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Wednesday, 13 November 2002
Page: 6258


Senator ALSTON (Minister for Communications, Information Technology and the Arts) (4:48 PM) —I was surprised to see Senator Conroy's name attached to this disallowance motion and then I realised that he has actually got formal responsibility in this chamber.


Senator Mackay —You don't turn up to estimates, so you wouldn't notice.


The ACTING DEPUTY PRESIDENT (Senator Brandis)—Order! Senator Mackay!


Senator ALSTON —It is something like 12 months since the last election and here he is making his debut. I have to say we should all welcome him and, I suppose, be a bit more tolerant than usual. It is interesting to reminisce about the genesis of this disallowance motion, because this was announced by Mr Crean at the start of the Cunningham by-election. Mr Crean said: `I'm in such a desperate hurry I am going to make Telstra the big issue of the campaign. Here is a classic example for you: how they're ripping off consumers and punishing low-income earners,' and all the things you normally say when you try to scare the pants off people. Then he made it plain that he had not even been to caucus he was so desperate to get this initiative out there, presumably on advice from Lindsay Tanner. I think that is a story in itself because Mr Crean called a door-stop interview last week to respond to Estens and, as you may recall, Mr Tanner had scheduled a press conference for, I think, 2 o'clock and suddenly it was cancelled without warning. Mr Crean came in over the top at 2.30 p.m. Mr Tanner had to be there with him, and Mr Tanner was not allowed to speak. So Mr Tanner is not exactly the flavour of the month. If you look at Kevin Rudd's top 10 shadow ministers, Mr Tanner is not there and, I am afraid, Senator Conroy, nor are you.

When we said that we would not play ball with this silly, shabby little Cunningham by-election stunt, Mr Tanner's response was to say, `Oh, no, it's not drop dead. This is to encourage you to negotiate.' That is what the Democrats have ultimately done, but policy lazy Labor never came near us and never for a moment suggested anything; they just said no. Again, it is symptomatic of a party that has all these very serious internal problems, because Mr Tanner, as we know, has been out there making speeches on a whole range of subjects outside his portfolio but when it comes to this one he is not interested in cutting any deals or talking to anyone; all he is interested in doing is putting out a release that basically misrepresents the position fundamentally while hoping no-one will notice.

The reality is that we allowed the increases on the recommendation of the ACCC. I think you will find, when you look at the very extensive discussion paper that the Democrats have released today, that the ACCC very carefully analysed some of the problems in the marketplace. One of them relates to competition because, whilst you have an access deficit of around $1.2 billion, you find that the line deficit rental is about 45 per cent of the interconnect charges, which means that Telstra's competitors are actually paying a lot more than they need to pay. So if you have line rebalancing, which the OECD has been promoting for some years and which the ACCC well and truly understands, you actually get a much healthier competitive environment. Of course Labor knows that. That is why this whole exercise is so profoundly dishonest and why it backfired hugely in Cunningham.


Senator Conroy —How many votes did you get in Cunningham?


The ACTING DEPUTY PRESI-DENT —Order! Senator Conroy!


Senator ALSTON —You tried to make this the big issue, and it just did not cut the mustard. The punters did not fall for it for a moment. It has never been an issue since. After that ultimate humiliation, you had your chance to come back and try and talk it through. I am not sure whether you even approached the Democrats—I suppose you did not. But the end result is you have done nothing; you have been cut out of the deal and the Democrats, of course, have been able to get a little extra. Good luck to them. But the fact is that there was no need for any extra, because these measures are very carefully considered and do contribute very substantially to competition.

The opposition claimed on 19 September that Telstra's customers under the new price controls would have to pay about $100 million a year more on line rentals than they would save on local, STD, IDD and fixed to mobile call costs. That was based on totally fallacious reasoning—and we had an example of it just a few moments ago with Senator Conroy adding a CPI of 3½ to a plus four to say that that was 7.5 real. Of course, that is nothing of the sort. The fact is that people have been getting substantial reductions on a basket of call prices in exchange for a modest increase over a five-year period in line rentals. As we know, that is something about which people have always been able to make a choice. While Senator Conroy likes to pretend that somehow I was not aware of this at the time, I have always been acutely aware that low-volume users were given the option of paying a little bit more on call charges in order to have a $4 a month less line rental charge. That is their choice—and we respect that. The way the Labor Party put it was that these people were suddenly being forced to pay higher call rates—and of course they were not. No-one was obliged to take up that package; it was simply there as an optional extra for those who did not use the service or make all that many calls.

Correctly calculated, using constant prices, consumers are in fact better off as a result of the price caps on line rentals and call charges by more than $100 million annually—so precisely the opposite of what the Labor Party like to pretend. The opposition then claimed on 10 October that a research paper presented by the Communications Research Unit on 2 October showed that Telstra would be $170 million better off under the new controls. The paper, as they well know, presented the results of running a computer model based on publicly available data and the researchers' own assumptions. The model was theoretical and very general, covering the industry as a whole. The researchers simply used the Telstra price caps as an illustrative example of how the model might eventually assist policy making. They openly acknowledged the model's limitations. They stated that it was `naive and relatively simple'. In fact, the industry had not previously been given an opportunity to make any informed comments on the model's structure and assumptions.

The model took no account of some important factors that could significantly affect Telstra's revenues: firstly, the depressed state of the telecommunications market over the past 12 to 18 months, which has reduced the scope for Telstra to achieve revenues theoretically permitted under the price caps; secondly, the fact that, as rebalancing occurs, competitive pressure on Telstra's prices should increase and Telstra's interconnect revenues from competing carriers should fall; and, thirdly, the fact that in most price cap periods, Telstra's prices have been reduced by more than what is required under the caps due to competitive pressures or commercial judgments by Telstra.

Perhaps most significantly, the paper did not consider the benefits deriving from Telstra's $150 million a year package of products for low-income consumers. That is the very package over which Labor now slams basically the entire welfare sector because there were five leading welfare organisations who signed off on that and who came out and criticised the Labor Party for its shabby and expedient threat to disallow. And, of course, that package is of very significant benefit to low-income consumers.

The opposition misled the electorate when they suggested that the disallowance would mean the reversal of the recent line rental increases. They well knew—or, if they did not know, they could have obtained advice— that any disallowance was not retrospective and that Telstra would not be required to reverse its price changes if the determination were disallowed. But, of course, they were not going to tell that to the people in Cunningham or to the electorate at large. Contrary to their claims, disallowance would have had serious, adverse consequences. It would mean the revival of price caps put in place over three years ago that are no longer relevant or appropriate and that are potentially damaging to competition. This includes price caps that would give very little scope for reduction of the access deficit—so a fundamental chilling of competition. It would give assistance to low-spend consumers—in other words, people who might have holiday homes and only make occasional calls— rather than targeting low-income earners who ought to be the ultimate beneficiaries of low income—



Senator ALSTON —You do not understand the difference, Senator Mackay? The original package was very poorly targeted at low-spend consumers—in other words, maybe very high-income people who only use the phone occasionally in a particular home.


Senator Mackay —It is new money, is it?


Senator ALSTON —No, it is not new money. These are people who only use the phone occasionally and the previous arrangements were benefiting them. The $150 million commitment by Telstra is certainly new money. It is a package of products for low-income earners.


Senator Mackay —Is it new money?


Senator ALSTON —Part of it is new money. It is not our money. Whether Telstra wants to call it new money or old money does not really matter. What does matter is that Telstra gave benefits to low-income earners, not low-spend users.

Of course, it would have meant that some important price controls like the local call price parity scheme which, again, was designed to ensure that people in areas where there is not sufficient competition, usually outside of the metropolitan areas, are able to get the benefits of a general reduction in call charges in competitive areas. That, of course, would have gone out of the window. Controls on directory assistance charges would no longer have applied. There would have been no controls at all on Telstra's prices after 30 June next year beyond those applying under trade practices law. Disallowance would have meant the loss of some very important low-income initiatives such as the new low-rental HomeLine Budget product and the expansion of pensioner concessions. These initiatives would no longer have been tenable and therefore would need to have been withdrawn.

I think the Democrats understood all that. Telstra has specifically designed product offerings for a group of over 340,000 holders of the low-income health care card. Telstra will offer a product with a rental that is $2 less per month than the standard residential line rental, which will not increase in real terms. Telstra will also offer substantially discounted connection charges to this low-income group.

These are the additional benefits that the Democrats can quite rightly say result from their taking this seriously. They are not the result of political posturing where you get out and pretend that somehow you are going to act to the benefit of low-income earners but you do absolutely nothing about it. That, I think, is really where Labor continues to be absolutely exposed. Senator Conroy said it all when he said: `Telstra's huge profits constitute no justification for these measures.' In other words, because he thinks that Telstra is making a lot of money, he could not care less about competition. He could not care less about line rebalancing or excess deficits. These issues are not too difficult to get your head around if you are prepared to do some homework on them. But ignore the ACCC, play the populist card, think you can appeal to low-income earners and the end result is that you come a huge cropper. That is what has happened here. Of course we are not in the business of giving handouts to Telstra; we are in the business of having a much fairer and competitive regime. I think the Democrats have comprehensively demolished all of Labor's arguments in the paper that they put out today.

Let us be quite clear: HomeLine Budget and other packages are part of the options available to people that give them more flexibility. Labor, presumably, would use the ministerial power of direction to stop those sorts of options being available because Labor somehow think that these people are being forced to pay higher call charges. Once again they would put Telstra in a straitjacket. We know that they would break it up. We know that they are in favour of structural separation, so we know that they would keep some poor pathetic part of the utility service in government ownership and sell off all the rest. Of course they would not let Telstra sell off NDC. Of course they would not let Telstra get into more foreign adventures, as they see them. They would not let them get into any media enterprise activities. They would have them stick to carriage and not content. Once again you would have the Labor Party hell-bent on crippling a great Australian company. For what purpose? To suit the ideological prejudices of those who really call the shots in the Labor Party. The CEPU and the other unions presumably write most of this material and they do not want to understand the benefits of rebalancing, which is so fundamental to health and competition in telecommunications. So I am pleased that, with the assistance of the Democrats, sanity has prevailed. Once again it shows the total irrelevance of the Labor Party, who are too lazy to do any serious work on the subject, and they of course will continue to get what they deserve.