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(Consumer Protection and Service Standards) Bill 1998
Date Introduced: 12 November 1998
House: House of Representatives
Portfolio: Communications, Information Technology and the
Commencement: The 28th day after Royal
Assent except the provisions dealing with the Universal Service
Regime and the National Relay Service which commence on 1 July
purpose of the Bill is to restate in a single Bill the range of
safeguards that are presently available to consumers of
The sale of
the first third
The coalition's 1996 election policy contained a
commitment to partially privatise Telstra. The major features of
the policy were:
- One-third of the Commonwealth's equity to be made available
through a share float, 65% of which would be reserved for
- Foreign investors only to be allowed to subscribe to 35% of the
float and no foreign investor to be allowed to acquire more than
five per cent of the one-third float
- Incentives to be provided to Australian citizens and Telstra
employees to encourage participation in the float
- Telstra not to be broken up
- Telstra to remain incorporated in Australia with an Australian
citizen as Chairman of the Board, of which a majority will also be
- The government would reserve the right to veto any excessive
- The community service obligations (CSOs) of telecommunications
carriers to be maintained, along with the requirement for such
carriers to contribute to a Universal Service Levy to meet the
costs of the CSOs
- The existing right to untimed local telephone calls to be
maintained and guaranteed by legislation
- All existing price caps to be maintained and the price controls
outlined in the Labor Government's August 1995 statement to be
- A new legislated customer service guarantee to be met by all
- Competition regulation to be administered by a special branch
of the Australian Competition and Consumer Commission.(1)
On 2 May 1996, the government introduced the
Telstra (Dilution of Public Ownership) Bill 1996.
The Telstra share offer opened on 15 October
1997. By the close of applications on 3 November 1997, 1.8 million
Australians had applied for shares. Of the employees eligible to
subscribe for shares under the employee share scheme, 92% took up
the offer. Shares were issued at $3.30 and that price was payable
by two instalments; the first $1.95 ($2.00 for institutions) and
the second $1.35 ($1.40 for institutions).
Of the one-third of shares which were sold, up
to 35% (11.67% of all issued shares) could be purchased by foreign
investors. At the end of 1997 the actual figure was 19.5% (6.8% of
all issued shares).(2)
Telstra instalment receipts were first traded on
the Australian stock exchange on 17 November 1997. Telstra has been
traded as a fully paid share from 27 October 1998. The second
instalment was due on 17 November 1998. Fully paid Telstra shares
were trading at $7.08 on 30 November 1998.
remaining two thirds
On 15 March 1998, the Prime Minister announced
the government's decision to sell the remaining two-thirds of
Telstra. It was envisaged that the legislation to facilitate the
sale, namely the Telstra (Transition to Full Private Ownership)
Bill 1998, would be enacted prior to the recent general election
but the provisions in respect of the sale would not commence until
after the election.
The passage of the legislation prior to the
election was defeated in the Senate.
Apart from the general issue of public ownership
versus privatisation the major concerns in respect of the sale have
related to the continued provision of service and new technologies
to rural and remote parts of Australia and to the continued access
to untimed local calls, an the implications of private ownership
for the local telecommunications equipment industry.
The Customer Service Guarantee (CSG)
In addition to providing for the sale of
one-third of Telstra and imposing ownership restrictions, the
Telstra (Dilution of Public Ownership) Act 1996 introduced
a significant regulatory policy measure, in the form of the
customer service guarantee (CSG).
The CSG provisions have been re-enacted in Part
9 of the Telecommunications Act 1997 and essentially
provide that the Commonwealth's telecommunications regulatory
agency the Australian Communications Authority (ACA) may make
performance standards to be complied with by carriers.(3) Those
performance standards relate to practical matters such as
connection and fault rectification times and the keeping of
appointments to meet customers.(4) If a carrier fails to meet a
performance standard it is liable to pay compensation to the
customer in the amount specified in a scale determined by the
ACA.(5) For example, where there is a delay in connecting a
standard telephone service, the customer is entitled to be paid (or
to have their first account reduced by) the equivalent of one
month's line rental for each day of delay. If the delay exceeds 5
days, the amount of compensation increases to $40 per day.
Telstra's performance in country areas
Concerns in respect of the standard of service
provided by Telstra to country areas have been underscored by
statistics contained in the Telecommunications Performance
Monitoring Bulletin, which are prepared by the ACA.(6) The ACA
monitors carrier performance using over 50 different indicators.
Prominent among these are the following:
- The percentage of new services connected on or before the
agreed commitment date (ACD - this is the date agreed between the
customer and Telstra which is acceptable to the customer and
realistic in terms of available workforce)
- The percentage of faults cleared within one working day
- The percentage of faults cleared within two working days
- The percentage of payphone faults cleared within one working
- The percentage of payphone faults cleared within two working
These performance indicators are summarised as
Service Provided in Country
New Services connected on/before the ACD
Faults cleared within one working day
Faults cleared within two working days
Payphone faults cleared within one working
Payphone faults cleared within two working
Source: Australian Communications Authority,
Telecommunications Performance Bulletin.
The Ministers' response to concerns for country
In response to community concerns over Telstra's
performance in country areas, the Ministers for Communications, the
Information Economy and the Arts and Finance and Administration
jointly announced in March 1998 that the government would introduce
amendments to empower the ACA to direct all carriage service
providers, including Telstra, to take remedial action to correct
any systemic problems which arise in meeting customer service
guarantee performance standards.(7) This measure was contained in
the first Telstra (Transition to Full Private Ownership) Bill and
is now proposed in this Bill.
The Universal Service Obligation (USO)
The Universal Service regime is contained in
Part 7 of the Telecommunications Act 1997. The USO is the
obligation on the carrier who is the declared universal service
provider to ensure that the standard telephone service (STS) and
payphones are reasonably accessible to all Australians on an
equitable basis.(8) STS refers to a service which permits voice
telephony or an equivalent service for a person with a
disability.(9) Regulations may be created which extend the
definition of STS.
The ACA held an inquiry this year to determine
whether the USO should be extended to incorporate digital data
capability (of a type comparable to Integrated Services Digital
Network - ISDN).(10) The ACA found that such an inclusion was not
supported by a cost/benefit assessment. It was also found that
using the USO to make this capability available to all Australians
would have unfavourable impacts on competition. A full discussion
of the findings of that extensive inquiry is beyond the scope of
this Digest and interested readers should seek further information
from the writer.
The Minister for Communications, Information
Technology and the Arts is empowered to declare that a specified
carrier is the national universal service provider. At present,
Telstra is the declared national universal service provider. Where
Telstra incurs a loss in complying with the USO it is entitled to
recoup those losses. That amount is recouped by imposing an annual
levy on all carriers in proportion to each carrier's share of total
Telstra recently calculated the cost of the USO
at $1.8 billion in 1997-98 or $3686 for each subsidised customer in
rural and non-urban areas. This costing has been disputed and the
other carriers and ion 12 October the Minister for Communications,
Information Technology and the Arts announced that the cost of the
USO would be capped at $253 million for 1997-98.
Untimed local calls
Part 8 of the Telecommunications Act
1997 deals with the obligation on carriage service providers
to provide customers with an option to have their local calls
charged on an untimed basis. The untimed local call option must be
given in respect of:
- residential voice calls
- residential data calls (i.e. internet connection and fax
- business voice calls.
There is no requirement to provide an untimed
local call option in respect of business data calls.
Section 226 of the Telecommunications Act
1997 deals with the provision of comparable benefits to the
untimed local call for those rural and remote customers for whom
there is no such thing as a local call. The Minister is obliged to
ensure that regulations are in force from 1 January 1998 to give
comparable benefits to those who do not have untimed local call
access. For the purposes of comparing benefits the legislation
provides that regard must be given to the ability to make essential
community and business calls on an untimed basis.
The insertion of section 226 into the
Telecommunications Act 1997 was prompted by an Australian
Democrats amendment proposed during the Senate's consideration of
the Telecommunications Bill 1997. It has resulted in the Minister
announcing a rebate scheme of up to $160 per year for the 17,000 or
so customers who are without benefits comparable to untimed local
The price control arrangements
Part 6 of the Telstra Corporation Act
1991 empowers the Minister for Communications, Information
Technology and the Arts to determine amounts which may be charged
by Telstra for services provided by it. Amongst other things, the
Telstra Carrier Charges - Price Control Arrangements,
Notification and Disallowance Determination 1997, sets a cap
on local call charges at 25 cents from subscriber telephones and 40
cents from public payphones.
The Minister's power to direct Telstra
Section 9 of the Telstra Corporation Act
1991 enables the Minister to give such written directions to
Telstra as appear to the Minister to be necessary in the public
interest. The only limitation on the power is that the Minister
cannot give a direction in relation to the amounts to be charged
for work done or services supplied by Telstra. If the Minister
wishes to regulate Telstra's charges he must do so under the price
control arrangements in Part 6 of the Telstra Corporation Act
In its original form, the Telstra (Dilution of
Public Ownership) Bill contained a provision which repealed section
9. However, the non-government parties succeeded in retaining the
Minister's power of direction through a Senate amendment. As far as
the writer is aware, the Minister has never issued a direction
under section 9. However, it could be argued that the existence of
this power has made Telstra more amenable to the wishes of the
This Bill is comprised of 10 Parts. Parts 2 to 8
replicate the provisions of 7 Parts of the Telecommunications
Act 1997 with only minor changes. Part 9 deals with the price
control arrangements applying to Telstra, and largely repeats the
substance of the provisions of Part 6 of the Telstra
Corporation Act 1991. Part 10 provides a limited power to the
Minister to direct Telstra in certain circumstances.
In his Second Reading Speech in respect of this
Bill, the Minister for Finance and Administration said:
It is essentially a transparency measure drawing
together the full range of consumer safeguards in a single Bill
making it easier for consumer to access information about their
Given that much of the Bill is a restatement of
existing legislation, this digest will only outline the current
provisions and draw the reader's attention to any changes.
Part 2 - Universal Service
The universal service obligation is outlined
The are no changes to the existing universal
service regime legislation currently contained in Part 7 of the
Telecommunications Act 1997.
Part 3 - The National Relay
The National Relay Service is the service which
provides persons who are deaf or who have impaired hearing with
access to a standard telephone service on terms comparable to those
on which other Australians have access to a standard telephone
There are no changes to the provisions dealing
with the National Relay Service which are presently contained in
Part 7A of the Telecommunications Act 1997.
Part 4 - Continued access to
untimed local calls
The existing provisions (contained in Part 8 of
the Telecommunications Act 1997) dealing with untimed
local calls are outlined above.
There are no changes to those provisions.
Part 5 - Customer service
The customer service guarantee provision in Part
9 of the Telecommunications Act 1997 are outlined above.
New Part 5 contains an amendment which was also
contained in the failed Telstra (Transition to Full Private
Ownership) Bill 1998.
Clause 118 empowers the ACA to
give directions to carriage service providers requiring them
- take specified action to ensure that the provider does not
contravene a CSG performance standard, or
- take such action as will ensure that the extent of the
provider's compliance with the standard reaches or exceeds a
specified goal or target.
The Minister will be able to require the ACA to
give directions under this provision.(12) The ACA must consult with
the Telecommunications Industry Ombudsman before giving a direction
unless the direction is one which the Minister has requested it to
The ACA's directions are disallowable
The proposed section provides 2 examples of the
type of direction that the ACA may issue:
- that the provider implements effective administrative systems
for monitoring compliance with a CSG performance standard
- that the provider take such action as is necessary to ensure
the provider's compliance with a CSG performance standard reaches
or exceeds a specified goal.
A failure to comply with a direction by the ACA
may result in the provider being liable to a civil penalty of up to
Digest Comment: A provider will not be
at risk of a penalty (in excess of the damages they are currently
obliged to pay to the customer, as mentioned above) for merely
failing to connect a telephone service within an agreed time or for
failing to repair a telephone service within a specified time.
Proposed new section 236A is a
two step process which first requires the ACA to issue a direction
before the threat of a pecuniary penalty becomes a reality for the
provider. The effectiveness of the provision therefore hinges on
the ACA's willingness to readily issue these directions. The ACA
will need to be vigilant in the use of this power to provide the
impetus for providers to change their operations with a view to
improving the standard of service provision.
Part 6 - The Telecommunications
The Telecommunications Industry Ombudsman (TIO)
scheme provisions are currently contained in Part 10 of the
Telecommunications Act 1997. The provisions require
carriers and carriage service providers to enter into a TIO scheme
which must provide for the TIO to investigate and make
determinations about complaints by end-users of telecommunications
The only change to these provisions is a minor
one and is the insertion of new section 128(3)
which provides that there is to be only one TIO scheme. The
remaining provisions are unchanged.
Part 7 - Protection for
residential customers against failure by carriage service providers
to provide standard carriage services
Existing Part 11 of the Telecommunications
Act 1997 is reproduced without amendment by this new Part. The
Part allows the ACA to formulate schemes to ensure that new
carriage service providers do not accept advance payment for
services and then fail to deliver those services. The sorts of
schemes that are envisaged are the payment of any advance amounts
into a trust fund, the provision of a third party guarantee or the
maintenance of insurance against a failure to provide service.
Part 8 - Provision of emergency
This Part reproduces unchanged the provisions of
Part 12 of the Telecommunications Act 1997.
Part 9 - Price control
arrangements for Telstra
Part 6 of the Telstra Corporation Act
1991 currently deals with regulation of Telstra charges,
sometimes referred to as the price cap regime. New Part
9 now contains those provisions.
Part 10 -
Clause 159 is headed 'Direction
to Telstra to comply with this Act'. It empowers the Minister to
direct Telstra to take specified action to ensure that Telstra
complies with the Act. Telstra is obliged to comply with such a
direction. The Minister is required to consult with Telstra before
making a direction.
The power of the Minister to direct Telstra,
which is contained in section 9 of the Telstra Corporation Act
1991, is a very wide power which is constrained by only two
relatively minor limitations:
- the directions must be 'as appear to the Minister to be
necessary in the public interest'; and
- they must not relate to charges by Telstra for work done or
services, goods or information supplied. Those charges may be
regulated by the Minister under the price-cap regime (currently
provided for in Part 6 of the Telstra Corporation Act 1991
and to be reenacted by Part 9 of this Bill)
Clause 159 of this Bill
empowers the Minister to direct Telstra to take specified action
directed towards ensuring that Telstra complies with the Act. The
Explanatory Memorandum states:
This new Ministerial direction power replaces
the current Ministerial direction power in Part 3 of the
Telstra Corporation act 1991 which is to be repealed by
item 28 of Schedule 3 to the Telstra (Transition to Full Private
Ownership) Bill 1998.
To compare the existing power of direction in
section 9 to that proposed in clause 159 by
suggesting that one 'replaces' the other would be like a comparison
of chalk with cheese. Section 9 is a very broad power to direct
Telstra in regard to any matter, except pricing arrangements.
Clause 159 merely allows the Minister to direct
Telstra to take specified action to comply with the Act. Telstra is
of course obliged to arrange its affairs to comply with the law
like any other corporation or person.
The rationale for the removal of the power to
direct Telstra is that it is 'inappropriate to retain such a power
in a situation where the Commonwealth no longer holds a majority
equity interest in Telstra'.(14) Whilst this may be true, it is
arguably inconsistent that:
- the Government retains full power to control the amounts that
Telstra charges for its services under the price cap
- Proposed section 8BUA of the Telstra Corporation Act
1991 (to be inserted by the Telstra (Transition to Full
Private Ownership) Bill 1998) will require Telstra to ensure that
at least 2 of its directors have knowledge of communications needs
in regional areas of Australia.
The abolition of section 9 is often supported by
the argument that by complying with the Minister's direction,
Telstra's board of directors could place themselves in a position
where shareholders might claim that they are being oppressed under
section 246AA of the Corporations Law. This could occur in
circumstances where, for example, the Minister directed Telstra to
engage in a substantial infrastructure development program in a
non-profitable area. However, it should be noted that that concern
could be avoided by specifically providing that a breach of the law
by the directors does not occur upon compliance with a direction
from the Minister.
- Liberal Party of Australia and National Party of Australia,
Better Communications, 1996.
- Mullane, M., 'That's not all from Telstra', Australian
Financial Review, 22 December 1997.
- Telecommunications Act 1997, Part 9.
- Telecommunications (Customer Service Guarantee) Standard 1997.
- Telecommunications (Customer Service Guarantee) Scale of
- Australian Communication Authority, Telecommunications
Performance Monitoring Bulleting, December 1997 quarter.
- Minister for Communications, the Information Economy and the
Arts (Richard Alston) and Minister for Finance and Administration
(John Fahey), 'Government to get tough on telecommunications
service standards', , 30 March 1998.
- Telecommunications Act 1997, section 149. Press
- Telecommunications Act 1997, section 17.
- Australian Communications Authority, Digital Data Inquiry
Public Inquiry under Section 486(1) of the Telecommunications Act
1997, 15 August 1998.
- Minister for Communications, the Information Economy and the
Arts (Richard Alston), 'Remote Australia to receive discount on
phone calls', Press Release, 14 January 1998.
- Telecommunications Act 1997, section 242.
- Through the operation of section 98, section 101(1), clause 1
of Schedule 2 and section 570(3) of the Telecommunications Act
- Explanatory memorandum to the Telstra (Transition to Full
Private Ownership) Bill 1998, p. 58.
2 December 1998
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