Chapter 1

Chapter 1

Telstra's carrier licence conditions

Conduct of the inquiry

1.1        On 27 June 2013, the Senate referred the following matter to the Environment and Communications References Committee (the committee) for inquiry and report by
19 July 2013:

All matters relevant to the impacts of imposing on Telstra Corporation Limited a carrier licence condition that would require it to produce printed and online national number directories within Australia.[1]

1.2        In accordance with usual practice, the committee wrote to stakeholders inviting submissions by 4 July 2013. Details of the inquiry were also made available on the committee's website at www.aph.gov.au/senate_ec.

1.3        The committee received eight submissions which are listed at Appendix 1. No public hearing was held for the inquiry. The committee thanks those organisations that made submissions to its inquiry.

Background

1.4        The Australian Communications and Media Authority (ACMA) administers the regime that licenses telecommunications carriers.[2] Owners of a network unit used to supply carriage services to the public are generally required to hold a carrier licence.[3]

1.5        Division 3 of Part 3 of the Telecommunications Act 1997 (the Act) provides for the imposition of licence conditions on telecommunication carriers. Section 63 of the Act provides that a carrier licence may be subject to any conditions declared by the minister administering the Act including:

1.6        Pursuant to subsection 63(3) of the Act, Telstra Corporation Limited (Telstra) is subject to the additional conditions of its carrier licence (Carrier Licence Conditions (Telstra Corporation Limited) Declaration 1997). Clause 9 of the Declaration requires Telstra to produce an alphabetical public number directory annually, in volumes by geographic area.[5]

1.7        The Department of Broadband, Communications and the Digital Economy (DBCDE) advised the committee that Telstra fulfils the obligations under Clause 9 of its carrier licence condition through the production and distribution of the White Pages directory.[6] DBCDE further explained that there is no obligation for Telstra to provide online telephone number directories. Telstra's licence conditions also do not cover the production of the Yellow Pages directory which Telstra produces 'on the basis of its own commercial decisions'.[7]

1.8        In February 2013 Sensis, the wholly owned subsidiary of Telstra which produces the White Pages and the Yellow Pages in Australia, announced that 'as many as 698 positions could go, more than half of which would be in back-office roles that would be sent offshore'.[8] It is this announcement by Sensis that forms the basis of the committee's inquiry into Telstra's carrier licence conditions. 

Discussion of key issues

1.9        Submissions from a number of stakeholders supported the imposition of a new carrier licence condition on Telstra to require it to produce printed and online national number directories within Australia. Concerns were raised, however, in respect of how such an obligation would interact with Australia's international trade commitments.

Support for a new licence condition

1.10      Submitters identified Telstra as holding a 'special and historic' place in Australia's history and expressed concern that, in the absence of a new carrier licence condition, offshoring in the telecommunication industry would lead to job losses, affect the quality of directories and put information security at risk.[9] The Australian Manufacturing Workers Union (AMWU) commented that it was aware of anecdotal information 'showing that language and cultural barriers have contributed to mistakes in copy and advertisements and notices published with mistakes which sit for the life of the directory'.[10] The Printing Industries Association of Australia (PIAA) raised similar concerns.[11]

1.11      In addition to concerns regarding quality, the Community and Public Sector Union (CPSU) suggested that there would be 'disquiet about privacy' if production of Telstra's directories was taken offshore.[12] The PIAA also raised this matter as a risk associated with offshoring production:

The transfer of Telstra's directory operations also understandably raises concerns and issues about offshore production. These include the risk of exposing private information on Australian citizens which Telstra holds, risk to intellectual property, risk of security breaches and data theft. Both offshore locations [Philippines and India] have high levels of poverty which could tempt the data handlers to engage in data theft and thus compromise the security and privacy aspects of the data.[13]

1.12      The CPSU suggested that '[o]nly by ensuring work is done in Australia can users and customers be certain that their data will be secure and protected by Australia's regulatory system'.[14]

1.13      The Communication Workers Union (CWU)[15] raised concerns about loss of jobs and skills. While the CWU acknowledged that it was 'hard to see why Telstra should be subject to such a requirement when no such legal restrictions on offshoring have...been placed on other Australian companies, including Telstra's competitors', it supported the imposition of a new licence condition.[16] The CWU advised the committee that, in its view, imposing an 'Australian made' condition on directories will not in itself stem the flow of skilled work, but it would 'draw a visible line in the sand'.[17] Submitters also expressed the view that offshoring was not in the national interest.[18]

Telstra's response

1.14      In response to the concerns raised, Telstra explained to the committee that Clause 9 of its carrier licence 'substantially reflects the equivalent licence condition that formed part of the original licence granted to Telstra in 1991 when it was known as the Australian and Overseas Telecommunications Corporation'.[19] Telstra noted that the 'original and continuing purpose of this obligation was to ensure that people with a telephone service have access to information about how to contact other people with a telephone service, thus enhancing overall network utility'[20] and that such a change would be both inconsistent with the original intent of the licence condition and unnecessarily onerous.[21]

1.15      Telstra contended that the imposition of the mooted new condition represented a 'significant extension' of the scope of the current licence in two ways:

...first, it would add a requirement for Telstra to produce online directories; and second, it potentially requires onshore production of all national number directories produced by Telstra in print or online, including those directories that it produces commercially and independently of the current licence condition applicable to Telstra.[22]

1.16      Telstra explained that the extension of the scope of the licence would increase its costs in an increasingly competitive global market[23] and stated that, as the amendment would not apply to competing directories or 'other commercial services in telecommunications, utilities or banking produced partly offshore', competition would be distorted and the higher cost structure would undermine its ability to meet its existing directory licence conditions and compete in the market.[24]

1.17      DBCDE informed the committee that the direction of regulatory policy for the telecommunications industry 'has been to gradually reduce the number of obligations placed on Telstra in areas where there is now a competitive market'.[25] DBCDE therefore noted that:

...it would be important to consider the intended scope of the proposal and whether it would regulate products that are not currently regulated or required by telecommunications legislation, but are provided by Telstra on the basis of its own commercial decisions.[26]

Trade concerns

1.18      In its submission, DBCDE commented that the imposition on Telstra of a licence condition requiring it to produce its directories in Australia may have 'implications associated with Australia's trade obligations' and advised the committee to seek advice from the Department of Foreign Affairs and Trade (DFAT).[27]

1.19      DFAT informed the committee that the proposed condition could affect 'trade in services', which is broadly defined under the World Trade Organisation General Agreement on Trade in Services (GATS) and Australia's free trade agreements (FTAs).[28] DFAT explained that Australia has made specific commitments on a variety of service sectors under the GATS and FTAs:

Two important commitments made in the GATS and Australia's FTAs are to allow access to the Australian market (market access), and not to discriminate against like services and services suppliers of other parties (national treatment), in certain sectors.[29]

1.20      DFAT therefore advised that a relevant consideration when determining if such a condition (requiring the local production of national number directories) was in breach of Australia's international trade commitments would be 'whether Australia has market access and national treatment obligations in respect of the relevant service sectors and if so, to whom'.[30] The committee was informed that Australia has undertaken obligations with respect to e-commerce, and has made commitments on 'printing and publishing services' but that the service sector(s) affected by the proposed measure would 'depend on the scope of the actual measure'.[31]

1.21      Telstra echoed the concerns of DFAT that, in its view, a licence condition requiring the production of directories within Australia would likely:

- violate Australia's national treatment obligations[32] under WTO GATS Article XVII because it reduces the competitive opportunities available in Australia to offshore suppliers of many of the services needed to produce the directories, e.g. data processing and advertising services. While certain exceptions are permitted under GATS, those exceptions are unlikely to be available to Australia in this case; and

- violate Australia's national treatment obligations under some of its bilateral agreements, for example Article 4 in Chapter 7 of the Singapore Australia FTA (the Trade in Services chapter) would apply to printing services that may be capable of being provided by Singaporean suppliers.[33]

1.22      Telstra further explained that:

...printing and publishing services are not specifically listed in Australia’s commitments to the GATS, they are covered by the national treatment obligation in several of Australia's bilateral trade agreements, including those with Singapore, the United States, New Zealand, and Chile.[34]

Committee view

1.23      The committee shares the concerns of submitters for local jobs and acknowledges that offshoring the production of directories may lead to the loss of jobs and skills in Australia.

1.24      The committee notes, however, the importance of Australia's international trade commitments to the country's continued participation in a global economy and therefore considers that the concerns raised by the Department of Foreign Affairs and Trade are paramount in the consideration of any proposed new carrier licence condition for Telstra or other participants in the telecommunication industry. In addition, the committee refers to the direction of regulatory policy for the telecommunication industry which 'has been to gradually reduce the number of obligations placed on Telstra in areas where there is now a competitive market'.[35]

1.25      In giving consideration to Australia’s international trade obligations and the fact that as a private company Telstra (or Sensis) should, as far as possible, be able to make commercial decisions about their operations (even where such operations are required of them by government), the committee is not convinced of the need to amend Telstra’s licence conditions at present.

 

Senator Simon Birmingham
Chair

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