1301.0 - Year Book Australia, 2001  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 25/01/2001   
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Communications Research Unit, Department of Communications, Information Technology and the Arts.


From the earliest days of European settlement in Australia, communication services have been seen as the almost exclusive responsibility of government. For the first decades of British governance no reliable mail service existed on the new continent. Messages, both between the colonies and internationally, were sent primarily by an ad hoc system of favours and paid messengers. It was not until 1821 that the first regular postal service began, initially operating only within New South Wales. Even then there were no truly reliable postal services within the new colonies until 1832, when Tasmania established the first post office as a Government Department. The other colonies quickly followed and soon Australia’s fledgling mail network was entirely run and regulated by government. This began a pattern that was to dominate the communication industry for the next 150 years - almost complete government control of Australia’s communications services.

The postal service within the colonies grew quickly, thanks mainly to the gold rush of the 1850s. As people flooded into Australia in search of fortune, sizeable townships built up where previously there had been nothing but the occasional squatter’s hut. The sudden increase in population meant a need for more and better communications networks, and post offices began to spring up throughout the country. Soon every major rural centre had a postmaster of its own. These offices became an important part of the social system, providing a link to friends and family often many years distant. They also provided an important link to the authorities of the colonies, becoming the principal symbol of civil governance in the most isolated of areas.

However, in a country as large and isolated as Australia a communication system that relied on horseback could only go so far. When the telegraph first appeared in Europe in 1844, the young country was quick to adopt the new technology. Morse code was brought to Australia in 1853 by Samuel McGowan, and by 1859 telegraph cables linked Melbourne, Adelaide, Sydney and even Tasmania. By the mid-1860s all regional centres in the south east of the country were part of a virtually instantaneous communications network owned, maintained and managed by government. The final and most significant breakthrough was made in 1872, when Sturt’s crossing of the Northern Territory enabled the establishment of Australia’s first international telecommunications system, a telegraph link to Asia. This in turn linked Australia to the European and American lines, and the great southern land finally ended its isolation from the rest of the world.

Over the next few years Australia’s dependence on the new telecommunications industry rapidly grew. The population quickly embraced all new technological developments in what would become the historical norm. In the final years of the nineteenth century Australia sent more telegraphs per capita than any other nation. Telephones quickly followed the telegraph, and in 1882 the first public telephone exchange, based in Sydney, made personal communication available to the average Australian, just six years after Alexander Graham Bell took out his patent.


Over this period of rapid development the Australian Government had been careful to retain control over the development of the new systems. Adequate communication services were widely regarded as the right of all Australians regardless of their geographical location, and government control was seen as the only way to ensure equity. With this in mind, section 51(v) of the Australian Constitution of 1901 gave power over all postal, telegraphic, telephonic and ‘other like services’ to the Federal Government. In 1901 the first Post Master General (PMG) was appointed to oversee communications throughout Australia. Government regulation of communications services at this time remained a relatively simple task - all communication was still made on a primarily individual basis and could be easily limited by infrastructure. The main focus was on modernisation, with developments such as the introduction of automatic telephone exchanges to replace cumbersome manual systems and the establishment of long-line ‘trunk call’ services to enable efficient personal interstate calls.

However, the introduction of the Marconi wireless radio system to Australia in 1905, just 10 years after its invention and four years after the first trans-Atlantic broadcast, was about to change all this. This marked the beginning of Australia’s broadcasting industry, and the first time instant communication to the public at large was possible. The potential for wireless communication in a country as large and scarcely populated as Australia was immediately evident, and by the end of World War I government wireless stations were established along the entire Australian coastline. In 1922 Prime Minister Hughes made the first publicly available radio broadcast from a small hall in Bendigo, and by November 1923 the first radio services were broadcasting out of capital cities.

Private companies were quickly clamouring for a stake in the new wireless market. For the first time, the Government was faced with the problem of how to maintain the service standards central to Australian communications policy and yet allow growth in a new and important commercial industry. Just how could communication with an unlimited potential audience be regulated to maintain equity? After some experimentation with ‘sealed’ radios fixed to a certain frequency a dual system of public radio stations, funded by licence fees, and private radio stations, funded by advertising, was established. This led to the concept of a national radio service, and the first Australia-wide broadcasting service was established in 1928. In 1932, this service was replaced by the Australian Broadcasting Commission. Postal services kept pace with these developments; overseas airmail was introduced in 1934.


Leading up to and immediately following World War II, the communications industry worldwide entered a period of extreme activity and technological development. Microwave radio, transistors, the first rockets and even early computers began to make an appearance. True to form, Australia was in the forefront of adopting these new developments. The first television broadcast was made from Sydney in 1956, and just six years later television was available in all capital cities except Darwin. The PMG even began to experiment with data services, sending computerised stock exchange and business information over the telephone system as early as 1964.

In the meantime, Australia was also developing its international telecommunications networks, taking advantage of all available technology to improve communications links with the rest of the world. The Overseas Telecommunications Commission (OTC) was established in 1946 to oversee Australia’s international telecommunications services and their development towards world standards. It was becoming increasingly clear that traditional ground-based technology was not sufficient to bridge the great distances that separated Australia from the rest of the world. When the first international communications satellite, INTELSAT I, linked North America and Europe in 1965, OTC was already well into negotiations with the United States to launch a similar satellite providing links to the Southern Hemisphere. In 1966 INTELSAT II was launched, providing the first satellite link between Australia and the international telecommunications network. By 1968 the entire Australian telecommunications system was plugged into this network.

By 1975 it was becoming clear that telecommunications, even of the purely domestic variety, had grown into a large and important industry, entirely independent from postal services. INTELSAT II was being used to facilitate communication within Australia as well as overseas, and the PMG’s Department was becoming increasingly stretched trying to perform its duties. The Government restructured the Australian communications bodies: OTC would remain responsible for Australia’s international telecommunications; the PMG would handle all postal and delivery services; and a newly established authority, the Australian Telecommunication Commission, would take control of all public telecommunication services. Telecom, Australia’s own telecommunications giant, was born.


Australia now had a fully-fledged communications industry, well up to world standards in the areas of international satellite and telephone technology. However, domestic communication services remained erratic. While the capital cities had television, radio and high quality telephone services, many rural communities struggled on without an adequate phoneline. Ironically, it was often easier for a Sydney caller to reach London than outback New South Wales. So in 1960 the PMG made a firm policy commitment - while Australia’s international telecommunications industry would continue to be developed, the main focus, for as long as was necessary, would be upon providing modern communication services to all Australians. The policy went into effect and huge development projects were implemented. The crucial step came in 1985, with the launching of Australia’s first geostationary communications satellite by AUSSAT, the organisation established in 1981 to oversee Australia’s satellite system. By 1987 all areas in Australia had basic telephone services, no matter how remote. Australia had achieved telecommunications maturity, with all Australians linked by a single infrastructure.

And not a moment too soon. Over the next decade information and telecommunications industries worldwide would change rapidly, and the quality of Australia’s domestic telecommunication services was to be crucial in the nation’s participation in this new economy. This change would be brought about by the proliferation of new technology that made the instantaneous exchange of information as easy as pushing a button. This was, of course, the birth of the Internet.


In theory, an early form of the Internet has been in existence since the early seventies, when the Defence Advanced Research Projects Agency Network (DARPAnet), was set up as an experiment by the United States military. Indeed, Australia has had its own computer information network running between selected Australian universities and research institutions since the late seventies, and the Australian top level domain, .au, has existed since 1984. However, it was not until 1990 that the international computer network began to attract popular attention, with the establishment of the World Wide Web by a server just outside Geneva. This new information forum was instantly linked via satellite to Australia’s own fledgling Internet system, Australian Academic and Research Network (AARNet). Australia’s first commercial Internet provider, connect.com.au, opened for business in 1992, and Internet addresses became widely available to the Australian public in 1993. Finally, in 1995 control over all interstate and international web links was handed over to the Government by the Australian Vice-Chancellor’s Committee, in acknowledgment that the Internet had become an important part of the public Australian communications industry.


As Australia entered the final decade of the century, having achieved basic access for all Australians and in view of the growing importance of telecommunications in the international marketplace, the Government changed the focus of its communications policy. The emphasis would now be upon developing Australia’s telecommunications system for the future, making it a world leader, not just world class, in industry as well as deliverance. Australia was in an ideal position to embrace and take advantage of the developments taking place internationally with the rise of the Internet - its infrastructure was new, complete and of world standard.

As telecommunications developed into an increasingly lucrative commodity, a growing international trend had emerged towards industry competition and, as part of this competition, towards privatisation. Traditionally, the telecommunications providers of all the major developed nations had been highly regulated government-owned monopolies. Since the early seventies this regulation had been gradually reduced in many nations to encourage marketplace development. Many telecommunications institutions had been fully or partially sold off by their governments. Over this period the possibility of deregulation and privatisation had frequently been discussed within Australia. However concerns, particularly the need to maintain an adequate and equitable standard of services for all Australians regardless of locality, had always prevented the topic from proceeding to a policy level.

With these developments in the world telecommunications market new concerns began to arise within Australia - concerns that Australia would be unable to remain competitive in the new economy unless it changed the structure of its communications industry. Market growth was necessary, and it was the opinion of an increasing number that the introduction of competition was the best way to achieve this. Yet this would require sweeping changes to the established industry, changes that carried with them a great deal of risk. If competition was introduced too quickly, and without due care, there was a genuine possibility that new entrants would flounder, causing the entire Australian telecommunications industry to become dangerously destabilised. Caution was warranted.

Mindful of this, in 1991 the Government passed a new Telecommunications Act. The Act introduced changes to the Australian telecommunications industry designed, all things going well, to eventually lead to the opening of the market to full-scale competition. As part of these changes Telecom and OTC were merged to form a single government player, the Australian and Overseas Telecommunications Corporation, renamed Telstra in 1993. In addition, after a long bidding process for a second telecommunications licence, a single private player, Optus, was allowed to enter the Australian telecommunications marketplace for national long distance and international telephone calls. Certain measures were set in place to enable Optus to gain a foothold beside the incumbent giant, including guaranteed access to Telecom’s existing infrastructure on reasonable terms. All other players would be prevented from entering the general telephone market until 1997, at which time a thorough review of the effect of competition on the market would be completed. This began the Telecom/Optus duopoly that would dominate the Australian telecommunications industry for the rest of the decade.

Over the next few years further steps towards open competition were made. Optus began using its own infrastructure from 1993. On the recommendation of Austel, the independent industry regulator introduced in 1990, Vodafone was permitted to enter the mobile telephony market with an exclusively digital licence in 1992. This added a third player to the emerging mobile industry, as Telecom had been providing mobile services since 1987 and Optus had been allowed to buy AUSSAT’s assets and begin mobile telephony as part of the general duopoly deal of 1991. It also laid the ground work for the compulsory conversion to digital technology currently taking place across the industry - Vodafone agreed to accept the exclusively digital licence on the sole proviso that the analogue mobile system being used at the time would eventually be phased out, placing it on equal footing with the major players.

All of these gradual changes had one principal aim: to test the waters of competition in the Australian telecommunications industry in a carefully monitored and relatively stable environment. The 1991 Act declared that if a review pronounced the experiment a success full-scale competition would be introduced by 1997. As 1997 rolled round the review was completed, giving a positive, if slightly tentative, verdict. Optus had suffered some difficult periods struggling against the marketplace dominance of Telstra, but was now performing strongly. Telecommunications had become the fastest growing industry in Australia.

On 1 July 1997, the industry was opened up to full competition. All limitations on the number of licensed players were removed and anti-competitive conduct was prohibited. Telecommunications regulation was aligned with general competition law, with the Australian Competition and Consumer Commission overseeing competition policy regulation across all sectors. The Australian Communications Authority still provided some technical regulation, but the main emphasis was on encouraging industry self-regulation. The Australian Communications Industry Forum was established as an industry body to facilitate and manage this regulation, including the development of codes of practice and technical standards. To allay concerns regarding the maintenance of service standards, legislative safety nets were introduced, ensuring that the Universal Service Obligations that had always applied to Telstra would now also apply to the new telecommunications providers. These obligations aim to guarantee the rights of end users and ensure that the lucrative urban market is not developed at the expense of the rural market.

The final, and most controversial, move towards an open market in telecommunications came with the partial privatisation of Telstra in September 1997. The initial sale, which placed 16.6% of Telstra’s shares on the open stock exchange, was the outcome of many years of debate and negotiation. It followed the trend towards partial sale of public telecommunications providers that had been taking place internationally for the last decade. At the time the decision was highly controversial, and the effect upon service and competition is still debated today. However, as a business move alone, the sale proved highly successful, with Telstra now ranking as the most valuable telecommunications company of its size internationally. The sale was also a financial success for the Government, and a further 33.3% of the company was sold off in 1999, bringing the privately owned portion of Telstra to 49.9%.


This gradual move towards open competition in telecommunications can be seen as merely part of a general restructuring that has been taking place across the Australian communications industry for decades. Media ownership legislation, particularly regarding cross-media ownership, has been constantly debated and amended since 1986. The laws governing foreign investment in the Australian media and communications industries have been loosened. New markets have emerged, with varying success. E-commerce has become the wave of the future, with 13% of small and medium businesses already participating in this new forum and a further 36% expecting to move online within the next year. The introduction of pay television with the launching of Australis Television in 1995, however, has been far less successful. For the first time a prominent new service has failed to be immediately embraced by the Australian population. Five years down the track Australis has gone into receivership and all of the major players that have entered the market since, including both Telstra and Optus (now Cable and Wireless Optus), have yet to show a profit. However, even in the world of pay television all is not dark; despite poor economic turnover, the rate of subscription takeup is actually quite high compared to international historical standards.

For the moment, the communications industry in Australia continues to grow at an increasing rate. Since its complete deregulation in 1997 over 30 players have entered the telecommunications market. Australia has one of the highest levels of mobile telephone ownership in the world, and is second in Internet takeup rate only to the United States. And growth does not look like stopping. Australia is still rapidly embracing new technology, with mobile telephones going exclusively digital this year and digital television to be introduced next year. Controversy still continues - the debate over the form the new digital television system will take has been running for years. However, this is inevitable if growth is to continue. Australia has developed into a world leader in communications industries and will continue to develop as the new century progresses.