UPDATE  MARCH  2006

HOWARD GOVERNMENT’S STAND-OVER

TACTICS WITH THE COMPETITION REGULATOR

The Howard-Vaile-Liberal-National Coalition has intervened in Telstra’s fight with the competition regulator over a pricing structure the Telco claim could reduce its annual revenue by $850 million.

On Monday December 19, 2005, Prime Minister John Howard and Senior Cabinet Ministers decided to force the Regulator not to impose an unreasonable burden on any company, lending weight to Telstra’s concerns that over-laden regulation could ruin its growth prospects.  This is a public snub to Communications Minister, Helen Coonan, who has declared there will be no Howard Government intervention, and has played down Telstra’s warnings on the price cuts sought by the Australian Competition and Consumer Competition.  But the decision didn’t go so far as to indicate the price the ACCC should impose, and the Ministers supported Senator Coonan’s proposal for new price regulations that prevent Telstra charging higher line rental charges in Rural Australia, limiting the company’s options.  The problem is the prices Telstra charges competitors to use the lines between households and Telephone Exchanges  -  a bottle-neck that is crucial for any company wanting to erect its own Broadband Network.  Trying to stall for time, the Howard Government asked the ACCC to ready a report on the issue by the end of January so Senior Ministers could consider whether to intervene by enforcing stand-over tactics upon the Telco.  The delay creates uncertainty to Telstra’s share price just as the Government takes another step closer towards selling the 51.8% owned by the Australian Populace, who have been gagged on expressing their feelings re the full sale of Telstra.

Finance Minister Nick Minchin is expected to seek Caucus approval in the early part of this year to proceed with the $25 billion sale, which should be completed by November 2006.  Treasurer Costello reduced the value of the Government’s stake last week from $5.25 to $4.13 a share.  Telstra shares fell 2 cents to $3.82 before it was made public.  The Government move comes a week after institutional investors wrote to the Prime Minister, calling for lighter regulation of Telstra over the price dispute.  The Telstra issue has become politically insensitive, so much so that a meeting in Sydney included Messrs. Howard, Costello, Minchin, Coonan and Nationals Leader and traitor to the constituents of Rural Australia, Mark Vaile.

The regulatory argument is based on Telstra’s call for the Government to overturn an ACCC draft decision on the price competitors pay Telstra for access to local phone lines.  The ACCC wants to fix wholesale prices for the lines, known as the unconditioned local loop (ULL) that are higher in Country areas because of the underlying costs of the Network, a plan welcomed by Optus and others.  The ACCC also wants Telstra to reduce all its access prices.  Telstra has warned that higher wholesale prices in the bush would eventually run through to retail prices, forcing Rural line rental charges upwards.  It has proposed a single average wholesale ULL price and forecast that it could lose $850 million in revenue if the ACCC draft decision is applied, because prices in suburban areas would be set too low, giving its rivals an unfair edge.  We can assure all Australians that, if Telstra falls into Foreign ownership and becomes a financial burden to Australian Consumers, we will not only name the aforementioned, but many of their Colleagues such as Senators Barnaby Joyce, Sandy McDonald, Boswell and Nash, to name but a few.