Dáil Éireann debate -
Thursday, 26 Sep 1996

Vol. 469 No. 2

Telecommunications (Miscellaneous Provisions) Bill, 1996: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. R. Burke

In a few months the people will be asked to make a judgement on the performance of the parties in Government as we face into a general election. I have no doubt, for a number of reasons which I will outline, that the parties in Government will be rejected on such issues as crime. On a nightly basis we have the spectacle of hundreds of residents marching to force suspected drug pushers out of their homes and their areas while the Garda stand by and do traffic duty and the Minister for Justice does nothing. The position so far as law and order and the drugs problem are concerned, where contract killings are a weekly occurrence, shows a lack of Government action on the crime issues and it will be judged accordingly.

At a time when the economy is booming, despite the efforts of this Government, unemployment continues to rise. This Government and the Ministers are more intent on PR exercises and announcing new jobs than trying to maintain existing jobs as we saw with Semperit and in South Tipperary last week where 1,000 jobs were lost. We see the failure of this Government in relation to Northern Ireland where there was an opportunity to build on the peace process and ensure that talks started at the end of last year. We see its failure in relation to the BSE crisis, the plight of the farmers and the contempt with which their plight is being treated by the Minister for Agriculture, Food and Forestry, Deputy Yates, who apologised here last night to the rest of the world for Ireland producing beef. The Leader of the Labour Party, the Tánaiste and Minister for Foreign Affairs, also treats them with contempt. Yesterday I tabled the following question:

To ask the Tánaiste and Minister for Foreign Affairs the specific action, if any, he has taken to help alleviate the problems being faced by the farmers in this country due to the BSE crisis.

In this era of openness, transparency and accountability he did what he always does — he transferred it to the Minister for Agriculture, Food and Forestry.

The Government will also be judged on the national debt. Despite a booming economy our national debt is £1.5 billion higher with 11 per cent growth in public expenditure. We also have residential property tax and water charges. For all these reasons the Government will be rejected. Instead of the crime problem, the farming crisis and the Northern situation being handled properly, these office holders — they are not really a Government — hold on and sit there but do not make any decisions. If for no reason other than the sale of 20 per cent of Telecom by means of this legislation, the damage being done to the telecommunications industry and the jobs potential of the industry, it should be kicked out of office as I believe it will when the taxpayer realises the full extent of what is going on.

We are being asked to agree to sell 20 per cent of Telecom Éireann for £183 million, a derisory sum. We are also being asked to allow the Minister to sell up to 49 per cent of the shares in this company without requiring him to come back to the House. What is this all about? Telecom Éireann needs a strategic, global alliance to ensure that it has the best technology available to it and access to world markets in the years ahead but we are getting a consortium of moderate sized Dutch and Swedish regional players in a global market and nothing else. They bring to the table none of the technological advances we require, yet they are being given a share in Telecom Éireann for a knockdown price by this three headed Government.

I wish to refer to the profits and turnover of Telecom and relate them to the price at which the Government is giving this company away. In 1994 Telecom had a turnover of £871 million with a profit of £80 million. In 1985 that turnover had been increased to £979 million while in 1996 it had increased to £1,094 million with a profit of £200 million. At the same time the company reduced its debt from £1,027 million to £718 million. Yet the Government is prepared to give away a 20 per cent stake in this company, which is worth at least £2 billion, for a derisory £183 million, with no technological advances and no improvements. On top of that, it is doing so at the expense of the worker directors in the company by reducing their representation by half.

This is being done by a Government which comprises not only Fine Gael — a party that never had a feel for the semi-State sector — but our socialist brethren of various hues. During the last general election the Tánaiste, Deputy Spring, referred to the plight of the semi-State sector and shed copious tears at Dublin Airport while outlining what he and his party would do to save the semi-State sector. What does this proposal amount to? It is national sabotage of a company of which we should all, rightly, be proud. It is a profitable company at the cutting edge of technology not only in the telecommunications area but in Cablelink and the mobile telephone system. The Tánaiste, Deputy Spring, and his Labour Party colleagues have agreed to halve the number of worker directors in Telecom and to give away 20 per cent of a £2 billion company for £183 million. The figure should be at least £500 million. They are the wrong partners at the wrong time and this proposal does not meet a national need.

As for Democratic Left, I am glad we are graced by the presence of the Minister of State, Deputy Rabbitte. When I sat in the seat in which Deputy Rabbitte is now sitting, every day I listened to him pour scorn on anyone who even thought of touching a semi-State company. If I had the time to look through the Official Report I am sure I would find numerous quotations by him on the rights of worker directors, the need for them and how any Government which even suggested touching a semi-State company should resign on the spot. However, both he and his party leader have become comfortable and are part of the Establishment. They no longer care about the issues of concern to the people who voted for them, they only care about staying in office. They are not concerned about what the people want or what is good for the country, all they are concerned about is what will keep them in their soft seats. If the Labour Party had one inch of backbone between all its members it would demand the withdrawal of this Bill. Instead, Labour Deputies will vote in favour of this Bill. They are being driven by their Democratic Left colleagues in Government who have sold out on whatever principles they had in whatever guise.

As regards the companies which we are told will be the saviours of the telecommunications industry, the 9 July edition of the Financial Times stated that Telia was awaiting EU deregulation and that Swedish Telecom groups were looking abroad as competition mounted at home. It went on to state that Telia had long been touted as a candidate for privatisation and that management saw flotation as the best answer to its capital needs, a view unanimously shared by industry observers. It also stated that Telia had demanded a cash injection from the Government of up to 10 billion kroner which is equivalent to $1.49 billion over the next five or six years as it could no longer fund internally its entire capital requirements of around 12 billion kroner a year. On the question of its loss of business, the report went on to state that it sought to compensate by doubling prices for local calls since 1993 but this has been more than offset by a 50 per cent fall in tariffs for long distance calls. This is the company which is supposed to be the saviour of Telecom and our future.

The fire sale of Telecom by this three headed Government shows very little confidence in Irish workers, funding and ability. Why is the company being sold in this way when pension funds of £15 billion are available? Some £6 billion of this is invested abroad and £240 million is invested in British Telecom and other communications companies. Even if Telia is floated on the stock exchange Irish pension funds cannot buy into it here, rather they will have to wait until it is floated on the Swedish stock exchange and buy into Telecom Éireann indirectly through that stock exchange. The Labour and Democratic Left parties should be ashamed of themselves for suggesting this option.

In its reports Forfás deals with the hopes of the telecommunications industry and states that effective use of advance communications could provide 40,000 jobs by the year 2010. Many thousands of jobs are already directly linked to telecommunications, for example, those in the financial services area and many other areas within the economy, and these would not be there only for the work of Telecom. Yet this company is being given away by the Government.

I received a letter from a worker director of a semi-State company who stated that recognition of the role of the worker shareholder in Irish State industry through representation on the boards of State enterprises had made a unique contribution to the necessary changes achieved in recent years. The letter continues that, in the light of such positive achievements, it is disturbing that a new Bill is being hastily rushed through the Dáil which will effectively deny worker shareholders in Telecom Éireann 50 per cent of their representation on the board of the company. In terms of the role of worker directors, if nothing else, this should be enough for the Labour Party and Democratic Left to pull out of Government. The Minister of State, Deputy Rabbitte, laughs about the role of worker directors being reduced. It is sad to see such principles being washed down the drain.

Mr. Rabbitte

I would like to hear the Deputy's contribution, not a letter.

Mr. R. Burke

The Government is giving aware 20 per cent of Telecom Éireann for £183 million. It is sacrificing and sabotaging the efforts to improve the job potential of the telecommunications industry by linking with a company which is in the state I mentioned earlier. From a technology point of view the economy has nothing to gain from the group.

If part of the company is to be sold, Irish pensions funds, which hold Irish workers' money, should be allowed to invest in it. If there is to be a strategic alliance, it should be with a major global company — I do not mean Cable and Wireless — and not a regional player. The idea of the reduction in the role of worker directors in the company, a matter which appears to amuse the Minister of State, Deputy Rabbitte, is a disgrace.

In the national interest the Bill should be withdrawn immediately. However, irrespective of whether it is withdrawn, the damage to what is left of the reputations of the Labour Party and Democratic Left has been done. I urge somebody in the Labour Party or Democratic Left to pluck up enough courage to stand by the principles which they claim from every soapbox during elections to hold near and dear.

Mr. S. Ryan

If the Bill was not so important, I would suggest Deputy Burke's contribution was a comedy act. He outlined what Fianna Fáil would or would not do, but workers are aware of what that party has done for them when in Government. The Labour Party and its Leader, the Tánaiste and Minister for Foreign Affairs, Deputy Spring, met its commitment to the workers in Aer Lingus.

Mr. R. Burke

They will make a judgment on that in north County Dublin during the next election.

Mr. S. Ryan

It is easy for Deputy Burke. He is running away.

Mr. R. Burke

I have no need to rush away but I must prepare for an Adjournment Matter on Balbriggan.

Mr. S. Ryan

The Deputy is running away.

Acting Chairman (Mr. McGrath)

Deputy Ryan without interruption, please.

Mr. S. Ryan

That is typical of Deputy Burke. Prior to the election, not one penny was available for Aer Lingus, but the Labour Party in Government secured £175 million for the company. Changes have been made in Aer Lingus and TEAM Aer Lingus, but without the Labour Party in Government, the company might not exist today. Perhaps some of Deputy Burke's colleagues would prefer it in a different form entirely.

I am pleased to contribute to the debate and in particular to have the opportunity to refute the allegations made by Deputy Brennan about my party earlier. His hypocrisy, and that of his party, regarding the semi-State sector beggars belief. In power, some in Fianna Fáil, if not all, planned the destruction of the semi-State sector. However, in Opposition, they all pretend to be its friend. Whether it involves Aer Lingus, Telecom Éireann or other State companies, it is not to Fianna Fáil that workers turn when problems arise.

The Labour Party does not believe in sterile debates about public versus private ownership for their own sake. However, the best way a major utility can be made responsible to its customers rather than its shareholders is through State control. An example is the privatisation of water supplies in Britain. Those private companies are, in effect, private monopolies, answerable solely to their shareholders. The proponents of privatisation continuously make their arguments by referring to the benefits to customers. In Britain, where privatisation has been Government policy for almost 20 years, customers have arguably suffered as much as they have gained. If the proponents of privatisation were open to rational argument, this experience might lead them to believe that a company's performance depends on broader issues than its ownership, public or private.

Given the comments of Deputies Burke and Brennan, I wish to repeat the statement made by Mr. David Begg, the general secretary of the Communication Workers' Union on 12 June 1996. He said:

We positively advocated the formation of a strategic alliance on terms which would allow the company to retain its position as the major telecommunications company in Ireland and a player on the international market. Our decision to become a proactive agent of change was motivated by a desire to influence that change in a manner which could afford the maximum protection to our members, the staff and the company.

It is worth recalling those comments.

The Bill maintains State control of Telecom Éireann. This is not an issue because for some time the Labour Party and the broader labour movement has supported the concept of a strategic alliance between Telecom Éireann and another company. The clear purpose of an alliance is to maximise the potential growth of Telecom Éireann by opening it up to co-operation with a major player in the global telecommunications market. As the Minister pointed out earlier, the world of telecommunications is perhaps the most rapidly changing industry of all.

In the last decade, Telecom Éireann has invested approximately £2 billion in our telecommunications infrastructure. This investment has provided a modern and advanced telecommunications system comparable to any in Europe. As a result, our competitiveness in areas such as telemarketing has increased considerably as has the number of jobs in that sector, which is an important aspect. This development has been aided by recent price reductions of up to 60 per cent in the cost of Telecom Éireann's international services. Undoubtedly, Deputies Brennan and O'Malley will say these reductions were prompted by competition within that section of the voice telephone market. This is the case, but the competition was only made possible by the investment undertaken by Telecom Éireann over the last decade. It is not unreasonable that the company should receive a return on it. Furthermore, the company's financial assets for the year ended 30 March 1995 show that turnover increased by 12 per cent. Investment in network development, provided entirely from internal resources, totalled £172 million, some 76 per cent of customers, the highest number in Europe, are now connected to digital exchanges and operating costs have been reduced. The workers in the company have made a major contribution to the changes that have taken place.

Despite Telecom Éireann's improved performance there is no time to rest on our laurels. Investment in telecommunications must be ongoing. I have no doubt about Telecom Éireann's ability to compete or maintain market share in some sectors. The Left does not fear competition. The Labour Party has always advocated competition, but it must be on a level playing pitch. In a global sense Telecom Éireann remains a small company.

The proposed strategic alliance will guarantee the company access to the most efficient technology and practices in the industry. To cement that alliance, the Government decided that KPN/Telia should take a 35 per cent share in the company. I have no difficulty with this, although it is incidental to the main function of the strategic alliance. I welcome in particular the decision to grant employees share ownership. Securing an equity and becoming strategic partners — even in a small way — is the best means by which staff can protect their future. The Minister stated that the Government was willing to set aside up to 5 per cent of share capital for the employee shareholding scheme, but the unions are seeking in excess of 10 per cent. The Minister should ensure that negotiations on this issue are satisfactorily resolved as soon as possible. The Government recognises the importance of company share owning schemes for employees. Such schemes have proven successful in the past and are further proof that the success or failure of a company is about more than the rate of corporation tax or employers' PRSI.

Deputy Brennan tried to type cast the Labour Party. He accused us of privatising Telecom Éireann, but he knows that is nonsense. It was amusing to listen to the contributions from the Fianna Fáil benches today because, at meetings of the Joint Committee on Commercial State-sponsored Bodies, those Members put forward a case for privatisation and doing away with semi-State organisations. I had to fight Fianna Fáil Members tooth and nail on the question of liberalisation at a meeting of that committee. They wanted complete liberalisation rather than the compromise reached by the Minister, although I thought he would have agreed a five year period for liberalisation rather than what he accepted.

The main difference between the Labour Party and Fianna Fáil is that we have a general interest in the welfare and ongoing viability of semi-State companies, many of which, despite all the rhetoric from the private sector, are our biggest and best companies. The Labour movement is united on this issue. The maintenance of Telecom Éireann as a major telecommunications sector and the protection of the universal service obligations, which should ensure equal access to new technology for all citizens, is what is at stake here.

Fianna Fáil shed crocodile tears about the effects of the BSE crisis on rural communities. It is ironic, therefore, that because of its connections with the business community it cares little about whether rural communities get the same service at the same cost as their fellow citizens in the larger towns and cities. I am familiar with its views on that matter because of comments at meetings of the Joint Committee on Commercial State-sponsored Bodies. That is the essence of the universal service obligation and it must be protected.

The sad reality for Deputy Brennan is that his efforts this morning will not wash with the workers of Telecom Éireann or any other semi-State organisation. People will not forget Fianna Fáil's attempt to sell part of Telecom Éireann to its friends in Cable and Wireless. That was Fianna Fáil cynicism at its worst. Cable and Wireless were perhaps the worst potential strategic partner for Telecom Éireann to enter into an alliance with as it did not have a significant base in Europe where Telecome Éireann has to operate and compete. Cable and Wireless were actively opposed by Telecom Éireann unions, particularly by the Communications Workers Union, whose role during the negotiations about the company's future has been an example of how a modern progressive union should conduct itself. The Labour Party had to block that sale. Thus, it was Fianna Fáil, not the Labour Party, that established the principle to sell a section of Telecom Éireann. In so doing it alienated potential partners who wanted co-operation on areas of expertise and mutual interest only. It is ludicrous for members of Fianna Fáil to crib at the outcome of this process.

I draw the Minister's attention to recent statements from the Communications Workers Union about a reduction from four to two in the number of worker directors in Telecom Éireann under the new arrangements. I was pleased to hear the Minister state that he would be available for consultation and further discussion on this matter. Perhaps he would table an amendment in that regard on Committee or Report Stage. While I understand his reason for adopting this position, I urge him to do everything possible to resolve the matter. I also urge him to deal with the question of board representation in a forthright manner. To date, he has done a good job in difficult circumstances. The remaining issues can be resolved through further consultations. I welcome the Bill.

Mr. Morley

I welcome the opportunity to contribute to the debate on the Telecommunications (Miscellaneous Provisions) Bill. It is not my intention to delay proceedings by repeating what has been said by others opposed to the Bill. It contains many questionable and, at first sight, unacceptable provisions which require the closest scrutiny and these have been highlighted by previous speakers such as Deputies Brennan and Burke.

I listened to the debate, including the Minister's speech and that of the two Government speakers, but none of them justified the about face by certain Government parties from their previous opposition to any suggestion of privatisation of State-sponsored companies. In the past, as Deputy Burke said, the slightest hint of privatisation of or a strategic partnership for a State company was totally opposed by the Labour element in the House. Yet it is now proposed to sell off one of our most successful and best semi-State companies, Telecom Éireann, to foreign companies at a sacrificial price. Even to a layman, the proposed cost of £183 million does not approach a reasonable fee for the company. Irish State pension funds are prevented from participating in the purchase of this share, which is totally mystifying. Not only that, the worker directorships in the new company will be reduced by half. This is a great change in the ideological thinking and philosophy of the Left in this Chamber. There has been no justification of the change or of their willingness to accept the sale at such a low price that it amounts to a financial sacrifice for taxpayers.

The Bill makes provision for an increase in charges by the new company not exceeding the inflation rate. Surely such a provision is an open invitation to increase prices when the customer is already over-charged for this service. Several items in today's media show evidence of this over-pricing. Ireland has higher charges for local and internal trunk calls than the European average, the highest VAT rate and the highest telephone rental fee in Europe, the latter a staggering 40 per cent above the average of other EU countries. It is total folly to openly advise the new company to increase its charges in line with the rate of inflation.

Another flaw in the Bill is its provision for the sale of a further 29 per cent interest in the company without consulting the Dáil. In a transaction as important as this the Dáil should be consulted and I fail to see the purpose of or motivation for including such a provision in the legislation.

My specific interest in the Bill concerns the proposal to appoint a regulator for the issuing of licences for the transmission and retransmission of television services. What impact will that have on the ongoing dispute between those who operate the deflector system and the Government, Cablelink and those who operate the MMDS system? I am glad the Minister of State, Deputy Rabbitte, is present as he has first hand knowledge of this matter. In my constituency and those surrounding it, people operate deflector systems which are community-organised and non-profit making. They were put in place by local communities when commercial interests such as cable companies failed to provide them with a television service that is available in other parts of the country. They set up community committees to deliver the service.

The system was deemed to be illegal in 1988 and that was the case even before that date. However, it was tolerated because the system which was supposed to replace it, MMDS, was not in a position to give service in many areas which used deflector systems. My constituency is a case in point. Those systems and the community organisations which run them have had a turbulent existence. They have been threatened with suppression, were put off the air and brought to court but they still operate.

A recent High Court decision in Cork appertaining to the deflector system stated that it was incumbent on the Minister to give fair consideration to the licensing of those systems. It is not the fault of the operators of the system that they are not licensed since they have applied for licences. The High Court decision also stated that assigning the provision of the service to one system, MMDS, without adequately and impartially considering the merits of the deflector system and its licensing, reflects partiality and unfairness.

During the last Cork by-election the Taoiseach gave a commitment to the people of Cork that one of the first things he would do would be to have the system licensed. I have gone into this in detail because I fear that appointing a regulator is a way of ducking what is clearly the Government's obligation to this matter. As stated by a High Court judge, it has a clear obligation to consider impartially the probability of licensing deflector systems. The Government should be honourable and meet that obligation by ensuring that licensing applications for those systems are impartially examined. Technology has changed a good deal since 1988 — we are aware of the pace at which it is changing in the communications field — and what was not practicable then might well be practicable now. There is a strong possibility that if this system were licensed it could provide a service of the highest standard to many parts of the country, particularly rural areas which are a major concern of mine.

I hope the Government will be honourable and deal with this issue fairly and will not hide behind a regulator, who the Bill states will be a civil servant. As such his or her judgment of this issue will be burdened with the antipathy in the Civil Service to the licensing of deflector systems. The old arguments will be trotted out again and scant reference will be made to technological advances since the subject was last debated in 1988.

Debate adjourned.