This submission is being made by Citizens Against Selling Telstra (CAST), a Canberra based community group. The Citizens Against Selling Telstra Policy is that:
- All Telstra core communications systems should be in public ownership.
- Non-essential business could be privatised.
- Telstra should proceed to buy back all shares, financed with profits and sale of non-core assets.
Telstra Belongs to You and Me
Telstra, or at least the share which still remains in Government hands, is an asset which belongs to every Australian citizen. This asset has been paid for in this and previous generations, through taxation and through the revenue paid to Telstra.
Given that the owners of this asset, including, apparently, even private shareholders, are overwhelmingly opposed to the sale according to all opinion polls, we believe that the Government has no more moral right to proceed with the sale, than has a Real Estate agent to sell your family home without your consent.
Record of Previous Privatisations
Local and overseas privatisation, especially of utilities, has shown customers pay more and that infrastructure is not updated. This is what has already happened where a large number of other assets which were previously publicly owned, both here and overseas.
Examples in Australia include: QANTAS, the Commonwealth Bank, various state owned banks and insurance companies, The Commonwealth Serum Laboratories, electricity generation in South Australia and Victoria and public transport in Victoria.
Overseas examples include: British Rail, water utilities in the United Kingdom and South Africa, electricity generation in New Zealand, and a large number of other telecommunications companies.
All of these privatisations have been costly, if not disastrous, for the public interest. Their effect may have been direct in the case of, for example, the electricity generation of South Australia and Victoria, where the public has suffered price hikes and blackouts, or indirect, in the case of QANTAS, where privatisation has helped to bring about the circumstances in which thousands of jobs and hundreds of millions of dollars in both taxpayer and investor funds have been lost as a result of ruin of Ansett and two failed attempts to start up Compass Airlines.
The privatisation of the Commonwealth Bank has led to the formation of what is effectively a cartel, where all four the major banks seem free to charge way in excess of what it actually costs to provide services and all have drastically reduced their own workforces and services to rural communities.
It is notable how today's advocates for the privatisation of Telstra do so little to draw the attention of the Australian public to this sorry record.
Costs of the Privatisation
There are many costs, which have not been taken account of in the Government's case for privatisation.
Any short term benefits gained through the windfall of the sale, will inevitably be offset by much greater and ongoing costs in the longer term.
In the first place a good deal of money will be lost to the public purse through the mechanisms of privatisation itself: these include administration, promotion, fees paid to stockbrokers, lawyers, and investment consultants.
A revenue stream, now available to the Government, will be lost, and the paying public can be expected to suffer asTelstra will use its status as monopoly, to squeeze every last cent out of its customers.
If the abuse of monopoly power is to be mitigated to any significant extent, then a large bureaucracy to regulate Telstra will be required. Furthermore, the legislation to regulate Telstra would have to be constantly reviewed and amended to keep abreast of rapid changes in communications and information technology.
For its part, Telstra can be expected to use an army of lawyers to devise ways to evade the rules. This cost will ultimately be met by its customers.
Service to Rural Australia
Taxpayers can also be expected to be billed for the provision of services to rural communities, that is, if these communities are not to be left completely behind in the wake of privatisation.
CAST, and, we believe, the Australian public, accepts that subsidisation of telecommunication services for rural and remote communities is a necessary price to pay for the maintenance of a healthy rural economy and for national harmony, however, the cost for doing so will be far greater if it is to be done by various schemes to either subsidise or compel Telstra or other private companies to provide these services. Rather, we believe that that subsidisation should be done directly and transparently by Telstra, as an arm of the Government.
Contrived Competition is Not the Solution
Whilst competition is vastly preferable to untrammeled monopoly power, CAST disputes the very prevalent view that this the only way to motivate the workforce and management of Telstra to provide decent service. There are many examples of workers providing excellent service to the public, without either the carrot of enormous wealth or the stick of unemployment and economic ruin.
Attempts to change the reality that telecommunications is a natural monopoly, and to artificially introduce the competitive model, have resulted in the wasteful duplication of infrastructure, and worse still, the scrapping of the Telstra analogue mobile phone network as an inducement for Vodaphone to set up its digital network.
Examples of duplication include:
- The laying of two optical fibre networks by Telstra and Optus covering the same streets in Sydney in the 1990s, whilst most of the rest of Australia has missed out on being connected to any optical fibre network.
- Three separate digital mobile 'phone networks all covering the same geographical regions in the heavily populated urban regions.
CAST believes that other less wasteful and more effective ways to protect the public from the abuse of monopoly power should be considered.
Telstra's Corporate Charter is Not in the Public Interest
Telstra's business charter recognises only the bottom line of profitability of Telstra itself and fails to recognise the other bottom line of intrinsic value to the public. As a consequence, Telstra has missed many opportunities to provide services that would have been of vast benefit to the Australian community in comparison to the relatively small amount of revenue it may have had to forgo in order to do so.
A striking example is ISDN, of which telecommunications journalist, Stewart Fist, has written extensively in his 'CrossRoads' column in the IT section of The Australian newspaper. This technology has been available since 1981. It allows for reliable 128K data connection to be built on the same copper line required for a single voice connection. This could be split into two 64K channels which would have allowed the same line to have been used also for voice. The cost of maintaining an ISDN connection would have been, at most, the same as that of maintaining an equivalent analogue voice connection. Setting up an ISDN connection would have required the expense of a visit from a Telstra technician, however, because of the overall reliability and simplicity of ISDN compared to analogue modem technology, it is likely that the cost would have easily been recovered by most users in a very short period of time.
In spite of the immense advantages of ISDN Telstra chose to effectively deny this technology to all but a few of the public by charging artificially high rates for this service.
Another example was Telstra's refusal to allow country customers to access city Internet Service Providers at the cost of a local call, even though the cost of providing STD connections is virtually the same as that of providing a local call connection. Consequently access to the Internet was unnecessarily placed beyond the means of rural users for many years.
The gap was, in many areas, filled eventually by private companies and community initiatives such as the Flexi Net ISP, funded by the Warwick TAFE, for which one of the authors (James Sinnamon) worked from 1996 until 1998.
According to even recent accounts, Telstra is persisting with its policies of 'pair gaining' each single copper phone connection between two customers. This has made it impossible for these customers to have access to ISDN or ADSL. One such case occurred even in the expensive new Jackson's Landing Housing complex in inner city Pyrmont, late last year, as was reported in The Australian on 25 November.
Telstra's business practices may have been good for its own bottom line, however the price paid by the Australian community in having lost an opportunity to get an early start in the global revolution in telecommunications and information technology must have been incalculably higher.
Public Ownership versus the Environment - a Spurious Conflict
It has been argued, for example by Senator Meg Lees and by ANU Academic, Dr Trent Barry (Canberra Times, 27 June 03) that there are other, far more urgent, needs that can only be funded by the sale of Telstra. The most prominent is the need to take action to halt and reverse the serious degradation to Australia's natural environment.
We believe that the public should be presented with all the possible funding options and be allowed to make the hard choices after an informed debate. They should not be made to choose only between the loss of a valuable asset on the one hand and continuing neglect of our gravely endangered environment on the other.
Other options to raise funds could include:
- Forgoing of tax cuts, so that next year's projected $6 billion budget surplus be put directly to use to repair our environment.
- Increases in taxes, if the $6 billion budget surplus is not sufficient.
- Issuing of Commonwealth Government bonds.
- Setting of environmental repair projects into which private funds could be directly invested.
The short term expedient of flogging off Telstra will almost certainly be far more costly than any of the above in the longer term.
Telecommunications Can Reduce Our Environmental Footprint
Telecommunications, particularly broadband telecommunications, offer an enormous and largely unrealised potential to reduce our environmental footprint in this country. Examples include:
- Transport needs can be reduced as teleconferencing, telecommuting, remote medical diagnosis and treatment, etc becomes viable for greater numbers of people.
- Consumption of paper can be reduce as broadband connectivity makes access to sophisticated electronic documents easier.
Indirectly, broadband connectivity between people and between communities will better enable access to, and the creation of, knowledge that will help us all to manage our natural resources better.
Telstra's practice of delaying access to newer technologies and for charging artificially high rates for its services has almost certainly been, and will continue to be, harmful to our environment as well as to our economy.
Make Telstra a Public Service Once Again.
We believe that a more effective way to protect the public from the abuses of monopoly power by Telstra would be to change Telstra's charter and make it once again a public service. Telstra should be made fully accountable to the Australian Parliament and subject to effective Freedom of Information legislation. Also, more effective channels though which customer grievances against Telstra can be handled, should be created.
Telstra's charter would be changed so that it would be simply required to make available, to the whole Australian community, the best possible communications services, which are within our means to pay. The huge economies of scale would make it possible for all sorts of services, such as mobile phones and broadband connectivity, which are currently beyond the means of many, to be affordable by every man woman and child in this country.
The first step would be to buy back the shares. Telstra itself has already done this to a limited extent. This could be continued through funds raised from the sale of non-core assets could be used to begin this process.
When this process has completed, and the restrictive, narrowly focused, business model, under which Telstra is required to operate, is abolished once and for all, it will be possible for each member of the Australian community to realise a much greater return, on the amount he/she has contributed as tax or revenue, than is now possible.
Implications for Telstra Competitors
If Telstra were to become a public service, it would provide a backbone that would allow many other companies, including many which provide communications services, to flourish.
However, it is also possible that many businesses, which have acted to fill the voids left by Telstra's past neglect, may be threatened.
An example which comes to mind was the Flexi Net ISP mentioned earlier. It existed largely because Telstra refused to give local call access to city ISPs for rural residents. Had that policy been changed, then Warwick residents would have had access to cheaper city based ISPs and Flexi Net would have been ruined almost overnight.
It is possible that over time, even larger competitors such as the TransACT, which has so far done such an excellent job of creating a broadband communications backbone in the ACT, may also be affected.
In such circumstances, we believe that ways to integrate such competitors into the structure of Telstra should be found. These competitors should be bought out at fair prices and every possible effort made to employ their workforces within Telstra.
CAST believes that Telecommunications policy should serve the Australian public first and not be manipulated to create artificial niches for private companies to fill, however, CAST also believes that it would be unacceptable if investors, who had invested in good faith to fill gaps left by Telstra's past shortcomings, were to lose their money as a result of Telstra being directed to properly serve the Australian public again.
Defence
Control of the telecommunications network should be held by the public service in times of war, terrorist attacks, and other emergencies. It is folly to allow the control of our national telecommunications to be in the hands of foreign consortia and investors whose government may be at odds with Australia.
A Referendum to Give the Public a Say on Privatisation
CAST reiterates that privatisation of Telstra is overwhelmingly opposed by the Australian public, including many who intend to vote for the Liberal and National parties. We believe that, at the next election, the public should be given adirect say on this issue through a question to be put in a referendum.
Conclusion
This submission has covered many, but not all, of the issues entailed in the debate over the public ownership of Telstra. As concerned and informed members of the community, we believe that the cases both both against the privatisation of Telstra, and the continued operation of Telstra, under its flawed corporate charter, are overwhelming. As a first step towards providing the Australian community with the telecommunications services which we believe it deserves, and which are possible, we urge the Senate to reject the Government's legislation to privatise Telstra.
James Sinnamon and Dave Dempster
on behalf of Citizens Against Selling Telstra (CAST).
Contact details:
James Sinnamon:
sinnamon@bigpond.net.au
ph 02 62842708(h), 0412 319669
LPO Box A171 ANU, ACT 2601
Dave Dempster:
dempster@pcug.org.au
161 Wickerslack Lane, Queanbeyan NSW 2620
ph 02 62975608(h)