Malcolm Turnbull Talks NBN, Technology, Startups And Queue-Jumping

Shadow communications minister Malcolm Turnbull talked the National Broadband Network (NBN), technology and innovation at a press conference at the Kickstart event in Queensland today. Read on for his thoughts on running a startup, why broadband speeds don’t matter, why businesses should be able to jump the NBN queue and the “barking unreality” of Australian technology writing.

[credit provider=”getty” creator=”Brendon Thorne”]

Detailed discussions from the Coalition on how it would approach broadband if it were in government remain a fairly rare event. As such, I figured it was worth covering Turnbull’s statements in some detail, even though most of his speech talks about innovation policy rather than the NBN as such.

Innovation Nation

Turnbull kicks off by talking about innovation and why Australia “does not feel that it is doing a good enough job at innovation”. “In terms of innovation, and I know many of you are involved in startups or would like to be, the critical learning is to be thoroughly resilient. Do not regard a failure as anything other than a learning experience. The critical lesson in innovation is to keep on innovating and keep on trying something else.”

“The other thing is to be thoroughly and remorselessly open-minded. It’s critical if you’re doing business in uncertain times to give yourself as much optionality as you can.”

There’s an inevitable through line of criticism of current government policy here. “Just in terms of Australia and innovation, since 2004 there’s been a broad decline in what economists call multi-factor productivity. It’s been declining at an average of 0.4 per cent a year after a decade where productivity was growing at 2 per cent.”

There are several factors at play here, Turnbull notes, included lower-grade mining and a lack of investment in infrastructure at state level. And then we’re at the NBN, albeit briefly initially. “Despite the wonders of broadband, the NBN is also a utility, and over-investment can create perverse outcomes for consumers.”

“The fact is that the rate of change — the speed at which we are pushing the frontier ahead — is actually slowing.” Turnbull then runs through familiar figures on how Australians like and adopt technology quickly.

The big barriers to innovation are a lack of skilled worker and a lack of funds for business, he argues. “In terms of education, there is evidence we are starting to fall behind the world in key areas.” Science and tech graduates are below 20 per cent of Australia’s tertiary students, for instance.

With all that said, we move on to the NBN. “The narrative that Labor has created is that the NBN will alleviate all of these problems and create a digital nirvana . . . At the outset, I want to say there is no one more committed to delivering fast and affordable broadband than I am. My criticism is that it will take too long and cost too much.”

Access is less of a barrier to innovation than staff and funding, Turnbull suggests. “While upgrading our infrastructure is an important and very urgent task, it is not a panacea, the government needs to be engaged in how the pipes are being used, not just putting them there.”

“Part of the challenge with the NBN is ensuring its benefits are enjoyed by as many people as possible. The focus of government policy should be on universal accessibility and affordability rather than being obsessed with very high headline speeds.”

“One of the things that is forgotten is that the biggest barrier to accessing the Internet is not technology, it is lack of income. The lowest percentage of people online are in the lowest income brackets, and so affordability is absolutely critical.”

Having made this point (without explaining how it might actually be solved), Turnbull moves on to discuss venture capital issues in Australia and the difference between Australia and the US. “Australian startups and Australian entrepreneurs find the American market very, very accessible. We need to do a better job of commercialising technology here in Australia.”

“What can the government do about that and where is the government doing too much? Few startups look to the government for help.” Turnbull then reviews the success of the R&D tax concessions introduced by the Howard government.

“I have been critical of the changes to the R&D tax concession introduced by the Labor government. They narrowed the range of activities, and created uncertainty by changing the eligibility rules.” Cutting unnecessary red tape will be a priority for a Coalition government, Turnbull said. Improving efficiency in universities and CSIRO and improving private sector links would also be a priority. Australia has far more university-funded researchers than those in the private sector, he notes. The number of startups funded by public organisation has decreased and is an inefficient process, Turnbull says (and he is quoting plenty of research to back that up — more than I’m going to type out here in detail).

Turnbull then turns to the current government’s recently launched innovation policy, which he says is largely a matter of rebranding and drawing on existing investment funds and projects.

“As we continue to pursue the important goal of improved productivity, which is closely linked to a better utilisation of technology, we have to ensure that governments are doing everything they can to make it easier for people to innovate. I’m not persuaded that governments and bureaucrats are any good at picking winners.”

NBN Questions

And now we’re moving on to questions, which I suspect will be more NBN-centric. But first: how would public organisations like NICTA change under a Coalition government? “We’re very supportive of those institutions. We’ll certainly continue to fund them. I can’t give you a commitment to a particular dollar amount, because that’s something we’ll announce in the lead-up to the election.” Any indication of timing? “That’s really a matter for Sophie Mirabella, who has the ministerial responsibility for it.” In other words: were not going to tell you.

Turnbull then gets into what might politely be described as a brawl with the ABC’s tech editor Nick Ross, who has frequently clashed with Turnbull over the lack of a detailed Coalition policy. What are the benefits of broadband? “It’s for everything. Broadband is used for every form of communications, entertainment, everything,” Turnbull responds.

What about telehealth? Is that only possible with fibre? “The areas where telehealth is probably most important is in regional and remote Australia, and nobody is proposing there is going to be fibre rolling out across the desert. We use a mix of technologies. Many telehealth applications do not require much bandwidth at all.” Ross quotes a series of studies, and Turnbull loses his patience. “That is just absolute nonsense. I don’t know where you’ll get this from. Let me just say this to you. These are the sort of issues that could have been examined if there had been a proper cost benefit analysis of the NBN.”

I’m often critical of rusted-on NBN opponents, who just blindly argue that it’s a waste of money. But Turnbull has an equally valid point when he notes, as he does here, that NBN supporters can be equally locked in with their views. Discussion frequently degenerates quickly, no matter which side you’re approaching from.

After some banter about FTTN in the US, the question arises: will businesses have to pay to be connected in a fibre to the node scheme, as has happened in some cases in the UK? Turnbull notes that many households were connected for free (around two-thirds) and that there is careful regulation to ensure equity of access. He would “absolutely” support the option of allowing businesses to pay for fibre-to-the-premises if they wanted to. “I’m not making a pledge on this here, but I struggle to see why you would object to that.”

“The mistake the Labor government made in the NBN was saying we are going to do FTTP to 93% of Australia. They should have said ‘we are going to do very fast broadband’ and identified where the deficiencies are and that’s where the cost-benefit analysis would have been so useful. Because of the approach they’re taking, people will have to wait a very long time. Broadband availability is patchy. Surely you would prioritise the areas where the need is greatest.”

Next: what would happen to the HFC cable network under a Coalition government? “HFC is a very big player in broadband everywhere in the world. It’s the biggest in many markets. As far as our policy is concerned, what I’ve said about HFC is that we’re going to prioritise the areas that are poorly served. [Overbuilding in] HFC areas would not be the highest priority. Any change would clearly require extensive renegotiation with Telstra.”

Turnbull also suggests that aiming for high speeds in itself isn’t always a worthwhile goal. “A lot of people are prepared to accept lower performance at a lower price. One of the challenges that telecom companies have is that they invest a lot of capital to upgrade services and then they struggle to get people to pay any sort of meaningful premium for it. Many people can do everything they want to do at a lower tier.”

Will NBN Co be privatised under a Coalition government? “Not any time soon. But the reality is the government shouldn’t be owning this business. We don’t like that. But we are where we are. I don’t see that the NBN could privatised for the foreseeable future. It just isn’t in a state you could sell in any sort of satisfactory way. Our focus has to be to complete the NBN and up and running in a viable and sustainable form.”

How could NBN Co be more transparent? Turnbull suggests monthly updates on premises passed could be useful. “NBN Co should be an open book. It doesn’t have any competition. What we will do as soon as we get in is we’ll very very quickly ensure that there is produced by NBN Co a fully transparent analysis of what it is really going to cost in terms of dollars and time to complete the build on the current plan.” That would be compared to variations that might save money, such as FTTN in brownfields areas. The subtext is important: we’re not going to be given a detailed plan ahead of the election.

Another question: Why can’t some of that analysis be done now? “If I put out a set of financials, I want them to be right. We do not know enough about the NBN’s commitments. If the NBN were to open their books to us, we could come up with some much more robust numbers.”

Turnbull can’t resist pointing out where he thinks coverage is wrong. “There is an air of complete barking unreality about some of the commentary here. There is a lack of interest in what is happening in other markets.”

What’s consistent through all this (and not unexpected) is we still don’t have any more detail about the Coalition’s broadband plans, and indeed we seem to have a commitment to not develop them unless the Coalition is elected. Turnbull knows the market well, but how that knowledge would be deployed is, still, something we’ll have to wait a little longer to learn — quite possibly longer than this year’s election.

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