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Outcome 2 - Resources for outcomes

Competitive and effective communications and information technology industries and services and improved access to Government information

	(1) Budget* 2002-03 $'000	(2) Actual expenses 2002-03 $'000	Variation (column 2 minus column 1) $'000	Budget 2003-04** $'000
Administered expenses (including third party outputs)	389,943	294,516	(95,427)	298,815
Total administered expenses	389,943	294,516	(95,427)	298,815
Price of departmental outputs
Output 2.1 Strategic advice, policy and programs to achieve competitive and effective communications and information technology industry and services	57,190	55,323	(1867)	51,463
Revenue from Government (appropriation) for departmental outputs	50,481	50,621	140	47,005
Revenue from other sources	6709	4702	(2007)	4458
Total price of outputs	57,190	55,323	(1867)	51,463
TOTAL FOR OUTCOME 2 (Total price of outputs and administered expenses)	447,133	349,839	(97,294)	350,278

 

Average staffing level	2002-03	2003-04
Average staffing level	317	332#

* Budget estimates as at 2002-03 Portfolio Additional Estimates Statements.

** Budget estimates as at 2003-04 Portfolio Budget Statements.

# Staff numbers reflect a reallocation of overheads.

Note: There are a number of changes in the outcome and output structure in 2003-04. For the purposes of the Annual Report, these changes have been amended to fit the 2002-03 outcome and output structure.

The 2003-04 changes are:

• Outcome 2 becomes Outcome 3 in 2003-04.
• - Sport will be the new Outcome 2 in 2003-04, which has been included as part of Outcome 1 in 2002-03.
• Output 2.1 is split into Outputs 3.1, 3.2, 3.3, and 3.4 in 2003-04.
• - Sport will be the new Output 2.1 in 2003-04, which has been included as part of Output 1.1 in 2002-03.

Performance indicator index

Performance indicator	PBS page reference	Annual Report page reference
Departmental outputs
Output 2.1 Strategic advice, policy and programs to achieve competitive and effective communications and information technology industries and services.	53	58
Administered items
ABC and SBS Digital Interference Scheme	51	66
Commercial Radio Black Spots	51	67
National Transmission Network Residual	51	67
Funding Pool
Television Fund	51	67
Regional Equalisation Plan	54 (PAES)	68
Television Black Spots - Alternative Technical Solutions	52	68
Regional Telecommunications	50	69
Infrastructure Account
Telstra Social Bonus 2	50	70
Untimed Local Calls Access	52	72
International organisations contributions	50	74
Compensation to Société Internationale de Télécommunications Aéronautiques	51	75
Government response to Telecommunications Service Inquiry	51	75
Australia's response to foot and mouth disease and other quarantine risks	51	78
National Relay Service	52	78
Universal Service	52	79
ICT Centre of Excellence	52	79
Telecommunications Action Plan for Remote Indigenous Communities	52	80
Evaluations
Universal Service Obligation contestability pilots	53	82

EFFECTIVENESS

Overall achievement of the outcome

The Department provides strategic advice on policy and programs across a wide range of significant and rapidly changing areas including broadcasting, telecommunications, information and communications technology (ICT), radiocommunications, intellectual property, online and postal issues.

The Department's policy and program processes are underpinned by a sound understanding and knowledge of the nature and dynamics of the communication and information technology industries and ongoing research and analysis.

Involvement and consultation with key bodies, including industry participants, users and communities, in the communication and information technology industries is an important aspect in the development of timely and responsive policy and program advice.

Facilitating competitive communications markets

Responsive regulation of communications services that provide incentives for the development and maintenance of efficient, high quality services

In 2002-03, the Department provided advice to assist the Government in its development of policy and implemented Government policy in relation to:

• providing support to Government, Parliamentary and community consideration of the ongoing issues of media ownership, communications market structures and institutional arrangements for spectrum management;
• the amendment of the regulatory frameworks for digital television and community television to provide greater flexibility and certainty for those sectors;
• undertaking a range of reviews required by legislation, examining online content and gambling, local content and datacasting;
• analysis and adjustment of the legislative framework for competition in telecommunications markets;
• participation in a co-regulatory approach to legislation for general telecommunications consumer protection and service standards;
• ongoing consideration of issues relating to communications convergence; and
• regular and wide-ranging consultation with key stakeholders to assess the impact of telecommunications regulation.

The Department also provides advice on the accountability and funding of the Australian Broadcasting Corporation (ABC), the Special Broadcasting Service (SBS), the Australian Communications Authority (ACA) the Australian Broadcasting Authority (ABA), and NetAlert. In addition, the Department monitors the activities of industry bodies such as the Telecommunications Industry Ombudsman and the Australian Communications Industry Forum.

Policy development activities directed at improving the policy and regulatory framework for communications

The key issues arising in the policy and regulatory frameworks for communications in 2002-03 were the changing structure of the communications sector and the regulatory implications of that change, the implementation of the framework for digital broadcasting, and the ongoing promotion of a competitive telecommunications sector.

Market structures

In 2002-03, the Department provided advice on media ownership issues in the context of Parliamentary consideration of the Broadcasting Services Amendment (Media Ownership) Bill 2002. The Bill concerns the implementation of the Government's election commitment to reform the media ownership regime in Australia by establishing the environment for a more sustainable, dynamic sector while preserving media diversity.

Changes in the pay television (pay-TV) market, including the Foxtel/Optus content sharing agreement, involved the Department providing policy advice to the Minister on the competition implications of emerging industry structures in the pay-TV market.

The Department also advised on possible changes in the respective roles and responsibilities of the ACA and the ABA, to provide for more effective and efficient regulation of spectrum management. Following consultation with the ABA and ACA, a discussion paper was issued on current arrangements and whether changes in the roles and responsibilities of those agencies are appropriate.

Digital broadcasting

The Department provided advice on adjustments to the regulatory framework for digital television to provide greater flexibility to broadcasters in relation to High Definition Television (HDTV) broadcast obligations. The HDTV quota commenced on 1 July 2003 in mainland state capitals and most broadcasters are already exceeding an average of 20 hours per week of HDTV content. The Department also assisted with a review of the regulatory arrangements for datacasting services.

Telecommunications competition regulation

The Department supported the development of the Telecommunications Competition Act 2002, which was part of the response to the Productivity Commission report on telecommunications competition regulation. The Act commenced operation in December 2002.

The initiatives in this legislation are aimed at improving the environment for competition and investment in the telecommunications market to the benefit of consumers and business. Consistent with these new provisions, the Minister issued directions to the Australian Competition and Consumer Commission (ACCC) to use its existing broad record keeping rule powers under Part XIB of the Trade Practices Act 1974 to require Telstra to prepare and publish reports separately on its wholesale and retail operations. The Government has indicated that it will continue to monitor the industry to ensure the telecommunications competition regulatory regime continues to meet the needs of an open and competitive telecommunications market.

Other highlights in this reporting period include:

• new licensing arrangements for community television to improve corporate governance and accountability;
• addressing industry concerns in relation to unplanned commercial radio broadcasting licences issued under Section 40 of the Broadcasting Services Act 1992;
• preserving the availability of high-quality commercial radio services of broad appeal;
• introduction of an improved reporting regime for broadband under the Monitoring and Reporting on Competition in the Telecommunications Industry Determination 2003 (No.1), which requires the ACCC to collect and publish detailed wholesale and retail statistics on broadband availability and take-up;
• provision of advice on ways to enhance a range of law enforcement and security issues, including participation in the Law Enforcement Advisory Committee and several forums examining critical infrastructure protection and counter-terrorism issues;
• provision of advice to the Minister on the installation of telecommunications infrastructure under Schedule 3 of the Telecommunications Act 1997;
• in conjunction with the Department of Finance and Administration, the Department continued to provide advice to the Minister on the financial operations and governance arrangements for Telstra and Australia Post;
• amendment of the Australian Postal Corporation Act 1989 to improve oversight of Australia Post and to legitimise current mail aggregation and document exchange services provided by the private sector; and
• assistance to the National Office for the Information Economy (NOIE) in relation to NOIE's secretariat function to the Broadband Advisory Group.

Stakeholder feedback on the quality of Divisional engagement on regulation, competition and market structure issues

In developing legislation and administering programs the Department adheres to a policy of consulting stakeholders. Each area engages in a transparent and consultative policy development process that incorporates stakeholder feedback, research, public consultation through submissions to Divisional reviews, and liaison with portfolio and other government agencies.

In particular, the Department was engaged during this period in extensive consultation with a wide range of stakeholders on:

• online content and gambling reviews;
• emerging industry structures in the pay-TV market;
• institutional reform of Australia's communications regulators;
• development of legislative proposals for the Telecommunications Competition Act 2002;
• development of a proposed Australian Competition and Consumer Commission (Accounting Separation - Telstra Corporation Limited) Direction (No. 1) 2003, to implement an accounting separation regime for Telstra's wholesale and retail operations;
• development of the Monitoring and Reporting on Competition in the Telecommunications Industry Determination 2003 (No. 1), relating to broadband services; and
• the regulatory regime to establish protection zones in relation to submarine telecommunications cables that link Australia to the global communications system.

Timely regulatory review

The Department provided secretariat support to the independent Regional Telecommunications Inquiry (RTI), chaired by Mr Dick Estens.

In addition, the Department undertook the following reviews in 2002-03:

• a review of the online content regulatory scheme, required under clause 95 of Schedule 5 to the Broadcasting Services Act 1992, which commenced on 27 September 2002. The Department will report to the Minister on the review in the first half of 2003-04;
• a review of datacasting arrangements, required under clause 61 of Schedule 6 to the Broadcasting Services Act 1992. The Minister tabled a report of the review in Parliament on 10 December 2002. As a consequence of the review, the Government announced that it would support spectrum being made available by the ABA for trials of new and innovative digital services, to assist and encourage industry to develop business strategies to fully exploit the potential of datacasting;
• a review of Australian Government regulation of interactive gambling services, required under s.68(1) of the Interactive Gambling Act 2001, which commenced on 16 January 2003. The Department expects to report on the review to the Minister during 2003-04; and
• a review of local content obligations for subscription television, which commenced on 26 August 2002, required by s.103ZJ of the Broadcasting Services Act 1992. The Department expects to report to the Minister during 2003-04.

All of these reviews were conducted in accordance with relevant timeframes.

Timely implementation of legislation and other regulations

In 2002-03, the Department provided advice and support to the Government in a timely manner, assisting it to pursue its legislative agenda. See page 59 for details.

Enhancing access to communications services

Improving access over time to basic and advanced telecommunications and broadcasting services.

In pursuing this objective in 2002-03, the Department processed 101 grants for new analog television services through the Television Black Spots Program, processed 36 grants in the first year of the Commercial Radio Black Spots Program and undertook signal testing in a range of locations as part of the Television Black Spots - Alternative Technical Solutions Program.

In keeping with Government policy of improving access to telecommunications services, the Department has also been heavily involved in a range of strategies to improve access to telecommunications services, particularly in regional, rural and remote Australia. Key activities included implementation of infrastructure programs, the provision of secretariat support to the independent RTI and, later, providing support to the Government in developing and implementing its response to the report of the Inquiry.

Quality of policy development activities directed at improving accessibility of communications services

Detailed policy advice was provided on a wide range of communications issues in 2002-03. This advice was accurate, timely and comprehensive.

Regulation of community television

The Department provided advice on the regulatory framework for community broadcasting services and Parliament passed the Broadcasting Legislation Amendment Act (No. 2) 2002 in November 2002. The Act amended the Broadcasting Services Act 1992 to establish new licensing arrangements for community television services that provide greater certainty for service providers and strengthen the accessibility of services to communities. The ABA is now considering applications for community television licences under the new arrangements in a number of markets.

Rollout of digital transmission

The Government has established a regulatory framework under the Broadcasting Services Act 1992 for the introduction of digital television in Australia. To date, more than 75 per cent of Australian viewers have access to a digital television service, including all State and Territory capitals, Newcastle, Wollongong, and most major regional centres.

The potential for digital television transmission to cause interference to the existing analog service reception is being managed through an Interference Management Strategy administered by Commercial Television Australia, with assistance from the ABA and the Department. Since the commencement of digital television, contacts in relation to interference have continued to decline from a peak of 7000 per week in January 2001 to the current weekly average of about 500-600. The vast majority of interference difficulties have been resolved through the provision of technical advice by telephone.

National broadcaster funding

In 2002-03, the last year of the triennium, $807.8 million was appropriated to the ABC, and $170.0 million to the SBS, to provide television, radio and online services across Australia. The Department provided advice, including briefing on funding proposals, for consideration in the context of the 2003-04 Budget on funding of a new triennium to begin in that financial year.

Regional Telecommunications Inquiry

The Department provided secretariat support to the independent RTI. The Inquiry was established to report on whether telecommunications services in regional, rural and remote Australia are adequate and on the arrangements that should be put in place to ensure all Australians continue to share in the benefits of further service improvements and developments in technology. The Inquiry reported to Government on 8 November 2002.

The Department supported the Government in the development of its response to the RTI, which resulted in a package of measures, responding in detail to each of the Inquiry's 39 recommendations, and involving funding of more than $180 million, commencing in 2003-04.

Network Reliability Framework

The Department assisted the Government to establish the Network Reliability Framework (NRF) to monitor and improve the reliability of telephone services provided by Telstra. The NRF came into effect on 1 January 2003 and requires that, where Telstra's network does not meet set performance standards, it must investigate and take action to fix the problem, as required by the industry regulator, the ACA.

New priority service arrangements

The Department provided advice to the Government which led to an amendment to Telstra's licence condition requiring it to establish priority assistance arrangements for people who, by reason of a diagnosed, life-threatening medical condition, have increased risk of a medical emergency, and therefore are more reliant on their telephone. The priority assistance arrangements require Telstra to, among other things, repair faults and provide new connections to priority customers within 24 hours (48 hours in remote areas).

Other highlights

Other highlights for 2002-03 included:

• the Telecommunications Amendment Regulations 2002 (No. 3), which responded to community concerns about unexpected high bills from premium rate services and access by minors to adult material;
• active participation, including with industry, in a range of counter-terrorism and critical infrastructure forums convened by the Attorney-General's Department and the Department of the Prime Minister and Cabinet to implement measures to protect critical infrastructure; and
• the pursuance by the Department of reform of international Internet charging arrangements in the International Telecommunication Union, with the aim of lowering Internet prices and enhancing access for Australian and other consumers.

Efficient and effective administration of relevant Government programs

The Department administers or advises on a range of programs aimed at enabling greater access to broadcasting services, including the Television Black Spots Program, the Commercial Radio Black Spots Program and provision of digital transmission services for the ABC and SBS.

The Department also administers a range of Government programs aimed at enhancing access to telecommunications services. Consistent with Government priorities, a particular emphasis is placed on enhancing the access of those who live in regional, rural and remote Australia to improved services. Significant programs in this context include the Networking the Nation Program, the Telstra Social Bonus programs, the Government's response to the Telecommunications Service Inquiry, and the Telecommunications Action Plan for Remote Indigenous Communities.

These programs are all designed to complement the Government's policy and regulatory framework with the combined aim of delivering improved services in regional areas and therefore reducing disparities in the standard of service between urban and non-urban Australia.

In the reporting period, the Department undertook its administration of the programs efficiently and effectively. The Department continued to monitor and evaluate its program management arrangements and to make improvements, consistent with Australian National Audit Office guidelines for best practice in grant management.

However, in some cases, the Government's milestones were not achieved because third parties were not able to fulfil contractual commitments. In the case of the community grants programs, unavoidable setbacks, such as delays in the importation of equipment, or local council planning approval processes, forced some infrastructure projects to fall behind schedule.

The Department also effectively administered grant deeds with Australia Post to enable the presentation of all inbound international mail to be inspected; and with the Australian Communication Exchange to provide the National Relay Service providing access to the standard telephone service for people who are deaf, or who have a hearing and/or speech impairment.

Implementation of the Consumer Representation Grant Program under section 593 of the Telecommunications Act 1997 ensured that there was appropriate priority given to representatives of people with disabilities and regional, rural and remote consumers.

These programs are discussed further under the Administered Items section commencing on page 66.

Stakeholder feedback on the quality of Departmental engagement on access issues

The Department regularly engages with stakeholders on access to communications services, both in the development and the evaluation of its policy and program activities. Further information on client and stakeholder feedback is covered in the Management and Accountability section of this report, under Client Service Charter.

Timely administration of those aspects of the telecommunications and broadcasting access programs which are the Department's responsibility

The Department manages the administration of a range of programs directed at improving access to telecommunications and broadcasting services. These programs are discussed in detail in the Administered Items section, commencing on page 66.

Support for the development of the ICT sector

Effective framework to support internationally competitive and efficient communications and IT industries and services

The Department addressed this objective by undertaking policy development, program administration and collaborative activities in relation to the key areas of:

• establishing and maintaining a policy framework for the future development of the Australian ICT sector;
• administering a range of funded programs to develop the capabilities of Australia's ICT industry including a world class research institute, business incubator activities and regional infrastructure programs;
• implementing industry development arrangements, including those for small-to-medium sized enterprises (SMEs), linked to Australian Government ICT procurement;
• encouraging multinational ICT corporations to invest in Australia; and
• facilitating an attractive financing and taxation framework for ICT companies.

ICT Framework for the Future

Enabling Our Future, the report of the ICT Framework for the Future Steering Committee, was released on 15 April 2003. The report was the outcome of a year-long collaboration between the Australian Government, the ICT industry and the research and education communities to develop a shared understanding of the challenges facing Australia's ICT sector and strategies to address these challenges. The Department provided extensive secretariat and research assistance to support the deliberations of the Steering Committee.

The report's recommendations provide a strategic blueprint for the development of the industry over the medium term, building on the foundations already put in place by the Government. Key recommendations relate to leadership, research and development, infrastructure, skills, enhancing ICT capacity through attracting and embedding ICT investments in high value-adding activities, and building innovative SMEs. The recommendations are informed by the view that ICT has a broader role - as a set of enabling technologies that underpin the development of Australia as an 'information' economy.

Electronics Industry Action Agenda

The Department supported the development of an Electronics Industry Action Agenda through the Action Agenda process, administered by the Department of Industry, Tourism and Resources, and is actively engaged with the Australian Electrical and Electronic Manufacturers' Association to assist in its implementation.

Venture capital

The Department played a significant role in the development and implementation of the legislation to enact the Government's venture capital limited partnership reforms.

Three Australian venture capital management groups have established limited partnership funds, obtained conditional registration from the Pooled Development Fund Board and are undertaking capital raising activities. These management groups are DB Capital Partners, Macquarie Direct Investments and Starfish Ventures, which collectively are seeking to raise $575 million.

ICT SME facilitation package

The ICT SME facilitation package, announced by the Government on 21 June 2002, is directed at helping SMEs access a greater share of the Australian Government ICT market, obtain the information they need and establish alliances. A Joint Industry Government Working Party is assisting to implement the package, including conducting a seminar series to provide SMEs with information on the ICT procurement market and assist them to form links with multinational corporations, and preparation of the publication Selling ICT to Government - a guide for SMEs.

Investment

The Department is supporting the investment promotion and attraction activities of Invest Australia, and was closely involved in Invest Australia's development of an Investment Attraction Strategy for the ICT industry to commence in 2003-04. There will be ongoing assessment of the strategy.

Quality of policy development activities directed at facilitating the development of Australia's ICT industries at all relevant levels

The key policy development activity during the year was the development of the ICT Framework for the Future. Other key policy activities included participation in Government processes to improve taxation arrangements for the venture capital regime, and development of measures to facilitate SME access to the Australian Government ICT market.

Quality of activities directed at ensuring that Government has a sound understanding of the ICT industry environment and developments

The Department was involved in detailed analysis of the ICT industry as part of the ICT Framework for the Future process. The substantial body of information released with the report included a study by McKinsey & Company, Australia: Winning in the Global ICT Industry, which provided a strategic perspective of the ICT industry in Australia in a global business context, and an ICT industry statistical map based on work undertaken by the Framework's Mapping Working Group.

Effective and compliant administration of relevant Government programs

Administered items

All administered programs were implemented in accordance with their original objectives and program guidelines. Further details of each program and its administration are provided under the relevant entry in the Administered Items section of this Outcome, commencing on page 66.

Industry development (ID) outcomes from Government ICT Procurement Framework

The Department administers the ID policy framework for Australian Government ICT procurement. The key elements of this framework include:

• minimum SME participation levels for contracts valued at more than $20 million;
• voluntary strategic guidelines, which outline the expected ID activities by the Government's major international ICT suppliers; and
• the Endorsed Supplier arrangement, which sets out pre-qualification requirements for all ICT suppliers to the Australian Government.

The Department also administers the ID commitments made under the Australian Government's former Information Technology outsourcing initiative. The Auditor-General reported on this activity (Audit Report No. 36, 2002-03), concluding that the contractors are performing well against their ID commitments and that progress in the delivery of these commitments has been effectively monitored by the Department.

Telecommunications Carrier Industry Development Plans

The Department administers carrier Industry Development Plans (IDPs) for the telecommunications industry under the Telecommunications Act 1997. During the year, the Department published a progress report for 2001-02 on carrier IDPs. Highlights included a total of 81 carrier licences as at 30 June 2002, with $7.9 billion capital investment reported by carriers during 2001-02.

Other initiatives

The Test-IT Program has assisted with the development of the testing and conformance infrastructure for the ICT industry in Australia. Final funding payments of $393 000 were made to Test-IT grant recipients during the year.

The role of Software Engineering Australia (SEA) National is to improve the quality and sophistication of software development and acquisition in Australia. The Government provided a further $2 million to SEA National during the year. SEA National staged a national software conference in October 2002 and five editions of its Software journal were provided to a subscriber list of over 6000. SEA National also announced in May 2003 its intention to introduce enhanced software quality certification programs.

Other Departmental activities in 2002-03 included promotion of the ICT industry, both nationally and internationally, under the 'Technology Australia' brand, through membership of the ICT Events National Committee, and launching the second 'Secrets of Australian IT Innovation' competition to identify key innovations being undertaken by Australian ICT firms.

Effective promotion of Australia's international telecommunications interests

International arrangements promoting competitive opportunity and supply of telecommunication services for Australian suppliers and users

Australian positions reflected in decisions of International Telecommunication Union (ITU), Asia-Pacific Economic Cooperation (APEC), World Trade Organisation (WTO) and other relevant multilateral forums

The Department was active in encouraging further liberalisation of the telecommunications sector in those international forums in which it participated, including:

• the Doha Round of the WTO General Agreement on Trade in Services (WTO GATS), where requirements for transparency, regulatory independence and general competitive safeguards were agreed. This will create improved competitive opportunities for Australian businesses operating in a number of markets;
• at the ITU Plenipotentiary Conference 2002, the Department made some progress towards achieving the extensive reform of the International Telecommunication Regulations and greater flexibility of the ITU Standardization Sector; and
• through the APEC Telecommunications and Information Working Group (APEC TEL), where projects included training for senior regulatory managers on arrangements to support competition in the telecommunications services market.

The Department assisted in negotiating the telecommunications chapter in the Singapore-Australia Free Trade Agreement. The telecommunications obligations entrench the WTO GATS requirements for transparency, regulatory independence and interconnection arrangements involving major suppliers, together with general competitive safeguards and appropriate industry participation.

In Study Group 3 of the ITU Telecommunications Standardization Sector, the Department continued making the case for reform of Recommendation D.50, which provides guidelines for companies to use when negotiating Internet interconnection.

Stakeholder involvement in consultation in developing Australian positions

The Department consulted widely with relevant stakeholders including government agencies and industry representatives in developing Australian positions for the Singapore-Australia Free Trade Agreement (FTA) and WTO GATS telecommunications trade negotiations; and in preparation for APEC TEL and ITU meetings.

Timely development and presentation of Australian positions to relevant forums

The Department successfully advanced Australia's position in negotiations in the ITU, Singapore-Australia FTA, WTO GATS, and in APEC TEL Working Group. The Singapore-Australia FTA telecommunications provisions were satisfactorily concluded within the two-year timeframe and Departmental officer, Mr Richard Thwaites, chaired the APEC TEL Working Group and the ITU Study Group 3 during 2002-03.

Development and maintenance of a workable and modern intellectual property (IP) regime

Balance of creators, investors and consumers' interests

Consistent with the Copyright Act 1968, the Department seeks to develop copyright policies, guidelines and legislative provisions which balance the interests of creators and authors who create copyright material, people and organisations who invest in the production of copyright material and consumers who purchase and use copyright material.

The Department aims to maintain this balance in the face of rapidly changing communications and reproduction technologies through the production of high quality research, analysis and advice for Government, informed by extensive consultations with key creator, investor and consumer stakeholders.

Development of balanced, workable and effective policies and regulations on copyright and related intellectual property issues

During 2002-03, the Department continued to progress the Government's legislative agenda in relation to Indigenous communal moral rights, parallel importation and creator rights.

In 2002-03, the Department was also extensively involved in preparations and negotiations for the Singapore-Australia FTA. The final Singapore-Australia FTA reflected the Department's emphasis on the need for balanced outcomes in respect of the interests of creators, investors and consumers. The Department is seeking similar outcomes from the Australia-United States FTA, which is currently being negotiated.

The Copyright Amendment (Parallel Importation) Act 2003 was passed by the Senate on 27 March 2003 and received Royal Assent on 15 April 2003. The Act represents a balance between the rights of copyright owners and users as it enhances competition in the distribution of software and introduces provisions to assist copyright owners in enforcing their rights.

A Guide to Digital Rights Management was released on 4 June 2003. The Guide was developed by the Department to provide a reference point to assist creators, producers and traders (including SMEs) to effectively manage digital content in the new communications environment.

Timeliness and effectiveness of policy outcomes and implementation

Considerable legislative development activities occurred during the year to develop and progress models for new rights for performers and film directors and to extend the duration of copyright in photographs in accordance with the Government's 2001 election commitments. The models provide practical proposals for reform and take account of the views of all relevant stakeholders and the existing industry arrangements.

During the 2001 election, the Government also committed to provide additional moral rights for Indigenous communities. In line with these commitments, the Government announced on 19 May 2003 that it would introduce legislation for Indigenous communal moral rights by the end of the year, based on a model agreed with the Attorney-General's Department.

Responsiveness to stakeholder concerns

The Commonwealth Copyright Administration (CCA) function responded to 1415 inquiries and requests for permission to use published Commonwealth copyright materials. Of these requests, 509 were responded to within 24 hours of registration and 1289 permissions and 17 licences for the reproduction of Commonwealth copyright material were granted. Broad consultation was undertaken with Government agencies to assist the CCA in consolidating efficient processes for issuing copyright licences and enhancing management practices for Commonwealth copyright materials.

The Department prepared and distributed within its portfolio agencies a discussion paper summarising the Copyright Law Review Committee's (CLRC) report into copyright and contracts. The discussion paper sought views from agencies as to the potential impact of the CLRC's recommendations.

The Department contributed significantly to the preparation of the Government response to the House of Representatives' Standing Committee on Legal and Constitutional Affairs report into the enforcement of copyright in Australia. The report's recommendations were made after significant consultation with Government and industry stakeholders. A number of the recommendations had already been largely implemented in the Copyright Amendment (Parallel Importation) Act 2003 outlined above.

DEPARTMENTAL OUTPUTS

Output 2.1 Strategic advice, policy and programs to achieve competitive and effective communications and information technology industries and services

To achieve its outcomes, the Department produces a wide range of outputs. Core activities are advice to the Minister and Government, provision of information to the Parliament, the preparation of legislation, instituting consultative processes to implement policy and programs, and administration of specific programs and initiatives.

Timeliness, relevance and accuracy of advice and draft legislation supported by relevant research

The Department provided timely and accurate advice to the Government throughout the year. In providing this advice and managing programs, the Department ensured that these activities were informed and supported by relevant research.

Strategic advice

The Department provided strategic advice on a range of key issues including:

• media ownership, restructuring in the communications sector and digital television;
• institutional reform of the Australian Broadcasting Authority (ABA) and the Australian Communications Authority (ACA);
• Australian and children's content obligations for the commercial television broadcasting sector, following a review conducted by the ABA;
• commercial, narrowcast and digital radio services, including advice on the establishment of a Digital Radio Study Group, which is investigating international developments in digital radio technology and international approaches to service delivery;
• national broadcasting funding issues, in the context of the 2003-04 Budget;
• regional communications issues including the availability of news and information services, the implementation of digital television transmission in regional Australia, progress with the implementation of the various Telecommunications Service Inquiry initiatives and programs to support the development of the ICT industry;
• telecommunications competition and consumer issues including accounting separation arrangements, a network reliability framework and a priority services direction;
• the ACA's cost recovery arrangements, in consultation with the Departments of Finance and Administration and Treasury;
• the implementation of a number of the Government's election commitments in the postal and telecommunications sectors, including the establishment of a Postal Industry Ombudsman;
• commercial, technological and regulatory developments in the Internet and broadband sectors;
• development of the ICT Framework for the Future;
• establishment of the ICT Centre of Excellence;
• formulation of an ICT investment and promotion strategy, and financing and taxation issues for Australian ICT companies, including venture capital;
• mapping of Australia's science and innovation infrastructure and National Research Priorities;
• implementation of industry development arrangements for, and facilitation of SME participation in, Australian Government ICT procurement;
• advice on implementation of the Government's copyright election commitments including development of legislation to remove certain parallel import restrictions, and formulation of models for increased protection for creators and Indigenous communities;
• advice on copyright industry proposals for reform including proposals to remove the one per cent cap on royalties for broadcasting sound recordings, introduce a blank media levy and increase protection of piracy of pay-TV signals;
• advice to Government on international negotiations and trade issues including the Australia-US Free Trade Agreement; and
• domestic reports and reviews on copyright including reports on the arts sector and copyright enforcement.

Government satisfaction with quality of advice

Legislation

The Department provided advice and support to the Government to implement the Government's legislative agenda, including:

• the Broadcasting Legislation Amendment Act (No. 1) 2002, which delayed the introduction of the HDTV quota (from 1 January 2003 to 1 July 2003) in mainland State capitals;
• the Broadcasting Legislation Amendment Act (No. 1) 2003, which annualised the HDTV quota. Consequent regulations were developed, in advance of the commencement of the HDTV obligations on 1 July 2003, which also provided for the ABA to collect information on broadcasters' compliance with the HDTV quota;
• the Broadcasting Legislation Amendment Act (No. 2) 2002, which established new licensing arrangements for the community television sector;
• the Broadcasting Services Amendment (Media Ownership) Bill 2002, in relation to cross-media and foreign ownership restrictions;
• the Communications Legislation Amendment Bill (No. 1) 2002, which, inter alia, provides for radiofrequency spectrum use for national security, law enforcement and emergency services;
• the Communications Legislation Amendment Bill (No. 2) 2003, which, inter alia, strengthens telecommunications law enforcement and national security provisions;
• the Communications Legislation Amendment Bill (No. 3) 2003, which, inter alia:
• - corrects legislative anomalies so that additional digital television services are able to be provided in certain regional areas; and
  - provides penalties in lieu of a prosecution scheme for non-compliance with obligations relating to telecommunications customer equipment and cabling;
• the Telecommunications Competition Act 2002, as part of the response to the Productivity Commission report, which enhanced the telecommunications-specific competition regime and simplified the administration of the telecommunications carrier industry plan arrangements;
• the Postal Services Legislation Amendment Bill 2003, to improve oversight of Australia Post and to legitimise current mail aggregation and document exchange services provided by the private sector;
• the Telstra (Transition to Full Private Ownership) Bill 2003, to allow for the sale of the Government's remaining holdings in Telstra; and
• the Copyright Amendment (Parallel Importation) Act 2003, to enhance competition in the distribution of software and assist copyright owners in enforcing their rights.

The Department also provided advice and support to the Government on a wide range of subordinate legislative instruments relating to Outcome 2.

Research

The Department ensured that the provision of advice and management of programs during the year were informed and supported by relevant research. In particular, the Department prepares policy advice taking into account research into industry developments both in Australia and overseas. Where appropriate, the Department also used the research skills of the Communications Research Unit or engaged specialist external research consultants.

As part of its day-to-day operations, the Department monitored and advised on technological, commercial and regulatory developments. This included the monitoring of the media and industry literature, attendance at industry briefings and seminars, and liaison with industry and other stakeholders and consultancies.

The Department has implemented the Spatial Data Network project, which links industry information with geographic details and other departmental data, and provides an innovative desktop reporting and analysis facility for departmental officers engaged in either program or policy work. A public interface to aspects of this spatial project will be available via the Department's website in 2003-04.

Government satisfaction with quality of advice

In 2002-03, a total of 191 briefs were prepared for Ministers, of which 63 per cent were provided within the initial requested timeframe, with alternate arrangements made with the Minister's Office for the remainder. This compares to 216 briefs in 2001-02 of which 73 per cent were provided within the timeframe.

The Department prepared 790 minutes providing advice on various matters in 2002-03, compared to 729 in 2001-02.

A total of 7397 items of ministerial correspondence (excluding campaign letters) were received by the Department in 2002-03. Of these, 3870 were assigned for reply with 3285 replies prepared, of which 13 per cent were returned for redrafting. This compares to 2001-02, when 6467 items of correspondence were received with 4125 assigned for reply and 2842 responses drafted, with 12 per cent returned for redrafting.

As at 30 June 2003, there were 332 items of ministerial correspondence requiring a reply, with 31 per cent overdue. This compares to 30 June 2002, when 508 items required a reply with 55 per cent overdue.

Through regular informal feedback, Ministers and their offices have indicated they are satisfied with the overall timeliness and quality of briefing, policy advice and ministerial correspondence.

Table 6 illustrates the distribution of the documents across the telecommunications, broadcasting, ICT and intellectual property (IP) areas.

Table 6: Subject matter of documents prepared for Government

Document	Total 2002-03	Total 2001-02	Tel 2002-03	Tel 2001-02	B/cast 2002-03	B/cast 2001-02	ICT 2002-03	ICT 2001-02	IP 2002-03	IP 2001-02
Brief	191	216	29%	55%	34%	40%	34%	3%	3%	2%
Minute	790	729	47%	57%	37%	36%	14%	2%	2%	5%
Ministerial	7397	6467	57%	59%	39%	39%	3%	1%	1%	1%

Stakeholder satisfaction with consultation processes

The Department undertook significant consultations with relevant stakeholders across all communications and information technology sectors in 2002-03 to ensure that they were actively engaged in relevant policy and program initiatives. Stakeholders included industry participants and associations, consumer and user groups, regional and Indigenous interests, regulators, and Government agencies and departments, including at the Australian, State and Local Government levels.

Consultations took the form of seeking comments on discussion papers and draft legislative instruments, formal and informal committee discussions and ongoing liaison, meetings and briefings. Throughout these consultation processes, the Department was responsive to stakeholder needs and adjusted consultation processes to address any stakeholder concerns.

These consultations included:

• consultation on proposed regulatory reforms such as accounting separation, reforms to community television licensing and restructuring of the roles of the ABA and the ACA;
• consultation on implementation of programs, such as the Telecommunications Action Plan for Remote Indigenous Communities and the rollout of digital broadcasting in remote areas;
• public industry forums held on the ICT Framework for the Future;
• ongoing liaison through a range of industry committees, such as the ICT Framework for the Future Steering Committee; and
• other consultations on key issues, such as the Free Trade Agreement with the United States.

Further information on client satisfaction is available in the Management and Accountability section of this report, on page 109.

Efficiency and timeliness of program administration

The Department administered a range of programs in an efficient, accountable and timely manner. Key issues in the effective administration of these programs included:

• ongoing monitoring and reporting requirements;
• ensuring appropriate evaluation;
• consistency against Government policy objectives;
• coordination across programs to deliver whole-of-government outcomes; and
• working with a diverse range of community-based organisations.

These programs are discussed in detail in the Administered Items section of this Outcome on page 66.

Tenders conducted with probity

The Department engages in open and accountable tender processes when seeking external assistance from consultants and contractors. Tender processes are conducted, with advice from the Department's Legal Group, in accordance with the Commonwealth Procurement Guidelines as implemented in the Department.

Under Outcome 2, the Department undertook a number of consultancies and procurement processes, including through tenders.

Those related to broadcasting were a review of online content, a consultancy on interactive gambling and digital television signal testing. Tenders related to IP included a review of the effects of extending the term of copyright, development of a database to assist management of the CCA, and a better practice manual for the management of Commonwealth copyright. On ICT matters, consultants were engaged to conduct a pilot evaluation of the BITS Incubator Program and to undertake research into global and domestic ICT trends.

Consultants were also appointed to advise on a range of telecommunications issues, including:

• powerline communications technologies and trunk transmission capacity;
• residential telecommunications user profiles;
• review of teletypewriter (TTY) technology;
• the establishment of a mobile telecommunications education and training service to remote Indigenous communities;
• the development of tools for communities to use several Indigenous languages online;
• the feasibility of higher bandwidth services in remote Indigenous communities;
• evaluation of the National Relay Service contract; and
• reviews of selected Networking the Nation projects in Tasmania.

Timeliness and comprehensiveness of responses to reviews and proposals

The Department supported the Government's response to several reviews and proposals during 2002-03.

The Senate Environment, Communications, Information Technology and the Arts References Committee inquiry Above Board? Methods of Appointment to the ABC Board, was tabled on 25 September 2001 and the Government's response was tabled on 29 August 2002.

The Government's response to the Radiocommunications Review Report and the Productivity Commission's Radiocommunications Inquiry Report were tabled on 5 December 2002. The Government accepted 35 of the 47 recommendations contained in the two reports. Government consideration of a further six recommendations was deferred pending the receipt of additional information on the practical effects of their implementation. The Department has developed legislative proposals to implement these decisions.

On 27 June 2003, the Government released its response to the House of Representatives Standing Committee on Legal and Constitutional Affairs' 1999 report into the enforcement of copyright in Australia. Many of the recommendations had already been implemented due to the April enactment of the Copyright Amendment (Parallel Importation) Act 2003. The response comprehensively addressed all 22 of the report's recommendations. The timing of the response was in line with the Government's priorities for the passage of the parallel importation legislative amendments.

The Government provided a comprehensive response to the Productivity Commission's 2001 report on telecommunications competition regulation with the passage of the Telecommunications Competition Act 2002. The provisions of the Act commenced in December 2002.

The Government's response to Connecting Australia! Wireless Broadband is expected in 2003-04. The response will take into account the Government's response to the Regional Telecommunications Inquiry (RTI).

The Department provided Secretariat support to the independent RTI. The Inquiry reported to Government in November 2002 and the Government announced its comprehensive response, accepting all recommendations, in June 2003.

The Department has sought to provide comprehensive and definitive responses by consulting thoroughly within Government. Where relevant, extensive consultation has been undertaken with the key agencies, the ACA and the ABA.

Client satisfaction with fee-for-service consultancies

Amount of repeat business for fee-for-service consultancies

The Department's Communications Research Unit (CRU) did not undertake any fee-for-service consultancies in 2002-03. Instead, it focused on meeting the needs of the Department and the Ministers.

The demand for statistics from the CRU's statistics section has continued to grow, with services expanded to include advice to various areas of the Department on survey design and analysis. In particular, the CRU provided considerable assistance to the Framework for the Future study group and the Broadband Advisory Group.

Clients expressed satisfaction in 2002-03 with the reports provided for the two previous fee-for-service contracts undertaken by the CRU. However, the CRU's bid for one repeat contract during the year was unsuccessful. The CRU may still seek occasional contracts in future but its focus will remain on meeting the needs of the Department and its Ministers.

Government expression of interest (EOI) or tender accountability funding agreement outcomes achieved.

The extent to which outcomes specified in contracts or funding agreements was achieved is discussed for each program in the Administered Items section, commencing on page 66.

Commonwealth funding agreement outcomes achieved

The Department monitors funding agreement conditions and implementation on an ongoing basis to ensure that outcomes are achieved. The requirements of Commonwealth funding agreements were generally met by recipients of Departmental funding in 2002-03.

Key outcomes for 2002-03 included:

• fully expending the first round of grant allocations for the Commercial Radio Black Spots Program for new or improved services to 36 communities in regional Australia;
• finalising grant deeds for new services in 101 television black spots, compared to 77 during 2001-02. As at 30 June 2003, new analog services were operating in 111 black spots across Australia under the Television Black Spots Program. The number of households benefiting from the Program was 25 519 in 2002-03, in addition to 21 148 households in 2001-02; and
• overseeing the funding and approval process for the rollout of national broadcaster digital transmission services, with a view to meeting the legislated policy objective that digital television is to commence in all regional transmission areas by 1 January 2004. Both the ABC and SBS have advised that they are on target to meet this requirement.

The Networking the Nation (NTN), Telecommunications Service Inquiry and Telstra Social Bonus programs are resulting in significant improvements in access to services including the following:

• upgrade of 3653 standard telephone services in the Extended Zones since August 2001;
• completion of nearly 10 000 kilometres of continuous terrestrial mobile phone coverage along Australia's national highways;
• 187 small towns with new or improved terrestrial mobile phone coverage;
• new spots of terrestrial mobile phone coverage on 34 regional highways;
• payment of 1554 satellite handset subsidies to consumers who are unable to access terrestrial mobile phone coverage;
• support for large-scale telecommunications projects which will improve the delivery of education and health services in regional Australia; and
• establishment of three advanced network projects to support the development, trialing and demonstration of advanced communications networks and test-beds.

Program funding applications administered in accordance with guidelines

The Department continued to administer relevant programs in a rigorous manner. For example, the review of the administration of the NTN programs by Origin Consulting revealed that the NTN Secretariat's administrative performance over the previous five years compared well with principles set out in the ANAO Best Practice Guide to Grants Management.

All relevant programs are discussed further under the Administered Items section of this Outcome, commencing on page 66.

Levies collected and paid in accordance with established processes

The only levy administered by the Department is the Universal Service Levy - an ongoing levy mechanism subsidising specific services provided under the Universal Service Obligation (USO) and Digital Data Service Obligation (DDSO). The levy is recovered from telecommunications carriers in proportion to their total revenues and paid annually in arrears.

Details of the collection of payment of the levy are in the Administered Items section of this Outcome on page 79.

ADMINISTERED ITEMS

ABC and SBS Digital Interference Scheme

Potential for interference to ancillary equipment from new digital broadcasting services adequately managed

Interference from new digital services minimised

The broadcasting industry has established an Interference Management Scheme to manage potential interference arising from the introduction of digital television services. The interference scheme includes mailouts, television and press advertising and a consumer hotline with free home visits by technicians where necessary to retune VCRs. The Department administers Australian Government funding to meet the ABC's and SBS's financial contributions to the scheme. In 2002-03, the Scheme reimbursed the ABC and SBS a total of $185 000.

During 2002-03, the rollout of digital television gained momentum with over 100 digital services commencing across Australia including in the New South Wales Central and South Coast, Illawarra, North East Tasmania, Central and Western Victoria, the Sunshine Coast, Darling Downs, Mackay, and regional South Australia. During 2002-03, the interference management hotline received in excess of 30 000 calls, which comprised both queries in relation to digital television as well as interference problems. This compares favourably with a similar level of hotline calls the previous year in respect of the commencement of 23 digital television services across Australia.

Since the commencement of digital television, hotline contacts have continued to decline from a peak of 7000 per week in January 2001 (the start of digital television in Sydney, Melbourne, Brisbane, Adelaide and Perth) to the current weekly average of about 500-600. The vast majority of interference difficulties have been resolved through the provision of technical advice over the hotline (re-tuning video cassette recorders, use of audio/visual cables).

Commercial Radio Black Spots Program

Efficient and timely funding agreements established

Extent to which targets for improving services are met

The Commercial Radio Black Spots Program commenced in 2002-03 and will continue until 2004-05. Thirty-seven projects for 36 identified blackspot communities were funded in 2002-03, and the available budget allocation was fully expended. All first grant payments were made, consistent with the terms of the Funding Agreement, within 30 days of finalisation of the agreements with the respective commercial radio licensees.

Each project was subject to assessment against the guidelines for the Program, and confirmation from the ABA that it met the relevant licence area planning requirements and the allocation of a suitable broadcasting frequency. All 37 projects funded in 2002-03 are expected to be completed in 2003-04.

National Transmission Network Residual Funding Pool

Community service obligations for transmission services efficiently administered

Funding delivered promptly to recipients in accordance with contractual obligations

The National Transmission Network Residual Funding Pool was created as part of the post-National Transmission Network sale arrangements to ensure that a number of Government commitments in relation to transmission arrangements for national, community and remote commercial broadcasters and Radio for the Print Handicapped were met. These commitments have now been discharged or, where appropriate, grant deed arrangements have been put in place to ensure they are met on an ongoing basis.

In 2002-03, seven of the eight payments made under grant deeds to recipient organisations were made on time; the third payment for Radio for the Print Handicapped was delayed as a result of additional time needed to process outstanding financial reports.

Television Fund

Efficient and timely funding agreements established

Extent to which Government targets for solutions are met

The Television Black Spots Program - designed to enable access to analog television services in metropolitan, regional, rural and remote areas of Australia by fixing television black spots - is funded for five years, until June 2004. The Program target is to fix 200-250 television reception black spots.

In 2002-03, $8.2 million was paid from the Program, compared to $7.2 million in 2001-02. During 2002-03, funding agreements were established for new services in 101 black spots, bringing the total number to 197. New transmission services have commenced in 111 black spots, with 83 established in 2002-03.

At 30 June 2003, another 62 eligible Coordinating Bodies were still to lodge fully costed budgets for assessment and funding approval, including five locations awaiting resolution of spectrum planning issues.

The number of black spots where funding agreements for the replacement of obsolete equipment have been established is 181 in total, with nine established in 2002-03. The number of black spots where services using replaced obsolete equipment commenced is 173 in total, including 62 in 2002-03.

Television Black Spots - Alternative Technical Solutions

Efficient and timely funding agreements established

Extent to which Government targets for solutions are met

Steady progress is being made with implementation of this $13.3 million program, which is scheduled to conclude at the end of 2004-05. There are currently 25 candidate locations for alternative technical solutions, each of which has poor analog television reception. Testing of digital signals is carried out in each of the black spots as digital TV services progressively commence in nearby areas.

Provision of satellite dishes to households is proceeding as the solution for two of the black spots. Digital re-transmission solutions are being explored for 13 black spots (including on the Gold Coast and in Port Stephens). Ten black spots are awaiting digital signal testing.

The Department anticipates that the Program will meet its target; however expenditure will be concentrated in the last 18 months of the Program. This is due to the testing requirements, the need to work with free-to-air broadcasters to implement solutions and the difficulties in finding solutions using new technologies in areas of the most difficult terrain and spectrum constraints.

Regional Equalisation Plan

Efficient and timely funding agreements established

All grant recipients that meet the digital service start up requirements are funded

Under the Regional Equalisation Plan, the Government announced in 2000-01 the provision of up to $260 million over 13 years to regional commercial television broadcasters to convert to digital transmission. The assistance is in the form of rebates on annual broadcasting licence fees, supplemented by grants in smaller markets.

In 2002-03, rebates totalling $21.8 million were provided by the ABA in accordance with the established process and schedule. The Department arranged for the ABA to provide a rebate of $200 000 against future rebates to the remote commercial broadcaster, Imparja. This was in response to a request from Imparja for assistance to meet unanticipated costs associated with the retransmission of digital program feeds.

The Department is developing appropriate arrangements for payment of grants to smaller markets which are due to commence digital services in 2003-04.

Regional Telecommunications Infrastructure Account (RTIA)

Efficient and effective program administration of grants program and funding agreements

Satisfaction of the Minister, the Networking the Nation (NTN) Board and other stakeholders with the quality and timeliness of Secretariat advice and support

Extent to which the results from the evaluation of the grants program demonstrate that program objectives have been achieved

Extent to which funding deeds are monitored in a timely manner (including the timely processing of progress reports from funding recipients and any resulting instalment payments to funding recipients)

Extent to which NTN Secretariat secures acquittals from funding recipients that accurately account for funds spent

Extent to which the various evaluation reports are completed on time

The RTIA is a Special Account within the meaning of the Financial Management and Accountability Act 1997. The largest single component of the RTIA is the NTN General Fund. The three other elements of the RTIA - the Remote and Isolated Islands Fund, the Internet Access Fund, and the Mobile Phones along Highways Program - are discussed in the Telstra Social Bonus section below.

The $250 million NTN General Fund - the result of the sale of the first tranche of Telstra - supports projects that bridge the gap between urban and non-urban Australia in regard to access to telecommunications services.

The Australian Government appointed an independent Board to make decisions about which projects should recieve support. The Department provides secretariat support to the Board and administers the funding agreements with successful recipients. A full description of the Board's role and activities during 2002-03 is included at Appendix 11.

Program administration

The General Fund's approaching sunset date of 30 June 2003 highlighted delays in a number of projects, resulting in lags in milestone achievements and funding agreement instalment payments. In an effort to make payments in a responsible manner before the sunset date, the Secretariat pursued funding recipients to improve performance or effectively re-scope projects. The Government extended the General Fund by 12 months to allow improved project outcomes.

An expected $19.7 million will be expended in the 2003-04 financial year, most of which will be in the first two quarters, to conclude the Program. This expenditure represents approximately eight per cent of total funding, and is a measure of the slippage that occurred in projects and the challenge in administering such a large stock of grants.

Acquittals

In January 2003, the Department established a Compliance Team within the Secretariat to manage projects with outstanding reports and unsatisfactory acquittal of funds. As a result, 40 projects have been successfully concluded, 32 continue to be pursued and one project has been terminated. The total Program has managed and acquitted 389 projects, 218 of these in the 2002-03 financial year.

Audit reviews on 28 funding recipients and 241 compliance checks of projects were undertaken during the 2002-03 financial year to provide assurance that funding recipients were expending Commonwealth funds appropriately. Actions were taken to address issues arising from these reviews.

Evaluation

Consistent with the overall evaluation framework for the Program, the first of a series of reports recording the goods and services made available by NTN projects to local communities was also prepared this year. The highlights of the first report are:

• public Internet access facilities installed in over 1400 new locations with over 610 000 users;
• the establishment of more than 111 websites/portals, visited more than 27.5 million times;
• the creation of an estimated 730 full-time and 830 part-time employment positions;
• around 220 projects offered training to an estimated 172 000 people; and
• NTN support exceeding $40 million for increased mobile phone coverage for local residents, tourists, emergency and road services with 229 base stations and 55 repeaters.

Telstra Social Bonus 2

Efficient program administration; timely funding agreement management; and tenders conducted with probity

Efficient and timely management of the untimed local calls agreement

Extent to which the Government targets for rollouts are met

Percentage of applications fully administered in accordance with timeframes and to the standards described in the program guidelines

Percentage of deed proposals made to applicants within one month of announcement of Board decisions

Achievement of key milestones in funding agreements

Timely payments in accordance with achievement of milestones

Monitoring of fulfilment of all contractual obligations under the untimed local calls agreement

In June 1999, the Government provided a further $670 million for a range of new initiatives, funded from the proceeds of the sale of a further 16.6 per cent of Telstra.

These were:

• the Building Additional Regional Networks (BARN) Program ($70 million);
• the Local Government Fund ($45 million);
• the Remote and Isolated Islands Fund ($20 million);
• Mobile Phones along Highways ($25 million);
• Connecting Tasmanian Schools ($15 million);
• Extending mobile phone coverage in South Australia, Tasmania and Western Australia ($3 million);
• Untimed Local Calls in the Extended Zones ($150 million);
• Building on Information Technology Strengths (BITS) suite of programs ($158 million), comprising the Incubator Program, the Advanced Networks Program and the Intelligent Island Program;
• the Launceston Broadband Project ($15 million);
• the Television Fund ($120 million);
• the Internet Access Fund ($36 million); and
• the Trials of Innovative Government Electronic Regional Services ($10 million). This program is administered by NOIE and is reported as part of the NOIE Annual Report.

The Department's performance in administering these programs for the 2002-03 financial year is set out below.

The NTN Board is responsible for approving projects to be funded under BARN, the Local Government Fund, the Remote and Isolated Islands Funds and the Internet Access Fund. In 2002-03, the NTN Secretariat received, assessed and processed approval of three applications and three requests for additional funding variations.

All successful applicants were processed in accordance with Program guidelines. They each received a letter of offer, specifying the requirements of the Funding Deed within one month of the public announcement of the Board's decisions, and in total they represented $1.42 million of Australian Government funding.

Building Additional Regional Networks (BARN)

The development of new networks and new network services and products was supported through NTN Board approval of 46 BARN projects worth an estimated $30 million. In most cases, these projects are only in the early stages of implementation. Outcomes will become apparent in the next 12 to 18 months.

In the past year, the NTN Board identified that applications did not appear to be addressing the greatest needs in regional Australia, and that there was a high level of risk associated with many of them. This resulted in a decrease in approvals with the Board proposing to the Minister in late 2002 that uncommitted funds from the BARN Program be re-directed to higher priority needs such as improving Internet access in currently under-served areas. In June 2003, the funds were redirected to the National Broadband Strategy as part of the Government's response to the Regional Telecommunications Inquiry.

Local Government Fund (LGF)

The Department supports local government authorities in regional and rural areas to improve services and benefits to their communities through the use of advanced telecommunications technologies. To date, the NTN Board has approved a total of $43.3 million to fund 42 LGF projects. No new projects received funding in the reporting period. The Australian Local Government Association is coordinating the liaison of Local Government authorities as they deliver their projects through to conclusion largely expected in 2003-04.

Remote and Isolated Islands Fund

The Remote and Isolated Islands Fund assisted in meeting the particular telecommunications needs of island communities such as the Torres Strait, the Cocos (Keeling) Group, Christmas, Norfolk, King, Flinders, Kangaroo and other islands, and in the Australian Antarctic Territories. Consistent with the provisions in the relevant governing legislation, expenditure from the Remote and Isolated Islands Fund ceased on 30 June 2003. In most cases, these projects are only in the early stages of implementation, with outcomes expected to become apparent in the next 12 to 18 months.

Mobile Phones along Highways

Under a contract with Vodafone managed by the Department, the Australian Government provided $22.7 million (excluding GST) over the three years to June 2003, for the provision of near-to-continuous mobile phone services along almost 10 000 kilometres on 16 of Australia's major highways. All new infrastructure was in service at the end of the reporting period, and consistent with the provisions of the relevant governing legislation, expenditure for this project ceased on 30 June 2003.

Connecting Tasmanian Schools

Through this Program, a local and wide area network was established to link Tasmanian schools and to provide additional computers and support resources for the State's government and non-government schools. This Project was undertaken with Australian Government Telstra Social Bonus funding of $15 million along with an additional $12 million from the Tasmanian allocation of the NTN General Fund. Information from the Tasmanian Department of Education is that access to the Internet is now available in 82 per cent of classrooms in Government schools and colleges, and in 96 per cent of primary schools. This Program is scheduled to conclude in June 2004.

Extending mobile phone coverage - Tasmania, South Australia and Western Australia

Through this Program, the Australian Government provided South Australia, Western Australia and Tasmania with $1 million each to expand mobile phone coverage in their major regional centres. All the funds in this complementary program to the Mobile Phones along Highways project were committed by the end of the 2001-02 financial year. In most cases, mobile phone services are now operational, but there are some sites where delays have been experienced. These sites are expected to be operational in the 2003-04 financial year with all payments completed in that year.

Access to Untimed Local Calls in the Extended Zones

In order to provide Australians living in Extended Zones with access to telephone calls and connection to the Internet via an Internet service provider (ISP) at the untimed local call rate, the Australian Government committed $150 million from the proceeds of the second partial sale of Telstra. Telstra won the tender to deliver these services. Contractual payments are scheduled over four financial years from 1 June 2001, while the contract itself will run for ten years.

Since August 2001, 3653 services have been upgraded to ensure customer access to additional call features and improved capacity. In the reporting period, Telstra successfully completed milestones dealing with the upgrade of its Public Switched Telephone Network in Extended Zones. As part of this contract, Telstra offered free equipment and installation for a two-way satellite Internet service, achieving a 25 per cent take-up rate, as well as a service tailored to Indigenous communities.

Telstra's milestone achievement has resulted in payments totalling $25 million over the financial year in accordance with the contract. Extended Zone customers and other stakeholder groups have been informed by periodic publicity about enhanced services and upgrades.

BITS Incubator Program

Under the BITS Incubator Program, $75.9 million is being provided to ten mainland incubator centres to support the development and growth of ICT start-up companies. Payments of $17.63 million were made to the incubators during the year. During 2002-03, the second annual report (2001-02) on progress under the scheme was released. That report showed that, as at 30 June 2002, the incubators had achieved cumulative totals of 158 incubatees, 27 graduates and co-investment of $38 million.

The Allen Consulting Group completed a pilot evaluation of the BITS Incubator Program in March 2003, which found that the three incubators performed well by international standards and generated economic benefits that included growth in revenue, jobs and exports. A full evaluation will be completed in 2003-04.

BITS Advanced Networks Program

Under the BITS Advanced Networks Program, funding of $37.2 million is being provided over three years to three advanced network projects - the Centre for Networking Technologies for the Information Economy (CeNTIE), m.Net Corporation, and the GRid And Next GEneration Network (GrangeNet). Payments totalling $8.75 million were paid during 2002-03 to the participating consortia on the completion of milestones set out in the funding deeds.

The CeNTIE project was officially launched by the Minister in April 2003. The GrangeNet project was interconnected with the CeNTIE network and with the global research and education networks via AARNet's links to the Southern Cross Cable Network. m.Net launched a third generation mobile network and the Gallery 4 initiative which provides developers with development tools and a commercial pathway.

The Australian Advanced Networks panel continued to facilitate cooperation and information sharing between the three grantees. The Broadband Advisory Group commented that the Advanced Networks Program was viewed positively by stakeholders.

BITS Intelligent Island Program

The BITS Intelligent Island Program has provided $40 million to Tasmania to promote the development of an internationally competitive ICT sector in Tasmania. In accordance with a memorandum of understanding between the Australian and Tasmanian Governments, biannual reports were provided on progress of the various initiatives.

A proposed Centre of Excellence, in the area of bioinformatics, is being considered for funding under the Program and a final decision on the Centre is expected to be made early in 2003-04. The In-tellinc incubator continued to make good progress and a further six incubatees were accepted during the year. A number of funding proposals under the Investment Attraction and Industry Development Initiatives were considered by working groups, with decisions on support expected early in 2003-04. Assistance was provided to a number of Tasmanian companies to attend national and international trade shows and other events.

Launceston Broadband Project

Through the Launceston Broadband Project (LBP), the Department provides Australian Government funding of $4.716 million over five years (1999-2000 to 2003-04) to the Tasmanian Electronic Commerce Centre (TECC) for its administration of the Business Development Fund (BDF). The BDF provides grants to stimulate new high-technology businesses in Launceston.

The LBP also channels Australian Government funding of $9.934 million to Telstra towards the establishment and ongoing operation of a multimedia development laboratory, the B-eLab, and the advanced ADSL Internet access test-bed in Launceston. Telstra is contributing a further $15 million.

TECC's required biannual progress reports showed that the BDF completed one funding round during the year, bringing the total number of projects to 13³. Decisions on further grants were made but not announced by the reporting date.

Telstra continued to operate the B-eLab, which developed applications including the BigPond Toolbar. Telstra also maintained the ADSL test-bed, which reached over 1400 subscribers in 2002-03, and was used for trials including ADSL to the streets/multimedia kiosks and the eLaunceston Community.

Telstra's milestone achievement in relation to the LBP ensured departmental payment of $440 000. However, other payments were withheld due to Telstra's failure to meet specified milestones. Consistent with the Deed, the Department undertook a mid-term review with Telstra of the LBP, resulting in joint project enhancement work to ensure objectives were met.

The Department made payments of $500 000 to TECC in relation to the BDF, during 2002-03. In accordance with the Deed, other payments were delayed due to TECC having sufficient grant funds on hand. The TECC was also advised that future departmental payments would be made in line with improved administrative practices and in line with the TECC forecast of its payment schedule to grant recipients.

International organisation contributions

Improved focus and efficiency in relevant international organisation programs

The Department administers financial contributions to relevant international non-government organisations and coordinates the Australian Government's policy position and substantive involvement in international forums. The Department's primary contribution is to the work of the International Telecommunication Union (ITU), the Asia-Pacific Economic Cooperation (APEC), the Asia-Pacific Telecommunity and the World Trade Organisation.

Each Member State contributes to the ITU in 'contributory units', which are calculated in Swiss Francs (CHF), and set every four years at an ITU Plenipotentiary Conference. To date, the Department has contributed the Australian Government's 15 units per annum against the ITU Plenipotentiary Conference 1998 agreed amount of CHF 315 000 per unit. After lengthy debate, the new level of the contributory unit was set at CHF 315 000 for the first two years and CHF 330 000 for the next two years.

Following this ITU announcement, the Australian Government took the decision to stabilise its current contributory obligations for the next four-year period at CHF 4 725 000 by:

• reducing its number of contributory units to 13; and
• maintaining the balance of the contribution through directed funding of ITU sponsored development projects, particularly in the Asia Pacific region.

This allows Australia to be more targeted in the provision of funding and will increase Australia's direct involvement in the expenditure of part of its ITU contribution. It will make available CHF630 000 per annum (approximately A$785 000) in the 2003-04 and 2004-05 budgets for development projects. For the 2005-06 and 2006-07 budgets this will reduce to CHF 435 000 (approximately A$540 000).

The Asia-Pacific Telecommunity is a treaty-based regional telecommunications development organisation that provides a forum for regional governments to build coordinated input on communications issues to ITU international meetings. The Department maintained the Australian Government's contribution to the Asia Pacific Telecommunity throughout the year.

Compensation to the Société Internationale de Télécommunications Aéronautiques (SITA)

Continued investment in Australia, particularly through location of its regional headquarters by SITA

Allocated funding expended effectively in accordance with grant deed

This Program encourages the SITA to maintain its regional headquarters in Australia by compensating the organisation for certain taxes and duties from which it was previously exempt. The compensation arrangement ceased on 30 June 2003, with the final compensation payment to be made in 2003-04. SITA continued to operate its Australasia-South Pacific regional headquarters in Sydney during the year and expenses totalling $1.75 million were incurred compared with expenses of $2.31 million in 2001-02.

Telecommunications Service Inquiry response

Efficient and effective administration of programs and agreements providing subsidies

Advice to Government on regulation that balances consumer protection with need to promote competition and support industry

Positive stakeholder feedback on administration

Satisfaction of the Ministers and other stakeholders with the quality and timeliness of advice and support

Extent to which subsidies enhance the quality of telecommunications services in regional Australia

Timeframes met, expenditure consistent with budget projections

Extent to which contractors meet their milestones

In May 2001, in response to the recommendations of the Telecommunications Service Inquiry (TSI), the Australian Government announced a funding package of $163.1 million including $9 million from the Department of Transport and Regional Services. The response included several major programs further improving telecommunications services for Australians living and working in regional, rural and remote areas.

Programs arising from the TSI response include:

• Towns over 500 Program;
• Regional Mobile Phone Program;
• Internet Assistance Program;
• National Communications Fund; and
• Section 593 Grants.

Towns over 500 Program

Through this Program, the Australian Government is subsidising the extension of terrestrial mobile phone coverage to 132 regional towns with 500 or more residents. Telstra successfully tendered for the project and was awarded, in April 2003, a $23 million contract to deliver improved mobile phone coverage by December 2003.

Telstra was unable to meet the milestones of 111 towns by 30 June 2003, with only 59 towns receiving improved mobile phone coverage by this time. Instalment payments were therefore not triggered and the Program will require a significant carryover of funds. Confident that it will meet all milestones in the remaining six months, Telstra meets regularly with the Department in monitoring the progress of the rollout.

Regional Mobile Phone Program

The Regional Mobile Phone Program, includes the following components:

• $18.8 million to extend terrestrial mobile phone coverage to 55 towns with less than 500 residents;
• $19.1 million for spot mobile phone coverage on 34 selected regional highways;
• $7 million for mobile phone coverage in 45 towns in south-west Western Australia (the WirelessWest Program); and
• $3.9 million to subsidise satellite handsets where terrestrial mobile coverage is not available.

The rollout of the first two mobile phone initiatives set out above, was monitored at monthly meetings between the Department and Telstra.

Telstra was expected to provide improved mobile phone coverage to 22 of the 55 towns, with a population under 500, by 30 June 2003. Roll-out delays meant payment projections were not achieved for the 2002-03 financial year. Telstra achieved its target of improved mobile phone coverage along 22 of 66 lengths of the selected regional highways. Actual payments were therefore consistent with the projections for the financial year.

On behalf of the Australian Government, the Department managed the memorandum of understanding with the Western Australian Government, in relation to the WirelessWest Program. Under this Program, Telstra has so far improved mobile phone coverage in a total of 36 towns, 26 of these during the reporting period, with the remaining nine sites to be completed in the 2003-04 financial year.

In accordance with the Contract Management Manual developed for the Satellite Phone Subsidy Scheme, and as at 30 June 2003, the Department had approved 1554 subsidies for the purchase of satellite phone handsets by applicants without access to terrestrial mobile phone coverage.

Internet Assistance Program

The Internet Assistance Program (IAP) is a three-year joint national initiative of the Australian Government and Telstra, valued at up to $48 million. It aims to improve dial-up Internet speeds over Telstra's fixed network and to provide users with an effective Internet throughput equivalent to at least 19.2kbps to support email and basic web browsing capability.

Over 108 000 users have contacted the IAP during the first seven quarters of its operation. Of these contacts, 95.9 per cent were resolved by the online help service and 4.1 per cent were referred on to the technical support service.

Australian Government IAP payments to Telstra in 2002-03 totalled $2.35 million, consistent with budget projections and milestone achievements.

National Communications Fund

In July 2002, the Prime Minister announced funding of $50 million under the National Communications Fund (NCF) for eight large-scale telecommunications projects which will improve the delivery of education and health services in regional Australia. Funding deeds were signed with seven of the successful applicants and $11 million in funds was paid upon delivery of milestones set out in the funding deeds. The last deed was close to finalisation at the end of the financial year.

Two NCF projects - the New South Wales and Northern Territory Interactive eLearning and the Grampians Rural Health Alliance Network - proceeded directly to detailed network planning and/or rollout. Four projects went to tender for telecommunications infrastructure and services and were evaluating responses at the close of the financial year: Health and Education Access for Rural and Regional NSW, Broadband for Rural Tasmania, Northwest and New England Broadband Telecommunications Network and Network WA. The remaining project, Outbacknet@qld, was preparing to issue a request for tender.

Both the Broadband Advisory Group and the Regional Telecommunications Inquiry (RTI) reported positive feedback on the NCF from stakeholders.

Section 593 grants

The Department efficiently and effectively administered the Consumer Representation Grant Program under section 593 of the Telecommunications Act 1997, according appropriate priority to representatives of people with disabilities and regional, rural and remote consumers. Grants for 2002-03 were administered and the Department conducted a further assessment process to allocate funding for 2003-04.

The Department also administered two rounds of applications for funding for telecommunications research under the Section 593 Program over the reporting period, and administered grants made under the Program.

Grant to Australia Post - Australia's response to foot and mouth disease and other quarantine risks

Meeting requirements specified in the grant deed

Provision of Australia Post response in accordance with the milestones requirement set out in the grant deed

To enable the presentation of all inbound international mail to the Australian Quarantine and Inspection Service (AQIS) and the Australian Customs Service (ACS) for inspection, the Australian Government has provided $49.4 million funding to Australia Post. AQIS and ACS are checking all inbound mail for the presence of possible sources of contamination by exotic animal diseases, particularly foot and mouth disease.

The Department effectively administered the Commonwealth grant deed in cooperation with AQIS and the ACS and, with all milestones set out in the grant deed achieved, scheduled payments totalling $21.2 million for 2002-03, were made to Australia Post.

National Relay Service

Effective administration of contract between the Commonwealth and the National Relay Service provider

Extent to which service standards specified in the contract between the Commonwealth (DCITA) and the National Relay Service provider are met

The Department ensures access to the standard telephone service for people who are deaf, or who have a hearing and/or speech impairment through the National Relay Service (NRS), provided by the Australian Communication Exchange (ACE). The NRS is funded by a quarterly levy on telecommunications carriers. In 2002-03, $13.3 million was paid to the ACE for service provision.

An independent evaluation of the NRS, carried out during the year found that ACE had performed well during 2002-03, meeting or exceeding the five quarterly performance standards in the service contract. These standards relate to the level of complaints, the percentage of ordinary inbound calls answered within ten seconds, the percentage of ordinary inbound calls receiving a busy signal, the percentage of emergency calls answered within ten seconds, and the percentage of emergency calls receiving a busy signal.

The Government took up the option in the existing contract to extend ACE's period as the NRS provider for a further three years, until 30 June 2006. A contestability process will commence early in 2005 for delivery of the NRS after June 2006.

Universal Service

Total levy collections are paid to the Universal Service Provider in accordance with established process

Percentage of payments collected and made in accordance with processes specified in legislation

Universal Service Obligation (USO) and Digital Data Service Obligation (DDSO) services are subsidised by the Universal Service Levy. The USO and DDSO are the legal requirements placed on relevant service providers to ensure standard telephone services and payphones, and digital data services are reasonably accessible to all people in Australia on an equitable basis, irrespective of their place of residence or business.

The USO levy is recovered from telecommunications carriers in proportion to their total revenues and paid annually in arrears. The levy is paid to Telstra and Hotkey Internet Services to subsidise specific services provided under the USO and DDSO. The notional subsidy in respect of 2001-02 was calculated to be $240.1 million. Levies collected from telecommunications carriers other than Telstra totalled $62.9 million in 2002-03, with Telstra notionally contributing the balance.

The Department also consulted with industry on further changes to the levy collection process to prevent and mitigate the impact of any future USO defaulters.

ICT Centre of Excellence

Feedback from stakeholders on the level and extent of consultation with the ICT industry and the research community during establishment of the Centre

Timeliness of Commonwealth grant payments to the Centre

The financial contributions to the Centre from non-Commonwealth sources to match, or exceed, those specified in the proposal submitted by the Centre operator

The ICT centrepiece of the Government's January 2001 Innovation Statement, Backing Australia's Ability, was the establishment of the ICT Centre of Excellence with funding of $129.5 million including operational costs, over five years. The Centre is an independent, world-class research and research training institution that will take Australia's ability to create and exploit ICT to a new level.

Following a competitive selection process, the Government announced in May 2002 that the National ICT Australia Ltd (NICTA) was the preferred applicant to establish and operate the Centre. Stakeholders have indicated their satisfaction with the consultation process.

Australian Government funding for NICTA is shared between the Department and the Australian Research Council (ARC). Two payments, totalling $10.3 million, were made by the Department during the year, both of which were processed within the timeframe specified in the funding deed.

NICTA has signed contribution agreements with its four founding members - the University of NSW, Australian National University and the NSW and ACT Governments. Agreements with other parties were also being negotiated. It is expected that the total contributions to the Centre from non-Commonwealth sources will significantly exceed the amount specified in the original proposal submitted by NICTA.

Telecommunications Action Plan for Remote Indigenous Communities

Efficient program administration

Tenders and applications-based funding allocation processes conducted with probity

Positive stakeholder feedback

Effective, comprehensive consultation with stakeholders

Timeframes met

Expenditure consistent with budget projections

Extent to which Government targets for rollouts are met

Percentage of applications fully administered in accordance with timeframes and to the standards described in the program guidelines

The Australian Government announced the Telecommunications Action Plan for Remote Indigenous Communities (TAPRIC) program in May 2002. Throughout TAPRIC's first year of operation, extensive consultation has been required to ensure well-informed activity. Consequently, implementation of the Program took effect in the second half of the reporting period, with a number of major projects put in place, including:

• provision of computer equipment to communities in conjunction with the revised two-way satellite offer to remote Indigenous communities in extended zones;
• establishment of a mobile telecommunications education and training service to support remote Indigenous communities;
• establishment of a project to develop tools for communities to use Indigenous languages online; and
• a major feasibility study to develop strategies to sustain higher bandwidth services in remote Indigenous communities.

To assist with a number of these elements, consultants were engaged through competitive tenders conducted in accordance with government regulations and legal and probity requirements. Risk management processes were incorporated in all tenders and an evaluation and risk management strategy for the TAPRIC Program is in place.

Tenders were issued for the Online Access Centre Business Study, Mobile Telecommunications Education and Training Service and the Online Content Development Program elements of TAPRIC. Contracts continue to be managed in accordance with contractual reporting, payment and milestone arrangements. Rollout of these programs is expected to be significantly progressed during 2003-04, particularly in relation to application-based programs.

Stakeholder consultation has been a key component of the TAPRIC program, with the Department meeting regularly with key stakeholders and developing effective partnerships with Indigenous communities, telecommunications service providers and Government Departments. In particular, the Department has worked to ensure telecommunications service providers have access to material and information regarding opportunities to provide products or services to remote Indigenous communities. A total of $596 205.50 was expended under TAPRIC in the 2002-03 financial year, which is less than projected due to the required extended consultation period.

Positive comments were received from key stakeholders including Indigenous communities, consultants, the Aboriginal and Torres Strait Islander Commission, Telstra, Indigenous Communities Coordination Taskforce, State and Territory and Australian Government Departments.

EVALUATIONS

Evaluations were undertaken of several key programs. NTN was subject to a review by the Australian National Audit Office (ANAO), and an evaluation of the Program's administrative processes was undertaken. An evaluation of the USO contestability pilots was also undertaken.

Networking the Nation

ANAO Review

During the 2002-03 financial year, the ANAO undertook performance audits of the Department administered NTN Program and the Department of Transport and Regional Services (DOTARS) administered Rural Transaction Centres Program.

The objectives of the audits were to provide an assurance to Parliament that:

• DCITA and DOTARS are administering discretionary telecommunications grant Programs, in particular the monitoring and evaluation of grant Programs, in a transparent and rigorous manner that reflects compliance with internal guidelines and best practice;
• the reporting and performance information that is available in relation to telecommunications grants provides sufficient accountability to meet the requirements of stakeholders; and
• DCITA has implemented the recommendations of Audit Report No. 43, 1998-99, Networking the Nation.

At the end of the financial year, the ANAO had not yet finalised the Audit Report. It is expected the Report will be tabled in Parliament in late August 2003.

Review of administrative processes

In this reporting period, the Program's administrative processes were reviewed by Origin Consulting in order to assess the efficiency and effectiveness of the administration of NTN against the principles set out in ANAO Best Practice Guide to Grants Management (May 2002). In addition, Walter Turnbull Associates reported on their assessment of the risk management practices of the Program.

The Review was completed in June and concludes that, overall, NTN compares well against the ANAO standards. The Review noted there was scope for strengthening the monitoring guidance framework (including the development of a Monitoring Guide and standards for Case Managers); more directly monitoring project milestones; and better documentation of monitoring activity by staff. Relevant recommendations will be implemented by the Secretariat to ensure the monitoring of projects is effectively maintained.

The first of a series of reports recording the goods and services made available by NTN projects to local communities was also prepared this year. The highlights of the first report:

• public Internet access facilities⁴ have been installed in more than 1400 new locations with over 610 000 users;
• NTN funding has supported the establishment of more than 111 websites/portals visited more than 27.5 million times;
• NTN-funded projects have created around 730 full-time and 830 part-time employment positions; and
• around 220 projects offered training and available usage figures indicate that more than 171 700 people were trained.

A total of 229 mobile phone base stations and 55 repeaters have been supported through NTN, permitting increased coverage for local residents, tourists, emergency and road services at a cost of over $40 million.

USO Contestability pilots

The Department, in consultation with industry, conducted an evaluation of the Universal Service Obligation (USO) contestability pilots during this reporting period. The pilots commenced on 1 July 2001 to trial a new means of generating competition in the customer access network through flexible arrangements thereby improving service levels in regional Australia.

Since 2001, the Government has initiated a number of measures to encourage participation in the pilots, and to provide flexible arrangements for industry involvement. To date the pilots have not attracted any competing universal service providers and there is no apparent industry interest in participating in the remaining part of the trial.

The Department's evaluation in July 2002 found there was a lack of industry support for the pilots due to the general downturn in the telecommunications industry and the challenges in the provision of loss making services. The pilots will conclude 30 June 2004.

Review of the Telstra component of the Launceston Broadband Project

Pursuant to the Deed with Telstra for the Launceston Broadband Project (LBP), the Department and Telstra undertook a review of the Telstra component of the LBP against the component's objectives. These objectives related to the establishment and operation of the B-eLab and the ADSL test-bed. The review concluded that progress had been made in achieving these objectives but improvements were still required.

This review specifically examined the scope of the project, relative levels of Australian Government and Telstra expenditure and appropriate milestones for future Australian Government funding. In light of the review, the Department initiated negotiations with Telstra in order to maximise the community benefits from this component of the LBP. Negotiations also sought to maximise the benefit to the Tasmanian IT sector from having the B-eLab in Launceston.

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³ Fifteen grants have been made but two have been terminated and repaid, leaving 13.

⁴ Public Internet access facilities includes computers and Internet access funded in schools, libraries, councils, telecentres and community facilities.

Document ID: 12412 | Last modified: 6 February 2008, 9:42am