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November 1997

Overview

• Despite its concerns at the lack of genuine public consultative arrangements, the CEPU has participated in this review as both a union representing the vast majority of employees within Australia's postal services and also as an organization with a strong record of concern for the direction of public policy development in Australia;
• There are compelling reasons for the maintenance of reserved services within the Australian postal industry. Circumstances have strengthened rather than weakened the need for these restrictions on competition and the alternative mechanisms proposed in the Options Paper are insufficient in terms of the achievement of the community's objectives. The benefits to the community of the reserved service out-weigh the costs of limiting competition;
• While there is room for change and improvement in Australia Post's performance and service standards, this change should only be pursued if it is in the interests of the vast majority of Australia Post's customers - ordinary Australians - rather than those of parties who merely seek to exact private commercial profit from change. Indeed the approach taken within the Options Paper, as reflected by the various options proposed, has the potential to seriously undermine rather than assist the postal service to meet Australia's communications needs into the future. This review should not merely succumb to the demand of those who lack the appropriate structure or network or intention to invest and create such a co-extensive network, seek to provide only for selective high volume, low cost delivery routes to capture a profitable but limited portion of Australia Post' letters business;
• Australia Post and its workforce comprise one of the most successful corporations in Australia and unarguably one of the most efficient postal services in the world. In terms of price, profitability and return on assets, productivity, delivery performance, international benchmarks, existing levels of competition, industrial relations, and service modernization and expansion, Australia Post has demonstrated its improved performance. Supported by customer and public opinion surveys, these improvements may be jeopardized by the introduction of further deregulation; Key Principles
• Universal Service and Public Ownership. The CEPU supports the continued existence of Australia Post as a publicly owned corporation, as an important element of national communications infrastructure, the uniform letter rate and the importance of the availability of a full range of affordable postal services throughout the nation - Australia Post is meeting the needs of the general public and the business community, contributing to Australia's future in a changing communications market. The Federal government's commitment to retain Australia Post in full public ownership is an important recognition not only of the merit of public ownership and of the specific performance of Australia Post as a public corporation but also of the significance of the CSO Australia Post's status as a public corporation, coupled with its legislative and regulatory environment, is an important element in ensuring that the community expectations regarding Australia Post - as reflected in the CSO and the wider community interpretation of these - are met and adequately monitored;
• Existing Competition Sufficient. The current extensive competition in the postal services market - with the sole exception of direct competition to the reserved service - has sufficiently maximized the possible gains from competition in the postal service industry to satisfy the government's dual objectives - minimum universal service provisions and appropriate levels of competition. To reduce or remove this sole area of monopoly will seriously threaten Australia Post's ability to provide universal service at a uniform price, undermine the provision of a range of Australia Post's other services to Australians (such as counter and financial services) and potentially threaten the financial viability of Australia Post;
• Expanding the CSO. The legislative CSO's of Australia Post need to be brought into alignment with community expectations, specifically with respect to delivery frequencies, and the availability counter services and other new communications services. Any adequate review of Australia's postal needs must ensure that all Australians not only continue to receive a standard letter service at uniform price throughout Australia but an expanded CSO that meets the changing needs of the community, including access to parcel and counter services, and existing electronic financial services and new communications services as they become available. Australia Post should be required to incorporate new communications options as they become established so that universal public access is available through its counter and delivery networks. The challenge for the NCC review and the Federal government is to ensure that the community is to put these into the CSO;
• Future Consultation and Implementation Issues. The consultation process within the NCC review has been entirely inadequate. The review should include a process of consultation with the general public, Australia Post employees, post office licencees and contractors regardless of the package of changes recommended. This is set out in section 6.6 of the submission. The CEPU believes that the legislative and regulatory status quo should be retained, especially with respect to the postal reserved service, until this consultation has been completed and a community consensus achieved;
• Impact Statements, including Employment Effects. It is incumbent on the NCC - and any advocates of change - to dimension the actual employment implications of the change being recommended. This should encompass the impact on employment levels and its geographic distribution, both in terms of any job losses and potential creations (within competitors) and the nature of the employment concerned in terms of social equity (such as full time, part-time, casual, wage levels etc.). The number of unsubstantiated "optimistic" statements made within the Options Paper gives cause for concern. Many competitors do not provide comparable employment to Australia Post, their workforce being essentially casual, untrained, under-paid and with little incentive for commitment to industry standards. Employment growth in such areas, when it occurs, is not adequate compensation to the Australian community for the loss of full-time, award covered and skilled employment in Australia Post;
• Industrial Relations. The CEPU has a sustained history of willingness to negotiate the introduction of new technology and workplace change on the basis that any impacts on employment are addressed and managed in a negotiated fashion, consistent with award entitlements. Such willingness could not be guaranteed in the future under the various deregulation proposals being considered by the NCC review;
  The NCC Options

• There are four major areas of change under consideration by the NCC review - the further deregulation of the reserved service (either a reduction, phased reduction or their total removal), maintenance of Australia Post's existing Community Service Obligation (CSO) to provide a universal service for the standard letter at a uniform rate of postage, alternative funding arrangements to the current cross-subsidy arrangement (such as via budget allocation or competitor contributions) and changes to the inter-connection arrangements;
• The CEPU does not support the four deregulatory options proposed in the Options Paper. While it is acknowledged that full deregulation is not accepted by the Options Paper, the other options proposed are no less unacceptable. This is based on the belief that the various elements of deregulation identified will inevitably threaten Australia Post's ability to meet both its legislative obligations to the Australian community or an expanded CSO. The CEPU will argue that the differences between the various options are merely a matter of degree and the differences in timing will merely result in delays to the inevitable outcomes - reductions in services to the community and the financial viability of Australia Post;
• The various proposals identified by the Options Paper are conceived has devices to deliver deregulation. They are against the public interest, are self-interested proposals of Australia Post's commercial "competitors", undermine Australia Post's ability to meet its CSO, contradict the ability to expand and modernize the CSO to encompass a range of additional services consistent with community expectations and undermine or replace the cross subsidy arrangement. They have the potential to lead to either differentiated services and charges or undermine financial Australia Post's viability, replace existing secure and award based employment with casual non-award based employment and threaten the continuance of productive industrial relations within Australia Post and the wider postal industry;
• The retention of the reserved service and the existing cross-subsidy arrangement is the most appropriate mechanism to guarantee funding for the CSO as provided for in Section 27 of the Australian Postal Corporation Act, 1989. As a result the alternatives proposed by the NCC Options Paper - direct budget payments, a lower rate of return and industry levy - should be rejected due to the various disadvantages attached to them. The current funding arrangements are sufficiently transparent. Australia Post's independent auditing procedures provide a basis for ensuring that cross subsidy is limited to within the reserved service. The proposed reduction in the price of standard letter to below 45c and in weight to 125grams is not justified. The current separation of regulatory function with respect to Australia Post is satsifactory. There is no demonstrated need for further moves towards either structural or accounting separation. The CEPU believes that the current arrangements with respect to non-reserved services are also adequate in that they are reflective of Australia Post's comprehensive network, a response to community demand and subject to competitive neutrality measures;
• Australia Post's comprehensive delivery and retail network represents a major social investment by the Australian community, represented by Australia Post, to ensure that the CSO are met. It also needs to be appreciated that potential competitors have no desire to replicate such a system due to their aim to "cherry-pick";
• The CEPU makes its position clear that any attempt to achieve privatization of Australia Post through the mechanism of extensive leasing or contracting out, beyond those areas subject to current industrial agreements, would inevitably be the subject of an industrial response. The CEPU believes that the NCC review has acted outside its terms of reference in raising these options;
• In addition, there are a number of other issues or implications of the various proposals made in the Options Paper which the have been inadequately addressed by the NCC review. These relate to the need to establish the impact of change on Australia Post in terms of price, revenue, services, employment, Australian ownership and the resultant impact on the overall services infratructure and local economy in specific localities. These matters constitute major challenges to the direction of change suggested by the NCC, and detailed impact statements must be prepared, considered and released as part of any consideration of the Options Paper and the issues canvassed. The public interest implications of these matters are of sufficient weight to require the response of both the NCC review and the Federal government;
  The CEPU Alternative Option

• The CEPU has proposed an alternative option for consideration by both the NCC review and government. This option can be summarized as maintaining the key aspects of the existing legislative and regulatory framework of Australia Post, with the expansion of its CSO to meet the emerging and future needs and expextations of the community;
• The major reasons in support of the CEPU Alternative Option are - Australia Post's performance should not be jeopardized by deregulation, Australia Post is already subject to sufficient competition and operates under a regime of competitive neutrality, further contracting out or leasing will mean effective privatization and violation of the Federal government's commitment in this regard and it enables Australia Post to respond to community expectations by providing a range of additional services sought by the public, including existing and new communications services;
• The CEPU Alternative Option also has the potential to combine the need for efficiency and reasonable levels of competition with a nationally integrated communications infrastructure and end-to-end service meeting the needs of the community throughout Australia well into the next century. It ensures that the advantages and benefits enjoyed by the vast majority of Australians under the current postal regime are combined with complementary reforms.
• There are 6 key elements of this option:
• Universal Service. Retention of the current arrangements concerning universal service, with standard letters being distributed at a uniform rate of postage for all Australians, and cross-subsidy as the most efficient and appropriate method to fund the CSO. This encompasses the retention of the current reserved service for the standard letter, but enhanced by stronger requirements in relation to providing delivery service and the frequency of deliveries;
• Regulatory Issues. Retention of the current regulatory environment for postal services and standards;
• Inter-connection. Retention of current inter-connection arrangements, with Australia Post negotiating access arrangements at discount rates at no less than that available to Australia Post's own customers;
• Universal Postal Union. Retention of the current shared representation on the Universal Postal Union by both Australia Post and the Federal Department of Communications;
• Review. Retention of the current arrangement whereby a full parliamentary review is conducted during the life of each Federal parliament into the operations and performance of Australia Post to promote responsiveness to the needs and expectations of the community and its recognition within legislation;
• Community Service Obligations. The existing CSO should be expanded to include the full range of basic communications services that could be provided by the counter and delivery networks of Australia Post. This should encompass the ability to post any article up to specified dimensions (including a parcel service) throughout Australia at an affordable price, a minimum standard for the location of post offices (both corporate and licensed post offices), the maintenance or resumption of rural mail runs (as an effective means for the delivery of a range of parcels to these communities), and extended provision of existing electronic financial services as well as new communications options (such as e-mail and other services) as they become available. This is to ensure universal public access is available to its customers, particularly those in rural and remote locations, low income earners, those in poorly serviced metropolitan fringe areas, small business and community organizations. In addition, the CSO should recognize the maintenance and restoration of a specific list of heritage buildings; and,
• Public Ownership. Australia Post remains 100% in public ownership.

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November 1997

 
CONTENTS

EXECUTIVE SUMMARY
RECOMMENDATIONS SUMMARY

1. 	PURPOSE
2.	THE NCC REVIEW
3. 	THE NCC OPTIONS - A CRITIQUE
4.	AUSTRALIA POST PERFORMANCE, INDUSTRIAL RELATIONS AND CONSUMER SUPPORT

	4.1	Introduction
	4.2	Price
	4.3	Profitability and Return on Investment
	4.4	Productivity Improvements
	4.5	Delivery Performance
	4.6	International Competitiveness
	4.7	Australia Post and Competition
	4.8	Industrial Relations
	4.9	Service Modernisation and Expansion
	4.10	Rural and Remote Services
	4.11	Customer and Public Support
	4.12	Conclusion

5.	THE CEPU ALTERNATIVE OPTION

	5.1	Introduction
	5.2	The CEPU Alternative Option
	5.3	Why a CEPU Alternative Option?
	5.4	Ensuring Public Access to New Communications
	5.5	The Deficiencies of the NCC Options
	5.6	Australia Post Deregulation - In Who's Interest?

6.	RESPONSES TO THE KEY AREAS OF REFORM 

6.1	Introduction
6.2	The Reserved Service

6.2.1	Defining Australia Post's CSO
6.2.2	Costing  the CSO 
6.2.3	Funding the CSO
	6.2.4	Reduced Prices and/or Weight Restrictions

6.3	Regulatory Functions and Other Activities

	6.3.1	Separation of Regulatory Functions
	6.3.2	Separation of Monopoly Activities

	6.3.2 (a)	Structural Separation
	6.3.2 (b)	Accounting Separation
			6.3.2 (c)	Access Regulation

	6.3.3 	Price Regulation
	6.3.4	Competition In Non-Reserved Services

6.4	Employment, Contracting And Leasing

	6.4.1	Impact On Employment
	6.4.2	Contracting and Leasing	

6.5	Public Ownership
6.6	Further Consultation and Implementation Issues

ATTACHMENTS

1.	NCC OPTIONS PAPER - REFORM OPTIONS AND THE CEPU RESPONSE
2.	AUSTRALIAN POSTAL CORPORATION ACT (1989) 
        - COMMUNITY SERVICE OBLIGATIONS PROVISIONS

BIBLIOGRAPHY