The Guardian November 26, 2003

Telstra: From "half-pregnant" to "conflict of interest"

by Bob Briton

As Federal Parliment resumes for the last two weeks of the year, 
the Government digests the defeat of its Bill to privatise the 
rest of Telstra. The Coalition pollies would have us believe they 
are struggling with a terrible moral dilemma: the propriety of 
the Government's position as regulator of the telecommunications 
industry and its 50.1 percent shareholding in Telstra. The 
"conflict of interest" slogan has now replaced the "half-
pregnant" one to defend the Government's push for the 
privatisation of Telstra.

Former Communications Minister Richard Alston aired the argument 
before similar sell-off moves in June. "It's like the chief 
steward in the Melbourne Cup owning the red-hot favourite", Mr 
Alston said.

The new Communications Minister Daryl Williams reiterated the 
sentiment, using it to argue for the full privatisation of 

"There is a very significant conflict of interest between the 
Government owning 50.1 per cent of the shareholding of Telstra 
and being the regulator of that and the other 88 carriers", he 
told the ABC's Premium News recently.

Of course, the role of this Federal Government and its 
predecessors in introducing the 88 other carriers into the system 
is not mentioned. The truly glaring conflict of interest of 
corporations delivering an essential service and trying to gouge 
the maximum private profit from it is also left alone.

Strong Profits Despite returning strong profits ($960 million 
this year) and containing its share value losses better than most 
telcos in the turbulent world market, it was argued that its dual 
private/public character somehow hinders Telstra.

Senator Nick Minchin used to profess concern for taxpayers who 
were exposed to "unnecessary risk" by having their money tied up 
in Telstra  "a publicly listed company in one of the most 
competitive industries".

Perhaps because Mr Minchin comes from South Australia, where 
similar concerns were expressed for the future of the once 
publicly owned electricity utility ETSA before being privatised, 
this old chestnut was seen to lack any credibility and was soon 

South Australian taxpayers have already had to bail out failing 
private operators showing, once more, that "free enterprise" 
privatises profits and socialises corporate risk. At the same 
time, the "free market" has pushed South Australians' power bills 
through the roof.

In the best corporate tradition, Telstra directors (mostly from 
the corporate sector) have had their hands out for a $170,000 pay 
increase in spite of a number of embarrassing developments 
lately. Telstra's foray into the Hong Kong telecommunications 
market ended when its Reach venture failed requiring a write-down 
of $965 million.

Despite its healthy profits, Telstra is keeping broadband retail 
prices and set-up costs high. Its reliance on usage metering 
means that download costs on this high-speed internet service are 
also high. As a result, Australians have been slow to take up the 
broadband option in a clear break with their customary 
willingness to embrace new technologies.

Only three per cent of Australians have a broadband internet 
connection, a figure below the OECD average and a level that Tony 
Blair called a disgrace when it applied in the UK. Britain now 
has 22 per cent of internet users connected through broadband.

Telstra's commitment to the bush is questionable with regard to 
broadband, as well. As shadow IT spokesperson Kate Lundy points 
out, Telstra continues to install outdated line-splitting 
equipment throughout regional Australia. She worries that 
regional and rural Australians will be "forever burdened with 
sluggish internet access and will never have any chance of 
affordable broadband".

If Telstra is fully privatised the chances of rectifying this 
situation are even more remote. Private telcos will focus almost 
all their attention on the more profitable metropolitan and big 
business markets regardless of the government's "legislative 
safeguards" eyewash.

The clearest evidence that Telstra is helping the privatisers is 
its establishment of a $1 billion fund to buy back shares from 
disillusioned "mum and dad" investors. It is hoped that this will 
cause the share price to rise closer to the $5.25 mark desired 
before the remaining third chunk of the telco can be offloaded.

Opinion polls, like a recent one conducted by the Advertiser 
in SA, show that nearly three quarters of Australians oppose 
the sale of Telstra. Two thirds of coalition voters are against 
it. Apathy will be encouraged, though, by the slowness of its 
response to problems with its Big Pond e-mail service and its 
involvement in an incident where Telstra Enterprise Services put 
some of the government's most sensitive backed-up e-mails on 
Canberra rubbish tip.

Telstra continues to alienate its workers with its undertakings 
before the Senate Estimates Committee to take the axe to jobs. 
Its "aspirational" figure is for 3000 jobs to be shed in the 
financial year 2003-04.

While the Greens and One Nation's Len Harris appear solidly 
opposed to full privatisation, the Democrats and independents Meg 
Lees, Brian Harradine and Shayne Murphy have shown signs of a 
willingness to negotiate.

Democrat Senator Andrew Murray reportedly wants part of the funds 
to be invested in the environment. Meg Lees (of GST infamy), also 
wants infrastructure projects and urgently needed action on the 
Murray Darling basin to take preference.

"If you think, that as a South Australian Senator, I am going to 
sit idly by and watch my state die of thirst on the basis of an 
ideological position about a telecommunications company without 
exploring every aspect of the debate then you seriously 
underestimate me", she told the media in June. Lees and several 
other Senators may yet capitulate to the Government.

The forces campaigning to keep the remainder of Telstra in public 
hands cannot afford to relax simply on the strength of the latest 
Senate victory.

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