Privatization Of Telstra
What are the advantages of privatizing Telstra
and how does this impact it's ethical
conduct while striving to satisfy
community expectations? I believe that putting
important public assets into
select private hands is not in Australia's
long-term interests, and oppose
the partial/full sale of Telstra for the reasons
that the Government has
given. The argument the Government has given for the privatization
and
corporatisation of Telstra has been a budget conscious one where the
proceeds
of Telstra will provide a "one-off" opportunity to: 1)
abolish Telstra's
pastoral call rate and provide untimed local calls in extended
zones in
remote Australia; 2) increase funding for Networking the nation; and 3)
pay
off foreign debt left over by the previous government However, this is
not
true as the Minister, Senator Alston already has the power to direct
Telstra to
provide services and upgrade infrastructure (points 1 and 2). If
the USO
(Universal Service Obligations Act) or performance standards under
the CSG need
changing, then the Minister should invoke his power to direct,
and these changes
should be made distinct from any attempts to sell Telstra.
Statistics also show
that the sale of the first third netted a total of $0.37
billion loss to the
Commonwealth. By the year 2000, it is estimated that
Telstra earnings will
exceed $2 billion annually. The Howard Government
estimats an interest saving of
about $2.4 billion per year. This doesn't take
into account the income that will
be lost to the government every year in
revenue earnings from Telstra. By 2007,
the sale of Telstra is expected to
create a budget black hole of $4 billion. The
government cites that the "Mums
and Dads" of Australia will benefit by
purchasing shares in the float, which
is true. But eventually the real
beneficiaries will be the multinational
companies who will have the controlling
majority, not the Australian public.
This can have detrimental effects on
society, especially to the rural regions
of Australia. The Democrats and the
Labor Party also disapprove of the
privatization of Telstra for the above
reasons. Privatization is when a
Government Business Entity (Statutory Body) is
sold to the general public and
becomes a public company. There is a belief that
Government run
businesses are inefficient because their motive isn't necessarily
money,
although there is no consistent evidence that privatization
increases
efficiency. However in the case of Telstra, there have been clear
signs of
deterioration in services since it's partial privatization. Delays
are longer on
connection and service times. Recent changes to the charging
regime for
community calls will impact on costs, particularly for small
business, in rural
and regional areas. (One in three rural customers were
denied connections to new
services ~ SMH 5/2/99) Rural and regional customers
also suffered the biggest
fall in standards for repairing faults. The Telstra
Communications Network is
also set to suffer shutdowns along the lines of the
power cuts in Queensland and
Auckland. All these factors can contribute
to the downward spiralling of the
essential qualities of life for country
families. This deterioration in services
has been a direct consequence of
privatization, where the focus of the company
has shifted to profits rather
than providing a cheap and efficient service.
Another example of this can
be seen when according to the Media (ABC), Telstra
reaches an excess of funds
of up to $1.5 billion as a result of staff/service
cuts. The Board of
Directors are urging for a special dividend to shareholders
or a share
buyback (to increase share prices). No one is suggesting the
obvious,
strategic investment. Privatization has also made an impact on the
working
conditions of employees. One of the first stages of structural reform
that
Telstra implemented was downsizing and the cutting of working
conditions of over
60 000 workers (formerly) employed by Telstra, after
experts claimed that there
is an excessive labour load of about 27000 strong.
As Telstra was previously a
GBE, it's structure was "suboptimal" in a
business sense ie: Telstra's
activities exceed what it would have undertaken
in a free market. This has given
it one of the worst staff to phone line
ratios in the advanced world. After 15
months of negotiations with the
Communications Electrical and Plumbers Union (CEPU),
the standardisation of
ordinary hours for full time employees, introduction of 3
main work streams
and the extension of shift arrangements to all sections was
agreed upon. Many
workers suffered pay losses when they were re-graded. The
Financial
review (17/2/99) records that in 1998, Telstra's labour costs
dropped
7.7% (the number of it's employees fell by 20000), despite a huge
increase in
the expansion of Telstra's business. While cutting costs and
restructuring has
seen record profits for Telstra, it also faced increasing
national competition
and has been sharply effected by the failure of it's
global ventures, including
mounting losses from investments in Indonesia,
India, China and Indo-China. The
increasingly ruthless struggle for
market share is driving the deepening assault
on workers' conditions, which
will only accelerate as time goes on. Unlike the
subjects of privatisation in
the past, Telstra operates as a monopoly with
extensive community service
obligations. Under a new board of directors who
favour privatisation, some of
these obligations have also been neglected. To
date, ACCC (The Australian
Competition and Consumer Commission) has issued 4
notices against Telstra in
respect of the "commercial churn" transfer
process, alleging that Telstra's
conduct is anti-competitive. Telstra's
competitors have complained that
Telstra has used it's near-monopoly powers to
restrict local and
long-distance customers transferring to other providers and
that this
inhibits the ability of telecommunications customers to enjoy the
benefits of
a more competitive environment. The ACCC instituted proceedings in
respect to
2 of the notices in Federal Court on December 24th. The 3rd
competition
notice, received on the 25/1/99 alleged that Telstra discourages
competition
by forcing other carriers wanting to transfer customers to Telstra
to use a
manual process that is inefficient and Cumbersome. Finally, the 4th
notice
alleged that the package of conduct that is continuing, along with the
price
charged by Telstra for the churn, is cumulatively a breach of the
competition
rule by Telstra. If found to have breached the competition rule,
Telstra
is liable for significant penalties of up to $10 million or more for
each
offence. In an attempt to prevent a private monopoly and to ensure
that
Telstra's ongoing delivery of new technologies and services can be
maintained,
the Government has promised that Telstra will remain in majority
public
ownership until an inquiry be conducted (independent of both Telstra
and the
Government). When, and only when a set of service requirements
(included in the
Telstra Sale Bill) has been "ticked off" by the inquiry
would the
process begin to sell any of the 51% remaining in public ownership.
"The
object of Privatization is a deregulation which allows the famous hand
of the
market to operate." (the New Australian 29/9/96). This means that
all
government direction and other uneconomical operations (sometimes
includes USO,
CSO) have to be removed, which in turn implies breaking up
the $30 billion
corporation into a dozen bite-size chunks, until companies
can afford enter the
market to compete with a reasonable amount of initial
investment. Only when Mr
Howard opens up the whole sector to competition
will the system function
properly, removing the need for schemes such as the
USO. However, on the
contrary, Mr Howard assures us that the privatized
Telstra will NOT be broken up
and be strictly regulated. He also says that
the Liberals will impose price caps
and give Telstra no freedom to introduce
timed local calls. The media states
that the Government will also force
Telstra to extend cross-subsidies community
service obligations via the
introduction of digital ISDN exchanges in rural
rates. If his plan is for a
tightly regulated Telstra, then what's the point of
privatisation? This is
another reason why I am opposed to the sale of Telstra,
as the intent of the
PM's actions do not seem very clear to me. Part privatization,
like the
current "part-competition", I believe, is the worst of all
choices. If open
competition is desired, Telstra must be split up and all
services and
entrepreneurial ventures privatized. But for the protection of the
common
good, the core network should remain in public hands, as Telstra
provides
more than a service; it is the infrastructure of which the services
of our
country rely on. In fact, if Telstra reduces expenditure on
advertising and
sponsorship, remove cross subsidisation of Pay TV, and give
up on it's
international ventures (which are loosing money) to concentrate on
giving
Australia a cheap and efficient network; the cost of phone calls
would be
considerably reduced. In the United States, local carriers are
regulated
monopolies, where price caps are forced down. As technology
develops and becomes
more efficient, the cost of distance in telephone calls
will continue to
decrease. Perhaps eventually there will be a
telecommunications regime where you
pay an annual fee for connection, while
all local/long-distance calls are free
and no restrictions are placed on
usage; much like how our current sewerage
networks already operate. If we can
achieve this, then we will have a leading
edge position in the Age of
Information. (NOTE ~ not part of essay: is this
highly unlikely as such
changes in operational efficiency would destroy
competitors such as Optus and
Vodaphone etc.???) Overall, my preferred position
would be for the
commonwealth the buy back to 1/3 of Telstra already sold,
because of the
public benefit derived from public ownership. Telstra is in an
effective
monopoly position, and taxpayers' funds have made the
telecommunications
giant what it is today. It is not fair to place this public
infrastructure
into private hands, which have failed to deliver service merely
for the
purposes of profit and shareholder
interests.