CHAPTER 2
LEGISLATION
2.1 The Telstra (Dilution of Public Ownership) Bill 1996 (the Bill)
was introduced into the House of Representatives on 2 May 1996 and into
the Senate on 9 May 1996. A summary of the Telstra (Dilution of Public
Ownership) Bill 1996, prepared by the Committee, is provided at Table
2.1.
Table 2.1 Summary of the Telstra (Dilution
of Public Ownership) Bill 1996 and the Acts it amends as it relates
to the Terms of Reference of the inquiry
| Terms of Reference |
Telstra (Dilution of Public Ownership) Bill 1996 |
Telstra Corporation Act 1991 |
Telecommunications Act 1991 |
| (a) post 1997 regs and consumers |
not in Bill |
|
|
| (b) amend Bill post-1997 regulation |
not in Bill |
|
|
| (c) timing of float |
facilitation (Divisions 4 and 5 of proposed new Part
2 of the Telstra Act); |
proposed new Part 2 |
|
| |
costsobligationspayment - debtreimbursementexempts
tax/stamp duty |
New section 8ALNew section 8AMNew section 8AONew section
8ASNew section 8AK |
|
| |
Financial Impact Statement
$1 billion from the partial sale to be transferred to the Natural
Heritage Trust
|
Refer Table 2.2 |
Amendments not expected to have significant impact
on Commonwealth finances |
| (d) splitting of Bill |
not in Bill |
|
|
| (e) public sector savings |
payment - debt |
New section 8AO |
|
| (f) accountability |
keep Ministers informed, Corporate Plan (Division 3
of proposed new Part 2 of Telstra Act) |
Proposed new Part 2 |
|
| (g) joint ventures |
negotiation of joint venture is in Bill |
|
|
| (h) USO |
proposed new Part 2B of Telstra Act; untimed local
calls - Items 9,10 and 19 |
proposed new Part 2B |
Amendments at Items 9,10 and 19 of the Schedule to
the Bill |
| (i) access, public interest, USO |
customer service guarantee - new scheme at Items 6-8,11,12
and 14 of the Schedule |
|
Amendments at Items 6-8, 11,12 and 14 of the Schedule
to the Bill |
| (j) Commonwealth/ State/ local
government
|
not in Bill |
|
|
| (k) duplication infrastructure |
not in Bill |
|
|
| (l) employment and economic activity |
not Bill directly |
|
|
| (m) foreign investment |
ownership limits (Divisions 4-7 of proposed new Part
2A of the Telstra Act) |
Proposed new Part 2A |
|
| (n) future development. |
Not in Bill |
|
|
2.2 The Bill as summarised in the Senate Regulations and Ordinances
Committee's Alert Digest, proposes to amend the Telstra Corporation
Act 1991 (the Telstra Act) to:
- enable and facilitate the sale of up to one-third of the Commonwealth's
equity in Telstra, while requiring the Commonwealth to retain the
remaining two-thirds;
- require Telstra to keep the Minister and the Minister for Finance
informed of its operations, to notify the Minister of significant
proposals and to provide to the Minister a Corporate Plan;
- set ownership limits in relation to the one-third equity in Telstra
which can be held by other persons than the Commonwealth;
- ensure Telstra's head office, base of operations and incorporation
remain in Australia and that its chairperson and majority of directors
are Australian citizens;
- enable remedial action to be taken where there has been a contravention
of the foreign ownership limits; and
- reaffirm that the transfer of part of the Commonwealth's equity
in Telstra will not affect the Universal Service Obligations; and
the Telecommunications Act 1991 (the Telecommunications Act)
to:
- extend the statutory obligation on general telecommunications carriers
to provide the option of untimed local calls to all customers in local
call areas;
- introduce a new scheme for a customer service guarantee; and
- extend AUSTEL's functions of developing indicative performance standards
about quality of goods and services and reporting annually on carrier
performance against those standards.
2.3 The Bill contains two 'inducements for passage':
(a) It contains a Customer Service Guarantee, which the Committee considers
so important that it should be provided quite independently of the sale
of Telstra. This issue is fully explored in Chapter
6.
(b) Secondly, the Bill is linked to the Natural Heritage Trust of Australia
Bill 1996, which is described in Table 2.2 and is considered in detail
in Chapter 4. Again, the Committee considers
that the need to fund environmental protection is so great that it should
be funded not from asset sales but from recurrent expenditure.
2.4 The Telstra Bill [1] is only a
small part of a complex, little understood and interconnecting maze of
telecommunications legislation operating in a hierarchy of Acts, Regulations,
Codes and compliances. The proposed partial privatisation of Telstra introduces
a further complicating element into this legislative policy jigsaw which
has the potential to distort the process of telecommunications policy
development. The Committee found that while expert witnesses had a good
grasp of the legal situation, the community at large frequently confused
customer service guarantees with the universal service obligation in the
Bill. Another area of confusion was the link between environmental protection
and telecommunications legislation, discussed in Chapter 7.
Table 2.2 Environmental legislation relevant
to the Telstra Corporation
| Natural Heritage Trust Fund Bill 1996 |
| Introduced into the Senate by the Australian Democrats
on 21 May 1996, to provide for a proportion of Telstra's profits
to directly fund the environment programs of the Government and
the remainder to continue to fund other portfolio expenditure.
Currently sitting on the Senate Notice Paper
|
| Natural Heritage Trust of Australia Bill 1996
|
| Introduced into the House of Representatives by the
Government.on 19 June 1996. Of the $1 billion proceeds from the
partial sale of Telstra, $700 m is to be spent on the environment
over 5 years. By the year 2001, $300 m remains and between $10-18
m pa (interest after inflation) will be spent on the environment
The Bill was referred to the Senate Environment, Recreation,
Communications and the Arts Legislation Committee on 25 June 1995
by the Senate on the recommendation of the Selection of Bills
Committee for report on 22 August 1996, which was extended to
19 September 1996.
|
Amendment of the Bill
2.5 Clauses (b) and (d) of the Committee's terms of reference relate
to the form in which the Bill should be proceeded with, if it is to be
proceeded with at all. In the absence of detail of the post-1997 arrangements,
the question addressed in paragraph (b) of the terms of reference –
whether the Bill might need to be amended to fully accommodate those arrangements
– cannot be determined. The Committee believes, however, that aspects
of the Bill which might be materially affected by the post-1997 arrangements
not be proceeded with until those arrangements are in place. The Committee
notes that those issues materially affect the proposed partial privatisation
of Telstra and could have a significant effect on its value (refer Chapter
4).
Splitting the Bill
2.6 The Bill proposes amendments to two principal Acts. The amendments
to the Telstra Act concern the proposed partial privatisation of Telstra,
while the amendments to the Telecommunications Act seek to enhance consumer
protection through the introduction of a Customer Service Guarantee.
2.7 The linkage between the two parts of the Bill is one of perception,
demonstrating:
... the government's desire to ensure that the increasing commercial
focus of Telstra will not compromise the quality or price of telephone
service available to customers. Those safeguards are contained in the
same piece of legislation that gives greater commercial freedom to the
operation of a company so that they are integrally linked. [2]
2.8 Evidence before the Committee indicated that the consumer safeguards
proposed in the Bill (amendments to the Telecommunications Act) and
those foreshadowed as part of the post-1997 regulatory regime –
although they would have an impact upon the decision whether to proceed
to privatisation, certainty in the valuation of Telstra etc. –
were intended to operate regardless of the ownership structure:
The consumer safeguards .... are, in fact, contained in the Telecommunications
Act and apply regardless of whether Telstra is 100
per cent government owned or partially privatised. [3]
2.9 Many submissions before the Committee were either non-committal
on, or opposed to, the privatisation aspects of the Bill, but strongly
in favour of the passage of the consumer safeguard aspects:
Given the circumstances and the timing that we face today, we
would certainly encourage the Committee ... to attempt to separate the
issues of the open competition post-1997 processes from the privatisation
processes, particularly because we have the strong view that the post-1997
processes should not be delayed ... we are of the strong view that the
open competition post-1997 arrangements are paramount … it is reasonable
to split [the Bill] … many people in the industry would have an
unequivocal commitment to the service guarantee in a multi-carrier environment
and would want to see that in place. [4]
2.10 For these reasons, the Committee found that it would be appropriate
to deal separately with the issues of privatisation and consumer safeguards
as they appear in the Bill.
2.11 On 9 June 1995, the Senate, for the first time, used procedures
provided for in its standing orders to divide a bill. The division of
a bill is not different in principle from the amendment of a bill and
can be effected in Committee of the Whole upon the instruction of the
Senate. [5] The process in this case
would involve the extraction from the Bill before the committee of the
amendments of the Telecommunications Act and their inclusion in a separate
bill, with the addition of appropriate enacting words, titles and commencement
provisions.
| RECOMMENDATION 2:
The Committee recommends that the Telstra (Dilution of Public Ownership)
Bill 1996 be split into two bills; one concerning the proposed sale;
the other concerning the Customer Service Guarantee. |
2.12 The detail of the post-1997 arrangements has not yet been finalised.
[6] At present, there are a number of
new telecommunications bills, awaiting introduction to the Senate in the
Spring sitting (Table 2.3). The Government's
Statements of Reasons are provided at Appendix 3 and additional legal
advice at Appendix 4. There are also a large number of current reviews
of legislative arrangements in the form of working groups and forums.
A summary of these is provided at Table 2.4.
The Committee noted, however, that the Government's own review of the
Universal Service Obligation, which would shape the form of the post-1997
arrangements, would not report until November 1996. [7]
Table 2.3 Communications Legislation proposed for
introduction and passage in the 1996 Spring Sittings. (Further details
are included at Appendix 3).
| Australian Communications Authority Bill |
- provide for the merger of AUSTEL and the SMA from 1 July 1997
|
| Radiocommunications Amendment Bill |
- bring forward price based allocation processes to enable the
sale of encumbered spectrum
|
Radiocommunications (Transmitter Licence Tax) Amendment
Bill
Radiocommunications (Receiver Licence Tax) Amendment Bill |
- make consequential amendments to the Radiocommunications
(Transmitter Licence Tax) Act 1983 and the Radiocommunications
(Receiver Licence Tax) Act 1983 as a result of the AUSTEL
and Spectrum Management Agency (SMA) merger
|
Telecommunications Bill
Telecommunications (Transitional Provisions and Consequential
Amendments) Bill
Trade Practices Amendment (Telecommunications) Bill †
|
- rewrite the Telecommunications Act 1991 to implement
government reforms to the regulation of the telecommunications
carriers and service providers
|
- amend the Trade Practices Act 1974 to provide for the
access to telecommunications services and infrastructure and
provide special rules to control anti-competitive conduct by
telecommunications carriers and service providers
|
- introduce transitional provisions arising from the Telecommunications
Bill and merger of AUSTEL and the SMA and make consequential
amendments to other Acts
|
Telecommunications (Universal Services Levy) Bill
Telecommunications (Carrier Licence Charges) Bill
Telecommunications (Numbering Charges) Bill |
- impose a levy in connection with ensuring that standard telecommunications
services and payphones are reasonably accessible to all people
in Australia
- rewrite the Telecommunications (Numbering Fees) Act 1991
consequential on the enactment of the Telecommunications
Act 1996
|
† The Committee understands that these three Bills may not be
introduced concurrently
Legislating the post-1997 regulatory arrangements
2.13 2.14 Open competition in the provision of telecommunications services
will commence on 1 July 1997, to replace the limited competition introduced
into the industry since 1992. The Government, in its discussion paper
published in May 1996, foreshadowed certain regulatory arrangements to
accompany the opening up of the industry. [12]
The proposed scope and effect of these arrangements ('the post-1997 arrangements')
are discussed in Chapter 8 and throughout the rest
of this Report. This chapter is concerned with the time frame for legislating
those arrangements.
2.15 The Committee noted that, according to the procedural orders of
the Senate, a bill introduced in the Parliament in the 1996 Spring Sittings
would not be automatically available for consideration by the Senate until
the subsequent sitting period in early 1997. [13]
In those circumstances the Bill would be unlikely to be passed until only
a short time before the Government intended it to take effect, if indeed
it were passed by the Senate.
Table 2.4. Regulatory arrangements for telecommunications
currently under consideration
| Arrangement |
Reporting date |
| Post-1997 discussion forum |
May 1996 [8] |
| Advisory group established by the Minister |
Spring 1996 [9] |
| "standard telephone service" post-1997
review group |
29 November 1996 [10] |
| draft Telecommunications National Code |
submissions by 2 August 1996 |
| draft Land Access Code |
submissions by 2 August 1996 |
| Networking Industry Interworking Forum |
ongoing [11] |
Timing of telecommunications legislation
2.16 The Government's preferred position in terms of timing involves
the passage of the privatisation legislation (the Bill) prior to the detail
of the post-1997 arrangements being available, with the expectation that
the legislation proposing those arrangements would be passed prior to
the finalisation of the privatisation process. [14]
2.17 In response to a question from the Committee as to whether the
post-1997 regulatory arrangements should be passed by the Parliament
prior to the passage of the Telstra Bill, Mr Stevens, Secretary of the
Department of Communications and the Arts, commented
... I think what we are saying is that, prior to actually selling
any shares in Telstra, that legislation should be available for potential
investors. Indeed, I think it is necessary that they have that information.
The Committee considers that legislation should not only be 'available'
but that it should have passed into law, and been operative for a considerable
period of time before any consideration be given to selling any part
of Telstra.
2.18 The issue of privatising Telstra without passing through the Parliament
was considered by the Committee. In late May 1996, it was revealed in
the press that the Government had received advice from the Attorney-General's
Department soon after the March election on a scheme to bypass Parliament
to sell Telstra. The Prime Minister and the Minister for Communications
both defended the exploration of alternative means of privatising Telstra.
[15] Telstra's assets and licences
would be transferred to a joint venture company comprising the Commonwealth
Government and Telstra. These could then be sold without breaching the
Telstra Act or requiring the authority of Parliament. [16]
2.19 The Committee is unable to comment further on the legal merits
of privatising Telstra by 'non-legislative' means as it did not receive
detailed evidence of any such proposal. The Committee considers that
while it may be possible to privatise Telstra by the 'non legislative'
route, this path should not be pursued further as it would subvert the
Parliamentary process.
Footnotes
[1] Senate Standing Committee for the Scrutiny
of Bills, Telstra (Dilution of Public Ownership) Bill 1996 Alert Digest.
No. 1 of 1996, 22 May 1996, pp.50-51.
[2] Mr N. Stevens, Secretary, Department
of Communications and the Arts, Official Hansard Report, 25
June 1996, p.51.
[3] Mr N. Stevens, Secretary, Department of
Communications and the Arts, Official Hansard Report, 25 June
1996, p.22.
[4] Mr A. Horsley, Managing Director, Australian
Telecommunications Users Group, Official Hansard Report, 12 July
1996, p.445 and p.456.
[5] Senate Procedural Information Bulletin
No. 97, dated 13 June 1995.
[6] Mr A. Shaw, Acting Deputy Secretary, Department
of Communications and the Arts, Official Hansard Report, 25 June
1996, p.32 and Mr G. Ward, Group Director, Regulatory and External Affairs,
Telstra, Official Hansard Report, 3 July 1996, p.130.
[7] Senator C. Schacht, Official Hansard
Report, 26 July 1996, p.768.
[8] Post 1997 Telecommunications Legislation,
16 May 1996
[9] Department of Communications and the Arts,
Submission No.131A, Vol not printed, p.28
[10] Department of Communications and the
Arts, Submission No.131A, Vol not printed, p.26
[11] Official Hansard Report, 12 July
1996, p. 449.
[12] Senator the Hon. Richard Alston, Minister
for Communications and the Arts, Post 1997 Telecommunications Legislation,
Discussion Paper, Telecommunications Working Forum, Sydney, 16 May 1996.
[13] Senator C. Schacht, Official Hansard
Report, 26 July 1996, p.767.
[14] Mr A. Shaw, Acting Deputy Secretary,
Department of Communications and the Arts, Official Hansard Report,
25 June 1996, p.38, and Mr N. Stevens, Secretary, p.39.
[15] The Hon. J. Howard, Prime Minister,
Official Hansard Report, House of Representatives, 27 May 1996.
[16] N. Savva, 'Government warned of lower
return from sale of Telstra', The Age, 28 May 1996.