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Address by Ian Sinclair



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.ADDRESS BY THE RT. HON. IAN SINCLAIR, MINISTER FOR COMMUNICATIONS TO THE C.E.D.A.

GROUP OF TRUSTEES ON FRIDAY, 11 SEPTEMBER, 1981, AT 5.45 P.M.

"SMALLER GOVERNMENT AND SELF-REGULATION - SOME PERSPECTIVES IN RELATION TO COMMUNICATIONS"

I decided to take "Smaller Government and Self-Regulation" as the main theme of

my address this evening. It is fashionable to expouse the case for smaller

government, and editorial writers take up that cause with great enthusiasm if

not with any vision of how smaller government can be achieved in the complexities

of society today. ,

"Self-Regulation" could be seen as a corollary of smaller government. The

starting point of many arguments for smaller government is that governments by

nature over-regulate industry and society resulting in an overweight bureaucracy.

Smaller government, therefore, in that view, means less regulation and fewer

public sector employees, but this is not linked in a philosophical sense with

reducing the number of elected institutions which, in fact, employ the officials

to implement their regulatory policies.

No doubt regulatory structures are established for good reasons seen at the time,

and these structures seem to have a natural instinct for survival because of the

lack of the will or the interest to review from time to time the need for

particular matters to be regulated, or to be regulated in a particular way.

If you have to cast blame for why this is to, you would have to end up with

criticising the people elected to exercise powers of government. It is not the

nature of institutions which are given responsibilities to regulate particular

matters to recommend their own abolition or a diminution of their powers. There

has to be a continual public questioning of the merit of regulation in particular

areas to have sensible discussion and to influence elected representatives to take

a serious interest in the matter.

The Commonwealth Government has just had a cleansing of its own house through the

Cabinet Committee which reviewed Commonwealth functions to see in what areas it

would be proper for the Commonwealth either to withdraw or to reduce its involvement.

Some of you may have been disappointed with the published results of that Review,

For the Government, I could not say to you tonight that we have abandoned or

abolished a number of Government authorities or Public Service positions by

declaring that we have found that there is unnecessary regulation over a wide area

of Commonwealth activity.

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The decisions which flowed from the Review of Commonwealth Functions are, however,

more pervasive than might be readily understood, and I will refer to that issue

again later when talking about my own portfolio. It is important to remember

that each Minister has been asked to scrutinise every authority within his portfolio

responsibilities and to report on the need of that authority to continue and to

exercise its present functional responsibilities. When I think back on a portfolio

I held previously - Primary Industry - my colleague, Peter Nixon, will be having a

busy time in examining the many Primary Industry Boards for which he is responsible.

The basis of any regulation must be that it is in the public interest - however you

might define that expression - that there be some regulation of a particular activit)

Once a decision is made to regulate, the pernicious effects of over-regulation must

be avoided. To some extent, over-enthusiastic control by regulation has been met

by establishing special tribunals, such as the Administrative Appeals Tribunal, to

hear appeals from decisions of officials and authorities exercising discretionary

statutory powers and by vesting the Courts with greater powers to review the way

in which Executive powers are exercised. The Judicial Review [Administrative

Decisions) Act was, in my view, a major innovation by the Government to simplify

procedures for the community to obtain a Court review on how executive powers have

been exercised.

Traditionally, communications has been subject to considerable regulation.

Broadcasting is perhaps the classic example of regulation of an industry. There

are good reasons for this. Broadcasters, whether they are radio or television

broadcasters, use the valuable spectrum space which, under international rules, is

allocated within Australia for broadcasting purposes. There is, therefore, a finite

number of radio and television stations which can be accommodated within the

broadcasting bands. There must be some mechanisms established, therefore, to

determine the number of licences available and how licences are to be granted

amongst competitors. That might not be a major problem, if a broadcasting licence

were not a valuable commercial right.

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As the licensees use spectrum space, which is a public property, the argument then

runs that people granted licences have special community responsibilities. They

are therefore ■ regulated in the question of standards in various matters, these

standards being determined now by the Australian Broadcasting Tribunal. They are

also required *to justify their continuing to hold licences through licence renewal

procedures.

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The commercial broadcasting industry, both radio and television, believes that the

industry should be self-regulating, or should, at least, initiate its own standards.

This is opposed by various interest groups, which consider that standards must

continue to be set by the Australian Broadcasting Tribunal. The frequency of

commercials, the interruption· of programs for commercial breaks, the number and

quality of children's programs, the fostering of local creative talent, and acts of

violence are some of the issues in which there is some public support at least for

continuing regulation through a Government authority.

The Broadcasting Tribunal will soon commence an inquiry into the introduction of

cable television and subscription off-air television, submissions on these matters

having been invited some time ago. Cable television does not, however, require the

use of radio spectrum space for distribution to households. Depending on whether tb

distribution system could provide between 30 and 100 programs for reception on the

home receiver. If cable television is introduced here, it could be expected to

achieve at least some of the popularity experienced in North America where the

distribution of television programs by cable has led to a soaring demand for access

to domestic satellitesL

Cable television would obviously be a competitive source to programs offered by '

radiated broadcasting signals. As distribution by cable does not require access to .

the radio spectrum, the argumment that commercial broadcasting requires a high order

of regulation because it employs the use of a scarce resource will hardly apply in

the case of cable television. A question to be considered is whether cable televisio:

requires regulation in the same way as radiated broadcasting services. Given the

capacity of a cable system to provide a large choice of programs, it might seem a

respectable argument to say that "market forces" should determine the number of cabl

services, the Government merely setting out the technical specifications, which the

services would be required to comply with. _

If cable television produces the greater diversity in program choices available to

the community generally, the policy of limitation of interests in the ownership of

broadcasting stations, which is strongly entrenched in the existing Broadcasting and

Television Act, may also need to be reviewed. To a large part, this would depend on

how cable television is introduced here, the acceptance of cable services by a

significant part of the Australian community, and how industry assesses the

opportunities for the large capital investments which will be required.

Looking at the general scenario in the medium term, I cannot foresee any radical

reduction in the Government's involvement in what I might call traditional broadcast

ing services. One of the complexities to be considered in respect to cable services

will be the amount or measure of regulation necessary for the introduction of such

services without stifling the entrepreneurial interest of the private sector.

Another important dimension of the involvement of Government in Australia is the protection of smaller sector interests. For example, if Western Australia, were to be dominated by eastern states advertising, there is little doubt there would both

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engineering resources and, of course, provide this technical detail, but others

rely on the Department to respond to an outline application by completing the

detailed technical studies needed to consider the application. The Department

also researchers the economic and social issues involved in an application

where this is required.

I am now discussing with the various industry organisations procedures under which

industry itself will be required to document the technical, social and economic

data required to support a planning proposal, rather than leaving it to the

Department to do that work.

I am hopeful that the industry will respond favourably to ammended procedures.

In a moral sense, I consider the new procedures are justified - the public should

not bear the costs of preparing the planning proposals of private organizations.

The advantages to the industry are that it will not have to wait on the Department's

ability to prepare the detailed planning proposals, and this should remove the

traffic jam which in now causing major problems. It will also provide the industry

with a greater involvement in and commitment to the planning processes in:

broadcasting.

. . . /Shortly I will announce the terms of reference for two important inquiries

■ f4;concerning the operations and structure of Telecom andAustralia Post. Both 1

^inquiries will be carried out by people independent of the Government. Both

•Inquiries will review the monopoly powers of thos authorities.

I suppose that one cynical view which might be taken of Government monopolies is

that they avoid the need for Government regulation. This is only partly true.

Legislation establishing statutory authorities which provide services usually

requires a Minister to exercise rights of approval or non-approval in some areas

of sensitivity, for example, charges for services and borrowings.

Apart from these instances - and I emphasis that these powers are circumscribed

to the extent that a Minister may "approve or not approve", but cannot determine

what otherwise should be done - such statutory authorities are largely self­

regulating. Of course, checks and balances are written into legislation, such

as requirements that Annual Reports are tabled in Parliament and accounts are

properly audited, but, in the day-to-day sense, Government monopoly organizations

determine vho gets what services at which times and at the standards considered

appropriate or reasonable by those authorities.

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be considerable unhappiness in the west and feeling that the survival of a

West Australian identity in television programming was threatened.

The same argument applies equally in regional centres throughout Australia

vdien measured against the much larger and hence more profitable commercial

environment of the major metropolises.

The preservation of localism seems to me a very important element in examining

the future Government involvement.

"Communications", in the broadest sense of the word, is seen by many as one

of the growth industries in Australia. Just as large companies have seen the

need to move away from traditional product lines and diversity into the area of

natural resources, so are corporations seriously considering the opportunities

for investing in communications developments. We are therefore likely to see

greater competition in the provision of communications services provided, that

policies - and this includes regulatory mechanisms - promote a climate for

wider private sector investment.

Smaller Government and less regulation may also involve industry accepting

additional responsibilities and costs. My Department, in common with all

Commonwealth Authorities, must carry out its functions this financial year

with a reduced level of staffing. This has required a re-assessment of

priorities with a searching review of the Department's own administrative pro- ..

cesses.

The Government has always had a close involvement in the planning processes

in broadcasting, with the Minister for Communications having the responsibility

for theplanning of broadcasting services. It is not the responsibility which

is now being scrutinised, but the way in which that responsibility is

administered. The Department of Communications has more than 500 applications

for, or expressions of interest in, new broadcasting services or for variations

to existing services. The Broadcasting and Television Act provides that the

Minister shall issue a planning proposal in respect of each of those matters,

that proposal being subject to public comment and reference to the

Australian Broadcasting Tribunal if a new licence of a variation of an existing

broadcasting licence is involved.

At present, applicants have not been required to give detailed technical

specifications for new services they wish to provide or for proposed changes

to existing services. The major broadcasters do have competent in-house

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One of the inquiries I have referred to will report on whether the Postal Commission

should continue to have a monopoly on providing the letter delivery service. This

inquiry may not be as wide ranging as the other inquiry into Telecom's monopoly for

providing telecommunications services, but the issues are at least as teasing.

Consider the fact that since the national postal service was established - the Penny

Post - we have had one common rate for the domestic letter service. Unlike

telecommunications services, the same charge is made whether a letter is carried

on kilometre of 6,000 kilometres to. its point of destination.

Now consider a possible situation in which private organizations are permitted

to compete with Australia Post in the delivery of letters. Because of advantages

of an established network to handle bulk movements of mail, it seems unlikely

that a private organization could shave the costs of Australia Post and offer a

letter delivery service, ;even in a limited area, below the Commission charge of

24 cents.

It is possible that competition with Australia Post would be more likely to take

the form of a "value-added" service with customers paying for a faster and'more

convenient system of delivery.

The economic maxim is that market forces should determine the commercial viability

or organisations offering alternative and competitive services. A complication

in any argument that it should be open to the private sector to provide letter

delivery services is the extent to which the national service should be allowed

to compete with private services. Australia Post is a large enterprise under : ■

intelligent management, and large resources used intelligently provide formidable

competition. ,

One might say that, as a matter of principle, the public sector should not provide

services which can be provided by the private sector. That argument must, however

reach a point where it starts to lack validity or credibility. The business of

Australia Post is to provide postal services for the nation. It would seem an odd

sort of objective to give the national postal service that it provide services only

if it does not compete with the private sector.

I am not inviting conclusions to be made from this brief reference to issues to

be considered by the inquiry. I will ventrue the view, however, that the Government

will have particular interest in whether competition would:-(A) Decrease demand on scarce public sector resources;

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(B) Be likely to result in reduced services or higher cost of services provided by Australia Post; and

(C) Impose some additional administrative costs by any requirement to regulate these services.

The inquiry concerning telecommunication services has a range of fascinating

issues to consider.

By law, Telecom.has the sole authority to provide and operate telecommunications

installations and to attach equipment to its network. The Act provides, however,

that Telecom may authorise a person to erect, maintain or operate a telecommunicatios

installation and may approve equipment for attachment to its telecommunications system.

The legal effect is that Telecom has a monoploy to provide telecommunications

services, but it may authorise breaches, as it were, of that monopoly. Telecom,

therefore, is in the position of a monopoly supplier who also regulates how that

monopoly is administered. ^

On the question of attachments, Telecom has sought to maintain its monopoly position., c

to supply only telex machines, the standard telephone handset, and larger PABX : .

units for Government authorities.

Mr Malcolm King, a former Deputy Managing Director of CSR Limited, has been

examining certain aspects of themarketing of attachments to the telecommunications .

network. The material he has gathered will be brought to the attention of the .

wider public independent.inquiry which will look into the case for increasing

private sector participation in the provision of telecommunications services

generally.

There is a trend in other countries to what is described as "de-regulation" in

the provision of telecommunications services. This.process of so-called "de-regulatior

is most pronounced in the United States, and this is understandable in a country

where there are more than 1,000 organisations providing telecommunications

services but with the bulk of those services coming from one company, AT ξ T.

In Britain too "de-regulation" is moving. British Telecom has been established

and through its subsidary, British Telecom Enterprises, is charged with the respons­

ibility of competitively marketing an array of communications devices. While a little

time is provided for the preservation of some aspects of British Telecom’s monopoly,

the writing is on the wall and the permitting of attachments to the system is being

opened to commercial competition.

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But more significantly, Barclay's Merchant Bank, British Petroleum and Cable and

Wireless have been encouraged to set up an independent trunk broad band network

based on optical fibres laid along the tracks of British Rail. The consortium

calls its proposed service Mercury. It sees itself as offering priority point

to point communications for the business customer, sixty-four kilobits per

second data carrier and no 18 months wait for service. It will combine the fibre

transmission with short range microwave within cities and for that last

important stage of the journey into the building, cellular radio.

While this is still tomorrow's world, it demonstrates the.increased significance

of telecommunications in industrialised economies. Indeed Governments like the

British and French already demonstrate that they believe their countries cannot

participate in thefull flowering of information technology withou good telecommuni.-

cations.. They see the computer and telecommunications industries's future growth

lying in the other's traditional territory. -

Importantly, multinational companies and banks recognise the need for around the

clock unimpeded global flow of information and cash transfers and the absolute

necessity to preserve communication links against industrial or other breakdowns.

In Australia, as in those countries, the big spenders, that is, those accounts

which generate more than 40 percent of the revenue of-Telecom, are progressively

seeking more choice and better service. _

I have referred to this process of a more liberal approach to provision of

telecommunications services as so-called "de-regulation". In fact, the process

of enabling greater competition in telecommunications services requires the

drafting of the new rules, particularly on inter-connection of services between

different carriers, and a system to supervise how the rules are implemented.

De-regulation, therefore, m a y !lead to greater regulation in the sense that there

is a new set of regulatory processes which have to be observed.

This one of the contradictions in public administration. To provide for competition

in the provision of services, you may have to devise reules which set the environment

for competition to take place. You then have to consider whether you need to

provide an umpire to ensure that all sides are playing the game according tothe rules.

This question of competition in services also arises in a serious form with the

proposal for domestic satellite communications system. When.that system becomes .

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operational, we will have the experience for the first time of two major common

carriers for telecommunications services, each carrier competing in some areas

at least for customers. I would hope that Telecom, the satellite company and the

user of that company's services would be able to compete in a way in which market

forces will determine the acceptability of their services in terms of price, needs

and consumer attraction. Maybe there will be some cries of "foul" by one against

the others in a very competitive environment, but it will need a lot better

experience than we now have to decide whether the public interest requires an

independent authority to determine and administer the rules of the competition.

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I read a comment the other day by, one of our top commercial managers that Australia

is the most regulated country in the world. I do: not know how you measure the extent

of regulation in a country so valid comparisons can bemade. Perhaps the statement

is correct, or it may be true only in some particular matters. Maybe the Australian

community feels more confident and secureif matters are subject to regulation.

I believe, however, that there has', been ia: . tendency in Australia to commence thinking

about the need for regulation in the terms of mximum regulation rather than minimum

regulation. This might reflect the conservative nature of our society. If public

funds and public assets are involved in any program, the community expects

Government to give a full accounting on how these assets are used or how the funds

are expended. The experienced public official, knowing the delays and. difficulties

in having legislation changed, might tend to.proffer advice which overshoots

rather than undershoots on the degree of regulation necessary. The political

head, aw^are of the same difficulties, might tend to accept that advice.

It was not my intention to leave you with the impression of a rather dreary

picture of a natural progression to greater regulation requiring more people

on the public pay-roll.

Taking my own portfolio as an example, I have identified several areas where

the issue of the appropriate role of the Government will arise in the future.

To those of you who are concerned about the extent of Government regulation of

industry, a heartening sign is that economic necessity is making many Governments

seriously question whether some of the functions, which they now perform are essential.

If there is a move to lesser Government involvement in the day-to-day affairs of

society, I would not expect that the effects of this would be pronounced for some

time. Nearly every piece of legislation - whether it is a by-law of a local

Government authority or an Act of a sovereign legislature - is regulatory in that

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it defines the policies and powers of the executive authority and sets out the

rights and obligations of the citizenry.

As Leader of the House, I am made acutely aware almost every day of the pressures

on the Government to introduce new legislature. ’

If the volume of legislation were the sole indicator of a resolve to have

smaller Government, you might have a case to side with the pessimists. I suggest,

however, that a judgement on the Government's policy to contain public administration

overheads should be reached on the content of legislative proposals and not on

numbers alone.

At the Federal level, we are giving even closer scrutiny to the needs and

priorities for new legislation, thelikely impact of legislation on the community,

its possible effects in relation to public sector employment levels, and the

administrative arrangements involved.

It is not my experience that Government sets out to interfere needlessly in the

affairs of the nation, establishing costly administrative mechanisms as a result, ”

and introducing uncertainties where there was previously surety. I have to admit

that Government has not always been successful in the sense that policy objectives

are fully realised by provisions in legislaton and the way in which the

legislation is administered.

The recent Review of Commonwealth Functions, has shown that much can be achieved

by a "one-off" review of this type. While the decisions taken as a result of that

Review are themselves important, an equally important factor is that those decisions

set a tone or approach by the Government for the future.

I hope that you would regard that as good news.