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Tuesday, 30 March 1999
Page: 4714


Mr STEPHEN SMITH (8:16 PM) —I am happy on behalf of the opposition and as shadow minister for communications to indicate that the opposition supports the legislation before the House. The measure is, I think, fairly summarised, explained and outlined in the second reading speech of the Minister for Communications, Information Technology and the Arts. The Telecommunications Laws Amendment (Universal Service Cap) Bill 1999 proposes to amend the Telecommunications Act 1997 and the Telecommunications (Consumer Protection and Service Standards) Act 1999 on the basis that that legislation is enacted by the parliament.

The legislation will cap the costs that can be claimed for reimbursement for discharging the universal service obligation, the USO, by the national universal service provider, Telstra, for the financial year 1997-98 at a level no higher than $253.32 million. Telstra has lodged a claim of $1.828 billion for the USO cost reimbursement for that financial year, which is about seven times higher than the previous year's claim. The $253.32 million, the proposed cap limit, is the 1996-97 recovered cost plus the CPI.

The Australian Communications Authority is currently assessing the 1997-98 claim by Telstra, and the legislative cap will only come into play as a last resort if Telstra, the industry, the ACA and the government fail to agree on an amount. Telstra's competitors, naturally, oppose the $1.8 billion claim and support utilisation of the cap measure if required. The recovered cost of providing the USO is shared by Telstra's various competitors in accordance with their market share—in other words, the effect of the legislation is to cap the amount Telstra can charge the other carriers for the cost of the 1997-98 financial year.

As well, the ACA has been asked by the government to review the USO cost methodo logy generally in order to address this issue for future years. This report, as I understand it, is not expected prior to July of this year. The bill also provides a last resort cap mechanism for the 1998-99 and 1999-2000 financial years by way of a ministerial decision subject to parliamentary disallowance—an entirely appropriate use of the disallowance mechanism in respect of those decisions if they are required to be utilised.

As I indicated, the opposition supports the legislation. We have done that on the government's timetable. Whilst, from memory, I think is true to say that the government indicated on 12 October—shortly after the last election—its intention to propose capping legislation if necessary, it has taken until last week to bring the legislation into the House. It was brought on this week in what could be regarded as a more speedy time than usual, but none of this has caused us any consternation. I am happy to, in a sense, restrict my remarks to the substance of this legislation on the basis that this is predicated as an interim or a last resort measure.

The cost of the universal service obligation and the public disclosure of the universal levy cost was the subject of some comments in the Labor minority committee report on the Telstra legislation and related legislation which was presented to the Senate recently. I will take this opportunity to quote a couple of extracts from the Labor senators' minority report together with their recommendations. Under the chapter entitled `Cost of the USO and Public Disclosure of USO levy cost data', the report had this to say:

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 amendments to the USO levy regime.

And there is a quote:

The recent $1.8 billion USO claimed 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 current arrangements.

That was a submission by Network Vodafone, one of Telstra's competitors. And, after some discussion, the Labor senators in the minority report go on to say:

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.

The opposition has announced today that, in addition to supporting the capping legislation before the House, it proposes—when the Senate gets around to ultimately considering the Telstra privatisation and related legislation—to move an amendment to the relevant telecommunications legislation to the effect that, in respect of the Australian Communications Authority's calculation of the USO, once Telstra has presented to the ACA the costs of its USO in a financial year, the ACA will then be authorised at its discretion to release that information, such information being in the public interest. The current mechanism is that at the end of each financial year Telstra presents a claim, the Australian Communications Authority assesses that claim and, once it comes to a conclusion as to the amount of the claim, under the legislation the ACA is then authorised to release its deliberations and to release such of the Telstra information presented to it that is not commercial-in-confidence.

There are two deficiencies in that regime in the opposition's view. The first is that the information is released ex post facto—that is, after the ACA's deliberation—and the criteria on which the information can be released is commercial-in-confidence. Given that ultimately the universal service obligation and its cost is in effect a matter of public interest, in the end it is the community that pays, and the opposition's view is that the test for the release of that information should be that which is in the public interest.

The second deficiency is that it seems the most relevant and prescient time for the ACA to have discretion to release that information is prior to its own deliberations and consideration of the Telstra cost. The obvious exercise of a sensible ACA discretion would be to make that information available to Telstra's competitors to enable industry to have their own views made known to the ACA prior to the ACA's deliberations. The opposition believes that is a much more effective and transparent and open cost calculation system. It is proposed to move accordingly if and when the government gets around to listing the Telstra legislation in the Senate. I suppose there may be some healthy or unhealthy delay depending upon your point of view—a bit of space from the New South Wales election, a bit of space from the terrible performance bulletin of Tasmanian service decline we saw from the ACA in recent days, a bit of ho-hum over Easter.

There are a couple of general comments to be made in respect of Telstra's $1.8 billion claim. These are, in a sense, tongue-in-cheek, but we are dealing here with either a monopolist or a dominant market player. In some respects, you can proceed on the basis that that which Telstra says in this regard is presumptively anticompetitive and/or presumptively an ambit claim. That is why there is a need to ensure thorough and exhaustive analysis of the claim.

Secondly, the government has made it clear that, in addition to the ACA considering the 1997-98 claim lodged by Telstra, it wants to have a proper methodology in place on the basis of a review and report by the ACA and subsequently, as I understand it, a review and report by the department to make sure that there is a proper methodology in place which will obviate the need for this type of shock to the industry and legislative cap in future years. I think that is appropriate because, whilst you might be able to mount some sort of argument for a $1.8 million claim on the basis of the capital investment which has gone into the PMG, then Telecom, now the Telstra network over a considerable time, if you actually put your mind to the cost of delivery of the USA using new technology and technology which will become available in the near future, you might find yourself dealing with substantially less amounts.

Another general point that can be made is that this legislation does not predetermine the nature and extent of the universal service obligation. Currently, of course, most members would be aware that the universal service obligation requires, as a matter of course, that people have access to standard telephony service and standard payphone service. Putting that in the vernacular, it is the payphone outside the pub in the local main street and the phone in your home. There is of course a live issue as to whether that realistically ought to be the nature and extent of the USO into the future. The obvious issue here is the provision of digital data service to all of Australia. Again, this is an issue which I am sure will be seized upon by the parliament, potentially in the course of consideration of the Telstra legislation, but also in the course of consideration of the necessary ministerial and no doubt parliamentary legislative deliberations, when we see the various results of the ACA and departmental reports in the next 12 months or so. So it does not predetermine the methodology which the ACA may apply, it does not predetermine what we might regard as the nature and extent of the USO and it does not predetermine a sensible cost of the provision of the USO, bearing in mind new and more readily available technology.

One of the notions which is contained in the majority report of the Telstra Senate committee—and there is also a reference in the minority report—is the notion of competitive tendering. The notion of competitive tendering on a regional basis is something I have expressed general sympathy towards in terms of considering it as an idea. Telstra is the national universal service provider. It is hard to envisage in the short and medium term how Telstra would be overtaken in that role as the national universal service provider. But the act currently makes available the option of competitive tendering, particularly on a regional basis, with the availability of new technology, whether that is terrestrial, whether that is satellite or whether, for example, that is using some of the bandwidth which AAPT has recently purchased across the countryside for a figure, from memory, of about $66.9 million.

There is the prospect in the future that on a regional or a niche basis the implementation of a USO in terms of efficiency, in terms of cost, in terms of availability of the provision of these services to regional Australia, is an area which is well worth exploring so far as the parliament is concerned and so far as the government of the day is concerned. If you go back to the point I made earlier that, tonguein-cheek, you may well regard the $1.8 billion claim from Telstra as being presumptively anticompetitive and presumptively an ambit claim, then at some point in the cycle you might just work out what the true cost of a USO is by throwing some parts of that out into a competitive tendering arrangement. It is not the case that every customer you find in a USO area is necessarily a loss leading customer.

In conclusion, the opposition supports the measures on the basis, as outlined, of last resort and interim measures. I notice that the Minister for the Arts and the Centenary of Federation, who represents the Minister for Communications, the Information Economy and the Arts, is in the chamber. I am not aware whether he or the parliamentary secretary is summing up the debate. If the minister is, he might want to take the opportunity of advising me and the House formally of the current proposed timetable for the various ACA and departmental reviews of the 1997-98 claim and also the more general review so far as future methodology is concerned. I am sure he will do that in the style that we have become accustomed to as we exchange notes across the chamber.

The opposition supports this piece of legislation and we look forward to considering in detail and carefully the USO, its nature, its extent and the calculation of its cost, as these issues come before the government and the parliament in the not too distant future.