By Jennifer Thompson
There was irony in the federal government's fanfare about honouring election promises when it introduced, on May 2, its bill to privatise a third of Telstra: this is the campaign promise most Australians would prefer it dropped.
Communications minister Richard Alston also continued the Coalition's attempts to get around a shortfall in Senate seats by blackmailing the Greens and Democrats.
The sale, for which the Coalition expects to receive $8 billion, will benefit all Australians, said Alston, through the benefits of private ownership and "competition" which would supposedly improve the service and efficiency of Telstra. The sale's proceeds would repair the environment and pay off government debt.
The Coalition's attempt to link the privatisation to a $1 billion environmental repair package belies its rhetoric about how good an idea the sale is. If it is so great, why is there a need to hold the environment to ransom to bully and threaten Greens and Democrats into voting for it?
Many people in rural areas will feel the same pressure; while a great deal of the environmental repair promised will be devoted to the rural environment, they also have the most to lose through Telstra privatisation. Forcing a choice between two important public assets — a national publicly owned telecommunications company and the environment — shows the Coalition is not serious about repairing the environment but merely seeking to blackmail opponents of the sale.
The benefit of the other $7 billion expected to be raised and put toward retiring government debt — currently around $100 billion — is also doubtful. Gerard Goggin, writing in the February Consumers Telecommunications Network Newsletter, notes that University of NSW Professor Bob Walker and James Cook University Professor John Quiggan independently reached the same conclusion: that the public will be worse off. This is because the rate of profit generally demanded by new private owners is much greater than the interest savings on government debt.
There are other problematic gaps between the rhetoric of the private sector's improved service and lower prices and the reality. One is the government's relinquishing of direct control over Telstra, which fits poorly with the promise of "iron-clad" guarantees of affordable telephone and other communications services to ordinary consumers.
The guarantees promised by the government include a universal service obligation to ensure that a standard telephone service is offered to all Australians; an obligation to provide untimed local calls to residential and business customers; continuation of the current price capping regime; a customer service guarantee; and extension of AUSTEL, the current industry regulatory body, to set performance standards.
Telstra's current operations have been strongly influenced by the move to corporatise and introduce "full competition" of the previous Labor government. Publicly owned companies were corporatised — required to operate like private corporations, on a commercial footing. Then, in the name of the price and service benefits of a "free" market, publicly owned companies had to compete for business with the private sector.
Profits become more important than service. Privatisation is the logical next step and usual result.
Rural customers lose
With the privatisation of Telstra, declining service and higher prices for customers considered unprofitable will be massively increased. Business consumers will be the chief beneficiaries of this process, although residential consumers in large metropolitan centres will undoubtedly fare better than rural consumers.
Currently the cost of telephone services for rural people is kept down by government requirements for subsidies from other, more profitable services. The March Common Cause, journal of the mineworkers' union, gives examples of the level of annual subsidy to mining areas in NSW: Bowra $1170, Nowra $490, Broken Hill $3410 and Gosford $1620.
While the Coalition has said that subsidising of high cost telephone services by profitable ones will be maintained, they will come under enormous pressure prior to privatisation. A privately owned Telstra and other service providers would not accept the cut into profit represented by these subsidies, and rural consumers face the prospect of paying the prohibitive real cost of telephone services.
Retaining restrictions on profitability would decrease the income the government could expect from the sale. Democrat leader Cheryl Kernot confirmed on May 3 that the universal service obligation to rural and low income customers is threatened because the legislation is a "substantial watering down of the current act, and would allow operators to argue that providing services to remote areas, for example, is simply both economically and efficiently impractical".
New services
The Consumers' Telecommunications Network (CTN) had already criticised the limitations of the Labor government's universal service obligation, citing the lack of will to include affordability, accessibility and new technology which has "seen consumers left off the network".
Colin Cooper, Communications Division president of the Communications, Electrical and Plumbing Union (CEPU), drove the point further when commenting on the Coalition bill. "The real question facing the community is how new services are going to be developed and made available throughout Australia", he said, "and who is going to pay. Private investors won't want to be involved in taking the superhighway to the bush — at least not if there's any cross subsidies involved."
The same tension between providing a decent service and making a profit applies to the price cap regime and the commitment to untimed local calls. The bill proposes to continue roughly the same arrangements as the Labor government's until December 1998; that the cap on the cost of a weighted basket of services should be 7.5% less than CPI each year; that connections, line rentals, trunk and international calls — residential services — should be capped at CPI -1%; and that standard local call and public pay phone charges remain constant.
The Democrats had also criticised Labor's price regime policy because of the large number of charges in that group, including business lines, and STD and IDD charges. This allows the provider to reduce some of these charges substantially, and other charges by very little and still comply with price controls.
CTN's Gerard Goggin noted that the viability of untimed local calls has already been affected by the introduction of competition in telecommunications, shifting costs from business to residential users and thereby putting pressure on the price of local calls and connection charges, which have not become significantly cheaper compared to services used mainly by business.
The Coalition has made a deal of its new customer service guarantee. It promises that providers in breach of AUSTEL standards will be liable for damages to be credited to customers' accounts.
However, "it is expected that carriers will regulate their own behaviour in the first instance", said Alston, with the backup provision that "where a carrier fails to pay damages voluntarily, the customer will be able to seek damages in the courts". The combination of industry self-regulation and ordinary people's financial ability to go to court makes this a very dubious guarantee for residential consumers.
Overseas experience
The government's "guarantees" sit uneasily with the private sector, as demonstrated in other countries. In Britain, 50.2% of British Telecom was sold in 1984 and further shares in 1991. BT has to maintain a universal telephone service throughout the UK, a network of public call boxes, telephone services in rural areas, directory inquiry services and services for people with disabilities.
Despite these guarantees, a report by the National Consumer Council in 1993 found that charges for telephone services used by domestic consumers, especially local calls, rose relative to those used mainly by business customers. The cost of first time access to a telephone service rose by more than 61% between 1985 and 1993 for customers paying full connection costs. These findings were supported by a Consumers' Association finding.
There are aspects of privatisation that both the Coalition, and the Labor government before it, are denying. Gerard Goggin notes that newly privatised companies improve their "efficiency" by sacking staff and forcing most workers to work longer hours, or suffer poorer terms and conditions, while senior executive and director salaries rise sharply.
Worker numbers fell by 70,000 over five years at British Telecom, and Telecom NZ has shed over one-third of its work force, according to Peter Cerexhe, writing in the summer Consuming Interest. Jobs shed at British Telecom, according to BT Asia Pacific managing director Steve Burdon, actually numbered 100,000. At the same time, the salary of BT's chairperson rose 700%, says CEPU.
Job losses are a major concern of the Telstra sale, with indications that Telstra management is starting early to maximise the sale price. Chief executive Frank Blount has said that he intends to cut workers numbers by "many thousands". Unconfirmed preliminary plans are said to cut at least 6000 full-time jobs, but unions fear that final cuts will be of the magnitude of those in NZ and Britain.
The array of damaging effects demands an answer to the question: why is Telstra being sold and who will benefit? The effects of Labor's competition policy in telecommunications answer that question: business, especially big business, will benefit tremendously, at the expense of ordinary Australians. The biggest beneficiaries will be the huge international companies, for whom telecommunications promise super profits.
Col Cooper comments on the bill that it gives away the public's power to determine our future telecommunications."We oppose that, and we think the public will too when they hear the details of this bill. Most Australians already oppose the sale of Telstra, and this [bill] will do nothing to change their minds."