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Thursday, 14 August 2003
Page: 18558


Mr CIOBO (12:22 PM) —I have listened to the so-called `independent' member for Calare's speech to this parliament on the Telstra (Transition to Full Private Ownership) Bill 2003 and it was interesting to hear of the numerous examples that he cited about how Telstra was experiencing service difficulties or how Telstra customers were having difficulties obtaining mobile phone reception or in having handsets repaired. I was intrigued because the member made no mention of the fact that these same problems also existed when Telstra was 100 per cent publicly owned. The litany of examples about how customers were experiencing difficulties makes absolutely no difference whatsoever to service delivery. The fact is that there will always be examples of how people are adversely affected by poorly performing telecommunications equipment. No-one steps into this chamber claiming that a fully privatised Telstra will solve every single example of telecommunications difficulty that exists. No-one stands before anyone in this chamber and claims that a 100 per cent privatised Telstra will no longer pose any problems in terms of mobile phone reception or telephones not working properly. But what we do contend, what those on this side of the chamber put forward, is that a privatised Telstra will not have an impact on service delivery. There are some that would go further, and they would say that it will not have an impact in a negative sense but may very possibly—in fact more than likely—have an impact in a positive sense.

Competition in the telecommunications industry has benefits that flow to all consumers. When Telstra started to become privatised and the first tranche was sold and the second tranche was sold and we opened up the marketplace to competition, consumers benefited extraordinarily. The ease with which we use Telstra services these days in terms of MessageBank, conference calls and call-waiting is not only a consequence of technological innovations; it is also a consequence of adoption of this innovation by Telstra, adoption demanded in the marketplace, adoption that is required if Telstra is going to continue to be an effective supplier in the marketplace, a supplier that customers will want to use.

In essence, the Labor Party and other members opposed to the privatisation of Telstra oppose it on one of two grounds. The first is a philosophical opposition to privatisation of a utility such as this. They will come into the chamber and say, `We believe it should be 100 per cent owned in the public domain.' Whilst I do not agree with that proposition, I certainly think it holds more weight than the view of those that come and argue the second limb, which is to say that they are not too concerned by a Telstra that is half owned by the private sector as long as the private sector only owns the minority. To me this half-pregnant Telstra would have to be the most absurd proposition of all. So let those on the opposition benches who believe that Telstra should remain in public ownership put forward their case for it to remain so. Let them put forward their philosophy and their reasons and their rationale as to why the government should buy back 49.9 per cent of Telstra. But to come in here and argue that Telstra should remain 50.1 per cent owned by the government is spurious in the extreme. The main reason it is spurious is that those arguing that point of view are blind to the consequences affecting not only Telstra as a company but consumers of Telstra services and the shareholders that have 49.9 per cent of Telstra. They hamstring Telstra. A half-pregnant Telstra is a Telstra that is bad on all fronts—and it is not just me and those on the government side that say this; it is also former members of the Labor Party. Gary Johns, a former Labor minister, recently wrote on the sale of Telstra:

The failure to sell Telstra will create the worst possible economic and social outcome. An inefficient Telstra burdened by increasing Community Service Obligations, a poor return with millions of dissatisfied shareholder-voters, a declining return to government and a weak international competitor with no capacity to raise capital from its principal shareholder.

It does not take more than a basic understanding of economics to understand how a former Labor minister is absolutely correct when he says that a half-pregnant Telstra, a half-privatised Telstra, is a policy on a hiding to nothing. In terms of the community service obligations—or what we term the universal service obligation, the USO—there is nothing at law that prevents government from imposing a USO on a fully privatised Telstra, nothing at all. There is nothing at law that prevents the government of the day from dictating to a fully privatised Telstra that it must comply with certain service standards. Those people that come into this chamber and argue that Australians are opposed to the sale of Telstra, asserting that Australians believe service delivery will go down, provide absolutely no justification as to why. We can legislate, we can mandate, service delivery. We can say to a fully privatised Telstra, `It is this government's decision to compel you, through legislation, to provide these minimum standards.' We do it all the time with other industries and there is no reason we cannot do it with the telecommunications industry. So the member for Calare and other opposition members who come into this chamber and highlight difficulties that consumers experience are doing nothing except engaging in a scaremongering campaign. They play the worst kind of politics because they play opportunistic politics.

It is the same thing that we see from the Labor Party when the Leader of the Opposition comes into this chamber and speaks about how he is opposed to the sale of Telstra. It is base politics of the most populist type. It ignores the real question that needs to be asked: why can't the government mandate minimum service requirements for a fully privatised Telstra? The answer is that it can and it will under the Howard government. It will still require minimum service levels that all Australians can be satisfied with, without the ensuing difficulties that currently flow to those who are shareholders in Telstra—for example, difficulties that mean Telstra is unable to increase its equity. If Telstra wanted to purchase a new company—say, Telstra identifies a particular technology that it believes would be good to roll out to the community generally and it wishes to acquire that company—it would need to do so on the basis of effectively paying cash for that company. It would not be possible for Telstra to issue equity to that company because to do so would mean that the government—under this half-privatised, half publicly owned model—would need to increase taxpayers' funds in Telstra.

In addition to that, it is also constraining Telstra's growth by keeping it in this half-privatised, half publicly owned model. The fact is that telcos traditionally have enjoyed a higher price to earnings ratio. In the marketplace there is an expectation that its earnings will grow more quickly because traditionally that has always been the case. But because Telstra cannot issue new equity, owing to the fact that the government would need to increase its investment in Telstra through using taxpayers' funds, the market keeps the Telstra share price low because it takes into account this constraint on new growth. In addition to that, it also puts Telstra in an invidious position whereby it is unable to truly distinguish between commercial considerations and the requirements of government, which, as part of governmental requirements as the majority shareholder, blend in considerations such as service delivery and perhaps non-commercial decisions. The government, as the majority shareholder, challenges the board to take these types of things into account in terms of the future plans and future projections of Telstra. By the same token, those that are private shareholders want Telstra to make commercial decisions: decisions that are good for shareholders.

On the vast majority of occasions, on the basis of the whole economy, we recognise that competitive conditions and commercial decisions are in the best interest not only of shareholders but of customers as well. There are very few examples that you could find in which a company would make a non-commercial decision that is against the interests of its customers. If it did, it would face the consequences as a result of poor decision making. Let us free Telstra from the shackles that it currently has and let us recognise that government can still mandate, still require and still enforce through legislation minimum service levels. Let us not hear this loose talk from the member for Calare and from opposition members: `I happen to know three constituents that have had problems with Telstra; therefore, we shouldn't sell it.' That has always been the case.

What are the other concerns that we hear enunciated in this chamber? We hear members speak about how Telstra will act as a monopoly in the marketplace, if it is fully privatised, and will misuse its market power. I have two responses to that. The first is that Telstra did that when it was fully government owned. When Telstra was fully government owned, it acted like some gigantic monolith in the marketplace, not responding to consumer concerns at all. If you were a customer under a fully government owned Telstra and you had a concern, it was bad luck if you wanted customer service because it did not exist. It has only been through a competitive marketplace that Telstra has become the more responsive organisation that it is today.

People say that, if Telstra is privatised, it will become a monopoly and might misuse its market power. My second response is that that is one reason we have the Trade Practices Act. There are many examples of companies that have significant degrees of market power, yet they are regulated and their conduct is watched closely by an aggressive Australian Competition and Consumer Commission. On this side of the chamber, I make no apology for the strong posturing of the ACCC. It is the ACCC's job to be on the lookout not only for consumers in any marketplace but also for other competitors in the marketplace. I know that there are many examples of Telstra's competitors taking advantage of the ACCC's powers to enforce actions against Telstra. This would continue under a fully privatised Telstra. Again, concerns that are put forward with regard to those two points are false.

With regard to the specific needs of constituents in my electorate on the Gold Coast, I have had some constituents approach me highlighting difficulties they have with Telstra, in the same way, I am certain, that every member in this chamber has had constituents approach them with their difficulties. However, I can report that Telstra responds in a very efficient and effective way to these concerns. I was very pleased to see Telstra recently broaden its Country Wide service to include and embrace the city of the Gold Coast. John Lister, who manages the Country Wide service on the Gold Coast, is someone that I know is doing a very good job of making Telstra a more dynamic and efficient operator in the marketplace. The provision of Telstra's Country Wide service to a city like the Gold Coast—the sixth largest city in the country with 450,000 people—highlights the way that a more agile, privatised and flexible Telstra will respond and react to consumer demands and consumer trends in the marketplace.

The notion that keeping 51.1 per cent in public ownership will somehow maintain the best of both worlds—a flexible Telstra and, at the same time, a Telstra which is in a situation where the government can watch it closely—is false. We can watch it closely irrespective of the ownership structure. I do not believe for one moment that the benefits that have been brought home to Telstra consumers are benefits that would have taken place if Telstra had remained the government monolith that it is—or, rather, that it was. Telstra is a company that needs to be dragged into the 21st century. The telecommunications sector is one of the most rapidly changing and rapidly advancing industry sectors in our entire economy. It is one of the most crucial sectors in terms of providing the kinds of support services that are required across the board.

Telstra, of course, will always perform a very important role at both a wholesale level and a retail level. In many regards, Telstra Wholesale powers the vast majority of our economy. Telstra Wholesale is in a unique situation, where it provides basic infrastructure needs. The ALP, up until several months ago, had as its policy what I believe it termed `virtual separation' of the Telstra wholesale and Telstra retail networks. It put this forward for a couple of years, saying that the answer to the Telstra conundrum was a virtual separation between the wholesale and retail networks. But we found that, when the ALP was confronted with the facts and when the ALP started to appreciate that the financial market saw this virtual separation as an absolute joke, it dropped it like a hot potato. The consequences are that, in terms of the ALP's policy position, now Telstra can remain both a retailer and a wholesaler.

Let us not get confused about the functions with which the ALP is concerning itself. The ALP often makes remarks along the lines of saying, `Labor is concerned about service delivery,' which you would interpret as being concerns about the wholesale arm of Telstra, yet the arguments it often uses to back that up are arguments pertaining to Telstra at a retail level. I do not hear any clarity from any members of the opposition indicating the reasons why it should not be privatised. The arguments are confused between wholesale and retail. The arguments are confused about the benefits that flow to consumers, the benefits that flow to shareholders and the benefits that flow to government from a half-privatised, half publicly owned Telstra. There is a complete vacuum of any clear policy direction from the opposition with regard to Telstra.


Mr Cox —What about concerns about competition?


Mr CIOBO —`Concerns about competition' I hear being interjected. What about concerns about competition? A fully privatised Telstra in the marketplace is subject to the rigours of competition. This government has done more to promote competition in the telco sector than any government before it, and consumers have been the beneficiaries of a more competitive marketplace in the telecommunications sector. The fact is that I can now pick up the telephone and pay 3½c per minute to call the United Kingdom, for example. Go back 10 years and you would not have paid 3½c per minute to phone the United Kingdom; you would have paid probably $1 a minute, if not more.

There is an array of examples in a more competitive telco marketplace of where benefits flow to consumers. Look at mobile technology. We have, as I said, an industry sector that is absolutely crucial to our economy. We also have an industry sector with the highest degree of convergence that we have ever seen. The fact is that we do not know whether in 10 years time the land copper wire lines will be, for all intents and purposes, a thing of the past. We talk about 3G technology with regard to mobile telecommunications and we learn that there are opportunities there, through mobile telecommunications, to have Internet access, email and PDA all available through your telephone and at call rates less than we pay for fixed-line calls.

As well, I hear members of the opposition talking about how line rental charges have increased and how line rental charges are another example of the reason why Telstra should remain in public ownership. What about all the arguments about the way in which so many prices have dropped? What about the numerous examples of how consumers are better off under a privatised and more competitive Telstra? They conveniently ignore all those concerns. They conveniently ignore all the benefits that have flowed to consumers, the investment in new technology, the fact that we have a third generation of mobile technology being rolled out, and they deny the fact that their half-privatised, half-public model of Telstra results in Telstra being ramshackle and unable to invest in new technology. If Telstra cannot pass on to consumers the benefits of new technology, it is because of Labor Party policy on a half-privatised, half-public model.

In conclusion, a fully privatised Telstra would provide consumers with a more competitive marketplace; a fully privatised Telstra would not mean any reduction in service standards. It would maintain, and we will enforce through legislation, minimum service standards. A privatised Telstra is in Australia's interests because it helps us to repay the debt that Labor left—the $80 billion black hole—under the leadership of Kim Beazley. The proposal for a fully privatised Telstra deserves the full support of this chamber. (Time expired)