COMMONWEALTH OF AUSTRALIA

SENATE Official Committee Hansard

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS LEGISLATION COMMITTEE

Consideration of Estimates

THURSDAY, 11 JUNE 1998

CANBERRA

BY AUTHORITY OF THE SENATE CANBERRA 1998 INTERNET The Proof and Official Hansard transcripts of Senate committee hearings, some House of Representatives committee hearings and some joint committee hearings are available on the Internet. Some House of Representatives committees and some joint committees make available only Official Hansard transcripts. The Internet address is: http://www.aph.gov.au/hansard CONTENTS

THURSDAY, 11 JUNE

Department of Communications and The Arts— Program 4—Communications—Subprogram 4.3—Telstra Corporation Limited ...... 295 Program 3—Broadcasting, online and information services— Subprogram 3.3—Australian Broadcasting Corporation ...... 352 Subprogram 3.4—Special Broadcasting Service ...... 414 Sub-program 3.5—Australian Broadcasting Authority ...... 424 Program 4—Communications— Subprogram 4.2—Australian Postal Corporation ...... 449 Subprogram 4.4—Australian Communications Authority ...... 454 Subprogram 3.2—National Transmission Authority ...... 466 SENATE

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS LEGISLATION COMMITTEE Thursday, 11 June 1998

Members: Senator Patterson (Chair), Senator Schacht (Deputy Chair), Senators Allison, Eggleston, Lightfoot and Lundy Substitute member: Senator Tierney Senators in attendance: Senator Calvert, Colston, Cooney, Eggleston, Forshaw, Lundy, Patterson, Schacht and Tierney

Committee met at 9.08 a.m. DEPARTMENT OF COMMUNICATIONS AND THE ARTS Proposed expenditure, $1,183,973,000 (Document A) Proposed provision, $43,768,000 (Document B) In Attendance Senator Alston, Minister for Communications, the Information Economy and the Arts Department of Communications and the Arts Executive Mr Neville Stevens, Secretary Program 1—Arts and Heritage Subprogram 1.1—Centenary of Federation Mr James Barr, Head of Secretariat, National Council for the Centenary of Federation Ms Sharon McAuliffe, Assistant Director, Corporate Management, National Council for the Centenary of Federation Subprogram 1.2—Arts and Heritage Policy Mr Les Neilson, Acting First Assistant Secretary, AHD Mr Peter Young, Acting Assistant Secretary, Arts Mr Kevin Wohlers, Acting Assistant Secretary, Cultural Heritage Ms Jen Levy, Acting Assistant Secretary, Federation Task Group Subprogram 1.3—National Archives Mr Malcolm Wood, Assistant Director General Mr Steve Stuckey, Assistant Director General Subprogram 1.4—Australia Council Mr Michael Lynch, General Manager Ms Sarah Gardener Mr Gabriel Chan Mr Don Baxter Subprogram 1.5—Australia National Maritime Museum Ms Mary-Louise Williams, Acting Director ERC&A 292 SENATE—Legislation Thursday, 11 June 1998

Mr Quentin Howarth, Assistant Director, Corporate Services Ms Debra Bock, Manager, Finance Subprogram 1.6—National Gallery of Australia Mr Brian Kennedy, Director Mr Alan Froud, Deputy Director Mr Keiron Roost, Head of Finance Subprogram 1.7—National Library of Australia Mr Warren Horton, Director General Mr Peter Hughes, FMS Project Team Subprogram 1.8—National Museum of Australia Ms Dawn Casey, Executive Director, (Acting First Assistant Secretary) Construction Coordination Taskforce Dr William Jonas, Director Dr Darryl McIntyre, General Manager, Core Operations Subprogram 1.9—National Science and Technology Centre Mr Chris Bee, Deputy Director Mr Gary Bullivant, Business Manager Program 2—Film and Intellectual Property Subprogram 2.1—Film and Intellectual Property Policy Dr Alan Stretton, First Assistant Secretary Mr Alan Edwards, Acting Assistant Secretary, PBB Ms Megan Morris, Assistant Secretary Film Dr Kay Daniels, Assistant Secretary, IPB Subprogram 2.2—Australian Film, Television and Radio School Mr Rod Bishop, Director Ms Susan Hissey, Accountant Subprogram 2.3—National Film and Sound Archive Mr Ron Brent, Director Ms Margaret Baird, Acting Senior Manager RMB Ms Sarah McDonald, GAA Subprogram 2.4—Australian Film Finance Corporation Ms Catriona Hughes, Chief Executive Mr Michael Malouf, Financial Controller Mr Michael Ward, Manager Subprogram 2.5—Film Australia Ms Sharon Connolly, Chief Executive Officer Ms Deborah Coombe, Head of Finance

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Subprogram 2.6—Australian Film Commission Ms Catherine Robinson, Chief Executive Ms Kim Ireland, Policy Adviser Mr Ron Neale, Director, Finance and Systems Program 3—Broadcasting, Online and Information Services Subprogram 3.1—Broadcasting, Online and Information Policy Dr Rod Badger, First Assistant Secretary (LBISD) Dr Beverly Hart, Assistant Secretary (LBB) Mr Michael Sutton, Assistant Secretary (RTIF) Mr Colin Lyons, Assistant Secretary, (Telev Group) Subprogram 3.2—National Transmission Agency Mr Vic Jones, General Manager Subprogram 3.3—Australian Broadcasting Corporation Mr Brian Johns, Managing Director Mr Colin Knowles, Head, Technology Ms Sue Howard, Head, Regional Services Ms Clair Henderson, Acting General Manager, Network Television Ms Liz Jakubowski Mr Russell Balding, Head, Finance and Business Services Ms Janet Clayton, Chief of Staff, Corporate Office Subprogram 3.4—Special Broadcasting Service Mr Nigel Milan, Managing Director Mr Peter Cavanagh, Head of Television Ms Maureen Crowe, Head, Resources Mr Chris Sharp, Policy Manager Subprogram 3.5—Australian Broadcasting Authority Mr Gareth Grainger, Deputy Chairman Mr Giles Tanner, General Manager Ms Jonquil Ritter, Acting Director, Policy and Content Regulation Subprogram 3.6—National Office for the Information Economy Mr Brian Stewart, General Manager, Legal and Regulatory Framework Mr Arthur Blewitt, General Manager, Corporate and Government Mr Tim Field, General Manager, Government Services Mr Tom Dale, General Manager, International Program 4—Communications Subprogram 4.1—Telecommunications and Postal Policy Ms Faye Holthuyzen, First Assistant Secretary, Telecommunications Industry Division Mr Chris Cheah, Assistant Secretary, Competition Consumer Branch

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Mr Richard Thwaites, Assistant Secretary, Trade and Development Branch Mr John Neil, Assistant Secretary, Enterprise and Radiocommunications Branch Subprogram 4.2—Australia Post Corporation Mr Gerry Ryan, Corporate Secretary Mr Maurice Castro, Group Manager, Strategic Planning Mr John Power, Group Manager, Letter Mr Jim Marshall, Group Manager, National Operations Subprogram 4.3—Telstra Corporation Limited Mr Graeme Ward, Group Director, Regulatory and External Affairs Mr John Stanhope, Director, Finance Mr John Losco, Managing Director, Business and Government Sales Mr Peter Frueh, Managing Director, Business Development, Products and Marketing Mr Geoff Barkla, Director, Industrial Relations Mr Lawrence Paratz, Executive General Manager, Network and IT Infrastructure Ms Deena Schiff, Director, Regulatory Mr Andrew Day, Managing Director, Commercial and Consumer Sales Mr Tony Bundrock, General Manager, Customer Strategy, Business and International Ms Deanne Weir, General Counsel, Regulatory and External Affairs Subprogram 4.4—Australian Communications Authority Dr Bob Horton, Deputy Chairman Ms Esther Alter, Member Mr Roger Smith, Senior Executive Manager, Planning and Standards Group Mr Geoff Luther, Executive Manager, Marketing Group Mr John Haydon, Executive Manager, Telecommunications Licensing Group Ms Roslyn Kelleher, Executive Manager, Consumer Affairs Group Mr John Grant, Executive Manager, Corporate Management Group Mr Jeremy Chandler, Manager, Finance Department of Finance— Ms Kelly Ralston CHAIR—I call the committee to order. The committee will continue the examination of Communications, the Information Economy and the Arts portfolio. Unless otherwise stated, answers to questions on notice are to be provided to the secretariat by close of business on 17 July 1998. The committee will begin with subprogram 4.3, Telstra, then proceed to subprograms 3.3, 3.4 and 3.5 of program 3—Broadcasting, online and information services—followed by subprograms 4.1, 4.2 and 4.4 of program 4, Communications. The committee will then conclude with subprogram 3.1, Broadcasting online and information services policy, and subprogram 3.2, National Transmission agency.

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I welcome the minister, Senator the Hon. Richard Alston, and officers from the Communications, the Information Economy and the Arts portfolio. [9.09 a.m.] Program 4—Communications Subprogram 4.3—Telstra Corporation Limited Senator SCHACHT—Welcome, gentlemen. I see that Mr Rizzo has decided to give us a miss again, and Mr Blount has not even considered us at all, I presume. Mr Ward—I think the team that you see before you, Senator, is the one that we consistently bring to Senate estimates. Senator SCHACHT—I am not denying that, that is the truth, but I noticed Mr Rizzo deigned to appear before the Telstra full privatisation bill inquiry in Melbourne, which I do not think we should be grateful about. He should have appeared, and he should appear here as the chief finance officer. Mr Ward—I guess the privatisation bill hearing fits very much into Paul Rizzo’s accountability, and for finance matters we have none other than the Director of Finance, John Stanhope. Senator SCHACHT—I would have thought Mr Rizzo would have had some responsibility as well. Nevertheless, you may remember that at the hearing in Melbourne I raised questions about whether the board of Telstra had approved the submission that the management of Telstra had made in favour of full privatisation. It became clear that Mr Rizzo did not have a clue what I was talking about, and you came to his rescue rather rapidly, Mr Ward, to say that, although there had been no formal decision put to the board, the chief executive’s monthly report had pointed out there had been a submission prepared and that that had been acknowledged in the board minutes, which I think you subsequently supplied to the committee. Mr Ward—In support of the bill. Senator SCHACHT—In support of the bill. Mr Ward—Yes. Senator SCHACHT—The minutes, I have to say, are extraordinarily perfunctory. The minutes show that there had not been any discussion by the board about the content of the report, the nature of the submission, and as this was done on behalf of the board one would have thought it would have been concerned about, above all else, who their shareholder is and who they could be. One would have thought in due diligence the board would have at least had a reasonable discussion about that. The other thing the minutes did not show, which I asked Mr Rizzo about and he could not answer, was whether any of the board members actually, post that board meeting, read your submission and approve it. Mr Ward—Can I take those points one at a time. I think we said at the sale bill hearing in Melbourne that the support for the full privatisation of the company had been an issue that has been discussed for some time. It builds on a number of discussions at the board and, therefore, it was not surprising to management that the board just noted that management would be preparing a submission in support of the bill. In respect of your second question, the management submission was sent to all board members. There was no formal resolution associated with that; it was for their information. Senator SCHACHT—I do not claim to be an expert about the due diligence of directors and the requirements of the Australian Securities Commission and the Australian Stock

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Exchange, but I would have thought it would have been germane to directors to have actually read the submission before it was released or lodged with this committee in its other form to see whether the directors agreed with the information and the comments being made which are fundamental to the shareholding structure of the company which they represent. Mr Ward—If you go back to my first comment about the discussions around privatisation, we had submitted of course a submission to Telstra 1, if you like, and that had been fully socialised with the board. Our submission built very much on our first submission, because the arguments essentially for privatisation were put in our first submission and repeated and updated in our second submission. Senator SCHACHT—So you are telling me, firstly, that the board took a direct decision, and it is recorded in the minutes of the board, that they favoured the one-third privatisation; secondly, that they gave some direction to the management in preparing the submission; and, thirdly, before that submission was lodged it was approved by the board? Mr Ward—Certainly I know that the board supported the one-third privatisation and certainly the CEO and maybe even the chairman had made public comments around that time. I cannot recall the formalities of the board back in 1996, Senator. Senator SCHACHT—I will ask you to take that on notice. You supplied me with the minutes early this year on this decision that recorded the CEO’s report. I want you to supply me with the minutes from the appropriate meetings during 1996 leading up to the government’s decision on one-third. Minister, this is a board which you basically reshaped to your own desires and wishes, I think towards the end of 1996. You asked for, I think, five or six resignations and appointed five or six replacements of the government’s choice. Do you think it surprising that, in due diligence, those directors chose not to have any view recorded in the minutes about the full privatisation or even chose not to look at the submission lodged on behalf of the company publicly to this committee about why they supported full privatisation? Senator Alston—I suppose boards might vary in the extent to which their minutes are expansive, but my understanding of minutes is that they record decisions rather than views or attitudes. That is what transcripts are all about. If you want to get a running assessment of who said what, you do not go to the minutes. Senator SCHACHT—No, I am not asking for a running assessment, Minister. The minutes I was supplied with as a result of the last hearing only said that there was a CEO’s report containing a number of matters, and the CEO’s report was noted. There was no resolution to say it was adopted. It was noted. Mr Ward—That management were putting in a submission in support. Senator SCHACHT—Yes, and it was noted. It acquiesces, but it does not endorse it, it does not oppose it. It just notes. I have been around writing minutes on various bodies of the Labor Party, and I know— Senator Alston—Probably rewriting them too! Senator SCHACHT—No, no. This is why I am a bit surprised that a board with such experienced company directors in the private sector would not show some interest in what is the most fundamental issue: the future shareholding of their company. Senator Alston—Mr Ward has made the point that it is not as if they would be taken by surprise. Senator SCHACHT—No, I am surprised that there is no decision formally.

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Senator Alston—But his point really is: why do they need to do that? This is pretty much a formality as far as they are concerned. It does not raise a brand-new issue that provokes a full-scale and heated debate. It is probably the culmination of a process that has been in train for a long time. Senator SCHACHT—I would have thought that in good due diligence, the directors would have at the very least read the report going public in favour of a fundamental change to the shareholding of the company which they represent. I am sure that if BHP released a report fundamentally changing the shareholding structure of that company, the directors would have actually read the report before it was released. Senator Alston—I am just speculating, but it is possible, for example, that they had discussed it in advance; in other words, been made aware— Senator SCHACHT—Not according to the minutes we were provided with. Senator Alston—No, at an earlier meeting or meetings they may well have foreshadowed that such a document was in the course of preparation and had an understanding of its general direction. When it was produced at this board meeting, it may have been said, ‘This is in line with previous discussions, therefore noted.’ I do not know, but I can understand meetings proceeding in that fashion. Senator SCHACHT—Thank you for that, Minister. I will ask Mr Ward. Are there any minutes of previous meetings, decisions or notings—as the minister has suggested there had been a prior discussion before the meeting—relating to the minutes you provided me with? Mr Ward—I am not aware of any particular minutes, but I have taken action to look at 1996, and I can assure you that the board have fully discussed privatisation and that privatisation was, in their view, in the interests of the company. Senator SCHACHT—When? Mr Ward—Over a period of time since 1996. Senator SCHACHT—Will you provide me with the minutes, then, showing when those discussions took place? Senator Alston—If you look at it another way, wouldn’t they be derelict in their duty if they had never discussed the implications of privatisation, given that it has been on the public agenda since prior to the last election? Senator SCHACHT—All I am asking for, Minister, is a record that that actually took place. Senator Alston—But you are concerned that they did not somehow have a full-scale discussion at this meeting, and what has been put is that they must have discussed this endlessly over a period of years, formally and informally. Senator SCHACHT—The best I can get is that informally there was a discussion. The best decision I can get from the minutes provided is that the CEO’s report was noted, where this was amongst other matters discussed. I would still raise this issue. I am more than a little surprised that once the submission came into this committee fundamentally recommending a change of the shareholding structure of Telstra, it was not endorsed formally or read by the directors before it was lodged and, on the last evidence you gave at the committee in Melbourne, there is no evidence you gave that that in any way was circulated to the directors, even for their own information. Mr Ward—Well, it has been. Senator SCHACHT—It has been, because I have now raised it.

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Mr Ward—It was going to be circulated in any event, but— Senator SCHACHT—Sorry, are you now saying it was circulated? Mr Ward—It was circulated. It has been circulated to the board. Senator SCHACHT—Just take it on notice. When was it circulated? Was it circulated after I asked the question in the meeting in Melbourne? Mr Ward—It was circulated after our hearing, yes. Senator SCHACHT—Yes. Mr Ward—Yes. Senator SCHACHT—I find it rather strange that it took me or a committee of the Senate to prod the directors into reading a submission which was lodged on their behalf about the fundamental shareholding restructuring of a company. Mr Ward—Senator, with respect, that was going to be circulated in any event, and we made the decision to give them a bit of a summary of what happened at the hearing in addition to circulating the report. Senator SCHACHT—Mr Ward, you are doing a very good job of trying to protect what I would say was a rather lazy attitude of the board. But, anyway, let us move on to other ques- tions. You have taken some on notice for me. I would appreciate getting those answers, and I hope if there are any significant future decisions on Telstra from the present board, they do actually record in the minutes what their view is. Mr Ward—Just one final comment, Senator: if there had not been full support around the board in support of the bill, that certainly would have been noted in the minutes. Everybody was building on a previous understanding of where things were going. Senator SCHACHT—All right. Can I now move on first of all to the answers you gave me to a question I asked at the March hearing—and I want to thank you for the material you finally provided, which has taken me some time to get but is most useful—about the numbers of telephone calls in those areas, for STD, local loop, international, et cetera. That was most useful. You may remember we had a lengthy discussion on the half-yearly report that was then available, about the revenue and the profitability that is listed in the revenue growth, product revenue section of the report. I asked questions about each of those listed product revenues, in terms of their profitability, and you said that that was commercial-in-confidence. I went back and read the transcript the other day. I did not specifically ask you to take it on notice, but I now will. I would like a formal response from Telstra of what was the profit for those product revenues listed under revenue growth. My photocopy does not have a page number, I am sorry. You know the one I mean, anyway, I think. Mr Ward—Yes. Senator SCHACHT—If you are going to use commercial-in-confidence, which I am not automatically sure stands up, but if you are going to use that, would Telstra be willing to provide that to the committee in confidence? I noticed yesterday or the day before in the press that Mr Rizzo, and it would have been nice for him to have been here, says—on 10 June it is reported in the Financial Review and a couple of other newspapers—that: Telstra will beat its prospectus net profit forecast of $2.8 billion in the year to June 1998, Mr Rizzo told an investment conference.

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Any chance of him telling the estimates the same thing? Mr Ward—Mr Stanhope can comment on our financial performance. Senator SCHACHT—So he speaks for Mr Rizzo on this? Mr Ward—He speaks for the company. Senator SCHACHT—With the same clout and weight as Mr Rizzo? Mr Ward—Certainly. Senator SCHACHT—Thank you. Mr Stanhope—I think Mr Rizzo’s comments at that conference were that Telstra would beat its profit forecast, as forecast in the prospectus, comfortably, and I can confirm to this Senate estimates committee that Telstra is confident of meeting that prospectus forecast for its profit after tax. Senator SCHACHT—So it will be in excess of $3 billion? Mr Stanhope—No, the forecast— Senator SCHACHT—No. Mr Rizzo has probably got a fair idea. Are we looking at a profit for Telstra in excess of $3 billion, which is at least $200 million more than the prospectus? Mr Stanhope—It is unlikely that it will exceed $3 billion. What I am saying is that it will exceed the $2.8 billion that— Senator SCHACHT—So it is $2.8 billion to $3 billion? Mr Stanhope—It may well be. Senator SCHACHT—We will see how accurate that turns out to be, obviously. I notice that Mr Rizzo goes on the record here in this article, saying that as part of a four-year program of redundancies and sackings, 18,000 of the 25,000 have already gone. He said: We’ll be revisiting the residue of the 25,500 because we are starting a new three-year business plan. I don’t expect we will reduce that figure as a target. Do you have any more evidence to give to the estimates that the 25,500 once reached by 1999 will not be revised upwards? Mr Stanhope—The plan for the three years ending 30 June 2000 is where the 25,500 ends from a starting position of 1996-97, and the 25,500 is over a four-year period. We are in the middle of updating that plan, but we have not changed the programmed staff reduction to the end of 30 June 2000. It is still 25,500. Senator SCHACHT—But will you achieve the 25,500 before 30 June 2000? Mr Stanhope—No, we are unlikely to. Senator SCHACHT—If you have got 6,500 to go, will you achieve, say, 24,000 in the next six to 12 months, and the residue of about 500 to 1,000 in the remaining part of the remaining two years? Mr Stanhope—No. The program was for a 8,000 reduction in 1997-98, 4,000 in 1998-99 and 2,500 in 1999-2000. That is our program. Senator SCHACHT—And that is still the program? Mr Stanhope—That is still the program. Senator SCHACHT—Can you table that to the committee? Mr Stanhope—The document I have in front of me has an extra year in it.

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Senator SCHACHT—Has what? Mr Stanhope—Has an extra year, and that plan has not yet been— Senator SCHACHT—So there will be more reductions past 30 June 2000? Mr Stanhope—There is another year of the plan, and it is likely there will be further staff reductions in that subsequent year. Senator SCHACHT—So we have got 25,500 by 30 June 2000? Mr Stanhope—Correct. Senator SCHACHT—Then in a further year there are going to be more reductions? That is what is on your piece of paper? Mr Stanhope—Yes, there will be. Senator SCHACHT—Irrespective of the government’s privatisation plans—and the parliament has not decided on that yet and there has got to be an election in between—can you tell the two-thirds shareholders of Australia how many more people will be sacked in that last year? Mr Stanhope—There is likely to be a similar size reduction as the preceding year. Senator SCHACHT—Which is about what? Mr Stanhope—Around 2,000. Senator SCHACHT—Okay, so the redundancies are now up to 27,500 by 30 June 2001? Mr Stanhope—That is a plan that is yet to be endorsed by the board of this company. It is work in progress. Senator SCHACHT—No, I understand that. CHAIR—Can I just ask a question there. Are some of those people taken up by other telecommunication companies like Optus? Mr Stanhope—Some are. Some are getting employment in other telecommunications companies. In fact, we have spun off; we have sold our Visionstream company, and in fact a lot of our employees or people who have been made redundant out of Telstra have joined Visionstream. They have joined companies like Skilled Engineering. They have joined companies like Optus and Vodafone. CHAIR—So it just does not mean the number of people who are shed equals the number of people unemployed? Mr Stanhope—No, it does not translate into unemployment. Senator SCHACHT—Seeing as Senator Patterson raised this, can you take on notice and provide us with a reasonable estimation—I cannot ask you to do it to an exact number—of how many of those 18,000 people who have already gone have got jobs, that you know of, in other telecommunications companies? Some might have got jobs mowing lawns or picking up papers or something in a totally unskilled area compared with their training that you have invested many thousands of dollars in over the years. Mr Stanhope—Senator, we do not track every individual that has left the company but— Senator SCHACHT—No, I know that. Mr Stanhope—Let me just finish, please. But we do have a career transition service in the company, and we do know how many have gone through there and how many have got jobs as a result.

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Senator SCHACHT—Good. Mr Stanhope—It is a very high percentage we have been able to find further employment for. Senator SCHACHT—You will be able to give us those details? Mr Stanhope—I can tell you those numbers. Senator SCHACHT—When I visited the national telecommunications operating centre in Brisbane, I stumbled across a coffee drinking area in one of the rooms next to the centre. It was when you were transferring people to Melbourne. There were lots of copies of the Melbourne Age and the Sun Herald real estate sections available to them to look at buying houses in Melbourne. You may say that’s a very sensitive way of doing it, but it made the point to those people that unless they went to Melbourne they were out of a job. Can I go back to the remarks of Mr Rizzo. You said to me about 18 months ago in an estimates hearing that the net savings on costs by this program of redundancies would improve Telstra’s bottom line by about $600 million per annum. That was correct, wasn’t it? Mr Stanhope—Yes, that is correct. Senator SCHACHT—Has that figure been revised? Is that still the figure in management’s view? Mr Stanhope—That figure is being realised—obviously not the whole $600 million yet, because we have not completed the program. Senator SCHACHT—No. Mr Stanhope—But given the number of staff who have left, and the average salaries and so on, that number will be realised. Senator SCHACHT—With a further 2,000 going in the year 2000-01, how much further would that saving be increased? Mr Stanhope—As a rough estimate, you can take 2,000 times $50,000, say—that is labour and labour on-costs—and that is another $100 million. Senator SCHACHT—Another $100 million, so that is $700 million. I suppose that is being given to the scoping studies for the full privatisation germane to the prospectus about cost structures, et cetera? Mr Stanhope—I know of no scoping studies for full privatisation, and those figures have not been given to anybody, including the board of the company, because the board meets on Monday the 15th to consider the corporate plan. Senator SCHACHT—To consider the corporate plan? Mr Stanhope—Nor has it been given to the government. A plan will be submitted to government around the end of June. Senator SCHACHT—When will this new three-year business plan start if it is approved by the board and the minister? Mr Stanhope—1 July 1998, running through to 30 June 2001. Senator SCHACHT—So it starts July next year? Mr Stanhope—It is a three-year plan, yes.

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Senator SCHACHT—I asked about the previous business plan back in 1996. I never got an answer from the minister as to whether he had actually approved a business plan for that three-year period. Did you actually approve a business plan, Minister? Senator Alston—I would have to refresh my memory on that. I will find out, if you like. Senator SCHACHT—Is it a statutory obligation under the act that you have to approve the business plan, or is it a matter of courtesy, representing the shareholders of Australia? Senator Alston—I think it has to be submitted to the minister but I do not know that— Senator SCHACHT—Mr Ward, you seem to know the act better than anybody—I hope. What does it say in the act? Mr Ward—I cannot answer that. I know we certainly have to submit a plan. Mr Stanhope—We certainly have an obligation under the act. Mr Ward—I believe we have had correspondence back from the minister subsequent to submitting the plan. Senator SCHACHT—Is that correspondence wanting to change the plan, or suggesting changes? Mr Ward—I cannot recall, but it did not change the substance of our plan at all. It made some comments, I think, about certain initiatives and perhaps reporting on certain issues. I cannot recall the correspondence. Senator SCHACHT—Minister, can you give the estimates committee some idea of what those suggestions that Mr Ward has mentioned were about the three-year business plan ending on 1 July next year? Senator Alston—I will take it on notice. I am not sure whether it is appropriate to disclose private correspondence. Senator SCHACHT—Well, there is a statutory obligation in some form or another. Senator Alston—There might be a statutory obligation for them to submit a corporate plan and for me to consider it, but that does not mean that it is a public exercise. Senator SCHACHT—No, I appreciate that, and I understand the dreaded phrase ‘commercial-in-confidence’ will have to be— Senator Alston—Otherwise I suppose they would put it on the Net and I would reply in kind. Senator SCHACHT—It does not matter what they put on the Net to you; you do not do anything with it, other than note it. You have never shown any interest in publicly giving any directions to Telstra in the public benefit. So I suppose it is almost useless sending it to you. Senator Alston—It is always useful to have it on record that that is your intention, if you come to government. Senator SCHACHT—It is in the prospectus, on the one-third sale, very clearly put there by Mr Beazley. Senator Alston—Well, you have put shivers down their spines! Senator SCHACHT—What, your spine? Senator Alston—Not ours. Senator SCHACHT—Well, whose spine? Mr Ward—Mine.

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Senator Alston—I do not think investors would be very keen on that proposition, either. Senator SCHACHT—But, Minister, we made it clear in the prospectus— Senator Alston—Yes. Senator SCHACHT—And you are going around skiting about how many people bought shares, so obviously they took that on board. Senator Alston—They did not think you had any chance of coming to government. CHAIR—Senator Alston, it was just as clear in the Commonwealth Bank prospectuses. Senator SCHACHT—The power of direction we made very clear in Telstra. This is about the power of direction to Telstra in the national interest. Mr Ward, how much of the approaching $3 billion profit do you expect would be retained? By the way, is the $3 billion profit before interest and tax, EBIT or what? Mr Ward—I will just ask Mr Stanhope to put on the record this $3 billion that you are now quoting— Senator SCHACHT—It is in the paper. It is Mr Rizzo saying it, not me. Mr Stanhope—Mr Rizzo did not say that the profit would be $3 billion. Senator SCHACHT—I am just using shorthand now. It is between $2.8 billion and $3 billion, right? Whatever that figure is, in that range, would you tell— Mr Ward—Right, let’s say $2.8 billion. Senator SCHACHT—For God’s sake, I am not holding your feet to the fire over this. I have acknowledged that it is a guesstimate of a range of $200 million. With the revenues you have of $17 billion, I would not blame you if you were $500 million out at the end because of the turnover you have. Can I get this straight about profit and all those accounting phrases like EBIT and so on? Mr Stanhope—It is profit after tax. Senator SCHACHT—It is the profit after tax? Mr Stanhope—Yes. Senator SCHACHT—What was the tax which you paid last year, in 1996-97? Was it $800 million or something like that? Mr Stanhope—No. It was about $500 million, because there were a number of abnormals. Senator SCHACHT—Would you expect, with the reduction of abnormals—fewer abnormals in the annual accounts this year—the tax may be higher than $500 million? Mr Stanhope—Sure. It certainly will be. Senator SCHACHT—That is good for the taxpayers of Australia first time round. Is this amount of money before the interest payments? Mr Stanhope—No, after. Senator SCHACHT—After interest? After tax? Mr Stanhope—It is after everything. It is profit after tax, from which the dividend is paid. Senator SCHACHT—Is it after retained earnings that go into capital works and reinvestment in capital works? Mr Stanhope—What comes out of the profit after tax is dividends, and what is left after dividends is retained earnings. Retained earnings are used for capital expenditure.

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Senator SCHACHT—So going on last year’s dividend, which was about $1.5 billion or $1.4 billion—what did you pay last year? Mr Stanhope—With the special dividend— Senator SCHACHT—Ignore the special dividend. Mr Stanhope—Okay. I think it was about $1.2 billion. Senator SCHACHT—So if you pay about the same dividend, but I am sure the government will ask you to pay a bit more if your profit has gone up— Mr Stanhope—Well, the profit has gone up. Senator SCHACHT—Let us just say for argument’s sake it goes to $1.5 billion. There is a negotiation between you and the government, the total dividend is $1.5 billion of which they get two-thirds, and the other third goes out to the shareholders. Mr Stanhope—When you say a negotiation, it is the stated board policy of a 60 per cent payout ratio. So there would be a 60 per cent payout. Senator SCHACHT—Is that 60 per cent a board decision? Mr Stanhope—Yes, it is. Mr Ward—It is in the prospectus. Senator SCHACHT—That is 60 per cent of the $3 billion, if it is a $3 billion figure? Mr Stanhope—If it is. Senator SCHACHT—I am not holding your feet to the fire. I have qualified myself already. It just makes it easier for the calculation in the Hansard. So that will be $1,500 million to $1,600 million could be paid out in dividends. Mr Stanhope—Correct. Senator SCHACHT—Right. Would you anticipate all of the remaining $1,400 million, that is retained as earnings, going into capital works? Mr Stanhope—Yes. Senator SCHACHT—So you would have $1,400 million into capital works? Mr Stanhope—Plus more. Senator SCHACHT—I am just coming to that. Last year the capital works program, from the information you have provided to me, was well over $3 billion. Mr Stanhope—Correct. Senator SCHACHT—How much was it actually? Mr Stanhope—In 1996-97? Senator SCHACHT—Yes, the last full year. You had a lot of cable running out over the joint, which put it up as well. Mr Stanhope—Yes. It was about $3½ billion. This year, 1997-98, it will be around $3.9 billion. Senator SCHACHT—Around $3.9 billion this year? Mr Stanhope—Correct. Senator SCHACHT—So $1,400 million of that will be paid out of retained earnings? Mr Stanhope—Earned in this year.

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Senator SCHACHT—Yes. How much of the $3.9 billion that is capital works this year just ending was paid for out of retained earnings? Mr Stanhope—The capital program will utilise previous years retained earnings as well, some borrowings— Senator SCHACHT—What are they? Mr Stanhope—We have got a net debt of around $7 billion, and we have got about $10 billion of shareholders’ funds at the end of 1996-97. So the combination of shareholders’ funds and debt goes to fund the operations of the company and the capital expenditure program. Senator SCHACHT—Is there any chance of us getting a breakdown of how the $3.9 billion was raised? You have got some from retained earnings. Some from borrowings? Mr Stanhope—Yes. Senator SCHACHT—Some from capital from the shareholders’ investment in the company, from the shares? Mr Stanhope—Yes. Senator SCHACHT—What is the breakdown of the full figures? Mr Stanhope—I will have to take that notice because I do not have all that information at my fingertips here. Senator Alston—It does not follow that these things are earmarked in any event. You do not hypothecate a certain proportion of debt for a particular project. You may simply borrow, have a stand-by facility, and you draw it down for a whole range of things. Senator SCHACHT—I am just trying to get the figures. Because of the substantial profits Telstra make after tax and interest, about half of it, 60 per cent, is going to go in dividends. I am not trying to ambush you. Mr Stanhope—No, that is okay. Senator SCHACHT—I am just trying to get the figures. Mr Stanhope—Let us understand something: profit after tax— Senator SCHACHT—And interest. Mr Stanhope—Right—is not the cash flow of the company. It is not the cash flow. The company earns up to about $6 billion, say, in cash flow, and that cash flow is disbursed across tax, dividends, and the capital expenditure program. So it is cash that is more important in trying to do this sum. Senator SCHACHT—Now that you have given the figure of the cash flow as being about $6 billion, can you break that up for me in the way you have just described? Mr Stanhope—Into tax? Senator SCHACHT—Interest, tax and so on. Mr Stanhope—It is in the balance sheet of the company. Senator SCHACHT—I have not got a balance sheet. Mr Stanhope—No. I will give you the 1996-97 numbers. Senator SCHACHT—Right, you will take it on notice. Mr Stanhope—They are rounded. I can give them to you now. Senator SCHACHT—1996-97.

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Mr Stanhope—Internal funds, which is— Senator SCHACHT—Look, I just— CHAIR—It is impossible. You keep interrupting Mr Stanhope. Ask him a question, let him finish, and go to the next one. Senator SCHACHT—I am speeding it up. CHAIR—It is not for you to speed it up. That is for me to decide as chairman. Senator SCHACHT—Well, it is for speeding it up. CHAIR—Mr Stanhope, can you make your answers as quick as possible, or as short as possible, and, Senator Schacht, do not interrupt Mr Stanhope. You are impossible. He does not need your help. Mr Stanhope—I will be very quick. The cash flow in 1997 was around $6 billion. Nine hundred and ninety-five of it was tax paid. Dividends were $4.3 billion. Senator SCHACHT—Because you had the special? Mr Stanhope—Sure. Senator SCHACHT—So you take the $3 billion out. It would have been $1.3 billion? Mr Stanhope—Okay. Senator SCHACHT—Right, yes? Mr Stanhope—That is right. Working capital increase was only $6 million, so it is irrelevant. We got the number wrong for capital expenditure before; we said $3½ billion. It was $4.3 billion, and that was because we had to pay the broadband roll-out. Senator SCHACHT—Yes, right. Mr Stanhope—In order to fund the special dividend, we had to do a borrowing. Senator SCHACHT—Yes, and that borrowing now has to be serviced? Mr Stanhope—Yes, it does. Senator SCHACHT—At the standard rate. What are you paying? Two hundred and eighty million dollars a year on the interest? Mr Stanhope—Well, $1 billion of it has already been extinguished. Senator SCHACHT—You have already paid $1 billion of it off? Mr Stanhope—Yes. Senator SCHACHT—So does that mean over another two to three years you will pay off the rest? Mr Stanhope—No, not necessarily. It depends on the cash flow of the company. Senator SCHACHT—Yes, I know, but in the business plan, is there a period of years set down for when you will pay off the rest of the government’s conscripted dividend? Mr Stanhope—No, it is not. It will depend on the cash flow. They have been refinanced, the syndicated bank loan has been refinanced, and it is now a fairly long-term debt. It is not prudent financial management to— Senator SCHACHT—No, but what you have done is you have taken $1 billion of it to pay it off so it is not on your books. So you are now servicing $2 billion of that special fund? Mr Stanhope—One billion dollars has been refinanced in a recently announced deutschmark issue, and there is still $1 billion that we are looking at refinancing.

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Senator SCHACHT—But you have paid off $1 billion? Mr Stanhope—Yes. Senator SCHACHT—Well, that just proves again you are a very successful company with the cash flow and the profits you have. Can I now turn to the capital works program and the business plan over the next three years. The capital works program was $4.3 billion in 1996-97 and I think you said it will be about $3.9 billion this year just ending. Is there a consistent trend, because major expenditure items have been completed, that the capital works program will be declining? Mr Stanhope—We expect it to decline over the three years of the plan. We are trying to get to what we call world best practice levels of capital expenditure to revenue ratios. It is generally accepted around the world in telecommunications companies that the appropriate level of capital expenditure is about 20 per cent of revenues. That is what we are aiming to do. We are a bit higher than that now. We have experienced the pay TV broadband roll-out and we are doing a modernisation of the network, as you well know, throughout Australia. When we are over that hump, we will get down to the 20 per cent ratio. Senator SCHACHT—Yes. In the answers you gave me from the March hearing on capital works where you broke it down for me into metropolitan and regional, I think it came out that the regional figure was about $800 million. I am just trying to find the question and the answer you gave me. Does that sound about right? Mr Stanhope—That sounds about right to me. Senator SCHACHT—The $800 million you are spending in regional Australia does make some balance of the government’s networking the nation program funding, which is supposedly to improve regional access for telecommunications, which is $250 million over five years or $50 million a year. You alone are spending $800 million in regional Australia. The networking the nation program spends $50 million a year. Isn’t that correct? The point I am trying to get to is that the government made a major song and dance about the networking the nation program fund. It was $250 million over five years to secure passage of the partial privatisation of Telstra. Compared with your own budget in capital works in regional Australia, it is a fleabite. Mr Ward—I do not know if that is a fair comparison. We can only speak for Telstra. We are significant investors in regional Australia. Senator SCHACHT—I thank God you are. Mr Ward—I think those figures show that we reinvest 50 per cent more per head in regional Australia than we do in metropolitan Australia. So we are significant investors. We announced yesterday some further investment in regional Australia, and I do not know if that comparison is meaningful. Senator SCHACHT—I just wanted to confirm a point and I will now put it to the minister. Minister, in view of the fact that Telstra is spending $800 million a year on capital works in regional Australia, doesn’t that put well into the shade any impact that you are going to have out of $250 million over five years or $50 million a year on the networking the nation program? Senator Alston—No, what it really does is highlight how extraordinary it was that you opposed this tooth and nail right through the process, and you still do not support the concept. I just find it amazing, but there is time to repent. So if you want to take the opportunity in the lead-up to the election, feel free.

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Senator SCHACHT—No, Minister, what is extraordinary is: why we want Telstra in public ownership is because the impact they make in Australia, of $800 million— Senator Alston—You want to give them a power of direction as to how much you think they should spend in rural Australia. Is that what you have in mind? Senator SCHACHT—What I have in mind? Senator Alston—Yes. Senator SCHACHT—You will have to wait to see at the election campaign. The people of Australia want to find out where Telstra is spending its money because they still two-thirds own it. People in the bush, on a margin of about three to one in every public opinion poll, oppose your full privatisation program. One reason is they know that Telstra is the major investor—$800 million a year—in telecommunications in the bush. You are offering them $50 million a year as though this is the great saviour to them. It is a monstrous distortion. Senator Alston—Are you suggesting that somehow Telstra is going to withdraw its capital spending program in rural areas? I have to say it has not changed much with the one-third. Senator SCHACHT—Minister, I have to say that all the published public opinion polls— and you may want to dismiss them as irrelevant—show that overwhelmingly, particularly in regional Australia, people do not believe that if it is fully privatised, that $800 million will consistently be spent to ensure they get equal access to the same level of telecommunications. Senator Alston—That is in part because you are running around telling them that it will all dry up. Senator SCHACHT—The figures speak for themselves. Senator Alston—No, the reason for the criticism about privatisation is because you lot splashed the proceeds up against the wall. You did not use it for capital reinvestment or for paying capital items, you squandered it. That is why there is a bit of scepticism about privatisation. The fact is, you and Mr Beazley are running around saying that further privatisation of Telstra will effectively mean they will withdraw services to the bush. That is the greatest load of nonsense of all time. Senator SCHACHT—Minister, let me put the figure to you in another way. The cross- subsidy, under the universal service obligation, is about $260 million across all categories, give or take a few million here or there. Is that right, Mr Stanhope? Mr Stanhope—Yes. Senator SCHACHT—That is overwhelmingly to subsidise the provision of services for Telstra into the bush to make sure a standard telephone service is provided, et cetera. That is $260 million a year, but Telstra is spending $800 million a year in regional Australia, way above the universal service obligation. I think a lot of people are a bit suspicious that if it is fully privatised, where profit becomes the only motive for the company, the difference between $260 million and $800 million may actually get shaved away over a period of time. Senator Alston—You mean they just abandon rural customers? Senator SCHACHT—No, quietly, so this is going to be full cost recovery. Services will be reduced or costs will go up. Mr Ward—Senator, if I could just make a comment. I think we have said this before. Our corporate plan and business planning process, which sorts out our resource allocation against our revenue predictions in a competitive environment, are ownership neutral plans. They are

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 309 based on the competitive and customer environment that we face. We are talking about servicing our customers in an increasingly competitive environment. Senator SCHACHT—Mr Ward, I must say your consistency is magnificent. You have said this consistently at every estimates hearing I have been at since— Mr Ward—Because it is true, Senator. Senator SCHACHT—I admire your consistency. The problem you have is that most people in rural Australia do not believe you, because what do they see under the present plan in the answers you gave to Senator Cooney’s question? They see the diminution and the reduction in substantial numbers of jobs in regional Australia. You say those reductions would have all happened, every one of them would have happened, without privatisation. Senator Alston—Senator Schacht, can I put it to you another way. The universal service obligation is there for a particular purpose. It is there to ensure that otherwise non-commercial or uneconomic activities are nonetheless conducted. By definition it follows that any amount spent over that is done so for commercial reasons. In other words, Telstra makes a profit from any difference between $250 million and $800 million. To the extent that they want to make more profit, they will spend more money. The RTIF funding has got nothing to do with the roll-out of basic infrastructure by Telstra. It funds a whole series of add-on activities that principally surround the Internet and access to higher speed services, data as well as voice. It has provided the opportunity for things that none of the carriers may well have contemplated doing, like local access points of presence. It is money that is in no way a substitution for the amounts that the carriers are spending. It is a completely new program. That is why I am surprised that you did not endorse it. Senator SCHACHT—Endorse the RTIF? Senator Alston—The RTIF. Senator SCHACHT—You took $3 billion as a special dividend out of Telstra 12 months ago and you gave $250 million back, saying, ‘This is coming out of the proceeds.’ Senator Alston—Telstra would not have spent that money. Senator SCHACHT—Whichever way you juggle the money, Minister, you have taken more out of Telstra, out of the $3 billion special dividend, than you have put back through the RTIF and now you have said, ‘We’ve got that. That’s made available out of the one-third sale.’ In the meantime you have slipped $3 billion out of Telstra straight into your bottom line for the budget. Senator Alston—They raised their borrowings to achieve that. Senator SCHACHT—Yes, they had to go and borrow. Senator Alston—So? The gearing level was well below commercial levels. Senator SCHACHT—But you keep saying, Minister, or the Treasurer keeps saying, ‘Debt is bad. We have got to get the public debt down.’ But you jacked Telstra’s debt up. That is an extraordinary thing. Senator Alston—There is a very big difference between private debt and public debt. Senator SCHACHT—Telstra’s debt, two-thirds owned by the government, still goes in the capital borrowings, doesn’t it, in the issue of public debt? In the debt that is measured in Australia against government, is the Telstra debt written two-thirds against publicly owned debt and one-third goes into private debt?

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Mr Ward—That is a question I guess you would need to ask Finance or Treasury, but my suspicion is that it is not included in there. I am not sure. Senator SCHACHT—But all of it goes into private debt, then? Mr Ward—Yes. Senator SCHACHT—Which this government campaigned on at the last election had to be reduced. They took a decision to jack up Telstra’s debt by $3 billion, which increased the total debt of Australia. What you did is hypocritical, Minister. Senator Alston—Total debt of Australia? Companies borrow all the time. Senator SCHACHT—Yes, but that goes into the gross debt of Australia. Senator Alston—I know you did not bother to read it, but the reports that we got actually said that Telstra would be more efficient with a higher level of gearing. That might sound counter-intuitive to someone coming from your background, but the fact is— Senator SCHACHT—Most ordinary Australians would listen to that and say, ‘Do you mean to say Telstra is made more efficient by increasing the debt?’ Senator Alston—That is right. Senator SCHACHT—When you are telling everybody else Australia has to reduce its debt to be a more efficient country. Senator Alston—They operate by deriving revenues from commercial activities, and if they do not, they go broke. Public debt is funded for private taxpayers. If you want to keep lumping it on the taxpayers and raising taxes, you can have as much extra income as you like. Senator SCHACHT—You have lumped the debt onto Telstra, which is two-thirds publicly owned. Senator Alston—I do not pretend it is publicly owned in the sense that— Senator SCHACHT—It is two-thirds publicly owned. You do not like it being publicly owned, but the law of the land is that it is still two-thirds publicly owned. Senator Alston—Ever since Mr Beazley as communications minister in 1991 required Telstra to operate commercially, it has been no different to any other private sector company. Senator SCHACHT—Yes, but it is still owned. There is a shareholder and a dividend. Senator Alston—They just happen to be passive shareholders, that is all. They receive a dividend. CHAIR—Excuse me. Senator SCHACHT—Passive? You were not passive. You went and collected a $3 billion special dividend out of it. CHAIR—Point of order. Senator TIERNEY—Surely this debate is better carried out in the chamber. Could we return to the estimates? Senator SCHACHT—It is about the funding of the company. Senator Alston—This whole exercise this morning may well be a steep learning curve for Senator Schacht, but it is a classic indulgence that is well beyond the reference point of any estimates committee. It has got nothing whatever to do with exploring expenditure. All you had to do was look at the annual reports. If you want to find out about these things and you

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 311 have not got the time to go to an accounts 1 class, then you should not be coming in here and wasting the time of the estimates committee. CHAIR—Now you have had that long discussion, Senator Alston, I am actually going to rule on the point of order. You have now had an hour exactly of this. Senator Cooney has been sitting here very patiently. I am now going to give him the opportunity to ask questions. Senator Cooney. Senator COONEY—Thanks very much. If I can give a little speech beforehand to put it in context, it is about a matter that I raised last time and it arises out of a discussion I had in Benalla, and I think you know all about it. I have noticed since then that Telstra and the union have carried on a discussion. The fact still remains that there is a perception that what has happened to Mr Renshaw is because of his meeting with me. I am sure you would say that is not so, but that is the perception. What I am concerned about is whether or not Telstra fully appreciates the law in this situation. What had me concerned was that I did get a letter that the union gave me which was written to Mr Cooper and Mr McLean, dated 24 March 1998. As you know, there had been discussions as to the attitude that the union had taken and a discussion as to whether it properly did so or not. Mr Barkla, the Director, Industrial Relations, said to the union, the CEPU, that if the union wanted to express its views, that was all right by Telstra but they should remain accurate. Mr Barkla in his letter of 24 March said: As you should be aware, the Trade Practices Act 1974 and corresponding state legislation (the Fair Trading Acts) prohibits misleading and deceptive conduct and the making of certain false representations. That is not accurate, because of course that law applies only to trading corporations. What has me concerned, and this is what I ask you: is does Mr Barkla have an appreciation of the law sufficient to allow him to carry on this discussion with the union? I raise that in public because it has been raised with me, and if you have some comments I would be glad to have them. If you want to leave it go, I can give you the letter and you can give it on notice. But the point I want to make is that, if this discussion is going on with someone who does not quite appreciate the law, we are not going to get to the answer. Mr Ward—Senator, Mr Barkla is here, and can perhaps address your question. Senator COONEY—I do not want to get into any hostility with Mr Barkla. This is something that I think ought to be properly settled, but it does concern me that you may be conducting these discussions by mail without a full appreciation of the law, and I will give you a look at the letter, if you like. You see where I have marked it in yellow? Mr Barkla—Yes. Senator COONEY—I am not sure—other than 45D and E, I think it would be, of section 52 of the Trade Practices legislation that you are thinking about—what relevance that has to the union. Mr Barkla—Senator, I do remember this letter. I myself am not a lawyer, and so I guess in that regard I could not go into chapter and verse about rights and wrongs for that. That information was provided to us by our corporate solicitors when we ran through the actions that were happening as far as the unions go, and the legal advice we received is represented in the letter that I signed off to the union. I would be happy to take that on board. Senator COONEY—Would you? Mr Barkla—Yes, certainly.

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Senator COONEY—Just ask your solicitors whether or not the trade practices legislation I think, insofar as misleading conduct goes, does apply to unions—in fact, whether unions are corporations within the meaning of the Trade Practices Act, and whether or not that does not apply to corporations that are in trading— Mr Barkla—Yes, I understand. Senator COONEY—It would be a reputable firm of solicitors. Mr Barkla—Yes, it was. Senator SCHACHT—That is not automatic, Senator. Senator COONEY—Yes. Senator SCHACHT—You know my views about the high cost of justice in this country. Senator COONEY—I do. The other perception, Mr Barkla, is this: given the provisions of the Workplace Relations Act, there is a specific provision in there—and perhaps you could pass this on to the lawyers—in section 298L, which sets out the prohibited reasons. The prohibited reasons are those reasons why you should not penalise an employee in his or her employment because of things she did or he did, and item 298L(1)M says that you are not to penalise an employee or an independent contractor because he or she absented themselves for the purposes of carrying out their duties or exercising their rights as an officer of an industrial association, as long as he has applied for leave before absenting himself. And I think your solicitors are probably saying, ‘Well, he didn’t apply properly in absenting himself.’ If that is the approach, and they are looking at 298L(1)M, that would be consistent with the purpose of the action against the person—and you know who it is— Mr Barkla—Yes. Senator COONEY—as he met with me as a union representative, rather than the reason given which was that he did not apply for leave properly. So I wonder whether you could take that on notice and check that. Because the perception is that it is not that his application was not made correctly, but that he was carrying out his duties as a union officer in meeting me and that this is what has brought the fairly heavy burden of the law upon him. You would know the discussion there is about whether or not his counselling should be recorded, and what have you? Mr Barkla—Yes. Senator COONEY—What I am saying—and you might want to get legal advice about this—is that if you just look at the approach that the lawyers have advised you to take, their advice seems to be based on a misunderstanding of the trade practices legislation and on an appreciation of the Workplace Relations Act, specifically 298L(1)M. What they have done is to advise a course of conduct that enables this person to be punished for what he did as a union officer, but to disguise that, and I do not say that in any way to demean you, but that is the perception. That all starts off, of course, with the original letter that was written to Neil Renshaw on 28 January 1998 which took him to task for meeting political people, being me. I do not deny I am a political person. So that is that. But if you build it all up together, it does seem that when the giant union and the giant corporation, being the CEPU and Telecom, go to war, the person that suffers most is the person down the line, and I am sure Telecom would not like to see that to be the situation. The union, of course, does not, and nobody else would.

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Mr Ward—Senator, that incident was taken with great seriousness by the company when you raised it with us. We would be very concerned about those perceptions, and I think we undertook, if I can recall, to make sure that we had broadbased management understanding of what was appropriate and what was not. Senator COONEY—I will not ask you to name the solicitors, but I think there is a perception in the world these days that solicitors and lawyers are tending to advise in terms of what the legal possibilities are, rather than in terms of broad ethical approaches. That is why I did not want to ask the name of the solicitor. But in the coffee halls and on the street corners where lawyers meet and have a talk about these things, we talk about the old days— you are too young to have old days, Mr Ward, and so is Mr Barkla— Mr Ward—That is the biggest rap I have had today. Senator COONEY—and one of the things we say is that the idea of ethics and doing the right thing has passed. What solicitors do is advise their clients in terms of what sort of legal manoeuvres they can make rather than what the broad approach is. So if you could take that back to them— Mr Barkla—Certainly. Senator COONEY—because clearly there is something personal in this. The union keeps writing me letters saying, ‘When this man met you,’ as if I am the occasioner of all this. There is a bit of evidence to indicate that. So if you could take that up? Mr Barkla—Sure. Senator COONEY—The other point which I would like to put to you about this is that there is also a perception that if a person is a member of the union within the service and his or her job can be done by a contractor outside the service, the policy of the corporation is to get the person from outside. So you might say there is an attack, as it were, on union members by ensuring that the job that he or she could do within the corporation, within the organisation, will be given to an outside contractor. Mr Ward—I would be surprised at any policy along those lines. Geoff, you might want to comment. Mr Barkla—No, there certainly is not. But if you had any sort of instance or whatever, perhaps I could take that off-line and I would be happy to look into that. But certainly there is no such company policy, and nor do we in many cases know if our members are in the union or not anyway. Senator COONEY—Yes. I asked a whole series of questions, as you know, and I noticed in the answers that you said that in no case had you asked anybody whether or not they were members of the union. I come here, and there are very reasonable people from Telstra, and if I go to the union they are all very reasonable, but there does seem to be a certain unhappiness between you both at the moment, and it would be a bit unfortunate if there were any truth in that, first of all, and if it were allowed to develop. So I just raise those issues. I see from the correspondence that you think the union is making unreasonable attacks, but there are two things which you have raised. This is the last point I want to develop. I do go to the country, and there has been a reduction in staff. No doubt your answer to that would be, ‘Well, we’ve got a business to run,’ but there has been that reduction in staff, and there do seem to be some difficulties with the union in the bush. I have heard your answers to Senator Schacht about this, but I do ask, again in the context of the employer-employee situation with the union and Telstra itself, what do you say about the withdrawal of personnel

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 314 SENATE—Legislation Thursday, 11 June 1998 from the bush? Is it motivated by an ambition to see the union reduced? Or is it motivated, as you have said I think already, by trying to make an efficient organisation? I would ask you that again within this context. Mr Ward—Senator, if I could just assure you, I certainly would not resile from the fact that it is probably a difficult time for the union in the context of the transformation of the company, but what we are facing, I guess, is a bit of a double whammy in terms of the technology impact on labour inputs required, plus from July 1997 we faced a very open marketplace which is increasingly contestable and competitive. Senator SCHACHT—Not in the bush, though, Mr Ward. Senator COONEY—Can you just answer. Senator SCHACHT—I am sorry, Senator Cooney. Mr Ward—As I said earlier to Senator Schacht, and I am sure Mr Stanhope would concur, our business planning takes into account the revenues, volumes and margins that we expect to receive as our market share is declining. We are of course fortunate to be in a growth industry, which helps that, but it is an increasingly competitive environment, and both our operational expenses and our capital have to be tailored to meet what we can afford and how we can compete in this marketplace. The duality, I guess, of the technology impact plus an open marketplace has led to the sorts of business plans that the company has to adopt and, I am quite sure, has made some of the Telstra-union relationship more difficult as a result. Senator COONEY—If I can put it in this context, it is not an anti-union approach behind it or a feeling that the union ought to butt out in certain things? Mr Ward—Certainly not. That just does not play a role in the resource allocation that we have to determine in the environment that we are in. Senator FORSHAW—Can I turn to another issue. I imagine you are aware of information that became public knowledge in the Senate Community Affairs Committee last week regarding the decision by the Department of Health and Family Services to no longer have published in the White Pages what I think is commonly called the easy guide to community services. Are you aware of that? Mr Ward—Yes, Senator, but not in all its detail. I do have the statement that I think Pacific Access put out about the issue here, but I am not briefed in any further detail. I am happy to read some of that into the Hansard if you wish, or to follow up on more detail. Senator FORSHAW—The position of the department as it was put to us, and this is in the Hansard, is that: We took the decision in March or April of this year to discontinue sponsorship. The department’s sponsorship cost about $200,000 a year, and in working with Telstra looking at those pages they advised us that they were redesigning and the sponsorship cost would potentially triple, so it would be between $600,000 and $800,000 a year for sponsorship. Their position is that as a result of that situation, they have decided from the next set of phone books they will not publish this community page. Firstly, is that the correct reflection of the position? Secondly, if it is—and I assume it is—why is it going to cost between $600,000 and $800,000 for a government department to have inserted into the White Pages community information that in many cases could well be lifesaving information? Mr Ward—Could I just feed back to you that the statement that Pacific Access has made public is as a result of the feedback— Senator FORSHAW—Who has made public?

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Mr Ward—Pacific Access, which is the entity which we have a 75 per cent interest in. It does our White Pages and Yellow Pages. As a result of feedback from users about the information pages in which this information was contained, Pacific Access has improved the layout and design of the information pages in the 1998 White Pages directories, making them easier to use and easier to find. As part of that effort, Senator, the spacing and word size were increased. Because of the amount of information contained on the Department of Health and Family Services community and welfare services page, which I believe was page 19 of last year’s directories—and I think I did see that it is a very busy page—extra space was required to fit all the information in the new format. Following discussions with the Department of Health and Family Services, Pacific Access offered to provide this extra space at no charge—I assume that is ‘no extra charge’—for this year’s White Pages directories while the department considered its options, which included maintaining information in the new format or condensing the information. The Department of Health and Family Services decided to withdraw its page. That decision was not taken by Pacific Access. That is the information I have. I am happy to provide more detail. Senator FORSHAW—I understand there is another page, page 18, which is ‘Age page’. That is also inserted as a community service by the Commonwealth Department of Health and Family Services. Was the total cost to the department of those two pages $200,000 a year or was it $200,000 just for page 19? Mr Ward—I would have to take that on notice, Senator. I do not have anyone from the directories business here. I am sorry. Senator FORSHAW—I think that is a bit of a shame—well, more than a shame. I would have thought that, given there was some publicity to this issue when it arose on Thursday and then there was publicity on radio and in newspapers on Friday and over the weekend, you would have come armed, as it were, with a defence; certainly, if not a defence—I am not sure if there is one to this—at least information on, for instance— Mr Ward—I am sorry. I will just undertake to get as much detail as I can from your questions. Senator FORSHAW—Let us pursue it a bit further. This is published in every White Pages throughout the country, is it, or is it just capital cities? What is the source? Mr Ward—I do not personally know. I do not know if any of my colleagues know. I suspect it is. Senator SCHACHT—When people pick up the White Pages they turn to the front of the document because historically they know at the front there is a whole range of service telephone numbers which, if they are in distress and need help or whatever, are quickly attainable. Could you claim the cost of doing that is a universal service obligation? Mr Ward—Certainly not in the current definition of the universal service obligation by government. Senator SCHACHT—I know that currently the view is that you have to have a telephone connected, basically, with dial tone. Maybe some of us old traditionals look to the front of the White Pages when we have got a problem in community welfare, pensions, emergency services, et cetera. You are jacking the price up because it is a cost to print the White Pages, et cetera. That is the reason why? Mr Ward—I presume it is partly the pricing structure.

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Senator SCHACHT—What I want you to take on notice is whether Telstra would be willing to put a submission into the present inquiry about— Mr Ward—Standard telephone services. Senator SCHACHT—Putting 64 kilobits per second as the standard telephone definition in the USO. Maybe you could take it on notice and let us know whether you would be willing to put a suggestion as to what the community sees as a decent community service in the White Pages. I agree that Telstra should not bear all the cost of that because in the competitive telephone market there are other competitors who say, ‘Well, that’s Telstra’s job to print the White Pages, and they bear it.’ But perhaps you would be willing to consider putting a submission either to that inquiry or directly to the government that the cost of doing this ought to go into community service obligation. Mr Ward—I can certainly take that on board, Senator. Senator SCHACHT—I think that is the only way in the long run. This fight is going to go on every year. Your managers, who are commercially driven, under your lashing and keeping the whips on them, Mr Ward, to make bigger profit, are going to be driven to do this all the time. The community is not going to accept it. Therefore, there is going to have to be another solution. Mr Ward—I will take that on board. Senator FORSHAW—What I would also like you to take on notice—I doubt if you would have the information to hand today—is an explanation as to why, if there is an increase, that increase is of the order of 300 per cent to 400 per cent just to redesign a page. I have the pages here and this is not lavish high art or something you could say needed to be designed by some exclusive agency. Mr Ward—I certainly will. Senator FORSHAW—That certainly is the major argument from the department. Mr Ward—The scale of the increase. Senator FORSHAW—The other question: as a general rule, are you aware as to whether or not any of the information that is provided in the White Pages is provided at no charge to the agency concerned? For instance, what happens with fire brigade and police and those emergency numbers? Mr Ward—Geoff was, in another life, the manager of directories, so he may be able to make a comment. Mr Barkla—I was two or three years ago. Generally, the rules were that certain information that was deemed as absolutely necessary to be in there for public health or safety reasons, like 000 and the fire brigade, was all provided pretty much at Telstra’s cost. But then there were specially sponsored pages by a lot of the government agencies, probably similar to the two that you are quoting there, that were over and above what the minimum obligations were seen as being. They were there more to help people, and they are really a form of advertising. Senator FORSHAW—The difficulty here is that one of the answers put to me by the department is, ‘These numbers appear elsewhere in the telephone book.’ That may well be the case, but they appear under their particular name, and of course a person in a crisis situation does not want to have to look up every page. That is the first point. The second point is that presumably the cost of the publication of the number elsewhere in the White Pages is the same as it is for any other subscriber, which is effectively that you do not pay because

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 317 it is built into the rate that you are charged for having the service. I am not sure if I can take it any further, but I have to say—if I may be permitted to repeat some comments I made at the Community Affairs Committee—I just find this outrageous, I really do. Here we have a majority government owned enterprise. If you are going to have a telephone number, or if an agency is going to have a telephone number and service in order to provide assistance to people in need, then people have to be able to access the telephone number in an easy and quick manner. It is no solution, as was put to us by the department—this is not necessarily Telstra’s fault—to say, ‘Well, we’re looking at putting it on the Internet,’ because at the end of the day people do not carry laptops around with them in emergency situations and, secondly, if you want access to the Internet you have got to have a telephone connection anyway. So I would appreciate as much information as I can on this. The other point is whether or not this is consistent with the attitude that is being adopted for what could be classed as a similar type of service that appears in the White Pages, because there are other entries in the front of the White Pages which are there for ease of access, such as government departments, local government, et cetera. Mr Ward—Senator, I understand the sensitivity of the issue. It is a pity that we could not have at least got it in this year’s White Pages and tried to resolve it in the way Senator Schacht describes, or some other way. But we will make sure we give you a fulsome brief. Senator SCHACHT—My solution is long term. Mr Ward—I understand. Senator SCHACHT—I agree with Senator Forshaw. A 300 per cent increase, if that is correct, is a hell of a big whack to put on someone for community service numbers in an emergency situation. Telstra ought to understand that I think you are just being penny wise and pound foolish. You might save yourself $600,000 or raise the revenue and do yourselves millions of dollars of bad public relations in the community accordingly, and I think that sometimes you are penny wise and pound foolish on some of those things. But you will take those things on notice. Mr Ward—Certainly. Senator LUNDY—I have some questions relating to Internet pricing packages offered by Telstra’s Big Pond product in both the home and business area. With respect to Big Pond Home in rural and regional Australia, is there a price differential for those customers? Mr Ward—I will have to rely on Mr Frueh to assist. Mr Frueh—I will try and address this, Senator. I am not familiar to the umpteenth detail on this, but I have been briefed on it to some extent. Yes, we have a number of different pricing options to suit different users, and we have quite an extensive range of points of presence where customers can dial in from. There are 63 Big Pond Home access points around the country now, and that is counting Melbourne and Sydney as one each, if you know what I mean, so those are widely distributed in regional areas now. For people who are beyond those areas, in remote areas, we have a special price of $7 per hour, and local call access. In other words, they do not have to pay STD rates to access. That is a rate of $7 per hour. Senator LUNDY—They are people who do not have point of presence access? Mr Frueh—Yes, that is right. They are not in a local call area. Senator LUNDY—For home Big Pond customers?

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Mr Frueh—Yes. This is generally outside of those regional areas so that they do not pay STD prices per se. In fact, in some cases, depending on the usage, if their hours of usage are in the evening period when we have our $3 STD rate, a better option is to use the STD rate and use that $3 capped call, if you like, that we have. Senator LUNDY—Is that still available if you have a modem line installed and it is identified as such? Mr Frueh—Yes. Calls that are made through a modem are not identified in the network in any way. Senator LUNDY—But you can identify them? Mr Frueh—It is technically possible to put something across, but we have no capability as such built into our network at this point. Senator LUNDY—Can you provide a map showing the location of the current points of presence, and also a geographical description of who that means gets access to points of presence? Mr Frueh—Yes. I can certainly take that on notice. Senator LUNDY—Thank you. With the Big Pond Home customers outside those areas of point of presence, can you provide a description of your continuing plan to establish more points of presence and approximate dates of when that is likely to be delivered? Mr Frueh—I will certainly look to what we can provide there, Senator. Obviously some of these things may be considered commercial-in-confidence over extended periods and also have degrees of uncertainty. There may be a plan to provide it, but it would always depend on demand in particular areas. But as much as we can, I will provide information along that line. Senator LUNDY—If you are claiming commercial-in-confidence, that implies that there is a competitor in that market. Mr Frueh—There definitely are. Senator LUNDY—There are lots of competitors in that regional and rural Internet market? Mr Frueh—There certainly are. In fact there are competitors in various ways, some of which have their own points of presence in places we do not have them, and there is another product we have called Dial Connect which provides access to other ISPs using Telstra’s infrastructure. We have 97 points of presence with Dial Connect, so there is a wider access of other ISPs that may be using the Dial Connect access as a means of provision. Senator LUNDY—Telstra provides both retail and wholesale bandwidths. Is there any other provider of that wholesale bandwidth to regional ISPs? Mr Frueh—There certainly is. There is a highly competitive situation in the wholesale market. Senator LUNDY—Can you take on notice the provision of what wholesale competitors you have in regional Australia in providing Internet bandwidth? Mr Frueh—We will take that on notice certainly. Senator LUNDY—Thank you. With respect to a recent announcement by Telstra to provide flat rate Internet access for Telstra Big Pond Home customers, the press release states that this new flat rate plan is available only to Sydney, Melbourne and Brisbane access numbers. Is it Telstra’s intention to extend the flat rate plan to regional customers of Big Pond Home?

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Mr Frueh—It is being considered. Telstra Big Pond was not the first ISP to introduce flat rate charges and, as you are probably aware, in other countries there is a move for heavy users to move to flat rate charges which cap their total expenditure. It does for the provider of those services introduce some risk factors in regard to how long those calls are held up and, as the committee is well aware from prior investigations on this, we certainly would have some reservations about widespread take-up in remote cities which may have limited infrastructure access where this may cross-impact on other services. So I will certainly take it on notice in terms of what we can say in regard to a progressive roll-out, but there is a potential, and maybe we will establish this as we get more experience, for widespread increases in network capability that we have to maintain for all of our existing customers. Senator LUNDY—There seems to be a structural barrier, if you like, to regional customers having access to the same standard of product as in the centres. Mr Frueh—Yes, we understand the issue of rural access to the Internet as being a key issue, and the company is certainly moving to address that. We had a launch of a new capability in Canberra last week which demonstrated a satellite based technology which we will apply, which by nature is not location specific and which could provide a real boost. That is a little bit down the track. We have got the commercial development of that into a product to take place. But I certainly think there are moves down that path which will provide that sort of equity of access people are looking for. Of course, the STS investigations will also address the issue of infrastructure access. Senator LUNDY—Will you be providing a flat rate product for that service for rural and regional customers? Mr Frueh—As I say, the promotion that was made of the capability there has not yet been converted into a commercial product. Mr Ward—It was a technology launch as opposed to a product launch. I think the product planning is only a couple of months away, though. Mr Frueh—That is right. We will be in a situation, I would hope, by the next hearing of the committee to have that well established. If not, we will certainly provide information on the timing of that as a follow-up from this meeting, if you would like that. Senator LUNDY—Yes, please. Currently your Big Pond business product has a distinct pricing differential between rural, regional, and metropolitan customers. From your web site it is impossible to ascertain the geographical relationship with your classifications and any particular relevance to points of presence or other methods which Telstra applies. Can you explain how you distinguish between those customers? Mr Frueh—Yes, certainly. I can deal with this very quickly now. We have in the business area rates for, as you say, metropolitan, regional, and rural. The definition of ‘regional’ is within 85 kilometres radially from the nearest Big Pond business point of presence, as we discussed before. Rural is beyond that. Senator SCHACHT—So if you had a point of presence in Rockhampton, it would be 85 kilometres outside of Rockhampton? Mr Frueh—That is correct, Senator, yes. Senator LUNDY—Sorry, can you just run that by me again? Eighty-five kilometres from a point of presence is classified as rural? Mr Frueh—Beyond that is rural. Within that is classified as regional.

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Senator SCHACHT—There is a differentiation between regional and metropolitan, is there? If within 85 kilometres of Rockhampton is regional, what is Brisbane? Metropolitan? Is that a different rate for a different definition? Mr Frueh—I think you have got me on that one, Senator. I will have to take that on notice. It is not in my briefing note here. I am sorry, I have not got that information. Senator SCHACHT—Will you take that on notice? Mr Frueh—We will certainly clarify that. Senator LUNDY—Can you provide a geographical representation of how that breaks up? Perhaps you could just overlay the 85-kilometre radius on the other map that you are going to provide to us relating to points of presence. Mr Frueh—Yes, certainly we will do that in geographic terms, and perhaps we will also try to give an estimate of population coverage as well. Senator LUNDY—Yes, that would be good. So everyone who has access to a point of presence is classified as metropolitan under your Big Pond business— Mr Frueh—Everybody who is within 85 kilometres of a point of presence, where that is in a regional zone, is a regional zone customer. There are different rates, I believe, for the metropolitan defined areas. Senator LUNDY—Say we are talking about Orange. Is there a point of presence in Orange? Let’s just say there is. Mr Frueh—Say there is, yes. Senator LUNDY—Let’s say there is a point of presence in Orange. Are those people classified as metropolitan or regional? Mr Frueh—No, they would be regional access. Senator LUNDY—Why, if there is a point of presence there? Mr Frueh—Because they still have some infrastructure tails that have to be provided and remote support for that equipment and so on. So the cost structure to support those points of presence is higher than in the metropolitan area. They would have long-distance transmission elements, et cetera. Senator LUNDY—So the loading that those regional customers pay over and above metropolitan customers who also only have access to their respective points of presence is a loading that Telstra impose because of the long distance between the point of presence and the major centre? Mr Frueh—The total cost of support of those has been factored into the way the product has been priced. We have to do that because, as you would understand, say, for an ISP who is competitive only in metropolitan areas, Big Pond as a service would be uncommercial if it did not offer competitive prices in those areas. So it does have to reflect its cost structure. Senator LUNDY—But your justification for that price differential, I understood, was specific, and I have been advised previously by officers of Telstra that the classification related specifically to the existence of a point of presence or not, because the pricing structure increases almost exponentially between metropolitan customers and regional customers and then it increases again between regional and rural customers. Mr Frueh—Yes.

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Senator LUNDY—So in terms of pricing, it is worked out in an almost arbitrary basis on this 85 kilometres. How do you justify making those customers pay more on that arbitrary basis without any sort of technological justification for the pricing, unless you can demonstrate, firstly, what your costs are between a regional point of presence and the major centre, quite specifically? We have never been able to get information out of Telstra previously about how you charge across those links. Mr Frueh—I think perhaps we need to be very clear on one point here. Big Pond as a retail offering, if you like, has to pay Telstra charges just like every other ISP, so they have to reflect all of the underlying retail tariffs. So when I was talking about their cost structure, their cost structure is not related to underlying transmission bandwith capability. Senator SCHACHT—So Big Pond is unbundled, to use that phrase? The charges are unbundled and you charge them exactly the same as you charge other service providers? Mr Frueh—Yes, that is right, they are charged— Senator SCHACHT—And within the industry, the phrase is you have unbundled your cost and charged them accordingly. Mr Frueh—That is what I am saying. They are sort of unbundled because they are using retail pricing from us, as other ISPs do. Senator SCHACHT—And does the ACCC accept that in their present inquiry and the competition notice they have launched on you at the moment? Mr Ward—Senator, I do not think the retail price structure, which this discussion concerns, on Big Pond is the issue for the current ACCC— Senator SCHACHT—That is what I was coming to. You are telling me that this area is not within the ACCC’s investigation? Mr Frueh—That is correct. Mr Ward—That is my understanding, and I think what Mr Frueh is saying is what we have to do, for any of our upstream products, if you like, is reflect the BCS tariffs that have to go to other service providers. Senator LUNDY—On the Big Pond business product to the regions, why is it that you do not disclose these details on your web site? Mr Frueh—I was not aware that it was not on the web site. I certainly think it should be, if it is not. I am happy to put that forward because, I agree with you, that information should be available. Senator LUNDY—Certainly on the application form that is on the web site, for new Big Pond business customers who plug in their postcodes, that determines their classification. Mr Frueh—Right. Senator LUNDY—You said 85 kilometres is what determines the distinction between regional and rural. If the only way I, as a potential Big Pond business customer, get automatically classified by your web site as to what my pricing will be is to put in my postcode, how does that work? Mr Frueh—I would have to take that on notice, but I would expect that it would be based on the centre of the postcode area whether it was in that category. We are not going to know geographically the physical location of every customer to establish a radial distance.

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Senator LUNDY—But according to what you have just told me, it is that radial distance that determines whether you charge them rural or regional rates, and there is a big difference. Mr Frueh—Yes, there is a big difference, and I am sure they have addressed that issue and the definition. It just may be not in the notes that I have here, but what I am saying is I think that could be another level down. Senator LUNDY—Right. Mr Frueh—It is 85 kilometres to the centre of the postcode. Senator LUNDY—If you take on notice an explanation as to the way in which your Web site makes the analysis of the classification of the potential customer between metropolitan, rural and regional using postcodes, and if it is distinct from what you have already described, please provide a graphical representation of how that works and how the two can be recon- ciled. Mr Frueh—We will definitely do that, and I will also undertake to have a look to see that that information is available as best as possible in the Web site itself. Senator LUNDY—I actually want to ask a few questions about Telstra’s Big Pond Home product. The current pricing regime works on the basis of a main usage for hours per month, and then additional costs for every additional hour, and that is generally the model of most of the Big Pond product plan in both home and business. You have one pricing plan called the regular user plan which has a particular rate, with a particular rate for additional hours—it is seven hours per month. I am just concerned with inexperienced customers coming in and thinking, ‘Regular use. Is that daily?’ and signing up for a seven-hour-a-month plan and then getting burnt. I suppose the question is: how do you determine how you badge some of these products in relation to usage? Do you have a database of usage patterns of your customers and things like that? Mr Frueh—Yes. Perhaps I could address a couple of points here. This is an issue, as you know, for the industry as a whole, as to how to structure pricing plans so that people can gain entry without having to pay large up-front fixed amounts, like joining a health club or something and not getting the benefits. That is the other extreme, I guess. So what we try to have is a range of those. Quite often people are testing out and do not really know what is there and do not want to pay too much up-front; so, as you say, there is a casual and a frequent rate. As people start getting experienced with that, they then make a choice. They understand their usage patterns, then they can make an informed change. They make that themselves. I am a Big Pond Home user myself. I started on the casual, went to the regular and I am now on the frequent, and you get interim billing so you do not have to wait till the end of the month to know if you have gone over the amount. They send you an e-mail saying, ‘This is what your account is now due.’ So there is a sort of a mechanism there triggered by the credit amount that is in the usage, if you like, which triggers an e-mail to you saying that you are now being billed. So that is used both as a credit and an information to customer type of situation. But I agree with you. It is like everything. There is choice, and sometimes people make choices that they may want to change, but they can do that electronically without even talking to Telstra. Senator LUNDY—Are you automatically transferring any of your current Big Pond Home customers onto flat rate?

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Mr Frueh—No. We certainly do not automatically. Like everything, we provide a choice to customers, and that is a new service that has been introduced. For heavy users on the frequent use plans, obviously it becomes attractive for them, and they select. There are some conditions applied to the frequent use service, in the sense that we have to provide a mechanism so somebody just does not make a call and then holds it up for the whole day, I guess in a scenario we have discussed in the past, and not have any penalty whatsoever in the use of that. So the service is disconnected after 25 minutes or something of non-use and so on. So there are certain conditions applying to those services. It depends on the need of the customer as to whether they go to those. Senator LUNDY—Thank you. Mr Frueh—We are finding, though, that there are some customers who just would prefer to know where they stand and just take a flat rate per month and then use it as much as they like, because it encourages use, rather than then paying above a flat rate. Senator SCHACHT—Can I ask just a simple question on this issue of Big Pond. Regarding the answer to question 127 you gave that I put on notice last time, under the revenue in the annual half-yearly report, it said that other sales and services for the half-year 1997 were $932 million, an increase of 58 per cent. I asked you how much of that came from your Internet, and Big Pond Direct was $28 million, Big Pond Home was $18 million, which is $47½ million altogether. Mr Frueh—Yes. Senator SCHACHT—Can you take on notice if you cannot give it to me now: if that was other sales and services, if Internet only was $47 million out of $932 million, where were the other revenues, what were the other products, what were the other customers that gave you the 58 per cent increase? Which other areas are they in? Mr Frueh—There is a range of other services, and to say that list is not incredibly long— you can imagine—Telstra has over 600 products in 200 families, so there is always going to be another category. As you say, there has been growth. I would suggest, Senator, we take that up with the prior question you raised in regard to briefing of— Senator SCHACHT—Yes, if you could. I was expecting, I have to say, the way we were talking about the Internet, that it would have been a substantial part of the revenue of the $932 million, and I just want to get a better grip on it. I do not want a list three pages long, but I want to get an understanding of where the growth rates are in these new products and which ones are giving you the biggest growth rate increase. Mr Frueh—We could certainly list the top five or 10 in that other category. Senator SCHACHT—Give us 10 or 12. Mr Frueh—Yes. Senator SCHACHT—But, if the miscellaneous line still looks like $600 million, you had better drop it down a bit. Mr Ward—We know what you are searching for. We will sort that out. Senator CALVERT—I have one or two questions on a proverbial subject that I seem to have brought up at every hearing for the last five years. Senator SCHACHT—You are not on a retainer, are you? Senator CALVERT—I wish I was. It reverts back to a matter called Operation Echo that followed on from, I think, Operation Saddler. Mr Ward would remember this, I think. I have

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 324 SENATE—Legislation Thursday, 11 June 1998 had questions on notice from time to time. I am just wondering to what extent Operation Echo resulted in improvement in the internal and external management of employees, particularly in regard to alleged travel allowance paid. I realise that since then, of course, there have been some changes in that area, but does Telstra consider that the allowance abuses and cover-ups and breaches of occupational health and safety that were uncovered by Operation Echo have been adequately dealt with? Mr Stanhope—We believe everything that came out of Operation Echo, which was primarily focused on what were called TA rorts at the time, has been adequately covered. We have attempted to have the involvement of the prosecutor in New South Wales. We have been through a whole process of having all those cases reviewed. We have also gone through a whole process of changing our travel allowance systems and having controls put in place, having samples done and so on, of people staying at various locations throughout the country, to ensure that what came out of Operation Echo is addressed. Senator CALVERT—So there have been a lot of changes made. Talking about network design and construction in New South Wales, were any changes made to people occupying middle and high level management positions as a result of Echo? Mr Stanhope—I cannot answer that specifically. There may well have been at middle management level. There has been a fairly significant change in personnel right throughout the company since Echo. As you say, it is nearly five years old, so no doubt there have been some changes in those management levels. Senator CALVERT—One of the things that has been coming up continually is the allegation that there were staff employed working within the New South Wales group of the network design construction but having a base address in Queensland and virtually being on full-time travel allowance while they worked in New South Wales. Do you have anybody physically checking the accuracy of those people who are alleged to have an address in one state and move to another and claim full-time travel allowance? Mr Stanhope—As I said earlier, the travel allowance and travel approval process has been upgraded as a result of Project Echo and Saddler before it. The supervisors are required to check the bona fides of the extension away from home, where they are staying, the expenses incurred and so on. Senator CALVERT—The Australian National Audit Office from time to time conducts performance audits on Telstra or have outsourced their— Mr Stanhope—The Australian National Audit Office is our auditor but they do subcontract Price Waterhouse. Senator CALVERT—Would those performance audits include an examination of alleged travel allowance rorts? Mr Stanhope—Yes, they have. On a number of occasions the ANAO, as part of their performance audits, have reviewed the improvements Telstra said it would make to the travel allowance and travel approval system. They have reported on that and obviously they have reported it, through their responsibilities in the Australian National Audit Office, to whom they are required, including ourselves. We have had satisfactory reports with respect to what we have done in response to the criticisms that were made and all the actions have been taken. Senator CALVERT—Who was the officer responsible for providing the information to the auditors about Echo and Saddler and those alleged travel rorts?

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Mr Stanhope—There would have been various officers. I was involved myself in terms of some procedural changes. There would have been people in our employee relations area as well, with respect to travel approvals, and obviously some of the line managers in the network construction group you mentioned before. As to the actual operation, it is one thing to write the procedures and another one to have them followed. Part of the audit role was to check that the new requirements of the line supervisors were actually being undertaken. The Australian National Audit Office satisfied themselves, according to their report to us, that the new procedures were being followed. Senator CALVERT—So they were satisfied that all related material was supplied for audit purposes? Mr Stanhope—All related material? I said all the processes and procedures were being followed, which would include correct submission of expense vouchers, the right sampling of people being away and correctly staying in motels, et cetera, if they say they are, and so on. Senator CALVERT—There is another matter I referred to earlier, a certain AAT matter that is being conducted at the moment and has been going on for quite some time concerning a Mr Edward Saul from Port Macquarie, whom I have never met. I have had plenty of correspondence with him over the last five years, as you have, Senator Schacht. You would have to say to yourself, ‘What the hell would an invalid pensioner from Port Macquarie be doing contacting a senator from Tasmania?’ I guess it is as the result of a whistleblower inquiry I was involved in a few years. Anyway, I have to ask myself and ask Telstra why, for instance, you would employ a Melbourne based legal practitioner to represent Telstra in what would seem to be a reasonably simple AAT matter in Sydney? It seems to me that Telstra is throwing hundreds and hundreds of thousands of dollars at this particular case when perhaps a bit of decent mediation and a bit of commonsense would have solved matters quite some time ago. It would have saved me a lot of time, and perhaps some of my colleagues. Mr Ward—I cannot answer the question about the location of the lawyer because I am not aware of that. Senator SCHACHT—You will take it on notice, though, won’t you? Mr Ward—I will do that. I think it has been a very frustrating case, probably for us as well as you and for the person involved. My understanding is that we are close to a resolution of the matter. I agree with you; it has gone on for seemingly a long time. There have been AAT issues and other issues that have made it difficult to reach resolution, but the advice to me is that we are fairly close to a resolution of the matter, which would be a relief. Senator CALVERT—I would hope that would be the case. I do not think it does Telstra’s corporate image any good. You have a guy who is an invalid pensioner with a record of five years of trying to get some justice in this case. He has to front up to a hearing without any legal aid. He tries to get representation, and fronts up to four or five well-paid barristers employed by Telstra. It seems to me that Telstra keeps on throwing more and more money at it, hoping it will go away. I must say one thing about this particular character: he does not seem to want to go away and he is very persistent. Mr Ward—I would certainly endorse that observation, Senator. I understand the points you are making. We are trying to resolve it.

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Senator SCHACHT—Would you take on notice, following up Senator Calvert on this, how much you have actually spent on lawyers on the Saul case? Senator CALVERT—I was going to ask if you could take this on notice: what are the total costs to date incurred by Telstra, broken down into categories for legal advice and representation staff, FOI applications, managers and staff time, and travel and mediation incurred in relation to this particular case? That should include hourly rates agreed to by Telstra for what they pay to their legal counsel. It would probably be an interesting exercise and perhaps it may in future help you deal with some of these other cases that may come forward in a cheaper fashion or a more satisfactory fashion. I understand there have obviously been some faults on both sides, but, having had one of my staff put together a synopsis of what has been happening in this particular case, going back to 1992, I would hope the AAT hearing, if it ever comes to that, will sort it out or perhaps commonsense on both sides may prevail. Mr Ward—I would hope the latter in this case. We will get out the details you have sought. There have been issues, as you suggest, on both sides that have probably complicated the matter. It is an unfortunate case, no doubt. Senator CALVERT—I spoke to somebody who had looked at all the facts and they seem to think Telstra has a less than 50 per cent chance of winning it. I thought under those cir- cumstances they would have been willing to settle and get the matter out of the way. I received a fax this morning and this particular guy said, ‘How can you be compensated for loss of family, loss of friends, loss of social life, economic loss, no assets, no future?’ Basically that is what he says. It is one of those sad cases, I believe. Senator SCHACHT—I am now the Acting Chair, which is a very useful position to be in here for a moment, I must say. While we are on legal costs, Mr Ward, I noticed in the paper the other day a little story about the litigation between BT Australia and Telstra. In a little line it says the discovery process alone has cost $19 million. How much is Telstra’s cost in this case? Judge Sackville has been critical and, first of all, said the parties should negotiate. Apparently he has been critical that the case has taken so long and there were further discovery sessions set. How much of the $19 million has Telstra spent on the discovery process? Mr Ward—I cannot answer that. You know there are three parties involved in that. Senator SCHACHT—Yes. There is you and the New South Wales government and BT. Mr Ward—That is right. Senator SCHACHT—So that is $6 million—if it is a third, a third and a third. Mr Ward—It is a very complex case, Senator. Senator SCHACHT—I know this committee got quite a shock when it was told about 12 months ago that you had spent $18 million on legal costs to defend yourself over the so-called CoT cases, which we found horrific, in that you had spent $18 million to oversee the payout of $1.8 million— Mr Ward—Against claims of $45 million. Senator SCHACHT—You have spent half of the claims. The lawyers got the lot. The CoT cases got $1.8 million. If you had offered them $10 million between the lot five years ago, they probably would have disappeared into the sunset and said, ‘Thank you very much, we’re glad to get out of this,’ and you would have been out of it cheaper. I will put on notice: how many other cases do you have of a substantial nature like this where you have got discovery

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 327 costs, legal costs, running into millions? Take that on notice. Also give me for the 1996-97 financial year the breakdown of who you paid what for legal fees—what firms. Mr Ward—I think we may have done this before, Senator. Senator SCHACHT—Yes, but each year goes by and the thing keeps going through the ceiling. This is taxpayers’ money you are spending on a two-thirds basis. The only people who are getting a benefit out of this are the lawyers. QCs are retiring early and rich on what you people are giving them. The implication is that Telstra has deliberately delayed the discovery process as a tactic in the case. Mr Ward—I do not believe that is the case. Senator SCHACHT—Maybe your lawyers have been doing it so they can charge you more. Mr Ward—In the particular case, I do not think that interpretation is reasonable, and whenever we can— Senator SCHACHT—Hang on, Mr Ward, before you go on and give me an obfuscating answer, the opening paragraph of this article says: The New South Wales Government and Telstra have been criticised in the Federal Court for prolonging the discovery process involved in an action brought by British Telecom Australasia against the State of New South Wales. That is not correct—the court did not criticise you? Mr Ward—I am not familiar with the precise nature of— Senator SCHACHT—Someone seems to be anxious in the next row behind you, a lady from Telstra who can come forward and answer. Mr Ward—If, indeed, she is that anxious. Senator SCHACHT—Is the officer from Telstra a lawyer? Mr Ward—Correct. Senator SCHACHT—Perhaps you could come forward and explain what this case is. Did the Federal Court criticise Telstra for delaying the process of discovery? Ms Weir—I was not in the court the other day, and I do not have the exact details of what was put forward. There are a lot of concerns in the BT case in regard to discovery. Telstra has in fact been trying to have the scope of the discovery process narrowed. Senator SCHACHT—I have heard that before too. Ms Weir—The width of the orders that are involved means that there is a huge amount of documents that are actually subject to the discovery process, which then obviously increases the cost of that. So that has been a concern in that matter. Senator SCHACHT—And you want to narrow the discovery down as part of your defence mechanism. Ms Weir—In order to try to manage— Senator SCHACHT—No, not to try to manage; in order to try to improve your position in the case, I presume. Ms Weir—Telstra is one party that is being sued in that matter, so we are trying to meet a claim that is being put against us. So that naturally involves legal fees in order to defend ourselves in this matter.

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Senator SCHACHT—So you are unaware from last week whether this article is correct or not, that you were criticised for delaying the discovery process? Ms Weir—I think the court was critical of the whole process generally, from what I understand— Senator SCHACHT—It says here Telstra and the New South Wales government. Ms Weir—Yes. I was not in the court, so I am unable to answer. Senator SCHACHT—Would you take that on notice and find out and give me a considered reply whether the judge did criticise Telstra either singularly or severally? Ms Weir—Certainly. We can take that on notice. Senator SCHACHT—While I have got you here from the regulatory section, I cannot miss this opportunity. Perhaps you can inform me how many other cases similar to this nature of the BT-New South Wales-Telstra case are you presently dealing with? Ms Weir—There is one other large court case, which is an action against Telstra by Optus under section 46. Senator SCHACHT—And how much have you spent so far on legal costs in that case? Ms Weir—I could not give you an exact answer. Senator SCHACHT—It would not be less than $5 million, would it? Ms Weir—At this stage, yes, it is a bit less. Senator SCHACHT—It would be. Goodness me! They have not sent all the bills in yet, I presume. Ms Weir—It has been going since around September of last year. Senator SCHACHT—Is the regulatory unit in charge of checking the invoices that come in from QCs, lawyers, to make sure that they are not overcharging you or they are not claiming against you for things that they have not provided? Ms Weir—The legal directorate is responsible for that. We handle the legal budget and, naturally, all counsel involved in the various court matters are responsible for reviewing all bills and signing off and determining what is appropriate and what is not. Senator SCHACHT—You might want to take this on notice, because I would not expect you to answer it here completely. Have you ever sent back to any of these major firms that you have employed a query and got a significant reduction in the bill once you have queried what they were charging you? Ms Weir—Counsel are challenging and querying bills all the time. When I say counsel, I mean the various lawyers within Telstra who are responsible for the different matters. Senator SCHACHT—Could you give an indication of whether you have been successful in having significant reductions in the bills? Ms Weir—Yes, on a case by case basis where there is an argument that a bill is inappropriate, absolutely. We do that with all our suppliers. Senator SCHACHT—Do you regularly go into the court and get the costs taxed? Ms Weir—That is a matter relating to litigation law generally. No, we have a commercial relationship with our legal suppliers, and so we negotiate with them. Senator SCHACHT—I think Telstra has got 40 law firms on retainers around Australia. Is that about right?

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Mr Ward—That is about right. Ms Weir—That is about right. It may even be a bit smaller now. Senator SCHACHT—Take it on notice. Which lawyers in Australia haven’t you got on a retainer? I do not know what else you are doing in telecommunications, but you seem to be a job creation scheme for the legal profession. Ms Weir—I am sure you will appreciate that it is a very increasingly complex commercial area that we work in. Mr Ward—I think your comments, Senator, in part are a reflection of corporate and commercial life, and in this industry. We would not be a patch on the activity in the US, for example. Senator SCHACHT—I hope you are not advising the government that we should try to match what is going on in the US. Mr Ward—We are certainly not. Senator SCHACHT—I did try an amendment of the bill last year on telecommunications regulations that takes lawyers out of some of the process and got rolled on the Senate vote. The government said, ‘No, no, that’s not what we’re going to do.’ CHAIR—Senator Schacht, we are straying. Senator SCHACHT—No, we are not straying. This is cost. This is substantial cost. We have got a figure here of $19 million, and that is why I wanted to raise it. I think that this ought to be raised in every estimates hearing to keep Telstra’s feet to the fire about how they are handling legal costs, because Telstra’s tactic is clear: ‘We have a big amount of money behind us. We’ll outlast anyone who challenges us in court, and we’ll starve them to death because our pockets are bigger than anybody else’s.’ That is your tactic, is it not, Mr Ward? Mr Ward—Our tactic is to ensure that we meet all the obligations to our shareholders. Senator SCHACHT—One can only be horrified at the idea that when you are fully privatised, if the government gets its way, the privatised Telstra will be given even more instructions to say the shareholders want to fight everybody off by starving them out. Mr Ward—We have an obligation to protect our legal rights. Senator SCHACHT—I have to say that the two-thirds of Australians who still own Telstra at the moment would say that some of this money you are spending is a delaying tactic and is not in the best interests of either the community or even yourself. But, anyway, you have taken on notice a number of those questions, and I would also ask you to take on notice how many of those 40 firms are still employed on a retainer basis, who they are and whether you have increased the number. Hopefully you might be able to decrease it. Mr Ward—We did decrease it, Senator. Senator SCHACHT—Did you? Mr Ward—We certainly did. Senator SCHACHT—Does that mean one other firm got the business so they doubled their business? Mr Ward—I will give you the sort of detail we gave you last time. Senator SCHACHT—This is just updating them. I am going to tell you this will be updated every year, because I think this is an area that has got to be consistently exposed, not only in your interests but in the interest of costs of justice in Australia. Could you also give us the

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 330 SENATE—Legislation Thursday, 11 June 1998 breakdown of the total legal bill that you spend each year? Is that $50 million, $100 million, Mr Stanhope? Mr Stanhope—It is around $50 million. Senator SCHACHT—$50 million a year is the legal bill? Mr Stanhope—Last year it was around $50 million. Senator SCHACHT—Around $50 million. You want to spend maybe $6 million on this discovery process alone in one case? Thank you on that. I look forward to those answers. Can I now turn to— CHAIR—Just before you do, I have got a series of questions from Senator Payne to put on notice. They will be forwarded to you from the secretariat. Thank you. Senator SCHACHT—Can I now turn to Mr Ward. Just quickly back to those issues of the revenue from the various products, you have taken on notice and you will come back to me, on whether you can give me, even in confidence, and I hope you can—I am happy to accept it in confidence— Mr Ward—I believe any profitability figures that we would give you would be in confidence. Senator SCHACHT—I have to say I think this committee has a very good record of— CHAIR—We cannot actually take in-confidence material at an estimates hearing. Senator SCHACHT—We can take it as part of our consideration of the annual report. CHAIR—We are not actually doing that at the moment. Senator SCHACHT—I know. CHAIR—If you need that information, then we should ask the secretariat to write to Telstra for you. Senator SCHACHT—We will get the secretariat to write. All I can say is that this committee is the same as the committee that deals with the annual report and it has an excel- lent record of not breaching commercial-in-confidence. Mr Ward—I have no difficulties in providing it. CHAIR—We will write to you under the annual report heading. Senator SCHACHT—I presume in the business plan that goes to the minister, those profitability figures may be provided. Mr Ward—The corporate plan to the minister is a— Senator SCHACHT—A future plan? Mr Ward—A reduced plan compared to the fairly massive internal planning that we have. I just cannot recall the level of detail on product profitability. We would probably have in there issues around what we are addressing where products are not as profitable as they need to be. Senator SCHACHT—Mr Ward, there are many questions I would like to ask about matters that may be before the ACCC but, because I do not know whether the sub judice rule applies or not in this case, I am cautious about asking questions because you are in dispute either with the ACCC or with other parties before the ACCC. Can you tell me how many actual competition notices the ACCC has now issued against Telstra? Mr Ward—I believe only one, and it is yet to take effect.

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Senator SCHACHT—They told me last week at the ACCC hearing an extension to 19 June? Mr Ward—Correct. Senator SCHACHT—I see that you have reached agreement with a couple of people— Mr Ward—OzEmail and connect.com. Senator SCHACHT—The main one still outstanding is to reach agreement with Optus? Mr Ward—Yes, and they are outstanding in reaching agreement with anyone else too. Senator SCHACHT—Yes, I note that, and I certainly make it clear that I think what is good for the goose is good for the gander in this area. Mr Ward—Thank you, Senator. Senator SCHACHT—If you cop a competition notice or transparency arrangement, et cetera, Optus and all other carriers who have got a carrier licence should be under the same provision, even though they may claim you are still dominant in the market, because if Optus itself escapes having the similar provision, they then have a significant competitor advantage. I accept that, and I have always had that view that unless the dominance in the marketplace, which leads me into the local loop area— Mr Frueh—Senator, just before we move to the local loop, it is probably worth putting on record that Optus claim to have over 50 per cent of the wholesale market in Internet connections. That is their claim. Senator SCHACHT—I am sure you will make that clear to the ACCC in information you put in. Mr Ward—We have, Senator. Senator SCHACHT—We turn to the local loop, where you are 90 per cent plus, and even at the ACCC they could not give me information of how successful Optus has been in getting telephony connections on their cable in the local loop. Maybe 1,000 a week are the estimations, and even at that rate that is 50,000 a year and in 10 years they would have 500,000. You have got 6½ million local loop connections? Mr Ward—Probably higher than that, Senator. Senator SCHACHT—Would it be 7½ million? Mr Ward—It would be up near there. Senator SCHACHT—I keep trying to get Mr Fels to explain to me how many of those cable connections would have to be made before there is effective local loop competition. He cannot give an answer on that, which I think is a deficiency in the ACCC process, which I have made clear. I think that, if he is really fair dinkum about competition, the issue is interconnect arrangements. The local loop at the moment, in your half-yearly report, if you extrapolate it, comes to $2½ billion a year in revenues? Mr Ward—That would probably be local calls. There are two elements to the revenue. There is local access and local calls. Senator SCHACHT—Local calls are $2½ billion, or thereabouts? Mr Ward—I think that is about what it is. Senator SCHACHT—I am not going to argue over whether we are out by a couple of hundred million either way. There is a significant profit for you in that $2½ billion revenue?

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Mr Ward—It is difficult for me, as I just said earlier, to comment on profitability. Let me just say that the combined local service market of local access and local calls is not significantly profitable. Senator SCHACHT—It is not as significantly profitable as mobiles as a percentage? Mr Ward—As long distance or mobiles or directories or a number of other parts of the business. These matters are of course being addressed with the ACCC in their current inquiry with some of the matters confidential to us and the ACCC in that inquiry. Senator SCHACHT—As I say, I accept my constraint reluctantly. When you have got matters before the ACCC and you are in dispute one has to be relatively constrained in asking you questions because I suspect you will just keep saying no. Mr Ward—I have not said no yet. Senator SCHACHT—I know you have not, but it is no use asking you questions on some aspects about it because the ACCC has got to have a transparent process about that. Have the ACCC given you any indication that, if certain commercial agreements are not reached in any area of Telstra’s activity, they may consider putting a competition notice out elsewhere? Mr Ward—You mean other than the Internet? Senator SCHACHT—Other than the Internet. Mr Ward—In terms of negotiations with other carriers or carriage service providers, the process there is more under another part of the act, which is the access part of the act, where the carrier or carriage service provider would go to the ACCC seeking an arbitration between Telstra and itself to resolve the issue. There may be one of those possibly in prospect as far as I know. On the matter of competition notices, there are other issues that the ACCC is currently looking at but it is yet to form an opinion, as far as I understand, about whether it would issue a notice. So there are some other areas of current investigation, Senator. Senator SCHACHT—Mr Ward, it has been suggested by other carriers that the ACCC telecommunications regulatory section is underresourced to handle the range of issues that are bouncing around, no matter which side of the argument you are on, to get quicker decisions, et cetera. I know it may suit Telstra to have delays in getting some of these decisions because you are the incumbent, but are you yourself seeing examples where the ACCC, in handling any issue, is underresourced or is not able to deal with it as expeditiously as you would have liked? Mr Ward—This is a personal opinion. I think in gearing up to the new regime, which was only passed by the parliament in March and implemented on 1 July, for the first few months they may have been gearing up in a resource sense. Obviously it is a question for them rather than me, but I would have thought now that they are resourced to do the tasks. That is a question perhaps you should ask Allan. Senator SCHACHT—We do—but you are a client in a sense. Mr Ward—We are. Senator SCHACHT—Some clients are complaining about that. Mr Ward—Can I make an additional comment there, and this may have occurred to you, Senator. It is a little bizarre to judge the effectiveness of the regime by, say, the number of competition notices. Senator SCHACHT—No, I just asked for factual information. I am not asking if the number of competition notices issued is a sign of what they are doing well.

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Mr Ward—The ACCC could well meet all of their charter without necessarily issuing competition notices. Senator SCHACHT—I accept that. It is not what others accept, but that is part of the public debate. I accept that in fact good regulation, when it settles down and there is an introductory period, would mean it was working well and there would be no need for any competition notices on either side. Mr Ward—That is what we would hope too, Senator. Senator SCHACHT—I have to say everybody is in favour of a competition notice on someone else in the industry rather than to them. Self-interest does have this sort of— Mr Ward—There is some sense to that. Senator SCHACHT—The other day the Senate carried a resolution which the minister, I think, reluctantly had to accept. It was on a motion from Senator Bourne about employment figures, which I presume you provided to the minister to meet that request. Mr Ward—If they are Telstra employment figures, yes. Senator SCHACHT—There are a couple of explanations you might help me clarify. What is the difference in the columns? There are Telstra numbers and then C&C. Are generally the C&C part of the overall Telstra numbers? Mr Ward—Yes, it is perhaps the largest division of the company but it is part of the Telstra figures. Senator SCHACHT—The next thing I want to ask is this: you have listed these in state metro and state country. Take New South Wales country; you have central New South Wales, central west, far north coast, et cetera. They are your formal regions within the structure of Telstra. There is a geographical definition for each of those places, is there? How were they compiled? Was this a matter of efficiency on your part to list them roughly like that? Is there a manager for central New South Wales? Mr Ward—There are different regional structures for different areas of the business. We do not maintain that a particular regional structure is mandated on any line of business. So that would have been our best effort, to aggregate those into some regions, to be helpful. Senator SCHACHT—I wanted to get that clear. So when I look at New South Wales country, central New South Wales, Telstra has gone down overall 176 and C&C has gone down 23 as part of that 176. Mr Ward—Right. Senator SCHACHT—That is the reduction and that is the total Telstra change in employment in what you have defined as central New South Wales? Mr Stanhope—Yes, that is right. Senator SCHACHT—Can I ask you to take on notice, if it is not too difficult, to actually describe what is central New South Wales? Mr Ward—Absolutely. Senator SCHACHT—If you could take that on notice, and the same for all of those regional areas. Mr Ward—If we compiled it, we have a basis for it—we will give you a description. Senator SCHACHT—If it is a map of something, or whatever, that will be fine. I was going to ask the minister, but he is not here, but Mr Stevens—he has hidden in the cupboard, has

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 334 SENATE—Legislation Thursday, 11 June 1998 he? The last person who walked into a cupboard in one of these rooms subsequently resigned, I think, so I hope it is not going to happen to this minister until the election. At the time of the partial privatisation of Telstra Senator Harradine and Senator Colston made big play of the fact that they were out to defend regional Queensland, in Senator Colston’s case, and in Senator Harradine’s case Tasmania, from job losses. Yet I notice here that Queensland country has a loss of 390 jobs from March 1997 to March 1998, and from April 1996 to March 1997 it was 68, so it is about 450 jobs. I was going to ask the minister if that meets his promise to Senator Colston to protect jobs in Telstra in regional Queensland. Mr Ward—You may need to go into the cupboard. Senator SCHACHT—To get him out of the cupboard? If I am going to run out of time, I will put that on notice, Mr Stevens, to the minister. If he gets back, I will raise it with him again. In Tasmania, country had a loss of 56 jobs, though in the previous period they actually had a gain of 16. So again country jobs went. I notice that in Burnie, in this information, there were 18 jobs gone, but on 5 June of this year the acting minister for communications, Warwick Smith, who happens to be from northern Tasmania, put out a statement saying: Telstra’s decision to expand its OAS centre at Burnie will create an additional 45 full-time jobs . . . This will increase Telstra’s Burnie workforce to more than 125... Mr Ward, is the 45 jobs increase after the 18 have been taken away? Or are the 18 to be taken away out of the 45? Mr Ward—I may stand corrected on this, but I believe a number of those 45 are still to be added to our numbers. Senator SCHACHT—Sorry? Mr Ward—The numbers that you have got are out of date. Senator SCHACHT—So some of those 45, but not all of them, could turn that minus 18 figure for Burnie into a plus? Mr Ward—Correct. I think those jobs are coming on board over the next three months or so. Senator SCHACHT—Mr Smith says there is an increase in the Burnie work force in Telstra to more than 125. What was the Burnie work force two years ago? Mr Ward—I would have to take that on notice, Senator. Senator SCHACHT—I now want to turn to some individual issues. Senator CALVERT—I missed it when I was here before, but I wanted to put some questions on notice regarding the other matter, and I am just wondering whether that was okay with Telstra. ACTING CHAIR (Senator Schacht)—That is fine. I now want to turn to a number of individual issues. Recently a statement was put out dated 7 May by the Boating Industry Association of Queensland, concerned that Telstra was putting up the cost of the telephone call when you dial 1800, or whatever the number, on weather information for coastal Queensland. The cost has gone up substantially per minute when you ring that number to get weather information. Their concern was that this will discourage up to several hundred thousand boat users—it says here ‘on behalf of Queensland’s one million boat and fishing population’—from going out fishing and that they may not get the correct information to warn them about weather.

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Last weekend we saw a tragic case along the coast where, through maybe no fault of Telstra at all, some maniacs—I should not use that word, I suppose, until the coroner completes his inquiry—according to the amateur video, showed a pretty devil-may-care attitude of putting a small boat into a big wave and turning over. Unfortunately, two people drowned. It is true that you have put up the cost per minute for the weather information? Mr Frueh—I will try to answer what I can here. I have no specifics on this. The service is probably a 1900 service, which would be a value added information service. Telstra works with service providers to provide that service. The price at which that is charged to the end user is dependent on the choice of the service provider and the value they charge. It is not really determined by Telstra, unless this is one of the exceptions. There are very few services now that are actually provided by Telstra. Mr Ward—I think we have had the transition, as I understand it, from a range of dial-it services— Mr Frueh—Dial-it services which have been wound back. Mr Ward—to the more commercially based, with other service providers, on 1900 numbers. Mr Frueh—We will certainly get the facts for you, Senator. ACTING CHAIR—I just want to read three paragraphs out. He says: The Queensland boating industry wants the Federal Government to abolish the new telephone charge for Bureau of Meteorology weather forecasts. Telephone forecasts, which previously could be obtained for the cost of a local call, now cost several dollars—and even more from a mobile ‘phone on the water. President of the Boating Industry Association of Queensland, Ron Collins, has condemned Telstra over the sky-high cost of weather forecasts. Mr Collins said lack of consultation and the underhand scrapping of the recorded weather information service was an insult to the State’s boating industry and the boating public. I know you have not got the detail, but is it true that it would be several dollars now compared with the cost of a local call previously? Mr Frueh—I do not believe it would be as high as quoted there, but it depends on the nature of the information. Some of these services have facsimiles of the weather and so on. It may be more for that. This is probably an issue for the Bureau of Meteorology. It is in a similar category to that raised before with the White Pages. Senator SCHACHT—I do not know whether you at a senior level have any contact with Mr Collins from the Boating Industry Association of Queensland, but if you could get his press release dated 7 May and contact him I think he would at least like the opportunity to discuss it at a senior level with Telstra. Mr Ward—We may have had some contact with him at a more junior level, but we will follow that up. Senator SCHACHT—You will take that on notice and come back to us? Mr Ward—Yes. Senator SCHACHT—Have there been any changes to charging arrangements for 13 and 1800 numbers? Mr Frueh—I am not sure what you are referring to. Is there something specific there? Senator SCHACHT—These are commercial arrangements, where people have an 1800 number. Has Telstra put up the charges? I now know that the government is changing the posi-

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 336 SENATE—Legislation Thursday, 11 June 1998 tion. Buying the 1800 numbers is now an option, I think, in some form or another, or there is some extra fee. It is in the budget. Is it $30 million, Mr Stevens, some increase in revenue? Mr Stevens—There are increased charges for those numbers. That is right. Senator SCHACHT—Is that flowing through to an increase which you will be charging customers? Mr Frueh—We are yet to follow through from those as those are determined obviously, but it would be our intention to on-charge the extra costs, yes. Senator SCHACHT—I have not disagreed with the government’s position, but what I would want to raise with you is that some of these numbers are actually an industry or a community association providing some community service. Whether the Boating Association is an example, I do not know. But what I would ask you to take on notice is to separate out those that are selling Tupperware—one of those famous television ads that you see rushing across the screen—from somebody who is clearly providing a community service, even though it might actually be partly commercial. They would use the 1800 number. I would like you to get some information back to us on whether you will be able to separate a charging regime if any of those fall into this category. I would also raise that, if they do, this may be another response you could give to us about the USO. Mr Frueh—Or a matter for the department determining the charges themselves. Senator SCHACHT—I have a particular case here which I have to say sounds strange to me. A constituent rang my office and said that he had taken out a mobile analog contract with Telstra five years ago for $10 per month plus call costs. He was rather late in paying his bill, and he was disconnected. The bill was a Telstra bill and he called the number given on that bill to negotiate payment and reconnection. The person answering the phone was from United Telecommunications, his new service provider. He was upset at the way they spoke to him and was told he would have to pay the bill in full instantly or he would be black-listed. That is his claim. There would also be a $30 reconnection fee. He said he had not been apprised of the change and thought he was still with Telstra, and he phoned Telstra, who said this change had occurred during deregulation. My office phoned a Mr Higginbottom at Telstra. Mr Ward—He is in my area, yes. Senator SCHACHT—He confirmed that this would be correct. The issue it raises with me is: if there was a change in whom he thought he was connected to in his business, is it a bit odd that he was not informed he was no longer with Telstra and he was with another company? I do not know who United Telecommunications is. Mr Ward—Mr Bundrock may be able to give a response. Mr Bundrock—With that transition, all our customers were advised by letter and they had the option of not making that transition, as I understood it. So the individual you are referring to might have received a letter and perhaps not read it and forgot about it, and then it was only later in the piece that he realised. Senator SCHACHT—The way I understand this is that, when he took out his analog phone five years ago with Telstra, that was to provide his mobile phone service. Is that right? Mr Bundrock—Yes. Senator SCHACHT—And now United Telecommunications has taken over that service. Is that correct?

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Mr Bundrock—That would have been part of an arrangement we came to with United to act as a service provider off Telstra, and certain customers were transferred across to United. Senator SCHACHT—Is United Telecommunications a fully owned subsidiary or controlled subsidiary of Telstra? Mr Bundrock—No, it is completely separate from Telstra. Senator SCHACHT—So, if I ring up now to get a MobileNet phone connection, how do I know I do not end up with United Telecommunications rather than with Telstra? Mr Bundrock—If you do connect with Telstra and there is ever any subsequent change, you will certainly be informed of the background and I think have the option of whether you stay with Telstra or otherwise. Senator SCHACHT—Can you explain to me what the advantage is to Telstra in having this passed off to another independently controlled service provider to run, because your television adverts say all the time, ‘Join Telstra MobileNet. This is a fantastic service.’ If the poor old punter at some stage is going to find that he has got a complaint and he is not dealing with Telstra but dealing with a company he has never heard of, isn’t that misleading advertising? Mr Bundrock—If anyone connects to Telstra, they are obviously a Telstra MobileNet customer and they will receive a bill from us. If there is any subsequent change, then the individuals are informed. Senator SCHACHT—I have to tell you, this is a bit odd. Mr Bundrock—It is the general principle of wholesale and retail within the market, and whether there are advantages in having more diversity in the way people can retail and provide customer service. Senator SCHACHT—When I got a mobile phone at Christmas time for my son, I went down to the Telstra shop and there was a queue a mile long—everyone was getting Christmas presents of mobile phones for their kids and their families and so on, and I was just one of many in the queue, which is fine, great business—and I actually signed a contract that was in 40 pages of triplicate or duplicate or whatever it was. You had to be Einstein and 47 of Mr Ward’s QC firms would have to have been there to interpret the goddam contract for a start. Nevertheless, I signed up on the Telstra digital MobileNet. Now you are telling me that, if I am not careful and read carefully everything coming through, I no longer will be a customer of Telstra MobileNet but, whether I like it or not, will be with United Telecommuni- cations or some other firm? Mr Bundrock—If that be the firm acting as a service provider. But everyone would be informed. Also it is always with the Telstra network. Senator SCHACHT—Can you tell me this then: what is the difference between a service provider and Telstra’s MobileNet? Mr Bundrock—MobileNet is our retail brand and, if you are a MobileNet customer, we would look after all customer service issues, the billing, any complaints, and also we would obviously have our own promotional packages, et cetera. If it was a service provider, they would have their own billing system, their own customer service people, and they have flexibility in how they might package— Mr Ward—But it is Telstra’s network. Mr Bundrock—It is still Telstra’s network.

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Senator SCHACHT—But the billing is done by United Telecommunications. Mr Bundrock—They obtain the raw information from us and they package the bill under their own billing system. I might add, if I could, Senator, it is not an unusual arrangement right around the world that— Senator SCHACHT—It may not be an unusual arrangement, but you are advertising to people, ‘Join Telstra’s MobileNet and get a MobileNet bill.’ You are saying that this person, Mr Mundy, if he had not been disconnected, would have received a bill headed ‘United Telecommunications’. The bill would not have had Telstra’s name on it; it would have had their name on it. Mr Bundrock—Yes. First of all, he would have been informed that this change was proposed, and then if there was no objection— Senator SCHACHT—And if he objected, what would you have done? Mr Bundrock—Hope he would stay with Telstra, but if the transition happened, then you are right. It would have been a United Telecommunications bill, still with the Telstra network. Senator SCHACHT—Who actually does the bill? You do and they put their name on it? Mr Bundrock—No, they do the billing. They only get raw information. There is a reasonable amount of computer processing and everything to put a proper bill up, and they have their own billing package. In fact, that was one of the attractions of this company—that they had a world recognised billing system that they were interested in introducing to Australia. Senator SCHACHT—But I have had evidence before other committees and to me personally as shadow minister on this very issue about unbundling the bill, so to speak, from Macquarie, Optus, AAPT. They are all asking about the big issue of the interconnect fees, et cetera. They want complete control of the billing. Telstra say, ‘We can’t give you that. We’re going to charge you interconnect fees because we’re in control of the billing, and that’s a cross we have to bear,’ and here you are putting it off to a subsidiary, separately done. You have already conceded 90 per cent of that argument, that are you already unbundling and separating the billing process out. Mr Ward—We are talking about the mobiles business here, though, Senator, and we are talking about a practice that I think is pretty common, is it not, Tony, in mobile phones? Mr Bundrock—In many countries. Senator SCHACHT—All I can say is I think you are misleading consumers. I do not see how you can advertise, ‘John MobileNet, get all the wonders of Telstra’s system,’ and then say, ‘We sent him a letter. He didn’t read it. Bad luck. He didn’t understand.’ Then, ‘We’ve transferred you to another company that runs the business.’ Mr Ward—I think you will see in the ad, Senator, that so-and-so is a registered MobileNet dealer. Senator SCHACHT—No, I have seen your ads on television. You are spending an arm and a leg. You are saying on television, ‘Join MobileNet, the best coverage.’ Mr Ward—That is the network advertising. Senator SCHACHT—I see. I should have realised the subtlety, that that was the network advertising, not the marketing name. I think that is almost deceptive. If you were an ordinary punter watching, you would not know the difference. You would have thought, ‘I am buying

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MobileNet in all its glory.’ This is an issue that I think the ACCC ought to have a look at, because I think you are misleading in your advertising. Mr Ward—I do not believe we believe that. Senator SCHACHT—Obviously you do not, but I have to say I am glad this gentleman raised this with me, because next time round in the ACCC on consumer protection—I think you ought to have a good look at this—I will raise it with them. Mr Ward—Senator, I am happy to provide you with a brief around that issue. Senator SCHACHT—First of all, can you tell me how many other United Telecommunica- tions, or similar, you have spun off. How many other independent companies have you got deals with that are now taking over the running, the marketing and the billing of Telstra’s MobileNet? Mr Bundrock—I think there are only three, as far as Telstra is concerned, with mobiles. We can provide you with some further information. Senator SCHACHT—Okay, give me the three names, and give me how many customers you have handed over to them from Telstra’s MobileNet, your own system. Mr Ward—In terms of the billing and servicing, Senator? Senator SCHACHT—Yes. Have United Telecommunications got 100,000 MobileNet people handed over to them to have the billing and the marketing done? Mr Bundrock—I will have to take that on notice. Senator SCHACHT—I want the three companies. Take it on notice. Also explain to me what the arrangement is. You might want to provide this commercial-in-confidence via a process that we outlined before. What are the commercial advantages of you handing this over to somebody else? Mr Ward—Yes, we are happy to do that, and we will comment on the advertising as well. Senator SCHACHT—And comment on the advertising, and I have to say in the meantime I might put this to the ACCC, anyway. What I thought was a strange query from a constituent has turned out to be right on the nose, and probably this is a bit on the nose, I think. Can you tell me the funding for Telstra’s research laboratories based at Clayton? In 1997-98 how much was it? How much did you provide? Mr Ward—Yes, we will have to take that on notice. Senator SCHACHT—When the new financial year begins, within a month’s time, you can provide how much Telstra is providing in 1998-99 to Telstra laboratories, and how many staff you presently have. In the redundancy program you have that you outlined earlier, how many further job redundancies will take place in 1998-99 in Telstra laboratories? Also could you provide information on how much generic research in telecommunications, both in hardware and software, is now being done in Telstra laboratories, or is it all applied research purely for the benefit of Telstra itself? Also, how much funding do you provide directly to other science research agencies in Australia, such as CSIRO and various university research programs, and how many CRCs are you providing funds for this year and for the coming financial year? From the business plan, without actually saying it is in the business plan, can you give any comment about where the future of Telstra laboratories is going within Telstra’s organisation. We all accept that before 1991, when Telecom was the absolute monopoly, the laboratories provided a lot of pure research, because you had no competitors. I understand that you do not want to spend money on applied research or even pure research that your competitors may

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 340 SENATE—Legislation Thursday, 11 June 1998 get the advantage of and that they do not contribute to. The final thing is: in the last five years, how many patents have Telstra laboratories taken out on the work that they have done, and also how many patents have they taken out in conjunction with other research agencies that I have just listed? Mr Ward—Okay. Senator SCHACHT—On the Jindalee project, how much has Telstra now written off? Has it changed from the last time you gave us a figure of $600 million or $700 million? Mr Ward—No. Senator SCHACHT—Is that the complete write-off or are there any more losses yet to come? Mr Stanhope—We do not expect any further losses. Senator SCHACHT—Are there any people in Telstra still working on Jindalee, even in the sad case that it is with Telstra? Mr Stanhope—There are about eight people who are watching over the new arrangements. Senator SCHACHT—How long will they be involved in watching over the new arrangements? Mr Stanhope—Until such time as the contract is handed over completely. Senator SCHACHT—Could you provide how much it is going to cost Telstra each year to have those people watching over it? They are project managers, I suppose you would call them. Mr Stanhope—Yes, there is a project manager and there are two or three accountants to make sure that the financial arrangements are in place. There is one technical person to make sure that the technical aspects are being watched over. Senator SCHACHT—I have raised this question before, and I will keep raising it. In view of the fact that in your submission for full privatisation you think the marketplace is the way to drive efficiencies in Telstra, and if you do not perform people pay a penalty, has anybody lost their job or been demoted for losing Telstra $800 million on the Jindalee project? Mr Ward—No, not that I am aware of, Senator. Senator SCHACHT—Isn’t this strange? You have shown me the wonders of privatisation: that even with one-third you will be much more market driven, cost driven, performance driven. Somebody or some group of people have lost the shareholders of this country $800 million and no-one has been sacked, no-one has had a mark put against their record? Mr Ward—I am not aware if people have been sacked per se, Senator, no. Senator SCHACHT—I want this now formally taken on notice. How can Telstra be telling us this—and Mr Rizzo is a great devotee of this argument, as he put to us in the Telstra inquiry a month ago about full privatisation—that $800 million has gone south, is missing, lost? This is one of the most substantial losses any public company owned by the people of Australia has sustained. You now rate just short of some of the state banks that went west in the late 1980s. I think Tricontinental lost a billion plus in Victoria, got wiped out. Unfortunately in my state the State Bank lost $3 billion. You are approaching that sort of league, and nobody got sacked, nobody was transferred or demoted? Mr Ward—I did not answer the latter. Senator SCHACHT—Has someone been demoted?

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Mr Ward—No. All I am saying is I am not aware of anyone who was sacked. I am not saying nobody has been transferred. I am quite sure people have been transferred, because we have been winding down that project. Senator SCHACHT—But transferred where? So that they can repeat the mess? What have they been transferred to? If they have lost $800 million of the shareholders’ money, where have they been transferred to? Mr Ward—As you know, the Jindalee project was one that had, I guess, some lessons for us and for the government in the way that that all— Senator SCHACHT—And the shareholders? That $800 million is a big lesson, Mr Ward. $800 million could probably build— Mr Ward—I understand. Senator SCHACHT—It could probably build 150 or 100 hospitals around Australia. Mr Ward—I understand. Senator SCHACHT—I want you to take it on notice, and I want a response. If this is how Telstra is going to operate in the marketplace if it is fully privatised, what do you think the analysts would say? Mr Ward—The analysts are fully informed of the history of the Jindalee project. Senator SCHACHT—Okay. Now let me turn to a later one. How much have you written off on the roll-out, the loss on the cable roll-out pay TV adventure? Mr Ward—I think we went through that last time, Senator. Senator SCHACHT—What is it—$600 million? $500 million? Mr Stanhope—If I recall, it was about $450 million. Senator SCHACHT—A $450 million write-off, a loss? Mr Stanhope—Yes. Senator SCHACHT—Loss. Have any of the people responsible for that decision been sacked, transferred, demoted, or had to leave the company? Mr Stanhope—No, they have not. Senator SCHACHT—So there has been something like $1,300 million worth of losses in Telstra, and you are telling me this is how you are going to operate, that people are respon- sible, and not one person has suffered or been made responsible? Mr Ward—I think on the investment in the broadband area, Senator, that investment was made with the best market and competition and technology assumptions available at the time. The market has been a fairly interesting one, as you know; certainly the pay TV market, at least. The broader potential of the broadband market I think is still ahead of us, so I do not think that story is over by any stretch of the imagination. So I am not too sure— Senator SCHACHT—But in that case, why did you write it down? If the potential is still fully before us, why did you write it down as a loss? Mr Ward—Mr Stanhope might describe the rationale that we took for the write-down. Senator SCHACHT—I know what the rationale is. You lost your dough. How could you say the big potential is before us, but you have put it in the books now as a $500 million or $600 million write-down, a loss? I cannot work that out.

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Mr Stanhope—On the basis of pay TV over that broadband cable, we believe its cost is not recoverable, so it is written— Senator SCHACHT—So it has lost that amount of money? Mr Stanhope—On the basis that pay TV is the only service over it, then it would not be recoverable as far as we can see. But as we have said in this place before, we are trying to develop other services over that broadband cable to make use of that asset, and we still are. Senator SCHACHT—That is just pie in the sky. You have had to write the loss off now, so the shareholders of Australia, both the one-third private shareholders, and the two-thirds through the public, have had to bear the loss of bad decision making. Mr Ward—We outlined all of that in the prospectus before any shares were sold. Senator SCHACHT—Yes, of course. And it is only because your company has such cash flows from other business that in some areas are near monopoly that you have all been able to survive. No other company that lost a $1,300 million write-down in a year would survive. Take Burns Philp. They went through this and they are about to go out of business and be liquidated. They made a couple of bad decisions and went ‘whack’. They have all got sacked and the company is to be liquidated. You are cross-subsidising this loss by the profit out of local calls, STDs, mobiles, and international. Mr Stanhope—Well, we have had this discussion in this place before. Senator SCHACHT—No, we have not had this discussion. Mr Stanhope—We have had a similar discussion, and you have made the assumption that the decision was a bad decision. Senator SCHACHT—The shareholders think it probably was. Mr Stanhope—We have talked about that before, that at the time the decision was made Optus was rolling out a broadband cable to take customers away from us in terms of access and local calls, and all our call products, and we decided, knowing that some shareholder value would be impacted, to roll out the broadband cable in telephony defence. Senator SCHACHT—But it was not to be used in telephony, it was to scare them. Mr Stanhope—No, this is very important. Let me just finish this. When we had a look and made that decision, it was a do nothing decision, or it was to roll out this broadband cable. The do nothing decision would have lost this company greater shareholder value than to roll out that broadband cable, and we made the decision on that basis. That is better for shareholders, so I still do not think it was a bad decision. Senator SCHACHT—So for the shareholders of Australia, all this cable we hung around was not actually to deliver pay TV, it was to scare Optus. Mr Stanhope—Pay TV was a service that was available over that cable, but we have never ever said anything different than that it was also to defend our telephony revenues. We have always said that. Senator SCHACHT—To defend it? As a sign that you had deep pockets. Can I put it around this way, then: if, all-up, those two projects had not lost $1,200 million or $1,300 million, not only would the shareholders have got more money, and profit be available for distribution, but I could say to all customers of Telstra, you would have been able to drop your prices further. Mr Stanhope—Take the broadband case. It is great with hindsight, because we now know that Optus was not as successful as we thought they might—

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Senator SCHACHT—In the private market that you want to go to, Mr Stanhope—in the private market that you keep telling me about, and which Mr Rizzo was so enthusiastic about, and Mr Blount in his public statements—you pay the penalty. You do not have hindsight. Those other companies n the full commercial sector, no matter what, do not have the benefit of hindsight. I suppose Mr Prescott, with the wisdom of hindsight, would have liked to have done something different, but he paid the penalty because BHP lost money in a couple of projects. That was nothing to what you have lost. He went. The chief executive went. Other managers of divisions have been sacked. The shareholders have demanded it. I do not think BHP has lost as much money as you have so far. Mr Stanhope—I get back to the broadband decision. It served its purpose, it defended our telephony revenues. We may have lost greater shareholder value had we not done it. Senator SCHACHT—Goodness me! Well, I am not going to labour the point now. You are going to take it on notice and come back to me with a particular answer. Can I now turn to the matter of the ISDN roll-out. Is it true that, even when the digitalisation of all the exchanges takes place under the speeded up program of the government that you took on 18 months ago—which cost $200 million or whatever it was, which no-one can disagree with—it still means, though, that anybody who is more than seven kilometres from the nearest exchange will not be able to get a normal ISDN connection? Mr Paratz—The provision of ISDN facility, as opposed to an ISDN connection, really involves a whole stack of technologies. The future mode of operation, which is effectively the digitisation of the switches within the network and the transmission that connects them together, provides the basis for ISDN. Subsequently, we have to provide infrastructure, either existing or embedded in some way, to allow customers to access that ISDN capability. There is a range of ways of doing that. You mentioned seven kilometres. That approximates to a limitation that might apply to a particular gauge of copper cable. ISDN can be delivered by a variety of media: radio; digital concentrator systems; satellite based solutions; fixed radio access; copper; potentially the cable network we have just been talking about. Senator SCHACHT—The cable network that has been rolled out, Mr Stanhope, can be con- nected. You can put ISDN down that? Mr Paratz—There is a range of technologies which allow the delivery of ISDN. The simple proposition of seven kilometres, and beyond that seven kilometres there is or there is not ISDN, really is not the situation. Telstra has recently announced a range of technologies, including satellite, which gives us the capability to deliver not only ISDN but the facilities which ISDN delivers—the Internet capability, the data networking capability—for customers throughout Australia, independent of location. So the capability that Telstra has put in place, right across the customer base, right across the geography base, to deliver the sort of capabilities that ISDN delivers, extends well beyond any seven kilometre or any other number. Senator SCHACHT—If I am 20 kilometres outside Broken Hill, on a sheep station, and I want ISDN, there is a copper pair going out, it has been there for 40 years or however long, and I want to connect to ISDN with the same quality as somebody in Broken Hill itself or in a suburb of Sydney, what would you have to do to provide that? Mr Paratz—If you are 20 kilometres outside Broken Hill— Senator SCHACHT—Which is the nearest telephone exchange.

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Mr Paratz—that is fine. You may or may not, in the first instance, be connected by a copper pair. You may be connected by a radio solution, and there are many types of radio solutions. Senator SCHACHT—Let’s just take the copper pair, because back in the 1950s and the 1960s under Country Party leverage, et cetera, there were big subsidies paid to farmers in the pastoral and wheat belt areas of Australia to lay copper wire out for many kilometres across a farmer’s property to get to the house. So there would be large numbers of farmers who have got a copper pair going into that house. Maybe I should not use Broken Hill. I should use the example of 20 kilometres outside Parkes, which is in the agricultural wheat belt. Mr Paratz—If we take the proposition that we are 20 kilometres outside Parkes and we are on an existing copper pair, the sheer physics of the situation, say the transmission of an ISDN signal on that copper pair, is extremely problematical. The question, though, is can you, as a customer of Telstra, get access to the products and facilities which you might seek to achieve through an ISDN connection? When you ask that question, a wide range of other responses come into play. For instance—and I am not familiar, as I sit here, as to whether this holds in a specific case at Parkes—we have just rolled out 150 fixed radio access base stations throughout regional Australia, and they give coverage and ISDN capability to radiuses of 25 to 35 kilometres, depending on the terrain and the foliage and so forth. In addition, we announced recently a set of satellite technologies which again give high speed data capabilities, high speed Internet capabilities, which again are available to this customer 20 kilometres outside of Parkes. So the capability of the company to deliver product to the customer that we are talking about is substantial. It is world-class and increasing. Senator SCHACHT—Just a simple question. In a suburb of Sydney they get an ISDN connection. Will the person 20 kilometres outside Parkes get exactly the same quality and range of services as the person in a suburb of Sydney under present technology? I just want yes or no. Mr Paratz—The delivery depends on the situation, and the customers get access to a— Senator SCHACHT—Does the customer in Parkes get the same as the customer— CHAIR—Senator Schacht, let the witness answer the question. Senator SCHACHT—Well, I know what is going to happen. We are going to go round and round in a circle until I actually nail this down. CHAIR—Just let him answer the question. Senator SCHACHT—Give him a hint, Mr Ward. Mr Paratz—For our customers, whether they are in metropolitan Sydney or whether they are 20 kilometres outside Parkes, Telstra is bringing to the marketplace the technologies which are appropriate for the situation. We cannot pretend that 20 kilometres out of Parkes is the same physical situation as one kilometre in Sydney. You and I cannot make that true. Senator SCHACHT—So, fine, the simple answer then is, ‘No, there is a difference.’ It might only be a 10 per cent difference, but there is a difference in that the provision of the same ISDN service in the suburb of Sydney, normal connection, does not automatically translate to be exactly the same as the person gets 20 kilometres outside Parkes. Mr Paratz—Senator, I believe the difference is in the method of provision rather than the delivery of service. If you just put to me the proposition, ‘Do you need different solutions in different locations?’, I will of course agree with you.

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Senator SCHACHT—So now you are telling me that the method of delivery will be different but the quality of the service and the content of the service are exactly the same? Mr Paratz—The nature of the service is the same. Senator SCHACHT—The nature of the service? I think there is enough obfuscation in there and I think you have given yourself enough outlets here that I will not be able to accuse you of misleading estimates when I get more advice. It has been a performance, Mr Paratz: Mr Ward will give you a good pat on the back and a free drink in the boardroom later on and say, ‘This bloke really knows how to handle the Senate estimates committee.’ Can I ask: whichever the delivery system is though, and even though we are going to argue about whether the service is exactly the same, irrespective of the delivery system, will the cost for that ISDN connect service 20 kilometres outside Parkes, however it is delivered, be the same as the ISDN in the city? Mr Paratz—We have just spoken through a number of delivery systems, Senator, and as I think Mr Frueh indicated earlier, Telstra has not yet productised some of those technologies, and particularly the satellite based ones we recently announced, so it is pretty difficult for me to answer that with a simple yes or no answer. Senator SCHACHT—I just ask you to take it on notice, and could you get back to me as soon as you can on what would be the range of prices, different prices, if there are different prices. The main thing I am after is: does the farmer 20 kilometres outside Parkes have to pay more for ISDN for the connection, the rate of use per minute, et cetera, as a person in the city. If he does, what is the difference? Mr Paratz—We can certainly take that on notice and give you an insight into the range of products that are out there at the moment. Senator SCHACHT—Could you explain the difference in the range of products so I can try and work out whether the person in the city is getting a better quality in content than they can do on ISDN in the bush. I hope, Mr Ward, you can do that in your submission to that inquiry over what is the USO definition. This issue of ISDN access is one of the most important issues we need to have looked at. Mr Ward—That will be covered in our STS submission. Senator SCHACHT—Right. When you do make that submission, if you have not already done so, I would not mind getting a copy of it once it is made public. Mr Ward—We will take that on board. Senator SCHACHT—I want to raise an issue about the closure of a company in Western Australia which is a subsidiary of Telstra called QPSX Communications. Is anyone aware of it? Mr Stanhope—Yes, I am. Senator SCHACHT—You say that with a weary sound, Mr Stanhope. Mr Stanhope—We have been here a long time, Senator. CHAIR—Not as long as we have, Mr Stanhope. Mr Stanhope—No, true. CHAIR—This is our third day.

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Senator SCHACHT—And our second week, for some of us—not for all of us but for some of us. What I have been informed, Mr Stanhope, is that the people at QPSX, a full subsidiary of Telstra—is it a full subsidiary of Telstra? Mr Stanhope—Yes, it is. Senator SCHACHT—They were not offered the same redundancy package as other Telstra staff have been in this downsizing, to use that euphemism, of the 25,000 going from Telstra. Is that correct? Mr Stanhope—Yes, that is correct. Senator SCHACHT—Why was that the case, if it is a full subsidiary of Telstra and, as I understand it, the staff actually came from Telstra in the first place? Mr Stanhope—No, the staff did not come from Telstra. Senator SCHACHT—There was no transfer from Telstra? Mr Stanhope—No, there was no transfer from Telstra. QPSX started some time ago and was not 100 per cent owned by Telstra. It had established its own employment terms and conditions and it was owned 25 per cent by the University of Western Australia, as I recall. Senator SCHACHT—When did you buy out the University of Western Australia? Mr Stanhope—It would be two years ago now, I would say, maybe three. Senator SCHACHT—So for the last four years since that occurred, since 1994, it has been a fully owned subsidiary of Telstra. Mr Stanhope—It has. Senator SCHACHT—In every sense of the word, in other arrangements and doing accounts, if you were looking at liabilities and assets and many accounting procedures, this would be put into the Telstra accounts as an asset and liability, would it not? Mr Stanhope—That is right. It is a controlled entity. Senator SCHACHT—So it is a fully controlled entity. If it is a fully controlled entity, why wouldn’t the staff expect to receive the same treatment as at Telstra? Mr Stanhope—Many of our subsidiaries had terms and conditions that were established in the companies as they were incorporated. This company has been earmarked for sale for some time, and the directors of that company, of which I am one, decided that the company would— Senator SCHACHT—It is good at last to have someone right at the table who has got his fingerprints on it. Thank you very much. Mr Stanhope—Okay. Mr Ward—We do our best, Senator, as you know. Mr Stanhope—You will be looking for my head. Senator SCHACHT—No, no, never. I am a kind person. Mr Stanhope—The company had its own terms and conditions and was earmarked for sale but the board of directors, of which there are two of us, decided that it would be less saleable if this company had any other terms and conditions than the company already had. Those terms and conditions were to remain in place for the sale of that company. As it turned out, we could not get a buyer for the company and the company has now been wound up. The net staff of that company now is one person who finishes up on 30 June.

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Senator SCHACHT—You can assure the Senate estimates committee that when these people were employed, even when it was a venture with the WA university—at that stage how much did the WA university have in it? Mr Stanhope—I think it was around 25 per cent, Senator. Senator SCHACHT—So right from the very beginning QPSX has always been majority owned by Telstra? Mr Stanhope—Yes, it has. Senator SCHACHT—When people were employed at any stage in the history of QPSX, can you assure the Senate that they were clearly informed they were not employed under the same conditions as Telstra employees? Mr Stanhope—Yes, I can. They were employed under the terms and conditions of QPSX the company, and they were different from Telstra’s. Senator SCHACHT—I am informed that on 22 March 1996 Frank Blount issued a memo directing that all subsidiaries adopt Telstra’s corporate policies. This memo indicated that any exemptions would be rarely granted, particularly with regard to employee relations and conditions. We understand that no exemption was granted for QPSX. That is the advice I have. Mr Stanhope—The board of directors, myself and one other— Senator SCHACHT—Who is also a Telstra person, I presume. Mr Stanhope—Yes, he is. Senator SCHACHT—Who is that? Mr Stanhope—At that time it was Peter Abery. He is no longer a director of the company. Senator SCHACHT—Who is the director now? Mr Stanhope—Myself and Noel Robertson. Senator SCHACHT—What is his position in Telstra? Mr Stanhope—He is a senior manager in our strategy area. Senator SCHACHT—Okay. Referring back to this memo from Frank Blount, is that correct, as he says—‘would rarely be granted, particularly with regard to employee relations and conditions’? Mr Stanhope—That is correct. I recall that memo from Frank Blount and this was one of those rare occasions. As I alluded to before, the company was about to be sold. Senator SCHACHT—So Frank Blount or the board or the senior management has given an exemption. Mr Stanhope—I think the exemption came from the group managing director at the time. Senator SCHACHT—An exemption was granted? Mr Stanhope—Yes, that is right. Senator SCHACHT—When was that exemption granted? Mr Stanhope—I cannot tell you the exact date but it certainly is minuted. The decision of the directors of QPSX is minuted in the minutes to retain the terms and conditions of QPSX for all employees as we were about to enter a sale. Senator SCHACHT—This is in the last year? Mr Stanhope—Probably the year before.

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Senator SCHACHT—In the last two years? Mr Stanhope—That is right. Senator SCHACHT—The exemption was granted. Mr Stanhope—That is right. Senator SCHACHT—It is one of these rarely granted exemptions. Mr Stanhope—That is right, because we were going to sell the company. That is a fairly exceptional event. Senator SCHACHT—But this meant Telstra was able to save itself a higher level of redundancy payout, did it not? Mr Stanhope—We would still pay redundancies but not to the extent of Telstra’s redundancies. Senator SCHACHT—What was the difference between what you would have had to pay out in redundancies? Mr Stanhope—I cannot tell you the amount, Senator. Senator SCHACHT—I would like you to take that on notice. Mr Stanhope—Okay. Senator SCHACHT—It seems to me that you have adopted a practice here that I think you could claim is technically and legally correct but I have to say I am not sure, in commonsense ethics around the place, that it is actually completely clean. You have sacrificed the workers. You have taken a decision that you had to get the exemption, otherwise you would have been responsible for giving them probably the same amount of redundancies as every other Telstra employee. You got the exemption so you could save yourself a payout. Mr Stanhope—That is true but the employees of that company were never under any misapprehension that they had any change in their terms and conditions. Senator SCHACHT—If that is the case, why did you need an exemption? Mr Stanhope—Because of Frank Blount’s memo. Senator SCHACHT—Yes, he had given a memo which the staff took as saying, ‘We are treated the same as Telstra employees.’ The exemptions were rarely granted. Mr Stanhope—Correct. Senator SCHACHT—So for four months they did not read the fine print or accept that Telstra would pull this on. Two years ago when you took the decision to give the exemption, were they informed beforehand? Were there any negotiations or discussions that this exemption would be called on? Mr Stanhope—I cannot say the extent of— Senator SCHACHT—No, but then you are a director. You should know. This is germane to the financial performance of the company. All right, you cannot remember two years ago. We all cannot remember everything two years ago. But you were a director. Mr Stanhope—That is right, and that decision was minuted in the board minutes, and whether the general management of the company two years ago then went out and said, ‘This is what the board has decided,’—I would expect them to do so. Senator SCHACHT—But you do not know. Mr Stanhope—But I cannot tell you.

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Senator SCHACHT—I would like you to take that on notice. Unfortunately I am not sure that this matter can be rectified if management has taken the decision, unfortunately, but I have to say I think these employees have been shabbily treated. CHAIR—Is that it? Senator SCHACHT—I just have a couple of quick ones, and we will not take long at all now. Has the digitisation of exchanges under the FMO program all been completed now? Is it close to the deadline? Mr Ward—I think the commitment was to effectively complete digitisation by December this year and we are on track to deliver that, Senator. Senator SCHACHT—Right. It is a pity the minister is not here again. He is still in the broom cupboard, I presume. CHAIR—I think he might have died in there from lack of oxygen! Senator SCHACHT—Mr Stevens, you will have to be it until he turns up. On 6 May in the Financial Review, I think it was, there was a story that the minister had asked the department for advice on possible amendments to the Telecommunications Act vis-a-vis competition policy vis-a-vis the relationship with Telstra and others. Has the department provided advice, and do you know if, as a result, the government is going to propose amendments to the Telecommunications Act? Mr Stevens—We have certainly provided some advice on that issue, and that is still advice we are refining at the moment. So no final decision has been made at this point. Senator SCHACHT—Would you anticipate—because the Telecommunications Act I think is before the parliament as part of the privatisation of Telstra—that the government is going to propose any amendments to that act, to this package, while this bill is being debated on these areas where the government has sought advice from the department? Mr Stevens—If any amendments are to be made, I am sure that would be the time frame. Senator SCHACHT—I just wonder if the minister could assist us here. Minister, I just asked this of Mr Stevens. On 6 May there was a story in I think the Financial Review that you had sought advice from the department about possible amendments to the Telecommunica- tions Act on issues of competition where there had been complaints and people wanted the act strengthened. Some of those people have given evidence to the Telstra inquiry just on the Telstra privatisation package when we took that, and they have been commented on by both the majority and the minority reports. Is it the intention of the government when this bill is debated in the last two weeks of this session to come up with significant amendments that deal with telecommunications competition issues while the Telecommunications Act is before the parliament—on the privatisation issue, I know, but as it is there it does not stop anybody moving amendments, including the government. Senator Alston—We have consistently said that we regard the package of bills that went through and took effect from 1 July last as adequate, essentially putting the onus on the regulator to pursue the reform agenda or competition agenda. At the same time, I have said that we would look at the possibility of finetuning, meaning that there might be some changes that could be made at the margin to either strengthen the role of the ACCC or to somehow assist the process, and we are considering whether that might be done in the context of the bill. Senator SCHACHT—Would that finetuning include such areas as forcing Telstra to unbundle, to use that phrase—is the other phrase ringbarking, or something?

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Mr Stevens—Ring fencing. Senator SCHACHT—Ring fencing? I knew it was something like that. I know some people want to ringbark Telstra. When I speak to them they use phrases probably that remind me of ringbarking. Are ring fencing and unbundling what you would call, Minister, finetuning or are they more substantial amendments that would need more considered discussion or consider- ation by the government? Senator Alston—Part of the difficulty in this debate which is being conducted in the media, to some extent, is even understanding what people have in mind when they talk about ring fencing—or in your case ringbarking. Certainly it has been suggested that we could draw some insights from the UK experience. Now, that does not, to me, seem to go anywhere near what the ultimate definition of ring fencing might involve, which is effectively a structural separation, not just an accounting separation, and we are not inclined in that direction. Senator SCHACHT—If it was just a mechanical separation, would you be inclined? Senator Alston—I am not sure what a mechanical separation is. Senator SCHACHT—I knew that; that is why I asked you about the phrase, because I am not sure— Senator Alston—Do you mean sending in engineers to separate the various parts of the network? Senator SCHACHT—Mr Ward, does Telstra have a view of what the difference between a structural separation and just a mechanical separation would be? Mr Ward—Structural separation at its ultimate means, I guess, economic separation— entirely different entities. Senator Alston—The sort of thing Keating had in mind prior to the last election. Senator SCHACHT—You would hive off mobiles and Yellow Pages. Mr Ward—Directories, et cetera—yes, that is right. Senator Alston—Which I presume is still your policy. Senator SCHACHT—All you have to do is read our national platform, Senator Alston, and you will find very clearly outlined what our policy is. Mr Ward—And at the other end of the scale there is the accounting separation, which is essentially what we have now. Senator SCHACHT—As you know, publicly some of these companies have used the opportunity of the Telstra sale— Mr Ward—I have noticed. Senator SCHACHT—to drop a few ideas around the place, and beat you around the head, which they are entitled to do—and you are entitled to hit them around the head in return, and I have noticed Mr Blount has done that on a number of occasions. Mr Ward—We encourage him to do so. Senator SCHACHT—I am sure. Perhaps you might encourage him to turn up here, and we could get some of this on the record as well. Never mind about his attendance or not. There was a suggestion by some companies at the hearing we had. I think AAPT said they thought for the local loop, the cost is about 12c a call, not 25c. I think Macquarie put in a submission saying that if you took out all overheads and if they did their own billing and everything like that, it would be 7c, 7.5c, 8c or something like that. Has Telstra done any public work in

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 351 response to that that you could provide us with where you explain why those figures, in your view, are wrong? You have publicly said you do not agree with them, but I have not actually seen any material that attacks the assumptions they are making. Mr Ward—Let me answer that in a few ways. Some of those assertions are just entirely outrageous in terms of the actual cost structures that apply. I think earlier in this session you have sought some profitability figures around parts of our business, which we have agreed to respond to commercially-in-confidence. Senator SCHACHT—Yes. Mr Ward—We will use that response to expand on this issue. Senator SCHACHT—Okay. Mr Ward—We will also give you information that we will put on the public record about this issue. However, the local part of our business does not enjoy profits, for a whole raft of reasons which go back to the history of pricing in telecommunications in Australia—in fact worldwide—and the price cap regime that we are under, et cetera. There is a rich history to it. Senator SCHACHT—It will be useful to get that information. Minister, I just want to raise this with you: two days ago, in I think the West Australian, a detailed story appeared about the fact that Northgate in Ballarat had completely withdrawn from using the cable that it had hung in some parts of Ballarat for any of its services, and said it was going to use the other carrier’s existing cable for getting into wholesaling, et cetera. Senator Alston, for 12 months you have lectured us in the Senate on a number of occasions about ‘This is the way that competition will operate in regional Australia.’ In view of the fact that the cable was not successful, and they have withdrawn from it and are now relying on using basically Telstra’s network, I would imagine, on the system, this actually is an example that would suggest regional Australia will never get the competition level that you will get in the city. Senator Alston—You have to distinguish between the different products. I think you will certainly get competition in telephony in all sorts of ways. Senator SCHACHT—They offered free phone calls and it never occurred. Senator Alston—They were essentially offering pay TV, but they only ever got something like 200 consumers because they were not able to get access to the product from Foxtel and Optus. What they were offering was essentially not competitive. I think when they decided to concentrate on untimed calls—and you will recall they had a package that allowed free local calls between subscribers, and I think also untimed calls to Melbourne—they have since expanded their operation to include untimed, fixed price packages to a number of international locations. They claim that they have been swamped by the demand. That suggests that there are going to be some competitive opportunities for telephone players. Whether they are installing their own infrastructure or leveraging off the carriers is obviously a commercial decision that they take depending upon interconnection rates. But I think it certainly suggests that the punters are hungry for an alternative, and that augers well for competition. Senator SCHACHT—Yes, but they are not going to be using duplicate infrastructure to do it; they are going to be using the existing— Senator Alston—They may or may not, depending upon the interconnection rate that is set.

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Senator SCHACHT—All I can note, Minister, is that twice you have got the Prime Minister of Australia to be publicly involved in launching a new local telephony system. One of them was Optus’s famous launch in August 1996 and ever since they never publicise it or never go out and encourage people to join up because they cannot get the technology to work. And then at the launch of the Northgate system you made a phone call from Ballarat to wherever the Prime Minister was, or vice versa, to launch that system. You have led the Prime Minister up a dead end twice. I trust that next time you put the third opportunity to him that he might have the wit to say no, because on both occasions it has not worked. Senator Alston—I think you understand as well as we do that we are not responsible for the business cases of players, but we do certainly welcome it when we see new and innovative packages being offered, including by Telstra, and we would always want to encourage those developments. We have recently had a very good launch of a Telstra’s announcement of— Senator SCHACHT—Well, that is Telstra. It works. Senator Alston—I am just saying, and it may be in due course— CHAIR—Order! On that note, my suggestion is that we have now gone well over time on Telstra, and the ABC officers are waiting. My suggestion is— Senator SCHACHT—Actually, I am finishing, but I just want to indicate, on the questions on notice, Madam Chair, that as we are meeting all day tomorrow as a committee on another matter, on digital matters, that if we could have till the close of business on Monday to lodge further questions on notice that we have not had a chance to raise here today with Telstra and the other agencies, that would be helpful. CHAIR—That will be an order. My suggestion is that we go to lunch now. At 20 past 1 we will resume with the officers from the ABC. I would like to thank the officers from Telstra for their attendance today. Thank you very much. Sitting suspended from 12.40 p.m. to 1.24 p.m. Program 3—Broadcasting, online and information services Subprogram 3.3—Australian Broadcasting Corporation CHAIR—We will now ask questions of the ABC. Senator SCHACHT—Is the minister going to turn up? CHAIR—If you need to ask questions of the minister, Senator Tierney can start. Senator TIERNEY—I do not have any questions of the minister. Mr Johns, I understand the latest rating figures for ABC TV news have shown very solid audience growth. Is that correct? Mr Johns—That is my impression, yes, Senator. Senator TIERNEY—What do you put that down to? Mr Johns—I would like to think it is excellence. Senator TIERNEY—It must be very heartening to see those ratings go up. So it must be very worrying to see the ratings for the 7.30 Report. It appears that viewers are switching off at the end of the news and coming back after the 7.30 Report. Have you got any indication of why they are doing that? Mr Johns—I am not sure that the 7.30 Report’s figures are less strong than they were last year. Ratings, as you know, ebb and flow, and while they are running in your favour they are always heartening and encouraging. Of course, with an organisation like the ABC we have

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 353 to be very conscious of audience responses. We also have to be very conscious of our charter responsibilities. In my view, the 7.30 Report is performing well. I would have to say that the 7.30 Report from its inception has had one area of criticism levelled at it, and that is that it is not sufficiently state based. But, for example, the state where it is my impression that that criticism was the strongest is Western Australia, and I think you will find that the 7.30 Report’s figures are highest in the west, so there you go. Senator TIERNEY—Have you got the actual audience rating for the news, then the 7.30 Report, then the program that follows? Mr Johns—I have not got them with me, Senator, but I could certainly provide them to you. Senator TIERNEY—Your impression is that there is not a discernible difference as you go from the news to the 7.30 Report. Mr Johns—No, that is not what I said. What I said was that I am not aware that there is a heavy difference between the 7.30 Report’s performance now and what it was, say, six months ago. This is just my impression. If I can take the question on notice, I will certainly supply you with the figures. Senator TIERNEY—There probably is not a great deal of difference between now and six months ago because I do not think the format has changed particularly. But the question I was asking was not comparing the 7.30 Report now with six months ago but comparing the news and after the news. Mr Johns—As I said, there is an ebb and flow. You have got to say that our news is probably consistently our strongest performer. There is a long tradition behind it, there is a heavy reliance placed upon it throughout the country and people have come to it over the years. I think that has to be taken into account also. Senator TIERNEY—Do you think that such a drop-off at 7.30 and then return might be due to the fact that the 7.30 Report might be, in the eyes of viewers, too Canberra oriented? Mr Johns—It is a national program— Senator TIERNEY—But is it focusing on what is happening just in Canberra? Mr Johns—I know what you are saying. It is a national program and it has to take account of what is happening in Canberra, self-evidently. I think that over the week it secures a reasonable spread of interests in the states and nationally. Senator TIERNEY—In terms of programs generally and what the ABC decides to show, can you tell me a little bit about what sort of survey work you might carry out to determine what audiences want? Mr Johns—We are, I am pleased to say, strengthening our audience research as a result of a reorganisation that the ABC is going through. We are increasingly taking account of what audiences believe are the most important things to them. But surveys are a guide and a check, and that is all they can be. We have to decide our programming policy on a range of criteria: our national charter, our need to be innovative, our need to take account and our need to provide alternatives at various times to other networks. There is a whole range of considerations. It is not simply just looking at an audience response in isolation. Senator TIERNEY—In that survey work, do you try to gauge what the community’s attitude to the ABC itself is? Is that part of the survey?

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Mr Johns—Yes, it is cast among ABC viewers. We have a number of means of gauging what the viewer’s attitude is to the ABC—from complaints, from an omnibus Neilson survey that is done annually. There is a range, but I would like there to be more, frankly. One of the problems is the cost. I do not think you can ever know too much about your audience. Senator TIERNEY—Do you survey what issues they feel are important? Mr Johns—There are interest surveys, yes. Audience interest surveys are conducted. Senator TIERNEY—What about your own programming and content? Are they surveyed in relation to what the audience’s attitude to that might be? Mr Johns—Yes. I have here an issues survey of March 1997, which has just become available to us. It actually has not been released to the board. Just flicking through it, under ‘Summary of interest in issues’: finance, 12; social issues, 13; education, 5; the environment, 10; international events and trends, 4; media and entertainment, 12. That is at random. I just happened to open it at that page. Senator TIERNEY—When it is appropriate, could the committee have a copy of that report? I know it has to go to the board. Mr Johns—Certainly. Senator TIERNEY—How much do you spend a year on that sort of research? Mr Johns—I would have to take that on notice. Senator TIERNEY—Who conducts the research? Mr Johns—It is done by various means. The Neilson survey is one that is provided for us. Our new strategic planning and research unit is carrying out research. I will give you those details. Senator TIERNEY—Does that strategic unit conduct the research themselves or do they outsource it to a company? Mr Johns—Sometimes it is outsourced. I think this particular one— Ms Clayton—Yes. We have a range of research that is undertaken by a range of different people. We do have an in-house research capability. This particular survey—the interests survey—is undertaken internally. The Neilson omnibus survey, which looks at broad audience interests in response to ABC programming—including the 7.30 Report—is an independent survey done by AC Neilson. We do one-off surveys from time to time which are undertaken by independent organisations. It is a mix of both internally run surveys and externally commissioned surveys. CHAIR—I am a bit confused about that one. Ms Clayton—That is an internally commissioned survey. CHAIR—I thought Mr Johns said it was a Neilson survey. Mr Johns—No. Ms Clayton—The one we referred to earlier, the Neilson omnibus survey, is another survey we do which looks at audience attitudes to our programs. This survey is about what audience interests are. CHAIR—I think it would be useful if the committee could have both of them as soon as they have gone to the board.

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Ms Clayton—Yes. I am not sure where we are at with the Neilson omnibus survey, but we will certainly take that on notice. CHAIR—Can you advise us when they are due to go to the board and then can we have a copy of them immediately after that? Mr Johns—Sure. Senator TIERNEY—Can you describe the process for me of how you actually work out what you are going to survey when it is an internal one? Ms Clayton—We have just consolidated our marketing division, which includes the strategic research unit, and it is now coordinated centrally. It is governed by a marketing executive, which comprises all the output executive, and they set the priorities as part of that executive. It is now an ABC-wide priority setting. The marketing people consult with the individual network managers, get their input into what their needs are during the year and they develop an annual marketing research plan which is then implemented. The board also has an input. We are now beginning a quarterly report to the board on our audiences, and that will provide an opportunity for the board to have an input into the type of research that the ABC is undertaking. Senator TIERNEY—When they conduct a piece of community research, what sort of sample size do they usually work to? Ms Clayton—I could not tell you precisely what the sample size is, but they are all conducted within the accepted professional standards of research. Senator TIERNEY—I was on an earlier committee looking into the ABC in 1993 where we were looking at the international television arm, and I remember there was a survey that they carried out in Malaysia which had a sample of eight. That worried us a little bit at that time. Could you provide us with— Ms Clayton—We can provide you with details of the sample methodologies. Senator TIERNEY—details of the sorts of methodologies that are used in surveys, which could include the total size of the survey, the way in which it is done—for example, is it done by phone or is it done in the street?—and the way in which the population is sampled—do we just do this in the capitals or do we do it Australia-wide? Those sorts of issues. Ms Clayton—Yes. Senator TIERNEY—How do the findings of this research into programming, attitudes and what the ABC is doing feed back into the programming of the ABC? Ms Clayton—The audience research is commissioned in consultation with the network managers and the program managers, and individual results are fed out from our planning unit back to the portfolio network managers for their use. It is also fed into corporate management and up to the board. Senator TIERNEY—Are you aware of criticism that the ABC focuses too much on social issues at the expense of things like economic issues? Mr Johns—I am aware of that. I would point out that which I think is sometimes ignored— that is, the full range of ABC programming and our charter responsibilities. As I just mentioned, I believe we have strengthened our programming on finance, for example—an argument which you mentioned in economic matters—over the last 12 to 18 months. But I think you have to look at the ABC across the full gamut of the hundreds and hundreds of hours of programming that we embark upon. You mentioned finance. The listing here for

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 356 SENATE—Legislation Thursday, 11 June 1998 finance happens to be 12; social issues, 13; environment, 10; and health, 15. This is just a range. As I said, I will make this available to you. Senator TIERNEY—I wonder why people are picking up that perception that you focus more on social issues. Senator SCHACHT—The minister keeps saying it all the time. Stooges from the Liberal Party keep saying it all the time. Senator TIERNEY—A point of order, Madam Chair: we sat here all morning in pain listening to you, Senator Schacht. Senator SCHACHT—You didn’t. You weren’t here all the time; you left. Senator TIERNEY—I raised one point of order, and everyone else remained silent. We will be providing you with an opportunity to ask the ABC questions later, so perhaps you can go and have a rest somewhere while we are doing this. Senator SCHACHT—No. I am just keeping you straight. Mr Johns—Senator, I would ask you: what people, where and how and what about? I acknowledge that I have heard the criticism that the ABC devotes too much of its time and concern to social issues. I would ask: when and where and how? If you levelled that criticism in a current affairs program, that would be one thing; if you levelled it in an arts program, that would be another thing. I think those sorts of generalisations really need to be weighted— Senator SCHACHT—Substantiated. Mr Johns—Weighted—thanks, Senator—into particular programs and particular situations. Senator TIERNEY—Let us take one issue—the issue of Wik, for example. Surveys have been done on where that ranks as an issue out in the electorate—voting intentions and that sort of thing. That has also been nationally. In the electorate I am in it was ranked there as well, along with a whole range of other issues, and it was actually very low on the scale. Senator SCHACHT—The National Farmers Federation said it was an economic issue. Senator TIERNEY—But, if you have a look at the proportion of ABC programming and the time devoted to this issue compared with the level of community concern about it in relation to other issues, wouldn’t you concede that perhaps it is out of balance? Mr Johns—I would want to look at that in detail. I would want to ask: what programs are we talking about, in what areas and what are the weightings on that? As I say, I would expect Wik to figure very strongly in a current affairs program and in our national news. I would not necessarily expect it to figure strongly in a drive time program on radio. So I think that I would want to look at the specifics of this and see how it was displayed. I remind you that I said our program responsibilities flow also from our charter responsibilities; they flow also from our need to provide alternative and supplementary programming. We do not flinch from dealing with issues; we do not flinch from those responsibilities. We can’t, because we have charter responsibilities for that. But, having said that, as I said at the beginning, the ABC, like any media organisation, has to take account of its audience interests and the openness of the audience to receive the programming we are delivering. Senator TIERNEY—You mentioned that you would have to do some sort of analysis across drive time and news and all those sorts of things, but couldn’t you do another sort of analysis that just aggregated that issue compared with other social issues that are being treated on the ABC to see if it is out of line with how the community is concerned about that?

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Mr Johns—Senator, I do not think I am as skilled as you perhaps are in terms of surveys and survey methodology. Senator SCHACHT—You are immensely more skilled than he is. CHAIR—Senator Schacht, we do not need your interjections. Mr Johns—I would want to get the best and the most appropriate methodology that I could to find it out, provided that we have the funds and provided that we have the responsibilities. I am not talking about Wik now; I am talking about the general issue of understanding our audiences and the program content we are providing them with. Senator TIERNEY—If you are out of balance on those sorts of things, is there not a danger that the ABC, as an independent and impartial broadcaster, could be accused of driving a political agenda rather than reflecting community debate at that time? Mr Johns—I would be living in another country, in another place, if I did not recognise that the ABC has been subjected to that level of criticism. But we are talking now about whether it is valid or not and what our responses should be in programming terms. Senator TIERNEY—If we bring it down to individual programmers and journalists, what procedures are there in place in the ABC that perhaps dissuade these people from driving their own agendas? Mr Johns—I do not know who these people are, but what I am saying in answer to your question— Senator SCHACHT—Name them, Senator Tierney. Senator TIERNEY—I am naming the categories, Senator Schacht. I am saying, if a reporter drives their own agenda—do you want me to name one and an issue? Senator SCHACHT—I want you to name them; give us an example. Senator TIERNEY—If you want me to name someone, let me talk about Kerry O’Brien when he was leading the Fightback debate and the way in which that program was biased and prejudiced because of the way he did it. CHAIR—Order! It is not appropriate for either of you two senators to have a discussion behind my back, which you were just doing. Direct your questions to Mr Johns or to the people at the table. Senator Schacht, Senator Tierney and Senator Eggleston sat in absolute silence, with one point of order, for 3½ hours this morning. I expect you to offer them the same courtesy while they ask questions. They have every right to ask questions and to be heard in silence, as much right as you have. Senator TIERNEY—Mr Johns is quite capable of handling himself without your assistance, Senator Schacht. CHAIR—Senator Tierney, I do not need your help. Just ask the questions and get on with it. Senator TIERNEY—I have asked the question, and I am waiting for Mr Johns’s response. Mr Johns—Let me address your question. In the first instance, we would have an executive producer who would, either on a daily basis or perhaps on a weekly basis, review the content of the program and ask, ‘Well, how did we perform? What was the range of interest? How did we do on that?’ That would be measured against the editorial purpose of the program, whether it is an arts program, a program on health matters, a program on living matters or a current affairs program. It is measured against that.

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Further up the line, in the case of radio, it could well be that a station manager is looking at the program, looking at the results of that and discussing it. And further up the line there can be the head of the portfolio. If it is, say, regional services, it falls within the responsibility of the head of regional services. They will talk to their managers and to their colleagues about the performance of programs. They are under continuous review, in other words. Further up the line again, it can go beyond the members of the executive to the board. The board, while it does not involve itself in programming, does involve itself in policy. We talk to the board and report to the board on our editorial performance and program performance. So there is a whole range of measures that are taken to test the performance. Obviously we are not unaware of ratings and we are not unaware of critical appraisal from television critics, radio critics and other commentators. We are not unaware of a whole range of external valuations that are put upon our work. Having been in the media for a fair time, I think the ABC is certainly at least as rigorous in appraising its internal performance as any other media organisation that I have worked with. Senator TIERNEY—That is interesting because I understand, from reports of a meeting, that you recently told the board that the ABC had in place a process whereby executive producers and program makers routinely examined their programs for bias and accuracy every day. I also note that you told ABC Radio 2BL that this occurred every week. ABC staff evidently expressed amazement at both of your statements. Mr Johns—I am sorry, I thought I corrected myself on that point as I was going through there. It depends upon the program and the nature of the program. A weekly program receives one sort of treatment, a daily program receives another sort of treatment, and they are not universal. It is not set to a particular timetable necessarily, but I am saying that, as a general rule and as a general process, this is the sort of thing that is done. Senator TIERNEY—So for something like, say, the 7.30 Report the executive producers and the program makers would meet every day and then the following day review it? Mr Johns—They are meeting daily. They look at their performance and they look at not only where they have been but where they might go. Senator TIERNEY—And they review the program of the previous night for bias and accuracy from some sort of feedback, presumably? Mr Johns—I would not say that they would review it under the headings of bias and accuracy. I am saying that they review the performance of the program in relation to interest; in relation to whether they have done it well enough; whether they were, as one might say, on the pace; whether it was appropriate for that day; and what they have missed. This is a normal editorial process. Senator TIERNEY—So when you were speaking on 2BL—I do not have the transcript— did you say that it was reviewed daily for bias and accuracy? Mr Johns—I do not recall that I said that. If I did, it is not what I meant. With bias and accuracy specifically, people are very conscious of our editorial policies. Although they may not specifically identify, ‘How did we go for bias and accuracy today?’ they could go through periods when they would do that, but there are other periods when they would be looking at other things. Whatever happens, within the context of program making, we have to meet—and our program makers have to meet—these detailed editorial policy standards; and so sometimes you could be saying that it is assumed rather than examined in particular on one particular day.

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Senator TIERNEY—In the case of the 7.30 Report, how is this matter of bias and accuracy handled with the executive producers and program makers? What is the process of reviewing that? How do they get feedback or complaints on bias and accuracy and, having received such complaints, how do they then deal with it? Mr Johns—Complaints are dealt with in various ways. For example, one way is that when a complaint is lodged by phone it is not referred to the person who caused the complaint to answer—it is referred to them—but dealt with by the executive producer or someone further up the line so that the individual is not sitting in judgment upon themselves. Senator TIERNEY—But it is all an internal process within the ABC, isn’t it? Mr Johns—Not all of them are internal processes. Senator TIERNEY—So how do you get external review? Are there any external elements to review? Mr Johns—Yes. The important external element is that, if a complaint is lodged and people do not believe it has been dealt with satisfactorily, it is available to that person to take that complaint to our independent six-member panel to review it. If in turn that complaint is considered not to have been satisfactorily dealt with by the person complaining, they can take their complaint in general circumstances to the Australian Broadcasting Authority. So there are those external as well as internal checks and balances. Senator TIERNEY—How often does that sort of complaint reach that level? Ms Clayton—There are a number of inquiries often to the Independent Complaints Review Panel. Sometimes we get a rush of them and sometimes we do not, so it is a little bit up and down. I would have to take it on notice. Senator TIERNEY—Could you give a ballpark figure for a year, for example, of how many complaints it deals with? Ms Clayton—Twelve to 15 complaints. They are usually complaints of a serious nature; they are not trivial complaints. That is part of the guidelines for the Independent Complaints Review Panel—complaints of serious bias, accuracy and partiality. There is a threshold test for it, and it is only for those that are referred to it, but very few matters referred to it are rejected by the Independent Complaints Review Panel. All complainants who have made complaints in those areas when our response is sent out are now sent out a pamphlet which tells them what their rights are to take the complaint further so that members of the audience and members of interest groups who are complaining are aware of their rights and their capability to take it further. Senator TIERNEY—So that ballpark figure you gave us referred to bias, inaccuracy, unbalanced reporting— Ms Clayton—That panel only exists for bias, accuracy and impartiality. Senator TIERNEY—Okay. Who is responsible for— Senator SCHACHT—How many? Ms Clayton—It was 12 to 15. Senator SCHACHT—In a full year? Ms Clayton—Yes. Senator TIERNEY—Who is responsible for corrective action? Ms Clayton—The managing director.

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Senator TIERNEY—It goes straight to the managing director? Ms Clayton—The recommendation goes to the managing director. Senator TIERNEY—On how many occasions in, say, the last year would you have undertaken corrective action that went through that process? Mr Johns—I cannot give you a figure on that from memory, but I do not recollect rejecting any independent action that was recommended to me. Ms Clayton—There is a summary of the findings of the review in the back of our annual report. Every year we summarise the outcomes of the review of the Independent Complaints Review Panel and that is available on the public record. Senator SCHACHT—Would you give that to the minister as well. I do not think he is aware of that either. Senator TIERNEY—In every instance, action was recommended to you and you undertook exactly the action that this panel recommended? Mr Johns—That is my recollection. Senator TIERNEY—Could you give us an idea of the range of the sorts of actions that were taken? Ms Clayton—It is summarised in the annual report. The National Association of Forest Industries complained about two items broadcast on the 7.30 Report. They asserted that the item on woodchip coupes broadcast in September lacked balance and was inaccurate and that the item ‘Pine Stockpile’ broadcast in November lacked balance and failed to present relevant viewpoints. The Independent Complaints Review Panel upheld the complaint, finding that the items lacked balance and failed to adequately present principal relevant viewpoints on a matter of considerable public importance. However, the 7.30 Report was commended for their attempts to achieve balance over time by broadcasting subsequent reports. The 7.30 Report broadcast a summary of the Independent Complaints Review Panel findings and an apology on 22 August 1996. Bankers Trust Australia Ltd claimed that, on 18 September, the 7.30 Report conveyed a fundamentally misleading impression of Bankers Trust’s involvement in the University of Queensland’s cholesterol project and it believed that the report was unfair, unbalanced and involved a highly selective reporting of facts. The Independent Complaints Review Panel upheld the complaint, finding that the use of the term ‘pulled the plug’ in the program implied that Bankers Trust had summarily withdrawn support from a significant project of great benefit to medicine and that this amounted to unfair treatment. It further found that there was no clarification in the program that Bankers Trust had fulfilled its contractual obligations, and the panel said that this amounted to serious lack of balance and unfair treatment of Bankers Trust by the 7.30 Report. The 7.30 Report broadcast a summary of the Independent Complaints Review Panel finding and an apology on 22 January 1997. In terms of the North Forest Products and Forest Industries Federation Inc., the Independent Complaints Review Panel found that the interview on 3LO was somewhat unfair, but it could not substantiate a claim of serious unfair treatment enough to uphold the complaint. The Independent Complaints Review Panel did uphold the complaint of Mr Andrew Casey, in part, finding that his complaint of unfairness in having off-the-record remarks sourced to him by name was justified, but the panel dismissed the claim that the use of his name created any distortion or wrong or improper emphasis. A written apology was sent to Mr Casey.

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Senator TIERNEY—You are aware, I suppose, that for every one who eventually gets a complaint through, there are a huge number out there who sit there and say, ‘Gee, that’s biased,’ and then they never do anything about it. Mr Johns—On that aspect, I would point out something a bit more objective than that: the Mansfield inquiry received something like 10,400 or 10,600 submissions, and fewer than five per cent expressed concern about bias on any account. Senator Alston—It should be pointed out that it was not an explicit term of reference for Mansfield, so it is not surprising that they did not respond in those terms. Senator SCHACHT—You were out there all the time, Minister, promoting the idea that there was bias. Couldn’t you get your own Liberal Party members to put submissions in claiming bias? Goodness me! You were claiming it all the time. Senator Alston—That is a fascinating insight into the way in which you approach independent inquiries and I am delighted to hear it. Senator SCHACHT—No, that is the way you would operate. You could not even get members of your own Liberal Party to put complaints in. Senator TIERNEY—Point of order, Madam Chair—Senator Schacht is interrupting yet again. Senator SCHACHT—The minister interrupted, for a start. CHAIR—Order! Senator TIERNEY—No, he asked for clarification. Senator Alston—I just pointed out a fact. Senator TIERNEY—On the process in which complaints get through— Mr Johns—Could I just add to that? Would you agree that it was relevant that 12 per cent of those who made submissions to the Mansfield inquiry explicitly stated that bias was not a matter of concern? Senator SCHACHT—Hear, hear! Senator TIERNEY—If you do not put that as a specific question, you will get a different result than if you indicate it in a range of things. It does give a different result. If it is a national program—the news or the 7.30 Report or something like that—how are complaints collated across the country? Do you have a mechanism whereby that feeds through to a central point? If they are in Perth they will obviously ring in Perth. Ms Clayton—Our switchboard complaints are logged, categorised and consolidated centrally. We have a weekly and a quarterly report on switchboard complaints which analyses the nature of those complaints and is circulated to all management and program areas. In addition, complaints are received directly by programs themselves within the news and current affairs area. Those program complaints are collated and analysed and a quarterly report is provided to the board on those. For written complaints, those of a serious nature go directly to our Corporate Affairs Unit and those complaints are tracked by our Corporate Affairs Unit. Annually, we do a summary of written and telephone complaints and that summary is contained within our annual report. Senator TIERNEY—What has been the most serious action taken, Mr Johns, as a result of those complaints, say in the last year? Do they get a slap on the wrist if these are proven? What happens?

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Mr Johns—It depends on the recommendations. It is a very serious matter—for the pride of the organisation—when we have to issue a correction. People are counselled. People are advised when a complaint has been registered and found to be valid; the journalist—or the person involved—is counselled. Senator TIERNEY—Who does that counselling? Mr Johns—Usually their immediate superior. Senator TIERNEY—And does a report of that go back to you—or where? Mr Johns—I am not sure whether this is invariable or not, but it can be recorded on their employment file. Ms Clayton—It depends on the nature of the complaint. If it is a serious complaint it would be referred upwards. If it is not a serious complaint, a person can be counselled and it can go on their record. Certain conditions can be set up at the time that the complaint is made. It really is very much dependent on the nature and seriousness of the complaint. Senator TIERNEY—What sort of conditions might be set up? Ms Clayton—That they have to report to a supervising editor—I am aware of an instance of that in recent times. They are required to have their stories double-checked by a supervising person from time to time until such time as their work has improved. Those are the sort of conditions that would be established at the time of discussing the counselling. Senator TIERNEY—But you have no formal feedback process to the independent group or the managing director on the outcome of all that? Ms Clayton—Where a complaint— Senator TIERNEY—Where action was taken—such as counselling or a notation on a file— that does not actually come back up that it was what was done? Ms Howard—If a broadcaster was being disciplined, Senator, I would require a report from their superior or their manager. Senator TIERNEY—It would come back to your level? Ms Howard—Absolutely. Senator TIERNEY—Not to the managing director or— Ms Howard—To my level, and then I would report to the managing director. Senator TIERNEY—You would pass that on? Ms Howard—As a matter of course. Senator TIERNEY—Are ABC employees legally required to abide by the ABC editorial policies? ‘Legally required’ is the emphasis there. Ms Clayton—Journalists’ contracts have a clause within them that requires them to abide by the editorial policies. Broadcasters who are employed—not on contract—must abide by the ABC staff rules; and staff rules include a requirement that they abide by all policies and procedures of the board. So a breach of the editorial policies can be regarded as a breach of contract. Senator TIERNEY—Has that ever happened? Ms Clayton—I would have to take that on notice. Senator TIERNEY—Any instances? I am not asking for details but numbers—

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Ms Clayton—There certainly has been serious counselling for people in the past. But, in theory, their contract does require them to abide by the editorial policies—so they do have a legal obligation. Senator TIERNEY—You might be aware that the BBC has an editorial policies unit that is totally independent and separate from the BBC’s program making arm. Does the ABC have any similar sort of unit? Ms Clayton—The editorial policies unit is not totally independent; it is set up within the corporate area of the BBC. It exists there to provide advice to program makers on editorial policies—as I understand it—and to provide reviews and updates of editorial policies. We have our own corporate policy area with two resident experts on editorial policies. They undertake the coordination and updating of editorial policies and provide clarification of policies as and when required. They also undertake training of journalists whenever the editorial policies are reviewed. They also participate in regular training programs in editorial courses—and there are a range of those. So we do have specialist expertise at corporate level to provide advice and assistance in terms of editorial policies. Senator TIERNEY—I realise that the editorial policy unit in the BBC is within the structure. But isn’t it true that it is totally separate from the program making arm? Ms Clayton—So is ours. Senator TIERNEY—Totally separate? Ms Clayton—Yes. Senator TIERNEY—Are you aware that in the BBC they have a chief political adviser who is part of an independent editorial policy unit that is charged with providing advice, wherever needed, about maintaining standards of fairness, balance and objectivity in relation to programs dealing with political issues? Ms Clayton—We are aware of that, yes. Senator TIERNEY—Do you have a similar position in the ABC? Ms Clayton—No, we do not have a similar position in the ABC. There has been a position of that nature in the past. Senator TIERNEY—In the past, has there? What time period did that run from? Ms Clayton—There has been a managing editor position, for instance. Senator TIERNEY—When was that? Ms Clayton—We would have to go back for that, but it was only a brief period that there was a managing editor position established. Senator SCHACHT—Was that Chris Anderson? Ms Clayton—Yes. Senator TIERNEY—How long ago did that cease? Mr Johns—About two years ago. Senator TIERNEY—Why did it change? Mr Johns—Because we were reorganising our whole news and current affairs approach. We were moving across media. Ms Clayton—It was not a position independent of the program makers, but it had an overriding editorial role.

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Senator TIERNEY—Does the BBC model of having an independent position attract you at all? They have obviously organised the position in this way for particular reasons. Do you think that would be appropriate in the Australian context? Mr Johns—I am not sure that it would. We have looked at the BBC approaches. In particular, we have got the suggestions that were made by the minister to the board and later on some further details from a press release. We believe that essentially we have got the equivalence of the BBC process. They are not exactly parallel; but we believe we have got the equivalence of it. For example, I have mentioned the complaints panel. The BBC has advisory panels of independent experts to advise on policy; we have a national advisory council of people drawn from the community to review our programming, comment on it and advise us on those program policies. Of course there is the matter of resources. We have a fraction—less than a quarter, I think— of the BBC’s budget. That would be a consideration. I think essentially we have our checks and balances, which the board has just recently endorsed. We believe that we have got a full range of very good checks and balances to ensure that we meet our charter responsibilities of fairness and impartiality. I happen to have a few recent English press clippings here. I have one from the Observer dated 26 April: ‘Tories accuse BBC of Labour bias’. Senator TIERNEY—A worldwide phenomenon. Mr Johns—An earlier one from the Independent, ‘Labour at war with "Today"’, stated: Labour has declared war on the BBC Radio’s Today programme, threatening to suspend co-operation in retaliation for ‘the John Humphrys problem’. I have another one from the Sunday Telegraph of 26 April of this year entitled ‘Stopwatch Tories find Labour has more BBC air time’. So the BBC does not seem to be without its critics either. Senator TIERNEY—I am sure if you pick a few examples of anecdotal evidence you will find that sort of thing. Senator SCHACHT—You’re incredible! Senator TIERNEY—Can we just go back to the ABC Independent Complaints Review Panel. Is that analogous to the BBC Program Complaints Unit or is it analogous to the BBC Board of Governors Program Complaints Appeals Committee? Ms Clayton—It is analogous to neither inasmuch as its structure. The BBC Program Complaints Unit deals with serious complaints. It is an internal complaints unit; it is headed by a head of program complaints. We have a head of corporate affairs who deals with serious complaints on our behalf. Serious complaints are ones which are written to the managing director or the chairman or which are referred up; also complaints which cross a number of areas. We have an internal corporate complaints handling unit as well. The BBC board of governors appeal committee is a subcommittee of the board, so it does not comprise external experts. The Independent Complaints Review Panel is appointed by the board and appoints external experts to it. Senator TIERNEY—Does your panel report directly to the ABC board? Ms Clayton—All its findings are reported to the board, yes. Senator TIERNEY—I am sure the findings are, but does it report directly to the board? Ms Clayton—Under the structure of the Independent Complaints Review Panel, because the board does not play a role in program matters, its findings and recommendations are

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 365 referred to the managing director as editor-in-chief, who takes action on those recommenda- tions. But the panel is appointed by the board and its findings are reported to the board. Senator TIERNEY—Via the managing director, not directly? Ms Clayton—Absolutely, but every report goes to the board. Senator TIERNEY—Do you think the BBC model is perhaps superior in the sense that the complaints go a little more directly to the board? Ms Clayton—I do not think they do. Senator TIERNEY—It is my understanding that they do. Senator SCHACHT—I think that is wrong, Senator Tierney. CHAIR—Order! Senator Schacht. Senator SCHACHT—You just made an assertion and are providing no proof. Senator TIERNEY—I have been listening to you make assertions all morning. Senator SCHACHT—I back them up with facts. CHAIR—Order! Senators. Please ask your questions. Senator TIERNEY—Can you tell me who is on your panel? Ms Clayton—It is in the annual report. It is a six-member panel. I do have those names here somewhere. If you would just bear with me, I will find them. If you want to proceed, I will then give you those names. Senator TIERNEY—I do not necessarily want to know their names, but their backgrounds would be more of interest. Ms Clayton—I am just trying to find where I have put those names; I did bring them with me. Mr Johns—Perhaps we can return to the names. Senator TIERNEY—Perhaps if we could have their backgrounds and occupations, that sort of thing would be of use. Ms Clayton—I know that it is chaired by Professor Michael Chesterman from the University of New South Wales. Members include Ted Thomas, former head of Channel 9— Mr Johns—The point is that they are people who have been invited to join the panel because of their media expertise and awareness. Senator TIERNEY—I recall that, in another area of the bureaucracy where we did ask for names, it revealed, I suppose, in terms of community representation, a very narrow cross- section of the public. On the grounds that they wanted people who were experts, I am just checking. Mr Johns—Okay, I will pursue that. The ICRP consists of Ted Thomas, Convenor; Margaret Jones, Deputy Convenor— Senator TIERNEY—It is just their backgrounds I wanted. Senator SCHACHT—Can you give their names and then their backgrounds? Mr Johns—Ted Thomas has been a prominent television executive— Senator SCHACHT—In the commercial sector? Mr Johns—Yes. Margaret Jones is a distinguished print journalist. She is the Deputy Convenor. Michael Chesterman—

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Ms Clayton—He is a professor at the University of New South Wales, and he is a lawyer, and I think deals in the media. Mr Johns—Stephan Kerkyasharian is, I think, at the moment chairman of the New South Wales ethnic council and was a former colleague of mine at the Special Broadcasting Service. Julianne Shultz has been a working journalist and has been an academic in media studies. Bob Johnson is another experienced journalist and executive, both in print and in radio, and I think perhaps television. Senator SCHACHT—In the commercial sector? Mr Johns—Yes, in the commercial sector. Members of the panel have been appointed for their experience in or knowledge of journalistic ethics and practice, media operations and program production, complaints handling and other review processes. Senator SCHACHT—Are any of them well-known members of the Labor Party that you know of, Mr Johns? Mr Johns—I do not identify people according to their political affiliations. Senator SCHACHT—That is what he is getting it. Senator TIERNEY—I was not getting at affiliations. Senator SCHACHT—That is what you were getting at. Senator TIERNEY—No, Senator Schacht, it was not. You are wrong again. What I am getting at— CHAIR—Order, order! Senator Tierney. Senator Schacht, do not interject. Senator Tierney, ask your question. I do not need a comment, just ask the question. Senator TIERNEY—It was not a question I was asking at all. CHAIR—Do not make a statement. Senator TIERNEY—The answer proves the point. What I was looking for, in regard to this other part of the bureaucracy and it has come up exactly the same, is that five out of six are totally in the club. These are people who are professionals in journalism. You could not possibly say this is a representative cross-section of the community in any way, shape or form, and when they are reviewing questions of media bias— Senator SCHACHT—This is extraordinary. Senator TIERNEY—It is not, particularly when you take the political— Senator SCHACHT—Why don’t you get the beggars out and a stake and start burning them at the stake, you dope! CHAIR—Order, order! Senator Tierney and Senator Schacht. Senator SCHACHT—This is extraordinary. He has just maligned six people. CHAIR—Senator Schacht, will you refrain from interjecting. Senator TIERNEY—It is extraordinary that we do not have a panel that represents a cross- section of the community. Mr Johns—Senator, I have already said— Senator TIERNEY—With the exception of the member from the ethnic communities council. We will allow one exception. Senator SCHACHT—All the rest are crook, are they?

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Senator TIERNEY—No, all the rest are in the club. CHAIR—Order! Senator Schacht! Senator SCHACHT—In the club—which club? Mr Johns—Senator, not accepting for a moment your strictures on the professionalism and integrity of the six-member panel, I do remind you of the existence of the advisory council, which I think at this moment has 12 members, which has a statutory responsibility to review and make recommendations on the ABC’s programming. Senator TIERNEY—We will not actually go through all 12. Senator SCHACHT—No, no, it would be too embarrassing. Senator TIERNEY—No, I do not think it would be. But take it on notice, we would like to have a look at that. Ms Clayton—They are representatives of the community. They come from all sections of Australia. They are workers from Blacktown, members of community groups in Alice Springs, and they are nominated from the advertised nominations on radio and television across Australia. We receive thousands of nominations, we try to make it as representative of all the community as possible, and the final selection is made by the board. Senator TIERNEY—Could you explain briefly what their role in the process is, and how that works? Ms Clayton—Their role in the process is that they exist under our act to provide advice on broadcast programs. The recommendations of the national advisory council are published in the annual report every year. They are extensive recommendations; they range across the entire programming of the ABC. Each quarterly meeting—I think it is a quarterly meeting at the moment; it might be three times a year—they make a series of recommendations to the board about programs. They commend and criticise programs. The board takes note of those recommendations, responses are given to them, program makers go and talk to them every month. From time to time they undertake community consultation on particular issues where they think they need to provide more formal input into the ABC. Senator TIERNEY—Do they have any role in the complaints handling process at all? Ms Clayton—They do not have a direct role but it is just another form of community consultation on our performance. Senator TIERNEY—So the complaints group we were talking about before is still that group? Mr Johns—Yes. Senator TIERNEY—That would be the point I was getting at. The fact that the government has asked the ABC to develop a service charter which sets out accountability and performance measures and requirements— Mr Johns—That service charter is really as a result of our own government’s directive. The BBC has a statement of promise to viewers and listeners. Our equivalent is the service charter, which this government has sought from all statutory authorities, like the ABC. We are in the process of developing that service charter. I think that is the equivalent of the BBC’s statement of promise to viewers and listeners. Senator TIERNEY—At what stage is your service charter at in development?

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Ms Clayton—The service charter has been in draft for some time. It is currently the subject of staff consultation. A draft will be going to the board at its next meeting. Currently, we have got 30 commitments or undertakings drafted as part of that service charter, as opposed to the BBC, which I think has 66 promises outlined within its service charter. We have around 30 commitments. The draft will be considered by the board at its meeting in two weeks and then it will go through a further amendment before its finalisation, probably in the following month or the next month after that. Mr Johns—What we would be saying is that we believe that we have four proposals of the minister’s five-point plan, based on the BBC model. We believe that we have the equivalent of them in four out of five cases. That is: the national advisory council, the equivalent of the program complaints unit, the editorial policies unit. The missing element is the suggestion of a body to monitor the performance of all Australian media. That we do not have the equivalent of and we do not think that that is an appropriate function for the ABC to perform. But I believe, I repeat, what the board has found: in discussing these issues and being aware of the BBC examples that you have cited, in their totality our policy directives, our editorial policy guidelines, our own mechanisms, are sufficient to guarantee a transparent operation and transparent dealing with complaints and to achieve our charter responsibility of not being biased and remaining independent and fair in our programming. Senator TIERNEY—When might a copy of that be available to this committee, after it has gone through your internal processes, of course? Ms Clayton—Once the charter is approved. It will probably be two or three months. It just depends— Mr Johns—It will be a public document. Ms Clayton—It will be a public document available to all. Senator TIERNEY—Roughly when? A ballpark estimate? Ms Clayton—It is due from 1 July. We will have a draft available. We will making amendments after the end of the June board meeting and it will be available as soon as possible in July. Senator TIERNEY—Does the charter include a significant number of detailed commitments against which the ABC’s performance could be measured? Ms Clayton—The ABC’s requirements for performance are set out in its corporate plan. It is a different procedure from the BBC. We have a number of objectives against which we must perform, that corporate plan must be lodged in parliament, and we will be providing—I think in our annual report according to the new requirements of our act—performance against those objectives to parliament. That is the mechanism by which that happens within the context of our legislation and the Australian government. It is through our corporate plan which is a public document. Senator TIERNEY—In the development of this charter, what was the process of public consultation? How did you go about that? Ms Clayton—The requirements of the government wide initiative for service charters require us to have consultation with staff and with community groups. The National Advisory Council is acting as our agent in terms of consultation with the community. The draft has been forwarded to the National Advisory Council as our community representative. It has also been circulated to staff for consultation.

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Senator TIERNEY—Apart from your staff and the Advisory Council, did you go to any other level in the community? Ms Clayton—No, we have not. I think the BBC’s statement of promises, the elaborate process that they went through—and we cannot verify this—cost about £1 million in total to get that document through an elaborate consultation process and printed. The BBC is a different organisation. It is differently funded in terms of level of funding. We have to make appropriate decisions on the level of consultation on this document. We do have a statutory process for community consultation through the National Advisory Council, and that is how we are proceeding. Senator TIERNEY—I understand you would not want to spend $2½ million—rapidly approaching $3 million, at the moment—but to carry out a wider level of consultation you do not have to spend that much money. I am just surprised that you did not go any further than just having a chat to your consultation group. Ms Clayton—There is no requirement. The BBC statement of promises, you also must understand, was part of a similar government wide initiative placed on statutory authorities. It was a requirement within the consultation process that was set up by the government. We are conforming with the requirements of this government for the consultation process on our service charter. Senator TIERNEY—Returning to the National Advisory Council, during the last financial year what areas of examination and report did they undertake? Ms Clayton—You will find a summary of all their recommendations in the back of the annual report. They are very extensive. Senator SCHACHT—I would have thought— Senator TIERNEY—We do not have time, as you know, Senator Schacht, to read every annual report that comes into this parliament. For the Hansard record, could you summarise— Ms Clayton—Okay. I will you give you some of the— Senator TIERNEY—We can badger you for the next day too, Senator Schacht. CHAIR—Senators, Order! Senator TIERNEY—We will get to your question more quickly— CHAIR—Order! Senator Tierney, ask your question. Senator TIERNEY—if you stop rabbiting on. CHAIR—Senator Tierney, it would help if you asked your question— Senator TIERNEY—I did, and I was interrupted. CHAIR—and, Senator Schacht, if you stopped interrupting. Senator TIERNEY—He is interrupting me. CHAIR—I said that it would assist if Senator Schacht stopped interrupting. I do not need to be directed on how to chair this committee. You asked a question; Senator Schacht stops interrupting. They are the rules. Senator TIERNEY—Good idea. Sit on him or do something. Ms Clayton—There were comments made about violence, particularly in children’s programs. There were some comments made about scheduling of the BBC program Pride and Prejudice. There were a number of comments made about the youth program Recovery in

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 370 SENATE—Legislation Thursday, 11 June 1998 terms of its style and recommendations for its improvement. There were some comments about the production values of sport and camera work in sport and news and current affairs. There were some comments about state based current affairs programming. Senator TIERNEY—What sorts of comments? Ms Clayton—The report said: As expressed previously (March 1996), the NAC continues to have serious concerns regarding the diminution of the state based current affairs programs on ABC Television. The Stateline format is unable to adequately inform Australian people on state based issues due to limited funds and a limit of one program per week, allowing for one or two issues at the most to be covered. The NAC recommends the ABC reassess the way in which Television strives to meet the needs of state based current affairs and reviews the level of resources put into this area. There were comments on news updates commending the ABC on the abolition of news updates during children’s viewing time. Senator SCHACHT—Once the kids have seen John Howard’s face it would simply be considered a horror movie. Ms Clayton—The report recommends a review of weekend programming on radio. There were a lot of comments about pronunciation, Senator Tierney. There were comments on the overseas sale of television films and the use of promotions and fillers. There were congratulations for programming the Christine Anu program Saltwater Soul. There were comments on the timeslot for Landline. There were comments on the use of repeats and the funding cuts to Quantum. There were comments on the excellence of documentary specials, the ABC program Heartland and Riverdance. There were comments on the appropriate and/or inappropriate use of words such as ‘controversy’ and ‘controversial’. There were comments on marketing and the content in Triple J. There were comments on the success of the Rural Woman of the Year award. There were comments on transmitters in north-western Australia, and so on. Senator TIERNEY—Anything on bias, inaccuracy or unbalanced reporting? Ms Clayton—Not in this set of recommendations at all. But you may find it in the next report—this is last year’s. Senator SCHACHT—They comment on it on page 71 of their annual report under ‘Complaints’. Senator TIERNEY—So, out of that whole process, nothing came out on that? That is interesting. Are you aware that the BBC has now done away with its— Senator SCHACHT—On a point of order— Senator TIERNEY—He is rabbiting on. CHAIR—Senator Tierney, there is a point of order. Senator SCHACHT—I just want to draw attention, Senator Tierney, to page 71 of the ABC report. Under National Advisory Council, there is paragraph headed ‘Complaints’. They do make a comment about complaints. Senator TIERNEY—A paragraph! Senator SCHACHT—Read it first before you bag them that it does not exist. Senator TIERNEY—Terrific. We have given the officer the chance to go through all the things and she did not come up with one issue.

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CHAIR—Ms Clayton, while these two cool their jets, I want to ask you some questions. Earlier you said that people were sent out a small pamphlet. Ms Clayton—Yes. CHAIR—Firstly, I would like a copy of it. Secondly, is that on the Internet? Ms Clayton—Yes, it is the ABC code of practice and it is available on the Internet. People who send a complaint via Internet are referred to the Internet copy of the code of practice. CHAIR—Thank you very much. Mr Johns, you produced a glossy brochure, which I received in the mail, telling me about all the wonderful things you are doing in Victoria in the ABC. How much did that cost? Mr Johns—I would have to take that on notice, Senator. CHAIR—You do not know about it? Mr Johns—I cannot give you the costs offhand. CHAIR—Do you know the brochure I am talking about? Mr Johns—I do not myself know, no. CHAIR—Do you know about it, Ms Clayton? Have you seen it, Mr Balding? Ms Howard—It came from the state manager of Victoria. CHAIR—Do you know how much that cost, Ms Howard? Ms Howard—No, I am sorry. We would have to take that on notice. CHAIR—Do you know why it was done and to whom it went? Ms Howard—Yes. It is available to the whole of the community of Victoria. CHAIR—What was the purpose of it? What was it going to achieve? Was it going to get more people to listen to the ABC? Ms Howard—That I could not tell you, but the aim of it is to inform people about what is being made in Victoria, what ABC activities are in Victoria. CHAIR—Could I have how much it cost, to whom it was sent, how many copies were made and whether you have had any response from people finding it informative, and also—I do not know whether you contracted it out—whether any guidelines were given to the person who produced it as to the purpose of it and where the target audience was? I am interested in it because I wonder whether it made any more people listen to the ABC. I was sent a copy of it, but I would like to know who else got it. So please take all those questions on notice. Also, while I have the floor, I have a series of questions which I would like to put on notice. So I will put those on notice and the answers will be due on 17 July. Senator TIERNEY—Are you aware that the BBC board has now decided to do away with its advisory council and replace it with independent advisory panels because they felt that it provided more focused and strategic advice about specific issues? Ms Clayton—We understand that these panels are ad hoc. I think there are only two standing panels, one on religious programming and one on charity appeals, and that from time to time ad hoc panels are convened on particular programs. There are still community advisory panels which operate for the regions, as we understand it. Senator TIERNEY—But, if there is a particular issue, obviously they have set up a particular panel to give them strategic advice on that issue. Does that attract you as a model for—

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Senator SCHACHT—On charities and religion? Senator TIERNEY—That is what they are looking at the moment. They might look at 10 other issues in the next two years. Mr Johns—It does not attract us at this point, Senator. Our mechanisms are evolving and we will give serious consideration. We have just reviewed our editorial policies which involved quite a heavy process of consultation and an awareness of what is happening with other broadcasters, such as the BBC. Clearly our system is evolving, but we would like to think that it is rooted in our own experience. This is not to say that there are not practices done elsewhere that we cannot learn from, but we really think that we are about developing systems and protocols that are appropriate to our own society and our own experience. Senator TIERNEY—Finally, could I refer to a segment in the ABC program Good News Week at the time the full bench brought down its decision on the waterfront. Evidently, there was a joke delivered and at the point where the line was delivered, ‘Prime Minister Howard has vowed to stand firm in pursuit of waterfront reform’— Senator SCHACHT—I thought you would have given up on this issue. Only a mug goes back to a place where they have had a beating. Senator TIERNEY—Verbal applause from a member of the audience was evidently filmed, and then later on it was refilmed without that sort of comment included. Can you explain why that happened? Mr Johns—I am not aware of that incident. Senator TIERNEY—Are any officers aware of it? Senator Schacht is indicating it is a well- known story. I am surprised no-one knows. Senator SCHACHT—No. I am saying that the beating the Prime Minister got over his effort on the waterfront is well known and is a joke. CHAIR—Senator Schacht! Mr Johns—I am not aware of the incident, Senator, but I will make inquiries. I have to point out that Good News Week is a satirical program. Senator TIERNEY—I am sure it is a satirical program. The point at issue, Mr Johns, relates to the fact that, according to this report, it was reshot so that it did not include someone applauding the Prime Minister. That is the complaint. Mr Johns—I will look into it. Senator TIERNEY—You are not aware of that? Mr Johns—No. Senator SCHACHT—The ABC cut a person’s hand off, Senator Tierney! Senator TIERNEY—There is not one officer at the table who is aware of that? Mr Johns—No. Senator SCHACHT—Why don’t you refer it to the club that you hate, the complaints tribunal? Senator TIERNEY—A useful contribution as usual, Senator Schacht! It does make us worry about your investigation procedures if no-one here is aware at all that that was something that happened in the ABC. Senator SCHACHT—We’ll send this up to the script of Good News Week next week!

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CHAIR—I have a couple of questions about the ABC documentary Victims, which is being produced by Ms Janet Bell. Can you tell me how much of the funds have been released to Ms Bell and how much of the funds remain outstanding. Ms Clayton—I am not aware of the actual allocation of funds to the program. We would have to take it on notice. Unfortunately, our head of television, who was to be here today, is ill. She may have been able to tell you. CHAIR—What is your understanding of the subject of the documentary? Ms Clayton—We understand that the subject of the documentary is about how current day Hungary is coping with its history and that a central part of the explaining of that issue is the story of two Hungarians, Tibor Vajda and Magna Bardy—their history and their past. I am not aware of the detail. CHAIR—Could you give me the detail of the original subject matter, the outline of that documentary for which Ms Bell sought funding, whether there have been any changes as a result of the inability of one individual to participate in that program and whether that would change the objectives if one of the two people were not available? Ms Clayton—I might add that this is an accord documentary that we fund through the Film Finance Corporation. We would normally view the documentary at the time when the rough cuts are developed, and at that stage we would be making editorial judgments on it. That stage has not actually arrived yet. We have had an original script treatment for it, as I understand it, and the next part in the process is to review the rough cuts. CHAIR—If you had an original objective and that original objective could not be achieved, would that concern you, given the money for a particular program? Ms Clayton—We will take it on notice. But what I am saying is that, as for its original objective, we have to view the program in its rough cut and at that point in time the editorial and any legal decisions that are necessary will be taken about the program in terms of its capacity to deal with the topic properly. CHAIR—The other thing I would like you to take on notice is whether the person who applied for the funding, Ms Bell, indicated whether she had any conflict of interest in association with anybody who was involved as a legal adviser for one of the key personali- ties—and I think you have mentioned both the names—Mr Vajda, in that documentary. Would you consider that to be a conflict of interest? Would you consider whether that advice should have been given? What professional obligations would the ABC normally observe in relation to potential conflict of interest with regard to someone applying for that sort of funding? And when do you expect to take delivery of the film? Would you take those on notice? Ms Clayton—Certainly. CHAIR—The other thing I was going to say is that I am critical of that three-page glossy document on Victoria, but I have to say that—I do not know where I got it from—somebody sent me another publication that told me about all the plays that were available and the times they were available, and I found that most useful. I was wondering why I did not get the next one, because we have gone on from May and I have not got any more. But I would rather have that than the document that came out of Victoria. I think that was a very good advertising poster. I do not know if you know the one I am talking about that listed radio plays— Ms Clayton—Yes, radio drama. Mr Johns—It is the radio dramas one.

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CHAIR—I think it was very good. I would rather see the ABC doing things like that to encourage listeners to listen to that sort of quality programming rather than trying to sell themselves about what they are doing in Victoria—which I do not think would make people listen to the ABC. The other poster had much more likelihood of getting people to listen to the ABC. If anybody has got the June one, I would like a copy of it, and I think so would the rest of the committee if we have got any time, at least driving along in the car, to listen to some of the plays. Thank you very much. Senator SCHACHT—Before I ask my question I just want to make the comment that I found it interesting that, when Senator Tierney was asking a whole range of questions by implication critical of the ABC, the only time the minister chose to intervene was to add further criticism to the ABC about it. I want to say, Mr Johns, that you can pass on to the complaints tribunal people that we in the opposition do not think they are a club, self- selected—as Senator Tierney described them. We think they are obviously people of integrity, and their performance will be judged, as it is in the annual report, on how they deal with complaints. Senator LUNDY—Can I just add to that comment. I think it is appropriate to question the relevance of a lot of the subjective comments and opinions made by particular senators in respect of the programming of the ABC. Whilst I understand that estimates provides an opportunity to query issues relating to programming because of the cost implications, I am gravely concerned that this opportunity has been used by members of the coalition to express their subjective viewpoint about the quality and content of individual programs. I am not convinced that is entirely appropriate. I would like my concerns on that basis to be on the public record. Senator TIERNEY—Have a look at some of the transcripts of your colleagues’ comments in other estimates committees. What a hide! CHAIR—Order! Senator SCHACHT—To Mr Johns and then the minister: where are we at with the exchange of correspondence starting, I think, with the minister writing to the board about complaints of bias, a press statement being issued at the same time with a five-point plan that the minister raised, a response from you, Mr Johns, and a response from Mr McDonald, the chairman? I think there may have been stories that there had been a further letter from the minister or the government. Can you just give us a run-down of where you understand the exchange of correspondence to be? Has the correspondence been concluded or is it still open with either you, Mr Johns, or the minister writing backwards and forwards to each other? Mr Johns—The chairman has responded to the minister following the last board meeting. But if the minister requests a further response then that will be a matter for the board. That is what I understand the position to be. Senator SCHACHT—You have not received a further letter from the minister after you got the letter of three or four weeks ago that was addressed to you rather than to the chairman? Is that the only letter you have received from the minister in the last month on the issues of bias and related matters? Mr Johns—Yes, that is the only letter. Senator SCHACHT—Minister, are you satisfied with the responses you have got so far from Mr Johns and Mr McDonald?

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Senator Alston—Could I start by saying that your introductory remarks are inaccurate. I did not intervene only to criticise the ABC. I merely intervened to state what I understood to be the terms of reference on one particular matter. Senator SCHACHT—You have never once intervened to do anything to defend the ABC in any area. Senator Alston—If you are now choosing to make a separate point, I will not bother responding to it. As far as the correspondence is concerned, I have received an extensive reply to a number of matters that I had raised with Mr Johns. I did at the time of the board meeting put forward some suggestions, which, as Mr Johns has indicated today, were further elaborated upon in a press release that was put out that day. My understanding from subsequent public comment—I am not sure whether from Mr Johns or Mr McDonald—led me to believe that there would be a further response forthcoming about the appropriateness of any of those suggestions. I am conscious of what Mr Johns has said today about the ABC’s general approach. He essentially says that on four out of the five they have at least a general equivalence with BBC practice. On the fifth matter—which I think I had indicated in my press release I did not regard as a matter that the ABC itself could espouse but that they might contemplate an expansion of the complaints body, and I suppose I was also inviting them to comment more generally on the concept—I think he has indicated today that he does not have a great deal more to offer by way of response, so maybe my initial expectations have been deflated today. That is basically where we are at. Senator SCHACHT—You are not feeling inclined to write a further letter saying that what you have heard today may have answered most of your queries? Senator Alston—I have read what the ABC had to say. I think that there are some valid rejoinders on the point by point response. There are some that I thought addressed only part of the issue and could have been taken further. In the scheme of things I did not think it was appropriate to pursue it by way of a rejoinder and I have essentially let the matter lie. My wider concern really is to try to ensure that the ABC has in place adequate arms-length independent mechanisms, which I think are in its own best interests. There is a considerable degree of goodwill towards the ABC, but I do not think a head-in-the-sand approach which essentially says that we do not think we can do any better is in the ABC’s own best interests. We can disagree on these matters. We had a pretty constructive, if not robust, discussion at the board meeting. I would still maintain, however, that the ABC could go a lot further in effective monitoring of complaints on a proactive rather than reactive basis. I am not particularly impressed with the upwards referral mechanism. I have made my point. The ABC is at liberty to treat it in whatever way it thinks. Senator SCHACHT—I will get back to the complaints issue in a moment, Minister. I notice that one of the suggestions in your five-point plan—or whatever you want to call it—is that the ABC consider the example of the Canadian Broadcasting Corporation where there was an independent, completely separate organisation that used to monitor and measure bias. It was an organisation completely outside the Canadian Broadcasting Corporation. I understand it was probably privately funded. Was that the model you were looking at? Senator Alston—That was one of the five specific suggestions that I put forward. I did say quite explicitly that the government recognises that establishing such an organisation is clearly outside the responsibilities of the ABC board, and the ABC reiterated that point in its response.

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Senator SCHACHT—When Mr McDonald was interviewed on the Sunday program he made the point that if any organisation in the community of Australia wanted to establish and spend money monitoring the ABC or any other media organisation they are free to do so. Are they? Senator Alston—Of course they are. Senator SCHACHT—Do you know of any organisation that is willing to take on the model in Canada and privately fund their own measure of ABC bias? Senator Alston—I am not sure that it is a question of monitoring ABC bias. What happens in Canada is that the national media archive monitors Canadian public and commercial media for balance and accuracy through a computerised process which allows researchers to examine how issues are dealt with over time by a particular network. I was not suggesting that the ABC should somehow do that itself, so Mr McDonald’s response is not taking the matter any further. I did, however, suggest that the ABC could examine whether the role of the Independent Complaints Review Panel might be broadened to include this type of content analysis, particularly given the upcoming digitisation of the archives. There is probably more to be pursued in content analysis and the extent to which the ABC effectively reflects the views and wishes of its audience. The BBC explicitly acknowledges that that is an obligation it should assume—in other words, it regards its own audience preferences as its benchmark. I am not persuaded to date that the ABC does that. The general explanation is that the charter allows it to be a pacesetter on various issues. To me that is almost carte blanche and I would certainly be interested in pursuing it further with the ABC to determine precisely how content analysis is applied to audience determination of priority issues. Senator SCHACHT—I understand from the information I received about this organisation in Canada that it is privately funded and has a number of views about political issues in Canada. For example, they were promoting the idea that roads in Canada should be privatised. I would not have thought that a think tank that had such a ideological position could claim to be an unbiased organisation that checked bias and content. Such an organisation, whether from the Left or the Right, is automatically not going to be received with great credibility. Senator Alston—Do you regard privatisation as an ideological issue? Senator SCHACHT—Privatising roads is a pretty obvious— Senator Alston—Have you pointed this out to Bob Carr? Senator SCHACHT—It was not just a matter of the odd toll road apparently; it was a matter of cost recovery. Whether it is good, bad or indifferent, this is an organisation that has another agenda. I find it hard to believe that people would accept any organisation—whether it was the Chamber of Commerce or the ACTU—that was running some monitoring of bias as an unbiased umpire when they are running other issues. I am intrigued that you would take this as a model. Senator Alston—The advice that I have is that the Fraser Institute is generally regarded as a credible organisation. If it is applying scientific methodology, then I assume that there is no shortage of experts to point out any shortcomings in the process. If they generally regard it as an effective and objective quantitative process, then I would have thought that the fact that it might be involved in other projects quite irrelevant to the merits of this particular one. It might suit your political purposes to tar it with a particular brush. Senator SCHACHT—No, it is self-tarred.

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Senator Alston—I would have thought that you would have judged it on the merits of the particular project. Senator SCHACHT—You just outlined that you thought that the complaint structure, the independent tribunal of the ABC, is already established, and I have to say established during the Labor Party’s term of office, and you might think that means it is tainted, but if you wanted to expand it to do some of these things would the government provide additional funds to the ABC to fund it? Senator Alston—That might be your first port of call. I would have thought that, if taxpayers are spending in excess of half a billion dollars on the ABC, the ABC itself ought to regard it as an absolute top priority that it is regarded as a credible and independent organisation. Whilst I suppose I would not say that means you should spend limitless amounts, there certainly should not be any reluctance to expend funds to ensure that it earns and maintains that sort of reputation. You can always say, ‘We would love to do things if we had the funds.’ I would have thought it ought to be very much at the top of the agenda, because the ABC funding depends on public support and it depends on the support of members of parliament of all sides. It does not get one cracker unless legislation goes through the parliament appropriating funds. Parliamentarians being generally reflective of the wider community, I would have thought the ABC had a vested interest in ensuring that it was regarded, as much as possible in an imperfect world, as doing its best. Senator SCHACHT—Mr Johns, how much do you think the model the minister has described would cost the ABC to put into place? Mr Johns—I have not attempted to quantify it. The point is that I think the ABC is a media organisation in very good public standing. Senator SCHACHT—I do not disagree with that, but someone else sitting next to you might, I suspect. Mr Johns—I think it is in very good public standing, and I think a factor in that is the way we handle complaints, attitudes, opinions and views that our audience put to us through one means or another, whether it be through the Friends of the ABC, whether it be through telephone calls, whether it be letters—the extensive communications that we have with our audience. We have concentrated here today on complaints. There is a whole range of people ringing up and saying that they like this program, believe it or not, and enjoyed this and thought this was a very useful thing for the ABC to be doing. We have looked at the BBC experiences, as I have said, and we have put what it does alongside what we are doing. We are not being resistant to change but, by the way, we do not see an overwhelming case to change. I started by saying that I think the ABC is an organisation in very good public standing. But these things evolve. I believe that we are improving. Recently we commissioned Professor Phillip Bell from the Media and Communications Unit of the University of New South Wales to do a month-long survey of ABC news, the 7.30 Report and the waterfront dispute. We believe that was objective. That examined the issues and came down and said that we had performed well on that. Senator SCHACHT—Minister, do you believe that that is an objective report by Professor Bell? Senator Alston—I am not sure whether I have read it. I have certainly acquainted myself with most of the findings. I do not have any reason to believe that, within the terms of reference of that exercise, Professor Bell did not carry out his responsibilities.

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Senator SCHACHT—So the terms of reference that the ABC gave Professor Bell are the problem, are they? Senator Alston—It is not my understanding that the board gave Professor Bell the— Senator SCHACHT—Who gave Professor Bell the terms of reference then, Mr Johns? Ms Clayton—The terms of reference are the range of questions put by the survey and analysed by the survey. Those questions were developed by the ABC Strategic Program Research Unit in conjunction with Professor Bell, who came in as an expert in that area and provided us with expert advice on how the objectives should be framed. Senator SCHACHT—So Professor Bell was involved in doing up drawing up the terms of reference, and he was happy with them, clearly? Ms Clayton—Absolutely, yes. Senator SCHACHT—And did anyone on the board object to them later on when they saw the report? Did anyone say that the report was unbalanced or the terms of reference were too narrow? Senator Alston—It was my understanding that the matter did not go to the board until they received the report. Senator SCHACHT—That is what I am saying. Even when they received the report, did anyone on the board complain about the terms of reference and the report itself? Mr Johns—I would have to take that on notice. Senator SCHACHT—I understand that you might say that the board discussions are in confidence, et cetera, and I appreciate that. We have another form in which information can be provided in confidence to this committee in a particular way, if you think that is necessary. What has clearly been said by the minister is that he is not happy with the terms of reference and, therefore, that led to a result of Professor Bell coming out with a result that may not have been to his satisfaction. Senator Alston—My essential point is that Bell confined himself to a quantitative assessment rather than a qualitative assessment. Senator SCHACHT—Qualitative is subjective; quantitative is— Senator Alston—If you say it is not worth doing or not capable of being done— Senator SCHACHT—I am not saying that all. Senator Alston—That is my point, that it is capable of being done and they chose not to do it. Senator SCHACHT—Mr Johns, I only saw a brief report in the press about some of the contents of the Bell report. Mr Johns—Could I give you a run-down on the questions? Senator SCHACHT—We are going to run out of time. Mr Johns, can we circulate the report? Mr Johns—Sure. Senator SCHACHT—One thing that I understand received some public criticism or comment was that one of the measures was how many times an ABC journalist, TV or radio, interrupted a political figure answering questions on the waterfront. It showed that if you were a waterside worker, trade union official or someone else in the community you really did not

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 379 get interrupted. If you were Mr Reith or Mr Howard, you got interrupted many more times by the interviewer. I understand that when Mr McMullan, the shadow minister for industrial relations, was being interviewed he got interrupted more than any other figure. Is that correct? Mr Johns—That is true. Senator SCHACHT—Is that an example of bias against the Labor Party? Senator Alston—Can I give you an example of an interview I saw by Jennifer Byrne with both Peter Reith and Greg Combet? She interrupted Combet on a number of occasions, but it was essentially along the lines of: ‘Well, wouldn’t you, therefore, regard this as a serious matter in which you should be taking legal action?’ Answer—‘Well, we are considering legal action.’ ‘But wouldn’t you want to claim damages?’ ‘Well, we might want to claim damages.’ ‘Well, wouldn’t you be interested in substantial damages?’ Senator TIERNEY—Leading questions! Senator Alston—All I am saying is that you can interrupt people to obstruct the flow against the run of play or you can basically egg them on. It might come out quantitatively— Senator SCHACHT—I see. I want to get this on the record—thank you very much. I think every chance we get to put your examples on the record, the better it is. So Jennifer Byrne was egging on the ACTU person— Senator Alston—That is right. Senator SCHACHT—And was always interrupting in an antagonistic way? Senator Alston—What I said to you was that, in my view, she was clearly egging on Combet, and what that demonstrates is that you may have an equality of interruptions in a quantitative sense, but they can be quite disparate in terms of their effect. Mr Johns—I wonder if I could add a point to that? Senator SCHACHT—Certainly, Mr Johns. Senator Alston—I am simply demonstrating what I regard as the shortcomings of a quantitative only analysis. Mr Johns—I am not sure that it is a quantitative only analysis. Senator SCHACHT—Thank you, Mr Johns. Mr Johns—I said that I will circulate this report, and I will not go through all of the questions, but there are questions that I would mention here in the spirit of debate. These questions do have a qualitative aspect to them: how frequently were groups or individual participants in the program/report identified—(example) named explicitly, shown as the agent of verbal abuse or of physical conflict, verbally in the initial headline or framing sentences of news reports or 7.30 Reports? How were diverse interests labelled? How often the success or failure—e.g. victory or loss—explicitly attributed to various interests? How was responsibility for negative consequences imputed to various interests? What metaphors and connotations were constructed for the disputes? Clearly, when that is the subject of examination, it was not simply a matter of saying how many times Senator McMullan was interrupted or how many times Mr Reith was interrupted. I think that may go to meet your concerns. Senator SCHACHT—Thank you, Mr Johns. I look forward to reading the report. I am glad that you have had the opportunity to put that on the public record. And I am also pleased, Minister, because every time you get a chance to name a journalist in the ABC who you think is biased or is, as you say, ‘egging on’ one side or the other, people can then make a judgment.

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Rather than the assertion that unnamed journalists or groups of journalists were biased in the ABC—let’s get down to the tin tacks—you are naming them. I think it is an extraordinary suggestion. I saw a number of those interviews. On a couple of occasions, when things in the waterfront dispute were going well for the government in the early days, Minister Reith had an absolute walk-up start of explaining how well the government was doing, with a big smile on his face, et cetera. I could have said, ‘This is why they are putting him on. He is just getting free propaganda.’ When the thing turned against you, you started turning against the ABC. Minister, earlier this week, you were interviewed by Mr Richard Ackland on the program Media Watch. He asked you about issues of bias. I do not have the transcript of the program but, from recollection, you said you had received hundreds of complaints about bias. I think it was in terms of bias. That is what you said in that interview. Mr Stevens, does the department have a record of all the letters received in the last month on the issue of bias in the ABC? Senator Alston—I do not recall saying anything like that. I would be happy for you to check the record. Senator SCHACHT—I have been trying to get hold of a transcript for a while and I have not been successful yet. I did see the program replayed on the ABC the next day. Senator Alston—By popular demand? Senator SCHACHT—No. You know as well as I do that it is done in-house. Programs are replayed the next day as an in-house service to members. I certainly can recollect you saying ‘hundreds’—hundred with an ‘s’ on it—of complaints. Mr Stevens, how many complaints have been received in the last six weeks which have been passed from the minister’s office to the department for preparation of a reply? Senator Alston—Are you suggesting that somehow all complaints go through the department? Senator SCHACHT—Okay, I will ask you. Minister, how many complaints about bias in the ABC have you received in your ministerial office in the last six weeks? Senator Alston—I do not have a recollection, but I do know that I have had a number of complaints in writing, by telephone and from people you run into. I would not have thought that there was a shortage of discussions on this subject. Senator SCHACHT—I know that every time you have a cabinet meeting and you meet the Prime Minister he complains about the ABC—and he probably complains about it five times. I do not think that I would take that as a really independent complaint from the public. I am asking you whether you keep a record in your office of all— Senator Alston—Every time I go to a function and people come up and talk to me about political issues, do I make a note of it? Senator SCHACHT—No, even people who just write to you as a minister for communica- tions. Of the letters and faxes you have received, how many complaints did you receive over the last six weeks on bias in the ABC? Senator Alston—I cannot tell you that. Senator SCHACHT—Can you take it on notice? Senator Alston—I will take it on notice.

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Senator SCHACHT—Don’t just to forget about it. Please try to respond. Surely your office keeps account of all its correspondence. You are not that much into chaos theory down there that no records are kept of correspondence in and out. So you will take that on notice? Senator Alston—I have taken it on notice. Senator SCHACHT—We know what that has meant with you in the past, Minister: it goes straight into the bin, never to be seen again. Mr Stevens, can you take on notice how many letters, faxes—written communications—the minister has received as minister for communica- tions and forwarded on to you in the ministerial section for the preparation of a reply? Mr Stevens—We do not classify them in terms of the subject matter, but we will certainly have a look. Senator SCHACHT—Say that again. Mr Stevens—We do not classify them on subject matter. Senator SCHACHT—So you will be able to count through all the letters that the minister got on broadcast matters over last two months; they are in that broad a description, are they? When rereading them, you will be able to determine whether they are about bias or not? Mr Stevens—That is the only way we could do it. Senator SCHACHT—Very good. You will do that? Mr Stevens—We will take it on notice. Senator SCHACHT—Now you are adopting the same words as the minister, like a well- trained Sir Humphrey. I look forward to getting a reply, if we ever do. Mr Johns, can you take on notice how many complaints have been received since the waterfront dispute started—not the ones that you treated in the formal complaint here in the report—how many letters, faxes, telegrams, whatever they wanted to use, even recorded telephone calls, about complaints of bias on the ABC’s coverage of the waterfront, and also which way they complained about the bias? Mr Johns—I will take that on notice. Senator SCHACHT—Would you be able to provide that? Do you have a record system? Mr Johns—Yes. Senator SCHACHT—Is that centrally organised or is it done in each state office and then you compile them? Ms Clayton—We do have a central record of all complaints received by the switchboard. We also have a central record of complaints received in writing about news and current affairs and by switchboard about news and current affairs. We do not have across the ABC a central register of all correspondence. Senator SCHACHT—Now that I have asked for it on notice, it is not too much trouble to get that across the ABC on a state basis, is it? Ms Clayton—In terms of regional services, we have all the metros and all the regional stations; it is a big call. Senator SCHACHT—It is a big call but, in view of the fact that the minister has made this an even bigger call in the publicity he has been giving you about claims of bias, I think this is a reasonable question to put to you so that the public can get the facts. Mr Johns—We will do our best to answer it.

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Senator SCHACHT—Because of the controversy the minister has created in his attacks on the ABC on this issue, have you noted yourself on a weekly basis that staff are saying to you, ‘We are getting so many more complaints’ or that there are less complaints about bias in the ABC? Ms Clayton—We reported to the board at the last two meetings about complaints handled within the news and current affairs area and also at the switchboard area for the first period of the report. So, yes, we are monitoring that closely at the moment. Senator SCHACHT—Is there any perception that there has been a dramatic upsurge? Ms Clayton—There has certainly been a large increase in the number of letters that have been written to us on the issue of coverage of the waterfront dispute and claiming bias one way or the other. But there is no underlying pattern within that correspondence indicating bias in one direction or the other. Mr Johns—In other words, there is no systemic bias. Senator SCHACHT—I am glad you put that on the record, Mr Johns, and had the opportunity to do so at the estimates, because the way this government was acting, you were not getting that opportunity, in my view. Minister, I refer you to an article written in the Sydney Morning Herald earlier this month by Gerard Henderson in which he raises your role in an ABC report done for the Senate back in 1995. He quoted from the report of the committee you chaired where you state: that the basic structure of the ABC is sound and that the organisation is considerably stronger and more relevant to the Australian community now than it was 10 years ago. What has happened since this government got elected in early 1996, only a few months after this report, that has led you now clearly not to have the same view that you had in 1995 when you were in opposition? Senator Alston—I presume you have read the whole article, have you? Senator SCHACHT—I have read the whole article. Senator Alston—Henderson makes the point that it might be better than it was 10 years ago, but that does not mean that it is perfect today. Senator SCHACHT—Of course, but what I am saying— Senator Alston—So it is not inconsistent to have a view—and I think Mr Johns is right in saying that you aim for, and largely achieve, continuous improvement—that it had come a long way in the preceding 10 years. But it is probably four years since that report. Is that right? Senator SCHACHT—From March 1995, it is now three years. And two full years of those have been under your government. Senator Alston—You obviously judge things as you go, don’t you? You judge them at the present time. Senator SCHACHT—When you were in opposition and the ABC was running stories which some of us in the Labor Party may have complained about as being anti-government, you were more than happy to go along with it. But when you get into government, you are not happy to go along with it. Senator Alston—That was not the issue. I forget the terms of reference now, but they were not as broad as, ‘What do you think of the ABC?’

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Senator SCHACHT—It says: that the basic structure of the ABC is sound— that is about operation and management— and that the organisation is considerably stronger and more relevant to the Australian community now than it was 10 years ago. He does go on to comment that even Gerard Henderson wants the ABC to keep improving and to be more relevant, and nothing that Mr Johns has said today is apposite to that. Senator Alston—I do not think the terms of reference or the quote you have read out specifically address issues of fairness and impartiality, or bias in current parlance. So I do not see that as reflecting on any view that I might be currently putting about the approach the ABC should adopt. Senator SCHACHT—But that is what I am saying. He paraphrases in the same article, saying: Certainly Alston was critical of aspects of ABC management and operations. But there was no criticism whatsoever of ABC content. It was as if the ABC Left never existed and the national broadcaster’s professional standards were beyond reproach. Those are his words in his own article, not yours—I must point that out. But I want to find out what has happened in the last two years since you have been minister to change your view from that held during a committee you chaired three years ago to now having a raging public debate created, led by yourself, that the ABC content is biased? Senator Alston—As I recall it, that inquiry spent most of its time looking at issues of sponsorship, coproduction and probably the early stages of outsourcing. That was essentially what was being addressed at that time. For example, we did not take evidence or volunteer views on Kerry O’Brien’s coverage of the 1993 elections. That does not mean we did not have views about it, and perhaps views on a whole range of other issues on the current topic, but that was not really what the terms of reference were about. Senator SCHACHT—But you were critical of ABC management and operations, according to Mr Henderson. Senator Alston—But this was in terms of whether it should have been allowing what was essentially infotainment—free-kick promotions for commercial organisations—whether it was compromising the editorial independence and integrity of the ABC, and to what extent coproduction made sense in that context. That is what that inquiry was about. Senator SCHACHT—So you did not receive or make comments about the ABC’s processes to handle complaints as part of their operations and management? Senator Alston—I do not think that that was in any way part of the inquiry. Senator SCHACHT—And the committee received no submissions on it? Senator Alston—It is not surprising, is it? We did not receive too many submissions on what football team we ought to barrack for either, but it does not matter we should volunteer an opinion. Senator SCHACHT—Minister—this might be a partial compliment to you—all I can say is that, as a robust political activist in the Senate, I have never known you to miss an opportunity to put the boot into something when you have the opportunity. In view of the fact that you were shadow minister for communications through most of the 1990s, I would have

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 384 SENATE—Legislation Thursday, 11 June 1998 thought that, if you had any of these agenda items in the back of your mind, you would have given them a run in this report of the inquiry of which you were the chair. Senator Alston—That just reflects a very cynical view of the world. I am sure you will practise what you preach but— Senator SCHACHT—In view of your performance, that is a fair bit of weight to put on it, I think. Senator Alston—All I can say is that we did our best to stick within the terms of reference. Senator TIERNEY—You should read the report, Senator. Senator SCHACHT—I have. In the letter you sent Mr Johns on 30 April, you drew attention to an interview with the Mayor of Burnie, Mr Steven Kons. You stated that he was the endorsed ALP candidate for Braddon. Then, in a remark you made in the Senate, in response to an interjection from me, you said: What is wrong with it is that he was the endorsed ALP candidate for Braddon. If you were talking about the federal election, I definitely know that is incorrect. The ALP endorsed candidate for Braddon is a Mr Sidebottom. Senator Alston—I was never talking about the federal election. Senator SCHACHT—We thought it might have been the state seat of Braddon. Senator Alston—So did I. Senator SCHACHT—We have gone back and checked in Tasmania. Maybe the records have disappeared, but we have no record of Mr Kons ever being the endorsed Labor candidate for Braddon or anywhere else. Senator Alston—Have you checked to see what his current standing is? Senator SCHACHT—Yes. Senator Alston—Is there a state candidate for Braddon? Senator SCHACHT—We have checked last week for the state seat of Braddon and we have been informed—going on the information given—that he is not an endorsed candidate for Braddon. Senator Alston—The reply I got from the ABC says that he is not. I have also been told that he is a likely candidate for preselection. I do not know whether that was in the ABC letter or not. Senator SCHACHT—But you actually said that he was the endorsed ALP candidate. On 14 May to me in the Senate in response to my interjection you said unequivocally that he was the endorsed ALP candidate for Braddon. Senator Alston—That was my understanding at the time. It was my understanding until we got that letter. I put out press releases; I made statements about this. Senator SCHACHT—In the letter on 30 April you said that he was the endorsed candidate for Braddon. Senator Alston—That is right. No-one ever corrected that. Senator SCHACHT—Now that it has been cleared up that the ABC told you— Senator Alston—All I am saying is that no-one ever pointed that out or brought that to my attention, either in the Senate or elsewhere, until I got that letter from the ABC. I assume they

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 385 got their facts right. As I say, someone else has told me that they believe he is a candidate for preselection. If those are the facts, I accept it. Senator SCHACHT—So you will apologise to Mr Kons? Senator Alston—I do not know that there is much to apologise about. Senator SCHACHT—Yes, there is. Senator Alston—Do you think he would be offended to be told that he had actually won nomination when all he is is an aspirant? I thought that was his aim in life, if he is a preselection candidate. Senator SCHACHT—The point is, Senator Alston, you thought you were making a major point—that this was another example of bias because the Mayor of Burnie was the endorsed Labor candidate for Braddon. Now the ABC has proved it wrong. I have taken the opportunity carefully to go and get as much information— Senator Alston—Well, you obviously have not. You did not even find out who the candidate for Braddon is, whether there is an endorsed state candidate for Braddon. Senator SCHACHT—I have been told that he is not the endorsed candidate for Braddon. Senator Alston—No, but you have not made proper inquiries; you have not found out whether indeed he is an aspiring candidate for preselection. Why haven’t you found that out? Senator SCHACHT—Because you said that he was the endorsed candidate. Senator Alston—I am telling you: I have now been told to the contrary. Senator SCHACHT—If you are willing to write letters to Mr Johns with facts that are clearly wrong, it actually affects the credibility of the rest of your argument. Senator Alston—The point is essentially valid. Do you know what my criticism was? Senator SCHACHT—You smugly said, ‘I’ll have a good go at this bloke.’ That is your line of tactics. Senator Alston—But what was the bias? Senator SCHACHT—The bias was: ‘I’ll say what really proved my point—that Kons is the endorsed ALP candidate for Braddon.’ Senator Alston—Is that all I said about him was it? Is that the only criticism I made of the ABC? Senator SCHACHT—In your letter of 30 April, you said: I also draw your attention to an interview with the Mayor of Burnie, Mr Steven Kons, aired on The World Today in which Mr Kons was not only highly critical of the Government’s handling of the waterfront issue, but was also allowed to portray himself as a ‘conservative person by nature’ when the interviewer would undoubtedly have been aware that Mr Kons is the endorsed ALP candidate for Braddon. That is how you make the weight of the point. Senator Alston—Just listen! If the point is that he is allowed to portray himself as a conservative person by nature—in other words, listeners may be much more likely to come to the conclusion that if he had any political leanings they would be towards the coalition—if the fact is that he was either an endorsed candidate or an aspiring ALP candidate, that is a relevant matter. Senator SCHACHT—Aspiring? You did not say that. You said he was the endorsed candidate.

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Senator Alston—I have conceded that from the outset. I have said to you in good faith— Senator SCHACHT—Well, why don’t you get your facts right before you write unusual letters? Senator Alston—You say, ‘Get your facts right.’ I had information that he was. Senator SCHACHT—And you did not bother to check it? Senator Alston—I checked it. I asked people. Senator SCHACHT—You did not, because you wrote it in a letter—an unusual letter—to the Chief Executive of the ABC. Senator Alston—You get information. There was every opportunity for the ABC or for your good self—presumably you read press releases and transcripts—to correct the record. All I am saying is that no-one sought to correct the record for a period of weeks. It was only about three weeks after I had written to Mr Johns that I finally got a reply which contested the proposition. From that point on, I basically accepted that they had done their homework. I still have not rung up the ALP to ask them—they probably would not know, and if I told them who I was, they probably would not tell me. I have not taken the matter any further. Even if it is a fact that Kons is not the endorsed candidate, he is an aspiring candidate for preselection. If he is a former well-known Labor mayor of Burnie, to portray himself as— Senator SCHACHT—Are you saying that he was elected as a Labor mayor of Burnie? Do you know that for a fact? Senator Alston—I am saying that if he were a Labor person of long standing, who was also the mayor of Burnie, to allow himself to be portrayed as ‘a conservative person by nature’ in my view still portrays a misleading impression of the standing of that commentator on the point. Senator SCHACHT—I think we have made the point. You are just going to use the usual lawyer’s slipperiness to not admit that you made a bad mistake. I want to point out, Mr Johns, that I did not hear it myself, but one of my staff members heard this: after this accusation by the minister, in a further interview with Mr Kons, at the end of the interview, I think it was Mr Thompson who is the compere for AM/PM said, ‘And that was Mr Kons, the ALP candidate for Braddon.’ That actually went to air. In that sense, the minister has had a partial victory, even though Mr Kons was not the endorsed candidate. I hope that you point out to AM/PM that he is not the endorsed candidate. Senator Alston—I presume that the ABC has already brought that to his attention if they brought it to my attention. Senator SCHACHT—It may have, but I wanted to put it on the record. I want to get it clear about the correspondence, Minister. You do not anticipate having any more correspond- ence from your end to the ABC over these issues of bias, do you? Senator Alston—I have said that I do not have any current intention of responding to their reply. Senator SCHACHT—Okay. Mr Johns, at the last estimates hearing in March, I asked you a question about whether the members of the board had the right to see the individual employment contracts of staff of the ABC and whether board members could be involved in the appointment process. You made it very clear on the record that board members did not have access to the contractual arrangements of staff. I think that is the correct procedure for any organisation of this size and nature.

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However, there have now been reports—which first of all were leaks and then were confirmed by even Mr McDonald in his interview on Sunday—that Mr Kroger, a board member newly appointed by this minister, suggested to the board that the perception of bias in the ABC could be overcome by employing well-known conservative commentators, thinkers or whatever. He gave the example of Mr David Barnett. I thought that Mr McDonald very successfully hit that right on the head. He pointed out that you only appoint people on the basis of merit and that it would, even to Mr Barnett, be derogatory to appoint him not on the basis of merit but on the basis that he is a Liberal stooge put on the board to look after Liberal interests. At the discussion that took place at the board meeting, did anyone on the board point out to Mr Kroger that issues of employment and appointment of particular staff members were matters for the management and not for board members to be involved in negotiating? Mr Johns—In an earlier response I said that I do not feel in a position to reveal discussions at the board level. If you ask me about my personal position on things, that is another thing, but I do not really want to traverse— Senator SCHACHT—The only reason why I raised it is that Mr McDonald—and I think he had no option—when he was asked in the interview on the Sunday program as chairman, confirmed that there had been a discussion about it and that the newspaper report on the board discussion and what Mr Kroger said was essentially correct. Mr Johns—What I am seeking is that I hope I do have an option. I do not want to discuss conversations or debates that take place at the board level. The chairman has the prerogative, but I am a member of the board and in a special position as managing director. However, if you were to ask me whether I think that people should be appointed to the ABC by reason of their political affiliations I would—and this would not surprise anyone here, I am sure—say definitely not. It is not a tolerable position and it is not a principled position as far as I am concerned. I believe that people should be appointed to their jobs on the basis of their professionalism and their ability, and their performance should be judged on what they do. I thought we were long past a period of bigotry in this country where people could say ‘Catholics need not apply, this one need not apply’ or whatever. I think it matters enormously that we observe the proprieties of people being appointed according to their abilities, skills and talents. Senator SCHACHT—Mr Jim Bonner was appointed and had a long period of employment in the ABC, including in current affairs—I think he was a producer of either AM or PM at one stage, and I think he was an executive producer of the 7.30 Report, or the precursor to the 7.30 Report, in South Australia. After being a press secretary to a number of Liberal ministers, he has now been appointed state director of the Liberal Party in South Australia. Mr Bonner was appointed to those jobs in the ABC in the past because of his professional qualifications and not because he was obviously a strong Liberal supporter. Mr Johns—I would assume that. Senator SCHACHT—I think a Mr Henshaw has been preselected as the Liberal candidate for the seat of Dickson in Queensland. I understand that in the immediate past he was a presenter on and an employee of the ABC. I presume that he was employed because of his professional qualifications. Mr Johns—I would assume so. Obviously it is a matter for your judgment, but I feel I must say again that I think it is not a healthy situation in our society if people are circumscribed

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 388 SENATE—Legislation Thursday, 11 June 1998 or identified by their political affiliations in their professional life and in their jobs, unless they choose to do that themselves in their own circumstances. I think this matters enormously most particularly to media organisations—whether it is the ABC or any other media organisation. I feel quite strongly about this. We are a relatively small society and we need all the mobility we can get between the public and the private sector—between politics and the public and the private sectors. We have been limited by narrow perspectives in the past. I certainly would personally not want to subscribe to anything that perpetuates that limitation or develops or rebuilds it. Senator SCHACHT—Mr Johns, I am raising this issue not because I disagree one iota with what you said about people being appointed according to their professional qualifications and their experience to various positions in the ABC or SBS or anywhere else. I am raising it only because it became public knowledge, to which Mr MacDonald had to respond—and I am not in any way criticising the chairman for that response. I think he responded with exactly the same theme as you have and which the opposition fully supports. We would expect, in an organisation as big as the ABC, that there will be people with all sorts of political backgrounds. But that is irrelevant. They will be appointed by the qualifications they can provide—some will be Labor oriented, some will be Liberal, some Democrat. But so what? If they carry out their professional job, it will be seen that they are doing their job as a media journalist, presenter, et cetera. That is the reason I am raising it, not because I am in any way a devotee of what I call the Kroger position. You emphasised at the last meeting that board members, as a practice and a principle, are not involved in dealing with the contractual employment arrangements of the staff of the ABC, and I hope that situation lasts forever. That is our position on the matter. Earlier today, Senator Tierney raised an issue about the so-called lack of economic content of the various ABC programs. He gave Wik as an example of an issue given undue weight. As I understand it, the National Farmers Federation have been given considerable coverage on the ABC because their view of Wik is seen as an economic issue about the future of farmers in Australia. In that case, isn’t the coverage of Wik be seen as an economic issue? Mr Johns—I understood Senator Tierney was making two points: firstly, that the ABC, in his view, could and should give more attention to financial reporting and economic reporting. I have got to say, in fairness, that he is not alone in that view, within or without the ABC. I have indicated that the ABC—over the last 12 to 18 months or so—has made quite deliberate efforts to lift its performance in financial and economic reporting. I answer in this way because I also want to underline the point that when I or others within the ABC reject suggestions—or say that we think the way we are doing it is all right—I do not then want to be put in the position where we are defensive or where we cannot frankly cop criticism or cop suggestions. That is the first point I would make about that. The second point I think I understood Senator Tierney to make—which I reject—is that we are giving undue attention to the Wik decision and issue as we are giving undue attention to other social issues. I do not accept that. I do not agree with it in relation to Wik; I do not agree with it in relation to our performance on social issues. I point out that at the ABC we spend a fair bit of time talking about the way the ABC deals with bias and whether the ABC is partial or not. One of the factors that I think has to be taken into account is that the ABC itself is not a passive organisation. Like any quality media organisation, it does not simply record but explores, seeks out and analyses issues. We do it in a whole range of ways—through general interest programs like Australian Story and more rigorously perhaps with programs

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 389 like the recent one that was replayed on Radio National, Rethinking Australia—Intellectuals and the public culture. It is this sort of broadcasting and programming which is searching and explorative and looking at the Australian identity—among others—and the underlying issues which we are confronting. This is a matter for us to do as part of our charter, but it is also a matter of pride. I think we are in fact not narrow; I think we present the greatest diversity of views of any media organisation in this country, and I think that should be recognised. A view which narrowly looks at our performance—in the case of the waterfront, for example, in respect of news and current affairs—neglects to actually examine the objective diversity of opinion that the ABC provides a platform for in this country. Senator SCHACHT—I do not disagree. I know that every night, on the 7 o’clock television news, there is always a factual report about finance, the dollar, the stock exchange, et cetera. I do not see every night automatic coverage of ACTU or trade union matters—and neither should there be. I notice most nights now on PM or mornings on AM—your flagship current affairs radio programs—you have economic reporters reporting about the problems of the dollar, though that may not be something the government wants publicised at the moment and that may be a problem for them. But the coverage is comprehensive and I cannot see how people can say that there is a lack of economic news. You have only got 24 hours a day to cover a whole range of issues. Again, from our point of view, we think your coverage—while never 100 per cent perfect—is giving, by gee, a fair whack of coverage to economic issues. Minister, I have raised this with you several times, and I now raise it with you again because you have expressed concern about the complaints procedures bias: do you have any plans to amend the charter of the ABC by putting proposals forward in legislation to amend or change the charter of the ABC, even according to some suggestions that Mr Mansfield made 18 months ago? Senator Alston—We are still considering that aspect of the Mansfield report. Senator SCHACHT—Still considering it, 18 months on? He might come and go and die before you get around to making a decision. Senator Alston—I suppose we are also considering the likelihood of its passage in the Senate, given your general attitude on these issues. Senator SCHACHT—If it was a good change to the charter and expanded the diversity and the programming content of the ABC, you never know, we might actually be sympathetic. But, in view of your performance in the last 12 months, I suspect we would be extremely suspicious of any move you would make to change the charter, knowing that behind the small piece of handkerchief there would probably be an axe that you were going to swing into the ABC. I still wait for that. How many jobs have now gone from the ABC since the government imposed the $55 million cut in the 1996-97 budget? Mr Balding—Since July 1996, it would be about 854 positions. Senator SCHACHT—Roughly what percentage of the total staff is that? Mr Balding—That would be around 15 per cent. Senator SCHACHT—In the coming financial year are there any more jobs to go? Mr Balding—In the coming financial year there could be in the order of about 50-odd positions lost as a result of roll-out of new technology and the completion of our re- engineering of our support services. On a timing aspect, there could be positions that do not go this year that will go next year.

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Senator SCHACHT—Okay. So maybe another 50, to bring it to around 900? Mr Balding—Yes. Senator SCHACHT—That is consistent with what you said even two years ago— Mr Balding—That is correct. Senator SCHACHT—that it would be close to 1,000. Senator Alston—For completeness, it might be helpful to also note the announcements of potential job losses made between March 1996 and the budget in August 1996. Senator SCHACHT—We would be happy to have those. Mr Johns, regarding your answer to my question on notice from the last hearing about the impact of the cuts on programming— and I thank you for that information—I ask you for an update: is there any further information now coming through of further cuts to programming in either television or radio as a rolling on effect of the $55 million cut from base funding? Mr Johns—I will take that on notice. Senator SCHACHT—In particular, do you have any unmet demands for the extension of Triple J transmitters—I know this is done through the NTA—or for ABC FM music to extend its coverage area in Australia? Mr Johns—That is an NTA matter, I think. Senator SCHACHT—Yes, I know that it is an NTA matter. Has the ABC received requests which you have passed on to the government and the NTA to extend either Triple J’s coverage or the ABC FM music coverage? Mr Knowles—I will have to take the question fully on notice, but, as far as I am aware, all of the proposed roll-outs of Triple J have, in fact, been completed. Senator SCHACHT—Yes, I know they have been completed; what I am asking is whether there is still demand out there, people still saying to you, ‘We want Triple J at Rockhampton. We want Triple J at Alice Springs,’ or wherever. Mr Johns—We will take that on notice. Senator SCHACHT—Minister, in an answer you gave, you listed those programs that are joint ventures, those that are completely outsourced and those that are done in-house. From page 551 onwards, for three or four pages in this document, there is a large list of joint venture programs across the whole of the ABC. Is it your consideration and view that there should be a higher level of outsourcing, of joint ventures? Is there an acceptance, a partial acceptance at least, that they are a part of outsourcing in one form or other? Senator Alston—Do you mean co-productions? Senator SCHACHT—Here they call them ‘joint ventures’, which I think means co- productions, does it not, Mr Johns? Mr Johns—Yes. Senator Alston—My reference point in all this has always been Mansfield, but the point that I think comes through from Mansfield’s recommendations is that if you are to make a truly objective assessment of whether or not you are getting best value for money then you do not do it by tying your own hands in advance by effectively requiring any outside body to make use of your services, irrespective of whether or not they might be the best value or whether they might prefer to operate entirely independently of the ABC. In other words, co-

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 391 production is potentially, at least, compromising the ability to obtain a fully independent alternative. Senator SCHACHT—Minister, if I draw your attention to the answer on notice, you will see there is an extraordinary number of productions that are joint ventures. There are a few outsourced, which should meet your absolute definition. In fact, looking through this, if I added up the joint ventures, I think I would find more joint ventures than ABC productions. Is that correct, on balance, Mr Johns? Mr Johns—Yes. Senator SCHACHT—That does not go to the value of each of them. I have to say that this goes on for four pages, I think. Mr Johns—No. We are exempting news and current affairs. Senator SCHACHT—Yes. Minister, I draw those to your attention, because the ABC cannot be criticised to the extent that it has been in the past that it is not actually out there in joint venture and out there encouraging the private sector to be involved. Mr Johns, in today’s paper there was a story by the famous H.G. and Rampaging Roy expressing concern about (1) the management of the ABC; (2) the coalition government’s attitude to funding cuts to the ABC; and (3) no commitment to the future. The way I get the drift of the story, they want a more committed future from the ABC. Firstly, where is the negotiation with them? Secondly, I want it put on record that there was some controversy—not so much I suspect with the ABC but with other commercial television stations—over their last successful show called the Channel Nine Show, in its all its glory. It was seen by some as promoting Channel 9, seen by Channel 9 as denigrating Channel 9 and seen by all the rest of us as a hugely successful show. It was extremely funny and a new level of satire in Australia—something that I suppose Senator Tierney might not understand. Nevertheless, were there problems in the ABC about allowing them to produce Roy and H.G.’s Channel Nine Show? Has that had any impact on their discussions for its continuation with the ABC? Mr Johns—We are very anxious indeed to hold Roy and H.G. to the ABC. I personally have a great interest in the success of their being able to do a joint production with an English television network because, to revert for a moment to the question of outsourcing, the fundamental challenge facing not only the ABC but Australian television in general is an ability to sell our programs overseas. I think you have heard me on this issue before. We have tended to be, all of us, buyers and not sellers of programs. That brilliant pair, Roy and H.G., have had one run at it in England, and if they can be successful in producing a program from there that can be seen with great enjoyment here that will be a very significant achievement. Let it be said from that, and from my own view, that we really do need to hold them, and we do want to hold them. It is always difficult for us to hold talent beyond a point because others have greater commercial power and money strength than we do. But the ABC does offer an atmosphere and an environment and an audience that a whole number of very committed creative people enjoy and value beyond just the simple terms of money. I hope that we will be holding them. And I also noted their strictures against management. Senator SCHACHT—I notice here, in the last two paragraphs of the story, they say that one of the reasons they have not signed up for another series with the ABC is ‘their distaste for "co-location" or the unpopular policy of merging radio and television on one site in Ultimo’. Have you discussed that with them or will you?

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Mr Johns—It is a burning issue within the ABC. Senator SCHACHT—Yes, I know that. Mr Johns—I am familiar with their views. Senator SCHACHT—They also point out they are ‘distressed that their long time director Colin Bromley was one of the hundreds forced to take a voluntary redundancy in the wake of staff cutbacks’. Mr Johns—I am not familiar with that particular. Senator SCHACHT—Mr Balding, are you aware of that? Mr Balding—No. Mr Johns—He would not be. I would have to take— Senator SCHACHT—Would you take that on notice. What concerns me is that, if Bromley clearly is a valued, skilled person and the cutbacks are meaning that you are losing people like him, in the end you start wasting the organisation, don’t you? Mr Johns—I do not know the particular, as I said, but I would be surprised if it was not a voluntary redundancy that you are talking about. Senator SCHACHT—But a voluntary redundancy in an atmosphere of ‘If you don’t take the voluntary redundancy this time around, next year you might be gone anyway.’ Mr Johns—Okay. I will look at it. Senator SCHACHT—There was a report last week—again this is on the programming side, and I might claim that this is bias in the ABC—that said that a Wildside episode had been taken off air this week because one of the characters in the episode was ‘a right-wing populist woman politician’ and this this might be seen to affect the election in Queensland. Was it taken off air because of that? Mr Johns—You would appreciate that we are in election mode in the ABC in respect of Queensland. So we are careful in the run-up to elections, and it is true that a sequence was pulled. Senator SCHACHT—For all of Australia or just Queensland? Mr Johns—For all of Australia, but— Senator SCHACHT—I am not voting in Queensland on Saturday. Mr Johns—Wait a minute. Hold on. Give us a go. It is only temporary. It is envisaged to put that sequence to air at a later date for all of Australia. Senator SCHACHT—Isn’t this a sort of salami effect, that you do this to this sort of character? What worries me is that you have made the example and then someone is going to cry out that one of the other drama programs has got a character in it— Mr Johns—If it causes a problem, if our editorial judgment is that it could create an unfair situation in the atmosphere of an election—three days before the election—then I think we would take a similar position. Senator SCHACHT—Was it the view of the ABC that this character, if shown on TV in Queensland, could in fact increase the vote for Pauline Hanson or reduce the vote for Pauline Hanson? Mr Johns—I do not know the exact details, but I am sure that it would have been a responsible decision, a sensitive decision, that would be saying, ‘We are not going to take any

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 393 undue risks within three days of an election.’ Although I am not familiar with all details, I think that is a sensible approach. Senator SCHACHT—Some years ago you put on air a program called the True Believers. Another one was the Last Bastion. They had much history of the Labor Party in them. Mr Johns—Were they played on the eve of an election? Senator SCHACHT—No, that is what I want to come to. If an episode is being played as part of a 13-week series and an election pops up, would you then take that episode off air? Mr Johns—I think it is a matter of horses for courses. You would have to look at the episode, you would have to look at the situation and you would have to look at the time. We have people who are capable of doing that fairly and not responding to outside political influence. Senator SCHACHT—I accept that, Mr Johns. I just want to get it clear that there is a discrete judgment about this. Mr Johns—Yes. Senator SCHACHT—I have to say I thought you might have been unduly sensitive about it, but then I thought you were unduly sensitive about taking off air people who were republican candidates for the last Constitutional Convention. I thought that was discrimination against the republican cause. But, unlike the minister, I do not go around raging like a mad bull in a china shop about bias in the ABC. I just have to take the good with the bad in that, over a great period of time, these judgments come and go and, on balance, the institution is providing a comprehensive, balanced service for all Australians. I now turn to digital. CHAIR—Just before you do that, I think Senator Eggleston has a question. Senator Eggleston, do you have a question to ask or do you want to say something? Senator EGGLESTON—There is something I would like to put on the record for a minute, Madam Chair. Today we have heard quite a lot of criticism by Senator Schacht of comments made by Senator Tierney about bias in the ABC. I suppose that he could be justified in claiming that Senator Tierney had a political point of view to pursue. Last Monday, 8 June, Frank Devine had an article in the Australian on page 13 headed ‘And now here is the views ...’.Itisananalysis of a week’s programming on the ABC. Mr Devine has looked at various stories and suggested what an editor might have said about them. I would like to read some of those and put them on the record. CHAIR—Have you got a question to ask? Senator SCHACHT—Madam Chair— CHAIR—Senator Schacht, give him a go. He has not asked a question all day. Senator EGGLESTON—I would like to ask Mr Johns a question at the end of these comments, and ask him what his comment is. For example, Frank Devine said: . The ABC devoted nearly half a night’s news and seven minutes of The 7.30 Report to "National Sorry Day." Acting as an editor, Mr Devine wrote a comment. The comment was: Editor: Is this the news or an endless bloody editorial? Give the story two minutes, either lead or second item, and five in The 7.30 Report. Mr Johns—I am familiar with the article, Senator Eggleston. Senator SCHACHT—Mr Devine’s views, biased views, are well known on most things because he writes them every day in the Australian.

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Senator EGGLESTON—Let us look at another item, which says: . Newsreader: And a year after an inquiry recommended a national apology [for the removal in the past of part-Aboriginal children from their Aboriginal families], the Prime Minister still refuses . . . As an editor, Mr Devine suggests: Cut "still refuses." Implies the inquiry is in charge. There is a comment in the news about the Leader of the Opposition, Kim Beazley. It says: . Opposition Leader Kim Beazley: "I’ve given up on trying to get an apology from the Prime Minister on these matters. It’s just not possible." Frank Devine’s comment as an editor is: Political free kick. Kill it. That, of course, did not happen on the ABC. Let us look at some of the others—some of the shorter ones. Another item from the news says: . Newsreader: "Police claim that several officers suffered minor injuries during scuffles with demonstrators [at the Jabiluka uranium mine]. But these demonstrators say police heavy-handedness caused the trouble." Frank Devine’s comment as an editor is: Both sides "claim" or both sides "say". Rewrite it. Senator LUNDY—Point of order, Madam Chair. CHAIR—Point of order, Senator Eggleston. Senator LUNDY—Madam Chair, you have expressed an imperative in terms of timing and sticking to our program, and you have consistently drawn Senator Schacht’s attention to the fact of whether or not he is actually asking a question. CHAIR—It is not right to say I have consistently done that. I have done it twice in three days. Senator LUNDY—We can check the record on that. CHAIR—That is not ‘consistently’. Senator LUNDY—Yet here we have an example of you being quite indulgent of Senator Eggleston expressing a viewpoint which, as far as I can tell, would be far more appropriately expressed in the chamber. CHAIR—Senator Lundy, on the point of order, Senator Eggleston has sat here for three days and I think he has asked about four questions. Senator LUNDY—We are all very patient. CHAIR—I would ask you, though, Senator Eggleston, to come to the point and ask Mr Johns the question you intend. Senator EGGLESTON—I said I wanted to read some examples and then I would ask him a question. The last example I want to read is from the ABC news. The item said: . Newsreader: "No sooner had Peter Costello got trading started on Wall Street [by ringing a bell, a privilege accorded distinguished visitors to the New York Stock Exchange] than the market plunged 100 points. It recovered later, but... Frank Devine said: The Dow Jones index stands at around 8200. A hundred points down is barely a burp, let alone a plunge, and 100 points up is not a [expletive deleted] recovery. What do you guys think you are doing, for God’s sake?

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That was his comment to the ABC. Mr Devine also said: Free of commercial and ratings imperatives, the ABC’s news and current affairs programs should be the ones that cause people to say, "There must be something to it. I heard it on the ABC." In practice, the programs at their worst—and probably at their average—are a disgrace. Mr Johns, would you like to comment on that article? Mr Johns—Mr Devine is responding as an editor and I obviously do not agree with his conclusions. It is possible, if I look at the programs that he covered over a period, that I might find something to agree with. I have not done that in the way that he has done it, but I am suggesting that he is operating as an editor and he is stating his views. We have our executives. I have in fact drawn that article to their attention and, in the environment of self- criticism which exists in the ABC, I am asking people to have a look at it to see whether they think there is any validity at any point. I want to emphasise that Frank Devine—distinguished former editor, distinguished journalist—is now a columnist and he is entitled to his views, but I certainly would not regard the conclusions as valid. Senator EGGLESTON—I read these examples to make the point that an outside journalist who has nothing to do with a political party has made these comments. I am glad to know that you have taken note of them already within the ABC, and I would like to seek leave to table this article and have it incorporated in the Hansard of these estimates. CHAIR—Senator, it is not appropriate to have it incorporated, since it is available on the public record, but it is appropriate to table it. Senator LUNDY—I have some questions about ABC Online. Within the scope of your annual budgets, are you being provided with any specific funding towards the development of the ABC’s on-line presence? Ms Clayton—Budgets have been drawn up for next year and, yes, our Online unit has been funded and there is a small increase in that funding. You will appreciate that the way in which our on-line services are funded within the ABC is that there is a coordination unit which is funded and then the majority of programs fund their own on-line presence out of their own program budgets. So that is happening, but there is a small increase in the budget for our on- line presence. Senator LUNDY—Do ABC Online, and the way in which that support is distributed through each of the different sections of the ABC, in turn get a relative funding boost specifically for that task? Ms Clayton—With the digital conversion task, what we are trying to do now with the whole ‘One ABC’ is bring our radio, television and on-line programming and production together to try to develop efficiencies from bringing people together so that when we make content we make it for all our delivery systems. That is part of our whole efficiency approach and that is how programs are dealing with the development of on-line services. It is a new way of thinking about the way we produce programming. Senator LUNDY—So that allocation of funding is embraced in what is being allocated for digitisation? Ms Clayton—That is correct. Senator LUNDY—In the development of ABC Online, with recent developments—for example, the association between Telstra and NineMSN as a blend of a carrier and content provider from a media based organisation—how do you see the ABC’s on-line product in the eyes of other competitors and your ability to maintain an innovative on-line presence?

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Mr Johns—We are going to have to look and look continually at what is happening elsewhere because, as you obviously well appreciate, the developments are coming fast. Our position at the moment is that we believe we have some inherent advantages—we have great funding difficulties—such as being a 24-hour operation, such as that we are audiovisual and text and such as that we are a national organisation with enormous penetration throughout the country. As my colleagues mentioned, we believe that the whole reorganisation which we are going through now, which is a cross-media reorganisation, is going to stand us in good stead because we believe that we are quite innovative about this and ahead of the game. For those reasons, while we are watching what is happening elsewhere, we are really concentrating on developing in our own way. But we will have to continue to watch. The general position that I have persuaded the board to take in respect of the ABC is that we should see ourselves primarily as a content creator and that really what we should do is look for opportunities to extend the life of our content, either by selling it overseas or selling it domestically here, as is appropriate, rather than entering into business partnerships. So the idea that as a content creator we are looking for a carriage partner, or whatever, does not come easily to us at this point. Senator LUNDY—Can you envisage or does the board envisage at this stage the need for any significant shift in the way you have structured the development of this on-line presence within the organisation? Mr Johns—I expect again that it will evolve, but it has been very good for us to have tried to in-bed ABC Online as a central part in the organisation rather than it being something too distinct. It does have some distinct characteristics, but when I first established the on-line services we wilfully stood against creating it as a separate division. We really want it to be an integrated, integral part of the whole corporation. In fact, we see that as an advantage, as a catalyst for creating content, for extending the life of existing content and extending the skills and awareness of people who are working throughout the corporation. Senator LUNDY—One of the issues that has emerged with the commercial content providers is the question of copyright and the availability of that content to, for example, organisations that monitor media content for redistribution to certain parties. Has the ABC been confronted with this issue about the way in which you administer copyright on that content? Mr Johns—I am not aware of that as a matter of detail. I have got to say—and I would like to respond to you in a general way—that, with copyright, people who talk about the development of multimedia and online services and so on make a lot of the copyright difficulties. In a previous life, I worked in book publishing and I am reminded of the fact that copyright has taken decades and decades to evolve. It is quite marvellous now that the copyright works so well for books and for music, for example. It is remarkable, when you think about it, that you could write a book, it could be sold in New Delhi and you would get your royalty. You would not if it was sold in Beijing, by the way, but you would if it was sold in New Delhi. It has taken quite a long time for that to evolve. So I am not bluffed from my position—I am not getting down to the nitty-gritty of that question you raised—by the challenges of copyright for online services or for the development of multimedia in general, but we will have to work our way through it. Senator LUNDY—Do you ever see the ABC moving into an area of effectively providing a distribution base for your content in a way that takes on the nature of a selective distribution point for content of a specific nature? I guess what I am getting at— Mr Johns—I know what you mean.

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Senator LUNDY—is some of the conceptual new approaches to media and people perusing media content on a given subject as opposed to the way in which it is currently presented. Mr Johns—That is interesting. Speaking personally, I have thought of it in the way you first broached the question: possible partnerships, possible alignments, with distribution mechanisms rather than ourselves being a distributing agent. It is an interesting idea. I think the potential and the excitement that is available to us is terrific. As I have said to this committee before, the success that we have had with our online services, given the funding that we put into it, has been quite remarkable. The future is really exciting. It is one thing to say that it is exciting; it is not all that easy to identify and delineate the staging points in the future. CHAIR—I think one of the interesting things, Mr Johns, is when you hear Macca and you hear someone ring in from downtown Penn. State or somewhere. It really means that the penetration is incredible. Mr Johns—Yes. Senator LUNDY—In the context of the digitalisation process and the convergence of online content and broadcast content, again going to the point of the alliances that are currently emerging within this sector between content providers, broadcasters and other media content providers, that all raises a series of challenges perhaps relating, in the first instance, to new forms of convergence between telecommunications and broadcasts but, secondly, to the ability of organisations to position themselves quite holistically to take advantage of what are conceivably unanticipated shifts in technology, particularly at the consumer end. What capacity do you as an organisation have to be able to move with those shifts or anticipate in perhaps a uniquely innovative way to take advantage of those changes? Mr Johns—I think we have enormous capacity, as I said. We are the organisation that is 24 hours in operation and we are audiovisual and text. As for the issue that is a very difficult issue in the minds of many of our staff at the moment, I must confess—the issue of co- location—I think that when we are co-located one of the tremendous creative advantages that that will give us is this ability to represent within our physicality a converged environment. It is one thing to day, ‘Look, communications is so terrific,’ and ‘Why can’t you get from one side of the harbour to the other via communications? You don’t have to be physically present.’ I think, in fact, there is enormous advantage about being physically present because ideas rub shoulders. I think that when we are co-located—and where we are co-located—we will have that capacity to move that much more quickly with the developments that are taking place in online and multimedia. Senator LUNDY—Certainly from a content perspective. CHAIR—Senator, I think Senator Eggleston has a question. Senator Eggleston, do you have a question that relates to that? Senator EGGLESTON—It is relating to digitalisation, which Senator Lundy mentioned in passing. Senator LUNDY—I have just got a few more questions specifically about this area. Senator SCHACHT—I have some on digitalisation. Senator LUNDY—I think everyone wants to talk about digitalisation anyway.

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CHAIR—Just let me say that everyone might want to talk about it, but we need to begin to realise that we are now more than over time. We need to think about how we are going to organise the time. Senator LUNDY—Okay. Just as a follow-on from that point, Mr Johns, turning to hardware, again some of the converging technologies are highly contingent on the type of hardware that in fact comes associated with that. Of course, it will be some time yet before the appropriate form of set top box or otherwise determines the delivery of many of these forms of new content. But what we do know is that many players who currently provide content or provide a means of transferring data also have an interest in the production of the actual hardware that is going to facilitate it. How is the ABC going to stop itself being marginalised in that process, given (1) you have indicated you are not looking at partnering in any broad sense with other carriage mechanisms, contact providers, et cetera and (2) the restrictions upon the capital you have access to in investing in some partnership arrangements, the provision of hardware—even to the degree of your voice in that public debate about it—presuming, of course, the government at some point is going to have to bite the bullet about some type of technology that is going to service the needs of consumers. Mr Johns—I will take the last part of the question. My colleague will talk about the hardware aspect. On the capital aspect of it, what we have been doing to date in the development of online services is that we have been working really smart. I do not say this in a self-congratulatory way, but we got in early, we began early and we are utilising the skills and the abilities of our staff and mobilising our existing staff in a way that other organisations are not. There will come a point when just working smart is not going to be enough and, you are right, capital is going to be an issue and we will have to address that. I hope that, by the time it is even more an issue than it is now, what we are doing will be so much more widely appreciated and one will not have to make the obvious statements that are commonplace to you but not necessarily so commonplace to other people and that the ABC’s role is well and truly accepted in radio and television and the necessity for it having a presence is taken for granted. But in other areas of decision making, and regrettably amongst decision makers, it is not readily accepted yet by planning and forethought that the ABC is going to have to play an equally important role in the development of multimedia and online services, otherwise that traditional mix will be diminished. Mr Knowles—In the convergence issue we are seeing multimedia becoming another means of providing different sorts of services to audiences. It is not necessarily trying to replace television or radio; it is providing a way of enhancing those programs. In order to make that work, the current Internet technology is far too slow. People have to wait a long time if they want to get pictures, for example, and they are not very good. If they want to get audio it is okay, but it is very much a one-to-one relationship. This means that when 500 people try to dial up the scores of the Superbowl the system crashes. We saw much the same when the original Olympics site went up last year, or the year before. However, what is happening now in the standards area is that there are a lot of different approaches being developed for delivery of Internet type traffic to consumers—in other words, set top boxes, the possibility of putting hard disks inside television sets and so forth. All of those are developing in somewhat parallel but with different innovations on them. What we will see happen, and this is the traditional way that most consumer products emerge, is that we will get a divergence. We saw a divergence with video tapes, for example, with beta-max

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 399 and VHS. Ultimately there is strong consumer interest in having a standard. All across the world people are looking at trying to get standards. People do not want to compete with technology so much as with content—but providing that content accessibly. No matter which content provider you look at, they are more concerned about having it available across a range of platforms than just on that particular provider’s platform because that immediately limits them to a number of subscribers. A lot of work has been done on conditional access arrangements so that you can make the thing generally available to those people who pay, irrespective of what boxes they provide. The cable industry in the US, for example, has recently standardised on the boxes it will use for digital, irrespective of the company, as a way of trying to facilitate that process and make it easier for consumers. Senator LUNDY—I have one last question in relation to ABC Online. Given the budgetary pressures on the ABC and its withdrawal in many respects from its presence in regional Australia, what strategies do you have to ensure that your online presence can perhaps even reinstate your presence at least in that format in the regions? Mr Johns—First of all, as I have said before—and perhaps at a later time I should amplify it—the whole reorganisation that the ABC is undergoing now is to say essentially that the means of delivery is secondary and what is important is what is being actually created. If you are creating content, it may go to radio, it may go to television, it may go online, it may go on the Web site—whatever. That is the essential characteristic of the reorganisation that is going on. That itself is built on the foundation that the ABC is the media organisation in the country with a regional spread. We reach throughout Australia. There is no other media organisation with that reach. So the reorganisation is in fact minimising that distance between us. Just to digress for a minute, the chairman expressed surprise that I was not aware of a brochure that was produced in Melbourne recently. Twelve or 18 months ago I would have been aware of it. What we are really trying to do now is to devolve decision making, both administratively and creatively. We are having a total look at that. Specifically, if you look at our Online site you will see a regional presence that you will not see on any other site. That is a concrete example of what I have been saying in generalities. That is proof positive of the effectiveness and our commitment to securing that regional presence, not just for the regions but for the whole of Australia. CHAIR—I did not expect you to be involved in the decision making on that brochure, but I thought that you may have been sent one like I was. Mr Johns—I was not. Senator SCHACHT—Complete devolution in the ABC. Senator LUNDY—One of the more fascinating aspects of ABC Online is the decision that you have made to have all of your staff participate in creating the content and the way it seems to be built around a collective input. Looking at the site from a regional perspective, the challenge seems to me to be to ensure that there are input points regionally to make sure that the content has a high degree of relevance to each constituency. Mr Johns—The effectiveness of that will be in a digital strategy, and the strategy that I am very confident the government is going to fund for us is going to be very relevant for regional Australia.

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Senator LUNDY—I have one other point on that in terms of access to the online presence. This goes back to questions we have asked recently of Telstra and others. The capability of regional Australia to get access to an online service is highly contingent upon the pricing regime of our national carrier, Telstra. I suppose it is more a question to the minister: have you contemplated the question of access to public services and public content from a highly regional perspective in the context of equity of access to an online medium for regional Australians? Senator Alston—The decision we took in relation to imposing licence conditions on Telstra to provide ISDN capability to homes within five kilometres of a local exchange was very much designed to give people access to high speed digital data capability. That has been a very successful exercise. The farm-wide trial of the National Farmers Federation, 1,000 homes in a pilot project, demonstrated a very high level of need. We made the original funds available and the board of the RTIF provided $1.5 million to expand that trial. It has also provided funds for a number of local Internet points of presence, which are essentially means of giving people access at the local call rate. Senator LUNDY—We canvassed that with Telstra. Senator Alston—I think they are pretty significant initiatives in terms of access. We expect these new satellite consortiums to provide greater degrees of access as well. So we certainly understand the need to ensure that everyone in the country has access to the Internet. Senator LUNDY—Thank you for that, because I am sure you can see as well as I can the interrelationship between the value of having this quality content available and being able to get at it. Secondly, in terms of the regional implications of the content, it is important to have basically a physical regional presence to allow that input to occur on-site, if you like, and it is important for the ABC to be able to maintain that local content development. I suppose it is a question to you, Minister, about the degree of commitment you have to the ABC’s regional presence. I am talking specifically about the Internet but, as Mr Johns has said, we are not talking just Internet, we are talking about digitised content that could be used in all formats. Senator Alston—We hope and expect that, consistent with the charter of the ABC, it will always regard itself as a truly national organisation. My recollection is that Brisbane ABC actually regards itself as a regional coordinator of inputs for online services, and there is quite a bit there on a 24-hour basis, I think. They do news and current affairs in there somewhere too, don’t they? Mr Johns—Yes. Senator Alston—So the updating of the ABC news online and a range of other ways of getting local information available I think is working very effectively. I have seen the facilities and I was pretty impressed. I have not heard any complaints. If you are saying that the ABC should nonetheless have a number of other physical locations where it feeds in material, I am not sure whether that is necessarily the most effective way of doing it. Senator LUNDY—I am not talking about the upload of the information; it is the collation of local content and the preparation of bulletins relating to local and regional events. It is more at the journalist end as opposed to the technical upload of the data. I do not know whether you had anything to add to clarify that. Senator Alston—Mr Johns might be able to elaborate on how it is handled at the moment. Mr Johns—We are developing regional centres with the capacity to act regionally. How many have we got now?

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Ms Howard—About a dozen, I think. Ms Clayton—I think it is a fair number more than that. I think we have got an objective to get them all online by the end of the calendar year or something like that. Mr Johns—But it is very much the case that a capacity to do this is absolutely related to a capacity to digitise, and that is really what we are talking about. I mean, that is what you are talking about and that is what we are talking about. Senator SCHACHT—My question to both the minister and the ABC is about the digitisation program. Minister, you have provided in the budget $20 million as the government contribution for digitisation. I think the ABC asked for $44 million over five years. You offered them $20 million, with the promise that you may reconsider the matter in the near future. Mr Johns—We sought $84 million over five years, and the total cost over five years was $150 million. Senator SCHACHT—There has been talk before about phase 1 and phase 2. Mr Johns—We are now talking about the total over five years. Senator SCHACHT—The two combined together. Mr Johns—Yes. Senator SCHACHT—Fine. So that is $84 million you sought from the government. Mr Johns—We are seeking $84 million over five years for our conversion program. The total cost, we believe, over five years is $150 million. We believe we provide the difference between the $84 million and the $150 million ourselves, and we provide that in two ways. It is important to note this. Senator SCHACHT—So that is $66 million you will provide yourself? Mr Johns—Yes, $66 million. We provide that in two ways. We do that from income from property sales and by the diversion of normal capital expenditure to digitisation. Senator SCHACHT—Can you break down the property sales and the diversion of capital expenditure? Mr Johns—Yes. Mr Balding—Over the five years, roundly $36 million gross from property sales and $30 million from our capital appropriation. Senator SCHACHT—I must say that they are the clearest set of figures I have received— full stop. The government has offered you $84 million—$20 million as a down payment, you are hoping? Mr Johns—A down payment of $20.8 million. Senator SCHACHT—Which means that there is $63 million and bit to come? Mr Johns—Yes. Since the minister is sitting next to me, I would like to make the point that the government— Senator SCHACHT—You can strangle him if you like and turn him upside down and shake the money out of his pockets. Mr Johns—There was mention of two things. I will take up one of the points now—the announcement that we could be financing the difference between the $20.8 million and the $84 million and that property sales could help us on that. What I want to explain and I really

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 402 SENATE—Legislation Thursday, 11 June 1998 want understood is that we have already calculated the income from property sales, that my colleague has mentioned, to find the difference between the $84 million and the $150 million. So we do not want to double count on property sales. Senator SCHACHT—I do not know whether the minister was listening. You will have to try again later, Mr Johns. So the $36 million has not yet been realised? Mr Balding—No. Senator SCHACHT—But this is what you now anticipate you will get? Mr Johns—Yes, and we will put that in to make up the difference between the $84 million and the $150 million. Senator SCHACHT—Minister, what chances does the ABC have of getting another $63 million over five years for the digitisation program? Senator Alston—Phases 1, 2 and 3? Senator SCHACHT—No, Mr Johns has just combined all the phases into one hit. He is asking for $84 million from the government over five years. It is $150 million all up, and the ABC will provide $66 million. You have already given $20 million, so that means you have to provide another $63 million over five years. What are the chances? Senator Alston—We have made it clear from the outset that we regard phase 2 as further down the track, and we have not offered funding in respect of that component. Senator SCHACHT—Down the track when? Senator Alston—At a later point in time. In other words, not now. The funding that we are providing is in respect of phase 1. Senator SCHACHT—Under the government’s general announcement of the introduction of digital, digital starts operating in Australia from 1 January 2001. Mr Johns, if you do not get any more than the $20 million by then, how many areas of Australia will get ABC in digital format? I will put it another way: how many will not? Mr Johns—You are right about the uncertainty. When we heard this announcement of $20.8 million, I said that it was a foot in the door, but we have to get the door really well open and the body well in very soon to be able to proceed effectively with the digitisation programs. Perhaps my colleague Russell Balding can— Senator SCHACHT—This is for re-equipping ABC studios—basically capital equipment in the studios and associated areas. Does this mean that, on 1 January 2001, Sydney, Melbourne and Brisbane may have enough for the studios, but Adelaide, Perth and Hobart may not, so only part of the ABC audience will have the opportunity to see digital television? Mr Johns—I know where you are going, Senator, but I have to tell you that we have such uncertainties that we cannot give you that sort of geographic answer. The uncertainty that we have now of receiving $20.8 million and the difference that we believe that we need presents us with planning problems because we are talking about five years. Forget the phases; we have a five-year challenge ahead of us. That is the one uncertainty. It is very difficult for us to describe what we are going to do now with $20.8 million when we do not know what our total is. It will even be difficult to spend the $20.8 million in a strategic way. Senator SCHACHT—But— Mr Johns—Just bear with me because I know where you are going and it is just not capable of that sort of answer. The next uncertainty that we have is the regulatory uncertainty. We have

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 403 high definition television. What is our role in high definition? Thankfully, we have a space on the spectrum, but what is going to be the regulatory requirement that we will have to meet? Senator SCHACHT—You have to put HDTV to air. Mr Johns—Yes, that is right. That matters, but for how much and for how long? That is a cost. The next uncertainty we have is our capacity for multi-channelling. What is our access to multi-channelling? Again, thankfully, we have, in theory, an access to multi-channelling. Those uncertainties together make it difficult to start giving you— Senator SCHACHT—Four channels. Mr Johns—If you only get this much, who is going to miss out? Senator SCHACHT—You get seven megahertz and you will be able to have a minimum of four multi-channels. That is clear even in the government’s decision, and the opposition has made it absolutely clear that we believe the ABC and SBS can have four multi-channels when they are not in HDTV format. CHAIR—Better than the others. Senator SCHACHT—Which, as Senator Patterson just said, is more than the commercials are getting. You are getting multi-channelling. Ms Clayton—However, our capacity to multi-channel is subject to review. Senator SCHACHT—I beg your pardon. Mr Johns—It is subject to review; it is subject to what we can put on it. Senator SCHACHT—Review of what? Whose review? Ms Clayton—By the department. No, the government. Senator SCHACHT—Which review was that, Mr Stevens? There are four review committees under the proposed digital legislation. Is there one reviewing the ABC’s multi- channelling? Mr Stevens—There certainly is a review as to what will be permitted under that multi- channelling option, yes. Senator SCHACHT—This ought to be in the digital inquiry tomorrow. You might have to stay overnight, Mr Johns, and turn up. Senator Alston—We said it at our original press conference. Senator SCHACHT—I do not think that is clear, Minister. Senator Alston—We have said it from day one. Senator SCHACHT—No. You have said the ABC gets multi-channelling. Senator Alston—No, we have not said that. We have said that we will conduct an inquiry to determine the extent to which we would prepared to allow the ABC and SBS to engage in multi-channelling that was on a non-commercial basis and was within charter obligations. Senator SCHACHT—I am sorry; you were going to have a review. When is that review going to be conducted? Senator Alston—Basically, it will be as soon as you give the nod to the legislation. Senator SCHACHT—I accept that that was the government’s decision. Our position is that we do not need a review, you are getting four channels, as long as the multi-channelling is not for commercial use. There is a difference between us and the government on that, which maybe the committee of inquiry that we have at the moment might resolve in discussion or

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 404 SENATE—Legislation Thursday, 11 June 1998 whatever. Will the $84 million be spent evenly roughly over the five years or is there going to be lumpy stuff? Mr Balding—No. The initial two years are the areas where we have to spend the most money per annum. Senator SCHACHT—How much is that per annum? Mr Balding—Our initial cash flows we had outlined in our digital strategy back in November. We are looking to spend now around $31 million in year one and $28 million in year two. Having regard to the funding that we would be putting into that ourselves, it is $6 million from our capital allocation. If I can just talk about net cash flow requirements for the organisation, in year one we require $25 million and in year two we require a further $20 million. Senator SCHACHT—Can I suggest, Mr Balding and Mr Johns, that those figures you have outlined here today—now that we have got rid of all the phase complications and we just have one five-year program—be provided to us on notice in that simplified form, because your own submission last year had bloody phases, which were extremely difficult to zigzag through to get a grip on exactly what you wanted. I think this is much simpler; I know what the argument is. In that lumpy beginning of over nearly $60 million in the first two years all up that you would require, irrespective of whether that comes from government or assets sales, is that overwhelmingly going to spent on equipment in studios around Australia? Mr Knowles—The initial investment is in fact in the infrastructure to get the digital programs around the country. Some of it, of course, is for producing it in studios. Because the world of studio equipment, particularly for HDTV, is still evolving, we would not envisage in fact equipping every single studio in the country for HDTV overnight; it will be a progressive build-out in the same way as we did colour in the past. Senator SCHACHT—Minister, this is an issue that may have to go for discussion to the NTA a bit later on: when we had the digital inquiry last week, I questioned the representative from the ABC, I think it was Mr McGarrity—I gave him a bit of a hard time. Mr Johns—We heard about it. Senator Alston—I read about it overseas. Senator SCHACHT—Even in Singapore? Senator Alston—Shockwaves around the world. Senator SCHACHT—I thought Mr McGarrity missed the opportunity to put the best foot forward for the ABC on this issue. Mr Johns—It would be unusual for Mr McGarrity for that to happen, I must say. Senator SCHACHT—I know. All this money is for studios, et cetera. When I asked how much the NTA is going to need for the transmission costs of putting the equipment up on the existing masts, the transmitter at the bottom and a shed, et cetera, he said, ‘If you capitalise it all out, we think, on a big guess, maybe about $30 million a year extra to what is provided to the NTA by the government for ABC transmission.’ Now if I take it correctly, that $30 million a year through the simulcast period is on top of what the government has provided for the ABC, is that correct? Mr Johns—Yes. Senator Alston—Yes.

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Senator SCHACHT—Minister, in the budget I see before me for the NTA, there is no mention of any figure or even of any planning for a figure for the ABC and, I might say, for SBS, for the provision of money for the actual digital transmission of the signal. I may be wrong, Mr Stevens can point this out to me. In the outlay years, up to 2001 and beyond, where are the transmission amounts of money? Senator Alston—We have made it clear from the outset that we have not provided funding in respect of phases 2 and 3. The ultimate transmission costs for phase 3 will depend to a significant extent on negotiations with the purchaser of the NTA, assuming that the bill goes through. That is a matter that will have to be addressed after that time. Phase 2, which involves transmission from the studio to the transmitters, is also a matter that requires further analysis and will depend to a considerable extent, I would have thought, on the outcome of the ABC’s own fundraising measures. Arthur Andersen does not take the ABC’s property sales estimates at face value, and we are guided by what they have said on the matter. There are, of course, reservations that have been expressed about whether all of the ABC’s proposed expenditure is germane to the digital upgrade. To that extent, we are on the side of conservatism. Senator SCHACHT—It is not a matter of erring on the side of conservatism. Even if you do not accept only $30 million, the figure that Mr McGarrity generally said, he said it is not a figure that the ABC has control of. Senator Alston—The ABC does not have any estimate of funding for phase 2 in the next two financial years. Senator SCHACHT—Is phase 2 the transmission period? If digital broadcasting starts on 1 January 2001, Minister, unless the ABC has got transmitters and equipment up on the existing masts, no matter what they have in the studios— Senator Alston—That is halfway through the third financial year. Mr Balding—To enable us to broadcast in the year 2001, the ABC is expecting to spend $14 million in year three, followed by a further $14 million in year four and $12 million in year five, to give a total of $40 million. Senator SCHACHT—This is what I was not certain of last week, and I want to get it clear now. Let us forget the government accepting it or not, does the bid that you have put in of $84 million from the government, and $150 million all up, include money to put the capital equipment in—on the transmitters for the actual devices and the thing up the mast—so that people can receive the signal through the air? Mr Knowles—No, Senator. Senator SCHACHT—It does not? Mr Knowles—No. In fact, our submission made it quite clear that it was not a requirement that the ABC— Senator SCHACHT—So no matter which phase you are in, Minister, whether it is ABC 1, 2 or 3, none of their phases is talking about the cost of actual transmission, either of the capital equipment or the cost each year of transmitting. Senator Alston—I understood phase 3 would involve the cost of transmission. Senator SCHACHT—No. Senator Alston—Okay, post-phase 2, if you like. Phase 2 is only partial transmission—in other words, from studio to transmitter. The actual transmission costs are a matter for negotiation with the NTA or its successor in title.

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Senator SCHACHT—Can I just go back one step so that we get the quicksand sorted out. The minister understands phase 1, 2 and 3. Does this $150 million include phases 1, 2 and 3? Mr Balding—No, phases 1 and 2. It enables us to get the signal to the transmitter. Senator SCHACHT—And that is over five years? Mr Balding—That is the first five years. Senator SCHACHT—What was going to happen in phase 3? What is phase 3 in your old definition? Mr Balding—We do not have a phase 3. Senator Alston—Call it post-2. Senator SCHACHT—So phases 1 and 2 over five years are to get the signal to the transmitter? Mr Balding—Yes. Senator SCHACHT—Actually getting the signal up the transmitter and out to the people is not in the $150 million? Mr Balding—No, it is not, Senator. Senator SCHACHT—This is where I come back. I think Mr McGarrity had a stab in the dark when he thought this would cost an extra $30 million, including the capital cost of provision. Whether the NTA is privatised or not, whoever provides it would capitalise the cost of the new equipment and charge the ABC about $30 million a year. Whether it is $30 million or $22 million or $28 million or $35 million, I am finding here in the documents that there is no mention yet—or discussion with the NTA on behalf of the ABC or SBS in the out years—of any funding for the actual transmission costs or transmission equipment. Senator Alston—Put it another way: there is an acknowledgment from everyone that there will be additional moneys required to complete the transmission phase. It is not possible to identify the costs apart from the fact that technology is evolving all the time and costs may well come down dramatically over the period of the next two or three years. Until you know the status of the NTA, and until they are able to quantify the costs, it simply does not make sense to have stabs in the dark at it. Much and all as you might want certainty, it is not relevant at this point in time. It will have to be addressed closer to— Senator SCHACHT—But it is relevant, Minister. Senator Alston—It does not have to be addressed right now. Senator SCHACHT—It does. In the digital inquiry, all the commercial television stations have been screaming their heads off: ‘Unless you get this legislation carried in the next four weeks, we can’t plan for the beginning of introduction of capital equipment to get a commercial signal out by 1 January 2001.’ Senator Alston—What they are saying is, ‘Why should we go out and spend money if the bill doesn’t get through the parliament?’ Senator SCHACHT—No. If the bill goes through, they said, ‘We can then go on, and we’ve got to use all the rest of the time to put the equipment in to have a transmission signal by 1 January 2001.’ Senator Alston—Same here.

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Senator SCHACHT—But the ABC have been left wide open; they have no understanding, no idea, of where their transmission costs are coming from. Senator Alston—There is an acknowledgment that there will be additional funds required. Their quantum is still a matter for negotiation. Senator SCHACHT—Mr Johns, Mr Knowles or Mr Balding, can the ABC plan to be on air with digital— Senator Alston—We are not criticising them for not being able to quantify the amount. I do not see why you are. Senator SCHACHT—I am not criticising. Mr Johns said before that there is uncertainty. Senator Alston—I thought you were. You kicked McGarrity to death last week. Senator SCHACHT—Mr Johns, to get a signal out in the metropolitan areas of Australia for some form of digital signal, when do you think you are going to have to start ordering transmitting equipment—to order, to purchase and to put up the aerial—so that on 1 January 2001 people in metropolitan Australia at least are going to get some digital signal from the ABC? Mr Knowles—Senator, the transmitting equipment is probably the least complex in terms of delivery and installation of the whole of the digital transmission chain. If I were a supplier of transmission equipment, I would probably have a lead time of 12 to 18 months for the purchase and construction of a particular facility. Most of the facilities will not require new antennae. Senator SCHACHT—I understand that. Mr Knowles—They will not require new masts, they will simply require the purchase of transmitters. Senator SCHACHT—And you will put some wire up the aerial? Mr Knowles—Exactly, so that time could well shrink. We have experienced a very large transmitter roll-out, as you might recall, when we did television equalisation. All of that happened in times which people previously considered to be impossible. Senator SCHACHT—The commercial television people may have been gilding the lily to encourage the parliament to carry the bill in the next three or four weeks. There is a demand for transmitters, for example in regional Australia—the aggregated regional stations. The bloke from Western Australia said he is going to have to buy 120 transmitters and translators for his GWN service. When you multiply that with the aggregated markets across Australia plus the networks, there are going to be several hundreds of—probably well past 1,000— transmitters and translators bought. It does not worry you that you might be on the tag end of the orders and miss out? Senator Alston—You are proceeding on the basis, are you not, that we have given the regionals an additional three years to complete the roll-out. That includes the ABC. Senator SCHACHT—I know that. The way they were talking is that they wanted to get cracking on it as soon as possible too. Senator Alston—No, their budgeting is that they do not require funds until the year 2000-01 and then they will have $14 million, $14 million and $12 million over a three-year period. That is progressive. Senator SCHACHT—Are you talking about the ABC?

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Senator Alston—Yes. Senator SCHACHT—We are talking at cross-purposes, Minister. One of the commercial representatives for commercial regional television said that he would like to get cracking on ordering his 120 translators, transmitters, et cetera, before the date of 2000. Even if they do not meet that date, they will want to be pretty close to being in the marketplace for digital television. Is it the plan, Minister, that the ABC and SBS, at least in the metropolitan markets, will also be on air on 1 January 2001 with the commercials and metropolitan markets with digital television and some hours, maybe, of HDTV? Senator Alston—Yes, assuming the legislation goes through. Senator SCHACHT—So, assuming the legislation goes through, that is the plan. When is the government going to put in the out years for the NTA or whoever succeeds it—or whichever way you want to do it—the funding for the ABC and SBS for transmitter costs and the extra money for the simulcast period for transmission costs? Senator Alston—That will be a matter for subsequent negotiation, but clearly— Senator SCHACHT—If it is not in this budget that means that another 12 months will go by, through to the middle of 1999, which is barely 18 months— Senator Alston—Anything is possible. We do not need to do it in the budget context, anymore than we needed to provide funding in this budget. We chose to but, if you recall, Mansfield was recommending that we could make funds available at a later date. We could have made them available prior to the last budget. We chose for convenience to put it in the budget this time around. We could do it in the next budget or we could do it at any time before that. Senator SCHACHT—I am interested to hear that your Treasurer is always happy to make money available outside the budget process. Nevertheless, are you confident that the money will be available in time? Senator Alston—I have said that there is an acknowledgment that further funding will be required. Senator SCHACHT—I just want to get it on the record that you are confident that the ABC and SBS will have enough funds to have transmission and capital equipment costs met so that they can go to air— Senator Alston—It is certainly our intention. Senator SCHACHT—Mr Balding or Mr Knowles, Mr McGarrity’s rough figure was $30 million a year, which is a mixture of both capital and transmission costs. Since I asked Mr McGarrity a few of these questions a week or so ago, has the ABC had a chance to refine them or have further discussions with the NTA? Mr Knowles—No. In fact, Mr McGarrity’s figures are probably fairly close to the mark, given the sort of capital investment that is necessary. What we do not know is what rates and things might be applicable for the provision of such services. That sort of estimate would come from the total amount of capital invested and some reasonable commercial return and depreciation over a 20-year period. To be any more precise than that really requires a site by site analysis and actual hardware costs. Senator SCHACHT—The other thing that Mr McGarrity, and also a representative of SBS, said at the digital hearing was that neither of you would be required to use the privatised NTA for digital transmission—the five-year commitment is only for analog. Is that correct, Minister?

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Senator Alston—Yes. Senator SCHACHT—So ABC and SBS could put their money, when they get it, towards tendering for some organisation other than the NTA or privatised NTA? Mr Knowles—Yes. Senator SCHACHT—Are you planning to have that option for yourself? Mr Knowles—I am sure we certainly will. In some cases we will not have a choice because there will only be one mast, and in other cases there will be multiple masts. Senator SCHACHT—When there are multiple masts, you will ask them to bid, will you? Mr Knowles—Where it is feasible, yes, because we might get a better price. Senator SCHACHT—What if the NTA says, ‘We do not mind your bidding when there is a competition in masts, but if you do not take ours where that competition is, you ain’t getting ours where we are the only ones’? Senator Alston—They would probably go to the ACCC. Senator SCHACHT—Is this under ACCC access rules or just general competition rules? Senator Alston—I would have thought general competition rules. Mr Knowles—The specific access rules are in the draft legislation. Senator SCHACHT—For privatisation of the NTA? Mr Knowles—No, for digital as well. Senator SCHACHT—Do you agree with the minister that the way they can stop doing this to you is to say, ‘You do not get access to our masts if we have to bid for that; if we don’t get that business, you are not going to have our business in the bush where there is only one mast’? Mr Knowles—No, there are protections for that built into the draft legislation. Senator SCHACHT—In the digital legislation? Mr Knowles—Yes. Senator SCHACHT—Thank you for that. These things keep popping up all the time. Every time you ask a question you get three pieces of information on digital that complicate the process. CHAIR—Senator Schacht, Mr Johns has just missed his plane. Could you please make sure that you accommodate his catching the next plane, which goes at 6 p.m.? Senator SCHACHT—Yes. Before I move on from digitisation, I will ask the minister, the department or the ABC to take on notice to provide more information on the transmission cost—this $30 million. I would be happy to receive that information. Mr Balding and Mr Knowles, will you take on notice any refinement about how you have changed these figures from two phases to one phase, and a total picture? Mr Balding—We have not changed the figures; we have set it out in two phases. Senator SCHACHT—But you will provide me with information on the new way that you have set it out. Mr Balding—Yes, we will do that. Senator SCHACHT—The minister said that the Arthur Andersen report did not accept your estimates on asset sales.

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Mr Balding—I dispute that. In actual fact, the Arthur Andersen report basically substantiated our estimates of what we would realise from property over the next five years, and that was the figure of $36 million. Senator SCHACHT—So the $36 million is their figure? Mr Balding—No, they confirmed— Senator SCHACHT—That your figure is realistic. Mr Balding—They confirmed that our figure was achievable. Senator SCHACHT—ABC one, minister nil. Senator Alston—That is not quite the same thing as saying that that is the most likely outcome. Senator SCHACHT—In the Arthur Andersen report, Minister, it said that the $20 million you have given should not be used to borrow money and then use it as an interest payment, whereas in your statement you have said— Senator Alston—Who said that? Senator SCHACHT—The Arthur Andersen report, I understand, said that you should not use the $20 million to service interest payments on borrowing to make up the lack you have given them. You said in your statement that that is a possibility. Do you think the Arthur Andersen report was wrong? Senator Alston—It said: We consider that the implied strategy to raise the $36 million is not necessarily the best strategy to adopt, as significantly improved long term savings (for example, over 15 years rather than just 5 years) can be achieved by the ABC adopting alternative property rationalisation options. In other words, they are not simply saying that there is only one approach to property sales and there is only one figure that is appropriate. They are effectively saying that there is probably a better way of going about it. In view of those uncertainties, we think it is prudent to await the outcome of the actual sales because, with the best will in the world, one can get it quite wrong. Senator SCHACHT—In the statement which you issued there was mention of the possibility of using the $20 million— Senator Alston—Well, that is an option open to the ABC. Senator SCHACHT—That is the option that the Arthur Andersen report was rather cool about, I believe. Mr Balding—In respect of the Andersen report on our property strategy, I do not necessarily disagree with what they are saying. In actual fact, they have misunderstood what we are doing. The Andersen report suggests that we do a comprehensive review of our property portfolio to look at the various options and that we adopt the net present value on each of those properties. That is exactly what we have done, so I do not disagree with that. I think Andersen are also saying that it would not be prudent for the ABC to borrow money in respect of its digitisation. Senator SCHACHT—And use that $20 million to pay the interest on the borrowing? Mr Balding—That is correct. The concern of the ABC is initially cash flow. Senator SCHACHT—Yes.

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Mr Balding—Some $45 million in the first two years. If we were to borrow to cover that cash flow and to use that $4 million per annum to pay interest, there would still be a significant outstanding debt at the end of that five years which the ABC would be very concerned about. That is the uncertainty that the managing director is referring to in being able to properly forward plan in respect of our capital and our strategy. Senator SCHACHT—Time is running out so I will move on from digital to three other quick singular issues. I have received—and I think a number of members of parliament have received, Mr Johns—concern about the ABC cutting its racing coverage. What has been your response to those concerns? I have to say—not being a horse racing devotee or a punter—I am not exactly au fait with what you have done, in the bush in particular, but quite obviously a lot of people are concerned about it. Ms Howard—We have agreements with the TABs in most states which expire on 30 June this year. After that, we are unable to deal with most of those TABs as they will be privatised. The Victorian TAB is already privatised. As a consequence, we can no longer take money from those TABs. The money that they give us partly funds our racing coverage. Senator SCHACHT—Why? Because they are commercial organisations? Ms Howard—They will no longer be state owned instrumentalities. Senator SCHACHT—So that means they are outside the charter? Ms Howard—That is correct. Several years ago the Palmer inquiry recommended that we have a look at our racing coverage and the deals that we did with the TABs, and to survey our audiences to find out how strongly they felt about regional racing. That was done. As requested, we surveyed audiences and discovered that the majority of people wanted uninterrupted football coverage rather than interrupted football and limited racing coverage. We think that, with the end of the agreements with the TABs, the time is now right to give the majority of our audience—something like 80 per cent of the listeners—the uninterrupted football coverage that they want. Senator Alston—I have probably had as many representations on it as Senator Schacht. I think one of the major concerns was that one of the earlier press releases or notes that the ABC sent out on the matter said that they would be providing a more comprehensive coverage of racing as a result of various new options, including Sky Channel and the Internet and the like, implying that there would be no reduction in availability of service. It seems at this point that there is going to be a significant number of areas that will simply be without any form of access to live racing coverage. I do not say that as my view; I am just relaying what the concerns are. Senator SCHACHT—Does the ABC still give the results service? Ms Howard—I am not aware of the press release that Senator Alston mentioned; but, yes, the racing results service will still be available. Part of the reason why we feel we are able to withdraw from the racing coverage is that there are a vast range of alternative services for the racing industry now, although I do acknowledge that in Victoria there are still some areas where there will be holes. Senator SCHACHT—The next issue I want to raise in programming is this endless brawl going on in the arts area about this appointment of a woman called Andrea Stretton. I am aware that everything in the arts area is fought at a level of intensity that sometimes is a bit overwhelming, but there are endless stories appearing about the diminution or reduction in Melbourne’s role in the arts programming of the ABC, about the appointment of Stretton and

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 412 SENATE—Legislation Thursday, 11 June 1998 how the salary she is supposed to get means that other people have had to go to pay for that, other people have lost their jobs or their role in covering the arts area, and programs have been changed. I am agnostic on the issue, Mr Johns, but perhaps you can use this opportunity to assuage some of the fears about the new empress of the arts area, Andrea Stretton, who, I understand, is a very capable person, irrespective of whatever else has been said, and that this is not a way to shift out of Melbourne or to reduce the arts coverage. Mr Johns—As you indicated, Andrea Stretton is a very fine broadcaster and an outstanding talent in the arts area. We have no intention of diminishing our arts coverage; in fact, we are trying to increase it. It will be a changed coverage perhaps from Melbourne, but we do not want to diminish Melbourne and Victoria’s role in providing arts programming. Andrea Stretton’s salary has been grossly exaggerated. Senator SCHACHT—There were a couple of presenters who were on the TV last year whom I occasionally saw when I watched those programs who seem to have disappeared. Is that right? Ms Clayton—We no longer have a presenter for the Sunday Afternoon program—that was Mary Delahunty. That was part of the budget— Senator SCHACHT—Was it because she was a Labor Party supporter or a republican? Mr Johns—It was part of the budget cuts. Ms Clayton—I believe Caroline Baum, who was the presenter of our book program Between the Lines, actually resigned. Senator SCHACHT—She used to do the literature interviews or something, did she? She just resigned? Ms Clayton—Yes, as we understand it. Senator SCHACHT—She was not pushed? Ms Clayton—No. I have just got a briefing on this, but I understand she resigned. Senator SCHACHT—Did anybody else resign, or were they pushed? Ms Clayton—No, I think they were the only two presenters that you might be talking about. Senator SCHACHT—So the staffing levels that Andrea Stretton has taken over are the same as the levels that they had? Ms Clayton—That is right; there is no diminution in the staffing numbers in Victoria. Senator SCHACHT—While we are on Victoria, Mr Johns, will you be representing the ABC in front of Mr Kennett’s ridiculous inquiry? Mr Johns—We said that we will cooperate with that inquiry. Senator SCHACHT—What does that mean? Mr Johns—It means that we will cooperate. Senator SCHACHT—Will you put a submission in? Mr Johns—When I understand the process and what is expected of us, we will have a look at it. Senator SCHACHT—Shall I recommend that every other state government hold a similar inquiry about what the ABC is not doing in their state? Mr Johns—Please do not.

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Senator SCHACHT—That shows how ridiculous it is, does it not? Every state premier could be populist and have an inquiry into what the ABC is not doing in their state and there would just be a chaos outcome, would there not? Mr Johns—It is an unusual course of action, is it not? Senator SCHACHT—Has Mr Kennett written formally to the ABC since he became Premier, complaining about: one, the coverage of current affairs by the ABC in Victoria; two, the coverage of the arts programs; and, three, the general infrastructure the ABC provides to the ABC in Victoria? Mr Johns—I would have to take that question on notice. Senator SCHACHT—Minister, will DoCA, your department, make a submission to Mr Kennett’s inquiry? Senator Alston—We have not considered that. Senator SCHACHT—Can you take that on notice? I make the same point that I made to Mr Johns: if every state premier went off half looped like this and had an inquiry, you would be running around all over the place, forgetting that this is actually a national organisation. Senator Alston—In fairness to Mr Kennett, he is concerned to ensure that Victoria gets its fair slice of the ABC cake— Senator SCHACHT—So is South Australia. Senator Alston—I think it is a legitimate concern. If South Australia felt sufficiently strongly about it, it has the option of establishing a committee. If we are able to be of assistance, then we will. Senator SCHACHT—Finally, Mr Johns, I come to my last area of questioning. The Jana Wendt program received considerable internal controversy within the ABC, if maybe nowhere else, about the cost and the preparation for it, about the fact that it was an outsourced program, and also about the rumours about Jana Wendt’s fee. Is the planning and the preparation for those programs well underway? Mr Johns—As I understand it, yes. Senator SCHACHT—Would we expect to see the Jana Wendt interviews on ABC television by the end of this year? Mr Johns—I am not aware of a date on that. Ms Clayton—I think they are scheduled to go to air early in the new financial year. Senator SCHACHT—Do you have any idea yet whether the range of people she was aiming to interview—the announcement of which was, I suppose, carefully leaked by some people—has been achieved? Mr Johns—The range of interviews have been kept very confidential to this point. Senator SCHACHT—I am not asking you to name them here; I understand that that is a programming advantage. Mr Johns—I am told that people are pleased with the range of interviews. Senator SCHACHT—So the nature of what you were told the program would be, the content of it, is meeting expectations? Mr Johns—That is what I am advised. Senator SCHACHT—And, as planned, the programs will go to air early next year?

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Ms Clayton—In the latter half of this year; early in the new financial year. Senator SCHACHT—It is a one-off series, there is no right of renewal, a first option to do a second series, or anything like that? Mr Johns—Not that I am aware of. Senator SCHACHT—That is all I have got, thank you very much. CHAIR—I thank officers from the ABC. Just before you go, I thank you for the demonstration you had here at Parliament House in response to estimates questions. I apologise that I was not able to come; I think I was either in the chair or had some other responsibility. I would have liked to have been there. Mr Johns—You might be able to visit us at Ultimo sometime, Senator. CHAIR—I would very much like to do that; thank you very much. I thank you for your attendance and hope you catch your plane, and save the TA. [5.16 p.m.] Subprogram 3.4—Special Broadcasting Service Senator SCHACHT—Mr Milan, at the hearing on digital television about a week ago, when I asked a question of a representative from SBS, they explained that you were reasonably satisfied with the $17 million that the government has given you, plus you are going to put $5 million in yourself for your digitisation of equipment, studios, et cetera. When I asked the question about transmission costs for digital, they basically said I would have to ask the NTA. Have you any idea what would be required to spend to get all your transmitters also able to transmit in a digital format? Mr Milan—There are two questions in that. One half I can give you some guidance on; the other half is totally beyond our control. As you know, the money we have been allocated is to convert our existing analog studio equipment to digital. There is a second issue, which is the presentation and play out of multi-channel high definition material. That is as yet unspecified. Then there is a third issue, which is really in two subsets, which are the distribution and then the rebroadcast of the signal on the ground. The last two are the domain of the NTA and our position has not changed from what we said at the inquiry last week. However, regarding the play out equipment—in other words, what it will take to take it from our own studios to the wall of the building—I can give you some indication, and we have given informal advice to the minister’s office: that is probably in the order of $10 million to $15 million. Senator SCHACHT—Another $10 million or $15 million? Mr Milan—The reason we cannot be more specific on that—we were reluctant to give you a figure last week—is for the other reasons I articulated last week: this is very new technology, the costs are changing, and we believe that over the next couple of years the cost of the play out equipment particularly will go south rapidly. Senator SCHACHT—When do you think the deadline would be for proper and sensible planning for you to get an indication from the government of how much money is available for that particular area, and as well to the NTA for transmission, so that on 1 January 2001 SBS viewers can get the signal in a digital format? Mr Milan—We are comfortable with the current time frame, but with an iterative process over the next couple of years we would like to see a bulk of the work done within the next 12 months.

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Senator SCHACHT—That is in your own studios, et cetera. I am talking about the planning for the NTA or whoever succeeds it. Mr Milan—No, I am talking about the planning. I would have thought the two-year time frame was a reasonable one. Also, to some extent, the later you call the shot the better the price you will get, and indeed the more accurate your costings will be. Senator SCHACHT—The ABC had a stab in the dark. It is more than a stab in the dark; it is a reasonably considered figure—they do not expect it to change much. The NTA would have to provide the cost for them to go to digital signals of about $30 million a year including the capital cost amortised out full charge. Have you any idea what your figure would be in formal discussions? Mr Milan—No, we do not, the reason being, of course, that our analog network is not fully national yet, anyway. Senator SCHACHT—I was going to come to that. Mr Milan—So, it has got to be, again, an iterative process with government. All I can assume, not having looked at or analysed the ABC figures, is that if you gave SBS similar coverage the pipeline costs would be about the same as the ABC’s. Senator SCHACHT—I have put questions to the minister about the ABC that are parallel to what I have put to you, so I will move on to extension of SBS. During the last two years, since the change of government, how many extra SBS fully funded operating cost transmitters have been established to extend the SBS coverage in Australia? And where are they? Mr Milan—The service extensions have been Albury-Wodonga, Grafton, Coffs Harbour and Kempsey, New South Wales Tablelands, which is Orange, Bathurst, Blayney, Parkes, et cetera, and upper Namoi, which is Narrabri, Moree and Gunnedah. They were fully funded. Senator SCHACHT—Has the government given any indication to you, via the NTA or vice versa in discussion with the NTA, about any further extensions of the fully funded transmitters? Mr Milan—No. Senator SCHACHT—So as far as you are concerned, that is it? There is no further money in the pot coming for fully funded regional SBS transmitters? Mr Milan—No, there is a submission in, but we have not had confirmation. Senator SCHACHT—A submission from you or from the NTA? Mr Milan—From us and the NTA, sorry. The NTA has advised us that SBS television service extensions will be contracted before the NTA sale and commissioned towards the end of 1998 or early 1999. They include Rockhampton, which is Rockhampton-Gladstone, Yeppoon— Senator SCHACHT—Yes, that is out of the Rockhampton transmitter. Mr Milan—Yes. Then Bathurst in New South Wales, Armidale in New South Wales, Lithgow in New South Wales, Portland and Tamworth. Senator SCHACHT—So by this time next year they should all be on air? Mr Milan—Yes, correct. Senator SCHACHT—Did they tell you how much it cost to put those in? Mr Milan—If you take the whole package—the future ones and the ones we previously articulated—that is $10 million.

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Senator SCHACHT—Can you tell me how many—what do you call them?—community plan transmitters I suppose is the phrase I might use— Mr Milan—Community self-help. Senator SCHACHT—How many community self-help transmitters have gone up in the last two years? Mr Milan—I do not know. All I have got is the total figure, which is 57 around the country. But I do not know what the time line is on those. Senator SCHACHT—Can you provide me with a list of those 57, on notice? Mr Milan—Yes, we certainly can. Senator SCHACHT—Do you have any planning in the pipeline for the communities that are raising the money and are about to put their transmitter up during the next 12 months? Mr Milan—The answer is no, in the sense it is not a plan— Senator SCHACHT—They know about your program. They are out there having chook raffles to raise the money. Mr Milan—Do you mean how many of them are there? Senator SCHACHT—Because they have told you they are out there doing it, you can estimate how many more in the next 12 months expect to— Mr Milan—We expect Broome and Kalgoorlie. Both have indicated a strong interest in self- help transmitters. Senator SCHACHT—Minister, I think you might have mentioned in passing in some debate in the Senate recently that the government might actually provide some assistance to the self- help program. Did I get that correct? I may not have. Senator Alston—It does not come to mind. Senator SCHACHT—Okay. Senator Alston—I understand Senator Ian Campbell made some announcement on my behalf. I can provide details of that for you. Senator SCHACHT—What was it? As I understood it, it was a reference in a debate in the Senate in which I was involved. Mr Edwards—Senator Ian Campbell, representing the minister in the Senate in the debate on the NTN sale bill, announced there would be a new SBS self-help program. It is funding to SBS of $150,000, $300,000 and then $500,000, ongoing. Senator SCHACHT—Five hundred thousand ongoing? Mr Edwards—Yes, for a program to assist self-help groups with their capital establishment costs. Senator SCHACHT—Mr Milan, are you aware of that amount of money being available? Mr Milan—Yes, we are. Senator SCHACHT—You told me just before about the self-help groups that have been established. They have all been established without access to this money? Mr Milan—Yes, they have. Senator SCHACHT—The ones that you know of—like Broome and Kalgoorlie—are being established without access to this money?

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Mr Milan—Correct. Senator SCHACHT—Does anyone feel a bit cheated that they went off, raised all the money on chook raffles and got their transmitter up, and now there is some money coming through from the government to help? Mr Milan—I cannot answer that question. Senator SCHACHT—Mr Edwards, when that money is given to SBS, is it given with some guidance as to how it is to be shared to help the community self-help program? Mr Edwards—The government will be working with the SBS to work out what the guidelines are likely to be, but it is envisaged that it will be on some sort of matching basis— possibly not dollar for dollar but obviously some incentive is required. Senator SCHACHT—So, in the coming year, 1998-99, there will be $150,000? Mr Edwards—That is assuming the NTN is sold. It is predicated on the NTN being sold. Senator SCHACHT—So the blackmail to the opposition and the minor party senators is that if the NTA is not sold this money will not be made available? Mr Edwards—The money is coming out of the funding pool following the sale. The money will not be there unless it is sold. Senator SCHACHT—The $500,000 per annum thereafter—I thought all the money from the sale of the NTA was going to pay off debt— Mr Edwards—No, this is not proceeds from the sale of the NTA. In breaking up the forward estimates of the NTA, a certain amount will be put aside for the contracts. There will also be funds for this program. Senator SCHACHT—So, even though the money is not coming from the actual sale of the NTA, the money out of the government’s revenue is made available only if the NTA is sold? Mr Edwards—The NTA at the moment provides some assistance for self-help groups. The idea is that this new program will similarly— Senator SCHACHT—Is this money equivalent to what they are providing in cash and in kind at the moment to the self-help groups? Mr Edwards—I would have to take that on notice. Senator SCHACHT—I would appreciate it if you could. So ad infinitum in the out years this government will make available $500,000? Mr Edwards—That is correct. Senator SCHACHT—Mr Milan, what is the average cost of a community self-help transmitter? Mr Milan—There is not an average price, in honesty, but the range is from approximately $20,000 to $150,000, depending on the size and the terrain. Senator SCHACHT—What would you expect the transmitter for Broome to cost with an average of 10,000 people? Mr Milan—We are guessing, but maybe $50,000. Senator SCHACHT—And $20,000 is what, Innamincka? Mr Milan—A village.

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Senator SCHACHT—So if the arrangement was on a dollar-for-dollar basis, you could probably help 30 or 40 a year? Mr Edwards—Yes, assuming an average of 20,000 per— Senator SCHACHT—Is any of the money available for recurrent costs, the transmitting cost itself, the electricity, et cetera? Mr Edwards—No, it is strictly for start-up capital costs. Senator SCHACHT—Does SBS provide any money for recurrent expenditure? Mr Milan—No. Senator SCHACHT—So it is the local council, whatever the group is? Mr Milan—Whatever self-help group formed—they take on the ongoing responsible. Senator SCHACHT—When Kalgoorlie and Broome are up and running, what audience coverage in Australia will be getting SBS? Mr Milan—It will be about 90 per cent population coverage, not geographic coverage. Senator SCHACHT—So these smaller transmitters are going to slowly, incrementally, 0.2 per cent of the time, increase the coverage of the population? Mr Milan—I would have thought 0.2 per cent was optimistic, actually. There will be very small incremental gains over a lengthy period. Senator SCHACHT—From memory, after places like Rockhampton, Kalgoorlie and Broome, before these other self-helps might operate, will there be any other major regional centres in Australia, from middle-sized to the Ballarat and Rockhampton size, that will not have SBS coverage? You have Ballarat, Bendigo, Rockhampton, Cairns, Townsville, Port Pirie and Whyalla et cetera with SBS coverage. Are there any significant towns of that size which still do not have SBS? Mr Milan—Yes, there are. We have taken the benchmark of over 30,000. They are Shepparton, Taree, Port Macquarie, Wagga Wagga, Mackay, Bunbury, Griffith, Leeton, Mildura, Mount Gambier, Southern Downs, Swan Hill, central agricultural Western Australia— that is not a town; that is an area—and Goulburn. Senator SCHACHT—For a transmitter to cover a town of those sizes in the self-help program, which they would be eligible for, I presume— Mr Milan—Yes, they would be. Senator SCHACHT—They would need a transmitter of the $150,000 size, would they? Mr Milan—More likely. Senator SCHACHT—Is there going to be any argument that some of these towns have it under your program for nothing and similar sized towns are going to be told that they are off under the self-help program? Mr Milan—I would say that that is a political issue for the government rather than an issue for SBS. Senator SCHACHT—Minister, I think you see it as an unavoidable issue, that you are going to have argument that some towns have it for nothing from the government and some are going to have to rely on a self-help program? Senator Alston—You will always get those arguments.

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Senator SCHACHT—After Broome and Kalgoorlie get SBS, do you have any plans that there will be further direct funding for SBS to provide transmitters to the towns that Mr Milan has just read out? Senator Alston—There are always groups, and indeed MPs, pressing for additional funding. Senator SCHACHT—From the right coalition electorate they have a better chance of getting one than if they happen to be in a Labor electorate? Senator Alston—Our door is always open. I do not recall any Labor people knocking on it recently. Senator SCHACHT—So you will receive me equally as you will receive a backbencher from the coalition? Senator Alston—Naturally. You will get all the respect you deserve. Senator SCHACHT—You will receive me, but my chances of getting equal treatment, I think, would be very modest indeed. Senator Alston—We could probably make a special exception. Senator SCHACHT—World Cup Soccer started last night. It has been put to me that regional television stations have claimed that SBS has insisted they take either the whole 300 hours or a one-hour highlight program of the World Cup Soccer. They also have to take all the SBS advertising and badging. Although they would receive the feed free of charge, broadcasters have argued that it would be loss making for them because they would have limited opportunities to put advertising in separate from the SBS badging and that would mean they would be putting it in over the top of breaking into the live program, and that will just be the time when Renaldo or somebody kicks the winning goal—and there will be a riot about that. These are the claims that have been put to me. I do not know whether or not they are correct. Would you care to comment about these arrangements, Mr Milan? Mr Milan—I think that is really just a commercial judgment on behalf of the networks. They do not have to take our badging, by the way, other than the watermark that appears at the corner of the screen. They are not expected to play commercials for SBS. They are obliged to take the five minutes of sponsor credits per hour but, bearing in mind the average commercial load time of a commercial station is 13 minutes, they still have eight minutes to put their own commercial line if they choose to. Senator SCHACHT—This is before the match starts. Otherwise, they would have to put the add-in while the live match is on. What I am saying is that, if they break in and take two minutes out of the live coverage, their fear is that that is when the goal will be scored or some incident will happen. Mr Milan—I would say that is stretching a long bow. If you watch the way commercial channels cover Australian football games, they have got very adept at picking the quiet time in the game and running— Senator SCHACHT—No, they have not. Senator Alston—Excuse me: after the goal. Senator SCHACHT—After the goal. On this issue, Senator Alston and I would be at one, as AFL advocates, because when it is a live coverage, the advertisement is only put after the goal is scored, the flags are being waved and they do not start the bounce until the light goes up on the stand.

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Senator Alston—That is very true. I sat there watching this light for two hours the other day. Senator SCHACHT—And all the crowd starts heckling as the umpire waits to bounce the ball. Mr Milan—But at the end of the day, Senator, it is a commercial decision. They make the decision whether or not they take the coverage. One would have thought, if they had enough concern for their community, they would take the coverage. Senator Alston—But the point you are getting at is that if there are 13 minutes of commercial advertising space available and there is only a requirement for five minutes of national advertisers, the other eight minutes is presumably not during the playing of the game. Senator SCHACHT—Is that right? Mr Milan—No, not necessarily, but there is half-time. Senator SCHACHT—Yes, I know. This is what I was going to get to next. At half-time for 10 minutes, are they able to put all their own ads in that 10 minutes or are some of those yours? Mr Milan—Five minutes would be ours, I assume. Senator SCHACHT—So five minutes is available to them at half-time? Mr Milan—And there would be time before the game and time after the game. Senator SCHACHT—After the game there would be time and they could put commercial ads on in place of Les Murray, Tracey Holmes or whoever talking? Mr Milan—Yes. Senator SCHACHT—You don’t have any objection to that? Mr Milan—No. Senator SCHACHT—When the commentators at the beginning or the end are summing up, if they want to cut that and put in a couple of ads for the local sheepdip prices or something, that is fine by you? Mr Milan—We have no problem with that—absolutely. Senator SCHACHT—Considering what I was given, I think there has probably been a bit of a misunderstanding about what you have just clarified. They may have deliberately misunderstood—I do not know. I suggest that you might want to go back and talk to them, because this is not exactly what they explained to my office. Mr Milan—I think that we should put it on the record. I will ask Peter Cavanagh, our head of television, to just take you through the process we went through. Mr Cavanagh—Yes, Senator, the coverage has been made available free of charge. Senator SCHACHT—They do not dispute that. Mr Cavanagh—As Mr Milan said, we are restricted to five minutes per hour but, of course, we are also restricted to having advertising not within the program but between natural breaks and before and after the program. There is no restriction on the commercial operators as to where they place their own commercial content: our only restriction was that retain the official broadcast sponsors who are actually funding the coverage. They can place that before or after the coverage or indeed in half-time in place of our commentators discussing the events in the first half or wherever they would like to place that.

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Senator SCHACHT—That is significantly different from the message we got. I also think that, now that you have got it on the record, you should go back and make it clear to them, because I think that is quite different. Mr Cavanagh—I would like to say that, having had a lot of discussions with the regional operators, I think that they are very clear on what the offer was. I think they do understand it. Senator SCHACHT—Is it right that, all up, this is 300 hours? Mr Cavanagh—Just over 200 hours. I think that includes replays and highlights packages. Senator SCHACHT—That is the replay and the highlights? Mr Cavanagh—And the live coverage. Senator SCHACHT—I see the other day that because of the increasing interest in the World Cup—even though it is played at odd hours of the night, as we are all discovering if we want to see it live—next time around there is going to be much more commercial competition to take the World Cup. Is that a concern? I think the contract you have runs out at the end of this one. Mr Milan—That is correct. Senator SCHACHT—Is this a concern? Mr Milan—Yes, it is a very big concern for us. Senator SCHACHT—What if it gets into an auction war? I am trying to sort out that you and the ABC do not kill each other. There was an unfortunate incident several years ago; no- one on either side has ever agreed who was at fault, but it occurred. If you got into a bidding war, you would rapidly run out of resources and have to approach someone else? Mr Milan—Correct. Senator SCHACHT—Would it ever be possible, under the present arrangements of sponsorship you are allowed to have and limited advertising, to convince a major sponsor to contribute much more heavily? Mr Milan—That is basically the process we are going through at the moment. Senator SCHACHT—But that is after you have bought the rights first, and then you are convincing someone? Mr Milan—What we are doing now is actually talking to our brokers and saying, ‘What are the chances? How much can we get, bearing in mind there is more publicity?’ Of course, you do not know whether Australia is going to qualify or not, and you have to make the buying decision three years hence. Senator SCHACHT—I suspect SBS and yourself died a hundred times a million more deaths compared with the rest of us when that rotten second goal was kicked in Melbourne. Mr Milan—I know; we don’t even want to think about it. If we could have taken a vote at SBS, we would have voted for execution for the guy that jumped onto the net. Senator SCHACHT—Have you been to the court case at the local court to make sure he gets a heavy sentence? Mr Milan—No. We should think about doing that though. Senator SCHACHT—So it is without doubt that you are going to be in a more competitive market next time around, no matter what?

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Mr Milan—We believe so but we also believe—and I think it is worth putting this on the record—that no commercial network would actually give the tournament anything like the coverage that SBS has given. Senator SCHACHT—Will that give you some leverage? Mr Milan—We think it may. Senator SCHACHT—With whoever has the rights overall? Mr Milan—It depends really on the agreement that FIFA have with the brokers for the rights in terms of how much motherhood, if you like— Senator SCHACHT—You cannot deal direct with FIFA for the rights? Mr Milan—We cannot. We now have to deal with their broker. But FIFA have suggested— because they are obviously impressed with the amount of coverage SBS gives and the way we cover the tournament—that they will lend it some support, but at this stage we have no idea of the outcome. Senator SCHACHT—Next time, when it is in Japan and Korea, the time zones are much more favourable. Mr Milan—Very good for television. Senator SCHACHT—Anyway, I wish you all the best in the negotiations. I am just dreading the next month of lying in bed at 4 o’clock trying to watch these endless soccer matches, knowing that when I fall asleep that is when they kick the three goals. Mr Milan—You will not be alone in that! Senator SCHACHT—As for the world movies that you provide under arrangement to pay TV, can you explain to me how that actually works? You promote on your own station that world moves are available on pay TV. What is the arrangement that you have for the provision of that? Mr Milan—World Movies is a separate company. It is a joint venture between a holding company of SBS; APN, which is the O’Reilly interest company— Senator SCHACHT—What did you say the O’Reilly company was called? Mr Milan—APN. You would be aware of APN. Senator SCHACHT—I thought you said ‘PN’ and I was trying to work out where Cameron had gone. Mr Milan—And one of Kerry Stokes’s companies, which is Orchard. SBS has 40 per cent of the shareholding and the other two commercial shareholders have 30 per cent each. Senator SCHACHT—Is the equity in the company in the form of content? Mr Milan—That is absolutely correct. Senator SCHACHT—And it is in the form that you basically do the subtitling? Mr Milan—Yes, and indeed we do the buying for them and advise on such matters. All the capital risk was taken by the commercial shareholders, so no taxpayers’ funds went into capitalising the business. Senator SCHACHT—After movies—especially if they are new foreign movies et cetera— are shown on pay TV, when is it likely that you would show them on SBS as a normal movie service? Mr Milan—Normally there is a 12-month window.

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Senator SCHACHT—As your equity is in the form of content, are you receiving yet a commercial profit from being involved? Mr Milan—Yes, we are. Senator SCHACHT—Congratulations, Mr Milan. In three years of estimates hearings you are the first person involved in pay TV in Australia whom I have heard say he is actually making money. Mr Milan—Pan TV, I think, would be the only profitable pay television company in the country. Senator SCHACHT—This is extraordinary. Mr Milan—We have developed a considerable capital asset for the taxpayers of Australia. Senator SCHACHT—Is the company available through Foxtel or Optus or both? Mr Milan—It is just becoming available through Optus too. Senator SCHACHT—And for all those other regional companies—Austar and so on? Mr Milan—Yes. Senator SCHACHT—Which means you have just doubled your market. Mr Milan—Doubled our potential market, yes. Senator SCHACHT—Do you have any figures on how many people watch the movie on your movie channel? Mr Milan—We do, but I would rather take that on notice because we have commercial shareholders involved and it is commercial-in-confidence. Senator SCHACHT—All they ever tell me is that they are losing money. I do not know what is commercial-in-confidence about how much they lose. So I suppose this is unique for them in that they are actually making money with you. Mr Milan—Yes, but this is a question of the two commercial shareholders within Pan, and they own the majority of shares between them. Senator SCHACHT—This committee can write to you and the information can be provided to us commercial-in-confidence as part of our consideration of your annual report. You can tell your commercial partners that I cannot recollect any commercial-in-confidence material provided to this committee ever leaking. This committee has always held its mouth very tight when information like that is provided. Mr Milan—We can take it on notice. We are happy to provide the information. Senator SCHACHT—Absolutely. A constituent has raised another matter, not with me but with one of my staff members—and I am not sure whether this allegation is correct or not— and that is that since you have been involved in pay TV with World Movies there are less Italian and Greek movies on SBS itself. Mr Milan—There may well be but it would be coincidental. Peter do you want to comment? Mr Cavanagh—Our program buyers go to all the international markets. We buy the material that we need for the schedule when we need it and when it is available to purchase and it is totally unrelated to the requirements of World Movies. Senator SCHACHT—Anyway, if they are on a year later they are going to be there ultimately.

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Mr Milan—But you do invariably find that, because of the way the buying pattern works, you will go through a genre of movies and that does change. It depends where the buying has taken place in the immediate period prior. Mr Cavanagh—I think it is also fair to say that international movies are often sold in packages of films so there can be bubbles that go through the system at different times. Senator SCHACHT—That is all I have to say except to declare my interest: I was very pleased to see the SBS coverage of the volleyball continuing. I have declared that before and I even got a bit of a write-up, I noticed, in the paper after the last estimates hearing where Senator Vanstone was totally unaware of the program. Also, unfortunately, Ms Crowe was not quite aware of the excellence of the program. Mr Milan—We are pleased that you are pleased, Senator. CHAIR—Thank you very much. I call officers from the ABA. [5.49 p.m.] Sub-program 3.5—Australian Broadcasting Authority Senator SCHACHT—I have a number of issues to cover. I want to first of all draw attention to the true blue issue, I suppose, or Blue Sky or whatever you want to call it. Mr Grainger—The New Zealand issue. Senator SCHACHT—The New Zealand issue, et cetera. The ABA is conducting an inquiry. The minister made a statement earlier this week, I think, formalising the fact that you were having an inquiry. I noticed when the decision of the High Court came down Professor Flint said the ABA would investigate the decision of the High Court and look at the interpretation of the clause in the act and whether it could be still, according to the High Court, used in a way to maintain Australian content rules and so on. Now the minister has made a more formal statement about requesting you to do that and report by 1 January. That is correct, isn’t it? Mr Grainger—The minister issued a press release earlier this week and I should leave it to the minister to comment on his press release. But, in fact, the Australian Broadcasting Authority had already announced publicly in its Update publication that it would be issuing a discussion paper in relation to a review of the Australian content standard flowing from the High Court decision in this matter and we are in the process of doing so. Senator SCHACHT—I am a bit intrigued about this, and I presume the discussion paper will raise this matter. If it is a public discussion paper, perhaps you can give us early advice or comment on what issues are in it. That could be useful. It has been suggested initially that the existing legislation could stay in place but the ABA could administer it differently to get around the access the New Zealanders would claim within Australia. The way I read the section of the act and the High Court decision, I find it very hard to understand how that could be achieved unless you actually amend the act itself. Mr Grainger—The Australian Broadcasting Authority is charged with administering this particular provision of the Broadcasting Services Act, and at all times we have sought to administer it according to the law and to act lawfully. We have done so at every stage in accordance with the legal advice that we have actually had. Of course, the latest pronounce- ment is a very lofty one, and that is a decision of the High Court itself. We will be administering the law in accordance with that finding, naturally, as I know you understand. What we will endeavour to do is to accommodate the finding of the High Court but, as far as is possible within that interpretation, to achieve what we see as being other objectives of the Broadcasting Services Act, notably the requirements in section 3 for the promotion of

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Australian culture, character and identity. We will be issuing a discussion paper, and the discussion paper will contain a canvassing of the issues and options for comment as the start of a process of considering how we might do this. Senator SCHACHT—With the existing act as interpreted by the High Court, can you give an idea of how under section 3, the Australian content, Australian image et cetera, you could use that to say—let us be blunt about it—that the New Zealand produced material cannot be counted as Australian content? Mr Grainger—I do not want to avoid the issue, but this is something which is very actively before the authority at the moment and I think it would be premature for me to get drawn into an interpretive discussion of what the High Court has said. Senator SCHACHT—Will the discussion paper get into an interpretive discussion of the High Court’s decision in terms of this particular possibility? Mr Grainger—The discussion paper will make clear what it is that the High Court has said and what clearly flows from that. But, to the extent to which there may be different ways of approaching a solution, it will be seeking to engage people in the industry and others who are interested in this matter in a traversal of what might be the best options for dealing with the matter. I have no doubt at all that you will have the opportunity to comment on it when that discussion paper comes out. Senator SCHACHT—Let us say that right now there was some program produced in New Zealand, whatever it may be, and a television network in Australia purchased it and said, ‘We are going to put it to air at the beginning of July.’ They would say, ‘The High Court has ruled in relation to section 3 and people are going through this discussion period.’ Would that go to air as Australian content? Mr Grainger—No, that is not right. The Australian content standard as it now is remains in force. It has not been declared invalid. The majority judgment of four judges in the High Court has specifically made clear that that standard is not invalid. It is unlawful but not invalid, so it remains on foot. We simply have an unspecified period of time in which to bring it into validity. The High Court has made it quite clear that it would be open to an interested party to seek a declaration in respect of some aspect of enforcement of the current Australian content standard. Senator SCHACHT—The Screen Producers Association is one of the groups who are jumping up and down, as are the MEAA and other producers in Australia in one form or another, the screenwriters guild or whatever they are called. They could seek a declaration. Could a New Zealand production company selling the product into Australia, because of this unlimited time that you have got to turn what is now invalid into something that is valid— Mr Grainger—It is not invalid. Senator SCHACHT—It is not invalid, it is unlawful. They could also seek a declaration from you? Mr Grainger—I think the latter scenario is the much more likely scenario. Senator SCHACHT—If they are turning up with a product which they have pre-sold to Channel 10 or Channel 9 or whatever, to start on 1 July, and they seek that declaration, would you have to make a decision before 1 July, when they begin the commercial telecast? Mr Grainger—We have no capacity to amend the standard before 1 July. The information that we have at the moment indicates that the New Zealand interests are happy to work through the discussion paper phase.

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Senator SCHACHT—It might sound reasonable, but other people are saying that there might be a recalcitrant producer over there— Senator Alston—Can we just be clear on it. My understanding of the High Court decision is that the status quo prevails unless and until the court itself makes another determination. Mr Grainger—Yes. Senator Alston—If the ABA, for example, said, ‘Thanks very much; we hear what you have got to say and we are going to ignore it,’ Project Blue Sky could go back to the court tomorrow and seek to have an alternative form of words inserted as the new standard. Given the timetable that has already been outlined by the ABA, Project Blue Sky has indicated that it regards it as compliance with the spirit of the High Court’s decision and, on that basis, it will not be making any application to effectively bring proceedings forward. In other words, it will let this process play out. Senator SCHACHT—Until 1 January? Senator Alston—Yes. Senator SCHACHT—Have they put that in writing somewhere? Senator Alston—No, but I think there has been a range of informal discussions with them. As you would know, the woman who is heading up Project Blue Sky, Ms Tyndall, has been in Australia. She has met with the ABA and with a number of other players. They are very much aware of what is happening and, as I understand it, they accept that the approach that is being pursued is reasonable. In the meantime, what follows from that is that it would not be open to an individual producer to simply come along and insist that somehow a New Zealand product be counted as Australian any more than it would be open to an Australian network, if it chose, to insist that that be done. The ABA will continue to apply its previous interpretation until such time as the court tells it do otherwise. Senator SCHACHT—But if they sought a declaration, for that declaration to be granted, it would have to go to the court? Mr Grainger—Yes. Senator SCHACHT—Would it have to go to the Federal Court or to the High Court? Senator Alston—To the High Court. Mr Grainger—I think to the High Court. Senator SCHACHT—Because they have that standing? Mr Grainger—Yes. Senator SCHACHT—I accept that the protagonists in the argument—the Blue Sky people— have said that they are not going to do that until the ABA completes this discussion paper and responds by 1 January, but if, on 1 January, the ABA has discovered, after all the advice, that it is possible to say to the High Court, ‘This is how we are going to interpret it—on the cultural section 3—which means in effect that they can’t count from New Zealand,’ the Blue Sky people will still have the right to go back to the High Court and have another go—as we say. Senator Alston—They have liberty to apply at any time and on any basis. In whatever form the standard is reworded, they would have the capacity to approach the court, but they may choose not to do so, depending on the outcome.

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Senator SCHACHT—Mr Grainger, you spoke earlier about understanding the spirit of what this legislation is about, in that it was cultural identity and those sorts of things. The Blue Sky people clearly understand that that is your view as well, which means that, if you can reinterpret or redraft the rules without changing the act to achieve that, that will actually knock them out of the game again, won’t it? Mr Grainger—I do not believe that we can proceed forward on this matter on a basis that rules New Zealand out of the game. It is a case of how New Zealand might be accommodated within the game in a way which is not excessive and which does not unduly undermine the cultural objective. Senator SCHACHT—Okay. Mr Grainger—But the High Court has made absolutely clear that the foreign treaty provision of section 160(d) is a more specific obligation with respect to the Australian content standard making power than the cultural objective of section 3. That view of the High Court is absolutely clear. Senator SCHACHT—On that content rule about rewording the definition so they can meet the content rule of cultural aspect, does that mean—and these are my words and I know you are constrained about commenting on what may be in the discussion paper—that a program that is produced in New Zealand—I am told Xena or something.— Senator Alston—An American production. Mr Grainger—Yes. Senator SCHACHT—But it is made in New Zealand. There is no pretence that this has some Australian content—some cultural aspect of Australia. But if The Man From Snowy River—clearly an Australian story—was filmed in New Zealand and they said, ‘This is Australia,’ and they had the sets looking like Australia and the actors speaking with Australian accents and everything else, that would then be a way by which they could say that they are complying with the cultural intent of section 3? Mr Grainger—I will deal with what appears to be absolutely factual and accurate in the first place. The New Zealand interests make absolutely clear that a program such as Xena does not actually count as New Zealand programming in New Zealand and, therefore, would not present itself as a problem in terms of trying to progress this issue about New Zealand programming within the context of the Australian content standard. The other matter which you have raised about The Man From Snowy River being made in New Zealand raises issues about Australian culture, Australian look and Australian feel. Certainly I think we are going to have to air some of those issues in our discussion paper because a number of the judges during the course of the litigation in this matter have actually flagged the possibility. Our discussion paper will canvass a wide range of potential options. Whether in the end they meet with enthusiasm, remains to be seen. Senator SCHACHT—At the digital hearing on Friday of last week, the screen producers and the union came together and put a submission to us that, as the digital bill is dealing with the Broadcasting Services Act, we ought to knock out the clause, et cetera, for it. Irrespective of what political and economic argument we may have about New Zealand, if you actually restructured the clause and they lodged an amendment which they thought would achieve it, would that assuage the view of the High Court that the treaty bill overrides on this issue? Mr Grainger—The High Court has made absolutely clear that it has only reached the view it has on the basis that section 160(d) of the Broadcasting Services Act imports the closer

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 428 SENATE—Legislation Thursday, 11 June 1998 economic relations agreement into the equation and, if that provision did not exist, the mere fact that Australia was a party to a particular protocol under the closer economic relations treaty would not apply to the ABA’s Australian content standards playing a role. Senator SCHACHT—That is why they are recommending from their point of view that that clause be deleted? Mr Grainger—Yes. The issue of whether it should be deleted is of course a matter for government policy. Senator SCHACHT—Yes, of course, for government policy, political debate, et cetera. I just wanted to get the technical side correct that if the High Court has said that if the act were amended in the way they are suggesting, whatever the political and broader implications are, it would achieve that end as far as they are concerned. Mr Grainger—Yes. They made clear that there was no wider dimension of the significance of foreign treaties than as was imported into the act by section 160(d). Senator SCHACHT—We have plenty of other things on the digital plate, so we may as well put that on there and say we are going to be lobbying for it. Minister, they have clearly sent me representations on it. Have that group of people—the unions, the Screen Producers Association, the Writers Guild and whatever—approached you directly on this issue of the amendment? Senator Alston—I had not heard of it. They may well have been to see my office or the department, but I have been away, as that may explain in part. Senator SCHACHT—Mr Stevens, have they been near the department? Mr Stevens—They have certainly raised it as an issue going back since the High Court decision came down. Senator SCHACHT—No. This has occurred in the last week or so when they put the submission to the digital inquiry. Mr Stevens—I am not aware of anything since last Friday, but I would have to check. Senator SCHACHT—Minister, I presume that the government’s view would be that it would not countenance such an amendment until the ABA completes its inquiry by 1 January? Senator Alston—I think any changes, whether they be by statute or otherwise, are premature until we see the extent to which the ABA is able to address the problem. It may well be that at the end of the day a satisfactory outcome can be achieved. Senator SCHACHT—Mr Grainger, have the people I have just described spoken to you or the ABA about this in the last week or so? Mr Grainger—They have not spoken to me, and I am not aware that they have spoken to anybody else at the ABA, but their position on the matter is of course very well known to us. Senator SCHACHT—Do you have a copy of their submission to the digital inquiry? Mr Grainger—Not that I am aware of. Senator SCHACHT—I will ask the secretariat to make sure you get a copy—if not today, to send it to you—for your interest and as part of the process. I want to turn now to something even more complicated than that—that is, the Fairfax inquiry. The ABA has announced that it has an inquiry going under the cross-ownership rules, ownership control and associates test about Mr Powers’ appointment, first of all, as director and now chairman of Fairfax. Do you have any idea when that inquiry will be completed?

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Mr Grainger—I do not want to give a commitment as to a time. What I can say is that we are proceeding very rapidly with our investigation on this matter, both in terms of obtaining the production of documents and conducting examinations. Because we are really in the middle of that, I would prefer not to go into the detail of the investigation. Senator SCHACHT—I understand and respect that, but there are matters that are on the public record that I think I could put to you. If you choose to say that you cannot comment because of the inquiry itself, that is your business. But there are a number of matters on the public record, even from Mr Powers himself, that are, to my way of thinking, at least of curiosity value—things he has said about the cross-ownership rules and the way they might operate in his particular case. The first thing is on the collection of material and documents. Will you have to use the power to subpoena information and documents? Mr Grainger—We have a power to issue notices for the production of documents, so it is not a subpoena; a subpoena is a court process. We have our own power of production and we have exercised that power. Senator SCHACHT—Can you exercise that power without having to go to the court? Mr Grainger—Yes. Senator SCHACHT—And you have exercised that power already? Mr Grainger—Yes. Senator SCHACHT—During the hearing, will it become obvious where you have exercised that power to collect documents? Mr Grainger—We have made clear that at this stage we are not planning to hold a public hearing on this matter. What has happened in investigations of these matters in the past has been that we have produced a report of our findings at the conclusion of an investigation or a particular phase of an investigation, and that document has contained evidence obtained both from the documents and from examination of witnesses. But, as I know you know, much of the matter which is produced to us in investigations of this kind is very much commercial-in- confidence, so we try to balance our various roles as carefully as possible. Senator SCHACHT—In view of the significance of this issue and the cross-ownership rules, which have been a matter of Fairfax in play on and off now for over a decade since young Warwick decided to do something stupid, wouldn’t it be useful for public transparency to hold at least part of the inquiry in public? Mr Grainger—We are certainly very mindful of the need for public transparency in all of the processes of the Australian Broadcasting Authority. Nowhere is that more difficult than in reference to ownership, control and cross-media rules inquiries because we have other obligations to protect commercial-in-confidence material. We are really very mindful of the public transparency aspect, and we have not ruled out the possibility, depending on developments in the matter, that perhaps some form of public process might occur. But it has not appeared to us to this point, which is the point where we are obtaining documents, examining witnesses and assessing what comes out of that. It has not appeared to us, to this point, that a public inquiry would be necessary or appropriate or helpful. Senator SCHACHT—Have any of the people you have sought information from by giving them a notice requested that all the hearings be in private? Mr Grainger—No-one has made that request to my knowledge.

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Senator SCHACHT—I would strongly urge, for the sake of the ABA, that a public hearing would be useful. I understand that they are commercial-in-confidence and there would have to be in camera hearings, et cetera, but I do think, in view of some of the heat that has been generated about this—there has been a fair bit of comment around the place and, I suspect, a lot more still to come—that whatever way you make a decision in the ABA, at the end you are not going to please everybody on either side of the argument. It always seems to me that, if there is a transparency in some public process, you are less liable to get criticised. Mr Grainger—I understand the view you are expressing, Senator. Senator SCHACHT—Has the board considered this issue yet of any form of public inquiry, or is it a view of the management, or is it staff thoughts at the moment? Mr Grainger—This is a matter which has received the full consideration of the authority itself. Senator SCHACHT—It has already? Mr Grainger—Yes, indeed. Senator SCHACHT—And the decision is not to hold a public inquiry? Mr Grainger—At this stage. Senator SCHACHT—You mentioned that if something else occurred that may come to the fore it would be useful to have a public inquiry. Can you give me any idea what sorts of issues would have to come to the fore that would lead the ABA to have a public inquiry or part- public inquiry? Mr Grainger—It really is difficult for me to comment on hypotheticals, as I have said to you on other occasions, and I really would rather not do so because it just fuels speculation about the matter. Let me assure you, though, that this is a matter which the authority is giving the highest degree of attention to. With the widened membership of the authority that we have enjoyed since October last year, we really have a range of very considerable expertise which we are drawing on very fully. Senator SCHACHT—Is the full board going to consider this matter? Mr Grainger—We have a board committee. In the way that we are now operating, we have a number of board committees. But they are committees of board members for the purpose of helping the authority as a whole to make decisions on various matters. We have a committee called the legal and enforcement committee, which I chair and which oversees these sorts of matters, but, because of the real importance and sensitivity of this matter, we are really moving very much between that committee and the full authority. The authority meets fortnightly. Senator SCHACHT—Who else is on the committee that you chair? Mr Grainger—The chairman himself, Professor Flint; Mr Ian Robertson, who is a Sydney solicitor; we have been joined recently by a new associate member, Mr Geoffrey Hilton, who is a part-time member of the ACCC and a senior counsel at the Sydney bar; and Ms Kerrie Henderson, who is a part-time member of the authority. Senator SCHACHT—They are on your committee? Mr Grainger—Yes. Senator SCHACHT—The full authority, for the Hansard record—I cannot remember it all.

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Mr Grainger—Yes, the two members of the full authority who are not on that committee are Mr Michael Gordon-Smith and Mr John Rimmer. Mr Michael Gordon-Smith is a full-time member and Mr Rimmer is a part-time member, but they have been engaged in discussions all the way along, in any event. Senator SCHACHT—So when the full authority meets, it is all of your subcommittee? Mr Grainger—Yes, plus those other members that I referred to. Senator SCHACHT—The two other members? Mr Grainger—Yes. Senator SCHACHT—In the discovery of documents, if that is the correct term, or the notice given to people who supply notices, apart from legal documents which are obvious about contracts being signed and transfers of money to pay for shares or whatever, does it include such things as calling for the records of telephone accounts for people who are clearly in communication with each other, or for such things as proving whether people are associates and what they are dealing with on a day to day basis? Mr Grainger—Rather than commenting on the specifics of this investigation, perhaps I could give you an example from a previous investigation. In the earlier investigations of the Canwest matter—not the investigation which is now under way but earlier investigations of the Canwest matter—we certainly called for telephone and fax details between a range of numbers in Canada and a range of numbers in Australia and, indeed, had to go through many boxfuls of records. It is why sometimes it is so time consuming for us to pursue these investigations, because that is the level of detail that we actually go down to—who has been talking to whom on what telephone number and where faxes have been going to. Senator SCHACHT—In that case, or any other case, you are not constrained from calling for that information up to the date a contract was signed, but at any time that you think is germane to your inquiry? Mr Grainger—Yes. Senator SCHACHT—In the middle of last year, before Professor Flint was appointed as chairman of the ABA and when he was chairman of the Press Council, he made a number of remarks on the record in a way which could be construed—and I do not want to put it more strongly than that—as saying that he was not overly concerned about cross-ownership rules where someone who owns a television station or owns a newspaper can own the other. He actually made remarks along the line that the law is the law, but people can get a smart lawyer and get around it. I am paraphrasing the remarks that Professor Flint has made on the record. As I said, it is not a clear-cut view either way, but he was asked on at least one occasion, when the issue of cross-ownership rules were on last year before the government withdrew in defeat in trying to get the change, that it would be possible for PBL to purchase Fairfax. Has Professor Flint considered that any of his previous remarks may in any way compromise his involvement in this inquiry? Mr Grainger—Professor Flint is probably the best person to comment on any comment that he has made at any stage. Perhaps I could say that he has made it very clear that the comments that he made in interviews after the announcement of his appointment, but before taking up his appointment, represented his personal views at that stage. He has made it very clear that he intends to operate—and he is operating—as chairman of an authority that consists of three full-time members, three part-time members and now a number of associate members. He very

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 432 SENATE—Legislation Thursday, 11 June 1998 much operates on the basis of discussion amongst those members. From my observation, whatever comments he made nearly a year ago now, he has operated meticulously as chairman of the authority and taken into account the views of all the members of the authority. Senator SCHACHT—I was a bit disappointed that Professor Flint was not present at the estimates hearing today because then he would have had the opportunity to put his view very strongly himself. You can take it on notice to give him that opportunity. Mr Grainger—I should say that this hearing was changed at short notice from yesterday to today. Professor Flint had a scheduled authority meeting in Sydney today and a speech to give on the Project Blue Sky matter at 5 o’clock in Sydney, and so he has presented his apologies for not being able to be here. Senator SCHACHT—There was correspondence in the Sydney Morning Herald that Professor Flint may choose to comment on. I will use the opportunity of putting it on notice and on the record for him to respond to. A letter appeared on page 16 of the Sydney Morning Herald which was signed by Lindy Magoffin, Head of Current Affairs, ABC. It says: There is an inference to be drawn from the letter of Professor David Flint, Chair of the Australian Broadcasting Authority, of August 13th that the ABC’s 7.30 Report, by excluding certain material from its broadcast on Thursday, August 7th did not treat Professor Flint’s comments fairly. The prerecorded interview for the 7.30 Report ran for 35 minutes. The edited version covered Professor Flint’s views that the current cross-media rules were arbitrary, gave a lot of power to the treasurer of the day, that the Trade Practices Act was deficient and that "we can become obsessed by Mr Packer". Professor Flint said "It is open to Mr Packer now if there is a willing buyer to buy Fairfax". He went on to say, "There would be ways, I am sure, where it could be done if you wanted to. It wouldn’t be perhaps the nicest thing to do, and I am sure Mr Packer doesn’t want to do what isn’t nice". Immediately following these remarks, the interview continued. This was not broadcast— and this is what the ABC is putting on the record— "Interviewer: By moving whatever enterprise to other entities? Professor Flint: That could be done, or if you look closely at the rules you will see that it has to be newspapers, and that the relevant newspaper which is caught is one in which the circulation is more than 50 per cent. Now I think it is easy to think of ways to circumvent that if you want to. Lawyers do that sort of thing in relation to taxation and have done it for a long time." There is nothing in that additional explanation which altered the substance of the earlier remarks. Having reviewed transcripts of both the interview and the story as it went to air, the ABC stands by the report as a fair representation of Professor Flint’s views. Lindy Magoffin Head of Current Affairs, ABC Sydney That was dated 15 August last year. I think you can interpret Professor Flint’s remarks in several contexts—and I am not saying that the ABC has done that. Mr Grainger—No, Senator, but can I say something very important. Professor Flint became Chairman of the Australian Broadcasting Authority on 5 October 1997. At the time he made those remarks, he was Professor of Law at the Law School of the University of Technology Sydney,and chairman of the Press Council, and that was the basis on which he was being interviewed. As I say, since he become chairman he has followed the meticulous practice of chairing the board and allowing the members to shape the progression of any issue. Senator SCHACHT—That is why I wanted to put that on the record and wanted to give him the opportunity of taking on notice a response to that statement.

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Mr Grainger—Thank you, Senator. Senator SCHACHT—Because of all the stuff floating around, I think part of the inquiry being public is to the advantage of the ABA and all its participants. At the end of the day, whichever way you rule—and I hope you rule in a particular way—will be a matter of controversy. I think that is unavoidable. Mr Grainger—I understand that, Senator, and it is not the first time I have thanked you for allowing me to place matters on the public record. Senator SCHACHT—I appreciate that. I also appreciate that you might say you are somewhat constrained by my next topic. I want to turn to remarks made by Mr Powers himself in an interview in the Australian Financial Review only a matter of two days ago. The interviewer, Pamela Williams, clearly and directly spoke to Mr Powers. The issue that I find intriguing is that he has openly said—and she has paraphrased it here: Powers has signed a consulting agreement with Packer whereby he will work on individual projects on a per diem basis. The contract explicitly provides that Packer will not ask, and that Powers will not accept, any projects that would conflict with Powers’ position at Fairfax. So what sort of projects? "I worked there for five years so if an issue comes up where Kerry thinks I can be helpful, or if they are looking at a new project that I can help with, then he’ll refer it to me," Powers says. Although the probe has been written to explicitly exclude his discussing any matter that relates to Fairfax, at the very least he is getting paid for providing advice to Mr Packer, which means there is some contractual obligation, does it not? Mr Grainger—I can assure you that the ABA will be pursuing every aspect of this matter and following all clues available to it in order to get to the bottom of whether there is a breach of the Broadcasting Services Act in respect of Mr Powers’s involvement with Fairfax. So I think it is safe to assume that any matter which has been aired in an article of that kind is certainly likely to be pursued with vigour by the ABA. Senator SCHACHT—The article also states: Powers’ stake has been financed thus: he put 20 per cent down ($3 million) and the rest is non-recourse financing through the ANZ over five years. With Kerry Packer’s guarantee on the loan. Powers says he has plenty at stake both in terms of the $3 million he has put at risk and a substantial upside to ensure he is focused on his investment. So why doesn’t this give Packer control and influence over him? "Very simple. Because its non-recourse financing," he says. I have to say—in common understanding—that if I borrowed money from somebody for a project and they gave me a guarantee of the mortgage from the bank I would certainly feel more relaxed about my future, if it went bad, if someone else was guaranteeing the loss. Isn’t that surely an influence that Mr Packer clearly has as an associate of Mr Powers? Mr Grainger—I do not want to avoid your questions. The fact is that we will be pursuing all matters of that kind. But it would be completely wrong and it would in fact undermine any decision that we might make to have prejudged the matter before our investigation is completed and all of the evidence is before us. So, in being as cautious in my answers to you as I am, I am very mindful of the need not to convey any view that we have prejudged the outcome of the investigation. Senator SCHACHT—The FXF Trust—it sounds like an American experimental aeroplane— which Mr Powers has bought shares in: is it not true that Mr Powers is on the board of Fairfax representing that trust?

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Mr Grainger—He has joined the board of Fairfax as a director of Fairfax representing that interest, yes. Senator SCHACHT—The other shareholder and interest in that trust is Mr Packer’s PBL company, which he owns. Mr Grainger—Yes. Senator SCHACHT—Does that not bring into play consideration of the associates— Mr Grainger—It absolutely brings all of those issues into play, and they are part of the subject matter of the investigation, so I do not want to say anything to minimise the fact that we are pursuing those matters. I think that is all that it is proper for me to say. Senator SCHACHT—One other comment Mr Powers makes in the interview is that he is very interested in the Fairfax’s online service which is, I think, called Fairfax Online. He suggested in the interview that one area in particular he would like to explore is whether Fairfax Online can form some sort of arrangement with one of the other television stations. He actually mentioned, I think, that PBL Microsoft have a joint venture online. Is that not an advantageous interest for Mr Packer, who has a company providing online services, to find that the new chairman believes that this is an area he ought to investigate commercially for Fairfax and make arrangements for? Isn’t this a merging of interests between a newspaper organisation and a television station? Mr Grainger—At the risk of being repetitive, the full field of these sorts of issues is within the purview of the authority’s investigation, so we can only pursue our investigation, gather information from documents and from examinations, weigh the material and see where we believe that takes us. It is easy for a journalist or, indeed, for you to read an article and say that you have reached a definitive position in your own mind. I can understand that, but the authority is actually charged with a statutory responsibility and must be careful in the exercise. Senator SCHACHT—Mr Grainger, you have been perfectly careful and proper, and I am not complaining about that. But I just want to put these matters on the record because, just on the matter I have just raised, Mr Powers is quoted in that article as saying: I have a sense that PBL and Fairfax somehow should have been natural partners or at least exploring partnerships or ways to work in alliances. We ought to be talking aggressively now to every player that can bring something to the table in the online world. I am not ruling out an alliance with PBL or any other content providers, whether it’s Seven, Ten, News, Foxtel or Optus. I appreciate the fact that Mr Powers has been so forthcoming in this interview on matters that are before your inquiry. I presume that this article is one of the documents you have sought on notice because, without in any way prejudging your work, this article alone is an astonishing comment about a relationship that Mr Powers quite openly wants to have with PBL Channel 9. Mr Grainger—I understand what you are saying. Senator SCHACHT—Mr Grainger, I am not criticising you in any way because you have got to do the inquiry, but we—the Labor Party—find this to be quite strong evidence on the record from Mr Powers’s own mouth that, certainly by association, there is clearly going to be influence, if not direct control, between the two organisations that is contrary to the existing cross-media ownership rules. And, if by some awful chance you find that the rules are deficient and this is able to continue, then I think it is up to the parliament to review the cross-media ownership rules to strengthen them, unlike the government wanting to weaken them as they did last year. My final question—

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Senator Alston—I do not think that is a question. Senator SCHACHT—I know, but I am going to put a question to you. Mr Powers, in the same article, on cross-media ownership laws, says: I think the Government thinks they’re not needed and I think they’re a Government that believes that if rules are not needed, you scrap them. Whether it’s one year, five years or 10 years, it’s just a question of time in my mind—they are obsolete. Do you agree? CHAIR—Senator Schacht. Senator SCHACHT—I am putting this to Senator Alston. CHAIR—I know. I just wanted to make a point on the record. When Senator Eggleston did this—I am not complaining because I protected him—Senator Lundy went ballistic— Senator SCHACHT—I did not go ballistic. CHAIR—I know. But I am just putting it on the record. Senator Lundy went ballistic, saying that it was inappropriate that he was reading out these things from the newspaper, and where was his question. So I am just saying that if it is good for the goose, it is good for the gander. I just want to put that on the record. Keep going. Senator SCHACHT—I never complain about what people say as members of Senate estimates committees. CHAIR—I know, but your colleague did. Senator SCHACHT—I may interject on them when they are making outrageous comments— CHAIR—Often. Senator SCHACHT—But I have never objected to their right to say what they like. CHAIR—I will remember that. Senator SCHACHT—Minister, in view of that statement by Mr Powers, as chairman of Fairfax, what is the government view on the cross-media ownership rules? You have said that you will not attempt to change them before the election. After the election, will you make another attempt to change the cross-media ownership rules by abolishing them? Senator Alston—We do not regard changes to the cross-media ownership rules to be a high priority. Given your attitude on the subject, it struck us that there was not much point in pursuing the matter last year, and I do not think anything much has changed since that time. Senator SCHACHT—So there is no quiet arrangement with Mr Packer that you will try again next year if you are successful in winning either the election this year or a double dissolution election? Senator Alston—Make these speeches in the chamber or outside the parliament; it is not really part of the estimates process. You ought to at least understand that there is a serious inquiry being embarked upon here, and your gratuitous prejudgment of the outcome really does not help the estimates process in any sense. All you are doing is using this as a platform from which to propound your view of the world; that is not in any shape or form relevant to this exercise. Senator SCHACHT—I notice that you were never been backward in propounding your view of the world in estimates committees in your 13 years in opposition, Senator.

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Senator Alston—I have spent remarkably little time in estimates, simply because I took the view that it was not a productive exercise. Senator SCHACHT—Richard, do not tell pork pies. CHAIR—Have you finished with ABA? Senator SCHACHT—No, I have not finished; I have more questions for the ABA which will take about half an hour. CHAIR—I hope that we will be working to the timetable when we get back after dinner. Proceedings suspended from 6.43 p.m. to 7.51 p.m. CHAIR—I call the committee to order. Senator SCHACHT—I hope that the minister will turn up very soon. Some of the questions I want to ask him deal with program standards, about which he has made a number of statements. But to lay the groundwork well, Mr Grainger, I will ask you: have you been consulted by FACTS or any of the commercial television stations in the last two or three weeks about revising the voluntary code for standards for commercial television after the minister made his statement in the Senate expressing a concern about the way the standard was leading to. I think he said ‘Sodom and Gomorrah’ and television in this country. Mr Grainger—The ABA has been in a long process of discussion with FACTS about the draft revised code and we have been negotiating from before the time the minister made his recent comments about having a meeting about the next stage of that process. In fact, the only reason that we have not had that meeting in the last— Senator SCHACHT—A meeting with who? Mr Grainger—With Mr Branigan of the Federation of Australian Commercial Television Stations. The only reason we have not had that meeting in the last two weeks is because of the involvement of FACTS in the digital hearing which you were involved in, so we have a meeting scheduled on 17 June to discuss a range of matters, including the matters raised by the minister, but not only the matters raised by the minister. Senator SCHACHT—The minister made his statement two or three weeks ago in the latter part of May. Up till the time he made the statement, what were the numbers of complaints the ABA was receiving regarding matters that he complained about—the level of sex displayed on television in certain programs. Ms Ritter—We get a smattering of ongoing complaints about issues to do with sex and nudity, some of which— Senator SCHACHT—Complaints against it or in favour of it? Ms Ritter—Against it, generally. Senator SCHACHT—Against it? People are not saying they want more of it? Ms Ritter—Not generally, no. It can be things like bare buttocks in a G program through to bare breasts in a current affairs program and complaints about Sex/Life. We have had quite a few on that, of which we upheld one. We did not find a breach with Playboy’s Really Naked Truth, but we did express concerns that we thought it was against the spirit of the advisory notes on the portrayal of men and women. We had discussions with Ten on that basis. Senator SCHACHT—How many complaints were you receiving before the minister made his statement? Would it have been 1,000 a week?

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Ms Ritter—No, nowhere that sort of number. The reason I hesitate is that we get complaints which are not official complaints—people ringing up or writing—and we refer them to the station to complain or we get ones which become official investigations. We would not have had more than maybe a dozen this year. Senator SCHACHT—A dozen in the year? Ms Ritter—In terms of official investigations. Senator SCHACHT—Official investigations that led to you believing the complaint was serious enough to have an official investigation? Ms Ritter—Yes. I could get you the exact numbers, but my recollection is that it would not be more than about that. Senator SCHACHT—Could you take that on notice to give me the exact number on a monthly or weekly basis so we can work out what was concerning the minister about complaints? Did the minister seek advice from you on the number of complaints you were receiving about these programs before he made the statement? Mr Grainger—Bear in mind that the complaints that come to the ABA are complaints which have been dealt with in the first instance by a licensee or by a public broadcaster— either the ABC or SBS—so we cannot tell you what complaints have been made where the complainant has been satisfied with the handling of that matter. We get the complaints, and it is a two-tier or, in the case of the ABC, a three-tier complaint system. What Ms Ritter is talking about, of course, are complaints which have gone through a licensee or a public broadcaster and there has not been satisfaction with the response to the complaint. Senator SCHACHT—So they are the 12 who have not been satisfied with the response they got from one of the commercial stations. Ms Ritter—I have now found the figures for the period from 1 January 1994 to 10 June 1998. There were 49 investigations with eight breach findings and one admitted breach in that period. Senator TIERNEY—What did you do in response to those breaches? Ms Ritter—The primary focus of the ABA has been to ensure that no breaches recur; that the stations take action to remedy the problem or make sure it does not happen again. Senator TIERNEY—When they are in breach of the act, what actually happens to them? What is the penalty? Mr Grainger—The provisions of the regulatory arrangements put in place by parliament in the Broadcasting Services Act provide a limited array of actions that the ABA can take. The whole spirit of the legislation and, indeed, its letter is about industry self-regulation. So it is quite clear that the focus is, as Ms Ritter has said, on trying to ensure there is no recurring breach. But, if there is a persistent experience of breach by a licensee or a public broadcaster of a provision of the voluntary code, the authority could take action to make that provision of the code a condition of the licence of that licensee. Generally, we are really looking at recurring breaches—three or four breaches—of the same provision of the code by a licensee or a public broadcaster as being the period at which we would be in serious discussion about the imposition of a condition of licence. Senator TIERNEY—Since the act came in in 1992, how many instances have there been of anyone receiving any penalty that is any further than a slap on the wrist?

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Mr Tanner—Perhaps we should just explain that in fact a breach of the voluntary codes does not actually attract a penalty. The question really is whether the ABA then takes some action which would make compliance with that rule mandatory. For example, if the ABA did not like the attitude of the broadcaster, if this was a repeated problem that clearly was not being fixed, the ABA could impose a licence condition. There are a couple of other things it could do as well. The effect of doing that would be to bring in a whole regime of sanctions which are quite powerful, including prosecution, suspension of licences and that sort of thing. Mr Grainger—The ultimate sanction for the authority is either to refer a matter for prosecution, because it has no power to prosecute itself, or to take action to suspend or cancel a licence. Those are very serious penalties. There is no provision for some more immediate penalty other than to make something a condition of a licence. Senator TIERNEY—So under the legislation set up by the last Labor government, you either slap them on the wrist or cut their head of, in effect, if you are going to take their licence away? Mr Tanner—Not quite. Senator TIERNEY—There is nothing in between. Mr Tanner—That is not totally fair actually. There are two stages. Senator TIERNEY—What is in between? Mr Tanner—The point about the voluntary codes is that, as there is a requirement that the ABA investigate if a person is dissatisfied with the way their complaint is handled, the ABA can investigate but it cannot actually punish, like fine or use any of its remedies, its sanctions, on the licensee for the breach of what is intended to be a voluntary code. The worst the ABA could do is take some action which would mean that it would be punishable if it recurred, for example, imposing a licence condition. If there is a licence condition imposed and if that licence condition is breached, there is a range of sanctions which range up to the fairly draconian, but there are some intermediate and lower steps. Senator TIERNEY—What are they? Mr Tanner—For example, the ABA could issue a notice on the licensee to comply with the condition. There are a whole range of criminal sanctions if you breach that. Alternatively, you could pursue fines. I am not sure that that is too draconian to use. Clearly, in many situations revocation of a licence is simply not going to be appropriate. That is not a realistic sanction. That was one of the problems that the ABA’s predecessor, the ABT, had. Its only sanction was revocation. I do not believe a fine fits into that category. It is perfectly feasible for the ABA to go to the DPP and for the DPP to pursue a prosecution and a fine for a breach of a condition. So there are some quite workable intermediate sanctions. Senator TIERNEY—But you have not fined anyone in six years. Mr Grainger—Senator, what we have described to you are processes which are fairly long and drawn out. I think it is up to parliament to decide whether it desires some other kind of measures that the ABA might have conferred upon it. Senator TIERNEY—Given that track record where you have never fined anyone and no-one has ever had a financial penalty, compared with the very large financial incentive of trying to push ratings by pushing the envelope on these sorts of issues which we have been discussing, wouldn’t there be a very powerful incentive to keep pushing the envelope and, in a sense, isn’t that why we have the problem we have today with programs like Sex/Life, which you have investigated seven times?

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Mr Grainger—I can only say these are matters for the government to decide and for parliament to discuss and legislate on, if it desires a regulator to have stronger powers than it has at the moment. I am really not wanting to say anything to gainsay the discussion which has been taking place in recent weeks about the extent to which there is a serious issue. The minister has raised a number of issues with us which he wishes us to pursue with both the commercial television industry body and the commercial radio industry body and we have every intention of discussing those matters. In regard to the issue of whether the ABA could be given some greater power to impose fines, the view that I have always taken is that that is a matter for parliament. There have been questions about the extent to which an administrative body such as the ABA can have a judicial power conferred upon it, and that goes to the issue of what power to impose fines we might receive. But subject to the constitution being complied with, I consider it to be a matter for parliament, whether it wishes to give us stronger powers than we actually have. Senator TIERNEY—So in the case of a program like Sex/Life on Channel 10, which you have investigated seven times, and it is now into its third series, doesn’t that indicate to you that there might be something lacking in the powers of the ABA if you have to keep coming back and investigating it? Obviously, they are just thumbing their nose at you because they know you have no financial penalty. Mr Grainger—We have only found a breach in respect of that program once in the seven investigations. Senator TIERNEY—And your action was, ‘We hereby declare that you have breached conditions,’ and that was it, in the letter that I saw. Mr Grainger—We have indicated that we found a breach and we have discussed with the licensee how to avoid committing further breaches. The minister has very properly raised a number of matters with us and with the industry bodies. It really does go to the issue of the codes themselves. Senator SCHACHT—You said the minister has raised this now with you? Mr Grainger—Yes, he certainly has. Senator SCHACHT—Since his statement in the parliament on 28 May, has he formally written to you? Mr Grainger—Yes, he certainly has, as he has made clear. Senator SCHACHT—What was the nature of the letter? Seeing this is self-regulation of the codes, what has he asked you to do? Mr Grainger—He has raised a number of concerns and has written also to FACTS and FARB, the two industry bodies, and asked us to discuss their codes, which are in two different stages of the process for revision. He pointed out some concerns he has. Senator SCHACHT—Concerns he has? Mr Grainger—Yes. It seems to me very proper that the minister should convey concerns that he has. Senator SCHACHT—Now the minister has turned up, we can direct some questions to him about his concerns. Minister, how many complaints had you received in your office and/or in your department regarding commercial television program standards which you mentioned in your answer to a question from Senator Calvert on 28 May where you made some pretty strong remarks? How many complaints had you received that led you to make those remarks?

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Senator Alston—I cannot tell you offhand. Senator SCHACHT—You made this very strong statement saying: I do not think anyone in this country wants to see an electronic version of Sodom and Gomorrah. Senator Alston—Sorry, are you an exception to that? Senator SCHACHT—No, I am just saying I want you to tell me how many complaints you received that led you to make such a strong statement. The ABA have told us they have had, I think, 12 complaints. Senator Alston—Do you think I am simply slavishly driven by complaints without any capacity to make independent judgments? Senator SCHACHT—I was going to come to that. I just want first of all to get on the record whether you had been hit with a confetti, a handful, hundreds or dozens of complaints. Obviously, you have not, so you have made your own judgment. Senator Alston—I did not give you any indication at all, because I did not know offhand. Senator SCHACHT—You did not know offhand? Senator Alston—No. I do not know offhand how many complaints I received. Senator SCHACHT—So you have forgotten? Senator Alston—I do not know. I will find out, if you like, as best I can. Senator SCHACHT—I find it extraordinary that for something that you have been on every media beating up—talking about these evil television stations destroying the fabric of our society, by implication—you cannot remember how many complaints you had. Senator Alston—Can I take it from that you do not take any exception to what you have seen or heard? Senator SCHACHT—I support the code. Senator Alston—But you do not have any problems with the way it is working? Senator SCHACHT—I am like you, Senator Alston, in that once, 15 years ago, you were a small ‘l’ liberal, but now you have gone so far to the right to curry favour with the present leadership of the government. I still have a view, as a small ‘l’ liberal in the broadest context, that adults have the right to see in private, as long as they are not illegal acts— Senator Alston—‘In private’ meaning free to air television? Senator SCHACHT—The guidelines say when these programs can be shown, what classification they can get and what hours they can be shown. I am trying to find out, and the ABA has told me this— Senator Alston—I wonder if you saw the response of the woman who runs that program on—whatever it is—Triple M radio who—or her producer—said, ‘As far as we’re concerned, all that the code now requires us to do is avoid using expletives.’ In other words, they do not acknowledge that there are any standards at all on radio. If you think that is acceptable— Senator SCHACHT—It is about community standards: the standards are reflecting the community. I would have thought that, if that program was so shocking to the listener, they would have done two things: one, turned it off and, secondly, lodged numerous complaints. You still cannot find evidence—empirical evidence—of the number of complaints that have been lodged.

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Senator Alston—Why do you think the producer of that program gave evidence before a Senate committee this evening that in hindsight it was a mistake to have broadcast from a brothel and that they would not do it again? Do you think she just does that for the love of it? Senator SCHACHT—Okay. Senator Alston—She is responding to community standards. Senator SCHACHT—She has probably been threatened by— Senator Alston—But why? If, as far as you are concerned, no-one is concerned? Senator SCHACHT—What I am asking for is empirical evidence of the complaints that have been lodged. Senator Alston—You can ask that question. Senator SCHACHT—I have got that already, before you were here: you were lazily off somewhere doing something else. Ms Ritter told me that, I think, 12 complaints—or ‘a dozen complaints’—had been lodged. Senator TIERNEY—Tell the full story! Senator SCHACHT—They are in the report here of the ABA itself, going back through several pages— Senator Alston—When was it produced? Senator SCHACHT—What? Senator Alston—This is 12 complaints about matters I have raised that are now contained in a document? Senator SCHACHT—No, over the period of time. She has taken it on notice. We have actually asked about the number of complaints that were lodged with them immediately in the period before you made your comments in parliament. Senator TIERNEY—That got through step 2 to the ABA. Tell the full story! Senator SCHACHT—Before you interrupted and took over the questioning, I was going to ask whether the ABA had sought from the members of FACTS the list of initial complaints they had received: how many complaints Channel 10, Channel 9 and Channel 7 received. Senator Alston—Are you proceeding on the basis that somehow all you need to do is look at how many complaints there are or do you acknowledge that, even if you do not have a large number of complaints, there is nonetheless an independent obligation to assess whether the standards are being adhered to? Senator SCHACHT—Senator Alston, I want to work through a process that is not driven by prejudicial views or, in your case, somebody doing a sleazy deal with Senator Harradine— CHAIR—Senator Schacht! Withdraw that! That is impugning a motive to Senator Alston that is not parliamentary. Withdraw it! Senator SCHACHT—What? CHAIR—That he did a sleazy deal— Senator SCHACHT—He did a deal— CHAIR—Even with that, it is inappropriate. Senator SCHACHT—That is my opinion. I am entitled to have it: that there seems to be a connection—

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Senator Alston—Seems to be? You just said I had done a sleazy deal. Senator SCHACHT—There is a deal you have done—I withdraw the word, sleazy; that is unparliamentary— CHAIR—Even that is skating on the edge of what is acceptable, Senator Schacht. Senator SCHACHT—It is quite clear that suddenly out of the blue a statement is made in the parliament to a dorothy dix question which everybody now around the place, because there has been a lot of speculation—I do not know how true it is— Senator Alston—Had you read that full-page article in the Australian that was the basis of that question? Senator SCHACHT—What story in the Australian? Senator Alston—You haven’t even read it! Senator SCHACHT—Which one are you talking about? Senator Alston—It was a full-page article. Senator SCHACHT—In? Senator Alston—The Australian newspaper. Senator SCHACHT—Which? Senator Alston—Led to that question. Senator SCHACHT—Which led to that question. Senator Alston—If you don’t think a full page in a national newspaper is any basis for community concern— CHAIR—Senator Schacht, let him finish. Senator SCHACHT—He is interjecting on me as much as I am on him. CHAIR—Senator Alston, have you finished? Senator Alston—Yes. CHAIR—Good. I think I ought to get a referee’s coat for this, a black and white thing from the football or the soccer. Senator Alston—Why don’t you send him off and we can get on with it? CHAIR—I have given him a yellow card and you might get one too in a minute. Senator SCHACHT—I am just trying to find out some facts. I concede, Senator Alston, that there was an article in the Australian. You say that prompted you to get a dorothy dix asked of you by Senator Calvert. Senator Alston—Do you say that a one-page article does not demonstrate community concern? Otherwise, why is the newspaper running it? Because it is irrelevant; the community is not interested? Of course it is interested! A lot of people responded to that article and they were uniformly appalled. Senator SCHACHT—How many people responded to your office then? Senator Alston—I do not know. I told you that. Senator SCHACHT—This is what I find extraordinary. Senator Alston—What does that have to do with the price of fish? Do you think I have no capacity for independent judgment, that I can read a newspaper and say that it looks appalling

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 443 but unless we have a certain number of complaints I will do nothing about it? That is the way you would run this ministry, is it? Senator SCHACHT—What I am getting down to is that it was not the complaints that prompted you— Senator Alston—So you would say, ‘We only got 19 phone calls this morning; that is below my benchmark of 20, so I will not do anything about it?’ CHAIR—Order! For the sake of Hansard, I will only have one person speaking at a time. We have had three minutes of both of you speaking at the same time. Senator Alston—I apologise for coming up; do you want me to leave now? CHAIR—Do not interrupt me when I am chairing the meeting. It is impossible for one person in Hansard to take down two people speaking at the same time. I will not tolerate two people speaking at the same time. Senator Schacht, ask a question. Senator Alston, answer the question. Do not interrupt each other. Senator SCHACHT—I am trying to find out, first, whether you responded because of the upsurge in the number of complaints you received. From your answer, I can work out that you cannot remember how many complaints you received. You are now clear that you acted on the basis of your own judgment after reading an article in the newspaper. Senator Alston—That is absolute nonsense. CHAIR—Senator Schacht, ask a question. Do not make assumptions. You are precipitating a response from Senator Alston which is warranted. Ask him a question. Ask him how many complaints he got. He will either tell you or not tell you. Do not make assumptions about it. Move on to the next question. Senator SCHACHT—He has already answered that he cannot remember how many complaints he got. Is that true? You cannot remember how many complaints you got? Senator Alston—That is right. Senator SCHACHT—Therefore, Minister, you acted on your own volition after reading the newspaper. Senator Alston—That is an appalling leap of logic. Let us say that I got 350 complaints but I cannot remember the number. You would say that it therefore follows that I took no account of complaints and acted purely on the basis of my own judgment, would you? Senator SCHACHT—I am trying to get you to agree that because you received some complaints or one complaint you decided to take— Senator Alston—That is a different proposition. If I said to you that I received no complaints, there might be some tenuous logic in what are you trying to put. Senator SCHACHT—As you cannot tell me— Senator Alston—Nothing follows from that. Senator SCHACHT—whether you received any complaints at all— CHAIR—Order! Please do not interrupt each other. Have a sensible question and answer session. I do not know what I am going to do. I will stop and we will have a private meeting of the committee until both of you decide that you are going to ask questions and answer them. It is idiotic going backwards and forwards interrupting each other. It is impossible for Hansard. Senator TIERNEY—I raise a point of order, Madam Chair. Given the lateness of the hour and the limited time that we have left, could we return to the estimates?

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CHAIR—Senator Schacht, ask questions relating to estimates. Senator SCHACHT—The ABA is before us with their estimates on expenditure. Before the minister deigned to appear before us this evening, I asked the ABA a series of questions about their activities dealing with complaints—on which they spend money. The minister finally turned up. I am asking him some questions about this complaint procedure. They have now told me that he wrote to the ABA asking them to review a new standard of the regulation. That is obviously taking up resources of the ABA and is included in their expenditure. That is why I am asking these questions. They are the regulator. It is a very legitimate question. CHAIR—Ask the question. You are not helping things by saying that the minister ‘deigns’ to come in here. Just refrain from that sort of taunting. Ask the questions. We will get on much better. Senator SCHACHT—I have had sent to me by FACTS—I do not know whether you have seen it; I presume they sent it to you—the proposed changes to the code dealing with the issues that you have raised. I do not know whether you have seen that proposal on what is presently 2.17.2. It is exactly the same except that it adds a further sentence. It states: Full frontal nudity which is exploitative or demeaning is not permitted regardless of the program context. Can you explain to me what that will do to a program such as Sex/Life in changing the content of that program by having those new proposed words adopted in the new voluntary regulation? Senator Alston—I would be surprised if it made a great deal of difference. Senator SCHACHT—Does that mean that you personally would be dissatisfied with the proposal that has come from FACTS? Senator Alston—If you are asking me whether I think that would by itself preclude Sex/Life, the answer is that I do not think it would. Senator SCHACHT—You want to see Sex/Life— Senator Alston—I thought you asked that. Senator SCHACHT—Your view is that the change should be made in the regulations so that the present program called Sex/Life is taken off air? Senator Alston—You were asking me whether I thought the change in the wording would be sufficient to rule out Sex/Life. I am saying that I do not think it would. It does not follow from that that the code should be worded in such a way as to rule out Sex/Life. If you ask me what I think of that program, I think it has very little going for it. Senator SCHACHT—Is it your intention, in discussions with the ABA and FACTS, to change the code—- if not in this section somewhere else? They have changed the wording proposed for 2.5 ‘The classification considerations’ quite significantly. One way or another, you want the code changed so that the present program Sex/Life is not eligible to be on air at all? Senator Alston—I do not think that is a sensible approach to take. If you are just dealing with a particular program, you might as well ban it expressly. There is no point having a form of words which appears to be general but which has only a specific intent. My general preference would be to see a tightening of the code that is meaningful and has an across-the- board approach in terms of standards. Whether or not any particular show satisfies that depends on the wording that you ultimately come up with. Mr Grainger—The ABA, in administering its role, has to take into account community standards. Community standards are revealed not simply by the number of complaints which

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 445 come to the ABA. We conduct research. We have researched and have made a supplementary submission to the Senate Select Committee on Information Technologies giving some of those findings. They certainly do indicate that matters of sex, nudity and perceptions of pornography are amongst the main matters of concern to members of the public who are concerned about subject matter on television. That is another area where we obtain this information. I might also say that parliamentary committees are another way in which views on community standards are presented to us. We certainly take the views of those committees into account. Senator SCHACHT—I feel sorry for you having to take on board the views of the Senate Select Committee on Information Technologies. I got the short straw once and had to serve on it for a period of time, and I found it nothing more than a witch-hunt by a couple of senators on a particular issue they felt very strongly about, which they are entitled to. I never found it was overwhelmingly dealing with issues that reflected the broad views and all the variety in the Australian community. Nevertheless, I appreciate the fact that you take note of Senate committees’ reports. Senator Alston—I know you do not talk to your colleague from South Australia Senator Quirke, but you should at least look at what he said in evidence tonight in relation to the radio broadcast that I was critical of. Senator SCHACHT—I want to find out about what Mr Grainger has been usefully describing and you are describing, Minister. I had sent to me yesterday by FACTS the draft changes. They are probably not satisfactory to your mind, though you will have further time to consider them. Mr Grainger, have you been consulted on the draft that FACTS have sent me? Mr Grainger—No, we haven’t. That is their first stab at the exercise they are engaged in. My colleagues confirm that we have not been consulted. We certainly expect to be in discussion with Mr Branigan. Senator SCHACHT—So that process has not been completed? Mr Grainger—We have a meeting on 17 June. Senator SCHACHT—When you talk about community standards, when I received this I actually rang Channel 10 and asked them about the program Sex/Life. I asked how many people watch it, and they said that it rates about 15 per cent, under the McNair rating system. I asked how many people would be watching on the network at that time across Australia. They told me that that equates to about 1½ million people. I do not know whether that is correct; that is what I was told informally by Channel 10 and in particular by the producer of the show. Is the fact that consistently 1½ million people—or, even if they have exaggerated, a large number, maybe a million people—are watching it regularly and it is getting 15 per cent of the audience any measure of whether the community finds it acceptable or not? Mr Grainger—I think that the research that I have quoted to you, which I am happy to make available to you, is a better guide to the sorts of matters that the community is concerned about. I think that is really all I can say. You are asking me to speculate on a hypothesis. Senator SCHACHT—I appreciate that you are going to send us the material, which I have not seen. That is what I put to Channel 10. In a commercial sense they would not put it on air unless they were making a quid out of it, because they do not want to lose money. I asked whether they had trouble getting advertising to go through the show. Apparently they do not. Advertisers, I would have thought, are extremely sensitive to the reaction of the community and do not want their product associated with something that is seen as rather nasty or

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 446 SENATE—Legislation Thursday, 11 June 1998 antisocial or socially deficient. I mentioned to Senator Alston briefly in a corridor conversation that last Monday night for the first time, in view of his concern about Sex/Life, I actually watched the program for about 15 minutes and got thoroughly bored with it. I do not disagree with Senator Alston that there may not be much to commend it, but then I do not want to automatically put my value judgment on everybody else in the Australian community. Senator Alston—Do you now acknowledge that there is a basis for independent concern other than complaints? Senator SCHACHT—I think there is a range of concerns, true. I was just trying to work out where your sudden enthusiasm came from. Senator Alston—I think these programs are only of fairly recent origin. I do not think we have had what is happening on both radio and television until fairly recently. This is a fairly sudden deterioration, as far as I can see. That is what prompted that article. The whole tenor of that article was that all of a sudden we are getting a couple of fairly gross examples on television, and what I would have thought was an outrageous example on radio, of much lower standards then we have had for many years. Senator SCHACHT—I am not talking about radio, I am talking about the television program. Senator Alston—I would regard the radio stuff as more offensive, quite frankly. CHAIR—Let us go to questions now, because I think we have done that. Senator SCHACHT—I was trying to find out what prompted you. I do not know how long this program has been on. I only saw it for the first time the other night. I do not know whether Mr Grainger knows how long Sex/Life has been on television for. Mr Grainger—I think it is in its third season. Senator SCHACHT—It has been on for three years? Mr Grainger—Yes, I think it is in its third season. Senator TIERNEY—A season is not a year, though. It is a series of tapes. I think it is more like a bit over 12 months. Can I correct the record on the audience figure. The figures that Senator Schacht is assuming— Senator SCHACHT—It is what I was told. Senator TIERNEY—They are based on an audience rating. The figures I have seen printed indicate that you were quoting a figure 10 times what it actually is. Senator SCHACHT—I was quoting the figure I was given by Channel 10, by the producer of the program. Senator TIERNEY—Then you turned it into people. Senator Alston—If 15 per cent translates into an audience of 1½ million, that means there are 10 million people watching television, which is more than half the population. Given that there are a fair number of kids around, that basically suggests that everyone is watching television at 10 o’clock at night. I am not, for one. Senator SCHACHT—All I am saying is this is the figure given to me by the producer. Senator Alston—I am saying that it does not sound right. Senator SCHACHT—When I discussed it, I said, ‘A million and a half? That sounds a lot,’ because it is at 9.30 of a night and a lot of television sets are already starting to be turned off.

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Senator TIERNEY—The figure is about 110,000. Senator Alston—I think that is more likely. Senator SCHACHT—One hundred and ten thousand across Australia? Senator TIERNEY—Yes, 110,000 people across Australia—give or take a few. Senator SCHACHT—One hundred and ten thousand across Australia. Fifteen per cent— Senator TIERNEY—No, it is 15 per cent of sets on at a particular point in time. People in Australia do other things rather than watch television at that point in time. Senator SCHACHT—I know. Senator TIERNEY—Some even go to bed at that point. Senator SCHACHT—That was the figure given to me by the producer of the show. When it says it has had three seasons, does that mean a season is the equivalent of a year though it is not on all the time in the year? Mr Grainger—I will take that question on notice. I think it has been on for at least two years. It was, in fact, moved back. It was often complained of when it commenced before 9.30 p.m.— Senator SCHACHT—Yes, your report says that. Mr Grainger—Than when it moved back. Senator SCHACHT—You moved it back to 9.30 p.m., did you? Mr Grainger—Yes, that is correct. Senator SCHACHT—Which is in the proper classification of MA. Is that right? Mr Grainger—Yes. Senator SCHACHT—Minister, your raising of this matter and your being happy to make a lot of comment about it in no way bears any relationship to conversations you have had with Senator Harradine over your interest in his vote in the digital television bill or the privatisation of Telstra? CHAIR—Senator Schacht, that is not a proper question. Senator SCHACHT—It is to the minister. CHAIR—It is not an appropriate question. Senator Alston—I have had virtually— CHAIR—Senator Alston, it is not an appropriation question to be asked at estimates, and I am going to disallow it. Senator SCHACHT—It is about policy and expenditure of government money. CHAIR—No, it is not about policy and expenditure of government money, and I will not allow your question. You can move on to the next question. Senator SCHACHT—That is just outrageous. CHAIR—It might be outrageous, but it is not an appropriate estimates question. Senator SCHACHT—It is an outrageous ruling. CHAIR—I have been very tolerant.

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Senator SCHACHT—The minister provides advice on policy and expenditure of money, and one of the expenditures of money that is going to cost a lot of money is the introduction of digital television. He wants the legislation through. Senator Alston—Are you opposed to the legislation? Senator SCHACHT—No. There has been some press speculation—which one does not automatically hold as correct—that this sudden interest of yours, in respect of the Australian article, is very convenient in attracting the support and interest of Senator Harradine, who has views that he would acknowledge are very strong on these sorts of matters. Senator Alston—I do not think I have spoken to Senator Harradine since that question. Senator TIERNEY—Point of order, Madam Chair. CHAIR—Senator Schacht, Senator Alston has already indicated that he believes that these shows are fairly recent, especially the radio show, and that was one of the reasons he became involved in this discussion. Your question is inappropriate. You have tried to make your point, now move on and ask a question. Senator SCHACHT—I notice that in the minister’s answer in the parliament on 28 May he does mention the radio show extensively and he even mentions the television area, I think even more extensively. But he mentions both. I was asking about the television— Senator Alston—There are two TV shows. There is Playboy’s Naked Truth. I am sure you have not missed an episode of that. Senator SCHACHT—No, I haven’t. Looking at the paragraphs, television probably got slightly more coverage than radio. Nevertheless, both of them got a big coverage in your emotive language. Mr Grainger, after all the consultations are completed, when can we expect the new code to be available? Mr Grainger—The commercial television code revision process is a lot further advanced than the commercial radio code revision process. We are in the early stages of that process with radio, and we are in the tail end of the process with respect to television. One of the reasons why that process has elided is because of new matters coming up. New matters have been coming up over the last nine months, and so there has been toing and froing between ourselves and Mr Branigan on a range of issues and he with his members. But I am hoping that we are— Senator SCHACHT—Close to finality. Mr Grainger—I hope we are close to finalisation. I hope we are within two to three months of finalisation. Senator SCHACHT—That is all I have on standards in commercial television. I want to ask one last question on another matter. CHAIR—I thought you said you were going to be about 20 minutes on the ABA. Senator SCHACHT—I am just about to finish. This is my last question. CHAIR—It has been a long 20 minutes. Senator SCHACHT—Because I have been interrupted and there have been interjections from various people. CHAIR—Including yourself. Senator SCHACHT—Mr Grainger, did you have any complaints from Galaxy subscribers who have had their pay television sets go blank because of the collapse of Australis?

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Mr Grainger—Yes, we certainly did have quite a lot of phone complaints about that in the immediate 24 to 48 hours after it occurred. We engaged in a process of discussion with the receivers of Galaxy and with other parties in order to ensure the provision of accurate and adequate information to those subscribers. We had no powers, of course, with respect to the matter, but we were concerned for the public interest in getting accurate information and timely information so that people could work out what was happening and find out what was going on and what, if any, recourse they had. Senator SCHACHT—Do you have any information about whether there are Galaxy subscribers still not receiving a picture? Mr Grainger—We do have that information. If you would not mind, I would like to take that on notice so that I can actually provide you with the accurate information. Mr Tanner—It is a complex moving picture. Senator SCHACHT—That is fine. I would appreciate that. CHAIR—I thank officers from the Australian Broadcasting Authority. I now call officers from the Australian Postal Corporation. [8.37 p.m.] Program 4—Communications Subprogram 4.2—Australian Postal Corporation Senator SCHACHT—Minister, I think it was in Monday’s Australian that there was an article by Ian Henderson which seemed to be, I think, an inspired leak from the government indicating that the government was quite sympathetic to most of the recommendations of the National Consumer Council over further deregulation of Australia Post. Senator Alston—I am innocent; I was out of the country. Senator SCHACHT—I know that. I suspect it probably came from the Treasurer because he is actually in charge of the NCC. Do you have any idea when the government would be making its final decision on whether it accepts, rejects or will amend those various recommendations of the National Consumer Council? Senator Alston—I do not think we have given any formal consideration to the recommenda- tions or, indeed, any response to them at this point. Senator SCHACHT—So in the near future you do not anticipate that one way or the other they would be— Senator Alston—No. I think it is still a matter of working them through and making sure that we are aware of every shade of opinion on the issue. Senator SCHACHT—You certainly are aware that there are, irrespective of the Labor Party’s position, various shades of opinion even within the coalition, I understand, particularly amongst National Party members, about some of these recommendations. They are the ones you are working through, I presume? Senator Alston—I am not aware that I have had any particular representations from National Party colleagues. Senator SCHACHT—They have certainly been on the record round the place a bit but, nevertheless, some of them you might not give much weight to. Senator Alston—No, they get every consideration.

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Senator SCHACHT—I think people like Mr Katter, the member for Kennedy, is very clear in his view. I think he has expressed a few views about this, and also generally about competition policy and the Telstra privatisation. But that is an aside. Will the government make a decision on these recommendations before the election is called? Senator Alston—Firstly, I do not know when the election is going to be called and, secondly, given that we have not given any formal consideration, it is very hard to prejudge when we are likely to make a decision. Senator SCHACHT—Mr Ryan, we have been through some of this before, so I am not going to go over it again because I think you stated in your submission to the NCC that you accepted some further deregulation. But, just for the record, I understand that the Australia Post board rejects the full implementation of the NCC recommendations. Is that correct? Mr Ryan—Yes. The board does have some concerns with the NCC recommendations and has taken a view that an alternative approach such as that which we have put to the council is a preferred way of introducing competition whilst also preserving certain services to the bush. Senator SCHACHT—Has the board made its views known on this formally to the government? Mr Ryan—Yes, they have. Senator SCHACHT—Did they go to your minister or did they go to the Treasurer, who has responsibility for the National Consumer Council? Mr Ryan—No. They went to our minister in his capacity for postal policy matters. Senator SCHACHT—That is one of the shades of opinion you are addressing, I presume, Minister? Senator Alston—Obviously we are interested, but I would not call Australia Post simply a shade of opinion. Obviously its response is central to any ultimate decision. Senator SCHACHT—We await your decision on that. Can I, Mr Ryan and other members of Australia Post, put on the record my thanks for the assistance given to me both by the management and the staff of Australia Post while visiting a number of postal sorting centres in recent months. I again compliment them and you on the excellent service you are running in Australia. When I was at the Gosford Regional Mail Centre, staff there outlined, not in an antagonistic way but openly in front of management—I thought it was a very good sign that they were willing to discuss matters that might be controversial inside Australia Post about restructuring, et cetera with me in front of the manager; I thought that was a very good sign of the trust and the openness between staff and management in Australia Post—some concerns that part of Australia Post’s regional operation in Gosford was going to be transferred, I think, either to Hornsby or to Beecroft because this would be a more efficient way of distributing the mail. A number of people were concerned that jobs may go or, if they do not go down to Hornsby, the jobs would go. Other than Gosford, how many other regional centres around Australia are you in the process of looking at with regard to restructuring the operations and shifting some of the operations from a regional centre to a bigger regional centre, if not a city-metropolitan sorting centre? Mr Ryan—There are a number, and I think Mr Marshall will be able to elaborate for all of us. We are reviewing our networks, we are engaging in a degree of centralisation, we are

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 451 putting in the latest equipment, we are introducing bar coding—all with the aim of improving delivery even more and with the aim of being able to hold price on the basic rate for a longer period. At this point, we think we can do that until 2002 if a sensible package emerges from the NCC recommendations. I think Mr Marshall will be able to comment more specifically to your question. Mr Marshall—To answer your question specifically, the restructuring process that we are going through will affect in one way or another every mail centre in Australia. Senator SCHACHT—How many job losses do you think it would cost? Mr Marshall—I do not have a specific estimate here over the whole network, but it is a combination of that and functions being shifted to more efficient points in the network. It is a combination of things going on that really has to do with better utilising the technology that is available to us. Senator SCHACHT—But there will be some job reductions? Mr Marshall—Absolutely. Senator SCHACHT—Are they in the order of 2,000? Are there 30,000-odd employees? Mr Ryan—There are 31,000 full-time and 6,500 part-time. Senator SCHACHT—Is it in the order of a couple of thousand jobs? Mr Marshall—Something of that order, yes. Senator SCHACHT—Do you expect to be able to achieve those redundancies through full attrition—retirements and people leaving the service? Mr Marshall—We are certainly aiming to do that. I cannot guarantee that that would be the case. We have been planning this change for quite some time, and we have been planning the factors that go around that change. The change itself is going to take a number of years, so we are aiming to manage that whole process and the people changes associated with it in the best way we can. Senator SCHACHT—Can you give me an idea of how many years this process will take? Mr Marshall—Let me say, first of all, that we have been changing our mail network for some time. Quite significant changes have already occurred in Victoria where we have closed our international mail centre. We have closed a quite significant mail centre in Footscray, and we have other changes obviously planned. The major changes really begin to occur in the middle of 1999 when we open two major centres, one in Melbourne and one in Sydney. Rolled into those is a significant amount of new technology. At that point, some of the current mail centres in Sydney and Melbourne, over the following 12 months, will be collapsed into those centres and the impact of that rolls out into some of these country areas. So we would expect the total change to take a couple of years. Senator SCHACHT—When you refer to new major centres for Sydney and Melbourne, I trust this is not Redfern repeated from the 1970s. Mr Marshall—We also are retaining the most significant of our centres that currently exist in Melbourne and Sydney, so for letters in each city we will have a three-centre network in Melbourne and a three-centre network in Sydney. Senator SCHACHT—Mr Ryan, about 12 months ago at an estimates hearing—it may well have been at a briefing that Australia Post gave—you mentioned that, in consultation with the

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 452 SENATE—Legislation Thursday, 11 June 1998 union, you had a trial operation in Queensland on the basis of the delivery system—I do not know what the phrase was—with staff paid more according to the amount of mail they delivered, et cetera. I do not know whether I have described it correctly, but I think you understand the one I am talking about. Senator Alston—It sounds horribly like performance pay. Senator SCHACHT—I cannot remember what Mr Ryan and the others called it. It was several months ago or last year when we met. Mr Marshall—Senator, I understand exactly what you are referring to. We have completed that trial in those trial locations. We have been evaluating the outcome of that trial with the people. We are refining the process so that we are able to deal with the problems that occurred, and we are aiming at furthering a system like that but a more refined one. Senator SCHACHT—And you are doing that in consultation with the staff and the union obviously? Mr Marshall—That is correct. Senator SCHACHT—It is an example I wish this government would take on elsewhere. I want to now turn to some little specific issues. If the NCC recommendations on deregulation for business mail—which is about 90 per cent plus of most mail, I understand—is accepted, it has been raised with me that this would mean that the present exemption for Australia Post staff to use their motorcycles, bikes or whatever on footpaths to deliver the mail to the letterboxes along the street would also have to be given to all the competitors. Would that be an outcome that would be the consequence of deregulation? Mr Ryan—If a notion of competitive neutrality was applied to this situation, I think it is likely that it would be argued that anyone who was delivering this sort of mail, for example, to households, should have equal access to the footpaths for that purpose. Senator SCHACHT—So if you have three or four other companies in the business, three or four of them will also be driving up and down the footpaths? Mr Ryan—That could be a possible outcome. Again, it is not an outcome that we favour, and it is not an outcome that would be needed under our proposal. Senator SCHACHT—I think it is an outcome that most ordinary sensible Australians would say is totally unneeded. I do not think they want three or four people riding up and down every street on a competitive basis delivering mail. Sooner or later there will be an accident out of that. Under the Samuel report recommendations, would any competitor to Australia Post that comes in and registers to deliver mail get the same exemptions from planning laws and arrangements at a state level that you now get? Mr Ryan—There are very few, if any, exemptions that we get now in relation to that. Senator SCHACHT—So they have all gone, have they? Mr Ryan—Yes, we are required to abide by all the laws of the Commonwealth and the state. There is one exception to that where we may erect street posting boxes so that our customers can lodge mail but, as a matter of course, we do that in consultation with local councils, even though we are not required to do that under the act. Senator SCHACHT—I have a couple of quick questions on even more specific matters. First of all, I appreciate your answer on the Koorawatha post office, which confirmed that either the post office is in the business of drink or the pub is in the business of post offices,

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 453 but that it was unavoidable in the circumstances. Is that the only pub in Australia that is now a post office? Mr Ryan—I think in the same answer we mentioned that there are something in the order of another 17. That is simply the by-product of its being the only business in town. Senator SCHACHT—The only place left standing is the pub. Mr Ryan—Not only do people collect mail there but they get— Senator SCHACHT—Does the famous Ettamogah Pub deliver mail as well? Mr Ryan—I am unaware of that, Senator, but I can let you know. Senator SCHACHT—You missed my sense of humour there. The Ettamogah is that cartoon pub that always looks like it is— Mr Ryan—I know the pub you are talking about. Senator SCHACHT—A member of the public has raised an issue with me about the tender being let for the operation of a car park at South Bank Boulevard, which is in the purview of Australia Post. The question that has been raised with me is that the person who operated the car park—which is a vacant lot, I presume—for a couple of years, asked the post office whether he could submit a tender and, in the meantime, continue to use the place. He was never given any information about how to lodge a tender and so on. As I understand it, it has now gone somewhere else, which has affected his business. Are you aware of the detail of it? Mr Ryan—No, I am not. Senator SCHACHT—Could you take that on notice? Mr Ryan—I will, and it may be useful if you could provide me with some further material after this session. Senator SCHACHT—I will. I will also probably give you some more questions about the situation of the motorbikes on the footpaths. I also wanted to raise with you some questions from another member of the public. Is Australia Post considering moving its post office in Queanbeyan, New South Wales, to a new location? Do you want to take that on notice? Mr Ryan—Yes, I will have to. Senator SCHACHT—Has any proposal been received from a property owner suggesting a new location or offering a lease? Would any decision to move to new premises be on the basis of a public tender process? Mr Ryan—Normally that would be the case, but I will check in this particular instance. Senator SCHACHT—Has Australia Post received any representations from the federal member for Eden-Monaro regarding the location of the Queanbeyan post office? If so, what form did those representations take and what was the position taken by the member for Eden- Monaro? Can Australia Post provide the committee with copies of correspondence or internal documents regarding any proposal to relocate the Queanbeyan post office in the last three years; in particular, copies of any correspondence received from either the property owners or the member for Eden-Monaro? If such a move is being considered, will Australia Post take into account public opinion and comment prior to making a decision? If the Queanbeyan post office were moved, what would be done with the existing site? I am happy for you to take those questions on notice.

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Mr Ryan—I will take them on notice, but as to documents between ourselves and third parties, I would have to take advice on that. Senator SCHACHT—Of course, take advice on that—I accept that. That is all the questions I have for Australia Post. Again, I put on the record—and I say this to your staff when I have the opportunity to meet them—congratulations on running a fine operation which is one of the best, if not the best, postal systems in the world. You certainly have our full support against that madman’s report on competition for the National Competition Council, which seems to me designed to destroy one of the best postal services in the world. CHAIR—Thank you very much for your attendance this evening. I now call officers from the ACA and the telecommunications and postal policy area. [9.01 p.m.] Subprogram 4.4—Australian Communications Authority Senator SCHACHT—My first question is about the spectrum auction that took place recently for the 800 and 1.8 gigahertz for telecommunications purposes and related areas. Did Telstra get everything they bid for? Mr Luther—No. There were a number of lots they bid for that they were not successful in getting. Senator SCHACHT—How many were they unsuccessful for in percentage terms? Because reading down the list you sent out they did not seem to miss much. Mr Luther—To be fair, Senator Schacht, I have not actually done a calculation. It would be a fairly small percentage though. Senator SCHACHT—As I say, looking down the list, although the minister had—and we did not disagree with this—banned existing carriers from bidding for about half or what was it— Mr Luther—It was about half. Senator SCHACHT—First of all, in the 800, were Telstra successful in getting most of what they bid for—in the half where they could bid? Mr Luther—Most, yes, but not all. There were a number of lots where they were not successful— Senator SCHACHT—I notice from the list that they seemed to be pretty successful particularly in the metropolitan areas of Australia. They do not seem to have missed much in the metropolitan areas of Australia in getting spectrum. Is that correct? Mr Luther—They have missed lots in Canberra and Adelaide. They were a couple they were unsuccessful in. Senator SCHACHT—Where they missed out, did the lots go to either Vodafone or Optus or did they go to new players? Mr Luther—It is a mixture of either the lots being passed in or going to new players. Senator SCHACHT—Were the lots that were passed in the ones they could not bid for? Mr Luther—No. It is more complicated than that. Senator SCHACHT—I was dreading you saying that. Mr Luther—There were a total of 230 lots on offer at the auction, 211 of which were sold. So that is a large proportion. There were a number of lots in Adelaide and Perth on which no

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 455 bids were received, and there were a few lots in remote areas on which no bids were received. However, there were a number of other lots—some in Brisbane, some in Sydney and Melbourne, one in Canberra and Adelaide—on which bids were withdrawn during the auction and they remain withdrawn. Senator SCHACHT—They were withdrawn by Telstra or others? Mr Luther—Others. Senator SCHACHT—I want to draw your attention to an article written by Stewart Fist in the Computers/Opinion section of the Australian on 9 June, page 53. He makes the comment that, despite the auction, Telstra used its financial power to basically get most of what it wanted and still maintain a very dominant position in the future in the way the spectrum will be put together. Does the ACA have any view about the fact that, because of Telstra’s economic clout and large amounts of money, they were able to basically buy up what they wanted, even though there was a bit they missed out on, and to maintain a very strong dominance for the future in mobiles? Dr Horton—There were safeguards built into the whole process. I think they were found to be acceptable, from a competition point of view, and as far as we were concerned they were adequate safeguards which were upheld. Mr Luther—One result of the auction, and in particular the rules that were provided in the auction, was that there was guaranteed entry of new players, and that has actually happened. Senator SCHACHT—When those new players get operating in the area that they have bid for spectrum, they will still be dependent on getting connection into someone else’s mobile network to get a phone call out to somewhere else; they will not have a geographic system right across Australia, will they? Mr Luther—Individually they won’t. If you combined each of the new players, though, they would have a pretty handy national coverage, if they were able to reach some intercon- nection agreement amongst themselves. Senator SCHACHT—So they could run a system that would have a pretty substantial coverage, if they agreed to interconnect with each other? Mr Luther—Yes, virtually a national coverage, I would think. Senator SCHACHT—If they all agreed to come together, would there be a natural limit to how many phones they could service in that mobile phone network? Is there a natural cap on the number of spectrum they bought that could limit the number of services or clients? Mr Luther—It would be a very large natural cap because together they would have a very significant amount of spectrum. Assuming that they would be using a digital technology such as CDMA—it is very high capacity technology—they would have the capacity to service a very large number of phones. But a lot will depend on what service they offer. If they offer data—either mobile or wireless local loop—they could take up more of the spectrum then than purely mobile voice services. Senator SCHACHT—Do you have any idea of which way they are going to jump in that decision? Mr Luther—One of the new players has already put out a press release—that was the OzPhone consortium owned by Qualcomm. Their press release is fairly non-specific, but it did say both mobile and wireless local loop systems would be in operation.

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Senator SCHACHT—Did that particular company buy enough spectrum in enough metropolitan areas to make a difference in offering competition? Mr Luther—In the end they were mainly successful in what I might call ‘regional markets’; they were not successful, for instance, in Sydney and Melbourne. However, Hutchison, for instance, was successful there. So, once again, if they were able to combine their operations through an interconnect arrangement, they would certainly be able together to make a difference. Senator SCHACHT—I do not know whether this question should be addressed to you, Mr Luther, or elsewhere in the ACA. The new players coming in, not just these people who bid for the spectrum but others outside the old triopoly, have been arguing for roaming provision— they say that is the only way you can provide effective competition. I know competition is generally an issue for the ACCC, but does the ACA have a view about whether roaming will allow more competition? Dr Horton—This cuts across a range of other issues which are being considered in the analog closure review which we are conducting at the moment. Attendant issues like that have been thrown up in the review, as have the possibilities for future technology around the year 2001, which Mr Smith is closely involved with. So if I deflect across to Mr Smith, he may be able to throw some light on that. Mr Smith—I think the essence of your question is really about roaming not only within GSM but also between other technologies and between carriers within technology. Senator SCHACHT—Yes, particularly between carriers. Mr Smith—It depends entirely whether the technology will permit the roaming. Certainly it is possible to roam between carriers in GSM, although we understand that there are still some technical problems that need to be ironed out before that can actually take place. But those technical problems are being worked on and we are told that they expect a solution within the next 1½ to two years. That is GSM roaming. Of course, roaming would be also possible in, say, CDMA or digital AMPS. For example, with a commercial arrangement, you could roam between the network of a CMDA carrier such as OzPhone in one location and, say, Telstra’s network in another location. Senator Alston—You are talking about them both being CDMA networks. Mr Smith—Both within CDMA, yes. If there is a CDMA network run by, say, Telstra, by OzPhone or by AAPT, then national coverage could be obtained by that sort of technical and commercial arrangement. Dr Horton—These are all issues which are subject to the review we are doing, and we will be reporting by the end of this month. Senator Alston—Because I have had conflicting reports on it, can I ask the extent to which CDMA is AMPS compatible? Mr Smith—You will be able to buy CDMA and AMPS dual mode handsets. So, to that extent, they are compatible. They are not compatible as technologies, but they are compatible in that you will have dual mode handsets. Senator SCHACHT—Are they compatible with digital? Mr Smith—They can be compatible between CDMA and digital AMPS and also between CDMA and analog AMPS. Senator SCHACHT—So you cannot have three in one?

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Senator Alston—Dual mode? Mr Smith—Dual mode, yes. Senator SCHACHT—If you had a CDMA, digital and analog operating, could you get a handset that has got the three? Mr Smith—You could. Senator Alston—Sorry, CDMA and GSM— Senator SCHACHT—GSM digital. Senator Alston—are not compatible, you cannot have dual mode either. Mr Smith—I am not sure about CDMA and GSM, but I do know that CDMA and analog AMPS and CDMA and digital AMPS can be compatible. Dr Horton—These combinations are purely decisions of the standards making bodies. Senator SCHACHT—Yes, it is a standards issue, not a technical issue. Dr Horton—That is correct. It is not insoluble. Senator SCHACHT—If it turns out that government accepts or rejects your recommenda- tion about existing analog in some way continuing and you have got CDMA, GSM and analog left in part of the bush, could the technology meet the standard requirement so that you could get a hand-held receiver that takes the three? Dr Horton—It is a decision that has not been taken by the larger outside market forces. Australia comprises only two per cent of the world market, so it is a market forces issue. Senator SCHACHT—So that is really a matter for the manufacturers elsewhere to take a decision, in view of the costs of the receiver, that there is a market big enough to put the three together? Dr Horton—Yes, and that was the same basis by which roaming with GSM on a national basis would be provided. It has been provided for international roaming on a standardised basis, but it will be another 18 months or so before the standardisation body, in this case ETSI in Europe, provides for roaming as a national solution. Senator SCHACHT—I do not want you to divulge any of your recommendations you may be leading to in your report— Dr Horton—I do not think we will be making recommendations, but we will be placing the status of issues before the minister. Senator SCHACHT—I suppose the simplest issue that a lot of people out there in the bush, or all over Australia, are asking is that if analog in some form is able to exist and if most of the rest of the country—the metropolitan areas anyway—has gone to GSM, will a receiver to handle both GSM and analog be available to consumers? Mr Smith—To our knowledge at the moment, it is not possible to have a handset that is dual mode GSM and analog AMPS. Senator Alston—That is why everyone today has two separate handsets. Senator SCHACHT—Yes. Obviously, if you could, maybe it is the quickest or simplest solution, even though the handset would be dearer. Mr Smith—I understand that it is very unlikely, because of the differences in the nature of the technology, that that would occur.

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Mr Horton—As we said, there will be a summary in that report of pending technologies. Certainly, what should be available by around about— Senator SCHACHT—If I sound like a butcher trying to be a brain surgeon on this technology I apologise, but I think I am no different to a lot of others. Say that an analog system was left out west around Parkes, a rural area of New South Wales, and the analog transmitter, the cell, continued to operate. I am a farmer there and I have got an analog phone. When the signal goes into the cell, the transmitter, and is then sent on, at that stage can you put the signal into a nearby GSM system to be directed to the phone that was dialled? Mr Horton—Sure. That is an interconnection issue between networks. Whether they are fixed networks or mobile networks the signal gets passed from one network to another with the routing instructions. Senator SCHACHT—What I am getting at is this. If all of Parkes stayed with an analog system—they had an analog cell—and everywhere else from Bathurst right through to Sydney was all on GSM, and I know the mobile telephone number of my mother in Sydney, which is a GSM cell system, would I still be able to dial on the purely analog phone into my cell transmitter and have the thing connect one way or the other technically to my mother’s GSM? Senator Alston—That happens now. Mr Horton—‘Any to any’ connectivity is a fundamental tenet of the legislation. Senator SCHACHT—So that is happening now? The decision from the argument about closing down the analog is not a decision of technology, it is a decision of commerciality— contractual arrangements, et cetera? Mr Horton—I think there is a bit of both. As we mentioned, there are some technical combinations which in practice we will not see. Senator SCHACHT—If most of the country went digital, except those areas of the bush where the analog cell had a broader radius of reception—which is the big argument—and if that can connect back into the transmitter and cell and connect with a digital telephone number—a digital receiver, through the digital back down to Sydney—then, apart from the commercial arguments about closing down on the contracts that may or may not have been signed, et cetera, you could then operate the analog system in a limited way in those few rural areas? Mr Horton—In a limited way, yes. The limitations are because what you are painting is a static picture where a person is in one particular place all the time. There may be visitors to that area who would find the coverage not capable of the technology they are carrying or the people in that area may want to travel. In that case that static picture is not very useful. Senator SCHACHT—Yes, if they do not have the analog transmitter and receiver their phones are only good in the area. Mr Horton—Yes. It is a fascinating and very broad concept review that we are doing. Senator Alston—All your own work! Senator SCHACHT—Oh no! You voted for it as well. That is all I will say in my defence. I dread the fact, but I suspect that it will not be the last time that a standards or technology issue has been received and entered into in great goodwill by everybody and five years later we all say, ‘Why did we do that?’ Who knows? I look forward to your report and hope, with the wisdom of Solomon, that you have got an answer that meets rural constituents and present carriers and new carriers and whatever, Mr Horton. I look forward to that report. With the start

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 459 of the so-called Iridium and Globalstar satellite and mobile telephone system, do they have to be actually allocated any spectrum to operate into Australia? Mr Smith—Yes, they do. Senator SCHACHT—Has that been allocated to them? Mr Smith—In the case of Iridium, yes, they do have access to spectrum. But the point to make is that spectrum availability has been negotiated on a worldwide basis. It is not simply access to spectrum in Australia. They are allocated that frequency on a worldwide basis. Senator SCHACHT—When it was allocated through—I forget the name of the organisation, what is it called? Mr Smith—The ITU. The International Telecommunications Union. Senator SCHACHT—Does that mean all the constituent members of the ITU—the host countries—are able to charge a licence fee for access to that spectrum, even though it was in the national advantage? Mr Smith—Yes. Senator SCHACHT—What is the licence fee that we will charging Iridium and Globalstar? Mr Smith—I am afraid I do not have it at my fingertips. Senator SCHACHT—It has been agreed. Mr Smith—Yes, it has been agreed, set and Iridium has paid it. Senator Alston—We granted them a licence in about May last year. Senator SCHACHT—When we granted them a licence, we were not able to auction the spectrum off between them and Global Star? Mr Smith—No, because it is allocated for that and Globalstar uses a different part of the spectrum. Senator SCHACHT—When someone else turns up with a satellite mobile telephone system, is there available spectrum in Australia to meet future demand for other new players? Mr Smith—For the international satellite systems such as Globalstar or ICO, or Ellipso or others that are coming along the way, there are those international allocations made. In some cases the spectrum is free and available. When I say ‘free’, I mean clear and available in Australia. In some cases it is not and we have to take some steps to make sure that it is available. Senator SCHACHT—Can you take on notice what the licence fee is? Mr Smith—Yes, we can let you know that. Senator SCHACHT—If they make a great success of this business and obviously start making a big quid out of it and revenues grow, is the licence fee commensurate with the growth of the business? Mr Smith—It is a static licence fee based on the spectrum access and, in fact, the licence fees paid by most licensees under the Radiocommunications Act are in that category. They also pay a carrier licence fee, so they are a licensed carrier. Senator SCHACHT—With, say, Iridium, which I understand is the closest to coming into operation, do you have any idea what the receiver is going to cost the consumer in Australia if they want to get onto the system?

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Mr Smith—At this stage they have not announced their prices so we are not sure what the prices are going to be, but there has been some press speculation about the prices of Iridium. Iridium will come into operation around September this year. We understand the handsets will be somewhere in the region of $3,000, but we are not too sure about that price because they have not yet announced the price of the handsets here. Senator SCHACHT—We do not have any idea what they would charge per minute? Mr Smith—No, we do not yet, but again there has been some speculation that it will be somewhere around $3 a minute or a little less. Senator SCHACHT—When they come off the satellite and come down to Australia the arrangement for their switches to come off the satellite and down to Australia to a base station is that they will then be able to connect into the terrestrial and mobile system within Australia? Mr Smith—In fact, at this point they are not planning a base station in Australia, but it will be interconnected into the Australian network through a terrestrial system. Senator SCHACHT—So, if they have my mobile telephone number, wherever they may be in the world they can dial my number and get me in Australia? Mr Smith—Yes, correct. Senator SCHACHT—And vice versa? Mr Smith—Yes, correct. Senator SCHACHT—I think Mr Stevens is chairing the underground cabling committee. I think it has to report soon, does it not? Mr Stevens—No, the legislation says we have to start the study by the end of June this year, but we are looking at trying to complete the study as quickly as possible. Senator SCHACHT—When do you think that will be? Mr Stevens—We are hoping to have a discussion paper out in the next few weeks. After that, when people have had a chance to comment, we will be able to finalise our report. Senator SCHACHT—I think you said to me about this time last year or in estimates in the second half of last year that you were happy with the cooperation you were getting from a diverse range of interest groups on this issue. Is that still the case? Mr Stevens—Yes, very much so, particularly the electricity authorities. They have been very helpful. Senator SCHACHT—That is good to hear. I look forward to that. Maybe our existing Telstra and Optus can look at ways of removing, at least in my own city, that useless stuff that hangs everywhere and that does not work. The biggest washing line in the history of the world is hanging all around Adelaide as a continuary cable. Thank you for the answer that someone got for me— CHAIR—Have you finished? Senator SCHACHT—No, I have not—about the planning arrangements. There is one question it raises with me—I am not quite sure from the answer. Optus have got the continuary wire up over hundreds of kilometres around Adelaide. They laid that before 30 september last year. Senator Alston—They commenced construction. Senator SCHACHT—They commenced construction and they had until 30 September to complete it. They did not actually hang the cable on the continuary wire. If they now want

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS Thursday, 11 June 1998 SENATE—Legislation ERC&A 461 to go back and hang the cable on the continuary wire, do they have to get council and local planning approval? Mr Stevens—Yes, they do. Senator SCHACHT—They do? Mr Stevens—Yes. Senator Alston—That is why there has been speculation about the fact that they have entered into agreements with a number of councils which will allow them to do it. But whether or not they will do it is what is being— Senator SCHACHT—I think the other thing is that some councils were demanding that they pay a rental for the clothes line—the continuary wire—even without the cable. I think that is another cost burden that Optus is trying to get out of, but that is their problem. I look forward to receiving that report, Mr Stevens. Electromagnetic radiation: the $4 million review. I think that has got three years to go, hasn’t it? Senator Alston—You will have to raise that matter with the Department of Health and Family Services. Senator SCHACHT—You have handed the money over to them, have you? You never know, do you? Mr Stevens—I am told that it formally goes to the health department from 1 July. Senator SCHACHT—Before it goes to the health department there will be no progress report? Mr Stevens—I very much doubt it. Senator Alston—Do you mean a report on whether it is going? Mr Stevens—I am not expecting one. Senator SCHACHT—That is fine. Just remind me again: what is the deadline? Is it a four- year program or a three-year program from March last year? Mr Stevens—It has three years to go. Senator SCHACHT—At the last estimates hearing you tabled for me, in response to a question on notice, a list giving information on the networking the nation fund. It was an update of where you were as of March this year on the allocation of successful applicants for the funding. Is there a further list available of successful applications for the next stage of networking the nation? Mr Stevens—I am not sure. If there is, we are certainly happy to table it. Senator SCHACHT—Could you take it on notice? Mr Stevens—Yes. Senator SCHACHT—If you do not have it, if it is not ready, could you let us know on notice when the next batch will be made available? Mr Stevens—Certainly. Senator SCHACHT—To the ACA: what is the latest carrier performance report that you have released? Ms Kelleher—The latest report was released for the period ending December 1997. It was released at the end of March. Senator SCHACHT—When is the next one due? These are quarterly based, aren’t they?

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Ms Kelleher—Yes, it is quarterly. We expect to release the next one on 29 June. Senator SCHACHT—For the March quarter? Ms Kelleher—For the March quarter, yes. Senator SCHACHT—The one you released in December on carrier performance: have the carriers responded to the queries you raised on the lack of performance in some areas? Have they responded to the report and its findings? Have they indicated to you that they are specifically taking action to improve their performance? Ms Kelleher—There has not been any specific response in relation to the report, but we have had discussions with each of the major carriers over the last few months in relation to performance under the customer service guarantee and how that might be measured and reported on in the future. Senator SCHACHT—I understand for the customer performance guarantee that the carriers themselves—and Telstra is still overwhelmingly the main carrier—have the right to determine when the customer service guarantee operates and when other external factors like climatic changes mean that it does not operate. Is that correct? Ms Kelleher—The customer service guarantee allows Telstra to say that they are exempt under certain conditions, but those conditions are laid down in the standard. So they cannot just say, ‘On this particular occasion, we’re going to be exempt.’ There has to be a certain condition met, like extreme weather conditions or vandalism of their system in some way. Senator SCHACHT—Who determines what extreme weather conditions are? Ms Kelleher—At the moment, Telstra determines that. There is a fair amount of discussion at the moment between Telstra and the TIO on what a definition of ‘extreme weather conditions’ may be. We expect that will be one of the issues we will take up in the review of the CSG which we will be doing over the next few months. Senator SCHACHT—I certainly agree with that. Is the definition of extreme weather conditions a disallowable instrument? Ms Kelleher—No. The standard itself is a disallowable instrument. The phrase ‘extreme weather conditions’ is not really defined within the standard. Extreme weather conditions have to have resulted in severe outages. So it is not just a matter of a bad storm and a few phones being out. It has to be significant outages for extreme weather conditions to come into play. Senator SCHACHT—But, if they say it is extreme weather conditions, that is it? Ms Kelleher—At the moment, yes. Senator SCHACHT—In the Northern Territory, the monsoon or the wet season is standard weather conditions because it happens every year. The wet turns up, 1,000 millimetres of rain falls, there are electrical storms and lots of lightning and these are just the standard weather conditions. Telstra has chosen at times to say that, because of all the lightning strikes, these are extreme weather conditions, even though this is a regular occurrence in the Northern Territory every wet season. Is that correct? Ms Kelleher—Yes, that is correct. Again, they are weather conditions which result in quite a large number of outages. Senator SCHACHT—Surely Telstra would be designing a telecommunications system for the Northern Territory to take account of the fact that the wet season is going to happen every year, as they have been happening for millions of years. It may be unusual for us living in

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Adelaide, but it is not unusual or extreme if you live in the Northern Territory; this happens every wet season. Ms Kelleher—These are the sorts of issues that we are going to be taking up in the review. Certainly the TIO is anxious for us to address them. Senator SCHACHT—Have there been many complaints from people in the northern part of Australia, in the Northern Territory and the far north of Queensland where the wet season happens every year, complaining that the service has been knocked over, dropped out and they have suffered, but Telstra says, ‘This is extreme conditions, we have no penalty’? Ms Kelleher—I am not really aware of the pattern of complaints. Complaints generally go through a number of stages before we would hear about them. Telstra would be the first port of call and then the TIO is the next port of call. We would only have something referred from the TIO if they had been unable to resolve the matter. I do not have a breakdown state-wise. Senator SCHACHT—Are you aware of how many legal firms Telstra has on retainer to defend its description of extreme weather conditions? Ms Kelleher—No, I am not. Senator SCHACHT—Do you have any idea how much money they spend each year on lawyers to explain and define what extreme weather conditions are against the TIO? Ms Kelleher—No. Senator SCHACHT—Perhaps you could take that up in the review as well. If one thing we can do is reduce the income of lawyers from all of this, I think the public of Australia would be greatly appreciative. Other than extreme weather conditions, are there any other examples where Telstra has a definition that is useful for them to opt out of the customer service guarantee? Ms Kelleher—Yes. There is another category and that is ‘cases of wilful damage to facilities’. So, for example, where a cable has been cut and it results in a large number of people losing service and will take some weeks for Telstra to repair the cable because of the nature of the technical work involved, that would also be an area for exemption. Senator SCHACHT—In Adelaide last weekend where some contractor doing something ripped open a cable and knocked out a great slab of the Kensington Gardens and Burnside area and several thousand phones went dead—I do not know whether they are reconnected yet—Telstra said that it was not just a matter of rejoining the cable. They had to replace a length of cable, and it was very complicated, and they could not guarantee the phone connection. In this case, they would have used that definition to opt out. Ms Kelleher—That is certainly an example of where they would be exempt. Senator SCHACHT—Will Telstra be able to sue the contractor who broke the cable through carelessness for the damage and loss of business? Ms Kelleher—I am not sure. I don’t know the answer. Senator SCHACHT—Does ACA or the department know that? Senator Alston—I would have thought yes, for negligence. There is no contract between the two, so there can be no protection afforded to some contractor. Senator SCHACHT—If Telstra is successful in suing and getting damages, will they then proportionately pay that back to all those customers who lost their phones? Ms Kelleher—They are not required to under the CSG.

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Senator Alston—They would not be able to recover the cost of the CSG if they were not paying it, therefore their damages would be limited to the amount of the repairs involved—so, by definition, you would not want to pass that on to customers. Senator SCHACHT—No, pass the money back to the customers— Senator Alston—But they have not recovered that part. Senator SCHACHT—Put it this way: are Telstra, if they wanted to, able to have the customers join them in a civil action for damages against the contractor for the loss of telephone service to these two thousand? There were extraordinary stories in the paper of small businesses—restaurants, pizza huts and so on—closing down for a week: ‘We’ve lost all our business. The phone’s gone. We can’t do anything.’ It was quite a serious matter in Adelaide and got coverage in the press every day as not just people in domestic residential homes but businesses got knocked over for at least a week. Substantial damage was done to income. You do not know whether Telstra, even if they wanted to, would be able to ask on behalf of all of those customers and would then take an action against the person responsible so that those people would get compensation for their loss of business? Ms Kelleher—I do not know. I think it is a question for lawyers. Senator Alston—There is no automatic entitlement. Senator SCHACHT—In the regulatory structure we have now, if Telstra wanted to, they could sue the person for the damage to the cable that has to be replaced. Senator Alston—Yes, they have suffered loss. They cannot sue on behalf of someone else who has suffered loss. Senator SCHACHT—But Telstra could also say that they themselves have lost a week of telephone calls which was income to them. Senator Alston—Yes, they could sue for that. Senator SCHACHT—So they could sue for that? Senator Alston—Yes, that is a reasonably foreseeable loss. Senator SCHACHT—Yes. The people who have lost their business—this is damages for the business—cannot then make a claim on Telstra for anything? Senator Alston—They could sue direct. Senator SCHACHT—They could sue the contractor direct? Senator Alston—It is not Telstra’s fault. Senator SCHACHT—So it is not Telstra’s fault. Do you know whether Telstra has ever assisted any of their customers in suing someone like this in the past? Ms Kelleher—I do not know. Senator SCHACHT—I could not imagine it actually, but I have always lived for that one day when I will be surprised by Telstra being magnanimous and having some sort of view of helping people as a corporate culture. Those are the two areas anyway. Ms Kelleher—There are a couple of others: the need to access land or facilities that are owned by a third party where permission is required to access the land and that permission is not forthcoming; and where there is, for some reason, compliance with a Commonwealth or state law that prevents the connection. Senator SCHACHT—Can you give me an example of the last one?

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Ms Kelleher—I cannot actually. Senator SCHACHT—I know we have changed the law. Dr Horton—Dangers, emergencies and in particular a national emergency situation. Senator Alston—Say there was a gas escape and the area was quarantined. Ms Kelleher—Occupational health and safety reasons are certainly acceptable reasons for not providing service. Senator SCHACHT—I think it is quite useful that you will be able to raise all of that with that inquiry—the definition of the universal service obligation and the new definition, which turns me to the department again. Has the department itself put a submission in on a new definition of the universal service obligation—the 64 kilobits per second? Mr Stevens—No. Senator SCHACHT—On the notices about 64 kilobits per second: Ms Kelleher, you have raised the subsidiary issue about the definition under the customer guarantee, which is part of this inquiry. Ms Kelleher—Yes. Senator SCHACHT—Is it legitimate for you to raise that? Dr Horton—Senator, these are two different things. Senator SCHACHT—Sorry, I was just consulting. Dr Horton—The inquiry is to look into the digital data capability. Senator SCHACHT—And the universal service obligation is part of that? Senator Alston—The universal service obligation involves the standard telephone service. The issue is whether the definition of a standard telephone service— Senator SCHACHT—goes to 64 kilobits. Senator Alston—No, whether it ought to be expanded or upgraded and then in what manner. You may want to run off 64 kilobits but I would be very surprised if anyone else does. Senator SCHACHT—You never know your luck in the big city. Ms Kelleher—The linkage between the CSG and the universal service plan is that connection times and fault repair times specified in the universal service plan become de facto customer service guarantee times. Senator SCHACHT—Mr Stevens, has anyone lodged a complaint or an objection over planning regulations on either side of the argument that the carriers have been refused planning permission to put up a tower or lay cable under the new planning arrangements that operated from July last year? Have there been any cases where people have gone to the local or state planning body to have it adjudicated? Mr Stevens—Not that we are aware of, but we will take it on notice. Senator SCHACHT—I presume that means none have come through to the ACA itself. Mr Stevens—Yes.

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[9.45 p.m.] Subprogram 3.2—National Transmission Authority Senator SCHACHT—Are either of you aware whether the compact between the SBS, the ABC and the government over transmission funds for the privatised NTA for the next five years been completed or agreed to? Mr Stevens—It has substantially been agreed to but not yet formally signed off. Senator SCHACHT—The debate on this bill takes place in the Senate the week after next. Is there any chance of having that available? The debate is now in the committee stage. It would be very useful, Minister, if we had that information. Mr Stevens—We will see what we can do. As far as we are concerned, there is no difficulty, but we have to check with the ABC and SBS. Senator SCHACHT—So basically you have it down to the last ‘i’ to be dotted. Mr Stevens—Very much, Senator. Senator SCHACHT—That would be useful, Minister, because the government list that came out yesterday showed that it was to be debated Monday week. This next question goes back to questions I put earlier to the ABC and SBS and also to the minister: do you have any idea of what the transmission costs would be for the ABC for digital transmission if the NTA was going to do it? The ABC thought that it would be around $30 million per annum. Is that a figure that strikes you as realistic or about the mark? Mr Jones—It is not a figure that came from us. We have not costed the provision of such facilities because that is not really practical at this stage. Having said that, a figure of that order of magnitude sounds reasonable. Senator SCHACHT—Included in the $30 million is a capital cost figure. The ABC said that the $30 million would cover both capital cost of the NTA or new body plus the recurrent costs. Mr Jones—When looking at buying transmission capacity commercially, the owner would obviously be looking at recovering the cost of his capital as well as the operating cost for the network—electricity, maintenance and all those sorts of things—and a profit factor, presumably, on top. Senator SCHACHT—What do you think the figure would be for SBS? Mr Jones—It would be proportionately less because of the small number of transmitters that they have, presuming that the SBS transmission coverage was provided on the basis of duplicating the existing transmitters. Senator SCHACHT—That is what I am going by. Would that be about half the ABC? Mr Jones—Less than half. There is far less than half the number of transmitters for the SBS than there are for the ABC. Senator SCHACHT—Would it be $10 million to $12 million? Mr Jones—We will say $10 million. Because I have agreed to the $30 million you are getting me into a corner. It is not my $30 million. Senator SCHACHT—I know it is not your $30 million. This is not a matter over which we will hold your feet to the fire, Mr Jones. It is just a matter of trying to get some perspec- tive. So $30 million for the ABC is about right—that is what they say it is anyway—and you say that proportionately the SBS—

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Mr Jones—It would be in that ballpark. It might be as high as $50 million. Senator SCHACHT—You just made them die with fright—or at least the Treasurer will die with fright when they tell the minister that they need $50 million. Mr Jones—I have no idea on what basis they made their guess—they certainly got no information from us. Departmental policy officers have pressed us very hard to give them costs and we have resisted that. In a situation where we do not have a system standard, where we cannot get prices from suppliers and where we do not know the extent to which our network can accommodate the digital transmissions, you are making wild guesses and engineers do not like doing that. We provided some figures to the department because they demanded some. We did not provide that figure to the ABC, I assure you. Senator SCHACHT—I thought engineers were exciting people, Mr Jones. Mr Jones—I am an engineer; I do not consider myself too exciting, frankly. Senator SCHACHT—The department has asked you for some estimations? Mr Jones—Yes. Senator SCHACHT—And you are saying that until you get a decision from government about the system and the standard that is going to operate it is just too difficult for you to make even a qualified estimation? Mr Jones—I have provided a very, very qualified estimate to the department, but it has more qualifications than it has anything else because of those factors—no system standard, no equipment prices and no planning rules. We do not know how many services there will be per area, other than it will be at least as many as we have existing broadcasters. The planning rules are not set. The most important thing for us is that we have an established network, but we do not know whether we will simply be able to add digital transmitters and feed them into the existing hardware or whether we will need a great deal of new hardware. The figures could vary wildly depending on the answers to those questions. Senator SCHACHT—Mr Stevens, in view of the fact that what Mr Jones has supplied you with is so qualified, what is your advice? Mr Stevens—We are only guessing at the moment. The ballpark figure is around $30 million—maybe a little more; maybe a little less. That is as good as we have. Mr Jones has given us some very rough capital costs which have to then be transferred into recurrent purchasing costs, which is what the ABC have tried to do. Senator SCHACHT—And proportionately it is the same for the SBS? Mr Stevens—Yes. Senator SCHACHT—The government has announced, subject to the legislation being carried, that the starting date for digital broadcasting in Australia, including HDTV, is 1 Janu- ary 2001. With your engineer’s knowledge of access to equipment and all the other bits and pieces that go with it—the transmitters, the wires, et cetera—what time lag do you think you would need to at least be able to provide the ABC and the SBS with a digital signal in metropolitan Australia on 1 January 2001? Mr Jones—You have defined the answer to your question. If it has to be on the air by 2001 in the metropolitan areas, that is when we would have to have the equipment available. That is one of the things that you and everybody else asks engineers.

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Senator SCHACHT—That is what I am asking you. That is what the legislation says, but when would you, being a good engineer—very methodical, well planned and structured in everything— Mr Jones—What the legislation requires, as I understand it, and I am not an expert and I did not write it— Senator SCHACHT—Perhaps you should have. We might have been better off. Mr Jones—It requires us to start transmission in the metropolitan areas by 2001 and then there is a time to complete it, and that is practical. Senator SCHACHT—Yes, but with a 2001 starting date for six metropolitan areas of Australia, taking into account ordering of the equipment, time lags for manufacture et cetera, how much time before January 2001 would you need to be able to place the orders and install it, meeting that time line? I know you could say, ‘Give me 10,000 engineers and 4,000 technicians and I can do it all in a day— Mr Jones—With all the resources we have got now, we want to start as soon as we can. Senator SCHACHT—That means during this coming financial year? Mr Jones—Yes. In a sense we have already started, because we have already been training people to look at our gear so that they can ask the questions about to what extent our gear can be used. So in a sense we started that 18 months ago. Senator SCHACHT—On the manufacturing of transmitters and translators, what sort of time do you think manufacturers need to meet an order which may be for several hundred, for the ABC at least? Mr Jones—The normal ordering time for us is about 12 months for high powered transmitters and about eight for lower powered transmitters. Again, you cannot predict the market situation. With people all around the world placing demands on these manufacturers, we do not know how much capacity they will wind up. But obviously the sooner we can place our orders, whether it is us or the commercials or anyone else, the better chance you will have of being well up in the queue. Senator SCHACHT—From your knowledge as an engineer, can any of this transmitting equipment be manufactured in Australia? Mr Jones—We hope in the next few weeks to turn on digital TV transmissions in this very part of the world, Canberra. Senator SCHACHT—No, manufacturing the transmitters. Mr Jones—We bought them. Senator SCHACHT—Are there any companies in Australia that would be able to manufacture the transmitters and the translators for digital television? Mr Jones—There is no-one that does it at the moment. We purchase it all overseas, on the current arrangement. Senator SCHACHT—Would the amount of transmitters and translators we would need for ABC, SBS and the commercials, including regionals, over a period of time for several years be, in your knowledge, even in worldwide terms, a major or significant purchase? Mr Jones—Yes, it would. The equalisation program that we did a few years ago strained the overseas manufacturers, and that was only Australia doing that, although it was a very big expansion in a short time. It strained them.

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Senator SCHACHT—This is not a major issue that has been debated yet in the digital legislation but it is something that has been raised and I am interested in it. Is it possible to say to those manufacturers overseas, ‘We are a big enough market, you do have to put extra resources in. We want as much manufactured in Australia as possible’? Is that a leverage we could put on? Mr Jones—You could certainly try. Mr Stevens—I am not quite clear who you would put leverage on, unfortunately. Senator SCHACHT—I know how to put the leverage on, but then you might tell me that I am acting contrary to the WTO or other treaties. How many manufacturers are there competing in the world market for transmitters and translators? Mr Jones—I do not know exactly, but of the order of a dozen at least. There might be more. Senator SCHACHT—I suspect there may be one or two of the dozen who, if you said to them, ‘You will get the major part of the contract, subject to reasonable— Mr Jones—That is the sort of requirement they would place on you, though. It is kind of anti-competitive. They would say, ‘We will do it if you give us all of the orders.’ You cannot deliver that, really. You might be able to offer all the national network because that is one purchaser, but there are a number of people buying transmitters in this country. Senator SCHACHT—Anyway, it is not an area of policy for the NTA per se. I am really after the information from your knowledge as an engineer, which has been useful. In the estimates last February and March, you gave some information about Cox Peninsula and the value of the facility. I think in the answer you gave you said that it may be worth a couple of million dollars. Is that correct? Mr Jones—Some of the hardware at the site might be worth that much if you were selling it second-hand. Senator SCHACHT—How much did we spend on Cox Peninsula equipment during most of the 1990s to get it up to the quality standard it was before the government chose to close it down? Mr Jones—I cannot remember the exact figure, but it is of the order of $11 million or $12 million. Senator SCHACHT—And now it has depreciated to $2 million. That is the standard depreciation, is it? Mr Jones—It is the sort of loss you face when you do away with a facility. Senator SCHACHT—It is now 12 months since it has been closed down. How long is it since it has been non-operational? Mr Jones—A little over a year. Senator SCHACHT—What is it costing the NTA each year to maintain the equipment? Mr Jones—About $700,000 for a year, but it is not on a yearly basis, it is on a monthly extension basis. Senator SCHACHT—So far you have spent $700,000 keeping it in reasonable order? Mr Jones—Of that order, yes. Senator SCHACHT—So in another couple of years the maintenance will have cost more than the depreciated value of the equipment if it were sold as equipment rather than an operating centre?

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Mr Jones—Yes. I do not think we would expect to continue that maintenance indefinitely. Senator SCHACHT—Minister, have we had any further inquiries from interests overseas or even Australia who might want to purchase Cox Peninsula for international short-wave broadcasting? Senator Alston—I think there was an informal approach, but not to the point of being regarded yet as a serious inquiry. Senator SCHACHT—That was some time ago, wasn’t it? Senator Alston—I think only in the last few weeks. Senator SCHACHT—Just an informal approach but nothing serious? Senator Alston—Yes. Senator SCHACHT—I understand that the Department of Foreign Affairs and Trade always runs a line over some of the people who may be interested in transmitting out of Australia’s sovereign soil, so you have to get past that test, don’t you? I do not argue with that; I think that is a reasonable test. Senator Alston—The government’s view is that foreign nationals should not be allowed to broadcast out of Australia. Anyone who wanted to broadcast from here would, at the very least, need to establish a local company and be subject to local controls. Senator SCHACHT—Mr Jones, if the government changed its view—and there was a very strong recommendation in the Joint Standing Committee on Foreign Affairs, Defence and Trade report that came out about a month or so ago on Australia’s relations with ASEAN that was in favour of Cox Peninsula certainly not being closed down and being restarted—what would it cost to reactivate Cox Peninsula as it was before it was closed and what it was providing to Radio Australia? Mr Jones—We do not have a hard estimate for it because you would have to ask at the time, but we estimate it would cost in the order of $1 million. Senator SCHACHT—To restart? Mr Jones—Yes. Senator SCHACHT—And how much would it cost the year thereafter—recurrent costs? That would be the $1 million, would it? Mr Jones—It previously cost about $4 million a year to run at full transmission capacity. Senator SCHACHT—The recurrent costs were $4 million a year. It would cost $1 million to start it up. Mr Jones—That is to restore the antennas and so forth. As far as I know, the transmitters are still in perfect condition, but the antenna systems—the outdoor gear—would have to be refurbished before we could start again. Senator SCHACHT—This is just natural wear and tear of weather? Mr Jones—Yes, you cannot protect them. Senator SCHACHT—And that is a cost that you would have to put up anyway, I suppose, year in and year out even if it were operating? Mr Jones—It would have been a maintenance cost for us, yes. Senator SCHACHT—So $1 million to start it and $4 million a year for running costs? Mr Jones—Yes.

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Senator SCHACHT—And that is basically electricity power? Mr Jones—And the maintenance on the transmitters. They are very large, powerful transmitters, and they cost a lot to maintain. Senator SCHACHT—A lot to maintain—at $4 million a year. Mr Jones—About $1.6 million of that is electricity; the rest is maintenance. Senator SCHACHT—How long would it take to restart it? Mr Jones—We have said three months, but that is an engineering and a fairly cautious thing. It might be quicker, but we have indicated three months. Senator SCHACHT—With respect to the NTA staff that would be required to start it up again, would you have to send them from somewhere else in Australia up to Darwin to do it? Mr Jones—No, they are not our staff. They are a contracted staff, and the contractor has kept the key staff carrying out the existing mothballing operation. So they are still available. Senator SCHACHT—I presume you could not start half of it, or could you? Mr Jones—It makes little sense. You could turn on half of the transmitters. It would not reduce the cost much, but it would greatly reduce the effectiveness of the service. Senator SCHACHT—Mr Jones, if the legislation to privatise the NTA is not carried by the parliament, have you been asked by the government to prepare contingency plans for privatising the NTA or selling it off by a non-legislative route? Mr Jones—No, I have not. I have prepared plans for us to continue the operation of the network in case the sale does not go through, but I have not been formally asked to do anything else. Senator SCHACHT—Mr Stevens, is that anywhere in the system? Mr Stevens—No. Senator SCHACHT—I do not know if we will know in the last two weeks of the parliament—with the 437 bills that seem to be lined up to be debated—whether the NTA has potluck like anyone else of either being carried, defeated or even dealt with. Nevertheless, it is on the list. Mr Jones, since we last met, have any more staff left the organisation because of the uncertainty of the NTA? Mr Jones—We have lost 28 altogether. Senator SCHACHT—Out of how many? Mr Jones—About 106 at the start. We have replaced a number of those 28, not directly but by acting people up and bringing in temporaries and so on at the bottom. Senator SCHACHT—Is it getting to the stage where that is having some effect on the running of the domestic transmission system? Mr Jones—No, no effect on the transmission system. Senator SCHACHT—Just an effect on morale, I think. Mr Jones—Yes, that is correct. Senator SCHACHT—You know the Labor Party and the opposition’s view about the privatisation of the NTA—we are opposed to it—and we appreciate the fact that this puts an incredible strain on the staff in this uncertain period. We hope that it is dealt with and defeated

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS ERC&A 472 SENATE—Legislation Thursday, 11 June 1998 in the next three weeks and that the staff can get on with the job which they have done very well in the last few years. That is all I have. Senator TIERNEY—Thank you. I hereby close the Environment, Recreation, Communica- tions and the Arts Legislation Committee hearing into the budget estimates. I thank the minister and I thank Mr Stevens. CHAIR—What are you doing? I am here. Senator SCHACHT—I am actually the deputy chair. I should be doing this. CHAIR—What suddenly happened for you to do that? Senator TIERNEY—And the officers. CHAIR—Thank you. Hansard can record that I said that, since I was actually here. I did not think Senator Schacht would be finished so soon. Senator SCHACHT—I told you, but you would not believe me. CHAIR—I would like to thank the committee staff for all their work and the long hours that they have put in. I would like to thank the officers of the department, particularly Mr Stevens, who has been here for two days, and the minister. I would like to thank Hansard and thank Senator Schacht for us finishing early. Committee adjourned at 10.06 p.m.

ENVIRONMENT, RECREATION, COMMUNICATIONS AND THE ARTS