John Hilvert, the Australian: A question to both of you. A strong theme that came out and a bit of a surprise and something of a delight personally is I'm hearing the return of the interventionist strand in IT policy making, something that seems to have gone to sleep possibly since Senator Cook was there, I think. Just a specific point for Professor Goldsworthy and a more general point for Dr Cutler is that I heard the usual traditional bleat about the cost of bandwidth and the traditional and conventional wisdom has been, it's a matter of time, deregulation will solve that. Are you saying it's not enough, that more intervention is required other than deregulation, and for Dr Cutler, I'm hearing a remarkably, even a stronger interventionist strand in your talk and something that I imagine the government would welcome providing there is a trade off in what we don't do now so that we can afford to do these new things. Could you suggest what things you point to that the government might drop in the interest of giving priority to your new order of IT policy making?
Professor Goldsworthy: What we are trying to do with the Taskforce is to base the recommendations on the reality of life. What we saying, and we using the competitiveness study which I've already mentioned is a consortia of consultants, to collect a lot of information at the firm level as to what incentives they were given to establish business, what constraints there were in establishing business, what the costs of doing business are including cost of bandwidth, communications etc, etc, and the information, there is a lot of information being collected commercial-in-confidence, which members of the Taskforce won't necessarily even see, but the message is very clear already. There's not a bleat. It's a statement of fact that Australia has got a significant problem in that area of costs of communications. What we going to be saying, I don't know because we haven't reached the recommendation stage yet, but I suspect that what we might say is, if the market doesn't solve it, there may have to be other actions taken to solve it, because solve it, it must be, and Australia will just disappear out the tail end if it doesn't solve the cost issue. I think, and as I say we haven't reached the stage yet, I think we will be saying very forcibly to the government, if the market doesn't solve this issue, it has to be solved in other ways. Now what those ways might be, of course, have yet to be decided, but it has to be solved.
Dr Cutler: I agree with Professor Goldsworthy that to focus on the hard, cold realities of what you need to achieve to be competitive in these global markets is not necessarily to say that particular forms of traditional intervention are the only strategies. There is clearly a lot of scope on the telecommunications side, a subject I love dearly, to accelerate the impact of further market liberalisation. Examples that come to mind are with respect to the treatment of non-metropolitan activity and getting rid of the old notions of community service obligations which give incumbent carriers protection from competitive exposure, there is A lot of opportunity to talk up the potential impact of new technologies in the mobile and satellite area, in other words to talk up and encourage investment that would make this a more competitive market. I am a great believer in the role of government in exercising the blunt instrument of shame and guilt, in crowbaring market players intro corrective action in areas like pricing. I think we haven't done nearly as much as we could have in that area.
Steve Lewis, Financial Review: I have a raft of questions but I'll start with one to Professor Goldsworthy about the issue that you raised of investment facilitation which is obviously going to be a fairly important area of your Taskforce work and I guess in particular in Canberra the uncertainty about the future of the partnerships scheme which of course is one of your specific terms of reference. Could I ask you to clarify what your thinking is given that you've received obviously a range of submissions what your position is, your initial thinking anyway, on the future of partnerships schemes, whether you believe that sort of framework should continue, and I say that in the context of probably more than one multinational waiting on the sidelines to see what the government does with this before they sign up, and on the question of investment facilitation you referred to a number of overseas jurisdictions which have a range of incentives, locational incentives in place. Are you going to propose to this government that Australia really needs to look at this particular area and put in place specific measures to encourage multinationals to establish their headquarters or to establish some sort of development structure in Australia?
Professor Goldsworthy: We'll certainly be recommending more that regional headquarter location activities, of course. The terms of reference we've been set really require us to recommend to the government a strategy for the long term growth and development of information industries in this country. I'd love to be able to answer your question but honestly we haven't yet got to the stage as a Taskforce of coming to even a preliminary conclusion in terms of what sort of, if any, schemes such as pfds and fdas and endorsed supplier arrangements and so on we will be recommending. We have just started to get submissions in. We've been concentrating to date on developing the policy principles if you like that I've enunciated that we believe are a fundamental philosophical base on which we will be giving our recommendations. The substantive nature of the specific recommendations - it's too early for me and I'm not avoiding the question, I'm just saying that I can't answer it because we haven't yet reached that stage. But there is no doubt, and the previous questioner identified it I guess, that there is a political will that is a little different perhaps from the past in the sense of what might be acceptable and what the government might be prepared to do and our terms of reference are very positive in that we're been asked to recommend measures to support proactive growth and development of the information industries in this country. Now to get to the venture capital, the risk capital, the patient capital or whatever you want to call it, it's an issue that's been a problem in Australia for as long as I've been involved with the field and that's since the early 1960s or the late '50s actually and we see even today companies racing offshore raising capital very easily that they can't raise in Australia. Unless we solve the problem this time around we've really saddled ourselves with a millstone around our neck. As far as I'm concerned we're going to be doing our damnedest to suggest to the government ways in which this venture capital, the risk capital, patient capital issue should be resolved. If we don't solve it people will continue to race off and raise capital elsewhere.
D'Arcy: Dr Cutler am I correct in saying that the penetration of pcs in homes in Australia is less that 30 per cent, ie that 70 per cent don't have them? Am I correct in saying that when it comes to the Internet that we are looking at probably less than 15 percent of the Australian population using it? If we are to become on online society what is going to be done about ensuring the method of being able use these facilities is in fact going to be placed in the hands of the consumer?
Dr Cutler: I think you are underestimating pc penetration and overestimating Internet penetration at the moment. However, the basic point I take and we are still clearly at a point where this is not yet a mass market. There has not yet been the consumer take-off that is going to really bring us into this new era. But I would strongly suggest that we're going to see this over the next 12 months. If you look at year on year increases in pc penetration and Internet usage the growth rates continue to be phenomenal. One of the issues with new pc penetration is just the unit price and my own personal view is that we are yet to see the point where pc manufacturers get away from the mindset of seeing these as business machines rather than as consumer commodities which they have truly become. Once that shift occurs that we'll see drops in price points that then really do encourage the mass market take-up that is going to be needed to preserve equity of access and utilisation of these resources. But I think over the next 12 months is when we really start to see things take off and change.
D'Arcy: This Forum hosted a lunch for the president of Oracle, Ray Lane, last week and of course the pitch was there for the network computer. Is it going to be an evolutionary technology that is going to place it into the hands of the masses or are we looking at a drop in the price of existing pcs? How do you see this occurring?
Dr Cutler: My personal view is that the network pc is a curious phenomenon. It really is pitched at the business intranet market of terminals working off servers. Now this is not consumer household solution stuff. So the real solution has to come when manufacturers start thing about production line volumes of pcs in the same way they think about fridges or television sets. When you start thinking about those economies of volume, you'll then see the appropriate price points.
Chess Krawczyk, PanDimensional Systems: A general question to both of you. We welcome you in the information industry as spokesmen or prophets or banner carriers to the new coalition government but the coalition government IT statement was one week before the election, was naive and uninformed, they had no IT advisers and started hiring them well after they got into power. They've appointed these new committees and policy boards in September of this year and they've set unreasonable deadlines. We have people like OGIT working for several years that are going to meet the same deadlines: a December report, a March/April report for a budget in May next year. Your intentions - totally supportive, industry directions wonderful, but are you just a figurehead or a token sort of gesture? They haven't actually been doers in the past. You are both doers, thinkers and planners. Will they listen to you?
Dr Cutler: There is a very short answer to that. That partly depends on our media colleagues here today. One of the real disappointments for me is the failure of the media to put these issues and the need for action on the front page and not in specialist computer supplements. I really throw it back and say, if we fail we share collective guilt. Both of us will continue to wave the banner as will our Taskforce and Council. But there is also a lot of onus on the media to really start addressing the seriousness of these issues on the front pages.
Professor Goldsworthy: I wasn't involved prior to March in the development of any IT policy, let me say that for a start. I'd like to see us, and I say us as Terry and myself I guess and I don't know how he'd respond, but I'd like to see us as opening bowlers rather than opening batsmen in this particular exercise. Whether or not our recommendations or whatever emanates from our activities will be implemented and accepted by government is beyond our control. I guess we can persuade, we can recommend, we can wave banners, flags and so on. We may even say some brutal things in private to the ministers responsible, but it is beyond our control as to whether they are implemented. I would certainly think that there is a willingness as far as the Taskforce is concerned, and I'm sure it applies to Terry, that there is a willingness at the ministerial level and beyond to listen to and accept recommendations along the sorts of lines we've indicated and I hope that will be translated into action. If I could just support what Terry said about the media. I was determined in this exercise that one thing we would do is specifically address the media, ask the media for their input. I've signed dozens and dozens of letters to individual journalists seeking their input, got zero return and what I'm saying now is that the journos are quite happy to parade their criticisms and complaints after the event, well, we're asking you to give us your input, become part of the development process, become part of the debate, and not just sit on the outside. I'm looking for and will certainly list in our report the input we have got from the media. It will be interesting to see how you respond.
Steve Lewis, Financial Review: Ashley, I did actually contact your office. I thought it did create a bit of a conflict if you like in terms of reporting the issues as well as putting submissions in. I'm not trying to take away from your comments. Terry, I wanted to ask you a few questions, one about grey cables. I think it's a terrific issue and I understand there is a problem for the carriers, quite seriously, about this large stockpile of black cables which they have got out there. I did actually suggest to Telstra that it would be good for their staff morale if they got out there with cans of grey paint. I don't know whether that message has filtered through as yet. I did want to ask you some questions, Terry, in terms of the work your committee is doing and I guess some thoughts that I know you've had for some time in the context of the post '97 framework. Correct me if I'm wrong but you've been a critic of the - I think this goes back to the previous government - of a failure by those formulating the post '97 framework, to, if you like, embrace the notion of the new digital era, the emergence of the online services as a serious player if you like in the whole information exercise. In terms of what you have seen so far in your discussions with the minister are you confident that that message that you have been pursuing is getting through and that this government will actually introduce a post '97 framework which will facilitate the development of an online economy and if not where do you think the weaknesses are going to be? Will it be the role of your council to recommend to Senator Alston specific measures to address that failure?
Dr Cutler: Steve, that is a somewhat daunting question but it highlights a key issue. One, I mentioned in my talk the pace of change in this industry and the concomitant need for policy thinking and implementation to take place within the same timeframe. A process of developing, let alone legislating for 1997 has now proceeded for two years, is a national disgrace, whoever is responsible. I think it is appalling that we have the prospect that the slow downs in the Senate mean that we won't have anything in place until sometime perhaps in the first quarter next year, regardless of the content of it. With respect to the question on the current legislative proposals, I think that everyone around the world is having trouble with this transitional legislation, of balancing the short term imperative of what I like to think of as legacy systems and the emerging imperatives of a digital environment and we're still on the cusp of that. Certainly I see the role of the council as being to constantly and consistently and vocally draw attention to any shortcomings with respect to new digital realities, in legislation past, current or proposed. That is part of our job.
John Hilvert, the Australian. Following my colleague. I was too low on the food chain to get a letter so I can't respond to your request. I follow my colleague in also taking conflict of interest had you sent a letter. The question I've got is for Professor Goldsworthy. I was taken by the elegance of the side stepping you took on the partnerships for development program but the fact is, that's it, that's really our IT industry policy. It's glorified quid pro quo based on the fact that the government as a huge buyer, a huge strategic buyer of IT supplies and services. Okay, you don't want to talk about the actual programs could you at least talk a little bit about whether your committee has moved, are you going to consolidate that idea of IT policy being grounded in the idea of government setting the agenda for its purchasing or are you going to move away from that for some other approach in terms of provoking and enhancing industry development. Is that an issue before the Taskforce?
Professor Goldsworthy: Yes it's an issue. I appreciate your compliment of elegant side stepping but I was trying to be brutally honest and say that we hadn't yet discussed the issue because it's too early days yet. But I mentioned one of our policy principles was the issue of using government, and that is state and federal, purchasing and outsourcing as a leverage for industry development. Obviously it is a major component of total expenditure. It used to be the wisdom because one of the problems we have in this whole exercise is an appalling lack of statistics. This is one thing we will be saying something about, the need for information. You can't manage anything without information and Australia has got an appalling lack of adequate statistical information on this area. But one of the things we recognise is that whatever the percentage is, it used to be seen as 40, it is now I heard the other day, down to perhaps 20 percent of total expenditure, nevertheless is an opportunity for leverage, for industry development. I suspect that this is probably antithetical to the treasury attitude of what life should be about. But everyone makes a mistake at some stage and I guess that we can argue about that. But we would like to see, and I think we will be making some recommendations about the need to recognise that this expenditure can and should perhaps be used in a way that does grow and develop information industries in this country. I think we would be remiss if we avoided that issue. So I am sure that there will be some recommendations about that particular issue. I'm really saying that's as far as our debate has got at this particular stage.
Chess Krawczyk, PanDimensional Systems: Dr Cutler, I just hope that your www.ipac.gov.au is better than the OGIT one which has not been updated since before the election. In the terms of references for policy and Taskforce are you going to review some the excellent programs that existed in the previous government, such as the cooperative research centres, Australia First, Centres of Excellence, the tax incentives for research, or are all these going to go the way of economic rationalism and dollar cuts?
Dr Cutler: Again speaking personally, given that I was an avid advocate of some of those measures to which you have referred, I am hardly likely to change my position on them now.
D'Arcy: You spoke of the media. In fact this information management forum has been set up to encourage the media's interest in this really fast growing section of the economy. It's a bit of a difficulty to get it out of the specialised sections and onto the front page, or toward the front page, because as you've noticed the only times that it gets there is when sex is involved. So perhaps that is one way of approaching it. Do you think there is a mindset at work here, either in a generational sense or for some other reason in the media and also at senior levels of government, that know about the figures but can't really grasp hold of the importance of this to Australia and to Australia in the 21st century?
Professor Goldsworthy: I'm absolutely certain, convinced that that is the case. Last Monday of last week in the editorial of Australia's leading daily, the Courier Mail, there was a comment about the IT&T industry "even though it's in its infancy". Even though they know the numbers there is a complete lack of appreciation of the importance for the future particularly of the industries we are talking about. I have said to very senior people, do you know that it generates greater exports than wool, wheat, iron ore etc and their jaw drops because they have never considered it in that context. They have no real appreciation of the impact it's going to have on jobs, productivity, growth, adding wealth to this nation in the years to come. I think one of the messages we've got to get across, and I'm sure that Terry's Council will be doing the same thing, is a much greater awareness of the impact and the ramifications of the industries we are talking about. They are tomorrow, they are enormous and they really are more important than sheep and wheat and iron ore and all those other good things we think are important.
Dr Cutler: I agree with that all of us at some stage have to have one of those ah ha experiences where we suddenly realise that everything is changed. The contrast I think we need to draw with respect to the media is, if we look at the media here versus, say, the US or even in Asia, where these issues are in the front section of the papers. In all the Asian papers I read this is main stream stuff. If you read the Wall Street Journal, this is right at the front of every issue. Perhaps one of the reasons for declining circulation of Australian print media in some areas at the moment is the fact that this is not happening because you se people reading specialist US publications, particularly younger kids. They're reading some of these things either online or the hard copy versions of things like Wired and so forth which are main stream and appealing to a group of people who are getting nothing out of main stream media, if I might be so courageous to say so.
Professor Goldsworthy: I do think the media does play and can play an increasingly important role in this awareness exercise. Clinton and Gore, to take just but two as an example, have information technology, information industries, not just today but at the previous election, as recognising the importance of them and we see other countries in the world where it's top of mind at the top level of government. It has to become top of mind at the top level of government in this country otherwise we are going to continue the slide that we have seen since 1901.
Dr Cutler: I totally agree. If I might reveal one of the closet goals of IPAC. It is recognition that we have to get the whole core cabinet group as excited about this as Jeff Kennett is in Victoria or our own minister is, because without that complete leadership commitment to this as one of the top priorities we are not going to get the action that we all look for. I think people like Ashley and myself are committed to working with our teams to try and make that happen.
Steve Lewis, Financial Review: I wish you good luck, Terry, in getting the whole of Cabinet interested in this particular issue.
Dr Cutler: Love a challenge, Steve.
Lewis: When you were referring to declining circulation you obviously had not seen the latest figures on the Financial Review. Terry, I did want to ask you some questions ... you raised some issues about content regulation and you mentioned the media inquiry, which of course is focusing the minds of certain media companies as we speak. Senator Alston has made it quite clear that this media inquiry is going to be fairly limited in looking at the cross media rules. In the context of the development of the online industry do think there are pressures on existing regime of media ownership and do you think this government should be looking at this particular issue either under this particular review or at a future time to address the question of content regulation? We have seen Telstra come out and say that FoxTel should not be regulated under the cross media rules. We've seen a similar, or slightly different version from New Ltd who of course joint venture partner is Telstra in pay tv. What are the pressures here, what will the Council be doing and are your anticipating having direct input into this current review?
Dr Cutler: We have been asked to contribute our general thoughts about the possible nature of the cross impact between online and new media developments and the current issues being examined with the cross media review. Clearly on any analysis you would have to see online, new content media as being directly relevant to such an inquiry. One of the issues, I suppose, is that you could probably use online developments to argue any case you wanted to. I think the real challenge is one of the time frame of development, in other words are new media and online content sufficiently well developed to be able to put in that same basket As established traditional media when you look at the cross impacts. There are a number of emerging characteristics of new media that should frame the thinking of the government and its current review. One of those in my personal view - I stress that because the Council is yet to really pull together its thinking on this issue - is the global nature of new content media in an online world which poses all sorts of challenges for the definition of markets and also issues like foreign ownership and its continued relevance.
D'Arcy: Thankyou very much. Last Thursday John Button came here to launch his book, Life After Politics. A point in his address that stood out to me was that the 20 biggest companies in this country are essentially out of growth, that the growth is gone, that profits they are making are coming about by reductions in costs, sacking of people etc. Here we are looking at this industry where there is enormous potential for growth and where there is enormous growth already taking place. There doesn't seem to my eye at least a great deal of interest. I wish you both well with the deliberations of your respective groups and we hope that we will be able to have you back again. These may be helpful in drowning your sorrows at some stage ..
Dr Cutler: Or giving us inspiration ...
D'Arcy: Or giving you inspiration. It depends what you put in them.
Thank you very much.
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