Of course, not all regulation is bad. Like most companies, Telstra accepts it is the right and obligation of Governments to make decisions about public policy that serve the best interests of society as a whole.
The world has changed. Many regulations have not
However, the basis for many current telecommunications regulations is rooted in the last decade, when Telstra was a government-owned monopoly and the industry was just beginning to move in the direction of full and open competition. These regulations were, perhaps, justified at the time to help promote competition and open up the market, but they were designed to facilitate a transition from monopoly to competition. The world has changed. Many regulations have not.
Regulations have expanded and become more intrusive
In fact regulations have expanded and become more intrusive even as the market has become more competitive. For example, the telco market has gone from just 3 carriers in 1997 to over 160 carriers, and almost 500 Internet Service Providers (ISPs) - 10 ISPs have in excess of 100,000 customers. During this time, Telstra's competitors' market shares have grown enormously – and to 30 June 2007 competitors had
- 37% domestic long distance share
- 50% international share
- 57% mobiles subscribers
- 54% broadband subscribers
(Source: Telstra 2007 Shareholder review, page 29 et al)
Regulations are also being extended into new areas where Telstra does not have historical market share.
While the rest of the world is winding back regulation, Australia is increasing it, imposing enormous administrative burdens and increasing costs that fall unevenly on Telstra – while placing new barriers in the way of Telstra earning new revenues.
Telstra shareholders fund a range of government social policy objectives
Telstra has over 1.6 million shareholders and has obligations to them like any other company listed on the Australian Stock Exchange.
Unlike our competitors’ shareholders, Telstra’s shareholders are expected to fund the lion’s share of a range of government social policy objectives – such as the vast majority of the Universal Service Obligation (Telstra’s obligations to provide accessible phones for all Australians).
We are not suggesting that there shouldn’t be a Universal Service Obligation or that we won’t comply with our regulated obligations, but obligations to pay for a social policy should be paid for either by the government or made competitively neutral by requiring other providers to pay their fair share.
Requiring Telstra shareholders to pay the lion’s share of the governments social policy is like making Commonwealth Bank shareholders pay the costs of the Australian mint.
The table below shows you how we think of all the different kinds of regulations. Tell us if you would think about them in a different way.
|
Community service
“Pro-consumer” regulations |
Management intrusive
regulations | Red Tape
Reporting Requirements |
Increase costs | - Universal Service Obligation (1)
- Priority Assistance (1)
- Costs of Emergency 000 service (1)
- Customer Service Guarantees (2)
- Manage the IPND – Integrated Public Number database (1)
- Internet Assistance program (1)
- Disability equipment (2)
- Telecommunications carrier licence fees (2)
| • Operational separation (3)
• Accounting separation (3) | • Local Presence Plan (4)
• Network reliability framework reporting (4)
• Priority Assistance reporting (4)
• CSG reporting (5)
• Record-keeping rules (3)
• Regulatory Accounting Framework (5)
• Contract reporting to ACCC (SFOA updates) (5)
• s. 105 reports to ACMA (5) |
| Limit revenues | • Low income support packages like pensioner discounts (1)
• Free directory assistance to residential customers (1)
• Free White Pages directories (1) | • Trade Practices Act, Part 11B (4)
• Trade Practices Act, Part 11C (4)
• Network access price setting principles of the ACCC, especially ULL (4)
• Price controls (4) | • Reporting for Trade Practices Act, Part 11B (4) |
| What does Telstra say? | These are “good” regulations – most people accept them. They are good for Australian consumers. Businesses like Telstra should contribute to social obligations like these. Which is exactly the point – it shouldn’t be Telstra alone which pays the cost (and there is a cost!) Many of these are funded solely by Telstra, and others, like the USO, are good social policy but are underfunded. | These kinds of regulations are a problem because they are open to creative and unpredictable interpretation by regulators. We don’t oppose the idea of government making sure competitors who need access to Telstra’s network can do so on fair terms. BUT frequently these regulations are applied unfairly – either by setting prices for access below the cost of providing the service in the first place (forcing Telstra’s shareholders to subsidise our competitors shareholders) or imposing costs and restrictions on Telstra that no other competitor faces. | There is too much red tape! and it’s not just Telstra that is saying so (though we have the most in our industry). Many of our competitors, and the broader business community, agree that the burden of red tape is stifling and harming the economy. Regulations increase costs or reduce revenues and end up decreasing productivity, reducing competitiveness or costing jobs. |
(1) Many regulations provide a social good, but when these regulations increase a company’s costs (or limit revenues), the burden should be shared fairly by the entire industry. As it is, Telstra shareholders pay many of the costs imposed by government’s social policies.
(2) “Fair-enough” fees/costs, paid by each telecom provider who is a carrier.
(3) These regulations should be subject to cost-benefit analysis – so that policies that destroy shareholder value or that prove to be anti-consumer, anti-competition, anti-investment or anti-rural parity can be stopped.
(4) Telstra shareholders have to put up with rules and regulations that target Telstra while letting Optus and other Telstra competitors off the hook.
(5) These reports impose big reporting burdens on all the carriers (and many of our competitors agree). There needs to be a fresh look at just which reports are really necessary, and which have very little value but impose big time and resource costs.