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    Privatization Of Telstra Essay (1484 words)

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    Whatare the advantages of privatizing Telstra and how does this impact it’s ethicalconduct while striving to satisfy community expectations? I believe that puttingimportant public assets into select private hands is not in Australia’slong-term interests, and oppose the partial/full sale of Telstra for the reasonsthat the Government has given. The argument the Government has given for the privatizationand corporatisation of Telstra has been a budget conscious one where theproceeds of Telstra will provide a “one-off” opportunity to: 1)abolish Telstra’s pastoral call rate and provide untimed local calls in extendedzones in remote Australia; 2) increase funding for Networking the nation; and 3)pay off foreign debt left over by the previous government However, this is nottrue as the Minister, Senator Alston already has the power to direct Telstra toprovide services and upgrade infrastructure (points 1 and 2). If the USO(Universal Service Obligations Act) or performance standards under the CSG needchanging, then the Minister should invoke his power to direct, and these changesshould be made distinct from any attempts to sell Telstra. Statistics also showthat the sale of the first third netted a total of $0. 37 billion loss to theCommonwealth.

    By the year 2000, it is estimated that Telstra earnings willexceed $2 billion annually. The Howard Government estimats an interest saving ofabout $2. 4 billion per year. This doesn’t take into account the income that willbe lost to the government every year in revenue earnings from Telstra. By 2007,the sale of Telstra is expected to create a budget black hole of $4 billion. Thegovernment cites that the “Mums and Dads” of Australia will benefit bypurchasing shares in the float, which is true.

    But eventually the realbeneficiaries will be the multinational companies who will have the controllingmajority, not the Australian public. This can have detrimental effects onsociety, especially to the rural regions of Australia. The Democrats and theLabor Party also disapprove of the privatization of Telstra for the abovereasons. Privatization is when a Government Business Entity (Statutory Body) issold to the general public and becomes a public company.

    There is a belief thatGovernment run businesses are inefficient because their motive isn’t necessarilymoney, although there is no consistent evidence that privatization increasesefficiency. However in the case of Telstra, there have been clear signs ofdeterioration in services since it’s partial privatization. Delays are longer onconnection and service times. Recent changes to the charging regime forcommunity calls will impact on costs, particularly for small business, in ruraland regional areas. (One in three rural customers were denied connections to newservices ~ SMH 5/2/99) Rural and regional customers also suffered the biggestfall in standards for repairing faults. The Telstra Communications Network isalso set to suffer shutdowns along the lines of the power cuts in Queensland andAuckland.

    All these factors can contribute to the downward spiralling of theessential qualities of life for country families. This deterioration in serviceshas been a direct consequence of privatization, where the focus of the companyhas shifted to profits rather than providing a cheap and efficient service. Another example of this can be seen when according to the Media (ABC), Telstrareaches an excess of funds of up to $1. 5 billion as a result of staff/servicecuts.

    The Board of Directors are urging for a special dividend to shareholdersor a share buyback (to increase share prices). No one is suggesting the obvious,strategic investment. Privatization has also made an impact on the workingconditions of employees. One of the first stages of structural reform thatTelstra implemented was downsizing and the cutting of working conditions of over60 000 workers (formerly) employed by Telstra, after experts claimed that thereis an excessive labour load of about 27000 strong.

    As Telstra was previously aGBE, it’s structure was “suboptimal” in a business sense ie: Telstra’sactivities exceed what it would have undertaken in a free market. This has givenit one of the worst staff to phone line ratios in the advanced world. After 15months of negotiations with the Communications Electrical and Plumbers Union (CEPU),the standardisation of ordinary hours for full time employees, introduction of 3main work streams and the extension of shift arrangements to all sections wasagreed upon. Many workers suffered pay losses when they were re-graded.

    TheFinancial review (17/2/99) records that in 1998, Telstra’s labour costs dropped7. 7% (the number of it’s employees fell by 20000), despite a huge increase inthe expansion of Telstra’s business. While cutting costs and restructuring hasseen record profits for Telstra, it also faced increasing national competitionand has been sharply effected by the failure of it’s global ventures, includingmounting losses from investments in Indonesia, India, China and Indo-China. Theincreasingly ruthless struggle for market share is driving the deepening assaulton workers’ conditions, which will only accelerate as time goes on.

    Unlike thesubjects of privatisation in the past, Telstra operates as a monopoly withextensive community service obligations. Under a new board of directors whofavour privatisation, some of these obligations have also been neglected. Todate, ACCC (The Australian Competition and Consumer Commission) has issued 4notices against Telstra in respect of the “commercial churn” transferprocess, alleging that Telstra’s conduct is anti-competitive. Telstra’scompetitors have complained that Telstra has used it’s near-monopoly powers torestrict local and long-distance customers transferring to other providers andthat this inhibits the ability of telecommunications customers to enjoy thebenefits of a more competitive environment. The ACCC instituted proceedings inrespect to 2 of the notices in Federal Court on December 24th. The 3rdcompetition notice, received on the 25/1/99 alleged that Telstra discouragescompetition by forcing other carriers wanting to transfer customers to Telstrato use a manual process that is inefficient and Cumbersome.

    Finally, the 4thnotice alleged that the package of conduct that is continuing, along with theprice charged by Telstra for the churn, is cumulatively a breach of thecompetition rule by Telstra. If found to have breached the competition rule,Telstra is liable for significant penalties of up to $10 million or more foreach offence. In an attempt to prevent a private monopoly and to ensure thatTelstra’s ongoing delivery of new technologies and services can be maintained,the Government has promised that Telstra will remain in majority publicownership until an inquiry be conducted (independent of both Telstra and theGovernment). When, and only when a set of service requirements (included in theTelstra Sale Bill) has been “ticked off” by the inquiry would theprocess begin to sell any of the 51% remaining in public ownership.

    “Theobject of Privatization is a deregulation which allows the famous hand of themarket to operate. ” (the New Australian 29/9/96). This means that allgovernment direction and other uneconomical operations (sometimes includes USO,CSO) have to be removed, which in turn implies breaking up the $30 billioncorporation into a dozen bite-size chunks, until companies can afford enter themarket to compete with a reasonable amount of initial investment. Only when MrHoward opens up the whole sector to competition will the system functionproperly, removing the need for schemes such as the USO. However, on thecontrary, Mr Howard assures us that the privatized Telstra will NOT be broken upand be strictly regulated. He also says that the Liberals will impose price capsand give Telstra no freedom to introduce timed local calls.

    The media statesthat the Government will also force Telstra to extend cross-subsidies communityservice obligations via the introduction of digital ISDN exchanges in ruralrates. If his plan is for a tightly regulated Telstra, then what’s the point ofprivatisation? This is another reason why I am opposed to the sale of Telstra,as the intent of the PM’s actions do not seem very clear to me. Part privatization,like the current “part-competition”, I believe, is the worst of allchoices. If open competition is desired, Telstra must be split up and allservices and entrepreneurial ventures privatized.

    But for the protection of thecommon good, the core network should remain in public hands, as Telstra providesmore than a service; it is the infrastructure of which the services of ourcountry rely on. In fact, if Telstra reduces expenditure on advertising andsponsorship, remove cross subsidisation of Pay TV, and give up on it’sinternational ventures (which are loosing money) to concentrate on givingAustralia a cheap and efficient network; the cost of phone calls would beconsiderably reduced. In the United States, local carriers are regulatedmonopolies, where price caps are forced down. As technology develops and becomesmore efficient, the cost of distance in telephone calls will continue todecrease.

    Perhaps eventually there will be a telecommunications regime where youpay an annual fee for connection, while all local/long-distance calls are freeand no restrictions are placed on usage; much like how our current seweragenetworks already operate. If we can achieve this, then we will have a leadingedge position in the Age of Information. (NOTE ~ not part of essay: is thishighly unlikely as such changes in operational efficiency would destroycompetitors such as Optus and Vodaphone etc. ???) Overall, my preferred positionwould be for the commonwealth the buy back to 1/3 of Telstra already sold,because of the public benefit derived from public ownership. Telstra is in aneffective monopoly position, and taxpayers’ funds have made thetelecommunications giant what it is today. It is not fair to place this publicinfrastructure into private hands, which have failed to deliver service merelyfor the purposes of profit and shareholder interests.

    This essay was written by a fellow student. You may use it as a guide or sample for writing your own paper, but remember to cite it correctly. Don’t submit it as your own as it will be considered plagiarism.

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