NBN Co freedom of information findings for iTnews

8/3/2019 NBN Co freedom of information findings for iTnews

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A Level 11, 100 Arthur Street, North Sydney NSW 2060 P +61 2 9926 1900 F +61 2 9926 1901

E [email protected] W www.nbnco.com.au 2

FREEDOM OF INFORMATION REQUEST – 1112A/14

James Hutchinson – iTnews

ACCESS DECISIONSTATEMENT OF REASONS

Background1. NBN Co Limited (NBN Co) is a government business entity (GBE), which has the mandate of realising the

Australian Government’s vision for the development of a next generation national broadband network.

2. NBN Co recognises that information is a vital and an invaluable resource, both for the company and for the

broader Australian community. That is why NBN Co fosters and promotes a pro-disclosure culture, with the goal of

creating an organisation that is open, transparent and accountable. In that light, members of the public will be able

to find a large amount of information freely available on our website.

3. In addition, NBN Co manages its information assets within the terms and spirit of the Freedom of Information Act

1982 (the FOI Act or the Act). We also endeavour to release information proactively, while taking into account

our commercial and other legal obligations.

4. Subject to relevant exemptions, the FOI Act gives the Australian community the right to access documents held by

Commonwealth Government agencies, as well as “prescribed authorities”, such as NBN Co.

5. Under subsection 23(1) of the FOI Act, the Chief Executive Officer of NBN Co has authorised me, David Mesman,

to make decisions about access to documents under the FOI Act.

6. Under section 26 of the FOI Act, I am required to provide a Statement of Reasons for my decisions in relation to

FOI access applications. I am also required to set out my findings on any material questions of fact, referring to

the material upon which those findings were based.

Application Chronology and Terms of Request7. On 23 November 2011, NBN Co received an FOI request from James Hutchinson of iTnews (the Applicant),

which sought the following:

Correspondence between NBN Co and the Tasmanian resident (and/or any other party, including a

contractor) who has accepted NBN Co’s offer to bring fibre to their premise under the fibre extension trial.

Any formal or informal price quote given to the resident for the proposed work.

Correspondence (internal/external) between NBN Co staff regarding the results of the fibre extension trial

and the installation of fibre at the premises of the aforementioned resident.

8. On 24 November 2011, NBN Co emailed the Applicant, acknowledging receipt of the application, as required by

section 15(5) of the FOI Act.





9. On 24 and 30 November 2011, NBN Co staff telephoned and emailed the Applicant, requesting confirmation of

the scope of this FOI application. Following discussions with NBN Co staff, the Applicant refined the scope of the

request to the following:

In relation to the NBN Co's offer to bring fibre to their premise under the fibre extension trial:

A) The price quoted to the Tasmanian resident ( the Fibre Extension Price or FEP ); and B) The methodology employed to come to the quote ( the Quote Methodology ).

10. On 2 December 2011, I wrote to the Applicant, indicating that NBN Co had estimated the processing fees to be

$207.50 and requested an advance deposit of $51.38. The processing fees were based on a search and retrieval

estimate of 6.5 hours and an additional 10.5 hours for decision-making time.

11. On 23 December 2011, NBN Co received the Applicant’s advance deposit of $51.38. On the same date, NBN Co

staff contacted the Applicant and indicated that the company’s offices would be closed during the end-of-year

holiday period. As such, NBN Co would not be able to progress his FOI application during this time. By agreement

with the Applicant, NBN Co resumed processing his FOI request on 3 January 2011, with a determination due

date of 1 February 2012.

12. In mid-January 2012, NBN Co determined that it may be required to undertake third party consultations regarding

the documents within the scope of this application.

13. On 25 January 2012, I contacted the Applicant, advising him that NBN Co may be required to undertake relevant

third party consultations. As permitted by sections 27 and 27A of the FOI Act, NBN Co advised the Applicant that

it may be necessary to extend the decision-making period by 30 days so as to complete these consultations.

14. On 1 February 2012, I made my access decision, as outlined below. On the same date, I finalised and forwarded

the decision, along with relevant documents to the Applicant.

15. In total, NBN Co staff spent approximately 16.5 hours in reviewing documents as well as drafting and finalising

this FOI decision. For reference, no fees are levied for the first 5 hours of decision-making time. In addition, other

NBN Co staff spent 7.5 hours in searching for documents, providing advice and undertaking administrative tasks

related to this FOI request.

16. As per Regulation 3 of the Freedom of Information (Charges) Regulations 1982 (the Charges Regulation), a

decision-maker has a general discretion to impose or not impose a charge, or impose a reduced charge for the

processing of an FOI request. The Office of the Australian Information Commissioner’s Guidelines (the OAIC

Guidelines) provide examples where agencies might consider waiving or reducing their processing fees for FOIapplications. At paragraph 4.57, the OAIC Guidelines indicate that an agency might consider a fee waiver or

reduction, if the document is similar to a document that the agency has published on its website under section

11C of the Act. While NBN Co has not yet published such documents, our company plans to publish information

similar to the Applicant’s request that will provide the public with details regarding the extension of the fibre

footprint.

17. Drawing from the OAIC Guidelines, the Charges Regulation and the objects of the FOI Act, I have determined to

exercise my discretion to waive the remaining fees associated with this FOI application.





Findings of Material Fact18. Following receipt of the Applicant’s request, NBN Co staff undertook searches through the company’s hard copy,

electronic and other files. In particular, NBN Co’s Commercial Networ ks Team undertook these searches and

located a letter addressed to a Tasmanian resident, which included the Fibre Extension Price (the FEP Letter ).

NBN Co indicated to the Applicant that it was unlikely that the company would be able to release the FEP Letter,

as it contained private and confidential information. Rather than undertaking extensive consultations and

reviewing the contents of the FEP Letter for exempt material, the Applicant agreed that NBN Co would be able toprovide the FEP figure as part of its FOI decision, but only in the event that the company determined that this

information was not exempt.

19. In relation to the Quote Methodology, NBN Co’s Commercial Networks Team was not able to locate a specific

document containing the discrete information requested above. In particular, the Quote Methodology did not exist

as a document per se, but rather as a quoting tool. Under section 3(1)(b) of the FOI Act, the public has a right,

subject to relevant exemptions, to seek access to “documents”, rather than discrete bits of information. As such, it

would be open to NBN Co to refuse this part of the Applicant’s request under section 24A(1) of the FOI Act. That

section enables NBN Co to refuse a request for access to a document if all reasonable steps have been taken to

find the document and the company is satisfied that the document does not exist.

20. Notwithstanding the above point, section 17 of the FOI Act enables Government authorities to provide applicants

with information, where such information is not available in a discrete written form and where the information is

“ordinarily available to the agency for retrieving or collating stored information”. In that context, I received advice

that NBN Co’s Commercial Networks Team would be able to create a summary document (the Quote

Methodology Document), which could outline the methodology used to develop the quoting tool. In addition, I

spoke to the Applicant who agreed with NBN Co’s plan to create the Quote Methodology Document.

21. To assist in making my decision, I reviewed the FEP Letter and the Quote Methodology Document. In addition, I

undertook discussions with relevant officers within NBN Co, including the company’s Commercial Networks and

Legal Teams as well as business experts regarding the commercial nature of both of these documents. It is

important to note that the FEP Letter contained sensitive pricing information relating both to NBN Co’s commercial

activities and those of its construction partner in Tasmania.

22. In addition, NBN Co did not undertake third party consultations with the company’s construction partner in

Tasmania. In particular, it was clear from the information provided by the Commercial Networks and Construction

Teams that NBN Co’s construction partner would object to the release of the FEP for the reasons outlined below.

Decision (Summary)23. In relation to the FEP Letter, the FEP itself and the Quote Methodology Document, it is my decision that these

documents (and information) fall within the meaning of the ‘commercial activities’ exemption under section 7(3A)of the FOI Act. As such, they are exempt from the operation of the Act.

24. For the reasons provided below, it is also my decision that the FEP would be exempt on the basis of sections 45

(Material obtained in confidence) and 47 (Commercially valuable information) of the FOI Act. There may be other

grounds, upon which I may have denied access, including the operation of agencies (s. 47E); personal privacy

(s.47F); as well as business and professional affairs (47G). However, I have chosen not to assert further grounds

in the current decision.

25. Notwithstanding my decision that the Quote Methodology falls within the terms of section 7(3A) of the FOI Act, I

have determined to release the document in full under sections 11 and 11A of the FOI Act.





Reasons for Decision

Commercial Activities - Background26. Part II of Schedule 2 to the FOI Act specifies that certain agencies are exempt from the operation of the FOI Act in

respect of particular documents. In the case of NBN Co, our company is exempt from the operation of the FOI Act

“in relation to documents in respect of its commercial activities”.

27. As per section 7(3A) of the FOI Act, “commercial activities” mean:

(a) activities carried on by NBN Co on a commercial basis; or

(b) activities, carried on by NBN Co, that may reasonably be expected in the foreseeable future to be carried

on by NBN Co on a commercial basis.

28. Before considering whether the FEP and the Quote Methodology Document constitute “documents in respect of

the commercial activities” of NBN Co, it is important to understand the company’s functions and powers, as well asits obligations to act in accord with sound commercial practices. This is made clear by the following:

i. NBN Co is a public company limited by shares incorporated under the Corporations Act 2001 (Cth)

(Corporations Act).

ii. NBN Co is a wholly-owned Commonwealth company under the Commonwealth Authorities and

Companies Act 1997 (Cth) (CAC Act). NBN Co is also a prescribed Commonwealth GBE.

iii. NBN Co enjoys the same rights and is subject to the same obligations as other public companies

incorporated under the Corporations Act. These rights and responsibilities include:

Directors duties under part 2D.1 of the Corporations Act;

Financial reporting obligations under part 2M of the Corporations Act; and

Restrictions on the management of its capital, including the issuance of shares, dividends, share

capital reductions and share buy-backs under parts 2H and 2J of the Corporations Act.

iv. The Commonwealth of Australia holds all shares in NBN Co and ownership interest is represented by the

Minister for Broadband, Communications and the Digital Economy (the Minister for BCDE) and the

Minister for Finance and Deregulation (collectively the Shareholder Ministers). In December 2010, the

Shareholder Ministers provided the Chairman of NBN Co with a Statement of Expectations, which maybe found at the following link:

http://www.dbcde.gov.au/__data/assets/pdf_file/0003/132069/Statement_of_Expectations.pdf

v. Among other matters, the Statement of Expectations outlines the Shareholder Ministers’ and the

Commonwealth Government's vision for NBN Co and the following principles:

The company should operate as a commercial entity;

At an appropriate time, NBN Co will raise debt on its own behalf;








During rollout, the Government will provide equity funding, so as to provide NBN Co and the

market with the certainty required to enter into long-term commercial contracts;

During rollout, the Government will retain full ownership of NBN Co in order to achieve its policy

objectives, but with the intention to privatise NBN Co once the Minister for BCDE declares that

the network is built and fully operational, among other conditions precedent; and

NBN Co should continue to conduct its planning and the execution of its strategy in a publicly

transparent manner, subject to any requirements for commercial confidentiality, and reflect thisin its annual reporting.

vi. As a GBE, NBN Co is subject to the Governance Arrangements for Commonwealth Government

Business Enterprises (June 1997) (GBE Guidelines), which may be found at the following link:

http://www.finance.gov.au/publications/governance-arrangements/index.html#Part4

vii. In the “Mandate and Objectives” section, the GBE Guidelines provide that the principal objective for

GBEs is to add to shareholder value. To achieve this objective, GBEs are required to:

operate efficiently, at minimum cost for a given scale and quality of outputs;

price efficiently; and

earn at least a commercial rate of return.

In addition, GBEs are to work towards a financial target and a dividend policy, agreed in advance with theShareholder Ministers. Financial targets are to be set on the basis that each GBE should be required toearn commercial returns at least sufficient to justify the long-term retention of assets in the business andto pay commercial dividends from those returns.

viii. The GBE Guidelines also provide guidance to NBN Co in relation to its corporate governance

arrangements, which are typical of commercial entities operating within Australia. These includerequirements to:

prepare a corporate plan and report on the plan’s progress; report on operations and financial statements; manage risks; appoint a board of directors with an appropriate mix of skills; and establish a target optimal capital structure, among other matters.

29. Based upon the above points, it is my opinion that NBN Co clearly operates as a commercial entity. However, I am

required to examine the FEP and the Quote Methodology Document, and whether they fit within the meaning of

“documents in respect of commercial activities” under section 7(3A), as detailed above.

Application of Commercial Activities Exemption to NBN Co30. The OAIC Guidelines do not provide specific guidance as to the meaning of the phrase “commercial activities”.

31. However, the FOI Commissioner, Dr. James Popple, considered the phrase “commercial activities” in relation to

NBN Co in a recent decision, Internode Pty Ltd and NBN Co Ltd [2012] AICmr 4 (the Internode Decision). In that

matter, the FOI Commissioner held that NBN Co’s Definitive Agreements (the DAs) with Telstra fell within the

terms of section 7(3A) of the FOI Act for a variety of reasons, key among which is that NBN Co will draw a

financial benefit from the DAs, which are valued at in excess of $9 billion. The DAs also translated financial heads



http://www.oaic.gov.au/publications/decisions/2012_aicmr4.html









of agreement with Telstra into binding legal agreements that will govern NBN Co’s use of Telstra's infrastructure

and the decommissioning of some of Telstra's network capability during the network’s rollout.

32. In the Internode Decision, the FOI Commissioner reviewed two cases dealing with commercial activities provisions

analogous to those governing NBN Co. In particular, those cases were Bell v Commonwealth Scientific and

Industrial Research Organisation [2008] FCAFC 40 (the CSIRO Decision) and Johnston and Australian Postal

Corporation [2006] AATA 144 (the Aus Post Decision).

33. Drawing from the CSIRO Decision, the FOI Commissioner quoted the Federal Court’s holding that:

...” activities are conducted on a commercial basis if they are related to, engaged in or used for commerce”.

That decision also referred to:

”...the importance of the whole of the circumstances including the commercial goal (profit making or thegeneration of income or return) in determining whether particular activities are sufficiently related to commerceto be characterised as commercial activities”.

34. In the Aus Post Decision, the Commonwealth Administrative Appeal Tribunal (the AAT) considered various

dictionary definitions and concluded that commercial activity:

...“c an be regarded as a business venture with a profit-making objective and, strictly speaking, will involve

activity to generate trade and sales with a view to profit. This is particularly so when the volume of activity is on

a large scale”.

35. Beyond the general points made above, it would be difficult to articulate a comprehensive definition of NBN Co’s

“commercial activities”, particularly as NBN Co is in an early operational phase. As a new and an evolving

commercial entity, NBN Co’s commercial activities will change as the company evolves. Moreover, the CSIRODecision requires an FOI decision maker to consider “the whole of the circumstances” of the given activity within

the business. It follows that any decision dealing with an exemption under section 7(3A) of the FOI Act will require

an analysis of NBN Co’s commercial realities at the time of a given request.

36. In that context, it is important to consider the background and whole of the circumstances surrounding the “fibre

extension program”, which is at the heart of the current request. In particular, I note that:

i. While subject to change, NBN Co’s fibre footprint is based upon detailed procurement and construction

modelling, which will enable the company to roll out fibre broadband connectivity to 93% of Australian

premises in the most cost efficient manner.

ii. The remaining 7% of premises will be covered by wireless (4%) and satellite services (3%). However, it is

important to note that all premises in the country will be covered by at least one of NBN Co service

delivery methods.

iii. For those premises outside the fibre footprint, individuals, groups, local government areas, etc. may

request that NBN Co provide them a quote to extend fibre to their premises. Those individuals, groups,

etc. will be required to pay the FEP and other costs associated with the fibre extension.

iv. The fibre footprint extension programme is currently in a trial phase and it is expected that NBN Co will

publish a formal policy document to assist the public in understanding the parameters of the fibre





extension programme. This is in accord with the Review of the Rollout of the NBN – 2nd Report from the

Parliamentary Joint Committee on the NBN (the JCNBN). In particular, the JCNBN recommended that

NBN Co formalise and publicise its policy for the provision of costing extensions to its planned fibre

footprint, especially for regional and remote Australia.

v. The FEP for any fibre extension project will vary based upon a series of factors relating to the exact

location of the extension site, including: geography, topography, distance from fibre connection point,number of premises sharing the cost, etc.

vi. The FEP will, ultimately, reflect NBN Co’s – and/or its construction partners’ – costs to provide the

service extension. This is inherently commercially valuable information, both to NBN Co and to our

construction partners. If the FEP were released with the Quote Methodology Document, it would be

possible to reverse engineer the quote to calculate the fibre extension builder’s cost. This is particularly

the case in smaller, identifiable communities. For that reason, NBN Co provides the FEP to interested

parties on a confidential basis, so as to safeguard NBN Co’s and our business partners’ commercially

sensitive and confidential information.

vii. The FEP information could be used by players within the telecommunications or construction industries

to gain an advantage in their dealings with competitors or NBN Co. In addition, the potential release of

the FEP and the Quote Methodology Document would impact upon NBN Co’s ability to go to market and

receive competitive tender bids for elements of the network’s roll-out. This is particularly the case in

Tasmania, where NBN Co is currently in the midst of a new construction tendering process. It follows that

local pricing information, such as the FEP, would be especially sensitive and valuable.

viii. In addition, the FEP information could also reveal NBN Co’s business model and commercial strategy,

making the company more vulnerable to current and future competitors. It could also make NBN Co

potentially less attractive to investors when the company eventually privatises.

37. Drawing from the above points, it is my opinion that the FEP and the Quote Methodology Document fall within the

meaning of NBN Co’s “commercial activities” as per section 7(3A) of the FOI Act. As such, they are not subject to

the operation of the FOI Act.

38. Despite my decision that the Quote Methodology Document falls within the terms of section 7(3A) of the FOI Act, I

have determined to exercise my discretion and release this document in full under sections 11 and 11A of the FOI

Act. In part, I have decided to release this document as NBN Co will shortly publish a policy document, which will

outline, among other matters, information similar to that contained in the Quote Methodology Document. In

addition, I made the decision to release this document as there is a strong public interest in this issue, evidenced

by the JCNBN’s recommendation to publish details about the fibre extension program. Moreover, it is my opinion

that the Quote Methodology Document will not reveal any commercially sensitive information, unless it were

combined with relevant information, such as the FEP and a given location, community, etc.

39. In the event that I am incorrect in that decision, there are other grounds upon which the FEP may be found to be

exempt from release, as outlined below.

http://www.aph.gov.au/house/committee/jcnbn/report2/front.pdf












Other Exemptions (Confidential Materials)40. Section 45 of the FOI Act exempts documents from release if they contain material obtained in confidence and

their disclosure would found an action for breach of confidence. The relevant section of the Act reads as follows:

Material Obtained in Confidence

45(1) A document is an exempt document if its disclosure under this Act would found an action, by a

person (other than an agency, the Commonwealth or Norfolk Island), for breach of confidence.

41. It is my understanding that to found an action for breach of confidence, the following criteria must be satisfied:

i. The confidential information must be specifically identified – The information used by NBN Co to produce

the FEP was provided by its construction partner in confidence. Both parties agreed to those terms.

Release of the FEP together with the Quote Methodology Document would indirectly disclose this

confidential information.

ii. The information must have the quality of confidentiality, meaning that it must be secret or only known to a

limited group of people – NBN Co has only shared the specific details of the FEP with its relevant staff,contractors and the Tasmanian resident concerned, all of whom have agreed to strict obligations of

confidentiality.

iii. There must be a mutual understanding of confidence, meaning that NBN Co must have understood and

accepted an obligation of confidence – See response in relation to paragraph (ii) above.

iv. There must be an unauthorised disclosure or the threat of unauthorised disclosure – If this FOI

application were successful, NBN Co would be required to release the FEP, both to the Applicant and to

the world-at-large through NBN Co’s FOI Disclosure Log. This is required under section 11C of the FOI

Act. This potential disclosure would be in clear violation of the above-mentioned undertakings.

v. The unauthorised disclosure has or will cause detriment to the person who provided the confidential

information – While I cannot provide details, NBN Co is subject to a confidentiality regime under its

contract with the Tasmanian fibre extension builder. Among other matters, this would cause a clear

detriment to NBN Co, including the following points:

The potential release of the FEP could be used to calculate our construction partners’ costs,

business model and pricing formulas. This information could be used by our business partners’

competitors in the construction sector, thereby potentially undermining NBN Co’s construction

partners’ market share and profitability. If NBN Co were to release the FEP, this could give rise

to a cause of action against the company, along with a claim for damages.

The potential release of the FEP would have a significant and detrimental effect on NBN Co’s

future business activities. In particular, commercial entities and other potential business partners

would, most likely, limit the scope of confidential information provided to NBN Co. In addition,

businesses and other parties may refuse to share such information with our company – or only

do so at an increased cost to NBN Co.

In summary, NBN Co’s ability to engage high quality and competitive business partners would

be undermined. It follows that NBN Co’s negotiating position would be compromised, along with

its capacity to generate shareholder value. In the extreme, it may mean that NBN Co would be





unable to proceed with its mandate to roll out the national broadband network, which would

have a negative impact on the Australian public.

42. For these reasons, it is my opinion that the potential release of the FEP would found an action for breach of

confidence. As such, the FEP would be exempt from release under section 45 of the FOI Act and access to this

information is denied.

Other Exemptions (Commercially Valuable Information)43. Section 47 of the FOI Act exempts documents from release if they would disclose trade secrets or commercially

valuable information. The relevant section of the FOI Act reads as follows:

Trade Secrets or Commercially Valuable Information

47(1) A document is an exempt document if its disclosure under this Act would disclose: (b) any

other information having a commercial value that would be, or could reasonably be expected to be,

destroyed or diminished if the information were disclosed.

44. As outlined above, NBN Co used a quoting tool – combined with information from commercially negotiated

agreements – to calculate the FEP. In addition to being protected by confidentiality arrangements, this information

is highly sensitive and also an integral part of the business models of both NBN Co and its Tasmanian

construction business partners. If this information were released in the public domain, I am of the opinion that its

commercial value would be destroyed (or could reasonably be expected to be destroyed or diminished), as it

would enable competitors to calculate construction costs or the market entry point.

45. The potential disclosure of the FEP could give rise to a right of action against NBN Co for a breach of confidence.

An action for breach of confidence would obviously increase legal and transaction costs to both NBN Co and its

contractors, thereby greatly diminishing the value of the information.

46. If the FEP were released, current and future business partners would, most likely, limit the scope of commercially

valuable information provided to NBN Co. Alternatively, parties may refuse to share such information with our

company. This would undermine NBN Co’s ability to engage high quality and competitive business partners. It

follows that the potential release of the FEP would either destroy or significantly diminish the commercial value of

our company’s brand, our standing in the business community and our ability to obtain value-for-money when

NBN Co goes to market.

47. Beyond the obvious detriment to the parties, there would be a significant detriment to the general public and the

Australian taxpayer, as it would push back the progress of NBN Co’s roll out, drive up costs and undermine

efficiencies, all of which would negatively impact the public purse. Therefore, it is my opinion that the FEP isexempt from release under section 47 of the FOI Act and access is denied.

Additional Information48. In addition to releasing the Quotation Methodology Document, I have provided a copy of an FAQ document,

entitled “Trial of the Network Extension – Tasmanian Stage 2 Rollout”, which NBN Co proactively released on its

external website. NBN Co provided this document to certain Tasmanian residents whose properties were near to,

but outside, the planned fibre footprint. The goal in providing the FAQs was to help local residents understand the

fibre extension programme generally, its parameters and other related issues. However, it is important to note that

these FAQs were tailored to the Tasmanian Stage 2 Rollout Trial. As such, some of the information contained in

the FAQs will change as NBN Co further develops and refines its fibre extension policy for the rest of the country.

http://nbnco.com.au/assets/documents/d-f/faqs-tasmanian-trial.pdf







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NBN Co freedom of information findings for iTnews