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Thursday, 20 June 1946

Mr CALWELL (Melbourne) (Minister for Immigration andMinister for Information) . - by leave - I move -

That the bill be now read a second time.

This is a bill which I am confident will commenditself to both sidesof the House. It deals with the transfer to national ownership of the external telecommunication services now owned and operated by

Amalgamated Wireless Australasia Limited and the. establishment of a statutory corporation to operate both radio and cable services linking Australia with other countries. This bill is one of a number of similar pieces of legislation which will be enacted by the parliaments of all self-governing countries in the British Commonwealth and Empire. It therefore does not represent a purely local conception. The step being taken in Australia is part of a united Empire-wide unified plan, recommended by the British Commonwealth Telecommunications Conference held in London in July and August, 1945, and accepted in principle by -all responsible governments of the Empire, subject to ratification by the respective parliaments.

As honorable members are aware, Britain pioneered the vast submarine cable network which to-day links all countries of the world and which has provided foi1 many years the backbone of i 1 1 te rn u ti on a 1 telegraph com i n un i ca ti ons. The submarine cable network proved ro bc a very lucrative investment for the cable companies who owned and operated these services until the year 1926, when a new and cheaper means of international telegraphy was introduced, in the form of what is commonly known to-day as beam wireless.

The cost of establishing and maintaining beam wireless services is very much lower than that of laying and maintaining submarine cables, and the natural result, was that the enterprises conducting radio services were able to undercut the rates charged by the cable companies for the transmission of telegraph messages.

This 'brought about an economic crisis for the cable companies, whose huge capital investments were seriously prejudiced. Those cable companies whose services were most seriously affected -by the competition from the radio-telegraph were faced with the situation of continuing at a loss or of selling out rather than run the risk of dissipating their shareholders' funds ; and since there was a grave possibility that the cables might be transferred to the ownership of companies in foreign countries, some of whom were anxious to obtain a larger share of international telegraph business, it was apparent to the authorities that steps must be taken to preserve the continuity of the cable system. This was necessary for a number of reasons.

As many honorable members are aware, notwithstanding the advantage, from an economic point of view, which the radio possesses over the submarine cables, the radio has certain disadvantages. Radio i.-i subject to fading and, at times, prolonged periods of interruption due to atmospheric conditions. Radio, moreover, is not a secret means of communication and, in times of war, radio transmissions can be jammed by a hostile power. The cables, on the other hand, are secret and provide a 24-hour a day continuous service, subject always, of course, to the possibilities of physical damage.

As the position was viewed in 1926, the conclusion was reached that unless there were further developments in the use of radio which would overcome its serious deficiencies, the submarine cable must bc maintained not only for the transaction of commercial business but also because of its value strategically in the defence of the British Commonwealth and Empire.

An Imperial Conference was held in 1928 to consider the problem and to makerecommendations to the Empire governments. This conference considered a number of possible solutions but finally made a. strong recommendation that then' should be a fusion of the cable and radio interests in the United Kingdom, and that the Dominion and Indian Governments should endeavour to make similar arrangements, lt was also suggested that the governments should not approve the establishment of any traditional radiotelegraph circuits with other countries if they would involve any substantial diversion of traffic, and therefore of revenues, from the merger company which it was proposed should be formed in the United Kingdom.

The recommendations were adopted in the United Kingdom and, in 1929, under an United Kingdom Treasury Agreement of that year, there was brought about a merger of all the cable companies in the Empire. Certain trans- Atlantic cables owned by the British Government were transferred to the new company, as also were the Pacific cables which had been laid by the United Kingdom, Canadian, Australian and New Zealand Governments in combination, and which were operated under the aegis of the Pacific Cable Board, a body representative of those governments. The beam wireless stations in England, which were owned and operated by the United Kingdom Post Office and provided radio-telegraph services between Britain and India, Canada, South Africa . and Australia, were leased to the new company. Originally, the company was known as Imperial and 'International Communications Limited, but the name was later changed to Cable and "Wireless Limited.

The United Kingdom Treasury Agreement also contained a number of provisions to safeguard the public interest, since the merger company virtually created a privately owned monopoly and it was deemed necessary to protect the public, and particularly the users of the system, against exploitation. Therefore, a body was constituted, known originally as the Imperial Communications Advisory Committee but later called the Commonwealth Communications Council, comprising representatives of the governments, whom the company was required to consult on all matters of policy and who were given authority on behalf of the governments to approve or veto rates, approve new services or the discontinuance of existing services, and. generally to keep a watchful - eye over the activities of the company and to advise the governments, as required, on matters considered to be of concern to Empire telecommunication interests.

The United Kingdom Treasury Agreement also provided that the capital of the communications company should not exceed £30,000,000 sterling initially, that dividends paid to shareholders should not exceed £1,865,000 (which is approximately 6 per cent, on a capital investment of £30,000,000), and that any profits earned above £1,865,000 should be allotted as to 50 per cent, towards a reduction of rates or such other purposes as the advisory committee might approve, and as to 50 per cent, to the company.

The stated objectives were, briefly, to secure as far as was possible all the advantages to he derived from unification of direction and operation of the services; at

Hil] the same time to preserve for the governments concerned control over the unified undertaking which, had been created so as to safeguard the interests of the public in general and cable and wireless users in particular ; and to secure these desiderata at a minimum of cost to the governments concerned.

It will be interesting to honorable members at this stage if I outline the situation as it existed in Australia at the time the 192S Imperial Conference was held. There was then, and still is, a local company - Amalgamated Wireless (Australasia) Limited - operating radio telegraph services between Australia and other Empire countries. Amalgamated Wireless (Australasia) Limited, as honorable members are aware, is a joint company with an authorized capital of £1,000,000 of which the Commonwealth Government holds 500,001 fully paid shares, the balance - except approximately 14,000 shares which have not been issued - being held by private shareholders. The local company, under agreements negotiated with the Commonwealth Government in 1922, 1924 and 1927, possesses a franchise" to establish, maintain and operate radio services between Australia and other countries, and in this respect the company enjoys a monopoly. The local company was both energetic and successful in its operations, and was keen to extend its services, but since the Commonwealth Government, as a' signatory to the 1929 United Kingdom Treasury Agreement, had undertaken to resist the opening of any. additional radio-telegraph services which would compete with the services of Cable and Wireless Limited, the Commonwealth Government was obliged to refuse to agree to the establishment of several new services which the local company, since 1929, sought approval to inaugurate. This not unnaturally led to disagreement between the Government and the company.

Although the 192S Imperial Conference had strongly recommended that the Dominion governments should encourage the fusion of cable and wireless interests in their respective territories, only in South Africa and in India was this recommendation followed. In Canada and Australia the position was met for the time being by joint purse agreements. In

New Zealand, Cable and Wireless Limited own the cable terminals and the New Zealand Government the radio terminals. It should be stated, however, that in 1930 Cable and Wireless Limited and Amalgamated Wireless (Australasia) Limited submitted to the Commonwealth Government of the, time a proposal for a merger, but government policy had in the meantime veered towards nationalization of the externa] wireless services and government agreement was withheld.

Since 1930., successive Commonwealth governments have given consideration to the local problems that arose in Australia in respect of external telecommunications, but although governments of both sides of the House endorsed the policy of national ownership, no positive steps were taken to introduce the necessary legislation.

It was transparently clear to those most closely associated with the administration of these services that something should be done but, since the governments of the day, although subscribing to the principle of national ownership, continued to be averse to taking steps to nationalize the services, an alternative scheme was evolved by the PostmasterGeneral's Department in 1940 and was approved early in 1941 by the Menzies Government. The proposal adopted provided for a tripartite Operating organization, in which, the Government would hold 50 per cent, of the shares, Cable and Wireless Limited, who own the cable terminals in Australia 25 per cent., and Amalgamated Wireless (Australasia)Limited who own the radio terminals, 25 per cent. Negotiations with Amalgamated Wireless (Australasia) Limited were undertaken but little progress was made until after the Curtin Government assumed office when, following an Imperial Conference held in Canberra in December, 1942, heads of agreement were drawn up for the necessary amalgamation of the interests involved and accepted by the Government and by the board of directors of Amalgamated Wireless (Aus- Limited. Sir Ernest Fisk, chairman and managing director of Amalgamated Wireless (Australasia) Limited, proceeded- to London in 1943- to secure the agreement of Cable and Wireless Limited, but negotiations broke down.

To return to the telecommunication scene in Great Britain, it may be stated that, although the 1928 conference had held out high hopes for the success of the new merger company as a financial undertaking, the company experienced early in its career serious financial difficulties. Soon after its formation in 1929 there was a world-wide depression which so seriously reduced the traffic revenues of the company that its financial stability was imperilled ; and it approached the Imperial Communications Advisory Committee with proposals for substantial increases in the rates for overseas telegrams. The advisory committee expressed doubts both about increasing rates during a time of financial stress and also whether an increase of rates would secure any improvement in the company's financial position. The committee, however, recommended that the company's administration and conduct of its services should be examined by an independent inquiry.

The committee of inquiry, in 1931, made a series of recommendations, among which were that the company's capital should be written down ; that the conditions requiring the company to maintain cables necessary for strategic reasons only should be revised, and that there should be- a general overhaul in the company'sadministration with a view to effecting economies. The revenues of the company, meanwhile, continued to be so low that in two successive years the dividends paid to shareholders were reduced to 5s. per £100 of share capital instead of £6 per cent, as provided in the merger plan. Some relief had to be given to the company, and the United Kingdom Government therefore agreed to cancel the annual rental of £250,000 which was being paid by the company to the British Post Office for the lease of four beam wireless stations in Great Britain, and to grant the company a freehold of those stations. In return for this and other concessions, the United Kingdom Government was given a shareholding of £2,600,000 in the company. The net standard revenue of the company was also reduced from 6 per cent, to 4 per cent, on the capital investment, thereby reducing the profit payable to shareholders from £1,865,000 to £1,200^.000. These financial adjustments were made in 193S.

Immediately afterwards, and as a result of an improvement in the financial position of Cable and "Wireless Limited, the partner governments, in collaboration with all the companies operating the external telegraph services throughout the Empire, introduced a new tariff schedule which conferred great benefits on the public in all Empire countries. A flat rate of ls. 3d. a word for full-rate traffic, with correspondingly lower rates for lower category traffics, was introduced early in 1.938. The saving to the public was estimated at £500,000 sterling. Although the new rates entailed considerable sacrifice in revenues both to the companies and to the governments, it was hoped that there would follow an increased traffic demand which would more than compensate for the loss of revenues in {he initial period. "Before the effects of the reduction in rates could be properly gauged, however, World War II. intervened.

During the war the volume of traffic considerably increased due very largely to the increase in government business transacted by telegraph. The revenues of the overseas telegraph companies, both in the United Kingdom and in the Dominions, readied all-time high levels. As a result, Cable and Wireless Limited was not only able to pay to its shareholders the standard revenue of 4 per cent, on invested capital during the years 1939 to 1944, ,but provided substantial balances for diversion to reserve funds to cover war taxation and other contingencies, including provision for future rate reductions in accordance with the 1929 United Kingdom Treasury Agreement.

But the war produced other telecommunication problems, both for Cable and Wireless Limited and the governments. Honorable members will recollect that the governments had 'agreed in 1929 to resist the opening of additional radio-telegraph services which might cause a diversion of revenues from Cable and Wireless Limited and its associates. All the partner governments had loyally adhered to that condition and had indeed, reaffirmed their obligations in this respect in 1937. In the intervening period, however, there had been insistent requests from other countries for direct radio telecommunication services. Australia was not immune from these importunings, and the continued refusals of the Commonwealth Government to permit the establishment of direct radio-telegraph services, particularly with the United States of America and Japan, had led to considerable embarrassment with overseas administrations and also, with Amalgamated Wireless (Australasia) Limited, who not unnaturally were desirous of expanding their services. The war brought about a radical change. As I have pointed out, the- volume- of traffic had greatly increased. This increase coincided with the interruption of a number of 'cable routes and that, in tarn, gave impetus to the establishment of direct radiotelegraph circuits.

Before the war the only Empire territories with which the United States of America had direct radio-telegraph communication were the United Kingdom, the Bahamas and British Honduras. On its entry into the war, however, the Government of the United States of America made an irresistible case for the establistment, as a w.-ar measure, of direct radio-telegraph communication with a number of Empire countries, particularly with those countries where United States forces were operating.. In the circumstances of the time, the Empire governments, Australia among them, could not. do other than agree to the establishment of a number of direct radiotelegraph services with the United States of America. It will be remembered that at one stage of World War II. the telecommunications system of the Empire was gravely imperilled. Cables had been cut in the Mediterranean, the entire Far Eastern cathie system had been seized by Japan, and the routes of the cables linking Australia with India and Canada were dangerously close to areas in the hands of the Japanese.

Cable and Wireless Limited strongly protested against the establishment of these direct radio-telegraph services with the United .States of America on the ground that it constituted a distinct departure from the -undertakings given to the company in 192S and reaffirmed in 1937; and the company claimed that if the services were established it should be compensated for any losses of revenue. The Imperial Communications Advisory

Committee suggested to the governments that the services, if established, should be retained, only for the duration of the, war and six months thereafter, and that transit traffic, that is to say, traffic other than that originating or terminating in the terminal countries, should not be admitted over these direct services. Some governments accepted those conditions, but the Australian Government reserved its position. In this connexion it should be explained that the Australian Government, following the 1937 conference in London, had expressly stipulated that it could not bind itself or its successors in office to abrogate, its rights to authorize new wireless services if arid when circumstances made it desirable to do so. The view was held that for several reasons it would be difficult to justify discontinuing these direct services once they were established. For one thing, it could be expected that there would be a greater community of interest than ever before between Australia and the United States, and that it would be desirable to foster this in every way . possible. There was also to be considered the cost of erecting the radio terminals both in Australia and the .United States of America, and the probable higher traffic demands to he met after the war than before.

The problems created by the establishment of these direct radio-telegraph services with America were considered at an Empire conference held in Canberra in 1942, and also at a meeting of the Commonwealth .Communications Council held in London in 1944. Meantime, . the United States authorities had been seeking assurances that the conditions attached to the establishment of the services would be withdrawn. The Australian delegates to those conferences made it clear that Australia for its part would not discontinue the radio-telegraph services with the United States if traffic and other needs after the war justified their retention; and that the claims for compensation by Cable and Wireless Limited for losses of revenue could not be admitted. The Commonwealth Government, however, as I have already stated, had meantime invited Cable and Wireless Limited to join with the Govern-1' ment and Amalgamated Wireless (Australasia) Limited rn forming a merger organization in .''Australia, through , which, as a partner, the London company would have been able to share in the revenues derived from the operation of these direct services. Cable and Wireless Limited had refused to participate in this merger organization.

The meeting of the Commonwealth Communications Council, held in London, was confronted with some grave problems ' in telecommunications. Cable and Wireless Limited emphasized that if the direct services with. America were retained in operation after the war, as Australia and other dominions intended, and if transit traffic were allowed over these services, the company would be faced with ruin. There were other problems also to which the company did not appear to be able to present a satisfactory solution and which were likely to affect its former revenue-earning capacity. A general rise in costs appeared to be inevitable, as was also a revision of the currency agreements relating to traffic settlements which, before the war, added considerably to the company's income. Intense competition from fast international air mail services would undoubtedly have to be met, particularly the competition of the air mail's with deferred category traffic, and there would he greater competition to meet than ever before from operator's in the United States of America. The company was invited to discuss these matters with the council, and the council also sought the company's views on these problems in writing. Later the council was notified, through the United Kingdom Treasury, that the company had come to the conclusion that the really satisfactory solution of all these problems was to form a single overseas telecommunications corporation for the whole Empire, the shareholders in all the existing companies, both in the United Kingdom and else- where in the Empire, to exchange their holdings for stock in the new corporation, with interest at 3 per cent, guaranteed by the governments concerned.

The Commonwealth Communications Council itself had reached the conclusion that the time had come for a radical reorganization of the control and operation of the Empire's telecommunication services. It was quite obvious that the attainment of unification of direction and operation of overseas communications, both cable and radio, which the 1928 Imperial Conference had recommended, had not in fact been achieved. Although Cable and Wireless Limited owned and operated the overseas telegraph services in the United Kingdom and held a substantial proportion of the share capital in the companies responsible for the operation of the radio-telegraph services in all the dominions, except New Zealand, and in India, those companies were for the most part conducted as separate entities. In Australia, Cable and Wireloss Limited conducts the cable services, and Amalgamated Wireless (Australasia) Limited the external radio services. A similar position obtains in Canada; whilst in New Zealand the radiotelegraph services _ are owned and operated by the Government. The proposal of Cable and Wireless Limited was virtually an admission that, in the light of the changed conditions brought about by the war and the inability of the governments to adhere any longer to the obligation they had entered into in 1929, the structure of the organization then established was no longer adequate, and that the governments themselves had to take a greater share of control and responsibility. The proposal submitted by the company was that by Royal Charter a single corporation, based on London, be formed to operate throughout the British Commonwealth and Empire. Ownership of the stock in the corporation would remain with existing shareholders, who would exchange their stock in the present companies for stock in ,the new corporation, the governments to guarantee a fixed rate of interest on the investment. The company suggested; however, that the undertaking bt managed by a board of governors representing the United Kingdom, the Dominions, India and the colonies, the number of each to bear some relation to Hie amount of guarantee and the responsibilities of the particular area. Governments were to control the corporation through terms laid down in the charter and by the issue of licences, which were to be exclusive.

It is interesting to record the premises upon which Cable and Wireless Limited based its proposals, as explained to the Commonwealth Communications Council by" the chairman of directors of the company. It was pointed out that the present arrangement represented a patchwork- of conflicting shades arid shapes; that Dominion governments were in an embarrassing position between their desire to manage their own affairs, without prejudice to imperial interests, and their present obligations to, and dependence on, London as a centre of the Empire telecommunication services; that there might soon be in all Empire ' countries a conflict between, the interests of company shareholders and of the public service; that the responsibility for maintaining a. rationalized system of cable and wireless services throughout the Empire could not be carried by one particular company ; that the increasing and aggressive competition from telecommunication entities in foreign countries had to be realized and met; and that a system must be devised which, with public service the sole motive, would result in flexibility in the conduct of these services and a coordination of direction in policy in their planning and execution; that it should be such as to combine the advantages of public control without its disadvantages; that there should be public control over major policy but not public interference in management; and that 'it should have an area of operation which would be right technically, economically and politically.

It is interesting also to record that the Australian and New Zealand members of the council, on somewhat the same premises but approaching the problem through dominion eyes, had formulated, another proposal which they presented to the council on the 25th April, 1944, a day earlier than the company's plan was communicated to the council. By virtue of the authors of the plan and the day on which it was presented, the alternative plan was promptly called the " Anzac plan ". This plan , proposed the establishment of a series of public utility corporations in the United Kingdom, in each of the dominions and in India, each corporation being owned by 'the local government but linked by an exchange of shareholding between the United Kingdom corporation on the one hand and the dominion and India corporations on the other, the Commonwealth Communications Council acting as a clearing house 1660 Overseas [REPRESENTATIVES.] Telecmmnimications Bill 1946. for information and as the essential coordinating authority on behalf of the governments.

The Commonwealth Communications Council, after a careful examination of both plans, decided unanimously to recommend to the partner governments the adoption of the Anzac plan. The council considered that it was essential that the Dominions and India should have a greater share in the administration of the British Commonwealth telecommunications system, with a view to its development as a whole on both the cable and wireless sides. Moreover, the council considered that a company largely commercial in structure", with obligations to private shareholders, might not be in a position to provide a service to satisfy fully public needs and strategic requirements. As honorable members will observe from the bill, the plan finally adopted resembles closely the plan submitted in April, 1944, by the Australian and -New Zealand delegates at the meeting of the Commonwealth Communications Council. The recommendations of the council were considered initially by the PrimeMinisters' conference in London in May, 1944, but no decision was taken other than that the plan would be examined in detail by each of the partner governments. Later, all partner governments accepted the plan in principle, with some reservations as to detail, except the Governments of the United Kingdom and the Union of SouthAfrica.

The United Kingdom Government, while accepting the view of the Commonwealth Communications Council that there was a case for a fundamental change in the structure of the Empire's telecommunication services, did. not think that the scheme recommended would provide that degree of central co-ordination which was essential to securing the consolidation and strengthening of the cable and radio systems which were considered to be imperative. The United Kingdom Government accordingly decided to send a mission, led by Lord Keith, to the Dominions and India to explain the difficulties seen by the United Kingdom Government and to explore alternatives. Since complete agreement was not reached another conference - the Commonwealth Telecommunications Conference - was held in

London in July and August, 1945. The Governments of the United Kingdom, Canada, Australia, New Zealand, South Africa, India and Southern Rhodesia were represented at this conference. Representatives of Cable and Wireless Limited and some of the associated companies in the Dominions, including a representative of Amalgamated Wireless (Australasia) Limited, althoughnot members of the conference, attended certain of itsmeetings. The conference made a series of recommendations, all of which have since been accepted by the partner governments subject to ratification by the respective parliaments.

The Commonwealth Telecommunications Conference reached the unanimous conclusion that, in order to secure the desired strengthening and better ordering of the British Commonwealth telecommunications system, a fundamental change in the present organization was necessary. The conference recommended, first, thatthe private shareholder interest in the ownership of overseas telecommunication services of the United Kingdom, the Dominions and India should be replaced by public ownership ; secondly, that the government in each Empire country should acquire the ownership of the telecommunication assets in its territories; thirdly, that the type of organization established in each Empire country to own and operate the external telecommunication services should as far as possible be uniform ; and, fourthly, that a Commonwealth Telecommunications Board be established to replace the Commonwealth Communications Council, with functions mainly advisory in character, but. extending to all the national organizations throughout the Empire instead of being related only to the London organization as under present conditions. The conference also worked out a system of pooling of net revenues in a central fund, from which out-payments for the maintenance of the Commonwealth Telecommunications Board and {he maintenance of the submarine cables could be met, after which the residues would be returned to the respective national bodies.

Legislation to give effect to the recommendations of the Commonwealth Telecommunications Conference has already been introduced in the British House of

Overseas[20 June,1946.] Telecommunications Bill 1946. 1661

Commons. The bill before the British Parliament provides for the acquisition of the shares of Cable and Wireless Limited, apart from the 2,600,000 shares which it already owns, and the payment of compensation to the shareholders. Another bill' is to be introduced later for the establishment of the Commonwealth Telecommunications Board and for the carrying into effect of. the full scheme recommended by the 1945 conference.

The bill before this Blouse provides for the full implementation of the recommendations of the Commonwealth Telecommunications Conference, which have already been accepted in principle by the Government, and the ratification of an overall agreement in the form set out in the first schedule to the bill. The bill provides for the establishment in Australia of a government commission as a corporate body, to acquire the ownership of and to maintain and operate the overseas telecommunication services at present conducted by Amalgamated Wireless ( Australasia) Limited and by Cable and Wireless Limited in the territories of the Commonwealth of Australia. The commission, which the hill provides shall be called the Overseas Telecommunications Commission (Australia), will be constituted on lines. similar to the Australian National Airlines. Commission.

In Part IV. of the bill, provision is made for the assessment of the compensation which will be payable to Amalgamated Wireless (Australasia) Limited for the acquisition by the Commonwealth of the company's telecommunication assets. The bill provides that the amount so payable may be determined by 'agreement between the commission and the company. Negotiations towards this end have already been opened between the Government and the company. In the event of agreement not being reached by the parties concerned, the amount may be determined by a compensation board set up in accordance with clause 50 of the bill. If either party is dissatisfied with the amount of compensation determined by the board, the act provides that an appeal may be made to the High CourtHonorable members will agree that the bill provides adequate and ample machinery for the acquisition of the company's telecommunication assets on fair and just terms. The assets of Cable and Wireless Limited to be taken over by the commission will be transferred by the British Government to the commission at an agreed price to be paid in cash.

The 1945 London conference recommended that the: governments should give consideration to means whereby the interests of the staffs of both companies might be safeguarded. Provision is accordingly made in clause18 of the bill to give effect to that recommendation, so far as it is practicable to do so. The honorable member for Martin (Mr. Daly) has made representations to the Government on this matter:

Mr Daly - Will their rights be protected ?

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