Chapter 5
Other Issues
Terms of Reference (f) and (g):
(f) the impact of privatisation on employment and economic activity,
particularly in regional Australia; and
(g) the impact of the privatisation of Telstra on industry development
issues, including research, development and manufacture in the Australian
telecommunications equipment and services industry.
Effects of Privatisation on Employment and Economic Activity
5.1 In the last decade, Telstra has moved from being an old style public
sector agency to a business enterprise run on commercial lines. Corporatisation
of Telstra had widespread support from all sides of politics. The new
approach has necessitated massive restructuring on the part of the agency.
It is doubtful whether Telstra would have survived in an aggressively
competitive business environment if it had not taken that path.
5.2 Telstra's total fulltime staff has declined steadily over that time,
from 96,725 in 1985/86 to 66,109 in 1996/97 and 58,800 in February 1998.
Telstra argued in its submission that it has had to reduce its labour
costs to improve efficiency under the pressure of competition:
Competition has forced Telstra to focus more sharply on productivity
and costs, including labour costs. [1]
5.3 The Department of Communications and the Arts argued that whether
Telstra is publicly or privately owned is not particularly relevant to
these employment trends:
Public ownership did not, and could not prevent Telstra from responding
to commercial pressures and the impact of technological change when it
undertook significant staff reductions over the last decade. [2]
5.4 In its submission, DoCA pointed out that overall employment in the
communications industry sector (telecommunications, postal and courier
services) has grown in the last decade in both metropolitan and non-metropolitan
areas (1987-1997: 100,300 to 109,900 metropolitan; 39,100 to 41,700 non-metropolitan).
[3]
5.5 The Communications, Electrical and Plumbing Union (CEPU) claimed
that Telstra has overshot the mark in trimming its workforce, to the detriment
of standards of service, particularly in country areas. [4]
The CEPU explained:
The Union does not have access to national data which disaggregates Telstra
redundancies on a regional basis. It is therefore difficult to assess
the degree to which employment opportunities in regional Australia as
a whole have been affected by job reductions. It is obvious, however,
that these areas have not been spared the employment impacts of Telstra's
cost-cutting… [5]
5.6 However, Telstra rejected claims that downsizing had affected the
country disproportionately:
But in the geography, that downsizing has not disadvantaged country Australia
any more than metropolitan. So the downsizing has been fairly consistent
across the board. [6]
5.7 Telstra also pointed to figures on its investments as a sign of its
commitment to regional areas:
Employment is not the only indication of regional economic activity.
Telstra is continuing to invest in regional communities for example, through
significant capital expenditure and also specific programs targeted at
rural communities, like remote learning, Internet access and satellite
delivery of telephone and data services. As a proportion of capital investment,
Telstra spent some 39% capex in non-metropolitan areas, compared to 61%
in metropolitan areas, for the six months to December 1997. [7]
5.8 Other submissions described ways in which improved telecommunications
can strengthen regional economies:
…enhanced communications services also offer significant opportunities
to rural areas and have the potential to enhance employment prospects
in two ways. Firstly, by improving the capacity of communications services
to rural consumers the cost of doing business at a distance is likely
to be reduced…This will enhance the economic viability of existing
businesses and will support the creation of new industries in rural areas.
Secondly, improvements in communications services will allow workers to
telecommute from remote locations… Call centres, which can offer
a range of services including simple answering services, telemarketing
or support services for other industries, are providing employment nationwide,
including in regional areas. [8]
5.9 The Committee notes that it received few submissions relating to
the issue of employment in regional areas. Rather, witnesses recognised
that improved telecommunications services are vital to rural and regional
Australia. Enhanced competition under privatisation together with a strong
regulatory regime has the potential to deliver improvements which will
greatly benefit rural and regional areas.
Industry Development Plans
5.10 Under the Telecommunications Act 1997, Telstra and other
telecommunications carriers must have an industry development plan detailing
strategic commercial relationships, research and development activities,
export development plans and arrangements aimed at encouraging employment
in relevant industries. A carrier must comply with its industry development
plan insofar as the plan relates to its research and development activities.
[9]
5.11 Particulars in relation to research and development include investment
in research and development; research into and development of new technologies;
arrangements for maintaining Australian ownership of intellectual property;
arrangements relating to technology transfers to Australian industry;
and research and development to address the needs of people with disabilities.
[10]
5.12 The Australian Telecommunications Industry Association commented
favourably on the industry development plans:
These [industry development] plans have worked relatively well in strategically
managing the deregulation of the Australian communications industry by
stimulating industry development… A continuation of this policy approach
with a privatised Telstra such that it maintains industry development
commitments (as do Vodafone and Optus) will in the view of the ATIA avoid
the situation that occurred in New Zealand and the UK where deregulation
of the telecommunications sector led to massive uncertainty and the loss
of significant industry capabilities. It will also ensure that Australian
industry has the opportunity of participating in the new emerging areas
of technology such as broadband services and wireless applications. [11]
Research and Development
5.13 In 1996/97 Telstra spent $190 million (1.3 per cent of sales revenue)
on research and development, including expenditure by Telstra Research
Laboratories and support to Centres of Expertise in selected tertiary
institutions. [12]
5.14 Some submissions feared that a privatised Telstra would spend less
on research and development. [13] But, to judge
from information supplied by the Department of Industry, Science and Tourism,
comparing R&D by public and private telecommunications providers overseas,
there is no reason to think this would happen:
| R&D expenditure as percentage of total
revenue, major providers of telecommunications services, 1995 |
| Privately owned: |
| Optus |
3.4% |
| AT&T (United States) |
3.1% |
| BT (United Kingdom) |
2.0% |
| Nynex (United States) |
1.3% |
| Publicly owned: |
| Telia (Sweden) |
4.0% |
| Deutsch Telecom (Germany) |
2.0% |
| France Telecom |
2.0% |
| Telstra |
1.6% |
| Part-privatised: |
| NTT (Japan) |
4.0% |
| Telefonica (Spain) |
1.2% |
Source: Submission No. 41 (Department of Industry, Science and Tourism),
p. 313, quoting OECD Communications Outlook, 1997; Scoreboard 96, Industry
Research and Development Board.
5.15 The Department of Industry, Science and Tourism argued in its submission
that:
There is no correlation between the ownership of the provider and the
share of revenues devoted to R&D. The range of R&D activity is
similar whether the provider is publicly owned, part privatised or fully
privatised. There is, therefore, no reason to expect that a change in
the ownership of a provider will mean a change in the level of expenditure
on R&D… Competition, rather than ownership, is the key driver
of business behaviour concerning industry development. [14]
5.16 Finally on the issue of support for local suppliers of goods and
services in the telecommunications area, the Committee notes that publicly
available evidence shows that there is no reason to believe that privatisation
will encourage Telstra to source fewer of its purchases locally. In 1996/97
local content accounted for 64 per cent of Telstra's purchases. [15]
From 1992 to 1997 local content in purchases was: Telstra about 67 per
cent; Optus 72.3 per cent; and Vodafone 67 per cent. [16]
DoCA pointed out in its submission that:
The issue of using local suppliers of equipment appears to be related
to Australian industry's ability to supply that equipment rather than
to whether or not a carrier is public owned. [17]
Conclusion
5.17 The evidence presented to the Committee during this inquiry has
consistently reiterated the line that the question of who owns Telstra
is not an issue of central importance to the majority of Australians.
The evidence suggests rather that the issue of concern is that all Australians,
wherever they reside, should have access to telecommunications services
of acceptable quality at a reasonable price. The Committee believes that
the Bill before it, together with the relevant provisions in the Telecommunications
Act 1997, provides the framework for the delivery of such services.
Accordingly, the Committee recommends that the Bill proceed.
Recommendation 8
The Committee reports to the Senate that it has considered the Telstra
(Transition to Full Private Ownership) Bill 1998 and recommends that the
Bill proceed, subject to the amendments recommended in this Report.
Senator Kay Patterson
Chairman
Footnotes
[1] Submission No. 39 (Telstra Corporation Ltd.),
p. 301.
[2] Submission No. 30 (Department of Communications
and the Arts), p. 179.
[3] Submission No. 30 (Department of Communications
and the Arts), p. 179.
[4] Submission No. 47a generally (Communications
Electrical Plumbing Union)
[5] Submission No. 47a (Communications Electrical
Plumbing Union), p. 507.
[6] Transcript of Evidence, p. 117 (Mr Shore).
[7] Submission No. 39 (Telstra Corporation Ltd.),
p. 303.
[8] Submission No. 30 (Department of Communications
and the Arts), pp 180-181.
[9] Submission No. 30 (Department of Communications
and the Arts), p. 182.
[10] Telecommunications Act 1997, Schedule
1 clause 6(3)
[11] Submission No. 19 (Australian Telecommunications
Industry Association), p. 93.
[12] Submission No. 39 (Telstra Corporation
Ltd.), p. 299.
[13] For example, Submission No. 27 (Australian
Local Government Association), p.120.
[14] Submission No. 41 (Department of Industry,
Science and Tourism), pp 312-313.
[15] Submission No. 39 (Telstra Corporation
Ltd.), p. 299.
[16] Submission No. 30 (Department of Communications
and the Arts), p. 135.
[17] Department of Communications and the Arts,
Answers to Questions on Notice, 9 May 1998, p. 12.