Home > Oz Politics > Telstra and the guillotine

Telstra and the guillotine

September 14th, 2005

Having taken nearly ten years to sell half of Telstra, the government seems to be in an awful hurry to sell the rest, ramming the necessary legislation through Parliament with almost no debate. Yet it’s clear that they still don’t have a clue about how to sell Telstra for an adequate price, what control they want to exercise in the future or how to implement the policy of structural separation.

It’s hard to avoid the conclusion that this resort to the guillotine was not due to any particular urgency about this legislation. Rather the government had the numbers and couldn’t resist using them. This is a bad sign for the future, both for Australia and the government. Such hubris generally turns out badly for all concerned.

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  1. econwit
    September 14th, 2005 at 22:46 | #1

    When you have insiders saying that Telstra is a dog and its long term prospects are negative. Maybe they are doing the right thing to offload it ASAP.

    “Telstra’s regulatory and policy chief Phil Burgess – one of Trujillo’s new team – incensed the government by saying he would not recommend his mother buy shares in Australia’s largest telecommunications company”.

    http://smh.com.au/articles/2005/09/06/1125772509507.html

  2. September 14th, 2005 at 23:08 | #2

    “…had the numbers and couldn’t resist using them”? Surely, on this one issue, it is clear that the government’s control of the numbers was precarious? Doesn’t that suggest that it made more sense (for the government, merely from a numbers perspective) to use the numbers while it could be sure that it still had them?

    As one old leftie with a grasp of these matters once said, “a week is a long time in politics”.

    That said, one hopes that guillotines don’t become a habit. After all, they were invented to override people who so disliked being railroaded into spurious democracy that they not only used their parliamentary position to sabotage its workings but gained electorally by so doing. The invention of the parliamentary guillotine was not a response to make democracy “work”, but rather to clamp down a safety valve. It was not used in that way on this occasion, but it is to be hoped that it will not become a regular habit.

  3. September 15th, 2005 at 05:13 | #3

    The Senate vote for privatisation is, of course, a disgrace.

    As one contributor to the debate noted every member of the public who contributed to the one day hearing pleaded for more time to be allowed for Parliamentary scrutiny and public input. Even this modest plea was ignored by Senator Barnaby Joyce.

    It is plain as day, notwithstanding the ideological hogwash that has been written by some other contributors to this forum, that the case for privatisation cannot withstand any level of public scrutiny.

    At one point Senator Joyce had made it clear that he was not prepared to do this because he feared retribution from his Liberal and National colleagues.

    What a miserable cop out!

    Clearly, any hopes any hopes placed in Joyce by his constituents were sadly misplaced.

    The straw that Joyce seized on to justify his shameful backsliding was the eleventh hour back flip by the National Farmers’ Federation to suddenly support the full privatisation in defiance of a survey of its own members which showed 80% of members opposed to privatisation. This disgraceful stance has been comprehensively dealt with by Independent MP Tony Windsor in this press release.

    The backflip by the NFF was almost immediately repudiated by the Queensland, South Australian, New South Wales and Western Australian Farmers’ Federations, but still Joyce and the rest of the Nationals continued with their sellout.

    Senator Joyce, himself, was absent until the point that the vote was taken at 6:30PM in the Senate last night, such was the courage of the conviction about the supposedly great deal he had secured for his constituency in return for his vote. (Some forum participants may care to read this “Open Letter to Barnaby Joyce”, which I sent on Monday morning.)

    Another Queensland Senator, Liberal Brett Mason practically boasted that 95% of the e-mails he received were opposed to privatisation. This was held by him as ‘proof’ of his politcal courage in proceeding to vote for the sale. I expect most would see his actions as complete contempt for the wishes of his electors.

    The vote for privatisation defies logic, all the evidence and the clearly expressed wishes of the Australian public and cannot be allowed to stand.

  4. Alan Walker
    September 15th, 2005 at 06:48 | #4

    Once the shares are sold, The Liberal Party will have billions of dollars to fund its promises at the next election. No further debate is necessary.

  5. still working it out
    September 15th, 2005 at 08:18 | #5

    Our communications infrastructure keeps falling further behind our neighbours and economic competitors and all our government does is help this trend along.

  6. econwit
    September 15th, 2005 at 09:35 | #6

    Since T2 the market value of Telstra has drop over 50%. The Government has a controlling interest and is therefore directly responsible for the bad management of this asset. Telstra customers and shareholders have suffered plenty because of some misguided communist ideal that the government can run a chook raffle.

    Well guess what “they can’t” and the people of Australia have spoken through the Senate.

  7. Homer Paxton
    September 15th, 2005 at 09:38 | #7

    the main question to me is whether they can sell the shares for the price they want.
    They can only do that IF competition is not allowed.
    mind you if this happens I can’t see the punters liking it.

    if competition is allowed then I can’t see how they will get their hopeful price which means either they have to settle for a lower price or they won’t be sold.

  8. Ian Gould
    September 15th, 2005 at 10:01 | #8

    PM,

    In this case I think there was an element of “use it or lose it” but I think avoiding further damaging publicity over several days of committee hearings was more important.

    It may also be that the Government wanted to regain its psychological edge over the Opposition after its recent embarassment.

  9. Chris C
    September 15th, 2005 at 10:29 | #9

    “the main question to me is whether they can sell the shares for the price they want.
    They can only do that IF competition is not allowed.
    mind you if this happens I can’t see the punters liking it.

    if competition is allowed then I can’t see how they will get their hopeful price which means either they have to settle for a lower price or they won’t be sold.”

    Couldnt agree more.

    In fact I consider that Sol has done exactly the right thing (by Telstra) in bringing forward the debate about telco regulation BEFORE T3 is sold off.

    By whingeing about over-regulation and driving down the share price, he has presented the Government with a tough choice: regulate properly and cop a much lower share price (but receive electoral advantage), or go soft on regulation to max the sale proceeds (and feel electoral blowback).

    It may not work, but it was Telstra’s only chance. Certainly, it has flushed out J Ho, who was hoping to stitch up the max sale proceeds then “regulating in the national interest” a’la Jeff “Cake and Eat it Too” Kennett. Just ask Victoria’s gas and electricity companies.

  10. Vee
    September 15th, 2005 at 10:36 | #10

    Its contempt of democracy.

  11. stoptherubbish
    September 15th, 2005 at 11:07 | #11

    Allen Walker has it right. The money will be used to fund another raft of economcially irresponsible handouts, mainly to placate the well off whose sense of entitlement under this government makes a ‘dole bludger’ look like a Hindu mystic. The tax treatment of the low paid and those who are now forced to move into (low) paid work for 15 hours a week, is an absolute disgrace. This from prattlers who never tire of preaching to the relatively worse off, the mantra of ‘work as redemptive activity’, not as a means for keeping oneself.

    Once the minimum wage is sufficiently low to enable the whole of the Press Gallery to hire the odd gardener, cook and/or Nanny, we will have completed the return to the late late 19th century we started with the nonesense created by those whose whole aim in life is to make others miserable, in order that they may feel virtuous. Watch out for articles celebrating the close and democratic relationship that Australian people have wiht their servants, as opposed to the exploitative and undignified one that others have. The aussie way to do domestic service. I can hardly wait. Not.

  12. Stephen L
    September 15th, 2005 at 11:11 | #12

    econwit uses the fall in the share price since T2 as evidence the government cannot run Telstra properly as a majority shareholder. However, between T1 and T2, when the government’s share was larger, the price rose dramatically. Perhaps this is evidence that the government runs Telstra better the larger the share it has.

    I’m not serious there – obviously Telstra’s rise and fall have been caused by many other factors. However, during an era when many other firms with interests in IT have gone bankrupt, or lost 90% of their market capitalisation, blaming Telstra’s fall in price on government ownership requires a fair bit more evidence than just “this happened on their watch so it must be their fault”.

  13. David.T
    September 15th, 2005 at 11:36 | #13

    At the time of drafting this response, I’m tuned into the broadcast from the House of Representative. With debate continuing on the legislation (from the Senate) government members aren’t interested in hearing what the Opposition is saying. Two quorums sofar.

    As someone who has followed federal politics for over 3 decades now, the tactics of the Government in the Senate last Thursday (this was the referring of the legislation to a Senate Committee) and in the Senate yesterday was appalling.

    Didn’t the Federal Government say to the people of Australia that having control of the Senate – wouldn’t see proper procedure being mistreated? They have done a backflip and what about the position of the Queensland National Party’s senators?

    Reading through the responses, I’m in agreeance and this issue won’t go away and now the post mortem starts.

  14. September 15th, 2005 at 12:04 | #14

    The bit I don’t get about this privatisation is: why privatise a monopoly? Surely using the logic of free-market capitalism and all that, the giant should have been broken up into smaller competing entities?

    Frankly, the logic of the whole thing is beyond me. Keeping ownership and control over a key public utility still makes more sense to me.

  15. Peter Anderson
    September 15th, 2005 at 12:07 | #15

    I can’t understand why more people aren’t concerned about the Government’s “Claytons Separation” to create a gap between Telsta’s wholesale (infrastructure provision) functions and its retail (selling telco services).
    Without a real physical separation (into two separate legal entities with separate ownership structures (preferably with infrastructure remaining in public ownership)) Australia will never have real competition in the telecomunications industry.

    The other problem is that a privatised Telstra could take ‘the regulator’ to court on the grounds of unfair and unconsurable behaviour vis-a-vis other telco’s who’s licence conditions don’t require them to provide free access to their infrastructure. Such a case has got to have a reasonable chance of success (denial of natural justice etc.).

    Such an outcome makes a mockery of all the current promises and lets a future government say “well its not an outcome we wanted but it is yet another example of the judiciary ‘making laws’ and we just have to accept the ‘umpire’s decision’”.

    A physical separation of fuctions (aka Bell Telephone Co. in the USA in the early ’80s) is the only way all Australians will be guaranteed of having equitable access to good telecomunications services. Learning from the US experience, the Government could retain the infrastructure side of telstra so that telecomunications services can be provided as both a social good and a plank in on-going national development. It also has the side benefit for our Federal politicians of enabling them to continue to ‘pork barrel’ at election time.

  16. econwit
    September 15th, 2005 at 12:08 | #16

    Stephen L & JH

    Compare and Telstra and AGL here.

    http://bigcharts.marketwatch.com/intchart/frames/frames.asp?symb=au%3Axao&time=8&freq=1

    put in au:tls and in compare au:agl over 5 years.

    Both are regulated quasi monopoly utilities.- ones private. the others a dog.

  17. Andrew Reynolds
    September 15th, 2005 at 12:13 | #17

    Does anyone here think that the ALP, when next in government, will re-nationalise? If not, get over it and move on.
    A campaign to break up Telstra would probably be the best use of our time from here on in.

  18. Vee
    September 15th, 2005 at 12:34 | #18

    Reynolds, the answer to the question is No.
    The answer to the statement is No. Utter contempt and abuse of the principles for the democracy that Australian’s are supposed to respect and stand for.

    The answer to the second statement is Yes that would probably be the best course of action but will it happen? I don’t know but I doubt it.

    Mr Peter Anderson – what you say is exactly right.

  19. lurch
    September 15th, 2005 at 13:49 | #19

    econowit
    if what you are saying is that government can’t manage a large organistaion when it is the majority owner then maybe we should sell the rest of the national assets and services. I for one am going to hold out and become a ‘Mum and Dad’ owner of the Armed Forces. I can’t wait to become the proud [part] owner of an outdated F111 or an unsevicable and overpriced submarine.

  20. Terje
    September 15th, 2005 at 15:59 | #20

    At last the deed is done and we can all get some sleep.

  21. Andrew Reynolds
    September 15th, 2005 at 17:52 | #21

    If utter contempt for democracy entails disagreeing with the majority of the population, as revealed by opinion polls, then I would think that we all stand in contempt at times. The only difference is that the government has the capacity to carry the day on the issues. Didn’t we Australians elect them to do that?

  22. econwit
    September 15th, 2005 at 18:04 | #22

    Lurch,

    Excuse my bad taste. Yes privatise the armed services- I am sure there would be big queues for shareholder discounted helicopter flights in Indonesia.

    What I am saying is “that government in this country can’t manage a large organisation” -period.

    The public sector inflicted on this country is a joke. At the local level. At the state level and federally. Anyone dealing with public sector from the local council to the tax office is left shaking their head in disbelief at what they try to pass off as service.

    If government concentrated on what it is suppose to be doing instead of exponentially expanding itself at societies expense we would all be better off.

    Government intervention in society should be minimal. Its role is to regulate and only provide essential services that can not be economically provided by the private sector.

    The public sector in this country is too big and out of control.

  23. September 15th, 2005 at 19:06 | #23

    It’s especially regrettable that the government’s vote to sell – one of the most unpopular decisions it’s ever made – will be now drowned by Latham, who was ostensibly against the sale last election. First he fails to win, and now he’s effectively working to get the government off the hook with the electorate on a major consequence. Woe.

  24. Andrew Reynolds
    September 15th, 2005 at 19:26 | #24

    Hey, it was at least pertially Latham’s ‘leadership’ that removed the ability of the minor parties to block the legislation. Sort of poetic justice that he now provides the political cover too. Peter Brett at mumble must be pleased, at least that he was right.
    .
    econwit – very few governments can manage a large organisation. People do not go into government if they can – the wages for a capable manager are much bigger in the private sector than can be justified to the chattering classes.

  25. Terje Petersen
    September 15th, 2005 at 21:19 | #25

    Speaking of Latham, you have got to love the guy for his consistency.

    QUOTE LATHAM:“I’m a hater. Part of the tribalness of politics is to really dislike the other side with intensity. And the more I see of them the more I hate them. I hate their negativity. I hate their narrowness. I hate the way, for instance, John Howard tries to appeal to suburban values when I know that he hasn’t got any real answers to the problems and challenges we face. I hate the phoniness of that.”

    And now he hates the ALP.

  26. September 15th, 2005 at 23:37 | #26

    “At last the deed is done and we can all get some sleep.”

    Now, why does that remind me of Macbeth? Probably because I’ve got a warped sense of humour or something.

  27. Peter Anderson
    September 16th, 2005 at 00:03 | #27

    econwit says:

    “The public sector inflicted on this country is a joke … Anyone dealing with public sector … is left shaking their head in disbelief at what they try to pass off as service.”

    As a retired Commonwealth public servant, I need to take you to task. In relation to the Commonwealth public service at least your stereo-type is very much out of date. Most public servants are hard working and diligent (even DIMEA!!!). The work ethic is not the issue these days, the real problem is the politicisation of the service.

    The days of “free and frank advice” have long gone. Most senior public servants spend a great deal of their time trying to second guess what the Minister or his staffer want. Government has lost a valuable asset by politicising the public service. And to be fair, its not just the current Howard government, the Hawke and Keating governments were just as bad.

  28. Vee
    September 16th, 2005 at 10:27 | #28

    No Andrew, we elected them to represent the will of the people

    Democracy – rule of the people.

    Or how about we just show the hypocrisy that the Liberal Party have no plans to privatise Australia Post, another one of the people’s assets and yet they will Telstra.

  29. Andrew Reynolds
    September 16th, 2005 at 10:38 | #29

    Vee,
    Maybe we should then just have the politicians to suggest ideas and the actual decision is given by an opinion poll – or, maybe the national newspapers should suggest the idea and then run the polls. Wouldn’t that be great. We could cut politicians out altogther.
    I would suggest you read up on ‘Representative Democracy’.
    As a side note, personally, I think they should privatise the postal service. They are just a jumped up courier company with branches. Somehow I think the agrarian socialist party would discover some backbone if that one got put up though.

  30. econwit
    September 16th, 2005 at 12:37 | #30

    PA

    “Most public servants are hard working and diligent (even DIMEA!!!). The work ethic is not the issue these days”

    I agree. The public sector work force is on par with other work forces. Individual workers are well educated and motivated. In their private lives they are generally more efficient, productive and cost conscious than the general population.This due to the public sector being generally compelled to live on lower remuneration than people in the private sector.

    The problem is with the public sector collectively. Its culture. A large amount of the work the public sector does it has created for itself. Most of it is unnecessary, logistically difficult for it to implement and for society to adhere to. This is a huge constraint on productivity generally. Some glaring examples would be the Tax Act and the reams of laws and regulations that come out of the 3 tiers of government on a daily basis.

    The individuals at the coal face can see many minor inefficiencies that all add up to the point where they become a major inefficiency.

    A cultural change within the public sector giving the (efficient, productive and cost conscious ) individuals at the coal face input to implement productivity and efficiency changes would be a good place to start.

  31. September 16th, 2005 at 12:57 | #31

    Chris has a good point. A cynic may even think that the main reason for invoking the guillotine was the timing of Latham’s book.

  32. Peter Anderson
    September 16th, 2005 at 16:02 | #32

    Econwit wrote:
    “The problem is with the public sector collectively. Its culture. A large amount of the work the public sector does it has created for itself. Most of it is unnecessary, logistically difficult for it to implement and for society to adhere to. This is a huge constraint on productivity generally. Some glaring examples would be the Tax Act …”

    On this I wholeheartedly agree. I, for my sins, once managed the Gatekeeper PKI initiative out of NOIE – a more inappropriate venture for the Public Sector to manage it is hard to manage. Gatekeeper has an enormous potential for a liability claim against the Government. (The Government by setting itself at the top of the trust tree guarantees the operational veracity of digital signature providers – when (not if) a transaction goes wrong who is the party with the ‘longest pockets’?) This potential liability is un-funded and during my time successive senior managers and Ministerial staffers could not or would not try to understand this issue. The solution was easy — move Gatekeeper to an organisation like Standards Australia or NATA (National Association of Testing Authorities) both of which have the necessary commercial insurance coverage for functions like Gatekeeper.

    Sorry for the rant, but even after four years, this is still an issue that bugs me!

  33. econwit
    September 16th, 2005 at 17:22 | #33

    Don’t worry I hear this all the time.

    There are thousands in the same position in the P.S. They put forward some glaringly obvious change to simplify a procedure or improve an outcome that would increase productivity and efficiency. It is never implemented, so they eventually stop putting anything forward.

    Tony Harris the ex- Auditor General of NSW said billions could be saved, just by getting grass root public servants to help instigate and implement simple productivity driven procedural changes.

    I would not see any harm in an incentive scheme being introduced, that rewarded public servants who initiated a change that improved productivity and cut costs. Maybe they could get a minor percentage of any cost benefits?

  34. Stephen L
    September 17th, 2005 at 12:41 | #34

    The public sector is inefficient, but that doesn’t mean that the private sector is any better at running things that require large organisations. I have worked for a three person firm, a university, been self employed and worked for a very large private sector employer.

    Of these the three person firm is by far the most efficient – he’s better at getting work out of me than I am when working for myself. However, the big private employer was easily the worst. By comparison the university is a model of efficiency.

    Governments fail when they try to do things that small firms can do, because they can never match the efficiency. However, privatisations often do not lead to greater efficiency because the businesses they spawn are usually huge, and experience the same dinosaur culture, with the addition of massive salaries being paid to the CEOs etc.

    econowit – the mere fact that AGL has been successful does not prove that all private firms working in semi-monopoly areas outperform government. I think Enron shares are pretty cheap these days.

  35. Peter Anderson
    September 17th, 2005 at 16:28 | #35

    econwit – I once worked for Tony Harris (at DIMEA, I worked in IT not the nasty part of the Department). He and Glenys Roper (at OGO/OGIT/NOIE) are the best managers I have worked for in 30 years of public sector employment.

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