I propose to share my time with Deputy Gallagher.
Private Members' Business. - Telecommunications Bill, 1993: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time".
Is that agreed? Agreed.
I am disappointed by the Bill which I see as an attack on the workers in Telecom Éireann. It shows a cavalier disregard for the interests of the staff. Over 13,000 people are employed in An Bord Telecom Éireann, a decline of over 30 per cent on the 1984 figure when over 18,300 people were employed. The annual turnover of Telecom Éireann is of the order of £814 million and its annual investment programme is £160 million. The net assets of the company are £1,500 million and on the balance sheet the company has debts amounting to £1,000 million. I make these points to show that the manner in which Fine Gael are approaching the company is cavalier and shows an unplanned, rushed approach.
A planned, coherent approach is the obvious one. To suddenly, in a peremptory fashion, abolish the monopoly of Telecom Éireann makes one query the Fine Gael attitude to the 13,000 workers. What is Fine Gael saying to those workers? In the lead-up to the publication of this Bill was there any genuine consultation to ascertain the views and needs of the Telecom Éireann workers? It could be argued that the publication of this Bill could do a lot to unsettle and undermine morale in the company. I am disappointed at the lack of regard for employment in Telecom Éireann.
Over the years there has been a significant reduction in the staff of Telecom Éireann and further reductions are on the cards if we are to judge by recent announcements in the newspapers and so on. The Minister could have a second look at that area. In the US over the last ten to 20 years where a company has been in difficulty the tendency has been to respond by cutting down the labour force. Serious questions are being asked about that response and studies have been carried out on the efficacy of the "big lay-off" solution for big companies. I ask the Minister and the board of Telecom Éireann to perhaps consider changing trends in the States where big conglomerates and multinationals are reconsidering the policy. "Big lay-offs" tend to reduce the company's bank of talent and expertise which can lead to uncertainty and to a decline in the morale which affects overall performance. The employment content in Telecom Éireann is an important factor, with over 300,000 people on the dole queue, we do not want to add unnecessarily to it. If this Bill was passed it would add to the dole queue, there would be an immediate impact on employment in Telecom Éireann because competition would make inroads into its control of the market and certain services it offers. That would have a negative detrimental impact on the numbers at work and on the future of the company.
It is very sad that it seems to be a national pastime to undermine State institutions and companies. There has been little acknowledgment from the Opposition of the tremendous progress in the telecommunications sector here in the last decade. There has been a quiet revolution. The service now on offer is far superior to that offered ten or 15 years ago, there is no comparison. An incredible amount of State resources has been invested in our modern telecommunications system which ranks among the best in Europe because the policy adopted by the Taoiseach when he was Minister in charge of that area gave priority to the need to develop our telecommunications system for strategic economic reasons. We have had very successful development since and an ongoing capital investment programme. Telephone usage has increased dramatically over the last decade. That should be acknowledged as should the contribution of the staff of Telecom Éireann. This Bill does not acknowledge the progress made. Many speakers attacked the company and endeavoured to undermine it. That is sad and unacceptable because it made tremendous progress in recent years.
There is no room for further improvement and the Minister made that point in his speech last night. We cannot peremptorily throw Telecom Éireann to the wolves. The Minister outlined measures which the company was undertaking to prepare it for competition which will come in tandem with European directives and policy. There is no immediate pressure from Europe to privatise the company. It is sensible to have a policy to strengthen the company and improve its capacity so that in ten years' time it will be in a position to complete meaningfully with outside interests. The Minister put forward a valid point and I cannot understand why the Opposition parties cannot accept it.
If we privatised Telecom Éireann it would have a disastrous impact on the company and on employment there. The telecommunications area has strategic importance for any country and, because of that, there will always have to be some degree of political control over telecommunications policy. We should not lightly throw away the investment we have made in the company. The significant debt that hangs over Telecom Éireann is something that will have to be addressed before we can talk about privatisation.
The Minister, in a difficult situation, endorsed the decision of the board arising from the Culliton report to rebalance telephone prices. Culliton stated that the very high cost of international telephone calls was a retarding feature of our economic performance, giving rise to an impediment to unemployment in the industrial field and hampering our export drive. What happened when the Minister attempted to deal decisively with that? The Opposition cried "foul" and opposed him tooth and nail despite the fact that they want Telecom Éireann to go into open competition. That rebalancing was part of a set of measures the Minister had to introduce to strengthen the position of Telecom Éireann. The policy of reducing the price of international telephone calls was to strengthen Telecom Éireann in the event of international competition in the years ahead. When that measure was introduced the Opposition made no attempt to amend it but opposed it outright just for the sake of opposition in an effort to gain party political advantage. The objective needs of Telecom Éireann were far down on the priority list of Fine Gael and other parties. I accuse Fine Gael on that score alone of being hypocritical in introducing a Bill to abolish the monopoly given its stance on reducing international telephone calls.
The decision to rebalance the charges was not an easy one. I am glad that in the Minister, Deputy Cowen, we have a man who is prepared to make the right decision and take the flak, if necessary. If we are to make progress in this country we need to display political courage. I respectfully suggest that this has been in evidence since 1987 and it has been of help in turning the economy around.
Very often legislation is presented without first consulting with the people who would be affected in the companies concerned. I have discussed this issue with workers in Telecom Éireann and they are genuinely concerned about their jobs. I put it to the Opposition that before it introduces a Bill such as this it should enter into consultations with the people who would suffer in order to ascertain their views and ideas on how the company concerned should be developed.
It has been mentioned time and again in this House that there is a need for worker participation, but there is little evidence of this in the context of this Bill. The views of the workers have not been taken into account by the Fine Gael Party. When this Bill is rejected by the House I urge that party to seek their views.
In conclusion I reiterate that rather than enhancing the position of Telecom Éireann, the Opposition has undermined it. We should do everything possible to strengthen its position so that in years to come it will be able to compete internationally.
(Laoighis-Offaly): At the outset I thank Deputy Martin for sharing his time with me and giving me the opportunity to make a contribution to this debate.
This debate about Telecom Éireann and the telecommunications industry in general is timely in the sense that this time last year, when we were tramping the footpaths during the general election campaign, in my area the question of privatisation was to the forefront of the minds of workers in Telecom Éireann. While that threat has now receded, serious issues in the telecommunications industry have to be addressed if we are to protect employment and develop an industry of a standard high enough to allow our business compete strongly on international markets. In that respect this debate is timely.
However, this Bill is badly thought out and lacks a strategy for the development of telecommunications services. Given its timing, one could argue that the Opposition is being opportunistic and trying to kill a number of birds with one stone. However, it has failed to hit any of them. I am convinced that this Bill would lead to job losses. As we are aware, in recent years the number employed in Telecom Éireann has decreased from 18,000 to 13,000 and the company hopes to gradually reduce this number by a further 2,000 in coming years.
This Bill would only make matters worse and lead to chaos, given the mystical belief in the free market. This is strongly held in one party and more tentatively in another, depending on the audience it is trying to reach. In addition there would be no guarantee that prices would be reduced; indeed, there would be danger that prices to the consumer would be increased. In effect, we would have another quango which would not be held accountable to this House; and social and national developmental objectives would not form part of our telecommunications policy.
The European Community has decided that competition for telephone companies in their home markets will be permitted in the 12 member states from 1 January 1998. There is a possibility of a derogation for a further five years, but 1 January 1998 is the operative date. A minority of member states has already introduced a element of competition. It should be understood that in the Single Market co-operation among telephone companies will be promoted to exploit the advantages associated with the right of access which they were previously denied when operating within the boundaries of their national states.
The Bill before the House contains one good idea and at least one bad idea. The one good idea is that the monopoly of Telecom Éireann in voice telephone services should be counterbalanced by the statutory regulation of prices charged by Telecom. However, the appointment of a director of telecommunications as proposed in the Bill is not the way to proceed. In effect it is being proposed that we should appoint another Minister.
The functions of the director are laid down in section 4 of the Bill. These are to promote the interests of consumers, purchasers and users; to maintain and promote effective competition; to promote efficiency and economy; to promote research into new techniques; to encourage major international users to establish in Ireland; to enable Irish service providers to compete outside Ireland; and to enable manufactures of telecommunications apparatus to compete both inside and outside Ireland. At present the Minister is entrusted with these tasks and we can put questions to him in this House. We may not be happy with the replies, but at least there is accountability. That would not be the case if this Bill is implemented.
In recent years the establishment of independent officers and agencies, which were established for good reasons, has led to a position where Ministers can no longer be held accountable to this House. Often questions, motions and other parliamentary representations are reflected on the grounds that the Minister no longer has responsibility for a particular agency or office. If a director of telecommunications as proposed in the Bill is appointed, that is what would happen in the area of telecommunications also.
In particular the proposal that the new director be given unspecified powers to set a schedule of charges for telecommunication services could be very dangerous in the sense that no parameters or objectives for pricing policy are set out in the Bill. The director would be given the power to set charges, but it is not indicated what factors would have to be taken into account in setting those charges. Under current policy, factors such as cost, fairness and the objectives of national development have to be taken into account. The proposals contained in the Bill could lead to a situation where factors such as these and the needs of the less well off in society, including pensioners and the disabled, are not taken into account. At present these groups are given a telephone rental allowance and a limited number of call units free of charge. It is mentioned in the Bill that a number of advisory group would be set up. It is proposed to set up a general advisory group and an advisory group for small business, the disabled and the voluntary sector. However, these would have little power. It is not specified in the Bill how the director would take those needs into account in deciding pricing policy. It seems that we would be able to avail of more advice but have little action.
As I said, the Bill contains one good idea and one bad idea. The bad idea is that Telecom Éireann's privileged position should be abolished now rather than wait until 1998, when we would have to do so under EC regulations. If we recall the purchase of Cablelink by Telecom Éireann from RTE and the speculation at the time that US interests wanted to acquire that company to provide a telephone service in competition with Telecom Éireann, then surely Deputy Noonan must be under a delusion that competition in this industry is simply an automatic gain without any losses. The reason Telecom Éireann purchased Cablelink was to protect the investment of £1 billion provided through the people for a comprehensive and national telephone service. The logic of this Bill is that we should have sold Cablelink and allowed a competitor to supply telephone service to those outlets which the Cablelink service covered. Telecom Éireann, as the poor relation, would still have to carry the cost of subsidising telephone lines in sparsely populated areas while new operators would be allowed to concentrate on providing a service to the profitable parts of the markets, particularly international calls. As seen in examples in many countries, privatisation allows so-called competitors to cream off the lucrative section of the market, leaving the dregs to the public sector which is then unable to earn the revenue needed to sustain these costly services.
Section 87 of the 1983 legislation which established Telecom Éireann recognised this need and that a truly national service involves subsidisation of some lossmaking services by profitmaking services. International competition from AT&T has already forced the recent reduction in call charges. We can expect the business growth in telecommunications to be mainly in new services rather than in the expansion of existing services. Because Telecom Éireann owns a majority stake in Cablelink, it will retain an effective monopoly on internal calls even after 1998, as the cost of providing an alternative national network, even via satellite, would be prohibitive. Of course, under existing legislation, the Government can already service operators who would be in direct competition with Telecom Éireann, and it has already done so in cases other than voice telephony. The proposal to abolish Telecom Éireann's privilege will simply lead to a demand by competitors to be allowed to provide a similar service to that provided by the British company, Mercury, in competition in the United Kingdom with British Telecom.
In the context of what is proposed in the Fine Gael Bill it would be useful to look at what happened in the UK market — in practice theoretical competition does not yield lower prices. The profit per telephone line of British Telecom is the highest in the 12 member states of the EC. A three minute local call through British Telecom costs 22.5p and 21p through Mercury compared to the 9.5p rate here. There is no evidence that the consumer is better off because of the arrival of Mercury on the scene. This is because the size of the market would not justify the initial investment. I suggest that the Government's approach of allowing Telecom Éireann to use the five year breathing space to increase its competitiveness and to continue to subsidise services valued by the community through cross-subsidisation is the best option not alone for Telecom Éireann but for the country as a whole.
At this stage, despite having a number of "apostles of faith" here in the House, privatisation is no longer the great white hope it was ten or 15 years ago. In reality it is a diversion from the issue which a small country like Ireland needs to face up to and address, particularly in regard to transport and communications. If we want comprehensive links with the outside world, we cannot rely solely on the market to provide them.
The best option for Telecom Éireann is to learn from the disaster that befell Aer Lingus because correct action was not taken in time. Privatisation for that company would be no answer. In the case of Telecom Éireann, business alliances to secure a foothold in the growth areas which are constantly being opened up in new technology are essential. In return, the business partners would gain access to the Irish market. What the privatisation lobby have not demonstrated is what impediment the State's shareholding has placed on the development of Telecom Éireann, including its contracts with Alcatel in France, and, indeed, with British Telecom in the United Kingdom. There is also the vital issue of the capital investment required to update Telecom Éireann's services. In the context of securing business partners which would open new markets for Telecom Éireann, the issue of a minority shareholding being swapped with a suitable partner could be looked at. I raise the issue as the outright privatisation of Telecom Éireann will not take place as long as the Labour Party is in Government. That does not mean that we will hold back the development of the telecommunications sector which is vital for investment and the retention of existing employment.
I regret that Deputy Noonan's Bill does not address the key strategic issues which Telecom Éireann will face. The introduction of a competitor to Telecom Éireann at this stage would seriously weaken its attractiveness as a partner to any suitable company currently operating in the EC because it would have precisely the same effect that the competition on the Dublin-London route had on Aer Lingus and Ryanair. Any competitor in the telecommunications area would concentrate on the profitable areas, Dublin, Cork, Galway and Limerick. There would be no question of a second system of cabling being introduced. What section 3 of this Bill really implies is the compulsory divesting of Cablelink by Telecom Éireann probably to a company hostile to Telecom Éireann. This would amount to a massive own goal and no Irish Government who understands that competition is never free could countenance it.
There are some areas of policy over which the Government should retain control. For example, the new bilateral agreement which will retain transatlantic services for Shannon in a new form would not be implemented if an open skies policy operated. Similarly, an open communications policy is unwise until we see how the Single Market in the European Community works in practice as opposed to theory. If the best that Fine Gael and the Progressive Democrats can offer is the so-called magic formula of free competition and privatisation, then there is not much hope that Ireland's development will proceed with the objective of jobs and investment in Ireland given the priority it deserves. For those reasons I cannot support this Bill, and I urge the House to reject it.
I wish to share my time with Deputy Gilmore.
Is that agreed? Agreed.
This House should welcome the debate on the issues thrown open by this Bill introduced by Deputy Michael Noonan, the Fine Gael spokes-person on Transport, Energy and Communications. The aim of the Bill is to introduce an issue for debate into this House which, as the Minister recognises, is high on the agenda at European level. This is an industry sector experiencing dramatic change in all the member states — a fact not recognised by the speakers I have listened to here this evening — an industry in a business sector likely to face increasing competition in the future, needing a new regulatory framework which would clearly lead to legislation in this country to ensure that it is managed properly.
The Minister was dismissive of the Bill, he described it as opportunistic, as did the previous speaker. On the contrary, it is opportune. Now is an appropriate time to discuss the future structure of the telecommunications industry because of the dramatic changes expected and happening at a rapid pace at European level at present. It is opportune because, by the end of the decade, telecommunications is likely to be Europe's largest equity sector ahead of banking. As a recent article in the Financial Times pointed out, in the next three years alone telecommunications companies with combined capitalisation of £44 billion are expected to come to the market. It is clear, of course, that the balance of pressure varies between countries and the European Community is now resolved to liberalise the national markets for telecommunications traffic from January 1998. It is obvious the pressures will increase.
The Minister is wrong in saying that the Bill cannot be considered as a serious contribution to the development policy in the communications sector. It is clear that this issue needs to be discussed in this House at this time when the industry is facing such international challenges and the public are demanding choice and flexibility in service. Clearly, they want a telecommunications service at a price they can afford.
Far from Fine Gael being the only party to raise this issue, it has been quite remarkable how strong, heated and real the debate has been for the public. Now people believe they cannot afford the service and are avoiding using it because of concerns about its cost. People are having to censor their behaviour in relation to the telephone. This applies particularly to vulnerable groups. I do not believe that the implications of this Bill are as has been suggested — that those vulnerable groups would no longer get special treatment or be dealt with in an appropriate way. Telephone calls would probably be cheaper for them. Surely we do not want to create a culture in Ireland where using the telephone has become so problematic for people that they must monitor and avoid its use. Surely we can do better than scare people off from using a service which they pay for.
I will remind the House of the international position. A portion of all the telecommunication operators in Denmark, Spain, Italy and Portugal are listed companies. Only one-third of the shares in the Spanish company are owned by the State and nearly one-half of the shares of the Italian telecommunications holding company are in private hands. A Bill to privatise the Dutch postal and telecommunications service is currently before the Dutch Parliament. The coalition Government in Turkey has agreed to privatise 40.9 per cent of the country's postal and telecommunications operations. I agree with the Minister when he says that any moves in this direction must be undertaken in a way which ensures we control the change rather than letting it control us. Deputy Martin talked about not appreciating the work of Telecom Éireann, its staff and how that would pose a threat to employment in the telecommunications sector. Far from threatening employment, the fact that we do not face up to some of the issues this Bill poses a threat to employment in this sector. This House is faced with a challenge to address those issues before it is too late. We have seen the dangers of delayed action in other areas.
We need to consider the issues raised by the Bill. The Minister acknowledges that allowing increasing competition is an important route to greater economic efficiency and this must also be good news for customers. If there is greater efficiency within the sector then surely customers will also be beneficiaries. I welcome the setting up of a neutral referee with adequate regulatory powers, and by acknowledging this the Minister is acknowledging also the need for some of the provisions in this Bill. The Minister could have been somewhat more generous in acknowledging the important issues on the international agenda which the Bill raises.
I want to consider an area which is separate from the issues addressed by the Bill but which does not in any way rule out that the sector could be dealt with in a special way, as recommended by the advisory groups associated with this area. I have had detailed correspondence with the Minister in relation to the various organisations and help lines which have applied to him for help in relation to the increased charges. Many voluntary organisations and help lines expressed their concerns to the Minister about telephone price restructuring and its effects on their organisations. Mr. Fox, head of the telephone service marketing department in Telecom acknowledged that the representations made to him went way beyond what the company could deal with in terms of deciding to make a special fund available to provide relief. He selected eight organisations and offered them a 1800 freefone number, and they are grateful for that, but he could not deal with the range of organisations who approached him seeking help.
Those organisations are very concerned about the rebalancing, which has not worked in their interest and has made life difficult for them. The Minister has received representations from the Carmichael Centre for Voluntary Groups, which deals with many organisations, and from Women's Aid and Parents Under Stress. He has received information from them to the effect that the average cry for help, the average call, could last for 45 minutes. This does not apply only to those who are working in the headquarters of those organisations; it applies throughout the country. How can people working in those organisations possibly tailor telephone calls so as to keep bills at the pre-September level? Those organisations are dealing with people in stress and in a crisis for whom the telephone has been a lifeline. They have been put under extraordinary pressure by the rebalancing exercise, which has increased their costs. Many of those organisations are performing the work of the State and it is important that we do not penalise them further for carrying out this work.
The same position applies to many people at home. It is a misrepresentation of Culliton to say that the increased telephone charges was one of its recommendations, although it addressed the issue of cheaper international calls. Many organisations have informed the Minister of their concern in respect of the increased charges. For example, Focus Point undertook a study and found that 40 per cent of all telephone calls made to its organisation during the day were in excess of three minutes. The increased charges raise many problems for those organisations.
The Bill is timely. It raises appropriate issues abouty the future development of telephone services in an increasingly competitive international environment. It is critical that the issues raised by it are faced up to by the Government. One Deputy mentioned that ten years should be enough time to enable Telecom Éireann to become more competitive, but I would be very concerned about a ten year time scale. It is a long time scale to allow for that process and such a time allocation would pose many problems for industry. There are serious questions about research into consumers' needs and attitudes, as illustrated by the difficulties experienced by the groups I mentioned. Recent decision making has not given central attention to the customer. In a changing world those businesses who do not place the customer at the centre will find themselves in serious trouble. This Bill attempts to place the customer at the centre and ensures that the customer gets a cheap, effective and efficient service and suggests a way forward to provide a cost efficient telecommunications service.
Why should the general public be penalised for using what should be a cheap form of communication? The needs of business and the general public have not been balanced appropriately. In telephone users terms the performance of Telecom Éireann has been incompetent. In human terms its performance has been insensitive and anti-customer. While the Minister may feel he must make a ritual defence of a State sponsored body that falls within his bailiwick, in this case he is defending the indefensible. I recommend this Bill to the House.
This Bill was first announced in the wake of the controversy which arose as a result of the rebalancing of Telecom Éireann's charges. At that time I published a Bill calling for the establishment of a Telecommunication Users Council. When this Bill first appeared it seemed to be in line with the critique the Fine Gael Party made of the rebalancing of charges. On studying it and listening to the case made for it, I regret to say it is not a Bill my party will support. The Bill is dressed up as consumer protection, but it seems to be designed to facilitate the carve up and ultimate privatisation of Telecom Éireann. The privatisation of Telecom Éireann is the real agenda in this Bill. It is refreshing to get the full blooded ideological manifestation of Fine Gael on issues like this because, notwithstanding one of the commissioners, it appears that party is fairly committed to the principle that as much as possible of the public sector, and certainly anything that is profitable, should be sold off.
Given the stench of greed and corruption that has surrounded previous privations, particulary the Greencore-Irish Sugar affair, a straightforward privatisation no longer appears to be something that can be argued for in polite company and does not appear to be a politically wise option. The proposal for privatisation is therefore dressed up as something else. As a former Fine Gael contracted handler said, it is a case of the iron fist in the velvet glove, and that is very much a feature of this Bill.
Telecom Éireann is very vulnerable at the moment. It is open to legitimate criticisms because of the botched rebalancing of telephone charges which has angered and alienated many customers. It is worth recalling that when the charges were first announced in May, Fine Gael appeared to make scapegoats of Telecom Éireann workers by suggesting that over-manning was the reason for the increased charges. Despite the controversy surrounding the new charges a broader view has to be taken of the record and the long-term prospects of Telecom Éireann. Great progress has been made and the contribution of the workforce in turning Telecom Éireann around should be acknowledged. An annual loss of about £80 million in 1984 has been turned around in recent years to annual profits of £80 million. The reduced profits last year were due almost exclusively to the interest repayments arising from the currency crisis. Waiting times for connections have been cut to a matter of weeks in most cases, and all of this has been achieved against the background of a reduction in the workforce of Telecom Éireann of about 5,000 people.
In making the case for privatisation it has been stated that it will produce leaner and more efficient companies and so on, but that is not what has happened in the United Kingdom. Privatisation in Britain certainly did not lead to an improvement in the level of service to the public and there is no reason to assume that the position would be any different here. Our limited experience has shown that those who benefit from privatisation are not the public but rather the stockbrokers, consultants, speculators and, in some cases, senior management of the companies being privatised who realise there is something in it for them and that the salaries they earn in public ownership may triple or quadruple. In addition they have access to share options and are on the inside track in terms of the sell-off and purchase of parts of their company.
The privatisation agenda for Telecom Éireann is not confined to Fine Gael. Earlier this year there were reports that a British company, Cable and Wireless, was attempting to acquire a 25 per cent stake in Telecom. According to The Sunday Tribune of 17 October Cable and Wireless is still stalking Telecom. The report in that issue of The Sunday Tribune makes interesting reading because it suggests that a deal is being done with Cable and Wireless in such a way as to make it palatable for the Labour Party to accept. It states that Cable and Wireless want to acquire part of Telecom Éireann and is prepared to offer the Government a share swop deal designed to make acceptable to the Labour Party what would amount to a privatisation bid.
My party has no objection to a joint venture between Telecom Éireann and Cable and Wireless, or any other such company. Such a joint venture may well be necessary in the context of the liberalisation of telecommunications in the EC. However, any such joint venture must not be in the form of a take-over. It must be designed to create additional jobs and wealth producing services rather than simply a take-over of existing jobs and services. Telecom Eireann has a high level of technical expertise and there is great potential for expansion abroad. The fact that British Telecom again turned to Telecom Éireann recently for assistance in carrying out repairs after flood damage is testament to its standing abroad.
If a new joint venture can be mounted between Telecom Éireann and Cable and Wireless, or any other company, that would be acceptable provided it is done in the way I have suggested. However, there should be no question of forcing Telecom Éireann to surrender to any multinational the services it has carefully built up on the domestic market. Neither should Telecom be forced into such an arrangement because of the starvation of funding by the State or indeed, as is happening, by the Government bleeding Telecom Eireann of its resources. Recently Telecom Éireann expressed its disappointment that the share of EC funds it had been expecting was far short of what it required. I understand it made a case for in the order of £200 million to £250 million but it received about £32 million, less than the amount it paid in dividends to the Government last year.
Telecom Éireann argued for these resources in order to maintain its competitive advantage and to maintain itself as one of the finest telecommunications companies in Europe. Independent consultants have recommended that an annual capital investment of £180 million per annum would be necessary in the course of the next years if the service is to maintain its present standards and that an additional £40 million would need to be invested to maintain Telecom's competitive advantage. Against that background there is clear evidence of penny-pinching at the level of investment through the national plan. The company is being bled by the Government in the form of dividends paid to the State. Telecom Éireann has to repay a crippling level of interest payments. In addition to the rebalancing of charges by Telecom Éireann the States added extra VAT charges to telephone bills. Telecom Éireann certainly needs the Government to get off its back and stop bleeding it financially which, in turn, leaves it vulnerable to the marketplace.
The case being made by Fine Gael, and the case being teed up in a much sweeter way by the Government for privatisation needs to be rebuffed. Statements were made recently about the productivity of Telecom Éireann's employees. A question was raised in the House and there were newspaper commentaries about the number of employees per telephone line. My understanding is that that is not the basis on which productivity should be assessed.
If one looks at the revenue generated by Telecom Éireann one will see that the revenue generated pre employee virtually doubled between 1987 and 1993. The revenue generated by Telecom is now as high as that of British Telecom, which is regarded as the most competitive telecommunications company in the world. People who use the argument that productivity can be assessed simply by dividing the number of employees by the number of telephone lines, without taking into account the other activities in which Telecom Éireann is engaged, including the contracting out of its services to other telecommunications companies and the revenue generated by that, are missing the entire point.
Telecom Éireann needs to display a greater degree of accountability and responsiveness to its customers than has been the case up to now. Much of the criticism Telecom Éireann has attracted has been very much of its own making. Issues such as the handling of customer complaints, including complaints about telephone bills, and the arrogance often displayed by Telecom need to be dealt with. One of the ways in which these issues could be dealt with — this is the way I proposed following the rebalancing of the charges — is through the establishment of a telephone users' council on a statutory basis. A telephone user's council was established on a statutory basis under the 1983 Act, but it was abolished by the Fianna Fáil Government in 1987. If that body was still in place we would not have had the mess we had with the rebalancing of charges. There was no statutory group to assess the charges from the consumer perspective before the Government agreed them. This was a great pity. The Government's subsequent announcement about the setting up of a telecommunications users' advisory group is no substitute for a proper users' council, particularly when it has not been given adequate funding — I think it was set up with a derisory budget of £3,000. This group may just as well not have been set up.
A telephone users' council needs to be established on a proper statutory basis so that the people who use the services of Telecom Éireann will have some method by which they can air their grievances. Deputy Gallagher made the point that when Members come in here and attempt to ask the Minister questions about certain aspects of Telecom Éireann's services they are told that the Minister is not responsible to the House for this, that it is a semi-State company, etc. There has to be some accountability. The consumer has to have some form of realistic redress and there has to be some mechanism to review the charges which have been rebalanced.
During Question Time yesterday there was a debate on the absurd situation the Government has got itself into, where the new charges have literally made people afraid of using the telephone and, on top of that, have resulted in Telecom Éireann losing £750,000 per week. There is a loss on both counts — the consumer is afraid to use the phone and Telecom Éireann is losing revenue. The Minister told us that the charges will balance out and that one cannot assess their impact after four weeks. That is probably true — usage of the phone will probably change over a period — but I should like to know what it means. I think it means that the £750,000 Telecom Éireann is losing every week will be taken out of the pockets of the consumer. One cannot have it both ways. If there is increased usage of the phone and domestic users revert to using the phone at peak times it means the money will be coming out of their pockets. The coded message given to the House yesterday by the Minister was: it has not happened yet, but telephone bills will increase.
The response now needed is not another call for the privatisation of Telecom Éireann, however it is dressed up. What the consumers need is a users' council on which they will be properly represented, which will deal properly with complaints, which will properly assess the rebalanced charges and which will make firm recommendations to the Government. This users' council should not be the kind of toothless tiger set up by the Government. It should have real power, a budget and resources and should be able to represent and protect the consumer. If we have such a users' council I believe it would ultimately be good for Telecom Éireann — it would make it more responsive and restore consumer confidence in it.
Notwithstanding the job it has done in extending services to the public, I believe there has been a very big diminution of public confidence in Telecom Éireann. There has certainly been a very big diminution of public confidence in the Minister and his ability or willingness to deal in a responsive way with the complaints made by the public over the past few months.
I welcome the opportunity to contribute to this important debate. In the course of a canvass I carried out 12 months ago in County Westmeath, I found that the major concern among many Telecom Éireann employees was that the company would be privatised. This Bill, which proposes to deal with competition and consumer protection, is the first step in an attempt to privatise Telecom Éireann.
The Telesis report on industrial policy and the Culliton report both called for the development of indigenous companies and their promotion as "national champions" which would give us stability and lead our industrial development. The main weakness identified in our industrial policy has been our over-reliance on foreign multinationals. Telecom Éireann is clearly the type of Irish company which fits the description of a "national champion". This company is owned by the Government in trust for the people of Ireland. It is clear that if a company like Telecom Éireann is privatised it will come under foreign ownership and control sooner or later. Telecom Éireann is one of Ireland's largest employers and is the second largest investor in the economy. Under public ownership this company has been transformed into one of the leading telecommunication companies in the world. This profitable company is undoubtedly of major strategic importance to the Irish economy. It is a major investor and purchaser of goods and services in the Irish economy.
I do not wish to confuse the House with a surfeit of numerical data, but it is worth putting some facts and figures in regard to Telecom Éireann on the record. The number of staff in the company decreased from 18,300 in 1984 to 13,000 in 1993, a reduction of almost one-third; the annual turnover of the company is £814 million; annual investment is £160 million, and increasing; and net assets amount to £1,500 million. Telecom Éireann contributes significantly to economic activity and Government Exchequer returns. Payroll taxes amount to £73 million; dividends, £26 million; corporate tax, £12 million and VAT, £81 million. Therefore, it is an important investor in the Irish economy.
Public ownership of Telecom Éireann is important from a social perspective because of its universal service obligation, which means that Telecom Eireann provides equal access to all citizens regardless of where they live.
It is surely naive to expect that other privately owned companies, motivated as they are by profit, would be willing to provide, for example, a sufficient level of public payphones in rural areas of Ireland or indeed in many of the housing estates throughout Ireland. Would these competitors be prepared, for instance, to ensure that a telephone line would be provided to a widow who lived alone in an isolated rural areas some 1,200 metres off the main road? Would not the impact be simply a further withdrawal from rural Ireland? That is what this provision is about at the end of the day.
These are the questions that must be addressed and no amount of pretension that the sole objective of this Bill is to promote competition, which will be for the benefit of the customer, will gloss over the social implications which would arise if this Bill was passed in its current form. Surely right wing parties who pursue and espouse their particular ideology, which was similarly enunciated during the Thatcher era in the United Kingdom, are quite aware that the declared purpose of the Bill is to introduce competition in Telecom Éireann. The scenario that would emerge would be for private companies to enter the market and focus their capital investment on the more profitable high density population areas of the country which are urban based.
This would represent a serious blow to the public policy aim of developing infrastructure in a manner consistent with national objectives, such as providing the means to locate data processing and other information technology industries in rural areas.
Let us consider the question of efficiency. We now have one of the most modern telecommunications services in Europe. Losses of £80 million have been transferred into profits of that amount in 1992 and staffing levels have been reduced by one third. Such changes were effected without an industrial dispute or disruption of any sort. The quality of the service is excellent. It is clear we have a very modern system, one of which we can all be proud. We now have very valuable assets backed up by a skilled and competent workforce who have adapted extremely well to the rapid technological advances of the past decade.
In the past few weeks British Telecom have had to rely upon that expertise by engaging Irish workers to carry out repairs in the United Kingdom. Let there be no doubt that these are the first shots in the privatisation issue of Telecom Éireann and we can expect this campaign to gain momentum in the future.
I want to set out clearly my view in this debate. My political belief is based on the fact that people should always be considered first in every decision that is made, and that consideration be given to the area of job security, pensions and conditions of employment. Those issues have not been properly addressed in the Bill. To be parochial, if one examines the position in Westmeath, Telecom Éireann employs 175 people in Mullingar and approximately 200 in Athlone. Is it not a fact that increased competition will undoubtedly lead to the privatisation of the company and will see many of the people involved consigned to the unemployment register? That has been the experience in the United Kingdom and the facts are there to prove it.
The reason for this is simple: profit is the sole motive and its pursuit requires cutting staff numbers to a minimum. Telecom Éireann is important not just for the service it provides and the profit it makes now but also because of the people it employs. It is an important source of employment as the figures in my county clearly demonstrate.
The Bill as it is drafted is an attack on Telecom Éireann. It is a clear manifestation of confused and woolly thinking and is nothing more than an attempt to ape the United Kingdom's Telecommunications Act of 1984.
I have no doubt that Telecom Éireann has been focused upon because it appears to be a popular exercise following the rebalancing of charges which has taken place recently. However, the preliminary results just published — they are only preliminary and things can change over a period — which chronicle the effects of this rebalancing, make interesting reading when compared with some of the figures that were bandied about here two or three months ago. Some people seemed to engage in what I call "fork speak"— they want Culliton and the other reports implemented, but as soon as the Government takes steps to effect some of those proposals, there is an outcry.
(Limerick East): An outrageous attack on Ruarí Quinn?
It is a clear attack upon the Deputy. A preliminary perusal of the Bill indicates that it contains a number of inherent contradictions. I would ask Deputy Noonan to take note of those. One has only to examine section 4, subsection (4) to realise the confused state of thinking which bedevils the proposal and indeed the proposers of the Bill.
While quite clearly advocating competition, it proposes that a schedule of charges be put in place which in my view, and I have been examining this from a different perspective, does not tally with the competitive environment which the Bill states it wishes to create. I now have no doubt that my initial perception that the Opposition parties are hellbent on privatisation has been proved to be well-founded.
We now have approximately ten years to prepare for the full liberalisation of voice telephony. We should give full-scale support and encouragement to Telecom Eireann in its quest to prepare itself for these changes and developments. I realise that the telecommunications industry will have to keep pace with such developments. For example, the growth in electronic data interchange, electronic mail, videotex and other services is expected to grow from 4 billion ECU in 1991 to over 11.9 billion ECU in 1996, or an annual growth rate of 27 per cent. The provision of these value added network services represents the main growth market for Telecom operators.
Telecom Éireann cannot be bypassed in the Irish market for some considerable time as the costs of a new competitor establishing an alternative network would be prohibitive. We have a derogation option after 1998 of a further five years. We should await the development of the Single Market in practice before deciding when competition should be allowed in the home market.
I suggest it is the duty of the Government and this House to ensure that Telecom Éireann is given the opportunity to position itself to face such competition.
Telecom Éireann has been through some rather dramatic changes in the past ten years, as has the whole technology industry. It is very important that at this crucial stage in its development an objective and positive attitude is adopted by all parties towards this company.
In his initial comments, Deputy Penrose referred to the growth potential for Telecom Éireann's business outside the country. Having travelled recently in eastern Europe, I agree that the investment programme, the upgrading and the development of Telecom is very much suited to many of the developing countries in the Eastern Bloc. The experience, the technical know-how and the success of Telecom in modernising its network here should be fully exploited.
Having listened to Deputy Gilmore, who rolled off the hundreds of millions of pounds of necessary funding required by Telecom Éireann by way of further capital investment, expressing disappointment at the figure allocated for that purpose in the National Development Plan, I have to say that, as is typical of Democratic Left, the free availability of vast amounts of funding is never reconciled with its source. For example, the Deputy was critical of the level of charges, some of the work practices and other aspects of the operations of Telecom Éireann and he sought further Government investment which would have to be aligned with additional charges, increased taxation or borrowings, allowing them very few options.
The automation and advancement aspects of technology have left Telecom Éireann, indeed the whole engineering, electronics and telecommunications industry, with very high manning levels. As one moves from semi-automatic to fully automatic, to fibre optics, to satellite, one ends up with a tremendous amount of automation and advancing technology with ever reducing requirements for staff. Telecom Éireann, when viewed per line or by any other criterion across the European Community, probably do have large numbers of staff. Having engaged in a massive investment programme the company now has many surplus staff which will mean they will either have to introduce redundancy packages continuously or, alternatively, develop external business. If there is to be any further interface with Government, I hope it will be in support of that aspect of Telecom Éireann's activities in the future.
Advancing technology, and the need to grasp it, is best highlighed by the job creation successes of the Japanese economy. In the European community we resisted advancing technology in many sectors. The Japanese grasped that opportunity, deployed their staff in building robots and other technological innovations which could assemble cars, improve design and so on. The United Kingdom car assembly industry resisted such advancement and lost out on the technological uplift which has been the order of the day elsewhere.
Telecom Éireann went from being semi-manual to automatic. In the course of my commercial activities I was involved in the design and installation of air conditioning in telephone exchanges. Fortunately, as they were about to equip those buildings the ACTEL system was perfected in France which meant that Telecom Éireann did not take the disastrous step of purchasing equipment that was going rapidly out of date but rather converted to the advanced French digital system. This put Telecom Éireann in the front line of technology in the telecommunications sector.
The board and senior management of Telecom Éireann, in attempting to address this rebalancing of their operations, probably got itself involved in much controversy, was the subject of varying views, of many wild exaggerations and many speculative figures about what the rebalancing exercise might mean. Now that the first set of figures in relation to that rebalancing exercise are available much of the hysteria appears not to have been well founded. Nonetheless there is quite a distance to travel. The £750,000 reduction in revenue to Telecom Éireann came about as a result of prudent use and/or maximising of the low-tariff period and lower revenue receipts from the commercial sector. The trends have been incorporated into the Telecom Éireann statement.
Telecom Éireann has a crucial role to play in marketing the attractiveness of this country. When industrialists, native or foreign, consider establishing a plant here, labour, transport, energy and telecommunications costs are the main overheads which will be taken into account in calculating the potential viability or otherwise of a project. Unless Telecom Éireann changed, acknowledging the statement in the Culliton report that its rates were extremely expensive by international standards, it would not remain uncompetitive. There has been reference to approximately 1,500 jobs being created arising from a more competitive telecommunications level of charges. For example, I do not think our Financial Services Centre would have been so successful had our telecommunications network not been so advanced, leading to linkages facilitating the overnight transfer of information and data.
As we head for the year 2000 the operations and networks of the telecommunications sector will become ever more sophisticated. The Fine Gael Bill is premature and there is some concern about the practicality of creating the climate sought by the Bill. The way forward for Telecom Éireann lies in the promotion of a number of joint ventures. From the point of view of the State, the distributions network, the main framework of the telecommunications sector positively should remain in public ownership and operate in that manner. However, there are many fringe activities in which Telecom Éireann is involved, which can be developed by way of joint venture on a commercial basis. Based on the non-availability of equity from Government in the future, probably that will constitute the way forward for Telecom Éireann. It would be my hope that they will not make the mistakes it would appear Aer Lingus made, of not being out in the international marketplace over the past decade, signing up and co-operating with other international organisations to ensure continuous growth and development. It would by my hope that Telecom Éireann would embark on that type of dynamic investment programme and job creation.
If one travels to the Czech Republic, to Poland, to Hungary or any former Eastern bloc country, one will observe that their electricity, telecommunications networks, their technical infrastructures are all defective and outdated, akin to Ireland in the 1950s. The investment programme, the dynamic solutions Telecom Eireann introduced to resolve the dreadful dilemma of public representatives — for example when I first entered public life the single biggest issue every Dáil Deputy encountered was the lobbying about telephones — are an example of its positive achievements. The delays in every constituency and the various difficulties encountered are all history mainly due to the major investment programme undertaken by Telecom Eireann. However, that was at a very severe price. I note reference to borrowings of £1 billion. In the course of that investment programme I recall there was not co-operation within Telecom Éireann at staff level. A great amount of work was contracted out which could have been carried out internally but, because of a reluctance to grasp advancing technology, there were various sweetheart financial deals done. This meant that Telecom Éireann ended up having a capital investment programme costing more than should have been the case. The company is now reaping the rewards of that £1 billion borrowing. It is a very substantial sum to service and a fine financial balancing act will have to be performed to ensure the company's ongoing prosperity, the protection of the maximum number of jobs and expansion and development. That may involve joint ventures. Telecom Éireann, with its technical expertise and other attributes, apart from equity, probably represents the best opportunity for growth in the telecommunications sector. It will not have vast surplus resources to invest abroad, other than its internal expertise. Therefore, as the Minister said last evening, the Fine Gael Bill gives us an opportunity to carry out a fairly comprehensive examination of Telecom Éireann and a discussion on the more immediate aspects arising from the rebalancing. Obviously, we will vote down the Bill.
(Limerick East): Why?
The Minister already made constructive criticisms concerning those aspects. Telecom Éireann will have to improve its efficiency and it should not have waited until now to recognise the disincentives and the unacceptable level of charges to the business sector, particularly to the international calling network. It was very expensive to do business abroad. I hope a major impediment to the cost of industry will be removed, particularly as telecommunications, fax and other communications weigh very heavily on the facilities Telecom Éireann provides. It has a vital role to play. I see Telecom Éireann's future in the State sector, possibly in a joint venture concept. There is no reason or need to privatise good, profitable State companies. It is much better for shareholders to receive a transfer annually rather than a profit take-out every eight or nine years from selling the shareholdings in State companies. It is possible that aspects of Telecom Éireann could be open to competition. The main frame of the telecommunications network, which is similar to the ESB, would be best left in public ownership. For valid reasons this side of the House proposes to reject the Bill. I hope that Telecom Éireann will continue to improve its efficiency and give a good international and domestic service.
Deputy Noonan, in moving his Bill last evening, used his considerable parliamentary skills to cloud what he really had in mind. If we look at this Bill carefully we could reduce it to sections 3 and 10. The whole concept of a director general of communications is nothing more than a smokescreen, to enable him to bring about a situation whereby Telecom Éireann would be privatised. Before we proceed down that road we should look at the matter very carefully. The Act we are seeking to amend by the Telecommunications Bill, 1993, is legislation in which Deputy Noonan played a major role in 1983. Is he now saying, ten years down the road, that it is defective?
Telecom Éireann has served the country well and our greatest asset is its workforce. It has achieved a level of efficiency unmatched in the technical sector, at enormous cost to people who get no benefit from the system, namely the taxpayer who does not have a telephone and who contributed to setting it up. They will never enjoy the benefits of the telecommunications network and will lose out on this deal. I have an article from The Irish Times of 29 September 1991 by the former leader of the Fine Gael Party, Dr. Garret FitzGerald, which states:
One argument in favour of public enterprise is that a purely commercial approach to the person of some services would inhibit the initiation, or the continued provision, of certain services that are generally of social benefit...
It is significant that a person of Dr. FitzGerald's stature should make this statement. The Fine Gael Party is trying to scuttle that point of view in no uncertain terms. Deputy Noonan quoted from an article in The Financial Times by Andrew Adonis and Andrew Hill which was similar to the Devil quoting scripture. I will also quote from the article:
Although the goal of open competition is all but agreed, the path ahead is littered with obstacles. As Mr. Carpentier says: "I don't know a member state or an operator which has said we shouldn't liberalise. The question is when and how."
In this country we should ask ourselves why.
(Limerick East): Why does the Deputy not read out what the Minister said? That would be very interesting.
I have only four minutes. Deputy Noonan and his party are attempting to dismantle a successful State enterprise. It cannot be said often enough that Telecom Éireann did not come about as a result of any ideological decision by any party in this House since the foundation of the State. It was for purely pragmatic reasons. There was a reluctance on the part of private investors to put their money and their capital at risk for the setting up of a telephone network. The one thing on which I would fault Telecom Éireann is that it claims full credit for the development of the telephone system since 1973. I am proud that a Coalition Government, in which Labour was a partner, was the first to recognise the need for investment in the telephone system. Indeed the first Minister to make such capital available for its development was Cornor Cruise O'Brien. It was fairly late in the day when Telecom Éireann came on the scene but it did its job efficiently. What will follow the privatisation or the liberalisation——
I ask the Deputy to bring his contribution to a conclusion.
If this Bill is accepted many thousands of people will lose their jobs. Already the predators are waiting to step in and the House cannot allow that. We are trying to create jobs. Telecom Éireann is providing well paid highly skilled jobs with security of tenure. Why squander that when we badly need those jobs?
I am amazed at the manner in which the Labour Party is debating this Bill. One of the reasons is that they can find nothing wrong in the Bill so they have to invent a reason for attacking it.
Sections 3 and 10 should be scrapped.
Ciúnas, please, let us not have a shouting match.
The Fine Gael position is quite clear. The truth is grave and shall prevail. The Deputy had his chance and made a mess of it.
The Deputy wants, to privatise.
Deputy O'Sullivan must desist from interrupting.
The one thing worse than a public monopoly is a private monopoly. I can clearly see why Deputy Toddy O'Sullivan now feels he has to go back into his bunker because he refused to address the real issue here. He invented an enemy within the Bill and attacked the alleged concept of privatisation. This Bill is about competition and it is important that all Members of this House and particularly the Governments——
Sections 3 and 10 say it all.
Deputy O'Sullivan must allow the Deputy in possession to speak without interruption.
——have a fair and honest approach in relation to the semi-State sector. For political reasons, companies in the semi-State sector have been virtually allowed to go to the wall. For example, Aer Lingus was practically brought to its knees because the Government, during the past couple of years, was not prepared to back it and to confront the problems facing it. When it was virtually in liquidation something was done. We in the Fine Gael party set up Telecom Éireann and we have no intention of seeing it brought to its knees.
The Deputy is on the sideline.
Competition is good for the country, for the consumer and, above all, for Telecom Éireann.
Thatcherism.
If the attitude of the Labour Party and the Government is to try to pretend that by excluding competition for the limited number of years for which it can be excluded, Telecom Éireann will prosper, it will make the same mistake it made with Aer Lingus.
Aer Lingus is surviving.
I invite Deputy O'Sullivan to listen to my main contribution next week when I will pin back his ears.
Debate adjourned.