Slowly the political forces are moving towards the full privatisation of Telstra. A year ago, only the Liberal party would countenance its privatisation. Now its Coalition partner, the Nationals, have opened the door towards privatisation in this term provided a review found that services in rural and regional Australia were up to scratch. Moreover, Green senator Bob Brown has suggested that he would think about allowing the privatisation in return for major expenditure and policy commitments on environmental concerns. A third of the ranks of the Democrats have said the issue ought to be looked at in the context of the national interest and One Nation Senator Len Harris has said he would agree to a privatisation in some circumstances provided it were delayed for 18 months. Even the Opposition Labor Party has stated it would permit a full privatisation of part of Telstra – the service provider element – provided the infrastructure were left in public hands.
These stances by the non-Liberal elements in the Federal Parliament might seem quite encouraging for the Liberals. The trouble is that it is no use getting all the opponents half way to agreeing to a privatisation. Rather the Liberals need to get most of the opponents all the way to agreeing to a privatisation.
As things stand, Prime Minister John Howard is quite right when he says, “”You can’t go on indefinitely having it half owned by the government owned by the public.” There are fundamental difficulties with the present position. Telstra cannot easily expand or diversify. The whole market is warped by one telecommunications company having community service obligations while others do not. Telstra has a conflict in being the monopoly owner of the network infrastructure as well as a service provider over that network on an equal pegging with others with whom it negotiates over terms and conditions for access to that network.
But Mr Howard should see beyond the act of privatisation of the remaining 50 per cent of Telstra. Even if and when fully privatised the situation will not be satisfactory because Telstra will have these two incompatible roles – as owner of the network and as competitive service on than network with other providers.
The Labor Party’s approach is to permit the privatisation of the service arm of the rest of Telstra, provided the infrastructure arm remained in public hands. The Liberals have denounced this a likely to reduce Telstra’s share price. It was a cheap shot aimed at attracting votes from the hundreds of thousands of Telstra share-owners. It might have been better to work with that proposal rather than against it, especially as it could help with dealing with the concerns of the National Party. The Nationals are concerned with service guarantees. They might be better enforced if Telstra were split. The infrastructure arm of Telstra, whether private or public or a mix, could be instructed about access equity for the bush. The service provision arm of Telstra would be in the same position as other service providers, like Optus, Vodaphone and AAPT. In this environment service rules for the bush could apply across the board.
Of course, this is the model that should have applied from Day One – a split Telstra, with the service provider fully privatised and the infrastructure owner – a natural monopoly because it would be silly to have two or three sets of cable through the country – as a regulated monopoly – whether private, public or a mix. It can be attained.