Telstra's price gouging is a sin


Sol TrujilloIf you know somebody who has moved from the UK to Australia in recent years, ask them what they are paying for their phone, internet and pay TV. They will probably tell you that they are now paying 50 per cent more than they were back in the UK. The reason is not simply the UK's larger market and geographical concentration. It's the forced separation of the retail and wholesale activities of the former British Telecom, which took place some time ago.

Following Australian Communications Minister Stephen Conroy's announcement of government moves to engineer the structural separation of Telstra, the Australian consumer has reasonable grounds for hope that telecommunications pricing will be fairer.

On the face of it, this is obviously good news for the consumer and bad news for Telstra and its shareholders. Opposition communications spokesperson Nick Minchin immediately leapt to the defence of Telstra's so-called 'mum and dad shareholders', insisting that they will have a case for seeking compensation for the '$2 billion wiped off the value of mum and dad shares in Telstra'.

This is understandable, as wealth is being transferred from one sector of the population to another as the result of a government change of policy. However questions need to be asked whether the widely-recognised price-gouging practices of Telstra make this wealth ill-gotten, and if the practices might be legally but not morally defensible.

There are many aspects of these questions we could take up. One is the use of the emotive term 'mum and dad shareholders'. Former Telstra chief Sol Trujillo would use it to justify predatory-pricing practices that sought to drive his Singapore-owned Optus rival out of business. He said:

We have 1.6 million mums and dads that own shares in Telstra and they do care about their investment and they want to be treated fairly and they don't want to see a government official, or regulator or whoever saying 'Let's take Telstra's value that they create and send it to Singapore'.

Aside from the fact that the significant transfer of Telstra's 'value' will be from 'mum and dad shareholders' to mum and dad 'customers' (rather than 'Singapore'), price-gouging has to be seen to be immoral. Trujillo and Minchin are using the the mums and dads moniker to sanitise the practice.

This must be seen as a sin akin to usury, which is now understood to refer to excessive interest. The online Catholic Encyclopaedia says 'lending money at interest gives us the opportunity to exploit the passions or necessities of other men by compelling them to submit to ruinous conditions'.

There is nothing wrong with mums and dads buying shares as an exercise in responsible stewardship of family assets. But they need to be ready to face consequences if profiting from their investments involves exploiting other Australians.

Michael MullinsMichael Mullins is editor of Eureka Street. He owns Telstra shares.


Topic tags: Telstra, Sol Trujillo, Stephen Conroy, sin, usury, mum and dad shareholders, price-gouging



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Existing comments

It is one of the best articles that I've read. It shows the true reality of Telstra, a corporate taking advantage of its own people.

Roberto | 21 September 2009  

Whilst your judgement of Telstra would appear to be spot on, Michael, it would seem almost impossible for almost any mum or dad to invest in shares in any company and know whether it is being managed in a morally defensible way.

The examples of companies, both in Australia (Babcock & Brown et al.) & almost anywhere that stockmarket gambling is allowed, over the past 12-18 months, makes it impossible for any ordinary mum or dad to know whether their investment will be lost, make exhorbitant gains or result in a morally acceptable outcome. One can only hope, including the Vatican Bank I fear.Until that is there a Theologian or maybe an economist who produces a comparative Table of acceptable behaviour which can foresee the future behaviour of company CEO's & directors? Mission impossible!

Graham Holmes | 21 September 2009  

My wife and I are now very happy that we couldn't afford the Telstra shares we were offered at the time we had to pay up. I feel we were lied to by the Howard government and Telstra at that time. and then that 'American' who lived by the motto of 'the ugly American' really stuffed it up for both shareholders and customers. Praise the Lord for Stephen Conroy and a government that has us in mind when making policy, and not just the 'top end of town'.

2. when will mobile phone users get the advantage of 13 and 1800 numbers? I feel we are being ripped off!

regardz .. jaymz

jaymz | 21 September 2009  

If the Government wants to control Telstra and the way it works they need to buy it back again at market price. It is immoral to privatise a company and then run it as an arm of the Government.

Fred | 21 September 2009  

Agree with you completely Michael. And I also own Telstra shares.

Roger O'Halloran | 21 September 2009  

Excellent article Michael though it begs a further analysis of the Catholic Church's relationship with Telstra though the Jesuit-affiliated business Church Resources. Effectively, the church has handed Telstra a virtual monopoly over church telco needs. Why are church groups told that all their telco business should go to Telstra when better deals can be found elsewhere?

Paul Cleary | 21 September 2009  

Mum and dad investors price gouging? I know of no mums and dads who gouge obscene salary "packages" for just being supervising other workers.

Mr Trujillo expressed disappointment at the level of anti-Latino racism in Australia. Oddly enough, I could not discern the difference between Mr Trujillo and AMP's onetime CEO George Trumbull. As it happens, they were both overpaid. Both were over here.

Both are now gone, with their obscene payouts. Would it that that be the end of obscenity in Australian corporate affairs!

However, those remaining from Mr Howard's much-lamented government remain unrepentant. How ironic that it takes a "factional Dalek" like Mr Conroy to start cleaning the obscenity away.

David Arthur | 26 September 2009  

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