Telstra privatisation worries the bush — and it should
By Allen Myers
Prime Minister John Howard's decision to make the privatisation of the remaining two-thirds of Telstra an issue in the next federal election is clearly worrying Coalition, mainly National Party, MPs from rural electorates, who have allowed some of their disquiet to "leak" to the establishment media. A few, like Bob Katter from Queensland, have expressed their opposition openly.
It seems there are widespread fears in the bush that a privatised Telstra will ignore the needs of rural customers as it pursues more lucrative business in the major cities.
That fear is well founded, and the government is therefore dishing out broad and carefully vague promises designed to lull rural voters. "I can assure the bush that there'll be guarantees galore to protect their position", Howard declared on March 29.
If, on a numerical scale, a Howard election promise is rated 1 and a core promise is 5, a galore guarantee must be worth about 0.3.
The inescapable fact is that a privatised Telstra will be run with profits being the overriding consideration. Indeed, corporate law would make it illegal for the directors to operate on any other basis. And because of distances and the thinly spread population, services to the bush and regional towns tend to lose money rather than make profits.
Once, the provision of telephones was considered a public service. Telstra — or Telecom as it then was — of course charged customers, and it even made substantial profits for the government, but it was not expected to maximise profits no matter what. Services to rural areas were subsidised.
Moreover, Telstra profits that weren't invested in new telecommunications went into government consolidated revenue, reducing the government's need to raise money through taxes. In effect, urban telephone users were taxed to provide telecommunication services in rural areas.
In the same way, people who send a letter to the next suburb are "taxed" to subsidise letters that cross the continent. This equalisation of services and prices was considered essential to maintaining a cohesive national market.
However, the community service obligation began to be undermined when Telstra was corporatised under the federal Labor government.
The corporatisation and partial privatisation of Telstra have already affected its service. In order to boost profits, thousands of jobs have been shed, and the results are a 20% decline in connections completed by the promised date, a 30% fall in repairs to pay phones within one working day and an 18% fall in private phone faults fixed within one day, according to figures for calendar year 1997 released by the Australian Communications Authority.
A fully privatised Telstra can be expected to go much further in boosting profits by cutting employee numbers, thereby reducing the quality of services.
On March 30, the Coalition government introduced a bill to make Telstra and other telecommunications companies subject to large fines — up to $10 million — for failure to maintain adequate services.
But the legislation is purely for show. If potential investors thought that the government was serious about such threats, they would seriously reduce what they were willing to pay for Telstra shares.
The wealthy and therefore influential private owners will have little difficulty convincing governments not to interfere with "business decisions". Even with only a third of Telstra privatised, Telstra CEO Frank Blount has been publicly complaining that community service considerations of the government as majority shareholder are "unfair" to the private shareholders.
If Telstra is fully privatised, the argument will be that it's unfair to impose standards on Telstra that aren't imposed on other businesses. We'll be told that "the market" punishes companies that don't deliver — as if telephone users in the bush had a real choice of service providers.
The most likely outcome in the bush will be that those who are well off — including MPs — will be able to obtain good services, including new technology, because they can pay for them, while others have to tolerate declining services.
This sort of division is already occurring to some extent — for example, the fact that some people pay for mobile phones allows Telstra to get away with providing fewer public pay phones.