Official Committee Hansard

COMMONWEALTH OF AUSTRALIA Official Committee Hansard

SENATE

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS

Consideration of Additional Estimates

THURSDAY, 10 FEBRUARY 2000

CANBERRA

BY AUTHORITY OF THE SENATE

Thursday, 10 February 2000 SENATE—Legislation ECITA 87

SENATE ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS LEGISLATION COMMITTEE Thursday, 10 February 2000

Members: Senator Eggleston (Chair), Senators Bartlett, Bishop, Bolkus Payne and Tierney Senators in attendance: Senators Eggleston, Bishop, Payne, Lundy, Faulkner, Schacht, Fer- ris, Calvert, McDonald and Allison Committee met at 9.09 a.m. COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS PORTFOLIO In Attendance Senator Alston, Minister for Communications, Information Technology and the Arts Senator Herron, Minister for Aboriginal and Torres Strait Islander Affairs Department of Communications, Information Technology and the Arts Neville Stevens, Portfolio Secretary Arts and Culture Rob Palfreyman, Acting Executive Director Les Neilson, General Manager, Arts Lynn Bean, Acting General Manager, Cultural Development Peter Young, Acting General Manager, Major Performing Arts Review Bill Henderson, General Manager, Old Parliament House James Barr, General Manager, Secretariat to the Centenary of Federation Peter Brown, Manager, Secretariat to the Centenary of Federation Pam Saunders Acting GM Old Parliament House Kate Cowie, Manager, OPH Public Programs Australia Council Jennifer Bott, General Manager Sarah Gardner, Director Strategy and Policy Don Baxter, Director, Arts Funding John Wicks, Manager, Finance National Library Warren Horton, Director Peter Hughes National Gallery Brian Kennedy, Director Alan Froud, Deputy Director

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Kieron Roost, Head of Finance Peter Gunning, Head of Facilities Australian National Maritime Museum Kevin Fewster, Director Quentin Howarth National Museum of Australia Dawn Casey, Acting Director Dr Darryl McIntyre, General Manager, Core Operations Acton Peninsula Project Craddock Morton, Acting Chief General Manager, Acton Peninsula Project Margaret Backhouse, Manager, Design Policy Acton Peninsula Project Phillip Allnut, Manager, Contracts and Finance Steve Costello, Manager, Alliance Support National Portrait Gallery Andrew Sayers, Director, National Portrait Gallery National Archives George Nichols, Director General Malcolm Wood, Assistant Director General National Science and Technology Centre Chris Bee, Deputy Director, Questacon, The National Science and Technology Centre Ann Landrigan Screensound Australia Ron Brent, Director Margaret Baird, Senior Manager, Resource Management Broadcasting and Film Broadcasting and Film Policy (DCITA) Dr Rod Badger, Acting Executive Director, ITTB Susan Page, CGM, Broadcasting and Film Ms Megan Morris, GM, Film and Online Content Ms Nerida O’Loughlin, GM, Licensed Broadcasting Colin Lyons, GM, Public Broadcasting Dr Simon Pelling, GM, Digital TV Group Peter Coroneos, Director, NetAlert Glen Alderton, Director – Company Secretary – Net Alert Special Broadcasting Service Nigel Milan, Managing Director Hugh James, Director Transmission Services Chris Sharp, Policy Manager

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Maureen Crowe, Head of Resources Australian Broadcasting Corporation Brian Johns AO, Managing Director Ms Janet Clayton, Chief of Staff Ms Julianne Schultz, General Manager, Corporate Strategy and Communications Andy Lloyd-James, Head National Networks Colin Knowles, Head Technology Strategy and Development Russell Balding, Head, Finance and Business Services Australian Broadcasting Authority David Flint, Chairman Giles Tanner, General Manager Andree Wright, Director, Policy and Content John Croker, General Counsel Jonquil Ritter, Director, Planning and Licensing Information Technology Office of Government Online Ms Glenys Roper, Chief Executive Warren Richter, Chief General Manager, Government Online Strategy and Implementation Peter Anderson, General Manager, Government Online Projects Gary Allan, General Manager, Government Electronic Business Susan Page, Chief General Manager, Y2K Office Steve Fielding, General Manager, Services Brian Stewart, General Manager, Policy and Directions Tim Field, Chief General Manager, Government Online Dave Hammond, Acting Director, Office Support Unit National Office for the Information Economy Paul Twomey, Chief Executive Fay Holthuyzen, Deputy Chief Executive Tim Field, Chief General Manager, Government and Community Strategies Tom Dale, General Manager, E-Commerce Janelle Bonnor, Chief General Manager, Strategy and Policy Richard Thwaites, General Manager, International Brendan Harkin, General Manager, Public Awareness David Kennedy, General Manager, AIEAC Telecommunications Chris Cheah, CGM, Telecommunications Division James Cameron, GM, Telecommunications Competition and Consumer Dr Beverly Hart, GM, Regional Communications Policy

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David Williamson, GM, Networking the Nation John Neil, GM, Enterprise and Radio Communications David Luck, GM, Research, Statistics and Technology Information Technology Keith Besgrove, CGM, Information Technology Andrew Skewes, GM, Information and Communications Industries Development Michael Sutton, GM, Building Information Technology Strengths Telstra Corporation Graeme Ward, Group Managing Director, Public Affairs and Corp Marketing John Stanhope, Director, Finance Ms Deena Shiff, Director, Regulatory Tony Bundrock, General Manager, Business Development, Telstra OnAir John Rolland, Director, OnLine Services Peter Freuh, Managing Director, Small/Medium Enterprise Sales Paul Granville, Regional General Manager, Network and Technology Group Graham Phillips, Legal and Regulatory Judy Slatyer, Managing Director, Telstra Information Connection Services Max Jennings, General Manager, Business Development, Telstra OnAir Australia Post Gerry Ryan, Corporate Secretary Jim Marshall, Group Manager, National Operations Michael Talbot, Group Manager, Retail Roland Hill, Group Manager, Corporate Public Affairs Australian Communications Authority Tony Shaw, Chairman Dr Bob Horton, Deputy Chair Geoff Luther, Senior Executive Manager, Radio Communications Jeremy Chandler, Executive Manager, Corporate Management Group Peter Stackpole, Executive Manager, Customer Services Group John Haydon, Executive Manager, Telecommunications Licensing Group Neill Whitehead, A/g Executive Manager, Consumer Affairs Group Roslyn Kelleher, A/g Senior Executive Manager, Telecommunications Grant Symons, Executive Manager, Standards and Compliance Group Barry Matson, Executive Manager, Radio Frequency Planning Group John Grant, Executive Manager, Spectrum Marketing Group Gill Kempton, Manager, Canberra Access Management Team Wayne Huxley, Customer Services Group Corporate Services

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Arthur Blewitt, Chief General Manager, Corporate and Coordination Len Marsden, General Manager, Corporate Services Dr Kay Daniels, Intellectual Property National Council for the Centenary of Federation Secretariat CHAIR—Good morning, Minister. The committee will now begin its consideration of the Communications, Information Technology and the Arts portfolio. Unless otherwise stated, responses to questions placed on notice today should be sent to the committee. I welcome the Minister for Communications, Information Technology and the Arts, the Hon. Richard Alston, and officers from the Communications, Information Technology and the Arts portfolio. Departmental officers will not be asked to comment on the reasons for policy decisions or the advice they may have tendered in the formulation of policy or to express a personal opinion on matters of policy. Minister, do you wish to make an opening statement? Senator Alston—No, Mr Chairman, other than to say that I had not expected to be here at all today, but I have been able to rearrange my schedule so that I will be here until lunchtime, when Senator Herron will take over. CHAIR—Thank you. TELSTRA Senator MARK BISHOP—Welcome. Just for the information of personnel from Telstra, I will be asking questions about ACA investigation of service levels, the CDMA network transition, the Telstra-OzEmail merger, local number portability and finally coming to the Telstra- ABC online deal. So going through the routine and process matters first, this is probably for you, Mr Ward. On the ACA investigation of service levels, a report was handed down in mid- December last year. Could you outline to the committee Telstra’s response to the findings of the ACA inquiry into Telstra service levels? Mr Ward—I will ask Ms Deena Shiff to answer that. She is across the detail there, Sena- tor. Senator MARK BISHOP—Thank you, Mr Ward. Ms Shiff—In broad terms, the ACA found that there had been a diminution in performance in some areas in terms of service activation for areas without infrastructure. Then it pursued investigation around those issues. There was, in fact in the subsequent quarter, a substantial improvement in performance in those areas. Senator MARK BISHOP—Which quarter are you referring to there, Ms Shiff? Ms Shiff—The September quarter was the quarter that experienced improvement relative to the period under investigation. The ACA looked at a range of matters that went to variabil- ity of performance. It looked at the operational focus on fault rectification and service activation and on the linkages between fixing faults and putting in new services. I think it is fair to say in general terms it was satisfied that there was a degree of management focus on improving service at an operational level. It listed out in some detail the measures that were being put in place within Telstra as part of its inquiries. It also observed that there was more capital being put into the customer access network to remedy longer term deficiencies that were giving rise to high fault levels and the need for more lines to improve compliance with CSGs overall. Given that investment of that sort takes time to kick-in, and in order to satisfy itself that the trends that were being experienced in terms of improvement were sustainable, it took upon

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 92 SENATE—Legislation Thursday, 10 February 2000 itself the task of monitoring service levels over a longer period. We are now subject to that monitoring regime. Senator MARK BISHOP—Could you outline that monitoring regime and the timeframe involved in that? Ms Shiff—I believe it is running for a period of six months and will look at all the matters that have been subject to investigation. It will obviously focus on the areas that were of concern in the June quarter and examine trends in relation to those areas as well as trends overall. Senator MARK BISHOP—What does Telstra regard as the priority areas in that review for focusing on? What are the important matters where you would hope for improvement in levels of service? Ms Shiff—There are a number of areas where there is continuing focus. There is continuing focus at an operational level to continue to improve fault rectification within the company. There is an awareness within the company that significant investment is needed in the customer access network to meet growing levels of demand. That then cuts into our ability to meet the necessary time scales to put on new lines and services for customers. That is an issue of central concern to Telstra at this moment. Senator MARK BISHOP—Subsequent to the report coming down, has Telstra had a communications with the ACA on the subject matter of the report? Ms Shiff—Obviously, we have had discussions about the information that will be necessary for the purposes of monitoring the issues going forward. Senator MARK BISHOP—What has been the thrust of those discussions? Ms Shiff—I cannot comment in detail other than to say that it goes to the information that we would need to provide going forward to satisfy the ACA in relation to the matters that came up in the report. Senator MARK BISHOP—Why are you unable to comment in detail? Ms Shiff—I am happy to take on notice the issues. There is nothing that is unrelated to what I have just discussed. Senator MARK BISHOP—You just do not have the information at hand? Ms Shiff—I have not been involved personally in those discussions. It goes to how data will be provided and how the monitoring will take place. Senator MARK BISHOP—In that case, would you take the question on notice and provide an answer to the committee in writing? Ms Shiff—Sure. Senator MARK BISHOP—Has the ACA sought any information from Telstra in respect of this matter as well? Ms Shiff—For the purposes of monitoring? Senator MARK BISHOP—Yes. Ms Shiff—That is covered in the question I have taken on notice. Senator MARK BISHOP—This is probably a question for you, Minister. There were press reports about three weeks ago that the Prime Minister had written to you requesting that detailed attention be given to improving service levels within regional Australia provided by Telstra. Can you confirm that such a request was made to you from the Prime Minister?

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Senator Alston—I cannot confirm any specific private correspondence but it is fair to say the Prime Minister has made it clear to all ministers that he expects them to be vigilant to ensure that service levels in regional Australia are at least maintained and that he does not want to see any further reduction in Commonwealth government services affecting country areas of Australia. That is much broader than my area of responsibility. Senator MARK BISHOP—I am only at this stage interested in your area of responsibility. When you say you are not going to discuss private correspondence, I understand that. But pursuant to a cabinet decision, you have received such a request/instruction to ensure that occurs? Senator Alston—I do not think it is appropriate to get into that level of detail. I am aware, as are my colleagues, that any areas of our responsibility should involve careful scrutiny to ensure that we adhere to the word and spirit of the Prime Minister’s assurances to regional Australia. It has obviously been a matter of ongoing concern to me to try and raise the standards generally. Telstra is very conscious of not only the government’s concerns in this area but the fact that it is in their commercial self-interest to try and meet the customer service guarantee requirements and to generally provide the best possible services to all Australians, but particularly those in regional areas who might otherwise feel that they are being bypassed or not treated with the same degree of importance that those in metropolitan areas might receive. Senator MARK BISHOP—Minister, have you had any communication with Telstra on this issue, maintaining or improving service levels in the bush, subsequent to that cabinet decision? Senator Alston—I think this is probably Blue Hills, isn’t it? Mr Ward—It is. Senator Alston—I think we have had those discussions over a period of years. Senator MARK BISHOP—The question was, ‘subsequent to the cabinet decision’. Senator Alston—I do not think there has been any particular increase in intensity of any discussions. It is just one of those matters that we are both aware are particularly important. I think both sides are committed to doing their very best to improve the level of service in regional Australia. Senator MARK BISHOP—Turning to the CDMA network transition, who will handle that, Mr Ward? Mr Ward—Max Jennings who has been out and about in regional Australia will answer your questions on CDMA roll-out. Senator MARK BISHOP—Welcome, Mr Jennings. On the CDMA, can you tell us what progress has been made to date by Telstra with regard to supplying coverage data or other information to the investigation into Telstra’s CDMA network service and coverage announced by the ACA earlier this year? Mr Jennings—I am project director of CDMA. We have supplied data to the ACA regarding expected coverage at CDMA. Senator MARK BISHOP—You have provided data to the ACA in respect of CDMA coverage. Can you expand on that a bit?

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Mr Jennings—We are just in the process of developing coverage maps for CDMA. We do that on the basis of predictive modelling, as we do for other cellular coverage. Those maps are in the final stages of production. Senator MARK BISHOP—When will that process be concluded? Mr Jennings—That process is largely concluded now in the sense of round one. These things are not static by any means. The CDMA rollout is very rapid. But the stage one coverage mapping will be complete early in March. In fact, the produced maps will be available early in March. Senator MARK BISHOP—What has the mapping to date revealed in respect of CDMA coverage? Mr Jennings—The mapping is pretty much as expected. Probably the more important issue is the practical experience. We have had people constantly in the field – myself included – particularly in country Australia, drive testing the CDMA network as it is built and measuring its performance against what we would expect that performance to be. In general, the performance of the CDMA network is as we would expect in terms of coverage and in terms of other performance parameters. There are some pockets within the network coverage areas that we would consider to be undergoing some teething problems and we are addressing those area by area. In some instances, we have in fact gone out to those areas, met with the people of the area and sought feedback from those people. I have to say that feedback has been extremely valuable and I would expect that we would do even more of that in the coming months. Senator MARK BISHOP—In terms of what you refer to as pockets, can you convert that to geographic spread for Australia? Where are the problems with CDMA? My office is start- ing to receive complaints. Up until a fortnight ago there was regular press right up and down the east coast and through central Australia. They were not isolated problems, but fairly significant problems. Can you tell the committee what is the geographic problem and where is the spread? Mr Jennings—It is very difficult to generalise on the spread. We have a pocket of poor performance in western Queensland. We were there last week examining that and we have people there this week going over that area with a fine toothcomb. It is an area of approximately 50,000 to 200,000 square kilometres. It is not a coverage related issue; it is a network performance related issue. We are focusing on that area to gather technical data that we require to solve that issue and we will do so. There have been other discussions about performance of CDMA in certain areas, which have turned out to be issues of misunderstanding rather than issues of network performance. For example, in Far North Queensland, there is no CDMA, but some folks expected that there would have been CDMA and commented on the lack of coverage of the technology. In fact, when CDMA is rolled out there in June this year, that area will receive far better coverage than the existing analog network ever provided. There is not only a spread of geographic coverage but also a spread of issues, and the type of issue that we are receiving varies quite widely. Senator MARK BISHOP—We had a CDMA problem in western Queensland and we had other problems unrelated to that in North Queensland. Were there other problems in other geographic parts of Australia related to the CDMA? Mr Jennings—There have been a number, some of which have been already corrected.

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Senator MARK BISHOP—Can you tell me about all the areas where there were problems? Mr Jennings—I could not recall all of the areas. Again, I can take that on notice if you want a list. Senator MARK BISHOP—Why can’t you recall all the areas? Mr Jennings—These issues are very localised. They are issues that would tend to come and go. They are identified and many of them are fixed and fixed without my knowledge. It is only the more significant ones like the one in western Queensland that would come to my direct knowledge. Senator MARK BISHOP—Were there other significant ones on a par with western Queensland? Mr Jennings—We had an issue in the Mount Panorama area near Bathurst. That was an issue of oversight in terms of the roll out and that has been corrected. The reports that are coming back from the Mount Panorama area are very positive. Senator MARK BISHOP—Did you have problems on the South Coast of New South Wales? Mr Jennings—We had some issues on the coastal coverage on the South Coast of New South Wales. We have had similar issues in Queensland off the coast. We are working with fishing organisations in both of those places. We have had technical people out measuring the performance of the networks offshore in Queensland and in New South Wales. We have had our technical teams out in helicopters surveying the area and taking performance logs of the area. For example, in Queensland we found the performance to be generally very good with one or two isolated spots where the performance was not as good as it should have been. These tend to be, again, not coverage related but issues of interaction between the different coastal base stations, and those problems have been taken away to be analysed. Generally, those issues are solved with some parameter changes in the base stations concerned. We will do the same with the New South Wales coastal situation and any other coastal situations that arise during the roll out of the CDMA network. Senator MARK BISHOP—Have you had other problems in Victoria, South Australia and Western Australia in the context of the CDMA roll out? Mr Jennings—In the context of the CDMA roll out in Shepparton in Victoria, we had an issue there. We sent our teams to Shepparton. We had a technical team drive for 1,200 kilometres in the Shepparton area and only experienced one call drop out in the whole of the 1,200 kilometres. We did not stop there because we still believe that our customers were not happy with the performance. After some investigation and use of some sophisticated technical tools, we discovered that some domestic masthead television amplifiers – of course, nothing to do with the CDMA network; these are domestic private installations – had become faulty and were radiating interference into the CDMA system. We have since located those interfer- ing amplifiers and have asked the owners to have them replaced with units that are not faulty. Senator MARK BISHOP—South Australia and Western Australia? Mr Jennings—For South Australia, I cannot recall an instance of major performance shortfall. Senator MARK BISHOP—Western Australia? Mr Jennings—Western Australia, the same.

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Senator MARK BISHOP—Is Telstra giving consideration at the moment to expediting the rollout of the new digital network? Mr Jennings—Yes, we are. Senator MARK BISHOP—Have you reached a conclusion on that yet? Mr Jennings—Not completely, no. We are still working through that. It is a question of balancing our own resources and the resources of our suppliers and the factory capacity of our suppliers. But we are endeavouring to bring forward as much of the rollout as we can. Senator MARK BISHOP—When do you expect a decision to be made on that? Mr Jennings—I would think within the next month. Senator MARK BISHOP—Are you giving any consideration to boosting signal strength or extending the number of boomer cells that would give more coverage? Mr Jennings—In a sense, we have done that already. We have currently rolled out across Australia over 1,200 CDMA base stations. To put it into perspective, the analog network only ever had 1,360 base stations at its peak. By September this year or earlier, depending on the rollout acceleration that we arrive at, we will have over 1,900 CDMA base stations. That will result, across Australia, in providing service to around 200,000 Australians that either had very poor or no analog service previously. In terms of towns with coverage not previously received, that will equate to about 100 extra towns. Senator MARK BISHOP—Can you take this question on notice, Mr Jennings, in the context and provide to the committee details of complaints relating to the CDMA rollout in respect of poor coverage or dropout in each geographic area in Australia, the size of that geographic area, and the number of consumers potentially affected by it. Secondly, advise us of ancillary or secondary problems that arose out of that – that is, problems that were not CDMA problems but were regarded as such – and provide the same detail. That concludes my questions there, Mr Chairman. Senator ALLISON—As I understand it, the budget for the rollout of CDMA was $430 million. Is that correct? Mr Jennings—It is more like $600 million. Senator ALLISON—What do you mean by ‘it is more like’? Mr Jennings—That was the number that we have publicly disclosed on CDMA rollout cost. Senator ALLISON—Back in July it was $430 million. When did it increase to $600 million? Mr Jennings—It was during the last year. It was decided for a number of reasons, particularly commercial reasons, that we should take the CDMA network into additional loca- tions that were not previously planned to have CDMA and, also, to make some enhancements to the power, if you like, of the CDMA technology. Senator ALLISON—When was that decision made? It was some time last year, wasn’t it? Mr Jennings—I believe it was during the third quarter of last year. Senator ALLISON—How much has been spent of that budget so far? Mr Jennings—I do not have that data with me. I can take that on notice. Senator ALLISON—Can you indicate roughly?

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Mr Jennings—Working on my previous numbers, if we have 1,200 bases out of 1,900, that would be roughly that proportion of the $600 million. Senator ALLISON—So 1,200 bases have been put in but there are 1,900 to go in altogether? Mr Jennings—Correct. Senator ALLISON—Why were the 1,900 not put in by the 1 January? Mr Jennings—Simply, it was logically not possible for us to do that. Senator ALLISON—Minister, you said in a press release that the coalition had imposed a licence condition upon Telstra that required it to replace the analog network with a new network that met the needs of rural and regional Australia. Did that licence condition include a date by which this had to occur? Can you perhaps tell us a bit more about what that condition requires? Senator Alston—I cannot recall precisely what the date might be, but I think it has been made clear to Telstra, and Telstra accepts, that we want this to happen contemporaneously – in other words, before analog services are withdrawn they are replaced by CDMA of reasonably equivalent coverage. That is a process that is being undertaken and now scrutinised by the ACA to ensure that that occurs. So it is not just a matter of any licence condition; it is very much a matter of the public record as to our expectations. Senator ALLISON—But someone here must know what the licence condition requires in terms of the time by which the CDMA network would be complete. Mr Jennings—In relation to the timing of our rollout and the objectives that we have for that rollout, the rollout is loaded in the early phases to replace the existing analog network. We are also taking the opportunity to put some new CDMA base stations into place – Senator ALLISON—If I can just interrupt you there, is the 1,200 the direct replacement? Mr Jennings—It is a little more than the direct replacement. In fact – Senator ALLISON—And the 1,200 have already been installed? Mr Jennings—Yes indeed. Senator ALLISON—So how do you explain the enormous number of complaints? I have had them to my office. We have had the National Farmers Federation say – I can quote from their press release the other day – that a number of problems have been brought to their attention: users complain that CDMA handsets do not work in analog areas as well as they do in CDMA areas; poor comparison between analog in-car kits and hand-held CDMA units; inef- fective application of analog cables in CDMA car kits; desire for greater coverage; better understanding of the new boundaries; et cetera. They are fairly strong complaints about the coverage. It is hard to accept that if you have put 1,200 out that it is a direct equivalent of what was there before in the analog system. Mr Jennings—There are a number of reasons for many of those complaints and, in terms of the total size of the rollout and the customers using the network, the complaints are not a large percentage and they cover a very broad span of areas. Some of the complaints are related to coverage directly, some of the complaints are related to the way the phones are actually used, and we have had some instances of incorrect comparisons, not apples with apples comparisons, of the analog service with the CDMA service. We have had a few handset related faults.

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There are also some issues with the interface between the analog network and the CDMA network, at the boundaries of the network. That was one of the reasons we chose to try and accelerate the network to try and remove those boundaries as quickly as possible, so that those sorts of faults would be moved from the environment. Senator ALLISON—Just coming back to this licence condition, you may not have the licence with you, Minister, but you must be able to tell the committee what is in the condition. You made a great point of saying it was a condition in your press release just on 17 January. What is that condition? Senator Alston—If it is a public document I will get it to you. But there is no doubt what the expectation is: there is a final cut-off date for the phase-out of analog of the end of the calendar year and therefore during that period they will progressively do the replacement. What we have made clear is that – Senator ALLISON—I thought the replacement had to happen before the end of the cut-off period? What is the point of replacing it after you have cut it off? Senator Alston—No, there is a final cut-off period for the ultimate closing down of the analog network, and that can continue on for the balance of this calendar year. But the CDMA commitment, I think, is to have that in place before the end of the calendar year – Mr Jennings—Correct. Senator Alston—Indeed, it was commenced in September or October last year. Mr Jennings—Yes it was. In fact, on a very localised basis, our objective is to have CDMA rolled into a given area at least three months prior to the analog closure in that particular area. So we are giving our customers at least three months to make the transition, to adjust to the new CDMA network, before the analog network will be closed. Senator ALLISON—Minister, let me go back to 9 July 1998 when there was a press release put out by the Prime Minister and the Leader of the National Party. They said: every area of Australia, which currently receives mobile phone coverage from the Telstra analogue network, will continue to receive the same coverage when the network is upgraded. That was quite clear and unequivocal. Was that a condition on the licence? Is that what this condition – Senator Alston—I have said to you, and we have used the phrase ad nauseam, I think: it is now in the legislation that the obligation is to provide reasonably equivalent coverage. Senator ALLISON—That is not what the Prime Minister said. Senator Alston—People might use shorthand but I am telling you that everyone under- stands the formal obligation, from the National Farmers Federation through to Telstra and every other interested party. Indeed, a lot of the comments that you get by way of criticism are of the type: ‘look we expected a reasonably equivalent coverage and we are not getting it’, and, of course, we are then concerned to ensure that they do. So they are rules of the game and I would be very surprised if that is not in the licence condition – I am sure it is. But all I am saying to you is that in terms of the timing, whilst the ultimate closure date is the end of this calendar year, we are proceeding on the basis of Telstra’s commitment complete that process ahead of schedule and to get CDMA rolled out there as quickly as possible. But as they do it at each point, they are not allowed, as far as we are concerned, to install CDMA if it involves the withdrawal of the analog network, resulting, therefore, in a lower general quality of coverage and area of coverage.

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Senator ALLISON—Does this licence condition stipulate things like charges for analog if the CDMA network is not available yet? Senator Alston—A penalty regime? I do not think so. Senator ALLISON—I understand that Telstra is charging customers $5 a month in order to access analog in areas where CDMA is not available, even though it was expected to be. Senator Alston—That was a one-off arrangement. Mr Jennings—That is a one-off arrangement and it is to cater for a very small proportion of customers who are still in an area where there is currently no CDMA, not because CDMA is late, but because CDMA was not scheduled to go there yet. They are customers who rely on high-powered analog equipment to get their analog coverage. Senator ALLISON—So these are already areas that had analog? They were working hap- pily with analog and now they are being charged $5 for something they had previously – is that right? Mr Jennings—These are customers who want, for reasons perhaps of needing to travel to a capital city where there is currently no analog, and who therefore would want to have a CDMA phone – and there are a lot of people are in that category. And, also, when people go back to their home area, or an area where they work, which does not have CDMA yet but where they require high-powered analog equipment to get coverage, the CDMA phone will work in analog mode but only in the low-power mode. So for that small number of customers we have said, ‘If you like, you may retain your analog service for a $5 per month charge.’ The normal rate for those services is $35 per month, and at that rate the call charges are lower than you would expect in a low power mode. Senator ALLISON—They have to pay something for the CDMA network? Mr Jennings—No, for retention of the analog phone. Senator ALLISON—But in addition to that, they are paying for the CDMA network – is that right? Mr Jennings—Yes, they will. Senator ALLISON—It is a very small amount of money. I would have thought that given the likely criticisms that would come from any charge at all it would be worth Telstra’s while to forget the charge altogether. Mr Jennings—The difficulty that we have in this case is that if we were to say that people could retain their analog service for a zero dollar charge, we fear that that would quickly expand to the entire analog base that remains and the incentive for migrating would be very low, and so the minimal $5 charge was, in one sense, a means of – Senator ALLISON—But the incentive is because there isn’t the coverage there, isn’t it? I do not understand why you think people would want to keep on with analog if it is going to close, when the real problem is that they cannot get adequate CDMA coverage, isn’t it? Mr Jennings—No. The issue is the difference between the CDMA phone in analog mode being a low powered service, and their existing analog service being a high powered service. Whilst those two services are operating in analog mode, depending on how and where the customer uses those services, there might be a disparity in coverage, in analog mode. Once CDMA comes into that area, there is not an issue and that goes away. Senator ALLISON—But it is not the consumer’s fault that they are having to pay an extra $5. It is the network’s fault, surely.

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Senator Alston—But the point is that CDMA is not in those areas, yet. Senator ALLISON—Precisely. Mr Jennings—This is partly the reason why we are accelerating the roll out, as well. Senator ALLISON—How many customers are in this category of having to pay $5 extra because the CDMA is inadequate for them? Senator Alston—Bear in mind that that then enables them to access the CDMA network in areas where it is in place, and they are – Senator ALLISON—That is very generous, Minister, but they had an analog system before that did that. Senator Alston—No. Do not pretend that somehow there is no difference between a digital CDMA and an analog AMPS. There is a very big difference. And if they are in an area where CDMA has already been rolled out and they get access to that at a high powered level, they are better off. Senator ALLISON—A lot of people do not seem to think so. Senator Alston—In the short term, there are people who are reasonably happy with analog but they understand the inevitability of the closure. It is human nature, I suppose, inertia, for them to leave it until the last possible minute. That is not what anyone wants to see happen. That leads to a clogging up of the system and all sorts of complications. What you want is, hopefully, a speedy and orderly transition process. I think that is what is being attempted here. Senator ALLISON—How many customers are currently paying the $5 a month to resume access of the analog network? Mr Jennings—I do not know exactly. My guess would be – Senator ALLISON—Thousands, hundreds, tens? Mr Jennings—No; hundreds or fewer than 100 at this point in time. Senator ALLISON—Perhaps you could provide the committee with the actual numbers and their location. Would that be possible? Mr Jennings—I think so. Senator ALLISON—And perhaps we could also have the licence conditions, Minister, if your office could provide them. Senator Alston—As I said, to the extent that it is a public document, I will get it to you. But if it is not a public document, then I cannot. Senator ALLISON—Why would the licence conditions on Telstra not be a public document? Senator Alston—I am just telling you that, if it is not a public document, it should not be in the public arena. Senator ALLISON—Mr Stevens seems to know. Is it a public document? Mr Stevens—No, I do not know. We are checking to see whether or not it is a public document. I do not know the answer at this stage. We think it probably is, but we are checking to make sure. Senator ALLISON—How can a licence condition on Telstra ever not be a public document? Senator Alston—I do not know. It might be a part of the statutory requirement.

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Mr Stevens—It was tabled in the parliament last March. So it is a public document and we can certainly get a copy for you. Senator ALLISON—Excellent, thank you. Mr Ward—In relation to Senator Bishop’s question, it is probably useful to separate the complaints into where they are of an education requirement in transiting from one network to another versus areas where we are having issues of the type Mr Jennings spoke about in terms of network performance, both in terms of actual performance and in terms of reach. I think you will find that a lot of the complaints are just in the normal education required for consumers to move from one network to another. There are only a small number of areas where we have put the network in three months before the analog has closed and where we have network performance problems. I think your question, Senator Bishop, was trying to separate that sort of detail. Senator MARK BISHOP—My problem was trying to separate, as you say, and identify where there are technical or operational problems deriving from and relating to the roll out of the new digital network. Mr Ward—And I think Mr Jennings’s response was that the areas that have a material network concern, probably, in your mind, they are only in the couple, rather than in the generic. Mr Jennings—Certainly, in the sense of the size and speed of the roll out, they are small by comparison. Senator MARK BISHOP—Just to wrap that, we are interested in identifying on a population base and geographic spread all of those areas with those problems. Senator ALLISON—Has there been time, Mr Jennings, to test the network? Is there some systematic way in which you are doing that, or have done that? Mr Jennings—We do that on two levels. In the first instance when we were determining the ability of the technology to provide comparable coverage to analog, we set up a number of technology demonstrations to satisfy ourselves that that was in fact the case, and it was. Then with the actual roll-out of the network, every base station area, or group of base station areas that we installed and commissioned, there is extensive drive testing done of that area to ensure both levels of coverage and levels of performance of the new network. Subsequently, there is continuous drive testing from time to time in every area of the network to ascertain the performance of the network in those areas. Senator ALLISON—So the problem is not one of time or resources to do the testing, what is it? Mr Jennings—No, it is not. The issue with any piece of new technology, particularly one as extensively deployed as this – and this is no different to the existing digital network or the analog network before it – is that there will be a number of teething problems and/or the need to tune the network once it is in service, and that is precisely what we are experiencing at the moment. Senator ALLISON—Thank you. Senator MARK BISHOP—Mr Ward, turning to the Telstra online agreement with the ABC, can you explain to the committee why Telstra has entered into such a deal with the ABC?

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Mr Ward—Senator, John Rolland has been managing that exercise personally, so he will share with you the strategy about the arrangements. Mr Rolland—It is clear with our online services that our customers want and require local content. Part of our strategy is to build up our local content pool, and we regard the ABC as absolutely one of the premium local content sources in this country. Senator MARK BISHOP—Is it driven wholly by a desire to provide local content, from Telstra’s perspective? Mr Rolland—From Telstra’s perspective, the core component of the agreement is around the provision of content. Senator MARK BISHOP—The provision of local content? Mr Rolland—Local content sourced by the ABC. Senator MARK BISHOP—Is that the only consideration? Mr Rolland—We have other parts of the agreement that take into account working together in a cooperative sense on interactive television and sharing information on mutual understanding of datacasting, as well as perhaps some cooperative marketing approaches. Senator MARK BISHOP—Could you then summarise what are each of the main points? Mr Rolland—There are four key planks to the agreement. The first key plank, and the major part of it, is the provision of non-exclusive content from the ABC to Telstra under very strict editorial guidelines from the ABC. The second component is an element of exclusive co-production which will be exclusive to the ABC and Telstra, equally. A third component is repurposing of ABC content for the purpose of putting it across wireless Internet, broadband, narrowband, and perhaps interactive television in the future. A fourth component is mutually working together, sharing our research labs, understanding of datacasting and other technologies. It is a cooperative, almost R&D approach. There is some mention in the current working document that we have both been working on around potentially marketing within each other’s shops, both ABC shops and Telstra shops. Senator MARK BISHOP—When did the negotiations commence with the ABC? Mr Rolland—We started discussing many issues with the ABC, but in particular around how we could work together, in August last year. Senator MARK BISHOP—Have the negotiations now been concluded? Mr Rolland—I would have to say no, because no documents have been signed. Senator MARK BISHOP—Do we have a working draft, or are we close to a final draft? Mr Rolland—We have a non-binding heads of agreement and I would have to say we are close a final draft, although there are still some words to be sorted out. Senator MARK BISHOP—I presume when you commenced the process last August it had been to the board and had been approved by the board? Mr Rolland—It is not a requirement for us to enter into discussions to go to the board. Certainly, senior management was aware that discussions were taking place. It is senior management’s – and indeed our CEO’s –right to brief our board. Senator MARK BISHOP—Did the senior managers or the CEO inform the board that the undertaking had been initiated? Mr Ward—We will have to check that. The board gets frequent briefings on the directions of our business and generic updates of the types of partners that we might be looking at. I

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 103 would have to check to see whether the ABC was specifically mentioned, but it is important to understand that any deal with the ABC will not be finalised, from our point of view, until it is approved by the board. Senator MARK BISHOP—I understand that but, I think it is fair to say that this is a fairly radical initiative that has been engaged in both by Telstra and the ABC – perhaps more so from the ABC's perspective, with a range of other considerations – but I am surprised that you do not know that there was no formal advice given to the board. Mr Ward—I know that that division briefed the board a few times on their strategic directions, but whether the list of content partners and the ABC specifically were mentioned I do not know. I will have to check that. Senator MARK BISHOP—In that vein, can you advise when the government and the minister were advised by Telstra that they were entering into these negotiations with the Aus- tralian Broadcasting Corporation – that is, if the government and the Minister were so advised? Mr Ward—Again, under the act we are required to advise the board of any new major venture. As I said, this is yet to be approved by the board. Senator MARK BISHOP—No. The question was: have the Minister and the government been advised? If so, when were they advised? Mr Ward—I do not know that. In the context of our corporate plan, we talk about the types of business directions and our search for local and international content. I cannot say whether the ABC was specifically mentioned. We are talking to a lot of players and a lot of partners. Senator MARK BISHOP—I understand that. Mr Ward—There are a fairly vast array of potential arrangements that we can enter into. Senator MARK BISHOP—But Mr Rolland advised us that the obtaining of local or domestic content for Telstra to put out through its systems was a critical point. That being the case, you have gone to the premier holder of such content in Australia for your negotiations. What I am asking is: if and when the minister and the government were advised? Mr Ward—I would have to check that, Senator. Senator ALLISON—The minister might be able to assist you. Senator MARK BISHOP—Thank you. I was coming to that. Minister, seeing that Mr Ward does not know, you might be able to help us as to if and when you were advised of this process. Senator Alston—I think the short answer is that we were not advised by Telstra. I was alerted on the Friday night that there was likely to be a leaked story in the media on the Satur- day morning – I got that third hand. It was only after there was a full report of it that I had some discussions with the ABC, but I have not had any discussions with Telstra to my knowledge – nothing formal. Senator MARK BISHOP—Prior to someone advising you by a leak a week or 10 days ago, you did not have any former knowledge? Senator Alston—No. I think it is fair to say that neither party took the view that they needed to inform the government. This was a commercial matter, and they would not have wanted us second-guessing these decisions. We assume that the ABC operates consistent with their charter obligations and that they are conscious of all that needs to be looked after. As far

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 104 SENATE—Legislation Thursday, 10 February 2000 as Telstra is concerned, I think they would probably approach us only when the agreement had been made but not made public. We probably have been told shortly in advance of the public announcement. Senator MARK BISHOP—Mr Rolland can you outline to the committee just what it is that Telstra is purchasing from the ABC? Mr Rolland—The first component is non-exclusive content - that is, rights cleared. The ABC has rights to pass to us. The second component is exclusive co-production, which is capped at 25 per cent of the base annual fee. The third component is re-purposing. The fourth component includes an online scholarship for us to jointly find someone to promote and help within the multimedia industry. It is there each year for five years, as well as the marketing of each other’s services within each other’s shops which is a consideration at the moment only. Senator MARK BISHOP—I will just go through each of those points one by one. In terms of the non-exclusive content rights cleared product, what does that extend to? Mr Rolland—That extends from television, radio and print and content that is available for online distribution. Senator MARK BISHOP—Is it material that has already been disseminated by the ABC? Mr Rolland—That is one component. Senator MARK BISHOP—Tell me about this in terms of material not previously disseminated. Mr Rolland—The ABC has one of Australia’s leading online sites already, so they will be producing and re-purposing their own content to go onto that site. That is also made available to Telstra. Senator MARK BISHOP—We have non-exclusive content that is print, TV or radio that has already been disseminated, by which I mean broadcast. We also have material that has been put out on ABC online services that Telstra is purchasing. In effect, you are a re- broadcaster if that material has already gone out. Mr Rolland—We would be a re-broadcaster if we were putting it over a broadcast spectrum. We are not. Senator MARK BISHOP—Fair comment. Are you purchasing this non-exclusive content? Is it material that has already been put out over the various media airways? Mr Rolland—In some cases that is possible. Senator MARK BISHOP—Let us turn to the cases where it is not. Does that mean that Telstra is purchasing right of first dissemination or is it simply material that the ABC through its various media arms has chosen not to disseminate? Mr Rolland—We have mutual dissemination rights with the ABC. In other words, it would stream to us at the same times as it would stream to ABC online. We do not have first rights. If it were first rights, it would go to us first. Senator MARK BISHOP—None of the non-exclusive content extends to first rights dissemination? Mr Rolland—Not that I am aware of and not under the current working document. Senator LUNDY—I want to quite specifically follow up that point in terms of mutual dissemination rights. If you are getting that content and putting it up on your site at the same

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 105 time that the ABC is getting it and putting it up on their site, what obligations do you have to reflect the same choices of the material that the ABC chooses to put on their site? Mr Rolland—Good question. Within the working document, and certainly in the spirit of all the negotiations we have had, we completely understand the editorial independence of the ABC. We take the streams that we have agreed to in toto and they go straight through. We have no ability to repurpose that content. Senator LUNDY—So, the content that you get at that point of mutual dissemination will reflect the structure of the content as it is presented on the ABC site. Mr Rolland—Correct. Senator LUNDY—And will it contain, for example, all of the stories in a news bulletin? Mr Rolland—If you are referring to the possibility that was reported in the press that we could take out certain stories, that is not possible. Senator LUNDY—Why not? Mr Rolland—Because it is protected under the agreement with the editorial independence of the ABC. We have no right to change that stream. Senator LUNDY—Can you tell me why, then, that although the ABC is carrying stories about the ABC-Telstra deal today, Telstra has chosen not to? Are you saying that you will actually change your editorial policies once this deal is put in place? Mr Rolland—I thought we were referring to the ABC deal. Senator LUNDY—Yes. I am just asking the question: will Telstra be changing their editorial policies once this deal is in place? Mr Rolland—Our editorial policies will support the agreement we have with the ABC. Senator LUNDY—In what way? You just told me that you would be getting the ABC’s editorial decisions and then just putting them on you site? Mr Rolland—That is right, so we will reflect in our editorial policies the agreement we have reached with the ABC on their editorial independence. Senator LUNDY—Will you be carrying your own news service, or will Telstra no longer carry their own news service with your own editorial policies once this deal is done? Mr Rolland—We will have other news streams coming in as well. Senator LUNDY—I will come back to that point, thank you. Senator MARK BISHOP—Are you going to disseminate in its entirety this non-exclusive content that you are purchasing? Or will you have the right to pick and choose what you want to put out? In other words, are you merely a duplicator of ABC Online or are you going to have a separate and perhaps different product going out, which is purchased from the ABC? Mr Rolland—Under the non-exclusive content, the ABC and Telstra will sit down peri- odically and go through the genres that we seek to get access to for our online service. Those discussions will be based around the performance of the content we have got on our site and what we are hearing back from our customers about what they would like to see. Senator MARK BISHOP—So you will have, if it is signed off, a contract giving you access to non-exclusive content rights cleared. Within that, you expect regular or periodic negotiations with the ABC as to what product in particular areas or genres you will take and disseminate? Mr Rolland—And that they will offer.

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Senator MARK BISHOP—In the form in which the ABC provides it to you, does the agreement give you the right to change that form, to change the content? Mr Rolland—Only in terms of repurposing for different devices, and that would be done by the ABC on our behalf and streamed through. For instance, how you present content on a PC is very different from how you present content on a mobile phone. So that content needs to be repurposed. Senator MARK BISHOP—And that is about method of delivery – Mr Rolland—Correct. Senator MARK BISHOP—taking into account technical accounts of the medium. I am not talking about that. I am talking about the material that is to be put out via the different media arms. Does the agreement give you the right to change the content or to seek that it be changed? Mr Rolland—No. We are abiding by the very strict editorial independence of the ABC. Senator MARK BISHOP—Mr Smith from the opposition has been referring in his press releases to Telstra purchasing off the shelf content. He has made the point that, if that is all that the ABC is selling and all that the Telstra organisation is purchasing, the opposition does not have at this stage any criticism of that? Is it fair to equate this discussion we have been having on non-exclusive content with off the shelf product? Mr Rolland—Given that my understanding is that the ABC has a number of other agreements for non-exclusive content that predate any discussions we have had, you would have to argue, I guess, that it is off the shelf. There are a number of other companies that already have these sorts of agreements around non-exclusive content. Senator MARK BISHOP—Going back to this issue of periodic negotiations on the genre of material that Telstra is going to purchase, can Telstra request of the ABC particular tailored product? Mr Rolland—Within the exclusive co-production component, we could jointly agree to work on a particular project together, but again that is still tied to the editorial independence of the ABC. Senator MARK BISHOP—How? Mr Rolland—How? They have right of veto on any particular project that we put forward. In other words, if we were to put forward something that they do not believe fits within their style, they have the right to refuse to do it. Senator MARK BISHOP—That is exclusive co-production. We are not talking about that: we are talking about non-exclusive content. That is what I am trying to stay with. I am talking about non-exclusive content rights - your first head. I have not yet come to exclusive co-production. So when I ask you can Telstra request tailored products within particular genres I am referring to non-exclusive content. Is the answer to that yes or no? Mr Rolland—The answer to that is probably yes, but that content would also be available to anyone else who wanted to buy it or stream it through the ABC. Senator MARK BISHOP—In terms of that non-exclusive content, can Telstra request changes or alterations to the product? Mr Rolland—Can we be a little more specific? Are we talking within a genre, a program or a five-minute slot? I am trying to understand what the minutiae is of the changes that you are suggesting.

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Senator MARK BISHOP—If for whatever reason Telstra might not like, be uncomfort- able with, not be satisfied with the product that is supplied in a non-exclusive contract. Whether it is a particular genre or program or a news bite or current affairs show, I do not care to get into that detail. What I am asking is, having received the product, and if Telstra is dis- satisfied, does the contract give Telstra the right to seek that that product be changed or al- tered? Mr Rolland—There is an agreement currently in the working document that states that if the content is not performing – in other words, people do not want to look at it – then we can go back to the ABC and jointly look at other content that may be more attractive. Senator MARK BISHOP—Is that the only ground upon which Telstra could go back? Mr Rolland—Those are the only grounds that I am aware of. Senator MARK BISHOP—Turning to the issue now of exclusive co-production, can you outline to the committee what is the intent there from Telstra’s perspective? Mr Rolland—The intent from Telstra’s perspective is to look at supporting the ABC in developing new and interesting content that may not necessarily be part of the current bank of content available from the ABC today. Senator MARK BISHOP—What areas are you thinking about there? Mr Rolland—An example may be an Internet program or a training program where we would ask the ABC to produce that for us. It will be exclusive for the ABC on-line service and the Telstra on-line service and would be perhaps a multimedia presentation of how to use the Internet. That might be a good example. Something that is not necessarily attractive to ABC TV or radio but is terribly pertinent to the on-line space. Senator MARK BISHOP—Understood. That product, that exclusive co-production, would that be subject to existing ABC editorial policies? Mr Rolland—Absolutely. Senator MARK BISHOP—In that respect, isn’t then Telstra choosing to surrender its right in terms of material that might be broadcast or put out over the Internet? Mr Rolland—Sorry, could you ask that question again? Are we surrendering which particular right? Senator MARK BISHOP—The ABC has got a very strict charter. It is instructed by the parliament on a range of issues, one of which goes to independence from the government of the day, and a range of matters derive from that. Telstra has not been so constrained in its commercial endeavours to date. You are now entering into exclusive co-production contracts with the Australian Broadcasting Corporation. You say that the contract provides that the ABC in these exclusive co-production contracts will be constrained by its charter and commitments of independence, but Telstra will also be so constrained, won’t it? You are adopting the ABC’s charter in terms of independence. Mr Rolland—We are getting from a production house – the ABC – content which we value very highly and also their skills in co-production. If, on that basis, we have to abide by the ABC’s charter and board, we understand that, and we are very happy for that to occur. Senator MARK BISHOP—All right. Is the figure from the press reports of $13.5 million per annum for five years, giving a total of $67 million correct? Mr Rolland—That figure is broadly correct but we do not have a signed document yet.

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Senator MARK BISHOP—I understand. Can you tell the committee how Telstra valued that price? Mr Rolland—We did extensive modelling on the current market rate and page view cost of like content. We looked at how our business was growing and how we could leverage that content in terms of being attractive for viewers to come to our portal and our ISP service. Senator MARK BISHOP—Having disseminated the material from the ABC on its online service, does Telstra have the further right to on sell that product? Mr Rolland—There is a clause in the working document that notes that there could, in the future, be a possibility for that to occur but that is to be with mutual consent, and that is about as far as that clause goes. Senator MARK BISHOP—The contract does not give you the right, at this stage, to on sell the content you purchase from the ABC? Mr Rolland—No, it has to be mutually agreed. Senator MARK BISHOP—Does that apply to all of the product you are purchasing from the ABC, that you cannot on sell it? Mr Rolland—That is my understanding currently, without mutual agreement. Senator MARK BISHOP—Does Telstra have any plans to establish an independent news gathering service at the moment? Mr Rolland—No. Senator MARK BISHOP—I have further questions of the minister and he has left the table on this issue. Mr Chair, do you know where the minister has gone, or how long he will be away? CHAIR—No, I do not, I am afraid. We can find out for you. Senator MARK BISHOP—I wonder if a request could be made for the minister to return so that I could ask him some questions. Senator LUNDY—I have some questions on exclusive co-production and the marketing aspects. With respect to the exclusive co-production of material, one of the distinctions that the ABC has with respect to the digital television legislation is the capacity to multichannel. What have you considered in the terms of this deal and exclusive co-production for the purposes of multichannelling content once the ABC has access to that digital spectrum? Mr Rolland—This agreement for Telstra currently excludes broadcast spectrum. It does allow for the content to be put across HFC, across Internet satellite and narrowband services as well as wireless Internet, but excludes broadcast spectrum. Senator LUNDY—Including the capacity to datacast? Mr Rolland—Including datacasting, as it is currently defined. Senator LUNDY—As it is currently defined. What would be the definition of datacasting that would, within the bounds of your current agreement, allow you to datacast? Mr Rolland—It will not. Senator LUNDY—Through the ABC. Mr Rolland—It will not. All I am indicating is: as datacasting is currently defined, it is excluded from this agreement. We have in part 4 an agreement to work together on datacasting in terms of mutually sharing our technical understanding of datacasting and how we could potentially both use datacasting for the purposes of benefiting our customers.

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Senator LUNDY—To what end, if you do not have the capacity to do it through the ABC under this agreement? Are you suggesting that you are talking about datacasting for the purposes of providing that content through another broadcaster and not the ABC? Mr Rolland—No. In terms of this agreement, we have confined the agreement to the current networks that we have and it excludes broadcast. Senator LUNDY—You just mentioned a clause about collaboration on datacasting style production. What is the purpose of that if this agreement does not cover? Mr Rolland—I am sorry, Senator. I thought I had mentioned that what we were doing with datacasting was sharing our technical understanding and how customers may use datacasting. We have absolute respect for the ABC’s leading position on datacasting and their understanding of it. They, we hope, equally have respect for what our research labs have done, for instance, in understanding what the technology can do. This clause simply allows both companies to share together in that understanding. Senator LUNDY—In terms of the point you mentioned about cross-marketing, the fifth point, can you describe what you envisage in terms of that cross-marketing? Mr Rolland—There is currently a clause in the working document, which is for consideration only and obviously to be thrashed out later, where we looked at the possibility of having co-branded CDs, for instance, for ISP services in the ABC shops and, equally, they may wish to put some product within the Telstra shops. But we certainly have not defined what that would be, and it was a point to be discussed as we go through the negotiations. Senator LUNDY—A co-marketing arrangement in that way is a lot more than just an off- the-shelf content deal. Mr Rolland—I think I mentioned to Senator Bishop that there were four key components to the deal. We have never said it is just a non-exclusive content deal. Senator LUNDY—Under Telstra’s current policies with respect to sharing of information of customer databases et cetera, you retain the right to share that amongst your own businesses or interests, although guided, according to evidence presented last time, by far more stringent policies about sharing or on selling that information. To what degree does this particular clause explore the opportunities to have a cross-market using the customer databases of both the ABC and Telstra? Mr Rolland—This agreement has no mention of swapping databases or customer information. It is simply Telstra purchasing content from the ABC on a commercial basis. Senator LUNDY—It is not, because you have just said that you are looking at co- promotion of other products – Mr Rolland—Sure – Senator LUNDY—so it is a lot more than that. Mr Rolland—But there is no agreement, nor it is being considered or discussed, about swapping of customer information or database information. Senator LUNDY—Can you give a clear guarantee that that is not being considered as part of your cross-marketing plans? Mr Rolland—I can tell you that since August last year that has not been considered as part of this agreement. Senator LUNDY—I beg your pardon?

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Mr Rolland—Since we began these discussions in August last year we have not discussed swapping of databases or customer information. Senator LUNDY—Okay. I will come back to that. Senator MARK BISHOP—Just following that point through, Mr Rolland, does the proposal require – CHAIR—I think Senator Allison wishes to – Senator MARK BISHOP—Okay, but can I just finish that issue? CHAIR—All right. Senator MARK BISHOP—Thank you. Could you outline to the committee the detail of the obligations that are imposed upon the ABC and Telstra to advertise or promote each other’s products or services? Mr Rolland—There is currently a clause in the contract that recognises that if – if – the ABC’s policy on advertising changes, then there is a commercial agreement to share revenues on that advertising. However, it is also recognised in the contract that is currently not the case, and is not a basis for us signing this deal, but we have dealt with it in the non-exclusive heads, which is unsigned, on a way to address the issue if that policy ever changed. Senator MARK BISHOP—So ABC and Telstra shops would be promoting and selling each other’s products? Mr Rolland—That is currently an idea that is in the heads that needs to be sorted through. It is certainly not one of the key components of the agreement. Senator MARK BISHOP—You would be aware that the Internet is not caught by the Broadcasting Services Act. Theoretically, the ABC could engage in advertising on ABC On- line Services – it does not, but it could. Does the contract address that issue of advertising on Online Services run by Telstra? Mr Rolland—Yes, that is what I just referred to; but that is an issue for the ABC, not an issue for Telstra. Senator MARK BISHOP—Thank you. Senator ALLISON—If I can take a few steps back and ask about the working document or deal, as it is variously described, exactly what is its status today? Mr Rolland—Its status today is that I am aware a version of the working document has gone to our board, with a business case; that is to be considered this week. There are still some minor adjustments to be made to the document, which is literally just a few words we are changing, nothing material, and that is a non-binding heads of agreement. Senator ALLISON—Is a copy of the working document available for the committee at this stage? Mr Ward—I will have to take that on notice. Senator ALLISON—And get back to us in four weeks? Mr Ward—I will get back to you as soon as I can, but I will have to take that on notice. Senator ALLISON—I am sorry, Minister? Senator Alston—Have we got another round of estimates in four weeks? Senator ALLISON—No, that is at least the time it takes for estimates questions to be returned to us.

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Mr Ward—Whatever date you give us through the Senate process we will meet. Senator ALLISON—This deal or working document was presumably initiated by Telstra – is that correct? Mr Rolland—I cannot remember who made the first phone call but I think it was mutually agreed we should talk. Senator ALLISON—It has happened with osmosis; an idea that arose in both quarters? Mr Rolland—It probably did. Senator ALLISON—It probably did? Mr Rolland—In terms of us sitting down and having a chat to them – them being the ABC – about content and how it went forward, it probably was, as most commercial agreements are not a well-defined ‘we are going to go in and take the hill’ approach. It was a chat. Senator ALLISON—Who in Telstra was doing the informal chats? Mr Rolland—I was. Senator ALLISON—You were? Mr Rolland—Yes. Senator ALLISON—What is your role in the organisation, Mr Rolland? Mr Rolland—I am Director of Online Services. Senator ALLISON—You personally had a chat with who at ABC? Mr Rolland—I have had discussions with numerous executives there, but, in particular, Julianne Schulz and Harry Bardwell. Senator ALLISON—The executive was aware of the deal, the idea? Mr Rolland—The discussions, certainly. Senator ALLISON—Did Telstra use any outside legal firm to assist it with this deal at any stage? Mr Rolland—No, we used internal legal counsel for the drafting of the non-binding heads of agreement. Senator ALLISON—It has been kept a remarkable secret until now. For how long has this been an idea in development? Mr Rolland—I would have to say probably since September last year we started to firm up on what we were potentially thinking about doing, but it is a very complex area. Senator ALLISON—The first meetings happened about that time? Mr Rolland—Our first meetings happened in August. Senator ALLISON—In August? Mr Rolland—Yes. Senator ALLISON—How will Telstra benefit in revenue terms from this arrangement? Mr Rolland—It is clear that most Australian portals suffer from a lack of quality local content. By us having the agreement with the Australian Broadcasting Corporation, we think in particular with certain segments of the market they will benefit greatly, particularly with us being able to get information online out to rural and remote areas and also in broadband. Senator ALLISON—Can you quantify the benefit? The deal with the ABC will be $67.5 million over five years. How do you expect your revenue to be increased?

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Mr Rolland—It is hard to quantify direct revenue, other than potentially, if advertising revenues or e-commerce revenues on the site ever came about. That is currently not factored in. We look at associated revenues and that is people going to our site and people using our ISP service where our portal is attached to it. Senator ALLISON—The ABC currently has agreements with other network portals such as Yahoo and AOL. Is there anything in the agreement which would affect those other agreements? Mr Rolland—No. Senator ALLISON—Is your agreement with the ABC similar to those agreements with the other organisations? Mr Rolland—I could not comment on that. I have not seen the other agreements. Senator ALLISON—There is nothing in your agreement with the ABC that would restrict the Australian Broadcasting Corporation’s ability to enter into agreements with other organisations? Mr Rolland—No. Senator ALLISON—Any restriction at all? Mr Rolland—Around non-exclusive content, no. Senator ALLISON—What about reprogram? Mr Rolland—Repurposing. Senator ALLISON—What about that? Mr Rolland—Repurposing is simply making content ready for other devices so if that came from the pool of non-inclusive content that would be available, I would imagine, to other sources. Senator ALLISON—So could the ABC enter into an agreement which is identical in every sense to the one with Telstra with Yahoo or somebody else? Mr Rolland—I would doubt it. Senator ALLISON—Why? Mr Rolland—Because I do not believe anyone else in Australia has the need for narrowband, broadband and WAP services all together. Senator ALLISON—In a contractual sense rather than a practical sense? Mr Rolland—In a contractual sense? I would have to take that on notice and really check the document to be accurate. Senator ALLISON—But it was not a primary issue for you? Mr Rolland—No, it was not a primary issue and in fact we do not refer to our competitors at all in the document. Senator LUNDY—Can I ask a question following that up? Is repurposed content exclusive or non-exclusive? Mr Rolland—In the vast majority of cases it is non-exclusive but, of course, with the exclusive co-production which will also need to be repurposed – Senator LUNDY—No, I am talking about the rights cleared non-exclusive content? Mr Rolland—That is non-exclusive.

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Senator LUNDY—Okay. What about when it is repurposed? When you change it to make it fit the different minutes and – Mr Rolland—There are two components. One component is sports, in which we have agreed we can get sports feeds exclusive for wireless Internet services for five years. Senator LUNDY—It is exclusive after you repurpose it? Mr Rolland—I am saying there are two components – only two. That is one and the second is if the ABC ever develops an online financial service and information that will be exclusive to Telstra for five years over wireless Internet. Senator LUNDY—Very interesting. Just going a little further on that, if you are creating exclusive repurpose content in the area of sport like an electronic commerce product – is that what you are describing? Mr Rolland—No, financial services. Senator LUNDY—A financial services product? Mr Rolland—Information on the stock market. Senator LUNDY—You also have an arrangement where you can cross-market that type of content in that online environment as well that we covered earlier? Mr Rolland—We would have to define what cross-marketing means but we cannot advertise around or on any – Senator LUNDY—But you could advertise your exclusively repurposed sports content? Mr Rolland—Yes, agreed, but what we cannot do is put advertising on that. Senator LUNDY—On that content? Mr Rolland—Correct. Senator LUNDY—Let’s use the sport example. In repurposing that content, suppose the ABC buys the rights for the cricket. You then repurpose it in the format of radio across the Internet, or something like that. You have, by virtue of this agreement, exclusive rights to that. Mr Rolland—For that technology, yes, but not for the other technologies. Senator LUNDY—What other technologies? Mr Rolland—Broadband, narrowband, kiosk. Senator LUNDY—Why, if you are the one repurposing it? Mr Rolland—Because the agreement we have with the ABC is that sport must be generally available. However, we have made an agreement on wireless Internet. Senator LUNDY—On wireless Internet? Mr Rolland—Yes, only wireless Internet. Senator LUNDY—Why only wireless Internet? Did the ABC refuse in the other areas? Mr Rolland—We didn’t ask for it. Senator LUNDY—Wouldn’t it be because they have some licence conditions and that wireless Internet probably was not covered in that agreement? Mr Rolland—It is because we are really trying to develop compelling applications and content for wireless and we think sport is terribly important. Senator LUNDY—In terms of the other area, financial services, if you are repurposing exclusive content, can you just describe the sort of product that you are talking about.

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Mr Rolland—I actually cannot because currently we recognise in the negotiations that the ABC does not have a financial services service. Senator LUNDY—But you do. You have financial services products? Mr Rolland—We get them from other parties, Samford, for instance. But if they ever did do that, that would be something we would be interested in. Senator LUNDY—But under the agreement it could very well be your content, not necessarily the ABC’s content, that is repurposed and captured and available for the co-promotion under this agreement. Mr Rolland—The way it is currently written, the intention is that it would be the ABC’s content and not ours. Senator LUNDY—Why? Mr Rolland—Because we are interested in what we regard as very high quality content from the ABC. Senator LUNDY—But you are not going to stop producing content, surely. Mr Rolland—No, we have been on the public record as saying we are an aggregator, not a creator. Senator LUNDY—What are your other interests as a company with content creators? Mr Rolland—For our web site we have a vast number of separate commercial agreements with companies to supply us with applications and information for our various online services. Senator LUNDY—I presume, as you build up your capacity to repurpose, you will be able to repurpose that content for different formats as well, different technologies, deliveries. Mr Rolland—Yes. Senator LUNDY—Does this agreement allow you to use your agreement with the ABC to co-promote those products that essentially become part of your content suite? Mr Rolland—That has not expressly been talked about so far in a working document. Senator LUNDY—Is it expressly excluded? What is implied? Mr Rolland—We could promote the ABC content on our web site. We can say we have ABC content on our web site. Senator LUNDY—But because you have a co-promotion arrangement which brings together ABC content and content from other people, that becomes your content suite. Are you able to promote that whole content suite back through the ABC in the co-promotion environment? Mr Rolland—That has not been expressly agreed. Senator LUNDY—But it is conceivable under the agreement, it is not excluded? Mr Rolland—I would have to take that on notice. I am not sure. Senator LUNDY—Don’t you think it is a little bit important? Mr Rolland—Yes, but there is no intention of Telstra being promoted on the ABC site. This is about us taking content from the ABC in a commercial agreement for our site. Senator LUNDY—In the co-promotion, in the cross-marketing arrangement, it is all one way, it is all about you, it is not about the ABC.

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Mr Rolland—There is a benefit for the ABC being on Telstra’s site. It gives them access to more customers, I guess. There is obviously a financial benefit for the ABC in selling their content to us. Senator LUNDY—You mentioned before that you had not seen the agreements that the ABC has with your competitors. Mr Rolland—I am not aware of what they are? Senator LUNDY—You are not aware of what they are? Mr Rolland—No. Senator LUNDY—Did you do any market research about this at all? Mr Rolland—For me agreements take on quite a very specific meaning. Yes, I am aware of what are the ABC contents on Yahoo or any of the other portals. Senator LUNDY—How many other portals has ABC got content on? Mr Rolland—I cannot comment on that. Senator LUNDY—But you know? Mr Rolland—My understanding, if I read what is in the press, is that they have 10 other agreements. Our interest has not been obsessively on our competitors, it has been on supplying content to our customers. Senator LUNDY—If it was just about content, I guess what you would be interested in is whether they all paid about $68 million for it as well. Mr Rolland—As I said before, we did modelling on the market rates for page views. You certainly know what the going market rates are. That was how we were doing our modelling. Senator LUNDY—Is what you are proposing to pay for this comparable to what those other portals have paid for the ABC content? Mr Rolland—I cannot comment because I am not aware of what expressly the other portals paid for their content. We know what the various market rates are though, generally speaking. Senator LUNDY—In terms of your BigPond retail product, I notice in your annual report that you think you have had a 100 per cent increase in subscribers in the financial year the report is covering. Putting aside your recent endeavours in pursuing OzEmail, what is your understanding of the number of views that the ABC site gets per day? Mr Rolland—There are various different metrics. My understanding is that the ABC site is consistently in the top 10 sites in Australia. Senator LUNDY—What about your site? Mr Rolland—BigPond is consistently in the top 10. Senator LUNDY—What about Telstra news service? Mr Rolland—Telstra com at the moment is floating anywhere between 27 and 13. Senator LUNDY—And what arrangements do you have with other news providers on the Telstra news service online? Mr Rolland—We have agreements with CNN and various other agreements to take their streams. Senator LUNDY—Anyone else?

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Mr Rolland—I would have to come back to you. There are discussions with Reuters. Senator LUNDY—And what about other news content providers in Australia? Mr Rolland—I am not aware of any other major news agreements we have for local content. I will take that on notice and check. Senator LUNDY—Are you in discussions with any at the moment or planning to be in the future? Mr Rolland—We have discussions with many companies just about every day. Senator LUNDY—With other news providers? Mr Rolland—Yes. Senator LUNDY—Is it conceivable that Telstra could host the news content of all the Australian news content providers? Mr Rolland—I doubt it. Senator LUNDY—I am asking you specifically in the context of this agreement. Mr Rolland—Is it possible? Senator LUNDY—Yes. Mr Rolland—To answer that I would have to know whether every news supplier has signed non-exclusive agreements. I am not aware of that. Senator LUNDY—No, does your agreement with the ABC exclude you from entering into arrangements with other news content providers? Mr Rolland—No, it is on the basis of being mutually non-exclusive. Senator LUNDY—So you could do deals with everyone else as well? Mr Rolland—We currently have other news feed. We intend to continue those and the ABC is aware of that. Senator LUNDY—Just going back to the issue of exclusive co-production, you mentioned a relationship between Telstra research labs and the ABC on some technology issues. Mr Rolland—Yes, I mentioned part 4 of the agreement which deals with us sharing technical knowledge and understanding of issues like interactive television and datacasting. Senator LUNDY—You said ‘sharing technical knowledge’. Can you be more specific? Does that relate specifically to intellectual property rights for technologies? Mr Rolland—We certainly have not got that specific, all we have acknowledged is that both parties have an interest in datacasting and extensive knowledge in different parts of the datacasting debate and we are going to come together and discuss those issues. That is as far as it has gone. Senator LUNDY—I am trying to get a clear picture of what we are actually talking about. Does that research project that is part of this deal relate only to datacasting technologies or does it relate to online delivery technologies, such as– Mr Rolland—Content management systems? Senator LUNDY—Yes, and wireless, the net radio thing and that kind of stuff? Mr Rolland—Yes. Senator LUNDY—I am just trying to get an idea of the scope and then I am going to ask you how much–

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Mr Rolland—The scope currently in the agreement is informal and it is about our people getting together with their people and talking things through. We also have the possibility of working together on trials of interactive television, for instance, which we think will be bene- ficial for both parties. Senator LUNDY—Hang on. Before we spoke about multi-channelling and datacasting. That is actually outside of the scope of this agreement. You said it yourself that it did not cover broadcast spectrum. Mr Rolland—Under broadcast spectrum, that is correct. Senator LUNDY—That is right. So when you talk about this sort of interactive stuff– Mr Rolland—Interactive television over a PSDN like the web TV service. Senator LUNDY—Okay. Sorry, I did not realise you were making such a distinction in terms of the delivery mechanism. Let us talk about web TV–I know that is a brand name– Mr Rolland—‘Interactive television’ is a more generic term. Senator LUNDY—Thank you. Let us also talk about the proposals there. You mentioned the PSDN delivery mechanism. What scope is there in terms of exclusive co-production for that style of content in the agreement? Mr Rolland—I think I mentioned before that the exclusive co-production can be run across a number of different networks, excluding broadcast spectrum. Senator LUNDY—Pay TV, the cable network? Mr Rolland—No, it excludes pay TV. Senator LUNDY—It does? Mr Rolland—It excludes pay TV and pay per view. Senator LUNDY—So it excludes, for example, what Foxtel currently deliver across the Foxtel suite? Mr Rolland—Correct. Senator LUNDY—But it does not exclude what you could potentially deliver over your cable modem product? Mr Rolland—Correct. Senator LUNDY—So it could be like cable TV, pay TV? Mr Rolland—No, I do not believe so in terms of style or richness. Senator LUNDY—Are you constrained by the definitions under the broadcasting act from delivering across a cable modem system, for example, a video on demand style service? Mr Rolland—This agreement does not address– Senator LUNDY—No; answer that question. Mr Rolland—Could you ask me that question again, please? Senator LUNDY—Are you excluding from delivering video style services across your cable network under this agreement? Mr Rolland—Yes. Senator LUNDY—You are excluded? Mr Rolland—Yes. Senator LUNDY—Are you sure about that?

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Mr Rolland—That is pay per view. Senator LUNDY—What about video style services? Mr Rolland—In terms of putting a video stream down their– Senator LUNDY—Yes. Mr Rolland—No, we are not excluded. Senator LUNDY—You are not excluded? Mr Rolland—No, and that goes to the point I said before, that we can put this content over HFC for our cable modem service, satellite for our online service, narrowband or wireless Internet. Senator LUNDY—When we are talking about interactive TV, we are actually talking about a delivery mechanism for a broadcast style interactive television product, a datacasting style interactive television product, outside of the broadcast spectrum delivery mechanisms. Mr Rolland—Our definition of interactive television, like web TV, is around taking the Internet on to the TV screen, as opposed to broadcasting programs. Senator LUNDY—But my point is you are constrained by the current datacasting definition in terms of the content you can deliver across that network, are you? Mr Rolland—They have two different definitions. Senator LUNDY—Just answer the question. Mr Rolland—Yes. Senator LUNDY—You think you are constrained? Mr Rolland—Under the current definitions of datacasting, no, we are not constrained because they have two different definitions. Senator LUNDY—The answer is no, because it is not across the digital spectrum – right? Mr Rolland—Correct. Senator LUNDY—That is what I wanted to know. In terms of cross-marketing and issues relating to that, do you have any content that goes out across that network? Do you have exclusive co-production arrangements with all of that content? Mr Rolland—In this agreement? Senator LUNDY—Yes. Mr Rolland—No, the exclusive co-production is a finite amount that is capped. There is only a small proportion that will be exclusive co-production, all the rest is non-exclusive. Senator LUNDY—I am talking specifically about content across the cable network. Mr Rolland—The content that is made available to us – Senator LUNDY—That we have just been talking about. Mr Rolland—The content that has been made available to us in the non-exclusive component and the exclusive co-production could be repurposed for delivery over cable modem. Senator LUNDY—Being protected by exclusive co-production under this agreement? Mr Rolland—I am answering the question by saying there is a big chunk of non-exclusive content, and there is a much smaller proportion of exclusive. Senator LUNDY—But remember it is going through a repurposing layer here. You will have to repurpose it for that delivery.

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Mr Rolland—The repurposing component does not capture the exclusivity. Repurposing is both non-exclusive and exclusive content. There is a small proportion that we will both work on together as exclusive co-production which then may be repurposed. Senator LUNDY—In terms of the capacity on that content, in terms of your capacity to co-promote or advertise, is it your understanding that there is a capability to advertise within that content? Mr Rolland—We are excluded from advertising around any page that has ABC content. Senator LUNDY—It is new content, it is interactive TV content that we are talking about. It will obviously be a combination of ABC content, but it could also include anyone else’s content that you choose to purchase. Mr Rolland—Yes. Senator LUNDY—How will you manage the advertising regime around that? Does that mean you just do not show ads if you are pumping something out that was sourced from the ABC, but you advertise everywhere else? Mr Rolland—Correct. Senator LUNDY—That’s it? Mr Rolland—Correct. We still are to sit down and sort out the detail of that, but that is correct. Senator LUNDY—Right. So, by creating this sort of consolidated interactive TV content, ABC content is potentially presented amongst other content and you will have to define what is and what isn’t. Mr Rolland—Senator, I suggest we split the two issues. Interactive television at the moment is simply us working together. We do not have a service today – Senator LUNDY—Sure, I have just got a mind for the future. Mr Rolland—Okay. The HFC cable issue on content is here today. So how we view interactive television is difficult for us to answer today, and that is why we wish to work together to find out how it can operate. Senator LUNDY—Thank you. CHAIR—Any other questions? Senator MARK BISHOP—Minister, I want to talk about the government’s attitude to comments in today’s press, specifically in the Australian by the chief officer of Telstra where the good doctor referred to possibly selling or floating key assets of Telstra. I think he mentioned Yellow Pages, a series of overseas assets, the online business, and possibly the mobile phone business. He referred to them as the ‘jewels in the crown’ and said that since his visit to Switzerland he was in the process of reviewing Telstra’s attitude to those key assets. They were no longer to be regarded as core aspects, I think is what he said, and could be flogged off. You will recall that either last year or the year before the government brought legislation into the parliament that would have given the government the right, if it had been passed, to fully privatise Telstra after an inquiry was undertaken and certain service levels were met. If that had been ticked off, you would then have had the right to sell the other 51 per cent that was outstanding. That particular clause in the bill at the time was defeated and it did not become law. It was effectively a rejection by the parliament of the proposition for the whole privatisation of Telstra. Since that time you have brought forward the bill in a different form,

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 120 SENATE—Legislation Thursday, 10 February 2000 partially privatising Telstra, and that went through. But still the people of Australia own 51 per cent of Telstra. We now have the chief officer proposing to sell the ‘jewels in the crown’ – the key core assets, and in particular I refer to the mobile phone business which is undergoing huge growth and appears to be part way through the process of replacing the landline as the chief medium. Does the government have a view on Telstra selling off or floating by way of equity raising those key assets of Telstra? What is the government’s attitude? Senator Alston—I have not had an opportunity to read Dr Switkowski’s comments in detail, but my understanding of the point that he was making is that this would be a second-class solution but one that Telstra is driven to seriously consider because of the intransigence and opportunism of the Labor Party in particular who privatised everything in sight when they were in government but now have an attitude that they will not privatise Telstra until they are satisfied there is sufficient competition in the marketplace. I can well understand his frustration because, having come back from Davos, no doubt he was once again forcibly reminded of all the strategic alliances, the megamergers that are being undertaken and the obvious limitations that are imposed on Telstra in moving in that direction because of their inability to dilute their shareholding arrangements by scrip transfers. As a result his point is that Telstra is severely handicapped by being in this halfway house. At the end of the day our obligation is to ensure adequate delivery of services, which we do through the whole parliamentary regime – whether it is the USO or whether it is the CSG or whether it is price caps or a whole raft of other obligations that are imposed irrespective of ownership. So if you really want to address these issues, perhaps you could go back and have a good, long think about your opportunistic attitude and accept that every other country in the world is going down this path, and it is about time we did too. Senator MARK BISHOP—I do not know if I want to address that. What I want to occur is for the government to advise whether it supports the chief officer of Telstra in his desire to sell the jewels in the crown, the fast growing businesses with the greatest revenue streams, because that is, if nothing else, privatisation by stealth. That is in the back door. You tried to bring it in the front door the proper way, and it was rejected by the parliament. You might want to try again to privatise the whole lot. As far as we are concerned, bring in the bill and we will see what happens. But at the moment we have, apparently, what you call a second- class solution being floated which involves the most profitable revenue streams of the corporation, 51 per cent owned by the taxpayers of Australia, being flogged off. I am asking you what the government’s position is on that. Do you support it or do you oppose it? Senator Alston—As I say, I have not even read his remarks in detail, let alone seen anything formal on the subject. I understand that what he is doing is expressing his frustration at the refusal of the parliament to allow the privatisation to occur when every citizen under- stands that that does not need to compromise the quality of service or the whole raft of minimum requirements that are imposed upon the telecommunications sector, despite the fact that apart from Telstra all the others are privately owned. I think all that Dr Switkowski is doing is pointing out that Australia will continue to be handicapped whilst it has this outdated approach to the issue of privatisation. Senator MARK BISHOP—Minister, I find that an odd comment. Over Christmas I read comments of the board and the chief officer repeatedly referring to the high standards of communication in Australia and how we were a leader in the marketplace in Asia. Indeed, in the last estimates Mr Ward referred to a report where that had been found – that our costs were going down, that there was more competition in the marketplace, that Telstra and its

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 121 competitors were offering bigger and better and different services and that there was growth all over the place. I read the opinion polls which still show that a significant majority of Australians regard Telstra as a fine Australian public asset. They are not keen for it to be sold off. They are not keen for it to be flogged off. You have tried to flog it off and it has been rejected by the parliament. What I am asking you is for the government to disavow or distance itself from the comments of the chief officer or, alternatively, if the government supports the chief officer, it should come forward and say so. That is what we are asking you to do. Do you support the chief officer or not? Senator Alston—My recollection is that at the time of privatisation of the Commonwealth Bank – which you went to an election studiously promising not to further privatise – you probably could have found public opinion polls then which showed that people were opposed. That is not the basis on which governments make decisions. They do it on the basis of what is the best policy outcome for consumers, and they also look to the health of an asset in which they currently have a majority interest, but only as a secondary consideration. I can fully understand that in a highly competitive international, and increasingly national, marketplace that Telstra wants to be ‘best of breed’ in every regard. If you are the one player who cannot enter into mergers, if you cannot effectively operate in strategic alliances in a way that other companies around the world are doing, then you should not be surprised if they start to look at some other alternatives. It is no secret that Telstra’s position is viewed askance by overseas investors and advisers who understand that there are very significant constraints on it entering into joint ventures or, indeed, equity swaps. It puts them in a unique situation. Senator LUNDY—Minister, are you on Telstra’s payroll? You seem to have the lines right in terms of advocating their interests as a company? Senator Alston—No, I have made it clear – Senator LUNDY—Apart from using it to prop up your own political campaign. Senator Alston—Obviously your ideology is once again overtaking your ability to listen. I said that our principal concern was to ensure that services were delivered. Senator LUNDY—You are a long way from that. Senator Alston—As a secondary matter, whilst we were still the majority shareholder in Telstra, we had a direct financial interest in the outcome. I think we get a second best result from our investment with those constraints on Telstra, but there is absolutely no link and you well and truly know it. It suits your purposes prior to an election to take the view that somehow ownership and services are linked. They are not. If the parliament wants to impose an even stricter regime in terms of quality of services, it can do it. You may well, of course, financially disadvantage some of the players in the marketplace, but there is nothing to stop the parliament. It has absolute sovereignty in regulating the telecommunications sector. There is no constitutional difficulty, as there might be in the US. We can do whatever we like to ensure that customers are not disadvantaged. That is our primary concern. But if you ask me whether Telstra has the optimum ownership structure then I say that it is in no-man’s land, and that it is a very unsatisfactory situation for a company that is looking to operate in the way that all of its competitors operate.

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Senator MARK BISHOP—I am not asking you, Minister, whether Telstra has an optimum ownership structure. That is a value judgment, and different people have different attitudes. What I am asking you – Senator Alston—I thought you were asking me about this whole issue of privatisation. Senator MARK BISHOP—No, I am not asking you that. I am asking you whether the government supports the sale of key assets of Telstra. I specifically identified Yellow Pages, online business and the mobile phone business. Senator Alston—You mean the Keating model. Senator MARK BISHOP—I beg your pardon? Senator Alston—You are asking me about the Keating model. Senator LUNDY—Just answer the questions. Senator MARK BISHOP—No. I am asking whether the current government supports the sale of those particular businesses of Telstra. Senator Alston—Which Labor, as I understand it, has never walked away from. You may have – for tactical purposes – gone quiet on the subject, but perhaps you might get the ball rolling by telling us whether you still support the Keating propositions, which were advanced on our friend the ABC, the 7.30 Report. Senator MARK BISHOP—We are not discussing it. Senator Alston—I am. The only people who have expressly advocated the selling-off of critical parts of Telstra are the Labor Party. Okay? Senator MARK BISHOP—And so you reject that, do you? Senator Alston—We sold it as a going concern. Senator LUNDY—Rule it out right now! Senator MARK BISHOP—Do you reject it now? Is the current government’s position to reject the sale of key assets of Telstra? Senator Alston—I have told you that what you were proposing in the lead-up to the 1996 election was to hive off a number of assets. We had a very different position, and that was to sell Telstra as a going concern, and we continue to adhere to that situation. Senator MARK BISHOP—So you still want to sell Telstra as a going concern. You have been unable to achieve that via the legislative process. The chief officer now wants to sell off the jewels in the crown. Senator Alston—I have no idea what the chief officer wants to do. Senator MARK BISHOP—Read the Australian today: it is on page 1. Senator Alston—Everyone is entitled to have a say in the media. Senator MARK BISHOP—Ask Mr Stevens. He will tell you. CHAIR—Senator Bishop, the minister has given a very clear answer on the government’s position. Senator Alston—If you are asking me for a formal response to a formal proposition, I have not had any such proposition put to me. I understand his remarks to reflect the continuing frustration at the inability of Telstra to operate in the way that all of its major competitors around the world are now able to do because government regimes of all persuasions – conser- vative or not – are going down this path, as you well know and as you would do, quick as a

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 123 flash, if you got into government. Has Cheryl Kernot ever resiled from her proposition that she was not so worried about what Labor would do in opposition, it was what they would do in government that worried her on privatisation? Senator LUNDY—Will you rule out selling off those assets? Senator Alston—She might have had some ideological commitment to the issue. Senator LUNDY—Answer the question, Minister. Senator Alston—Yours is entirely opportunistic. Senator LUNDY—Answer the question: will you rule out the sale of those assets? Senator Alston—I have given you an answer. Senator LUNDY—Or are you going to blackmail the Australian public with the idea that this is the alternative if they do not proceed with privatisation? CHAIR—With respect, Senator Lundy, the minister has set out the government’s position very clearly. Senator LUNDY—It is blackmail. Senator Alston—Why don’t you have this debate at a party branch? You will probably get a lot more applause there. Senator LUNDY—It is blackmail, nothing more. Senator MARK BISHOP—We are interested in you telling the Australian people whether you support or oppose the sale of key assets by the current administration of Telstra. Senator Alston—I have just said to you, and I will say again, that no formal proposition has been put to me. I have not even read in detail the remarks to which you refer. My understanding is they reflect the continuing frustration of Telstra – and, indeed, the government – at your refusal to face up to reality. The reality is that you can absolutely protect every consumer in Australia, you can have a much better outcome for the entire community – including close to two million Telstra shareholders, some of whom are on the Labor Party side of the parliament – and you can have a win-win situation. You do not want to do that, for opportunistic reasons. I do not think the public for a moment thinks that you would maintain that position in government. So, if you want to get real about the debate, let us have it all again once more in the parliament – and I am sure we will. Senator MARK BISHOP—I am sure we will. Senator Alston—This is not meant to be an opportunity for yet another tired re-run of your union driven intransigence on the subject. Senator LUNDY—You forgot Cuba and Albania. Senator Alston—We will save Cuba and Albania for next week. There are probably others. Senator ALLISON—Is it necessary for legislation to pass to sell off the Internet mobile system, Yellow Pages, et cetera, as has been suggested? Senator Alston—I do not know what has been suggested. If you are asking for a legal opinion, we can see what might be available. Senator ALLISON—Perhaps I could ask Mr Ward if it is his understanding that divesting those parts of Telstra would need legislation.

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Mr Ward—I think what our CEO was saying is that the international marketplace and the domestic marketplace are so dynamic that we continue to have to review our options. Senator ALLISON—I did not ask you why you want to do it. I asked you whether it was necessary for legislation. CHAIR—I think you should give Mr Ward the opportunity to answer, Senator Allison. Mr Ward—I was going to go on, Senator, if I could, to say that any proposition would need to go first of all to the Telstra board. That proposition would need to be in the interests of all our shareholders and it would need to comply with existing legislation. Senator ALLISON—So that means it would need changes to existing legislation. Mr Ward—No. I said that, if we take a proposition to the board, first of all, it needs to recognise the marketplace we are operating in. It needs to be in the interests of all our shareholders. It would need approval by the Telstra board and it would need to comply with existing legislation. Senator ALLISON—But what does that mean? Can you sell those assets and have it comply with existing legislation? Mr Ward—If you read the article carefully, the CEO was talking about the use of those assets in particular deals. There are lots of possible options in terms of us deploying those assets. I think the important thing is whatever we would take to the board needs to be in the interests of all our shareholders. Senator ALLISON—But what does that mean ‘deploying the assets’? Mr Ward—We would need to get specific proposals. We do not have any specific proposals that we are dealing with at the moment. Senator ALLISON—So there could be a specific proposal which deploys the asset but does not actually remove it from Telstra. I am just trying to understand what you mean by deploying assets and complying with the existing legislation. That suggests you are looking for a way of avoiding changing the legislation. Would that be fair? Mr Ward—I think the important point is that we are looking at a range of options. Any- thing that we do with those assets will go to the Telstra board. The Telstra board has to operate in the interests of all our shareholders and obviously comply with the existing legislation. Senator ALLISON—So, in those options, a criteria for the option that you might put to the board will be not having to change the legislation. Is that correct? Mr Ward—That is too speculative for me to comment on. Senator ALLISON—Okay. So some of the options might involve legislation? Mr Ward—That is possible. But at the end of the day, if Telstra is to do anything in this regard, it will need to have legislative approval. It needs to comply with existing legislation or any other legislation that might occur. Senator ALLISON—Who is currently writing those options in Telstra? Who is developing the plan to go to the board? Mr Ward—There is constant review by our key executives of options in the communications and information economy. As I think our CEO pointed out, things in this industry now change quite rapidly and we need to continue to review those options. Senator ALLISON—So somebody is developing the options. The CEO presumably is part of that. Who else is involved?

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Mr Ward—The executive is involved. I do not think it is appropriate to talk about individuals in the company. At the moment it is the management team who continue to look at various options in an ongoing way. Senator ALLISON—This morning’s Australian reports that these assets are worth $6 billion in revenue. Would that be something you would agree with? Mr Ward—$6 billion – I did not say that. I am not quite sure what that is covering. Mr Stanhope—That is the collection of the mobile business and the Yellow Pages business and so on that have been added together to say it is $6 billion. Senator Alston mentioned some of the difficulties we have in that, when you want to engage in an Internet play, our position is that we have to pay cash because we do not have scrip to which we can deal for that sort of equity engagement. It would be ideal in the world we are in today to be able to deal in the same currency – for example, to be able to deal in Internet scrip to get into other Internet players. We are just unable to do that. What the CEO is really talking about is how can we restructure ourselves inside the company – I think it is a fairly big leap to suggest we are going to flog off large assets of the company – to maximise the shareholder value of the company for everybody and also to be able to participate in the new economy, if you like. That is what he is really talking about. I am involved in that as director of finance. The senior leadership team is involved in it. How can we get ourselves to a situation where we might do that. If you have a look around the world, there are a number of mechanisms to do that, like investment vehicles – Senator ALLISON—Sorry, what was that – investment? Mr Stanhope—Various investment vehicles. Senator ALLISON—Vehicles? Mr Stanhope—Yes. AT&T has just done a tracking stock with their mobiles business, for example. We are not thinking of a tracking stock, but that is just an example of restructuring of a company to be able to position itself to pay in like currency or to join this larger global game, if you like, in the same way. Those are the sorts of things he is talking about. Senator ALLISON—So we are not talking about a share float? You would not be putting the Yellow Pages out to the public? Mr Stanhope—That has not been contemplated. You might put a couple of your small businesses or some of your investments into an investment vehicle and IPO some of it – 10 per cent of it or something. If you did something like that, you would have some scrip to deal with. Senator ALLISON—So it is not a public – Mr Stanhope—And this is an important point: that would help you to maximise your total shareholder value, but it would not dilute the Commonwealth’s shareholding. Senator ALLISON—So we are not talking about a public float of anything? Mr Stanhope—I did not say I am not talking about a public float of anything; I just gave you an example where you might put a couple of things into a vehicle that you may do an IPO on a small percentage of. Why would you do that? You would do that because it does give you some scrip availability. Senator ALLISON—Are any of the options, including a public float, likely to be put to the board? Mr Stanhope—Not of the whole of the company or not of a large piece of the company.

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Senator ALLISON—No, that is not what I asked you. Is any aspect of the options being put to the board – a public float of any aspect of Telstra’s business? Mr Stanhope—One option could well be that. It has not been put to the board yet. It is still being discussed, along with other options, inside the company. Senator ALLISON—Which of those parts of Telstra are being discussed at present? Mr Stanhope—It has not even been decided. Even to mention some of them would be quite dangerous, I would suggest. Senator ALLISON—Okay. Is there a point at which – CHAIR—I think you can justify it by saying it is commercial-in-confidence. Mr Stanhope—It is certainly – Senator ALLISON—It is a public company. CHAIR—It is operating in a public arena – Mr Stanhope—Accepting we have shareholdings in other companies. Senator Alston—Public companies do not go around disclosing all the things they are considering internally. CHAIR—Exactly. Senator ALLISON—Mr Stanhope, what would the implications be for the existing two million shareholders in Telstra of even a small part of Telstra’s operation being taken away and put into a public float? Isn’t it the case that not only the Commonwealth currently owns half of everything that Telstra has but also that those two million shareholders own what you are suggesting is a possibility that Telstra might want to divest and put to a public float? Mr Stanhope—The implication may well be that the value of their shares may increase. Senator ALLISON—How would that be? Mr Stanhope—Because we have been able to maximise the shareholder value of the company – Senator Alston—One would be very surprised if Telstra was contemplating a decision that was not in its best commercial interests. If you are suggesting that somehow shareholders have a right of veto over commercial decisions that the board believes are in its best interests, then it is very novel proposition. Senator ALLISON—Presumably there is revenue flowing from some of these. Let us take one. Let us take Yellow Pages. What is the revenue from Yellow Pages? Mr Stanhope—Off the top of my head, it is probably in excess of $1 billion. Senator ALLISON—Two billion dollars? In the event that that is divested and put to a public float, that $2 billion no longer flows as revenue to the two million Australians who currently own shares in Telstra. Is that correct? Mr Stanhope—I already suggested to you that that was not being considered. Senator ALLISON—We are having difficulty understanding what is being considered, Mr Stanhope, so this is the only way I can get at it. Mr Stanhope—The example I gave you is to set up an investment type vehicle where you may put some assets into it, be they investments that we may have or parts of the business that we might have, and IPO a small percentage of it. So Telstra still has the controlling interest in that entity and so do all the shareholders, including the government. Why would you do that?

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You would do that because, first of all, you get yourself some cash to be able to invest in other investments. Secondly, you also have some scrip which you can also exchange as currency, if you like, for other like investments. That would increase the shareholder value of the company and hopefully that would be seen by analysts and so on to be value adding. The share price ought to increase accordingly. Senator ALLISON—That sounds like a worthy proposition, and I do not have a problem with your arguments. But I asked you whether there was any part of Telstra that might not be the investment arrangement that you are suggesting but might be a public float, and you said it was still a possibility. My question relates to that possibility. Mr Stanhope—The possibility is in that sort of vehicle that I am suggesting. If you are asking me whether we would IPO Yellow Pages, I am saying that is not what I am suggesting in my proposition at all. Senator ALLISON—Sorry, IPO? What does that mean? Mr Stanhope—An initial public offering – float, if you like. Mr Ward—If I can make this point: the CEO used the phrase ‘the jewels in the crown’. It would be highly unlikely – in fact we just would not do it – that we would sell off those jewels in a way that could be detrimental to the whole 100 per cent of the shareholders of Telstra. What we are really talking about and what the CEO is really speculating about is that we may have to deploy those jewels in different ways to grow the value of the company. There are all sorts of options that are possible and combinations of options. Coming back to the point I made to you, whatever we do has to be in the best interests of all shareholders, plus it has to go through the governance of the board and comply with legislation. Senator ALLISON—We have often heard about the frustration experienced by Telstra, the enormous constraints of 50.1 per cent government ownership and the inability, I think you said, to operate in the international market. What exactly are those constraints? You have talked about cash and scrips. What else constrains Telstra in terms of being a competitive player? Mr Ward—I think the dealing in scrip is a key issue, particularly the way the industry is unfolding globally. I would have to say – and I think I have given evidence to this effect at the sale committee hearings in the past – that some of the parties we deal with are not necessarily attracted to be dealing with a company that is majority government owned. They do not necessarily see that ownership as in their best interests in commercially going forward. Senator Alston—And they probably still shudder when they see that the ministerial power of direction is there, because it is potentially a blank cheque. Senator ALLISON—If you ever used it, Minister. Senator Alston—But that is the point: Labor never used it and we say we will not use it. But what if Senator Schacht had become the minister? His attitude was, ‘If we have ever got a problem in a marginal seat, we will tell Telstra to fix it up.’ That sends shivers down the spines of anyone who is interested in maximising shareholder value, including the two million shareholders. What is happening at the moment is that Dr Switkowski is reported as being very concerned that when he returned to Australia more than $6 billion had been wiped off the value of his company at a time when the value of telecommunications companies elsewhere around the world were soaring. His concern is that Telstra is in a straightjacket that applies to no other major telco around the world. Senator ALLISON—Minister, we are trying to determine what this straightjacket is.

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Senator Alston—Just listen, will you! You have Vodafone and Mannesmann getting together – Senator ALLISON—We have heard this speech before. Senator Alston—and you have megamergers like ALO and Time Warner, all almost entirely driven by scrip for scrip exchanges. In other words, they are not shelling out precious cash which they might want to use for reinvestment or for increased dividends or whatever else, they are actually issuing scrip. That is how these mergers are occurring. Telstra could be left lamenting because it is not able to do those sorts of deals without diluting its current shareholding structure. What is happening at the moment is that those parties who are opposed to the further privatisation of Telstra are effectively saying, ‘We don’t care if Telstra ends up in a global backwater. We don’t care if all its competitors around the world are able to use all of these commercial arrangements, but it can’t. We don’t care if Telstra has one hand behind its back whilst all its competitors are out there punching with both hands.’ It seems to me that you ought to have a good look at yourselves on the other side. I am di- recting this particularly to Senator Bishop’s party because they have had, as you well know, a very flexible and opportunistic attitude to privatisation. They well know that privatisation has made sense in a whole raft of areas. There is absolutely no logic in this day and age as to why the parliament cannot properly regulate the quality and range of telecommunication services, why you cannot have cross-subsidies to your heart’s content, why you cannot have any manner of restrictions and guarantees, but at the same time free up ownership. Ownership is an absolute red herring when it comes to insisting on quality of service. We are absolutely committed to that. We put consumers’ interests first. We do not want to be second-guessing the commercial operation of the company that is almost the largest on the Australian Stock Ex- change. If you take the view that you really do not care that $6 billion has been wiped off shareholder value, then there are two million people out there who will not be very happy with that either. We are not expressing this frustration because we somehow want to help Dr Switkow- ski and a few of the other management group. We are concerned that Telstra ought to be able to prosper; it ought to be able to do its best on the national and international stage, and do it in such a way that it benefits shareholders. And to the extent that it is bringing new services and applications to Australia, that is in everyone’s best interest. Senator ALLISON—Mr Ward, what arrangements are there presently between Telstra and overseas organisations? Mr Ward—Could you be a bit more specific about the question? We have lots of arrangements with overseas suppliers in the way we deliver international services to customers in Australia and customers overseas and with traditional telcos. Senator ALLISON—It is more than suppliers, isn’t it? Mr Ward—We have a lot of equipment suppliers that supply us both here and offshore. Mr Rolland’s group is talking to a lot of content suppliers overseas as well as local content providers. We have a rich set of arrangements. We have businesses in many parts of the world, both retailing and wholesaling to international customers. Senator Alston—If you ask what strategic alliances they have got, I think they still have 20 per cent of that licence in central Java. There is not much else you can point to, yet you will find all these other telcos are out there taking equity stakes, developing strategic alliances that are much more effective, much more in their commercial interests, and much more bene-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 129 ficial to shareholders. Telstra has a constraint that applies to no other telco around the world these days. Senator ALLISON—You still say strategic alliances are restrained. Is the restraint other than merging arrangements? What constraints on Telstra are there in terms of delivering a business? Mr Ward—I think it is a combination of the scrip issue and the uncertainty that the current ownership structures bring with it. Senator ALLISON—By uncertainty do you mean the minister’s power to direct. Mr Ward—Yes, the minister’s power of direction and the uncertain expectations of privately owned companies about what a government controlled company might do. It just delivers an element of uncertainty for people who – Senator ALLISON—Do you think the minister’s power to direct has been responsible for the share price going down? The Minister seems to suggest that. Is that your view too? Senator Alston—No. What I said was, if you are someone offshore looking at getting closely involved with Telstra – Senator ALLISON—No, Minister. You spoke about the share price. Senator Alston—I quoted Dr Switkowski. When he returned to Australia last week, more than $6 billion had been wiped off the value of his company at a time when the value of telecommunications companies elsewhere around the world were soaring. Senator ALLISON—And you attributed that to your power to direct. Senator Alston—That power of direction is so broad that Telstra could enter into some agreement that we could veto. Senator ALLISON—But you did not introduce a power to direct when the CEO went off overseas. It has always been there. Senator Alston—Exactly, because people are increasingly becoming aware that this is a company that is suffering from constraints that do not apply to others – and you can smirk as much as you like. It is a company that cannot get into the same sorts of arrangements that other telcos are getting into around the world. Do you deny that? Senator ALLISON—So it suddenly happened in the last two months. Senator Alston—Share prices do actually suddenly move – quite often very substantially. Senator ALLISON—Not because you have got the power to direct, Minister. Senator Alston—You can laugh. You could say it is an act of God. The fact is it is a market response to an assessment of the company’s future prospects. That is what drives share prices. Senator ALLISON—Perhaps, Minister, it is your talking down of Telstra too. Senator Alston—If shareholders, financial advisers, fund managers and investors of all descriptions – institutions and the like – take the view that this company’s long-term prospects are not as good as its competitors’ because it will continue to be under the yoke of government and it is at risk of being second-guessed or even vetoed by opportunistic government decisions; then they will mark it down accordingly. If you have a better explanation for a de- cline in the share price, let us hear it. What is it? Senator ALLISON—Perhaps it is because the Prime Minister has announced that he is selling off the rest. Maybe that is the reason.

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Senator Alston—You are not serious. You say ‘because the Prime Minister announced that he is selling off the rest’, but this has been government policy probably since the start of the 1990s, when we have been on about this subject. There would not be a fund manager or an institution around the world that did not understand that this government is dead keen to go down this path, and it is being blocked only by an opportunistic opposition party in this country. They know all of that, and they would be very worried. This is a judgment that they have made in recent times about the future prospects of the company. Senator ALLISON—Are you exploring options that might avoid legislation going to the Senate, as well? Senator Alston—No, we are not exploring any options. CHAIR—Is that all, Senator Allison? Senator ALLISON—Yes. Senator LUNDY—I want to revisit some earlier points with Mr Rolland. We were discussing earlier the development of interactive TV style content over, according to what I think you said, the PSDN network or a cable-modem network and that that sort of interactive content is certainly characterised within the realms of datacasting in terms of style. Is that a reasonable assessment? Mr Rolland—In terms of putting video stream down for a defined period – yes, that is possible. Senator LUNDY—Is there anything in the agreement that you have with the ABC that would preclude you delivering that content in conjunction with ABC broadcast content if you had the right box to be able to bring together those two different forms of digital content? Mr Rolland—There is an agreement that the ABC can look at where that is being streamed. So the answer I believe is yes, but I will take that on notice and check it. Senator LUNDY—Thank you. The upshot of that, of course, is that through this arrangement the ABC might be able to have datacasting services outside of the current definitions as they are provided for datacast material streamed across the digital spectrum. Mr Rolland—I do not believe that is covered in our agreement. We are excluded from putting any of this content over the digital spectrum. Senator LUNDY—That is my point: you are not excluded from putting over your cable network or PSDN. Mr Rolland—No, that is right. Senator LUNDY—So you could in fact present a product on people’s TV sets of an interactive TV of datacasting style that is not constrained by the datacasting definitions as they are currently constructed. Mr Rolland—As they are currently constructed. Senator LUNDY—Thank you. I would like to turn to other issues that I have followed through previously – that is, Telstra’s involvement in regional telecommunications infrastructure fund projects, as well as issues relating to Telstra’s involvement in government business. Turning to the RTIF issues first, answers to previous questions on notice reveal that Tel- stra has a possible interest in some 114 of the RTIF projects released to date. Can you clarify exactly how many RTIF projects Telstra has a direct interest in?

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Mr Ward—We provided a number of answers following the last set of hearings. In terms of further information that we have on hand here today, I would have to take on notice any further questions. Senator LUNDY—Do you have someone here who handles your relationship with the RTIF or networking relations unit? Mr Ward—No. He is not here today. We have covered most of the bases so far, but we do not have that expertise here with us today. I am happy, as we have done before, to take questions on the RTA. Senator LUNDY—One of the particular projects that Telstra has been involved in is the RABS project – I do not remember the full name. Senator Alston—The Remote Area Broadcasting Service. Senator LUNDY—There was an application by Telstra for nearly $9 million to put in place that system. Minister, you seem to have some knowledge of this. Can you just describe what the RABS project delivers? Senator Alston—RABS used to consist of Imparja, Golden West and one other. I think it has now shrunk down to two, since Golden West disappeared. You have Imparja and what is now called Network 7 or something. There are two remote area broadcasters, as I recall. Mr Stevens—My recollection is that there are three commercial remote broadcasters. CHAIR—WIN, TWN and Imparja. Senator LUNDY—A $9 million project was approved by the RTIF. Senator Alston—Yes. Senator LUNDY—It was to deliver a remote access broadcasting service to regional Aus- tralia. What are the terms and conditions of the agreement in relation to the delivery of content within the scope of that project? Senator Alston—I do not think the funding is predicated on any content restrictions. It is simply a subsidy to the user of up to 50 per cent of the total cost of the receiving equipment. There is a specified number of remote communities. Mr Stevens—That is my recollection. If there is any difference we will let you have that information on notice, but that is my understanding. Senator LUNDY—Yes. I am exploring the implication because it seems that while it allows for the delivery of broadcast content, obviously, in those areas – Senator Alston—But it is just facilitating the conversion. The problem was that those commercial networks were going across to digital unilaterally – they did not need our approval – but by so doing people who did not convert across missed out altogether. So they were not simulcasting. We are really just subsidising people to be able to afford those services. They get a better range of services as a result. Senator LUNDY—You had identified this problem from a policy perspective quite some time ago? Senator Alston—This has been an ongoing issue, particularly in Western Australia, for a couple of years. Senator LUNDY—When you knew you needed a market solution to deliver this, did the department approach Telstra to make this application?

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Senator Alston—Yes. There would have been discussions with all the major players. I think part of the problem was that Telstra were using a different satellite service from Optus and there was therefore concern about the extent to which you had incompatible platforms. I cannot remember the detail of it now. Mr Stevens—I think the problem there was that the two satellites were the Optus satellite and PanAmSat, and a number of different suppliers of programming had chosen different commercial satellite delivery systems. Our concern was to ensure that any consumer could actually access all the services without having to get two dishes and two vehicles. Senator Alston—The ABC, SBS and one of the commercials went to one satellite and the other went to the other. Mr Stevens—I think the solution was that they were being simulcast on both satellites, at the end of the day; that is my understanding of how that was resolved. Senator Alston—Yes. Senator LUNDY—Was there competitive tendering with respect to this $9 million project? Senator Alston—No, I do not think so. Obviously, we got advice from various people. We came to a judgment that the total cost was around $1,500 and we would pay 50 per cent of that. Senator LUNDY—And Telstra got the other half. Mr Stevens—I would have to take the details on notice, I cannot recall the actual details of the process. Senator LUNDY—I would like full details about the project itself, but also whether or not there was any competitive tendering, and who initiated the approach or whether this is just a bit of a deal. Senator Alston—This is a consumer subsidy, not a Telstra subsidy. Senator LUNDY—Telstra were the ones in receipt of the $9 million. They made the application. Senator Alston—I would be surprised. The RTIF program is essentially community based applications. Senator LUNDY—Let me tell you what the application form says: name of organisation Telstra Corporation; project cost $9 million; project title Remote Area Broadcasting Scheme Digital Conversion. What I want to know is why Telstra got $9 million of RTIF money without a competitive tender on something that obviously gives them the significant technological advantage in a critical area of the market. That is what I want to know. Mr Stevens—I think we will have officers here this afternoon who might actually be able to give more detail than I can, but we have to take it on notice. I think it was quite a complex issue and I simply would like to get the details right for you. Senator LUNDY—I suggest you do and I will look forward to revisiting that. Can Telstra take on notice to provide full details on how they expended every cent of the $8,919,000 that they received from the RTIF? Mr Ward—Is that the same program?

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Senator LUNDY—Yes, it is. It changes through the course of the application form from the project cost being $9.6 million to the funding amount actually sought in the latter part of the application form. Mr Ward—We will give you the Telstra aspect of that in detail. Senator LUNDY—It does seem to me that that money is reimbursed to those customers through Telstra. The other question I want to ask is: what relationship, if any, has this project had with the presentation of the Telstra satellite advance product delivering ADSL, if there is any relationship at all with your capacity to use that spectrum to deliver those services? Mr Ward—I suspect there is not, but I will take that on notice. Senator LUNDY—I am also interested in Telstra’s relationship with the coalition government in other ways. Currently, Telstra are involved in several significant federal government projects, including those relating to the IT outsourcing program and other major communications contracts with the federal government. Can you tell me, including where it is not just Telstra Corporation but perhaps a Telstra subsidiary or a Telstra partnership, the major contracts that you have with the federal government and their approximate value? Mr Ward—I will have to take that on notice. Mr Stanhope—We will take that on notice because there are many of them, customer contracts and – Senator LUNDY—Can we focus specifically on the IT outsourcing program, particularly the interest that Telstra has with respect to IBM GSA? What is Telstra’s current interest in that company? Mr Stanhope—It is currently 26 per cent, and as you are probably aware, that interest is reducing slightly as part of the proposed take out of the minorities in Advantra. We did an- nounce our intention to do that. Senator LUNDY—What is the relationship, as far as Telstra is concerned, between IBM GSA and Advantra? Mr Stanhope—With respect to Advantra and IBM GSA there is no relationship, they are a stand-alone operation. IBMGSA is an application developer and a data centre operator, and Advantra is an IT&T service supplier. We have an equity in IBM GSA and it is a stand-alone operation. Advantra is a stand-alone operation as well. Senator LUNDY—Just on that, you had two definitions of what those different companies do. Can you take on notice providing an answer on the different descriptions of those companies is to the committee? Mr Ward—Yes. Mr Stanhope—We will do that. Senator LUNDY—Who are the board members of IBM GSA and Advantra respectively? Mr Stanhope—I cannot tell you off the top of my head. Senator LUNDY—Do they share common board members? Mr Stanhope—No, not to my knowledge. Maybe there is one, Gerry Moriarty. We will give you a list of the Telstra directors. Senator LUNDY—Regarding the recent change in the ownership structures of Advantra, can you outline those for the committee?

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Mr Stanhope—The objective is for Telstra to own Advantra 100 per cent. Lend Lease had an 20 per cent equity share and IBM had a 30 per cent share. It is proposed for us to take out those two shareholders and own it 100 per cent. Senator LUNDY—When was that done, or is it a proposal at this stage? Mr Stanhope—It is still in the process of being done. It has been approved by our board. Senator LUNDY—It has been approved? Mr Stanhope—Yes, it has been approved by the board. Senator LUNDY—When was it approved? Mr Stanhope—Several weeks ago. Senator LUNDY—Can you give me a date? Mr Stanhope—We announced on 2 February that Telstra had signed a letter of intent with the Advantra minority shareholders to take out the minority interests. That would have been approved by the board probably that day, I would suggest. It was around 2 February. Senator LUNDY—You say ‘take out’ the other interests. What were the terms and conditions of you taking out those other interests? Did you make an offer, or did you just buy them out or what? Mr Stanhope—I cannot disclose the terms and conditions. I have already mentioned to you that part of it was a dilution of a couple of per cent of our share in IBM GSA. Senator LUNDY—Can you explain that? How many per cent? Mr Stanhope—I think it took us down from 26 per cent to 24.3 per cent, or something like that. Senator LUNDY—So 30 per cent of IBM’s share in Advantra was worth two per cent of your share in IBM GSA? Mr Stanhope—Plus something else. I did not say that was the totality of the arrangement. Senator LUNDY—What else? Mr Stanhope—I cannot release that. It is a commercial arrangement. Senator LUNDY—What is the nature of it? Does it have anything to do with – Mr Stanhope—Some cash. Senator LUNDY—An amount of money. Mr Stanhope—Yes. Senator LUNDY—Now that Advantra is in the process of becoming a fully owned subsidiary of Telstra Corporation – Mr Stanhope—Yes, it is a 100 per cent owned and controlled entity. Senator LUNDY—Advantra are currently engaged in the group 5 contract under the government’s IT outsourcing program. Mr Stanhope—Yes. Senator LUNDY—I presume you would be very familiar with the agencies and departments that group 5 covers. Do you want to just run through them, please? Mr Stanhope—I know there are five, but I could not tell you the five. Senator LUNDY—Could you tell me the ones you do know?

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Mr Stanhope—No. I would hate to guess, and I will not. Senator LUNDY—Mr Stevens, would you like to tell the committee which of the agencies and departments that the group 5 IT outsourcing contracts cover? Mr Stevens—My own department, the Department of Prime Minister and Cabinet, the De- partment for Industry, Science and Resources, the Department for Transport and Regional Services and the Australian Competition and Consumer Commission. Senator LUNDY—The Australian Competition and Consumer Commission? Mr Stevens—I am pretty sure that is right but, if that is incorrect, someone here should know the answer to that. If I am wrong, I will correct it on notice. Senator LUNDY—That is a pretty interesting group of departments, isn’t it, Minister? Senator Alston—They are all pretty interesting. Senator LUNDY—Information technology is now managed by a fully owned and controlled Telstra company. Senator Alston—What is the point you are making? Senator LUNDY—The point I am making is that, under the terms of that contract, there remains an option for both the Department of Communications, Information Technology and the Arts and the ACCC to pull themselves out of group 5. That clause was put in there, according to evidence heard in estimates this week, if those departments perceive that a conflict of interest may exist or become of concern. Is it in the public interest to have Telstra Corpora- tion running the information technology sections of the ACCC and the Department of Com- munications, Information Technology and the Arts, in your view? Senator Alston—You have Chinese walls in a whole range of areas. The implication is that the largest provider by far of telecommunication services in Australia should be disquali- fied simply because you continue to refuse to allow it to be wholly privately owned. I would have thought that ,as long as there is no compromise of the integrity of those making decisions – and I cannot see why there would be – the people who regulate the telecommunications services in the ACCC are unlikely to be the people who are sitting on the panels making competition decisions. I would expect them to have internal processes to ensure that there are proper Chinese walls in place. Senator LUNDY—What investigation have you conducted? Senator Alston—But we can solve this problem if we can fully privatise Telstra. Senator LUNDY—No, you cannot. My concern is that Telstra have a direct interest in the business of the department, the ACCC and everybody else. The question is one of Chinese walls and public perception, not of public ownership or conflict of interest. That is a different issue. Senator Alston—I do not understand your point. Are you saying that a privately owned telephone company should not be allowed to be providing services to the ACCC? Senator LUNDY—Minister, you have spent all morning advocating on Telstra’s behalf and Telstra have made it very clear – Senator Alston—No. Senator LUNDY—over time that they have a very specific agenda. You have a very specific agenda. Senator Alston—We have a public policy agenda.

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Senator LUNDY—What I am concerned about is that there is a very real concern about the perception that Telstra, or a company only controlled by Telstra, has this contract in terms of delivering information services to those departments. Senator Alston—What is your concern? Is it that a telephone company is providing telecommunications services to government? Senator LUNDY—No, that is not my concern. I just want you to answer the question: first of all, have you considered, in the context of this change of ownership, whether or not a conflict of interest exists within the group 5 contract? Senator Alston—Why do you say there is a potential conflict? Senator LUNDY—I am asking you. Answer the question. Senator Alston—It is an utterly hypothetical matter that has never been brought to my attention. No. Senator LUNDY—I am asking you whether you have ever considered, in the context of the change of ownership, whether a conflict of interest exists. Senator Alston—No, I have not. No one has suggested it to me. I would like you to elaborate on the proposition and we might have a more profound think about it. Senator LUNDY—What is the value of Telstra’s contracts as far as the IT outsourcing program goes – across the range of contracts? Mr Stanhope—I am sorry, Senator, I was distracted. Senator LUNDY—What is the value of Telstra’s interests of the contracts that they have secured in the IT outsourcing program? Mr Stanhope—The value of all the contracts that Advantra has won? Senator LUNDY—Including the interest that they have in IBM GSA. Mr Stanhope—I cannot release that information. What is in the balance sheet of the company will be revealed at the half year and the full year. It will be shown as shareholder interests in other companies. That is all you will see. It is commercial information. It is not public information. Senator LUNDY—My understanding is that Telstra has the communications component of the EDS contract with the Australian Taxation Office. Are you familiar with that? Mr Stanhope—That could well be. Through Advantra we may win the IT component but not the telecommunications component. I think that is the case in the group 5 – that for some of the agencies we might do IT but not the telecommunications. With the EDS arrangement and Telstra, that may well be the case. Senator LUNDY—Please take on notice to provide to the committee the specific details of the nature of the contracts that Telstra has through the IT outsourcing program – and others outside of that – but focusing, within the IT outsourcing program suite, on the value of those contracts. Mr Stanhope—I am not too sure about the value, but when you say the nature, what do you mean? Senator LUNDY—The scope of services that Telstra is providing. Mr Stanhope—Such as who is providing the IT, and who is providing the coms – that the sort of thing? Senator LUNDY—Yes.

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Mr Stanhope—Okay. Senator LUNDY—Can you provide information from within Telstra’s whole suite of sub- sidiaries or partnerships or alliances? For example, I also want the information about IBM GSA and the scope of those contracts, given that you have a significant interest in that company. Mr Ward—Of the federal government contracts? Senator LUNDY—The federal government contracts. Minister, can you take on notice or answer now whether or not it is your intention to review the continuation of utilising Advan- tra for the purposes of the group 5 contract, given the opportunity that exists within that contract to pull this department out on the basis that there might be a perception that there is a conflict of interest? Senator Alston—I will refer what you have had to say today to the Minister for Finance and Administration, who I think has the ultimate responsibility in this area. Senator LUNDY—No, he does not, because they told me that the Department of Finance and Administration, the area handling this, said that this would be an issue specifically for the Department of Communications, Information Technology and the Arts to decide. Senator Alston—If that is the case, we will have a look at it. Senator LUNDY—You are going to have a look at it? Senator Alston—I will examine further what you have said today. It does not make sense to me on the run, but I will see if there is any more substance to it later. Senator LUNDY—Do you think there could be a perception that a conflict may exist, given that Telstra is providing that resource to your department and given the sensitive policy issues that you traversed? Mr Stevens—This issue was addressed at the start of this process when Telstra was a part owner of Advantra, so it is not a new issue in that sense. Senator LUNDY—No, I appreciate that. Mr Stevens—It was in fact covered off in the deed of agreement, if you like, between departments and Advantra to ensure that there was an explicit clause to ensure that in regard to the statutory functions of the ACCC we did cover this possibility off, that there is no possibility that information which is available to Advantra would in fact be available to the Telstra group. So this is not a new issue. I think what you are asking us is, now that Advantra is 100 per cent owned by Telstra, does this change any of these issues. Senator LUNDY—Yes. Mr Stevens—I think that is something we could have a look at, but I want to make very clear that this is not a new issue and it was covered off in the original deed of agreement. Senator LUNDY—I am aware of that, but what was also presented as evidence was that there is an outlet clause within that that allows the department to further consider these issues if there is a change of ownership or a change in arrangements. That is the question that I am asking you, the motivation as to why you would do that. I suppose I am suggesting there could be a range of reasons, not necessarily that there is some sort of breach going on or the implication that Advantra or Telstra are acting inappropriately but indeed that there is a public perception that a conflict of interest exists, and that is where it becomes a political consideration, Minister.

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Senator Alston—If there had been no get-out clause in the first instance and you said, ‘Hang on, isn't there a potential for this to occur?’ the point might have some validity. But if there is already a recognition of the potential dangers that might occur to the point where departments might even be able to opt out altogether, that seems to me to suggest that everyone has been very alive to this concern. To the extent that Advantra changes its status, it does not seem to me that that would in any way reduce the strength of the clause. If you say it needs to be strengthened as a result of that, we will have a look at it, but I cannot see why if it already sounds as though it is pretty tight. Senator LUNDY—I think you are missing the point. First of all, I have not seen the clause, so I will put on notice to actually see that clause in the contract, if you could provide that clause of the contract to the committee so I can have a look at it. It could be that that clause is appropriately drafted and serves the appropriate purpose of providing those protec- tions and assurances. But what I am asking you is what the people out there are going to think when they hear that Telstra is effectively the owner, or a 100 per cent subsidiary is, of the information technology services of the ACCC, PM&C and Communications and the Arts. You would have to concede, Minister, that there could be a perception that in fact a conflict of interest could exist. Senator Alston—But Telstra has already been a partner in the process. That has already been acknowledged as a possible cause of a conflict of interest. That has already been addressed ultimately by a get-out clause. All I think you are asking is whether we need to tighten it further because of Telstra's greater involvement. We will have a look at it, but I cannot see why the public would suddenly have a concern. They might if, for example, when the thing was signed there was no opting-out arrangement and Telstra was not on the horizon and then all of a sudden it acquired a full interest in the supplier. That would be an appropriate time to consider conflict of interest issues. But they are already on the table and they have been addressed. Senator LUNDY—With all due respect, Telstra's presence in the IT outsourcing contracts continues to grow. The close relationship between you by virtue of the fact that you have spent half the morning pitching up Telstra's big claim for a further sell-down would lead some in the public to perceive that you are very close. Senator Alston—Don't play silly games and pretend that somehow we are sort of on the Telstra payroll because we are arguing a public policy position. That is ludicrous. I might as well accuse you of being on the Optus payroll because you are opposing it. Senator LUNDY—The question is one of the perception that you insist on giving as far as Telstra's interests go in advocating their campaign and indeed your policy for a further sell- down. So I guess it is in that context that I asked the question about the public perception of Telstra having these contracts so closely associated with you. It actually goes back to their other big complaint, which was the conflict of interest that they claim existed having you as minister as regulator as well as your advocacy of the public policy issue. So it all becomes a very messy blend. Senator Alston—I have told you, we can solve those problems if they are fully privately owned, then there will not be a shareholder minister. Senator LUNDY—All the public see is Telstra having an increasing presence with respect to government contracts and a closer relationship developing, which is Telstra’s right because they are out in the marketplace.

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Senator Alston—You are just highlighting the absurdity of a partially owned telecommunications carrier, and it is within your capacity to change that. Senator LUNDY—It is the public perception of the closeness between you – Senator Alston—Public perception it may well be, but there is a conflict of interest between – Senator LUNDY—I do not hear the conflict of interest coming from Telstra. Tell me, Mr Ward, is it still a major complaint of Telstra? Senator Alston—It is an obvious concern. Senator LUNDY—I am asking Telstra. Senator Alston—If you are talking about public perception – Senator LUNDY—They do not talk about that any more. Senator Alston—If they do not want to talk about that any more – Senator LUNDY—No, they do not. Senator Alston—Well, let us move – Senator LUNDY—Is that still a concern, Mr Ward? Mr Ward—Could you repeat the question, Senator? Senator LUNDY—The former CEO of Telstra – and since then, Mr Switkowski – has expressed the concern that there is a conflict of interest in the minister’s role as both regulator and part owner of Telstra Corporation. Is that still your view? Mr Ward—I think we have gone on the record in a couple of parliamentary inquiries and elsewhere that that conflict is really at the whole of government level rather than at a ministerial level. I think we have said that consistently. Senator Alston—That does not detract from the validity of the proposition that whilst it remains partially owned by government you do have that inherent tension. We have been as- siduous in saying that we will put public interest ahead of maximising Telstra’s revenue position, but that is not a desirable choice to have to make. We would much rather be doing it entirely at arms-length but we cannot. If all you are saying is that because the government has a stake in Telstra it is inappropriate to be a bidder – well, if you are not saying that – Senator LUNDY—You said that. Senator Alston—I am saying if that is not your position, then all you need to do is to be satisfied that there are adequate conflict of interest clauses, and it seems to me it has already been carefully addressed. If, because of an increase in Telstra’s stake, you somehow say that makes it more likely in terms of public perception, I would not have thought, unless there are people like you out there promoting that position, that the public would take that view at all. Senator LUNDY—Minister, are you familiar with the industry development commitments associated with this particular plan that is also administered by your department – associated with that group 5 contract? Senator Alston—Can I recite them off the top of my head – no. Have they been put to me – yes. Senator LUNDY—Are you aware that they are currently adhering to their industry development commitments under the group 5 contract?

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Senator Alston—I have no reason to think they are not. If you have evidence that they are not, we will deal with it. Mr Stevens—I am not aware that they are not, Senator, but, again, I have officers that are more closely associated with this than I am. It has not come to my notice that they are not doing it. Senator LUNDY—Okay, I know we will be coming to that section as part of the agenda later on. Senator ALLISON—I just have one more question for Telstra and it is about Internet provision. I just wonder, Minister, if your commitment to ISDN provision has extended to South Australia. I am getting constituents in that state saying that their Internet provision is hopeless and considering they should move to the eastern states. Senator Alston—Rather a drastic action. Senator ALLISON—What is the government’s plan to improve Internet provision in South Australia in particular? Senator Alston—If you want to write to me about any particular factors that are operating there, I will obviously have a look at it but, in principle, we do not distinguish between states. The ISDN capability requirement is now built into the USO, and that requires Telstra to make an ISDN connection available to all places – to all households and businesses – within five kilometres of a local exchange, which means about 96 per cent of the population. The other four per cent get an asymmetric ISDN equivalent satellite downlink and, as a result, 100 per cent of the population should have access to that relatively high-speed capability. Senator ALLISON—It is difficult to get a grasp of the extent of this problem. I wonder whether Telstra could put their minds to a report on this. Mr Ward—If we could understand the nature of the complaint, we would be more than happy to have a look at it. Senator ALLISON—Thank you. The study that was released this week on schools and access to computers and Internet provision was again another reminder that country Australia is missing out on high speed Internet services. Senator Alston—There is a remote Aboriginal community in South Australia that has an absolutely first class system. They have got the best databank of equipment I have ever seen and it connects up a network of schools in remote parts of South Australia. I will provide that information to you as soon as possible. Senator ALLISON—I am sure there are examples of really good practice but what we need to know is where the holes are in the system. Certainly there are still plenty of people complaining that their Internet service is so slow that, by the time they download material, it is two hours later and they have lost interest. Senator Alston—Part of the issue, of course, is whether or not they make a judgment that it is affordable to access that ISDN or ISP equivalent service. Senator ALLISON—Affordability has got to do with the time it takes. Senator Alston—Yes, but Austar is about to offer high-speed satellite access to the Inter- net. There are going to be competitive alternatives that will bring the price down but, as I have said ad nauseam about ISDN, ISDN has always been priced as a premium product and therefore it has probably meant that a number of people have taken the view that it is not affordable. Certainly we want to see it widely available and that is why that farm-wide trial has

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 141 been very successful in demonstrating the needs of people on remote farm properties for high- speed access to the Internet. So, you give us your problems and we will respond to them. Senator ALLISON—And, yes, if we could have a report too about Telstra’s ISDN distribution. Senator LUNDY—I have two questions, Chair. One relates to that particular point. Can you tell me whether subscribers to BigPond’s advanced satellite also have to take out another arrangement with another BigPond product for the uplink through another ISP? Is subscrip- tion to BigPond’s advance satellite a complete service with the downlink and the uplink? Mr Rolland—That channel is via the PSDN and that, when the service is fully commercial, is available through any ISP. Senator LUNDY—So they have to pay again? Mr Rolland—It is an asynchronous system. Senator LUNDY—No, I appreciate that. My point is that you promote this product, Big- Pond’s advanced satellite, as costing a certain amount but to actually use it effectively and to have an uplink as well those consumers require another package of services to be embarked upon with an ISP? Mr Rolland—They do require a phone line and they do require a relationship. Senator LUNDY—Yes, a relationship with and ISP. Do you give them a cut-price relationship through your BigPond products on your PSDN network for subscribers to BigPond’s advance satellite? Mr Rolland—No, they pay the normal rates and we would be happy to give you the full detail of the rates that we currently charge. Senator LUNDY—Have you included that information on your promotional material for BigPond’s advance satellite? Mr Rolland—I cannot answer that. I have not seen the promotional material. Senator LUNDY—I suspect the answer is no, but I will look forward to a response. I have another question. Do you still discriminate on pricing with respect to your BigPond products on a regional basis? By that I mean the categorisation of ‘remote’ with your business BigPond product and your residential BigPond product in regional Australia. Mr Rolland—We currently have different prices. Senator LUNDY—Can you tell me what the percentage difference is between those classified as remote, those classified as regional and those classified as metropolitan? Mr Rolland—I cannot do that today but I would be happy to supply that. Senator LUNDY—But there is a difference, isn’t there? Mr Rolland—Yes. Senator LUNDY—Why is there a difference? Mr Rolland—Our cost. Senator LUNDY—You say there is a cost difference in providing that service? Mr Rolland—Correct. Senator LUNDY—In relation to a point of presence? Mr Rolland—In relation to the data costs of getting information to different parts of Aus- tralia.

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Senator LUNDY—Getting the data costs to these? Mr Rolland—Correct. Senator LUNDY—Wouldn’t that be a point of presence issue? Mr Rolland—That is part of the issue, yes. Senator LUNDY—So how come these discriminatory pricing zones do not relate to points of presence? Mr Rolland—Rather than being discriminatory prices, they are distance dependent prices. Senator LUNDY—Distance dependent prices? Senator Alston—We will be ensuring that everyone has access to a point of presence at a local call charge. Senator LUNDY—That is not my point, Minister. I am talking about Telstra’s pricing policies on their Internet products. You have the legislation in place. You are saying it is delivering in this. Telstra that are operating the market are still discriminating against people in remote and regional areas and making them pay more. I want to hear Telstra’s reasons for putting those differential or discriminatory pricing regimes in place with their Internet product. Mr Rolland—Cost. Senator LUNDY—Can you provide a full explanation as to the justification for those costing differentials? Mr Rolland—Yes. Senator LUNDY—Thank you. Senator CALVERT—I would like to express my appreciation for Telstra’s reaction to a problem that arose in Port Arthur just prior to Christmas. Telstra has been trying to provide a mobile service in that area for quite some time and they have been frustrated by other government departments, namely Environment Australia. I would like to thank them personally for providing a temporary service over the Christmas-New Year period. I know that all the residents were very grateful. So thank you to those people involved for their timely interven- tion. Senator LUNDY—Mr Ward, can you provide an update on the international tariff link issue that Telstra, I know, has been concerned about? Mr Ward—I do not think there actually is much of an update, but we will see whether we can help you on that. Senator LUNDY—Is it likely that that complaint will be heard in a WTO forum? Mr Ward—I would have to take that on board. We are still pursuing the issue, but I doubt whether there has been much of an update since we last discussed it. Senator LUNDY—Okay. I would appreciate any information you have in that regard. CHAIR—I thank the officers from Telstra. [12.17 a.m.] AUSTRALIA POST Senator MARK BISHOP—Minister, I have a couple of questions on the Australia Post and digital TV legislation. When does the government propose to release for public scrutiny

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 143 and comment proposed legislation to enact the decisions announced last year, and are any other outstanding issues required by the digital conversion legislation? Senator Alston—There are still some other matters to be resolved in terms of ABC multi- channelling, funding for the ABC, regional broadcasters, captioning and community television. Once those decisions have been taken and announced, then I think we would be keen to see a legislative package introduced into the parliament as quickly as possible. Senator MARK BISHOP—Do you anticipate that occurring in this session of parliament? Senator Alston—Yes. Senator MARK BISHOP—And do you presume that the digital TV legislation will be passed in this session? Senator Alston—Yes, I would hope so. If the start-up date is 1 January, then obviously the sooner we remove any uncertainty, the better. The mere fact of our announcement does not necessarily mean that the legislation will go through unamended, but I am always hopeful about these things. Certainly, I think we would want to progress it as quickly as we can. Senator BOLKUS—But at this stage you cannot give us a specific date of introduction because the other issues have not yet been determined by the cabinet. Senator Alston—But it is up to the draftsmen anyway – until they come back to us. But we are not wanting to drag the chain on this, I can assure you. As soon as we are in a position to do it – and I hope that is a matter of weeks, really – we will. Senator MARK BISHOP—A matter of weeks? Senator Alston—Yes. Senator MARK BISHOP—Similarly, on the Australia Post deregulation issue: when will we get that legislation introduced into the parliament? Senator Alston—Again, I think we are expecting it to be introduced this session. Senator MARK BISHOP—Yes, I saw that on the bills list yesterday. Is there anything waiting to be ticked off there by cabinet? Senator Alston—Yes, there may be some tidying up but essentially, no. I think we are ready to go so it is a drafting issue more than anything. Senator MARK BISHOP—Have the instructions gone to Parliamentary Counsel yet? Senator Alston—I cannot tell you that. That is a matter for the department. Mr Stevens—We have certainly been in contact, Senator. I cannot give you the actual state of play on it but drafting, I believe, has commenced. Senator MARK BISHOP—I can possibly pursue that with the department now. As far as you are concerned, the bulk of it has been endorsed by cabinet, there might be some tidy up exercise, you think it is being drafted by the counsel and you anticipate introducing it in this session. Is that correct? Senator Alston—Yes. Senator MARK BISHOP—Thank you, Minister. Welcome Mr Ryan. Perhaps you can tell us where we are at on the Australia Post deregulation legislation. Mr Ryan—I do not think I have anything to add to that which the minister has already put to you. That does reflect my understanding of where things are progressing and the time frame within which they are progressing.

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Senator MARK BISHOP—Have instructions gone to Parliamentary Counsel to draft the bill yet? Mr Ryan—I know there has been discussion between the department and Parliamentary Counsel. I am not sure if formal instructions have gone or not. It is really out of our bailiwick. It is really a matter for the department and Parliamentary Counsel. Senator MARK BISHOP—As that is a matter for the department, Mr Stevens, can you give us an answer? Mr Stevens—I am sorry I did not hear the question. Senator MARK BISHOP—Australia Post advises that the question of instructions for drafting is a matter for the department. I am asking you where we are at on that. Mr Stevens—Drafting instructions actually have gone to Parliamentary Counsel and we are just finalising at the moment. Senator MARK BISHOP—Finalising the instructions or the results? Mr Stevens—No, the results. We are finalising the legislation but it is an iterative process between officers and the counsel of course. Senator MARK BISHOP—Do you have any idea when that process will be concluded? Mr Stevens—A couple of weeks, but I should make the point that the poor old parliamentary draftsman is under a lot of pressure at the moment because of some of our digital legislation as well. Senator MARK BISHOP—Because of? Mr Stevens—Our digital legislation as well, but a couple of weeks I am told. Senator MARK BISHOP—Thank you Mr Stevens. Mr Ryan, last time I asked you a question – No 45 – about the likely implications for Australia Post of the government’s decision to deregulate the postal industry in respect of article weight allowances and offshore international exemptions. You gave me a written response which I received yesterday. In question No 46 you advised that the government had announced that the standard letter rate would not rise as a result of the GST but advised that Australia Post would take the best commercial decisions in respect of price in bulk pre-sorted mail. So I take it that Australia Post has the right to impose the GST on bulk pre-sorted mail. Mr Ryan—If I could answer that in two parts, Senator. Firstly, because we are required to absorb the GST on the basic postage rate, that effectively reduces that price for businesses, who can claim an input tax to 40.9c. That therefore means there is some compression between the full letter rate adjusted down for GST absorption and our bulk rates. That means we are considering reducing the bulk rates further so that the relative attractiveness between full rate mail and bulk mail remains. If I can give you an example. A bulk letter that presently costs around 37c would come down to something like 34c. Then GST would be applied to that rate, which would bring it up to around 37.4c. The business involved can then claim that as an input tax and take that off subsequently, so that the net effect in the bulk price area is going to be lower prices than presently exist. Senator MARK BISHOP—All right. What about in terms of the other products that you sell or the services you provide through your retail outlets? Will they all be subject to GST? Mr Ryan—Yes, they would be. For example, parcels or express post would be subject to GST. I might add that we are still developing a range of GST pricing proposals, and we will be working with the ACCC and other agencies to ensure that whatever prices emerge are fully

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 145 consistent with the ACCC's guidelines and the government's policy pronouncements on the issue. Senator MARK BISHOP—I accept that point but, nonetheless, the bottom line is that, apart from the postage stamp and bulk postage mail related to the standard letter, all other products and services sold or offered by Australia Post will be affected by the GST? Mr Ryan—Yes, I believe that is correct, although I would emphasise that standard letters and bulk letters do represent a very large proportion of our revenue. Senator MARK BISHOP—I take that point. My final question: on the Camperdown Post Office issue, I asked you last time whether Australia Post had commissioned an independent valuation of Camperdown Post Office and, if so, by whom and what were the valuations. The answer was, `Yes, by FPD Sevilles in October 1999’ and ‘valued the building at $125,000 based on vacant possession.’ You then offered the advice that the estimated cost of rental in a lease-back situation is approximately $20,240 per annum. So you would be flogging off an asset, leasing it back and the new owner would be getting a property asset with a yield of over 16 per cent. Is that correct? Mr Ryan—I can only rely on the information that came from the property division. I will certainly have that checked if you believe that that return is an excessive rate, which I guess is the implication of your question. Senator MARK BISHOP—You advise that the rental cost is $20,240 per annum and the price on vacant possession last October was $125,000 - which simple maths tells me is in the order of 16 per cent. My observation of various products in markets is that a 16 per cent return on property is the best you are going to get anywhere in the world. So I ask the question: that being the case, why would Australia Post be choosing to sell the property and pay out the realised price back to the new owner in six years? That strikes me as being absurd, but I would ask you to advise us why. Mr Ryan—Mr Talbot may be able to elucidate. Mr Talbot—The valuation is part of an asset valuation that we do to reflect in our balance sheet each year. It is based on vacant possession. If we were to go and sell the property and Post was to have a lease there, we believe there would be a much more attractive value for us to receive from that property in an actual sale. So the capitalisation rate that you referred to would be at a rate that is less than that. Since we have actually provided this response to you, the sale of this property has slowed as we go and negotiate with council. So we are not certain at this stage of the game whether we will sell the property or not. Senator MARK BISHOP—But, even if you sell the property, you are intending to run Post out of there? Mr Talbot—Yes. Senator MARK BISHOP—So you are still selling it and so you would be expecting con- siderably more than $125,000? Mr Talbot—We believe that there is a better premium on sale of property where there is a tenant of the quality of Australia Post. That would add to the value of that property. It is part of a broader program where we cycle our asset holdings out of property and into more pro- ductive assets. Senator MARK BISHOP—I do not quarrel with that. It is just that the return struck me as being very low, and really anything above about eight per cent for property is pretty good in my view.

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Mr Talbot—In fact, in some of these areas it is possibly less. Senator MARK BISHOP—So would you look at that and advise us? Mr Talbot—Yes. Senator MARK BISHOP—That is all I have on Post. Senator ALLISON—I would like to ask lots of questions to follow up on the health path questionnaire that Australia Post put out. However, the answers to my last questions only came in I think to the secretariat a day ago and I have only just had them over a very short time frame. CHAIR—You put a huge number of questions on notice though. Senator ALLISON—It took a long time to answer them as well. Senator MARK BISHOP—They took a long time to come from the minister's office, Senator. Senator ALLISON—Perhaps I can ask you when you provided to the committee the answers to the questions. Mr Ryan—I would have to check the precise date, but I believe it was in January - but I do not have the date immediately to recall. I will check that for you. Senator ALLISON—The staff information bulletin that you put out in November talked about media reports, many of which you said had been inaccurate and misleading. Can you explain why it is you say they have been inaccurate and misleading? I would have thought they had been quite accurate. Mr Ryan—The main concern was the strong inference in some articles that it was mandatory that all staff complete all questions in the health questionnaire and that was not the case. Staff had the option of completing the questionnaire and they had the option of completing or not completing each question within it. Senator ALLISON—Last time I was surprised to see under 'confidentiality' that Australia Post cannot access individual or work centre results. I thought that one of the purposes, as you responded to some of our questions, was that Australia Post could look at workplaces or general areas and say, 'The workers in this place need a bit of geeing up about X, Y or Z.' Mr Ryan—No, we were quite explicit that we did not intend and we made a provision in the contract to ensure that we could not get access to information relating to an individual workplace because that would raise the very fears that you have properly represented to us. What we can get is an overall view of category information – for drivers, posties or mail centre operators – and we can get a state view so that we can compare issues across states, but we are not permitted under the contract to disaggregate below that level. Senator ALLISON—I asked about the number of organisations and examples of the organisations which would meet the guidelines of being suitable organisations to receive information. Mr Ryan—I think that related to a different survey. Senator ALLISON—Yes, sorry. That is the other one, the public one. We do not seem to have that in the responses. Could you look at that again? Mr Ryan—Yes, Senator. I am surprised if we have not responded because we had sought to respond to each issue that was raised and taken on notice.

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Senator ALLISON—Perhaps I will go back and have a look at the answers that you have given – it has been too short a time for me to absorb them – and follow up on that. Mr Ryan—I have noticed one response where we were asked to provide a list of organisations or agencies that receive information arising from the collection of the customer survey data and we have indicated that we do regard that list as commercial-in-confidence, but we will be pleased to offer that to individual members of the committee. Senator ALLISON—That offer was that we could sight it but not take it away? Mr Ryan—Not divulged to others. CHAIR—We are now over our adjournment time. We will conclude at that point. I thank the minister for being here this morning. This afternoon I believe we are going to have Sena- tor Herron here. Proceedings suspended from 12.33 p.m. to 1.33 p.m. AUSTRALIAN BROADCASTING CORPORATION CHAIR—We will resume this hearing of the estimates committee. I welcome Senator Her- ron as the Minister Representing the Minister for Communications, Information Technology and the Arts to this hearing. I also note that this is the last appearance of Mr Brian Johns, who has put in several years as the Managing Director of the Australian Broadcasting Corporation, and we wish you well in your future endeavours. Mr Johns—Thank you very much, Chair, I appreciate that. Senator MARK BISHOP—The main issue, if not the only issue, I wish to talk about with the ABC is the Telstra content proposal –probably no surprise there, Mr Johns. We might go right back to the beginning, and you might tell us when the proposal was first authorised by the ABC to enter into negotiations with Telstra. Mr Johns—With your indulgence, I would like to go back a bit further than that because I would like to put it in the policy context. In fact, I believe that the first discussions between Telstra and the ABC were in about August last year. But I would want to say this: when I arrived at the ABC some five years ago, we set about what was my unhappy task in the first few months extricating the ABC from a number of joint ventures, including pay television. Partly as a result of that experience, I formed the view that the ABC should very much concentrate on the development of what it does really best, which is make programs and make content. So we embarked on focusing the ABC on making content for itself and for others. In the first days, I suppose, one was concentrating to an extent on what we would now look back on and call traditional media – radio and television. But because of my own experience, and I am sorry to talk about myself in this but I think it is very relevant to the Telstra arrangement – if it comes about – because in the previous government I had been appointed to chair the BSEG inquiry, the so-called Broadband Services Expert Group, I came to the ABC convinced that the new media environment offered the ABC and the Australian broadcasting industry and creative industry great opportunities for the creation of Australian content. So those two judgments came together; that is, concentrating the ABC playing to its strength by concentrating on the development of content and not getting into joint ventures and business arrangements – do what it knows best – and also embracing the new media environment. We did that and we reorganised ourselves for it. I believe that this Telstra arrangement – that is still only a proposed Telstra arrangement – is a benchmark in the broad scheme of things of the development and the recognition of Australian content in the new media environment. This Telstra arrangement recognises the value of Australian content in the new me-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 148 SENATE—Legislation Thursday, 10 February 2000 dia environment. Because we started early on this and because we developed our online services, this Telstra arrangement that we are approaching – still only approaching – represents a benchmark position. It values the Australian content for the first time, I believe, in a really signature way for an output arrangement. To give you a comparison: we have an output agreement with the BBC for the provision of television material. That output agreement, a five-year agreement, is a $60 million agreement – $7.5 million less than the proposed Telstra arrangement. The only difference is that we pay that $60 million to the BBC; we do not earn it. And those two bookends, if you like, really frame this potential Telstra arrangement, because we are at this time demonstrating that we are on at least the ground floor of developing Australian content in its own right in this new exciting media environment. That is the first important feature of the Telstra arrangement. The second important feature – and, in fact, at the end of the day it may even be the more lasting – is that it centres the ABC in the development of new media delivery systems. If this arrangement comes to pass we will have access to new delivery systems. Under the present broadcasting regime we get our spectrum and we take our position as a right against Channel 7, Channel 9 and Channel 10. Under the emerging news era that we have, they have delivery systems that we do not have of our own and will never have of our own – broadband services, for example. So this arrangement gives us access to that. It has tremendous potential for helping us to deliver online services to regional Australia. I understand that we will be talking detail, but I think it would be a great pity if, in looking at the detail, we missed the framework of this arrangement. So we began talking with Telstra in about August. Mind you, that in itself was foreshad- owed by public discussion that we had had in the ABC as a result of the suggestion that the ABC should float its online service and we had said, ‘No, we should not float our online service.’ The board agreed with this and the board at the time, some 12 months ago, confirmed that what we should do is seek to sell our online content. Senator MARK BISHOP—Thank you for that background, Mr Johns. So it has been developing over four or five years; it was affected by the discussion concerning the future of ABC online services probably this time last year; and then in August negotiations commenced with Telstra. I presume those negotiations that commenced with Telstra had been approved prior to August by the board? Mr Johns—The general principle of seeking arrangements had been. We informed the board – we have a number of online operators and we were seeking to establish those. So I do not say that the board specifically agreed or endorsed the Telstra negotiations at that point because there were talks. It was part of a range of efforts that we were making and contacts with people to sell our content. Senator MARK BISHOP—So the board was informed or the board became aware that you had entered into or were about to enter into negotiations with a range of potential purchasers of your online content? Is that a fair summary? Mr Johns—I am just checking at what time I did inform the board. Ms Clayton—I think at least three to four months prior to confirmation that we were going ahead the Managing Director in his reports to the board was informing the board about the range of Internet service providers that the ABC was having discussions with. Mr Johns—I am sorry but where I was confused was that we informed the board subsequent to August about the talks with Telstra. That is the point I am trying to clear up.

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Senator MARK BISHOP—So, let us just nail that down: some time around April or May of last year the board was informed – Mr Johns—No, subsequent to August. It was August that we began talks with Telstra. Those talks were in the context of talks with numbers of operators. In fact, my colleagues could perhaps give you some details of arrangements and deals that we have completed and the timing of them. So Telstra talks begin in that context of discussion in August. Subsequent to that, two or three months after that, I begin informing the board that Telstra was coming along. Senator MARK BISHOP—Let us nail this down then: some time around April or May the board is informed that the corporation wishes to have discussions with a range of possible purchasers of ABC product. There is no specific mention made of Telstra at that time. Then we go forward to around about August when negotiations commence with Telstra about provision of ABC online product. And since August of last year presumably the board has been broadly kept informed of the progress of those negotiations – Mr Johns—Yes. Senator MARK BISHOP—One, with Telstra and, two, with other providers of online content. Mr Johns—Yes. Senator MARK BISHOP—Who are the other providers of online content? Mr Johns—My colleague Harry Bardwell might be able to answer that. Mr Bardwell—We currently provide news and current affairs content to 10 ISPs and we are in the process of constantly discussing with a whole range of others. We are talking to about six others at the moment. Senator MARK BISHOP—Are you talking to any of the majors? Mr Bardwell—We do have most of the major ones already on board – AOL, LookSmart, Yahoo!, Excite, Optus via a company called Red Rock – as well as some of the minor ones such as Sanford Securities and then some of the other ones are more specific sites that have more specific purposes. Senator MARK BISHOP—Are you engaged in any discussions with the major media conglomerates such as News Corporation? Mr Bardwell—We are. Senator MARK BISHOP—Fairfax? Mr Bardwell—Yes. Senator MARK BISHOP—And the rest? Mr Bardwell—We currently work with ninemsn on cricket and we are having ongoing and quite wide-ranging discussions with ninemsn. We are talking to News Corporation. We are seriously talking to Reuters of Australia. Senator ALLISON—Can I ask what topics you are discussing with them? Mr Bardwell—We are discussing the possibility of providing them with a range of news and audio grabs. Senator ALLISON—Audio? Mr Bardwell—Audio grabs, audio pieces. And also they are actually quite new in the area and they are looking at various places where we may have areas of common interest.

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Senator ALLISON—I am sorry, Senator Bishop, you mentioned a third that you were having discussions with. Mr Bardwell—Reuters, did I say? Senator ALLISON—No. Mr Bardwell—We are talking to Reuters. Senator ALLISON—What topics are you discussing with them? Mr Bardwell—We are talking to Reuters about the possibility of our acting for them as an agent for their international news coverage. We are in discussion. Senator ALLISON—I am sorry, Senator Bishop, you say you are providing material for 10 online companies. With how many of those 10 do you have an arrangement for repurposing? Mr Bardwell—At this stage none. Senator ALLISON—So it is only potentially Telstra? Mr Bardwell—At this stage we are discussing with a number of others, including some of the ones that we are supplying, the possibility of providing them with broadband content, which is essentially where the word ‘repurposing’ comes in, where we are looking at the possibility of enriching an online service. Senator ALLISON—Who is that with? Mr Bardwell—AOL and – let me think – Austar or Cello, which is the broadband company that operates alongside Austar, and also with another company called Fantastic. Senator MARK BISHOP—Mr Johns, we were discussing the process of information to the board or board endorsement of the process with Telstra. There has been a lot of discussion in the papers about funding of the Australian Broadcasting Corporation, Minister Alston’s correspondence to the chief officer and requirement of certain conditions or certain standards being met – this is the suggestion. Is the proposal with Telstra in any way linked to those proposals for triennial funding? Mr Johns—No. As I hoped I established, this is part of a strategic positioning of the ABC to sell content and create content not only for ourselves but also for others. We have been particularly keen to establish ourselves in the online environment, in the Internet environment. Senator MARK BISHOP—So even though the corporation sees a great opportunity and is seeking to focus in this particular area, you see it as being unrelated to government funding? Mr Johns—Well, in our minds it is. For example, take the minimum figure of $13.5 million for $67.5 million. If that comes to pass and the board approves that, then we have earned that money. But put it against our budgetary requirements, which are something over $500 million, no reasonable government – I would say – would say, ‘Okay, there is the ABC helping itself in this particular way. Therefore that is going to affect our decision on how much we fund them.’ Senator MARK BISHOP—Have you had any discussions with the government on that particular point? Mr Johns—My colleague Russell Balding, who has been leading our triennial funding discussions, would be in a better position to comment on that. Mr Balding—The discussions to date with respect to the triennial funding submission have not directly canvassed the Telstra deal.

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Senator MARK BISHOP—Have they indirectly covered that? Mr Balding—The discussions have canvassed additional revenue that the ABC would be seeking to earn over the course of the triennium. But there has been no canvass of the Telstra deal other than revenue targets, efficiency savings and productivity targets that the ABC has set as a target within the triennial funding submission. Senator MARK BISHOP—So as yet it has not been raised with you that, if you are going to be making $13 million or $15 million per annum from Telstra and perhaps similar or smaller amounts from a range of other commercial organisations, that should be or would be offset in the budget process from government? Mr Johns—No, to the contrary. The ABC has gone forward in respect of saying, ‘This is the amount of money we see that we require for additional services and to maintain the ABC, and this is the target of additional revenue we believe we can achieve over the course of the triennium.’ Senator ALLISON—So what will that money be used for in the ABC’s budget? How will you use that money? Mr Balding—That is up to the board. It just forms part of the budget process and the board allocates those funds. Senator MARK BISHOP—Can you tell me which senior executive staff were consulted in the preparation of the Telstra content proposal currently before the board? Dr Schultz—In the process of these negotiations we have had discussions with the head of national networks; we have had discussions with the head of finance; we have had discussions with the head of online and multi-media; we have had discussions with the head of enter- prises; we have had the discussions with the head of technology; and we have had discussions with the head of local and regional services. Mr Johns has been directly involved. As well, the head of corporate and policy area and Judith Walker, who is the head of legal, have been across the entire process. Mr Johns—And the head of news and current affairs. Dr Schultz—Yes, my apologies, Paul Williams, who is head of news and current affairs, has also been involved. Senator MARK BISHOP—Those seven or eight key people, were they informed right from the beginning? Dr Schultz—Just to go back on what Mr Johns was saying about the process by which this discussion occurred: when the board took that position of seeking to license ABC online content into third party sites, which was a decision that was taken at the March board meeting last year and implemented with the establishment of the Business Development Unit in ABC En- terprises in May of last year, that policy was endorsed by the full executive at that point. So to the extent that they had endorsed it, we were in conversation with them about who likely clients would be for these new services. Senator MARK BISHOP—So all of the senior executives of respective divisions within ABC have fairly well been informed and involved post June of last year? Dr Schultz—Before June of last year. This was something which was argued very rigor- ously before the policy went to the board.

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Senator MARK BISHOP—All right then. The publicly reported figure is $67.5 million revenue to the ABC over five years. Can you tell me how you arrived at that figure and what methodology the ABC used? How did you fix the price? Mr Bardwell—The price was fixed through negotiation with Telstra, obviously. It was based on the standard rates that we charge to our other online services for narrowband content for non-exclusive use, the likely use on Telstra and the projected subscribers that they were predicting over the next five years. Senator MARK BISHOP—So you essentially adopted market rates for selling online product? Mr Bardwell—Yes, market rates. We adopted our market rates. At this point we are in a new area, but I am quite confident that we have a commercially fair price. Senator MARK BISHOP—What proportion of that estimated $67.5 million revenue from the proposed deal with Telstra will be dedicated to servicing the deal? Mr Bardwell—To actually servicing the deal per se –approximately 35 per cent. Senator MARK BISHOP—And the other 65 per cent can be categorised as? Mr Bardwell—A combination of the co-production area and repurposing. Let me just take one step back: when you say ‘servicing the deal’ meaning expenditure in order to deliver Tel- stra the content or expenditure to develop services that we would both benefit from? Senator MARK BISHOP—Both and none. Expenditure to comply with the terms of the contract. Mr Bardwell—Approximately 50 per cent. Senator MARK BISHOP—And the other 50 per cent therefore would be? Mr Bardwell—Essentially, it would be money that we would be deriving as a result of the value of the agreement. Dr Schultz—If I can just add that the framework for licensing agreements out of enter- prises has a standard procedure whereby any additional funds that are earned from whatever activities go back into program making. So that is the same sort of principle that we have applied. Mr Bardwell—If I can make one more point about that: that is the cost to us, the direct expenditure, but the value of it does take into account the much greater cost of production of this material. Senator MARK BISHOP—How would you categorise that latter point in terms of percentages? Mr Bardwell—The actual cost – I suppose you could say at a maximim it is $500 million. I mean, the cost of production for the entire ABC – Senator MARK BISHOP—Yes – Mr Bardwell—It is very difficult to say how much it costs to create all the content that ends up being filtered through our online process. Senator ALLISON—Would you be putting extra staff on? Mr Bardwell—We will be, yes. Senator ALLISON—How many?

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Mr Bardwell—At this stage we are not absolutely certain. You have to realise we are still in negotiation here. This is something that we have not completely finalised, but we estimate that it would be somewhere between 20 and 30 or thereabouts. Senator ALLISON—How will the salary costs be paid before the first instalment? Mr Bardwell—There will be an instalment paid in advance. Senator ALLISON—By Telstra? Mr Bardwell—Yes. Senator ALLISON—What about equipment purchases? Mr Bardwell—There will be some equipment that will be required. Senator ALLISON—Is there a budget for the equipment? Mr Bardwell—That will be included in that budget of the 50 per cent that I was talking about. Senator ALLISON—Do you have a budget? What is it for the first 12 months? Mr Bardwell—At this stage we do not have a finalised budget. We have an estimate which, given that we do not have an agreement, we do not have completely locked down. We are in the process of negotiating a term sheet which is the set of terms under which a final agreement would be negotiated. We have an estimate. Senator ALLISON—But having arrived at what the deal will be in terms of Telstra’s payment to you, you must have done that in the knowledge of what it would cost the ABC, otherwise how can you negotiate a price? Mr Bardwell—Yes. At this point you sit down and make an estimate of how much you think it would cost to ensure that you will not be disadvantaged and hopefully be advantaged – and we believe we will. Senator ALLISON—What was that estimate? Mr Bardwell—The estimate of the total costs is, should I say, at a pessimistic level – from our point of view, 50 per cent. Senator ALLISON—So the cost would be nearly $7 million? Mr Bardwell—Yes. Senator MARK BISHOP—Turning to the terms of the proposed contract, what specific procedures or measures does the contract contain to ensure the ABC’s news production independence is not eroded by commercial imperatives? Dr Schultz—There is an overarching principle across the entire contract, which is that ABC editorial policies and guidelines and the ABC act cover the entire contract. So as the representatives from Telstra were making clear this morning, we have complete editorial control and authority over the material which is made available to them. That is one of the key clauses in the draft agreement. Senator MARK BISHOP—Is it fair to say Telstra do not have any right to request the ABC to deliver the nature of content in a particular way? Dr Schultz—Do you mean in a particular medium? Senator MARK BISHOP—No, not in a particular medium; in terms of the actual product that is supplied – the reporting or the information or the news. Dr Schultz—No, they do not have the capacity to determine that.

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Senator ALLISON—The staff who will be employed, the 20 or so people, will they actually be producing separate material for Telstra or is their role to take what the ABC has already done and repackage it somehow? Can I also ask in relation to the questions I asked before about cost: is the ABC going to somehow ring fence – I think that is the term – so that you can work out what costs are attributable to this service? Mr Bardwell—Just one step back. The answer to that is yes. The agreement has four parts. The majority of the agreement is an output deal of our existing content. There is also the capacity for us to repurchase and enhance content for our own services and for Telstra. There is co-production and then there is some R&D components. Senator ALLISON—Do you have journalists doing that? Mr Bardwell—The ABC will employ people to do that packaging. There will some people who will be employed to make sure that the existing content is delivered to Telstra on time, et cetera. There will be some production people who would be employed by the ABC to enhance our content for ourselves and to also ensure that it is shipped to Telstra. Senator ALLISON—What do you mean by ‘enhancing’? Mr Bardwell—For example, if we decide to make an interactive program that is currently being produced as a linear program for our other broadcasting streams and we decide that we want to make it interactive for our own interactive services, that will also be available to Tel- stra. We are making programs for ourselves which we are then supplying to Telstra. Senator ALLISON—The content will be there; you will just repackage it in different ways? Mr Bardwell—That is right, with the exception of the coproductions which would be mutually agreed productions that we would initiate from scratch. Senator ALLISON—And this 20 staff will do it? Mr Bardwell—I do not know how many people will be involved on co-productions on a case by case basis, because we do not know what they are exactly and more people may have to be brought on for a short period in order to carry out a particular production. Senator ALLISON—Is there a special arrangement for the co-productions if the demand for co-productions – Mr Bardwell—As you say, there is a ring fence around the co-production budget. The agreement is that a certain proportion of the money is set aside for co-productions. Senator ALLISON—And once you exceed that budget you do so by mutual agreement? Mr Bardwell—Yes, that is right. If we decided to exceed it, then it would be by mutual agreement, but we anticipate that we will not be exceeding it. Senator ALLISON—Does that mean that existing ABC staff would not be expected to be doing additional or different kind of work because of the Telstra deal? Mr Bardwell—That is right. Over the course of the next five years it is quite possible that the existing ABC staff will be doing more work for ABC Online, but existing ABC staff would not be employed to work specifically for creating material for Telstra unless they were taken off their existing duties and moved across to that. Senator ALLISON—They would be quite separately identified as the Telstra deal? Mr Bardwell—That is right. They are the Telstra people, or whatever.

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Senator ALLISON—What about the use of content: is there any consideration for the journalists who produce that content in terms of copyright and moral rights? Mr Bardwell—Under their agreement, the ABC owns the copyright. Senator ALLISON—And this agreement with Telstra does not alter that agreement? Did the agreement with your journalists include any possible future arrangements such as this? Ms Clayton—I may be able to answer your question partially. At present, under the terms of contracts with our journalists all ABC content is owned by the ABC. We hold copyright in that content. I understand that there are still outstanding issues with the MEAA that continue to be discussed in terms of future agreements about moral rights, rather than strict copyright issues in terms of product ownership. Those discussions will continue and I am sure the MEAA will continue to raise those issues with us. They have been raised in the past about the onselling of our television and radio content into other markets as well. It is a continuation of that discussion. Senator MARK BISHOP—Mr Johns, we were talking about the independence of the ABC before and we had the response from Dr Schultz that there was complete integrity and independence, that the ABC could not be dictated to and that Telstra would abide by ABC policies. We are talking about a large amount of money. What arrangements are proposed in respect of the Telstra content deal pertaining to a share of any advertising revenue that Telstra might derive? Does the contract address that issue? Mr Johns—After two years it would be available. If the ABC chose to allow Telstra to have advertising around its material, then the ABC would share in revenues that were going that way. That is a possibility, but this arrangement that we are talking about at the moment is not contingent upon that at all. We have absolutely no advertising on our own site. Any arrangement that we have made with other online operators includes no advertising on our sites and around our material. There will never be any advertising envisaged at all around news and current affairs. It is there in the foreground for the board of the day, if it chose to do that, to avail itself of that possibility, but it would be entirely for the board. Senator MARK BISHOP—Are you saying anything more than the fact that the ABC would have the right to reopen negotiations on this issue in two years? Mr Johns—No. I am saying that the working arrangements that we are talking about at the moment provide for a formula by which, were the ABC to allow advertising around its material, on the Telstra strata I emphasise, then we would get a share of that revenue. Senator MARK BISHOP—And what would that share be? Mr Johns—I do not have those details at the moment. Dr Schultz—The proposal is that, should the board make that decision, we would receive a minimum of $2.5 million per annum, or a percentage of e-commerce and advertising calcu- lated at commercial rates, whichever is the greater. There is a base fee of $2.5 million, but there is a possible escalator. The reason we constructed it that way was it was just a proviso that, should the board come to that decision at some point over the life of this agreement, we did not want to then be in the situation where somebody said, ‘We have decided to permit this to happen’, and we had no possibility within the contract of extracting some revenue from it. We have not done it just on a straight percentage basis because who knows what is going to happen in this industry? Nobody is actually making money out of advertising or e-commerce at the moment; everyone is losing money out of it. By putting a dollar figure on it, but with an

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 156 SENATE—Legislation Thursday, 10 February 2000 escalator should that industry grow, we felt that we were providing some protection for the ABC’s interests should a board make that decision in the future. Senator MARK BISHOP—This is all contingent upon the board making a decision some time in the future? Dr Schultz—To allow advertising on the third party sites, that is correct. Senator MARK BISHOP—If it does so, do you have other similar arrangements with the other online content people? Mr Bardwell—No, we do not. However, I am sure that we can arrive at those because we have had quite a few approaches from other providers. Also, none of our other agreements are as long as this one. The longest other one is three years. Senator MARK BISHOP—If we go down this path and the ABC board should choose to change its mind in a couple of years time, there is considerable revenue gain to the ABC of many millions of dollars per year from Telstra and probably similar amounts from the other organisations you have been dealing with if advertising should be allowed. Mr Bardwell—Yes, there is, although I think that all of our deals are structured basically around content and the viewing of that content and, unless something remarkable happens which we cannot foresee at this stage, the actual sale of content is the principal revenue. Senator MARK BISHOP—Can you tell me what the net value is to the ABC of all of those other arrangements, excluding Telstra? Mr Bardwell—At this point in time we are presuming that it will be around about $3 million by the end of next year. However, it is difficult to tell because, unlike the Telstra deal which is a fixed fee, the deals we have at the moment have a minimum guarantee with an escalator as they grow. Senator MARK BISHOP—The ballpark figure we are talking about in terms of revenue to the ABC over a five-year period is in the order of a minimum of $80 million to $85 million, isn’t it? Mr Bardwell—Yes, I suppose. Senator ALLISON—Can I just go to that question of the advertising revenue: $2.5 million as a minimum would suggest there is going to be a very substantial amount of revenue gener- ated from advertising right from the outset. Any advertising they do, the ABC get $2.5 million. Is that correct? Dr Schultz—The minimum cuts in at year three. Part of the reason that is there at that time is that Telstra does not anticipate that the revenues are going to be there in any substantial way in the first few years. Just to pick up the point Harry was making a minute ago, with the other contracts, we are on an escalator which depends on their success in generating subscriber numbers. In this contract, there is a fundamental difference and that fundamental difference is that we have taken projections of their subscriber numbers over the period of five years and averaged it back. We are accepting they are quite ambitious projections of their subscriber numbers, but we are taking a proportionately greater share of that in the early years of this arrangement. Senator ALLISON—You said that it is $2.5 million a year or a percentage if that is higher to allow for escalation. What is that percentage of the total?

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Mr Bardwell—I am not sure whether we are at liberty to say that, because we are still in negotiation with them. It is a relatively small percentage of the revenue that they would be making. Dr Schultz—It is a commercial proportion – Mr Bardwell—Which we sought advice on and which we believe is a fair rate. I do not know with these sorts of things when we are halfway through a negotiation whether they are commercially privileged details at this point. Senator ALLISON—I guess the committee is trying to get a grasp of the volume or the importance of advertising. If a sort of minimal amount is $2.5 million and if that is only 10 per cent of the revenue from advertising that Telstra might get, we are talking about quite a substantial amount of advertising, I would have thought. Mr Bardwell—There are all sorts of ifs and buts here. At the moment, there is no advertising. I presume there is some advertising revenue from telstra.com but nobody knows how far it will grow. So when we were negotiating it, that was a figure that was arrived at as a minimum guarantee because we did not want to get into a situation where we were not getting some money back. Senator ALLISON—But you see where I am getting. If $2.5 million is 10 per cent – Mr Bardwell—It is not necessarily 10 per cent. Senator ALLISON—I know that. Mr Bardwell—Why did you come to the idea it was that? Senator ALLISON—Well, give me another percent. A range of percentages would be good. CHAIR—I think Mr Johns wanted to make a point. Mr Johns—I wanted to make the point that advertising has not been and is not a focal point of discussion in these negotiations. The formula that has just been mentioned is a minimum figure. There is advertising on the site projected at this stage, so this is very speculative. I do not think we can contribute more to this than to say what the base figure is. Senator MARK BISHOP—Thank you, Mr Johns. Was the ABC’s own legal and copyright unit involved in the contractual drafting of all of these other arrangements? Mr Johns—Our legal and copyright area have been involved in these discussions, I would say, from the outset, and they have had a continuing role. They have had a continuing role in the legal aspects, and they have had a continuing role – and a direct role to me personally – in assuring me and watching that the ABC’s editorial independence and practices are not being infringed or threatened in anyway. Senator MARK BISHOP—Did they do the actual drafting of the contracts? Mr Johns—No. Dr Schultz—They have been actively involved in the drafting. We have worked with Atanaskovic Hartnell, who are very experienced commercial lawyers. At every point, the drafts have either been initiated or run back past our legal people, and only when they have been satisfied have we moved on to the next step. Senator MARK BISHOP—How does the Telstra proposal differ from each of the other arrangements you have entered into?

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Mr Bardwell—I think the Telstra proposal as it appears to you is a very much larger proposal than we have with any other ISP. The reason it does differ from the others is that it is an agreement where we have an output deal with a much greater quota of content, but it is also for the first time an agreement where we have looked at narrowband, broadband and wireless Internet. As compared to dealing with someone like Yahoo!, which is essentially a portal and buying its space from Telstra or somebody else, we are actually going to deal with Australia’s largest telecommunications company. The benefits that we get from that are access to being able to put our material on the services that they provide, which are much wider than the services that any of the other companies provide at this point. Senator MARK BISHOP—So the contract is significantly different with Telstra vis-a-vis the other ISPs? Mr Bardwell—It is different in its scale and it is different in its breadth. However, it is the same in terms of its editorial control and its basic business structure. Dr Schultz—Could I add to this because I think it is material: one of the key things that has been shaping this whole licensing approach is a recognition that in this online environment the premium which was once placed on exclusivity in the media market place has virtu- ally gone away. No-one at this stage is prepared to pay or is looking to pay for exclusivity of access to content. Because the web is itself so easy to get around, what you find is that the companies are saying, ‘What I want to do is to aggregate content’ – or services or whatever it may be – ‘to serve the group I have identified as my subscribers, my customers.’ So that makes it possible for this non-exclusive model to work in a commercial way, which is quite a break with the traditional paradigms we have been accustomed to working with. What that means in terms of the negotiations with other companies and with other contracts is that we could go and talk to Telstra, we could talk to ninemsn, we could talk to News or we could talk to Yahoo! Each one of them sees the ABC content as an excellent product, but each one of them comes to it saying, ‘We’re interested in this slice,’ or ‘We’re interested in the fact that you’ve got this content,’ or ‘We’re interested in the fact that you’ve got access to something else,’ and it constructs what is a quite different framework than just everyone wants the news. Senator MARK BISHOP—I understand. If material is to be repackaged for Telstra, can that repackaged material be onsold to other parties by the ABC? Mr Bardwell—Yes. Senator MARK BISHOP—There is no prohibition on that? Dr Schultz—No. The re-versioning is a non-exclusive activity. Senator MARK BISHOP—Can Telstra on sell it as well? Mr Bardwell—No, unless we mutually agree to sell material that we have exclusively produced. There is an exclusive co-production area. Neither of us can sell that material unless the other agrees, and we would obviously share in any revenues that were accrued from that. Otherwise, we completely own all of our own material and we have the right to distribute it on a non-exclusive basis. Senator MARK BISHOP—In relation to the provision of the content and dissemination by the various media arms, are Telstra entitled to disseminate that prior to the ABC dissemi- nating it through its various arms?

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Mr Bardwell—No. Senator MARK BISHOP—They can only do it contemporaneously or after it? Mr Bardwell—That is right, contemporaneously or after our own broadcasting or our own transmission because it is online content. Senator MARK BISHOP—You say then that there is no suggestion that the ABC’s ability to hunt news or break a news story, be the first deliverer, is in any way affected by this arrangement with Telstra or the other ISPs? Mr Bardwell—No. Senator LUNDY—Whose server will it be hosted on? Mr Bardwell—It will be hosted on the Telstra server. Senator LUNDY—On the Telstra server? Mr Bardwell—Sorry, the original material will be hosted on the ABC servers and will then be cached to the Telstra servers. Senator LUNDY—In terms of the updating process and keeping it current, how are you going to manage that whole caching process within the servers? Dr Schultz—That is a matter for the technical details, which will be resolved in the long- term negotiations. Mr Bardwell—We currently have 10 companies that are taking our material, and we are not having any problems with that. Senator LUNDY—So they actually transfer content? Mr Bardwell—They take their material from our server. Senator LUNDY—How do you get it to them? What is the process? Mr Bardwell—FTP, whatever that means. Senator LUNDY—It is an important question. Mr Bardwell—We currently send it by HTML, but we are moving to XML. Senator LUNDY—Part of the value of the ABC’s online presence goes way beyond the actual content. It is actually the work processes that you have been able to create with ABC Online – the way you input this content, the way you have trained and skilled up the journalists to input the content. Will all of those business systems, if you like, or business processes and organisational processes be retained as property under the control of the ABC? Mr Johns—Absolutely. Senator LUNDY—How can you guarantee that? Mr Johns—Because that is the platform of our success. Senator LUNDY—Absolutely it is. Mr Johns—And we are not going to impair it. Senator LUNDY—If you are supplying content in this way and it is FTP’d – and let us presume you are going to stick with that methodology at least in the short term – does that mean that the look and feel of the ABCI content will actually reflect how it is currently visu- ally and graphically constructed on the ABC web site? Mr Bardwell—Yes, it will.

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Senator LUNDY—So, for example, if a subscriber to Big Pond’s residential suite of ISP servers opens up the Telstra page and goes to the news service, they will think they are looking at the ABC’s home page? Mr Bardwell—They will know they are looking at Telstra, but the material will be branded as ABC material and it will be laid out by ABC staff. Senator LUNDY—Why was the agreement with Telstra not just one of creating a relationship that allowed them to link directly to the ABC’s own web site? Why do you have to do this FTP thing? Mr Bardwell—If Telstra is as successful as it can be, we did not want to be in a situation where we had to have the servers to actually serve that number of subscribers. That would be an initial reaction to that. Our basic policy is to get stuff out to somebody else’s server so they can maintain it and it is their problem if it is not working. Senator LUNDY—So what you are saying – Mr Johns—Excuse me, Senator, I think this might help. Chair, with your permission, I would like Colin Knowles, who is our technical expert in this area, to perhaps help Senator Lundy. Mr Knowles—Senator, the concept of caching basically works on the basis of a server carrying the material locally so you have very ready access. It constantly goes back and checks on a regular basis – Senator LUNDY—It depends what settings you put on it. Mr Knowles—Yes, you can put it on different settings, and some material is fairly static so you do not need to update it. But you can actually set the thing dynamically so that you either update on a regular basis when you get a change or otherwise. All of those options are open to us. In fact, for example, when we were doing the federal election coverage, we were actually mirroring our material onto about six or eight other sites. That was being constantly updated. Had we not done that, we could not have handled the traffic. We do not want all the Telstra providers to actually be reflected into our site and our having to cope with all of their traffic. Senator LUNDY—But you could set up proxies anyway. Mr Knowles—We would set up the proxies to suit the particular type of material that they were taking. A lot of material, for example, on a web site is relatively static. Some of the education material and so forth is probably static for a month or so before it changes. In regard to material such as transcripts of programs that have gone to air, there is no reason to change them, so they probably actually stay static. On issues of the news, the news is updated on about five bulletins a day with subsequent other bulletins. We can easily arrange for those to be actually updated as the new bulletin is published. So keeping the two in synchronism is not really an issue in question. It is a fairly rudimentary exercise to be done and it is happening every day. It is simply a matter of the protocols we set up for the particular content we are exchanging. Senator LUNDY—Thanks for that. I think there is still a point there in terms of the timing issues and relativities with the actual process of FTPing that content up. I presume that would be on a regular interval basis as well. Mr Knowles—Yes. Not everything needs to be FTP. FTP happens to be a very efficient way of shifting material.

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Senator LUNDY—Sure. Whatever your transfer protocols are. Mr Knowles—If we were doing an update on, say, five times a day news, for a special bulletin we would just update that file and send it down. It is just the way we actually decide to manage that particular transfer. Senator LUNDY—And how you manage it with the other people that you have an arrangement with. Mr Knowles—Yes. Senator LUNDY—Just getting back to the whole look and feel thing, what is there in the agreement about protecting that sort of graphic representation of the ABC web site when that content is moved on and put on other people’s sites? Mr Bardwell—The ABC has quite a comprehensive series of guidelines that have been worked through in depth. Prior to your coming in, Senator, we were talking about some of the history of this and how this was worked out. Approximately 12 months ago a series of very tight editorial safeguards and marketing safeguards were put in place prior to entering into any of these sales and which were approved by the board of the ABC. As part of that, all of our material that is on a third-party site must be branded as ABC. There are very strict guidelines as to how it is formatted and the lack of advertising and so on and so forth. Senator LUNDY—What about some of the value-added aspects of this deal? What about subsequent arrangements with Telstra, for example, to handle the electronic commerce for the ABC, selling ABC products online? Are they going to do that for you? Mr Bardwell—At this stage this has not been discussed. Senator LUNDY—Are you currently selling ABC products through electronic commerce? Mr Bardwell—We are. The ABC has a shop online, which is an e-commerce site which is a reflection of one of our many shops. Senator LUNDY—Who provides the technology for that e-commerce site? Mr Bardwell—At the moment this is done by Village Roadshow. We would look for the best offer, the best deal. There is no obligation on us to use any Telstra service. Senator LUNDY—Right. I was going to ask whether there was any first preference option to visit Telstra in any of those sorts of value-added features of what an online presence is becoming. Mr Bardwell—The nearest thing we have to any compulsion is that if this deal goes through Telstra would be obliged to give us the best possible offer that they can. However, we are not obliged to take it. In fact, we would go through our normal processes – Senator LUNDY—Is that a realistic proposition, given the closeness of the relationship and co-production of content, collaborative research and development projects? Is it a realistic prospect that you going to be able to get a technological provider outside of Telstra? Mr Johns—I would say it is entirely realistic. Senator LUNDY—In circumstances where you are actually going to be developing new digital products in collaboration with Telstra? You would, I presume, know enough about the organisation to know how keen they are to be establishing themselves in some of these new markets. Why wouldn’t they want to pin it on the back of you guys? Mr Johns—We for our part are very keen to be at the centre of developments, and being at the centre of developments does not mean being locked into one relationship. We want as

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 162 SENATE—Legislation Thursday, 10 February 2000 varied and as complex a range of relations as we can, because we are seeing ourselves, as I said at the outset in my initial remarks, as a content provider. We are deliberately turning away from a joint venture or equity arrangements; we are not doing any of that at all. We have turned our back on that. What we are really saying is, ‘Here we are, here is the ABC content provider,’ and we want to supply to as many people as possible. We want to be present in as many delivery systems as possible because we want the ABC presence to be ubiquitous. Senator LUNDY—What about your role as – Mr Johns—Excuse me. Russell Balding, the Finance Manager, is anxious to add to the point that I made. Senator LUNDY—Please. Mr Balding—In respect of procurement, talking about future arrangements or deals, the ABC has in place some fairly strict procurement policy and guidelines. We have a contracts review committee process in place. So, although the obligation is on Telstra to provide us the best deal they can, as Mr Bardwell said, we are not obligated to take that. In actual fact, we will be testing the market through the normal procurement process. Senator LUNDY—Thank you. With respect to the opportunities that will present themselves, primarily to Telstra, I think, about how they can work with you in research and development on content related issues, I want to turn specifically to one that has come to mind, which is the protection of intellectual property rights in a digital environment. It is obviously a topic of discussion in many forums right around the world about how that is protected. Is it likely that the ABC content will become a test bed, for example, for a future Telstra technological development in this area, and is it a part of the agreement or something you have contemplated for your content to become part of perhaps being a pilot project on such technologies for Telstra? Mr Bardwell—It is possible that it could be trialled. Obviously if we are getting into a situation where it is of mutual benefit for us to develop some particular medium or technology during the course of this period, we would quite possibly be providing some content for those trials, as we do on a regular basis with a whole range of people all the time. We are interested in trialling with anybody who has got something of interest to us, and those trials are going on all the time within the ABC. Our standard policy is that if somebody comes to us with some technology and they say, ‘Can you provide us with some content to use on this?’ we provide it. Dr Schultz—You may have seen the Telstra datacasting demonstration that Telstra research labs were showing last year quite widely, and in that there was quite a deal of ABC content that was there for the purposes of the exercise. Senator LUNDY—I guess my question comes back to one of your capacity to pursue such matters independently of your relationship with Telstra. Correct me if I am wrong, but you seem to be saying that, yes, you are free to pursue others. Dr Schultz—As we said, we are trialling a number of technologies with a number of different players. The essence of it all is non-exclusive. Senator LUNDY—Okay. With respect to that, is that an issue that you have identified as part of this agreement, that you will be pursuing exploration with Telstra of some of the co- production projects and related research? Dr Schultz—The research and development component of the proposed agreement is quite separate to the co-production agreement. They need to be seen within that situation.

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Senator LUNDY—Can I ask the question with respect to the research projects, then? Is it an issue that is actually part of the research projects? Mr Bardwell—I am not sure what you mean. Senator LUNDY—The issue of intellectual property management in a digital environment. Dr Schultz—The framework for the research and development is quite broad at this stage – Senator LUNDY—Does it include those issues? Mr Bardwell—It does not in detail but it does in scope. I think they are issues which we would be addressing as a matter of course should we get to the stage of beginning to negotiate a long form contract. Senator LUNDY—Going back to my point about the value addeds, there is potential value added in that. For example, if they resolve some technology, it might involve some sort of royalties scheme attached to the distribution of content in some way. I suppose it is a little bit out there in what happens next, but is there anything in the agreement that restricts, reduces or modifies the capacity of the ABC to be able to have a degree of control and flexibility on those types of schemes? You have in no way relinquished anything to Telstra in that regard? Dr Schultz—No, we have not. There is no obligation on us. For instance, if Telstra were to develop a particular set of software which they thought was the best way of doing something in this new environment, there would be no obligation on us to accept that. It is something that we can evaluate. We can make decisions on it. If we decide to procure it, we do. But there are no obligations on us in that regard at all. Mr Bardwell—If we did go ahead with something like that, that would be subject to a separate contract and a separate agreement. Senator LUNDY—Will the ABC ever be asked by their partner Telstra in this regard to endorse Telstra in any way, shape or form? Mr Johns—I have heard nothing. No suggestion like that has reached me. Senator LUNDY—Do you think that, by virtue of your existence within the content of their site and by virtue of this relationship, you are in fact by default endorsing Telstra in their conduct and practices in this marketplace? Mr Johns—No. You have to understand that we are looking to a maturing Australian environment, where Australian content, and in particular ABC content, is going to be sought by a range of people. I will admit – and this is one of the encouraging things about this arrangement – that it is startling in its scope and scale at this stage. But I believe that in the future there is going to be a great demand for Australian content within the country, and hopefully we will be successful overseas as well, being a content supplier on the scale, for example, that the BBC is to us. They are not embarrassed by their content supply arrangements with us. Senator LUNDY—What opportunities exist for the staff and the people in ABC Online, who have developed – and I have heard you say this many times – a world leading organisational process for the preparation and publishing of digital content, to be able to further develop and expand their skills, capability and scope, given this arrangement you are entering into? Does it enhance their chances? Does it restrict their opportunities? Mr Johns—I think it enhances their chances. Senator LUNDY—Why?

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Mr Johns—I think this is enabling because it is a recognition. It is of enormous encour- agement that this is a recognition of the value of our content for its own sake, not because it is wrapped around advertising or because of its e-commerce potential at all. It is because Telstra and others are saying, ‘We want ABC content for its own sake.’ You have possibly also heard me say, Senator, that elsewhere people very often have to pay to get their content taken up. Our content is of such quality and such relevance. I believe that, very encouragingly in this new generation of broadcasting, Australian content is a scarce and really valuable commodity, and we are taking full advantage of that. That confidence will flow through the whole ABC organisation. There will be great confidence with this, once we have got over the startling dimension of it. By the way, I might just say on this too that we did not time this announcement, as you know. If we had had our situation when we had actually reached a point of agreement that was endorsed by our boards, then of course we would have consulted and planned to do it. We would have minimised the fears that are lurking around this arrangement in some quarters by having proper discussion. You again know that I have never been wary or one who has been unwilling to argue, to press cases and to entertain discussion. The arrangement that we are reaching for is being done under the constrictions of normal commercial confidentiality but the principles, the purpose and the direction have been thoroughly discussed and will be thoroughly discussed. If we can come to this arrangement quickly, I relish the opportunity – it may not be mine – to talk to the staff, to engage the staff and to share with them the enthusiasm that I think is going to flow from this and similar sorts of arrangements. Dr Schultz—Senator Lundy, you asked a very specific question about the benefit to staff of this proposal. It seems to me that there are three very particular components in this proposed agreement which just need to be put in that context. The first is that, by bringing this money into the organisation, the capacity to undertake online production will be significantly enhanced, so that will mean that we will have the capacity to be employing more people doing more online stuff. Senator LUNDY—Will you employ them, though, or will you contract it out? Dr Schultz—This is yet to be resolved. I would anticipate that we would employ them. They would be producing content for the ABC – so, whatever the contractual relationships that exist for people who produce stuff for overseas. Senator LUNDY—It is not because it is going to be bigger and better that you suddenly change tack, say, with the look, the feel and that kind of thing? Dr Schultz—No. Senator LUNDY—These are really important issues. Mr Bardwell—There is a lot more money flowing through, and there will be a greater ability to make more product. It is a very impoverished service that we have at the moment. Dr Schultz—There are two other points which are really crucial in terms of enriching the capacity for people to be engaged in the production of online content within the ABC. Within this agreement, there is a provision for a fellowship. There are fellowships at the moment for writers, for musicians and for others. This will be the first time – to the best of my knowledge – that, in Australia, there will be fellowships available for the very best creative and technical people who are involved in online content production to put up their hands to get an opportunity to apply for a substantial amount of money to undertake a fellowship to do something

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 165 new and creative. So that will be a very real benefit not just to the ABC and Telstra but across this whole emerging industry. The other area which I think is important is that, within the proposed agreement, we have a budget of a little over $1.5 million a year which is for exclusive online co-productions. Those co-productions will be available for distribution on the ABC site and on Telstra’s site, again, although editorial control policies apply. But that will mean that there is an opportunity and a specific budget available for doing just online co-productions. We do television co- productions; we do radio co-productions. This will be a new and extended capacity for online co-productions. If you take those three elements as a package, you start to see that this is an opportunity to significantly enrich the resources that are available to ABC staff who are involved in the production of online content for our service and any other services that we, as a secondary capacity, are able to license it to. Senator ALLISON—Can I go back to the comment you made that you did not time the announcement. What if the announcement had been timed by you? How would it have been different? Mr Johns—We would have been able to consult, to discuss more widely, to frame it, to explain, to answer the questions, to answer the issues and that sort of thing. Dr Schultz—We had a very elaborate briefing structure planned for all stakeholders, including politicians and departments – for instance, the ABC staff unions. All that was in train, but we felt that we were not in a position to implement that until we had the approval of our board for the non-binding agreement. By this non-binding being leaked in advance of any formal signature, we have had to try and get those briefings done on something which actually has no standing. Senator ALLISON—Quite a lot of the controversy around this leaked announcement has been the procedure that was used in approval, and it has been reported that the proposal was not taken to the executive. Can you just run through the standard procedure for proposals of this sort and what actually happened in the ABC, just so we can get that on the record? Mr Johns—I do not think one can say that there is a set series of procedures but, as outlined by my colleague in answer to an earlier question, members of the senior management have been involved in advice and discussions about the development of this over the long months. The board has been advised, board papers have been developed and so on. It is a developing discussion. When we reach a point where there is collective discussion required, that is what we do and have done. Senator ALLISON—So there is no foundation to the accusation that this was developed somewhere by heads of department or whatever but not in any formal sense taken to the ABC management group? Mr Johns—I think there have been inhibitions in terms of commercial-in-confidence aspects. That has perhaps inhibited discussion, but it has not curtailed it where it has been important. We could not have got to the position that we have if it had been done in isolation from the executive. Senator ALLISON—Did the commercial-in-confidence reasons, if that is what you are saying, stop it being taken to the ABC management group? Mr Johns—No, I did not say that. I said at various points – because it has been moving – we have been responding to the discussions with executives as they have progressed and as required. As a result, having met those requirements, I would say that the developments have

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 166 SENATE—Legislation Thursday, 10 February 2000 been shared with our senior management. I have to tell you that we are only reaching a point where we have a non-binding agreement. If we are reaching the conclusion of the discussions of the arrangements – if we do, and hopefully we do, from my point of view – then the executive, the full senior management, will have to be fully involved in all of this and play a very influential role in its development. Senator ALLISON—Is there an ABC management group as such, an identifiable group? Mr Johns—Yes, there is. Senator ALLISON—And this was not presented to them as a group but rather to executives at various times as necessary? Is that the fine line of distinction between the two? Mr Johns—That is true. Senator ALLISON—I understand now. What about the board? Mr Johns—We have been reporting to the board regularly on the progress of these talks. Senator ALLISON—It went to the board and the board sought some clarification and so on? Mr Johns—It did, and it is still seeking clarification. This arrangement will not come to pass, of course, without the board’s full endorsement and the board will not endorse this arrangement at either this early stage or the later stage without being fully informed, and informing itself. Senator ALLISON—What about the accusation that this was not leaked at all but that it was the ABC wanting to make the announcement within this time frame before it had gone to the board? Is that nonsense? Mr Johns—It is nonsense. Senator ALLISON—So where did the leak come from? How did it get out? Mr Johns—You tell me. I am amazed that you, from that side of the table, would ask me about leaks and where they come from. Senator ALLISON—It did not come to me, I can tell you that. I am just saying that, obviously, the controversy is about the timing of the leak or the announcement or whatever. Mr Johns—I genuinely think the controversy is about the scope and scale of it and the spectre of advertising. That is really what the controversy has been about. The concerns about advertising are unwarranted and the scale of it, I think, is something that we will be very com- fortable with over a period, if and when it comes to a satisfactory conclusion. Senator ALLISON—So in advertising you dismiss this concept of the thin edge of the wedge? Mr Johns—Absolutely. We are a mature organisation. If it were to address this issue, the board would certainly look after the Australian Broadcasting Corporation’s independence. Senator LUNDY—I would like to go back to where I left off. You mentioned that you were changing from HTML to XML. Is that part of this agreement? Mr Bardwell—No. Senator LUNDY—Were you going to do it anyway? Mr Bardwell—At this time, we are in the process of negotiating a term sheet, which is a set of intentions of what we will do. We do not have anywhere near that sort of detail. Senator LUNDY—It is interesting that you call it that.

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Mr Bardwell—We are in the process of moving to supply our material on XML as a result of requests from about three other companies. Senator LUNDY—Including Telstra? Mr Bardwell—No. Senator LUNDY—Not including Telstra? Mr Bardwell—We are not supplying Telstra. Senator LUNDY—If you were. Mr Bardwell—We have no agreement to supply Telstra. Senator LUNDY—That is not my point. They made that a precondition of getting your content. Mr Bardwell—No. They have not. We have not had any discussions on the method of delivery. Dr Schultz—The three other companies have not made it a precondition either. Mr Bardwell—They have just approached us to see whether we can supply it on XML because that is where they are headed. Senator LUNDY—We heard from Telstra earlier. I do not know whether I understood it correctly, but it was about delivering a radio service across the Internet. It is an audio service. Can you clarify what part of the proposal that relates to? Mr Bardwell—I am not sure what part of the proposal it relates to either. Telstra will have access to our online services. Senator LUNDY—They specifically mention a Net radio service that they would have exclusive access to. Mr Bardwell—They have no exclusive access to any Net radio service. They may have been talking about wireless, which is not radio. Wireless is portable. Senator LUNDY—I am getting mixed up in terms of the content, definition and the delivery mechanism. What is the process when you restructure the content? Dr Schultz—Reversing? Senator LUNDY—‘Repurposing’ is the word I am looking for. If it is repurposed for wireless delivery to a different device, Telstra was saying that that became exclusive content. That is if it is repurposed for a wireless delivery. Is that true? Mr Bardwell—No. That is not true. Senator LUNDY—Telstra is wrong? Mr Bardwell—No. I heard what Telstra had to say. Senator LUNDY—So you know what I am talking about? Mr Bardwell—I know what you are talking about. Senator LUNDY—I am glad we have established that. Mr Bardwell—As part of this agreement, the ABC will provide a sports results service, which is the only situation where we have discussed an exclusive co-production. Senator LUNDY—In terms of repurposing sports results, Telstra gets them and no-one else? Mr Bardwell—Only for wireless Internet, yes. It will be non-exclusive for other things.

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Senator LUNDY—But we are talking about a technological delivery mechanism essentially to next generation mobile phones; is this true? Mr Bardwell—Correct. Senator LUNDY—Why have you chosen to embrace a technologically specific content delivery mechanism as part of this agreement? Mr Bardwell—We are providing content on three areas of delivery. Senator LUNDY—I know that. That is not my question. Mr Bardwell—Narrowband, broadband and wireless. Senator LUNDY—Why are you choosing to make your wireless content on sports results exclusive to Telstra? Mr Johns—I do not know whether it will help, but I want to make one general point without intending to inhibit the questioning. The general drift of the discussions towards conclud- ing this agreement is for us to come to an arrangement where we can say what Telstra can do, not what it might do or cannot do. Because technical developments, as you know, are coming at such a pace, we are trying to be as specific as we can so that we know that when we are entering into an arrangement we will not be surprised by technological development. I just put that as a general statement. Senator LUNDY—I will put my comments into context. What we are talking about in terms of next generation Internet delivery is that, by supplying that content exclusively to Tel- stra, you are playing in a completely new market where you are giving Telstra exclusive rights to some potentially very lucrative content. Dr Schultz—I will try to clarify some of the issues that are around that, as I have been hearing them. The proposed agreement, which may be made available for Telstra for use on its wireless devices, is that we would undertake a sports results service. We would be able to use it as we see fit. It may be on the Internet. It may be that we put it as a ticker across a digital channel. It may be that we use it in any one of a number of different ways. What we are giving them is the exclusive right to use that sports results service on that device. That does not mean that we cannot put it on an Internet service and sell it to somebody else. All we are saying is that a small results service will be available to them for that application. The information, content and versioning of it is available for us to use in any other way we see fit for any other clients and for our own services. Senator LUNDY—But it means that anyone else who is using any other carrier for those devices will not be able to access that content. Mr Bardwell—At the moment, nobody has access to that content because we cannot afford to gather it. At the moment, if we cannot afford to gather that content, which is what we cannot do, that content does not exist. This is a way that we can actually do that. Senator LUNDY—But this comes back to the political point that the ABC is not able to develop this generic content and then sell to other carriers and have it posted over any technological devices because it has been starved of funding for the last four years. The point is that the ABC is now being forced to exclusively supply new styles of content on the basis that that is the only way it can get the money in to have the capacity to produce it. It is done by making that new style of content. I am making a point because it gives a context to my questions.

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Senator Herron—We are here to answer questions, not to debate this with you. We are here to answer questions. Senator LUNDY—Is it the policy of this government – Senator Herron—The debating forum is across the road. Senator LUNDY—Is the policy of this government to force the ABC into a position of providing exclusive content to fund technological progression within their organisation? Senator Herron—Ask that question of the minister responsible. Put it in writing. I am not here to debate with you, and nor are the people with me. Senator LUNDY—They are pretty important questions as far as the integrity of the ABC in the future goes. Senator Herron—Ask it in the chamber, which is the proper place to do that and to conduct debate. Senator LUNDY—I have one more series of questions that goes to the definitions of datacasting and the presentation of interactive television style product as part of this proposal. The issue really goes to your capacity to deliver an interactive style content using your broadcast product as the base content and then using a PSDN delivered enhancement to that broadcast content through whatever the appropriate technology is so that you can deliver a datacasting style service that sits well beyond the scope of the current datacasting definition. Dr Schultz—I will take one step back in helping to provide an answer for that question. As you would be aware, the ABC is still awaiting the decision of cabinet about our capacity to offer multichannels in the digital environment. We are hoping that that decision will be in our favour and that we will be able to offer multichannels in that new digital environment. We are proposing within the digital channel environment to offer two new program streams. One we are calling ABC Plus, which has very much a state look and feel and a lot of information programming, education programming and children programming. The other channel that we are proposing to offer we are giving the name at the moment of ABCI, ABC Interactive. You may have seen the demonstration that we were showing last year, which gave a sort of feel for an interactive ABC programming stream. To the best of our advice and we can determine the moment, that degree of interactivity would fall within the scope of our multi-channelling – Senator LUNDY—Multi-channelling, or datacasting? Dr Schultz—No, multi-channelling – so that it would not be captured specifically by the carve-outs on datacasting that would apply to new operators who wish to come in and acquire broadcast spectrum. We do not know that yet, because we do not know what the decision of the government will be but, to the extent that our interactive proposal was very much based on our charter and so on, we expect that we will be able to do that. What is yet to be seen is the degree to which that sort of interactivity becomes part of the normal broadcasting spectrum and the normal broadcasting services. That is something which will be determined in the market over the next little while. To the extent that there is any overlap at all with this proposed agreement with Telstra, it is at the margins. This is an online output agreement; it is not a datacasting agreement. It is not about them streaming ABC programming to make it look like they have an ABC television program. There are lines – and I realise that this area is going to blur over time – that are very clearly defined within the proposed agreement.

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Senator LUNDY—Just clarify for me as far as the current definition of datacasting goes, what constraint does that impose on the ABC in terms of an interactive product you could present through the digital spectrum on your current broadcast channel? Dr Schultz—To a considerable extent that will depend on the constraints that are placed around our multi-channelling proposals. Senator LUNDY—No, I do not understand why it is so related to your capacity to multichannel. Dr Schultz—The essential core of the datacasting definition as it is being proposed is that datacasting is an e-commerce enabling medium. To the extent that we seek some interactivity in our television services, it is not – Senator LUNDY—I had not heard that definition of datacasting. Dr Schultz—I think if you read the definition you will see that a lot of it is around forms of e-commerce, one way or the other, whether it is through advertising or transactions or what have you. So, to the extent that our proposed interactivity on television is about delivering public service broadcasting, the e-commerce component is tangential. So, as I say, we do not know the extent to which we will be able to do the full interactive services until we have got that multi-channel definition, but think that they will need to be seen in context together. Senator LUNDY—Have you got a definition from the government as to the scope of content that you can present on your other channels or your multi-channels? Dr Schultz—No. That is what we are waiting for. Senator LUNDY—That is what you are talking about; that is the definition you are looking for now. So that definition will determine the extent to which you can provide a – Dr Schultz—That is right. And if that definition is relatively liberal – we operate within charter restrictions and we operate within spectrum availability and so on – there may be no reason why we cannot do interactivity as one of our multi-channels. Senator LUNDY—No, I would expect not. It will be interesting to see what FACTS have to say about it. Dr Schultz—FACTS has been across our interactive television demonstration since the first day we showed it to them. Mr Johns—On this point, if I may say so, I personally have argued that we, as the national broadcasters, should be given the maximum flexibility and the responsibility to use the digital spectrum to the greatest benefit. Senator LUNDY—With all due respect, Mr Johns, that was when you had no money. Now you have got money, how is it going to change? Mr Johns—No. We value this money, but do not come this, ‘We didn’t have any money.’ This is – if it comes to pass – a significant increase in funds, but it by no means ends our funding difficulties. To take up your point about datacasting and the potential for us, what I am saying is that we should have – and I have argued this with government – the maximum flexibility to use the new digital spectrum. We should have that with one, and only one, limi- tation, and that is our charter responsibilities. I am concerned that we may not get this flexibility because of the considered flow-on effect to commercial operators, and I think that is wrong. Senator LUNDY—That, I suppose, goes to my point as to what is likely to change now, with the scope the government decides to afford you as far as the definitions of your multi-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 171 channelling scope goes, with this deal out in the open and circulated. Is this going to change some of the free-to-airs’ attitudes towards you and the definitions? Are they going to then go and lobby the minister’s office and say, ‘You had better narrow it down a bit, because these guys could get serious?’ Mr Johns—All I can say is that it should not, because what we are doing is moving to a more sophisticated environment where Australian content is valued. If you want us to say, ‘We’re not going to take any of these opportunities. We’re not going to establish real value for Australian content. We’re not going to that, because of the dangers that are involved in limited, unimaginative response to it,’ then what we would be doing would be underwriting the situation that we have had with previous generations, and that is that we are simply here taking overseas content. We are trying to set up bulwarks against that, and this is an essential element of establishing those bulwarks. There may be difficulties. There may be problems about it, but that is no reason not to launch ahead with it. Senator LUNDY—Just going back to the sport example, how does that affect your capacity in purchasing the rights to sporting events if you are saying up-front and completely distinct from purchasing the rights to sporting events that you are going to exclusively provide the sports results through that technological medium? Mr Bardwell—We do not intend to be transmitting the sporting event. Senator LUNDY—I appreciate that. Is it a consideration when you purchase the rights to a sporting event? Mr Bardwell—No, I do not think so. No, there is no connection. Senator LUNDY—Have you had discussions with other carriers, people who – Mr Bardwell—ISPs? Senator LUNDY—No, not necessarily ISPs – others who will have the capacity to deliver content over wireless devices to market test this concept of making it exclusive? Have you tested that market, as to what sort of demand you would get for that kind of content, with other potential delivery technology companies? Mr Bardwell—We have been in discussion with other companies about wireless delivery. Senator LUNDY—And you have still chosen to go exclusive? Mr Bardwell—I do not think I am at liberty to talk about those. Senator LUNDY—I really wanted to just know if you had been talking to them because, obviously, if you have, that just tells me that you have made a decision to go exclusive with Telstra in the proposal. Mr Bardwell—This is one very small part of our overall delivery. Senator LUNDY—There was another thing that Telstra said was an issue of exclusivity. Can you remember what it was? You were listening. You tell me. There was something else. There was sports results and something else. Mr Bardwell—There is a request from Telstra regarding finance services – Senator LUNDY—What do you think of that? Mr Bardwell—which we believe is a very unlikely thing to come to pass. Senator LUNDY—They were pretty keen on it. Mr Bardwell—Of course. I think it is important to realise that we are in control of our content here.

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Senator MARK BISHOP—On this point of exclusive provision by Telstra of sports results – the point that Senator Lundy has been pursuing – how does that differ in principle from me ringing up, either from that phone over there or from my phone at home, and getting the sports results for the races or the AFL all around Australia? Mr Bardwell—There is no difference whatsoever, and you could get them from the ABC under this situation if we had a sports results service. Senator LUNDY—It is the delivery technology. Senator MARK BISHOP—But they are both via phones; aren’t they? Senator LUNDY—You get a digital readout. Mr Bardwell—One is an online service, and one is a telephone answer service. Senator LUNDY—I want to do a bit of speculating about what we are talking about here, just so I have it clear in my mind. If you have a financial service, for example, with a credit card company, these interactive devices – the third-generation mobiles, Net on the phone kind of thing – part of the service suite that I have seen is you can go into a restaurant and have all of your credit details in that device and you just do an infra-red exchange with the cash regis- ter. Is that the sort of depth of financial service you have in mind? Is it that kind of thing? Mr Bardwell—What they are seeking is an information service on financial results and that sort of thing. Senator LUNDY—Stocks? Day traders? Mr Bardwell—Yes. Senator LUNDY—They are trying to tie up the day trade market on wireless devices? Mr Bardwell—It is just something that they are after. Senator LUNDY—Yes, I can imagine. Mr Bardwell—And it is not us. Senator LUNDY—Everyone could follow their Telstra share prices. Mr Bardwell—It is most unlikely that we would provide that, so they said, ‘What about that?’ Dr Schultz—There have been a number of these matters over the process of this negotiation where subjects which have been put on the table have been pulled off and have come back on and off. In some of these areas, such as the finance results from the financial information service, we have made it clear that we do not think that that is something we would ever want to undertake. We have editorial veto over any project we choose to undertake, as the Telstra representatives were saying this morning. In the end, we said, ‘Put it in there. We can talk about it, but don’t have any expectation in any substantial way that this is going to materialise. We will do it only if we decide that it’s in our best interest to do it.’ Mr Bardwell—As we have reiterated, we are in the process of negotiating a term sheet. It is the heads of agreement of something. Senator LUNDY—Have they put anything else on the table? Dr Schultz—They have put things on the table which have been knocked off. Senator LUNDY—I am curious. What is their ambit claim? Dr Schultz—Their ambit claim is irrelevant.

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Senator LUNDY—Apart from being generally interesting because of the incredibly interesting technological developments and what this third generation of wireless devices is going to look like, I am curious as to the extent of the ABC’s involvement. Mr Bardwell—We have entered into negotiations with Telstra, and we are in the process of trying to create an agreement about what they can do, not what they cannot do. There is a fundamental difference between the two, because we are looking at five years of unknowns. What we are talking about are existing Telstra online services in narrowband, broadband and wireless. We have spent a long time and been very careful about this to ensure that we are proceeding within our guidelines, within a box of an area, rather than saying, ‘Here is the open plain. What about this? What about that?’ Everybody is saying, ‘What about this? What about that?’ but those things are outside the scope of this agreement. This agreement is quite specific that it is to do with our online content being presented on those services. Senator LUNDY—Is this the consideration of the ABC? Telstra have a fairly strong presence in the vertical marketplace. They sell bandwidth on a wholesale basis. They sell ISP style services. They sell information services. We heard this morning that they even sell their services to the Department of Communications, Information Technology and the Arts. They are a very comprehensive presence in the marketplace. That affords them certain luxuries. I guess it is their residual monopolistic tendencies. One of these issues – and the reason I think it is of concern with the ABC – is that your charter is about providing all Australians with quality information. I do not know the exact words of your charter; I am sure you know what I am talking about. Telstra, by virtue of their retail Internet service product, discriminate across geographical lines in this country. They charge a different rate for their metropolitan customers, for what they classify as ‘regional’ customers and for what I think they classify as their ‘remote’ customers for the purposes of the definition. I am not sure of the specific definitions, but their definitions do not relate to a technological cause or a point of presence. My understanding is that, at the moment, they are set according to an arbitrary number of kilometres from a given point or a given point of presence. Given that you are putting content on their site, that is going to make them a lot more appealing as an Internet service provider – getting fantastic, high quality ABC content every time you open up the Telstra page. How do you feel about the ABC being cobranded with Telstra when Telstra are out there providing a discriminatory service for access to the Internet? Mr Johns—Note that we have an overwhelmingly non-exclusive arrangement with Telstra. We are not endorsing Telstra policy – and nor am I validating your criticisms of Telstra. We are supplying them content on an overwhelmingly non-exclusive basis. Senator FERRIS—Mr Johns, radio and television will continue, won’t they? Mr Johns—Absolutely, and our own online service will, of course, too. Senator LUNDY—Thank you for that contribution, Senator Ferris. Mr Johns—We are looking to have the spread of our quality Australian content throughout Australia and through as many of the mediums of delivery as we can achieve. That is not because we are financially strapped; that is because we want to extend the life of our content. CHAIR—Senator, a lot of this ground was covered this morning with Telstra. Senator LUNDY—I am finished, thanks.

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Senator ALLISON—We have heard lots of assurances today that the commercial content will not intrude on news gathering or other programs. Will there be clauses in the contract which will put that in concrete? Mr Johns—I think you would have heard this morning from Telstra that they accept the ABC is in full control of its content. That was repeated at several points. I am asserting it. Senator ALLISON—But will there be an attempt to build it into the contract? Mr Johns—Hopefully, when we reach the final agreement, it will be very well recorded and reflected in that arrangement. Senator ALLISON—So you have a draft now? Mr Johns—You have a working document now. Senator ALLISON—Is it in the working document now? Mr Johns—Yes, and that is still being refined. Senator ALLISON—Dr Schultz, you mentioned a fellowship available for new and creative ideas within this arrangement with Telstra. What is the value of the fellowship? Dr Schultz—It is $100,000 per year. Senator ALLISON—Is that open to employees of the ABC? Dr Schultz—Employees and to people who are not employees as well. As we have been saying repeatedly this afternoon and as Telstra was saying this morning, this is just a working document. This is just a framework. A couple of lines spell it out, but the detail of how fel- lows would be selected and so on is all a matter for further negotiation. Senator ALLISON—Is it $100,000 each year or is that over the five years? Dr Schultz—For each of the five years. Senator FERRIS—I am not quite sure which of the officers will be able to answer these questions – perhaps Mr Bardwell, involved in business development. I am wondering whether the ABC have any plans that they are able to tell me about to screen a privately produced documentary on aged care in Australia. Mr Lloyd-James—It sounds like me – I do not mean aged care; I mean the subject that you raise. Senator FERRIS—Wait until later tonight! Mr Lloyd-James—Could you expand slightly, Senator? Senator FERRIS—Yes, I would be very pleased to. I have an advertisement here which appeared in the 17 December and 21 January editions of a publication called Aged Care Housing Weekly News. Perhaps I can summarise it for you. It is an advertisement which says: You are invited to support the making of a film documentary on aged care in Australia. The 45-minute Four Corners style documentary is currently being filmed and it will be screened on the ABC around June/July 2000. I am interested in this production because this advertisement says that sponsorship of $2,000 from 20 aged care housing providers is being sought and credits will be carried on screen when the documentary is shown, which suggests to me that the ABC could be involved in a co-production here or certainly involved in showing a documentary which in fact has been produced commercially. Mr Lloyd-James—May I take part of this question on notice? I am reasonably across the detail of our production slates. I am not conscious of this at all; if it is being produced by the

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ABC or is indeed being co-produced by the ABC. The only circumstance that I cannot cover at the moment is acquisitions, but clearly the concern that you raise would be one that we would raise. Could I take that on notice and come back to you? Senator FERRIS—Could you also perhaps take another couple of questions on notice? The working title of this production is How will we house them?, referring to the elderly in Australia. I would be interested if you could give me any correspondence that has come from the producers of this documentary. The person named in the advertisement is a man called Mr Bevan Crowley. He is named as a development officer. I would be interested to know if you have had any contact with anybody else involved in this documentary and if you are able to tell me whether this is something that happens regularly. It does seem to me to traverse some new ground in relation to commercial operations and co-productions whereby people can send in money to be part of the film, then they have their credits listed on the end of the film and yet it is presented – as they say here – as a Four Corners style documentary. It does raise concerns. Mr Lloyd-James—Leaving aside all other issues, those two points seem to be in complete conflict with each other anyway. I will come back to you. Senator FERRIS—I am very pleased to hear you say that and I would be delighted to give you a copy of the advertisement in a few minutes. My second set of questions relates to the purchase of new equipment for digital television. Mr Knowles, I wonder if you could advise the committee whether the ABC has yet made a decision on the equipment that will be used to take the broadcaster into the digital age. Mr Knowles—We have made decisions on some equipment. We are currently on the threshold of presenting further proposals to the board and we will be continuing to do so probably for the next six to eight months. What we have ordered so far are the first priority equipments, recognising that what we are doing is basically replacing the whole of our television chain from television camera out to transmitter. All of that is a progressive thing which will come together in time to allow us to go on air in January 2001. Senator FERRIS—Has the ABC yet made a decision on whether you are going to use Sony SX or Panasonic? Mr Knowles—No, we have not made a decision about any of that. It is part of the evaluation process we are currently undertaking. Senator FERRIS—Can you tell me the role that the technical staff might have played in the development of a recommendation on that equipment? Mr Knowles—On this particular occasion the technical staff – and, in fact, in all of the acquisitions we have made in the last 12 or 18 months – have been involved to quite an appropriate degree. Our process of selecting technical equipment these days is to engage the users of the equipment in the development of the specification. We go to open tender for that equipment. We then evaluate the commercial proposals that are put to us and eliminate from that those proposals which are totally out of the ballpark or are technically deficient after having negotiated with it. In fact, one week ago we had a very extensive shoot-out of all of the major equipment items on our shortlist with the suppliers actually bringing it physically in. We flew in staff from every state to engage in a very intensive operational evaluation of that equipment and the reports of those particular evaluations are currently being formulated. Senator FERRIS—I wonder if you can confirm for me that staff in each state have been asked to express a preference over Sony or Panasonic?

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Mr Knowles—The staff have been involved in the selection process. It is quite inappropriate to simply ask what somebody’s preference is. What we set out to do in the choice of all of our equipment is to get the best value for money to achieve the most effective operational use of the equipment. We have done that with every single piece of equipment. That has involved people who are actually hands-on users in developing their particular preferences and otherwise. That process is still in discussion and the staff from each of the states are involved in the discussion as well. At the end of the process the staff will have been heard, they will understand the reasons for our decisions, they will have been involved in the reasons for the choice and understand why, in fact, those choices were made. Senator FERRIS—Would it be true to say that a decision will be made to go with either Panasonic or Sony? Mr Knowles—We are actually buying a whole range of equipments, ranging from studio cameras through to field cameras. It is possible we may in fact decide to choose slightly different solutions for different outcomes. What we need to do is find what works best for the corporation. Clearly, if I need to shift tapes from one place to another, I need to have a common format. It is like that. Unfortunately, if you simply ask people their choice, it is a bit like asking someone whether they prefer Holden or Ford. Senator FERRIS—My information is that news want one and production want the other. I am anxious to explore the compatibility of either system with the other. Mr Knowles—I have heard various versions of that story. I have also heard that general production wants a very high end Sony equipment and news would like a low end Sony equipment. There are many variants of the story. It depends on who you talk to and what they are trying to achieve. Compatibility is an issue which we certainly will be considering. For example, one of the elements we need to consider is: how much equipment do we need to provide at the centre to allow all of the tapes in that centre to be properly managed and to handle our archives and all of those other things? We also need to consider the totality of our existing archives, how we manage that into the future and what is happening with the technologies. One of the critical questions with our suppliers is: where is that technology going? Does it have a future? What is the length of the future? What might be the changes that occur on that? How well does it satisfy the operational need? Senator FERRIS—Presumably another question might be related to the supply of some of your material to other television channels. Mr Knowles—We have an agreement between television channels on the format in which we exchange material. That does not necessarily direct what we do with the particular equipment for acquiring it. Senator FERRIS—No, but there is some apprehension by some of those customers of yours about whether the compatibility will continue to exist. Mr Knowles—Each broadcaster in the world has made different choices. None of us have any difficulty exchanging material between ourselves and one of the great benefits of digital technology is that we can make many of those transfers many times and totally transparent to the end user. It is not really an issue anymore. Senator FERRIS—I am pleased to hear your assurance and I am sure many other people will be as well. The other questions I have relate to the publication of this magazine. I am interested in exploring the publication that I received in my mail. I wonder who the target audience was for the publication and why it was decided to begin production. Could you tell me a

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 177 little bit about the publication? I was surprised to see Mr Laws’ photograph on the front of an ABC publication, but it just shows how open the broadcaster is these days. Dr Schultz—That publication has come about as a result of a review that we did last year of the internal communications process within the ABC. Up until about October of last year we were producing an internal newsletter which had very wide distribution. It was sent to politicians, stakeholders, embassies and interested groups. It was very widely distributed and it was made available for staff as well. It was a 16-page, glossy papered publication, but when we started to re-evaluate our internal and external communication strategies, we tested how well that publication was being received in the marketplace for those various stakeholder groups and for staff. We fairly quickly – after quite extensive analysis, focus groups, outside research and so on – came to the view that we needed to review both the internal and external communications, and we needed to do that within our global budget for such communications. As a result, we decided to publish each week a one-page, back and front, staff newsletter called ABC Ex- change, which has short bits of information about what is happening in the ABC each week. That is supplemented on the staff intranet, where people can then get the full version of those particular stories. So we have a weekly communication going out to staff for the first time for a very long time. We recognised, as part of that review process, that the internal audience and the external audience were quite different and that we needed to be able to address both. We wanted to have a high quality publication that we could make available to all those people who have an interest in the ABC: politicians, industry groups and stakeholders – that is, to make it as widely available as we possibly could. It needed to be an attractive publication that reflected the scope and range of the activities the ABC was engaged in, provided an outlet for corporate material but also had human interest stories and other material that audiences could engage with. So the outcome was those two publications. Senator FERRIS—What is the circulation of this magazine? Dr Schultz—We published 5,000 copies of that edition. It is also available on the ABC Online site so that people who come to ABC Online can get the publication through that. Senator FERRIS—Are you are able to give me the total cost of production? Dr Schultz—I would have to take that on notice, but I can certainly do that. Senator FERRIS—Is it put out by the ABC internally or do you contract it out? Dr Schultz—The editorial work was done by ABC corporate strategy and communications. Some of the design work was contracted out. Senator FERRIS—Is the editor of the magazine an ABC employee? Dr Schultz—The editor is an ABC employee and I am the managing editor of it. Senator FERRIS—Is this the first time that the ABC has done something like this? Dr Schultz—Yes, we are working on the next edition now. We are doing them four times a year with the season, so the autumn edition will be out in early March. Senator FERRIS—Would you have any idea of the unit cost? Dr Schultz—I can give you that; I do not have that number offhand. I can tell you that, while it looks quite an impressive publication, the total cost of producing that magazine and the staff newsletter is within the budget that we have had for staff communications for quite some years. While it looks quite glossy, we have done it on a relatively inexpensive stock and used modern printing techniques to embellish it as much as we can.

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Senator FERRIS—What has been the feedback from the first edition? Dr Schultz—It has been terrific; it has been very strong. Senator FERRIS—Can you give us some idea of where those 5,000 copies have gone? Other than politicians, who else gets them? Dr Schultz—We have quite extensive mailing lists through the corporate area and they include all the key industry groups, as well as interested individuals. I will have to take on notice the exact number, but we put a number of copies into each ABC shop. We have had them in the foyers and lobbies of all our offices around the country and all our international offices and so on, so we have spread it as widely as we could. But I can get you the details on that. Senator FERRIS—You have an editor on staff, but what about the contributions from other people? Do you have a permanent writing staff or are you seeking contributions from within the ABC and perhaps outside the ABC? Are you going to commission articles and pay for them, and how are you going to decide on the content? Dr Schultz—That is decided within my area. We have invited ABC staff to write for it and they have very graciously taken up that opportunity. As you will notice in that first edition, there is an extract of a speech that Steve Vizard gave to the Andrew Olle address and there are extracts from a couple of pieces which spun off from consultancy work that we had commissioned. So there are a range of different things. There has been a lot of goodwill and a lot of excitement within the staff. People have been quite keen to contribute, as in the case of the Chris Masters piece – to tell the story behind the story of going into East Timor – and similarly with the John Laws story – to tell the story behind the Media Watch story. While our audiences get access to the programs, they often do not get access to the stories behind them, so that is part of what we are trying to do. Senator FERRIS—If the staff contribute, are they paid for their articles? Dr Schultz—We have not been paying for the articles. They have seen it as a promotional activity for their programs. Senator FERRIS—You were going to tell me how many permanent staff were involved. Dr Schultz—There are no permanent staff; the editor of the publication has other duties as well. There is a full list in the inside panel. Senator FERRIS—Yes, but it is not clear. Dr Schultz—The person who edits the publication has other duties within Corporate Strat- egy and Communications, the Production Editor has other duties within Corporate Strategy and Communications, and that is it. Senator FERRIS—Thank you very much. I will look forward to some of the financial details. CHAIR—Is that the end of questions on the ABC? Senator MARK BISHOP—I have some questions on digital funding. Mr Johns, you might be able to help. Has the ABC received approval from the minister for funding the conversion to digital broadcasting since the positive findings of the ANAO report on DTV budgets of the national broadcasters? Mr Balding—No, Senator. Senator MARK BISHOP—What additional revenue has been requested by the ABC?

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Mr Balding—Do you mean funding requested of the government? Senator MARK BISHOP—Yes. Mr Balding—There were two parts to the request – phase 1 and phase 2. I think you are referring to phase 2 where we have sought $54 million from the government. It was initially $74 million, but at the last Senate estimates I advised that the board had advised the government that it could contribute $20 million to that, so our net ask for phase 2 is still at $54 million. Senator MARK BISHOP—So there has been no change since the last time? Mr Balding—No, there has been no change in respect of the funding of digital. Senator MARK BISHOP—Has the ABC board or organisation received from the minister or his department an agreement or proposal linked to the current funding application, Mr Johns? Mr Johns—I think you are referring to a letter from the minister to the chairman. Senator MARK BISHOP—I am indeed. Mr Johns—We have received a letter. The chairman has responded in general terms to that – Senator MARK BISHOP—I have seen your response. Mr Johns—noting the continuing discussions at officer level about the issues raised in triennial funding, submission and other matters of corporate governance and accountability. The chairman has said that the board will continue to be conscious of its duty in respect of independence and integrity of the corporation. Senator MARK BISHOP—Let us talk about that in a bit of detail now. Mr Johns—It is not an issue that I would have thought was directed at me. Senator MARK BISHOP—I direct it to whoever the responsible person is, because the minister has written to the chief officer, making some suggestions and linking them to funding. Mr Johns—No, he has written to the chairman. Senator MARK BISHOP—I am sorry, to the chairman. There has, as you say, been a rather terse statement, which you have just referred to, in response. How does the ABC view – Mr Johns—I am sorry, Senator, that was not a public statement of response. I am telling you the general terms of the chairman’s response to the minister. Senator MARK BISHOP—I am sorry; I misunderstood you. Would you like to go over that again then? Mr Johns—I am saying that the nature of the response was that the chairman answered the minister in general terms at this point, noting the continuing discussions at officer level about issues raised by the minister in respect of triennial funding and other matters of corporate governance and accountability. The chairman, in his response, said that the board will con-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 180 SENATE—Legislation Thursday, 10 February 2000 tinue to be conscious of its duty in respect of the independence and integrity of the corporation. Senator MARK BISHOP—So we had a relatively neutral response? Mr Johns—I am sorry, Senator, that is your description of it. I would have thought that the chairman noting that the board will be conscious of its duty in respect of the independence and integrity of the corporation was a significant point to make. Senator MARK BISHOP—You could say that or you could say that it is a statement of the obvious. I would have hoped that that would be the obvious response from an independent organisation in making decisions consistent with our charter. You might regard it as a significant statement. It does not matter. What practices relating to programming independence and accountability does the ABC currently have in practice? Mr Balding—If it is about programs, I thought it would be on the editorial policies. Mr Johns—In respect of editorial policies, we have a very developed set of editorial guidelines that are approved by the board and management, and I believe it protects our editorial independence. Of course, the board itself has a statutory responsibility to protect the independence of the ABC. Senator MARK BISHOP—The minister’s proposal, as I understand it, is that the ABC board should assess the likely ratings of programs before it gives funding. What sort of criteria does the minister have in mind? Have they been explained to the board? Mr Johns—I have not been involved in discussions with the minister about these matters. On the matters of proper corporate governance, ABC officers have been in discussions with their counterparts in the department. Mr Balding may like to elaborate upon that. Senator MARK BISHOP—Perhaps someone could give me some help, because it has been suggested by the minister that the ABC board should assess the likely ratings of programs before it gives funding. What I am interested in is: what is the ABC board’s response? What sorts of criteria does the ABC have in mind? Senator Herron—We have Mr Stevens back. My understanding is that that suggestion is incorrect. Do you have anything to say in relation to Senator Bishop’s statement? Mr Stevens—I am sorry, Senator? Senator MARK BISHOP—My understanding is that the minister has written to the board, and that has been acknowledged by Mr Johns – Mr Stevens—That is public knowledge. Senator MARK BISHOP—That is right. Part of his proposal, as reported in the press, was that the ABC board should assess the likely ratings of programs before it gives funding. My question in response to that is: what sorts of criteria does the minister have in mind? Mr Stevens—I think the most useful thing I could do is point you to an article that the minister wrote in the Australian subsequent to that publicity, where I think he made that particular issue a little bit clearer than perhaps it was in the letter. I think what he said was that he was not suggesting for a moment that ratings were the only criterion that should be used. I think his concern was that, before putting a program on air, the ABC should have some crite-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 181 ria by which they would judge the success or failure of a program. Ratings may be an issue; they may not be. Senator MARK BISHOP—Are they an issue or are they not an issue? That is a change in practice, as I understand it, in determination by the ABC. All the commercial stations obviously have regard to ratings. It is a very high priority. I am not aware of such a high priority within the ABC. What I am asking for is guidance from the officers. Is there going to be a change in response to the minister’s request? Mr Johns—As far as the management of the ABC is concerned, we have developed in various portfolios business plans, and included in those business plans are a whole range of matters by which we judge our performance. The position that we take is that it is for the ABC management and the board to determine the processes by which we judge the success or otherwise of our programming. Having done that, we are very happy to report on that. We are not a bit shy about public accountability on this level of course, but we believe that it is up to management and the ABC board to determine the processes by which we measure our success or failure, as I say. Senator MARK BISHOP—Has the responsible officer responded to the minister’s correspondence as yet – do you know, Mr Johns? Mr Johns—No, I do not. Senator MARK BISHOP—Has it gone to the board? Mr Johns—The matter was discussed at the last board meeting and that is why I was able to tell you the terms of that response. I have just done that. Senator MARK BISHOP—So it was discussed. Was there any resolution? Mr Johns—No, it was just a matter of discussion. I do not feel bound to go further than that. I am telling you what the response was as a result of that discussion. Senator MARK BISHOP—I am not so sure I agree with your conclusion, Mr Johns. Mr Johns—I believe that these questions are either ones that I would take on notice and refer to the chairman or matters that would be directed to the minister. CHAIR—Quite so. They are probably best put on notice in that case and the minister can answer them. Senator MARK BISHOP—All right. Could we request a copy of that correspondence and a copy of the response from the chairman to that correspondence on notice? Can we request that we receive advice in writing of any changes to current practices in terms of program selection consequent upon that resolution of that correspondence; is that clear? Mr Johns—Yes. Senator MARK BISHOP—Thank you, Mr Johns. CHAIR—Senator Lundy, I would ask you to be expeditious because we are now a long way behind time. Senator LUNDY—I asked Telstra a couple of questions and I thought I would ask you about the remote area broadcasting scheme digital conversion. Is anyone here familiar with what is happening with that? What are the implications for the ABC with respect to that particular project?

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Mr Knowles—The remote area broadcasting service is currently all operating in digital form and was consequent upon the government actually paying subsidies to those people who had set-top boxes. Beyond that, in terms of the full digital conversion in the long term, that is a subject which is subject to review and report by the government at some time in the future. It is not part of the current decision. Senator LUNDY—As I understand it, there was a successful RTIF grant to Telstra that in- corporated the subsidy to participants in that scheme. Do you have any knowledge of that particular RTIF grant? Mr Knowles—This may be an issue that the department is probably better placed to answer than I am. Senator LUNDY—I just want to know if the ABC is familiar with the RTIF project. Mr Knowles—I am aware there were subsidies made to private owners of set-top boxes to allow them to acquire the new digital boxes, and that has been quite successful. Whether that came out of the RTIF, I am not quite sure. Senator LUNDY—Perhaps I can ask you this in terms of your transmission of your content: I understand that previously it went through PAS2, PanAmSat. Is your content now able to be distributed through another means? Has this project facilitated greater competition in terms of the transmission of your content to those people affected? Mr Knowles—The ABC service has been operating on the Optus satellites ever since its inception. The PAS2 transmissions were a consequence of one of the networks in Western Australia choosing to go on PAS2. As part of that arrangement, the government basically co- erced the parties to carry the ABC service on the PAS2 satellite so that those viewers who had a different box and received the commercial service could still receive the ABC service. Op- tus did a similar reciprocal deal in relation to its service. Senator LUNDY—When you say ‘coerce’, what do you mean by that? Mr Knowles—The ABC did not have to pay for it. Senator LUNDY—So you saw it as a good outcome for you? Mr Knowles—It provided an outcome for the public in a situation of confusion which is resulting from some commercial decisions that were made independent of other broadcasters. Senator LUNDY—Okay. In terms of the delivery mechanism, is there competition in that market now in terms of how these people can get this content? Mr Knowles—They can still get their service through PAS2 as they are currently looking at that type of box. There are a number of services currently operating on the Optus platform. In us making our decision to go on the Optus platform, we went to the open market to com- petitively test the marketplace to see what was the optimal solution, then taking account of not just the commercial issues but the whole of the public interest issues. We have a very competitive marketplace for satellite delivery. But, certainly, because people have dishes pointed at a certain satellite, it makes it hard to change. Senator LUNDY—If you could just take on notice to provide the impact on the ABC in what has changed about the competitive delivery of that service – Mr Knowles—Essentially there has been none. The service is available to all Australians who actually choose to go and look at it. Some viewers chose to acquire the other satellite boxes at a time. They were not disadvantaged because the ABC service was being carried on

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 183 that satellite. So essentially the commercial decision by the broadcasters to switch to the PAS satellite did not disadvantage the viewers at all and did not disadvantage the ABC. Senator LUNDY—Why was it necessary for you to fund this project? Mr Knowles—That is quite a separate issue altogether. The conversion to digital of the satellite was largely an issue of the general trend in the marketplace to switch everything to digital on the satellite, because for satellites it makes it extremely cost effective to so do. From our viewers’ point of view, it has enabled us to provide a national beam for every one of our time zones so that, if you have a satellite dish and you want to watch the news three hours late, you can watch it from Western Australia. So it provided much greater access and facility for our viewers. The cost savings were substantial in going into the digital platform. There was not an option to remain with the old analog platform, and that was the reason why the government chose to assist the viewers in making the change – their old boxes had to be changed. Senator LUNDY—Thank you. CHAIR—I thank the ABC staff for appearing and Mr Johns, as I said earlier, we wish you well in your future endeavours. Mr Johns—Thank you. CHAIR—Because we are running late and because Dr Kennedy has an important appointment at 6 p.m., I call the National Gallery and we will deal with them. Senator MARK BISHOP—ABA is next. CHAIR—No, I have decided to call the National Gallery. [3.54 p.m.] NATIONAL GALLERY OF AUSTRALIA Senator LUNDY—I would like to go through some issues relating to the human resource management at the National Gallery and I have a series of questions relating to employee matters over a period of time. The first question is: how many employees have ceased employment at the National Gallery of Australia within the last three years? Dr Kennedy—My understanding is that, in the time I have been director, which is since September 1997, the total number of staff is 65. Senator LUNDY—Do you have the figures there that shows the break-down within that three-year period – like, did they all leave in the first year? Dr Kennedy—Yes, I have a break-down for you. I do not have a break-down of that fully in front of me other than to say that 65 staff have left in total and that I have the break-down of why they left. Senator LUNDY—Do you have that? Dr Kennedy—Yes, indeed. Senator LUNDY—So is that 65 within the last three years? Dr Kennedy—Since I became director 23 staff have resigned to take up other employment, 20 staff have accepted offers of voluntary redundancy, 14 have resigned for personal reasons, four retired on age grounds, three retired on medical grounds and one passed away. Senator LUNDY—How many of these people left before the end of their contracted period? Dr Kennedy—I would have to take that on notice; I am not sure exactly.

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Senator LUNDY—Do you have a copy of that break-down that I could refer to? Dr Kennedy—I can put a copy to you now, if you wish. Senator LUNDY—Yes, thank you. Will it be possible for you to determine how many of these people left before the end of their contracted period? Dr Kennedy—Of course, Senator, yes. Senator LUNDY—The reasons behind each case, if you are in a position to provide any information now about any that you know to have left before the end of their contracted period – I do not know if you are in a position to comment now on that. Dr Kennedy—Not on the exact numbers, Senator. The information provided gives the break-down of the reasons for the staff leaving, and the reasons are as stated. Some staff, as you can imagine, leave making very favourable comments about their time in the gallery; others do not say anything at all. But the numbers are as stated. Senator LUNDY—Did the general employment contracts in the first instance and the contracts of the people who chose to leave in the second contain termination clauses? Is that part of your standard contract of employment? Dr Kennedy—I would like to refer that to Mr Froud. Mr Froud—The majority of the employees at the National Gallery are in fact permanent officers and therefore their employment terms are indefinite, so that a question about staff leaving before the end of their contracted terms refers only to a very limited number of the gallery’s employees. The information that has been offered is looking at all of them. As part of the information gathering to be able to explain reasons for departure, we have been able to classify those departures in the manner that we have identified there. Our ability to go further than that and be more detailed in terms of an explanation for departure would probably depend on case to case. We have had and have recently reintroduced an exit interview arrangement that will actually probe and gather information about reasons for departure, but largely reasons for departure are a matter for the individual and whether that individual would di- vulge them. Senator LUNDY—Do you have those records if they did leave with an expressed view? Mr Froud—Indeed. We do not have them with us but we certainly can access our records and we can make available further information where it exists. Senator LUNDY—That would be useful. Where those types of clauses did actually exist, what were the nature of those clauses? Mr Froud—We are talking about termination clauses? Senator LUNDY—Yes. Mr Froud—The termination clause would vary on a case-by-case basis but, generally speaking, gallery staff are employed with common terms, and the terms of employment that currently apply for people who are engaged generally refer to our certified agreement. Cer- tainly that has been the case since the establishment of a certified agreement. Senator LUNDY—When was that? Mr Froud—January 1999 is the current agreement. Senator LUNDY—When is that due to expire? Mr Froud—On 31 December this year.

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Senator LUNDY—Are you able to provide me with a copy of the clause contained within that certified agreement? Mr Froud—I can, definitely. I do not have it with me at the moment but I can certainly provide that. Senator LUNDY—Prior to that certified agreement, can you give me an indication of which staff would be likely to have a termination clause in their contract, if they were not subject to the permanent staff conditions of the Public Service? Mr Froud—I would like to take that on notice and have a look at our records because there would be few variations to the standard arrangement. But certainly we would be happy to look and provide information on any arrangements that existed that were outside of the normal arrangement, because the normal arrangement covers most of our employees. Senator LUNDY—Again, where they did exist, are you aware whether or not those clauses had any limitations or restrictions placed on the ability of the gallery to terminate contracts where the employee did not wish their contract terminated? Mr Froud—No, I do not. I just return to saying that I would be happy to investigate and provide advice. There are no special arrangements that I can particularly recall, so it is difficult to comment upon them. Senator LUNDY—Can you give an indication of any legal costs the gallery has incurred associated with people having left or resigned? Mr Froud—I can. The gallery has incurred some costs associated with separation arrangements with some staff. I do not have with me at the moment what the specific numbers would be, but we certainly can provide that information. Senator LUNDY—It says 62 staff on the brief here – Mr Kennedy—There were 65 departures. Senator LUNDY—Of the 65, for how many of them did you incur separation costs or legal costs? Mr Kennedy—Not more than a handful, but we can provide you with the detailed information. Senator LUNDY—How many is a handful? Mr Kennedy—Five. I imagine around a handful. Senator LUNDY—Do you know if it is five – Mr Kennedy—I said we can provide you with the information precisely, but in my head that is what it amounts to. Senator LUNDY—So it is about five. Can you give me an idea of the sorts of costs we are talking about for those five? Mr Kennedy—At this moment, I would be guessing. If you are looking for a ballpark, we are not talking seven figures and I am not even sure if we are talking half a million, but we would have to look at it. Senator LUNDY—How much, sorry? Mr Kennedy—Are you talking about legal costs only or separation costs? Senator LUNDY—No, I am talking about separation costs. I will come to greater specificity in a minute.

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Mr Kennedy—I am afraid we are not going to be able to help you with the detail of that information right now because we have not got it in front of us and I do not want to mislead you. We can provide you with that. Senator LUNDY—But you said a ballpark for those five would be six figures, perhaps not quite half a million dollars? Mr Kennedy—If you want me to say how I feel about it, it would be somewhere like that. Our staffing budget is in the order of just over $12 million, so it is quite sizeable, and it had been a bit more than that. Senator LUNDY—Out of that, let us say, maximum half a million dollars in separation costs for five people, what proportion of those costs would be related to legal costs? Mr Kennedy—As I said, I cannot help you right at the moment, so hopefully you will allow us to take it on notice and provide you with the detailed information. Senator LUNDY—Can you provide the detail of costs associated with each case in that handful of people? Mr Kennedy—Certainly. Senator LUNDY—Have you got an item in your annual report which shows how much you have expended on legal expenses? Mr Froud—Within our annual report, we do not have a dissected sum. The manner of presentation of our accounts is such that we aggregate supplier expenses for the supply of goods and services. We are indicating $7.3 million for the 1998-99 year. That does include legal costs. The legal costs are obviously a relatively small amount in that total sum. We would be certainly happy to provide the particular sum, but I do not have it in the annual report separately identified. Senator LUNDY—Have you got anyone here who can tell me how much you have expended on legal expenses in the last financial year? Mr Froud—I do not think anyone would be able to recall that sum, but let us just check that. No, we would be guessing. We would have to check and let you know. Senator LUNDY—I guess what I am trying to find out is what proportion of those separation costs can be attributed to legal costs. Mr Froud—Again, if we can provide that information completely to you and identify the various elements, we are happy to do so. Senator LUNDY—If you have no line item for legal expenses, what do you have in terms of your financial management structures to identify, keep track of and make assessments for budget purposes about what legal action you actually engage in? Mr Froud—We do actually have an item within our internal accounts. In the consolidated form in which they appear and are published in the annual report, those costs are aggregated with many others. We do actually have a separate budget provision for legal costs, and we do monitor expenses against that. It is an amount that typically is between $50,000 and $100,000. Senator LUNDY—Have you exceeded that this year? Mr Froud—I believe we have on a year to date basis, but I would not be able to give you the precise number. Senator LUNDY—When you say ‘year to date’, the annual report relates to the last financial year?

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Mr Froud—Correct. Senator LUNDY—Did you exceed that budget item in the last financial year? Mr Froud—I believe we did. Senator LUNDY—Have you exceeded it year to date in this financial year? Mr Froud—I believe we have. Senator LUNDY—Already? Mr Froud—Yes, pro rata. Senator LUNDY—Understandably. To what degree in the last financial year did you exceed that? Mr Froud—I cannot be specific. That is my difficulty. I do not actually have figures that I can refer to. I can say that I have a recollection that the expenditure on that item exceeded our budget provision last year, but I cannot recall precisely what the numbers were. I understand that at the present time year to date – and we have just had a budget review, so the information is in my mind – we are actually trending above budget, but again I cannot be specific about the numbers. Senator LUNDY—Going back to what the actual budget is, you said $50,000 to $100,000. Is the ceiling on that budget item $100,000? Mr Froud—The budgeted sum is $50,000. Our expenditure last year was above that, and the expenditure year to date will be above that. Again, I am sorry. I have said that before. I cannot be more specific. Senator LUNDY—I wanted to know whether you were exceeding $50,000 or exceeding $100,000 in terms of the statement that you made. So you are exceeding $50,000? Mr Froud—Yes. Senator LUNDY—When you have a situation where there are insufficient funds in that budget item, which item within your budget do you draw the additional funding from? Mr Froud—The gallery receives an appropriation for its operations. The Gallery Council has an approval process which includes, in terms of the accountability that the gallery administration presents, estimates of revenue and expenditure to the council. The council approves of that. It is not a matter of saying, ‘If we’re over in this one item, we will move the money from this other one item.’ It is dealt with in a whole of entity approach. In any item in any given year, it is quite usual for your expenditure to exceed budget expectations in some areas and in others to be under budget expectations, as most organisations of course experience. There is no one item that is identified or linked to any other item. Senator LUNDY—So what is the process for you if you need to spend more than $50,000 on legal expenses? What I am interpreting is that you need council approval to do that. Mr Froud—The nature of the approval from the Gallery Council is, generally speaking, to identify expenses of a salary and related nature of operating expenses. We report on a project specific basis but there is a degree of discretion that is given to the management of the gallery to operate within a total bottom line and within groups. So if the legal expenses item, for instance, were to exceed the budget provision but they were offsetting savings or there was the opportunity to contain expenditure in other areas below original budget provision sent such that the net financial position was as expected or better, then there would not be a need to seek approval to overrun in a particular item.

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Senator LUNDY—Did you seek approval from the council for overexpending that legal expenses budget last year? Mr Froud—No, because the total operating expenses budget was within the budget approved. Senator LUNDY—But you cannot identify what was forgone in other areas as far as that additional expense was concerned. Mr Froud—Forgone is a particular interpretation. Senator LUNDY—It implies something else suffered and I know that is not what you are saying. Mr Froud—Again, we could explain in our annual accounts, demonstrate with the notes, where the gallery’s revenue and expenditure was incurred, but the level of detail that you are seeking in terms of a specific item is not required under the whole of government reporting format. It is certainly not in the format that we publish. Senator LUNDY—No, I was hoping you would be able to answer the questions. Mr Froud—We are happy to do that but I do not have that information in front of me now. Senator LUNDY—With respect to that council approval, at what point, if at all, was council notified of the overexpending of that legal expenses line item? Mr Froud—I do not recall there being a specific report to the council about overexpendi- ture in that single item. Again, I mention that certain expenses are grouped and the gallery’s council and its finance and audit committee monitor the gallery’s finances and hold the gallery management accountable for the overall finances. But it is not necessarily at a level of detail on an item by item basis. Senator LUNDY—Can you show, as far as that detail sitting underneath the annual report is concerned, where that was drawn from, even if it is a further extrapolation of the gallery’s equivalent of consolidated revenue? You can take that on notice. Mr Froud—Yes, I think what we can do is say where the money was spent. Senator LUNDY—Certainly. Mr Froud—We do not actually identify that a certain sum of money was taken from some other purpose and applied for that. We could not do that, but what I can do is provide the comprehensive information about expenditure on a line by line basis. Senator LUNDY—You will recall – it seems like years ago now – we explored things like the gallery utilising money in the possession of the foundation, for example, for developments at the gallery. I am curious as to whether that came from the additional money – Mr Froud—I can certainly say that the National Gallery Foundation was not asked to assist in any way, no. Senator LUNDY—In terms of overexpending that in this financial year, are you in a position to give me any idea of to what degree you are overexpending it today? Mr Froud—No, I cannot. I have indicated that I do not have that information with me. I am sorry. But I can provide it. Senator LUNDY—What number of Comcare cases have existed in the years between 1996 and 1999? Mr Froud—Again, I am happy to take that on notice. I do not have that one in my head. Senator LUNDY—Can you also provide information about the total cost of these cases?

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Mr Froud—Yes, we can. Senator LUNDY—Can you tell me what is the gallery’s policy in terms of management and process of occupational health and safety, prevention strategies, managing workers compensation? Comcare certainly provides a case management system. Did you utilise that or did you contract anyone external to manage any of the Comcare cases? Mr Froud—The gallery, as a general rule, engages service providers. We have contracted some independent service providers and we have also used Comcare service providers. It tends to be on a case by case basis that decisions are made. Senator LUNDY—How do you make those assessments as to whether to use Comcare services or to contract out the services? Mr Froud—That is a decision that is in the main informed by the officer concerned and their views. Senator LUNDY—Do you mean a management officer? Mr Froud—No, the individuals concerned as well as the gallery’s personnel staff who have a role to play there in making assessments. We have regard for the management of that area in terms of what has worked for us most effectively and what has not in years past or in recent cases. It is essentially a judgment but it is an open process to try to include the stakeholders and to come up with something which works most effectively for everyone. The common ingredient is to try to come up with something that will work successfully for a successful outcome. Senator LUNDY—Is it possible for an employee to nominate to use a case manager other than Comcare? Is that something you have considered? Mr Froud—I am not sure on that, whether any employees have nominated somebody other than a Comcare service provider. We are basically obliged to work within a framework of accreditation. The Comcare accreditation process, to my knowledge, is the one which we work within. Senator LUNDY—I am just trying to ascertain what the preconditions would be to your using an external service as opposed to Comcare. Mr Froud—Somebody who still enjoys the accreditation of Comcare. Senator LUNDY—You have mentioned that it would be through a process of consultation that you would decide not to use that Comcare system. The Comcare system is the default system, if you like? Mr Froud—No, not necessarily. I know in particular of one case recently where we actually had a Comcare service provider. It was a case that ran for some period of time. The person who had been the service provider left the employ of Comcare and we chose to engage that service provider independently so as to maintain continuity of case management. That is the exception that my remarks, if they appeared guarded, were trying to cover and embrace. But, generally speaking, no, we would use Comcare service providers. Senator LUNDY—So using that example that you just provided, that would be done by agreement with the person requiring that service, or is that a management decision? Mr Froud—Whilst it may ultimately be a management decision, clearly if we are talking about case management, effective and successful case management of that kind is made with everybody having the opportunity to express a point of view. So generally they are informed by what the views of the individual may be.

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Senator LUNDY—Have you ever engaged a contractor to provide these types of services against the wishes of the employee concerned? Mr Froud—Not to my knowledge. Senator LUNDY—Have you ever received any complaints from employees about their case management in workers comp matters? Mr Froud—I do not believe so. Senator LUNDY—Could you take that on notice? Mr Froud—I certainly can. Senator LUNDY—If you did, what would be the process for resolving that complaint? In terms of resolving workers compensation matters, is it your practice to require staff members or former staff members, employees, to sign nondisclosure agreements as part of their resolution with the National Gallery of Australia? Mr Froud—Is it our practice to ask employees – Senator LUNDY—Or former employees to sign a nondisclosure agreement as part of resolving any outstanding matters relating to their employment or termination of employment? Mr Froud—I think you are asking whether it is our normal practice. It is not our normal practice, but there was an occasion recently where there was an agreement made with an employee that dealt with some issues that might be associated with the line of inquiry. Senator LUNDY—If it is not common practice, what unique circumstances would require a nondisclosure agreement as part of that resolution? Obviously I do not want specifics, but I do want to know what circumstances could conceivably lead up to that occurring. Mr Froud—I do not think that it was necessarily a nondisclosure agreement. But, in a case where issues had been raised and there was the possibility of a former employee pursuing actions, we have entered into an agreement to obtain the agreement of that employee not to pursue certain actions. Senator LUNDY—Was it part of a legal settlement? Mr Froud—In this particular case, yes, I suppose you could say it was part of a legal settlement. But it was actually an agreement between the gallery and the individual. The agreement was not struck by the lawyers. Senator SCHACHT—Dr Kennedy, it is not surprising that I want to follow up the cancellation of the Sensation exhibition last year. Unfortunately, I was not able to raise it at estimates in December because of conflicting estimates committee hearings, and I appreciate the cooperation that was then attempted by the chairperson to give me that opportunity. But, since then, more information has come to light about the background of the cancellation. I should just preface, Dr Kennedy, that, when you first became the director of the gallery and you came to this hearing, you were very forthright and open about your views on where the gallery should go. Even though some of the remarks you made might have been considered sensational or controversial by some, I think we all appreciated the fact that you were quite willing to openly state the artistic direction of the gallery. I think that I was amongst others who complimented you on those remarks. So I have to say that raising this issue is a bit different. I want to just quote to you last year’s press clippings. First of all, there was general criticism from most people that the exhibition was cancelled. The main argument that you seem to have expressed in various articles is that there was some problem with the sponsors of the

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 191 exhibition and that there were legal problems in America – that Mayor Giuliani or somebody was suing somebody else and trying to make a political point out of it for his own end. But generally there was a suggestion that that was the main reason. Is that still your view, that there was something untoward, some unreasonableness, some corruption or some pressure from the sponsors and that the legal issues in America made it difficult? Is that still your view as to why it had to be cancelled? Dr Kennedy—At its meeting in October, the council agreed that it would be cancelled. The exhibition had become untenable due to revelations in a court case taken by the Brooklyn Museum of Art against Mayor Giuliani to recover funds that he had threatened to withdraw from the museum. Those difficulties made it untenable for the gallery council to pursue the exhibition. Senator SCHACHT—I raise the point that this is Australia. What they do when they sue each other in America is in another country. Can you explain to me what is untenable? Why should the exhibition not be shown in Australia because of a law case in America between some crazed mayor who wants to make his own political point and some other commercial interests? I cannot see the connection yet. Dr Kennedy—We have indeed provided extensive information, approximately 60 documents, under freedom of information. Senator SCHACHT—To whom? Dr Kennedy—To the Australian newspaper, which I think makes the process very clear. If the National Gallery of Australia operated independently in some province where it did not matter – where it was not part of the international museum community – and was not an institution nearly fully funded from the government, the matter might not be an issue. There was never any suggestion that what Brooklyn Museum had done was, by its standards or by its methods, against their criteria. But, for our point of view, the way that exhibition was funded had made it untenable in the international museum environment, which has been re- emphasised to me in all communications with international museum directors that I have had in recent months. Senator SCHACHT—You are suggesting that, in America, in the dispute between Mayor Giuliani and the Brooklyn Museum there was something dreadfully untoward and corrupt going on that was going to affect the presentation of the exhibition in Australia. I do not have all the 60 documents that the Australian has, but I find that hard to believe from what you have said so far. What difficulty would it create for the reputation of the National Gallery of Australia to put on the exhibition? The implication is that the sponsorship was somehow corrupt, dirty or crook, but you do not give any evidence that it was. Dr Kennedy—I have, indeed, to various journalists. Senator SCHACHT—I think you had better give it to the estimates committee for the record. Dr Kennedy—We are very happy to do that. Senator SCHACHT—But now, on the record. Dr Kennedy—Yes. Thank you for your compliment about the open style. I have tried to continue that throughout the term of my directorship. The reality is that the way they conducted affairs in Brooklyn made it untenable for a public museum here. That may seem very arcane, but in the international museum environment this exhibition, in the opinion of the leading experts on museum ethics, has become an example – only because we got to know so

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 192 SENATE—Legislation Thursday, 10 February 2000 much about it through the court case that Brooklyn took against Mayor Giuliani – of a case whereby a museum went too close to the commercial market. Our head of exhibitions went to the opening in New York and came back with the view, which he gave to the council of the gallery, that the owner of the exhibition was in complete control of the exhibition within Brooklyn Museum. It was clearly untenable for us that we would have an exhibition whereby curatorial control would be given away. I will give you some specific examples which would be of concern here. The Brooklyn Museum director received money for specific purposes from donors. He instructed staff that part of it would be spent in different ways. We do not operate like that. He solicited money from the dealers of artists in the show. We do not operate like that. He operated with Christies as a sponsor – which was tenable, in one way, because they had been the sponsor of the original exhibition in London – but he led Christies to believe that works from Brooklyn Museum would be de-accessioned through Christies. Indeed, works – even though not an awful lot of money’s worth – were de-accessioned through Christies. This is only a small part of what really matters to museum directors internationally and makes this exhibition untenable. It may seem surprising to you, Senator, but the reality in the international museum world is that, if we had continued with this exhibition, we would have been party to what will become a major chapter in museum ethics discussions in the future. Senator SCHACHT—We are all under privilege here so the language can be a bit freer, but just because the implication of what you say is that the curator or director of the Brooklyn Museum was a bit crook on accepting sponsorship, was not defending the artistic independence or whatever else and may have put slogans next to each painting sponsored by somebody else or was getting a 15 per cent cut if it was sold or whatever, you were not asked to do any of that when it was coming to Australia, were you? You were not asked to meet any of the things that the Brooklyn bloke was devising. Were you asked to do exactly the same to get the exhibition to come to Australia? Dr Kennedy—We may be under privilege, but I have no wish to state that the Brooklyn Museum director was ‘crook’ or ‘a crook’. Senator SCHACHT—What was he then? Dr Kennedy—What he did with this particular exhibition – by their particular standards and if their particular chairman wants to approve them – was not tenable for us. You may say that it is fine to do that in Brooklyn and that we should just take the whole exhibition over here, but we did not think so. Senator SCHACHT—I do not want it to happen in Australia, but I cannot yet see the connection between what someone has unethically done in Brooklyn and how that affects the artistic display of an exhibition on its own merit in Australia. If you can explain to me that the exhibition in Australia would have had its artistic merit affected or compromised by what the director of the Brooklyn Museum did in putting it on there, then I am interested but, so far, you have not made that connection for me. Dr Kennedy—No, and I will not do it because it was not an issue of the artistic merit of the show. I went after this show; I was keen to put it on throughout the period of late Septem- ber and October. It began to change at the end of October, when the Australian Financial Re- view contacted me on 3 November about an article in the New York Times on 31 October and published an article on 4 November. All this was missed by those in the coming weeks who sought to inspect the matter. The matter had become of concern to the museum community. It is not an issue of artistic merit; it is an issue of museum ethics.

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Senator SCHACHT—But we are not asking you to adopt the Brooklyn Museum ethics. You have your own ethics and your own board that would insist on good ethics. We are not asking you to adopt those ethics at all. Until you show me how you would have been forced to adopt the Brooklyn ethics, you have still not made the connection for me. Dr Kennedy—Forgive me, but it seems to me that if we want to live in an island community that is not related to what happens in the rest of the world – Senator SCHACHT—We are a continent and not an island, by the way. Dr Kennedy—Indeed, instead we are a continent with international respect with an international gallery that is part of the international museum community. Within the world of museum directors there was absolutely no doubt that this exhibition had become untenable for a national gallery which is actually fully funded by the state. Senator SCHACHT—Untenable in what way? Dr Kennedy—I have tried to explain. Senator SCHACHT—No, you have not. Dr Kennedy—I have tried. Senator SCHACHT—Untenable in what way? Untenable artistically because someone has put some money under the table in Brooklyn or because someone had raised money under false pretences? What was untenable about Brooklyn that you would have had to do in Aus- tralia that would have said, ‘Our gallery is the same as Brooklyn.’ What you are telling me is that, if we put it on, we would then be accused of the same ethics as the Brooklyn Gallery. Dr Kennedy—I am trying to explain what the significant issues were. This collection was from one collector-dealer entrepreneur, Mr Charles Saatchi, who, in putting on the exhibition in Brooklyn, exercised effective curatorial control and was allowed to do so. There is no doubt that he wished the same control in our institution. That is one thing. Senator SCHACHT—We are finally getting to an issue that I think has some merit. Dr Kennedy—I feel that I am repeating myself. Senator SCHACHT—No, it has some merit. When you first negotiated to bring the exhibition to Australia, did Mr Saatchi say, ‘I want curatorial control over the way the exhibition will be displayed in your National Gallery in Australia’? Did he actually put it on you at that stage or at any stage until you cancelled it? Dr Kennedy—Clearly not, until we actually learned how it was conducted in Brooklyn, and we were going to take it from Brooklyn. We were dealing with an agent and not with Charles Saatchi directly in terms of the contract. His agent had not made that specifically clear and that was demonstrated by the way in which it was conducted in Brooklyn. Senator SCHACHT—But, as soon as the agent raised it on behalf of Mr Saatchi or Mr Saatchi himself raised it, you, being a very robust director with a strong board, would have, with our full support, said, ‘No, I am the curator. We’ll be in charge of it. We’ll display it as we see fit.’ Then, if they had said, ‘No, we’re not going to send it to you,’ or they had refused that agreement and you had said, ‘We won’t take it,’ I would find that a reasonable excuse. But you are just telling me that they did not put that on you in the discussions until you cancelled it and that you never had that raised with you. I cannot see how that is an issue. Dr Kennedy—Because you are assuming that we have gone fully to contract. We were able to cancel because we had not even begun to discuss the details of the contract.

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Senator SCHACHT—Over the phone, by fax, by mobile phone, by smoke signals or any way you like, in the informal conversations with Mr Saatchi’s agent, did he at any stage say to you, ‘Mr Saatchi will insist on curatorial control of the exhibition’? Did he at any stage informally say, ‘That is a condition we will insist on when the contract turns up’? Dr Kennedy—From discussions with his agent, on the phone and in a letter from his agent, it became obvious that Charles Saatchi was under very significant pressure in Brooklyn and that he would wish to have curatorial control such that – and this is a privileged environment – his agent actually wrote to us to advise us not to take the show. Senator SCHACHT—I would ask you to take it on notice to provide us with a copy of that letter. Dr Kennedy—Certainly. Senator SCHACHT—When you got that letter you cancelled it. Is that right? Dr Kennedy—No, there is a whole sequence of events which would probably take me a few minutes to explain to you. I can if you wish. Senator FERRIS—Can I ask where we are going with this particular cross-examination. It seems to me that Dr Kennedy has made it very clear that the decision of the gallery was based on advice from an international agent. Why are we traversing something that has been traversed for hours in the previous estimates? Senator SCHACHT—Mr Chairman, it has come out only in the last couple of minutes that there was actually a letter, which the director has agreed to table, so I am now moving on. Senator FERRIS—Thank goodness! Senator SCHACHT—Dr Kennedy, as you can see, some senators are getting a bit restless, so I will not ask you to go through all the points at the moment. If you have not already done this elsewhere, could you take it on notice to provide the sequence of events for the committee. I am more than happy to save time by doing that. Dr Kennedy—Thank you. That is very helpful. Senator SCHACHT—But I do want to ask a couple more questions. In the press clippings, just after it was cancelled, the Minister for Communications, Information Technology and the Arts, Senator Alston, ‘admitted that he had been less than impressed with some pic- tures in the Sensation exhibition of works by young British artists which was set to appear in the gallery next year’. Senator Alston, like all of us, is entitled to his artistic opinion. Did he communicate at any stage to you before the cancellation that he thought some of the artistic content of the exhibition was less than impressive? Dr Kennedy—As he said on ABC’s Radio National, he had indeed communicated that view. He communicated it on the morning that we launched the Hockney-Stella part of the Chihuly Hockney-Stella exhibition on 12 or 13 October of last year. In a sense, this was a response to my wish to have the benefit of his view and the information provided to him that the exhibition was going ahead. He communicated that to council members who were present in the boardroom on that day and said that he would not be rushing in to see it and some of the works were not at all to his taste, but it was a matter for the gallery to decide whether to go ahead with the exhibition. Senator SCHACHT—That had nothing to do with the cancellation? The cancellation was purely to do with the commercial arrangements which you have just explained?

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Dr Kennedy—When you read the 60 pages, I think you will see the sequence of events and come to that conclusion yourself. Senator SCHACHT—Is it true, Dr Kennedy, that you wrote to the actual minister for the arts, Mr McGauran, during the matter, seeking his comments about the exhibition? Dr Kennedy—Specifically I wrote a letter to him on 29 September. I also wrote to Senator Richard Alston. Are we talking about Peter McGauran or Richard Alston? I sent the same letter to both of them. A portion of it was published in the Australian on 25 January. Just a few lines were published. The letter was strongly in favour and support of the exhibition, but the final line, which drew some attention in the press, stated that if the minister had any serious objections to the show, I would be keen to learn of them as early as possible. Senator SCHACHT—Senator Alston’s remarks were expressed to you verbally at another function. Did Mr McGauran express any view formally or informally? Dr Kennedy—I met Mr McGauran, to my recollection, some time later at a function in Sydney. I think it was a Friends of Museums function. On his way out – I had made a speech – he said that he had received my letter and would not be replying. Therefore, I knew there were no objections. Senator SCHACHT—So he did not reply. Therefore, he did not say yea or nay? He just ignored it, and you took it that he was not objecting? Dr Kennedy—That is what I informed the council of in the October meeting. Senator SCHACHT—It seems that something extraordinary has happened here in the history of the Australian parliament: the National Party has ended up having a more liberal attitude to the arts than the Liberal Party. I was nearly going to say that having a National Party minister in charge of the arts is a bit like putting Idi Amin as the head curator of the Louvre. Senator FERRIS—That is really offensive. It should be withdrawn. Senator SCHACHT—I am just saying that I have been shown to be wrong. Senator Herron—This is characteristic of Senator Schacht. Senator SCHACHT—I am pleasantly surprised that Mr McGauran did not express an opinion. In the past, the National Party have always been the first to the fire to cook somebody on these sorts of issues. Senator FERRIS—Please, move on. Senator Herron—We are not here to listen to diatribe from you. You condemn yourself. Basically, what you are saying is of no interest to us at all. Senator FERRIS—It is a disgrace. Senator SCHACHT—Mr McGauran did not express any opinion. The only opinion was verbally from the minister, Senator Alston. Is it your policy that, in future, with each exhibition you may be putting on at the gallery you will write to the arts minister and the senior minister to see whether they approve of the exhibition? Dr Kennedy—I have an obligation under section 60 of the Commonwealth Authorities and Companies Act to keep the minister informed. The particular words of this sentence have been certainly brought to my attention in public. While the phrase has been judged by some people to be infelicitous, I have to say that it has made me aware of many letters I have written in the past which, when brought to full public notice under freedom of information, have led me to wish that I had revised them somewhat. If by this wording you are saying, as others

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 196 SENATE—Legislation Thursday, 10 February 2000 have tried to, that the intention was for the minister to play a role in the decision instead of me informing the minister of the exhibition and being informed of his views, that is the case. It was not an intention. I may be too polite or courteous. I may have misphrased it. I may speak Irish English as opposed to Australian English, but I am learning, Senator. Senator SCHACHT—They are both the same thing. Our strine is derivative of your Eng- lish, I would have thought. If we were to have a retrospective of Tom Roberts paintings, which would be a quite successful and attractive exhibition, would you think it necessary to write to either or both ministers asking whether they have any view about such an exhibition being put on? Dr Kennedy—The minister would wish to be alerted to all exhibitions that the gallery puts on. He is alerted by virtue of charts which lay out our exhibition profile and in soliciting federal government indemnity, where required. However, it is reasonable to assume that the minister would be particularly interested in those exhibitions where he could reasonably expect considerable political interest in due course. Those exhibitions are usually controversial ones. Therefore, you are very aware that the process of informing the minister is all the more applicable. It would be ridiculous to think that he would be particularly concerned about a Tom Roberts exhibition. But there is no doubt that where an exhibition had been the subject of an intense political interest, not just in America but internationally, and that this would impact on the Australian environment, he would wish to be kept informed of the matter. There is a considerable difference. Senator SCHACHT—But the way that the letters were phrased were not just keeping him informed under the provisions of the companies act or even under provisions of the act of the National Gallery. You were asking him for an opinion about that exhibition. That is the point I am making. I think it is only appropriate after the board makes a decision to approve any particular exhibition or activity that you inform the minister. That is absolutely correct. In wis- dom and hindsight, you may have wished you had phrased the letter rather differently. When you read the letter, it is quite clear that you were seeking an opinion about the controversial nature of this exhibition. That is what I am asking. I presume you would not write a similar letter on a Tom Roberts exhibition, a Picasso exhibition or even a French impressionist exhibition. That is the point I am raising. Dr Kennedy—At risk of repetition, that is obvious, yes. Senator SCHACHT—Will you or the board make a judgment that the next time you have a similar exhibition that is controversial by reputation you will write a letter to the minister seeking his views about whether it is too controversial? Dr Kennedy—I said, ‘If you have any serious objections to the show’ – this is exactly what I have said – ‘I would be keen to learn of them as early as possible.’ Senator SCHACHT—You have proven my point. Dr Kennedy—That is what I said, but it is not what you said. That is what I said. Senator SCHACHT—Serious objection. Mr McGauran did not write back. He made no comment to you. You even sought him out at a function and he still made no comment. It is to his credit, in my view, that he made no comment to you. But Senator Alston did make some informal comment – not in writing. You specifically asked him whether he had any objection. That is asking him to make an editorial comment about the artistic merit of the exhibition. I do not think it is the role of a minister in any party to be given the last drop when you have a dedicated board appointed for their expertise and responsible to the minister and the parlia-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 197 ment. In the end, the last thing you want is any minister, Labor or Liberal, being the artistic director of the National Gallery of Australia. Dr Kennedy—And they are not. I campaigned to see that the minister would not be involved in the purchase of works of art for the gallery. A decision was taken by the minister – we are grateful for it; previously, the purchase of works of art valued at over $450,000 had required his decision – that his approval is only required for works valued at over $10 million. We are in a freer environment. At risk of genuflecting and laying myself on the floor, I have made it very clear that I understand that you take that view from my wording. Senator SCHACHT—It is obvious that it is not. Senator Herron—You were a minister once. I think it would be almost a dereliction of duty if a head of a department did not let the minister know of something that is contentious either way. There is no implication, as I understand, in the wording of the letter that an opinion is sought, be it yea or nay. As the facts stand, there was no response in any case. I do not know what you are going on about. Maybe I have missed the point, other than the political one that you are trying to score. I do not think you should take it out on the director of the gallery. Senator SCHACHT—It is the same as debates on the censorship on films and books et cetera. I do not believe that politicians should wander around and be overstepping the mark of those who are appointed because of their expertise. I suggest that that is what are you doing now. Senator FERRIS—Dr Kennedy has shown that that is not the case. It is just not sustainable. Senator SCHACHT—Dr Kennedy should be given the job, and it is clear that one minister expressed disapproval of some part of the potential exhibition that he did not think was worth much. Dr Kennedy—Senator, I think I emphasised the important point that the minister made to members of the board: that he had no wish to interfere in the gallery’s decision in the matter. That was the important point. CHAIR—That is a very important point. Senator FERRIS—Exactly. We have laboured it for half an hour. Senator Herron—Senator Schacht, you are the only one who seems to have his knickers in a knot over the whole thing. Senator FERRIS—You want to try to paint a picture that a politician vetoed it, and Dr Kennedy has shown your argument is unsustainable. Senator SCHACHT—It has come out slowly that there were letters written, that there was advice sought in one form or another from the minister. I believe, and certainly the opposition believes, that these are matters that you leave to the experts. Dr Kennedy, we do not mind you informing the minister about what you are doing. That is what you have to do, and I fully accept that. But on artistic matters, when you ask them for an opinion about whether it is too controversial or whether they approve in anyway, I think that is unnecessary and I think you leave yourself and the gallery open to the impression that there is a political judgment finally made about how and what will be shown in our gallery.

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Dr Kennedy—I am much reassured by that. I am comforted that a bipartisan institution like the National Gallery of Australia will be able to look forward in the future as it has in the past and through the present to free artistic expression. Senator SCHACHT—Absolutely. I am here actually defending that. Senator FERRIS—This is not going anywhere. Senator SCHACHT—If there had been no problem with the Brooklyn Museum, would you have still written to the ministers seeking their opinion of whether they had any problem with the exhibition? Dr Kennedy—Of course not. It is surely obvious that it was in reaction to what was an international story on this particular exhibition that I actually wrote to the minister in the first place. I was greatly comforted actually noting that it went in Berlin without any difficulty at all, but that was not the case in New York and I wanted to be sure that it would not be the case here either. I gained that comfort and then found that, for completely different reasons which became clear from the end of October and into November, it would be untenable for the Na- tional Gallery of Australia to have this exhibition. As I have said, my international colleagues agreed. Senator SCHACHT—Did the Berlin Gallery suffer any diminution of its reputation by having the exhibition, presumably with Mr Saatchi as the overriding curatorial expert? CHAIR—Dr Kennedy has already said there was no problem with that. Dr Kennedy—The way the exhibition there was managed was obviously something that did not lead to any difficulty. The Hamburger Bahnhof, which is a place I was actually in during the middle of last year, had had a very, very successful exhibition they had exercised themselves. They are very, very well funded, as are most federal government institutions in Germany. That is not the case with Brooklyn, and they found themselves in an entirely difficult and different situation. I felt very sympathetic towards Arnie Lehman. Let me say to you, Senator, that you will be surprised that a few days after I wrote to Senator Alston and Minister McGauran, I wrote to Arnie Lehman to congratulate him on the PR coup that had occurred by Mayor Giuliani taking such a stance. At that point I knew nothing of the details. So the story is not what it appeared. It is exactly what we have said and it is consistent with what we have said. Museum ethics are a difficult situation, and the way museums operate – indeed, the way Canberra operates and the way we bump into ministers and senators at functions – is not apparent to journalists in Sydney or Melbourne. It is not difficult to meet a politician in this city. Senator SCHACHT—I hope it is not difficult to meet a politician in Canberra. I and Senator Herron would agree on that: we do not want it to be difficult. As a minister, we would hope there was plenty of contact. However, I think the letter you sent leads, at the very least, to an unfortunate impression that there would have been an opportunity for political pressure to be brought to bear. I presume no such letter has been sent for any other exhibition you have held at the gallery since you took over as director. Dr Kennedy—This exhibition Sensation was an exhibition that had actually been authorised and publicised in June 1999 and it was in our scheduled program. There are many exhibitions that we investigate to see whether we will put them on. Among those, according to my obligations, I keep the minister informed on the matter, so there may be other occasions where

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 199 that is required. I very much value the views and the helpful comments of many people in our stakeholders in the gallery on our exhibitions. Senator SCHACHT—If the minister had written back and said, ‘I do have an objection formally,’ you would still argue that the board could ignore that objection and put the exhibition on? Dr Kennedy—Absolutely, and the board was very, very clear on the point. My phrasing – I have repeated, Senator, and I take the view that you are putting – may have led to the opinion that you have expressed, but the intention of it was actually to seek the minister’s words, if he had them at all, a response of being kept informed, just as the minister, our constituents in the staff and in the artistic community and indeed journalists whom I told about the exhibition would actually participate in informing me as well as indeed many letters I got from people who were critical of it. So all those people go into ‘being informed’, which is what the board requires me to do. Senator SCHACHT—I understand that. I am just saying that no other letter has been sent on any other exhibition or activity you have organised along similar lines saying, ‘Minister, not only am I informing you but do you have any objection?’ Dr Kennedy—No, I do not believe there was any objection but I can think of one other exhibition which was indeed very, very controversial where I was grateful to have the minister as indeed other people’s cooperation in the matter. Senator SCHACHT—Which one was that? Dr Kennedy—It was an exhibition called Body World. Senator SCHACHT—Did it go ahead? Dr Kennedy—No, but for reasons that it was not available, it was not an art exhibition and the council decided that we could not do it. I tried to get it placed instead at the National Sci- ence and Technology Centre and, by extraordinary misfortune, the exhibition became unavail- able because the owner of the exhibition’s bodies was in Japan subject to a legal case. Senator Herron—Is that the one with the animals and humans? Dr Kennedy—This is a fantastic story but I really feel that now is not the time. The point I am trying to make is that I go in pursuit of the very best exhibitions I can for this country. Sometimes I succeed and sometimes I do not. We have the Book of Kells coming shortly that I hope you will enjoy as many others. Some things work; some things do not. We pursue them all and we pursue them at the highest level. Senator SCHACHT—But if you pursue them because you think they have some intrinsic artistic merit and then after you have put all that energy in and you are actually making some progress you then write to the minister saying, ‘Do you have any objection?’ and he says no or implies it – Senator FERRIS—This is a dead horse being flogged. Senator SCHACHT—I think you are compromising your own position. I just want to ask one question about Body World. That was one that you thought would have artistic merit for the gallery. Dr Kennedy—No, I did not say that. Senator SCHACHT—Why did you show interest in putting it on initially? Dr Kennedy—This exhibition was the most successful exhibition in the world in 1997. To my mind, it informs art in an incredible way. What is involved are plastinated human bodies.

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In other words, they are corpses from which the fluids are vacuumed out and plastic is put in instead. This was a highly explosive exhibition in one way, if you like, but informs human anatomy and the study of the human body in a way that is absolutely remarkable. On the other hand, it is not an art exhibition. It certainly is of interest and it shows you the breadth of my mind, but we did not pursue it. Senator SCHACHT—And in the end you were thinking of putting it at the science centre. Dr Kennedy—Well, it raises a heck of a lot of issues. It was the subject of a huge storm in Germany, Senator. You can see that we are very ambitious. Senator SCHACHT—I am all in favour of your entrepreneurial ambition, et cetera, and I am in no way critical of you trying to get that exhibition to Australia in one way or the other. Dr Kennedy—Neither was the minister, I have to say. Senator SCHACHT—Again, when you think that something is controversial you not only inform the minister but also actually imply in a word that if he has an objection to it you may drop off it. I just think that puts you in a difficult position, at least in perception. So there are now two exhibitions. One cancelled – Dr Kennedy—You said, Senator, it was with the phrasing. I have volunteered the information to you. I am not exactly sure what the other phrasing is, but it is certainly not like this. On the other hand, I have said to you before, this may be judged to be infelicitous. There may be lots of letters that I have written on lots of topics which, subject to scrutiny of many people, can be interpreted in different ways. I know exactly what I meant and the person who received it knew what I meant. My aim was to be clear to the person who receives the letter. Senator Herron—I am sure Senator Schacht has written many letters as a minister that he might have regarded as infelicitous. Senator SCHACHT—You always do your best. Mr Stevens, who was head of my department, always helped me out on those matters to ensure that letters were well done. Just as someone helps you out, Senator Herron. Yes and occasionally you regret. I accept that Dr Kennedy has been very honest. He said that with this in mind he may well have chosen a different form of words. Dr Kennedy—Clearly. Senator SCHACHT—Clearly, because then I would not be here asking questions. CHAIR—Well, you are and you have made your point, Senator Schacht. Make it expeditious and draw this to a conclusion. Senator SCHACHT—Since the cancellation of Sensation, you mentioned you received some letters, communications. There were plenty of letters in the paper. I do not take them as an absolutely balanced view of public opinion because the zealots on either side will write accordingly. How many letters or communications did you receive either agreeing or dis- agreeing with the cancellation of Sensation? Dr Kennedy—I would have to check the exact numbers but my recollection is that prior to the cancellation we had received several hundred. I did not read them all, I have to say. Some of them recommended effectively that I be deported, others that I was a pagan and all sorts of things. I hardly read them because it was becoming very tiresome. Senator SCHACHT—I think they all sound good descriptions actually. A badge of honour for those of us of a non-religious bent. And the letters changed to the other side after the cancellation?

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Dr Kennedy—No, actually. I was praised by everybody who had vilified me beforehand and I was criticised by those who had not written to me. Senator SCHACHT—Yes, so you were no longer a pagan, you were defending mother- hood again, but the agnostics and the artistic community thought you had let them down. I suppose that is a summation of the range of the letters you got. Dr Kennedy—That is your submission, Senator. If you would like me to send you those letters too, I will. Senator SCHACHT—No. Just one other thing about the several hundred letters, like Senator Herron and other senators we all know about write-in campaigns. Were any of the letters that you received consistently written in a similar form, roneoed off, or did they seem to have a striking similarity in their content? Dr Kennedy—That had started to happen, yes. In fact, I was anticipating probably a significant contribution to the destruction of forests by June 2000. I was not worried about that; that was not the issue. Senator SCHACHT—They are all the questions I have. Obviously in the future we will watch with interest and we wish you well in your artistic independence and the board’s independence in putting on controversial and interesting exhibitions, which there should always be some dispute about but which should not involve politicians having the last say. Dr Kennedy—I am grateful for that, Senator, and for the involvement of parliament in our exhibitions. It is very important to us. Senator LUNDY—My questions are of a more logistical nature. CHAIR—We do have to do the ABA. Senator LUNDY—Yes, I know that. I will be as brief as I can conceivably manage. It really depends on the responses. Does the gallery have a special budget line for travel for you and other staff members to attend exhibitions overseas? Dr Kennedy—Yes. It has a budget line for myself within the executive budget and for other staff among their individual curatorial budgets or otherwise. Senator LUNDY—What is that budget for you? Dr Kennedy—It is within the executive budget entirely. Sometimes it is funded from within exhibitions. If you are talking about an exhibition that is going to cost, for example, $3 million to put on, the actual cost of my seeing it in advance is minuscule and can be put against the cost of that exhibition. So some of them are not actually strictly speaking to my budget. Senator LUNDY—What is your budget though, distinct from the exhibition travel? Dr Kennedy—I will see if we can get that for you now, Senator. It is of the order of $40,000, I understand, domestic and foreign. Senator LUNDY—Did you expend that in full last year? Dr Kennedy—I think once again the detail of this information is very specific, and we would appreciate being able to provide it to you on notice. Senator LUNDY—You would have an idea though? I am sure it would be in your interest to know whether or not you were within your personal travel expense budget. CHAIR—Dr Kennedy has offered to put it on notice, as I understand what he has just said. Dr Kennedy—I would rather, if you will, provide you with the correct information.

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Senator LUNDY—Can you tell me whether you exceeded it? Dr Kennedy—I cannot right at this moment, no. As I say, the apportionment of our travel is not specifically to that budget. Senator LUNDY—But I am asking you specifically about this budget. Dr Kennedy—Yes, and I cannot answer that question for you right now. Senator LUNDY—You cannot? Dr Kennedy—No. Senator LUNDY—To what extent were your travel expenses funded outside of that line item and within the scope of the exhibition travel that you mentioned? Dr Kennedy—As I said, if I could take that on notice. That is specifically the question. I do understand the question. We will have to provide you with the answer. Senator LUNDY—Can I ask you how many NGA exhibitions you attended overseas in the last financial year and this current financial year? Dr Kennedy—In the last financial year, I went to St Petersburg – Senator LUNDY—Sorry, we are talking about 1998-99 but also year to date in 1999-2000. Dr Kennedy—Are you asking me within Australia or how many times we have been out of the country? Senator LUNDY—Out of the country first and then I am going to ask you about Australia. Dr Kennedy—You are relying on memory and I do not have my diary with me. I was in St Petersburg last week, as I think is clear from the press, for an extraordinary exhibition of Abo- riginal art at the State Hermitage Museum. I was abroad in New York before that checking out exhibitions and in Europe for exhibitions and acquisitions. I am in a little bit of difficulty on my memory. I was at the New Worlds from Old opening in Washington DC. I was at the international gallery directors meeting, which is held once a year, indicating the importance of the National Gallery of Australia in the international environment. It is one of the top 45 galleries. They have an annual meeting of directors and that meeting last year was held in Berlin. I try where possible, within the constraints of what is a very busy schedule, to build other activities into those trips. I can provide you with a detailed list, if you wish. Senator LUNDY—Yes, certainly. Do you travel first class? CHAIR—Senator Lundy, you would expect the Director of the National Gallery to travel and to travel comfortably as part of his job. What is the point of these questions? Dr Kennedy—I am happy to answer the question. Senator LUNDY—It is a question of fact. Dr Kennedy—My contract entitles me to travel business class. Sometimes I am upgraded. We never pay for a first-class seat. Senator LUNDY—Can you provide details of your travel arrangements substantiating that? Dr Kennedy—As to whether we have paid for first-class travel? Senator LUNDY—Yes. Dr Kennedy—Certainly. Senator LUNDY—I am just not quite sure if I have covered the scope of what you need to take on notice, but certainly details of your international travel and the costs associated with

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 203 those trips. In terms of the budget, you have your $40,000 and then you have scope for travel with exhibitions. In that scope for travel within exhibitions, who else is provided for to travel with you – how many staff and other hangers on? Dr Kennedy—If you are implying that I travel with an entourage, Senator, I do not. I generally travel alone. Senator LUNDY—No, I apologise if I have implied that. I am just curious as to the extent of who you are entitled to have travel with you within the scope of the budgets of those exhibitions. Dr Kennedy—It does not arise who I am actually entitled to travel with. What arises is that, where it is required that particular members of staff see exhibitions for logistical reasons, they may accompany me. But it happens rarely. At other times other staff go in my stead, as indeed at exhibition openings from time to time. There is very considerable travel in the gallery because of the international nature of our activities, and much travel is done on a courier basis whereby you are bringing a work of art either to or from a venue. Senator LUNDY—So works of art are being accompanied? Dr Kennedy—That is another form of international travel at the gallery, yes. Senator LUNDY—So in terms of the allocation within an exhibition, such as $3 million for a given exhibition, how do you determine who would get to travel to that exhibition? I am particularly interested in whether or not there is a capacity to take, for example, an Australian journalist with you to cover the event – those types of things. It might not necessarily be staff of the gallery, but you can find a reason to justify their attendance. Dr Kennedy—The gallery operates a press and PR budget which is managed by our national adviser on public affairs. Senator LUNDY—So that is separate to the exhibition group of funding; you have a line item for this? Mr Froud—If I may, on a project specific basis major exhibitions do have budgets, and that budget covers the various elements that are required to support it, including an advertising and promotion budget. So within the exhibition advertising and promotion budget, there will be at times expenses incurred which include the costs of getting people to cover the story. Senator LUNDY—First of all, if you could take on notice to provide the details of the travel – I suppose those who travelled with the director to exhibitions within the scope utilising the budget of that exhibition. Dr Kennedy—Senator, I feel I must correct the suggestion that journalists travel with me. I cannot recall when a journalist has travelled with me – Senator LUNDY—Attended the same event as you. Dr Kennedy—Right, that is a different matter. Senator LUNDY—Sorry. What I am interested in is the actual logistic and attendance at the event that you are attending. So if you could take that on notice. Is there another budget item for travel by people other than yourself within the gallery? Dr Kennedy—As I said, the budgets for travel by individuals from many areas of the gallery, whether they are conservation or registration or curatorial, are within the budget structure that we have established for the departmental areas of the gallery under a program manager system that we have established.

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Senator LUNDY—So you would have policies guiding the expenditure of travel in relation to all of those different operations? Dr Kennedy—Policies as to who goes or when? Senator LUNDY—Who goes, if it is a curatorial accompanying thing, if it is an exhibition – Dr Kennedy—In other words, who is appropriate to go to a particular event – absolutely. Senator LUNDY—Who makes those decisions about who travels with what? Dr Kennedy—There are conventional processes within a gallery whereby certain activities – for example, the accompaniment of works of art – would be done generally by people who have experience in the matter. For example, with the Aboriginal memorial which has just gone to St Petersburg, we would have conservators who are experts in bark conservation going there. So it is really the relevant people and appropriate people for particular tasks. Senator LUNDY—Have you ever been required by the minister to travel with him when visiting exhibitions or perhaps looking for acquisitions? Have you been required to travel with or accompany the minister, or has he accompanied you? Dr Kennedy—No, the only occasions when that has occurred, to my recollection, are on two occasions when we visited Aboriginal communities. Senator LUNDY—What were the circumstances surrounding that travel? Dr Kennedy—The circumstance was that it was agreed that it was very important within our own gallery staff, particularly in the Aboriginal art area, that I should, where I could, both view and talk to people in remote communities. It has also been something very important to me – given the fact that I am not from Australia – in giving me a deep appreciation and a deep passion for contemporary Aboriginal art. Senator LUNDY—So why did the minister go with you? Dr Kennedy—As you can imagine, the schedule is very, very tight and I cannot and have not been able to, for example, make a number of weeks available to do anything or even to take holidays in such a way. So in the circumstance where the minister was going for a few-day period and where the facility of the plane to do that in remote areas – a small plane as opposed to having to take road transport – was available, I accompanied him on two occasions. Senator LUNDY—So the minister was going on a preorganised trip to outback Australia; is that what you were saying? It was something that the minister had scheduled. Dr Kennedy—I cannot remember exactly what month it was but I was in South Australia with the minister for a few days when he was going on a trip where he had quite a bit to do with Telstra. There were quite a number of meetings about Telstra which took us to remote areas in South Australia. Senator LUNDY—Whose idea was it for you to accompany the minister on those trips? I find this quite extraordinary: was the minister travelling to those communities anyway and you found out about the opportunity, or he approached you to accompany him because it resolved the transport issue? Can you step me through as to actually how that came about? Dr Kennedy—I am sure I would have to think about that in detail to as to the precise recollection because I had not expected a questioning on this line. Senator FERRIS—It is a serious policy issue!

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Senator LUNDY—We do not need your facetiousness, Senator Ferris. Senator FERRIS—We have put up with your offensive questions for 10 minutes. CHAIR—There is nothing particularly remarkable about a director going with the minister. Senator Herron—There is a standard protocol for ministers that they can invite whom they wish as long as it is appropriate to the portfolio, if that saves any time. That is the standard procedure. It is nothing unusual. Senator FERRIS—It is just very offensive questioning. Senator Herron—It is in the ministerial guidelines. Senator LUNDY—It depends on your perspective. Dr Kennedy—I happen to know that Minister Alston shares a passion for Aboriginal art – he has a personal collection, which I have not seen – but it certainly has been very useful to meet Aboriginal leaders in these areas and I have been very grateful for the opportunity. I would hope to do that with whichever minister was in place if they shared that same preoccu- pation and also that generosity in allowing the Director of the National Gallery to accompany them. Senator LUNDY—So we have ascertained so far that the minister was visiting Aboriginal communities using the VIP jet, I presume, to get there – Dr Kennedy—It was not a VIP jet, no. Senator Herron—You cannot get VIPs into Aboriginal communities, Senator. Senator LUNDY—What was it? I guess the point is that it was transport that he secured under his ministerial entitlement. Dr Kennedy—I have no idea about the arrangements. Senator LUNDY—Okay. My point was that you did not incur a cost for this travel. CHAIR—As is usual within standard ministerial protocols. Dr Kennedy—I think there was some cost, yes, indeed. Senator LUNDY—There was some cost? Dr Kennedy—Yes. My recollection is that we paid a proportion of it. Senator LUNDY—Okay, so it might not have been ministerial entitlement. Dr Kennedy—Entitlement? Senator LUNDY—Sorry, I am just trying to ascertain what entitlement the minister used for his travel, whether it was part of his ministerial duties or whether he was off duty. Maybe you can enlighten me. Dr Kennedy—He was certainly on duty. Senator LUNDY—He was on duty? Dr Kennedy—I really cannot answer for the minister in this regard. Senator Herron—I would be happy to invite Dr Kennedy to accompany me on a future occasion under similar arrangements. Senator LUNDY—No, I am just exploring it. I am trying not to imply anything. I am just trying to ascertain whether or not it was an official trip by the minister and that it made sense

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 206 SENATE—Legislation Thursday, 10 February 2000 for Dr Kennedy to accompany him. And then, secondly, if the motivation for that trip was in fact to peruse Aboriginal art – Dr Kennedy—No, not just to peruse Aboriginal art – to meet Aboriginal communities, to have meetings with them, to find out what their preoccupations were and, from my point of view, which has been very important, to find out how – in the objective that I had nationally where we have lent 1,500 works across the country and have 11 travelling exhibitions, one to go to keeping places this year – we could actually become relevant to people in remote Abo- riginal communities. It was very, very informative in that regard. Senator LUNDY—So the minister participated in those meetings with you? Dr Kennedy—No, I had discussions with artists. I cannot recall whether the minister himself was actually present or not. What do you mean? Senator LUNDY—In those discussions that you had with the Aboriginal artists in those communities, I am asking you if the minister was a part of that. Dr Kennedy—That is not the way that things happen in remote Aboriginal communities. When I was in Papunya there were people seated on the ground and I was seated on the ground. The minister, I remember, was over by a fence with somebody else and I was having a discussion which took 20 minutes to start. We sat looking at each other and understanding each other, and I found that very enriching. I really feel that I do not wish to participate in anything that might demean those occasions because they were very important to me. Senator LUNDY—It is not my intention to demean them. I am simply exploring the circumstances around that particular event. Dr Kennedy—Indeed. CHAIR—Can I just remind you, Senator, that Dr Kennedy does have a time limit. That is why we called him on earlier. He has an appointment. Senator LUNDY—I think I have everything on notice that I need with respect to details about overseas travel, but I would also like details about your domestic travel and the expenses related to that. Dr Kennedy—Certainly. Senator LUNDY—I have one final group of questions in relation to the $23 million for the upgrade to the entrance and foyer. Can you tell me what is happening with that? Dr Kennedy—I can give you a brief account. Our gallery development manager is present, if you require detailed questions. The gallery is at the present time conducting an architectural competition in a process leading to the enhancement of the gallery building. The amount allo- cated is $20 million. The overall amount that could be spent is of the order of $27 million, a seventh of which would be for landscape works around the gallery. But that does not exactly come out of our gallery budget because we do not own the land around the gallery. That comes under the authority of the National Capital Authority. We are very excited by the process that is under way and have selected eight architectural firms, which are in the process of selection. This will have the most significant imprint in demonstrating that access is vitally important in the gallery building as well as in everything else we have done. Senator LUNDY—In terms of the actual process and having a competition, where is that at? Dr Kennedy—We have established a jury committee, which is independent and has had the cooperation of the National Capital Authority and the Institute of Architects, and also has

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 207 their involvement in the selection committee. We are in a process of selecting an architect as a designer. This is a design led competition to provide ideas that can realise a more exciting gallery entry and gallery display area. Senator LUNDY—Have you put a cap on the costs for those entrants? Do you understand what I mean? We have a precedent that I hope you are familiar with respect to the National Museum design competition, which was handled with some difficulty. So I am just concerned about whether or not you have put the appropriate framework around this particular competition; that is, capped the costs and made that very clear, and given the participants in that competition very specific guidance as to how closely you will adhere to the integrity of the winning design – those kinds of issues. Dr Kennedy—We are not actually seeking to secure a winning design; we are seeking to secure a winning designer. Senator LUNDY—This is a significant point of distinction, as we have found out previously. Dr Kennedy—Indeed it is, and I think it is very appropriate to an artistic institution. We want to work with our architect and they fully understand the scope of work that is required. We would be doing nothing for which we are not funded. Senator LUNDY—Have you had any design work done? Have you commissioned any drawings or had any architects or designers work on this prior to this point? Dr Kennedy—No, we are having a competition for that purpose. Senator LUNDY—I know that, but I just want an answer to that question of whether you had commissioned anything to date or spent any money on any designs, drawings or architectural consultancies to date. Dr Kennedy—Yes, as part of the process – which has been a long one – to satisfy our department and the Department of Finance and Administration, we created quite a volume of documentation to demonstrate the need for the particular scheme of works. That was successful and in that process we sought and secured the advice of architects and other consultants. Senator LUNDY—So you have already paid for some work to be done in that design and architectural consultancy area. Dr Kennedy—A process leading to an architectural competition is a staged one. While the expenditure was – Senator LUNDY—This is the first time I have heard about the competition. I know I have explored this previously. Was it always your intention to have a competition? Dr Kennedy—Obviously, we should really send one to every senator, but we did put out a press release on the issue. Senator LUNDY—No, I am talking about in previous estimates when that budget item came up. I am just saying this is the first time I have heard of it. Dr Kennedy—I think it is some time since I have been with you. Senator LUNDY—Unfortunately. If I had my way – as you know – I would speak to you every time we have an opportunity. CHAIR—You can always make an appointment to go and see Dr Kennedy to discuss these matters.

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Dr Kennedy—I am grateful for the opposition’s interest and the opportunities that I have to brief the opposition spokesmen, which I avail myself of, as you know. Senator LUNDY—So was it always your intention to have a designer competition? Dr Kennedy—It was my intention. I care very much about this. There has been some controversy about the different ways that things have been established. With an art gallery I think it really matters that you have an architect, somebody sensitive to these issues, who will lead the process and who will understand the real reasons why you want something to happen, which is to improve that extraordinary interaction that can occur between a visitor and a work of art. So, yes, it was always my intention. Senator LUNDY—To have a competition? Dr Kennedy—To have a process which would lead to the selection of a designer, yes. Senator LUNDY—Can you tell me how much money you have expended to date on those consultancies leading up to this point in the process? Dr Kennedy—I would be very happy to provide you with that information. Senator LUNDY—And could you provide a time line on the significant points in that process as it has developed? Dr Kennedy—We have a month-by-month chart, as you can imagine, to try to secure this. Senator LUNDY—That would serve my purpose very well. Dr Kennedy—Thank you. CHAIR—Is that your conclusion? Senator LUNDY—Mr Kennedy, I just want you to just clarify with me what was the budget allocation for that project. Dr Kennedy—For this project? Senator LUNDY—The entrance foyer – Dr Kennedy—The announced amount has been $20 million out of gallery funds, and there is a hope that there will be $7 million expended out of other funds which would address the area around the gallery. Senator LUNDY—Are the other funds out of your annual budget? General budget? The National Capital Authority? Dr Kennedy—No, we hope that it will come from the Capital Authority as a development of the Parliamentary Triangle, but we will have to see whether that happens. The fact of the matter is we can solve our building issue, because that is the footprint that belongs to us. Senator LUNDY—In terms of that whole project, are you finding that, to take it to the standard and the vision that you see, you are having to draw on other line items in your budget to really give it the look and feel and sense of what you want to achieve? Dr Kennedy—Not at all. We have not got that far yet. Senator LUNDY—One, has the government given you enough money to do what you want to do and, two, if not, are you having to draw it from other places? Dr Kennedy—We are not actually at that point yet. What we have had is meetings with the minister and with the departments, including the Department of Finance and Administration, which have allowed us to proceed on this road, which is to seek to enhance the building through this process. Obviously, when we have gone through various stages of the process we

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 209 will have to seek the relevant approvals for those points. We have sought the approvals that we have needed to date. Senator LUNDY—Will you need to have guarantees of the source of that additional $7 million funding before you proceed to the next stage? Dr Kennedy—No. But there are other ways of funding too. As you know, we have been very successful in recent times in attracting private funding. Senator LUNDY—So you might use Gallery Foundation money? Dr Kennedy—I am not saying that. But somebody might be kind enough to give us a lot of money and say they want it for the entrance of the gallery. Certainly we will be asking people to try to do that. Senator LUNDY—So you are looking for donations. Dr Kennedy—Always. Senator LUNDY—That is all I have. CHAIR—Thank you, Senator Lundy. Thank you, Dr Kennedy. [5.34 p.m.] AUSTRALIAN BROADCASTING AUTHORITY CHAIR—I welcome the officers from ABA to the table. I understand that Professor Flint has had to leave. Mr Tanner—Professor Flint wishes me to pass on his apologies. He had an immovable appointment in Sydney tonight. CHAIR—I understand that. We are running quite a long way behind time. Senator FERRIS—Mr Tanner, I want to ask you some questions related to the implementation of the online services legislation. I was particularly interested in hearing you explain to me how many complaints you have received concerning material on Internet sites since the legislation came into force on 1 January. Mr Tanner—Certainly. Andree Wright, our director of policy and content regulation, should have those statistics. Ms Wright—By the end of the first month of operation – that is, by the end of January – we had had 35 complaints and we had investigated 21 of those. We had ascertained that that number of complaints covered a broader range of items. So, while we had 35 complaints, we had an overall total of 44 items to investigate. We would be averaging nine complaints a week, so that would probably take the 35 out to the mid-40s by this stage. Senator FERRIS—Are the complaints coming from individuals or organisations? Ms Wright—Every complaint needs to carry the name and contact details of a particular complainant, so we have always been provided with the name of an individual. The complaint form would not state whether that complainant belonged to an organisation or not. Senator FERRIS—What sort of material are they complaining about? Is it RC, X or R rated material? Ms Wright—We have found approximately 50 per cent of the complaints we have had have related to Australian hosted material and 50 per cent to overseas material. For the Aus- tralian hosted profile, there is a predominance of refused classification material – that is, material that would be refused in any medium, whether it was film, video or publication, dealing with sexual matters, say, with underage connotations, perhaps extreme violence issues. For

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 210 SENATE—Legislation Thursday, 10 February 2000 the overseas material, it is more likely to be the type of material that we associate with the X category in video. Senator FERRIS—So in fact the material that has been taken off Australian sites is material which would have been banned offline, as the legislation I think originally outlined would be covered? Ms Wright—That is right. My understanding is that for the first month of operation we issued take-down notices to four content hosts. In all but one case, the notices, which I think covered quite a number of items, were for material that had been classified by the classification board as RC. Senator FERRIS—When you issued the take-down notices, how were they received by the Internet service providers? Ms Wright—Usually, we would get a phone call. In fact, we have had a lot of phone calls over the last month from content hosts wanting to understand better their obligations under the scheme. They have responded in a number of ways but, overall, we have found the industry to become cooperative. Senator FERRIS—So there has been no difficulty in having to proceed to threats of fines, which are provided for under the legislation? Ms Wright—No, we have not moved past the issuing of interim take-down notices followed by final take-down notices. It would be fair to say that in all cases people have technically complied. There has been one matter which has received press coverage where the content hosts then moved that content offshore and it was accessible via the same URL. However, the legislation provides two clear pathways – one for material that is hosted in Australia and one for material hosted overseas. So, if that occurs, the ABA can as an option change gears and move into the process to deal with that content as hosted overseas. Senator FERRIS—What sort of material was that, in terms of classification? Ms Wright—That material was RC material. It was best described as material containing people who were being described as if they were under age whether or not they actually were, which merits an RC classification. Senator FERRIS—How familiar are the ISPs about the industry code of practice? Ms Wright—When the code was registered by the ABA on 16 December, we then moved to mail out to all ISPs and ICHs and provide them with information and a web address where we would be posting further information and personal contact details so that they could ring and ask questions if they had questions. As I said earlier, many of them took us up on that invitation. We are now aware that IIA have also set up their site to which all their ISP members are linking, which provides information on the scheme as well as the code of practice and a direct link to our web site and our complaints form. Senator FERRIS—Part of the legislation included the establishment of a community advisory body. I wonder if you could tell us how that is progressing? Ms Wright—Yes. The ABA is not represented on that body, but we are invited to attend as observers, so I am able to comment from an observer perspective. The ABA has attended two meetings of NetAlert to date. The first meeting dealt with the consultation with NetAlert and the presentation of what then was the draft codes of practice by the industry. NetAlert considered those codes and made some suggestions prior to them coming to the ABA for registration. At the second meeting the ABA attended to give an update on the implementation of the codes and the complaints process, and NetAlert was organising its work program and forming

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 211 subcommittees to deal with particular matters of interest, one of which would be relating to community education, which is also an area that the ABA has a brief for. We will be attending the next meeting in March to do a presentation on the community awareness initiatives that are being undertaken in Europe currently. Senator FERRIS—I seem to recollect that the legislation provided for $3 million for the development of a community education program. How are you going on the development? Ms Wright—The $3 million is, as I understand it, the funding for the NetAlert body. Senator FERRIS—That includes the development of this education program as well? Ms Wright—It would include their work overall and would include any initiatives that they undertake in the community education area. Senator FERRIS—Does the ABA expect to be involved in the development of that program? Ms Wright—We are interested to ascertain where we would be able to work productively together and where we might be undertaking different initiatives so that we will not be over- lapping in a negative way. Our moves for community education over the last month have obviously focused on publicising our complaints mechanism, especially at a grassroots level to reach families and parents of young users. Senator FERRIS—Thank you. I will be interested to see how that goes over the next few months. Senator LUNDY—What has been the process to date for establishing NetAlert’s office in Hobart? Have any consultants been engaged? Ms Wright—As I said, the ABA only attends as an observer, so we would not be in a position to speak for NetAlert, but perhaps that would be a matter for the department. Mr Stevens—The department has been responsible for establishing NetAlert. Senator LUNDY—To whom should my questions be directed? I have a couple of logistical matters about it. Can you give me an update on the establishment of the NetAlert office? Ms Morris—NetAlert has been established in Hobart. It was always the intention that it should operate from Hobart. It currently consists of basically the secretariat of one person, who is an administrative officer serving the board. NetAlert, as the ABA described, have only had two meetings, and at the second meeting they set in progress the development of a work program. Really, until they have a clear idea of what they want to do to meet the objectives for which they were set up, they will not really know who else they need to employ and whether they need to engage any consultants, or whatever. They are still very much at an early stage. Senator LUNDY—It is not functioning as yet? Ms Morris—They have carried out one of their functions which was to be consulted on the development of the industry codes of practice for the legislation and that really preoccupied their first meeting, I understand. Beyond that, a pamphlet has been put out on community education. Senator LUNDY—Was that pamphlet approved by the NetAlert board? Ms Morris—No, it was put out before the board was established. Senator LUNDY—So it is not a NetAlert pamphlet?

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Ms Morris—No, not as such, but it relates to the sort of functions that NetAlert was established to do, and NetAlert are considering putting out a further edition of it. Senator LUNDY—Who is responsible for the content in that pamphlet? Ms Morris—It was at the time put out by the National Office for the Information Econ- omy. The $3 million was put aside for community education type activities. Senator LUNDY—Was that pamphlet theoretically funded out of the $3 million? Ms Morris—Yes. Senator LUNDY—You mentioned consultants. Have any consultants been engaged as yet? Ms Morris—No, not yet. Senator LUNDY—Have any tenders being released? Ms Morris—No, not that I am aware of. Senator LUNDY—At what stage is the tender preparation for any consultancies? Ms Morris—I do not think that they have got to the stage of preparing tenders for consultants. Senator LUNDY—We are a pretty long way from operations. Ms Morris—They have literally just had two meetings. At the first one they had a job that had to be done, and the second one, which was held two or three weeks ago, was really the first time they had a chance to sit down and talk about what they would do and get themselves organised. Then they were organised into subcommittees to try to work out what realistically they can do. I think the next meeting is scheduled for late March. I may not have the date quite right, but by the next time this committee meets, I think you will have a much better idea of what they intend to do. Senator LUNDY—Can you provide the committee with the minutes of those meetings of the NetAlert board? Ms Morris—Yes. Senator LUNDY—The person who has been employed as administrative officer, is that a secondment from the department, or was there an employment process that was advertised and interviews conducted? Ms Morris—There was an advertised employment process for someone based in Hobart with previous experience in this sort of work. Senator LUNDY—Who was on the selection panel for that position? Ms Morris—I would have to take that one on notice. Senator LUNDY—Can you tell me the terms and conditions of their employment, if it is a contract or if they are an employee of the Public Service? Ms Morris—Yes, I will provide that on notice. The responsibility just transferred recently for NetAlert and the employment process was done while NOIE had responsibility. I would like to take that on notice. Senator LUNDY—I can perhaps follow up later with NOIE. Ms Morris—I can just provide it on notice. That is probably easier. Senator LUNDY—Have there been any changes in the composition of the directors appointed to the board since the announcement of 11 directors being appointed last year?

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Ms Morris—Two further directors have been appointed with extensive regional experience. Senator LUNDY—So there are two additional people on board? Ms Morris—Yes. Senator LUNDY—Who are they? Ms Morris—I am sorry, I don’t have their CVs with me. Senator LUNDY—Could you take that on notice? Ms Morris— I will. I only got the paperwork today, I am sorry. Senator LUNDY—Also accompanying that paperwork, could you also provide reasons as to why those additional appointments were made and the qualification accompanying those appointments? Has NetAlert been formally gazetted as a community advisory body? Ms Morris—I do not know. Senator LUNDY—I do not know if the ABA is able to enlighten me in this regard. Ms Wright—I believe before it dealt with the code, it was described as the designated body under the legislation, but I have no further information than that. Senator LUNDY—So you cannot tell me whether or not they have been formally gazetted as yet? Ms Wright—My understanding was that they have. Ms Morris—I would be surprised if they have not, but I just do not feel in a position to say definitely if they have. Senator LUNDY—I think it would be of serious concern, given the relevant act is actually being implemented as we speak. Ms Morris—I assume the answer is yes, but I will follow up with a written answer on that. Senator LUNDY—Thank you. I know Senator Ferris asked a couple of questions about the allocation of $3 million for the funding of NetAlert over the next three years or is that over the next two years? Ms Morris—No, it is this financial year and next financial year. Senator LUNDY—What is the intention in terms of funding post that period? Ms Morris—They have funding allocation only for that period. It will be up to the Ne- tAlert board and how they see and develop their role – whether they develop any sort of sponsorship or private sector type activities – and that has not yet been determined. They have two years worth of funding from the Commonwealth government; beyond that, they have no ongoing funding. Senator LUNDY—Is industry sponsorship being actively considered as where their future lies? Ms Morris—They have talked about it but, as with the rest of their work plan, it is so early on that I would be unable to say what the likelihood of them getting that is and who they have approached.

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Senator LUNDY—What is the impact with respect to the legislation of the existence of NetAlert and its role in community education? Do you see it as an essential element of the implementation of this particular policy? Ms Wright—Yes. We have had some discussions with NetAlert about our differing approaches. I think both organisations are quite clear that we operate a complaints mechanism, which we will publicise and, from time to time, they will publicise it as well. I think they see their role very much in a broader context for community education. For example, one of the things that they may consider is that if somebody wants to go online for the first time and they are not sure how to go about setting up with a family friendly system, they might ring Ne- tAlert and use NetAlert in that way. While we provide information on our web site on that, at the moment our efforts have been focused on the complaints mechanism, people’s awareness of that and the useability of that. Senator LUNDY—The community education focus is certainly a critical element in dealing with the political challenge that the government has attempted to define. I am curious – perhaps, Minister, you could take on notice a question for the minister – as to whether it is his intention to continue a public funding commitment to this body, given it is really at the fore- front in many respects of probably, certainly in my view, the most effective means of educat- ing the community as to how they can manage Internet content. Will you take that on notice? Senator Herron—Yes, I can do that. Senator LUNDY—I missed a part of Senator Ferris’s questions to you earlier. Have any take-down orders being issued as yet? Ms Wright—Yes, that is correct. I stated earlier the number of complaints that we had received in the first month of operation, which was 35. It is approximately nine a week. We had issued take-down notices in that first month to four ICHs. Senator LUNDY—Did you say all this to Senator Ferris? Ms Wright—Yes. Senator LUNDY—I do not want to go through it all again. Have there been any take-down orders? Ms Wright—A take-down notice works in two parts. First of all, there is an interim take- down notice. If the ABA considers that the material is likely to be found within the prohibited content range by the classification board, it will issue an interim take-down notice. Then, when the OFLC have considered the material and have classified it, if the material is prohibited content, then a final take-down notice is issued. I was referring to final take-down notices as well as interim take-down notices. Senator LUNDY—Can you distinguish them for me? Can you tell me how many were interim ones and how many of the interim ones had to be followed up with formal notices? Ms Wright—We had a perfect match. Senator LUNDY—Once you have issued the interim one, is the process that they then take it down or is the process that they then wait until they get the formal notice, once the OFLC have looked at it?

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Ms Wright—On receipt of the interim take-down notice, the obligation is for the ICH not to host that content, pending the outcome of the decision. Senator LUNDY—It usually comes down then? Ms Wright—Yes, that is correct. Senator LUNDY—When you issue the next one, the content is not there? It is just closing off the formalities and the process? Ms Wright—Yes. It then means it has a particular status, and it cannot be hosted legally in Australia after that point in time. Senator LUNDY—I am just trying to get an idea of whether or not you are having to apply a more strident and more effective tier in applying those directions, but obviously not. It is just the legal process. What is your current form of communication with the industry with respect to the code of practice? Ms Wright—We have had two meetings with IIA since the code was in operation since the beginning of this year, and we have had many more informal phone conversations with them. We keep in touch regularly to keep across their understanding of the way the code is operating, to answer any questions that they may have and to take anything we may need to on notice. It is a close, effective working relationship with the industry body. As I indicated, we did a mail out to all ISPs and ICHs in Australia after the registration of the codes. We provide information on our web site for them about the scheme. We are linked to IIA’s web site and, through that link, to all the major ISPs, and they are linked to our complaints mechanism. Moving beyond that, we are also developing hard copy information for distribution. But we found that many people took up our offer to ring us and talk about various aspects of the scheme. Senator LUNDY—How do you envisage that dialogue continuing? Will it continue with this degree of informality, or are you looking to structure your relationship with the industry associations in a more formal way? Ms Wright—As I have said, we have had two arranged meetings with them, if you like – so that is one a fortnight – as well as the informal contact. We have attended some meetings with particular industry players – ninemsn, ABC Online – who have particularly wanted to talk about various ways the scheme would function. We are open to meet with any members of the industry if and when they have problems or issues they want to raise with us, and we are proactive in keeping in touch with the industry body to understand where things are up to with them. Senator LUNDY—What proportion of ISPs does the IIA cover in Australia? Ms Wright—My understanding is that it covers major ISPs who, between them, have a reach of users of approximately 80 per cent or above. Senator LUNDY—That is in terms of their market share? Ms Wright—That is right. Senator LUNDY—But how many of the ISPs? Ms Wright—As I said, we are aware that there are about 800 ISPs, and we have written on a number of occasions to all of them and provided them with information on the scheme. It tends to be the smaller players that ring in and take up our invitation to talk.

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Senator LUNDY—How many of those 800 or so ISPs does the IIA represent? Ms Wright—I do not have that information to hand. We had it supplied to us when we considered registering the codes. It was thought to be a substantial list. Senator LUNDY—What is a substantial list? Do they cover 500 ISPs, 400, 300? Ms Wright—They were not required under the legislation to be representative but able to represent the industry. So in some ways it differs from other industry associations that the ABA deals with. For example, the membership of FACTS matches the number of television stations, if you like. That is not the case with the Internet industry, and nor is it required to be the case. But, while not everybody is a member of IIA, we have made sure that we have contacted all ISPs and ICHs. Senator LUNDY—I am not questioning that. My understanding is that the IIA represents less than 10 per cent of ISPs in the country. I do not know if you can confirm or deny that. I would have presumed you knew. Ms Wright—We could certainly answer that on notice, but our interest was the number of users that were reached. Senator LUNDY—The question has a specific relevance when it comes to ongoing consultation as the legislation is implemented. What are your mechanisms for specifically consulting in a proactive way with the other 700 or so ISPs? You have already said you are pro- tective. How are you proactive in consulting with them? Ms Wright—I think I would take another tack here. We are interested in monitoring the implementation of the code of practice, but one of the ways that we would be doing this is by ascertaining what the Australian community uses. Senator LUNDY—Sure, that is one perspective. Ms Wright—That is one of the ways we are monitoring the code. We have put the invitation out to ISPs. We have contacted all of those who are registered ISPs. Senator LUNDY—Are you aware of other representative bodies? Ms Wright—Yes, that is another valid point, and we are regularly in contact with those. We made contact with all those organisations last year to ascertain whether or not they would be coming to us with a code of practice. Again, our doors are open to them and we do have dealings with them. Proceedings suspended from 6.02 p.m. to 7.05 p.m. Senator LUNDY—I would like to refer to a recent newspaper report with the headline ‘ABA moved to censor newsgroup’. From recollection, quite some time was spent – certainly in the second reading and committee stages of the debate in the chamber – determining that emails and newsgroups would not be captured by the regulation. Can you explain what the situation is with respect to newsgroups and whether or not this is accurate? Ms Wright—No, it is not accurate. We have not moved beyond the original legislation, and newsgroups were clearly included in that. The article is misleading because, if you read the article, it would indicate that this was a new move that followed the legislation or is an extension of it. That is not the case. We have always understood that newsgroups and the World Wide Web – but not email and not chat lines – were things that we would have carriage of. The article is further misleading because it implies that we have had a complaint about a newsgroup hosting prohibited content, and we have not. The complaint was actually about archived content which was archived on the World Wide Web. The complainant was very

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 217 aware of that and, when filling out the complaints form, he indicated that that was the case. So we have not had a complaint about a newsgroup nor have we issued take-down notices in relation to one, but we understand that the scheme has always had provision for us to deal with newsgroups. Senator LUNDY—To clarify, the take-down notice arising from this complaint relates to a web site upon which the archived material from the newsgroup is located? Ms Wright—That is correct. Senator LUNDY—To clarify the position with respect to newsgroups and particularly with regard to distinguishing a news group from, for example, a mailing list, can you tell me whether or not mailing lists fall, as you understand it, within the definition of your jurisdic- tion? Ms Wright—We have not had to test that. Could I revisit the newsgroup at the moment? We did not issue a take-down notice. The material was hosted in America so it would have been part of that process and would not involve a take-down notice, which relate only to Australian hosted material. Senator LUNDY—What was the action you took with respect to deja.com? Ms Wright—It was referred via the approved filter providers on the schedule to the IIA code. Senator LUNDY—So people were notified to block that particular site? Ms Wright—That is correct. Senator LUNDY—I have a question about blocking that particular site. Given that a newsgroup archive is a pretty big site, were you able to notify the content host providers of a specific part of that particular archive? How specific can you be with respect to content of that nature, given, I understand, it was one posting that had been archived? Ms Wright—What we refer on is the particular URL where the material can be located. At a minimum, they must block that particular item. It is a matter for them, in the way they operate a commercial filter, whether they go wider or have already gone wider, but we focus on that particular item on the web site – that particular URL – rather than necessarily taking a whole-of-site approach – and we did not in that case. Senator LUNDY—So you just identify that component of the URL. I am trying to get an idea of the degree of specificity with which you are advising them. If, for example, a content host were able to structure their content and break up the content to put it on specific URLs, are you able to liaise with them and work with them in terms of how they pull off specific sections of content within one particular URL? Ms Wright— Is this referring to Australian hosted material in this instance? Senator LUNDY—I guess there are two scenarios, so perhaps you could give me an explanation for both of them. With Australian content, can you negotiate with content host providers to allow them to restructure their content for the purpose of giving them a notice for one part of it? That is one scenario. The other scenario is: how on earth would you contem- plate approaching such an outcome with content hosted elsewhere? Ms Wright—For Australian hosted material, our complaints form is structured so that, when a complainant makes a complaint, they identify the particular location of the offensive material. When we refer that material to the OFLC, we refer it by URL. I said earlier that, in some instances, we would have a complaint but a number of items would come from that. The

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS ECITA 218 SENATE—Legislation Thursday, 10 February 2000 number of items would probably form the basis of a number of take-down notices – sometimes all relating to material on one site. But we are not necessarily taking the view that all content on that site is a problem, so we are going in for the problematic material and trying to be as specific as possible. Senator LUNDY—On the complaints form that you have posted on your site, you specify areas: ‘What type of Internet content do you wish to complain about: World Wide Web, newsgroup article or other Internet content?’ Has the reference to newsgroup articles always been on the form that you have had on your site? Ms Wright—Yes, that is right. Senator LUNDY—In terms of the actual input fields, it does not specify that you actually insert the URL. Ms Wright—I am of the view that it does, under item 8. Senator LUNDY—‘Give the details of the links that were followed to access the content or passwords that are required.’ It does not actually say, ‘Give us the URL.’ Ms Wright—It follows on from item 7, ‘Internet address of World Wide Web content’. Senator LUNDY—What happens with a page that has frames on it or a site that is constructed in such a way that the content exists within a page constructed with frames? I know that I have trouble bookmarking some sites because of the way that they are constructed in that regard. How can people go about identifying sites in that way, and how do you get the degree of specificity that you are looking for? Ms Wright—I would like to clarify your meaning of ‘frame’. Do you mean particular items within a page or links to material sitting behind a page? Senator LUNDY—Quite often, depending on how the page is constructed, you can go to the entry point of a given web site and move through that site, but the URL at the top of the browser will not change because you are actually moving within the site, within an overarching template of that web site. The DCITA site used to be of that nature. You get into the department site and the URL does not change at the top, yet you have the capability of moving through the site. It makes it very hard to bookmark interesting bits of the department’s work, I might add, but I think you get my point. Ms Wright—With the complaints I am aware of, the URL is often extended so that various parts of the site carry additional address material, so it is quite easy to be specific. It is also possible to identify particular JPEG files if you are framing a take-down notice. Senator LUNDY—Again, I think you missed my point. Obviously you have not had the situation where the only URL is the overarching URL and you cannot get to a degree of specificity within the whole site. Does that mean you end up issuing the notice for the whole site or, when you go in there, do you have some technology analysts or mark-up experts that can access the code and source the appropriate URL? Ms Wright—That is what I was saying about the JPEG files. You can go into a particular part, and you can therefore frame that material that you are referring to. Senator LUNDY—That is for a graphic; I am talking about general content that sits within that. Ms Wright—Our form asks them to give reasons for their complaint – they may say that it is a particular photograph. We have not had the precise situation that you have described, but

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 219 we have moved down the path of focusing on the complainant’s concern and identifying the material in that way. Senator LUNDY—So you just keep liaising with the complainant if you are having trouble accessing what they are complaining about? Ms Wright—The form is fairly specific. People are finding it easy to use and are supplying that information, so we have not had that type of problem. In a couple of instances we have returned an email, requesting more information, but that has often been because people have not used the form, have contacted us by fax or whatever and are not necessarily aware of the information that is most helpful to investigate a complaint. But it has not caused any major problems. Senator LUNDY—The URL obviously covers all the material that is on that newsgroup that has not been archived yet. Have you issued a notice to a newsgroup hosted in Australia? Ms Wright—No. As I said, we have not received a complaint about a newsgroup; however, from working with the Internet Watch Foundation, we are aware of how they approach the matter. When they liaise with the industry, they are very specific about content which is to be removed from a newsgroup. Senator LUNDY—So you identify a specific contribution? Ms Wright—Yes. Senator LUNDY—So the question of filter would not come into that, because it is hosted onshore? Ms Wright—It depends where it is hosted. If it is hosted within Australia. I guess it is slightly different because ISPs actively choose the newsgroups that they carry. Senator LUNDY—But they are not responsible for the content of them? Ms Wright—Our understanding, from talking to ISPs about this, is that they would be in a position to remove particular content. Also, if they found a newsgroup to be particular problematic all up, they would consider, as they always have done, whether they would continue to carry it. They do not carry all newsgroups; they make selections. If it was a particularly problematic newsgroup content – for example, if it was dealing with child pornography – and we had a complaint about it, under the act we would refer that on to an enforcement authority, as we are bound to do. Senator LUNDY—We are not talking about legal content here; we are talking about censored material. When you talk about child pornography, you are talking about illegal content, aren’t you? Ms Wright—Yes, but we are aware that there are a range of newsgroups around the world, some of which we know do focus on those particular illegal topics. Senator LUNDY—Which can be dealt with by the authorities. Ms Wright—We have committed, as I said, to working with the Internet Watch Founda- tion. We are looking at the way they have dealt with material on the newsgroup at whatever level that they have had a complaint or where it is problematic. We are aware that there would be a range of material, and we are aware of the options that are available to us to deal with that. But, as I said, we have not received a complaint, and we have not had to go down any of those paths.

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Senator LUNDY—I am curious that you have used child pornography as the example, given that you have often gone to great pains to describe the difference between censored content and illegal content. Ms Wright—Under the scheme, the material that is covered includes a range of material that includes illegal material. It is appropriate to refer to it because, from work being done by other hotlines around the world, particularly those in Europe, England and America, we are aware that child pornography and newsgroups have been a particular issue for them. Senator LUNDY—When dealing with a newsgroup hosted in Australia, do you consider ISPs to be responsible for the content contained in them, given that they do have some discretion as to whether they host those particular newsgroups? Ms Wright—We have spoken to ISPs about that, and they have said that they would if they chose to host it themselves – that it was one that they ran, as opposed to one that they took on. They have made that distinction to us. Senator LUNDY—How does that affect the treatment of a complaint by a given ISP? Ms Wright—From talking with ISPs, it probably was not of much moment, because they felt that either way they could remove the specific content if there was a take-down notice if necessary. Senator LUNDY—If they are just hosting access to a newsgroup, can they take down specific content on that newsgroup? Ms Wright—Yes, I have been told by ISPs that they can. Senator LUNDY—Given that one newsgroup can be hosted by lots of different ISPs, how does that work? Ms Wright—If we received a complaint, we would go to where it was hosted – where the complainant had come across it. It would be open to us to then send an all-out alert email to all ISPs, notifying them of the decision we had made and the particular content. Senator LUNDY—So it is like a multiple take-down notice – a whole range of ISPs can get the notice to take down the same material? Ms Wright—It may not be a multiple take-down notice; it might simply be an email advising them. It is for their information, for actions they might see appropriate if they had a concern, but we respond to the material at that particular site that was a problem for that complainant, in the first instance. Senator LUNDY—I am not familiar with the hosting arrangements of newsgroups specifically. If you have a newsgroup posting on a newsgroup that has been hosted by a multitude of ISPs as part of their suite of newsgroups within their services, who is actually responsible for that newsgroup? Or is it a collective amorphous existence? Ms Wright—It is coming from an offshore source but being hosted in Australia. Senator LUNDY—No, it might be hosted here. Doesn’t a newsgroup exist by virtue of the server upon which it is hosted? Or is it something that exists by virtue of multiple points of input, and the technological structure of a newsgroup exists wherever an ISP chooses to host that particular newsgroup? How does it work? Ms Wright—We are aware that it can be made available over a number of services. If we were to receive a complaint, our way would be to go to the particular identification that was given to us and to also send out an email alert to other Australian ISPs. We would not see our

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 221 role in the first instance to proactively try to hunt down everyone. That is not our role under the legislation. Senator LUNDY—I would not have thought so. Ms Wright—With respect to your more technical questions, I may not be the best person to answer them, but I can provide you with the thinking that the ABA has in dealing with such a complaint, if we were to receive one. Senator LUNDY—I would certainly be interested in that, and also if you can take on notice what is the technology behind the newsgroup. I expect that would be something you would need to know and understand if you were to apply this law effectively. Ms Wright—As I said, we have approached it by talking to ISPs to ask them what they are able to do, what is possible for them and what is not. I am not sure that the technical information is necessary to that extent and the answers from the ISPs would indicate a real problem for them dealing with it. Because they have not done so, in a sense that is a more academic question for us and not necessarily one that we need to explore to implement the scheme. Senator LUNDY—But if you got a complaint about a posting on a newsgroup that is, for the purposes of this example, hosted offshore, effectively you are obliged to try and contact every ISP in Australia who might happen to have that particular newsgroup as part of their suite. Ms Wright—As I said, we are in a position to email all ISPs. Senator LUNDY—And you would do that. So it is like a multiple notice. Ms Wright—No. I am saying that it is not a notice - depending on what it was, and whether it was an interim take-down notice, but we would be alerting other ISPs to the existence of that material in the first instance. Senator LUNDY—I am just trying to follow through the course of action. If you are notified just by email, saying, ‘Get off with this’, what you have said so far is that each ISP is then in a position to remove that posting of a current newsgroup. Ms Wright—It would be of interest to ISPs, knowing our process from interim to final take-down notice. Once a final take-down notice is issued and the material is identified, that material is prohibited content – if that is the decision – so it is relevant to them. Senator LUNDY—You need to let everyone know who has got that. Ms Wright—Yes, we are aware of that. Senator LUNDY—When you first email them, how do you know at what point you need to give them an interim notice? Ms Wright—We give the interim notice to the particular location that the complainant has provided to us in the first instance. That is the place where the material has been accessed, that is the place where the material has been a problem for someone. Senator LUNDY—That is the first notification. How do you ascertain whether or not you need to proceed to an interim notice from that point? Do you check to make sure it has come down? Ms Wright—The final notice, Senator? Senator LUNDY—You spoke about an email that goes around to everybody: you actually issue an interim notice.

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Ms Wright—An adjunct to the interim. We issue the interim to the particular host and, as an adjunct, an email to others that may be interested. Mr Tanner—I suppose our scheme assumes that you have a complainant and you have an ICH or an ISP - that is, the person who happens to be the host - that you have had a complaint about. That is the target for our investigation formally. That is the person to whom we serve the interim and the final notice. But you are raising a scenario where that person may be one of numerous Internet hosts that carry the newsgroup. As they are not formally complained about we would not necessarily be sending out numerous take-down notices but, in that scenario, it would be fairly meaningless if we did not send round the information that there was a problem. That is where the email would come – just to put the industry on notice that there was a problem across a number of sides. The email would be an ancillary thing to ensure that our action was effective rather than merely symbolic. Senator LUNDY—It is only symbolic because you are not requiring them to do anything, are you, with that email? Ms Wright—At this stage we are talking in theoretical terms. The scenario that we have outlined and ways of moving on from that would be premised on the cooperation or whatever that we received from the industry. We are not pre-empting what they would do at this point but, by and large, with the work that we have done we have found over the last month the industry to be cooperative. Senator LUNDY—One of the earlier concerns, and a concern that has persisted through the development of the code, is about the cost increase in Internet access as a result of this. What role does the ABA have, if any, in assessing that overarching industry impact of this legislation? Is that something you are concerned with, or is that something for NOIE or someone else? Ms Wright—That is something that will be of interest to us when the codes of practice are due for review, which they will be in 18 months time. There will be a number of stakeholders providing or gathering information in that regard - obviously the industry itself, NetAlert - and it would be our role to be considering that information and that impact. Senator LUNDY—Do you think it is reasonable that the sanction end and the complaints end of this regime are operating and NetAlert is not? Ms Wright—NetAlert has, in two meetings, moved to be consulted about the code. Senator LUNDY—I know they are getting there, but they are not actually there yet. It would be a reasonable assumption, for anyone observing from the industry or affected directly, for an ISP to be concerned that the complaint sanction side of it is operational but the user education side, the community advice side, is not yet functioning. Ms Wright—I think the ABA has gone some way to already fulfilling that role. Our family friendly web site was getting upwards of 200,000 hits on it a month before we launched the complaints mechanism and we have had that information and that site available for some time. As I said earlier, we are linked to IIA and to the major ISPs, so people can come to that information via a number of ways. People are coming into the site on the pages where they can specifically gather information on filters, on how to be proactive, if you like, in making sure that the web is a positive experience for their children. We are about to send out information in various – Senator LUNDY—The ABA is? Ms Wright—Yes. Part of our role is to undertake community education.

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Senator LUNDY—I thought that was NetAlert’s job. Ms Wright—Under the act we also have a community education role. It is spelt out quite clearly. Senator LUNDY—Does NetAlert have to approve your material? Ms Wright—No. As I indicated earlier, they see their role as covering a different set of parameters potentially, but over the last year we have provided a lot of information for families and users. Senator LUNDY—Does your site work if you do not have a Java enabled browser on your complaint form? Ms Wright—When it was first launched there were some applications which had difficulty lodging a complaint, but within a fortnight we had dealt with that. Senator LUNDY—Do you have to be Java enabled to be able to use your form and submit your complaints form? Ms Wright—No, that is not my understanding. We had problems brought to our attention very early on. It is my understanding that it is now accessible to anyone who is online. Senator LUNDY—There was a problem with it. Ms Wright—In the first fortnight it was found that some people with some older software applications might have some problems, so we addressed that. Senator LUNDY—What were the problems? Was it because it could only be activated if your browsesr was Java enabled? Was that the problem? Ms Wright—I am not aware that it was, no. I would have to take that on notice. Senator LUNDY—What was the problem? Ms Wright—It seemed that some people with very old software applications could not necessarily gain access, so they contacted us by other means. Senator LUNDY—Was it a frames thing – browsers that did not support frames? Ms Wright—I am not aware of the details. It was also for a very short period because we immediately moved to rectify it. Senator LUNDY—In two weeks. In terms of liaison and investigation internationally, you mentioned earlier that you are looking at various examples. Is the ABA of the view that any legislative amendment is required to improve the operation of this regulatory regime? Ms Wright—It has been in operation for only a month. While that was something that we would be vigilant about, I am not aware of anything that we have identified as a problem at this stage. The complaints mechanism seems to be working well. The codes of practice are in place. But we are aware that the act itself has provision for a review, and the ABA has provision to bring information to the attention of the government if there is a problem with the legislation. Senator LUNDY—Is the ABA of the view that the development and operation of the code of practice conforms to the intent of the legislation? Ms Wright—Yes. In assessing the codes of practice for registration there were a number of things we needed to consider. One of them was the way that it met the legislative framework, and the ABA reached the opinion that all matters that the legislation had indicated should be covered within a code had been covered in the IIA codes.

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Senator LUNDY—Looking at international developments in this area, has the ABA had the opportunity to look at jurisdictional issues in other places and see how they deal with them? Ms Wright—Yes. The group called INHOPE is particularly helpful. It is, if you like, the coalition of hotlines throughout Europe and the UK, and it also draws on observers from other countries, such as America. Because they are operational hotlines working from a number of perspectives - sometimes they are industry based, sometimes they are government based and sometimes they are community based - they are dealing with material that is seen to be a problem within the community. They have a role in liaising with industry for remedy and also a role in liaising with enforcement agencies. Senator LUNDY—Did you recently attend a conference in Brussels on the safe use of the Internet? Ms Wright—No. Senator LUNDY—Did anyone from the ABA? Ms Wright—I am not aware of anyone attending a conference in Brussels, but there are other conferences in this area that we have attended over the last year. Senator LUNDY—Where? Ms Wright—We attended the conference on Internet and child pornography in Austria in September, and we attended the conference in Munich that was run by the Bertelsmann Foun- dation, which covered a rather broader range of Internet issues. We also attend INHOPE meetings. Senator LUNDY—Why didn’t you send someone to the safe use of the Internet conference, given that you are obviously familiar with the circuit? Ms Wright—I would say that we have a limited travel budget and we have a travel policy. Every year this is prioritised and particular conferences are given priority over others. It is just not possible to go to everything. Senator LUNDY—The particular emphasis is that that conference was looking at the community education side and a series of measures with respect to Internet content that were not reliant on mandatory requirements, take-down notices or indeed the model that has been adopted in Australia. Is that why you did not attend? Ms Wright—No. We are aware of the work done in community education in Europe through Childnet International, and some of that work would have been carried forward to that conference. We had already had a briefing on that initiative from Childnet when they visited Australia late last year. So we were aware of the work done and the recent research on community education in Europe to that extent. There are other ways, Senator, of becoming familiar and taking on board this material. Senator LUNDY—I certainly agree with that. Do you think we will get to a stage where community education reaches a point where it is no longer required to have, I suppose, at least the impression that there is an operational regulatory regime in this area? Is that the ideal; is that the direction you are heading in? Ms Wright—I think there is an interest in the community as take-up of the Internet in households increases. The take-up of the Internet in households is still below one-third. Most Australians access it at school, at work or in libraries, and as I said, the number is less than one-third in homes. But, as the take-up rate is increasing, more and more people are coming

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 225 to these issues for the first time for themselves and their families so, whatever the framework, there will be a continuing interest in these issues and people being able to make choices about what content they select and the experiences that they have. Certainly the take-up rate will probably increase quite steeply, and I think there will be a continuing interest in these issues for some time to come. Senator LUNDY—That was not quite my question. I am sure there will be a continuing interest, but my question went to our continuing need to have the legislative framework around the issue with such a global emphasis, particularly in places like the EU, on community education and structures that actually empower and inform end users and to help to manage Internet content. Ms Wright—Yes. The ABA's key role is implementing the complaints mechanism and registering the codes, and they would both seem to be very viable initiatives, with a long and desirable lifespan, as I said. We are interested in researching community attitudes in Australia on these issues and on the implementation of the codes and complaints process. We will be actively undertaking such research. At this stage, the scheme is very new but, as I indicated before the dinner break, we are very interested in users, what the community is thinking and what assists them. Mr Tanner—Perhaps I can add to that. The ABA has, I think, throughout the development of regulatory responses to community concerns about the Internet, taken the view that it is desirable to try to encourage high-quality public policy debate and to attempt to encourage meaningful communication between industry, between government and between the community. That is something that I think the ABA will continue to do as it is what we believe to be a key feature of a successful coregulatory approach to community concerns about content in the media. As a creature of parliament, a statutory authority that has been charged with making the current complaints scheme that parliament has asked for work, we are not going to take a lead role now as we try to implement it in promulgating views about whether we think the scheme and its details are going to be desirable in two, three or four years time. I think we would like to certainly assist in creating a climate in which we can have a healthy policy debate about that, but that is parliament’s call, in the end. Senator LUNDY—Indeed it is, thank you. I have no further questions. CHAIR—In that case, that concludes the estimates for the ABA. [7.49 p.m.] NATIONAL COUNCIL FOR THE CENTENARY OF FEDERATION Senator FAULKNER—Mr Palfreyman, would you outline for the benefit of the committee what the current situation is in relation to the Australia Week trip to the United Kingdom? I was informed at the Prime Minister and Cabinet estimates earlier in the week that the program was being coordinated from the national council. Mr Palfreyman—Australia Week in London is planned from 3 to 8 July 2000 and follows an exchange of correspondence between the Australian and British Prime Ministers. The national council has developed a program of events in London to commemorate the centenary of the passage of the Commonwealth of Australia Constitution Bill through the British parliament. The council has worked closely with the Australian High Commission in London and the Prime Minister's office in developing the program to ensure that it is sharply focused on the central themes and issues in the contemporary relations between Australia and Britain.

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Commemoration of this fundamental event in the establishment of the Commonwealth is an important precursor to the national events program planned by the council and its affiliated state and territory committees to extend throughout Australia during 2001. Participation by Commonwealth, state and territory leaders symbolises the strength and unity of the Australian Commonwealth on the eve of its first century. Australia Week combines official parliamentary and government ceremonies, an arts festival, promotional trade and tourism events, a history conference and a thanksgiving service. Key events are question time in the House of Commons, a parliamentary reception at the Royal Gallery, House of Lords, Commonwealth Secretary-General's reception at Marlborough House, a thanksgiving service at Westminster Abbey, a history conference examining Austra- lia-Britain relations 1900 to 2000, addresses by the Prime Minister to business leaders in Brit- ain including the Confederation of British Industry and Australian Business in Europe. In addition, the Prime Minister will undertake a program of calls and activities associated with a normal bilateral visit. The arts program has been undertaken as a joint initiative of the National Council for the Centenary of Federation and the Australia Council. This program aims to present a profile of contemporary Australia through a festival of arts to be presented during Australia Week. The program will include music, dance and drama performances, visual and multimedia arts exhibitions, indigenous arts, films and a literature program. It will be presented at world-famous venues such as the Barbican Centre, Wigmore Hall, South Bank Centre, the National Portrait Gallery and the Commonwealth Institute, and as part of the program of the City of London Festival and the Greenwich and Docklands Festival. Senator FAULKNER—Thank you, Mr Palfreyman. That was very comprehensive. Let us concentrate on the program. As I understand it, in the first instance the National Council for the Centenary of Federation is tasked with preparing a program for, I presume, later perusal by the Department of the Prime Minister and Cabinet or the Prime Minister. Is that how this process is working? Mr Palfreyman—There have been a number of bodies involved in the preparation of the program. They include the council itself, the Department of the Prime Minister and Cabinet, the Department of Foreign Affairs and Trade and the Prime Minister's office. Senator FAULKNER—Yes, but the Department of the Prime Minister and Cabinet indicated in the first instance that preliminary preparation of the program was being undertaken by the National Council for the Centenary of Federation. Can you confirm that? Mr Palfreyman—Yes, Senator, that is correct. The National Council for the Centenary of Federation is taking the central role in the preparation of the program, but in concert with others. Senator FAULKNER—How is the coordination working? Is there an interdepartmental committee? Mr Palfreyman—Yes, there is. Senator FAULKNER—And on the IDC is the National Council for the Centenary of Fed- eration? Mr Palfreyman—Yes. Senator FAULKNER—The Department of the Prime Minister and Cabinet? Mr Palfreyman—Yes.

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Senator FAULKNER—The Department of Foreign Affairs and Trade? Mr Palfreyman—Yes. Senator FAULKNER—Could you indicate any other representation, please. Mr Palfreyman—No. Senator FAULKNER—That is all? Mr Palfreyman—Yes. Senator FAULKNER—And what is the lead agency on the IDC? Mr Palfreyman—The Department of Foreign Affairs and Trade. Senator FAULKNER—Within the various tasks and responsibilities that are being undertaken to organise the trip, what are the main responsibilities of the National Council for the Centenary of Federation? Mr Palfreyman—Two major areas: the development of the program outline with ideas for particular events and development of the arts program itself. Senator FAULKNER—So at the moment the program – let us just go through the main proposals – is: attending question time in the House of Commons – Mr Palfreyman—That is correct. Senator FAULKNER—Do you know what date that will be? I appreciate that this is probably in draft form, that you might have just pencilled it in. Mr Palfreyman—I can give you the dates. Question time in the House of Commons is planned for Wednesday, 5 July. Senator FAULKNER—Is there anything else on that day? Mr Palfreyman—Yes, there is. Prime ministerial calls on ministers, PM’s business lunch, question time, afternoon tea with University of Sydney alumni and a speech by the Prime Minister in the evening. Senator FAULKNER—Where is the Prime Minister’s speech being held? Mr Palfreyman—At the Guildhall banquet. It centres around a major business function. Senator FAULKNER—That is a business function basically? Mr Palfreyman—Yes. Senator FAULKNER—What is planned for the next day, 6 July? Mr Palfreyman—Historians conference opens, official government consultations for the Prime Minister, a British parliamentary reception to celebrate the centenary at the Royal Gal- lery, the Prime Minister visits the National Portrait Gallery, a reception by the Commonwealth Secretary-General and a private dinner that evening. Senator FAULKNER—On 7 July? Mr Palfreyman—It begins with a breakfast meeting of the Prime Minister and major bank leaders, a continuation of the historians conference, official government meetings for the Prime Minister - Senator FAULKNER—It is really hard to hear. Would you just speak up a little? You might have to get a couple more decibels into it. It is always the case, I think, that the acous- tics in here are not good either, to be honest.

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Mr Palfreyman—A thanksgiving service in Westminster Abbey, the Prime Minister's speech at the historians conference - Senator FAULKNER—So the Prime Minister is making a speech at the historians conference, is he? Mr Palfreyman—Yes; a Menzies Centre ceremony, and a reception by the Prime Minister at Australia House. Senator FAULKNER—What about on 8 July? Mr Palfreyman—No details at this stage. Senator FAULKNER—What about 9 July, or was 8 July the last day? Mr Palfreyman—That is the last day. Senator FAULKNER—Are other members of the delegations going to all these functions as well? Mr Palfreyman—At this stage, details of the itineraries of other members of the delegations have not been finalised. Senator FAULKNER—What you have given me at this stage then, effectively, is a proposed or draft itinerary for the Prime Minister. Is that its status, in a nutshell? Mr Palfreyman—It does, in fact, represent a wider program for the week, and the Prime Minister will participate in a number of these. Senator FAULKNER—So they are the events, and the Prime Minister and other members of the delegations will be participating in some of them? Mr Palfreyman—That is correct, yes. Just for completeness, we have not covered the 3rd and 4th. Senator FAULKNER—We always should make sure that the record is complete, and I am sure that Senator Herron would agree with that. Mr Palfreyman—We have a number of Australian promotional activities on the third, a national portrait gallery Australian exhibition, Australian poetry on the underground and indigenous arts at the Commonwealth Institute; that is on Monday. On Tuesday, cultural and arts programs continue; they start on Monday, and the Prime Minister is scheduled to arrive in London on the Tuesday. Senator FAULKNER—So what you have just read out there for the 3rd and 4th is part of the arts program? Mr Palfreyman—It has a heavy emphasis on that, yes. Senator FAULKNER—Can you confirm for me what the current status is in terms of those who will be attending Australia Week? Mr Palfreyman—At this stage, it includes the Prime Minister, former Prime Ministers, state premiers, presiding officers of parliament and a number of national council members. Senator FAULKNER—This is the Commonwealth or part of the Commonwealth delegation. We heard from the Department of the Prime Minister and Cabinet that at least four state premiers were going. Mr Palfreyman—I mentioned the state premiers. Senator FAULKNER—Did you? I missed that, I am sorry. Chief Ministers? Mr Palfreyman—Yes.

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Senator FAULKNER—And obviously spouses of most of the above or partners of most of the above. How many members of the national council are going? Mr Palfreyman—At this stage, six. Senator FAULKNER—PM&C told me that there were five. I appreciate that these things change, and I am not critical of that. As long as we get it clear, it is fine. Mr Palfreyman—The difference may well be explained in that the Commonwealth will be picking up the cost of five, and one member will be paying his own expenses. Senator FAULKNER—Can you let me know who will be attending from the national council? Mr Palfreyman—You mean the staff? Senator FAULKNER—No. Who are the five? Mr Palfreyman—I am sorry, I beg your pardon. I will give you the names of the six: the Chairman, Mr Dick Smith; the Deputy Chairman, Mr Rodney Cavalier; the Chief Executive, Mr Tony Eggleton; and three members, Mr Richard Walley, Professor Geoffrey Blainey and Archbishop Peter Hollingworth. Senator FAULKNER—So that is six members of the national council. I appreciate that Mr Eggleton is the full-time CEO and Mr Cavalier also undertakes quite significant administrative duties. If you like, there are non-executive and executive members of the board. They are my words; I think you understand. Mr Palfreyman—I understand the point you are making. Senator FAULKNER—In layman's language, we have that sort of situation. Is there any other staff support from the national council? Mr Palfreyman—I was anticipating your question as that was what I thought you were talking about. No. Senator FAULKNER—Are there any plans at this stage for the Minister for the Arts and the Centenary of Federation to attend? Mr Palfreyman—At this stage we do not know. Senator FAULKNER—The Deputy Prime Minister we had confirmed as attending? Mr Palfreyman—Yes, that is true. Senator FAULKNER—Senator Lees is attending? Mr Palfreyman—I think we mentioned the two presiding officers. The other parliamen- tarians attending are Mr Anderson and Senator Lees. Senator FAULKNER—So at this stage, in terms of the full Commonwealth contingent, have we got a figure? Mr Palfreyman—I could do a rough sum. Senator FAULKNER—What you are giving me is the delegation. I do not know whether we would want rough figures. Mr Palfreyman—We will try to get you a rough figure. CHAIR—Do you want to take that on notice? Mr Palfreyman—We are not quite sure of some of the state premiers. Senator FAULKNER—What total are you up to at the moment?

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Mr Palfreyman—Fifteen. Senator FAULKNER—That does not include partners and so forth? Mr Palfreyman—That is correct. Senator FAULKNER—And does not include staff support? Mr Palfreyman—That is correct. Senator FAULKNER—Prime Minister's staff, ministerial support? Mr Palfreyman—Not the 15, no. Senator FAULKNER—Have you made block bookings and that sort of thing in advance in London? Mr Palfreyman—The Australian High Commission in London is handling accommoda- tion arrangements. I understand that bookings have been made. Senator FAULKNER—Do you know for how many? Mr Palfreyman—No, not at this stage. We would need to take that on notice. Senator FAULKNER—Perhaps take on notice the details of the block bookings that have been made – Mr Palfreyman—Certainly. Senator FAULKNER—and whether that would have covered the whole of the Australian delegation - Mr Palfreyman—Certainly. Senator FAULKNER—including the delegation and other support staff. I am interested in understanding the full picture, if I could. Mr Palfreyman—Certainly. Senator FAULKNER—What is your working budget for this at the moment? Mr Palfreyman—The only cost that the Centenary of Federation Council will be picking up is its contribution to the arts festival at $350,000. The cost of dignitaries other than the national council members I understand is being picked up by Prime Minister and Cabinet. Senator FAULKNER—But you are picking up the cost of the five council members that are being paid for? Mr Palfreyman—That is correct. Senator FAULKNER—Do you know what the cost is for them? Mr Palfreyman—We will take that on notice. Senator FAULKNER—You said that the national council's contribution to the arts festival was $350,000. Is that part of the total budget? Mr Palfreyman—The other contribution which is matched at $350,000 is coming from the Australia Council. Senator FAULKNER—So $350,000 from the national council and $350,000 from the Australia Council. Do you know whether at the IDC there has been any indication of what the budget for Australia Week in total might be? Mr Palfreyman—No. Senator FAULKNER—That has not been discussed at the IDC?

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Mr Palfreyman—As I understand. Senator FAULKNER—It has not been? Mr Palfreyman—Yes. Senator FAULKNER—I think I have asked you to take on notice the number of actual members of the delegation in a formal sense - Mr Palfreyman—That is correct. Senator FAULKNER—the partners of delegates who might attend, how many of those; and the full range of support staff that will be travelling from Australia to London to provide support for the delegation. Mr Palfreyman—Certainly. Senator FAULKNER—No other costs, as you understand it, are being borne by DOCITA or the national council? Mr Palfreyman—That is correct. Senator FAULKNER—Has that draft program now been submitted to the Department of the Prime Minister and Cabinet for its consideration? Mr Palfreyman—Yes, they have the draft program. Senator FAULKNER—That has been approved by the board of the national council, has it? Mr Palfreyman—It has been approved as a draft. Senator FAULKNER—But, in that ‘it has been approved as a draft’, it has been submitted as a draft, hasn’t it? Mr Palfreyman—That is correct. Senator FAULKNER—So, effectively, it has been approved? Mr Palfreyman—That is correct. The point about it, getting back to your earlier comment, is that it is a draft program and has not yet been fully finalised. Senator FAULKNER—Yes, but the national council, as I understand it, was asked to submit a draft program. Mr Palfreyman—Yes. Senator FAULKNER—So that is what they have done. Mr Palfreyman—That is what they have done, yes. Senator FAULKNER—The board has ticked off on that? Mr Palfreyman—Yes. Senator FAULKNER—And that has gone forward to the Department of the Prime Min- ister and Cabinet? Mr Palfreyman—That is correct. Senator FAULKNER—Do we know what the next step is? Mr Palfreyman—It has yet to be formally considered by the IDC, although it is currently with Prime Minister and Cabinet. So there would need to be some sign-off there and obviously a sign-off in the Prime Minister's office. Senator FAULKNER—What about the cricket match; where is that up to? I appreciate that they have not bowled the opening over tonight, but I mean in a planning sense.

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Mr Palfreyman—No cricket match at this stage. Senator FAULKNER—At this stage? Mr Palfreyman—It is unlikely that there will be. Senator FAULKNER—So that might fall off the program? Mr Palfreyman—It is not on the program at the present time. Senator FAULKNER—So it might not fall onto the program? Mr Palfreyman—Yes. From what I am advised, I think it is effectively off. Senator FAULKNER—Did the national council have any discussions with any cricket authorities in the United Kingdom about the possibility of having a cricket match? I want to follow through what you mentioned there, Minister; we will find this out for you. Mr Palfreyman—There were no discussions with organisations in the UK, but there was discussion with the Australian Cricket Board here. Senator FAULKNER—So how far did they progress? Mr Palfreyman—Both cricket boards here and in the UK were amenable to the idea. However, it has proved difficult to program it bearing in mind that both countries have international commitments. Senator FAULKNER—Was this an idea of the national council? Mr Palfreyman—Yes. Senator FAULKNER—And it is the national council which had discussions with the ACB? Mr Palfreyman—That is correct. Senator FAULKNER—Are negotiations on ice now? Is that what you are really saying to us? Mr Palfreyman—Yes. I think it has proved to be just too difficult. Senator FAULKNER—Because what was looked at was some sort of international level match. Would that be right? Mr Palfreyman—Initially it was an international match between Australia and England. They then looked at a prime ministerial match, but I am told that, because of England's commitments with the West Indies, both proved not to be possible. Senator FAULKNER—Did the national council communicate to the ACB that it did not want to proceed with this or did the cricket authorities indicate to the national council that this was becoming difficult to organise? Mr Palfreyman—We do not have the answer. We will take it on notice. Senator FAULKNER—Would you please take on notice for me whether there was an approach from the national council or any other Commonwealth government authority or agency to cricket authorities, the ACB, the English Cricket Board or whomever else you might have been discussing these matters with, in the United Kingdom? I would be interested to know the nature of such an approach, if it took place, and when that occurred. Mr Palfreyman—Certainly. Senator FAULKNER—Thank you for that. We will probably be having a look at this at a later stage, but not tonight. It is an important enough issue for us to address in the next round of estimates. I thought I might just flag that with Mr Brown, who might take that back to the

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 233 officers of the national council and indicate that the next time we meet – hopefully not at this time of night – we will be able to have a look at this in some detail so we can try to nail down what might be happening. Mr Palfreyman—Certainly. Senator FAULKNER—Mr Chairman, I have some questions on a part of output 1.1 of outcome 1. CHAIR—Which group do you wish? Senator FAULKNER—I suspect that this is also in Mr Palfreyman’s area. Mr Palfreyman—What is it, Senator? Senator FAULKNER— I want to ask some questions about the FCHP program. Mr Palfreyman—Yes. Senator FAULKNER—I am pleased that you have the Auditor-General’s report because there are one or two paragraphs in that report that I wish to draw your attention to. We might complete this line of questioning a little quicker as you have the primary document before you. I will take you to paragraphs 2.43 and 2.44 of the Auditor-General’s report. This refers to a change in the originally agreed guidelines for the FCHP, which required departments to jointly prepare recommendations for ministers to permit departments to present ministers with a list of projects from which to select. I specifically draw your attention to paragraph 2.44. It says: It is not clear why there was a change in the approved arrangements where the FTG was to put reces- sion to the Ministers. The Auditor cites DOCITA as advising, ‘that this was a result of a decision by the Reference Group’. Senator FAULKNER—I did ask the Department of the Environment and Heritage members of the reference group about this and they did not know anything about it when I ques- tioned them yesterday, so I wonder if DOCITA could shed a little light on this. Mr Palfreyman—Before I talk about 2.43, can I refer you to 2.44, where it says: The Department advised that it is their understanding that there was no change in the process established in the guidelines approved by the Prime Minister on 14 May 1998. It says in fact there was no intention for departmental officers to recommend specific projects to ministers. All along it was intended that there would be some ranking scheme, and the actual scheme that was decided upon was that referred to in 2.43. I am making that point because there was no conscious decision on the part of the reference group not to prepare specific recommendations and change to a ranking system; it was the fact that they designed and decided on a ranking scheme at that time. Senator FAULKNER—Who are the DOCITA representatives on the reference group? Mr Palfreyman—The reference group really comprised two officers, one from our department and one from Environment at SES level. Senator FAULKNER—That is a little different from the evidence that we had yesterday. The Department of the Environment and Heritage said there were three representatives. Mr Palfreyman—Sorry, I have just been corrected: there were in fact two from DOCITA and one from Environment. Senator FAULKNER—This is the reference group? Mr Palfreyman—Yes.

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Senator FAULKNER—I might be mistaken but my recollection from yesterday is that there were three from the department of the environment on the reference group. Mr Palfreyman—I beg your pardon, Senator. Senator FAULKNER—My recollection yesterday was that the reference group comprised Ms Sullivan from AHC, Dr Reville and one other from the department of the environment – Mr Babington, I think. Is that not right? I do not have the minutes of course. I am relying on memory, which is always risky. Mr Palfreyman—The core group that met continuously, I think about every fortnight, really comprised the two officers I mentioned plus one officer from Environment. Sometimes they were joined by other people. In fact, of the meetings, I probably went along at least a couple of times. I think it was the same thing with Sharon Sullivan from Environment. Senator FAULKNER—Were you on the reference group yourself? Mr Palfreyman—Not formally, although I did attend some meetings. Senator FAULKNER—Who were the DOCITA representatives on the reference group? Mr Palfreyman—Mr Les Neilson and Ms Jen Levy. Senator FAULKNER—In 2.43, we have DOCITA advising that this changed approach was a result of a decision by the reference group. Were there formal minutes of the reference group? Mr Palfreyman—No, there were not. Senator FAULKNER—So how did decisions of the reference group get recorded? Mr Palfreyman—While there were no formal minutes of those meetings kept, they were attended by officers comprising the FTG – the group that was set up to do it – and they would relay the outcomes of those meetings. Senator FAULKNER—Were notes kept? Mr Palfreyman—No formal notes. I cannot answer whether hand notes and so forth were kept. I will take that on notice. Senator FAULKNER—Is this normally the way administrative practice with reference groups works? Mr Palfreyman—I think that the group was actually quite small and so I think it was seen as an efficient way of operating. People would have meetings, there would be others from the FTG that were involved and they would just go back and implement it. Senator FAULKNER—But on this particular issue, as an example – I heard what you said before: The revised guidelines approved by the Prime Minister in mid-May 1998 envisaged the responsible Departments would jointly prepare recommendations along those lines − as outlined earlier here, strongly recommended, recommended and not recommended – for consideration by the ministers. I assume what the Auditor-General has reported there in 2.42 is correct; is that right? Mr Palfreyman—Yes. Senator FAULKNER—The Auditor-General goes on and says:

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However, rather than presenting the Ministers with a set of recommendations, as was originally envisaged, the FTG presented as list of projects that rated 15 points and over from which the Ministers could select their preferred projects. I think you have told us that is correct. Mr Palfreyman—Yes. Senator FAULKNER—Then the Auditor-General says: DOCITA advised that this was the result of a decision by the Reference Group. I assume that is correct. Mr Palfreyman—In my previous remarks I tried to explain that, in the mind of the group, they always had in mind a ranking system. In fact, if you go to the beginning of paragraph 2.42, there are three categories: strongly recommended, recommended and not recommended. Senator FAULKNER—Yes. That is the original draft administrative arrangement. Mr Palfreyman—That is correct. But what I am trying to convey to you is that the group always had in mind that they would have a ranking system. Senator FAULKNER—I understand. Mr Palfreyman—What I am saying to you is that, on the basis that that is what they had in mind, they in fact developed four categories rather than three. Senator FAULKNER—I understand that and I accept what is reported there by the Audi- tor-General and you have been able to confirm that. But I am actually going to the next paragraph and trying to focus in on this. The Auditor-General tells us that, rather than going with the processes originally envisaged: ... the FTG presented as list of projects that rated 15 points and over from which the Ministers could select their preferred projects We understand and you have accepted that that is the case. It is the next part of the operation I am trying to focus on: DOCITA advised that this was the result of a decision by the Reference Group. For these decisions, there are no minutes of the reference group. I think that is correct, is it not? Mr Palfreyman—That is correct. Senator FAULKNER—There are probably no notes. There are certainly no formal notes. I think that is correct. Mr Palfreyman—Yes. Senator FAULKNER—All I am grappling with is just trying to understand how a decision of the reference group would be recorded. I do not understand enough about this, but I assume it cannot all happen by osmosis. That is what I am trying to understand. Mr Palfreyman—The reference group had a discussion about a rating system, and as a result of that discussion and exchange of views officers went back and developed this four- ranking system. Senator FAULKNER—So it was not a decision of the reference group; it was something that arose out of a confab at the reference group. Mr Palfreyman—When you look at the decision in this context, perhaps it is a bit strong. The reference group talked about a ranking system along these lines and as a result of that officers in the FTG went ahead and developed it.

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Senator FAULKNER—Did the Auditor-General ask the department whether minutes were taken of the reference group or how decisions were recorded? Mr Palfreyman—The answer is no, Senator. Senator FAULKNER—Can you tell me whose initiative it was to give ministers a pool of projects from which to select instead of making recommendations? I am just trying to crystal- lise the nub of the difference here. I wonder where the initiative came from. Mr Palfreyman—My understanding was that there was no decision to go from the question of recommendations to a ranking system. As I tried to explain, I think that people had in their minds that a ranking system was what was required and then moved to develop one. Senator FAULKNER—But did ministers, for example, advise informally that they would like to see a change of process here? Mr Palfreyman—I think the report makes this point a little later on, in 2.43. The ministers signed off on this process on 9 July. In the advice that went to ministers it was just a ranking system, the ranking system that had been developed. There was nothing in that advice to ministers which says, ‘We have taken this conscious decision, will you endorse it?’ Neither was there any request from ministers to have a change made. In other words, this ranking system that had been developed by the working group was embedded in the note that went to the minister. Senator FAULKNER—I ask you to go to 2.41 in the Auditor-General's report. The Audi- tor-General said: Unlike other major grant programs administered by DOCITA and DOEH, such as Networking the Na- tion and the Natural Heritage Trust, the FTG did not make recommendations to Ministers but rather provided a list of projects for Ministers to choose from. Can anyone from the department explain to me why DOCITA decided to put recommendations to the minister in relation to Networking the Nation, yet there is a different course in relation to the FCHP? Mr Palfreyman—There was no conscious decision in terms of doing it differently. It was really done because it was our understanding that that was what was required. Senator FAULKNER—Who put up the note to ministers on 9 July 1998? Mr Palfreyman—Mr Les Neilson. Senator FAULKNER—You will appreciate, Mr Palfreyman, there are some matters here that I would like to take further, but I am limiting myself to matters that I think I can reasonably ask you in the absence of the minister. I think you would be aware that I do not like plac- ing officers in an invidious position. I am trying to keep any political colour out of this and just limit my questions. It is very difficult, I must say to Senator Herron, to do this. Senator Herron—I understand, Senator Faulkner, having known you for some years. I appreciate your constraint. Senator FAULKNER—We will stick to administrative process here. There are, nevertheless, Mr Palfreyman, some matters you can assist us with and we will leave the political argument for another day. Minister, I just wanted to put that on the record. Do not think that I am going soft. Senator Herron—I would never suggest that, Senator Faulkner. It would not do your image any good.

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Senator FAULKNER—I have a pretty soft image anyway, but I would not want it to be any softer. CHAIR—You mean your mother thinks you’re a softie? Senator FAULKNER—I am sure she would if she was still with us. CHAIR—My apologies. Senator FAULKNER—Can I go to page 29 of the report. I want to ask a couple of questions about the time frame for applications, just to identify it. The Auditor-General outlines how the originally proposed timetable was changed. The two departments and PM&C all originally proposed that three months be allowed for the preparation of submissions and two months for the departmental assessment of proposals and preparation of recommendations for ministers. Can I take you to 2.14 on page 29, Mr Palfreyman: The timetables reflect the minimum time required to deliver supportable outcomes ... Any substantial reduction of the timetables (say by one or two months) would place additional pressure on both the assessment and application processes ... These timetables in fact were changed: the time for preparation of submissions was shortened to one month, that is, it was reduced by two months to one month – a very significant reduction – and preparation for so-called departmental recommendations was reduced to six weeks. Can DOCITA confirm that this initiative did come from ministers? Mr Palfreyman—Yes. Senator FAULKNER—You may be aware, Mr Palfreyman, that Senator Hill acknowledged that in the estimates for the Department of the Environment and Heritage. CHAIR—He did, yesterday. Senator FAULKNER—Yes. Did DOCITA change its view about the original timetable being ‘the minimum time required to deliver supportable outcomes’? Mr Palfreyman—The answer to your question is that along with the tighter deadlines there was some streamlining of the process which made it possible. Perhaps I could give you a couple of examples where that was the case. In the original program, the timetable in 2.13 was based on an application based system inviting applications in the press. The program as finally agreed used a nomination system, which is outlined earlier in the report, which greatly restricted the volume of potential applications. The processing time was cut from eight to six weeks and the application closing date was also brought forward. I am being corrected by my colleague on the volume of applications. The point I think we are trying to make is that the volume of applications that we received, that is, 741, to a total value of $1.5 million, indicated that there were many proposals around worthy of consideration. Senator FAULKNER—We got advice, though, that says that the timetables reflect the minimum time required to deliver supportable outcomes. My question is: was there a change of departmental view about the original timetable being ‘the minimum time required to deliver supportable outcomes’? That was the view of the department at the time of that previous advice. Mr Palfreyman—I think that the changes in the arrangement that were made under the process that was finally decided on, plus the fact that we probably put a few more resources into it, meant that it was doable.

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Senator FAULKNER—But the original advice talked about a minimum time to deliver supportable outcomes. Doable is a little different from delivering supportable outcomes, is it not? Mr Palfreyman—The results show that we did deliver that and we delivered it on time. Senator FAULKNER—The question is whether the outcomes are supportable or not supportable. As you probably appreciate from reading evidence at a previous estimates committee, that is what I have been trying to establish. On this occasion I am not in a position to be able to have an interchange with the minister, so I am limiting myself to trying to understand if, and when, the department changed its mind about the original timetable being ‘the minimum time required to deliver supportable outcomes’. The ‘minimum time required to deliver supportable outcomes’ was massively reduced: the timetable was massively truncated. There was not just a little bit lopped off; there was a huge reduction. That is why I ask the question. I am only asking about the departmental perspective. Mr Palfreyman—Yes, I understand. I am only giving you a departmental perspective. As I say, with those changes that were made to the arrangements, I think we did deliver what we were asked to do in a very supportable way. There is nothing in the Auditor-General’s report that suggests that the outcomes were not supportable. Senator FAULKNER—Again, that is a matter for political debate. I will not enter into that. The report deals, in paragraph 4.7 and from page 60 onwards, with the caretaker conventions. Can you outline for me the department’s understanding of the caretaker conventions as they apply to announcements of decisions in the course of an election campaign? CHAIR—Is that a fair question for Mr Palfreyman? Senator FAULKNER—I think it is. The matter of caretaker conventions is fundamentally one for departments to provide advice on. We know from the report that the Federation task group sought advice from both DOCITA’s legal section and PM&C. I think it is entirely proper. In fact, PM&C are the – CHAIR—I am sure it is proper, but should it be directed to Mr Stevens? He is not here. Senator FAULKNER—I would love to direct it to Mr Stevens, but all I can see is Mr Stevens’s empty chair. It is a bit hard to direct it to Mr Stevens because he is not here. CHAIR—It would not be unreasonable for Mr Palfreyman to put it on notice for Mr Stev- ens to answer it. Mr Palfreyman—It is as is stated in the report, in paragraph 4.7. Senator FAULKNER—Can you tell me why the Federation task group sought advice on this issue from DOCITA’s legal section and the Department of the Prime Minister and Cabi- net? Mr Palfreyman—It was a matter on which the FTG sought advice because they did not have relevant expertise themselves. They sent it to our legal area and to Prime Minister and Cabinet. Senator FAULKNER—Was the advice consistent in both areas? Mr Palfreyman—Yes, it was. Senator FAULKNER—Did the advice that was forwarded to the minister’s office on 13 August – I think I am referring to paragraph 4.10 –make it clear that both PM&C and DOCITA’s own legal section were of the view that FCHP grants were significant initiatives and, therefore, should not be announced in the caretaker period?

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CHAIR—Senator Faulkner, I think these are questions that should go to Mr Stevens or the minister. The agreement for these estimates tonight in the absence of the minister and Mr Stevens was that we would not get into political areas. Senator FAULKNER—There is nothing political about it. In fact, I suspect that Mr Stev- ens probably would not even know. You do not have the advantage of having the report in front of you, but we are talking about caretaker conventions here. Nothing could be more anodyne, frankly. CHAIR—Nevertheless, in this context the caretaker conventions are sensitive matters. Senator FAULKNER—I am not talking about ministers’ reactions; I am just talking about advice on the caretaker convention. It is pretty well canvassed in the report. Mr Palfreyman—In any event, Senator, I would need to take it on notice and check the advice. Senator FAULKNER—If you could, I would appreciate it. Do you know whether anyone pointed out to ministers the convention that, where significant decisions or announcements are proposed in the caretaker period, ministers seek the agreement of relevant shadow ministers? Mr Palfreyman—I would need to check the advice, Senator. Senator FAULKNER—You will take that on notice? Mr Palfreyman—Yes. Senator FAULKNER—Do you know what the response was of ministers or ministerial staff to the advice on the caretaker conventions? Mr Palfreyman—I would need to take that on notice. Senator FAULKNER—I take you to paragraph 4.11. It states that decisions on the timing of the announcements of successful and unsuccessful applications were made by the ministers. That is pretty clear. There was no departmental involvement in that at all, I assume. It says categorically in this report that decisions on timing were made by ministers. You can confirm that for us, Mr Palfreyman? Mr Palfreyman—Yes, Senator. Senator FAULKNER—It states: The draft information and application kit prepared by the FTG for the Ministers’ approval outlined a timetable that included the announcement of successful applications. It goes on to say: A file note prepared by the FTG on 25 May 1998 noted that, at the request of the Minister for Commu- nications’ office, all reference to the timing of the decision-making process be removed to enable Min- isters maximum flexibility in the timing of the announcement of decisions. Do you have that file note handy perchance? Mr Palfreyman—No, Senator. Senator FAULKNER—On this occasion there was a note coming from the FTG, as opposed to the reference group. Is that the administrative point that you would make to me? Mr Palfreyman—The FTG was the group of officials working on it. We had more senior officials oversighting it. Senator FAULKNER—As opposed to the reference group, it would not be an uncommon thing to have a file note prepared by the Federation task group.

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Mr Palfreyman—No, it is not uncommon. Senator FAULKNER—That is fair enough. Here is one noting that, at the request of the minister for communication’s office, ‘all reference to the timing of the decision-making process be removed to enable Ministers maximum flexibility in the timing of the announcement of decisions’. There is such a strong interface here with the caretaker convention. Mr Palfreyman—Is that a question? Senator FAULKNER—I am asking whether you understand that there is a strong interface here with the caretaker convention. Mr Palfreyman—I point out that the file note was prepared on 25 May. Senator FAULKNER—I appreciate that. It is prepared on 25 May 1998 as a timetable for the grants. This particular process is, as we know, a matter of serious consideration within government, and we also know that an election campaign is going to be held some time before the end of that calender year. Mr Palfreyman—The sentence you referred to was quite consistent with the first sentence in that paragraph 4.11, and ministers’ offices were advised of the caretaker convention. Senator FAULKNER—Let me take you back to paragraph 4.9 PM&C emphasised that, if any announcements were made after an election had been called, the De- partment could not provide assistance and Commonwealth funds could not be used for any purposes associated with announcements. Do you know how many announcements were made after the 1998 election was called? Mr Palfreyman—Yes, it is in the report − 32 were made. Senator FAULKNER—Can I be assured that no departmental resources were used − Mr Palfreyman—Yes. Senator FAULKNER—Or that no Commonwealth funds were used for any purpose associated with those announcements? Mr Palfreyman—Not that I am aware of. Senator FAULKNER—I assume you would be aware of it if it had occurred. Mr Palfreyman—Yes. Senator FAULKNER—So there was no assistance in any way for the announcement of those 32 projects? Mr Palfreyman—No. Senator FAULKNER—Did the department engage the minister for communications on his request that ‘all reference to the timing of the decision-making process be removed to enable Ministers maximum flexibility in the timing of the announcement of decisions’? Mr Palfreyman—I think not, but I will check. Senator FAULKNER—I would appreciate it if you checked and indicated to the committee what ensued. Could you take that on notice? Mr Palfreyman—Yes. Senator FAULKNER—In paragraph 2.36, the Auditor-General deals with the question of late applications and the fact that the published guidelines state that no late applications will be accepted. Of course, they were accepted and, in fact, one was approved − the Tuggeranong Homestead. Is that correct?

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Mr Palfreyman—Yes. Senator FAULKNER—This was initiated by the reference group if you look at paragraph 2.38: The FTG acting on advice from the reference group assessed all late applications. Was this a decision of the reference group? Mr Palfreyman—Yes. Senator FAULKNER—Do you know how that was recorded and communicated, if it was recorded? Mr Palfreyman—I would need to check the record. Senator FAULKNER—We still have this situation where no notes are taken or minutes kept at the reference group. That did not change, I assume. Mr Palfreyman—No, but I said I would check the note generally. I simply cannot answer the question whether this was recorded or not. I do not have that detail. Senator FAULKNER—We know that no minutes were taken of the reference group and we know that no formal notes were kept, so at best it might be an informal note. Do you know whether the Auditor-General asked the department in relation to this matter how the reference group advice was passed on to the Federation task group? Mr Palfreyman—No. Senator FAULKNER—Is the department able to justify this particular change to the published guidelines? Mr Palfreyman—I think the report makes the point that we did not want to be overly bu- reaucratic. I can think of three reasons why we adopted this approach. The first was that there were some applications that had been completed but had not been signed off by nominees, I think there was another situation where there was an election in Queensland and a new government there and I think there were some floods in Victoria. Senator FAULKNER—Did the department react to the Auditor-General’s view that the reasons given for the late applications ‘would seem difficult to describe as exceptional circumstances’? Mr Palfreyman—I think that we have noted what the Auditor-General said on that. Senator FAULKNER—Were any applications ruled ineligible on account of their late lodgment? Mr Palfreyman—No. Senator FAULKNER—Some were ruled in and some were ruled out, were they not? Mr Palfreyman—Ruled out of what? Senator FAULKNER—Were some applications ruled in and some applications ruled out? Mr Palfreyman—I am sorry, Senator, I do not understand the point you are making. Senator FAULKNER—You say to me that no applications were ruled ineligible on account of their late lodgment. Mr Palfreyman—Yes. Senator FAULKNER—But were all applications ruled eligible? Mr Palfreyman—There were some applications ruled ineligible, but not because of their lateness.

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Senator FAULKNER—So you have a situation where some applications were ruled ineligible, but the guidelines said that no late applications would be ruled eligible. This is the point I am making. It is not as if everything is in. You have a certain number of applications ruled ineligible and the guidelines saying that late applications will be ruled ineligible. The late applications are in and one of them is approved, but there are still other applications ruled ineligible. That does seem to be rather inconsistent. Mr Palfreyman—The reason that some projects were ruled ineligible is that they were programs which did not fit the guidelines – for example, swimming pools. Senator FAULKNER—But the guidelines said that no late applications would be received. They did not fit the guidelines either. Mr Palfreyman—I understand the point you are making, Senator. Senator FAULKNER—That is the point I am making. Mr Palfreyman—Yes, I understand the point you make. I said a little earlier that the department notes what the Auditor-General has said. Senator FAULKNER—Were there any departmental concerns about the unfairness of allowing late applications? Mr Palfreyman—I do not think so at the time. Senator FAULKNER—But there are now? Mr Palfreyman—As I say, we think that the Auditor-General has a point to make there. Senator FAULKNER—The thing here is – and this is a process issue – there may well have been any number of potential applicants who might have basically given up trying to meet what was an impossibly tight timetable who thought, ‘I am going to be a day late, two days late or a week late. I won’t bother applying.’ Is it reasonable for me or for someone to draw a conclusion that there is an absolute inherent unfairness in this? Do you understand the point I am making? Mr Palfreyman—Yes, and that is why I said that the department believes that the Auditor- General has a point to make there. Senator FAULKNER—They might have made a big effort and got a late application in if they had known it was going to be stamped ‘late’ and put in front of ministers and been assessed in the same way that other applications were assessed. Senator Herron—Senator Faulkner, we have an agreement to finish at 10 o'clock. Senator FAULKNER—I had an agreement to go to Melbourne at 10 to seven. Senator Herron—That was the agreement reached earlier in the day. I merely bring it to your attention because I do not know whether Senator Lundy has any more questions to ask. Senator FAULKNER—We will keep battling on, Minister. We are going all right – don’t worry. Senator Herron—I am not worried. Senator FAULKNER—I have not even asked Mr Palfreyman about this, but for some reason officers who may have some more information than Mr Palfreyman are not sitting at the table. I have not raised this, but you have seen this and you would appreciate that it tends to elongate the time. Senator Herron—The original timetable was to finish at 5.30 p.m.

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Senator FAULKNER—Okay, but the trouble is that a question is taking five or 10 times as long as it otherwise would. I am not critical of that and I had not even raised it until you raised the question of time, but all of us have to understand that sometimes these things slip a little. I have been pretty reasonable about this. Senator Herron—I appreciate your comments. Senator FAULKNER—Let us not waste too much time worrying about that. I will go on to try to finish as quickly as I can. CHAIR—In relation to absent officers, Mr Stevens is at an industry awards conference, to which he was invited three months ago when these estimates were putatively to be held last week. Also, as Senator Herron has said, it was anticipated that these estimates would finish by 5.30 or 6, so he made other plans. Senator FAULKNER—I am not being critical about this. As you know, Mr Chairman, I was expecting to be dealing with this, and I wanted to be doing so well, before the dinner break, but that is not the case. The questioning, which probably would have been well and truly concluded by now, has not been because of other factors. Senator Herron—I appreciate that. Senator FAULKNER—So I am going as quickly as I can. Senator Herron—Thank you. CHAIR—Of course there will be another round of estimates fairly soon and I am sure the minister would be happy to answer your questions in the Senate. Senator FAULKNER—In the circumstances, I can assure you I am keen to knock this one over tonight and we will do so if we bat on. Let us move off that, Mr Palfreyman, because I want to move along here and Senator Herron is getting tired. Senator Herron—That is correct. Senator FAULKNER—You have always looked after our interests in these late night sit- tings. Senator Herron—I have been consistent. Senator FAULKNER—Can I take you to 2.63, Mr Palfreyman. This is on the question of that part of the assessment process that was undertaken by ministers. Here we have the statement: FTG staff were on standby to assist in the assessment of applications by ministers and their staff but were not called on to assist. As you may know, this was also raised at the Environment estimates. My question to you, Mr Palfreyman, is just a process one of whether this statement of staff being on standby refers only to the day on which the final departmental submission was sent to ministers, which was 14 August, or to the whole period during which ministers were making their selection. That is the two-week period from 14 August to 28 August. Mr Palfreyman—I think the reference ‘were on standby’ refers to the weekend of the 15th and the 16th. They were to answer any initial queries that ministers might have on the documentation that was passed across on the 14th. Senator FAULKNER—Was there any expectation on the part of the task group that they would be consulted? Mr Palfreyman—No, they were just on call.

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Senator FAULKNER—There were no expectations about that at all? Mr Palfreyman—No. Senator FAULKNER—Wouldn’t that be normal practice? Mr Palfreyman—Sorry, what would be normal practice? Senator FAULKNER—For ministers to consult staff in a situation where ministers made so many selections that were at variance with departmental proposals. CHAIR—With respect, did we not get answers to this very question yesterday? Senator FAULKNER—I did not ask it, to be honest, Mr Chairman. CHAIR—I thought there was one. Senator FAULKNER—Yes, but I was asking Senator Hill about something there. Now, because the minister is not at the table, I am asking the departmental officer about the departmental perspective. That is reasonable. CHAIR—I thought departmental officials provided an answer yesterday. Nevertheless, you may press ahead. Mr Palfreyman—Sorry, Senator Faulkner, are you expecting an answer? Senator FAULKNER—I was hoping for one. Mr Palfreyman—There was a lot of material sent across. It was not only the original thing but there was additional material that went across. Our people were on call, and it is really up to ministers. I cannot really go any further than that. Senator FAULKNER—I understand that. When I say ‘understand that’ I realise you would probably prefer to leave it there, and that is fair enough. The situation is, as you make the point, that there is an awful lot of material over there with the ministers whether we get to the 14th or the weekend of the 15th and 16th . It is true, as you made the point, that there is a lot of material before ministers. That is a fair comment, is it not? Mr Palfreyman—Yes. Senator FAULKNER—There are departmental officers on call if necessary, at the call of ministers if required? Mr Palfreyman—Yes. Senator FAULKNER—So was there any consultation by ministers with DOCITA or the FTG during that period? Mr Palfreyman—There could have been requests for information but I would need to check that. Senator FAULKNER—There could have been? Mr Palfreyman—Yes. Senator FAULKNER—Apart from a possible request for information, was there any other contact? Mr Palfreyman—I can say generally that the departmental officials were not involved in the assessment process. There may have been queries on this or queries on that and there may have been requests for information, but any substantial departmental involvement in the assessment process did not occur. Senator FAULKNER—I appreciate that. I ask you to take on notice, given that there is a little qualification in the answer you have given about the possibility of supplementary infor-

ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Thursday, 10 February 2000 SENATE—Legislation ECITA 245 mation – and I appreciate the relevant officers may not be here – if there was any contact or consultation with the department during this period going to phone calls, emails, requests for supplementary information or other types of communication. Perhaps I can ask you to take that on notice so we get a clear answer. That might be the best way of dealing with it. Mr Palfreyman—Yes. Senator FAULKNER—Thank you very much. Perhaps you could tell me if there was surprise in the task group about the fact that this was being handled by ministers and there was not a departmental involvement. Mr Palfreyman—I do not care to comment on that. Senator FAULKNER—Fair enough. Paragraph 2.91 in the report says: The FTG provided comments to the ministers on five of the individual project assessment reports on the viability of providing part funding. The Auditor-General goes on to say that better practice suggests that, where a decision is made to offer a smaller grant than requested, decision makers not only address the viability question but also document the reasons behind their decisions. Can I ask if the FTG responded to a request from ministers? Mr Palfreyman—I would really need to check the record. Senator FAULKNER—In relation to the task group's comments there, could you check where the initiative came from in relation to that, when requests were made, who the requests came from, how the comments were provided to ministers’ offices and when they were provided. I would appreciate that, Mr Palfreyman. I assume those are issues you cannot canvass now. Mr Palfreyman—No. Senator FAULKNER—Could you take those on notice, then? I go back to paragraph 2.63. It says: The Ministers’ offices requested copies of all applications and supporting documentation and these were provided on the same day. When were initial assessments provided to ministers’ offices in relation to this? This is dealing with ministers’ offices requesting copies of all applications and supporting documentation. I suppose I am wondering whether there is a distinction here and, if so, whether you could provide any information on that. Mr Palfreyman—Distinction between what, Senator? Senator FAULKNER—Copies of all applications and any initial assessments or material. Or did it all go over in a job lot, I suppose is what I am asking. Mr Palfreyman—Yes, it did. Senator FAULKNER—The lot? Mr Palfreyman—Yes. Senator FAULKNER—So there was no preliminary departmental or task group advice? Mr Palfreyman—The minute of 14 August went across with individual assessments and ratings, and then later the minister’s office requested copies of all the applications and supporting documents. Senator FAULKNER—The minute is referred to in 2.62.

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Mr Palfreyman—That is right. Senator FAULKNER—The minister’s office request as in 2.63 was made on what date? Mr Palfreyman—It went the same day as the minute of the 14th. Senator FAULKNER—And did you know how the request was communicated by the minister’s office to the department, in other words the request for the copies of all applications and supporting documentation? Just the method of communication is all I am asking you. Mr Palfreyman—Probably telephone. Senator FAULKNER—I am not surprised to hear that, but could you take that on notice so that we can remove the qualification? I thought it probably would be telephone, but just so I can understand. When did the department learn that ministers had selected 16 projects that did not make the 15-point threshold? Mr Palfreyman—That would have been following the Prime Minister’s decision on the 60 projects. Senator FAULKNER—So the department has no involvement until the Prime Minister ticks off on this? Mr Palfreyman—Yes. Senator FAULKNER—The Prime Minister, of course, signs off on the minister’s decisions. How was this communicated to the department? Mr Palfreyman—From the Department of the Prime Minister and Cabinet. Senator FAULKNER—When did that occur? Mr Palfreyman—On either 1 or 2 September. Senator FAULKNER—The date is actually of some interest to me here. I wondered if you could be more precise. Mr Palfreyman—I do not think I can. We will check it for you. Senator FAULKNER—All right, you will check the date. I would appreciate that. I do not normally ask this, but on this one I would like you to tell me the time, also, if you can. Mr Palfreyman—If I can. Senator FAULKNER—There might be a facsimile involved here. Mr Palfreyman—Yes. Senator FAULKNER—I think we are all aware of the sensitivities of the timing and dates here, so we will not go into that in any detail. I would like to know how this was communicated and precisely when it was communicated. Mr Palfreyman—Yes. Senator FAULKNER—And where in the Department of the Prime Minister and Cabinet the department received this from, if possible, if there is still a record. Was the department given any reasons, at any stage, for this outcome? Mr Palfreyman—No. The statement of reasons was forwarded to the department on 5 No- vember. Senator FAULKNER—Did the department seek any reasons for these outcomes? Mr Palfreyman—No, we did not.

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Senator FAULKNER—Did the department conduct any reassessment of its earlier proposals and rankings? Mr Palfreyman—No. It was a decision by the Prime Minister. Senator FAULKNER—Did anyone wonder how you could have 16 projects that did not make the 15-point threshold and in the process eight of the very highly ranked projects of the department were rejected and 41 of the highly ranked projects were rejected? This did not cause any consternation? Mr Palfreyman—I do not believe that there was any discussion about it. Senator FAULKNER—Was there any involvement of the National Council for the Cen- tenary of Federation in this. Were there any inquiries how it was that ministers selected 14 projects that were not even ranked, by the National Council for the Centenary of Federation? Mr Palfreyman—Not to us. Senator FAULKNER—So, as far as the department is concerned, this is an exercise of ministerial and prime ministerial prerogative and that is where it rested? Mr Palfreyman—Yes. Senator FAULKNER—Can I take you to paragraph 2.71, which says: Following a discussion between a DOCITA officer and staff in the Minister for the Environment’s office on 6 October 1998, the Department received a memorandum from the ... two ministers. Who was the DOCITA officer who is referred to in 2.71? Mr Palfreyman—Mr Bill Scott. Senator FAULKNER—Is Mr Bill Scott here? Mr Palfreyman—Yes, he is. Senator FAULKNER—Would Mr Scott be able to come to the table to give us a little bit of background on this? Mr Palfreyman—I would prefer to handle all questions, if that is okay with you. Senator FAULKNER—Let us see how we go. I do not know Mr Scott. I would like to understand the background to this. Mr Scott is a DOCITA officer; is that right? Mr Palfreyman—Yes. Senator FAULKNER—So why did he contact the Minister for the Environment and Heritage? Mr Palfreyman—He did not. Senator FAULKNER—Sorry, the Minister for the Environment and Heritage’s office? I apologise. Mr Palfreyman—He rang to contact Mr Scott to see whether there were any outstanding matters in terms of what they had to do. Senator FAULKNER—Who is ‘they’? Mr Palfreyman—The minister’s officers. They rang to see whether there were any matters outstanding. Senator FAULKNER—About what – the FCHP? Mr Palfreyman—That is correct.

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Senator FAULKNER—But why the Minister for the Environment and Heritage’s office as opposed to the office of the Minister for Communications, Information Technology and the Arts? That was the point of my question. Mr Palfreyman—There was close contact between departmental officials and ministers’ officers, so it was not uncommon for our people to speak to Senator Alston’s office or Minis- ter Hill’s office. Senator FAULKNER—I am sure that is right, but why was this particular communication made? This was after the event. It was a couple of months after decisions were made. I was just wondering why it was Minister Hill and not Minister Alston. Mr Palfreyman—I cannot answer for Minister Hill’s office. I do not know why, particularly, it called. Senator FAULKNER—Hang on. Who made the contact here? Did the DOCITA officer make the contact or did staff in the Minister for the Environment and Heritage’s office make the contact? Mr Palfreyman—I said a little earlier that it was Senator Hill’s office that made contact. Senator FAULKNER—Senator Hill’s office made the contact with the DOCITA officer? Mr Palfreyman—Yes. Senator FAULKNER—So they did this for what reason? I am sorry, I must admit I misunderstood you. I understood the communication to have come the other way. I apologise for that. Can you now outline to me what the purpose of this was? Mr Palfreyman—He asked for a copy of the best practice guidelines and whether there was anything else that needed to be done. Senator FAULKNER—A member of Senator Hill’s staff asked for a copy of the best practice guidelines and whether there was anything else to be done? Mr Palfreyman—Yes. Senator FAULKNER—What did the officer from the Department of Communications, In- formation Technology and the Arts say to him? Mr Palfreyman—He provided him with a copy of the guidelines and reminded him that the statement of reasons was due, which he said he understood. That was all the outstanding matters. Senator FAULKNER—A departmental officer provides advice to the minister’s office that the statement of reasons is required from ministers? Mr Palfreyman—Sorry? Senator FAULKNER—Isn’t that what has happened? A departmental officer from DOCITA advises a member of Senator Hill’s staff that a – Mr Palfreyman—No. He reminded him that the statement of reasons had still to come in from ministers’ offices – or from ministers. Senator FAULKNER—I appreciate that. But that is a departmental officer telling a member of Senator Hill’s staff that this is required. The departmental officer is right. Of course a statement of reasons is required. Mr Palfreyman—He was reminding him that they were still to come in and that was acknowledged.

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Senator FAULKNER—Yes, fair enough. But, Mr Palfreyman, we have just had evidence before this committee from you that a member of Senator Hill’s staff rings up a member of the Federation Task Group two months after the grants for the Federation Cultural and Heritage Projects program have been awarded and asks for the Auditor-General’s best practice guides. Mr Palfreyman—I would not necessarily read anything into that at all. It was a pure request whether he had a copy available. Senator FAULKNER—Minister, let me ask you. Do you not think the Australian public would be a lot more confident if Senator Hill or Senator Alston’s staff had asked for the best practice guide when they were actually making the decisions about this program? Senator Herron—I am sure the Australian public have great confidence in Senator Hill and Senator Alston, whatever actions they took. Senator FAULKNER—Just listen to what I am saying. Senator Herron—I am taking your point. I did listen to what you said. I am just replying in kind. Senator FAULKNER—I do not want to engage the departmental officer – Senator Herron—No; you are making an assertion that is not sustainable. It is your interpretation. I do not agree with it. Senator FAULKNER—Let me ask you, Senator Herron. You have heard the evidence that a member of Senator Hill’s staff rings an officer in the Department of Communications, In- formation Technology and the Arts, asks for a copy of the Auditor-General’s best practice guide to the administration of grants and asks the officer if there is anything else that needs to be done. The officer, very properly, informs the minister’s office that the ministers are required to provide a statement of reasons for decisions. I have got to say to you, Minister: do you not find that absolutely remarkable, more than two months after these decisions have been made? Senator Herron—There may well be another explanation. Senator FAULKNER—What is it? Senator Herron—I do not know what the explanation is. You put a hypothetical to me. One such explanation may be that that particular minister’s officer was away and had not been aware. That is one explanation. The second is maybe one had been consulted and this officer was not aware of it. It is a whole hypothetical range of possibilities which you wish to put one particular interpretation on which I do not agree with. I think you ought to get on with your question. Senator FAULKNER—All right. And following that, is it not correct that ministers provide their statement of reasons that afternoon? Senator Herron—As I said, I do not know the detail of what has occurred, obviously. Senator FAULKNER—Let us check the detail with Mr Palfreyman. I make that point to you, Minister, because I do not want to make it to the officer at the table. Senator Herron—Okay. But I believe that there may be explanations other than what you have put – Senator FAULKNER—There will need to be, Minister, or there will be two ministerial resignations. After this contact on 6 October, the ministers’ reasons for decisions were received in the department on what date?

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Mr Palfreyman—5 November. Senator FAULKNER—Could I ask if any member of the Federation Task Group or the task group itself provided assistance in drafting the reasons for decisions. Mr Palfreyman—No, there was no assistance. Senator FAULKNER—None at all? Mr Palfreyman—None at all. Senator FAULKNER—Okay. Let us get the time frame right here. The ministers have made their decisions between 14 and 28 August. Is that correct? Mr Palfreyman—Yes. Senator FAULKNER—It goes to the Prime Minister and you receive a copy of the ministers’ decisions – and, if you like, by this stage it has prime ministerial imprimatur – on what date? Mr Palfreyman—1 or 2 September. Senator FAULKNER—Okay. I said two months but I think it is five weeks after that – is it five or six weeks after that? – that the call is made from Senator Hill’s office to – Mr Palfreyman—6 October. Senator FAULKNER—What is that – five weeks or a bit over five weeks? Mr Palfreyman—About that. Senator FAULKNER—Yes, a bit over five weeks. A bit over five weeks later – this is five weeks after the decisions have been made – Senator Hill’s office contacts the Department of Communications, Information Technology and the Arts to ask for a copy of the Auditor- General’s best practice guide. And about a month after that the statements of reasons are provided. Have I got the right timetable? Mr Palfreyman—Yes, Senator. Senator FAULKNER—Did anyone from the department think to send a copy of the Auditor-General’s best practice guide over there while the ministers were making decisions? Mr Palfreyman—I would need to take that on notice, Senator. Senator FAULKNER—When Senator Hill’s office, on 6 October, asked for the Auditor- General’s best practice guide, that was forwarded to Senator Hill’s office? Mr Palfreyman—A physical copy was not, Senator; he was reminded that it was on the web. Senator FAULKNER—Was any effort made to remind Senator Alston also that this was on the web? Mr Palfreyman—I do not know, Senator; not that I recall. Senator FAULKNER—The reason I ask is that two ministers are involved here. We both appreciate that. Did the department proactively try to contact the office of the Minister for Communications as well? Mr Palfreyman—Not that I am aware. Senator FAULKNER—It was reported by the Auditor-General that contact took place on 6 October 1998. Was the Auditor-General made aware by DOCITA officials that the contact was initiated in Senator Hill’s office?

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CHAIR—I have been advised by the Clerk of Committees that, unfortunately, we do not have a quorum and, accordingly, we have been requested to close this meeeting. Senator FAULKNER—I think we do have a quorum. CHAIR—I am the only full committee member here. There is no ALP member and no other government member here. Apparently, this is the third time this evening that the Clerk of Committees has contacted the secretary of this committee and I feel obliged to accept that advice in this situation. Accordingly, I have no alternative but to adjourn this meeting. Given that, I thank the officers for attending, I thank the minister for attending and I thank Hansard. I believe Senator Lundy may have some questions to put on notice. I would ask her to do so by the close of business next Friday. Committee adjourned at 9.59 p.m.

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