retail at the moment, so my cost would certainly go up. I think a lot of people would be in the situation of saying, ‘Yes, fine. We can get a 12 megabit service under the NBN, but we just can’t afford it. Even if we could afford it, we could only use it for an hour or so a month at full speed and then we will have to put our hand in our pocket again to pay for it.’ There is unfortunately something of a fallacious public perception at the moment that the cost of a fast notionally unlimited internet connection is $50 or $60 a month, when that is quite simply not the case. That is only sustainable at a retail level because ISPs are really oversubscribing their services. That is why you see things such as download limits. The true cost of even a one megabit internet service that you can use at one megabit all month is not less than $100. It is probably over $1,000.
Mr Suzor—The reason we are critically concerned about download quotas and upstream capabilities is that the use of the internet is changing in Australia. It is not just about having a high-speed network to browse the occasional webpage. We are looking at connections that are always on. We are looking at cloud computing, where people are increasingly moving their applications away from their desktop and onto the internet via various servers around the world. All of this takes upstream processing. We are looking at people who are participating in various multimedia and content rich services, so people who are uploading and downloading videos and participating in a real global conversation. As these sorts of activities increase we have to be very careful about the very high costs that we currently pay in Australia for upload content and download quotas—cents per megabytes above a certain quota and upstream speeds—in order to participate in participatory communication. This is something we are very concerned about at the moment.
We suggested that the proposed $4.7bn investment would be better spent bringing access to rural areas and increasing infrastructure based competition:
Senator IAN MACDONALD—Thank you for your very lucid submissions on some very interesting points. You have covered nearly everything I wanted to ask. Would you think that the$4.7 billion taxpayer subsidy could just be used as a separate program to try to connect thosewho are not currently able to get 12 megabits to the system?
Mr Suzor—That is a suggestion worth investigating. Rural users and users currently outside the zone of ADSL2 services could certainly benefit from that level of investment.
Mr Clapperton—For that matter, on a political level, some of the changes to the existing
regulatory regime that had been mooted might also be effective in ensuring that more people can get access to those types of services by promoting the level of infrastructure based competition in what you might call fringe regional areas. Certainly $4.7 billion could do a lot to help internet access in rural and remote areas that genuinely do need it. Perhaps it could be targeted at them rather than a one-size-fits-all approach. Pulling the pin on the OPEL project was perhaps a mistake in that respect.