Australian Post Office - Commission of Inquiry - Report - Volume I - Commission Report

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

1974— Parliament Paper No. 123

REPORT OF THE

COMMISSION OF INQUIRY

INTO THE

AUSTRALIAN POST OFFICE

VOLUME 1 - COMMISSION REPORT

April 1974

Presented by Command 23 July 1974 Ordered to be printed 13 August 1974

THE G O V E R N M E N T PRINTER OF AUSTRALIA

CANBERRA 1975 ‘

First published 1974 Reprinted 1974

© COMMONWEALTH OF AUSTRALIA 1974

ISBN 0 642 00633 4

Printed by McClintock Bros..Sydney.

THE AUSTRALIAN POST OFFICE COMMISSION OF INQUIRY

Telephone 251866 Area Code 02

19 April, 1974

BOX 4564 G.P.O. SYDNEY, N.S.W. 2001

Your Excellency,

We have the honour to present the Report of the Australian

Post Office Commission of Inquiry upon the matters entrusted to us for

enquiry by Letters Patent dated 22 February, 1973.

The reports of consultants, engaged to assist with particular

aspects of the matters raised by the terms of reference, accompany our

Report.

The Letters Patent issued to your Commissioners are returned

herewith.

Yours sincerely,

B.J. Callinan

His Excellency the Right Honourable Sir Paul Hasluck, G.C.M.G., G.C.V.O. K.St.J. Governor-General Government House CANBERRA A.C.T.

L E T T E R S PA T E N T

ELIZABETH THE SECOND, by the Grace of God of the United Kingdom,

Australia and Her other Realms and Territories Queen, Head of the

Commonwealth, Defender of the Faith,

TO SIR JAMES VERNON, Commander of the Most Excellent Order of the

British Empire, Company Director,

TO BERNARD JAMES CALLINAN, Commander of the Most Excellent Order

of the British Empire, Companion of the Distinguished Service Order, upon

whom has been conferred the Decoration of the Military Cross, Commissioner

of the State Electricity Commission of Victoria, Engineer,

AND TO JAMES JOSEPH KENNEDY, Member and Fellow of the Institute

of Chartered Accountants, Company Director,

GREETING:

WE DO by these Letters Patent, issued in Our name and under the

Great Seal of the Commonwealth of Australia by Our Governor-General in and

over the Commonwealth of Australia, acting with the advice oh the Federal

Executive Council, and in pursuance of the Constitution and the Royal

Commissions Act 1902-1966 and all other powers him so enabling, constitute

and appoint you to be, under the title The Australian Post Office

Commission, Commissioners required and authorised to inquire into and

report upon the following matter, namely:-In the public interest, what changes, if any, should be made in the

organisation, administration and operations of postal and

telecommunications services (including overseas services) provided in

Australia, including, inter alia, changes in relation to:

. the range of services to the public and their adequacy to meet

present and future needs, including services as affected by

proposals approved but not yet implemented;

. the financing of recurrent and capital costs;

. management/staff relations, including the jurisdiction of the

Public Service Board;

. responsibilities of the Overseas Telecommunications Commission

and the division of functions between that Commission and the

Postmaster-General's Department;

. urban and regional development;

(iv)

. procurement of supplies with the aim of developing Australian

industries;

. the performance of work by contract; and

. other matters to which the attention of the Commission is

particularly directed by the Postmaster-General in the course of

the inquiry.

AND WE APPOINT YOU, SIR JAMES VERNON, to be the Chairman of The

Australian Post Office Commission,

AND WE DIRECT that, for the purposes of taking evidence, two

Commissioners shall be sufficient to constitute a quorum, and may proceed

with the inquiry under these Letters Patent,

AND WE REQUIRE YOU to make your inquiry with a minimum cf legal

formality and to report to Our Governor-General in and over the

Commonwealth of Australia with as little delay as possible the result of

your inquiries into the matters entrusted to you by these Letters Patent.

WITNESS HIS EXCELLENCY THE RIGHT

HONOURABLE SIR PAUL MEERNAA CAEDWALLA

HASLUCK, a member of Our Most Honourable

Privy Council, Knight Grand Cross of the

Most Distinguished Order of Saint Michael

and Saint George, Knight Grand Cross of

the Royal Victorian Order, Knight of the

Most Venerable Order of the Hospital of

Saint John of Jerusalem, Governor-General

and Commander-in-Chief in and over the

Commonwealth of Australia, this

Twenty-second day of February, in the year

of Our Lord One thousand nine hundred and

seventy-three and in the twenty-second

year of Our Reign.

By His Excellency's Command,

PAUL HASLUCK

D. WILLESEE Governor-General

Special Minister of State.

(v)

(vi)

T A B L E OF C O N T E N T S

V O L U M E 1 p a g e

Summary - Principal Conclusions and Recommendations (xiii)-(xxvi)

Chapter 1 - Introduction 1

Persons, Groups and Organisations Examined in Public Hearings

Chapter 2 - The Australian Post Office Today 11

General 11

Legislative Framework 13

Organisation 15

Staffing 18

Financial Framework 23

Financial Performance 29

Source and Application of Funds 46

Growth of Postal and Telecommunications Traffic 46 Conclusions 52

Chapter 3 - Role of the Australian Post Office in the Community 53

Two views on the Role of the Australian Post Office 53 1908-1910 Royal Commission 53

1915 Inquiry on Business Management of the Australian Post Office 54

1919-1921 Royal Commission on Economies 55

Parliamentary Joint Committee of Public Accounts 55 Ad Hoc Committee of Inquiry into the Commercial Accounts of the Post Office 1959-1960 55

Effect of Earlier Inquiries 56

Conclusions 56

Chapter 4 - The Range and Adequacy of Postal and Telecommunicat­ ions Services 61

Postal Services 61

The Mail Service 62

Mail Handling and Processing 65

Standards of Performance , Mail Services - delivery 69 Sydney Mail Exchange 73

Missing, Damaged and Dead Mail 77

Posting Times 79

Saturday Trading 80

Official and Non-Official Post Offices 82

Future Postal Developments 84

Post Office Buildings 85

Post Office Banking Service 86

Decentralised Mail Centres 86

Parcels Centres 88

Mechanisation 89

Transfers of Money 91

Agency Services 92

Telecommunication Services 94

Standards of Performance — Telephone service 95

The Telegram Service 97

(vii)

New Telephone Connections 98

Telephone Accounts 100

Private Automatic Branch Exchanges 104

Telex Services 105

Data Services — Datel and C.U.D.N. 105

Leased Lines 109

Special Equipment and Attachments 111

New Equipment and Services 112

Representation of User Interest in Postal and Telecommunications administration 113

Chapter 5 - Management/Staff Relations 115

Page

Staff Organisations 117

Staff Organisation Views on Management/Staff Relations 118

Industrial Relations Generally in the A.P.O. 131

Chapter 6 - The Separation of Postal and Telecommunications Administrations 143

The Case for Separate Administrations 144

Comments of Consultants on Separate Administrations 146 Practical Effects of Separation 148

Customer Services and Customer Contact 148

Common Property and Equipment 148

Staffing and Costs 149

Attitudes of Staff Organisations 150

Conclusion of the Commission 154

Chapter 7 - Financial Prospects 155

Introduction 155

Superannuation Liability 156

Postal Services - Projected Profit and Loss Accounts 166 Telecommunication Services - Projected Profit and Loss Accounts 167

Discussion of Expense Items in Profit and Loss Accounts 169

Financial Objectives 176

The Provision of Capital 182

Taxation 183

Capital Expenditure Requirements 183

Implications for Future Tariffs: Postal 185

Telecommunications 187

Tariff Setting 189

Concluding Remarks: Postal Services 193

Telecommunications Services 195

Price Waterhouse Report 196

Chapter 8 - Form of Administration - Departmental or Corporate 197

Corporate Forms 197

Administration by a Department of State 198

Statutory Corporation 200

Conclusions of the Commission 205

(viii)

Chapter 9 - Jurisdiction of the Public Service Board 207

Page

Functions and Powers of the Public Service Board 207 Co-ordination of Pay and Conditions of Service in Government Employment 208

Co-ordination and the Postal and Telecommunications Corporations 209

Industrial Relations Staff 211

Arbitration 212

Factors put Forward by the Public Service Board in Support of a Co-ordinated Approach 215

Chapter 10- Corporate Functions and Powers 219

Corporation Titles 219

Administration of the Corporations 220

General Functions Duties and Responsibilities of the Corporations 221

Responsibilities of the Postmaster- General under the Broadcasting and Television Act 222

Responsibilities of the Postmaster- General under the Wireless Telegraphy Act 223

General Powers 225

Acquisition of Land 225

Construction and Maintenance of Buildings 226

Financing 227

Bank Accounts 228

Application of Moneys 228

Borrowing 228

Provision for Insurance 229

Liability for Tax 229

Financial Objectives 229

Tariffs 230

Reimbursement of Revenue Foregone 232

Estimates and Capital Programmes of the Corporations 232 Audit of Corporation Accounts 233

Report of the Corporations 233

Power to Employ Staff 233

Relationship of the Corporation to the Minister 234 Power to make By-laws ' 235

Chapter 11 - Corporate Organisation 237

Organisation of the Telecommunications Services Observations of Consultants on Existing Organisation of the Telecommunications Business 237

Proposed Administrative Levels 240

Proposed Organisation of Central Management Level 241 Commissions Comments on the Central Management Organisation Proposed 247

Proposed Regional Organisation 248

Proposed District Administration 251

Commissions Comments on the Regional and District Organisation Proposed 252

(ix)

Page

Organisation of the Postal Services Observations of the Consultants on Existing Organisation of the Postal Business 253

Proposed Organisation at Central Management Level 256

Proposed Regional Organisation 260

Proposed District Organisation 262

Postal Services Classification and Pay Scales 264 Commissions Comments 264

Chapter 12 - The Relationship of Overseas Telecommunications to National Telecommunications 269

Background 269

Composition and Powers of the O.T.C . 269

O.T.C. Facilities 271

Staffing 272

Operational Arrangements: Telephone 273

Telegrams 274

Telex 275

Leased Circuits 275

Financial Structure and Profitability of O.T.C. 275 Profitability of Individual Services 283 Growth of International Business 283

International Tariffs 285

A.P.O. and O.T.C. Financial Relationships 287 Relationships between the A.P.O. and the O.T.C. 288 Technical Planning 288

Financial Arrangements 290

Relationships with Customers 291

Division of Responsibilities 291

Future Relationships 292

Discussion - Views of the Commission 294

Chapter 13 - Protection of Rights of Serving Officers of the Australian Post Office 301

Temporary and Exempt Staff 301

Permanent Officers of the A.P.O. 302

Chapter 14 - Procurement of Supplies by the A.P.O. 309

Interpretation of Commissions Terms of Reference 309

Present Policy and Practice 309

Procurement Practices of the A.P.O. 310

The Australian Telecommunications Industry 311 Supply of Switching Equipment 314

Consultants Comment on Supply of Switching Equipment 315

Commissions Conclusions (Switching Equipment) 316 Development of Technology in Switching Equipment 318 Supply of Cables 319

Consultants Report on Supply of Cables 319

Commissions Conclusions (Cables) 321

Post Office Workshops 321

Commissions Conclusions (Postal Workshops) 323

(x)

Chapter 15 - Performance of Work by Contract 325

Present use by A.P.O. of Contractors 325

Views of Staff Organisations 326

Contractors Views 330

Consultants Report: Cable Conduit Construction 331

Installation of Exchange Switching Equipment 332 Conclusions 333

Contractor Installation A.P.0./P,T.T.A. Agreement for the Installation of Public Telephone Exchanges 335

Chapter 16 - Urban and Regional Development 337

Page

Assistance to Growth Centres: Concessional Tariffs 337

Location of A.P.O. Facilities 338

Awarding of Contracts 339

Range and Availability of Services 339

Postal and Telecommunications Services in Rural Towns 340

Uniform Charges for Telephone Calls 341

Extended Local Services Area 342

Regional Administration of Postal and Telecommuni­ cations Services 343

Acknowledgements 345

V O L U M E 2

Consultants Reports:

Price Waterhouse and Company Cresap McCormick and Paget Inc. G. Paterson

(xi)

S U M M A R Y OF P R I N C I P A L C O N C L U S I O N S AND R E C O M M E N D A T I O N S

The Terms of Reference given to the Commission have required it

to review a large number of issues relating to the postal and telecom­

munication services in Australia. In considering the format of its Report,

the Commission concluded that it was not practicable to present its

proposals as a series of recommendations under specific items of the Terms

of Reference. Consideration of desirable changes in the organisation,

administration and operations of postal and telecommunication services,

including overseas services, involved issues of importance which the

Commission believed should be discussed as separate matters. Discussion of

such questions as the financial prospects of the services, changes in

organisational arrangements, and management/staff relations has required the

Commission to express its views on many particular issues at various stages

of its Report.

The principal conclusions and recommendations arising from the

Inquiry are brought together in this section in summary form to provide an

overview of the Commission's Report. Before presenting them, however,

attention should be drawn to some key recommendations which bear on the

structure and operations of the Australian Post Office (A.P.O.).

. The A.P.O. is responsible for the provision of both postal and telecom­

munications services throughout Australia - services which differ

widely in respect of technology, capital investment requirements,

growth rates, and employment characteristics. Each of the services is

a large and important enterprise in its own right and, as argued in

Chapter 6, the Commission considers that the time has come to place

them under separate administrations.

. The recommendation is made in Chapter 8 that two statutory corporations

should be formed to administer respectively the postal and telecom­

munication services. Both are essential community services but have

the basic characteristics of commercial enterprises. The Commission

does not consider that they should continue to be administered as

(xiii)

departments of State. Corporate structures will give the two

managements the authorities and responsibilities considered by the

Commission to be necessary for the organisation and administration of

the enterprises. The Commission proposes, in Chapter 7, financial

objectives considered to be appropriate for both corporations and the

principles that should be observed in the setting of tariffs for the

services.

The Commission recommends in Chapter 9, that responsibility for

determining pay, classifications and conditions of employment should be

placed with the corporations and that the existing responsibility of

the Public Service Board in respect of the A.P.O. should cease when

the corporations are established.

For ease of reference, the summarised conclusions and

recommendations which follow are grouped under Chapter headings:-

Chapter 2 - "The Australian Post Office Today"

Postal and telecommunications services, which are examined separately, show widely differing characteristics in respect of capital investment, growth rates, and profitability. In the

profit and loss sense, postal services have been a problem area within the A.P.O. for a number of years. Consistent losses have largely offset profits derived from telecommunications services. (page 33)

The postal and telecommunications services provided by the A.P.O. function in much the same way as do the services provided by authorities in other countries and face many of the same problems. Relatively limited scope exists for the application of new

technologies to postal services, and prospects for major advances in productivity are not high; increasing wage and salary rates are therefore causing postal costs to rise substantially. The advanced technologies employed in telecommunications, together with increasing demands for these services, are giving rise to

heavy capital demands. (page 52)

Chapter 3 - "Role of the Australian Post Office in the Community"

Two differing views have been advanced as to the nature and role of the A.P.O. in the community. The first is that the A.P.O. is essentially the supplier of a social service and as such should not be orientated to the making of profits; the second is that the

(xiv)

A.P.O. is a business enterprise which should provide services based on commercial criteria and achieve given financial objectives. (page 53)

The Commission sees the A.P.O. as an organisation which

- offers a comprehensive range of postal and telecommunications services and at standards which meet, within reasonable and responsible limits, the requirements and needs of the whole community.

- offers those services on the basis of a tariff structure which

(i) provides for the reasonable costs of those services to be recouped from revenues received from customers^

(ii) ensures that the community contributes to the revenues of the A.P.O. in proportion to the use each member makes of those services;

(iii) provides a reasonable return to public revenues for the use of community funds employed in the enterprise.

- is administered in accordance with accepted principles of business management so that the efficiency and vitality of the organisation is constantly under review. (page 58)

Chapter 4 - "The Range and Adequacy of Postal and Telecommunication Services"

Postal

The range of postal services offered by the A.P.O. is adequate and compares favourably with that offered in overseas countries. (page 65)

The performance standard of mail delivery in States other than New South Wales is generally acceptable. The New South Wales performance is considerably and consistently below any reasonable standard. (page 70)

A major factor affecting mail delays and regularity of performance in New South Wales has been industrial unrest in the form of stoppages and "black bans" at the Sydney central mail exchange, (page 73)

The successful solution of the industrial problems at the Sydney central mail exchange offers the best immediate hope for a significant improvement in the performance standards and reliability of mail services in New South Wales. (page 76)

Consideration should be given to improving the design of parcel handling facilities to reduce the risk of damage, particularly in the Sydney mail exchange. (page 78)

(xv)

The closure of all post offices other than G.P.O.s, and the withdrawal of deliveries on Saturdays, are retrograde steps for a public facility such as the postal service. Decisions on such matters should be the responsibility of postal management and

provided employees are properly paid, they should have no objection to providing the services called for by management, which has the responsibility of interpreting and providing for the public's

postal needs. (page 80)

Where the volume of work through small official post offices does not justify their retention, it is reasonable and responsible to look to alternative means of providing equivalent services at less cost through non-official offices. (page 83)

The closure over recent years of a number of small non-official post offices has been justified. (page 84)

The A.P.O. has a responsibility to reduce its operating costs wherever practicable. Rationalisation from time to time of service outlets to take account of changes in customer needs is

clearly sensible, provided reasonable access to essential postal services is still available to the community concerned. (page 84)

The programme of construction and renovation of post offices should continue and be expanded in the future. (page 85)

The introduction of a Giro banking service would represent an unnecessary and undesirable diversification. (page 86)

The decentralised mail centre scheme heir planned by the A.P.O. is sound and should be developed as quickly as is practicable in Victoria and New South Wales; the preliminary planning understood to be in progress for other States should proceed. (page 88)

The concept of parcels centres in Sydney is good and planning for the scheme should proceed with studies being extended to cover other capital cities. (page 89)

A vigorous programme of mechanisation for the processing of mail is essential to the maintenance of service performance standards and to the control of costs within the A.P.O. (page 90)

Mechanisation should be accepted by staff organisations of the A.P.O. in the interests of maintaining an effective mail service and containing the growth of its costs. (page 90)

The problems of the Sydney central mail exchange seem to have stemmed more from the industrial situation in the exchange than from its mechanical equipment. (page 91)

The postal order and money order services of the A.P.O. are showing substantial annual losses. There is a need for the money order service in particular to be examined closely to see if it can be made more attractive to the public and the costs involved in running it reduced. (page 92)

(xvi)

Telecommunications

The present range of telecommunications services available in Australia is reasonably adequate for the needs of the present and the immediate future, taking into account the resources available to the A.P.O. (page 95)

Standards of performance in respect of technical faults and plant congestion for local calls are generally satisfactory. With S.T.D. calls, losses due to plant defects and plant congestion are exceeding targets. (page 96)

The performance standard of the A.P.O. in clearing telephone service faults seems comparable with that of most overseas telecommunic­ ations authorities. (page 96)

Total unsatisfied demand for new telephone services has been increasing and stood at 105,000 in January 1974, including 21,000 deferred applications. Improvement in the position would only seem possible if total resources available to the A.P.O. were increased. (page 100)

With the present call metering system, no details of S.T.D. calls are available to permit subscribers to check their telephone accounts. The A.P.O. should expand and develop the Automatic Message Accounting (A.M.A.) system for telephone accounts, already

planned for introduction in association with International Subscriber Dialling, to embrace the whole network. (page 100)

Some degree of standardisation of Private Automatic Branch Exchange (P.A.B.X.) equipment is desirable and of benefit to users. Customers should be allowed reasonable freedom to select equipment appropriate to special requirements. (page 104)

The planning and organisational arrangements for the Common User Data Network (C.U.D.N.) were inadequate for the development of such a major innovative project. (page 106) ,

The policy of the A.P.O. on the permitted uses of leased lines is reasonable but should be kept under review. (page 109)

The A.P.O.'s policy on the multiplexing of leased lines provides a reasonable opportunity for a lessee to obtain the greatest benefit from a private line. (page 111)

There is evidence of lack of co-ordination within the A.P.O. in the handling of applications for approval to attach special equipment to its network, and the procedures should be investigated with a view to speeding up the handling of such applications. (page 111)

The A.P.O. should charge for work it performs in connection with applications to attach special equipment to A.P.O. lines. (page 112)

Applications for approval to attach an item of equipment to a line to provide a particular and specialist service not provided by

(xvii)

standard A.P.O. equipment, should be granted subject to the equipment meeting necessary technical standards. (page 112)

Chapter 5 - "Management/Staff Relationships"

The policy of neutrality adopted by the A.P.O. in relation to the number of staff organisations representing employees of the A.P.O. is correct. (page 117)

There are difficulties at present in offering greater scope for the career development of officers within certain categories of employment in the A.P.O. The separate career Services for employees of the proposed postal and telecommunications corporations should improve matters. (page 119)

Evidence supports the A.P.O. contention that it has been responsive to the need for consultation with staff organisations before new technologies are introduced. (page 121)

There is need for an agreement between management and staff organisations on consultation, to identify the types and classes of matters on which the A.P.O. management has a responsibility to consult with staff organisations, and to establish some formal process for consultation which ensures an appropriate coverage of the views of the staff organisations concerned. (page 122)

The organisation of industrial relations responsibilities within the A.P.O. needs revision and strengthening. (page 123)

Experienced officers with an immediate responsibility for industrial relations, should be located in areas where significant work forces are located. (page 124)

Staff problems associated with the introduction of new technologies seem confined largely to the postal service. The A.P.O. has given adequate undertakings to staff likely to be affected by new technologies and is more than fully meeting the guidelines recommended by the National Labour Advisory Council. (page 127)

The industrial record of the A.P.O. in terms of manhours lost per 1,000 employees has been generally better than that of Australia as a whole in recent years. (page 131)

Black bans have been a feature of the industrial scene, particularly at the Sydney central mail exchange. They do not necessarily find their way into the records of lost time per 1,000 employees but are obvious sources of disruption in the mail handling process.

(page 131)

llanagement/staff relations at locations other than the Sydney mail exchange appear to proceed in general within an orderly framework, even though arguments and difficulties occur from time to time. (page 134)

(xviii)

The industrial climate at the Sydney mail exchange is unsatisfactory to a degree that is unique within the A.P.O. service. Improvement in this climate will be one of the major tasks for the management of the proposed postal corporation as it has been for the A.P.O. for many years. Responsibility also falls on the central executives of the staff organisations to control

and prevent unauthorised industrial action within the exchange. The achievement of better industrial relations is one of the major problems which management and the staff associations will have to pursue assiduously in the public interest. (page 134)

Chapter 6 - "The Separation of Postal and Telecommunications Administrations"

The administration of the postal service should be separated from that of the telecommunications service. (page 154)

Chapter 7 - "Financial Prospects"

Certain additional superannuation charges have not yet been brought to account in the books of the A.P.O., notably charges arising from the Superannuation Act 1973' which gave effect to the recommendations by Professor A.H. Pollard that staff pensions be

adjusted in future by 1.4 times the percentage increase in the Consumer Price Index. An additional superannuation charge of $11 million will fall on postal services and an additional $20 million on telecommunications services for the 1973-74 year. (page 165)

Adjusting for these additional charges, it is estimated that, for 1973-74, postal services will lose about $53 million. On certain stated assumptions as to the rate of increase in wages and prices, it is projected that the postal services loss could rise to about

$154 million by 1976-77 unless postal tariffs are increased. (page 167)

Telecommunications services should show a profit of about $30 million in 1973-74. Under similar assumptions to those used for postal services, a loss of about $87 million is projected for 1976-77. (page 169)

Capital provided from Consolidated Revenue for A.P.O. services should continue to be subject to the payment of interest; the present basis on which the interest rate is calculated is eminently fair to the A.P.O. and thus to the users of its services,

(page 174)

Interest is currently charged to postal services on accumulated losses; to place postal services on a reasonable footing for the future the accumulated losses at 30 June 1974, which by that time will have reached approximately $200 million, should be written

off and the interest charge in consequence reduced. (page 175)

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Depreciation is currently calculated on the basis of the historical cost of assets. In view of rising replacement values, the A.P.O. should examine the British Post Office system which involves charging supplementary depreciation designed to bring the

total annual depreciation charge in line with depreciation based on replacement costs. (page 178)

The postal and telecommunications organisations should be given the financial objectives of obtaining, by way of charges for services, such amounts as are necessary to:-

(1) meet all costs, including:­

. wages and salaries, materials and services;

. depreciation, including supplementary depreciation designed to bring the total annual depreciation charge into line with depreciation based on replacement costs;

. superannuation payments, notified by the Treasurer to be necessary to fund accrued liabilities to staff;

. provision for long service leave;

. interest on borrowings; and

(2) provide, together with other funds generated internally such as depreciation and provisions, amounts equal to 50 per cent of capital expenditure in each year. (page 182)

The present arrangement for financing of the A.P.O. by advances from the Treasury, carrying interest at the rate current for long dated Australian Government securities at about the time each advance is made, is appropriate and should be continued. There is little merit in the A.P.O., or the organisations envisaged to operate the two services, raising finance on the market. (page 182)

The two organisations proposed to provide the postal and telecom­ munications services should be authorised to negotiate appropriate overdraft facilities with approved banks for temporary

accommodation purposes. (page 183)

Having regard to the nature of the postal and telecommunications services, the organisations should continue to be exempt from income tax, local government rates, payroll tax, sales tax, customs and excise, and motor vehicle registration charges.

(page 183)

Capital expenditures for the telecommunications services are projected to rise from $462 million in 1972-73 to $878 million in 1976-77, an increase of 17 per cent per annum. (page 183)

Under the assumptions noted in the Commission's Report, the indications are that postal tariffs will have to increase at an average rate of about 15 per cent per annum if the profit and loss account for postal services is to be brought into reasonable

(xx)

balance and large and escalating losses avoided. To place this rate of increase in perspective, the ordinary letter rate of seven cents would rise to ten cents in less than three years, and to 12 cents in about four years time. (page 187)

On the indications of forward projections of trading results, and taking account of the requirement to finance 50 per cent of capital expenditure from funds generated internally, telecom­ munications tariffs will need to increase at the average rate of

about seven per cent per annum, compared with 3.5 per cent per annum over the past 10 years. (page 188)

The setting of tariffs for individual categories of service provided by the two proposed organisations, must be largely a matter for judgment by their respective managements, subject to the approval of the Minister. The aim should be to minimise, as

far as possible, major distortions in financial performance; tariffs for an individual service should be set to recover at least its direct costs even though revenue may not always be sufficient to match fully allocated costs. (page 189)

Certain telecommunications tariffs should be examined by management. (page 190)

It would be unwise to introduce procedures which involve the annual calculation of losses suffered on particular services as a result of Government policy, and the matching of these losses with

a series of subsidies. Both organisations should accept a certain amount of the "rough with the smooth" in the conduct of their businesses. (page 192)

It should be the responsibility of the two organisations to submit to the Minister from time to time proposals for changes in tariffs estimated to be required for the achievement of their financial objectives. If, for reasons of Government policy, the Minister does not approve certain proposed increases, it would be necessary

for management to examine the practicability of adjusting other tariffs to the extent required to produce the necessary revenue. Should the estimated effect of the tariff changes finally approved by the Minister be such that the organisation will be unable to . achieve its financial objectives, the Government should seek an appropriation of the amount necessary to cover the shortfall, for payment to the organisation as a specific item of revenue.

(page 192)

The practice of changing tariffs only within the framework of the annual Budget has introduced substantial delays and has handicapped postal services, in particular, in times of rising costs. The corporations proposed for postal and telecommunications

services should be given power to vary tariffs at any time, subject always to Ministerial approval. (page 193)

(xxi)

Chapter 8 - "Form of Administration - Departmental and Corporate

To achieve a new approach to organisation, management and administration, separate statutory corporations should be established. (page 205)

Chapter 9 - "Jurisdiction of the Public Service Board"

If the A.P.O. remained as a department of State, there would be considerable disadvantages in removing it from the jurisdiction of the Public Service Board. (page 208)

Pay, classifications and other conditions of service of employees should be determined by the Boards of the corporations. (page 211)

The Public Service Board should work with the A.P.O. prior to inauguration of the statutory corporations, to structure the Industrial Relations Divisions of the corporations and to recruit suitable staff. (page 212)

Chapter 10 - "Corporate Functions and Powers"

The Commission suggests that the corporations be titled "Australian Post Office" and "Australian Telecommunications Corporation". (page 219)

Each corporation should be administered by a Board of Commissioners, comprising seven members. (page 220)

The responsibilities of the telecommunications corporation will depend in part on the decision as to whether the O.T.C. should be merged with the new corporation. (page 221)

The telecommunications corporation should provide and maintain, for the present, the radio and television broadcasting facilities of the A.B.C. and the postal corporation should continue to issue broadcast listeners' and television viewers' licences. (page 223)

Responsibilities under the Wireless Telegraphy Act should continue to be exercised by the appropriate Minister of State. (page 224)

Each corporation should have the usual powers to enter into contracts and to acquire and hold land, subject to the Minister's approval in certain cases. (page 225)

Provision should be made for the financing of the corporations through Treasury advances. (page 227)

The corporations should have authority to open and maintain bank accounts, and to borrow by way of short-term overdraft up to defined limits. (page 228)

(xxii)

The corporations should not be required to insure their assets and should be exempt from taxes under Federal and State laws. (page 229)

Each corporation should have the financial objectives proposed. (page 229)

The corporations should have authority to determine tariffs for basic or standard services subject to the approval of the Minister, (page 230)

Provision should be made for payments to the corporations for revenue foregone in certain circumstances. (page 232)

Each corporation should be required to keep the Minister informed about corporation activities. (page 234)

Chapter 11 - "Corporate Organisation"

Telecommunications Services

. There are some deficiencies in the present top level organisation structure of the A.P.O. and the Commission supports the new organisational arrangements proposed by its consultants, Cresap, McCormick and Paget. (page 238)

. New regional organisations, as outlined, should be established for the administration of the telecommunications service; the boundaries of these administrative areas should be determined by the business characteristics of the telecommunications network

rather than by State boundaries. (page 248)

. Below the regional administrations, District Telecommunications Managers should be appointed to exercise the responsibilities outlined. (page 251)

Postal Services

New organisational arrangements at the central management level are recommended. (page 256)

New regional organisations as outlined should be established. State boundaries provide a basis on which the re-organisation of postal administration could be introduced, but they should not be regarded as imposing rigid geographical demarcations for this

purpose. (page 260)

A new level of postal administration called "districts" be introduced. (page 262)

The duties of the position of Supervising Postmaster as recommended by the Commission's consultants should be reviewed later. (page 266)

(xxiii)

Chapter 12 - "The Relationship of Overseas Telecommunications to National Telecommunications"

The Overseas Telecommunications Commission (O.T.C.) has developed a substantial and profitable business which has required only a modest initiating investment of Government funds, (page 277)

Comparison of the financial performance of A.P.O. telecommunications with that of O.T.C. shows that, before interest charges, the A.P.O. earned in 1972-73, 6.3 per cent on funds of $3070 million and

O.T.C. 22.4 per cent on funds of $70 million. (page 282)

O.T.C. payments to the A.P.O. in respect of services provided by the A.P.O. represented on average 28.7 per cent of the O.T.C.1s total operating costs over the past five years and 1.3 per cent of A.P.O.'s telecommunications revenue. (page 287)

Submissions from the A.P.O. and the O.T.C. reflected disagreement on a number of issues such as technical planning, adequacy of payments by O.T.C., relationships with customers, and division of responsibilities. (page 288)

The Commissioners have not been able to reach a common view on the question of whether the O.T.C. should remain as a separate entity or whether it should be merged with the proposed national telecommunications corporation. (page 295)

Chapter 13 - "Protection of Rights of Serving Officers of the Australian Post Office"

Staff of the A.P.O. now employed on a "temporary" or "exempt" basis should have the right to accept employment with the corporations under the conditions recommended. (page 301)

The adoption of the Report of the Joint Council on the rights of career officers, transferred to a statutory authority by virtue of a specific statutory provision, provides an equitable basis on which officers might be transferred to the Services of the new

authorities. Special rights or privileges to re-join the Australian Public Service, should however, be exercised within three years from the date of separation from the Australian Public Service. (page 304)

Chapter 14 - "Procurement of Supplies by the A.P.O."

No change is warranted in the present tender system for switching equipment. The A.P.O. has sufficient safeguards to ensure competitive pricing. (page 316)

(xxiv)

The policy of the A.P.O. in encouraging and assisting the development of a local manufacturing capability has made an important contribution to the telecommunications industry in this country. (page 316)

The A.P.O. has administered policy in respect of purchases of cables in a realistic and practical way. (page 321)

There is some over-capacity in cable manufacturing capacity at present and there seems no scope for the entry of additional suppliers. (page 321)

The retention of the competitive tender system for plastic insulated cable is supported. In the case of paper insulated lead- covered cable, the alternative of negotiated agreements with suppliers should be examined by the A.P.O. (page 321)

The present A.P.O. workshops should be retained and placed under the control of the proposed telecommunications corporation. (page 323)

The possibility of the workshops entering into the manufacture of limited quantities of telecommunications items should be further examined. It would be essential to introduce a full commercial costing and accounting system to permit proper comparisons of

workshops costs with prices quoted by outside companies. (page 323)

Chapter 15 - "Performance of Work by Contract"

In November 1973 major contractors were advised of the phasing out of contract work. (page 326)

The Commission makes the following observations on the performance of work by contract as required by its terms of reference:­

- The procedures used by the A.P.O. for estimating the costs of work carried out by its own staff for comparison with prices quoted by contractors for the same work, are reasonable.

- The A.P.O. specifications and its procedures for contract supervision are adequate to ensure that required standards of work and of working conditions are met, provided the supervisory staff exercise the powers given them.

- The laying of conduits by contract in New South Wales is the cheapest way of doing the work. It does not call for any special expertise.

- Installation of switching equipment by contract is only margin­ ally cheaper than installation by A.P.O. staff. Special skills are required and it is appropriate that the greater part of such installation work should be carried out by A.P.O. staff.

(xxv)

- There is merit in equipment suppliers being given a reasonable base load of installation work to be carried out by their own staff to provide them with continuing installation expertise. In particular this would assist local companies to

compete for contracts to supply and install switching facilities in overseas countries.

- Peaks occur in the A.P.O.'s capital programmes. It would appear to be economically desirable for the A.P.O. to maintain a steady load of work for its own staff and "take up" peaks by the use of contractors as appropriate. (page 333)

Chapter 16 - "Urban and Regional Development"

The cost of any concessional tariffs in the use of telecommunic­ ations services for selected "growth areas" should not be met by the A.P.O. (page 338)

Postal and telecommunications facilities must be strategically located to serve users of those services. To the extent that some choice in the location of facilities is available, and provided the cost differentials are modest, the postal and tele­ communications corporations could make a positive contribution to plans for the re-distribution of employment opportunities.

(page 338)

A tender system which involved the giving of a preference to persons or organisations located in particular areas would destroy much of the purpose of the open tender system. (page 339)

If concessional telecommunications tariffs are introduced for growth centres, a special appropriation should be made to the telecommunications corporation for additional facilities to accommodate increases in traffic. (page 340)

There is little, if any, scope for the A.P.O. to extend services in rural towns with a view to encouraging decentralisation. (page 340)

The location of administrative centres for A.P.O. activities should be selected primarily on the grounds of administrative suitability. (page 343)

Having in mind the organisational changes proposed in its Report, the Commission considers it would be unwise to contemplate any extensive move of the Central Office Administration of the A.P.O. to Albury/Wodonga at this stage. (page 343)

(xxvi)

C H A P T E R 1

I N T R O D U C T I O N

I.] The Commission was appointed on 22 February 1973 and held its

first meeting on 27 February 1973. The Commission's Secretariat was

established in Sydney with an initial staff of eight. Subsequently an

additional officer was appointed to the Secretariat to assist in various

research projects.

1.2 The Commission sought the widest possible involvement of the

public in its inquiry and to this end the terms of reference were

published by way of advertisements in daily newspapers throughout

Australia inviting interested persons, groups and organisations to make

written submissions. It was noted in the advertisements that the

Commission might subsequently wish to examine persons or representatives

of organisations on the evidence submitted. The Commission also wrote to

Federal and State Departments likely to have an interest in the issues

raised by the Commission's terms of reference and drew their attention to

the newspaper notices.

In total, 482 submissions were received, varying in size from

one page letters to lengthy and detailed statements. The Australian Post

Office (A.P.O.) made a submission of some 660 pages which outlined the

major changes which had taken place in postal and telecommunications

administration since Federation; detailed the findings of earlier

inquiries; and commented in depth on the many issues raised by the

Commission's terms of reference. The Commission wishes to record its

appreciation of the effort which the A.P.O., staff unions and associations

and private organisations made in the preparation and documentation of

their submissions. The Commission also thanks those people who, in a

private capacity, made submissions to the Commission. These gave much

valuable comment to the Commission on how the customer regards the

standards and efficiency of the services provided by the A.P.O.

1

The following is an indicative classification of the

submissions received

Number of Submissions

Australian Post Office 1

Australian Post Office Employees 54

Australian Post Office Staff Organisations 25

Non- Official Postmasters and Non- Official Postmasters Association 5

Australian Post Office Contractors 5

Australian Post Office Suppliers 7

Government Departments and Instrumentalities 10

Local Government Bodies 56

Members of Parliament 3

Academics 3

Organisations using Post Office Facilities 25

Chambers of Commerce 10

Progress Associations 4

Rural Groups 30

Political Parties and Party Branches 6

Industrial and Professional Associations 5

Other Organisations 21

Members of the General Public 212

482

1. 3 Following an appraisal of all submissions the Commission

decided that some 46 should be further examined in public hearings.

Arrangements were made for a number of organisations to

exchange submissions with the A. P. O. prior to their examination in public

hearings. The A. P. O. was invited to submit written comments on many

submissions and these were entered as exhibits and made available to the

organisations concerned.

The Commission met on 16 days to take evidence, 130 witnesses

appearing either in a personal capacity or as representatives of groups

or organisations. The transcript of evidence at these hearings covers

1, 329 pages and 237 exhibits were received in evidence. Appendix 1 to

this Chapter lists the persons, groups or organisations examined in

public hearings.

Many of the submissions from members of the general public

dealt with difficulties experienced in connection with some of the

2

services provided by the A.P.Q. or advocated changes believed to be

desirable in some particular activities. Although the Commission

decided that it would not be necessary to take further evidence on

such submissions, they provided, nevertheless, useful indications of the

attitudes of the public to certain aspects of the administration and

operation of the A.P.O. Many of the issues raised were followed up by

the Commission in the public examination of the Director-General and other

representatives of the A.P.O. At the conclusion of the Commission's

public hearings those submissions which were by way of "user complaints"

were referred to the Director-General for further attention.

1.4 The issues raised by its terms of reference required the

Commission to obtain information and elicit views on many aspects of the

organisation, administration and operation of the A.P.O. The Commission

was also conscious of the direction given to it in its Letters Patent that

it should conduct its inquiry with a minimum of legal formality and with

as little delay as possible. It was decided therefore that the inquiry

would be best pursued if any suggestion of "adversary proceedings" was

avoided. The Commission did not engage Counsel to assist it in the

examination of witnesses in public hearings; questioning of all witnesses

was undertaken by the Commissioners themselves. Witnesses were informed

that they would be required to appear in person and that, unless for some

quite exceptional reason, they would not be allowed legal representation

before the Commission. Witnesses were further informed that cross­

examination of one witness by another before the Commission would not be

permitted but that if it was considered that evidence had not been

sufficiently developed in any particular respect the Commission would be

prepared to receive written requests to inquire further into that evidence.

No applications for legal representation or requests to further develop

any particular evidence were in fact received.

The Commission believes that the decision to undertake its

inquiries in this way assisted materially in avoiding protracted public

hearings and in encouraging critical comment and the frank expression of

views.

3

1.5 The Deputy Crown Solicitor's Office, Sydney, provided the

services of a senior officer to give legal advice and assistance to the

Commission. This officer attended all public hearings and some meetings

of the Commission.

1.6 During the course of its inquiries the Commission visited A.P.O.

establishments in Sydney, Melbourne, Perth and Brisbane to examine

facilities at first hand and obtain an understanding of important

operational procedures.

Having in mind the wide-ranging nature of its inquiry into the

A.P.O. and the many conflicting views placed before it in evidence, the

Commission decided to visit a limited number of postal and telecommunic­

ations establishments overseas, the selection being made with the aim of

covering a wide range of organisational structures, including some that

had very recently undergone major changes.

In particular, it was considered desirable that the Commission

should have discussions with senior officers of the new organisations

which had been established in Britain and the United States as a result of

major reviews conducted in those countries.

The countries visited by the Commission are given below

together with brief comments on the structures of their postal and

telecommunications systems.

Britain. The British Post Office prior to 1969 operated as a

department of State, embracing both postal and telecommunications

services. In October of that year it was completely re-organised

and changed to a public corporation under a Board made up of both

full-time and part-time members, with a full-time Chairman and Chief

Executive and with two Managing Directors responsible respectively

for telecommunications including overseas telecommunications and

posts.

Sweden. The Swedish Telecommunications Administration and the

Swedish Post Office have always operated as entirely separate and

unrelated State-owned enterprises. They are currently administered

4

by Boards made up largely of part-time members under the Chairmanship

of the respective Directors-General.

United States. The telecommunications system including overseas

telecommunications is entirely private enterprise but the companies

operating in this field are subject to scrutiny as to service and

tariffs by State and Federal regulatory bodies.

The United States Post Office, previously a Department of the

United States Government, was converted in 1970 to a public

corporation, the United States Postal Service, following a report

published by the President's Commission on Postal Organisation in

June 1968. The United States Postal Service operates under a Board of

Governors, all of whom, with the exception of the Chief Executive

Officer, the Postmaster-General, are part-time.

, Canada. Internal telecommunications are operated by private

enterprise as in the United States, but external telecommunications

other than with the United States are the responsibility of a public

corporation, the Canadian Overseas Telecommunications Corporation.

The Canadian Post Office is currently organised as a Department

of State but proposals have been prepared and are now being studied

which could lead to its conversion to a statutory corporation.

The Commission was given every assistance by the senior

representatives of the various postal and telecommunications organisations

in these four countries. Much information was provided and problems were

freely discussed. The visits have helped the Commission to see the

problems and future needs of the A.P.O. in clearer perspective than would

otherwise have been possible.

1.7 To assist the Commission on particular aspects of its inquiries

consultants were engaged. The consultants employed and their terms of

reference are:­

. Price Waterhouse & Co.

"To independently examine, investigate and formally report on the

5

accounting, budgeting, costing and statistical and funding

procedures and philosophies of the Australian Post Office and to

provide the Commission during the course of its inquiry and in

the final compilation of its report with whatever information

relative to the above which it may require to correctly and

efficiently carry out its inquiry into the Australian Post

Office".

Cresap, McCormick and Paget

"To examine, comment on and make recommendations with regard to

such matters as:-

(1) "The efficiency and effectiveness of the existing organis­

ational arrangements in providing an integrated structure

through which the Australian Post Office can achieve its

objectives

(2) "The necessity or desirability, from a management stand­

point, of separating the administration of postal services

from the administration of telecommunications services

(3) "The extent to which responsibility and authority is and

should be delegated from central or state offices to local

managers of areas or regions

(4) "The advantages, if any, that might accrue in terms of

management efficiency and control if responsibility for

national and international telecommunications were

combined in a single authority

(5) "The adequacy of arrangements for the co-ordination of

planning and research functions, including market research

and technology research

(6) "The most appropriate organisational structures to give

effect to recommendations under the terms of reference,

specified in items (1) through (5) above".

6

Mr. G. Paterson

"To report on the use by the Australian Post Office of

contractors within the following broad categories of contract

work:-

(A) "Contract work for the laying of conduits and the

installation of standard telephone switching

equipment for the national telecommunications network

(B) "Contract work which requires the manufacture and

supply of telephone switching equipment and cables

for the national telecommunications network.

Having particular regard to:-

(1) "Statements by the Australian Post Office that the use of

private contractors for work within Category "A" has been

in general the "least cost" way of performing this work,

especially for conduits

(2) "The methods used by the Australian Post Office to deter­

mine relative costs of performing work within Category

"A" by contract as opposed to employment of departmental

resources

(3) "The effectiveness of the "open tender system" in ensuring

competitiveness in pricing for work within Category "B"

(4) "The data and information available to the Australian Post

Office to determine the reasonableness of tenders within

Category "B"

(5) "The scope for the department to manufacture an increasing

amount of technical equipment required for the telecommuni­

cations network through a greater utilisation of existing

resources in postal workshops".

7

The reports of these consultants form Volume 2 of this Report. They

give the Independent professional views of the consultants engaged in

the studies and have been of great assistance to the Commission. The

conclusions reached by the Commission, however, represent its own

independent judgments.

8

A P P E N D I X 1 T O C H A P T E R 1

P e r s o n s , Gr o u p s a n d O r g a n i s a t i o n s E x a m i n e d in P u b l i c H e a r i n g s

Australian Post Office

Overseas Telecommunications Commission

Commonwealth Department of Works

Australian Direct Mail Association

The Readers Digest Association Pty. Ltd.

Public Service Board

Australian Newspapers Council

Australian Postmasters Association

Association of Professional Engineers, Australia

Professional Radio Employees Institute of Australia

Queensland Branch, Union of Postal Clerks and Telegraphists

Victorian Branch, Union of Postal Clerks and Telegraphists

Union of Postal Clerks and Telegraphists

Administrative and Clerical Officers Association

Professional Officers' Association

Postal Telecommunication Technicians Association (Aust.)

Non-Official Postmasters' Association of Australia

Association of Architects, Engineers, Surveyors and

Draughtsmen of Australia

Amalgamated Postal Workers Union of Australia

Ms. Elizabeth Reid

Australian Computer Users Association

Telecommunications Technical Officers Association

Regional Dailies of Australia Ltd. and Australian Provincial Press

Association

United Press International

Australian Booksellers Association

Australian Workers Union including Australian Worker Newspaper and

Northern Worker Newspaper

9

Hr. B.F. Jones

Department of the Treasury

Postmaster-General's Department Heads of Divisions and

Branches Association

Postal Overseers’ Union of Australia

Australian Telecommunications Development Association

Standard Telephones and Cables Pty. Limited

Plessey Telecommunications Pty. Ltd.

Senator McAuliffe and Senator Wilkinson

L.M. Ericsson Pty. Ltd.

Austral Standard Cables Pty. Ltd.

Amalgamated Wireless (Australasia) Limited

Dr. R.L. Wettenhall

Supply Management Group of the Australian Institute of

Management, Victoria

Institute of Purchasing and Supply Management, Victorian

Division

Kodak A'asia Pty. Limited

Decentralisation and Development Association of Victoria

Federal Parliamentary Country Party

Australian Certificated Radio (Electronic) Officers Association

Department of Urban and Regional Development

Department of Services and Property

10

C H A P T E R 2

THE A U S T R A L I A N POS T O F F I C E TOD AY

2.1 As the report proceeds, many individual aspects of the work of

the Australian Post Office (A.P.O.) will be examined in some detail.

Before moving to these more detailed matters however, it is necessary to

outline some of the main features of the A.P.O. as it is today so that

detailed discussion can take place against a background of understanding of

its present structure and financial performance.

G e n e ra l

2.2 The A.P.O. is a major enterprise of the Australian Government,

supplying a wide range of postal and telecommunications services to the

nation. The postal service dates from 1809 when the first official

postmaster was appointed in the Colony of New South Wales. The first

telegraph service was opened in 1854 over a line between Melbourne and

Williamtown and the system was rapidly extended thereafter; Sydney,

Melbourne and Adelaide were linked by telegraph in 1858. The telephone was

introduced in 1878, only two years after Bell demonstrated his invention in

the U.S.A.

The Commonwealth of Australia Constitution Act of 1900 gave the

Commonwealth Government the Constitutional power in respect of postal,

telegraphic, telephonic and other like services. In 1901 the Departments

of Posts, Telegraphs and Telephones In each State were transferred to the

Commonwealth, and the Postmaster-General's Department was created by the

Post and Telegraph Act of 1901. The official title of the Department still

remains, but over the years the term "Australian Post Office" has emerged

as a convenient one to apply to the organisation within the Postmaster-

General's Department responsible for providing the postal and telecom­

munications services.

11

2.3 At 30 June 1973 postal services were provided through a network

of 6,534 post offices. Of these, 1,435 were termed "official post

offices" and 5,099 "non-official post offices", the latter being maintained

in areas, either urban or rural, where the volume of business does not

justify the establishment of an official post office manned by trained

career postal staff. An approximate distribution of post offices is shown

in Table 2.1 below.

T A B L E 2.1

D i s t r i b u t i o n o f P o s t O f f i c e s 30 J u n e 1 9 7 3

Area Population Post Offices Ratio Post

Offices to Population

Metropolitan 7.9 m. (61%) 1669 (26%) 1 : 4,700

Large Urban 1.4 m. (11%) 412 ( 6%) 1 : 3,400

Other Urban 1.9 m. (14%) 825 (13%) 1 : 2,300

Rural 1.8 m. (14%) 3628 (55%) 1 : 500

13.0 m. 6534 1 : : 2,000

Source: A.P.O. submission amended to show position at 30.6.73.

The metropolitan areas of the country, with 61 per cent of the

population were served by 26 per cent of the post offices while at the

other end of the scale, 14 per cent of the population in rural areas were

served by 55 per cent of the post offices. Over Australia as a whole, a

post office was provided on average for every 2,000 persons, a proportion

roughly equivalent to that in Canada.

Also at 30 June 1973 mail could be posted at the 6,534 post

offices, in any of 16,540 pillar boxes, or collected by 3,952 road mail

services. On average, one posting point was provided for each 157

householders in Australia. Mail was delivered to 4,254,000 households and

to 343,000 business premises, a total of 4,597,000 delivery points.

2.4 The telecommunications network at 30 June 1973 comprised

3,147,000 telephone services, 1,904,000 of which were in metropolitan areas

12

and 1,243,000 In the country areas. With extension telephones, these

services used 4.7 million telephone instruments, 35 per 100 persons. On

available international statistics this gives Australia a ranking of

seventh in the world list of countries with more than one million

telephones.

An average of some 240 telephone calls per person are made

annually in Australia, somewhat higher than the 220 calls per person in

Britain, but significantly lower than the 830 calls per person in the

U.S.A. and 780 per person in Canada.

The telecommunications network of cable and radio links handles,

as well, a range of other telecommunications services including telegrams,

telex and specialised data transmission.

2.5 In all 130,372 persons were engaged in the provision of postal

and telecommunications services as at 30 June 1973. Of this number 118,735

persons were on the official staff of the A.P.Q., and 7,390 on the

non-official staff, while mail contractors numbered 4,247. The official

staff employed by the A.P.O. account for about 45 per cent of total

Australian Government employment.

2.6 Australian Government funds employed as at 30 June 1973 amounted

to $3,180 million. Revenue from the sale of services for the 1972-73 year

was $937 million. Capital expenditure is proceeding at the rate of nearly

$500 million per annum.

The size and complexity of the A.P.O. are evident from the figures

quoted above. The enterprise is a large one by most yardsticks and

certainly very large in the Australian context.

L e g i s l a t i v e F r a m e w o r k

2.7 The Post and Telegraph Act 1910-1973 states that there shall be a

Postmaster-General's Department to control the postal and telegraphic

services of the Commonwealth, with a Director-General responsible for

administration of the Department. In simple terms this means that the

13

postal and internal telecommunications services of the nation are provided

through the normal structure of a department of State, responsible to a

Minister of State, with the Director-General as Permanent Head of the

Department. It follows that the Permanent Head and all career officers of

the Department form part of the Australian Public Service; that the

Department is subject to the jurisdiction of the Public Service Board on

matters of salaries, conditions of employment, of officers, classifications

of positions and organisational structure; and that the Department is,

amongst other things, subject to the provisions of the Audit Act and

Treasury Regulations.

The Post and Telegraph Act requires that a Director of Posts and

Telegraphs be appointed as the principal officer of the Department in each

State. The Northern Territory has been attached to the Director, South

Australia, for the purposes of administration; the Australian Capital

Territory has been similarly attached to the Director, New South Wales.

In practice each State Director has been given considerable

autonomy in administering postal and telecommunications services within

his area, subject to compliance with policies and practices which apply at

a national level. Co-ordination of activities, the national planning of

postal and telecommunications services, research and development, overall

financial management, and the preparation of policy advices to the

Minister, are the responsibility of the Central Office of the Department

located in Melbourne. Later Chapters of the report discuss the present

organisational and management structure of the A.P.O. and the concepts of

regionalisation of management.

2.8 The A.P.O. is given a virtual exclusive right under the Post and

Telegraph Act to the carriage of letters. For other articles which do not

fall within the definition of "letters" (as prescribed by the Act and

Regulations) it competes with private carriers. It has also been given a

statutory monopoly right to transmit public telecommunications traffic

within Australia. Telecommunications with other countries is the

responsibility of the Overseas Telecommunications Commission (O.T.C.), but

the A.P.O. operates the international telephone service, utilising circuits

to overseas countries provided and maintained by Che O.T.C. The A.P.O.

14

undertakes the billing of the user for international telephone calls and

acts as agent for the O.T.C. in receiving international telegrams for

despatch and in transmitting incoming international telegrams through the

national network to their destinations. The responsibilities of the O.T.C.

and its future relationships with the A.P.O. are discussed in Chapter 12.

2.9 Under the Broadcasting and Television Act 1942-1973, the A.P.O. provides and maintains the transmitters used by the Australian Broadcasting

Commission for radio and television transmission, and issues broadcast

listeners' licences (radio) and television viewers' licences. Expenditures

incurred by the A.P.O. in equipping and maintaining the radio and

television transmitting stations for the Australian Broadcasting Commission

are met from a specific budget appropriation under the Broadcasting and

Television vote. Revenues derived from licence fees are paid to

Consolidated Revenue, the A.P.O. being reimbursed for its costs of issuing

the licences and collecting the fees.

2 . 1 0 The Postmaster-General is authorised under the Wireless Telegraphy Act 1905-1973 to control the use and to plan the orderly

development and conduct of radio services in Australia and its Territories.

Bands of frequencies are allocated for broadcasting and television

purposes, and the use of frequencies within those bands is administered by

the Australian Broadcasting Control Board. Under the Act the A.P.O. issues

licences to persons or organisations to operate radio-communication

stations for transmitting or receiving messages by wireless telegraphy.

O r g a n i s a t i o n

2.11 The Central Administration of the A.P.O., located in Melbourne, is responsible for policy formation, overall planning and control of the

postal and telecommunications systems and for the provision of specialist

central services.

The organisation immediately surrounding the Permanent Head, the

Director-General of Posts and Telegraphs, is shown in Chart 1. The

Director-General has reporting to him 11 senior officers within the

Central Administration together with the six State Directors of Posts and

15

i n s A ί

PRESENT PLAN OF ORGANISATION BASIC STRUCTURE NOVEMBER 1973

POSTMASTER-GENERAL'S DEPARTMENT

E N G I N E E R I N G P L A N N I N G

F I R S T A S S I S T A N T F I R S T A S S I S T A N T

D I R E C T O R O F P O S T S A N D

E N G I N E E R I N G W O R K S

P U B L I C R E L A T I O N S R E P R E S E N T A T I V E

A U S T R A L I A N

S E N I O R A S S I S T A N T

P O S T S A N D T E L E G R A P H S

F I R S T A S S I S T A N T

S O U T H A U S T R A L I A W E S T E R N A U S T R A L I A

P O S T S A N D

D I R E C T O R O F P O S T S A N D T E L E G R A P H S

V I C T O R I A

F I R S T A S S I S T A N T

P O S T M A S T E R G E N E R A L

N O T E . N U M B E R S I N D I C A T E T O T A L N U M B E R OF E M P L O Y E E S IN E A C H O R G A N I S A T I O N A L U N I T A S O F J U N E 3 0 . 1 9 7 3

(a) T O T A L C O N T A I N S A D D I T I O N A L P O S I T I O N S N O T C L E A R L Y A S S I G N E D T O A N Y S I N G L E O R G A N I S A T I O N A L U N I T

Telegraphs. The three Deputy Directors-General shown in Chart 1 have no

permanently assigned line or functional responsibilities but undertake

such duties as are delegated to them by the Director-General. They act on

his behalf as circumstances may require and are his senior advisers on a

wide range of matters. A Deputy Assistant Director-General has

responsibility for "Ministerial and External Relations" while public

relations functions are carried out by the Director of Public Relations.

The Director-General has responsible to him also the A.P.O. representative

resident in London.

2.12 The heads of five Divisions (First Assistant Directors-General)

and one Branch (a Senior Assistant Director-General) also report to the

Director-General, the functions of the Divisions and the Branch being as

follows:-

The Postal Services Division has the principle operating

responsibility for postal services.

The Telecommunications Division similarly has the principle

operating responsibility for telecommunications.

The Engineering Planning and Research Division services both

the Postal Services and Telecommunications Divisions, its

activities being in practice related mainly to

telecommunications.

The Engineering Works Division also services both the Postal

Services and Telecommunications Divisions. In view of the

magnitude of the telecommunications capital program in

relation to that of the postal services, the work of this

Division is mainly related to telecommunications.

The Management Services Division provides a range of services

to the other Divisions of the A.P.O. in connection with

financial and accounting matters, automatic data processing,

procurement of supplies and personnel.

17

The Industrial Relations Branch gives assistance to

management throughout the A.P.O. on industrial matters.

The organisation charts for the Postal Services Division and the

Telecommunications Division are reproduced as Charts 2 and 3. It was not

thought necessary for the purposes of this Chapter to give the detailed

organisation charts for other Divisions and for the Industrial Relations

Branch. The latter charts may be referred to as necessary in the report

of the consultants - Cresap, McCormick and Paget - in Volume 2 of the

Commission's report.

2.13 Each of the six State organisations is headed by a Director of

Posts and Telegraphs, who reports to the Director-General as noted in

Chart 1. A typical State organisation is depicted in Chart 4.

The functions which are the prime responsibilities of the

various Divisions in the Central Administration are in large part

reflected in branches within the organisations of the State Directors of

Posts and Telegraphs. The corresponding groups within the Central

Administration and the State organisations work closely together, but the

formal channel of authority is via the Director-General and the State

Directors.

The size and complexity of the A.P.O.'s operations, the

functional role of important Divisions in Central Administration and the

lines of authority from Director-General to State Directors, requires the

use of a considerable number of Committees to bring about effective

co-ordination. The basic organisation structure imposes a particularly

heavy load on the Director-General in terms of decision making ahd in

regard to the number of senior officers reporting directly to him.

Further comments on organisational matters appear in Chapters ό and 11.

S t a f f i n g

2.14 A total of 130,372 persons were engaged in the operations of the A.P.O. at 30 June 1973. The main categories and rates of growth in these

categories over the period 1963 to 1973 are shown in Table 2.2

18

POSTMASTER GENERAL S O E PA R ΓΜΕΝ

PRESENT PLAN OF ORGANISATION POSTAL SERVICES DIVISION NOVEMBER 1973

S E R V I C E S S E C T I O N

PRESENT PLAN OF ORGANISATION TELECOMMUNICATIONS DIVISION NOVEMBER 1973

POSTMASTER-GENERAL'S DEPARTMENT

O F F I C E S E R V I C E S T R A I N I N G

S E C T I O N

S A L E S S E R V I C E

B R A N C H

S E R V I C E S T A N D A R D S S E C T I O N

S E R V I C E A D V I S O R Y

C U S T O M E R M A J O R F A C I L I T I E S S E C T I O N

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

S E C T I O N

C O M M U N I C A T I O N S S E C T I O N

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

S A L E S A N D S E R V I C E S U B D I V I S I O N

C O M M E R C I A L S U B - D I V I S I O N

T E L E C O M M U N I C A T I O N S

F I R S T A S S I S T A N T D I R E C T O R G E N E R A L

C O M M E R C I A L P L A N N I N G

S T U D I E S S E C T I O N

M A C R O F O R E C A S T I N G T E C H N I Q U E S S E C T I O N

S E C T I O N

A D P U S E R C O O R D I N A T I O N S E C T I O N

D I R E C T O R Y S E C T I O N

W O R K S A N D E Q U I P M E N T S E C T I O N

O P E R A T I O N S S E C T I O N

POSTMASTER-GENERAL’S DEPARTMENT

PRESENT PLAN OF ORGANISATION TYPICAL STATE ADMINISTRATION NOVEMBER 1973

S U P P L Y I N T E R N A L A U D I T S E C T I O N

A D P B R A N C H

T E L E C O M M U N I C A T I O N S D I V I S I O N

E N G I N E E R I N G D I V I S I O N

P E R S O N N E L A N D

I N D U S T R I A L R E L A T I O N S

P O S T A L S E R V I C E S

D I V I S I O N

D I R E C T O R O F

P O S T S A N D T E L E G R A P H S

l a ) At present, New South Wales and Victoria only

T A B L E 2.2

ST A F F E M P L O Y E D BY THE A U S T R A L I A N POST O F F I C E

At 30 June 1973 Annual Rate of

Growth 1963-1973

per cent

Permanent Officers 84,507 2.7

Temporary ana Exempt Employees

Full Time 30,913

Part Time 3,315

34,228 2.9

Total Official Staff 118,735 2.8

Staff at Non-official Offices

Postmasters and Postmistresses 5,181

Other Staff 2,209

Total Non-official Staff 7,390 - 2.5

Mail Contractors 4,247 - 2.0

Grand Total 130,372 2.2

Source: Financial and Statistical Supplement to the 1973 Annual Report of the A.P.O. and calculations by the Commission.

22

Of the 118,735 official staff, 84,507 permanent officers are in

full time employment under the Public Service Act. Temporary employees

are engaged on a year-to-year basis but are subject to the provisions of

the Public Service Act during their employment. Exempt employees are

those exempted from some of the provisions of the Act. Staff at

non-official offices is engaged on a contractual basis, as are the mail

contractors.

No figures are prepared on a regular basis to show the numbers

of official staff employed on postal and telecommunications operations

and on capital work. However, for the purposes of the Commission the

A.P.O. estimated that at 30 June 1973 there were 31,000 engaged on postal

operations and 58,000 on telecommunications operations. The permanent

staff engaged on capital works was therefore about 30,000.

At 30 June 1973 the total full time staff in the Australian

Public Service was 254,367 persons, of whom 45.4 per cent were employed

by the A.P.O.

Management/staff relationships, an important issue before the

Commission, are discussed in Chapter 5.

F i n a n c i a l F r a m e w o r k

2.15 In the widest sense the postal and telecommunications services

of the A.P.O. are "community services", provided by Government to meet the

communication needs of the entire population, but it is not surprising

that the magnitude of the operations and the extent of the revenues and

expenditures involved have progressively tended to emphasise the basic

commercial nature of the enterprise and the necessity to utilise resources

with maximum business efficiency. For the 1972-73 year revenues derived

from the sale of A.P.O. services amounted to $937 million; profit, arrived

at after payment of interest but not subject to tax, was $41 million;

$482 million was spent on additions to fixed assets.

The published accounts of the A.P.O. are r.ow prepared in a form

closely similar to that adopted by companies operating under the Companies

23

Act. Interest is paid on funds advanced by the Treasury and normal

provisions are made for depreciation of fixed assets and for accrued

liabilities in respect of superannuation and long service leave. The only

major departure from normal corporate accounting is that no income tax is

payable in respect of profits earned. The present accounting structure

has come about as a result of successive Government inquiries and decisions

of Government to which it is now necessary to refer.

2.16 In 1954 the Parliamentary Joint Committee of Public Accounts

recommended that accounts be prepared on the basis of the Post Office as

a commercial enterprise. In particular the Committee recommended that:-

(1) All revenue and expenditure during a financial year be recorded in the commercial accounts;

(2) The system of depreciation of assets be reviewed;

(3) The Post Office liability for superannuation payments be included in the commercial accounts;

(4) The amount of the capital of the Post Office to be included . in the commercial accounts should be determined without delay;

(5) A review be undertaken of the basis for charging interest on that capital.

Because of subsequent disagreement as to the amount of capital

on which interest should be paid and the extent of the liability for

superannuation contributions to be charged against the Post Office, the

Government appointed in 1959 an "Ad Hoc Committee of Inquiry into the

Commercial Accounts of the Post Office" under Sir Alexander Fitzgerald.

The Terms of Reference were:-

"(1) To study and report on -

(a) the extent of the net financial advantage which has accrued to the Post Office regarded as a business undertaking from the inception of the Commonwealth up to the 30th June, 1959 having regard to -

(i) the funds from time to time made available to the Post Office by the Commonwealth Treasury, and

24

(ii) any returns which the Post Office has made to the Commonwealth. Treasury out of profits of the undertaking or the realization of any of its assets;

(b) what part if any of the accrued net advantage ought to be treated as at 30th June, 1959 as the amount upon or in respect of which the Post Office should thereafter make an annual contribution to the Commonwealth Treasury; and

(c) the amount, basis or rate, as the case may be of such annual contribution. In expressing the amount, basis or rate of the annual contribution the Committee shall make provision for an increase of such annual

contribution to reflect any further sums which the Commonwealth Treasury may hereafter from time to time make available to the Post Office.

(2) To study and report upon the basis for the preparation of the commercial accounts of the Post Office, with particular reference to the matters referred to in Term of Reference (1) and also, as the Committee sees fit, to -

(a) the provision of services at rates lower than could be justified by costs whether in accordance with Government policy or direction or otherwise;

(b) the basis on which the Post Office contribution to meet superannuation, pension and furlough payments should be calculated and shown; and

(c) the basis upon which provision for depreciation of the capital assets of the Post Office should be calculated and shown.

In considering Term of Reference (1) the Committee may have regard, among other things, to the services which have been rendered by the Post Office up to the 30th June, 1959, at uneconomic rates in

accordance with Government direction or policy."

The Committee produced majority and minority reports, the

Government in general approving the recommendations of the majority report

which interpreted the "net financial advantage which has accrued to the

25

Post Office" as meaning:-

"the net amount of cash that the Post Office, regarded as a business, would have received from the Treasury, regarded as a business financier, up to 30 June, 1959, including interest calculated on the balance of this net amount from year to year."

After adjustments for certain excess interest payments, the

majority members assessed the net financial advantage, on which the

A.P.O. should make an annual contribution, to be approximately

$765 million. They considered that the A.P.O. had suffered no net

financial burden as a result of services provided at uneconomic rates in

the past, holding that losses on uneconomic services had been more than

offset by profits on other services.

The minority report interpreted the "net financial advantage"

as

"the present worth of the net tangible assets of the Pest Office regarded as a business undertaking at 30 June 1959."

It assessed the net financial advantage on which interest

should be charged as $600 million. The minority members considered that

the A.P.O. had suffered serious losses on uneconomic services in the past

but did not take into consideration any retrospective financial

adjustments on that account. The Government decided that $680 million

should be determined as the net financial advantage on which interest was

payable.

2.17 Other decisions taken as a result of the recommendations of the

Committee were:-

(1) The annual contribution by the Post Office to Consolidated Revenue should be by way of an interest charge and that the interest rate should be at the average long-term bond rate at or about the time the advances (comprising the net financial advantage) were deemed to have been made and that interest on future net advances should be at the rate of the longest term Commonwealth loan raised at about the time each advance is made.

26

(2) Full superannuation liability on an accrual basis should be charged to the Post Office.

(3) Furlough payment on an accrual basis to be charged to the Post Office.

(4) Assets should be depreciated by means of annual charges to the profit and loss account established to spread the original costs, less the estimated salvage value, of each asset as evenly as possible over the estimated life of the asset.

(5) Revenue taken into account as earned during any year should include only revenue which is or which was expected to become payable to the Post Office and should not include "notional1 1 credits for services to other Commonwealth Departments or for losses on any services provided at less than cost.

Until 1968, the A.P.O. was financed as a normal department of

State. All revenues received were paid into the Consolidated Revenue

Account and Parliament appropriated in detail the funds required to meet

the recurrent costs and the approved capital programme for each financial

year. The published accounts, reflecting the decisions referred to above,

detailed how the funds appropriated for the use of the A.P.O. were

expended.

2.18 Amendments to the Post and Telegraph Act in 1968 inserted a new

Part in the Act dealing with the financial and accounting procedures of

the A.P.O. The most important amendment established the Post Office Trust

Account, an account within the overall Trust Fund of the Commonwealth.

Under the Trust Account procedures all A.P.O. revenue is credited to the

Account and all expenditure, whether of a recurrent or capital nature,

debited to it. To the extent that revenue is insufficient to meet all

expenditure, the shortfall is met by way of "advances" or "borrowings",

drawn from Treasury up to the total of the funds appropriated by

Parliament by way of a single line entry in the Budget for each year.

The establishment of the Trust Account has provided a degree of

financial flexibility for the A.P.O. which is not common to other

departments of State. As the funds for the proposed expenditures of the

27

A.P.O. are not appropriated in detail under votes for specific purposes,

the A.P.O. is free to amend its expenditure proposals during the course

of a year, without Parliamentary approval. Also the funds appropriated

by the Parliament are only drawn when needed so that interest charges do

not accrue until the moneys are actually employed in the enterprise.

2 . 1 9 The A.P.O. does not have an independent bank account. Its receipts are paid to the credit of the Commonwealth Public Account with

the Reserve Bank in each capital city and are credited to the Trust

-Account in A.P.O. and Treasury ledgers. Payments are by cheque drawn on

a Drawing Account with the Reserve Bank, reimbursed by Treasury, the

amounts being debited to the Trust Account. The Trust Account is

therefore not a bank account but an accounting device.

At times the Post Office Trust Account is in surplus,

particularly during the first three to four months of each financial

■ car but the A.P.O. does not have access to these surpluses. The

Commission's consultants, Price Waterhouse and Co., noted that in July

and August 1973 the Post Office Trust Account was in credit to the extent

of $25.8 million and $27.1 million respectively on which no interest was

earned by the A.P.O.

2 . 2 0 Other Important legislative changes in the 1968 Act were:-

(1) The Postmaster-General is required, in the administration of the Act, to pursue a policy directed towards achieving, in respect of each financial year, such financial results as the Postmaster-General, with the concurrence of the Treasurer,

determines.

(2) The profits for a financial year shall be applied in such manner as the Postmaster-General, with the concurrence of the Treasurer, determines.

(3) The cost of A.P.O. services chargeable against the revenue received or receivable in a financial year shall include provisions for depreciation of assets and for future or contingent liabilities including provision in respect of long service leave.

28

(4) The Postmaster-General is required to cause proper accounts and financial records to be kept in accordance with accounting principles generally applied in commercial practice.

(5) The Director-General is required to prepare and furnish the Postmaster-General with a report in relation to the operation of Post Office services during the financial year together with financial statements in respect of that year in such form as

the Treasurer approves; these reports and statements to be tabled by the Postmaster-General, with the report of the Auditor-General on the financial statements, in both Houses of the Parliament.

(6) The Postmaster-General is required to table in both Houses of the Parliament at the end of each financial year, a statement showing:-

(a) the estimated financial results of the Post Office in respect of that financial year, the amount of capital expenditure incurred, and the sources from which the monies expended were obtained, on the works and services

to which that expenditure related;

(b) similar statements in respect of the estimated financial results of the Post Office for the next succeeding financial year.

F i n a n c i a l P e r f o r m a n c e

2.21 The published Balance Sheets of the A.P.O. cover the assets and

liabilities of the postal and telecommunications activities combined; no

separate balance sheets are prepared on a regular basis for the two major

divisions. Since the two services differ so greatly it was thought

necessary for the purposes of this Inquiry to be able to consider them as

separate entities and the A.P.O. was accordingly asked to prepare separate-

balance sheets. They have done so, using their best judgment as to the

division of items in the consolidated balance sheet. The published

consolidated balance sheet as at 30 June 1973 and the separate balance

sheets prepared by the A.P.O. for postal and telecommunications activities

respectively are shown in Tables 2.3, 2.4 and 2.5. It should be noted

that the two latter balance sheets represent reasonable estimates only and

that they have not been audited, They were judged however to be adequate

29

3,012,212,862

113,332,211

T A B L E 2.5

B A L A N C E SH E E T T E L E C O M M U N I C A T I O N S

30 Ju n e 1973

$ i n . $m. $m. $m.

FUNDS PROVIDED FIXED ASSETS (at cost less

By the Treasury Accumulated Profits/Losses 2,783.6 286.3

3,069.9

depreciation)

Telecommunications Plant Motor Vehicles

CURRENT LIABILITIES

Land and Buildings Other Plant and Equipment

Creditors for

Stores and Services 21.7 STORES

Advance Receipts 57.9

79.6

CURRENT ASSETS

PROVISION

Cash and Bank Balances Debtors

Long Service Leave 54.4

Accrued Earnings Prepayments

2,483.1 22.7 313.7 67.4

5.6 43.1 158.1 0.8

3,203.9

2,886.9

109.4

207.6

3,203.9

Source: Details supplied to the Commission by the A.P.O.

for the purposes of the Commission.

Separate profit and loss accounts for the postal and telecom­

munications services are published, as well as the consolidated account.

Table 2.6 shows the three accounts for the year ended 30 June 1973.

The profit and loss accounts and balance sheets referred to

above reflect the widely differing characteristics of the postal and

telecommunications services. Differences can perhaps be most clearly

seen from the figures collected together in Table 2.7.

2.22 Telecommunications dominate the capital structure of the A.P.O.;

postal services account for only about 3.5 per cent of the net funds

employed, while telecommunications absorb about 96.5 per cent. The fixed

assets per employee in postal services, $4,000, place this activity in the

relatively "labour-intensive", class in contrast to the more "capital­

intensive" telecommunications services where fixed assets per employee

amount to $50,000. The percentage composition of the expenses of the two

services given in Table 2.7, shows that for postal, the expenses flowing

directly from capital employed (depreciation plus interest) account for

only 8.5 per cent of total expenses as compared with 43.1 per cent in the

case of telecommunications. Wages and salaries, plus their directly

associated costs of superannuation and long service leave, amount to

72.7 per cent of the total expenses of the postal service as compared

with 46.8 per cent for telecommunications.

The earnings, expenses and profit or loss for both services for

the years 1959-60 to 1972-73 inclusive are given in Table 2.8 and shown

graphically in Figure 1. The year 1959-60 was the first year in which the

accounts of the A.P.O. gave effect to the recommendations of the Ad Hoc

Committee of Inquiry referred to in Section 2.16.

2.23 Over the full 14 year period, postal services have shown an

aggregate loss of $138.2 million and telecommunications a profit of

$226.9 million, the A.P.O. as a whole showing an aggregate consolidated

profit of $82.7 million. It should be noted that this 14 year result was

33

Consolidated

9.37,060,845

545,457,096

154,096,572

36,905,607

12,797,122

146,581,269

(Profit)

895,837,666

41,223,179

TABLE 2.7

C O M P A R A T I V E F I G U R E S PO S T A L A N D T E L E C O M M U N I C A T I O N S Y e a r End ed 30 Ju n e 197 3

Postal Telecommunications Combined

Fixed Assets (at cost less depreciation) Working Capital $125.3 m.

4.8

$2,886.9 m. 237.4

$3,012.2 m. 242.2

LESS provision for Lone Service Leave

$130.1 m.

20.1

$3,124.3 m.

54.4

$3,254.4 m.

74.5

Net Funds $110.0 m. $3,069.9 m. $3,179.9 m.

Earnings $ Earnings/$ Net Funds Employed

$226.5 m.

$ 2.06

$ 710.6 m.

$ 0.23

$ 937.1 m,

$ 0.29

Approximate full-time employees (excluding those engaged in capital work) 31,000 58,000 89,000

Fixed Assets (depreciated) per employee $ 4,000 $ 50,000 $ 34,000

Profit (+) or Loss (-) - $20.9 m. + $62.1 m. + $41.2 m.

Profit or Loss as per cent Net Funds - 19.0% + 2.0% + 1.3%

Profit or Loss as per cent Earnings - 9.2% + 8.7% + 4.4%

Composition of Expenses

Per Cent Per Cent Per Cent

Wages and Salaries 65.5 41.8 48.4

Materials and General 18.8 10.1 12.5

Depreciation 2.2 22.9 17.2

Superannuation 5.3 3.7 4.1

Long Service Leave 1.9 1.3 1.4

Interest 6.3 20.2 16.4

100.0 100.0 100.0

Source: Calculated by Commission from data supplied by the A.,P.O.

35

TABLE

T R A D I N G RE S U L T S

1959-60 to

P o s t a l

Financial Years Earnings Expenses Profit (+) or Loss(-)

$ $ $

1959-60 86,522,158 85,065,722 + 1,456,436

1960-61 92,848,476 90,858,106 + 1,990,370

1961-62 94,621,250 95,374,968 - 753,718

1962-63 99,845,118 98,795,592 + 1,049,526

1963-64 106,576,520 105,620,230 + 956,290

1964-65 112,190,506 114,808,696 - 2,618,190

1965-66 116,746,338 127,087,679 - 10,341,341

1966-67 119,988,404 143,568,482 - 23,580,078

1967-68 138,178,573 158,339,140 - 20,160,567 .

1968-69 154,935,945 163,636,853 - 8,700,908

1969-70 161,866,245 181,734,374 - 19,868,129

1970-71 185,599,026 211,087,687 - 25,488,661

1971-72 213,363,707 224,617,092 - 11,253,385

1972-73 226,496,226 247,387,721 - 20,891,495

TOTAL - 138,203,850 *

* Note: Balance Sheet adjustments In various years between 1959-60 and

1965-66 for a number of factors including Provision for Long

Service Leave and Provision for Depreciation resulted in the

opening balance of the Postal Service at 1 July 1959 being

adjusted to show a loss of $11 million, bringing the

accumulated loss for the Postal Service to $149.2 million at

30 June 1973

36

2.8

OF TH E A . P . O .

1972-73

T e l e c o m m u n i c a t i o n s

Financial Years Earnings Expenses Profit (+) or Loss

$ $ $

1959-60 164,651,272 165,251,202 - 599,930

1960-61 179,446,284 175,910,328 + 3,535,956

1961-62 185,790,498 188,960,216 - 3,169,718

1962-63 203,093,574 205,669,062 - 2,575,488

1963-64 222,716,610 224,266,546 - 1,549,936

1964-65 257,854,690 251,024,108 + 6,830,582

1965-66 284,527,708 274,310,484 + 10,217,224

1966-67 311,499,880 309,422,041 + 2,077,839

1967-68 364,477,843 353,965,382 + 10,512,461

1968-69 412,271,682 395,534,147 + 16,737,535

1969-70 463,378,054 441,527,656 + 21,850,398

1970-71 530,014,123 506,168,217 + 23,845,906

1971-72 645,128,824 574,076,497 + 71,052,327

1972-73 710,564,619 648,449,945 62,114,674

TOTAL +220,879,830 < t >

TOTAL FOR BOTH SERVICES 4* 82,675,980 *

< / > Note: Balance Sheet adjustments in various years between 1959-60 and 1965-66 for a number of factors including Provision for Long Service Leave and Provision for Depreciation resulted in the opening balance of the Telecommunications Service at 1st July

1959 being adjusted to show a profit of $65.4 million bringing the accumulated profit for the Telecommunications Service to $286.3 million.

* Note: After adjustment of opening balances at 1st July 1959 to show a consolidated profit of $54.4 million the accumulated consolidated profit stands at $137.1 million.

Source: Published Accounts of the A.P.O. and details supplied to the Commission by the A.P.O.

37

F I G U R E I

TELECOMMUNICATIONS

Earnings

----- Expenses

S o u r c e : b a s e d o n f i g u r e s i n t a b l e 2 . 8 .

1 9 5 9 - 6 0 6 0 - 6 1 6 1 - 6 2 6 2 - 6 3 6 3 - 6 4 6 4 - 6 5 6 5 - 6 6 6 6 - 6 7 6 7 - 6 8 6 8 - 6 9 6 9 - 7 0 7 0 - 7 1 7 2 - 7 3

POSTAL

Expenses— -j

S o u r c e : b a s e d o n f i g u r e s i n t a b l e 2 . 8 .

1 9 5 9 - 6 0 6 0 - 6 1 6 1 - 6 2 6 2 - 6 3 6 3 - 6 4 6 4 - 6 5 6 5 - 6 6 6 6 - 6 7 6 7 - 6 8 6 8 - 6 9 6 9 - 7 0 7 0 - 7 1 7 1 - 7 2 7 2 - 7 3

FIGURE 1 -EARNINGS AND EXPENSES TELECOMMUNICATIONS AND POSTAL SERVICES 1959-60 — 1972-73

Figure 1 - Earnings and Expenses

Telecommunications and 'Postal Services

1959-60 - 1972-73

38

substantially influenced by the relatively favourable telecommunications

profits for the 1971-72 and 1972-73 years. The 1970 Budget increased

telephone connection fees and rentals and the 1971 Budget provided for

still further increases in telephone connection fees and rentals together

with higher charges for local and trunk telephone calls.

2.24 Figures prepared by the A.P.O. and shown in Table 2.9 permit an

approximate analysis of the trends in earnings and expenses over the 10

year period 1962-63 to 1972-73. Changes in the method of recording mail

statistics, introduced in 1962-63, make it difficult to calculate trend

data for a longer period than 10 years.

It may be desirable to comment briefly on the construction of

Table 2.9. Considering earnings first, the average annual growth rates

in current dollars are calculated directly from the figures shown in

Table 2.8. The growth rates so calculated are the products of two

separate components: the growth rates of business at constant tariffs and

the rates of increase of tariffs. In the case of postal earnings

1.032 x 1.C51 = 1.085. On the expense side, growth rates in current

dollars are again calculated from Table 2.8 and then broken down into the

two components which together account for the increase. "Prices" in this

context covers wages and salaries, materials and services.

Over the years covered by Table 2.9 the total postal articles

handled grew at the rate of 2.3 per cent per annum as is shown later in

Table 2.15. The higher rate of growth of business at constant tariffs,

recorded in Table 2.9 as 3.2 per cent per annum, reflects quality changes

in postal traffic, importantly an increasing proportion of overseas mail

which attracts higher tariff charges and the introduction of new products

such as priority paid mail, print post and surface-air lifted mail.

Even though postal tariffs have increased at an average rate of

5.1 per cent per annum, significantly higher than the 3.5 per cent per

annum for telecommunications tariffs, the postal service has been

handicapped by a real rate of growth (i.e. growth of business at constant

tariffs) of only 3.2 per cent per annum compared with a relatively buoyant

39

TABLE 2.9

T R E N D S IN E A R N I N G S A N D E X P E N S E S

19 6 2 - 6 3 to 1 9 7 2 - 7 3

Average Annual Compound Rates of Increase

Postal Telecommunications

Per cent Per cent per annum

per annum

Earnings

Actual earnings in current dollars 8.5 13.3

Due to:

Growth of business at constant tariffs 3.2 9.5

Increase in tariff rates 5.1 3.5

Expenses

Actual expenses in current dollars 9.6 12.3

Due to:

Growth of expenses at constant prices 2.3 5.4

Increase in prices * 7.1 6.5

* Note: "Prices" as used in this Table embraces the prices of labour, materials and services.

Source: Actual earnings and expenses from Table 2.8; other figures supplied by the A.P.O.

40

9.5 per cent per annum for telecommunications. The rate of increase of

postal tariffs over the past 10 years has clearly been inadequate; in

consequence earnings have not kept pace with the growth of expenses and the

postal services have been in a continuing loss situation.

Increasing competition from private carriers in the inter­

capital city carriage of parcels, the growth of private courier services in

capital cities and the distribution by private organisations of printed

material, may well have had some effect on the growth of postal traffic and

acted to restrain the rate of increase of certain tariffs. Concessional

rates granted to some categories of users have resulted in some

individual postal services operating at a loss as will be shown later in

this Chapter.

2.25 Under the present financing arrangements, past losses on the

postal service are funded by further advances from the Treasury on which

interest is payable. Postal services have built up accumulated losses to

30 June 1973 of $149 million as shown in Table 2.4 and the annual interest

on this sum of approximately $9 million worsens the profit and loss account

by that amount.

It emerges from the figures considered thus far that, in the

profit and loss sense, postal services have been a "problem area" within

the A.P.O. for a number of years. Consistent losses have offset, and

frequently more than offset, the profits derived from telecommunications

services and have constituted a drain on the financial resources of the

A.P.O.

2.26 The figures considered so far for postal services have related

to the activity as a whole. The A.P.O. submitted in evidence estimates

of the profit and loss performance of the different categories of mail

and other services making up the total for the 1971-72 year and these

figures are shown in Table 2.10.

Product costing within a service such as is provided by the

A.P.O. is technically complex and the principles and assumptions inherent

41

TABLE 2.10

P RO FITS O R L O S S E S FR O M IND I V I D U A L C A T E G O R I E S

OF M A I L 19 7 2 - 7 3

Earnings Expenses Profit(+)/Loss(-)

$million $million $million

DOMESTIC MAIL

Letters 126.7 123.6 + 3.1

Other Articles (Note 1) 19.8 20.7 - 0.9

Registered Publications (Note 2) 6.2 16.1 - 9.9

Registered Articles 6.1 10.9 - 4.8

Parcels 9.6 11.8 - 2.2

Special Services 2.8 3.7 - 0.9

OVERSEAS MAIL 31.0 34.5 - 3.5

MONEY TRANSFER 4.8 8.4 - 3.6

OTHER 19.5 17.7 + 1.8

226.5 247.4 - 20.9

Note 1: "Other Articles" comprise mainly non-personal correspondence, printed matter and small packets up to 500g.

Note 2: "Registered Publications" are periodicals and newspapers which receive concessional rates of postage.

Source: A.P.O. submission.

42

in any such costing system can always be subject to argument. The

Commission requested Price Waterhouse and Co. to examine the methods

employed and their comments on the subject appear on pp. 80 to 94

of their report reproduced in Volume 2. In brief, Price Waterhouse

consider that the fully distributed cost basis used by the A.P.O. is an

appropriate method for product costing. Some user groups hold that the

primary function of the A.P.O. is to deliver letters and that all the

fixed costs of the postal network should be charged against the letter

service, leaving only marginal or variable costs to be charged against

particular ancillary services such as registered publications. The

Commission considers that in view of the fact that revenue from letters

accounts for only about 56 per cent of total postal revenue, marginal

costing for non-letter services would not be appropriate.

2 . 2 7 Although the figures for different categories of mail in Table 2.10 give a reasonable measure of the financial performance of the

different services, care must be taken in interpreting the results. If a

given service shows a loss on the basis of fully distributed costs, the

abandonment of that service will not necessarily cause a corresponding

improvement in the overall profit and loss account of postal services.

Price Waterhouse and Co. note that the accounting system does

not record much of the information that would normally be required for

product costing on a regular basis and that there is a need, in their

view, for a more fully developed system. However they consider that

within the limitations of the present system, costs have been equitably

distributed.

For the purposes of the present discussion, it is not necessary

to argue closely as to exactness of the profit or loss figures shown in

Table 2.10; the figures indicate highly uneven results from the different

categories of service. Tariff increases for registered publications,

announced in the last Budget and subsequently amended by Parliament, will

go some way towards the correction of the large loss shown for this class

of mail. A closely comparable financial performance could not reasonably

be expected from each of the categories of service but it would seem

desirable to avoid too great disparities or distortions. The subject is

43

considered further in Chapter 7.

2.28 As noted earlier, telecommunications tariffs have increased at

an average rate of 3.5 per cent per annum over the past 10 years, but

within the same period the growth in volume of business, 9.5 per cent per

annum on average, has resulted in earnings increasing at the satisfactory

average rate of 13.3 per cent per annum. Telecommunications has many of

the characteristics of a capital-intensive growth service and, as the

figures show, has been a regular profit-earner for the past nine years.

2.29 The costing of individual services within telecommunications

and the determination of profits or losses from these services represents

a major problem that has not yet been satisfactorily solved by the A.P.O.,

or indeed by any major overseas telecommunications organisation. The

difficulties are obvious. A telecommunications system comprises a network

of inter-connected exchanges, capable of servicing a variety of product

lines in accordance with the demands placed upon it. The proper

allocation of the costs arising from this fixed equipment network to

individual services presents peculiar costing difficulties. The A.P.O. is

carrying out pilot costing studies only at present, based on South

Australia, and has not yet satisfied itself as to the soundness or

applicability of the system for general use. Price Waterhouse and Co.

have examined the present status of the telecommunications costing study

and their comments appear on pp. 70 to 79 of their report. They note

that much further work will be necessary before an adequate system is

developed. The figures for the 1971-72 year prepared by the A.P.O. and

given in Table 2.11 must therefore be taken as indicative only.

The results shown in Table 2.11 indicate that telephone

installation and calls are profitable In the metropolitan areas and that

trunk calls, telex services and private lines also show satisfactory

profits. Country and rural services, the public telegraph facility and

vertical services (i.e. facilities provided in addition to the basic

telephone service), are unprofitable.

44

TABLE 2.Π

T E L E C O M M U N I C A T I O N S T R A D I N G RE S U L T S BY TY P E OF S E R V I C E 19 7 1 - 7 2

Service Earnings Expenses Profit(+) or Loss(-)

$million $million $million

Basic Telephone Facility - Metropolitan 119.6 71.2 + 48.4

Basic Telephone Facility - Country 27.0 50.7 - 23.7

Basic Telephone Facility - Rural 6.5 36.0 - 29.5

Untimed Calls - Metropolitan 109.7 82.4 + 27.3

Untimed Calls - Country and Rural 36.2 71.9 — 35.7

Trunk Calls (including S.T.D.) 244.1 130.3 + 113.8

Vertical Services (a) 40.8 69.8 - 29.0

Private Lines and Networks (excluding telegraph) 11.0 6.3 + 4.7

Public Telegraph Service 17.6 36.3 - 18.7

Telex Services 13.6 4.5 + 9.1

Telegraph Private Wire Services 6.2 3.4 + 2.8

Common User Data Network (CUDN) Service — -

Other Data Services 0.4 0.3 + 0.1

Directory Publications 12.4 11.0 + 1.4

645.1 574.1 + 71.0

(a) Vertical Services: Any facility provided to a subscriber in addition to basic telephone service.

Source: Supplied by A.P.O. to Price Waterhouse and Co.

45

S o u r c e a n d A p p l i c a t i o n o f Funds

2.30 As remarked earlier, funds are provided by the Treasury through

the Trust Account to meet the cash needs of the A.P.O. Funds are

generated internally within the A.P.O. by way of retained profits and non­

cash charges included in the trading account (depreciation and long

service leave provisions). Tables 2.12, 2.13 and 2.14 show the sources

and applications of funds for the A.P.O. as a whole and for the postal

services and telecommunications separately for the five years 1968-69 to

1972-73 inclusive. It was considered that the figures for this last five

year period would be sufficient to establish the financing pattern for

postal and telecommunications services.

For the five year period considered, the A.P.O. as a whole spent

in total $2,011.7 million on fixed assets, stores and increased working

capital. It generated internally 38.2 per cent of this amount

($769.2 million) and drew on the Treasury for 61.8 per cent ($1,242.5

million).

In the case of postal services, shown separately in Table 2.13,

expenditure on fixed assets and additional working capital amounted to

$84.3 million for the five years. Non-cash charges provided $27.6 million

but trading losses totalling $86.3 million were incurred. Treasury funds

of $143 million were drawn to meet these losses and to finance part of

the increases in fixed assets and in working capital; for the five year

period 60.4 per cent of Treasury funds was used to finance trading losses.

With telecommunications, shown in Table 2.14, expenditure of

$1,927.0 million was met as to 42.9 per cent from internal sources and as

to 57.1 per cent from the Treasury.

G r o w t h o f P o s t a l a n d T e l e c o m m u n i c a t i o n s T r a f f i c

2.31 Growth in the volume of postal traffic has been irregular as

between classes of mail or service. The growth rates for major categories

of business over the 10 years 1962-63 to 1972-73 are shown in Table 2.15.

46

Source

From Treasury

From Internal Sources -Net Trading Result

PI us Non-cash Charge -Depreciation Excess of Liability over Cash Payments for Long Service Leave

Increase in Current Liabilities over Current Assets

TOTAL

Application

Increase in Fixed Assets and Stores Holdings

Less Non-cash Charges

Capitalised -Depreciation

Liability for Long Service Leave

Increase in Current Assets over Current Liabilities

TOTAL

S O U R C E A N D A P P L I C A T I O N O F F U N D S - C O N S O L I D A T E D

TABLE 2.12

1968-69 $m.

1969-70 $m.

1970-71 $m.

1971-72 $m.

204.5 233.0 247.0 270.0

8.0 2.0 -1.6 59.8

103.7 113.6 127.8 139.8

3.1 3.6 3.2 5.2

- -

0.4

319.3 352.2 376.8 474.8

311.4 358.1 385.6 442.8

-4.7 -4.6 -5.6 -5.1

-2.4 -2.8 -3.2 -3.9

15.0 1.5 41.0

319.3 352.2 376.8 474.8

Source: A.P.O. submission page 495 amended to include actual figures for 1972-73.

1972-73 $m.

Total $m. 5 Years %

288.0 1242.5 61.8

41.2 109.4 5.4

154.1 639.0 31.8

5.3 20.4 1.0

0.4

488.6 2011.7 100.0

479.8 1977.7

-5.9

-4.4

-25.9

-16.7

19.1 76.6

488.6 2011.7

TABLE 2.13

1972-73 $m.

Total 5 Years $m. Per Cent

From Treasury

From Internal Sources -

Non-cash Charges -

Depreciation Excess of Liability over Cash Payments for Long Service Leave

Increase of Current Liabilities over Current Assets

TOTAL

Application

Increase in Fixed Assets and Stores Holdings

Net Trading Loss

Increase in Current Assets over Current Liabilities

TOTAL

15.9 28.7 31.1

3.2 3.8 4.3

0.9 0.9 0.9

__ 0.6 3.3

20.0 34.0 39.6

10.1 14.1 14.1

8.7 19.9 25.5

1.2 - _ - ____

20.0 34.0 39.6

28.5 38.8 143.0 82.0

4.5

1.4

5.4

2.3

21.2

6.4

12.1

3.7

3.9 2.2

34.4 46.5 174.5 100.0

18.4 20.1 76.8

11.3 20.9 86.3

4.7 5.5 11.4

34.4 46.5 174.5

Source: A.P.0. submission page 496 amended to include actual figures for 1972-73

Source

From Treasury

From Internal Sources -

Net Trading Result

Plus Non-cash Charges -

Depreciation

Excess of Liability over Cash Payments for Long Service Leave

TOTAL

S O U R C E A N D A P P L I C A T I O N O F F U N D S - T E L E C O M M U N I C A T I O N S

1971-72 $m.

1972-73 $m.

249.2

62.1

148.7

3.0

463.0

Application

Increase in Fixed Assets and Stores Holdings 301.3 344.0 371.5 424.4

Less Non-cash Charges

Capitalised -

Depreciation - 4.7 - 4.6 - 5.6 - 5.1

Liability for Long Service Leave - 2.4 - 2.8 - 3.2 - 3.9

Increase in Current Assets over Current Liabilities 13.8 2.1 2.9 36.3

TOTAL 308.0 338.7 365.6 451.7

459.7

- 5.9

- 4.4

13.6

463.0

Source: A.P.O. submission page 497 amended to include actual figures for 1972-73.

Total 5 Years $m. Per Cent

1099.5 57.1

195.7 10.1

617.8 32.1

14.0 0.7

1927.0 100.0

1900.9

- 25.9

- 16.7

68,7

1927.0

TABLE 2.15

GR O W T H IN P O S T A L T R A F F I C

1 9 6 2 - 6 3 to 19 7 2 - 7 3

1962-63 1972-73 Growth Rate

(million) (million) Per cent Per Annum

Letters 1963.0 2475.0 2.3

Other Articles 121.0 172.1 3.6

Registered Publications 141.0 143.9 0.2

Registered Articles 12.3 11.4 - 0.8

Parcels 16.5 25.4 4.4

TOTAL POSTAL ARTICLES HANDLED 2253.8 2827.8 2.3

Money and Postal Orders 27.4 21.9 - 2.3

Source: Figures supplied to the Commission by the A.P,,0.

Total postal articles handled have been increasing over the past

10 years at 2.3 per cent per annum, fairly close to the rate of growth of

population over the period of 2,0 per cent per annum. In the small

categories of mail, parcels have shown a higher rate of increase of 4.4

per cent per annum, and other articles 3.6 per cent per annum while

registered articles have declined. The money and postal order service

provided by the A.P.O. has decreased significantly in usage at the rate

of 2.3 per cent per annum.

50

2.32 Growth r a t e s f o r some of th e m ajor te leco m m u n icatio n s s e r v ic e s

a re shown in T ab le 2 .1 6 .

T A B L E 2.1 6

G R O W T H OF P R I N C I P A L T E L E C O M M U N I C A T I O N S S E R V I C E S

1 9 6 2 - 6 3 to 1 9 7 2 - 7 3

Service 1962-63

(Million) 1972-73 (Million)

Growth Rate Per Cent Per Annum

Telephone Services in operation 1.812 3.147 5.7

Local Telephone Calls 1809.0 3146.0 5.7

Trunk Calls 84.5 276.3 12.6

Telex Calls 8.4(a) 18.0 16.5

Public Telegrams 18.9 18.0 - 0.5

(a) 1967-68

Source: A.P.O. Financial and Statistical Bulletin for 1962-63 and Financial and Statistical Supplement to the A.P.O. Annual Report for 1972-73.

Local telephone calls have been increasing at 5.7 per cent per

annum, indicating that per capita usage of the telephone has been

increasing at about 3.5 per cent per annum. Trunk calls and telex calls

have shown notable rates of growth. The public telegram service is

declining in usage. Datel services have shown remarkably high growth

rates but the service has only been operating for four years and the

figures are not included in the above table.

51

C o n c l u s i o n s

2.33 The main purpose of this Chapter has been to set a background against which the Commission's proposals for changes in particular areas

can be viewed. It was not the intention that the Chapter of itself

should give rise to any major Commission conclusions but there are some

observations that might appropriately be made at this stage.

The postal and telecommunications services provided by the

A.P.O. function in much the same way as do the services provided by

authorities in other countries. As an organisation the A.P.O. stands

high in the opinion of its counterparts in other countries. The

technical and administrative competence of its officers have been

recognised by the positions accorded to many of them in the international

forums and agencies concerned with problems of postal and telecommuni­

cations development.

2 . 3 4 The administration of these services in Australia faces problems which are common to many countries. Increased labour costs which cannot

be offset by greater productivity through technical advances, are causing

postal costs to rise substantially. The advanced technology of telecommuni­

cations and increasing demands for services, are placing strains on the

financial resources of authorities. Inevitably countries have been

reviewing their approach to the administration of their services with the

aim of improving their management and efficiency of operations. For

reasons which do not in any way reflect on the skills, dedication and

past achievements of officers of the A.P.O., the administration of postal

and telecommunications services in Australia is now being given much the

same sort of scrutiny as has been given, or is occurring, in some other

countries.

52

C H A P T E R 3

RO L E OF T H E A U S T R A L I A N PO ST O F F I C E IN T H E C O M M U N I T Y

Two Views on the R o l e o f the Aus trali an P o s t O f f i c e

3.1 The extension of the mail service has played an important role in the development of many nations. The tradition of service that the mails

must be delivered at all costs, the legends associated with that tradition

and the former importance of the mail service as providing the only common

means for communicating with, and disseminating information to, people in

remote areas, still influence the public concept of the post office in

modern society.

Before answers can be given to questions concerning financial and

management responsibility, tariff policies or the range and adequacy of

services, the basic question of the proper role of the Australian Post

Office (A.P.O.) in the community should be first examined.

3.2 Two differing views have been advanced on the nature of the role of the A.P.O. in the community. One is that the A.P.O. is essentially the

supplier of a social service to the Australian public and, as such, should

not be oriented to making a profit on its services; on the contrary it

should provide a service wherever there is a demonstrated community need

and any shortfall between revenue and costs should be met by contributions

from public moneys.

The second view is that the A.P.O. is a business enterprise and

as such should provide services based on commercial criteria and with the

minimum overall objective of matching revenue with expenditure.

1 9 0 8 - 1 9 1 0 R oy al C o m m i s s i o n

3.3 The Royal Commission appointed in 1908 "to inquire into and

report upon the Postal, Telegraphic and Telephone Services of the

53

Commonwealth", recommended that an independent Board of Management of three

Directors be appointed to control the Post and Telegraph Department. In

support of this recommendation, the Commission commented:-

"The Post and Telegraph Department is not a purely commercial proposition, nor is it a taxing Department, but every effort should be made to conduct the services on business lines".

In discussing the financial responsibility of the Department the

Commission's report said:-

"Your Commissioners recommend that the Department should be self-supporting as a whole, and consider that this is practicable without the lessening of facilities. The services should be viewed as a Commonwealth concern, and the term "self-supporting" should be applied

to the functions of the Department as a whole, irrespective of any particular State, and also to each main branch of the services, viz, postal, telegraphic and telephone".

Interestingly, the postal service of the Department at that time showed a

profit while the telegraphic and telephonic services made losses. The

Commission noted that "the postal section of the Department has to assist

in carrying the financial burden of the telegraph and telephone sections".

The Commission regarded this as "distinctly inequitable", and resulted in

mail facilities being curtailed to outlying districts.

A number of important decisions were taken as a result of the

1908-10 Royal Commission. In 1910 the "penny postage" was introduced as a

uniform letter rate throughout the Commonwealth, i.e. one penny for half

an ounce; and commercial accounts were introduced in 1912-13, with

principles established for the depreciation of assets.

1 9 1 5 I n q u i r y on B u s i n e s s M a n a g e m e n t o f t h e A u s t r a l i a n P o s t O f f i c e

3 . 4 The recommendation that a Board of Management administer the Department was not acted on and in 1915 an inquiry into the need for a

business outlook and business methods in the management of the A.P.O. was

carried out by Sir Robert Anderson. He considered that the Department

could not be run as a business concern on a profit making basis, and thus

each branch could not be expected to pay its own way. He recommended

54

however that the Department as a whole should match expenses with revenue,

and that a general manager be placed in charge of the Department to instil

business methods. The general manager should, he recommended, have full

control over staff with the powers of the Public Service Commission in this

regard transferred to the general manager.

1 9 1 9 - 1 9 2 1 R o y a l C o m m i s s i o n o n E c o n o m i e s

3.5 In 1918 a Royal Commission was appointed to "consider and report

upon the Public Expenditure of the Commonwealth of Australia, with a view

to effecting economies". The Commission was critical of the failure to act

on the recommendations of the 1908-10 Royal Commission or the 1915 report

of Sir Robert Anderson to change the management of the Department. It

supported the proposal of the earlier Royal Commission that the affairs of

the Department be administered by a Board of three Commissioners.

P a r l i a m e n t a r y J o i n t C o m m i t t e e o f P u b l i c A c c o u n t s

3.6 The twelfth report of the above Committee, issued in 1954,

examined the accounts of the Postmaster-General's Department. The

Committee believed that the business management of the Department should

not be subordinated to its status as a Government department, and that the

importance of the commercial accounts could not be over-emphasised. The

Committee made a number of recommendations on the form of the commercial

accounts of the A.P.O. and the principles which should be followed in

preparing those accounts.

A d H o c C o m m i t t e e o f I n q u i r y i n t o t h e C o m m e r c i a l A c c o u n t s o f t h e P o s t O f f i c e , 1 9 5 9 - 1 9 6 0

3.7 Several issues arising from the report of the Parliamentary

Joint Committee of Public Accounts were referred for report by a special

committee. The terms of reference of this Committee, its findings and

decisions of the Government on those findings are given in detail in

Chapter 2, "The Australian Post Office Today".

55

For the limited purposes of this present Chapter, it is important

to note that one of the terms of reference given to the Committee required

it to study and report on the extent of the net financial advantage which

had accrued to the A.P.O. "regarded as a business undertaking" from the

inception of the Commonwealth up to 30 June 1959.

E f f e c t o f E a r l i e r I n q u i r i e s

3.8 While the terms of reference of the different inquiries referred

to above varied considerably, it is possible to make a number of general

observations about consistency in views expressed through the reports of

those inquiries.

Those inquiries which were concerned with the management of the

services, considered that the A.P.O. should be managed on business lines.

Recommendations were made which aimed to give greater business direction

and managerial freedom, although there was no proposal as such to change

the administrative form from a department of State.

Two inquiries which examined the financial policy for the

provision of the services, differed as to whether each of the services

(postal, telephone and telegraph as they then were) should match expenses

with revenues, but both reports recommended that the A.P.O. in total

should do so.

The implication in the 1954 report of the Joint Committee of

Public Accounts, and in the terms of reference for the study by the Ad Hoc

Committee in 1959, is of a general consensus that the A.P.O. should be

regarded as a business undertaking, and that users of the services offered

by the Department should meet the proper costs and charges incurred in

providing those services.

C o m m i s s i o n C o n c l u s i o n

3.9 The Commission considers that it is not correct to define the

role of the A.P.O. today in simple terms which describe it as a social

service or as a business undertaking. It clearly has elements of both in

its role and the real difficulty in interpretation arises in particular

56

cases when the business responsibility and the social responsibility are

not readily compatible.

3. 1 0 Where there is a conflict between the commercial and the social responsibility of a statutory authority, a common response is that the

Government should subsidise losses caused by providing a service for

classes or categories of consumers at what is effectively a concessional

rate. There would however be real problems of interpretation in

introducing subsidies for some customers where an authority is providing a

wide range of services through common facilities to the general community.

The method of costing employed to determine the economics of a service, and

the degree of the financial disability which is attributable to Government

policy as distinct from other characteristics of the service, could

produce widely divergent opinions which are not reconcilable. Also this

form of subsidy tends to reduce the pressure to operate with the maximum

efficiency while complicating the task of measuring the overall performance

of the authority.

Most large organisations engaged in the supply of goods or

services, do so in the knowledge that their goods or services may in their

best overall interests, be supplied to some classes or categories of

customers at less than the fully allocated cost or with a reduced margin of

profit. Some services may be marginal in operation, or manufacturing

resources might give greater profits if utilised elsewhere in the

enterprise, but it is not uncommon that organisations continue to supply

the services or continue the manufacture of the goods to keep faith with

customers, to retain custom, and to attract further custom.

3.1 1 The Commission sees no reason why the A.P.O. should be regarded differently. If the tariffs for a service are shown to be so low as to

prevent the attainment of the financial objectives of the A.P.O., then the

only commercial solutions are: to increase the tariffs: to cross-subsidise

the service by increasing tariffs for some other services; or to use a

combination of tariff adjustments to accomplish a similar result.

The postal and the telecommunications operations both rely on a

high volume of business through the range of services they provide. As

57

such it is possible by imaginative uses of tariff structures, to provide

services to some categories or classes of users at something less than

fully allocated cost or with a reduced profit margin, without the

enterprise necessarily incurring an overall trading loss. For example

there is an element of subsidy in the adoption of a basic letter rate

which operates throughout the Commonwealth. The policy of a common rate

at which letter mail can be posted and delivered within the Commonwealth

has its antecedents in the report of the Royal Commission of 1908-10, and

there has been no suggestion to the present Commission that this policy is

unfair or unreasonable.

3.12 There is a tolerance however beyond which cross-subsidisation of

a minority of customers at the expense of the majority users should not be

extended. It would be difficult, if not unrealistic, to attempt to

quantify the permissible limit of cross-subsidisation within particular

services. The Commission believes that it can only state a general

principle that the tariff structure should not reflect a gross distortion

in favour of some categories or classes of users of a service at the

expense of the majority of customers of the A.P.O.

3 . 1 3 The fact that the A.P.O. has never been given objectives against which its performance can be measured, has caused a lack of community

understanding of the financial responsibilities of the A.P.O. If a

surplus of income over expenditure results from its activities in a year

the A.P.O. is criticised on the ground that the charges for its services

are excessive; if it returns a loss it is criticised for lack of business

efficiency.

For various reasons the Commission considers that statements

resulting from earlier inquiries do not give an adequate definition of the

service philosophy of the A.P.O. in the community today. The Commission

sees the A.P.O. as an organisation which:-

offers a comprehensive range of postal and telecommunications

services and at standards which meet, within reasonable and

responsible limits, the requirements or needs of the whole

community;

58

offers those services on the basis of a tariff structure which

(i) provides for the reasonable costs of those services to

be recouped from revenues received from customers;

(ii) ensures that the community contributes to the revenues

of the A.P.O. in proportion to the use each member makes

of those services;

(iii) provides a reasonable return to public revenues for the

use of community funds employed in the enterprise.

is administered in accordance with accepted principles of

business management so that the efficiency and vitality of the

organisation is constantly under review.

This is not advanced as a complete definition of the role of the

A.P.O. There are important administrative and financial aspects of postal

and telecommunications services discussed in other Chapters of this report

which expand or qualify this broad definition. In the Commission's view

however, it was desirable to introduce here in its report a succinct

definition of the Commission's view of the A.P.O., as views and comments

which follow in later Chapters are, in some cases, related to the issue of

the appropriate role of the postal and telecommunication authorities in the

Australian community today.

59

60

C H A P T E R 4

T H E RA N G E A N D A D E Q U A C Y OF POSTAL A N D T E L E C O M M U N I C A T I O N SE R V I C E S

4.1 The Commission's terms of reference require it to investigate "the range of services to the public and their adequacy to meet present and

future needs, including services as affected by proposals approved but not

yet implemented". This Chapter describes the services provided and discusses

their adequacy.

Communications in general and telecommunications in particular

are playing an ever-increasing role in the life of the community. There is

a very real limitation to the application of new technologies in the postal

service which is built around the fundamental activities of processing,

transporting and delivering mail which are likely to remain relatively

labour-intensive. On the other hand, rapid changes are likely to occur in

the technology of telecommunications services. Growing demand for some

services will result in the fuller utilisation of the capacity and

capability of the existing network and new technologies such as satellites

for internal telecommunications and transmission by optical fibres are

likely to have an impact on the relative costs of services in the future.

P O S T A L S E R V I C E S

4 . 2 The Australian Post Office (A.P.O.) has a responsibility to meet the public need for a national postal service, to offer additional services

in response to public demand and to provide its various services efficiently,

with acceptable performance standards and at reasonable costs.

The A.P.O. provides four basic services:-

1. The transmission of mail from the point of posting to its

destination within Australia or to overseas countries.

61

2. The provision of related services including registered mail,

cash-on-delivery parcels, certified mail, priority paid mail

and messenger delivery.

3. The provision of money transfer services such as money orders

and postal orders.

4. Agency services for the Commonwealth Bank, Taxation Department,

Customs Department and other Government departments.

The Australian continent presents a number of unique problems for

the postal service with an area of almost 7.7 million square kilometres and

a population of only 13 million, of which some 7.9 million live in and

around seven major cities. The distances involved are great and the postal

service must be provided over large areas of low population density. Some

statistics for the postal service network were given in Chapter 2 in the

course of describing the operations of the A.P.O. today: the numbers of

posting and delivery points provided for mail. The figures need not be

repeated here. An extensive postal network covering the whole country has

been developed.

T h e Mail S e r v i c e

4.3 Australia. Mail is divided into:

LETTER MAIL, which is designed for the transmission of business

and personal correspondence including letters, lettercards,

lettersheets and postcards. As a general rule any postal

article, other than a parcel, which is sealed or otherwise

closed against inspection is subject to the letter mail rate of

postage. Letter mail falling within specified dimensions is

carried by air within Australia where air services are available

at surface rates of postage. All other items to be sent by air

attract airmail rates.

PARCELS, which are accepted up to a maximum permissable weight of

20 kg (44 lbs.) with any types of contents permitted for general-

postal transmission.

62

OTHER ARTICLES, which comprise mainly non-personal correspondence,

printed matter and small packets up to 500 gms in weight.

REGISTERED PUBLICATIONS, which include periodicals and newspapers

receiving concessional rates of postage.

4.4 Overseas. Mail is divided into:

LETTER MAIL, which includes letters, aerograms and postcards.

Lower postage rates than those provided for in the Universal

Postal Convention apply by mutual consent to letter mail

exchanged by surface between Australia and countries in Asia and

Oceania.

SMALL PACKETS, which include dutiable or non-dutiable goods of

small quantity or weight. The small packet post provides

speedier treatment than can be given to parcels and at cheaper

rates.

PARCELS, which are accepted up to a maximum weight of 20 kg

(44 lbs.) and which may contain items not excluded from postal

transmission or not debarred from export from Australia or import

into the country of destination.

PRINTED MATTER which includes books, newspapers, periodicals,

and a range of other printed material.

Special services are available within Australia and its

territories, in association with some categories of inland mail,

constituting a series of priced options to the basic services, giving for

example, priority in handling, messenger delivery, security in handling and

delivery and proof of delivery.

4 .5 The range of mail services presently being provided and an indication of their relative importance in terms of earnings is shown in

Table 4.1 which covers the statistics for the 1972-73 year. It will be

seen that about 73 per cent of mail revenue comes from letter mail.

63

TABLE 4.1

M A I L S E R V I C E

D et ails o f e a r n i n g s b y c a t e g o r i e s

1 9 7 2-73.

($ m i l l i o n )

Letters Earnings

Ordinary Domestic 126.0

Pre-sorted Domestic 0.7

Overseas Surface 0 9

Overseas Air 19.4 147.0

Other Articles

Ordinary Domestic 15.7

Pre-sorted Domestic 4.1

Overseas Surface 1.4

Overseas Air 3.8 25.0

Registered Publications 6.2 6.2

Parcels

Ordinary Domestic 9.5

Pre-sorted Domestic 0.8

Overseas Surface 2.0

Overseas Air 2.1 14.4

Registered Articles 6.8 6.8

Special Services

Householder Delivery 1.2

Certified Mail 0.9

Messenger Delivery 0.7 2.8

TOTAL 202.2

Source: Details supplied to the Commission by the A.P.O.

64

The Commission has examined the range of postal services offered

by the A.P.O. and considers that it is adequate and compares favourably

with the range offered in overseas countries. It considers that the A.P.O.

is meeting its responsibilities to provide as wide a range of services as

is reasonably required to meet the social and business needs of the nation.

Looking to the future, the Commission considers that the A.P.O. should still

further develop its marketing and sales capacity to enable it to identify

and respond promptly to change in needs. It may be noted in this

connection that business mail accounts for probably about 70 per cent of

total mail handled and that the rate of growth of mail revenue in

Australia will be directly influenced by the further development of

business mail services.

Although evidence before the Commission did not reveal the

existence of any significant gaps in the range of mail services provided

by the A.P.O., many submissions commented adversely on the standards of

performance, particularly in respect of delayed deliveries. Before

examining this issue, it is necessary to describe in very brief outline

the operation of the mail processing system in Australia since a prior

understanding of its main features is essential to the discussion of

performance.

Mail H a n d l i n g a n d P r o c e s s i n g

4.6 In 1972-73, 2,827 million articles in total were handled

throughout the mail system. A breakdown into States of the postal

articles handled in Australia in that year is given in Table 4.2. The

concentration of population in the metropolitan areas of the various

States, and the historical development of transport systems radiating

from State capital cities, places great importance on the six central

mail exchanges, located in the mainland capital cities, which form the

backbone of the whole mail network.

Mail posted in an area for local delivery or despatch to nearby

offices, is separated at the local post office. Most of the mail,

however, exchanged between suburbs, towns and States and to and from

overseas, passes through the central mail exchanges. About 90 per

cent of all mail posted in Australia traverses these central

65

TABLE 4.2

PO S T A L A R T I C L E S H A N D L E D 1 97 2-73

Let ters

Posted for Delivery Posted for within Australia ■ Places Abroad

( Ό 0 0 ) ( Ό 0 0 )

N.S.W. 836,863 51,051

Vic. 646,581 30,613

Qld. 313,028 9,298

S.A. 203,236 9,619

W. A. 162,275 10,319

Tas. 54,925 351

2,216,908 111,251

O t h e r A r t i c l e s

N.S.W. 123,720 4,278

Vic. 91,676 3,380

Qld. 31,701 705

S.A. 18,317 787

W. A. 12,757 789

Tas. 6,394 41

284,564 9,979

Received from Total Abroad Articles

( Ό 0 0 )

75,380 49,586 8,215 5,745

6,860 1,052

146,837

8,154 5,838 2,255 1,731 2,827

425

21,230

( Ό 0 0 ) 963,294 726,780 330,542 218,600 179,453

56,328

2,474,996

136,153 100,894 34,661 20,834

16,372 6,859

315,774

R e g i s t e r e d A r t i c l e s ( a n d p a r c e l s )

N.s.w Vic. Qld. S.A.

W. A. Tas.

P a r c e l s

N.S.W. Vic. Qld. S.A.

W. A. Tas.

GRAND TOTALS:

2,810 1,020 1,586 5,416

1,724 577 724 3,025

1,190 68 34 1,292

606 85 30 722

520 93 77 690

222 3 4 228

7,071 1,846 2,455 11,372

10,258 477 780 11,515

5,970 402 548 6,919

2,862 87 156 3,106

1,889 93 85 2,066

1,245 68 168 1,481

260 10 88 358

22,483 1,137 1,825 25,445

2,531,026 124,214 172,347 2,827,587

Note: Minor discrepancies may occur due to rounding

Source: Statistical Supplement to the Annual Report of the A.P.O. 1972-73

66

mail exchanges.

4.7 The handling of letters breaks down into the following steps

(1) Culling, i.e. separation of oversize letters, packets, etc.

from ordinary letters.

(2) Facing, so that all letters have the stamped and addressed side

facing up, with the stamp at the top right-hand corner.

(3) Cancelling, i.e. the imprinting of a post mark on the stamp.

(4) Sorting into destinations for despatch either to post offices,

other mail exchanges or overseas.

(5) Transportation either direct to post offices or to rail or air

terminals.

(6) Delivery: mail received at post offices is sorted as appropriate

to the different postmens' "rounds", and each postman "makes up"

his own mail according to the sequence in which he delivers it.

4.8 All the processes from (1) to (4) above can be done manually, but

as volume increases varying degrees of mechanisation can be justified

. Conveyors and elevators are used extensively for handling bagged

mail.

. Small cancelling machines are employed to cancel mechanically the

stamps in bundles of faced-up letters.

In mail exchanges, high speed machines have been introduced to

cull and face letters and cancel the stamps automatically. The

A.P.O. currently employs Toshiba equipment which has superceded

the former Pitney Bowes machines. A random feed of letters is

culled mechanically to divert oversized articles into a separate

stream; the letters remaining pass between electronic sensors

which respond to a fluorescent marking on the stamp and activate

67

mechanisms that turn the letters so that they are all faced the

same way. The stamps are cancelled automatically and the letters

stacked into storage receptacles. Toshiba machines are used at

the central mail exchanges and at the Canberra and Artarmon mail

sorting centres.

. In the Sydney mail exchange only, the letter streams from the

Toshiba machines pass to encoding machines, of which some 150 are

in use. Letters drop into position before the operators so that

addresses or postcodes can be read. By means of keyboards, the

operators cause code marks to be imprinted on the backs of the

envelopes, the code marks indicating the destination for sorting

purposes. The letters pass to decoders which automatically read

the code marks and direct the letters to appropriate conveyors.

The Sydney mail exchange is the only one using electronic letter

sorting; at all other central mail exchanges faced and cancelled letters

from the Toshiba machines are sorted manually using so-called "flat top"

sorting units, comprising sets of slots, appropriately labelled, arranged

in a horizontal sorting field. Addresses are read by the sorting staff

and letters dropped into the slots. At least two stages of sorting are

usually required because of the number of destination points involved.

Mechanisation has been a major issue affecting industrial

relations within the A.P.O., particularly in Svdney, and will be referred

to later in this Chapter and in Chapter 5 whicii deals with management/

staff relations.

4.9 The sorting of Other Articles is carried out at all mail

exchanges using flat top sorting units with enlarged slots.

4.10 Parcels are sorted at each central mail exchange with the aid of

a parcels sorting machine comprising a belt conveyor and a memory device.

The parcels are fed to an operator who reads the addresses and presses a

selector button appropriate to the primary sorting destination of the

parcel. The parcels then feed onto the belt conveyor and the memory

device activates a mechanism which diverts the parcel from the belt to the

appropriate destination bin. Secondary sorting may be carried out in a

68

similar fashion or performed manually.

S t a n d a r d s o f P e r f o r m a n c e , Mail S e r v i c e s

D e l i v e r y

4 .1 1 Service standards for the different types of mail have been prescribed by the A.P.O., the basic service standard within and between

capital cities and some larger country centres being that letters posted by

the advertised closing or clearance times will be delivered by the next

working day.

Each month the A.P.O. samples at random some 89,000 letters

passing through certain points to derive a measure of the performance of

the mail service for that month, performance being expressed as the

percentage of letters in the sample which are available on time fox

delivery by the postman. Table 4.3 shows the results from 1964 to 1973

for all States.

T A B L E 4 . 3

M A I L S E R V I C E P E R F O R M A N C E ( p e r c e n t a g e of l e t t e r s f a 1 1 ing w i t h i n b a s i c s e r v i c e s t a n d a r d )

Year

(Calendar) N.S.W. Vic. Qld. S.A. W.A. Tas. Australia

1964 88.7 94.8 96.3 99.2 99.2 96.5 95.5

1965 85. 1 94.6 96.5 97.9 98.8 97.6 94.5

1966 73.5 93.9 94.7 97.5 97.8 97.2 92.0

1967 75.3 96.4 96.7 98.2 98.8 98.2 93.4

1968 78. 1 95.5 98.6 98.5 97.7 98.6 93.9

1969 79.0 98. 1 99.2 99.7 97.2 98.8 94.9

1970 83.4 98.2 98.0 98.2 97.8 98.9 93.2

1971 84.5 98.7 96.6 98.6 98.4 99.8 93.3

1972 90.5 99.0 98.0 98.4 98.5 99.5 95.2

1973 76.7 98.2 95.8 98.6 98.3 98.8 90.6

Source: Details supplied to the Commission by the A.P.O.

69

The performance standard in New South Wales is considerably and

consistently below that achieved in other states. Since, as noted

previously, a high proportion, about 90 per cent of total mail passes

through the central mail exchanges, critical attention focuses on the

performance of the Sydney exchange which is discussed later in this

Chapter.

It should be remarked that sampling methods such as are employed

by the A.P.O. for estimating performance standards can only be regarded as

giving relative measures of performance. Some countries have embarked on

expensive methods of testing mail performance against standard. The U.S.

Postal Service employs a system of daily checks on every fifth letter on

selected mail routes, the results being fed into a central computer and

made available daily to the postal administration. The Canadian Post

Office uses a system, termed "Post Track", based on codes envelopes

containing magnetic surfaced paper which are tracked electronically to

give a record of the actual times of arrival at various stages of the mail

handling process. This system enables detailed records to be prepared of

time delays throughout the whole system, including those within mail

centres. The Commission suggests that the A.P.O. could well consider a

detailed examination of the Canadian system to test its suitability under

Australian conditions.

I

4.12 The service performance for mail processed by central mail

exchanges may be gauged by measuring the quantity of mail on hand but not

processed in time to be included in the despatches needed to meet the

appropriate service standard. This is termed "leaveover mail". Table 4.4

gives performance data in terms of "leaveovers" for the mainland central

mail exchanges. The percentages of mail which failed to connect with the

appropriate despatches are markedly higher at the Sydney mail exchange

than at any other mainland central mail exchange. and confirm in a general

way the lower performance indicated for New South Wales by the sampling

method referred to in paragraph 4.11.

Since all central mail exchanges are operated by the A.P.O. in

accordance with uniform basic procedures and staffing and rostering

principles, the Commission concludes that the unsatisfactory Sydney

performance must be attributed largely to the poor industrial climate in

70

TABLE 4.4

"LE AVEOV ER" MAI L A T C E N T R A L MAI L EXC H A N G E S

Percentage of Traffic

No. of No. of Days which failed to

Mail Exchange

Year

(Calender) Despatch Days

full clearance of Mail Obtained

connect with .

Appropriate Despatch

Letter Form

°ther Parcels Articles rarcels Letter Form Other

Articles Parcels

Sydney 1969 303 17 0 N.A. 11.7 15.1 N.A.

1970 303 16 0 0 11.0 13.5 11.5

1971 303 9 0 0 8.1 17.9 27.6

1972 304 28 1 1 8.6 19.1 20.4

1973 303 9 0 0 24.2 27.8 46.8

Melbourne 1969 303 225 252 258 0.5 1.5 0.6

1970 303 273 258 273 0.2 2.1 0.4

1971 303 302 291 292 0.001 0.3 0 . 1

1972 304 289 280 304 0.3 0.8 NIL

1973 303 230 239 302 1.0 1.6 0.02

Brisbane 1969 303 220 217 248 1.3 2.4 0.3

1970 303 211 190 222 0.2 1.3 0.6

1971 303 151 151 164 1.6 1.7 1.0

1972 304 189 195 202 0.2 1.2 0.7

1973 303 64 146 102 3.2 1.9 1.0

Adelaide 1969 303 296 270 303 0.06 1.3 NIL

1970 303 295 182 303 0.06 6.6 NIL

1971 303 292 152 303 0.2 8.8 NIL

1972 304 295 172 304 0.2 6.9 NIL

1973 303 204 136 303 1.0 8.9 NIL

Perth 1969 303 152 84 303 4.9 18.5 NIL

1970 303 278 242 293 0.5 5.9 0.7

1971 303 302 302 303 0.03 0.1 NIL

1972 304 285 185 302 0.1 1.4 0.05

1973 303 260 222 303 0.7 6.2 NIL

Note: N.A. - Not Available

Source: Details supplied to the Commission by the A.P.O.

71

that exchange referred to later in this section.

4.13 Various overseas postal administrations have also experienced

delays or irregularities in mail deliveries in recent years. It is

difficult to develop standards of comparison as between one country and

another due to a variety of circumstances, including differences in the

areas covered by mail networks, in population density and distribution,

and in transportation systems. Importantly, care has to be exercised in

the interpretation of statistical results derived from sampling techniques.

Three overseas examples may be quoted:

In Sweden the performance standard aimed at for first class

letter mail is delivery the day after posting except in areas where

transportation poses particular difficulties; in which cases delivery on

the second day after posting is aimed at. The Commission understands that

actual performance is currently about 95 per cent of standard.

In Britain the standard aimed at for first class letter mail is

delivery by the week day following the day of posting. During 1972-73,

according to the Annual Report of the British Post Office, performance

averaged 92 per cent of standard.

The United States Postal Service standards for first class mail

are:-

. Within local areas: 95 per cent delivered next day.

. Within distances up to 600 miles: delivery by the second day

after posting.

. To any other point in the country: delivery by the third day

after posting.

The most recent Annual Report of the U.S. Postal Service for the

year ended 30 June 1973 noted that in the first category, the 95 per cent

standard had been met; in the two other categories, actual performance was

90 per cent of standard.

72

Because of difficulties in the interpretation of performance

statistics, it would be unwise to draw too precise conclusions from the

above results, but on the face of it, the standards of performance attained

in Australia in all States other than New South Wales, shown in Table 4.3,

compare favourably with those quoted above. The New South Wales standard

is markedly lower.

4 . 1 4 Although performance figures for the national mail service, expressed as percentages of standard, undoubtedly give useful measures of

relative progress or retrogression in the service as a whole or in

different parts of the network, an important point must be made. Users

are unlikely to form their opinions or to develop their attitudes towards

the mail service on the basis of its average annual performance, figures

for which inevitably smooth out variations that occur at various times

throughout the year. A pattern of random delays, even if not of major

duration individually, can quickly give an impression of general

unreliability. From the submissions received by the Commission it is

evident that this impression exists widely in Australia.

S y d n e y Mail E x c h a n g e 4 . 1 5 Considering the New South Wales mail network, there is no doubt that a major factor affecting mail delays and regularity of performance

over recent years has been industrial unrest in the form of stoppages and

"black bans" at the Sydney mail exchange. This exchange is the largest in

Australia; its performance is of central importance to the network in New

South Wales and affects the nation as a whole because of the volume of

interstate and overseas mail it handles.

The operation of the Sydney mail exchange has received considerable

publicity since the building was completed in 1966-67. Prior to that time,

the principal mail sorting activity was carried on at the Sydney G.P.O.:

parcels were handled through a Chief Parcels Office near the Central

Railway Station; a separate mail transit depot was maintained at Central

Railway Station and interstate and overseas mail were processed at a centre

in Alexandria. The need for expansion and better facilities led to the

decision to build a new mail centre on a site of 231,500 square feet at

Redfern. The building, which was designed to handle all classes of mail,

including parcels, has a total floor area of 658,000 square feet, of which

454,000 square feet is used for mail handling. The exchange operates

73

24 hours per day, seven days per week. The total staff employed at

30 June 1973 was 3,103.

The Sydney mail exchange was the first designed by the A.P.O. to

include a major degree of mechanisation. In addition to mechanical

equipment for bag handling and transfer operations, Pitney Bowes facer/

canceller machines and equipment for coding and automatic sorting,

developed by Telephone and Electrical Industries Pty. Ltd. (now Plessey

Telecommunications Pty. Ltd.), were installed. The Pitney Bowes machines

were found to be expensive to maintain and were replaced in 1973 by

Toshiba culler/facer/canceller machines which are now standard equipment

in all Australian central mail exchanges.

4.16 The Sydney exchange has been subject to a much higher degree of

industrial unrest than has prevailed in other central mail exchanges and

in the A.P.O. generally. The manhours lost per 1,000 employees at the

Sydney mail exchange and in the A.P.O. taken as a whole over the 18 months

period ending June 1973 are shown in Figure 2 by way of illustration.

During the year ended 30 June 1973 there were 79 work stoppages at the

Sydney mail exchange involving staff engaged in mail processing, resulting

in the loss of 10,993 manhours. Stoppages by craft unions in the same

period numbered 21 for the loss of 845 manhours but these stoppages seldom

affected the movement of mail. During the 1972-73 year only one other

stoppage occurred in a central mail exchange when 93 manhours were lost

at Adelaide.

74

MAN HOURS LOST/1000 EMPLOYEES FIGURE 2

THROUGH INDUSTRIAL DISPUTES - March 1972-June 1973 quarters

O 1200

Mar 1972 June 72 Sept 72 Dec 72 Mar 73 June 73

QUARTER ENDING

-------- - A.P.O.

----------SYDNEY MAIL EXCHANGE

Source: based on figures supplied to the Commission by the P.S.B. and the A.P.O.

4·17 The figure for manhours lost at the Sydney mail exchange does

not fully reflect the industrial situation· The smooth functioning of the

exchange and the flow of mail through it are adversely affected by

black bans" imposed from time to time. Figures supplied to the Commission

by the A.P.O. covered only the six months period ended 30 June 1973 but

indicate the type and range of bans imposed; they are shown in Table 4.5

below. Of the total of 28 bans, 26 involved staff engaged in mail

processing and two involved members of craft unions.

75

TABLE 4. 5

B L AC K BANS I MP OS ED AT S YD NE Y MAI L EXC HANGE

Half Year ended 30 June 1973

Nature of Ban Number of Bans

Disposition of Staff 8

Installation of new equipment or suitability of existing equipment 8

Mail processing procedures not involving mechanical equipment 4

Demarcation 3

General conditions of service, amenities and welfare 2

Safety 1

External factors not associated with mail exchange activities 2

28

Source: Details supplied to the Commission by the A. P. O.

The Commission requested the A. P. O. to prepare average annual

figures for mail articles handled per manhour over a ten year period for

the Sydney and Melbourne mail exchanges to permit comparison of trends in

this simple measure productivity. Table 4. 6 shows separate series of

figures for total articles handled and for letters and other articles.

Over the past ten years the indices at the Sydney exchange have trended

downward in contrast to the upward trends in Melbourne.

Resolution of the industrial problems that beset the Sydney mail

exchange offers the best immediate hope for a significant improvement in

the performance standards and reliability of mail services in New South

Wales. The A. P. O. is constantly in the process of updating its methods and

procedures and is in close touch with developments in technology overseas,

but none of these factors is likely in itself to bring about marked

improvements in service performance unless management/staff relations are

placed on a better footing than at present in the Sydney mail exchange.

76

TABLE 4.6

P R O D U C T I V I T Y T R E N D S SY D N E Y A N D M E L B O U R N E C E N T R A L MAI L E X C H A N G E S

(Article s per m a n hour, c o n v e r t e d to ind ex num bers, bas e y e a r 1 96 3-64 = 100)

Financial

Year

Productivity Index 1963-64 = 100

Total Articles Handled Letters anc Other Articles

Sydney Melbourne Sydney Melbourne

1963-64 100.0 100.0 100.0 100.0

1964-65 106.2 105.9 101.4 106.2

1965-66 99.3 105.1 97.4 106.3

1966-67 97.2 107.0 99.2 106.9

1967-68 90.1 103.9 89.5 103.9

1968-69 91.2 103.1 92.6 105.0

1969-70 87.5 109.0 88.9 112.1

1970-71 89.0 112.6 90.3 117.3

1971-72 89.8 113.0 91.3 117.2

1972-73 95.7 125.7 95.7 129.3

Source: Data supplied to the Commission by the A.P.O.

4.18 In its search for improvements to the mail network, the A.P.O.

is currently planning to develop "decentralised mail centres" in the

larger capital cities to reduce the load on central mail exchanges and

ease the road transport problems associated with exchanges in central areas

of cities. This development has met with resistance from various staff

associations but is being proceeded with. Comments on the decentralised

mail centre scheme are given in a later section of this Chapter dealing

with future postal developments.

M i s s i n g , D a m a g e d a n d D e a d Nail

4.19 Apart from delayed deliveries, missing or damaged mail must also

77

be considered when judging service performance. Statistics for 1972-73

relating to inquiries about mail articles allegedly missing are shown in

Table 4.7 belbw.

T A B L E 4. 7

M I S S I N G M A I L 1 9 7 2 - 7 3

N.S.W. Vic. Qld· S.A. W. A. Tas. Total

Reported Missing 24,227 18,700 7,686 5,673 5,550 1,408 63,244

Located 8,250 9,199 3,513 2,813 2,535 814 27,124

Not Located 15,977 9,501 4,173 2,860 3,015 594 36,120

Source: Details supplied to the Commission by the A.P.,0.

It must be borne in mind when considering these figures that in

most cases it is impossible to determine whether or not the allegedly

missing articles, not eventually located by the A.P.O., were posted or were

in fact received. The total mail not located for 1972-73 amounted to

approximately 13 articles per million handled.

4 . 2 0 Damage to letter mail can occur in mail exchanges for example when blockages cause abrasion by high speed conveyor belts, but the great

majority of such damaged letters is still deliverable.

Much publicity was given in the early days of operation of the

Sydney mail exchange to the incidence of damaged or destroyed letters.

Modifications to mail handling procedures and equipment have been

progressively made since then to eliminate as far as practicable, damages

within the handling system. Details supplied by the A.P.O. to the

Commission show that in a six weeks period late in 1973, only four letters

of standard size were destroyed out of a total of 67 million handled in

the period, a ratio of one letter in every 17 million. In addition, some

4,300 were damaged but were either forwarded to the addressees or returned

to the sender with a letter explaining the circumstances.

4.21 Damage to parcels at mail exchanges is not inconsiderable. Much

78

of this damage occurs as a result of poor packing and wrapping by senders,

but the handling systems themselves must be reckoned to be partly

responsible. Parcels pass down chutes and can be damaged by heavier

parcels in the stream. At the Sydney mail exchange it appears that about

1.5 per cent of parcels require some form of repair, ranging from the

fixing of adhesive tape to complete re-wrapping; the repair figures for all

capital city mail exchanges are as follows

Central Exchange Per cent Repaired

Sydney 1.5

Melbourne 0.4

Brisbane 0.8

Adelaide 0.2

Perth 0.5

Hobart 0.2

The same problem was evident to some degree in other postal

administrations visited by the Commission and it appears that consideration

should be given by the A.P.O. to improving the design of parcel handling

facilities to reduce the risk of damage, particularly in the Sydney mail

exchange.

4.22 In discussing postal standards, reference should also be made to

the fact that each year about six million "dead letters" are handled:

letters incorrectly, insufficiently, or illegibly addressed, or with no

addresses at all. Over three million such letters are returned to senders.

"Dead" mail represents 0.22 per cent of the total mail handled.

The A.P.O. has endeavoured, over the years, to encourage by way

of leaflets and general publicity, the correct addressing of mail, and this

activity should be continued and expanded.

Po s t i n g Tim es

4.23 Postal delivery standards require that users post their mail by

specific times of the day so that it can be processed to meet the

necessary mail departures. The Commission considers that the A.P.O. could

79

do more to draw the attention of users to the need to post by specific

times and suggests that the design and layout of information provided on

pillar boxes and at post offices could well be improved to assist the

public. The Commission was impressed by the prominent displays in Canada

and the United Kingdom of the posting times required for speedy delivery.

S a t u r d a y T r a d i n g

4.24 As from Saturday 23 February, 1974, deliveries of mail on

Saturdays ceased and all post offices other than G.P.O.s closed on

Saturdays; both changes attracted much adverse publicity. In its examin­

ation of the adequacy of postal services to the public, the Commission

considered the implications of the decisions.

An investigation of Saturday services provided in some overseas

countries showed the following:-

Counter Service

Britain

Sweden

West Germany

Canada

U.S.A.

New Zealand

Many post offices close at 12 noon. The normal hours of

business for the remainder are 9 a.m. to 4.30 p.m.

Normal hours are 9 a.m. to 1 p.m.

Normal hours are 8 a.m. to 12 noon but main offices are

open to 1 p.m.

Normal hours are 8 a.m. to 1 p.m. but some offices are

closed on Saturday.

Exceptionally busy city offices are open until 5 p.m.

but others close at noon.

Most offices open 9 a.m. to 11.30 a.m. but some of these

provide only "back door" attendance for telegraph,

telephone and urgent postal business.

80

Mail Deliveries

Britain )

Sweden (1) )

West Germany )

U.S.A. )

New Zealand (2) )

One delivery by postmen is made and mail is

sorted into private boxes.

Canada

Notes:

(1)

There is no delivery by postmen, but there is no

restriction on deliveries by rural mailmen and mail

is sorted into private boxes.

Sweden: Although one delivery is made, certain types

of mail, for example bulk mailings of such items as

telephone bills and printed matter, may be deferred

until Monday.

(2) New Zealand: Delivery by postmen is restricted to

letters, other enveloped articles except advertising

matter from overseas, any urgent or perishable articles,

parcels up to 1% lbs. and subscribers' copies of daily

newspapers. Mail is sorted into private boxes only at

offices where there are 50 or more boxes installed and

where there is a demand for this service.

The all but complete cessation of Saturday trading and the

cessation of Saturday mail deliveries and sorting of mail into private

post office boxes, represents a significant reduction in service to the

public.

From 1967 to February 1974 the Postmaster-General authorised

closure of some individual post offices on Saturdays and varied the

trading hours of others. Offices have been closed on Saturdays in the

past when they were attracting an average of 60 or less customers in the

case of metropolitan areas and five or less customers in country areas.

Counter service hours on Saturdays prior to 23 February, 1974 at the 1,432

official post offices were:-

81

Number of Official Post Offices Per cent

Closed 239 16.7

Open for one hour 277 19.2

Open for two hours 910 63.7

Special hours (G.P.O.s) 6 .4

1,432 100.0

The Amalgamated Postal Workers Union had pressed for some time

for a five day week, Monday to Friday, for postmen and negotiations

commencing late in 1973 finally led to the cessation of Saturday mail

deliveries in February 1974.

The Commission considers that the closure of official post

offices, the withdrawal of deliveries and the cessation of sorting into

private boxes at post offices on Saturdays, are retrograde steps for a

public facility such as the postal service. The management of the new

postal organisation which the Commission proposes will be charged to be

efficient, to actively merchandise and promote postal services, and to

compete with private enterprise in areas of postal service which are not a

monopoly, for example, parcels. The postal organisation's aims of fully

developing the postal services and of achieving the objectives set for it,

will be inhibited if management is restricted in the hours during which it

can provide services. The Commission believes that decisions on matters

such as closing on Saturdays and Saturday deliveries are the responsibility

of the management and provided employees are properly paid, they should

have no objection to providing the services called for by management which

has the responsibility of interpreting and providing for the public’s

postal needs.

O f f i c i a l a n d N o n - O f f i c i a l P o s t O f f i c e s

4 . 2 5 No discussion of the adequacy of postal services would be complete without considering the implications for the postal service of the

current policy of replacing certain categories of official post offices

with non-official post offices.

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In February, 1974 postal services were provided through some

1,432 official post offices and 1,731 full-time non-official post offices.

In addition, 3,195 small businesses such as general stores supply a limited

range of postal services and are paid for these services on a scale

related to postal business transacted.

Official post offices are graded by the A.P.O. on the basis of

business transacted, Grade V being the highest classification. There are

about 300 small centres now served by Grades I and II post offices which

the A.P.O. believes could be replaced by non-official post offices without

reducing the range of services now given to people in these areas. If

this were done the A.P.O. estimates annual savings of $2 million.

Replacing an official post office with a non-official post

office can bring an emotional response from the local residents. In many

small towns the "government" is represented by the police officer, the

stationmaster, and the postmaster, and the closing of an official post

office may be viewed locally as a down-grading in the status of the town.

Such local reaction is understandable, but it. must be accepted that there

have been and are likely to continue to be, changes in the distribution of

population stemming from such factors as the movement of younger people to

larger centres to take advantage of training facilities and wider employ­

ment opportunities. Where the volume of work through small post offices

does not justify their retention as official offices, the Commission

considers it reasonable and responsible to provide equivalent postal

services at less cost through non-official offices. The Commission

considers that non-official post offices will have a continuing role to

play in providing postal services to the public.

In evidence before the Commission, the Australian Postmasters'

Association commented on the seeming reluctance of the A.P.O. to convert

post offices from non-official to official status. The A.P.O. has stated

that because of higher costs of operating a post office under official

conditions, it continues to provide services under non-official conditions

while a satisfactory standard of service can be maintained. It would

appear reasonable that the A.P.O. should provide an official post office

when the business of a non-official office has passed a certain point.

83

The public is entitled to deal directly with a responsible government

authority, wherever possible, rather than transact business through an

agency.

When justified, the A.P.O. arranges for the establishment of

non-official post offices in metropolitan and large urban areas,

particularly in shopping complexes more than a mile from existing offices.

In rural areas, the A.P.O. states its policy to be one of establishing a

non-official office "only if the local residents are experiencing

inconvenience by its absence. As a general rule a new office would not be

merely centre where mail is handed out; a substantial amount of other

counter business is needed to justify it".

In recent years the A.P.O. has been following, not without some

criticisms, a policy of closing small non-official post offices where the

amount of business* transacted is too small to justify the costs of

maintaining them. In the five financial years ended 30 June 1972 over

1,000 of such offices were closed. In justifying its policy, the A.P.O.

states that the closure of 280 offices in 1971-72 saved about $200,000 in

direct costs. The daily average sale of postage stamps over all these

offices was $1.77; of the 3,450 families, who had been collecting their

mail at these offices, 3,200 now have it delivered to them, while the

remaining 250 have it delivered to a point from which they pick it up.

The Commission considers that the A.P.O. has a responsibility to

reduce its operating costs wherever practicable and that service outlets

should be rationalised from time to time to take account of changes in

customer needs, provided the community concerned still has reasonable

access to essential postal services.

F u t u r e Postal D e v e l o p m e n t s

4 . 2 6 The A.P.O. informed the Commission that various new or improved services were at present under investigation including:­

. International priority paid services to certain overseas

countries.

84

. A courier service, including mail pick-up facilities, and computer data collection.

. A postage-collect service which will enable mail to be posted without prepayment of charges, the postage plus fee being collected from the addressee.

. An extension of the range of padded post bags.

. Facsimile mail.

It is clearly desirable for the A.P.O. to have an active market

research and marketing organisation to enable it to identify and respond

to the needs of users, provided always that the A.P.O. keeps before it, as

its principle aim, the efficient provision of basic postal services and

does not allow these to suffer through the unduly rapid extension of

fringe services.

It is doubtful whether sufficient effort has been expended to

date in informing users of the considerable range of services currently

available and the Commission considers that this aspect of marketing and

customer relations could well be developed further.

P o s t O f f i c e B u i l d i n g s

4.27 The A.P.O.'s principle service outlets are the 1,432 official

post offices spread throughout the country, ranging in size from the

General Post Offices in capital cities to small offices in country towns.

Over the 10 years ended June 1972, 83 official post offices were

established in growing centres; 185 new post office buildings were

erected; 83 existing post offices had major alterations or extensions;

and 29 new combined post offices/telephone exchanges were built.

A substantial building programme has therefore been in progress

but much still remains to be done. With the rapid spread of the postal

service during the 19th century, a large number of post offices were

constructed throughout the country, many of which are still in use.

Despite some excellent features, the old post office buildings, in the

Victorian architectural style, have an institutional appearance and

frequently drab interiors which do not project an image of modern service

efficiency. The public areas of many such buildings are in need of

85

renovation. The new post offices that have been constructed over recent

years are of good modern design and the Commission considers that the

A.P.O.'s programme of construction and renovation of post offices should

continue and be expanded in the future.

Po s t O f f i c e B a n k i n g S e r v i c e

4 . 2 8 Some submissions, including that from the A.P.O., discussed the possibility of the A.P.O. setting up a so-called Giro service such as is

operated by the British Post Office and by postal administrations in

several other countries. In simple terms Giro is a post office trading

bank which does not grant overdraft facilities or pay interest on account

balances. The Commission considers that the A.P.O. should not become

involved in such a service. Adequate facilities are available in Australia

at present through a very extensive branch banking system and it should be

noted that the A.P.O. already acts as agent for the Commonwealth Savings

Bank. The introduction of a Giro banking service would, in the

Commission's view, represent an unnecessary and undesirable diversification.

D e c e n t r a l i s e d Mail C e n t r e s

4 . 2 9 As noted earlier in this Chapter, the concentration of population in metropolitan areas and the structure of the transport system

have given rise to the development of central mail exchanges, through which

pass about 90 per cent of all mail. The Sydney and Melbourne exchanges are

the largest in the network, the total articles handled during 1972-73 being

839 million and 772 million respectively.

The concentration of mail sorting in large central mail exchanges

can lead to diseconomies. Location of mail exchange buildings in inner

city areas where land values are high, makes multi-storey construction

inevitable, which complicates the flow of mail through the exchange.

Traffic congestion, which is increasing in all cities, gives rise to

problems of access by road transport. The spreading of cities such as

Sydney and Melbourne over large areas and the distribution of population

and of industry and commerce within these areas, is changing the pattern of

mail distribution; a greater proportion of mail than formerly now

circulates within one regional area of a city. As an example, the A.P.O.

86

states that of the letters posted north of the harbour in Sydney, about

40 per cent are for delivery within that area.

The A.P.O. has developed a new network approach to mail

handling which involves the construction of so-called Decentralised Mail

Centres, in suburban locations. Lower land values will permit single­

storey construction and the problems arising from traffic congestion in

central city areas will be reduced. The transfer of mail within the

region serviced by a decentralised mail centre will be facilitated and

transfer between metropolitan centres and between metropolitan and

country mail centres will be possible without passing through the central

city area. Mail from suburban post offices will be sent to the

appropriate decentralised mail centre in an unsorted condition, permitting

more economical processing by mechanical or semi-mechanical means. The

existing central mail exchanges will continue to handle the large volume

of inner city area mail.

The A.P.O. also strongly favours the decentralised mail centre

concept on the grounds that it should assist materially to improve

management/staff relations. Better staff working conditions will be

provided, staff will be closer to their homes and the smaller centres

should make possible the development of more cohesive staff groups.

In Sydney a start has been made with an interim decentralised

mail centre at Artarmon. The approved network plan for Melbourne

comprises decentralised mail centres at Brighton, Dandenong, Blackburn,

Preston and Footscray, in addition to the existing central mail exchange

to handle central city area mail. Country centres are planned to be at

Geelong, Ballarat, Bendigo, and Benalla or Seymour.

Final decisions have not yet been taken as to the equipment to

be used in all stages of the decentralised mail centres. Machines of the

Toshiba type for culling/facing/cancelling will no doubt be employed, but

further evaluation will be necessary before a decision can be taken as to

sorting equipment. The A.P.O. points out that for the full economic

development of a network, encoding and automatic decoding machines are

essential; once the address is read and a code impressed on the envelope,

decoding and sorting may be carried out automatically at subsequent stages

87

of the network. On the basis of economic studies carried out to date,

the decentralised mail centre scheme offers significant cost savings.

4.30 There has been opposition from some staff organisations to the

decentralised mail centre scheme, despite considerable consultation

between the A.P.O. management and the organisations. Submissions to the

Commission from the Union of Postal Clerks and Telegraphists, the

Australian Postmasters Association, and the Postal Overseers Union

referred to the matter. The submissions questioned the validity of the

decentralised mail centre concept on the grounds of its operational

efficiency, its cost, and in the case of the Australian Postmasters

Association, its affect on career opportunities. On the other hand, the

Amalgamated Postal Workers Union, whose members predominate in mail

handling operations, is not opposed to the concept provided conditions and

amenities are acceptable to the staff and consultation takes place on staff

rosters.

The central mail exchange in Melbourne is located in an old multi­

storey building in the heart of the city. It is performing well, but the

building is not capable of expansion and will shortly need replacing. The

erection of a new central mail exchange in Melbourne based on the

centralised handling of mail, could not reasonably be contemplated.

Having considered all the evidence before it, the Commission

considers that the decentralised mail centre scheme is a sound one and that

it should be developed as quickly as is practicable in Victoria and New South

Wales and that the preliminary planning understood to be in progress for

other states should proceed.

P a r c e l s C e n t r e s

4.31 To improve service performance for parcels in New South Wales

and relieve the load in the Sydney central mail exchange the A.P.O. has

developed a proposal for a parcels network in Sydney involving the

decentralisation of parcels sorting.

The plan envisages four strategically placed centres plus two

"functional" centres, one to handle mainly country and overseas parcels,

located in the central mail exchange at Redfern, and one to handle

interstate parcels. Parcels lodged at suburban post offices and larger

88

post offices throughout New South Wales would be sorted six ways

(corresponding to the six centres), despatched to the appropriate centres,

interchanged directly between centres and despatched to post offices for

delivery. The proposed scheme would reduce parcel handlings and so

potentially reduce parcel damage and handling costs.

The A.P.O. is currently evaluating a counter proposal put forward

by a staff organisation involving centralised sorting of parcels away from

the Sydney central mail exchange.

The Commission considers that the concept of decentralised

sorting of parcels is good and urges that planning for the scheme should

proceed as quickly as practicable and that studies should be extended to

cover other capital cities.

Mechani s a t i o n

4.32 Because of the relatively labour intensive nature of the mail

service, performance can be affected by the changing availability of

labour and the costs directly influenced by rising wage and salary rates.

It is not surprising that, throughout the world, great efforts are being

made to mechanise as many as possible of the mail processing operations

in an endeavour to maintain performance standards and contain costs.

Mechanisation has become a major objective of postal administrations and

will inevitably be pursued world-wide.

Equipment in use in Australia for the processing of mail has

been described earlier in this Chapter. In countries visited by the

Commission, culler/facer/canceller machines were in universal use and,

apart from their value in speeding the processing of mail they were

recognised as relieving the staff of some of the most tedious tasks

involved. Encoding and decoding machines in use in the Sydney central

mail exchange are well developed at present and no doubt will be improved

as further developments in their technology take place. The next step in

the technology of mail handling is "optical character recognition" (O.C.R.)

which employs equipment capable of "recognising" the address electronically

and either sorting the mail direct or automatically imprinting on the

envelope the appropriate sorting code. O.C.R. is in use at present in the

89

U.S.A., but only for typewritten addressed envelopes, and in Japan where it

can handle handwritten addresses. O.C.R. offers the prospect of being able

to remove the need for the visual reading of addresses. Although rapid

development of O.C.R. equipment is taking place overseas, it is unlikely

that its wide scale use in Australia will be justified for some years

because of the smaller mail volumes in Australia.

4 . 3 3 The introduction of mechanised mail processing equipment has met with opposition from some of the staff organisations in the A.P.O. and it

has been necessary for the A.P.O. management to enter into extensive

consultation, extending over some years, with the organisations. Even

though the A.P.O. has made it clear that no retrenchments would take place

and that any staff affected by the introduction of mechanised equipment

would be retrained at the expense of the A.P.O., mechanisation appears to

have been regarded by some of the staff organisations as a threat to growth

of organisation membership.

4 . 3 4 The Commission considers that a vigorous programme of mechanisation of mail processing is essential to the maintenance of service

performance standards, to the control of costs within the A.P.O. and to the

removal of some of the most tedious and routine tasks involved in manual

handling. It must therefore be pursued in Australia as it is elsewhere in

the world. In the four countries visited by the Commission, mechanisation

was proceeding and was the basis for the future development of the mail

network.

For the proper working of the mail service, co-operation between

management and staff is essential. The Commission considers that

mechanisation should be accepted by the staff organisations of the A.P.O.

in the interests of maintaining an effective mail service and containing

the growth of its costs.

4 . 3 5 Much criticism has been directed in the past to the mechanisation of mail handling in the Sydney central mail exchange and it is desirable to

place this issue in perspective. The exchange was the first major exercise

in mechanisation undertaken by the A.P.O. and world wide tenders were

called for equipment. Not all of the equipment subsequently decided on

proved satisfactory and some, including the Pitney Bowes facing and

90

cancelling machines, has been replaced by equipment of more modern design.

Mechanical weaknesses in some other equipment have been progressively

overcome. Over the intervening years the design of mail processing

equipment has received much attention in North America, Europe and Japan

and new generations of equipment are becoming available. Were the Sydney

central mail exchange to be built today, no doubt an improved system could

be installed but.this situation is likely to occur in any area of

developing technology.

The problems of the Sydney central mail exchange would seem to

have stemmed more from the industrial situation existing in the exchange

than from the performance of its mechanical equipment.

T r a n s f e r s o f M o n e y

4.36 The A.P.O. provides two separate services for customers to

transfer money without sending cash through the mails.

The first is for the purchase of "Postal Orders" and is

designed for small transfers within Australia. Customers purchase the

orders from post offices and send them through the mail. They are

redeemable in cash to the bearer at any post office. Postal orders are

pre-printed in the following denominations:-

10 cents and each succeeding 10 cents up to $1.00;

25 cents and 55 cents; in steps of $1.00 up to $10.00;

and $20.00.

At the time of drafting the Commission's report a black ban had

been placed on the cashing of $20.00 postal orders by the Union of Postal

Clerks and Telegraphists, whose members are employed in official post

offices; non-official post offices were not affected by the ban.

The second service is the Money Order service, which is

available for the transfer of money both within Australia and to overseas

countries. Money orders are issued for the amount desired by the

purchaser and made payable to a particular payee at a particular post

office. Advice of purchase and authority to pay may be transmitted by

91

telegram to the payee and post office of payment respectively upon payment

of the appropriate additional fees. Telegraphic transmission of money

orders overseas is limited to about five countries.

The charges for money orders are:-

Within Australia

First $30.00 or part thereof: 50 cents

Over $30.00 and up to $200 : 70 cents

For amounts in excess of $200 the

above charges are repeated.

The usage of postal orders is increasing, the number issued

rising from 12.4 million in 1967-68 to 16.8 million in 1972-73.

The money order service on the other hand is declining in

popularity. Statistics supplied by the A.P.0. show that the number of

money orders issued decreased from 11;4 million in 1967-68 to 5.2 million

in 1972-73.

The A.P.O. reports that both services operate at a loss, the

combined loss in 1972-73 being $3.6 million.

The Commission finds it difficult to appreciate why, in view of

the tariff applying, a simple transaction to transfer money should operate

at a loss, but is not able to say whether the loss is due to costing

practices adopted, the administrative procedures applying or a combination

of these factors. In any case there appears to be a need for the money

order service in particular to be examined closely to see if it can be made

more attractive to the public and the costs involved in running it reduced.

A g e n c y S e r v i c e s

4.37 The A.P.O. provides a number of agency services for other

organisations including the Taxation Department for tax instalment stamps,

and the Australian Broadcasting Commission for broadcasting and television

licence fees. Some post offices are also agents for the Commonwealth

Overseas

For each $2.00 or part

thereof, 10 cents with a

minimum of 65 cents.

92

Savings Bank. The A.P.O. charges for its agency services on the basis of

direct costs plus a loading for administration expenses, with a small

profit margin where the principal concerned is a commercial activity such

as a bank.

The Commission considers that there should be a component in all

agency charges to provide some "profit" to the A.P.O. It is unable to say

what the profit factor should be; this would be a matter for subsequent

negotiation. Some return over and above costs would however be consistent

with the later recommendations regarding financial objectives for postal

operations,

93

T E L E C O M M U N I C A T I O N S E R V I C E S

4 . 3 8 The A.P.O. is responsible for planning, building, developing, maintaining and operating economically and efficiently a nationwide

telecommunications network. This is done through a system of cables and

radio links connected by means of manual and automatic switching centres.

A wide range of services is provided to all sections of the community

through the telephone, telegram, telex and data transmission services.

4 . 3 9 The A.P.O. telephone network has been developed for the past 15 years in accordance with an overall plan, the Community Telephone Plan,

aimed at bringing a modern automatic telephone service to the whole of

Australia. This plan is now in the process of being revised for inclusion

in a new plan for the whole of the telecommunications network to the year

2000.

Apart from the basic telephone service the A.P.O. provides

. Private Automatic Branch Exchange (P.A.B.X.) equipment to

Government and semi-Govemment subscribers only, other

installations being provided by authorised private contractors.

. Facilities such as intercommunication/secretarial units and

switchboards.

. Public telephones (excluding privately owned units such as the

Victa Red Phone).

. Telephone directories (alphabetical and classified) and telex

directories.

. Pre-sale and after-sale advice and assistance to customers.

Specialised items of equipment such as facsimile units, loud

speaking telephones, and telephone answering machines, may be obtained from

commercial organisations after the A.P.O. has examined them and issued

94

"permits to connect".

In addition to facilities for local, trunk, and overseas

telephone calls, special services are available such as early morning and

reminder calls, time of day, recorded information, directory assistance,

emergency service, credit card and reverse charge calls.

4 . 4 0 The telegraph service provides a public telegram network within Australia and to overseas, the telex service and a picturegram service.

4.41 The data service is designed for the high speed transmission of data over the switched telephone network, over leased private lines or

over the Common User Data Network (CUDN). As part of its standard range

of facilities the A.P.O. provides devices (data modems) which convert

data signals to a form suitable for transmission over telephone channels

and which at the receiving end, reconvert the incoming impulses to data

signals. Datelphones permit data transmission over the ordinary switched

telephone network. Devices to permit the visual reading of data are avail­

able .

4 .4 2 The A.P.O. provides also leased private telephone, telegraph and data circuits as well as the terminal equipment for use on telephone and

telegraph circuits and data modems.

4 . 4 3 The Commission has examined the present range of telecommunica­ tion services available in Australia and is of the view that they are

reasonably adequate for the needs of the present and the immediate future,

taking into account the resources available to the A.P.O. to plan, develop,

build, operate, and maintain an Australia-wide telecommunications network.

In seeking to establish priorities the A.P.O. has to consider its

responsibility to provide basic telephone services to new subscribers as

against increasing the range of services available to existing subscribers.

Clearly it is impossible to provide all the services that technology has

made possible.

S t a n d a r d s o f P e r f o r m a n c e

4.44 The A.P.O. has set standards against which the performance of

95

its automatic telephone network is assessed. Broadly the objective is

that on the average no more than 2.5 per cent of local calls should fail

due to technical difficulties, made up of 1.5 per cent due to plant

defects and 1.0 per cent to plant congestion. Actual performance is

measured by sampling facilities in telephone exchanges. The British

Post Office objective, by way of comparison, is three per cent of call

failures.

The A.P.O. reports that with the exception of Sydney and

Canberra, the capital city networks operate with less than 1.5 per cent

loss resulting from plant defects. Improvements to the Sydney network

have reduced the loss due to plant defects from 2.6 per cent to 2.0 per

cent, Canberra being only slightly over the target figure. Most networks

meet the 1.0 per cent for call failures due to plant congestion.

4 . 4 5 For S.T.D. calls the standard set is that no more than three per cent of calls should fail due to plant defects and no more than two per

cent of calls due to plant congestion. The British Post Office standard

is that not more than five per cent of S.T.D. calls should fail due to

technical, causes. The A.P.O. reports that S.T.D. call loss due to plant

defects is exceeding target in most capital city networks and loss due to

plant congestion is above target in all networks. The A.P.O. states that

it is acutely aware of the reasons behind these results which emphasise

the need to keep well ahead in the provision of plant and equipment in the

switching and trunk areas.

4 . 4 6 The standard aimed at for clearing faults is that 90 per cent of all fault reports in metropolitan areas should be cleared by the close of

business on the following day. Within this objective the A.P.O. also

aims to give attention on the same day to "no service" faults reported

before 4 p.m. and clear them if possible. A "no service" fault is one

which results in the subscriber being unable to call out or receive

incoming calls. The A.P.O. reports that in general this latter aim is

being met in all capital cities. However, the overall performance results

in capital cities are below the standard aimed at with Sydney recording

about 75 per cent achievement and the other capitals between 82 per cent

and 87 per cent. The service standard set by the A.P.O. for clearing

96

faults seems comparable with those of overseas countries of which the

Commission has knowledge.

4.47 While the Overseas Telecommunications Commission provides the

international telecommunications links with other countries, access to the

international telephone network is through operators provided by the A.P.O.

The Commission was informed by the A.P.O. that the speed of answering

subscribers" calls to the overseas operator in the mainland capital cities,

is not up to the appropriate service standard due mainly to inability to

recruit sufficient staff in the face of rising traffic and to retain

experienced staff. The A.P.O. is endeavouring to improve the situation

by employing part-time staff in the general telephone operating area so

as to ease the overall staffing situation.

T h e T e l e g r a m S e r v i c e

4.48 In former years the telegram service was a vital link in the

communication network of the country. With the rapid growth in the use

of telephone and telex services, telegrams have declined from 18.9

million in 1962-63 to 18.0 million in 1972-73. The A.P.O. states that

the telegram service is incurring "substantial losses".

The A.P.O. service standard for telegrams is that 90 per cent of

ordinary rate messages should be issued for delivery at the terminating

post office within 30 minutes of lodgment and urgent rate telegrams within

15 minutes, but only 65 per cent of ordinary rate messages and 45 per cent

of urgent rate messages are handled within these standards. The A.P.O.

recognises that the standards set for telegrams are not really meaningful

to customers and states that new standards are being developed.

Although its importance is being usurped by other telecommuni­

cation facilities, the telegram is an important means of communication

and is likely to remain so in the foreseeable future. The A.P.O. has

reduced the physical handling of telegrams as far as is practicable with

the available technology. The use of an automatic switching system for

messages in transmission has eliminated the need for operators to receive

and re-transmit messages from central telegraph offices.

97

N e w T e l e p h o n e C o n n e c t i o n s

4. 4 9 The time taken by the A.P.O. to provide a new telephone service following an application for installation is regarded by many people as an

important measure of its efficiency.

Where an applicant for a telephone service can be connected to an

existing telephone exchange and there is line equipment available to make

the connection, the A.P.O. reports that the average delay, in providing a

telephone service as at January, 1974 was 2.1 months from the time that

all formalities in connection with the application had been completed. If

a service cannot be provided because of the absence of lines to an exchange,

or because there is no equipment available in the exchange to complete the

connection, the application is deferred. A deferred application has to

await either the provision of additional cable to the exchange, the

provision of additional switching capacity, or the disconnection of a

current service. The waiting time for deferred applications can therefore

be considerable, particularly in rural areas where it may even be

necessary to provide a new exchange.

Table 4.8 shows the unsatisfied demand for telephone services,

including deferred applications over the period January 1972 to January

1974.

Total unsatisfied demand has been increasing over the two year

period covered in Table 4.8 and stood at 105,000 in January 1974.

Included within this figure are 21,000 deferred applications, about 20 per

cent of the total. The deferred applications have also been increasing.

The rate of new connections averaged 30,276 per month for the

12 months ended January 1974, compared with 24,242 per month during the

preceeding 12 months, this representing an increase of nearly 25 per cent

in the connection rate. The Commission understands that the A.P.O. plans

to further increase to about 33,000 per month, for the 1974-75 year.

The rate of connection of new telephone services must be

balanced against the capital programme for the expansion of the network

98

T A B L E 4 . 8

U N S A T I S F I E D D E M A N D AND C O N N E C T I O N DE L A Y FOR T E L E P H O N E S

Month D e t erred U n d e r Q uo tes

A p p l i c a t i o n s E n g i n e e r i n g wi t h

I n v e s t i g a t i o n Public

C o n n e c t i o n o f S e r v i c e P r o c e e d i n g

Total U n s a t i s f i e d Dem and

N e w C o n n e c t i o n s S e a s o n a l l y A d j u s t e d

A v e r a g e De l a y in Mon ths

Jan.1972 18,785 5,148 8,247 31,606 63,786

Feb. 14,291 3,660 11,514 37,232 66,697

Mar. 13,712 3,666 11,850 36,234 65,462

April 13,828 3,635 12,270 36,535 66,268

May 13,278 3,579 12,774 36,338 65,969

June 13,250 3,974 12,686 35,459 65,369

July 13,537 3,811 13,434 36,577 67,359

Aug. 13,663 4,006 13,853 37,933 69,455

Sept. 12,793 3,929 14,660 38,595 69,977

Oct. 12,152 4,185 13,915 40,924 71,176

Nov. 12,251 3,919 13,553 42,522 72,245

Dec. 13,438 3,618 12,488 41,297 70,841

Jan.1973 13,821 4,177 14,394 42,838 75,230

Feb. 14,840 4,511 15,281 49,431 84,063

Mar. 15,046 4,612 16,887 50,246 86,791

April 14,721 3,132 16,741 51,344 87,938

May 15,884 5,176 16,794 54,775 92,629

June 16,183 5,416 17,750 50,268 89,617

July 16,561 6,337 18,737 56,252 97,887

Aug. 18,460 6,767 19,455 60,412 105,094

Sept. 17,607 5,902 19,870 61,943 105,322

Oct. 18,828 6,113 17,285 61,708 103,934

Nov. 19,646 5,306 17,261 59,166 101,379

Dec. 20,570 5,239 16,055 55,451 97,315

J an.19 7 4 21,178 5,198 17,199 61,461 105,036

18,536 17,335 24,471 22,441 21.956 22,282 23,503 23,963 23,770 25,475 27,532 25,803 32,364 25,387 28.957 27,817 29,615 31,741 31,191 31,007 29,755 33,572

33,421 31,318 29,527

1.7 2.1 1.5 1.6 1.7 1.6 1.6 1.6 1.6 1.6 1.5 1.6 1.3 1.9 1.7 1.8 1.8 1.6 1.8 1.9 2.1 1.8 1.8 1.8 2.1

SOURCE: Data supplied to the Commission by the A.P.O.

as a whole. Little purpose would be served, except in the short run, by

diverting resources to new connections at the expense of providing balanced

expansion of the network. Currently, demand for new connections is

buoyant and on present indications it seems unlikely that the unsatisfied

demand figure will be capable of material improvement unless the total

resources available to the A.P.O. for new connections and balanced

network expansion are increased.

T e l e p h o n e A c c o u n t s

4 . 5 0 The Commission received a number of submissions relating to alleged overcharges on telephone accounts particularly in relation to

S.T.D. calling. Currently about four per cent of telephone accounts issued

are queried by customers; less than one per cent of accounts are

subsequently adjusted.

The A.P.O. is examining the possibility of three-monthly

instead of the present six monthly billing in the belief that this would

be better suited to customer convenience and would be likely to reduce

the numbers of complaints of overcharging, some of which at present may be

related to the long period elapsing between accounts.

4 . 5 1 All charging at present is based on readings from meters connected to each telephone service and located in the appropriate telephone

exchange. When a local call is made, a single pulse activates the meter

causing it to register a call. With an S.T.D. call, the S.T.D. area code

prefixing the ordinary telephone number activates a mechanism which causes

the meter to record a series of pulses appropriate to the calling distance,

the duration of the call, and the time of day at which the call is made.

The S.T.D. call is in effect registered as a number of local calls; for

example a three minute S.T.D. call between Canberra and Sydney between

6.00 p.m. and 8.00 a.m. for which the charge is 57 cents, will be

registered on the meter as 12 local calls of 4.75 cents each.

Under this system it is not possible to give the customer details

of the S.T.D. calls made and there appears, unfortunately, to be some

public suspicion of the accuracy of telephone accounts, particularly when

100

significant increases take place. The customer Is without direct evidence

or proof, cannot test the account by checking the trunk calls made by STD

and is in effect, arguing against a meter record. It seems inescapable that

some problems stem from bad customer use or control of the telephone, but

undoubtedly many people remain unsatisfied as to the accuracy of their

accounts.

A number of overseas administrations, including those in

Britain and Sweden, employ pulse metering for local and S.T.D. calls

and the Commission was assured by the overseas authorities, as well as

by the A.P.O., that the recording of local and S.T.D. calls by this system

was accurate and reliable.

4 . 5 2 The A.P.O. has Call Record Printer equipment available which is used to investigate metered call complaints. The equipment is connected

in the telephone exchange to the customer's telephone service, and

registers details of numbers called, the time and duration of calls, and

the operation of the meter. This equipment is of limited value; it

cannot satisfy queries about charges in an earlier account; and during

test periods the customer, knowing that his use of the telephone is being

checked in this way, may exercise some reserve about its use. There are

also limitations in the Call Record Printers available and in the number

which can be connected to any one exchange.

4 . 5 3 A private meter, operating in much the same fashion as the exchange meter, can be connected to the user's telephone. While the

A.P.O. states that the present model is not suitable for all telephone

services, the meter would seem to offer subscribers a means of generally

monitoring the usage of their own telephone services. It should be noted

however that the A.P.O. must rely on their exchange meters for accounts

purposes.

4 . 5 4 Business users with Private Automatic Branch Exchanges(P.A.B.X.) may have equipment fitted which bars selected telephone extensions from

calling S.T.D. Control locks which prevent outgoing calls being dialled

or which immobilise lines after business hours can also be provided. A

unit can be fitted to a P.A.B.X. system to sample the various extensions

and register on paper tape certain details of originating calls - the so­

ldi

called F.E.T.R.A. system. All these devices would seem to have some

limited application to meet particular needs or circumstances.

4.55 It is possible in general for telephones to be barred from

access to the S.T.D.service, although in view of the extra charge now

made for operator connected calls, not all users would wish to have

S.T.D. barring. The policy of the A.P.O. has been to 'discourage whole

sale use of trunk access barring' which it regards as a negative

approach to the question of controlling the use of telephones for S.T.D

calls. Barring takes away from subscribers the advantages and economies

which can normally be gained from the S.T.D. service, while from the

A.P.O. point of view, escalation in the use of operator-connected calls

would increase staff requirements and reduce the economic benefits of

the automatic trunk service.

As a consequence, the A.P.O. until fairly recently, permitted

only total trunk barring, that is no access either to S.T.D. or to the

trunk operator, except in circumstances where there was a demonstrated

requirement for access to the manual service. From 1st October 1973,

its general policy on trunk access barring was liberalised and the

following range of alternatives is now available to all telephone sub­

scribers

(i) Unrestricted

(ii) Barred to S.T.D.

(iii) Barred to the trunk operator

(iv) Barred to S.T.D. and the trunk operator

The range of alternatives available to a subscriber depends on

the type of equipment installed in the exchange to which the service is

connected, and the extent of any modifications required. The recently

liberalised barring conditions overcome the previous disability that a

subscriber had no access to the trunk service if S.T.D. barring was

desired.

4.56 A key control facility is being developed for subscribers

connected to exchanges in which crossbar-type equipment is installed;

modifications to associated exchange equipment will permit one of the

102

twc positions of the control key to provide unrestricted service and the

other position a selected alternative.

4. 5 7 Prior to 1 October 1973 whenever trunk access barring was permitted, the cost to the subscriber was $20 per year per exchange line

barred but since then the charge has been $3 per year per exchange line

barred, irrespective of the type of barring or method used. When the key

control facility becomes available, a charge of $2.50 per year for each

instrument fitted with the key control is to be applied, in addition to the

$3 per year for the associated exchange line.

4. 5 8 An alternative to pulse metering, used notably in the United States, is Automatic Message Accounting, or A.M.A. In this system a

detailed printed record is made of the numbers called by S.T.D. and the

duration of the calls providing a complete check on the S.T.D. charges.

The A.M.A. system requires that when an S.T.D. call is made, a signal is

sent back through the circuit identifying the calling number. The

provision of calling line identification equipment adds greatly to the cost

of the system as compared with the simple pulse metering, where only a

single meter has to be provided for each telephone service.

With the introduction of International Subscriber Dialling

(I.S.D.) within a few years, A.M.A. will be progressively introduced to

record overseas calls; the high cost of international calls makes this

almost mandatory. On present planning the A.M.A. equipment will not be

fitted generally throughout Australia but will be restricted to selected

exchanges through which pass a high proportion of the international

telephone traffic.

In retrospect, the Commission considers it was unfortunate that

A.M.A. was not introduced progressively in Australia with S.T.D. Prior

consumer testing by the A.P.O. had indicated that pulse metering would be

generally acceptable in association with S.T.D. and this, together with

the substantial capital saving that would result and the fact that the

pulse metering system was operating in other countries, no doubt led the

A.P.O. to rely on this equipment. Looking to the future, however, the

Commission considers that if S.T.D. traffic continues to grow at the

1 0 3

rate indicated by recent experience, an increasingly restive customer

reaction will develop. Telephone customers are reasonably entitled to

a charging system which can be shown to be accurate and which can

provide, if required, details of S.T.D. calls.

The Commission therefore recommends that the A.P.O. should

expand and develop the A.M.A. system, already planned for introduction

in association with I.S.D., to embrace the whole network. Progressive

development will be necessary. About 90 per cent of services are

connected to modern exchanges where the cost per line of calling line

identification equipment would average about $6 and major progress

could be made by concentrating on these exchanges. In terms of current

costs an expenditure of the order of $20 million would be involved. The

installation of calling line identification equipment in some of the

older-type exchanges would be unreasonably expensive in terms of the

cost per line and the introduction of A.M.A. into these exchanges may

well have to await the installation in due course of modern crossbar

equipment. It would be difficult to justify expenditure averaging

about $70 per line for calling line identification equipment at these

exchanges which cover about 10 per cent of all telephone services

currently installed.

P r i v a t e A u t o m a t i c B r a n c h E x c h a n g e s ( PA BX)

4.59 A P.A.B.X. system is essential in large organisations to pro­

vide an inter-office telephone network and to obtain the maximum benefit

from telephone outlets. The A.P.O. decided in 1957 that after that time

certain private contractors would be permitted to sell or lease approved

P.A.B.X. units for connection to the telecommunications network.

Until 1957, the A.P.O. supplied all P.A.B.X. units. At present

the A.P.O. supplies and installs P.A.B.X. units only for Government

Departments and instrumentalities, but maintains all installations at a

fee related to the size of the unit. Because of the proliferation of

types submitted for approval, the A.P.O. in 1973 called for tenders for

a standard range of units, preferably to be made in Australia. The

Commission endorses the view of the A.P.O. that some degree of standardi-

104

sai ion of V '.A.B.X. equipment would assist in reducing maintenance costs,

but it considers that customers must be allowed reasonable freedom to

select equipment appropriate to special requirements. The A.P.O.

does not charge for the work involved in examining and testing P.A.B.X.

units submitted for approval. A charge for such work is made by the

British Post Office and would be justified in Australia.

T e l e x S e r v i c e s

4.60 Telex is a system by which subscribers can communicate with each

other using teleprinter machines. Teleprinters manufactured by Siemens

Industries Ltd. are currently the A.P.O. standard equipment. The A.P.O.

provides a range of optional attachments to the basic service, such as

tape preparation and transmission facilities and two colour printing.

The Commission considers the service a valuable one; no submissions were

received criticising its operation.

D a t a S e r v i c e s - Patel a n d CU D N

4.61 Three special services are provided by the A.P.O. for the

electronic transmission of dat i. One system enables a customer to use

the normal telephone network for this purpose, while the second involves

the use of leased private lines; both of these come within the so-called

Datel Service of the A.P.O.

4.62 The A.P.O. commenced supplying data modems necessary for the

transmission of data in 1969, the year in which its Datel service was

introduced; at 30 June 1973 nearly 2,500 modems were in service. The

A.P.O. is the sole supplier of data modems to users of the service,

except in those cases where the customer wishes to operate at a speed

not - encompassed in the standard range. The A.P.O. has adopted this policy

on the grounds that there are advantages to the user and the A.P.O. in

having maintenance responsibility placed with one authority on an "end

to end" basis. The Commission supports the grounds on which the A.P.O.

has adopted this policy, particularly in view of the growth which is

taking place in the numbers of modems in use.

105

4.63 The third facility is the Common User Data Network (CUDN)

which was introduced with the aims of meeting the increasing demands

expected for data transmission and of providing capacity to handle

telegraph-type messages such as are sent on leased lines by airlines.

The system is designed to transfer data between branch offices and

centralised computers or between one computer installation and another.

The particular advantage of CUDN is that costly common control equipment

is shared between a number of customers, but each customer's network

can be established in a way that makes it in effect his own private

network. The development has not been without its difficulties.

The Univac Division of Sperry Rand Australia Ltd. was given the

main contract in September 1970 after open tenders were called. The

original contract required the service to be operating by the following

dates:-

Brisbane - November 1971

Melbourne - March 1972

Sydney - September 1972

Perth - November 1972

Adelaide - January 1973

In the period between the awarding of the contract and February

1973, considerable slippage had occurred in the completion dates specified.

The A.P.O. admits responsibility for delays of 19 weeks in this period

due to the late provision of sites and power requirements and to

difficulties in reaching agreement with UNIVAC on the specifications

of the system. However, it maintains that the balance of delay was due

to the contractor. In February 1973 it was necessary to renegotiate

the contract which was amended in April 1973 to provide for the following

completion dates, with substantial damages for non-compliance:-

Melbourne 31 January 1974(modified

reliability tests) with all tests

completed four months later

1 0 6

Sydney and Brisbane* . four months after Melbourne

acceptance of modified reliability

tests

Perth . two months after Brisbane acceptance

Adelaide . two months after Perth acceptance

* The Brisbane centre has been operating under "qualified"

acceptance conditions since September, 1972.

The A.P.O., at the time of writing this Report, believes that

these amended dates will not be met in which event it would expect to

recover a substantial sum from UNIVAC by way of liquidated damages. The

A.P.O. expects that multi-centre operation of the network will not be

achieved until January 1976 and that the first group of new customers

for the network will not be able to be connected until September 1977.

At present the A.P.O. has three customers for C.U.D.N.: Trans

Australia Airlines, Department of Health and the Bureau of Meteorology.

Although the systems was not fully operational, Trans Australia Airlines

commenced passing traffic through the Brisbane installation on a limited

basis in November 1972 as did the Department of Health in February 1973.

Special arrangements were made in April 1973 to put some CUDN equipment

in Sydney to carry Department of Health traffic between Melbourne and

Canberra.

A survey conducted by the Australian Computer Users Association,

revealed that, subject to the tariff rates finally determined, 14 new

customers would use CUDN when the full facility is available. Dr. C.H.P.

Brookes who represented the Association to give evidence before the

Commission, estimated that the rate of growth in data transmission is

about 25 per cent per year and expressed the view that CUDN as a

facility would be attractive to computer users because of likely cost

savings compared with the leasing of private lines, and because of its

freedom from the delays which can take place if faults develop on a

private line.

107

Some delays in completing the facility would have been under­

standable in view of the technical problems always likely to arise when

new systems are being introduced. A time lag of about three years, how­

ever, is not reasonable and reflects on all aspects of the project.

The original capital estimate based on tender prices was

$8.1 million. Expansion of capacity subsequently decided on added

$6.2 million, making $14.3 million for the enlarged system. The cost

is now estimated to be $18.4 million, an increase of 29 per cent, a

high but not altogether unreasonable over-run in view of the nature of

the project and cost escalation.

The three initial customers of the facility were given firm

tariff quotations for the first five years use of the system before the

capital and operating costs of providing CUDN had been estimated in

detail. Tariffs accepted by these organisations are below those which

were subsequently found to be necessary when estimates of the capital

and operating costs of the network were revised. In the case of one

Government department, the difference between the tariff accepted and

the tariff subsequently determined is of the order of $550,000 a year -

a loss in revenue to the A.P.O. of $2.75 million over the five year

period. The Commission considers that renegotiation of such tariff

agreements entered into with Government departments would be justified.

It is suggested also that the present tariff schedule for CUDN should

be reviewed before any further decisions on customer contracts are

taken.

The A.P.O. states that the CUDN system should be capable of

accommodating seven customers with traffic patterns similar to those of

T.A.A., the Bureau of Meteorology and the Department of Health, or

alternatively a larger number of smaller customers.

The A.P.O. has revised its original financial assessment of

CUDN using a sixteen year equipment life period. On the basis of this

assessment it estimates that C.U.D.N. will not reach break-even point

after paying interest on all capital investment until about 1980-81 or

1981-82. The A.P.O. is carrying out further studies in an attempt to

108

improve the financial performance of C.U.D.N.

In retrospect it would appear that the CUDN system should have

been studied in considerably more detail by both the A.P.O. and the

successful tenderer and its operational requirements more clearly defined

before a contract was let. Problems developed which were not foreseen in

the preliminary planning and undoubtedly delayed the project and added to

its cost. Entering into firm five year tariff agreements at an early

stage of development of such a system was a hazardous procedure.

The Commission also concludes that the organisational arrange­

ments within the A.P.O. were inadequate for the development of such a

major innovative project. It would appear that the project should have

been made the responsibility of a special management group reporting

regularly to top management.

L e a s e d L i n e s

4.64 A customer may lease a telephone, telegraph or data line from

the A.P.O. to provide a private communication link. The condition laid

down by the A.P.O. is that the leased line should be used exclusively

for traffic for or on behalf of the lessee; leased lines cannot be used

to provide a private communication network for a number of organisations

under different ownership.

The A.P.O. relies on Section 80 of the Post and Telegraph Act

1901-1973 to maintain its position in this regard. Section 80 states

inter alia:-

"The Postmaster-General shall have the exclusive privilege of erecting and maintaining telegraph lines and of transmitting telegrams or other communications by telegraph within the Commonwealth and performing all the incidental services of receiving, collecting

or delivering such telegrams or communications except as provided by this Act or the regulations".

(By definition under the Act "Telegraph" means a wire or cable used for telegraphic or telephonic communication).

109

The A.P.O. also holds that giving rights to private organisa­

tions to operate message switching systems would make it difficult to

maintain a reasonable level of charges for the services used by the

community in general. The view was put to the Commission by organisations

providing a comprehensive subscriber news service, that the A.P.O. policy

was unreasonable. Both points of view have some validity. The Commission

has not sought legal advice on the A.P.O.'s interpretation of Section 80

of the Post and Telegraph Act but has considered the reasonableness or

otherwise of the present A.P.O. policy.

The A.P.O. must ensure a reasonable return on invested capital

in the national network. The return is dependent on tariffs charged and

on the degree of customer usage of the network. When a customer is

given the exclusive use of a line through a lease arrangement, the A.P.O.

is deprived of the use of that line for other traffic; and the customer

has the use of a line which has been provided by public monies. There is

no agreement internationally as to what is a reasonable attitude towards

lessees seeking to switch calls on private lines. There are obvious

dangers in allowing the development of private networks to the point

where a private organisation is effectively a telecommunications carrier

using A.P.O. facilities; special tariffs would be needed to compensate

the A.P.O. for loss of revenue from the use of public facilities and

to reflect their value to the private network. In the Commission's

view the existing policy of the A.P.O. is reasonable, but should be

kept under review.

The Australian Newspaper Council represented to the Commission

that the tariffs for leased lines over the longer distances were relatively

dearer compared with those for shorter distances than was the case in some

overseas countries. The Commission considers that arguments for tariff

adjustments based on overseas comparisons are difficult to sustain because

of differing economic circumstances. In view of the rising costs of the

telecommunications service, commented on in Chapter 7, the Commission feels

unable to recommend downward adjustments in the area of private line

rentals but suggests that such rentals should be reviewed as telecommuni­

cations costing procedures are further developed.

110

The news services also state that policy on the multiplexing

of lines is restricting the services which they wish to give to their sub­

scribers. Multiplexing involves the use of special channel-subdividing

equipment which enables the lessee of a line to obtain a number of communi­

cation channels from the one circuit, for example 24 low-speed telegraph

channels can be obtained by dividing one telephone speech channel. Since

1969 the A.P.O. has allowed multiplexing equipment to be connected to

leased lines, subject to approval by the A.P.O. of technical specifications.

A special tariff loading of 25 per cent is placed on leased lines where

multiplexing has been approved. At April 1973 about 20 private multiplex

systems were operating in Australia.

Having regard to the capital investment involved and to the

present rate of return on investment in the telecommunications network,

the Commission concludes that the A.P.O. policy on multiplexing provides

a reasonable opportunity for a lessee to obtain the greatest benefit from

a private line. As the national network develops further there may be a

case for policy in this area to be reviewed.

S p e c i a l E q u i p m e n t a n d A t t a c h m e n t s

4.65 The A.P.O., as a general policy, will not approve the attach­

ment of special equipment to its network by a subscriber unless that

equipment meets A.P.O. technical standards and unless the needs of the

subscriber cannot be met by equipment available from the A.P.O. This

policy was criticised in evidence on the following grounds

. unreasonable demands and delays by the A.P.O. in considering

applications for approval of equipment

. the A.P.O. should automatically grant "type approval"

where this has been given by organisations overseas

. the A.P.O. is deciding whether the equipment it has avail­

able is suitable for a customer's special needs when this

should be a matter for the customer

111

The characteristics of telecommunication systems vary from

country to country. The A.P.O. has a duty to protect its system from

damage, its employees from exposure to danger and the general interest

of all users and there is a clear case for continuing the policy of

allowing only approved equipment to be connected to the network. The

Commission considers that there is sufficient evidence to support thv

claim that undue delays can occur when customers seek type approval

for equipment; instances of delay were quoted in evidence before the

Commission. There appears to be some lack of co-ordination in the

handling of such applications within the A.P.O. and m e procedures should

be investigated with a view to speeding up the handling of applications

for approval.

The A.P.O. does not at present charge for work involved in

these applications, in contrast with the practices of several overseas

authorities. The Commission considers that it would be appropriate

for the A.P.O. to charge fees for this work which constitutes, in effect,

a technical advisory service.

With certain categories of equipment in normal use by a sig­

nificant number of users, such as teleprinter machines for connection

to the telex service, and data modems in the standard ranges, there is

a case for uniformity on the basis of savings in maintenance costs.

However, when a customer wishes to attach an item of equipment to a line

to provide a particular and specialist service not available through

standard A.P.O. equipment, the Commission considers that "permit to

connect" approval should be granted, so long as equipment meets the

necessary technical standards. Within reasonable limits there are

advantages to the A.P.O., as well as to the customer, in allowing the

selection of special equipment not provided by the A.P.O.

N e w E q u i p m e n t an d S e r v i c e s

4.66 The A.P.O. is presently considering introducing certain new

equipment and services, including push button telephones, cordless

switchboards facilities to allow outdoor extensions on certain inter­

communication systems, and telephone answering services. These services

112

appear to involve a minimum of capital investment and will satisfy the

needs of specific market segments. The A.P.O. is also considering

introducing electronically controlled local telephone exchanges which will

make possible the introduction of some new services.

R e p r e s e n t a t i o n o f U s e r I n t e r e s t in Pos ta l a n d T e l e c o m m u n i c a t i o n s A d m i n i s t r a t i o n

Some countries have introduced special arrangements to enable

users of postal and telecommunications services to express their views on

matters such as tariffs and the range and adequacy of services provided.

These arrangements vary from a requirement to refer particular matters to

a legally-constituted organisation representing user interests, to informal

consultations arranged so that the authorities responsible for the services

are better aware of the needs and views of their customers.

Although the Commission considers that the market research

facilities of the A.P.O. need strengthening, the A.P.O. makes considerable

efforts to obtain and analyse user reactions, for example, by way of

special customer surveys and from complaints received in the normal course

of business. In this regard the A.P.O. acts as does any commercial

enterprise.

The question of customer involvement in tariff setting is related

to the degree of autonomy granted to the authorities providing the

services. The British Post Office, for example, has the statutory power to

determine the tariffs, but is required to refer proposed tariff amendments

to the Post Office Users' National Council, a statutory body which reports

to the Minister of Posts and Telecommunications.

The Commission's proposals for changes in the organisation and

administration of A.P.O. functions as outlined in later Chapters, include

however the requirement that the responsible Minister approve amendments to

tariffs. A requirement to refer tariffs and other matters to an external

organisation would, in the view of the Commission, detract from the

responsibilities of the new authorities which it proposes should administer

the services. These authorities would be operating within specific

financial objectives and it is proposed that the Minister have a number of

113

important powers to exercise in relation to their activities. The

relationships envisaged between the Minister and the new authorities

would be disturbed if another organisation was given responsibilities for

advising on matters which are the concern of the authorities and of the

Minister.

114

C H A P T E R 5

M A N A G E M E N T / S T A F F R E L A T I O N S

5.1 The Australian Post Office CAPO) is an organisation employing

more than 115,000 people on a full-time basis and the relations

between management and staff are vital to its functioning. In this

Chapter, a range of issues concerned with industrial relations are dis­

cussed, with particular reference to those matters raised by staff

organisations in evidence to the Commission.

As the criticisms by staff organisations were directed in large

part to the role of the Public Service Board in matters relating to pay

and conditions of service, it is desirable to outline the respective

responsibilities of the Public Service Board and the Permanent Head of a

department in maintaining good relations between management and staff.

5.2 In its submission to the Commission, the Public Service Board

said:­

"..... it should be noted that under section 25(2) of the Public Service Act, an important responsibility on the management side for management/staff relations in a department is borne by the Permanent Head. He is responsible for its general working, including the exercise of managerial functions and powers at all levels within the department. He carries the basic

responsibility for the general well-being and morale of his staff, the quality of supervision, working conditions, rosters, shift arrangements, grievances and disputes arising at the work face. The handling

of these matters provides the basic foundations for good management/staff relations".

5.3 In relation to its own role, the Public Service Board said:­

" The Public Service Board als° has an important influence on the management/staff relations within a department, through its responsibilities for:

(1) the fixation of rates of pay and other conditions

of service;

115

(2) the determination of classification structures appropriate to particular work areas;

(3) the determination of the appropriate number and classification of staff".

5.4 The submission to the Commission by the A.P.O. remarked:-

"The constraint exercised by the Public Service Board over staffing levels and individual position classification in the Department has as significant an effect on departmental

operations as the industrial-arbitral constraints".

In discussing the authority to determine pay and conditions of

service, the A.P.O. submission said:-

"From the point of view of the national economy there is a strong argument to support retention of an overall co-ordinated approach to pay fixation and determination of conditions of service for all Commonwealth staff. A Post Office Corporation could however have authority for negotiating with staff organisations on pay and conditions

subject to consultation with the Public Service Board before decisions are made".

5.5 Two comments might usefully be made at this point on the

statements quoted from the submissions of the Public Service Board and

the A.P.O. Firstly there is a division of responsibility between the

Board and the A.P.O. in respect of industrial disputes. Those

disputes which relate to working conditions, work procedures or similar

matters are dealt with by the A.P.O. Disputes which concern pay and

conditions of employment are matters for which the Public Service Board

has the prime responsibility.

Secondly, it is clear that the A.P.O., as the "de facto"

employer involved, feels that it is at some disadvantage in maintaining

good working relations with its employees, when disputes concerning pay

and other conditions of service are involved. At the same time it

recognises the merits of arrangements for the co-ordination of the pay

and conditions of service of all Commonwealth staff.

116

5.0 The jurisdiction of the Public Service Board is discussed as

a separate matter in Chapter 9 in relation to changes recommended by the

Commission in the future administration of the postal and telecommuni­

cations services.

S t a f f O r g a n i s a t i o n s

5.7 There are 28 registered staff industrial organisations with

members employed in the A.P.O. Membership of 11 of those organisations

is confined to the A.P.O. Appendix 1 to this Chapter lists the 17 unions

or staff associations with the largest membership in the A.P.O. and

indicates the work areas in the A.P.O. where the members of each organi­

sation are principally located.

5.8 Several staff organisations referred to the multiplicity of

organisations covering staff employed in the A.P.O. and saw the need

for a reduction in their number. The Amalgamated Postal Workers

Union (A.P.W.U.) considered that the A.P.O. should promote and, if

necessary, require the amalgamation of some of these staff organisations.

It suggested that the A.P.O. could refuse to negotiate witu smaller

organisations and referred to the situation in Britain where the

British Post Office had refused to enter into negotiations with organi­

sations representing only a comparatively small number of staff employed

in particular work categories.

The A.P.O. considers that it could be helpful to the maintenance

of good industrial relations if there were fewer staff organisations.

With the existing number the A.P.O. has experienced difficulties in co­

ordination, consultation and negotiation. It has, however, always

adopted a neutral attitude on issues of representation of staff through

organisations on the basis that it is a matter in which it has no

jurisdict ion.

5.9 It can readily be understood that a large number of staff

organisations exercising their legitimate interests in the welfare and

employment conditions of their members would pose difficulties of

communication and co-ordination for both management and the staff

organisations. It would seem sensible that action be taken at some stage

1 1 7

to rationalise staff organisation representation but this seems a matter

principally for organisations and their members to decide. The

Commission considers that the policy of neutrality adopted by the A.P.O.

in this matter is correct, and that the A.P.O. would be in an indefensible

position if it attempted to force amalgamations by refusing to recognise

or negotiate with staff organisation which are registered under the

Conciliation and Arbitration Act.

S t a f f O r g a n i s a t i o n V i e w s on M a n a g e m e n t / S t a f f R e l a t i o n s

5.10 Submissions were received from the staff organisations

listed below. In some cases, branches of an organisation also made

separate submissions.

. Administrative and Clerical Officers Association (A.C.O.A.)

. Amalgamated Postal Workers Union of Australia (A.P.W.U.)

. Association of Architects, Engineers, Surveyors and

Draughtsmen of Australia (A.A.E.S,D.A.)

. Association of Professional Engineers of Australia (A.P.E.A.)

. Australian Postmasters Association (A.P.A.)

. Line Inspectors Association (L.I.A.)

. Non-Official Postmasters Association (N.O.P.M.)

. Postal Overseers Union (P.O.U.)

. Postal Telecommunication Technicians Association (P.T.T.A.)

. Postmaster-Generals Department Heads of Divisions and

Branches Association (P.M.G.H.B.)

. Professional Officers Association (P.O.A.)

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Professional Radio Employees Institute of Australia (P.R.E.I.)

. Telecommunications Technical Officers Association (T.T.O.A.)

. Union of Postal Clerks and Telegraphists (U.P.C.T.)

These organisations have an estimated total membership within the A.P.O.

of 92,000.

In many cases the submissions gave views of the staff

organisations on management/staff relations in some detail, these views

being supplemented by further evidence given at the public hearings of the

Commission. To ensure, however, that the attitudes of the staff organi­

sations who had made submissions were known on certain "key" issues, the

Commission asked that they respond in writing to six questions. The

Commission's conclusions on some of the issues raised by these questions

appear in other Chapters, but the views of the staff organisations are

summarised in this present Chapter as all the questions directly concern

management/staff relations, or involve possible changes in the admini­

stration of postal and telecommunications services.

Q u e s t i o n 1 . " D o e s y o u r U n i o n / A s s o c i a t i o n c o n s i d e r t h a t g e n e r a l l y t h e p r e s e n t s t r u c t u r e o f t h e P o s t O f f i c e o f f e r s a r e a s o n a b l e c a r e e r o p p o r t u n i t y f o r m e m b e r s o f y o u r U n i o n / A s s o c i a t i o n , o r d o e s it c o n s i d e r t h a t t h e r e is a p r e s s i n g o r u r g e n t n e e d t o a m e n d t h i s s t r u c t u r e in s o m e w a y to p r o v i d e a m o r e s a t i s f a c t o r y i n d u c e m e n t f o r p r o m o t i o n a n d b e t t e r

j o b s a t i s f a c t i o n ?"

5.11 Except for two staff organisations, the response was to the

effect that the present A.P.0.structure does not offer reasonable career

opportunities for their members. One of the organisations which answered

this question affirmatively considered, however, that management attitudes

resulted in a lack of "job satisfaction". The reasons given by the staff

organisations for dissatisfaction with career opportunities varied. Some

considered that the structure of the Public Service into four Divisions,

119

resulted in officers in the Fourth Division having limited prospects for

advancement. Several referred to the structures within the Fourth or

Third Division as not providing a satisfactory "promotional line". Two

staff organisations mentioned the need for more opportunities for study

and training.

5 . 1 2 In Chapters 8 and 11, which discuss the future form of administration of the postal and telecommunications services and the

organisation of the proposed corporations, the Commission commented on the

promotional limitations imposed by the organisation of the Australian

Public Service into four defined divisions for the purpose of classifying

positions. The consultants who reported on the organisation of the A.P.O.

mentioned unsatisfactory aspects of the "postal levels" structure; they

also recommended that management positions within the proposed new

organisation for the telecommunications service should be open to

technical and clerical officers.

The conclusions of the Commission on this question largely

support the views of the staff organisations. The difficulties in offer­

ing greater scope for career development are principally a consequence

of the administration of postal and telecommunications services through

a department of State and the constraints necessarily attaching to

management as a result. These constraints would be avoided by the

proposed establishment of separate career Services for staff. The point

is developed further in later Chapters of this Report.

Q u e s t i o n 2. " D o e s y o u r U n i o n / A s s o c I a t i o n c o n s i d e r t h a t t h e r e a r e p r a c t i c a b l e a v e n u e s a v a i l a b l e t h r o u g h w h i c h m a n a g e m e n t / s t a f f r e l a t i o n s h i p s c o u l d be i m p r o v e d ?"

5 . 1 3 Every staff organisation con sidered that there were ways by which management/staff relationships could be improved. The most common

response was for greater consultation by the A.P.O. with the organisations.

Other views included the establishment of industrial relations sections

within the State offices of the A.P.O., and better training of A.P.O.

officers to handle industrial questions.

1 2 0

5.14 The A.P.O. states that it consults with the staff organisations,

particularly on matters such as the introduction of new technologies; and

that requests by organisations for discussion meetings of legitimate

interest or concern to them are invariably met. It pointed out that in

the three years 1970 to 1972, 167 formal meetings with staff organisations

were held at the Central Office of the A.P.O. and about 500 matters were

discussed. In the same period some 850 staff organisation representations

were made in writing and dealt with by the Central Office. In addition

there were numerous meetings between the State officers and local officials

of staff organisations.

These figures indicate that the A.P.O. does make a considerable

effort to consult with staff organisations. In a separate statement

to the Commission, the A.P.O. detailed the consultative steps it had taken

with staff organisations preceding the introduction of mechanisation in

mail processing at the Sydney mail exchange. The evidence before the

Commission supports the A.P.O. contention that it has been responsive to

the need for consultation with staff organisations before changes are

introduced.

5.15 The reasons given by the staff organisations in support of the

need for better consultation indicate why the organisations and the A.P.O.

disagree about the adequacy of consultation at present. For example, the

Amalgamated Postal Workers' Union (A.P.W.U.) said inter alia in its

response

"There is still a need for much closer co-operation in planning future developments in the A.P.O. This must be extended to all areas on almost all subjects, and particularly to such matters as technical innovation

and recruiting".

The Professional Officers' Association (P.O.A.) claimed that

improved relations would result by ensuring "that Union/Association

representatives are involved in any working party set up by the A.P.O.

to make recommendations which will affect career prospects, job

satisfaction, conditions of service, etc."

1 2 1

These responses suggest that staff organisations are expressing

the view that consultation be extended to matters which might previously

have been regarded as the prerogative of management. The issue of

participation in management by employees is not exclusive in its appli­

cation to the A.P.O.; it applies equally to employer and employee relation­

ships in other areas of employment, both governmental and private.

5.16 The A.P.O. states that its procedures for dealing with industrial

disputes are in harmony with the principles stated in 1970 by the

National Labour Advisory Council and endorsed by the Government, the

A.C.T.U. and the National Employers' Policy Council. These procedures

provide for discussion at appropriate levels between the management and

the staff organisations concerned; where agreement cannot be reached, a

matter is advanced to higher levels on both sides for joint consideration

and eventual determination. The principles call for effective means of

consultation between employers, employees and staff organisations on all

matters of mutual interest and concern, irrespective of whether these

matters are likely to give rise to dispute.

In introducing technological change, the A.P.O. follows the

guidelines recommended by the National Labour Advisory Council in 1969.

The Commission considers that management/staff relations

would be improved if the A.P.O. and the staff organisations were able to

enter into an agreement which identified the types or classes of matters

on which there should be consultation; and which established some

appropriate mechanism for consultation which ensured that all staff

organisations with an involvement in a particular matter were represented

in these discussions.

5.17 The internal organisation of industrial relations responsibilities

within the A.P.O. also needs revision and strengthening. To up-grade the

industrial relations function within the A.P.O., a separate Industrial

Relations Branch was established within the Central Office of the A.P.O.

in 1969. The functions of this Branch are administered by a Senior

Assistant Director-General who reports directly to the Director-General.

In addition there are industrial relations units in the mail exchanges,

122

in the Post Offices Branch of the Postal Services Division and in

the Engineering Works Division, at Central Office. At the State

level, industrial relations functions are performed in the Personnel

Branches and in staff and industrial sections in other Branches.

In October 1973 the Personnel Branches in the State

administrations were re-organised and renamed as Personnel and Industrial

Relations Branches. The total staff engaged on industrial relations

work is 108, with the numbers divided equally between the Central Office

and the State administrations.

5 . 1 8 The administrative arrangements for the handling of industrial relations are, however, less than satisfactory. The Industrial Relations

Branch of the Central Office is concerned primarily with providing high-

level policy advice to the Director-General on industrial relations

generally, and on issues concerning pay and conditions of employment - the

latter being matters for which the Public Service Board has the principal

jurisdiction. Industrial disputes on a day to day basis are dealt with

by a small number of officers in Postal Services Division and the

Engineering Works Division of the Central Office - eight in total - and

by officers in the State administrations. When day to day disputes are

of such a nature that the Federal Executive of the staff organisation

concerned becomes involved then the Industrial Relations Branch at

Central Office also becomes directly involved in negotiations.

In the Commission's view these arrangements, which involve

responsibility in industrial matters being spread over a number of

Branches at the Central Office and State administrative levels, must

unduly complicate the determining of a "management attitude" on

industrial issues which arise. In Chapter 11 which discusses the

organisation of the postal and telecommunications services, new arrange­

ments are proposed which locate the industrial relations function

within the headquarters and regional administrations to overcome the

problems inherent in the existing arrangements.

5.19 These re-organisation proposals do not provide a complete

answer to the problem. The functional responsibility for industrial

123

relations should include the identification of problems before they reach

the "dispute" stage. This requires the location of experienced officers

with an immediate responsibility for industrial relations, in areas

where significant work forces are engaged. The Amalgamated Postal

Workers' Union (A.P.W.U.) expressed the view that there is "a definite

tendency for more sophisticated arenues to exist at P.M.G. Central

Office letels, and for management-staff relations to develop in a way

which is not balanced by suitable avenues at the area work level".

Q u e s t i o n 3. "I f it w a s d e c i d e d t o c h a n g e t h e e x i s t i n g r e l a t i o n s h i p b e t w e e n t h e A . P . O . a n d t h e P u b l i c S e r v i c e B o a r d , w h a t w o u l d be y o u r U n i o n / A s s o c i a t i o n o p i n i o n s o n :-

(a) t h e e f f e c t s on t h e r i g h t s o f y o u r m e m b e r s ;

(b) t h e a c t i o n , i f a n y , b y t h e A . P . O . r e q u i r e d to m a i n t a i n t h o s e r i g h t s ;

(c) t h e c o - o r d i n a t i o n r e q u i r e d o f s a l a r i e s a n d o t h e r c o n d i t i o n s o f s e r v i c e o f A . P . O . e m p l o y e e s w i t h t h o s e o f o t h e r s in C o m m o n w e a l t h e m p l o y m e n t " .

5.20 The general response of the staff organisations was that the

existing rights of their members should be protected or not adversely

affected. In two cases this attitude was linked specifically to the

protection of rights provided under the Officers' Rights Declaration

Act.

5.21 The purpose of the second part of the question - the action required by the A.P.O. to maintain the rights of existing staff - was

to ascertain views on how the rights of their members should be pro­

tected if the functions of the A.P.O. were administered through a

statutory corporation or corporations. The replies ranged from the

view of the A.P.W.U. that staff of the A.P.O. should retain the right

to apply and be appointed to positions elsewhere in the Australian

Public Service, to the view of the Postal Telecommunications Technicians

Association (P.T.T.A.) that, if the A.P.O. were "transformed into a

Statutory Authority the A.P.O. would be initially required to implement

1 ?4

"Staff Rules" or "Personnel Instructions" no less favourable than those

existing in the C.P.S. at the date of transformation". The P.T.T.A.

also commented that it would prefer that the A.P.O. staff continue in

the Commonwealth Superannuation Scheme instead of in any special

superannuation scheme established for former A.P.O. staff.

Protection of rights of existing staff transferred from the

Australian Public Service is discussed as a separate issue in Chapter

13, including the protection of existing superannuation rights and

entitlements.

5.22 As regards part (c) of the question concerning the co-ordination

required of salaries and other conditions of service, five staff organi­

sations accepted the need for some co-ordinating process while four

considered that co-ordination could be achieved through the processes

of arbitration. Several staff organisations which did not support the

need for co-ordination of pay and other conditions of employment, considered

that the inability of the A.P.O. to negotiate directly with staff organi­

sations on those matters had impaired industrial relations in the A.P.O.

5.23 The issue of co-ordination of pay and other conditions of

employment if statutory corporations are established to administer the

postal and telecommunications services is discussed in Chapter 9. The

Commission's recommendation that the Boards of the corporations should

have the freedom to decide these matters would, if implemented, give

those Boards a complete management responsibility in industrial matters.

Q u e s t i o n 4 . "W h a t a r e y o u r U n i o n / A s s o c i a t i o n o p i n i o n s o n :-

( a ) m a i n t e n a n c e o f t h e p r e s e n t o r g a n i s a t i o n a l s t r u c t u r e o f t h e A . P . O . ?

(b) t h e d i v i s i o n o f t h e A . P . O . i n t o t w o o r m o r e p a r t s as s e p a r a t e d e p a r t m e n t s o r c o r p o r a t i o n s ?

(c) d e p a r t m e n t a l o r c o r p o r a t i o n s t a t u s f o r t h e w h o l e o r a n y p a r t o f th e A . P . O . ? "

125

5.24 Relatively few comments were received on the present organisation

structure of the A.P.O.; most frequent was on the need for changes to

provide for more decentralisation of responsibilities. One staff organi­

sation referred to the need for changes to the organisational structure

to improve management procedures and the speed of response to staff

representations and to industrial relations problems.

Staff organisation views differ on the merits of separating the

administration of postal and telecommunications services. The changed

organisational arrangements, which the Commission recommends and which

are outlined in Chapter 11, should go a long way towards removing the

causes for criticism of the present organisational structure expressed

by some of the staff organisations.

5.25 The views of individual staff organisations on separate admini­

strations for the postal and the telecommunications services are summarised

in Chapter 6. Generally those staff organisations whose members are

mainly technical or professional officers engaged in the telecommunications

service, support the separation of the two services and favour the

administration of telecommunications services through a statutory board

or commission. Those staff organisations which represent officers

employed in the postal service do not favour separate administrations

for the two services, or a change from a department to a corporate

authority.

These views tend to the impression that staff of the postal

service see any change in existing administrative arrangements as being

to the disadvantage of that service and perhaps to the career prospects

of the staff. This possibly is related to the differences between the

two services - telecommunications having a high growth rate, large

capital inputs and fairly rapid change in services through technology;

postal having a relatively smaller growth potential, modest capital

expenditure and less potential for changes in the range of services

provided.

5.26 The Commission considers that the changes it has recommended

in the organisation and administration of the postal service will provide

126

greater career opportunities for staff employed in postal administration.

To some extent, the interests and needs of the postal service may have

tended to become secondary to those of the telecommunications service and

separation and re-organisation of the services should correct this. This

issue is referred to again in Chapters 6 and 11 of the Commission's Report.

Q u e s t i o n 5 . " W h a t a r e t h e o p i n i o n s o f y o u r U n i o n / A s s o c i a t i o n o n :-

(a) t h e i n t r o d u c t i o n o f n e w t e c h n o l o g i e s t h a t w o u l d a f f e c t t h e d u t i e s a n d p e r h a p s c a r e e r o p p o r t u n i t i e s o f its m e m b e r s ?

(b) w h a t s h o u l d be d o n e f o r its m e m b e r s in t h e e v e n t o f s u c h c h a n g e s in t e c h n o l o g i e s c o m i n g a b o u t a n d a f f e c t i n g t h e i r d u t i e s o r c a r e e r o p p o r t u n i t i e s ?"

5 . 2 7 All staff organisations expressed their support for the introduction of new technologies with important qualifications in many

cases; some of the qualifications expressed were that:-

(a) the new technology should increase the quality of the service in

. a real sense;

(b) there should be consultation with staff organisations bei.ore a

new technology is introduced;

(c) there should be no disturbance to the career opportunities of

staff as a result of technological change;

(d) existing staff should be allowed to continue in their present

position or be given the opportunity of retraining for positions

which promise job security and career opportunities comparable

to previous expectations.

The general issue of consultation between management and staff

organisations was discussed earlier in this Chapter. The introduction of

new technologies and even new procedures has particular sensitivities.

Those directly affected by proposed changes must be expected to examine

those proposals in relation to their own duties and career prospects in

127

the future and misconceptions as to the effects of proposed change can

arise if there has been inadequate communication between management and

staff.

5.28 At present the problems associated with introducing new

technologies seem confined largely to the postal service. New technology

in telecommunications has had the effect of increasing the career scope of

staff and this is generally recognised by the technical and professional

staff. In the postal service the handling and processing of mail and the

work associated with post office counter services are performed to a large

extent by staff whose skills and training have limited relevance to major

employment areas outside that service. It is to be expected that such

staff will see themselves as being more directly affected by change.

The guidelines recommended by the National Labour Advisory

Council on introducing technological change, require the acceptance of

responsibility by employers while planning the introduction of

technological i n n o v a t i o n s .

(a) to consult with employees through their union officials about,

and give as much notice as possible of, the contemplated

change;

(b) to provide opportunities for retraining in new skills and

techniques for employment in other jobs in the same

organisation where this is possible;

(c) to minimise retrenchment by curtailment of recruitment prior to

the introduction of technological change and through normal

labour wastage;

(d) to provide the Commonwealth Employment Service with ample

notice of likely disemployment;

(e) to assist such people affected to find alternative employment.

5.29 The A.P.O. has given an undertaking to the A.P.W.U. that the

installation of letter preparation and optical character reading equipment

128

in mail exchanges will not result in the retrenchment of regular full-time

staff in the Mail Exchange Branch; the loss of classification for any Mail

Officer; or the transfer of a Mail Officer out of the Mail Branch unless he

wishes to have a transfer. If a Mail Officer is required to transfer to

another Section of the Mail Exchange Branch, the undertaking provides for

the re-trainii.i of the officer for the new work in departmental time and at

departmental expense.

The A.P.O. has gone an appreciable distance beyond the National

Labour Advisory Council guidelines in this instance by guaranteeing

continuity of employment, when the guidelines envisage that staff

retrenchments might follow the introduction of new technology.

While the policy and procedures followed by the A.P.O. seem to be

in general harmony with the views expressed to the Commission by staff

organisations, the Commission considers there would be advantages in

formalising policy and procedures to the extent necessary. Agreement by

management and staff organisations on these issues will place a responsi­

bility on both parties to establish procedures for discussing new

technologies so that disagreements can be brought out and resolved.

Q u e s t i o n 6 . " W h a t a r e t h e o p i n i o n s o f .your U n i o n / A s s o c i a t i o n o n :-

(a ) t h e r a n g e o f s e r v i c e s b e i n g s u p p l i e d n o w ?

(b) in t h e e v e n t o f s o m e s e r v i c e s b e i n g s t o p p e d :-

(i ) w h i c h o n e s w o u l d b e c o n s i d e r e d t h e l e a s t d e t r i m e n t a l to t h e w e l f a r e o f t h e A . P . O .?

(i i ) w h i c h o n e s w o u l d be m o r e i m p o r t a n t to r e t a i n ?

(c ) w h a t n e w s e r v i c e s s h o u l d b e i n t r o d u c e d ?

(d) w h a t s h o u l d be d o n e f o r its m e m b e r s in t h e e v e n t o f t h e r e b e i n g c h a n g e s in t h e s e r v i c e s s u p p l i e d ? "

129

5.30 The matters raised in parts (a) to (c) of the above question

concern the range and adequacy of services now provided by the A.P.O.

This is one of the particular matters on which the Commission is required

to report under its Terms of Reference, and the Commission comments and

conclusions are given in Chapter 4.

In summary most staff organisations believe that the present

range of services is adequate in meeting customer needs although there

were some helpful suggestions on how the existing services might be

improved or extended. Some of these suggestions such as proposed changes

in the money order and money transfer services, have been submitted to the

A.P.O. by the staff organisation concerned.

Of the services which might be stopped with least effect on the

welfare of the A.P.O., the abolition of Saturday morning trading and mail

deliveries was proposed by one staff organisation. The Commission has

commented on the closing of all post offices and the abolition of mail

deliveries on Saturdays in Chapter 4. Other responses included the issue .

of radio broadcasting and television viewers' licences, and the

concessional tariffs for registered publications and bulk posting of mail.

Regarding the more important services to retain, comments of the

staff organisations generally covered the various facilities for

despatching letters, parcels and other articles through the mail, the

philatelic service, and the range of services relating to the telecom­

munications network. One staff organisation referred to the need to

retain the concept of the postal service as a "service to the community"

rather than as a profit organisation.

On part (d) of the question concerning the effect of change in

services on its members, the most general request was for the need for

re-training opportunities.

5.31 The responses of the staff organisations emphasise the need for

consultation before changes are introduced and reflect the’concern of

staff organisations that changes should have advantages also for staff by

providing additional training opportunities and increasing career

opportunities. This reinforces the concern of the Commission that some

130

formal agreement and procedures be established for the consideration and

introduction of change in the A.P.O.

I n d u s t r i a l R e l a t i o n s G e n e r a l l y in th e A . P . O .

5.32 The tecord of manhours lost through industrial disputes in the

A.P.O. from the September quarter of 1969 to the same quarter of 1973,

compared with losses in Australia (excluding the Australian Public Service)

and in the Australian Public Service (excluding the A.P.O.), is illustrated

in Figure 3. The record of the A.P.O. in this regard has been generally

better than that of Australia as a whole in recent years.

When comparing the A.P.O.'s industrial record, as measured by an

index such as manhours lost per 1,000 employees, with industry generally it

should be remembered that with postal and telecommunications services an

industrial stoppage has an immediate and obvious impact; the effect of a

dispute in a mail exchange one afternoon, for example, is evident in the

next morning's mail deliveries. In industry generally, the existence of

stocks in the chain of supply, alternative sources of supply and the

possibility of substitutes, frequently lessen the impact of an industrial

dispute on users. No such cushions are possible with the A.P.O. services.

In consequence, a seemingly reasonable overall performance by the A.P.O. in

terms of lost time may still produce a pattern of service delays

unacceptable to the public.

In addition, the figures for manhours lost do not fully reflect

the industrial situation. As noted in Chapter 4, a feature of the

industrial scene, particularly at the Sydney central mail exchange, is the

imposition of black bans. These do not necessarily result in lost time and

so do not find their way into the data recorded in Figure 3, but they are

obvious sources of disruption in the mail handling process.

5.33 A general indication of the state of industrial relations within

the A.P.O. is the number of arbitral determinations which have been made as

a result of agreement between management and staff organisations. The

Public Service Board provided a table of "arbitrated determinations" and

"consent determinations" under the Public Service Arbitration Act. The

131

132

MAN HOURS LOST/1000 EMPLOYEES THROUGH INDUSTRIAL DISPUTES - Sept 1969-Sept 1973 quarters

Sept 69 Sept 73

QUARTER ENDING

------------------------AUSTRALIA (excl. A.P.S.) ■ " ' ' A.P.O. ................................A.P.S. (excl. A.P.Oj

Source: based on figures contained in P.S.B. submission and updated for the Commission.

IGURE 3

following is an extract from that table:-

Year Arbitrated

Determinations

Consent Determinations

Total

1967-68 9 132 141

1968-69 14 232 246

1969-70 26 245 271

1970-71 31 249 280

1971-72 30 169 199

This table includes all the determinations to which the Public Service

Board was a respondent. Most of the determinations apply to staff groups

employed generally in the Australian Public Service, including the A.P.O.

The Public Service Board has pointed out that only a relatively few claims

can be dealt with exclusively in terms of A.P.O. staff. The figures taken

from the table support the view of the Public Service Board that

management/staff relations in the A.P.O. compare favourably with industry

generally.

5.34 Management/staff relations within the A.P.O. were the subject of

extensive evidence before the Commission both from the A.P.O. itself and

from the various staff organisations referred to earlier in this Chapter.

The Commission has been concerned to make an appraisal of the situation so

that account could be taken of important aspects in framing its

recommendations. The Commission considers that the proposed formation of

two statutory corporations to administer postal and telecommunications

services respectively and the creation of two new management structures,

should provide an opportunity for re-organisation of the industrial

relations and personnel functions; placing of responsibility for salaries

and conditions of employment directly with management should go a long way

towards removing staff organisation objections to some of the rigidities

necessarily accompanying Public Service Board jurisdiction; officers rights

on transfer to the new organisations will be fully protected; improved

career opportunities should result.

5.35 A number of staff organisations appearing before the Commission

commented at length on the need for greater consultation between the

organisations and A.P.O. management. On the evidence before it the

Commission considers that the A.P.O.'s attitude to consultation has been

1 3 3

a reasonable one; the A.P.O. has gone to considerable lengths to consult

with the staff organisations in advance of changes in procedures or

equipment so that the implications of the proposed changes could be fully

understood by the organisations concerned. The process has made heavy

demands on management time. The Commission considers that every effort

should be made jointly by management and by the staff organisations to

codify and agree on consultation procedures so that necessary changes can

be introduced in an orderly fashion with minimum disruption. There is a

considerable danger that consultation, unless conducted within firmly

agreed guidelines, can deteriorate into a process which acts generally to

inhibit change.

5.36 In this Chapter the Commission has referred to a number of issues

which concern management/staff relations where some changes are desirable

from the management side. This should not however obscure the fact that

relationships between management and staff are a joint responsibility which

must be exercised with good judgment from both sides. Some of the past

problems seem to have involved difficulties in securing agreement from all

staff organisations with members involved in a particular issue.

5.37 The i n d u s t r i a l problems a t t h e Sydney c e n t r a l m a il exchange have

been r e f e r r e d to i n C hap ter 4 where th e ra n g e and adequacy o f s e r v i c e s i s

d i s c u s s e d . M a n a g e m e n t/sta ff r e l a t i o n s a t l o c a t i o n s o t h e r th a n t h e Sydney

exchange ap p ear to p ro c e e d , n o t w i t h o u t argum ents o r d i f f i c u l t i e s

o c c u r r i n g from time to tim e , b u t i n g e n e r a l w i t h i n an o r d e r l y framework.

The same cannot be said of the Sydney mail exchange; the unsatisfactory

industrial climate at this exchange, evidenced by the number of stoppages

and black bans, the frequency of meetings between management and staff and

the difficulties of making changes in procedures, is unique within the

A.P.O. service.

The Commission has no ready solutions to propose. Improvement in

the industrial climate at the Sydney exchange will be one of the major tasks

for the new management of the postal services as it has been for the A.P.O.

for many years but responsibility also falls on the central executives of the

staff organisations to control and prevent unauthorised industrial action

within the exchange. The achievement of better industrial relations at the

Sydney mail exchange appears as one of the major problems which management

134

and the staff organisations will have to pursue assiduously in the public

interest of maintaining a reliable and efficient mail service.

135

O R G A N ISA TION M E M B E R S H I P MAIN D E S I G N A T I O N S OR GRO UPS C O V E R E D AND -------------------------- — S T A F F N U M B E R S

1. With membership confined to P.M.G.'s Department

T Y P E O F W O R K C O M M E N T

A.P.A. 1240 Postmasters Grades 1­

5 (1240)

Officers in charge of official Post Offices

A.P.W.U. 45000 Lines Staff

(19000)

Installation and mainten­ ance of conduits, cables, aerial lines, radio towers

etc. Operate plant (bull­ dozers etc.) and drive motor vehicles

Dominant coverage. Union of Postal Clerks and Tele­ graphists has a very small number (around 40)Post- masters in its membership

Exclusive coverage except for Lines Inspectors (top foreman)

Mail Officers and Senior Mail Officers (6200)

Manual sorting of letters, packages, parcels etc. in Mail Exchanges (Redfern etc.) and in major Post Offices. Senior Mail Officer is first line

supervisor

Exclusive coverage

Assistant Postal Officers and Postal Officers Grades 1-4 (7500)

Counter work at official Post Offices, mail sort­ ing at other than major Post Offices, telephone

accounts, telegram delivery and some mail delivery

Exclusive coverage except for Assistant Postal Officer - note U.P.C.T. has members performing

counter functions at Post Offices and has a propor­ tion of Assistant Postal Officers

— i 3=

o-o E N D I X 1 C H A P T E R 5

COMMENT

Exclusive coverage

Exclusive coverage of Motor Drivers. Shares coverage of supervisory positions with Postal Overseers Union

Exclusive coverage

Coverage shared with Commonwealth Public Service Association (Fourth Division Officers ) and Federated Clerks Union

Exclusive coverage

Exclusive coverage

Membership shared with A.P.W.U.

Exclusive coverage

COM M ENT

Exclusive coverage

Membership shared with A.P.W.U.

Shares membership of Tele­ communications Technical Officers with Telecommuni­ cations Technical Officers'

Association (latter has roughly 25% of total). Exclusive coverage of remainder.

Membership shared with Commonwealth Public Service Artisans' Association, Electrical Trades Union,

Amalgamated Metal Workers' Union, etc.

1 3 9

CO M M E N T

Membership shared with Telecommunications Technical Officers' Association and Association of Architects, Engineers, Surveyors and Draughtsmen of Australia

Dominant coverage. Some overlap with Administrative and Clerical Officers' Association and Professional Officers' Association

Shares membership with P.T.T.A. (latter having roughly 75% of total).

Membership shared with P.T.T.A. and A.A.E.S.D.A.

O R G A N I S A T I O N M E M B E R S H I P C O M M E N T S

T •T.S.O.A. 320

M A I N D E S I G N A T I O N S O R G R O U P S C O V E R E D A N D S T A F F N I I M R F R S

Supervisors (200) Traffic Officers (Telegraphs)

(N. A·.)

T Y P E O F W O R K

Supervision, management and administration of Chief Telegraph Office. Supervisors directly control Telegraphists in a type of

leading hand cum foreman situation. (Chief Telegraph Officers handle receipt and onward transmission of

telegram traffic, as well as telex assistance.)

U.P.C.T. 4500 Postal Clerks

Telegraphists Postmasters Assistant Postal Officers

Postal Clerks Counter, clerical, super­ vising clerical and tele­ graph work at Post Offices. Telegraphists

Operation of teleprinters and other transmission equipment for despatch and receipt of telegrams. Postmasters

Very small membership. Officer-in-charge of official Post Offices at Grades 1 and 2 (at this stage).

Assistant Postal Officers Recruitment level for Postal Clerks. Performs Postal Clerk functions.

Exclusive coverage

Exclusive coverage

Exclusive coverage

Vast majority of Postmasters are members of Australian Postmasters' Association

Exclusive membership of A.P.O.'s selected for training as Postal Clerks. Minority membership of

A.P.O.'s in total.

COMMENT

O R G A N I S A T I O N M E M B E R S H I P MAIN D E S I G N A T I O N S OR GR O U P S C O V E R E D AND S T A F F NU M B E R S

2. With membership in and outside F.M.G's Department

TYPE OF WORK

A.C.O.A. 9,000 Clerical/Administra­

tive Structure (multitude of designations)

All types of clerical and administrative activities including personnel, accounting, industrial relations. Also administra­ tive/management work in all functional areas. Higher supervisory levels in Mail Exchanges.

A.A.E.S.D.A. 3,000 Technical Grades

(N.A.)

Planning, programming, design and general technical assistance to professional engineers. Preparation of briefs on building layouts

and services. Supervision of Radio Licensing.

Draftsman Grades (1000) Detail drafting and design drafting. Supervision of

such work.

A.P.E.A. 450 Engineers

(2000)

Professional Engineering work including engineering management

Dominant coverage. Some overlap with Heads of Division and Branches Association and Federated

Clerks' Union.

Significant coverage. Overlap with P.T.T.A. and Professional Officers' Association.

Major coverage. Some over­ lap with Professional Officers' Association.

Approximately 1/5 of Engineers are members. Remainder are members of Professional Officers'

Association.

C OM MENT

Significant coverage. Shares membership (in some areas) with P.T.T.A. and with a large number of other

Unions, e.g. E.T.U., A.M.W.U.

Shares membership in Assistant area with A.P.W.U. Dominant coverage in other areas.

Shares membership in pro­ fessional engineering area with A.P.E.A. - has bulk of staff in membership.

Drafting Grades Design drafting and super­ vision of drafting work A.A.E.S.D.A. has vast bulk of membership.

C H A P T E R 6

THE S E P A R A T I O N OF POSTAL AND T E L E C O M M U N I C A T I O N S A D M I N I S T R A T I O N S

6.1 With its combined responsibilities for postal and telecommuni­ cations services, the Australian Post Office (A.P.O.) has grown to an

enterprise of great size and complexity as is evident from the review

given in Chapter 2, and it has been necessary for the Commission to form a

view as to the appropriateness of its present organisation structure for

the tasks in hand and for the future.

In Australia the postal and telecommunications services have

developed historically within the one organisation, a department of State.

A closely similar form of organisation existed in the United Kingdom until

quite recently when a public corporation, the Post Office, was created to

operate both services. The departmental form of organisation is used in a

number of countries and corporations are employed in others, but the trend

overseas appears to be towards corporate rather than departmental

structures, as instanced by the formation of the Post Office in the United

Kingdom, the creation of the U.S. Postal Service, a public corporation

formed in 1970 and the current consideration being given to corporate forms

in Canada and West Germany. The desirability of a change from a

departmental to a corporate structure for the A.P.O. is discussed in

Chapter 8.

6 . 2 Regardless of the particular form of organisation however, whether departmental or corporate, it is clear that the prevailing pattern

overseas is for postal and telecommunications services to be substantially

separate in their managements and the present Chapter discusses this issue

in the context of the operations of the A.P.O. From its consideration of

the organisation structure of the A.P.O., the Commission concluded that,

were it to remain a single organisation, a number of changes would be

desirable. The two services are both large and important enterprises in

their own right and, in the Commission's view, require a more direct

143

assignment of management responsibility than can be achieved under the

present structure. However, the Commission decided that it was first

necessary to resolve the fundamental question of whether postal and

telecommunications services should remain within the one organisation or

be separated. The two activities differ widely in a number of respects as

has been pointed out in Chapter 2; so widely, indeed, that their

association within the one organisation can only be assumed to have been a

matter of history rather than of deliberative decision.

T h e C a s e f o r S e p a r a t e A d m i n i s t r a t i o n s

6 . 3 The differences that characterise postal and telecommunications services were referred to in several submissions to the Commission,

notably from the A.P.O. itself and from the Public Service Board. Both

submissions raised for consideration the question of the possible future

separation of postal and telecommunications services. The issue was also

discussed in two submissions, one by Mr. B.F. Jones, a former Deputy

Director-General of the A.P.O., and another by the Australian Newspapers

Council and Others.

6 . 4 Despite their historical linkage within the Postmaster-General's Department, the two services are not basically inter-dependent or

complementary from the management or organisation viewpoint and in the

existing A.P.O. structure a significant measure of separation exists at

present. It is not surprising that this should be the case. The postal

service is concerned broadly with the physical transfer of articles sent

through the mail. It is relatively labour intensive, requiring

comparatively small capital investment and modest technological resources.

The telecommunications service transmits communications electronically

through a complex and inter-linked network, characterised by advanced

technology and a high capital investment in relation to employment and to

revenue.

Growth rates differ markedly as between the two activities. The

usage of the postal service has been growing only slightly in relation to

population and it seems likely that in the future the rate of growth of

postal traffic will approach more and more closely to the rate of growth

of population, placing postal services in the low-growth situation that

144

characterises a saturated market. Telecommunications traffic on the other

hand shows every sign of continued and significant growth. Per capita

usage of telecommunications services is clearly increasing and judging from

the experience of other developed economies, is still a long way from

saturation. Telecommunications technology continues to develop and the

range of services offered will undoubtedly continue to increase.

The management resources required for the proper development of

the two services differ in character and extent. The differing skills

required in the respective work forces, and the particular types of

management expertise necessary, give rise to the need for broadly separate

career structures. The financial needs of the two services also differ

widely, as is evident from the figures reviewed in Chapter 7.

6.5 Considering more intangible aspects, the postal service, as shown

in Chapter 2, has consistently lost money for a number of years while the

telecommunications service has been a consistent profit-earner. The degree

to which "cross-subsidisation" may have occurred as between the two

services, operated within the one organisation, is impossible to assess.

To the extent that it has occurred, any such "cross-subsidisation" would

have tended to distort the tariff patterns of the two services and confuse

their real economic needs. The heavy and continuing loss situation of

postal services would seem to the Commission to have undesirable

implications for the morale of the postal staff and for the general

development of postal services. There could well be some danger of postal

needs being subordinated to those of the faster-growing, more profitable

telecommunications services.

6.6 In the A.P.O. structure as at present, outlined in Chapter 2,

both the Postal and the Telecommunications Divisions receive assistance

from the various service divisions and are able to draw on the large

resources of the organisation as a whole. The formation of separate

organisations would require the splitting of the service divisions into

two smaller groups. It is difficult to judge the effect of such splitting

on management or economic efficiency. On balance the Commission does not

believe it would have adverse consequences. The A.P.O. is now such a

large organisation that it presents a major management task and questions

arise of possible dis-economies resulting from its great size and spread.

145

It seems probable that, with the management skills available, two separate

organisations, which would still be of substantial size, could prove to be

more manageable entities, more capable of being operated efficiently in

the industrial and financial climate in Australia. Looking to the future,

it would seem that growing complexities in both services will require that

the concentrated expertise and attention of individual management groups

should be applied to service needs and standards and to the economic

operation of each activity.

C o m m e n t s o f C o n s u l t a n t s o n S e p a r a t e A d m i n i s t r a t i o n s

6.7 Cresap, McCormick and Paget consider in their report, as

required by their terms of reference, the question of the possible or

desirable separation of postal and telecommunications services and an

extract from their report may usefully be quoted

"The notion that both services are engaged in "communication" and that this renders them similar is only a superficial truth. Postal services is concerned with the movement of physical objects, and will continue to be so concerned. Facsimile transmission, if and when introduced, is far more likely to be a written extension of telecom­ munications than an electrical extension of postal services. Telecommunications is concerned with the movement of electrical

impulses by wire or through the air. Similarity between the two services begins and ends with the fact that both communicate information.

The basic differences between the two services along a number of dimensions have been well documented in other submissions to the Commission of Inquiry and in the activities of similar commissions and related operating agencies in other nations with which the Commission of Inquiry is familiar. Accordingly, this discussion touches only on those dimensions which yield particularly fundamental differences from a management viewpoint.

To accomplish its purposes, management manipulates two basic resources: human talent (including technology, which is accumulated knowledge), and money. Regarding human talent, both services employ vast numbers of people but require fundamentally different operating work force skills. Telephonist, postman and lineman are three major

categories of employment which represent r.o overlap whatsoever between the two services. Engineering skills are similarly quite distinct: electrical engineering, for example, is basic to telecommunications and only ancillary to postal services. Generally, telecommunications requires a higher proportion of technically trained persons than does postal services.

146

The technologies involved are completely different. Optimum scheduling of transport vehicles is no more fundamental to the basic operations of telecommunications than electrical switching is to postal services. Furthermore, postal services requires a physical transaction with the customer (two persons coming to the same place, separately or

simultaneously), while telecommunications does not. The logistical implications of this difference are obvious, and decisively influence operating organisation and staffing arrangements. Technology is important to both services; the rate of technological change, however,

is already high and accelerating in telecommunications, whereas such a rate of change, and the level of sophistication of technology, are likely to be of considerably less magnitude in postal services.

Both services require very considerable amounts of money, but the uses are different and so too must be the planning for such use and its control. Telecommunications is capital-intensive: money must be planned for over a relatively long period of time, project expenditure control is vital, and return on assets is the key financial result. Postal services should be more capital-intensive than historic patterns

indicate, but nonetheless will probably never require the magnitude of capital expenditure that is characteristic of telecommunications. Accordingly, the financial planning for postal services is more immediate and operational, and operating margin is more the key

financial result.

From a management standpoint, therefore, the basic resources and the ways they are applied are very different, with postal services fulfilling a stable and essentially satisfied demand, while telecom­ munications grapples with an expanding and critically unsatisfied demand.

Resources and markets are the means and ends of management. The inescapable conclusion is that the two services represent wholly different management environments.

As described earlier, Central Administration incorporates three divisions concerned with telecommunications and one with postal services. The sharply defined functions and deep structures of the divisions concerned with telecommunications require a labyrinth of committees and other informal devices to permit a functioning of the whole. The distinct separation of postal services and telecommuni­

cations activities is evident in the relative absence of such committees (as already noted) linking the Postal Services Division and the three telecommunications-oriented divisions. With no operating relationship, there is no need for such co-ordination devices. This same pattern of separation exists in the state administrations below the State Director

level.

There are, of course, numerous examples of operating support being provided by one service to the other, such as the placement of manual exchanges in post offices, the conduct of telecommunications customer service across the post office counter, and postmaster duties

regarding telephone bill payments. These activities, however, have little or no management significance. They are merely vestiges of physical convenience, already accounted for fiscally through transfer

mechanisms within the APO, and are presumably suitable for inter-agency pricing if the two basic services were to be managertally separated.

147

Regardless of operational differences, the provision of common staff services to telecommunications and postal services might theoretically be argued to be a major economy-of-scale benefit of the existing organisational structure. In fact, any such benefit appears to be minor, because many staff services are oriented totally to one operation or the other. Finance and accounting services, for example, hane separate units for post office accounting and telecommunications billing; neither function relates to the other".

Price Waterhouse and Co. consider the question of separation

briefly in the concluding section of their report and draw attention to

the logic of dividing postal and telecommunications services and placing

each under the control of a separate Chief Executive.

P r a c t i c a l E f f e c t s o f S e p a r a t i o n

6.8 To assist it in its consideration of the question of the

possible separation of the two services, the Commission referred a number

of questions to the A.P.O. and it is appropriate to summarise briefly some

of the comments from the A.P.O. on particular queries.

Customer Services and Customer Contact: The A.P.O. remarked that,

under the present method of operation, postal and telecommunications

services each have direct contact with the public. Telecommunications

provides direct sales and service facilities through sales offices,

manually operated exchanges, etc., while the main contact points of the

postal services for the placement of business are the post offices. Each

service carries out a certain amount of work for the other; in particular,

the postal service carries out work for telecommunications at post

offices. The A.P.O. expects that, should separate organisations be

created, each would continue to perform the work currently being carried

out for the other and that the present inter-service cost transfers would

be replaced by cash agency payments. So far as customers are concerned,

the A.P.O. believes that there would be little discernible variation from

existing arrangements, at least at the outset.

Common Property and Equipment: The possible separation of the two

services brings into issue the question of common property and equipment

The A.P.O. reports that a considerable amount of property (buildings and

sites) and equipment (automatic data processing equipment, workshop

148

machinery and plant, motor vehicles, etc.) is used in providing services

for both activities at present. If two separate organisations were

established, the allocation of separate items of property or equipment

would be highly desirable and the A.P.O. study has shown that this could

be done by applying appropriate guidelines to each category of property

and equipment. In the case of buildings, many are dedicated at present to

a particular service. Where common occupancy occurs, the building could

be allocated to the major occupant with the other paying rental, in much

the same way as if the property were rented from the private sector.

Automatic data processing equipment is used at present as to at least

95 per cent for telecommunications and under conditions of separation this

equipment could be allocated to telecommunications, with postal services

obtaining any service necessary on a payment basis. Telecommunications at

present are the major users of workshop facilities and it would be logical

to allocate workshop buildings and equipment to telecommunications

management, work for the postal services being done on a contract or

recoverable cost basis. Motor vehicles could be distributed directly to

the separate services on the basis of regular usage.

Staffing and Costs: The A.P.O. undertook a study of the

distribution of the existing staff as between two separate organisations

and concluded that a split of the present organisation would have little

effect on the bulk of its operations as over 90 per cent of the staff is

solely involved with either the postal or telecommunications activity.

Some 10,000 persons are in common service areas and to varying degrees

perform work for one activity or the other. The A.P.O. comments that if

separate organisations were created, the staff in this common area would

have to be allocated between activities, this involving the establishment

of new organisation structures and some re-arrangement of accommodation.

On the basis of its study, and with the proviso that their

estimates were approximate only, the A.P.O. considered that little

additional capital expenditure would be involved in separation. The

planning work Involved prior to separation would, however, be considerable

and the A.P.O. estimated that the additional costs for planning and

associated activities could be as high as $250,000.

6.9 Based on the preparation of notional organisation charts, the

i /. r.

A.P.O. estimated that the creation of two separate organisations would

involve about 140 additional staff positions as compared with the present

single organisation. They believe that a number of these additional

positions could arise as a result of splitting large staff groups,

particularly in common service areas such as finance and accounting where

there would be some decrease in work load flexibility and where a number

of senior and middle management positions would need to be created. The

A.P.O. remarked that some degree of spare capacity would have to be

created initially for the first year or two after separation, but that in

due course the overall staff in the two separate organisations would be

expected to be little different from that required for a single

organisation.

The A.P.O. estimated that, for the first year of separation, the

cost of the additional staff would be of the order of $0.8 million rising

in the long-term to $1.1 million. Interest, superannuation and furlough

charges would add a further $85,000 to $110,000 to these figures.

6 . 1 0 The consultants, Cresap, McCormick and Paget, were aware of the requests made to the A.P.O. for a special study of the consequences of

separation and they comment on the question on page III-19 of their

report. On the basis of Cresap, McCormick and Paget's examination of the

organisation of the A.P.O. they consider that the estimate of increased

staff numbers in the service areas prepared by the A.P.O. may be on the

high side and that staff increases resulting from separation could be

lower. They remark that, regardless of the estimating accuracy of the

exercise, the 140 extra positions estimated by the A.P.O. to be required

under conditions of separation, represent less than 1.5 per cent of the

staff currently employed on management services activities and that the

current practice of providing staff services under a common structure

appears to be yielding little, if any, benefit in terms of economy of

scale.

A t t i t u d e s o f S t a f f O r g a n i s a t i o n s

6 . 1 1 During the course of its inquiry, representatives of unions and staff associations having significant membership within the A.P.O. service,

forwarded submissions and appeared before the Commission in public

150

hearings. Representatives of each union were invited, at the close of

their public evidence, to consider and submit comments in due course on a

rist of questions prepared by the Commission. Included in the list was a

question as to their attitudes to a possible separation of postal services

and telecommunications.

Eleven unions or associations commented on this issue and their

views are briefly summarised below:­

. THE TELECOMMUNICATION TECHNICAL OFFICERS ASSOCIATION considers

that there is little connection between the postal and telecommunications

activities of the A.P.O. and purely on financial grounds the separation of

the activities into two parts would be justified.

. THE POSTAL TELECOMMUNICATIONS TECHNICIANS ASSOCIATION favours a

separation without giving specific reasons.

. THE PROFESSIONAL OFFICERS ASSOCIATION favours separation mainly

for financial reasons, arising because of the different nature of the

activities.

. THE ADMINISTRATIVE AND CLERICAL OFFICERS ASSOCIATION acknowledge

that there are quite strong arguments in favour of separation and would

not oppose such action if the separation resulted in the creation of two

new departments of State.

. THE AMALGAMATED POSTAL WORKERS UNION believes that the financial

argument (telecommunications profitable, postal services unprofitable) is

not a reason in itself for the separation. The A.P.W.U. points out that

the A.P.O. provides a total communication system. The union suggests as

another consideration that significant management dis-economies would

result if separate organisations were created.

. THE UNION OF POSTAL CLERKS AMD TELEGRAPHISTS expressed opposition

to separation because, in their view, the direction of technological change

implies a greater unification of all forms of communication.

151

. THE AUSTRALIAN POSTMASTERS ASSOCIATION suggests that any

fragmentation would lead to costly duplication, unnecessary additional

expenditure and a lesser quality of service.

. THE POSTAL OVERSEERS UNION expresses opposition without giving

reasons.

. THE POSTMASTER-GENERAL'S DEPARTMENT HEADS OF DIVISIONS AND

BRANCHES ASSOCIATION doubts the value of separation.

. THE ASSOCIATION OF ARCHITECTS, ENGINEERS, SURVEYORS AND

DRAUGHTSMEN OF AUSTRALIA did not express a view.

. THE ASSOCIATION OF PROFESSIONAL ENGINEERS, AUSTRALIA also did not

comment.

The A.P.O. furnished the Commission with a list showing the

approximate number of members of the various unions and associations in

the postal and telecommunications activities respectively, those employed

in common service areas being apportioned according to the numbers

directly employed in the two activities.

The breakdown of members is shown in Table 6.1, the unions or

associations being listed in the order in which they appear above.

The total membership of unions and associations significantly

involved in postal and telecommunications services is stated by the A.P.O.

to be approximately 106,000 and the responses summarised above represent

therefore about 82 per cent of the union membership.

6 . 1 2 As would be expected, the unions and associations involved with the A.P.O. exhibit diverse attitudes. Some of the queries raised or

concerns expressed about different aspects are in respect of matters

discussed elsewhere in this Report. The Commission does not believe that

such queries or concerns as have been expressed can be regarded as

outweighing the advantages to be gained by separation.

152

T A B L E 6.1

M e m b e r s h i p of Uni ons and A s s o c i a t i o n s D i r e c t l y or I n d i r e c t l y Em p l o y e d in Postal S e r v i c e s and T e l e c o m m u n i c a t i o n s

Union/Assoelation

Postal Services

Telecommunications Total

Telecommunications Technical Officers Association 1,130 1,130

Postal Telecommunications Technicians Association 500 20,500 21,000

Professional Officers Association - 1,400 1,400

Administrative and Clerical Officers Association 1,900 7,100 9,000

Amalgamated Postal Workers Union 22,700 22,300 45,000

Union of Postal Clerks and Telegraphists 3,750 750 4,500

Australian Postmasters Association 1,240 1,240

Postal Overseers Union 450 - 450

Postmaster-General's Department Heads of Divisions and Branches Association 32 73 105

Association of Architects, Engineers, Surveyors and Draughtsmen of Australia 3,000 3,000

Association of Professional Engineers, Australia - 450 450

30,572 56,703 87,275

Source: Data supplied to the Commission by the A.P.0.

153

Concl us i on of the Commi s s i on

6 . 1 3 From its consideration of the various issues involved, of the views expressed to the Commission and of the evidence before it, the

Commission came to the conclusion that the separation of postal services

from telecommunications would be desirable and in the general interest,

and it recommends accordingly.

Formal separation into two independent organisations, each with

clear responsibility for a single service, would seem to have few

disabilities and great potential advantage. The Commission does not

believe that good purpose would be served by deferring this decision.

The problems of administration and organisation of the A. P. O. are unlikely

to grow less with the years ; indeed they are more likely to increase.

The separation of the two services will provide a unique opportunity for

the reconsideration of all aspects of their future organisation and

financing and hopefully will put them in better shape to cope with future

community needs. .

The Commission places considerable importance on its

recommendation for separation; indeed it regards it as a key decision in

its Report. The forms of organisation appropriate for the two separate

activities are discussed in Chapter 11.

154

C H A P T E R 7

FIN A N C I A L P R O S P E C T S

Introduc tion

7.1 The financial framework within which the Australian Post Office

(A.P.O.) presently operates and its financial performance to date, were

discussed in Chapter 2. Balance sheets and profit and loss accounts for

the postal and telecommunications services were shown separately to permit

consideration of the individual performances and characteristics of these

services and in Chapter 6 the recommendation was made that the two services

should be administered by separate organisations.

It is now necessary to review the financial prospects of each

organisation, taking into account the effects of current and prospective

rates of increase in costs and of present financing arrangements and

accounting methods. Consideration must also be given to the financial

objectives appropriate to each service and to the implications for future

tariff changes.

In the operations of the A.P.O. as it is today, two services with

very different characteristics and profitabilities are combined within the

one organisation. To the extent that the combined financial results of the

A.P.O. in recent years may have influenced tariff decisions, it could be

said that the profitable telecommunications services have "subsidised" the

unprofitable postal services. Under conditions of separate operation, the

performance and financial needs of each service will be considered and

judged separately and it is therefore important to review their individual

financial prospects. Before doing so however, it is necessary to consider

the implications for both services of recent major change in

superannuation liabilities so that account can be taken of them in forward

projections.

155

S u p e r a n n u a t i o n L i a b i l i t y

7.2 The cost of providing superannuation benefits for staff is an

expense item in the profit and loss accounts of the A.P.O.; during

1972-73 the amount debited on account of superannuation to the postal

service's profit and loss account was $13.1 million and to telecommunica­

tions services $23.8 million, a total of $36.9 million; a further

$12.6 million was debited to capital account. In 1971 the Government

decided to increase the Government share of pensions and in 1973, as

recommended in the report by Professor A.H. Pollard, to adjust them

annually in future by 1.4 times the percentage increase in the Consumer

Price Index, such adjustment not to exceed the percentage increase in

Average Weekly Earnings for the year. Amendments to the Superannuation

Act incorporating the recommendations of Professor Pollard's report were

approved by Parliament in June 1973. Adjustments in respect of these two

recent changes have not yet been given effect to in the A.P.O. profit and

loss accounts.

Permanent officers of the Australian Public Service are required

to contribute to the pension or provident benefits to which they become

entitled on retirement, while eligible temporary and exempt employees may

elect to contribute for pension or provident benefits. In the A.P.O.

about 28 per cent of the total official staff, comprising temporary and

exempt employees, are non-contributors.

Those of satisfactory health standard contribute to the pension

scheme, contributions being based on units of pension according to salary

and at rates appropriate to age. Contributions of the staff are deducted

from salaries and wages and paid to the Superannuation Board, where they

accumulate together with interest earned on investments made by the Board

and, at retirement, provide for a proportion of pensions. The Government

provides the balance of pensions by way of direct payments from the

Consolidated Revenue Fund. The proportions of pension represented by the

accumulated contributions of the staff and by payments from the

Consolidated Revenue Fund will be discussed later.

A relatively small proportion, about 10 per cent of contributors,

who cannot meet the required health standards, contribute to the Provident

156

scheme at the approximate rate of 5 per cent of salary. On retirement a

contributor receives a lump sum payment consisting of total contributions

plus interest, multiplied by three; two-thirds of the lump sum is thus met

by the Government.

The Government's liability for its share of retirement benefits

is not funded by way of contributions to the Superannuation Board;

payments for pensions and other retirement benefits are made from the

Consolidated Revenue Fund as they fall due.

Following the report in 1960 of the Ad Hoc Committee of Inquiry

referred to in Chapter 2, it was decided that the accounts of the A.P.O.

should be put on a full commercial basis and that the A.P.O. should show,

as an expense, the cost of funding the Government's accruing liabilities

in respect of A.P.O. staff. A notional fund to reflect the Government's

liability for A.P.O. staff was established.

Until 1967-68 the liability of the A.P.O. for superannuation was

calculated and included in its annual accounts, but no separately

identifiable cash payments were made to Treasury, which was deemed to be

the A.P.O.'s insurer for superannuation. The liabilities included in the

A.P.O. accounts up to 1967-68 were credited to the notional fund. With the

introduction of the new financial arrangements for the A.P.O. on 1 July

1968, a specific provision was included in the Act for payments to be made

by the A.P.O. to the Consolidated Revenue Fund, at such times and in such

amounts as the Treasurer may determine, in respect of the Government's

future liability to make superannuation payments to A.P.O. staff. Since

1968-69 these payments have also been credited to the notional fund.

The notional fund is deemed to be invested in long-term

Australian Government securities and the interest likewise invested.

Payments made to former members of the A.P.O. staff by Government to meet

its share of pensions and lump sum payments are debited to the fund.

At 30 June 1959 the notional fund was deemed to stand at

$142 million, this amount being the estimated accrued superannuation

liability of the A.P.O. at that date. The fund at 30 June 1973 stood at

157

$523 million, the pension scheme accounting for $497 million and the

provident scheme for $26 million.

At the time of the introduction of the notional fund in 1959-60

the pensions of former members of the A.P.O. staff were made up as

two-sevenths from their own accumulated contributions to the Superannuation

Board and as to five-sevenths from the Government, funded via the notional

fund. Various decisions of Government since then have increased pension

benefits. The cost of the increases has been borne entirely by

Government, the additional liabilities in respect of A.P.O. staff up to

1971 being funded by extra payments from the A.P.O. to the Treasury for the

credit of the notional fund.

In August 1971, pensions were raised by increasing the

Government's share of pensions but no decision has yet been made as to the

treatment of the resulting A.P.O. liability. The Australian Government

Actuary advised in 1972 that, excluding the 1971 adjustment, the liability

of the A.P.O. for 1972-73 was $49.09 million and that an additional lump

sum liability of $52.8 million existed in respect of the 1971 pension

increases. Lump sum liability is the present value, calculated

actuarially, of all the future additional pension payments due to existing

pensioners and their dependants. On the determination of the Treasurer,

$49.09 million was paid to the Treasury by the A.P.O. for the 1972-73 year.

Following the report by Professor A.H. Pollard in March 1973, the

Government decided to implement his recommendation that the Government's

share of pensions should be adjusted annually in future by 1.4 times the

percentage increase in the Consumer Price Index, such adjustment not to

exceed the percentage increase in Average Weekly Earnings for the year.

The actuarial effects of this change on the A.P.O. were calculated by

Professor Pollard, based on the following assumptions as to growth rates:-

Consumer Price Index 3.5 per cent per annum Salaries 6.25 per cent per annum

Weekly Earnings 6.5 per cent per annum

A discount rate of 5.5 per cent was assumed.

158

With these assumptions, Professor Pollard calculated that the

adjustment of pensions for changes in the Consumer Price Index would affect

the Λ.Ρ.Ο. finances as follows:-

(1) Liabilities to existing pensioners would increase and would require

funding by way of a lump sum, estimated by Professor Pollard to be

$119 million.

(2) Accumulated contributions from the A.P.O. within the notional fund

being now insufficient to pay the increased pensions, an additional

lump sum of $192 million would be required to fund the shortfall.

(3) Fortnightly contributions by the A.P.O. to the notional fund in

respect of existing and new contributors would need to be increased

in the future. Originally the Government provided five-sevenths of

the pension and the accumulated staff contributions two-sevenths, a

ratio of 2.5 to 1. The new pension provisions would require the

ratio to be 4.3 to 1, calculated on the assumption that staff

contributions to the Superannuation Fund would have a future

earning rate of 5.5 per cent.

As noted above, $49.09 million was paid to the Treasury by the

A.P.O. for superannuation during the 1972-73 year. For 1973-74 the current

determination of the Treasurer (dated 15 February 1974) is $61.8 million,

an increase of $12.7 million on 1972-73 made up of

"Normal" increase $4.9 million

Shortfall in payments 1972-73 $1.5 million Effect of salary increases since May 1973 $6■3 million

$12.7 million

This determination of $61.8 million excludes any adjustments in

respect of the lump sum liability resulting from the 1971 pension increases.

and the lump sum liabilities totalling $311 million estimated by

Professor Pollard to result from the change of pensions to a cost of livin,

basis. Neither does it provide for the increased annual payments in

respect of existing or new contributors, referred to above, made

159

necessary by the linking of pensions to cost of living changes. It is now

necessary to consider the magnitude of these adjustments and how they

should be treated in the books of the A.P.O.

The notional fund, referred to earlier in this Chapter has been

the subject of a recent actuarial valuation by the Australian Government

Actuary. In his report, dated 25 January 1974, the Actuary valued the fund

as at 30 June 1972 under various assumptions as to future earning rate and

gave an estimate of the additional liabilities resulting from the

Superannuation Act 1973. Recent actuarial valuations of the fund have

been based on an assumed earning rate of 4.5 per cent; the Actuary carried

out his valuation on the 4.5 per cent basis but as well included the

result of a 5.5 per cent earning rate assumption. A subsequent report

provided a valuation ona 6 per cent earning rate. Excluding the effects

of the Superannuation Act 1973, the Actuary estimated the fund to be

showing a deficit of $85.7 million on the 4.5 per cent basis, a surplus of

$30.6 million on the 5.5 per cent assumption, and a surplus of $77.5 million

on the 6 per cent assumption. .

The A.P.O. represented in its evidence to the Commission that it

was being disadvantaged by the operation of the notional fund which is

credited with interest at the average rate from time to time appropriate

to a portfolio of long dated Australian Government securities. The A.P.O.

pointed out that the resulting average earning rate of the notional fund

was significantly lower than that of the Superannuation Fund, which had

wider investment scope. This matter has been the subject of discussion

between the A.P.O. and the Treasury over the past two years but has not yet

been resolved.

It has been the practice for annual payments by the A.P.O.,

calculated on the basis of 2.5 times staff contributions, to be reduced by

the amount of interest earned by the notional fund in any one year in

excess of 4.5 per cent. In the most recent year, 1972-73, the notional

fund showed an average earning rate of 5.74 per cent, its income being

$5.85 million higher than would have been earned at 4.5 per cent interest.

This sum of $5.85 million was deducted from the A.P.O.'s payment calculated

on the basis of 2.5 times staff contributions.

1 6 0

The A.P.O. payments have therefore fully reflected the year-by­

year earning rates of the notional fund. During the 1972-73 year however,

the Commonwealth Superannuation Fund earned 6.498 per cent and the

question arises as to whether the A.P.O. payments should be reduced by

amounts appropriate to this higher earning rate, as has been proposed by

the A.P.O. The Commission considers it would be reasonable to do so when

assessing the A.P.O.'s annual payments.

The Australian Government Actuary based his most recent

quinquennial valuation of the Commonwealth Superannuation Fund as at 30

June 1972 on an assumed future earning rate of 5.5 per cent; the Fund was

then earning in excess of 6.0 per cent. The future earning rate adopted

from time to time for the purpose of valuing the Superannuation Fund must

of necessity be somewhat conservative because of the need to ensure that a

deficit does not occur in the Fund in the future; any such deficit would

give rise to the need for variation in the contributions by subscribers to

the Fund. In the case of the notional fund however, such a constraint is

not so critical; in the event of a deficit occurring in the future due to

the use of an earning rate subsequently found to be too high, adjustment of

the deficit could be made by increasing A.P.O. payments in later years.

The Commission considers that it would be reasonable for the notional fund

to bedeemed to have a marginally higher future earning rate than that

adopted from time to time by the Actuary for the purpose of valuing the

Commonwealth Superannuation Fund and considers a margin of 0.5 per cent to

be appropriate. For present purposes, therefore, an assumed future earning

rate of 6.0 per cent would apply for the purposes of actuarial valuation of

the notional fund.

Taking into account the liabilities resulting from the 1971

pension increase and with an assumed future earning rate of 6 per cent, the

Australian Government Actuary estimates the notional fund to be in surplus

as at 30 June 1972 to the extent of approximately $77 million, as noted

above. In addition it has been calculated that, had the notional fund been

credited with the same earning rate as the Superannuation Fund since the

inception of the notional fund in 1959-60, the contributions by the A.P.O.

would have been reduced by amounts which would have accumulated to about

$28 million by 30 June 1972. These two sums, which together amount to

161

$105 million can be said to constitute a present surplus in the notional

fund and should reasonably be taken into account in considering the A.P.O.'s

present position in respect of lump sum liabilities.

In assessing the liability resulting from pension increases under

the Superannuation Act 1973, Professor Pollard assumed a future rate of

increase in the Consumer Price Index of 3.5 per cent per annum. The

Australian Government Actuary, in a report dated 20 February 1974, assumed

a slightly higher rate of increase of 3.9 per cent per annum. On the

latter basis and with an assumed future earning rate of 6.0 per cent, the

Actuary estimated the lump sum liability resulting from the 1973 Act to be

$385 million, existing contributors accounting for $245 million of this

amount and pensions $140 million. These figures assume that all future

staff contributions to the Superannuation Fund are based on existing

contribution schedules and attract A.P.O. liability in the ratio of 3.4 to

1 .

As shown above, the notional fund can be said to be in surplus- at

present to the extent of about $105 million. Subtracting this sum from the

liability of $385 million referred to above gives a net lump sum liability

of $280 million, an amount which must be taken into account in assessing

the A.P.O.1s annual superannuation payments.

Normal practice would be to amortise a lump sum liability by way

of annual payments spread over a number of years, the appropriate

amortisation period being a matter of judgment. In his report, Professor

Pollard suggested 10 years. The Commission's consultants, Price Waterhouse

and Co., discuss this question on pp. 122 and 123 of their report and

conclude that 10 years is probably unduly conservative; they suggest a

period of 30 to 40 years as being more appropriate. The Commission

considers that, having regard to all the circumstances, 30 years would be

a reasonable period over which to amortise the present net lump sum

liability. If this were done with a compound interest rate of 6 per cent,

an annual charge of $20.3 million would result. This charge would be

subject to re-assessment in future years should the Australian Government

Actuary vary his assumptions as to the long-term rate of increase of the

Consumer Price Index and as to the future earning rate of the

162

Commonwealth Superannuation Fund. As noted above the liability presently

calculated is based on an assumed rate of increase in the Consumer Price

Index of 3.9 per cent; judging from present trends this may well prove to be

too low even as a long-term rate. The adoption of higher rates of increase

in subsequent valuations could materially increase the superannuation

liability.

The Australian Government Actuary calculates that the ratio of

A.P.O. to staff contributions should be 3.4 to 1 as noted earlier in this

Chapter. The application of this ratio would cost the A.P.O. an additional

$21.7 million for the 1973-74 year, which, together with the annual

amortisation charge of $20.3 million referred to in the previous paragraph,

would result in the annual payment to Treasury for the current 1973-74 year

increasing from $61.8 million as presently indicated to $103.8 million, an

increase of $42.0 million.

7.3 Table 7.1 below shows the superannuation payments for the 1973-74

year adjusted for the above additional charges and the distribution of the

payments as between postal and telecommunications services.

. As can be seen from Table 7.1, the increased superannuation costs

falling on postal and telecommunications services as a result of pension

increases, are material. In the case of postal services the 1972-73 charge

of about $13 million would rise in 1973-74 by some $14 million to $27

million. With telecommunications, the 1972-73 figure of approximately

$24 million would rise by about $24 million to $48 million.

The A.P.O. has prepared estimates of superannuation costs from

1973-74 to 1976-77, excluding adjustments in respect of the 1971 pension

increases and the recommendations of the Pollard report so it is necessary

to extend their estimates to take account of these exclusions. Adding the

annual charges necessary to amortise net lump sum liabilities over 30 years

and the additional annual payments necessary in respect of existing and new

contributors, results in the total superannuation costs shown in Table 7.2.

The effect of these higher superannuation costs on the profit and

loss accounts of the A.P.O. is discussed below in the two sections dealing

with postal and telecommunications services respectively. Before doing so,

163

T AB L E 7. 1

E S T I MAT E OF S UP E RANNU ATI ON LI ABI LI TI E S OF T HE AU S T RALI AN P OS T OFFI CE, 1 9 7 3- 7 4

( As s umi ng 30 years Amort i s a t i on Peri od for Lump S um Liabi li ti es )

$m.

Current determination of the Treasurer, excluding the effects of 1971 adj ustments and the Pollard recommendations 61. 8 *

Amortisation of total net lump sum liability of $28 0 million 20. 3

Increased annual contributions in respect of existing and new contributors flowing from the Pollard recommendations 21. 7

103. 8 *

Distributed between: -Profit and Loss Account ( 74 per cent) 75. 7

Capital Account ( 26 per cent) 26. 6

102. 3

Profit and Loss Charges divided: -Postal ( 36 per cent) 27. 3

Telecommunications ( 64 per cent) 48. 4

75. 7

Profit and Loss Charges 1972-73 for comparison: -Postal 13. 1

Telecommunications 23. 8

36. 9

Includes $1. 5 million short paid 1972-73 but accounted for in 1972-73 accounts.

Source: Details supplied to the Commission by the A. P. O. and calculations by the Commission.

164

S U P E R A N N U A T I O N COS TS 1 97 3-74 TO 19 7 6 - 7 7 C H A R G E A B L E TO PR O F I T A N D LOSS A C C O U N T S

however, it is necessary to remark that, operating as a single

organisation, the A.P.O. prepares its accounts for postal services and

telecommunications services respectively on an apportioned, or usage,

basis. The creation of two separate organisations to administer postal

and telecommunications services as recommended by this Commission, would

involve the assignment of assets to one or other of these organisations,

assets having joint usage being assigned to the predominant user with the

minor user paying appropriate annual charges.

The Commission requested the A.P.O. to prepare notional balance

sheets and profit and loss accounts for three years 1973-74 to 1975-76

under conditions of separation and they have done so. Various changes

would occur in the balance sheets. The postal service assets would be

expected to increase and those of telecommunications services decrease by

like amounts with consequent effects on borrowings from the Treasury;

postal services would pay more interest to the Treasury, but should

recover the increased cost from telecommunications services by way of rents

or service charges. The profit and loss accounts of the two services

would be affected by separation only to a small degree. To avoid

confusion, the Commission has thought it reasonable to consider the future

prospects of both services from the standpoint of the present system of

accounts. This permits comparison with the results of past years, for

which balance sheets and profit and loss accounts have not been prepared

under conditions of notional separation; differences involved are

relatively minor from the point of view of discussion of trends.

P os tal S e r v i c e s - P r o j e c t e d P r o f i t a n d L o s s A c c o u n t s

7.4 In January 1974 the Commission obtained from the A.P.O. its

latest estimate of the postal services trading result for the year ended

30 June 1974 to serve as a starting point for projections. Trading results

for postal services for the ensuing three years were calculated using the

following assumptions:­

. no change in tariffs; tariff increases in the last Budget are

already reflected in the estimated 1973-74 and 1974-75 earnings;

166

. 12h per cent increase in wage and salary rates in 1974-75 and 10

per cent per annum thereafter. (The current 1973-74 year for

comparison is likely to show an increase in wage and salary rates

approaching 20 per cent);

. price increases for materials and incidentals: 6 per cent in

1974-75 and 5 per cent per annum thereafter;

. present A.P.O. financing methods; that is, trading losses financed

by further Treasury advances on which interest is payable;

. superannuation costs as shown in Table 7.2: that is, including

the costs of the 1971 pension increases and of the recent increases

following the Pollard Report.

Table 7.3 shows the profit and loss figures for postal services from 1968-69

to 1972-73 as published, the A.P.O. estimate for the current year, 1973-74,

adjusted for extra superannuation charges, and projections on the

assumptions listed above for 1974-75 to 1976-77 inclusive.

. The A.P.O.'s current estimate for the 1973-74 year is a loss of

$42 million for postal services compared with a loss of $20.9 million in

1972-73. The 1973-74 loss has been increased by $11 million to $53 million

by the additional superannuation charges. Table 7.3 shows that with the

stated assumptions, postal losses can be expected to increase to about

$154 million in 1976-77 unless tariffs are increased.

T e l e c o m m u n i c a t i o n s S e r v i c e s - P r o j e c t e d P r o f i t and L o s s A c c o u n t s

7.5 The Commission examined the future financial prospects for

telecommunications services on the basis of the present system of accounts

as it did with the postal services, considered in the previous section of

this Chapter.

An estimate of the likely trading result for the 1973-74 year,

obtained from the A.P.O., was used as a starting point and the projected

results for telecommunications services for the following three years

167

calculated using the assumptions listed previously for postal services with

the exception that prices for material purchases for telecommunications

plant were assumed to rise by 4 per cent in 1974-75 and 3 per cent in the

remaining years. The superannuation costs calculated in Table 7.2 have

been included in the 1973-74 year and thereafter.

Table 7.4 shows that the A.P.O.'s estimate for the current

1973-74 year of a profit of $50 million from telecommunications services is

reduced by $20 million to a profit of $30 million by the inclusion of the

higher superannuation charges. The projected figures indicate that by

1976-77 telecommunications services are likely to show a loss of about

$87 million unless tariffs are increased.

D i s c u s s i o n o f E x p e n s e I t e m s in P r o f i t a n d L o s s A c c o u n t s

7.6 The projected profit and loss accounts for postal and telecom­

munications services show such a serious deterioration over the next few

years that some examination is warranted of the bases on which the various

expense items in commercial accounts of the A.P.O. are calculated.

7.7 The costs shown under the heading "Operating Maintenance and

General" are the direct cash costs for salaries, materials and services.

They account for about 80 per cent of total expenses in the case of postal

services and over 50 per cent in the case of telecommunications.

Improvements in productivity based on past experience have been taken into

account in the forward postal estimates but the rate of increase of

productivity, measured by such indices as the numbers of postal articles

handled per staff member, is not large: approximately 1 per cent per

annum. With telecommunications services, account has also been taken of

productivity trends established over recent years and it seems reasonable

to assume that with this relatively capital-intensive enterprise, past

trends will continue. For the purposes of estimating for the next few

years, the figures shown against Operating Maintenance and General in

Tables 7.3 and 7.4 should he realistic.

7.8 The charge for depreciation is obtained by assigning a service

life to each class of asset and providing for depreciation on a straight

1 6 9

Projected

1973-74 1974-75 1975-76 1976-77 $ $ $ $

million million million million

237 263 285 308

487 533 587 646

19 19 19 20

15 17 19 21

59 67 74 82

817 899 984 1077

1027

- 43

593 236 68 13

254

1164

- 87

Estimated) Calculated by the Commission from data supplied by the Projected) A.P.O.

line basis at such a rate as will recover the original cost of the asset by

the end of its useful life. Reviews are carried out by the A.P.O. every

three years to re-estimate service lives so that depreciation rates can be

adjusted if necessary. This method makes no provision for higher

replacement costs of fixed assets consequent on inflation and the

Commission's consultants, Price Waterhouse and Co., argue on pp. 132 to 136

of their report that there is justification for making supplementary

provisions for depreciation to take account of higher replacement values.

The question is discussed later in this Chapter in connection with the

financial objectives of the two services; for the purposes of the present

section it need only be remarked that depreciation as calculated by the

A.P.O. is in accord with accepted accounting practice and provides for the

recovery of the original costs of assets by the end of their useful lives.

Depreciation may be said to be understated to some degree in view of rising

replacement values; it is certainly not overstated.

7.9 The charge for superannuation has been discussed at some length

earlier in this Chapter. There can be no question that the A.P.O.,

operating as a business enterprise, has a liability to provide retirement

benefits for its staff and that these liabilities should be brought to

account as an expense of the business. As an enterprise of the Australian

Government it may be argued that the A.P.O. could meet all pension payments

as they arise, that is, on an "emerging cost" basis, instead of funding its

liabilities on an actuarial basis each year. Such a system would defer,

but not reduce, the overall cost of superannuation benefits and the

Commission does not consider it would be appropriate to adopt such a course.

As Price Waterhouse and Co. point out on p . 120 of their report:-

"The costs accrue as an employee renders service to his employer and whether his rights to such benefits have vested or will not vest until some future date, does not alter the fact that the related costs have accrued.

To produce a proper allocation of costs to accounting periods, the full cost of accruing superannuation entitlements should be absorbed in the period in which the service was rendered."

In discussing superannuation costs earlier in this Chapter, the

Commission noted that recent pension increases had created large lump sum

171

liabilities for the A.P.O. and the Commission suggested that these

liabilities should be amortised over a substantial period of 30 years. In

the case of postal services, this treatment gives rise to additional

charges of about $5 million per annum and with telecommunications services

about $10 million per annum. These charges are included in the 1973-74 and

projected profit and loss accounts, and in the opinion of the Commission

could not reasonably be reduced. The annual payments in respect of existing

contributors needed to fund future pension liabilities are directly

assignable elements of expense.

The A.P.O. faces a difficult situation as regards superannuation

costs. Price Waterhouse and Co. remark on p. 114 of their report:-

"Since 1959-60, the costs of superannuation of the APO have been steadily rising. In addition to the question of rising costs, the APO has been required to accept additional costs in respect of adjustments made by Government decision to the value of past service

pensions not only in respect of existing employees, but also in respect of retired employees and their dependants.

In 1959-60, it was considered that the majLj) question was,,one of determining the true cost of superannuation in any one year to the APO regarded as a business. However, the situation which has arisen on a number of occasions since 1960, where the APO has been required to accept

increased superannuation costs and liability in respect of pension increases, without prior consultation and in circumstances beyond its control, differ greatly from a business undertaking which operates under normal business constraints.

The need for the APO to accept large additional costs such as superannuation, without prior consultation, makes any requirement to maintain profitable operations as a business undertaking extremely difficult, inhibits proper financial planning and imposes severe

financial strain when the absolute magnitude of the costs of pension adjustments is of the order contemplated by the Pollard Report."

There is substance in these remarks and the Commission considered

whether it should recommend that the lump sum liabilities now falling on

the A.P.O. should be met directly by Government rather than be funded

through the accounts of the A.P.O. It was decided not to recommend such a

course. Regardless of whether the extra liabilities arise from a decision

of the A.P.O. itself, or from "outside", they represent a true added cost

of providing postal and telecommunications services and as such have a

direct bearing on the prices at which these services should be sold.

Failure properly to assign costs would distort the relationships between

172

users of the A.P.O. service and taxpayers.

The question of the earning rate to be assumed for the purposes

of the notional fund operated by the A.P.O. and the Treasury, was

discussed earlier in this Chapter. The Commission considered that a rate

equal to the future earning rate of the Superannuation Fund assumed from

time to time by the Australian Government Actuary plus 0.5 per cent would

be equitable, and account has been taken of this rate in calculating

superannuation costs.

The Commission concludes that the superannuation costs as given

in Table 7.2 are fairly calculated and that there is no scope for

significant reduction.

7.10 Liability for long service leave accrues with years of

employment of each staff member. It can be readily calculated and is an

undoubted cost, to be provided for each year.

7.Π The interest charges shown in the profit and loss accounts in

Tables 7.3 and 7.4 are steeply rising items. Advances by the Treasury to

the A.P.O. carry interest at the rate current for long dated Australian

Government securities issued at about the time each advance is made, the

liability of the A.P.O. to the Treasury being thus made up of a "portfolio"

of long-term borrowings. As the oldest loan matures, it is refinanced by

the issue of a matching loan at the then current rate of interest. The

average rate of interest on the portfolio of loans is currently slightly

less than 6 per cent.

Various witnesses suggested to the Commission that in view of the

"community service" nature of the A.P.O.'s operations, some or all of its

borrowings from Treasury should be interest-free or at some nominal rate of

interest. Some witnesses represented that since the funds supplied to the

A.P.O. came from the Consolidated Revenue Fund, that is from taxation,

charging interest to the A.P.O. constituted a form of "double taxation".

It is necessary to discuss the principle of payment of interest by the

A.P.O. on borrowings from the Treasury before dealing with more

particular issues.

173

Capital is required to enable the A.P.O. to provide its services

to the community. At 30 June 1973 funds provided by the Treasury stood at

$3,043 million; during the 1972-73 year interest paid by the A.P.O. to

Treasury was $158 million. If this interest payment by the A.P.O. to

Treasury were waived, the cost of A.P.O. services would decrease and

tariffs could be reduced with benefit to users of the services. Government

revenue would fall by the amount of interest foregone and taxes would then

have to be raised to finance the Government's expenditure budget. If taxes

were not raised, the Government's expenditure would have to be reduced in

other directions. The taxpayers and the users of A.P.O. services represent

two separate and distinct groups; some taxpayers may pay relatively little

tax but may be heavy users of A.P.O. services; others may pay relatively

higher taxes but make little use of the services. There is no correlation

between the two groups and problems of equity arise if costs are moved

from one group to the other.

In the economic sense capital can never be considered a "free"

resource; it is always in short supply relative to total demand and capital

directed to one investment area means capital investment foregone

elsewhere. The cost of foregoing alternative investments, the so-called

"opportunity cost", is a cost that has to be borne by taxpayers or by other

groups in the community.

Apart altogether from the question of the equitable treatment of

different groups, distortions arise if the prices of goods or services do

not reflect their economic cost. Failure to include a charge for capital

in the costs of A.P.O. services would cheapen these services and Increase

their usage, giving rise to still further demands for capital.

If inequities and distortions such as have been referred to

above, are to be minimised, services such as are provided by the A.P.O.

should be fairly costed and priced; included in the costs should be a

charge (Interest) for the capital employed. The Commission therefore

rejects the suggestion that capital for A.P.O. services should be interest-

free or at some nominal rate of interest. Nor does it accept that there

is any element of "double taxation" involved in charging interest on

capital provided by Government.

174

The only question that arises is whether the interest rate

charged is a fair one. The rate from time to time applicable to long

dated Government securities represents the lowest market rate for long-term

borrowings and such a rate would seem to be eminently fair to the A.P.O.

and thus to the users of its services, The average interest rate paid by

the A.P.O. changes only slowly as old loans are retired and new ones are

made; fluctuations in the amount of interest payable by the A.P.O. from

year to year are thus avoided.

One particular aspect of the present system requires

consideration. In addition to paying interest, as described above, on

Treasury advances for capital purposes, any trading losses by the A.P.O.

are deemed to be met by further Treasury advances on Which interest is also

payable. The A.P.O. as a whole, as shown by the most recent balance sheet

as at 30 June 1973, has accumulated profits of some $137 million, but if

separate balance sheets are constructed for the two services as in Tables

2.4 and 2.5 of Chapter 2, the postal services are shown to have accumulated

losses of $149 million and telecommunications services accumulated profits

of $286 million.

7.12 Looking at postal services standing alone, therefore, interest on

accumulated losses is now an important component of the total interest

payment. As at 30 June 1973 advances by the Treasury to postal services

amounted to $259 million of which $149 million (58 per cent) was on account

of accumulated losses. In preparing the projected profit and loss figures

for postal services as shown in Table 7.3, the same system was deemed to

apply. The assumption of constant postal tariffs and rising costs leads to

a rapidly escalating loss situation and thus to steeply rising interest

charges.

The Commission accepts that the principle of meeting an annual

loss by way of an interest-bearing Treasury advance would be a reasonable

one under circumstances where an activity such as postal services could be

expected to fluctuate between profit or loss situations over the years.

However, the power to determine tariffs rests with the Government and if,

for economic or political reasons, tariffs are kept at unduly low levels in

relation to the cost structure, losses and thus escalating interest charges

1 7 5

are forced on the enterprise. Postal tariffs have in truth been too low

for a number of years, as evidenced by the continuing trading losses shown

by postal services.

The Commission considers that this "spiral process" should be

broken since it can progressively lead to greater and greater distortions.

The management of the postal service has a clear responsibility to operate

efficiently and minimise its costs, taking into these costs all properly

assignable charges. It has not been able to date to recover its costs by

way of tariff charges for its services and the Commission considers that to

place postal services on a reasonable footing for the future, the

accumulated losses as at 30 June 1974 should be written off and not

transferred to the balance sheet of the proposed postal corporation. The

principles which the Commission recommends should apply to the future

treatment of any losses subsequently incurred by postal services are given

in a later section of this Chapter dealing with tariff setting.

As at 30 June 1973, the telecommunications service's balance Sheet . · . i v s o f > . 1 1 : · n c h · i m e s t i o ..

shows accumulated profits of $286 million and the question discussed above,

of writing off past losses, does not therefore arise. It could be argued

that accumulated profits should not be transferred to the balance sheet of

the proposed telecommunications corporation, but the Commission does not

recommend such a course. Accumulated profits in the telecommunications

balance sheet could be thought of as a general reserve of the business

appropriately transferred to the new corporation.

F i n a n c i a l O b j e c t i v e s

7.13 The Post and Telegraph Act 1901-73 provides in Section 96 H(l):-

"In the administration of this Act in relation to Post Office services, the Postmaster-General shall pursue a policy directed towards achieving in respect of each financial year, in respect of those services, such financial results as the Postmaster-General, with the concurrence of the Treasurer, determines."

No specific financial objectives have so fgr been set under the

Act and it is necessary now to consider what financial objectives should

be set for the two organisations which the Commission proposes should be

176

formed to operate postal and telecommunications services respectively.

Financial objectives that have been incorporated in legislation

covering the formation of various trading-type organisations of the

Australian Government appear to fall broadly into two classes: a requirement

to meet costs and pay a reasonable return on capital or a requirement to

break even after meeting all costs, including the payment of interest on

capital. The former type of financial objective is generally adopted in

circumstances where some proportion of equity capital is involved in the

" capital structure and the latter in cases where capital is provided in the

form of interest-bearing advances.

The Commission does not believe that any useful purpose would be

served by reconstructing the capital of the two proposed organisations to

provide for a mix of equity and loan capital; any such division would be.

purely arbitrary. Postal and telecommunications services have been

financed from their inception by Government funds, now treated as long-term

Government loans, and the Commission considers such a financing method to

be appropriate. As noted in the previous section of this Chapter, interest

calculated in accordance with present methods is properly chargeable

against the two services.

7.14 A minimum objective for the two organisations would be to seek to

recover, by way of charges for the various services, the costs involved in

providing them, these costs to include all direct charges, provision for

depreciation of fixed assets on an historical cost basis, provision for

long service leave, the funding of superannuation liability, and the

payment of Interest as at present on Treasury advances corrected for

accumulated losses in the case of postal services. A matter for discussion

is whether the financial objectives should be such as will require the

organisations to provide, as well, surpluses to assist with further capital

development.

In commercial organisations, retained earnings commonly provide

a significant proportion of funds needed for replacement of fixed assets

and for growth. The Commission's consultants, Price Waterhouse and Co.,

noted that in a number of overseas telecommunications activities reviewed,

about 50 per cent of capital expenditure was financed from internal

177

resources and concluded that a reasonable financial objective for both the

postal and the telecommunications organisations would be to provide a

minimum of 50 per cent of the cost of new capital works from internal

sources. The Commission has considered this in conjunction with its own

inquiries overseas and supports it as an objective that should be met by

both organisations.

If this principle were applied to the two proposed organisations,

the situation over the next few years would be as shown in Table 7.5. The

anticipated capital expenditures given in this Table are taken from A.P.O.

figures referred to in the next section of this Chapter dealing with

capital investment requirements.

In the case of postal services, depreciation charges and

provisions provide approximately 50 per cent of the anticipated capital

expenditures. With telecommunications services, facing a very large

capital investment programme, depreciation plus provisions falls short of

the 50 per cent target, deficiencies rising from about $106 million to

$190 million, as shown in the last line of the Table. To meet these

deficiencies the telecommunications organisation would have to aim at

making surpluses of like amounts, the surpluses being retained and

re-invested in the business.

7.15 Depreciation charges are the main source of internal finance for

capital expenditure and the appropriateness of the present methods used

for calculating depreciation requires consideration. Depreciation

calculations, as noted earlier, are in accord with accepted accounting

practice and provide for the recovery of the original costs of assets by

the end of their useful lives.

Price Waterhouse and Co. note in their report that the British

Post Office makes an annual charge for supplementary depreciation designed

to bring the total annual depreciation charge in line with depreciation

based on replacement costs. The supplementary depreciation is charged to

the profit and loss account and credited to General Reserve. For the

1972-73 year the British Post Office's ordinary depreciation charge amounted

to 4.26 per cent of fixed assets (excluding land) at cost, a figure which

compares with 4.52 per cent provided by the A.P.O. Supplementary

178

TAB LE 7.5

FIN A N C I N G OF CAPITAL E X P E N D I T U R E

1973-74 1974-75 1975-76 $ $ $

million million million

Postal

Anticipated capital expenditure 22 23 23

50 per cent of expenditure 11 11.5 11.5

Estimated to be available from:

Depreciation 6 7 7

Provision for Long Service Leave _5 6 6

11 13 13

Deficiency (-) or Surplus (+) - + 1.5 + 1.5

Telecommunications

Anticipated capital expenditure 560 658 754

50 per cent of expenditure 280 329 377

Estimated to be available from:

Depreciation 165 185 209

Provision for Long Service Leave 9 10 12

174 195 221

— — ------ -

Deficiency (-) or Surplus (+) 106 134 156

Source: Details supplied to the Commission by the A.P.O. and calculations by the Commission.

1976-77 $ million

32

16

8

_7

15

1

878

439

236

13

249

190

179

depreciation of 1.79 per cent of fixed assets was provided by the British

Post Office, making total depreciation 6.05 per cent of fixed assets at cost.

Price Waterhouse and Co. remark on p. 135 of their report:-

"As a separate commercial entity the Australian Post Office needs to provide internally for funding of fixed assets replacements. Like a commercial enterprise in the private sector it normally should only look for an injection of additional funds from its sponsoring "shareholder" when it could be demonstrated in financial terms that physical expansion or substantial change of technology justified it. In other words, shareholders of a company can reasonably expect directors to operate and account in such a way that their investment is maintained intact in terms of current replacement values.

We believe that it is appropriate that organizations such as the APO - with a high rate of technological development, and a fast rate of expansion should provide for replacement of assets at current values.

The determination of the means of assessing the annual values of a supplementary depreciation would require special study and we suggest that this should be done by the Management Services Division of the APO."

7. 16 For public enterprises of this type, where it is important to

maintain reasonable equity as between present and future users of the

services, the question of the adequacy of depreciation charges clearly comes

into issue. The present system, generally accepted by the accounting

profession, charges depreciation on the basis of the historical cost of

fixed assets. When assets are due for renewal at the end of their useful

lives, their replacement costs will have risen with inflation; the

depreciation charged against operations will be insufficient to renew the

assets and additional capital to finance the difference will have to be

provided by future users. To the extent that this is necessary, past users

have been buying their services too cheaply. On the grounds of equity as

between present and future users, there are therefore good grounds for

charging, year-by-year, supplementary depreciation based on movements of

replacement costs as is done by the British Post Office.

No figures are available at present which would permit even an

approximate estimate of the likely charge for supplementary depreciation,

but some indication may perhaps be obtained from the British Post Office

accounts. Currently, the British Post Office, after charging normal

180

depreciation based on historical costs, provides supplementary depreciation

amounting to 42 per cent of the normal depreciation charge. If a like

percentage, say 40 per cent, was found to be appropriate in the case of the

A.P.O.'s telecommunications services, the depreciation position in say

1974-75 would be:-

Noraal depreciation, based on historical costs of assets $185 million

Supplementary depreciation $ 74 million

Total depreciation on replacement cost basis $259 million

7.17 Supplementary depreciation provisions would add materially to the

internal financial resources of the two organisations and in the case of

telecommunications services would be likely to go some way towards meeting

the "deficiencies" shown in Table 7.5. However the lack of any figures at

present makes it impossible to examine real situations; the issue must be

left in abeyance until detailed studies have been carried out. The

Commission recommends that the two organisations examine, the British Post

Office system with a view to its adoption if found appropriate. It should

be noted that the question of supplementary depreciation is likely to be of

relatively minor significance for postal services because of their low

fixed asset investment, but would be of importance in the case of the

capital-intensive telecommunications service.

Since no figures are available to show the supplementary

depreciation provisions that would be necessary to put depreciation on a

replacement basis, it is only possible to consider the general question of

the proportion of capital expenditure that should be supplied from internal

sources. As noted earlier, the Commission considers it reasonable to adopt,

as a financial aim, the provision of 50 per cent of capital expenditure

from internal resources; such provision would include any amounts

chargeable in respect of supplementary depreciation.

The financial objectives of the two organisations would therefore

be to ubtain, by way of charges for services, such amounts as are necessary

to:-

181

Cl) meet all costs, including

. wages and salaries, materials and services,

. depreciation, including supplementary depreciation

designed to bring the total annual depreciation charge

into line with depreciation based on replacement costs,

. superannuation payments, notified by the Treasurer to be

necessary to fund accrued liabilities to staff,

. provision for long service leave,

. interest on borrowings, and

(2) provide, together with other funds generated internally such as

depreciation and provisions, amounts equal to 50 per cent of

capital expenditure in each year.

T h e P r o v i s i o n o f C a p i t a l

7.18 As explained previously, capital for the postal and telecom­

munications services has been provided to date by advances from Treasury,

carrying interest at the rate current for long dated Australian Government

securities at about the time each advance is made. The Commission

considers that this method of financing is appropriate for services such as

are provided by the A.P.O. and should continue. The Commission sees little

merit in the A.P.O. or the organisations envisaged for the operation of the

two services, raising finance on the market.

The Commission proposes in Chapter 8 that the new organisations

should be statutory corporations and the Trust Account procedures presently j

operation would no longer be appropriate. Each corporation would have its ov

bank account and would therefore draw from Treasury as required during the

course of the year amounts up to the total of the appropriations approved

in the Budget, the drawings being considered to be long dated Australian

Government loans at interest rates appropriate to the date of each drawing.

1 8 2

The A.P.O. and others have commented in evidence before the

Commission that the annual budgetary procedures for appropriating money

gave rise to problems when large forward capital investment programmes are

in progress. Some hiatus can occur during the period of approximately

three months from the end of a financial year to the time when budgetary

appropriations are approved by Parliament. It would seem reasonable to the

Commission that the two organisations proposed for postal and telecommunic­

ations services respectively should be authorised to negotiate appropriate

overdraft facilities with their banks, to be drawn on if necessary during

this period in order to permit them to proceed in an orderly fashion with

their capital programmes. To ensure that they are used only for temporary

accommodation purposes, the overdraft facilities, if drawn on, should be

substantially repaid prior to the end of each financial year.

T a x a t i o n

7.19 The A.P.O. does not pay income tax and is exempt from local

government rates, payroll tax, sales tax, customs and excise and motor

vehicle registration charges and does not recognise any of these items as

notional costs in its accounts. Normal charges are paid for public

utilities.

The Commission considers that, having regard to the nature of the

services, these exemptions are reasonable and should continue.

C a p i t al E x p e n d i t u r e R e q u i r e m e n t s

7.20 The Commission obtained from the A.P.O. its most recent estimate

of the capital expenditure likely to be incurred during the current

1973-74 year, and its estimates for the ensuing three years. Table 7.6

lists these figures, together with actual expenditure during 1972-73.

Projected capital expenditures for postal services are relatively

modest, rising from $20 million in 1972-73 to $32 million in 1976-77. The

telecommunications capital programme involves large expenditures rising

from $462 million in 1972-73 to $878 million in 1976-77, a rate of increase

of over 17 per cent per annum. The Commission has accepted these figures

183

T A B L E 7.6

C A P I T A L E X P E N D I T U R E R E Q U I R E M E N T S

1972-73 1973-74 1974-75 1975-76 1976-77

Actual Estimated Projected

$million $million $million

Postal Services

Plant 5 4 6 4 8

Motor Vehicles 2 3 3 3 4

Other Plant and Equipment 1 1 1 2 2

Land and Buildings 12 14 13 14 18

— — — — —

TOTAL POSTAL 20 22 23 23 32

Telecommunications

Plant including engineering moveable plant 401 492 571 652 748

Motor Vehicles 7 11 14 15 16

Other plant and equipment 6 10 10 11 18

Land and Buildings 48 47 63 76 96

— — — — —

TOTAL TELECOMMUNICATIONS 462 560 658 754 878

GRAND TOTAL 482 582 681 777 910

Source: Details supplied to the Commission by the A.P.O.

184

as representing best current estimates but notes that they will need

critical scrutiny as they come forward for future budgets.

I m p l i c a t i o n s f o r F u t u r e T a r i f f s

7.21 Postal: If accumulated losses as at 30 June 1974 are written off, the postal services position is projected to be as shown in Table 7.7.

The additional earnings required each year to meet the financial objectives

of the corporation are shown in the bottom line of the table and it is

assumed that tariffs are adjusted to return the required amounts.

T A B L E 7. 7

P R O J E C T E D F I N A N C I A L P O S I T I O N , P O S T A L S E R V I C E S ( B a s e d o n T a b l e 7.3: a c c u m u l a t e d l o s s e s at 30 J u n e 1 9 7 4 w r i t t e n off )

($ M i l l i o n )

1973-74 1974-75 1975-76 1976-77

Expenses

Operating maintenance and general Depreciation Superannuation Long Service Leave

Interest

Earnings at current tariffs

Trading loss

Additional amounts needed to provide 50 per cent of capital expenditure from internal sources

247 282 312 345

6 7 7 8

27 31 34 38

5 6 6 7

18 __7 __8 __9

303 333 367 407

250 268 278 288

53 * 65 89 119

1

Additional earnings required 65 89 120

* The trading loss for the 1973-74 year would be written off.

Source: Calculated by the Commission from data supplied by the A.P.O.

185

The A.P.O. has been, active in seeking ways to improve the

efficiency of its postal operations by mechanisation and by rationalising

its post office network and all such avenues for cost saving should

undoubtedly be pursued vigorously in the future; the need is very great.

The problems are considerable, particularly in respect of industrial

relations which are discussed in Chapters 4 and 5, and progress is unlikely

to be rapid. However, even assuming that work in these directions

continues with some success, it is clear that savings by way of rational­

isation, methods improvement, mechanisation and labour productivity cannot

possibly offset cost increases of the magnitude of those indicated in

Table 7.7 which, it will be recalled, were based on the assumption of wage

and salary rates increasing by 12^5 per cent in the 1974-75 year and 10 per

cent in each of the following two years.

7.22 If cost increases of this order do in fact occur, major tariff

increases will be necessary in order to balance the profit and loss

account. Present tariffs are already inadequate as shown by the

prospective trading loss of $42 million * for 1973-74, a loss equal to

about 17 per cent of earnings in that year. Future tariff increases will

have to be pitched, not only to keep pace with cost increases in the future,

but to overcome the present rate of loss.

It is not possible to calculate simply the tariff increases

necessary to offset these present and prospective future trading losses,

since changes in tariffs affect demand. In the case of postal services,

past experience shows that demand generally drops for a period following a

substantial tariff increase and then resumes its normal upward course; the

estimation of change in earnings following a tariff change becomes a matter

of judgment. The A.P.O. has carried out a certain amount of work on the

elasticity of demand for its services but interpretation of their results

presents difficulties. Nor is it necessary for the Commission to attempt

precise estimating; it is sufficient for the purposes of the present

discussion to indicate the likely order of magnitude of the tariff changes

* Current estimate by A.P.O. In Table 7.7 the loss has been increased by $11 million to $53 million to reflect additional superannuation liability not provided for in the A.P.O. figure.

186

that would be necessary if costs continue to increase at the assumed rate.

Under these conditions, the Commission concludes that postal tariffs will

have to increase over the next few years at the average rate of about 15

per cent per annum if the profit and loss account for postal services is to

be brought into reasonable balance and the large and escalating losses

projected in Table 7.7 avoided. To place this rate of tariff increase in

perspective, if the present ordinary letter rate of seven cents increases

at 15 per cent per annum it would rise to 10 cents in less than three years

and to 12 cents in about four years time.

A rate of increase of postal tariffs of the order of 15 per cent

per annum, a rate which compares with an average of about 5 per cent per

annum for the past 10 years, is a most concerning prospect, but the

Commission believes that if the postal service is to achieve a state of

reasonable balance in its profit and loss account, such a rate of increase

will be inescapable if wages, salaries and other costs continue to escalate

to the assumed extent.

7.23 It was represented by various witnesses before the Commission

that the A.P.O. had become an unduly "profit-oriented" organisation,

concerned with showing an acceptable financial performance, if necessary at

the expense of its "community service" character. It was held by these

witnesses that postal services in particular should be considered from the

point of view of a communications system for the whole community and that

financial considerations should not be allowed to become paramount.

The Commission does not consider these arguments to be valid.

Postal services are considerable users of public moneys; they have

assignable costs. The Commission considers that these costs should be met

by the users of the services in proportion to usage. If the services are

provided at substantially less than cost, the unrecovered costs are

distributed amongst taxpayers who do not coincide as a group with the users

of postal services as pointed out previously. Regard must also be had to

the distortions in usage that inevitably result when goods or services are

provided at less than economic cost.

7.24 Telecommunications: The projected figures for telecommunications

services are given in Table 7.8 below. As with the postal services, the

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additional earnings required each year to meet the financial objectives of

the corporation are shown in the bottom line of the table and it is assumed

that tariffs are adjusted to return the required amounts.

T A B L E 7 . 8

P R O J E C T E D F I N A N C I A L P O S I T I O N , T E L E C O M M U N I C A T I O N S S E R V I C E S

( B a s e d o n T a b l e 7.4)

($ M i l l i o n )

1973-74 1974-75 1975-76 1976-77

Expenses

Operating maintenance and general 416 478 532 593

Depreciation 165 185 209 236

Superannuation 48 55 61 68

Long Service Leave 9 10 12 13

Interest 149 178 213 254

787 906 1027 1164

Earnings at current tariffs 817 899 984 1077

Trading profit (+) or Loss (-) + 30 - 7 - 43 - 87

Additional amounts needed to provide 50 per cent of capital expenditure from internal sources 106 134 156 190

Additional earnings required 76 141 199 277

Source: Calculated by the Commission from data supplied by the A.P.O

7 . 2 5 Considering the implications for future trends in telecommunic­ ations tariffs, it should be noted that telecommunications services are

currently making a profit in contrast to the substantial current loss

situation of postal services. Telecommunications tariffs will need to be

increased over the next few years to take account of rising costs but will

not have to overcome the "back-log" of a current trading loss. On the

indications of the forward projections of Table 7.8, and taking account of

the contributions needed to make up 50 per cent of capital expenditure

requirements from internal resources, it would seem that telecommunications

tariffs will have to increase at the average rate of about 7 per cent per

annum as compared with 3.5 per cent per annum over the past 10 years.

188

T ar iff S e t t i n g

7.26 In the above review of possible future, tariff trends for postal

and telecommunications services, consideration was given only to the future

rate of Increase of total earnings likely to be necessary to meet the

stated financial objectives of each service; no account was taken of

possible variations in the rates of increase of individual tariffs within

each service. It is necessary now to consider this question.

As shown in Chapter 2, individual categories of service show

widely different profit and loss results and it can be said that "cross­

subsidisation" takes place as between different categories. Ideally,

tariffs for different services should be such that each service produces a

comparable financial result measured say in terms of return on capital or

profit margin on sales. This would imply that all services were properly

costed, direct and indirect costs allocated and tariffs set to recover

these costs plus some agreed margin. Such an aim is never capable of

achievement in a multi-product commercial enterprise due to a variety of

external constraints and cannot be expected even with semi-monopoly services

such as are provided by the A.P.O. The elasticity of demand varies from

service to service; direct competitive forces operate in some instances,

for example, with parcels in the postal services; social or community needs

or pressures come to bear; services may be in different stages of

development and so on.

The setting of tariffs for individual categories of service within

the two proposed organisations must therefore be largely a matter for

judgment by their respective managements, subject to the approval of the

Minister. All that can be said is that the aim should be to minimise, as

far as possible, major distortions in financial performance. Tariffs for

an individual service should at least be set to recover its direct costs,

even though revenue may not always be sufficient to match fully allocated

costs. A degree of "cross-subsidisation" will undoubtedly continue into

the future; the aim should be to minimise it, while seeking to achieve the

overall financial objective of the organisation.

Although the Commission has not attempted to reach conclusions on

the pricing of individual services, it suggests that some aspects of

189

telecommunications tariffs should be examined by management

. telephone calls classed as "local" do not have a time limit. Trunk

calls are charged on the basis of time. In some countries charges

for all calls have a time base, reflecting the principle of a

subscriber paying for a service in proportion to usage. It would

seem appropriate to examine the situation in Australia to see

whether it is desirable and practicable for local calls to be

charged for according to duration;

. fees for providing, re-connecting and removing telephone services

may be in need of review to establish a firm basis for pricing

policy;

. in order to encourage optimum use of the existing network

consideration might be given to extending the concessions for

trunk telephone calls made in off-peak times.

7.27 A particular issue which received much attention in evidence

before the Commission was that of concessional or uneconomic services. The

A.P.O. pointed out that the tariffs for a number of its services reflected

decisions of Governments over the years to grant concessions for particular

purposes or to particular classes of users. For example, concessional

postage rates for "registered publications" were based on the recognised

social aim of encouraging dissemination of news, information and literary

matter throughout the community; the disabilities and needs of people in

country areas were reflected in concessional telephone rentals to country

subscribers; charitable organisations received various postal and telecom­

munications concessions, and so on.

The August 1973 Budget removed some of the concessions previously

applying to various postal and telecommunications rates; in the case of

registered publications the Budget changes will go some way towards reducing

the disparities commented on by the A.P.O. in its evidence. The general

problem still remains however.

7.23 The A.P.O. suggested in evidence in June 1973 that, in the case

of the registered publications concessional rates then current, there was

190

a case for A.P.O. losses on these publications, estimated at about $9

million for 1971-72, to be identified in the public accounts and financed

from general Government revenues rather than by other A.P.O. customers.

The question of possible concession rates for telephone services supplied

to regional centres selected for accelerated development was commented on

by the A.P.O. as follows

"A principal concern in these matters is the cost and where the burden will fall - on other telephone subscribers perhaps ultimately through tariffs higher than might otherwise have been or on the general taxpayer. The Department is sensitive to the frequent criticisms about

the level of its charges and naturally is concerned with development which could lead to them being higher. There is a case for the costs, reflected in capital investment, operating costs and revenue foregone, of subsidies granted to community groups through the Telecommunications

Service, to be met by the general taxpayer, rather than other telephone customers. This could be achieved by reimbursement to the Department of these costs from an appropriation under the control of the Department of

Urban and Regional Development or some other appropriate authority."

The Commission is proposing that postal and telecommunications

services be operated by separate statutory corporations and that overall

financial objectives should be set for each body. If these objectives are

to serve a real purpose, tariffs will have to be structured in such a way

that each corporation may reasonably expect to collect sufficient revenue

to satisfy its objectives. It is important therefore to consider the

problems presented by concessional or uneconomic services and the

principles that should apply to tariff setting generally.

It might appear reasonable to suggest that if an uneconomic

service is retained for reasons of public policy, the corporation concerned

should receive a subvention from Government by way of compensation, but

complexities arise when considering the possible operation of such a system.

Problems of costing make it difficult to assess precisely the costs and

profits or losses of individual services; the profit level to which a

particular service should be restored by way of subsidy would be. a matter

of argument; different services in a commercial enterprise can always be

expected to show different financial results as noted above and when one

service is in a loss situation, difficulties may arise in deciding whether

some or all of this loss flows from Government policy or from the

characteristics of the business.

191

For these reasons the Commission does not consider that it would

be wise to introduce a regular subsidy system based on annual calculations

of losses on particular services. It would appear to the Commission that

both organisations should accept a certain amount of the "rough with the

smooth" in the conduct of their businesses; this is the normal situation in

large commercial enterprises and should certainly be accepted in

organisations which have been granted extensive monopoly rights. The one

proviso that should be made is that revenue from an individual service

should at least cover its direct costs; if it does not, tariffs should be

adjusted upward to the appropriate extent.

7 . 2 9 Apart from any such specific adjustments, it would be the responsibility of each corporation to keep under review trends in actual

earnings and expenses in relation to its annual budget and if necessary to

propose from time to time such increases in tariffs for basic or standard

services * as may be necessary for the achievement of its financial

objectives. These proposals would be submitted to the Minister for approval.

If the Minister, for reasons of Government policy, does not approve certain

of the proposed tariff increases, it would be necessary for management to

examine the practicability of adjusting other tariffs to the extent required

to produce the necessary total revenue. Should the estimated effect of the

tariff changes finally approved by the Minister be such that the corporation

will be unable to achieve its financial objectives, the Commission considers

that the Government should seek an appropriation from the Parliament of the

amount necessary to cover the shortfall, for payment to the corporation as

a specific item of revenue.

The amount involved and the reasons for its payment should be

referred to in the annual report of the corporation. The payment in question

would be specifically in respect of revenue estimated to be foregone and

would in no way "guarantee" that the corporation would achieve its financial

objectives. It is likely that in some years a corporation will fail to do

so, due to costs rising at a rate faster than was forecast; in some years

it may exceed its objective. Such "overs and unders" should be regarded as

the normal course of business; a deficiency in any one year should be

* The services which the Commission recommends should come within the definition of "basic or standard services" are referred to in Chapter 10, Corporate Functions and Powers.

192

carried forward and the corporation should endeavour to recover it in the

succeeding year.

It has been the practice in the past for tariff changes for the

services provided by the A.P.O. to be effected only within the framework of

the annual Budget. This has introduced substantial delays in the adjustment

of tariffs and in particular has consistently handicapped the postal

service in times of rising costs. The Commission considers that the

creation of statutory corporations to administer postal and telecommunic­

ations services and the assignment of financial objectives to each

corporation would make this process unnecessary and the Commission

recommends that the corporations be given power to vary tariffs at any

time, subject always to Ministerial approval.

C o n c l u d i n g R e m a r k s

7.30 In this Chapter the postal and telecommunications services have

been considered as separate and unrelated entities. The main purpose has

been to explore some of the future financial implications for each service

of trends now evident and in the course of the Chapter a number of

different aspects have been examined. It appears desirable, by way of

conclusion to summarise some of the more important points

Pos tal S e r v i c e s

(1) The postal service has been in a loss situation since 1964-65,

despite tariff increases. Costs have been escalating, importantly

due to the impact of rising wage and salary rates on a service in

which about 75 per cent of costs is on account of wages and

salaries and the charges directly related thereto: superannuation

and long service leave. Over the current 1973-74 year increases

in wages and salary rates are likely to approach 20 per cent.

(2) Substantial additional costs arising from amendments to the

Superannuation Act 1973, which provided for pensions of Australian

Government employees to be increased by 1.4 times the rate of

increase in the Consumer Price Index, have not yet been brought to

19 3

account in the books of the A.P.O. The Commission estimates that

they will add $11 million to postal costs during 1973-74, equal to

4 per cent of the total revenue expected for the year.

The Commission considers that these added superannuation charges

must properly be included in postal costs.

(3) Postal tariffs have been too low for a number of years and losses

have resulted. These losses, under present arrangements, have

been financed by Treasury advances on which interest is payable.

A substantial proportion (58 per cent) of the present interest

charge payable by postal services is on account of accumulated

losses. The Commission considers that accumulated losses as at

30 June 1974 should be written off and not carried into the books

of the proposed postal corporation.

(4) The Commission considers that reasonable financial objectives for

the postal services organisation should include the requirement

that 50 per cent of its future capital investment requirements

should be provided from funds generated internally. This

proportion is currently being provided by way of depreciation and

provision for long service leave.

(5) The proposed writing off of past losses will assist to some extent,

but will not by any means solve, the problems of the postal

service profit and loss accounts. Projections based on an assumed

12% per cent increase in wages and salary rates during 1974-75 and

10 per cent in each of 1975-76 and 1976-77 indicate that under

conditions of constant tariffs, the postal services will lose about

$65 million in 1974-75, the loss rising to about $120 million in

1976-77.

To overcome the present rate of loss and prospective future cost

increases of the order assumed will require tariff increases

averaging about 15 per cent per annum for the next few years. The

present seven cents ordinary letter rate under these conditions

will increase to 10 cents in less than three years and to 12 cents

within four years.

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(6) If wages and salaries continue to rise at the rates indicated by

recent experience, unpalatable increases in postal tariffs can only

be ameliorated by savings in costs. Rationalisation of the existing

A.P.O. network, mechanisation, methods improvement and labour

productivity all come into issue. Management/staff relations and

union attitudes will be critically important.

T e l e c o m m u n i c a t i o n s S e r v i c e s

(1) Profits have been consistently earned by the telecommunications

service for a number of years. Telecommunications is a capital­

intensive operation with good growth characteristics; technology

and growing demands for an increasing range of services have

assisted to contain costs and tariff increases.

(2) As with postal services, substantial additional costs arising from

the Superannuation Act 1973 have not yet been included in the

A.P.O. accounts. The Commission estimates that they will add about

$20 million to telecommunication costs during 1973-74.

(3) Rising costs of wages, salaries and materials together with added

costs of superannuation pose problems and, based on projections

for the next few years, it would seem likely that the telecom­

munications service will move into a substantial loss situation of

about $87 million by 1976-77 with tariffs at present levels.

(4) As with the postal services, the Commission considers that

reasonable financial objectives for telecommunications should

include the requirement to provide 50 per cent of capital

expenditure needs from funds generated internally. This will

require the telecommunications services to provide significant

additional amounts rising to about $190 million in 1976-77 by way

of supplementary depreciation or retained profits.

(5) Projections indicate that telecommunications tariffs will need to

increase at the rate of about 7 per cent per annum for the next

few years.

1 95

( 6) Forward estimates, prepared by the A. P. O. , of the capital needs of

telecommunications service indicate expenditures rising at the rate

of about 17 per cent per annum between 1972-73 and 1976-77. Actual

expenditure was $462 million in 1972-73 and the forward estimates

indicate an expenditure of $878 million in 1976-77. Since the

future capital programme of the telecommunications service has a

substantial impact on tariffs and on the provisions of public

moneys, the Commission considers that it should be subj ected in due

course to close scrutiny and its j ustification tested.

Price Waterhous e Report

7. 31 The Commission' s consultants, Price Waterhouse and Co. made a

considerable number of observations and proposals concerning financial

management in the A. P. O. ; some of these have been dealt with in this Report.

The Commission commends those which have not been specifically mentioned to

the consideration of the managements of the A. P. O. and of the proposed

corporations. '

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C H A P T E R 8

FORM OF A D M I N I S T R A T I O N - D E P A R T M E N T A L OR C O R P O R A T E

8.1 An examination of the nature and characteristics of the

postal and telecommunications services in Chapter 6 led to the

conclusion that it would be desirable to separate the administration

of the two services, which since Federation have been provided through

the administrative arrangement of a single department of State. It

remains to be considered whether the two services should be administered

in the future through separate departments of State or whether there

would be advantage in establishing corporate organisations with res­

ponsibility for providing these services.

C o r p o r a t e F o r m s

8.2 The corporate organisations could take the form of public

companies with the Australian Government as the sole shareholder. Some

enabling legislation might be required for this purpose, but given

that such legislation is passed by the Parliament, incorporation of

the companies could be arranged in accordance with company law.

Qantas Airways Limited is an example of government ownership

of a public company. The company is incorporated in Queensland with

an authorised share capital of $50 million and an issued capital of

$39.4 million as at 31 March 1972. As the sole shareholder the

Government appoints the directors to the board of the company but the

company must operate in accordance with the requirements of State

legislation which regulate generally the activities of companies.

8.3 The development of Qantas in this particular form appears

to be largely the result of decisions that the Government purchase the

shares of an existing public company. Incorporation of authorities

1 9 7

under company law does not however have any particular application to

the administration of the national postal and telecommunications

services. These services are more than a commercial activity carried

on by government. They are fundamental and vital factors in the social

and economic life of the community and as such the arrangements under

which these services are provided require the application of special

principles regarding their funding, their financial objectives and

tariff policies and the relationships between the Government and the

administering organisations.

8.4 The more common device which enables government to provide

for the administration of functions or activities other than through

a department of State, is the statutory corporation or authority.

While the words "corporation" and "authority" are commonly used as

expressing the same concept, there seems to be the distinction that

a "statutory authority" is a regulatory or functional organisation

while the description "statutory corporation" is better applied to an

authority which is engaged in activities which are business or

commercial in nature.

The essential features of a statutory corporation or authority

are that it obtains its legal form and status by an Act of Parliament,

and its powers, duties and responsibilities are set out in the governing

Act. Special provisions are included where appropriate regarding the

funding of the organisation, its financial objectives, contractual

powers and the powers and responsibilities of the Minister in the

administration of the corporation or authority. If it is engaged in

business or commerce, the liability of the organisation for Federal

and other taxes, rates and charges are specified in the Act.

A d m i n i s t r a t i o n b y a D e p a r t m e n t o f S t a t e

8.5 It would be incorrect to conclude that the provision of

postal and telecommunications services through separate departments

would be an impracticable or unserviceable administrative form to

envisage for the future. In Government administration the department

is a tested and proven administrative arrangement which has well-

198

defined lines of responsibility. The Permanent Head of a department

is responsible to a Minister for the efficient administration of the

department; the Minister is accountable to the Parliament for the way

in which he discharges the responsibilities of his portfolio.

In addition to providing policy advices to the Minister and

ensuring that approved policies are implemented, the Permanent Head has

a responsibility to ensure that the Minister is aware at all times

of problems and issues which arise so that the Minister has the

opportunity to initiate appropriate action as he considers necessary.

There is necessarily therefore a very direct and close working relation­

ship between the Minister and the Permanent Head which ensures that the

department is aware at all times of the Minister's views.

There are other advantages in administering functions and

responsibilities through a department. Government is administered

through a number of departments of State, but each decision of Govern­

ment must reflect or take into account the views of all Ministers with

a "portfolio" interest in the subject matter of that decision. To

assist in bringing together these views in a cohesive way, a free and

full exchange of views takes place between officers of various depart­

ments before policy proposals are put before the Government. This

balancing of views is an important step in the development of policy

initiatives.

The adoption of a single career Public Service enables a

department to recruit staff with experience, expertise and training

from the full resources of the Public Service. Salary scales and

conditions of service are applied evenly to officers of all departments

and problems of co-ordination are avoided by the Public Service Board

exercising an overall responsibility for those matters.

8.6 These advantages of administration through a department of

State are substantial. There are however a number of restraints in

management freedom flowing from this form of administration which must

be taken into account.

199

The doctrine of ministerial responsibility means that many of

the issues on which decisions are taken by management in a non-government

organisation must necessarily be referred through the Permanent Head to

the Minister. A result of one central body with the principal authority

to determine organisational arrangements, salary classifications and

staffing levels is the tendency to produce conformity in these matters

rather than organisational and staffing arrangements devised to meet

specific needs. Other departments must be relied on for the provision of

incidental but essential services and the attainment of objectives and

targets may depend on the priorities allotted by those departments.

It is in the nature of public administration that a considerable

part of the day-to-day effort is concerned in dealings with other

departments. This is not a critical factor in the operations of a

normal functional department. The processes of administration do however

inhibit or delay the making and taking of the decisions essential to the

efficient management of a commercial enterprise.

As a final point, the Australian Public Service is engaged

essentially in the task of public administration. It includes officers

who have attained special skills and experiences required as managers

in that Service. It is not a criticism of the Public Service or its

officers to say that while the standard of public administration in

Australia compares favourably with that of any other country, the

emphasis of that Service on public administration does not encourage

the development of the talents and skills necessary to operate a

successful business undertaking.

S t a t u t o r y C o r p o r a t i o n

8.7 In its submission to the Commission, the Public Service Board

made the following observations about the differing relationships of

departments and corporations to Ministers

"The essential criterion for the establishment of a statutory authority instead of a department is the nature and degree of Ministerial and Parliamentary control to be exercised over the

200

functions involved. In a public service department the Government bears ultimate responsibility for the activities undertaken and the policies pursued and the Minister is answerable for them in Parliament. Subject to the political processes of Cabinet and

the need to adhere to the provisions of the relevant legislation, decisions and policies within the department are under the control and direction of the Minister, although the extent to which he becomes personally involved in particular matters will of course

depend on circumstances. Statutory authorities are established to remove some matters from the direct control and responsibility of Ministers. Various degrees of independence are possible and some Commonwealth Acts include provisions for Ministers to issue

policy directions to statutory authorities in certain circumstances, or to approve certain decisions of the authority, or to appoint a representative to the governing body of an authority. There is, however, generally a clear intention to limit in some degree the

day-to-day responsibilities and powers of Ministers and to vest them in a separate legal entity."

8.8 There is an interesting discussion on the role of the

statutory corporation in Australia in the Report of the Joint Committee

of Public Accounts on the "Australian Aluminium Production Commission"

presented on 2 June 1955. At page 8 of its report the Committee said,

inter alia:-

"There is a wide agreement amongst authorities in this field that the statutory corporation is the most suitable device for ensuring the public management of economic enterprises, where there is need for flexibility in administration, and for

independence from close political control. These attributes, essential for successful business operation, are seldom present in ordinary Government Departments."

These two statements present a reasonable summary of the

basic reasons for establishing a statutory corporation in preference

to providing a community service or utility through a department

of State.

In Chapter 3 the Commission examined the role of the A.P.O.

in the community. It concluded that while the A.P.O. provides an

essential community service, this service should be administered in

accordance with accepted principles of business management.

8.9 As an enterprise which has the basic characteristics of a

commercial operation, the Commission considers that the postal and

201

telecommunications services should be organised and managed in a way

which:-

. relieves the Minister of responsibility for the day-to-day

administration of those services;

. gives management a reasonable freedom to make the necessary

commercial and business decisions;

. places with management the authority and responsibility for

organisational and staffing matters;

. enables persons outside Government employment to contribute

their skills and experiences to the overall direction of the

enterprises.

The complexities of maintaining and developing the national

postal and telecommunications networks are increasing. The emergence of

new technologies and the demands on financial and other resources will

require important judgments to be made affecting the range and quality of

services for decades ahead. Rising costs of labour and materials will

require that management utilise available resources with maximum

efficiency in efforts to contain costs.

8.10 In particular, a solution has to be found to the present

difficulties of amending tariffs if these services are to be managed as

businesses. Recent decisions to increase superannuation entitlements,

and to increase salaries and other conditions of service have increased

significantly the costs of providing postal and telecommunications

services. These increased costs have not been reflected by adjusted

tariffs and their effect on the finances of the A.P.O. is discussed in

Chapter 7.

A business undertaking cannot operate with realistic financial

objectives if the prices of the goods or services it supplies are not

reviewed when increased costs are incurred. The difficulties of obtaining

a review by the Parliament of the tariffs charged by the A.P.O.

202

except in conjunction with the Budget, and the delays inherent in

seeking changes in tariffs through Acts of the Parliament, mean that

the A.P.O. frequently provides services for significant periods at

charges which are considerably below their fully allocated costs. This

has a marked effect in particular on the labour intensive postal services

and destroys much of the purpose of annual budgeting or longer-term

financial planning.

If postal and telecommunications services continue to be

administered through departments of State it is unlikely that any change

in existing arrangements whereby all tariff proposals are in effect

subject to Parliamentary approval, would be politically acceptable.

8 . 1 1 The view was put to the Commission by several persons and organisations that there is a stronger case for establishing a statu­

tory corporation to administer the telecommunications service than is

so for the postal service. In large part these views were based on the

ability of the telecommunications service in the past to operate

profitably while the postal service has incurred trading losses since

1961.

The case for administering these services through statutory

corporations is not based only on the question of profitability of the

services. The essential point is that the postal service requires a

flexibility in management which it is not possible to achieve while

that service is provided by a department of State. In this regard the

Commission sees no reason to differentiate between the needs of the

telecommunications service and those of the postal service. The reasons

for change apply equally to both.

8 . 1 2 There are several additional advantages which would follow from a decision to establish statutory corporations. They have not. been

included in the general discussion on reasons for change from the exist­

ing form of administration, as they might appear to have been given

undue weight by the Commission in reaching its conclusion on this matter.

They are nonetheless important aspects in the operations and administration

of the services in the future.

?03

It is the Commission's view that the structure of the

Australian Public Service into "Divisions", with eligibility for pro­

motion from the Fourth Division to the Third and Second Divisions

being the attainment of prescribed educational qualifications, is not

appropriate in the cases of the postal and telecommunications services.

Many of the officers in the Fourth Division now employed in the A.P.O.,

have technical qualifications but their promotional opportunities are

limited to positions with the Fourth Division because they do not

possess the general educational qualifications now prescribed for

entrance to the Third Division. For the same reason many officers

in the Fourth Division performing a range of clerical or operational

duties have little opportunity for advancement.

To staff the statutory corporations new "career Services"

will be needed, separate from the Australian Public Service. The estab­

lishment of these Services will provide the opportunity for implementing

organisational structures based on different principles of work

classification and avoiding the rigidities of the "divisional" approach"

applying to the Australian Public Service.

8.13 As the corporations will be the employers of the staff,

the corporation managements would be directly involved in, and have

responsibility for, negotiating industrial disputes. This would extend

to arbitration proceedings and replace the existing arrangements where

the Public Service Board has the principal advocacy role in such

proceedings. A source of discontent expressed by some unions about the

inability of the A.P.O. management to negotiate on questions of salary

and conditions of service, would therefore be removed.

The advantages referred to above would not be capable of

realisation if the two organisations remained as departments of State.

As remarked in Chapter 9 Section 9.2 departmental status would

necessitate the retention of the jurisdiction of the Public Service

Board.

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C o n c l u s i o n o f the C o m m i s s i o n

8.14 To achieve the new approach to organisation management and

administration required for the postal and telecommunications services,

the Commission considers that the only course of action which it could

support is the establishment of separate statutory corporations to

provide those services. The issue of co-ordination in pay and

classification and conditions of service of employees of the corporations

with those in other Government employment, and the essential powers and

functions which should be vested in the new authorities, are discussed in

Chapters 9 and 10 respectively.

205

2 0 b

C H A P T E R 9

J U R I S D I C T I O N OF THE PU B L I C S E R V I C E B O A R D

Fun ction s and Pow ers o f the Pu b l i c S e r v i c e Bo ard

9.1 In their evidence before the Commission some of the staff organisations criticised the role of the Public Service Board in issues

concerning such matters as pay and conditions of service, organisation and

classification of offices in the Australian Post Office (A.P.O.) and

proposed that the management of the A.P.O. should be free from control by

the Public Service Board.

The principal statutory responsibilities or powers of the Public

Service Board include

. the determination of salaries and wages of officers, and employees

of the Australian Public Service;

. the determination of salary classifications of approved positions

in the Public Service;

. the examination and approval of organisation structures within

departments;

. the regulating of a variety of conditions of service including the

rate of, and the conditions under which special allowances are

payable to officers;

. the appointment of officers to the Public Service;

. the exercise of certain disciplinary powers in respect of serving

officers;

. ensuring that departments operate efficiently and economically.

207

In addition the Board is the principal adviser to the Prime

Minister on matters concerning the Public Service and this gives it a

position of influence in relation to proposed amendments of the Public

Service Act and Regulations. In industrial disputes within the Public

Service the Board through its Industrial Relations Division takes the

leading role in negotiations with unions. In matters before the Public

Service Arbitrator the Board is the principal advocate for the

Commonwealth.

9.2 While the Public Service Board indicated in a separate

submission to the Commission that relationships between the A.P.O. and the

Public Service Board on some of the above matters could be amended by

delegation of greater authority and responsibility to the A.P.O., the

Public Service Board sees considerable disadvantages in removing the

A.P.O., as a department of State, from its jurisdiction. The Commission

agrees with the view of the Board. The result of separating the A.P.O.

from the jurisdiction of the Public Service Board would be, in effect, to

create two separate career Public Services. Apart from any other

consideration, it is difficult to conceive how this would operate to the

advantage of the A.P.O. and its employees. There would have to be close

co-ordination to ensure parity and equity as between salaries and

conditions of service applying in both services, so that there would be

little real gain in management freedom for the A.P.O. resulting from such

an arrangement.

C o - O r d i n a t i o n o f P a y a n d C o n d i t i o n s o f S e r v i c e in G o v e r n m e n t E m p l o y m e n t

9.3 In view of the recommendation that separate statutory

authorities be established for postal and telecommunications services, it

is necessary however to consider the implications this change would have

in relation to the future role of the Public Service Board.

In its submission to the Commission, the Public Service Board

stated:-

"The Board is strongly of the belief that irrespective of whether the Post Office is to remain within the C.P.S. proper or is to

208

be separated from the Service, the pay (and classification) of Post Office staff and the conditions of employment which are to apply to them should continue to be detemined in accord with the general co­ ordinated arrangements which apply through the Commonwealth employment

area."

It then went on to list 13 "factors" which it considered should be taken

into account in examining the need for some co-ordinating mechanism. To

ensure that the Board's views are given due attention the factors or

issues stated in its submission are reproduced at Appendix 1 to this

chapter.

Before the Commission's views are given on the question of

co-ordination of salaries and other conditions of employment, it is

proper to point out that the Public Service Board is the approving

authority under various statutes for pay rates and conditions of staff

employed by more than 30 statutory boards, authorities and commissions.

Most of the remaining statutory bodies of the Australian Government which

are under no legal requirement to co-ordinate the pay and conditions of

employment of their staff with the Public Service Board, are nevertheless

required by Government policy to refer such matters to either the Public

Service Board or the Department of Labour.

C o - O r d i n a t i o n a n d t h e P o s t a l a n d T e l e c o m m u m c a t T o n s C o r p o r a t i o n s

9.4 Although there are merits in co-ordinating pay and other

conditions of employees of the new statutory corporations with those

applying in the Australian Public Service the Commission doubts whether

a requirement to this end would be workable in practice.

If "co-ordination" is to be effective, one authority should

be specified as having the final right to approve or not approve

proposed changes in pay or other conditions. A requirement merely to

"consult" would beg the question of which authority should have the

decisive voice in the event of disagreement.

If the decisions of the corporation Boards on pay and conditions

of staff were subject to approval of the Public Service Board or some

209

other authority,the present division of responsibilities in indus­

trial matters as between the Public Service Board and the A.P.O. would

be perpetuated in relation to the corporations.

9.5 It is fundamental to the Commission's recommendations for the

formation of two statutory corporations, that the new authorities be

given as much autonomy as possible as well as clear responsibilities.

Authority and responsibility should go together and the corporations

must be given reasonable or adequate powers to deal with all the manage­

ment issues confronting them.

Looking to the future of the organisations it is clear that

industrial relations will be one of their biggest challenges. This is

particularly so for the postal corporation which is likely to remain

always as a labour-intensive organisation despite future developments

in mechanisation. It is considered essential that the corporations

be seen to be the employers and that as employers they enter into

relationships with employees as responsible entities.

Again looking to the future, the career service needs of the

two corporations and those of the Public Service are likely to diverge.

It would seem unwise therefore to attempt to bring unity into matters

where there is no real unity of need and purpose.

Industrial relations involves a whole range of issues. Pay

and conditions is a major one, but included are such matters as the

development of career structures, working conditions, career prospects

and job satisfaction. It will be the responsibility of each corporation

to develop its own management philosophy and its own corporate morale and

this cannot be achieved in reality if the responsibility for industrial

relations is divided between the corporations and an authority which is

external to those organisations.

9.6 The issue whether there should be a legal requirement that the

corporations co-ordinate the pay and conditions offered to employees

with those applying in Government employment generally, is a matter of

judgment as to where the balance of the arguments falls. The Commission's

210

judgment is that the long-term interests would be best served by placing

responsibility clearly on each corporation to determine pay and classific­

ation and service conditions of its employees.

In reaching this conclusion the Commission was influenced also by

the large work force which would be employed by the corporations.

Co-ordination achieved by requiring approval of the Public Service Board or

the Department of Labour to pay and conditions of service poses lesser

management difficulties for statutory authorities with more modest work

forces than the postal and telecommunications corporations. These

corporations will be amongst the largest employers in Australia and in

terms alone of reaction time to proposals for changes and the need to frame

pay scales and other conditions which have a proper regard to the needs,

circumstances and character of the corporations, the problems of compulsory

co-ordination are so formidable as to raise serious doubts whether it is a

principle which can be translated into a practical administrative

arrangement.

The conclusion of the Commission in this matter should not be

taken as implying any criticism of the way in which the Public Service

Board has discharged its responsibilities in relation to the A.P.O. The

growth and development of the Australian Public Service, the high percentage

of claims lodged by staff organisations which have been settled by

agreement and the relatively small losses in manhours through industrial

disputes in the Public Service reflect sound management practices for which

the Public Service Board must be given proper credit.

I n d u s t r i a l R e l a t i o n s S t a f f

9.7 At present the A.P.O. has a substantial industrial relations

staff, but the Public Service Board has been responsible for much of the

detailed work involved in determining pay scales, conditions of service and

other matters. The Public Service Board, through its Industrial Relations

Division, has officers with particular experiences and skills in

arbitration proceedings. When the corporations are established, they will

have to assume direct responsibility for all aspects of industrial

relations and therefore considerable effort will be required prior to

211

inauguration of the corporations to strengthen the existing resources and

provide the basis for Industrial Relations Divisions capable of handling

the whole range of matters that will come before them. It is recommended

therefore that the Public Service Board work with the A.P.O. prior to

inauguration to structure their Industrial Relations Divisions and recruit

suitable officers.

Although the Commission concluded that there should be no formal

or direct link between the Public Service Board or other departments on

pay and other conditions of service of corporation employees, it can be

assumed that the managements of the corporations will, as is normal

practice, consult with other employers on industrial issues where there

is a community of interest. The corporations will be subject to many

of the disciplines which apply to commerce and industry generally.

To meet their financial objectives they would have the responsibility

of relating costs to incomes. Although enjoying exclusive rights to

provide many of the services, the charges for those services will have

to be attractive to consumers if the optimum use of their network

facilities is to be secured. For these reasons alone, the corporations

would have to act responsibly in matters concerning pay and conditions

of service of their employees.

A r b i t r a t i o n

9.8 Under the Public Service Arbitration Act 1920-73, the Arbitrator

appointed under that Act determines all matters submitted to him relating

to conditions of employment of officers and employees of the Australian

Public Service. The Arbitrator may refer a claim, application or matter

submitted to him to a Deputy Arbitrator for hearing and determination.

In certain cases a claim, application or matter may be referred to the

Commonwealth Conciliation and Arbitration Commission comprised for this

purpose of at least two Commissioners and the Arbitrator. An appeal

can be made from a decision of the Arbitrator to the Commonwealth Con­

ciliation and Arbitration Commission, constituted in that case by at

least three Commissioners.

The Public Service Arbitration Act defines "the Public Service"

212

as including the service of any public institution or authority of the

Commonwealth and includes all persons employed in any such service in

any capacity, whether permanently or temporarily, and whether employed

under the Public Service Act or not (but excluding members of the

Defence Force). Unless separate provision is made, the provisions

of the Public Service Arbitration Act would apply therefore to

industrial disputes which concern employees of the two corporations.

As the Act provides a scheme of arbitration to cover all

Australian Government employment, it recognises the special position

and responsibilities of the Public Service Board in matters relating

to pay and conditions of employment. For example the Arbitrator is

required to forward a copy of all claims to the Board as well as to

the Minister of any department of State affected by the claim. The

Board and the Minister may lodge joint or separate objections to the

granting of any claim; and the Board, the Minister or any organisation

affected by any determination of the Arbitrator may submit an application

to vary a determination wholly or in part.

9.9 As the Commission proposes that the Public Service Board should

not have responsibilities in regard to pay and other conditions of

employees of the two corporations, the scheme provided under the Public

Service Arbitration Act is not wholly appropriate in respect of claims

which concern employees of those corporations.

It would seem possible to amend the Public Service Arbitration

Act so that more suitable arrangements would apply to claims, applications

or matters concerning employees of the corporations. An alternative is

the establishment of a new arbitral tribunal to deal with industrial

matters concerning officers of the corporations, or separate tribunals

for each of the corporations.

9.10 Determinations of the Arbitrator over the years have established

a matrix of work values or relativities in the Government employment area.

Some aspects of the matrix could be criticised on the grounds that work

performed by one group or category is often related, for the purpose of

determining equality or differences in pay scales, to work in quite

213

different categories which require the use of other skills and quali­

fications. Establishment of a separate tribunal or two tribunals to

hear and determine claims relating to employment in the corporations,

might assist in overcoming some of the difficulties raised by existing

work relativities in developing pay structures more closely related to

careers in postal and telecommunications services.

A substantial argument for retaining a single arbitral

tribunal is that a degree of co-ordination on pay and conditions could

be achieved through determination of the Arbitrator. This would be so

particularly for common employment categories in the Public Service and

the statutory corporations such as engineers, mechanics, motor transport

workers and clerical staff. On the other hand, a single arbitral

authority for all Government employment could result in determinations

based on the hierarchical structure of the Australian Public Service

being applied to the Services of the corporations.

9.11 On balance the Commission recommends that industrial dis­

putes concerning the Services of the corporations be not dealt with by

the Public Service Arbitrator. The Commission favours the establishment

of separate arbitral authorities to hear and determine claims and

matters arising from the Service of each corporation.

214

A P P E N D I X 1 TO C H A P T E R 9

Fa c t o r s put F o r w a r d by the Pub lic S e r v i c e Bo a r d in S u p p o r t o f a C o - o r d i n a t e d A p p r o a c h

(1) Because of the size, significance and standing of the

Commonwealth as an employer, decisions on pay and conditions in

the Commonwealth area have an important influence on other

public and private employers. Decisions in the Commonwealth

area therefore need to be taken in the full knowledge of the

wider repercussions which may result. In this connection it

should be noted:

(a) The size of the Commonwealth area of employment. As at

June 1972 total Commonwealth employment of some 340,000

(excluding the Defence Forces and the Papua and New

Guinea Administration) represented about 7^% of the

total civilian workforce.

(b) The Commonwealth area of employment is a diverse one.

Most occupational groups in the community are represented

in some area of Commonwealth employment. Some

occupations are exclusive to the Commonwealth, (for

example certain Post Office and Department of Civil

Aviation staff) however, many occupational groups are

spread throughout the Commonwealth area and the

community generally, e.g. Clerks, Engineers, Chemists,

Tradesmen, Motor Drivers, Cleaners.

(c) Commonwealth staff are employed widely throughout the

length and breadth of the country e.g. Post Office staff.

(2) Equity and justice considerations demand that pay and conditions

matters need to be handled on an even-handed basis, with the aim

of establishing fair and reasonable pay rates and conditions for

215

all employees in Commonwealth employment.

(3) The processes of determining pay and conditions of employment

need to be carried out in accordance with a set of generally

understood principles and practices, which are applied

consistently over the whole area of Commonwealth employment.

The problems associated with the granting of concessions in

only a limited area of Commonwealth employment cannot be over­

stressed.

(4) Problems and difficulties would inevitably arise if the large

number of separate Commonwealth employers - approximately 100,

were not required to co-ordinate with other Commonwealth

employers in determining the pay and conditions of employment

to apply to their own staff.

(5) The Unions and arbitral authorities have placed considerable

weight on established relationships between occupations in

different areas of Commonwealth employment and with similar

occupations in the community generally.

(6) The Commonwealth area of employment is an open system so far

as the fixation of pay and terms and conditions of employment

are concerned. The results of negotiations with Unions are

inevitably made public, and details of conditions of employment

and pay rates are widely known. They are therefore subject to

the full light of public scrutiny.

(7) The Commonwealth area of employment is highly unionised.

Coverage extends into all departments and most instrumental­

ities to almost all levels. Approximately 150 organisations

are registered under the Conciliation and Arbitration Act;

about half of these have all or part of their membership in

Commonwealth employment.

(8) Dual or multiple coverage of designations is common in the

Commonwealth area. For example there are 10 Unions which cover

technical grades staff, some of these are confined to one

216

department or one instrumentality and one covers all departments

and most instrumentalities. It is not unusual for identical or

similar claims to be served by several Unions on a number of

separate Commonwealth employers, covering staff common to each

body. The handling of such claims obviously requires a

co-ordinated approach on the part of the various Commonwealth

employers.

(9) Under the Public Service Arbitration Act, all claims are served

on the Board and on the Ministers affected by the claims. With

those claims which eventually proceed to arbitration, while the

various Commonwealth employers have a right to be separately

heard, it has been the long standing practice for the Board to

present the main submissions on behalf of the employing

department and instrumentalities. This has been seen as

desirable in the interests of the Commonwealth speaking with one

voice. Consultation between the various employing bodies

involved is necessary in the preparation of submissions.

(10) The existence of formal arbitration machinery itself encourages

the drawing of comparisons with the pay rates and conditions of

employment of other similar staff employed elsewhere in the

Commonwealth employment area or the community generally. The

'comparative wage justice' criterion is a well recognised and

accepted arbitral principle.

(11) There is no room in the Commonwealth system for a private deal

with a particular staff group because of the public context in

which decisions are taken and the ease of access to formal

arbitration machinery where other Unions can seek similar

treatment for their members. In this situation decisions taken

outside the arbitration arena need to be seen to be fully

justifiable and defensible.

(12) Pay rates in the Commonwealth area of employment are determined

on a group by group basis. The groups of designations which

are separately considered for pay purposes are based on

established or agreed linkages which usually cover staff groups

217

spread throughout the Commonwealth area. For example reviews

of Engineers salaries throughout the Commonwealth area lead

directly to the adjustment of rates of Experimental Officers,

Research Scientists, Surveyors, Architects, Examiners of

Patents, Quantity Surveyors and some other groups.

(13) When industrial action occurs on an issue which affects more

than one Commonwealth employer the handling of the dispute

obviously will necessitate co-ordination between the different

Commonwealth employing bodies involved.

218

C H A P T E R 10

C O R P O R A T E FUN C T I O N S A N D POW ERS

10.1 Each of the corporations will be a substantial enterprise in its

own right. The telecommunications corporation in terms of expenditures and

staffing requirements, will be larger than any other commercial or industrial

’ enterprise in the country. The postal corporation will be small by

comparison but will still initially control an annual expenditure in excess

of $300 million, and employ more than 30,000 staff.

The responsibilities of enterprises of this magnitude can only be

exercised successfully by the use of administrative and managerial skills

of a high order deployed through appropriate organisational structures. It

may be necessary to attract and retain the services of people with

particular qualifications to supplement the resources available from within

the present Australian Post Office (A.P.O.). Special powers and provisions

to enable this to be done are referred to later.

1 0 . 2 Some important provisions which the Commission recommends be included in legislation establishing the corporations are outlined in this

Chapter. Many of these will apply equally to both corporations. Those

which are applicable to only one or other of the corporations are identified

accordingly. Some of the provisions are related to recommendations made in

earlier Chapters of this Report regarding financing and financial

objectives and the determination of pay and conditions of service; these

have been brought together in this present Chapter for presentation

purposes.

C o r p o r a t i o n T i t l e s

10.3 It is recommended that the corporations be titled "Australian

Post Office" and "Australian Telecommunications Corporation". The first

title "Australian Post Office" has historical significance and both titles

define properly the services to be provided by each corporation.

219

A d m i n i s t r a t i o n of the C o r p o r a t i o n s

10.4 To exercise the powers, functions and authorities conferred on

the corporations, and to perform the duties and responsibilities given to

them, it is proposed that Boards of Commissioners be established. A variety

of arrangements could be contemplated for the composition and membership of

the Boards. For instance the Boards might comprise a balance of part-time

members and members who hold executive positions within the corporations;

the Chairmen of the Boards could also be the chief executive officers of

the corporations. The proposals which follow however have been prepared

with the express purpose in mind that Board members, with one exception,

should have a minimum of involvement in the day-to-day administration of

the corporations' affairs, but should be selected to provide the experience

and skills required for the overall direction of the enterprises.

It is recommended that each Board comprise seven persons, one of

whom shall be the Managing Director and Chief Executive Officer of the

corporation, the remainder being non-executive members.

During the early years of the corporations at least, the Chairmen

should be drawn from the non-executive members. The positions of Chairmen

will have added importance during those years in developing a corporate

character reflecting the changed management of the services. It would be

profitable therefore to look to commerce and industry for senior persons

to act as Chairmen on a part-time basis.

The members of the Board, with the exception of the Managing

Director as an "ex officio" member, should be appointed by the Governor-

General and be paid such remuneration and allowances as the Governor-

General determines. The term of appointment should be for a maximum of

five years, with provision for re-appointment.

It is recommended that the Managing Directors of the

corporations be appointed by the respective Boards. There are precedents

for giving this power to the management of statutory corporations (e.g.

T.A.A. and the O.T.C.) and it is consistent with the principle that the

Boards be given as much autonomy as possible in the administration of

corporation affairs.

220

10.ό With Boards of seven members, it is considered that an

appropriate quorum for Board meetings is four members. Provision should be

made for members to vacate their offices for the usual reasons such as

bankruptcy or failure to attend three consecutive Board meetings without

leave, and for the filling of casual vacancies in membership of the Boards.

G e n e r a l F u n c t i o n s , D u t i e s a n d R e s p o n s i b i l i t i e s o f t h e C o r p o r a t i o n s

10.6 Basically the corporations will assume the existing

responsibilities of the A.P.O. for the postal and telecommunications

services of the nation respectively. Appropriate powers and authorities

now provided under the Post and Telegraph Act 1901-73 and which are

ancillary to the exercise of responsibility for the administration of those

services, should be vested in the corporation Boards.

The legislation should provide that the postal corporation has

the exclusive right to carry "letters" with the exceptions now set out in

sub-section (3) of section 98 of the Post and Telegraph Act. The

exclusive rights of the Postmaster-General under section 80 of the Post

and Telegraph Act to erect and maintain facilities employing the use of

telecommunications, should similarly be vested in the telecommunications

corporation.

10.7 The issue whether the Overseas Telecommunications Commission

(Australia) (O.T.C.) should be merged with the new telecommunications

corporation is discussed in Chapter 12. The Commission of Inquiry is not

in agreement on this question. Depending on the decision taken, it may be

necessary to include in the responsibilities of the proposed telecommuni­

cations corporation the responsibility for international telecommunications

services now provided by O.T.C.

10.8 The A.P.O. also acts as an agent for a number of departments and authorities using facilities of the post offices for that purpose. It

acts as an agent of the Commonwealth Savings Bank for both deposits and

withdrawals. Federal Tax Stamps, State Duty Stamps, are sold and

repayments of War Service Home loans can be made at these offices. Forms

and pamphlets are also distributed for various other departments. In

221

charging for these services the A.P.O. aims to recover the full cost plus

a small profit margin where the agency involves a commercial activity such

as banking.

To enable the postal corporation to continue to supply these

agency services, it is proposed that the legislation provide for the Board

of the corporation to enter into agreements to supply services as agent

for other organisations.

10.9 Responsibilities of the Postmaster-General under the Broadcasting

and Television Act 1942-1973. In accordance with the Broadcasting and

Television Act, the A.P.O. provides and operates the transmitters used by

the Australian Broadcasting Commission (A.B.C.) for its radio and

television broadcasting network. The A.P.O. is reimbursed by the A.B.C.

for the cost of providing the technical services; in the case of capital

expenditures, the A.P.O. draws on funds appropriated for this purpose under

a separate Broadcasting and Television vote. Capital expenditures incurred

on behalf of the A.B.C. are therefore excluded from the commercial accounts

of the A.P.O.

There are 75 national broadcasting stations for the medium

frequency service and about 400 professional engineering and technical

staff are employed in providing and extending the service. The A.P.O. is

also responsible for the technical planning, establishment and operation

of radio stations for the Radio Australia network.

For the national television network the A.P.O. operates 39 high

power transmitting stations and 60 low power transmitting and translation

stations. About 400 professional engineering and technical staff are

employed in providing the national television network.

At the request of the Australian Broadcasting Control Board, the

A.P.O. also investigates causes of interference to radio and television

reception and gives advice and assistance in overcoming reception

difficulties.

Radio listeners' and television viewers' licences are issued

through post offices, and the A.P.O. also checks on the use of unlicensed

222

receivers and institutes prosecutions for offences wire re necessary. For

these services the A.P.O. is reimbursed its assessed administrative costs.

10.10 Relationships between the A.P.O. and the A.B.C. were not included

in the Commission's Terms of Reference. Clearly a decision that the A.B.C.

should assume responsibility for providing and maintaining its network

facilities could only be made after a detailed study of the effect of such

a change. Under present arrangements there could, for example, be

significant savings in administrative costs. In the meantime it is

considered that the legislation should provide that the telecommunications

corporation will supply these services to the A.B.C.

As an enterprise being conducted on commercial lines, it would be

unreasonable to require the corporation to provide these services "at cost".

It is recommended therefore that the charges be based on cost plus a

reasonable margin for profit - say 10 per cent of the total cost - and that

the legislation provide for the reimbursement of the corporation on this

basis.

10.Π The issue of broadcast listeners' and television viewers' licences

through post offices is a convenient arrangement for both Government and

the general public. Since alternative arrangements would be costlier and

more difficult to administer, it is recommended that the postal

corporation be required to provide this service but again on the basis of

reimbursement of its costs plus a reasonable margin for profit.

10.12 Responsibilities of the Postmaster-General under the Wireless

Telegraphy Act (1905-1973). The Postmaster-General has the responsibility

under the Wireless and Telegraphy Act to control the use of and plan the

development and conduct of radio services in Australia and its territories.

The powers of the Postmaster-General in this regard are delegated by him to

officers of the A.P.O.

Bands of frequencies are allocated for broadcasting and

television purposes and the allocation of frequencies within those bands

is the responsibility of the Australian Broadcasting Control Board.

223

The Act confers on the Minister the exclusive right to establish,

maintain and operate radio-communication stations but also authorises him

to issue licences for these purposes to other persons. At present there

are more than 165,000 licensed stations of various types operating under

conditions designed to maintain the orderly conduct and development of

radio communication services.

The administration of the Act and Regulations involves the

planned use of the radio frequency spectrum to meet the requirements of

private radio services and those of Government authorities concerned with

civil aviation, overseas telecommunications and defence needs. A master

registry of the frequencies used is maintained by the A.P.O. and there is

close collaboration with various committees and boards of the International

Telecommunications Union about international aspects of the use of the

radio spectrum.

10.13 Some evidence was given to the Commission expressing

dissatisfaction with the A.P.O.'s administration of the Wireless and .

Telegraphy Act and the suggestion was made that the responsibility for the

control of radio licensing be transferred to a separate authority

established for that purpose.

The functions under the Wireless and Telegraphy Act are

"regulatory" in nature. While the A.P.O. carries out these functions on

the basis that its costs are met from Consolidated Revenue and are not

charged to operating expenses in the commercial accounts of the A.P.O.,

the transfer of these responsibilities to the telecommunications

corporation would not be compatible with its function of supplying services

as a commercial operation.

10.14 One alternative would be to give the responsibility for

administration of functions under the Wireless and Telegraphy Act to a new

Board or Commission. A simpler administrative change, which the Commission

recommends, is that responsibilities under that Act continue to be

exercised by the appropriate Minister of State.

224

General P o w e r s

10.15 Both corporations will need the essential powers of a business

enterprise to enter into contracts in their own names for the supply of

works, services, equipment or materials, and to hold real and personal

property in their own right. The powers of the corporations to enter into

contracts for these purposes should be subject to the approval of the

Minister where a contract exceeds $500,000 in amount or value. The

Minister's approval to disposal of assets of the corporations should be

required where the value of the assets involved exceeds $500,000.

A c q u i s i t i o n o f L a n d

10.16 The corporations will from time to time need additional land and

buildings to expand or develop their networks, to provide administrative

centres, and to provide housing for employees serving in remoter areas.

The advantages of centralising the function of acquiring land on

behalf of the Australian Government or its instrumentalities within a

single specialist department, the Department of Services and Property, are

appreciated. This ensures that departments and authorities do not go on

the market and compete for the same land; that public funds are protected

against the payment of excessive prices, and that policy on land

acquisitions is administered with an "even hand".

The virtues of centralising the exercise of land acquisition

powers should not however obscure the case for different arrangements to

apply in the case of an organisation with the essential character of a

normal commercial enterprise, motivated largely by commercial

considerations, not only in its selection of particular sites, but in the

time-scale within which the acquisition should be completed.

10.17 After carefully considering the views put in evidence by the

A.P.O. and the Department of Services and Property, the Commission considers

that a reasonable degree of freedom should be given to the corporations to

acquire, whether by lease or purchase, the land, buildings and easements

necessary for its purposes. It considers that it is essential to give such

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powers in order that the Boards can exercise effective and responsible

management over the enterprises. It would be reasonable to fix an upper

limit of cost beyond which ministerial approval of an acquisition is

required. In this regard it is proposed that an acquisition exceeding

$500,000 be subject to approval by the Minister.

1 0 . 1 8 The Commission's recommendations on land acquisitions do not extend to compulsory acquisition. It is considered that any such

acquisitions should be carried out by the Department of Services and

Property on behalf of the corporations.

C o n s t r u c t i o n a n d M a i n t e n a n c e o f B u i l d i n g s

1 0 . 1 9 Under the Administrative Arrangements Order, the responsibilities of the Department of Housing and Construction, formerly the Department of

Works, include the planning, execution and maintenance of capital works,

and the design, provision and maintenance of furniture, furnishings and

fittings for Government departments. It is also responsible for the

promotion of national standards for building construction.

Some statutory authorities are not obliged to use the services

of the Department as the legislation establishing and controlling those

authorities gives them specific powers in relation to their own capital

expenditures. The Department does, however, service a number of statutory

authorities which are not required to use its services as the design and

construction authority, and it estimates that about 20 per cent of the

total work of the Department is for such statutory organisations.

1 0 . 2 0 Whether the Department of Housing and Construction should continue to provide its present services is an important issue for the

Department and the proposed corporations. In its evidence, the former

Department of Works stated that about 16 per cent of the annual capital

works it undertook were for the A.P.O., and about 1,000 staff of the

former Department (i.e. excluding the day labour force) were engaged on

capital projects for the A.P.O.

To provide a works and maintenance service for the A.P.O., the

Department of Housing and Construction has developed an organisation which

226

provides the capability to service the A.P.O. throughout Australia. For

its services the Department makes a "professional" charge of 6 per cent of

the cost of a capital works project. While this on-cost is under review

and is likely to be increased to 8 per cent of the cost of capital works,

no further charges are made if specialist consultants are required for a

particular project.

10.21 While the Commission is not proposing that there be any

legislative requirement that the corporations utilise the services provided

by the Department of Housing and Construction, it would be a duplication of

resources and costly to the corporations, if they were to attempt to assume

all the service functions now provided to the A.P.O. by the Department of

Housing and Construction. The Commission recommends therefore that

administrative agreements be entered into between the corporations and the

Department for the provision of services to the corporations, and to

establish the working relationships to operate between the parties. Such

an agreement, which should be on the basis of the Department providing a

service to a "client", is considered necessary so that the Department can

plan and organise its own resources on a continuing basis.

10.22 The Minister's approval should be required before the

corporations enter into a contract for the construction of a building where

the cost of the building exceeds $500,000. This would require the

corporations to justify the expenditure of funds and would enable the

Minister to seek such advice as he considers necessary on the proposed

standards of construction in the light of building standards adopted by

the Australian Government.

F i n a n c i n g

10.23 In Chapter 7 discussing the financial prospects of the postal

and telecommunications services, the Commission recommends that the

Treasury continue to advance funds on an annual basis to the corporations

to meet the shortfall between estimated expenditure and estimated revenue.

These advances would be in the nature of loans to the corporations on

which interest would be paid to the Treasury.

227

The legislation should establish the amount of the advances or

borrowings from Treasury to be shown initially in the accounts of the

corporations. This will require the apportionment as between the two

corporations of previous Treasury advances on the basis of those funds

employed in the postal business and those employed in telecommunications.

Provision for the payment to the corporations of further funds

appropriated by the Parliament for that purpose, will be necessary and

there should be a requirement that the corporations pay interest to the

Commonwealth on all Treasury advances. This requirement should be read

subject to the Commission's recommendation that postal losses incurred to

the date of establishment of the postal corporation be written off.

10.24 Bank Accounts. The corporations will require the authority to

open and maintain an account or accounts with such banks as may be approved

for this purpose and all the moneys of the corporations should be required

to be paid into this account or accounts.

10.25 Application of Moneys. The moneys of the corporations should be

applied to the payment of expenses, debts and charges incurred by the

corporations in accordance with their respective Acts, including the

payment of fees and allowances to the Boards of Commissioners and the

payment of interest to the Commonwealth. Moneys which the corporations do

not require for immediate use should be invested on fixed deposit with an

approved bank; in securities of the Commonwealth; or in any other manner

approved by the Treasurer.

B o r r o w i n g

10.26 The Commission considers it desirable that the Boards of the

corporations be authorised to borrow from approved banking institutions or

authorities by way of short-term overdrafts. The intention of this

provision is to give the corporations some flexibility to meet possible

situations where they may need to respond quickly to maintain a service, or

where expenditure on approved programmes should proceed pending the

provision of advances from the Treasury.

228

A l i m i t to s u c k b o rro w in g s s h o u ld be f i x e d by t h e A c t . The

Commission c o n s i d e r s a l i m i t o f $20 m i l l i o n would b e r e a s o n a b l e f o r t h e

te le c o m m u n ic a tio n s c o r p o r a t i o n , w i t h a c o r r e s p o n d in g l i m i t o f $1 m i l l i o n

f o r t h e p o s t a l c o r p o r a t i o n . The Boards s h o u ld have t h e power t o g i v e

s e c u r i t y o v e r c o r p o r a t i o n a s s e t s i n r e s p e c t of s u c h b o r r o w i n g s .

P r o v i s i o n fo r I n s u r a n c e

10.27 The Australian Government carries its own insurance risks. The

Commission considers rt would be impracticable to require the postal and

the telecommunications corporations to insure their assets against loss or

damage, or to establish special funds to replace lost or damaged assets.

Both corporations will be of a size where it would be reasonable to expect

the enterprises to carry their own insurance risk.

L i a b i l i t y f o r T a x

10.28 In accordance w ith th e recommendation i n C hapter 7, th e

c o r p o ra tio n s should be exempt from l i a b i l i t y f o r income t a x , l o c a l

government r a t e s , p a y r o l l t a x , s a l e s t a x , customs and e x c i s e , motor v e h i c l e

r e g i s t r a t i o n ch arges and any o t h e r ta x e s imposed under th e law o f a S t a t e

o r a T e r r i t o r y .

Fin an ci a l O b j e c t i v e s

10.29 In accordance w ith th e Commission's recommendation i n C hapter 7

or. f i n a n c i a l o b j e c t i v e s , th e l e g i s l a t i o n should p ro v id e t h a t th e f i n a n c i a l

aims fo r each c o r p o r a tio n a re e x p ressed i n terms which r e q u i r e them to

o b ta in , by way of charges f o r s e r v i c e s , such amounts as a re n e c e s s a r y t o : -

(1) meet all costs, including

. wages and salaries, materials and services

. depreciation, including supplementary depreciation

designed to bring the total annual depreciation charge

into line with depreciation based on replacement costs,

229

. superannuation payments, notified by the Treasurer to be

necessary to fund accrued liabilities to staff,

. provision for long service leave,

. i n t e r e s t on b o r r o w i n g s , and

(2) pro v id e, t o g e t h e r w i t h o t h e r fu n d s g e n e r a t e d i n t e r n a l l y such as

d e p r e c i a t i o n and p r o v i s i o n s , amounts e q u a l to 50 p e r c e n t o f

c a p i t a l e x p e n d i t u r e i n e a c h y e a r .

T a r i f f s

10.30 In Chapter 7 th e Commission commented on th e d i f f i c u l t i e s under

p r e s e n t arrangements i n h a v in g t a r i f f s f o r s e r v i c e s a d j u s t e d in o r d e r to

r e l a t e revenue to c o s t s . The r e p o r t o f th e c o n s u l t a n t s , P r i c e Waterhouse

and C o ., re fe rs to t h e n eed f o r an a u t h o r i t y r e s p o n s i b l e f o r p ro v id in g

s e r v i c e s to have a r e a s o n a b l e measure of freedom to d e te rm in e th e t a r i f f

s t r u c t u r e . I t i s i m p l i c i t i n th e Commission's c o n cep t o f s e p a r a t e

s t a t u t o r y co rp o ra tio n s f o r th e a d m i n i s t r a t i o n of s e r v i c e s w i t h d eterm ined

f i n a n c i a l o b je c tiv e s , t h a t t h e r e should be g r e a t e r f l e x i b i l i t y than a t

p r e s e n t to a d ju st t a r i f f s .

10.31 While P r i c e W aterhouse and Co. d i s c u s s th e p o s s i b i l i t y o f an

e x t e r n a l committee to make recommendations to th e M i n i s t e r on t a r i f f

changes submitted by th e r e s p o n s i b l e a u t h o r i t y , th e Commission does not

support the e s ta b lis h m e n t o f such a committee. A s e p a r a t e committee would

i n h i b i t or delay changes i n the t a r i f f s t r u c t u r e which might be n e c e s s a r y

to avoid losses on t r a d i n g ; nor i s th e j u s t i f i c a t i o n f o r such a committee

app aren t when the c o r p o r a t i o n s a re r e q u ir e d to meet s t a t e d f i n a n c i a l

o b je c tiv e s .

10.32 In some a r e a s , n o ta b ly th e c a r r i a g e of p a c k e ts and p a r c e l s , th e

A.P.O. services a r e u n d e r s tr o n g p r e s s u r e from p r i v a t e c a r r i e r s who o f f e r

a d e liv e ry service a t s p e c i a l r a t e s to meet custom er r e q u i r e m e n t s . These

c a r r i e r s are in a p o s i t i o n to s e l e c t th e most p r o f i t a b l e r o u t e s f o r t h e i r

o p e ra tio n s and they have been e f f e c t i v e i n g a in in g a l a r g e s h a r e o f t h e

b u s i n e s s o f f e r i n g w h ich w ould o t h e r w i s e be c a r r i e d by t h e A.P.O. I f t h e

230

postal corporation is to offer a service which is competitive in terms of

price and standard of service, it must have the freedom of a commercial

enterprise to gear its tariffs and services accordingly.

There is no corresponding problem with the telecommunications

corporation. The corporation will however need to attract customers for

particular services so that an optimum use is made - with a consequent

higher return on invested capital - of the telecommunications network.

This attraction could be by way of special rates.for high volume users or

- for use of network facilities during particular times when demand is low.

10.33 The Commission accepts that, of necessity, there must be some

surveillance by government of tariffs; the Minister to whom the corporations

report will still have a degree of political responsibility and

accountability for the services provided by the corporations. Tariff changes

are issues of some political sensitivity - although the actual degree of

sensitivity is possibly over-stated - where the Minister could, by reason of

his political office, come to a different view to that of the corporation

Boards. The Commission recommends that the Boards of the corporation have

the authority to determine tariffs, but that in the case of tariffs for

basic or standard services, variations proposed by the Boards be subject to

the approval of the Minister. The Boards should however be required to

prepare their tariff proposals on the basis that revenues from services

would, in the best judgments of the Boards, enable the corporations to

achieve their financial objectives.

In exercising his powers in respect of tariffs, the Minister should

be required to have due and proper regard to the financial objectives of the

corporations. If the total estimated effect of the tariff changes approved

by the Minister is such that the corporations will be unable to achieve their

financial -objectives, the Boards should be required to state the estimated

revenue foregone as a result in the annual reports of the corporations.

10.34 Apart from the standard or basic services, the corporations should be free to enter into arrangements with categories or classes of users to

provide services at special tariffs. The intention is that the freedom of

the corporations in this regard should extend to providing special services

at special rates for the carriage of mails or the transmission of information

231

between p a r t i c u l a r se n d in g and d e s t i n a t i o n p o i n t s i f th e y so w ish e d . The

c o r p o r a t i o n s sho u ld however be r e q u i r e d to e x e r c i s e t h e s e powers i n such a

way t h a t th e s e s e r v i c e s a r e a v a i l a b l e , a s f a r a s p r a c t i c a b l e , in a non­

d i s c r i m i n a t i n g way to a l l p o t e n t i a l u s e r s .

R e i m b u r s e m e n t o f R e v e n u e F o r e g o n e

10.35 In d i s c u s s i n g th e f i n a n c i a l p r o s p e c ts of th e p o s t a l and telecom ­

m u nications s e r v i c e s i n C hapter 7, th e Commission s a id t h a t th e Government

should seek an a p p r o p r i a t i o n from th e P a rlia m e n t f o r payment to th e

c o r p o r a tio n s of th e amount o f any s h o r t f a l l between e s tim a te d revenue and

revenues r e q u ir e d to ach iev e th e f i n a n c i a l o b j e c t i v e s , as a r e s u l t of

Government p o lic y d e c i s i o n s .

The Commission recommends t h e r e f o r e t h a t th e l e g i s l a t i o n should

e s t a b l i s h an e n t i t l e m e n t f o r th e c o r p o r a t i o n s to reim bursem ent by th e

Commonwealth f o r revenue e s tim a te d to be foregone i n th e s e c ir c u m s ta n c e s .

E s t i m a t e s an d C ap it al P r o g r a m m e s o f the C o r p o r a t i o n s

10.36 The Commission c o n s id e r s t h a t t h e r e would be ad v antages in

r e q u i r i n g th e c o r p o r a tio n s to subm it t h e i r annual e s tim a te s o f o p e r a t i o n a l

e x p e n d itu re and revenues t o g e th e r w ith t h e i r proposed c a p i t a l works

programmes f o r th e y e a r c o n c e rn e d , to th e M i n i s t e r . The e s t i m a t e s and the

proposed c a p i t a l works programmes should be accompanied by s ta te m e n ts from

the r e s p e c t i v e Boards which g iv e d e t a i l s of p a r t i c u l a r a c t i o n s proposed by

the Boards to en a b le th e c o r p o r a tio n s to a c h ie v e t h e i r f i n a n c i a l o b j e c t i v e s

in t h a t y e a r .

In addition the Boards should submit to the Minister, at the same

time, statements outlining their proposed capital expenditure programmes

for the three year period. The purposes of this provision are to assist

the Government in arriving at decisions regarding the level of advances

required from the Treasury, and to inform the Minister about forward

planning.

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Audit o f C o r p o r a t i o n A c c o u n t s

10.37 It is usual to provide for the financial statements of statutory

corporations to be subject to audit by the Auditor-General and the

Commission recommends that similar arrangements should apply to the postal

and telecommunications corporations. The corporations may well find it

desirable to appoint professional firms of chartered accountants to assist

them in their consideration of desirable changes in, say, accounts

procedures, financial control systems or the preparation and presentation

of commercial accounts, and the Commission recommends that the

corporations should be empowered to make such appointments.

R e p o r t o f t h e C o r p o r a t i o n s

10.38 Each corporation should furnish to the Minister as soon as

practicable at the end of each financial year, a report of its operations

together with its financial statements. These reports and statements and

the reports of the corporations' auditors and the Auditor-General should be

tabled in each House of the Parliament.

P o w e r t o E m p l o y S t a f f

10.39 Each corporation should be empowered to appoint such officers as it considers necessary, these officers to constitute the "Service of the

Corporation" concerned. The power of appointment should extend to the

employment of temporary or casual staff. In addition the Boards should

be given the power to promote and to discipline officers. Tribunals need to

be established for the hearing and determination of appeals against

promotions, and appeals against disciplinary action.

10.40 In accordance w ith th e recommendation in Chapter 9, th e Boards

of th e c o r p o ra tio n s should have th e power to determ ine pay and o th e r

c o n d itio n s of s e r v i c e , to determ ine th e c l a s s i f i c a t i o n of o f f i c e s , and to

r e - c l a s s i f y o f f i c e s as c o n sid ered a p p r o p r ia te from time to t i m e .

10.41 The magnitude of th e ta s k s fa c in g th e c o r p o r a tio n s s u g g e sts t h a t

i t would be u n r e a l i s t i c to assume t h a t th ey w i l l always be a b le to f i l l to

the b e s t advantage from w ith in e x i s t i n g s t a f f , a l l of the more s e n i o r

233

management positions. It may be desirable therefore from time to time to

appoint to a senior position, a person with experience and skills acquired

in another organisation.

' While the new Services should offer careers in postal and tele­

communications administration with safeguards such as apply to the

Australian Public Service in respect of such matters as dismissals,

retirements and promotions, the powers of the Boards should not be

circumscribed in such a way as to unduly limit their freedom to appoint

people from outside the corporation to senior positions in the services

of the corporations. Although superannuation provisions are being

changed significantly, the number of years during which a person has

contributed to a particular scheme - and the consequent rights accrued-

will probably remain a factor which will influence a person when

considering a change in employers. The Commission considers that the

Boards of both corporations should be empowered to contribute from

corporation resources to increase the superannuation benefits to which

that person would otherwise be entitled, or to ameliorate the contri­

butions by that person to the existing superannuation fund. In

determining the contribution to be made from corporation resources the

Boards should however take into consideration the retirement benefits

accumulated by that person in respect of his previous employment.

R e l a t i o n s h i p o f t h e C o r p o r a t i o n to t h e M i n i s t e r

10.42 Under the Commission's proposals, the Minister would exercise

a range of powers relating to the financing of the corporations, approval

of tariffs, approval of contracts for buildings costing in excess of

$500,000, and approval of certain land acquisition proposals.

Through the submission of capital expenditure proposals for

the succeeding financial year together with the forecasted programme for

the two years subsequent, the Minister will have available to him a

considerable body of information regarding the activities of the

corporations.

234

Ί Ο «43 The Commission considered whether there should be a

statutory responsibility on the Boards to keep the Minister informed

generally about the corporation activities and has concluded that this

would be desirable. While the Minister will have no day-to-day

responsibility for the administration of the services, he will still

be expected to answer questions in the Parliament on the administration

of the services. A regular flow of information to the Minister will

also enable him to inform the corporation as necessary on policies which

the government is pursuing at the national level.

P o w e r to m a k e B y - l a w s .

10.44 The corporations should be authorised to make by-laws regarding

such matters as the conditions under which any service is provided

by them; their liability in respect of loss of or damage to any goods;

and the obstruction of an officer or employee of either corporation

in the discharge of powers and authorities entrusted to the corporations.

Such by-laws should require approval by the Governor-General, and

publication in an appropriate way to draw them to the attention of users

of the services.

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236

C H A P T E R 11

C O R P O R A T E O R A N G I S A T I O N

1 1 . 1 Organisation and administration are key issues in an enterprise as large and dispersed as the Australian Post Office (A.P.O.). The word

"organisation" is commonly used in relation to the structure of an

enterprise while "administration" is concerned with the way in which the

affairs of the enterprise are managed. The organisation and the admini­

stration of a business are inter-related matters; a proper organisational

structure enables an enterprise to be administered efficiently and with

flexibility.

1 1 . 2 The Commission engaged the international firm of Cresap, McCormick and Paget, management consultants, to report on particular aspects

of the organisation and administration of postal and telecommunications

services. The terms of reference of the consultants are given in Chapter 1

of the Commission's Report. The comments and views of the consultants in

regard to the terms of reference concerning separate administrations for

the postal and telecommunications services, and the advantages, if any, in

vesting responsibility for national and international telecommunications in

a single authority, have been dealt with in Chapters 6 and 12 respectively

of this Report. The present organisational arrangements of the A.P.O.

have been referred to in Chapter 2 on "The Australian Post Office Today".

In this present Chapter the organisational arrangements recommended by the

consultants for the administration of the postal service and the

telecommunications service are considered.

O R G A N I S A T I O N OF T H E T E L E C O M M U N I C A T I O N S S E R V I C E

O b s e r v a t i o n s o f C o n s u l t a n t s o n E x i s t i n g O r g a n i s a t i o n o f th e T e l e c o m m u n i c a t i o n s B u s i n e s s

11.3 The consultants made a number of observations about the existing

organisation. One of the principal observations is that the Director-

General, Posts and Telegraphs, serves, in effect, both as the chief

237

executive and the chief operating officer of the telecommunications

business. The consultants consider that the scope and complexity of

directing a functionally organised business this large is beyond the

capabilities of any one person. Other comments or observations by the

consultants are summarised below. The Commission's comments appear later.

11.4 "Strategic Planning Activities for The Telecommunications

Business Are Fragmented, And Report At Too Low A Level In the Organisation".

There is no Central Administration executive at division level or higher whose principal concern is with the overall strategic planning for the total telecommunications business. Responsibility is spread over three Divisions at various levels and it is almost impossible under the

present arrangements to provide co-ordinated leadership at a senior level other than in the office of the Director-General, which is several levels removed from the organisational units performing the work.

11.5 "The Organisation of Central Office Technical Activities Makes

Them Difficult To Co-ordinate". .

Factors contributing to co-ordination problems are:-

(a) The organisational separation of engineering planning from engineering works is inappropriate.

(b) Co-ordination problems are also caused by the lack of congruity among research branches, engineering planning branches, and engineering plant branches. This difficulty is brought out in the development of a new product or system

involving two or more plant branches each of which has a different set of design priorities and established commitments. In the end, the branch which accords the lower priority and encounters delays in a project will determine the implementation date of the project.

(c) Present organisation arrangements contribute to difficulties in co-ordinating new technological developments. The organisational arrangements within the A.P.O. are not conducive to early senior-level appraisal of new technology or to smoothing the way for major projects once commitment has been made. Another consequence of the present arrangements

for managing major technological change is that the A.P.O. can be drawn into new projects more as a result of energetic efforts of branch-level managers, than of conscious strategic choice, and becomes committed before top management has had an opportunity to appraise the project potential clearly.

2 3 8

11.6 "Marketing Activities Are Not Effectively Integrated Into The

Telecommunications Business".

It is acknowledged that the organisation of the Telecommunications Division was restructured in the middle of 1973 with the aim of improving the A.P.O.'s capabilities in telecommunications marketing and sales. As this is only a recent change, it is not fair to make any

judgments on the effects of these changes at this stage. The pressures created by basic subscriber demand have, however, focused the Telecommunications Division's attention on the sales and service problems related to the basic telephone system. Under these conditions

there has been little motivation to emphasise other marketing and sales efforts. Additionally, the technical organisation units, (engineering planning and engineering works branches), do not regard the Telecommunications Division as capable of contributing to certain

technical decisions, even though these decisions clearly have marketing implications. As a consequence, the telecommunications marketing programme has been, and continues to be more heavily influenced by technical hardware capacity than by customer marketing considerations. Two activities provided in the recent reorganisation of the Telecommunications Division need strengthening, i.e. market research

and tariff analysis.

11.7 "Certain Key Positions In The Organisation Lack Adequate Direct

Staff Support".

The absence of specialist staff support to monitor actual and anticipated progress against commitments is particularly noticeable as affecting the positions of Director-General, the First Assistant Director-General (Engineering Works) and the State Director (regarding his telecommunications responsibilities).

11.8 "The Organisational Location Of The Data Processing Activity Has

Certain Drawbacks".

The location of the Automatic Data Processing responsibility within the Management Services Division has tended to make data processing less accessible to users outside the Division, resulting in user dissatisfaction and criticism of the A.D.P. Branch. Its current

organisational location, the general feeling that it is linked to accounting, and the fact that it still seems to be too far removed from the top management level, probably contributes to a large extent to existing difficulties.

11.9 "The Current Geographic Sub-Division Immediately Below Central

Administration Is Generally Satisfactory".

239

The telecommunications business activity in each of the present State organisations is sufficient to justify a viable organisation functioning with maximum delegation from central administration. In Victoria, Queensland, South Australia, Western Australia and Tasmania the scope of present and anticipated telecommunications activities represent a management responsibility for a single manager. On the other hand there is evidence suggesting that telecommunications activities in New South Wales may be too large and complex for effective management by a single executive.

11.10 "The Present Functional Plan Of Organisation For

Telecommunications Within The State Administrations Is Inappropriate".

The Assistant Director, Engineering, and the Assistant Director, Telecommunications, in each State report separately to the Director of Posts and Telegraphs. The Engineering Division and the Telecommunic­ ations Division are each sub-divided internally on a geographic basis, but the technical and commercial functions constituting the

telecommunications business in a State are brought together only at the level of the State Director. Below him there is no one responsible for all telecommunications operations activities in a part of a State. The A.P.O. recognised the weaknesses inherent in these arrangements some

time ago and attempted to overcome them by introducing the "area management" scheme. Had the plan been implemented with only 32 areas, there would not have been any improvement in the co-ordination of activities for many sizable areas.

P r o p o s e d A d m i n i s t r a t i v e L e v e l s

11.11 The consultants recommend organisations at the central management

and State headquarters levels, with other organisational arrangements which

would bring the technical and commercial activities of telecommunications

under the responsibility of managers for geographic areas within the

States. Below the central management, the administrative areas are

identified as "regions" and "districts". The arrangements are designed to

alleviate existing problems. In particular they are intended to provide

for more effective co-ordination of headquarters technical activities, to

augment headquarters marketing and customer services, and to elevate the

standing of the personnel and automatic data processing functions. They

also significantly strengthen the field organisation for telecommunications.

The Commission's comments on the boundaries proposed for regional

administration are given in section 11.25.

11.12 The organisational proposals of the consultants have been put

240

forward on the assumption that certain "fundamental recommendations" they

make in Chapter III of their report, are accepted. These recommendations

include the establishment of the telecommunications business as an entity

separate from postal services - either in a statutory corporation form or

as a department of State and the concept of a top management with a chief

executive officer responsible for long range and external matters, and a

chief operating officer responsible for tactical and day-to-day internal

management matters. They also include the enlargement of- the authority of

the telecommunications business, particularly in matters of organisation,

establishments, and managerial classifications and pay.

11.13 The "fundamental recommendations" of the consultants are, in

general endorsed by the Commission. The case for separation of the

administration of the postal and telecommunications services is discussed

in Chapter 6 and separation is recommended. From its own awareness of the

magnitude and scope of the planning, financing and general administration

tasks involved in the telecommunications operation, the Commission supports

the view of the consultants that it is impracticable to expect one person

to carry properly a total administrative responsibility for these matters

under the existing organisational structures.

The powers and authorities which the Commission recommends be

exercised by the telecommunications corporation with regard to

organisational and staffing matters, including the determination of pay and

conditions of employment of its staff, are set out in Chapter 10. In brief

the Commission proposes that the corporation should have complete freedom

in these matters.

P r o p o s e d O r g a n i s a t i o n a t C e n t r a l M a n a g e m e n t Level

11.14 At the headquarters or central management level the organisational

arrangement in Chart 5 is proposed by the consultants. For convenience this

chart shows the "line" responsibility of the offices of Director-Telecom­

munications whose responsibilities are discussed later in section 11.26.

Separate organisation charts for the immediate staff of the

"Managing Director" and the "Chief General Manager" have been prepared also

2 4 1

RECOMMENDED PLAN OF ORGANISATION S u b m i tt e d b v BASIC STRUCTURE C R E S A P . M cC O R M IC K A N D P A G E T

TELECOMMUNICATIONS

IN D U S T R IA L R E L A T IO N S

D IR E C T O R S

G E N E R A L M A N A G E R

by the consultants. Charts 6 and 7 illustrate the proposed grouping of

functions under the managers reporting to the two senior management

positions.

11.15 For the immediate staff of the Managing Director, the organisation

includes a secretariat, which provides support assistance to the chief

executive, and the units responsible for external relations, finance,

planning and internal audit.

"External relations" would handle matters external to the

corporation in the domestic and not the international sense. This would be

an important function and include the responsibility for maintaining a

close working relationship with the department of State which advises the

Minister responsible for the affairs of the corporation. While this is not

stated by the consultants, this unit would mainly provide a central point

for co-ordinating the external issues concerning the corporation, rather

than acting as a policy unit in its own right.

The placing of the secretariat above the other administrative

units, with the other units on the same line level, does not indicate the

relative status of the units. Two of the more senior managers would be those

in charge of "planning" and "finance".

The main effect of these organisational arrangements is to place

the functional responsibility for corporate planning and financing with the

Managing Director. Relationships with the Minister, the public and other

Government authorities are sensitive issues and are appropriately placed

under the Managing Director, while "internal audit" will provide a direct

reporting service to the Managing Director on the control of corporate

expenditures.

11.15 The titles shown against the various offices in the

organisational charts are the suggestions only of the consultants. The

Commission supports the use of the titles "Managing Director" and "Chief

General Manager" but considers It desirable to avoid the title "Director"

for other management positions. Also a more appropriate management title

should be considered for the position now identified as "Chief Engineer".

243

RECOMMENDED PLAN OF ORGANISATION MANAGING DIRECTOR'S IMMEDIATE STAFF

TELECOMMUNICATIONS

S u b m i tt e d b y C R E S A P . M cC O R M IC K A N D P A G E T

• S e c re ta ria l a n d A d m in is tra tiv e S u p p o r t

• L egal L iaiso n W ith A tto r n e y -G e n e ra l s D e p a rtm e n t

P u b lic R e la tio n s • F in a n c ia l O b je c tiv e s

M in isterial R e la tio n s A n d P o licies

D o m e stic G o v e rn m e n ta l R e la tio n s e B u d g e t A n d T a riff S u b m issio n s • C ash B u d g e tin g

• E c o n o m ic A n d F in a n c ia l

A n aly sis

• N a tio n a l T e le c o m m u n ic a tio n s P la n n in g · F is cal A n d A c c o u n tin g A u d its

• N a tio n a l B u sin es s P la n n in g

• P r o j e c t M a n a g e m e n t E x p e d itin g

CHART 7

RECOMMENDED PLAN OF ORGANISATION CHIEF GENERAL MANAGER'S IMMEDIATE STAFF

TELECOMMUNICATIONS

S u b m i tt e d by C R E S A P , M cC O R M IC K A N D P A G E T

* T ran sm is sio n N e tw o rk R e searc h

* Basic T e le p h o n e (V o ice) R e searc h

* R ecord (D is crete ) T e le c o m m u n ic a tio n s S y s te m R e searc h

• T ra n sm is sio n N e tw o rk P lan n in g

• B asic T e le p h o n e

(V o ic e ) S y s te m P lan n in g

• R e c o rd (D iscrete )

T e le c o m m u n ic a tio n s S y s te m P lan n in g

• P la n n in g S ervices

• T ra n sm is sio n N e tw o rk D e v e lo p m e n t

• B asic T e le p h o n e

(V o ice) S y s te m D e v e lo p m e n t

• R e c o rd A n d D ata S y ste m

D e v e lo p m e n t

• R a d io A u str a lia

(B ro a d c a stin g )

• E n g in eerin g S u p p o r t S erv ices

• B u ild in g s A n d P o w e r

• N e tw o rk P e rf o rm a n c e

A n d O p e ra tio n s

- S erv ice D e v e lo p m e n t

- R e s id e n tia l A n d C o m m e rc ia l T e le p h o n e D e v e lo p m e n t

- B u sin ess S y ste m s D e v e lo p m e n t

245

Π . 17 There are several features in the organisation of the units

reporting to the Chief General Manager which should be noted. Through the

proposed position of "Chief Engineer", the engineering planning and

programming functions, and engineering works functions, which are

performed in separate Divisions of the A.P.O., would be brought under the

position of Chief Engineer. The consultants consider that this arrangement

will provide a focal point below the top management level for arbitrating

differences of opinion between planning engineers and plant branch

engineers. It would have the further advantage of achieving agreement on

the boundaries between the responsibilities of the two categories of

engineer.

To provide management support for the Chief Engineer, the

position of "Co-ordinator - Progress Reporting" is proposed. Similar

positions are recommended in the regional organisations for each of the

Directors - Telecommunications. The functions proposed for the

Co-ordinators at Central Office and Regional levels include:­

- ensuring that important performance targets and project milestones are subjected to regular senior management review.

- accumulating information regularly concerning progress against planned targets and project milestones.

- ensuring that key executives are notified as soon as possible of probable significant variance from plans.

- monitoring corrective actions agreed upon by key executives and their respective subordinates; preparing modifications to plans and reporting these changes to all groups affected.

- controlling agenda for key executives' staff meetings.

11.18 The consultants further recommend that planning and development

sub-units be organised around the three basic parts of the system viz., the

transmission network, the basic telephone (voice) segment and the record

and data segment. The consultants consider that this division of

responsibilities is logical not only on the basis of technical but also of

marketing requirements, and would permit each project to move from research

through planning to development (engineering works) in a simple

progression.

2 4 6

Π . 19 While the consultants consider that co-ordination should be

improved by this re-organisation, they see a further need for "active

project management of such major development efforts in telecommunications

as new cable systems, computerised exchanges, and integrated switching and

transmission". They recommend the establishment of a "project management

expediting" unit under the control of the Director (Planning) who reports

to the Managing Director. This unit would not have budgeting or personnel

control for development projects but would maintain continuous

communication with those involved in such projects, monitor progress and

ensure balanced consideration of technical, financial and marketing

aspects at each important decision point.

11.20 To take responsibility for marketing and customer-related

programmes, a special unit is proposed under a "Director-Customer Services".

This unit represents a markedly upgraded and re-organised version of the

existing Telecommunications Division within the A.P.O. Central Office. Its

purpose is to improve co-ordination between marketing and engineering by

bringing a marketing viewpoint into technical decisions. Product marketing

analysis would be strengthened to provide better sources of market data,

including tariff analysis. The consultants make the point that adequate

staffing in terms of numbers and quality of personnel is fundamental to the

proposed Customer Services unit and that experienced marketing personnel

should be sought from outside the A.P.O.

11.21 Because they are seen as inter-related matters, the personnel and

industrial relations functions are brought together under a "Director -

Personnel and Industrial Relations" who reports direct to the Chief General

Manager. To provide top management attention, the A.D.P. function is

placed on the immediate staff of the Chief General Manager. The accounting

and supply functions would be brought together in another unit reporting to

the Chief General Manager, in place of present arrangements where these

functions are dealt with in different branches of the Central Office and

report to the First Assistant Director-General (Management Services).

Commissions Comments on the Central Management Organisation Proposed

11.22 The consultants concentrated their inquiries on the top and

2 4 7

senior management levels of the organisation and some administrative units

of the Central Office staff may not be shown in the organisation proposals

of the consultants because they are not seen as key elements in how the

total system operates. The proposals submitted involve however a major

re-structuring of the organisational arrangements for the telecommunications

service.

Π . 2 3 Formulating an appropriate organisation for an enterprise involves particular skills and experiences from which responsible judgments

can be made. At various stages of the inquiry the Commission has thought

that some aspects of the existing organisational arrangements must present

major problems of management and co-ordination, particularly in the

research planning, and development of large projects and of projects such

as the Common User Data Network which employ new technology. The

Commission also thought that the customer relations aspects of the

business were not being given the required emphasis in the planning of the

development of the network and of the new services in prospect.

The consultants' report has confirmed the Commission's opinions

and exposed other deficiencies in the top level and senior management

organisation which must be rectified by changes to the present structure

and form of administration. The organisational changes they recommend are

supported although there may be room to amend the basic model organisation

in minor details when considering the implementation of the new

arrangements. In section 11.16 the Commission referred to the need to

reconsider the titles suggested by the consultants for some of the senior

management positions.

Proposed Regional Organisation

11 .24 The consultants recommend a new organisation for the regional administration of telecommunications. These proposals are based on their

findings that, except in the case of New South Wales, the State

geographical boundaries represent reasonable management units; and that

below the level of the State Division, the administration of the service

should be divided into a number of Districts.

2 4 8

11.25 The Commission however sees no reason why regional boundaries

should be based on existing State boundaries. On the contrary it considers

that there are advantages in abandoning the approach of the States being

separate administrative units for this purpose. The telecommunications

network has developed certain characteristics over the years as a result of

the location of customers and the traffic flow that has grown from the use

of telecommunications by commercial and private subscribers. Local

switching facilities and other major facilities which provide a connection

to the national network have been located at strategic points to handle the

traffic patterns which have been established by customer use. The division

of administrative regions based on State boundaries may result in parts of

the network being divided for administrative purposes when they would be

more sensibly placed within a single management area. The Commission

therefore recommends that the boundaries of the regional administrations be

determined on the basis of the business characteristics of the network and

not on State boundaries; but that each region should satisfy the criteria

that on the business transacted, a regional administration is justified,

and that the region presents a reasonable management responsibility for a

senior executive of the corporation.

11.26 For the regional administrations the consultants recommended the

organisation arrangements in Chart 8. This provides for three Assistant

Directors at regional headquarters with the following functions

- The Assistant Director - Engineering, is an existing position which would have the present responsibilities except that "District Engineers" would become professional problem-solvers. Their present responsibility for supervising technical personnel involved in local

installation and maintenance of standardised equipment would pass to the District Telecommunications Administration. The "District Engineers" would continue to report to the engineering unit at regional levels in order to permit purely engineering activities to be organised geographically as best suits their particular needs.

- The Assistant Director - Customer Services, would provide staff support to the Director - Telecommunications, and other key regional executives on the development and implementation of marketing and customer service policies and programmes.

- The Assistant Director - Operations, whose principal responsibility would be to the Director - Telecommunications, for the performance of District Telecommunications operations throughout the region.

249

TELECOMMUNICATIONS

RECOMMENDED PLAN OF ORGANISATION S u b m i tt e d by FOR A TYPICAL STATE C R E S A P . M cC O R M lC K A N D P A G E T

S E R V IC E S

P R O G R E S S

S T A N D A R D S

F IN A N C E A N D A C C O U N T IN G

R E L A T IO N S

E N G IN E E R S

M A N A G E R S

P R O G R A M M IN G

E N G IN E E R IN G

• S ale s A n d S erv ices

• T e c h n ic a l S e rv ices • C o m m e rc ia l O p e ra tio n s • A d m in is tra tio n

Proposed District Administration

Π .27 The consultants recommend that the technical and commercial

activities related to standardised services be brought together under

District Telecommunications Managers in each region. Responsibility and

accountability for profit contribution and customer service in a geographic

area could be delegated to District Managers. These officers would be

responsible for the following functions

- The installation of standardised equipment, systems and exchanges for the district network, and the maintenance of the system. Construction of major projects and the installation of specialised equipment would continue to be the responsibility of the construction unit within the regional organisation. In carrying out

these responsibilities the District Manager would have available the assistance of the regional engineering organisation to solve engineering problems, etc.

- The operation of telecommunications equipment by telephonists and telegraphists.

- Handling of sales orders; the implementation of district sales and advertising programmes; provision of advisory services to customers; handling of complaints, etc.

- Preparation of budgets and provision of various support services.

11.23 From discussions with the A.P.O. to determine the industrial

relations implications of the District Telecommunications Manager concept,

the consultants believe it is clear that Fourth Division technical officers

and Third Division clerical officers, who would report to the District

Manager, must be eligible for promotion to District Manager.

11.29 With regard to the number and location of Districts, they believe

that one logical approach would be to orient the districts around:

(1) the planned manual assistance centres (about 70 by 1980); (2) other

population centres large enough to support a District office; and. (3)

conversion of existing sales districts in each capital city to District

offices. On this basis some 100 Districts might evolve.

251

Commission's Comments on the Regional and D istrict Organisation Proposed

11.30 The principles adopted by the consultants and the organisational

proposals which they evolve as a result are supported by the Commission.

Decentralisation of responsibility in management and administration is a

striking feature of the initiatives taken by authorities overseas

responsible for telecommunications services and/or postal services.

Decentralising administration cannot be accomplished satisfactorily unless

it is accompanied by an appropriate decentralising of authority. Some

controls through reporting systems, etc., must inevitably remain, but the

concept of giving a real financial responsibility for meeting budgetary

proposals determined for the decentralised units is strongly supported by

the Commission.

11.31 The Commission considers that it is impracticable for sound

administrative reasons, to have district managements reporting direct to

the central management. The area serviced by the network, the resources

required to implement major improvements or additions to it, and the

overall planning of the network, compel the interposing of management or

administrative units between the "district" and the central management

levels. The consultants' proposal for strong regional organisations is

therefore considered to be an essential part of the overall organisational

arrangements.

11.32 The Commission also supports the views of the consultants on the

need for opening up the career opportunities for technical and clerical

officers engaged in telecommunications administration. The comments of

the consultants in substance mean that they see the position of District

Telecommunications Manager as a true management position and not a position

where professional engineering qualifications should be regarded as

essential. Having regard to the functions proposed for the office of

District Managers, this is a proper assessment of the position. Staff

should have access to special training opportunities for these higher

administrative offices.

The classification of positions into various "Divisions" is no

doubt a sensible arrangement for a Public Service whose essential role is

2 5 2

in the field of public administration. It has lesser merit in relation to

an enterprise which is commercial in nature and whose staff comprise people

with qualifications in many disciplines.

O R G A N I S A T I O N O F T H E P O S T A L S E R V I C E

Observations of the Consultants on Existing Organisation of the Postal Business

11.33 In discussing the organisation of the postal service, the

consultants state that particular organisational issues of the postal

service are not as critical as the issues raised by administering the

postal and the telecommunications services as one enterprise.

Organisational matters within the postal service which they consider warrant

attention include the excessive burdens placed on senior management; the

organisation and related difficulties surrounding the basic structure of

branches in the Central Administration Postal Services Division; and

insufficient delegation of field authority and responsibility below the

State level. Also, effectiveness is hindered by restricted career

development opportunities consequent on organisation structures, classifi­

cation of positions and promotion practices. Observations of the

consultants on the existing organisation are summarised below.

11.34 "The Position Of First Assistant Director-General Postal Services

Is Overburdened".

Existing organisational arrangements require that the First Assistant Director-General be responsible for planning and conducting an effective postal service in Australia. The over-burdening of this position results in less than sufficient time to devote to planning and

policy matters, organisational considerations and the maintaining of necessary external relationships. As the First Assistant Director- General is the only senior functional officer for the postal service he has many of the combined responsibilities of a chief executive and chief

operating officer of that service but without the authority associated with a chief executive and chief operating officer.

11.35 "Organisational And Other Factors Are Severely Limiting The

Effectiveness Of The Postal Planning Branch".

2 5 3

Organisational arrangements hinder the postal planning function in several ways. There is little if any working relationship between postal planning and postal engineering. Organisationally, planning is a level once removed from the First Assistant Director-General

(F.A.D.G.) although planning is perhaps the function which is most intimately involved in the F.A.D.G.'s responsibilities and should be at his immediate call. Non-organisational factors are also limiting the effectiveness of the Postal Planning Branch. The results of Branch activities appear to fall well short of expectations. Lack of accomplishment is perhaps most notable in the Management Information Section where the entire function appears to be suffering from a lack of specific documented objectives and of plans for attaining them. The Management Information Section additionally lacks suitably skilled and experienced staff for accomplishing its admittedly difficult responsibilities. .

11.36 "Some Confusion And Inefficiency Result From Organisational

Mingling Of Disparate Basic Activities, Principally In The Branches

Reporting Directly to the F.A.D.G. Postal Services."

Fundamentally, operation of the postal system involves simultaneous management of two quite different although closely related groups of activities - one involving public contact and the servicing of customers, and the other involving the processing of mails. These activities differ significantly in their operations, objectives and administrations. There are two Central Administrative branches in which the two activities overlap and this appears to be causing some

difficulty. The overlap involves the Commercial Branch and the Post Offices Branch, both of which are principally focused on activities in, or intimately related to, post offices.

11.37 "Responsibility And Commensurate Authority Are Not Sufficiently

Delegated From The State Level To The Field Post Offices Management

Organisation".

On paper, there is a field management organisation structure. Fundamentally however, it is not a decentralised management structure at all. Instead it is essentially a supervisory extension of authorities exercised at State or higher levels. District Postal Managers who represent the bulk of the decentralised intermediate management really have little if any managerial authority or

responsibility and have historically functioned essentially as "super" inspectors.

There are other problems with the structure. There are not enough intermediate levels and the skills of the Postmasters of larger official post offices are not applied for the benefit of smaller official facilities in the area. Finally the structure provides only a moderate growth opportunity in the District Postal Manager position because the

2 5 4

districts are based on the distribution of comparable work loads for each area.

11.38 "Organisation Structure, Related Pay Levels And Historical

Promotion Practices Combine To Underutilise And Too Narrowly Develop

Resources in Postal Services".

In general, there are several key career progression points at which the salary differential between subordinate and superior positions is insignificant at best. Salary levels are also troublesome in a hierarchical, as distinguished from a career progression, sense. In some cases there are too few steps within certain pay levels. In addition, quite apart from salary consideration, post office field

career paths are narrow.

11.39 "Generally The Present State Orientation Of The First Level Of

The Field Organisation Appears Quite Workable".

The current division of postal services field operations into six State administrations appears to be quite logical. It is not felt that the task of managing postal services within any one of these geographic entities would overtax the top executive, although New South Wales represents a sufficiently large situation to warrant periodic

re-appraisal. From the standpoint of management the existence of six geographic entities appears to represent an entirely manageable arrangement.

11.40 The "fundamental recommendations" of the consultants which the

Commission stated earlier in this Chapter in relation to the telecommunic­

ations service, apply also to their recommendations to re-organise the

postal service. These recommendations included the separate administration

of the two services.

Resulting from their observations on the existing organisation of

the postal services, the consultants recommend organisational structures

designed to relieve the excessive burden on the First Assistant Director-

General - Postal Services; to provide more appropriate arrangements for

postal services planning; to separate more clearly and to strengthen the

customer services and mail processing activities; to strengthen the field

management by facilitating the delegation of management authority and

responsibility; and to provide improved opportunities for employee

development and career progression.

2 5 5

Three administrative levels below central management are proposed

"State" and "regional" organisations and "Supervising Postmaster". The

Commission's comments on the proposed division into "States" and "regions"

are given in sections 11.43 and 11.44, and 11.46 respectively.

Proposed Organisation at Central Management Level

11.41 The organisation the consultants recommend at the Central

Management level is set out in Chart 9. The structure rests upon two key

positions - the Managing Director as the Chief Executive Officer, and the

Chief General Manager as the Chief Operating Officer.

The Managing Director would be responsible for all elements of

the service but orienting his activities heavily towards matters of long

range import. He would also develop relationships with higher authorities

and with outside bodies having significance to the development of postal

services. A plan of organisation for the Managing Director's staff appears

in Chart 10. The Secretariat includes a high level industrial relations

adviser as immediate support for the information needs of the Managing

Director but not responsible for the conduct of industrial relations. The

Finance unit would make recommendations on financial objectives and

financial management and analysis. Strategic services is recommended as a

small group of functions that would principally facilitate and co-ordinate

the efforts of other organisational units and pursue long term issues not

clearly located in other functional areas.

11.42 The organisation proposed for the Chief General Manager's

immediate staff, is in Chart 11. Functions which would report directly are

Operations, Customer Services, Mail Processing, Personnel, Employee and

Industrial Relations, and Management Services.

The consultants propose that the Operations Office serve as an

immediate source of staff support to the Chief General Manager and the

organisation which he directs. It would be responsible for maintaining

consolidated network plans and analyses, and for co-ordinating operating

information and providing management advisory services. The Customer

Services and Mail Processing groups would each constitute the full range of

expertise and functions necessary to plan and support operations in these

2 5 6

257

RECOMMENDED PLAN OF ORGANISATION BASIC STRUCTURE

POSTAL SERVICES

S u b m i tt e d b y C R E S A P . M cC O R M IC K A N D P A G E T

r

D IR E C T O R

M A N A G E M E N T S E R V IC E S

POSTAL SERVICES

R E C O M M E N D E D P L A N O F O R G A N I S A T I O N Submitted bY

M A N A G I N G D I R E C T O R ' S I M M E D I A T E S T A F F CRESAP. McCORMlCK AND PAGET

• In d u s tria l R e la t io n s A d v iser

e In t e r n a t io n a l R e la tio n s

• L egal L ia iso n W ith A tto r n e y G e n e ra l's D e p a rtm e n t

E X T E R N A L R E L A T IO N S

IN T E R N A L

S T R A T E G IC S E R V IC E S

D IR E C T O R

• P u b lic R e la tio n s

• M in isterial R e la tio n s

• D o m e stic G o v e rn m e n ta l R e la tio n s

s F in a n c ia l O b je c tiv e s A n d P o licies

e B u d g e t A n d T a riff S u b m issio n s • C ash B u d g e tin g

• E c o n o m ic A n d F in a n c ia l A n aly sis

a L o n g -R a n g e P la n n in g a n d B u sin es s P lan

• M a n a g e m e n t C o m m u n ic a tio n s S y s te m s

D e v e lo p m e n t e A D P C o -o rd in a tio n

e F iscal A n d A c c o u n tin g A u d its

POSTAL SERVICES

RECOMMENDED PLAN OF ORGANISATION CHIEF GENERAL MANAGER' S IMMEDIATE STAFF

S u b m i tt e d by C R E S A R , M cC O R M IC K A N D P A G E T

1

two basic activities which constitute the postal system. They recommend

that the "Personnel" and the "Employee and Industrial Relations" groups be

established as two separate units principally because of the present state

of industrial relations in the postal services. If and when the industrial

situation permits a more programmed and stable performance of the

industrial relations function, the two functions would be combined as is

proposed for the telecommunications service.

Proposed Regional Organisation

Π .43 The consultants have submitted an organisational plan for

regional offices. Following their earlier comment that the current

division of postal services field operations into six State administrations

appears logical, they identify this plan as being for a State organisation.

The State boundaries provide a basis on which the regionalisation

of postal administration could be introduced but should not, in the

Commission's view, be accepted as imposing rigid, geographical demarcations

for that purpose. If, for example, the mail for an area within one State

is processed principally from a mail exchange located nearby in another

State, it would be sensible to include the mail exchange and the area it

services within the one regional administration.

11.44 The Commission recommends that the identification of adminis­

trative areas for the postal service with State boundaries be abandoned,

and that the administrative centres below central management be called

"regions".

11.45 The organisation proposals of the consultants for regional

administration appear in Chart 12. A phased approach is recommended. In

the first phase a Customer Services unit would be established, reporting to

the Regional Director. This unit would direct, through a number of Postal

Managers, the activities in and related to post offices, and also the

activities of any mail handling offices, mail sorting offices and area

mail centres that now report to District Postal Managers. Customer Services

would also include the activities now performed by Post Office Branches in

the State organisations, including postal planning and engineering now

conducted at State level.

260

2 6 1

POSTAL SERVICES

R E C O M M E N D E D P L A N O F O R G A N I S A T I O N Submitted by

I N I T I A L P H A S E , S T A T E S T R U C T U R E CRESAP, McCORMICK AND PAGET

T ra in ing  A ccoun ting  B udge t  A dm in is tra tion A nd S ecu rity  Pu rchas ing C o -o rd ina tion

 A ccoun ting A ud it

 Inves tiga tion s

Processing Aw ards In te rp re ta tion and

 N e tw o rk A na lysis and P lann ing  Mail P rocessing P rodu c tiv ity A na lysis

F lee t M anagem en t T ran spo r t C on tra c ts Schedu ling

Post O ffices P rodu c tiv ity A na lysis Post O ffice P lann ing Po st O ffice Design

 R ec ru iting and T esting  T ra in ing  O pe ra tion s

(See E xh ib i t V-8)

M A NA GE R

M A IL EXC H A NGE

P A R C E L C E NT R E S

P R OC E S SING

P O ST A L S E R V IC E S

 O p e ra tion s  T ra in ing , Rece iv ing and ^

T esting A s R equ ired £

Also in the first phase, a Mail Processing group would be

established, reporting to the Regional Director. This group would direct

mail exchanges and, during construction and pilot operation periods, the

mail and parcel centres. It would also absorb the Transport Branch

functions at regional level and include the non-post office activities now

performed by postal planning and by engineering at the State level.

The second phase would occur at the completion of an initial

shakedown period for a mail or parcel centre. At that time the centre and

related transport would be transferred from Mail Processing to the

authority of the relevant Postal Manager who would then be responsible for

the entire scope of the postal system in his region.

The organisation structure would evolve gradually in this way

towards a pattern in which Postal Managers for areas which have

responsibilities for more than post offices, report to the regional

Director either direct or through a Deputy Director.

Proposed District Organisation

11 .46 The consultants recommend another level of postal administration

be introduced, and these administrative areas are identified in their

report as "regions". As the Commission recommends that "regional

administrations" replace the State postal administrations, the adminis­

trative areas below regions are titled "districts" in the Commission's

Report.

Re-structuring of the field organisation is recommended in two

phases. Two new management positions are proposed - District Postal

Manager and Supervising Postmaster. Existing positions of Superintendent

and Assistant Superintendent Post Offices, and the position of District

Postal Manager, so far as existing functions are concerned, would be

abolished. The organisation recommended is shown in Chart 13.

The District Postal Manager, who reports to the Customer Services

unit in the region, would be responsible for all post offices and any

processing facilities already fully operational in his area, and the

related intra-district transportation. These Managers would exercise

262

CHART 13

POSTAL SERVICES

R E C O M M E N D E D P L A N O F O R G A N I S A T I O N Submitted by

C U S T O M E R S E R V I C E S F I E L D S T R U C T U R E CRESAP, McCORMICK AND PAGET

(a) O f w h ic h t h e su p erv isin g p o s t m a s t e r is th e d ir e c t h ead

263

authority to approve expenditures and would be responsible for the

operational results achieved against the approved budget for the region.

The positions would carry the authority to appoint officers to positions

two or more echelons below his own position, and to recommend the

appointment of immediate subordinates.

11.47 The position of Supervising Postmaster is to serve as an

intermediate point of management and communications. A Supervising

Postmaster would be responsible for the operations of his own post office

and have management authority over a number of subordinate Postmasters.

The second phase of the organisation would be completed when the

District Postal Manager takes over functional responsibility for mail or

parcel centres in his area, and reports to the Regional Director instead of

to the Customer Services unit.

11.48 The consultants believe that the districts could be made larger

and suggest that the present number of 72 postal districts could, ,

approximately, be halved.

Postal Services Classification and Pay Scales

11.49 The consultants have commented that the organisational changes

would substantially alter the responsibilities and span of control of a

number of employment categories as well as those of individual positions.

To ensure a realistic and equitable compensation, and to facilitate

promotional transfers, they say that complete classification study would

be required for all "analytical, supervisory or management positions -

whether newly created or continued from the present scheme". The

qualifications and pay levels of positions in the field and at State and

Central headquarters level should be arranged to provide, as far as

possible, the opportunity for advancement into and through many facets of

postal services.

Commission's Comments

11.50 The Commission has had the advantage of discussions, at various

stages, with the consultants about their views and findings on the present

2 6 4

organisation of the A.P.O. and their proposals for changes to overcome

the problems they had observed. Their report is accepted, as an expert

critique on organisational problems of the A.P.O. and the Commission

generally endorses their observations and recommendations on postal

services organisation subject to certain comments below.

In particular the consultants have identified the managerial

difficulties of the present arrangement where one officer at the First

Assistant Director-General letel is responsible, in fact, for the

administration of postal services. There is a great disparity in the

strength of the organisational arrangements at senior management level

accorded to the telecommunications services compared to the postal

services, which the Commission considers cannot be justified on proper

management grounds. This is not to suggest that the telecommunications

service is over-managed, but rather that the postal service is, to a

noticeable degree , under-managed.

11.51 The Commission has sympathy for the views expressed by the

Australian Postmasters' Association and various staff organisations with

members employed in the technical and operational areas of the postal

services, that the existing organisational arrangements and classifica­

tions of positions do not offer an adequate career structure for their

members. In view of the findings and recommendations of the consultants

in this regard it is only necessary to say that the proposals for

changes described by the consultants have the Commission's support and

would remove anomalies caused by the existing organisation and

classifications, and provide increased opportunities for officers to

advance to more senior management positions. This advancement will

be dependent to some extent upon the corporation giving adequate

training to staff so that they can qualify for senior positions.

11.52 The Commission's views on the need for decentralisation of administrative responsibility are given in the comments on the proposed

re-organisation of the telecommunications business. The proposals for

management through District Postal Managers provide an appropriate

framework for devolving a real measure of responsibility in postal

administration.

265

11.53 The Commission discussed with the consultants their proposal that

a District Postal Manager have authority to "appoint" officers to positions

two or more classification levels below his own position. The consultants

stated that they were not referring here to appointments in the sense of

acceptance for employment in the corporation, but in relation to promotions

within the Service of the corporation. The consultants do not differ from

the view of the Commission that "appointments to the Service" should be a

responsibility of the Central Management of the corporation.

11.54 The authority to "promote" officers needs further consideration.

It is desirable that as much responsibility as practicable be given to

District Managers in staffing matters. There is the possibility however, of

conflict between a Regional Director and a District Manager on promotional

matters if these are questions largely for the judgment of the District

Managers. The Commission recommends that the question of the authority of

District Managers to promote officers be reviewed later in the light of the

detailed organisational arrangements and classifications of positions

located within districts. .

11.55 The Commission disagrees with the consultant's proposal that the

Secretariat to the Managing Director should include a high level industrial

relations adviser. In the Commission's opinion this would be likely to

confuse and complicate the exercise of management responsibilities when

industrial issues arise.

11.56 The Commission expresses reservations about the proposal that a

Supervising Postmaster have operational responsibility for a large post

office as well as supervisory responsibilities for other post offices in

his area. It is unclear how much time and effort a Supervising Postmaster

would have to give to duties related to other post offices. If he is

required to administer in a real sense a large post office as well as

supervise a number of other post offices, it might result in the

Supervising Postmaster having insufficient time to carry out either

function effectively. This problem could be overcome perhaps by providing

additional support to a Supervising Postmaster in staffing the post office

he administers but the Commission considers that the duties of the office

of Supervising Postmaster should be reviewed later when a better

2 6 6

assessment can be made of the effectiveness of the arrangement.

Π .57 In sections 11.43 and 11.44 the Commission commented that State

boundaries could provide a basis for the introduction of regional

administration without necessarily accepting those boundaries in every

respect for that purpose. The Commission recommends that the

identification of these areas with State boundaries be abandoned and that

these administrative areas be called "regions".

'll.58 In section 11.46 the Commission recommended that the admini­

strative areas below the regional centres be titled "districts".

267

268

CHAPTER 12

THE RELATIONSHIP OF OVERSEAS TELECOMMUNICATIONS

TO NATIONAL TELECOMMUNICATIONS

12.1 The telecommunications responsibilities of the Australian Post

Office (A.P.O.) cover the network within Australia. All telecommunications

services between Australia and the rest of the world are under the

ownership and control of a separate statutory body, the Overseas

Telecommunications Commission (Australia), (O.T.C.). The operations of the

Commission and its relationships with the A.P.O. will be considered later

in this Chapter as is required by the Terms of Reference; it is first

necessary to describe generally the structure and operations of the O.T.C.

Background

12.2 Participating countries at the Commonwealth Telecommunications

Conference in London in 1945 accepted Conference recommendations that those

countries establish a partnership in external communications requiring,

inter alia, the acquisition by each Government of the existing external

telecommunications system (where the facilities were not already

Government-owned) and the vesting in each country of such facilities in a

"National Body". The conference recommended that the "National Body"

should be either a public, corporation or company wholly owned by the

Government concerned; if this were impracticable, the organisation should

be a recognisable separate entity within a departmental structure.

The Australian Government decided to establish a statutory

corporation to take over the external communications then provided by

Amalgamated Wireless (Australasia) Ltd., and the Overseas Telecommuni­

cations Act 1946 created the Overseas Telecommunications Commission

(Australia) as a body corporate for this purpose.

Composition and Powers of the O.T.C.

12.3 The O.T.C. comprises five Commissioners appointed by the

269

Governor-General; the Commission appoints a General Manager who is the

chief executive officer of the Commission. The Commission appoints

officers to the service of the Commission and may create, abolish and

reclassify positions and transfer andpromote officers. There is a

statutory limitation that the Commission shall not, except with the

approval of the Minister, determine the salary of a position exceeding

$9,500 per annum. The Act provides for a Promotions Appeal Board and a

Disciplinary Appeal Board for officers in the service of the Commission.

The staff of the O.T.C. is not subject to the provisions of the

Public Service Act as is the case with the official staff of the A.P.O.

Evidence submitted by the O.T.C. makes it clear however that the O.T.C.

works in close collaboration with the Public Service Board in the

negotiation of salary levels and conditions of employment in order to

avoid anomalies developing as between the respective staffs of the O.T.C.

and the A.P.O., many of whom are engaged in comparable work.

The Overseas Telecommunications Act is administered by the

Postmaster-General but the Commission is given considerable legal

autonomy in carrying out its responsibilities. For example it can enter

into contracts for the executing of works and services authorised by the

Act; it has little overt restriction imposed in staffing and organis­

ational matters; and it has authority to acquire land by agreement or

compulsory process. In practice the Commission has not exercised its land

acquisition powers but has utilised the services of the Department of

Services and Property.

Before making any changes in tariffs it is necessary for the

Commission to negotiate or consult with the Commonwealth Telecommuni­

cations Organisation in respect of tariffs between Commonwealth countries

and with the International Telecommunications Union in respect of

international tariffs generally. The O.T.C. has emphasised, in evidence,

the key role that international negotiation plays in the setting of

tariffs for its international services. Ministerial approval is required

for any tariff changes proposed bythe O.T.C. but the Minister is required

to have regard to the provision in the Act that the "Commission shall

pursue a policy directed towards securing revenue sufficient to meet all

its expenditure properly chargeable to revenue and to permit the payment to

270

the Commonwealth of a reasonable return on the capital of the Commission".

O.T .C . F a c i l i t i e s

12.4 International telecommunications between Australia and the rest

of the world are provided through submarine telephone cables, high

frequency radio and communication satellites.

The two major submarine cables connecting Australia with the rest

'of the world are the Pacific Cable (COMPAC) which extends from Sydney

across the Pacific Ocean via Auckland, Suva and Hawaii to Vancouver; and

the Southeast Asian Cable (SEACOM) from Cairns to Madang, Guam, Hong Kong

and Singapore with an extension to Kuala Lumpur. The A.P.O. provides the

overland connection between the Cairns terminal of SEACOM and Sydney.

High frequency radio links are maintained through four

international radio stations which provide some services to Papua New

Guinea, Nauru and other countries of the Southwest Pacific area. These

radio facilities provide, as well, stand-by circuits in the event of

interruption to the cable or satellite systems. Transmitting and

receiving stations are operated at Boonside and Bringelly near Sydney and

at Gnangara and Bassendean near Perth.

Satellite facilities are supplied under contract by the

International Telecommunications Satellite Organisation (INTELSAT) in which

O.T.C. currently holds a 2.78 per cent share. There are four satellite

earth stations, two of which are at Carnarvon, Western Australia and the

others at Ceduna, South Australia and Moree, New South Wales. Two of the

stations operate with a satellite located over the Pacific Ocean and one

with a satellite located over the Indian Ocean. The fourth station

provides for remote control and surveillance of the Pacific and Indian

Ocean satellites. The A.P.O. provides the landline connections to the

four earth stations.

O.T.C.'s overseas telecommunications terminal which is located at

Paddington in Sydney, is the interface between the international network

and the national telecommunications network of the A.P.O. A second

overseas telecommunications terminal is currently under construction in

271

Broadway, Sydney to augment the Paddington terminal.

O.T.C. operates the Coastal Radio Service, comprising 18 radio

stations, for commercial telecommunications with ships at sea in

Australian waters and for the purposes of the Safety of Life at Sea

Service. A high frequency radio service permits telecommunications

contact with ships in any part of the world.

The O.T.C. provides the Safety of Life at Sea Service on behalf

of the Department of Transport, from whom it receives an annual sum,

currently $500,000 in compensation for the cost of the service.

With the above facilities, O.T.C. provides:­

. the overseas links for the international telephone service;

. an international telex service, about 90 per cent of the calls

being automatic in operation; .

. an international telegram service;

. leased international circuits to provide customers with a

permanent and direct connection between offices in different

countries and

. reception and transmission of international television programmes

via satellites for T.V. networks.

Staffing

12.5 Staff employed by the O.T.C. amounted to 2,097 at 31 March 1973.

About 75 per cent of the staff is located in N.S.W. where the O.T.C. has

its Head Office and international gateway exchange. An approximate

breakdown of staff employed shows

Executive., administrative and clerical - 458

Engineers - 112

Technical grades - 487

272

Traffic and operating

Trainees

Miscellaneous

562

- 374

- 104

2,097

Operational Arrangements

12.6 The respective roles of the two organisations, the A.P.O. and the

O.T.C. can be best understood by considering the modes of operations of the

major international services:-

Telephone. A customer in Australia wishing to place an overseas

telephone call, dials the international operator - in capital cities 016.

This gives connection to the international exchange, manned and operated

by the A.P.O. After receiving the necessary details, the international

operator dials the overseas number, prefixed by a routing code which

switches the call via the O.T.C. gateway exchange in Paddington, Sydney, to

the appropriate international circuit. When the call is directed to a

country with direct dialling facilities, it passes through the

international gateway exchange in that country and then directly through

the internal network to the number in question. When direct dialling

facilities are not available, the call goes to an international operator

in the country and is then routed through the system by that operator.

The O.T.C. gateway exchange in Sydney comprises switching

equipment of the crossbar type, plus interface equipment which must be

interposed to make compatible the differing technical characteristics of

the national and international circuits. No telephone operators are

involved at the gateway exchange; it is manned by O.T.C. technical staff

who attend to the maintenance of the equipment and the testing of the

international circuits.

In the reverse direction, an overseas caller obtains access to a

subscriber in Australia via the O.T.C. gateway exchange, the call then

being switched automatically in the case of direct dialling areas or

manually at the A.P.O. exchange, as the case may be.

273

The billing of all customers is attended to by the A.P.O. The

proceeds are credited to O.T.C., the A.P.O. receiving payment for its

services by way of a terminal fee per paid minute for outgoing and

incoming calls. This fee is 31.25 cents per paid minute, with the .

following exceptions

. calls ship-to-shore, station-to-station

and to Papua New Guinea - 25 cents per paid

minute

. calls in transit through Australia

requiring manual switching - 30 cents per paid

minute

Where rented or leased circuits within the Australian network

are involved in the carriage of telephone traffic, e.g. between the Cairns

SEACOM terminal and the O.T.C. international gateway exchange in Sydney,

negotiated rental or lease charges are payable in addition to the A.P.O.

generally on the basis of assessed costs plus a margin varying from 15 per

cent to 22 per cent.

Telegrams. Senders of international telegrams may lodge them

directly with an O.T.C. Receiving Office in Sydney, Melbourne or Brisbane.

The messages are forwarded to the O.T.C. Operations Rooms in each city

and despatched by appropriate equipment to their destination. A routing

code switches messages at the gateway exchange to the appropriate

international circuits.

Messages may also be lodged at any post office in Australia.

Those lodged at General Post Offices in Sydney, Melbourne and Brisbane

are transferred physically to the O.T.C. Operations Rooms in those cities

for direct transmission via teleprinter. Messages lodged at the General

Post Offices in Adelaide and Perth and at Canberra Post Office are

prepared in the appropriate international format and transmitted on

direct circuits to O.T.C. Sydney where they are switched direct to the

international stream without further manual intervention. Messages

lodged at Hobart General Post Office and all other post offices throughout

Australia are sent directly to the O.T.C. Sydney Operations Room over the

274

A.P.O. TRESS system. These messages are converted to international format

by O.T.C. operators and switched into the international stream. Incoming

international telegrams follow the same paths in reverse. Approximately

half the outgoing telegrams are lodged with the A.P.O. and the remainder

direct with the O.T.C.

The income received by the A.P.O. in respect of telegrams

handled through post offices is credited to O.T.C., the A.P.O. receiving

payment calculated on the basis of its assessed costs plus 10 per cent.

O.T.C. charges customers directly for messages lodged at its receiving

offices.

Telex. Telex subscribers in Australia wishing to send messages to

subscribers in other countries where automatic working is available use the

appropriate routing codes which take their calls through the gateway

exchange at Sydney direct to the subscribers in the other countries

without the intervention of operators. Telex calls to countries where

direct automatic operation is not available are placed through an

international telex operator, located in the Sydney gateway exchange.

All billing for international telex calls is carried out by

O.T.C. The A.P.O. receives payment based on its assessed costs plus 10

per cent. Rental charges for telex equipment and charges for telex calls

within Australia are billed by the A.P.O.

Leased Circuits. Customers having leased circuits to overseas

countries are given connections via A.P.O. landlines, through the gateway

exchange, to the international circuits necessary to give them permanent

connection to the recipient at the other end.

The A.P.O. and the O.T.C. each receive leased line rental

payments appropriate to their circuits involved. Customers are billed

separately by both the O.T.C. and the A.P.O. for their respective charges.

Financial Structure and Profitability of O.T.C.

12.7 The O.T.C. was financed from its inception by Treasury advances

275

plus self-generated funds. Interest was payable on the advances up to

31 March 1970. Treasury advances outstanding as at 31 March 1968 amounted

to $22,544 million and general reserves and unappropriated profits had

been built up by that date to $29,490 million. Although provision was

made in Section 48 of the Overseas Telecommunications Act 1946-1958 for

net profits derived from O.T.C. operations "to be applied in such manner

as the Minister, after considering any recommendations of the Commission

and with the concurrence of the Treasurer, directs", profits were in fact

retained by the O.T.C. from the start of operations to 31 March 1968.

The Overseas Telecommunications Act was amended by Act No. 9 of

1971, the amendments relating to financial matters being with effect from

1 April 1970. For the two financial years prior to the coming into effect

of the amending Act, certain payments were made by the Commission to the

Commonwealth Government:-

. A part-repayment of Treasury advances of $5 million was made

during the year ended 31 March 1969, making Treasury advances .

then outstanding, $17,544 million.

. During the year ended 31 March 1970 a payment of $4.9 million

was made in lieu of taxation, to which the O.T.C. was not then

liable. In addition, a payment of $1.57 million was made in

lieu of dividend, this amount, together with interest paid

during the preceding year giving a return to the Government

of 7% per cent on a capital of $35 million.

Under the amended Act, outstanding Treasury advances as at

1 April 1970 of $17,544 million were capitalised and an amount of $17,456

million was transferred from General Reserve to Capital, making the

capital of the Commission as at 31 March 1971, $35 million. The

Commission became liable for income tax; interest was no longer payable

on the capital of the Commission, but it was provided that the Commission

should pay to the Commonwealth, out of the profits of the Commission, such

amounts by way of dividend as the Minister, with the concurrence of the

Treasurer, determined.

276

Since the capital of O.T.C. was restructured in accordance with

the requirements of Act No. 9 of 1971, the Commonwealth Government has

received a dividend of 7^ per cent on the $35 million capital of the

O.T.C., the dividend rising to 8h per cent for the most recent year ended

31 March 1973.

The Balance Sheets of the O.T.C. as at 31 March from 1969 to

1973 inclusive are shown in Table 12.1.

Table 12.2 summarises the consolidated profit and loss accounts

for the five financial years 1969 to 1973 while Table 12.3 gives the

sources and applications of funds for the same five financial years.

The Overseas Telecommunications Commission has developed a

substantial and profitable business which has required only a modest

initiating investment of Government funds. As at 31 March 1973, funds

contributed by Government amounted to a net $17,544 million and accounted

for 25 per cent of the Government equity at that date of $70,248 million,

the other 75 per cent having come from retained profits.

. To assess the trend in profitability over recent years, the

published profit figures have to be adjusted to bring them to a comparable

basis. Adding back the interest payable to the Treasury over the two

years 1969 and 1970, the profit results before payment of interest or tax

are as shown in Table 12.4 for the five financial years 1969 to 1973

inclusive. Government funds at the end of each year are recorded in the

first column of the Table.

Over the years covered by Table 12.4 the O.T.C. has been able to

lift its profit rate before tax slightly from about 20.5 per cent to 22.4

per cent. The 1973 year's result, which is subject to tax, shows:-

Profit pre-tax $15,758 million

Tax Payable 7.500

Profit after tax $ 8.258 million

The profit after tax is equivalent to a return of 11.76 per cent

on funds employed.

277

278

1972 $'000

35,000

29,954 64,954

5,197

4,477

2,625 7,467 14,569

84,720

1973 $'000

35,000

35,248

4,854

2,975 7,550

70,248

5,452

15,379

91,079

77,599

25,777

4,325 1,954

51,822

6,279

84,930

30,872

4,740 1,264

14,973 294

11,147 205 26,619

84,720

54,057

6,004

18.584(a) 325 11,899 210

(a) The published Balance Sheet as at 31st March 1973 includes Commonwealth Inscribed Stock, interest bearing deposits and money at call to a total value of $18,016 m. under the heading of Investments. For the purposes of this Table they have been included, as negotiable securities, under Current Assets. Note: Minor discrepancies in totals due to round of figures.

Source: Annual Reports of the O.T.C.

TABLE 12.2

O.T.C. C O N S O L I D A T E D PR O F I T A N D LOSS A C C O U N T S

Ye ars en d e d 31s t Mar ch

Revenue

Traffic Other

Expenditure

Operating Administrative Other Interest

Depreciation

Operating Profit

Less Tax

Net Profit

Capital Profit

1969 $'000

26,554 2,198 28,752

10,615 1,391 2,525 981 3,397 18,909

9,842

9,842

2,079

11,921

1970 $'000

31,327 2,661 33,988

13,227 1,633 3,858 812 3,853 23,383

10,605

10.605

____ 1

10.606

1971 $'000

36,970 3,189 40,159

17,062 1,917 3,507

4,320 26,806

13,353

6,927

6,426

___118

6,544

1972 $'000

40,350 3,485 43,835

19,638 2,541 2,771

4,482 29,431

14,404

7,133

7,271

____ 6

7,277

1973 $'000

42,900 4,374 47,274

20,861 2,954 2,738

4,963 31,516

15,758

7,500

8,258

____11

8,269

Note: Minor discrepancies in totals due to rounding of figures.

Source: Annual Reports of the O.T.C.

lAtSLt IZ.3

O . T . C . S O U R C E A N D A P P L I C A T I O N O F F U N D S

Y e a r s e n d e d 3 1 s t M a r c h

FUNDS WERE PROVIDED FROM:

Operating Profits (before Tax) Depreciation Other Provisions Disposals of Assets

Encashment of Superannuation Investments Decrease in Working Capital (2)

1969-70 $'000

10,893(1) 3,475 176 2,918

20

17,482

1970-71 $'000

11,483(1) 3,922 237 436

2,283

18,361

1971-72 $'000

13,353 4,347 319 622

18,641

1972-73 $'000

14,404 4,583 705 318

20,010

1973-74 $'000

15,758 5,095 255 249

21,358

FUNDS WERE APPLIED FOR:

Purchase of Assets Net Investment in Satellite Space Segment Superannuation Investments Taxation (3)

Dividend (4) Interest on Treasury Advances Repayment of Capital Net Increase in Working Capital:

Investment Purchases Other (2)

LESS Effect of U.S. $ Devaluation on Investment in Space Segment

5,'239 571

1,051 5,000

3,366 2,255

17,482

17,482

9,381 697

4,901 1,574 878

930

18,361

18,361

5,286 1,707

5,167 1,747 659

915

3,160

18,641

18,641

5,867 506 150 6,593 1,966

5,182 _____6

20,270

260

20,010

7,567 1,164

7,418 2,625

3,333

22,107

749

21,358

(1) Operating profits are gross, before the charging of interest on Treasury Advances, and thus differ from net profit figures published for these years. (2) Consists of variations in Cash, Debtors, Stores and Prepayment balances less Creditors. (3) Payments in lieu of taxation made in 1969-70 and 1970-71 in respect of 1968-69 and 1969-70 profits. (4) In each case the payment shown, plus the interest paid in the previous year, totals $2,625 million, being a

dividend for that year of 7^5 per cent on Capital of $35 million. For 1968-69 and 1969— 70 the payments were in lieu of dividend, as no statutory obligation existed until 1970-71. Q r - x n > - r .ω · Δ τ ν η η a 1 P o n n r t - e n f t - h ο Ο T C sa-nH rl<=>t-31* "1 fi f i v m n l i e d t o t h e C o m m i s s i o n b y t h e Q . T . C .

TABLE 12.4

P R O F I T A B I L I T Y OF O.T.C.

Years Ended Government Funds 31 March Employed at Year End Profits before Profits Interest or Taxation Funds

as Per cent Employed

$million $million

1969 52.480 10.824 20.6

. 1970 56.172 11.417 20.3

1971 60.302 13.353 22.1

1972 64.954 14.404 22.2

1973 70.248 15.758 22.4

Source: Annual Reports of the O.T.C.

12.8 It is of interest to compare the profitability of the O.T.C. with

that of its counterpart in Canada, the Canadian Overseas Telecommunications

Corporation; the two bodies have closely comparable roles. The C.O.T.C.

which is wholly Government-owned, operates Canada's international

telecommunications services with the exception of those linking Canada with

the United States. The latter services are provided by the inter­

connecting internal networks of the two countries, all of which are under

non-Government ownership. The C.O.T.C. connects with users of the

international service through the internal telecommunications network of

Canada as does O.T.C. through the A.P.O. network.

Rir the most recent year ended 31 March 1973, funds employed and

profits before interest or tax were:-

O.T.C. C.O.T.C.

$million $Can. million

Government funds at end of year 70.248

Profit before interest or tax 15.76

Profit as per cent Government funds 22.4

94.358

20.14

21.3

The profitability of the two organisations was thus closely

similar for the 1973 financial year.

281

12.9 The financial performance of the O.T.C. has differed markedly

from that of the internal telecommunications system operated by the A.P.O.

For the most recent year (ended 30 June 1973 in the case of telecommuni­

cations and 31 March 1973 for the O.T.C.) the comparative investments and

profitabilities are as shown in Table 12.5, interest being added back in

the case of telecommunications to place both earning rates on a comparable

basis.

T A B L E 12 . 5

C O M P A R I S O N O F A . P . O . T E L E C O M M U N I C A T I O N S W I T H O . T . C .

(A. P .O . T e l e c o m m u n i c a t i o n s , y e a r e n d e d 3 0 . 6 . 7 3 , O . T . C . y e a r e n d e d 3 1 . 3 . 7 3 )

A.P.O. Telecommunications O.T.C. Combined $million $million $million

Government funds at year end:

Provided by Treasury 2783.60 17.54 2801.14

From accumulated profits 286.30 52.70 339.00

3069.90 70.24 3140.14

Earnings 710.56 47.27 757.83

Expenses (excluding interest) 517.47 31.52 548.99

Profit before interest 193.09 15.76 208.85

Per Cent Per Cent Per Cent

Profit before interest as per cent Government funds 6.3 22.4 6.7

Source: O.T.C. Annual Report 1973 A.P.O. figures supplied to the Commission by the A.P.O.

The earning rate for telecommunications of 6.3 per cent only

covers by a small margin the interest rate chargeable on funds advanced by

Treasury; the O.T.C. result provides a very large cover.

The A.P.O., in its submission, drew attention to this great

disparity in profitability. It noted that, taking the telecommunications

as a whole, the O.T.C. clearly had the profitable segment of the business,

282

international services, while the A.P.O. had the relatively unrewarding

task of providing the internal telecommunications network throughout

Australia through which O.T.C. obtained access to the senders or receivers

of international communications.

12.10 Profitability of Individual Services. No estimates are available

of the profitability of individual services such as telephone, telex or

telegram; the calculation of service profitabilities would present major

costing problems as is the case with the internal telecommunications

■services referred to in Chapter 2.

The O.T.C. publishes separate profit and loss accounts only for

its combined international services and for the Coastal Radio Service,

(C.R.S.), the results for the most recent year ended 31 March 1973 being:~

Profit or Loss Before Tax $million

International Services (profit) 17.086

Coastal Radio Service (loss) 1.328

(profit) 15.758

The loss on the Coastal Radio Service has been increasing over

recent years as the following figures show:-

Years Ended 31 March

1968

1969

1970

1971

1972

1973

G r o w t h o f I n t e r n a t i o n a l B u s i n e s s

C.R.S. Profit/Loss before Interest or Taxation $million

(profit) 0.053

(profit) 0.036

(loss) 0.491

Ν'. A.

(loss) 0.924

(loss) 1.328

12.11 At present about 86 per cent of the revenue of the O.T.C. comes

from its telephone, telex, telegraph and leased circuit services. The

283

growth of these services is shown in Table 12.6.

T A B L E 1 2 . 6

G R O W T H O F O . T . C . S E R V I C E S

Years Ended 31 March Telephone (Minutes) Telex

(Minutes) Telegraph (Words) Leases

(Hours)

'000 '000 m. '000

1963 960 820 92 157

1964 1,489 1,079 95 208

1965 2,546 1,494 103 413

1966 3,233 1,656 108 553

1967 4,162 1,916 114 738

1968 5,507 2,590 123 930

1969 7,280 3,483 128 1,071

1970 9,307 4,848 136 1,185

1971 12,253 6,909 140 1,160

1972 14,439 8,346 134 1,290

1973 17,492 10,166 136 1,350

Growth Rates

Per cent Per cent Per cent Per cent

per Annum per Annum per Annum per Annum

1963/1973 34 29 4 24

1968/1973 26 31 2 8

Source: Supplied to the Commission by the O.T.C.

The figures for growth of traffic in the main services show

that the international telegraph service is growing at only a very modest

rate. Notable growth rates are indicated for telephone and telex services

and these clearly constitute growth areas of the O.T.C. business. Leased

services appear to be growing moderately.

Growth of revenue over the five year period for the four major

divisions of O.T.C. international operations are given in Table 12.7. The

overall growth rate of revenue, 14.5 per cent per annum, is again

dominated by the growth of telephone and telex revenue.

284

TABLE 12.7

G R O W T H OF O.T. C. RE V E N U E I N T E R N A T I O N A L SE R V I C E S

1968

$million

1973

$million

Average Growth Rate per cent per annum

Telegraph 6.495 7.402 2.7

Telephone 4.939 15.276 25.3

Telex 2.833 10.354 29.6

Leased Circuits 6.573 7.418 2.5

Other .971 2.450 20.3

21.811 42.900 14.5

Source: Annual Reports of the O.T.C.

I n t e r n a t i o n a l T a r i f f s

1 2 . 1 2 Charges to persons within Australia in 1968 and 1973 for international telephone calls and telegrams are shown in Table 12.8 for a

selected number of destinations. Rates for telex and for leased circuits

are given in Table 12.9.

Over the five years 1968—1973 the minimum person to person

telephone rates to the United Kingdom and New Zealand have increased by

20 per cent and the charges for each additional minute have fallen by

20 per cent. Those to other destinations have remained unchanged. Over

the same period, lower minimum station-to-station rates have been

introduced to the United Kingdom and New Zealand. Telegram and telex rates

have not altered.

The rates for leased telegraph circuits have been substantially

reduced by 53 per cent to New Zealand and by 29 per cent to the other

countries listed in Table 12.9. Tariff charges for leased voice circuits

have been variable. Rates to the U.S.A., Japan and New Zealand have risen

by 14 per cent and those to the United Kingdom and Europe have fallen by

15 per cent.

285

TABLE 12.8

INTERNATIONAL TELEPHONE AND TELEGRAM C H A R G E S 1968 AND 1973

TELEPHONE Minimum Charge Three Minutes Each Additio

Person to Person Station to Station Minute $ $ $

To U.K. 1973 9.00 6.00 2.00

1968 7.50 N. A. 2.50

U.S.A. 1973 10.80 8.10 2.70

1968(a) 10.80 8.10(a) 2.70

Europe 1973 10.80 N.A.(b) 3.60

1968 10.80 N. A. 3.60

Japan 1973 9.90 N.A. 3.30

1968 9.90 N.A. 3.30

New Zealand 1973 4.50 3.00 1.00

1968 3.75 N.A. 1.25

(a) From 1.7.68

(b) Station to Station calls are available to some individual European countries.

TELEGRAMS Full Rate/Word Letter Telegram

Min. 22 Words

. $ $

To U.K. 1973 0.17 1.87

1968 0.17 1.87

U.S.A. 1973 0.20 2.20

1968 0.20 2.20

Europe 1973 0.25 2.75

1968 0.25 2.75

Japan 1973 0.35 3.85

1968 0.35 3.85

New Zealand 1973 0.05 0.55

1968 0.05 0.55

Source: Supplied to the Commission by the O.T.C.

286

TABLE 12.9

INTERNATIONAL TELEX AND LEASED CIRCUIT RATES 1968 AND 1973

Telex Per Leased Telegraph Leased Voice

Minute Circuit/Month Circuit/Month

$ $ $

To U.K. 1973

1968 (a)

2.50 2.50

2,667 3,750

10,667 12,500

U.S.A. 1973

1968

2.70 2.70

2,667 3,750

10,667 9,375

Europe 1973

1968

3.60 3.60

2,667 3,750 (+ circuit extension costs beyond London)

10,667 12,500 (+ circuit extension costs beyond London)

Japan 1973

1968

2.70 2.70

2,667 3,750

8,917 7,812

New Zealand 1973 1968 (a) 1.25 1.25

1,333 2,833

5,333 4,687

(a) From 1..7.68

Source: Supplied to the Commission by the O.T.C.

A.P.O./O.T.C. FINANCIAL RELATIONSHIPS

12.13 For the last five financial years the payments made by O.T.C. to the A.P.O. in respect of international traffic were as shown in Table 12.10

below.

For the five years in question the payments made to the A.P.O.

have represented, on average, 28.7 per cent of O.T.C.'s total expenditure.

Looked at from the other point of view, the payments have averaged 1.3 per

cent of the total telecommunications revenue of the A.P.O.

287

TABLE 12.10

PAYMENTS FROM O.T.C. T O A . P . O .

Year Ended 31 March Landline Payments Terminal Payments Total $ $ $

1969 815,173 4,387,000 5,202,173

1970 766,991 5,344,000 6,110,991

1971 1,033,394 6,624,000 7,657,394

1972 1,026,623 7,591,000 8,617,623

1973 1,033,456 8,665,000 9,698,456

TOTAL 4,675,637 32,611,000 37,286,637

Source: Supplied to

RELATIONSHIPS BETWEEN the Commission by THE A.P.O.

the O.T.C.

AND THE O . T . C .

12.14 The responsibilities of the A.P.O. and the O.T.C. are defined in their respective Acts and they work as separate and independent entities.

Considerable liaison is required to ensure the smooth working of the total

system in its planning and operational aspects. A good working basis

appears to have been established for the joint operation, in token of which

the international services available in Australia are adequate in capacity

and of high technical standard.

The submissions and public evidence from the A.P.O. and O.T.C.

reflected, however, disagreement on a number of issues, some of which bear

on the future relationships between the two organisations, and it is

necessary to refer to their opposing views.

12.15 Technical Planning. As described earlier, the international circuits provided' and operated by the O.T.C. pass through its gateway

exchange in Sydney which acts as the interface between the international

and national networks. Actual points of entry of the international

circuits are at Sydney (COMPAC cable) and Cairns (SEACOM cable) while at

Ceduna (S.A.), Moree (N.S.W.) and Carnarvon (W.A.) there are O.T.C. earth

stations for transmissions via satellites. Connections from Cairns, Ceduna,

Moree and Carnarvon are by leased A.P.O. landlines to the Sydney gateway

288

exchange. The high frequency transmitting and receiving stations near

Sydney and Perth operated by O.T.C. are similarly connected via leased

landlines to the Sydney gateway. Since different technical and operational

standards apply to the domestic and international networks, interface

equipment is necessary at all junctions between international and national

networks to permit circuits to be linked together.

The subject of some difference of view as between the A.P.O. and

O.T.C. is whether or not the present gateway exchange system will continue

to be appropriate in the longer term in view of developing technology,

growth of traffic and the increasing variety of telecommunications service.

The A.P.O. states that its new generation of trunk exchanges, to

be installed at mainland capital cities, would be capable of being adapted

and extended to perform international switching functions direct to

international circuits. It suggests that it should be more economic to

carry out international switching through these individual exchanges than

to concentrate all international switching through a single specialised

gateway exchange as at present. It suggests further that such an

arrangement would lead to a reduction in the trunk circuit mileage

required v/ithin Australia for international traffic, both between the

network and the gateway exchanges and between the gateway exchanges and the

international points of entry.

The O.T.C. view is that the absorption of the international

switching function into the domestic sySBm would not only be of doubtful

economic benefit but would result in the complicated and rapidly changing

international functions being moved from a relatively small and

controllable gateway centre into and through the domestic system. Such a

change, in its view, would diminish the flexibility of the present

arrangement under which increments of capacity and technical innovations

can be economically implemented at the international gateway. The O.T.C.

believes that adding international switching functions to domestic

exchanges would unnecessarily complicate the domestic trunk system and

restrict the freedom of operation of the rapidly gro ing international

system. It notes that the current situation in Australia is similar to

that found in almost every country in the world, including those in which

the domestic and international sectors are joined organisationally.

289

12.16 Financial Arrangements. In evidence before the Commission, argument developed between the two organisations as to whether the payments

made by O.T.C. to the A.P.O. for the use of the latter's national network

were equitable. The A.P.O. holds that the present arrangements favour the

O.T.C. and the following extract from one of its statements to the

Commission is relevant

"In 1972/73, on existing bases, O.T.C. will pay the Department about $9.5m. for use of the national network for international public communications, broadcast extensions, television relays and broadband leases. If O.T.C. paid the appropriate commercial

tariffs applicable to the general public (or tariffs compatible in principle with commercial tariffs, in the case where facilities provided to O.T.C. are not on offer to other customers) for the departmental facilities used by the Commission the payment would have been about $13m. The application of these tariffs in 1971/72 would have increased the Department's earnings by about $2m. The Department would intend to pursue with O.T.C. a new basis of financial

settlement which takes the a.ove comments into account.

In addition, as foreshadowed at the Commission of Inquiry (refer Transcript of Proceedings - pages 257-260), the Department would intend to raise with O.T.C. the matter of a subscription charge, in . recognition of the A.P.O.'s large Investment in a national network which provides the capacity to make and receive International as well

as local and trunk calls".

Some of the points raised by the A.P.O. in evidence went beyond

the question of the fair assessment of costs and margins for particular

facilities or services. The A.P.O. believes that it would be appropriate

to consider the payment by O.T.C. to the A.P.O. of a "subscription",

somewhat analgous to the telephone rental charge paid by a telephone

subscriber, in recognition of the fact that the O.T.C. has available to it,

at all times, the Internal Australian network for the purposes of outgoing

and Incoming international calls. The A.P.O. considers that the costs to

be debited against the international service should take account of the

large investment in the local network which is a necessary prerequisite

to all national and international services.

The A.P.O. also noted that the international business is a

relatively profitable section of telecommunications as is the trunk

service in the national network. In the latter case this profitable

service contributes significantly to meeting the costs of the total

network, including unprofitable segments, and the A.P.O. represented that

290

this principle should logically be extended to the international/national

relationships.

The O.T.C. does not accept that the present charges paid to the

A.P.O. are too low; the view was expressed that they are "not only fair

but generous".

The A.P.O. suggested that the O.T.C.'s clearly defined

international role and the economies of scale possible with international

circuits could place it, in the future, in a position to negotiate

reducing international tariffs. With the national network on the other

hand, significant economies of scale are possible only with trunk circuits

and local tariffs are likely to rise. Such diverging characteristics, in

the A.P.O.'s opinion, could lead to undesirable imbalances as between

international and national tariffs.

12.17 Relationships with Customers. In its evidence, the A.P.O. suggested that the present arrangements for billing and customer relations

introduced elements of confusion for customers.

Advertising and promotion also seem to have been somewhat

contentious issues between the A.P.O. and the O.T.C. The latter has on

occasions undertaken advertising work designed to bring the O.T.C. before

the public, to establish its name and presence and to promote the increas­

ing use of its overseas services. The A.P.O. comments that this can lead

to difficulties if O.T.C. advertisements promote the use of a service at a

time when the A.P.O. is unable to meet the resultant demand falling on the

national network.

12.18 Division of Responsibilities. The Overseas Telecommunications Act dates from 1946. Section 34 of the Act, which defines the powers,

functions and duties of the O.T.C. is now to some degree out of date.

Some services such as telex, television and data transmission which are

now of importance, are not referred to in the Act. Section 34(b) refers

to the overseas telephone service in the context of radio transmission;

submarine telephone cables and satellites were not in contemplation when

the Act was drafted. In consequence it has been necessary for the O.T.C.

and the A.P.O. to confer and agree from time to time as to the reason- ’- 1

291

interpretation of this Section of the Act.

The O.T.C. in evidence suggested that the Act should be

reviewed in so far as it bore on the division of functions between the

O.T.C. and the A.P.O. The specific suggestion was made that Section

34(b) of the Act should be varied. Section 34 states:-

"For the purposes of this Act and subject to the provisions of this Act, the Commission may do all that is necessary or convenient to be done for, or as incidental to, in relation to, or in connection with:

(a) ....

(b) the establishment and maintenance in Australia by the Commission of radio transmitting and receiving apparatus to permit of the conduct of overseas telephone services in respect of public communications;"

The O.T.C. recommended that its responsibilities under Section

34(b) be enlarged to include the "operation" of the international

telephone service. As noted previously, the A.P.O. provides the .

switchboards and operators handling international telephone traffic, the

operators switching calls through the O.T.C. gateway exchange to

appropriate international circuits. The O.T.C. provides and maintains the

gateway equipment but has no other role in the direct operation of the

international telephone service. An amendment to the Act as contemplated

by the O.T.C. would give it the right to use its own operators on the

international switchboards, thus establishing direct O.T.C. contact with

telephone subscribers.

The A.P.O. argued strongly against such a move. International

switchboards are located in each capital city, generally adjacent to its

main trunk exchanges and it was held that separate organisational control

of the international operators would be undesirable and would reduce the

manning flexibility that now exists. The A.P.O. remarked that, as

international traffic develops, it is contemplated that operating

facilities will be provided at further key centres.

12.19 Future Relationships. The A.P.O. concluded the section of its

submission dealing with overseas telecommunications with the following

comment

292

"Differences in initial viewpoint in the areas of policy, long term development planning and operations are to be expected while two separate authorities with different financial and investment policies and different management conditions exist. Negotiations with other countries, especially Australia's near neighbours, where special arrangements may be advantageous, also require close and continuous

co-ordination. The level of revenue return from the international services due to the Department for its contribution within Australia and the relationship of the Department and O.T.C. with subscribers both require continued negotiation.

The successful development of international communications in terms of the economic provision of facilities in Australia will necessitate a continuously closer Departmental and O.T.C. relationship. This will need to look towards a high degree of joint management and policy development in all areas, including financial and technical planning,

research and development, public and customer relations, operations and accounting".

The O.T.C. noted that one of the categories of change that might

come before the Commission of Inquiry for examination was some form of

"merger" between the O.T.C. and the A.P.O. It expressed considerable

concern at such a possibility. The O.T.C. considers that an interface

between international and internal systems is sound technically and in wide

use in other countries. It believes that an organisation such as O.T.C.,

providing international telecommunications, must be differently oriented,

more flexible and faster in response than the very much larger

organisation, the A.P.O. which has responsibilities for the internal

network. In O.T.C.'s view an amalgamation of the two would result in the

successful and profitable O.T.C. being submerged, to the detriment of the

international telecommunications system. An extract from the O.T.C.'s

submission may be quoted:-

"The historical decision by the Australian Government in 1946 set the course for development of the two services along separate organisational paths. In this environment the two services have developed and have satisfactorily inter-operated with each other and with other systems all over the world during a period of far-reaching

technological development and phenomenal growth.

Both A.P.O. and O.T.C. have justifiable claims of achievement, each in its own sphere. Nevertheless, as has been observed above, the very size and nature of the A.P.O. operation has produced problems at national level for that organisation. On the other hand, measured in

any terms O.T.C. is a successful organisation. The quality and adequacy of its services, its customer charges, its profitability and its international performance all contribute to the high reputation which it enjoys both in Australia and overseas. In fact O.T.C. has

2 9 3

moved from the 1946 pioneer phase to its 1973 position of a recognised leader in a highly sophisticated global industry.

O.T.C. has demonstrated, both at home and abroad, that a Government-owned business undertaking can be both responsive to the public interest and exceptionally effective in the management of a complex and dynamic industry.

The Australian Post Office Commission of Inquiry is investigating possible changes. In so far as the international telecommunications service is concerned, O.T.C. has addressed itself in this paper to the postulation of a merger between O.T.C. and A.P.O., representing a fundamental change, particularly to O.T.C. From the analysis presented in this paper, there is no case for such a merger, whatever changes might be recommended so far as A.P.O. is concerned.

The Overseas Telecommunications Commission opposes the concept of a merger with the Australian Post Office either in its present form or in a restructured form in the belief that the national interest would suffer from any such merger".

D i s c u s s i o n

12.20 The Commission is required by its terms of reference to comment

on the division of functions between the A.P.O. and the O.T.C. The

Commission's recommendation to divide the A.P.O. into two separate

statutory corporations, one for postal and the other for telecommuni­

cations , necessarily requires that the division of functions between the

O.T.C. and the proposed telecommunications corporation, the A.T.C., should

be reviewed. In particular it must be considered whether the O.T.C.

should remain as a separate entity or whether it should be merged in some

fashion with the new body to become, in effect, its international division.

12.21 Dealing first with two of the specific matters referred to in

the preceding section, the Commission noted that the technical planning

issues raised in connection with the gateway exchange system are to be the

subject of a joint study by the A.P.O. and the O.T.C. The study team will

examine the alternatives of separate international and national switching

centres compared with integrated exchanges, from the point of view of

comparative costs, security, flexibility and technical design elements in

order to determine the best way to develop the networks in the future. It

would be premature for the Commission to express views at this point of

time on the technical and economic issues that will be the subject of the

detailed joint study.

2 9 4

12.22 The Commission examined the O.T.C.'s proposal that Section 34(b)

of the Overseas Telecommunications Act should be amended to provide for

the operation of the international telephone service by O.T.C. The

Commission can see no advantages, either economic or operational, in the

O.T.C. taking over the international telephone switchboards presently

manned by the A.P.O. and does not recommend, therefore, the enlargement

of O.T.C.'s operational responsibilities by amendment to its Act.

12.23 The Commissioners have not been able to reach a common view on

.the general question posed above: whether the O.T.C. should remain as a

separate entity or whether it should be merged with the proposed A.T.C.

A number of intangible elements enter into consideration and there is

scope, in such situations, for differing opinions as to the relative

importance that should be attached to the various issues in reaching a

final judgment. Rather than attempt to strike a compromise in the framing

of its conclusions the Commissioners considered it desirable to expose

their differing viewpoints.

12.24 Commissioners Callinan and Kennedy see no justification for a

separate corporation for overseas telecommunications and recommend a merger

of the O.T.C. with the A.T.C. They observe that so long as there are two

separate authorities involved in the nations telecommunications system,

problems as to division of functions will arise. If a merger takes place,

no division of functions will be necessary.

In the opinion of Commissioners Callinan and Kennedy, the

formation of the A.T.C. makes the merger with the O.T.C. possible and

desirable. The Director-General of Posts and Telegraphs considered that,

notwithstanding the fact that the A.P.O. has responsibility for postal

services as well as telecommunications services, the O.T.C. could logically

be joined to the A.P.O. In public hearing the Director-General was asked

if he considered that the O.T.C. should be merged with the A.P.O. His

reply was: "I think it would be fairly hard to put up an argument that it

should not become one".

Commissioners Callinan and Kennedy consider that issues such as

those referred to in the preceding section of this Chapter are symptomatic

of the problems of divided control. They consider that placing

295

responsibility for both national and international telecommunications with

one statutory body will overcome problems caused by divided control and

conflicting objectives; that a single telecommunications authority will

ensure that there is no unnecessary duplication of plant, equipment and

other resources and will enable tariffs for local, trunk and international

calls to be considered at the same time in order to provide a balanced

tariff structure. They further consider that a single organisation will

offer, to the staff of both organisations, better career prospects and

better scope for advancement. The Commission does not consider it

desirable that the A.T.C. should pay Federal or State taxes including

income tax, sales tax and customs duty. At present the O.T.C. is required

to pay such taxes. Commissioners Callinan and Kennedy are of the opinion

that to levy taxes on international calls and not on local or trunk calls

is anomalous.

A considerable number of countries operate their international

and national telecommunications through one organisation and in many

countries where this is not the case, such as Canada, it is because

private companies operate the internal network. In Britain and New

Zealand, both external and internal telecommunications services are

combined under the one authority.

(he of the terms of reference presented to Cresap, McCormick and

Paget, the Management Consultants to the Commission, was:-

"The advantages, if any, that might accrue in terms of management efficiency and control if responsibility for national and international telecommunications were combined in a single authority".

On page III-32 of their Report to the Commission, the Consultants state:-

"Assuming That Telecommunications Is Established Under Statutory Corporation Governance, Have The PTC Report To The Same Governing Board

In the opinion of the consultants, the nation would benefit if its domestic and international telecommunications received common governance on policies, fiscal objectives and relationships, and operating linkages. A common board would achieve the necessary co-ordination.

It is not believed that carrying this organisational

296

consolidation down to a lower level would be beneficial, for at least some time to come. As noted earlier, the OTC appears to operate effectively, and there seems to be no reason to risk submerging it in

the large structure of APO telecommunications, which in all probability will be in a situation of organisational change for several years.

If telecommunications is not separated from postal services, or if it is separated but constituted as a Department of State, the OTC should remain a separate statutory corporation".

Commissioners Callinan and Kennedy consider that, on evidence

presented to the Inquiry, the merging of the two organisations would be

most desirable. It is clear there is conflict at present; evidence given

by Sir Arthur Petfield on 9 July 1973 to the Commission indicated that

co-ordination and entente between the A.P.O. and the O.T.C. was

"insufficient at all levels". The two Commissioners do not consider that

the merging, which is desirable from an organisational and administrative

viewpoint, should be delayed because of the possibility that it may

complicate the formation of the A.T.C. The O.T.C. is not a large

organisation; it employs some 2,000 people and its merger with the much

larger A.T.C. employing almost 90,000 people should not present great

difficulties.

Commissioners Callinan and Kennedy recommend that the Overseas

Telecommunications Act should be repealed and the present O.T.C.

organisation should become a division of the A.T.C. responsible to the

Managing Director.

12.25 In the Chairman's view a number of the issues, on which disagree­ ment between the A.P.O. and the O.T.C. was expressed in evidence, are not

material to the question of merging versus independent operation. As

regards the reasonableness of charges paid by the O.T.C. to the A.P.O., the

basis for payment can be objectively examined and if appropriate, adjust­

ments can be made. However the ability of the relatively prosperous

international operation to "subsidise" the less profitable national service

is very limited. The financial figures for the two organisations given in

Table 12.5 show that the O.T.C. is relatively small in terms of revenue,

297

funds employed and profits when compared with national telecommunications.

After payment of fair and reasonable charges to the A.T.C., the surplus

remaining in O.T.C.'s hands would not be large enough to have a material

effect on the financial performance of the latter or on its tariffs. The

Australian Government will be the sole "shareholder" in both organisations

and its total return by way of interest, dividends, or taxes will not be

affected by transfer payments. The Chairman sees little risk of

imbalances developing in tariff scales, since all tariffs will remain

subject to Ministerial approval.

The Chairman does not consider that the present arrangements are

causing significant customer confusion.

On the evidence before this Inquiry, the Chairman is not con­

vinced that merging of the two organisations would be desirable. The

O.T.C., formed in 1946, has now been in operation as a statutory

corporation for some 27 years. It is a well developed and compact

organisation, strongly market-oriented, showing good performance and with

established relationships in the international field. It has developed

its own career service and its corporate morale appears to be good. In

the Chairman's view O.T.C., a well established, going concern, should not

be destroyed unless or until overwhelming advantages can be shown to

attach to its merging with the very much larger A.T.C.; on the basis of

the evidence, only fringe advantages can be seen.

The single organisation that would develop from the merging of

the two systems might appear at first sight an attractive simplification

of the present situation, where the existence of two independent

organisations has undoubtedly given rise to arguments in respect of the

planning of the networks and their inter-working arrangements. Planning

and co-ordination will always be necessary however as between national and

international networks and the study group approach referred to previously

would seem to be an effective way of exposing differing viewpoints and

resolving complex issues. The Chairman does not believe that problems

disappear and that planning is necessarily optimised by the creation of a

single central planning authority.

298

In the Chairman's view, some time will elapse, after formal

establishment, before the new A.T.C. has "settled down" to become a fully

effective operating entity. The basic re-organisation of the management

and staffing structures of the present telecommunications activities of the

A.P.O. is a major task involving new responsibilities and authorities, the

definition of new corporate aims and objectives and the establishment of

new management procedures. It would be unwise to add to the already

considerable problems by introducing, during this period, the further

complication of some form of O.T.C./A.T.C. merger.

Effort therefore should first be concentrated on the setting up

and organisation of the A.T.C., with the O.T.C. continuing in its present

form. When the A.T.C. is fully established as a going concern, the

relationship between the A.T.C. and the O.T.C. should be reviewed by the

Boards and managements of both corporations and by Government and a

decision then taken as to whether the dual operation should continue,

whether some closer forms of association should be developed, or whether

the Overseas Telecommunications Act should be repealed and the O.T.C.

operations merged with those of the A.T.C.

In summary, the Chairman believes that it would be altogether

premature to take a decision at this time to merge the well-established

O.T.C. with an A.T.C. not yet in being. The situation will be seen in

proper perspective only when the new corporation is properly established

and when the Boards and managements of the two corporations have been able

to study the practical inter-working of the national and international

systems.

299

300

CHAPTER 13

P R O T E C T I O N OF RIG HTS OF S E R V I N G O F F I C E R S O F T H E A U S T R A L I A N P O S T OF F I C E

13.1 In Chapter 2 discussing "The Australian Post Office To-day", it was pointed out that there are some 84,000 permanent officers of the

Australian Public Service employed in the Australian Post Office (A.P.O.)

plus another 34,000 persons engaged as temporary or exempt employees

under special provisions of the Public Service Act. In addition about

11,500 persons are engaged in providing postal services as agents for

the A.P.O. under contractual arrangements with that authority. These

persons comprise the Postmasters and Postmistresses at non-official '

post offices, the staff employed in those offices, and private persons or

organisations who operate a mail delivery service under contract.

The proposed change to administer the existing services of the

A.P.O. through separate statutory corporations will not materially affect

the situation with regard to non-official post offices and mail contract­

ors. The agency agreements or contracts with the proprietors of non­

official post offices or mail contracting services would simply be

continued as agreements or contracts with the new corporations. There

may be some minor difficulties where a non-official post office also

operates a manual telephone exchange service. In such cases it would

appear to be necessary to have separate contracts with the telecommuni­

cations and postal corporations in respect of services provided on an

agency basis for each corporation.

T e m p o r a r y a n d E x e m p t S t a f f

13.2 Staff employed on a "temporary" or "exempt" basis could continue their employment under the power proposed for the corporations to employ

staff on a casual basis. Temporary and exempt staff employed in the

A.P.O. will have entitlements to certain rights arising from their ser­

vice such as accumulated sick, recreation and special leave rights.

301

Some principles therefore need to be determined regarding these rights

when the corporations come into existence.

The principles that are recommended by the Commission for

adoption for present employees of the A.P.O. who are in the category of

temporary or exempt employment are ι­

(1) there will be no diminution in the conditions (including wages)

attaching to employment with the corporations compared to the

conditions at the time employment in the Australian Public

Service ceases;

(ii) every employee will be offered employment with one of the

corporations, but without the choice of remaining in the

Australian Public Service;

(iii) wherever possible, an employee will be offered a position in the

"Service" of the corporation whose functions are most clearly

identified with the duties performed by that employee;

(iv) accumulated entitlements to recreation, special and sick leave

will be transferred with the employee as of right;

(v) for the purposes of determining furlough entitlements,

continuous service with the Australian Public Service at the date

οί transfer will be counted as service with the corporation.

Permanent Officers of the A.P.O.

13.3 The position of permanent officers of the Public Service who

now occupy positions within the A.P.O. poses a different range of

problems. The concept of one career Public Service is that every

officer has the right to seek promotion to positions within any department

of State, or can seek transfer from a position within a department to

a position of equal or lower classification within that or another

302

department.

The scope which the Public Service offers for advancement and

the wide variety in the fields of work which the Public Service spans,

are inherent attractions to a person taking up employment in the Public

Service. There is less movement of officers to and from the Postmaster-

General's Department than is the case with most other departments, but

it could be expected that some career public servants in the A.P.O. would

be reluctant to see their connection with the Australian Public Service

severed. However the Commission agrees with the views expressed by the

Public Service Board that it would not be practicable to consider arrange­

ments which gave these officers the option of remaining in the Public

Service in other departments or joining the Services of the corporations.

Some categories of employment in the A.P.O. are, in any case,

exclusive to that Department, particularly in technical fields where

specialist skills and training in telecommunications are required.

Additionally, the new corporations will need all the skills and experiences

of serving officers of the A.P.O. if they are to operate successfully under

the new administrative form proposed.

It is recommended that legislation provide for the transfer of

the career Public Service officers who occupy positions within the A.P.O.,

to the appropriate Service of the corporation concerned. The conditions

under which the transfers operate, and the rights, if any, of those

officers to return to the Australian Public Service at a later date

warrant however special consideration.

13.4 The Officers' Rights Declaration Act 1928-73 establishes the

rights of officers of the Public Service who accept appointments with

Commonwealth statutory authorities or appointments to statutory offices

to which that Act applies. In addition to preserving existing and

accruing superannuation, furlough, and sick leave rights, the Act

provides that such officers shall be deemed to be unattached officers of

the Public Service; and upon "the termination of his employment an

unattached officer who has not been dismissed for misconduct or who has

not attained the maximum age for retirement fixed by the Commonwealth

303

Public Service Act 1922-24, shall be entitled to be appointed by the

Public Service Board to an office in the Public Service of such status

and salary as are determined by the Board, having regard to the office

in the Public Service previously vacated by the officer and the period

of his employment".

On a proper interpretation of these provisions quoted above, a

resignation from the staff of an authority, gives an entitlement to that

officer to return to the Public Service and to occupy a position of

equivalent classification at least, to the position formerly occupied

by him as an officer in the Public Service. Clearly it would not be

possible to extend the provisions of the Officers' Rights Declaration

Act as they now stand to A.P.O. career officers when transferred to the

Services of the corporations.

13.5 The Public Service Board has been examining the general

operation of the Officers' Rights Declaration Act and at its suggestion

the Joint Council has completed a total review. The Joint Council is

established under the Public Service Act and comprises representatives

of the Public Service Board, departments and organisations of officers

and employees, with the function of advising the Public Service Board

on such matters of general interest in relation to the Public Service

as are referred to it by the Board.

While the report of the Joint Council to the Board on this

matter is now available, we acknowledge the co-operation of the Joint

Council and of the Public Service Board in making a copy of the report

available to the Commission before its general release.

The report was under consideration by the Public Service Board

in consultation with departments and staff organisations at the time

this Commission's Report was drafted. The Commission has refrained

therefore from commenting in detail on the changes the report recommends

except to say that these proposals deal with the issues of principle

which concerned it when considering the situation of career officers

transferred compulsorily to the service of the statutory corporations.

304

The Joint Council report states the firm view that in the

case of officers who joined an authority in a situation where the

duties they were previously performing were transferred from the Public

Service to the authority, it would be impracticable to grant a right

of return to the Public Service "at whim"; that is, to grant the right

to automatic reappointment to an office in the Public Service at any

time chosen by the former officer. The report then deals with several

types of arrangements under which an officer of the Public Service may

take up an appointment with a statutory authority, but for the purpose

of the Commission's Report, only the proposals relating to officers

transferred from the Australian Public Service to an authority by virtue

of a specific statutory provision in relation to such transfers, need

to be outlined here.

13.6 The Joint Council report recommends in this type of case that

on transfer to the authority an officer ceases to be an officer of the

Australian Public Service (A.P.S.), but has the following rights -

. he remains a contributor under the Superannuation

Act unless he elects to become a contributor to the

fund of the authority

. existing and accruing A.P.S. long service leave

entitlements are retained unless he elects to accept

the entitlements of the authority

. any A.P.S. sick leave and recreation leave credits are

carried over to the authority - his entitlements then

being subject to the rules of the authority

. during his employment with the authority (or with

another authority, provided the periods of service

with the authorities are continuous) and up to age 65,

he is entitled to sit for Public Service examinations

and apply under section 50 for promotion or transfer to

any advertised vacancy (whether open to outsiders or

not) in, and appeal against provisional promotions in,

305

th£ A.P.S. as if he were still an officer. In this regard -

- if successful, he must take up duty in the

A.P.S. position within one month of finality of

the selection process, or the action will be null

and void.

- he becomes the occupant of the A.P.S. office with

effect from the date of taking up duty in it.

- for the purpose of determining whether any such

movement would be promotion, his classification

is to be that held in the A P.S. at the time he

ceased to be an A.P.S. officer.

- for the purpose of promotion or appeal, his

seniority is to be that he held in the A.P.S.

13.7 In addition to the rights outlined in the previous paragraph,

the Joint Council report recommends that a person who has ceased to be

an officer of the A.P.S. has, on application, access to additional re­

entry provisions if he is in one of the following categories -

(i) he is dismissed from the authority and claims within one

month that this should not deny him the opportunity to

return to the A.P.S.

(ii) he is retrenched (or is to be retrenched) from the

authority

(Hi) he joined the authority in a situation where the duties he

was previously performing were transferred from the A.P.S.

to the authority (i.e. usually by virtue of a specific

statutory provision in relation to transfer to the authority)

and he claims his career expectations or employment

situation are substantially affected by curtailment of

activities of the authority or for similar reasons.

306

(iv) in special circumstances, e.g. on compassionate grounds he

may also apply to return to the A.P.S.

For present purposes, the rights proposed under paragraph (iii)

are particularly relevant. The Joint Council report recommends that the

case of a person who applies for re-entry under this category be considered

by a committee comprising:­

. a Chairman, Promotions Appeal Committee;

. a nominee of the Public Service Board; and

. a nominee of the staff association which covers the employment

group in which he has indicated he would like to be absorbed

within the A.P.S.

The Committee would assess whether his claim is such as to warrant him

being given a right to return to the A.P.S. and, if so, the level at which

he should return. On the date of determination by such a committee of a

re-entry level, a person who applied is deemed to be an unattached A.P.S.

.officer at the level determined by the committee and is thus subject to

the provisions of the Public Service Act.

Clearly the reference of this matter to the Joint Council and the

considerations of the Joint Council would have been influenced by the

possibility that this Commission might recommend that some or all of the

services provided by the A.P.O. be administered in the future by statutory

corporation(s). While the ramifications of the recommendations in the

Joint Council report will be of interest to all departments, officers and

staff organisations with members in the Public Service, they will have the

most widespread impact initially in respect of officers employed in the

A.P.O.

13.8 For the purposes of this Report it has been assumed that

decisions arising from the Government's consideration of the Joint

Council's proposals will be applied to officers of the A.P.O. transferred

to the statutory authorities. On that assumption the Commission

307

supports the adoption of the Joint Council report as providing an

equitable basis on which officers might be transferred to the Services

of the new authorities. One qualification is expressed to this general

endorsement of the report.

One of the important advantages of separating employment in the

corporations from the Australian Public Service is the opportunity this

will provide for officers of the corporations to identify closely with

the aims and objectives of those authorities and the services they

provide.

This sense of personal identification could be reduced if

officers of the corporations transferred from the A.P.O. continued to

have special rights or privileges to re-join the Australian Public

Service no matter how uncertain that possibility might be. For this

reason the Commission has concluded that it would be desirable to fix

a time limit within which those rights should be exercised. A period

of three years from the date of separation from the Australian Public

Service is considered to offer a fair and reasonable opportunity for

the officers concerned to determine whether their future career prospects

would be better served by remaining with the Services of the corporations

or by seeking transfer or promotion to the Australian Public Service.

3 0 8

CHAPTER 14

P R O C U R E M E N T OF S U P P L I E S BY THE A.P.O.

14.1 In the financial year 1972-73 the Australian Post Office (A.P.O.) spent over $220 million on the purchase of supplies and materials for its

capital and operational needs. The expenditure covered a wide range of

items, but the major purchases included telephone switching equipment,

cables, carrier equipment, telephones and other items of special equipment

for the postal and telecommunications networks.

Interpretation of Commission's Terms of Reference

14 . 2 The Commission is required to consider what changes, if any, should be made in the policy and practices of the A.P.O. relating to the

"procurement of supplies with the aim of developing Australian industries".

In its inquiries under this term of reference, the Commission concentrated

its attention on those industries which supply the need of the A.P.O. for

specialist equipment to maintain and develop its services. Materials and

equipment purchased by the A.P.O. in common with other departments or

authorities were excluded from the study.

Present Policy and Practice

1 4 . 3 As a department of State, the A.P.O. is required to conform to Government policy in awarding contracts for the supply of goods and

services. Under Treasury Regulations a department is not required to seek

quotations where the estimated cost of supplies is less than $1,000; over

that amount, tenders must be called. Apart from these Regulations the

purchasing policy of the Government is expressed in a number of decisions

taken over a period of years. It is not essential to detail, in this

Report, all the conditions governing the awarding of contracts for the

supply of goods and equipment. Several decisions, however, relate to the

consideration of overseas tenders as against tenders from Australian

companies, and are relevant to tills particular aspect of the Commission's

inquiries.

3 09

For the purpose of evaluating overseas tenders against those

from within Australia, the overseas tender prices include the costs of

freight, insurance and duty. Commonwealth purchasing policy is not

directed generally towards providing additional protection to Australian

industry, but in some circumstances the Government may exercise a

discretion in favour of Australian made goods. This policy is mainly

applied to assist a depressed industry or area, or to contracts which

contribute materially to a particular and significant aspect of national

development.

The most recent policy decision of which this Commission had

notice was taken in January 1973, and was to the effect that Australian

Government contracts should be awarded to an Australian-owned company in

cases where Australian and overseas-owned firms submit tenders which meet

specifications and which are equal in respect of price and availability.

P r o c u r e m e n t P r a c t i c e s o f t h e A . P . O .

1 4 . 4 The A.P.O. prepares on an annual and a three year basis, its Engineering Construction Programmes, together with an annual Engineering

Maintenance Programme. From these programmes materials budgets are

prepared on an Australia-wide basis. Major material supplies common to all

States are procured in bulk by the Central Office Tender Board. To cover

the long lead times from placing an order to delivery of the goods or

materials, a "forward ordering authority" is obtained as necessary from the

Treasurer.

About 80 per cent of materials requirements is purchased under

this system of central procurement, which the A.P.O. states has the

benefits of:­

. achieving economies through planned large-scale manufacture;

. bringing closer control over the performance of contractors,

particularly in regard to delivery times;

. facilitating the administration of contracts from the viewpoints

both of the A.P.O. and of the suppliers.

310

Tender Boards are appointed for Central Office and State

Administrations by the Minister. Where the expenditure under a tender

exceeds $10,000, a "Tender Board Recommendation" is prepared, usually

supported by a comparative summary of tender prices, a technical report,

and on some occasions, a financial report.

While the powers delegated to Tender Boards are expressed as

being subject to "any direction by the Postmaster-General on specific

matters or to any directions which may be given by the Director-General,

Posts and Telegraphs", the A.P.O. states that there is no record of a

Minister or a Director-General issuing a direction to the Tender Boards.

The A.P.O. does, however, keep the Minister informed on matters associated

with the procurement of supplies and has, from time to time, sought the

Minister's views on policy aspects of particular proposals for supplies.

T h e A u s t r a l i a n T e l e c o m m u n i c a t i o n s I n d u s t r y

14.5 The Australian telecommunications industry comprises a group of

companies which manufacture and supply telecommunications equipment.

These manufacturers can be divided into those which depend substantially on

orders from the A.P.O. and those which do not.

The major companies substantially dependent on A.P.O. contracts,

their shareholdings in terms of overseas and Australian ownership and the

amounts paid and received on contracts from the A.P.O. in 1971-72 are set

out in Table 14.1. In the case of two of the companies - L.M. Ericsson

Pty. Ltd. and Philips Telecommunications Manufacturing Co. Ltd. - the

Australian equity is derived through shai^holdings in other companies

which are the beneficial owners of shares in the two manufacturing

companies concerned.

TA B L E 14.1

C O M P A N I E S S U B S T A N T I A L L Y D E P E N D E N T ON A.P.O. C O N T R A C T S

Company

Issued Capital

Percentage Australian Owned

Amounts Received from A.P.O. in 1971-72

$million $million

Austral Standard Cables Pty. Ltd. 11 22 21.9

L.M. Ericsson Pty. Ltd. 6 15 (approx.) 17.9

Philips Telecommunications Manufacturing Co. Ltd. 4.6 17 (approx.) 5.7

Plessey Telecommunications Pty. Ltd. 1.3 Nil 13.9

Siemens Industries Ltd. 2.3 Nil 8.2

Standard Telephones & Cables Pty. Ltd. 11.5 Nil 23.5

Transmission Products Pty. Ltd. 1.1 100 3.2

Source: Data supplied by the ATDA and the APO

1 4 . 6 Major suppliers of equipment and materials not : substantially dependent on A.P.O. contracts for their operations are shown in Table

14.2.

T A B L E 1 4 . 2

C O M P A N I E S N O T S U B S T A N T I A L L Y D E P E N D E N T ON

A . P . O . C O N T R A C T S

Company

Issued Capital

Percentage Australian Owned

Amounts Received from A.P.O. in 1971-72

$million $million

Amalgamated Wireless (Australasia) Ltd. 8.09 96 6.4

Conqueror Cables y. Ltd. 4 60 4.5

Olympic Cables Pty. Ltd. 1.8 100 7.3

Source: Data supplied by the AT DA and the APO

Three of the companies listed in Table 14.1 - L.M. Ericsson Pty.

Ltd. , Plessey Telecommunications Pty. Ltd. , and Standard Telephones and

312

Cables Pty. Ltd. - supply virtually all telephone switching equipment plus

certain other equipment. Austral Standard Cables Pty. Ltd. is the

principal supplier of cables, but Conqueror Cables Pty. Ltd. and Olympic

Cables Pty. Ltd., listed in Table 14.2, are also significant suppliers.

Telephone switching equipment and cables accounted for 65 per cent of the

total payments for supplies in 1971-72.

Of the three remaining companies listed in Table 14.1,

Transmission Products Pty. Ltd. supplies loading coils, switchboards and

plugs and sockets for the installation of telephones; Philips

Telecommunications Manufacturing Co. Ltd. supplies carrier equipment;

Siemens Industries Ltd. is the sole supplier of the A.P.O. requirements for

teleprinters and as well supplies carrier equipment. Amalgamated Wireless

(Australasia) Ltd. listed in Table 14.2 supplies mainly telephone sets and

radio system equipment.

14.7 The A u s t r a l i a n T elecom m unications Development A s s o c i a t i o n , which

i s a d i v i s i o n of t h e Chamber o f M a n u fa c tu re rs of N.S.W., r e p r e s e n t s t h e

i n d u s t r y i n t e r e s t s of 46 companies engaged i n th e m a n u fa c tu re and su p p ly of

equipment f o r th e tele c o m m u n ic a tio n s i n d u s t r y . In i t s su b m is s io n to th e

Commission, t h e A s s o c i a t i o n s u p p l i e d t h e f o llo w in g s t a t i s t i c s c o n c e rn in g

th e i n d u s t r y : -

Annual turnover 1970-71

Total assets employed

Total exports

Annual expenditure on research and development

Direct employment in the industry

$275 million

$218 million

$ 44 million

$ 9.75 million

20,000 persons

These figures relate to the year ended 30 June 1971; they are

indicative of the size and importance of the industry and more recent

figures would no doubt reflect a strong growth pattern throughout. Another

313

indication of the growth and importance of the local industry is the fact

that the A.P.O. now purchases more than 90 per cent of its requirements

from local manufacturers compared with the situation after World War II

when 90 per cent of materials and supplies was purchased from overseas

sources.

The Australian telecommunications industry is significant both

in relation to its ability to produce for local requirements, and the

technical capabilities it has developed over the years. The industry works

closely with the A.P.O., particularly through a system of committees on

which the industry and the A.P.O. are represented. The Commission was

impressed with the working relationships that have been developed between

the suppliers and the A.P.O. which have extended to joint efforts in

research and development for new designs, or the modifying of equipment

designed overseas, to meet the special requirements of the A.P.O. network.

S u p p l y o f S w i t c h i n g E q u i p m e n t

14.8 It was pointed out earlier that purchases of switching equipment

and cables accounted for 65 per cent of expenditure on supplies for the

A.P.O. and it is worthwhile therefore to examine some aspects of this

segment of the industry.

In 1948 the A.P.O. entered into agreements with Standard

Telephones & Cables Pty. Ltd. (S.T.C.) and the predecessor of the present

Plessey Telecommunications Pty. Ltd. (P.T.P.) for the local manufacture

of telephone switching equipment. The agreements covered the succeeding

ten years and their purpose was to develop a local industry. Contracts

were not allocated on the basis of tenders received; each company was

guaranteed a minimum annual order for equipment with prices jointly

determined by the A.P.O. and the companies. If annual profits before tax

exceeded 12^ per cent on funds employed, surpluses were shared equally

between the A.P.O. and the companies; if the companies failed to achieve

returns of 12^ per cent there was no automatic adjustment of the contract

price to lift the companies' returns to that level, but they could state a

special case for further payments.

314

14.9 In 1959 the A.P.O. made the decision to replace progressively its

"Strowger" equipment with "crossbar" equipment developed by L.M. Ericsson of

Sweden. The arrangements with S.T.C. and P.T.P. to purchase "Strowger"

equipment under the agreed price and minimum annual purchase arrangement

continued, however, until 1965 when prices were determined by calling for

quotations from the two companies.

Following its decision to standardise on crossbar equipment, the

A.P.O. arranged with L.M. Ericsson to grant licences to S.T.C. and P.T.P.

to manufacture this equipment in Australia. Ericsson was originally

discouraged by the A.P.O. from establishing a manufacturing plant in

Australia on the grounds that the market would not support three companies.

With the growth of the market, L.M. Ericsson eventually established a

subsidiary company in Australia and commenced manufacture of crossbar

equipment in 1963.

The three companies manufacturing crossbar equipment supplied the

equipment initially at negotiated prices related to the prices of the

equipment in Sweden. Since 1965 the price has been determined by calling

tenders. No two of the companies has the capability of supplying the

whole of the requirements of the A.P.O., but the failure of one company to

secure an order from the A.P.O. would be disastrous to its operations.

C o n s u l t a n t ' s C o m m e n t s o n S u p p l y o f S w i t c h i n g E q u i p m e n t

14.10 The Commission engaged Mr. G. Paterson, B.C.E., F.I.E. Aust., to

report on certain aspects of the supply of equipment and materials to the

A.P.O. Mr. Paterson recently retired from the State Electricity Commission

of Victoria as an Assistant General Manager. The terms of reference given

to Mr. Paterson are reproduced in Chapter 1. They required him to report on

the effectiveness of the tender system in ensuring price competition in

contracts to manufacture and supply telephone switching equipment and

cables to the A.P.O., and to determine the reasonableness of such tenders

on the basis of data and information available to the A.P.O.

14.11 In section 4 of his report, reproduced in Volume 2, the

consultant summarises in table form the distribution of the contracts

awarded for crossbar equipment over the seven years 1967-68 to 1973-74,

315

inclusive. The total price paid by the A.P.O. during this period was

$234.99 million; the Plessey company received orders totalling $75 million;

S.T.C. $74.5 million; and Ericsson $81 million. Another company, Centre

Industries, also supplied some equipment but the amount involved was small

in relation to the total.

The consultant studied the 1973-74 purchasing documents for the

supply of crossbar equipment. After referring to the factors taken into

account in awarding contracts, the consultant states that the A.P.O. staff

concerned with these tenders spare no effort to ensure the best possible

deal for the A.P.O. and that they are to be commended for the expertise

and competence they have displayed. The cost of a switch equivalent of

crossbar equipment is less now than in 1964-65 when competitive tendering

between the major suppliers commenced. In real terms the consultant

considers that the cost reduction is about 45 per cent over the nine years

concerned.

14.12 The conclusion of the consultant is that no change is warranted

in the present system of competitive tendering for switching equipment.

After examining the data and methods for checking reasonableness of prices

tendered, he considers that the A.P.O. has available sufficient safeguards

to ensure that tenders submitted are reasonably priced.

C o m m i s s i o n 's C o n c l u s i o n s ( S w i t c h i n g E q u i p m e n t )

14.13 On the facts available the Commission agrees that the competitive

tender system for the supply of switching equipment is the most effective

means of ensuring that a fair price is paid for such equipment. It is also

the view of the Commission that the past policy of the A.P.O. in encouraging

and assisting the development of a local manufacturing capability has been

an important contribution to the telecommunications industry in this country.

Evidence suggests that the Australian industry is efficient and

is making also a positive contribution to the growth of the technology of

communications in the Australian scene. The present suppliers of

switching equipment are reported to have an over-capacity of about 40 per

cent at present and while this over-capacity exists it is difficult to

envisage the establishment of an additional supplier of such equipment

without undesirable effects on the economic viability overall of this

316

segment of the industry.

A situation where a Government authority is the sole purchaser

of specialist equipment requires that a great deal of judgment be exercised

in purchasing policy. This responsibility is increased when the number of

suppliers of that equipment reflect a deliberate policy intent to develop

a competitive situation between suppliers. The Commission commends the

A.P.O. for the way in which the purchasing policy for switching equipment

has been developed and administered.

> 4 . 1 4 As the demand for switching equipment continues to grow with the

increasing demand for telecommunications services, there will be a need to

review from time to time the case for attracting further manufacturers to

the industry. This will place a responsibility on existing suppliers to

maintain efficiency and competition in an industry which has been a

profitable one for suppliers in the past, and which should remain so for

the future.

1 4 . 1 5 It was not within the scope of this Commission to examine the

reasonableness or otherwise of the tariffs currently applicable to

switching equipment covered by A.P.O. tenders; this is a matter for the

Industries Assistance Commission. An inquiry into the telephone and

telegraph equipment industries is in progress at present and the Industries

Assistance Commission's report will no doubt comment in due course on the

efficiency of the industry and make recommendations regarding any changes

considered desirable in existing tariffs. The procurement policies of the

A.P.O. and the degree of local manufacture of switching equipment may well

come under review.

For the purpose of reporting on its Terms of Reference, the

Commission considers that proper regard must be had to the following:-

. The three major suppliers of switching equipment have established

a manufacturing capability in Australia in response to Government

policies over a number of years.

. The affiliation of local companies with parent companies overseas

has resulted in the most modern technologies being available to

317

the Australian industry.

. Local manufacturers appear to have acted responsibly in the

application of profits earned in Australia to further capital

investment in their manufacturing facj ;ties.

D e v e l o p m e n t o f T e c h n o l o g y in S w i t c h i n g E q u i p m e n t

14.16 As an alternative to crossbar equipment, a "stored programme

controlled" (S.P.C.) system has been adopted by the A.P.O. in new trunk

switching facilities. The first installation of this equipment is being

carried out at the Pitt Street Exchange, Sydney, and S.P.C. trunk exchanges

have been ordered also for Melbourne and Adelaide.

The equipment for the Sydney exchange was designed by the Bell

Telephone Manufacturing Company of America which is a subsidiary of the

International Telephone and Telegraph Company and was offered by S.T.C.

which has manufacturing rights in Australia. Much of the equipment is

presently being made in Belgium, but some of the equipment for the

Melbourne and Adelaide exchanges will be made by S.T.C. in Australia.

The A.P.O. informed the Commission that it has entered into an

agreement with S.T.C. which provides inter alia for

. local manufacture of equipment;

. the licensing of other local manufacturers if the volume of

demand warrants this;

. prices to be determined jointly by the A.P.O. and the company;

. S.T.C. to make available to the A.P.O. information on all

components, including profit, in the price of the equipment.

The stored programme controlled system is now being widely used

overseas, particularly in the United States. In the light of these

overseas developments, it would seem likely that the S.P.C. system will be

applied eventually in Australia to all automatic exchanges and not

restricted to trunk exchanges.

318

14.17 The approach outlined by the A.P.O. to local manufacture, and to

licensing and pricing arrangements for S.P.C. equipment is consistent with

that adopted for the manufacture and supply of the present generation of

switching equipment. Given that purchasing policy is administered with the

same degree of judgment as has been apparent in the past, there is no

apparent reason why the industry should not retain its competitive character

in the foreseeable future.

S u p p l y o f C a b l e s

1 4 . 1 8 Austral Standard Cables Pty. Ltd. (A.S.C.) was incorporated in 1948 in response to an A.P.O. decision that production of underground

telephone cables should be established in Australia to meet A.P.O.

requirements. An arrangement similar to that entered into with S.T.C. and

Plessey for the supply of switching equipment was negotiated with A.S.C.,

i.e. a ten year agreement with a minimum level of annual orders, prices to

return to the company a 12^ per cent profit before tax on funds employed,

any surplus being distributed between the company and the A.P.O.

At the end of the ten year period in December 1957 the agreement

was renewed on the basis that the local industry was established and in a

position to compete with overseas suppliers. Since then two more local

companies have begun operating as cable manufacturers and are now suppliers

to the A.P.O. Olympic Cables Pty. Ltd. (Olympic) supply a full range of

cables along with A.S.C., while Conqueror Cables Pty. Ltd. (Conqueror)

supplies plastic underground cables only. At present local manufacturers

supply about 99.5 per cent of the A.P.O.'s requirements.

C o n s u l t a n t ' s R e p o r t o n S u p p l y o f C a b l e s

1 4 . 1 9 The consultant Mr G. Paterson, reports that there is a considerable over-capacity in the two companies - A.S.C. and Olympic - to

supply paper insulated lead covered (P.I.L.C.) underground cables. A.S.C.

could supply the whole of the A.P.O. requirement while Olympic can supply

about 50 per cent of A.P.O. needs. There is adequate production capacity

in the three companies for the supply of plastic insulated and sheathed

cables.

3 1 9

A.S.C. is dependent on A.P.O. orders for about 83 per cent of

its total business. While A.S.C. supplies the major part of A.P.O.

requirements for plastic covered cable, it is meeting growing competition

from the other two companies. Olympic's telephone cable factory would be

forced to close without A.P.O. orders. Conqueror is not substantially

dependent on A.P.O. orders since it also manufactures cables for the

electrical industry as does Olympic Cables.

14.20 In the supply of P.I.L.C. cables the consultant's report shows

that A.S.C. received between 57 and 73 per cent of A.P.O. contracts over

the period 1967-68 to 1973-74; the only other supplier, Olympic, received

the balance of the orders. The report notes that A.S.C. is aware that,

however competitive its own prices, the A.P.O. could not permit Olympic's

share of the contracts to fall much below 30 per cent. On the other hand,

Olympic is unlikely to receive more than 45 per cent of the total contracts

no matter how competitive its prices. As A.S.C. is assured of 55 to 70

per cent of the business, its pricing policy could be directed towards

securing the more profitable lines of cable, while maintaining higher

than necessary prices for the remainder.

14.21 The consultant considers that because of over-capacity in the

industry, the entry of another manufacturer into the P.I.L.C. field would

aggravate the problem and that an increase in Olympic's capacity is not

warranted in the present circumstances. The consultant concludes that

there is a case in these circumstances for the A.P.O. to negotiate

agreements with the two suppliers similar to that which existed with A.S.C.

in 1958. Such an agreement would incorporate guaranteed minimum orders,

or agreed percentage of profit on funds employed with sharing of profits

over the specified percentage. He notes in his report that the New

Zealand Post Office obtains all its cable supplies from A.S.C. through

the latter's fai c.ory in New Zealand, and that there is a negotiated agree­

ment on prices which is apparently satisfactory to both parties.

14.22 In the plastic cable area where purchases have doubled in the

past seven years, the consultant reports that competition is strong, with

A.S.C., as the largest supplier, offering keen prices to contain the

growth rate of competitors. In this situation he considers that the open

tender system is satisfactory and that no change in existing practices

320

appears necessary.

C o m m i s s i o n ' s C o n c l u s i o n s ( C a b l e s )

14.23 Comments made earlier in relation to the need for exercising

responsible judgments in applying purchasing policy to the supply of

switching equipment, have equal validity to contracts for the supply of

cables. The judgments to be made are not easy ones and the A.P.O. has on

all counts administered policy to date in a realistic and practical way.

It is apparent that there is some over-capacity in the cable

manufacturing industry at present. The economics of that industry could

therefore be disturbed if another business was established to produce cable

for the telecommunications industry. A company seeking to establish itself

as a supplier of switching equipment to the A.P.O. would first have to

obtain a licence to manufacture the particular equipment concerned and the

number of suppliers can be limited by an agreement controlling the number

of such licences to be issued. The same situation does not apply to the

cable industry; there is nothing to prevent a new business being

established in competition with existing businesses, other than the normal

commercial considerations which apply to any industry.

This may be a problem to which consideration will have to be given

in the future. For the present the Commission can only conclude that there

is no scope for the entry of additional suppliers in the cable manufactur­

ing industry so far as the needs and requirements of the A.P.O. are

concerned.

14.24 The retention of the competitive tender system for the supply

of plastic insulated cables is supported by the Commission. The tender

system does however appear to have limitations in providing real

competition between the two suppliers of paper insulated lead covered

cables. The Commission considers that the alternative of negotiated

agreements with the suppliers should be examined by the A.P.O.

P o s t O f f i c e W o r k s h o p s

14.25 Workshops were established by the A.P.O. in each State before

321

World War I as central depots for tradesmen such as carpenters and

painters, for the repair and reconditioning of telephones, switchboards,

and telegraph apparatus and later for the production of telegraph

apparatus and small replacement parts. In 1940 the total staff was a

little more than 900. During World War II the staff almost doubled and

the workshops manufactured a wide range of equipment for the Army as well

as telephone plant that could not then be obtained from overseas.

After World War II the workshops continued to expand to

manufacture telecommunications equipment that was then difficult to obtain

and this led to the engagement of staff and to the setting up of

professional engineering management. The staff in mid-1972 totalled

over 3,000, the value of fixed assets was $14 million and the output

valued was at $24 million per annum.

14.26 W h ils t t h e g r e a t e r p a r t o f workshop a c t i v i t y i s c o n n ected w ith

t e le c o m m u n ic a tio n s , a c o n s i d e r a b l e ra n g e of work i s c a r r i e d o u t , i n c l u d i n g

f a b r i c a t i o n of te l e p h o n e b o o t h s , s m a ll exchange b u i l d i n g s , and l e t t e r

r e c e i v i n g b o x e s , and t h e m a n u f a c tu r e of r e l a y s and r e l a y s e t s . A major

a c t i v i t y i s t h e r e c o n d i t i o n i n g o f t e l e p h o n e s and te le p h o n e s w i t c h b o a r d s .

The workshops also manufacture parts for equipment which is still in

service but for which suppliers no longer make parts. There is a great

variety and range of machine tools and equipment, particularly in the

Sydney workshops, and this, together with the high standard of engineering

management, suggests that there is scope for the workshops to be used to

greater advantage.

In addition to present activities, the manufacture of limited

quantities of some telecommunications equipment would give fuller

utilisation of the expensive workshop plant, improve the security of

supply of some components, and reduce the stock holdings of some items.

This could be achieved with little increase in fixed capital equipment and

a relatively small increase in manipulative staff, mostly unskilled. The

manufacture of limited quantities of items such as relays, telephones and

printed circuit boards would reduce delays, give checks on the cost of

purchased supplies and allow the workshops to participate in technological

developments. More importantly it would maintain within the corporation

an expertise which is important when deciding on manufacturing processes

322

and materials.

14.27 The costing system employed for the workshops does not include

provision for overheads in respect of

. interest on fixed assets and working capital;

. depreciation;

. superannuation and furlough liabilities;

. engineering and general administration costs.

Unless these costs, which are true costs of any business, are included

the real performance and efficiency of the workshops cannot be assessed.

There is some case for excluding these overheads when the workshops are

used mainly - as at present - to perform jobbing or short-run production

work and reconditioning work. If the workshops are to extend operations

to include the manufacture and supply of equipment there should be a

proper commercial costing of the workshop products.

C o m m i s s i o n ' s C o n c l u s i o n s ( P o s t a l W o r k s h o p s )

14.28 The Commission considers that the workshops should be retained

and placed under the control of the Telecommunications Corporation and that

they should continue to carry out work for the Postal Corporation. The

Commission suggests that the possibility of the workshops entering into the

manufacture of limited quantities of telecommunications items should be

further examined. It would be essential, however, to introduce a full

commercial costing and accounting system to permit proper comparison of

true workshop costs with prices quoted by outside companies.

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3 2 4

CHAPTER 15

PERFORMANCE OF WORK BY CONTRACT

Present use b.y A.P .O. o f C o n t r a c t o r s

15.1 A significant amount of work in the Australian Post Office

(A.P.O.) is undertaken by contractors who compete for contracts arranged

in conformity with the Audit Act and Treasury Regulations, and the

Commission is required by its Terms of Reference to consider what

changes, if any, should be made in the policy and practices of the

A.P.O. in relation to such work. The use of contractors extends over

a wide range of departmental activities, including the installation of

automatic telephone exchanges, cable ducts and associated manholes,

major transmission systems, microwave radio systems, P.A.B.X.s,

privately supplied attachments and cabling in buildings; the servicing

of certain equipment; the carriage of mails and roadside mail services

in country areas; the cleaning if buildings; the printing and distribution

of telephone directories; the maintenance of office machines and computers,

and the preparation and distribution of money for staff salaries.

The Commission was informed by the A.P.O. that the use of

contractors increased after the early 1960s to meet the heavy demand for

telephone services particularly around Sydney. Representations from

Members of Parliament and community organisations, as well as individual

citizens prompted the A.i.0. to seek means of having work done which, at

that stage, exceeded the limits of its resources. As there were diffi­

culties in obtaining additional departmental staff, contractors were

sought to meet the need and they made a significant contribution. A

comparison of costs of works done by contractors with the estimates of the

costs of doing the same works by departmental labour showed savings and

encouraged a continuation of their use.

Since that time the trend in New South Wales has been for an

increasing use of contractors, with less emphasis in consequence on a

3 2 5

build-up of an A.P.O. labour force which would otherwise have been necessary

to meet the works programme. The A.P.O. estimates that savings of

approximately $3 million were achieved by the use of contractors in the

1972-73 year, mainly on cable conduit projects and on two large installa­

tions at Pitt Street Exchange, Sydney.

15.2 Some contract work has been opposed by staff organisations, who

claim that such work should be carried out by departmental staff. The two

most contentious areas, both in telecommunications, are the installation

of telephone exchange equipment and the laying of conduits for underground

cables; currently the greater part of the contract work in both these

classes is being performed in New South Wales.

15.3 Early in 1973, following discussions between the Postmaster-

General, the Director-General, the N.S.W. State Director, and officers

of the Postal Telecommunication Technicians Association (P.T.T.A.), the

Postmaster-General wrote to the N.S.W. Branch of the Association stating

that it was the Government's policy to dispense with private contract

work wherever possible, and giving his assurance that every effort would

be made to introduce this policy. Subsequently in November 1973 an

agreement was made with the Association (Appendix 1) and the major

contractors were advised of the phasing out of contract work. One union

claimed that the A.P.O. would then be able to recruit staff from amongst

those forced to leave contractors employment by the cessation of contract

work, but the A.P.O. informed the Commission that its attempts to recruit

staff particularly from amongst that group had not met with the success

expected.

V i e w s o f S t a f f O r g a n i s a t i o n s

15.4 The staff organisations most concerned with contract work are the

Postal Telecommunication Technicians Association (P.T.T.A.) on exchange

installation and the Amalgamated Postal Workers Union (A.P.W.U.) on conduit

laying.

326

15.5 The P.T.T.A. made the following points about the use by the

A.P.O. of contractors

. It considered that A.P.O. staff could compete more than

favourably with contractors, although the Association

did not have possession of the details of contract costs.

. The A.P.O. appeared to have changed its reason for using

contractors from that of a technical advantage to the

equipment supplier, to that of a necessity to meet peaks

in work.

. In the absence of proper costing, the advantages of using

contractors was questionable, especially in view of the

assistance and facilities made available to them by the

A.P.O.

. Many of the staff employed by contractors had been trained

by the A.P.O., and this represented a cost to the A.P.O.

and an assistance to the contractors.

. The standard of work carried out by contractors was something

less than the standard produced by A.P.O. employees, and

on some occasions the latter had been called in to remedy

sub-standard work.

15.6 The employment of contractors, in the view of the P.T.T.A.,

would have detrimental effects on the promotional opportunities of its

members and would adversely affect conditions and salaries by reason

of the fact that contractors operated in the same area without having

to meet wage and employment conditions comparable with those of A.P.O.

staff. It suggested that the use of contractors would lead to a

deterioration in the service offered to the public since contractors

employed casual and largely unskilled staff without any continuing

responsibility to the public or to the telephone network. The P.T.T.A

recognised that there were skills and expertise not available at the

present time within the A.P.O., and stated that in these circumstances

there would be no objection to certain works being done by contractors

327

15.7 The P.T.T.A. stated that it would consider co-operating in any

fair examination of work practices designed to produce economies in

A.P.O. installations. The Commission was informed that the Association

was thinking of more flexibility in the engagement of staff, including

the employment of females, subject to that employment being consistent

with union principles.

15.8 The A.P.O. told the Commission that, following the installation

of new equipment by contractors, there were occasional "teething"

problems, but the incidence of these did not differ as between work done

by contractors or by the A.P.O. staff. Work done by the contractors

was supervised as carefully as was the work done by the A.P.O. Commenting

on the P.T.T.A. claim that work was done by the A.P.O. for contractors

and not charged to them, the A.P.O. said that the contract specifications

provided for the A.P.O. to do some work with its own staff because it

was considered the best way of doing it.

15.9 The A.P.O. maintains that some works can be done more economi- .

cally by contract, possible reasons for this including a more flexible

approach to staffing practices by contractors and lower incidental costs

such as travelling allowances and the provision of amenities. The more

flexible approach to staffing includes the employment of temporary and

casual staff, including females, sometimes recruited locally for a

specific job and the use of lower skilled and hence lower paid staff for

certain tasks involved in an installation. A contractor also has

opportunities to use incentive payments.

15.10 The A.P.W.U. evidence on the use of contractors included the

following points:-

. Contractors were employed because of the inability of the

A.P.O. to meet the requirements of the departmental

programme due to the Public Service Board's administration

of staff ceilings.

. The A.P.O. should be more active in recruiting and training

staff for some tasks.

3 2 8

. The estimated cost of work to be done by A.P.O. staff was

inflated by the large provision for non-effective time. In this

regard the A.P.O. adds a further 87 per cent to the calculated

manhours of work for conduit installations.

. The work performed under contract was usually below the standards

required by the contract specifications.

. Additional costs were involved in the preparation of schedules

and the supervision of the work; the A.P.O. paid more and

received less for the work performed under contract.

15.11 The A.P.O. maintained that savings had been achieved by the use

of contractors, particularly on work such as the laying of cable conduits

in the Sydney metropolitan area where excavating and similar plant was

used. Staff shortages and difficulties in recruiting have been factors in

the inability to meet its work commitments using its own staff, but the

recruitment difficulties reflected the highly competitive conditions on the

labour market.

15.12 With regard to work standards of contractors, the A.P.O. stated

that on conduit installation work it appoints an inspecting officer,

normally an experienced Line Inspector, to supervise the work of the

contractor and ensure that the installations meet the requirements of the

specifications and contractual conditions.

15.13 The A.P.W.U. submitted that contractors on conduit installations

were not complying with contractual conditions on a number of matters

including rates of pay, amenities for employees, display of notices,

erection of barriers and warning lights. Although the A.P.O. informed

the Commission that some of the Union allegations were incorrect, and

that in other circumstances contractors had been instructed to remedy

at their own expense breaches of contractual conditions, it appears to

the Commission that some contractors have not been instructed by the

supervising officers to comply with all contract conditions mainly in

respect of the provision of site amenities.

329

15.14 The A.P.W.U. also questioned the increasing use of contract work

for the cleaning of buildings. At the present time, the A.P.O. favours

the use of its own cleaning staff for buildings housing technical equip­

ment where a high level of security is necessary. Other buildings such

as post offices and administrative buildings are treated on an individual

basis with costs being the deciding factor. Leased office buildings were,

in the main, cleaned by contractors; the A.P.O. told the Commission

that it was adhering to Government policy in this regard.

15.15 The Union suggested that the A.P.O. had the organisational

ability and financial need to direct completely the preparation and

publication of the "Pink Pages" telephone books. The A.P.O, told the

Commission that it would be possible for it to take over the whole

operation, but the question not yet determined was whether it could

achieve the same or better financial results.

C o n t r a c t o r s V i e w s

15.16 No submissions were received from contractors engaged on cable

conduit installations. The major manufacturers of telecommunications

equipment, Standard Telephones and Cables Pty. Limited (S.T.C.), Plessey

Telecommunications Pty. Limited (Plessey), and L.M. Ericsson Pty. Ltd.

(L.M.E.), emphasised in their submissions the importance to them of

being able to continue to do a proportion of the installation work. The

advantages to the manufacturers and ultimately to the A.P.O. lie in

possible improvements in equipment design arising from experience gained

during the installation and in the capability of the manufacturers to

compete for export contracts, where installation as well as supply is

often essential. The A.P.O. suggested to the Commission that there

would be advantages to it from suppliers gaining work outside Australia

since this could lead to lower costs.

15.17 With regard to design "feedback", the Postal Telecommunications Technicians Association pointed out that the current practice is for

contractors to draw the equipment to be installed as complete units

from the A.P.O.'s store and that only L.M.E. could initiate design

changes on crossbar equipment, since Plessey and S.T.C. manufacture under

330

licence. The Association claimed that design "feedback" cannot and does

not occur. The contractors, however, maintain that there are sufficient

advantages for them to continue to do their present small proportion

of this work, although they do not consider it to be attractively

profitable.

C o n s u l t a n t ' s R e p o r t

15.18 The terms of reference for the consultant, Mr. G. Paterson,

asked that he report on the use by the A.P.O. of contractors for the

laying of conduits and for the installation of standard telephone

switching equipment. The comments and conclusions of the consultant

are summarised below.

15.19 Cable Conduit Construction: Cable conduit construction is

relatively simple civil engineering work, including the digging of

trenches averaging about three feet deep by two feet wide, usually

within the footpath or nature strip, laying a number of pipes properly

spaced in the bottom of the trench, placing a special fluid concrete

mix around the pipes, and backfilling the trench and constructing

manholes.

The addition of 87 per cent to the calculated number of

departmental staff manhours for cable conduit installations, which the

A.P.W.U. considered to be excessive, was verified by the consultant

from records of completed works. It reflects the organisation and

staffing of gangs and the high standard of site amenities and

conditions on jobs done with A.P.O. staff. The consultant studied

the A.P.O. work specifications and made the folowing comment:-

"The specificotions cover all technical requirements adequately, and also provide the A.P.O. supervisory staff with the authority necessary to ensure that the contractor observes requirements for safety barriers, covers , warning lights, etc. The specification requires that the contractor shall "erect

shelters wherein his workmen may change their clothes, have meals, wash and boil water". It also makes the contractor responsible for providing "efficient sanitary appliances for the use of his employees and the supervising officer".

331

15.20 The Commission endorses the conclusions reached by the

consultant that:-

"The use of contractors to perform conduit laying works is definitely the "least cost" way of doing this work in N.S.W. and there is no reason why it should be different in other States. Conduit construction can be done by any com­ petent civil engineering contractor and does not call for any

special expertise possessed only by the A.P.O.

On economic grounds it would be desirable for the A.P.O. to carry out an increasing proportion of its conduit works by contract, while retaining a departmental labour force of sufficient size to perform works associated with operating areas where contract work would be difficult to specify and supervise,

and at the same time to do sufficient straight forward new work to maintain a constant check on contract prices and departmental efficiency."

15.21 Installation of Exchange Switching Equipment: The installation

of switching equipment is restricted to telecommunications. The A.P.O.

determines the quantity, extent, location and standards for this type

of work; and as it will be responsible for the operation and maintenance

of the equipment, it will have strong reasons for carrying out much

of the installation with its own staff. However, the consultant

considered that there was "some merit" in the argument that the

installation experience gained by the contractors did lead to design

improvements through "feedback" and that apart from any other reason

this justified some part of the installation work being performed by

contract.

15.22 The Consultant reported that:-

"Unlike conduit work, the installation of telephone switch­ ing equipment requires special skills possessed only by the A.P.O. and by the suppliers of the equipment.

It would therefore seem logical and desirable for the A.P.O. to carry out the greater part of its normal installation work with its own forces, who in addition to installation capability must possess the expertise needed to operate and main­

tain all the types of equipment in the telecommunications network.

The most satisfactory overall arrangement in the interests of both the A.P.O. and the switching equipment industry would be to have a base load of installation work always available to fully

332

occupy the A.P.O. staff while leaving a limited proportion of the work including the peak loads to be done by contract.

15.23 The Commission endorses the conclusion reached by the

Consultant that:-

"The use of contractors to install standard type switching equipment has in a majority of cases proved to be more economical than departmental installation. The economic advantage of contract installation is in a number of cases marginal and

could be further reduced by a relatively small improvement in departmental efficiency.

Installation work requires special skills which are not readily available outside the Post Office or the three equipment manufacturers. The Australian Post Office staff must possess the expertise necessary to install, operate and maintain all the

equipment in the telecommunications network. It is therefore considered that the major part of the installation work should continue to be done by theAustralian Post Office with its own resources."

C o n c l u s i o n s :

15.24 The Commission is required by its Terms of Reference to report

on the performance of work for the A.P.O. by contract. Although the

decision to phase out contract work was announced during the course of

the Inquiry, the Commission makes the following observations:

The procedures used by the A.P.O. for estimating the costs

of work carried out by its own staff for comparison with

prices quoted by contractors for the same work, are reasonable.

The A.P.O. specifications and its procedures for contract

supervision are adequate to ensure that required standards

of work and of working conditions are met, provided the

supervisory staff exercise the powers given them.

The laying of conduits by contract in New South Wales is the

cheapest way of doing the work. It does not call for any

special expertise.

333

Installation of switching equipment by contract is only margin­

ally cheaper than installation by A.P.O. staff. Special skills

are required and it is appropriate that the greater part of such

installation work should be carried out by A.P.O. staff.

There is merit in equipment suppliers being given a reasonable

base load of installation work to be carried out by their own

staff to provide them with continuing installation expertise.

In particular this would assist local companies to compete

for contracts to supply and install switching facilities in

overseas countries.

Peaks occur in the A.P.O.'s capital programmes. It would appear

to be economically desirable for the A.P.O. to maintain a

steady load of work for its own staff and "take up" peaks

by the use of contractors as appropriate.

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A P P E N D I X I T O C H A P T E R 15

C O N T R A C T O R I N S T A L L A T I O N A.P.O. - P.T.T.A. - A G R E E M E N T FOR T H E I N S T A L L A T I O N OF P U B L I C T E L E P H O N E E X C H A N G E S

1. The Department shall progressively reduce the proportion of contract installation in the Exchange Installation area with a view to eliminating contractor usage, except as indicated in Clause 9, by 1st July, 1975.

2. The Department will endeavour to recruit staff for exchange installations to raise the present level to where it can match programme requirements.

3. The Association acknowledges this agreement and will agree to:-

(i) Delegations being extended to allow the project O.I.C. to recruit Telecommunications Assistant staff

(ii) Recruitment of female labour

(iii) Recruitmei. of local labour for the duration of specific projects

(iv) On-the-job training of Telecommunications Assistants for specific manipulative tasks related to the project

4. The Department agrees that the lowest level of staff employed in the area concerned will be Telecommunications Assistants.

5. In States where the Department is or intends carrying out the installation of public telephone exchanges by contract the Department will make available to the appropriate State Branch of the Union, at the time of preparation, a copy of the works programme and any proposed contract allocations for the next

financial year.

6. When the Department has determined which items on the works programme it proposes to undertake by contract, contracts will not be let until the programme is discussed and written agreement reached between representatives of the State Branch of the Union

and the State Administration of the Department . In the event of disagreement those items subject to disagreement shall be referred to the Federal Executive of the Union and the Central Administration of the Department for examination. If agreement cannot be reached

at this level the item/s will be referred to the Postmaster-General or a mutually-acceptable arbitrator for determination.

335

7. The Union may nominate an officer of the Union who shall be authorised by the Department to accompany an inspecting officer of the Department with full authority to inspect works in progress and wage records in accordance with Clause 14 (2) and (4) of General Conditions of Tender and Contract PMG No. 2. Any matters the Union wishes to raise from these inspections to be referred through the Staff and Industrial Officer (Engineering) to the Assistant Director (Engineering). Any information obtained by the Union nominee from inspecting the contractors' wages books is to be

classified as strictly confidential and only to be disclosed to the Assistant Director (Engineering).

8. The Department will continue to maintain full authority over any projects undertaken by contract and to strictly supervise standards of work performed by contract prior to such work being accepted into service.

9. The exceptions to this agreement mentioned in (1) are those pro­ jects where it is agreed between the Union and the Department that the installation is one requiring special skills and techniques not reasonably available to the Department.

10. This agreement shall be reviewed by the parties at 12-monthly inter­ vals. Additional reviews may be made by mutual agreement between the parties.

Dated this Nineteenth day of November, 1973

For and on behalf of the For and on behalf of the

Postal Telecommunications' Postmaster-General's

Technicians Association Department

Sgd: Sgd: Sgd:

Ken Turbet C.P. Cooper W.J.B. Pollock

(K.C. Turbet) General Secretary

(C.P. Cooper) (W.J.B. Pollock) Federal President Senior Assistant Director-General

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C H A P T E R 16

UR B A N A N D R E G I O N A L D E V E L O P M E N T

16.1 The Commission is required to consider the changes, if any, which should be made in the organisation, administration and operations of

postal and telecommunications services in relation to urban and regional

development. The expression "urban development" requires some definition

in its application to the inquiries of the Commission. For this purpose

it was decided that "urban development" should be considered primarily in

the context of stated policies of the Australian Government to assist and

encourage the relocation of people in designated "growth centres", and

secondly, with regard to postal and telecommunications services in rural

towns.

A s s i s t a n c e to G r o w t h C e n t r e s

16 . 2 In its evidence to the Commission, the Australian Department of Urban and Regional Development (D.U.R.D.) mentioned three forms of

assistance which the Australian Post Office (A.P.O.) could give in

implementing policies of urban and regional development; concessional

tariffs, the locating of facilities, and the awarding of contracts.

1 6 . 3 Concessional Tariffs. The first proposal referred to by D.U.R.D. is the granting of concessional tariffs in the use of telecom­

munications services. More particularly, this is related to the charges

for telephone calls between growth centres and the capital cities. Taking

Albury/Wodonga as the example, D.U.R.D. proposed that telephone calls

between that centre and the metropolitan areas of Sydney and Melbourne be

charged at the rate of a "local" call and not as a trunk call. This

concession would not apply to all residents of the growth area, but would

be related to industry only. D.U.R.D. accepts that, as a first measure,

the concession might be related to outward calls onl from the growth

centre, but considers that, desirably, a concession should apply also to

inward calls.

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16.4 The interest of this Commission is not so much in the nature or

extent of concessional tariffs given to encourage particular urban

development plans, as in the effect of such concessions on the finances of

the A.P.O. The view of D.U.R.D., that the cost of the concessions should

be borne by the authority providing the telecommunications service, is not

supported by the Commission. The A.P.O. or the proposed telecommunications

corporation, will be relying on retained profits of the business and

borrowings from the Treasury to meet its capital expenditure programmes.

In either case it is the users of the telecommunications service who have

to provide the source of retained funds, or pay the interest accruing on

borrowings from the Treasury.

In the Commission's view, it would be unreasonable to require the

users to fund, through increased charges for services, tariff concessions

which are given as part of a policy of decentralisation. The costs of any

such concessions should be provided for in the appropriation of the

department concerned and paid, either as direct subsidies to the

businesses concerned, or as a reimbursement to the telecommunications ·

corporation of the amount of the concessions given.

16.5 Location of A.P.O, Facilities. The second form of assistance

proposed by D.U.R.D. concerned the location of new facilities of the

A.P.O., having regard to the Government's policy decisions on employment

redistribution. D.U.R.D. considered that the A.P.O. should, as a matter

of principle, locate its own offices and workshops away from metropolitan

city centres.

16.6 A normal commercial firm would be attracted to relocation in a

growth centre by factors which work to the firm's interest or advantage.

The postal and telecommunications corporations would be in a different

position to private organisations in their freedom to exercise commercial

judgments on such issues. As statutory authorities they must have regard

to Government policies and it would not be unreasonable to expect their

co-operation in planning for decentralisation, even if some additional

costs were involved.

The postal and telecommunications networks, however, involve

large and complex operations which do not generally allow a great deal of

3 38

choice as regards the location of facilities. These facilities serve users

and must be strategically located with that purpose in mind. To the extent

that some choice in the location of facilities is available, and provided

the cost differentials are modest, the postal and telecommunications

corporations could make a positive contribution to plans for the

redistribution of employment opportunities.

16.7 Awarding of Contracts. The third proposal concerned the

awarding of contracts to take account of the location of contractors and

suppliers, but D.U.R.D. did not press this proposal in its oral evidence

to the Commission. The A.P.O. conforms to Government policy as regards the

awarding of contracts and this involves the calling of public tenders. A

business located in a particular area may have an advantage in the price it

is able to quote for the supply of goods or services within that area; this

is a natural advantage attached to the location of a business. However, a

tender system which involved giving a preference to persons or

organisations located in particular areas would destroy much of the purpose

of the open tender system.

R a n g e a n d A v a i l a b i l i t y o f S e r v i c e s

16.8 For obvious reasons D.U.R.D. considers that new growth areas

should be provided with postal and telecommunications services which

correspond both in range and standard to those available in metropolitan

areas. In the case of postal services, it considers that these facilities

should be available immediately; for telecommunications services it

proposes that there be a minimum of delay in providing connections to the

network.

16.9 If the A.P.O. is to provide the services to growth areas it

would need a reasonable lead-time within which to plan and build the

extended facilities. This is not a major problem for postal services, but

is a highly relevant issue in telecommunications planning. D.U.R.D. is

aware of the need for advance information to be available on the growth

rates likely for particular areas and the A.P.O. is a member of a

committee representing a number of departments involved in the planning of

growth centres.

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16.10 The A.P.O. has also been considering the extra capital costs that

would be involved in providing telecommunications facilities for likely

growth areas on the basis that concessional tariff charges would operate.

The point made by the A.P.O., and which the Commission accepts, is that

concessional tariffs would give rise to an immediate traffic increase and

that planning would have to take this into account. If, for example,

concessional tariffs were introduced for the existing Albury/Wodonga

population, the A.P.O. estimates that additional capital investment of

$5 million would be required for the Albury/Wodonga-Melbourne route and

$3 million for the Albury/Wodonga-Sydney route.

If concessional tariffs were introduced the capital required to

develop telecommunications services in growth areas would draw on the

capital resources of the telecommunications corporation and unless special

advances were made to the corporation this would require the curtailment

of the extension of services to other areas, or the increase of tariffs

generally to finance the extra expenditure. The pressure on capital

resources could be avoided by a special appropriation to the corporation

to cover the cost of the additional facilities for the growth centres and

the Commission recommends that this should be done.

16.11 In normal circumstances the telecommunications corporation

would pay interest on the special appropriation once the funds are drawn

from the Treasury. With the considerable lead-time from the commitment of

funds to the stage where the new facilities are operational and

generating revenue for the corporation, the interest payable to the

Treasury could be a significant item of cost. In the Commission's view it

would be reasonable to lessen the burden on the corporation, and therefore

on its customers, by not requiring interest to be paid on these borrowings

until the additional facilities are in service.

Pos ta l a n d T e l e c o m m u n i c a t i o n s S e r v i c e s in R ur a l T o w n s

16.12 Rural towns, whose size and location suggest that they might be

appropriate areas for decentralisation, are now provided with the same

range of postal and telecommunications services as are generally available

in the metropolitan areas. A 24 hour telephone service is provided

3 4 0

through automatic exchanges and users are linked with the national network

for the purpose of making and receiving trunk calls. In particular cases

there may be a need for additional facilities to meet user demand, but the

same situation applies in some metropolitan areas of the capital cities.

As a general comment the Commission considers that there is

little, if any, scope for the A.P.O. to expand services in rural towns with

a view to encouraging decentralisation, except where there is a planned

"growth centre" development. In the latter case the assistance which can

be given by the A.P.O. is in adding to existing facilities rather than

introducing new services.

U n i f o r m C h a r g e s f o r T e l e p h o n e C a l l s

16.13 A number of submissions to the Commission from rural areas

proposed the introduction of a uniform charge throughout Australia for

telephone calls. This proposal included the retention of the policy of

unlimited time for local calls, with a three minute limit on trunk calls

before an extra charge was incurred.

The A.P.O. estimates that if uniform charging was introduced, a

local call and a three minute trunk call would each have to be priced at

33 cents to achieve the same trading result as given by the present

differential tariff structure. It also considers that the additional trunk

traffic, that could be expected to result from the reduced charge for such

calls, would require a capital expenditure in the order of $850 million at

1972 prices to up-grade the trunk network. Assuming that the re-equipping

of the network would be spread over 15 years, the growth in traffic could

escalate the cost to $2,500 million at 1972 prices by the end of the 15

year period.

16.14 The Commission considers that it would be impracticable to

introduce uniform charging for telephone calls in the foreseeable future.

Such a policy would destroy the balance built into the present network

between facilities required for local calls and for the trunk network.

Local calls would be priced beyond the financial means of most users,

resulting in present facilities being under-used; the growth in trunk

traffic could only be satisfied by an extraordinary capital development

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programme, the funding of which would require progressive increases in

call charges.

1 6 . 1 5 A further suggestion was that local call fees remain unaltered and that a flat-rate trunk charge for three minutes be applied. To

maintain the same trading result as at present, the charge for a three

minute trunk call would be of the order of $1.13, an increase on the

charges now made for more than 70 per cent of trunk calls. The equipment

to handle the extra trunk traffic generated would require capital

expenditure in the order of $100 million at 1972 prices, and this cost, at

1972 prices, could escalate to $250 million because of traffic growth over

the re-equipping period of six to seven years.

This proposal would, if implemented, cause distortion in the

tariff structure and would involve some of the users of the telephone

service in the subsidising of the users of the trunk service. The

business community, governments and public authorities are heavy users of

the trunk service and there is no sound reason why their normal costs

should be the subject of such a subsidy. The Commission does not

therefore support an amendment of the tariff structure on these lines.

E x t e n d e d Local S e r v i c e A r e a ( E . L . S . A . )

16.16 One of the aims of the Community Telephone Plan described in

Chapter 4, was to extend the area within which local calls could be made.

For the purpose of determining tariffs, the telephone network is divided

into zones. Telephone calls within a zone and to an adjv ming zone are

charged as local calls; calls from one zone to a non-adjoining zone are

trunk calls and charged at the rates for the trunk service. The Extended

Local Service Area (E.L.S.A.) policy was introduced in 1960 and has meant

that many calls previously charged on trunk rates are now charged as local

calls.

The Commission supports the principle of the E.L.S.A. system

which seems to have considerable acceptance by rural subscribers. It has

the merits of offering rural subscribers the opportunity to use the

telephone over a significant part of the network at the rate applying to a

local call, and of avoiding most of the difficulties which the proposals

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for uniform call-charging raise. A few submissions to the Commission

referred to anomalies created by excluding a particular rural town from a

designated zone, but the Commission considers that, on the evidence, the

zoning policy has been implemented sensibly and provides a significant

recognition of particular needs of rural subscribers.

R e g i o n a l A d m i n i s t r a t i o n o f P o s t a l a n d T e l e c o m m u n i c a t i o n s S e r v i c e s

16.17 In Chapter 11, discussing the organisational arrangements for the

postal and telecommunications corporations, the Commission recommends that

the administration of services provided by the corporations be decentral­

ised through the establishment of regional and district administrative

centres. The establishment of such centres will provide an opportunity for

the corporations to give a practical form of assistance to the development

of growth centres. The location of an administrative centre should be

selected primarily on the grounds of its suitability as a base from which

the users can be provided with the best service and the facilities best

managed. It would be logical to expect that a selected growth centre would

provide the most appropriate location for these purposes.

It is not possible to forecast the number of people who might be

employed by the postal and telecommunications corporations on average in

regional centres. Effective decentralisation of management responsibil­

ities will require that each administrative unit should have the

responsibility for the day-to-day administration of the services for a

defined area. It is reasonable to expect, therefore, that there will be a

conscious and planned move over a period of time to increase the number of

staff in particular rural centres.

16.18 In accordance with Government policy, the A.P.O. is investigating

the practicability of re-locating staff from inner city areas of Melbourne

and Sydney to suburban or country areas, including the possible transfer of

some units now located in its Central Office in Melbourne to Albury/Wodonga.

Having in mind the extent of the organisational changes required to

implement the recommendations in this Report, the Commission considers it

would be unwise to contemplate any extensive move of the Central Office

Administration of the A.P.O. to Albury/Wodonga at this stage.

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.

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A C K N O W L E D G E M E N T S

The Commission was a s s i s t e d i n i t s i n q u i r i e s by many p erso n s and

o r g a n i s a t i o n s . W ithout t h i s a s s i s t a n c e i n some c a s e s , i t would n o t have

been p o s s i b l e f o r th e Commission to have c a r r i e d out th e t a s k e n t r u s t e d to

i t . In o t h e r c a se s th e work o f th e Commission was f a c i l i t a t e d by th e

w i l l i n g n e s s and i n t e r e s t o f p e r s o n s , e i t h e r in t h e i r p r i v a t e o r o f f i c i a l

c a p a c i t i e s , to g iv e th e Commission th e b e n e f i t of t h e i r views and

e x p e r ie n c e s .

The Commission acknowledges the g r e a t c o - o p e r a tio n r e c e iv e d from

th e D i r e c t o r - G e n e r a l , P o s ts and T e le g ra p h s, Mr. E.F. Lane, and o th e r

o f f i c e r s i n the C e n tr a l O f f ic e and S t a t e a d m i n i s t r a t i o n s of th e A u s tr a lia n

P o st O f f i c e . A Royal Commission to s c r u t i n i s e th e whole o p e r a tio n s of a

departm ent o f S t a t e i s a d au n tin g p r o s p e c t f o r th e Permanent Head and

s e n i o r o f f i c e r s to fa c e . I t says much f o r th e d e d ic a tio n o f th e o f f i c e r s

of th e A u s t r a l i a n P o st O f f ic e t h a t th e Commission never f e l t t h a t i t s many

r e q u e s t s f o r in fo rm a tio n were r e s e n te d o r unwelcome. The D ir e c to r - G e n e r a l

and o th e r o f f i c e r s responded prom ptly and c o u rte o u s ly to a l l such re q u e s ts

and went t o e x c e p tio n a l le n g th s to en su re t h a t th e Commission was f u l l y

informed on a l l a s p e c t s of th e A u s t r a l i a n P o st O f f i c e 's o p e r a t i o n s .

Although i t may seem in v id io u s to s i n g l e out one o f f i c e r of th e A u s tr a lia n

Post O f f ic e in t h i s r e g a r d , Mr. A.F. S p r a t t , Deputy D ir e c to r - G e n e r a l, b ore

th e m ajor r e s p o n s i b i l i t y f o r en su rin g d e p a rtm e n ta l c o - o p e r a tio n w ith th e

Commission's r e q u e s t s f o r a d d i t i o n a l in fo rm a tio n .

The Commission a l s o r e c e iv e d th e maximum c o - o p e r a tio n from th e

Chairman o f th e Overseas Telecommunications Commission ( A u s t r a l i a ) ,

S i r A rth u r P e t f i e l d ; th e G eneral Manager, Mr. H. W hite; and o t h e r s e n i o r

o f f i c e r s o f t h a t Commission.

The Commission thanks those persons and organisations who

responded to the invitation to make written submissions, and who in many

cases, appeared before the Commission to give further evidence. Through

them the Commission was able to obtain an understanding of the interests of

staff organisations, commercial and private users of Australian Post Office

services, and of the companies which are major suppliers of equipment.

345

The Commission acknowledges th e a s s i s t a n c e and c o - o p e r a t i o n

r e c e iv e d from th e f o llo w in g government a u t h o r i t i e s and dep a rtm e n ts of

S t a t e w ith an i n t e r e s t in th e i s s u e s b e f o r e th e Commission:­

. The P u b lic S e r v ic e Board

. The Department of T re a s u ry

. The Department o f Housing and C o n s tr u c tio n

. The Department of S e r v ic e s and P r o p e r ty

. The Department o f Urban and R egional Development

In p a r t i c u l a r th e a s s i s t a n c e of th e S e c r e ta r y and o f f i c e r s of

th e Department of th e S p e c i a l M i n i s t e r of S t a t e i n p r o v id in g th e many

a d m i n i s t r a t i v e s e r v i c e s r e q u i r e d i s g r a t e f u l l y acknowledged.

The Commonwealth A c tu a ry and I n s u r a n c e Commissioner,

Mr. S.W. C a f f i n , O.B.E. p ro v id e d th e Commission w ith in v a lu a b le

a s s i s t a n c e on th e complex i s s u e s a s s o c i a t e d w ith d e te rm in in g th e l i a b i l i t y

of th e A u s t r a l i a n P o st O f f i c e f o r su p e r a n n u a tio n c o n t r i b u t i o n s . The

A u s t r a l i a n Government P u b lis h in g S e r v ic e and th e Court R eporting Branch,

A t t o r n e y - G e n e r a l 's D epartm ent, were always a v a i l a b l e to p rovide t h e i r

e f f i c i e n t s e r v i c e s as r e q u i r e d .

The Commission r e c o r d s i t s g r a t i t u d e f o r th e a s s i s t a n c e and many

c o u r t e s i e s extended to i t d u rin g i t s v i s i t o v e r s e a s . D is c u s s io n s w ith

p o s t a l and telecom m unications a u t h o r i t i e s i n c o u n t r i e s v i s i t e d were

f r i e n d l y and f r a n k in a l l c a s e s , and g r e a t l y a s s i s t e d th e Commission's

u n d e rsta n d in g o f problems e x p e rie n c e d i n A u s t r a l i a .

In t h i s re g a r d th e Commission i s in d e b te d t o : ­

. S i r W illiam Ryland, C .B ., Chairman and Chief E x e c u tiv e , B r i t i s h

P ost O f f i c e , and s e n i o r o f f i c e r s of th e C o r p o ra tio n .

346

. Lord P e d d le , Chairman, P o st O f f i c e U s e r s ' N a tio n a l

C o u n c il.

. Mr. B. B j u r e l , D ir e c t o r - G e n e r a l of T elecom m unications, Sweden, and

o f f i c e r s o f t h e Telecom m unications A d m i n i s t r a t i o n .

. Mr. N. H o r j e l , D i r e c t o r G eneral of P o s t s , and o f f i c e r s o f th e

P o s t O f f i c e , Sweden.

. Mr. J.D . d e B u tts , Chairman, American Telephone and T e le g ra p h

Company, and members of th e Board.

. Mr. E.T. K la s s e n , P o s tm a s te r G e n e ra l, U nited S t a t e s P o s t a l S e r v ic e ,

and o f f i c i a l s of t h a t agency.

. Mr. Dean Burch, Chairman, F e d e r a l Communications Commission, U.S.A.

. Mr. M.F. Y alden, Deputy M i n i s t e r , Department of Communications,

Canada and s e n i o r d e p a r tm e n ta l s t a f f .

. Mr. J.A .H . Mackay, Deputy P o s tm a s te r G e n e ra l, and s e n i o r o f f i c e r s

o f th e P o s t O f f ic e D epartm ent, Canada.

. Mr. J .C . Delorme, P r e s i d e n t , Canadian Overseas Telecommunications

C o r p o r a tio n .

The a s s i s t a n c e o f th e Department of F oreign A f f a i r s , C anberra, and

of th e o v e r s e a s p o s t s i n o r g a n i s i n g th e Commission's v i s i t s and p r o v id in g

a s s i s t a n c e in o t h e r c o u n t r i e s , was g r e a t l y a p p r e c i a t e d .

The Commission acknowledges th e h e l p f u l ad v ic e i t r e c e iv e d a t a l l

tim es from Mr. R. N eal, P r i n c i p a l Legal O f f i c e r , Deputy Crown S o l i c i t o r ' s

O f f i c e , Sydney.

I t would n o t have been p o s s i b l e f o r th e Commission to keep w i t h i n

the time s c h e d u le of about 14 months which i t s e t f o r i t s e l f , w ith o u t th e

g r e a t a s s i s t a n c e of th e S e c r e t a r y , Mr. E.E. P ay n e, th e A s s i s t a n t S e c r e t a r y ,

347

Mr. B.W. B yrnes, and th e s t a f f of t h e S e c r e t a r i a t . The two o f f i c e r s worked

i n c l o s e c o l l a b o r a t i o n w ith th e Commission on a l l m a t t e r s r e l a t i n g to th e

I n q u ir y and Report and t h e Commission thanks them f o r t h e i r c o n s i d e r a b l e

c o n t r i b u t i o n . The Commission a l s o wishes to re c o r d i t s a p p r e c i a t i o n of

th e work o f th e s t a f f o f t h e S e c r e t a r i a t who were r e s p o n s i b l e f o r

c o l l a t i n g i n f o r m a tio n , t y p in g o f numerous d r a f t s and th e checking and

p r e p a r a t i o n o f th e R eport i n i t s f i n a l form.

348