Transcript: Media Conference Q&A with Stephen Conroy

Staff Writers
Tuesday, 15 September 2009 12:50

IT Industry - Market

QUESTION: Well, do you have a business plan? How does the company pay back its debt? What kind of price will you have to charge to get people on board?

STEPHEN CONROY: No, look I have seen some of the commentary, Henry Ergas. Henry Ergas has made a number of comments. He's just recently been structurally separated from his own company, I understand.

And the sort of assumptions that were built into many of the models that Henry used were just fanciful. They took the $43 billion, they set a 20-year timeline for the assets rather than the 30 years. It said oh you've got to get 15 per cent rate of return, ignoring the fact that we've always believed it's an infrastructure. I mean there was a string of assumptions built into those.

Now, at the moment in the marketplace, Internode are selling 100 megabytes for $100; iiNet are talking about that sort of pricing point. So what we've always argued - and Optus have stood up and said they believe it will cost around $27 to $30 billion to build and that you could, with the new business opportunities that have come online, you're going to be able to have a wholesale price around $60 in an Optus assessment.

So we've always believed that those sort of fanciful figures of $200 and those sort of were nothing more than political opposition for political opposition's sake.

QUESTION: But getting back to your point about children needing faster internet in the future, if parents wanted that now, they could get faster speeds but they'd have to pay more. So can you give…

STEPHEN CONROY: That's not true, David. The claims of where a DSLAM can reach are just a circle on a map. They don't represent the infrastructure that's in the ground that's impeding every home. And we're talking more than 50 per cent of Australia, I think, the last figures - I'm happy to have it tweaked a bit, but it's of that magnitude - cannot get access to even ADSL2+ speeds.

And what we're saying is if you want to take all of the incredible applications that are currently being developed - and, importantly, ones that haven't yet been developed in terms of bandwidth - then if you want to say okay, it's Johnny's time to do his homework on the computer now, everything else has to stop, we all can sit around waiting until Johnny's finished his homework, sure, you can do that.

But what we're going to see is the new health applications, the education applications, the Smart Grid applications, the working from home applications. All of those things are going to demand an increase in bandwidth that isn't going to be deliverable under the current infrastructure. It's crumbling in the ground, and we need to move from the end of the copper era to the fibre future.

QUESTION: You just cited an Optus estimate at a wholesale price of $60. So is the scenario here that Australians could get these fantastic new speeds, but they're going to have to be willing to pay a little bit more to get them?

STEPHEN CONROY: Well, I think if you actually add up the costs of what you actually get and what you actually pay for at the moment, you'll actually find they go past those sort of prices. Everyone goes oh it's $39 for just the basic basic, but most people want 512, and then you add on a whole range of other numbers, and you start to see numbers well north of $60 that people are actually paying today.

At the moment, in fact, it's so prevalent in this industry that the ACCC are engaged in conversations with the industry to get them to introduce truth in pricing, a bit like the airlines, where, you know, here's the price, but then there's all these other things on top of it.

And in the telco sector that's prevalent at the moment. So what you actually see is a whole range of extras like the cap. If you go past the cap, you go past the cap like that, and all of a sudden you're paying an extraordinary amount or your broadband slows to a crawl. So for a whole range of things at the moment that are built into the pricing, it's because of the poor quality of the infrastructure that we've got today.

So I'm not saying that Optus are absolutely right in their figures. What I'm saying is they've got a far more realistic understanding of what's needed than Henry Ergas and some of the other commentators who have just been pulling numbers out of the sky and making a range of assumptions.

Optus sat down and actually did a serious analysis. And the important thing that Optus were pointing to is the growth in the sectors that don't currently operate online.

The health sector: we just saw one of Australia's major e-health providers appear at the Senate Committee recently, called iSOFT. And they said look, the NBN will pay for itself twice just in the health sector because all of these applications that exist today will become available.

And I've launched just recently a number of fabulous initiatives that demonstrate the benefits of e-health. And later this year what we'll be doing is hosting a forum, with people from around the world and around Australia, to talk about what the applications are going to be online.

Because there still isn't yet a great enough understanding of all of the incredible things that you could do online today but you're held back from because the infrastructure in the ground can't deliver it.

I mean the architect one is one that is happening today. I talk with architects regularly on this. And hopefully we'll get a couple of architects to come along to the conference. And they'll show you it takes all night to down load one of these things that we're sending off for a tender in the US, or even just to Sydney, and our business is being slowed down.

And there's actually hundreds of examples like this at the moment, and this is actually where it's going to grow to. And then you have Smart Grid, you have educational opportunities, you have telecommuting, you have videoconferencing, all of those sorts of applications which are going to become the norm.

QUESTION: Would it be possible to conduct a meaningful implementation study if Telstra isn't onboard for your timetable at the end of the year?

STEPHEN CONROY: Well, there's two different things. The discussions with Telstra at the moment are to try and resolve a number of issues. The implementation study is looking at a whole range of things like what should the cap be, should it be 25 per cent, should it be 15 per cent, for a company that's vending in. So there's a whole variety of issues that aren't relevant to the negotiation with Telstra that the implementation study is actually working on.

QUESTION: Okay, but some kind of business case cost benefit analysis, how do you do that without understanding what Telstra's tipping in and what they're not tipping in?

STEPHEN CONROY: Well, that's why those discussions are taking place now. And the lead advisor is advising us in terms of those discussions at the moment. The lead advisor does have some expertise in this area, and I've had a couple of meetings with them. And they're, this is not something that somebody's gone oh, I've never heard of that before type.

There's an enormous amount of work gone into this over the last couple of years, if not longer, about people thinking about well what about if we try this, what about if we try this, what about if we try this. So people aren't starting from zero today. There's an enormous amount of work that's already gone into both Telstra's position and the Commonwealth's and NBN Co.

FACILITATOR: Just one last question.

QUESTION: What sort of changes will consumers notice because of the reforms to the competition regulation?

STEPHEN CONROY: Well, firstly, in terms of phone boxes, I mentioned that there's going to be different regimes. So in terms of access to public phones, there's clearly a difference.

At the moment, if Telstra breach, it takes them more than three days I think on average to repair, you get a small fine. So we're putting into place a benchmark that we're then saying we're going to start fining you if you breach that.

So we're going to be driving Telstra to start - and this is all of the telcos - driving them to improve their customer service across the board or start paying fines. So there will be improvements both at a macro level as well as at that localised level.

QUESTION: Why is Telstra saddled with the USO?

STEPHEN CONROY: Because it owns the copper in the ground at the moment.

QUESTION: I mean I don't think anyone's happy with the USO arrangements right now. The other telcos have no say over how the money gets spent, but Telstra are the ones who are going to cop the fine.

STEPHEN CONROY: No, I said this is right across. If you're an Optus customer, this is universal across everybody. This one doesn't - USO is different from customer service guarantees. They're two different things.