Editorial:

Privatised Telstra means you pay

The Howard Government's latest plan in the ongoing privatisation of 
Telstra — a targeted welfare package for some of the most disadvantaged in 
the community. — in itself is an admission that the next round of changes 
will further disadvantage domestic users. The partial (49 percent) 
privatisation of Telstra has already resulted in poorer services and the 
introduction of many new fees for the various components of its 
service.

Apart from the welfare component of the package, a compensation package for 
telephone calls, the Government plans to raise the price cap on the cost of 
telephone calls generally and eliminate the cross-subsidisation of network 
costs by higher charges for telephone calls. These changes are in response 
to pressure from Telstra management and its competitors.

Since "competition policy" was introduced, and private companies such as 
Optus, AAPT and many small retailers were allowed into the industry, 
Telstra has come under considerable pressure in its most profitable areas -
- particularly in regard to mobiles and big business customers. 
Historically Telstra has kept the cost of line rentals down by cross-
subsidisation from these more profitable areas. Its competitors, with the 
help of the Government's ACCC have received below cost access to Telstra's 
networks.

Now the Government expects Telstra to separate the accounting of its 
infrastructure provision from its other services where it faces 
competition. Each section would be expected to fully meet its costs and 
make a profit, and thereby end the practice of cross-subsidisation. The 
Government stopped short of a proposal to break the organisation up into 
completely separate retail and wholesale organisations.

By lifting the price cap on line rentals, Telstra could set about full cost 
recovery and profit-making from its infrastructure, at the expense of 
domestic users. It is talking about a 60 per cent rise in line rental 
charges over the next five years. The Government's proposal is for a cap on 
CPI increases plus up to an additional four per cent each year.

Telstra's wholesale division would be required to charge its own retail 
division at commercial rates, putting further pressure on the cost of its 
services.

The consumer will foot the bill. The welfare package is to try and placate 
welfare organisations and gain the ALP's support. This package could 
disappear later at the stroke of a pen or wither away as it failed to keep 
up with rises in rental charges. In addition, the parasitic private 
resellers and servers in the industry would continue to avoid paying the 
full cost of their access to Telstra's network.

They are the ones who have been screaming about paying for access. Now the 
Government is coming to their rescue by transferring the cost onto 
consumers.

The new arrangements illustrate the Government's complete subservience to 
private interests. Private telecommunications firms throughout the world 
have been failing at an alarming rate in recent times, and the new rules 
would relieve the pressure on them. Many of them have found it extremely 
difficult to compete with Telstra because Telstra as an integrated national 
carrier providing the full range of services is far more efficient.

In attempting to justify the new rules, the federal Minister for 
Communications Richard Alston this week made a frank acknowledgment of his 
support for the private sector at the expense of the taxpayer: "Telstra is 
huge, so how can (private firms) compete? (They) can't even afford to build 
a niche network. Many are on life support, while Telstra is going from 
strength to strength", he commented bitterly.

The new rules would also eliminate Telstra's ability to appeal to the 
Australian Competition Tribunal against adverse findings by the Australian 
Competition and Consumer Commission, which would probably favour splitting 
Telstra into retail and wholesale divisions in order to provide "level 
playing field" conditions for telecommunications service providers.

Instead, the Government proposes to convert Telstra to a form in which it 
could most readily be fully privatised, i.e. the form that most closely 
resembles that of its competitors.

The fact that the Government has to bludgeon Telstra into submission, even 
though it is half privatised and run by Government-appointed privateers, is 
undeniable evidence that Australia only needs one national 
telecommunications provider, publicly owned and run to provide services 
around the nation.