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Thursday, 18 November 2004
Page: 116


Senator ALLISON (5:05 PM) —Telstra provides a range of services that are absolutely vital to the national security and economic and social development of Australia. Australians are increasingly relying on e-commerce, e-health and e-banking. For many businesses, especially small businesses, efficient and effective communications systems are absolutely critical. A cost-effective, reliable communications system is especially critical for Australians living in the country—in regional, rural and remote areas—where tyranny of distance and lack of services need to be overcome. We have had three Senate inquiries report to this place in the past 18 months, and the outcomes in all three very clearly point to the fact that the sale of Telstra is not in Australia's best interests, particularly for regions, with faults and services still falling well short of world's best practice.

The report of the Senate inquiry into the full sale of Telstra, tabled in this place on 27 October 2003, found that competition has not developed as extensively as generally expected after partial competition was introduced in 1997 and that various telecommunications markets are not yet effectively competitive; there is market failure and an imbalance in market power; Australian household consumers are still paying too much for services; services are not equal between urban Australia and regional and rural Australia; Australian specific research and development is dissipating and networks are not being developed and used to their full potential; the current regulatory system needs improving; and there has been no independent, authoritative study undertaken to examine structural separation, despite being recommended by the OECD and required by subclause 4(3) of the Competition Principles Agreement. Of particular concern is that there is no future proofing—to use a phrase that has been used by various people—especially for regional Australians. It has also been argued that market forces on their own can never provide rural Australia with the telecommunications services that are required. However, the National Farmers Federation contend that it is the government's responsibility to ensure that there are appropriate and adequate services in regional and rural Australia. In their submission to the Senate inquiry into the full privatisation of Telstra the National Farmers Federation stipulate:

... the Government should ... provide targeted government funding necessary to future-proof the ongoing provision of equitable telecommunication services as new technologies emerge.

While the government contends that item 32 of schedule 1 of the 2003 bill, part 10, `Independent reviews of regional telecommunications' is a future-proofing mechanism, the National Farmers Federation argue that the provision does not guarantee any meaningful outcome. There are no provisions for a mechanism to require implementation of the independent review committee's recommendations or for adequate funding. The report of the Senate inquiry into Australia telecommunications network, tabled on 5 August this year, found that Telstra is underinvesting in its repair and upgrading of Australia's telecommunications network, that the Australian Telecommunications Authority is failing to properly oversee the network and that tougher legal requirements are needed on Telstra to upgrade the performance of its network.

Telstra's failure to invest and maintain its network is resulting in unsatisfactory service levels in many parts of Australia. Telstra's spending on capital investment has fallen from $4 billion in 2001 to just $2.9 billion this year. Its staffing levels have more than halved since 1996. Not surprisingly, the percentage of faults not cleared by Telstra within required time frames increased from seven per cent in June 2001 to 14 per cent in June 2003. The report of the Senate inquiry into broadband competition, tabled on 10 August this year, found that not enough was being done to ensure that Australia, especially regional Australia, will have access to a state of the art broadband network. Australia is behind other countries in penetration and cost. Access to broadband, a key tool for modern business and commerce and a facilitator of e-health and e-education, is still very limited and is a contentious issue, especially for those in the country. The inquiry found that the copper network is at the end of its effective life, and even Telstra admits that ADSL is interim technology. Countries such as South Korea have a state of the art network, and the United States and the United Kingdom have recently committed billions of dollars to broadband roll-out.

The government's metro broadband black spot program, announced during the election, if implemented, will be a big disappointment to the communications industry and the thousands of small business and home users who still do not have access to fast and affordable broadband. The Democrats think the ill-targeted initiative demonstrates that the government is only concerned about propping up Telstra's copper network at the expense of Australia's economic and social future. Like the wasteful HiBIS program, the metro black spot program will pour money into extending the life of the copper wire network to deliver ADSL, rather than investing in fibre and wireless infrastructure.

The committee also concluded that the only way to ensure the development of a strongly competitive broadband industry is to have a significant change in the structure of the industry, and made recommendations accordingly. The government continues to ignore the findings of the Senate inquiries and advice presented to it from high profile regulatory bodies such as the ACCC. Instead of considering the impact of privatisation on consumers and competition, the government instead focuses on debt reduction and shareholder value.

The government argues that the sale of Telstra will improve the financial state of the public sector. However, it is clear that, by world standards, Australia does not have a major problem in terms of public sector debt. Indeed recent OECD data show that Australia's public sector debt financial liabilities are one of the lowest in the OECD. Australia's 2003 net financial liability was 2.9 per cent of GDP, compared with the UK, which is 33.6 per cent, Canada, which is 34.9 per cent, and the US, which is 46.3 per cent. The review of the Commonwealth government securities market indicated the difficulties that will result from further reductions in Commonwealth debt. Maintaining depth and liquidity within the Commonwealth government securities market is necessary for the stability of Australia's financial markets.

The Democrats also believe that the government has not adequately presented to the parliament and the public an accurate analysis of the financial benefits and the costs of selling the remaining government ownership of Telstra. The government's focus on debt reduction and shareholder value, together with its ideological attachment to this idea of selling off government enterprises, over the national security, economic and social development of Australia is of great concern to the Democrats and, we think, to the majority of Australians. The Democrats argue that in its rush to reduce debt, despite Australia having one of the lowest national debts in OECD, this government has not given adequate consideration to the implications of the full privatisation of a vertically integrated, monopolistic Telstra and the alternatives.

There is little evidence around the world that reducing public ownership improves customer outcomes, particularly in markets where the former government telco retains strong market dominance. Comparing public ownership using the OECD's price for domestic phone charges comparator highlights this relationship. Three of the four countries with the cheapest phone prices have majority publicly owned telcos, while three of the four with the highest prices have private ownership rates in excess of 90 per cent.

The Democrats believe that, on all key criteria, the government has still failed to make out its case that the sale is justified, whether it be on competition, service, legal or financial grounds. Every opinion poll shows that, at a minimum, more than 60 per cent of the population is opposed to the full privatisation of Telstra. In September 2003, my colleagues Senator Bartlett and Senator Cherry undertook a survey of the people in rural and regional Queensland seats, asking them how they felt about the government's agenda—supported by The Nationals of course—to sell off the rest of Telstra. Eighty per cent of the nearly 13,000 responses were opposed to the further sale of Telstra. Four months later, a ninemsn poll on 5 February found that 77 per cent—that is, 26,544 people—agreed that Telstra should be kept in public hands.

The Democrats continue to call for stronger regulation to protect consumers, increased competition and regulation to improve network reliability. We again call for the government to meet its obligations under the competition principles agreement and to undertake an independent review of structural separation—including consideration of the ACCC's Emerging market structures in the communications sector report. We call for a comprehensive analysis of Telstra's investment and infrastructure to be undertaken. We again ask that Telstra be directed to increase its investment infrastructure to meet tougher performance standards and national policy objectives. I remind the Senate that the government is able to direct Telstra. It chooses not to do so. It tried very hard to remove that ability in legislation some years ago, but this place required for it to remain unchanged. We call on the government to set, in consultation with industry, a 10-year national target for an optic fibre consumer access network, in line again with the Democrats broadband proposal.

These calls reflect the concerns of the public and the industry that have come out through Senate inquiries and various reports on telecommunications in Australia. They reflect the concerns regularly expressed about Telstra on talkback radio, out in the bush and even in the suburbs. The Democrats do not believe that this government won a mandate at this election to sell Telstra. Telstra barely rated a mention during this campaign. We believe that the majority of Australians still oppose the sale of the rest of Telstra. If the government can demonstrate in this place that that is not the case then I encourage them to do so and to do so quickly, but I doubt that they can. It is not enough just to go to The Nationals and persuade a few members that Telstra must be sold. We need to have demonstrated in this place that the general public is in favour of such a proposal. Upgraded infrastructure and improved competition will deliver far better consumer outcomes than the flawed privatisation plan of the Howard government.