Senator EGGLESTON (12:03 PM) —As Chair of the Senate Environment, Communications, IT and the Arts Legislation Committee, which conducted the inquiry into the provisions of the Telstra (Transition to Full Private Ownership) Bill 2003, I believe I can make some pertinent observations about the bill. The committee received 168 submissions and took evidence from 41 groups of witnesses at seven public hearings. Two of those hearings were held in regional centres: Dubbo in New South Wales and Nambour in Queensland. Witnesses from other parts of the country, such as Western Australia, were also heard via teleconference. As we all know, the bill will amend the Telstra Corporation Act 1991 to repeal the provisions that require the Commonwealth to retain 50.1 per cent of its equity in Telstra, thereby enabling the corporation to become fully privately owned.

I would like to make some remarks about the evidence the committee heard. Firstly, there was a common tendency of submitters to the inquiry to link ownership with control and to argue that a fully privatised Telstra would put profits and shareholder value ahead of the interests of consumers, particularly in regional areas of the nation. This ignores the fact that Telstra has been required to operate on a commercial basis since 1991. The argument that you need to own something in order to be able to effectively regulate it is completely fallacious. There is a range of consumer and regulatory safeguards that will be unaltered by this bill and will remain in place regardless of the ownership status of Telstra.

The ability to regulate Telstra in no way depends on its ownership status. The government will continue to be able to regulate a privatised Telstra, and future governments will be able to choose to extend these safeguards. Existing consumer safeguards include the universal service obligation, the customer service guarantee, the National Relay Service, price controls, untimed local calls, priority assistance for people with life-threatening medical conditions, the low-income customer package, the network reliability framework, the digital data service obligation and the Telecommunications Industry Ombudsman. In addition, the government can impose licence conditions on Telstra. Existing regulations need not remain static and future governments can choose to enhance them, such as by expanding the USO to include technological upgrades, which might also include a requirement for the provision of broadband services at particular levels.

It was a matter of concern to the committee that, based on the submissions received, it seemed that the average citizen had a substantial knowledge deficit in relation to the regulatory regime. This has given rise to misunderstandings based on half-truths about the practical effect of the privatisation of the remainder of Telstra. For example, Phyllis Miller, President of the Shires Association of New South Wales, who is opposed to the sale, appeared to be blissfully unaware of the regulatory regime and, in particular, to have no knowledge of the future-proofing proposals. Accordingly, the committee has recommended that the government launch a public awareness program to improve understanding of the current system of regulation of the telecommunications industry and the rights of consumers under this regulatory regime.

Some submitters, while not happy with the level of existing and proposed consumer safeguards, were sceptical about the willingness of governments of any persuasion to effectively regulate what would be the country's largest and, arguably, most powerful privately owned corporation. The committee took the view that the public would not accept substandard telecommunications services and that no government would be prepared to risk losing voter support by failing to enforce regulations, especially as it would no longer have a stake in Telstra's profitability. The committee also noted that there was a tendency by submitters not to recall how things were before the privatisation process began, when Telstra was a fully publicly owned monopoly. I would like to quote the AAPT submission. AAPT said:

There were no consumer safeguards, as exist today—and, I might say, these were introduced by the Howard government—and Telstra seemed only to connect telephones and repair faults when it was good and ready. Now, under the customer service guarantee, customers are compensated if a provider breaches performance standards in relation to the timeliness of new service connections and fault repairs and the keeping of appointments. That speaks for itself, of course, about how things were under the old regime and how they are now under the regulatory regime that the Howard government has enhanced.

The committee noted that among those opposed to the full sale of Telstra there was general satisfaction with the standard telephone service, especially in regional areas. There were no complaints about basic telephone services; people thought their basic telephone services were good. However, technological advances have created an expectation that more sophisticated services will be provided, particularly extended mobile telephone coverage and fast Internet and broadband services.

I point out to senators that this bill includes a number of future-proofing initiatives for regional areas. In accordance with the recommendations of the Estens inquiry, the government has decided to impose a licence condition on Telstra to maintain a local presence in regional, rural and remote Australia, including developing a local presence plan setting out the range of activities and strategies it will undertake to maintain its local presence, and reporting publicly on its achievements against the plan. This licence condition aims to ensure the continuation and future further development of the Telstra Country Wide business model. Telstra has confirmed its ongoing commitment to regional, rural and remote areas and has confirmed that it will continue its Telstra Country Wide business model because it is in its commercial interests to do so. A higher degree of satisfaction with the Telstra Country Wide service was also evident during the inquiry—something the opposition seems to have missed.

The bill also provides for the establishment of a Regional Telecommunications Independent Review Committee to review the services in regional Australia at least every five years. This will help to ensure that consumers in these areas continue to receive the benefits of technological advances. The committee noted concerns that five-yearly reviews were not sufficiently regular, given the quick pace of change in telecommunications technology. Therefore, the committee has recommended, in accordance with the evidence of Mr Dick Estens, that reviews should be undertaken every three years rather than every five. The committee has also recommended that, if a recommendation of the RTIRC is not accepted by the minister, the minister should be required to give reasons for that decision so that consumers are informed of where the government stands on recommendations made by that committee.

A number of telecommunications companies appearing before the inquiry expressed some concern in relation to the state of competition in the telecommunications market and the continuing dominance of Telstra. As well as being subject to the general trade practices regime, Telstra is subject to part XIB and part XIC of the Trade Practices Act. Part XIB allows the ACCC to issue competition notices to carriers engaging in conduct with the purpose or effect of substantially lessening competition. Part XIC facilitates competing carrier access to the networks of other carriers.

In 2001 and 2002 the government amended aspects of the telecommunications-specific competition regime—including in response to a report by the Productivity Commission—to streamline the access regime, provide greater certainty to telecommunications carriers and improve the operation of the anticompetitive conduct regime. This, of course, refers to matters like the interconnect charges, which Telstra charged other telecommunications companies for access to its network. There were a number of problems there, where Telstra was failing to give the other networks certainty about the costs involved in accessing their network, and those amendments a couple of years ago streamlined this process and gave the other carriers a great deal of certainty about the costs involved in accessing the Telstra network.

There is now also accounting separation between the retail and wholesale operations of Telstra, which is important for those interested in examining the competitiveness of the Telstra operation. This accounting separation will make Telstra's costs and its treatment of access seekers more transparent and it was considered particularly important by a number of witnesses, including the National Competition Council, that these steps be taken.

The committee is of the belief that the question of competition regulation is separate from the ownership of Telstra. The government does not need to own Telstra in order to be able to regulate it. Competition regulation is not static and the government has consistently displayed a willingness to improve the regulatory regime. The committee considers that the recent competition reforms that have been made should be given time to take effect before further reforms are considered.

The committee firmly believes that governments should be in the business of governing, not of having a majority interest in a telecommunications company in competition with other private companies. The full privatisation of Telstra will remove the conflict of interest whereby the government is both the regulator of the telecommunications industry and the majority shareholder of the largest player in the industry. The Senate perhaps needs to be reminded that Australia has 89 licensed phone companies, 88 of which do not have an Australian government shareholding but all of which are subject to the same regulatory regime.

This bill provides for maximum flexibility of the sale process, with the object being to maximise returns from the sale. The configuration of the sale will be subject to a scoping study, and the bill leaves open the option of using hybrid securities as a means of enhancing the sale. While Labor has characterised this as an attempt to exclude retail investors—the so-called mum and dad investors—the Department of Finance and Administration confirmed the importance of retail investors in terms of maximising returns by appealing to as broad a range of investors as possible. The hybrid security option will be attractive to institutional investors, I have no doubt, and considering the size of the proposed sale, which is some $30 billion, it is important to make that sale attractive to as wide a range of investors as possible. Hybrid securities will certainly enhance the saleability of the Telstra shares which the government owns, if they do in fact go to the market.

To reiterate, the government does not need to own something in order to be able to regulate it. Arguments that, simply because Telstra will no longer be in public ownership, telecommunications services in regional areas will decline are quite ridiculous. All of the current regulatory safeguards will remain in place under this bill, and it is open for future governments to strengthen or extend these safeguards if necessary. The majority of the committee has made some sound and sensible recommendations and I urge the government to give these recommendations serious consideration.

May I say, as someone who has strong links with regional Australia, that I personally believe that people living in regional Australia should have no fears regarding the full sale of Telstra. It is my belief that the regulatory regime and future-proofing initiatives will ensure that those in regional, remote and rural Australia will continue to have a high standard of telecommunications services in the future and that, in fact, a privatised Telstra, subject to competition from companies like Optus—with its commitment to satellite service delivery to regional Australia—will be forced by competitive pressure to ensure that technological standards are continually improved.