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Our Case Against Privatisation

Taxpayers, Telstra Customers will Foot the Bill

Any money gained by the sale of the government's controlling stake of Telstra cannot compensate for the longer term loss of income and the loss of control by the Australian community over a vital component of our national infrastructure.

After Telstra has been sold we will lose $2 billion per year which Telstra now contributes to the national budget. Even if all of the proceeds were committed toward retiring public debt, the $30 Billion would save us only $1.5 billion per year, that is we would be $500 million per year worse off.

Telstra shareholders will expect a return on their investment. Past experience shows the Australian public that Telstra managers are unlikely to produce a private enterprise magic wand that will suddenly create new efficiencies and innovation. Instead, Telstra's customers and workforce will end up paying for their investment by increased monopoly rate charges, poorer service, and job losses. This is certainly what happened after the Commonwealth bank was privatised, so there can be no reason to expect any better from a fully privatised Telstra.

Rural and Remote Communities Poorly Served by Telstra.

The Regional Telecommunications Inquiry has been set up by the Government, obviously with an expectation that it would be able to hand down a report, finding that services had reached a standard deemed to be 'satisfactory'. This would then be taken by the government as a mandate to proceed with the sale.

Instead, the evidence shows that Telstra has neglected to maintain and modernise its rural infrastructure. As a result many rural users do not have reliable access to the Internet and many of the more basic services, such as voice telephone connections, faxes and mobile phones, are deficient. Basic customer service has suffered as regional offices have been closed, forcing customers to deal with support staff in distant metropolitan locations who are unfamiliar with local conditions.

Significantly, many submissions to this Inquiry expressed strong and heartfelt opposition to the sale. This is consistent with the overwhelming opposition to privatisation expressed in opinion polls since the early 1990's.

In its submission, Telstra acknowledged the problems, but posed as a solution that a special fund be set up to meet the needs of the bush. In other words it wanted to abandon rural Australians so that it could invest in more lucrative markets in metropolitan areas and in Southern East Asia, whilst Australian taxpayers picked up the bill for its neglect.

Regulation of Telstra a Second Rate Alternative to Public Ownership

A number of submissions to the Regional Telecommunications Inquiry outlined proposals for legislative guarantees that would tighten Telstra's obligations to provide acceptable levels of service to all of its customers.

In all likelihood a sufficiently tight regulatory regime would not be set up by the Government. However, if this were to be done, it would require a greatly expanded government bureaucracy, which would have to be paid for by taxpayers. Also, within the privatised monopoly, a large number of employees would be employed in order to deal with the regulators. In this sense the point made about regulation by the pro-privatisation submission from the Chamber Of Commerce and Industry of Western Australia (CCI) does have some validity. However we would argue that it would be simpler to not privatise Telstra in the first place.

Telstra's Corporate Charter a Barrier to Provision of Services

Citizens Against Selling Telstra (CAST) is opposed to Telstra's current charter which requires it to behave as a corporation dedicated only to maximising its own bottom line profitability above all other considerations. Even if full public ownership of Telstra were to be regained, as we think it should be, this charter would still remain an obstacle to the effective provision of telecommunications services to all of our citizens.

In the early days of the debate over privatisation, even coalition MPs were critical of this charter. However, instead of proposing the logical remedy of repealing the charter and using their own legislative control to achieve their stated telecommunications objectives, they chose privatisation, or rather, as they said at the time, 'partial' privatisation.

As a result of this corporate charter, Telstra has failed to make available many appropriate technologies, or has charged excessively for them when it has done so. Consequently, many services have been needlessly placed beyond the means of ordinary citizens, businesses, schools, and other organisations.

One example is ISDN, which has been in existence since 1981. It would have been possible for Telstra to have begun providing this service at very affordable rates to every household or business within 6km of a telephone exchange over 10 years ago.

Even today ISDN would be the most suitable technology for connection to the Internet, where optical fibre has not yet been installed. However Telstra chooses to promote the more complex ADSL which can provide better access to some customers who are prepared to pay, but at the expense of the quality of connections for other users including users of conventional modems.

As noted by telecommunications journalist Stewart Fist, Telstra has not made ISDN available because it would have threatened the revenue gained from its digital data services in the past used exclusively by medium and large businesses¹. Arguably, these policies have helped to lift Telstra's profitability and hence added to our national coffers, but the overall result has been that the Australian community, as a whole, has missed opportunities to take early advantage of newer technologies, including the communications revolution of the Internet. Undoubtedly we are all poorer as a result.

Full privatisation is no solution to these problems. There is no reason to expect that the managers of Telstra, if set free from control by our legislators, will behave any better toward its customers than it has up until now. The only way in which Telstra can ever be made to properly meet the communications needs of this country is for it to be returned to full public ownership and be made, once again, directly answerable to our Parliament and subject to effective Freedom of Information legislation.

Note:The thunder of much of what has been written above has already been stolen from us by an article, Telstra: Dumb and Dumber, written by Stewart Fist 1996. We commend this article very highly. The original can be found here

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1. However, recently, over the 2004 Christmas break, I had a lengthy discussion with a Telstra market researcher, who was adament that the universal provision of ISDN could not have been achieved at a cost of less than AU$1,000 per household. I am sure he was not intending to mislead, however a lot of his assumptions seemed to be based on Telstra's flawed business model, and probably did not recognise the economies of scale which could be achieved if the service were made universal.

One argument put was that much of the cost of buying computers deters many from buying them and that therefore many connections would go unused. However Telstra absolutely refuses to support any operating system other than Windows and the Macintosh operating for which users must pay dearly. In order to originally get conected to broadband, I had to ask the technician to ignore Telstra's stated requirements so that I could simply connect myself on my Linux system using freely available Open Source software. If Linux were supported, it would be possible for many more customers using much older computers to be able to effectively use the Internet, and with a vastly smaller risk from virus infections than what users of Microsoft products have to put up with.

As a non-expert, it is difficult to assess the various technical claims and counter claims. Certainly, Telstra's secretiveness doesn't help matters. - JS 26 Mar 05

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About this page : This page states comprehensively our case against privatisation and the case for Telstra to be run as a public service accountable to the Australian Parliament.