Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Postal Services Legislation Amendment Bill 2000



Download PDFDownload PDF

Bills Digest No. 1 2000-01

Postal Services Legislation Amendment Bill 2000

ISSN 1328-8091

 Copyright Commonwealth of Australia 2000

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means including information storage and retrieval systems, without the prior written consent of the Department of the Parliamentary Library, other than by Senators and Members of the Australian Parliament in the course of their official duties.

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document. IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

Inquiries

Members, Senators and Parliamentary staff can obtain further information from the Information and Research Services on (02) 6277 2646.

Information and Research Services publications are available on the ParlInfo database. On the Internet the Department of the Parliamentary Library can be found at: http://www.aph.gov.au/library/

Published by the Department of the Parliamentary Library, 2000

I N F O R M A T I O N A N D R E S E A R C H S E R V I C E S

Bills Digest No. 1 2000-01

Postal Services Legislation Amendment Bill 2000

Mark Tapley Law and Bills Digest Group 1 August 2000

Contents

Purpose....................................................................................................................................... 1

Background ................................................................................................................................ 1

Australia Post: Current Operations ..................................................................................... 1

Reserved Services .............................................................................................................. . 2

Competition in Postal Services ........................................................................................... 3

The Government Response to the NCC report ................................................................... 4

ALP/Australian Democrat commitments............................................................................ 4

Main Provisions ......................................................................................................................... 5

Conversion to a Corporations Law Company..................................................................... 5

Deregulatory Measures ....................................................................................................... 5

Reducing the Scope of Reserved Services: Incoming International Mail .......................... 6

Reducing the Scope of Reserved Services: Price and Weight Exceptions ......................... 6

Access Regime.................................................................................................................... 8

Review of Determinations ................................................................................................ 10

Undertakings ..................................................................................................................... 11

Record keeping Requirements .......................................................................................... 11

Review of Part XID .......................................................................................................... 11

Ministerial Declarations.................................................................................................... 12

Concluding Comments............................................................................................................ . 12

Endnotes................................................................................................................................... 13

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Postal Services Legislation Amendment Bill 2000

Date Introduced: 6 April 2000

House: House of Representatives

Portfolio: Communications, Information Technology and the Arts

Commencement: The conversion of Australia Post to a Corporations Law company, reductions in the scope of Australia Post's reserved services and the postal access regime all commence on a day to be fixed by proclamation or alternatively, six months and a day after Royal Assent.

Purpose

The Bill proposes to convert Australia Post from a statutory corporation to a public company under the Corporations Law.

It also proposes to increase competition in postal services by reducing the range of services which are reserved to Australia Post. Further it amends the Trade Practices Act 1974 by inserting an access regime for postal services.

Background

Australia Post: Current Operations

Australia Post is the successor body to the Postmaster-General’s Department which was established in 1901 to operate a national postal service. Australia Post became a separate entity under the Australian Postal Services Act 1975. In 1989 it became a statutory corporation under the Australian Postal Corporation Act (the Act).

Australia Post is generally regarded as a successful business. As the Explanatory Memorandum notes Australia Post ‘is among the top performing postal authorities and compares extremely well with comparable organisations and similar corporations.’1 Over the period 1989-1998/99 the percentage of letters delivered on time increased from 88 per cent to 94.4 per cent while at the same time mail volumes rose by around 50 per cent and delivery points by 27 per cent. The basic postage rate has been 45 cents since 1992. In 1998/99 Australia Post delivered a pre-tax profit of $373 million and a return on assets of

2 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

13.8 per cent. Since corporatisation in 1989, Australia Post has paid dividends and taxes to the Commonwealth of over $4 billion.2 It has also invested $2.3 billion in improving postal infrastructure.3

However in the view of the National Competition Council (NCC) Australia Post’s performance has been too good, in that it reflects a lack of competition in postal services. The NCC noted that in recent times Australia Post’s return on equity has been about three times higher than the highest average for publicly listed companies.4

Australia Post’s profits provide a return on equity which is well in excess of what could be considered typical for a corporation of this type suggesting that the extent of the monopoly is too large and that prices could be lower or services or service standards enhanced.5

Reserved Services

Under section 51(v) of the Constitution the Commonwealth Parliament has power to make laws with respect to ‘postal, telegraphic, telephonic and other like services.’ Since 1901 the Commonwealth has used this power to ‘reserve’ certain postal services to be conducted by government owned postal authorities. The Postmaster-General’s Department was originally granted reserved services protection to carry all letters weighing up to one pound (500 grams).6

Section 29 of the Act currently reserves to Australia Post the exclusive right to carry letters within Australia, whether the letters originate within or outside Australia. A ‘letter’ is defined broadly in the Act to mean any form of written communication that is directed to a particular person or address. A lengthy list of exceptions from the scope of Australia Post’s ‘reserved services’ is contained in section 30 of the Act. Generally speaking the principal services reserved to Australia Post are: the collection and delivery of all letters weighing no more than 250 grams, letters carried for a fee of less than $1.80 and all inward bound international letters.

Australia Post uses its monopoly over the reserved services to cross-subsidise its community service obligations (CSOs). CSOs arise when the government requires a business to provide services which a private company would not choose to provide without compensation.7 Section 27 of the Act sets out the CSOs. The section requires Australia Post to supply a letter service for the principal purpose of carrying within Australia, letters that Australia Post has the exclusive right to carry; and to carry letters between Australia and places outside Australia. The letter service is to be available at a single uniform rate of postage for standard postal articles.8

Subsection 27(4) is concerned with access and performance issues. It requires Australia Post to ensure that:

• the letter service is reasonably accessible to all people in Australia on an equitable basis, wherever they reside or carry on business, and

Postal Services Legislation Amendment Bill 2000 3

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

• the performance standards (including delivery times) for the letter service reasonably meet the social, industrial and commercial needs of the Australian community.

The CSOs are further defined by regulations. Regulation 5 of the Australian Postal Corporation (Performance Standards) Regulations 1998 provides that Australia Post must service 98 per cent of delivery points daily and 99.7 per cent of delivery points at least 2 days a week. Regulation 6 deals with delivery times, 94 per cent of reserved services letters must be delivered within the specified time. This time ranges from 1 to 4 working days.

Australia Post must also maintain a physical presence throughout Australia. Under regulation 9 of the regulations there must be at least 4000 retail outlets with at least 50 per cent in a rural or remote zone.

Australia Post estimated the cost of the CSOs to be $70 million in 1998/99. The cost of providing CSOs represents 2 per cent of total revenue (including non-letter revenue) or 19 percent of total profit.9

Competition in Postal Services

The scope of Australia Post’s reserved services monopoly was reduced by the previous Labor Government in 1994 with the passage of the Australian Postal Corporation Amendment Act 1994. This Act opened Australia Post to competition in six product areas namely:

• domestic letters weighing between 250 and 500 grams

• domestic letters carried for between $1.80 and $4.50, including

• products linked to domestic letter prices, such as bulk discounts

• newspapers, magazines, books, catalogues and leaflets directed to a particular person or address and enclosed in a cover

• letters moved within document exchange networks

• Express Post, and

• international outward bound mail. 10

Postal industry deregulation did not appear to damage Australia Post’s performance, between 1994-95 and 1996-97 record profits were reported.11

In 1995, Commonwealth, State and Territory Governments signed the Competition Principles Agreement. Amongst other matters, the parties agreed to review all legislation containing provisions restricting competition. In 1998, the National Competition Council

4 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

(NCC) conducted a review of the Australian Postal Corporation Act 1989. Its recommendations included that:

• the price element of the reserved services monopoly be reduced by requiring competitors to charge two times the standard letter rate (90 cents) rather than the existing four times ($1.80)

• there should be open competition in business letter services with Australia Post being free to offer discounts to business customers but with no business paying more than the uniform rate to post a standard letter

• all international mail services should be open to competition, and

• postal services should be subject to an access regime.

The Government Response to the NCC report

The Minister for Communications, Information Technology and the Arts, Senator Alston announced the Government’s response to the NCC report in July 1998. The Government rejected the NCC’s recommendation that all business mail should be deregulated and instead stated that it would legislate to reduce Australia Post’s reserved service for Australian origin/destination mail from 250 grams and four times the standard letter rate to 50 grams and one times the standard letter rate.

In addition, the Government stated that it would remove Australia Post’s monopoly on incoming international mail with safeguards to prevent this being used to circumvent Australia Post’s domestic reserved services.12

The Government also proposed ‘arrangements that [will] provide for access by competitors to Australia Post on terms and conditions no less favourable than Post offers its own customers.’13

ALP/Australian Democrat commitments

The Labor Party has indicated that it will oppose this Bill. It has argued that the competition will erode Australia Post’s revenue base thereby undermining its capacity to provide services to rural, regional and remote Australia.14 Further the Opposition has committed itself to a policy of using Australia Post offices as a vehicle for the delivery of services to regional areas such as on-line Government services. The Leader of the Opposition has argued that a further deregulation of Australia Post’s reserved services would undermine Australia Post’s profitability and capacity to deliver both current and enhanced services.

Labor will oppose further deregulation of our postal sector, as deregulation will reduce the capacity of Australia Post to provide essential services. Our opposition to deregulation will also ensure that Australia Post is able to carry on its unique role in the emerging digital data age. 15

Postal Services Legislation Amendment Bill 2000 5

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

The Australian Democrats have also expressed concerns about the impact of the Bill on rural communities and stated that they are opposed to the Bill.16 The Democrats have described the Bill as ‘a purely ideological exercise’ and argued that the Government has not demonstrated that tangible benefits to the Australian community will flow from the proposed deregulation.17

Main Provisions

Conversion to a Corporations Law Company

Part 2 of the Bill is intended to convert Australia Post from a statutory corporation into a public company limited by shares and subject to the Corporations Law. In his Second Reading Speech the Minister cited the need for competitive neutrality as the justification for this change.

The conversion of Australia Post is consistent with government policy that all government business enterprises should be companies registered under, and therefore subject to, Corporations Law. This decision reflects the policy that Commonwealth owned entities competing against other companies should be subject to the same law.18

Clause 8 of the Bill states that as soon as possible after the commencing time, Australia Post must apply to the Australian Securities and Investments Commission to register as a public company limited by shares. Subclause 8(5) exempts Australia Post from some minor application requirements such as the requirement to provide the name and address of each member of the body.

Subclause 9(2) provides that the share capital of Australia Post will be divided into 400 shares. Under clause 12 at the conversion time (a date to be fixed by Proclamation) these shares will be taken to have been issued fully paid to the Commonwealth. The Government has denied that the corporatisation is a prelude to the privatisation of Australia Post.

Deregulatory Measures

Schedule 1 of the Bill amends the Australian Postal Corporation Act 1989 making amendments consequential to the corporatisation of Australia Post and implementing the Government’s response to the NCC report by reducing the coverage of Australia Post’s reserved services.

The Bill inserts a new section 27 which deals with Australia Post’s community service obligations. Proposed subsection 27(2) states that Australia Post must by physical means carry letters that Australia Post has an exclusive right to carry. Sections 29 and 30 of the Act define this category of mail and these provisions are amended by items 29-34. The new section removes the link between Australia Post’s reserved services and the CSO.

6 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Under the Bill, Australia Post will have exclusive rights to letters weighing up to 50 grams, however the CSO will require Post to carry letters weighing up to 250 grams at a single uniform postage rate.

Reducing the Scope of Reserved Services: Incoming International Mail

Section 29 currently states that Australia Post has the exclusive right to carry letters within Australia regardless of whether the letters originated within or outside Australia. The proposed new subsection 29(1) scales back this right to situations where the letters originate in Australia. This amendment reflects the Government's decision to deregulate the delivery of incoming international mail.

In its submission to the Senate Environment, Communications, Information Technology and Arts Legislation Committee (ECITA), Australia Post observed that the deregulation of international mail opens up the possibility that the reserved services revenue may be undermined.

Reserved domestic mail (eg invoices, bank statements, personalised advertising - weighing less than 50gs) could be sent offshore electronically, printed offshore and reintroduced as deregulated incoming international mail.19

The Bill attempts to address this danger through the anti-avoidance provision contained in proposed subsection 29(2). It provides that a letter will be taken to have originated in Australia if

• some or all of the content or information in the letter is generated by an enterprise carried on in Australia,20 and

• the information is sent outside Australia for the purpose of avoiding the restriction imposed by Australia Post’s reserved services.

Section 31 of the Act allows Australia Post to apply to the Federal Court for relief against a person infringing its exclusive right to undertake reserved services. In any action against a person sending material overseas, Australia Post will bear the onus of establishing that the person did so with the intention of avoiding the reserved services restriction. The Deputy Chief Executive of Australia Post has expressed doubt about the anti-avoidance provision. In evidence to ECITA he stated ‘I do not believe that it will be effective because of the need to prove intent.’21

The ECITA majority report takes note of these concerns and recommends that consideration be given to removing the requirement for Australia Post that a person intended to evade the reserved services.22

Reducing the Scope of Reserved Services: Price and Weight Exceptions

The exclusive rights conferred by section 29 are subject to exceptions listed in section 30. Currently paragraph 30(1)(a) provides that the reserved services do not include the

Postal Services Legislation Amendment Bill 2000 7

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

carriage of a letter weighing more than 250 grams. Item 30 amends paragraph 30(1)(a) so that reserved service is reduced to letters weighing up to 50 grams. Existing paragraph 30(1)(e) requires Australia Post’s competitors to charge 4 times the rate of postage it charges for a standard postal article. Item 31 inserts a new paragraph 30(1)(e) requiring competitors to charge an amount that is equal to at least standard price, currently 45 cents ‘including GST and any special fee.’ The Explanatory Memorandum notes that Australia Post and the Government have agreed that Australia Post will not raise the postage for a standard postal article from 45 cents when the GST commences.23 Australia Post estimates that the cost of absorbing the GST on the standard letter rate will be between $90 and $100 million per annum.24

In its submission to the NCC review Australia Post recommended different price weight thresholds. The table below summarises the gradual approach that it advocated:

Price Multiple/ Weight Timing

4 times ($1.80)/250gms Current

2 times (90c)/125gms From 1/1/1999

1 times (45c)/125grms From 1/1/2001

Review 2003

Source: Australia Post Submission to ECITA p. 9.

Australia Post's stated rationale for a higher weight threshold was the need to prevent reserved services revenue being undermined by the practice of ‘bulking up’.

‘[B]ulking up’ occurs where, for example, a power bill or a bank statement (weighing say 20gms) is ‘bulked up’ by the addition of advertising material (promoting a bank/insurance /electricity product) which could result in the letter weighing more than the reserve weight threshold.25

Australia Post is not able to estimate the amount of revenue at risk specifically from the practice of bulking up but has estimated that the increase in competition would reduce revenue by $160 million.26

Australia Post’s major customers disputed the impact of the reform in evidence to ECITA. The Major Mail Users of Australia argued that the 50 gram threshold encompassed 91.66 per cent of bulk business mail and that the reduction in the weight threshold was unlikely to make a big difference to the business mail contracts negotiated by its members.27 Similarly, Readers Digest stated that the cost of producing and inserting advertising material to take a letter above the 50 gram threshold was likely to offset any savings in postage rates that may be offered by a competitor of Australia Post.28

8 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Item 33 inserts proposed paragraph 30(1)(hb) which establishes mail ‘aggregation’ as a new exception to the reserved services. Under the new provision a person will be able to take mail from a number of sources, pre-sort it and then deliver it to an Australia Post office for delivery under a ‘bulk service’. This term is defined in proposed subsection 30(1BA) as service provided by Australia Post under which bulk quantities of letters are delivered in Australia at reduced rates if they are sorted and lodged at a Post Office in accordance with the terms and conditions of the service. Australia Post estimates that this new exception will reduce its annual revenue by $40 million.29

Access Regime

Australia Post already provides access to its network. Since 1975 it has offered discounted access to bulk mail customers/mail houses who pre-sort mail and in 1995 it introduced discounts to customers who ‘interconnect’ (ie deliver) bulk mail to designated mail centres.30

Even so, the Government has decided to establish a legislative framework to facilitate access to postal networks. The proposed framework for access has changed substantially since the Minister announced the Government's response to the NCC review. In July 1988, the Government stated that the access regime would allow Australia Post's competitors access on ‘a similar basis and on terms and conditions no less favourable than Post offers to its own customers.’ Instead the Government has adopted a regime where the ACCC may (in the event that an access provider cannot come to terms with Australia Post) determine access terms and prices. In its submission to ECITA Australia Post expressed a concern that the proposed access regime may put at risk revenues for reserved service mail which it uses to fund CSOs.

Schedule 4 establishes the access regime for postal services by inserting a new Part XID into the Trade Practices Act 1974. The ACCC may declare that a specified service is a 'declared service' if:

• the service is significant to the provision of postal services in Australia

• access to the service would promote competition in at least one market (that market may be outside Australia), other than the market for the service

• access can be provided without undue risk to health and safety, and

• access to the service would not be contrary to the public interest (proposed new section 153C(2)).

In determining whether or not to declare the postal service the ACCC must under proposed subsection 153C(3), have regard to:

• the long-term interests of consumers of postal services

Postal Services Legislation Amendment Bill 2000 9

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

• the legitimate business interests of the provider and the provider’s investment in a facility used to supply the service

• the economically efficient operation of the service or a facility used to supply the service

• if the provider is Australia Post - Australia Post’s community service obligations, and

• any other matters the Commission thinks are relevant.

Proposed subsection 153C(4) provides that before making a determination the ACCC may hold a public inquiry. If the Commission decides to do so the inquiry must be conducted in accordance with proposed subdivision C.

If a public inquiry is not held the Commission must nevertheless publish the proposal and invite public submissions. A report based on the submissions must be prepared (proposed subsection 153C(5)). When the Commission makes a decision about a proposal to declare a service it must publish its reasons.

Once a postal service is declared access seekers must negotiate terms and conditions for access with the service provider. If the parties agree on the terms and conditions of access they may apply to register a contract. In deciding whether to register the contract the ACCC must have regard to the public interest (specifically including the public interest in competition in markets) and the interest of persons who use the postal service that is the subject of the contract (proposed section 153HB). The effect of registration is that the contract can be enforced as if it were a determination of the Commission. A decision to refuse to register a contract may be reviewed by the Australian Competition Tribunal (proposed section 153HC).

In the event that the parties are not able to agree on the terms of access, either party may notify the ACCC that an access dispute exists. The procedures governing arbitration are contained in new Division 5.

A determination by the Commission may:

• require the provider to provide access to the service by the access seeker

• require the access seeker to accept, and pay for access to the service

• specify the terms and conditions of the access seeker’s access to the service

• require the provider to extend a facility used to provide the service (proposed section 153KA).

Australia Post’s concern that the ACCC may make a determination about the price of access which will undermine Post’s capacity to invest in its network and fulfil its community service obligations are in some measure addressed by proposed section

10 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

153KC. It provides that when making a determination, the ACCC must take into account factors which include:

• the legitimate business interests of the provider and the provider's investment in facilities used to supply the postal services

• the interest of all persons who have rights to use the postal service

• the direct costs of providing access to the postal service

• if the provider is Australia Post - its need to recover the cost of performing its community service obligations

• the economically efficient operation of the postal service or a facility used to provide the postal service, and

• any other matters the ACCC thinks are relevant.

The ACCC has the power to terminate an arbitration if, amongst other things, it thinks the notification of the dispute was vexatious, the subject matter is trivial or a party to the arbitration has not engaged in negotiations in good faith (proposed new section 153KD).

In order to facilitate negotiations the ACCC is empowered to make directions to the parties. Proposed subsection 153KE(2) gives examples of the types of direction that may be given, including directions:

• to give relevant information

• to carry out research or investigations in order to obtain relevant information

• to attend mediation or conciliation conferences, and

• not to impose unreasonable procedural conditions.

Review of Determinations

A party to a determination can apply to the Australian Competition Tribunal for review of a determination (proposed new section 153N). The application must be made within 21 days of the determination being made. A party to a determination can appeal to the Federal Court on a question of law from a decision of the Australian Competition Tribunal (proposed new section 153NB).

The fact that an appeal is instituted to the Federal Court does not affect the operation of the decision of the Tribunal. However, the Court may make any order staying or otherwise affecting the decision (proposed new section 153NC).

Postal Services Legislation Amendment Bill 2000 11

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Undertakings

Proposed Division 6 deals with access undertakings for postal services. This proposed Division provides an alternate means of establishing an access regime. Under proposed section 153PA a provider of a postal service (or a person who expects to be a provider) may give a written undertaking to the Commission in relation to access to the service. The service does not need to be declared for an undertaking to be given.

In deciding whether to accept the undertaking, the ACCC must have regard to the matters raised in considering whether to declare a postal service under proposed section 153C. An undertaking cannot be accepted by the Commission unless the ACCC has published the undertaking, invited submissions and considered them. An undertaking may not be withdrawn by a provider without the consent of the Commission (proposed subsection 153PA(8)).

Record keeping Requirements

In its submission to ECITA, the Australian Newsagent’s Federation (ANF) raised concerns that Australia Post was using its reserved services revenue to cross-subsidise its retail activities such as selling greeting cards, stationery and postcards. The ANF submitted that ‘In general the selling price of many Australia Post retail items is lower than what any competitive retailer would consider sustainable if he is to remain in business.31’ Australia Post has denied that the retail service is being cross-subsidised.32

In order to allay concerns that such cross-subsidisation is occurring proposed new Division 9 will require the ACCC to make record keeping rules for Australia Post. The rules must require Australia Post:

• to keep and retain records in relation to costing the CSO

• to keep and retain separate records for Australia Post’s reserved services and services other than reserved services, and

• to prepare and submit reports consisting of information contained in the records to the ACCC. (proposed section 153TA)

Proposed section 153TB sets out the circumstances under which the Commission may permit access to these reports.

Review of Part XID

The Minister must cause a review of the operation of the access regime to be made before 1 July 2004. Copies of the report must be laid before each House of Parliament within 15 sitting days after the completion of the preparation of the report (proposed new section 153WG).

12 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Ministerial Declarations

Part 2 of Schedule 4 specifies that the Minister must by written instrument determine that each bulk service and each service related to a post-office box is declared. The effect of this provision is that a person seeking access to either of these services may commence negotiations with Australia Post. If these negotiations do not result in a contract which is registered by the ACCC, the Commission may conduct an arbitration and determine the terms and conditions of access.

Concluding Comments

The Bill proposes to subject Australia Post to greater competition by reducing its reserved services through lower price and weight thresholds and deregulating the delivery of incoming international mail. Further it seeks to encourage the development of niche players in the postal services sector by facilitating greater access to the postal network.

The key issue posed by the reforms is whether Australia Post will continue to be able to fund the CSOs, reinvest in its network and maintain its current levels of service if its revenue base is eroded by the changes.

The Government has given an undertaking that the reforms will not adversely impact on the delivery of postal services in regional Australia

No post office or mail centre in regional Australia will close as a result of our package. Australia Post will continue vital subsidies to 700 Licensed Post Offices in regional and rural Australia and maintain current concessional rate arrangements for the delivery of distance education material to isolated children.33

However Australia Post has not guaranteed that services outside the CSOs will not be affected by these reforms. For example parcels are currently carried at a uniform rate, a 250 gram parcel can be sent anywhere in Australia for $2.50. In evidence before the Senate Committee Australia Post indicated that the current cross-subsidy may need to be reviewed depending upon the impact of competition and that it may need to charge on a differential basis.

Australia Post and the Government seem to be divided over the impact of the proposed reform measures. In its evidence to the Senate Committee, Australia Post forecast that the reduction in the scope of reserved services and aggregation (the collection and pre-sorting of mail by a person other than Australia Post) would reduce revenue by $200 million and profits by $85 million. Furthermore, Australia Post raised concerns that ‘bulking up’34 and ‘re-mail’35 may undermine its revenue base.

While the Explanatory Memorandum acknowledges that Australia Post faces possible revenue losses following from the reduction in the reserved services and the imposition of

Postal Services Legislation Amendment Bill 2000 13

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

an access regime, it also states that the measures contained in the Bill are not expected to have any significant impact upon Commonwealth expenditure or revenue. One would expect if revenue loses were of the magnitude Australia Post estimates they could impact on dividend payments to the Commonwealth.36

The Explanatory Memorandum also asserts that some of Australia Post’s losses should be offset by the advantages that Australia Post could obtain if it benefits from access to declared services provided by other postal services providers.37 However the Explanatory Memorandum does not provide any examples of such services.

Australia Post assumes that the letter market will continue to grow at 3.5 to 4 per cent a year. Given that the letter market is currently estimated to be worth between $1.5 and $1.6 billion, growth in the market will to some extent counter the competition induced reduction in profitability.38

There is however some uncertainty about whether the letter market will continue to grow at these rates. AUSDOC told the Senate Committee that the growth of business-to-business mail is slowing due to the impact of electronic mail.39 Australia Post estimates that the letter market will cease to grow in a little over five years.40

Endnotes

1 Explanatory Memorandum, p. 3.

2 Dividends alone amount to more than $1 billion.

3 Australia Post, Submission to Senate Environment, Communications, Information Technology and the Arts Legislation Committee, May 2000, p. 5.

4 National Competition Council, Review of the Australian Postal Corporation Act, 1998 p. 35. http://www.ncc.gov.au/nationalcompet/Australia%20Post%20Review/Default.htm

5 Explanatory Memorandum, p. 5.

6 House of Representatives Standing Committee on Communications, Transport and Microeconomic Reform, Keeping Rural Australia Posted, August 1996, p. 10.

7 National Competition Council, Review of the Australian Postal Corporation Act, 1998, p. 43.

8 Subsection 27(3). Standard Postal Article is defined in section 4. It is an article that weighs no more than 250 grams and is not more than 5 millimetres thick. There are also size and shape restrictions. The definition generally excludes parcels.

9 Australia Post, Annual Report 1998/99,p.28.http://www.post.com.au/index.asp?link_id=6.610

10 National Competition Council, Review of the Australian Postal Corporation Act, 1998, p. 35.

11 ibid, p. 33.

14 Postal Services Legislation Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

12 Minister for Communications, the Information Economy and the Arts, ‘Government delivers better postal services’, Media Release, 16 July 1998. http://www.dcita.gov.au/cgi-bin/trap.pl?path=3145

13 ibid.

14 Stephen Smith, ‘Where’s the Nyngan Declaration and Where’s the National Party’, Media Release, 6 April 2000.

15 Kim Beazley, ‘Australia Post: A Platform for Delivering Services in the Digital World’ Media Release, 28 February 2000.

16 John Stensholt, ‘Return to sender: mail changes stymied’, Australian Financial Review, 8 April 2000.

17 Senate Environment, Communications, Information Technology and the Arts Legislation Committee, Report on the Postal Services Legislation Amendment Bill 2000, p. 43 http://www.aph.gov.au/senate/committee/erca_ctte/postal/Postal%20Services.pdf

18 House of Representatives, Debates, 6 April 2000, p. 14826.

19 This practice is sometimes known as re-mail. Australia Post, Submission to Senate Environment, Communications, Information Technology and the Arts Legislation Committee, May 2000, p. 14.

20 This term is defined in proposed subsection 29(2A) and draws on the definition of enterprise contained in A New Tax System (Goods and Services Tax) Act 1999.

21 Mr Ludlow, Senate Environment, Communications, Information Technology and the Arts Legislation Committee, Hansard, May 8 2000, p. 51.

22 Senate Environment, Communications, Information Technology and the Arts Legislation Committee, Report on the Postal Services Legislation Amendment Bill 2000, p. 22. http://www.aph.gov.au/senate/committee/erca_ctte/postal/Postal%20Services.pdf

23 ibid., p. 47.

24 Mr G. Ryan, Corporate Secretary, Australia Post, Senate ECITA Committee, Hansard, May 8 2000, p. 49.

25 Australia Post, Submission to Senate Environment, Communications, Information Technology and the Arts Legislation Committee May 2000, p. 14

26 Mr Short, Senate ECITA Committee, Hansard, May 8 2000, p. 53.

27 Mr John Gilroy, Senate ECITA Committee, Hansard, May 8 2000, p. 32.

28 Christopher Smith, Senate ECITA Committee, Hansard, May 8 2000, p. 37.

29 Mr Short, Senate ECITA Committee, Hansard, May 8 2000, p. 53.

30 Australia Post, Submission to Senate Environment, Communications, Information Technology and the Arts Legislation Committee, May 2000, p. 16.

31 Australian Newsagents Federation, Submission to Senate Environment, Communications, Information Technology and the Arts Legislation Committee, April 2000, p.4.

Postal Services Legislation Amendment Bill 2000 15

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

32 Mr Ryan, Senate ECITA Committee, Hansard, May 8 2000, p.49.

33 Minister for Communications, the Information Economy and the Arts, ‘Government delivers better postal services’, Media Release, 16 July 1998. http://www.dcita.gov.au/cgi-bin/trap.pl?path=3145

34 Bulking up is a practice where additional material added to business mail to take it above the 50 gram threshold. Major customers of the Australia Post have argued that there is little financial incentive to bulk up as the costs of inserting extra material are likely to offset cheaper postage costs.

35 Re-mail refers to a situation where reserved domestic mail is sent offshore, perhaps in an electronic form and reintroduced as deregulated incoming international mail. The amendment proposed by the Government members of the Senate Committee would seem to address Australia Post’s concerns about the difficulty of bring an action for re-mail. The amendment would remove the requirement of Australia Post to demonstrate that a person sent information or content overseas intending to avoid the reserved services restriction.

36 In 1998/99 the Government received a dividend from Australia Post of $148.7 million.

37 p 3.

38 Mr Ludlow, Senate ECITA Committee, Hansard, May 8 2000, p. 59.

39 Mr Reilly, Senate ECITA Committee, Hansard, May 8 2000, p. 41.

40 Mr Ludlow, Senate ECITA Committee, Hansard, May 8 2000, p. 59.