Government Members' Dissenting Report
Introduction
The Government members of the Committee strongly reject the
approach taken in examining the Australian telecommunications network in this
Report and the conclusions and recommendations made by the non-government
majority of the Committee. Instead of being
an objective examination of the state of the network, the Report is a thinly
veiled, politically motivated, attack on one participant in the industry,
Telstra.
The Opposition's motives for referring this inquiry to the
Committee were made clear in its media statements at the time. Senator Mackay
set the tone with a media release entitled 'Senate set to examine
Telstra'. After losing the 2001
election, the Opposition had declared that all its policies were up for review,
except one: opposition to the further privatisation of Telstra. The inquiry was simply a fishing expedition to
find something about which to criticise Telstra. Senator Mackay's
media statement went on to say:
At the moment it is difficult to get all the information
from Telstra to consider this issue in detail, but that material can be fully
ascertained through a Senate Inquiry.
This process will provide a far more accurate picture of service levels
than the Government's current plan to proceed with T3 after canvassing opinions
amongst its own backbench.
Labor remains implacably opposed to the full privatisation of
Telstra but now is the time to put Coalition claims to the test before there
is any further attempted dilution of Telstra's remaining public ownership.[425]
In light of the above it was no surprise to find that the
Committee's report concluded that 'the evidence presented to the Committee
strongly suggests that full privatisation of Telstra should not proceed until a
more competitive market for telecommunications is established'.[426]
Senator Allison
from the Australian Democrats, the then Committee chair, thought the inquiry
was for a different purpose and issued a press release emphasising that the
inquiry would examine the prospects for universal broadband access. It is, therefore, a little difficult to
understand why the Democrats subsequently supported a separate inquiry into
broadband while this inquiry was still underway. She also suggested that the inquiry would
look at the regulatory and other measures that might be necessary to ensure
appropriate investment in the network.[427]
The intent of the Senators who supported the proposal to
refer this inquiry to the Committee is reflected in its Terms of
Reference. They clearly implied in items
(c) and (d) of the terms of reference that services were inadequate and needed
to be improved before they had taken the trouble to examine any evidence. Although the terms of reference referred to
the Australian telecommunications
network, the Committee's report and its recommendations focus almost
exclusively on Telstra's operations and the alleged flaws in its network.
Over recent years the Government has focused heavily on the
development of a modern, efficient, competitive telecommunications industry
which will provide Australians with the services they need. To this end the Government has initiated a
series of independent inquiries into telecommunications. Both the Besley and Estens inquiries were
focussed on examining the adequacy of telecommunications services. The Government has acted on the
recommendations of those inquiries to ensure that service levels are
adequate. The Government tasked the
Productivity Commission with the role of examining the effectiveness of
competition regulation in the industry and again acted on its recommendations
to ensure that the regulatory framework supported the development of
competition.
Regrettably the Committee's report, rather than seeking to
genuinely assess the state of the network, is focussed on a union driven agenda
of turning the clock back to the days when a bloated public service bureaucracy
ran telecommunications. The members of
the Committee who support this report are seeking to once again burden this
country with one of the world's most expensive and outdated telecommunications
networks.
Network faults and maintenance
The terms of reference called on the Committee to examine
the capacity and adequacy of the Australian telecommunications network. Instead the Committee spent an inordinate amount
of time discussing air bottles and gel as the Labor members of the Committee
searched for grounds on which to find real or imaginary faults with the Telstra
network and to promote the union's campaign to expand the size of Telstra's
workforce.
At one hearing after another witnesses from the
Communications, Electrical and Plumbing Union were brought before the Committee
to tell us how much better things were in the good old days when Telecom/Telstra
employed more of their members. We heard
from past and present CEPU officials and members in Wollongong,
in Melbourne, at
two separate hearings in Sydney,
in Launceston, in Cairns and in
Bunbury. However, these witnesses were
never able to produce any substantial evidence that the Telstra network had
become unserviceable and fault ridden as a result of the efficiencies
introduced over recent years which they vociferously condemned.
Unfortunately the evidence given by union representatives
was not always reliable. During the
Committee's hearing in Cairns Mr Paul White from the CEPU told the Committee
that 'there are massive service disruptions throughout north Queensland
in monsoon season'[428]. When the Committee questioned Telstra about
these disruptions Telstra was able to advise the Committee that it 'has no
record of any CSG Exemption Public Notices of MSD's in the area of Far North
Queensland during 2002/03.'[429]
Similarly the Committee spent an extraordinary amount of
time discussing the use of gel to seal main cables and the maintenance of air
pressure in cables. Reading the Hansard
transcripts and the Committee's report might lead an uninformed person to the
conclusion that the main cables in Telstra's network were on the verge of
collapse. But once again when the
evidence was tested it was found to be sadly wanting. When Telstra was questioned about the impact
on its network of a series of six severe storms in Queensland over a seven day
period it was able to advise the Committee that:
Over that period of time and we have spoken in this forum and
many forums about main cables and air pressure and the CPAS network there was
no evidence of main cable failure. That
means that one major component of our network, which was under contention
through the network inquiry and through this, stood up the whole time.[430]
While the Opposition and Democrat Committee members were
obsessively pursuing their mission of finding something about which to
criticise Telstra, they ignored the remainder of the industry. The Australian Communications Authority's
Performance Monitoring Bulletin shows that while Telstra's call centre responds
to 93% of operatorassisted international and long distance calls within 10
seconds, the Optus call centre is only able to respond to 86% of calls in the
same time frame.[431] However, in the Committee's report you will
not find any evidence of the Committee seeking to examine the performance of other
carriers. The Committee was focussed on
Telstra to the exclusion of everyone else.
During the inquiry the Committee received submissions from a
number of witnesses who were experiencing difficulties with services provided
by Telstra. Telstra responded by
contacting some of those people so that it could rectify any problems with
their services. An Opposition member of
the Committee then made an unsubstantiated claim that Telstra was harassing
witnesses with the result that Telstra agreed to cease contact with those
submitters in order to remove any possibility that its actions would be
misunderstood. This may have suited the
Opposition's political agenda by ensuring that the level of dissatisfaction
with Telstra's services was sustained, but it left those customers with
unresolved complaints about their services.
In the Opposition's view it seems that Telstra is equally at fault when
services are inadequate and when it seeks to improve them.
It is interesting to compare the figures for the performance
of Telstra in 2003 with those for 1996, the last under the previous Government. While comparable figures are not available
for many measures the following are illustrative.
Comparison of Telstra
Performance 1996 and 2003
|
1996[432]
|
2003[433]
|
Call Centre Performance
|
|
|
%
of directory assistance calls answered within 10 seconds
|
33
|
94
|
%
of directory assistance calls leaving without being answered
|
18
|
2
|
%
of calls to Telstra's service difficulties answered within 15 seconds
|
66
|
73
|
%
of calls to Telstra's service difficulties queue leaving without being
answered
|
13
|
6
|
Payphones
|
|
|
Average
hours to clear a payphone fault
|
24
|
12
|
%
of public payphones operating at any one time
|
96
|
98.8
|
New Connections
|
|
|
%
of in place new connection completed within the specified timeframe
|
86
|
97
|
%
of customers connected to new services within the specified timeframe
|
83
|
92
|
Fault Rectification
|
1996
|
2003
|
%
of faults in metropolitan/urban areas cleared within one working day
|
Metro-business
Metro-residential
Urban
|
79
51
|
90
|
%
of faults in country/rural areas cleared within two working days
|
Country
Rural
|
84
|
93
|
The above comparisons clearly show that despite all of the
criticism of Telstra during this inquiry, its performance has significantly
improved since this Government came to office and opened up the
telecommunications industry to full competition. The Government Senators believe that there is
still room for further improvement in Telstra's services. However, the suggestions in the Committee's
report that services have drastically deteriorated and that the network is in
danger of collapse are clearly not borne out by the evidence.
When this inquiry was set up the then Minister for
Communications, Senator the Hon Richard
Alston, said that:
Labor has already totally made up its mind on Telstra's service
levels before it has seen the evidence.
Because of its unsustainable opposition to any further sale of Telstra,
Labor has no political choice but to conclude that services are deficient
regardless of the facts presented.[434]
His misgivings at the time that the inquiry was established
have been completely vindicated over two years later.
Internet Access
In its report the Committee has recommended that carriers be
required to increase the dial-up speed supported by their networks to at least
40 kbps over the next two years. While the
aim of this proposal is unobjectionable in principle, it fails to address the
issue that dial-up Internet access is an ageing technology and that the cost of
such an upgrade would be difficult to justify.
The Committee's report correctly identified the fact that the number of
dial-up subscriptions was already in decline last year. This trend can be expected to accelerate
rapidly now that broadband prices have fallen to the point where the cost of
broadband is comparable to the cost of dial-up access. In light of this, it is difficult to see how
the Opposition can justify a massive investment in increasing the speed of
dial-up access for a declining number of users.
The Committee has also failed to clearly address the issue
of how this upgrade is to be funded. The
estimated cost of such an upgrade is at least $5 billion dollars.[435] It would have been helpful if the Opposition
and the Democrats had clearly stated whether they wanted to take this money out
of the pockets of Telstra's shareholders, or to fund the project by blowing a
$5 billion hole in the Federal budget.
The Government has already acted to ensure that all
Australians have access to a minimum dial-up speed of 19.2 kbps. This speed has been criticised as being too
slow for some purposes but the Government's intention was not to identify an
ideal speed or to try and dictate to industry what products to offer consumers.
The Government mandated a minimum
requirement that provided all Australians with basic access at a speed which
was achievable both in light of the existing telecommunications infrastructure
and the cost of upgrading.
The majority report has also made some equally dubious
recommendations about higher speed Internet access. The Committee recommends that a licence
condition be placed on the Universal Service Provider requiring that a minimum
data speed be made available to all Australians within twelve months. The Digital Data Service Obligation (DDSO)
already does that. Once again the
Government has not attempted to tell the industry what its customers want, but
has specified an achievable minimum speed that all Australians can access. The Government has also introduced programs
such as the extended zones program and HiBIS to bring even faster speeds within
the reach of all Australians.
Pair Gain Systems
The majority report recommends that Telstra remove from its
network all pair gain systems which restrict dial-up connection speeds. We have already discussed the possible cost
of this type of upgrade above but it is worth noting the measures which Telstra
has already undertaken on this issue in response to the finding of the Regional
Telecommunications Inquiry. Telstra
states that it has:
-
introduced processes to ensure that pair gain
systems operate to their design level of performance;
-
undertaken additional network activities in some
instances where Internet Assistance Program (IAP) customers may not be able to
achieve 19.2 kbps minimum equivalent throughput due to causes within Telstra's
fixed network; and
-
assisted customers who are accessing data speeds
in excess of the IAP minimum equivalent throughput but who are not achieving
the maximum data speed possible using their existing modem or computer
configuration.[436]
The majority report recommends that Telstra be required to
remove from its network all pair gain systems which do not support broadband
services. In evidence to the Committee,
Telstra has already outlined a range of approaches it is taking to address this
issue. If Telstra's solutions do not effectively
address the problem then it might be appropriate for a Government to act after
a reasonable interval. However,
broadband equipment and technologies are evolving rapidly and it would be
premature for any Government to assume that there is a long term problem which
industry is unable to address. The worst
possible outcome would be to have politicians trying to dictate to telecommunications
companies how they should design their networks.
Once again the Opposition and Democrat members of the
Committee have avoided specifying who is to pay for their proposals.
The Committee also recommended that the USO be revised to
incorporate a guarantee that customers will always be able to obtain a dial
tone. This recommendation is apparently
aimed at concerns that Telstra customers connected through 6/16 and similar
pair gains systems may be affected by congestion problems. This issue has already been addressed by the
Government.
The Deed of Undertaking signed by the Government and Telstra
requires that the company progressively improve the standard of service on
those systems until they reach a specified system grade of service target. That target is that during the fifty busiest
half-hour periods of the week there will be not more than five chances in a
thousand that a call on a particular system will not be able to be
completed. This is a very demanding
standard which will ensure that consumers connected via those systems have
reasonable access to the network at all times.
In evidence to the Committee Telstra advised the Committee
that old pair gain systems which do not support modern services are no longer
being purchased by Telstra and in some cases are being removed or phased
out. The new systems now being acquired
and installed by Telstra, such as the CMUX-AU, support the full range of voice
and data services. Given that some of
these systems are pre-war, one would expect Telstra's efforts to phase them out
would be applauded, not criticised.
Access programs
In its majority report the Committee has criticised the
Government for introducing programs to improve access to telecommunications
services and allowing Telstra to participate in those programs. Of the programs mentioned in the report only
the Internet Assistance Program was specifically conducted in conjunction with
Telstra. That program was part funded by
Telstra and aimed directly at improving dial-up speeds available on Telstra's
PSTN network. At no stage did any of
Telstra's competitors complain to the Committee that they were being excluded
from these programs.
All of the other programs were, and are, open to the whole
industry. A variety of other
telecommunications companies have tendered for or participated in Government
programs. In Chapter 4 of its report the
Committee cites Telstra's intention to use funding under the HiBIS program to
improve the availability of ADSL services as an example of a Government program
being used to consolidate Telstra's market dominance. The claim is contradicted by the fact that Telstra
was not one of the providers of services under the scheme named when the
Minister for Communications, Information Technology and the Arts announced the
first two Internet Service Providers approved under the scheme.[437]
The Government Senators consider that the focus in any
Government program aimed at expanding the services available to consumers
should be on delivering services to Australians in need at the lowest cost to
the Government. In the view of the
Government Senators, placing restrictions on Telstra's participation in these
programs will not only disadvantage Telstra and its shareholders, but may also
entrench the disadvantages faced by users of telecommunications services in
rural, regional and remote areas of Australia.
Competition
In its report the Committee claims that the current
regulatory regime has failed to deliver a competitive environment. While this view was strongly expressed during
the Committee's hearings by Telstra's rivals and some commentators, it is not
sustainable in the light of any objective examination of the industry. Competition may be developing more slowly in
some areas than Telstra's rivals would like, but the history of
telecommunications since the introduction of the current regime has been one in
which Telstra's market share has been slowly but steadily eroded. Strong competition already exists in mobile
telephony, the provision of long distance voice services, the reselling of local
call and broadband services, and across the full range of services in capital
city CBDs.
When Telstra and Optus were rolling out their rival HFC
networks, they did not make that installation available in regional Victoria
or in the Australian Capital Territory. Their failure to provide service to those
markets created an opportunity for two new companies, Neighborhood Cable and
TransACT, to establish their own infrastructure- based networks in those
markets. In the past consumers in those
markets would have had no other option than to rely on whatever services
Telstra offered them, but because this Government opened up the industry to
competition they now have choice. This
is another concrete example of the positive effects of competition.
There is evidence that infrastructure based competition in
other areas will grow over coming years.
As an example, the Committee's Report notes Optus is already considering
rolling-out its own broadband network.
Recently iiNet announced its intentions to roll-out a national broadband
network in competition with Telstra.[438]
In 2000 the Government referred the issue of
Telecommunications Competition Regulation to the Productivity Commission. In response to that reference the
Productivity Commission provided the Government with a comprehensive 580 page
report on the state of competition in the telecommunications industry and on
ways in which competition regulation could be enhanced.[439] The Government Senators commend the
Government for its diligence in addressing this issue and acting on the major
recommendations of that report. In our
view the recommendations of the non-government majority on the Committee make no
significant contribution on this issue.
Benefits from
telecommunications reforms
In the majority report the Opposition and the Democrats have
set out to portray an industry in which there is little competition and
therefore little pressure on the incumbent, Telstra, to lower prices. In fact the prices paid for telecommunications
services have fallen dramatically since the introduction of the current
competition regulatory regime. The
Australian Competition and Consumer Commission (ACCC) recently reported on
changes in the prices paid for telecommunications services in the five year
period between 1997-98 and 2002-03.[440] The ACCC found that:
-
local call prices for residential customers fell
by 34.8%;
-
national long distance call prices for
residential customers fell by 26.4%;
-
international call prices for residential
customers fell by 58.9%;
-
fixed to mobile call charges for residential
customers fell by 13.3%; and
-
overall the price of PSTN services for all
customers fell by 18.1%.
These figures show that the regulatory reforms introduced by
this Government are delivering real savings to Australian consumers and
businesses. The benefits from a more
efficient telecommunications industry have also flowed through to the wider
economy. In 2003 the Allen Consulting
Group was asked to look at the benefits which have accrued to consumers and
small business following the passage of the Telecommunications
Act 1997 and Part XIB and Part XIC of the Trade Practices Act 1974.[441] That report found that:
-
The efficiency gains brought by the
telecommunications reforms have increased both aggregate employment and real
wages. In 2002-03 national employment
had been increased by about 54,000 jobs.
In addition, real wages are estimated to be 3.07 per cent higher than
they would have been in the absence of the telecommunications reforms.[442]
-
The benefit per household is estimated to be
worth between $330 and $1,028 (in 2002-03 dollars) by 2002-03. These per household benefits can be
aggregated and were worth between $2,482 million and $7,721 million by 2002-03
to the Australian economy at large.[443]
-
This analysis reveals that in 2002-03 small
business was 2.78 per cent better off than it would have been in the absence of
the telecommunications reforms. The
telecommunications reforms since 1997 have resulted in a benefit of $1790
million per annum.[444]
-
Not surprisingly, the telecommunications
industry is the biggest beneficiary of the telecommunications reforms, with
output being around 97 per cent higher in 2002-03 than would have been the case
in the absence of the reforms.[445]
In addition to the financial and economic benefits outlined above,
the Government's telecommunications reforms have facilitated the introduction
of a greatly enhanced range of services.
Ten years ago mobile phones were a new technology available mainly to
the business sector while broadband access to the Internet was unknown to most
Australians. Today services like these
are available to all Australians through a range of terrestrial and satellite
services. While the availability and
cost of some services may not satisfy all consumers, every month sees the reach
of these new services extended to more Australians while prices remain stable
or fall.
Conclusion
The Government's telecommunications reforms have brought
enormous benefits to all Australians. A
wider range of telecommunications services are available than ever before. The cost of those services has fallen as a
result of the Government's actions in opening up the industry to competition
and this process has brought significant economic benefits to the Australian
economy, and it will continue to do so.
To ensure that all Australians share in these benefits, the Government
has embarked on a series of reviews of the telecommunications industry and has
acted on the recommendations of those reviews.
Several of these have only recently been introduced and it is ludicrous
for the majority Report to condemn them at this early stage.
Contrary to the assertions contained in the majority report,
the Australian telecommunications network is now providing all Australians with
reasonable, reliable and equitable access to the full range of
telecommunications services. During the
Committee's inquiry a great deal of evidence was given which suggested that the
network was in a parlous state and in imminent danger of collapse. An objective examination of all of the
evidence simply does not support that conclusion. While fault levels fluctuate from month to
month and from year to year there is no evidence of gross deterioration in the
condition of the network.
To ensure that the network continues to operate reliably the
Government introduced the system of Customer Service Guarantees and the Network
Reliability Framework. These mechanisms
ensure that any failings in the network are identified and acted upon and give
consumers automatic relief if service standards fall to an unacceptable
level. This is a far better approach than
to hand the design and management of the network over to politicians and
bureaucrats, as the Opposition and the Democrats apparently want to do.
The only area in which the majority Report makes a positive
contribution is in its recommendations on the provision of telecommunications
services for people with disabilities.
The Government members of the Committee will be encouraging the Minister
to carefully consider those recommendations.
As the evidence we have outlined above shows, the network is
more reliable than it was under the previous Government, it supports a wider
range of services than ever before, and the cost of those services has
fallen. There is naturally room for
further improvement in all of these areas, as one would expect, and Telstra has
programs in place to progressively address all such issues. However, in the view of the Government
members of the Committee the remaining recommendations contained in the Report
do not make a useful contribution to the development of the Australian
telecommunications network and we do not support them.
Senator John Tierney, Senator for NSW
Senator
Tsebin Tchen, Senator
for Victoria