The Telecom Monopoly: Natural or Artificial?

While artificial and unnecessary restrictions are placed on competition in the telecommunications field, the Australian community will not be able to enjoy the improvements in efficiency that are now beginning to be enjoyed by consumers in other countries, irrespective of whether ownership of the basic telephone network is private or public.

Australian Treasury,
Treasury Economic Paper No. 10,
1983, pp. 11-12.

FOREWORD

The assumptions that Telecom's monopoly of Australian telecommunications is a "natural monopoly", and that competition should be prohibited, seem deeply engrained in Australian politics.

Spokesmen from all major political parties have lauded the virtues of this monopoly, and some have at times even evoked it in a quasi-mystical way as a manifestation of national unity.

It has, however, been deemed necessary to reinforce the monopoly allegedly conferred by nature with powers conferred by law.  That law provides heavy penalties for anyone attempting to challenge the "natural monopoly" by going into the telecommunications business for themselves.

Telecom's monopoly -- a regulated, union-dominated, government-owned monopoly -- is now much more rigid than the systems of such other major English-speaking countries as the USA, Canada or Britain.

For a long time this assumption of "natural monopoly" seemed to have little if any challenge.  It was just the way things were done in Australia and, presumably, the way things would always be done.

However, Telecom has provoked increasing doubts and scepticism about its performance in recent years.  Even so conservative a body as the Australian Treasury has questioned aspects of its operations.  Comparisons with other countries with less government control (such as Canada, which has a similarly dispersed population) do not show Telecom up in a particularly flattering light.

Telecom is now being criticised for, among other things, taking advantage of its monopoly position to charge high prices while being slow to introduce new kinds of service, and for failing to make proper use of new technology.  A recent survey of 4,000 Telecom employees indicated that they rated the provision of "excellent service" only fourth in priority, well behind their own training and career development.  Telecom is now planning to spend thousands of dollars on an in-house campaign to remind staff that customers come first, but public dissatisfaction is widespread.

Given the growing importance of telecommunications to every aspect of economic life, a second-rate system in a competitive world is something Australia cannot afford.

In this book Mr Richard Wood shows that contrary to the arguments put forward by some defenders of the status quo, Telecom is not a "natural monopoly", there is no good reason to think it is uniquely immune from the bad features of government monopolies, and there is no good reason why it should continue to have monopolistic privileges.

Telecom's "natural monopoly" is a myth, and an expensive one.  The facts Mr Wood presents are striking, and there are some surprises among them.

Vested interests are identified which are benefiting from the existing restrictive system to the detriment of the community as a whole, and which are the real obstacle to change.

Mr Wood shows why much greater liberality in the form of "marketisation" and competition should be allowed, both in ordinary telephone services and in the use of satellite and other new technology.

He also examines the consequences of privatisation, and suggests several far-reaching changes in the direction of liberalisation from today's restricted regime to improve service and increase efficiency.

He finally offers a set of suggestions for more minor changes which would at least improve Australian telecommunications within the existing system.

His economic scholarship is complemented by familiarity with the historical and political backgrounds of telecommunications policies in Australia and overseas.

Mr Wood says this study is not intended to be the last word on all aspects of Australian telecommunications policy, but it is complete in itself and surveys most of the major issues.

In a time of rapid technical change, and in an intensely competitive world trading environment where the cost, speed, capacity and reliability of communications are major factors in economic development and in achieving and maintaining competitiveness, the subject of this book is important for all Australians.

Hal Colebatch

INTRODUCTION

BACKGROUND

While the British heritage has been of immense importance to Australia's economic development, it has had its negative impacts.  We adopted Britain's system of public ownership and monopoly in postal services, and, as in Britain, extended it to include the potentially competitive telegraph and telephone in the latter half of the nineteenth century.  Despite a brief period of competition, public monopoly has prevailed in telecommunications in Australia virtually since the beginning.  The system has survived -- with no changes of substance except the splitting of telecommunications from the postal services in 1975 -- for a century.

Some would argue that the public telecommunications system has served us well by providing a constantly-improving means of communications at a falling real cost which has allowed most Australians to share in it eventually.  Australia, with its concentrations of population in the south-eastern and south-western corners and very little in between has been difficult to unite.  The telecommunications system has helped join us together.

But there are those who have been less enthusiastic about the system of telecommunications.  There have been serious complaints about the overall cost of the services, the unfairness of the distribution of the costs amongst users, and the extent to which Australians have missed out on technological changes that are benefiting users in some other countries.  The quality and reliability of the services have also been questioned.  In short, there are many who feel we can do better and that changes must be made either to improve the existing system or to replace it.  The emphasis of this study is not on further tinkering with the regulation of the public monopoly organisations, but on the more radical suggestions of permitting competition and private ownership.

Two new features have entered the debate about Australia's telecommunications industry.  Most importantly, the traditional view that telecommunications is a "natural monopoly" has come under challenge.  The implications of new technology have become evident from overseas developments, the publication of the (Davidson) Report of the Committee of Inquiry into Telecommunications Services in Australia, ⁽¹⁾ the advent of the AUSSAT domestic communications satellite and the popularisation of new developments in economic thinking about industry structure.  These events suggest that substantial competition in telecommunications is both possible and desirable.  The second new feature is the advocacy of "privatisation" to improve performance in this and other industries.

These policies of marketisation and privatisation have received growing prominence in academic circles.  This interest was sparked by the Centre of Policy Studies at Monash University, which sponsored a conference on "State Enterprise and Deregulation" in 1983, has published a special study on telecommunications in Australia, and has sponsored visits by international experts. ⁽²⁾  The Centre for Independent Studies has also encouraged research along these lines into industries such as domestic airlines, postal services and telecommunications.

The main organisation in Australian telecommunications is the Australian Telecommunications Commission (Telecom).  Telecom began life in 1975 as an offshoot of the old Australian Post Office (APO).  After the (Vernon) Commission of Enquiry into the Australian Post Office, ⁽³⁾ the APO was split into two commissions, Telecom and the Australian Postal Commission (Australia Post).  This split -- and the removal from direct departmental control -- was the first major change for nearly one hundred years.  After ten years we can now assess whether this re-organisation set the scene for reliable, cost-efficient and innovative telecommunications in Australia or whether there is need for further change.  In particular, could marketisation and privatisation improve performance?

THE SCOPE OF THIS STUDY

This study begins by examining the structure and performance of Telecom, highlighting the various failures in the current system.  Problems seem to be in statutory monopoly, public ownership and government interference with (in particular) pricing policy.

This is followed by a consideration of the scope for "marketisation".  We need to determine whether Telecom, or parts of it, has elements of natural monopoly.  Where natural monopoly is not present the appropriate policy should be to open up those areas to competition.

Advances in technology have expanded the scope for competition in telecommunications substantially.  This was recognised by the Davidson Committee, which demonstrated that areas such as long-distance communications and the supply and installation of terminal equipment should be opened up to competition if the "public interest" was foremost in the minds of decision-makers.  Part of this paper will show any sceptical readers that telecommunications are not a "natural monopoly" and that competition in telecommunications can work for the good of society as a whole, as it does elsewhere in the world.

The Davidson Report has received little attention either academically or officially.  Unfortunately, arriving as it did just before the 1983 election, it was not acted on by the Fraser Government.  While the incoming Hawke Government dealt with the (Bradley) Report of the Committee of Inquiry into the Monopoly Position of the Australian Postal Commission, ⁽⁴⁾ it has rejected Davidson's Report virtually out of hand and without argument.

The Davidson and Bradley Reports are like cheese and chalk.  While the Davidson Committee took a very open attitude to competition, the Bradley Committee broadly favoured the continuation of Australia Post's exclusive trading powers.  Neither report considered the appropriate form of ownership of the service examined, which was not part of the terms of reference in either case.  This omission is of interest because while marketisation is important, social benefits may also be expected from the transfer of a public enterprise to private ownership.  This question will be examined in the light of both theory and overseas experiences with private ownership of telecommunications.

Privatisation has since become an "issue" in Australia. ⁽⁵⁾  The Federal Opposition has raised the question and several public bodies have been considered.  One short-list of candidates for privatisation includes the Commonwealth Banking Corporation, Telecom, Australian National Lines and Trans Australia Airlines (TAA).  In the light of the British experience with privatisation and widespread disenchantment with some aspects of the operations of these bodies in Australia, the question is important.

It is interesting that Telecom has made it onto this particular list, while its old partner in the Australian Post Office, Australia Post, has not.  In my view, the case for the postal service to be on the privatisation or liberalisation schedule is at least as strong as that of telecommunications.  Both should be there for the same sorts of reasons.

Telecom and Australia Post have much in common.  Both are public enterprises under Commissions with very similar legal and financial structures and a common parentage.  Both have substantial degrees of statutory monopoly although that afforded to Telecom is far more protective.  Both have been subjected to Government pressure to maintain politicised pricing structures involving significant cross-subsidy of rural users.  Further, the two organisations have lost much of the public trust and esteem they once enjoyed.  The criticism of their performance has been widespread and strong.  Perhaps most important, neither organisation can be construed as operating in a naturally monopolistic environment requiring protection from competition.

The monopoly supplier of telephonic and related services has, for a publicly-owned enterprise, shown an inordinate amount of interest in preserving its own privileged position by political means rather than by proving its worth as an efficient, innovative and reliable performer.  This aspect of Telecom's behaviour is dealt with in a concluding section which considers the political economy of telecommunications policy-making in Australia.

CHAPTER 1:  A PROFILE OF TELECOMMUNICATIONS
IN AUSTRALIA

The importance of telecommunications to any modern economy cannot be over-emphasised.  For a country with Australia's geographical features, efficient and up-to-date telecommunications are of great importance for all economic development.

Telecommunications are far more than telephony, itself of crucial importance to business and wealth-creation.  The use of the system for data transmission has been growing at astronomical rates and illustrates how technology has changed the entire concept of telecommunications.

The telecommunications industry in this country is dominated by Telecom, its highly unionised labour force, the Overseas Telecommunications Commission (OTC) and a group of equipment suppliers.  A new, and wild, card in the pack is the AUSSAT domestic communications satellite.  The outstanding features of the industry are statutory monopoly, public ownership and political interference.

Both the Postal Services Act and the Telecommunications Act of 1975 establish significant exclusive trading powers for the respective operators, Australia Post and Telecom.  In the case of Telecom the monopoly power appears virtually absolute.  Any person or body, other than Telecom, "shall not erect, maintain or operate a telecommunications installation within Australia" or "attach a line, equipment or apparatus to a telecommunications system".  "Installation" and "system" are extremely widely defined.  There are some minor exceptions as set out in Section 94 including Telecom's right, under section 13, to authorise persons to erect, operate, install, etc.  The penalty for a breach of section 94 is two years' imprisonment.  This has meant that Telecom, unlike Australia Post, has had no effective competition at all.  Its monopoly has been as complete as one could imagine.

The exclusive trading powers under the Telecommunications Act have been vested in a 100 per cent publicly-owned commission trading under the name "Telecom".  The act requires the Commission to operate efficiently and cover its costs of operation, including financing from its surplus at least one-half of its capital spending.  Telecom also has rights to undertake public borrowing to help finance its investments, which it does on a very large scale.  The Minister (for Communications) has to approve Telecom's prices (under certain specified conditions) and has considerable powers to direct its operations.  Telecom is also obliged to notify the Prices Surveillance Authority of proposed changes in its charges.

While there has, since 1975, been an attempt to simulate the organisation of a private firm, there is not the same disciplinary and incentive structure as in private enterprise.  Ownership is diffused, management and staff tenured, and take-over impossible.  The result that may be expected is that the commission is used to at least some extent for the benefit of the operators rather than the consumers of telecommunications services.  The absolute monopoly power is an integral part of a process which can produce monopoly prices but where the consequent, profits are disguised in the form of cost-inefficiency of various kinds. ⁽⁶⁾

Monopoly power is also used to sustain cross-subsidy.  This may not be the free choice of management but the result, in part, of overt and covert pressure from Government.  The overt pressure for politicisation of pricing comes from a section (6.(2)(b)(iii)) of the Telecommunications Act requiring Telecom to cater for the special needs of people living or carrying on business outside the cities.  Covert pressure is exerted in mysterious ways.  As noted by Butlin, Barnard and Pincus, ⁽⁷⁾ the Country (now National) Party has traditionally shown great interest in the operations of Telecom, Australia Post and their predecessors.

Total cross-subsidy has been enormous, as is shown by the following table from the Prices Surveillance Authority's Report ⁽⁸⁾ showing estimates of revenues and expenses from the major services for 1984-85.  This is the picture that emerges well after the commencement of a "rebalancing strategy" in 1981.  While, in aggregate, trunk callers are taxed, there is a cross-subsidy within trunk calls which tends to favour the bush.  An STD call between Melbourne and Sydney could be expected to be much cheaper to connect than one over a similar distance between two rural locations.  The actual urban-rural cross-subsidy from all sources is large but is not known with certainty.

TABLE 1:  TELECOM'S CROSS-SUBSIDISATION
Estimated 1984-85 -- Millions of dollars

	Earnings (including depreciation)	Direct Expenses	Contributions
Access rental   - metro   - non-metro   Total	551 334 885	517 574 1,091	34 -240 -206
Local calls   - metro   - non-metro   Total	678 295 973	386 286 672	292 9 301
Trunk calls	1,469	437	1,032

Source:  Prices Surveillance Authority, Inquiry in Relation to the Supply of Telecommunications Services, (1984) Report, p. 45.

The urban-rural cross-subsidy has a surprising degree of support from various quarters.  The Federal Secretary of the Australian Telecommunications Employees' Association, Mr W. Mansfield, claims it is supported by "all three major political parties ... [indicating] an acceptance of Telecom's cross-subsidy which transcends political differences".  He also claims that the more than $300m that is transferred from STD users "to sustain the loss-making rural network is an equitable and socially-beneficial arrangement" (letter to Australian Financial Review, 1 April 85).

The Minister, Mr Duffy, is also a strong supporter of the cross-subsidy.  Telecom has embarked on a $400m project to complete the automatic network at an average cost of $20,000 per outback subscriber.  The price to subscribers will range from $150 to $1350.  The huge cross-subsidy under the "Rural and Remote Areas Programme" has been endorsed by the Minister, who referred to unspecified benefits "from Telecom's endeavours in the rural and remote areas that don't show up on its balance sheet" (Australian Financial Review, 12 September 84).  The Minister has since made numerous statements in support of cross-subsidy which, in turn, have been used to defend Telecom from threats of privatisation.

The costs of this program and other rural cross-subsidies must be met by urban consumers, and add substantially to the cost of a telephone, certainly making it prohibitive for many.  Mr Mansfield's concern that "all Australians have access to and can afford to use a telephone, wherever they may live" appears empty when it is realised that many low-income urban consumers are deprived of a telephone because of the policies he supports.  This tax is about $125 per urban subscriber per annum, being about $500m spread over about 4 million urban subscribers.

The urban-to-rural cross-subsidy should not be sacred.  I would like to see a gradual movement towards cost-related pricing in telecommunications and more explicit financing.  The method suggested by Brock and Evans ⁽⁹⁾ is for the government to levy a revenue surcharge on the suppliers of urban services which would provide a fund for subsidising rural carriers.  This suggestion was made with a competitive system such as that emerging in the United States in mind.  A competitive system of telecommunications and the maintenance of cross-subsidy are not, as is often suggested, mutually exclusive.

CHAPTER 2:  TELECOM'S PERFORMANCE

In its 1984-85 Annual Report, Telecom sets out its corporate objectives and commitments.  Among these is the following:

Telecom takes pride in being one of Australia's more efficient enterprises and is committed to continuing to improve its efficiency.

This is a claim worthy of close consideration given the importance of telecommunications to Australia's economy.

Unfortunately it is rather difficult to evaluate the performance of public monopoly enterprises, but in this section we look at ways this can be approached and find signs of performance deficiency which should be a matter of concern, and which point to the desirability of change.

PRODUCTIVITY MEASURES

Telecom, like all government monopolies, prefers to measure its performance in "technical" terms such as the extent of its network, its degree of automation and the penetration of the telephone, rather than in terms of productive efficiency.  It can point to quite impressive achievements in this regard while also being able to boast declines in its real price structure.  Consider Table 2.  Taken on its own this shows that Telecom has facilitated enormous growth in the use of the telecommunications system, especially in regard to trunk and overseas calls and data transmission, increased its productivity by percentages ranging from 66 (for services per employee) to 103 (for real earnings per worker), and reduced its real tariffs by 34 per cent.  Further, the penetration of the telephone has risen appreciably from 62 to 85 per cent of households.

TABLE 2:  TELECOM'S MAJOR ACHIEVEMENTS 1975-1984

	JUNE 1975	JUNE 1984	CHANGE
GROWTH
Telephone services in operation	3,538,948	5,850,594	68%
New services connected in the year	345,529	510,728	48%
Provision of new misc. telephone facilities	256,782	481,120	87%
Telephone calls   Local   Trunk   Overseas   Total	3,560,000,000 345,000,000 2,225,000 3,905,000,000	6,174,595,000 933,621,000 22,204,000 7,108,216,000	73% 171% 898% 82%
Data Modems in operation	6,019	83,249	1283%
PRODUCTIVITY
Total staff	88,690	88,488	0%
Telephone services per staff member	39.9	66.2	66%
Earning per staff member	$12,049	$47,698	296%
Tariff Index *	161.8	265.0	63%
CPI *	171	402	135%
SERVICE
Homes with telephone	62.0%	85.0%
STD (% customer-dialled)	74.0%	96.3%
ISD (% customer-dialled)	0.0%	83.2%
Deferred applicants	16,472	5,226

(* 1966-67 base year)

Source:  L. McPherson "Evaluation of the Economic Performance of Government Trading Authorities", Australian Accountant, April 1985.  p. 24.  Original heading retained.

This array of superficially flattering statistics is impressive until the sceptic takes a closer look.

One obvious point should be made at the outset.  Telecom has not passed on all of the increases in productivity to its customers.  Productivity (of workers) indices have gone up far more than rates have come down, even though real wage rates in the industry have not risen significantly.  However, unlike Australia Post, Telecom uses a lot of capital equipment in producing its services and we would not expect to observe the same relationship between falls in real charges and rises in real (wage adjusted) productivity as in a labour-intensive industry.  Interestingly enough, such a relationship is not observed in the labour-intensive Australian Postal Commission. ⁽¹⁰⁾

COMPARISONS WITH PRIVATE OPERATORS

Another interesting exercise would be to compare Telecom's charges with those of private telecommunications operators.  However these are forbidden to operate by statute so no such comparisons can be made.  But even if there were rival operators, as in the United States, Telecom's reluctance to disclose information might still make a fair comparison impossible.  Telecom does not use private contractors for any of its functions.  Even Australia Post makes extensive (although arguably insufficient) use of private contractors.  Several areas such as laying of cages or wiring of buildings could be contracted out, probably at a considerable cost-saving.  This has been the experience of the South-East Queensland Electricity Board since it began contracting out certain functions early in 1985.

INTERNATIONAL COMPARISONS OF CHARGES

Another way of broaching these difficult questions is to make comparisons of charges between Telecom and overseas operators.  International comparisons are fraught with difficulties but nonetheless are valuable.  Telecom itself has attempted such comparisons.  Consider Chart 1 which reproduces an item from a 1985 Telecom Topics distributed with telephone bills.

Source:  Telecom Topics chart claiming to show that Australian telephone charges are "lower than most other countries".

A subscriber confronted with these data might well wonder what comfort can be drawn from them.  My own reactions run along the following lines:

• Why is the comparison made with only four other countries, only two of which are usually credited with exemplary economic performance?  The other two -- New Zealand and the United Kingdom -- are not countries with which we usually wish to compare ourselves.
• The comparison with the United States is not complimentary to Telecom.  While there are reasons for expecting the United States to do better (because of its denser traffic), why is Canada omitted from the chart?  It has population distribution and density much more comparable with Australia.
• What is being compared?  What is "the annual cost of a telephone service of the average residential customer"?  If it means the average annual telephone bill (rental plus all call charges) why then is this relevant when it ignores what is being received for this payment?

As it turns out, the Telecom data are highly abridged and selective reproductions of results which Telecom obtained from a 1983 study it undertook and which are summarised by the House of Representatives Standing Committee on Expenditure. ⁽¹¹⁾  The full comparison is between 11 countries and is considerably less flattering to Telecom.  The cost is based on the sum of one-tenth of installation costs, total rental charges, charges for 600 local calls and fifty standardised trunk calls, as of 1982-83.  The comparison was done for both total cost (converted by the exchange rate) as well as on the "hours of work required" basis reported in "Telecom Topics".  The full figures for 1982-83 are graphed as Chart 2.

One point should be highlighted.  Three of the six countries excluded -- Canada, Japan and Sweden -- all had considerably better figures than Australia.  Canada, at 25.63, was about 19 per cent less than Australia's 31.68, and was a particularly surprising omission given, as the Davidson Report points out, its significant similarities of standard of living, population density and dispersion compared with Australia.  While Canada's overall population is larger than Australia's (approximately 25 million to Australia's approximately 15.5 million) it is spread over an area nearly a quarter larger again, so its density is comparable.  The dispersion of the population, with a major concentration in the south-eastern corner and a smaller concentration in the south-west, is also remarkably similar.  The one major difference from our point of view is that Canada's telecommunications system privately-owned.

According to the Standing Committee, "The conclusion to be drawn from these international comparisons is that continuing efforts are required by Telecom to improve efficiency and productivity in order to keep charges internationally competitive" (p. 22).  This assessment was omitted from "Telecom Topics" although it might have been of very great interest to telephone subscribers.

TECHNOLOGY

Telecom has taken an insufficiently progressive attitude towards new technology, despite its claims to the contrary.  This has probably resulted from insufficient competition and has manifested itself in various ways including Telecom's own "accord" with the unions and its restrictive policy on telephone attachments.

The accord with the unions over technology was set up after a strike in 1978 over new switching equipment.  The settlement of this strike -- discussed in Chris Trengove's Telecommunications in Australia -- provided for joint consultation between management and unions before any decision is made to adopt new technology.  This has served as a brake on new technological innovation and has retarded the development of the telecommunications system.

As with the "accord", a lack of interest in technological change was evidenced by Telecom's attitude towards a domestic communications satellite.  Seeing it as a potential competitor, Telecom conducted a campaign to kill the satellite system.  When this failed it attempted to gain control of the system and was, as we will see below, partly successful.  This approach seems to be standard amongst public monopolies faced with competition.  The British Post Office, when faced with competition from the telephone in the late nineteenth century, behaved in exactly the same way and attained control of a facility it had previously argued was unnecessary. ⁽¹²⁾

Various observers have commented on the technological problems emerging in Australian telecommunications.  Even the Australian Treasury has compared our access to new technology with that of other countries unfavourably.  Regarding telephone attachments the complaints have been many.  For example, Mr Paul Travers, Chairman of the Australian Information Industry Association, has argued that the supply and attachment of hardware to the network, and its maintenance, "must be hived off" (Australian, 28 October 85).  He added that "Australia urgently needed a telecommunications environment in which the potential of the public-switched network could be fully realised".  Telecom's move into marketing a combined personal computer and modem has been criticised in the light of Telecom's ability to knock back alternative systems.  The advent of the "ComputerPhone", claimed by Telecom as a symbol of its high-tech profile is, in fact, more a symbol of its monopoly power and its use of it to retard technological innovation:

A COSY ARRANGEMENT WITH AUSTRALIAN EQUIPMENT SUPPLIERS

Another example of Telecom's monopoly power being used to limit the introduction of new technology arises from its cosy relationship with a favoured group of Australian manufacturers of telecommunications equipment.  This rapport, explored at more length below, was recently pointed out in a long article about one of the favoured suppliers, Standard Telephones and Cables Pty Ltd (STC). ⁽¹³⁾  STC would "vigorously oppose" privatisation of Telecom because the current practice of big business subsidising the domestic subscriber would cease and the result could be "catastrophic" because of STC's "traditional strength in manufacturing for the domestic sector".  Privatisation "could only mean less manufacture in Australia".  In short, STC's impressive profitability is tied up with a relationship with Telecom based on favoured treatment and Telecom's unfair pricing policies.

A realistic overall assessment must lead to the conclusion that Telecom has quite considerable -- and growing -- performance problems with the cost, quality and range of services offered.  In its quest to protect Australian equipment manufacturers, recipients of cross-subsidies and itself, it has caused Australian telecommunications to fall behind those of a number of other countries at a very crucial time.  Telecom certainly does not have grounds for any self-congratulation, particularly not after real international comparisons of performance.

CHAPTER 3:  NEW DIRECTIONS -- MARKETISATION

Telecommunications services in Australia are dominated by a body which is publicly-owned (and therefore really owned by nobody), ⁽¹⁴⁾ has almost absolute monopoly powers and which is subject to both open and hidden government interference.  Although this system may have worked tolerably well in the past, significant performance problems are now emerging.  Economic logic and experience overseas with alternative forms of organisation both suggest that new directions should be considered.  In particular, rather than trying to make Telecom work better through bureaucratic controls, it is time to consider the scope for substituting the discipline of competition (i.e. "marketisation") and concentrated ownership (i.e. "privatisation").

It should be remembered that with the advent of long-distance competition and the divestiture of Bell's local exchanges in the United States, and the sale of just over half of British Telecom in 1985, Australia is the only major English-speaking country which has a public monopoly telecommunications system.  Private ownership prevails in the United States, Canada and Britain and each of these countries has more competitive conditions than has Australia.

We now consider in turn the two broad policy directions in which we could head, beginning with undoubtedly the most important:  greater competition and marketisation.  This is followed by a consideration of privatisation.  In each case we begin with a review of the economic theory supporting the policy and then consider the prospects specifically regarding telecommunications.  As will become clear there is considerable empirical evidence favouring these policies of liberalisation.

MARKETISATION:  THE THEORY

It used to be argued that the existence of economies of scale or scope constituted "natural monopoly" requiring protection from competition.  This argument has always been suspect but the many doubts about it have recently been brought together as the "theory of contestability".  The concept of contestability relates to the determination of the conditions under which previously-protected markets can be opened to competition with socially desirable results.  Efficiency gains may be expected from marketisation even where there are scale or scope economies of single-firm operation.

The theory of contestability is not really new.  Ideas that have been around a long time have been drawn together and elaborated by a resourceful group of economists with experience in the areas of welfare economics and deregulatory experiments. ⁽¹⁵⁾  They have drawn on various work including that of a brilliant British economist, Frank Ramsey.  The possibility of forcing operators to set "Ramsey prices" (in crude terms, average costs) in all areas by subjecting them to competition is integral to the contestability story. ⁽¹⁶⁾

Economies of scale (i.e. unit costs decrease as output rises) and of scope (i.e. total costs of producing a given bundle of outputs are least for a single firm) are the basis of "natural monopoly".  Where such economies exist it is often alleged that single-firm operation minimises costs.  However, single-firm operation, where it is protected by statutory limits on competition, involves potential monopoly power which can be used explicitly for the purposes of making profits, supporting cost-inefficiency or cross-subsidy.  Regulations preventing explicit profits may allow the organisation to hide implicit profits by feather-bedding, on-the-job consumption of perquisites and generally leading the easy life. ⁽¹⁷⁾  Politicised pricing practices (cross-subsidisation) involving taxing some users to subsidise others may also arise.  In short, absence of competition may have undesirable consequences even where there should be the economies of single firm operation.

The theory of contestability involves three conditions under which the allowance of open competition will result in pricing according to unit costs, the absence of both explicit and implicit profits and zero cross-subsidy.  The conditions for these results are:

• the absence of significant sunk costs in the industry -- that is, fixed costs incurred by an entrant can be recouped if entry into the market is unsuccessful;
• the absence of any tieing, by technological or legal means, of customers to the incumbent operator in an industry; and
• the absence of any restrictions on an entrant in having access to the most advanced technology available for use in the industry.

In addition, the outcome of allowing competition depends on the response made to a challenge by the existing operator.  Strategies involving price flexibility may be possible that thwart the intentions of new entrants.  It may be argued that prices based on average rather than marginal costs are not really "socially-optimal".  However, while this belief has some force, "Ramsey prices" are very attractive.  Where there are economies of scale or scope, marginal cost pricing will result in losses.  Where such losses are made up from taxation revenue, the raising of the revenue will itself cause inefficiencies. ⁽¹⁸⁾  That is, there is both a potential gain and loss from moving from average cost to marginal cost prices.  It must further be remembered that the divergence of average and marginal costs depends on the extent of scope-scale economies.  The less significant are such economies, the closer will be Ramsey prices to marginal cost ones.

Some may be troubled by the fact that opening up a contestable market to competition results in the elimination of cross-subsidy.  However, if it is desired to favour some users over others it is, as we have seen, possible to do this in ways that are divorced from monopoly retention.  That is, competition and cross-subsidy are separate issues in contestable markets.

Even an approximation of the above conditions may lead to gains from putting an alleged "natural monopoly" to the market test.  The only thing that can go wrong is that "wasteful competition" may occur, resulting in the wasting of scarce resources.  But the possibility of such waste depends on the existence both of sunk costs and of private entrepreneurs who are foolhardy in that they have a propensity to risk money (their own) without a good chance of retrieving it. ⁽¹⁹⁾  Those risking their own money can usually be relied upon to make sensible decisions, an attribute often missing from those spending public funds.

Social gains may also be had if only parts of an industry are contestable.  Those areas which can be thrown open to competition should be exposed to market forces, while those that are truly "natural monopolies" could be protected by a cordon sanitaire if wasteful competition may be expected.  Baumol gives the example of airline operations which are broadly contestable and airports which, arguably, are not.  Some regulation (i.e. non-market control) may be required where contestability does not apply.

The basic messages of contestability analysis are these:

• Economies of scale or scope do not, in themselves, constitute a case for statutory protection from competition.  There is a strong case for putting any alleged "natural monopoly" to the market test although it is probably wise to check whether the conditions for contestability do, in fact, appear to hold, before opening to market forces.
• Average cost prices may not be too different from marginal cost prices depending on the extent of economies of scale or scope.  Marginal cost prices are not necessarily "socially-optimal" given that losses must be financed.  Further, average cost prices are certainly better than the monopoly prices which may arise from statutory protection from competition.
• Where only part of an industry is not contestable, this does not justify failing to open up those parts that are.  Any truly naturally monopolistic bits could be quarantined and subjected to regulation if wasteful competition was a realistic possibility.

THE CONTESTABILITY OF TELECOMMUNICATIONS

The idea that telecommunications are a natural monopoly has widespread currency.  When people think of competition in telecommunications they often have a notion of duplication of wiring, switching and terminal units which, on the surface, seems ridiculous.  Surely one network is the only sensible organisation for telecommunications?  However, this "common-sense" view has a number of failings, not least of which is that it ignores the greatly expanded possibilities for competition that have resulted from technological advances in recent years.

It is local networks in particular that have traditionally been regarded as being naturally monopolistic.  This was the conclusion of the Australian Treasury in its review of the evidence on natural monopoly in telecommunications. ⁽²⁰⁾  Treasury concluded this on the basis of common-sense and its understanding of the history of telecommunications in the United States.  However, according to a very interesting paper describing the early history of competition in telecommunications in the United States, there were many instances of duplicate systems.  As Bernholz and Evans note, "In 1916, well after the heyday of independent telephony, 20% of all Bell exchanges still faced direct competition from independent exchanges".  These authors conclude that even "local telephone markets were reasonably contestable" and that sunk costs "were not effective deterrents to entry ... local exchange monopolies may never have been 'natural'. ..." ⁽²¹⁾

In contrast to its view on local networks, Treasury saw scope for competition in long-distance transmission if there was sufficient volume.  Further, it noted that "the introduction of satellite technology has made the provision of relatively small-scale, long-distance telecommunications services viable" (p. 12).  Treasury emphasises the fact that "technological advances over the last two decades have begun to change many of the basic conditions in the industry and will almost certainly continue to do so. ..." (pp. 12-13).

Telecommunications, being an industry which is constantly changing as a consequence of technological developments, is now much more than the original POTS ("plain old telephone service") and is, in fact, so broad and so complex as to defy concise summary.  Advances have occurred in regard to methods of transmission (e.g. use of microwave radio and large capacity optical fibre cables), exchange or switching of electromagnetic signals (originally through manual switchboards and now fully digital) and of end-user terminal equipment (witness Telecom's new "ComputerPhone").  The telecommunications network can be used for the sending of far more than audible messages.  Examples include telegrams, television signals, telex, data services and facsimile transmission.  The role of telecommunications in a society which wishes to remain progressive, prosperous and internationally competitive is becoming increasingly important.

Telecom serves us less well as the sophistication of the industry it dominates advances.  While having served us reasonably in the past, it has not proved itself capable of meeting all the new challenges.  It has placed great emphasis on jobs and conditions rather than technology, acted to protect the established Australian equipment industry from domestic and international competition, restricted users' connections of terminal equipment, lobbied strenuously against allowing competitive and complementary networks and generally shown a resistance to change.  Australians have, it seems, been forced to fight for the limited access to new technology in telecommunications that has been allowed.  The monolithic, union-dominated Telecom has had to be dragged, screaming and kicking, towards the new age of technology.

The Davidson Committee took an extremely enlightened attitude to new technology and competition in telecommunications.  In virtually all respects its 1982 Report contains recommendations compatible with an innovative and efficient telecommunications sector.  It highlights those areas where gains could be expected from competition.  Gains would, according to the Committee, manifest themselves in the forms of more varied and cheaper services, more rapid access to technological advances and the elimination of major cross-subsidies.

Davidson considered the extent to which the Telecom terrestrial network is a "natural monopoly" needing protection from competition.  The Committee was "satisfied that the economies of scale and scope in telecommunications are not abnormally large and do not support a 'natural monopoly'." (p. 50)  It argued that technological change was "reducing cost of entry and permitting service responses increasingly tailored to the varied needs of different customers -- hence displacing the relevance of 'natural monopoly'." (p. 48)

The Davidson strategy can be summarised as allowing the existence of alternative networks (leased or independent) and their interconnection, at cost, with that of Telccom;  the introduction of time-based local call charges;  increased private participation in the supply and installation of terminal equipment;  removal of "protection" of Australian equipment manufacturing;  and the adoption (largely through market forces) of cost-related pricing policies.  The then-proposed AUSSAT domestic communications satellite was seen as playing a major part in this very open approach to telecommunications policy.

AN OPEN APPROACH TO LEASING TELECOM'S CAPACITY

Consider first the potential benefits from a more open approach to the leasing of Telecom's capacity.  While Telecom allows the leasing of lines for certain purposes, it does not allow the 1easing of networks (i.e. switching capacity).  Further, it does not allow the use of leased lines to establish networks in competition with Telecom, restricts the attachment of terminal equipment to leased lines and does not allow resale of leased capacity.  Many have argued that this very restrictive set of policies robs the community of full potential use of the existing terrestrial telecommunications network and serves only to protect Telecom from competition.  Such views were put strongly to the Davidson Committee which gave several examples of how intra- and inter-city networks using leased Telecom capacity could work.

The Davidson Report recommended that a virtual "open-go" policy on leasing be forced upon Telecom. ⁽²²⁾  Leased capacity should not be subject to any restrictions on its use or resale and should be priced at cost-related non-discriminatory rates.  Interconnection should be allowed at the cost of a time-based local call.  Such a policy was not seen to be potentially detrimental to Telecom as long as it was able and willing to alter its own charging policies to reflect more closely the costs of providing different facilities.  Otherwise, users of leased capacity subject to non-discriminatory pricing could skim off the cream, leaving Telecom with expensive community obligation and no basis for subsidising them.

The Davidson Report also recommended that independent networks be allowed.  However, it did not feel that complete openness was appropriate and could foresee only the possibility of "specialised networks" arising.  The Report expresses some worry about the possibility of "destructive competition" and is concerned to rule out another national terrestrial network.  Further, it was not in favour of OTC establishing its own domestic network.

LONG-DISTANCE COMPETITION

Long-distance competition is now a feature of the United States system and has begun to emerge in the United Kingdom.  Consumers subscribing to a competing long-distance operator do not need a separate telephone.  They can connect with the alternative operator by dialling an access code before the required number.  Charges for such calls have been below those of AT&T and have put downward pressure on AT&T's charges.  Local exchanges in the United States have been forced to allow non-discriminatory interconnection to any long-distance firm -- companies like MCI and Sprint must have equal access with AT&T. ⁽²³⁾  The annual investment of AT&T's rivals in long-distance capacity is now significantly above that of the traditional carrier.  According to Baumol and Willig there has been an "extraordinary rise in competition". ⁽²⁴⁾  In Britain competition is far more limited -- only one rival (Mercury) is allowed and it does not enjoy the same "equal" access as do AT&T's competitors.⁽²⁵⁾

American consumers have benefited greatly from the new competition.  There does not seem to be any good reason why Australian consumers should be denied similar benefits.  If long-distance competition were allowed and non-discriminatory interconnection forced upon Telecom, operators would almost certainly enter the market.  For example, Australia's AT&T manager, Mr J. Berrier, has said that "AT&T would be in like a shot ... I'd put in a microwave link between Sydney and Melbourne and Brisbane.  We'd establish our own towers and undercut Telecom prices". ⁽²⁶⁾  As the Treasury has noted, the domestic communications satellite could also be used in making such links.  We turn now to a consideration of this satellite's actual and potential role.

THE DOMESTIC COMMUNICATIONS SATELLITE

A publicly-owned company, AUSSAT Pty Ltd, was set up in 1981, to own and operate a national satellite system.  The company is owned 75 per cent by the Commonwealth and 25 per cent by Telecom.  While attention has focussed on the use of the satellite system for the purposes of television transmission, there is great potential for its use in telecommunications as more commonly defined.  AUSSAT had, for example, seen the scope for providing "Telecom with the means to introduce telephone service to those areas of Australia beyond the reach of existing or planned terrestrial communications system". ⁽²⁷⁾

The Davidson Report saw a very important potential role for the satellite system through interconnections between it and capacity leased from Telecom or, indeed, with independent networks.  It did not see a role for AUSSAT in establishing its own local terrestrial networks although it felt that AUSSAT could lease Telecom capacity to create networks.  Most importantly, "[u]sers should be permitted to lease satellite capacity for incorporation in leased or independent networks" (Recommendation 10).

The advent of a domestic communications satellite system in Australia is the greatest-ever potential challenge to Telecom's monopoly.  The satellite provides the basis for an alternative national network in competition with the terrestrial network of Telecom.  However, maximum use of this network depends on leasing of Telecom capacity and interconnection on reasonable terms.  After years of political maneouvering on this issue, in which Telecom attempted at first to stop and later to control the communications satellite, it has attained the situation where it has partial control of AUSSAT and has announced discriminatory prices for interconnection (see articles in the Australian Financial Review, 19 March 85 and 21 March 85).  Unlike American consumers, those in Australia have no "equal access" legal protection.  This pricing policy -- described by at least one commentator as one of "charging the Earth" for inter-connection -- has upset both AUSSAT and potential business users of the system.  Telecom has accompanied this charging policy with a very heavy advertising campaign publicising the advantages to business of its system, "the network", as Telecom calls it.

Of course, the reason for part of the trouble is that Telecom uses its STD facilities as a vehicle of cross-subsidy.  There is a huge tax of over $1 billion on trunk calls to provide funds for subsidising other services.  In order to protect that ability to over-charge, Telecom has set prices for interconnection which allow cross-subsidy to continue.

Telecom also has a policy of allowing only "common interest groups" to operate a private network using leased capacity.  Such groups must have a common interest -- other than telecommunications -- and not act as common carriers.  This prevents sharing of facilities by different groups for the purposes of establishing a network competitive with that of Telecom.

In fact, what has happened is exactly what the Australian Treasury warned might happen.  It saw the satellite system as being "able to offer an alternative means of long-distance telephone communication which could be attractive to many users ..." (p. 15).  However, Treasury warned that:

If Telecom's monopoly were maintained in this area, then not only would users be denied the full economic benefits of more diverse and economically-priced telecommunications services but also the viability of the satellite system itself would be artificially constrained and/or would depend more heavily on the existence of "captive" public sector users.  (p. 15)

Telecom will be making only limited use of the satellite to offer "customised communications" anywhere in Australia using its Iterra Network Service.  Using fixed or portable network earth stations, the Iterra service offers point-to-point communications for telephone, text or data transmission.  The sort of use Iterra will make of the satellite will, of course, be denied to other users because of Telecom's policies on the basis and cost of interconnection with its terrestrial network.

Despite the difficulties, some of the promise that the Treasury and the Davidson Committee saw in the satellite may come to fruition.  The Chairman of that Inquiry, Jim Davidson, is now a director of Equatorial Satellite Systems Australia Pty Ltd, a company which plans to offer services (such as links between bank branches) now operated through leased land lines from Telecom.  The pressure from business for interconnection and leasing on reasonable terms will be immense, and ways may be found to circumvent the Telecom monopoly.  Just before its first launch, AUSSAT was perceived to be struggling a little (see, for example, The Australian, 17-18 August 85).  If AUSSAT is not a commercial success because of its bondage there will be pressure on Governments to liberalise the usage of the very expensive but potentially beneficial domestic communications satellite system.

COMPETITION IN SUPPLY AND INSTALLATION OF TERMINAL EQUIPMENT

Terminal equipment is yet another area in which Telecom currently plays a dominant and restrictive role which appears to be aimed at protecting itself and Australian equipment manufacturers rather than enhancing the interests of users of telecommunications services.  Telecom even seems to have tried to determine import protection policy affecting the telecommunications equipment segment of the Australian manufacturing sector.

Terminal equipment of many kinds is attached to the telecommunications network.  In addition to the "telephone" there are PABX systems (ie. "switchboards"), modems (devices for connecting computers via telephone lines), combined computers and modems (e.g. ComputerPhone), teleprinters, facsimile machines and small business systems (e.g. Commander).  This is one of the growth areas of new technology in telecommunications and it is vitally important that use of the network is not hindered by unnecessary restrictions on the installation of such equipment.

As we have already noted, Telecom has a virtual monopoly in the installation and maintenance of terminal equipment.  It has reserved for itself markets for some types of equipment and controlled completely what can be attached to the network.  In its own equipment purchases it favours Australian suppliers by ill-defined and almost covert preference scheme.  This scheme may not only have protected Australian manufacturers from import competition but also may have protected established manufacturers, such as STC, from new ones.

The Davidson Report was scathing in its attack on the status quo and made the following major recommendations:

• The private sector should be allowed to participate in all aspects of marketing and installation of terminal equipment.
• Responsibility for setting technical standards should be removed from Telecom and placed in the hands of an independent standards authority.
• Any support to local equipment manufacturing should be explicit and in keeping with general government policy.

These suggestions were aimed at improving the availability and lowering the cost of terminal equipment without jeopardising safety standards.

While none of the Davidson recommendations were acted upon by Government, Telecom did agree, as it is able to do under Section 13 of the Telecommunications Act, to be more permissive about the range and source of terminal equipment that could be attached to its network.  However, this slightly more liberal attitude was short-lived and attempts have been made to return to the old policy.  It seems the only way to ensure that Australia keeps up with new terminal technology is to do as suggested in the Davidson Report and to remove, by statute, Telecom's powers in this area and to make policy towards fostering the domestic equipment manufacturing industry a Government concern -- not Telecom's.  This is not to suggest that Telecom does not have a role in the supply and maintenance of terminal equipment, but interference such as that witnessed at last year's Industries Assistance Commission (IAC) inquiry into telecommunications equipment must become a thing of the past.  The IAC held an inquiry into assistance levels for a wide range of telecommunications equipment after a reference from the Minister in November 1983.  The final report went to the Government in October 1984. ⁽²⁸⁾  The report recommended reductions in the level of protection of the various items under review.

The IAC found it difficult to come to grips with the role of Telecom, stating that "Telecom's powerful influence on industry structure is very difficult to observe and quantify" (p. 3).  This difficulty was illustrated by the fact that a witness at the final hearing on the Draft Report revealed that Telecom had moved in the direction of re-establishing itself as the monopoly supplier of "telephones", a position it had given up in 1980.  Without telling the IAC, Telecom had written to equipment suppliers during the inquiry telling them that, "from September 1984, applications for permits will only be accepted for privately supplied telephones which have at least two significant facilities additional to Telecom's new standard telephone" (Letter to Permitted Attachment Suppliers, 15 June 84).  This would have the effect of switching demand back to Telecom and, thus, to its privileged suppliers.

Rationalisation for the new policy was on the grounds of safety although a Telecom witness at the IAC inquiry was reported to have said it was designed "to protect the local manufacture of the standard telephone" (Canberra Times, 21 September 84).  Given that the safety standards story seems unconvincing, this interpretation is more plausible.

This affair prompted the editorial writer of the Canberra Times (21 October 84) to make the following scathing criticism:

A Telecom witness told the commission that Telecom's failure to notify it of its new policy, which he insisted was simply a variation of existing policy, was an oversight.  Perhaps it was.  But it should entail a re-examination of those passages in the draft report which say that there is not conclusive evidence that Telecom is making monopoly profits or, alternatively, dissipating them by sumptuous consumption on a feather bed (shared with friends).  Specifically, the commission might ask itself who benefits from Telecom's decision to switch imports away from existing importers to its own preferred suppliers.  Better still, it should ask Telecom.  Twenty per cent by value of the phones sold to Telecom by its four favoured "local manufacturers" in 1982-83 were imported.  And Telecom's suppliers accounted for more than 60 per cent by value of the phones imported in 1983-84.  And they import them duty free!

The IAC also might ask just what sense its inquiry into assistance for the local industry makes when Telecom can determine by regulation who gets a licence to import what.  The IAC might also ask whether an organisation meant to run a national telecommunications grid is well-placed to determine manufacturing industry policy by deciding what to buy from whom.  Parliamentarians seeking the answers need look no further than the Davidson Committee's report.

Unfortunately, the IAC did not take up the suggestion to explore whether its Draft Report comments were still appropriate in the light of this revelation of one use to which Telecom puts its monopoly power.  In its Final Report the IAC discusses the ways "public monopolies may ... exploit their monopoly power ... [but found] no evidence to suggest that any of these apparent characteristics apply" (p. 34).

The IAC did, however, express some worry about Telecom's permit restrictions, noting:

the potential that Telecom has to provide industry assistance and thus to influence industry structure through measures which are not subject to the public scrutiny inherent in normal assistance review procedures. (p. 44)

This whole episode throws considerable light on another facet of Telecom's monopoly and of its propensity to exploit it in one way or another, and to fight for its retention in the face of challenge.  In this latter regard Telecom has shown itself to be more adept and more successful than its pre-1975 partner, Australia Post.

CHAPTER 4:  NEW DIRECTIONS -- PRIVATISATION

THE ADVANTAGES OF PRIVATE OWNERSHIP

As a result of the separate treatment of marketisation, "privatisation" is interpreted here in a narrow sense.  The term, which is still fairly new, seems sometimes to have an unclear meaning in public discussions.  Strictly it means transfer to private ownership of a public enterprise under the conditions prevailing prior to the transfer.  Others, including Littlechild, ⁽²⁹⁾ have interpreted it more widely to include changes in organisational structure and the allowance of greater competition.

Several advantages may be expected from private ownership.  Consider the following:

• Private ownership is more concentrated than public ownership -- each individual has a larger interest or stake in the efficient running of the organisation and is more likely to become involved in monitoring its performance.
• If existing operators are not performing, a privately-owned firm can be taken over by those who feel they can do better.  This possibility, unavailable with public enterprise, places an added control on management's performance.
• Share values can act as a yardstick, albeit imperfect, of the performance of a firm.  The devising of appropriate performance criteria is, as we have seen, a major problem with public enterprises.
• A private firm will be less amenable than a public one to the demands of unions interested in enjoying "feather-bedding", job security, etc.
• A private firm will feel far less obligation to practice politicised pricing or to perform  other "social obligations" not justified by commercial criteria.

For all these reasons a private firm would be expected to be a lower-cost, and more innovative, operator than a public one,.with prices set to reflect costs more closely.  This would be true even if privatisation occurred with the monopoly intact.  Private owners would use the monopoly to maximise explicit profits and not as a vehicle for the enjoyment of perquisites and slackness.

To the extent that a privatised organisation did make above-normal profits, this would be prima facie evidence that it operates in an insufficiently competitive environment and that its degree of contestability requires examination so as to determine how much competition can be allowed.  In general, this question should be considered, and acted upon, before transfer to private ownership.

PRIVATISATION OF TELECOM

The privatisation of Telecom has recently become a subject of public discussion in Australia.  While some critics of Telecom's performance have advocated either bureaucratic or market discipline as a palliative, the transfer to private ownership has been suggested less often.  One serious consideration of the privatisation option did come from the Australian Treasury which, in its submission to the telecommunications and postal inquiries, discussed the pros and cons of the sale of Telecom to the private sector.  It concluded "that the option of full or partial transfer to the private sector is not one that can be lightly dismissed" (p. 11).  However, while this "would bring worthwhile benefits" it would not "in itself ... deal with the more basic problem of the lack of effective competition ..." (p. 11).

The Davidson Report was concerned primarily with competition rather than private ownership as the means of disciplining Telecom.  It was not, in fact, asked to consider private ownership of Telecom.  While vast improvements could be expected from adopting a competitive strategy, problems could still remain as long as public ownership persisted.  In particular, Government could be tempted to support Telecom if it was unable to compete successfully and in order to sustain political favours through cross-subsidy.

Privately-owned telecommunications systems have operated successfully in the United States and Canada.  In each case these systems have performed well compared with public systems elsewhere in the world and with the publicly-owned postal systems in the two countries.

International comparisons are difficult for a number of reasons alluded to earlier, including exchange rate problems and differences in geographical conditions.  Nonetheless, the American and Canadian systems of telecommunications are at the forefront of the world in all measurable respects.  Superiority of the privately-owned U.S. system over the then public system in the U.K. was the conclusion of a specific comparative study. ⁽³⁰⁾

Privately-owned telecommunications services in the U.S. and Canada have also performed better than the publicly-owned postal systems in these countries.  While the Canadian Bell telecommunications service has been praised, the Canadian postal service is widely condemned as one of the worst in the world.  A similar picture has emerged in the United States.  As Chodorov has remarked in regard to the United States Post Office, "if the Government had kept its hands out of mail business, the pioneers would have developed a mail service comparable to the telephone system, and the taxpayer would have been saved uncountable deficit billions". ⁽³¹⁾

The telecommunications service in the United States is likely to improve now that the previously monopolistic American Telephone and Telegraph Company (AT&T) has been made subject to far greater competition.  As we have seen, this occurred firstly in regard to the long-distance market.  Then, in 1982, AT&T agreed, under pressure, to divest its local telephone exchanges by September 1984. ⁽³²⁾

Other events of relevance to Australian telecommunications policy are the partial privatisation of British Telecom and of the Japanese Nippon Telegraph and Telephone (NTT).  It is very important that the effects of these experiments be watched closely.  In both cases, elements of competition are being introduced simultaneously with privatisation.  However, the degree of competitiveness allowed is small in each situation so that the results observed will flow from privatisation per se.

The actual effects from privatising Australia's Telecom would depend on the conditions of sale.  In particular, would it be simply a sale of about 50 per cent of the shares (as in Japan and Britain), a sale of some other percentage of the shares, the sale of some or all parts of it individually (i.e. a breaking-up) or a complete sale to a private buyer or buyers?  Would the buyer then be saddled with restrictions such as maintaining existing cross-subsidies and generous conditions of tenured employment (including superannuation)?  And, most important of all, would privatisation be accompanied by an element of marketisation?

A federal Liberal MP, Mr Jim Carlton, has used Telecom as an example in painting a picture of the possible effects of privatisation (see, for example, Australian Financial Review, 29 July 85).  Mr Carlton viewed the basic telecommunications network as a "natural monopoly" which, he argued, would mean a private monopoly emerging after privatisation.  However, he also foresaw elements of competition in the supply and installation of subscriber equipment and in long-distance links between capital cities.  Cross-subsidies, if any, would be financed from explicit taxes on profit-making activities.  In short, the Carlton view is one of privatisation combined with substantial marketisation thus constituting, by Australian standards, a very radical proposal indeed.

The Australian debate is not yet clear but seems to be becoming focussed on Telecom.  The Government has made a counter-attack against the Opposition, pointing to a lack of agreement in its camp and highlighting the extent to which privatisation threatens services which allegedly have become part of the Australian way of life.  The Minister, Mr Duffy has claimed that direct subsidies to the bush of up to $500 million per annum would be required to maintain the level of subsidisation inherent in Telecom's operations (Australian Financial Review, 26 August 85).  This indicates that he views privatisation as not involving an undertaking on the part of the buyer(s) to maintain present cross-subsidies.

The situation will become clearer in time but, at present, there is a strong need for the Liberals to spell out exactly what they mean by "privatisation", rather than to assume that the electorate can practice mental telepathy (if that is not also illegal under the Telecommunications Act).

CHAPTER 5:  CONCLUSIONS AND RECOMMENDATIONS

The political forces at work in Australian telecommunications have tended to operate in favour of the maintenance of public ownership, monopoly and cross-subsidy.  Rural interests, equipment suppliers and the producers of the services have formed a tacit coalition to deny the bulk of users an efficient and innovative service.  The weak and diffused majority has, as usual, lost out to the well-organised vested interests.  The status quo has survived under both Coalition and Labor Governments, giving the impression of impregnability.

However there are forces working in the opposite direction which hold some promise of changing the balance in favour of deregulation.  Let us consider the most important of these.

First, and foremost, is the advent of new technology, the full benefits of which Australians are being denied.  The change is so rapid that it could overwhelm attempts to resist it.  Telecom is reaching the position where, unless it starts running with the new technology, it will endanger its long-term relevance.  In this regard, Telecom and Australia Post are in very similar positions.  Telecom has, so far, been able to resist change, but can it continue to do so against the interests of users who will increasingly find ways around the restrictions placed on them?  Telecom may have won a battle over AUSSAT but it certainly has not won the war against potential competition.

Secondly, there are signs that the power of the "bush" is declining. ⁽³³⁾  The present Federal Government is so unpopular in rural areas that it would not matter what it did to harm rural interests -- it could not lose any more support by deregulating telecommunications.  Further, country people must weigh up the benefits and costs of protecting Telecom and Australia Post.  The costs of losing cross-subsidies may be more than outweighed by the longer-term benefits of competition.  The alliance of rural interests with urban communications unions has never been more than a marriage of convenience.

Thirdly, there are, increasingly, examples of privatisation and marketisation taking place in other countries including those with which we have strong economic and cultural links.  To the extent that these experiments are successful, they will demonstrate to Australians that radical policies do not result in chaos and, indeed, must be adopted if we are to have a reliable, efficient, fair and innovative system of telecommunications.

Finally, there is an increasing academic interest in industry policy which does not endorse traditional approaches in the alleged areas of natural monopoly such as communications and airlines.  The theory of contestability has provided an intellectual basis for a broad-based and consistent approach to industries exhibiting statutory control of competition and public ownership.

IMPROVEMENTS WITHIN THE EXISTING SYSTEM

Even if it is at present politically impossible to change the system fundamentally, unsatisfactory and inadequate as it is, at the very least there are some obvious ways in which it could be made more cost-efficient, fairer, and technically more progressive.  The following set of proposals is similar to that made in regard to improving the performance of the Australian Postal Commission (see Albon 1985).  I suggest:

• Greater "accountability".  In particular, Telecom and OTC must disclose far more about their operations.  The excuse of "commercial-in-confidence" does not apply to a monopoly (since there are no competitors to gain from the information), which is allegedly owned by the public.  Individuals should not have to incur the trouble, expense and frustration of resorting to freedom of information legislation to find out about the financial affairs of a body like Telecom.
• Greater use of private contractors.  Even Australia Post uses private contractors for many functions.  Telecom uses none at all.  Surely there are areas where cost-savings would result from contracting-out functions to private firms?  Considerable savings have been proven in other areas and there is no reason why Telecom should be different.
• Freer terminal equipment marketing and maintenance.  The setting of standards for allowable terminal equipment should be taken from Telecom and placed in the hands of an independent body charged with establishing a competitive environment for the supply, installation and marketing of all types of terminal equipment.  Telecom would be free to participate in this market.
• Ending the relationship between Telecom and Australian equipment suppliers.  This is imperative.  Telecom and O.T.C. should be made to purchase telecommunications equipment in an open manner from least-cost suppliers.  Any support for local manufacturing should be in line with broad government industry assistance guidelines.
• More cost-related pricing practices.  As rates are well out of line with costs there should be a gradual move towards a fairer and more efficient pricing structure reflecting costs.  This should involve greater rural access rental charges, time-based local calls and the relationship of STD charges to density as well as time of day and distance.
• Removal of public-sector employment conditions.  An innovative competitive firm operating in a dynamic market cannot be saddled with nineteenth-century public service employment conditions featuring security of tenure, rigidity of wage/salary scales and promotion by seniority.  Telecom should be freed from such restrictions but only if it is prepared to accept the other changes outlined above.

CONCLUDING COMMENTS

The telecommunications industry has changed rapidly as a result of technological advance.  The availability of new technology has opened up opportunities for competition which have been grasped in other parts of the world.  Australia persists with a system of monopoly, public ownership, union domination, protectionism and politicisation.

There is no need on the grounds of "natural monopoly" to persist with such a system.  Large parts of telecommunications are "contestable" and can be opened up to competition to the benefit of society as a whole.  Cross-subsidy does not provide a valid argument for maintaining the existing system -- it can be preserved, if socially desirable, quite independently of monopoly and public ownership.

The real obstacle to change is the plethora of vested interests which benefit from the existing system to the detriment of the community as a whole.

Liberalisation of telecommunications is both feasible and desirable and deserves an important place on the agenda of any government that is genuinely seeking a freer, fairer and more productive society.

APPENDIX I

THE "GREAT AMERICAN TELEPHONE DISASTER", OR ILL-INFORMED SPECIAL-INTEREST BLEATING?

The very fact that the strongest opposition to the liberalisation of telecommunications in Australia comes from the Australian Telecommunications Employees Association (ATEA) is itself indicative of who benefits from the present system of regulated public monopoly.  The ATEA's Federal Secretary has assumed a very high profile in defending Telecom from the threat of privatisation.  Some comments have already been made on the Secretary, Mr Mansfield's, public statements.  In this appendix I concentrate on the ATEA's undated 1985 publication, The Great American Telephone Disaster:  A Lesson for Australia, which purports to show that the break-up of Bell "has led to confusion, duplication, inefficiency, lower technical standards and higher tariffs" (p. 4) and "will almost exclusively benefit business subscribers" (p. 3).  It relies almost entirely on secondary sources.  None of these seems to provide any damning evidence against the injection of competition into telecommunications.  In fact, the results it mentions are broadly those that would be expected -- temporary disruption to the market as competitors emerge, new service arrangements arise and charges vary to fall in line with sometimes changing underlying cost levels.

The ATEA begins by misrepresenting the Davidson Report which did not recommend "hand[ing Telecom's] most profitable activities to the private sector" but rather pin-pointed certain areas where Telecom could be exposed to competition.  This was quite explicit in the Davidson Report (point 13, p. 8) and it is surprising that this is not known to the ATEA.

The ATEA publication then proceeds to allege, without evidence, that the Australian media have misrepresented the events in the United States because "corporate ambition and editorial comment is directed by the same people" (p. 2).  This is not true of at least one newspaper, the Sun-Herald which, on 4 August 85 gave very sympathetic treatment to the ATEA study.

The Great American Telephone Disaster then proceeds to present the happenings in the United States in the worst possible light.  Except for large corporations and Bell's competitors, no-one benefits:  "For most citizens, especially those who are poor, divestiture means costlier and less reliable telecommunications" (p. 4).  The plight of the poor will be considered below, but first consider non-business consumers in general.

On first reading it would appear that domestic consumers have suffered only as a consequence of "marketing gimmicks", "discounts galore", "aggressive selling", "a bewildering variety of service options" and "complicated bill-paying".  These do not seem to be very serious problems -- or even "problems" at all.

In some instances local call rates and access charges have risen.  Consumers who have "lost" are those who previously benefited from cross-subsidy:  Local call rates have tended to rise -- sometimes quite substantially -- although this has been alleviated by innovative charging schemes being offered.  Access charges have also risen.  But is this any more of a move to a cost-related pricing structure than one involving a cross-subsidy?  Further, in some cases the lessening of urban-to-rural cross-subsidies has reduced some urban rates and raised rural ones (e.g. in Illinois -- see page 4).  It should not surprise anyone that changes such as these have resulted in some temporary confusion, but they are part of a fairer and more efficient pricing structure.

Further, The Great American Telephone Disaster attempts to smear the really great boon to consumers which pre-dated divestiture -- long-distance competition which is now complete with guaranteed "equal access" to local networks.  The success of this competition has been almost universally acknowledged, except by AT&T.  The ATEA's arguments against long-distance competition (p. 5) are weak and relate to lack of answerability for faults, an alleged disappearance of AT&T's expertise and a (temporary?) increase in delays.  This seems a very small price to pay for much lower long-distance charges (implicitly acknowledged but not documented by the ATEA).

Now consider the fate of the poor.  These unfortunates are alleged to have borne the heaviest burden of competition.  As usual the evidence is weak and, to some extent, supports the opposite case.  All of the data about the poor being poor in telephony relate to pre-competitive days.  There is a report of what some people said they would do if such-and-such happened and some opinions about what might happen, but nothing about what has happened or what might offset deleterious effects on some poor users.  There is also a discussion of a possible solution if problems do show up -- that is, some form of explicit subsidisation.

The Great American Telephone Disaster is itself a disaster -- it is poorly researched, superficial, and badly written and organised.  Even at the present time, so soon after the advent of long-distance competition, equal access and divestiture, the events in the United States are suggestive of a more efficient and fairer telecommunications system emerging with only a minor cost in confusion and disruption.

The real losers have been those groups who have benefited from protection from competition in the past -- employees of AT&T, the owners of the previous monopolies, favoured US equipment suppliers and recipients of cross-subsidy.  The ATEA is rightly scared of competition as it is a major beneficiary of regulated public monopoly communications.  It should come as no surprise that it is trying to disguise its self-interest as concern for users of the system.  It would be more surprising if it did anything else.  Finally, why did the ATEA neglect to tell its readers that AT&T is, and always has been, a private company which has consistently performed, according to Telecom's criteria, far better than our system?  Is it not a little incongruous that an Australian union is arguing for the continued protection from competition of a giant American multinational privately-owned monopolist?

APPENDIX II

THE TELECOM MONOPOLY'S UNIQUENESS

Of the four major English-speaking countries -- the United States, Canada, the United Kingdom and Australia -- we have the least "liberal" system of telecommunications.

The following table sets out characteristics of each telecommunications system, and an "index of liberality", which is reported in the bottom line.  The United States has a perfect score on each attribute, while Australia gets one point for having some private sector involvement in terminal equipment supply.

Attribute	U.S.A.	U.K.	Canada	Australia
Ownership   (2/10)	Private	Private/ Public	Mainly Private	Public
Long-distance Competition   (2/10)	Yes	Some	No	No
Local Exchanges Monopolised   (2/10)	No	Yes (except Hull)	Yes (minor exceptions)	Yes
Competition in Terminal Equipment   (2/10)	Yes	Yes	Limited	Limited (Controlled by Telecom)
Public Service Employment Conditions  (1/10)	No	Yes	No	Yes
Cross-Subsidy Required   (1/10)	No	Some	Yes	Yes
Index of Liberality   (Max. 10)	10	5.5	4.5	1

APPENDIX III

SOME FACTS ABOUT TELECOM

• Australia is the only major English-speaking country which has a telecommunications system that is both publicly-owned and completely monopolistic.
• Telecom's monopoly under the Telecommunications Act 1975 (and as amended) is complete.  No-one can "erect, maintain or operate" or "attach a line, equipment or apparatus to" a telecommunications system unless Telecom gives permission.
• Telecom makes a profit of over $1 billion per year on trunk calls.
• There is an urban-to-rural cross-subsidy of about $500 million per annum.  This represents an average tax of about $125 per urban subscriber.
• Telecom uses no private contractors for any of its operations.
• Canada, which has a population density and dispersion similar to Australia provided, through a private monopoly, a standard telephone service (as defined by Telecom) at a cost in 1983 of 19 per cent less than Telecom.
• Telecom must consult with its unionised labour force before making any decisions to adopt new technology.
• Telecom's record of technological advancement has been criticised by, inter alia, the Davidson Committee, the Australian Treasury and the Australian Information Industry Association.
• Telecom's policy of fostering local manufacturing of communications equipment has involved allowing some Australian manufacturers to import equipment duty-free.

BIBLIOGRAPHY

Albon, R.P., Private Correspondence:  Competition or Monopoly in Australia's Postal Service?, Centre for Independent Studies Policy Monograph No. 7, Sydney, 1985.

Albon, R.P., "The Effects of Financial Targets on the Behaviour of Monopoly Public Enterprises", Australian Economic Papers, 24, June, 1985, 54-65.

Albon, R.P. and M.G. Kirby, "Cost-Padding in Profit-Regulated Firms", Economic Record, 59, March, 1983, pp 16-27.

Allen, L., "Telecom a credible performer -- AT&T Aust. chief", Pacific Computer Weekly, 28 June 1985, 5.

AUSSAT Australia's National Satellite System:  General Information, Sydney, 1984.

Australian Telecommunications Commission, Comparison of Telephone Tariffs in Australia with Those Applying in Other Countries, Melbourne, May, 1983.

Australian Telecommunications Employees Association, The Great American Telephone Disaster:  A Lesson for Australia, Melbourne, 1985.

Australian Treasury, Public Monopolies:  Telecom and Australia Post.  Submission to the Committees of Inquiry into Telecommunications Services and into the Monopoly Position of the Australian Postal Commission.  Reprinted as Treasury Economic Paper No. 10, AGPS, Canberra, 1983.

Baumol, W.J., "Natural Monopoly and Contestable Market Analysis", in Centre of Policy Studies, State Enterprise and Deregulation, pp 1-17, 1983.

Baumol, W.J. and R.D. Willig, "Telephones and Computers:  The Costs of Artificial Separation", Regulation, March/April, pp 23-32, 1985.

Bernholz, R. and D.S. Evans, "The Early History of Competition in the Telephone Industry", in D.S. Evans (Ed.), Breaking Up Bell, loc. cit., pp 7-40, 1982.

Brock, W.A. and D.S. Evans, "Creamskimming", in D.S. Evans (Ed.), Breaking Up Bell, loc. cit., pp 61-94, 1983.

Butlin, N.J., A. Barnard and J.J. Pincus, Government and Capitalism:  Public and Private Choice in Twentieth Century Australia, George Allen and Unwin, Sydney, 1982, Chapter 11, ("Service at Any Cost:  PMG").

Canes, M., "Telephones -- Public or Private?", Hobart Paper No. 36, Institute of Economic Affairs, London, 1966.

Centre of Policy Studies, State Enterprise and Deregulation, Special Study No. 5, Monash University, 1983.

Chodorov, F., "The Myth of the Post Office", Human Affairs Pamphlet No. 34, Henry Regnery Co., Hillsdale, Illinois, 1948.

Commission of Enquiry into the Australian Post Office (Vernon Commission) Report, Parliamentary Paper No. 275, AGPS, Canberra, 1974.

Commission of Inquiry into Telecommunications Services in Australia (Davidson Committee) Report, AGPS, Canberra.

Committee of Inquiry into the Monopoly Position of the Australian Postal Commission (Bradley Committee) Report, AGPS, Canberra, 1982.

Drury, R., "STC casts off Telecom shackles", Australian Financial Review, 26 August 1985.

Evans, D.S. (Ed.) Breaking Up Bell:  Essays on Industrial Organization and Regulation, A CERA Research Study, North-Holland, New York.  1982.

House of Representatives Standing Committee on Expenditure Ringing in the Changes:  Telecom's Zonal Charging Policies, AGPS, Canberra, October, 1984.

Industries Assistance Commission, Report:  Telecommunications and Related Equipment and Parts, No. 352, AGPS, Canberra, October, 1984.

Katz, M.L. and R.D. Willig, "The Case for Freeing AT&T", Regulation, July/August, 1983, pp 43-49.

Littlechild, S.C., "Deregulation of U.K. Telecommunications:  Some Economic Aspects", in State Enterprise and Deregulation, loc. cit., 1983a, pp 113-123.

Littlechild, S.C., "Problems of Controlling State Enterprises", in State Enterprise and Deregulation, loc. cit., 1983b. pp 19-32.

McPherson, L., "Evaluation of the Economic Performance of Government Trading Authorities", Australian Accountant, pp 22-24 April 1985.

Millar, F., "The Evils of State Trading as Illustrated by the Post Office" in T. Mackay (Ed,), A Plea for Liberty, Liberty Classics, Indianapolis, 1981, pp 385-412.

Prices Surveillance Authority, Inquiry in Relation to the Supply of Telecommunications Services:  Report, Melbourne, October, 1984.

Ramsey, F.P. "A Contribution to the Theory of Taxation", Economic Journal, 37, March, 1927, pp 47-61.

Siebert, S., "Privatising British Telecom", Review, 38, 4, Summer, 1985, pp 210-213.

Trengove, C.D., Telecommunications in Australia:  Competition or Monopoly?, Centre of Policy Studies Special Study No. 4, Monash University 1982.

Trengove, C.D., "Whither Communications Policy In Australia?" in State Enterprise and Deregulation, 1983, pp 83-112.

Trengove, C.D., "Costs of the Telecom Monopoly", Review, 38, 4, Summer, 1985, pp 204-209.

---

ENDNOTES

1.  See Committee of Inquiry into Telecommunications Services in Australia (Davidson Committee) Report, AGPS, Canberra, 1982.  Hereafter this is cited as the Davidson Report.

2.  Three studies by C.D. Trengove have helped change thinking about telecommunications policy:  Telecommunications in Australia:  Competition or Monopoly?  Centre of Policy Studies Special Study No. 4, Monash University, 1982;  "Whither Communications Policy in Australia" in State Enterprise and Deregulation, Centre of Policy Studies Special Study, No. 5, Monash University, 1983;  83-112 and "Costs of the Telecom Monopoly", Review, 38, 4, Summer, 1985, pp 204-209.

3.  See Commission of Enquiry into the Australian Post Office (Vernon Commission) Report, AGPS, Canberra, 1974.

4.  See Committee of Inquiry into the Monopoly Position of the Australian Postal Commission (Bradley Committee) Report, AGPS, Canberra, 1982.

5.  Privatisation, to many, means more than just transfer of ownership from public to private.  For example S.C. Littlechild ("Problems of Controlling State Enterprises" in State Enterprise and Deregulation Centre of Policy Studies Special Study No. 5, Monash University, 1983, pp 19-32) takes a wider view encompassing increased competition and deregulation.  In this study the term is generally interpreted narrowly.

6.  The behaviour of monopoly public enterprises is discussed in R.P. Albon "The Effects of Financial Targets on the Behaviour of Monopoly Public Enterprises", Australian Economic Papers, 24, June 1985, pp 54-65.

7.  N.J. Butlin, A. Barnard and J.J. Pincus, Government and Capitalism:  Public and Private Choice in Twentieth Century Australia, George Allen and Unwin, Sydney, 1982, Chapter 11 ("Service at Any Cost:  PMG").

8.  Prices Surveillance Authority, Inquiry in Relation to the Supply of Telecommunications Services:  Report, Melbourne, October 1984.

9.  W.A. Brock and D.S. Evans, "Creamskimming", in D.S. Evans (Ed.), Breaking up Bell:  Essays on Industrial Organization and Regulation, A CERA Research Study, North-Holland, New York, 1982, pp 61-94.

10.  A discussion of comparisons of changes in productivity and changes in charges for Australia Post is contained in R.P. Albon, Private Correspondence:  Competition or Monopoly in Australia's Postal Services?, Centre for Independent Studies Policy Monograph No. 7, Sydney, 1985, Chapter 7.

11.  See House of Representatives Standing Committee on Expenditure, Ringing in the Changes:  Telecom's Zonal Charging Policies, AGPS, Canberra, 1984 and Australian Telecommunications Commission, Comparison of Telephone Tariffs in Australia with Those Applying in Other Countries, Melbourne, May, 1983.

12.  This story is told by F. Millar in his illuminating early paper, "The Evils of State Trading as Illustrated by the Post Office", in T. Mackay (Ed.) A Plea for Liberty, Liberty Classics, Indianapolis, 1981, pp 385-412.

13.  See B. Drury, "STC casts off the Telecom shackles", Australian Financial Review, 26 August 85.

14.  The concept of contestability has been posited in this country by one of its American developers.  See W.J. Baumol, "Natural Monopoly and Contestable Market Analysis", in State Enterprise and Deregulation, pp 1-17.

15.  The Minister for Trade, Mr J. Dawkins, said in a speech attacking privatisation on 26 January 86 that:  "telephones ... have been provided and maintained by the collective will of the people."

16.  See F.P. Ramsey, "A Contribution to the Theory of Taxation", Economic Journal, 37, March 1927, pp 47-61.  Baumol op. cit., p. 6, n. 3, describes Ramsey prices thus:  "Ramsey prices are ... defined as those prices which are compatible with financial viability and which cause a minimal deviation in the allocation of resources from that which would occur if all prices were set equal to marginal costs.  It can be shown that Ramsay prices, for understandable reasons, will be higher than marginal costs.  Moreover, the less elastic the demand for a particular item, i.e., the more resistant consumer demand for the item is to an increase in its price, the greater, generally, will be the difference between its Ramsey price and its marginal cost.  Intuitively this is so because a rise in the price for such an item will cause relatively little contraction in its market demand, and hence will have relatively little effect on the quantity of resources it uses."

17.  The concept of "cost-padding" is explored in R.P. Albon and M.G. Kirby, "Cost-Padding in Profit-Regulated Firms", Economic Record, 59, March 1983, pp 16-27.

18.  All taxes, except perhaps lump-sum taxes and taxes on pure rents, cause distortions of economic behaviour and, thus, deadweight losses in economic efficiency.  Estimates of such costs are suggestive of large orders of magnitude at the margin.

19.  Sunk costs are those which, once incurred, cannot be retrieved;  for example, purchase of highly specialised equipment only used in a particular enterprise.  See Baumol, op. cit., for more details.

20.  Australian Treasury, Public Monopolies:  Telecom and Australia Post.  Submission to the Committees of Inquiries into Telecommunications Services and into the Monopoly Position of the Australian Postal Commission.  Reprinted as Treasury Economic Paper No. 10, AGPS, Canberra, 1983.

21.  R. Bernholz and D.S. Evans, "The Early History of Competition in the Telephone Industry", in D.S. Evans (Ed.), op. cit., pp 7-40.

22.  One of the many reforms in telecommunications in Britain has been a very open approach to leasing.  This followed a report to the Government by Michael Beesley which, in turn, influenced Australia's Davidson Committee.  The reforms in Britain are discussed in S.C. Littlechild, "Deregulation of U.K. Telecommunications:  Some Economic Aspects" in State Enterprise and Deregulation, op. cit., pp 113-128.

23.  M.L. Katz and R.D. Willig, "The Case for Freeing AT&T", Regulation, July/August 1983, pp 43-49.

24.  W.J. Baumol and R.D. Willig, "Telephones and Computers:  The Costs of Artificial Separation", Regulation, March/April 1985, pp 23-32, at p. 27.

25.  See Littlechild,"Deregulation of U.K. Telecommunications", op. cit.

26.  Quoted in L. Allen, "Telecom a credible performer -- AT&T Aust. chief", Pacific Computer Weekly, 28 June 1985, 5.

27.  See AUSSAT, Australia's National Satellite System:  General Information, Sydney, 1984.

28.  Industries Assistance Commission, Report:  Telecommunications and Related Equipment and Parts, No 352, AGPS, Canberra, October 1984.

29.  Littlechild, "Problems of Controlling State Enterprises, op. cit.

30.  This was the conclusion of a study by M. Canes, "Telephones -- Public or Private?" Hobart Paper No. 36, Institute of Economic Affairs, London, 1966.  If anything, the differences found then would have become greater since.  Telecom's 1982-83 data (see Telecom, op. cit.) find a huge difference between the American and British services.

31.  F. Chodorov, "The Myth of the Post Office", Human Affairs Pamphlet No. 34, Henry Regnery Co., Hillsdale, Illinois, 1948.

32.  The Australian Telecommunications Employees Association has prepared a critical study of the American deregulation.  This study, The Great American Telephone Disaster:  A Lesson For Australia, is reviewed in Appendix I.

33.  Further, as Wolfgang Kasper reminds me, rural interests are becoming more sophisticated and are beginning to see the advantages of competition all round.

The Rise of the Femocrats

Sisters in Suits
by Marian Sawer,
Allen and Unwin:  Sydney, 1990.

&

Bureaucrats, Technocrats, Femocrats
by Anna Yeatman,
Allen and Unwin:  Sydney, 1990.

Playing the State
Sophie Watson,
Allen and Unwin:  Sydney 1990.

To outsider, the bureaucratic and legislative achievements of feminism in Australia seem very great;  so great, indeed, that feminism appears to be part of the New Establishment.  From a miniscule advisory unit in the Prime Minister's Department during the Whitlam years, feminism's presence in the bureaucracy has spread to every Commonwealth Department, as well as into the States.  It has created a raft of positions occupiable only by women with feminist credentials, and it has successfully guided the enactment of laws compelling other institutions of society (businesses, universities) to establish similiar women-oriented positions.  It has also diverted public monies to support its own favourite projects in the community.

The view from within the feminist movement is rather different;  just how different can be grasped from three recent books dealing with the "femocracy":  Marian Sawer's Sisters in Suits, Anna Yeatman's Bureaucrats, Technocrats, Femocrats, and Sophie Watson's collection, Playing the State.  These books recognise the gains feminism has made, but see them as being over-shadowed by the expectations that have been dashed, the battles lost, the positions captured by non-feminist women, by the threat from an anti-feminist backlash growing just at the time when feminism is suffering from exhaustion.  As Sawer comments, "the older generation of political activists worries about how to "hand on the torch".  Feminists inside the bureaucracy bemoan the lack of organised pressure from outside".  The effusion of soul-searching, stock-taking and strategic reassessment spawned by this crisis of morale should be of interest to us all, for it offers us fascinating insights not only into feminism but also the ALP's style of government, the politics of the media and the general nature of contemporary Australian politics.

Hester Eisenstein, one of the contributors to Sophie Watson's volume, writes that "the strategy of creating a femocracy has gone hand in hand with a strategy of alliance with the Labor Party".  As the 1980s rolled on, however, the ALP became increasingly obsessed with loyalty to itself, and those femocrats who were not members of the Party found themselves somewhat frozen out.

The case of Mary Draper is instructive.  According to Marian Sawer, when Draper took over Victoria's Office of Women's Affairs (as it was then known) in 1983, she found the ALP's women's policy "very thin" and therefore set about developing an agenda of her own.  Because party committees in that State played an important role in the operation of the government, however, the Status of Women Policy Committee had to have Draper's initiatives "retrospectively legitimised through the party conference".  This made her unpopular with party women.  As Sawer comments, "women without strong links with the party found it difficult to succeed in senior positions in Victoria".

At the Federal level, the obsession with loyalty saw the Office of the Status of Women select staff of non-women's movement backgrounds (and even non-feminist backgrounds!).  The Department of Prime Minister and Cabinet -- a department notable for its sensitivity to political imperatives -- became a major source of recruits.  One recounted to Sawer that she had been "surprised to find there were very few in NSW who regarded themselves as feminists".

When the veteran feminist Anne Summers left the office in 1986, she was replaced by Sue Brooks, who had previously worked for the State Bank of Victoria and the Victorian Treasurer.  Brooks lacked "shared experience in the women's movement", which created some problems over consultative mechanisms.  While she found the post a "radicalising experience", the office showed an increasing concern with "second-guessing" PM & C's economic rationalists, and a tendency to submit to the government only those policy options which it was thought likely to accept.  The emphasis on being "on side" with PM &  C even led to men being appointed to the office!

MODERATES AND EXTREMISTS

The influx of ALP women into the femocracy exacerbated a pre-existing division between relatively moderate and extreme femocrats.  A similar division has existed in the general feminist movement virtually since the beginning, although the bureaucratic factional alignments have not always corresponded to those in the movement as a whole.

Women's Liberation groups began to spring up in 1969, first in Sydney and Canberra, then spreading rapidly to the other capitals.  Focusing initially on "consciousness raising" and "personal transformation" with a view to making revolutionary changes, these groups were amorphous and anarchic.  Many of these groups developed an enthusiasm for socialist ideologies, separatist lifestyles and paranoid, rancorous protests against the insidious "patriarchy".  They also seem to have furnished many of the staff (at least in the initial stages) for women's refuges, rape crisis centres and women's health centres.

The more pragmatic organisation was the Women's Electoral Lobby (WEL), which coalesced in 1972.  WEL adopted the same six-point agenda as Women's Liberation -- free, "safe" abortion on demand;  24-hour childcare;  Equal Employment Opportunities;  equal access to education;  free contraceptives;  and equal pay.  But WEL was more interested in getting "runs on the board", as it were, than in making symbolic gestures or spouting revolutionary rhetoric.  Using the expertise of professional women -- female journalists, sociologists, economists, political scientists -- WEL mounted a sophisticated campaign and became, as Lyndal Ryan puts it (in Watson), "the political bombshell of 1972".

Within the bureaucracy, the moderatelextreme division has revolved around the competition between the Office of the Status of Women (earlier known as the Women's Branch and then the Office of Women's Affairs) and the older Women's Bureau of the Department of Employment and Industrial Relations.  In the late Whitlam and early Fraser periods, the Women's Bureau was "not headed by an SES officer and its actions were partly dictated by an extremely conservative branch head".  It was also somewhat jealous of the Women's Affairs Branch.  By contrast, the Women's Affairs Branch was headed first by Elizabeth Reid and then by Sara Dowse, both of whom were in WEL as well as Women's Liberation.

By 1988, the relative inclination of the two units had been reversed.  Now the Women's Bureau viewed itself as more in touch than the Office of the Status of Women (OSW) with the interests of working-class women.  Between 1983 and 1986 (i.e. Anne Summers' period at OSW), bureau staff referred disparagingly to the "Office of Women of Status".  One reason for this (which became more pronounced after 1986) was that the Bureau used the euphemistic employment criterion of "knowledge of women's issues" to recruit movement-feminists while OSW was recruiting non-activists and non-feminists.  The tensions persisted despite, according to Sawer, "deliberate efforts to recruit heads of the Women's Bureau who would be able to work more co-operatively with the office".

Relations between femocrats and feminists in the community have often been severely strained.  For example, when the first ever Prime Ministerial advisory position on women's affairs was created by the Whitlam Government, and filled by Elizabeth Reid, there was uproar in the "women's" movement.  The editorial collective of one Sydney journal circulated a protest letter declaring that "no woman chosen by men to advise upon us will be acceptable to us".  An accompanying leaflet attacked the applicants, "pointed out that all the women on the short list were white, hlghly educated, socially adept and heterosexual, and asked how they would resolve conflicts of loyalty between the PM and women".

The case of Anne Summers is also interesting.  In 1969 she was a founder of Women's Liberation in Australia.  At a Women's Liberation conference in Melbourne in 1970, she was abused for daring to wear make-up.  Then in 1973, she was one of the unsuccessful applicants for Elizabeth Reid's position.  She also helped establish a radical journal called Refractory Girl.  1974 saw her participate in the "squat" which established "Elsie", believed to be the country's first women's refuge.  In 1975 she published the controversial book, Damned Whores and God's Police, and was at the forefront of a hostile Balmain Town Hall crowd that confronted Elizabeth Reid's spokeswoman over International Women's Year funding.  Then, after completing a PhD and working as a journalist, she emerged as head of OSW in 1983.  Summers had thus passed from an early radicalism to an interest in the femocracy, then from radical criticism of the femocracy to being the nation's leading femocrat!

One twist of Summers' career draws our attention to the media's political role.  The distinct lack of interest in "feminism" shown by young women nowadays is often blamed, by feminists, upon the prejudicial outpourings of the "masculinist" media.  But how anti-feminist really is the media?  True, Sawer notes the "unremitting press hostility", the trivialisation and personal innuendo practised on Elizabeth Reid (and some others).  On the other hand, we see that of 164 press articles about WEL during 1972, only three were unfavourable.  And when refuge funding seemed threatened in the early Fraser years, "Lyndal Ryan, who had left the Office [of Women's Affairs] contacted Paul Lyneham and arranged for a Four Corners program on the refuges".  On top of this, we learn from Sawer that at one stage the Federal Parliamentary Press Gallery was so anti-feminist that it elected Anne Summers as its President!

HOSTILITY TO NON-FEMINISTS

The books reveal the existence within both feminism and the femocracy of a widespread antipathy towards non-feminist women.  Anna Yeatman, using a species of post-Marxist class analysis, decides that "a dilemma appears for femocrats when it is appreciated that their feminism, when set to work in practical policies, usually turns out to be an effective ideology and class consciousness for them but not for the majority of women".

One of the most explicit cases of hostility to traditional women is revealed by Watson's contributor, Ludo McFerren:  in 1976-77, it transpires, the women's refuge liaison officer in NSW's Department of Youth and Community Services persuaded her Minister to oppose the funding of church-run refuges on the grounds that only "women's groups should set up women's refuges".  The pragmatic Premier, Neville Wran, over-rode this policy because of the political power of Catholics in the ALP, but the feminist opposition did limit the number of funded religious refuges in the State.

Now, if the objective is to help women in need, then surely the ideological pedigree of the helpers is irrelevant.  If, however, the object is to gain power over other women, to close off their opportunities for living in ways which feminists dislike, then the drive to privilege feminist refuges makes perfect sense.  She who offers the shelter calls the tune!

Some of the writers' off-hand remarks also reveal anti-traditional feelings.  Anna Yeatman speaks of the ideology of "familism" and implies that the position of women in the home is inherently one of "exploitation".  Ominously, she goes on to argue that "struggles against the exploitation of women by men are necessarily struggles over the extent to which women's work should be left to private choices ..." and that "femocrats seek to deprivatise this relationship ..." that is, to make people's private relationships the objects of "public" or political scrutiny.  Judith Allen speaks of a "foetocentric backlash" that has forced women to pay 40 per cent of the cost of their own abortions.  The comment most demeaning to home-making women, however, must surely be Marian Sawer's quip that National Party MP Tom McVeigh was "a Catholic father of five who also bred Clydesdales".

The wealth of information in the three books is so great that here I have merely presented some of the highlights.  Researchers can find within these pages plenty of ideas for future work:  they might consider the role played by Liberal Party women, as well as by pro-feminist male MPs and bureaucrats, in the femocracy's advancement;  or they might ponder the relationship between bureaucratic and academic feminists (particularly since Anna Yeatman argues that the latter are fully-fledged "femocrats");  or they might study how the feminist movement has used the competing jurisdictions of Australian federalism to advance its own objectives.

This is not to say that the books have no faults.  Yeatman's handful of prescient observations must be extracted from the convoluted prose so beloved of the modern social science academic.  She accepts uncritically the caricatures of conservatism put about by radical intellectuals:  neo-conservatives are "undemocratic", deregulators are "proto-fascists", etc.  Watson's Playing the State suffers, as so many collections do, from the uneven quality of the contributions.  Sawer's Sisters in Suits has suffered from its long gestation, and also from a fear of "economic rationalism" -- a fear which seems rather excessive when it is recalled that "efficiency" was one of the earliest stimuli for equal opportunities in the public service.

These books give us a glimpse of feminism's state of mind, which is not very healthy.  However, the femocrats' bureaucratic achievements -- machinery, regulations, legislation -- have faired much better than their morale.  Although some budgets have been cut back, some positions downgraded, a few planned programs put on hold, the essential structures remain in place.  The femocracy is unlikely ever to shrink to its proportions of the Fraser era, let alone to the miniscule size of its Whitlam foundations.  Feminism's biggest handicap must be its poor public reputation, and this, I would suggest, will only change when those women who are seen as feminism's leaders begin to show genuine interest in the aspirations of ordinary women.  That, I would submit, means taking the desire for home, children and domesticity as seriously as the quest for a career.

Coal: the communist challenge to law and order

THE PROBLEM

THIS PAMPHLET WILL TELL YOU ABOUT --

• The facts behind the Coal Industry Tribunal Award of December, 1950.
• The strangling effects of the one-day stoppages between January and March, 1951.
• The growth of lawlessness in the mines.
• The pit-top meetings as part of the Communist technique of sabotaging output, and sabotaging awards.
• The sort of frivolous stoppages that rob us of coal.
• The way the darg defeats the use of machines for increasing output.
• The Coal Industry Tribunal, and the Joint Coal Board.
• The story of Government control at Coalcliff, and Government ownership at Lithgow.
• The Communist rejection of Arbitration.
• The vacillation of the authorities on the observance of conditions for paid annual holidays.

THE SOLUTION

THESE THINGS WILL RELIEVE THE COAL SHORTAGE

• Develop the Open Cut Mines.
• Use Snowy River earth-moving machines, if necessary, on open cuts.
• Make duplication of Railway from Muswellbrook a first priority and transfer men from East Sydney railway.
• Speed up road and rail connection with Burragorang and speed up development of the mines there.
• Secure a revision of the existing dargs in mechanised pits.
• Introduce the incentives in the Gallagher award of December, 1950.  This will, in itself, restrict frivolous stoppages, curtail pit-top meetings.
• Make mining lodges responsible for authorising stoppages.
• Galvanise the State Labor Ministry into giving the Commonwealth positive help.
• Prevent Communist control of coal mines, which is strangling our whole economy, e.g., use Secret Ballot.  Is there a new field for public relations?

---

When your wife cannot cook your meal because there is no gas, and cannot wash the children or do the ironing because of an electricity black-out, when your train is cancelled, or your tram service curtailed to save coal, when your factory is closed because there is no power, and when you are unemployed and cannot buy the things you need for the home, when these and other uncomfortable things happen daily, life becomes pretty grim.  How long are you going to put up with these disruptions?  What are you going to do about them?  What have you been doing about them for the past five years?

It is easy to "pass the buck" and make the excuse that you do not know who really is to blame.  But even though all these industrial disputes are complicated, there is a fairly safe test you can apply when trying to find out who is to blame.  Here it is, and it is quite simple.

ARBITRATION OR JUNGLE RULE?

We have set up Arbitration Courts and other Industrial Tribunals whose main job is to hear union arguments and to settle disputes.  These Courts are on the job all the time and don't make things difficult for those who want to settle disputes legally.  Very well.  If one of the parties to a dispute refuses to go to the Arbitration Court, or if it decides to take direct action, and stage a strike to force its demands, then it is clear that the party so acting is to blame for the industrial hold-up.

The party that refuses to abide by the law of the land is a rebel, and, as such, cannot expect our sympathy or our support.  We must stand for Law and Order, or we shall have to put up with the rule of the Jungle, where might is right.  All rebels may have just grievances, but rebellions must be put down if society is to survive.  If rebels are not prepared to let the Courts set up by Parliament judge the merits of their claim, then they are relying upon jungle rule, and jungle rule means chaos.

In this case, where the Miners' Federation are endeavouring to beat us to our knees because they can stop our factories, and throw us out of work, disrupt our transport, our gas works, and our power plants, we have no alternative but to support the authority of the law, and the forces that stand for order.  If we give in, then the miners, like Hitler, or like the Communists, will regard our surrender as appeasement, and will be continually increasing the kind and extent of their demands.

WHO STANDS FOR LAW AND ORDER?

You rightly expect that you will be supported in your stand by all who believe in the supremacy of the law of the land.  So when Mr. Chifley found himself in mortal conflict with the Communists in 1949, the Liberals and the Country Party stood behind him and helped Mr. Chifley all they could.  To-day, when the Liberals and the Country Party are fighting the same sort of battle that Mr. Chifley waged, the leaders of the Labor Party are playing politics and are not giving Mr. Menzies the unqualified support he gave Mr. Chifley.

If you ask where the Labor Party really stands in this war for survival the best answer is found in the Communist Miners' Federation declaration of the terms upon which they would go back to work.  Mr. Williams declared that they had "neutralised the Labor Movement" and by the agreement made with the A.C.T.U. "were assured of its 100 per cent. support for our claims".

DOUBLE-CROSSING

As you read this pamphlet, we are sure that you will think it outrageous after all that has been done for the mining industry and for the miners during the past ten years that our position should be measurably worse than it was before the War.  Is this constant interruption with industry to be permanent?  If it is, where is our vaunted full-employment policy?  What is the use of labor leaders boasting about having attained full-employment when various key groups of unions can throw tens of thousands out of work, when these groups wreck our factories, strangle our businesses, disrupt our transport, and reduce housewives to despair as they go about their work in unlighted homes!

ONE-DAY STOPPAGES

The effects of the one-day stoppages decreed by the Communist majority in the Miners' Federation, added to other stoppages, are felt everywhere.  On the first occasion in January, 1951, about 200,000 men and women were thrown out of work, and apart from a serious loss in wages, there was a loss of about £2,000,000 production.  Lost production is best measured in terms of lost homes, less furniture, less clothes, fewer refrigerators, fewer motor cars, and so on.  These things cannot be made up;  they have gone for ever.

What do you think of the reasons given by the Miners' leaders for the stoppages?  You know the facts.  The Miners' Federation called a strike each week as a protest against an award made on December 20, 1950, by the Coal Industry Tribunal, Mr. F.H. Gallagher, which required the miners to work ten consecutive clays to qualify for a pound a week increase (in addition to the basic wage rise of one pound, of course).  Men who don't work the ten consecutive days don't get the extra pound a week.  The Federation sought to prevent any of the miners from getting it by calling the weekly stoppages.  The Communist majority in the Federation chose the award as the ground for striking, condemned it as a "swindle", demanded its cancellation, and the unconditional granting of the log of claims, including the £2 per week increase.

We shall try to show you later in this pamphlet that the Miners' leaders have repeated this tactic again and again since 1947.

They attack an award which might be twisted into an industrial dispute and then apply the Communist technique for disrupting industry, at the same time using the occasion for making new demands in the hope of wringing fresh concessions from the Government or from the Industrial Tribunals, who are always anxious to save the people the distress of industrial upheavals.  Here, for example, is the usual method adopted:

An award is made giving something the miners have been agitating for subject to their fulfilling certain conditions.  Because the men's leaders want unconditional benefits they strike against the award;  later, under the terms of the settlement, or for other reasons, the award is varied by removing the conditions.  Then fresh demands are formulated, and the business starts all over again.

Every concession squeezed from the Court, or from the Government, is represented to the rank and file of the miners' unions as another example of the manner in which the Communist leaders are able to "put things over".  And this partly explains their success at elections of Federation officials!

On the occasion of the recent strike there is no really serious dissatisfaction with the award on the part of the rank and file, who stand to gain from it;  the stoppage had to take place to carry out the commands of the Moscow authorities to sabotage all efforts by the democracies to build up their defences as a means of protecting us against Communist aggression,

WHAT COAL SHORTAGES MEAN

It is impossible to exaggerate the importance of coal in our Australian economy.  It is the foundation of all our industrial progress, and is therefore vital to all our defence preparations.  Without it, our migration policy must be curtailed, for it is estimated that every 100,000 migrants require an additional 250,000 tons of coal.  Unless the vast post-war expansion of industry and transport is to "fold-up" we must get additional supplies of coal to keep our power houses at Bunnerong, White Bay, Pyrmont, and elsewhere up to our demands for electricity.  These power houses have been starved and rendered inefficient by inadequate maintenance and by short supplies of coal suitable for their types of boilers.  Coal and power shortages have prevented the Broken Hill Steel-works from working at more than 70 per cent. capacity, and that has meant the loss of our export markets, and has had its repercussions throughout the whole Commonwealth by disastrously retarding our development.

Because steel cannot be produced in sufficient quantities, our industries have been prevented from supplying our urgent needs for homes.  The shortage of coal, power and steel has played havoc with our railway transport, caused it to show a loss of some millions, and thrown such a burden upon road transport as to make many of our roads unuseable;  Millions of pounds are now involved in road reconstruction and repairs.

Or take the effect upon our ship-building programme of the shortages of coal and steel.  We would not need many of the new ships we have ordered were it not that the Water-side workers and the Seamen are following a course similar to that being pursued by the Miners under directions from Moscow, by slowing down the handling of cargoes and the turn round of ships.

Coal shortages result in slowing down the making of bricks, tiles, and fibro-cement needed for our building programme.  Increased demands by the Miners for houses have recently developed as a result of welfare schemes worked out by the Joint Coal Board, but every strike or petty stoppage delays the fulfilment of their expectations.

Every new factory that is built, every new railway engine or truck that takes the rails, and every new home that is occupied and furnished reminds us that coal out-put and power supplies must be increased to keep pace with increased demands.  To have to resort to substitute fuels, or to the installation of factory power plants is to add disastrously to costs of production, and therefore to our cost of living.

Think what might have been.  Between January 15, 1951 when the Miners returned to work after three weeks' holiday, and March 8, the one-day stoppages had lost us 311,250 tons of coal.  In addition, other disputes and stoppages that were unavoidable lost us another 309,585 tons or a total of about 620,000 tons.  It is estimated that one and a half tons of coal is needed for a ton of steel and that a ton of coal is used in the building of the average house.  In addition the loss of time in factories ranging from eight to fourteen hours a week because of power shortages, and the never-ending irritation of the housewife would have been prevented.

TARGETS AND OUTPUT

In recent years, the coal authorities have been setting out the minimum needs of our expanding economy as "targets" hoping thereby to stimulate productive effort.  They have also been proceeding with "mechanisation" in the hope of increasing out-put per man-shift.  But all to no avail.  The following figures eloquently tell the story of the deliberate starvation of coal-hungry industries:

In 1938 machines were used to cut 28 per cent. of coal mined, and the output was 3.51 tons per man-shift.  This output has steadily decreased to 2.91 tons in 1949 notwithstanding that much more was cut in that year by machines;  in addition, in 1949 over 30 per cent. was mechanically loaded on to skips as against 6.5 per cent in 1938, and even then less coal was loaded.  The setting of "targets" has emphasised the Miners' policy of restricted output.

In the last three years of the war, the coal output, and the losses that might have been avoided were:

Year	Output: Tons	Avoidable Losses: Tons
1943	11,528,000	1,284,000
1944	11,102,000	1,547,000
1945	10,237,000	1,282,000

The figures for the past three years are:

Year	Output: Tons	Avoidable Losses: Tons
1947-48	11,917,000	1,607,000
1948-49	11,647,000	2,096,000
1949-50	11,191,900	3,015,000

Had it not been for the open cuts, the coal position would have been wholly desperate.  At the beginning of 1943 there was only one open cut with an output of 55,000 tons a year.  In 1950, there were 19 cuts producing 1,600,000 tons.

THE DARG AND MECHANISATION

A closer look at the production from mines, as distinct from that from open cuts, shows clearly the policy of deliberate restriction.  At Hebburn, No. 2, when all coal was loaded into skips by hand, the output was 5.95 tons per man-shift.  In 1950 with machine loading, the output is 3.81 tons.  At the same mine, before power borers were installed, the output was 8.81 tons as against 8.64 in 1950.

At Elrington, 1268 tons a day were loaded before machines were installed.  Now that the mine is 60 per cent. mechanised, the output has fallen to 735 tons a day.  At the same mine, when the machines were first installed, each machine loaded an average of 192 tons a day.  To-day it is 135 tons.

At Hebburn, No. 2 in 1939 when all coal was handmined, the lodge fixed 16 skips as the number to be filled (the darg).  In 1950, with 70 per cent. of the mine mechanised, the darg remains at 16.  At Burwood, there was a darg of 26 skips before the mine was mechanised.  When mechanised, the darg was reduced to 22 skips with the result that the output per man-shift at the coal face fell from 15.73 tons to 12.34 tons.

In one group of mines, about a million pounds was expended in mechanisation and improving facilities, and yet the output from these mines is less than it was before that expenditure was incurred.  One consequence of the reduced output in relation to the increased capital expenditure has been the heavy additional cost per ton of coal mined.

In the face of this refusal so to work the machines as to increase output, the 1951 policy of the Joint Coal Board to push ahead with mechanisation, and to import additional machinery from overseas is, in itself, not likely to get us increased tonnage of coal.

RESTRICTED OUTPUT

The Joint Coal Board reports that N.S.W. Miners are producing about 51,000 tons of coal daily, which is, at least, 10,000 tons below their capacity given the existing dargs, while if full use of machines were made "capacity" could be increased by some thousands of tons without involving any undue effort.

Output is reduced not merely by adopting smaller dargs, or by deliberately slowing down;  it is reduced by taking longer "cribs" i.e., time off for meals, etc., industrial disputes, political action, community considerations (funerals), inter-union quarrels, late starts, early knocking off, absenteeism, break-down of mine equipment, weather conditions, and so on.

The Joint Coal Board showed in its first report (1947-48) that about 550,000 tons were lost through disputes between the craft unions and the Miners' Federation.  Another half-million tons were lost from stoppages that were socio-political, rather than industrial.  Still another million was lost for reasons so vague as to be impossible to classify.

FANTASTIC LOSSES

In the Board's view, these losses were "fantastically high" when the needs of the community for coal were so desperate.  And all the Board has done to improve living conditions in the coal-mining districts has so far failed to bring any change in employer-employee relationships, or any good will for the Board itself.

In 1950, the Joint Coal Board decided to make a fresh appeal to those members of the mining unions who were not deliberately committed to the destruction of the Australian economy.  It published "Coal Facts", which showed that the loss of 2,500,000 tons of coal for the year 1949 was equivalent to a loss of:  400 houses, 1,000 motor cars, 2,000 refrigerators, and 2,000 electric stoves.

There was a loss of 860,000 man-shifts, which was equivalent to a loss of 48 shifts or an absence from work of 9 weeks for each miner.  That meant that virtually 3,600 miners did not work for a whole twelve months.  The loss in wages to the miner was £1,800,000 or an average of about £4 each pay for each miner!  The picture sketched by the Joint Coal Board also illustrates the fact that absenteeism has increased over the past ten years from 11 per cent. to 15 per cent. i.e., for every 100 men employed, 15 are away from work every day!

ARBITRATION

Whatever grievances the miners have had in the past, they can have none now in respect of the readiness of any government to listen to those grievances, and, in general, to take steps to remove them.  Indeed, some of the concessions have been outright appeasement and have consequently tended to make the Federation leaders more truculent in their attitudes.

There have been Royal Commissions and other investigations into coal mining and its problems, and there has been a spate of legislation, some of which Mr. Justice Davidson (in his report of March 13, 1946) criticised as adding "confusion to the tangled mass of legislation surrounding coal mining under which it is a mystery that any industry could survive".

SPECIAL COAL TRIBUNALS

During the war, the coal industry was regulated by the Commonwealth under its defence powers.  When those powers were about to lapse, the Commonwealth and New South Wales Governments agreed to legislate jointly to secure what neither could effectively do separately.  By legislation passed by each Government in 1946, the Joint Coal Board was established in February, 1947 with power "to ensure that coal is produced in the state in such quantities and with such regularity as will meet requirements throughout Australia and in trade with other countries".  In addition, the Board is to conserve develop, and work the coal resources to the best advantage;  to distribute such coal in such manner, quantities, classes, grades and prices as will be in the public interest, and finally "to promote the welfare of workers engaged in the coal industry in the State".  These powers are extremely wide and allow the Board to take over and manage any privately owned mine if the occasion seems to warrant it.

In addition, the Coal Industry Acts of 1946 establish the Coal Industry Tribunal (Mr. F.H. Gallagher) as an arbitration authority to deal with the industry as it affects the Miners' Federation, while other Unions engaged in the industry come under system of central and local Reference Boards.  Mr. Gallagher is also Chairman of the Central Reference Board.

There is thus a separate Board of Management and a separate Industrial Tribunal devoting all their time to the problems of production as well as to the disputes that arise.  Governments have, at least, gone more than half-way to meet Miners' claims.

STUDIED CONTEMPT

The practice of the Tribunal has been to anticipate disputes, and to eliminate, as far as possible, any undue delay in hearing those that develop.  Nevertheless, the policy of the Miners' Federation has been for direct action, and when ever the Tribunal makes an award with which it disagrees, the Federation's deliberate policy (See Common Cause -- the Miners' paper) has been to fan agitations and promote strikes in the confident expectation that if enough vigour is displayed in aggressive opposition, the Coal tribunal will either reverse or modify its decision.  This readiness to review on the part of the Coal Tribunal becomes a new jumping-off ground for discrediting it.  And not being a "Court", the Tribunal has no remedy lying to it for contempt.  There is ample evidence of the determination of the Miners' Federation to refuse to accept arbitration, although it has no compunction in taking what it can get from the system.  The Tribunal has pointed out, however, that if the Federation objects to an award, there is always the right to apply for a new hearing, and even of appealing to the High Court for a writ of Prohibition if it is thought that the Tribunal has exceeded its powers.  The tribunal went to extreme lengths to meet the Federation's objections to this award of December, 1950, but the Miners' Federation unhesitatingly preferred direct action as being the most effective manner of black-mailing the Community and the Tribunal.

If there is no justification for the Miners' contemptuous attack upon the Arbitration system, little can be found for the childishly irresponsible stoppages that have accounted, in recent years, for annual losses of millions of tons of coal.

FRIVOLOUS STOPPAGES

The Joint Coal Board includes an item "Not readily classifiable" in its catalogue of reasons for stoppages, and it comments that not only is this the case, but often reasons for the stoppages are never known.

A boy's boots are hidden, a cap is missing, a path is muddy, a manager so far forgets himself as to help a man push a skip, a horse has a nasty smell, a S.P. Bookmaker delays settlement, or the High Court declares invalid "such progressive legislation as the Bank Bill" -- these are some of the reasons for holding a pit-top meeting that always results in the whole of the employees of that mine going home.

The Joint Coal Board also lists many stoppages hypocritically called as a protest against the progress of its welfare programme, against delays in installing power borers, in equipping pit-top shelters, and so on, and it comments that such strikes are futile for they can do nothing to hasten the objects of the strike, and often indirectly delay their realisation.

The following list of frivolous stoppages indicates the deep-seated failure on the part of lodge leaders to exercise leadership in the several mines -- although some of them have at times pilloried the younger employees for their indiscipline.  They also show the unquestioning loyalty of the employees to each other, and their unrelenting refusal to examine the bona-fides of any employee making a complaint at a pit-top meeting.

PIT-TOP MEETINGS

Pit-top meetings have long been a means of irritating the employers, and they have always played into the hands of the agitators and malcontents.  There have been efforts over the years to prohibit the meetings during working hours unless the management consented, or unless there is a genuine industrial dispute.  At times, Tribunals have imposed penalties for unauthorised stoppages but have seldom exacted them.  Indeed, in seeking to avert industrial upheavals, the Tribunals have been so ready to appease and conciliate that they have forfeited some public respect, and have undermined their authority with the Miners.

If the pit-top meeting is a genuine opportunity to air grievances or to discuss industrial methods, then there is much to be said for the contention that it should be held after knock-off time, when discussions could continue without watching the clock.  But that does not suit the irresponsibles, or the agitators, while the practice of a large number of employees leaving the pits as soon as they have filled their "Darg" -- an hour or more before normal knock-off time -- would not make for full attendance after work.

There is widespread agreement that the pit-top meeting should be curtailed, but in any case, there is urgent need for formalising the procedure, and for making the lodge officials responsible for them.  As it is, anyone seems able to call a meeting, and the procedure is hopelessly haphazard.

IDLE MINES

Every day, the District Officers of the Joint Coal Board collect telephonic information about every mine in N.S.W. and thus the Board knows every morning what mines are idle, for what reason, how many men are affected, and the loss of coal resulting.

Mr. Justice Davidson catalogues a long list of stoppages which he says (p.170) "are a few only of the more unreasonable excuses for cessation of work".  Here are some of them:

In May and June, 1944, many of the collieries of the Northern District were idle as a protest against butter rationing.  At Bellbird, on 24th January, '44, the mine was idle as a protest against income tax assessments received the previous week.  About 29th November, 1944, many pits were idle as a protest against a vice-president of the Northern Branch of the Federation remaining at work after reaching retiring age.  At Pelaw Main, on 10th July, '44, a wheeler complained that his horse had a sore shoulder, and while it was being replaced, all the miners went down except the wheelers' pair of miners;  when it was discovered that they were missing, all the men came out, and went home without making any further inquiries.  At Corrimal, a pair of boots had been missing from the bathroom for several days prior to the 16th June, 1944.  A miner accused the clippers of being responsible.  The latter became incensed, and refused to resume work until he apologised publicly.  The man apologised publicly to avoid a stoppage.  The clippers then demanded that he apologise privately as well.  He agreed, but the stoppage still took place.  There was a similar occurrence at the Hermitage, in the Western field, on 10th May, 1944, with the inevitable stoppage even after the boots had been restored.

LAWLESSNESS

The records of the Joint Coal Board are replete with instances similar to those quoted by Mr. Justice Davidson.  At Burwood, on 6th and 7th October, 1949, 741 men were idle with a daily loss of 2,736 tons, because of a dispute about the quality of household coal.  At Abedare Central, and at Stanford Main No. 2, 296 and 361 employees respectively were idle for a loss of 670 and 867 tons of coal as a protest against the non-issue of domestic coal.  At the State Mine, at Lithgow, there was a pit-top meeting on 16th August, 1949, which requested an immediate issue of household coal.  The manager said this was impossible as there had been falls leaving accumulations of debris and mud.  To allow household coal to be pulled up would interfere with the general working of the mine.  He promised that some household coal would be made available next day, but this was unacceptable, and the men went home.  1,355 tons of coal were lost.

ARROGANT ATTITUDE

This stand and deliver attitude is characteristic where there is the slightest suggestion that the management is indifferent to a grievance, and their stopping work highlights their utter indifference to the needs of other workers in the community who cannot get a ton of coal or coke in a year (let alone one ton a month) because of miners' stoppages, and in addition have to put up with the misery and discomfort of unlit and unwarmed homes.  The urgency of the miners' demands for their issue of household coal was not unconnected with their desire to fulfil promises to sell some on the black-market.

IRRESPONSIBLE METHODS

In October, 1949, Austral Main was idle for three days because of a complaint about the bath house.  32 men were affected and 134 tons daily were lost.  On 18th August, 1950, Excelsior mine, employing 225 men, was idle with a loss of 460 tons because of dissatisfaction with the condition of the bathroom.  On 2nd August, 1950, South Bulli, with 496 men, lost 810 tons of coal because it was alleged that there was an offensive odour in the changeroom.  At Stockrington, during October, November, and December, 1949, there were several occasions upon which pit-top meetings threw the mine idle, but the management was never given any reasons for the men not working.  On the other hand, on 24th October, 1949, Stockrington No. 1 was idle for a loss of 405 tons because of dissatisfaction with the bathroom.  The trouble was satisfactorily adjusted, but the men continued with their meeting, and then went away without having any further communication with the management.

Stockrington No. 2 was idle on 14th and on 19th October, 1949, with a daily loss of 749 tons because of resentment at men being disciplined for smoking in the pits -- a practice which is prohibited by law because of the possible fire hazards.

DISCIPLINE RESENTED

Disciplinary action by the management invariably brings about a cessation of work.  Mr. Justice Davidson comments that discipline is almost non-existent, and he strongly recommends the restoration of the rights of management to dismiss recalcitrant employees, subject to appeals to the Arbitration Court.  There is little doubt that the right to hire and fire would immeasurably raise the morale of the men in many mines where discipline is non-existent.

ROLLING STRIKES

During September, 1950, there were rolling strikes throughout the Northern and Southern fields involving losses of thousands of tons of coal to protest against not granting long service leave to miner "service" men.  On 29th September, 1950, Abermain No. 1 was idle with the loss of 290 tons because there was some delay in harnessing the horses in the absence of the Ostler.  On 11th October, there was a dispute at Excelsior mine over an alleged delay in getting a new collar for a horse.  The management was not approached in the first instance, but the dispute involved a daily loss of 460 tons.  On 2nd October, 1950, John Darling was idle for a loss of 2,020 tons because it was alleged that an employee had been prematurely discharged from the Newcastle hospital.  Stockrington lost 890 tons on 25th October, '50, because the miners were protesting against an increase in bus fares.  South Bulli was idle on 9th October, as a protest against the evidence of the Colliery Manager, before the Coal Industry Tribunal.  Aberdare Central lost 650 tons on 27th September, 1950, because the wheelers objected to their horses being used by other employees.  Hartley Main was idle on 8th December, 1950, and lost 40 tons of coal because the miners were disputing payment of an S.P. debt by a bookmaker.  And on the day after the first of the general one-day stoppages, 6th February, 1951, Hebburn was idle because the wheelers demanded another horse.  The management was willing to provide another if an inspector so recommended after investigation.  But the men would not wait for any inspection, and went home.

CONTEMPTUOUS DISREGARD FOR THE PUBLIC

To counter this contemptuous disregard for the rights of the community, the several tribunals that, from time to time, have had to deal with the mining industry, have sought to impose sanctions in the form of penalties -- loss of annual leave -- loss of pay -- and so on.  Mr. Justice Davidson believed that any injustices would be corrected by allowing the right of appeal.  But even if these frivolous stoppages were altogether eliminated, the "daily targets" set by the Coal Board would not be reached.  Nor would they be reached if the futile strikes were also abandoned.  But there would be at least upwards of a couple of million more tons of coal available, and industry and housewives would not be so despairingly scraping the bottom of coal bins in search of fuel.

The contemptuous rejection of awards by the Coal Industry Tribunal, of the authority of the Joint Coal Board, and of directions by mine managers are further exemplified in the unbending opposition of the Miners' Federation to the extraction of pillars by machines.  It is true that in this opposition, the Miners have been aided and abetted in the past by the then N.S.W. Minister for Mines (J.M. Baddeley), who refused to allow the work to proceed.

PILLAR EXTRACTION

There are over 240,000,000 tons of coal in the pillars in our mines, and it is estimated that about 170,000,000 tons of this can safely be extracted by machines before it deteriorates.  This coal is easily accessible, and could add considerably to the daily output of miners working it.  The owners have had permission to instal machinery in two mines but the miners refuse to work the machines on grounds of safety.  On April 14th, 1950, Mr. Gallagher, by exercising his Federal powers, over-ruled the State Minister, and decided, after having a report by three British experts, that the mechanical extraction of pillar coal would be in the best interests of the community, colliery employers and employees, because it had been proved that use of machines:

1. Had reduced accident rates in U.S.A.
2. Kept miners further away from falls of coal.
3. Made possible better dust control, and
4. Was less fatiguing than hand-mining.

The Coal Industry Tribunal (Mr. Gallagher), at the same time, recommended that the pillars should be extracted as soon as possible, and especially in the Maitland district, to prevent both deterioration and spontaneous combustion.

The day after the Tribunal's decision, the Miners' Federation declared that under no circumstance would they work machines for pillar extraction.  They did not present their case at the hearing, but withdrew altogether saying that the Tribunal had no jurisdiction to deal with the matter.

Here, again, is a refusal by the Federation to accept an award it dislikes and yet the Federation takes no steps to have the award set aside as being beyond the jurisdiction of the Tribunal.  In other words, the Federation, by repudiating the law of the land, proclaims that it is a law unto itself.

The community cannot afford to ignore such a challenge.  Nothing but anarchy can result if a powerful section is allowed to make its own rules in defiance of those made by a duly constituted authority.

Mr. Justice Davidson, in his report (1946), strongly supports the mechanical extraction of pillar coal, but here, again, the State Government will do nothing that might offend the Communists.

NATIONALISATION

Coalcliff represents a story of studied rejection by the miners of all overtures by the management and by the Government through its Controller, together with a steady decline in production, as well as in morale.

The management of Coalcliff mine had engaged three pairs of miners to extract the pillar coal.  The work had been proceeding satisfactorily for some time, when, in January, 1944, the Miners' Federation demanded the abolition of the three lifts, and Mr. A.C. Willis, in his capacity as Commonwealth Conciliation Commissioner, directed that one pair of miners was to be employed on each pillar.  For reasons of safety, the management thereupon ceased pillar extraction and concentrated upon solid coal winning.  This led to a strike, on 8th February, and threatened to develop into a district stoppage, whereupon the Coal Commissioner decided to allow two pairs of miners.  Still the miners refused to return to work and the management said that because of the marked decline in output (from 800 tons daily to about 370), the mine would be closed down.  The Coal Commissioner therefore decided in terms of the wartime powers of control vested in him to take over the mine, and work was resumed on 14th March, 1944.  The mine was decontrolled on 31st March, 1947, and reverted to private management.

The assumption by the Government of control evoked no response from the Federation which puts nationalisation amongst its objectives.  Production per man shift fell, absenteeism increased, compensation claims increased, and industrial interruptions occurred just as freely under Government control as before.  In other words Government ownership produced no change in attitudes or methods on the part of the miners.  Production fell from 800 tons a day when the mine was taken over to 570 in February, '47, partly because the number of miners offering for work under the Government agency fell from 176 to 113.  Both Mr. Justice Davidson (pp. 259, et seq), and the Joint Coal Board report one beneficial result from the assumption of public control of Coalcliff, viz.:  A means of minimising dust.  Experiments costing about £2,800 proved the value of certain techniques which are now being applied in other mines liable to dust.  (See first Report of Joint Coal Board, 1948, p. 14.)

LITHGOW STATE MINE

The State Mine at Lithgow was acquired to prevent the Railway Department from alleged exploitation by private coal owners, but its costs have been such as to necessitate its paying more for mining its own coal than it would if it bought from private enterprise.  The methods of management, its accounting system, and its value as an experiment in public ownership are not now our problem.  What we are concerned with is whether relationships between miners and management are better than under private ownership, and whether this results in greater output, and whether the management has shown more progressiveness than have the privately-owned mines.

Mr. Justice Davidson reported in March, 1946, that recent changes in management were likely to result in an increased output, but until then, the output was not such as to enable the Railways to produce cheaper than private owners were able to in the same locality.  It appears that the accident rate is higher than in the case of privately owned mines in the Northern District of equal or larger size;  that progress in mechanisation has been less than in privately-owned mines;  and that there are not substantially fewer of the usual industrial troubles such as strikes, absenteeism, and pit-top meetings in comparison with privately owned mines in the same district.

These instances suggest that neither Government control nor Government ownership offers any hope of better industrial relationships or of obtaining increased output.

PAID HOLIDAYS WITH CONDITIONS

Annual leave with pay was first granted by Mr. Justice Drake-Brockman, in his interim award of 29th June, 1939, which gave the miners ten days on pay;  the leave was to accrue at the rate of one day's leave for every 25 shifts worked.  The final award of 28th October, 1939, which was to run for three years, imposed penalties for unauthorised stoppages (loss of one day), holding pit-top meetings in working hours (half a day), or for refusing to work on Saturdays (half a day).  Later (8th October, 1940), refusal to work overtime when so required meant the loss of half a day, while absenteeism for two consecutive days without reasonable explanation also cost half a day's leave.

An application for the removal of the penalties was refused on 10th June, 1941, because, said the Judge, to do so "would render the clause almost meaningless and certainly quite valueless".

ENTER POLITICS:  EXIT CONDITIONS

On 25th November, 1941, just after the Curtin Government took office, the Minister for Labour, E.J. Ward, directed Mr. Morrison, Conciliation Commissioner, to hear and determine industrial disputes between the unions and employers with respect to annual leave.  Mr. Morrison decided on 5th December, 1941, to delete the penalty clauses from the annual leave clause, and made that deletion retrospective to the commencement of annual leave for 1940.

When the employers protested, a National Security regulation was immediately issued to remove the existing right of appeal from the Conciliation Commissioner's decision.  During 1942-43-44, there were no penalty provisions in the award, but the Government prosecuted hundreds of employees for absenteeism, while the possibility of a "call-up" operated as a sanction as compelling as penalties might have been.

ADDITIONAL HOLIDAYS WITH PAY

On 10th October, 1946, the Central Industrial Authority heard an application by the Federation for fifteen days' annual leave for each employee after twelve months' employment in the industry.  The application was refused, and instead, five days' "recreation" leave was added to the existing ten days' annual leave, subject to employees working 225 shifts in the year.  The original award of ten days provided that leave should accrue at the rate of one day for every 25 shifts worked.  Mr. A.C. Willis (the Central Industrial Authority) refused to make the award without conditions, and said:  "It is the responsibility of each and every employee to render, in return for any privileges enjoyed, satisfactory service to his employer, which obviously must, of necessity, include regular attendance at work."

On 2nd June, 1947, the Coal Industry Tribunal heard a further application by the Federation to combine the annual and recreational leave and for an award of fifteen days without any other condition than that an employee had been in the industry for twelve months.  The Coal Industry Tribunal reversed the decision of Mr. Willis (Central Industrial Authority) and awarded fifteen days' annual leave, subject to the condition that 225 shifts were worked, or that for the balance of the year (from June to December, 1947), the employee's service was continuous.  It was also a condition that the extra leave was not to be taken at a time when the Joint Coal Board thought that stocks of coal were insufficient.

Stoppages having occurred immediately after the making of the award, the Tribunal extended the date from which continuous service was to operate, in case the men had not appreciated the effect of the conditions imposed.  The award was made "interim" only, and leave was reserved to the parties to apply for variation after 1st January, 1948.

THE COAL BOARD INTERVENES

Because few employees would have qualified for the extra five days on the conditions laid down by the Tribunal, the Joint Coal Board made an agreement with the Federation, without consulting either the Tribunal or the employers.  Mr. Idris Williams, the Miners' President, had declared that the June Award was noxious and would result in at least 70 per cent. of the miners losing the extra five days.  Consequently stoppages were likely to occur.  The terms of the Agreement as set out in a letter of 3rd September, recited the Coal Board's belief in the good faith of the Miners, and the willingness of the Miners' Federation to persuade the members to work "back Saturdays" for the rest of 1947, to intensify efforts to reduce stoppages, to raise output by at least 10 per cent., and to try to better the targets set.  In return, the Joint Coal Board undertook to support the Federation's application for the cancellation of the conditions requiring a minimum number of shifts, or continuity from June to December, 1947.

AN AGREEMENT FOR UNCONDITIONAL HOLIDAYS

Although the employers opposed the variation, the Coal Industry Tribunal declared that the action of the Coal Board which was "the managerial authority created by the Governments for the purpose of directing or controlling the coal mining industry", had left him with no option but to make an award consistent with the Agreement of 3rd September.  While, therefore, on 10th September, 1947, he cancelled the conditions attaching to his June award, the Tribunal made it clear that the award was to operate for the year 1947 alone, and that it was not intended to create a precedent for the granting of paid leave without conditions relating to service.  On 8th December, 1947, a further interim report was made covering the amount of leave to be granted, viz.:  fifteen days, and designed only for the special conditions of 1947, and the Tribunal again took the opportunity to declare the need for attaching conditions to leave privileges.

The agreement between the Coal Board and the Federation torpedoed the Industrial Tribunal because the Coal Board was prepared to believe that the Federation could so discipline its members as to make conditions attached to the award unnecessary.  What did the Federation do to justify its claim?  In 1947, the Federation could point to a number of victories for the men.  It had gained fifteen days' annual leave unconditionally, the doubling of previous amount of sick-leave, payment for statutory holidays, as well as increases in pay -- all this within a few short months.  It was therefore in a highly favourable position to demand attention to its wishes.

Nevertheless, on the Wednesday after the first "Back-Saturday" (September, 1947), twenty-seven mines on the Northern field were laid idle by the Wheelers for what Common Cause described as petty and unjustified.  The paper attacked the wheelers for endangering the gains of the Federation, and called for support for its policy.

STOPPAGES CONTINUE

Whatever efforts the Federation officials may have made, stoppages showed no diminution during the rest of 1947, and the beginning of 1948.  The miners got their leave, and the community went short of coal.

In April, 1948, the Coal Board made a fresh application to the Tribunal to have conditions attached to the right to annual leave.  The Federation's response to this was to declare that outside intervention with the internal union discipline was undesirable, and to inform the Coal Board that the Mining Council had passed a resolution on 11th February, 1948, outlawing "unauthorised" local strikes.

ANOTHER AGREEMENT

In the discussions that followed, the Coal Board agreed not to proceed with its application that annual leave should be conditional upon continuity of work, on the Federation's undertaking to do everything possible to get the rank and file to observe the resolutions passed by the 1945 convention concerning internal union discipline and the elimination of petty stoppages.

This agreement was reported to the Tribunal which, on 19th April, 1948, adjourned the Coal Board's application.  In applying for the adjournment, the Coal Board expressed its belief that internal discipline would be improved if the Federation took steps to have the 1945 resolutions adopted.  These resolutions (as set out in the proceedings of the Tribunal) included the reference to District Officers if a dispute could not be settled by the lodge officers and the management, the limiting of pit-top meetings to safety matters, the endorsement by the District Management Committee of stoppages, provided the Governments left discipline to the Federation.  A scale of Union fines for breaches of discipline was fixed, including suspension or even expulsion for indulging in disruptive activity.

PROMISES

The Federation promised the Coal Board that these resolutions would be submitted to the District Boards of Management, to a conference of such Board and Lodge Officers, to area conferences of District Boards and Lodge Committees, and finally to all the members of the Federation at all collieries at pit-top meetings approved by the Board.  (See Common Cause, 8/5/'48.)

BROKEN

Although the minutes of the Northern District Board of Management show that approval was given to the procedure outlined above for the adoption of the 1945 resolutions, it is significant that the resolutions were not submitted to the members.

THE COAL BOARD AGAIN

In July, 1948, the Coal Board again brought to the Tribunal the "urgent necessity of varying the award" because of losses through petty stoppages, "notwithstanding the undertakings given by the Miners' Federation".

After the case had proceeded for six days, the Coal Board asked for an adjournment because it had reached another agreement with the Federation providing that Aggregate meetings set down for Thursday, 16th July, were abandoned, and that the Federation undertook within three weeks to give effect to the resolution to maintain internal discipline.

ANOTHER AGREEMENT

Other items in the agreement included a conference on "back-Saturdays", on raising permissible output in pits where power borers had been installed, and an understanding that the Coal Board was to inform the Tribunal that its report upon long-service leave would soon be ready.

THE FEDERATION'S ATTITUDE

At the hearing of this case, the Federation witnesses gave no evidence of steps taken to impress upon the rank and file the need for internal discipline while, in reporting the proceedings, Common Cause took an aggressive tone regarding "the Coal Board's action in seeking the scrapping of our holiday awards".  It spoke of the "Federation's determination to fight", of the "backing of the rank and file in the spontaneous stoppages of protest", and in consequence "threats vanished, coal owners sulked, and a calm hearing of the case proceeded".

As in April, 1948, so in August, 1948, the Federation failed to honour its promise to submit disciplinary code to the members.

Between 1948 and 1950 lie the turbulent days of 1949, with its savage strikes, the special labour legislation under which fines and imprisonment were imposed on some of the Federation leaders, the undertakings, freely given, and as freely disregarded when the undertaking had served its purpose.

1950 was a year of stocktaking by the miners, but in April, 1950, the question of leave sanctions came up again when the representatives of the Northern District Branch applied for an adjournment for the purpose of submitting the 1948 code to the rank and file.

ARBITRATION REJECTED

According to Common Cause, of 6/5/'50, the Southern District Delegate Board rejected "the so-called codes of discipline" which would take "away the rights of local lodges to deal with their disputes from time to time".  This was a repudiation of the promises of the Federation, but when it came before the Central Council, Common Cause reported (20/5/'50) the Council's attitude to discipline.  We will not "agree on the plea of elimination of trivial stoppages to the introduction into the industry of restrictive arbitrationist practices that are calculated to prevent legitimate freedom of action" ... "particularly do we reaffirm the right to strike, the right to hold pit-top meetings, and unfettered negotiations with management to endeavour to iron out disputes".

COMMUNISM RAMPANT

These attitudes are in line with the repeated assertions of the President (Mr. Williams) that the Federation does not favour anything, e.g., Conciliation Committees at each mine, "which could develop into machinery of an arbitrationist character".

This pamphlet was written in January, 1951, and its publication delayed to record the result of the dispute that developed over the December, 1950, award.  In March, 1951, at the time of resumption of work, the Tribunal's decision on annual leave and paid holidays is still couched in terms of an "interim" award to meet the special conditions of September, 1947.  And the Joint Coal Board is still waiting, apparently hopefully, for the Federation to honour its plighted word.

Despite the unequivocal declarations by the Miners' President during January and February, 1951, that "there can be no settlement of the dispute except on terms providing for the cancellation of the award" of December, 1950, the several Governmental authorities (other than the State Government), made every possible move to get the miners back to work, short of surrender to the Miners' demands.  And to what end?

All the world knows what credence to attach to any Communist undertaking.  In particular, there is the Moscow declaration upon Trade Unions and collective bargaining that "the belief in the sanctity of collective bargaining ... must be met with a resolute and decided resistance on the part of the revolutionary trade union movement." (From the First International Congress of Revolutionary and Industrial Unions, Moscow, 1921.)