BY ALISON DELLIT
On September 19, federal ALP leader Simon Crean, accompanied by Labor's candidate for the Cunningham by-election, Sharon Bird, announced that the party would vote against the Coalition's proposed changes to Telstra's price controls in particular, a proposal to massively increase what Telstra is allowed to charge for line rentals.
Although the legislation has been pending for months, Crean chose to make the statement while campaigning in Wollongong where voters are likely to punish the ALP with a swing to the Greens and other progressive parties.
Defence of Telstra has become a major part of the ALP's campaign platform, no doubt because the party wants to change the perception, noted in its recent internal review, that the party is too similar to the Coalition. Opposition to the further sale of Telstra is the only policy that has been "quarantined" from the policy review being undertaken by deputy leader Jenny Macklin.
Labor's decision to block the fee hikes is welcome news. Telstra's line charges were just over $11 in 1995. If the Coalition's changes to price controls go through, they could sky-rocket to $32 by 2005. The government's aim is to force Telstra to use the extra income to reduce charges to other telecommunications companies for access to its network.
Despite the rhetoric, Labor's opposition to the further privatisation of Telstra is not straightforward. On May 22, shadow communications minister Lindsay Tanner released a discussion paper titled "Reforming Telstra". Although not formal ALP policy, it provides a strong indication of what such policy might be.
After claiming that the partial sale of Telstra has "altered the ways in which public ownership can be employed for public benefit", Tanner presents four options:
1. Strengthen the regulatory accounting framework for Telstra.
2. Increase the internal separation between "Telstra retail" (which deals with business and residential customers) and "Telstra wholesale" (which negotiates other telecommunications companies' access to Telstra's infrastructure). This would hinder Telstra from using its "unfair" network advantage from benefiting its retail operations, forcing it to deal with itself on the same terms as it deals with other companies. This has been taken up as policy by the Coalition, which is investigating how to implement it.
3. Splitting Telstra into two majority-government-owned companies, one retail and one wholesale company.
4. Splitting Telstra into two companies, selling the remaining 51% of the retail arm, and using the proceeds to buy back 49% of the wholesale arm, thus ending up with one private and one public company.
'Maximise competition'
Frighteningly, the final proposal echoes almost exactly a proposal made by right-wing columnist Paddy McGuinness in the Sydney Morning Herald on May 14.
Although Tanner has since argued the paper is just a presentation of alternatives, the disadvantages of the first two proposals are thoroughly canvassed, while the advantages of "structural separation", and proposal four in particular, are reiterated several times.
Tanner presents five principles which are "at the heart of Labor's approach to telecommunications policy". The first four deal with the expected guarantees of customer service, regional access, high employment and business services. "Maximising competition, investment and innovation in Australia's communications networks" is the fifth.
Tanner does not explain what is so good about competition. In fact, he points out that since competition was introduced Telstra's staffing levels, prices and the disparity between rural and metropolitan services are much worse.
Like most defenders of "competition in the industry" (including the Australian Telecommunications Users Group and most of non-Telstra telcos), Tanner argues that the main problem with a further privatisation of Telstra is that it "would create a huge private monopoly which would totally dominate telecommunications and be almost too powerful to regulate".
This scenario is likely. Real competition in the telecommunications industry is a myth. Telstra takes around 90% of the industry's profits and dominates almost every aspect of the market (and if Prime Minister John Howard manages to change the cross-media ownership rules, Telstra may end up owning Channel Nine and several newspapers to boot).
Telstra's control of the telecommunications market still almost absolute after five years of full competition and 11 years of competition with Optus is inevitable because telecommunications should be run as a monopoly. But it should be a publicly controlled one. This is simply the most rational and efficient way to run it.
By putting the "god" of competition before the needs of the Australian people, the ALP may end up with a policy on Telstra which is as bad as the Coalition's, if not worse.
Tanner has not proposed to stop telcos from building infrastructure that could compete with "Telstra wholesale". This is no doubt, in part, because new technologies could entirely replace Telstra's main asset, the copper network. Private satellite technology, in particular, could be highly profitable. Nevertheless, Tanner's support for buying back the infrastructure network is a tacit admission that this should be run as a public monopoly, at least for now.
Duplicated infrastructure
Certainly, "infrastructure competition" is the insane and irrational tip of the competition wedge. For example, two-thirds of Australian households have no access to pay TV cables. But of the third that do, 80% have both Optus and Foxtel (Telstra) cable running past their houses. The current proposal by these two companies to share a content warehouse makes this even more ridiculous.
In 2000-01, a single provider, Nextgen networks, began installation of 8400 kilometres of optical cable between major cities. Yet in 1999, the National Bandwidth Inquiry reported that the potential capacity of existing networks exceeded current usage by up to 100,000 times. According to the Communications, Electrical and Plumbing Union's submission to a recent Productivity Commission inquiry, technological research is likely to "enhance the capacity of each single fibre so it would be capable of efficiently carrying the entire forecast load between Melbourne and Sydney for the next five years".
According to Kenneth Davidson, writing in the May 2 Melbourne Age, infrastructure duplication in telecommunications has cost about $10 billion. This would be enough to fully upgrade the regional and rural network and would leave enough to massively expand broadband data access.
<%-2>Worse than just creating wastage, competition has undermined the network. In the first three years after the introduction of full competition in 1997, Telstra's capital expenditure was reduced by around 40% and was concentrated in the major cities, where the company faced most competition. This has a large part to do with the worsening service gap between the cities and rural and regional areas.<%0>
Tanner and McGuinness argue that these problems can be fixed by taking the infrastructure back into public hands, while flogging off the services arm. This is only marginally less insane.
Countries across the globe, from the Britain to the United States, have rejected structural separation because it results in duplicated paperwork, longer repair times as customers have to contact their provider which then has to contact the repair company, less ability to offer discounts for "bundled" services and a loss of economies of scale.
It takes telecommunications in the opposite direction to the drift of technological change and public demand, which is towards further integration of different telecommunications services. A company seeking to extract maximum return on a network is going to be resistant to upgrading to new technologies which increase its upfront costs, even if they are more efficient in the long run.
Non-profit network
A network run on a non-profit basis, owned by the public, and selling services to private "retailers" would be little more than a direct hand-out to private companies, which would receive technological development and upgrading free of charge, while, largely free from regulation, they could jack up prices mercilessly.
Even if the network is kept up to scratch at public expense, it is likely that few private companies will ensure that basic services are met for unprofitable customers, such as low volume users or those living in rural and remote areas. According to Tanner, these could be maintained through entrenching current regulations, such as the Universal Service Obligation and price caps on some services. However, even with these controls in place now, Tanner admits that prices are getting more expensive and there is pressure on the government to further loosen controls.
Then there is the question of what constitutes the "network". The yellow pages, for example, are "retail" services. But a competition of different directories could easily lead to the loss of one central access point to all directory information.
The only rationale for this proposal is that it will make "competition" in the industry more sustainable: i.e., ensure that more companies are profitable. These profits will come from the pockets of consumers and at the expense of workers' jobs, wages and conditions.
Tanner's proposal is as pro-business as the Coalition's. It's just that Tanner is defending the interests of Telstra's competitors, while the Coalition is more focused on those who want to make a killing out of the private monopoly Telstra is becoming. It's no surprise that sections of private industry welcomed Tanner's paper as enthusiastically as other sections condemned it.
There is an alternative policy on Telstra. It would involve running telecommunications as a service, not as a profit-making industry. Renationalising Telstra, bringing it under real public control (which the old Telecom never was) and ending competition in the industry would be a start.
By ploughing the money currently wasted on duplicated infrastructure, dividends to wealthy share-owners, useless advertising and ridiculous corporate salaries back into putting Australians in touch with each other and the world, we could have one of the most advanced systems of communications possible.
From Green Left Weekly, October 2, 2002.
Visit the Green Left Weekly home page.