Privatization Of Telstra Essay Example For Students

Privatization Of Telstra Essay Whatare the advantages of privatizing Telstra and how does this impact its ethicalconduct while striving to satisfy community expectations? I believe that puttingimportant public assets into select private hands is not in Australiaslong-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 Telstras 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 doesnt 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 isnt 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 its 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. Causes Of The American Civil War Essay 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 itsinternational 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.