PM: Today we can announce a major new agreement to build a stronger Australian economy, but also to provide cheaper, better broadband services to Australian families, to Australian small businesses, right across our nation.
Today, Telstra and the National Broadband Network have signed a Financial Heads of Agreement which provides the way for that cheaper, faster, universal broadband service for all Australians.
After 20 years, it also achieves fundamental structural reform in the telecommunications sector, separating out wholesalers from retailers, and therefore represents a major reform for the nation.
The Government committed to building a superfast broadband service for all Australians back in 2007, when the Government was then in Opposition.
In 2009, the Government committed to building a National Broadband Network.
Last month the Government released the National Broadband Network implementation study, and today we announce the conclusion of what has been a very tough negotiating process between NBN Co on the one hand and Telstra on the other which has gone on for the better part of a year. This has been a very difficult, tough, hard negotiation, but it's also been an honest set of negotiations and it demonstrates what can be yielded through a process of negotiation where the end point is to deliver better services for all Australians and a better outcome for our nation's economy.
So, I'd like to thank very much both the representatives of Telstra and of course the leadership if NBN Co for their participation in what has been a hard negotiation over a long period of time.
This also, of course, makes Telstra a participant in the NBN roll-out. It also makes Telstra the largest customer of the National Broadband Network and we, through the National Broadband Network, look forward to partnering with Telstra, and of course other companies, in the future in delivering this important new set of services, as I said, right across our nation.
It also provides certainty for Telstra's future. It also provides certainty for Telstra's 1.4 million shareholders, as well.
We regard this as a good outcome for the nation; a good outcome for our economy; a good outcome for the National Broadband Network; a good outcome for Telstra, and most critically, a good outcome for all Australians - individuals, families, small businesses - who stand to benefit from this fundamentally new technology able to turbocharge out nation's future.
So - good for a stronger economy; good for families; good for the nation.
I'm now going to ask the Minister, Stephen Conroy, to comment. Before he does so, can I say publically how much I have valued his strong support, engagement and shepherding of this process through what has been a very, very tough negotiation of a long period of time, and it is a tribute to the Minister, as well as to others, that we have reached this significant outcome today.
Over to you, Stephen.
MINISTER CONROY: Well, thank you, Prime Minister.
Well, today is a truly exciting day in the history of Australian telecommunications sector.
I would like to start by thanking Catherine and David and the entire team at Telstra, as well as Mike Quigley and his team at NBN Co.
These negotiations have been tough, they have been complex, and at times they have been colourful, but most importantly, I believe that they have been conducted in good faith with a firm focus on getting the best outcome for everyone.
The Government has always maintained that it was possible to have a win-win: a win for Telstra shareholders and a win for the Australian public as a whole.
This Agreement provides us with a clear pathway to take Australia from the copper age to the fibre future. We also have a clear way forward for reforming the telecommunications sector, to introduce the right market structure, to unleash genuine competition at the retail level for the first time.
Once the NBN rollout is complete and Telstra has completed the migration of its customers to the NBN, Australia will be served by a national wholesale-only network not controlled by any retail company. In other words, structural separation - so long argued for by many stakeholders in this sector - this will have been achieved.
Today's announcement involves: the progressive migration of customers from Telstra's copper and HFC networks to the new wholesale-only fibre network to be built and operated by NBN Co; the re-use of suitable Telstra infrastructure - including pits, ducts and backhaul fibre - by NBN Co as it starts to rollout its new network, avoiding unnecessary duplication.
Combined with the Rudd Government's public policy reforms, Telstra estimates the agreement will deliver them a post-tax net present value of approximately $11 billion.
As part of the public policy reforms, the Government will establish a new entity, USO Co - with Commonwealth funding of $50 million in 2012-13 and 2013-14, increasing to $100 million per annum thereafter. It will provide $100 million to Telstra to assist in the retraining and redeployment of Telstra staff that will be affected by this change to the structure of the telecommunications sector. And it will require NBN Co to be the wholesale supplier of last resort for fibre connections in greenfield developments from 1 January 2011.
Further information regarding the reforms I've just mentioned will be available on the Department's website.
The Agreement means that NBN can be rolled out quicker, cheaper, more efficiently and with faster take-up rates.
Today's agreement is significant, but there is still more work to do across a number of very complex issues, including the move to Definitive Agreements and shareholder approval.
To improve competition and consumer protection in the transition to the NBN, last year we introduced a Bill to reform the structure of the telecommunications sector. The Government remains committed to implementing the reforms set out in the Bill, which is currently before the Senate. The Government will be making a number of amendments to the Bill to provide Telstra with the legislative certainty that it needs to proceed with structural separation while still protecting the long-term interests of end-users.
These amendments will improve the current equivalency and transparency measures while the NBN is rolled out. They will also permit Telstra to set out how it will migrate customers to the NBN and for this to be subject to industry consultation and consideration by the ACCC.
As the Prime Minister has said, today's agreement between Telstra and NBN is significant. It will be remembered as the moment the Australian Government and the industry joined together to revolutionise the telecommunications sector in this country.
Of course, fast broadband will deliver more than just high-speed telecommunications. It is about better access to health services for Australian families; better educational opportunities for Australian kids; creating new business opportunities and stimulating Australia's economy, and it is about creating and keeping jobs in Australia.
In just a few short weeks the first customers in Tasmania, in one of the worst broadband markets in the country, will begin receiving services under the NBN.
Today's milestone brings the rest of Australia a step closer to receiving these services that will lift us to be a world leader in broadband access and telecommunications innovation.
Thank you very much.
PM: Good. Just before we take questions, if I could ask Catherine Livingstone from Telstra to make some remarks to you, followed by Mike Quigley from the NBN Co.
LIVINGSTONE: Thank you, Prime Minister. I think, just to add to those words, today's agreement is an encouraging milestone in the process and the result, as the Prime Minister and Minister have said, are the result of a very complex series of negotiations over quite some time between Telstra, the Government and NBN Co.
The agreement certainly takes us a step closer to achieving that mutually beneficial outcome which, as you know, has always been Telstra's objective, and that outcome will be in the best interest of the Telstra shareholders.
Now, we're very encouraged by the Heads of Agreement, but there is a great deal of work to do to achieve the definitive agreements. The Heads of Agreement gives us a very firm base from which to proceed down that path and Telstra will very diligently and with resources seek to conclude those definitive agreements as quickly as possible.
Thank you.
PM: Good. Thanks very much, Catherine. Now, Mike Quigley from NBN Co.
QUIGLEY: Thank you, Prime Minister.
This is a very important step forward for NBN Co and I'd like to acknowledge and thank all those people within Telstra and NBN Co who have put in literally thousands of hours of work in reaching this point.
The board and management of NBN Co believe this $9 million investment, which is the NBN Co component of the deal, represents a very sound outcome for NBN Co. It's a sound outcome because, first of all, it maximises the use of existing infrastructure. It avoids infrastructure duplication. It accelerates the roll out of the NBN and, I think most importantly, Telstra is likely to become NBN Co's biggest customer, as we've said.
In a previous life, I had Telstra as a customer, and I very much look forward again to having the same opportunity as we move forward.
Thank you.
PM: Good. OK folks, over to you.
JOURNALIST: There's no guarantees this deal will be done, is there?
PM: Can I say, when you have a Financial Heads of Agreement, which goes to the level of detail in which we have just concluded between the two sides, this is absolutely basic to this rollout occurring. Both Telstra, in my discussions with them, and NBN Co, in my discussions with them, and discussions with them together, are confident this will occur. It could not occur in the absence of this Financial Heads of Agreement, as the Minister outlined in his statement just before.
JOURNALIST: What is the legislative timetable now, given that the parliamentary weeks are rapidly running out?
CONROY: Well, look we obviously have been in discussions with Telstra about a range of amendments that deliver that certainty that I described earlier. We are in a position where we can bring some of those forward. Whether or not the Opposition choose to be constructive, I mean, they're now in a situation where this agreement has widespread support across the whole sector.
We would be able to, certainly, put forward a raft of them this week. Whether or not they will be passed by the Senate- as I said, all round Australia: the telco sector; the local government community, if you were here this week and talked with any of the local government communities; and in Western Australia, the Barnett Government; the Tasmanian Liberal Opposition, they are behind and supportive of this agreement.
If we're re-elected, we will continue to implement the NBN. So, people should understand that if Tony Abbott is elected he will shutdown the National Broadband Network, and it's now time for Tony Abbott to make a decision.
The Australian public have a clear choice and we will be progressing this forward this week, if we can get cooperation. We have, obviously, a raft of other legislation equally as important to the Government that we need to progress. The Opposition, for many months now, have refused to support extra days, extra hours, to allow bills to be debated in the Senate. This level of obstructionism has been unheard of in the last 20 years, and we will continue to press ahead with our reform package, our legislation and our amendments.
JOURNALIST: Minister, will you be retaining for the average internet user - or the average Australian, in fact - and how much cheaper will they get their broadband as a result of this deal and when exactly will it be delivered? Will it be delivered-
CONROY: -Well, as I said, in Tasmania, in a couple of weeks, the first customers will actually get National Broadband Network services, and already we've seen the three ISPs, or RSPs as we now call them, who've gone in to the marketplace in Tasmania, put out their pricing structures.
Internode have probably been the most aggressive, and I do want to stress these are introductory prices for Tasmania. They're not the final prices that will be across the whole of Australia, but you've seen, as an example, Internode are offering 25 meg for $29.99 and you've seen-
JOURNALIST: -(inaudible)
CONROY: -Absolutely. This will be delivering cheaper and faster services for all Australians ultimately, and Internode is offering 100 meg for $60. I mean, this is a real price in the marketplace right now.
JOURNALIST: When do you anticipate Telstra completing the migration of its customers to NBN Co and-
CONROY: -I'm not sure. Mike, did you want to hazard a guess, or-
JOURNALIST: -and therefore achieving structural separation?
CONROY: I mean the build is across the eight years we've talked about, but I might pass to the engineers to give us a-
QUIGLEY: -This is, as we know, it's a very large engineering project. There's quite a bit of complexity, as you would understand, in migrating customers. There's lots of different scenarios to be looked at. It is an 8-year rollout that has been scheduled, so I imagine the last of the customers would come across at the end of that rollout period.
JOURNALIST: Mr Quigley, how much money have you saved by not having to duplicate the infrastructure you're getting from Telstra?
QUIGLEY: This is a, it's a significant saving, and obviously that's why NBN Co board and management-
JOURNALIST: -(inaudible)
QUIGLEY: No, I'm not prepared to give a figure on that, obviously, but it's obviously a good outcome in that regard.
JOURNALIST: Is it more or less $11 billion?
JOURNALIST: (inaudible) between Telstra and the Government were pretty much poison only a year or so ago. How did things change to the point where you can get an agreement like this?
PM: Sweetness and light and Stephen Conroy are the three answers to that question.
This is a- if you're having a negotiation on something as hard as this, and it is hard - Just roll the clock back a bit, 20 years ago when we began this long process of telecommunications reform, and it's not been a glorious history over that 20 years, from governments of both political persuasions, getting this fundamental reform, this structural reform right, and that is separating out wholesaler from retailers.
That's been tough, and of course the commercial detail of this particular negotiation's been tough as well, but I think in the last 12 months, what you've seen behind the scenes is a strong determination on both parties to get this done, and again I commend the role of Stephen Conroy in shepherding this thing through.
I think it's fair to say that over the last month or so the two sides have come closer, and I think there is a genuine commitment, as I see it, on the part of Telstra to go forward with its business future. It's a strong company with a strong history in Australia, a robust financial position and therefore carving out its future on the basis of this new certainty, as well as our national obligation to put forward this major new piece of infrastructure for the 21st century.
Stephen mentioned before, I think, what excites people about this is what it's potentially going to do for something as basic as delivery of health services across Australia. In the health and hospitals reform in which I've been engaged for much of the last six months, the future of a patient-controlled electronic health record is so fundamental - shooting health data around the country from a doctor to a specialist, to a surgeon, for someone who gets sick on holiday at one end of the continent to the other.
Revolutionising the way in which we deliver education - you don't have an advanced maths teacher in central west Queensland? Well, suddenly you can get one, you know, online with available bandwidth, band speed, cheaply, efficiently.
The applications are huge, so what I sense in my conversations with all these good folk this morning - and we've been having quite a long conversation this morning about the where to from here - is a commitment to, I think, this important national purpose.
You see, when we land this and it's out there on the ground, Australia will be out there as a global leader in providing this-
JOURNALIST: -(inaudible)
CONROY: -If I could just add-
PM: -providing this - just one sec - and providing this infrastructure relative to what we see in other countries of similar geographical size, or even population concentrations worldwide.
So, you asked your question, how'd it all come together? Hardline commercial negotiations, honesty in the negotiations, but I think a unifying purpose about a huge future for the company, Telstra, but getting on with this important public purpose.
Over to you.
CONROY: Sorry, if I could just add to that - probably, to take your point, the single most important change that took place was when the Telstra board elected Catherine and David as the chair and CEO, and brought John Stanhope, who's quietly standing over in the corner and no-one's mentioned his name yet, on to the board as part of the team. So, I think the single most important step forward was the decision by the board of Telstra to elect the new leadership which has taken an absolute change in the approach from Telstra. It's been evident for the last- these have been very tough negotiations, yet you have not been reading about them from us. There's been much speculation and at times comical speculation, but it has not been put in place by Telstra or ourselves or NBN Co, and I think that that good faith and that trust that has been built up over the last- demonstrates absolutely that the war is over.
JOURNALIST: Question for Telstra.
PM: There's a question here from, Phil.
JOURNALIST: On another topic, Prime Minister, could I-
PM: -We'll roll with this one for a bit and then come-
JOURNALIST: (inaudible)
PM: David over here, and then you, mate.
JOURNALIST: Just a question about the $11 billion. Has it come out of the $43 billion? Does it mean that the network in the end will cost less than $43 billion? And a related question for Ms Livingstone - if the independent experts say that $11 billion is not a fair value, is the deal off?
CONROY: Certainly, I think Mike has indicated that there is now a cheaper national build for the total project. I think he's rightfully saying there's some commercially sensitive issues there in revealing exactly what that figure would be, but no question, it is again cheaper and delivering a better, more reliable, and faster services that we've currently got now.
And in terms of the Telstra question, Catherine?
LIVINGSTONE: Yes, thank you, Stephen.
Clearly, Telstra has negotiated very hard over the last 12 months and we're very well informed about our business and also the interests of our shareholders. We will, of course, take the final proposal if it's negotiated through the definitive agreements, through an independent experts review and then put that to shareholders, subject to regulatory approvals.
PM: There's a question here in the front - Ari.
JOURNALIST: Telstra, how confident are you that you've achieved a good deal for shareholders, given that there were estimates that went up to $25 billion for the value of the assets that are being sold?
LIVINGSTONE: Look, I think it's- how many times can I say it? We have been through very tough negotiations. We are very well informed about our business. We regard this Financial Heads of Agreement as a significant milestone and we look forward to negotiating the definitive agreements.
PM: OK, there's another one at the front here.
JOURNALIST: A question for Telstra - you mentioned that there are still some issues outstanding, amongst them taxation and issues around the migration. Can you explain just what the tax issues are and explain a little of just what remains still to be done?
LIVINGSTONE: Look, I don't want to comment on all of those details because that's part of the negotiation of the definitive agreement, so, we've tried to be clear about the fact that there's a great deal of work yet to do but we'll just work through the issues.
JOURNALIST: But what is the tax? I'm just particularly interested in what the tax issue might be?
LIVINGSTONE: It's just to do with the way the arrangements are structured financially. It's a mechanical exercise, but it's something that has to be resolved as part of the negotiating of the agreements.
JOURNALIST: Prime Minister, you must be hoping for a similar circuit breaker on the mining tax. Can you tell us, do you support Wayne Swan's claims that-
PM: -Hang on. Are there any other questions on the Telstra stuff, and I'll come back to you.
JOURNALIST: How much equity does this deal give Telstra in the NBN Co? Is that a, or is there a value of that $9 million or-
CONROY: No, we're buying access to their ducts, the bits of their infrastructure. There's no Telstra ownership of NBN shares or anything like that. It's a commercial transaction which is what was signed this morning which commits NBN to pay certain prices for certain access to Telstra assets, so, there's no equity involved. The Government remains as the McKinsey- McKinsey's recommended the Government should retain 100 per cent ownership during the course of the build and that remains consistent after today's announcement.
JOURNALIST: Minister, just to clear up those numbers, though - $43 billion has been well canvassed publicly and yet we're being told today that the savings below that can't be for commercial-in-confidence reasons. This is a taxpayer-owned company in the first instance. When and how will we get that indication?
CONROY: We - Lindsay, did you?
TANNER: I think there's some confusion between capital and recurrent here, because effectively what's happening is that the payments that we're talking about here are recurrent payments that are into the future.
NBN Co is not fronting up with a giant pile of money tomorrow to Telstra. These are contractual arrangements where NBN Co is effectively saying we will pay you a payment for access to your infrastructure, whereas the figure of $43 billion relates to the capital build, so the two are not comparable.
JOURNALIST: So then you will own the infrastructure, that the deal's been done-
TANNER: -No. NBN Co is proposing to pay Telstra for the use of its infrastructure. It is not buying the infrastructure.
JOURNALIST: So is it leasing it, in effect?
TANNER: That's a matter for detailed negotiations-
JOURNALIST: Can you indicate over what period of time will they take place?
TANNER: Look, that's something that obviously is still to be negotiated between parties.
JOURNALIST: (inaudible)
PM: Can we just have a bit of order here, thanks? Over here then you.
JOURNALIST: Sorry, Prime Minister. Does this mean Telstra will no longer be building infrastructure for broadband? Will that be now taken over by NBN Co, and Telstra will just become its biggest customer? Is that how it works from now on?
PM: Stephen
CONROY: I think, that's essentially. I mean, they'll still be providing wireless services, so they've still got a very strong interest in broadband through the wireless spectrum and obviously the release of spectrum in to the future, and Telstra, I'm sure, will have an interest in that to ensure that they can introduce - and they're already testing I believe - their 4G products. So, they'll still be providing infrastructure on the ground to support that wireless structure and they've still got existing infrastructure in the ground and they'll be servicing it and upgrading it as they see fit in terms of back-haul.
But in terms of the copper network, part of the agreement is that the copper network is obviously being phased out, so that as we connect fibre - in each street, in each suburb and each town - Telstra transfers its customers across and the decommissioning of the copper network.
I mean, that's how it's structured. Well, we said it's an 8-year build.
JOURNALIST: (inaudible)
CONROY: Oh, sorry, look, I think, to be fair we'd like to try and finalise that document before the annual general meeting. I think that would be in time for it. I should let Telstra speak for what their timing is of presenting of the vote. That's a different issue to completing this, but I think it would be very fair, if we're wanting to try and complete, so Telstra shareholders at the AGM could ask questions about and it could be described and discussed, but I should really pass to Catherine to comment on that any further if she'd like to.
LIVINGSTONE: Well, I think, as I said, we're aiming to work with NBN Co and to see the completion of the definitive agreements and that final negotiation as rapidly as possible. I think that's our mutual intention.
PM: I just add one point - the bottom line is this is a better deal for the Australian taxpayer because we've struck a negotiated outcome with Telstra. It made sense for the taxpayer to be able to use Telstra's ducts in order to put this through and we think that is the sensible, prudent, proper way to conduct these negotiations.
Second thing is, get the infrastructure out there. Third thing, make it available to all families and small businesses.
Over to you.
JOURNALIST: Can I ask you a Sydney-centric question, Prime Minister?
PM: A what?
JOURNALIST: A Sydney-centric (inaudible)
PM: All right, OK.
JOURNALIST: The Penrith by-election - did you heed any message out of what happened in Penrith on the weekend, and what is your message, the Federal Government's message, to the people of Western Sydney?
PM: Well, as far as Sydney by-elections are concerned, I think both Kristina and I think the leader of the State Opposition have made it pretty clear, that these have been fought on state issues, and secondly, I think it's our long experience in the political process that the Australian people vote differently on state and federal political matters and they have done for quite some time.
As for the people of Western Sydney, can I just say this, and communities like those in Western Sydney right across the nation: there are still big cost of living pressures out there and these are real. When we look at the fact that our economy as a whole has held up really well through the global financial crisis, that's true relative to the rest of the world, but the cost of living pressures out there and the challenges faced by small business on the ground are real, and they are hard and they are difficult, and as I've moved around the nation last month, I just picked this up time and time again.
As a nation, relative to what's going on in Europe, what's going in North America, this is a good performance for us as Australia, but let me tell you, it is still very hard out there. So, our challenge as a Government is, for example, to deliver things like what we have got coming forward on 1 July, which is the third round of tax cuts. If you're on $50,000 a year, it means that after three years, you effectively got about $1,750 less tax than you were paying three years ago. It's nearly a 20 per cent tax cut. It's those basic cost of living questions, which I think are really important for people out there.
Sam, I said before, and then over to you, mate.
JOURNALIST: Thank you. What evidence do you have of strong arm tactics by big mining companies in relation to this mining tax debate? Is it anecdotal? Have there been any direct concerns raised with your government?
And in relation to the issue of Western Sydney, are you picking up at all that the boat people issue is a concern there among your Labor MPs or your constituents?
PM: Sure. On the first point, I think what the Treasurer was doing this morning is simply calling a spade a spade.
Answer to your second question, yes.
And thirdly, as far as the concerns about the vote in Western Sydney, as I've said, I think in response to Phil's question before, our overwhelming sense of that, and having spoken with state political colleagues, is that this is a vote on local state political issues.
JOURNALIST: So companies have gone to the Prime Minister's office and said they're being strong-armed? Is that what you're answering yes to?
PM: I said, in the sequence of the questions you asked, yes to the second.
JOURNALIST: Prime Minister, given the tenor of today's-
PM: -To the Government. I didn't say to the PMO.
JOURNALIST: Given the tenor of today's agreement, and I'm sure that you'd like Telstra to be digging iron ore as well-
PM: -Well, business diversification's always possible. It's a diverse, flexible company and it's-
JOURNALIST: It's quite evident, isn't it, Prime Minister, that you're not going to be able to get the big miners across? Are you then hopeful that the small miners or the smaller miners will be happier with concessions on faster recovery of capital and the taxing point at which certain minerals are taxed?
PM: I think the bottom line is, building out of the negotiations with Telstra, is that if you engage in those negotiations in a constructive, positive, frank, honest, upfront sort of way, they'll be tough and they'll be long, but you get there in the end and you produce something which is good.
We'd- actually, in a similar process with a whole bunch of mining companies right now - very constructive, positive, full of detail, getting there, wrestling it down. I can't say that for all, though.
I go back to what I've always said through this process, though. Reform is tough. It's very tough, and I saw some commentary the other day about this, but you know, the Government's belted around in the opinion polls at present. The Government will continue to be belted around the opinion polls at present, but this is not a Government of opinion polls. It's a Government which believes in the national interest and the national interest demands that we do tax reform. That tax reform is hard, but we intend to prosecute the debate.
We've always said that we would be open to consultation and negotiation on detail and implementation and generous transition arrangements for mining companies across the country. That remains the case, and we are through that process with so many mining companies right now.
Folks, I'm about to freeze. Socceroos.
JOURNALIST: How do you feel about Harry Kewell's (inaudible)
PM: We are a)-
JOURNALIST: -(inaudible) with Senator Conroy, do you agree that this just sounds like a bunch of whinging Poms?
PM: I'll let him answer the latter part of your question. I actually, look I am not fully versed on every rule of the round ball game, OK? I'm just being upfront with you here. But I think the red card was a bit rough. I would say questionable, but you know something? let's get behind the Socceroos. They've got a game coming up against Serbia and it's a tough competition over there.
You can answer the question about your country of origin.
CONROY: Well, look I don't think, I think they've got a lot to complain about given how they played against Algeria, frankly, but look, the Socceroos put in a great performance.
PM: I think that will be in the British (inaudible)
CONROY: The Socceroos put in a great performance last night. I mean, clearly a penalty, but the sending off was probably a bit harsh and the way they responded to the sending off was fabulous. I mean, Chipperfield had the chance to score with the keeper and we were just dead unlucky. So, it was a fabulous performance last night and if they can produce a performance like that, then there's still a chance to go through and we should get right behind them and congratulate them on how they've bounced back from, you know, a very tough game against Germany.
But it was a great performance last night, particularly given they were down to 10 men, and Harry's one of the, you know, the stars of the team and to lose Harry was a real blow, 'cause he was causing havoc in that early stage before he got caught.
PM: And now that NBN Co and Telstra matters have been concluded with this Financial Heads of Agreement, Conroy will now be heading to South Africa to assist with general advisory responsibilities.
That was a joke. It was not true.
JOURNALIST: (inaudible)
PM: Got to go, folks. We're heading off. Thanks very much.