Pearls and Irritations

One of the Whitlam government’s first major reform programs was focused on telecommunications. In January 1973, Whitlam announced a royal commission to investigate the Postmaster-General’s Department (PMG) and provide recommendations on Australia’s ‘present and future needs’.

The three commissioners—James Vernon, a pillar of Australia’s business establishment, Bernard Callinan, appointed for his technical expertise, and James Kennedy, a Labor-linked entrepreneur with a ‘liberal attitude in worker/employer relationships’—were granted wide discretion, though their terms of reference also drew attention to matters of concern to Labor.

One issue was ‘the financing of recurrent and capital costs’, which in part reflected Whitlam’s support for user-pays principles in telecommunications. Another, also sensitive, was an instruction to investigate ‘the division of functions’ between the PMG and the Overseas Telecommunications Commission (OTC), the statutory authority responsible for international communications services.

Tensions between the PMG and OTC had existed since 1946, when, with bipartisan agreement, OTC was established in preference to expanding the PMG’s remit. Though they collaborated closely and PMG officials comprised the core of OTC’s board, disagreements were regular and sometimes fiery.

A fight over global satellite governance arrangements in 1964, for example, which included a renewed PMG push to incorporate OTC, had required personal mediation by the postmaster-general. Around this time, the already profitable OTC also became spectacularly more so. This deepened PMG frustration that the international services organisation was ‘wallowing in money’ while it was chronically capital constrained.

From autumn to spring 1973, the commissioners received nearly 500 written submissions, conducted public hearings, investigated arrangements overseas, and visited PMG sites around Australia.

OTC’s independent existence was imperilled by the Whitlam government’s royal commission and it fought a fierce, politically partisan battle against being subsumed. It argued that the flow of easy money to government depended on its remaining nimble and businesslike; this would be jeopardised were it absorbed into a lumbering bureaucracy.

Labor was in the throes of its 1974 re-election campaign when Vernon produced a meticulous 340-page report that sought to square all policy circles and provide a blueprint for reform.

A key recommendation was replacing the PMG with two new statutory authorities. The commissioners argued that telecommunications and post were so different ‘in respect of technology, capital investment requirements, growth rates, and employment characteristics’ that housing them together could ‘only be assumed to have been a matter of history rather than of deliberative choice’.

Moreover, the continuous technological advances, increasing market demand and large capital investment that characterised telecommunications meant that those in charge needed the freedom to make ‘important judgments’ that would impact ‘the range and quality of services for decades ahead’.

But there was no consensus when it came to recommending an appropriate division of functions for national and international telecommunications.

Kennedy and Callinan asserted that ‘divided control and conflicting objectives’ had underpinned nearly thirty years of strains and inefficiencies and that this could be resolved by joining OTC’s 2000 staff with the PMG’s 90,000 telecommunications employees.

Vernon was initially on the same page and shocked Kennedy and Callinan when he then dismissed their argument as an ‘attractive simplification’, apparently following intense lobbying by OTC executives and a senior Sydney banker. Vernon considered OTC a ‘well-developed and compact organisation, strongly market-orientated’ and saw a risk of it being ‘destroyed’ if forcibly restructured.

Whitlam announced just five days after receiving the report that the government would establish two new authorities (later known as Telecom and Australia Post).

Whitlam also committed to rolling OTC into Telecom. This move triggered a bitter political conflict that would compound his government’s woes and continue to simmer within Labor into the 1990s.

OTC was appalled. Under its mercurial general manager Harold White, OTC geared up for a bare-knuckle fight against the government. The campaign united OTC’s largest union, the parliamentary Liberal Party, the chambers of commerce in Sydney and Melbourne, and most of OTC’s large institutional customers.

About a hundred of these customers formed a pressure group, the Overseas Telecommunications Users’ Association, headed by a former OTC chairman, and was soon shaping up to Labor via mass meetings in Melbourne and Sydney.

The stage was set for an almighty showdown that would have long-term political and policy ramifications.

Following Labor’s re-election, an interdepartmental committee worked methodically through the commission’s recommendations. Its toughest challenge was finding a position on OTC that satisfied Whitlam’s repeated pledge to abolish it while being ‘mindful’ of Vernon’s strong advice to the contrary.

Searching for options, officials invited OTC’s thoughts, which were provided with alacrity. OTC argued that ‘business prudence and commonsense [and] the national interest’ were all against Whitlam’s plan. It proposed an ‘incorporation’ model that reflected, in all but name, a continuation of the status quo.

OTC executives were also pleased to advise that the ‘vast majority’ of their staff had formally confirmed their opposition to the government’s policy.

The campaign by OTC and its influential supporters played out prominently, helped by a lavish advertising budget and Harold White’s personal collaboration with the Opposition.

In February 1975, the government confirmed its intention to implement nearly all the commission’s recommendations, and bills were tabled in the Senate to effect the myriad changes required.

The Opposition, newly led by Malcolm Fraser, was lukewarm, but confronted by the unviable status quo and lacking an alternative to the cogent framework before it, took a broadly bipartisan approach.

However, it insisted on more prescriptive ‘political obligations’ for Telecom, and for stronger ministerial powers in order to keep responsibility for service delivery ‘where it has been and where we believe it must continue to be … squarely on the shoulders of the government of the day’.

The Coalition also rejected outright Whitlam’s plan for OTC.

By late May 1975, the postmaster-general, Reg Bishop, and his predecessor Lionel Bowen were racing against time to pass the government’s bills so that Telecom could begin operations by 1 July. They knew the most critical challenge was resolving the impasse over OTC.

The debate was intense and emotional, though revisited well-trodden ground. One Labor senator declared himself ‘giddy and tired from … repeating the same old arguments for and against’. Bishop was at pains to acknowledge OTC’s ‘fine record’ and gave assurances that it would ‘retain [its] identity as a working group’ within Telecom, but this counted for little. The Coalition controlled the Senate, so it won the contest.

When the government’s telecommunications bill was sent to the lower house with all OTC incorporation-related clauses removed, Labor was not ready to concede. But with Telecom’s inauguration due just five weeks away, it needed to advance where it could.

Labor passed the amended bill and then tabled another containing all its original OTC clauses. This was inevitably defeated in the Senate.

Senior Opposition figure Peter Nixon thought Labor’s move ‘novel, if not unique’. Shadow postmaster-general Peter Durack was likely close to the mark when he suggested that its ‘obstinacy’ stemmed from Whitlam’s determination to push on ‘come hell or high water’ because he was personally invested in the outcome.

Another factor may have been precipitous cabinet decision-making in the context of mounting internal dysfunction and external crises, with inflation reaching 17 per cent and following a messy reshuffle.

For Labor, OTC had become personal. Bowen railed against an OTC ‘personality cult which … requires that one has to live at Point Piper and drive a Mercedes-Benz’. Whitlam was still seething a decade later, dismissing OTC as a ‘cosy bureaucracy’ that ‘remains an extravagant excrescence’.

Following rapid royal assent, Telecom began operations on 1 July. But it was not Labor who had the most significant influence over how Australia’s new telecommunications arrangements would work.

The Fraser-led Coalition inherited this role when it swept to office following Labor’s dismissal just four months later.

 

This is an edited extract from Crossed Lines: Disruption, Politics and Reshaping Australian Telecommunications, by John Doyle, published in October 2022 by Australian Scholarly Publishing.