Consideration of the Telstra (Dilution of Public Ownership) Bill 1996



Telstra (Dilution of Public Ownership) Bill 1996

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


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:

the Telecommunications Act 1991 (the Telecommunications Act) to:

2.3 The Bill contains two 'inducements for passage':

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:

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:

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:

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.


Other telecommunications regulatory arrangements

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
Radiocommunications Amendment Bill
Radiocommunications (Transmitter Licence Tax) Amendment Bill
Radiocommunications (Receiver Licence Tax) Amendment Bill
Telecommunications Bill
Telecommunications (Transitional Provisions and Consequential Amendments) Bill
Trade Practices Amendment (Telecommunications) Bill †
Telecommunications (Universal Services Levy) Bill
Telecommunications (Carrier Licence Charges) Bill
Telecommunications (Numbering Charges) Bill

† 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

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.


Privatisation of Telstra by the 'non legislative' route

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.



[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.