Submission by Don Ditchburn, 61 Church Road, Black River, Queensland. 4818.

Senate inquiry into the sale of Telstra

This submission argues against fully 'privatising' Telstra on 2 grounds -

1. The principal function of Telstra utilizes infrastructure that can only be efficiently operated as a natural monopoly. This allows it to impose inordinate infrastructure charges on people who are dependant on its services, thereby enabling it to subsidise other charges which may be subject to competitive pressures.
2. Legislation in respect to postal, telegraphic and telephonic services should comply with the requirements of section 70 of the Australian Constitution. A logical construction of that provision confines powers and functions in respect to the provision of such services to Commonwealth government entities.

In respect to the first case, the justification for 'privatising' telecommunication services has generally been that greater efficiency will occur as a result of increased competition. But the major part of telephonic services provided by Telstra require traditional forms of infrastructure which are expensive and inefficient to duplicate. Thus whoever has control of them has a natural monopoly which is immune from effective comp

Telstra has already taken advantage of this situation by increasing infrastructure charges and reducing the 'phone call charges which are subject to competition. For instance, the charge Telstra imposed on me for service and equipment for the billing period to April 2000 was $11- 65 per month compared with $21-90 per month (plus GST) for the period to August 2003. Local calls decreased from 25 cents to less than 20 cents and now to 22 cents over the same billing periods. Any claim that the cost of maintaining infrastructure has almost doubled in three years must be viewed with scepticism.

This practice imposes an unfair penalty on people who make relatively few calls, but who are reliant on traditional telephone service to pro-vide communications with government departments and other providers of services required for everyday living. Moreover, the effective subsidy provided by these infrastructure charges gives Telstra an unfair advantage over its competitors.

One can expect this advantage to be even more exploited if Telstra is freed from government control. The explanatory memorandum to the Bill states that it is proposed to remove the Ministerial power to give certain directions to Telstra in the public interest when the Commonwealth's equity has fallen below 50 per cent. But the envisaged licence conditions - "that an effective Telstra local presence will be maintained; and ? that it will maintain the right to manage its regional operations autonomously and in its commercial interests" give no assurance that infrastructure charges will be constraine

People living in rural and remote areas are inherently more dependant on telephonic services than others, and thus more vulnerable to unfettered increases in infrastructure charges. Without legislative protection we can expect to be exposed to a classical case of capitalist exploitation. As Ministers appear more susceptible to the interests of large corporations (from whom they derive most of their election funding) than those of people they purport to represent, we cannot rely on administrative decisions to protect us from unwarranted infrastructure charges.

Alternatively, if charges for infrastructure use are regulated by law, prospective investors should be fully informed of restrictions which may be imposed. In either case, it makes more sense for governments to retain control of services which inhere in essential infrastructure as natural monopolies so that all Australians benefit, rather than sell our assets for the benefit of the wealthy, on spurious ideological claims of greater efficiency.

The second grounds for opposing the further sale of Telstra is more important. Any person with sufficient resources and incentive who has a dispute with any telecommunications provider could pursue a case in a Federal Court based on the following dialectic -

Precedent for this interpretation of sec.70 is to be found in the majority decision of the High Court in Joseph v. Colonial Treasurer of NSW(1918) 25 CLR 32 at p.46-47. This decision applied to departments of naval and military defence (which were also transferred to the Commonwealth Government in accordance with sec.69), where prerogative powers in respect to defence were found to be solely and permanently vested in the Commonwealth Government.

The decision was supported by Rich and Williams JJ. in Carter v. Egg & Egg Pulp Marketing Board of Victoria (1942) 66 CLR 557 at p.596-597. Although the majority of the High Court in this case found Parliament's legislative powers in respect to defence were not exclusive (because war time defence powers would have denied the States normal constitutional powers if they were), they made no reference to section 70, and as a consequence exclusive executive powers conferred by this section were not compromised.

Clearly an interpretation of sec.70 which requires prerogative powers in respect to defence to vest solely in the Federal Government must also apply to the other powers and functions related to defence, customs and excise, and posts, telegraphs and telephones. This contention was made in similar terms to the Secretary of the Department of Defence in my letter dated 25 April 2001. (Copy attached.)

The reply received from M J Roche of Defence Material Organisation and dated 16 August 2001(see attachment) was evasive. It avoided answering my contention by ignoring the transfer of departments of posts, telegraphs and telephones under section 69, and the fundamental requirement that laws enacted by the Federal Parliament are subject to all provisions of the Constitution which may impinge upon them. The fact that defence powers and functions derive from several areas of the Constitution is irrelevant to whether laws comply with the requirements of section 70.

Both legislators and governments are bound to decisions of the High Court. The logical consequence of the decision in Joseph's case is that all powers and functions pertaining to departments of public service transferred to the Commonwealth must vest in Federal Govern-ment entities. No doubt this interpretation of sec.70 is politically inexpedient and conflicts with orthodox perceptions of unfettered legislative powers. Consequently some Senators may assert that -

1. section 70 is now redundant; or
2. section 70 was not intended to limit legislative powers in respect to postal, telegraphic or telephonic services; or
3. section 51 is 'intended to apply to the varying conditions which the development of our community must involve.'

It is obviously necessary for me to counter such assertions in case they become accepted by default -

1. An assertion that section 70 is now redundant can be answered by noting that it would still have application to -

• state railways which might be transferred pursuant to subsection 51(33) of the Constitution;
• any territories surrendered to the Commonwealth pursuant to sections 111 and 122 of the Constitution;
• other departments referred to in section 69 which, (at least theoretically), could yet be proclaimed for transfer.
If valid, this assertion would also conflict with the 1918 High Court decision in Joseph's case as prerogative powers found by the Court to vest solely in the Federal Executive could also be exercised by State governments.

2. An assertion that section 70 was not intended to limit Parliament's powers under section 51 of the Constitution must be considered in the general scheme and historical context applying to both provisions. Under section 51, the Commonwealth acquired jurisdiction over those matters which were of common concern to all colonies and which could be better administered by a central government.

Section 70 was clearly intended to facilitate the transfer of departments of public service specified in section 69, and other matters which might pass to the Commonwealth from State governments. These included matters such as the collection and control of duties of customs and excise, and naval and military defence, which are fundamental powers and functions of executive governments, neglect of which could threaten the viability of a former colony or the nation. The necessary corollary to assertion (b) is the presumption that framers of the Constitution considered Parliament should be able to divest its government of those fundamental powers and functions of executive government entrusted to it by the federal compact in the Constitution.

To assert that fundamental powers and functions of executive government, (including prerogative powers), can be exercised by pri-vate or publicly owned corporations, including foreign corporations, involves questions of sovereignty, and the exercise of executive power of the Commonwealth vested in the Queen by section 61, as well as those transferred under section 70. It also ignores the historical context and perceptions of those who drafted and enacted the Constitution.

For at federation, the provision of postal, telegraphic and telephonic services to the public was just as fundamental and as entrenched a function of government as those of the other departments of State transferred under section 69. It should be noted that postal, telegraphic and telephonic services had all been privately operated in Australian Colonies, and all became government monopolies prior to federation. It is reasonable to assume that the option of privately operated communications would have been recognised and rejected by framers of the Constitution

With Australian Colonies at war in South Africa, security considerations would have been another reason to make private operation of these functions just as unthinkable in that era, as it would be to privatise departments of defence, or customs and excise. Consequently, it is unlikely the question of whether a federal Parliament might wish to divest its government of these monopoly powers and functions eighty or ninety years later was ever contemplated. If it was, the phrase 'until Parliament provides otherwise', which appears in numerous other provisions, could have been included in section 70, which is not the case.

What is there then, to suggest section 51 was intended to permit Parliament to vest fundamental executive powers and functions, including prerogative powers, in public or private companies contrary to the requirements of section 70, or to exclude transferred departments of posts, telegraphs and telephones from the operation of the provision?

3. The words quoted in assertion (c) above have a similar effect to assertion (b) and should be rejected for much the same reasons as those expressed above. They were taken out of context from remarks made by O'Connor J. in the Jumbunna Coal Mines case to negate the plain meaning of section 70. For his Honour went on to say -

"For that reason, where the question is whether the Constitution has used an expression in the wider or narrower sense, the Court should, in my opinion, always lean to the broader interpretation unless there is something in the context or in the rest of the Constitution to indicate that the narrower interpretation will best carry out its object and purpose". (My italics).

It is one thing to give an evolving meaning to expressions which are intended to apply in a general sense by interpreting them widely, such as construing telegraphic and telephonic services to apply respectively to modern digital and analogue communications. It is quite another to ignore express provisions which are unambiguous in their wording and intended effect, the extent and application of which can be ascertained by documented historical fact.

Should we assume that O'Connor J. intended sections 92, 99, 100, 101 or 116 might be dismissed by interpreting section 51 broadly, whenever the government wished to satisfy evolutions in political ideology? If that is so, why bother with a Constitution at all? If not, then the clear intent of section 70 should also be observed.

In Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd. (1920) 28 CLR 129, the majority of the Court quoted Lord Loreburn at 150 in saying - "In the interpretation of a completely self-governing Constitution founded upon a written organic instrument, such as the British North America Act, if the text is explicit the text is conclusive, alike in what it directs and what it forbids. When the text is ambiguous, ............ recourse must be had to the context and scheme of the Act." (Their italics). Surely O'Connor J.'s remarks would be negated by these findings by the majority of the Court if there was any conflict between them.

While the current political ideology holds that governments should be divested of as many functions as may be profitable to private or public corporations, judicial rules of construction require the Constitution to be interpreted in its historical context. And it would be inconsistent for the Courts to construe sections 41 and 92 of the Constitution in their historical context, but not do the same for sec. 70.

The anticipated assertions referred to above are not logically sustainable without contrived interpretations of the Constitution. No doubt prejudice and vested interests will elicit other reasons to refute my contention in order to justify the political ideology of government. But such reasons must be based on properly considered and relevant judicial decisions, not a'priori assumptions of unfettered legislative power, (in reality, unfettered executive power).

The clear purpose of the proposed law is to discontinue the Commonwealth's control of Telstra. If that occurs, the powers and func-tions inherent in providing telegraphic and telephonic services to the public will not vest in any entity of the Commonwealth Government. Even the present laws which enable such services to be provided by public or private corporations, would not, in my view, comply with the section 70 requirement that ALL powers and functions exercised by former State PMG departments vest in comparable Commonwealth Government entities

Laws passed by Parliament were always intended to be constrained by the Constitution and decisions of the High Court. Ignoring the requirements of the Constitution and inexpedient High Court decisions subverts the rule of law and subjects Australian people to laws which logically, ought to be invalid. But it should not be the responsibility of powerless individuals or even groups of people to prove laws are invalidly enacted. The onus should be on legislators to show that their laws are substantially valid, not make citizens subject to them, and then require us to prove they are not.

The public should be informed of any credible doubt as to the validity of telecommunication laws, especially as it may affect the investments of so many people. In selling most of our telecommunications industry to private interests, we have lost part of our common inheritance. If the government claims that it is 'acting in the national interest' it should prove it by holding a referendum to amend section 70, rather than subjecting us to laws of dubious validity.

D. Ditchburn

21 September 2003.