FREE ESSAY ON PRIVATISATION OF TELSTRA

PRIVATISATION OF TELSTRA

PRIVATISATION - TELSTRA 
What are the advantages of privatising Telstra and how does this impact it's ethical
conduct while striving to satisfy community expectations?
I believe that putting important public assets into select private hands is not in
Australia's long-term interests, and oppose the partial/full sale of Telstra for the
reasons that the Government has given.
The argument the Government has given for the privatisation and corporatisation of
Telstra has been a budget conscious one where the proceeds of Telstra will provide a
one-off opportunity to:
1) abolish Telstra's pastoral call rate and provide untimed local calls in extended zones
in remote Australia; 
2) increase funding for Networking the nation; and
3) pay off foreign debt left over by the previous government
However, this is not true as the Minister, Senator Alston already has the power to direct
Telstra to provide services and upgrade infrastructure (points 1 and 2). If the USO
(Universal Service Obligations Act) or performance standards under the CSG need changing,
then the Minister should invoke his power to direct, and these changes should be made
distinct from any attempts to sell Telstra.
Statistics also show that the sale of the first third netted a total of $0.37 billion
loss to the Commonwealth. By the year 2000, it is estimated that Telstra earnings will
exceed $2 billion annually. The Howard Government estimats an interest saving of about
$2.4 billion per year. This doesn't take into account the income that will be lost to the
government every year in revenue earnings from Telstra. By 2007, the sale of Telstra is
expected to create a budget black hole of $4 billion.
The government cites that the Mums and Dads of Australia will benefit by purchasing
shares in the float, which is true. But eventually the real beneficiaries will be the
multinational companies who will have the controlling majority, not the Australian
public. This can have detrimental effects on society, especially to the rural regions of
Australia.
The Democrats and the Labor Party also disapprove of the privatisation of Telstra for the
above reasons.
Privatisation is when a Government Business Entity (Statutory Body) is sold to the
general public and becomes a public company. There is a belief that Government run
businesses are inefficient because their motive isn't necessarily money, although there
is no consistent evidence that privatisation increases efficiency. However in the case of
Telstra, there have been clear signs of deterioration in services since it's partial
privatisation. 
Delays are longer on connection and service times. Recent changes to the charging regime
for community calls will impact on costs, particularly for small business, in rural and
regional areas. (One in three rural customers were denied connections to new services ~
SMH 5/2/99)
Rural and regional customers also suffered the biggest fall in standards for repairing
faults. The Telstra Communications Network is also set to suffer shutdowns along the
lines of the power cuts in Queensland and Auckland. All these factors can contribute to
the downward spiralling of the essential qualities of life for country families.
This deterioration in services has been a direct consequence of privatisation, where the
focus of the company has shifted to profits rather than providing a cheap and efficient
service. Another example of this can be seen when according to the Media (ABC), Telstra
reaches an excess of funds of up to $1.5 billion as a result of staff/service cuts. The
Board of Directors are urging for a special dividend to shareholders or a share buyback
(to increase share prices). No one is suggesting the obvious, strategic investment. 
Privatisation has also made an impact on the working conditions of employees. One of the
first stages of structural reform that Telstra implemented was downsizing and the cutting
of working conditions of over 60 000 workers (formerly) employed by Telstra, after
experts claimed that there is an excessive labour load of about 27000 strong. As Telstra
was previously a GBE, it's structure was suboptimal in a business sense ie: Telstra's
activities exceed what it would have undertaken in a free market. This has given it one
of the worst staff to phone line ratios in the advanced world.
After 15 months of negotiations with the Communications Electrical and Plumbers Union
(CEPU), the standardisation of ordinary hours for full time employees, introduction of 3
main work streams and the extension of shift arrangements to all sections was agreed
upon. Many workers suffered pay losses when they were re-graded. The Financial review
(17/2/99) records that in 1998, Telstra's labour costs dropped 7.7% (the number of it's
employees fell by 20000), despite a huge increase in the expansion of Telstra's business.

While cutting costs and restructuring has seen record profits for Telstra, it also faced
increasing national competition and has been sharply effected by the failure of it's
global ventures, including mounting losses from investments in Indonesia, India, China
and Indo-China. The increasingly ruthless struggle for market share is driving the
deepening assault on workers' conditions, which will only accelerate as time goes on.
Unlike the subjects of privatisation in the past, Telstra operates as a monopoly with
extensive community service obligations. Under a new board of directors who favour
privatisation, some of these obligations have also been neglected.
To date, ACCC (The Australian Competition and Consumer Commission) has issued 4 notices
against Telstra in respect of the commercial churn transfer process, alleging that
Telstra's conduct is anti-competitive. Telstra's competitors have complained that Telstra
has used it's near-monopoly powers to restrict local and long-distance customers
transferring to other providers and that this inhibits the ability of telecommunications
customers to enjoy the benefits of a more competitive environment. The ACCC instituted
proceedings in respect to 2 of the notices in Federal Court on December 24th.
The 3rd competition notice, received on the 25/1/99 alleged that Telstra discourages
competition by forcing other carriers wanting to transfer customers to Telstra to use a
manual process that is inefficient and Cumbersome. Finally, the 4th notice alleged that
the package of conduct that is continuing, along with the price charged by Telstra for
the churn, is cumulatively a breach of the competition rule by Telstra. If found to have
breached the competition rule, Telstra is liable for significant penalties of up to $10
million or more for each offence.
In an attempt to prevent a private monopoly and to ensure that Telstra's ongoing delivery
of new technologies and services can be maintained, the Government has promised that
Telstra will remain in majority public ownership until an inquiry be conducted
(independent of both Telstra and the Government). When, and only when a set of service
requirements (included in the Telstra Sale Bill) has been ticked off by the inquiry would
the process begin to sell any of the 51% remaining in public ownership.
The object of Privatisation is a deregulation which allows the famous hand of the market
to operate. (the New Australian 29/9/96). This means that all government direction and
other uneconomical operations (sometimes includes USO, CSO) have to be removed, which in
turn implies breaking up the $30 billion corporation into a dozen bite-size chunks, until
companies can afford enter the market to compete with a reasonable amount of initial
investment. Only when Mr Howard opens up the whole sector to competition will the system
function properly, removing the need for schemes such as the USO.
However, on the contrary, Mr Howard assures us that the privatised Telstra will NOT be
broken up and be strictly regulated. He also says that the Liberals will impose price
caps and give Telstra no freedom to introduce timed local calls. The media states that
the Government will also force Telstra to extend cross-subsidies community service
obligations via the introduction of digital ISDN exchanges in rural rates. If his plan is
for a tightly regulated Telstra, then what's the point of privatisation? This is another
reason why I am opposed to the sale of Telstra, as the intent of the PM's actions do not
seem very clear to me.
Part privatisation, like the current part-competition, I believe, is the worst of all
choices. If open competition is desired, Telstra must be split up and all services and
entrepreneurial ventures privatised. But for the protection of the common good, the core
network should remain in public hands, as Telstra provides more than a service; it is the
infrastructure of which the services of our country rely on. 
In fact, if Telstra reduces expenditure on advertising and sponsorship, remove cross
subsidisation of Pay TV, and give up on it's international ventures (which are loosing
money) to concentrate on giving Australia a cheap and efficient network; the cost of
phone calls would be considerably reduced. 
In the United States, local carriers are regulated monopolies, where price caps are
forced down. 
As technology develops and becomes more efficient, the cost of distance in telephone
calls will continue to decrease. 
Perhaps eventually there will be a telecommunications regime where you pay an annual fee
for connection, while all local/long-distance calls are free and no restrictions are
placed on usage; much like how our current sewerage networks already operate. If we can
achieve this, then we will have a leading edge position in the Age of Information.
(NOTE ~ not part of essay: is this highly unlikely as such changes in operational
efficiency would destroy competitors such as Optus and Vodaphone etc.???)
Overall, my preferred position would be for the commonwealth the buy back to 1/3 of
Telstra already sold, because of the public benefit derived from public ownership.
Telstra is in an effective monopoly position, and taxpayers' funds have made the
telecommunications giant what it is today. It is not fair to place this public
infrastructure into private hands, which have failed to deliver service
merely for the purposes of profit and shareholder interests.
Bibliography
me, my sources