Government Members' Dissenting Report
Purpose of the inquiry
From the outset, the value of an
inquiry into competition in broadband services was questionable. The Senate recognised this when rejecting a
similar reference on 24 June 2003. The
current reference was adopted two days later with a majority of just one vote. We are left to surmise what occurred in the
interim to persuade some of the independent senators to change their votes.
Of the resulting inquiry, the
then Minister for Communications, Information Technology and the Arts, Senator the
Hon Richard
Alston said:
Today's decision to support a Senate inquiry that
100% duplicates the terms of reference of an existing, already twice-extended
Senate inquiry demonstrates just how totally out of touch with reality the
Labor Party has become This latest inquiry is a gross waste of time and money
and Australian taxpayers have every right to be appalled that the Senate, which
obstructs every important reform that the Government brings forward, is spending
its time on such a pointless exercise.[297]
Even a cursory reading of the
majority report would show Senator
Alstons comments had proven to be remarkably prescient. The inquiry provided nothing more than a
platform for yet another attempt by the Labor Opposition to turn the clock back
to a time characterised by excessive government control over a distorted
telecommunications market while ignoring the evidence of significant
community benefits that have flowed from competition in related infrastructure
services introduced under the 1995 National Competition Policy reform package. Ironically, that reform was carried through
by an ALP Federal Government, with the support of the Coalition then in
Opposition and the State Governments.
Interestingly, these repetitious and
trenchant inquisitions into Telstra beg the question at least for those who
remember the quality of service provided by the 100 per cent government-owned
entity if it is still poorly managed as a part-privatised company, surely
privatisation is the logical answer, rather than the problem.
As the Senate's Environment,
Communications, Information Technology and the Arts Legislation Committee noted
in its report on the provisions of the Telstra (Transition to Full Private
Ownership) Bill 2003:
Despite suggestions that there is an obvious and
necessary nexus between ownership and service quality, the Committee could find
no evidence that full privatisation of Telstra would impede the Government's
ability to regulate the level of services provided by Telstra.[298]
What this inquiry has shown,
clearly, is that the current non-government parties are reliant with only
lightly concealed cynicism on the expectation that telecommunications
services have been sufficiently good for sufficiently long that Australians may
have forgotten how bad services were in the days of the Postmaster-General's
Department and (the corporatised but not privatised) Telecom Australia.
Once stripped of its anti-Telstra
ideological propaganda, the majority report actually proves that the Government
in fact has in place appropriate regulatory and budgetary settings to ensure
that all Australians will have equitable access to broadband services as
these services evolve. The technology is
relatively new, and the challenges are admittedly huge in the short term,
especially in the more remote areas of Australia, but every day sees a new
development which justifies the Government's faith in its approach.
Competition in broadband services
Government Senators observe that
there is a strange and illogical reluctance in the majority report to
acknowledge the fact that Australian consumers have benefited from changes to
Telstra and telecommunications since the introduction of open competition in
the telecommunications market in 1997. Significantly, the Government introduced
the Telecommunications Competition Act in
2002. The Act implemented the Government's response
to the Productivity Commission's Inquiry Report on Telecommunications
Competition Regulation and introduced a range of measures to enhance the level
of competition and improve the investment climate in the telecommunications
sector.
The process of moving from a
government-owned and operated monopoly to an open competitive
telecommunications market is not achieved overnight. However, the Government has been driving this
process of change, which has had major benefits for Australian
telecommunications users, by developing an effective regulatory regime. The Productivity Commission's Inquiry Report
on Telecommunications Competition Regulation recognised that the underlying
regulatory philosophy of the current telecommunications competition regime is appropriate, and that since the
introduction of open competition in
telecommunications the Government has made a number of amendments to the regime
to ensure that it continues to operate effectively.[299]
In April
this year the Government again asked the Productivity Commission to review
national competition policy arrangements.[300]
As with telecommunications
generally, the Government's policy on competition in broadband services has
been to:
Make sure that people are able to get what they
want and that there is maximum competition in there. That drives prices down
and gets quality of services up.Maximum choice is what it is all about. At the
end of the day the consumer will decide. We think the market is the best place
to decide the level of take-up, and it is pretty much sorting the players out
right now.[301]
Mr
Colin Lyons
from the Department of Communications, Information Technology and the Arts told
the Committee that sustainable broadband competition was reliant upon a
regulatory policy which did not distort the market:
I think the general policy of the government is to
make sure there are the right regulatory settings to allow sustainable
broadband competition rather than to distort the market. So the general
philosophy, I think, is to have sustainable competition and make sure that the
ACCC has a range of very strong regulatory powerswhich it hasto intervene if
there is anti-competitive conduct.[302]
The Government members of this
Committee have taken the opportunity during the course of this inquiry to
carefully observe market competition in broadband services. We do not agree with claims that due to
Telstra's incumbency, competition in this sector is limited. Australia has seen dramatic reductions in the
cost of broadband services over the past six months. Broadband is now available
for as little as $19.95 per month,[303] and a wide
range of ISPs now offer a suite of services and prices allowing consumers a
range of choices. The reduction in cost
has seen a corresponding increase in the number of people connecting to, or
switching from dial-up to, broadband services. Telstra claimed:
Telstra's target to connect one million Australians
to broadband will be reached six months sooner than expected, with recent
discounts sparking a dramatic increase in demand.
"Telstra has signed its 750,000th broadband
customer this week, following a 46 per cent surge in demand in just five
months," Mr Bruce Akhurst, Group Managing Director, Telstra Wholesale,
Broadband & Media, said today.
"Telstra will beat its target of one million
broadband customers by the end of next year. We are now on track to achieve
that six months early, by the end of June 2005," he said.
"By dropping broadband prices, Telstra set off
an avalanche of customer demand. We have been setting and then breaking records
ever since".[304]
Similarly Optus reported that:
OptusNet broadband customer base had expanded to
185,000 - marking a 36,000 increase in subscriber numbers since 31 March 2004. OptusNet
Cable customers now total 162,000 and
OptusNet DSL customers total 23,000. Scott
Lorson, Acting Managing Director of Consumer
and Multimedia said Optus has experienced unprecedented call volumes and sales
in response to its broadband campaigns.
"We are pleased to have reached this
significant milestone in such a short timeframe and we expect the momentum to
continue. Optus is playing a major role in the expansion of the broadband
market in Australia
by increasing the level of competition," Mr
Lorson said.[305]
The majority report has challenged
Telstra's decision to lower broadband prices in February. The Government does not support Telstra, or
any other carrier, misusing market power; however, the process of price
reduction and competition within the sector has clearly simulated broadband uptake.
Government Senators believe that this is
evidence that the current level of regulation and competition is driving the
market in a positive direction.
Divestiture of Telstra's Foxtel stake and HFC network
The majority report notes favourably
that ACCC has called for serious consideration to be given to Telstra's
divestiture of both its share in Foxtel and its HFC network. This hardly comes as a surprise given the
Labor Partys so far declared position on Telstras holding of Foxtel
shares. However, Government Senators note
that the ACCC had arrived at its view on the basis of a concern for a perceived
conflict of interest on the part of Telstra, rather than from: (1) any behavioural
evidence of a conflict of interest by Telstra; and/or (2) firm knowledge of real
community benefits that would flow from such a divestiture. We further note that no witness has at any
stage of the inquiry offered the Committee any evidence that the proposed divestiture
would not simply result in other players in the broadband market being able to
take over the market to the disadvantage of Telstra, and the Australian people.
Government Senators note that the
Government will continue to refine the regulatory regime to ensure that no one
sector of the community is disadvantaged.
As Senator Alston as Minister for Communications, Information Technology
and the Arts pointed out in 2002:
We know that Telstra is in both of those networks.
I have made it plain that, if there is any indication that Telstra is running
dead on DSL, we would take a very dim view. That is one thing; it is another
thing to say that simply because they are in Foxtel and there is a possibility
that they might act in a way that you disapprove of that would then justify a
policy decision to excise them, presumably against their wishes and against the
wishes of the shareholders in Telstra, not to mention the shareholders in the
Foxtel consortium. That would be a very big step.[306]
The new Minister for
Communications, Information Technology and the Arts, Senator the Hon
Helen Coonan,
reinforced this position and rejected calls by the ACCC to compel Telstra to
sell its 50 percent share in Foxtel.[307]
Conclusion
The Government's National
Broadband Strategy seeks to make Australia
a world leader in the availability and effective use of broadband, to deliver
enhanced outcomes in health, education, community, commerce, and government and
to capture the economic and social benefits of broadband connectivity.[308] Under this strategy the Howard Government, in
partnership with State and Territory Governments, has invested $142.8 million
on a range of programs directed specifically at supporting both competition and
the uptake of broadband service. As
Communications Minister Senator Coonan
has said:
Take-up is also being fostered by the Australian
Government under the National Broadband Strategy, which includes significant
targeted funding programs including the $107.8 million Higher Bandwidth
Incentive Scheme (HiBIS) and the $23.7 million Coordinated Communications
Infrastructure Fund. With the first registrations of ISPs under HiBIS, we can
expect the uptake of broadband in regional and rural Australia
to increase markedly. The use of broadband across the economy has great
potential to increase the productivity of Australian business and to improve
the delivery of essential services such as health and education.
More importantly for the economy - the strongest
take-up is being seen in the small business sector. In the latest Pacific
Internet Broadband Barometer released last week, ACNielsen Consult reported
that of those small businesses with an Internet connection, more than 52% are
on broadband connections. This has more than doubled from 23% two years ago.[309]
The move to a fully competitive
telecommunications market will continue to occur in stages. The Government will continue to support the
market's move towards greater competition through a light touch regulatory
regime, which aims at allowing market forces to flourish, rather than being
crushed under the dead weight of some utopian central planning model as
proposed in the majority report.
The recently released reports on
broadband deployment confirm that broadband take-up is growing strongly and
that this Government is supporting and encouraging competition in the supply of
telecommunications in an appropriate and effective manner. ACCC Commissioner, Mr Ed Willett, issued an
update of the ACCC's Snapshot of broadband deployment on 26 July 2004:
The report shows that as at the end of March 2004,
there were 829,300 broadband services connected across Australia,
an increase of 130,600 since December 2003. This is the largest quarterly
increase since the ACCC began collecting broadband statistics in 2001. Growth
in broadband services increased to 18.7 per cent for the March 2004 quarter,
reversing the downward trend in growth rates seen over the last three quarters
of 2003.[310]
This Committee the Senate
Environment, Communication, Information Technology and the Arts Reference
Committee has undertaken a number of inquiries to examine the Australian
telecommunications sector over the past few years. All, including this one, seemed to follow the
same script highly critical and politically motivated attempts to discredit
Telstra. The following unchallenged observation
made during the course of this inquiry seems to provide a good summing-up of
these exercises :
This is the fourth or fifth telecommunications
inquiry I have been on since joining this committee three years ago. In just
about every one of them I get the impression the inquiry is a matter of Telstra
versus the rest of the world.[311]
Government Senators believe that Australian consumers
recognise that - while Telstra services are not perfect - they continue to be
improved, and that the Government has in place a regulatory regime that will
assist Telstra and the telecommunications industry to bring state-of-the-art
and affordable broadband services to ordinary Australian businesses and
households.
Government Senators consider
that, based on the evidence provided to the inquiry, the majority report's
recommendations are a contrived solution in search of a problem, and dissent
from them in their entirety.
______________________
Senator John Tierney Senator
Tsebin Tchen
________________________
Senator for NSW Senator
for Victoria