Telstra and Woodside Petroleum have spent much of the past 12 months annoying Rudd government ministers with their aggressive lobbying behaviour. Last week the government gave Telstra the elbow and Woodside a huge Christmas gift. For most of the year, however, Woodside seemed to have a knack for upsetting ministers that rivalled Telstra’s reputation for belligerence.
After the government released its green paper on its Carbon Pollution Reduction Scheme (CPRS) in July, Woodside complained bitterly that its natural gas exports would miss out on any the proposed compensation for “emissions intensive trade exposed” industries. Never mind that the industry promotes natural gas as a clean green fuel rather than one that’s emissions intensive. In any event, Kevin Rudd responded by bluntly telling the ABC’s 7.30 Report that the government was determined to push ahead despite “Woodside getting its knickers in a knot”.
However, when the government released its CPRS white paper last Monday, Woodside emerged a big winner. Natural gas exports would now qualify for the free pollution permits which the green paper said would be confined to much heavier greenhouse gas emitters. This back down occurred, regardless of the fact that several companies were keen to spend billions of dollars to export natural gas through Gladstone in central Queensland without a promise of free permits. Likewise, Japan’s Inpex group said it would go ahead with building a $12 billion gas export plant at Darwin before the government's softer approach was announced.
The white paper commits the government to spending so much on compensation for a wide range of industries and households that there will be no money left over to boost the commercialisation of new technologies which are essential to reducing emissions in the most efficient manner. The upshot is that more weight will have to go on government regulation to enforce the CPRS’s reducing cap on emissions each year.
Government ministers were most unhappy about the pressure applied by Woodside’s tough talking CEO Don Voelte. But he did at least acknowledge the importance of key ministers to his company. Telstra took a different tack, at least in public. The CEO Sol Trujillo and chairman Donald McGauchie were openly dismissive of the government’s plans to put $4.7 billion towards building a new high speed broadband network around the nation. Their attitude was that they didn't really care what the government wanted, they would plough ahead on their own terms.
They even appeared reluctant to tender for the new broadband project. When the company finally did so, it submitted a truncated version that failed to meet the tender requirement that all proposals had to explain how small and medium sized businesses would be included. Last week, the government's expert panel in charge of assessing the tenders excluded Telstra from the bidding process because it had failed to meet the tender conditions.
McGauchie claims Telstra is the victim of bureaucratic obstructionism over a technicality and won't really be hurt by its exclusion from the project. The share market has taken a different view, reacting adversely to Telstra’s exclusion. Several businesses commentators criticised the company for botching its tender and adopting such an abrasive approach to relations with the Rudd and the Howard governments.
John Howard and Peter Costello were highly critical of Telstra’s personal attacks on their appointee as chair of the Australian Competition and Consumer Commission, Graeme Samuel. Trujillo behaved as if Telstra, unlike any other big company in Australia, should be exempt from ACCC scrutiny. Instead, he wanted to negotiate directly with ministers about how the competition laws should apply to Telstra and has maintained this position with the Rudd government.
Telstra has also objected vigorously to the Coalition government’s insistence that any new broadband network would have to operate on an “open access” basis so competitors could exert downward pressure on telecommunications charges throughout Australia. The Labor government has retained this condition for its broadband network.
Despite the Howard government’s repeated difficulties with Telstra, the Coalition’s shadow communications minister Nick Minchin last week defended Telstra over the tender. He said, "It’s difficult to fault Telstra on this”. But the Communications minister Stephen Conroy said the company had only itself to blame for not submitting a complying tender.
Telstra’s behaviour could prompt the Future Fund, which holds two billion shares in the company, to review its support for McGuachie and Trujillo. The fund is chaired by a former commercial banker David Murray and operates independently of the government. Murray will have to decide whether the retention of McGauchie and Trujillo on the Telstra board is in the best interest of Telstra shareholders.
If they remain in charge, Telstra could test the Rudd government’s resolve by frustrating the winning tenderer’s efforts to roll out the new fibre optic cable. Telstra’s options include making it hard to access trenches below public footpaths and the existing wires into homes and business premises. If so, the Rudd government will need to reinforce policies intended to prevent Telstra acting as a quasi-monopoly.
The alternative is to cave in to renewed Telstra lobbying. Woodside has shown what can be achieved. This time, Rudd needs to demonstrate that he’s made of sterner stuff, unless he wants his policies to unravel repeatedly.