NBN Co

Senator LUDLAM-Maybe I will give your finance questions a break for a little while and ask about the actual rollout of the network. I will come back to some of the financial stuff a bit later. There is a greenfields bill parked in the Senate at the moment that has not proceeded.

Senator Conroy-I thought the greenfields bill was in the House of Representatives

Senator LUDLAM-We have not seen it yet. I am interested to know, in the interim while that legislation is stalled, what is your thinking around installation of fibre into subdivisions and housing estates that are being built now or in the near future?

Mr Quigley-We are looking at that right now to see what we can do. I understand that the legislation is still working its way through, and until we know where that ends up it is a little hard for us to judge. We are now investigating what it is possible for us to do sensibly in greenfields areas, at least in terms of physical plant that we could get in there. That is an investigation that is going on right now as we speak.

Senator LUDLAM-I understand that you have not been up and running all that long, but there are obviously housing subdivisions and estates being ploughed into the ground right now. I asked this in the select committee, and the department was not sure how much is being built at the moment that we will have to go back in the next 12 or 24 months and retrofit.

Mr Quigley-In terms of new estates?

Senator LUDLAM-Yes.

Mr Quigley-I do not have the numbers of that with me. As part of the exercise I just mentioned, we are trying to get a plot on every new greenfields estate and multidwelling unit that is going up just to see what we can possibly do. There are also places, for example, such as in the Pilbara, where new facilities are going in, and we are looking at those as well.

Senator Conroy-As you know, we think it is important to get the legislative framework in place in order to provide certainty to all the stakeholders. That is why I recently wrote to the opposition, through their shadow spokesman, seeking agreement to pass the bill in a timely fashion.

Senator LUDLAM-Is this the greenfields bill?

Senator Conroy-Sorry, yes. However, the opposition has not agreed to this. In fact, in the Senate committee report on this bill the opposition indicated it was not willing to assist with expediting passage of the bill. We will continue to press our case that these reforms are vital to ensure that people in new estates get access to high-speed broadband. We will continue to press our case that the reforms are needed to provide certainty across the telco and development sectors. However, as we have seen with the competition and consumer standards bill, the opposition is prepared to filibuster to prevent the bill coming to a vote. For this reason, and given the absence of support from the opposition, we will be proposing to move the legal start date from 1 July 2010 to 1 January 2011.

Senator LUDLAM-I am aware of the filibuster, having sat through a fair bit of it myself. Do you, Minister or Mr Quigley, have any idea of what it costs to go back and retrofit a new subdivision rather than at least getting in the ductwork and so on initially?

Senator Conroy-That is one of the things I am sure Mr Quigley is in discussions about. I know I have been approached by developers and housing organisations. While I have not identified how much it would cost, the discussion around providing ducting is absolutely fundamental to ensuring we know the difference between having to completely dig new trenches and start again versus making sure the ducting is available for future fibre, because, as you would understand, there is a back haul issue that comes with the housing estate.
You do not necessarily have access to competitively priced back haul. Therefore, you cannot just necessarily connect a piece of fibre to a home, because it does not actually achieve the objective. We are very conscious of wanting to ensure that the infrastructure is in place to allow us to put fibre in as we come to those new areas if they have not had fibre installed at the beginning. My office and I have been in discussions with housing groups about how to try to bring certainty, but remember that the key here is that the opposition is refusing to
cooperate and pass this bill. That creates an enormous amount of uncertainty in the sector and an enormous amount of uncertainty for every stakeholder, when the universal view and commonsense is that fibre should be laid and that we need the guidelines, the rules and the legislation in place to ensure that we get common standards.

Senator LUDLAM-Fibre is a part of it, but I suppose in a sense I am almost more interested in the ducting and putting the hard infrastructure into the ground as these estates are going in. You are in discussions, but what is actually happening if we visit the sorts of outer urban areas at the moment in cities around Australia-will we find subdivisions going in that we will have to retrofit in a year's time?

Senator Conroy-Mr Quigley may have more to add, but it depends on your definition of ‘retrofit'. If the ducting is in place, then you can just put a piece of fibre through the ducting.

Senator LUDLAM-That is not what I mean.

Senator Conroy-That is what I wanted to clarify. You are not talking about that situation. You were asking about if they just dig a trench and put a piece of copper in and then you have to open up the trench and replace it.

Senator LUDLAM-That seems like less of an ask than going back into a subdivision that has only just been put in place and digging the holes.

Senator Conroy-We would agree with you entirely.

Mr Quigley-Yes, absolutely. It just makes perfect sense to put ducting in when the trenches are open.

Senator LUDLAM-You have both said that discussions are underway, but has that been reflected anywhere in the country in activity?

Senator Conroy-The existing laws require that Telstra provide a fixed line service. I have seen some speculation that Telstra has indicated that it will stop laying copper. Given the announcement I have just made, I think that leaves a question mark over Telstra's previous decision. I think it was a questionable decision in the first place, given the lead time that is necessary for housing developments. They do not just make a decision on the first day or the second day; these things take a number of years to work their way through planning processes. The discussions that we have been having with Telstra and the housing industry are to ensure that a fixed line product continues to be in place. There is some argument that I have seen that Telstra may decide to put wireless into places. I am not sure that that meets the universal service obligation. We have been seeking advice on that. We are not going to allow the situation where no trenching and ducting is put in place. If that is your concern-

Senator LUDLAM-It is.

Senator Conroy-I would share your concern absolutely.

Senator LUDLAM-So you will not be allowing Telstra to-

Senator Conroy-We are making some progress in the conversations with the industry and with Telstra, and we do not accept an argument that a wireless service with no trenching will meet a universal service obligation. But we are in discussions with both Telstra and the industry about how we can resolve this issue.

Senator LUDLAM-Was the announcement of the moving of the legal start date for the greenfields one that you had made previously that I have missed, or are you making it right here?

Senator Conroy-No, it is what I just announced.

Senator LUDLAM-Well, okay.

Senator Conroy-There you are: breaking news in Senate estimates. You always want fresh news in Senate estimates; you just got it.

Senator LUDLAM-And such a bombshell as well.

Senator Conroy-I know you are genuinely interested in the deployment of this issue, as opposed to some other senators.

Senator LUDLAM-I am interested in not coming back in 12 months time and digging holes that should have gone in-

Senator Conroy-No, and neither is Mr Quigley or NBN Co., and neither are we. It is just very frustrating for some people in this building to think that, even if you agree or disagree with the NBN, anyone is still going to be laying copper in two years time or three years time or four years time. This is a nonsense argument where you cannot justify laying copper into the future. You just cannot do it when you have an alternative like fibre.

Senator IAN MACDONALD-What was the announcement? I missed it, it was so short.

Senator LUDLAM-We have moved on.

Senator LUDLAM-I have a couple more. Mr Quigley, at what point are you going to be in a position to let people know which of the three cohorts that were identified in the implementation study they will be in? So, being parochial for a moment, coming from Western Australia, I presume there will be large areas of the map in WA where fibre will not go. How soon will you be in a position to either provide detailed mapping or some kind of model, or indication to people in the Pilbara and the Kimberley, for example, as to whether they
will be getting a fibre service or one of the other forms of service?

Mr Quigley-We are having those discussions with the government at the moment. I think it is up to the government to decide at what point it releases that information. As you would expect, we are doing successive network architectures and looking at cost benefit trade-offs of those. So that information is being discussed with the government right now.

Senator LUDLAM-I am sure it is. When will you or the minister, if you want to take this-

Senator Conroy-I would hope that we would have an announcement in the not too distant future about the footprints of NBN Co.

Senator LUDLAM-Presumably you will be rolling that out in phases or will we get a map of the whole country?

Senator Conroy-Probably a map-please correct me if I am wrong, Mr Quigley. Depending on the detail we are able to get-and that is one of the issues we want to make sure we have a detailed announcement on- you will be able to potentially judge whether you are in the satellite footprint or the wireless footprint or the fibre footprint. But we want to provide as much information as we can, and that is a very detailed thing to try to deliver. But that is what we are working towards delivering with the NBN Co. So you will actually be able
to key in your address down the track and see which of the services of NBN you will be able to receive.

Senator LUDLAM-What does ‘the not too distant future' mean in this context? I do not want to tie you down.

Senator Conroy-It is a question of whether we can pull all of the logistics of a map of that detail together. Quite genuinely, that is quite a large project. There is a map we could show, but that would not actually answer the questions that people want answered.

Senator LUDLAM-Presumably you have done this work, Mr Quigley, in parallel. McKinsey have done a very similar map. They have mapped every single address in the country and modelled where the fibre will go and where it might not. That is how they came to the 93 per cent figure.

Mr Quigley-That was from a slightly different base-the way in which they did it. We did it from a network design; they did it from looking at special data and to build up a cost model. As you would understand, in some cases when you get to the fringes of the fibre, as the senator has mentioned, just exactly where that borderline sits is not so obvious. It is not tricky, but in terms of an overall sense of what the coverage will be, which areas we will be covering with fibre, what the reach is, we should be able to give people a very good view. People who are sitting right on the edges will wonder: is this house in it, and is this one? At some point in time you are going to have to make a decision. Is this premise in; is this premise out of the fibre footprint?

Senator LUDLAM-Okay. I will still press you; are we talking days, weeks or months just for that indicative model, not necessarily house by house?

Mr Quigley-It is really up to the government to decide when it wants to make that information public.

Senator Conroy-As I said, to create what I am describing is actually quite complex.

Senator LUDLAM-I understand that, but when you say in the not too distant future, in here, quite frankly, that could mean just about anything.

Senator Conroy-We are keen for this information to be available as soon as possible. IT is IT, and making sure that we have a proper working model that can answer the key questions is something like asking how long is a piece of string. We are working to get it as fast as we can.

Senator LUDLAM-But there will be something in the public domain?

Senator Conroy-Yes, and we intend to put it up on a website so, if it is possible to do, people can check.

Senator LUDLAM-I am presuming that, at the very least, an indicative final back haul map of the country should be available now. Presumably you have that?

Senator Conroy-We have indications from NBN Co. of what they think is the appropriate architecture for their network.

Senator LUDLAM-Are you going to tell me when that will be released?

Senator Conroy-We are just contemplating that. We would like to release it all at once. I have a map I can just put up, but that will not answer people's questions. It will answer your concerns around back haul, but we would actually like it to do more than that. It is a question of the functionality of the information that we provide. We are trying to use the digital economy to provide as much information as we can.

Senator LUDLAM-That will be appreciated. But we are still none the wiser as to when that will be. I guess that was a statement, not a question.

Senator Conroy-I will just let it go through to the keeper.

Senator LUDLAM-I am getting used to it. Will such a map be indicative also of what you intend to bury versus what you intend to hang by overhead cable?

Mr Quigley-No, not at this stage.

Senator LUDLAM-I have asked this a couple of times, and nobody seems to be able to provide modelling of the short term versus the long term costs of hanging the cable. In the short term I understand it is cheaper?

Mr Quigley-If you look at trends around the world, such as Brighton and other places which have trialled both technologies, clearly they are largely moving to aerial deployment simply because of the costs associated with that, the speed at which you can do it and the fact that it is considerably easier and that you can preconnect a lot more. That does not necessarily mean that is the decision that we would make. This is once again an issue we are discussing with our shareholder, the government, to look at those trade-offs. One of the
reasons it is almost impossible for someone to tell you whether this premise would be underground or whether this premise would be aerial is that it is not always obvious what facilities are available to put it underground. It may seem so, but it is not always so obvious. Then you have to make a decision on what is the least bad option-drilling underground or going aerial, remembering that this is not like a hybrid fibre coaxial cable. It is considerably thinner and does not have big inline amplifiers sitting there.

Senator LUDLAM-We have not spoken much about the negotiations with Telstra. I will ask you about the substance of those in a moment. Is it true that, if you do come to an amicable settlement with Telstra and are able to access its ductwork, we will see a lot more of the network go underground than overhead? Is that a fair statement?

Mr Quigley-I think it is fair to say that, yes, there would be certainly more underground, but I cannot comment too much more about what percentage that would be. There are a lot of factors in there.

Senator LUDLAM-Without giving too much away, is your shareholder pressing you for the greatest short- term cost savings, which means hang virtually the whole network?

Mr Quigley-No, not at all.

Senator LUDLAM-Or are some considerations of long-term resilience of the network and the long-term costs being taken?

Mr Quigley-Even without any discussions with the shareholder, NBN Co. is very concerned about obviously the long-term resilience of the network. We have investigated overseas as to what their trends are. I will be visiting again with some service providers I know, rather big ones, who have a lot of experience in fibre rollouts, just to try to judge again what their practical experience has been. But that is a very real factor. We will not be making any short-term cost savings at the expense of long-term resilience. We are looking at the overall life of this asset, and it will have a very long life.

Senator LUDLAM-Would either of you care to make an announcement now as to the status of the negotiations with Telstra?

Senator Conroy-No, other than they are constructive and ongoing.

Senator LUDLAM-That has been the line since about last October. Are you able to provide us with an update, because obviously a lot of this discussion hinges on how those negotiations are going.

Senator Conroy-I can only speak for myself, but I am sure it is relatively similar to Mr Quigley's situation, but I do not think we can add anything more to the public discourse. There have been lots of wild rumours, lots of wild suggestions, lots of ill-informed commentary-

Senator LUDLAM-Occasionally selective leaks.

Senator Conroy-No, not really.

Senator IAN MACDONALD-Have you put all that to bed, Minister?

Senator Conroy-I do not think that we can add anything to the public discourse at this stage.

Senator LUDLAM-You have given Telstra I think until the end of June to come to a negotiated settlement, otherwise the Commonwealth is going to walk away; is that a rumour?

Senator Conroy-I do not think that is quite what I said. I actually had been saying something along those lines for a number of months. I think I had identified that I did not think there would be a lot for us to talk about by the end of June. We have kicked the tyres of each other's models; we have had a test drive occasionally of each other's models, and I think we would be wasting both Mr Quigley's time, Mr Thodey's time and that of a whole range of other executives who have been tied up quite extensively in these discussions if we were still going after June. I think that was how I described it. It was not a threat to walk away. I did see that it was reported as that, but I do not think I described it as that.

Senator LUDLAM-I think some analysts saw it as a hopeful sign that you were collaborating with Telstra in one particular instance or one particular subdivision or area, where you were working with Telstra technicians on accessing-

Senator Conroy-I think down in Point Cook in Melbourne we have been observing-

Mr Quigley-We had some observer status. They invited us to have a look at what they were doing at Point Cook, and we accepted it.

Senator LUDLAM-Can you talk us through exactly what is happening down there? If your role was as observer, you might not be able to give too much away, but what is that actually about? What is that for?

Senator Conroy-There are retrofitting a suburb, are they not?

Mr Quigley-Yes. They were just looking at doing something which we may be able to learn something from. They are looking at a fibre that is a brownfield and putting fibre in it.

Senator LUDLAM-To an estate that has copper at the moment?

Mr Quigley-I believe so, yes.

Senator Conroy-A major part of the Point Cook development is actually fibre to the home done by someone other than Telstra. I think a healthy competition has arisen from residents in other areas on Point Cook that have said, ‘How come they have fibre when we do not?' I think there are a number of issues, and information that might be useful to NBN as part of the NBN rollout plan.

Senator LUDLAM-That did seem to be a rather unusual example of collaboration between Telstra and NBN Co., and this is a field that has been relatively free of that sort of behaviour thus far. You look surprised.

Mr Quigley-Yes, I am surprised. I think both Telstra and NBN Co. are on the record as saying it would be a good thing for the nation if we can find a reasonable outcome to this. It just makes good sense. It is an obvious thing to do. I think it is good both for Telstra and NBN Co., so that is what we are working hard towards.

Senator LUDLAM-If presumably all three parties-because I am sure the minister is looking for just such a settlement-are in furious agreement that this needs to happen, why are we still sitting here in the middle of 2010 without an agreement?

Mr Quigley-Money. There are very large sums of money involved, and we take a view, and NBN Co., that this is public money we would be committing and spending, so we are being very careful with it, and making sure that we analyse very carefully the net benefits. It is very complex. One thing I can quote is the investment bankers whom we are using who have said this is the most complex transaction they have ever been involved with.

Senator LUDLAM-Such a shame we privatised them, is it not? It would be a lot simpler if-

Senator Conroy-As you know, like yourself, we opposed that. We voted against it five times.

Senator LUDLAM-I recall. I want to move on to the work that you are doing with local government, if any. At one of the earlier rounds of the select committee, which Senator Macdonald now chairs, we sat in Hobart and heard from the local government authority that they had kind of been left behind. They did not really know what was going on. They wanted to be on board; they wanted to actually help sell the proposal. They wanted it in their area, but they had been really left behind. How are you working with the local government authorities around the country in the areas where you are going?

Mr Quigley-We have been putting a lot of energy into engaging with local governments, and it is true that we do not reach every person in every local government, so it is going to be possible that people will say, ‘I don't know what's going on.' We have had numerous discussions, certainly in the first release sites, with local governments and with local communities also, as we said. It is true to say that we get more requests for engagement than we can possibly handle. In fact, my first day on the job, I was getting requests for engagement from people asking me to spend hours with them, and it simply is impossible to satisfy every one of those. We do our best, and we have in the last couple of months been ramping up quite extensively our engagement with local governments and local communities. So what I said in the opening statement is absolutely the case.

Senator LUDLAM-Who heads that team?

Senator Conroy-On the government side, we are also trying to engage as many local councils as well so that we can engage them with the process to help have conversations with them about the question of ducting, making sure that the pit and pipes are actually available. We are also engaged with the councils in an education program around the country. We started the first one in Perth last week, where we had local councils come along to an information session that I was at, the NBN were at, Nextgen were at, and the departments, state
and federal, were represented. So we are engaging with the councils wherever we can. It is fair to say, as Mr Quigley said, that there is enormous support for the project. Every council wants to be first. We would love to be able to make every council first but, by definition, everybody cannot be first.

Senator LUDLAM-As long as the ones in WA are first.

Senator Conroy-Understood. But as you know, we cannot be seen to favour politicians, so I just need to get your suburb so I know where not to go, because I would not want you to be accused of special pleading for your suburb. So if you can let us know which suburb you are in so we can make sure you are last in that general-

Senator LUDLAM-I am in North Fremantle. We are actually very well served. I am more interested in Jigalong, Port Hedland, Dampier and places like that. Is there a reason why there were no WA sites on your initial mainland rollout? I think you chose five sites.

Mr Quigley-On the first release sites, no, it is really just a question of logistics. As we said, these were first release sites in which we were trialling new technologies and new construction practices. It was just a matter of logistics, nothing more than that. But I can absolutely assure you we have not forgotten Western Australia.

Senator LUDLAM-I should hope not.

Mr Quigley-There is active work going on there, and we are ramping up the team that is in fact doing the community consulting and involvement.

Senator LUDLAM-Will you end up with an NBN Co. office in Perth?

Mr Quigley-Yes.

Senator LUDLAM-When is that scheduled for?

Mr Quigley-I cannot tell you when that is, but it is absolutely our intention to have an office in Perth.

Senator LUDLAM-A large part of this is going to be digging in the back haul where it does not exist, and the other component of the work is the very fine grained work where you are going from house to house.

Mr Quigley-Yes.

Senator LUDLAM-How are you approaching those two tasks which are very distinct, and in what way are you thinking about those two tasks? Are they a phase A and a phase B, or is it all going to be happening at the same time?

Mr Quigley-There will certainly be some overlap in those two tasks, and you are absolutely right, Senator, to describe them as two distinct tasks. There is a job to be done which is connecting a point of interconnect through the transit back-haul to what we call fan sites. This is where the equipment sits from which then all the distribution of local fibre fans out. We see those as two distinct things. We may end up-and we are just developing these at the moment-by looking at those two in two ways. For example, the work that is being done on the back-haul black spots at the moment you would categorise in that first, putting fibre in so that you can connect points of interconnect to fan sites. Those fan sites can then be of various sizes, potentially up to roughly 70,000 premises that you would cover in each fan site. There are two distinct phases of work. We may in fact look at them separately and have specialist teams doing the points of interconnect to fan sites and then specialist teams, which will be much larger teams, rolling out the fibre that goes out to the premises from those fan sites.

Senator LUDLAM-Will you be using old exchange buildings, is that the idea?

Mr Quigley-That is a possibility. It depends on how the negotiations go.

Senator LUDLAM-How are they going?

Senator Conroy-He is being cheeky, Mr Quigley. Don't be drawn.

Mr Quigley-It is right, and that is the way in fact we are looking at it, and we are using very much a modular approach. In other words, when we design fan sites, we have an idealised picture. Then we go and translate that architecture on to the ground fan site, what we call fibre-serving area, which is around a fan site, fibre-serving area by fibre-serving area. There is probably likely to be 700 to 800 of those fibre serving areas across the country.

Senator LUDLAM-There has been some reporting in press recently about skills shortages. I think one of you mentioned 25,000 people. Do I have that correct?

Mr Quigley-Yes, I mentioned that.

Senator LUDLAM-How much local training and apprenticeship work are you undertaking versus the amount of people that we are going to be expected to import from elsewhere?

Mr Quigley-That exercise is underway as well at the moment of looking at all of the training that needs to be done. Of course, we expect the large contractors to be doing a substantial amount of training themselves, also, in areas such as fibre splicing. We are doing an assessment now of all of the different training facilities that are available. Some of them are government-based, some are state-based, and others are private enterprises that do training. We are trying to do an inventory of all the training and trying to dimension the size of the training and the workforce. That is going on right now. It is kind of a supply and demand analysis that we are doing right at the moment. I do not have the outcomes of that yet, but we are getting some help in doing that from a particular consulting company.

Senator LUDLAM-Who is that?

Mr Quigley-That is Deloittes.

Senator LUDLAM-When do you expect to have that modelling finished?

Mr Quigley-I am not sure. I will have to take that one on notice.

Senator LUDLAM-One of the issues that has also been raised is that one of the advantages of copper is that if a storm knocks out the power, you still have a phone. My understanding is that the junction boxes on the house, where the fibre connects with the house, will be powered. Have you modelled the total energy draw of having all these devices in every house in the country, or every premise in the country? What will that actually cost in electricity? What are the backup plans when power knocks out the fibre? Presumably that knocks out your landline as well?

Mr Quigley-I will take those one at a time. The device on the home can either be on the outside of the home or it can internal to the home. It has an optical network termination, ONT. It converts the fibre into an electrical signal for a phone or computer or whatever. So that could be placed in either location. If it is placed on the outside of the home, it needs to be fed. If you were doing an installation coincident with smart metering rollout, you may in fact then power that ONT from the line side, the network side of the powering. But in any
eventuality, you always have a case in which something could be cut. If the fibre is cut in the street, the same way as if the copper is cut, your line goes dead. There is not much you can do if somebody puts a spade right through a cable. That happens. In the other parts of the network, by the way, we protect it to make sure that no single cut will cut off quite a number of subscribers at once. We are also looking at battery backup for services so that if there is a power failure, the phone service can keep going. Frankly, that whole question around battery backup is still an open issue that needs some consideration on which we are consulting with the government.

Senator Conroy-McKinsey has made a number of suggestions in this direction, and as Mike said, we are consulting with NBN Co about it to ensure that we have ongoing safety covered.

Senator LUDLAM-It might sound like a trivial question, but what is the total energy demand additional going to be on having millions of these devices all over the country?

Mr Quigley-One of the factors we took very carefully into account when we were looking at the overall selection of potential ONT vendors is power consumption. Remember, this is a similar device to what you have today with your DSL modem overall which will sit in a home. There is a bit of a trade-off there. If you move from DSL on to fibre, there is an exchange there. One thing that is very important to note, though, if I can make the point, when you do the calculation, if you were to do this all with wireless, the power differences are huge. That is because in a fibre network you are sending a very small amount of energy down a fibre. It is constrained into the fibre, and it is a direct connection. If you are doing this with wireless, you are splaying out all of that power omni-directionally, everywhere, so you are only picking up a little bit in the antenna. You have to use an immense amount of power for a wireless solution than you do for a fibre solution.

Senator Conroy-There are a number of studies. Professor Rod Tucker has done quite a number of studies measuring the carbon footprints power issue for wireless networks versus fibre networks. If you contract them down, I think you will actually find there is some very instructive information there that demonstrates that fibre networks are far less power demanding than wireless networks.

Senator LUDLAM-Would you provide the committee with your favourite one or two referenced works, on notice?

Mr Quigley-We could do it with the Institute for a Broadband-Enabled Society study.

Senator Conroy-I am happy to track it down. Professor Rod Tucker has done it. He is at IBES.

Senator LUDLAM-Thanks. It might seem a little bit unfashionable or maybe this is something we have to ask Telstra, but presumably thousands of kilometres of copper will be hauled out of ducts. What kind of recycling are we doing with the material that is already in the ground?

Mr Quigley-There has been, as you may know already, a fair amount of reclamation of copper as what are called digital line concentrators have gone out. Things such as remote integrated multiplexers, RIMs, have gone out because they are fibre fed and then copper from there. When it comes to the copper that may be in the conduit, we are hopeful that if we were to strike a deal with Telstra and we reuse the conduit that they have that is carrying the copper, then that potentially could be used as a lead-in to pull the fibre through into that
same conduit. Then it gives you an opportunity to reclaim and recycle the copper.

Senator Conroy-Telstra is very keen to do some of that, as the price of copper is now returning to pre- GFC levels, which makes it a very valuable item.

Senator IAN MACDONALD-As long as it is Telstra.

Mr Quigley-Yes, it is.

Senator Conroy-We were just making the point that it becomes a very valuable item.

Senator LUDLAM-There was early speculation that most of it would stay in the ground.

Mr Quigley-If, for example, the conduit simply was not available, crushed or whatever it was, then it simply does not pay to try to remove that copper. It probably would sit there.

Senator Conroy-It is literally a line by line issue.

Senator LUDLAM-My last question, and then I will hand you back to the chair, is around security. Again the select committee some time last year heard evidence from some security specialists who taught the committee some techniques of splicing fibre simply by bending them and putting some kind of device on a backhaul line that allowed you to essentially seamlessly duplicate the traffic that was travelling down the line. Maybe it was just a sales pitch, but I think it convinced the committee, that encryption devices were placed at
all the key nodes in the NBN. What can you tell us about network encryption and security?

Mr Quigley-Probably very little at this stage, other than it is being looked at very carefully, and we are consulting with the appropriate agencies within the government to make sure we are taking account of all of their advice and requirements on this issue.

Senator LUDLAM-I find that curious, given that you are digging trenches in Tasmania and hooking people up already. It is not as though this is just an academic exercise. You are laying out the network. Should I not be a bit surprised that you do not know what the security and encryption is going to be in a network that you are currently building?

Mr Quigley-If I can also say, if you are talking about encryption, encryption is one of these higher layer services. In other words, we supply the layer to bitstream which we protect, and we are interested in the physical security and what you do on that. Going at the next level up is where encryption devices will sit; in fact, above layer 3.

Senator LUDLAM-Above layer 3? So the whole layer 2 architecture has nothing to say about security?

Mr Quigley-Other than it absolutely enables it.

Senator LUDLAM-But it will not be your responsibility, or it will be?

Mr Quigley-Encryption occurs at the end points of traffic. So you have encryption at one end, decryption at the other end, and we are not the traffic generators or traffic syncs. We just carry the bits. We cannot tell whether the bits that are being carried are encrypted or in the clear. We simply do not know.

Senator LUDLAM-Okay, so there is no role for devices at the physical hardware layer 2 level?

Mr Quigley-Layer 2, no. We are interested in other issues which we are talking to agencies about.

Senator LUDLAM-I will probably leave it there.