Phone Competition Divides Australian Cabinet

BECAUSE of the great distances between cities, towns, and the rest of the planet, Australians count on their telephones. These days, however, it is unclear who will provide the phone service in the future.

After decades of monopoly, Australians are now debating how to foster competition in telecommunications. This week, Kim Beazley, the government minister in charge of transport and communications, is expected to recommend major changes for Telecom, the Australian equivalent of American Telephone & Telegraph before it was broken up into different competing segments.

Exactly how to go about the deregulation has resulted in a debate that is beginning to resemble a free-for-all. Prime Minister Bob Hawke's Cabinet is divided over the issue. Mr. Hawke has already told his ministers to stop talking to the press.

However, Mr. Hawke has had less success muzzling his own party, the Australian Labor Party, which is also divided over the issue. The ALP hierarchy has called for a special meeting of the party to try to find a solution which appeases all its factions.

The dividing issue is how to carve up Telecom, the communications giant, the Overseas Telecommunications Corporation, the provider of most foreign services, and Aussat, the supplier of domestic satellite service. While Telecom and QTC are profitable, industry sources say Aussat needs a major infusion of capital.

Mr. Beazley is expected to recommend merging Telecom with QTC, resulting in a company dubbed Megacom. At the same time, Aussat, which provides domestic satellite services, would be privatized and allowed to compete against Megacom in some areas. Paul Keating, the Treasurer, has a competing proposal.

Bill Mansfield, assistant secretary at the Australian Council of Trade Unions, says the issue arouses a lot of concern among the unions. The key issues, says Mr. Mansfield, who also is on Telecom's board of directors, are that phone service continues to be available in remote areas of Australia at a reasonable price and that telephone equipment continues to be made in Australia.

Telecom itself is not opposed to competition. ``The board's view is that it is better to bring the issue of competition out into the open and in a structured way instead of an ad hoc way,'' says Mansfield.

Many businessmen call for open competition. ``We think there are not enough incentives for better service at lower cost,'' says Wally Rothwell, executive director of the Australian Telecommunications Users Group. ATUG proposes maintaining an independent Telecom, QTC, and Aussat, but allowing full competition.

In some ways, the debate is about how to continue deregulating the market. Long-distance service and public switching in the domestic market are the major monopolies. Users can now buy their own equipment from competing suppliers.

Competition is already hot in the beeper market where Telecom is battling BellSouth Australia Pty Ltd. In a possible sign of the future, BellSouth has gained a significant share of the high-priced part of the pager market while Telecom supplies much of the lower margin business.

Australia is not the only nation concerned about introducing more efficiency into the telephone business.

The Mexican government plans to sell a 20.4 percent stake in the national telephone company by Dec. 20. This would be the first stage in Mexico's largest privatization effort.

The government would even allow foreign investors to participate, though control of the company would remain in Mexican hands.

Faced with pressure from the United States, Japan is permitting more competition in its telecommunications equipment market. After four months of bargaining, the two nations agreed last week that Japan would remove barriers blocking US companies from offering various telephone services, such as voice mail and electronic banking.