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
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
Telstra (Transition
to Full Private Ownership) Bill 1998
Date Introduced: 12 November 1998
House: House of Representatives
Portfolio: Communications, Information Technology and the
Arts
Commencement: Except Schedule 3, the Act
commences on Royal Assent. The commencement of Schedule 3 is
discussed below.
Purpose
To:
-
- facilitate the sale, by the Commonwealth, of shares in Telstra
Corporation Limited (Telstra) so that the Commonwealth retains
50.1% of the total number of shares
-
- set out the distribution of the Government's 'social bonus',
which is to be funded by the sale
-
- make provision for the establishment of an independent inquiry
into Telstra's service performance before the Commonwealth divests
itself of more than 49.9% of Telstra shares.
Background
This Bill is one of a package of five Bills.(1)
The Background to this Bill is contained in the Bills Digest for
the Telecommunications (Consumer Protection and Service Standards)
Bill 1998.
Main
Provisions
The Bill is comprised of three amending
Schedules.
Schedule 1 - General
Amendments
Item 5 inserts proposed
new section 8BUA into the Telstra Corporation Act
1991. That section requires that Telstra must ensure that at
least 2 of its directors have knowledge of, or experience in, the
communications needs of regional areas.
This policy decision was announced by the
Minister for Communications, the Information Economy and the Arts
on 22 July 1998, at least partly as a response to concerns that a
fully privatised Telstra may not meet the needs of regional and
rural subscribers.(2)
Schedule 2 - Amendments relating
to the sale by the Commonwealth of 49.9% of its original equity
interest in Telstra
Item 3 inserts proposed
new section 22A into the Natural Heritage Trust of
Australia Act 1997. That section will provide for the transfer
of another $250 million from the sale of the remainder of Telstra
to the Nature Heritage Trust of Australia Reserve.
Item 19 inserts new
section 8AUA into the Telstra Corporation Act
1991. That section will allow the Minister to amend Telstra's
constitution (i.e. its memorandum and articles of association) at
any time between the commencement of the section and the day on
which the Commonwealth's shareholding in Telstra falls below fifty
per cent. The amendment must relate to the sale of Telstra and the
effect of the alteration must be to remove the requirement that a
particular act or thing be done only with the consent of the
Minister.
Items 27 to 34
deal with the foreign ownership restrictions. The amendments are of
a technical nature and do not change the existing foreign ownership
limits, i.e. total foreign ownership must not exceed 35 per cent
and no foreign individual may own more than five per cent.
Item 42 creates new
section 8CCA which is an anti-avoidance provision. The
section will prohibit Telstra from entering into a scheme for the
purpose of avoiding the application of any of the provisions of the
Telstra Corporation Act 1991. The Explanatory Memorandum
to the Bill cites examples of the types of provisions which could
be the subject of avoidance through the use of a scheme as, the
foreign ownership restrictions and requirement that Telstra base
its operations in Australia.
Part 2C of the Telstra Corporation Act
1991 was inserted by the Telstra (Dilution of Public
Ownership) Act 1996 immediately prior to the sale of the first
third of the company. Part 2C is headed 'Re-affirmation of
Universal Service Obligation' and contains a restatement of the
core elements of the USO. Its insertion was intended to:
re-affirm that the transfer of part of the
Commonwealth's equity in Telstra will not affect the 'Universal
Service Obligations' that apply to Telstra and other
telecommunications carriers.(3)
The USO at that time was contained in the
Telecommunications Act 1991 and is now contained in the
Telecommunications Act 1997, as mentioned above.
Consequently the re-affirmation served no legal purpose but instead
was intended to allay concerns about Telstra's performance of its
community service obligations following its partial
privatisation.
Item 45 repeals Part 2C.
The Social Bonus
Item 52 inserts
proposed new Part 9 into the Telstra
Corporation Act 1991. Part 9 will be headed 'Social bonus
resulting from the partial sale of Telstra'.
The social bonus is an amount of $421 million
which has been allocated to spending on improving
telecommunications services in rural and remote areas. The
components of the social bonus are:
-
- $70 million over 5 years will be expended from the Rural
Transaction Centres Reserve. The purpose of the expenditure will be
to enable people in rural areas to have access to services and
technology that enable them to obtain information or carry out
business (proposed new section 48).
Examples of the types of services envisaged are:
phone, fax, postal, data transmission and internet services.
Examples of the types of transactions are: commercial, banking and
insurance transaction and dealings about employment matters and
with governments.
-
- $150 million over 3 years will be expended from the Untimed
Local Call Access Reserve. The purpose of the expenditure will be
to enable carriage service providers to provide people who are do
not currently have access to untimed local calls with access or
provide people who have only limited access to untimed local calls
with extended access (proposed new section
54).
-
- An addition to the Regional Telecommunications Infrastructure
Fund (RTIF) of $81 million. The RTIF was established in early 1997
with a independent board which was allocated $250 million to spend
on regional communications needs over 5 years.
A further $81 million is allocated to the RTIF
by this bill, to be spent on:
-
- $20 million to assist in meeting the telecommunications needs
of people in remote island communities, isolated island communities
or the Australian Antarctic Territory
-
- $36 million to facilitate the provision of internet access for
people in rural or regional areas, being access at a reasonable
cost and involving a reasonable bandwidth
-
- $25 million to facilitate mobile phone coverage along
highways
-
- $120 million over 5 years will be expended from the Television
Fund Reserve. The purpose of the expenditure will be to extend
areas in which television programs broadcast by SBS can be received
and enabling people to obtain reception of programs transmitted by
SBS, the ABC or the commercial television stations.
Schedule 3 - Amendments relating
to the sale by the Commonwealth of more than 50% of its original
equity interest in Telstra
Item 2 of Schedule
3 permits the Minister for Communications, Information
Technology and the Arts to establish an inquiry into whether
Telstra has met 'prescribed criteria' relating to its operational
performance for a particular 'designated period'. If the inquiry is
satisfied that Telstra has met the prescribed criteria in respect
of the designated period, it must issue a certificate to that
effect to the Minister. Upon the issue of a certificate, the
provisions of the Bill which facilitate the sale of the remaining
50.1% of the shares in Telstra commence.
The designated period is the period during which
Telstra's performance will be assessed and must be at least 6
months.
The prescribed criteria are not set out in the
Bill, but are to be specified in regulations.
Certain persons and bodies are ineligible to
conduct the inquiry. Those persons include Telstra or an employee
of Telstra and employees of the Commonwealth and Commonwealth
authorities.
Schedule 3 also makes the usual
provision for preservation of long service leave entitlements.
Part 4 of Schedule
3 commences on a day fixed by proclamation. However, a
proclamation cannot be made until the Commonwealth owns less than
50% of the shares of Telstra. Item 28 of
Schedule 3 (which is in Part 4) repeals the
Minister's power to direct Telstra, which is presently contained in
section 9 of the Telstra Corporation Act 1991.
Concluding Comments
At least four issues arise in relation to the
proposed inquiry into Telstra's performance:
-
- probably the most critical element of the inquiry is the nature
of the criteria which Telstra's performance must satisfy - why is
the specification of that criteria deferred to regulations?
-
- the designated period can be as short as 6 months - from a
statistical perspective, is that period sufficiently long to allow
an accurate assessment of performance?
-
- what would stop Telstra being on its 'best behaviour' during
the assessment period, perhaps by increasing the allocation of
resources to certain areas of the organisation during that
time?
-
- To what extent are any measures or assessments of Telstra's
performance as a joint private/public sector corporation relevant
to its prospective performance as a wholly private sector
corporation?
Endnotes
1. Telstra (Transition to Full Private
Ownership) Bill 1998
Telecommunications Legislation Amendment Bill
1998
Telecommunications (Universal Service Levy)
Amendment Bill 1998
Telecommunications (Consumer Protection and
Service Standards) Bill 1998
NRS Levy Imposition Amendment Bill 1998
2. Minister for Communications, the Information
Economy and the Arts (Senator the Hon Richard Alston) and Minister
for Finance and Administration (the Hon John Fahey MP), 'The Sale
of Telstra', 22 July 1998.
3. Australia, Parliament, Telstra (Dilution of
Public Ownership) Bill Explanatory Memorandum, 1996, 3.
Lee Jones
2 December 1998
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1998
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