commonwealth of australia official committee … · anderson, ms judy, manager, regulatory...

COMMONWEALTH OF AUSTRALIA

Official Committee Hansard

SENATE ENVIRONMENT, COMMUNICATIONS, INFORMATION

TECHNOLOGY AND THE ARTS REFERENCES COMMITTEE

Reference: Australian telecommunications network

FRIDAY, 6 DECEMBER 2002

CANBERRA

BY AUTHORITY OF THE SENATE

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SENATE

ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY

AND THE ARTS REFERENCES COMMITTEE

Friday, 6 December 2002

Members: Senator Allison (Chair), Senator Tierney (Deputy Chair), Senators Lundy, Mackay, Tchen and Wong

Participating members: Senators Abetz, Bolkus, Boswell, Brown, Buckland, George Campbell, Carr, Chapman, Conroy, Coonan, Eggleston, Chris Evans, Faulkner, Ferguson, Ferris, Harradine, Harris, Knowles, Lees, Mason, McGauran, Murphy, Nettle, Payne and Watson

Senators in attendance: Senators Allison, Lundy, Mackay, Moore and Tchen

Terms of reference for the inquiry:

To inquire into and report on:

(a) the capacity of the Australian telecommunications network, including the public switched telephone network, to deliver adequate services to all Australians, particularly in rural and regional areas;

(b) the capacity of the Australian telecommunications network, including the public switched telephone network, to provide all Australians with reasonable, comparable and equitable access to broadband services;

(c) current investment patterns and future investment requirements to achieve adequacy of services in the Australian telecommunications network;

(d) regulatory or other measures which might be required to bring the Australian telecommunications network up to an adequate level to ensure that all Australians may obtain access to adequate telecommunications services; and

(e) any other matters, including international comparisons, which are deemed relevant to these issues by the Committee.

WITNESSES

ANDERSON, Ms Judy, Manager, Regulatory Strategy, SingTel Optus Pty Ltd................................... 257

McCulloch, Mr David, General Manager, Government Affairs, SingTel Optus Pty Ltd...................... 257

NEEDHAM, Mr Mark, Policy Manager, Telecommunications, National Farmers Federation ........... 271

PARATZ, Mr Lawrence, Regional Managing Director, Southern Region, Telstra CountryWide, Telstra............................................................................................................................................................ 285

PATERSON, Dr Paul Robert, Director, Regulatory, Telstra................................................................... 285

WARREN, Dr Tony, Group Manager, Regulatory Strategy, Telstra ..................................................... 285

Friday, 6 December 2002 SENATE—References ECITA 257

ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS

Committee met at 9.03 a.m. ANDERSON, Ms Judy, Manager, Regulatory Strategy, SingTel Optus Pty Ltd

McCulloch, Mr David, General Manager, Government Affairs, SingTel Optus Pty Ltd

CHAIR—I declare open this public hearing of the Senate Environment, Communications, Information Technology and the Arts References Committee. I welcome everybody here today. Today is the fifth hearing of what is intended to be a comprehensive national program of hearings into the Australian telecommunications network, an inquiry referred to the committee by the Senate on 25 June 2002. It should be stressed that the terms of reference have particular resonance in regional and remote areas. That said by way of general introduction, I now welcome the representatives of Optus. The committee has your submission before it. Are there any alterations or additions you wish to make to that document at this stage?

Mr McCulloch—No, there are not, Senator.

CHAIR—The committee prefers all evidence to be given in public but should you at any stage wish to give your evidence, part of your evidence or answers to specific questions in private, you may ask to do so and the committee will consider your request. Finally, and I will only state this once for the benefit of all witnesses, witnesses are reminded that the evidence given to the committee is protected by parliamentary privilege. I have also been asked by the Senate Committee of Privileges to remind you that the giving of false or misleading evidence to the committee may constitute a contempt of the Senate. Mr McCulloch, I now invite you to make an opening statement, after which we will ask questions.

Mr McCulloch—The overall focus of our submission is on federal government policy directed towards rural communications. Our submission highlights problems and deficiencies we have had in relation to past policies and some decision making processes. We make these complaints not for their own sake but to suggest a path forward. I think it is fair to say that some government programs and decisions do seem to be moving in the right direction. The recent Estens inquiry made some positive recommendations, a couple of which I will highlight in a moment. Optus looks forward to the government’s constructive response to those recommendations and, indeed, to the recommendations that this committee will make in due course.

We would like to comment briefly on the two main issues raised in our submission: firstly, funding policy; and, secondly, the universal service obligation. Before doing that, I would like to outline what Optus is doing, or can do, to provide communications services, particularly in rural, regional and remote Australia. I will do this by reference to Optus’s three operating divisions: firstly, mobiles; secondly, Optus business, which includes our satellite operations as well as the provision of services to all governments; and, thirdly, our consumer and multimedia division, which includes local, long-distance and international calls as well as dial-up broadband Internet and pay TV. In relation to mobiles, we are very much committed to expanding, to the extent that it is commercially feasible, our GSM mobile network, which currently covers 94 per cent of the Australian population. Over the next two years, we are building 518 base stations. Forty-three per cent of these will be built in regional and rural areas.

Satellite is the best technology to provide many communication services in a country as vast as Australia. Optus is the only company operating in Australia that owns its own satellites. We

ECITA 258 SENATE—References Friday, 6 December 2002


have three satellites in orbit and we are launching a fourth satellite early next year. Our satellites provide remote area broadcasting, free-to-air television and pay TV for both Foxtel and Austar customers; however, the jewel in terms of satellite capabilities lies in delivering broadband data and value added services such as interactive distance learning. Many of Optus’s activities in this respect are taking place in partnerships with state and territory governments—for example, we are delivering satellite broadband services to 47,000 school students in remote and rural New South Wales and the Northern Territory and we provide communications services via satellite to regional police stations in Western Australia.

The government partnership theme extends beyond satellites to all delivery platforms. With a number of Australian governments, we are working to deliver better competitive communications services to regional areas. A number of governments are being quite creative in the way they leverage their requirement for telecommunication services to get those services into regional areas. In relation to our consumer services we provide local, long-distance and international calls to all Australians; however, for regional customers, we inevitably resell Telstra’s local service.

As our submission highlights, we unsuccessfully bid to provide local calls via satellite to those 40,000 people in the most remote parts of the country. This was our only real opportunity to provide directly connected local services in regional areas. As I will discuss shortly, the fact that Optus is required to pay $40 million per annum to Telstra as part of the USO arrangements acts as a disincentive to our providing rural services generally.

Finally, our telephony and data traffic is conveyed on our backbone fibre network. This stretches 8,400 kilometres from Perth through to Cairns. This also brings competitive infrastructure to many towns. That outlines our capabilities. I will briefly highlight the two policy areas of funding and the universal service obligation, and my colleague Judy Anderson will then talk briefly on the universal service obligation.

I would like to look at the framework for the future. In that respect, the key point for Optus, and for consumers, is to ensure that funding for rural communications is designed in a way that does not simply lock in the dominance of the incumbent. That means that the government needs to think very carefully about competition consequences of its policies and decisions as well as positive mechanisms that promote new players and new technologies. We are seeing significant steps in the right direction. I think the best example of this is the National Communications Fund, which came out of the Besley inquiry. It provided $50 million for health and education communication services. It encouraged partnerships between carriers, state and territory governments and industry groups. It promoted large projects and operated in a way that was genuinely contestable.

Eight very significant projects have been funded from the NCF, and Optus are very pleased to be leading a consortium with the New South Wales and Northern Territory governments to be providing services under the fund. We will be providing interactive distance learning to remote School of the Air students and school students in New South Wales and the Northern Territory. The service will be delivered by satellite. It means that School of the Air students, instead of talking to their teacher by an outdated HF radio system, will sit in front of a computer. They will see and interact with their teacher. Complex concepts can be taught using visual demonstration as well as verbal explanation. This presents a quantum leap in the way remote students will be



taught. The NCF model has been endorsed by the Estens inquiry, and we think that NCF mark II is a desirable policy goal that should be adopted by the government.

More broadly, our submission goes into detail in relation to designer funding mechanisms going forward in a way that will promote competition and new technologies. We have some particular views, expanding on the points in our submission, relating to funding for mobile coverage, particularly the balance between government support and policy directed towards CDMA and GSM. I will not go into detail about that now, but if that is an issue that the committee is interested in exploring we will be happy to talk about that in the course of questioning. I will now hand over to my colleague Judy Anderson, who will talk briefly on the USO.

Ms Anderson—The USO is clearly a very important mechanism for ensuring all Australians have equitable access to a standard telephone service. Optus endorse the maintenance of the USO; however, there are a couple of issues going forward which Optus feel should be looked at. There needs to be a review of who pays for the USO and how it is costed. As I am sure the committee is aware, the USO is funded by other carriers who contribute to Telstra for providing the USO, and those funds are worked out according to industry revenues—that is how the market share is calculated. For Optus, this means that we pay Telstra about $40 million a year. This is a cross-subsidy to the near monopoly provider, and it is a large disincentive to our offering services in rural and remote Australia. Our view is that this should be questioned. In other countries, particularly in Europe, the incumbent funds the USO and also provides the USO services.

The other issue that we want to talk about is how the USO is costed. At present the USO is costed in the 2003-04 year at about $234 million. It takes no account of the benefits that Telstra receives from the USO. These benefits include brand recognition, corporate reputation and being able to provide a national ubiquitous network. In the UK these benefits have been costed by Oftel. The result of those costings in relation to BT providing USO services means that, as the benefits far outweigh the costs, BT, as the incumbent, carries the burden of the USO. This issue was looked at by the ACA in about 2000. It found that the costs of these benefits varied between about $80 million and $134 million. Because of the varying values, it decided that more work needed to be done. Our view is that it is time for that work to be done and for these benefits to be looked at more closely and to be valued.

The Estens inquiry was sympathetic to these concerns. It recommended that there be a review of the USO and that that review include looking at the costing and funding of the USO and, in particular, the impact of the USO on competition. We strongly hope that the government adopts this recommendation and moves forward with reviewing the USO. We hope that the committee endorses these points we have raised in relation to the USO and funding more broadly. That ends our opening comments.

CHAIR—Mr McCulloch, I want to go to your remarks about the National Communications Fund and how Optus has used this to reach remote students, which sounds very exciting indeed. How many students does it reach? In your estimation, what would be the cost of providing this satellite service to all remote students? How do you think that should be funded?

Mr McCulloch—My recollection is that the service will be rolled out in total to about 500-odd sites, and that includes remote schools and School of the Air students on farming and



station properties. From memory, the total number of students that that will cover is about 3,700. That will cost $17 million over three years.

CHAIR—Are those the capital costs of putting in place the infrastructure?

Mr McCulloch—Yes; the capital costs of putting in place the infrastructure, the training and the equipment.

CHAIR—What proportion is that 3,700 of the total number?

Mr McCulloch—Do you mean in terms of the break up between School of the Air students and others?

CHAIR—I am trying to get a grasp of whether this is a very small move forward in terms of the numbers we are covering and what the cost might be of getting to all of the students who are classified as remote.

Mr McCulloch—My sense is that it is covering a significant proportion of School of the Air and rural and remote students. I do not have details in my head as to relativities with others in New South Wales and the Northern Territory who might benefit, but I can certainly look into that and provide that information to the committee.

CHAIR—So would you say that, if as much again was spent we would expect to pretty much cover the field?

Ms Anderson—The expectation of this program from the New South Wales and Northern Territory governments was basically that the School of the Air students in those two states would receive the interactive distance learning. All current School of the Air students will receive the service. The numbers vary a bit. One of the impacts on the numbers is the drought, with students and families moving off farms and back into towns. We cannot give you precise numbers at this stage, but we anticipate that the program will deliver this new interactive distance learning to all School of the Air students in those two states.

CHAIR—So that was Western Australia and Queensland?

Ms Anderson—Northern Territory and New South Wales.

CHAIR—So we would still have Queensland, Western Australia and even some remote areas in Tasmania in that category?

Ms Anderson—Yes.

Senator LUNDY—I want to talk a little more about the costing and funding of the USO. Was it the ACA that did the preliminary costing showing that the benefits of the USO would be valued around $80 million to $100 million?

Mr McCulloch—The figure was around $80 million to $136 million, and I think that was in 1999-2000. It was a study done by Ovum Consulting.



Senator LUNDY—What is your view of that study? Did you think that was reasonable or did you think there were some flaws that did not recognise the full benefit? How did Optus respond at the time?

Mr McCulloch—The ACA came to the view that the study was not sufficiently robust to justify any change to USO policy. I think that was because there really was not sufficient time to undertake the study. We think that justifies a more rigorous study being undertaken to provide more robust figures. As demonstrated by the Oftel examination in the UK, that is entirely possible. Judy may want to add to that.

Ms Anderson—No, that is fine.

Senator LUNDY—Is the recent announcement that Telstra got the exemption to third-line forcing provisions under 87B to bundle their telephony Internet with Foxtel the sort of change in the landscape that could enhance the quantitative benefits to the incumbent, with the way the USO is structured?

Mr McCulloch—The intangible benefits that are being considered or which are not currently considered really relate to slightly more amorphous concepts. For example, if you are a business you may be more likely to go with Telstra because it can offer its services on an Australia-wide basis; or there is the loyalty that regional telecommunications consumers give to Telstra because Telstra provides the ubiquitous service—not recognising and understanding that other carriers are subsidising Telstra to provide that service. So those are the sorts of benefits and values that really need to be determined, to be offset against the current fairly economic calculation of revenue and costs as far as the USO goes.

Senator LUNDY—You said that Optus currently pays Telstra some $40 million per annum for provision of the USO and that that creates a disincentive for you to invest in rural and regional areas. Can you tell me in a little more detail what the correlation is between the two? Is it just about availability of capital for Optus to make the investment, or does it cross over into areas about Telstra’s capacity to defend, if you like, their monopoly hold in regional and rural Australia?

Mr McCulloch—I think a very important aspect is the availability of capital. One might ask: what could Optus provide if it had $40 million per annum to provide services to rural and remote Australia?

Senator LUNDY—I do not mean to interrupt, but I cannot help highlighting the fact that you said that the National Communications Fund has been quite a meaningful policy. That is $50 million.

Mr McCulloch—$17 million.

Senator LUNDY—But the overall National Communications Fund—

Mr McCulloch—Overall it is $50 million.



Senator LUNDY—And here we are talking about potentially $40 million of additional capital that could be invested.

Mr McCulloch—Yes.

Senator LUNDY—So it could be meaningful, couldn't it?

Mr McCulloch—Absolutely. Of course it is not just Optus that is paying Telstra; it is other carriers. I think the total amount paid to Telstra is in the vicinity of $60 million. We have actually done a bit of work to look at what we could provide for $40 million into regional Australia. We could use our satellites, for instance, to provide subsidised two-way satellite services to people on farms outside of regional towns. Into regional towns we could provide trunk satellite capacity which then might be reticulated on a wireless local loop to provide broadband services to businesses and residents in those regional towns on a subsidised basis. It could operate on both a wholesale and a retail basis. We could provide our own retail services but we could provide the capacity to others—to local ISPs, for instance—to provide their own services. The government, hypothetically, could kick in additional funds to widen the scope of the services. We did a bit of work, which found that with our $40 million we could provide about 15,000 to 20,000 people with broadband services over a three- to four-year period and provide those services into about 50 regional centres.

Senator LUNDY—One of the areas that has emerged where they find it very difficult to get any broadband service lies conceptually between those who are eligible for the extended zone subsidy—I would like to talk to you a bit about that later—and those who are within the reach of most regional towns who have some capacity to get ADSL, albeit quite limited. So the scenario you are describing could potentially provide broadband services to those people in perhaps less densely populated regional centres but also in what I call the ‘long roads out of town’, where the copper is clearly quite degraded. They are usually on an old pair-gain style of system, so the copper is no good for a broadband service. At the moment there are very few options for those people other than an unsubsidised satellite connection.

Mr McCulloch—That is clearly the case, and that is the area where government needs to focus its funding policies and assistance policies.

Senator LUNDY—As a competitor to Telstra, what other features of the USO, such as the standard described, do you think could constitute a barrier, albeit obviously with good intent in that the intent of the USO is to provide a standard telephony service? Are there any other features of the USO as it currently stand that you think need to be looked at?

Mr McCulloch—The two that Judy has highlighted are really the main ones. The first is: is it appropriate, given the impact that the USO has on constraining competition, that other carriers should have to subsidise Telstra to provide USO services? Secondly, is there something more creative we can do to encourage other carriers to utilise what would otherwise be their USO contribution to provide their own services? As you would be aware, the government did trial USO contestability in small areas of Victoria and New South Wales. The problem with that was that it did not create the necessary scale to attract Optus, for instance, to attempt deliver those services. The customer had to make a positive choice to move away from Telstra, which was problematic. Telstra has all the customer information and, therefore, is in a good position to



really identify and target the best customers. That was not a successful outcome from our perspective or, indeed, from a policy perspective.

Senator LUNDY—I have one last question, and it does relate to the experience of Optus with the extended zones contract. You have mentioned yourself the strength you believe Optus has in delivering satellite services. My understanding is that, when the crunch came, Telstra’s offer of an additional broadband capability outside the scope of the tender was pivotal in their winning the contract. Would you like to take this opportunity to just reflect on the experience of Optus with the extended zones contract tender process, and how that informs your view about contestability in the future?

Mr McCulloch—I might let Judy talk a little about our experience with the process and, in particular, how aspects of the tender we thought were skewed somewhat against us. I would like to emphasise that although there have been problems in the past, the extent to which we are highlighting problems in the past is to illuminate policy for the future. In addition to the weighting against us, a problem with the outcome of that tender was the fact that Telstra did offer this free equipment satellite broadband offering to people in the extended zones. That is obviously a great thing for those people to get that equipment free first up but, as far as satellite is concerned, which is the one technology where competition can thrive in regional Australia, it had the impact of really shutting other satellite providers out. How that will translate in the medium to longer term in satellite pricing to those people that have been locked into Telstra, we will have to wait and see.

Ms Anderson—In relation to the extended zones contract, the main comment that we would like to highlight is that the government needs to be really careful when it offers these sorts of arrangements because it can inadvertently disenfranchise other tenderers. An example of this was the requirement for untimed local calls to be rolled out within six months. Only Telstra could meet this requirement because it has the network in place, whereas we had an offering which involved installing a whole new network and there was no way known that we could have installed a whole new network within six months.

Senator LUNDY—So the tender was constructed so that only Telstra could really satisfy the requirements?

Ms Anderson—I am not saying it was designed that way, but that was the inadvertent outcome. It is one of those issues where the government needs to think carefully about how it structures these arrangements and to make sure that it does not inadvertently create these problems.

Senator LUNDY—Were you consulted on those kinds of issues in the preparation of that tender?

Ms Anderson—We were consulted on the arrangements, but it was a situation where, as time moved on, the time frame for rollout tended to get squeezed. That was just an unfortunate outcome because the government wanted to proceed quickly—naturally, because it wants to get services out there. That was just an unfortunate outcome, I think.

Senator TCHEN—Perhaps I can pick up on some of the questions that you have been asked already and ask you to expand on them. Firstly, I would like to ask you about your service to



remote education—Schools of the Air. I understand one of the requirements of Schools of the Air is the ability to for children to interact with each other. You mentioned earlier that you are providing a service which provides for interactive service. Is that interactive in the sense of computer interactive?

Mr McCulloch—Yes, it is, Senator. The student will sit at their computer screen and will see the teacher in the studio, whether it be in Broken Hill, Dubbo or Darwin. There may well be other School of the Air students participating, and the students will be able to, as I understand it, not see but hear and communicate with those other students. The teacher, through the use of software, will be able to teach using PowerPoint and Word, answer and bring up questions on screen and the like. It is a very powerful application and it will fundamentally change the way that teaching services to remote students occur. In a way, I think that means that there will be a significant transition time whilst teachers, students and parents get used to this new framework, but it is incredibly powerful.

Senator TCHEN—I was given to understand that a lot of the parents of children in these schools believe the human interactive elements are very important for their children’s education, because their children do not have much opportunity to have face-to-face contact with other children and teachers, and they were concerned that the satellite services have disadvantages because of the time lag. Many of the students are not able to undertake some activities—in particular, some of the extracurricular activities such as drama, music and children playing in bands—if the connection is through a satellite, because of the time lag. Could you comment on that? My understanding is that the lack of ability to do that is a serious handicap for the children’s education. Is there any way you can overcome that?

Mr McCulloch—If you do have a teacher in a location different to where the student is located, you just cannot do everything that you could do—

Senator TCHEN—That is the essence of School of the Air.

Mr McCulloch—if everyone was in a classroom together—like play in a band or in an orchestra. My understanding, as far as the development of satellite technology is concerned, is that the lag issue has become much less of an issue. Certainly, for the services that will be provided on the interactive distance learning platform, I do not believe that the lag provides any significant issue or problem. Judy, do you have any comments on that?

Ms Anderson—One comment I have is that there is also a whiteboarding application, so the student sees on the screen a similar sort of thing that they would see in the classroom. They are able to use voice over it, and the lag has been minimised so that they can interact and hold discussions. It does advance a student’s experience quite remarkably. We are moving from a HF radio system, where only one person can speak at a time—whereas on the satellite more than one person can speak at a time—and when they finish speaking they have to say, ‘Over,’. So it is not very interactive; it is quite stilted conversation. For students who are slightly introverted, it is not a very good school experience; whereas interactive distance learning opens up their experience a lot more. As David said, it is not trying to replicate the classroom in the home, but it is trying to move a lot closer to what city students get.

Senator TCHEN—If that is the service that you are offering, it will certainly require a significant cultural change in what people expect. You are basically offering one-on-one



interaction, whereas in traditional school environments there are many interactions. Is it fair to say that you are actually offering a different kind of interaction, which is one-on-one, essentially?

Mr McCulloch—My understanding is that the teaching will in instances also involve other students in different locations.

Ms Anderson—Yes, that is right. The teacher, to all intents and purposes, is sitting in a studio and broadcasting the class, but the class has the opportunity to interact with the teacher. That is the way it works.

Senator TCHEN—But not in real time? There is a time lag.

Ms Anderson—It is real time.

Senator TCHEN—Satellite technology improvements are reducing this time lag. How far down do you think it can be reduced to? It still takes time to get up to the satellite and down again.

Ms Anderson—There is obviously a limit because of the distance from the earth to the satellite, but it has been reduced quite remarkably. I have used satellite voice services, and you notice a lag but you get used to. It is something that is very easy to get used to. It is not intrusive at all to communication.

CHAIR—What is the length of the time lag?

Ms Anderson—I do not know precisely. It is a matter of milliseconds.

Senator TCHEN—Milliseconds or seconds?

Ms Anderson—Milliseconds.

Mr McCulloch—We can find out precisely and provide that information to you.

Senator TCHEN—Senator Lundy asked you a number of questions on the USO. Supposing Optus had the opportunity to provide in its manner a USO service, and that enabled you not to pay Telstra the subsidy of $40 million a year, how much do you think you would have to invest to provide that level of service?

Mr McCulloch—We are not saying that we should be given the opportunity to provide the USO service, which is the standard telephony voice service. What we perhaps should be given the opportunity to do is to utilise the cross-subsidy we pay to Telstra to fund advanced communication services, broadband services. Therefore, we are not looking at USO services in terms of the provision of communication services that we might offer; we are looking at providing services where there is a demonstrable need in regional areas.

Senator TCHEN—Does that mean that you would be providing a service which is not a universal service?



Mr McCulloch—That is correct.

Senator TCHEN—But the USO is a commitment to the community.

Mr McCulloch—The USO relates to the standard telephony service. It does not extend to data services. In a policy sense, it is really mechanisms to get broadband services and data services in regional, rural and remote areas that is the crucial concern of government and communities.

Senator TCHEN—I have a bit of difficulty with that, Mr McCulloch. To use a simple analogy, with the USO we are essentially saying to communities, ‘We will guarantee you an apple because it is good for your health.’ But then you come along and say, ‘For some of these people, the apple is out of date. We can provide something much better. If we don’t have to help you pay for the apple, we can offer you something else,’ but instead of offering a pear you offer a fountain pen.

Mr McCulloch—I understand what you are saying. We are saying that, leaving aside the issue of what carriers themselves might offer in regional Australia, we think there is a very good argument that other carriers should not have to cross-subsidise Telstra for the provision of USO services, not only because of the very detrimental impact it has on competition and providing incentives for us to deliver services in regional areas but also because of the issue that Judy was talking to—the fact that there is no consideration in the USO costing of the intangible benefits that Telstra receives from being the USO provider. In the UK, those benefits have been costed so that the benefit offsets the cost. British Telecom is the universal service provider and there is no cross-subsidy from carriers. At the very least, in the Australian context there needs to be a rigorous study as to the amount of these intangible benefits, to look more carefully and realistically at the USO costing.

Senator TCHEN—I think the second part of your argument is worth looking at. But in the first part of your argument you seem to be suggesting that Telstra should reverse cross-subsidise new providers into other types of services and out of what they provide as a universal service to everybody. That sounds to me like rather a dubious argument.

Mr McCulloch—We would argue that, if you look at the relative competitive positions, the starting point of Telstra as a government monopoly and where competition has gone—

Senator TCHEN—I said the second part of your argument was perhaps worth looking at, but I am a little concerned about the first part. It sounds to me like reverse cross-subsidisation.

Mr McCulloch—The proposition we are putting forward is certainly not unique as far as other jurisdictions internationally are concerned. If you look to Europe, in Denmark, Finland, Germany, Luxembourg, the Netherlands, Portugal, Sweden and the UK there is no cross-subsidy provided by other carriers. Countries where there is a cross-subsidy that I can point to are Austria, Belgium, France, Italy and Spain—but the balance is very much against it.

Senator TCHEN—The other question I have is related to the customer service guarantee. On page 22 of your submission, you argue:

The imposition of strict regulatory standards on all providers in regional areas acts as a disincentive to new players.



You go on to argue that, because CSG standards reflect the design and configuration of Telstra’s network, Optus and other competitors face higher costs in complying with the CSG. I would like you to enlarge on that, particularly with a view to explaining how you can guarantee your service and provide the same character of service that the customer demands.

Mr McCulloch—I might let Judy talk to this one, but I will just say initially that the Besley inquiry actually recommended that the CSG requirement should only apply to Telstra. It essentially provides a safety net that then encourages other, smaller carriers to be more creative.

Ms Anderson—Our position is that, if the CSG applies to Telstra, other carriers will be expected by the market and the consumer to at least match that benchmark requirement. If other carriers decide that they want to vary the requirement in any way, customers will quite reasonably expect differential charging. For example, if in certain areas appointment times were a bit looser, customers might expect a lower access charge for telephony. There could be some flexibility in the way it is delivered, but there would be a benchmark safety net requirement so that the market and consumers could respond. That is one clear argument: it gives us the flexibility to be more creative in delivering services to consumers and it allows us to give customer service according to the consumers’ needs rather than having it dictated according to the way Telstra does it.

The other argument is, as you mentioned, the cost of doing it. The CSG was designed around the configuration of Telstra’s network—the way it is laid out, where it has its maintenance stations and so forth. Our position is that that does not necessarily reflect our network. New carriers are often trying to design networks which are more efficient and more effective. They are not designed the way Telstra designed its network some years ago. It is a burden for us to configure and design our customer service standards to be close to Telstra’s customer service standards. It is costly and it is a disincentive for us to work harder to meet customer service needs in a different way, because we have this regulatory burden.

Senator TCHEN—Are you saying you think that, with the new technology that you use, you are able to provide a higher CSG than Telstra?

Ms Anderson—Not necessarily higher, but different—in different ways. Methods of doing things are always changing; technologies are always changing. The main thing is that we meet customer expectations according to the standards that they want. If they want a service representative at their house at a certain time, we want to ensure that the provider can meet that requirement, that a connection happens on time or that there is flexibility in negotiating when a connection can take place—that is, that it does not necessarily have to be within the CSG time frames, that you can negotiate with the customer to make the connection earlier or later and structure it quite differently if you want to; that you can work that out with the customer, according to the customer’s needs, particularly if you have to attend the premises.

Senator TCHEN—Would you be arguing for CSG to be divorced from the technical standard?

Ms Anderson—No. The CSG is a customer service standard. We are arguing that carriers other than Telstra—which is the universal service safety net provider—be relieved of the CSG so that we have the flexibility to tailor customer service arrangements to better meet our customers’ needs and the technology which we are using to provide our services.



CHAIR—How could that be monitored? What sort of comfort could government have that this was being delivered? It is all very well to say, ‘A bit later probably suits some customers,’ but how would anyone know?

Ms Anderson—There could be monitoring and reporting requirements. We could design standards according to our own needs. Internally, we monitor all sorts of customer service arrangements, complaints levels and those sorts of things. Some level of internal monitoring is happening on service standards outside the CSG, so I do not think monitoring and reporting would be difficult issues.

Mr McCulloch—We are saying that, yes, you apply the regulatory standard to the universal service provider and then competitors can be faster and nimbler if they wish. If they offer an inferior service such that they are going to disappoint their customers, they are going to lose, not win, customers. Therefore, you encourage the competitive dynamic a little more.

Senator TCHEN—What you are arguing for is additional regulatory control—because not only would the government have to monitor Telstra’s CSG, it would have to monitor the CSG equivalent of other suppliers and it would also have to monitor whether those two sets of standards are equivalent.

Mr McCulloch—No, because we are not saying that there should be another obligation on anyone other than the universal service provider. You should have a safety net that applies to the universal service provider and then others can provide whatever services they will in the marketplace or in the free market.

Senator TCHEN—Then it goes back to the question on USOs that, if one provider is providing a USO as a safety standard for everybody, it stands to reason that other providers should in fact pay for their service. We are back to the same argument.

Mr McCulloch—Can you elaborate on your question?

Senator TCHEN—You are saying that what you are providing is outside the safety net. But the safety net is still required as a universal service. If you operate outside the safety net, it does not preclude your customer from needing the safety net and therefore you still have to help pay for the safety net.

Mr McCulloch—I guess we get back to the USO arguments we were talking about earlier and whether there should be a cross-subsidy by other carriers to Telstra which applies regardless of whether or not those carriers are delivering services in rural areas.

Senator MOORE—My understanding on reading your submission is that the enhanced program for schools—and people have an interest in the schools aspect—is very new, that you are already providing the service under previous contracts with the Northern Territory and New South Wales and that, under the National Communications Fund, you are going to provide an enhanced service from now on. Can we get some more information about exactly how that enhanced service will work? Because it is very new, I would imagine that it has not started yet. Are you talking about what is going to happen.



Mr McCulloch—That is correct. I think funding deeds with the Commonwealth have just been signed in the last week or so.

Senator MOORE—Yes.

Mr McCulloch—The service will be rolled out progressively as from about February next year. In terms of detail as to the service offered, would it be useful if we provided the committee with further information?

Senator MOORE—That would be very useful. I think a lot of the discussion we have had this morning has been on what is going to happen as opposed to what is happening now, so I would like to get a bit more detail on that.

Mr McCulloch—Absolutely.

Senator MOORE—Would it be accurate to say that it was easier to do stuff in the Northern Territory and New South Wales because you are already operating in the remote networks there?

Mr McCulloch—No, I do not think that is the case. Certainly, we are engaged in quite advanced discussions with a number of other Australian governments to provide similar sorts of learning and data services into regional areas of those jurisdictions. I think it is just a question of the dynamics and the various relationships we had at the time the NCF program came out. I mentioned earlier that we think NCF provides a very good model into the future. A lot of creative thought has gone into proposals. I think there are a number of good proposals that actually did not get funding that have the option to be revitalised and improved. It was very a good program in getting different players together—carriers, state governments, industry groups et cetera.

Senator MOORE—You commented earlier that perhaps an NCF mark II would be a good idea, from your point of view.

Mr McCulloch—Yes, that is correct.

Senator MOORE—You raised a number of concerns with the way funding operates now and you have elaborated on that. On page 16 you suggested two particular ways that it can be improved. There is no short way for you to give any more information on that, but is there anything you would like to add about the focus on funding for infrastructure, particularly on excluding Telstra from accessing particular funds?

Mr McCulloch—I think the key point is that, when funding is thought about, designed and decisions are made, there really needs to be very clear and conscious thought as to the competitive impact. We think positive consideration should be given to proposals that are going to advance the competitive environment, rather than just updating the—we would say—outmoded technology that is already there. We have proposed that, in certain instances, the government might consider excluding Telstra. Let me give you an example as to where that might occur.

Senator MOORE—That was I was after—something specific.



Mr McCulloch—It is in the context of funding for mobile services in Australia. We have two technology networks in regional Australia. One is CDMA, which is operated solely by Telstra, and the other is GSM, which is, in an infrastructure sense, operated by us, Telstra and Vodafone. By our reckoning, $110 million to $120 million has been allocated by the current government to improving mobile services. All but $25 million of that has gone to Telstra’s CDMA network. In one sense, that is understandable. CDMA is a much more rural friendly network. Many rural people use CDMA—but not exclusively. Twenty-seven per cent of our 4.2 million or 4.3 million mobile phone subscribers are in regional areas. Our network covers 94 per cent of the population. We would like to extend our coverage, but there is an economic limit. Given the balance of funding that has gone in the past to expand CDMA, the extent to which the government is going to contribute towards further mobile expansion now really needs to be directed to GSM. To that extent, you might exclude Telstra from bidding to expand its CDMA network, as far as new mobile funding is concerned. I think that the balance is particularly important to recognise when you realise that there are 800,000 people on CDMA networks but 12 million on GSM. Therefore, there is a big incentive for commercial arrangements or government policy that can expand GSM coverage.

CHAIR—Thank you very much for appearing before us today and for your submission.



[9.57 a.m.]

NEEDHAM, Mr Mark, Policy Manager, Telecommunications, National Farmers Federation

CHAIR—Welcome, Mr Needham. Thank you for agreeing to appear before us. Our inquiry would not have been complete without a submission from the National Farmers Federation. The committee prefers all evidence to be given in public but should you at any stage wish to give your evidence, part of your evidence or answers to specific questions in private, you may ask to do so and the committee will consider your request. I now invite you to make a brief opening statement, and then we will go to questions.

Mr Needham—Thank you for your invitation to appear here today. I will make a brief opening statement. A major component of NFF policy is that service levels in rural and regional areas should be equivalent to those in urban Australia, and it is the Commonwealth’s responsibility to ensure that the appropriate mechanisms are in place to guarantee the ongoing provision of equitable telecommunication services and service quality for all Australians. I am sure you are all aware that rural, regional and remote Australians continue to identify telecommunications service availability and quality as significant issues. The NFF position is that equitable access to affordable quality telecommunications and the effective use of online services can have a significant positive effect on farming enterprises and therefore the future viability of rural and remote communities.

The NFF continues to emphasise that outcomes are critical for rural and regional Australians. Therefore, the NFF continues to work closely with government, Telstra and others to identify and deliver significant solutions to the current telecommunications inequities. An example of this outcome oriented approach we have is the recently announced Telstra initiative to provide the same level of service nationally for newly installed telephone services in the current CSG without infrastructure category. This is reducing the unacceptable six-month timeframe in minor-rural areas to one month, which is the same as the urban time frame.

This initiative affects approximately 90 per cent of Australia’s telephone exchanges and, you may be interested to know, my estimate of some two million voters. So NFF looks forward to further outcomes in relation to these initiatives that will help address these current service level inequities. NFF again believes that the delivery of equitable telecommunications services in rural Australia requires the government to facilitate a number of issues. One is that all Australians, wherever they reside or carry on their business, should have timely access to affordable quality Internet and on demand digital services, as well as fixed and mobile telephony. The customer service guarantee enshrines that rural and regional quality of service standards are the same as metropolitan standards, that there is more affordable digital telecommunications in non-metropolitan Australia, and they are accessible. These should be provided preferably through competition. There should be a higher priority attached to the development and timely implementation of a whole-of-government online service provision obligation so that rural Australians can interface with government and industry online.

The government must provide service level guarantees in legislation for voice, data telecommunications, quality services, connections, faults and appointments that are based on, as



mentioned, equitable services. NFF’s recent representations to the Regional Telecommunications Inquiry and the HRSCCITA wireless broadband inquiry highlighted a range of telecommunications service level inequities, as well as opportunities, and these were in four general categories that are of strategic importance to farmers in rural and regional Australia. Those categories are service, fault, repair installation times, mobile phone coverage, bandwidth availability and cost and future proofing rural and regional services. I presume the inquiry may have already referenced those materials in relation to the other inquiries.

With reference to the recent Regional Telecommunications Inquiry, NFF noted that the report did give a positive assessment based on the terms of reference. But it also identified many areas of concern and made some 39 recommendations to the minister. A conclusion could be that, therefore, it did not provide an overall finding that everything was okay. The report recommendations do address NFF equitable service issues to varying degrees and, of course, NFF awaits a government response that will deliver and maintain equitable quality telecommunications services for rural and regional Australians. That is all I wanted to say as an opening statement.

CHAIR—Thank you very much. The big question is cost of providing universal services such as broadband to people in rural areas. I note that you suggest that this is a government responsibility. Do you have some idea of the scope of that cost? Should it be funded through general revenue? How do we achieve this goal?

Mr Needham—The NFF made some comments to the Regional Telecommunications Inquiry along the lines of those that have been recommended for a form of incentive scheme to address areas where services could not be provided on a commercial basis. I would hope that that recommendation does go forward and meets with government approval. But this incentive scheme would, we hope, require a small preselected panel of providers, allowing the level playing field from a competitive point of view, where consumers, customers, et cetera, could choose their provider from the small panel of preselected carriers or service providers. Again, our comment is that this relates to the areas where non-commercial services can be provided. We look forward to all providers realising the benefits that they can obtain from rural and regional Australia and continuing to invest and hopefully getting returns on their investment.

CHAIR—The cost of a universal service of certain broadband services is said to be up to $60 billion. Again, where do you think that money should come from?

Mr Needham—Again, our position is that we would like to see people going through a transitionary phase, moving away from their current less than desirable analog dial-up services to higher quality services so that they can get a better feel for the value that online services can provide. We do not believe that there is an immediate requirement for broadband services, defined as one megabit and above, for all Australians. Rural and regional Australians need the ability to access broader and broadband services when they have a need to do so—again, at the same price as metropolitan services. I believe that the transition away from analog services to more digital quality services will give an opportunity for providers to leverage their business case, continue to provide those services and, where necessary, upgrade facilities through income derived from the delivery of other services in order to provide broadband where necessary.

CHAIR—It has been suggested to the committee that competition is not feasible in terms of laying out infrastructure for broadband or slightly less broadband services universally and that



we should accept that it is a natural monopoly in infrastructure. Do you agree with that or do you think that there are other options? Perhaps you could let us know how competition has worked in some areas.

Mr Needham—I do not believe that it can only be the natural monopoly that provides quality broader and broadband services to rural and regional Australia. We have heard comments this morning from Optus that there are opportunities for providers to deliver broadband services now, and with additional infrastructure—presumably the new satellite that they will hopefully launch next year—there will be the opportunity for additional broadband services being available. A broadband service can be provided through a variety of technologies. I do not think that copper is the only solution; I do not think that satellite is the only solution. We have heard a number of recent announcements in relation to wireless. I think these are all opportunities where a number of providers can utilise the existing infrastructure and new infrastructure to provide those services.

Senator TCHEN—I might have missed something in your last remark. When you are talking about a broadband service, that is not in reference to a universal service obligation, is it?

Mr Needham—No, not at all.

Senator TCHEN—You are talking about an additional service?

Mr Needham—That is right. At present, from our perspective the minimum standards that are required are those defined in the current universal service obligation and those defined in the digital data service obligation. We are strong advocates of the availability of more affordable 64 kilobit digital services to all rural and regional Australians. As mentioned before, we need to move people, if they wish, away from the less than desirable analog dial-up services to the higher quality 64 kilobit service. We are not suggesting in any way that broadband megabit and above services are imposed on people. We believe people need to move through an online experience that is positive, and moving from analog to 64 kilobit and higher speeds will give them that, so when they have a requirement to move to broadband they can do so on an affordable basis.

Senator TCHEN—As more broadband services become available for people to use, when do you think the analog service the USO is modelled on could be dispensed with?

Mr Needham—I do not think we should ever consider dispensing with minimum government standards. The NFF believes that it is the government’s role to ensure that minimum service standards are in place for both voice and data telephony and that they should continue. The NFF has made no suggestion at any stage that we should abandon the USO in relation to some broadband universal service obligation.

Senator TCHEN—Wouldn’t that be a duplication?

Mr Needham—No, from our point of view there are two standards at present, the USO and the DDSO. That is all that is required at present because they deliver the minimum service standards. Commercial providers who wish to offer more than that are obviously at liberty to do so in the marketplace, based on their business case and anticipated consumer demand.



Senator TCHEN—I think earlier you heard Mr McCulloch from Optus say that he believes that Optus is able to provide services which are alternative to what is provided through USO. If you accept that all these various alternatives that new technologies can provide would give you a better service, why do you still need this old technology as a safety net? Shouldn’t you be looking at a safety net under the new system rather than under the old system?

Mr Needham—From NFF’s perspective, the standards are not related to any particular technology, it is the type of service that is provided. So I do not relate aspects of the USO or the DDSO to any particular technology. People must have minimum standards in relation to voice and data. The 64 kilobit standard in relation to data we believe is very adequate at present, but again we want to see a competitive marketplace. It is the responsibility of government to ensure that that is in place to allow market forces to work and to provide other services when required by customers on an equitable basis.

Senator TCHEN—Forever?

Mr Needham—Yes. I do not see any reason why there is any need to change the provision of government minimum service standards. At a later stage NFF certainly suggests that there needs to be reviews of telecommunication service standards. At a later stage, given appropriate demand levels and supply, there may be pockets of metropolitan or regional Australia where some services cannot be provided on a commercial basis, therefore one imagines that, in the future, consideration may need to be given to how those services could be provided.

Senator TCHEN—Yes, I understand. I now recall that you said earlier that you do not believe that the USO is related to a particular technology.

Mr Needham—That is correct.

Senator TCHEN—What do the rural and regional consumers generally use the broadband service for?

Mr Needham—As I am sure you are aware, there is not a high penetration of broadband services in rural and regional Australia.

Senator TCHEN—What do you anticipate they will be used for?

Mr Needham—Again, the definition of broadband varies. From my perspective, using the traditional one megabit, I would imagine that it would be only high end, large small to medium enterprises—if you can call them that—and larger organisations that would have an immediate demand for that service. But again, there is a need. If particular farmers or small business want to use services that improve their business bottom line, then they need the opportunity to access those services on an equitable basis. That could be for a variety of business requirements and, I imagine, some social requirements. I suppose I am saying that there is no need for everyone to have a broadband service to use email, but there certainly is a requirement for some farmers and businesses to access broader band services.

Senator MACKAY—I just wanted to go to the NFF’s response to Estens, which you covered briefly in your introduction. The government have indicated that it is likely still to bring the Telstra privatisation legislation in for debate early next year, even though they have indicated



that the sale will not proceed until the share market is in better shape. Does the NFF believe that the Telstra legislation should be brought in early next year, or should it be suspended, if you like, until such time as the issues that you have raised are in some way comprehensively addressed?

Mr Needham—The NFF has had a policy position for a number of years now that it will not consider the disposition of the sale of Telstra until service levels in rural and regional Australia are equivalent to those in metropolitan Australia.

Senator MACKAY—Presumably that criterion would not be fulfilled by early next year from NFF’s point of view. Is that correct?

Mr Needham—The 39 issues raised by the RTI may indeed take longer than that for outcomes to be seen ‘in the paddock’ rather than merely programs announced. Again, the policy at present is that we will not consider the issue until service levels are equivalent.

Senator MACKAY—So it may well be that the NFF has the view that bringing on the Telstra legislation early for debate, which is what the government seems to be indicating, may be a little premature?

Mr Needham—Again, our policy is not to consider the issue until services are equivalent.

Senator MACKAY—One of the critical focuses of this inquiry is the state of the network, which presumably for your member organisations is also critical. Have you undertaken any work on the state of the network yourselves?

Mr Needham—From our perspective, it is about what carriers and carriage service providers can deliver and the appropriate government measurements that indicate the quality of those services that are being delivered. We have not undertaken any technical analysis of the network at all. We have to rely on information that is provided by carriers or government in relation to determining the quality of the network.

Senator MACKAY—What information have you received on the state of the network from the government or other parties?

Mr Needham—We are very keen to understand the quality aspects of the network. One of those aspects relates to fault levels in, for example, rural Australia. From our perspective, one of our preferences is that there is a significant reduction in faults in rural Australia and that, over time, there is a reduction in what we call ‘the tails’; that is, the number of services that remain faulty after the prescribed time frame under the current CSG.

Senator MACKAY—What information have you received on the state of the network in relation to faults?

Mr Needham—There is an improvement.

Senator MACKAY—No, what detailed briefings have you received and what information have you received on the state of the network?



Mr Needham—Information that relates to the performance of Telstra and information that relates to the number of faults in the rural network.

Senator MACKAY—Specifically, what have you received? What have they given you on fault levels, for example?

Mr Needham—National figures in relation to faults over a period of time—

Senator MACKAY—National figures?

Mr Needham—Yes, national figures over a period of time so we can gauge the trend in faults and our version of performance of fault restoration in rural and regional Australia. For example, there is carrier performances identified by the ACA; that is, the percentage of services that have been repaired in the prescribed time as well as the volume of services that have been repaired. The NFF measure is to determine how many services remain unrepaired after the prescribed time.

Senator MACKAY—So you have only received national figures; you have not received it state by state?

Mr Needham—I apologise. They are figures on a state basis and on a national basis. It is very similar to the ACA information.

Senator MACKAY—It is similar to the ACA information?

Mr Needham—Yes, we believe it is.

Senator MACKAY—Have you had any recent updates on fault rates in the network? When was the last time that you got information on that?

Mr Needham—We have received September quarter figures. We are now able to compare the trends in services from 1998 through to September 2002.

Senator MACKAY—Have Telstra provided you with information by category, or is it just aggregate information on the number of faults?

Mr Needham—No, it is the highest level information.

Senator MACKAY—I see. They have not disaggregated it for you into critical faults, important faults and less important faults?

Mr Needham—No.

Senator MACKAY—You might be interested to hear the Telstra evidence, if that is the case.

Mr Needham—All right.



Senator MACKAY—What consultation has the NFF had with the government in relation to the proposed privatisation of Telstra?

Mr Needham—The issue of privatisation has not been discussed. The issue of service and service quality is discussed very frequently.

Senator MACKAY—So when was the last time you had a discussion with the government on this matter?

Mr Needham—I talk to the department a number of times per week and I talk to the minister’s office once every few weeks.

Senator MACKAY—When was the last time the NFF spoke to the minister?

Mr Needham—That was probably within the last two months.

Senator MACKAY—Do you think it is possible to have a regime that meets the criteria you indicated in your submission to Estens? You proposed a number of benchmarks. You have not actually identified them, but I understand that: it is not your job to develop benchmarks—how could you? Do you think there will ever be a circumstance in which Telstra could be fully privatised and still meet the criteria you have outlined in terms of equitable service provision?

Mr Needham—Again, I am afraid our policy position is that we are not considering the ownership issues of carriers. Our only interest at present is the quality of the services provided to rural and regional areas.

Senator MACKAY—So you do not think there is a nexus between the ownership of Telstra and the provision of services?

Mr Needham—It is an issue we are not considering at present. What is most important to rural and regional Australians, as farmers have identified to us, is the quality of their telecommunications services and, in our terms, the future proofing of those telecommunications services.

Senator MACKAY—Would that be the general view of the constituent groups you represent: they are not interested in who owns Telstra; they are just interested in services?

Mr Needham—I am sure they are very interested in who owns the carriers, but certainly what has been identified to us is that telecommunications service quality is of paramount importance.

Senator MACKAY—I am curious as to why the NFF does not take an interest in who owns Telstra.

Mr Needham—At present the policy decision made by the elected members of the NFF, representing the farmers of Australia, is that we will not consider the ownership issues of any carrier until service quality issues are sorted out.



Senator MACKAY—Will you be revisiting that policy position?

Mr Needham—The NFF council meets regularly, and that issue has been on the agenda for quite some time. I would imagine it will be on future agendas.

Senator LUNDY—I would like to make a historical foray into the NFF’s role with Networking the Nation and the various grants programs the federal government has embarked upon over the years. Are you in a position to tell the committee how many grants the NFF has either received directly or been party to within that suite of BARN and NTN programs and the other raft of connectivity programs?

Mr Needham—I can only suggest, with my limited knowledge, that the National Farmers Federation—now the National Farmers Federation Ltd—has not received any direct moneys from government in relation to RTIF or Networking the Nation related funding.

Senator LUNDY—Can I ask you to take it on notice to provide the committee with a very clear picture, preferably in tabulated form, of the grants programs you have been involved in. In fact, I will make it as wide a question as possible. Can you respond in terms of all government funded initiatives?

Mr Needham—I can certainly request that of the hierarchy of the organisation.

Senator LUNDY—I appreciate that you have not been there the whole time and that you will need to do a bit of research. I am trying to get a feel for the relevance of those funding programs to organisations such as yourselves, particularly because of the vocal role the NFF has played in the issue of rural connectivity. I would like to go into some of the detail of the dial-up Internet connectivity and quality issue. This issue was canvassed in some detail in both the Estens report and Telstra’s submission to this inquiry. Do you have NFF information in your possession that describes the types of technology Telstra uses in rural exchanges, particularly those described as minor rural?

Mr Needham—No, we do not have any detailed information of what equipment is used in the Telstra network. From our perspective again, it is about the outcomes that the variety of carriers deliver and the measurement that the government provides as to the quality of that service. It is up to the provider to decide, presumably on their own internal business case, as to what is the most appropriate technology to meet the minimum standard that the government has in place.

Senator LUNDY—To collate that information from a consumer perspective or a customer perspective is incredibly difficult and could probably only be best described as ad hoc, and the information from Telstra with regard to how the Internet Assistance Program has been responded to demonstrates that. Do you think there is a need for a greater understanding about the limitations of that technology in the exchanges, given we now know that, depending on the type of technology used, dial-up Internet connection speeds can be prevented from getting higher than, say, 14.4 kilobits per second?

Mr Needham—From NFF’s perspective, it is about delivering quality services in a competitive marketplace, and those minimum standards need to be provided by government. From our perspective, the requirement of the 64 kilobit data service on an affordable basis is



essential. The availability of that needs to be universal, and it needs to be provided. As to the method used to provide that, I do not think we have a particular interest other than that it is provided up to the required standard where and when necessary. If it requires additional satellite infrastructure from one provider, or additional cable or wireless infrastructure from another provider, they have to decide to do that because, from our perspective, rural and regional people and farmers want to be able to access that service whenever and wherever they are at an affordable rate. Going into the minutia of the detail, from my point of view, is extremely difficult. It is about the high level outcome to get a satisfied online experience by end user so they can take the advantages.

Senator LUNDY—So you have never asked Telstra to provide the details of the type of technology they use in minor rural exchanges?

Mr Needham—No. I have not gone into the minutia of what they have. My questions are general ones—for example, are 64 kilobit services available everywhere?

Senator LUNDY—Can I put to you that with Telstra’s capability now to provide to a satellite and broadband service through that, albeit very expensive for those outside the subsidised area of extended zones, that that fulfils the DDSO?

Mr Needham—From our perspective, it is more than just the DDSO; it is the affordable availability of services. From our perspective, the two-way satellite service does not fulfil that requirement. In our submissions to the RTI and the House of Representatives Standing Committee on Communication, Information Technology and the Arts inquiry into wireless broadband technologies, we identified that there is a need for government to address the affordability aspects of the minimum 64 kilobit data service.

Senator LUNDY—Do you think the DDSO minimum 64 kilobits per second service for data is being complied with?

Mr Needham—At present the service is delivered via the ISDN 64 kilobit service or the one-way satellite with the back channel service.

Senator LUNDY——Do you consider that the one-way satellite is affordable in your interpretation of what would be compliant with the DDSO?

Mr Needham—No. We have again suggested that the government needs to look at improving the subsidy in relation to those customers who are unable to get the terrestrial ISDN service, for example.

Senator LUNDY—I will come to the ISDN service, but I want to focus on the satellite service. Do you think that the current pricing structure of the one-way download satellite service is compliant with the DDSO as it is currently described?

Mr Needham—Yes, it does. But, from our perspective, we would like to see a more affordable service.



Senator LUNDY—So the National Farmers Federation does not think it is satisfactory because it is too expensive?

Mr Needham—That is right. It needs to be more affordable.

Senator LUNDY—I will move now to ISDN, which is the other way. Are you aware that there is some technology that Telstra uses in minor rural exchanges that does not provide for ISDN?

Mr Needham—Yes.

Senator LUNDY—Are you aware of the details of how extensively it is used?

Mr Needham—No, just that in general terms that that there are some limitations; hence my comment earlier that 64 kilobits is available everywhere and it is available on an affordable basis.

Senator LUNDY—I know you are not particularly interested, but I am just trying to understand how the NFF is approaching this problem, because you are obviously a key lobby group in the scheme of things.

Mr Needham—Obviously we would like to see the use of a number of technologies from a number of carriers in the delivery of that minimum 64 kilobit standard on a symmetrical basis.

Senator LUNDY—You also understand, I am sure, that if Telstra does not have the capability within its exchanges to provide ISDN, no other carrier is likely to be able to establish a business case to install technology that would provide those services.

Mr Needham—I could make some comments about that. We look forward to other carriers. There are only two special digital data service providers at present. I hope that the major satellite provider in the country will also become a special digital data service provider, utilising the infrastructure they have to provide a quality service to rural and regional Australia at an affordable cost. From my point of view, additional providers and competition in the market place using different technologies may negate the requirement for a particular provider to do certain things and would give the customer a better choice.

Senator LUNDY—So you really think that some sort of subsidy is the only way to go to meet your affordability criteria?

Mr Needham—There does need to be consideration given to increasing the subsidy in relation to the special digital data service.

Senator LUNDY—What about wider eligibility for the special digital data service obligations?

Mr Needham—The recent pricing initiative from Telstra—the removal, from a retail perspective, of the extender cost; therefore, in theory, increasing the range of ISDN from the nominal six kilometres to a possible 30 kilometres in rural areas, depending on the capability



and so on—is a significant step. We have had feedback from quite a number of farmers who have gone from the less than desirable 14.4 kilobits to the optional 64 kilobits or 128 kilobits for the same price as in metropolitan areas. From our point of view, the dramatic increase in the availability of that 64 kilobit service to more than 80 per cent of farmers, at the same price as metropolitan, is certainly a step forward, but there is still a gap that needs to be addressed; hence my earlier remarks about the importance of the incentive program identified in the RTI.

Senator LUNDY—How did the farmers that have been able to get this upgrade to an ISDN copper based service go about getting the service? What is the process? Do they use the NFF to identify their needs and then you contact Telstra?

Mr Needham—Obviously the need for quality service has been identified for a long time—and we have been working hard to get some improvements—but, in this case, it is a relationship between the customer and Telstra or Telstra’s wholesale customers. You will note in the RTI that there is a reference to some Telstra pricing issues—that, when using a particular Telstra Internet service, there is a particular access rate but when customers want to use another access service the price is higher.

Senator LUNDY—What was that again?

Mr Needham—It was an RTI recommendation.

Senator LUNDY—I know that, but what was the service?

Mr Needham—The background to that is that, if you ring an 0198 number, you pay 30c per hour surcharge when you are using the 64-kilobit service. If you want to access another ISP using ISDN and ISDN home product, I believe you pay $1.10 and a 16.5c flag charge. From my perspective, I think that is inappropriate and I hope that that recommendation from the RTI is acted on. I think they have referred it to the ACCC, so I look forward to equity in price and non-discrimination between Telstra and the ISP you may wish to use. So from my point of view, a farmer—a rural and regional customer—needs to have a quality ISDN service and their choice of ISP.

Senator LUNDY—That is not currently the case because of that pricing differential?

Mr Needham—I am not sure of the specific status of that recommendation but, again, it is one of a number and I look forward to that issue being resolved.

Senator LUNDY—You mentioned the issue of consumer service guarantee and waiting times having some parity between rural and metropolitan areas—from six months to one month. In terms of the impact of that, have you had a look at the role that Telstra’s declarations of mass service disruptions have played on the payment and acknowledgment of the consumer service guarantee? I suppose you could generalise that the climate at the moment as abnormal when it is not raining but, clearly, when the rain does come—and hopefully that will be soon—the CSG is not likely to apply anyway as Telstra will be able to claim a mass service disruption because it will possibly be an abnormal weather condition. Do you have any concerns?

Mr Needham—Certainly the issue of MSDNs has come up over a period of time. We have had discussions with the ACA in relation to that. We certainly did notice that, in the new



arrangements with respect to priority assistance, instructions were given that there needed to be a closer look at the analysis that already happens in relation to MSDNs. Obviously, there is a need for some different arrangements when there are ‘natural disasters’ or issues of significance—and I understand that—but the ACA needs to scrutinise those a little more, from our perspective. I believe that process is under way. I am not aware of any specific outcomes, though I understand that more people work on it now than they did before.

Senator LUNDY—The government recently said that 19.2 kilobits should be the new standard. It has particular relevance for dial-up Internet connection speeds. One of the recommendations from the Estens inquiry that the minister seems quite favourably disposed towards is to make that a licence condition for carriers. What is the NFF’s view of 19.2 kilobits as the minimum dial-up connection speed?

Mr Needham—I think I highlighted earlier that it is NFF’s belief that people need the opportunity to move away from dial-up analog services and the ability to access the digital data service—the 64-kilobit service—on ‘the same basis’.

Senator LUNDY—Do you think that has any real meaningful relevance in terms of your membership or the current state of the telecommunications network, given that just about everyone who has come before this committee has highlighted the importance of availability of affordable broadband, or do you think it is a bit of backfilling the standards?

Mr Needham—It does have some bearing on the back channel capability for a one-way satellite service, but I believe a 64-kilobit digital service is a better starting point. Our only issue at present is the affordability of that particular service. I would hope that people who want to access quality data services would consider a 64 kilobit service in that they may find a 19.2 kilobit service inadequate or very adequate, depending on what they are doing.

Senator LUNDY—If that back channel capability of 19.2 kilobits is the minimum, are you able to comment on whether that is particularly useful for your membership—for farmers who download a lot of material but who, depending on how they use the Internet, will need a decent upload capability; otherwise, they will get caught in the upload warp rather than the download warp?

Mr Needham—I mentioned very briefly the need for symmetrical services.

Senator LUNDY—You would prefer to see a 64 kilobit symmetrical service?

Mr Needham—Sixty-four kilobits is symmetrical.

Senator LUNDY—With ISDN.

Mr Needham—From our perspective, this relates to a gap that needs to be filled and the current RTI recommendation that the government should consider an incentive program on a competitive basis to satisfy that. Our comment is that the services should be symmetrical but, again, it should be subject to customer choice—if the customer wants a symmetrical service, it should be there. If they do not, they can choose something of a lesser quality.



Senator MOORE—We have been bedazzled by graphs and figures in the submission which show how the customer service guarantee has improved, particularly over the last four years. The last sentence in that particular section of the Telstra submission says:

This record of compliance certainly does not suggest a distinct pattern of disadvantage of people living in regional, rural and remote communities.

That sentence concludes the section with graphs showing how faults, service and connections have improved over the period of time. I would like to get a comment from you in response to that sentence.

Mr Needham—From the NFF’s perspective at present, service quality in relation to faults in rural Australia continues to improve. My figures show that there has been a 44 per cent reduction in the number of services that have not been repaired after the prescribed time frame. Some people could consider that to be a 44 per cent improvement in service. But our perspective is that we would like to see a continuing reduction in the number of faults in rural Australia and a continuing reduction in the tail—that is, the number of outstanding faults. We believe that a number of aspects of the network reliability framework will address this. The RTI recommendation that some of those triggers or aspects in relation to the ACA need to be looked at is important from our point of view. We would agree that there is a continuing reduction in the number of outstanding faults in rural Australia.

Senator MOORE—Could that be defined as disadvantage?

Mr Needham—One thing I do not do is a comparison in detail between metropolitan and rural areas. My focus is purely on rural areas. I have not done a comparison between metro and rural areas. From my point of view, there is an improvement in rural areas. There needs to be more improvement and we have highlighted that to the RTI.

Senator MOORE—This question is purely for self-interest. In their submission Telstra have dedicated a number of paragraphs to a proposal for a long-range cordless phone. They see that as being a very important aspect of their submission. I would like to know what you think about the long-range cordless phone policy.

Mr Needham—In theory that sounds like an excellent product. I have not used the product; I have heard a variety of comments about it. Having something that has a line of sight range of five or 10 kilometres—I am not sure of the specs of it—is worthwhile.

Senator MOORE—The way Telstra promotes it is that it is responding to a particular need. Was the NFF involved in identifying such a need?

Mr Needham—Certainly from the NFF’s point of view, having improved communications on the farm is something we have been highlighting for a long time. The combination of terrestrial mobile services, more affordable satellite handheld services and all those things contribute towards those issues.

CHAIR—Looking at the Telstra submission, Mr Needham, have you had a chance to evaluate the Internet Assistance Program?



Mr Needham—The NFF has a representative on the Internet Assistance Program—the NFF CEO—but, to my knowledge, at present there has been no public reporting in relation to the Internet Assistance Program. I could stand corrected on that, but I am not aware of any public report on the IAP, and we highlighted that to the RTI.

CHAIR—You might care to look at the Telstra submission and, if you feel that it is worth while, give the committee a response to it.

Mr Needham—I suppose that I was thinking of the report from the IAP rather than from Telstra.

CHAIR—I will leave it to you. If there is something that you want to say to the committee with regard to how successful you think that program is, we will be pleased to hear it.

Mr Needham—Thank you.

CHAIR—Thank you very much for appearing before us. It has been really useful.

Proceedings suspended from 10.46 a.m. to 10.58 a.m.



PARATZ, Mr Lawrence, Regional Managing Director, Southern Region, Telstra CountryWide, Telstra

PATERSON, Dr Paul Robert, Director, Regulatory, Telstra

WARREN, Dr Tony, Group Manager, Regulatory Strategy, Telstra

CHAIR—I welcome the witnesses. The committee has your submissions before it. We have already published those. At this stage, do you wish to make any alterations or additions to those documents?

Mr Paratz—No, we do not.

CHAIR—The committee prefers all evidence to be given in public but should you at any stage wish to give your evidence, part of your evidence or answers to specific questions in private, you may ask to do so and the committee will consider your request. I now invite Mr Paratz to make an opening statement, after which we will go to questions.

Mr Paratz—Before we move to the opening statement, there is an administrative matter I would like to raise. Would this be an appropriate time to do that?

CHAIR—It may be.

Mr Paratz—We have just been passed, by the representatives of the committee, a number of documents which have the appearance of being cable records, pressurisation records and so forth.

CHAIR—Are these the documents presented to the committee in our hearing in Sydney?

Mr Paratz—Yes. I am advised that the committee has taken a decision to make these documents public. I would like to advise the committee that we have some concerns about that. We obviously have not had a chance to look at these documents. They have the appearance of being Telstra internal records. What particularly concerns us is that I see in here what may be a very explicit description of our plant and its physical locations. That raises concern about the security risk if this was released in this raw form.

I am sure senators are well aware that we had a major disruption to communications in Sydney some years ago with an attack on our plant. So, whilst absolutely wanting to assist the committee to understand and resolve these issues, we would ask the committee not to make these public and that we have the opportunity to examine these documents, assess what they really are and to have a discussion with the committee around the security aspects of these documents.

CHAIR—The committee will consider your request. However, I think the documents are central to our inquiry. We were keen to question you on them, and we cannot do that unless they are published by the committee. It is also the case that they were provided to us a week and a



half ago. As I understand it, you knew at that stage what documents they were, even if you did not have them available to you. I suggest that might have been an appropriate time to inform the committee. However, if you wish to put this to us perhaps later this morning and mount a case for your argument, we would be happy to reconsider.

Mr Paratz—Thank you. I appreciate that, and we would be quite prepared to discuss with the committee today the general issues that I believe these documents relate to rather than the specifics, so the impact of the request that we will put to you formally is really about the very atomic and specific nature of some of the geographic descriptors.

Dr Warren—Senator, I have just been told that we asked to have the documents. We were told they were posted to us, and they were not.

CHAIR—The release of the documents to Telstra and to anyone else is dependent on a decision by the committee, and we had not made that decision until this morning.

Dr Warren—It was hard for us to make these comments back then.

CHAIR—Perhaps we will have this argument a little later, but I would have thought that, given the very lengthy questioning around these documents—I think Telstra was present at the time—and the fact that they are available on Hansard, it would have been quite clear to you, so I am not sure that I can accept your argument that, having seen them now, it is the first time you have understood the importance of them with regard to security. Can we proceed?

Mr Paratz—Thank you for the opportunity for Telstra to appear here today at this inquiry. I would like the opportunity to add briefly to Telstra’s written submission by way of some general comment. The Australian telecommunications network is highly regulated in terms of service performance, pricing and the interconnection and access arrangements between not only the 27 owners and carriers that have physical infrastructure but also the other players in the Australian telecommunications network, around 600 ISPs and, we believe, in excess of 100 licensed carriers and mobile operators.

Despite this, Telstra’s position in the Australian telecommunications network is scrutinised far more closely than that of the other carriers. This would often appear to be driven at least as much by the political debate about Telstra’s ownership as a desire to deliver better service to consumers. In such a highly charged environment, myths sometimes masquerade as accepted facts, and we believe this can seriously distort the public policy debate around the adequacy of the network and also unfairly damage Telstra’s brand and commercial position. The first myth is that Telstra is the Australian telecommunications network. Plainly and clearly, it is not. We believe Telstra’s network represents approximately 70 per cent of telecommunications infrastructure and is now subject to vigorous facilities based competition in most sectors. To be coherent, regulation needs to cover all players in the industry, not just Telstra.

The second myth is that, every time Telstra innovates and introduces a new service, this can and should immediately be made available at minimum prices to all competitors. Such an approach is often technically impossible and commercially unviable, and would choke off future innovation and investment. It is also inconsistent with the access regime introduced in 1991 which guaranteed access to bottleneck services only. Third is the myth that big is bad: that Telstra’s full service integrated network is bad for consumers and bad for competition. In fact,



competitors share the benefits of Telstra’s vertical integration through the access regime and the consumers benefit through lower prices. This is reinforced by the CEPU’s public opposition to structural separation concepts. Moreover, our size and ability to invest make Telstra the only Australian owned and controlled major force providing infrastructure for broadband, digital pay TV and, potentially, interactive television.

A small or uncompetitive Telstra would never be able to sustain basic services in suburban, rural or remote areas nor introduce new and innovative services. When it comes to investment for customer benefit, big is good. The fourth myth is that Telstra can and should provide identical technologies for everyone across the network and across Australia. Regrettably, no provider can do that, given the inherent technical limitations which affect distance and cost of service delivery. For example, ADSL has a limit of about 3½ to four kilometres from the exchange. This was well understood by both the Besley and Estens inquiries—where they focused on outcomes rather than inputs.

Fifth is the myth that Telstra can and should provide the latest technology to everyone immediately—thus before a commercially viable business model has been developed and genuine demand has been proven and established. In a highly competitive and commercial market it is economically unsustainable for services to be provided without regard to the cost or where there is inadequate demand. That is a recipe for sending a business or an industry broke, which in the end would hurt consumers and the nation. Alongside this, Telstra has repeatedly demonstrated its commitment to invest and roll out infrastructure to meet demand as it develops.

Correcting these myths is necessary for any informed political debate about the capacity and adequacy of the Australian telecommunications network. We would therefore submit that this inquiry should focus on the ability of the competitive network to deliver a variety of services and choices for customers and consumers, lower prices and a consistent improvement in service performance. How these outputs are achieved is the responsibility of the competing networks and the literally thousands of highly trained individuals that make those networks function. This output focused approach is crucial in an industry such as telecommunications which carries huge risks due to the constantly changing technologies.

Determining which technologies will provide the most efficient solution is the biggest issue facing network owners. The right solution today can become out of date within months. A wrong decision can cost billions of dollars and possibly bankrupt even the biggest companies; such as, for instance, the US giant Global Crossing. There is no correct technology when the only constant is technological change. The network itself, therefore, must be constantly evolving and companies like ours are always learning, adapting and refining.

In this environment, we suggest that regulators have two issues to consider. The first is to make sure the appropriate consumer safeguards are in place, something that affects all service providers in the industry. The second is to ensure that the regulatory regime is doing enough to encourage, and not to discourage, the investment needed to sustain the constant upgrading required to deliver the services expected. The terms of reference for this inquiry are clearly and correctly concerned with the output or performance of the network rather than the network operations.



This is absolutely appropriate and reflects the fundamental objective of telecommunications industry reform, first introduced by the Hawke government in 1991. Eliminating the Telecom monopoly in favour of competition fundamentally switched from a system of micro government control of the network operations to a system of regulatory oversight of network output and performance: a change from controlling inputs to regulating outputs. The success of this outputs based approach to regulation, introduced over a decade ago now, can be measured in the dramatically improved performance of today’s telecommunications networks throughout Australia. Thank you for the opportunity to add to our submission. We look forward to assisting the committee in its deliberations.

CHAIR—Thank you. Just to follow up on your comments earlier on the matter of the documents we have just agreed to make public, if you would like to suggest to us whether there is a particular column or identifier on these documents—I do not think we are prepared to accept your argument that none of this should be published—and indicate to us, over the next period of time what, if anything, you would prefer to see not published on these documents then we will consider that.

Mr Paratz—I will certainly ask my colleagues to attempt to get a position to assist us all on that as soon as possible.

CHAIR—Thank you.

Senator MACKAY—I might actually skip over the gratuitous advice on how we run our committee. The reality is that the terms of reference are there, determined by parliament, and my interest, as you would probably be aware, Mr Paratz, is the state of the network. To my knowledge, this is the first inquiry there has been into the state of the network for some time, so I am sure that the sort of information we are getting will make Telstra fairly uncomfortable. I want to start off with the issue of faults. I refer to the Estens report, where it talks about the E71 database. Is it correct that the E71 database is now known as the customer network improvement database?

Mr Paratz—That is correct, yes.

Senator MACKAY—At Senate estimates, I asked Mr Rix some questions about the customer network improvement database—to use a shorthand term, the faults database. He said:

We categorise orders by priorities from 1 to 5. The first three of those categories are escalated tickets of work that need work done straightaway, that are a safety issue or that relate to a complaint. All of those are service affecting ...

So the categories 1 to 3 are service affecting and categories 4 to 5 are not service affecting. If categories 1 to 3 are service affecting work orders, as Mr Rix indicated, how was Telstra able to tell the Estens inquiry that the ‘CNI entries are not service faults directly affecting customers’? I am referring to page 70 of the Estens inquiry report.

Mr Paratz—I believe that we discussed this proposition at estimates. The CNI database is not a faults database. It is a listing of things that Telstra, in its day-to-day operations, identifies that may need attention. The vast majority of those items are not faults. When we talk about it loosely, as in your question, as a ‘faults database’, I think it is important that we understand that



it is not a faults database. The management of faults is done through the CSG process, and that is a process that does track and understand faults.

Senator MACKAY—Mr Paratz, they are faults. I am saying that Mr Rix himself said that categories 1 to 3:

... are escalated tickets of work that need work done straightaway, that are a safety issue or that relate to a complaint. All of these are service affecting ...

Whether you, in an Orwellian sense, regard that as requiring attention or you regard it as faults is irrelevant—they are Telstra’s words at the estimates. Let us not argue semantics. I will be able to come to it as we progress, so there is no point having that argument.

Mr Paratz—The listings for CNIs are items that are noted in our day-to-day operations. Let us take a practical example that will probably assist to get clarity around the issue. If a pit lid had a crack in it—a pit being an underground box in a footpath or something like that—I think all of us could agree that that is not something that would have an immediate impact on customer service.

Senator MACKAY—What category would that be in?

Mr Paratz—It is possible that that could be regarded as a safety related issue, if there were a hazard.

Senator MACKAY—If it were safety related.

Mr Paratz—It may well be safety related. The example I am giving you is a demonstration of one which is safety related but not customer affecting.

Senator MACKAY—So what does ‘safety related’ mean?

Mr Paratz—I think it means the normal, common term: one of our people has taken a view that it is potentially safety related, it is safety related or it may become safety related. I do not believe our criteria are that prescriptive, and that is in fact why we write these things down—so they can be assessed.

Senator MACKAY—I understand that. Let us go through the categories. I have some documentation here. As I understand it, category 1 is defined by Telstra as ‘customers off the air’—I presume that means not connected, or extremely angry; I am not too sure—‘medical customers’ and ‘very high safety issues’, such as hospitals and schools et cetera. Is that definition of category 1 correct?

Mr Paratz—I have not got the document in front of me, but that substantially fits my understanding of it.

Senator MACKAY—Category 2, as I understand it, is called ‘CICERO complaints or level 2 escalated faults’. What are CICERO complaints?



Mr Paratz—CICERO is a database or computer system that we use to log in customer concerns and then they are managed by people in the company.

Senator MACKAY—But what are CICERO complaints?

Mr Paratz—A CICERO complaint is where a customer has contacted Telstra with a concern which may be a network concern, as I understand it, or they may be other concerns. I will take advice from my colleagues, but I think it could include things like concerns about an overhanging tree or something like that. It can be billing complaints. It is a wide range of things where customers have an issue, they wish to log it, and we then deal with it.

Senator MACKAY—There is no prioritisation. Anybody who rings up with a concern gets put into category 2; is that correct?

Mr Paratz—Then of course the ones that generate CNIs—not all of them would; a billing complaint, for instance, would not generate a CNI—are then assessed for action.

Senator MACKAY—And then determined whether they go into categories 1, 2, 3, 4 and 5?

Mr Paratz—Presumably.

Senator MACKAY—And this states ‘or level 2 escalated faults’. What are level 2 escalated faults?

Mr Paratz—As I understand it, they are where a customer fault has been reported—maybe by the customer, maybe by another party. Our processes have gone to the first level of fault finding, and that has not resolved the issue. That happens from time to time for more complex or difficult faults. So they are escalated to a higher level to get a resolution.

Senator MACKAY—Presumably that is because they are level 2 priority. That is why they are in level 2 rather than level 5. I presume this is a priority order; Telstra describes it as a priority order.

Mr Paratz—Yes.

Senator MACKAY—The third category, as I understand it, is safety issues. We have already gone through the definition of safety issues. Then the fourth category is ‘previously used for team leader escalations, now used for CNIs, i.e. faults in the WMCQ ... for issue to local staff or CNIs with re-reports waiting validation’. The fifth category is ‘non-service affecting’. That is my understanding of the five categories, which we have talked about at some length.

Mr Paratz—I think an important clarification is that I would not draw the inference that 1 to 4 are by definition service affecting just because the fifth one is called non-service affecting.

Senator MACKAY—No, but one would assume that 1 to 3 may be service affecting.

Mr Paratz—I think we can say that 1 to 3 may be service affecting, yes.



Senator MACKAY—I would suggest that customers off the air, medical customers, very high safety issues, hospitals, schools, level 2 escalated faults and safety issues—I think one would take it that they are service affecting.

Mr Paratz—Within those there will absolutely be some service affecting ones. I think the safety one that we discussed earlier, like a cracked pit lid, is not service affecting.

Senator MACKAY—Yes, I know. That would presumably be category 5, if it was not service affecting?

Mr Paratz—No, under my understanding, it would be category 3.

Senator MACKAY—Whether it is category 3 or not, it is regarded as a safety issue: correct?

Mr Paratz—It is a potential safety issue, an actual safety issue. The purpose of this system is actually to allow us to identify things that happen out there and assess them. That is really why we put these things together.

Senator MACKAY—I know. That is very kind of you. It also assists us in determining the level of faults.

Mr Paratz—Good.

Senator MACKAY—The Estens report quotes a figure of 104,500 CNIs as of February 2002. Why didn’t Telstra provide the Estens inquiry with a more up-to-date figure? Why February 2002? The report came down on 8 November, I think.

Mr Paratz—Submissions would have been about August-September. I will get some advice as to whether that was the latest available.

Senator MACKAY—That is really my question, I suppose.

Mr Paratz—I am advised that there certainly has been a change in that period to the database that is holding those—the change from E71s to CNIs—so that may be the most recent complete report in a form for giving to the committee.

Senator MACKAY—I would check that, if I were you.

Mr Paratz—We can check that for you.

Senator MACKAY—I would check that now. Is it the latest available information or not?

Mr Paratz—I am advised that the number is very much the same in any case.

Senator MACKAY—That was not my question. Is that the latest information available?

Dr Warren—That is what we are checking.



Mr Paratz—That is what we are confirming.

Senator MACKAY—How do you track the CNIs? Do you have six-monthly reports, annual reports or monthly reports?

Mr Paratz—CNI is an integral part of the activities of our operations group. They would be monitoring that at various levels on a daily, weekly and monthly basis.

Senator MACKAY—So it is possible to get a snapshot of the faults database on a weekly basis?

Mr Paratz—I take it you talking about the CNI database?

Senator MACKAY—Yes.

Mr Paratz—I would expect that that database is a real-time database. Things are put into it, things are taken out of it, and you can take a read from time to time.

Senator MACKAY—Does Telstra take snapshots on a weekly basis?

Mr Paratz—I am sure that at various operational levels we have people looking at it daily.

Senator MACKAY—So, in theory, if you wanted to you could provide the committee with a snapshot on a weekly basis of the state of CNIs across the network?

Mr Paratz—The information we would provide outside the company necessarily might be different from what we would see for operational purposes. For instance, in the CNI database there is material that is subject to the privacy provisions that apply to Telstra and its staff, so there may be additional processing—

Senator MACKAY—I am talking raw figures here; I am not talking names or anything like that.

Mr Paratz—required to go from the operational information, which is used day to day, to something that we could report publicly on. So the nexus between our day-to-day use of the database does not flow to us being able to report publicly daily.

Senator MACKAY—But you could. If I asked as a committee member—and the committee so resolved—Telstra could in theory provide a weekly snapshot of the CNI database.

Mr Paratz—But it may take us three, four or six months to expunge the privacy information. It may be a different time scale from the operational time scale.

Senator MACKAY—We are not asking for names or addresses; we are asking for raw data. Could Telstra at any point provide the committee with a weekly snapshot of raw data from the CNI database?



Mr Paratz—By way of clarification, is the question: could we provide it weekly for that week? If so, I think the answer is probably not.

Senator MACKAY—Why not?

Mr Paratz—Because of the time taken to process it and get it into a form suitable for external release.

Dr Warren—We did not create the database as a monitoring tool for external parties; we created it to deal with customer concerns. It might take us six months to make it appropriate for you to have those figures on your desk each morning.

Senator MACKAY—You want to be careful, because I have actually got one. According to figures which have recently been quoted to me, in the ‘National and regional outstanding CNI snapshot (weekly)’ for Tuesday 3 December, which is now two weeks old—I am sorry about that, but I am sure Telstra can give me an update—the total faults recorded in the CNI database were 111,750. Is that correct?

Mr Paratz—I do not have the document in front of you. Could we have a copy of that, please?

Senator MACKAY—Yes, you can. It is taken from the weekly report downloaded overnight every Tuesday. It is called ‘National and regional outstanding CNI snapshot (weekly)’.

Mr Paratz—We released that document to you, did we?

Senator MACKAY—I have it, so I am going to release it publicly if the committee so determines. Presumably you know the current number of CNI faults. What is the latest figure?

Mr Paratz—I note that the figure you quote and the figure in the Estens report are materially in the same range: 104,000 to 105,000 versus 111,000.

Senator MACKAY—Actually, there is an increase of 7,000 from the information you provided to Estens in February to the two-week-old information I have. Isn’t it true that a priority 1 CNI, as I indicated, is where customers are off the air, are medical customers or are customers with high safety issues, such as hospitals? The answer is yes. How many priority 1s are currently in the system?

Mr Paratz—Senator, could I ask you to share that document with us, please?

Senator MACKAY—You do not have this information with you?

Mr Paratz—I do not have it with me, no.

Senator MACKAY—We will arrange for you to have a photocopy of this document.

Senator LUNDY—While we are waiting for that document, perhaps I could ask a question. At the hearing we had in Melbourne on Tuesday, 26 November, witnesses referred to a



document called ‘Rural and remote access technologies and features summary’. The committee has since requested that document from Telstra. The advice from Telstra to the committee initially was that an updated version had been prepared but that Telstra was not prepared to release it. I now ask Telstra to provide that document to the committee. If you have not brought it with you today, can you please make arrangements to make that document available to the committee—preferably within the next half an hour so that I can refer to it?

Mr Paratz—Senator Lundy, you say that you have been advised that that document has been updated. Could you share with me the source of that advice?

Senator LUNDY—Athol Chalmers.

Mr Paratz—Mr Chalmers has just confirmed my understanding of the issue. The document you refer to was in fact a personal set of notes from a Telstra staff member rather than an official Telstra document. Notwithstanding that, I can absolutely understand that it is a useful document for all of us. Mr Chalmers has just confirmed that he indicated to you that it was being updated—not that it had been updated—and that that process is going on at the moment. We can certainly undertake to provide you with a copy of that document when that updating has occurred. That would take it from its present status, being someone’s personal notes from some time ago, through to something that we could use as a basis for discussion. But that process is ongoing.

Senator LUNDY—That is an unsatisfactory response. Clearly, the information is available. Are you prepared to give a time at which you can deliver that document to the committee?

Mr Paratz—I will just consult with Mr Chalmers. Mr Chalmers has indicated that he believes it could be delivered to you by the middle of next week.

Senator LUNDY—Thank you. I will look forward to receiving it.

ACTING CHAIR (Senator Tchen)—Mr Paratz, Senator Mackay has just informed me that the copy that has been circulated contains quite a few of her written notes and she would like to retrieve it. We will recover it from you later.

Senator MACKAY—The comments are just for working purposes. You can use the document now.

ACTING CHAIR—Use it now, but we will substitute a clean copy.

Mr Paratz—My colleague has just said that he cannot read those notes anyhow, but we will certainly respect the request.

Senator MACKAY—Nobody can read my writing, which is very handy. So what do you think about that then?

Mr Paratz—We are not in a position to know what this document or piece of paper is that you have given me—whether, in fact, it is an authorised piece of paper. To my knowledge, we in Telstra certainly have not given this to you or to the Senate inquiry.



Senator MACKAY—No, you did not give it to me—that is right.

Mr Paratz—It is absolutely impossible for me to comment on any numbers in here, until we have gone away and authorised it. Given the comments just made by Senator Tchen, I wonder whether it is possible for you to supply us with a clean copy of this without your annotations—

ACTING CHAIR—Yes, that is being prepared now.

Mr Paratz—Then we can take it away, get it checked and make sure that we understand what we are talking about and what this piece of paper is or purports to be.

Senator MACKAY—As you will see, this document talks about various reporting periods on a weekly basis. In the documentation I have been given, the aggregate is 111,755. Is that figure accurate? Telstra must know how many entries there are.

Mr Paratz—I cannot identify the document by looking at what you have supplied.

Senator MACKAY—No, I am not asking you that. I am asking you: how many entries are there in the CNI database?

Mr Paratz—I think we can get that information; hopefully, we can get it for you in a very short time this morning.

Senator MACKAY—Is this correct or not?

Mr Paratz—I am not in a position to comment on whether this document is correct or not, because I do not know what this document—

Senator MACKAY—No; is this figure correct?

Mr Paratz—I have just undertaken to get that information for you. Perhaps we could return this and ask you to supply a clean copy so that we can have it authorised.

Senator MACKAY—You can have that until we have given you a clean copy.

ACTING CHAIR—That is being arranged now.

Senator MACKAY—We have managed to agree that priority 1s relate to medical customers—customers with high safety issues, such as hospitals, and customers that are off the air. How many priority 1s are currently outstanding?

Mr Paratz—That is the information I have just asked my colleagues to go and fetch for us, and so I do not have that information here for you right now.

Senator MACKAY—How long will it take to get that information?

Mr Paratz—We have just sent people out to get the numbers.



Senator MACKAY—I will pass over to Senator Lundy and continue when you have got that information.

Mr Paratz—We are getting it as expeditiously as possible.

Senator LUNDY—Going back to your opening comments, I found—as Senator Mackay did—some of your suggestions to the committee quite gratuitous. I would like to explore why Telstra is so afraid of having a high level of scrutiny on the actual physical network that is currently in place. I note that you said 70 per cent of the network in this country is Telstra’s. Why do you have a problem with this committee investigating the actual physical state of the Telstra network? Also, why are you so insistent that this committee take your advice and focus on outcomes to consumers? What are you afraid of?

Mr Paratz—Telstra has absolutely no difficulty in discussing with this committee the network and any technologies in it. That certainly is not the intent or even the content, I believe, of the opening statement. The point that we are making, though, is that our industry is a multitechnology industry; that is its nature. At the end of the day, it is measured by the outcomes for customers and consumers, and the value of any network operation can only be measured in those terms. In any network, technologies come and go. There are physical disturbances—there were bushfires in Sydney last night and they are again occurring this morning; we have plant being destroyed as we sit here and we have people out there doing very important work to support the fire services. They are the sorts of things that happen in a real world. I guess our request of the committee is that the discussion of the physical plant be in the context of outcomes. In no way is Telstra seeking to limit the scope of the committee or its investigations.

Senator LUNDY—You cannot, so there is no problem there.

Mr Paratz—And neither would we seek to.

Senator LUNDY—I am just curious as to why you are advocating it.

Dr Warren—Also—and this point has just been made by Mr Paratz—the network is very dynamic. We were mandated back in 1991 to lower prices, improve service quality and increase the range of services, while reducing the draw on community resources. That last thing is quite important. Basically, it means that we have had a productivity improvement since 1997 of an annual 5.5 per cent, compared with national productivity of 1.2 per cent. That means that, if you go through the network, you will find bits of it that have changed. There will be bits of the network that have been downscaled—

Senator LUNDY—I really do not have time for a lesson in what has changed since 1991.

Dr Warren—What I am trying to say is that what matters to consumers out there is outputs. We can sit here and talk until the cows come home about the input side, but I would have thought that what really matters is whether it is customer affecting.

Senator LUNDY—Let us talk about that. What information does Telstra have for this committee about the precise level of service delivered to every customer in the country? You are the only organisation that could provide that information. The government does not have the



capacity to do that because you still have an effective monopoly in a large part of the market in Australia. What detail do you have? I can tell you that, for all the statistics that we have been provided, there are continued inconsistencies, as Senator Mackay has drawn out.

Senator MACKAY—I have only just started to draw out.

Senator LUNDY—It is very difficult from this committee’s perspective and from the parliament’s perspective to get a clear picture of what consumers are actually experiencing, other than continuing and ongoing complaints about service levels. I am sure you can appreciate that the parliament has now determined that, because we have been unable to solve the mysteries of Telstra’s poor service in a number of areas, highlighted in inquiry after inquiry, we are now turning to the physical infrastructure as a way of getting to the bottom of the problem. Our investigations so far have been incredibly informative. The only barrier to getting the sort of information that we need to further inform the debate on this issue, from a consumer perspective, is asking Telstra for that information. I have previously, for example, in relation to ADSL and its reach around Australia, asked Telstra about where those services are able to be provided and what proportion of customers in those areas who can actually get ADSL. That information has not been forthcoming. What do we get back from Telstra? That it is commercial-in-confidence. So do not sit there and tell me that it is about the consumer, when the one organisation in this country that can provide us with detailed information refuses to and uses the shroud of commercial-in-confidence to prevent that information from coming forward.

Today I intend to ask a series of comprehensive questions about that detailed information, and I look forward to receiving it from Telstra because that will be the ultimate test about whether or not you are serious about consumers and the outcomes in telecommunications services. We will see what sort of information is forthcoming over time—including the document that I requested previously—when, for all intents and purposes, the committee understood that that information would not be provided by Telstra. I acknowledge that you have said that you will provide it to me on Wednesday next week and I look forward to getting a comprehensive document. I can tell you that I will be coming straight back to Telstra if it has any less information in it than the document that was referred to in the hearings in Melbourne. It is my understanding that that document did detail the types of technology that is used in all the exchanges, the capability of that technology as far as reach to customers is concerned in dial-up bandwidth speeds, dial-up Internet connectivity speeds, as well as the availability of dial tone and whether or not there are any inhibiting factors on that type of technology that could in some circumstances prevent some customers from accessing the network. We want the technical information; we want to know about the physical network.

Dr Paterson—Could I point you to the network reliability framework which, when it is first reported on in February next year, will give a new level of information at the customer level, and at a very specific geographic level, about customer service and customer experience around network reliability.

Senator LUNDY—Can you tell me why Telstra made a decision to prevent information relating to ADSL being made available to the parliament? Can you also tell me why the question on notice was answered with the response that it is commercial-in-confidence?

Mr Paratz—The information about where ADSL is available is widely available, both to Telstra and to other suppliers who work off our network. I believe the commercial-in-



confidence components applied to forward plans. We gave you a response at estimates hearings, maybe two weeks ago, outlining that ADSL is available at 800 exchanges that in this financial year roughly 100 exchanges are planned for additional ADSL, and we have indicated to you that we are actively exploring technology solutions to extend that reach. Until we have completed those technical investigations, it is almost an impossible question to ask us to somehow lay out a five-year works program for technologies that we have not even seen. We are happy to share with you materials in the public arena.

Senator MACKAY—That is very gracious. You keep saying that.

Mr Paratz—Let me reword that, Senator Mackay: it is only reasonable for us to share with you information which is of that nature.

Senator MACKAY—Just before Senator Lundy continues, don’t you regard it as pathetic that a Senate committee has to rely on information that we get privately from people in order to substantiate our inquiry? Don’t you think it is pathetic that Telstra cannot give us the level of detail we require?

Mr Paratz—We are trying very hard to supply you with all the information that we can.

Senator MACKAY—You are not.

Mr Paratz—We have brought along people well equipped to answer these questions.

Senator MACKAY—Senator Lundy is absolutely dead right: you are not. You are not providing the people of Australia with a true and accurate picture of what is going on and we, as senators, have to rely on information that falls off the back of a truck to get an accurate picture of what is happening in Telstra.

Senator LUNDY—A case in point—and I will come to this in my questioning—is the questions we asked at Senate estimates recently about the use of air bottles to maintain air pressure in cables. That information has not come from Telstra. Fortunately, it has been made available to the committee from somewhere else. That is an excellent example of the sort of obfuscation that we are experiencing.

Mr Paratz—I am very reluctant to get into a point-by-point debate on this, but I understand you asked a question, we undertook to get you the information and we are getting you the information. The fact that you had a prior document from another source makes it very difficult for us. There are so many questions you could ask on a given day about so many minute objects. We cannot supply that information on 30 seconds notice.

Senator MACKAY—Why in your submission didn’t you give us a snapshot of the start of the network?

Dr Warren—I thought we did. We used things like the CSG performance et cetera

Senator MACKAY—That is not empirical data. That is not the sort of thing that Senator Lundy and I—



Senator LUNDY—Just for the record, Mr Paratz, you mentioned the tragic bushfires that are currently occurring and that Telstra has plant going down. Will Telstra be claiming a mass service disruption for those fires and, therefore, those customers will not be eligible for the CSG anyway?

Mr Paratz—I do not know.

Senator LUNDY—I think the answer is most likely yes.

Mr Paratz—In the last Sydney bushfires the answer was yes.

Senator LUNDY—Thank you—just to clarify that point.

Dr Warren—Just on the CNI database, it did say at estimates on page 64 that it is February 2002. It also says elsewhere in the report that current levels are similar. We provided the estimates inquiry with supplementary data as at 1 October 2002.

Senator MACKAY—That was not in the report.

Dr Warren—We did not write the report.

Senator MACKAY—That was not the question I asked, but I will come back to that. I have a fairly extensive line of questioning on faults.

Mr Paratz—Just for completion of the record, I have just been advised by one of my colleagues that, for customers who have had their houses burnt in the bushfires, we are supplying a free phone service.

Senator MACKAY—So you should.

Mr Paratz—And so we do.

Senator MACKAY—Thank you.

Senator LUNDY—Perhaps if I could just go to the submission received on the 11th from Telstra’s legal and regulatory, from Mr Paul Paterson. It is a clarification with respect to Telstra’s broadband figures. It says:

As the Committee will note from the attached media release, the total number of Telstra’s broadband services has grown by 45,000 to 216,000 in the September 2002 quarter. In particular, in that quarter demand for Telstra’s wholesale DSL services grew by more than 65 per cent.

The press release referred to is a correction of the Telstra DSL services, which revises the numbers down. Dr Paterson, can you explain how that error occurred and where, if at all, the incorrect broadband figures were either reported in the media or referred to in any government or independent publication?

Dr Paterson—Taking the second part of your question first, I am really not in a position to answer as to where those figures have been reported.



Senator LUNDY—How long were the incorrect figures out there?

Dr Paterson—On the first part of your question, to put those figures together we draw information from many different sources across the company. As it turns out, an error occurred in pulling that information together. When we realised that, we made that known and we have since, of course, corrected the way that is done to provide correct statistics.

Senator LUNDY—But how long was the incorrect information in the public domain?

Dr Paterson—From the time of publication.

Senator LUNDY—Which was?

Dr Paterson—I am sorry; I cannot tell you off the top of my head. We can certainly get that for you.

Senator LUNDY—It was corrected, I presume, on 11 October when this release was put out?

Dr Paterson—That is right.

Dr Warren—Senator, I was talking to the person who was involved. It was a double counting error.

Senator LUNDY—The press release explains that it was a double counting error.

Dr Warren—I know the person who found it. She could not believe it. She double-checked it and she was told, ‘No, we didn’t do that,’ and then, ‘Oh oh, we did.’ The press release and the report came out within a day of that.

Senator LUNDY—I am not questioning that. I just want to know how long the incorrect figures were in the public domain and if they were used or referred to in any media or reports.

Dr Warren—We will check that for you, but I suspect they were used in the ACCC’s broadband monitoring report.

Senator LUNDY—Any other reports?

Dr Warren—They were originally used in our submission. That is why we wrote to the committee immediately to inform them.

Senator LUNDY—The submission to this committee?

Dr Warren—To this committee.

Senator LUNDY—What about to the Estens inquiry?

Dr Warren—No, the Estens report was produced after those numbers. I think they were originally sent to the Estens inquiry and then we corrected them.



Senator LUNDY—Can you provide me with the correspondence that you sent to the Estens inquiry in relation to this matter?

Dr Warren—We can, but it was presumably the same as what you got.

Senator LUNDY—I am presuming it was dated 11 October.

Senator MACKAY—While you are at it, can we get the supplementary figures on CNI that you gave to Estens.

Dr Paterson—Importantly, Senator, those figures have since been updated and in fact overtaken by more recent figures for 30 September, as documented in an ACCC report which gives broadband figures for 30 September 2002.

Senator LUNDY—Sorry, can you say that again?

Dr Paterson—Yes. The figures in question were for June 2002. There are now September figures available.

Senator LUNDY—Your point being—that they have been corrected?

Dr Paterson—Yes, they have.

Senator LUNDY—Are you trying to make another point?

Dr Paterson—There has been a more recent measurement taken and reported.

Senator LUNDY—We knew that. We knew they had been corrected; we knew there was more information out there. Are you trying to make another point that is going over my head or something?

Dr Paterson—No.

Senator LUNDY—Can you take it on notice to provide that information and any other written correspondence to organisations other than Telstra seeking to correct the inaccurate data that was circulated?

Senator MACKAY—Have you got that other information yet? How long is it going to take?

Mr Paratz—I am advised by Mr Chalmers that he believes we will have it before we are finished.

Senator MACKAY—I really cannot continue my line of questioning until we have got it. How long will it take?

Mr Paratz—Mr Chalmers will see whether he can confirm the time scale.



Senator MACKAY—Very good—thank you. We need as much time as possible, because I have got a lot of information here.

Senator LUNDY—Perhaps I could continue by also referring to the documents tabled last week—the ones that the committee is currently considering whether or not we should modify the detailed location information in. The documents refer to the state of the cable network and relate to evidence the committee has received about the leaks in the cable and the maintenance of and alarm system for air pressure in those cables. I understand these documents relate to New South Wales and the ACT, sometimes in all and sometimes in part. I am looking for confirmation that from the period of 1 September to 30 September approximately 3,122 air bottles were used to maintain air pressure at some 44 different locations at a cost of over $100 per air bottle. I know you received the documentation only this morning and I assume you will need some time to confirm those figures, but that is quite an extraordinary expense. Effectively, if it is $100 per bottle it is over $300,000 per month just to blow enough air into your cables so that they do not have leaks or allow moisture in.

Mr Paratz—As you have correctly identified, obviously we just received those figures this morning. I am happy to deal with this on the basis that we discuss the issue rather than whether it is 3,122 or 3,123.

Senator LUNDY—I would like to do that, but perhaps I could put it on notice for Telstra to provide the comparable record. The title of the NDC document is APCAMS—New South Wales, all regions, all groups, all MUs: cylinders between 1 September 2002 and 30 September 2002. It would be useful for the committee to have the comparable document for that month for all states and territories of Australia so we can get at least a snapshot of the way in which Telstra uses air bottles to maintain air pressure in what are obviously main cables. I cannot remember the terminology; there is a terminology for the sorts of cables that have air pressure in them.

Mr Paratz—I believe we can do that for you. We will undertake to do that.

Senator LUNDY—Another document that was provided is entitled NDC National IAL monitoring spreadsheet: metro. This document is dated as covering the period between January 2001 and June 2002. It has a description of the nature of the leak in each of the cables identified and has a series of dates as to when those complaints were responded to, the cost, and the start and end date of the bottle support for each of those faults. There are over 300 cables in this metro data sheet alone that are getting that bottle support and have obviously got a price next to them for rectification. I would also like Telstra to take it on notice to provide the comparative document for all regions in Australia for the same period, January 2001 to June 2002 so the committee can get a clear picture. I have to say the figures are quite astounding—as I am sure you will confirm, now that you have a copy of these documents.

Finally, I would like to refer to the larger of the documents. This is a database identifying the cables associated with each exchange, the planning region—whether it is urban or rural—the cable size, the presence or absence of the APCAMS alarm, the air pressure within the cables and the priority rating of that air pressure. I am looking at the document that is notionally numbered 3; I am not sure about that.

First of all, my interest is in whether an APCAMS alarm is present. Secondly, given that we have heard evidence that Telstra’s air pressure standard is now 40 kilopascals, it seems fair to



say that the vast majority of cables kept under air pressure to help resist leaks are at less than 40 kilopascals, which is the already reduced standard Telstra now applies. I am trying to respond to your request to keep the questions general. I do not know if that is general enough. Why are the vast majority of cables that are kept under air pressure—and we only know of those alarmed with the APCAMS system—at under 40 kilopascals?

Mr Paratz—Thank you for assisting us to answer and address these issues.

Senator LUNDY—I am trying to make it really easy for you.

Mr Paratz—Subject to the discussion we had earlier, we will attempt to provide you with information substantially of this form, consistent with the security issues we raised earlier. I can—I hope usefully—address some of the questions arising from the 40 kilopascals discussion. The first point to be made is that there has been no change, as far as I am advised, in Telstra’s standards. The compressors that feed the air cable system generally put out around 70 kilopascals. The 40 number is an alarm level. If the pressure in the cable falls to 40, that is the point at which you say, ‘I need to pay attention.’ It does not necessarily mean the cable is faulty at that point and it does not mean the customers are affected—in fact, they are not; it is an alarm point.

Senator LUNDY—Do you concede that falling pressure could make that cable more susceptible to, say, water damage in the event of a rainstorm?

Mr Paratz—Our information is that the point at which you start to worry about actual damage and degradation is below 20. So the 40 gives you headroom to assess, respond to and deal with the issues. That is why it is set at 40.

Senator LUNDY—Why 20, though? Where did you get that figure from?

Mr Paratz—Twenty is two metres head of water; it is a physical number.

Senator LUNDY—Sorry, what is it?

Mr Paratz—It is two metres head of water. It is the amount of water that would sit outside the cable in a practical situation.

Senator LUNDY—Two metres?

Mr Paratz—We are not talking about cables that run under the Pacific Ocean where you have to keep out the Pacific Ocean; we are talking about ground water risk. So, in a typical situation, 20 suffices—

Senator LUNDY—Twenty kilopascals of pressure will keep out two metres of water sitting on top of the cable?

Mr Paratz—Yes. There is another point I want to clarify, just to make sure we do not get into a subsequent debate about changing standards. The standard has always been 40. There are two ways—an old way and a new way—of determining the alarm condition. The older system was a



mechanical detector, and that mechanical detector is reasonably inaccurate. Because we want to be sure we hit the 40 point, we set the mechanical detector with a margin of 10 above that to allow—

Senator LUNDY—So at 50?

Mr Paratz—Yes. That allows for the variability in the mechanical detector.

Senator LUNDY—We heard evidence that it used to be 70. How do you explain that?

Mr Paratz—That is the feed pressure; that is not the alarm pressure. The modern detectors are electronic and are much more accurate, so you do not need the same offset to ensure that you pick it up when the pressure is dropping. The feed pressure has always been 70 and the alarm you are trying to hit has always been 40. The purpose of that is to give you headroom to be able to respond before it gets to 20. Because of the different sorts of detectors, in practice you have to put in a little margin for the older mechanical detectors.

Senator LUNDY—Can you tell me why not all the cables identified in this document have a pressure reading next to them? Is that because a significant proportion do not have an APCAMS alarm on them?

Mr Paratz—I will not respond in terms of the information on the document, as we have discussed earlier, but I can confirm for you—

Senator MACKAY—That is not what we agreed.

Senator LUNDY—That is not what we agreed. You said you would be prepared to answer general questions.

Mr Paratz—That is what I am going on to do, actually.

Senator LUNDY—It does relate to the document in front of us.

Mr Paratz—I can confirm that we have a number of cables under pressure but which are not currently monitored. We have a retrofit program under way in relation to those cables. It is a 2½-year retrofit program. In this financial year we are spending $800,000 on alarming those cables using the new techniques. If your question is whether we believe it is appropriate that those cables be alarmed, the answer is yes. Do we have that under way? Yes, we do.

Senator LUNDY—Why have you only just started doing that?

Mr Paratz—This is not uncommon around the world—

Senator LUNDY—I do not care about around the world. Why is Telstra just starting to do it now? It sounds to me like a very clear acknowledgment that there has been negligence on the part of Telstra.



Senator TCHEN—Senator Lundy, earlier you accompanied one of your questions with a four-minute commentary. I think you should give the witness a reasonable time to answer at his own pace.

Senator MACKAY—Can I respond, Chair? I think Senator Lundy is quite happy to do that if the answers are short and actually answer the questions she is asking.

CHAIR—Let us all focus on short questions and meaningful answers.

Mr Paratz—We need to look at a little bit of history here, and I apologise if it sounds like a history lesson. I guess hindsight is a wonderful thing for everyone in this room. If we go back a few years, the commonly held view was that hybrid fibre coax was going to take over from copper. If we go back to a few years after that, the commonly held view was that fibre to the kerb would be ubiquitous by about this date. Those things have not occurred. What has occurred, though, is that new technologies have emerged which meant copper was able to deliver broadband much more strongly in the future than anybody anticipated. The management of copper networks—and this relates to my comment about ‘all around the world’—obviously took into account the fact that people drew a line in the sand and said, ‘That is where we believe the end of copper is.’ In fact, that has turned out to be wrong. As a result of that, the plant we saw as having a finite lifetime we now see as having a longer lifetime. We are now going back and improving the protection arrangements to ensure that it has that lifetime.

Senator LUNDY—In other words, you concede that Telstra’s network is currently vulnerable in ways it should not be in a best-case scenario?

Mr Paratz—I believe we are managing the network. We have arrangements to maintain service. The evidence is that fewer than three per cent of faults are in this part of the network. So the evidence and the outputs show that it is being managed competently. Are we doing a retrofit program to increase the alarming of the network? Yes, we are.

Senator MACKAY—I have a specific question which you might want to take on notice. The documents that we just released publicly—with the expunging the chair alluded to—were a snapshot of the situation in New South Wales for the month of September. The first of those documents showed that there were 254 identified faulty leaks across New South Wales. Is that correct?

Mr Paratz—While remaining generic, can you refer me to which of the documents you are looking at? They are numbered.

Senator MACKAY—Document no. 1—‘National IAL monitoring spreadsheet: metro’.

Mr Paratz—You are looking at a number on which sheet?

Senator MACKAY—I have counted them up: it is 254.

Mr Paratz—You have counted them, have you?

Senator MACKAY—Yes.



Mr Paratz—I can confirm that there would appear to be around 254 lines on the document.

Senator MACKAY—From the work done by Senator Lundy and our staff, document No. 3 seems to indicate that every cable in New South Wales is under some kind of pressure. You may want to take this on notice for comment.

Mr Paratz—Yes, I will take that on notice.

Senator MACKAY—The CEPU alleged in Sydney last week that NDC has a $19 million per year contract to look after air pressures on the main cable network. Is that correct?

Mr Paratz—I believe NDC are the prime contractor, yes.

Senator MACKAY—What time frame would Telstra regard as temporary in relation to gas bottles?

Mr Paratz—That really comes down to the degree of the degradation. I believe that there are situations where it is reasonable that a gas bottle be there almost indefinitely—

Senator MACKAY—That is not temporary, then, is it. ‘Almost indefinitely’ is not temporary.

Mr Paratz—I would just like to complete my answer. I also believe there are situations where gas bottles are absolutely an interim stopgap and it is necessary to quickly move to a repair. We have some very technical people to make those assessments. I would see a range of times as reasonable.

Senator MACKAY—Document No. 4 that has been tabled by the committee shows that there have been bottles on most locations listed for months. In fact, the oldest that my staff could see goes back to January-February 2001.

Mr Paratz—If that is the fact, I would not necessarily find it remarkable or concerning. There may be instances where it is reasonable.

Senator MACKAY—It is hardly temporary. Document No. 4 also shows that the total number of cylinder locations in New South Wales in September was 404, but the total amount of cylinder changes in all cables for September was 3,122. I suppose you can have a look at that and check my adding up.

Mr Paratz—I think those numbers really have to flow subsequent to the authorisation process we have got going, but I am happy to talk about these issues at a general level.

Senator LUNDY—I should say that when I referred to this earlier I think I said 44, but Senator Mackay is right: it actually says 404 locations on my notes.

Senator MACKAY—What is the cost to Telstra for a gas bottle? Is it about a grand each?



Mr Paratz—We would have to get some information on that. That sounds like a fairly large number to me, but we will check that.

Senator MACKAY—Document No. 4 also shows that for exchanges in Glen Innes, Double Bay, Erina, St Marys, Haymarket, Nowra, Kingscliff, Long Jetty, Lidcombe, Blakehurst, Oxford Street Sydney and Mawson there have been 30 bottle changes per month. Given that the use of bottles shows a leak in the cable and that there have been 30 bottle changes per month in those areas, can we conclude that heavy rainfall is going to have an impact on services in those areas?

Mr Paratz—No, you cannot conclude that.

Senator MACKAY—Why is that?

Mr Paratz—The number of bottle changes per month at any exchange depends on the number and length of cables in the area. When we get some information tabled, it is probably bottle changes per kilometre or per cable that is useful. If the bottles are being changed and the air pressure is being maintained, then the system integrity is intact. That is a legitimate process and it makes no difference whether the air is coming out of a compressor or out of a bottle. It is the same air doing the same job.

Senator LUNDY—The question I want to ask is one of efficiency. NDC are getting paid $19 million to maintain the network. Is it NDC staff who change the bottles?

Mr Paratz—I believe it is NDC staff. Obviously for a network operator such as Telstra there is a balance between zero bottles and a number which is too high. We are investing at the moment in improved alarm systems. I would not be surprised—in fact, I would expect that over time the number of bottles reduces. But that is a management question, not a network integrity question.

Senator LUNDY—Because of that $800,000 investment that you referred to? Does that relate to this?

Mr Paratz—That is obviously part of it.

Senator LUNDY—What is the other part of it?

Mr Paratz—The other part of it is that remediation and repair is built into our operational budgets.

Senator LUNDY—Do you factor in the cost of plastic bags?

Mr Paratz—Not for this job.

Senator LUNDY—We have heard that you use plastic bags to stem leaks into cables.

Mr Paratz—You will have to indulge me while I do a little bit of explanation of context. You asked a question on notice at estimates around plastic bags. The use of plastic bags is a



discussion in the distribution part of the network, and we have supplied you with an answer around that. We are now talking about a different part of the network—the main cable network.

Senator LUNDY—Are you telling me you do not use plastic bags on the main cable network?

Mr Paratz—I am not aware of it.

Senator LUNDY—Can you take that on notice?

Mr Paratz—I would be surprised if we were generally using plastic bags on the main cable part of the network.

Senator LUNDY—I would be very surprised if you were using them at all. That is my question: are you using plastic bags at all on your main cable network?

Mr Paratz—We will take that on notice. It sounds like maybe one of our staff has done a very pragmatic thing in the field.

Senator MACKAY—By necessity, I suspect.

Senator LUNDY—To follow up the issue of efficiency—you have a huge number of bottles being changed over. Senator Mackay listed the ones that are changed on a daily basis and there are a huge number being changed over every two, three, four or five days. That means an employee of NDC has to go and physically change the bottles. They can probably change half a dozen bottles in a day, depending on how far they have to travel between them. How efficient is that in terms of your staffing costs? Senator Mackay and I and others have explored at great length the numbers of staff that Telstra have been cutting over the years and yet we find that, clearly, the fortunate few who are left spend most of their life changing bottles. Where is the efficiency in that?

CHAIR—We will leave it at that question. Mr Paratz, can you respond?

Mr Paratz—Yes. You identify a large number of bottles. There are also a large number of cables out there. These are the ones that are reported; there are many cables that are not on this report. Our approach is to look at these things as a day-to-day management thing. I am sure if my operational colleagues were here they would run you through the way in which they are working to reduce the incidence of bottle changing. It is obviously not something that we like to do either, because of the cost. On the other hand, it is absolutely legitimate that there is some bottle changing going on. At the end of the day, as I have explained in my answers, this is a question of operational efficiency, not a question of network integrity, because the bottles are maintaining the network integrity.

CHAIR—Have you had a chance to examine the table entitled ‘National and regional outstanding CNI snapshot (weekly)’? Can you verify that this document was produced by Telstra? Do you need some more time to do this, Mr Paratz?



Mr Paratz—We will return the marked copies, and we thank you for the clear copies we can take away. I have some preliminary information here that my colleagues have got—

CHAIR—Are you not in a position to answer the question of whether this is a Telstra document?

Mr Paratz—I am not in a position to answer that question. There was an earlier request to get some numbers, and I am in a position to deal with that.

Senator MACKAY—But the question was: is this a Telstra document? Do you know that yet?

Mr Paratz—I do not know that. I will just confer with my colleagues. I am advised that we still have not been able to supply and probably will not be able to supply today confirmation that that piece of paper—that document—is an authorised Telstra document. In your earlier question, you did ask us to get some figures—

CHAIR—I am sorry, Mr Paratz. It is not a question of whether it is an authorised document or not. The committee wishes to table the document.

Mr Paratz—Okay.

CHAIR—I think it is fair to say the committee is satisfied that this is a document which has come to it from reliable sources. We are just giving you the opportunity to confirm, or otherwise. If you are not able to confirm—

Senator TCHEN—I am sorry, Chair, but I do not know whether the committee is satisfied that it is an authentic document. It is just a document being tabled.

Senator MACKAY—That is fair enough, Senator Tchen; I appreciate your query. But I have given Telstra fair opportunity. This is a download, a click of the mouse.

Senator TCHEN—It is downloaded from somewhere, but we do not know it is downloaded from the Telstra system.

Senator MACKAY—I understand that. Perhaps Mr Paratz could answer the questions that are contained in this—

CHAIR—But it would be useful for the committee, I think, if you could get that information so we can determine whether or it is to be tabled today, while you are still with us.

Dr Warren—I think that is happening. Senator Mackay, you asked what the supplementary number was that we provided to the Estens inquiry on 1 October. I am advised it is 108,772.

Senator MACKAY—So what is the total?

Dr Warren—The total as at 6 December is 112,159.



Senator MACKAY—My document is two weeks old.

Dr Warren—So somewhere in between.

Senator MACKAY—My document has got 111,755. It is now 112,159. Let us just go to that figure. We were talking about priority 1s previously and we agreed, I think, that priority 1s are customers who are off the air, medical customers or customers with high safety issues, such as hospitals. I have got some figures here. How many priority 1s are currently in the system?

Mr Paratz—We are advised that, as of the report my colleague just referred to for 6 December, there are 355.

Senator MACKAY—That is higher than the figure I have got. How many priority 2s are there currently?

Mr Paratz—On the same basis, 961.

Senator MACKAY—That is higher than the one I have got as well. How many P3s, the safety category?

Mr Paratz—I think there are some other elements. The P3s—13,708.

Senator MACKAY—That has gone up as well. P4s?

Mr Paratz—The information here is 8,397.

Senator MACKAY—That has gone up too. P5s?

Mr Paratz—88,730.

Senator MACKAY—That has gone up as well. How old is the oldest fault or CNI under the P1 category, which is the most dramatic category?

Mr Paratz—I do not have that information available to me.

Senator MACKAY—My information is that the oldest priority 1 fault—the highest category—is from 8 January 1997. The oldest priority 2 fault—and I am taking Telstra’s advice; as far as I am concerned, the first three priorities are the ones we are looking at and I take your advice on the other two—is from 24 July 1997. The oldest priority 3 fault—priority 3 is safety related—is from 14 August 1996. Can you confirm those?

Mr Paratz—We can certainly do that. It would also be useful if you have details of those particular ones so we could determine whether we have an issue of database management here as opposed to any—

Senator MACKAY—No, I do not have details. I only have the aggregate figures I just gave you. As I said, we are relying on stuff falling out of the back of a truck here. It is fairly difficult to get specific information. I just want confirmation of those.



Mr Paratz—In our reply, we will also give an indication as to whether those things should still be in the database or should have been expunged at some earlier date.

Senator MACKAY—Let me just confirm the areas that Telstra uses. You have Melbourne metro—is that correct?

Mr Paratz—I believe so.

Senator MACKAY—New South Wales country, Queensland country, western country, Tasmania-Melbourne, Sydney metro, Brisbane metro, western metro, TASM and Vic-TAS—are they correct?

Mr Paratz—Yes, I believe so. TASM, I believe, stands for total area service management.

Senator MACKAY—Okay. The information that I have got, which is from the chart that I tabled previously, is that, as of two weeks ago, for priority 1 faults—that is, customers off the air, medical customers, and very high safety issues, including hospitals, schools et cetera—NSW Country had 152 outstanding; Western Country had 120 outstanding; and Sydney Metro had 59 outstanding. The numbers for the other areas are quite low.

Let us go to priority 2. I am advised that for NSW Country there were 392 priority 2s outstanding as of two weeks ago; for Western Country, there were 163 priority 2s outstanding; TASM Melbourne, 58; Sydney Metro, 45; TASM Brisbane, 49; and Western Metro, 100.

Priority 3 is safety related. I am advised that, according to the faults database—the CNI database—as of two weeks ago, in NSW Country there were 4,149 CNI outstanding; in Queensland Country, 2,831; in Western Country, 1,204; Western Metro, 1,663; TASM Brisbane, 774; Sydney Metro, 1,306; Vic Tas, 1,577; TASM Melbourne, 29; and Melbourne Metro, 31. I am prepared to draw the line at category 3, because that is where it gets into an argument. Can Telstra please take it on notice to confirm those figures?

Mr Paratz—We will take that on notice.

Senator MACKAY—Let us go to the issue of the tasks of a service operations team leader. Before I go to that, what specific procedure does Telstra have for dealing with the reporting of CNIs—faults?

Mr Paratz—My understanding is that anybody in the company, although it is most commonly our field operatives, can lodge a CNI. I believe anybody can identify something that concerns them and enter it into the CNI database.

Senator MACKAY—Let us go to the tasks of a service operations team leader. I have a document here called ‘CNI process: CAN defect reporting and restoration, Telstra’. This is a ‘Telstra in confidence’ document and it also says ‘Controlled document—no unauthorised copying’. Under 4.2 of this ‘Telstra in confidence’ document, which is headed ‘Service operations team leader’—this is in relation to the details of CNIs and monitoring et cetera, it says:

The team leader shall be responsible for—



and then it lists those. The last dot point on page 7 of 15 says:

being satisfied that any temporary service is provided to the minimum standard.

What is ‘minimum standard’?

Mr Paratz—You have put me in a very difficult situation. If that document is a Telstra document and if it is marked ‘Telstra in confidence’, I am not sure that I am unable to discuss it in a public place.

Senator MACKAY—If Telstra wishes to continue the obfuscation, that is fine.

Mr Paratz—No, I am not trying to obfuscate, but I do not have the document in front of me and I do not know what else is in the document.

Senator MACKAY—Okay, why don’t you get the committee a copy of ‘Telstra—Procedure 00019, CNI process and CAN defect reporting and restoration’. This goes directly to the terms of reference of this inquiry. I am alleging that this document says:

... that a team leader shall be satisfied that any temporary service is provided to the minimum standard.

I want to know what the minimum standard is.

Mr Paratz—I am sure all of our staff would work to a situation where there was a possibility to restore service. So the minimum standard would be a standard which restores the service in an expeditious and effective way.

Senator MACKAY—To the minimum standard?

Mr Paratz—To a standard which achieves the objective, which is to restore service.

Senator MACKAY—Well, what is a maximum standard? Can you take it on notice to provide me with a definition of your minimum standard.

Dr Warren—It can be read both ways, half full and half empty, can’t it? It does not say, ‘Push it down to the minimum’. It could say, ‘Make sure you get it above the minimum’.

Senator MACKAY—That would be axiomatic, I would have thought. But you have taken it on notice and that is fine.

Mr Paratz—I would read that as, ‘Restore it to the standard that does the job.’

Dr Warren—You can read it like the Devil reads the Bible.

Senator MACKAY—Take it on notice; that is fine. Did you provide the breakdown of the CNI database and the faults by the various areas of Telstra that I have just put on the Hansard—the breakdowns for categories 1, 2 and 3; I also have figures for categories 4 and 5 but the numbers are so gigantic that I will not read them out here—to the Estens inquiry?



Mr Paratz—Just while we are checking that: in terms of your comment that the numbers are gigantic, I note that, of course, if you take all the categories it adds up to about 100,000—

Senator MACKAY—That is why—

Dr Warren—The answer is: yes.

Mr Paratz—as a fraction of the total, that is less than one per cent.

Senator MACKAY—I understand that. That is why I ruled off at category 3—to be fair to Telstra. Did you just say yes, Dr Warren?

Dr Warren—Yes.

Senator MACKAY—So the Estens inquiry was provided with these breakdowns by priority.

Dr Warren—I will check that, but my preliminary advice is: yes.

Senator MACKAY—I just want to get this absolutely clear. The aggregate figures for priorities 1, 2, 3, 4 and 5 by area as of—I think the last report to the Estens inquiry, the supplementary report, was in October?

Dr Warren—1 October 2002.

Senator MACKAY—The Estens inquiry had all this information. Is that right?

Dr Warren—That is what I have been told.

Senator MACKAY—I did not read it in the Estens report anywhere.

Dr Warren—It was by priority code—priority 1, 2, 3, 4, 5—but not by state, by the look of it.

Senator MACKAY—You did not give them state by state or area by area breakdowns, but you gave them aggregates—

Dr Warren—Senator, I am sorry, but we will have to check that with the person who provided the information to Estens.

Senator MACKAY—But your preliminary response is that you do not think you gave the information on an area by area basis.

Dr Warren—It is not looking like it, but let me check it for you. That was the supplementary advice.

Senator MACKAY—Did the Estens inquiry include the supplementary information in its final report? Was it used?



Dr Warren—Not that we are aware of.

Senator MACKAY—The first information you gave them was in February. That is the information they have used publicly in the report.

Dr Warren—Did we do it there? We will check that as well.

Senator MACKAY—Did you give them the priority category—

Dr Warren—We will check that.

Senator MACKAY—How long will that take?

Dr Warren—We can do that now.

Senator LUNDY—I have to say that it is quite extraordinary.

CHAIR—The point was made very clearly in our Sydney hearings that the number of outside contractors and their subcontracting arrangements with other contractors was posing not only a security problem but questions surrounding the adequacy of the work they were doing. I think Telstra was present at that hearing. Would you like to comment on that practice, particularly the concept of contractors working unidentified on various bits of equipment. Perhaps Mr Chalmers could come to the table.

Mr Paratz—No. Mr Chalmers was just being of assistance. I was not present in Sydney, so it was useful to get some background.

Senator MACKAY—It is on the Hansard, Mr Paratz.

Mr Paratz—We use a range of arrangements, including our own staff and subcontractors. Our contractual arrangements with contractors include requirements for training, attention to security and so forth. It would be my expectation, particularly in these times of heightened security—and I can certainly tell you that Telstra is paying due regard to security issues and has dedicated increased effort to them—that we would ensure our security measures included any people who worked on our plant, whether they be subcontractors or staff.

CHAIR—Should they be identified? Should they have something on their outfit—

Mr Paratz—That may well be the outcome of that security review. I do not know, as I said here.

CHAIR—When is the review due to be completed?

Mr Paratz—It is an ongoing process. It is under way. We will take notice of your comments, and I will pass them on to the people doing that review.



Senator LUNDY—Before I go on with another line of questioning, I would like to refer to an article in the Australian today, ‘Crown shields Telstra’. I am very curious; I will quote from the article:

Telstra submitted the defence in arguments with the Australian Competition and Consumer Commission, which enforces the act.

This is sometimes known as invoking the Shield of the Crown or “derivative immunity” and effectively means the Government cannot bring a legal action—such as a competition notice—against itself.

The context of the story is that Telstra has raised the stakes. The opening paragraphs are:

Telstra has raised the stakes in its bid to protect its near monopoly in most of rural and regional Australia, invoking the protection of the Crown under an arcane legal defence that dates back to 1649.

The telco giant has used its position in carrying out a government contract to overcome the anti-competitive sections of the Trade Practices Act—avoiding allegations of anti-competitive behaviour in relation to the distribution of up to 10,000 free satellite dishes to rural customers.

Are you in a position to provide the committee with Telstra’s view of your activities in regard to invoking that particular defence?

Dr Paterson—When we put in our tender for the OEZ contract, we did not include any reference to the Bradken defence. In fact, we did not have that in mind. Our general procedures applied there—that is, we test for Trace Practices Act compliance on all those sorts of activities, and that had taken place on that one. When the issue was raised by the ACCC as to whether there were trade practice issues, we commenced a dialogue with the ACCC around that. As part of that process, we were advised that the Bradken defence applied. We indicated that to the ACCC. That is the history on that matter.

Senator LUNDY—What is the upshot? Can you provide some background as to why you need to use this defence? What is the claim being made against Telstra that has forced you to use it?

Dr Paterson—The claim being made was that we were pricing anticompetitively and specifically that we were using predatory pricing—that is, pricing below cost in the market. Our position is that we were not doing that, and we had commenced a dialogue with the ACCC around that when the Bradken issue was put forward.

Senator LUNDY—Was this the issue in relation to GMTel?

Dr Paterson—This is for the OEZ contract with the government.

Senator MACKAY—So, because you are fulfilling a contract to the government through the extended zones contract, you are immune from certain aspects of the Trade Practices Act as far as anticompetitive pricing goes.

Dr Paterson—That is that provision of the law, yes.

Senator LUNDY—What you are trying to do is keep competitors out of your area of the market that is covered by the extended zones contract.



Dr Paterson—Not at all, Senator. Our commercial objective was to win that contract. We won that contract on a basis that we firmly believe was within the provisions of the Trade Practices Act. The Bradken defence issue came up later on and was tendered to the ACCC; at that point they terminated their investigation.

Dr Warren—The issue is that one of the elements of meeting the OEZ contract was that we got a government subsidy to provide these two-way satellites to consumers in the extended zones. Basically, that means they are getting it at $18 a month or something like that, which is substantially below what it would be if you were to do it in a free market type context. The reason we can do that at the moment is that the government gives us a subsidy. There was some sense from some of our competitors that that was predatory pricing, that we were effectively dumping that service on the market. One of the defences that you can use there is that, because the government is subsidising it, it is not predatory pricing; that is where that comes in. Predatory pricing in terms of satellite has been raised outside the OEZ. We have never relied on the Bradken defence there because it does not work as it is not a government subsidy. Basically, every time it has been raised by one of our particular commercial competitors who is very keen to get some government subsidy around this stuff, it has been dismissed by the ACCC.

Senator LUNDY—Does provision of the two-way satellite service relate to the part of the contract that was part of the original scope, or is that the part of the contract that was the additional offering by Telstra for broadband?

Mr Paratz—Some contracts have a very defined scope. Bidders put in various offers and they vary often in price, and then you select amongst those. The call for bids that was put out said, ‘We have a fixed amount of money: who can give us the most result for that money?’ So the arrangement that we are talking about here absolutely was part of the original scope.

Senator LUNDY—Has this Bradken defence been used to protect the two-way satellite aspect of the extended zones contract and the broadband service provision aspect of the contract?

Dr Paterson—The ACCC inquiry did relate to the two-way satellite introductory offer there, the reduction in the installation fee—

Senator LUNDY—It was about broadband services being provided through the two-way satellite, wasn’t it?

Dr Paterson—That was the element of the contract that it referred to, yes.

Senator LUNDY—Optus told us this morning that its view is that that part of what Telstra offered was not part of the original scope of the tender documentation; that it was an additional offering of Telstra which obviously created a great deal of appeal with regard to the bid and contributed directly to your winning that contract.

Dr Warren—We heard what Optus said and it was outrageous. Mr Paratz has just said that it was not a fixed service, you bid on price; effectively it was a beauty parade contract. We came along and said, ‘We will supply A, B and C, including broadband, for that pot of money.’ Optus did not provide as attractive a suite of services for that pot of money. It may want to get that pot and have us excluded but, quite frankly, that is not good for consumers in OEZ.



Senator LUNDY—We have conflicting evidence on that matter. I think the best way to clarify this will be for us to speak to the department and get the original tender documentation. This defence has meant that no-one else will be able to compete whilstever Telstra has that contract for the delivery of broadband services in the extended zones because of the subsidised lower price you can offer consumers, I guess.

Dr Paterson—To be clear on what the subsidy was, it was an introductory offer; essentially, it was on the installation charges for the satellite service and reduction of price on that; and it was for a limited period and a limited period in different areas on a rolling basis, as the technical people moved around the country to be able to provide those services. So it is not something that exists on an ongoing basis.

Senator LUNDY—What is this $18 thing that Dr Warren referred to?

Dr Warren—As I understand it, part of the contract is that we will provide satellite services to those who, after we have approached them, want such a service for, I think, $18 a month.

Senator LUNDY—That is an ongoing cost; it is not just an establishment cost?

Dr Warren—Yes, but it is all part of the overall package we provide—

Senator LUNDY—I appreciate that. But Dr Paterson said that the subsidy only related to installation. You are saying that the subsidy relates to monthly connectivity costs.

Mr Paratz—The question presumes that somehow there is a subsidy. The government proposed to invest a certain amount of money into a certain customer segment, and we put a total package. In that sense, it is not a subsidy.

Senator LUNDY—I am just trying to get some facts about what the customers in the extended zone actually pay for their two-way satellites.

Dr Warren—They pay extremely low amounts.

Mr Paratz—It is a number in the teens; I am not sure whether it is $18 or $16, but it is a number in the teens.

Senator LUNDY—Perhaps my question will make more sense when I ask the next one, which is: is it Telstra’s intention to maintain those subsidised rates after the current contract expires?

Dr Warren—There are transition provisions, as I understand it, in the contract, and the contract goes for, I think, 10 years.

Senator LUNDY—Does it?

Dr Warren—I think so. Excuse me while I try to verify that. I am sorry; we will have to find out.



Senator LUNDY—It says 10 years in the document, apparently. Telstra offered subsidised broadband as an extra—

Dr Warren—Presumably at the end of the period, there will be another contract let by the government to subsidise services in that area.

Senator LUNDY—Okay, so that full subsidy for broadband will last for 10 years?

Dr Warren—As I understand it, yes. Our contractual obligations are to provide this for the length of the contract. Just on the point of locking out competition, the alternative is that these people pay much higher rates for broadband.

Senator LUNDY—I know that.

Dr Warren—We cannot have it both ways.

Senator LUNDY—Turning to the issue of ISDN, I have heard in various pieces of evidence, both here and in the estimates committee, that Telstra is increasing the reach of ISDN. There was a reference earlier to technology that makes it possible to push ISDN services further out along the copper.

Mr Paratz—Yes. We have not so much increased the reach but improved the affordability. Previously, to achieve ISDN at a very long distance—

Senator LUNDY—You charged by the kilometre, didn’t you?

Mr Paratz—No, we use to charge out as far as we could go on the first go, and then you had to put a technical device in called a repeater, which would grab the ISDN signal, amplify it and send it on again. We used to charge for that, and the initial charge was something like $1,815, and there was an ongoing rental which was a $300 or $400 figure. On 1 September this year we absorbed that into general infrastructure costs. That means that a customer at, let us say, 18 or 20 kilometres, can now get ISDN at the same price as a customer at six or seven kilometres. So there is no change to the technical reach of ISDN, but there is a major improvement and benefit in affordability.

Senator LUNDY—Why didn’t you do that four years ago?

Mr Paratz—With the demand for data out there, it was an opportunity to say, ‘Well, look, it is getting to the point now where we can relook at the costing model.’ In my opening comments—

Senator LUNDY—So you are making enough money out of it now to justify the business case?

Mr Paratz—No, in my opening comments I said we refine, we adjust, we grow, we learn. It is just one of those changes. It is a positive change, and I would hope that we would be recognised for doing something positive.



Senator LUNDY—Are you able to provide an estimate of the percentage increase you are hoping to achieve for customers accessing ISDN services as a result of this change? Have you done any forecasting or estimates? Forgive me if this is in the Estens report.

Mr Paratz—We will take that on notice. I am not sure that we have done it in that way; I think it was more looking at it and saying, ‘This is something that makes sense and we’ll do it.’ So I am not sure whether those numbers exist, but we will certainly get the information if it exists.

Senator LUNDY—But it would be true to say that—and we have had this discussion in the context of ADSL—you are looking at creating a far larger number of customers who are able to access ISDN services throughout Australia.

Mr Paratz—I think we heard evidence this morning from the NFF recognising the role that ISDN has.

Senator LUNDY—I am not refuting any of that—I heard that too.

Mr Paratz—We have made it easier for ISDN to play that role. This is not about saying ISDN is 100 megabits; ISDN is ISDN. What it is doing is making it more affordable.

Senator LUNDY—I know that. I asked a pretty straight-up question.

Dr Warren—This may go some way to answering your question, although I know it will not answer it fully. In our submission we said that, with the ISDN extender, we can double the geographic reach of ISDN. That is obviously not population, because we are at about 96 or 97 per cent.

Senator MOORE—Is doubling nine? It says 4.5 from the exchange. Does that mean doubling is nine?

Dr Warren—No. Double the geographic reach, so it is the circle getting bigger.

Senator MOORE—The circumference?

Dr Warren—Yes.

Senator MOORE—So if you have 4.5 from the exchange, with the extender it would be nine?

Mr Paratz—No. I might clarify that. This gets really technical, because it depends on the thickness of the copper. ISDN on its first go will go, let us say, about nine or 10 kilometres. When you put the extender in, it will go double that, which is 18 or 20. But there are lots of caveats I have to put on that answer around copper sizes.

Senator LUNDY—Is the ISDN service subject to an access regime?

Dr Paterson—Yes, it is. ISDN access is a declared service.



Senator LUNDY—How do competitors get access to your network for the purposes of providing ISDN services?

Dr Paterson—They approach our wholesale channel, Telstra Wholesale, and get the service through that channel.

Senator LUNDY—Would competitors be given access to your program of upgrading exchanges and reach of ISDN as part of that exercise, if they were to request that information?

Dr Paterson—I do not know specifically, but I certainly assume that they would in terms of knowing where service is available.

Senator LUNDY—I am not talking about existing services; I am talking about your program of upgrading and extending the reach of ISDN.

Dr Warren—They will be able to resell services that flow over the extender, yes, definitely.

Senator LUNDY—Okay. I now want to clarify something about HFC cable. In terms of Telstra’s cable, I presume there is a finite description of the bandwidth that you make available to Foxtel for the purposes of their pay TV network. I also presume that there is an amount of bandwidth that you could nominate for your BigPond cable service and that there is a residual amount of bandwidth available for other services. Are you able to give me the bandwidth that you are allocating to those different areas of service?

Dr Paterson—You are certainly correct that the HFC cable is, in a sense, split in terms of its capacity—that for pay TV and that for the BigPond service. My understanding is that that is the two-way split that is made.

Senator LUNDY—So it is half and half?

Dr Paterson—I do not know whether it is half and half. It is split in some way. I do not know what the dimensions of that split are.

Senator LUNDY—Can you take that on notice?

Dr Paterson—Yes.

Senator LUNDY—On page 50 of your submission you refer to the Internet Assistance Program and state that it is a $50 million program. We heard from the government not so long ago that they have reduced their commitment to the Internet Assistance Program by $2 million to $10 million, and we have heard previously that Telstra’s spend to date has been $4.5 million out of the $38 million. Could you provide updated information on Telstra’s spend to date on the Internet Assistance Program?

Mr Paratz—We will certainly do that. Telstra’s commitment to the program was an outcomes based commitment, and the $50 million was the combination of budgetary figures both from the government and from Telstra. The objectives of the program are being well achieved. We can certainly give you that information.



Senator LUNDY—I will look forward to receiving that information. We heard from witnesses last week about the TTY devices and the situation facing the deaf.

Mr Paratz—I am thinking about whether we are actually capable of giving you that information. You have asked about the total program. Telstra reports to an independent board, so it may be that the department would be the appropriate place to get that information. We would be unable to report on the government component of the program.

Senator LUNDY—If you can just report on Telstra’s component of the program, that will be fine. Last week, we heard evidence in relation to the TTY devices used by the deaf community. I do not know whether you have had the opportunity to familiarise yourself with that evidence. I do not want to waste the committee’s time if you have not familiarised yourself with it.

Dr Paterson—No, I haven’t.

Senator LUNDY—I would like to submit a range of questions to Telstra in relation to the evidence we heard and to seek Telstra’s response to it. I will place those questions on notice, but I flag now, Chair, that it is pretty clear that we will need to get Telstra back for a future opportunity. I will leave it at that for now.

Dr Paterson—Would it be an appropriate time to respond to your questions around the numbers provided on the broadband services and the corrections to those numbers?

Senator LUNDY—No, I think the chair would like to ask you some questions now. Please make sure you place your response on the record before we conclude today.

Senator MACKAY—At the hearing in Sydney last week, the CEPU raised with the committee the issue of national security and the security of Australia’s telecommunications network. The CEPU said:

Telstra will engage external resources to carry out specific work on its behalf without any labelling or any identification of these people. Any person could be going into these pillars and tampering with the telecommunications network. We see that as a very significant risk to the security of the Telstra network today. We constantly get a number of concerns and problems relayed to us by our membership in these areas.

What does Telstra say to that?

Mr Paratz—Your colleague Senator Allison, if I have understood it, raised this question earlier today. I indicated in my answer that we are looking at security issues at the moment—in common with many people in our society—and that I would note those concerns and pass them on to the people who are undertaking that review.

Senator MACKAY—Is Telstra looking at improving the identification of all staff working on the network?

Mr Paratz—As I indicated earlier, I think that is a useful input. We will take it on board and report back.



Senator MACKAY—Does Telstra do any background security checks on its employees and field staff?

Mr Paratz—I do not believe we have anybody here who is familiar enough with our HR processes to answer that reliably. I am sorry to do this, but we will have to take that on notice.

Senator MACKAY—Do any of these people wear a uniform that is clearly marked with who they are?

Mr Paratz—I sense a series of questions here.

Senator MACKAY—I have two more.

Mr Paratz—Give them to us.

Senator MACKAY—Are their vehicles clearly marked to indicate who they are?

Mr Paratz—Yes.

Senator MACKAY—Do you think it might be useful to have some identification that says that they are a contractor working on the network on behalf of Telstra or similar?

Mr Paratz—We till take those as useful questions and thoughts. We will respond to them as questions and take them on board as suggestions.

Senator MOORE—Do I understand correctly from your answers to Senator Allison and Senator Mackay that you are undertaking a review of this process, or is it just that you are reviewing it generally?

Mr Paratz—The comments I made earlier were that obviously there is a heightened security awareness. Telstra and its network are an important part of Australia’s consideration of its security. We, in common with others, are taking that very seriously. I am certainly aware that we are undertaking broadscale activities—not just on this specific issue—to understand and to ensure, in a sense, that we are discharging our responsibilities.

Senator MOORE—So it is an ongoing consideration as opposed to a specific review of your security?

Mr Paratz—I am sure that most people would understand that this is a time of enhanced focus on security. It is a time to review what is in place. We are doing that. Out of that, I am sure we will find things that make us say, ‘Gee, we should be doing that differently, regardless of the level of threat,’ and that is what we will do.

Dr Warren—We have quite a large security section in Telstra. As you can imagine, we are not privy to what goes on there.

Senator MOORE—After your answer to Senator Allison earlier I wrote down ‘review of security’, and I wanted to clarify whether that was something specific you were doing. I take the



answer, as you have now given it, that it is just an ongoing process. You are going to take the issues raised by Senator Allison and Senator Mackay and incorporate those into your ongoing activities. Is that fair?

Mr Paratz—That is right. And, as well as being an ongoing activity, it is getting additional attention at the moment.

Senator MACKAY—Can you tell me who Champion Compressors are and what work they do for Telstra?

Mr Paratz—I think the answer is: no, we cannot tell you. We will have to take that on notice.

Senator MACKAY—Can you tell me who Comet are and what work they do for Telstra?

Mr Paratz—There are several companies by the name of Comet, but I know there is one that has been involved in satellite dish installation work. We probably owe you a more comprehensive answer than my recollections of a small part of it.

Senator MACKAY—Can you provide the committee with the names of all the companies who are contracted to provide services to Telstra, the nature of the work they do, an explanation of what part of the Telstra network they work on, the percentage of work that is subcontracted out again, how many times it is subcontracted out and whether these contractors and subcontractors are accredited to work on the network?

Mr Paratz—We can do that.

Senator MACKAY—In evidence to the inquiry in Sydney last week, the CEPU gave a description of the relative costs between Telstra Retail and Telstra Service. They made the claim that Telstra Retail is telling Telstra Service that their installation costs are too expensive at $150, that Telstra Retail can get Comet to do the job for $110, and that Comet is actually subcontracting the job out for $75. Can you confirm that these would be, roughly, the relative cost differences?

Mr Paratz—Again, we will take that on notice.

Senator MACKAY—Is it true that subcontractors are paid by the number of faults they fix and not by the time spent fixing them?

Mr Paratz—We will take that on notice. I am sure there is a wide range of contractual arrangements out there.

Senator MACKAY—What steps does Telstra take to monitor the quality of work done on its network by contractors?

Mr Paratz—I think, as with Senator Lundy’s questions, it is useful if we get this set of questions on the table, and we will give you a comprehensive answer on notice.



Senator MACKAY—I presume you might have some idea on that one. That is why I started off with a general question. What does Telstra say to claims by the CEPU that only one in 10 jobs are inspected? Is that correct?

Mr Paratz—As I said, we will give you a comprehensive summary.

Senator MACKAY—No, I do not want a summary; I want specific answers to the questions I am putting on notice.

Mr Paratz—We will take them on notice and give you a description of the contractual arrangements.

Senator MACKAY—No, I want answers to my questions. I do not want more Orwellian responses. How many inspections are done, and who does these inspections? Will you take that on notice?

Mr Paratz—Yes.

Senator MACKAY—How many of the inspections that are done result in Telstra doing an adverse report on the quality of the work? What evidence can Telstra provide to the committee on this inspection work? We would like a range of evidence to be provided. Is it true that Telstra is about to make people doing contract inspections redundant and to instead have the contractors do a self-assessment of their work? Is that true?

Mr Paratz—I am not aware that it is true but, in fairness to us both, we will take that one on notice also.

Senator MACKAY—What is Telstra doing in response to the government licence condition requiring Telstra to more clearly identify the areas covered by its mass service disruptions and to ensure that mass service disruptions are only issued for areas affected by the cause of an outage or the need to move staff or equipment from an associated area to attend the outage?

Dr Paterson—If you could give me a moment, I will respond.

Senator MACKAY—Do you want to take it on notice?

Mr Paratz—No, we will respond to that.

Dr Paterson—Telstra has, as part of its licence conditions, a very clear process—and a publicly known process—for identifying mass service disruptions. This involves looking at the causes and from there determining whether there is a disruption and what length of time it involves in terms of an extension to the CSGs. That process is available for the ACA to look at, and I understand that they review that at different points in time.

Senator MACKAY—Let me get to that ACA issue. At the Senate estimates hearing on 20 November, Mr Scales told us that the ACA grill Telstra quite substantially with respect to mass service disruption notices and get independent verification of mass service disruption claims that Telstra make. Is that correct?



Dr Paterson—I do not know.

Senator MACKAY—That is what Mr Scales told us. I have got the Hansard here. You do not know whether that is correct?

Dr Paterson—I cannot verify that. I just do not have knowledge of that.

Senator MACKAY—Take a look at the Hansard.

Dr Paterson—I can only presume it is correct, if that is what Mr Scales said.

Senator MACKAY—He said:

The officers of the ACA grill us quite substantially on some of these issues and, not surprisingly, they do not just take on face value what we say to them; they get independent verification of the points that we make.

Is that correct?

Dr Paterson—I do not have that transcript in front of me.

Senator MACKAY—If he says it, it must be true. Is that right?

Dr Paterson—To be clear, I do not know specifically. I think it would be best if I make an inquiry and come back to you on this in the course of these proceedings.

Senator MACKAY—At the estimates hearing, the ACA said that they take information on mass service disruptions at face value and that there are limitations on the ability of the ACA to test this information. What is the nature of the supporting documentation that Telstra give to the ACA to support the declaration of a mass service disruption? What information do you give to the ACA?

Dr Paterson—We undertake an independent internal validation—a validation by our internal review team that is distanced from the actual procedures involved around it—and provide that to the ACA.

Senator MACKAY—You provide your internal investigations report to the ACA?

Dr Paterson—That is my understanding, yes.

Senator MACKAY—Are you sure?

Dr Paterson—To tell you the truth, I am not 100 per cent sure because I am not involved in that process.

Senator MACKAY—I would take that on notice, if I were you.

Dr Paterson—Perhaps we should.



Senator MACKAY—I think you should read the ACA evidence, because they indicate that Telstra has absolute power to declare a mass service disruption and there are no checks and balances on it. The ACA told us that they have no capacity to check, stop or change a mass service disruption. Is it true that mass service disruption notices are sometimes declared several days after an interruption to services has affected a customer?

Mr Paratz—That is the process.

Dr Warren—In the middle of a crisis, you are hardly going to be ringing up the ACA and saying, ‘Sorry, we’ve got a mass service disruption.’

Senator MACKAY—That is all right; I am just checking. What would be the longest delay in declaration?

Dr Warren—We will take that on notice.

Senator MACKAY—Can you provide the committee with a brief on Telstra’s internal processes and criteria for determining a mass service disruption?

Dr Paterson—Yes, we can.

Senator MACKAY—In their investigation into the Boulding family case released in March 2002, the ACA listed the criteria Telstra uses for determining exemptions from the customer service guarantee eligibility. Page 38 of the ACA report lists the criteria as:

• a significant loss in productive hours (>20 per cent);

• a significant increase is average work times (>20 per cent);

• a significant reduction in productivity (>20 per cent); and

• a significant increase in deferred work (>20 per cent).

Can Telstra define each of these criteria so that we can determine how they are arrived at and measured? Does Telstra provide any information on these criteria to the ACA?

Mr Paratz—We will take on notice to give you a comprehensive answer. We could certainly discuss today the intent and relevance of those measures at a more general level, if that were useful for you.

Senator MACKAY—Okay. How much is Telstra spending on transporting customer field staff from one state to another? Please take that question on notice. Does Telstra know how much revenue is generated by a particular exchange?

Mr Paratz—That is an interesting question. I do not fully understand what you mean by ‘revenue’ generated by an exchange. Any one call would involve multiple exchanges. We certainly know where we send our bills.

Senator MACKAY—I mean: do you know how much money Telstra makes from each individual exchange?



Mr Paratz—We could probably identify the revenue which is billed in that exchange. Not all revenue is billed in the exchange where it is generated. For instance, a customer may have a billing address in Sydney and a business in Dubbo—

Senator MACKAY—I understand that. I am just saying in terms of the actual—

Mr Paratz—We certainly have a high level of understanding of the calls that are billed at each exchange.

Senator MACKAY—And, therefore, the revenue derived therefrom?

Mr Paratz—Yes, but there are other little caveats such as where it is billed, where it is generated.

Senator MACKAY—No, I am just talking about the actual exchange. I am not interested in the billing arrangement; I am interested in how much revenue each exchange generates.

Mr Paratz—The point I am making is that the lines at an exchange may be billed to a customer who is not in the exchange itself.

Senator MACKAY—That is fair enough; I accept that.

Mr Paratz—We can give you an understanding of that.

Senator MACKAY—Yes. Mr Chalker from the CEPU, in Sydney last week, told this inquiry about a report commissioned by a Telstra manager, Mr Peter Gumley, some time in the 1990s. This report contained a list of all telephone exchanges, the number of faults per hundred lines in the exchange, the number of recurring faults per hundred lines in the exchange, the frequency of the fault recurrences and the revenue that is made by Telstra per exchange. Are you familiar with this report?

Mr Paratz—I am not.

Senator MACKAY—You would presume that somebody has heard of it. It was in the 90s; it is possible.

Mr Paratz—Yes.

Senator MACKAY—The allegation made by the CEPU was that, where there was big revenue from an exchange, Telstra put more resources into fixing the faults. Is that correct?

Mr Paratz—No, I do not believe that is correct at all. In fact, the demonstration of that not being correct is the commitment we have made of $187 million in the Regional Network Task Force program that we discussed with the committee at estimates. That is absolutely service based.



Senator MACKAY—I understand that. I am not asking what you are doing specifically; I am asking whether there is any trending by Telstra in terms of putting more resources into exchanges that are higher revenue generating.

Mr Paratz—No.

Senator MACKAY—You are absolutely unequivocal about that?

Mr Paratz—I believe that is not a driver of the way we address our business.

Senator MACKAY—You were unequivocal; do you stand by that? There is no corollary or nexus between the amount of resources Telstra puts into fixing faults in an exchange and the revenue derived from that exchange?

Mr Paratz—I guess there will be a secondary connection in the sense that a larger exchange will generate more revenue and it will also generate more faults, and it would demand more resources to attend to those faults.

Senator MACKAY—I understand that. I am asking whether there is a disproportion?

Mr Paratz—Again, I think this is where we can look at the outputs and the outcomes. Our smallest exchanges, on average, are likely to be the lowest revenue generating. With our performance against CSGs, in the minor rural we are achieving some of the highest performance across Australia. So that would tend to suggest that we are adequately resourcing faults.

Senator MACKAY—I will give you the opportunity to go back and do some work and check this. When was Mr Gumley employed by Telstra, and what positions did he hold? Please take that question on notice. Has Telstra ever done any work similar to that done by Mr Gumley when he was contracted?

Dr Warren—Could you define ‘ever’, please? Since 1901?

Senator MACKAY—A list of all telephone exchanges, the number of faults per hundred lines in the exchange, the number of recurring faults per hundred lines in the exchange, the frequency of the faults—

Dr Warren—I am sorry, Senator; could you please define the time period that you are asking about there? Telecom Australia may have done it; the PMG may have done it.

Senator MACKAY—Since Mr Gumley. Do you do any work of that nature now?

Dr Warren—No.

Senator MACKAY—You do not know?



Mr Paratz—At one level, not that we know of. But we analyse faults all the time and we analyse revenue all the time. There would be reports throughout the company that would have that information.

Senator MACKAY—No, it is quite specific. His report contained a list of all telephone exchanges, the number of faults per hundred lines in the specific exchange, the number of recurring faults per hundred lines in the specific exchange, the frequency of the fault recurrences and the revenue made per exchange. That was what his report did. Since this report, has Telstra done any work of that nature, or is it currently doing any such work?

Dr Warren—Are you also interested in whether it is our policy to do such work?

Senator MACKAY—Yes, of course.

Dr Warren—People can write reports till the cows come home about a problem in Telstra. What really matters is whether it is policy, whether it actually directs resources, isn’t it?

Senator MACKAY—No. What I am not interested in is an answer from Telstra that says, ‘Yes, we do, but it doesn’t impact on our policy.’ That is what I am not interested in.

Dr Warren—Yes; so outcome on policy. We can do that for you.

Senator MACKAY—Please check that. If Telstra does do work of that nature, I would like for the committee a report which shows a list of all telephone exchanges, the number of faults per hundred lines in the exchange, the number of recurring faults per hundred lines in the exchange, the frequency of fault recurrences, and the revenue made by Telstra per exchange for the last two years per exchange.

Dr Warren—We cannot provide you with revenue by exchange; that is ridiculous. We are a commercial company. We have huge competitors.

Senator MACKAY—All right. Scrap that last one and just go back to the questions I asked Mr Paratz earlier and make them general.

Mr Paratz—Okay.

Senator MOORE—Senator Mackay has done a lot of work in this area. But page 28 of your submission talks about a reporting mechanism that the ACA has brought in for exchange service areas. Just so that I can clarify this in my own head, I would like to know the difference between what Senator Mackay is asking in particular about exchanges and what the ACA is expecting from you. I thought there were some similarities in that process, and this seems to be the ACA’s ongoing expectation of Telstra. So can I clarify your submission and what you have to do for the ACA from now on and the question that Senator Mackay is asking?

Dr Paterson—Yes. The report to the ACA will be one on the network reliability framework, which will be first tendered in February next year. That has three levels of reporting. The first is at the national level, which deals with the percentage of lines with no faults per month and line availability per month. In fact, that goes down to field service areas, which I understand there



are 48 of in Australia. The second level of reporting occurs at the exchange service area level. That relates to the number and the names of the exchange service areas with the certain number of customers who have any faults in two consecutive months. So that is conducted at the exchange service area. Similarly, at that same level, there is a report on customers with three or more faults in 60 rolling days and customers with more than four faults over 12 rolling months.

Senator MOORE—And that is at the exchange level?

Mr Paratz—It is at the ESA level. It focuses on customers, not exchanges, and so it is the customers served by that exchange.

Senator MOORE—So that does not provide the degree of detail in terms of the requirements we are asking for?

Mr Paratz—I believe it will, yes.

Senator MACKAY—Per exchange?

Mr Paratz—Yes, it will. That is a regulatory mechanism to obtain, on an ongoing basis, the exact sort of information that Senator Mackay, I believe, is asking for.

Senator MOORE—A clear expectation per exchange of the faults listed, the regularity, how long they last—

Mr Paratz—Yes.

Senator MOORE—So that is from now on.

Mr Paratz—In a sense, it is even more useful than per exchange, because it identifies any chronic faulting that is occurring in an exchange. So it is not just an average, ‘Hey, it’s 10 per whatever.’ That will give the ACA visibility of any embedded in there—‘There are three customers who are having a really bad run.’

Senator MOORE—When we receive the information that you are going to provide on the question that has just been asked and when we see the future information, will we be able to compare the two lots?

Mr Paratz—Yes.

Dr Paterson—Not all that information will be publicly available.

Senator MACKAY—That is correct.

Dr Paterson—Some of it goes to the ACA.

Senator MACKAY—I was just saying to Senator Moore that we actually went through this in great detail with the ACA, and I would suggest you read the Hansard. For the current financial year, what is the budget of the capital program for each Telstra region?



Mr Paratz—I believe we can assist you with that, but can you clarify what regions we are talking about here?

Senator MACKAY—Your areas.

Mr Paratz—That is a pretty well used term.

Senator MACKAY—The areas that I referred to earlier.

Mr Paratz—Okay, those earlier ones.

Senator MACKAY—If you have any more micro breakdown, I would like that as well. Please take on notice what sort of work is done within the capital program.

Mr Paratz—Yes.

Senator MACKAY—Is there any prioritisation in relation to the capital program in terms of system priority?

Mr Paratz—Yes.

Senator MACKAY—What would the response of Telstra management be if the capital work program budget for any area was already spent, say, for this year? If in an area that has already been expended and capital work is still required in that area, would that area be able to get further funding?

Mr Paratz—That circumstance can arise for a variety of reasons in any large capital program. We have regular checkpoints through the year. We look at what capital is available and where the needs rest, and we reallocate capital. That is a quite usual—

Senator MACKAY—The answer then is yes.

Mr Paratz—No, the answer is not yes. The answer is that there is a process to considering that proposition.

Senator MACKAY—Are you aware of any areas where the capital works or capital program budget has already been expended for this financial year?

Mr Paratz—There may well be such areas.

Senator MACKAY—Are you aware of any?

Mr Paratz—Not as we sit here.

Senator MACKAY—What is your position again, Mr Paratz?

Mr Paratz—There are a whole range—



Senator MACKAY—No, I am serious. What is your position?

Mr Paratz—I am the regional managing director for southern region. I am very familiar with the capital program; I have been deeply involved in it. Within the capital program there are many subprograms; they go up and they go down, and we review them regularly.

Senator MACKAY—Are you aware of any areas where the spend for capital has already been expended in this financial year?

Mr Paratz—We are coming up to a review point. At that point I will become aware of the full range of those.

Senator MACKAY—So you currently are not aware of any? It is a fairly straightforward question. Are you or are you not aware of any?

Mr Paratz—Anecdotal comments have been made to me that some issues may need to be looked at and, in a couple of weeks, they will become things to be looked into. That is quite normal and usual.

Senator MACKAY—Are you not prepared to answer my question?

Mr Paratz—I believe that I have answered the question.

Senator MACKAY—No, you have not. Are you—you, personally—aware of any areas where the capital spend allocated for this financial year has already been spent?

Mr Paratz—I have not personally looked into those areas. It would be my expectation that they would exist because of our review cycle.

Senator MACKAY—Are you personally aware of any?

Dr Warren—Senator, are you aware that capex is one of the most sensitive areas for our share price and for our—

Senator MACKAY—Did I ask for details, Dr Warren?

Dr Warren—No, but—

Senator MACKAY—Did I ask for details?

Dr Warren—Yes; and, if Mr Paratz were to sit here and say, ‘Oh yeah, we’ve blown our capex budget a million-fold in Tasmania’—and I have no idea of whether that is or is not the case, fortunately, for this purpose—that would have market effect.

Senator MACKAY—Are you aware that, if capital expenditure has been expended within a financial year and there is no further money available and there is more work to do, that has impact on customers and consumers? Are you aware of that?



Dr Warren—Am I aware of that? Yes, I am sure.

Senator MACKAY—Mr Paratz, are you aware of any?

Mr Paratz—I think Dr Warren has adequately outlined to you that it is an impossible question for us to answer in that closed form. I am aware that we are managing the capital. We have regular review points, and that is the way the capital is managed.

Dr Warren—Maybe we should look at last year; undoubtedly there would be programs where budgets have been blown and other programs where budgets have not been blown.

Senator MACKAY—Let us just cut through this. The reality is that you are 51 per cent owned by the Australian people, and we want answers. All you do is sit there and cite commercial-in-confidence and commercial priorities. If you have already exhausted a capital expenditure budget in a particular region or area and more money is still required but not forthcoming, that has implications for consumers and customers. That is why we are here asking these questions.

Please take these questions on notice. What sort of work is done within the ‘planning for future projects’ area of Telstra? What is the 2001-02 Telstra budget for ‘planning for future projects’, both national total and by area/region? What was the budget for each region for each of the past six years? Have there been any cuts to this program this year for any region? If there have been, could you please compare them, and tell us where the cuts have been made and for what budget amounts?

CHAIR—Perhaps Telstra could respond to some previous questions. I presume that you have had a look at the Hansard by now.

Dr Warren—Yes.

CHAIR—The Southern Phone Company in Wollongong made the point that it aimed to cut the cost of certain business calls in order to make them considerably cheaper than comparable calls made via Telstra’s plans. The company also referred to Telstra’s response to its business proposals as being one of intimidation. Can you assure the committee that this was not the case or provide reasons why the Southern Phone Company would form that view?

Dr Paterson—I do not know the specifics of that particular case.

CHAIR—Dr Warren has read the Hansard; perhaps he can help us.

Mr Paratz—I am certainly aware that Telstra is strongly of the view that that is not an appropriate assertion; Telstra in no way was involved in intimidatory behaviour. I personally do not have knowledge of the details of that. So I think it is appropriate that we clarify or expand that for the committee, which we would be pleased to do.

CHAIR—That would be useful; thank you. We have pursued in fairly minute detail the question of the state of the cables: the pressure and the gas and so forth. Can you respond in more general terms to the accusation that we have a crisis on our hands and that the next time it



rains heavily we will see a lot of the faults and problems? Can you assure the committee that this will not be the case? To what extent are you able to say, ‘No, our estimate is that the faults will not be any worse than they have been in recent times’? Can you put some sort of Telstra view in response to that accusation?

Mr Paratz—I think I can usefully do that. In doing so, it would be reasonable to observe that, when it rains, you will see faults in any cable network that has been through a prolonged dry period; there will be an increase in faults.

CHAIR—Is this because of some characteristic of prolonged dry periods?

Mr Paratz—There is a correlation, and we have just spent a lot of time talking about the gas pressurisation to keep water out. Obviously, water is bad stuff in conjunction with cables.

CHAIR—If there is heavy rain tomorrow and it follows a long dry period, is that worse than heavy rain tomorrow that follows a period of relatively consistent rainfall?

Mr Paratz—Absolutely.

CHAIR—Why is that?

Mr Paratz—Because, when you have consistent rainfall, you are able to understand and detect maybe some latent faults that would not evidence themselves if it is very dry. Where there are those sorts of exposures in your getting consistent rainfall, you are dealing with them on an ongoing basis; the lack of rainfall can mask some of those. So it is entirely reasonable that, if you suddenly get rain, you will say, ‘Where do all these faults come from?’ That is reasonable and that is physically real.

CHAIR—So your pressure detectors do not help with that?

Mr Paratz—It is about the nonpressurised part that I make those comments. A lot of the smaller cables are not pressurised. They are not designed for pressure and they will never be pressurised. They are just not designed for pressure; they are not a pressurised cable.

CHAIR—That would suggest that, after this long dry period, we are going to see faults; they will be inevitable. Is that what you are saying?

Mr Paratz—I think that is a reasonable expectation—that, in a network that is being competently managed and which is of high integrity, if you get rain after a long dry spell there will be an increase in faults, and we will deal with them. Presumably, we will be coming back here to discuss why that surge occurred.

CHAIR—With businesses that sue Telstra because of loss of telephone services for lengthy periods of time—and I go back to the old CoT cases, but I guess there are new versions of the same thing—it seems to me that Telstra being required to refund the line rental for the period of time in which services were not available is a very minimal approach to compensating somebody for the loss of service. It has also been suggested to the committee that a few people would take on Telstra’s might; in turn, we know that you would trot out all your best legal teams



to fight such cases. How many instances are there of companies wishing to get proper compensation for loss of services, and how do you deal with those?

Dr Paterson—We will need to take on notice the question of the number of companies seeking compensation there. We do endeavour to address those sorts of concerns in a way that gives every opportunity for aggrieved parties to put and prosecute their case. In particular, in the hope of providing resolution before things get to court, we have an alternative dispute resolution process for addressing those.

CHAIR—In what sense is it a dispute? If somebody says that they have been out of business for two weeks because they have had no phone service, what is the dispute there?

Dr Paterson—In that sense, if there is no service, there is no dispute about the absence of service. In those sorts of cases there may be a dispute about the damage to the business.

CHAIR—So, if there is no dispute about the absence of service, you give them back their $30-a-month line rental. At what point do you then start talking about the cost to that business of losing service, or does Telstra not consider such matters? I know that you are not required to, but how often do you pay compensation without going through the courts?

Dr Paterson—Again I would need to take that on notice. I do not know the details on that. Certainly we would engage any parties on that issue if they raised it with us, but I do not know number of instances around that.

Dr Warren—I would just add to that. Recently on the Sunday Program, the CEO did not quite get the appropriate level of coverage. When a recent Sunday Program rehashed the old evidence, an annoyance of the CEO—I think he stated this quite clearly—was that, since he had come on board, one of the real changes he had tried to make was that it was not the case of fighting these people all the way to the courts. There was to be a whole series of processes put in place so that you would not be engaged in this destructive—and actually quite damaging to Telstra—process, to say nothing about the poor business.

CHAIR—So what is that process?

Dr Warren—We will take it on notice to get that for you.

CHAIR—Is it a new process in that you do not know what it is?

Dr Warren—I do not know the process. As with a lot of the questions today, it would have been useful if we had had some forewarning, as we then could have had that information here.

CHAIR—We might invite you back, and so you are forewarned.

Dr Warren—It would be nice to be forewarned, but we do not seem to get the same questions.

Senator MACKAY—We will give you warning and then we will get you back when we get responses that say, ‘Can’t provide because of commercial-in-confidence.’



CHAIR—With the roll-out of broadband, you say that your stated objective is to have one million broadband customers by 2005. Does Telstra have a map of where those customers might be? Can we see lines on some sort of plan that would assist us to understand where you think broadband is going, or does that just come as a surprise as you proceed?

Mr Paratz—I do not believe that we would have such a map. Our approach is a market based approach. We would aim to promote broadband. We would aim to get technologies that would make it as cheap as possible. We would aim to make it perform as well as possible. Then, in response to market demand, we would invest. We could give you a map, I guess, today saying that broadband is available everywhere because of the use of satellite. So we could colour in the whole map, but the depth to which it is coloured is a market question.

CHAIR—What marketing approach do you take? Do you set off to do the Albury-Wodonga region and heavily market in that area and then proceed to supply, or do you market around the country and see how many expressions of interest there are?

Mr Paratz—No; we are promoting broadband widely. I regularly see on TV and in newspapers right throughout Australia the promotion of broadband. I believe absolutely that we are taking the possibilities of broadband to the Australian market and seeking to maximise outcomes.

CHAIR—Let me ask that question in another way. This one million customers is at least two-thirds again as many as we have at the current time—is that right—so we are talking about trebling the current number?

Dr Paterson—In September 2000, we had 321,000 customers.

Mr Paratz—Yes, 321,000.

CHAIR—So I am roughly right in saying that we are going to end up with three times as many as we now have.

Mr Paratz—Yes. Of course this is a national figure, not a Telstra figure.

Dr Paterson—That is right, yes. It represents all providers.

CHAIR—The committee is interested in knowing what your thinking is. It is hard to imagine that you will just market it without in some way having a breakdown of this group of extra 600,000 or 700,000 customers. Are they all going to be in the city, or are they mostly going to be in bigger regional centres? Are we going to concentrate on Queensland and Victoria, or is it Tasmania and Western Australia? Can we get some sense of where you are heading here?

Mr Paratz—I think we can absolutely say that there will be no state bias in it.

Dr Warren—It will be nationally based, but we will have different channels through which to market it. We have just restructured the company, as you may have seen, and it is still being bedded down. One of the elements of that we have created a new broadband online media group. That group’s mandate is to generate programs. How those programs will be delivered as



content that gets customers online and interested is going to depend on which channel it goes through. It may be sold through Telstra Wholesale, Telstra CountryWide, the mass marketing group or as part of the work to business. Each of those individual business units will have their own marketing targets and they will be going after those. But TCW, Telstra CountryWide, has a series of ads that are specialised for individual areas.

Mr Paratz—Vignettes.

Dr Warren—Vignettes. They basically target the extremely local level, which is the beauty of Telstra CountryWide. That is where we are heading with it. It is a myth to believe—it is a myth believed by many of our competitors, by the way—that Woollahra is where you want to be marketing and not Walgett. It is that kind of thinking that Telstra CountryWide has proved to be a myth. There is value out there, and it is for that reason we market out there as well as in Woollahra and Toorak.

Dr Paterson—The process we will use in doing that—we use it now and we will continue to use it in an enhanced way—is to record the expressions of interest we get from customers in getting broadband. We can then see where the areas of greatest needs are and move to service them as quickly as possible—and so have a register.

CHAIR—That is an interesting approach, if I may say so. Doesn’t that suggest that a lot of customers who might express an interest, if they happen to be the only one in the local area, are not likely to be satisfied by your services? How do you deal with those people?

Dr Warren—They are not likely to get ADSL if they are the only one that is ever likely to want ADSL at their exchange, because it does not make sense to upgrade that exchange.

CHAIR—Do you ring them up and say, ‘Sorry, you were the only ones who wanted ADSL’?

Dr Warren—No, we do not. There is an ADSL fetish that ADSL equals broadband. We do not believe that. We sell broadband services, and so we will try ISDN for those customers. That may be all they need, particularly if they are downloading stuff from the US, because ISDN is the maximum speed you will need to get stuff from the US. Alternatively, we may be marketing satellite to them. There is, as was mentioned before, I think by the NFF, a problem with two-way satellite expense, and we would love to see some form of subsidy which would allow us to equalise prices across the technologies. At the same time we are rolling out, as we have said to you before, many ADSL exchanges.

Mr Paratz—In addition, on the technology side, we are out there very aggressively beating the world market, looking for broadband devices that will deliver in smaller modularity at affordable prices. We are trying to drive our underlying cost and the price that goes into the market for this whole product down to get it out as pervasively and as quickly as possible.

CHAIR—It has been suggested to the committee that Telstra is not interested in working with other parties like local government, and that local government is doing quite well with your competitors by agreeing to be responsible for some infrastructure layout, just working out cooperative arrangements. In fact, I think it was Mr Ross Kelso in Canberra who told us that there were many precedents. For example, in the Coorong area of South Australia, local government, with Networking the Nation assistance, had bypassed the Telstra network and



managed to supply much cheaper local, state and national calls. Why is it that Telstra is not able to build such partnerships and provide services in that way?

Mr Paratz—Telstra is working very actively with a wide range of local governments. But one of the real positives of the regulatory regime is that it allows a richness of outcomes; it allows competitive outcomes. We would love the Coorong’s business but it is working with somebody else, and that is reasonable.

CHAIR—We heard from businesses—I am sure it was in Wollongong and elsewhere—that Telstra did not want to know.

Dr Warren—If that is the case, then we would obviously have to go and see that marketing manager and wonder why he is continuing in his position.

Senator MACKAY—You should read Hansard, because it has been alleged many times.

Dr Warren—You know, Senator, as well as I do, that there are a lot of underlying objectives running around this inquiry and all of them do not exactly have Telstra’s best interests at heart.

CHAIR—Perhaps you could provide the committee with a schedule, if that is possible, of where you have—particularly local government; I think this is of great interest to the committee—established cooperative arrangements and partnerships. That would be useful.

Mr Paratz—I believe that we can do that, because a couple spring to mind, and we can get a complete answer. There are many local governments who find that a very fruitful and useful way for the community to operate.

CHAIR—I have a question about mobile phones and your approach to black spots and service failures. What is your process for identifying problem areas and how do you analyse the data and decide to take action? Obviously, there are issues in country areas. Anecdotally at least, we hear a lot of complaints about how services do not work. It is hard to match this with your claim of there being I think 97.8 or 98.7, one or the other, coverage of mobile services. I know that every time I come out of the airport in Melbourne, the line drops out at the bridge when you are about 30 seconds out from the airport. I am accustomed to having to ring back—because it is always when you are making calls. I do not make any complaints because I think it is just inevitable, but how do you figure out what is going on there and what does your analysis look like?

Mr Paratz—There are a couple of bits to this discussion. The first is to put in new base stations and extend coverage, which broadens coverage in macro. In micro, radio is a medium which is affected by lots of things. It can be affected by terrain, topography, interference with things like high-frequency welders and all sorts of things like that. So you can get isolated spots where you will not get coverage. For instance, I was driving at about 10 o’clock one morning, and I had a drop-out on my mobile. I realised that I was in a place where at 10 o’clock in the morning the sun was not even hitting the ground; the place was deep down in a hole. So it is not remarkable that the radio did not find its way down there. How do we deal with these things? There is a variety of elements. Firstly, in areas where there is an intensity of traffic, an intensity of customers, we may do infill with a small cell. They obviously are not cheap and they need transmission—



CHAIR—I am sorry, Mr Paratz; I am not so interested in how you fix those problems but how you analyse, how you get to that point.

Mr Paratz—We do a couple of things. Firstly, our own mobile staff are drive testing and logging coverage, so we build up profiles of the coverage.

CHAIR—So they would know about the Tullamarine airport problem, presumably?

Mr Paratz—I do not know about that specific one, but conceptually they should come to know about it. That would allow them to—

Dr Warren—But we will know and make sure that they do know about it.

Mr Paratz—Yes, they will know by this afternoon and I will ask you about your telephone subsequently. That allows them to tune antennas, change their angles, their tilts and so forth to work on these black spots, these points of poor coverage. The other area is that, when customers ring into Telstra mobile net service, we log and correlate that data. So, if we find we are getting a consistent pattern from a particular place, we investigate that. It might be a coverage issue or it might be a capacity issue.

The third thing—this is very important—is that we work with our dealers and our customers to help them to have the equipment that helps themselves. For instance, car kit antennas are really important. It may well be that I might have the appropriate equipment in my vehicle; Tony, for instance, may have lesser equipment and he may have a drop-out and I do not. There is coverage, there is service, but he has a drop-out. With a bit of education, maybe he can get service. So those things put together are all part of getting better results.

Then there is the discussion around whether you have the right network, CDMA/GSM. I know that members of the committee are pretty familiar with the fact that the area coverage of CDMA is far superior to that of GSM. Then there are multiple CDMA networks, only one of which is Telstra’s, and the coverage of those GSM networks varies from operator to operator. I am sure either by experience or anecdote you will have an understanding of the difference of those different networks.

CHAIR—So you are describing a process which goes beyond the list of complaints that comes into Telstra. Does that data, including your people who run around testing and so on, go to the ACA when they consider Telstra’s performance levels?

Mr Paratz—I will take that on notice. I suspect the answer is that I am talking about the engineering analysis which allows us to improve and manage our service. The figures in the ACA report are, I believe, in aggregate drop-out numbers. That then is an amalgum of people driving out of range at the periphery and all sorts of other factors, and so it is actually measuring something different.

Dr Paterson—My understanding of the source of the ACA numbers is from network documentation whereby a caller drops out and is reconnected not long after. Say, for example, you have a call that is happening, it stops and then a call to that same number is made within 30 seconds or whatever the period is. That is counted as a call drop-out.



CHAIR—Does Telstra charge for the second call?

Dr Paterson—No, we do not.

CHAIR—I cannot find the reference to it, but there is an Internet connection program partly funded by the Commonwealth and partly funded by Telstra.

Dr Warren—The Internet Assistance Program?

CHAIR—Can you describe how that works? You come and assist people with how their modem works, you look at their equipment—in other words, you find a way of them getting better service on the Internet than they currently have.

Mr Paratz—That is right.

CHAIR—Can you just explain to the committee what you find are the opportunities that have not been found by customers and why it should be necessary to have a technician point this out; why can’t we have a kit or a booklet that tells us how to do it?

Mr Paratz—The answer is that the Internet Assistance Program includes the kit, the booklet, the web site—everything except the movie—and the technician is right down the process. Underlining it is that many customers have reported to us—and this really came out of the Besley inquiry—that they were having slow Internet, and the inference that flowed from that was that somehow Telstra’s lines were causing this. Our experience was that, in the vast majority of cases, the customer is having slow Internet, but it was easily and readily fixed and it probably had nothing to do with the Telstra network in the majority of cases.

The sorts of issues that come into it are the way the computers are set up, things they have wide and parallel with the computer, maybe the performance or even the arrangements that particularised PCs have in place, the presence of electric fences—lots of things that are manageable and under the customer’s control. We could have taken the view and said, ‘It is not our problem,’ and just wash our hands of it. But we did not. What we said is, ‘This is an education process. We are moving in the Internet era so it makes more sense for us to make our knowledge and our learning widely available.’

The Internet Assistance Program is administered by an external board, not by Telstra. Telstra has one seat on that board, but as to the other members of the board, one is from the department; the NFF has a seat on the board, as you heard earlier; and the others are generally consumer and community advocates from around Australia—so it is externally administered. It provides a layered response. There is a body of information which is available on a web site. You may ask, ‘If you are having Internet trouble, can you get to the web site?’ Many customers can quite satisfactorily. Backing that up is a call centre they can ring into and be sent the pack information that you refer to. If that does not do the job, there is an online help to say, ‘Have a look at this on your screen; change that setting.’ That builds on a real databank of knowledge that we have and are sharing with the community about how to get Internet to go properly.

If, at the end of that things are not working, we have committed to send a technician out to investigate the issue and, if the issue is in our plant, to resolve it. Let me give you a sense of this—and these numbers are a little dated; please do not tell me later that I gave you numbers a



couple of months out of date: we have had around 70,000 customers through the Internet Assistance Program. Of that 70,000, the number where we have had to send a technician out is around 1,100. So about 69,000 problems have been resolved on a guided self-help basis. Of the 1,100, around 700 were resolved by the technician but were in the category where they could have been resolved by self-help but the process just did not get there. Therefore, for about 400 of the 70,000 we got down to things in the Telstra network, and they have tended to be things you would put in the annoyance or silly category, such as coil left out or a bad termination. They are things that were not affecting the telephone service. You go and fix them and they are done. So it has been spectacularly successful.

CHAIR—How many of those 70,000 people would be in the dreaded pair gains category?

Mr Paratz—The Internet Assistance Program reports quarterly, I believe it is, to the department. I am sure you would have access to the departmental reports that would give you that next layer of granularity. I do not have that number in my head at the moment.

CHAIR—It might be useful to check if that becomes a public document or whether it just goes to the department. It is perhaps something we will ask the department too.

Mr Paratz—We are unsure on that.

CHAIR—It sounds like useful information for us.

Dr Paterson—I would like to make a couple of points based on issues discussed earlier.

CHAIR—Please go ahead.

Dr Paterson—First, on the number of broadband services, the statistics behind the June 2002 report were provided to the ACCC at the end of the first week in July 2002, so that was as soon as we could after the end of the financial year. The ACCC report on the June 2002 broadband services was released on 10 September 2002. Telstra provided the correction as we have noted on 11 October 2002 and did that by press release, notification to the ACCC and notification to the Estens and Senate inquiries. I will make one other point of clarification. The ACCC’s concerns of inquiry into broadband services as part of the OEZ contract related to installation charges and equipment costs, not to ongoing charges. So ACCC concerns were about those up-front costs.

Mr Paratz—Perhaps I could just add some clarifications and responses to some of the questions that are on the table. Earlier, there was questioning around the date of the CNI information of February 2002. The questioning largely was: why was the February 2002 information used in the Estens report? I am advised that the Estens report notes the source of that information. That information was sourced from our responses to estimates; it was not supplied to Estens by Telstra. The Estens committee then sought further details from us, which were subsequently supplied. The February 2002 date relates to data available, through estimates, in the public arena.

Senator MACKAY—Did you find out about the priority classifications?



Mr Paratz—Yes, I am just going to give you some information.

Senator MACKAY—No; to Estens.

Mr Paratz—I am being advised at the moment. I believe the February information was aggregate and the October information contained the breakdowns.

Senator MACKAY—Of priorities 1, 2, 3, 4 and 5?

Mr Paratz—I am advised that the October data did.

Senator MACKAY—By state?

Mr Paratz—No, not by state.

Senator MACKAY—Aggregate.

Mr Paratz—Then there is the document tabled earlier ‘National and regional outstanding CNI snapshot (weekly)’, our people have been unable to source this document this morning in our records. That is not to say that it is not in our records; they have been unable to source it this morning. They have been able to confirm that bottom right-hand number of 111,755. They have found that number in our records on that date.

Senator MACKAY—That would lead us to assume that the rest of the documentation is accurate.

Mr Paratz—It does not necessarily lead us to that. This may be somebody’s notional disassembly of that number. I think in fairness I have confirmed for you that 111,000 number, and I am unable to confirm today the rest of the document. I do not know whether it is our records or somebody’s analysis.

CHAIR—I think that is useful for us in our deliberations as to whether that should be tabled or not. Perhaps at this stage we could go back to the other documents that were passed to the committee in Sydney a week or so ago numbered 1, 3, 4 and 5. You indicated that some of the information on those documents might be a problem for Telstra in terms of security. I have suggested that we might consider obscuring some of that data in making these public documents. Do you wish to advise us as to what that might be?

Mr Paratz—I am advised that certainly our concern remains as presented this morning. We really need to run this document past our security and infrastructure people. That is under way, and we will do that with a view to minimising any impediment or restriction on the committee. We would ask your indulgence to allow us to do that early next week. Based on the information I have from my colleague, we would ask your indulgence through to close of business Wednesday.

CHAIR—I think we would like you to do it a little sooner than that if at all possible.

Mr Paratz—We will make that endeavour.



CHAIR—I make the point, just looking at document No. 1, for instance, that it seems to me that the exchange is not identified in terms of its location; rather the customer’s problem location has been. I can see an argument for privacy reasons in obscuring that information but it is hard to see what other security issues might arise from that. Schedules 3 and 4 again seem to me to have the same kind of information. At face value at least they would not seem to pose a security issue, but we take your advice and look forward to hearing at the earliest.

Mr Paratz—That would be excellent. I certainly see information here that would allow a technically adept reader to divine other information.

CHAIR—Yes, which I do not claim to be, of course. The committee has before it a document which is an extrapolation of those 111,755 regional outstanding CNI snapshot faults. Is it the wish of the committee that that be tabled?

Senator MACKAY—Yes; and I would like Telstra to respond. This is the table that I read out into Hansard. I want Telstra’s response as to whether these figures are Telstra derived and the accuracy of them.

Mr Paratz—I believe we have undertaken to do that.

Senator MACKAY—No, not in response to the breakdowns—area by area. I did not go into full figures; I did not go category 4 or 5, for example. This is giving you the opportunity to respond. I just have one procedural question of Telstra. I have been approached, as has another member of this committee, about Telstra having contacted at least two people who have put submissions, organisations, into this inquiry and the approach has been characterised as quite intimidatory in terms of people who have put in submissions. I would like Telstra to ask its personnel whether anybody has approached anybody who has put submissions into either this inquiry or the library’s inquiry and what the nature of that contact was—I am giving you the benefit of the doubt there.

The second issue I want to raise is that a number of workers of Telstra have been in contact with my office at least and have indicated that they would like to give evidence in relation to the state of the network. I raised with the committee the issue of whether we could do it in camera; therefore, those workers’ identities would be protected. I went back to those workers with that response but they did not regard that as sufficient protection; they are concerned about retaliatory action. I want some indication from Telstra about what would happen if we took in camera evidence from particular workers. We would be able to track what happened to those workers, by the way, subsequent to making in camera submissions to this inquiry. So I want a response from Telstra as to whether that has happened in any instance or if you are aware of any Telstra management person being approached along those lines and if there has been any intimidation at all.

I remind Telstra that, in terms of those allegations, the first one particularly, if it has occurred, is a very serious contempt of the Senate. I am aware that it has happened on two occasions. The people concerned are too afraid to approach the committee. The second thing I would like to indicate is that I have a number of other documents that I am not prepared to table because they could be sourced to a section within Telstra or particular Telstra employees. I ask Telstra to bear that in mind when they provide responses that in some cases I already have that information.



The third thing I would like to suggest is that the next time we call Telstra I would like to ask Dr Switkowski to appear.

CHAIR—Just another point of clarification about documents numbered 1, 3, 4 and 5: these documents have the status of being published but only to Telstra until we receive advice from you concerning the security issues.

Dr Paterson—Perhaps I could raise one point before we close in relation to contact with customers who have put in submissions to this and the Estens inquiry. On the basis of public submissions, we did follow up with some customers with a view to assisting them with their concerns. We most certainly did not do it in an intimidatory way but with a view to helping them with their concerns.

CHAIR—Did they suggest you did?

Dr Paterson—Not as far as I am aware.

Senator MACKAY—I have had contact from two people and two organisations. I am giving you the benefit of the doubt to go and check this. If necessary, I will take this further because it is a contempt of the Senate.

Dr Paterson—What would help us in doing that is to have some details around that so we can—

Senator MACKAY—These people will not go public and they will not allow me to use this information.

CHAIR—That concludes today’s hearing. Thank you very much for appearing before us.

Committee adjourned at 1.57 p.m.

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