House debates

Thursday, 22 October 2009

Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009

Second Reading

11:58 am

Photo of Sid SidebottomSid Sidebottom (Braddon, Australian Labor Party) Share this | Hansard source

If the member for Maranoa thinks that Australia has a truly competitive telecommunications system, then I suggest that he must be living on another planet. No other industry in Australia, member for Maranoa and others in this place, is so dominated by one player as the telco industry and Telstra is one of the most dominant telcos within OECD countries. The self-regulatory regime has failed to foster real competition in the market and those opposite know it. Telstra has been able to use the regime to its advantage. That is a fact. Listening to the member for Maranoa, you would think that Telstra was the most benevolent telco that it was ever possible to have in Australia. Coming from regional Australia, I can tell you that that is not the case. We do not have genuine competition in this country. The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 goes towards helping that happen. And it is about time.

I know that those opposite know this to be true as well. But instead, like with most of our fundamental legislation to update to a modern economy in Australia, those opposite want to sit on their hands and delay purely and simply for point-scoring and ideological reasons. Their response to this legislation demonstrates that even more categorically.

Today I hope to add to the debate on what is a very important bill to this government and to the nation as a whole. It relates to something that we all regard as important. It is as simple as our ability to communicate via a competitive, fair and effective telecommunications framework. The essence of this legislation is about competition. A competitive telecommunications sector is vital to Australia clawing its way back towards the front in the telecommunications pack in international terms. We are way behind and we have been way behind for a long time. It also contributes to the social fabric, allowing friends and families to communicate with each other in many varied ways because of the rapid changes in technology that we see today.

In tandem with the Rudd government’s bold move to establish the National Broadband Network, it is also moving to create a level playing field for telecommunications through this bill. I am very pleased—as no doubt you are in your representation of Lyons, Deputy Speaker Adams—that Tasmania is the first rollout point of the National Broadband Network, and in particular one of my home towns, Smithton. From the outset, it is obvious that the bill is directly aimed at the prize position that Telstra occupies in the Australian telecommunications landscape. It is widely accepted that Telstra dominates the industry and it is very hard to find any other telco sector throughout the world where one company is so completely in control.

In an attempt to overcome the restrictions created by the dominance of one player in the market, the Rudd Labor government has acted. If passed, this safeguards package will represent the most significant reform to the telecommunications regime since open competition was introduced in 1997. Over 12 years have passed since that time and many stones have been cast by a number of smaller operators, but the goliath that is Telstra has failed to be felled or even dented by its competitors. Telstra remains one of the most integrated telecommunications companies in the world. It owns the only fixed line copper network in Australia, a network that connects almost every home and business, as well as the largest hybrid fibre-coaxial cable and mobile networks. It also has a 50 per cent share of Foxtel. This may be less of an issue in geographically smaller countries. But to duplicate even parts of Telstra’s network today would be an undertaking too huge to contemplate.

It is not hard to tell that the failure to address Telstra’s size and level of integration has also meant a missed opportunity to promote effective competition. That argument was very well made in this place by the member for New England in his speech in support of this legislation. His viewpoint is the same as mine, as we are both representatives of regional seats. Australia lags well behind other developed economies on a range of telecommunications indicators. In the telecommunications markets of other countries, competition drives companies to innovate and provide the best of services at the most competitive prices. In the United Kingdom, for example, the communications regulator reported that the net effect of the functional separation of British Telecom has been positive for both competition and consumers. Closer to home, in New Zealand the separation is only in its early days, but I understand that the preliminary results are again positive. It is important that we raise some of these examples to counter some of the gloom and doom and end-of-the-world scenarios that have been presented by those opposite—who effectively did nothing in the 11 years that they were in government.

The consequences of this lack of competition is obvious in my own region of Tasmania where, despite a good effort by Telstra—and I acknowledge the work of Telstra Countrywide; I have had a very positive relationship with them and those people involved with it, and I thank them for their ongoing efforts—the services available are limited. There is very little competition for the major dominant carrier. This has been well demonstrated in the recent outcry over Telstra’s decision to impose a $2.20 billing fee on people who wish to pay their bills in person. Many have contacted my office, and no doubt the offices of other members in this place, expressing a desire to switch carriers as a result of Telstra imposing this penalty payment. But they know that in reality they have little option but to stay with Telstra. I would again ask on behalf of the many thousands of loyal Telstra customers negatively affected by the charge but, more importantly, insulted by being penalised for paying in person that Telstra drop this penalty fee holus-bolus.

I acknowledge Mr David Thodey and his direct communications with me. It was very nice; he rang me up. I assume he was using a Telstra phone. And I acknowledge that Telstra was prepared to extend the concessions to the Commonwealth health card holders, but I did reiterate that it was not so much the amount as the principle that was involved. Again, I asked him to be a new Telstra and to drop this charge—this penalty fee, this tax on poverty—once and for all. In a more competitive market all carriers would be forced to consider carefully any move to institute wholesale and unpopular changes such as this.

Over the years we have heard many stories where the services offered by Telstra in regional Australia only a few kilometres beyond the local exchanges have failed to meet the basic expectations. Stronger competition will also increase the need to deliver on these expectations or risk losing important custom. Unkindly, but not necessarily inaccurately, Telstra’s idea of competition was recently defined by Melbourne based communications commentator David Llewellyn-Smith as ‘to invest just enough in services to become the least worst option’. Is this what we really want for the people of Australia?

The need for a structural separation of Telstra has been long recognised. The only difficulty in this place is that we have not done anything about it. I have heard some on the other side saying privately that we should have a structural separation and that it should have happened years ago. And those on this side say it as well. Well, here is the opportunity to do it. We ask those on the other side to get on with it so that we actually have a 21st century telecommunications system. The need for that was made quite clear during the inquiry into the structure of Telstra by the 2002 House of Representatives Standing Committee on Communications, Information Technology and the Arts, and it is still highly relevant today. A submission from the University of Melbourne’s CoRE research group cast a critical eye over the subject of Telstra’s virtual monopoly.

CoRE’s Joshua Gans and Stephen King argued that the structure and behaviour of Telstra were key factors in determining both the efficiency of the telecommunications industry in Australia and the overall development of competition and innovation in telecommunications. At that stage, while they did not favour one model over another, they found that a rigorous inquiry into alternative structures was both justified on the basis of economics and important to the future of the Australian telecommunications industry. In the paper they said:

Because Telstra controls the CAN, it is also able to exercise significant influence over the provision of related retail services, such as fixed-line local and long distance telephony, and DSL broadband internet services. Thus, while it faces competitors in some parts of its business, those competitors must deal with Telstra if they want to provide services that allow their customers the ability to receive or make calls to fixed-line users.

The paper went on:

By owning and controlling the CAN, Telstra owns and controls a critical hub in the telecommunications network. Ubiquitous telecommunications services can only be achieved by Telstra’s competitors accessing the CAN.

At present, Telstra’s ability to use its market power in the CAN is limited by various price and non-price regulations. But … many of these regulations are a response to Telstra’s structure.

           …         …         …

In the absence of regulation, Telstra would be able to use its monopoly position over the Customer Access Network both to control the degree of competition in related telecommunications markets and to distort competition in these markets.

Very little has changed in the position of Telstra and the telecommunications market in Australia since that submission of 2002.

In a submission to the same inquiry, noted communications analyst and commentator Paul Budde was highly critical of the telco’s position. He regrettably found:

… the self-regulatory regime has failed to foster real competition in the market and Telstra has been able to use the regime to its own advantage.

He said:

Their ‘gaming’ and delaying tactics have resulted in a reduction of competition.

He noted that Australia is the only country in the OECD where such a high level of market dominance is permitted. At the time, Budde urged the committee to consider a proposal to alter Telstra irrevocably, given its central role in the economic life of the nation. He said:

This is arguably the most important inquiry to be held in the history of our telco industry and, as such, deserves to be treated very seriously.

Nothing has changed since then.

The Australian Chamber of Commerce and Industry in its submission to the 2002 inquiry was, I must admit, less enthusiastic about structural separation, but it too was very aware of the problems which existed then and do to this day. The ACCI contended that investment in telecommunications, and thus competition, has been hindered by the significant costs, rapid technology progression and long return time frames. The ACCI’s comments came at a time when the government still held a majority shareholding in Telstra and, while cautious about structural separation, it too saw the need to increase competition. But seven years later this is still to happen in any significant manner—thus, I suggest, testing the logic of the ACCI submission of 2002.

I believe today the support for such a change is even greater. On 7 April the government announced its commitment to reform the current telecommunications regulatory regime, with a discussion paper canvassing options for reform released on that day. A strong response of 140 submissions from a broad range of stakeholders was received, including all major telecommunication service providers, broadcasters, media companies, state and territory governments, the ACCC, disability and consumer groups, business organisations and unions. The overwhelming message from almost every submission was that the current regime does not work effectively to achieve its goals, it is failing business and consumers, and reforms were needed urgently.

We are heading into a new era of telecommunications with the National Broadband Network and all players will be given equal opportunity to be part of this future. Naturally there will be some level of uncertainty as we head down this new road. But the only other option is to sit back and do nothing like the previous government did for so long, and like they are still encouraging us to do today. I have already copped my fair share of criticism from Telstra shareholders in my electorate who were quick to assume that a separation of the company would guarantee a lower share price. I would ask them to take the time to examine the full case and to look at what has happened elsewhere, where such broad telco reforms have been put into place with a great deal of success both for consumers and for shareholders.

It is now part of history that the restructuring of BT, British Telecom, has resulted in a stronger share price and better performance. The same predictions could be made about Telstra if people would stand back and look at the advantages that a more competitive company would offer. It would be hard to argue that anyone else is in as strong a position as Telstra to position themselves as a leader in telecommunications in this country. A separate retail arm could soon become the provider of choice for people around the nation, thereby strengthening its share price. I know it is difficult for all the mum and dad investors who were encouraged by the previous government to be part of the ownership of Telstra, but this is a move that is designed to improve the prospects for all and will ultimately be better for all, including the share price, which has not been the fantastic performer it was expected to be under the current structure. Indeed, under the last Telstra regime, the Telstra share prices dropped by some 40 per cent. So I suggest that a leaner, more competitive Telstra that is hungry for real competition would see this trend reversed.

This bill includes a commitment to protect consumer access to affordable telecommunications services. The reforms give the regulator an ability to enforce existing consumer safeguards and mitigate the risk of Telstra reducing service quality on its copper network prior to the NBN. Amendments in this bill are focused on retaining and strengthening existing regulation to better protect consumer access to and the reliability of basic telephone services. This includes the removal of payphones, something that you, Mr Deputy Speaker Adams, would know that the people of Tasmania’s west coast have been only too familiar with. I know that you, along with the mayor of the West Coast Council, Darryl Gerrity, have battled for years to stop Telstra removing public telephone boxes from areas like Linda, a small community just outside the regional hub of Queenstown. I have no doubt that similar threats to local phone infrastructure exist in other parts of Australia, particularly in regional Australia. The new universal service arrangements proposed in this bill make it clear for consumers of Telstra services, both voice and payphones, that Telstra must supply in fulfilment of its universal obligation, rather than these decisions being left up to Telstra’s discretion.

I have run out of time, but I am very pleased to be able to support this legislation. It will bring about protection for consumers and much greater opportunity for Telstra to make its own decisions to be more competitive, and to have a very competitive regime that is befitting of the 21st century and the technologies that go with it.


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