Privatisation's hidden agenda

March 3, 1993
Issue 

Privatisation's hidden agenda

Privatisation made a brief (but embarrassing to the major parties) appearance in the election campaign when Prime Minister Paul Keating pointed out that the Coalition's Fightback program counted on the sale of Telecom for $20 billion. The Labor government, said Keating, had been advised by consultants Goldman Sachs that a float of Telecom would bring in only between $12 and $14 billion; therefore there was a potential $6 to $8 billion shortfall in the costing of Fightback.

In his desperation to make up this shortfall, opposition leader John Hewson said that some of the current restrictions on Telecom's profitability would be lifted, thus making it possible to attract the higher price. At a February 22 press conference in Whyalla, Hewson refused to rule out the introduction of timed local calls as part of this move. Three hours later, realising his gaffe, he retracted this unpopular suggestion.

But this was one Hewson gaffe that Keating was reluctant to make much of, and after a couple of days the big media dropped the subject of the privatisation of Telecom. Why? Because this squabble has the potential to reveal some very unpopular features of the privatisation agendas of both parties.

Both parties would like us to believe that the aim of privatisation is simply to introduce competition in order to boost efficiency. They seek to hide the fact that the privatisation of major utilities, like Telecom, involves major public subsidies of the profits of the corporations which will come to own these utilities.

The various consultants' reports cited by Keating and Hewson allow us to quantify some of these hidden subsidies. Under Labor's program for the privatisation of the telecommunications system, the still publicly owned Telecom is forced to grant special rights to Optus, its new private competitor. This includes cheap access to the telecommunications network and (ironically, considering that competition is the official objective) restraints on Telecom's freedom to compete.

According to a report by Salomon Brothers, Telecom can be sold for $20 billion only if the current "regulatory inequalities" in favour of Optus are removed. This would make Telecom worth between $2.1 and $2.4 billion more than estimated by Goldman Sachs. Another $3.1 billion could be added to the price if Telecom's staff is cut by a further 20-30%. These figures show both the scale of the subsidy involved and also the further price society will pay in the form of higher unemployment.

Hewson's caginess on timed calls reflects the fact that the privatisation of public utilities does not guarantee a better and lower cost service to the general public. In fact, the privatisation of telecommunications in Britain and New Zealand shows the reverse: the public has ended up paying more. But both Labor and the Coalition are concerned about lowering the telecommunications costs to business ieve this by shedding jobs, cutting wages and even increasing costs to the public.

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