The telecommunications industry has never been as politicised as it is in 2007.
As a result of the ongoing fight between the Federal Government and Telstra over broadband regulation, there are few of Telstra’s business decisions that aren’t immediately pounced upon by politicians trying to gather potential votes.
One new target in this seemingly eternal stoush is Telstra’s migration of its rural customers off its CDMA mobile telephone network, and onto the highly publicised Next G service.
Next G was launched in November 2005, and provides customers with a far superior service than the ageing CDMA network due to be switched off in January next year.
But doing so isn’t that simple.
Communications Minister Helen Coonan and the Attorney General Philip Ruddock have argued that Telstra should be prevented from making the switch until the Next G network provides at least the equivalent coverage of the existing CDMA network.
The Government has imposed an additional licence condition upon Telstra to that effect.
However, Telstra argues that that level of coverage will be achieved later this month and therefore the new licence condition is redundant.
With so many marginal seats in rural areas, that the Federal Government would be paying attention to a new mobile network in the bush is not surprising. But, by imposing a new condition on Telstra’s CDMA licence, it indicates a willingness to intervene opportunistically in the affairs of a private sector company for political gain.
The Government has preached at length about the need to cut ‘red tape’, but its continued regulation-making demonstrates that it is merely rhetoric.
The telecommunications industry has one of the highest regulatory burdens in the Australian economy. The pages of legislation governing the sector has grown from 1,600 ten years ago to over 10,000 today.
For Telstra, this constitutes nearly 500 regulatory reports to government agencies a year. The Australian Competition and Consumer Commission, which manages much of this regulation, has itself doubled in size since 1999.
Regulation diverts firms away from productive activity. And the telecommunications industry is awash with regulatory affairs managers, communications and policy directors, consultants and lobbyists.
There are few sectors of the economy that require more innovation and flexibility than the technology sector. But instead, the future of Australian telecommunications services is vested with governments and regulators, who operate at glacial speed.
When they do finally act, they frequently misunderstand the nature of what they are regulating, or act only to please political constituencies, or even act just to justify their own existence.
It is hard enough for the industry to keep up with Australian consumers’ insatiable demand for new technologies. So when it is deeply intertwined with politics and regulation, it is doubly unable keep up.
But taking a long-term view, this episode illustrates a major policy issue that the telecommunications sector has to grapple with.
The radio-frequency spectrum licences that are necessary to operate a mobile network like Next G or CDMA are ultimately controlled by regulators and the Government, not the firms which actually operate the networks.
This government control of spectrum licences leaves telecommunications firms susceptible to political manipulation. Spectrum management has, since its last major reform in 1992, been overhauled to allow for greater flexibility and ‘ownership’ of spectrum licences by firms.
As Senator Coonan has bluntly shown, these licences still have a long way to go until they can be free of arbitrary government intervention.
Governments need only to follow due process – Telstra alleges that the Communications Minister in this case has not – and they can alter the terms of those licences at their whim.
Licence holders are exposed to the political calculations of the government of the day.
Ideally, firms which held spectrum licences would be able to use those licences as they saw fit and make business decisions about how best to serve their customers.
But in an election year, and in an industry that is highly politicised and highly regulated, that ideal is still far away.