Bills Digest no. 5 2007–08
Telecommunications Legislation Amendment (Protecting
Services for Rural and Regional Australia
into the Future) Bill 2007
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Conclusion
Endnotes
Contact officer & copyright details
Passage history
Telecommunications Legislation
Amendment (Protecting Services for Rural and
Regional Australia
into the Future) Bill 2007
Date introduced:
21 June 2007
House: House of Representatives
Portfolio: Communications, Information Technology
and the Arts
Commencement:
On Royal
Assent
Links:
The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The purpose of this legislation is to amend
the Telecommunications (Consumer Protection and Service
Standards) Act 1999 (the Act) to provide for the maintenance
of a principal amount of $2 billion in the Communications Fund.
Following its election victory in 1996, the
Coalition undertook to fulfil an election commitment to the partial
privatisation of the national telecommunications carrier, Telstra.
Following sale of one third of the carrier, in March 1998, the
government moved to sell the remaining shares in Telstra.
The Senate, however, rejected this proposal
and in response the government adopted a staged approach. In
December 1998, it sold a further percentage of the carrier,
bringing private ownership to 49 per cent. It also agreed to impose
conditions on any further sale. [1]
In its 1998 election policy, the government
committed to the conduct of an independent inquiry, the
Telecommunications Service Inquiry (the Besley Inquiry), to assess
the adequacy of telecommunications services in metropolitan,
regional, rural and remote areas, prior to its acting to privatise
Telstra fully. [2] In
September 2000, the Besley Inquiry reported that aspects of
services in rural and remote Australia were not adequate and
recommended that the government continued to provide financial and
strategic assistance to ensure that those currently disadvantaged
especially in regional, rural and remote Australia are able to take
their place in an information society . [3]
In August 2002, the then Minister for
Communications, Information Technology and the Arts, Senator
Richard Alston, announced that a further independent inquiry would
review telecommunications services in regional, rural and remote
Australia. The Regional Telecommunications Inquiry (the Estens
Inquiry) reported that while some issues were being addressed in
response to the earlier Besley Inquiry, telecommunications services
in rural Australia could still be improved. [4]
The government accepted all the
recommendations of the Estens Inquiry and in its response, released
in June 2003, it committed $181 million to improve access to
telecommunications services and enhance a range of existing
services. It recommended specifically that the government should
provide funding for future service improvements in regional, rural
and remote Australia. [5]
In the 2004 election campaign, the Prime
Minister reaffirmed, however, that any further sale of Telstra
would be subject to meeting rural service obligations and achieving
levels of service in rural areas. [6]
Following a Coalition election victory in
2004, the National Party expressed reservations about the full
disposal of Telstra shares and called for major concessions for the
bush if the party was to support the sale. In July 2005, Deputy
Prime Minister and Leader of the National Party, Mark Vaile, in an
address to the Queensland National Party Conference, suggested that
a $2 billion Telecommunications Future Fund should be established
with proceeds from the sale of Telstra. The fund would be used to
secure the future of telecommunications in regional and rural
Australia. [7]
This suggestion caused conflict within the
Coalition, with some Liberals reportedly opposed to the fund and
the Treasurer, Peter Costello, labelling the plan as financially
irresponsible . [8]
The plan also caused some dissent within the
National Party. Queensland Senator Barnaby Joyce initially
considered the fund inadequate to deliver services to rural areas
and called for funding of $5 billion to be allocated. Senator Joyce
later requested that a study was undertaken to examine the adequacy
of the proposed funding. [9] Senator Joyce also threatened to cross the floor to vote
against the Telstra sale. He was criticised for his stance within
the Nationals, particularly by New South Wales National Ian
Causley. [10]
There was some suggestion that the government
may have to reconsider the Telstra sale if the Nationals withdrew
support, [11]
despite the introduction of a plan to support telecommunications
services in the bush by the Minister for Communications,
Information Technology and the Arts, Senator Helen Coonan. [12] Senator Coonan s plan
included the $2 billion previously suggested by Minister Vaile for
a communications fund for rural telecommunications. Additionally,
the plan provided $1.1 billion for direct capital investment under
a Connect Australia initiative. [13]
Originally, the government proposed that the
Communications Fund would be financed partly by Telstra shares.
This proposal was extensively criticised with many, including the
Nationals, pointing out that the value of the fund would therefore
fluctuate with the Telstra share price. The intention that the Fund
was also originally to be funded for an amount up to $2 billion was
also criticised. [14]
Eventually, agreement was reached between the
Coalition parties on the plan to future proof telecommunications in
the bush. The Communications Fund was not to consist of Telstra
shares and it would comprise a guaranteed $2 billion. [15] This funding was also
to be made available once the Telstra sale legislation received
Royal Assent. It was not dependent on the Telstra sale.
The Telstra sale legislation and associated
Bills were passed through Parliament in September 2005.
The Communications Fund
was created in September 2005 under the Telecommunications
Legislation Amendment (Future Proofing and Other Measures) Act
2005, which amended the Telecommunications (Consumer
Protection and Service Standards) Act 1999 to establish the $2
billion Fund.
On 26 September 2005, the government allocated
funding to a Communications Fund account. [16] Monies were invested in a short term
deposit with the Reserve Bank of Australia to allow an investment
framework to be agreed upon by the government. In July 2006, the
Australian Office of Financial Management, which had served as the
interim manager of the Fund since its establishment, was appointed
as permanent manager. It was decided that Fund investment under the
permanent management would concentrate on a portfolio of
short-term, low-risk assets. [17]
Spending from the Fund has been tied to
independent, regular reviews of telecommunications services in
rural, regional and remote Australia. Reviews are to be conducted
by the Regional Telecommunications Independent Review Committee
established under the Telecommunications Legislation Amendment
(Regular Reviews and Other Measures) Act 2005. [18] The reviews will take
place every three years with the first of these commencing in 2008.
Position of
significant interest groups/press commentary
The National Farmers Federation (NFF) welcomed
the establishment of the Communications Fund, but argued that
funding needed to be accompanied by strong legislation to ensure
that services were delivered to the bush. [19] The NFF also criticised the timing of
the review process, which is linked to the dispersement of monies
from the Fund.
A number of other interest groups were
concerned that the $2 billion proposed for rural communications
services was a relatively small revenue stream to be spread in
perpetuity . [20]
Telstra reportedly eagerly anticipated the
establishment of the Communications Fund. Chief Executive Officer
of Telstra Sol Trujillo was reported as describing the idea of a
Communications Fund as the kind of creative thinking we need to
encourage . [21]
One report noted, however, that Telstra s support most likely
stemmed from the fact that the company benefited from government
subsidies on rural services. [22]
In 2005, there was little discussion in the
media of the Communications Fund within the broader context of
discussion of the sale of Telstra. One commentator noted, however,
that despite the government spending $11.1 billion on regional
telecommunications between 1997 and 2005, there was still no real
plan for how to provide [telecommunications] services or how much
it will cost . [23]
Criticisms raised at the time the
Communications Fund was established appear not to have been
revisited in the relation to this legislation by either interest
groups or the press.
In 2005, the Independent Member for Calare,
Peter Andren, criticised the Nationals for accepting the $2 billion
funding for the Communications Fund. Mr Andren considered the Fund
would not produce sufficient revenue to deliver adequate services
and that it was a con . [24]
In a dissenting report to the Senate
Environment, Communications, Information Technology and the Arts
Committee examination of the Telstra sale and related bills, Labor
Senators agreed with the view that the Communications Fund may not
generate sufficient revenue to address communications issues in
rural areas. [25]
In their dissenting report, the Labor Senators also expressed
concern about administration of the Fund, arguing there were legal
and policy issues that needed to be scrutinised further before
establishing the Fund. [26]
The Australian Democrats argued in a report
similarly dissenting from the findings of the Senate Environment,
Communications, Information Technology and the Arts Committee that
the combined funding for Connect Australia and Communications Fund
was inadequate to provide fast modern broadband to regional and
rural Australia. The Democrats also considered the government
should undertake a mapping exercise of current fibre networks
including 'dark fibre', develop a national plan to roll out
broadband, and establish an adequate fund to finance the roll out.
The $2 billion future fund could be used to maintain and upgrade
services into the future . [27]
In March 2007, the ALP released a
communications policy document which argued that the Communications
Fund:
was setup in 2005 as a consequence of pressure
from the National Party. The Fund is intended to earn an income
stream to finance spending on telecommunications projects in
regional Australia but it will not result in a national broadband
network. These projects are supposed to come from the Government s
response to any recommendations proposed by the Regional
Telecommunications Independent Review Committee. Despite the Fund
being established in 2005, this report is not due until 2008. Labor
will use this asset to provide investment capital to deliver
high-speed broadband across Australia.
[28]
On 18 June 2007, the government also announced
funding for a broadband inititave, Australia Connected.
[29] In making this
commitment, Senator Coonan noted the centrepiece of the initiative
was national broadband network that will extend high speed services
out to 99 per cent of the population and provide speeds of 12
megabits per second by mid 2009 . [30] The Senator noted further that the
network would have capacity to provide vastly increased speeds as
Australia s demand for bandwidth grows, with funding already
assured from the ongoing income stream provided by the Government s
$2 billion Communications Fund . [31]
On 21 June 2007, Senator Coonan announced that
the government would introduce legislation to protect the $2
billion principal of the Communications Fund so that only the
interest earned from the Fund, up to $400 million every three
years, can be spent . The government intended the legislation would
also prevent Labor using funds in the Communications Fund to build
its proposed national broadband network. [32]
The Bill is not expected to have any financial
implications for Commonwealth revenue or expenditure.
Schedule 1 Amendment
Item 1 inserts a new
section 158ZA to require the Minister to take all
reasonable steps to ensure that the balance of the Communications
Fund Special Account and the value of investments of the Fund do
not fall below $2 billion.
Conclusion
As noted above, this Bill ensures that a
minimum of $2 billion remains in the Communication Fund to ensure
monies continue to be available to support the delivery of
telecommunications to rural Australia. While there were concerns
raised when the Communications Fund was established that the monies
allocated to the fund would not be adequate to ensure the delivery
of services to rural areas, there was no question that funding
should be made available for this purpose.
The ALP has since introduced a plan to use
monies in the Communications Fund to provide investment capital to
deliver high-speed broadband across Australia. This legislation is
intended to prevent the Communications Fund from being accessed for
such purposes.
The legislation could, however, be overturned
if Labor wins the next election and secures a majority in the
Senate or if the composition of the Senate after the election is
conducive to an ALP government negotiating options to allow it to
introduce its broadband proposals.
Endnotes
[1] . G. O Leary,
Telstra Sale: Background and chronology, Parliamentary
Library, Canberra, September 2003 http://wopared.parl.net/library/pubs/chron/2003-04/04chr03.htm.
See also A. Palmer and J. Chownes, Bills Digest No 45, 2005/06,
Telstra (Transition to Full Private Ownership) Bill 2005,
Parliamentary Library, Canberra, for more detail http://www.aph.gov.au/library/pubs/bd/2005-06/06bd045.htm
accessed 11 July 2007.
[2] . Senator, the
Hon. Richard Alston, (former) Minister for Communications,
Information Technology and the Arts, media release,
19 March 2000, http://www.dcita.gov.au/Article/0,,0_4-2_4008-4_14874,00.html,
accessed 12 July 2007.
[5] . ibid.
Recommendation 9.5.
[20] . Ms Eason,
CEPU submission to Senate Environment, Communications, Information
Technology and the Arts Committee, Inquiry into the Telstra
(Transition to Full Private Ownership) Bill 2005 and Related Bills,
17 September 2005.
[27] . Australian
Democrats Senators Dissenting Report in Senate Environment,
Communications, Information Technology and the Arts Committee
Inquiry, op. cit.
Dr Rhonda Jolly
2 August 2007
Social Policy Section
Parliamentary Library
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