Minority report of ALP Senators
CHAPTER 1 - OVERVIEW AND RECOMMENDATIONS
This is the third time in as many years that the Senate has
considered a proposal by the Coalition Government to privatise part or all of
This most recent attempt is the culmination of a tawdry
process of political deception and sleight of hand by the Coalition Government.
Despite the creation of a perception by the Ministers for
Communications and Finance on 22 July 1998 that the Government would, in the
first instance, seek to sell no more than 49% of Telstra, the Government has
introduced legislation that, if passed, will authorise the sale of 100% of
Telstra without further reference to the Parliament, and without Parliament
being aware of the criteria for the sale beyond 49%.
This is in spite of numerous pleas from its own backbench
and from rural, regional and remote constituents all over Australia, fearful of
a voracious private monopolistic Telstra.
The Opposition members of the Committee remain strongly
opposed to the sale of any further portion of Telstra.
Opposition Senators condemn the Coalition Government for its
crude attempt to dupe the public and its own backbench and bypass the authority
of the Parliament by instituting a sham inquiry as the trigger for the disposal
of the Government's controlling equity in Telstra.
Opposition Senators do not believe it is appropriate to hold
for ransom reform of the regulatory environment for telecommunications. The
case for reform of aspects of the current regime is a compelling one and
legislation to effect change in this area should be considered in advance of
and independently of any proposal to sell more of Telstra.
Opposition Senators believe that a strong case has been made
for a closer examination of the proposed amendments to the current
pro-competitive regime. Evidence received by the Committee has indicated that
the proposed legislation does not go far enough towards addressing some of the
inadequacies of the existing framework, in particular the problems caused by
Opposition Senators welcome the move to enshrine in
legislation consumer protection measures and guarantees of service standards
but warn that in the absence of a more effective Government information and
awareness campaign and more effective monitoring by the relevant authorities,
consumers will continue to suffer the inconvenience of sub-standard service.
Opposition Senators recommend:
the Government not proceed with the Telstra (Transition to Full Private
Ownership) Bill 1998
the Government urgently pursue a comprehensive public review of the competitive
regime and make further amendments to the regime where appropriate.
the Telecommunications (Consumer Protection and Service Standards) Bill 1998 be amended to ensure that in the event of a delay in the provision of service
due to a network fault, the carrier responsible for the fault, not the carriage
service provider, be required to compensate effected consumers.
the Government pursue further the notion of competitive tendering of the
Universal Service Obligation on a regional basis, so long as it is understood
that Telstra will remain as the National Universal Service Provider.
CHAPTER 2 - FURTHER SALE
Opposition Senators continue to strongly oppose the sale of
any further shares in Telstra for all the reasons outlined in the Majority
Report of the September 1996 Senate Environment, Recreation, Communications and
the Arts References Committee inquiry into the proposed sale of the first third
of Telstra and the Opposition Senators' Minority Report of the May 1998 Senate
Environment, Recreation, Communications and the Arts Legislation Committee
inquiry into the first Telstra (Transition to Full Private Ownership) Bill
No new evidence has been presented, by the Government or any
witness to this inquiry, to justify any further sale of Government shares in
Rationale for Continuing Opposition to Telstra
Labor's reasons for stridently opposing any further sale of
shares in Telstra are summarised in brief terms as follows:
- Since the sale of the first one third of Telstra, service levels
in the less profitable areas of Australia have declined. By keeping Telstra,
Australia's dominant service provider, in public hands the Federal Government
will retain the right to direct Telstra to ensure that adequate service levels
and access to up-to-date technology are delivered to all Australians,
particularly in rural, regional and remote Australia.
- The money that Telstra generates each year and pays to the
Government directly benefits taxpayers. As the level of Government ownership in
Telstra decreases, so does the dividend to Government at the end of each
financial year. By keeping Telstra in public hands the Federal Government will
continue to receive these funds, funds which will grow each year into the future.
- 35% of the profits of a fully privatised Telstra will go off
- Investment in and maintenance of Australia's national
telecommunications infrastructure will decline as more of Telstra is sold.
Australia's telecommunications infrastructure is too crucial an element of the
economic, industrial and social framework of the nation to allow any further
dilution of government ownership and control.
- Levels of investment by Telstra in research and development for
the public good have already begun to decline. Instead of selling Telstra, the
Government should be ensuring that Telstra continues to invest time, resources
and expertise in the innovations and technical infrastructure necessary to take
Australian industry into the new millenium.
- Privatisation gives rise to an environment where the emphasis is
on reducing staff and staffing costs - this means less workers, and degraded
workplace conditions for those lucky enough to keep their jobs. Telstra has
shed nearly 25% of its total workforce in less than two years with further job
cuts scheduled for both the current and subsequent financial years.
As more and more of Telstra is sold, the pressures on the
Telstra Board to make decisions based solely on economic and logistic
imperatives, will increase. Profit for shareholders will become the primary and
eventually, under a fully privatised Telstra, the only concern.
Bitter experience, since the sale of the first third, has
shown that as more of Telstra is sold:
- Service levels will decline, particularly in rural and regional areas;
- Investment in research and development for the national good will cease;
- Levels of foreign ownership will increase - with more of Telstra's
profits going overseas;
- More jobs will be lost in regional Australia;
- Investment in and maintenance of the telecommunications infrastructure
in rural and regional areas will decrease;
- Any notion that Telstra has a social (and not just a legislative)
obligation to provide services to the sick, the disabled, the elderly and the
isolated in the Australian community, will vanish completely.
Reforms Held to Ransom
Opposition Senators are strongly of the view that the
Government's proposal to further privatise Telstra is completely irrelevant to
the issue of the adequacy of the regulatory regime for telecommunications. The Telstra
(Transition to Full Private Ownership) Bill 1998 should be considered
entirely independently of legislation relating to any proposed reform of
existing consumer and competition provisions.
There was considerable support for this view in evidence
presented at the public hearing by witnesses to this inquiry:
We are concerned about going any further down
that track (further privatisation) while we are still in a period of
uncertainty about how that regulatory regime might operate and, fundamentally,
how the further privatisation of Telstra and the demands of the shareholders
will match with the overall social objectives which are stated and set out in
the Telecommunications Act 1997.
The problem is that, if you release the shackle
from Telstra before you have actually achieved the goal of full competition,
you actually put at risk achieving competition and all the other objectives
that are set out in the (Telecommunications) Act.
The Charter Council concludes that it is not yet
'safe' to relinquish government control over Telstra through its majority
shareholding. Given the inadequacy of the current regulatory framework, and the
history of Telstra's unwillingness to comply with the spirit of privacy
principles, the Committee should recommend that the Sale Bill not proceed.
Ideally, the accompanying legislation strengthening the ACA and the Minister's
power should proceed independently.
That is our fundamental message: while it is in
public ownership governments of any calibre or any colour will be making sure
that the country constituency and all those other disadvantaged areas get a
The WA Government has no objection to the
partial sale of the next part of Telstra but is very keen to see consumer
safeguards in place and actually proven to be working before the sale.
Proposed Sham Inquiry
Irrespective of their attitude to the question of the
further privatisation of Telstra, witnesses before the Committee almost
universally condemned the Government's model for an inquiry into the service
levels of Telstra.
Witnesses variously criticised the extraordinarily short
timeframe of six months, the proposal to conduct the inquiry in secret, the
fact that the public were not being asked to make submissions to the inquiry,
the fact that the terms of reference for the inquiry had not been released
prior to consideration of the legislation by the Senate, the fact that those
terms of reference would ultimately be set by regulation not legislation
despite an ironclad commitment to the contrary by Government ministers, and
finally that the inquiry would examine only Telstra's service levels, not the
behaviour of Telstra vis-à-vis its competitors.
We view with alarm the apparent reneging on the
Government's commitment to ensuring there would be a public process in which
there would be public access to information and the opportunity for the public
to participate. As we have said in our submission, it appears to us that,
despite the fact that there will be a review, that can be conducted in secret.
There is no obligation on the minister to reveal the results of the review or,
indeed, if the review makes a recommendation, there is no obligation on the
Minister to follow the recommendation.
The period of six months is short in the context
of a decision whose impacts will be felt for generations. With Telstra
management publicly and vigorously committed to full privatisation, it is hard
to imagine that the company will not be able to muster the energy to jump the
immediate hurdle presented to it.
The six months mooted in the Bill as a period
under which a measured service performance would be a criterion for the
government relinquishing majority ownership would not be acceptable. A period
of twelve months is considered an absolute minimum.
I think the Government should have confidence
that past experience of an open consultative process has been very successful.
Therefore it seems to us very inappropriate to do it that way (in private).
Senator Allison: Can I ask you
then about the inquiry that is proposed prior to full privatisation. Is it your
view that that ought to include some criteria for what is happening in the bush
in terms of current services and new services? Should that be a public inquiry?
Would you wish to make a submission to it? And would you expect to see the
report at the end of the process?
Dr Wendy Craik: Yes, yes, yes and
Cable & Wireless Optus believes that any
independent inquiry ordered before a further sell down to remove Government
ownership should also involve an investigation of the health of competition in
the telecommunications market.
The "Social Bonus"
According to the provisions of the Telstra (Transition to
Full Private Ownership) Bill 1998, $671 million of the total funds derived
from the further sale of Telstra will be set aside in the form of a
"social bonus" and allocated to various initiatives, principally for
the benefit of residents of rural and regional areas.
The Department of Finance and Administration gave evidence
to this inquiry that the current value of the Commonwealth's remaining shares
in Telstra is $55.4 billion.
According to the Explanatory Memorandum to the Telstra (Transition to Full
Private Ownership) Bill 1998, fees for the sale of these shares are
expected to amount to between 1.5 and 2 per cent of sale proceeds. On this
basis, the Government will pay bankers and lawyers between $800 million and
$1.1 billion for the sale.
So, while the bankers and lawyers collect in excess of $1
billion, the people of rural and regional Australia stand to reap just $671
million in compensation for the sale of the remaining two thirds of Telstra.
Opposition Senators condemn the Government its pitiful
attempt at bribery. The residents of rural and regional Australia, far from
feeling placated by additional funding, should feel outraged that their
telecommunications needs are worth less than the services supplied by the
myriad of bankers and lawyers fortunate enough to be aboard the Telstra sale
recommend that the Government not proceed with the Telstra (Transition to
Full Private Ownership) Bill 1998.
CHAPTER 3: THE COMPETITION REGIME
The current pro-competitive regulatory framework for
telecommunications is still in its infancy. Nonetheless it is possible, even at
this early juncture, to identify failings in the regime's operation.
That we do not have a fully operative competitive
environment in telecommunications in Australia is clear from the evidence, not
only of industry participants but consumer and community organisations, who
consistently claim that Australian consumers, particularly those in regional
and rural Australia, are paying substantially more for telecommunications
services than consumers in other countries and getting poorer service.
As was the case in the last Senate inquiry into a Government
proposal to privatise Telstra, a number of witnesses have alleged that the
regulatory scheme, even with the passage into law of the legislation currently
before this Committee, is inadequate to prevent Telstra from using its market
dominance for anti-competitive purposes.
The main cause of Australia's lack of
international competitiveness is Telstra's bottleneck control over the local
network. As the Industry Commission, the Hilmer Committee and Professor Henry
Ergas have recognised, Telstra is able to impose price and non-price terms on
access on its competitors which limit their ability to compete against
Telstra's retail arm.
The danger for non-Telstra telecommunications
service providers, particularly new entrants without a critical mass of capital
or customers, is that the dominant player uses its position to directly or
indirectly flout the rules in order to damage its competitors.
Opposition Senators welcome, as do most in the industry, the
recent draft decisions of the ACCC with respect to interconnection charges and
access to Telstra's local call network and the issuing and pursuit to the
Federal Court by the ACCC of competition notices against Telstra in regard to "customer
These actions represent important steps in the right
direction, but much relies on cooperation by Telstra for any practical effect.
In evidence, Telstra has demonstrated an unwillingness to
submit passively to the authority of the Regulator.
We do not believe, particularly with the
modified processes that we have put in place, that we are in contravention of
the Trade Practices Act. The ACCC clearly has another view.
The Witnesses' view of the Telecommunications Amendment
It is perhaps telling that, of all of the witnesses to this
inquiry, Telstra was the only one to criticise attempts in the proposed
legislation to improve or modify the current regulatory framework.
Telstra continues to have concerns with the
measures proposed by the Government for amendment to the Trade Practices Act -
specifically, increasing the powers of the ACCC to enable it to order
disclosure of Telstra's costs to its competitors. Telstra considers this is
harmful to competition, because it would enable competitors to price Telstra's
costs, rather than their own, which is at odds with the primary aim of the
access regime which is to promote the long term interest of end users.
This provision in the Bill is justified by the Department of
Communications Information Technology and the Arts:
These amendments will make a wider range of
information available to industry participants, particularly cost data, thus
enabling more informed access negotiations and scrutiny pricing and other
practices of competitors.
None of the other carriers expressed any objection to the
provisions contained in either the Telecommunications Legislation Amendment
Bill or the Telecommunications (Consumer Protection and Service
Standards) Bill, but all, bar one, were of the view that a number of
additional measures were warranted in order to counteract what they maintain is
a market monopoly or market dominance by Telstra.
We support the measures that are contained in
the Telecommunications Legislation Amendment Bill, which relates to the opening
up of competition. We advocate a number of other things.
So I guess overall, we would be supporting the
thrust of the legislation. However, we see there is significant opportunity for
finetuning to make the competitive framework actually work.
AAPT, Cable & Wireless Optus and Macquarie Corporate all
expressed support in their submissions and at the public hearings for the
notion of "ring fencing" Telstra's corporate entities requiring them
to deal with one another at arm's length.
The rationale for this proposal was expressed by Mr Grant of
AAPT to be as follows:
The primary need for ring fencing arises from
the fact that Telstra is an incumbent-forming monopolist. It is a vertically
integrated operator so it provides the access and all the retail and wholesale
services and it is also horizontally integrated in that it provides the full
range of services at the retail level. Now a fundamental regulatory problem is
how to stop a vertically integrated operator providing preferential treatment
to itself as opposed to its competitors, and how to stop a horizontally
integrated operator cross-subsidising profits from areas that are not subject
to competition... to those services that are subject to competition.
Opposition Senators note the recent draft determinations of
the ACCC with regard to Telstra's access prices and access to the local call
network. These decisions represent important advances in respect of ensuring
existing barriers to competition are torn down.
Ring fencing is an artificial commercial device and
Opposition Senators are not persuaded that currently, at this early stage in
the development of the competitive environment, such a measure is warranted.
Telstra's competitors have all expressed concern with delay
- that is the time taken by the ACCC to take action in respect of alleged
anti-competitive conduct or to finally effect competitive changes. They refer
variously to Telstra's anti-competitive and persistent monopolistic behaviour,
timidity on behalf of the ACCC to act speedily for fear of legal challenge, and
the infancy and inadequacies of the regime as possible reasons for such delay.
At the moment that is possibly the major
criticism if you like of the legislation over the last 18 months or so - that
there are a number of major issues which have taken far too long to be resolved
and there are a number of major issues that will take far too long to be
resolved in the future.
We are looking at a situation where a
competition notice investigation will continue for periods of three or six
months - perhaps even longer. This is simply an unacceptable period of time for
the industry to be able to withstand anti-competitive conduct, if that conduct
is subsequently held to be so.
Mr Horsley of the Australian Telecommunications Users Group
expressed a similar concern:
I think most of us are of the view that delays
have been too great and that, in fact, delays have become somewhat of a disease
in the industry.
The ACCC, in giving evidence at the Committee, seemed to
accept that the concern with delay was valid, but it nonetheless defended its
own conduct in this regard:
I would certainly say that we have been
disappointed and concerned about the length of time it has taken to deal with
some of the anti-competitive issues that confront us. The reason for that is
not any lack of expedition on our part but essentially just the processes that
we have to go through. The basic point about the processes that we have to go
through is that we have to be affirmatively satisfied, in the same way as a
court would be, that we have a breach of the Act.
"Cease and Desist" orders
A number of witnesses to the inquiry addressed this issue by
advocating amendments to Part XIB of the Trade Practices Act 1974. The
most substantive of these purports to enable the ACCC to impose an interim
"cease and desist" order on a carrier or carriage service provider
who is the subject of an investigation into anti-competitive conduct commenced
under that Part.
Mr Alasdair Grant of AAPT made the case for a "cease
and desist" power on the grounds that in order for the Regulator to be
effective it needed a power to stop suspected breaches of anti-competitive
The primary policy objective of Part XIB is to
act as a deterrent. It is to require a party to cease engaging in
anti-competitive conduct. The ACCC's commercial churn competition notice, or
set of notices... took 14 months for the ACCC to get to the point of issuance.
Now that Telstra has decided to challenge those, it will be at least a year, we
believe, before the issue will be finally resolved.
It is quite clear that if the competition notice
regime is working so that judicial enforcement of all those decisions is
required, then it clearly cannot meet its objectives... So we feel that Part XIB
needs to be beefed up so the deterrent effect of the competition notice is
Mr Shogren appears to have some sympathy with this argument
when he says that:
the basic point about the processes that we have
to go through is that we have to be affirmatively satisfied, in the same way as
a court would be, that we have a breach of the Act.
He then goes on to say:
The sorts of things we look at in
telecommunications tend to be like section 46 misuse of market power cases.
They tend to be big and difficult issues where we have to go through complex
processes of defining the market, deciding where the market power is, whether
it is being abused and whether there is a substantial lessening of competition.
You just cannot do that quickly - not if you want to do it properly.
We believe that proposals that are currently on
the table very much err on the side of discouraging and potentially dooming
Both Telstra and the Department expressed the view in
evidence that an attempt to empower the ACCC to issue an interim cease and
desist order would be in breach of the constitutional doctrine of separation of
powers and therefore unconstitutional.
The ACCC's view of the adequacy of the current regime
Opposition Senators note the statement of Mr Shogren from
the ACCC that "by and large we think the legislation is working
satisfactorily" and that "overall we think the legislative
framework is adequate to the job."
But we also note Mr Shogren's reluctance to canvas ways in
which the legislative framework could be improved:
We are not in the policy advising business or
the legislative change business. We deal with the legislation we have and we
administer it as efficiently as we can.
Evidence from Mr Cameron, Acting General Manager,
Telecommunications Competition and Consumer Branch, of the Department of
Communications Information Technology and the Arts, that Mr Shogren has in fact
raised with the Department certain matters is an indication, however, that the
ACCC, far from viewing the regime as perfect, has some concerns with its
The issues that have been raised by Rod
(Shogren) with the ACCC and the Department are issues that the Minister has
indicated he does want advice on in relation to whether there should be
particular amendments to the provisions of the anti-competitive conduct
provisions of the Trade Practices Act with a view to actually facilitating a
faster operation of those services.
The Department is aware of the comments made by
the industry, and the Minister has indicated that if amendments can be made to
improve or speed up the operation of those provisions then he would give
consideration to those.
Mr Cameron made it clear to the Committee that the Minister
had requested the Department to prepare as a matter of priority a report into
the adequacy of the legislation:
Mr Cameron: The Minister has
indicated that he would hope to make relevant decisions on this as early as
possible this year.
Senator Mark Bishop: Is it regarded
as a matter of priority or urgency?
Mr Cameron: It is certainly an
issue that we would want to deal with as rapidly as possible, yes.
Opposition Senators are sympathetic to the concerns of
Telstra's competitors on the issue of delay in the identification and
determination by the ACCC of anti-competitive conduct by a telecommunications
carrier. The complex processes adopted by ACCC under Part XIB with respect to
an investigation of perceived anti-competitive conduct, render speedy resolution
of any matter nigh on impossible.
Opposition Senators are horrified that the Government has
proceeded with legislation when it had clearly not examined the issues in
proper detail. Evidence given by the Department of Communications Information
Technology and the Arts indicates that the Minister has only recently, almost
three months after the introduction of the legislation into the House of
Representatives, called for advice on the adequacy of the competition regime
and whether any further amendments should be made to it.
It is clear to Opposition Senators that steps must be taken
immediately to lessen delays in the issuance of a competition notice once
evidence of anti-competitive behaviour exists.
Opposition Senators believe that a comprehensive review of
the competition regime and the powers of the ACCC, as the Regulator, must be
urgently conducted prior to the review currently scheduled for July 2000.
recommend that the Government urgently pursue a comprehensive public review of
the competitive regime and make amendments to the regime where appropriate.
CHAPTER 4 - CONSUMER PROTECTION AND SERVICE STANDARDS
The Customer Service Guarantee
A number of witnesses to this inquiry have indicated that in
spite of measures imposing performance standards on telecommunications
carriers, implemented by the Government at the time of its initial one third
sale of Telstra, adequate levels of service are still not being provided to
The National Farmers Federation, the Consumers
Telecommunications Network, the WA Government, the City of Yarra, and the
Communications Electrical and Plumbing Union all gave evidence of poor
performance by Telstra in the provision of service, particularly in rural and
Their concerns have been underscored each and every quarter
since the beginning of 1997 in statistics released by the Australian
Communications Authority (ACA). The ACA monitors carrier performance using
various indicators including the percentage of new services connected on or
before the agreed commitment date, the percentage of faults cleared within one
and two working days and the percentage of payphone faults cleared within one
and two working days.
According to the ACA, Telstra's service levels in the
provision of service to regional, rural and remote Australia hit a record low
in the 1997 December quarter. Quarterly reports since have not indicated much
In its Telecommunications Performance Report for 1997-98,
the ACA expressed its concern at the "apparent decline in service levels
for the provision of telephone services and repair of faults, particularly in
In addition, anecdotal and deductive evidence, indicates
that not all customers are being compensated when they experience unreasonable
delays in connection or fault repair.
The ACA reports that in the first 6 months of the CSG's
operation, Telstra compensated some 52,847 out of a total of 3.25 million
consumers, for delays in service provision. That amounts to less than 2% of
Telstra's customers receiving compensation. The ACA also reports that Telstra,
on average, fails to comply with the CSG in 10-15% of cases, indicating that a
significant number of consumers are missing out.
C&W Optus makes the very valid point that improved
competition will ultimately be the panacea to tardy service:
We believe that measures such as the Customer
Service Guarantee and other consumer safeguards like that are valuable and
useful tools but, at the end of the day, if the penalty that is suffered for
failure to connect the service or provide adequate service is some form of
imposition of financial cost, that will not prove nearly as useful as an
incentive as the risk that a customer can actually take the whole of their
business away from a carrier and go to another competitor.
In the meantime, we see it as incumbent upon the Government
to properly enforce the CSG by promoting consumer awareness of the scheme and
by keeping a closer watch on carriers.
Clarification of the CSG
The object of the Customer Service Guarantee is to ensure
that consumers, who are inconvenienced by slow or sub-quality service, are
In its submission to the inquiry Macquarie Corporate
Telecommunications has identified what it perceives as a significant problem in
the application of the Customer Service Guarantee Standard.
Opposition Senators agree with Macquarie Corporate that the
differential application of the Customer Service Guarantee to carriers and
carriage service providers in the event of a network fault has the potential to
form a significant barrier to fair competition, as consumers may be less
willing to give their custom to a carriage service provider instead of the
network carrier, Telstra.
Competitive Tendering for the USO
There was considerable discussion at the hearings on the
issue of the Universal Service Obligation and whether there was room for more
than one universal service provider. Many of the carriers expressed an interest
in being allowed to bid for the USO on a regional basis:
We are a little bit frustrated that at the
moment Telstra is the only one that is able to supply those services and we
look forward to opportunities to competitively bid for the provision of the USO
in those areas.
We also, like AAPT, are scoping whether
internally we could provide that service. What the engineers have told us and
what we have looked at is we absolutely could provide those services.
This is a franchise that has just been allocated
by Government to Telstra and I endorse what previous speakers have said about
wanting the opportunity to tender for that.
A number of non-carrier witnesses, including the Australian
Telecommunications Users Group, the NFF, the WA Government and the Consumers
Telecommunications Network expressed a wish to look at the notion in more
Yes, we strongly support the concept of
competitive tendering so that one is able to bring to bear the best
technological/service solution to a particular circumstance and be able to
deliver the USO at the best price.
It is our view that what the marketplace needs
to be is open and competitive. Once you get the competition in there, you
tender out the universal service obligation and you have some competition, then
if one carrier is not providing the service another one can.
...there is some competition in the provision of
infrastructure in major cities and maybe a little bit in very large regional
centres, but we would have only perhaps one in Western Australian and for the
vast rest - around 200 towns in Western Australia - there are no incentives for
incumbent carrier to upgrade or extend infrastructure. Perhaps competitive
tendering for the USO might be part of a solution to that.
The Consumers Telecommunications Network expressed a concern
that such a scheme might put service to a particular region at risk:
We have in our earlier submission indicated that
we would have some concerns about the tendering model. It would be fair to say
that concerns the implementation rather than the theory of it, if you know what
I mean. One of the concerns that was expressed about the tendering model was
what happens if the tenderer fails.
Telstra expressed support for competitive tendering of the
USO on a regional basis:
We would welcome competition in the provision of
USO services. We think that if other carriers believe the costs of USOs that we
provide - or indeed they see an opportunity to provide lower cost services - we
would welcome that competition.
Opposition Senators note evidence from the Department of
Communications Information Technology and the Arts that a discussion paper of
this issue is forthcoming from the Australian Communications Authority.
Opposition Senators are in favour of pursuing further the
notion of competitive tendering of the USO on a regional basis.
But we stress that our support for this notion is
conditional upon Telstra remaining the one and only National Universal Service
Provider. In order to ensure that a consistent level of service is available at
all times to the residents of regional, rural and remote Australia, we must and
should retain Telstra as the National Universal Service Provider. We must also
maintain existing levels of Government ownership and control. Service standards
cannot be guaranteed unless the Government retains a power to direct Telstra in
the public interest.
Cost of the USO and Public Disclosure of USO levy cost
Several witnesses to the Inquiry addressed directly the
issue of Telstra's 1997-98 USO levy cost claim. The witnesses, Telstra's
competitors, disputed the amount of the claim and called for amendment to the
USO levy regime.
The recent $1.8 billion USO claim by Telstra has
served to highlight the need to strengthen the legislation in this regard. The
very size of the claim (over seven times the value of claims in previous years)
and the inadequacies and shortcomings in the data provided by Telstra in
support of its claim, have generally highlighted the inadequacies of the
Network Vodafone summarised its concerns with Telstra's claim
in its submission, citing an inadequate sampling base for data, the fact the
wireless local loop and satellite technologies have not been utilised by
Telstra in the delivery of the service, questionable financial parameter values
and an equally questionable calculation of the weighted average cost of
Witnesses to the inquiry almost universally supported the
notion of full public disclosure of information relevant to the formulation of
a USO cost claim. Public disclosure of all data and the basis for calculation
of expenses would, they suggest, assist in determining the voracity of the
...given that the community pay the bill, they are
entitled to know the basis of the calculation.
Senator Mark Bishop: Do you
support Telstra's method of calculation of the USO being out there in the
public domain so that other carriers, members of your organisation and other
interested groups could participate in the debate, to try to have some
objective determination of the true cost of the USO?
Ms Campbell: Certainly. The more
information that is available to the public and the more capacity we have to
participate in this, the better we believe the regulatory regime will be
We all have to pay our share of it (the USO). If
we have to pay our share of it, we should be able to see the bill and get a
decent invoice for us to look over.
It has certainly been the experience overseas -
and we have always pointed to the UK - that a lot of these problems disappeared
when the Regulator said, 'Alright British Telecom, just make your costs
available to your competitors.' If for no other reason than the shame factor -
that they could not have inflated and outrageous costs...
If we were the USO provider and we had put in a
$1.8 billion claim, expecting Telstra to pay a levy of $1.5 billion to us, you
can be sure that Telstra would be at the table here demanding that there be
full disclosure of all our costs for making them pay a levy of $1.5 billion.
Telstra expressed its opposition to the notion of full public
...we do not have any problem with making most of
the information available. However, we are in a competitive environment and
there is certain information that we would not like competitors to have because
it will give them a certain advantage. I have described one of those; that was
the component parts of the weighted average cost of capital.
Opposition Senators are aware that the Australian
Communications Authority is at present analysing and assessing Telstra's USO
claim. Reports released by the ACA in recent weeks bring into question aspects
of Telstra's calculation, in particular the figure allocated to the Weighted
Average Cost of Capital.
Opposition Senators agree with Telstra's competitors and
interested parties that there is far too much secrecy associated with the
calculation of the USO cost.
There is particular validity in the argument that as the
public are ultimately the ones to bear the cost of the claim, information
relating to its calculation should be more readily available upon request.
Opposition Senators welcome the move to consolidate all
existing provisions relating to consumer protection and service standards in
the one Bill.
In respect of the Customer Service Guarantee, Opposition
Senators urge the Government to work harder to promote awareness of the
existence of the Customer Service Guarantee.
With respect to the issue of competitive tendering for the
Universal Service Obligation, Opposition Senators note the evidence of
witnesses that an ACA report on this issue will soon be released. We certainly
agree that this notion is worth examining in more detail.
Opposition Senators share the concerns of numerous witnesses
to this inquiry about the magnitude of Telstra's recent $1.8 billion USO cost
claim, particularly in terms of its ramifications not only for consumers who
ultimately have to bear the cost, but for the viability of competition in the
industry if Telstra's competitors are forced to foot this enormous bill.
Opposition Senators recommend
that the Telecommunications (Consumer Protection and Service Standards) Bill
1998 be amended to ensure that in the event of a delay in the provision of
service due to a network fault, the carrier responsible for the fault, not the
carriage service provider, be required to compensate any effected consumers.
recommend that the Government pursue further the notion of competitive
tendering of the USO on a regional basis, so long as it is understood that
Telstra will remain the National Universal Service Provider.
CHAPTER 5 - CONCLUSION
As in the two previous Senate inquiries into Telstra
privatisation legislation, evidence presented to this inquiry confirms that
there is significant and persistent community concern about any proposed sale
of further shares in Telstra.
In this instance those concerns are magnified by the
none-too-subtle attempt by the Government to by-pass the authority of the
Parliament and sell off 100% of Telstra by way of a sham inquiry.
No new or compelling evidence has been presented by the
Government to justify its ideological obsession with privatising Telstra.
Opposition Senators would welcome an opportunity to debate
the merits of the Telecommunications Legislation Amendment Bill 1998 and
the Telecommunications (Consumer Protection and Service Standards) Bill 1998
independently of the proposal to privatise Telstra. As stated above, the issue
of Telstra's ownership is irrelevant to the effective operation of a
pro-competitive telecommunications regime.
Signed this Day
8th March 1999
Senator Mark Bishop
Senator the Hon Nick Bolkus
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