This week I chaired the first day of the Australian Financial Review’s Telecoms Summit. Enclosed is my openings address.
A warm welcome to everyone, and, in particular, to The Honorable Minister for Communications, Helen Coonan. Please allow me to also add my congratulations on your re-election as our Minister.
I also would like to extend this welcome to Theresa Gattung, our leading female telco executive from across the Tasman.
As I have said on many occasions, we are fortunate and honoured to work in what is probably the most exciting industry in the world. We don’t produce weapons of mass destruction or anything like that – telecommunications offers huge benefits to our economy, and to society in general.
This makes it so much easier to be passionate about our industry. And it is because of that passion that I take on the role, not only of commentator and analyst, but also of a facilitator – to make things happen.
Most of you will be aware of my activities in the broadbanding of local communities around the country – getting the utilities to play a more central role in infrastructure competition, consolidation roundtables between the various players, as well as forging cooperative models between the various subgroups in our industry.
Given this deep involvement in the industry, I dare to say that the most challenging issue that telecommunications is facing at the moment is that of preparing for the privatisation of Telstra. Like most people in the industry I take a neutral position regarding the privatisation itself. However, I am firmly of the view that we must have the right environment if Australia is to profit from the enormous benefits telecoms has to offer.
I also know, Minister, that you have clearly earmarked this as a key issue within your portfolio.
Telecoms in Australia is a sizeable industry, worth around $40 billion – and several hundred billion dollars more if you take into account e-commerce, business productivity gains and innovations leading to activities in other sectors, such as, for example, education and healthcare.
I agree that this government has done a good job of running our economy – we are one of the few global success stories. Our Treasurer has once more called attention to the importance of ongoing economic reform, and I fully support his call, as I am sure do most of the people in the industry. However, we are at a loss to understand why he doggedly refuses to extend these reforms to the telecoms sector.
If one company receives 90% of all the profits generated within an industry, then I would think that such an industry would be right at the top of the government’s reform list.
So, it is here that we need your assistance, Minister. I know that you are very much up-to-date with the issues in our industry and we need to find ingenious ways to produce the regulatory outcome that safeguards competition against this 800-pound gorilla, which might soon turn into a 1000-pound gorilla – the incumbent has indicated its interest in printed and electronic media, so that would further increase its dominance.
Please, tell us what we can do to assist you in convincing your colleagues in Cabinet that we need a better regime – one that:
guarantees well-funded strategies for regional infrastructure;
guarantees that we get broadband at prices and speeds on a par with our trading partners; and
provides the ACCC with the necessary power (like that of Ofcom in the UK) to structurally separate Telstra if it continues to find the company too dominant to handle, even after privatisation.
Now, let’s go to the other groups represented here by the delegates of this conference ….
We have 3 to 6 months to work together with the Minister to find solutions to the problems we have in the market. And there are quite a few:
after nine months we still have no outcome on Telstra’s anti-competitive behaviour in the broadband market;
after four years of negotiation we still don’t have an economically viable ULL regime – an essential component of economically viable triple-play business models; and
we are still at the bottom of the list of broadband penetration – as an example, penetration in Canada is five times higher than ours, and one-third of the price.
Surely these matters cry out for resolution. They can’t be solved by a few well-intentioned handouts which fail to address the fundamental issues.
Once the government gets serious about privatisation we can forget about any reforms and we might as well all take a 3-year regulatory holiday. So now is the time for us, through our Minister, to urge the Treasurer and Prime Minister to take these issues seriously, and to discuss with us the economic reforms that are so desperately needed in our industry.
Telecoms touches every single person in this country. I believe that, by working together, we will be able to find solutions that will allow us to create a healthier industry – one where true competition is possible, where innovation is given a chance.
Economists, including those closely linked to the government, have indicated the importance of broadband. True broadband (not the kiddie stuff we currently have access to) is conservatively estimated to be able to deliver an 11% productivity gain to our economy.
However, without your assistance, Minister, true broadband will only be drip-fed to us by a monopoly that has more interest in avoiding risks and delaying investment – a monopoly that is completely focused on its shareholders. We are alarmed by the sheer lobbying power, the PR machine and the army of lawyers that the incumbent has at its disposal. None of us – not even the regulator – are any match for this. And an unshackled incumbent will be even more inclined to play the delaying and frustrating games that it has made into a fine art over the last decade – at least some of which border on anti-competitive behaviour.
We desperately need your support to properly address these issues.
Please accept our sincere invitation to discuss this with us. The Australian people, which you as our Minister represent, deserve better.
PS The Minister unfortunately did send her apologies and in her place The Honorable Federal Member for Lindsay Mrs Jackie Kelly presented a paper on the Minister’s behalf.
Australia – Government Policies – Economic Reform in Telecoms Sector (Free Report)
Theme – Are we ready for the Telstra privatisation?
My Roundtable on Wednesday 24th November will further explore all of the above, with the central theme: ‘Are we ready for privatisation?’.
As usual, I will take a neutral stance on the advisability or otherwise of privatisation – instead the Roundtable is aimed at crystallising some of the issues that will arise after the fact, if the privatisation of Telstra does take place.
Firstly, privatisation need not necessarily mean disaster. BT in the UK is also fully privatised and, like Telstra, has been dragging its feet on broadband. Yet the British Government (Prime Minister Blair himself) successfully ‘persuaded’ BT to lift its game and the country now has close to six million broadband users. Furthermore, the regulator, OfCom, is now working on a report that could lead to the structural separation of BT.
These are clear examples that privatisation need not necessarily mean giving the incumbent a completely free ride. The question for Australia is whether our regulator, the ACCC, has sufficient power to replicate the example of Ofcom, should it feel this is necessary to prevent anti-competitive behaviour and safeguard competition in the telco market.
The other hot issue continues to be the situation in regional and rural Australia. A privatised Telstra will find it difficult to come up with the $5 billion investment necessary to upgrade the telecoms network in regional Australia to allow for the provision of true broadband services. The federal government is not going to look after this investment, so what will this mean for regional and rural Australia? Obviously state and local governments will have to take a leadership role here.
Alternatively, Telstra has already indicated it wants an FTTH monopoly – again, what will this mean for innovation and competition?
As well as this, the Media Inquiry, which will most probably be reopened, will take into account the pay TV industry, and it will be interesting to see what Telstra’s reaction is to that. Is it voluntarily going to divest its Foxtel share? And what is the government is going to do?
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