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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TELECOMMUNICATIONS LEGISLATION AMENDMENT
(COMPETITION AND CONSUMER) BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Communications,
Senator the Honourable Mitch Fifield)
TELECOMMUNICATIONS LEGISLATION AMENDMENT
(COMPETITION AND CONSUMER) BILL 2017
OUTLINE
Overview
The Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 (the
Bill), together with the Telecommunications (Regional Broadband Scheme) Charge Bill 2017
(the Charge Bill) will implement the main legislative components of the Government's response
to the independent cost-benefit analysis and review of regulatory arrangements for the National
Broadband Network (NBN) undertaken by the panel of experts headed by Dr Michael Vertigan
AC. The Government's response, 'Telecommunications Regulatory and Structural Reform', was
released on 11 December 2014.1
The Government response proposed three major reforms:
amendments to the superfast network rules in Parts 7 and 8 of the Telecommunications Act
1997 (Tel Act) to make the default structural separation requirement clearer and more
effective as a baseline for industry, while at the same time creating new commercial and
competitive opportunities;
introduction of a statutory infrastructure provider regime; and
introduction of a funding mechanism for regional broadband services.
The Bills implement these reforms.
Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017
The Bill proposes amendments to the Tel Act, the Competition and Consumer Act 2010 (CCA)
and the Telecommunications (Consumer Protection and Service Standards) Act 1999 (TCPSS
Act).
Schedules 1 and 2: Amendments to the superfast network rules
The superfast network rules in Parts 7 and 8 of the Tel Act were introduced in 2011 and apply to
superfast fixed-line networks servicing residential and small business customers (other than the
NBN). Part 7 requires operators of such networks to supply a Layer 2 bitstream service to access
seekers. Part 8 requires the networks to be wholesale-only (that is, structurally separated). There
are a number of exemptions to the superfast network rules. In particular, the rules do not apply to
superfast networks that existed prior to 1 January 2011, or to extensions of pre-2011 networks of
less than 1 kilometre on or after 1 January 2011. There are also exemptions in relation to the
supply of services to utilities and a ministerial power to grant exemptions.
1
See: https://www.communications.gov.au/sites/g/files/net301/f/Telecommunications%20Regulatory%20
and%20Structural%20Reform%20Paper.pdf
2
The Bill makes several key amendments to the superfast network rules to make the default
structural separation requirement clearer and more effective as a baseline for the industry, while
at the same time creating new commercial and competitive opportunities. These amendments
reset the structural separation arrangements, establish functional separation arrangements and
promote competition.
The three key ways in which the Bill improves commercial and competitive opportunities are by
removing regulation of networks servicing small business customers, enabling new superfast
networks to operate on a functionally separated basis with the approval of the Australian
Competition and Consumer Commission (ACCC), and enabling the ACCC to exempt small
start-up networks from separation regulation. The overall rationale for the superfast network
rules and these changes is discussed in the relevant Regulation Impact Statement.
Generally, apart from limited exceptions, it is intended that in future superfast residential
networks would either be subject to a class exemption granted by the ACCC, operating on a
functionally separated basis approved by the ACCC, or operating on a wholesale-only basis.
As part of these arrangements, the Bill provides that non-discrimination requirements apply to
eligible services supplied by persons owning or controlling superfast local access lines built on
or after 1 July 2018.
Grandfathering arrangements
The Bill proposes to amend Part 8 so that the current wholesale-only obligations in section 143
of the Tel Act will now generally apply to superfast fixed-line networks that came into existence
between 1 January 2011 and 30 June 2018, or to networks that existed before 1 January 2011
and were extended, altered or upgraded between 1 January 2011 and 30 June 2018. A new
proposed section 142C will then apply the new structural separation or functional separation
rules to local access lines that come into existence on or after 1 July 2018, or that are altered or
upgraded after that date and as a result become capable of being used to supply a superfast
carriage service. In effect, therefore, the rules applying to networks that were subject to the
current Part 8 will be grandfathered. Network operators will still be able to connect premises to
networks that are subject to the existing rules, without needing to comply with the new rules.
A number of networks that are subject to Part 8 currently operate under Ministerial exemptions.
For example, Telstra's fibre-to-the-premises (FTTP) network in South Brisbane has an
exemption until 1 July 2018, and specified Telstra Velocity and TransACT networks have
exemptions until the 'designated day', which is specified under subsection 577A(10) of the Tel
Act to be 1 July 2018 or another day specified by the Minister (Schedule 5 to this Bill proposes
to amend the designated day to 1 January 2020). The Bill provides powers for the Minister to
extend any exemptions that are in place on 1 July 2018, but after that date the Minister will have
no powers to grant new exemptions.
The Bill also proposes grandfathering arrangements for local access lines that are currently
subject to the Carrier Licence Conditions (Networks supplying superfast carriage services to
residential customers) Declaration 2014 (CLCs Declaration). Such lines are not otherwise
subject to the existing Part 8 rules. The CLCs Declaration effectively requires networks it covers
to operate on a functionally separated basis.
The Bill exempts the CLCs Declaration from sunsetting, which will ensure that it continues to
apply in relation to lines that form a part of a telecommunications network to which the rules
applied between 1 January 2015 and the commencement of the new rules, provided that the lines
have not been altered, upgraded or extended on or after 1 July 2018. The Bill also provides that a
network that is subject to the CLCs Declaration can continue, on or after 1 July 2018, to connect
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premises that are in close proximity to the network under the rules set out in the CLCs
Declaration, rather than the new rules in proposed section 142C.
The requirements of the CLCs Declaration will not apply to a network that is included in a
functional separation undertaking given by the carrier who owns or controls the network and
which is in force.
Repeal of Part 7
Part 7 of the Tel Act and associated provisions in the CCA will be repealed. Currently Part 7
requires affected providers to supply a Layer 2 bitstream service. The associated provisions in
the CCA required the ACCC to declare this service, which it did in 2012 (the Local Bitstream
Access Service). Following repeal, access to specific wholesale services on superfast broadband
networks would only be mandated if the services are declared by the ACCC under Part XIC of
the CCA. For example, networks that are not currently subject to Part 7 (such as Telstra's
Velocity networks and TPG's fibre-to-the-basement network) are required to supply the
Superfast Broadband Access Service as declared by the ACCC in July 2016 under Part XIC of
the CCA. Furthermore, under the Bill, superfast networks would operate on either a functionally
or structurally separated basis. They would therefore supply eligible services on a wholesale
basis.
Changes to Part 8, including exemptions
The Bill makes a number of changes to the exemptions in Part 8. It amends the exemption under
subsection 156(4) for network extensions of less than 1 kilometre from a point on the
infrastructure of a network as it stood immediately before 1 January 2011. This exemption
would, from 1 July 2018, only be available for networks that are being transferred to NBN Co
under contracts (the Definitive Agreements). As a result, extensions of pre-existing networks on
or after 1 July 2018 which are not covered by the amended exemption must be used to supply
services on a structurally separated (wholesale-only) basis as the default (or be covered by a
functional separation undertaking approved by the ACCC, as the alternative).
The existing exemption under subsection 156(3) of the Tel Act for networks that, prior to
1 January 2011, were being rolled out in stages as part of a real estate development project, will
now only apply until 30 June 2018. From 1 July 2018, a new section 143E of the Tel Act will
cover such real estate development projects, but also amend the exemption, so that projects will
continue to be covered even though there may be changes to the relevant contracts. The Minister
will also be able to grant exemptions for specific new developments or a class of new
developments within the geographical footprint of already exempt networks. This ensures that,
subject to the approval of the Minister, the exempt network can be extended to service the new
developments and those extensions will also be exempt from sections 142C and 143. The
Ministerial exemption power would expire on the date that the NBN is declared, under section
48 of the National Broadband Network Companies Act 2011, to be built and fully operational.
For clarity, the existing exemptions in the Tel Act for the supply of services to specified classes
of utilities will not be changed by these amendments.
Five separate Ministerial exemptions have been granted under Parts 7 and 8 of the Tel Act. One
of those exemptions, for specified TransACT fibre networks, is no longer operative due to the
sale of these networks to NBN Co. The other four (for two categories of TransACT networks
and for Telstra's South Brisbane and Velocity fibre networks) remain in force. The Bill provides
that, if these exemptions are in force on 1 July 2018, they can continue to be varied by the
Minister. The Bill also provides, through new section 143G of the Tel Act, that any new local
access lines that form part of the infrastructure of the exempt networks will be exempt from
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section 142C. This ensures that the networks can continue to be operated in accordance with the
terms of the relevant exemption instruments for as long as the exemption instruments remain in
force so as to maximise service continuity for consumers.
Local access lines
Part 8 will be amended to focus largely on individual local access lines to better target
regulation. The intention is that any single local access line that:
forms part of a network (other than the NBN) that is wholly or principally supplying services
to residential customers, and
is used to supply a superfast carriage service to residential customers in Australia,
will be subject to obligations in Part 8. This new approach will apply to lines that come into
existence after 1 July 2018, or are altered or upgraded on or after 1 July 2018 and as a result
become capable of being used to supply a superfast carriage service.
Removal of regulation for networks servicing small business customers
The Bill amends the existing Part 8 rules so that they no longer apply to local access lines that
are part of a telecommunications network used to supply superfast carriage services to small
business customers. The new Part 8 rules will only apply to local access lines used to supply
superfast carriage services to residential customers. This means that lines used to supply
superfast carriage services to small businesses will no longer be subject to structural or
functional separation requirements. This creates greater flexibility for network operators in the
supply of superfast carriage services to small business customers.
A business network may supply a small number of residential customers, sometimes without the
knowledge of the network operator (for example, because a customer has ceased trading as a
business while still retaining their service). Consequently, the Bill exempts local access lines that
are used to supply superfast carriage services to residential customers if that use, when
considered in relation to the use of all the local access lines that form part of the infrastructure of
the network, is minor. The relevant network also has to be marketed exclusively as a business
network.
Functional separation undertakings
The Bill inserts a functional separation undertaking process into Part 8, under which network
operators will be able voluntarily to submit undertakings to the ACCC for approval. This creates
greater flexibility in the supply of services on an integrated, albeit functionally separated, basis.
That is, a telecommunications business could have both network/wholesale and retail operations,
subject to certain requirements. Undertakings may be given by a person alone or jointly with one
or more other persons. In deciding whether to accept a functional separation undertaking, the
ACCC will be required to have regard to the long-term interests of end-users and any matters
specified by the Minister in a legislative instrument. If accepted, the operator would be required
to comply with the undertaking.
The Bill proposes that the ACCC would also be able to make deemed functional separation
undertakings that would apply to specified classes of network operators. If an operator chooses
to comply with a deemed undertaking, the undertaking would apply as though the operator had
submitted it and the ACCC had approved it. This measure is intended to reduce the regulatory
workload for some sectors of the industry as individual undertakings will not need to be
prepared by members of the class covered by the undertaking. It is also intended to reduce the
ACCC's workload as there would be a lower number of standard functional separation
undertakings submitted for its assessment.
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The Bill sets a baseline for functional separation by requiring that a functional separation
undertaking include a number of key elements. In particular, the operator will be required to:
operate separate wholesale and retail business units;
ensure that confidential information is not passed between the retail business unit and
wholesale business unit and vice versa; and
offer the same terms and conditions to its retail business unit and wholesale customers.
It is intended that functional separation undertakings can be tailored for each business subject to
the underlying purpose of the three principles above being met. The Bill therefore provides some
flexibility in how these key elements are met. The ACCC would assess proposed functional
separation undertakings based on the size and scale of each business.
Where operators are subject to a functional separation undertaking approved by the ACCC, all of
an operator's superfast fixed-line networks would be subject to the functional separation
requirements, regardless of when they were built or further altered or upgraded. That is, for
example, the undertaking would supersede grandfathered arrangements. This is intended to
promote consistent operation of a carrier's networks, regardless of when they were constructed.
The proposed amendments to Part 8 will not alter NBN Co's statutory prohibition on supplying
retail services, or Telstra's obligations to structurally separate.
As the assessment of functional separation undertakings will involve significant administrative
and regulatory effort on the part of the ACCC, the Bill allows the ACCC to determine a fee, or a
method of ascertaining a fee, for the consideration of functional separation undertakings.
Class exemption from superfast network rules for small start-up networks
The Bill introduces a power for the ACCC to exempt operators with a very small retail customer
base from the superfast network rules if it considers that exemption would promote the long-
term interests of end-users (as currently defined in the CCA). The exemption would be limited to
operators with fewer than 2,000 retail residential customers on all fixed-line networks. The Bill
provides that the statutory exemption could be extended, by regulation, to include operators (or
groups) with up to 12,000 retail residential services. The figure of 12,000 is based on the
exemption threshold for small networks set out in the ACCC's final access determination for the
superfast broadband access service.
This threshold will minimise the potential impacts on long-term competition from allowing these
operators to be vertically integrated, and the operators will be required to offer a wholesale layer
2 bitstream service, or other service specified by the ACCC in a legislative instrument, on a non-
discriminatory basis.
The proposed exemption provision recognises that the costs to such providers of separation
could be burdensome and will facilitate entry by new small players into the market. Once such
operators exceed the specified threshold, they would become subject to the new requirements of
Part 8 and need to become structurally separated unless functional separation undertakings were
in place.
It is envisaged that the regulation power would not be used in the short-to-medium term.
Enforcement
The Bill proposes to change the offence provisions under Part 8 from criminal offences to civil
offences. Although criminal penalties can be invoked for breaches of some competition laws,
6
they are usually applied in relation to conduct that is especially egregious (e.g. cartel conduct).
The Government therefore considers civil penalties more appropriate in the context of Part 8.
The change would mean that contraventions of the wholesale-only rules under the proposed
revised superfast network rules, failure to comply with a functional separation undertaking, or
breaches of other obligations in Part 8 (such as the non-discrimination obligations), will be civil
penalty provisions for the purposes of Part 31 of the Tel Act. As such, the maximum penalty for
a body corporate is $10 million for each contravention. The level of penalty reflects the
importance of the new rules.
The Bill would also confer power on the ACCC to issue formal warnings or infringement notices
where it has reasonable grounds to believe that an operator has breached the superfast network
rules. This will provide the ACCC with mechanisms to resolve matters without taking court
action.
As noted above, the Bill proposes that every functional separation undertaking must contain
specified elements ('fundamental provisions') that are critical to the achievement of the public
policy and competition policy objectives of undertakings. Fundamental provisions must include,
but are not limited to, requirements to maintain separate business units and requirements to
protect confidential information. Other fundamental provisions can be proposed by the person
who gives the ACCC the undertaking.
Where the person who gives the undertaking has breached a fundamental provision, or has an
unsatisfactory compliance record in relation to non-fundamental provisions, the ACCC may
revoke the undertaking and the operator will have 12 months to structurally separate the parts of
its network that would otherwise have been subject to the superfast network rules had the
undertaking (which is to be revoked) not been in force.
The ACCC will also be able to revoke an undertaking for breaches of the non-discrimination
obligations.
Finally, the Bill will allow carriers or carriage service providers to apply to the Federal Court to
have alleged contraventions of subsections 142C(2), 143(2) and 143A of Part 8 enforced. The
Federal Court will have powers to make orders directing a person to comply with the particular
subsection, compensate a person or any other order that the Court thinks appropriate. These
powers will operate in conjunction with the ACCC's and Minister's existing powers to seek
injunctions under Part 30 of the Tel Act.
Merits review
Key ACCC decisions under the proposed amended Part 8 (for example, the decision not to
accept an undertaking, or a decision to revoke a functional separation undertaking), will be
subject to merits review by the Australian Competition Tribunal. This reflects the fact that the
ACCC will be making decisions that can affect the commercial viability of individual
enterprises. Such an approach is consistent with the guidelines published by the Administrative
Review Council.
Schedule 3: Statutory Infrastructure Provider (SIP) regime
The current Statement of Expectations issued by Shareholder Ministers to NBN Co requires
NBN Co to roll out the NBN. However, there is no statutory obligation requiring it to connect
any premises to its network and service them on an ongoing basis into the future. While NBN Co
has clear commercial incentives to do so in most cases, the Bill would implement a new SIP
regime to provide industry and consumers with certainty that all premises in Australia can have
access to infrastructure that supports the delivery of superfast broadband services. This is
7
appropriate given that NBN Co will ultimately replace Telstra as the principal fixed-line
operator in Australia. With other carriers being expected to contribute to the cost of regional
NBN Co wholesale services through the Regional Broadband Scheme, those carriers and
regional end-users will also expect that there is some guarantee that NBN Co will deliver
services. The rationale for the SIP regime is further discussed in the relevant RIS.
The Productivity Commission, in its draft report on its review of the universal service obligation
(USO), acknowledged the Government's intention to introduce the SIP regime. It has put a
similar view in the final report which will be released shortly. The Productivity Commission saw
the SIP regime as a key part of its recommended approach to the USO. By providing certainty
that premises can be connected to superfast networks and end-users at those premises can
receive superfast broadband, the SIP arrangements provide a solid core around which a new
forward-looking consumer protection architecture for the future NBN environment can be built.
Under the proposed new SIP scheme, during the NBN rollout, NBN Co will have SIP
obligations in all areas where it is supplying carriage services. After the NBN rollout is
completed, NBN Co will be the default SIP for all of Australia. Other carriers can also become a
SIP where appropriate, for example where a carrier has a contract to provide infrastructure in a
new development. The SIP obligation also guarantees the provision of wholesale access to
superfast broadband infrastructure for retail service providers.
There are three key elements to the proposed SIP regime--identifying the SIP, the obligations of
the SIP, and the processes to be followed when a SIP does not or cannot meet the SIP obligation.
These are summarised below.
The Australian Communications and Media Authority (ACMA) will be the regulator with
responsibility for enforcing the SIP regime. If a SIP does not meet any of the SIP obligations, the
ACMA will have a range of enforcement mechanisms available, including issuing formal
warnings, accepting undertakings, issuing an infringement notice or taking court action if
appropriate.
The ACMA will maintain a register of SIPs, their service areas, and of contracts to install
infrastructure in areas which, when the installation is complete, would become SIP service areas.
The SIP regime deals with the connection of premises and the supply of services to carriage
service providers for the provision of services to end-users. It does not deal with the initial
provision of infrastructure in new developments per se. This is, in the first instance, a
commercial matter between developers and carriers. However, in a new development, the SIP
arrangements are intended to apply once SIP infrastructure is contracted for provision and once
installed.
Identifying the SIP
The Bill provides that, as the NBN rolls out, NBN Co will become the default SIP for each area
which it declares to be 'ready for service'. These areas are termed 'interim NBN service areas'
in the Bill. NBN Co will also be required to declare interim NBN service areas for all areas that,
prior to the Bill coming into force, it has already declared to be ready for service. To ensure
enhanced transparency about the service status of an NBN rollout area, the Bill would require
NBN Co to notify the ACMA when it declares an interim NBN service area.
Once NBN Co is the SIP for an interim NBN service area it will have an obligation, on
reasonable request from a carriage service provider, to connect any premises in that area to its
networks and to supply wholesale services so that the carriage service provider can supply
superfast broadband and voice telephony to the premises.
8
Following completion of the rollout, NBN Co will be the default SIP for the 'general service
area' which, as a default, will be all of Australia. However, 'nominated service areas' that are
covered by other SIPs will be excluded from the general service area.
New developments specified in existing 'adequately served' carrier licence condition
determinations will also be nominated service areas. The 'adequately served' licence conditions
were made in 2013 and 2014 and apply to four carriers - NT Technology Services, OptiComm,
Pivit and Places Victoria. They require those carriers to connect, upon reasonable request, any
premises within networks in new developments specified in the licence conditions. In effect, the
licence conditions impose a form of statutory infrastructure provider obligation on those four
carriers. The Bill ensures that those carriers' specific networks are automatically subject to the
new SIP obligations. As a consequence, the Bill also provides that the existing licence conditions
will be repealed upon the commencement of the SIP provisions.
Carriers who have contracts under which they are to supply eligible services to all of the
premises in a particular area, or to the whole or part of a real estate development project or
building redevelopment project, will be required to notify the ACMA after completing the
installation of infrastructure in those areas. To provide greater transparency to consumers and
other service providers, carriers who have entered into contracts to install infrastructure in real
estate development projects or building development projects will also be required to notify the
ACMA of the contracts ('anticipatory notices') before they install infrastructure, including the
project area and the estimated project completion date.
The Bill also includes a ministerial power to declare that a carrier is the SIP for a particular area,
for example, areas where there is superfast broadband infrastructure in place that it would not be
economically efficient for NBN Co to duplicate ('designated service areas'). The Minister also
has powers to adjust nominated service areas such as those created by the 'adequately served'
arrangements or carrier contracts with developers should it be needed.
SIPs for nominated service areas and designated service areas, and also NBN Co when it
declares interim NBN service areas, must provide the ACMA with the geographic coordinates of
their respective service areas. Similarly, anticipatory notices about contracts entered into by
carriers must contain the geographic coordinates of the service areas.
SIP connection and supply obligations
Upon reasonable request by a carriage service provider on behalf of an end-user in the service
area, a SIP will be required to connect a premises to a superfast fixed-line network (a 'qualifying
fixed-line telecommunications network') in order that the carriage service provider can supply:
retail services with a peak download speed of at least 25 Mbps and a peak upload speed of at
least 5 Mbps; and
carriage services that can be used by end-users to make and receive voice calls.
Where it is not reasonable for the SIP to connect premises to a fixed-line network, it must
provide a fixed wireless or satellite technology solution. The fixed wireless or satellite service
must also be able to support retail services with peak download speeds of at least 25 Mbps and
peak upload speeds of at least 5 Mbps. The fixed wireless service must also enable a carriage
service provider to supply voice services to end-users.
SIPs must publish standard terms and conditions on their websites on which they offer to
connect premises and supply eligible services. If a carriage service provider requests the SIP to
connect or supply on the terms published on the website, then the SIP must enter into an
agreement on those terms with the carriage service provider.
9
The Minister will have the power to make a legislative instrument setting out circumstances in
which the SIP obligation does not apply, and requirements for people purchasing a SIP service.
This reserve power is similar to the power which exists under the USO regime in the TCPSS
Act. For example, a SIP should not have to connect premises to its network where it cannot
receive required approvals, or there are safety concerns involved.
The Minister will have a reserve power to set standards, rules and benchmarks that SIPs must
comply with (or in the case of benchmarks, meet or exceed). The matters that could be specified
in standards, rules and benchmarks are broad. By way of example, standards could include
timeframes for connecting premises and rectifying faults, and rules could be made about how
premises must be connected and complaints must be addressed. Benchmarks could be set in
relation to a matter covered by a standard.
Complaints
If a SIP refuses a carriage service provider's request to connect premises to its network, it must
notify the service provider within five days after the refusal . The carriage service provider must
then provide the notice to the end-user on whose behalf it made the request. This provides
greater clarity for end-users of the reasons why a request cannot be fulfilled, and the end-user
can give the notice to the ACMA or the Telecommunications Industry Ombudsman as part of a
complaints process.
The Government is concerned that end-users frequently have little visibility, when a request for
a service is rejected, of why the request has been rejected and whether the rejection was caused
by the actions of a retail provider or a wholesale provider. The notification measure outlined
above will help to address this concern. The Bill also proposes a broader measure that could be
used to address this issue. Item 4A of Schedule 3 to the Bill proposes to amend the service
provider rule provisions in the Tel Act so that the Minister may, by legislative instrument, make
service provider determinations setting out rules that apply to carriage service providers in
relation to the supply of specified carriage services. The power could be used to address future
issues that may occur. However, as any determination would be a legislative instrument, it
would be subject to the consultation, disallowance and sunsetting provisions in the Legislation
Act 2003.
Targets for NBN Co
The Bill provides two targets that NBN Co, as a SIP, must take all reasonable endeavours to
meet. These are expressed as the intention of the Parliament and are:
NBN Co's fixed-line networks are capable of being used to supply fixed-line carriage
services with peak download speeds of at least 50 Mbps and peak upload speeds of at least
10 Mbps to at least 90 per cent of premises in areas that, according to NBN Co's website, are
serviced by those networks.
NBN Co's fixed-line networks are capable of being connected to at least 92 per cent of
premises in Australia.
The second target reinforces the first one; the target of higher 50/10 Mbps speeds is applicable to
the majority of premises in Australia.
Failure or inability to meet the SIP obligation
If a SIP becomes aware that it is likely that it will no longer be able to fulfil its SIP obligations
for that area, it would be required to notify the Secretary of the Department of Communications
and the Arts and the ACMA. The notification process is intended to provide time to develop and
implement optimal alternative arrangements. The SIP may negotiate with another carrier to take
10
over its SIP obligations. If an alternative SIP is agreed, the first carrier must notify the ACMA. If
no alternative SIP is agreed, NBN Co would become the replacement SIP for that area.
Periodic compliance reports
The Minister will have powers to make rules, if needed, requiring SIPs to give the ACMA
periodic reports about their compliance with the SIP arrangements. These are additional to the
ACMA's normal powers as a regulator, for example, to establish record-keeping rules and
request information.
Delegation
To simplify administration in the long-term, the Bill enables the Minister to delegate to the
ACMA a range of powers, including the power to make standards, rules and benchmarks, if
appropriate.
Schedule 4: Funding of fixed wireless broadband and satellite broadband
Schedule 4 of the Bill sets out the operational arrangements of the Regional Broadband Scheme
(the Scheme): an industry charge of around $7.10 per month that carriers would be required to
pay for each premises on their network that has an active fixed-line superfast broadband service.
The purpose of the charge is to sustainably fund the net costs of NBN Co's fixed wireless and
satellite networks, which provide access to essential broadband services predominantly in
regional Australia. The charge was foreshadowed by Government in its December 2014
response to the Independent Cost-Benefit Analysis of Broadband and Review of Regulation (the
Vertigan Review).
Rolling out superfast broadband infrastructure to regional Australia is very expensive.
NBN Co's fixed wireless and satellite networks are expected to incur a net cost of $9.8 billion
(in net present value terms) over thirty years. NBN Co currently funds these net costs through an
internal cross subsidy from its fixed line networks. The monies collected from the Scheme will
be used to fund NBN Co's net costs for constructing and operating fixed wireless and satellite
network infrastructure, replacing the company's opaque internal cross subsidy. The funding
assistance will be in the form of contracts and/or grants made by the Secretary of the Department
to NBN Co.
Schedule 4 works in tandem with the Telecommunications (Regional Broadband Scheme)
Charge Bill 2017 (Charge Bill), which establishes the tax for constitutional purposes. Schedule 4
outlines the operational aspects of the Scheme, and covers:
the types of premises caught by the charge;
the types of premises exempt from the charge;
the administrative arrangements for assessing and paying the charge, including yearly
reporting requirements for carriers;
penalties for avoiding the charge;
the Special Account into which funds from the charge will be credited and debited;
the arrangements for paying NBN Co (and other eligible funding recipients) for its fixed
wireless and satellite networks through contract or grant;
an offset mechanism to allow eligible funding recipients to offset their charge liability
against money owed to them under the Scheme;
information gathering and disclosure powers for the ACCC and the ACMA;
information reporting obligations for carriers, the ACMA and the Department's Secretary;
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a one off reporting requirement on carriers, which will give the ACCC a snapshot of the high
speed, fixed line broadband market as at November 2017; and
a requirement for the Scheme to be reviewed during the first four years or as soon as
practicable after.
Types of premises included in the charge base
The charge base is set out in Division 4 of Schedule 4. In summary, carriers will have to pay the
charge on premises to which a carriage service provider (CSP) provides a broadband service
during the whole or part of a month using a local access line that is technically capable of
providing download speeds of normally 25 megabits per second (Mbps). This requirement is
supported though four fundamental definitions.
Chargeable premises associated with a local access line (chargeable premises): Carriers will be
liable to pay the charge for each chargeable premises on their networks during the whole or a
part of each month in a financial year. Chargeable premises are 'potentially chargeable premises'
that are not exempt premises (discussed below).
Premises is given its ordinary meaning but the Minister has the power to determine specified
conditions that would deem a location to be or not to be a premises. The determination would be
by way of legislative instrument and it would be subject to a delayed commencement through
special disallowance provisions established by the Bill. Some examples of specified conditions
that may cause a location to not be a premises include where there was a public mobile
telecommunications tower, traffic control equipment, bus stop, metering point or public alarm or
security system at the location.
Potentially chargeable premises: If a person is a carrier and either owns a local access line or is
the nominated carrier in relation to a local access line, and a CSP supplies a designated
broadband service to a premises in Australia using the line during the whole or part of a month,
then the premises is a potentially chargeable premises. This does not apply to exempt lines
(discussed in more detail below).
Designated broadband service: A designated broadband service is defined as a carriage service
supplied using a local access line in Australia that enables end-users to download
communications and is technically capable of being used to supply a superfast carriage service.
Voice-only telephone services and television services are excluded from the definition because it
is intended that the charge apply only to broadband services. The Minister can determine a class
of services to be excluded from the definition to ensure it continues to apply only to broadband
services as technological changes arise.
It is important to note that it is the speed that the line is technically capable of providing rather
than the speed that the consumer experiences that is relevant to determining whether the line is
capable of being used to supply a superfast carriage service. For example, an FTTP line that is
technically capable of download speeds exceeding 100Mbps is technically capable of being used
to supply a superfast carriage service even if the consumer has only ordered a 12Mbps retail
broadband service or normally experiences download speeds of less than 25Mbps because of
congestion on the network. It is expected that all FTTP, FTTN, FTTB, FTTC and HFC networks
are 'technically capable' of being used to supply a superfast carriage service.
Attempts to manipulate a line's usual technical capability will be considered an attempt to avoid
the charge and will trigger the anti-avoidance provisions discussed below.
Superfast carriage service: A superfast carriage service is a carriage service that enables
end-users to download communications where the download transmission speed is normally
12
25 Mbps or more. The word "normally" is akin to "usually"; it recognises that circumstances
may arise that temporarily displace usual download transmission speeds.
The carriage service must be supplied using a line to premises occupied or used by an end-user.
The line does not need to be physically connected to the premises because 'using' means use in
isolation or in conjunction with one or more other things. While the provisions are not intended
to capture mobile broadband services, fixed wireless broadband services, or satellite broadband
services, it is intended to capture a line that runs most of the way to the premises but is then
connected to the premises over a short distance using wireless or mobile technology.
Figure 1: Demonstration of Charge Base
A CSP supplies a designated
broadband service to a premises
using the technology during:
Whole or part
Not at all
of the month
FTTP X
Carrier owns or is the nominated carrier in relation to:
FTTN X
Technically
capable of FTTB X
download speeds
of normally FTTdp/FTTC X
Fixed line
25Mbps
HFC X
Other X
Not technically
capable of Exchange
download speeds based xDSL X X
of normally
25Mbps
Mobile X X
Non-fixed
line
Fixed-wireless X X
Satellite X X
Types of premises exempt from the charge
The Bill provides for three categories of exemptions.
Exempt premises - small networks: The first exemption applies to carriers that operate very
small networks. Carriers that have less than 2,000 potentially chargeable premises during the
whole or a part of a month are exempt from paying the charge on those premises. If the carrier is
part of an associated group and the group as a whole has less than 2,000 potentially chargeable
premises, then each carrier in the group is exempt from paying the charge on those premises.
13
This exemption applies on a month by month basis. For example, if a carrier had less than 2,000
services in January and then more than 2,000 services in February, only the January services
would be exempt from the charge.
Exempt lines - local access lines transitioning to the NBN: The second exemption applies to
local access lines transitioning to NBN Co or being decommissioned under certain agreements.
The following local access lines are exempt:
Lines that are transitioning to NBN Co from Telstra Corporation Limited (Telstra) as part
of the revised Definitive Agreements.
Lines that are the subject of an agreement between NBN Co and specified Optus
companies providing for the deactivation or decommissioning of hybrid fibre coaxial
lines.
Lines that are transitioning to NBN Co where:
o the lines are transitioning in one of the first six months of the first eligible
financial year (1 July 2018); and
o a contract was in place for their transfer prior to 1 July 2018.
The Bill provides that the Minister can remove agreements from the exemption by specifying the
agreements in a legislative instrument. The legislative instrument is a disallowable instrument.
Charge concession period - potentially concessional premises: The first 25,000 residential and
small business premises on each carrier's network that have an active superfast fixed-line
broadband service will be exempt from the charge for the first five years of the Scheme. The
proposed concession period will lessen the burden on smaller carriers and help them transition to
paying the charge.
Carrier reporting obligations
There are two sets of carrier reporting obligations set out in the Bill: a once-off reporting
obligation and an annual reporting obligation.
Once-off report to the ACCC: The once-off reporting obligation occurs in financial year
2017-18. By 31 December 2017, carriers must provide the ACCC with a breakdown of the
number of premises that a CSP has supplied a designated broadband service to on their fixed-
line networks during November 2017, and any associations the carrier had in respect of a
telecommunications network, a company or a local access line during the month. This
requirement applies to carriers whose premises might otherwise be exempt from the charge.
This once-off reporting obligation will give the ACCC a snapshot of the high speed, fixed line
broadband market at it stands during November 2017. It will enable the ACCC to review the
base component of the charge and provide advice to the Minister to consider whether it should
be adjusted for the 2018-19 financial year (see the Charge Bill's explanatory memorandum for
more information). This would align the charge with the latest industry information about the
size of the high speed, fixed-line broadband market.
Failing to lodge a report is a strict liability offence. The penalty is 50 penalty units (currently
$9,000). A person who fails to lodge a report commits a separate offence for each day they fail
to lodge a report.
Annual report to the ACMA: The annual reporting requirement starts in financial year 2019-20.
Carriers are required to self-report the amount of chargeable premises and potentially
concessional premises they have each year to the ACMA so that the ACMA can assess their
charge liability and collect the charge.
14
If particular premises are reported as potentially concessional premises and the carrier did not
know and could not, with reasonable diligence have ascertained, that the premises were not
potentially concessional, then the premises are taken to be potentially concessional premises in
relation to the person for the month. The Government recognises it is sometimes difficult for
carriers to ascertain, for example, whether premises are small business premises or medium
business premises at a particular point in time. As such, there is limited leniency for mistakenly
misreporting potentially concessional premises. It is expected that carriers establish systems to
enable them to tell whether individual premises are potentially concessional.
Carriers must also report any associations the carrier had in respect of a telecommunications
network, a company or a local access line during the financial year. This information will
facilitate the ACMA's ability to enforce the Scheme. Carriers with exempt premises under new
section 95 or exempt lines under new section 96 do not have to report about those premises and
lines. This decreases the compliance burden on industry.
The report is due by the 31 October following the financial year to which the report relates (for a
timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses
below). The penalty for failing to lodge a report is 50 penalty units (currently $9,000).
Charge assessment
The ACMA will assess carriers' charge liability one year in arrears. Starting in financial year
2019-20, the ACMA will annually assess:
The person's total number of chargeable premises for each month in the financial year.
The person's annual chargeable premises amount for the financial year (refer clauses 6 and 9
of the Charge Bill).
The person's annual base amount for the financial year (refer clause 10 of the Charge Bill) -
this is the amount that will be used to pay eligible funding recipients.
The person's annual administrative cost amount for the financial year (refer clause 14 of the
Charge Bill) - this is the amount that will be used to pay the ACMA and ACCC's designated
administrative costs.
The charge payable by the person in relation to the financial year.
The ACMA is required to complete its assessment by 30 November following the financial year
that the charge is accrued or another day no later than two months before the standard due date
for the charge (for a timeline of administrative events related to the Scheme, see Figure 4 in the
Notes on Clauses below). The ACMA will notify the carrier of its assessment as soon as is
practicable.
Each year, the ACMA must also publish on its website the aggregate amount of charge carriers
pay and the total of the amounts specified in charge offset certificates for the eligible financial
year.
Charge due dates and collection
The charge is collected one year in arrears. The collection arrangements are different depending
on whether a carrier is an eligible funding recipient.
For all carriers that are not eligible funding recipients, charge payment is due on the standard
due date, that is, 31 December following the financial year that the charge is accrued or a later
date determined by the ACMA, but no later than 28 February following the financial year. The
ACMA can also give individual extensions to specific carriers until no later than 28 February
following the financial year.
15
Eligible funding recipients can pay their charge in two instalments. This arrangement is
necessary for the Bill's offset mechanism to operate effectively (discussed below). The
administrative cost instalment (equal to the annual administrative cost amount) is due on the
standard due date. If an eligible funding recipient has made an application for an offset
certificate, their base instalment (equal to the annual base amount) is due on 30 April following
the financial year that the charge is accrued, otherwise it is due on the standard due date. For a
timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses
below.
Late payment penalties apply to unpaid charge liabilities at a rate of 20 per cent per year, or
another lower amount that the ACMA determines. The ACMA may also remit a late payment
penalty. The ACMA may recover the charge on behalf of the Commonwealth in the Federal
Court, the Federal Circuit Court or a court of a State or Territory that has jurisdiction.
Penalties for failure to pay charge liability
The Bill establishes civil anti-avoidance provisions for carriers that seek to avoid application of
the charge and for persons who aid or abet such avoidance activities. For example, if carriers
artificially alter lines that are technically capable of download speeds of 25 Mbps in order to
reduce the speed capability of the line, or experts advised carriers on how to do so, both parties
would be caught by the civil anti-avoidance provisions.
The Bill also includes civil anti-avoidance provisions for carriers that enter into a scheme for the
sole or dominant purpose of obtaining a benefit from the charge concession period, and for
persons who aid or abet such a scheme. Carriers would be caught by the anti-avoidance
provisions if, for example, they artificially split their company into smaller companies with less
than 25,000 chargeable premises each so that they have no charge liability for the first five years
of the Scheme.
These provisions are civil penalty provisions for the purposes of Part 31 of the Tel Act. As such,
the maximum penalty for a body corporate is $10 million for each contravention. The Bill
increases the maximum civil penalty for a person other than a body corporate to 10,000 penalty
units (currently $1.8 million). This reflects the seriousness of seeking to avoid paying the charge
and aiding and abetting such behaviour.
The Bill also establishes a criminal offence for carriers that seek to avoid the charge and carriers
that enter into a scheme for the sole or dominant purpose of obtaining a benefit from the charge
concession period. The offence does not include a penalty of imprisonment. The maximum
penalty is 10,000 penalty units (currently $1.8 million) for a person other than a body corporate
and 50,000 penalty units (currently $9 million) for a body corporate (per the Crimes Act 1914).
The criminal offences and level of proposed penalties reflect the seriousness of the
contraventions, which involve dishonest and potentially fraudulent behaviour which would
adversely impact on the delivery of essential broadband services to regional and remote
Australia.
The establishment of a Special Account
Increasing the transparency of fixed wireless and satellite funding is one of the main purposes of
the Scheme. To facilitate this goal, the Government is establishing a Special Account so that
affected carriers can see how much money is being raised by the charge and where it is going.
The Special Account effectively quarantines proceeds raised by the charge so that they can only
be used to pay eligible funding recipients and the ACMA and ACCC for the functions under the
Scheme.
16
Arrangements for paying NBN Co (and other eligible funding recipients)
The Bill provides that the Secretary will be permitted to enter into a contract or grant with
eligible funding recipients on behalf of the Commonwealth to provide financial assistance for:
the connection of premises to fixed wireless or satellite networks;
the supply of eligible services to carriage service providers to enable them to provide fixed
wireless and satellite broadband services; or
fixed wireless or satellite facilities.
In order to receive funding, the eligible funding recipient's fixed wireless and satellite networks
must be capable of peak download transmission speeds of at least 25Mbps. These speeds are
consistent with the speeds the Government expects NBN Co to supply over the NBN, as set out
in the Statement of Expectations issued on 24 August 2016,2 and also with the proposed baseline
SIP speeds under Schedule 3 to this Bill.
An eligible funding recipient is defined to be an NBN corporation, or a specified carrier as
declared by the Minister. Whilst it is envisaged that NBN Co will be the only eligible funding
recipient at the Scheme's commencement, there is flexibility for the Minister to declare other
eligible funding recipients if required.
The Bill allows the Secretary and the eligible funding recipients to agree upon terms and
conditions of the contracts and grants. The Minister may make a determination setting out
standards, rules and benchmarks that are to apply to such contracts and grants but there are
limitations on such determinations. The Minister cannot, for example, specify prices for services
or facilities or override terms or conditions that give the contractor or grant recipient a right to
adjustment of payment for a change in the services, facilities or customer equipment to be
supplied.
The Secretary must maintain a register setting out the details of these contracts and grants and
publish the register on the Department's website.
The offset mechanism and payment of eligible funding recipients
The Bill allows the Secretary to offset eligible funding recipients' charge liabilities against their
funding entitlement under a contract or grant. This improves the efficiency of the Scheme and
minimises transaction costs. The offset mechanism relies on two certificates: the nominal
funding entitlement certificate and the offset certificate.
Nominal funding entitlement certificate: The nominal funding entitlement certificate (NFEC)
establishes an estimate of how much money the Commonwealth owes an eligible funding
recipient for the financial year under a contract or grant. This estimate is based on the balance of
the Special Account that is attributable to the base component of the charge. If a carrier is an
eligible funding recipient on 1 February in a year that charge payment is due, the Secretary must
issue it with an NFEC by the following 31 March. The Secretary will issue a new NFEC every
year that charge payment is due and publish the NFEC on the Department's website.
Offset certificate: The offset certificate specifies the amount of charge the Commonwealth will
offset against a carrier's nominal funding entitlement. To be eligible for an offset, an eligible
funding recipient must apply for an offset certificate by the standard due date of the charge,
typically during December or February following the year in which the charge accrues. For a
2
Available at http://www.nbnco.com.au/content/dam/nbnco2/documents/soe-shareholder-minister-letter.pdf.
17
timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses
below.
Eligible funding recipients can only apply to have their annual base amount offset. They must
contribute to the administrative costs of the charge by paying their annual administrative cost
amount on the standard due date of the charge.
The Secretary will approve an eligible funding recipient's offset certificate application after
issuing an NFEC by 31 March following the financial year that the charge accrues. The
Secretary will then remit the offset amount or, if the eligible funding recipient has already paid
the offset amount, refund the amount. Later in the financial year, the Secretary will pay the
eligible funding recipient the amount specified in the NFEC adjusted by the offset amount.
If the eligible funding recipient's offset certificate application is refused, it must pay its annual
base amount by 30 April following the financial year that the charge accrues. If the carrier does
not apply for an offset certificate it must pay its annual base amount on the standard due date
along with its annual administrative cost amount. In each of these cases, the Secretary will pay
the carrier the full amount specified in the NFEC later in the financial year.
ACMA access to information held by carriers and carriage service providers
The Bill establishes information gathering powers to facilitate the ACMA administering and
enforcing the Scheme. The ACMA can require carriers and carriage service providers to provide
information and documents it believes on reasonable grounds to be relevant to the operation of
the Scheme. To request information, the ACMA will issue a written notice specifying the
timeframe for the request, the manner in which the documents should be set out and whether
copies of documents are required. Carriers and carriage service providers are entitled to be paid
compensation for reasonable expenses incurred in meeting a request.
The penalty for failing to comply is 50 penalty units (currently $9,000).
ACCC access to information held by eligible funding recipients
The Bill establishes information gathering powers to facilitate the ACCC's five yearly review of
the base and administrative cost components. The ACCC can require eligible funding recipients
to provide information and documents relevant to the performance of the ACCC's functions. To
request information, the ACCC will issue a written notice specifying the timeframe for the
request, the manner in which the documents should be set out and whether copies of documents
are required. Eligible funding recipients are entitled to be paid compensation for reasonable
expenses incurred in meeting a request.
The penalty for failing to comply is 50 penalty units (currently $9,000).
Information disclosure between government agencies and quasi-government bodies
The Bill allows the ACMA and the ACCC to disclose information to the following government
and quasi-government bodies if the information will enable or assist the body to perform or
exercise their functions:
the Department of Communications and the Arts,
the Department of Finance,
the Treasury,
the ACCC or the ACMA,
the Regional Telecommunications Independent Review Committee (RTIRC), and
an authorised Government agency.
18
These information sharing provisions will assist government agencies in continuing to give
evidence-based policy advice to Government. The information is protected by confidentiality
laws that apply to all Commonwealth officers. For members of RTIRC that are not
Commonwealth officers, the information could be protected through confidentiality agreements.
Review of the Scheme
The charge base has been designed to capture services that are substitutable for an nbn service,
that is, superfast, fixed line broadband services. The telecommunications industry changes
rapidly and other types of services may become substitutable for an NBN Co service in the
future. It is desirable that the charge continue to capture substitutable services so that the charge
base is as equitable as possible.
To facilitate this, the Bill provides that the Scheme must be reviewed before the fourth year after
commencement of the Scheme, or as soon as practicable after. The review must provide for
public consultation and a report of the review must be tabled in each House of Parliament within
25 sitting days after it has been complete. The Government may decide to change the charge
base by legislative amendment if the review finds that the charge base is no longer appropriate
given developments in the market.
Schedule 5: Designated day
Paragraph 577(10)(a) of the Tel Act establishes the 'designated day' for the purposes of Telstra's
structural separation. The designated day is the date from which Telstra is subject to structural
separation obligations set out in its structural separation undertaking. The date currently set out
in the Tel Act is 1 July 2018, or such other date as is specified by the Minister by written
instrument. The current date reflects the date by which, at the time that the clause was enacted, it
was anticipated that the NBN rollout would be complete, thereby enabling Telstra's structural
separation. Telstra's structural separation is accomplished by migrating its customer base from
its own local access networks to the NBN. The fact the date could always be altered by
Ministerial instrument reflects the reality that the date may have had to be changed depending on
the time required to complete the NBN.
Item 1 of Schedule 5 will amend the designated day to 1 January 2020. This date better reflects
the date by which the NBN rollout is now expected to be completed. The date can still be
adjusted by Ministerial instrument if required.
19
FINANCIAL IMPACT STATEMENT
The proposals in the Bills will require a small increase in resourcing for the ACMA and the
ACCC. Separation and SIP measures are expected to be funded from within those agencies'
existing budgets. Their activities in relation to the RBS are funded through the receipts from the
scheme.
20
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMPETITION AND
CONSUMER) BILL 2017
The Telecommunications Legislation Amendment (Competition and Consumer) Bill (the Bill) is
compatible with the human rights and freedoms recognised or declared in the international
instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
The Bill comprises three main measures:
amendments to the superfast network rules in Parts 7 and 8 of the Telecommunications
Act 1997 (Tel Act) to make the default structural separation requirement clearer and
more effective as a baseline for industry and create new commercial and competitive
opportunities (Schedules 1 and 2 to the Bill);
introduction of a statutory infrastructure provider regime (Schedule 3 to the Bill); and
implementation of administration arrangements for the Regional Broadband Scheme
which will fund the net costs of NBN Co Limited' s fixed wireless and satellite networks
(Schedule 4 to the Bill).
Amendments to the superfast network rules
The Bill proposes to repeal Part 7 of the Tel Act and amend Part 8 so that the current wholesale-
only obligations in section 143 of the Tel Act will now apply to fixed-line networks that came
into existence between 1 January 2011 and 1 July 2018, or to networks that existed before
1 January 2011 and were extended, altered or upgraded between 1 January 2011 and 1 July
2018. New structural separation rules would apply to local access lines that come into existence,
or are altered or upgraded, after 1 July 2018. Network providers will be able to operate on a
functionally separated basis where approved by the ACCC. Non-discrimination requirements
will apply to both structurally separated and functionally separated networks.
Statutory Infrastructure Provider (SIP) regime
The Bill would implement a new SIP regime to provide industry and consumers with certainty
that all premises in Australia will have access to infrastructure that supports the delivery of
superfast broadband services.
During the rollout of the National Broadband Network (NBN), NBN Co will have SIP
obligations in all areas where it is supplying carriage services. After the NBN rollout is
completed, NBN Co will be the default SIP for all of Australia. Other carriers will also be SIPs
where appropriate, for example, where a carrier is the sole provider of infrastructure in a new
development. The SIP obligation also provides wholesale access to broadband infrastructure for
retail service providers so they can service their retail customers.
There are three key elements to the proposed SIP regime--identifying the SIP, the obligations of
the SIP, and the processes to be followed when a SIP does not or cannot meet the SIP obligation.
The Minister can make rules specifying requirements for connection and supply, and
21
circumstances in which it would be reasonable to connect and supply. The Minister can also
make standards, rules or benchmarks applying to connection and supply.
Regional Broadband Scheme
Schedule 4 of the Bill would establish the operational arrangements of the proposed Regional
Broadband Scheme (the Scheme): an industry charge of around $7.10 that carriers would be
required to pay for each premises on their network that has an active fixed-line superfast
broadband service. The purpose of the charge is to sustainably fund the net costs of NBN Co's
fixed wireless and satellite networks, which provide access to essential broadband services
predominantly in regional Australia. The charge was foreshadowed by Government in its
December 2014 response to the Vertigan Review (the Independent Cost-Benefit Analysis of
Broadband and Review of Regulation).
Rolling out superfast broadband infrastructure to regional Australia is very expensive. NBN
Co's fixed wireless and satellite networks are expected to incur a net cost of $9.8 billion (in net
present value terms) over thirty years. NBN Co currently funds these net costs through an
internal cross subsidy from its fixed line networks. The money collected from the Scheme will
be used to fund NBN Co's net costs for constructing and operating fixed wireless and satellite
network infrastructure, replacing the company's opaque internal cross subsidy. The funding
assistance will be in the form of contracts and/or grants made by the Secretary of the Department
to NBN Co.
Schedule 4 works in tandem with the Telecommunications (Regional Broadband Scheme)
Charge Bill 2017, which establishes the charge. Schedule 4 establishes:
the types of broadband services caught by the charge;
the types of broadband services exempt from the charge;
penalties for avoiding the charge;
the administrative arrangements for assessing and paying the charge, including yearly
reporting requirements for carriers;
the arrangements for paying NBN Co (and other eligible funding recipients) for its fixed
wireless and satellite services through contract or grant;
the Special Account into which funds from the charge will be credited and debited;
an offset mechanism to allow eligible funding recipients to offset their charge liability
against money owed to them under the Scheme;
information gathering and disclosure powers for the ACCC and the ACMA,
information reporting obligations for carriers, the ACMA and the Department's Secretary;
a one off reporting requirement on carriers, which will give the ACCC a snapshot of the high
speed, fixed line broadband market as at November 2017, and
a requirement for the Scheme to be reviewed during the first four years or as soon as
practicable after.
Human rights implications
No human rights issues were raised during consultation.
This Bill does not engage any of the applicable rights or freedoms.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
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REGULATION IMPACT STATEMENTS
Three Regulation Impact Statements were prepared for the following measures:
1. amendments to Parts 7 and 8 of the Telecommunications Act 1997 and Part XIC of the
Competition and Consumer Act 2010;
2. introduction of a statutory infrastructure provider regime into the Telecommunications
Act 1997; and
3. establishing an ongoing funding arrangement for NBN Co's fixed wireless and satellite
networks through the Regional Broadband Scheme.
The Regulation Impact Statements were assessed by the Office of Best Practice Regulation as
meeting best practice requirements in line with the Australian Government Guide to Regulation.
The Regulation Impact Statements for measures one and two are found in this Explanatory
Memorandum whilst the Regulation Impact Statement for the third measure is found in the
Explanatory Memorandum to the Telecommunications (Regional Broadband Scheme) Charge
Bill 2017.
23
REGULATION IMPACT STATEMENTS
Amendments to Parts 7 and 8 of the Telecommunications Act 1997 and Part XIC of the
Competition and Consumer Act 2010
This Regulation Impact Statement (RIS) looks at the options for responding to the
recommendations of the independent cost benefit analysis of broadband and review of regulation
chaired by Dr Michael Vertigan, AC (the Vertigan panel) in so far as they relate to Parts 7 and 8
of the Telecommunications Act 1997 (the Tel Act).
In 2011, the Parliament enacted Parts 7 and 8 of the Tel Act, and associated provisions in the
Competition and Consumer Act 2010 (CCA). In essence, Part 7 and associated CCA provisions
provide that non-NBN networks that are built, upgraded or extended after 1 January 2011 and
supply superfast carriage services to residential and small business customers must supply a
wholesale Layer 2 bitstream service to access seekers on request on an open access and non-
discriminatory basis. Part 8 provides that such networks must operate on a wholesale-only (i.e.
structurally separated) basis. There are statutory exemptions that, for example, allow pre-2011
networks to be extended by up to one kilometre, and there are also powers for the Minister to
grant exemptions.
The Vertigan panel recommended that the Government repeal Part 7 of the Tel Act, arguing that
it provided an unnecessary constraint on competition. The panel also recommended that Part 8
should be amended to tighten its operation so that there is a baseline of structural separation of
superfast broadband networks, but also to implement a process under which the ACCC can
authorise providers operating on a functionally separate, rather than structurally separate, basis
where this promotes the long-term interests of end-users.
This RIS:
provides background to this problem;
explains the Government objectives;
considers the options available, and the strengths and weaknesses of those options;
assesses the impact of those options on stakeholders;
recommends a preferred course of action; and
assesses the costs of the options.
The options are:
1. status quo--retain Parts 7 and 8 in their current form;
2. amend Parts 7 and 8, broadly in line with recommendations made by the Vertigan panel;
and
3. repeal Parts 7 and 8.
This RIS recommends option 2 as it is expected to deliver a net economic benefit by promoting
investment and competition while ensuring adequate safeguards are in place to preclude
discrimination in the supply of wholesale broadband service, which could otherwise impact
retail level competition to the detriment of consumers.
An early assessment draft of this RIS was provided to OBPR in 2014 and then considered by the
Government when it developed its response to the Vertigan panel (set out in the 2014
24
Telecommunications Regulatory and Structural Reform policy paper). The Minister also
considered an early draft of the RIS in finalising his decisions upon separation issues as part of
the development of the response. The draft RIS was published with draft legislation in December
2016 and the Government sought submissions on the RIS. The RIS was submitted to OBPR for
First and Second Pass Final Assessment in May 2017.
Context
Parts 7 and 8 contain rules applying to a local access line that forms part of a local access
network:
used, or proposed to be used, to provide a fixed-line carriage service where the download
transmission speed is normally more than 25 Mbps to residential or small business users;
and
that was built, upgraded, altered or extended on or after 1 January 2011 so that it is
capable of being used to supply broadband services with of a download transmission
speed normally more than 25 Mbps.
Part 7 requires operators of such networks to provide a Layer 2 bitstream service.3 Part XIC of
the CCA sets out associated obligations in relation to the supply of high-speed carriage services
to residential or small business users using these networks. In particular, network relevant
operators are required to supply a Layer 2 bitstream service declared by the ACCC and comply
with non-discrimination obligations in relation to the supply of the service. There are a number
of exemptions to Parts 7 and 8; for example, extensions of up to 1 kilometre of superfast
broadband networks that were built prior to 2011 (the 1 kilometre exemption) and exemptions
granted by the Minister (ministerial exemptions).
Parts 7 and 8 were established as part of the previous Government's changes to the Australian
telecommunications regulatory regime. Parts 7 and 8 complemented the establishment of NBN
Co and its construction and operation of the NBN as a new high-speed wholesale-only open
access, non-discriminatory network, as well as the structural separation of Telstra.
The Explanatory Memorandum to the Telecommunications Legislation Amendment (National
Broadband Network--Access Arrangements) Bill, which introduced Parts 7 and 8 into
Parliament, noted the scope for competing providers to target highly profitable areas and
"operate as vertically-integrated providers and advantage themselves over independent retail
service providers."4
Parts 7 and 8 were intended to ensure that where such networks are built and operated that they
provide consumers with a choice of competing retail service providers and the benefits of that
competition, in terms of service innovation and lower retail prices. As such, they seek to provide
consumers with the same types of outcomes that they should enjoy on the NBN. They also
meant that retail providers in the residential and small business markets would have limited
opportunities to operate their own access networks going forward, advantaging their retail
businesses as a result.
3
'Layer 2' is a commonly-used term in the industry and refers to a particular layer in the network. It is formally described in the
Open Systems Interconnection (OSI) model. A layer 2 service will not have the characteristics of a retail service but forms a
'raw' foundation on which a wholesale customer can build advanced retail services.
4
Revised Explanatory Memorandum (Senate), p.13
25
Parts 7 and 8 would also create a more level regulatory playing field for NBN Co, enabling it to
compete in the provision of infrastructure. As a result of this, NBN Co would also be better able
to cross-subsidise loss-making services, as required by the previous Government's operational
model for NBN Co.
Vertigan Review and Government Policy Statement of 11 December 2014
In 2014, the Vertigan panel conducted a review of telecommunications regulation. As part of this
review, the panel considered whether Parts 7 and 8 were operating effectively and if
amendments should be made to promote competition, innovation and investment.
The Vertigan panel recommended that the Government repeal Part 7 of the Tel Act and amend
Part 8 to repeal the statutory and ministerial exemptions and implement a process under which
the ACCC could authorise integration of operators that would otherwise be required to
structurally separate, where this promotes the long-term interests of end-users, subject to
appropriate access, equivalence and non-discrimination regulation.5
The Government accepted the recommendations in large part. In its December 2014 policy
statement, Telecommunications Regulatory and Structural Reform, the Government announced
that it would introduce legislation to:
repeal Part 7 with intended effect from 1 July 2017 and from this time, access to services
would be dealt with under Part XIC of the CCA, by the ACCC deciding whether to
declare access to, and regulate, wholesale services;
require new networks offering high-speed broadband to be structurally separated as a
default and offer non-discriminatory access;
remove small business customers from the scope of Part 8, leaving it to apply to
networks servicing residential customers;
remove the statutory exemptions, such as the 1 kilometre exemption, and the power for
the Minister to grant exemptions from Part 8;
provide for the ACCC to authorise functional separation arrangements (subject to
undertakings from carriers detailing satisfactory arrangements for access and equivalence
to minimise anti-competitive effects); and
include appropriate grandfathering measures for pre-existing high-speed broadband
networks.
As an interim measure, in December 2014, the Government also made the Carrier Licence
Conditions (Networks supplying Superfast Carriage Services to Residential Customers)
Declaration 2014 (superfast carrier licence conditions) requiring affected providers of superfast
broadband networks providing services to residential customers to operate on a functionally
separated basis.
Assessing the problem
The fundamental problem in this area is whether Parts 7 and 8 operated as best they can and
whether their operation could be improved to promote investment and competition while still
supporting effective retail level competition (in the same manner envisaged on the NBN). A
further consideration is how any changes to the arrangements will impact on the operation of
5
Independent cost-benefit analysis and review of regulation (2014), Volume 1--National Broadband Network Market and
Regulatory report, p. 85.
26
NBN Co and its ability to deliver on the Government's objective that it provide better broadband
and an improved platform for retail competition and at less cost across Australia as soon as
possible.
If the provision of infrastructure is left to the market, further investment in new broadband
infrastructure would be expected to occur over time. Such investment is occurring already in
some instances, for example, there is competing infrastructure in the inner cities of several
capital cities. However, such investment has been slow in occurring and is highly targeted,
generally leaving the bulk of premises untouched. In response to this, the previous Government
established NBN Co to deliver better broadband within a fixed timeframe.
Telecommunications infrastructure generally requires significant capital and it is often not
economically efficient for competing providers to duplicate infrastructure. For this reason, many
networks are 'bottlenecks' and the network owner controls access by competitors to the
consumers that are connected to it. This is particularly the case if it is the only access network in
a locality; but it can also be an issue if there are competing networks in a locality, because both
carriers and consumers may be reluctant to meet the cost of additional new connections and
there may be a general inertia on the part of consumers to churn from one access provider to
another. As a result, there may be only one network servicing any individual premises.
Bottleneck control over access networks can limit retail competition in two key ways. First, the
network owner may not allow competitors to access the network at all. In this case, customers
that are connected to the network will not have any choice of retail provider. Second, the
network owner may supply its competitors on terms that do not enable them to compete
effectively with the network operator's own retail arm, for example, it could charge prices that
are close to or higher than its retail prices. In this case, competitors would need to charge higher
retail prices than the network operator in order to turn a profit.
Recognising the bottleneck control of access providers, the established remedy has been for the
ACCC to be able to declare access to such networks. It should be noted that the general access
regime under the CCA does not apply to telecommunications and instead Part XIC of the CCA
provides a telecommunications specific access regime. Once the ACCC declares access to a
service, infrastructure owners must give access to competing providers to make use of their
network. In this way, declaration is designed to enhance retail competition. Following
declaration, the ACCC can set regulated terms and conditions, including price, that a network
owner must comply with in the absence of commercial negotiation. In 2010, however, the
ACCC had not looked at the issue of access to new superfast access networks. Moreover, the
Part XIC regime cannot readily deal with preferential self-treatment by integrated providers. In
particular, the ACCC cannot demand particular structural remedies for competition problems
and also cannot require non-NBN Co providers to supply services on a non-discriminatory basis.
In this context, the then Government decided to legislate to deal with these issues. Subsequent to
that, as required by statute, the ACCC declared access to services on new superfast networks that
compete with NBN Co in 2012 through the Local Bitstream Access Service. This declaration
only applies to specific networks that were not exempted from the new laws. Following issues
with wholesale supply in networks that were exempt from the laws, in September 2014 the
ACCC also announced that it would look at declaring access to new VDSL2 networks, such as
TPG's proposed fibre to the basement network.6 In July 2016 the ACCC declared a superfast
6
www.accc.gov.au/regulated-infrastructure/communications/superfast-broadband-access-service-declaration-inquiry.
27
broadband access service. The ACCC's two declarations ensure that a high-speed wholesale
broadband service is available on non-NBN superfast networks. However, as noted above, the
ACCC has no powers to require separation of network providers, or to require SBAS providers
to supply the service on a non-discriminatory basis.
The issues of access and preferential self-treatment have been accepted by Government and
Parliament as key issues. In recognition of this, there has been support for the structural
separation of Telstra and the establishment of NBN Co as a wholesale-only, non-discriminatory
operator to address the problem. Parts 7 and 8 of the Tel Act were also enacted to deal with the
issues more effectively on an ongoing basis.
While it is important for regulation to tackle the ability of network operators to favour their own
retail operations over wholesale customers, strict structural separation rules may have a negative
effect on incentives to invest in infrastructure.
There are three key ways in which Parts 7 and 8 may discourage investment and competition.
First and foremost, such rules force a particular operational structure onto investors rather than
leaving this to their commercial judgement. Second, they confine investors in networks to
funding their investments from revenues from the network and prevent them accessing revenues
from retail operation. Third, the separation of network and retail businesses can dampen retail
market feedback to the network operation which is important to network investment and
upgrades.
The Government has received requests for exemption from Part 7 and 8 of the Tel Act from five
carriers. These requests indicate that Part 7 and 8 of the Tel Act discourage investment and limit
competition. For example, in its request for exemption, one carrier identified that newer, smaller
networks have difficulties competing with larger, pre-existing networks as a result of the rules. If
a smaller network operator wished to extend its network to new small business customers, for
example, it was limited to extensions of up to 1km by the rules if it wished to continue to operate
on a vertically integrated basis. By contrast, larger pre-existing network providers, with
substantial network footprints, had much larger networks and addressable premises from which
they could operate on a vertically integrated basis. As a result, larger providers have advantages
in competing for business customers.
Two small providers both argued that the laws placed considerable operational and financial
burdens on them. As smaller operators, the costs of structural separation were prohibitive and
being able to adopt functional separation would reduce their costs.
The diagram below shows that the tension between the rules in Parts 7 and 8 and the promotion
of investment is cyclical in nature.
28
Figure 1: Impact of vertical integration and structural separation on competition and
investment
A balance must therefore be struck between promotion of innovation and investment and the
desire to avoid the potentially negative implications of vertical integration, particularly in the
retail market. This was of particular concern to the Vertigan review.
The tension between these two countervailing policy issues is discussed in detail in section 7.4
and 7.5 of the Vertigan review's Market and Regulatory Report. Amongst other things,
particularly pertinent to the current discussion, the review noted:
Both retail and wholesale competition can and should therefore be pursued.
The former is guaranteed by Part XIC and the special access provisions
relating to NBN Co. The latter can be promoted by removing disincentives to
wholesale market entry while ensuring there is effective support for retail
competition, potentially in the form of access, equivalence, and appropriate
non-discrimination and/or separation regulation. Removing those
disincentives is obviously all the more important if NBN Co remains as an
integrated entity; in that event, the changes proposed by the panel should be
treated as a matter of considerable urgency.7
Given these considerations, the panel rejects the unqualified imposition of any
structural separation, wholesale access and/or equivalence, separation and/or
non-discrimination rules. Attempts to impose arrangements of that kind are
likely to worsen the artificiality of the current arrangements stifling
competition while giving rise to perverse and unanticipated consequences.
7
Independent cost-benefit analysis and review of regulation (2014), Volume 1--National Broadband Network Market and
Regulatory report, p. 79.
29
Moreover, it is difficult to see why those arrangements would be necessary,
given the industry structure that could emerge under better policy settings.
That said, the panel recognises that situations may arise where imposing
structural requirements would be in the LTIE [long term interests of end-
users]. However, Part XIC provides only limited capacity to address vertical
integration issues apart from the access declaration and determination
process. The processes it establishes are likely to be too weak or slow to
address any vertical integration issues promptly and effectively. The panel
therefore does not favour the option of leaving those issues to Part XIC as
currently drafted.
Instead, it would be preferable to adopt an intermediate position in which
desirable levels of access can be ensured, and additional carrier-specific
requirements relating to equivalence, non-discrimination and separation
imposed as requirements of entry and/or ongoing service provision, where
(and only where) they are clearly justified.8
As the above paragraphs and the Vertigan panel's report generally indicates, the appropriate
balance between regulatory interventions is finely balanced, particularly noting that once a
network is built and operational, it is extremely difficult to later impose structural or other
separation requirements on it that apply retrospectively to address equivalence concerns,
reducing the policy options for government. As such there are strong arguments for structural
separation being the default or baseline position, even if it is a position from which there is
movement over time.
In essence then, the issue is what is the optimal mix of Government interventions, if any, to
promote infrastructure investment and competition, while at the same time ensuring there is
access for access seekers to bottleneck facilities, and that the controllers of such facilities cannot
advantage their own operations, so as to maximise retail level competition, and the benefits it
delivers.
Objectives
The Government's key objective is to promote infrastructure investment and competition by
letting the market operate freely to the extent possible, while at the same time ensuring there are
appropriate protections in place to ensure that end-users have access to the same kinds of service
outcomes available on the NBN, regardless of the network provider, and access seekers are able
to access bottleneck facilities on non-discriminatory terms.
A further consideration is how any changes to the arrangements will impact on the rollout of the
NBN by NBN Co and the NBN's ability to deliver on the Government's mandate that it provide
better broadband and an improved platform for retail competition and at less cost across
Australia as soon as possible.
This Regulation Impact Statement (RIS) considers options for implementing the
recommendations made by the Vertigan panel in relation to Parts 7 and 8 of the Tel Act in the
context of encouraging investment in infrastructure and infrastructure competition, while
8
Independent cost-benefit analysis and review of regulation (2014), Volume 1--National Broadband Network Market and
Regulatory report, p. 80.
30
balancing the potential impact on NBN Co, in particular its ability to deliver on the
Government's mandate.
Attachment A details the regulatory burden measurements and compliance costs for each option
considered in this RIS.
Overview of options
This RIS considers three options:
1. status quo--retain Parts 7 and 8 in their current form;
2. repeal Parts 7 and amend Part 8, broadly in line with recommendations made by the
Vertigan panel; and
3. repeal Parts 7 and 8.
Option 1: Status quo--Retain Parts 7 and 8 in their current form
Under this option, the level playing field rules in Parts 7 and 8 would remain unchanged. New
networks targeting residential and small business customers and extensions of more than 1
kilometre to pre-existing networks would generally need to be wholesale-only and offer a Layer
2 bitstream service.
The existing exemptions would remain in place, providing carriers with a mechanism to extend
networks built prior to 2011 by up to 1 kilometre and/or seek ministerial exemptions from the
level playing field rules. If this option was adopted, the Government would need to consider
whether to extend the superfast carrier licence conditions, which are scheduled to expire on 1
July 2018.
Part 7 and associated provisions in the CCA would also remain in place, limiting the ACCC's
ability to develop more up-to-date service declarations because it cannot vary or revoke the
Local Bitstream Access Service declaration.
Option 2: Repeal Part 7 of the Telecommunications Act and tighten up the operation of
Part 8 while also creating a mechanism to allow the ACCC to allow functional separation
Under this option, the Government would amend Parts 7 and 8 broadly in line with the Vertigan
panel recommendations.
Part 7 would be repealed and access to high-speed broadband networks would be dealt with by
Part XIC of the CCA through the ACCC declaring access to bottleneck services. The wholesale-
only rules in Part 8 would be amended to reset the basic requirement of structural separation of
carriers' wholesale and retail operations and remove the current statutory exemptions and the
Minister's ability to grant exemptions from Part 8. The structural separation obligation would be
amended to only apply to local access lines used to supply residential customers, including
home-based businesses rather than residential or small business customers, as is currently the
case. This is because there is considered to be greater scope for competition in the supply of
services to small businesses and competition concerns are less pressing as a result. This means
that new networks targeting residential customers and extensions of any length to pre-existing
networks targeting residential customers would need to be wholesale-only as the default.
Part 8 would be amended to set out a functional separation regime under which operators can
seek authorisation from the ACCC to operate on a functionally separated basis, subject to the
31
operator providing an undertaking detailing satisfactory arrangements for access and non-
discrimination to minimise the anti-competitive effects of operating their network on an
integrated basis.
The amendments would include mandatory considerations for the ACCC in assessing whether a
functional separation undertaking promotes the long-term interests of end-users, while giving the
ACCC the flexibility to tailor the level of separation required for an operator, depending on the
size and scale of the business. For example, larger network operators may be required to operate
separate wholesale and retail companies whereas smaller operators may be required to operate
separate business units.
The ACCC would also be able to make a legislative instrument establishing a deemed functional
separation undertaking that providers can elect to be bound by.
Where the ACCC has authorised functional separation, all of the operator's local access lines
serving residential customers, not merely new local access lines serving residential customers,
would be operated on a functionally separated basis, thereby streamlining and simplifying the
current regulatory landscape for operators that have networks, or parts of networks, that are
subject to different regulatory regimes.
As the assessment of functional separation undertakings will involve regulatory assessment by
the ACCC, Part 8 would also be amended to allow the ACCC to set a fee for the consideration of
functional separation undertakings.
Conceptually, this approach can be seen as setting structural separation as the baseline for new
superfast networks but allowing alternative separation rules, as appropriate to the circumstances.
Option 3: Repeal Parts 7 and 8
Under this option, Part 7 would be repealed on the basis that access to networks can be regulated
as required by the ACCC under Part XIC. Part 8 would be repealed on the basis that,
notwithstanding the arguments for it, it inhibits infrastructure investment, and to the extent that
there was strong infrastructure investment and competition between competing networks, there
would be an incentive for operators to provide access to their networks and on fair and
reasonable terms. Moreover, to the extent that there is an argument for Part 8 to provide a level
playing field for operators that operate on a wholesale-only or a retail-only basis, that decision is
generally a decision of the operator concerned, and/or the investors in it, for commercial and
other reasons.
Analysis of options
This section discusses the relative costs and benefits of the three options and their impacts on
stakeholders, particularly end-users, access seekers, NBN Co, and alternative providers.
The criteria used in the assessment relate to the Government's combined objectives:
1. Does the option promote competition in the supply of high-speed broadband services?
2. Does the option promote the efficient use of and investment in infrastructure?
3. Does the option provide regulatory symmetry between competing networks, including
NBN Co?
4. Does the option give regulatory certainty to operators of high-speed broadband networks,
including in relation to structural separation?
32
5. Is the option operationally practicable and administratively simple?
6. Does the option support the Government's policy of delivering faster broadband sooner
and at less cost through the rollout of the NBN?
Option 1: Status quo--Retain Parts 7 and 8 in their current form
Competition
Advantages:
Access seekers would generally continue to have access to bottleneck infrastructure on
non-discriminatory terms, which would promote their ability to offer competitive
services and thereby accelerate benefits for Australians.
End-users should be able to receive service outcomes comparable to, or better than, those
available on the NBN, regardless of which infrastructure provider services their
premises.
Disadvantages:
To the extent the arrangements discourage network investment, they discourage
infrastructure competition.
Under the current framework, it is possible for some network operators (absent other
constraints) to use statutory exemptions to build and operate substantial networks
servicing residential customers, favouring their own retail operators and not necessarily
providing access to competitors. While this is addressed in part by the December 2014
Carrier Licence Conditions, this situation may inhibit wholesale and retail level
competition, in that those providers can be advantaged over others.
The current rules apply to networks servicing both residential and small business
customers. This appears to create additional burdens on the supply of service to small
business customers, even though there is often greater competition in this market9.
Investment
Advantages:
Alternative infrastructure providers are able to invest in infrastructure under the level
playing field rules.
To the extent that some operators can invest and compete under the existing statutory
exemptions, this also provides scope for infrastructure competition, albeit on an
asymmetrical basis.
Disadvantages:
The rules may discourage infrastructure investment to the extent that investors are not
prepared to operate on a wholesale-only basis.
Lack of competing infrastructure may lead to poorer outcomes for customers, as there
would be limited competitive pressure on NBN Co to deliver tailored solutions in a
timely manner.
9
This is particularly the case where small businesses are located in CBDs and other higher density business areas serviced by
competing infrastructure, often also used to service larger business and government customers.
33
Regulatory symmetry
Advantages:
Similar regulation would continue to apply to networks and providers that are
comparable, including NBN Co. That is, networks supplying superfast services to
residential and small business customers and retailer providers on such networks.
Disadvantages:
Networks are subject to different regulation depending on when they were built and the
statutory exemptions can advantage providers that had large network footprints prior to
2011, as these providers (absent other constraints) can service a broader customer base
on a vertically integrated basis than providers with smaller network footprints.
Carriers are subject to greater regulation in operating networks servicing small business
customers than those servicing other business.
Regulatory certainty, including in relation to structural separation
Advantages:
The industry has planned its investments on the basis of the existing rules, which have
been in place for five years.
To the extent the rules are in place and working, they set structural separation as the
baseline for all affected networks rather than this having to be imposed at a later date.
Disadvantages:
The arrangements provide statutory exemptions that can benefit some carriers over
others.
Ministerial exemption powers are exercised at the Minister's discretion and allow
different providers to be dealt with in different ways.
Operational practicability and administrative simplicity
Advantages:
While some issues have arisen and exemptions are resource intensive to process, the
current rules have been in place five years and are familiar to stakeholders.
Disadvantages:
The rules are administratively complex, more so as they apply differently depending on
when a network was built.
Several exemptions have been granted and others have been sought indicating the rules
raise practical operational issues.
The rules impose strict regulatory obligations on affected parties, limiting their
commercial flexibility.
Processing of exemptions is resource intensive and time consuming for all parties.
NBN rollout:
Advantages:
There would be minimal disruption to the rollout and NBN Co's network planning. This
would enable NBN Co to continue focusing on the supplying high speed broadband to as
many customers as possible, as soon as possible.
34
Disadvantages:
To the extent the existing arrangements provide for asymmetrical treatment of pre-
existing networks and scope for exemption, this could create asymmetries in the
competitive framework that could potentially disadvantage NBN Co and affect its
operation, although the magnitude of any impact would depend on the extent of the
asymmetries
Option 2: Repeal Part 7 of the Telecommunications Act and create a mechanism in Part 8
to allow the ACCC to allow functional separation
Competition
Advantages:
Maintaining structural separation as the default requirement and allowing effective
functional separation solutions would promote competition as it allows providers to
operate in the retail market while preventing network operators favouring downstream
operations.
Allowing carriers to operate on a functionally separated basis would increase scope for
competition, subject to appropriate disciplines.
Removing networks servicing small businesses from the application of Part 8 would
likely enhance competition between high-speed broadband networks and between retail
providers as it would give operators greater scope to service businesses of all sizes.
The proposed exemption for networks with up to 2,00010 end users could also facilitate
new market entry.
Disadvantages:
The ACCC will have the ability to exempt operators with fewer than 2,00011 retail
customers, meaning there could be "islands" where operators can build and operate
networks servicing residential customers, favouring their own retail operators and not
providing access to competitors.
Functionally separated operators could be competitively advantaged relative to providers
like NBN Co and Telstra subject to separation obligations.
Investment
Advantages:
Allowing functional separation would promote the economically efficient use of and
investment in infrastructure, as network operators would be able to supply retail services
over their networks.
Implementing a functional separation model whereby the ACCC is required to assess
applications for authorisation against specific criteria would provide a means for
addressing concerns about access and discrimination without requiring full structural
separation.
10
Or a higher number up to 20,000 if prescribed regulations.
11
Or a higher number up to 20,000 if prescribed regulations.
35
Disadvantages:
Carriers would still be required to functionally separate all fixed-line networks if they
wanted to expand their superfast networks, which they may see as burdensome and a
disincentive.
Regulatory symmetry
Advantages:
Maintaining structural separation as the default and removing the statutory exemption
going forward would mean that all future extensions of non-NBN networks are subject to
the same baseline rules (though grandfathering arrangements apply to pre-2011 networks
that are extended by 1 kilometre before 1 July 2017).
Removing the 1 kilometre statutory exemption would close loopholes, providing greater
certainty for industry and greater regulatory symmetry for operators of non-NBN high-
speed broadband networks.
Disadvantages:
Allowing functional separation and removing networks servicing small businesses from
the structural separation obligation would lead to less regulatory symmetry between
networks and service providers, including NBN Co.
Regulatory certainty, including in relation to structural separation; operational
practicability and administrative simplicity
Advantages:
The model draws heavily on existing arrangements, with which industry is familiar and
on the basis of which industry has made investments.
Maintaining structural separation as the default would provide greater certainty for
industry as it would know the default requirement going forward and would have
planned its investments on the basis of the existing rules.
Maintaining structural separation as a default would minimise issues in seeking to
impose new structural requirements if warranted in future.
The rules would provide greater operational flexibility than the current rules. For
example, there would be more scope to service small business customers and carriers
could seek ACCC authorisation to operate on an integrated but functionally separated
basis.
Disadvantages:
Structural separation will remain the regulatory baseline.
The changes are a departure from the current regime but there remain many similarities
and changes have been foreshadowed since December 2014.
The assessment of functional separation undertakings by the ACCC may take time,
which may cause delays to network owners' planned infrastructure deployments.
Decisions would be a matter for the ACCC, thus there is a degree of uncertainty.
NBN rollout
Advantages:
To the extent this approach increased competitive pressure on NBN Co, it would be
expected to further promote NBN Co's efficient operation.
36
NBN Co would operate in a regulatory framework broadly comparable to that currently
applying, but no change is proposed to its obligations under the National Broadband
Companies Act 2011 and Part XI of the Competition and Consumer Act 2010 where it
operates solely as a wholesale-only company and it sells its services to retail service
providers.
To the extent it is impacted by greater competition, NBN Co's ability to continue to
provide fixed wireless and satellite services in regional, rural and remote areas will be
further supported by the proposed non-commercial services funding mechanism.
Disadvantages:
To the extent that this option increases competition to NBN Co, NBN Co would need to
be able to respond. (This is now possible given the move away from uniform national
prices to price capping.)
Increased competition could affect NBN Co's financial performance and its ability to
deliver on the Government's broadband rollout objectives (though some of the objectives
may be met by competing investments).
Any impact on NBN Co's ability to deliver non-commercial services should be offset by
the proposed scheme to which its competitors will need to contribute.
Option 3: Repeal Parts 7 and 8
Competition and investment
Advantages:
Option 3 is similar to Option 2 in that there would be greater scope for network operators
to operate in retail markets.
Operators would be able to operate in both network and retail markets, free of regulatory
constraints. (However, there was limited investment in high-speed broadband
infrastructure prior to Parts 7 and 8 being introduced.)
Investors would be able to choose their preferred corporate structure and mode of
operation.
Additional competition may lead to better outcomes for customers, as there may be more
competitive pressure on NBN Co to deliver tailored solutions in a timely manner.
Disadvantages:
While the ACCC could require carriers to provide access to services on non-NBN
networks, there would be no clear mechanism to deal with the issues of such networks
becoming significant players in the marketplace and favouring their downstream retail
operations over those of access seekers. This could have an impact on long term
competition, especially at the retail level.
Regulatory symmetry
Advantages:
There would be regulatory symmetry between providers other than NBN Co and Telstra,
which are subject to specific structural rules.
37
Disadvantages:
There would be greater regulatory certainty for most carriers. However, new operators
would have a competitive advantage relative to carriers like Telstra and NBN Co, which
are more heavily regulated and have less commercial flexibility.
Regulatory certainty, including on structural separation; operational practicability and
administrative simplicity
Advantages:
Repealing Parts 7 and 8 would simplify compliance and enforcement processes relating
to high-speed broadband networks. There would not be any exemptions, as now, or
functional separation undertakings as proposed under option 2.
Market participants other than NBN Co, Telstra and those with 'Adequately Served'
obligations12 could choose their preferred mode of operation, subject to general
regulation.
Disadvantages:
There would be no clear mechanism to introduce structural or functional separation in
future if required to deal with any future competition issue that could emerge.
Repealing Parts 7 and 8 would be a significant change in the direction of policy as it has
stood since 2011, which has focused on the establishment of the NBN as the primary
fixed-line network, operating on a wholesale-only non-discriminatory basis.
Many investors have made significant investments on the basis of this policy direction
and their business plans reflect this. This includes moving towards a retail-based model
based on operating on the NBN.
Significant changes to regulation following the changes made in 2011, may affect
investor confidence in the stability of the market.
Submissions to the Vertigan panel's consultation broadly supported the continuation of
the current approach to regulating NBN Co and similar networks. Industry may be
concerned if there is a significant departure from the regulatory model.
Given the fundamental issues that can arise from vertical integration, there would be a
risk that further regulation may need to be implemented in future; creating some degree
of uncertainty. For example, there may need to be some new mechanism to deal with
future vertical integration issues
There appear to be no particular operational or administrative issues with Option 3,
although there may need to be greater use of other regulatory mechanisms such as Part
XIB, and Part XIC of the CCA and general competition law.
NBN rollout
Advantages:
To the extent this approach increased competitive pressure on NBN Co, it would be
expected to further promote NBN Co's efficient operation.
12
Carrier with 'Adequately Served' obligations like Opticomm and Pivit are obliged to offer wholesale services at a minimum.
38
Disadvantages:
NBN Co's regulatory disadvantage could affect its financial performance and its ability
to deliver on the Government broadband rollout objectives.
Any competing investment is likely to target high value areas, leaving NBN Co to focus
on lower value areas, which may impact on its ability to supply affordable broadband at
the lowest cost to taxpayers.
To the extent it is impacted by greater competition, NBN Co's ability to continue to
provide fixed wireless and satellite services in regional, rural and remote areas would be
affected and there would be ongoing need for the proposed non-commercial services
funding mechanism.
Preferred option
As discussed above, there are many competing factors in relation to these policy issues, which
means consideration is finely balanced and there is no clear or simple answer.
In terms of determining the likely extent of the impacts of change, they potentially benefit most
licensed carriers and all small businesses in Australia. There are currently 267 licensed carriers
in Australia and approximately 400,000 small businesses (excluding home-based businesses).
Laws that provide greater commercial and competitive flexibility for carriers potentially benefit
most of those carriers, in that they reduce barriers to operating in small business and residential
markets (NBN Co is the main exception to this.) In turn, small business customers would benefit
from greater competition and investment to provide them with services.
Furthermore, changes to the laws would provide more specific benefits for certain types of
carriers. There are 12-15 non-NBN carriers who currently operate superfast fixed-line networks
in Australia. Most of these are small carriers who operate in new developments and or in
business zones. The networks currently pass approximately 500,000 premises, located mainly in
metropolitan areas or on the fringes of metropolitan areas. In practical terms existing networks,
subject to the current rules, will have more scope to service small business customers and
operate retail businesses as well as networks. Some carriers may also be motivated to enter small
business and residential superfast fixed-line network markets, further increasing competition and
investment.
Option 2 provides flexibility in terms of corporate structure (in that it allows functional
separation, where it is in the long-term interests of end-users), thereby creating greater potential
for infrastructure investment and competition and the benefits it can deliver, while safeguarding
retail competition, by providing ongoing access and non-discrimination mechanisms. Under
option 2, the ACCC would also be able to make a class exemption for very small networks (up
to 2,000 customers, or up to 12,000 customers if regulations are made), which would promote
entry by new providers.
Option 2 is expected to deliver a net economic benefit, because it best balances the
Government's objectives (promoting investment and competition while ensuring adequate
safeguards are in place to preclude discrimination in the supply of wholesale broadband service
(which promotes retail level competition) and allows NBN Co is able to complete its network in
accordance with the Government's mandate.
Option 2 satisfies each of the criteria used to assess the Government's objectives. In particular,
Option 2 has the advantages of:
39
regulatory certainty as it is consistent with the current policy direction and the business
planning that has been done on that basis, including by NBN Co;
enabling concerns about preferential treatment of a carrier's downstream retail business
to be pre-empted and addressed, while maintaining structural separation as the default on
all affected networks going forward, minimising issues in applying this later, if required;
providing more regulatory symmetry for operators of non-NBN high-speed broadband
networks.
The figure below shows how functional separation encourages investment while also
promoting competition.
Figure 2: Impact of functional and structural separation on competition and investment
Accordingly, option 2 is considered to deliver the greatest net benefit.
Option 1 does not address all of the Government's objectives, though it does at least provide
certainty to industry that the current regulation would continue as expected. However, the
concerns identified by the Vertigan panel in relation to investment in infrastructure and the
regulatory asymmetry caused by the current exemptions would continue.
Option 3 does not address all of the Government's objectives either. Under this option,
investment in infrastructure would likely be enhanced as network owners could operate on a
vertically-integrated basis. However, as noted above, infrastructure-based competition has been
historically limited to lower cost, higher revenue markets, meaning issues relating to integrated
monopolies could re-occur in future. Moreover, network owners would be incentivised to
discriminate in favour of their own retail business. This could limit retail competition,
particularly noting the bottleneck characteristics of local telecommunications access networks.
However, there would be no ready means to address any such issues under Option 3. The option
is therefore less likely to deliver a net benefit than option 2.
Consultation
There was extensive consultation on possible changes to the telecommunications regulatory
framework in 2014 as part of the Vertigan review. The Vertigan panel released a Regulatory
Framing Paper in February 2014 to take soundings from industry and the public on key issues
that should be considered. The panel received 43 submissions. The Vertigan panel also engaged
directly with a range of stakeholders in follow-up discussions.
The Government published its Telecommunications Structural and Regulatory Reform policy in
December 2014, which set out its response to the Vertigan review and its reform plans for the
40
sector. The response was based on the reports of Vertigan review, the submissions to it, and
other industry engagement. There has been ongoing engagement with industry since that time.
On 12 December 2016, the Minister for Communications and the Minister for Regional
Communications released for public comment exposure drafts of the:
Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017;
and
Telecommunications (Regional Broadband Scheme) Charge Bill 2017.
The Bills provide for three key reform measures:
Refinement of the carrier separation rules under Parts 7 and 8 of the Tel Act;
The introduction of a statutory infrastructure provider obligation for superfast broadband;
and
The introduction of a Regional Broadband Scheme to support loss-making services.
Along with the Bills, the Government released:
explanatory notes on the draft Bills - an overview of the Bills and explanation on the
operation of the key measures; and
Regulation Impact Statements for the three measures.
Submissions on the package were requested by 3 February 2017.
In addition to public announcement of the consultation process, the Department of
Communications and the Arts undertook a number of initiatives to raise awareness with
stakeholders, in particular, carriers, service providers, industry, consumer and regional
representative groups and regulators.
The Department emailed all licensed telecommunications carriers and other known interested
parties, advising of the consultation process and offering to provide further explanation and to
discuss issues. It made a presentation to Communications Alliance members on the package in
December, offering follow-up engagement. A range of follow-up briefings and discussions with
other groups and individual stakeholders followed. The Department also provided an online
briefing to the Wireless Internet Service Providers of Australian (WISPAU) in early 2017.
The Department received 30 submissions. These included submissions from Telstra, Optus,
VHA, Vocus, TPG, the Greenfield Operators of Australia (four small carriers: OPENetworks,
LBN Co, CNT Corp Pty Ltd and Opticomm), NBN Co Limited, Great Northern
Telecommunications, Spirit Telecom, the Australian Communications Consumer Action
Network (ACCAN), Better Internet for Rural, Regional & Remote Australia (BIRRR), Cotton
Australia, the Isolated Children's Parents Association (ICPA), the NSW Farmers' Federation,
the National Farmers' Federation, the Telecommunications Industry Ombudsman (TIO),
Regional Development Australia and individual members of the Australian community.
Submissions covered all aspects of the package to varying degrees.
There were limited comments on the proposed changes to the separation rules and even fewer
comments on the related RIS. Two submitters criticised the existing separation rules, indicating
41
that, in this context, they saw little benefit in the proposed reforms. However, they did not
directly comment on the proposed changes to the rules. Three submitters supported retention of
the status quo on the basis that this was the accepted industry model. Three submitters supported
the proposed reforms on the basis that they would create more competitive opportunities and
benefits for consumers. One submitter raised the need to maintain service continuity on networks
currently operating under exemptions pending completion of the NBN. ACCAN was the only
consumer organisation to comment on the proposed changes. It welcomed them on the basis that
they would promote competition and benefits for end-users.
Following consideration of these comments, the Government amended the Telecommunications
Legislation Amendment (Competition and Consumer) Bill 2017 to clarify its operation in a
number of areas and to better accommodate pre-existing networks in the transition to the new
arrangements, particularly to better safeguard service continuity for service providers. The key
revisions are ensuring that existing exempt networks can effectively continue to provide services
pending completion of the NBN and clarifying the non-discrimination and enforcement
arrangements.
The Department considers that the above changes will not impose any further regulatory burden
overall.
Implementation and Evaluation
Option 2 would be implemented by legislation. Legislation is expected to be introduced into the
Parliament in 2017. Should the Parliament pass the legislation as proposed, the aim is to have the
amendments in place for 1 July 2018, but a later date may need to be considered depending on
when the Bill is passed.
The Government would evaluate the impacts of the legislation through its normal industry
monitoring and consultation processes. Additionally, the Productivity Commission is required to
conduct a thorough review of the NBN once the Minister for Communications determines that
the NBN is built and fully operational. This review must consider a range of matters, including
competition in telecommunications markets, structural features of those markets, and equity of
access to broadband services and bundling of services supplied by NBN Co.13
13
Section 49 of the National Broadband Network Companies Act 2011.
42
Attachment A
Regulatory Costings for amendments to Parts 7 and 8
This Regulation Impact Statement considers the Government's response to the recommendations
made by the Vertigan Panel regarding future separation arrangements for the operation of
superfast networks.
This measure is deregulatory in that while it continues a basic requirement for structural
separation for such networks, it narrows it and provides flexibility by allowing for functional
separation (a less restrictive from of separation). If operators do not have the benefit of
exemptions, under the current arrangements, they face costs in implementing stringent structural
separation requirements. Therefore, by giving flexibility to operators, this measure would reduce
costs.
It should be noted that this costing relates to the compliance costs of regulation as opposed to the
substantive costs and benefits of regulation in terms of economy-wide outcomes. In this context,
while it is assessed that both Options 2 and 3 will generate savings relative to the current
regulatory burden on industry, it does not assess the substantive economic benefits of greater
investment, commercial flexibility and competition under the options, and the countervailing
costs, for example, from less effective retail competition.
Summary of Options
Options Preferred Costs
1: Status quo--do nothing No Neutral
2: Repeal Part 7 and allow authorisation of Yes Reduction in costs
functional separation under Part 8
3: Repeal Part 7 and Part 8 in their entirety-- No Reduction in costs
providers would be free to structure their
businesses as they wish
Assumptions (option 1)--status quo
No change in regulation--neutral regulatory burden impact.
Average Annual Regulatory Costs (from Business as usual)
Total
Change in costs Community
Business Individuals change in
($ million) organisations
cost
Total by Sector $0 $0 $0 $0
43
Assumptions--Option 2--Repeal Part 7 and amend Part 8 to tighten structural separation
and allow the ACCC to consider functional separation--preferred
It is assumed that five providers would benefit from functional separation which would
become possible from the proposed changes to Part 8. This number is based on the number
of superfast broadband providers who emerged in the decade prior to the NBN regulatory
landscape. Under future arrangements a similar number could be expected to emerge.
Using a weighted average separation formula (see Appendix 1), it is estimated these
businesses would incur a cost of $3.5 million to implement full separation under the current
arrangements. Under the preferred option these costs would be reduced by a factor of 30% if
the providers choose to functionally separate rather than structurally separate. These cost
reductions account for reduced need for systems separation, legal separation and personnel
separation. The cost reduction for implementing functional, rather than structural, separation
is estimated to be approximately $742,000 per carrier, or approximately $3,710,000 for the
five carriers that are likely to be affected. Including ongoing costs over ten years for all five
carriers would result in savings of approximately $10,388,000.14
There would be savings to providers in avoiding having to submit requests to the Minister
for exemptions from the level playing field rules, and consequentially there would be savings
to the Department of Communications in not processing these requests, and to the ACCC
and the ACMA in not having to advise on these requests.
However, there would be an increase in costs that is likely to be commensurate to these
savings for carriers in preparing and lodging functional separation undertakings with the
ACCC for assessment.
The ACCC will also incur costs in assessing undertakings. While the ACCC is yet to advise
on the amount it will charge applicants, it may be assumed to be a similar amount to the fee
it charges for conducting formal merger reviews - $25,000.15 For the five providers that are
considered likely to apply for functional separation undertakings, the cost impact would be
$125,000.
The ACCC could offset some of these costs through preparing a legislative instrument
establishing the deemed functional separation undertaking.
Regulatory Burden and Cost Offset Estimate Table--average annual regulatory costs
(from business as usual)
Change in Community Total change in
costs Business organisation Individuals cost
($ million) s
Total by Sector ($0.91416) $0 $0 ($0.914)
14
See costing spreadsheet attached. The cost of structural separation per affected carrier is estimated to be $2,473,437; the cost
of functional separation is estimated as 70% of structural separation cost, or $1,731,406 (a difference of $742,031 per carrier);
ongoing costs are estimated at 20% of implementation costs or $494,687 for structural separation per carrier per year and
$346,281 for functional separation. The annualised average costs over 10 years for five carriers for structural separation is
$3,462,812.13 and for functional separation is $2,423,968.49 (a difference of $1,038,843.64)
15
www.accc.gov.au/system/files/Formal%20Merger%20Review%20Process%20Guidelines%202008.pdf p.11.
16
This is the annualised average of the cost saving of functional separation over structural separation for all five providers (that
is, $1,038,843.64, see above) less the $125,000 assessment fee paid to the ACCC.
44
Assumptions--Option 3--repeal both Part 7 and Part 8
The removal of Part 7 and 8 would theoretically reduce costs for firms because they would
not need to meet the costs of structural separation, functional separation or seeking
exemptions. That is, an assessment of the future with and without these amendments
indicates that they would produce significant cost savings for future network deployments.
However, they would not produce any cost savings for current networks or businesses.
As per option 2, there are expected to be five operators who would benefit from not having
to structurally separate.
Therefore they would avoid the costs of implementing structural separation.
Average annual regulatory costs (from business as usual)
Change in Community Total change in
costs Business organisation Individuals cost
($ million) s
Total by Sector ($3.463) $0 $0 ($3.463)
45
Appendix 1
Method Used to Estimate the Costs of Structural and Functional Separation
The costs of structural or functional separation depend on a range of variables and circumstances
specific to the context of the business that is undergoing separation. These factors include:
The size of the business
o The larger the business the greater the cost to achieve separation. There are more
products, systems, people and business processes to separate.
o This should only account for the fixed-line portion of the business (either by
assets or revenue). Information has been sourced from annual shareholder reports
(prior to separation and indexed for inflation).
How established the business is as a vertically integrated entity.
o The degree of vertical integration and systems interdependence follows from the
period of time a business has operated the more costly the process will be given
business processes and systems are more integrated.
Corporate Structure
o Whether the business has any natural organisational separation between its retail
and wholesale divisions.
The complexity of legacy IT systems.
o The older the IT systems the higher the cost of achieving functional separation of
those operating and business systems. The financial sector is a perfect example of
this.
Complexity of network asset ownership post separation.
o The more complex the asset ownership the greater costs in developing new
systems to achieve the post separation regulatory outcomes.
Estimating costs impacts of structural and functional separation
The method outlined here uses available data about separation costs for British Telecom (BT)
and Telecom New Zealand to develop an estimate of the costs incurred by five providers that are
likely to implement the regulatory requirements proposed under the preferred option 2.
This estimate is developed by comparing the relative degree of size, complexity and vertical
integration of Australian operators in comparison to BT and Telecom New Zealand and making
proportional adjustments in costs to reflect differences. The two cost estimates are then averaged
to produce the cost estimate used in the RBM calculations.
Key assumptions in comparing the costs of BT and Telecom NZ to the potential costs of
Australian operators achieving functional separation:
BT and Telecom NZ were long established vertically integrated providers operating since
the early 1900s.
o Affected Australian operators are likely to be relatively new and not to operate
substantial local access networks.
o A relative weight of 40 per cent was assigned to reflect comparative costs.
BT and Telecom NZ had many legacy systems and complex IT arrangements. This is a
highly significant driver of costs when logical and physical separation of IT systems is
required.
46
o Affected providers operate simple business models with very few products and
little complexity.
o A relative weight of 30 per cent was assigned to reflect comparative costs.
In terms of size of business, the likely affected providers are much smaller than BT and
Telecom New Zealand and therefore we expect the costs of separation to be
proportionally smaller. For example, the five affected providers are likely to have fewer
than 100,000 customers each, whereas BT has 25,302,000 physical lines17 and Chorus
(Telecom NZ's infrastructure division) has 1,794,000.18
It is assumed that an affected business would incur ongoing annual costs of 20 per cent of
their one-off separation costs (primarily arising from wages relating to functions
separation--for example, appointing a new director).
It is assumed that functional separation would incur 70 per cent of the costs of full
structural separation.
See below for snapshot of working spreadsheet.
17
BT annual report 2015, page 208
(www.btplc.com/Sharesandperformance/Annualreportandreview/pdf/2015_BT_Annual_Report.pdf)
18
Chorus (Telecom NZ infrastructure division) annual report 2015, page 2 (www.chorus.co.nz/file/65885/5.4-3348-CHO-
Annual-Report-2015_WEB.pdf)
47
Table: costs of functional separation
RIS - Amendments to Parts 7 and 8 - functional separation
Cost of BT Separation $ 372,170,763 AUD (2014)
Factors contribution
Factor BT (index) Carrier % weights Total
to separation costs
Degree of vertical integration 30% 10 4 40.00% $ 44,660,492
Corporate structure 20% 10 8 80.00% $ 59,547,322
Complexity of IT systems 50% 10 3 30.00% $ 55,825,614
Size of business Adjustment factor 25302000 100000 0.40%
Estimated costs for Carrier $ 632,493
Cost of Telecom NZ Separation $ 180,000,000 AUD (2014)
Factors contribution Telecom NZ
Factor Carrier % weights Total
to separation costs (index)
Degree of vertical integration 30% 10 4 40.00% $ 21,600,000
Corporate structure 20% 10 8 80.00% $ 28,800,000
Complexity of IT systems 50% 10 3 30.00% $ 27,000,000
Size of business Adjustment factor 1794000 100000 5.57%
Estimated costs for Carrier $ 4,314,381
Implementation Cost - structural separation (one off) $ 2,473,437
Implementation Cost - functional separation (one off) - 30% discount to full structural separation $ 1,731,406
Ongoing costs (20%) $ 346,281
Number of businesses 5
Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total
Functional separation costs $ 8,657,030.31 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 1,731,406 $ 24,239,684.88
RBM (annualised average over
10 years) $ 2,423,968.49
Average Annual Regulatory Costs (from Business as usual)
Community Total change in
Change in costs ($million) Business Individuals
Organisations cost
Total by Sector $2,423,968 $0 $0 $2,423,968
Table: costs of structural separation
RIS - Amendments to Parts 7 and 8 - structural separation
Cost of BT Separation $ 372,170,763 AUD (2014)
Factors contribution
Factor BT (index) Carrier % weights Total
to separation costs
Degree of vertical integration 30% 10 4 40.00% $ 44,660,492
Corporate structure 20% 10 8 80.00% $ 59,547,322
Complexity of IT systems 50% 10 3 30.00% $ 55,825,614
Size of business Adjustment factor 25302000 100000 0.40%
Estimated costs for Carrier $ 632,493
Cost of Telecom NZ Separation $ 180,000,000 AUD (2014)
Factors contribution Telecom NZ
Factor Carrier % weights Total
to separation costs (index)
Degree of vertical integration 30% 10 4 40.00% $ 21,600,000
Corporate structure 20% 10 8 80.00% $ 28,800,000
Complexity of IT systems 50% 10 3 30.00% $ 27,000,000
Size of business Adjustment factor 1794000 100000 5.57%
Estimated costs for Carrier $ 4,314,381
Implementation Cost (one off) $ 2,473,437
Ongoing costs (20%) $ 494,687
Number of businesses 5
Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total
Structural separation costs $ 12,367,186.16 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 2,473,437 $ 34,628,121.26
RBM (annualised average over 10 $years)
3,462,812.13
Average Annual Regulatory Costs (from Business as usual)
Community Total change in
Change in costs ($million) Business Individuals
Organisations cost
Total by Sector $3,462,812 $0 $0 $3,462,812
48
REGULATION IMPACT STATEMENTS
Introduction of a Statutory Infrastructure Provider Regime into the
Telecommunications Act 1997
This Regulation Impact Statement (RIS) considers options to ensure that industry and
consumers have certainty that NBN Corporation Limited (NBN Co) (or comparable
providers) will connect and supply next generation broadband infrastructure and services on
an ongoing basis, while balancing the potential operational impact on NBN Co and
comparable providers, in particular NBN Co's ability to roll out the National Broadband
Network (NBN) sooner and at lower cost, as instructed by the Government.
The RIS looks at three main options:
1. continue to give NBN Co guidance on its connection and supply obligations through
Statements of Expectations;
2. make carrier licence conditions setting out connection and supply obligations for NBN
Co and alternative providers; and
3. legislate connection and supply obligations for NBN Co and alternative providers.
These are assessed against factors such as whether the option will ensure consumers have
access to high-speed broadband after the NBN rollout is completed in each area, whether
consumers and industry will have certainty about NBN Co's supply obligations, whether
there is the flexibility to allow providers other than NBN Co to register as the statutory
infrastructure provider in areas where they have deployed infrastructure, the potential impact
on NBN Co's rollout, and whether the compliance costs of the option would outweigh the
benefits.
The RIS concludes that legislating connection and supply obligations on NBN Co and other
comparable providers (Option 3) offers the greatest net benefit as it provides certainty for
end-users that they can receive high-speed broadband services and does this through
imposing limited compliance costs on industry. It would provide the most clarity and
certainty for NBN Co and access seekers as to NBN Co's supply obligations. It would also
ensure that there is certainty for alternative providers, in areas where they are the sole or main
providers of infrastructure, that they will have connection and supply obligations and how
such obligations will be implemented and enforced.
Context
In December 2013 the Government appointed a panel chaired by Dr Michael Vertigan, AC
(the Vertigan panel) to conduct a cost-benefit analysis of the National Broadband Network
and a review of structural and regulatory arrangements in the telecommunications sector. As
part of this review, the panel considered whether a legislated obligation on NBN Co to
connect premises and supply services is needed to give certainty that consumers and
businesses will be able to access telecommunications services, regardless of where they live
in Australia, following the NBN rollout.
In its 2014 National Broadband Network Market and Regulatory Report (the Regulatory
Report), the Vertigan panel recommended that the Government introduce legislation to
require NBN Co to supply broadband access to:
premises that are not already being serviced by another entity; and
49
premises that were serviced by another entity but that entity has exited the market. 19
The panel also recommended that NBN Co have a Broadband Connection Service
Undertaking (BCSU) approved by the ACCC setting out the terms and conditions on which it
will provide a broadband connection service.20
The Government accepted the recommendation in part. In its December 2014 policy
statement, Telecommunications Regulatory and Structural Reform (the 2014 Government
Response), the Government announced that it would legislate infrastructure provider of last
resort (IPOLR) obligations for NBN Co on an area basis once it has a well-established
presence in the area. These have been renamed statutory infrastructure provider (SIP)
obligations in the draft Bill. The 2014 Government Response also stated that the
arrangements would allow for the SIP obligations to be applied to other carriers on an area
basis where appropriate.
In relation to the panel's proposal that NBN Co set out the terms and conditions on which it
will fulfil its obligations in a BCSU approved by the ACCC, the Government considered the
requirement unnecessary. NBN Co's special access undertaking (SAU), which was accepted
by the ACCC on 13 December 2013, already set out the terms and conditions on which NBN
Co will supply services to retail providers.
The SAU identifies the main services to be supplied by NBN Co and sets out price caps
relating to those services, but does not create obligations to connect premises, nor does it
include service level standards like timeframes for connection and repair.
In a separate recommendation, the Panel advised the Government if it disaggregated NBN Co
into competing business units, it should remove NBN Co's internal cross-subsidy of its
services in non-commercial areas and fund the loss through an industry charge. While the
Government did not agree to disaggregate NBN Co at this time, it decided to implement
arrangements for funding NBN Co's non-commercial services to ensure their long-term
sustainability. These arrangements are being developed and this will be considered in a
separate RIS. Given that a statutory requirement to connect and supply services would entail
connection of non-commercial services, the future funding arrangements are relevant to the
current RIS.
The NBN is currently being rolled out progressively across Australia. After the rollout is
completed, NBN Co will become the primary supplier of residential fixed-line
communications infrastructure in Australia. When it is complete, the NBN will deliver high-
speed broadband services across Australia. As part of the NBN rollout, Telstra, as the owner
of the existing fixed-line copper network, has agreed to stop supplying fixed line
telecommunications services using its network in an area 18 months after NBN Co starts
supplying fixed line services in an area. Telstra will migrate these services to the NBN.
Accordingly, NBN Co will ultimately replace Telstra as the principal fixed-line
telecommunications network operator in most of Australia, the main exception being in the
NBN satellite and fixed wireless footprint.
On 8 April 2014, the Shareholder Ministers issued a new Statement of Expectations to NBN
Co requiring the company to continue the NBN rollout using a multi-technology mix (MTM)
model to complete the rollout as quickly and as cost-effectively as possible. However, the
19
Independent cost-benefit analysis and review of regulation (2014), Volume 1 - National Broadband Network Market and
Regulatory report, p. 91.
20
Independent cost-benefit analysis and review of regulation (2014), Volume 1 - National Broadband Network Market and
Regulatory report, p. 91.
50
Statement of Expectations does not explicitly address NBN Co's ongoing obligations to
provide infrastructure and services.
An early assessment draft of this RIS was provided to OBPR in 2014 and then considered by
the Government when it developed its response to the Vertigan panel (set out in the 2014
Telecommunications Regulatory and Structural Reform policy paper). The Minister also
considered an early draft of the RIS in finalising his decisions upon separation issues as part
of the development of the response. The draft RIS was published with draft legislation in
December 2016 and the Government sought submissions on the RIS. The RIS was submitted
to OBPR for First and Second Pass Final Assessment in May 2017.
Assessing the problem
The key issue for this RIS is how to ensure that NBN Co will continue to connect premises
and supply services after it has completed its rollout in an area within reasonable timeframes.
A related issue is whether there are circumstances where another provider should be able or
obliged to connect premises and supply services and if so, what those circumstances are.
Consideration must also be given to whether it is appropriate for the same obligations to
apply to all SIPs.
The Australian Government is committed to consumers in Australia having access to
appropriate telecommunications services at affordable prices. The Australian Government has
implemented a number of initiatives to ensure access to telecommunications services. In
particular, in 2013, the Government indicated that it would continue the NBN rollout of a
new national wholesale-only high-speed broadband network. When it is complete, the NBN
will deliver high-speed broadband services across Australia.
There is also a legislated Universal Service Obligation (the 'USO'). Under the USO, Telstra
must supply an end-user with a standard telephone service on request. That is, the obligation
is restricted to providing a voice telephony service rather than a broadband service that SIPs
will be required to offer. The USO is complemented by the Customer Service Guarantee
(CSG), which requires carriage service providers (CSPs) to meet performance standards, for
example connection and repair timeframes, and provide end-users with financial
compensation when these standards are not met. In areas where the NBN has not yet been
rolled out, Telstra generally uses its copper network to meet the USO but may also use other
technologies. As Telstra will stop using its copper network after the NBN becomes available
in an area, it is expected Telstra will generally use the NBN to meet the USO.
At present, the only way that the Government, as shareholder, provides clarity about when,
where and how NBN Co is to provide infrastructure is through the Statement of Expectations
or other direction. Given the significance of ready and ongoing access to modern
telecommunications, this method does not provide certainty or clarity to NBN Co, access
seekers or consumers about NBN Co's service provision obligations after it rolls out in an
area. This lack of clarity and certainty has been raised as a concern by industry and the
public, given past delays in service provision in some areas.
The Vertigan panel considered whether NBN Co's ongoing service delivery obligations
should be specified in legislation and noted that:
Taxpayer equity funding of up to $29.5 billion, acceptance that ongoing
service supply in loss-making areas will be subsidised, as well as funding
to support the migration of customers from Telstra's copper network
represent a major public commitment. This warrants a corresponding legal
obligation relating to wholesale service provision by NBN Co ... In any
51
event, such a [legislative] requirement will need to be put in place prior to
NBN Co being privatised otherwise its new owners could choose to
withdraw from unprofitable areas or decline to extend its infrastructure
into areas or to premises where it expects to make a loss.21
In considering whether to impose SIP obligations on NBN Co, it is important to consider the
progressive nature of the NBN rollout. Imposing default provider obligations on NBN Co
before it has a network in an area would be to impose obligations on it that it could not meet,
or that would impose considerable costs on it to meet. It would only be possible to impose
these obligations on NBN Co where it has infrastructure rolled out in that area in order to
provide certainty that services are able to be supplied. It is more appropriate to only impose
obligations to the rollout as it progresses.
The Vertigan panel also considered the potential impact of a SIP regime on NBN Co's ability
to complete the rollout of the NBN. In this regard, the panel noted:
[T]here would have been difficulties in placing supply obligations on NBN
Co when it was a start-up company with no infrastructure and with an
uncertain rollout-completion timetable. It would be undesirable for
inconsistencies to arise, however inadvertently, between the deployment
schedule for the NBN that made the best use of resources and NBN Co's
mandated service obligations. But the situation is changing and will
change further as deployment progresses. At the very least, property
owners in areas where the NBN has been provided need to have certainty
about supply continuing into the future, as do those in areas what would be
affected by infill service provision.22
A further issue is whether NBN Co should be the SIP for all of Australia after the NBN
rollout is completed. While NBN Co will be the sole infrastructure provider in many parts of
Australia, alternative operators are able to roll out competing networks. Private investment
has occurred, and continues to occur. This is generally in new real estate developments
(where the operator will likely connect the majority of premises in the development) and in
apartment buildings in the inner cities of several capital cities (as these are generally low-
cost, high-return investments). For example, Opticomm has installed infrastructure in
approximately 100 new real estate developments and TPG has announced its intention to roll
out a network to apartment buildings in a number of capital cities.
Arguably operators other than NBN Co will be better placed to assume the role of SIP in
some circumstances, for example where they have a contract to be the infrastructure provider
in an area. Another example is where vectored VDSL technology is used in an area or
building. In some circumstances, the presence of multiple infrastructure providers using
vectoring technology can lead to the degradation of end-user services which may mean a
single provider other than NBN Co needs to exercise SIP responsibility.
Requiring NBN Co (or another provider) to be the SIP will give end-users and industry
certainty that regardless of where they reside or operate, they will have access to underlying
telecommunications infrastructure and services. As NBN Co will likely be the sole
infrastructure provider in most areas, it is appropriate for it to be the default SIP. However,
21
Independent cost-benefit analysis and review of regulation (2014), Volume 1 - National Broadband Network Market and
Regulatory report, p. 88.
22
Independent cost-benefit analysis and review of regulation (2014), Volume 1--National Broadband Network Market and
Regulatory report, p. 88.
52
any SIP regime needs to include a mechanism for alternative carriers to displace NBN Co as
the SIP in areas where they have infrastructure that can, or have entered into an agreement to
install infrastructure that will, supply all premises in an area. To require NBN Co to be the
SIP in such areas would require NBN Co to overbuild competing networks, even though
there may be no commercial case to do so.
Generally, there are no restrictions on NBN Co overbuilding competing networks.23
However, NBN Co will only do so where there is a commercial case. Requiring NBN Co to
overbuild all alternative networks would likely impact on private investment incentives.
If there is to be an obligation placed on NBN Co or any other provider, the issue then is what
form the obligation should take and when that obligation should apply. Secondary issues
relate to the appropriate standards and benchmarks that should apply to NBN Co or any other
provider in fulfilling its SIP obligations. The USO and CSG set out a number of features that
a SIP regime could include, for example a broad obligation to connect premises.
Objective
The Government's objective is to ensure that NBN Co continues to supply broadband access
to Australian premises after it completes the network rollout in each area so that all premises
have access to high-speed broadband. The Government also considers that industry, including
access seekers, consumers and NBN Co should have certainty as to what NBN Co's supply
obligations are.
Options
This RIS considers three options:
1. status quo--continue to give NBN Co guidance through the Statement of Expectations;
2. make carrier licence conditions setting out SIP obligations for NBN Co and alternative
providers; and
3. legislate SIP obligations for NBN Co and alternative providers.
Option 1: Do nothing--Government to continue to give NBN Co guidance through the
Statement of Expectations
Under this option, NBN Co's SIP supply obligations after it completes the network rollout in
an area would be left to the Government, as shareholder of the company, to set out in the
Statement of Expectations or other written direction. There would be no legislated supply
obligation on NBN Co or any other carrier. Under this option, the delivery of
telecommunications infrastructure and connections would be left to NBN Co, with guidance
provided by the Government and the commercial marketplace.
Should NBN Co be privatised in the future, it would not be subject to any obligation to install
new infrastructure, but would be required to continue to supply services on request on its
existing networks in accordance with its Special Access Undertaking and Part XIC of the
23
Under the Adequately Served Policy, owners of certain networks as at 1 January 2012 were able to apply to the Minister to
have these networks recognised as meeting adequately served criteria. This provided guidance to NBN Co that it did not
need to deploy its network in areas deemed adequately served to meet its coverage obligation. However, NBN Co can still
overbuild these areas where not doing so would have a significant impact on its ability to efficiently rollout the network.
Forty-five networks operated by four carriers have been granted adequately served status.
The Government's Telecommunications Infrastructure in New Developments (TIND) policy, which took effect in March
2015, confirms that the Adequately Served Policy is no longer open for applications. However, NBN Co must advise, and
get agreement from, Shareholder Ministers in advance of construction if it considers there is a commercial case to materially
overbuild an existing network in a new development providing NBN-comparable outcomes.
53
CCA. As a result, there may be a number of premises that would not have any guarantee of
being connected to infrastructure supplying high-speed broadband services.
Option 2: The Minister makes carrier licence conditions
The Minister for Communications could make carrier licence conditions that would apply to
NBN Co and other providers as appropriate. The carrier licence conditions would set out
carriers' obligations as SIPs. In relation to NBN Co, such carrier licence conditions could
require NBN Co to supply broadband access to premises when requested by a retail service
provider and where the premises are in an area that has been declared ready for service.
Under this option, NBN Co would be required to report to the Government when it has
commenced supplying services in an area.
Under this option, the Minister could specify that NBN Co's SIP obligations commence only
after it has commenced the supply of services in an area, in order to ensure that these
obligations do not affect NBN Co's ability to meet its objective to complete the NBN as
quickly and as cost-effectively as possible.
The Minister could also make similar carrier licence conditions to require other providers to
assume SIP responsibilities if they are able to better fulfil the role in an area. In practice, this
is what has been done in relation to 'adequately served' areas. The Government has also
recently consulted on draft carrier licence conditions that, if made, would implement SIP
obligations on carriers that enter into agreements to deploy infrastructure in new real estate
developments. NBN Co's carrier licence conditions would not apply in areas where another
provider has been made the SIP through a carrier licence condition.
The carrier licence conditions could set out standards, rules and benchmarks that carriers
must comply with, including:
maximum timeframes for the supply of services and for rectifying faults;
the reliability of services; and
the technology used to connect premises.
Option 3: Legislate SIP obligations
Option 3 is similar to Option 2, however under this option, SIP obligations would be
enshrined in legislation by the Parliament.
Under this option, legislation would be introduced to require NBN Co to supply services that
allow carriage service providers to supply broadband services to end-users with peak
download speeds of 25 Mbps. NBN Co would need to connect premises to its networks on
reasonable request (by a retail service provider and where the premises are in an area where
NBN Co has commenced supplying services. It would also have to supply wholesale services
to carriage service providers on reasonable request. NBN Co would be required to report to
the Government when it has commenced supplying services in an area.
The legislation would allow other providers to nominate to be the SIP in an area where the
provider has contracted to supply services to premises in the locality. These alternative
carriers would also be required to report to the Government when they have signed contracts
to deploy infrastructure in an area involving SIP obligations.
The legislation would also give the Minister the power to declare a provider to be the SIP or
revoke a provider's SIP status if it is not meeting its SIP obligations or will not be able to
meet its SIP obligations in the future. The Minister would also be able to declare that there is
no SIP for an area if the level of competition in the area is such that the Minister considers
that services will be delivered to end-users without the imposition of SIP obligations.
54
Following completion of the NBN rollout, NBN Co would be the default SIP for all of
Australia except in areas where an alternative provider has nominated to be the SIP, where
the Minister has declared another provider to be the SIP or where the Minister has declared
that there is no SIP because the level of infrastructure competition ensures that all premises
can be connected to superfast networks on reasonable request. The default provider
obligations would extend to any entity that purchases NBN Co, should NBN Co be privatised
in future.
The legislation would require the Australian Communications and Media Authority to
publish a register of SIPs on its website so that end-users and service providers are able to
easily determine who the SIP is in any particular part of Australia. This would ensure that
retail providers will know which carrier to contact if they need to have infrastructure installed
to premises in order to supply retail carriage services to those premises.
The legislation would give providers the flexibility to determine how they meet their SIP
obligations, including the technology used to connect premises. However, the Minister would
have a reserve power to set standards, rules and benchmarks that SIPs must meet if, through
operational experience, it appears that SIPs are not installing infrastructure and supplying
services of an appropriate quality within appropriate timeframes. These standards, rules and
benchmarks could include the type of technology that SIPs must use in particular areas.
Should the Minister make SIP standards or rules, they would interact with the SAU
obligations. The legislation would provide, however, that if there is any inconsistency
between the two, then the SIP standards or rules would prevail going forward.
Analysis of options
This section discusses the relative costs and benefits of the three options and their impacts on
stakeholders, namely telecommunications customers, retail service providers, alternative
providers and NBN Co.
The criteria used in the assessment relate to the Government's objectives:
1. Does the option ensure that consumers and access seekers have access to high-speed
broadband after the NBN rollout is completed in each area, thereby giving them
certainty in this regard?
2. Is the option sufficiently flexible to allow for non-NBN carriers to register as the SIP in
areas where they have deployed high-speed broadband infrastructure?
3. Does the option impose significant compliance costs on industry that may outweigh the
benefits of providing industry and consumer certainty?
4. Does the option support the Government's policy that NBN Co deliver faster
broadband, sooner and at lower cost?
5. Does the option support the proposed non-commercial services funding arrangements?
Option 1: Do nothing--Statement of Expectations continues to guide NBN Co
Access and certainty
Advantages:
The Statement of Expectations can be readily revised to impose relevant obligations
on NBN Co, thus providing access and a degree of certainty.
Disadvantages:
As the Statement of Expectations does not have the force of legislation and is subject
to change, this option does not provide access seekers and end-users with certainty
55
about NBN Co's supply obligations either during the rollout or after the NBN Co is
completed.
While NBN Co would have some greater certainty as its obligations, it would be
limited as the Statement of Expectations can be readily changed.
As the Government is not able to issue a private company with a Statement of
Expectations, this option would not prevent a future privatised NBN Co withdrawing
from unprofitable geographic areas or declining to extend the network infrastructure
into areas or to premises where it expects to make a loss.
There are limited options to enforce any obligations set out in the Statement of
Expectations, should NBN Co fail to meet them.
Other providers and other SIPs
Advantages:
Other providers would be able to act as infrastructure providers on a commercial
basis.
Disadvantages:
While other providers would be able to act as infrastructure providers on a
commercial basis, there would be no regulatory framework confirming their
obligations and the rights of access seekers and customers.
Compliance costs
Advantages:
While NBN Co would still need to report to Parliament and the Government as a
government business enterprise (GBE), this option would impose minimal compliance
costs on NBN Co and other carriers.
Disadvantages:
Updating, monitoring and revising the Statement of Expectations would require
greater ongoing involvement on the part of the Department of Communications and
the Arts and the Department of Finance and their Shareholder Ministers.
In its submission on proposed carrier licence conditions for new developments,
ACCAN pointed out potential costs for consumers in the absence of appropriate
regulation.
NBN rollout
Advantages:
This approach would allow the Government to easily tailor NBN Co's obligations as
the rollout progresses, thereby avoiding any negative impact on the rollout. For
example, the Government could require NBN Co to meet certain timeframes after the
rollout is substantially completed.
Non-commercial services funding
Advantages:
To the extent the Statement of Expectation required the provision of non-commercial
services, the approach would provide a sufficient basis for new funding arrangements.
56
Disadvantages:
Funding of non-commercial services would not be tied to a clear statutory obligation
to provide infrastructure and services, particularly given the Statement of
Expectations can be readily changed.
Option 1 would not support future funding of a privately owned NBN Co, as a
privately-owned NBN Co would not be subject to a Statement of Expectations issued
by Shareholder Ministers.
Option 2: The Minister makes carrier licence conditions
Access and certainty
Advantages:
Carrier licence conditions would require carriers to install high-speed broadband
infrastructure and connect premises to the infrastructure in all areas where the carrier
licence conditions apply. This will ensure that consumers have access to high-speed
broadband in these areas.
NBN Co's (and alternative providers') SIP obligations would be set out in enforceable
legislative instruments, providing certainty for the SIPs, access seekers and end-users.
Carrier licence conditions could be set in place relatively quickly, meaning that NBN
Co, access seekers and end-users would gain legal certainty in a short period of time.
Carrier licence conditions would ensure that after NBN Co is privatised, the privatised
company would be required to continue to supply services as the default SIP for all
Australian premises.
The Minister's ability to revoke a provider's SIP status will ensure that providers do
not retain SIP-status if they are not meeting the SIP obligations or will not be able to
meet the SIP obligations in the future.
Disadvantages:
The relative ease with which Ministers can change carrier licence conditions means
that this approach cannot provide the same long-term certainty of NBN Co's
obligations as a legislative requirement.
In the lead-up to possible privatisation of NBN Co, the Parliament, industry,
consumers and any potential buyer(s) of NBN Co are likely to seek greater certainty.
Carrier licence conditions are subject to sun-setting. That is, after ten years the
conditions would lapse unless the Government reviews the condition and decides that
it should be remade or rolled over. Given the enduring nature of the proposed SIP
obligations, a carrier licence condition may not be an appropriate vehicle.
Other providers and other SIPs
Advantages:
Carrier licence conditions can be tailored in order to allow alternative providers to be
the SIP where it is appropriate. NBN Co would not need to overbuild alternative
networks where there is no commercial case to do so, thereby reducing disincentives
on private investment and allowing NBN Co to focus the rollout on other areas.
Carrier licence conditions can also be adjusted relatively quickly to reflect changes in
circumstances, whereas legislation can take longer to develop and implement.
57
Disadvantages:
There would be no clear and consistent statutory framework setting out SIP
obligations (i.e. licence conditions can vary), thus reducing regulatory certainty and
increasing risk.
Compliance costs
Advantages:
Carrier licence conditions could be tailored to minimise compliance costs.
Carrier licence conditions could also be tailored to provide SIPs with the flexibility to
set the terms and conditions on which they will meet the SIP obligation with
minimum standards only being imposed where there is a clear need.
Disadvantages:
This option would impose compliance costs on NBN Co and other alternative carriers
as they would need to set up new internal systems and comply with requirements to
report to the Department and the ACMA when they start to supply services or have
signed a contract for services.
o However, it is arguable that NBN Co should be doing this anyway as a GBE
that has been required to provide all Australian premises with high-speed
broadband.
In addition, the conditions would impose an administrative burden on the Government
and affected carriers at the end of the sun-setting period, when it came to considering
whether they should be continued.
NBN rollout
Advantages:
The carrier licence conditions would be tailored to reflect NBN Co's planned roll out
approach and not complicate it.
Carrier licence conditions can be more readily amended if necessary to address
unforeseen issues or changing circumstances.
Setting standards, rules and benchmarks in carrier licence conditions, rather than in
legislation, will ensure that they can be flexibly adjusted in response to changing
circumstances.
The carrier licence conditions can be tailored so NBN Co and other SIPs will have the
ability to set the terms and conditions on which they will meet the SIP obligation
unless it is clear minimum standards need to be imposed.
Disadvantages:
To the extent NBN Co (and others) are subject to regulatory rules, there is a risk of
greater inflexibility that could impact on the role, but the risk is considered low, given
the types of rules envisaged and the scope for modification.
Non-commercial services funding
Advantages:
Carrier licence conditions, as binding regulation, would provide a firmer basis for
obligations that would be funded by a legislated funding scheme.
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Disadvantages:
While carrier licence conditions would provide a firmer regulatory basis for a
legislated funding mechanism, carrier licence conditions can be more easily revoked
or modified than legislation.
Option 3: Legislate Statutory Infrastructure Provider (SIP) obligations
Access and certainty
Advantages:
Legislated requirements would provide access seekers and end-users with access to
next generation infrastructure and services.
Legislated requirements are less easily changed and provide greater certainty to NBN
Co, other SIPs, access seekers and customers about carriers' obligations.
Legislation would ensure that once NBN Co is privatised, the privatised company
would be required to continue to supply services as the default SIP for all Australian
premises.
Allowing the Minister to revoke a provider's SIP status will ensure that providers do
not retain SIP-status if they are not meeting the SIP obligations or will not be able to
meet the SIP obligations in the future.
Disadvantages:
While legislation would provide a high level of access and certainty, the use of
subordinate legislation to add necessary details means not all issues may be covered
in statute.
That said, subordinate legislation can better deal with matters of detail like
timeframes and could be more readily adjusted in light of changing circumstances.
While it is unlikely to be an issue, if it became apparent there was a flaw in the
proposed legislation, it may require Parliamentary amendment to address it requiring
added time and resources.
Other providers and other SIPs
Advantages:
The proposed legislation would provide a clear framework for other providers to
operate as SIPs, giving the providers, access seekers and end-users certainty as to
their obligations. It also provides certainty for other providers who do not operate as
SIPs, particularly in terms of who is providing infrastructure in an area.
Allowing alternative providers to self-nominate as the SIP will give them certainty
that if they invest in infrastructure in a new real estate development or multi-dwelling
unit, they will be able to nominate to be the SIP for that area.
Disadvantages:
While the legislation would provide for other SIPs, they would be subject to a
statutory framework which would impose regulatory obligations and compliance costs
that could restrict their operational flexibility. However, providers other than NBN Co
designated as SIPs will be operating in an area on a commercial basis, and SIP status
will confirm their obligation to service premises in their area of operation.
59
Compliance costs
Advantages:
The legislation can be tailored to minimise compliance costs, for example, by limiting
SIP obligations to notifying the Government that they have contracted to provide
infrastructure and services in a specific locality.
Disadvantages:
This option would impose compliance costs on carriers in the same way as Option 2
as they would need to set up new internal systems and report to the Department and
the ACMA when they start to supply services or have signed a contract for services.
NBN rollout
Advantages:
The legislation would be tailored to reflect NBN Co's planned roll out approach and
not complicate it.
Setting standards, rules and benchmarks in instruments, rather than in the legislation
itself, will provide flexibility to adjust arrangements in response to unforeseen issues
or changing circumstances.
As with Option 2, NBN Co and other SIPs will have the ability to set the terms and
conditions on which they will meet the SIP obligation unless it is clear minimum
standards need to be imposed.
Disadvantages:
While the legislation will reflect NBN Co's proposed roll-out approach, it would be
subject to a statutory framework which would impose regulatory obligations and
compliance costs that could restrict its operational flexibility.
NBN Co's operational flexibility could be affected depending on the final shape of
the legislation passed by the Parliament.
Legislation is less flexible, and any issues identified through operational experience
could only be changed through legislative amendment. However, this issue will be
mitigated through ministerial powers to make instruments to set standards, rules and
benchmarks, rather than setting these out in legislation.
Non-commercial services
Advantages:
A legislative obligation to supply infrastructure and services provides a firmer basis
for the proposed arrangements to fund NBN Co's non-commercial services.
Given the significance of the obligations, their ongoing application, and the linkage to
the non-commercial services funding, this is arguably a matter best considered by the
Parliament.
Disadvantages:
Option 3 does not appear to have any particular disadvantages in terms of the funding
of non-commercial services.
Preferred option
Option 3 is the preferred option because it offers the greatest net benefit. It best delivers the
overarching objective of providing access seekers and end-users with ongoing access to high-
60
speed broadband services and maximum certainty this will occur. It does this with limited
compliance costs on industry. It would provide the most clarity and certainty for NBN Co and
access seekers as to NBN Co's supply obligations. It would also ensure that there is certainty
for alternative providers, in areas where they are the sole or main providers of infrastructure,
that they may have SIP obligations and how such obligations will be implemented and
enforced.
Legislation, while it can take time to pass Parliament, is the most certain form of regulation.
As such, legislation is the most appropriate vehicle to establish enduring requirements for the
supply of broadband access to premises, which will have a long-term operation and will
constitute an important safety-net for consumers. Legislation would also ensure that after
NBN Co is privatised, the company continues to be obliged to supply broadband access to
premises where access is not being provided by another entity or where a third party that was
providing access to the premises has exited the market.
The Government intention to introduce a mechanism by which competing providers will
contribute to the cost of NBN Co's connection and supply of non-commercial services needs
to have a legislative basis. Where there is a legislative obligation on superfast broadband
providers to contribute these costs, it is a reasonable expectation that there should be a
legislative obligation for NBN Co to connect infrastructure and provide services.
Legislation can be drafted to set out the basic SIP obligations and give providers the
flexibility to determine how they will meet the SIP obligations in the most efficient way. At
the same time, the Government would retain the ability to step in and set minimum standards
through legislative instruments if required. Any such intervention would be subject to a
separate regulatory burden analysis at the time.
Option 3 is consistent with the Government's expectations that NBN Co will build a national
broadband network that is available to all premises in Australia for use by retail service
providers on an open access basis. The proposed SIP regime also recognises that other
providers may provide superfast services in a range of circumstances and enables other
providers to be designated a SIP where appropriate. This includes providers already operating
as the IPOLR in adequately served areas, those that are contracted to service new
developments and providers with established networks. The regime recognises that other
providers will generally be servicing areas on a commercial basis and will be contracted to
supply premises on this basis. SIP status will confirm their obligation to service premises in
their area of operation
Option 1 does not address the Vertigan panel's concern that the Government's Statement of
Expectations does not provide sufficient certainty for NBN Co, access seekers and consumers
about NBN Co's ongoing supply obligations. In particular, it would not ensure that NBN Co,
after privatisation, continued to supply broadband access to premises in unprofitable
geographic areas. It also provides a poor basis for charging non-commercial services funding.
Option 2 addresses the panel's concern, but does not provide the same level of certainty as
Option 3 because a carrier licence condition is a relatively flexible mechanism. Given the
importance of ongoing supply obligations to industry and consumers, they need a high degree
of certainty. This issue is compounded by the sun-setting of carrier licence conditions and the
intention to privatise NBN Co once fully built and operational. Given the significance of the
issue, there is also a strong argument that it should be explicitly considered by the Parliament
(as has the existing USO requirement, with which the SIP obligations have many analogies).
This is particularly true given NBN Co's SIP obligations is the basis for the proposed non-
61
commercial services funding regime. For these reasons, carrier licence conditions would not
be the appropriate vehicle to set out SIP obligations on an enduring basis.
Consultation
There was extensive consultation on possible changes to the telecommunications regulatory
framework in 2014 as part of the Vertigan review. The Vertigan panel released a Regulatory
Framing Paper in February 2014 to take soundings from industry and the public on key issues
that should be considered. The panel received 43 submissions. The Vertigan panel also
engaged directly with a range of stakeholders in follow-up discussions.
The Government published its Telecommunications Structural and Regulatory Reform policy
in December 2014, which set out its response to the Vertigan review and its reform plans for
the sector. The response was based on the reports of Vertigan review, the submissions to it,
and other industry engagement. There has been ongoing engagement with industry since that
time.
On 12 December 2016, the Minister for Communications and the Minister for Regional
Communications released for public comment exposure drafts of the:
Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017;
and
Telecommunications (Regional Broadband Scheme) Charge Bill 2017.
The Bills provide for three key reform measures:
Refinement of the carrier separation rules under Parts 7 and 8 of the Tel Act;
The introduction of a statutory infrastructure provider obligation for superfast
broadband; and
The introduction of a Regional Broadband Scheme to support loss-making services.
Along with the Bills, the Government released:
explanatory notes on the draft Bills - an overview of the Bills and explanation on the
operation of the key measures; and
Regulation Impact Statements for the three measures.
Submissions on the package were requested by 3 February 2017.
In addition to public announcement of the consultation process, the Department of
Communications and the Arts undertook a number of initiatives to raise awareness with
stakeholders, in particular, carriers, service providers, industry, consumer and regional
representative groups and regulators.
The Department emailed all licensed telecommunications carriers and other known interested
parties, advising them of the consultation process and offering to provide further explanation
and to discuss issues. It made a presentation to Communications Alliance members on the
package in December, offering follow-up engagement. A range of follow-up briefings and
discussions with other groups and individual stakeholders followed. The Department also
provided an online briefing to the Wireless Internet Service Provider Association of Australia
(WISPAU) in early 2017.
The Department received 30 submissions. These included submissions from Telstra, Optus,
VHA, Vocus, TPG, the Greenfield Operators of Australia (four small carriers: OPENetworks,
62
LBN Co, CNT Corp Pty Ltd and Opticomm), NBN Co Limited, Great Northern
Telecommunications, Spirit Telecom, the Australian Communications Consumer Action
Network (ACCAN), Better Internet for Rural, Regional & Remote Australia (BIRRR),
Cotton Australia, the Isolated Children's Parents Association (ICPA), the NSW Farmers'
Federation, the National Farmers' Federation, the Telecommunications Industry Ombudsman
(TIO), Regional Development Australia and individual members of the Australian
community. Submissions covered all aspects of the package to varying degrees.
Generally the comments on the SIP provisions were supportive of the scheme, with most
stakeholders expressing support for the overall objectives of the scheme. Two industry
submitters provided detailed comment on the drafting with a view to maximising clarity for
industry and consumers. These comments focussed on the supply of services to 'designated
equipment', the interaction between the SIP provisions and Part XIC of the Competition and
Consumer Act 2010 (CCA), and the operation of exemptions from the SIP obligations.
Regional and consumer groups suggested a number of enhancements to the SIP provisions,
particularly relating to service speeds, connection and fault repair timeframes, the consumer
experience and dispute resolution. There were no comments on the draft RIS.
Following consideration of these comments, the Government decided to amend the
Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 to
make a number of enhancements. In particular, it amended the Bill to remove obligations
relating to designated equipment, on the basis these are better handled on a commercial basis
as has been the case to date. The Government also clarified that the SIP supply obligation can
be fulfilled by a service being supplied under Part XIC of the CCA. The Government also
amended the SIP obligations to specify download and upload speeds (25/5 Mbps) that are
consistent with NBN Co's Statement of Expectations, and also to set out a target for NBN Co
that it can supply speeds of 50/10 Mbps to 90 per cent of the premises connected to its fixed-
line networks. The Bill was also amended to provide that SIPs can supply services to carriage
service providers that can support voice services on fixed-line or fixed wireless networks.
The Government also introduced measures to improve consumer outcomes by providing
powers for the Minister to make service provider rules. Such rules would, if made, be
legislative instruments and therefore subject to consultation, disallowance and RIS
requirements.
In the case of issues like connection and repair time frames, the Government considers the
matters raised need to be considered further as part of the proposed review of consumer
safeguards. A number of matters would most likely be best addressed in subordinate
legislation given the level of detail that would generally be involved.
The Department considers that the above changes will not impose any further regulatory
burden overall, particularly noting the SIP provisions have been costed on the basis that they
create a broad legislative supply obligation consistent with established and intended modes of
operation.
Implementation and Evaluation
Option 3 would be implemented by legislation. Legislation is expected to be introduced into
the Parliament in 2017. Should the Parliament pass the legislation as proposed, the aim is to
have the amendments in place for 1 July 2018, but a later date may need to be considered
depending on when the Bill is passed.
The Minister may consider making legislative instruments setting out service standards
following passage of the legislation. The development of such instruments would be subject
to further regulation impact analysis and consultation with industry.
63
The Government would evaluate the impacts of the legislation through its normal industry
monitoring and consultation processes. Additionally, the Productivity Commission is
required to conduct a thorough review of the NBN once the Minister for Communications
determines that the NBN is built and fully operational. This review must consider a range of
matters, including competition in telecommunications markets, structural features of those
markets, equity of access to broadband services and bundling of services supplied by
NBN Co.
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Attachment A
Regulatory costings
This RIS considers the implementation of the Government's decision to establish a statutory
infrastructure provider regime for NBN Co (and comparable providers). While NBN Co has
rollout obligations under the Government's Statement of Expectations, this RIS examines
mechanisms to establish ongoing obligations to connect infrastructure and supply services.
Scope will exist for other providers to operate as SIPs. This already occurs in practice, as is
evidenced by the adequately served carrier licence conditions already in place for providers
such as Opticomm and Pivit Telecom.
Options Preferred Costs
1: Status quo--do No Neutral
nothing
2: Make a licence No For NBN Co, the costs are neutral--the obligation
condition has not changed, just the legal mechanism through
which it is expressed. There may be some
additional compliance and reporting costs.
For carriers that nominate to be the SIP, the costs
are arguably neutral as they will likely have
committed to connecting all premises in an area to
their high-speed broadband infrastructure. Carriers
will incur costs in nominating service areas--
including mapping these service areas.
For carriers that are required to be the SIP, there
will be a cost in complying with the obligations,
including extending networks to serve additional
premises and non-premises. However, a non-NBN
carrier would only be required to be the SIP in an
area where it has pre-existing high-speed
broadband infrastructure and the costs associated
with connecting additional premises to a pre-
existing network are likely to be marginal and
offset by the revenue that will be gained from the
customer. The prices that non-NBN Co-operators
can charge for connection and supply will be a
commercial matter for each operator.
65
Options Preferred Costs
3: Legislate SIP Yes For NBN Co, the costs are neutral--the obligation
obligations has not changed, just the legal mechanism through
which it is expressed. There may be some
additional compliance and reporting costs.
For carriers that nominate to be the SIP, the costs
are arguably neutral as they will have committed
to connecting all premises in an area to their high-
speed broadband infrastructure. Carriers will incur
costs in nominating service areas--including
mapping these service areas.
For carriers that are required to be the SIP, there
will be a cost in complying with the obligations,
including extending networks to serve additional
premises and non-premises. However, a non-NBN
carrier would only be required to be the SIP in an
area where it has pre-existing high-speed
broadband infrastructure and the costs associated
with connecting additional premises to a pre-
existing network are likely to be marginal and
offset by the revenue that will be gained from the
customer. The prices that non-NBN Co-operators
can charge for connection and supply will be a
commercial matter for each operator.
Assumptions (option 1)
No change in regulation--neutral regulatory burden impact.
Average Annual Regulatory Costs (from Business as usual)
Total
Change in costs Community
Business Individuals change in
($ million) organisations
cost
Total by Sector $0 $0 $0 $0
Assumptions (option 2)
It is assumed that no more than ten carriers, other than NBN Co, will either nominate to
have statutory infrastructure provider obligations or be designated the statutory
infrastructure provider for an area. This is based on the number of providers who have
submitted data to the National Map on the new developments that they have contracted
to serve.24
24
www.communications.gov.au/what-we-do/internet/competition-broadband/telecommunications-new-developments-map
66
It is further assumed that these carriers are likely to employ 1.0 FTE for four weeks to
work on implementing the SIP arrangements (administrative and mapping) at $37.40 x
1.75 per hour25 x 150 hours = $9817.50 per carrier and a maximum of $98,1750 for ten
carriers.
Average Annual Regulatory Costs (from Business as usual)
Total
Change in costs Community
Business Individuals change in
($ million) organisations
cost
Total by Sector $0.098 $0 $0 $0.098
Assumptions (option 3--preferred)
It is assumed that no more than ten carriers, other than NBN Co, will either nominate to
have statutory infrastructure provider obligations or be designated the statutory
infrastructure provider for an area. This is based on the number of providers who have
submitted data to the National Map on the new developments that they have contracted
to serve, as per option 2.
It is further assumed that these carriers are likely to employ 1.0 FTE for four weeks to
work on implementing the SIP arrangements (administrative and mapping) at $37.40 x
1.75 per hour x 150 hours = $9817.50 per carrier and a maximum of $98,1750 for ten
carriers.
Regulatory burden and cost offset estimate table--Average Annual Regulatory Costs
(from Business as usual)
Total
Change in costs Community
Business Individuals change in
($ million) organisations
cost
Total by Sector $0.098 $0 $0 $0.098
The Department requests submissions as part of the consultation process to comment on the
estimate of the regulatory burden.
25
The default hourly cost is based on average weekly earnings, but adjusted to include income tax, as set out in the
Regulatory Burden Measurement Framework: https://www.dpmc.gov.au/sites/default/files/publications/
005_Regulatory_Burden_Measurement_Framework_1.docx
67
ABBREVIATIONS
The following abbreviations are used in this explanatory memorandum:
ACCC Australian Competition and Consumer Commission
ACMA Australian Communications and Media Authority
Bill Telecommunications Legislation Amendment
(Competition and Consumer) Bill 2017
Charge Bill Telecommunications (Regional Broadband Scheme)
Charge Bill 2017
CCA Competition and Consumer Act 2010
CLCs Declaration Carrier Licence Conditions (Networks supplying
Superfast Carriage Services to Residential
Customers) Declaration 2014
CSP/CSPs Carriage service provider/Carriage service providers
Department Department of Communications and the Arts
Legislation Act Legislation Act 2003
Minister Minister for Communications
NBN National Broadband Network
NBN Co NBN Co Limited
SIP Statutory infrastructure provider
TCPSS Act Telecommunications (Consumer Protection and
Service Standards) Act 1999
Tel Act Telecommunications Act 1997
TIO Telecommunications Industry Ombudsman
68
NOTES ON CLAUSES
TELECOMMUNICATIONS LEGISLATION AMENDMENT
(COMPETITION AND CONSUMER) BILL 2017
Clause 1 - Short title
Clause 1 provides that the Bill, when enacted, may be cited as the Telecommunications
Legislation Amendment (Competition and Consumer) Act 2017.
Clause 2 - Commencement
Clause 2 provides for the commencement of provisions in the Bill when enacted.
Item 1 of the table at subclause 2(1) provides that clauses 1-3 of the Bill and any other
provisions not covered in the table provided at subclause 2(1), would commence on the day
on which the Act receives the Royal Assent.
Items 2 and 3 of the table provide that Schedules 1 and 2, and Part 1 of Schedule 3 to the Bill,
commence on the day after the Act receives the Royal Assent. Consequently, the repeal of
Part 7 of the Tel Act (set out in Schedule 1) would commence on the day after the Act
receives the Royal Assent. The changes to Part 8 of the Tel Act would commence on the
same date, although the obligations in some provisions in Schedule 2 would apply on or after
1 July 2018.
Item 4 of the table provides that the provisions in Part 2 of Schedule 3 to the Bill would
commence immediately after the commencement of the provisions in Part 1 of Schedule 3 to
the Bill. Consequently, the repeal of four carrier licence declarations setting out 'adequately
served' obligations on four specified carriers would take effect immediately after the
statutory infrastructure provider obligations in Part 1 of Schedule 3 commence.
Item 5 of the table provides that the provisions in Schedules 4 and 5 to the Bill would
commence on the day after the Act receives the Royal Assent. However, the obligations in
some provisions in Schedule 2 would apply on or after 1 July 2018.
Clause 3 - Schedules
Subclause 3(1) provides that legislation that is specified in a Schedule to the Bill is amended
or repealed as set out in the applicable items in that Schedule, and any other item in a
Schedule has effect according to its terms. There are five Schedules to this Bill.
Subclause 3(2) provides that the amendment of the CLCs Declaration does not prevent the
declaration, as amended, from being varied or revoked by the responsible Minister. The
amendments to the CLCs Declaration are contained in Schedule 2 to the Bill.
Similarly, subclause 3(3) provides that the amendment of any regulation by the Bill does not
prevent the regulation, as so amended, from being amended or repealed by the Governor-
General. Schedule 2 to the Bill would amend the Legislation (Exemptions and Other Matters)
Regulation 2015 to provide that the rules relating to sunsetting of legislative instruments
contained in the Legislation Act would not apply to the CLCs Declaration.
69
Schedule 1--Layer 2 bitstream services
Part 1--Amendments
Part 1 of Schedule 1 to the Bill contains amendments to the CCA (items 1 to 23 inclusive)
and to the Tel Act (items 23A to 27 inclusive). These amendments repeal Part 7 of the Tel
Act and make a number of consequential changes in both the CCA and the Tel Act. Part 1
also includes an amendment to the definition of 'Layer 2 bitstream service' in section 7 of the
Tel Act to improve the operation of that definition.
Competition and Consumer Act 2010
Item 1 - Section 152AC
Item 1 repeals the following four definitions from the dictionary at section 152AC in Part
XIC of the CCA:
designated superfast telecommunications network;
Layer 2 bitstream service;
national broadband network; and
superfast carriage service.
This represents a consequential change as a result of item 2, which would repeal section
152AGA of the CCA, which itself is to be repealed as a result of the proposed repeal of Part 7
of the Tel Act at item 24.
Item 2 - Section 152AGA
Item 2 repeals section 152AGA of the CCA, which sets out when a network is a designated
superfast telecommunications network. The repeal of section 152AGA is consequential to the
repeal of Part 7 of the Tel Act (see item 24 below).
Item 3 - Subsections 152AL(3C) to (3H)
Item 4 - Subsection 152AL(8CA)
Item 3 repeals subsections 152AL(3C) to (3H) of the CCA, while item 4 repeals subsection
152AL(8CA) of the CCA. These provisions relate to the declaration by the ACCC that a
specified Layer 2 bitstream service is a declared service.
The repeal of these provisions is consequential to the repeal of Part 7 of the Tel Act (see item
24 below).
Item 5 - Subsections 152ALA(1) and (5)
Item 6 - Subsections 152ALA(5A)
Item 5 removes the words, "(other than a declaration mentioned in subsection 152AL(3C))"
from subsections 152AL(1) and 152AL(5) of the CCA.
Item 6 repeals subsection 152ALA(5A) of the CCA.
These changes are necessary as a result of the repeal of subsection 152AL(3C) (see item 3
above).
Item 7 - Subsection 152AO(4)
Item 7 repeals subsection 152AO(4) of the CCA, including the accompanying note. This
amendment is also necessary as a result of the repeal of subsection 152AL(3C) (see item 3
above).
70
Item 8 - Sections 152ARA and 152ARB
Item 8 repeals sections 152ARA and 152ARB of the CCA. These provisions impose non-
discrimination obligations on carriers or CSPs who supply a declared Layer 2 bitstream
service over a designated superfast telecommunications network.
The repeal of these provisions is consequential to the repeal of subsection 152AL(3C) (see
item 3 above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream
services.
Non-discrimination obligations modelled on sections 152ARA and 152ARB are proposed to
be inserted in Part 8 of the Tel Act but will apply to all eligible services supplied by carriers
or CSPs (see proposed Division 2C at item 51 of Schedule 2 below).
Item 9 - Paragraph 152AZ(aa)
Item 10 - Paragraph 152BA(2)(aa)
Item 11 - Subsection 152BB(1AA)
Items 9 and 10 remove references to sections 152ARA and 152ARB of the CCA. Item 11
repeals subsection 152BB(1AA) of the CCA.
These changes are consequential to the repeal of sections 152ARA and 152ARB by item 8
above.
Item 12 - Subsection 152BC(4AA)
Item 13 - Subsections 152BCB(4G) to (4J)
Item 12 repeals subsection 152CB(4AA) of the CCA. Item 13 repeals three subsections,
subsection 152BCB(4G), 152BCB(4H), and 152BCB(4J) of the CCA.
These changes are consequential to the repeal of subsection 152AL(3C) (see item 3 above)
and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.
Item 14 - Subsection 152BCB(5)
Item 14 removes the reference to subsection 152BCB(4G) from subsection 152BCB(5) of the
CCA. This change is consequential to the repeal of subsection 152BCB(4G) by item 13
above.
Item 15 - Subsections 152BDA(4G) to (4J)
Item 15 repeals three subsections, subsection 152BDA(4G), 152BDA(4H), and 152BDA(4J)
of the CCA.
These changes are consequential to the repeal of subsection 152AL(3C) (see item 3 above)
and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.
Item 16 - Subsection 152BDA(5)
Item 16 removes the reference to subsection 152BDA(4G) of the CCA. This change is
consequential to the repeal of subsection 152BDA(4G) by item 15 above.
Item 17 - Subsection 152BE(1B)
Item 17 repeals subsections 152BE(1B) of the CCA consequential to the repeal of subsection
152AL(3C) (see item 3 above) and other provisions in Part XIC of the CCA relating to Layer
2 bitstream services.
71
Item 18 - Sections 152BEBE to 152BEBG
Item 18 repeals sections 152BEBE, 152BEBF, and 152BEBG of the CCA. The repeal of
these provisions is necessary as a result of the repeal of subsection 152AL(3C) (see item 3
above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.
Sections 152BEBE and 152BEBF of the CCA apply to carriers or CSPs (other than an NBN
corporation) who supply a declared Layer 2 bitstream service. If a carrier or a CSPs has
entered into an access agreement with an access seeker with different terms and conditions
from those set out in a special access undertaking or an access determination, the carrier or
CSP must provide the ACCC with a statement about the differences between that agreement
and the special access undertaking or access determination.
A similar provision is proposed to be inserted in Part 8 of the Tel Act as part of the new non-
discrimination obligations under that Part (see proposed section 151ZH at item 51 of
Schedule 2 below).
Item 19 - Section 152BEC
Item 20 - Subsection 152BED(2)
Items 19 and 20 remove references to sections 152BEBE and 152BEBF from section
152BEC and subsection 152BED(2) of the CCA, respectively, consequential to the repeal of
these sections by item 18 above.
Item 21 - Subparagraphs 152CJH(a)(ia) and (ib)
Item 21 removes references to sections 152ARA and 152ARB, repealed by item 8 above,
from paragraph 152CJH(a) of the CCA.
Item 22 - Subparagraph 152CJH(a)(iii)
Item 23 - Subparagraph 152CJH(a)(iv)
Item 22 removes references to subsections 152BCB(4G) to (4J), repealed by item 13 above,
from subparagraph 152CJH(a)(iii) of the CCA.
Item 23 removes references to subsections 152BDA(4G) to (4J), repealed by item 15 above,
from subparagraph 152CJH(a)(iv) of the CCA.
72
Telecommunications Act 1997
Item 23A - Section 7 (paragraph (a) of the definition of Layer 2 bitstream service)
Item 23B - Section 7 (definition of Layer 2 bitstream service)
Items 23A and 23B amend the definition of Layer 2 bitstream service in section 7 of the Tel
Act.
Currently, Layer 2 bitstream service is defined to mean a carriage service that is either a
Layer 2 Ethernet bitstream service or a Layer 2 bitstream service specified in a legislative
instrument made by the ACMA. For the purpose of the definition, 'Layer 2' has the same
meaning as in the Open System Interconnection (OSI) reference Model for data exchange.
Item 23A repeals paragraph (a) of the definition and substitutes it with a new paragraph (a) so
that, for a carriage service to be a Layer 2 bitstream service, the carriage service must be a
Layer 2 bitstream service within the ordinary meaning of that expression. This change
recognises that Layer 2 bitstream services can be supplied in a number of forms and not just
using Ethernet protocols. With the definition broadened to capture the ordinary meaning of
the expression, it is no longer necessary for the ACMA to have a residual power to specify a
Layer 2 bitstream service for the purposes of the definition.
Item 23B amends the final sentence of the definition, consequential to the change in item
23A. As a result of this amendment, the final sentence in the definition would provide that,
for the purposes of determining the ordinary meaning of the expression used in paragraph (a),
the reader is to assume that Layer 2 has the same meaning as in the Open System
Interconnection (OSI) reference Model for data exchange.
Item 24 - Part 7
Item 24 repeals Part 7 of the Tel Act.
Part 7 of the Tel Act currently imposes an obligation on owners of certain local access lines
to supply a Layer 2 bitstream service.
The obligations in Part 7 were introduced in 2011 and were designed, together with Part 8 of
the Tel Act, to ensure that providers of superfast fixed-line broadband networks in Australia
other than NBN Co could provide outcomes to consumers similar to those available on the
NBN. When these networks were the only fixed-line networks in an area, they could form
local access bottlenecks and competition on them could be ineffective - either because the
networks did not offer a wholesale service, or because the network owner would favour its
own retail operations over those of competitors accessing the network. Part 7 addressed the
concern that wholesale services would not be supplied, while Part 8 addressed concerns about
discrimination.
Following the repeal of Part 7, it is intended that any required access to Layer 2 bitstream
services would be regulated under Part XIC of the CCA. The ACCC has declared the
'Superfast Broadband Access Service' (SBAS) under Part XIC of the CCA. As a result, the
SBAS is required to be supplied to access seekers on a range of superfast networks.
Furthermore, under the proposed changes to Part 8 of the Tel Act (contained in Schedule 2 to
the Bill), new superfast networks will be required to be either structurally separated (i.e.
operating on a wholesale-only basis) or functionally separated. In both cases, superfast
networks will be required to supply eligible and ancillary services on a non-discriminatory
basis.
73
Item 25 - Subsection 349(16) (definition of local access line)
Item 26 - After section 349
Items 25 and 26 are consequential to the repeal of Part 7 of the Tel Act (see item 24 above).
Section 349, in Part 17 of the Tel Act, deals with requirements to provide pre-selection in
favour of certain carriage service providers. Subsection 349(16) contains definitions for a
number of terms used in section 349 and it includes a definition of local access line by
reference to section 141D in Part 7 of the Tel Act. Section 141D is to be repealed by item 24,
so a new definition of local access line is required for the purposes of Part 17 of the Tel Act.
Item 25 repeals the definition of local access line in subsection 349(16) and substitutes it with
a new definition with reference to new section 349A. Item 26 inserts a new section 349A in
the Tel Act, which defines the term local access line for the purposes of Part 17 of the Tel
Act. The definition in new section 349A is the same as the current definition in section 141D
of the Tel Act.
74
Part 2 - Transitional provisions
Part 2 of Schedule 1 to the Bill contains transitional provisions as a result of the repeal of Part
7 of the Tel Act.
Item 27 - Transitional - exemptions
Item 27 sets out transitional arrangements for exemptions granted under section 141A of the
Tel Act (contained in Part 7).
Section 141A provides that the Minister may, by written instrument, exempt:
a specified network (subsection 141A(1));
a specified local access line (subsection 141A(2));
a specified owner 141A(3);
from the obligation to supply a Layer 2 bitstream service in section 141 of the Tel Act.
At the time of introduction of the Bill, the following exemptions made under subsection
141A(1) are in force:
Telstra's South Brisbane Network - exemption expires on 1 July 2018;
Specified Telstra Velocity Networks - exemptions expire on the Designated Day under
subsection 577A(10) of the Tel Act (1 July 2018 or a later date as specified by the
Minister);
three exemptions for TransACT networks - exemptions expire on the Designated Day
under subsection 577A(10) of the Tel Act.
One of the exemptions for TransACT networks is no longer operative because the networks
have been sold to NBN Co.
The Minister has similar powers to grant exemptions under section 144 in respect of the
prohibition in section 143 of the Tel Act (both contained in Part 8).
The three subitems in item 27 provide that an exemption instrument made under subsections
141A(1), (2) or (3) and in force immediately before the commencement of item 17 will have
effect, after the commencement of the item, as if it had been made under section 144 of the
Tel Act and each reference in the instrument to section 141 of the Tel Act were a reference to
section 143 of the Tel Act. This ensures that those exemption instruments can continue to
have effect after the repeal of Part 7 of the Tel Act.
These transitional provisions need to be read together with proposed new subsections 144(7)
and (8) of the Tel Act (see item 43 of Schedule 2 to the Bill). While the Minister would be
prohibited from granting new exemptions under subsections 144(1), (2) and (3) after 1 July
2018, the Minister would be able to vary any exemption instruments in force after the start of
1 July 2018. By virtue of the transitional provisions in item 27, this would include exemption
instruments made by the Minister under section 141A.
75
Schedule 2 - Local access lines
Schedule 2 to the Bill contains proposed amendments to the CLCs Declaration (items 1 to 8
inclusive), the CCA (items 11 to 14 inclusive), the Legislation (Exemptions and Other
Matters) Regulation 2015 (item 15) and to the Tel Act (items 16 to 87 inclusive). Due to
amendments in drafting, there is no item 9 or 10.
Consistent with the Government's decision to grandfather existing arrangements, the
amendments to the CLCs Declaration would effectively preserve the operation of the
Declaration for certain networks. The CLCs Declaration applies to certain carriers in respect
of specific local access lines that are not subject to the current Part 8 of the Tel Act. The
licence conditions set out in the Declaration would continue to apply to lines forming part of
a network that:
came into existence before 1 July 2018; and
has not been extended, altered or upgraded on or after 1 July 2018; and
no functional separation undertaking given by the carrier is in force (in accordance with
Part 8 of the Tel Act as amended by this Bill).
The amendments to the CCA would ensure that the ACCC's powers to make record-keeping
rules extend to arrangements under Part 8 of the Tel Act.
The amendment to the Legislation (Exemptions and Other Matters) Regulation 2015 would
exempt the CLCs Declaration from automatic sunsetting (though it would not prevent the
Minister from revoking or varying the CLCs Declaration in the future).
The amendments to the Tel Act would amend Part 8 to give effect to new structural
separation and non-discrimination obligations and establish the framework for functional
separation undertakings.
Carrier Licence Conditions (Networks supplying Superfast Carriage Services to
Residential Customers) Declaration 2014
Item 1 - Section 3
Item 1 repeals section 3 of the CLCs Declaration, which currently sets out that the
Declaration expires on 30 June 2018. The effect of this change is that the Declaration, a
legislative instrument, would continue to operate beyond this time. This change operates
together with the amendment to the Legislation (Exemptions and Other Matters) Regulation
2015 (see item 8 below) to preserve the operation of the CLCs Declaration.
Item 2 - Subsection 4(1)
Item 2 inserts a new definition of functional separation undertaking in subsection 4(1) of the
CLCs Declaration.
Functional separation undertaking is given the same meaning as in Part 8 of the Tel Act as
amended by this Bill. This term appears in the proposed amendment to section 5 of the CLCs
Declaration (see item 6 below).
Item 3 - Subsection 4(1) (at the end of the definition of local access line)
Item 4 - Subsection 4(1) (at the end of the definition of superfast carriage service)
The term local access line is currently defined in the CLCs Declaration as having the same
meaning as in section 141D of the Tel Act. The term superfast carriage service is defined in
the CLCs Declaration as having the same meaning as in subsection 141(10) of the Tel Act.
76
The provisions referred to in these definitions are both contained in Part 7 of the Tel Act,
which is proposed to be repealed by the Bill (see item 24 of Schedule 1).
In recognition of that repeal, items 3 and 4 amend the definitions of local access line and
superfast carriage service to refer to the Part 7 provisions as they stood immediately before
the commencement of Schedule 2 to the Bill. These changes have the effect of preserving the
Part 7 provisions for the purposes of the CLCs Declaration.
Item 5 - Section 5
Item 6 - Section 5
Item 7 - At the end of section 5
Items 5, 6 and 7 amend section 5 of the CLCs Declaration.
Section 5 specifies when the carrier licence conditions in section 6 of the Declaration apply.
The trigger is the supply of superfast carriage services or specified broadband services using
a local access line forming part of a designated telecommunications network to residential
customers at any time on or after the commencement of the CLCs Declaration (i.e. 1 January
2015).
The change in item 6 has the effect of limiting the application of the licence conditions in
section 6. That is, they would apply where:
the relevant networks came into existence before 1 July 2018; and
the network has not been altered, upgraded or extended on or after 1 July 2018; and
no functional separation undertaking given by the carrier is in force.
If the circumstances set out in section 5 as amended are not met, the CLCs Declaration would
not apply and Part 8 of the Tel Act would apply in respect of the relevant access lines.
Item 7 inserts a new subsection 5(2). Proposed new subsection 5(2) clarifies that a functional
separation undertaking can be given by a carrier either alone, or jointly with one or more
other persons. This is consistent with the way functional separation undertakings can be
submitted under Part 8 of the Tel Act, as amended by this Bill.
The change in item 5 is consequential to the insertion of subsection 5(2) by item 7.
Item 8 - Paragraph 6(1)(c)
Item 8 removes the reference to 30 June 2018 in paragraph 6(1)(c) of the CLCs Declaration.
Paragraph 6(1)(c) specifies the period within which carriers are required to comply with the
carrier licence conditions in subsections 6(5) to 6(8) of the Declaration, namely from 1 July
2015 to 30 June 2018 (which is the date on which the Declaration would, but for the change
proposed in items 3 and 8, expire). The licence conditions in subsections 6(5) to 6(8) relate to
general separation and supply obligations and obligations in respect of the supply of a Layer
2 Wholesale Service.
As a result of this change, the licence conditions in subsections 6(5) to (8) would continue to
apply to carriers beyond 30 June 2018, consistent with the ongoing operation of the CLCs
Declaration beyond that date.
77
Competition and Consumer Act 2010
Item 11 - After paragraph 151BU(4)(da)
Item 12 - After subparagraph 151BUA(2)(b)(iia)
Item 13 - After subparagraph 151BUB(2)(b)(iia)
Item 14 - After subparagraph 151BUC(2)(b)(iia)
Items 11 to 14 amend Division 6 of Part XIB of the CCA.
Division 6 provides that the ACCC can make record-keeping rules relating to information
that is relevant to the ACCC's functions and powers. Division 6 also sets out the
circumstances in which access can be given to reports prepared by carriers or carriage service
providers in accordance with record-keeping rules.
Given the new functions and powers that the ACCC will have as a result of the proposed
amendments in Schedule 2 to this Bill, items 11 to 14 amend certain provisions in Division 6
to extend their operation to Part 8 of the Tel Act.
Legislation (Exemptions and Other Matters) Regulation 2015
Item 15 - Section 12 (table item 61, column headed "Legislative instrument", after
paragraph (a))
Item 15 adds the CLCs Declaration to the table in section 12 of the Legislation (Exemption
and Other Matters) Regulation 2015 setting out legislative instruments that are exempt from
rules relating to sunsetting n the Legislation Act. This ensures the continued operation of the
CLCs Declaration into the future.
Telecommunications Act 1997
Item 17 - After subsection 69(4)
Item 17 inserts a new subsection 69(4A) in the Tel Act.
Section 69 empowers the ACMA to issue remedial directions to carriers if they have
contravened, or are contravening, a condition of their carrier licence.
The effect of new subsection 69(4A) is that the ACMA will not be able to issue remedial
directions for contraventions of carrier licence conditions that relate to new provisions in Part
8 that are listed in new subsection 69(4A). This amendment is required because the ACCC,
and not the ACMA, will be the regulator with responsibility for Part 8.
Item 18 - After subsection 70(1)
Item 19 - Before paragraph 70(5)(a)
Items 18 and 19 insert new subsection 70(1A) and new paragraph 70(5)(aaa) in the Tel Act.
Section 70 empowers the ACMA to issue formal warnings if carriers contravene a conditions
of their carrier licence. Section 70 also empowers the ACCC to issue formal warnings for
specified contraventions (see subsection 70(5)).
The effect of new subsection 70(1A) is that the ACMA will not be able to issue formal
warnings for contraventions of carrier licence conditions that relate to new provisions in Part
8 that are listed in subsection 70(1A). Instead, the ACCC will have this power as a result of
new paragraph 70(5)(aaa). This reflects the policy intention for the ACCC to be the regulator
of Part 8 given the strong competition objectives underpinning Part 8.
78
Item 20 - After subsection 102(4)
Item 20 inserts a new subsection 102(4A) in the Tel Act.
Section 102 empowers the ACMA to issue remedial directions to service providers if they
have contravened, or are contravening, a service provider rule.
The effect of new subsection 102(4A) is that the ACMA will not be able to issue remedial
directions for contraventions of service provider rules that relate to new provisions in Part 8
that are listed in new subsection 102(4A). As noted under item 17, this change is required
because the ACCC, and not the ACMA, will be the responsible regulator.
Item 21 - After subsection 103(1)
Item 22 - After subsection 103(4E)
Items 21 and 22 insert new subsection 103(1A) and new subsection 103(4F) in the Tel Act.
Section 103 empowers the ACMA to issue formal warnings for contraventions of service
provider rules. Section 103 also empowers the ACCC to issue formal warnings for specified
contraventions.
The effect of new subsection 103(1A) is that the ACMA will not be able to issue formal
warnings for contraventions of service provider rules that relate to new provisions in Part 8
that are listed in new subsection 103(1A). Instead, the ACCC will have this power as a result
of new subsection 103(4F).
Item 23 - Part 8 (heading)
Item 14 substitutes the current heading for Part 8 with a new heading, which better reflects
the scope of Part 8 as a result of the amendments in Schedule 2 to the Bill.
Item 24 - Section 142
Item 24 replaces the current Simplified Outline for Part 8 of the Tel Act with a new
Simplified Outline, which reflects the main proposed amendments to Part 8.
The new Outline summarises the operation of section 143 as amended (see items 35 to 41
below) and new section 142C (see item 34 below). Sections 143 and 142C both impose an
obligation to provide eligible services on a wholesale basis on persons who are in a position
to exercise control (and on associates of persons who are in a position to exercise control)
over networks or local access lines of the kind specified in those sections. Section 143 as
amended will apply in relation to telecommunications networks that came into existence or
were altered or upgraded between 1 January 2011 and 1 July 2018, while new section 142C
will apply in relation to local access lines that come into existence on or after 1 July 2018 or
are altered or upgraded on or after 1 July 2018.
Item 25 - Section 142A (definition of alter)
Item 26 - Section 142A
Item 27 - Section 142A (definition of small business customer)
Item 28 - Section 142A
Item 29 - Section 142A (paragraph (b) of the definition of superfast carriage service)
Item 30 - Section 142A
Item 31 - Section 142A (definition of upgrade)
Item 32 - Section 142A
Items 25 to 32 amend section 142A to amend existing definitions of terms used in Part 8 and
introduce new definitions to reflect amendments to that Part.
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Item 25 amends the definition of alter in section 142A. Currently, section 142A states that
alter, in relation to a telecommunications network, has a meaning affected by section 159.
Item 25 amends the definition so that the meaning of alter is affected by section 159 in
relation to either a telecommunications network or a line. This change is consequential to the
substantive change in section 159 (see item 74 below), which in turn reflects the operation of
new proposed section 142C with respect to local access lines.
Item 26 introduces a new definition of associate, which is to take the meaning given by
section 152 as amended by this Bill (see items 53 and 54 below). The concept of associate is
relevant to the operation of proposed new section 142C and existing section 143 as amended
by this Bill.
Item 26 also introduces new definitions of business unit and of corporation. Corporation
means a body corporate, while business unit means part of a corporation. These terms are
central to the operation of the functional separation undertakings provisions in Part 8, which
apply to corporations and business units within those corporations.
Item 26 introduces a definition of close proximity, which states that the term has a meaning
affected by section 162. Proposed section 162 (see item 77 below) would empower the
Minister to determine, by legislative instrument, when premises are, or are not, in close
proximity to a local access line. The concept of close proximity is relevant to the operation of
new section 143F (see item 42 below), which exempts certain local access lines from section
142C.
The new term customer interface means a wholesale interface for the purposes of ordering,
provisioning, billing, service activation and fault rectification in relation to the supply of local
access line services. In other words, it is the interface that is used to manage key aspects of
the relationship between the supplier of a wholesale service and its wholesale customers. This
term is used in proposed new sections 151A and 151C, which set out the requirements for
standard and joint functional separation undertakings, respectively (see item 51 below - for
example, proposed paragraphs 151A(2)(l) and 151C(2)(q)). Specifically, as part of a
functional separation undertaking, the same customer interface that is used to provide local
access line services to wholesale customers must also be used in providing those services to a
person's own retail business unit (or a retailer that is part of the undertaking) for supply to
retail customers. This promotes a non-discriminatory approach to the supply of local access
line services.
The term declared service is given the same meaning as in Part XIC of the CCA.
Item 26 includes a definition of designated carriage service, which has the meaning given by
section 142BD (see item 33 below). This term is used in proposed new section 143A, which
empowers the ACCC to determine that certain classes of persons are exempt from sections
142C and 143, subject to certain conditions and limitations (including in relation to the
supply of designated carriage services - see item 42 below).
The new term fixed-line carriage service means a carriage service that is supplied using a line
to premises occupied or used by an end-user. This term is also used in proposed section
143A. A person who elects to benefit from a class exemption made by the ACCC under
section 143A must not supply fixed-line carriage services to more than 2,000 residential
customers (or a higher number, not exceeding 12,000, specified in the regulations). The
objective is that a person's residential customers supplied on other networks (for example,
mobile or wireless) will not be counted, and so the term 'fixed-line carriage service' is
required to distinguish the different networks used to supply residential end-users.
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The new term functional separation undertaking means either a standard functional
separation undertaking under proposed section 151A (see also the new definition of standard
functional separation undertaking in item 26) or a joint functional separation undertaking
under proposed section 151C (see also the new definition of joint functional separation
undertaking in item 28). A standard functional separation undertaking is given to the ACCC
by a single corporation, while a joint functional separation undertaking is given to the ACCC
by two or more corporations.
In the context of the new functional separation undertakings regime, functional also includes,
but goes beyond, organisational arrangements (e.g. the use and structure of business units or
subsidiary companies).
The new term fundamental provision has the meaning given by subsection 151A(9) (in the
context of standard functional separation undertakings) or 151C(9) (in the context of joint
functional separation undertakings). A fundamental provision is a provision in a functional
separation undertaking that is a basic element of the undertaking, and critical to its success
and enforcement.
The term local access line service means an eligible service supplied using a local access
line. The term eligible service is already defined in section 142A, and it has the same
meaning as in section 152AL of the CCA. The concept of local access line service is a key
concept under the functional separation undertakings process being introduced by the Bill
(see item 51 below).
Functional separation undertakings would be given by a corporation or corporations in
relation to their supply of local access line services, and key requirements such as functional
separation and non-discrimination relate to the supply of local access line services. The term
is cast broadly, so, for example, it does not limit the eligible service by type (e.g. a voice or
Internet service) or by speed (e.g. broadband or superfast), although download speed is
relevant to whether other requirements apply to local access line services.
The new term multi-unit building means:
a building that has two or more units for occupation as a place of residence or business; or
a building in a complex, where each building has two or more units for occupation as a
place of residence or business.
The term is broad and intended to capture both an apartment building, where the units in the
building can be occupied as places of residence or business, and commercial or business
complexes where individual buildings in the complex have two or more units that are used
for residential or business purposes. It includes buildings governed by a body corporate, even
if there are properties within that building with separate titles. The term would not generally
cover, for example, a townhouse complex where each building contains a single place of
residence or business, each of which has a title, and for which there is no body corporate.
Such buildings would be understood to be single premises.
The term multi-unit building is used in proposed new subsection 158(2B) (see item 71
below). That item amends the definition of 'local access line' in Part 8 of the Tel Act for the
purposes of certain provisions in Part 8. It provides that a line in a multi-unit building that is
used to supply a superfast carriage service to a residential customer occupying a unit in the
building is taken to be a local access line and to form part of the infrastructure of a
telecommunications network. As a result, those lines would be subject to proposed new
section 142C and other relevant provisions in Part 8. Although multi-unit building is defined
broadly to cover a building with both residential and business customers, given that the rules
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in relation to local access lines will apply only to the supply of local access line services to
residential customers, only buildings with residential units will be subject to the amended
definition of 'local access line' in item 71.
The new term residential customer is defined to have a meaning affected by section 161,
which extends the meaning of that term to include home-based businesses (see item 77
below). The term residential customer is used throughout Part 8 and is central to the
operation of many existing and proposed new provisions in Part 8, which are premised on
local access lines being used to supply superfast carriage services to residential customers.
The terms retail business unit and retailer are key concepts under the functional separation
undertakings process being introduced in Part 8 through item 51 of the Bill. Under that
process, a corporation (if a standard functional separation undertaking is given under section
151A) or corporations (if a joint functional separation undertaking is given under section
151C) must separate key wholesale and retail functions, and the definitions clarify who
within a corporation or among multiple corporations will undertake those functions.
A retail business unit is a unit by which a corporation deals with its retail customers in
relation to the supply of local access line services. A retail business unit is required where a
single corporation proposes functional separation of its wholesale and retail functions within
that corporation. Retailer, in the context of a joint functional separation undertaking, is a
corporation that is identified as the retailer, or as one of the retailers, for the purposes of the
undertaking. A retailer is required where the wholesale and retail functions are separated into
different corporations which, however, form part of a single business organisation.
The term retail customer means a customer other than a wholesale customer. Wholesale
customer is also separately defined in section 142A (see item 32) and it means a customer
that is a carrier or a carriage service provider. These concepts are central to the operation of
the structural separation obligations and functional separation undertakings provisions in
Part 8.
Item 27 repeals the definition of small business customer in section 142A because it is no
longer required. The current rules in Part 8 apply to the supply of superfast carriage services
to residential or small business customers. However, under Part 8 as amended by this Bill,
existing rules and proposed new rules will only apply to the supply of superfast carriage
services to residential customers, thereby providing greater flexibility in the supply of
services to small business customers.
Item 29 amends the definition of superfast carriage service in section 142A. Currently, one
of the criteria in the definition is that a carriage service provide a download transmission
speed that is normally more than 25 megabits per second (see paragraph (b) of the current
definition). This means that a carriage service with a speed of precisely 25 megabits per
second is not a superfast carriage service. The amendment provides that a carriage service
with a download transmission speed of normally 25 megabits per second or more will be
defined as a superfast carriage service, provided the other criteria in the definition are also
satisfied. This better reflects the general understanding of the capabilities of such services.
Item 30 inserts two new definitions into section 142A that are required under the new
functional separation undertakings process.
The first definition provides that supply, in relation to a service, includes the supply of the
service by a corporation to itself, but further provides that the definition does not apply to
subsection 142C(2) or 143(2). That is, when used in subsections 142C(2) and 143(2), supply
by a corporation would only mean supply to others. This is because these subsections will
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require a person controlling a local access line or superfast fixed-line network to be
wholesale-only. Accordingly, in this context, supply could not refer to internal supply.
The second definition provides that unsatisfactory compliance record has a meaning affected
by section 142BC, which exhaustively sets out the matters that can be considered when
determining whether a person has an unsatisfactory compliance record in relation to
functional separation (see item 33 below). An unsatisfactory compliance record is a key
concept in the enforcement of functional separation undertakings. The ACCC could revoke
an undertaking if a person has an unsatisfactory compliance record (see proposed new section
151W, noted at item 51 below). An unsatisfactory compliance record is also relevant to
breaches of an undertaking while it is in force and contraventions of specific new provisions
in Part 8 of the Tel Act (for example, the non-discrimination obligations under proposed
sections 151ZF, 151ZG and 151ZH, and the anti-avoidance obligations under proposed
section 151ZI) (see proposed new section 151Y, also noted at item 51 below).
Item 31 amends the existing definition of upgrade in section 142A. The current definition
provides that upgrade, in relation to a telecommunications network, has the meaning affected
by section 160. The amendment in item 31 would have the effect of applying the amended
definition to lines as well as networks. This change is consequential to the substantive change
in section 160 (see item 76 below), which in turn reflects the operation of new proposed
section 142C with respect to local access lines
In addition to the new definition of wholesale customer (noted above), item 32 inserts new
definitions of wholesale business unit, wholesaler and worker.
Together with the concepts of retail business unit and retailer, wholesale business unit and
wholesaler are key concepts under the functional separation undertakings process being
introduced in Part 8. Wholesale business unit is relevant in the context of standard functional
separation undertakings given by a single corporation under section 151A and it refers to the
business unit within a corporation through which the corporation deals with its wholesale
customers and retail business units to supply local access line services. Wholesaler, in the
context of a joint functional separation undertaking given under section 151C, refers to the
person(s) named in an undertaking as the wholesaler(s) in the undertaking.
Worker has an expanded meaning and covers individual employees, individual contractors or
subcontractors, and employees of a contractor or subcontractor. This term is used in proposed
new sections 151A and 151C, which set out the requirements for standard and joint
functional separation undertakings, respectively (see item 51 below). The definition is
intentionally broad to ensure appropriate and effective separation between wholesale and
retail functions can be achieved under a functional separation undertaking by having different
workers performing those functions to the extent necessary.
Item 33 - At the end of Division 1 of Part 8
Item 33 introduces a number of new sections into Part 8 that are foundational to the new
functional separation undertakings regime.
Proposed Section 142B - Functional separation undertaking given by a person
New section 142B clarifies that a reference in Part 8 to a functional separation undertaking
given by a person is a reference to a functional separation undertaking given by the person
either alone or jointly with another person. The effect of this is that references in Part 8 to a
functional separation undertaking refer either to a standard functional separation undertaking
or a joint functional separation undertaking.
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Proposed Section 142BA - Promotion of the long-term interests of end-users of carriage
services and of services supplied by means of carriage services
One of the criteria that the ACCC must have to regard to in deciding whether to accept a
functional separation undertaking (or a variation to an undertaking) is whether the
undertaking (or the variation) promotes the long-term interests of end-users of carriage
services and of services supplied by means of carriage services (see proposed new section
151J at item 43 below and new section 151V). The promotion of the long-term interests of
end-users must also be considered by the ACCC when deciding whether to make a class
exemption determination under subsection 143A(1) and (2).
New section 142BA clarifies that, for the purposes of Part 8, the question of whether
something promotes the long-term interests of end-users of carriage services or of services
supplied by means of carriage services is to be determined in the same way as it is
determined for the purposes of Part XIC of the CCA (see section 152AB of the CCA
specifically).
The object of promoting the long-term interests of end-users underpins the ACCC's
regulatory functions under Part XIC of the CCA.
Proposed Section 142BB - Terms and conditions
New section 142BB clarifies how notional contracts, and terms and conditions in notional
contracts, should be treated for the purposes of Part 8. The concept is relevant for
arrangements between wholesale and retail business units within a single corporation to give
effect to a functional separation commitment, where it would not be legally possible to have a
legally binding contract as the units are part of the one and same legal entity. In this context,
the corporation could put in place a notional contract between the retail business unit and the
wholesale business unit. Section 142BB operates as an interpretative aid to clarify that
notional contracts (however described) between a corporation's business units should be
treated as if they were actual contracts, and any terms and conditions in such contracts should
be treated as if they were actual terms and conditions.
Proposed Section 142BC - Unsatisfactory compliance record
Under proposed new section 151W (to be inserted by item 43 of Schedule 2 to this Bill), the
ACCC may revoke a functional separation undertaking if it is satisfied that a person has an
unsatisfactory compliance record.
New section 142BC specifies exhaustively what the ACCC can consider in determining
whether a person has an unsatisfactory compliance record. The ACCC must have regard only
to:
any breaches by the person of any functional separation undertaking given by the person;
and
any contravention by the person of section 143B, 151ZA, 151ZB, 151ZF, 151ZG, 151ZH
or 151ZI.
Under section 143B, a person who has been exempted from the wholesale-only requirements
in section 142C or section 143 as a result of an ACCC class exemption determination made
under subsection 143A(1) or (2) must comply with the conditions and limitations of the
determination. Proposed new sections 151ZA and 151ZB deal with reporting obligations
following a revocation notice under section 151W and obligations to notify changes in
control of the person who gave a functional separation undertaking, respectively. Proposed
new sections 151ZF, 151ZG and 151ZH set out non-discrimination obligations applying to
persons who are subject to the structural separation and functional separation requirements
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under Part 8. Proposed new section 151ZH requires persons who are subject to the structural
separation or functional separation requirements under Part 8 to publish standard terms for
the supply of eligible services and also to publish information on how any access agreements
differ from those standard terms. Proposed new section 151ZI is a general anti-avoidance
measure in relation to Part 8.
As each of these sections sets out key requirements that a person must comply with under
Part 8, they are necessarily matters that the ACCC must consider in determining a person's
compliance record.
Proposed Section 142BD - Designated carriage service
New section 142BD defines designated carriage service for the purposes of Part 8.
Under subsection 142BD(1), designated carriage service means a carriage service specified
by the ACCC in a legislative instrument in accordance with subsection 142BD(2) or, if no
such carriage service is specified, a Layer 2 bitstream service.
Subsection 142BD(3) limits the kind of carriage services that the ACCC could specify under
subsection 142BD(2). The ACCC must not specify a carriage service unless:
the service enables end-users to download communications, and
the download transmission speed of the service is normally 25 megabits per second or
more, and
the service is supplied using a line to premises occupied or used by an end-user, and
there is in force a declaration under new section 152AL(3) of the CCA that relates to the
service.
The concept of a designated carriage service is used in section 143A, which allows the ACCC
to determine class exemptions (see item 42 below) from sections 142C or 143. One of the
requirements for a person who elects to be subject to an exemption determination is that they
must ensure that a designated carriage service is available for supply to the person's
wholesale customers or prospective wholesale customers. The intention is that any network
provider exempted by the ACCC under section 143A will supply (or offer to supply) a
wholesale service that can be used by wholesale customers to supply high quality retail
broadband and voice services. A Layer 2 bitstream service is the baseline service in these
circumstances (see paragraph 142BD(1)(b)). However, the section also provides flexibility
for the ACCC to specify an alternative carriage service by legislative instrument (see
paragraph 142BD(1)(a) and subsection 142BD(2)). To ensure that any alternative service
specified by the ACCC offers appropriate functionality to wholesale customers, subsection
142BD(3) sets out key characteristics that the service must meet. Notably, the service must
provide a download transmission speed that is normally 25 megabits per second or more (see
paragraph 142BD(3)(b)). In addition, the service must be a declared service under subsection
152AL(3) of the CCA (see paragraph 142BD(3)(d)).
In July 2016 the ACCC declared a superfast broadband carriage service that meets the criteria
set out in subsection 142BD(3). The ACCC could specify that service as a designated
carriage service, so that any persons who are exempt from the wholesale-only requirements in
section 142C or section 143 would be required to supply that superfast broadband access
service to their wholesale customers.
Item 34 - Before section 143
Item 34 inserts a new section 142C before section 143 in Part 8 of the Tel Act.
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New section 142C is modelled on existing section 143 of Part 8. Section 142C and section
143 as amended by this Bill are central to the operation of Part 8 of the Tel Act. Section 143
would be amended by this Bill so it applies only to local access lines that form part of a
telecommunications network that came into existence, or was altered or upgraded, on or after
1 January 2011 but before 1 July 2018 (see items 35 to 41 below). Section 142C applies to
local access lines that come into existence, or are altered or upgraded, on or after 1 July 2018.
Subsection 142C(1) specifies the local access lines that will be subject to the requirements in
new section 142C. Specifically, new section 142C will apply to a local access line that meets
the following criteria:
the line is part of the infrastructure of a telecommunications network, other than the NBN,
in Australia (paragraphs 142C(1)(a) and (b)); and
the line is used, or proposed to be used, to supply a superfast carriage service wholly or
principally to residential customers, or prospective residential customers, in Australia
(paragraph 142C(1)(c)); and
either the line came into existence on or after 1 January 2018, or the line was altered or
upgraded on or after 1 July 2018, and, as a result of the alteration or upgrade, the line
became capable of being used to supply a superfast carriage service to residential
customers in Australia ((paragraph 142C(1)(d)).
There are three notes accompanying proposed subsection 142C(1) which provide the reader
with cross-references to other sections that operate together with or qualify the obligations in
proposed section 142C. Note 1 refers the reader to new section 156A, which sets out the
circumstances in which certain lines are deemed to have come into existence on or after 1
July 2018 (see item 43 below). Note 2 refers the readers to section 158A, which deems
certain line extensions to be local access lines in their own right and to have come into
existence on or after 1 July 2018. As a result of the application of sections 156A or 158A,
those local access lines would also be captured by subsection 142C(1). Note 3 refers the
reader to new sections 143A and 151, which deal with exemptions from sections 142C and
143 (see items 42 and 43 below).
A local access line can be used to supply an individual residential customer or multiple
residential customers.
In paragraph 142C(1)(c), the words 'wholly' and 'principally' comprising the expression
'wholly or principally' are intended to have their ordinary meaning (similar to existing
section 143). By way of example, a superfast local access line that is predominantly used to
supply government or corporate customers would not be subject to the obligation in
subsection 142C(2), even if it was also used to supply a small number of residential
customers on an incidental or ancillary basis (see proposed new section 143H below).
Subsection 142C(2) contains the obligation to supply eligible services on a wholesale-only
basis. A person (the first person) who is in a position to exercise control of the line, or is an
associate of a person who is in a position to exercise control of the line, must not, on or after
1 July 2018, either alone or jointly with one or more other persons, supply an eligible service
unless the service is supplied to a carrier or carrier service provider.
Section 152, as amended by this Bill (see items 53 and 54 below), sets out when a person is
an associate of a person in relation to control of a line. For example, an associate could be a
partner of the controller, or a person who acts, or is accustomed to act, in accordance with the
directions, instructions or wishes of, or in concern with, the controller.
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The note accompanying subsection 142C(2) refers the reader to new section 155A, which
explains when a person is in a position to exercise control of a line for the purposes of Part 8
of the Tel Act.
Under subsection 142C(3), the wholesale-only obligation in subsection 142C(2) does not
apply to the use of a local access line if a functional separation undertaking is in force under
new Division 2B of Part 8 of the Tel Act (see item 43 below). However, under subsection
142C(3), if a local access line comes into existence after the ACCC has given a notice
revoking the undertaking, but the revocation has not yet taken effect, then that line is subject
to the wholesale-only obligation in subsection 142C(2). This reflects the policy intention that
the wholesale-only requirements are the default arrangement.
Two notes accompany subsection 142C(3). The first reminds the reader that a functional
separation undertaking relates to eligible services supplied using a local access line regardless
of when that line came into existence. The second directs the reader to section 142B, which
effectively provides that a functional separation undertaking may be given by a single person,
or jointly by more than one person.
Subsection 142C(4) introduces ancillary contraventions of the prohibition in subsection
142C(2).
Civil penalties apply to direct or ancillary contraventions of the prohibition in subsection
142C(2) (see subsection 142C(5)). The accompanying note directs the reader to Part 31 of the
Tel Act, which provides for the recovery of pecuniary penalties in relation to breaches of civil
penalty provisions.
Item 35 - Section 143 (heading)
Item 35 substitutes the current heading for section 143 of the Tel Act with a new heading to
better reflect the proposed amended scope of section 143 (to cover networks in existence, or
upgraded or altered, on or after 1 January 2011 but before 1 July 2018. The changes to
section 143 generally give effect to the Government's commitment to grandfather existing
arrangements and also remove regulation of small business networks.
Item 36 - Paragraph 143(1)(b)
Item 37 - Subparagraph 143(1)(d)(i)
Item 38 - Subparagraph 143(1)(d)(ii)
Item 39 - Subparagraph 143(1)(d)(ii)
Item 40 - Subsection 143(1) (note 2)
Items 36-39 make two main changes to section 143. Items 36 and 39 remove all references to
'small business' from section 143. Items 37 and 38 establish that the wholesale-only
obligations under section 143 apply only to networks that came into existence, or were
altered or upgraded, on or after 1 January 2011 but before 1 July 2018.
As a result of the amendments in items 36-39, section 143 will apply to local access lines that
are part of a telecommunications network (other than the NBN) that supplies superfast
carriage services wholly or principally to residential customers or prospective residential
customers.
The Government has decided to remove the wholesale-only obligation from networks
supplying small business customers. However, proposed new section 161 of the Tel Act, to
be inserted by item 77 of Schedule 2 to this Bill, sets out an extended meaning of residential
customer that includes home-based businesses. Currently, the majority of small businesses in
Australia are home-based businesses, so the wholesale-only obligations in Part 8 will
continue to apply to networks supplying superfast carriage services to such end-users. Small
87
businesses that are not home-based (for example, they use premises in commercial strips or
business parks) would not be captured by the definition in section 161.
This is consistent with the scope of new section 142C.
The removal of the wholesale-only obligation from networks supplying superfast carriage
services to small business customers will provide greater commercial opportunities and
flexibility for fixed-line network providers.
These changes to section 143 take effect on the day after the Act receives the Royal Assent.
Item 40 makes a minor change to note 2 accompanying subsection 143(1) to replace the
reference to section 144 with section 143A. This change is consequential to the amendment
made by item 42.
Item 41 - Subsections 143(2) and (3)
Item 41 repeals existing subsections 143(2) and 143(3) and replaces them with new
subsections 143(2) and 143(3). Item 41 also introduces new subsections 143(4)-(6).
Existing subsection 143(2) imposes an obligation on a person who is in a position to exercise
control of a network to use a local access line forming part of that network to supply eligible
services on a wholesale-only basis. The obligation also applies to associates of the person.
New subsection 143(2) is the same in substance as existing subsection 143(2), however the
new drafting reflects new subsection 142C(2) for consistency.
Similar to new subsection s142C(2), new subsection 143(3) provides that the wholesale-only
obligation in subsection 143(2) does not apply to the use of a line if a functional separation
undertaking is in force. For consistency with proposed new subsection 142C(3), if a notice
revoking the functional separation undertaking has been given by the ACCC, but the
revocation has not taken effect, subsection 143(2) will apply to any local access lines that
come into existence after the notice was given.
New subsection 143(4) provides that subsection 143(2) also does not apply to the use of a
line if the CLCs Declaration is in force, the line is part of the infrastructure of a designated
telecommunications network (as defined in the CLCs Declaration) and a carrier who owns or
operates the network is subject to the conditions in that Declaration. This new subsection
provides clarity that a carrier who operates a network subject to the CLCs Declaration will
not be subject to subsection 143(2). However, if that carrier gives the ACCC a functional
separation undertaking, it will no longer be subject to the CLCs Declaration (see item 6 in
Schedule 2 to the Bill).
New subsection 143(5) establishes ancillary contraventions of proposed subsection 143(2).
This is consistent with new subsection 142C(4) with respect to the prohibition in 142C(2).
Existing subsection 143(3) provides that conduct that breaches the requirement in subsection
143(2) is a criminal offence. As criminal offence provisions in competition law are usually
reserved for conduct that is especially egregious, the Government has determined that it is
more appropriate for civil penalties to apply to breaches of Part 8 of the Tel Act. This is set
out in new subsection 143(6), which provides that subsections 143(2) and (5) are civil penalty
provisions.
The accompanying note to subsection 143(6) directs the reader to Part 31 of the Tel Act,
which provides for the recovery of pecuniary penalties in relation to breaches of civil penalty
provisions.
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Item 42 - After section 143
Item 42 introduces a new section 143AA and a new Division 2A into Part 8 of the Tel Act.
New Division 2A comprises new sections 143A to 143H and existing sections 144 to 151 of
Part 8 (noting that these sections are also amended, see items 43 to 51 below). Again, a
number of existing statutory exemptions are retained and adjusted in line with the
Government's commitment to grandfather existing arrangements.
Proposed Section 143AA - Judicial enforcement of prohibitions
Currently, contraventions of the prohibition in section 143 are criminal offences and can be
enforced by the Minister, the ACCC or the ACMA. Third parties currently cannot take
similar enforcement action.
As a result of proposed amendments in this Bill, the prohibitions in existing section 143 (as
amended) and new section 142C would be civil penalty provisions (see subsection 142C(5)
and subsection 143(6)). The ACMA's ability to take enforcement action would also be
limited (see items 17-21 in Schedule 1 above, and items 79-80 and 81-83 of in Schedule 2
below).
Proposed section 143AA would enable enforcement action to be taken by affected private
parties who are carriers or CSPs, as well as by the ACCC.
If a person has contravened subsection 142C(2) or 143(2) (or the related ancillary
contraventions in subsections 142C(4) or 143(5)), proposed section 143AA would enable the
Federal Court, upon application from the ACCC, or a carrier or a CSP, to make orders
directing the person to comply with the subsection or to compensate any other person (who
may be the applicant) who has suffered loss or damage as a result of the contravention. The
Federal Court may make any other order that it thinks appropriate and may discharge or vary
an order granted under section 143AA.
Proposed Division 2A - Exemptions
Proposed Section 143A - Class exemptions
Section 143A provides powers to the ACCC to determine class exemptions from section
142C or section 143 through a legislative instrument (subsections 143A(1) and (2)). Any
person who is a member of a class set out in an ACCC class exemption determination would
not be required to comply with the wholesale-only obligations or functional separation
requirements. However, the person would be subject to certain conditions and limitations
(subsection 143A(3)).
For a class exemption to be effective, the ACCC would first specify the relevant class of
persons to which the class exemption determination would apply. A person who is included
in that class would then notify the ACCC, in writing, that it elects to be bound by the class
exemption determination (paragraphs 143A(1)(a)-(c) and 143A(2)(a)-(c)).
A person can only benefit from a class exemption if that person (either alone or together with
any other persons who are members of the same associated group) supplies fixed-line
carriage services to no more than 2,000 residential customers. Regulations could allow the
limit of 2,000 to be raised up to 12,000 (paragraphs 143A(1)(d)-(e) and 143A(2)(d)(e)).
A class exemption determination would be subject to the following conditions and limitations
(subsection 143A(3)):
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the person must ensure that a designated carriage service is available for supply to its
current or prospective wholesale customers (see proposed section 142BD, noted at item
33 above) (paragraph 143A(3)(a));
the person must not discriminate between its current or prospective wholesale customers
in relation to the supply of that service (paragraph 143A(3)(b));
the person must not discriminate in favour of itself in relation to the supply of that service
(paragraph 143A(3)(c));
the person must not discriminate between its current or prospective wholesale customers
when carrying on activities related to, or preparatory to, the supply of eligible services
(paragraph 143A(3)(d));
the person must not discriminate in favour of itself when carrying out activities related to,
or preparatory to, the supply of eligible service (paragraph 143A(3)(e)); and
such other conditions and limitations as are specified by the ACCC in the determination
(paragraph 143A(3)(f)).
Subsection 143A(4) provides an exception to the rule in paragraph 143A(3)(b) prohibiting
discrimination between the person's current or prospective wholesale customers. The person
could discriminate against a wholesale customer if it has reasonable grounds to believe that
the wholesale customer would fail, to a material extent, to comply with the terms and
conditions on which the person supplies designated carriage services.
Subsection 143A(5) gives some examples of grounds for such a belief, including where there
is evidence that the wholesale customer is not creditworthy, or has repeatedly failed to
comply with terms and conditions on which the person supplied eligible services.
The non-discrimination obligations that apply to persons who benefit from a class exemption
by the ACCC, and the limited exception to those obligations, largely mirror arrangements
that apply to NBN Co under sections 152AXC and 152AXD of the CCA.
Subsubsection 143A(6) limits the kinds of additional conditions or limitations that the ACCC
could specify in a class exemption determination under paragraph 143A(3)(f), so the ACCC
would not be able to specify conditions or limitation of a kind specified by the Minister, by
legislative instrument, under subsection 143A(7). This is a reserve power that could be used,
for example, in response to changes in market circumstances, or to respond to specific
compliance issues.
Subsection 143A(8) provides that, in deciding whether to make a class exemption
determination, the ACCC must have regard to whether the determination promotes the long-
term interests of end-users of carriage services or of services supplied by means of carriage
services. It must also have regard to any matters specified by the Minister in a determination
under subsection 143A(9) or such other matters (if any) as it considers relevant.
In accordance with new section 142BA (see item 33 above), whether a class exemption
determination promotes the long-term interests of end-users must be determined in
accordance with Part XIC of the CCA. Under section 152AB of the CCA, in determining
whether a particular thing promotes the long-term interests of end-users, the ACCC is
required to have regard to a range of factors, including the extent to which the thing is likely
to result in promoting competition in markets for listed services, achieving any-to-any
connectivity and encouraging the economically efficient use of, and investment in,
infrastructure.
Subsection 143A(10) defines associated group for the purposes of section 143A. It provides
that a person who is in a position to exercise control of a local access line or a
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telecommunications network, and who has one or more associates, is taken to belong to an
associated group. The associated group consists of the person and those associates.
Proposed section 143A reflects concerns that the wholesale-only obligations and functional
separation requirements may be unduly onerous on very small networks and pose a barrier to
new market entrants. The section therefore provides a limited exemption for small networks
that allows them to be vertically integrated (outside the new functional separation
undertakings process in Part 8), on the basis that this will promote investment and entry by
small providers. However, the Government wishes to ensure that such networks do not
establish vertically-integrated local access bottlenecks that may impede long-term
competition. The requirement to supply a Layer 2 bitstream service (or similar service as
specified by the ACCC) (see discussion in relation to item 33) will ensure that the network
provider will not have an effective monopoly in providing retail services to end-users. The
requirements not to discriminate between wholesale customers, or in favour of the network
provider itself, ensure that the network operator cannot have an unfair advantage over its
wholesale customers.
Proposed Section 143B - Compliance with conditions and limitations of exemption
determinations
This section requires a person, on or after 1 July 2018, to comply with the conditions or
limitations of a class exemption determination made under subsection 143A(1) or subsection
143A(2). It also sets out ancillary contraventions and provides that breaches of the
requirements are civil penalty provisions. The accompanying note directs the reader to Part
31 of the Tel Act, which provides for the recovery of pecuniary penalties in relation to
breaches of civil penalty provisions.
Proposed Section 143C - Judicial enforcement of conditions and limitations of
exemptions determinations
Section 143C provides that the ACCC, a carrier or a carriage service provider may seek
judicial enforcement of conditions or limitations of class exemption determinations made
under section 143A. The Federal Court may make orders directing a person to comply with a
condition or limitation in a determination, directing a person to compensate any other person
(who may be the applicant) who has suffered loss or damage as a result of the contravention,
and any other order that the Court thinks appropriate. The Federal Court may discharge or
vary an order granted under section 143C.
Proposed Section 143D - Publication of list of persons who have elected to be bound by
exemption determinations
Under new section 143D, the ACCC will be required to publish on its website the names of
the persons who have elected to be bound by a class exemption determination under
subsection 143A(1) or subsection 143A(2) and who have not cancelled the election.
Proposed Section 143E - Exemptions--certain real estate development projects
Currently, the wholesale-only obligation in section 143 does not apply to extensions of
telecommunications networks, where the networks are extended to another area that is being
developed (or will be developed) as another stage of a real estate development project that
was under way before 1 January 2011 (see subsections 156(2) and 156(3)).
The Government understands that a number of real estate development projects that were
under way before 1 January 2011 continue to be developed. It is therefore necessary to
preserve the existing rules that apply to extensions of telecommunications networks in other
stages of these projects.
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Proposed subsection 143E(1) provides for exemptions from both sections 142C and 143 for
such extensions on or after 1 July 2018. The section works together with proposed
amendments to subsection 156(3) (see item 63A below), which would limit the operation of
the current exception to extensions that occur before 1 July 2018.
The Government understands that agreements to install network infrastructure in real estate
development projects can be varied over time (or novated to a new developer). The drafting
of the exemption in subsection 143E(1) is broad enough to cover agreements that have or
have not been varied. In addition to extending the statutory exemption, new section 143E
makes a number of changes.
First, the existing exemption in subsection 156(3) was drafted before Part 20A of the Tel Act
was enacted. It therefore refers to real estate development projects 'within the ordinary
meaning of that expression'. As Part 20A inserted a definition of real estate development
project for the purposes of the Tel Act (see subsection 372Q(5)), this definition will also
apply to new section 143E.
Second, it is possible that some new areas may be developed within the project area of an
existing real estate development project but would not be part of the project that was under
way before 1 January 2011. They would be subject to a different contractual arrangement.
Some such developments may be for multi-unit buildings where it could be expected that
there would be competition to provide network infrastructure. Other developments, however,
could be for very small areas (for example, the subdivision of a single lot). In such cases it
may be more practical for the existing network provider also to service the new area that is
being developed.
Consequently, subsection 143E(2) provides for exemptions for projects specified by the
Minister. Given that the extension could be for a completely new real estate development
project or for a building redevelopment project, the Minister would have the power to specify
both types of projects.
Where one or more individual projects are exempted, the Minister would specify those
projects by notifiable instrument (subsections 143E(3)-(4) and (6)-(7)). Should the Minister
decide to make a class exemption, this would be by legislative instrument (subsections
143E(5) and 143E(8)).
Subsections (4) and (7) state, for the avoidance of doubt, that subsection 13(3) of the
Legislation Act does not apply to the notifiable instruments set out in subsections (3) and (6).
Subsection 13(3) of the Legislation Act provides that notifiable instruments can refer to a
class or class of matters. However, the notifiable instruments that would be made under
subsections 143E(3) and 143E(6) are limited to referring to specific projects. Classes of
projects instead would be dealt with through legislative instruments (subsections (5) and (8)).
The exemption power is intended to be transitional pending the completion of the NBN, so
the Minister's exemption powers would expire when the NBN is declared built and fully
operational under section 48 of the NBN Companies Act (see proposed paragraph
143E(2)(b)).
The Minister can only grant exemptions to the carrier who installed the network
infrastructure on or before 1 January 2011 (paragraph 143E(1)). However, this does not mean
that other carriers would be excluded from tendering for projects within the area of the
original real estate development project. As noted above, new subsection 143E(2) responds to
the possibility that some development projects may be so small that it would be impractical
for any carrier to service them other than the carrier who is operating the network in the area.
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It would be at the Minister's discretion whether or not to accept a request to specify one or
more projects, or classes of projects. The Bill does not propose specific criteria for the
Minister to consider, but it is envisaged that a carrier would need to demonstrate, for
example, that it is unlikely that other carriers would be in a position to undertake the project
and that granting an exemption would provide end-users with faster access to superfast
carriage services.
Proposed subsections 143E(9) and 143E(11) insert a new definition of building
redevelopment project for the purposes of section 143E. The essential characteristics of a
building redevelopment project are that it involves the significant refurbishment or
repurposing of one or more buildings so as to bring into existence one or more building units,
any or all of which are then made available for sale or lease. It is immaterial whether the
project is implemented in stages, or different elements of the projects are carried out by
different persons, or approvals are required under relevant Commonwealth, State or Territory
laws.
This definition is modelled on the definition proposed in new section 360Y in Schedule 3 to
this Bill. The main difference is that section 360Y includes a power for the Minister to
specify conditions for building redevelopment projects. This power is not required under
section 143E given the discretionary nature of the Minister's powers under the section and
the Minister's ability to determine conditions (if any) when specifying projects, or classes of
projects.
Subsection 143E(10) clarifies that, for the purposes of section 143E, the areas occupied by
the buildings are the project area for the building redevelopment project.
Proposed Section 143F - Exemptions--lines installed in close proximity to other lines
Currently, persons who control superfast fixed-line networks that came into existence before
1 January 2011 can install lines to connect customers in close proximity to those networks
and continue to operate the networks on an integrated basis (i.e. not wholesale-only). The
subscriber lines are not subject to section 143 of the Tel Act. Proposed section 143F provides
a similar exemption for lines installed on or after 1 July 2018 to connect customers to two
types of networks.
The first type of network is those that were built between 1 January 2011 and 1 July 2018
(i.e., under the rules that applied under section 143, including any exemptions made under
those rules). Carriers can install lines to connect customers in close proximity to those
networks.
The second type of network is those built under the rules in the CLCs Declaration. Carriers
can also install lines to connect customers in close proximity to those networks. The
exemptions are provided as part of the Government's policy to grandfather existing network
arrangements. The intention is that the networks can continue to be operated under the rules
that apply to them if the network operators so desire.
New subsection 143F(1) exempts from section 142C local access lines that come into
existence on or after 1 July 2018 and that form part of a telecommunications network that
came into existence on or after 1 January 2011, where:
the installation of the lines enables the occupier of the premises to become a customer in
relation to a superfast carriage services supplied using the line; and
the premises are in close proximity to a line that forms part of the infrastructure of the
network as the network stood immediately before 1 July 2018; and
the lines are used to supply superfast carriage services.
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New subsection 143F(2) is similar in effect to subsection 143F(1), however it relates to new
local access lines installed on or after 1 July 2018 which form part of a designated
telecommunications network (within the meaning of the CLCs Declaration) in existence
before 1 July 2018. In order for the lines to be exempted from section 142C:
the new lines must have come in existence for purposes of connecting particular premises
to the network and thereby enabling the occupier of the premises to become a customer in
relation to superfast carriage services supplied using the lines; and
the premises must be in close proximity to a line that forms part of the infrastructure of
the network as the network stood immediately before 1 July 2018.
It is envisaged the close proximity would facilitate the connection of existing network
infrastructure in the street to premises, but not the extension of that network infrastructure to
allow connection in a new location where the network is not already 'in close proximity'.
Close proximity has a meaning affected by proposed new section 162, which empowers the
Minister to determine, by legislative instrument, when premises are, or are not, in close
proximity to a local access line (see item 77 below).
Two legislative notes accompany subsection 143F(1) and subsection 143F(2). Note 1 refers
the reader to proposed new section 156A, which deems certain lines to have come into
existence on or after 1 July 2018 (see item 66 below). Note 2 refers the reader to proposed
new section 158A, which deems certain line extensions to be local access lines in their own
right and to have come into existence on or after 1 July 2018 (see item 72 below).
Proposed Section 143G - Exemptions--networks covered by exemption instruments
New section 143G sets out four specific exemptions from 142C. These relate to local access
lines that come into existence on or after 1 July 2018 and which form part of networks that
are currently subject to a ministerial exemption granted under sections 141A and 144 of the
Tel Act. The new lines will be exempt if they are within the exempt network boundary (as set
out in the named ministerial exemption instrument) and during all times that the ministerial
exemption is in force.
The statutory exemptions are required because the existing exemption instruments only relate
to the wholesale-only requirements in section 143. Without the statutory exemptions, new
lines installed on or after 1 July 2018 within the boundaries of the exempt networks would be
subject to the wholesale-only requirements in section 142C.
The four related ministerial exemption instruments are as follows:
the Telecommunications (Network Exemption--Specified TransACT Very Small Scale
Networks) Instrument 2012 (subsection 143G(1));
the Telecommunications (Network Exemption--Telstra South Brisbane Network)
Instrument 2012 (subsection 143G(2));
the Telecommunications (Network Exemption--TransACT Upgraded VDSL Networks)
Instrument 2012 (subsection 143G(3)); and
the Telecommunications (Network Exemption--Specified Velocity Networks) Instrument
2012 (subsection 143G(4)).
A further ministerial exemption made under sections 141A and 144 of the Tel Act, the
Telecommunications (Network Exemption--Specified TransACT Networks) Instrument 2012,
is no longer operative because the networks that are subject to it are no longer owned by
TransACT but have been sold to NBN Co. Therefore, no further exemption is required under
section 143G for those networks.
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Subsection 143G(5) makes a minor amendment to the Telecommunications Network
Exemption--Specified Velocity Networks) Instrument 2012 for the purposes of paragraph
143G(4)(c). The reader is to assume that paragraph (c) of the definition of Specified Velocity
Network in the instrument were modified by omitting references to specific contracts from
the definition. This amendment is required because the referenced instrument only provides
an exemption for lines that are installed as part of specific real estate development projects, in
relation to which there are specific agreements in place. It is possible that infrastructure for
new developments may be required within the geographic areas of the exempt networks, but
be carried out under contracts different from those under which Telstra is rolling out the
exempt networks. Telstra could install lines to service those developments on an integrated
basis.
Other carriers would be able to tender for any new development projects within the exempt
areas, but as some of the projects may be very small it may not be practical for any carrier
other than the existing network provider to fulfil them. Consequently, section 143G provides
a mechanism to ensure end-users in exempt Velocity estates can receive superfast carriage
services without undue delay.
For the avoidance of doubt, the amendments in subsection 143G(5) would also mean that
Telstra's ability to install lines on an exempt basis would not be affected if its contracts for
the specified Velocity estates were to be varied.
Proposed Section 143H - Exemption--networks marketed as business networks
New subsection 143H(1) exempts from section 142C local access lines which are part of the
infrastructure of a telecommunications network marketed exclusively as a business network
where:
the line is used, or proposed to be used, to supply a superfast carriage service wholly or
principally to residential customers, or prospective residential customers, in Australia;
the use, or proposed use, of the line to supply such service to residential customers is
minor when considered in relation to the use, or proposed use, of all the local access lines
that form part of the network; and
any other conditions specified by the Minister under subsection 143H(2) are specified.
This exemption would ensure service continuity for customers if their status changes from
business to residential. For example, a customer may cease trading as a business at a
particular location but remain there and retain their service as a residential customer. Without
the exemption, the local access line used to serve that residential customer would then be
subject to section 142C and the carrier controlling the line would be required to undertake
structural or functional separation in relation to the line. It may be uneconomical for the
carrier to do this, so it may cease to supply services to the customer without an exemption.
The exemption would only be available for networks that are marketed exclusively as
business networks. A carrier who knowingly markets a network as both a business and
residential network should undertake structural or functional separation for local access lines
used to service residential customers.
'Minor' in paragraph 143H(1)(d) means a very small number. It does not mean 'minority'. It
is envisaged any residential customers would be incidental and ancillary in number. The
ability for the Minister to set additional conditions under proposed subsection 143H(2)
provides a mechanism to further clarify the operation of the exemption and to deal with any
misuse of the exemption, if required.
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Item 43 - At the end of section 144
Item 43 inserts new subsections 144(7) and 144(8) in the Tel Act. Section 144 currently
empowers the Minister to exempt specified networks, specified local access lines or specified
persons from the wholesale-only obligation in subsection 143(2) (refer to subsections 144(1),
(2) or (3), respectively).
As a result of new subsection 144(7), the Minister will no longer have the power to exempt
specified networks, lines or persons from the wholesale-only obligation in subsection 143(2)
on or after 1 July 2018. This responds to recommendation 4 of the 2014 National Broadband
Network Market and Regulatory Report published by the Vertigan panel, which found that
Ministerial exemption powers should be repealed. The report also recommended that
appropriate grandfathering provisions should be developed for networks already subject to
Ministerial exemptions. Subsection 144(8) therefore preserves the Minister's power to vary
existing exemption instruments that are in force immediately after the start of 1 July 2018. By
virtue of the transitional provisions in item 27 of Schedule 1, this would include exemption
instruments made by the Minister under section 141A, which will be repealed as part of the
repealed of Part 7 of the Tel Act.
With the exception of any such exemptions that may be extended, on or after 1 July 2018,
local access lines or networks that are subject to sections 142C or 143 will fall into one of the
following categories:
they will be wholesale-only;
they will be functionally separated under the CLCs Declaration or in accordance with a
functional separation undertaking (see item 51 Schedule 2 to this Bill); or
they will be exempt from the obligations as a result of a class exemption determination
made by the ACCC or the application of the statutory exemptions in proposed new
sections 143E to 143F and existing sections 145 to 151.
Item 44 - Subsections 145(1), (3) and (5)
Item 45 - Subsection 146(1)
Item 46 - Subsection 147(1)
Item 47 - Subsection 148(1)
Item 48 - Subsection 149(1)
Item 49 - Subsection 150(1)
Item 50 - Subsection 151(1)
Items 44-50 amend existing exemptions in sections 145-151 of the Tel Act. These sections
currently provide that the wholesale-only obligation in subsection 143(2) does not apply to
the supply of specific types of services to transport authorities, electricity supply bodies, gas
supply bodies, water supply bodies, sewerage services bodies, storm water drainage services
bodies and State or Territory road authorities. Services that are supplied to these
organisations must be for the sole use of the organisation to carry communications necessary
or desirable for managing the supply of their services, the workings of aviation services or the
management or control of road traffic.
Items 44-50 makes consequential changes to the relevant subsections to include references to
new subsection 142C(2). Consequently, the exemptions will apply both to networks subject
to subsection 143(2) and local access lines subject to subsection 142C(2). These changes are
again consistent with the Government's commitment to grandfather existing arrangements.
A local access line can be used to supply services to more than one end-user, so a single line
could, for example, be used to supply a superfast carriage service to a residential end-user
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and to electricity supply, gas supply, water supply and sewerage services bodies. In these
circumstances, the line would not be exempt from subsection 143(2) or 142C(2) in relation to
the residential end-user.
Item 51 - Before Division 3 of Part 8
Item 51 inserts two new Divisions into Part 8 of the Tel Act.
Division 2B will establish a process for persons who exercise control of networks or local
access lines that are subject to the wholesale-only obligations in Part 8 to seek authorisation
from the ACCC to operate on a functionally separated, rather than structurally separated,
basis. The mechanism for this is a functional separation undertaking that meets certain
specified requirements. Division 2B sets out the process for the ACCC's consideration of
undertakings, including the criteria for accepting undertaking and public consultation
requirements. The new Division also establishes processes to vary or revoke a functional
separation undertaking and compliance and enforcement provisions.
Division 2C will establish non-discrimination rules applying to:
persons supplying eligible services on a wholesale-only basis; and
persons supplying eligible services on a functionally separated basis.
Proposed Division 2B - Functional separation undertakings
There are two types of functional separation undertaking that can be submitted to the ACCC
- a standard functional separation undertaking, given to the ACCC by a single corporation,
and a joint functional separation undertaking given to the ACCC by two or more
corporations. Standard functional separation undertakings are established by section 151A
and joint functional separation undertakings are established by section 151C.
Division 2B also empowers the ACCC to make deemed standard functional separation
undertakings for specified classes of corporations under section 151B.
Proposed Section 151A - Standard functional separation undertaking
Proposed section 151A is one of the key provisions in Division 2B. It provides that a person
(who is a corporation) can give a functional separation undertaking to the ACCC (subsection
151A(1)) and it sets out what that undertaking must contain (subsection 151A(2)).
Specifically, a standard functional separation undertaking must provide for the following
matters:
arrangements for separate wholesale and retail business units, workers, accounts and
operational support, business and communications systems (paragraphs (2)(a), (2)(b),
(2)(d) and (2)(e));
transparency of dealings between a person's wholesale and retail business units
(paragraph (2)(c));
publication of standard terms and conditions of supply of local access lines services, and
supply on request at those terms and conditions (paragraphs (2)(f) and (2)(g));
confidentiality of information supplied to the wholesale or retail business units
(paragraphs (2)(h)-(2)(k)); and
a standard interface for dealings between the wholesale business unit and wholesale
customers and between the wholesale business unit and the person's own retail business
unit (paragraph (2)(l)); and
any other provisions specified in a determination made by the Minister under subsection
151A(14) (paragraph (1)(m)).
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A standard functional separation undertaking must not contain provisions of a kind specified
in a determination by the Minister under subsection 151A(15) (paragraph 151A(2)(n)). This
is a reserve power that could be used to deal with circumstances that arise (see below).
These are key aspects of functional separation. Separation aims to limit the ability and
incentive of an integrated corporation to discriminate in favour of its own retail operations
relative to those of other access seekers. Separation of business units, workers, systems and
accounts, and appropriate confidentiality arrangements, keep wholesale and retail activities
separate and limit an integrated organisation's ability to favour itself. They are intended to
maximise equal treatment of competitors who require access to the network, thereby
supporting fairer and more effective retail competition on bottleneck networks.
The non-discrimination obligations in Division 2C further limit a corporation's ability to
favour its own retail operations and therefore support standard functional separation
undertakings (see also the legislative note accompanying subsection 151A(2)).While the
majority of the matters set out in subsection 151A(2) must be implemented by the person
giving the undertaking, flexibility is provided in relation to the extent to which two matters
can be implemented - separation of workers for the wholesale and retail business units and
separation of systems and accounts. A person giving a standard functional separation
undertaking to the ACCC must specify in the undertaking the extent to which these will be
separated. Subsection 151A(3) clarifies that 'extent' may be a nil extent. A person can
therefore propose limited or no separation in relation to these matters, for example, because
of the likely costs of implementing separation.
Although the undertaking process gives flexibility to a person to develop its functional
separation arrangements in these two respects, the ACCC will need to determine whether the
proposal as a whole promotes the long-term interests of end-users (see proposed new section
151J below).
Subsection 151A(4) clarifies that the undertaking must be in a form approved in writing by
the ACCC, and be accompanied by such information as is reasonably likely to assist the
ACCC in deciding whether to accept or reject the undertaking. These requirements will
streamline the ACCC's consideration of an undertaking. Subsection 151A(4) also provides
that the undertaking must be accompanied by the fee (if any) specified in, or determined in
accordance with, a determination by the ACCC under subsection 151A(16)). It is envisaged
that any fee payable would provide for the recovery of the ACCC's costs in considering an
undertaking, and the ACCC's costs would therefore be reflected in the amount of any fee set
or methodology for ascertaining the fee. Subsection 151A(17) is intended to ensure that the
fee is not a tax by providing that the fee must not be such as to amount to taxation.
Proposed section 151G (below) requires the ACCC to consult publicly on a functional
separation undertaking before accepting or rejecting it.
Subsections 151A(5) provides that an undertaking must include an expiry time. The expiry
time can be described by reference to the time the undertaking comes into force or the
undertaking can include a specific date (subsections 151A(6)-(7)), but it must not be more
than ten years after the undertaking comes into force (subsection 151A(8)). The period of ten
years is seen as providing sufficient commercial certainty for network operators who give
undertakings.
Prior to the expiry of the undertaking, the person will need either to renew the undertaking
(as set out in proposed new section 151M below) or take steps to be able to comply with the
wholesale-only obligations in Part 8 of the Tel Act.
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Subsection 151A(9) provides for fundamental provisions (see the definition noted at item 26
above). The undertaking must state that the provisions of the undertaking relating to the
requirements to maintain separate business units (paragraphs 151A(2)(a) and (b)),
transparency of supply between the units and of terms and conditions of supply (paragraphs
151A(2)(c) and (f)), supply on request of services on standard terms (paragraph 151A(2)(g))
and confidentiality arrangements (151A(2)(h)-(k)). The undertaking can also identify other
provisions of the undertaking as a fundamental provisions. As noted at item 26 above, breach
of a fundamental provision may be grounds for the ACCC to revoke an undertaking (see
proposed new section 151W below).
Under subsections 151A(10) and (11), the undertaking must provide that the person giving
the undertaking will give the ACCC periodic reports about its compliance with the
undertaking and plans setting out the actions the person will take to ensure compliance with
the undertaking. These requirements ensure that the ACCC will have adequate information
available to it to evaluate compliance with an undertaking.
Subsection 151A(12) provides that the ACCC may perform functions or exercise powers
conferred on it by the undertaking. The provision provides certainty that, if it is envisaged
that the ACCC may perform a particular role by the person giving the undertaking, then the
ACCC would not be acting beyond its power if it performs that role. For example, an
undertaking may provide for the ACCC to review expenditure and pricing arrangements and,
if required, change prices. The ACCC would not normally have the power to do this unless it
declared the specific service being supplied in accordance with Part XIC of the CCA.
Subsections 151A(13)-(17) provide the powers for determinations that may be made in
relation to a standard functional separation undertaking. Specifically:
the ACCC can determine what kinds of information may be shared between a person's
wholesale and retail business units (subsection 151A(13));
the Minister may determine additional provisions that must be included in an undertaking
or kinds of provisions that must not be included in an undertaking (subsections 151A(14)
and (15)); and
the ACCC may determine a fee, or method for ascertaining a fee, that must accompany an
undertaking (subsections 151A(16) and (17)).
All these determinations would be legislative instruments and, therefore, subject to
Parliamentary scrutiny, disallowance, and sunsetting in accordance with the Legislation Act.
The Minister's powers under subsections 151A(14) and (15) provide flexibility to deal with
market developments. They could be used to add to or expand the requirements at paragraphs
151A(2)(a)-(2)(n), but not to remove them. Two theoretical examples are:
it becomes clear that a particular method of interconnection is required for more effective
functional separation and competition - the Minister can therefore make a determination
that a standard functional separation undertaking must include this method; and
it becomes apparent that certain business arrangements are impeding competition or the
effectiveness of functional separation arrangements - the Minister can therefore make a
determination to prohibit such arrangements from being included in undertakings.
As noted in the discussion on items 6 and 34-41, the CLCs Declaration, subsection 142C(2)
or subsection 143(2) will not apply to local access lines if a functional separation undertaking
is in force in accordance with section 151A (or section 151C). The requirements of a standard
functional separation undertaking apply to the supply of local access line services (that is,
eligible services supplied using local access lines, see the definition of local access line
99
service in section 142A), regardless of when the local access line used to supply the services
came into existence. This includes local access lines that came into existence before
1 January 2011 (and are not subject to any of the CLCs Declaration, subsection 142C(2) or
subsection 143(2)) controlled by the corporation.
In effect, therefore, a standard functional separation undertaking must cover the use of all
local access lines that a person controls servicing residential customers. This ensures that a
single set of statutory separation and non-discrimination obligations applies to those lines.
Proposed Section 151B - Deemed standard functional separation undertaking
Proposed section 151B sets out a process for the ACCC to make a deemed standard
functional separation undertaking. In effect, this would be a model undertaking that persons
could elect to be bound by.
The ACCC could make a determination which specifies a class of corporations. If a
corporation belongs to that class, provides a written notice to the ACCC notifying it that it
elects to be bound by the determination, and has not later cancelled that election (or the
ACCC has not itself revoked the election), then effectively the Tel Act has effect as if the
corporation had given the ACCC a standard functional separation undertaking in the terms set
out in the determination and the ACCC had accepted it (see paragraphs 151B(1)(a)-f)).
There are two possible times when a person's deemed functional separation undertaking
would come into force (see paragraphs 151B(1)(g)-(h)). If the ACCC has made a
determination before 1 July 2018 and the person elects to comply with it before that date,
then the deemed undertaking would come into force on 1 July 2018. This is consistent with
the operation of proposed new section 142C. If a person elects to comply with the
determination after 1 July 2018, then the undertaking would come into force when the
election is given to the ACCC.
This provision will reduce compliance costs for smaller providers and for the ACCC itself. If
a number of persons elect to be bound by the deemed undertaking, they will not have to go to
the expense of preparing undertakings themselves, and the ACCC will also not have to
consider several separate undertakings. Importantly, the choice of whether or not to be bound
by the deemed undertaking will be left to each individual corporation.
Subsection 151B(1A) specifies that a functional separation undertaking covered by an ACCC
determination must comply with paragraphs 151A(2)(a) to (m) and subsections 151A(9), (10)
and (11). These are the key provisions setting out what a standard functional separation
undertaking must contain. This means that the ACCC's deemed standard functional
separation undertaking must cover all of those matters.
Subsection 151B(1B) provides that the functional separation undertaking must not contain a
provision of a kind specified in a determination by the Minister under subsection 151A(15).
Subsection 151A(15) allows the Minister, by legislative instrument, to determine that certain
kinds of provisions must not be contained in a standard functional separation undertakings.
Subsection 151B(1B) makes it clear that, if such a legislative instrument is made, it affects
functional separation undertakings covered by an ACCC determination.
Subsection 151B(2) sets out specific provisions in Division 2B that do not apply to a deemed
standard functional separation undertaking. These are:
particular requirements about form and information that must accompany a standard
functional separation undertaking, and provisions about expiry time (subsections 151A(4)
to (8));
variation of the expiry time of a functional separation undertaking (section 151N);
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duration of a functional separation undertaking (section 151P);
variation of a functional separation undertaking that is in force (section 151Q); and
revocation of a functional separation undertaking (section 151W).
As a deemed undertaking would be set out in a legislative instrument, the above listed
provisions cannot apply. Under the Legislation Act, the instrument itself can be varied or
revoked and will be subject to sunsetting. Requirements about form and required information
are also not applicable as the ACCC itself would make the determination giving effect to the
deemed undertaking.
Subsections 151B(3) and (4) clarify that a person who has elected to be bound by a deemed
undertaking can still give the ACCC its own proposed functional separation undertaking,
either alone or with one or more other persons. Should this occur, the person is taken to have
cancelled the election immediately before the other undertaking comes into force.
Subsections 151B(5) and (6) require the ACCC to consult on a draft determination prior to
making the determination under subsection 151B(1)). The ACCC has to publish the draft
instrument on its website and invite persons to make submissions about the draft
determination. The time limit for consultation must not be shorter than 15 business days after
the ACCC published the draft determination.
These obligations are intended to provide certainty that consultation will occur and how it
will occur, and they go beyond the requirements in section 17 of the Legislation Act.
Subsection 151B(7) sets out the circumstances in which the ACCC can revoke a person's
election to be bound by a deemed standard functional separation undertaking, which are the
same as the grounds for revoking a standard functional separation undertaking. These are:
where a person has breached a fundamental provision of the undertaking;
where the person has contravened the non-discrimination obligations in sections 151ZF or
151ZG; and
where the ACCC is satisfied that the person has an unsatisfactory compliance record in
relation to the undertaking.
Proposed Section 151C - Joint functional separation undertaking
Proposed section 151C is another key provision in Division 2B. It provides that two or more
persons (who are corporations) may give to the ACCC a joint functional separation
undertaking (subsection 151C(1)) and it sets out what the undertaking must provide
(subsection 151C(2)). .
The provisions that a joint functional separation undertaking must contain are the same as
those for standard functional separation undertakings, with differences stemming from the
joint nature of the undertaking, most notably that different corporations (rather than different
units within a single corporation) can take on the wholesale or retail functions for the
business.
It is not uncommon in the market for a number of different corporations to be part of a
broader corporate structure. Under this structure, a single entity can control, for example, one
or more network companies and one or more retail companies. It is also possible for a single
corporation to split into two separate corporations, each taking on the wholesale or retail
functions.
Therefore, under subsection 151C(2), the undertaking must identify one or more corporations
(but not all) as the wholesaler or wholesalers, and the remaining corporations as the retailers
for the purposes of the undertaking (paragraph 151C(2)(a)). It must also provide that the
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wholesaler(s) will only supply local access line services to wholesale customers, and the
retailer(s) will only supply local access line services to retail customers (paragraphs
151C(1)(b) and (c)). Each corporation must also have different directors (paragraphs
151C(2)(h) and (i)).
Under paragraph 151C(2)(o), the undertaking must provide that a retailer must not disclose to
a wholesaler information provided to it by a carrier or carriage service provider. This
excludes information provided by a wholesaler (as the wholesaler itself will be a carrier or a
CSP) or information of a kind specified in a determination made by the ACCC under
subsection 151C(15).
Paragraph 151C(2)(p) requires the undertaking to provide that a wholesaler will ensure it
does not obtain, access or use information provided to a retailer by a carrier or a carriage
service provider. This requirement is subject to the same exclusions as set out in paragraph
151C(2)(o).
As with standard functional separation undertakings, the Minister may, by legislative
instrument, determine additional provisions that must be included in a joint functional
separation undertaking or kinds of provisions that must not be included in a joint undertaking
(paragraphs 151C(2)(r) and (s), subsections 151C(16) and (17)).
Like standard functional separation undertakings, there is flexibility in relation to separation
of operational support, business and communications systems and accounts. A joint
functional separation undertaking must specify the extent to which systems and accounts will
be different for wholesalers and retailers (including to a nil extent) (paragraphs 151C(2)(j)).
The undertaking must specify the extent to which workers engaged by a wholesaler or retailer
will perform their duties exclusively for the wholesaler or retailer, respectively (including to a
nil extent) (paragraphs 151C(2)(d) and (e)). The undertaking must also specify the extent to
which workers who are engaged by persons other than the wholesaler, but perform duties for
it, are different from the workers who are engaged by persons other than the wholesaler but
perform duties for the retailer, and vice versa (paragraphs 151C(2)(f) and (g)).
These provisions are intended to provide some flexibility to the persons giving the
undertaking. Workers could, for example, work exclusively for a single corporation, or
perform some duties for both. If they perform duties for both, it is envisaged that the joint
undertaking would identify the specific duties and any actions that would be taken to ensure
those workers do not have access to information that must not be shared between the
corporations. It is a matter for the ACCC whether it accepts such arrangements having regard
to the long-term interests of end-users test.
Joint functional separation undertakings are subject to similar requirements about form,
expiry time and fundamental provisions as standard functional separation undertakings
(subsections 151C(4)-(9)). Fundamental provisions for a joint functional separation
undertaking include those that require separate corporations to be identified as wholesalers
and retailers (paragraph 151C(2)(a)), limit the wholesaler to wholesale supply and the retailer
to retail supply (paragraphs 151C(2)(2)(b) and (c)), require separate directors (paragraphs
151C(2)(h) and (i)), require transparency of terms and conditions and supply on those terms
and conditions on request (paragraphs (2)(k) and (2)(l)) and require confidentiality of
information (paragraphs 151C(2)(m), (n), (o) and (p)).
Proposed section 151G (below) requires the ACCC to consult publicly on a functional
separation undertaking before accepting or rejecting it.
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Subsections 151C(10), (11), (12) and (13) require the joint undertaking to provide that a
wholesaler or a retailer will give the ACCC periodic reports about the parties' compliance
with the undertaking and plans setting out actions they will take to ensure compliance with
the undertaking. These requirements ensure that the ACCC will have adequate information
available to it to evaluate compliance with an undertaking.
Subsection 151C(14) provides that the ACCC may perform functions or exercise powers
conferred on it by the joint undertaking. As noted in the context of section 151A, this
provides certainty that, if it is envisaged that the ACCC may perform a particular role by the
person giving the undertaking, then the ACCC would not be acting beyond its power if it
performs that role.
Subsections 151C(15)-(19) empower the ACCC and the Minister to make various
determinations for the purposes of a joint undertaking. These mirror the ACCC's and
Minister's powers under subsections 151A(13)-(17) in respect of standard undertakings.
These determinations would be legislative instruments and subject to Parliamentary scrutiny,
disallowance, and sunsetting in accordance with the Legislation Act.
Finally, as is the case with standard functional separation undertakings under section 151A,
the requirements of a joint functional separation undertaking apply generally to the supply of
local access line services to residential customers (that is, eligible services supplied using
local access lines, see the definition of local access line service in section 142A), regardless
of when the local access line used to supply the services came into existence. That is, if a
corporation controls local access lines that came into existence before 1 January 2011 (and
are not subject to any of the CLCs Declaration, subsection 142C(2) or subsection 143(2)),
then a functional separation undertaking must apply to the use of those lines.
Proposed Section 151D - Further information about undertaking
Proposed section 151D provides that the ACCC may request further information about an
undertaking after it has been given to the ACCC (subsections 151D(1) and (2)). This ensures
the ACCC can obtain necessary information to make a fully-informed assessment of the
undertaking. For example, an undertaking may be provided with insufficient information
about one of the matters in subsections 151A(2) or 151C(2), or contain information that is
unclear or ambiguous. The ACCC should be able to seek further information or clarification
in such circumstances.
The ACCC may refuse to consider an undertaking until a person gives it the information it
has requested (subsection 151D(3)). It may withdraw its request for further information in
whole or in part (subsection 151D(4)).
Proposed Section 151E - Withdrawal of undertaking that is under consideration
This section would provide that a person or persons may withdraw a functional separation
undertaking given to the ACCC before the ACCC makes a decision whether to accept or
reject the undertaking (subsections 151E(1) and (2)). Corporations may change their business
strategies, and decide that an undertaking is no longer required as a result, and this clause
provides flexibility to deal with such situations. However, the person or persons may give a
new undertaking to the ACCC (subsection 151E(3)).
The section would also provide that, if a person has paid a fee to the ACCC when submitting
the undertaking (in accordance with paragraph 151A(4)(c) or 151C(4)(c)), the ACCC, at its
discretion, may refund the whole or a part of the fee (subsection 151E(4)). The reason for a
partial refund is that the fee is intended to recover the ACCC's costs of assessing the
undertaking. At the time the undertaking is withdrawn, the ACCC may already have incurred
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costs, and it should therefore be entitled to recover some of those costs. As it is a
discretionary matter for the ACCC to refund a fee, there is no requirement for the ACCC to
provide the person with substantiation for the amount of refund (if any).
Proposed Section 151F - ACCC to accept or reject functional separation undertaking
Proposed section 151F requires the ACCC to make a decision to accept or reject a functional
separation undertaking, after considering the undertaking (subsections 151F(1) and (2)) and
sets out the timeframes for doing so (subsections 151F(5)-(8)).
The ACCC must either accept or reject the undertaking by written notice to the person or
persons who gave the undertaking. If it decides to reject the undertaking, it must set out
reasons why it has rejected the undertaking (subsections 151F(3) and (4)).
The ACCC must take all reasonable steps to make a decision about the undertaking within
three months of receiving it (subsection 151F(5)). Under subsection 151F(7), the ACCC may
extend that initial 3-month period for a further period of up to three months. The ACCC may
do so by written notice to the person or persons who gave the undertaking and must include
in the notice a statement explaining why the ACCC was unable to make a decision in the
initial 3-month period. The ACCC must publish a copy of the notice on its website
(subsection 151F(8)).
Under subsection 151F(6), the ACCC may 'stop the clock' in the initial 3-month period in the
following circumstances:
if the ACCC has requested a variation to a functional separation undertaking under
consideration (in accordance with section 151K) and no varied undertaking is given to the
ACCC in response - any day in the period specified in the variation notice (paragraph
151F(6)(a)); or
if the ACCC has requested a variation to a functional separation undertaking under
consideration (in accordance with proposed new section 151K) and a varied undertaking
is given in response - any day in the period from the date the ACCC gave the variation
notice to the date the public consultation period for the draft variation ends (paragraphs
151F(6)(b))or
when the ACCC is consulting on a draft undertaking (in accordance with proposed new
section 151G) - any day in the period from the date the ACCC published the draft
undertaking to the end of the time period it specified for consultation (paragraph
151F(6)(c)); or
when the ACCC has sought further information on an undertaking (in accordance with
proposed new section 151D) - any day during any part of which the request, or any part
of the request, is unfulfilled.
These provisions ensure that the ACCC will reach a decision within a clear and reasonable
timeframe, while also providing it with flexibility to extend the timeframe, in a limited way,
or suspend the timeframe in predictable circumstances. The provisions thereby deliver greater
certainty to the person giving the undertaking that it can expect a quick decision.
Section 151G - Consultation - Acceptance or rejection of undertaking
Proposed section 151G provides that before making a decision to accept or reject a functional
separation undertaking, the ACCC must publish the draft undertaking on its website, invite
persons to make submissions and consider any submissions received in response within the
time limit specified (subsections 151G(1) and (2)). The consultation period must not be
shorter than 15 business days after the ACCC has published the undertaking on its website
(subsection 151G(3)).
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Proposed Section 151H - Serial undertakings
Proposed new section 151H provides a mechanism for the ACCC to refuse to consider serial
functional separation undertakings. A serial undertaking is essentially an undertaking that
contains provisions that are materially similar to those in a previous undertaking given to the
ACCC, and which the ACCC rejected (subsections 151H(1) and (2)). If a person gives the
ACCC a serial undertaking and the ACCC refuses to consider it, the ACCC must refund the
fee (if any) that was paid (subsection 151H(3)).
This provision is intended to ensure that the ACCC does not have to devote time and
resources to considering a functional separation undertaking that it has effectively considered
before and rejected, and that is likely to be rejected in its slightly varied form.
Proposed Section 151J - Criteria for accepting functional separation undertaking
Proposed new section 151J establishes criteria the ACCC must have regard to in deciding
whether to accept an undertaking. Under subsection 151J(2), the ACCC must have regard to:
whether the undertaking promotes the long-term interests of end-users of carriage
services or of services supplied by means of carriage services; and
any matters specified in a determination made by the Minister under subsection 151H(3)
and in force at the time the undertaking was given; and
any such other matters as the ACCC considers relevant.
In accordance with proposed new section 142BA (see item 33 above) whether an undertaking
promotes the long-term interests of end-users is to be determined in the same manner as it is
determined for the purposes of Part XIC of the CCA.
The purpose of proposed subsection 151J(3), which empowers the Minister to determine, by
legislative instrument, additional matters for the ACCC to consider, is to provide scope to
provide additional guidance to the ACCC, if required. The undertaking provisions are new,
and it is possible that the Minister or the ACCC may identify that some matters are important
in deciding whether to accept an undertaking, but they cannot be considered because they are
not encompassed by the long-term interests of end-users test as used under Part XIC of the
CCA. In such a case, the Minister could make a determination to specify the additional
matters.
As a Ministerial determination would be a legislative instrument, it would be subject to the
normal consultation, publication, disallowance and sunsetting requirements that apply to such
instruments.
Proposed Section 151K - Variation of functional separation undertaking that is under
consideration
Proposed new section 151K enables the ACCC to suggest variations to a functional
separation undertaking under consideration. This provision is designed to avoid a situation
where the ACCC may decide to reject a functional separation undertaking, resulting in the
person or persons who lodged it having to start the process again by lodging a new
undertaking. Instead, it allows the ACCC to propose variations to the undertaking it was
given.
If the ACCC determines that it cannot accept an undertaking, having regard to the matters in
proposed new section 151J, then it can give the person or persons who gave the undertaking a
written notice specifying variations to the undertaking. If the variations are made and the
varied undertaking is given to the ACCC within the time specified in the notice, then the
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ACCC must consider the varied undertaking under section 151F as if it had been given to the
ACCC instead of the original undertaking (subsection 151K(2)).
As noted under proposed section 151F, the period between when the variation notice is given
and the public consultation on the draft variation ends does not count towards the initial 3-
month period during which the ACCC is required to make a decision whether to accept or
reject an undertaking.
The ACCC does not have a duty to consider whether to give a notice to a person under
subsection 151K(2) ( subsection 151K(4)).
Proposed Section 151L - Replacement of functional separation undertaking that is
under consideration
Proposed new section 151L provides a mechanism for the ACCC to deal with a standard
functional separation undertaking that, in its opinion, should instead be a joint functional
separation undertaking. If the ACCC reaches this decision, it may give the person who gave
the standard functional separation undertaking a written notice stating that, if the person
withdraws the undertaking and submits a joint functional separation undertaking in the terms
specified in the notice, then it would be inclined to accept the joint functional separation
undertaking (subsection 151L(2)).
The ACCC must nominate a time period for the persons to provide it with a joint functional
separation undertaking. The ACCC does not have a duty to consider whether to give a notice
under subsection 151L(2)) (subsection 151L(3)).
Proposed Section 151M - Renewal of functional separation undertaking
Proposed new section 151M provides for the renewal of functional separation undertakings
that are in force. At least 12 months before an existing undertaking expires, the person or
persons who gave the ACCC the original undertaking can give the ACCC another
undertaking and specify it is a renewal of the existing undertaking.
If the ACCC receives an undertaking by way of renewal of an existing undertaking under
section 151M, it must then decide whether to accept or reject the undertaking in accordance
with section 151F and the consultation requirements in section 151G would apply to that
undertaking (see the notes accompanying section 151G).
Proposed Section 151N - Variation of expiry time of certain functional separation
undertakings
Proposed new section 151N provides a mechanism for the ACCC to vary the expiry time of
functional separation undertakings in certain circumstances.
If a standard or joint functional separation undertaking is in force and another standard or
joint functional separation is given to the ACCC but the ACCC rejects the other undertaking,
the ACCC can, by written notice to the relevant person or persons, vary the expiry time in the
existing undertaking (subsections 151N(1) and (4)).
The new expiry time for the existing undertaking must be later than the date on which the
subsequent undertaking is rejected, and must not be later than 12 months after the rejection
(subsections 151N(2) and (5)). The new expiry time can fall outside the maximum 10 year-
period in which an undertaking can be in force (subsections 151N(3) and (6)).
Providing a means for the ACCC to vary the expiry time of an existing undertaking gives the
ACCC flexibility to take into account the time it has spent in considering the subsequent
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undertaking and allow sufficient time for the relevant person or persons to take steps to be
able to operate on a wholesale-only basis once the undertaking expires.
Subsection 151N(7) provides that, before making a decision to vary an undertaking under
section 151N, the ACCC must publish the proposed variation on its website, invite persons to
make submissions about the proposed variation and consider any submissions in response
within the time limit specified in the notice. The time limit must not be shorter than 15
business days after the notice is published (subsection 151N(8)).The consultation obligation
in subsection 151N(7) ensures that interested parties have an opportunity to comment on any
proposed variations being set out in the ACCC's notice.
Proposed Section 151P - Duration of functional separation undertaking
Proposed new section 151P specifies when a functional separation undertaking comes into
force and its duration. Different rules apply depending on whether the new undertaking is
given by way of a renewal of another undertaking or not.
Where the new undertaking is not given by way of renewal, there are two scenarios set out in
subsection 151P(2):
If the undertaking is accepted before 1 July 2018, the undertaking either commences on 1
July 2018 (in accordance with the operation of proposed new section 142C) or on such
later date as is specified in the undertaking;
If the undertaking is accepted on or after 1 July 2018, the undertaking comes into force on
the day after it is accepted or such later date as is specified in the undertaking.
In both scenarios, the undertaking continues in force until it expires, unless it is revoked
sooner.
Under subsection 151P(3), where the new undertaking is given by way of renewal, that new
undertaking comes into force immediately after the expiry of the existing undertaking and
continues in force until it expires, unless it is revoked sooner.
Proposed Section 151Q - Variation of functional separation undertaking that is in force
Proposed new section 151Q establishes a mechanism for a person or persons to vary a
functional separation undertaking that is in force.
The person or persons may give the ACCC a variation of the undertaking (subsection
151Q(2)). The undertaking as varied must still comply with the key requirements under
section 151A or section 151C, as applicable (subsections 151Q(3) and (4)). It must address
all the matters set out in subsection 151A(2) or 151C(2), it must be in a form approved in
writing by the ACCC, it must specify an expiry time that cannot be more than ten years after
the undertaking comes into force, it must specify fundamental provisions and provide for the
provision of compliance reports and compliance plans.
The variation must be accompanied by such information as is reasonably likely to assist the
ACCC to decide whether to accept or reject the variation, and must be accompanied by any
fee that is specified in, or ascertained in accordance with, a determination by the ACCC
under subsection 151Q(6)) (subsection 151Q(5)).
Proposed Section 151R - Further information about variation of functional separation
undertaking
After the ACCC has received a variation of a functional separation undertaking from a person
or persons, it may determine that it needs further information to enable it to make a decision
whether to accept or reject the variation. Proposed new section 151R provides for such a
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process. The ACCC can request the person or persons to provide the information (subsection
151R(2)), and may refuse to consider the variation until that information is provided
(subsection 151R(3)). The ACCC can withdraw the request for further information in whole
or in part (subsection 151R(4)).
Similarly to section 151D in relation to new functional separation undertakings, section 151R
provides flexibility for the ACCC to seek further information about proposed variations as
appropriate, rather than requiring proposed variations to be withdrawn or rejected in the
absence of necessary information.
Proposed Section 151S - Withdrawal of variation that is under consideration
Proposed new section 151S provides for a person or persons to withdraw a variation of a
functional separation undertaking that is under consideration by the ACCC at any time before
the ACCC makes a decision to accept or reject the variation (subsections 151S(1) and (2)).
Should it be desired, the person or persons can later give the ACCC a fresh variation
(subsection 151S(3)).
Similarly to section 151E for new functional separation undertakings, section 151S confers
flexibility on the process of varying an undertaking. There could be a number of reasons why
a person may need to withdraw a variation (whether or not that person then intends to submit
a fresh variation). For example, there may be a change of business strategies, or it could
merge with another business, or acquire new assets.
If a variation is withdrawn, the ACCC may refund the whole or a part of any fee that has been
paid in relation to the variation (subsections 151S(4)). As the fee imposed by the ACCC (if
any) is intended to recover its costs of assessing a variation, the ACCC should be able to
retain a percentage of the fee that reflects the costs it incurred until the time the variation was
withdrawn.
Proposed Section 151T - ACCC to accept or reject variation
Proposed new section 151T requires the ACCC to accept or reject a variation of a functional
separation undertaking after considering it (subsections 151T(1) and (2)), and also sets out a
timeframe for doing so (subsections 151T(5)-(8)). Proposed new section 151T operates in a
similar way to proposed new section 151F.
The ACCC must either accept or reject the variation by written notice to the person or
persons who have given the undertaking, and must provide reasons if it rejects the variation
(subsections 151T(3) and (4)).
The ACCC must take all reasonable steps to make a decision about the variation within three
months after receiving the variation (subsection 151T(5)), but can extend the initial 3-month
period for a further period of up to three months subject to the requirements set out in
subsections 151T(7) and (8).
There are certain circumstances in which the ACCC can 'stop the clock' during the initial
three-month period, specifically while the ACCC consults on the draft variation (in
accordance with section 151U) and while it waits for further information on the draft
variation (in accordance with section 151R) (subsection 151T(6)).
Proposed Section 151U - Consultation - acceptance or rejection of variation
As is the case when a person or persons give a functional separation undertaking to the
ACCC (see section 151G above), before the ACCC can accept or reject a variation, the
ACCC must publish the draft variation on its website, invite and consider any submissions on
the draft variation within the time specified (subsections 151U(1) and (2)). The time limit for
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consultation must be at least 15 business days after the notice is published (though it could be
longer) (subsection 151U(3)).
Proposed Section 151V - Criteria for accepting variation
Proposed new section 151V operates in a similar way to section 151J and sets out criteria the
ACCC must have regard to when deciding whether to accept or reject a variation of a
functional separation undertaking. Under subsection 151V(3), the ACCC must have regard
to:
whether the variation promotes the long-term interests of end-users of carriage services or
of services supplied by means of carriage services; and
any matters specified in a determination by the Minister under subsection 151V(3); and
such other matters (if any) as it considers relevant.
In accordance with proposed new section 142BA (see item 33 above) whether a variation of
an undertaking promotes the long-term interests of end-users is to be determined in the same
manner as it is determined for the purposes of Part XIC of the CCA.
A Ministerial determination under subsection 151V(3) would be a legislative instrument. The
Minister's power to determine additional matters for the ACCC to consider provides scope to
identify matters that may be critical to deciding whether to accept or reject a variation , but
are not clearly encompassed by the long-term interests of end-users test.
Proposed Section 151W - Revocation of functional separation undertaking
Proposed new section 151W sets out three situations in which the ACCC could revoke a
standard or joint functional separation undertaking that is in force.
The first situation is if a person (or any of the persons who have a joint undertaking) has
breached a fundamental provision, or the non-discrimination obligations set out in proposed
sections 151ZF and 151ZG (subsections 151W(1) and (6)).
The second situation is if the ACCC is satisfied that a person (or any of the persons who gave
the joint undertaking) has an unsatisfactory compliance record in relation to functional
separation (subsection 151W(2) and (7)). In both situations, the ACCC may revoke the
undertaking by written notice to the person (or each of the persons who gave the joint
undertaking).
The third situation is if a person requests (or all the persons who gave a joint undertaking
request) the ACCC, in writing, to revoke an undertaking (subsection 151W(3) (8)). Following
a request, the ACCC must revoke the undertaking by written notice to the person (or each
person who gave the joint undertaking).
A revocation takes effect at the time specified in the ACCC's notice of revocation, but the
specified time must not be earlier than the time the notice is given and must not be later than
12 months after the notice is given (subsections 151W(4) and (9)). This is to provide
sufficient time for a person or persons to take steps to be able to comply with the wholesale-
only obligations in Part 8. For example, they may have to dispose of either their wholesale or
retail businesses.
In addition, after the ACCC gives a notice of revocation, the undertaking will not apply to
any local access lines that come into existence after the notice is given (subsection 151W(5)
and (10)). This means that, after a revocation notice has been given, the undertaking would
continue to apply only to local access lines that were subject to it before the revocation
notice. Any new local access lines built after the revocation notice has been given would be
subject to the wholesale-only requirements in Part 8 of the Tel Act.
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Subsection 151W(11) sets out matters to which the ACCC must have regard when it revokes
an undertaking. These include:
whether there are arrangements, or arrangements can be made, to maintain the continuity
of supply of superfast carriage services to residential customers using the local access
lines that are subject to the undertaking;
the consequence of the relevant breach or unsatisfactory compliance record;
such other matters (if any) as the ACCC considers relevant.
The intention of subsection (11) is to provide the ACCC with discretion when it chooses to
revoke an undertaking, but also to guide it so that the power is only used when appropriate. It
also ensures that the ACCC does not revoke an undertaking for minor or trivial breaches.
Fundamental provisions, as noted above (refer item 26, proposed sections 151A and 151C
above), provide for basic elements of an undertaking and are critical to the success of the
undertaking. They include separation of wholesale and retail activities, transparency of terms
and conditions, supply on published terms and conditions and appropriate confidentiality
requirements. Should such requirements be breached, it may no longer be possible for the
undertaking to operate effectively, so the ACCC could consider whether revocation would be
appropriate. Similarly, the non-discrimination requirements in sections 151ZF and 151ZG are
fundamental to the effectiveness of functional separation and the promotion of competition.
Should they be breached, the undertaking may be so compromised that revocation would be
appropriate.
Continued non-compliance with an undertaking could also compromise the ongoing
effectiveness of the functional separation arrangements. The ACCC will be able to judge
whether the person's conduct is such that the long-term interests of end-users are no longer
being promoted by the undertaking remaining in force.
The ACCC has discretion whether to revoke an undertaking, and it is also not automatic that
it would revoke an undertaking if a fundamental provision, or the non-discrimination
requirements, have been breached. This is why it is required to consider the consequences of
the breach. A breach that has had serious consequences may preclude the continued effective
operation of the undertaking, so revocation may be appropriate. A breach that has had less
serious consequences may not of itself warrant revocation, particularly if steps are taken to
correct the breach and remediate any harm. In such circumstances, the ACCC has alternative
enforcement options available to it under the Bill, including issuing an infringement notice
(see items 84-87 below) or commencing court proceedings (see sections 151ZD and 151ZE
below in relation to compliance and enforcement of functional separation undertakings, and
section 151ZHA below in relation to judicial enforcement of the non-discrimination rules).
The intention is that the ACCC will weigh up the nature of the breach or continued non-
compliance, the consequences of the conduct for competition and end-users, and then the
consequences of taking revocation action.
Proposed Section 151X - Consultation - revocation of functional separation
undertaking
Before making a decision to revoke an undertaking where there has been a breach or
unsatisfactory compliance, the ACCC must consult with the person or persons who gave the
undertaking. By written notice to the person or persons, the ACCC must advise that it is
proposing to revoke the undertaking, invite them to make submissions about the proposed
revocation and consider any submissions (subsections 151X(1) and (3) for standard and joint
functional separation undertakings, respectively). The timeframe for a person or persons to
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provide submissions, and for the ACCC to consider those submissions, must be at least 15
business days after the notice is given (subsections 151X(2) and (4)).
Section 151X ensures that impacted persons will have the opportunity to comment before a
final decision about revocation is made.
Proposed Section 151Y - Notification that a person is at risk of having an unsatisfactory
compliance record in relation to functional separation
Proposed new section 151Y ensures that the ACCC warns a person or persons that they are at
risk of having an unsatisfactory compliance record in relation to functional separation. The
ACCC delivers the warning through a written notice (subsection 151Y(2)).
The requirement to issue a notice applies in relation to breaches of a functional separation
undertaking (provided the breach occurred when the undertaking was in force), or
contraventions of specific requirements in Part 8 of the Tel Act. Those include: non-
compliance with conditions and limitations of class exemptions determinations (section 143B
above), contraventions of reporting obligations (sections 151ZA and 151ZB below), non-
discrimination obligations (proposed new sections 151ZF, 151ZG, 151ZH below) or the anti-
avoidance provisions in proposed new section 151ZI (below). Such breaches or
contraventions are the only matters that the ACCC can have regard to when determining
whether a person has an unsatisfactory compliance record in relation to functional separation
(see section 142BC at item 33 above)
Subsection 151Y(2) sets out the process to be followed by the ACCC. If an undertaking is in
force, and the ACCC is aware of one or more breaches of the undertaking, or contraventions
of specific requirements in Part 8 of the Tel Act, the ACCC can consider whether those
breaches or contraventions, taken together, amount to an unsatisfactory compliance record. If
the ACCC is satisfied that they do not, but it is satisfied that, if a particular kind of additional
breach or contravention were to take place, the person would have an unsatisfactory
compliance record, then the ACCC must give the person a notice. The notice must state that
the person is at risk of having an unsatisfactory compliance record and inform the person that
this is a ground for revoking the undertaking. Subsection 151Y(3) clarifies that a failure to
comply with subsection 151Y(2) does not affect the validity of a revocation of a functional
separation undertaking. There may be, for example, circumstances where the ACCC
considers that the breaches or contraventions are such that it needs to take urgent action. In
such cases, it may move straight to advising a person of its proposal to revoke the
undertaking as required under section 151X (noted above).
Proposed Section 151Z - Variation of functional separation undertaking following
giving of revocation notice
If the ACCC has given a revocation notice in relation to a functional separation undertaking
under section 151W, it is important that it has powers to ensure that breaches of the
undertaking, or contraventions of specific provisions in Part 8, do not continue following the
time the revocation notice is given and until the revocation takes effect.
As a result, proposed new section 151Z empowers the ACCC to vary a functional separation
undertaking after it has given a revocation notice in relation to that undertaking, and before
the revocation has taken effect. The ACCC would do this by written notice to the person or
persons who gave the undertaking, with the variation taking effect at the time the notice is
given (subsections 151Z(1), (3) and (5)).
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The ACCC's power is limited to variations that specifically address the matter or matters that
constituted the grounds for the revocation of the undertaking under section 151W. A variation
cannot address any other matter (subsections 151Y(2) and (4)).
As a variation under section 151Z may be required to correct breaches or contraventions that
have affected other corporations' participation in the market, it needs to be able to be made,
and come into effect, quickly. As such, the ACCC is not required to consult on a variation
under section 151Z before it is made.
Proposed Section 151ZA - Reporting obligations following giving of revocation notice
Proposed new section 151ZA allows the ACCC to require certain reports or information to be
provided to it after a revocation notice is given under section 151W.
In the period between the time the ACCC gives the revocation notice and the revocation takes
effect, under subsections 151ZA(1) and (2), the ACCC can direct a person or persons to give
to the ACCC:
a report or information about the person's compliance with the undertaking; or
a report or information about action that the person has taken, is taking, or proposes to
take to ensure that it complies with sections 142C or 143 after the revocation takes effect.
The ACCC can direct the person to give such reports or information within the period
specified in the direction.
Section 151ZA enables the ACCC to ensure that persons continue to comply with an
undertaking after the revocation notice is given, and also that they will be able to comply
with the wholesale-only obligations after the revocation takes effect.
Subsection 151ZA(3) requires a person to comply with a direction. subsection 151ZA(4)
prohibits ancillary contraventions of subsection 151ZA(3).
Subsection 151ZA(5) provides that subsections 151ZA(3) and (4) are civil penalty
provisions. The accompanying note reminds the reader that Part 31 of the Tel Act provides
for pecuniary penalties for breaches of civil penalty provisions.
Proposed Section 151ZB - Requirement to notify changes in control of person who gave
undertaking
While a functional separation undertaking is in force, the business structure of the person or
persons who gave a functional separation undertaking may change, and lead to changes to the
persons who control the person or persons who gave the undertaking. Although changes in
control may not necessarily cause competition concerns, in some cases the change in control
could mean some parts of the undertaking are no longer appropriate or effective or a different
person or persons should give an undertaking.
For example, a small company with a functional separation undertaking in force may be
acquired by a larger provider with a complex business organisation including several separate
corporations. The larger provider may not immediately change the small company's business
structure, but choose to operate it as one of its associated corporations for some years. In this
case, the small company's undertaking would remain in force, but would not actually reflect
the overall corporate structure of the organisation. This presents a risk that the small company
may be in breach of its requirements under the undertaking, and should either vary the
undertaking or submit a new one for the larger organisation.
Therefore, proposed new section 151ZB imposes requirements to notify the ACCC of
changes in control. Subsection 151ZB(1) requires a person who gave a functional separation
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undertaking to notify the ACCC of the change in control as soon as practicable and not later
than ten business days after becoming aware of the change in control. The notification
requirement applies both in relation to new controllers and persons who cease to be
controllers. Subsection 151ZB(3) imposes a similar notification obligation on the controller
of the person who gave the functional separation undertaking. If another person becomes
aware that they are in a position to exercise control over the person who gave the
undertaking, that person must notify the ACCC as soon as practicable and not later than ten
business days of becoming aware that it is in a position to exercise control.
The notice must be in a form approved in writing by the ACCC (subsections 151ZB(2) and
(4)).
Proposed subsection 151ZB(5) prohibits ancillary contraventions of the notification
obligations in subsections 151ZB(1) and (3).
Subsection 151ZB(6) provides that subsections 151ZB(1), (3) and (5) are civil penalty
provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act
provides for pecuniary penalties for breaches of civil penalty provisions.
Proposed Section 151ZC - Register of functional separation undertakings
It will be important for the telecommunications sector to have access to all functional
separation undertakings so that potential wholesale customers of a person or persons have
transparency about the terms and conditions of supply and knowledge of the legal obligations
that apply to the supply of services. End-users may also wish to ensure that they will be able
to have a choice of retail provider.
Accordingly, proposed new section 151ZC requires the ACCC to maintain on its website a
register of all functional separation undertakings (including those that are no longer in force)
and all variations of undertakings (paragraphs 151ZC(1)(a) and (c)).
If the ACCC has made a determination under section 151B and there is in place a deemed
functional separation undertaking, the Register must include the name of any corporation that
has notified the ACCC that it elects to be bound by the undertaking and the date that the
undertaking came into force (paragraph 151ZC(1)(b)).
Section 151ZC operates alongside section 143D, which requires the ACCC to publish on its
website a list of all persons who have elected to be bound by a class exemption determination
made under section 143A.
Proposed Section 151ZD - Compliance with functional separation undertaking
Proposed new subsection 151ZD(1) provides that a person must comply with a functional
separation undertaking that is given by that person and that is in force. The accompanying
note refers readers to section 142B, which provides that a functional separation undertaking
can be given by a person either alone or jointly with other persons.
Proposed subsection 151ZD(2) prohibits ancillary contraventions of subsection 151ZD(1).
Subsection 151ZD(3) provides that subsections (1) and (2) are civil penalty provisions, and
the accompanying note reminds the reader that Part 31 of the Tel Act provides for pecuniary
penalties for breaches of civil penalty provisions.
The effect of proposed new section 151ZD is that, if a functional separation undertaking is in
force and a person who gave the undertaking has breached the undertaking, there are a range
of enforcement options available to ensure compliance or address non-compliance. These
include injunctions (Part 30 of the Tel Act) or recovery of pecuniary penalties (Part 31 of the
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Tel Act), formal warnings (see items 18-19, 21-22 above) and infringement notices (see items
84-87 below). The ACCC could also revoke the undertaking as explained above (section
151W).
Proposed new section 151ZE will also be available, as noted below.
Proposed Section 151ZE - Enforcement of functional separation undertaking
Proposed new subsection 151ZE(1) permits the Federal Court to make a range of orders if the
Court is satisfied, on the application of the ACCC, a carrier or a carriage service provider,
that a person has breached a functional separation that is in force. Given the importance of an
undertaking in force under Part 8 and the potential negative impact on competition in the
telecommunications industry if an undertaking is breached, the Federal Court has been given
extensive powers in the range and nature of the orders it may make. These include orders to
comply with the undertaking, dispose of network units, lines, shares or other assets, to pay
the Commonwealth any financial benefit obtained as a result of the breach, or to pay
compensation to any person (who may be the applicant) who suffered loss or damage as a
result of the breach.
The note refers readers to section 142B to remind them that a functional separation
undertaking can be given by a person either alone or jointly with other persons.
Proposed subsection 151ZE(2) provides that, in addition to the Federal Court's powers under
subsection 151ZE(1), the Federal Court has power to make an order directing any person to
do or refrain from doing a specified act (for the purpose of securing compliance with any
other order made under section 151ZE), and the power to make an order containing such
ancillary or consequential provisions as the Court thinks just.
Before making an order under section 151ZE, the Federal Court may direct that notice of the
application be given to such persons as it thinks fit and/or be published in such manner as it
thinks fit (subsection 151ZE(3)).
Subsection 151ZE(4) provides that the Federal Court may rescind, vary, discharge or suspend
the operation of an order made under section 151ZE. This provides it with flexibility to take
account of changes in conduct or circumstances.
Proposed Division 2C - Non-discrimination rules
Proposed new Division 2C sets out non-discrimination rules that apply to persons who use
local access lines to supply eligible services, or carry our related services, on a wholesale-
only basis (in compliance with sections 142C or 143) or on a functionally separated basis (as
set out in Division 2A). The non-discrimination rules in proposed new Division 2C are
broadly based on those already applying to NBN corporations under sections 152AXC and
152AXD of the CCA, but have been tailored to reflect that some persons may operate both
wholesale and retail businesses.
If a person supplies eligible services on a wholesale-only basis, the rules ensure that that
person cannot discriminate between wholesale customers when it supplies eligible services or
carries out related activities. If a person supplies eligible services on a functionally separated
basis, the rules prevent that person from discriminating between wholesale customers, but
also prevent the person from favouring its own retail operations over its wholesale customers.
Proposed Section 151ZF - Eligible services to be supplied on a non-discriminatory
services
Under subsections 151ZF(1), if:
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an eligible service is supplied, or proposed to be supplied, by a person using a local
access line; and
any of the following conditions is satisfied:
o sections 142C applies to the line;
o section 143 applies to the line;
o neither section 142C nor section 143 applies to the line and there is in force a
functional separation undertaking that relates to local access lines services
supplied, or proposed to be supplied using the line;
the person must not discriminate between the person's current or prospective wholesale
customers when supplying eligible services using the line. The prohibition applies on or after
1 July 2018.
There are five scenarios envisaged in subsection 151ZF(1):
1. section 142C applies to the line, and there is not in force a functional separation
undertaking that relates to local access line services supplied, or proposed to be supplied,
using the line;
2. section 143 applies to the line, and there is not in force a functional separation
undertaking that relates to local access line services supplied, or proposed to be supplied,
using the line;
3. section 142C applies to the line, and there is in force a functional separation undertaking
that relates to local access line services supplied, or proposed to be supplied, using the
line;
4. section 143 applies to the line, and there is in force a functional separation undertaking
that relates to local access line services supplied, or proposed to be supplied, using the
line;
5. neither section 142C nor section 143 applies to the line, and there is in force a functional
separation undertaking that relates to local access line services supplied, or proposed to be
supplied, using the line.
The fifth scenario reflects the fact that there may be lines that are not subject to section 143 or
section 142C (because, for example, they came into existence before 1 January 2011).
However, the use of these lines would still be subject to a functional separation undertaking
given by a person in relation to the use of other lines to which section 142C and 143 apply.
As a result, when such an undertaking is in force, the non-discrimination obligations in
section 151ZF will apply to all those lines.
As noted above (see the discussion on items 25 to 32), the term 'eligible service' has the
same meaning as in section 152AL of the CCA. These are listed carriage services or services
that facilitate the supply of listed carriage services, where the service is supplied, or is
capable of being supplied, by a carrier or carriage service provider (whether to itself or to
other persons). 'Listed carriage services' are defined by section 16 of the Tel Act.
The effect of the prohibition in subsection 151ZF(1) is that all eligible services supplied by a
person must be made equally available to all wholesale customers, and those customers
would be able to receive the services on the same terms and conditions of supply. This
promotes equal access to local access lines that are subject to Part 8 of the Tel Act and
precludes a person who controls a local access network from favouring specific customers.
Subsection 151ZF(2) provides an exception to the rule in subsection 151ZF(1). The person
could discriminate against a wholesale customer if the person has reasonable grounds to
believe that the wholesale customer would fail, to a material extent, to comply with the terms
and conditions on which the person supplies eligible services using the line.
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Subsection 151ZF(3) sets out examples of grounds for believing that a wholesale customer
would fail to comply with the terms and conditions of supply. They include:
evidence that the wholesale customer is not creditworthy; and
repeated failures by the wholesale customer to comply with the terms and conditions on
which the person supplied eligible services (whether or not using the line).
This limited exception to the non-discrimination obligation is consistent with that permitted
to NBN corporations (see section 152AXC of the CCA).
Under subsection 151ZF(4), if a person supplies, or proposed to supply, an eligible service to
itself and to wholesale customers, using a local access line, and any of the following
conditions is satisfied:
sections 142C applies to the line;
section 143 applies to the line;
neither section 142C nor section 143 applies to the line and there is in force a functional
separation undertaking that relates to local access lines services supplied, or proposed to
be supplied using the line;
the person must not discriminate in favour of itself in relation to the supply of the eligible
service. The prohibition applies on or after 1 July 2018. Accordingly, the person must supply
the same services to its wholesale customers as it supplies to itself, and on the same terms and
conditions as it supplies those services to itself. Subsection 151ZF(4) ensures that a person
who has both wholesale and retail operations cannot discriminate in favour of those retail
operations, to the detriment of downstream competition.
Subsection 151ZF(5) prohibits ancillary contraventions of subsection 151ZF(1) or (4).
Subsection 151ZF(6) provides that subsections 151ZF(1), (4) and (5) are civil penalty
provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act
provides for pecuniary penalties for breaches of civil penalty provisions.
Proposed Section 151ZG - Eligible services - related activities to be carried out on a
non-discriminatory basis
Proposed new subsection 151ZG(1) sets out the circumstances in which section 151ZG apply
to a person on or after 1 July 2018. A for section 151ZF above, the section applies if:
an eligible service is supplied, or proposed to be supplied, by a person using a local
access line; and
any of the following conditions is satisfied:
o sections 142C applies to the line;
o section 143 applies to the line;
o neither section 142C nor section 143 applies to the line and there is in force a
functional separation undertaking that relates to local access lines services
supplied, or proposed to be supplied using the line.
Subsection 151ZG(2) and (3) contain the substantive rules. Under subsection 151ZG(2), a
person must not discriminate between its current or prospective wholesale customers in
carrying out any of the activities listed at paragraphs 151ZG(2)(a) to (g). The activities
include developing a new eligible service or enhancing an eligible service, extending or
enhancing the capability of a facility or telecommunication network by means of which an
eligible service is, or is to be, supplied, and giving information to service providers about any
of the activities. This provision is modelled on a similar obligation that applies to NBN
corporations (see section 152AXD of the CCA).
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Discrimination between wholesale customers could take a number of forms. It could include
discrimination in the terms of supply - for example, charging one customer a higher or lower
price than another customer. This form of discrimination will be prohibited by section 151ZF.
It could also take the form of providing some customers information about new services, or
access to new facilities which can be used to supply new services, at different times. Such
discrimination can be just as detrimental to effective competition as discrimination in the
terms of supply, which is why section 151ZG would prohibit it.
Under subsection 151ZG(3), the person also must not discriminate in favour of itself when
carrying out any of the same activities. As a result, a person could not, for example,
discriminate in favour of its own retail business unit by providing it with advance notice of
new facilities or services.
Subsection 151ZG(4) prohibits ancillary contraventions of subsection 151ZG(2) or (3).
Subsection 151ZG(5) provides that subsections 151ZG(2), (3) and (4) are civil penalty
provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act
provides for pecuniary penalties for breaches of civil penalty provisions.
Proposed Section 151ZH - Statement about the differences between an access
agreement and an offer
Proposed section 151ZH provides a mechanism for ensuring transparency of supply
arrangements. If a person uses a local access line that is subject either to wholesale-only or
functional separation requirements, then that person's wholesale customers will have an
interest in ensuring that there is no discrimination taking place. Proposed section 151ZH
achieves this transparency in two ways: by requiring persons subject to wholesale-only or
functional separation requirements to publish standard offers for the supply of wholesale
services (subsection (2A)) and also requiring them to publish statements describing any
differences between the terms and conditions set out in an access agreement and the terms
and conditions set out in the offer (subsection (1)).
The obligations apply to a person who uses a local access line on or after 1 July 2018 to
supply eligible services, or who proposes to supply such services, to a wholesale customer or
prospective wholesale customer. Section 142C or section 143 must apply to the line, or, if
neither section 142C nor section 143 applies to the line, a functional separation undertaking
must be in force that relates to local access line services supplied, or proposed to be supplied,
using the line. If the person then enters into an access agreement with a wholesale customer,
and there are differences between the terms and conditions set out in the access agreement
and those set out in the standard offer, the person must, within five business days after the
day on which the access agreement was entered into, publish a statement on the person's
website.
The statement must be in a form approved in writing by the ACCC and must identify the
parties to the access agreement and describe the differences between the terms and conditions
set out in the access agreement and those set out in the offer. It must also set out such other
information (if any) about the access agreement as is required by the form.
The note to subsection (1) refers the reader to subsection (5), which sets out a special
definition of access agreement for the purposes of section 151ZH.
A similar obligation to publish a statement about differences applies to variation agreements
that may be entered into by a person on or after 1 July 2018 (subsection 151ZH(2)). The note
to subsection (2) refers the reader to subsection (5), which sets out a special definition of
access agreement for the purposes of section 151ZH.
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Subsection (2A) clarifies that requirements to publish standard offers for the supply of
eligible services apply both to wholesale-only providers and functionally separated providers.
Proposed subsection 151ZH(3) prohibits ancillary contraventions of subsection (1), (2) or
(2A). Subsection (4) provides that subsections (1), (2), (2A) and (3) are civil penalty
provisions, and the note reminds the reader that Part 31 of the Tel Act provides for pecuniary
penalties for breaches of civil penalty provisions.
Subsection 151ZH(5) provides that, for the purposes of section 151ZH, access agreement and
variation agreement have the same respective meanings as in Part XIC of the CCA, but it is
assumed that a reference in Part XIC to a declared service is a reference to an eligible service
and that subsection 152BE(2) of the CCA had not been enacted. Subsection 152BE(2) applies
to eligible services that were not declared services at the time an agreement was entered into,
but at a later time (the declaration time) become declared services, and provides that such
agreements are taken to be 'access agreements' immediately after the declaration time.
Subsection (5) is a key clause for determining the content of agreements to supply eligible
services that are entered into by persons who are subject to the wholesale-only or functional
separation requirements in Part 8. A person may supply some eligible services that are
declared services; in such cases, the agreements to supply the eligible services will
automatically be 'access agreements' under Part XIC, and therefore set out any or all of the
terms and conditions on which an access provider supplies the service to an access seeker.
Some of those terms and conditions may be regulated through a special access undertaking,
an access determination or a binding rule of conduct. However, the non-discrimination
obligations proposed in this Bill will apply to all the eligible services that a person supplies.
Many, if not most, of those services may not be declared services. To ensure that agreements
to supply those services embody the terms and conditions on which a person will supply the
service, subsection (5) clarifies that those agreements are considered to be 'access
agreements' even though the services are not therefore subject to standard access obligations
under Part XIC of the CCA.
Proposed Section 151ZHA - Judicial enforcement of non-discrimination rules
Section 151ZHA provides that the ACCC, a carrier or a carriage service provider may seek
judicial enforcement of the non-discrimination rules in Division 2C. The Federal Court may
make orders directing a person to comply with a condition or limitation in a determination,
directing a person to compensate any other person (who may be the applicant) who has
suffered loss or damage as a result of the contravention, and any other order that the Court
thinks appropriate. The Federal Court may discharge or vary an order granted under section
151ZHA.
Item 52 - Before section 152
Item 52 inserts a number of new provisions in Part 8, as set out below.
Proposed Section 151ZI - Anti-Avoidance
New section 151ZI is an anti-avoidance provision.
Under subsection 151ZI(1), a corporation must not, either alone or together with one or more
persons, enter into, begin to carry, or carry out a scheme for the sole or dominant purpose of
avoiding the application of Part 8 in relation to the corporation or any other corporation.
Subsection 151ZI(2) sets out ancillary contraventions for the prohibition in subsection
151ZI(1). Subsections 151ZI(1) and (2) are civil penalty provisions (subsection 151ZI(3)).
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Subsection 151ZI(4) clarifies the meaning of "scheme" for the purposes of this section. It
means:
any agreement, arrangement, understanding, promise or undertaking, whether express
or implied, or
any scheme, plan, proposal, action, course of action or course of conduct, whether
unilateral or otherwise.
However, it does not include a functional separation undertaking.
Proposed Section 151ZJ - Self-incrimination
New section 151ZJ deals with self-incrimination and the admissibility of evidence in civil
and criminal proceedings.
New subsection 151ZJ(1) provides that a person is not excused from giving a report in
compliance with a provision of a functional separation undertaking covered by subsections
151A(10) or 151C(10) or (11), or from giving a report or information under section 151ZA
on the ground that that report or information might tend to incriminate or expose the person
to a penalty. New subsection 151ZJ(2) provides that, in the case of an individual, the report
or information, or giving the report or information, or any information, document or thing
obtained as a consequence of giving the report or information, is not admissible in evidence
against the individual in civil proceedings for the recovery of a penalty or in criminal
proceedings (other than proceedings for an offence against certain specified provisions of the
Criminal Code).
Proposed Section 151ZK - Delegation
Section 151ZI permits the ACCC to delegate, by writing, its powers under certain provisions
of Part 8. The ACCC can delegate such powers to staff members of the ACCC that are SES
employees or acting SES employees.
Proposed Section 151ZL - Review by the Australian Competition Tribunal
New section 151ZL deals with review by the Australian Competition Tribunal of decisions
made by the ACCC under certain provisions of Part 8. As the ACCC may make decisions
about functional separation undertakings that affect the commercial operations of an
individual person, the default approach in such cases is for key adverse decisions to be
subject to merits review.
A person may apply to the Australian Competition Tribunal for a review of a decision by the
ACCC to:
reject a functional separation undertaking under section 151F (subsection 151ZL(1));
vary the expiry time of a functional separation under section 151N (subsection 151ZL(2);
variation under section 151N may occur if the ACCC has rejected a subsequent
undertaking);
reject a variation of a functional separation undertaking under section 151T (subsection
151ZL(3));
revoke a functional separation undertaking under section 151W (subsection 151ZL(4));
vary a functional separation undertaking under section 151Z following a revocation
notice (subsection 151ZL(5)).
New subsection 151ZL(6) sets out the requirement for an application for a review of a
decision. The application:
must be in writing, and
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must be made within a specified timeframe after the ACCC made the decision - within 14
days for a decision to vary a functional separation undertaking under section 151ZN and
within 21 days for other decisions.
The Australian Competition Tribunal must review a decision if it receives an application to
review that decision (new subsection 151ZL(7)).
Proposed Section 151ZM - Functions and powers of the Australian Competition
Tribunal etc.
New section 151ZM sets out the functions and powers of the Australian Competition
Tribunal when reviewing a decision of the ACCC under section 151ZL.
The Australian Competition Tribunal may affirm or set aside the ACCC's decision and, for
the purposes of the review, may perform all functions and exercise all the powers of the
ACCC (subsection 151ZM(1)). A decision by the Australian Competition Tribunal to affirm
or set aside a decision of the ACCC is taken to be a decision of the ACCC, though such a
decision cannot be subject to further review by the Tribunal (subsection 151ZM(2)).
If the Australian Competition Tribunal sets aside a decision of the ACCC to reject a
functional separation undertaking under section 151F or to reject a variation under section
151T, the ACCC would be required to make new decisions about those matters within three
months of the decision by the ACCC to set aside the ACCC's initial decisions (subsections
151ZM(3) and 151ZM(4)).
When conducting a review, the member of the Australian Competition Tribunal presiding the
review may require the ACCC to provide to the Tribunal specified information, reports and
other assistance (subsection 151ZL(5)). The Australian Competition Tribunal is also able to
have regard to information given, documents produced or evidence given to the ACCC in
connection with the making of the decision that is being reviewed (subsection 151ZL(6)).
New subsection 151ZM(7) has the effect of the extending the operation of certain provisions
contained in Division 2 of Part IX of the CCA (dealing with proceedings before the
Australian Competition Tribunal) to reviews by the Australian Competition Tribunal under
Part 8 of the Tel Act.
Proposed Section 151ZN - Provisions that do not apply in relation to an Australian
Competition Tribunal review
New section 151ZN provides that Division 1 of Part IX of the CCA does not apply in relation
to reviews by the Australian Competition Tribunal of a decision of the ACCC of a kind
mentioned in new section 151ZL.
Division 1 of Part IX of the CCA sets out a process for review of ACCC decisions in relation
to authorisations under that Act (except for merger authorisations). As this process is not
relevant to the ACCC decisions that are to be reviewable under proposed section 151ZL,
section 151ZN is provided for the avoidance of doubt.
Item 53 - After paragraph 152(1)(a)
Item 53 amends section 152 of the Tel Act to insert a new paragraph (aa), 'a line; or'. Section
152 provides a definition of associate for the purposes of determining control under Part 8 of
the Tel Act. The amendment is consequential to the insertion of new section 142C (see item
34 above) and reflects the application of wholesale-only requirements to a person who is an
associate of a person who is in a position to exercise control of a local access line.
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Item 54 - After paragraphs 152(2)(a) and (b)
Item 54 makes further amendments to section 152 to insert the word 'line' in paragraphs
152(2)(a) and (b). These amendments are also consequential to the insertion of new section
142C at item 34.
Item 55 - At the end of section 155
Item 55 inserts new subsection (4) at the end of section 155. Section 155 currently sets out
when a person would be considered to be in a position to exercise control of a network.
Under this Bill, the existing wholesale-only rules (in section 143) will apply to specific
networks that come into existence before 1 July 2018. New rules (under section 142C) will
then apply, and the definition of control in section 155 will be re-stated (see proposed section
155A below) for the new section 142C rules.
New subsection (4) ensures that the definition of control in section 155 does not apply to
networks subject to section 142C (and other provisions in Part 8, to the extent to which they
relate to a line to which section 142C applies).
Item 56 - After section 155
Item 56 inserts proposed new section 155A into Part 8. The new section imports the
definition of control in current section 155 for the purposes of the new wholesale-only rules
in section 142C.
Subsections (1)-(3) set out rules for determining when a person is in a position to exercise
control of a local access line. Subsection (4) effectively ensures that these rules do not apply
to networks subject to section 143 (and other provisions in Part 8, to the extent to which they
relate to a line to which section 143 applies). Section 155A therefore applies only to local
access lines that come into existence on or after 1 July 2018.
Proposed section 155A sets out three main circumstances in which a person (the controller),
whether alone or together with an associate of the controller, and whether indirectly or
directly, will be taken to be in a position to exercise control of a line for the purposes of
section 142C and related provisions in Part 8. These are:
(a) the controller legally or beneficially owns the line;
(b) the controller is in a position to exercise control of:
i. the operation of all or part of the line; or
ii. the selection of the kinds of services that are supplied using the line; or
iii. the supply of services using the line.
(c) a company other than the controller legally or beneficially owns the line (whether alone
or together with one or more other persons), and the controller can exert various forms of
control over the company. For example, it is in a position to veto any action taken by the
board of directors, is in a position to appoint, or veto the appointment of, at least half of
the board of directors, it can exercise direction or restraint over any substantial issue
affecting the management or affairs of the company or the company or more than 50 per
cent of its directors act, or are accustomed to act, in accordance with the directions,
instructions or wishes of, or in concert with, the controller, the controller and an associate
acting together, or the directors of the controller.
These clauses set out direct and indirect control measures and mitigate against a person being
able to use hidden forms of control to evade statutory requirements.
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Item 57 - Section 156 (heading)
Item 57 repeals and substitutes the heading for section 156. This change is consequential to
the amendment in item 66, which introduces a new section 156A in Part 8. It forms part of
the changes to existing Part 8 to grandfather existing superfast network rules.
Section 156, as amended by items 59 to 65 below, sets out the circumstances in which
alterations, upgrades or extensions to telecommunications networks between 1 January 2011
and 30 June 2018 will be treated as networks in their own right and taken to have come into
existence during that time. Such networks will be subject to the prohibition in section 143, as
amended by items 35 to 41 (see above).
Item 58 - Paragraph 156(1)(a)
Item 59 - Paragraph 156(1)(a)
Item 60 - Paragraph 156(1)(d)
Items 58 and 60 insert the words "but before 1 July 2018" after the words "after 1 January
2011" in paragraphs 156(1)(a) and 156(1)(d), respectively. Item 59 omits all references to
"small business" in paragraph 156(1)(b).
These changes are consequential to the changes to section 143 (see items 35 to 41 above).
As a result of these changes, if:
a telecommunications network is altered or upgraded between 1 January 2011 and 30
June 2018, and
as a result of that alteration or upgrade, a part of the network became capable of being
used to supply a superfast carriage service to existing or prospective residential customers
in Australia,
then that part of the network will be taken to be a network in its own right and to have come
into existence between 1 January 2011 and 30 June 2018. As such local access lines that are
part of the network will be subject to section 143 (and not to section 142C).
Item 61 - Paragraph 156(2)(a)
Item 62 - Paragraph 156(2)(b)
Item 63 - Paragraph 156(2)(d)
Items 61 and 63 insert the words "but before 1 July 2018" after the words "after 1 January
2011" in paragraphs 156(2)(a) and 156(2)(d), respectively. Item 62 omits all references to
"small business" in paragraph 156(2)(b).
These changes are consequential to the changes to section 143 (see items 35 to 41 above).
As a result of these changes, if:
a telecommunications network is extended between 1 January 2011 and 30 June 2018,
and
the extended part of the network is capable of being used to supply a superfast carriage
service to existing or prospective residential customers in Australia,
then the extended network is taken to be a network in its own right and to have come into
existence into between 1 January 2011 and 30 June 2018. As such local access lines that are
part of the network will be subject to section 143 (and not to section 142C).
Item 64 - Subsection 156(4)
Subsection 156(4) currently provides that a network that came into existence before 1
January 2011, and is used to supply superfast carriage services to residential or small
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business customers, can be extended by up to 1km without being subject to the wholesale-
only obligation in subsection 143(2). Item 64 amends section 156 so that it can continue to
apply after 1 July 2018 in the following limited cases:
there is in force a legally enforceable agreement that provides for the transfer of
ownership or control of the infrastructure of the extension to an NBN corporation, and
that agreement is covered by a determination made under section 577BA(9); and
there is a legally enforceable agreement that provides for the deactivation or
decommissioning of the infrastructure of the extension, and that contract was entered into
between NBN Co and listed Optus companies.
Subsection 577BA of the Tel Act authorises certain conduct for the purposes of competition
law. Subsection 577BA(9) states that the Minister may, by legislative instrument, determine
that authorisations apply to certain contracts, arrangements or understandings between Telstra
and an NBN corporation. There has been one determination under subsection 577BA(9) to
date, the Telecommunications (Agreements for Compliance with Structural Separation
Undertaking) Determination 2014 ('the Determination'), which commenced on 14 December
2014. There are six contracts, arrangements or understandings to which the Determination
applies:
the four agreements originally entered into by Telstra and NBN Co in June 2011,
collectively known as the 'Definitive Agreements' including amendments to those
agreements which commenced on 14 December 2014; and
two deeds associated with the Definitive Agreements, known as the 'Continuity Deed'
and the 'Deed of Amendment and Restatement', which commenced on 14 December
2014.
Consequently, networks that are covered by the Definitive Agreements and the other two
deeds may be extended by Telstra by up to 1km, and, if used to supply superfast carriage
services, operated on a vertically integrated basis after 1 July 2018. Under the Definitive
Agreements the networks are expected to be transferred to NBN Co over the next few years,
so the exemption under item 64 is expected to be short-lived.
NBN Co has also entered into agreements with listed Optus companies to deactivate or
decommission HFC networks. The exemption under item 64 would allow the listed Optus
companies to extend those networks by up to 1km before deactivation or decommissioning
occurs. Again, such deactivation or decommissioning is expected to occur over the next few
years, so the exemption under item 64 would be short-lived.
The listed Optus companies are set out in proposed subsection 156(7), to be inserted by item
65 of Schedule 2 to this Bill.
The purpose of the exemption is to ensure that end-users who are near to networks that are
being transferred to NBN Co can be supplied with superfast carriage services if Telstra or an
Optus company determines that it makes commercial sense to extend existing networks to
supply such services. Otherwise, end-users might have to wait for an extended period for
such access.
Extensions of pre-2011 networks that are used to supply superfast carriage services and are
not subject to agreements specified in item 64 would, after 1 July 2018, be subject to
subsection 142C(2). Consequently, any extension would need to be operated on a wholesale-
only or functionally separated basis.
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Item 65 - At the end of section 156
Item 65 inserts new subsections 156(6) and (7) at the end of section 156. New subsection
156(6) is an interpretative provision and clarifies that subsections 156(1) and 156(2) (which
define 'deemed networks') do not apply in determining the meaning of an expression used in:
section 142C, or
sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which
section 142C applies, or
any other provision of Part 8 so far as that provision relates to the provisions mentioned
above.
As a result, subsections 156(1) or (2) can be considered in determining the meaning of (for
example) 'alteration or upgrade' or 'extension' in relation to the wholesale-only obligation in
section 143 or related provisions in Part 8, but not in relation to the wholesale-only obligation
in section 142C. This is because of new section 156A, which will operate in a similar way to
section 156 in relation to certain categories of local access lines (see item 66 below).
Proposed new subsection (7) lists six listed Optus companies. These companies are listed for
the purposes of determining agreements covered by proposed sub-paragraph 156(4)(f)(ii), to
be inserted by item 64 above.
Item 66 - After section 156
Item 66 inserts new section 156A in Part 8. New section 156A sets out the circumstances in
which local access lines will be taken to have come into existence on or after 1 July 2018. As
a result, such local access lines will be subject to the wholesale-only obligation in new
section 142C (see item 34 above).
Under new subsection 156A(1), a local access line is taken to have come into existence on or
after 1 July 2018 in the following circumstances:
the line came into existence before 1 July 2018, and
before 1 July 2018, the line was used wholly or principally to supply a superfast carriage
service to non-residential customers of Australia, and
on or after 1 July 2018, following the construction or alteration of premises or changes to
the activities carried out at premises, the line is used wholly or principally to supply a
superfast carriage service to residential customers in Australia.
This amendment is intended to capture changes in the use of networks. A network may have
already been used to supply superfast networks before 1 July 2018, for example to business
or government customers. A building that housed such a customer may experience a change
in use, or be refurbished for new residential premises. Subsection 156A(1) clarifies that in
this case, even if there is no actual change to the local access line used to supply superfast
carriage services to the premises, the line must be operated in accordance with section 142C.
It should be noted that there may be some incidental change in use on a network, and a
network operator may not know, or could not reasonably have been expected to know, that
such change had occurred. Such change in use is accommodated by paragraph 142C(1)(c) in
item 34 above, which casts the wholesale-only obligation on local access lines that form part
of a network that is used, or proposed to be used, to supply a superfast carriage service wholly
or principally to residential customers, or prospective residential customers. Where a carrier
operates a network targeting business customers, for example, and a small number of
business customers become residential customers, the carrier would not have to comply with
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subsection 142C(2) because the carriers' network would still principally be used to supply
superfast carriage services to business customers.
New subsection 156A(2) is an interpretative provision and clarifies that subsection 156A(1)
does not apply in determining the meaning of an expressions used in:
section 143, or
sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which
section 143 applies, or
any other provision of Part 8 so far as that provision relates to the provisions mentioned
above.
Item 67 - Section 157 (heading)
Item 67 repeals and substitutes the heading for section 157, adding the words 'of a network'
to the end. This change is consequential to the amendment in item 70, which introduces a
new section 157A in Part 8. The change reflects the approach taken in the Bill in which some
sections in Division 3 of Part 8 will now apply only to networks that came into existence
before 1 July 2018, while other similar sections are inserted that apply to local access lines
that come into existence on or after 1 July 2018.
Section 157 sets out the circumstances in which certain installations and connections will not
be considered to be an extension, alteration or upgrade of a network for the purposes of
Part 8.
Item 68 - Section 157
Item 68 renumbers existing section 157 as new subsection 157(1). This change is
consequential to the insertion of proposed new subsection (2) through item 69 below.
Item 69 - At the end of section 157
Item 69 introduces a new subsection 157(2). This is an interpretative provision and clarifies
that subsection 157(1) does not apply in determining the meaning of an expression used in:
section 142C, or
sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which
section 142C applies, or
any other provision of Part 8 so far as that provision relates to the provisions mentioned
above.
Currently, subsection 157(1) provides an exemption from the wholesale-only obligation in
section 143 in relation to networks that came into existence before 1 January 2011 but, after
that date, a line is installed to connect premises that are in close proximity to those networks.
This exemption will continue as part of the grandfathering arrangements the Government has
determined should apply to superfast networks that came into existence before 1 July 2018.
Proposed new section 143F (inserted by item 42 above) provides exemptions from section
142C for lines that are installed to connect premises that are in close proximity to networks.
That section provides two exemptions, for lines that connect premises to networks that are
subject to section 143 (or have been exempted from section 143) and also for lines that
connect premises to networks that are subject to the CLCs Declaration.
There is no item 70 in the Bill because of amendments to the exposure draft to insert
section 143F.
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Item 71 - After subsection 158(2)
Section 158 provides the meaning of the term local access line for the purposes of Part 8.
Item 71 introduces new subsections 158(2A) and 158(2B), which modify the meaning for the
purposes of certain new provisions in Part 8.
New subsection 158(2A) provides that subsection 158(2) has effect subject to new subsection
168(2B).
New subsection 158(2B) clarifies when a line is taken to be a local access line and to form
part of the infrastructure of a telecommunications networks for the purposes of:
section 142C,
sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which
section 142C applies, or
any other provision of Part 8 so far as that provision relates to the provisions mentioned
above.
Specifically, if a line in a multi-unit building is used to supply a superfast carriage service to
a residential customer living in a unit in the building, then the line is taken to be a local
access line and to form part of the infrastructure of a telecommunications network.
This provision addresses potential confusion over whether such a line is covered by the
requirements, particularly given the complexity of the rules relating to the network boundary
in a multi-unit building. End-users in premises in a multi-unit building may be served by one
or more lines that enter the building, and which are connected to nodes or points or presence
outside. Such lines would generally be understood to be local access lines, and subject to Part
8 if they are used to supply superfast carriage services to residential customers. The local
access lines that enter a multi-unit building may be connected to the main distribution frame
in the building, either directly or through a patch panel located nearby, or to another network
termination device nearby. Other lines may then run from the customer-facing side of the
frame, or the customer-facing side of the network termination device, directly to end-user
premises or to router equipment located elsewhere in the building and to which other lines are
then connected that are also connected to end-user premises.
Lines on the customer side of the network boundary are usually considered to be customer
cabling and therefore not part of a telecommunications network. Under section 58 of the Tel
Act the lines cannot be local access lines because a line that is on the customer side of the
network boundary is not a local access line. Where a telecommunications network is used to
supply a carriage service to an end-user by means of a line that enters the building, by
operation of sub-paragraphs 22(4)(a)(i) and (ii) of the Tel Act, the default network boundary
is either at the side of the frame nearest the end-user or the side of the network termination
device nearest to the end-user. However, if a different point has been agreed between the
customer and the carrier or CSP, the boundary point will be that other point.
Some service providers purchase a wholesale service over a local access line that terminates
in the building, connect that line to the customer cabling and then supply superfast carriage
services over the cabling to residential customers. Such service providers should be subject to
Part 8 if the cabling comes into existence on or after 1 July 2018. Proposed subsection (2B)
achieves this outcome.
Item 72 - After section 158
Item 72 introduces a new section 158A.
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Subsection 158A(1) deems extensions on or after 1 July 2018 of local access lines that were
in existence before 1 July 2018 to be local access lines in their own right and to have come
into existence on or after 1 July 2018. As a result, these extensions would be subject to the
prohibition in new section 142C.
Subsection 158A(2) is an interpretative provision and clarifies that subsection 158A(1) does
not apply in determining the meaning of an expression used in:
section 143, or
sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which
section 143 applies, or
any other provision of Part 8 so far as that provision relates to the provisions mentioned
above.
Rather, subsection 156(2) (dealing with telecommunications networks that are extended
between 1 January 2011 and 30 June 2018) is relevant to the operation of the above
provisions.
Item 73 - Section 159
Item 74 - At the end of section 159
Item 74 introduces a new subsection 159(2), which provides that, for the purposes of Part 8,
an alteration of a line does not include an extension of a line. New subsection 159(2) operates
in respect of a line in a similar way as existing section 159 operates in respect of a network to
alter the meaning of 'alteration' so it does not include extensions. New subsection 159(2)
reflects the operation of proposed new section 142C, which applies to local access lines that
came into existence, or were altered or upgrade on or after 1 July 2018.
The amendment in item 73 is consequential to the change in item 74.
Item 75 - Section 160
Item 76 - At the end of section 160
Item 76 introduces a new subsection 160(2), which provides that, for the purposes of Part 8,
an upgrade of a line does not include an extension of the line. New subsection 160(2)
operates in respect of a line in a similar way as existing section 160 operates in respect of a
network to alter the meaning of 'upgrade' so it does not include extensions.
The amendment in item 76 is consequential to the change in item 75.
Item 77 - At the end of Part 8
Item 77 inserts two new sections, section 161 and section 162, into Part 8 of the Tel Act.
Proposed section 161 sets out an extended meaning of residential customer for the purposes
of Part 8. Home-based businesses are to be treated as residential customers, given that they
are usually served by residential networks. Subsection 161(1) deals with businesses that are
carried on by individuals (for example, sole proprietors). Subsection 161(2) deals with
businesses that are carried on by a partnership, subsection 161(3) with businesses carried on
by a corporation and subsection 161(4) with businesses carried on by a trust.
The key criteria for determining when a customer is a home-based business are that most or
all of the work of the business is carried out at the residence of an individual; or the business
does not occupy any premises other than the residence of the individual. A business in the
former category could, for example, be a designer, lawyer or day care provider who carries
on a business at home. A business in the latter category could, for example, be a plumber or
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electrician who works from home but whose work is largely conducted away from the home,
though some administration might be carried on at home.
These criteria have been based on the Australian Bureau of Statistics' definition of a home-
based business.
Proposed section 162 sets out powers for the Minister, by legislative instrument, to determine
when premises are or not in close proximity to a line. Specified circumstances must exist in
relation to premises and a line. Should the Minister make an instrument under section 162,
that would affect the meaning of close proximity in proposed section 157A and in the CLCs
Declaration as proposed to be amended by this Bill. The Minister may delegate this power to
the ACCC.
Item 78 - Before paragraph 564(3)(a)
Item 79 - After paragraph 564(3)(ba)
Item 80 - Subsection 564(3) (before note 1)
Item 78 introduces new paragraphs 564(3)(aaa) and (aab), while item 79 introduces a new
paragraph 564(3)(bb).
Under section 564 of the Tel Act, the Federal Court may grant restraining or performance
injunctions for contraventions of the Tel Act or the TCPSS Act on the application of the
Minister, the ACMA or the ACCC (see subsections 564(1) and (2)). Subsection 564(3) limits
the ACMA's ability to apply for injunctions for contraventions of carrier licence conditions
or service provider rules that are listed in that section.
The effect of new paragraphs 564(3)(aaa), (aab) and (bb) is to limit the ACMA's ability to
apply for injunctions in relation to contraventions of:
certain provisions in Part 8 of the Tel Act;
carrier licence conditions relating to those provisions in Part 8 of the Tel Act;
service provider rules relating to those provisions in Part 8 of the Tel Act.
Item 80 inserts a new note (Note 1AA) in subsection 564(3) to remind readers that the
provisions listed in new paragraphs 564(3)(aaa), (aab) and (bb) are contained in Part 8 of the
Tel Act.
As the ACCC has responsibility for enforcing Part 8 of the Tel Act, it would not be
appropriate for the ACMA to take enforcement action and items 78-80 are therefore required.
Item 80A - After subsection 564(3)
Item 80A inserts new subsections 564(3A) and (3B). As a result of these provisions, carriers
and CSPs would be able to apply to the Federal Court for restraining or performance
injunctions to address conduct in contravention of section 151ZI of the Tel Act. This would
be in addition to the ability for the Minister and the ACCC to apply for injunctions under
subsection 564(1) and (2) for contraventions of section 151ZI. If a person who is subject to
wholesale-only or functional separation requirements, or operating under a class exemption,
takes action that may contravene the Act, that action could directly affect the commercial
interests of carriers or CSPs who are receiving wholesale services from the person or
competing against it. Given the resourcing constraints on ACCC enforcement, it is therefore
appropriate for carriers and CSPs also to be able to seek injunctions if their commercial
interests are affected.
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Item 81 - Before paragraph 571(3)(a)
Item 82 - After paragraph 571(3)(ba)
Item 83 - Subsection 571(3) (before note 1)
Item 81 introduces new paragraphs 571(3)(aaa) and (aab), while item 82 introduces a new
paragraph 571(3)(bb).
Subsection 571(1) of the Tel Act permits the Minister, the ACMA and the ACCC to institute
proceedings in the Federal Court for the recovery on behalf of the Commonwealth of a
pecuniary penalty for the contravention of a civil penalty provision. Subsection 571(3) limits
the ACMA's ability to institute any such proceedings for contraventions of carrier licence
conditions or service provider rules that are listed in that section.
The effect of new paragraphs 571(3)(aaa), (aab) and (bb) is to limit the ACMA's ability to
institute proceedings for the recovery of pecuniary penalties for contraventions of:
certain provisions in Part 8 of the Tel Act;
carrier licence conditions relating to those provisions in Part 8 of the Tel Act;
service provider rules relating to those provisions in Part 8 of the Tel Act.
Item 83 inserts a new note (Note 1AA) in subsection 571(3) to remind readers that the
provisions listed in new paragraphs 571(3)(aaa), (aab) and (bb) are contained in Part 8 of the
Tel Act.
As the ACCC has responsibility for enforcing Part 8 of the Tel Act, it would not be
appropriate for the ACMA to take enforcement action and items 81-83 are therefore required.
Item 84 - At the end of paragraph 572E(6)(c)
Section 572E of the Tel Act sets out when an infringement notice may be issued by an
authorised infringement officer in relation to the contravention of a particular civil penalty
provision.
Under subsection 572E(6), if:
a person's conduct constitutes a contravention of section 68 or 101 of the Tel Act; and
the contravention consists of a breach of the carrier licence condition in Part 1 of
Schedule 1 or the service provider rule in Part 1 of Schedule 2; and
the contravention consists of a breach of another provision of the Tel Act;
an infringement notice can be given to the person in relation to the contravention of section
68 or 101 if the other provision is a listed infringement provision and has been listed as such
for at least three months.
The amendment in item 84 has the effect of carving out from the operation of subsection
572E(6) certain provisions of Part 8. Those provisions are civil penalty provisions and also
carrier licence conditions and service provider rules (compliance with which is required by
sections 68 and 101 of the Tel Act respectively). As a result, an infringement notice may be
issued in relation to contravention of those civil penalty provisions under subsection 572E(1)
of the Tel Act.
The provisions are sections 142C and 143 (wholesale-only rules), 143B (class exemptions),
151ZA (reporting obligations after a revocation notice is given), 151ZB (requirement to
notify changes in control), 151ZD (compliance with a functional separation undertaking),
151ZF and 151ZG (non-discrimination obligations), 151ZH (publication of offers and
statements of differences) and 151ZI (anti-avoidance).
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Infringement notices are one of the enforcement options available to the ACCC in relation to
Part 8. Its options include seeking injunctions from the Federal Court or recovery of
pecuniary penalties (see Parts 30 and 31 of the Tel Act). This Bill also provides for the
ACCC to seek other orders from the Federal Court in relation to breaches of undertakings
(refer proposed section 151ZF). It could also revoke a functional separation undertaking if a
person has an unsatisfactory compliance record. These are strong measures and it would not
be appropriate, for some breaches, for the ACCC to take court action. Accordingly, the Bill
allows the ACCC to issue formal warnings or infringement notices in relation to
contraventions of section 151ZD (compliance with an undertaking).
Item 85 - After paragraph 572F(1)(c)
Item 86 - Paragraph 572F(1)(d)
Section 572F of the Tel Act sets out the matters to be included in an infringement notice.
Currently, only the ACMA has powers under the Tel Act to issue infringement notices in
relation to contraventions of civil penalty provisions. Items 85 and 86 provide new powers
for the ACCC to issue infringement notices in relation to contraventions of civil penalty
provisions in Part 8 of the Tel Act.
Item 85 inserts a new paragraph 572F(1)(ca) setting out a particular statement that must be
included in an infringement notice if the alleged contravention consists of a breach of:
section 68 of the Tel Act to the extent to which that section relates to the carrier licence
condition in Part 1 of Schedule 1 in so far as that condition relates to certain specified
provisions in Part 8 of the Tel Act; or
section 101 of the Tel Act to the extent to which that section relates to the service
provider rule in Part 1 of Schedule 2 in so far as that rule relates to those provisions in
Part 8 of the Tel Act; or
those provisions in Part 8 of the Tel Act.
The provisions are sections 142C and 143 (wholesale-only rules), 143B (class exemptions),
151ZA (reporting obligations after a revocation notice is given), 151ZB (requirement to
notify changes in control), 151ZD (compliance with a functional separation undertaking),
151ZF and 151ZG (non-discrimination obligations), 151ZH (publication of offers and
statements of differences) and 151ZI (anti-avoidance).
The statement to be included in the infringement notice must be to the effect that the matter
will not be dealt by the Federal Court if the penalty specified in the notice is paid to the
ACCC on behalf of the Commonwealth within a specified timeframe. This is essentially the
same as the statement that must be included in infringement notices for other contraventions
with changes to reflect that the ACCC, rather than ACMA, would collect the penalty on
behalf of the Commonwealth.
The amendment in item 86 is consequential to the amendment in item 85. Item 86 inserts the
words 'if paragraph (ca) does not apply' before the word 'contain' in paragraph 572F(1)(d).
This amendment ensures that only the ACCC can issue infringement notices for
contraventions of civil penalty provisions in Part 8 of the Tel Act.
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Item 87 - At the end of section 572L
Item 87 introduces new subsections 572L(3) to 572L(6).
Section 572L deals with the appointment of authorised infringement officers. Currently, only
certain members of the staff of the ACMA can be appointed as authorised infringement
officers.
However, given the ACCC's responsibility for overseeing the operation of Part 8 of the Tel
Act, this is not appropriate for infringement notices relating to contraventions of civil penalty
provisions in Part 8.
The amendments in item 87 address this by:
empowering the ACCC to appoint, in writing, certain members of the staff of the ACCC
as authorised infringement notice officers (new subsections 572L(3) and (4)); and
limiting the ability of authorised infringement notice officers appointed under subsection
572L(1) (that is, authorised infringement notice officers who are members of the staff of
the ACMA) to give or withdraw infringement notices for contraventions of provisions
contained in Part 8 of the Tel Act (new subsection 572L(5)); and
specifying that authorised infringement notice officers appointed under subsection
572L(3) (that is, authorised infringement notice officers who are members of the staff of
the ACCC) can only give or withdraw infringement notices for contraventions of those
provisions on Part 8 of the Tel Act (new subsection 572L(6)).
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Schedule 3-- Statutory infrastructure providers
Overview
Schedule 3 to the Bill introduces a statutory infrastructure provider (SIP) regime into the Tel
Act for the future connection and supply of superfast broadband services to premises in
Australia. These arrangements provide a solid core around which a new forward-looking
consumer protection architecture for the future NBN environment can be built.
Part 1 of Schedule 3 sets of the details of the SIP regime and makes consequential
amendments to the telecommunications access regime provisions in Part XIC of the CCA.
Part 2 of Schedule 3 to the Bill repeals four existing 'adequately served' carrier licence
declarations which will be replaced by the new SIP obligations.
The SIP regime provides industry and consumers with certainty that all premises in Australia
can have access to superfast broadband services. The regime provides for premises to be
connected to networks and for the network provider to supply eligible services to CSPs in
order that those CSPs can supply superfast broadband services to end-users (and voice
services on fixed-line and fixed wireless networks).
The SIP regime recognises that network infrastructure is deployed on a competitive basis, but
also that the costs of deploying fixed-line networks are such that in many areas it will only be
economical for there to be a single network provider. As a result the regime is based on the
policy that there should always be a SIP for a specific area, but there can be different SIPs for
different areas as a function of Australia's open, competitive telecommunications market.
Given that NBN Co will ultimately replace Telstra as the principal fixed-line operator in
Australia, NBN Co is expected to operate as the default SIP provider once the NBN rollout is
complete.
There are three ways in which SIP areas can be identified, and SIPs specified for those areas.
First, NBN Co has SIP responsibilities, and two service areas relate to its role. Prior to the
completion of the NBN rollout, NBN Co must declare provisional interim NBN service areas
where it declares an area 'ready for service'. It must also declare provisional interim NBN
service areas where it had declared areas ready for service prior to the commencement of the
SIP regime.
After the NBN rollout is complete, NBN Co becomes the default SIP for Australia (the
general service area).
NBN Co does not have SIP responsibilities in areas where other carriers are SIPs.
The second way in which SIP areas are identified is that other carriers must declare service
areas (nominated service areas) where:
they have a contract to install infrastructure in a real estate development project; or
they have a contract to install infrastructure in a building redevelopment project.
Carriers can also declare nominated service areas where they have a contract to install
infrastructure to all the premises in a specific area (for example, a pre-existing building). (As
there could be other network providers in the same area, it is not compulsory for carriers to
declare a nominated service area in this case).
The network areas served under the four 'adequately served' carrier licence declarations
imposing provider of last resort requirements will automatically become nominated service
areas under the Bill.
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The obligation on other carriers to declare nominated service areas takes effect when the
legislation comes into force. It therefore applies both before the NBN rollout is complete and
afterward.
The third way in which SIP areas can be identified is that the Minister can, by legislative
instrument, designate specific areas to be designated service areas and determine that a
particular carrier is the SIP for a designated service area. This power could be used, for
example, to determine the SIP for new developments that were already completed before the
SIP regime comes into effect, and where there is only one provider of superfast broadband
services.
The Minister also has powers (which can be delegated to the ACMA) to vary service areas if
required to ensure that premises are serviced by the carrier best suited to perform the role of
SIP in that locality.
Once the SIP for an area has been established, the SIP will then become subject to two
obligations as noted above - connecting premises, on reasonable request from a CSP, to its
networks, and supplying an eligible service, also on reasonable request from a CSP, so that
the CSP can supply carriage services to end-users at the premises. The Bill establishes that a
SIP should connect premises to a fixed-line network as the default, but if this is not
reasonable then the SIP should connect premises to a fixed wireless or satellite network. It is
envisaged that SIPs will be able to establish their own network preference rules; for example,
if a SIP is only supplying fixed wireless services in a service area, then it would not be
reasonable for it to connect premises to a fixed-line network, and so could automatically
connect premises to the fixed wireless network.
The eligible service that a SIP must supply must enable a CSP to supply broadband services
with a peak download transmission speed of at least 25 Mbps and a peak upload transmission
speed of at least 5 Mbps. These are baseline speeds and apply across all network
technologies. It is envisaged that SIPs will generally supply higher speeds on fixed-line
networks. NBN Co in fact is required, under the Government's 2016 Statement of
Expectations, to ensure that 90 per cent of premises in its fixed-line footprint can receive
peak download speeds of at least 50 Mbps and peak upload speeds of at least 10 Mbps. In
recognition of this, the Bill sets out that it is a target for NBN Co to meet this requirement.
On fixed-line and fixed wireless networks, the eligible service that a SIP must supply must
enable a CSP to supply carriage services to end-users that those end-users can use to make
and receive voice calls. This obligation will ensure that broadband services provided by SIP
networks of this kind can support voice services. However, in areas where a SIP only
supplies broadband services using satellite technology (such as, for example, NBN Co), voice
services may be better supported by other network technologies operated by carriers who are
not SIPs. This issue will be considered further by the Government in its response to the
Productivity Commission's review of the universal service obligation.
The Minister will have powers to make standards, rules and benchmarks that SIPs must
comply with. Standards could include timeframes for connecting premises and for rectifying
network faults. Rules could include rules for handling complaints. Benchmarks could set
targets, for example, for the number of premises that should be connected within the standard
timeframes. These mechanisms will enable the core provisions of the SIP regime to be
developed over time to provide a new forward-looking consumer protection architecture for
the future NBN environment.
SIPs will be required to publish standard offers for connecting premises and supplying
eligible services.
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The ACMA will be the regulator with responsibility for enforcing the SIP regime. It will
maintain a register of SIP service areas and SIPs, so that industry and consumers can know
what network infrastructure exists in an area and who the SIP is for the area. To facilitate the
ACMA's role, SIPs will be required to notify the ACMA when they declare service areas (or
are designated as SIPs for a service area), and provide geographic coordinates for the service
area in a specific format.
Part 1 - Amendments
Part 1 inserts four amendments into the CCA and two amendments into the Tel Act.
The amendments to the CCA (items 1-4) relate to Ministerial standards or rules made under
sections 360V or 360U of the Tel Act (to be inserted by item 7 below). The amendments
ensure that SIP standards or rules prevail over inconsistent access determinations, binding
rules of conduct, access agreements or special access undertakings, which are different
mechanisms by which terms and conditions, including price, can be set.
Under Part XIC of the CCA, if a wholesale service is regulated ('declared'), baseline terms
and conditions for the service are either set out by the ACCC in an access determination or a
binding rule of conduct, or by an access provider in a special access undertaking. Access
seekers can request that an access provider supplies the service on those baseline terms and
conditions, and enter into an access agreement. Access seekers can negotiate different terms
and conditions with access providers (other than NBN Co) and in this case the access
agreement would have unique terms and conditions of supply.
The amendments to the Tel Act (items 4A and 4B) insert a new power for the Minister, by
legislative instrument, to make service provider determinations that apply to CSPs in relation
to the supply of specified carriage services.
Competition and Consumer Act 2010
Item 1 - After section 152BCCA
Item 1 inserts a new provision, section 152BCCB, into Part XIC of the CCA. This new
section ensures that SIP standards and rules prevail over inconsistent access determinations.
Under proposed sections 360U and 360V the Minister may, by legislative instrument,
determine standards or make rules to be complied with by SIPs. A SIP would not be required
to comply with the standards or rules in relation to existing access agreements, but would
have to comply with them when entering into new access agreements or when an existing
access agreement is varied.
SIPs can meet their supply obligations by supplying a declared service under Part XIC of the
CCA (see subsection 360Q(2) below). If a SIP does that, it may be subject to an access
determination made by the ACCC in relation to the declared service. The access
determination may already be in place when the Minister makes a SIP standard or rule, and
there may be some years before the ACCC reviews the access determination. Proposed
section 152BCCA therefore provides clarity that any SIP who meets its SIP supply
obligations by supplying a declared service must comply with standards and rules even if
they are inconsistent with an ACCC access determination.
Item 2 - After section 152BDCA
Item 2 inserts a new provision, section 152BDCB, into the CCA. This new section ensures
that SIP standards prevail over inconsistent binding rules of conduct. A binding rule of
conduct may be in place when the Minister makes a SIP standard or rule, so proposed section
152BDCA provides clarity that any SIP who meets its SIP supply obligations by supplying a
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declared service must comply with standards and rules even if they are inconsistent with an
ACCC binding rule of conduct..
Item 3 - Before section 152BEC
Item 3 inserts two new provisions, sections 152BEBH and 152BEBI, into the CCA. This new
section provides that SIP standards and rules will prevail over certain inconsistent access
agreements. However, subsections 152BEBH (2) and 152BEBI (2) conserve the operation of
access agreements entered into before the commencement of the particular conflicting
standard or rule (as the case may be) so long as they have not been varied after the
commencement of the standard or rule.
The proposed new sections provide clarity that a SIP must comply with SIP standards and
rules after the standard or rule is made
Item 4 - After section 152CBIC
Item 4 inserts a new provision, section 152CBID, into the CCA. This new section ensures
that SIP standards and rules prevail over inconsistent special access undertakings.
A special access undertaking may be in place when the Minister makes a SIP standard or
rule, so proposed section 152CBCID provides clarity that any SIP who meets its SIP supply
obligations by supplying a declared service must comply with standards and rules even if
they are inconsistent with its special access undertaking that is in force.
Telecommunications Act 1997
Item 4A - After subsection 99(1)
Item 4A inserts a new subsection, 99(1A), into the Tel Act. The new subsection creates a
power for the Minister to make service provider determinations. Currently, the ACMA may
make service provider determinations that apply to service providers in relation to the supply
of either or both of specified carriage services or specified content services (subsection 99(1)
of the Tel Act). The ACMA cannot make a service provider determination unless it relates to
a matter specified in the regulations or in section 346 of the Tel Act (dealing with designated
disaster plans).
In practice, this means that the process for making service provider determinations can be
complex and lengthy. Regulations first need to be made and then the ACMA needs to
complete a second process to make a determination about the same issue. This can delay
necessary Government action, for example, concerning interactions between wholesale and
retail service providers when dealing with customer complaints. The proposed power
introduced by item 4A streamlines the process.
The power is similar to the Minister's power under section 63 of the Tel Act to declare
conditions of carrier licences. Those powers apply to licensed carriers, however a large
number of service providers currently do not operate as carriers but as CSPs.
The power is restricted to rules that apply to CSPs in relation to the supply of specified
carriage services. Service provider determinations could be made in relation to individual
CSPs or in relation to a class of CSPs. The 'supply of carriage services' is intended to be read
broadly and would include any activities associated with supply (such as billing, service
qualification and activation, fault repair, provision of information and network management
and reliability), the terms and conditions of supply, the method or mode of supply (such as
network technology and technical parameters) and the ongoing supply relationship (for
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example, dispute resolution and contract management). It would also include supply to a
carrier or another CSP (wholesale supply) as well as supply to end-users (retail supply).
Item 4B - At the end of section 99
Item 4B inserts new subsection 99(6) into the Tel Act. This provides that a service provider
determination made by the ACMA under subsection 99(1) has no effect to the extent to
which it is inconsistent with a service provider determination made by the Minister under
subsection 99(1A). Although it is considered unlikely that the ACMA and the Minister would
make inconsistent determinations, the clause provides clarity in the unlikely event that this
could happen.
Item 7 - After Part 18
Item 7 inserts a new Part 19 into the Tel Act. Part 19 establishes the SIP regime.
Proposed Division 1 - Introduction
Proposed Section 360 - Simplified outline
Proposed section 360 provides a simplified outline of proposed Part 19 to assist the reader.
Proposed Section 360A - Definitions
Proposed section 360A inserts a number of definitions for key terms used in proposed
Part 19.
The term access agreement has the same meaning as in Part XIC of the CCA.
The term building redevelopment project has the meaning given by proposed section 360Y of
the Tel Act.
The term designated day means the day on which a declaration is made under paragraph
48(1)(c) or (2)(a) of the National Broadband Network Companies Act 2011. A declaration
made under those paragraphs will state that, in the Minister's opinion, the NBN should be
treated as built and fully operational. (This designated day is different from, and not to be
confused with, the term 'designated day' used in section 577A of the Tel Act, in relation to
the structural separation of Telstra.)
The term designated service area has the meaning given to it by proposed section 360L.
The term eligible service has the meaning given to it by section 152AL of the CCA and is a
listed carriage service (within the meaning of the Tel Act) or a service that facilitates the
supply of a listed carriage service (within the meaning of that Act), where the service is
supplied, or is capable of being supplied, by a carrier or a CSP (whether to itself or to other
persons).
The term GDA94 means Geocentric Datum of Australia 1994. It is a datum (a mathematical
surface on which a mapping and coordinate system is based) and coordinate system used in
Australia. It is a system of latitudes and longitudes, or east and north coordinates, which can
be used to identify locations. It will be the default format to be used by SIPs when declaring
their service areas and when notifying the ACMA of their service areas.
The term general service area has the meaning given by proposed section 360F, being any
area in Australia other than a nominated service area or a designated service area.
The term interim NBN service area has the meaning given by proposed section 360D and
refers only to service areas in existence before the designated day.
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The term NBN Co has the same meaning as in the National Broadband Network Companies
Act 2011.
The term nominated service area refers to a nominated service area as defined in section
360GB.
The term project area, for a building redevelopment project, has the meaning given to it by
proposed section 360Y. The project area of a building redevelopment project is expected to
be the same as the provisional nominated service area.
The term provisional interim NBN service area has the meaning given to it by proposed
section 360D and refers to the service areas declared by NBN Co before the designated day.
A provisional interim NBN service area could be the same as an interim NBN service area,
but may not if there are any nominated service areas or designated service areas within the
geographic area of a provisional interim NBN service area. Those service areas are excluded
from the interim service area.
The term provisional nominated service area has the meaning given to it by proposed section
360H. A SIP declares a provisional nominated service area for a specific area (such as the
project area of a real estate development project or a building redevelopment project). The
nominated service area may be the same as the provisional nominated service area, but if
other service areas are declared within the same geographic area (for example, because a new
project area is established with a different carrier as SIP within the same geographic area)
then the nominated service area would automatically be updated to exclude subsequent
service areas.
The term qualifying carriage service is central to the SIP obligations. It covers three types of
qualifying services based on technology platform type; namely:
qualifying fixed-line carriage services;
qualifying fixed wireless carriage services; and
qualifying satellite carriage services.
Each of these types of services are separately defined in proposed section 360A.
The term qualifying fixed-line carriage service is also a central term for the SIP obligations
because it represents the baseline carriage service that a CSP should be able to deliver to an
end-user using the eligible service supplied to it by a SIP. A qualifying fixed-line carriage
service enables end-users to download communications, is supplied using a line to premises
occupied or used by an end-user, and has a peak download transmission speed of at least 25
megabits per second and a peak upload transmission speed of at least 5 megabits per second.
A SIP must supply eligible services to a CSP in order that that CSP can supply qualifying
fixed-line carriage services to end-users.
The download and upload transmission speeds set out in the definition are consistent with
those set out in NBN Co's 2016 Statement of Expectations (and supplied by NBN Co on its
fixed-line, fixed wireless and satellite networks). The speeds are also consistent with those
capable of being supplied by superfast networks built by other carriers (for example, fibre
networks in new developments or fibre-to-the-basement networks in multi-unit buildings).
The term qualifying fixed-line telecommunications network means a telecommunications
network that is used to supply a qualifying fixed-line carriage service to customers in
Australia.
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A qualifying fixed wireless carriage service has the meaning given by section 360AA (see
below).
A qualifying satellite carriage service is a carriage service supplied using a satellite which
enables end-users to download communications and has a peak download transmission speed
of at least 25 megabits per second and a peak upload transmission speed of at least 5
megabits per second or more. It does not include a public mobile telecommunications service.
If a telecommunications network is used, or proposed to be used, to supply qualifying
carriage services to customers, or prospective customers, in Australia, it will meet the
definition of a qualifying telecommunications network.
The term relevant service area means the service area (as defined in proposed section 360C),
for which the person is the SIP.
The term request refers to a request by a CSP to a SIP to connect premises or supply an
eligible service. To avoid doubt, the definition in section 360A expressly states that a request
includes notional requests by a company (as a CSP) to itself as a carrier. The obligations on a
SIP to connect premises and supply carriage services are wholesale supply obligations. In
many cases, a person who is a wholesale provider would receive a request from another
person (a retail provider). Some SIPs may, however, be functionally separated under the
arrangements set out in Schedule 2 to this Bill, and so the SIP would be receiving a request
from itself, rather than another person. The definition clarifies that such notional requests can
be requests under proposed sections 360P and 360Q.
The term service area has the meaning given to it by section 360C.
The term statutory infrastructure provider refers to the SIP for each of the service areas
specified in any of the proposed sections 360E (interim NBN service area), 360G general
service area), 360K (nominated service area) or 360L (designated service area).
The term TAB vector format means the MapInfo proprietary format that contains a spatial
representation of data using points, lines, and polygons. This definition is relevant to the
specification of service areas by SIPs under proposed section 360LA (below).
Proposed Section 360AA - Qualifying fixed wireless carriage service
Proposed subsection (1) specifies that, for the purposes of new Part 19, qualifying fixed
wireless carriage service means a carriage service that satisfies all of the following eight
criteria:
a) it is supplied using a fixed wireless technology platform;
b) it is marketed to customers, or potential customers, as a fixed wireless service;
c) it enables end users to download communications;
d) the peak download transmission speed of the carriage service is at least 25 megabits per
second;
e) the peak upload transmission speed of the carriage service is at least 5 megabits per
second;
f) it is not a public mobile telecommunications service;
g) it a listed carriage service; and
h) it satisfies any conditions determined by the Minister under subsection (2).
Proposed subsection (2) confers power upon the Minister to determine conditions for the
purposes of paragraph (1)(h). This is a reserve power that could be used to clarify matters.
For example, the Minister could add technical parameters to the service description. The
determination would be in the form of a legislative instrument, meaning that any additional
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matters specified would be subject to the consultation, disallowance and sunsetting
requirements in the Legislation Act.
Proposed subsection (3) specifies that the expression fixed wireless technology platform has
the meaning generally accepted within the telecommunications industry.
The term 'fixed wireless' is commonly used within the industry to refer to a specific network
technology that transmits data using radio signals. Fixed wireless networks deliver carriage
services to end-users at premises by sending data from a transmission tower wirelessly to an
antenna installed at the premises. Fixed wireless technology is therefore different from fixed-
line technology (where carriage services are delivered over lines to premises) and public
mobile telecommunications services (where end-users can send and receive data as they
move around, and the service is supplied by use of a telecommunications network that has
intercell hand-over functions).
Proposed Division 2 - Service areas and statutory infrastructure providers
Division 2 defines service areas and establishes how the SIP for a service area is determined.
Proposed Subdivision AA - Introduction
Proposed Section 360B - Simplified outline
Proposed section 360B provides a simplified outline of proposed Division 2.
Proposed Section 360C - Definition of service area
Proposed section 360C provides a definition of service area for the purposes of new Part 19.
There are three different service areas prior to the designated day (which is the date when the
NBN is deemed to be built and fully operational). These are:
interim NBN service areas (defined at section 360D);
nominated service areas (defined at section 360H); or
designated service areas (defined at section 360L).
After the designated day, NBN Co would become the default SIP for all of Australia. Its
service area is known as the general service area, which is defined at proposed section 360F.
Nominated service areas and designated service areas continue after the designated day.
Nominated service areas and designated service areas do not form part of the general service
area.
The Bill distinguishes service areas in which NBN Co has SIP responsibilities from service
areas in which another carrier has SIP responsibilities. Other carriers may, for example, roll
out fibre networks in new developments or specific locations. Some carriers already have
obligations to connect premises and supply services under carrier licence conditions (see
section 360J). Those carriers will be deemed to be SIPs for the areas where the licence
conditions apply (see section 360K). Other carriers will be required to declare nominated
service areas where they have contracts to supply carriage services to all the premises in an
area.
These rules would apply to infrastructure installed after Part 19 commences. However, a
number of areas in Australia are currently served by fibre networks that were not installed by
NBN Co and are the only fixed-line networks in the area. The Minister would have the power
to designate such providers' network service areas as designated service areas, and to
determine that the network providers must be the SIPs for the service areas. If this were to
occur, those SIPs would have obligations to connect all premises in the areas to their
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networks and to supply qualifying carriage services. They would also need to comply with
any standards or rules made by the Minister.
The intention is that carriers who have entered into contracts to supply carriage services to a
specific area, and who are not NBN corporations, would declare nominated service areas and
have SIP responsibilities in those areas. Carriers have entered into contracts to service these
areas on a commercial basis and therefore should be capable of meeting SIP obligations. As
there may be people living in these service areas who need to receive carriage services, the
SIP obligations ensure those people can receive services from the network best placed to do
so.
Areas that have existing superfast network infrastructure, but which are not nominated
service areas or designated service areas, would be part of the general service area. NBN Co
could overbuild networks in these areas to meet its SIP obligations or source network
capacity from another provider to do so. Although NBN Co would not have SIP
responsibilities in nominated service areas or designated service areas, it could overbuild in
these areas as well, subject to Government policy at the time and its commercial discretion,
or source network capacity from another provider to do so.
Proposed Subdivision A - Rules applicable before the designated day
Proposed Section 360D - Interim NBN service area
At present, NBN Co is required to connect premises to its networks under the current
Statement of Expectations which requires NBN Co to continue the NBN rollout using a
multi-technology mix model. This contrasts with the long-standing universal service
obligation, which requires Telstra, as the primary universal service provider, to ensure that
standard telephone services and payphone are reasonably accessible to all people in Australia
on an equitable basis, wherever they reside or carry on business. The provisions in
Subdivision A of Division 2 of Schedule 3 provide industry and consumers with certainty that
they will have similar access to superfast broadband.
Proposed section 360D provides a set of rules which apply to interim NBN service areas
before the designated day. An interim NBN service area is defined at proposed subsection
360D(1) and is so much of a provisional interim NBN service area as is not the whole or a
part of a nominated service area or a designated service area.
Proposed subsections 360D(2) and 360D(3) set out the process by which NBN Co must
declare areas to be provisional interim NBN service areas. If NBN Co publishes on its
website a statement that a particular area in Australia is ready for service, during the period
beginning at the commencement of the section and ending immediately before the designated
day, then NBN Co must declare that the area is a provisional interim NBN service area. It
must do this within ten business days after the statement was published.
If, before the commencement of the section, there was a statement published on NBN Co's
website that a particular area was ready for service, then NBN Co must declare the areas to be
provisional interim NBN service areas. It must do this within ten business days of the
commencement of the section.
These provisions are drafted to be consistent with NBN Co's rollout plan requirements. NBN
Co publishes a three-year rollout plan which sets out when it expects to commence building
its network in a 'rollout region', and when that rollout region is 'ready for service'. NBN Co
generally declares a rollout region to be ready for service once at least 90 per cent of
premises in its footprint in that area are passed. NBN Co is subject to commitments in its
special access undertaking to publish this information.
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Proposed subsection 360D(3) would apply to rollout regions that have already been declared
ready for service by NBN Co, and proposed subsection 360D(2) would apply to other rollout
regions that are declared ready for service while the NBN is being built.
Notes are included after proposed subsection 360D(2) and (3) to remind readers that
proposed section 360LA sets out the format for the declaration statements.
Proposed subsections 360D(4) and 360D(5) impose a requirement that NBN Co publish a
copy of any declaration made under proposed subsections 360D(2) and 360D(3) on its
website and give a copy of the declaration to the ACMA. The ACMA must then publish a
copy of that declaration on its website (proposed section 360Z). These publication
requirements provide transparency for industry and end-users of available network
infrastructure and who the SIP for a service area may be.
Proposed subsection 360D(6) provides that a declaration made under subsection (2) or (3)
cannot be revoked. This is to ensure end-users have certainty, once an interim NBN service
area has been declared, that their retail provider can request a connection to the NBN and the
supply of eligible services.
Under subsection 360D(7), a declaration made under subsection (2) or (3) cannot be varied
except in accordance with proposed subsection (8) or (9). These set out two circumstances.
The first is to correct a minor error. Proposed subsection (8) states that a declaration made
under subsection (2) or (3) cannot be varied by NBN Co except to correct a clerical error or
obvious mistake. The limitation to minor errors is intended to ensure that NBN Co will not be
able to change an interim NBN service area arbitrarily after it has been declared.
There could be operational reasons for variation to an interim NBN service area. For
example, developments in network technologies may lead to some reconfiguration of service
areas. Proposed subsection 360D(9) provides that the Minister can vary a declaration under
subsection (2) or (3) in writing. Such a variation would not be a legislative instrument
(subsection 360D(16)) because the variation is administrative in character. The power for the
Minister, rather than NBN Co, to vary declarations recognises that significant variations
could have significant consequences, both to end-users and retail providers, in terms of
continuity of service and access to carriage services.
Proposed subsection 360D(11) provides for the Minister, before making a decision to vary a
declaration, to conduct a public consultation process on the draft variation. The Minister must
cause to be published on the Department's website a notice setting out the draft variation and
invite persons to make submissions on it. The time limit for such submissions to be made
must not be shorter than 10 business days after the notice is published (subsection 360D(12)).
The Minister must consider any submissions received within the time limit specified in the
notice.
Proposed subsection 360D(13) requires NBN Co, in making a declaration under proposed
subsection (2) or (3), to comply with any rules which the Minister may determine under
proposed subsection 360D(14). A determination made by the Minister under subsection (14)
would be a legislative instrument. The rule-making power is a reserve power that could be
used to address circumstances as they arise. For example, there may be issue with the format
of declarations, or a need for the declarations to include specific information.
Subsections (15) and (16) clarify that, as declarations made by NBN Co under subsections (2)
or (3), and variation declarations made by NBN Co or the Minister under subsections (8) or
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(9), do not meet the requirements of subsection 8(1) of the Legislation Act, they are not
legislative instruments.
Proposed Section 360E - Statutory infrastructure provider for an interim NBN service
area
Proposed section 360E provides that NBN Co is the statutory infrastructure provider for a
provisional interim area if, before the designated day:
an area was a provisional interim NBN service area because of a declaration made by
NBN Co under proposed section 360D; and
the whole or a part of the provisional interim NBN service area is an interim NBN service
area.
Proposed Subdivision B - Rules applicable after the start of the designated
day
Proposed Section 360F - General service area
Proposed section 360F provides that the general service area means Australia other than a
nominated service area, or a designated service area.
Under section 7 of the Tel Act, Australia includes Christmas Island and the Cocos (Keeling)
Islands, and any other external Territory prescribed under the Tel Act.
Proposed Section 360G - Statutory infrastructure provider for the general service area
By operation of proposed section 360G, NBN Co will become the SIP for the general service
area after the start of the designated day. This will ensure that there is a guaranteed
infrastructure provider of last resort for all of Australia.
The designated day, as noted under section 360A, is when the Minister declares the NBN to
be built and fully operational under section 48 of the National Broadband Network
Companies Act 2011.
Proposed Subdivision C - Rules applicable before, at and after the start of
the designated day
Proposed Section 360H - Nominated service area--declaration made by a carrier
Under proposed subsection 360H(1) a provisional nominated service area will be a nominated
service area if the area is not wholly or partly:
a provisional nominated service area that is attributable to a subsequent declaration under
section 360H; or
a designated service area.
That is, a nominated service area may be the same as a provisional nominated service area,
but could be adjusted to exclude areas designated by the Minister or subsequent nominated
service areas.
The adjustment mechanism in subsection 360H(1) deals with the potential for new
development projects to be initiated within existing service areas. A carrier may be the SIP
for a nominated service area, only for another carrier then to enter into a contract to install
infrastructure to a new building within the same service area. Subsection (1) clarifies that the
new carrier takes on SIP obligations for the new building.
Proposed subsections 360H(2)-(7) then set out three avenues by which carriers nominate
service areas, and themselves as SIPs for those areas.
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The first avenue is under proposed subsection 360H(2). This is applicable where a carrier
(other than an NBN corporation) has installed telecommunications network infrastructure
(after the commencement of the section) under a contract for the supply of eligible services to
premises in the whole of the project area of a real estate development project. In these cases,
a carrier must declare that all of the project area is a provisional nominated service area
within 10 business days after completion of the infrastructure build. The carrier must also
meet the conditions specified in a legislative instrument made by the Minister (subsection
(3)).
Real estate development project is defined in section 372Q of the Tel Act. A project is a real
estate development project if it involves the subdivision of one or more areas of land into lots
(however described) and the making available of one or more of those lots for sale or lease,
or the construction of building units on any of the lots and the making available of any of
those building units for sale or lease. An area of land subdivided into lots is the project area
for the real estate development project.
The second avenue by which a carrier may declare a provisional nominated service area is
under subsection 360H(4). This covers the case where a carrier (other than an NBN
corporation) has (after the commencement of the section) installed telecommunications
network infrastructure under a contract for the supply of eligible services to premises in the
whole of the project area of a building redevelopment project. The carrier must declare that
the whole of the project area is a provisional nominated service area within 10 business days
after completing the installation of infrastructure. The carrier must also meet the conditions
specified in a legislative instrument made by the Minister (subsection (5)).
Building redevelopment project is defined at proposed section 360Y (below).
The third avenue of self-declaration is set out in subsection (6). This covers the circumstance
where:
a carrier (other than an NBN corporation) installs infrastructure under a contract in an
area (other than the project area of a real estate development project or a building
redevelopment project); and
the installation contract requires the carrier, on reasonable request by a carriage service
provider on behalf of an end-user at premises in the area, to connect the premises to a
qualifying telecommunications network so that the carriage service provider can provide
eligible services to the end user at the premises.
As with the other two circumstances mentioned above, the carrier may declare that the area is
a provisional nominated service area after it has installed the infrastructure. The carrier must
also satisfy the conditions specified in a ministerial determination, as in force at the relevant
time of proposed declaration (subsection (7)). A declaration can specify the whole or part of a
building (proposed subsection (20)). This provides flexibility, for example, enabling multiple
carriers to enter into contracts to supply services to different parts of a large building, like a
shopping centre, business complex or residential building. The different areas would
therefore constitute the service area.
It is compulsory for a carrier to declare a provisional nominated service area when it installs
infrastructure under a contract for a real estate development project or a building
redevelopment project. This is because generally there will only be a single carrier servicing
these areas. By contrast, it is at a carrier's discretion whether it declares a provisional
nominated service area when it enters into a contract to install infrastructure that is not a
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contract for a real estate development project or a building redevelopment project. This is
because the carrier may not be the only network provider to the premises in question.
Under the third avenue, if a carrier becomes the only network provider to the premises in
question, it would be open for the carrier to declare a provisional nominated service area. If
the carrier did not, the Minister could designate the area as a designated service area, and
declare the carrier to be the SIP for the service area.
In all of the three circumstances of self-declaration, the carrier is required to publish the
declaration on its website (subsection 360H(8)) and give a copy of the declaration to the
ACMA (subsection 360H(9)). The ACMA in turn must include the information on its register
of SIPs (proposed section 360Z). Together, the notification and publication requirements
ensure that end-users, and other carriers, are aware of SIP service areas and which carriers
have SIP obligations in those service areas.
Proposed section 360LA prescribes the format of the description of the area and a note
referring to this accompanies proposed subsections 360H(2), (4) and (6) as an aid to the
reader.
A declaration under subsections (2), (4) or (6) must comply with any principles determined
by the Minister, by legislative instrument, under subsection 360H(11).
Declarations made under proposed section 360H cannot be revoked (proposed subsection
(12), but they can be varied in accordance with subsection (14), which enables the Minister to
vary one in writing. A variation is not a legislative instrument, because it is administrative in
character. If the Minister varies a declaration, the Minister must give a copy of the variation
to the ACMA (proposed subsection (15). Before proceeding with a variation, the Minister
must consult the public on a draft of the variation. Specifically, the Minister must arrange for
a notice with the draft variation to be published on the Department's website and an
invitation must be made to the public to make submissions to the Minister about the draft
variation within the time limit specified in the notice (which cannot be less than 10 business
days). The Minister must consider any submissions received within the time limit specified in
the notice.
The consultation requirements, like the similar requirements in relation to the Minister's
proposed powers under section 360D to vary declarations about interim NBN service areas,
reflect the fact that significant variations to previously declared service areas can have
significant consequences for end-users and service providers, and as a result they should have
the opportunity to comment on any variation before it is made.
Subsections (18) and (19) clarify that, as neither the declarations by a person under the
section, nor variation declarations made by the Minister under proposed subsection (14), meet
the requirements of subsection 8(1) of the Legislation Act, they are not legislative
instruments.
Proposed Section 360HA - Nominated service area - anticipatory notice to be given to
the ACMA by a carrier
Proposed section 360HA sets out a process for carriers who enter into contracts for real estate
development projects or building redevelopment projects to give notice to the ACMA about
the contracts. The notices will be published by the ACMA, providing greater transparency to
end-users and other network providers that areas will become nominated SIP areas and who
the SIP will be.
Under proposed subsection 360HA(1), after the commencement of the section, a carrier
(other than an NBN corporation) will have to notify the ACMA if it enters into a contract for
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a real estate development project and would be required, under subsection 360H(2), to
declare the whole of the project area is a provisional nominated SIP area.
The notice to be provided to the ACMA must specify the project area, describe the
telecommunications network infrastructure to be installed under the contract and set out the
carrier's estimate of the likely completion date for the installation. It must be provided within
10 business days after the carrier entered into the contract.
A note reminds the reader that the format of the description of the area is specified under
proposed section 360LA.
Proposed subsection 360HA(2) sets out similar notification obligations on carriers who
entered into contracts to install infrastructure in real estate development projects before the
commencement of the section and the installation will be completed after the commencement
of the section. The notice to the be provided to the ACMA must contain the same information
as required under subsection (1), but must be given within 90 days after the commencement
of the section or, if the ACMA allows a longer period, within that longer period. The
extended notification period reflects the fact that it may take some time for carriers installing
networks in real estate development projects (some of whom are very small carriers) to
provide the information.
Under proposed subsection 360HA(3), after the commencement of the section, a carrier
(other than an NBN corporation) will have to notify the ACMA if it enters into a contract for
a building redevelopment project and would be required, under subsection 360H(4), to
declare the whole of the project area is a provisional nominated SIP area.
The notice to be provided to the ACMA must contain the same information as required under
subsection (1) and must also be provided within 10 business days after the carrier entered into
the contract.
A note reminds the reader that the format of the description of the area is specified under
proposed section 360LA.
Proposed subsection 360HA(4) then sets out similar notification obligations on carriers who
entered into contracts to install infrastructure in building redevelopment projects before the
commencement of the section, and the installation will be completed after the
commencement of the section. The notice to the be provided to the ACMA must contain the
same information as required under subsection (1), but must be given within 90 days after the
commencement of the section or, if the ACMA allows a longer period, within that longer
period.
Proposed section 360HA does not apply to the third category of project which a carrier must
declare to be a provisional nominated service area under section 360H (infrastructure
installed under a contract). This is because a carrier has discretion to declare a provisional
nominated service area in these circumstances. The carrier may determine that it would be
appropriate to declare a provisional nominated service area when it has completed installing
infrastructure, for example if it is the only provider of superfast network infrastructure to the
premises. As some premises may have more than one network provider, however, the carrier
could not anticipate this when entering into the contract and therefore could not reasonably
anticipate that it would become the SIP for the premises.
Proposed Section 360J - Nominated service area - carrier licence conditions declarations
Proposed section 360J deems certain nominated service areas by reference to specified carrier
licence conditions declarations. The declarations were made under the 2012 Adequately
Served Policy, which was designed to prevent unnecessary duplication of fibre networks
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(existing as at 1 January 2012) in residential estates that were able to deliver NBN-like
outcomes. Networks operated by four carriers were determined to have adequately served
status, and carrier licence declarations set out requirements on those carriers, on reasonable
request from a CSP, to connect premises to the specified networks in order that a CSP could
provide carriage services to the end-user at the relevant premises. The four declarations are
listed in paragraphs 360J(a)-(d).
As the four declarations set out obligations that are analogous to the SIP obligations being
implemented by the Bill, proposed section 360J, together with subsection 360K(3),
streamlines the regulatory framework by deeming the relevant carriers to be the SIPs for their
respective areas. The clauses also work together with Part 2 of Schedule 3 (below), which
repeals the four declarations immediately after Part 1 of Schedule 2 commences (i.e., the day
after the Royal Assent).
As the 'adequately served' networks will become nominated service areas, they will be taken
to have been declared under section 360H and therefore the declarations could also be varied
by the Minister under that section.
Proposed Section 360K - Statutory infrastructure provider for a nominated service
area
Proposed section 360K identifies situations where a carrier becomes a statutory
infrastructure provider for a nominated service area.
The first circumstance, under proposed subsection 360K(1), is where a carrier has declared an
area is a provisional nominated service area under section 360H. In this case, the area
becomes a nominated service area and the carrier will be the SIP for that area.
The second circumstance, under proposed subsection 360K(2), is where the Minister, by
legislative instrument, declares that subsection (1) does not apply to a specified nominated
service area and declares another carrier to be the SIP for the nominated service area. This is
a mechanism to change the SIP where the area is better served by another provider.
After the designated day NBN Co will be the default SIP if another SIP exits a nominated
service area. This is by virtue of its status as the SIP for the general service area (see
proposed section 360F above). However, a SIP could negotiate with another network
provider to take over the provision of carriage services in a nominated service area (see
proposed subsection 360R(3) below). Should another network provider take over the SIP
obligations, the Minister would need to declare that that provider is now the SIP for the
service area under subsection 360K(2). That declaration would then trigger the obligations on
the new SIP to connect premises within the service area to its networks and supply eligible
services to CSPs.
Proposed subsection 360K(3) deems carriers responsible for 'adequately served' networks to
be the SIPs for the nominated service areas created under proposed section 360J. The
Minister may, by legislative instrument, declare that subsection (3) does not apply to a
specified nominated service area and declare another specified carrier to be the SIP for the
nominated service area (subsection 360K(4)). This is a similar power to that in subsection
360K(2) and similarly provides a mechanism to change the SIP where the area is better
served by another provider.
Proposed Section 360L - Designated service areas and statutory infrastructure provider
Under proposed subsection 360L(1), the Minister may, by legislative instrument, declare that:
a specified area is a designated service area; and
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a specified carrier is the statutory infrastructure provider for the designated service area.
This is a reserve power for the Minister. For example, it could be used to designate real estate
development projects that were installed before the commencement of proposed Part 19, and
are serviced by a single superfast fixed-line network provider (other than NBN Co). In such
cases, it may be appropriate for the network provider to be the SIP for the area and so the
Minister would be able to determine this. The Minister's powers under the section are
deliberately cast broadly as there could be specific circumstances that need to be taken into
account on an area by area basis. However, as any Ministerial determination would be a
legislative instrument, it would be subject to the consultation, disallowance and sunsetting
requirements under the Legislation Act.
Proposed Subdivision D--Format of description of areas
Proposed Section 360LA - Format of description of areas
Proposed subsection 360LA(1) provides that any of the service areas declared under
subsections 360D(2) or 360D(3) (dealing with provisional interim NBN service areas),
360H(2), 360H(4) or 360H(6) (dealing with provisional nominated service areas), or section
360L (dealing with designated service areas) must be described:
in a TAB vector format using the GDA94 coordinate system; or
in any other format determined by the Minister under subsection 360LA(2).
These provisions are to ensure that a consistent and clear mapping system is used to describe
SIP service areas.
Proposed subsection 360LA(2) empowers the Minister, by legislative instrument, to
determine a format for the purposes of new Part 19. This is a reserve power that could, for
example, be used if different formats or systems become standard in the future.
The TAB vector format and the GDA94 coordinate system are used by carriers to provide
geographic information on the extent of their networks to the ACCC under the Infrastructure
Record-Keeping Rules. They were chosen so that SIP notification obligations would be
consistent with existing reporting requirements.
Proposed Division 3 - Obligations of statutory infrastructure provider
Proposed 360P - Obligation of statutory infrastructure provider to connect premises
Proposed subsection 360P(1) outlines the core obligation of a statutory infrastructure
provider to connect premises to a qualifying fixed-line telecommunications network. The
connection obligation applies 'on reasonable request' by a CSP (i.e. retailer). In turn, the CSP
must be making the request on behalf of an end-user at particular premises in the service area.
This approach reflects the fact that the NBN has been established as a wholesale-only basis to
support fairer and more effective retail competition and other new superfast networks need to
operate on a structurally or functionally separated basis. (That is, they must be wholesale-
only or only operate a retail business at arm's length, subject to the arrangements in Part 8 of
the Tel Act, as amended by Schedule 2.) CSPs can use these underlying networks to provide
retail services to their consumers.
Although the request is made on behalf of an end-user, it is not an agency relationship, as the
supply obligation is at the wholesale level (i.e. between the statutory infrastructure provider
and the requesting carrier or carriage service provider). It is not envisaged that there would be
any contractual relationship between the statutory infrastructure provider and the end-user.
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Subsection 360P(1) establishes that a SIP has an obligation to connect premises. This
obligation could only be displaced if the SIP could demonstrate that a request to connect
premises is not reasonable. In practice, whether the SIP exercises its judgement appropriately
in refusing a request to connect premises would be subject to the determination of the ACMA
and ultimately the courts.
As general principle, it is envisaged that SIP obligations would apply to the connection and
supply of services to premises that are generally accepted as places of residence, business or
other ongoing activities. SIPs will not necessarily need to connect premises and provide
services to premises that are only being occupied on a temporary or periodic basis. However,
rules in relation to such premises can be set out in Ministerial instruments under proposed
subsection (3) if required.
It is envisaged that a SIP would publish the circumstances in which it considers a request
would not be reasonable. For example, a SIP may consider that it should not have to connect
premises where doing so would expose workers to unreasonable dangers (such as in an
unsafe building), or where it may not be able to obtain relevant approvals to install a facility
from a land owner or council. A CSP may also reject a SIP's standard offer for the
connection of premises (see proposed section 360W below), and in this case the request
would not be a reasonable request.
Subsections 360P(2) and (3) provide that the obligation to connect premises on reasonable
request does not arise in the circumstances (if any) specified in a Ministerial determination.
This creates a power for the Minister to determine such circumstances, thereby clarifying
when a request is reasonable. A Ministerial determination would be a legislative instrument.
Subsections 360P(4)-(7) set out powers for the Minister to determine, by legislative
instrument, requirements that a SIP must comply with in fulfilling its obligations under
subsection (1). A requirement may be of general application or may be limited to one or more
service areas. For example, the Minister could determine a requirement to connect premises
in a particular area to a particular type of network.
Subsection 360P(7) notes, for the avoidance of doubt, that the application of subsection
33(3A) of the Acts Interpretation Act 1901 (relating to specification by matter or class) is not,
by implication, limited by subsection (6).
Subsection 360P(8) provides clarity about terms and conditions in relation to the connection
of premises in a service area. If a SIP has an obligation to connect the premises and has
published on its website the terms and conditions on which it will do so, and a CSP requests
connection on the published terms and conditions, then the SIP has an obligation to enter into
an agreement on the same terms and conditions if requested to do so by the CSP. A note
reminds the reader that proposed section 360W (below) requires SIPs to publish standard
offers for connecting premises to networks.
The obligation to comply with the request under subsection 360P(8) is only triggered if the
CSP has made a reasonable request. For the avoidance of doubt, if the SIP determines that the
request is not reasonable, it would not have to comply with subsection 360P(8).
Proposed subsection 360P(9) also covers terms and conditions in relation to the connection of
premises in a service area. Unlike subsection 360P(8), however, it covers a situation where
the connection is not covered by an agreement between the SIP and a CSP. In this situation
the SIP must comply with its obligation to connect premises on the terms and conditions that
were published on its website at the time the request was made. A note reminds the reader
that proposed section 360W (below) requires SIPs to publish standard offers for connecting
premises to networks.
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The default obligation is to connect the premises to a qualifying fixed-line
telecommunications network to allow the CSP, in turn, to provide qualifying fixed-line
carriage services to the end-user at the relevant premises. If it is not reasonable for the SIP to
connect the premises to a qualifying fixed-line network, then the SIP must connect the
premises to either a fixed wireless network or a satellite network.
For example, if NBN Co were to receive a request from a CSP to supply a fixed-line carriage
service to premises within the NBN fixed wireless footprint, it would not be reasonable for
NBN Co to have to fulfil the default obligation. It could instead connect the premises to a
fixed wireless network.
It is envisaged that SIPs would be able to set network preference rules that match the network
technology they have deployed in particular areas. They could determine the most
appropriate technology on an area by area basis.
Proposed subsection 360P(10) provides a mechanism for the Minister, by legislative
instrument, to specify when it is 'reasonable' to connect premises to a qualifying fixed-line
telecommunications network. The instrument could specify a condition or a set of conditions.
For example, a Ministerial instrument could specify that, if a SIP only has a fixed wireless
network in an area, but that network is at full capacity, it would be reasonable for the SIP to
connect premises by satellite.
Proposed subsection 360P(11) provides that a ministerial determination made under proposed
subsection (10) must be an instrument of a legislative character. This is included for the
avoidance of doubt.
Proposed subsection 360P(12) sets out an obligation on a SIP if it refuses a request from a
CSP to connect particular premises. The SIP must reach a decision on the request within 10
business days. If the SIP refuses the request, it must give written notice of the refusal to the
CSP within 5 business days of the decision to refuse. In turn, if a CSP receives this notice, it
must give a copy of the notice to the end-user within 5 business days after receiving the
notice.
This provides a mechanism for end-users to have visibility, when a connection request is
refused, of which party has refused the request and on what grounds. A customer could then
provide the notice to the ACMA or the TIO if she or he wished to dispute the refusal.
Proposed section 360Q - Obligation of statutory infrastructure provider to supply
eligible services
Proposed subsection 360Q(1) sets out the other core SIP obligation: the obligation to supply,
on reasonable request by a CSP, an eligible service to the CSP in order that the CSP can
provide qualifying carriage services to end-users at premises in the SIP's service area. The
obligation includes a requirement to supply eligible services on the terms and conditions that
were published on the SIP's website at the time the CSP made the request.
The accompanying note refers the reader to obligations to publish terms and conditions set
out in new section 360X.
Subsection 360Q(1), together with the definition of 'qualifying carriage service' in new
section 360A, establishes a baseline broadband speed that end-users can expect. A CSP
should be able to use the eligible service supplied by the SIP to supply broadband services to
end-users with peak download transmission speeds of at least 25 megabits per second and
peak upload transmission speeds of at least 5 megabits per second. These speeds are those
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that the Government expects NBN Co to supply over the NBN, as set out in the Statement of
Expectations issued on 24 August 2016.26 Where a network is capable of achieving higher
speeds, then it would be expected that SIPs would supply faster speeds commercially in
response to end-user demand. Conversely, a SIP could provide slower speeds in response to
consumer demand, but it needs to be able to supply the baseline speeds as well.
Under the approach set out in this Bill, the actual speeds supplied to end-users by CSPs are
not determined by the SIP. The SIP would supply a wholesale service that on its own could
support the baseline speeds, but the CSP would be responsible for the actual speeds end-users
receive. There can be a range of factors that affect the actual speeds end-users experience,
including the amount of capacity and congestion on the network units used by the CSP, the
capabilities of customer premises equipment and the extent of any interference between
broadband systems used by different network operators. The Government has taken, and is
taking, other steps to ensure that consumers can have greater clarity from CSPs about actual
service speeds, including the ACCC's broadband performance monitoring and reporting
program. The Government also made regulations in 2015 to allow industry to develop a code
to manage interference between competing broadband systems; industry is currently
developing that code.
Proposed subsection 360Q(1A) provides that the eligible service supplied by the SIP must
enable a CSP to supply carriage services that can be used by end-users at premises in the
service area to make and receive voice calls. Given concerns about the quality of voice
services provided over satellite networks, however, the obligation in subsection (1A) does not
apply if the carriage service is supplied using a satellite (subsection 360Q(1B)). Voice
services remain important to end-users and the obligation under subsection (1A) would allow
CSPs to supply voice services to end-users over fixed-line and fixed wireless SIP networks if
end-users wish to receive them. A SIP would not need to supply a standalone voice service.
Under the approach in this Bill, it would be enough for the SIP to provide an eligible service
that could be used by a CSP to supply both broadband and a Voice over IP service.
Subsection 360Q(1C) clarifies, for the avoidance of doubt, that the requirement under
subsection (1A) is part of the obligation under subsection (1). Accordingly, the SIP must
supply, on fixed-line and fixed wireless networks, an eligible service that will enable a CSP
to supply an end-user with superfast broadband and voice.
Proposed subsection (2) provides a limited exemption from subsection (1). Where a SIP
supplies an eligible service that is also a declared service within the meaning of Part XIC of
the CCA, and the SIP is subject to a standard access obligation (within the meaning of that
Part) in relation to the service, then the SIP is exempt from subsection (1) if two criteria are
met. The declared service must support the baseline speeds for qualifying carriage services
and must enable a CSP to supply voice services to end-users (subsection 360Q(2A) clarifies
that the voice obligation does not apply if the carriage service is supplied using a satellite).
Subsection (2) recognises that SIPs may supply declared services and therefore should, if the
declared service is fundamentally the same as the SIP service, only be subject to one supply
obligation, being that under the CCA. Effectively the declared service is taken to be supplied
in fulfilment of the SIP service supply obligation.
Consistent with the approach in proposed section 360P, under subsection 360Q(3) the SIP
also is not required to comply with its supply obligations under subsection (1) in the
circumstances (if any) specified in a ministerial determination made under subsection
26
Available at http://www.nbnco.com.au/content/dam/nbnco2/documents/soe-shareholder-minister-letter.pdf.
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360Q(4). Such a determination would be made by legislative instrument and could set out
grounds when a request should not be considered to be reasonable. For example, a SIP could
refuse to supply if it cannot obtain required approvals from a land owner or a local council.
Proposed subsection 360Q(5) provides that a SIP is required to also comply with any
requirement determined by the Minister by legislative instrument under proposed
subsection 360Q(8). Requirements specified by the Minister can be of general application or
more specific application (for example, one or more service areas: proposed subsection (7)).
Proposed subsection (8) is included for the avoidance of doubt and clarifies that subsection
33(3A) of the Acts Interpretation Act 1901 (dealing with specification by matter or class) is
not limited by subsection (7).
Proposed subsection 360Q(9) establishes how the terms and conditions of supply are
determined. Key preconditions are that a SIP must have published the terms and conditions of
supply on its website (as it would be required to do by new section 360X below), and the SIP
has an obligation to supply an eligible service in response to a request from a CSP. If these
preconditions are met, and a CSP asks the SIP to enter into an agreement that sets out terms
and conditions that are the same as those published by the SIP, then the SIP must comply
with the request.
As is the case under proposed section 360P, a SIP would only be required to comply with a
request under subsection 360Q(9) if it has an obligation to comply. The obligation to comply
may not arise if the request made by the CSP is not reasonable.
A note is included to remind readers of the requirements under proposed section 360X for
SIPs to publish standard offers for the supply of eligible services.
Proposed subsection 360Q(10) is similar to subsection (9) but establishes that, if the supply
of the eligible service is not covered by an agreement between the SIP and the CSP, then the
SIP must comply with its obligation to supply the service on the terms and conditions that
were published on its website at the time the request was made.
A note also reminds readers that proposed section 360X requires SIPs to publish standard
offers for the supply of eligible services.
Proposed section 360R - Notification obligations of statutory infrastructure provider
Proposed section 360R deals with the notification obligations of SIPs when they need to
cease operating in a nominated and designated service areas. It is intended to ensure that early
notice is provided when the SIP, for whatever reason, can no longer continue as a SIP .
Notice at the earliest stages will assist in identifying and establishing the best alternative SIP
or putting in place arrangements for NBN Co to take on the role as the default SIP for the
whole of Australia. The provision is a reserve mechanism to deal with the unlikely but
possible scenario that an alternative SIP may need to leave the market.
Proposed subsection 360R(2) requires a SIP, as soon as practicable after becoming aware that
it will no longer be able to fulfil its obligations in respect of its service area under proposed
sections 360P or 360Q, to give written notice of the matter to the Secretary of the Department
and the ACMA. If the SIP becomes aware of another carrier who is willing to become the
replacement SIP for the area, the impacted SIP must also give written notice of the matter to
the Secretary of the Department and the ACMA (subsection 360R(3)).
These provisions are intended to address circumstances where a SIP may be proposing to
wind up its business or change its business operations. The SIP should provide ample time for
a transition to a new provider. It may be possible for carriers to negotiate the transfer of the
SIP obligations on a commercial basis. If such negotiations are not successful, or do not
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occur, or no other arrangements are put in place, then the relevant service area would revert
to the general service area. As the default SIP with responsibility for the general service area,
NBN Co would become the SIP for the service area.
These provisions apply when a SIP elects to give up its SIP status voluntarily and has some
time to exit the market. However, a SIP may exit the market suddenly, for example, if it
becomes bankrupt. In such cases the relevant service area would become part of the general
service area and NBN Co would, as the default SIP, become responsible for meeting SIP
obligations in the area. NBN Co may need to construct network infrastructure in the service
area or obtain network capacity from another provider. This would mean that end-users in the
area may experience some service disruption while new infrastructure is installed. It is
envisaged that the Minister could determine timeframes for the connection of premises, and
the supply of eligible services, that would apply in these circumstances. The Bill provides the
Minister with such powers at proposed section 360U below.
Proposed section 360S - Target for NBN Co
Proposed subsection 360S(1) sets out two statements of the intention of the Parliament in
respect of NBN Co in fulfilling its SIP obligations under section 360P or 360Q. These
statements are expressed as targets for NBN Co to achieve. The targets are based on a target
set out in the Government's Statement of Expectations provided to NBN Co on 24 August
2016.
Proposed subsection 360S(1) states that it is Parliament's intention that NBN Co should take
all reasonable steps to ensure that its fixed-line networks are capable of being used to supply
fixed-line carriage services with:
peak download transmission speeds of at least 50 megabits per second; and
peak upload transmission speeds of at least 10 megabits per second;
to at least 90 per cent of premises in the areas that, according to NBN Co's website, are
serviced by NBN Co's fixed-line carriage services.
While the Government has set a baseline speed across all of NBN Co's technology platforms
of 25 megabits per second download transmission speed and 5 megabits per second upload
transmission speed, it has set an additional target of 50 megabits per second download
transmission speed and 10 megabits per second upload transmission speed for NBN Co's
fixed-line network. Nothing in the Bill is intended to prevent a SIP from offering faster or
slower speeds as well, to meet consumer demand, but a SIP must provide the baseline speeds
required under section 360P on reasonable request.
A similar Parliamentary intention statement is set out at proposed subsection 360S(2). The
provision states that it is the Parliament's intention that NBN Co should take all reasonable
steps to ensure that NBN Co's fixed-line networks (when considered together) are capable of
being connected to at least 92% of Australian premises. This target is required to provide
context for the target in proposed subsection (1). The higher speed target proposed for 90 per
cent of premises that are serviced by NBN Co's fixed-line carriage services only has force if
it is clear how many premises could be connected to the NBN fixed-line network.
NBN Co indicated in its 2017 Corporate Plan (page 40) that it is aiming to provide its fixed-
line network to 92 per cent of premises.
In fulfilling its obligations under section 360P or 360Q, NBN Co must have regard to the
targets in subsections 360S(1) and (2).
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Proposed Division 4 - Standards, benchmarks and rules
Proposed Section 360U - Standards and benchmarks
Proposed section 360U sets out the power of the Minister to impose standards and
benchmarks that SIPs need to comply with in fulfilling their obligations. These powers are
based on similar powers that exist in relation to the universal service obligation. Experience
has shown that an obligation to connect premises to a network, and to supply services, may
need to be subject to further requirements setting out the timeframes for connection and
supply, and also for rectifying service faults and difficulties, and general network reliability
measures. These are reflected, for example now, in the rules associated with the supply of
standard telephone services. These obligations are best set out in legislative instruments
rather than in legislation because of the level of detail that may be required and because they
may need to be adapted over time in response to market circumstances.
The Minister will have powers to determine standards in relation to the matters set out in
paragraphs 360U(1)(a)-(g). By operation of proposed subsection 360U(4), a statutory
infrastructure provider is required to comply with any such standard in force.
Proposed paragraphs (a) - (g) make it clear that standards may deal with:
terms and conditions of the supply of an eligible service to a CSP (paragraph (a));
the reliability of the eligible services supplied to a CSP (paragraph (b));
the maximum period within which a SIP must begin to supply an eligible service
(paragraph (c));
the maximum period within which a SIP must rectify a service fault or difficulty
(paragraph (d));
any other matter concerning the supply, or proposed supply, of eligible services
(paragraph (e));
the maximum period within which a SIP must connect premises in a service area to a
qualifying telecommunications network (paragraph (f)); and
any other matter concerning the connection of premises to a qualifying
telecommunications network (paragraph (g)).
Proposed subsection 360U(2) clarifies that a determination under subsection (1) can be of
limited or general application. Proposed subsection (3) makes clear, for the avoidance of
doubt, that subsection (2) does not operate, by implication, to limit subsection 33(3A) of the
Acts Interpretation Act 1901 (dealing with specification by matter or class).
Proposed subsection 360U(3A) enables standards determined under subsection (1) to make
provision for, or in relation to, a matter by conferring a power on the ACMA to make a
legislative instrument. This is provided for administrative flexibility and could be used, for
example, to empower the ACMA to prescribe formats for reports or specify more detailed
requirements
A SIP must comply with a standard (subsection 360U(4)). Proposed subsection 360U(5) sets
out an exception. A SIP is not required to comply with a standard if the standard is
inconsistent with an access agreement it entered into with another party before the
commencement of the standard, provided that the access agreement has not been varied at
any time after the commencement of the standard. Proposed subsection 360U(5) ensures that
existing agreements can continue to operate but also ensures that new or varied agreements
must comply with the standard.
Proposed subsection 360U(6) confers power on the Minister to set, by legislative instrument,
minimum benchmarks in relation to compliance by a SIP with a standard. A SIP must meet or
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exceed a minimum benchmark that is in place at any given time (subsection 360U(9)). For
example, a benchmark may require that connection and fault rectification timeframes are met
in 90 per cent of cases.
The benchmark setting instrument can be of general application or limited application
(subsection 360U(7)). Proposed subsection (8) makes clear, for the avoidance of doubt, that
subsection (7) does not operate, by implication, to limit subsection 33(3A) of the Acts
Interpretation Act 1901 (dealing with specification by matter or class).
Proposed subsection 360U(8A) enables benchmarks determined under subsection (6) to make
provision for, or in relation to, a matter by conferring a power on the ACMA to make a
legislative instrument. This is provided for administrative flexibility and could be used, for
example, to allow the ACMA to prescribe formats for reports or specify more detailed
requirements.
Proposed Section 360V - Rules
Proposed subsection 360V empowers the Minister to make rules (by legislative instrument)
that must be complied with by SIPs.
The types of matters that a rule can be made about are:
processes for resolving complaints about eligible service supplied by a SIP to CSPs;
any other matter concerning the supply of such an eligible service to a CSP;
processes for resolving complaints about the connection of premises in the service area to
a qualifying telecommunications network; and
any other matter concerning the connection of premises in a service area to a qualifying
telecommunications network.
Rules determined under proposed subsection 360V(1) can confer power on the ACMA to
make a legislative instrument in relation to a matter relevant to the Rules (proposed
subsection 360V(1A)). For example, the ACMA may wish to prescribe formats for
documents used in resolving complaints about the supply of an eligible service or the
connection of premises to a qualifying telecommunications network.
A SIP must comply with rules made under subsection (1) (proposed subsection 360V(2)).
However, a SIP is not required to comply to the extent that a rule is inconsistent with an
access agreement that the SIP has entered into before the rule commences, provided that the
access agreement has not been varied after the rule commenced (proposed subsection
360V(3)). Subsection (3) ensures existing access agreements can continue to operate but also
ensures that new or varied agreements must comply with rules.
Proposed Division 5 - Publication of offers
Proposed section 360W - Publication of offer - connection of premises
Proposed subsection 360W(1) requires a SIP to publish, on its website, the price and non-
price terms and conditions for connecting premises in the service area to a qualifying
telecommunications network. If price-related terms and conditions cannot be published, the
SIP must publish its method of ascertaining the price for connecting premises.
One of the published conditions must be the maximum period within which the SIP will
connect premises following a CSP's request (proposed subsection (2). This is specified to
ensure that this matter is included among the published terms and conditions, but it is
envisaged that published offers would include all the terms and conditions necessary for a
CSP to enter into an access agreement for the connection of premises. For the avoidance of
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doubt, subsection (3) makes clear that proposed subsection (2) does not limit proposed
subsection (1).
Proposed subsection (4) provides that an offer published in accordance with subsection (1)
has no effect to the extent it is inconsistent with either:
a standard determined by the Minister under proposed section 360U; or
a rule determined by the Minister under proposed section 360V.
This enables such Ministerial instruments to shape important aspects of offers in relation to
connection, including price and non-price terms and conditions.
Proposed section 360X - Publication of offer - supply of eligible services
Proposed section 360X largely mirrors section 360Q, but applies in relation to offers by the
SIP to supply eligible services in fulfilment of its supply obligation as opposed to its
connection obligation. Under proposed subsection 360X(2), the terms and conditions that a
SIP must publish must include the maximum period within which the SIP must begin to
supply a service following a request by a CSP, and the maximum period within which the SIP
must rectify a fault or service difficulty. These are specified to ensure that they are included
in the published terms and conditions, but it is envisaged that published offers would include
all the terms and conditions necessary for a CSP to enter into an access agreement for the
supply of the eligible service. For the avoidance of doubt, subsection (3) makes clear that
proposed subsection (2) does not limit proposed subsection (1).
Subsection 360X(4) ensures that a SIP's published offer has no effect to the extent to which it
is inconsistent with a Ministerial standard or rule. As timeframes for service supply and fault
rectification could be determined by the Minister through a standard under proposed section
360U, a SIP would need to amend its published offers to match any standard once made.
In the case of NBN Co, it is envisaged that NBN Co, if it wishes, will be able to meet its
obligations as a SIP to publish offers under proposed sections 360W and 360X through the
publication of its standard form of access agreement (see section 152CJA of the CCA)
providing the standard form of access agreement covers the requirements of the SIP offers
and specifies it is also being issued for the purpose of these provisions. The SIP arrangements
are not intended to unnecessarily duplicate processes and documentation where effective
processes and documents already are in place. That is, existing processes and documents that
effectively meet SIP obligations can be used to fulfil SIP obligations.
Division 6 - Miscellaneous
Proposed section 360XA - Periodic compliance reports
Proposed subsection 360XA(1) confers powers on the Minister to make rules, by legislative
instrument, requiring each SIP to give to the ACMA periodic reports about their compliance
with new Part 19. This additional reporting obligation is designed to incentivise provider's
compliance and provide assurance to the public about the achievement of the important
connection and supply outcomes set out in Part 19.
SIPs must comply with any rules made by the Minister (subsection (2)).
Proposed subsection (3) provides that a person is not excused from giving a report under
rules under subsection (1) on the ground that the report might tend to incriminate the person
or expose the person to a penalty. However, as the common law privilege against self-
incrimination entitles a natural person to refuse to answer any question, or produce any
document, if the answer or the production would tend to incriminate that person, subsection
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(4) provides that any information provided would not be admissible in evidence against the
person, protecting the privilege in the case of natural persons.
Subsection 360XA(5) states, for the avoidance of doubt, that section 360XA does not limit
Part 27 of the Tel Act. Part 27 confers information-gathering powers on the ACMA.
Proposed section 360Y - Building redevelopment projects etc.
Proposed section 360Y defines building redevelopment project. This is an important term in
subsections 360H(4) and 360HA(3) and (4), which deal with provisional nominated service
areas and anticipatory notifications for building redevelopment projects.
In broad terms, a project will be considered to be a building redevelopment project if it
involves:
the significant refurbishment or repurposing of one or more buildings so as to bring into
existence one or more building units;
the making available of any or all of those building units for sale or lease; and
it satisfies any conditions set out in a Ministerial instrument made under proposed
subsection (3).
All of the areas occupied by the building or buildings are the project area for the building
redevelopment project.
A building redevelopment project would therefore encompass projects which change an
existing building for a new purpose. For example, the term would cover converting an old
warehouse into residential apartments or the subdivision of an existing house into two new
flats.
Proposed section 360Z - Register of statutory infrastructure providers
Proposed section 360Z provides that the AMCA is required to maintain a Register of SIPs.
That register must detail the names of each SIP, and the relevant service areas for each of
those providers. The Register also has to include anticipatory notices given to the ACMA by
SIPs under subsections 360HA(1), 360HA(2), 360HA(3) or 360HA(4). Those subsections
include details of contracts carriers have entered into for real estate development projects or
building redevelopment projects and, when it has installed the infrastructure, the carrier
would become the SIP for the project area.
Notices given in relation to service areas have to include the geographic coordinates of the
service area (subsection 360LA). Accordingly, the Register would include geographic
information for each service area, enabling them to be readily mapped online.
The section also provides that the Register may be maintained by electronic means, and is to
be made available for inspection on the ACMA's website.
Proposed section 360ZA - Delegation
Proposed subsection 360ZA(1) provides that the Minister may delegate his or her powers
under the 13 listed provisions to the ACMA. This is a broad ranging delegation which would
be used to transfer administrative aspects of the SIP regime to the ACMA if considered
appropriate, particularly after the arrangements have been bedded down. For example, the
Minister could elect to delegate the determination of standards to the ACMA, or conditions
on declarations by SIPs of nominated service areas.
In performing a delegated function or exercising a delegated power, the ACMA must comply
with any written directions of the Minister (proposed subsection (2)).
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Proposed subsection 360ZA(3) provides that the Minister may delegate any or all of his or
her powers under proposed subsection 360H(14) to a member of the ACMA, or a person who
is an SES, or acting SES, staff member of the ACMA. The Minister's powers under proposed
subsection 360H(14) relate to making a variation of a nominated service area declaration
made by a carrier. As such variations may be mechanistic, for example, being variations to
adjust geographic coordinates if the boundaries of the project area change, subsection (3)
provides flexibility in the administration of the SIP arrangements.
In exercising a delegated power, the delegates must comply with any written directions of the
Minister (proposed subsection (4)).
Part 2 - Repeals
Carrier Licence Conditions (NT Technology Services Pty Ltd) Declaration 2014
Item 8 - The whole of the Declaration
Item 8 repeals in full the Carrier Licence Conditions (NT Technology Services Pty Ltd)
Declaration 2014.
Carrier Licence Conditions (OptiComm Pty Ltd) Declaration 2013
Item 9 - The whole of the Declaration
Item 9 repeals in full the Carrier Licence Conditions (OptiComm Pty Ltd) Declaration 2013.
Carrier Licence Conditions (Pivit Pty Ltd) Declaration 2013
Item 10 - The whole of the Declaration
Item 10 repeals in full the Carrier Licence Conditions (Pivit Pty Ltd) Declaration 2013.
Carrier Licence Conditions (Urban Renewal Authority Victoria t/a Places Victoria Pty Ltd)
Declaration 2014
Item 11 - The whole of the Declaration
Item 11 repeals in full the Carrier Licence Conditions (Urban Renewal Authority Victoria t/a
Places Victoria Pty Ltd) Declaration 2014.
The four declarations listed above are no longer required because once Part 1 comes into
effect, the real estate development areas covered by the declarations will have, by operation
of proposed subsection 360J, become nominated service areas. If the declarations were
retained, they would create duplicate regulatory connection and supply obligations on these
carriers. As such, it is necessary to revoke the declarations.
Notwithstanding the revocation of the declarations, the service areas currently set out in the
declaration are able to be varied by the Minister under section 360H.
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Schedule 4 -- Funding of fixed wireless broadband and satellite broadband
Item 1A - Before paragraph 151BU(4)(e)
Item 1A inserts two new paragraphs 151BU(4)(dc) and 151BU(4)(dd) into the CCA. The
paragraphs have the effect of enabling the ACCC to require carriers and CSPs to keep and
provide records regarding the operation of Part 3 of the Tel Act (which deals with the funding
of fixed wireless and satellite broadband) and the operation of the Telecommunications
(Regional Broadband Scheme) Charge Act 2017 (Charge Act).
This information will facilitate the ACCC's five-yearly advice to the Minister regarding the
base and administrative cost components if the charge, required under clauses 13 and 17 of
the proposed Charge Bill. While preparing this advice, the ACCC will need to consider the
size and character of the telecommunications market in order to assess whether the
components are sufficient to meet eligible funding recipients' fixed wireless and satellite
costs as well as the ACMA's and the ACCC's administrative costs.
Item 1B - Before subparagraph 151BUA(2)(b)(iii)
Item 1B inserts two new subparagraphs 151BUA(2)(b)(iic) and 151BUA(2)(b)(iid) into the
CCA. The subparagraphs have the effect of enabling the ACCC to give the public access to
reports provided by carriers and CSPs under section 151BU of the CCA, if it is satisfied
disclosure would facilitate the operation of Part 3 of the Tel Act (which deals with the
funding of fixed wireless and satellite broadband) and the operation of the proposed Charge
Act.
The ability to publicise the reports where appropriate will increase the transparency of the
Scheme.
Item 1C - Before subparagraph 151BUB(2)(b)(iii)
Item 1B inserts two new subparagraphs 151BUB(2)(b)(iic) and 151BUB(2)(b)(iid) into the
CCA. The subparagraphs have the effect of enabling the ACCC to direct carriers and CSPs to
give the public access to reports provided under section 151BU of the CCA, if it is satisfied
disclosure would facilitate the operation of Part 3 of the Tel Act (which deals with the
funding of fixed wireless and satellite broadband) and the operation of the proposed Charge
Act.
Item 1D - Before subparagraph 151BUC(2)(b)(iii)
Item 1B inserts two new subparagraphs 151BUC(2)(b)(iic) and 151BUC(2)(b)(iid) into the
CCA. The subparagraphs have the effect of enabling the ACCC to direct carriers and CSPs to
give the public periodic access to reports provided under section 151BU of the CCA, if it is
satisfied disclosure would facilitate the operation of Part 3 of the Tel Act (which deals with
the funding of fixed wireless and satellite broadband) and the operation of the proposed
Charge Act.
Telecommunications Act 1997
Item 1 - Section 7
Item 1 inserts a new definition into section 7 of the Tel Act. The term Federal Circuit Court
means the Federal Circuit Court of Australia. Under proposed sections 102E and 102N of
Schedule 4 to the Bill, the ACMA can recover unpaid charge debts and late payment
penalties in the Federal Court, the Federal Circuit Court or a State or Territory Court with
appropriate jurisdiction.
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Item 2 - Paragraphs 58(2)(a) and (b)
Item 2 makes a modification to paragraph 58(2)(a) and (b) of the Tel Act, as a consequence
of the change made by item 5. The item inserts a new reference to subsection 72(2B), being a
new ground upon which a carrier licence may be cancelled.
Item 3 - After subsection 58(4A)
Item 3 inserts a new subsection 58(4B) and represents a consequential change as a result of
the introduction of the new charge (as introduced by the Charge Bill). This new provision
describes when a person will be considered to be disqualified as a result of not paying the due
charge.
Subsection 58(1) enables the ACMA to refuse to grant a carrier licence to an applicant if the
applicant is disqualified immediately before the ACMA makes its decisions on the
application. Subsection 58(4) sets out the circumstances for when an individual is
disqualified for failure to pay the universal service charge. The proposed amendments to
subsection 58(4) make clear that this subsection is to apply to the new charge. The proposed
new subsection 58(4B) is intended to operate concurrently with subsection 58(4) and sets out
the circumstances when an individual is disqualified for failure to pay the new industry
charge proposed to be imposed by the Charge Bill.
These amendments will enable the ACMA to refuse to grant a carrier licence if at the
appropriate point in time the individual has been disqualified due to a failure to pay either the
universal service charge or the new charge.
Item 4 - Paragraph 58(5)(a)
Item 4 makes a modification to paragraph 58(5)(a) of the Tel Act, as a consequence of the
change made by item 5. The item inserts a new reference to subsection 72(2B), being a new
ground upon which a carrier licence may be cancelled.
This amendment ensures that subsection 58(5) - which applies to when a partnership is
disqualified - will also operate with respect to a disqualification arising from the failure to
pay the new charge.
Item 5 - After subsection 72(2A)
Section 72 enables the ACMA to cancel a carrier licence held by a carrier under various
circumstances. Item 5 is a consequential amendment arising from the introduction of the new
charge - a new subsection 72(2B) is inserted. The proposed amendment will enable the
ACMA to cancel a carrier licence if a carrier fails to pay in full by the due date the new
charge proposed to be imposed by the Charge Bill.
Item 6 - Subsection 570(4)
Item 6 repeals subsection 570(4), and substitutes a provision that provides that the pecuniary
penalty payable under subsection 570(1), by a person other than a body corporate, is not to
exceed:
(a) 10,000 penalty units for each contravention of subsection 68(1) or (2) that relates to
the carrier license condition set out in Part 1 of Schedule 1, where that condition
relates to subsection 97(1) or 97(1A) of the TCPSS Act.
(b) $50,000 for each contravention, in any other case.
Subsections 97(1) and 97(1A) refer to provisions set out in Item 13 that prohibit a carrier
from entering into a scheme for the sole or dominant purpose of avoiding paying the charge
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or obtaining the benefit of the transitional exemption for the first 25,000 residential and small
business chargeable premises on a carrier's network.
Item 7 - After paragraph 1(ja) of Schedule 4
Clause 1 of Schedule 4 to the Tel Act sets out the kinds of decisions that may be subject to
reconsideration by the ACMA.
Item 7 amends the current list by adding new paragraphs (jaa) and (jab), covering two
additional kinds of decisions:
under new subsection 102N(3), to remit the whole or part of a late payment penalty
that a person is liable to pay in respect of the new charge amount that remains
unpaid.
under new subsections 102Z(2) and 102ZA(2), to make a notifiable instrument.
New subsections 102N(3), 102Z(2) and 102ZA(2) are set out in Item 13.
Telecommunications (Consumer Protection and Service Standards) Act 1999
Item 8 - Section 4 (simplified outline)
Section 4 of the TCPSS Act sets out the simplified outline for that Act.
Item 8 amends the simplified outline in section 4 of the TCPSS Act by inserting, before dot
point 6, several other new dot points explaining that:
(a) the Secretary is responsible for contracts and grants relating to fixed wireless and
satellite broadband services;
(b) the ACMA is responsible for assessing and collecting the new charge; and
(c) the proceeds of the new charge will be used to pay contractors and grant recipients
and offset designated administrative costs.
Item 9 - Subsection 5(2) (definition of contractor)
Item 10 - Subsection 5(2) (definition of grant recipient)
These items repeal the definitions of 'contractor' and 'grant recipient'. The definitions are
relocated, by Item 11, to a new consolidated definition section, new section 8A.
Item 11 - Section 8A Definitions
Item 11 is a new provision that has centrally located the definitions (in modified form) of
'contractor' and 'grant recipient'.
Item 12 - Subsections 14(2) and (3)
Item 12 amends subsections 14(2) and (3), by omitting the words 'this Act' and substituting
the words 'this Part'. This ensures that the definitions of contractor and grant recipient for
public interest telecommunications (to which Part 2 of the TCPSS Act relates) are
distinguished from the specific definitions of contract and grant recipient used in new Part 3
of the TCPSS Act.
Item 13 - After Part 2
This item inserts a new Part 3 into the TCPSS Act. There are nine new divisions comprising
the proposed Part.
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Part 3--Funding of fixed wireless broadband and satellite broadband
Division 1--Introduction
New section 75 - Simplified outline of this Part
New section 75 of the TCPSS Act sets out the simplified outline for this Part, explaining that:
(a) the Secretary is responsible for contracts and grants relating to fixed wireless and
satellite broadband services;
(b) the ACMA is responsible for assessing and collecting the new charge; and
(c) the proceeds of the new charge will be used to pay contractors and grant recipients
and offset designated administrative costs.
New section 76 - Definitions
New section 76 sets out the key definitions for new Part 3.
The term administrative cost instalment of charge has the meaning given by
subsection 102D(5).
The ordinary meaning of the term, amount has been modified to include a nil amount. This is
important as it is possible for a charge liability to be nil.
The term annual administrative cost amount, for an eligible financial year, has the meaning
given by section 14 of the Charge Act.
The term annual base amount, for an eligible financial year, has the meaning given by new
section 10 of the Charge Act.
The term annual chargeable premises amount, for a financial year, has the same meaning
given by new section 9 of the Charge Act.
The term associate has the same meaning as in Part 8 of the Tel Act. Section 152 in Part 8 of
the Tel Act currently provides an expansive definition of an associate of a person who is in a
position to exercise control of a telecommunications network or a company. Under the
changes to Part 8 set out in Schedule 2 to this Bill, section 152 will only apply to networks
that came into existence before 1 July 2018. Proposed new section 155A (see item 56 of
Schedule 2) will provide a matching definition of associate for local access lines that come
into existence on or after 1 July 2018.
The term base instalment of charge has the meaning given by subsection 102D(5).
The term broadcast television stream means services that have a continuous stream of
program material that is identical to the program material provided by either a licensed
television broadcasting service or a national television broadcasting service. The terms
licensed television broadcasting service and national television broadcasting service are
separately defined in proposed section 76.
A licensed television broadcasting service is a broadcasting service that provides television
programs and is either provided under a licence allocated by the ACMA or a class license
determined by the ACMA. Examples include commercial and community television
broadcasting services.
A national television broadcasting service is a broadcasting service that provides television
broadcasting and is a national television broadcasting service within the meaning of the
Broadcasting Service Act 1992. Examples include the Australian Broadcasting Corporation
(ABC) and the Special Broadcasting Service Corporation (SBS).
The term charge means the charge imposed by the Charge Act.
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The term chargeable premises associated with a local access line of a person has the
meaning given by section 93.
The term charge offset certificate means a certificate issued under section 98.
The term contractor has the meaning given by section 80.
The term declared service has the same meaning as in Part XIC of the CCA.
The term designated administrative costs covers the ACMA and the ACCC's employment
costs, expenses, any other costs, and other obligations incurred by the ACMA and ACCC in
connection with their functions or powers, including costs incurred enforcing the Scheme.
Designated administrative costs do not include amounts incurred under contracts or by way
of grants made under section 80.
The term designated broadband service has the meaning given by section 76AA.
The term eligible financial year has the meaning given by section 79.
The term eligible funding recipient has the meaning given by section 78.
The term eligible service has the same meaning as in section 152AL of the CCA
The term exempt line has the meaning given by section 96.
The term exempt premises has the meaning given by section 95.
The term grant recipient has the meaning given by section 80.
The term instalment of charge has the meaning given by subsection 102D(5).
The term local access line has the same meaning as in section 76A.
The term month means calendar month.
The term multi-unit building is defined as meaning either a building that has 2 or more units
for occupation as a place of residence or business, for example an apartment block; or a
building in a complex, where each building has 2 or more units for occupation as a place of
residence or business, for example a shopping complex.
The term NBN Co has the same meaning as in the National Broadband Network Companies
Act 2011.
The term nominal funding entitlement of a person for a financial year, means the amount
specified in a nominal funding entitlement certificate held by the person in relation to the
financial year.
The term nominal funding entitlement certificate means a certificate issued under section 86.
The term potentially chargeable premises has the meaning given by section 94.
The term potentially concessional premises has the meaning given by section 96A.
Subsection 100(4) sets out carriers' reporting requirements for potentially concessional
premises. A note is also included to refer readers to subsection 100(5), which provides that if
a person reports a premises as a potentially concessional premises but did not know and could
not with reasonable diligence have ascertained that the premises was not a potentially
concessional premises, then the premises is taken to be a potentially concessional premises in
relation to the person for the month.
The term Regional Broadband Scheme Special Account means the Regional Broadband
Scheme Special Account established by section 89.
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The term residential customer has the same meaning as in Part 8 of the Tel Act. This
definition is to be inserted into Part 8 by item 26 of Schedule 2 to this Bill.
The term satellite broadband service has the meaning given by section 77.
The term small business customer means a customer who either:
(a) is a small business employer within the meaning of the Fair Work Act 2009; or
(b) has a business with no employees.
The definition clarifies that for the purposes of (a), it is assumed that each reference in
section 23 of the Fair Work Act 2009 to a national system employer is a reference to an
employer within the ordinary meaning of the term.
The term superfast carriage service is used in the definition of designation broadband service
(see new section 76AA). 'Superfast carriage service' means a carriage service, where:
(a) the carriage service enables end-users to download communications; and
(b) the download transmission speed of the carriage service is normally 25 megabits per
second or more; and
(c) the carriage service is supplied using a line to premises occupied or used by an
end-user.
The word 'normally' is akin to 'usually'; it recognises that circumstances may arise that
temporarily displace usual download transmission speeds.
A note is included to clarify that the line does not need to be physically connected to the
premises because 'using' means use in isolation or in conjunction with one or more other
things, as established by subsection 5(1) of the TCPSS Act and section 24 of the Tel Act
(when read together with section 18A of the Acts Interpretation Act 1901). It is the intention
that it is the carrier that provides the last part of the connection (whether physical or non-
physical) of the line to the premises that are subject to the new charge.
It is not intended that the charge should cover carriage services supplied using predominantly
fixed wireless or mobile technology. The charge is intended to apply to superfast carriage
services supplied over fixed line technologies like fibre-to-the premises (FTTP), fibre-to-the
node (FTTN), fibre-to-the-basement (FTTB), fibre-to-the-curb (FTTC) and hybrid-fibre
coaxial (HFC). However, the extended meaning of use does mean that paragraph (c) covers
not only a carriage service supplied using a line that is connected directly to a premises but
also, for example, a carriage service supplied using a line that runs most of the way to the
premises but is then connected to the premises over a short distance using wireless or mobile
technology.
New section 76A - Local access line
New section 76A comprises six subsections. Subsection (1) provides that a local access line
is a line that is part of the infrastructure of a local access network. Lines on the customer side
of the network boundary are usually considered to be customer cabling and not part of a
telecommunications network and this is reflected in subsection (2), which provides that a line
will not be taken to form part of a local access line if it is on the customer side of the
boundary of a telecommunications network.
However, subsection (4) provides a qualification to the rule in subsections (1) and (2) and in
effect, deems lines which would otherwise be considered customer cabling to be local access
lines in cases where the line is in a multi-unit building and is used to supply carriage services
to a unit in the building. This is intended to ensure that carriers that circumvent the boundary
163
between a telecommunications network and customer cabling are caught by the charge
(presuming they meet the criteria for chargeable premises associated with a local access line).
Subsection (5) provides that the boundary of a telecommunications network is to be
determined in the same manner in which it is determined under section 22 for the purposes of
sections 20, 21 and 30 of the Tel Act. Subsection (6) provides that the term 'local access
network' for the purposes of new section 76A has the meaning generally accepted within the
telecommunications industry. It is not intended that transmission lines would be caught by the
charge.
New section 76AA - Designated broadband services
Designated broadband services are a key element of 'potentially chargeable premises' (see
new section 94). This section defines a 'designated broadband service' excluding certain
carriage services from the definition, and empowers the Minister by legislative instrument to
exclude a class of carriage services from the definition.
Subsection 76AA(1) provides that a designated broadband service means a carriage service
supplied using a local access line, where:
(a) the carriage service enables end-users to download communications; and
(b) the local access line is part of the infrastructure of a telecommunications network in
Australia; and
(c) the local access line is technically capable of being used to supply a superfast
carriage service.
The use of 'technically capable' in paragraph (c) has been specifically chosen to
communicate that it is the speed that the line is technically capable of providing, rather than
the speed that the consumer experiences, that is relevant to determining whether the line is
capable of being used to supply a superfast carriage service. For example, a fibre-to-the
premises (FTTP) line that is technically capable of download speeds exceeding 100Mbps is
technically capable of being used to supply a superfast carriage service even if the consumer
has only ordered a 12Mbps retail broadband service or normally experiences download
speeds of less than 25Mbps because of congestion on the network. It is expected that all
FTTP, FTTN, FTTB, FTTC and HFC networks are 'technically capable' of being used to
supply a superfast carriage service.
Since the expression 'technically capable' has been created for this specific purpose, a note is
included to direct readers to new section 102ZH, which provides that it should only be used
to determine the meaning of 'capable' in a provision of this new Part of the TCPSS Act.
Any attempt to artificially lower a line's usual technical capability below 25Mbps would be
considered an attempt to avoid the charge and should trigger the anti-avoidance prohibition in
new section 97.
Subsection 76AA(1) also provides that designated broadband service does not include voice
only telephony services, carriage services dedicated to broadcast television streams, and
carriage services that belong to a class determined by the Minister under subsection 76AA(2).
Voice-only telephone services and television services are excluded from the definition
because it is intended that the charge apply only to broadband services.
Subsection 76AA(2) gives the Minister power to determine, by legislative instrument, one or
more classes of carriage service to be excluded from the definition of designated broadband
service under paragraph (1)(f). This is intended to give the Minister flexibility to alter the
definition to ensure it continues to apply only to broadband services as technological changes
arise.
164
A note is included to direct readers to section 102ZFB, which sets out special disallowance
provisions that cause a determination under subsection (2) to not take effect until after the
disallowance period has elapsed. This means people will not be affected by the Minister's
change to the tax base until after the Parliament has had time to scrutinise the change.
New section 76AB - Fixed wireless broadband service
This section outlines the definition of the term fixed wireless broadband service for the
purposes of this Part. A fixed wireless broadband service is a carriage service that:
(a) is supplied using a fixed wireless technology platform, and
(b) is marketed to customers as a fixed wireless service, and
(c) enables end-users to download communications, and
(d) has a peak download transmission speed of at least 25 megabits per second (Mbps),
and
(e) has a peak upload transmission speed of at least 5Mbps, and
(f) is not a public mobile telecommunications service, and
(g) is a listed carriage service, and
(h) the conditions (if any) determined under subsection (2) are satisfied.
The peak speeds mentioned in paragraphs (1)(d) and (1)(e) are baseline speeds. They are
consistent with the speeds the Government expects NBN Co to supply over the national
broadband network (NBN), as set out in the Statement of Expectations issued on 24 August
2016,27 and also with the proposed SIP speeds under Schedule 3 to this Bill.
Subsection 76AB(2) provides that the Minister may determine conditions for the purposes of
paragraph (1)(h) by legislative instrument.
Subsection 76AB(3) provides that fixed wireless technology platform has the meaning
generally accepted within the telecommunications industry, for the purpose of this section.
New section 77 - Satellite broadband service
This section outlines the definition of the term 'satellite broadband service' for the purposes
of this Part. It means a carriage service that:
(a) is supplied using a satellite; and
(b) enables end-users to download communications; and
(c) has a peak download transmission speed of at least 25Mbps, and
(d) has a peak upload transmission speed of at least 5Mbps, and
(e) is not a public mobile telecommunications service; and
(f) is a listed carriage service; and
(g) satisfies any conditions (if any) determined under subsection (2).
The peak speeds mentioned in paragraphs (c) and (d) of the definition are baseline speeds.
They are consistent with the speeds the Government expects NBN Co to supply over the
NBN, as set out in the Statement of Expectations issued on 24 August 2016,28 and also with
proposed SIP speeds under Schedule 3 to this Bill.
New subsection 77(2) outlines that the Minister may, by legislative instrument, determine one
or more conditions for the purposes of paragraph (1)(g).
27
Available at http://www.nbnco.com.au/content/dam/nbnco2/documents/soe-shareholder-minister-letter.pdf.
28
Available at http://www.nbnco.com.au/content/dam/nbnco2/documents/soe-shareholder-minister-letter.pdf.
165
New section 78 - Eligible funding recipient
New subsection 78(1) provides that an 'eligible funding recipient' means a carrier that is an
NBN corporation or a carrier or carriers determined by the Minister to be an 'eligible funding
recipient'.
New subsection 78(2) provides that the Minister may determine, by legislative instrument,
one or more carriers to be eligible funding recipients. This gives the Minister flexibility to
extend the opportunity of receiving funding under a new section 80 contract or grant to other
fixed wireless and satellite providers if, for example, fixed wireless and satellite infrastructure
becomes contestable.
New section 79 - Eligible financial year
New subsection 79(1) defines the term, 'eligible financial year' for the purposes of new
Part 3 to be the financial year beginning on 1 July 2018 or a later financial year.
New section 79A - Premises
The concept of 'premises' is one of the fundamental concepts of the charge. It is a central
component of 'chargeable premises associated with a local access line' (see new section 93),
which are the type of premises that attract the charge. Tying the charge base to premises
rather than just broadband services is intended to give industry clarity about the type of
'thing' that attracts the charge.
The term 'premises' is intended to have its ordinary meaning, however, this ordinary
meaning is affected by new section 79A, which empowers the Minister to determine that:
(a) if a location satisfies one or more specified conditions, the location is taken to be
premises for the purposes of new Part 3; and
(b) if a location satisfies one or more specified conditions, the location is taken not to be
premises for the purposes of new Part 3.
The determination would be by way of legislative instrument and it would be subject to a
delayed commencement by operation of section 102ZFB.
Some examples of specified conditions that may cause a location to not be a premises include
where there was a public mobile telecommunications tower, traffic control equipment, bus
stop, metering point or public alarm or security system at the location.
Subsection 79A(3) states that a determination made under subsection 79A(1) or (2) must be
of a legislative character. This is a declaratory statement.
Division 2--Contracts and grants relating to fixed wireless broadband and satellite
broadband
New section 80 - Contracts and grants
The purpose of the Regional Broadband Scheme (the Scheme) is to sustainably fund the net
costs of NBN Co's fixed wireless and satellite networks, which provide access to essential
broadband services predominantly in regional Australia. This section establishes the contracts
and grants that will be used to provide this funding.
Eligible funding recipients that have a section 80 contract or grant will receive a nominal
funding entitlement certificate each year that sets out the amount of money they can expect to
receive from the Commonwealth (see new section 86). They can also apply for an offset
certificate to offset their nominal funding entitlement against their charge liability (see new
section 98).
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New subsection (1) provides for the Secretary to enter into a contract or make a grant of
financial assistance on behalf of the Commonwealth to an eligible funding recipient in
relation to:
(a) the connection of premises to a telecommunications network or the supply of eligible
services in order that a carriage service provider (CSP) can provide fixed wireless or
satellite broadband services to an end-user at the premises, or
(b) facilities used or proposed to be used to supply a fixed wireless or satellite broadband
service, or
(c) matters incidental or ancillary to the above.
Under new subsection (2), a person who enters into a contract with the Secretary is a
contractor for the purposes of the Part. Similarly, under new subsection (3), a person who
receives a grant of financial assistance from the Secretary is a grant recipient.
Subsections (4) and (5) provide that the contracts and grants can provide for reimbursement
(in whole or part) of costs or expenses. Subsections (4) and (5) do not limit the terms of
contracts or grants the Secretary can enter into under subsection (1) (refer subsection (6)).
These provisions make it clear that eligible funding recipients can receive funding for fixed
wireless and satellite costs incurred before and after the commencement of this Act.
Subsection (7) clarifies that the use of the word 'Regional' in the title of the Charge Act, the
name of the Regional Broadband Scheme Special Account or section 92A do not limit
subsection 80(1). While NBN Co's fixed wireless and satellite networks predominantly serve
regional Australia, there are some non-regional areas that also receive these services. NBN
Co and other eligible funding recipients can receive funding for fixed wireless and satellite
infrastructure, facilities and incidentals wherever they are provided in Australia, not just in
regional areas.
New section 81 - Terms and conditions of grants
Apart from the condition to comply with a ministerial determination under section 82, new
subsections 81(1) and (2) require that the terms and conditions of section 80 grants are set out
in a written agreement between the Commonwealth and the grant recipient. New subsection
81(3) provides that the written agreement will be entered into by the Secretary on behalf of
the Commonwealth.
Section 82 makes it a condition of a section 80 contract or grant that contractors and grant
recipients comply with Ministerial determinations about standards, rules and benchmarks.
This condition applies to all contractors and grant recipients for the purposes of this Part so it
does not need to be set out separately in writing.
New section 82 - Condition about compliance with Ministerial determination
The intention of this section is to make clear that all contractors and grant recipients for the
purpose of this Part are to comply with standards, rules and benchmarks set by the Minister,
insofar as they relate to their contract or grant.
New subsection 82(1) makes it a condition of section 80 contracts and 81 grants that the
contractor or grant recipient complies with all ministerial determinations made under new
subsection 82(2) so far as the determination applies to those contracts or grants. New
subsection 82(2) provides the Minister with the power to make, by legislative instrument,
determinations that set out standards, rules and minimum benchmarks. This determination
may be of general or limited application (refer new subsection 82(3)).
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New subsection 82(3) does not limit subsection 33(3A) of the Acts Interpretation Act 1901,
which clarifies that legislative and notifiable instruments do not need to cover all of the
particular matters to which they can relate, but can be made in respect of some of those
matters only (refer new subsection 82(4)).
Section 82 does not limit, by implication, the terms and conditions of a new section 80
contract or a new section 81 agreement (refer new subsection 82(5)).
Any term or condition of a section 80 contract or grant which is inconsistent with a
ministerial determination will have no effect to the extent of the inconsistency (refer
subsection (6)). However, new subsections (8) to (10) effectively prevent a ministerial
determination imposing conditions that:
override a term or condition that gives a contractor or grant recipient a right to
adjustment of payment for a change in the services, facilities or customer equipment
to be supplied by the contractor or grant recipient under a s80 contract or grant, or
specify the price, or a method of ascertaining the price, for any of the services,
facilities or customer equipment to be supplied by a contractor or grant recipient in
accordance with a section 80 contract or grant.
This effectively quarantines matters of price from the ministerial determinations under new
subsection 82(2) to give industry certainty that the price terms of section 80 contracts and
grants will be dealt with between the Secretary (on behalf of the Commonwealth) and
contractors or grant recipients.
New section 83 - Secretary has powers etc. of the Commonwealth
New subsection 83(1) specifies that the Secretary, on behalf of the Commonwealth, has all
the rights, responsibilities, duties and power of the Commonwealth relating to the
Commonwealth's capacity as a party to a contract or the grantor of a grant under new section
80.
New subsection 83(2) sets out a number of specific functions of the Secretary in respect of
the new section 80 grants (and these specified are not to limit the intended broad scope of
power conferred on the Secretary by subsection 83(1)):
An amount payable by/to the Commonwealth under a section 80 contract or grant is to
be paid by the Secretary on behalf of the Commonwealth.
An amount payable to the Commonwealth under a section 80 contract or by way of a
repayment of the whole or part of a grant is to be paid to the Secretary on behalf of
the Commonwealth.
The Secretary may commence an action or proceeding on behalf of the
Commonwealth in relation to a matter that concerns a section 80 contract or grant
(refer paragraph 83(2)(e)). For example, the Secretary may take legal action to seek
repayment of money paid to a grant recipient or payment of money owed by a
contractor to the Commonwealth.
New section 84 - Conferral of powers on the Secretary
New section 84 outlines that the Secretary may exercise a power conferred on the Secretary
by a contract or grant agreement entered into under new section 80.
New section 85 - Monitoring of performance
To enhance transparency and accountability with respect to the new section 80 contract and
grant arrangements, new subsection 85(1) requires that the Secretary monitor and report to
the Minister on all significant matters relating to the performance of contractors and grant
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recipients each financial year. The report prepared by the Secretary under this section must
then be included in the Department's annual report prepared in accordance with section 46 of
the Public Governance, Performance and Accountability Act 2013 (PGPA Act) for the
financial year (refer new subsection 85(4)).
New subsection 85(2) sets out the matters which must be included in the report, including for
each contractor and grant recipient:
the adequacy of their compliance,
any notice of breach of contract or grant,
any remedial action taken by the Secretary during the year and the result of that
action.
The Secretary may include any other significant or relevant matters in the report (refer new
subsection 85(3)).
New section 86 - Nominal funding entitlement certificate
The nominal funding entitlement certificate (NFEC) establishes an estimate of how much
money the Commonwealth owes an eligible funding recipient under a new section 80
contract or grant each financial year. The estimate is based on the balance of the Regional
Broadband Scheme Special Account (established under new section 89 (the Special
Account)), since it is intended that all the funding eligible funding recipients receive will be
paid from the proceeds of the charge.
New subsection 86(1) defines funding financial year to mean the second eligible financial
year or a later eligible financial year for the purpose of section 86. The ACMA will collect
the charge one year in arrears (refer new Division 7, sub-divisions B and C), so eligible
funding recipients will also receive their funding one year after the charge is collected. This is
the basis for calling the second eligible financial year and each financial year after that the
'funding financial year' for the purposes of this section.
New subsection (2) outlines that, if a carrier is an eligible funding recipient at 1 February in a
funding financial year, the Secretary must issue the carrier an NFEC specifying its nominal
funding entitlement amount for the funding financial year. The Secretary must do this by
31 March in the funding financial year and before making a decision regarding the eligible
funding recipient's application for a charge offset certificate. This is because the offset
certificate depends on the NFEC to determine the amount of funding an eligible funding
recipient can offset against its charge liability (see further discussion about new section 98
below). Together, the two certificates determine whether there is an amount of funding still
owing to the eligible funding recipient after the offset is complete. For a timeline of
administrative events related to the Scheme, see Figure 4 below.
It is intended that the base amount of the charge will only be used to pay eligible funding
recipients, and the administrative cost amount of the charge will only be used to pay the
ACMA and ACCC's designated administrative costs (or, if appropriate, refunded to industry
in circumstances where there is a surplus). The amount of funding available to eligible
funding recipients each year is limited to the amount of money in the Special Account that is
attributable to the base amount of the charge.
To this end, subsection (4) requires the Secretary to make an estimate of so much of the
balance of the Special Account as is attributable to the annual base amount (see clause 10 of
the Charge Bill) or base instalment of the charge as at 7 May in the funding financial year
before issuing NFECs(see new subsection 102D(5)). The Secretary must have regard to this
estimate in issuing NFECs. By 7 May of the funding financial year, the total amount of
169
charge attributable to the base amount will be credited to the Special Account - so the
Secretary will have sufficient information to make his/her estimate and decision (see new
Division 7, subdivision C for charge due dates).
Subsection 86(6) requires the Secretary to provide a copy of the NFECs to the ACMA.
To maximise transparency of the entities and value of any certificates issued by the Secretary
under new section 86, copies of all nominal funding entitlement certificates issued must be
published on the Department's website (refer subsection 86(7)). It is expected that the
certificates would be published promptly after issuance.
NFECs are entity-specific and cannot be transferred (refer subsection 86(8)).
New section 87 - Secretary to comply with rules
Under new section 87 the Minister may, by legislative instrument, make rules for the
Secretary to comply with in relation to the performance of their functions, or the exercise of
their powers, under this Division. The Secretary must comply with any rules in force. This
power is not expected to be exercised often.
New section 88 - Executive power of the Commonwealth
New section 88 makes clear that Division 2 of this Schedule does not, by implication, limit
the executive power of the Commonwealth.
Division 3--Regional Broadband Scheme Special Account
New section 89 - Regional Broadband Scheme Special Account
Increasing the transparency of fixed wireless and satellite funding is one of the main purposes
of the Regional Broadband Scheme. To facilitate this goal, a Special Account is to be
established so that affected carriers can see how much money is being raised by the charge
and where it is going. The Special Account will effectively quarantine proceeds raised by the
charge so that they can only be used to pay eligible funding recipients and the ACMA and
ACCC for designated administrative costs.
New section 89 establishes the Regional Broadband Scheme Special Account (Special
Account), which is a Special Account for the purposes of the PGPA Act. The Secretary will
administer the Special Account.
New section 90 - Credits to the Account
New section 90 establishes that the following amounts must be credited to the Special
Account:
(a) an amount equal to an amount paid to the Commonwealth by way of charge or an
instalment of charge; and
(b) an amount equal to an amount paid to the Commonwealth under a section 80 contract;
and
(c) an amount equal to an amount paid to the Commonwealth by way of damages or
compensation for a breach of a section 80 contract; and
(d) an amount equal to an amount paid to the Commonwealth by way of the repayment of
the whole or a part of a section 80 grant.
A note is included to remind readers that an Appropriation Act may contain a provision to the
effect that, if any of the purposes of a special account is a purpose that is covered by an item
in the Appropriation Act (whether or not the item expressly refers to the special account),
then amounts may be debited against the appropriation for that item and credited to that
special account.
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New section 91 - Distribution of whole or part of balance of the Account
New section 91 allows the Secretary to distribute to carriers the whole or part of the Special
Account's balance as is attributable to the charge amount paid by them, if rules are in force
under subsection (2). Subsections (2) and (3) allow the Minister to, by legislative instrument,
determine rules that must be complied with by the Secretary in relation to the exercise of
these powers. This proposed power will appropriately ensure there are limits on the
Secretary's power to distribute taxation revenue and give the Government (with appropriate
Parliamentary oversight) the opportunity to provide input into the Secretary's.
New section 92 - Purposes of the Account
New section 92 outlines the following four purposes of the Special Account:
(a) to pay amounts payable by the Commonwealth under a contract entered into under
new section 80;
(b) to make grants under new section 80;
(c) to make distributions in accordance with section 91; and
(d) to pay refunds under new section 99 or 102J.
A note is also included to direct readers to section 80 of the PGPA Act, which deals with
special accounts established by an Act.
New section 92A - Offset for designated administrative costs - transfer to general CRF
New section 92A enables the Secretary to direct, by notifiable instrument, that funds be
debited from the Special Account to pay for the ACMA and ACCC's costs for performing
their functions under the Scheme.
New subsection 92A(2) limits the amount of funds debited to the lesser of:
(a) the total of the relevant Budget amounts
(b) the total of the charge collected as is attributable to the annual administrative cost
ount for a financial year (see clause 14 of the Charge Bill) or an administrative cost
instalment of charge (see new subsection 102D(5)).
The relevant Budget amounts are:
(a) the amount for Regional Broadband Scheme--Departmental expenses (2016-17)
shown in the table that relates to the ACCC's Entity 2016-17 measures since Budget
in the Treasury's Portfolio Additional Estimates Statements (PAES) for 2016-17; and
(b) the amount for Regional Broadband Scheme--Departmental capital (2016-17) shown
in the table for ACMA's Entity 2016-17 measures since Budget in the
Communications Portfolio's PAES for 2016-17; and
(c) the amount for Regional Broadband Scheme Special Account--Departmental
expenses (2017-18) shown in the table that relates to Budgeted expenses for the
Department in the Department's Portfolio Budget Statements (PBS) for 2018-19; and
(d) the amount for Regional Broadband Scheme Special Account--Departmental
expenses (2018-19, and later years) shown in the table that relates to Budgeted
expenses for the Department in the Department's PBS for the 2018-19 financial year,
or a later financial year;
This means that only the administrative cost portion of the charge can be used to pay
designated administrative costs. If more money is raised by the administrative cost
component (see clause 16 of the Charge Bill) than is required to pay designated
administrative costs under an appropriation for a particular year, the surplus may be refunded
to carriers under new section 91 or held over for the next year as is appropriate.
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Division 4--Chargeable premises associated with a local access line
New section 93 - Chargeable premises associated with a local access line
New section 93 defines 'chargeable premises associated with a local access line' (chargeable
premises). This definition is central to establishing the charge base of the new tax: carriers
will be required to pay a charge on each chargeable premises they have per month in an
eligible financial year.29
For the purposes of new Part 3 of the TCPSS Act, if a person is a carrier and particular
premises are potentially chargeable premises in relation to the carrier for a month (refer new
section 94), and the premises are not exempt premises (refer new section 95), then the
premises are chargeable premises of the carrier for that month.
Figure 2 below sets out various example scenarios and the number of charges that would
apply in each scenario in accordance with the definition of chargeable premises. Note that the
table assumes the premises are not exempt premises and the lines are not exempt lines.
29
Clause 6 of the Charge Bill imposes charge on a person's annual chargeable premises amount, which is
calculated by reference to the base and administrative components (clause 12 and 16) and the number of
chargeable premises a person has in a month.
172
Figure 2 - Examples of the application of chargeable premises associated with a local access line
Example scenario Number of Number of Number of Number of Number Number of
Carriers CSPs local access designated of charges
lines broadband premises
services
1 One house or business that has no 0 0 0 0 1 0
telecommunications infrastructure.
2 One house or business that has had the 1 0 1 0 1 0
nbn connected but has not taken up a (Carrier A)
service.
3 A non-premises structure that is being 1 1 1 1 0 0
provided a service over the nbn - e.g.
(Carrier A)
mobile tower.
4 One house or business where one 1 1 1 1 1 1
service is provided over one nbn line. A (Carrier A) (CSP 1) (CSP 1) (Carrier A)
typical residential house; some business
premises.
5 One house or business where two 1 1 1 2 1 1
services are provided simultaneously by (Carrier A) (CSP 1) (2 x CSP 1) (Carrier A)
the same CSP over one nbn line.
173
Figure 2 - Examples of the application of chargeable premises associated with a local access line
Example scenario Number of Number of Number of Number of Number Number of
Carriers CSPs local access designated of charges
lines broadband premises
services
6 One house or business where two 1 2 1 2 1 1
services are provided simultaneously by (Carrier A) (CSP 1, (1 x CSP 1; (Carrier A)
different CSPs over one nbn line.
CSP 2) 1 x CSP 2)
7 One house or business that has been 2 1 2 2 1 2
connected to two fixed line networks (Carrier A; (CSP 1) (1 x Carrier A; (1 x CSP 1 on (1 x Carrier A;
and two services are being provided Carrier B) Carrier A;
simultaneously by the same CSP over 1 x Carrier B) 1 x Carrier B)
lines owned by different carriers. 1 x CSP 1 on
Carrier B)
8 One house or business that has been 2 2 2 2 1 2
connected to two fixed line networks (Carrier A, (CSP 1, (1 x CSP 1 on (1 x Carrier A;
and two services are offered Carrier B) Carrier A;
simultaneously by different CSPs over CSP 2) 1 x Carrier B)
different carrier lines. 1 x CSP 2 on
Carrier B)
174
Figure 2 - Examples of the application of chargeable premises associated with a local access line
Example scenario Number of Number of Number of Number of Number Number of
Carriers CSPs local access designated of charges
lines broadband premises
services
9 A multi-dwelling unit (MDU), business 1 2 100 100 100 100
block or campus that contains multiple (Carrier A) (CSP 1, (50 x CSP 1; (Carrier A)
premises is connected to the nbn.
Tenants can order a service directly CSP 2) 50 x CSP 2)
from CSPs. Different CSPs are
providing services to a proportion of
premises over separate local access lines
on nbn's network. This is a typical
apartment block and some business
blocks.
10 A MDU, business block or campus that 2 2 200 100 100 100
contains multiple premises is connected (Carrier A, (CSP 1, (100 x Carrier (50 x CSP 1 (50 x Carrier A;
to two fixed line networks. Tenants can Carrier B) A; 100 x on Carrier A; 50 x Carrier B)
order a service directly from CSPs. CSP 2)
Carrier B)
Different CSPs are providing services to 50 x CSP 2 on
a proportion of premises over separate Carrier B)
local access lines on each network. This
occurs in some apartment blocks and
some business blocks.
175
Figure 2 - Examples of the application of chargeable premises associated with a local access line
Example scenario Number of Number of Number of Number of Number Number of
Carriers CSPs local access designated of charges
lines broadband premises
services
11 A MDU or business block or campus 1 1 2 1 50 1
that contains multiple premises is (building
(Carrier A) (CSP 1) (Carrier A) (CSP 1) (Carrier A)
connected to the nbn. A CSP provides manager
one service to a building manager over provides
one or more carrier lines, some of which services to
may be redundant lines. Tenants do not individual
order separate services from CSPs. premises)
13 A MDU or business block or campus 2 1 2 2 50 2
that contains multiple premises is (building
(Carrier A, (CSP 1) (1 x Carrier A, (CSP 1) (1 x Carrier A;
connected to two fixed line networks. A manager
Carrier B)
CSP provides multiple services to a 1 x Carrier B) provides 1 x Carrier B)
building manager over multiple lines services to
owned by different carriers. Tenants do individual
not order separate services from the premises)
CSP..
176
Figure 2 - Examples of the application of chargeable premises associated with a local access line
Example scenario Number of Number of Number of Number of Number Number of
Carriers CSPs local access designated of charges
lines broadband premises
services
14 A MDU or business block (eg a 2 2 2 2 50 2
shopping centre) that contains multiple (building
(Carrier A, (CSP 1, (1 x Carrier A, (1 x CSP 1 on (1 x Carrier A;
premises is connected to two fixed line manager
Carrier B) Carrier A;
networks. Different CSPs provide a CSP 2) 1 x Carrier B) provides 1 x Carrier B)
service to a building manager over 1 x CSP 2 on services to
multiple lines owned by different Carrier B) individual
carriers. Tenants do not order separate premises)
services from the CSP.
15 A MDU or business block that contains 1 1 1 or more 1 (CSP 1) 1 1
multiple subdivisions that are not (Carrier A) (CSP 1) (Carrier A) (Carrier A)
technically premises is connected to the
nbn. A CSP provides one service to a
building manager over one or more
carrier lines, some of which may be
redundant lines. Tenants do not order
separate services from CSPs.
177
Figure 2 - Examples of the application of chargeable premises associated with a local access line
Example scenario Number of Number of Number of Number of Number Number of
Carriers CSPs local access designated of charges
lines broadband premises
services
16 A MDU or business block that contains 2 2 2 2 1 2
multiple subdivisions that are not (Carrier A, (CSP 1, (1 x CSP 1 on (1 x Carrier A;
technically premises is connected to two Carrier B) CSP 2) Carrier A;
fixed line networks. Different CSPs 1 x Carrier B)
provide a service to a building manager 1 x CSP 2 on
over multiple lines owned by different Carrier B)
carriers. Tenants do not order separate
services from the CSP.
17 A managed Wide Area Network service 1 1 1 or more to 1 or more to 10 10
where a carrier provides connectivity each premises each premises (geograph- (Carrier A)
(Carrier A) (CSP 1)
between multiple premises for a single (Carrier A) (CSP 1) ically
business. distinct)
178
New section 94 - Potentially chargeable premises
New section 94 outlines the meaning of 'potentially chargeable premises' for the purposes of
new Part 3. This definition forms one of three parts of the chargeable premises definition in
new section 93. It relies on the definitions 'local access line' (refer new section 76A) and
'designated broadband service' (refer new section 76AA). In summary, a potentially
chargeable premises is a premises that a carriage service provider supplies a designated
broadband service to, during the whole or part of a month, using a local access line (that is
not an exempt line) owned or controlled by a carrier or nominated carrier, respectively.
New subsection (1) identifies the three necessary characteristics of a potentially chargeable
premises:
A particular type of person that has a particular type of relationship with a local
access line,
A particular type of local access line, and
A premises with particular characteristics.
New paragraphs (1)(a) and (b) identify the type of person the definition applies to. The
person must be a carrier that either:
owns a local access line, but no nominated carrier declaration is in force in relation to
the line, or
is the nominated carrier in relation to the local access line under a nominated carrier
declaration.30
This definition ensures that the charge cannot be recouped from two carriers in respect of the
same line.
New paragraph (1)(c) goes to the type of local access line the definition applies to. It provides
that the line mentioned in paragraph (1)(b) must not be an exempt line. This has the effect of
exempting the lines identified by new section 96, which are transitioning to the nbn, from the
definition and from paying the charge.
New paragraph (1)(d) sets out characteristics of the premises to which the definition applies.
It provides that a carriage service provider (who may be the carrier) must supply a designated
broadband service to particular premises in Australia using the line. This establishes that in
order to be a potentially chargeable premises, the premises must have an active, superfast,
fixed-line broadband service. Note, that the wording of this paragraph is intended to capture
designated broadband services supplied both by carriage services providers that only operate
at the retail level of the market and carriers that operate as both a wholesaler and retailer.
As in the definition of superfast broadband service in new section 76, a note is included to
clarify that the line does not need to be physically connected to the premises because 'using'
means use in isolation or in conjunction with one or more other things, as established by
subsection 5(1) of the TCPSS Act and section 24 of the Tel Act (when read together with
section 18A of the Acts Interpretation Act 1901).
Readers should note that the provisions in this section are based on the concepts used in the
standard access obligation provisions under Part XIC of the CCA.
30
A nominated carrier declaration is a declaration made under Division 4 to Part 3 of the Tel Act by the ACMA
, which declares a carrier to be the nominated carrier in relation to specified network units which are not owned
by the carrier.
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New section 95 - Exempt premises - small networks
New section 95 outlines an exemption for carriers that operate very small networks (refer
subsections (1)-(5)).
New subsection (1) deals with the instance that a person is a member of an associated group.
In this case, if the group has less than 2,000 potentially chargeable premises in a month, and
one or more of those potentially chargeable premises are potentially chargeable premises in
relation to the person for that month, then each of the person's potentially chargeable
premises will be exempt for that month.
The purpose of the wording of subsection (1) is to ensure that new Part 3 captures corporate
structures where, for example, a parent company owns various subsidiaries that all provide
broadband services. If the parent company and its subsidiaries together have 2,000 potentially
chargeable premises or less, then each company's potentially chargeable premises are
exempt.
New subsection (2) provides for an exemption to an individual person who is not a member
of an associated group and who has less than 2,000 potentially chargeable premises per
month applies.
The exemptions outlined in new subsections (1) and (2) apply on a month by month basis.
That means that if a person or an associated group has 1,500 potentially chargeable premises
in January, for example, they will be exempt for January, but if they have 2,100 potentially
chargeable premises in February, they will be required to pay the charge in respect of 2,100
premises for February.
New subsection (3) outlines what will be considered an 'associated group' for the purposes of
this section. New subsections (4) and (5) provide that, for the purposes of new subsection (3),
whether a person is in a position to exercise control of a local access line or a
telecommunications network, and whether a person has one or more associates, is to be
determined in the same manner in which that question is determined for the purposes of
Part 8 of the Tel Act.
New section 96 - Exempt lines - local access lines transitioning to the NBN
New section 96 outlines three classes of exempt lines that are transitioning to the nbn.
Generally speaking, the lines are exempt while they are transitioning and once they are
owned byNBN Co, it is NBN Co who will be liable to pay charge on the line if it is
associated with a chargeable premises.
Under new subsection (1), the first category of exempt lines covers local access lines owned
by Telstra, where ownership of those lines is to be transferred to NBN Co under the
Telstra-NBN Co Definitive Agreements (restated in December 2014).
New subsection (2) outlines that the Minister may, by legislative instrument, specify one or
more agreements for the purposes of subparagraph (1)(e)(iii). This would have the effect of
removing the lines covered by the specified agreement from the exemption.
Under new subsection (3), the second category of exempt lines is local access lines covered
by a contract between NBN Co and the Optus Group of companies (as listed in new
subsection (10)) that provides for the deactivation or decommissioning of lines that form part
of the infrastructure of a HFC network.
New subsection (4) outlines that the Minister may, by legislative instrument, specify one or
more agreements for the purposes of subparagraph (3)(d)(iv). This would also have the effect
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of removing the lines covered by the specified agreement from the exemption. It is expected
that this power would be used sparingly.
Under new subsection (5), the third category of exempt lines is local access lines owned by
any other carrier that has an agreement in place to transfer ownership of the lines to NBN Co.
The agreement must have been in force before commencement of the section, must not be an
agreement covered by one of the first two categories of exemptions, must not have been
specified by the Minister under new subsection (6) and must satisfy conditions determined by
the Minister under new subsection (7).
Per paragraph (5)(c) this exemption only applies for the first six months of the first eligible
financial year. This time limited exemption is intended to give carriers seeking to transfer
their lines to NBN Co opportunity to do so without being impacted by the charge, but also
balances the need for industry certainty about which carriers are paying the charge and how
much funding is likely to be raised.
New subsection (6) outlines that the Minister may, by legislative instrument, specify one or
more agreements for the purposes of subparagraph (5)(e)(iv). This would also have the effect
of removing the lines covered by the specified agreement from the exemption.
In relation to other carriers, new subsection (7) outlines that the Minister may, by legislative
instrument, determine one or more conditions for the purposes of subparagraph (3)(e)(iv).
Unlike Telstra and Optus, other carriers are unlikely to have had significant commercial
dealings with the Commonwealth and/or NBN Co. This necessitates the ability for the
Minister to determine additional conditions that must be satisfied to claim this exemption.
New subsection (8) clarifies that, for the purposes of this section, an agreement is taken to
come into force when the agreement is entered into.
New subsection 9 specifies that subsection 13(3) of the Legislation Act 2003, which enables
the Minister to specify the subject of a determination by class, does not apply to subsections
(2), (4) or (6) of this section. This is to give carriers certainty about the specific agreements
that will cause lines to no longer be exempt from the charge.
New subsection (10) lists the Optus entities that are referred to as listed Optus company for
the purposes of new subsection (3).
Division 5--Anti-avoidance
New section 97 - Anti-avoidance
New section 97 sets out both civil and criminal anti-avoidance provisions intended to prevent
carriers circumventing their charge obligations and prohibit people from aiding or abetting
such behavior.
New subsection (1) provides that a carrier must not, either alone or together with one or more
other persons, enter into, begin to carry out or carry out a scheme if it would be concluded
that the carrier did so for the sole or dominant purpose of avoiding the application of new
section 93, or any provision of the Charge Act, in relation to the carrier or any other carrier.
New section 93 establishes the charge base - chargeable premises associated with a local
access line.
New subsection (1A) provides that a carrier must not, either alone or together with one or
more other persons, enter into, begin to carry out or carry out a scheme if it would be
concluded that the carrier did so for the sole or dominant purpose of section 20 of the Charge
Act in relation to the carrier or another carrier. Clause 20 of the Charge Bill provides for a
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carrier's charge liability to be reduced by up to 25,000 potentially concessional premises for
each of the first five years of the Scheme.
New subsection (2) establishes anti-avoidance provisions for conduct ancillary to a
contravention of subsections 97(1) and 97(1A). It provides that a person must not:
a) aid, abet, counsel or procure a contravention of subsections 97(1) or 97(1A), or
b) induce, whether by threats or promise or otherwise, a contravention of subsections
97(1) or 97(1A), or
c) be in any way, directly or indirectly, knowingly concerned in, or party to, a
contravention of subsections 97(1) or 97(1A), or
d) conspire with other to effect a contravention of subsections 97(1) or 97(1A).
New subsection (3) provides that a breach of subsections (1), (1A) and (2) are civil penalty
provisions. It includes a note to remind readers that Part 31 of the Tel Act provides for
pecuniary penalties for breaches of civil penalty provisions. These include $10 million for
each contravention for a body corporate and $50,000 per contravention for a natural person.
New subsection 97(4) provides that a carrier commits a criminal offence if:
a) the carrier, either alone or together with one or more other persons, enters into, begins
to carry out or carries out a scheme; and
b) the carrier did so for the sole or dominant purpose of avoiding the application of new
section 93 of this Act or any provision of the Charge Bill (other than clause 20) in
relation to the carrier or any other carrier.
New subsection 97(4A) provides that a carrier commits a criminal offence if:
a) the carrier, either alone or together with one or more other persons, enters into, begins
to carry out or carries out a scheme; and
b) the carrier did so for the sole or dominant purpose of obtaining the benefit of
section 20 of the Charge Act in relation to the carrier or any other carrier.
The penalty for each criminal offence is 10,000 penalty units for a person other than a body
corporate ($1.8 million, based on one penalty unit value of $180), and, under the Crimes Act,
50,000 penalty units ($9 million, based on one penalty unit value of $180) for a body
corporate. The criminal offences and level of proposed penalties reflect the seriousness of the
contraventions, which involve dishonest and potentially fraudulent behavior which would
adversely impact on the delivery of essential broadband services to regional and remote
Australia. It is noted that the Crimes Amendment (Penalty Unit) Bill 2017 proposes that the
amount of the Commonwealth penalty unit increase from $180 to $230).
Two examples of the type of behaviour that may be caught by new subsections (1) and (4)
are:
1. A carrier artificially altering local access lines that are technically capable of
download speeds of 25 Mbps in order to reduce the speed capability of the line.
2. A carrier artificially splitting its company into smaller companies with less than 2,000
chargeable premises so that each company can be exempt from paying the charge (see
new sections 93 and 95).
Two examples of the type of behaviour that may be caught by new subsections (1A) and (4A)
are:
1. A carrier artificially splitting its company into smaller companies with 25,000 or less
potentially concessional premises each so that each company does not have to pay the
charge for the first five years of the Scheme.
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2. A carrier knowingly reporting that it had more potentially concessional premises than
it actually had in a particular period may also be caught by the subsections (see
subsections 100(4) and 100(5) for reporting obligations). Note, however, that if a
carrier reports that a particular premises is a potentially concessional premises and did
not know and could not have reasonably have ascertained that the premises was not a
potentially concessional premises, then the premises is deemed to be potentially
concessional (see new subsection 100(5)). It is not intended that carriers should be
caught by the anti-avoidance provisions if it innocently and erroneously over-reported
its potentially concessional premises for a period.
New subsection (5) makes clear that a contravention of subsection (1), (1A), (2), (4) or (4A)
does not affect the validity of any transaction. This is consistent with other tax avoidance
provisions.
New subsection (4) makes clear that, for the purposes of this section, the term 'scheme'
means:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express
or implied; and
(b) any scheme, plan, proposal, action, course of action or course of conduct, whether
unilateral or otherwise.
Division 6--Charge offset certificate
New section 98 - Charge offset certificate
This section establishes the charge offset certificate. This forms part of the Scheme's
offsetting mechanism that works in tandem with the nominal funding entitlement certificate
(NFEC - refer new section 86) and the refund and remission provisions in new section 99.
The mechanism enables eligible funding recipients to offset their charge liability against the
amount owed to them by the Commonwealth (their nominal funding entitlement - refer new
subsection 86(2)).
The offset mechanism makes the Scheme more efficient since eligible funding recipients will
not have to pay their charge liability only to have it paid back to them by way of a section 80
contract or grant. It also reduces transaction and administrative costs for eligible funding
recipients and the Commonwealth.
New subsection 98(1) provides that an eligible funding recipient can apply to the Secretary
for a charge offset certificate if the ACMA has assessed their charge liability for a financial
year (the charge financial year) under new section 102. The person may make the application
between the day the assessment is made (usually in November of the year after the charge
financial year - see new section 102) until the standard due date of the charge financial year
(usually 31 December of the charge financial year - see new subsection 102D(14)). For a
timeline of administrative events related to the Scheme, see Figure 4 below.
New subsection 98(2) provides that the application must be made in writing, in a form
approved by the Secretary and be accompanied by any information specified in rules made by
the Minister under new subsection (9).
New subsection (3) provides that if a person has made an application for a charge offset
certificate for the charge financial year, the person has been issued with a NFEC in relation to
the next financial year, rules under new subsection (9) are in force and the rules are satisfied,
the Secretary must issue a certificate by 31 March in the year after the charge financial year.
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The certificate is called a charge offset certificate and it must state that the person is entitled
to an offset for the charge financial year equal to the amount specified in the certificate.
The amount specified in the certificate must be ascertained in accordance with new
subsection (9) rules, must not exceed the nominal funding entitlement of the person for the
financial year after the charge financial year and must not exceed the person's annual base
amount for the charge financial year, refer subsection (4)). The offset is limited to the
person's annual base amount because eligible funding recipients are still required to
contribute to the administrative costs of the Scheme through their annual administrative cost
amount. This distributes the administrative costs of the Scheme fairly across the charge base.
Figure 3 - Example of charge offset certificate for charge financial year 2018-19
An eligible funding recipient has 4,500,000 chargeable premises associated with a local
access line for each month in 2018-19, the first eligible financial year of the Scheme. This
means the following amounts would apply to the eligible funding recipient for 2018-19:
Annual base amount: 4,500,000 x $7.09 x 12 = $382,860,000
Annual administrative cost amount: 4,500,000 x $0.01266 x 12 = $682,640
Nominal funding entitlement (hypothetically): $415,190,400
Amount specified in the person's offset certificate: $382,860,000.
This amount would be remitted or refunded under new subsection 99.
The carrier would still be required to pay its annual administrative cost amount of $682,640.
The amount of funding it would receive from the Commonwealth for the year would be:
$415,190,400 - $382,860,000 = $32,330,400
While it is open to the Secretary to refuse to issue a charge offset certificate, it is expected
that one would ordinarily be issued if the requirements in new subsections 98(1), (2) and (3)
are met. If the Secretary decides to refuse to give a charge offset certificate, he/she must give
written notice of the decision to the person who applied for the certificate (refer new
subsection (6)).
The Secretary must give a copy of any offset certificates made to the ACMA (refer new
subsection (7)). This is will enable the ACMA to vary the carrier's charge assessment per
new subsection 99(2), if required, and enable the ACMA to fulfil its public reporting
requirements under new section 102ZD.
The charge offset certificate is particular to the person that applies for the certificate and
cannot be transferred (refer new subsection (8)).
New subsection (9) provides that the Minister may, by legislative instrument, make rules for
the purposes of this section. Appropriately, this gives the Government input into the way in
which taxation revenue raised by the charge is managed.
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New section 99 - Remission or refund of charge
New section 99 establishes the final part of the Scheme's offset mechanism, through
remission or refund of a portion of an eligible person's charge liability. It works in tandem
with the charge offset certificate (refer new section 98).
If a person has a charge offset certificate in relation to a financial year and a base instalment
payable in relation to the financial year, and has not paid the instalment, new subsection (1)
enables the Secretary to remit the amount of the person's base instalment equal to the amount
specified in the charge offset certificate.
New subsection (2) requires the Secretary to inform the ACMA of remissions of charge under
new subsection (1) so that it can vary the person's assessment to reflect the remission under
new subsection (3) (see new section 102 for further information about assessments).
If a person has a charge offset certificate in relation to a financial year and a base instalment
payable in relation to the financial year and the base instalment has been paid, under new
subsection (4) the Secretary must refund so much of the base instalment as specified in the
charge offset certificate.
Division 7--Assessment, collection and recovery of charge
Figure 4 below demonstrates the timing of the carriers' various reporting obligations, the
ACMA's assessment of the charge, the due dates for payment of the charge and application
for charge offset certificates, issuance of nominal funding entitlement certificates and offset
certificates and the payment to the ACMA and the ACCC for their designated administrative
costs, and eligible funding recipients under new section 80 contracts and grants. It assumes
that eligible funding recipients will apply for a charge offset certificate under new section 98.
185
186
Subdivision A--Reporting obligations
This sub-division sets out carriers' annual reporting obligations. Carriers are required to self-
report the amount of chargeable premises and potentially concessional premises they have
each year to the ACMA so that the ACMA can assess their charge liability and collect the
charge. Carriers with exempt premises under new section 95 or exempt lines under new
section 96 do not have to report about those lines. This decreases the compliance burden on
industry.
The charge is reported, assessed and collected a year in arrears, so the annual reporting
obligations begin in the second eligible financial year of the Scheme (for a timeline of
administrative events related to the Scheme, see Figure 4 above). There is also a special, one-
off requirement for carriers to report to the ACCC in December 2017 (refer commentary on
new section 102ZF below).
New section 100 - Reporting obligations
New subsection (1) sets out the reporting obligations that carriers liable to pay the charge
must adhere to. New subsection (2) provides that the report must be in a form approved in
writing by the ACMA. New subsection (3) outlines that the approved form may require
verification, by a statutory declaration, of statements made in the report.
New subsection 3(A) requires carriers to declare certain details about their associations. This
information will facilitate the ACMA's ability to enforce compliance with the provisions of
the Charge Act and new Part 3 of the TCPSS Act.
New subsection (4) requires carrier to report their number of potentially concessional
premises per month for the first five eligible financial years of the Scheme. This will enable
the ACMA to reduce the number of chargeable premises the carrier has, if appropriate, per
clause 20 of the new Charge Bill.
New subsection (5) provides that if particular premises are reported as potentially
concessional premises and the carrier did not know and could not, with reasonable diligence
have ascertained, that the premises were not potentially concessional, then the premises are
taken to be potentially concessional premises in relation to the person for the month.
The Government recognises it may sometimes be difficult for carriers to ascertain, for
example, whether a premises is a small business premises at a particular point in time or a
medium business premises. As such, this subsection provides limited leniency to carriers for
mistakenly misreporting potentially concessional premises. It is expected that carriers
establish systems to enable them to tell whether a premises is potentially concessional. They
must use reasonable diligence to ensure that the premises they report as potentially
concessional are in fact potentially concessional.
New section 101 - Offence of failing to lodge report
New subsection (1) establishes the offence of failing to lodge report, which is a strict liability
offence that carries a penalty of 50 penalty units. A person will commit this offence if the
person is subject to a requirement under new section 100, they omit to do an act, and that
failure constitutes a breach of the regime.
New subsection (2) outlines that a person who contravenes new subsection (1) commits a
separate offence in respect of each day (including a day of a conviction for the offence or any
later day) during which the contravention continues.
Other penalties may apply for contravention of this section, by virtue of compliance with the
new section now being a carrier license condition.
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Subdivision B--Assessments
This sub-division sets out the ACMA's assessment obligations and powers. The ACMA will
assess carriers' charge liability and use these assessments to collect the charge. Assessment
will be undertaken a year in arrears and can be varied if necessary (for a timeline of
administrative events related to the Scheme, see Figure 4 above).
New section 102 - Assessments
New section 102 sets out the ACMA's assessment obligations.
Subsections (1) provides that if a person has given the ACMA a new section 100 report in
relation to a financial year before the 31 October after the relevant financial year, the ACMA
must make a written assessment before the assessment deadline setting out:
The person's total number of chargeable premises for each month in the financial
year.
The person's annual chargeable premises amount for the financial year (refer clauses
6 and 9 of the Charge Bill).
The person's annual base amount for the financial year (refer clause 10 of the Charge
Bill) - this is the amount that will be used to pay eligible funding recipients.
The person's annual administrative cost amount for the financial year (refer clause 14
of the Charge Bill) - this is the amount that will be used to pay the ACMA and
ACCC's designated administrative costs.
The charge payable by the person in relation to the financial year.
Splitting the annual chargeable premises amount into the annual base amount and the annual
administrative cost amount facilitates the instalment mechanism outlines in new subsection
102D(5).
Two notes are included, one to direct readers to new section 102D, which sets out when the
charge is payable, and the other reminding readers that the annual chargeable premises
amount may be reduced in the first five eligible financial years in accordance with clause 20
of the Charge Bill.
Subsection (2) provides that the ACMA may issue an assessment by the assessment deadline
setting out the same things required by paragraph (1)(a) if a person has not given the ACMA
a section 100 report on time. The same notes are included as in subsection (1).
New subsection (3) makes clear that an assessment under this section is not a legislative
instrument. This is a declaratory statement.
New subsection (4) outlines the assessment deadline for a financial year, which is to be the
end of 30 November next following the financial year, or a later day determined by the
ACMA under new subsection (5) so long as that later day is at least 2 month before the
standard due date of the charge (refer new section 102D).
New subsection (5) provides the ACMA may make a determination varying the assessment
deadline by legislative instrument.
New subsection (6) provides that section 20 of the Charge Act (clause 20 of the Charge Bill)
applies for the purposes of subparagraph (1)(a)(i) and paragraph (2)(a) in the same way that it
applies in the Charge Act.
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New section 102A - Notification of assessment
New section 102A outlines that, as soon as practicable after making an assessment under new
section 102, the ACMA must give a copy of the assessment to the person to whom the
assessment relates. This is so the person knows how much charge they are liable to pay for
the year and has ample time to make payment arrangements.
New section 102B - Variation of assessments
New section 102B deals with assessment variations made by the ACMA. New subsection (1)
outlines that the ACMA may vary an assessment made under this Division by making
alterations and additions it thinks necessary, even if levy has been paid under that assessment.
New subsection (2) makes clear that, unless the contrary intention appears, a varied
assessment is taken, for the purposes of this Division, to be an assessment under new section
102.
New section 102C - ACMA may accept statements
New section 102C makes clear that, despite anything in this Division, the ACMA may, for
the purposes of making an assessment under this Division, partly or completely accept a
statement in a report under new section 100.
Subdivision C--Collection and recovery of charge
This subdivision sets out the ACMA's powers and responsibilities in relation to collecting the
charge and recovering it when it has not been paid. It includes standard due dates that apply
to carriers that are not eligible funding recipients and particular due dates and payment
arrangements for eligible funding recipients that have applied for a charge offset certificate
under new subsection 98. For a timeline of administrative events related to the Scheme, see
Figure 4 above.
New section 102D - When charge payable
This section sets out different due dates and payment arrangements for carriers that are not
eligible funding recipients and carriers that are eligible funding recipients. The difference is
necessary because an eligible funding recipient's nominal funding entitlement and subsequent
charge offset can only be confirmed once the Secretary can make an estimate of the balance
of the Special Account, i.e. after most carriers have already paid their charge liability (see
commentary above on new sections 86 and 98). The particular characteristics of a Special
Account (particularly that its balance cannot be reduced below zero) do not permit this
process to commence any earlier.
For a person who is not an eligible funding recipient, charge is due and payable on the
standard due date for the financial year (refer subsection (1)). The ACMA can grant an
extension by written notice (refer paragraph (1)(b)) but that date cannot be later than
28 February next following the financial year (refer subsection (2)). This limit on extensions
to payment dates is to allow the Secretary time to ascertain an eligible funding recipient's
nominal funding entitlement and issue their offset certificate before paying the eligible
funding recipient under a new section 80 contract or grant before the end of the financial
year.
New subsection (3) provides that a copy of this notice must be published on the ACMA's
website. This increases the transparency of the Scheme. New subsection (4) makes clear that
the notice is not a legislative instrument. This is a declaratory statement, reflecting the non-
legislative nature of the notice.
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An eligible funding recipients' charge is payable in two instalments: the base instalment,
which equals their annual base amount; and the administrative cost instalment, which equals
the annual administrative cost amount of the person for the financial year (refer to new
subsection (5)). This ensures that the eligible funding recipient can contribute to the
designated administrative costs of the Scheme and still have their base instalment offset by a
charge offset certificate (see discussion above of new sections 98 and 99).
New subsection (6) provides that the base instalment becomes due and payable on 30 April
next following the financial year if the person has made an application for a charge offset
certificate or, if not, the standard due date for the financial year. The ACMA can grant an
extension by written notice (refer paragraph (6)(b)) but that date cannot be later than
28 February next following the financial year (refer subsection (7)). A copy of the notice
must be published on the ACMA's website (refer new subsection (8)). The notice is not a
legislative instrument (refer new subsection 9). This is a declaratory statement, reflecting the
non-legislative nature of the notice.
New subsection (10) provides that an eligible funding recipient's administrative cost
instalment becomes due and payable on the standard due date of the financial year. The
ACMA can grant an extension by written notice (refer paragraph (10)(b)) but that date cannot
be later than 28 February next following the financial year (refer subsection (11)). A copy of
the notice must be published on the ACMA's website (refer new subsection (12)). The notice
is not a legislative instrument (refer new subsection 13). This means eligible funding
recipients contribute to the designated administrative costs of the Scheme at the same time as
other carriers.
New subsection (14) outlines that, for the purposes of this section, the standard due date for a
financial year is 31 December next following the financial year, or the later day determined
by the ACMA under new subsection (15) (which is a legislative instrument). This later day
cannot be later than 28 February next following the financial year.
New section 102E - Recovery of charge
New section 102E outlines that the charge or an instalment of the charge is a debt due to the
ACMA on behalf of the Commonwealth. It may be recovered by the ACMA, on behalf of the
Commonwealth, in the Federal Court, the Federal Circuit Court, or a court of a State or
Territory that has jurisdiction in relation to the matter.
New section 102F - Validity of assessment
New section 102F makes clear that the validity of an assessment under this Division is not
affected by a contravention of this Division.
New section 102G - Evidence of assessment
New section 102G applies if a document that purports to be a copy of an assessment under
new section 102 is produced in a proceeding. New subsection (2) outlines that unless the
contrary is established, it must be presumed that the document is a copy of the assessment,
the ACMA duly made the assessment, and the amounts and other particulars set out in the
assessment are correct.
New section 102H - Onus of establishing incorrectness of assessment
New section 102H provides that the onus of establishing that an assessment under new
section 102 is incorrect in a proceeding is on the party making that assertion.
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New section 102J - Refund of overpayment of charge
New section 102J outlines that, if there is an overpayment of charge or an instalment of
charge, the overpayment is to be refunded by the Secretary on behalf of the Commonwealth.
New section 102K - Cancellation of certain exemptions from charge
New subsection 102K(1) cancels the effect of a provision of another Act that would have the
effect of exempting a person from liability to pay charge. New subsection (2) clarifies that the
cancellation does not apply if the provision of the other Act is enacted after the
commencement of this section and refers specifically to a charge that is proposed to be
imposed by the Charge Bill.
New section 102L - Commonwealth not liable to charge
New subsection 102L(1) provides that the Commonwealth is not liable to pay the charge.
New subsection (2) makes clear that a reference in this section to the 'Commonwealth'
includes a reference to an authority of the Commonwealth that cannot, by law of the
Commonwealth, be made liable to taxation by the Commonwealth. NBN Co is not an
authority of the Commonwealth and will be liable to pay the charge.
Subdivision D--Other matters
New section 102N - Late payment penalty
New section 102N outlines the late payment penalty that will apply if an amount of charge
that is payable by a person remains unpaid after the day on which it becomes due and payable
(refer new subsections (1)-(7)). This penalty is to be 20 per cent per year, or a lower rate that
the ACMA determines in writing (which new subsection (7) clarifies, is a legislative
instrument). Recovery of the late payment penalty is consistent with new section 102E
(recovery of the charge) with respect to the applicable jurisdiction (refer new subsection (5)).
Division 8--Disclosure of information
Subdivision A--Access to information or documents held by a carrier or carriage
service provider
The ACMA is responsible for administering and enforcing the Scheme. This Subdivision
creates appropriate information gathering powers required to fulfil that role.
New section 102P - Access to information or documents held by a carrier or carriage
service provider
New section 102P applies to a carrier or carriage service provider if the ACMA reasonably
believes that they have information/documents relevant to the operation of Division 4, 5, 6 or
7 of this Part, or the Charge Act (refer new subsection 102P(1)).
Under new subsection (2), the ACMA may, by written notice, require a carrier or carriage
service provider to give information, documents, or copies of documents to the ACMA
within the period and in the manner and form specified in the notice. Under new
subsection (3), the period specified must not be shorter than 14 days after the notice is given.
New subsection (4) outlines that a carrier or carriage service provider must comply with new
subsection (2), to the extent that they are capable of doing so. New subsection (5) establishes
an offence for contravention of a notice given under new subsection (2). The penalty is 50
penalty units.
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New section 102O - Copying documents--compensation
New section 102O outlines that a carrier or carriage service provider is entitled to be paid
reasonable compensation by the ACMA for complying with a requirement covered by new
subsection 102P(2)(c).
New section 102R - Copies of documents
New section 102R provides the ACMA with the power to inspect a document or copy
produced under new subsection 102P(2), and make and retain copies of, or take and retain
extracts from, such a document. New subsection (2) outlines that the ACMA may retain
possession of document copies produced in accordance with new subsection 102P(2)(c).
New section 102S - ACMA may retain documents
New section 102S provides the ACMA with the power to take and retain possession of a
document produced under new subsection 102P(2) for as long as is necessary. If this occurs,
new subsection (2) establishes the requirement for the ACMA to provide a certified copy in
place of the original document. Under new subsection (3), this copy must be received in all
courts and tribunals as evidence as if it were the original. New subsection (4) provides a
carrier or carriage service provider, or an authorised person, with access rights until a
certified copy is supplied.
New section 102T - Law relating to legal professional privilege not affected
New section 102T makes clear that new Subdivision 8 does not affect the law relating to legal
professional privilege. This section ensures that carriers and carriage service providers can
fully comply with any ACMA request for access to information/documents in accordance
with new section 102P, without risk that their rights at law to claim legal professional
privilege in respect of any such information being eroded. This is consistent with public
policy.
Subdivision B--Access to information or documents held by an eligible funding
recipient
The ACCC is responsible for reviewing the base and administrative cost components under
new sections 13 and 17 of the Charge Act. These reviews are important in order to facilitate
Ministerial determination of the components under new sections 12 and 16 of the Charge Act.
This Subdivision creates appropriate information gathering powers required to fulfil that role.
102U - Access to information or documents held by an eligible funding recipient
New section 102U applies to an eligible funding recipient if the ACCC believes on
reasonable grounds that they have information/documents relevant to the performance or
exercise of any of the ACCC's functions or powers, under the Charge Act. The provisions of
this section (refer new subsections (1)-(5)) mirror those in new section 102P, replacing
'carrier or carriage service provider' with 'an eligible funding recipient' and the ACMA with
the ACCC.
New section 102V - Copying documents--compensation
New section 102V mirrors new section 102O but the ACCC is required to pay compensation
rather than the ACMA and the section applies to eligible funding recipients.
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New section 102W - Copies of documents
New section 102W mirrors new section 102R but applies to the ACCC.
102X - ACCC may retain documents
New section 102X mirrors new section 102S but applies to the ACCC and covers eligible
funding recipients' documents.
New section 102Y - Law relating to legal professional privilege not affected
New section 102Y mirrors new section 102T but it applies to new Subdivision B.
Subdivision C--Disclosure of information to certain bodies
Subdivision C gives the ACMA and ACCC power to share relevant information with
particular government agencies. These information sharing provisions will assist government
agencies to continue to give evidence-based policy advice to Government. The information is
protected by confidentiality laws that apply to all Commonwealth officers. For members of
RTIRC that are not Commonwealth officers, the information could be protected through
confidentiality agreements.
New section 102Z - Disclosure of information by the ACMA to certain bodies
New section 102Z provides the ACMA with the power to disclose relevant information (refer
new subsection (1)(g)), to the Department, the ACCC, the Regional Telecommunications
Independent Review Committee, the Department administered by the Minister administering
the PGPA Act, the Department administered by the Treasurer, and any authorised
government agency, if the ACMA is satisfied that the information will enable or assist the
body to perform or exercise any of their functions or powers. New subsection (2) outlines that
the ACMA may, by notifiable instrument, declare that a specified department or authority of
the Commonwealth, a State or a Territory is an 'authorised government agency'.
New subsection (3) outlines that the ACMA may, by writing, impose conditions for the above
bodies to comply with new subsections (4) and (5) make clear that an instrument made under
new subsection (3) that imposes conditions relating to one particular disclosure is a notifiable
instrument (given its non-legislative character), but an instrument made under new
subsection (3) imposing conditions on more than one disclosure is a legislative instrument.
New section 102ZA - Disclosure of information by the ACCC to certain bodies
New section 102ZA mirrors new section 102Z, but applies to the ACCC instead of the
ACMA.
Division 9--Other matters
The Government recognises the importance of making the funding arrangements for nbn's
fixed wireless and satellite networks as transparent as possible. To this end, new sections
102ZB, 102ZC and 102ZD establish mandatory public reporting requirements relating to the
collection and payment of charge proceeds and the use of those proceeds to fund nbn's fixed
wireless and satellite networks.
New section 102ZB - Register of Contracts for the Funding of Fixed Wireless
Broadband and Satellite Broadband
While copies of funding agreements will not be published in full for commercial reasons,
new section 102ZB requires the Secretary to maintain a public register, that includes a range
of information for each in-force section 80 contract (refer paragraphs (1)(a)-(f)).
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The register is to be known as the 'Register of Contracts for the Funding of Fixed Wireless
and Satellite Broadband' and will be maintained by electronic means and made available for
inspection on the Department's website (refer new subsections (2) and (3)). New subsection
(4) makes clear that the register is not a legislative instrument.
New section 102ZC - Register of Grants for the Funding of Broadband Services
New section 102ZC mirrors new section 102ZB, but applies to a Register of Grants instead of
a Register of Contracts. The register will include the information required at paragraphs
(1)(a)-(e). New subsection (4) also makes clear that the register is not a legislative instrument.
New section 102ZD - Publication of levy payments and levy offsets
New section 102ZD outlines that each year the ACMA must publish on its website a
statement that sets out the total amount of charge paid by carriers, and the total of the
amounts specified in charge offset certificates issued to carriers, in relation to the eligible
financial year.
New subsection 98(7) requires the Secretary to give ACMA a copy of charge offset
certificates issued during the year, which will enable the ACMA to calculate the total of the
amounts specified in the certificates for the year. Since the ACMA would only publish the
aggregate amount of charge paid and offset each year, the information should not reveal
carriers' sensitive commercial information.
New section 102ZE - ACMA may give certain information to the ACCC
To ensure the ACCC can carry out its functions effectively, new section 102ZE outlines that
the ACMA may give the ACCC information that is relevant to the performance of any of the
ACCC's functions, or the exercise of any of the ACCC's powers, under the Charge Act.
Since carriers report their chargeable premises to the ACMA each year, the ACMA may have
information relevant to the ACCC's five yearly advice regarding the base and administrative
cost components (refer clauses 13 and 17 of the Charge Bill). This advice will help ensure
that the charge amount continues to reflect the changing size of the telecommunications
market. It may be appropriate, for example, for the ACMA to share relevant information to
facilitate the review that would underpin this advice.
New section 102ZF - Report about the number of premises supplied with designated
broadband services during November 2017
New section 102ZF establishes a one-off reporting requirement that will give the ACCC a
snapshot of the high speed, fixed line broadband market at it stands during November 2017.
The ACCC may decide to use this information to give the Government advice about the base
and administrative cost components in accordance with its function under clauses 13 and 17
of the Charge Bill. The Minister may then choose to adjust the base and administrative cost
components before the charge begins to accrue on 1 July 2018. This would align the charge
with the latest industry information about the size of the high speed, fixed line broadband
market.
New subsection (1) defines a reportable premises as a premises in Australia that a carriage
service provider supplies a designated broadband service to during the whole of part of the
month using a line owned by a carrier (or a nominated carrier) during the whole or part of
November 2017. The definition effectively encompasses all the potentially chargeable
premises (refer new section 94), chargeable premises (refer new section 93), exempt premises
(refer new section 95), exempt lines (refer new section 96) and potentially concessional
premises (refer new section 96A) in relation to a carrier during November 2017.
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New subsection (2) requires carriers that have one or more reportable premises in November
2017 to give the ACCC a written report setting out:
the number of those premises, and
the number of potentially chargeable premises, and
the number of chargeable premises, and
the number of exempt premises, and
the number of exempt lines, and
the number of potentially concessional premises
in relation to the person for the month (assuming paragraph 79(1) referred to 1 July 2017
instead of 1 July 2018 - this enlivens the relevant provisions in new Division 4). Carriers
must give this report to the ACCC by 31 December 2017.
The breakdown of reportable premises into potentially chargeable, chargeable, exempt and
potentially concessional premises and exempt lines is necessary to indicate to the ACCC
which of the reportable premises would be included in the charge base if the charge was in
operation. The ACCC will require this information to give advice to the Government before
the charge begins to accrue, if it chooses to do so.
New subsection (3) outlines that the report must be in a form approved in writing by the
ACCC.
New subsection (4) outlines that the approved form may require verification of statements
made in the report by statutory declaration.
New subsection (4A) provides that if, at any time during November 2017, the carrier had an
associate in relation to control of a telecommunications network, company or local access
line, the report must also set out the name and ACN of the associate, identify the network,
company or line and identify which paragraph/s of subsection 152(1) of the Tel Act resulted
in the carrier having the associate.
New subsection (5) makes it a strict liability offence to fail to adhere to the requirements of
new subsection (2). The penalty is 50 penalty units.
New subsection (6) creates a separate offence for each day that a person who is subject to
new subsection (2), contravenes new subsection (5).
New section 102ZFA - Review of this Part etc.
The charge base has been designed to capture broadband services that are substitutable for an
nbn service, that is, superfast, fixed line broadband services. The telecommunications
industry changes rapidly and other types of services may become substitutable for an nbn
service in the future. It is desirable that the charge continue to capture substitutable services
so that the charge base is as equitable as possible. To facilitate this, new section 102ZFA
provides that a policy review must be conducted before the fourth year after commencement
of the Scheme. The Government may decide to change the charge base by legislative
amendment if the review finds that the charge base is no longer appropriate given
developments in the market.
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New subsection 102ZFA(1) requires the Minister to cause to be conducted a review of the
operation of:
new Part 3;
the remaining provisions of the TCPSS Act to the extent they are related to new
Part 3;
the Tel Act to the extent it is related to new Part 3 (for example, the enforcement
provisions in Part 30, 31 and 31B); and
the Charge Act.
The review also needs to consider if any amendments should be made to new Part 3 or the
remaining provisions of the TCPSS Act, the Tel Act and the Charge Act to the extent to
which they relate to new Part 3.
The review must provide for public consultation (see new subsection 102ZFA(2)) and be
undertaken before the end of four years after commencement of new section 102ZFA or as
soon as practicable after (see new subsection 102ZFA(3)).
To ensure the person or organisation undertaking the review has access to full information
relevant to the administration of the Scheme, the Minister may direct the ACMA and ACCC
to make information available for the review. The ACMA and ACCC must comply with the
Minister's direction (refer new subsections (4), (5), (6) and (7)).
A report of the review must be prepared and the Minister must ensure that copies of the
report are tabled in each House of the Parliament within 25 sittings days of that House after
the completion of the preparation of the report (refer new subsections (8) and (9)).
New section 102ZFB - Disallowance of determinations
New section 102ZFB provides for the delayed commencement of determinations made under
new subsections 76AA(2), 79A(1) or (2). This means that the usual disallowance
arrangements for legislative instruments under section 42 of the Legislation Act 2003 do not
apply to determinations made under those subsections (refer new subsection (4)).
New subsections 76AA(2), 79(1) and 79(2) enable the Minister to make determinations that
would affect the types of premises charged under the Scheme. As such, it is appropriate to
give the Parliament opportunity to scrutinise and disallow the determinations before they take
effect.
Either House of Parliament may pass a resolution disallowing the determination following a
motion upon notice. The notice must have been given in the House within 15 sitting days of
that House after the determination was tabled and the resolution must be passed within 15
sitting days of the House after the notice is given (refer new subsection (2)). In effect, this
means that either House of Parliament has 30 sitting days to disallow the Minister's
determination once it has been tabled.
If neither House of Parliament passes a resolution disallowing the determination during that
time, the determination takes effect on the day immediately after the last day upon which
such a resolution could have been passed (refer new subsection (3)). In effect, this means that
if the House does not disallow the determination in accordance with the requirements in new
subsection (2), the determination takes effect on the 31st day after the determination has been
tabled.
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Two notes accompany new section 102ZFB. The first note reminds readers that the 'within
15 sitting days' period mentioned in new paragraph 102ZFB(2)(a) has the same meaning as
in paragraph 42(1)(a) of the Legislation Act. The second note reminds readers that the 'within
15 sitting days' period mentioned in new paragraph 102ZFB(2)(b) has the same meaning as
in paragraph 42(1)(b) of the Legislation Act.
New section 102ZG - Delegation by the Secretary
New section 102ZG outlines that the Secretary may, by writing, delegate their functions or
powers under new Part 3 to an SES employee or an acting SES employee in the Department.
A note is included to direct readers to the Acts Interpretation Act 1901 (section 2B), which
defines the terms 'SES employee' and 'acting SES employee'.
New subsection (2) provides that delegates must comply with any written directions of the
Secretary.
New section 102ZH - Meaning of capable
New section 102ZH clarifies how to determine the meaning of the expression capable when
used in a provision of this Act (other than this Part) or the Tel Act. Readers should disregard
the expression 'technically capable' when used in the definition of 'designated broadband
service' in new section 76AA (refer to above commentary at section 76AA).
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Schedule 5 -- Designated day
Overview
Schedule 5 makes a single change to the Tel Act. It amends the date of the 'designated day'
under paragraph 577A(10)(a). The designated day in that paragraph is established for the
purposes of Telstra's structural separation obligations in section 577A of the Tel Act. Under
those obligations, Telstra gave the ACCC an undertaking that it will not, on or at all times
after the designated day, supply fixed-line carriage services to retail customers in Australia
using a telecommunications network over which it is in a position to exercise control. It also
made commitments to implement transparency and equivalence matters until the designated
day. As a result, the designated day is the date on which Telstra will become structurally
separated.
Under section 577A of the Tel Act, the designated day is 1 July 2018 or another day specified
by the Minister by written instrument.
Telstra's structural separation occurs through the migration of its fixed-line customer base to
the NBN. The date of its structural separation is therefore tied to the date when the NBN
rollout is complete. At the time that section 577A was enacted, that date was anticipated to be
1 July 2018. However, the NBN rollout is now anticipated to be finalised by 2020. The
designated day therefore needs to be amended to enable Telstra's structural separation and
the completion of the NBN to be synchronised.
Item 1 - Paragraph 577A(10)(a)
Item 1 repeals paragraph 577A(10)(a) and replaces it with a new date, 1 January 2020. This is
the date by which it is anticipated the NBN rollout will be complete.
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