The Senate has thwarted the Federal Government's second attempt to fully privatise Telstra, which could trigger a double dissolution election.
The legislation, which would have enabled the government to divest its remaining 50.1 percent slice of Telstra, was defeated 35 votes to 30 in the 76-seat Senate.
Communications, IT and the Arts minister, Daryl Williams, said the Senate has chosen to "hamstring" Telstra. Williams said the result would penalise Telstra and its 1.7 million minority shareholders.
The bill was first knocked back by the Senate in late October, when the four independents -- Meg Lees, Brian Harradine, Shayne Murphy and Len Harris -- judged Telstra's service levels not good enough and the regulatory regime inadequate to temper the company's considerable market power.
"Contrary to the scaremongering claims of some senators, the Australian Government's ability to regulate the delivery of telecommunications services has absolutely nothing to do with who owns Telstra," said Williams in a statement.
Democrats' spokesperson for IT, Senator Brian Greig, argued that Telstra should remain in public hands so high quality bandwidth can be developed for all Australians.
"Telstra is a company in a mess. It is a company suffering from multiple personality disorder. An IT company which rushes out to buy a newspaper business, yet had to be dragged kicking and screaming into the large scale supply of affordable broadband. A company, half owned by the Government, which can afford to throw hundreds of millions of dollars at Foxtel, that can afford to buy the Trading Post newspaper, and yet worries that Fibre To The Home (FTTH) is too expensive," Greig said in a statement.
"A very substantial percentage of any government's spending is on Information Technology, yet here we have a Cabinet whose members are largely IT illiterate. A Cabinet which has overseen $5 million being spent on one departmental website and $4 million of tax payers money on a Minister's website - clearly it does not comprehend what a waste that is."
The bill now qualifies as a double-dissolution election trigger for Prime Minister John Howard.