COVER STORY: Hurdles to the sell-off of Telstra
by Peter Westmore
News Weekly, October 5, 2002
With the establishment of a new inquiry into telecommunications services to rural Australia, the Federal Government is clearly hoping for a favourable report which will facilitate the sell-off of the remaining 50.1 per cent of Telstra which remains in government hands.
One problem with such a sell-off is that of increased foreign ownership, attracted by Telstra's high profitability as a monopoly service provider.
Another is the indirect effect on the financial system, if the anticipated $30 billion is used to retire public debt. Financial institutions have warned that it could cause the collapse of the bond market.
Ever since the Telecommunications Services Inquiry completed its report in 2000, the Federal Government has promised that it would not attempt the further privatisation of Telstra until services to rural Australia had reached satisfactory levels.
In its report, Connecting Australia, the Inquiry identified "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 ...
"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."
The report added, "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 industries (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."
While Telstra has undoubtedly improved services in rural and regional Australia since then - its privatisation depends on such an outcome, and the Federal Government has invested $160 million into lifting Telstra's services in rural areas - problems remain.
The Federal Council of the National Party strongly resisted moves to support the full privatisation of Telsta, and highlighted some serious problems: the fact that there are still areas previously served by the analogue mobile phone network that do not receive digital coverage; and the promise of Internet access to an acceptable data service standard has not been delivered.
Further, more than a million Australian telephone users have shared (pair gained) lines, which are unsuitable for Internet access, and cannot be used for ADSL connections.
Quite apart from this, once privatised Telstra will invest money in its most profitable services, rather than expensive rural infrastructure, where profits are low.
Interestingly, Telsta, Optus and other industry corporations recently called on the Federal Government to spend substantial amounts to provide optic fibre cable access to all Australians. This would allow fast (broadband) telecommunications and Internet access throughout Australia.
The ABC's Inside Business program recently featured a report on broadband access in Australia. It included an interview with Communications Minister, Richard Alston, in which he was asked, "Would you like to see, at some point in the future, every Australian home connected to broadband Internet in some way?"
Senator Alston replied, "I'm all in favour of people having access to the latest technology. But that's not quite the same thing as saying the Government has a role in subsidising that."
The fact is that only a public utility can provide this infrastructure: it will not be a priority of privately-run corporations which must produce profits for their shareholders.
Telstra's monopoly services - the infrastructure of cables, microwave, and satellite links - should remain as a public utility, whose function is to provide improved services for people throughout the nation.
Its operations would be transparent, so that all telecommunications retailers would be treated equally, and it would be required, where necessary, to cross-subsidise services to people in rural areas, who suffer the tyranny of distance, or to invest in new technology even if at the moment it is unprofitable.
The recurring statements by economic rationalists in support of Telstra's privatisation need to be challenged by an alternative policy, based on a practical separation of Telstra into wholesale and retail units, with the monopoly wholesale services being a public utility.
Such a policy, based on the common good, would meet the needs of all Australians.
- Peter Westmore is President of the National Civic Council