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Industry leaders call on government to rein in Telstra.



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Media release

 

June 21,1998

 

Industry leaders call on Government to rein in Telstra

 

Optus, AAPT and telecommunications user group, ATUG, are urging the Federal Government to consider further regulatory change in the lead-up to the senate debate on the privatisation of Telstra.

 

In a joint letter sent out on Friday to Federal Cabinet Ministers, the three players questioned the effectiveness of the current telecommunications regime.

 

“The ultimate safeguard for consumers of telecommunications is effective and sustainable competition. Evidence abounds that this does not exist at present because of Telstra's dominant position in the market.

 

"From experience it is evident that Telstra has little regard for either the letter or the spirit of existing legislation and less for regulatory bodies like the ACCC.”

 

The letter warns that action must be taken now before Telstra is fully privatised.

 

“Consideration of the full privatisation of Telstra marks the ideal opportunity to enhance the regulatory settings to encourage further competition.. once Telstra is privatised the task of correcting regulatory imbalances will be made much more difficult."

 

The three players have put a joint proposal to the Government outlining how the market can be opened to full competition in all areas of Australia, including rural areas.

 

“By this we mean that competitive services will become more readily available throughout the whole of the country, including rural and regional areas. Not only will Telstra's competitors offer cheaper calls, but Telstra will be encouraged to improve its performance.”

 

The proposal states the solution lies in ensuring Telstra’s competitors get access to the bottleneck elements of Telstra’s network on the same terms as Telstra's retail operations. It also calls for increased ACCC powers to ensure Telstra treats its competitors in a non-discriminatory manner.

 

The joint letter and proposal follow this release.

 

Ends

 

Further information:

Stephe Wilks, Director Regulatory and Public Affairs, Optus, 0412 301 616

Brian Perkins, Director Regulatory & Legal, AAPT, 0416 188 448

Allan Horsely, Managing Director, ATUG, 0411 113 342 or 9904 0898

 

 

TELSTRA PRIVATISATION

COMPETITION IS THE ONLY REAL CONSUMER SAFEGUARD.

 

 

The Issue

 

The most important issue for consumers of communications services is whether they obtain the best possible service at the lowest possible price.

 

Monopolies, whether public or private, have been shown, both here and overseas, not to deliver these outcomes. On the other hand, there is ample evi dence that effective competition is the best way to maximise benefits for consumers. Regulation can be eroded or avoided. When consumers have the ability to vote with their feet all service providers (including Telstra) will have to perform.

 

In one key respect Telstra remains a monopoly. It continues to control the local access network, That is the distribution network connecting virtually every home and business in Australia. In regional Australia the situation is even worse as Telstra controls all telecommunications facilities and there is no competing infrastructure.

 

Telstra has used this monopoly position to keep prices unnecessarily high. Local call prices have risen since competition began in 1992. Long distance and international prices have not fallen as fast as they could have because of Telstra’s charges for delivery of calls over its network. Indeed the flag fall for long distance calls has just risen by 25%. These charges are as much as three times as high as in some other countries.

 

Customer service guarantees do not provide adequate protection. So long as a customer has no choice but to remain with Telstra, Telstra can simply factor in the cost of any penalty it suffers and decide whether it is worthwhile providing speedy service. If Telstra risks Losing the customer’s business there is an incentive to provide good service from the outset.

 

Telstra’s network is a national resource funded over the years by taxpayers. Telecommunications law and policy assumes that competitors should have access to the Telstra network. If Telstra provides that access at a fair price and on reasonable terms, there is no reason why competitors cannot offer a full range of services no o matter where the customer is located.

 

 

The solution

 

The problem of monopoly control of bottleneck infrastructure has been understood for some time. There are widely agreed solutions in. place in other countries and being instituted (at Commonwealth insistence) in gas and electricity.

 

The so lution lies in ensuring that Telstra’s competitors Set access to the bottleneck elements of its network on no less favourable terms than Telstra’s own retail operations.

 

Two key measures are necessary:

 

1. the ACCC, which has the power to require Telstra to account separately for its monopoly network elements, should be given the power to make that cost information public; and

 

2. the ACCC should have the power to require Telstra to treat its competitors in a non discriminatory manner in relation to the terms on which it grants access.

 

The majority report of the Senate Environment, Recreation, Communications arid the Arts Committee endorses the first of these proposals. This is an important step and the Government should adopt the report’s recommendations.

 

However, price is not the only way in which a monopolist can stifle competition. For example:

 

* Telstra is not obliged to give competitors notice of changes to its network which may affect the services they offer;

 

* competitors do not get the same acce ss to customer data bases as Telstra’s retail arm, preventing them from offering the same standard of customer service; and

 

* there appear to be no safeguards to prevent Telstra. using competitors’ customer calling information in direct marketing campaigns.

 

Removal of these barriers to competition would open the market and see real benefits flow to all Australians.

 

 

The method

 

It would be possible to make a simple amendment to the Trade Practices Act to give the ACCC the necessary powers in relation to any carriers with substantial market power. Optus provided the Senate Committee and the Government with suggested drafting for this approach. Other carriers have supported this.

 

Alternatively, the Telstra Corporation Act could be amended to make these ACCC powers apply only to Telstra.

 

Either approach could be subject to review or a sunset clause on the assumption that over time (say in five years) this will be Irrelevant because competition will be well established.

 

 

The Hon Tim Fischer MP

Deputy Prime Minister

Minister for Trade and Leader of

the National Party of Australia

MG 51 Parliament House

Canberra ACT 2600

 

 

Dear Deputy Prime Minister

 

The ultimate safeguard for consumers of telecommunications is effective and sustainable competition Evidence abounds that this does not exist at present because of Telstra's dominant position in the market.

 

From experience, it is evident that Telstra has little regard for either the letter or the spirit of existing legislation and less for the regulatory bodies like the ACCC.

 

Consideration of the full privatisation of Telstra marks the ideal opportunity to enhance the regulatory settings to encourage further competition. Indeed, once Telstra is privatised the task of correcting regulatory imbalances will be made much more difficult.

 

We attach a paper outlining a proposal which we believe would better open the telecommunications market to full competition. By this we mean that competitive services wi1l become more readily available throughout the whole of the country, including in rural and regional areas. Not only will Telstra's competitors offer cheaper calls, but Telstra will be encouraged to improve its performance.

 

We urge you to raise this proposal with the Minister, Senator Alston, and your Cabinet colleagues. If the Government is prepared to make these necessary enhancements we can assure you that the telecommunications industry would give strong endorsement of the Government's telecommunication policy.

 

Yours sincerely

 

 

 

 

Chris Anderson          Larry Will iams                                       Allan Horsley

Optus                          AAPT                                                     ATUG

 

 

 

LK