by Peter WestmoreNews Weekly
Telecommunications Inquiry: Telstra's country services deficient - TSI report
, November 4, 2000
Connecting Australia, the Report of the Telecommunications Service Inquiry, has reported major deficiencies in Telstra's services in rural and regional areas, and called for an immediate improvement in services to give Australians living in remote areas access to better quality communications services.
The Inquiry was commissioned last March by the Minister for Communications, Senator Richard Alston, to precede the Government's plan to complete the privatisation of Telstra. It was conducted by a former Chairman of the Commonwealth Bank, Mr Tim Besley, former Queensland parliamentarian, Ray Braithwaite, and Tasmanian businesswoman, Jane Bennett.
The 261-page report is a comprehensive analysis of the current state of telecommunications services provided to people throughout the country by Telstra and other service providers.Thousand submissions
The Inquiry received over 1000 submissions, almost a third of which were received from the six per cent of people living in remote parts of Australia.
The report noted "the greater degree of concern expressed by rural and remote Australians about service levels, compared with those in metropolitan areas", where services were generally good.
People living in rural Australia told the Inquiry that they needed access to services comparable with those available to people living in the metropolitan areas and large urban centres.
The Inquiry concluded, "The rapid diffusion of new services and capabilities is vitally important for the economic development and continued competitiveness of regional, rural and remote businesses and communities. They also hold the potential to complement, enhance or replace traditional delivery mechanisms in areas such as education, finance or government services. (This is particularly important where those traditional mechanisms have been withdrawn or, in the most remote parts of Australia, never existed.)
"Access to advanced telecommunications services, just like access to other infrastructure services, has the potential to assist in encouraging regional Australians to remain in regional Australia."
Discussing services in rural Australia, the Inquiry "heard the frustration of many consumers, particularly concentrated in rural and remote Australia, in getting basic and reliable telephone services connected quickly and repaired in a timely manner. This frustration is exacerbated when consumers deal with call centres which are unaware of their circumstances and cannot provide a continuity of contact to track their service request.
"A substantial number of those who contributed to the Inquiry pointed to the problems they experienced as a result of service reliability, dated network capabilities or issues regarding the infrastructure available in their area.
"Many consumers, again with a greater concentration in rural and remote Australia, experience slow data speeds when accessing the Internet. These people are sometimes further disadvantaged in lacking access to the Internet at local call rates.
"Many of these difficulties have been acknowledged by the telecommunications service providers themselves. In their submissions, and during meetings with the Inquiry, most of the service providers acknowledged that despite recent market developments, a proportion of the Australian community does not currently enjoy access to a full range of reliable and advanced communications services."Dissatisfaction
The Inquiry also reported "higher than average levels of dissatisfaction in some key areas, such as prompt fault repair and the ease with which they can deal with their service provider. These findings reinforce the message from the Inquiry's consultations that service reliability and customer/service provider contact are areas of concern for a number of consumers. Dissatisfaction levels were higher with users, particularly small businesses, in remote areas ..."
The Inquiry highlighted the fact that the demand for high quality telecommunications services has grown rapidly, and that expectations had been raised by government and media "hype" and increased availability of services for business and educational needs in the cities.
It said, "It is important from a national perspective that the existing telecommunications disadvantage experienced by many Australians in rural and remote areas is addressed.
"The rural (farm, forestry and fisheries and mining sectors collectively) account for nearly 60 per cent of Australia 's total exports. If those sectors are to continue to contribute to the wealth of the nation they must be capable of operating online - whether to manage relationships with suppliers and customers, or to monitor the weather or markets.
"Similarly, if rural and remote communities are to grow and prosper, their citizens need to have access to effective telecommunications services not just to communicate for social and emergency reasons, but increasingly to access a range of vital community services."
The Inquiry's preferred method of improving telecommunications services was through increased competition, rather than government regulation.
It did not consider that natural monopolies should remain as public utilities.
It said, "Governments usually intervene in markets for two broad reasons: to address a failure in the operation of those markets, or to achieve identified public interest objectives where an effectively operating market may be unlikely to ensure those objectives are met. Funding
"The trend of government telecommunications policy indicates that interventions over the last decade have tended to take two forms - regulation and funding programs.
"Regulatory interventions seek to change the way the industry acts, either by establishing firm rules or by creating incentives. While transparent regulation can provide the community and industry with some certainty, it can also have a number of potential weaknesses.
"Regulation which seeks to control or guide how a company operates can become complex. It can fail to reflect the differing priorities and preferences of different customers, have unintended consequences, and dissuade competitors from entering markets.
"Where regulation seeks to predict the outcomes that a fully competitive market would otherwise achieve, intervention represents a second best solution ...
"Regulation is not as effective as a fully competitive market in meeting consumer and community needs. Regulation plays a necessary role where competition is not mature or where public interest outcomes are not likely to be achieved through competition alone.
However, it should be avoided where competition is working and should be carefully designed, and regularly reviewed, to ensure it does not discourage the development of competition."
The Inquiry decided not to recommend improving the Universal Service Obligation (to a basic telephone service) to include fax or Internet services, saying it would be too expensive at $4 billion.
It also suggested that arguments of equity could not be sustained because of different user requirements, including domestic and business phone services, fax, mobile phones, public phones and Internet access. The cost of upgrading equipment to ISDN standard (64 kbps) was estimated to be from $14 billion to $30 billion.
The Inquiry supported the Government's plan to directly subsidise provision of the USO in remote areas: "The Government's decision to invite tenders to provide USO services and untimed local calls in those areas which are currently Telstra's extended call zones has attracted interest from a number of potential providers.
"The tender model, which encourages bidders to commit to service offerings over and above the minimum USO requirement, has the real prospect of transforming the levels of service available to the approximately 40,000 consumers in those areas. In particular, the availability of $150 million of upfront support has the potential to offset the substantial initial capital costs of a new entrant in this market."
Implicitly, the Inquiry conceded that its support for a market-based solution to the problems of rural services is an act of faith. It said that if "market developments do not have the effect of improving service levels, the Inquiry believes that the Government should reassess the USO mechanism."
Among the Inquiry's 17 recommendations was one that "the Government offer up-front incentives to potential alternative universal service providers in return for their commitment to supply, as a standard service, substantial improvements above the legislated minimum."Reassessment
It also explicitly recommended that "if the contestability processes announced by the Government do not have the effect of materially improving service levels in regional, rural and remote areas, the Government should reassess policy measures, including the USO, with a view to ensuring the contemporary telecommunications needs of all Australians are met."
To address the failure of Telstra and other service providers to meet their Customer Service Guarantee (CSG), the Inquiry recommended that the Australian Communications Authority should be empowered to enforce levels of service provided by telecommunications companies, and to "identify and investigate extreme cases of failure by providers to meet CSG timeframes."
The Inquiry has served the important function of documenting existing levels of telecommunications services in Australia, and highlighting the city/country divide.
Adoption of its recommendations will at least ensure that attention is given to the needs of those Australians who have too frequently received a second-rate service.