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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TELECOMMUNICATIONS LEGISLATION AMENDMENT
(COMPETITION AND CONSUMER SAFEGUARDS) BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for
Broadband, Communications and the Digital Economy,
Senator the Hon. Stephen Conroy)
TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMPETITION AND CONSUMER
SAFEGUARDS) BILL 2009
OUTLINE
The Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Bill 2009 (the Bill) introduces a package of legislative
reforms aimed at enhancing competitive outcomes in the Australian
telecommunications industry and strengthening consumer safeguards.
The package has three primary parts: addressing Telstra's vertical and
horizontal integration; streamlining the access and anti-competitive
conduct regimes; and strengthening consumer safeguard measures such as the
Universal Service Obligation (USO), the Customer Service Guarantee (CSG)
and priority assistance.
The Bill contains amendments to the Telecommunications Act 1997 (Tel Act),
Parts XIB and XIC of the Trade Practices Act 1974 (the TPA), the
Radiocommunications Act 1992 (the Radcom Act) and the Telecommunications
(Consumer Protection and Service Standards) Act 1999 (the Consumer
Protection Act). The Bill also makes consequential amendments to the
National Transmission Network Sale Act 1998 (NTN Sale Act).
Addressing the current structure of the telecommunications sector
The Australian telecommunications market is characterised by a very strong
and highly integrated incumbent, Telstra. Telstra is one of the most
integrated telecommunications companies in the world owning the only copper
network connecting almost every house, the largest cable and mobile
networks, and a 50 per cent stake in Foxtel, Australia's largest
subscription television provider.
Partly because of this integration, it has been able to maintain a dominant
position in virtually all aspects of the market, despite more than 10 years
of open competition. It is the Government's view that Telstra's high level
of integration has hindered the development of effective competition in the
sector.
The National Broadband Network (NBN) will deliver a wholesale-only, open
access telecommunications market structure, transforming the competitive
dynamics in the Australian telecommunications industry.
However, during the rollout of the NBN, the existing regulatory regime will
remain important for delivering competitive outcomes in the interests of
Australian consumers, businesses and the economy more broadly.
Consistent with the market structure that will be delivered through the
NBN, Part 1 of Schedule 1 of this Bill inserts a new Part 33 in the Tel Act
which provides provisions for Telstra to voluntarily structurally separate.
Structural separation may, but does not need to, involve the creation of a
new company by Telstra and the transfer of its fixed-line assets to that
new company. Alternatively it may involve Telstra progressively migrating
its fixed-line traffic to the NBN over an agreed period of time and under
set regulatory arrangements, and sell or cease to use its fixed-line assets
on an agreed basis. This approach will ultimately lead to a national
outcome where there is a wholesale-only network not controlled by any
retail company-in other words, full structural separation in time. Such a
negotiated outcome would be consistent with the wholesale-only, open access
market structure to be delivered through the National Broadband Network.
However, if Telstra does not voluntarily implement structural separation,
this Bill will require the functional separation of Telstra. Functional
separation is a regulatory tool that has been used successfully in other
countries such as the UK and New Zealand and is being considered by the
European Commission, to address the underlying incentives that fixed-line
incumbents have to favour their own retail businesses.
This Bill amends the Tel Act to require that Telstra must:
. conduct its network operations and wholesale functions at arm's length
from the rest of Telstra;
. provide the same information and access to regulated services on
equivalent price and non-price terms to its retail business and non-
Telstra wholesale customers; and
. put in place and maintain strong internal governance structures that
provide transparency for the regulator and access seekers that
equivalence arrangements are effective.
These provisions are contained in a new Part 9 of Schedule 1 to the Tel
Act, to be inserted by Part 1 of Schedule 1 to the Bill.
As part of the functional separation framework, Telstra will be required to
establish and maintain a single wholesale/network unit, separate from its
retail business units, and a committee to be known as the Oversight and
Equivalence Board.
Telstra will be required to operate its network and wholesale functions at
arm's-length from the rest of Telstra. The Oversight and Equivalence Board
will report to the Australian Competition and Consumer Commission (ACCC)
and Telstra's board of directors about Telstra's compliance with its
functional separation obligations.
Telstra's level of horizontal integration across the different delivery
platforms-copper, cable and mobile-is in contrast to many countries where
there are restrictions on incumbents owning both cable and traditional
fixed-line telephone networks. Unlike Australia, in a range of countries
the fixed-line incumbent does not also own the largest mobile carrier as
measured by market share. Telstra's horizontal integration has
significantly contributed to Telstra's ongoing dominance in the Australian
telecommunications market.
The Government intends to correct this unique market structure, by
introducing a set of measures designed to promote competition across the
various telecommunications platforms while providing Telstra with the
flexibility to choose its future path.
The proposed amendments to the Radcom Act and the new Part 10 of Schedule 1
to the Tel Act (in Part 1 of Schedule 1 to the Bill) will prevent Telstra
from acquiring specified bands of spectrum, which could be used for
advanced wireless broadband services unless it structurally separates,
divests its hybrid fibre coaxial cable network and its interests in Foxtel.
The legislation provides scope for the Minister to remove the requirements
around the cable network and Foxtel if he is satisfied that Telstra's
structural separation undertaking is sufficient to address concerns about
the degree of Telstra's power in telecommunications markets.
Streamlining the access and anti-competitive conduct regimes in Parts XIB
and XIC of the TPA
The Government's key objective is to promote an open, competitive
telecommunications market to provide Australian consumers with access to
innovative and affordable services. The telecommunications access regime in
Part XIC of the TPA and the telecommunications-specific anti-competitive
conduct regime in Part XIB are two essential means of accomplishing this
objective.
Regulated access ensures that communications services which have been
declared by the ACCC will be provided to access seekers to enable them to
provide services to end-users. Where the ACCC is of the opinion that anti-
competitive conduct is occurring (or has occurred) it can issue a
competition notice, which can lead to penalties being imposed if the
conduct is proven.
Since the introduction of these measures in 1997 their operation has been
criticised by many in industry as being overly protracted, and vulnerable
to 'gaming' by parties with an incentive to delay or damage new entrants.
Attempts have been made to improve aspects of the regime, but with limited
success. Building on extensive consultations with industry, regulatory
agencies and the public, this Bill will significantly reform the
competition regime to address these problems.
Amending Part XIC of the TPA
Currently Part XIC provides that, if parties cannot agree on the terms of
access to a declared service, then either party (the carrier or carriage
service provider that provides access to the service, or the access seeker)
can notify an access dispute to the ACCC. The ACCC must then arbitrate the
dispute. The terms and conditions of access are then those determined by
the ACCC in its arbitration determination for those two parties only. This
is know as the 'negotiate-arbitrate' model.
Since it is clear that the 'negotiate-arbitrate' model is not producing
effective outcomes for industry or consumers, Part 2 of Schedule 1 to the
Bill reforms the regime to allow the regulator to set up-front prices and
non-price terms for declared services. This will create a benchmark which
access seekers can fall back on, while still allowing parties to negotiate
different terms.
The ACCC will issue access determinations for each declared service, with
terms and conditions (and any appropriate exemptions or special rules)
usually set for a period between three and five years. The regulator will
also be able to determine 'fixed principles', such as how depreciation is
treated, to remain in force over a longer period if necessary.
Access agreements entered into between providers and access seekers will
have to be registered with the ACCC; however approval by the regulator will
not be required.
The ACCC will have the power to make binding rules of conduct for the
supply of declared services which would apply either in addition to, or as
a variation of, an access determination. Having such rules in place will
allow the regulator to act quickly on issues affecting the supply of retail
services. Since they are designed as a temporary measure to deal with
urgent matters, the duration of binding rules of conduct is limited to a
maximum of 12 months. It is envisaged that binding rules of conduct will
only be used on an occasional basis.
Part XIC will be modified to remove the option to apply for exemptions from
access obligations or undertakings, except in relation to new services
which are deemed to require regulatory relief to stimulate innovation in
the market. To promote regulatory certainty and timely decision-making,
merits review of decisions under Part XIC will no longer be available.
Judicial appeal processes will still be available, however, for parties
wishing to appeal a point of law.
The process of lodging special access undertakings has proven to be
unnecessarily inflexible, with even minor changes to the terms of the
undertaking requiring an entirely new application to be submitted and
assessed from the beginning. This will be changed to allow the ACCC to
suggest changes to undertakings as the assessment process proceeds.
Amending Part XIB of the TPA
Part 3 of Schedule 1 to the Bill will make two changes to the way the anti-
competitive conduct provisions in Part XIB operate. Part 3 streamlines the
enforcement process that the ACCC is required to follow, and clarifies that
the competition notice regime applies to content services delivered by
carriers and carriage service providers.
The competition notice process has been criticised on the grounds that the
consultation process prior to the issuing of a competition notice can delay
enforcement action. These delays may lead to irreversible damage to the
parties that are affected by any alleged anti-competitive conduct.
This Bill will remove the requirement for the ACCC to undertake
consultation before issuing a Part A competition notice. This Bill also
explicitly provides that the ACCC is not required to observe any
requirements of procedural fairness in relation to the issue of a Part A
competition notice.
This will deny the party alleged to have taken part in anti-competitive
conduct the ability to delay the ACCC's enforcement activities on
procedural grounds. The focus for both parties will therefore be on
resolving the alleged illegal conduct, rather than on litigation aimed at
challenging the processes followed by the ACCC. The competition notice can
be lifted at any time if the ACCC is satisfied that the allegation of
improper conduct is mistaken, or the situation has been corrected.
If the ACCC commences court proceedings to enforce a Part A competition
notice, the ACCC would still have to prove to the court that the
competition rule had been breached by the alleged offender.
Content services are defined in section 15 of the Tel Act and include a
broadcasting service, online information service, online entertainment
service, any other online service, or any other service as determined by
the Minister. Content services are not currently listed as a service
supplied in a telecommunications market and as a consequence, it is unclear
whether Part XIB applies to content services supplied by carriers and
carriage service providers.
Clarifying the scope of Part XIB will increase regulatory certainty and
reduce the risk of protracted legal disputes on this issue.
Strengthening existing consumer protection regulations
The Government is committed to ensuring consumers are protected in
the transition to the NBN. Current protections are delivered through
key telecommunications-specific consumer safeguards including the
Universal Service Obligation, the Customer Service Guarantee and
Priority Assistance.
The Bill strengthens existing legislative requirements to better
protect consumers, address falling service quality and ensure
continued access to basic voice services in the lead up to the NBN.
There are also measures to improve the effectiveness of the
regulating body, the Australian Communications and Media Authority
(ACMA), through enhanced regulatory powers.
Universal Service Obligation
The Universal Service Obligation has the objective of ensuring basic
voice telephony and payphone services are reasonably accessible to
all people on an equitable basis. However, current requirements
imposed on the primary universal service provider (currently
Telstra) are imprecise and difficult to enforce.
Part 4 of Schedule 1 to the Bill amends the Consumer Protection Act
to include new requirements for the universal service provider to
supply, on request, standard telephone services with characteristics
and to performance standards determined by the Minister. It is
intended that performance standards will include maximum periods of
time for new connections and fault rectification and reliability
standards. There are also new provisions providing minimum
performance benchmarks that the universal service provider must meet
in fulfilling its responsibilities.
The Bill also provides the Minister with the power to specify, by
written determination, rules and performance standards to which a
primary universal service provider must adhere in relation to the
supply, installation, maintenance and location of payphones. In
addition, there will be new rules in relation to public consultation
and notification of proposals to remove payphones. The ACMA will
have new powers to direct the universal service provider not to
remove payphones. It is intended that people adversely affected
about a proposed payphone removal will be able to request that ACMA
consider issuing directions to the universal service provider. In
considering whether to issue such a direction, the ACMA will have
regard to both the consultation and notification requirements as
well as the rules about the location of payphones.
Customer Service Guarantee
The CSG requires telephone companies to meet minimum performance
standards or provide customers with financial compensation when
these standards are not met. However, compliance reporting
undertaken by the ACMA indicates declining industry performance
against the CSG requirements, which suggests the existing
arrangements are not providing sufficient incentive for the industry
to maintain or improve service quality.
Part 5 of Schedule 1 to the Bill amends the Consumer Protection Act
to provide for the Minister to establish minimum CSG performance
benchmarks to arrest the decline in telecommunications service
quality standards. While failure by a service provider to meet a CSG
standard is not subject to a civil penalty under the Tel Act,
failure to meet the minimum CSG performance benchmarks will be. As
for the USO, expanded powers of the ACMA to issue infringement
notices under the new Part 31B will assist the ACMA to effectively
enforce this consumer safeguard. It is expected that this will be a
strong incentive on the industry to improve service quality.
In addition, the Bill provides for the Minister to establish new CSG
timeframes for connections and repair that will apply to wholesale
providers to assist retail providers of CSG services meet CSG
service quality standards.
To avoid stifling innovation and customer choice, the Bill will
clarify CSG waiver provisions provided for under section 122 of the
Consumer Protection Act. A customer's express agreement for a waiver
will be required. The practice of deeming CSG rights to be waived,
for example, through a standard form of agreement under Part 23 of
the Tel Act, will not be allowed. In addition, there is a new
requirement that a customer waiver of the CSG must include a
statement that summarises the consequences of the customer waiving
the CSG.
To ensure consumers have the safety net of always being able to
purchase a CSG service, the Bill makes explicit that the CSG cannot
be waived for a telephone service that is supplied in fulfilment of
the Universal Service Obligation.
Priority Assistance
Priority assistance services provide enhanced telephone connections
and fault repairs for customers with a need for such services
because a person at the residence has a life threatening medical
condition and is at risk of suffering a rapid, life threatening
deterioration in their condition.
To assist customers purchase services with priority assistance if
this is needed, Part 6 of the Bill introduces a new service provider
rule in Schedule 2 of the Tel Act requiring service providers to
either offer a priority assistance service in accordance with the
Communications Alliance code on priority assistance or inform
customers of providers from whom they can purchase such a service if
they require it. Telstra will remain bound by its current carrier
licence condition requiring it to have priority assistance services.
Enforcement
Part 7 of Schedule 1 to the Bill inserts a new Part 31B into the Tel
Act which provides expanded powers for the ACMA to issue
infringement notices. This will assist the ACMA in enforcing
obligations under the telecommunications regulatory regime.
Part 8 of Schedule 1 to the Bill substitutes a new definition of
civil penalty provision to simplify and clarify the definition.
FINANCIAL IMPACT STATEMENT
These reforms will have a moderate financial impact on
administration costs for the ACCC and the ACMA, which will be funded
by increasing the carrier licence charges levied by the ACMA under
the Telecommunications (Carrier Licence Charges) Act 1997. This will
mean that the proposal has a limited fiscal impact for the
Commonwealth.
REGULATION ASSESSMENT
ADDRESSING TELSTRA'S VERTICAL AND HORIZONTAL INTEGRATION
1. Introduction
This regulation assessment has been prepared in consultation with the
Office of Best Practice Regulation to provide an analysis of the regulatory
impact of the Government's decision to implement measures to address
Telstra's horizontal and vertical integration.
2. Background
On 7 April 2009, the Australian Government announced it would establish a
new company that would invest up to $43 billion over eight years to build
and operate a National Broadband Network (NBN) delivering superfast
broadband to Australian homes and workplaces.
This historic nation-building investment will help transform the Australian
economy and create jobs and businesses for the 21st century.
The Government's plan will dramatically improve the availability of
superfast broadband across Australia and fundamentally change the
competitive dynamics of the Australian telecommunications sector. This new
network will be wholesale-only and open access to maximise competition, and
ensure improved consumer outcomes.
Operating as a wholesale-only provider, the NBN Company (NBN Co) will solve
the current structural issues in the telecommunications sector where the
vertically integrated incumbent owns the only ubiquitous fixed-line network
in Australia, and competes against its wholesale customers in downstream
retail markets. NBN Co will have less incentive to unfairly discriminate
between access seekers. It will also be required to operate on an open
access basis and provide equivalent terms and conditions of access to all
access seekers.
The Government has stated that the NBN will be rolled out progressively
over eight years. During this time the existing telecommunications
regulatory regime will remain important for delivering services in the
interests of Australian consumers and businesses.
As such, reform of the current telecommunications regulatory regime is a
core element of the Government's historic plans for the NBN. Taking into
account the views expressed in response to the NBN discussion paper
released on 7 April, the Government has announced a reform package
including measures that promote greater equivalence, transparency and
competition in the industry.
3. Issues associated with vertical and horizontal integration would be
addressed by structural separation
Telstra is a vertically integrated incumbent, which provides access to its
network and supplies wholesale services to those that it competes with in
downstream retail markets. Telstra also owns the largest mobile network,
the largest hybrid fibre coaxial cable network in Australia (passing
2.5 million homes) and 50 per cent of Australia's largest subscription
television provider, Foxtel.
Telstra's integrated position across all the telecommunications platforms
has led to long-standing and widespread concerns that the existing
telecommunications structure is failing consumers, businesses and the
economy in general.
As the nation moves to superfast broadband it is the Government's clear
desire for Telstra to vertically structurally separate, on a voluntary
basis, in the transition to the NBN to be consistent with the structure of
NBN Co. This is a view shared by consumer group the Australian
Telecommunications User Group where:
'[t]he Government's approach to the NBN operator should be the benchmark
for arrangements during the 8 year transition period...'-Australian
Telecommunications User Group[1]
Structural separation is the only arrangement that will fully address both
Telstra's incentives and its ability to discriminate against its
competitors and thereby ensure equivalence.
The Government retains an open mind on what the best model for structural
separation is as the nation transitions to the NBN. It may, but does not
need to, involve the creation of a new company by Telstra and the transfer
of its fixed-line assets to that new company.
Alternatively, it may involve Telstra progressively migrating its fixed-
line traffic to the NBN over an agreed period of time and under set
regulatory arrangements, and for it to sell or cease to use its fixed-line
assets on an agreed basis. This approach will ultimately lead to a national
outcome where there is a wholesale-only network not controlled by any
retail company-in other words, full structural separation in time. Such a
negotiated outcome would be consistent with the wholesale-only, open access
market structure to be delivered through the NBN.
What is structural separation?
Structural separation as defined by the ACCC is:
'...the legal separation of Telstra's assets and activities into separate
corporate entities with entirely separate owners/shareholders.'-ACCC[2]
Why structural separation limits the incentives to discriminate
The ACCC explains that the incentive to discriminate arises where there is
market power and:
'equivalence in access might risk profit contribution - that is, where:
. a materially higher return is available on retail supply than from
providing network access services; and
. effective competition in downstream markets would result in the erosion
of excess profits if access seekers had equivalent access to the upstream
input; and
. countervailing incentives-such as those that might exist under the threat
of effective competition across all levels of production (e.g. if HFC
[hybrid fibre coaxial] and/or wireless networks provided strong
competitive constraint)-are weak.'-ACCC[3]
Further, the ACCC explains that a structurally separated entity has few
incentives to discriminate against downstream rivals because:
'...without a retail arm to which it may seek to provide an advantage, a
wholesale-only operator would gain little from favouring one access seeker
over another, thereby ensuring true equivalence. On the other hand,
vertical integration of any form into downstream markets, even when subject
to regulatory measures, will not ensure equivalence.'-ACCC[4]
The views of the industry
Submissions in response to the Regulatory Reform discussion paper called
for Telstra's structural separation and stated that:
'...Optus does not believe that these [functional separation] arrangements
go far enough and they remain a second best approach to structural
separation.'-Optus[5]
'Structural Separation between access provider and access seekers is
essential.'-iiNet[6]
'The structural separation of Telstra should be a policy objective.
Functional separation should not be pursued as it does not materially
improve on the current arrangements.' -Unwired[7]
'The separation arrangements should, in fact, encourage Telstra itself to
consider divesting itself of its network activities, consistent with the
Government's ideal model of the industry structure.' -Competitive Carriers
Coalition[8]
According to these submitters, structural separation is the only remedy to
fully address Telstra's incentives to discriminate.
Telstra did not directly address the issue of its structural separation in
its regulatory submission. However, submissions it has made to previous
processes indicate it has not supported this option in the past.
The views of the regulator
The ACCC considers:
'...that structural separation is the only regulatory arrangement that will
in practical terms address Telstra's incentives and ability to discriminate
against its competitors and thereby ensure equivalence.'-ACCC[9]
Potential benefits to the company of structural separation
The ACCC in its regulatory submission[10] stated that vertical separation
can enhance the value of separated firms and that there may be some
vertical dis-economies of scope which may arise as firms take on additional
functions which are outside the scope of its core functions and which the
firm is not well equipped to perform.
Voluntary structural separation is not without precedent. The ACCC in its
submission provided several examples of companies which have chosen to
legally and structurally separate including:
. in May 2008, Time Warner Inc announced that it would structurally
separate from the second largest cable operator in the United States,
Time Warner Cable Inc. The reason for the separation was that each
company would have greater strategic, financial and operation flexibility
and would be better positioned to compete within their respective
markets;
. in 2005, the Australian Gas Light Company split its infrastructure assets
from its retail and merchant energy business on the basis that the move
would create greater long-term value for shareholders; and
. in 2007, Toll split off its infrastructure assets (ports and the Pacific
National rail business) from its logistics business. Regarding the re-
structure Toll stated that 'dynamic growth opportunities were identified
in both businesses, building on Toll's current strong results and
performance'.
How structural separation could be implemented
Telstra's structural separation could be implemented under a voluntarily
enforceable undertaking to be submitted to the ACCC. Under this sort of
mechanism, the Minister could provide guidance to the ACCC on the matters
it would take into account when considering whether to accept the
undertaking.
An important note is that the enforceable undertaking to structurally
separate could take different forms. For example, to achieve the aim of
structural separation:
. Telstra could undertake to create a new company, vest its fixed-
line network in that company and then sell that company, leaving
Telstra operating as a retailer of fixed-line services; or
. Telstra could undertake to migrate its traffic to the NBN over time
and sell or cease to use its fixed-line assets. Under this option,
Telstra would undertake to:
o supply services to its retail customers using carriage services
provided by means of the NBN;
o vend the fixed-line assets that the NBN requires to NBN Co; and
vend to another company (or in the alternative, cease to use) any
other fixed-line assets.
In the absence of an outcome which delivered structural separation on a
voluntary basis, regulatory intervention will be required to address
Telstra's vertical and horizontal integration.
4. Telstra's vertical integration
The problem being addressed
Telstra's level of vertical integration raises concerns about the extent to
which it has the ability and the incentive to favour its own retail
business over its wholesale customers when providing access to various
services, particularly those which are key upstream inputs for providing
downstream services to end-users. It also can strategically delay or limit
investment in access services and related infrastructure.
These incentives may lead to behaviour by the vertically integrated
incumbent that limits the development of effective competition in the
provision or availability of services, including new and improved services.
Types of discriminatory behaviour that a vertically integrated incumbent
might engage in include:[11]
. price discrimination-where the access provider charges a higher price to
its wholesale customers than is implicitly charged to its own retail
business;
. discriminatory use or withholding of information-where the access
provider provides information to its retail business with information it
does not provide to access seekers or refuses to supply other information
which is necessary to take up the wholesale offer or to supply the retail
service;
. delaying tactics-where the access provider supplies a certain input to a
downstream competitor at a later point in time compared to its own retail
business;
. quality discrimination-where the access provider supplies products and
services at a lesser quality to downstream competitors than it supplies
to its own retail business;
. strategic design of product characteristics-for example, the access
provider may use particular standards that are easy to meet for its own
retail business but not for its wholesale customers; and
. undue use of information-this may arise where an access provider obtains
certain information about the customers of its downstream competitors.
Based on this information, the access provider can target competitors'
customers with tailor-made offers and so can restrict its competitors'
sales and or raise its rivals' costs.
Lord David Currie, the former Chairman of Ofcom, the United Kingdom's (UK)
communications regulator, stated the following about the harmful effects of
discriminatory behaviour:
'It does not even require active non-price discrimination. All that is
needed is for the incumbent not to try their hardest to achieve
reliability, timeliness and predictability to disrupt significantly the
launch by competitors of a rival retail proposition. A significant mismatch
between the promise of a marketing campaign and consumers' actual
experience of waiting weeks or even months to get what is promised can do
significant and lasting damage to a competitor's market entry.'-Lord David
Currie[12]
Industry stakeholder concerns
Telstra has been criticised in the past for using its vertical integration
to protect its position across key telecommunications markets and therefore
limiting the ability for competition to grow in the sector.
Optus in its submission to the Government's regulatory reform discussion
paper gave the following examples of Telstra's behaviour in using its
vertical integration to limit competition in broadband.
. 'Initially set high prices for broadband access thereby discouraging take-
up. Telstra only dropped its retail prices for broadband services when
Optus commenced re-selling its wholesale DSL [digital subscriber line]
service in February 2004;
. Delay competitor deployment of DSL services by structuring its wholesale
offering in such a manner that its competitors could not offer services
substantially different from those offered by Telstra. For example,
Telstra refused to configure its wholesale ADSL[asymmetric digital
subscriber line] service so as to allow for a high speed Internet service
to be provided to a residential customer at a different quality of
service from that which Telstra BigPond offers;
. Squeeze the margin available to competitors taking its wholesale DSL
service by setting retail prices close to or below wholesale prices;
. Limit the functionality of its wholesale broadband services and thereby
hinder innovation by competitors, such as symmetrical services and VOIP
[Voice over Internet Protocol] services; and
. Artificially cap broadband speeds at 1.5Mbps [Megabits per second] on
first generation ADSL(a technology capable of up to 8 Mbps) and delaying
until February 2008 the introduction of ADSL2+ services (except in
exchanges where it faced direct competition from ADSL2+ services provided
by competitors using ULLS [unbundled local loop service] access to deploy
their own equipment). Many areas within Australia continue to be denied
access to ADSL2+ services.'-Optus[13]
AAPT, Internode, Primus, Hutchison and Austar all gave similar examples in
their regulatory submissions regarding Telstra's behaviour to limit
competition. The ACCC also provided examples in its regulatory
submission.[14],[15],[16],[17],[18],[19]
Optus also noted that Telstra misused information available to it as a
wholesale provider:
'Telstra has been found guilty of misusing information available to it as a
wholesale provider, by passing this information to its retail arm for
marketing and competitive analysis purposes. The court found that, at least
in the period 1993 to 2000, Optus' confidential long distance traffic
information was provided by Telstra Wholesale to Telstra Retail and then
used to prepare 'Market Share' reports...'-Optus[20]
Measures to reduce the ability and incentives to discriminate
The basic concept of vertical separation in telecommunications is to
separate the bottleneck upstream assets, such as the copper customer access
network, so that control of access to them cannot be used to lessen, damage
or exclude competition in downstream markets. Vertical separation can be an
effective regulatory tool to improve competition and services to end users
by promoting transparency and equivalence.
Transparency and equivalence
Transparency can be achieved by implementing processes and reporting
requirements so that the regulator and Telstra's wholesale customers can be
confident that Telstra's wholesale customers are being treated in an
equivalent manner to how Telstra supplies its own retail business.
Equivalence is where Telstra provides essential business inputs on
equivalent terms and conditions to both its own retail business and its
wholesale customers. Equivalence relates to both price and non-price terms
and conditions such as service provisioning and availability of information
about the network, and is considered an essential factor in promoting
effective competition in downstream retail markets.
The history of attempting to address Telstra's level of vertical
integration
In an attempt to address Telstra's level of vertical integration by
promoting equivalence and transparency the following regimes have been
implemented in Australia.
Accounting separation
Measures to promote transparency were first introduced in 1991 requiring
the Australian Telecommunications Authority to develop an accounting
separation regime, which was referred to as the chart of accounts and a
cost allocation manual. The regime, however, only required horizontal
accounting separation between each carrier's retail services. Horizontal
accounting separation is a requirement for reporting revenue and historical
cost information of the carrier's different retail businesses to the ACCC.
In 2001, under direction from the Minister for Communications, Information
Technology and the Arts, the ACCC introduced its Telecommunications
Industry Regulatory Accounting Framework issued under section 151BU of the
Trade Practices Act 1974. These record keeping rules required Telstra to
keep vertically separated accounts on an historical cost basis and report
revenues and costs for Telstra's retail and wholesale services separately-
including wholesale services Telstra provides to itself internally.
In June 2003, a second set of accounting separation rules were implemented
by the ACCC which required vertical accounting separation under a current
cost accounting basis. Current cost reporting requires Telstra to produce
accounting records that reflect current costs (i.e. the costs Telstra would
incur if its network was built today).
Furthermore, the then Government directed the ACCC to implement an enhanced
form of accounting separation of Telstra. This required the ACCC to report
on key performance indicators for non-price terms and conditions that
compare service performance between Telstra's retail and wholesale supplied
services. The purpose of the enhanced accounting separation framework for
Telstra, which is still in force at present, was to provide the ACCC,
access seekers and the public with greater transparency with respect to
Telstra's wholesale and retail costs. It also required imputation testing,
which can be used to assist in detecting an anti-competitive price squeeze
in a retail market. Specifically, the imputation testing implemented under
this direction involved comparisons of:
. the retail price charged by Telstra for a particular service; and
. the (wholesale) access price charged by Telstra for an essential input to
that service plus the additional costs incurred in transforming the
essential input to the retail service (the 'retail costs').
Operational separation
In 2005, the current operational separation framework for Telstra was
introduced following a review of the competition regime. The operational
separation regime aimed to promote the principles of transparency and
equivalence in relation to the supply by Telstra of wholesale services.
The operational separation of Telstra is a statutory condition of Telstra's
carrier licence. Telstra was required to prepare an operational separation
plan, which was approved by the then Minister on 23 June 2006. Under the
plan, Telstra is required to maintain three business units, wholesale,
retail and key network services and to operate these businesses
substantially separate from each other.
The operational separation plan includes four strategies for Telstra to
provide equivalence:
. a service quality strategy-which aims to ensure that Telstra's standard
of delivery of eligible services made available to its wholesale
customers is equivalent to the standard of delivery of comparable
eligible services supplied to its own retail business unit;
. an information equivalence strategy-which aims to ensure that information
provided by Telstra's key network services or wholesale business units to
its wholesale customers about relevant changes to Telstra's network is,
to the extent possible, equivalent to the provision of the same or
similar information to its own retail business unit;
. an information security strategy-which aims to protect Telstra's
wholesale customers' confidential information; and
. a customer responsiveness strategy-which aims to ensure that Telstra is
responsive to complaints made by its wholesale customers and also
includes the measures Telstra will implement to monitor its compliance
with the service quality and information equivalence strategies.
Telstra's operational separation plan also provides for a price equivalence
framework, which seeks to provide an ongoing assurance that Telstra is not
favouring its retail business by supplying services to itself at lower
prices to the services that it supplies to its wholesale customers. The
price equivalence framework requires Telstra to conduct imputation testing
to assess the impact of material price changes, on the margin available to
efficient competitors.
The accounting, record keeping and operational separation regulations are
all still in effect.
The effectiveness of the current operational and accounting separation
regulations
The broad consensus across industry and from the regulator is that
accounting and operational separation regimes have not promoted genuine
equivalence of access or effective competition in the telecommunications
sectored.
The views of the regulator
The ACCC's experience is that:
'...the current operational separation regime aimed at promoting
equivalence is ineffective and does not address Telstra's incentive and
ability to discriminate against its competitors', and '[s]ince coming into
effect in June 2006 the operational separation arrangements that apply to
Telstra have been shown to be ineffective in a number of essential areas.
Since
June 2006 Telstra has been able to:
. supply ADSL2+ services on a retail basis only;
. ignore the ACCC's written advice on imputation testing principles;
. deflect wholesale customer complaints on the basis they were not made
under the OSP [operational separation plan];
. provide whole-of-business incentives to executives in the ring-fenced
divisions; and
. require end-user customers who are customers of access seekers to provide
Telstra retail units with information that is confidential to the access
seeker'. -ACCC[21]
All the above issues mentioned by the ACCC have not promoted genuine
equivalence or transparency, or promoted effective competition. Expanding
further the supply of ADSL2+ services on a retail only basis, until
relatively recently, has had the effect of limiting the opportunity for
Telstra's competitors to compete with Telstra for the most valuable
business customers.
The views of the industry
The overwhelming message from regulatory consultations conducted in 2008
and more recently in response to the National Broadband Network: Regulatory
Reform for 21st Century Broadband Discussion Paper is that the current
operation and accounting separation measures have not worked effectively.
Most of the 130 submitters called for structural or stronger functional
separation of Telstra.
The following comments in the regulatory submission summarise the general
sentiments raised in response to the discussion paper.
'there has been no discernable increase in competition in the fixed
network market after the introduction of accounting and operational
separation...Operational Separation in Australia has not been a transparent
regulatory tool.'-Australian Telecommunications User Group[22]
'it is clear that they [the operational separation arrangements] have
delivered little if any benefits to end-users...these arrangements are not
fit for purpose...'-Optus[23]
'The cost of trying to manage behaviour [sic] while making inadequate
efforts to change incentives has been demonstrated by the continual gaming
of the regulatory requirements in Australia in the past 12 years and by the
abject failure of the operational separation and, before them, the
accounting separation arrangements.'-Competitive Carriers Coalition[24]
'...there are no benefits of the operational and accounting separation
regimes...' -Macquarie Telecom[25]
'Accounting separation and operational separation have been tried but have
both been spectacularly unsuccessful.'-AAPT[26]
'Operational separation of Telstra has not led to satisfactory outcomes in
the Australian telecommunications sector.'-Vodafone[27]
'...the current so-called "operational separation" regime that applies to
Telstra, TransACT strongly believes that that regime has failed...'-
TransACT[28]
'...the accounting and operational separation regimes have been widely
acknowledged as failures.'-iiNet[29]
The sentiments expressed by both the regulator and Telstra's competitors
demonstrates a lack of trust in the operational separation regime and its
lack of transparency has not assured them that access seekers are being
treated in an equivalent manner to Telstra's own retail business.
One of the major issues expressed by access seekers is the delays in being
provided a wholesale service by Telstra and issues surrounding access to
Telstra's exchanges to install equipment. For example:
'Some of the conduct engaged in by Telstra has been quite explicit, for
example defying access obligations and ... refusing industry participants
access to exchanges. Some of the conduct has been more strategic, such as
refusing to implement efficient migration processes, and the practice of
disputing the ACCC pricing decisions to delay competitor rollout, impose
litigation costs on the industry and unsettle investment plans. One thing
is very clear, during the history of competition in our industry Telstra
has had no appetite to foster or promote competition, innovation or
increased network utilisation.'-Primus[30]
'Optus complained to the ACCC that Telstra was providing higher performance
standards to its retail customers than wholesale customers-for example, by
routinely offering better connection times to its retail customers than to
wholesale customers...Whilst Telstra Retail is able to provide connection
remotely at the flick of a switch-Telstra applied a cumbersome process for
wholesale customers requiring two separate technicians to visit the
customer's premises and taking several days to complete (and requiring
customers to be present for both visits). '-Optus consultant Dr Chris
Doyle, University of Warwick[31]
Further, access seekers need to have confidence that the regime to address
the issues surrounding vertical integration is working effectively to
justify their investments. In its submission the Strategy and Policy
Consultants Network, who specialise in providing strategy, policy and
economics advice in electronic communications markets, stated that:
'[w]hile the incentives for discrimination remain in place [due to vertical
integration] it is essential that wholesale customers of Telstra believe
that they are being treated equally, as perceptions are sufficient to
change the behaviour of operators. They need to have the confidence that
the system is working to justify investments in the market, without which
retail customers will be the losers.'-Strategy and Policy Consultants
Network[32]
Most fundamentally, the current operational separation regime has not
addressed Telstra's vertical integration and its lack of incentive to reach
agreement on reasonable access terms, or to conclude negotiations speedily
with access seekers.
The chairman of the ACCC, Mr Graeme Samuel, has previously reported that:
'[s]ince 1997, the ACCC has been notified of a total of 157
telecommunications access disputes. This is in stark contrast to the three
access disputes that have been notified to the ACCC across all other
sectors of the economy.
Over the past 24 months, judicial review has also been sought in respect of
almost all final arbitration determinations made by the ACCC. As of 6 May,
there were 15 final determinations before the Federal Court-all relating to
the unconditioned local loop service and the line sharing service.'-Mr
Graeme Samuel, ACCC[33]
This large number of access disputes compared to other regulated sectors
demonstrates both the ability and the incentive Telstra has to pursue a
litigation strategy to limit or delay competition. The harmful effects such
a strategy can have on investment in the sector. The Strategy and Policy
Consultants Network comments on:
'[u]ncertainty about outcomes will have an impact on operators' ability to
commit to product and market developments. This will particularly be the
case where the process is not able to deliver outcomes in a timely manner,
as delays in the process will typically disadvantage operators competing
with Telstra.'-Strategy and Policy Consultants Network[34]
Primus also notes that:
'...Telstra typically rejects the authority of the ACCC and routinely
challenges decisions in court, means the industry never acquires any
certainty about the terms and conditions applicable to an access service it
acquires, until it is of historical impact only.'-Primus[35]
In addition to the business uncertainty caused by the high level of
disputation, Optus estimates it could have cost the whole industry at least
$200 million over the past 12 years in the preparation of expert statements
and legal support not to mention the time and resources required to
participate in these processes.[36]
Telstra acknowledges in its regulatory submission that:
'...despite our ongoing effort, the wider telecommunications industry
continues to express concerns about the need for greater equivalence and
transparency.'-Telstra[37]
To address the equivalence concerns expressed by the industry and the
regulator, Telstra proposed in its regulatory reform submission the
establishment of an independent technical Telecommunications Adjudicator.
The Telecommunications Adjudicator would make binding decisions
specifically on equivalence and related service and technical issues in the
supply of regulated services to access seekers.
The Telecommunications Adjudicator would be a welcome addition to the
Australian telecommunications landscape to resolve many of the non-price
issues in the sector. However, it still does not effectively alter
Telstra's underling incentive, as a vertically integrated incumbent, to
favour its own retail business over its competitors.
Operational separation's weak enforcement mechanisms
Enforcement mechanisms for the existing operational separation regime are
weak and indirect. There is no legal obligation on Telstra to comply with
its operational separation plan. In the event of a contravention, the
Minister may direct Telstra to give him a draft rectification plan for
approval. Once the Minister approves the rectification plan, it is then a
licence condition that Telstra comply. Weak enforcement mechanisms are a
disincentive to enforcement action and no directions have been issued. The
ACCC states that:
'[w]e [the ACCC] continue to receive complaints of conduct that suggest
that the objective of equivalence, which was the objective of the
[operational separation] regime, is not being achieved. There have been
some instances of conduct [by Telstra] since the regime's inception which,
while it is not clear they breach the operational separation plan, do not
promote the objective of equivalence which was the fundamental objective of
the plan in the first place.'-ACCC[38]
The ACCC has written twice to the relevant Ministers advising of its
concerns on the apparent shortcomings of the operational separation plan:
'First, on 6 February 2007, in relation to concerns that Telstra was
rewarding ostensibly ring-fenced technicians for providing retail sales
leads and introducing higher quality ADSL services for retail customers
before advising wholesale customers.
Second, on 27 February 2008, in relation to Telstra's failure to provide
information to the ACCC in response to a formal request made under clause
6.8 of Telstra's OSP[operational separation plan]. The request required
Telstra to produce the model it uses to assess its pricing under the PEF
after notifying the ACCC of a material price change.'-ACCC[39]
It is clear that stronger enforcement mechanisms are needed to give the
regulator sufficient powers to ensure that the objectives of transparency
and equivalence are being met.
Why Government action is needed
During the rollout of the NBN the existing regime, including measures to
promote transparency, equivalence and competition, will remain important
for delivering outcomes in the interests of consumers and businesses. The
intended outcome is a healthy competitive market, thereby improving
quality, prices and choices for end-users, and creating a sector where
different business models and innovation can prosper.
Current state of competition in Australian telecommunications market
The ACCC has recently reported that competition in the Australian
telecommunications market is not emerging as anticipated.
'effectively competitive telecommunications markets-anticipated in 1997
when the sector was opened to competition-do not appear to be emerging...
In particular, the industry's underlying structural features have hindered
the development of competition with the high, specialised and largely
"sunk" costs of investment in the most fundamental elements of
telecommunications networks (e.g. the ducts, pits, poles, copper, cable and
fibre) imposing high barriers to entry for competitors, and thus conferring
a very high degree of market power on the incumbent operator, Telstra.
While new entrants and investment have made some inroads, the incumbent
still retains enduring and substantial market power, with shares of 72 per
cent, 58 per cent and 42 per cent of retail PSTN [public switched telephone
network] voice services, retail fixed broadband and retail mobile voice
services in 2007-08...
A key factor in Telstra's ongoing success in maintaining its dominant
market position has been its historical position as the owner of the
ubiquitous CAN [Customer Access Network]. The ability of competitors to
access the existing fixed-line CAN continues to directly affect how access
seekers compete for end users. It is becoming increasingly evident that the
CAN is (and will remain) an enduring bottleneck, emphasising how critical
it is for access seekers to be able to obtain access to the CAN at
reasonable prices.'-ACCC[40]
The following graph using the Herfindahl-Hirschman Index (HHI) further
illustrates Telstra's dominance of the retail fixed voice and broadband
sectors in Australia. The subscriber-based HHI measures concentration
levels in a service area and provides a snapshot of competition in that
particular service area. The HHI can range from 0 to 10 000 with increases
in the index generally indicating a decrease in competition and an increase
of market power. While market share measures are only one measure used in
competition analysis, the ACCC's 2008 Merger Guidelines indicate that
scores above 2,000 identify potential competition issues, which can be
indicative of structural characteristics of the market that exist or are
emerging.[41]
Source: ACCC Report Telecommunications competitive safeguards for 2007-
2008.
For retail public switched telephone network services, the very high
concentration levels are likely to be influenced heavily by Telstra's level
of vertical integration in the market with shares of close to or over 70
per cent in the last three years as illustrated by the table below.[42]
|Provider |2005-06 |2006-07 |2007-08 |
|Telstra |69% |71% |72% |
|Optus |11% |11% |11% |
|AAPT |4% |3% |3% |
|Other |16% |14% |15% |
Source: ACCC Report Telecommunications competitive safeguards for 2007-
2008.
In the case of retail broadband services, there has been an upward trend in
the concentration of the market since 2005-08 as illustrated in the table
below. The ACCC reports that during this period, Telstra grew its market
share of retail services by almost 25 per cent, while its major
competitors' iiNet managed to retain its existing market share and Optus'
fell by a fifth. In addition, the share of the market held by small
internet service providers halved during the same period.[43]
|Provider |2005-06 |2006-07 |2007-08 |
|Telstra |47% |56% |58% |
|Optus |20% |19% |16% |
|iiNet |6% |8% |7% |
|Other |28% |18% |19% |
Source: ACCC Report Telecommunications competitive safeguards for 2007-
2008.
The market within which retail mobile services are supplied is currently
less concentrated.
International Comparisons
Key international statistics indicate that Australia is trailing other
developed economies. In many areas Australia is trailing other countries
with similar geographic realities, such as Canada.
Key international statistics
A recent OECD report indicated that Australia is ranked:[44]
. 16th for total broadband subscribers per 100 inhabitants;
. 4th, 5th and 9th most expensive for low-speed, medium-speed and high-
speed average monthly subscription broadband prices respectively;
. 14th, 16th and 17th most expensive for residential low-use, medium-use
and high-use fixed-line voice prices respectively; and
. 5th most expensive for both small/home offices and small and medium-sized
enterprises fixed-line voice prices respectively.
The World Economic Forum ranks Australia:[45],[46]
. 12th for both residential and business telephone connection charges;
. 20th for high speed broadband subscription charges;
. 22nd and 37th for residential and business monthly telephone subscription
charges respectively;
. 25th for accessibility of digital content;
. 29th for the lowest cost of broadband; and
. 35th for quality of competition in the internet service provider sector.
The ACCC's analysis and Australia's poor international indicators highlight
the ongoing importance of Telstra's competitors being able to access
Telstra's customer access network in a manner that is transparent and
equivalent to how Telstra's retail businesses access the network. To create
an environment for healthy competition to flourish, stronger vertical
separation with enhanced equivalence and transparency measures is required.
In countries such as the UK where stronger forms of separation have been in
force since 2005, there has been a marked improvement in its key
international telecommunication statistics and indicators. The UK
outperforms Australia across a range of key telecommunications indicators
as shown in the table below.
|Telecommunications |UK ranking |UK better than |
|indicator/statistic | |Aust. |
|OECD |
|Total broadband subscribers per |11th |Yes. |
|100 inhabitants | | |
|Low-speed, medium-speed and |24th, 28th |Yes. |
|high-speed average monthly |and 22nd most| |
|subscription broadband prices |expensive | |
|Residential medium-use and |13th, 23rd |Yes. |
|high-use fixed-line voice prices |and 23rd most| |
| |expensive | |
|World Economic Forum |
|High speed broadband subscription|14th |Yes. |
|charges | | |
|accessibility of digital content |14th |Yes. |
|Lowest cost of broadband |10th |Yes. |
|Quality of competition in the |21st |Yes. |
|internet service provider sector | | |
As illustrated by the difference between the international rankings between
Australia and the UK, it is anticipated stronger separation measures would
improve competition, lower prices and improve take-up rates in the
broadband market.
5. Objectives of the Government's vertical separation action
The Government's objective is to address concerns created by Telstra's
vertical integration by reducing Telstra's ability and incentive to
discriminate against other service providers and to promote greater
equivalence and transparency which will encourage greater competition
across the telecommunications industry.
6. Government's functional separation policy to address Telstra's vertical
integration-including implementation process
If Telstra decides not to voluntarily structurally separate then a
functional separation regime will be established to address Telstra's
vertical integration.
It has been widely observed that imposing mandatory structural separation
on Telstra is likely to raise compensation issues.
The ACCC notes that although functional separation is unable to ensure
equivalence:
'...a strong functional separation model is a step forward in promoting
equivalence from the current operational separation regime applied to
Telstra...[it] may go some way to providing open access and promoting
equivalence of price and non-price terms and conditions.'-ACCC[47]
Optus in its submission argues that functional separation is the second
best option to structural separation, however, the:
'[f]unctional separation of the form implemented in the UK and New Zealand
provides an appropriate starting point for consideration of a new
regulatory settlement. Such an approach would almost certainly represent a
significant improvement on the arrangements we have today.'-Optus[48]
The proposed functional separation framework will be implemented through
legislative amendment to the Telecommunications Act 1997 with more detailed
requirements to be addressed by Telstra to be set out in a determination to
be made by the Minister.
Broadly, Telstra will be required to submit undertakings to the Minister
concerning the implementation of functional separation, and ongoing
commitments to functional separation.
These undertakings will be contained in a draft Functional Separation
Undertaking (FSU). Those undertakings must be directed at achieving key
principles and objectives of functional separation and must include
specific matters set out by the Minister in a requirements determination.
The key principles of the new functional separation regime include:
. Telstra to operate its network and wholesale functions at arm's-length
from the rest of Telstra;
. non-Telstra wholesale customers to access regulated services on
equivalent price and non-price terms and conditions as is provided to
Telstra's retail unit;
. Telstra's retail unit to only be consulted on future products and future
demand requirements at the same time and in the same way a non-Telstra
access seeker is consulted; and
. strong internal governance structures with transparency so that Telstra's
competitors and the regulator can be confident that Telstra's retail unit
is being treated the same as competitors.
The Minister will consider the draft FSU submitted by Telstra, hold a
public review and consult the ACCC.
The Minister will then approve, vary or replace the draft FSU. It then
becomes a final FSU. Telstra will then be required to comply with the final
FSU with compliance being a carrier licence condition.
As part of the requirement for strong internal governance structures with
transparency, Telstra will be required to establish an oversight and
equivalence board to monitor and support Telstra's compliance with the
final FSU and report to Telstra's Board and the ACCC about that compliance.
There will also be provisions for the establishment of a new independent
telecommunications adjudicator, to provide a practical way to enable access
providers and access seekers to resolve non-price equivalence and service
level issues.
More detailed requirements of the functional separation undertaking to be
addressed by Telstra will be set out in a written determination (a
functional separation requirements determination), which is not a
legislative instrument, to be made by the Minister within
90 days of the commencement of the legislation and will provide specific
detail on:
. the responsibilities of, and requirements on, the functionally separated
business unit;
. the assets residing in the functionally separated business unit;
. the equivalence requirements for regulated services to be provided by
Telstra;
. the functional separation governance framework;
. enforcement and oversight provisions; and
. the requirement for Telstra to establish an oversight and equivalence
board, including a support office, to monitor and support Telstra in
complying with its FSU.
As functional separation is the next best option to structural separation,
the functional separation obligations on Telstra would cease in the event
that Telstra submits an enforceable undertaking acceptable to the ACCC to
structurally separate.
7. Regulatory assessment of functional separation
Functional separation provides a much stronger form of separation than the
current operational separation regime and is similar to regimes introduced
in the UK and more recently in New Zealand (see Appendix A for a table
providing a comparison of the Australian, UK and New Zealand separation
models - source ACCC). It would enable Telstra to retain limited economies
of scale and scope as a vertically integrated supplier where services are
not regulated, such as in the mobile sector, but would have much more
stringent controls over its network and wholesale dealings with its own
retail arm in relation to regulated services.
Price and non-price equivalence, ring-fencing measures and enforcement
provisions will all be much stronger than the current regime, thereby
providing the right incentives for Telstra to deliver its network and
wholesale functions to a high standard no matter which customers it is
dealing with.
The exact requirements for these measures and provisions will be set out in
the functional separation requirements determination with the following
descriptions being examples of how the measures in the proposed functional
separation framework could be made stronger than the current operational
separation framework.
Stronger price and non-price equivalence
The ACCC in its submission to the regulatory reform discussion paper
outlined the minimum requirements for a robust functional separation model.
In particular, the ACCC explained how price and non-price terms could be
made stronger than what is required in the current operational separation
regime.
Regarding equivalence for price terms, the ACCC states that:
'[p]rice equivalence measures requiring affiliates pay the same for their
access to the network as wholesale customers. This involves establishing a
transfer pricing system and the preparation of separate accounts for the
ring-fenced affiliates, and retail affiliates, of the firm that are
prepared on the basis of these transactions. This differs from imputation
testing models, as are used in Part XIB anticompetitive or competition
investigations, which seek to identify for regulatory purposes an implied
access price for affiliates by deducting an estimate of higher layer costs
from average retail prices that are offered. Without ex-ante separation of
the relevant business units, however, there is no requirement that this
implied price must reflect the same tariffs faced by wholesale customers.
Further, there is no requirement under an imputation testing only model for
retail or wholesale affiliates to account for their use of the network on
an arms length basis.'-ACCC[49]
For non-price terms the ACCC states that:
'[n]on-price equivalence measures requiring that the same access products
are offered, and the same processes and systems are used to provide
operational support (service qualification and provisioning, fault handling
and billing) to the retail and wholesale customer facing affiliates and to
access seekers. Equivalence in technical quality is promoted by the use of
the same access products, while equivalent operational quality is promoted
by the use of the same operational support systems. This differs to a more
light handed approach that permits differences in processes provided that
specified measures of relative performance do not differ. This alternative
approach provides less assurance and is dependent upon robust and
encompassing measures being designed and implemented, and even then permits
targeted discrimination.'-ACCC[50]
Ring-fencing arrangements and the oversight and equivalence board
Ring-fencing arrangements govern staff roles and the transactions between
the functionally separated business units to ensure the separated units
operate on a stand-alone basis, at arm's length and in the separated
business units' best interests.
Ring-fencing arrangements would be much stricter than in the current regime
and new oversight arrangements would apply with the establishment of a new
oversight and equivalence board.
An example of the stronger ring-fencing arrangements in the proposed
functional separation framework would be that staff in the network and
wholesale business unit would not be permitted to receive whole-of-business
incentives. Localised incentive arrangements are considered essential in
delivering the objectives of functional separation as in the absence of
these requirements employees will likely seek to maximise group shareholder
value (and thereby discriminate against competitors) to maximise their own
bonuses.
Telstra would establish an oversight and equivalence board and set its
terms of reference in consultation with the regulator similar to the
equivalent oversight bodies that have been established in both the UK and
New Zealand. Some examples of the roles that the oversight bodies undertake
overseas include:
. report to the Board and the regulator on matters including when it
becomes aware of a non-trivial breach of the functional separation
obligations or any actions or omissions in terms of compliance with the
obligations;
. consider and review key performance indicators and report to the Board
and the regulator on a regular basis and in the company's annual report
compliance with the functional separation obligations;
. review performance, carry out investigations, process complaints, consult
regularly with wholesale customers generally and recommend to the Board
and the regulator actions needed to remedy any concerns with compliance
with the separation undertakings;
. consider codes of conduct for personnel and review and report to the
regulator any requests for exemptions permitted under the undertaking,
making clear whether those requests are supported or not; and
. review the supply of the company's services internally to the retail
business unit.
Stronger and more direct enforcement provisions
Enforcement provisions will be stronger as a contravention of Telstra's
functional separation undertakings will be a direct breach of its carrier
licence conditions. This is stronger than the current operational
separation regime. The ACCC explains the weak and indirect nature of the
current enforcement provisions:
'[i]n terms of remedying a breach, Telstra's OSP [operation separation
plan] can be seen to contain a "two strikes policy", as the ACCC can only
take enforcement action when a 'rectification plan' has been contravened,
and a rectification plan would only exist where the Minister has first
required Telstra to prepare such a plan and has accepted it.'-ACCC[51]
As stated in the Telecommunications Act, the pecuniary penalty payable as a
result of a breach of a carrier licence condition by a body corporate is
not to exceed $10 million for each contravention.
Both stronger ring-fencing arrangements and enforcement provisions will
make it much more difficult for employees to intentionally or
unintentionally circumvent their obligations under functional separation
and create stronger incentives for Telstra employees not to discriminate
against Telstra's competitors.
The stronger measures just outlined are all equally important to the
effectiveness of a functional separation regime where the aim is to promote
equivalence and transparency.
The cost of functional separation
Functional separation is not without cost and it will be more complex and
costly for Telstra to implement than the current measures. It could also
involve the migration of Telstra's customers to new systems, which could
potentially affect those customers' services. It will be the responsibility
of Telstra to minimise customer impacts during the transition to functional
separation.
Cost of functional separation in the United Kingdom
In 2005, functional separation undertakings were submitted by British
Telecommunications plc (BT) to Ofcom, the UK's communications regulator, in
lieu of the possibility of much harsher regulatory penalties, including
structural separation, being imposed given Ofcom's findings that BT's
market power was restricting competition in the sector.
The key features of the BT undertakings were the establishment of a new
business unit, called Openreach, responsible for the operation and
development of BT's local access network and that Openreach would support
all communications providers, including BT's retail businesses, on an
equivalent basis.
Functional separation in the UK is reported to have cost GBP153 million[52]
to set up. However, substantial benefits were apparent within 12 months of
functional separation commencing. The costs to BT were in relation to the
establishment of Openreach and to the introduction of equivalence of input
systems.
A non-price cost was that during the implementation of BT's functional
separation undertakings, some customers' services were affected when BT
migrated its customers to new systems.
Cost of functional separation in New Zealand
The functional separation model adopted in New Zealand is based on the BT
model and was implemented to promote competition and increase broadband
take-up in the New Zealand telecommunications markets.
In 2006, a law was passed requiring the functional separation of Telecom
New Zealand. The law, and the resulting determination, required Telecom New
Zealand to separate into three separate business units-retail, wholesale
and fixed network access service-with the separated business units all to
operate at arm's length from one another. The separation process formally
commenced on 31 March 2008.
The key difference between the New Zealand and UK models is that Telecom
New Zealand avoided the requirement to re-develop many of its information
technology support systems due to the fact it was not obliged to provide
equivalence of inputs for legacy wholesale services.
Functional separation is reported to have cost NZ$200 million. However,
benefits have been identified within 12 months of functional separation
commencing. It is reported that the annual operational costs for functional
separation is up to NZ$40 million per annum.[53]
Costs on Telstra
As further details of the functional separation model will be set out in a
determination at a later date, the exact costs that will be incurred by
Telstra cannot be quantified. Telstra recently reported in its 2009 full
year financial results analyst briefing that functional separation could
take between one to five years to implement and cost between $500 million
to $1 billion. [54],[55]
Specifically, Telstra claims that if it is required to implement a similar
functional separation model as to the one implemented by Telecom New
Zealand it would take greater than one year, cost $500 million and affect
its share price by approximately four cents per share.
Telstra also reports that if it is required to implement a BT-style
functional separation model it could take five to six years, cost between
$800 million-$1 billion or more with ongoing costs of $50 million-$100
million and affect its share price by greater than 10 cents per share.
Telstra states that implementing this model would involve a very expensive
unwinding of its information technology systems.
It is unclear what assumptions Telstra's claimed implementation costs or
effects on its share price are based on, but it is assumed that much of the
incurred cost would be as a result of initial set up and administrative
costs as well as the required changes to information technology systems.
Telstra's claims can be assumed to represent the upper bounds of possible
costs.
A separate analysis of the effects functional separation may have on
Telstra's share price has been performed by Macquarie research, which is
part of the Macquarie Group, where it estimates that:
'...functional separation would cost Telstra shareholders between six and
33 cents per share-the lower figure representing a scenario in which
regulatory changes are made without a National Broadband Network (NBN)
being completed by the Government, the latter including the competitive
effect of an NBN.'-Macquarie[56]
However, functional separation does not necessarily have a negative impact
on share price as demonstrated by BT. In 2007, the European Regulators
Group noted that:
'[f]ollowing the announcement of the undertakings in the United Kingdom,
BT's share price increased. After almost two years, BT has shown a
relatively strong share performance compared with many of its European
peers...it is clear the undertakings entered into by BT were not perceived
by the market as a disincentive to invest.'-European Regulators Group[57]
Despite the uncertainty on the effects functional separation will have on
Telstra's share price and the ongoing costs it is likely to incur, the
initial set up costs and implementation timeframes for Telstra will be
significant.
Costs to the Government
The functional separation of Telstra will also incur costs for the
Government in terms of administering, monitoring and enforcing the
framework by the ACCC. It is estimated that functional separation will
cost:
. in 2009-10 $2,863,154;
. in 2010-11 $2,276,795; and
. in 2011-12 $1,459,526.
The proposed increased resources for the regulator will be recovered by
increasing the carrier licence charges.
There is potential over time for the wind back of work programs concerning
Telstra's operational and accounting separation as a result of functional
separation. However, it is not possible to precisely identify the reduction
of regulations and work programs at present as a result of these new
regulatory measures.
The benefits of functional separation
For similar reasons that functional separation is being proposed in
Australia, functional separation was implemented in both the UK and New
Zealand to promote transparency and equivalence to encourage the
development of retail-level competition and broadband take-up.
The benefits resulting from functional separation have been significant, in
particular in the UK, where the functional separation of BT had an almost
immediate effect on the state of competition in their telecommunications
market.
Benefits of functional separation in the United Kingdom
The UK experience has demonstrated that functional separation can deliver
competitive outcomes to the benefit of consumers, businesses and the
industry. Consumers in the UK are able to benefit from lower prices and the
development of more innovative services with the European Regulators Group
reporting that:
'[the] creation of Openreach [BT's functionally separated network and
wholesale business unit] prompted a new wave of investment in the UK
electronic communications market, which in turn triggered a major price war
in the retail broadband market and led to a range of innovative broadband
services being offered to end-users.'- European Regulators Group[58]
Some commentators have criticised functional separation as compromising
investments by restricting the ability of a vertically integrated operator
to coordinate investment with its retail arm and limiting its incentive to
upgrade the network. This has not been the experience of BT, with BT
stating that:
'...[t]he provision of equivalence does not stifle our ability or desire to
invest; we have just announced a ?1.5bn investment programme in next
generation broadband with full equivalence. We are amongst the world
leaders in this area.'-BT Global Services[59]
Ofcom, the UK's communication regulator, considers that while not the sole
contributing factor to increased competition and benefits experienced by
consumers and businesses, BT's functional separation undertakings have
contributed to the following outcomes:
'Fixed broadband adoption has continued its growth reaching over 60 % of UK
households at the end of 2008 from 41 % at the end of 2005.'
'Over 5.5 million broadband connections at the end of 2008 were provided by
operators other than BT who have deployed infrastructure at BT's local
exchanges.'
'Competition between 2005 and 2007 led to a fall in the cost of a basket of
residential fixed voice services on average by 10.5 per cent in real terms
each year.'
'The take-up of [unbundled local loop (ULL)] services has grown from less
than 200,000 lines in Q3 2005 to over 5.5 million lines at the end of
December 2008, equating to approximately 32 per cent of all (cable and
ADSL) fixed broadband connections.'
'BT's share of wholesale broadband access (ADSL and cable) fell from 71% at
the end of 2005 to 47% at the end of 2008.'
'BT's retail share of (residential and SME) broadband connections stood at
around 27 per cent at the end of 2007 which is one of the lowest incumbent
operator market shares in the OECD, with the exception of North America.'-
Ofcom[60]
The results from the UK experience are positive as illustrated by the
statistics just stated. Of particular note is that broadband adoption has
grown significantly, while BT's market power has diminished substantially
and fixed voice prices have decreased as a direct result of the increased
competition in the market.
As demonstrated by the following analysis and table from the Strategy and
Policy Consultants Network, the UK has stronger broadband take-up and a
higher proportion of its subscribers use higher bandwidth connections than
Australians. It is therefore expected that Australia will improve its
broadband penetration rate and the percentage of subscribers using higher-
speed broadband connections as a benefit of the increased level of
competition in the sector due to stronger separation measures for Telstra.
'Broadband Penetration: Australia's level of penetration is 25.4% against
28.5% in the UK. However, penetration is strongly and positively associated
with Gross Domestic Product (GDP) per capita: the higher the GDP per
capita, the higher the level of penetration. If we correct for GDP per
capita we find that penetration is (sic) Australia 2.28 percentage points
below the level we would expect whilst the UK is 2.18 percentage points
above the level we would expect.'-Strategy and Policy Consultants
Network[61]
Percentage of Australian and UK subscribers per bandwidth.
| |Proportion of Subscribers |
|Bandwidth | |
| |Australia |United Kingdom|
|512 kbps and below|44% |4.3% |
|512kbps-8mbps |33% |89.3% |
|More than 8 mbps |23% |7.2% |
Source: Strategy and Policy Consultants Network, Preventing Discrimination
in the Australian Broadband Market.
Another important point is that the take-up of unbundled local loop
services has grown dramatically since the introduction of functional
separation. Unbundled local loop services are an essential service to
foster competition on the existing fixed-line copper network and require
the incumbent to lease at cost part of its local assets to competitors. The
dramatic increase in take-up of this essential service demonstrates the
high level of confidence competitors have that the functional separation
regime results in them being treated in a non-discriminatory way by the
incumbent which has given them confidence to invest in the market.
Functional separation has had a positive net effect in the UK with its
telecommunications regulator, Ofcom stating that:
'[s]ince our last review, and nearly four years on since the [BT functional
separation] Undertakings were given, our annual evaluation continues to
indicate that the net effect of the Undertakings to date, both for
competition and consumers has been positive.'
'Given the substantial benefits the Undertakings have delivered to retail
and wholesale customers to date, we continue to remain of the view that the
Undertakings are an appropriate and comprehensive solution to the
competition concerns that we set out in the TSR [Strategic Review of
Telecommunications].'-Ofcom[62]
Furthermore, the benefits of functional separation are displayed earlier in
this regulatory assessment where the UK is superior to Australia in most
key international telecommunications indicators stated regarding price,
take-up rates and the state of the sector's competition.
Benefits of functional separation in New Zealand
Functional separation in New Zealand is in its early days but there appears
to be early benefits as a result of its implementation.
'Telecom's share of the retail broadband market has continued to decline
and now sits at 57 percent of total broadband connections compared to 61
percent at the end of 2007...the 2006 legislative reforms continue to have
a positive effect on the fixed line telecommunications markets and are
likely to show further gains in 2009.'-New Zealand Commerce Commission[63]
In addition, functional separation in New Zealand has seen a marked change
in Telecom New Zealand's behaviour towards its wholesale customers.
'Operational separation [the equivalent of functional in the Australian
context] of Telecom NZ has been a huge success. It is all positive; there
are no negatives.
From the moment the government announced the separation plan on 3 May 2006,
Telecom's behaviours in the market place changed. Before separation it
viewed its wholesale customers as unwelcome campers on its network. The
moment separation became inevitable, it immediately started to recognise
them as valued business partners.'-speech by Dr Ross Patterson,
Telecommunications Commissioner, New Zealand Commerce Commission[64]
Changing the incumbent's attitude towards its wholesale customers, not just
because of the regulation imposed, but for the incumbent to see the true
value of its wholesale customers as equal business partners, is a major
outcome for the functional separation regime implemented in New Zealand.
Reduction of regulation
The increased competition resulting from functional separation could reduce
the need for other forms of regulation, such as retail price controls. For
example, in the UK, Ofcom has reduced BT's retail price controls, as a
result of the benefits from functional separation due to the increased
level of retail level competition in the market. However, such a reduction
of regulation could only occur once a fully competitive retail market was
established.
8. Overall assessment of functional separation
Functional separation is the next best option to structural separation and
will go some way in providing equivalence and thereby further promoting
competition in the sector.
Currently, reviews of regulatory frameworks are being contemplated in many
overseas markets as a regulatory remedy to ensure competition prevails. In
its 2009 Communications Outlook publication, the Organisation for Economic
Co-operation and Development (OECD) states:
'...functional separation of integrated incumbent operators should be part
of the policy toolkit available to regulators to use, as a last resort
measure, if other possibilities to create competitive markets have not been
successful...[and] regulatory frameworks, which had reached a certain
stability and maturity during the last decade, are in many cases being
reviewed in order to ensure that competition prevails.'-OECD[65]
As stated earlier the competitive telecommunications market that was
envisaged is not emerging due to Telstra's level of integration and
incentives to favour its own retail business compared to its wholesale
customers. The proposed functional separation framework will go a long way
to altering Telstra's incentives and its behaviour when providing access to
services for its wholesale customers.
Even though functional separation is seen as the second best option to
structural separation, it will be supported by Telstra's competitors as
they will be able to compete with Telstra on more level terms than
currently. As a result, competitors will have the confidence to invest in
the market, which will see greater innovation, lower prices and more
choices for consumers.
That being said, the ongoing cost to the competition due to Telstra's
vertical integration affects all Australians and the economy more generally
through higher telecommunications prices and reduced innovation and
investment in the sector. Also any costs incurred to Telstra as a result of
functional separation may not be as significant as other systems costs that
are part of the costs of doing business. For example, in recent years
Telstra has reportedly spent in excess of $10 billion[66] on next
generation networks (including wireless) systems and over $1.5 billion[67]
on its recent information technology transformation project.
It is the Australian Government's considered view that the medium- and
longer-term competition benefits for the economy, business and end-users of
implementing functional separation outweigh the short-term costs to Telstra
of implementing functional separation if Telstra decides not to voluntarily
structurally separate.
9. Telstra's horizontal integration
The problem being addressed
In the past, concerns have been expressed by a range of stakeholders that
Telstra's control of the only and near ubiquitous copper fixed line
network, the largest cable and mobile networks and 50 per cent of the
Foxtel has reduced the development of facilities-based competition in
Australia in comparison to other countries and has contributed to Telstra's
dominance in the market.
Compared to most other countries, Telstra's level of integration is unique.
For example, in most other developed countries there are restrictions on
incumbents from owning both cable and traditional fixed-line telephone
networks.
Unlike Australia, in a range of countries, the fixed-line incumbent does
not also own the largest mobile carrier as measured by market share.
Telstra's ownership of the two largest fixed line networks in Australia has
limited competitive tension in the telecommunication sector, and therefore
choice for consumers with the ACCC stating in 2003 that:
'...Telstra's control of both a copper and a cable network and the lack of
competitive discipline it faces as a result of this dual ownership, means
Telstra is in a position to largely dictate the type of services that
consumers will be able to access and the time at which these services
become available.'-ACCC[68]
In addition to Telstra's control of fixed line networks, Telstra's 50 per
cent stake in Foxtel has hindered competition in both the
telecommunications and pay-TV markets. This is because Telstra has the
incentive to base its decisions on its interests in both the
telecommunications market and its pay-TV interests. As a result, new
products that a pure media company or a pure telecommunication wholesaler
might offer are potentially not being made available to consumers.
Why Government action is needed
To ensure that competition across telecommunications platforms can prosper
into the future, Telstra will be required to structurally separate, divest
its cable network and Foxtel interests in order to acquire spectrum for
advanced wireless broadband. However, under the legislation, the Minister
has the power to exempt Telstra from requirements to divest its cable and
pay-tv assets.
These measures are designed to promote competition across the various
telecommunications platforms, but provide Telstra will the flexibility to
choose its future path.
Australia is one of the few countries that has allowed its
telecommunications incumbent to own a hybrid fibre coaxial cable network.
In many other countries, including within the European Union, there are
restrictions on incumbents that own the fixed line telephone network also
owning cable networks (See Appendix B for a list of countries where
restrictions have been placed on the incumbent's involvement in the Pay TV
sector, source: Optus).
The divestment of certain assets to be allowed to participate in other
market segments or to avoid regulation is not unfamiliar in the
telecommunications sector. For example, for the merger between the European
telecommunications providers Telia and Sonera, the European Commission
directed Telia to divest its cable network in Sweden.[69] While in the UK,
'BT divested itself of its mobile business in 2001 to simplify its
business, and since then the company's performance has gone from strength
to strength...'-Ovum[70]
The Government's clear objective is to promote competition which is in the
interests of all Australian consumers, businesses and the economy more
broadly.
The issues surrounding Telstra's ownership of Foxtel
Optus contends that Telstra's investment in Foxtel represents a significant
threat to competition:
'Telstra's fifty per cent ownership in Foxtel has been recognised to have
caused significant distortions in the development of the Pay TV market
within Australia, with associated impacts on the telecommunications fixed
line services market.'-Optus[71]
The impacts and distortions in the development of the respective markets
are difficult to quantify, however, problems arise because content can
provide telecommunications service providers with new high-value business
opportunities and further stimulates demand for their carriage services.
Exclusive access to content creates an effective means of locking customers
in. Further lock-in can be achieved through the bundling of services (i.e.
selling two or more types of services together at a discount rate). Access
to content on an exclusive basis limits the opportunities available to
competitors, in both the carriage and content sectors.
Because of Telstra's stake in Foxtel and its ownership of the largest
hybrid fibre coaxial cable network, Telstra has the incentive to seek to
restrict the supply of Foxtel Pay TV channels to other networks competing
with Telstra for the supply of telecommunications services and to hinder
other Pay TV businesses from accessing Telstra's cable network. The Seven
Network in its submission strongly supports Telstra being required to
divest its ownership of Foxtel arguing that competition has suffered as:
'[t]he [Australian] pay TV sector is characterised by the absence of any
effective competition. The barriers to entry are now such that the
marketplace is highly unlikely to deliver any real or sustainable
competition in the future.'-The Seven Network[72]
Telstra choosing to divest its Foxtel interests could see new entrants into
the Pay TV sector with new channels providing greater choice for consumers.
It could also see increased competition in the telephony and broadband
markets as Pay TV services could be bundled with other telecommunications
providers.
A number of submitters to the regulatory discussion paper argued for
Telstra to divest its Foxtel interests including:
'...Telstra should be required to immediately divest its interests in
Foxtel.' -Macquarie Telecom[73]
'...the Government ought to require Telstra to divest its ownership
interest in FOXTEL.' -Austar[74]
'TransACT would encourage the government to consider... horizontal
separation, by requiring Telstra to divest its 50% interest in FOXTEL...'
-TransACT[75]
'Competition policies dictate that Telstra must be forced to divest its
ownership interest in Foxtel.' -Primus[76]
'The CCC submits Telstra should be required to divest itself of its
interests in the HFC cable and Foxtel...' -Competitive Carriers
Coalition[77]
Optus also submits that Telstra's stake in Foxtel will be significant into
the future. The reason being as consumers move to higher speed broadband
services, such as those offered by the NBN, IPTV and the associated content
are likely to be key drivers for the take-up of these higher speed
services. That is:
'...control of content will become increasingly critical, since it will
become a crucial factor in customer's purchasing decisions.'-Optus[78]
In a recent speech, the ACCC's Chairman Mr Graeme Samuel also noted the
reasons why control of content could stifle competition:
'...a telecommunications network operator is able to acquire sufficient
compelling content on an exclusive basis, such that it limits alternative
network owners' ability to offer attractive packages to consumers.'-Mr
Graeme Samuel, ACCC[79]
In contrast, Telstra in its submission argued that the presence of
telecommunications carriers in media markets promotes the traditional media
policy goal of diversity and plurality and:
'...the existing legal and regulatory frameworks for cable networks, media
and content, contain strong safeguards to prevent anti-competitive conduct
and the misuse of market power...The Foxtel content sharing agreement with
Optus and Foxtel's undertakings to the ACCC, for example, have helped
secure the industry's financial sustainability and ensured that pay TV
content is accessible across platforms and providers.'-Telstra[80]
Foxtel did not address its possible divestment by Telstra in its submission
to the regulatory reform discussion paper. It did state that it:
'...would be particularly concerned that a new regulatory regime may be
introduced to deal with perceived concerns with Telstra and that this
regime may end up having wider application...[and] is also concerned...on
the need to prohibit one company from buying a media asset fundamentally
misunderstands the way in which the content supply market operates as well
as misunderstanding the implications of broadband...[and] is not
aware...that access to content has foreclosed competition or otherwise
acted as a barrier to entry or that this has caused a lack of investment in
facilities or the subscription television industry. '-Foxtel[81]
Austar in its submission notes the ability of a dominant telecommunications
operator to reinforce its dominance not just through subscription
television services but also in the broadband market is an issue:
'The issue is the potential for a powerful telecommunications operator to
exploit its power in the platform delivery market to close off content
competition, not just in subscription television, but also in broadband
service acquisition. We have already seen this in the exclusive content
deal that Telstra did for AFL rights for its Bigpond internet service. As
the lines between platforms begin to blur as true "convergence" takes hold,
the ability for a dominant telco operator to dominate this space and use
content rights to reinforce that dominance become even more concerning.'-
Austar[82]
With the Government's aim for the NBN to deliver superfast broadband to all
Australians and a fully competitive telecommunications market, Telstra's
divestment of Foxtel would improve the environment for a competitive market
to develop.
The lack of infrastructure based competition in the past due to Telstra's
ownership of a hybrid fibre coaxial cable network
Telstra's ownership of the largest cable network means that, along with its
fixed line copper network, it owns the two most significant fixed line
communications platforms in Australia.
Divestment of the cable network could provide the basis for additional
infrastructure-based competition for the provision of voice, broadband and
subscription television services in metropolitan areas where this cable
footprint exists.
In their respective regulatory submissions Macquarie Telecom, Primus and
the Competitive Carriers Coalition all argued for Telstra to be required to
divest its cable network. Telstra, Foxtel, Optus and the Communications,
Electrical and Plumbing Union argued against divestment. Optus stated that
Telstra's cable network should reside in the company that will be created
as a result of Telstra's structural separation (Optus in its submission
provided a structural separation model for Telstra where Telstra would be
required to divest its network and wholesale functions to a separate
company not owned or controlled by Telstra).
Making Telstra's access to spectrum conditional on structural reform
To promote competition across the various telecommunications platforms, the
Government is proposing legislative measures that will provide Telstra will
the flexibility to choose its future path.
The Government is proposing that Telstra will not be able to acquire
spectrum for advanced wireless broadband while it remains vertically
integrated, maintains its interest in Foxtel and owns a hybrid fibre
coaxial cable network. If the Minister is satisfied that any concerns
arising from Telstra's market power are sufficiently addressed by Telstra's
undertaking to structurally separate, the Minister will be able to exempt
Telstra from the requirements to divest its interests in Foxtel and/or its
hybrid fibre coaxial cable network. This reflects the view that an
appropriate form of structural separation may address the concerns in
relation to Telstra's level of horizontal integration.
The availability of spectrum has been essential in encouraging competition
between different technologies, as well as different service providers of
mobile services.
Availability of spectrum is becoming increasingly important for
telecommunications as the use of wireless broadband and mobile technologies
such as 3G increases. The prospect of new technologies-such as Long Term
Evolution-which allow for more bandwidth-intensive applications will
further increase this demand.
The allocation of spectrum is carried out under the Radiocommunications
Act. Currently, when spectrum becomes available, it can be sold through
auction, with licence periods of up to 15 years. Secondary trading in
spectrum is permitted.
Over coming years, the Government will consider the allocation of spectrum
made available through the staged cessation of analog television in the
transition to digital television, the expiry of licences for spectrum
currently used for mobile telephone services and any changes to the use of
spectrum currently used for electronic news gathering.
The Government recognises that the future demands will place pressure on
the available spectrum.
Competition limits have been imposed on existing carriers in Australia in
the past. Specifically, the applicable Ministers have used their directions
powers under section 60 of the Radiocommunications Act 1992 to apply
competition limits to particular spectrum licence auctions five times.[83]
If Telstra wishes to participate in spectrum auctions for advanced wireless
broadband it must structurally separate and divest its cable network and
subscription television assets. The relevant spectrum Telstra will be
prevented from acquiring is the broadcasting spectrum and spectrum used for
electronic news gathering. Telstra will not be prevented under this rule
from re-acquiring spectrum it currently uses for mobile telephone services.
Telstra in its submission does not support the proposal to prevent it from
accessing the spectrum that is required for the provision of next
generation wireless services.[84] Hutchison also does not consider
competition limits appropriate on spectrum unless the Government identifies
clear quantifiable net social benefit from restricting competition for
newly available spectrum.[85] Whereas the ACCC states that:
'[a]lthough Telstra has voiced concerns over the use of competition limits
... the ACCC considers they can be an effective mechanism to promote
competition.'-ACCC[86]
The Digital Economy Industry Work Group[87], Optus and Unwired in their
regulatory reform submissions also stated that competition restrictions
should be considered to spectrum auctions with Optus and Unwired stating:
'Optus submits that competition limits on spectrum allocations should be
considered...'
-Optus[88]
'[f]uture competition limits on spectrum allocation should be based on the
market power of
applicants across all delivery platforms.'-Unwired[89]
10. Objectives of the Government's horizontal separation action
The Government's objective is to address Telstra's ability to discriminate
against its competitors, promote competition across the various
telecommunications platforms, and provide Telstra will the flexibility to
choose its future path.
11. Government's policy to address Telstra's horizontal integration
Telstra will be required to nominate which markets it participates in by
being prevented from acquiring spectrum for advanced wireless broadband
while it:
. remains vertically integrated; and
. maintains its interest in Foxtel; and
. owns a hybrid fibre coaxial cable network.
In order to acquire spectrum, Telstra must submit enforceable undertakings
to structurally separate to the ACCC and to divest its Foxtel and hybrid
fibre cable coaxial network. Under the legislation, the Minister could
provide guidance to the ACCC on the matters it would take into account when
considering whether to accept a structural separation undertaking.
There is a provision to enable the Minister, if satisfied that any concerns
arising from Telstra's market power are sufficiently addressed by Telstra's
undertaking to structurally separate, to exempt Telstra from the
requirements to divest its interests in Foxtel and/or its hybrid fibre
coaxial cable network.
12. Regulatory assessment of measures to address Telstra's horizontal
integration.
The Government is not imposing any regulation on Telstra to structurally
separate or divest its Foxtel or hybrid fibre coaxial cable network
interests. Telstra will have a choice to divest these assets and to
structurally separate or to participate in the market for advanced wireless
broadband.
Therefore the intention of this section is to outline the potential costs,
where possible, to Telstra and the Commonwealth if Telstra decides to
participate in spectrum auctions for advanced wireless broadband.
All the costs identified are estimates only.
Estimated cost of Telstra's divestment of Foxtel
Foxtel has 1.63 million direct and wholesale subscribers. It has been
reported that Foxtel is worth $3.5 billion, with revenue reaching $1.84
billion and posting a pre-tax profit of
$135 million for the year ended 30 June 2009.[90],[91],[92]
If Telstra divests its Foxtel interest it will lose the associated profits
from the cable TV provider and the strategic benefit to its
telecommunications business in owning a premium content provider. However,
it is not possible at this time to accurately state how much Telstra would
lose or gain in to divesting its 50 per cent stake in Foxtel, which would
partly depend on the revenue from the sale.
Costs will also be incurred by the Government in assessing the Foxtel
divestment undertakings, however at this point in time it is not clear what
these costs will be.
Estimated cost of Telstra's divestment of its hybrid fibre coaxial cable
network
There are financial costs involved in Telstra divesting its hybrid fibre
coaxial cable network in terms of securing market value for the asset.
In its financial analysis of the NBN, Deutsche Bank stated that the
estimated 'book value' of Telstra's cable network is approximately $3.6
billion or $1450 per home passed, while the market value is in the vicinity
of $1.25 billion or $500 per home passed. This could be a direct cost to
Telstra in the vicinity of $2 billion if Telstra sells its network at
current market value. Another cost is that Telstra would lose revenues
received from Foxtel for use of the cable network, which is estimated to be
$80 million per annum, but this is a low margin offering.[93]
Deutsche Bank also estimate that if Telstra divests its hybrid fibre
coaxial cable network at market value and a successful NBN is built, the
estimated value of Telstra's share price will be $3.70 per share.
Costs will also be incurred by the Government in assessing the divestment
undertakings, however at this point in time it is not clear what these
costs will be.
Estimated cost of preventing Telstra from acquiring spectrum
There could be a cost to the Commonwealth Government if Telstra chose not
to participate in spectrum auctions due to the loss in competitive tension.
However the Government considers the benefit of a more competitive
telecommunications sector outweighs the potential loss of revenue from
spectrum auctions.
At this point in time, it is not possible to predict the potential loss in
revenue to the Commonwealth.
It is also not possible to estimate the potential loss in revenue for
Telstra as a result of not acquiring spectrum and not providing advanced
wireless broadband services.
13. Overall assessment of the measures to address Telstra's horizontal
integration
As the Chairman of the ACCC recently stated:
'...control of both the telecommunications pipes and a large volume of
compelling content that is distributed over those pipes, could give one
company significant market power in both the telecommunications and content
sectors.'-Mr Graeme Samuel, ACCC[94]
Telstra's level of integration across all fixed line platforms has meant
effective competition between the various types of infrastructure has not
developed in the past and has resulted in Telstra growing its market power
in both the content and telecommunications areas.
The rollout of the NBN as a wholesale-only open access network will
fundamentally transform the competitive dynamics of the Australian
telecommunications sector. That said, during the rollout and after, the
existing telecommunications regulatory regime and market structure will
remain important for delivering services in the interests of Australian
consumers, businesses and the economy more broadly.
In order to promote more effective competition in the sector in the
interests of consumers, businesses and the economy more generally, the
Government is proposing measures to address Telstra's level of integration
across various telecommunications platforms. Within these measures, the
Government is providing Telstra with the choice and flexibility to choose
its future path.
If Telstra chooses to remain vertically-integrated, and is therefore unable
to participate in the spectrum auctions it will open up the market to new
entrants which would provider even greater competition in the mobile market
and promote an environment for healthy cross-platform competition to occur.
This could result in new and innovative bundling and pricing packages for
consumers from the new entrants, with the increased level of cross-platform
competition lowering prices in both the fixed-line broadband and mobile
markets.
Similarly, if Telstra decides to participate in the spectrum auctions a
competitive market will also develop with the possibility of infrastructure-
based competition to occur between the fixed-line telecommunication and the
new cable network owner. The divestment of Foxtel would improve the
environment for a competitive market to develop. The structural separation
of Telstra will improve the level of competition on the fixed-line network
during the transition to the NBN.
In line with the proposed measures to ensure that the NBN Co is a wholesale-
only open access network, these measures to reduce Telstra's level of
integration across telecommunications platforms and promote more effective
competition can be expected to be broadly supported by non-Telstra
participants in the industry.
The Government acknowledges that requiring Telstra to make choices will
curtail future business opportunities and have potential costs. It could
also affect the Government's revenue from the spectrum auctions.
However, the Government considers that in moving towards the rollout of the
NBN, it is imperative to promote greater competition and address the
investment issues that have arisen in the past from Telstra's horizontal
and vertical integration for the benefit of all Australian consumers,
businesses and the economy more broadly.
APPENDIX A
Table 1 Comparison of the Australian, UK and New Zealand operational
separation models (Source: ACCC)
| |Australia` |UK |New Zealand |
|Organisational |Notional. Telstra still operates|More substantive. Network |More substantive. Network services |
|Split |the Key Network services |services division separately |division separately branded. |
| |division which deals with |branded. |1. The Access Network Services unit |
| |Telstra and access seekers. |1. Network services (separately|(separately branded) |
| |1. Key Network services (Telstra|branded) - Openreach |2. Wholesale unit |
| |branded) |2. Wholesale business units |3. Telecommunications Fixed Network |
| |2. Wholesale business unit (for |(separate for (i) unbundled and|business unit (other than ANS and |
| |both unbundled and managed |(ii) managed services) - BT |wholesale unit) |
| |services) |Wholesale |4. Retail unit |
| |3. Retail Services Unit |3. Retail business unit - BT | |
| | |Retail | |
|Accounting |No requirement for separate |Requirement for separate |Requirement for separate accounts of |
|arrangements |accounts. |accounts. |ANS. |
|Assets allocated |No |Yes |No |
|between units | | | |
|Price equivalence|Relatively weak. Imputation |Stronger. Transfer pricing to |Stronger. Transfer pricing to promote |
| |testing preferred but Telstra |promote internal/external |internal/external |
|measures |has not yet provided relevant |equivalence. |Equivalence. |
| |information. | | |
|Service quality |Relatively weak. General |Much stronger. Requirements to |Much stronger. Requirements to offer |
|measures |equivalence obligation on |use the same regulated |same products and services at both the|
| |service quality, KPI reporting |wholesale products, at the same|wholesale and retail levels and use |
| |on connections, faults and |prices and using the same |same processes as wholesale KPI |
| |billing but does not necessarily|transactional |reporting on connections, faults and |
| |translate into services |systems/processes, as BT's |billing to demonstrate equivalence of |
| |delivered. |retail activities. KPI |inputs. |
| | |reporting on provision and | |
| | |repair for wholesale line | |
| | |rental, ULL, IPstream, and | |
| | |billing. | |
|Customer support |Questionable. Dispute resolution|More robust. Independent |More robust. Independent complaints |
|measures |and responsiveness measures |complaints body. |body. |
| |managed by Telstra internally. | | |
|Governance |Relatively weak. Externally |More robust. Externally audited|More robust. External audit of |
| |audited annual compliance report|annual compliance report. |Independent Oversight Group's (IOG) |
| |to Minister, Board committee |Equality of Access Board |annual report, arms-length rules |
| |oversight, designated executive |committee oversight |applying to certain Telecom personnel,|
| |with day-to-day responsibility, |(independent |requirements regarding reporting |
| |staff training obligation. |directors). Requirements |lines, requirements for setting ANS |
| | |regarding reporting lines, |policies to ensure that ANS operates |
| | |senior staff engagement. |on a stand-alone basis. |
|Regulator |Responsible Minister. ACCC |Ofcom investigatory and regular|NZ Commerce Commission - Enforcement |
| |investigation function and |reporting function. |role |
| |regular reporting function. | |IOG - independent oversight role. |
|Timing |Commenced June 2006. |Commenced late 2005. |Commenced 31 March 2008. |
|Enforcement |Relatively weak. Many steps |Stronger. Ofcom can prosecute |Stronger. Commerce Commission can |
|options |before ACCC can take action. |breaches of OSP undertakings. |prosecute breaches of OSP - $10m for |
| |"Two strikes" policy requiring |Financial penalties up to 10% |each breach, $500k per day for |
| |intervention of Minister. |of relevant turnover. |continuing Breaches. |
APPENDIX B
Restrictions on incumbent involvement in Pay TV (Source: Optus[95])
|Country |Restriction |
|Belgium |Belgian cable operators are traditionally |
| |separated from the incumbent. |
|Canada |Bell Canada was prohibited from holding a |
| |broadcasting licence and operating a broadcasting|
| |undertaking. (Section 7 Bell Canada Act, repealed|
| |1997 as a result of Convergence Policy Statement |
| |6 August 1996). |
|Germany |Deutsche Telekom has announced that it will |
| |separate its cable operations into separate legal|
| |entity and that it will consider further measures|
|Hungary |Telecommunications organisation cannot own, lease|
| |or control a cable network, except in settlements|
| |with a population of under 30,000. |
|Hong Kong |The cable operator Wharf was granted an exclusive|
| |licence to provide pay TV services. |
|Italy |Telecom Italia was prohibited to enter the |
| |terrestrial broadcasting market. |
|Japan |NTT and KDD were prohibited from providing cable |
| |TV service. |
|The Netherlands|KPN (the holding company of the incumbent PTT |
| |Telecom) is not allowed direct provision on cable|
| |TV infrastructure. The incumbent sold its |
| |shareholdings in cable companies at the |
| |insistence of the regulator. |
|Spain |Telefonica was prohibited from entering into |
| |cable telephony (1997-1999). |
|United Kingdom |Cable operators were initially granted exclusive |
| |geographical licences to provide pay TV services.|
| |BT and Mercury were not permitted to enter the |
| |Pay TV business. BT was prohibited from |
| |involvement in broadcasting by Duopoly Review |
| |1991 (effective from 1991-2001). |
|US |Incumbent telcos were barred from providing video|
| |service in all but the most rural areas and |
| |similarly cable operators is (sic) limited to |
| |providing subscription TV - known as the Cable |
| |Communications Policy Act 1984 (effective from |
| |1984 to 1996). |
REGULATION IMPACT STATEMENT
REFORM OF PART XIC OF THE TRADE PRACTICES ACT 1974 (NETWORK ACCESS
ARRANGEMENTS)
1. Issues which give rise to the need for action
In order to obtain improved outcomes for consumers, a competitive market
for telecommunications services must be established. Competitors' access on
reasonable terms to services that are necessary for the supply of retail
services is an essential element of this objective. The current access
regime has failed to adequately provide such access in a timely fashion.
Background
Under Part XIC of the Trade Practices Act 1974 the Australian Competition
and Consumer Commission (ACCC) has the power to 'declare' specific
telecommunications services to be subject to the access regime.
Once a service is declared, a telecommunications provider that supplies the
declared service (an access provider) is obliged to supply it to other
telecommunications service providers (access seekers) on request (subject
to certain exceptions). After it declares a service, the ACCC is required
to issue non-binding 'pricing principles' for that service.
The price and non-price terms on which a declared service is supplied are
determined by the following means:
. negotiation and agreement between the access provider and the access
seeker; or
. if negotiation fails, the terms are as specified in:
o an access undertaking previously lodged by the access provider and
accepted by the ACCC, or
o in the absence of a relevant undertaking that specifies the terms of
access, a determination by the ACCC following arbitration.
This is known as the negotiate-arbitrate model. This approach was chosen
over more direct methods of setting access terms in order to encourage
market-based outcomes. However, in practice determining terms and
conditions of access under Part XIC has proven to be time-consuming and
litigious.
Part XIC also provides for:
. the ACCC to determine model terms and conditions for certain 'core
services';
. the granting of exemptions, for existing services and for services that
are not yet declared (to encourage investment in new telecommunications
infrastructure);
. the Minister to make a determination setting out pricing principles
(which apply to undertaking and arbitration decisions); and
. applications to be made to the Tribunal for review of exemption and
undertaking decisions.
The exercise of the regulatory powers of the ACCC in Part XIC, including
the power to declare services, is governed by consideration of the long-
term interests of end-users (LTIE). In deciding whether something is in the
LTIE, the ACCC must consider whether it is likely to promote:
. competition;
. any-to-any connectivity (i.e. communication between users of services
over different networks); and
. the efficient use of, and investment in, telecommunications
infrastructure.
The negotiate-arbitrate model has proven to be complex and delay-prone.
Each access dispute has to be arbitrated individually - even if it is very
similar to disputes that have previously been arbitrated. For instance, an
arbitration relating to one of the most important declared services, the
unbundled local loop service (ULLS), which commenced in early 2005 was not
finally decided by the ACCC until December 2007, despite the Commission
having made numerous earlier statements on ULLS pricing. Rather than
encouraging flexible negotiation, the process has been a source of
uncertainty and delay for access seekers.
It was originally envisioned that, as the access regime became well-
established, new entrants would compete successfully with the incumbent
provider (Telstra) and gradually invest in their own infrastructure,
perhaps eventually replicating Telstra's network and thus eliminating the
economic bottleneck comprising Telstra's fixed line customer access
network. While significant investment has taken place, this outcome is
nowhere near being achieved. ACCC figures for June 2008 show that out of
5069 Telstra exchanges, only 521 (10 per cent) have had competitors'
facilities installed. Regulatory uncertainty appears to have played a part
in curbing more extensive investment by competitors.
Problem
The negotiate-arbitrate model within the telecommunications access regime
has been extensively criticised by a range of stakeholders across the
industry. Access seekers have been the primary critics, but the ACCC and
bodies such as the Internet Society of Australia have also expressed grave
doubts that the regime is achieving its aims.
Stakeholders' main areas of concern have been that the negotiate-arbitrate
model is very slow, cumbersome and open to gaming (if not outright
obstruction), and that Part XIC in its current form does not provide
sufficient regulatory certainty for investment. It is ineffective largely
because it has not effectively constrained the incentive of the vertically-
integrated Telstra to provide access to its network on terms that are not
as favourable as those it supplies to its own retail business.
The telecommunications sector is characterised by disputation to a greater
extent than other industries where negotiate-arbitrate access regimes
operate. The litigious nature of the telecommunications sector in Australia
is illustrated by the fact that:
. as of mid-May 2009, 157 telecommunications access disputes had been
notified since the commencement of the Part XIC regime in 1997. This
can be contrasted to three access disputes that have been notified in
other sectors (in respect of a gas pipeline, Sydney airport, and a
sewerage service); and
. in recent times, judicial review has been sought in respect of almost
all final arbitration determinations made by the ACCC (mostly by
Telstra).
. as of March 2009, the ACCC was considering 51 access disputes, all
involving Telstra. Of these, 42 related to the supply of broadband
inputs.
While disputes in different regulated industries cannot be directly
compared, the number of arbitrations requested and the regular reoccurrence
of the same access issues lead the Government to conclude that the process
is not working as intended and is prone to excessive delay. Telstra is the
main beneficiary of this delay and disputation, as it retards the rollout
of competing services. Investment in new infrastructure is similarly
inhibited by regulatory uncertainty. More than a decade after the
introduction of competition, Telstra remains dominant in almost all sectors
of the telecommunications market, and it continues to be one of the most
profitable operators in the world. The use of regulatory and legal
processes appears to be one way in which Telstra maintains this dominance.
Contributing factors include that:
. the ACCC cannot set binding terms of access up-front when a service is
declared, but has to wait until an access dispute is referred to it for
arbitration;
. arbitration proceedings can take a long time, sometimes years;
. when arbitrating an access dispute, the ACCC cannot determine terms of
access collectively for all access providers and access seekers-its
arbitrations are only binding on the parties to the arbitration; and
. there are multiple steps at which parties can challenge procedural
matters and seek judicial review.
The undertaking process is also seen as ineffective by a range of
stakeholders. In total, 36 undertakings have been submitted. Five of these
have been accepted by the ACCC (three relating to pay TV services); six
were withdrawn prior to the ACCC making a final decision. Five of the
decisions to reject an undertaking have been appealed in the Tribunal, four
of them unsuccessfully, with one appeal still current.
Voluntary access undertakings were intended to provide an opportunity for
increased certainty for access providers, as well as the flexibility to
develop their own terms of access for approval by the ACCC. However,
certain stakeholders have argued that, instead of the undertaking
provisions being used to provide certainty, they have been used to create
delays in regulatory processes, and have resulted in a situation where
'serial' undertakings are lodged (i.e. repeated undertakings with only
minor changes made from previous submissions, even when it is clear that
the terms proposed will not be acceptable to the ACCC; this simply delays
the process of reaching a proper outcome).
Every undertaking must be considered on its merits by the ACCC. To date the
ACCC has rejected most of the undertakings that have been submitted to it
on the basis that it was not satisfied that the undertakings met the
relevant legislative criteria. To this date, no decision to reject an
undertaking has been successfully appealed in the Australian Competition
Tribunal.
The deficiencies of the current regime have hindered competitive access,
and this has the effect of deterring innovation and investment, thus having
a negative impact on the range and price of telecommunications products
offered to Australian consumers.
2. Objectives
The Government's objective is to facilitate the delivery of affordable,
high quality, innovative and reliable telecommunications services in a
sustainable competitive market. Outcomes for end-users of
telecommunications services will be significantly improved through a
regulatory process for access to telecommunications services that operates
in a timely and efficient manner and provides a reasonable degree of
regulatory certainty for access providers and access seekers.
3. Options
The two main options for reform available to the Government are:
A. retain the current regime, but make it work more effectively; or
B. replace the negotiate-arbitrate model with a streamlined process.
Option A-Retain the current Part XIC processes-including the negotiate-
arbitrate model-but make them work more effectively
Under this approach the current regulatory processes, including the
negotiate-arbitrate model, would be retained. However, changes would be
made to reduce delays and opportunities for gaming and to encourage the
effective use of undertakings. These changes would include:
. limiting opportunities to challenge procedural matters by exempting
certain decisions (e.g. interim access determinations) made by the ACCC
from judicial review by the Federal Court;
. enabling the ACCC to request a party who lodges an undertaking to vary
it without requiring the party to lodge a fresh undertaking and
effectively 'restart the clock' on an already lengthy process;
. placing a time limit on the ACCC for finalising an arbitration; and
. allowing the ACCC to specify pricing methodologies for declared
services which would be used to determine prices over successive
regulatory proceedings or successive undertakings in order to create
greater regulatory certainty.
Option B-Replace the Part XIC negotiate-arbitrate model with a streamlined
regulatory process
This approach would replace the negotiate-arbitrate model with a
streamlined regulatory process and provide the ACCC with the ability to
make up-front determinations on price and non-price terms of access. Under
the new process:
* the ACCC would determine up-front price and non-price terms and
conditions (the access determination) to apply, in general, for a three
to five year period;
* the access determination would apply to all access providers and access
seekers of the declared service (although the access determination
could specify different terms of access for different access providers
and/or access seekers);
* access providers and access seekers could agree to different terms of
access from those in the access determination;
* the ACCC would have the power to determine fixed principles to apply
for a stated period which may extend beyond the duration of the access
determination (e.g. how depreciation is treated);
* the ACCC would have the power to make binding rules of conduct for the
supply of declared services which would apply either in addition to, or
as a variation of, an access determination. Such rules could address
particular competition issues, such as inadequate exchange access
processes or service migration processes;
* there would no longer be ordinary exemptions from access obligations
and no ordinary access undertakings;
* the ACCC would have the power to request a party that lodges a special
access undertaking to vary the undertaking without having to lodge a
new undertaking; and
* merits review would not be available for decisions under Part XIC.
Suitable transition arrangements would be developed for existing declared
services.
4. Impact assessment
This section discusses the costs and benefits of the two alternative
options put forward in terms of the impact on business, the Government and
consumers. It is not possible to precisely quantify the costs and benefits
for any party, though both options would, to varying degrees, reduce the
amount of resources expended in regulatory processes and litigation.
Option A-Retain the current Part XIC processes-including the negotiate-
arbitrate model-but make them work more effectively
All the proposed reforms under this option would operate to simplify the
access regime, and in theory this would allow disputes to be settled more
quickly and leave less opportunity for decisions to be appealed. Access
seekers would benefit most, and they would have greater confidence in
achieving speedy outcomes. However, many avenues would remain open for
access providers to 'game' the system to their advantage, and the ACCC
would probably still have to deal with a significant number of disputes.
Eliminating the right to apply for judicial review of interim access
determinations could reduce uncertainty and delay.
In the absence of more sweeping changes to the negotiate-arbitrate model,
imposing a time limit on decision-making by the ACCC is one way to
encourage all participants in a dispute to avoid time-wasting. This
approach is taken by the British regulator, Ofcom, which has four months to
resolve disputes.
At present the ACCC is obliged to re-examine all matters involved in making
an arbitration determination or undertaking when it expires, even issues
that are well-established (such as network costs, depreciation or a
regulatory asset base). Allowing the ACCC to specify certain matters for a
longer period than the duration of the arbitration determination or
undertaking concerned would save having to undertake such re-examination
and would provide longer-term investment certainty for all parties. It
could also prevent parties from re-opening long-standing arguments over
pricing in an attempt to slow down proceedings.
As noted earlier, almost every undertaking submitted to the ACCC has been
rejected - in several cases (notably the ULLS), the same basic undertaking
has been knocked back multiple times in slightly altered form. By proposing
more streamlined regulatory processes, access providers may be encouraged
to avoid going to arbitration and instead submit better undertakings up-
front. The fewer the avenues there are for delay, the more likely this is
to happen.
While all of these proposed changes should simplify regulatory processes
and have the potential to produce financial savings for the ACCC and
industry, the primary benefit would be to increase certainty and lower
obstacles to achieving competitive access to key bottleneck services.
However, this option would still be vulnerable to regulatory gaming by
parties that see an advantage in refusing to negotiate terms and using the
arbitration process to protect their commercial interests.
Benefits:
. Should expedite decisions and dispute resolution, which will lower
costs and increase certainty in the market.
. May encourage access providers to lodge undertakings that are likely to
meet statutory criteria and be accepted by the ACCC.
. Broadly maintains the status quo, reducing disruptive costs.
Costs:
. Does not address the central criticism that the negotiate-arbitrate
model can continue to be used to delay regulatory decisions.
. Even under a modified system, the industry may well suffer from a
surfeit of long, expensive regulatory actions and administrative
appeals, if providers see some benefit to engaging in them.
. Applicants will continue to be able to use the undertaking process to
force the regulator to re-examine the same issues multiple times.
While this option would have relatively little cost and result in moderate
benefits to industry, it would not resolve most of the issues identified as
requiring attention.
Option B-Replace the Part XIC negotiate-arbitrate model with a streamlined
regulatory process
This option would much more directly address the deficiencies of the
current regime and would greatly reduce disputation regarding access. The
costs to the industry would be minimal, as the ACCC would be able to set
price and non-price terms for a range of services up-front without need for
lengthy and repeated adjudications. Operators could still commercially
negotiate their own terms of access, but there would be an up-front access
determination to fall back on.
Evidence provided by access seekers (including Optus, Primus and the
Competitive Carriers' Coalition) suggests that access disputes can cost
access seekers hundreds of thousands of dollars per dispute, while Optus
estimates that the overall cost to industry of regulatory proceedings over
the last 12 years is at least $200 million.
Merits review, which currently applies to a limited number of Part XIC
decisions (but not service declarations and access determinations), would
be abolished under this option. Introducing merits review for access
determinations or maintaining it for other Part XIC decisions would
substantially negate many of the benefits of this option as it would defeat
the objectives of timely outcomes and greater regulatory certainty. However
access to judicial review will continue to be available.
Under the proposed changes, an access determination process would proceed
in the following manner:
1. The ACCC would declare a service, and set standard price and non-price
terms of access for the declared service in an access determination.
2. An access provider would be obliged to offer the declared service to any
access seeker on the terms set down in the access determination. The two
parties could still negotiate different terms.
3. The ACCC would be able to specify in the access determination fixed
principles for treating certain on-going matters such as the depreciation
methodology or the regulatory asset base, which could be set for a longer
duration than the duration of the access determination.
4. The ACCC would not be able to issue ordinary exemptions from the access
obligations as it can now; however anticipatory exemptions would still be
available.
Benefits:
. A streamlined up-front terms-setting approach would provide greater
regulatory certainty for access providers and access seekers.
. It would eliminate unreasonable delays which frustrate regulatory
outcomes.
. It would also reduce disputation about access matters which is costly
both for telecommunications providers and the ACCC.
. Fewer disputes and greater certainty should enhance competitiveness,
which benefits consumers.
Costs:
. The industry would need to adjust to having a regulator with expanded
powers to impose price and non-price terms on operators up-front.
. The regulator may have to devote more resources to market analysis, to
determine appropriate price and non-price terms and conditions
(although the expected reduction in dispute-handling should offset
this).
5 Consultation
These two options for reform of Part XIC were included in the discussion
paper 'National Broadband Network: Regulatory Reform for 21st Century
Broadband'. 140 submissions were received during the consultation, many
from industry stakeholders.
Of the submissions which commented on the operation of Part XIC, the vast
majority supported reforming the access regime (access seekers were
particularly strong on this point), and there was broad agreement with the
direction laid out in Option B. Most submissions endorsed the general use
of ex ante determination of price and non-price terms, the elimination of
the negotiate-arbitrate model and the curtailment of appeals processes.
While Telstra supported some of the measures put forward (such as greater
streamlining of regulation) it did not endorse either option. Foxtel and
News Ltd opposed Option B.
The ACCC submission suggested combining the two options and applying
different approaches to different market segments, depending on the degree
of vertical integration present. Some declared services would remain under
the negotiate-arbitrate model, while others would be regulated in
accordance with Option B. However, this would substantially increase the
complexity of access regulation without a clear benefit.
Detailed summary of submissions
Submitters were overwhelmingly of the opinion that the negotiate-arbitrate
model has not worked; however opinions varied about whether and to what
extent it should have a continuing role. Unwired and the Seven Network
considered that the streamlined process for setting access terms should
only apply to vertically integrated providers. Some parties said the ACCC
should have the option to choose between a streamlined, up-front price-
setting process and the negotiate-arbitrate model. There appeared to be a
consensus that any terms of access not determined under the streamlined
process should be left to negotiate-arbitrate.
Some submitters, including Hutchison and Macquarie, suggested time limits
should apply to the process and there was also support for giving the ACCC
flexibility to specify terms of access for a long duration in order to
afford greater certainty (for instance TransACT).
A number of parties, including the ACCC, Telstra and Optus, argued that the
value of the regulatory asset base be determined up-front and apply to
future relevant regulatory decisions, without the need for constant
revaluation (perhaps, subject to standard variations for capital and
depreciation).
AAPT objected to the ACCC being given the ability to determine different
terms of access for different access providers and/or access seekers,
arguing that the same terms of access should have to apply across the
board.
All submitters who addressed the issue were in favour of letting access
providers and access seekers agree different terms of access than those
determined by the ACCC. However, AAPT and Macquarie said that any
alternative terms agreed by the parties should require the ACCC's approval,
or should be subject to the ACCC's veto (respectively). In addition, AAPT
said that the access price agreed by the parties should not be allowed to
differ from the access price determined by the ACCC by more than 3% to 5%
(up or down) to prevent big volume discounts being given to big players
only. The Competitive Carriers' Coalition (CCC) said that the parties
should only be allowed to agree a lower access price than that determined
by the ACCC if the lower price reflected identifiable and quantifiable
economies for the access provider.
In general, submitters did not propose significant changes to the process
for declaring services. Vodafone, however, submitted that only services
that are supplied by operators with significant market power should be
susceptible to declaration.
Optus, Macquarie and AAPT wished to see exemptions abolished, believing
that they undermine declarations and create uncertainty.
There was also significant support for abolishing undertakings; this was
advocated by Optus, Macquarie, Vodafone, AAPT and the CCC. Telstra
expressly supported the proposal to enable the ACCC to request a party who
lodged an undertaking to vary it without being required to lodge a fresh
undertaking and re-start the process. Telstra also argued that undertakings
be deemed acceptable where they are consistent with legislated pricing
principles.
Optus, Macquarie, Primus, TransACT and the CCC called for the abolition of
merits review of the ACCC's decisions. The only major telecommunications
providers who expressly supported merits review were Vodafone and
Hutchison.
Telstra advocated more limited changes to Part XIC than other
telecommunications providers, the main elements being: enable the ACCC to
deal with access disputes collectively; specify pricing principles in
legislation which the ACCC will be bound to apply; and appoint an
independent expert to review the ACCC's and Telstra's cost models.
6. Recommendation
Having examined the available evidence, the Government agrees with the
premise put forward by many stakeholders that the current
telecommunications access regime is flawed. Given the sector's increasingly
important role in Australia's economy, this regulatory failure needs to be
addressed.
Based on feedback received from its public consultation process, the
Government is persuaded that any reform undertaken must include the removal
of the negotiate-arbitrate model from the regime, in favour of more direct
ex ante price-setting by the regulator. This will lead to greater
certainty, less disputation and more timely and efficient outcomes. It is
also more broadly consistent with the access regimes that operate in other
key infrastructure industries in Australia, such as gas and electricity,
and the role of the telecommunications regulator in other international
jurisdictions. Option B's package of reforms is therefore the recommended
alternative, as on balance the benefits to be gained outweigh the potential
costs.
7. Implementation & review of the preferred option
The Government will introduce legislation to reform Part XIC of the Trade
Practices Act 1974 in accordance with the principles outlined under Option
B. This will include transitional arrangements for existing declared
services.
The ACCC will be asked to analyse the current market and consult widely
with industry on the optimum terms and conditions to apply to each declared
service, in advance of any formal determinations being made. Provisions for
transitioning current contracts to the new arrangements will be examined,
with the most likely approach being that transitional arrangements would
provide for determinations to be made on access disputes where the
determinations would have retrospective application or would apply to the
date of an access determination for the relevant service under the new
framework.
A review will be conducted three years after implementation to assess how
the new system is working.
REGULATION IMPACT STATEMENT
REFORM OF PART XIB OF THE TRADE PRACTICES ACT 1974 (COMPETITION
ARRANGEMENTS)
1. Issues which give rise to the need for action
Background
Part XIB of the Trade Practices Act 1974 (the Act) sets out a
telecommunications-specific anti-competitive conduct regime (and certain
information gathering powers). Part XIB prohibits a service provider with a
substantial degree of market power from engaging in conduct which has
either the effect or purpose of substantially lessening competition.
Telecommunications carriers and carriage service providers are prohibited
from engaging in anti-competitive conduct, as defined by section 151AJ of
the Act. This is known as the competition rule (section 151AK). If the
Australian Competition and Consumer Commission (ACCC) believes a service
provider is engaging in anti-competitive conduct in a telecommunications
market it may issue a competition notice under Part XIB
Proceedings for enforcing the competition rule, other than proceedings for
injunctive relief (that can be instituted at any time), cannot be
instituted unless the alleged conduct is of a kind dealt with in a Part A
competition notice that was in force at the time the alleged conduct
occurred. Before the ACCC issues a Part A competition notice, it must give
the provider concerned a consultation notice which describes the alleged
anti-competitive conduct in summary form, and must give the provider an
opportunity to make submissions (s151AKA(9), (10)).
As an alternative to issuing a Part A competition notice, the ACCC can
issue a Part B competition notice. A Part B competition notice sets out the
particulars of the contravention, which are prima facie evidence of the
matters in any proceedings under or arising out of alleged contraventions
of the competition rule. There is no requirement to issue a consultation
notice before issuing a Part B competition notice. (However, the ACCC still
has a duty under the general law to afford the provider concerned
procedural fairness before issuing a Part B competition notice.)
There are some important differences between Part A and Part B competition
notices. A Part A notice allows the ACCC to obtain pecuniary penalties
under s151BY of the Act and also allows for the recovery of damages under
s151CC. In contrast, the issuing of a Part B notice does not allow the
recovery of pecuniary penalties or damages.
The recipient of a competition notice can alter its behaviour to take
account of the competition notice or it may choose not to change its
behaviour. A decision to disregard a competition notice exposes a party to
very significant potential penalties, but those penalties would only apply
if a court found that the competition rule had been breached. Importantly,
as a competition notice does not of itself direct a party to take action,
there are no penalties for failing to comply with a competition notice.
Thus, a party who believes that a court would not find it in breach of the
competition rule might decide to continue its behaviour unchanged. In
practice, both scenarios have occurred, i.e. in some cases the recipient of
a competition notice has altered its behaviour, while in one case the party
continued its conduct unchanged.
The problem
Part A Competition Notice
The Part A competition notice process has been criticised on the grounds
that the consultation process is open to being manipulated. The statutory
requirement to consult with the intended recipient of a Part A competition
notice means the ACCC must take a number of steps prior to issuing this
form of competition notice. Specifically, the ACCC must ensure it gives the
intended recipient of a competition notice sufficient time to make a
submission and must then take that submission into account prior to issuing
a competition notice.
A competition notice can be subject to legal challenge on the grounds that
the prior consultation notice did not afford sufficient procedural
fairness. The potential and incentive exist for the intended recipient of a
notice to draw out any consultation to avoid or delay the issue of a Part A
competition notice. Such a delay can lead to irreversible damage to
competitors that may be affected by any alleged anti-competitive conduct.
For example, the ACCC issued a consultation notice to Telstra in December
2005 with respect to increases in the price of the wholesale line rental
service. In April 2006 the ACCC issued a Part A competition notice against
Telstra because it had reason to believe that Telstra had engaged, and was
engaging, in at least one instance of anti-competitive conduct relating to
Telstra's pricing of its wholesale local services products.
Telstra challenged the competition notice, arguing that the issues raised
by the ACCC in the competition notice differed from the issues raised in
the consultation notice and that, as a result, Telstra had not been
provided with procedural fairness. The Federal Court agreed with Telstra
and the competition notice was declared invalid.
Application of Part XIB to content service providers
Part XIB needs to be responsive to technological changes that are occurring
in the industry. At present, it is not explicit that Part XIB applies to
'content services' supplied by carriers and carriage service providers.
Content services are defined in section 15 of the Telecommunications Act
1997 and in section 152AC of the TPA (within Part XIC) and include a
broadcasting service, online information service, online entertainment
service, any other online service, or any other service as determined by
the Minister.
Advances in technology have increased the capacity for carriers and
carriage service providers to provide content services. Clarifying the
scope of Part XIB is beneficial for all parties, as it increases regulatory
certainty and reduces the risk of protracted legal disputes on this issue.
The offering of bundled packages (often involving the supply of voice,
internet and television) is now commonplace. Bundled packages involving the
supply of content services by carriers and carriage service providers may
have anti-competitive consequences if a provider's market power can be
leveraged to gain advantage in the market for another service. For example,
if a vertically integrated carrier acquires premium content on an exclusive
basis this could be a source of significant market power which could be
used to stifle investment in new telecommunications infrastructure. In
these instances, if the ACCC believes the relevant conduct breaches the
competition rule it must be able to take enforcement action without doubts
over the application of Part XIB to content services.
2. Objectives
Streamlining the competition notice process under Part XIB
The first objective is to develop a more streamlined process for
competition notices so that the ACCC can move quickly to issue a
competition notice as soon as it has reason to believe anti-competitive
conduct is occurring in the telecommunications industry.
Ensuring Part XIB applies to content services
The second objective is to ensure that the ACCC will be in a position to
take swift enforcement action in relation to instances of alleged anti-
competitive conduct involving content services.
3. Options (regulatory and/or non-regulatory) that may constitute viable
means for achieving the desired objectives
Streamlining the competition notice process under Part XIB
There were a number of regulatory options considered when examining how to
streamline regulatory processes under Part XIB. These reform options
include:
A. removing consultation notice requirements for Part A Competition
Notices;
B. requiring the ACCC to provide guidance when issuing competition notices;
C. enabling the ACCC to issue binding rules of conduct when issuing a
competition notice; and
D. enabling the ACCC to issue binding rules of conduct when it suspects
anti-competitive conduct.
Ensuring Part XIB applies to content services
E. clarifying the scope of Part XIB.
Option A - Removing consultation notice requirement
This option involves removing any requirement for the ACCC to undertake
consultation before issuing a Part A competition notice. By removing the
requirement for the ACCC to undertake consultation before issuing a Part A
competition notice, the party alleged to have taken part in anti-
competitive conduct is denied the ability to delay the ACCC's enforcement
activities on procedural grounds. The focus for both parties will therefore
be on resolving the alleged illegal conduct, rather than on litigation
aimed at challenging the processes followed by the ACCC. If the ACCC
commences court proceedings to enforce a Part A competition notice, the
ACCC would still have to prove to the court that the competition rule had
been breached by the alleged offender.
In addition to removing the specific requirement in s151AKA to issue a
consultation notice, it is also necessary to remove the requirement imposed
on the ACCC under the common law to provide procedural fairness when
issuing a competition notice. Otherwise, the policy objective of more
timely outcomes would be frustrated and the risk of a successful challenge
to the ACCC's legal processes would remain. It may be noted that procedural
fairness arrangements have previously been removed under s152CPA(3) of the
telecommunications access regime. The purpose of the amendment to
s152CPA(3) was to allow the ACCC to issue interim determinations quickly so
as to avoid competitive damage being incurred as a result of any delays on
procedural fairness grounds.
Removing the obligation to issue consultation notices would not be
inconsistent with procedural fairness considerations more generally,
because:
. the ACCC will issue a competition notice that specifies the details of
the alleged anti-competitive conduct;
. the ACCC would retain the power to revoke the competition notice if
parties can convince the ACCC that the notice was issued in error; and
. before penalties are applied, the ACCC has to prove to the court that the
anti-competitive conduct has occurred.
Option B - Requiring the ACCC to provide guidance when issuing a
competition notice
This option, which could be implemented separately or in conjunction with
Option A, requires the ACCC when issuing a competition notice to provide
guidance to the recipient on how to rectify the anti-competitive conduct
and have the competition notice removed.
Option C - Enabling the ACCC to issue binding rules of conduct when issuing
a competition notice
This option involves giving the ACCC the power to impose binding rules of
conduct when issuing a competition notice. If the ACCC believed that anti-
competitive conduct was taking place, the ACCC could be empowered to issue
binding rules of conduct that would compel the recipient to change its
conduct. The binding rules of conduct would be forward-looking and would be
targeted at preventing future instances of particular anti-competitive
conduct. In practice, the ACCC would be able to directly regulate the
behaviour of a party or parties, including behaviour relating to the supply
of wholesale services.
A competition notice differs from binding rules of conduct, because a
competition notice does not direct any party to undertake or refrain from
any course of action. It must be enforced by the ACCC in court before the
alleged offender can be made to pay damages or penalties.
Binding rules of conduct would provide the ACCC with the ability to clearly
specify the conduct that must be followed by a party that has been issued a
competition notice. This mechanism would provide for timely outcomes and
greater certainty for the parties involved in a dispute.
Option D - Enabling the ACCC to issue binding rules of conduct when it
suspects anti-competitive conduct
This option involves abolishing the competition notice regime and
empowering the ACCC to issue binding rules of conduct where it considers a
party is engaging in anti-competitive conduct. Unlike Option C, the ACCC
would not be required to issue a competition notice before issuing binding
rules of conduct. Therefore, the ACCC could quickly issue binding rules of
conduct to address conduct that it believes to be detrimental to
competition. Option D would also remove the penalties which currently apply
to breaches of the competition rule.
Ensuring Part XIB applies to content services
Option E - Clarifying the scope of Part XIB
This option involves ensuring that the Part XIB competition notice regime
unequivocally applies to content services delivered by carriers and
carriage service providers.
4. Impact assessment
This section discusses the costs and benefits of the options put forward in
terms of the impact on business, the Government and consumers. It is not
possible to precisely quantify the costs and benefits for any party, though
all of the options would, to varying degrees, reduce any losses that might
arise from anti-competitive behaviour.
The proposed changes to Part XIB will affect the ACCC and potentially any
carrier or carriage service provider that is providing telecommunications
services. As the proposed reforms aim to achieve greater efficiency under
Part XIB, the benefits of a less cumbersome regulatory framework will flow
through to consumers in the form of investment leading to better quality
services. This is because a market that operates free of anti-competitive
practices will achieve more efficient outcomes for the end-users of
telecommunications services. Anti-competitive conduct damages the
competitive process by potentially eliminating or damaging smaller
competitive players. Such damage to the competitive environment will reduce
the benefits to consumers that stem from innovation and competitive
pricing.
The options discussed below will negatively impact on any access provider
that may look to engage in anti-competitive conduct in relation to the
supply of telecommunication services. It is believed that this outcome will
be of benefit to consumers, because anti-competitive conduct detracts from
the benefits that are attained through well-functioning and competitive
markets.
Option A - Removing consultation notice requirements for Part A Competition
Notices
Benefits:
. The operation of a more streamlined competition notice process will allow
the ACCC to commence enforcement action under Part XIB in a more timely
manner.
. Access seekers and access providers will benefit from the removal of the
ACCC's obligation to issue a consultation notice before it can issue a
competition notice. This is because the swift resolution of these
disputes will allow for the affected parties to have greater regulatory
certainty and this allows for more effective business planning.
. In the past, the ACCC has stated that Part XIB regulatory processes have
taken over 18 months to resolve. For access seekers that are waiting for
the outcome of such processes, this uncertainty can be very costly as
some instances of competitive harm are irreparable. Therefore, removing
such uncertainty can provide some significant benefits for the parties
waiting for the dispute to be resolved.
Costs:
. The current consultation process allows for the recipient of a
consultation notice to alter its conduct, potentially removing the need
for a competition notice to be issued. When the consultation notice
regime works effectively, competition notices do not need to be issued,
as the party involved in the alleged illegal conduct can reach an
agreement with the ACCC to discontinue any further action.
. Currently a party that had been issued with a consultation notice could
make a submission to the ACCC to explain why a competition notice should
not be issued. This process can alleviate the need for further action to
be taken, if the recipient of the notice can show its conduct is
justifiable. Removal of this consultation process may negatively impact
on the recipients of competition notices, as they will no longer be
afforded the opportunity to justify their conduct before being issued
with a competition notice.
Option B - Requiring the ACCC to provide guidance when issuing a
competition notice
Benefits:
. If the recipient of a competition notice uses the guidance provided by
the ACCC to alter its conduct, then ACCC resources will be used more
efficiently and the anti-competitive conduct can be quickly brought to an
end.
Costs:
. If the ACCC was to provide guidance when issuing a competition notice,
this could compromise the ACCC's enforcement role, either on that
occasion or in future instances, i.e. where similar circumstances apply
and the conduct remains anti-competitive, but had been modified to avoid
the description in the ACCC guidance.
. The provision of guidance will also be a resource intensive process for
the ACCC and the costs imposed on the ACCC may not be justifiable if the
guidance provided does not result in the recipient of the guidance
altering its conduct.
Option C - Enabling the ACCC to issue binding rules of conduct when issuing
a competition notice
Benefits:
. This type of regulatory mechanism could facilitate timely intervention by
the ACCC to prevent or mitigate competitive detriment flowing from the
anti-competitive conduct. It would provide for a more effective operation
of the competition notice regime.
. This could also deter future instances of anti-competitive conduct.
Costs:
. This option would in effect allow the ACCC to regulate the supply of
wholesale services where competition issues have arisen, regardless of
whether these services have been declared under the telecommunications
access regime in Part XIC of the TPA. The ACCC would be able to instruct
the relevant parties to engage in a specific course of conduct.
Regulation of non-declared services in this manner may be considered to
be over-reaching and could harm investor confidence.
Option D - Enabling the ACCC to issue binding rules of conduct when it
suspects anti-competitive conduct
Benefits:
. This would provide for a much simpler regime without competition
notice/consultation notice arrangements which have been criticised for
taking too long and being too cumbersome.
. This would allow the ACCC to provide timely, practical responses to
potential competition issues without having to prove that the competition
rule has been breached. There should also be more certainty on how
matters could be resolved.
Costs:
. As in Option C, this option would also allow the ACCC to in effect
regulate the supply of wholesale services, regardless of whether these
services have been declared under the telecommunications access regime in
Part XIC of the TPA. Regulation of non-declared services in this manner
may be considered to be over-reaching and could harm investor confidence.
. If the ACCC was able to impose binding rules of conduct on the basis of a
reasonable belief that the conduct concerned is anti-competitive conduct,
without having to establish in court that the conduct actually is anti-
competitive conduct, the result would be that binding rules of conduct
could sometimes prevent conduct which constitutes legitimate competition
and which is not, in fact, anti-competitive. This would be detrimental to
competition and efficiency. It would also be unfair to the provider
concerned, who would be prevented from being able to pursue its
legitimate commercial interests.
Option E - Clarifying the scope of Part XIB
Benefits:
. Amending Part XIB in order to confirm it applies to carriers and carriage
service providers providing content services would add certainty to the
scope of the anti-competitive conduct regime.
Costs:
. As this provision would give more certainty by clarifying the existing
law, no costs have been identified. It is not believed that any parties
are benefiting or would seek to benefit from the lack of clarity that
currently exists. This amendment is being proposed simply to clarify the
scope of Part XIB.
5. Consultation
Suggested reforms for Part XIB have been made by a variety of stakeholders.
Some of the suggestions that were provided by stakeholders have been used
to develop the reforms to Part XIB. For example, the ACCC stated that
"Removing the statutory requirement to undertake consultation prior to
issuance of a competition notice would simplify the administrative
obligations on the ACCC and could enable it to respond more quickly to anti-
competitive conduct."[96]
Optus has also expressed concern about the drawn out nature of the
consultation process that currently operates under Part XIB. Specifically,
Optus has argued that "The time required for the ACCC to receive
submission(s) from Telstra in response to such notices and consider them
allows Telstra many further months in which to continue engaging in anti-
competitive conduct, thereby damaging competition in the market."[97]
Telstra also supported the removal of consultation notices.[98] Telstra
also suggested in its submission that it believes the ACCC should be
required to give guidance on rectifying behaviour and be required to
proceed with legal action on a timely basis.[99] Telstra does not support
giving the ACCC power to make binding rules of conduct. It believes this
would slow down the issuing and resolution of Competition Notices because
of need for due process.[100]
AAPT supported the removal of the consultation notices and supported the
introduction of ACCC powers relating to binding rules of conduct when it is
issuing a competition notice.[101] The Competitive Carriers Coalition also
believes that the consultation notice requirement should be revoked and the
ACCC should be given the ability to impose binding rules of conduct when
issuing a competition notice.[102]
6. Recommendation
The requirement to issue a consultation notice has resulted in legal
challenges and delays that have frustrated the efficacy of the Part A
competition notice process. The consultation notice was intended to provide
the recipient with certainty in relation to the allegation of alleged anti-
competitive conduct. However, the consultation phase has arguably provided
the recipient with the ability to delay the issue of a competition notice,
whilst trying to maximise the advantage accrued as a result of the relevant
alleged anti-competitive conduct.
Such delaying tactics are contrary to the policy intention of Part XIB,
which is aimed at achieving the timely resolution of disputes regarding
allegations of anti-competitive conduct. It is therefore recommended that
Option A be implemented.
It is also recommended that Option E be implemented. Clarifying the scope
of Part XIB to include content services will be beneficial for all relevant
parties, as it increases regulatory certainty and reduces the risk of
protracted legal disputes on this issue.
It is recommended that Option B not be implemented, as the costs of this
reform are likely to outweigh the benefits that are derived from this
reform. The resource costs imposed on the ACCC are likely to be significant
and it is unclear whether the guidance provided by the ACCC will lead to
the swift resolution of a dispute. As discussed earlier, it is also
believed that Option B could compromise the ACCC's enforcement role.
The proposed reforms to Part XIB are being made in conjunction with reforms
to Part XIC. One of the proposed reforms for Part XIC will provide the ACCC
with the power to issue binding rules of conduct to address competition
issues relating to the supply of declared services under that Part. It is
expected that the ACCC will be able to use that power to effectively
resolve some competition issues that may otherwise require the ACCC having
to issue a competition notice under Part XIB. Therefore, including a power
to issue binding rules of conduct within Part XIB may amount to the
creation of superfluous regulation.
It is recommended that Options C and D are not implemented. Binding rules
of conduct are best introduced into Part XIC, because this would ensure
binding rules of conduct are only issued in relation to declared services.
This outcome is preferable, because it ensures that any binding rules of
conduct that may be issued by the ACCC are clearly linked to benefiting the
long-term interests of end users.
Furthermore, the removal of the consultation notice requirement (as
proposed by Option A) will lessen the need for binding rules of conduct to
be used under Part XIB. This is because it is believed that removal of the
consultation notice requirement will lead to the more timely resolution of
disputes under Part XIB.
7. Implementation and review the preferred option
The implementation of Option A and Option E will require amendments to the
Act.
Transitional arrangements will not be required. If at the time in which the
proposed amendments become law the ACCC has issued a consultation notice,
it is intended that the consultation notice would cease to have effect and
the ACCC will be able to utilise the streamlined process proposed in Option
A.
REGULATION IMPACT STATEMENT
TELECOMMUNICATIONS CONSUMER SAFEGUARDS AND USO AND OTHER LEVY DEREGULATION
UNTIL THE NATIONAL BROADBAND NETWORK IS ROLLED OUT
This Regulatory Impact Statement consists of two parts. Part A deals with
strengthening consumer safeguards in the transition to the National
Broadband Network (NBN). Part B deals with reducing red tape by addressing
the eligibility of carriers to pay the universal service obligation (USO)
levy, the carrier licence fees, the costs of the National Relay Service and
funding for the Australian Communications and Media Authority.
PART A
1. Issues which give rise to the need for action
Changing customer needs
The Universal Service Obligation was set out in the Telecommunications Act
1975 as a requirement on the then Telecom:
'to perform its functions in such a manner as will best meet the social,
industrial and commercial needs of the Australian people for
telecommunications services and shall, as far as it is, in its opinion,
reasonably practical to do so, to make its telecommunications services
available throughout Australia for all people who reasonably require those
services...[and] to have regard to the special needs for
telecommunications services of Australian people who live or work outside
the cities.'
The concept has its genesis in the development of the telephone network to
provide a ubiquitous service throughout the nation. Prior to the
establishment of competition in the 1991 legislation, Telecom and its
predecessors financed the development of the network in rural and remote
areas. With the advent of competition it was believed that this policy
might become unsustainable as competition in urban areas made the incumbent
telephone company uncompetitive compared to providers that did not need to
incur the expense of extending the network into remote areas. It was
assumed that extending the telephone network to remote areas meant
supplying services in these areas at a commercial loss.
To deal with this perceived problem the Telecommunications Act 1991: (a)
enshrined the obligation on the incumbent, Telstra, to maintain services
across Australia; and (b) provided for the incumbent, Telstra, to be
compensated. Thus the concept of the USO and the supply of a standard
telephone service at a loss was introduced, at least as far as funding was
concerned. The Telecommunications Act 1991 also provided that all carriers
contribute to the compensation paid to the USO provider.
Currently the USO arrangements have the objective of making access to basic
voice telephony services and payphones available across the nation on a
reasonable and equitable basis (s.8A of the Telecommunications (Consumer
Protection and Service Standards) Act 1999.
The USO is implemented by a legislative requirement that Telstra 'take all
reasonable steps to fulfil' the obligation, and to the extent necessary,
supply services to people on request (ss.12C & 9(2) of the
Telecommunications (Consumer Protection and Service Standards) Act 1999).
In addition to the USO, where a provider offers a basic telephone service,
the Customer Service Guarantee (CSG) provides standards for the time to
connect new services, repair faults and keep appointments. Where the
standard is not met, the provider must pay the customer financial
compensation. The CSG does allow providers to supply a service without the
CSG applying in some circumstances and there are exemptions from the CSG
where providers offer temporary services or are unable to meet repair times
due to circumstances beyond their control.
The Australian Communications and Media Authority (ACMA) has found, in its
various consumer reports, that over recent years overall compliance with
the CSG has been falling, particularly repair times for payphones in remote
areas[103].
The retail price controls imposed on Telstra under Part 9 of the
Telecommunications (Consumer Protection and Service Standards) Act 1999
require Telstra to offer a basic voice telephony service at the same or
lower prices in non-metropolitan areas as it offers in metropolitan areas.
Due to its USO obligation, this raises the issues as to whether Telstra
provided services in certain areas of Australia at prices below the cost of
provision.
While traditional fixed-line voice services remain important, people can
now purchase a range of standard mobile and satellite services across the
nation from commercial suppliers operating outside the USO regime. These
services are available wherever a person resides or works. They generally
provide voice telephony services and often broadband services. The price
and charges for some of these services may be higher than the charges
applying to the standard voice service supplied by Telstra. However, given
the take-up of mobile services it is clear that they are generally
affordable.
Further, in many areas Voice Over the Internet Protocol (VOIP) services -
voice telephony supplied using a broadband or bitstream connection - are
available. Excluding the charges for the broadband connection, these
services generally provide substantially cheaper voice telephony than the
standard voice telephony service provided by Telstra under the USO.
The cost of the USO
The arrangements providing for Telstra to be compensated for its USO
obligation involve a levy imposed on all carriers that is proportional to
their annual revenue. The total levy is paid as a subsidy to Telstra. No
arrangements are in place for the benefits accruing to Telstra from being
the USO provider to be taken into account.
The levy arrangements do, to a certain extent, distort the market, by
leading to inefficient prices. The levy arrangements increase the cost to
providers in supplying services, which is likely to be passed on to
customers in higher prices. Given the sensitivity of telecommunications
demand to price changes and the importance of telecommunications as an
input to economic and business activity, the economic efficiency cost of
the levy is likely to be significant. In addition, to some extent the levy
acts as a barrier to market entry. Although there are provisions for other
USO providers to date, no provider has been approved by ACMA as a competing
universal service provider. There are no suppliers, other than Telstra, of
fixed cable or fixed wireless terrestrial telephony services in many rural
and remote areas.
The problem of measuring USO costs
Determination of the USO subsidy amount has always been a matter of
dispute.
Telstra consistently claims that the cost to it in fulfilling the USO is
much higher than the subsidy. A financial cost model developed by the
former Australian Communications Authority for the 1997-98 subsidy
estimated the USO cost at $548 million per annum.
Other industry participants claim that the current subsidy level set by the
Minister at $145 million for 2007-08 is too high. They claim that Telstra
gains significant benefits from being the USO provider which at least match
the USO cost. These benefits include the marketing advantages of a
national presence and status as the USO provider and other benefits such as
advertising on payphones. A 1999/2000 study commissioned by the Australian
Communications Authority estimated these benefits to be between $36 and $73
million per annum[104]. This argument has led to numerous calls over many
years for Telstra to meet the full cost of the USO.
Estimating the true cost of the USO subsidy is problematic. Equally
difficult would be the task of estimating the number of individuals or
businesses who might be disadvantaged by the absence of the USO. For the
years from 1992-3 to 1997-98, when a cost model was used to estimate USO
costs, the number of loss making customers was estimated at around 400
000[105]. However, many of these consumers would still have purchased a
standard telephone service even if the full cost of provision were charged.
Other countries, such as the United States and Canada have USO subsidy
arrangements. However, in some countries the incumbent telecommunications
operator is required to meet a universal service standard but it is not
compensated for doing so. The universal service provider does not receive
funding in the United Kingdom, Singapore, the Netherlands, Finland or
Germany. While the United Kingdom, Singapore and the Netherlands are
small, high population density countries, Finland and Germany have
substantial rural populations.
Need to upgrade the universal service regime
While the USO covers only standard telephony services and payphones there
have been calls for universal service arrangements to apply to digital or
bitstream communications access since the late 1990s. Recently the
Regional Telecommunications Independent Review Committee recommended that
new universal service arrangements should apply to mobile telephony and
broadband. Many submitters to the discussion paper National Broadband
Network: Regulatory Reform for 21st Century Broadband (the discussion
paper) called for universal arrangements to be extended to broadband.
The Regional Telecommunications Independent Review Committee took the view
that mobile and broadband services have become as significant and important
to Australians as fixed line voice telephony.[106] The Committee noted
that broadband has become an essential service in households across
Australia and that in wide areas of Australia access to terrestrial
broadband services and satellite broadband services are more expensive and
of a lower standard than services available in metropolitan areas.
The Regional Telecommunications Independent Review Committee was not in
favour of bringing new services specifically under the USO. Instead the
Committee recommended a new universal service regime that would involve:
. reference standards for services which customers should be able to
access across the country (the Committee referred to these standards as
the Communications Service Standards);
. Government intervention such as targeted funding programs to ensure
services that meet the reference standards are available in areas where
the market does not supply them; and
. arrangements making the Minister transparently accountable to Parliament
for the effectiveness of Government interventions in ensuring services
meeting the reference standards are available[107].
The Regional Telecommunications Independent Review Committee proposal, if
implemented, would indicate where there are service adequacy gaps which the
market could fill. Failing that, the Government might address these service
gaps through programs such as the Australian Broadband Guarantee or through
regulation.
The Australian Government has announced its plan for a wholesale-only, open
access NBN that will be rolled out over the next eight years. The new
network will:
. make high speed broadband services available across the nation;
. provide fibre optic to the home and workplace, supplemented with next
generation wireless and satellite technologies to deliver superfast
broadband services; and
. fundamentally change the competitive dynamics of the Australian
telecommunications sector.
Broadening universal service arrangements at this time could lead to
significant higher costs that may be avoided if the reforms were deferred
until after the detailed operating arrangement for the NBN had been
settled.
The Government has announced that once the detailed operating arrangements
for the NBN have been settled, the Government will consider the broader
range of issues associated with the delivery of universal access in an NBN
environment.
Maintaining a satisfactory voice telephony USO
The impact of the USO and the retail price controls means there is little
incentive on the (USO provider) Telstra, to improve service delivery to
consumers, including the provision of payphones. This has resulted in
criticism of the USO arrangements particularly from Telstra's competitors,
but also from consumers who argue they have limited choice of provider and
are not satisfied with the quality of service received.
Successive governments have regulated Telstra's behaviour, particularly
requiring Telstra to supply services in fulfilment of the USO and where
there is limited competition. Examples of such regulation include:
. the Customer Service Guarantee (CSG) which imposes requirements on
service providers to supply new service connections and fix faults
within specified periods of time and to keep appointments or pay the
customer specified financial damages;
. Priority Assistance which requires Telstra to provide enhanced services
to people with life threatening medical conditions;
. the Network Reliability Framework which requires Telstra to report to
the ACMA on performance of its network, and to fix poorly performing
local areas and individual services; and
. the Local Presence Plan which requires Telstra to maintain local
presence in regional areas.
Past practice has sought to minimise the negative impact on the industry of
these legislative requirements by providing substantial flexibility within
the regulations. The ACMA is responsible for administering the legislative
requirements and is required under section 4 of the Telecommunications Act
1997 (the Act) to regulate telecommunications in a manner that:
a) promotes the greatest practicable use of industry self-regulation; and
b) does not impose undue financial and administrative burdens on
participants in the Australian telecommunications industry, but does not
compromise the effectiveness of regulation in achieving the objects of
the Act, such as the object of providing a regulatory framework that
promotes the long-term interests of end-users.
The USO requires Telstra to only take 'reasonable steps' to fulfil the
Obligation. The details on what services will be supplied and in what
circumstances are set out in Part 2 of the Telecommunications (Consumer
Protection and Service Standards) Act 1999 and in Telstra's Universal
Service Obligation Standard Marketing Plan.
The Standard Marketing Plan and policy are prepared by Telstra and approved
by the ACMA. It is largely up to Telstra to decide what is 'reasonable'.
Controls on Telstra have been criticised as being ineffective. For example,
there have been numerous calls to improve the provisions relating to the
consultation with local communities before payphones are removed. These
concerns may have been heightened in view of the decline in the number of
payphones in recent years (see Figure 1).
[pic]Figure 1: Number of payphones in Australia
(Source: ACMA, Communications Report 2007-08)
The Customer Service Guarantee
The CSG provides for carriage service providers to pay customers
compensation for each working day that connections or fault rectifications
are delayed beyond the maximum CSG timeframes, or if they fail to keep an
appointment. Currently there is no other consequence if there is widespread
non-compliance with the CSG timeframes.
The Regional Telecommunications Independent Review Committee noted that
communities felt carriers were inappropriately using CSG waiver provisions
to avoid their CSG responsibilities[108]. In addition there is evidence
that some service providers have increased their overall damages payments
to consumers which would indicate a preference to pay the damages rather
than fix the service for the consumer[109]. Many of Telstra's competitors
argue that they have difficulty with the CSG requirements because they rely
on Telstra's network and Telstra to repair faults and make new connections.
Despite the interventions, service quality monitoring by the ACMA indicates
that service quality measures have been falling in recent years. For
example, overall compliance by Telstra with CSG provisions has been
steadily falling (see Figure 2).
Providers are also increasingly avoiding the CSG in many areas by offering
customers alternative services on the condition that the customer agrees to
waive rights to the CSG. Examples include Telstra's wireless local loop
service, Virgin, TransACT, and various VOIP based services.
[pic]Figure 2: Telstra's quarterly fault repair performance
(Source: ACMA, Telecommunications Performance Bulletin 2005-06-2006-07 and
Telecommunications Performance Data March 2008 quarter)
Summary
As customers increasingly switch to services supplied using technologies
other than Telstra's fixed local access network, Telstra will be faced with
lower revenues from this infrastructure, but will face ongoing costs (and
perhaps increased costs due to the aging nature of the network) to maintain
the network for remaining customers. It will be a challenge in this
environment to maintain service quality, and Telstra will have increasing
incentives to allow service quality to fall to avoid investing or expending
maintenance costs on a network that may be obsolete and stranded with the
NBN.
The recent report of the Regional Telecommunications Independent Review
Committee noted that the current arrangements for the USO are no longer
working effectively. Further, there are concerns that Telstra, in
particular, is failing to meet its obligations under the CSG with
compliance falling in recent years. Telstra could let its compliance slip
further during the rollout of the NBN.
2. Objectives
The objectives are:
. to ensure a basic voice service remains available across Australia;
. provide clarity and certainty to consumers and industry; and
. to ensure consumer safeguard regulations are effective and complied
with.
3. Options for achieving the desired objectives
Three options have been identified concerning the scope of universal
service arrangements and three options for funding during the interim
period while the NBN is being rolled out.
SCOPE OF UNIVERSAL SERVICE
The three options identified for interim (pre NBN) universal service
arrangements include:
A. expand the scope of universal service arrangements along the lines
suggested by the Regional Telecommunications Independent Review
Committee;
B. retain the current scope of the arrangements but tighten regulation
to ensure existing safeguards are effective in the transition to the
NBN; and
C. no change to existing arrangements.
Option A - Expand the scope of universal service regime along the lines
suggested by the Regional Telecommunications Independent Review Committee
A modified version of the Regional Telecommunications Independent Review
Committee proposal for Communications Service Standards would be developed.
This would involve amending the Telecommunications (Consumer Protection
and Service Standards) Act 1999 to enable the Minister to establish
Communications Service Standards in respect of voice telephony, mobile
voice telephony, payphones and broadband. Prior to the rollout of the NBN,
any communications service standard developed by the Minister would be
limited to broadband and mobile services and should not increase Government
demand for safety net programs such as the Australian Broadband Guarantee
and the Satellite Phone Subsidy Scheme. The objective would be to ensure
there was no reduction in services available under the current arrangements
and to minimise unnecessary costs due to investments in infrastructure
supporting broadband supply which would be obsolete with the NBN.
Legislative arrangements would also be made to provide that the current USO
arrangements for standard telephony (including mobile and broadband
services) would cease in areas declared by the Minister. This would be
confined to areas where competition was strong and a range of services were
being provided to consumers or where alternative arrangements are in place
with services available from the NBN. It would enable the obligation on
Telstra to be gradually wound back in the transition to the NBN.
This option would largely address the problems raised by the Regional
Telecommunications Independent Review Committee concerning the lack of
access by many rural and remote customers to broadband services.
Option B - Retain the current scope of the arrangements but tighten
regulation to ensure existing safeguards are effective in the transition to
the NBN
This option involves measures to better protect consumers in the transition
to the roll out of the NBN, including by:
. replacing current unenforceable arrangements which require Telstra to
only take reasonable steps to fulfil the USO with a legislated
requirement for Telstra to supply specified services when requested by
customers and make available public payphones;
. enabling the Minister to determine in enforceable subordinate instruments
the specific characteristics, terms and conditions of the services to be
supplied in fulfilment of the USO including connection and repair
periods, the reliability of services, payphone placement criteria and
performance benchmarks;
. providing for failure by the universal service provider to meet
performance benchmarks or service specifications or criteria to be a
contravention of a civil penalty provision, subject to a fine;
. enabling ACMA to review Telstra decisions on the supply of USO services
including removing payphones;
. legislating minimum performance standards in meeting the CSG with
significant penalties to promote compliance;
. introducing new timeframes for connections and repairs on Telstra where a
non-Telstra provider supplying a CSG service relies on Telstra to make
the connection or repair the service;
. clarifying the operation of provisions allowing providers to contract out
of the CSG to ensure that the provider may only do so with the customer's
express agreement;
. enabling the ACMA to issue infringement notices; and
. retaining the Priority Assistance requirement on Telstra and requiring
providers to either offer a Priority Assistance service or inform
customers of providers from whom the customer can purchase a priority
assistance service if they require it.
This option would strengthen the USO requirements to ensure no Australians
are worse off in the transition to the NBN environment and largely address
the growing problem of falling compliance with the CSG and prevent any
further decline in compliance.
Option C - No change to existing arrangements
Under this option no regulatory changes would be proposed at this stage but
major regulatory change would be required in the post NBN environment.
USO FUNDING OPTIONS
The three funding options are:
D. abolish the universal service levy and subsidy;
E. introduce a new funding model; and
F. roll-over existing funding.
Option D - Abolish the universal service levy and subsidy
Under this option all provisions for the USO levy and subsidy in the
Telecommunications (Consumer Protection and Service Standards) Act 1999
would be abolished.
Telstra would be required to fulfil the USO and there would be no provision
for any subsidy to Telstra.
This option would address the problem of smaller carriers having to meet
the burden of the USO when it is unclear that Telstra suffers any net cost
in meeting the USO and the USO subsidy helps entrench Telstra's monopoly.
Option E - Introduce a new funding model
This would involve the ACMA or the ACCC building a new USO costing model.
The last revision of the model by the former Australian Communications
Authority in 1996 cost around $2 million and took around two years to
complete. A new model is likely to be more complex in some areas (for
example, introducing a greater number of competitors) but less in other
areas (for example, it may not need a completely new module to account for
incoming calls and ensuring no double counting of revenue).
This option would address the problem of estimating the cost of the USO and
enable better informed decisions on funding.
Option F - Roll-over existing funding
The Minister would, after seeking advice from the ACMA, simply issue a
Determination for the 2009-2010 subsidy to be $145.1 million, the same as
in 2007-08 and 2008-09.
The issue of universal access would then be addressed once the detailed
operating arrangements of the NBN were finalised.
4. Impact assessment
Option A - Expand the scope of the universal service regime along the lines
suggested by the Regional Telecommunications Independent Review Committee
Benefits:
This option would help address the gap between rural and urban take-up of
broadband services. Australian Bureau of Statistics data shows that the
gap in broadband take up between very remote areas and the major cities is
between 10 and 20 per cent of households[110].
The Regional Telecommunications Independent Review Committee has commented
on the large benefits of broadband services to people in rural and remote
areas although it was unable to quantify these. There have been a large
number of studies recently, in Australia and elsewhere, demonstrating very
large benefits from broadband services both for consumers and
business.[111] Thus there are likely to be significant economic benefits
as well as equity benefits.
In summary, the main beneficiaries of Option A are:
. Consumers, particularly in rural areas, would have an increased
assurance of ongoing availability of broadband services;
. Telstra who would be able to be released from some legislative
requirements where competition is established;
. Telstra's competitors who would have a greater chance of competing in
rural and remote areas, particularly by supplying mobile and broadband
services in competition against Telstra's fixed network. Non-Telstra
providers would also have greater opportunities to receive subsidies
for programs such as the Australian Broadband Guarantee if the scope
of services being subsidised were widened.
Costs:
Any broadening of universal service arrangements or government funding
programs to provide further broadband services in rural and remote areas is
likely to be very costly. For example, subsidies payable under the current
Australian Broadband Guarantee (ABG) program are up to $6000 per customer
over three years and this is for a minimal broadband service. It is unclear
how many USO customers there are, but in the past the number has been as
high as 400 000. Using the lower figure would produce a one off cost
estimate of more than $400 million per year. In addition, some of the
costs of Telstra's existing network would remain even if customers switched
to ABG funded broadband services. In fact, Telstra's USO costs could
increase significantly as revenues are likely to fall more if Telstra has
to keep its network going for those customers that remain on its network.
Of more concern, however, is that any increased investment in broadband
services prior to the rollout of the NBN would become obsolete. The
Government has announced a higher standard of services of at least 12 Mbps
for the households outside the fibre network fibre to the premise footprint
of the NBN.
Option B - Retain the current scope of the arrangements but tighten
regulation to ensure existing safeguards are effective in the transition to
the NBN.
Benefits:
There is a strong level of concern about the quality of telephony services,
particularly in rural and remote areas. The findings of successive reviews
of telecommunications services in regional areas have highlighted this
issue. Further, the ACMA has drawn attention to the decline in standards
of service in recent years.
All carriers, including Telstra, are required to meet CSG requirements
including connection times and timeframes for repairing faults. For
example, Telstra failed to meet the ACMA standard of 90 per cent of faults
repaired within CSG timeframes in the December 2007, and the June and
September quarters of 2008[112]. In 2006, (the latest figures which are
available from the ACMA) Telstra took longer than the CSG requirements to
repair more 60 000 faults and paid out over $5 million in CSG compensation
payments to customers. Compliance has fallen further since then. The
Telecommunications Industry Ombudsman has also noted a large increase in
industry complaints in 2007-08[113].
Option B will strengthen the USO and CSG arrangements and signals the
Government's intention to ensure high quality telecommunications services
are provided in regional and rural Australia.
While no statistics are collected of Telstra's refusal to provide a service
on grounds that it was unreasonable, the Regional Telecommunications
Independent Review Committee has reported that the ACMA finds enforcement
problematic. It also notes that Telstra retains the right to make the final
decision on providing a payphone service. The Committee noted the concerns
expressed in submissions about lack of adequate consultation and the need
for improvement.
This option would also address these community concerns. Firstly, it will
clarify the obligations for both Telstra and customers. Secondly, it will
provide the opportunity for a review by the ACMA of the process for
Telstra's decisions on new connections and payphone locations, particularly
where a decision to remove a payphone is disputed.
By including the standards in the Telecommunications (Consumer Protection
and Service Standards) Act 1999 and specifying penalties there should be a
marked increase in compliance. By increasing civil penalties in some
cases, carriers will be more likely to comply with the obligations rather
than pay compensation. Under this proposal, by setting out clearly the
standards of service required customers would be given a clearer
understanding of their legitimate expectations on service quality and
providers would also be given greater certainty.
Importantly, option B does not exclude the implementation of Option A at a
future date.
Costs:
While Option B would provide more protection to customers, it should be
acknowledged this option does involve continued investment in, and
maintenance of, assets that are likely to be superceded by the rollout of
the NBN. The cost of maintaining the ageing copper network could exceed
the costs to customers of additional faults. For example, the costs could
greatly exceed the current CSG compensation payments of around $5 million.
While some assets, like copper cables and ducts, have a long economic life,
other assets such as electronic equipment, switching equipment and IT
assets, have shorter lives and so need to be replaced more frequently.
Option B would require Telstra, Optus and other carriers to maintain
compliance to meet the benchmarks for consumer safeguards on a national
basis. However, Telstra's compliance with remote fault repair times would
need to increase from around 86 per to 90 per cent (December 2008 (latest
figures available)[114] ). Based upon the December 2008 figures,
compliance with new connection times will have to be brought up, as only
Optus was the only carrier that met the ACMA informal benchmark CSG
standard of more than the 90 per cent. Telstra (88 per cent) and AAPT (82
per cent) did not meet the informal benchmark.
.
There would be additional resource costs for both the ACMA and the
carriers, because they would have to devote more resources to ensuring
compliance. In addition, civil penalties may add to the current
compensation fees of $5 million unless carriers change their behaviour.
Telstra has been in discussions with the Department about compliance and
reporting obligations over the past few years. The main cost increases for
Telstra will be potential civil penalties if Telstra does not meet
compliance benchmarks and the costs of maintaining the copper network which
will be progressively overbuilt by the NBN. It is not possible to quantify
these costs, and they will depend on the degree to which the new
regulations will require services to be delivered at standards higher than
those currently achieved. A further RIS will be prepared for the
legislation to implement these arrangements, which will better address
these costs, after the detailed regulatory changes have been determined.
Option C - No change to existing arrangements
Benefits:
There are few benefits to this Option. Consumers will not be protected by
strengthened safeguards, which are proposed in Option B.
This option leaves decisions on the USO to be taken in the context of the
Convergence Review in 2010 which was outlined in the discussion paper.
Costs:
Option C risks a fall in service quality for customers covered by the USO
using Telstra's voice telephony and payphones. Telstra may seek to minimise
maintenance costs of the copper as the NBN is rolled out. This may impact
badly on customer services. The current arrangements may not effectively
prevent this.
Option D - Abolish the universal service levy and subsidy
Benefits:
Under this option carriers would no longer be required to contribute to the
levy used to subsidise Telstra's USO costs.
There will be administrative and regulatory burden savings in abolishing
the Universal Service Fund and the collection of contributions from around
180 carriers, however the industry would still have to file annual returns
for other purposes.
The abolishment of the USO levy has received much support in recent years
from Telstra's competitors. It should be noted that while carriers support
the industry levy being abolished, many support government funding of the
USO. This option has also been supported by the ACMA and was recommended
in the Department's 2004 Review of USO arrangements, although with
conditions on the scope of the USO. It is consistent with practices in a
number of other countries, including Germany and Finland that have
significant rural populations and topographical cost impediments like
Australia.
The cost to Telstra may be at least partly addressed by the argument that
Telstra gains substantial intangible benefits from being the USO provider.
These include: life cycle effects, brand enhancement, payphone advertising,
volume discounts, network effects and non-USO services provided to USO
customers. As noted above, these were estimated in 1999-2000 as being in
the range of $36 million - $72 million[115].
The option also addresses an argument by Telstra's competitors that the USO
subsidy helps entrench Telstra's monopoly. At present, in USO areas,
competitors have to compete against a subsidised Telstra. Telstra's
intangible benefits also make it harder for other firms to compete against
it. These add to Telstra's natural advantages of economies of scale and
size. Other carriers consider they are penalised by having to subsidise
Telstra which has these natural advantages. It is not possible to estimate
the competitive advantage that the USO provides to Telstra but it is
possible that competitors could provide non-copper based services to some
USO customers at a cheaper price than Telstra's copper fixed line services.
This will become more likely as the NBN is rolled out.
Costs:
Under this option Telstra would no longer receive around $50 million in
subsidy payment from other carriers. This loss would in turn impact on
Telstra's customers, shareholders and employees The customers and
shareholders of the other carriers would gain an equal amount.
Customers could be further disadvantaged if Telstra used the loss of
payments as a pretext for reducing its commitment to the USO. Telstra
could respond by claiming the provision of many loss making services as
'unreasonable' and test the enforcement framework. Additionally, if the
net cost of the USO increased, in the absence of the USO funding mechanism,
Telstra would bear the risk of meeting these additional costs.
This option may open up once again the arguments about the real cost of the
USO. We do not know the true cost and it could be higher than $145
million. Telstra is likely to argue that this option is particularly
inequitable and, if anything, the subsidy should be increased.
The argument about intangible benefits is also not conclusive and on
balance, it is not clear that Telstra currently enjoys net benefits from
the USO.
Although some countries do not provide funding arrangements for their USOs
many do, including the United States and Canada which have large rural
areas. Telstra claims in its submission to the Government's 2007 Review of
the USO that, in addition, most regulators such as those in the US, New
Zealand and Japan have rejected offsetting intangible benefits against USO
costs because they recognise that they are difficult to measure and are
small in size[116].
Option E - Introduce a new funding model
Benefits:
A new USO cost model would enable the actual cost of the USO, including
those intangible benefits that can be substantiated, to be ascertained.
This would enable policy decisions to be made with more certainty.
Only Telstra has advocated the development of a new cost model although the
Department's 2004 review of the USO noted that a new model was required if
a costing approach was to be used in future.
A new cost model would provide evidence as to whether the USO cost has
increased or decreased relative to the level found in the 1997-98 run of
the last cost model - $548 million.
Costs:
There are a number of difficulties with building a new cost model. The
last model that was developed in 1995 cost $2 million and took two years to
complete. Any new model may only be useful for a relatively short period
because of the changes in the industry structure as a result of the rollout
of the NBN.
One of the main obstacles to a new model is the likely difficulty of
obtaining consensus within the industry on key model inputs. The history
of cost modelling has been replete with argument over such inputs including
the Weighted Average Cost of Capital, the valuations of assets, the
allocation of joint and common costs and the required sample size of
exchanges, and the appropriate allocation of risk.
Unless agreement can be achieved within the industry, and the ACMA is
accepted as the umpire, there is little likelihood of the cost model
approach being widely accepted.
Option F - Roll-over existing funding
Benefits:
This option leaves future USO arrangements to be decided once further
detail is known of NBN arrangements. Thus it avoids any costs associated
with changing arrangements in the meantime.
There would be a small reduction in administration costs for the ACMA as it
would not have to calculate a different total subsidy figure. However, the
levy for each carrier would still have to be calculated from their eligible
revenue statements. (Note that part B of the RIS recommends that only large
carriers pay the levy in future).
Costs:
Telstra's competitors would continue paying a levy which they consider too
high and Telstra would receive a subsidy that it considers too low.
Some or all of the measures under Option B will still be required to ensure
that compliance does not continues to fall.
5 Consultation
In April 2009 the Government called for submissions on its National
Broadband Network: Regulatory Reform for 21st Century Broadband discussion
paper. The issues covered in this RIS formed Chapter 4 of that discussion
paper. All the options except some elements of Option B are raised there.
The discussion paper elicited over 130 submissions from a wide range of
industry carriers, consumer groups, State and local government bodies and
individuals.
The main views expressed in the submissions were:
Scope of Universal Service
Most of the industry support the USO continuing in the interim but consider
that changes will be necessary after the NBN rollout. Industry stakeholders
noted that:
. the NBN could take responsibility for the USO;
. the USO could be shared between NBN Co and Telstra;
. new arrangements could be established such as government funding;
. The USO could be reduced to a safety net.
Telstra opposes any extension of the obligation - rather it supports
reducing regulations associated with the USO. Some carriers supported the
Communications Service Standard approach but others see the USO being
gradually phased out as the NBN is rolled out (Competitive Carriers
Coalition) or restricted to providing a safety net (Hutchison).
There was fairly widespread support among consumer groups for the
Communications Service Standard approach as well as from some State
Governments. The ACCC argued that the Communications Service Standard could
be a tool for reducing the regulatory burden in the area of consumer
safeguards, by removing unnecessary regulation and/or streamlining
regulatory requirements such as the Network Reliability Framework and the
Customer Service Guarantee.
The Communications, Electrical and Plumbing Union, however, opposed this
approach noting the cost and likelihood of insufficient funding. However,
it also believed the NBN had overtaken the concept of the Communications
Service Standard and is concerned that the Communications Service Standard
might not provide the current level of certainty to consumers, at least for
those services now included in the USO. The Communications Alliance
supports research on the appropriateness of consumer protections before the
obligation is broadened.
Consumer groups generally favour the Communications Service Standard. The
Australian Telecommunications Users Group favoured both a voice and a
broadband guarantee.
Customer Service Guarantee
Telstra and Australian Telecommunications Users Group supported
strengthening the CSG with significant penalties. The Tasmanian Government
opposed it. TransACT supports the CSG being the sole regulatory safeguard.
Consumer groups supported introducing CSG performance benchmarks. This
proposal was also supported by Telstra. Other providers tended to oppose
introducing CSG performance benchmarks. In many cases they do not have
control over repairs to services because Telstra is the underlying carrier.
The proposal to require Telstra to meet CSG timeframes for services
provided at a wholesale level to other providers should address this
concern.
Option B was not mentioned in the discussion paper and so was not commented
on. However, this option is consistent with the main argument of the
submission to retain the current arrangements in the lead-up to the NBN.
The proposal to tighten the USO and CSG arrangements is a reasonable
response to the potential risk of Telstra running down its network.
The ACMA, which will implement the measures in Option B, has been
consulted. It is in favour of the measures in Option B although would seek
additional funding to match the additional administrative work involved.
It also supports Option D
6. Recommendation
Scope of Universal Service
Option B is recommended because it is critical to protect consumers as the
NBN is progressively rolled out and new universal service arrangements can
be developed.
The changes proposed should provide more certainty to consumers and greater
clarity of their rights because they will be less reliant on Telstra's
decisions as to what it deems is reasonable. Consumers should also gain
more confidence in that they can seek a review by the ACMA of Telstra's USO
decisions that adversely affect them. It is acknowledged that this option
will impose some extra costs on carriers, particularly Telstra, in ensuring
compliance with USO and CSG requirements. It is also not possible to
quantify the impacts on customers of the benefits of greater carrier
compliance nor the costs on the USO provider.
The main reason Option A is not recommended is because of the potential
large increase in cost. The costs could be in excess of $1 billion while
the benefits are uncertain. There is also a large risk that network
upgrades could become obsolete with the rollout of the NBN and this would
result in considerable costs due to wasted investment.
The costs of Option B are likely to be much smaller than those of Option A,
or negligible if Telstra alters its behaviour. Possible civil penalties may
add to the current compensation payments of $5 million or alternatively,
there will be costs to Telstra of bringing compliance up to standard to
avoid civil penalties. In total these costs should be of an order of
magnitude less than those of Option A and the costs will be offset by
increases in benefits to consumers.
Option C was not supported as it would allow service quality to continue to
fall. Further it would expose consumers to further declines in service
quality should Telstra allow service quality to decline as the NBN is
rolled out. Should this occur, consumers would face considerable costs due
to an inability to get a new service connected, or an existing service
repaired, in a reasonable timeframe.
7. Implementation and review of the preferred option
The proposed legislative changes are designed to apply for the interim
period while the NBN is being rolled out. The legislative arrangements for
tightening consumer protection measures will be implemented immediately.
The ACMA will be required to administer the changes proposed in Options B.
As noted above, Option B will entail some resourcing issues for the ACMA.
The ACMA has estimated the cost at about $1.5 million per year.
Future USO arrangements will be considered once the detailed operating
arrangements for the NBN have been settled in early 2010.
PART B - DEREGULATION OF USO LEVY, CARRIER LICENCE CHARGES AND NATIONAL
RELAY SERVICE LEVY ARRANGEMENTS
1. Issues which give rise to the need for action
As noted above, the current USO is financed by a levy on all carriers,
including Telstra. The total levy is paid as a subsidy to Telstra for
fulfilling the USO.
Under section 20 of the Telecommunications (Consumer Protection and Service
Standards) Act 1999, all carriers must lodge an annual eligible revenue
return which provides information on the carrier's 'eligible revenue'.
'Eligible revenue' is used to determine each carrier's levy contribution.
It is also used to determine carrier payments for the National Relay
Service (NRS) levy and the variable component of the carrier licence
charge.
The telecommunications industry is highly concentrated. Of
approximately 180 carriers in the telecommunications industry around
150 carriers lodged eligible revenue in 2007-08 of less than $10
million and around 40 carriers lodged returns with eligible revenue
of zero. This compares with around 10 carriers with eligible
revenue of greater than $100 million.
Preparation of the eligible revenue returns is a considerable
expense for smaller carriers. It is estimated that it costs at
least $7000 just for auditing the returns. Given that there are
around 30 carriers with eligible revenue of zero, and around 70
carriers with eligible revenue of less than $100 000, this is a
significant impost on them. Audit costs alone would amount to over
$1 million per annum but preparation of the returns could add
significantly to this.
The ACMA believes that the burden of the levies and the reporting
process is a factor in the high level of non-compliance in ACMA
overall reporting requirements. Around 95 per cent of non-
compliance is due to small carriers.
Currently there is a threshold of $10 million set for payment of the
National Relay Service Levy.
2. Objective
The objective is to reduce the administrative costs involved in preparing
the 'eligible revenue' returns and to remove the USO and NRS levy burden on
a large number of smaller carriers. This should encourage more competition
in the industry.
3. Options for achieving the desired objective
The four options identified for the USO levy, carrier licence charges and
NRS levy arrangements include:
A. exempt carriers from carrier licence fees and the costs of the USO and
NRS if their revenues are less than $10 million.
B. exempt carriers from carrier licence fees and the costs of the USO and
NRS if their revenues are less than $25 million.
C. exempt carriers from carrier licence fees and the costs of the USO and
NRS if their revenues are less than $50 million.
D. no change to the existing arrangements.
Option A - Exempt carriers from carrier licence fees and the costs of the
USO and NRS if their revenues are less than $10 million.
Under this option telecommunications legislation would be amended including
section 20 of the Telecommunications (Consumer Protection and Service
Standards) Act 1999 to provide an exemption for carriers with revenues of
less than $10 million.
Option B - Exempt carriers from carrier licence fees and the costs of the
USO and NRS if their revenues are less than $25 million.
This would work in a similar manner to option A except the cut off would be
$25 million. This would align the revenue threshold more closely with the
reporting threshold set in the Corporations Act 2001.
Option C - Exempt carriers from carrier licence fees and the costs of the
USO and NRS if their revenues are less than $50 million.
This would work in a similar manner to option A except the cut off would be
$50 million.
Option D - No change to the existing arrangements
Under this option there would be no change to the existing carrier licence
fees, USO levy and NRS levy arrangements.
4. Impact assessment
Option A - Exemption for carriers earning under $10 million
Benefits
Under this option around 150 carriers (based on eligible revenue returns
for 2007-08) out of a total of around 180, would be exempt from providing
their eligible revenue returns. This would remove a significant impost on
these carriers. It should then enable these firms to better compete in the
marketplace.
There may be a saving in administrative costs for the ACMA.
A $10 million threshold would bring all the levies in line with the
National Relay Service.
Costs
On the basis of the 2007-08 USO subsidy of $145 million and the Carrier
Licence Charge of $37 million, approximately 32 carriers with eligible
revenue in excess of $10 million would have their levy payments increased
by approximately 0.6 per cent.
Telstra would have to bear the biggest absolute increase in USO levy
(around $560 000) and Carrier Licence Charge (around $140 000). For Optus
the increases would be around $170 000 for the USO levy and $42 000 for the
Carrier Licence Charge.
Option B - Exemption for carriers earning under $25 million
Benefits
Under Option B around 160 carriers (based on eligible revenue returns for
2007-08) would be exempt from providing their eligible revenue returns.
Only the largest 22 carriers would have to file returns and make levy
payments. Thus a further 10 or 11 firms would not have to provide the
returns or pay the levies.
The saving in administrative costs for the ACMA would be similar to those
under Option A as would the boost to competition.
A $25 million exemption would align more closely with the reporting
processes mandated for Australian business under federal government
legislation and regulation. It will allow the ACMA to align its
requirements with section 292 of the Corporations Act 2001 so that a
company required to submit a return under that section would be required to
submit a return to the ACMA. This could streamline the reporting process
for the companies involved and for the ACMA.
Costs
On the basis of the 2007-08 USO subsidy of $145 million and the Carrier
Licence Charge of $37 million carriers with eligible revenue in excess of
$25 million would have their levy payments increased by approximately
1.33 per cent.
Telstra will have to bear the biggest absolute increase in USO levy (around
$1.2 million) and Carrier Licence Charge (around $310 000). For Optus the
increases would be around $360 000 for the USO levy and $94 000 for the
Carrier Licence Charge.
Option C - Exemption for carriers earning under $50 million
Benefits
Around 166 carriers (based on eligible revenue returns for 2007-08) would
be exempt from providing their eligible revenue returns and the USO levy
and Carrier Licence Charge. Compared with Option B, six further carriers
would be relieved of providing the returns and paying the levies.
The saving in administrative costs for the ACMA and the impact on
competition in telecommunications would be similar to that of Options A and
B.
Costs
Under this option the 16 major carriers would have to pay an increase of
2.13 per cent in their USO levy and Carrier Licence Charges based on 2007-
08 figures.
For Telstra, the increases would be around $1.970 million in USO levy and
around $500 000 in Carrier Licence Charges. For Optus the increases would
be around $600 000 for the USO levy and $151 000 for the Carrier Licence
Charge.
Option D - No change to the existing arrangements
Benefits:
This option would more closely meet the object set out in s.8A (e) of the
Telecommunications (Consumer Protection and Service Standards) Act 1999,
which states that providers of telecommunications services should
contribute, in a way that is equitable and reasonable, to the funding of
the USO.
Costs:
The current arrangements impose an unnecessary burden on smaller carriers -
for example, more than 30 carriers have zero eligible revenue and yet have
to provide eligible revenue returns. More than 60 have an eligible revenue
less than $100 000 for which the cost of lodging the return represents a
significant proportion of their total revenue.
This option would not address the complaints of industry that the existing
arrangements are inequitable because small carriers are subsidising Telstra
and entrenching Telstra's monopoly position in USO areas.
5. Consultation
The option of a $10 million exemption was raised in the NBN discussion
paper although comment was not specifically sought on a particular amount,
only whether smaller carriers should be exempt. Some submissions supported
Telstra funding the USO itself (for example, AAPT and Optus). Of the other
submitters, some supported industry funding (for example the
Communications, Electrical and Plumbing Union), some government funding
(for example Vodafone and Hutchison and the Australian Telecommunications
Users Group) and others supported both industry and government (for
example, the Australian Computer Society). None specifically raised the
issue of a funding threshold.
The ACMA has suggested a funding threshold, and favours a $25 million cut
off.
6. Recommendation
There is little between Options A, B or C. All three options will enable
administrative cost savings and remove a significant burden on small
carriers without a significant impact on the remaining large carriers.
Option B is recommended because the cut off of $25 million would align more
closely the revenue threshold more closely with the reporting threshold set
in the Corporations Act 2001.
7. Implementation of preferred option
It is envisaged that the proposed changes would apply from the eligible
claim period 2009-10. The levy calculations are made after the end of each
financial year.
ABBREVIATIONS
The following abbreviations are used in this explanatory memorandum:
ACCC: Australian Competition and Consumer Commission
ACMA: Australian Communications and Media Authority
AIA: Acts Interpretation Act 1901
Bill: Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Bill 2009
BSA: Broadcasting Services Act 1992
Consumer Protection Act Telecommunications (Consumer Protection and
Service Standards) Act 1999
CSG: Customer service guarantee
CSP: Carriage service provider
Interception Act: Telecommunications (Interception and Access)
Act 1979
LIA Legislative Instruments Act 2003
Minister: Minister for Broadband, Communications, and the Digital Economy
NTN Sale Act: National Transmission Network Sale Act 1998
Radcom Act Radiocommunications Act 1992
Tel Act: Telecommunications Act 1997
TPA: Trade Practices Act 1974
Tribunal: Australian Competition Tribunal
USO: Universal service obligation
VOIP: Voice over Internet Protocol
NOTES ON CLAUSES
Clause 1 - Short title
Clause 1 provides that the Bill, when enacted, may be cited as the
Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Act 2009.
Clause 2 - Commencement
Clause 2 of the Bill provides for the commencement of this Bill.
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 Bill
receives the Royal Assent.
Parts 2, 3 and 8 of Schedule 1 will commence on the day after this Bill
receives the Royal Assent.
Parts 4, 5, 6 and 7 of Schedule 1 of the Bill will commence on 1 July 2010.
The operation of each of these Parts is dependent on a number of
legislative instruments coming into force. Delaying the commencement of
these Parts will allow time for those instruments to be drafted and, in
reliance on section 4 of the AIA, to be made in advance of the amendments
made by those Parts to the Tel Act and the Consumer Protection Act.
Division 1 of Part 1 of Schedule 1 of the Bill would commence on the day on
which the Bill receives the Royal Assent.
Division 2 of Part 1 of Schedule 1 of the Bill would commence immediately
after a functional separation undertaking comes into force under Part 9 of
Schedule 1 to the Tel Act (see item 22 of Schedule 1). That Division makes
changes to the Tel Act and the TPA that are necessary as a consequence of
the commencement of a functional separation undertaking. The Minister is
required to announce, by notice published in the Gazette, when a final
functional separation undertaking comes into force.
Division 2 of Part 1 of Schedule 1 of the Bill would commence immediately
after an undertaking comes into force under proposed section 577A of the
Tel Act (see item 21 of Schedule 1). That Division makes changes to the
Tel Act and the TPA that are necessary as a consequence of the commencement
of an undertaking under proposed section 577A. The Minister is required to
announce, by notice published in the Gazette, when such an undertaking
comes into force.
Clause 3 - Schedule(s)
Clause 3 provides that each Act that is specified in a Schedule to the Bill
is amended or repealed as set out in that Schedule and any other item in a
Schedule has effect according to its terms. There is one Schedule to the
Bill which amends the Tel Act, the TPA, the Consumer Protection Act and the
NTN Sale Act.
Schedule 1-Amendments
Part 1-Amendments relating to Telstra
Part 1 of Schedule 1 of the Bill makes a number of amendments to the Radcom
Act, the Tel Act and the TPA to address the current structure of the
telecommunications sector.
Division 1-Amendments commencing on the day after this Act receives the
Royal Assent
Radiocommunications Act 1992
Item 1 - After subsection 58(1)
Item 1 amends subsection 58 of the Radcom Act by inserting proposed
subsection 58(1A).
Subsection 58(1) deals with spectrum licence allocation by the ACMA
following conversion of an apparatus licence into a spectrum licence.
Proposed subsection 58(1A) makes it clear that spectrum licence allocation
pursuant to subsection 58(1) of the Radcom Act is subject to the provisions
in proposed section 577J of the Tel Act. Proposed section 577J limits the
allocation of certain spectrum licences to Telstra and is discussed under
item 21 below.
Item 2 - At the end of section 60
Item 2 amends section 60 of the Radcom Act by inserting proposed
subsection 60(15).
Section 60 deals with procedures for spectrum licence allocation by the
ACMA.
Proposed subsection 60(15) makes it clear that any spectrum licence
allocation procedures determined by ACMA under section 60 would be subject
to the provisions in proposed section 577J of the Tel Act.
Item 3 - At the end of section 62
Item 3 amends section 62 of the Radcom Act by inserting proposed
subsection 62(4).
Section 62 deals with the allocation of spectrum licences by the ACMA.
Proposed subsection 62(4) makes it clear that any spectrum licence
allocation by the ACMA under section 62 would be subject to the provisions
in proposed section 577J of the Tel Act.
Item 4 - At the end of section 68
Item 4 amends section 68 of the Radcom Act by inserting proposed
subsection 68(5).
Section 68 authorises third party use of a spectrum licence subject to
conditions specified under that section.
Proposed subsection 68(5) makes it clear that third party use of a spectrum
licence under section 68 is subject to the provisions in proposed section
577K of the Tel Act. Proposed section 577K puts limits on the use of
certain spectrum licences by Telstra and is discussed under item 21 below.
Item 5 - Subsection 85(1)
Section 85 of the Radcom Act deals with trading of spectrum licences.
Item 5 amends subsection 85(1) to make the assignment or dealing with
spectrum licences subject to proposed section 577L of the Tel Act. Proposed
section 577L limits the assignment of certain spectrum licences to Telstra
and is discussed under item 21 below.
Telecommunications Act 1997
Item 6 - Section 7
Item 6 inserts a proposed definition of 'designated part of the spectrum'
in section 7 of the Tel Act referring to proposed section 577H of the Tel
Act. This definition is discussed below under the explanatory note for
proposed section 577H under item 21.
Item 7 - Section 7
Item 7 inserts a proposed definition of 'draft functional separation
undertaking' in section 7 of the Tel Act by reference to proposed Division
2 of Part 9 of Schedule 1. Proposed Division 2 of Part 9 of Schedule 1
includes provisions dealing with the contents of a draft final functional
separation undertaking, the provisions it must contain and the principles
with which it must comply.
Item 8 - Section 7
Item 8 inserts a proposed definition of 'final functional separation
undertaking' in section 7 of the Tel Act by reference to proposed Division
2 of Part 9 of Schedule 1. Proposed Division 2 of Part 9 of Schedule 1
includes provisions dealing with the contents of a final functional
separation undertaking, the provisions it must contain and the principles
with which it must comply.
Item 9 - Section 7
Item 9 inserts a proposed definition for 'hybrid fibre-coaxial network'
under section 7 of the Tel Act. This new definition underpins the proposed
amendments to be made to the Tel Act by Part 1 of this Bill which enable
the ACCC to accept an undertaking by Telstra in relation to control of
hybrid fibre-coaxial networks. The proposed definition is not restricted
to Telstra's current hybrid fibre-coaxial network, but could also apply to
any such network Telstra builds in future or hybrid fibre-coaxial networks
owned by other parties.
Item 10 - Section 7
Item 10 inserts a proposed definition of 'internet carriage service' in
section 7 of the Tel Act.
Item 11 - Section 7
Item 12 - Section 7
Item 13 - Section 7
Item 14 - Section 7
Items 11 to 14 insert proposed definition of 'radiocommunications device',
'spectrum', 'spectrum licence' and 'subscription television broadcasting
licence' in section 7 of the Tel Act, adopting the same meaning for those
terms as they have in the Radcom Act.
Item 15 - Before subsection 69(7)
Section 69(1) of the Tel Act and its related provisions under section 69
authorise ACMA to issue a remedial directions to a carrier that is
contravening, or has contravened, a condition of its carrier licence.
Item 15 amends section 69 by inserting proposed subsection 69(6B).
Proposed subsection 69(6B) prevents current subsection 69(1) from applying
to the condition set out in proposed clause 84 of Schedule 1 (which deals
with control by Telstra of certain spectrum licences).
The effect of proposed subsection 69(6B) is that the ACMA would not be
authorised to issue a remedial direction to Telstra in the event it
contravened proposed clause 84 of Schedule 1. The reason for this
restriction is that it is intended that only the ACCC (and the Minister,
where appropriate) will have authority to take action against Telstra for
breach of proposed clause 84 of Schedule 1. The condition in proposed
clause 84 of Schedule 1 is associated with amendments proposed under part 1
of this Bill to address Telstra's level of dominance in telecommunications
markets and the negative impact this has had on the development of
effective competition in the telecommunications industry. It is therefore
a matter for which it is appropriate the ACCC be given regulatory
responsibility.
Item 16 - Before subsection 70(4)
Subsection 70(1) of the Tel Act authorises the ACMA to issue formal
warnings to carriers that have contravened a condition of their carrier
licence.
Item 16 amends section 70 by inserting proposed subsection 70(3B).
Proposed subsection 70(3B) indicates that current subsection 70(1) does not
apply to the condition set out in clause 84 of schedule 1. The effect of
proposed subsection 70(3B) is that the ACMA would not be authorised to
issue a formal warning to Telstra in the event it contravened proposed
clause 84 of schedule 1. The reason for this restriction is the same as
that outlined under the explanatory note under item 15 above.
Item 17 - After paragraph 564(3)(b)
Item 17 amends section 564 by inserting proposed paragraph 564(3)(ba).
Under current subsection 564(3) the ACMA is not entitled to apply for an
injunction in relation to a contravention a carrier licence condition or
service provider rule listed under that subsection.
Proposed paragraph 564(3)(ba) adds the licence condition under proposed
clause 84 of schedule 1 to the list of licence conditions and service
provider rules in subsection 564(3). This means the ACMA would not be
entitled to apply for an injunction in relation to a contravention of
clause 84 of schedule 1. The reason for this restriction is outlined the
same as that outlined under the explanatory note under item 15 above.
Item 18 - Subsection 564(3) (after note 2)
Item 18 adds a proposed note to section 564 in relation to proposed
paragraph 564(3)(ba) (under item 17 above) to assist the reader.
Item 19 - After paragraph 571(3)(b)
Item 19 amends section 571 by inserting proposed paragraph 571(3)(ba).
Under current subsection 571(3) ACMA is not entitled to institute a
proceeding for recovery of a pecuniary penalty in relation to a
contravention of a carrier licence condition or service provider rule
listed under that subsection.
Proposed paragraph 571(3)(ba) adds the licence condition in proposed clause
84 of schedule 1 to the list of licence conditions and service provider
rules in subsection 571(3). This means ACMA would not be entitled to
institute a proceeding for recovery of a pecuniary penalty in relation to a
contravention of the carrier licence condition in proposed clause 84 of
schedule 1. The reason for this restriction is the same as that outlined
in the explanatory note under item 15 above.
Item 20 - Subsection 571(3) (after note 2)
Item 20 adds a proposed note to section 571 in relation to proposed
paragraph 571(3)(ba) (under item 19 above) to assist the reader.
Item 21 - After Part 32
Item 21 inserts proposed Part 33 into the Tel Act.
Proposed Part 33-Voluntary undertakings given by Telstra
The provisions under Part 33 are intended to address the level of Telstra's
vertical and horizontal integration. Telstra's high-level of integration
has hindered the development of effective competition in the Australian
telecommunications market. The Government intends to correct this unique
market structure, by introducing a set of measures designed to promote
competition across the various telecommunications platforms while providing
Telstra with the flexibility to choose its future path...
Part 33 will prevent Telstra from acquiring specified bands of spectrum,
which could be used for advanced wireless broadband services, unless it
provides undertakings accepted by the ACCC, to structurally separate,
divest its hybrid fibre coaxial cable network and divest its interests in
Foxtel.
If the Minister is satisfied that a structural separation undertaking given
by Telstra is sufficient to address concerns about the degree of Telstra's
power in telecommunications markets, the Minister may remove either or both
of the requirements for Telstra to divest its hybrid fibre coaxial cable
network and divest its interests in Foxtel.
Proposed Division 1-Introduction
Proposed section 577 Simplified Outline
Proposed section 577 provides a simplified outline of proposed Part 33 to
assist the reader.
Proposed Division 2-Structural separation
Proposed section 577A Acceptance of undertaking about structural
separation
Proposed subsection 577A(1) allows the ACCC to accept a written undertaking
given by Telstra regarding structural separation. Structural separation is
regarded, under proposed paragraph (1)(a), as Telstra, at all times after a
specified day, ceasing to supply fixed-line carriage services to retail
customers using a telecommunications network over which Telstra is in a
position to exercise control. Additionally, Telstra must take all
reasonable steps to ensure that a company over which Telstra is in a
position to exercise control will not supply fixed-line carriage services
to retail customers using such a telecommunications network.
A 'fixed-line carriage service' is defined in proposed subsection 577A(14)
to mean a carriage service supplied using a line to premises occupied or
used by an end-user.
The meaning of 'control' and 'control of a company' for the purposes of
proposed Part 33 is addressed in proposed sections 577N and 577P
respectively.
Under proposed paragraph 577A(1)(b), Telstra is required, under a
structural separation undertaking, to set out specified action it will take
and/or refrain from taking in order to comply with the structural
separation undertaking. It is intended that Telstra would set out, in any
structural separation undertaking purported to be given under section 577A,
the action it will take or refrain from taking, in order to achieve
structural separation as described under paragraph 577A(1)(a). This may
involve a series of steps in the lead up to full structural separation and
milestones and timeframes for achieving each of those steps.
There are a number of ways in which Telstra might propose to undertake
structural separation under proposed subsection (1). A few examples are:
. Telstra may elect to facilitate the transfer of the provision of fixed-
line carriage services to its retail customers to another carriage
service provider, over which Telstra is not in a position to exercise
control.
. Telstra may establish a new company to supply fixed-line carriage
services to its retail customers and divest enough of its interests in
that company to ensure that it is no longer in a position to exercise
control of that company.
. Telstra may elect to progressively migrate the traffic of its retail
customers to another national network for the provision of fixed-line
carriage services, such network being a network over which Telstra is
not in a position to exercise control
Proposed subsection 577A(2) sets out the matters the ACCC must have regard
to when deciding whether to accept a structural separation undertaking.
Under proposed paragraph 577A(2)(a), the Minister can set out matters that
the ACCC must have regard to in deciding whether to accept a structural
separation undertaking. Proposed paragraph 577A(2)(b) requires the ACCC to
have regard to such other matters that it considers relevant.
Proposed subsection 577A(3) authorises the Minister to set out the matters
in writing that the Minister will require the ACCC to consider under
proposed paragraph 577A(2)(a). For the avoidance of doubt, an instrument
under proposed subsection (3) is not a legislative instrument (subsection
577A(13)). This reflects the fact that a direction from a Minister to any
person is not subject to disallowance (see section 44 of the LIA) and the
fact that the instrument made by the Minister under proposed subsection
577A(3) operates like a direction to the ACCC to consider the specified
matters.
Proposed subsection 577A(4) sets out the day to be specified by Telstra in
an undertaking under proposed subsection (1) as the day by which Telstra
will at all times meet the requirements of paragraphs 577A(1)(a) and
577A(1)(b). That day is 1 July 2018 or another day, if specified by the
Minister by legislative instrument.
Proposed subsection 577A(5) indicates that the undertaking must be
expressed to be an undertaking under section 577A, so that when the ACCC
receives the undertaking there can be no doubt as to whether the
undertaking was intended to be given in accordance with proposed section
577A.
Proposed subsection 577A(6) provides that the undertaking comes into force
when it is accepted by the ACCC. Until the undertaking is accepted by
ACCC, there is no obligation upon Telstra to comply with the undertaking.
Once the undertaking is accepted by the ACCC, Telstra must comply with the
undertaking and will become subject to proposed section 577G which deals
with Telstra's compliance with the undertaking.
Proposed subsection 577A(7) provides that the undertaking may not be
withdrawn. This provision is aimed at ensuring that careful consideration
has been given to the matters proposed in the undertaking before it is
given, in the knowledge that if the undertaking is accepted by the ACCC,
the undertaking will become final. Given that the matters proposed under
the undertaking are likely to have a significant impact on the
telecommunications industry and the acceptance of the undertaking by the
ACCC would have the effect of triggering the operation of a number of
provisions proposed under this Bill there is a need for certainty and
therefore a need for the undertaking to be final (note: the undertaking can
be varied to a limited degree - see notes for proposed section 577B).
Proposed subsection 577A(8) provides that the ACCC must publish the
undertaking on its website as soon as practicable after it comes into
force. This provision recognises that it is important to publicise the
undertaking as soon as practicable, given the potential impact it will have
on the telecommunications industry.
Proposed subsection 577A(9) confirms that Part 9 of Schedule 1 to the Tel
Act does not, by implication, limit the matters that may be included in an
undertaking under proposed section 577A. Part 9 deals with the functional
separation of Telstra, which is a different separation model to the model
of structural separation referred to under section 577A. However, there
should be no implication that any model proposed under an undertaking
provided in accordance with subsection 577A(1) cannot include similar
matters to those set out in Part 9.
Proposed subsection 577A(10) authorises the Minister to exempt from the
structural separation undertakings made under 577A(1) a fixed-line carriage
service which has been set out in a legislative instrument. Proposed
subsection 577A(14) defines a 'fixed-line carriage service'. This provision
will enable flexibility to exempt certain fixed-line carriage services from
the structural separation requirements, if appropriate to do so.
Proposed subsection 577A(11) authorises the Minister to exempt from the
structural separation undertakings made under 577A(1) a telecommunications
network which has been set out in a legislative instrument. This provision
will enable flexibility to exempt certain telecommunications networks from
the structural separation requirements, if appropriate to do so.
Proposed subsection 577A(12) requires the Minister to cause a copy of his
or her instrument under proposed subsection 577A(3) to be published on the
Department's website.
Proposed section 577B Variation of undertaking about structural
separation
Proposed section 577B contains provisions setting out the circumstances
under which a structural separation undertaking in force under proposed
section 577A could be varied.
Proposed subsection 577B(1) provides that proposed section 577B only
applies if an undertaking is in force under proposed section 577A.
Proposed subsection 577B(2) allows Telstra to give the ACCC a variation of
the undertaking in so far as the undertaking is covered by proposed
paragraph 577A(1)(b). This means Telstra is permitted to propose
variations as to the action it will take or refrain from taking in order to
comply with structural separation. Given that the undertaking may require
Telstra to take action, or restrain from taking action, under paragraph
577A(1)(b) over the course of several years, it is appropriate that a
mechanism be included to vary the nature of the obligations applying to
Telstra during that period if necessary to do so. However, Telstra is not
permitted to propose variations that alter the character of the undertaking
as described by reference to proposed paragraph 577A(1)(a).
Proposed subsection 577B(3) provides that after considering the variation,
the ACCC must either accept or reject the variation, having regard to the
matters
(if any) set out in an instrument in force under proposed subsection
577B(5) (proposed paragraph 577B(4)(a)) and such other matters (if any) the
ACCC considers relevant (proposed paragraph 577B(4)(b)).
Proposed subsection 577B(5) authorises the Minister to set out the matters
in writing that he or she requires the ACCC to consider for the purposes of
proposed paragraph 577B(4)(a). For the avoidance of doubt, and for the
same reasons noted with respect to instruments under proposed subsection
577A(3), an instrument under proposed subsection 577B(5) is not a
legislative instrument (subsection 577B(9)).
Proposed subsections 577B(6) and (7) confirm that the variation takes
effect when it is accepted by the ACCC and that the ACCC must publish the
variation on its website as soon as practicable.
Proposed subsection 577B(8) requires the Minister to cause a copy of his or
her instrument under proposed subsection 577B(5) to be published on the
Department's website.
Proposed Division 3-Hybrid fibre-coaxial networks
Proposed section 577C Acceptance of undertaking about hybrid fibre-
coaxial networks
Proposed subsection 577C(1) allows the ACCC to accept a written undertaking
by Telstra that Telstra will cease to be in control of a fibre-hybrid
coaxial network at all times after the period specified in the undertaking.
Under proposed paragraph 577C(1)(b) Telstra is required, in its
undertaking, to set out specified action that it will take and/or refrain
from taking in order to comply with the undertaking.
Proposed subsection 577C(2) indicates that the period specified in the
undertaking must not be longer than 12 months.
Proposed subsection 577C(3) indicates that the undertaking must be
expressed to be an undertaking under section 577C, so that when the ACCC
receives the undertaking there can be no doubt as to whether the
undertaking was intended to be given in accordance with proposed section
577C.
Proposed subsection 577C(4) provides that the undertaking comes into force
when it is accepted by the ACCC. Until the undertaking is accepted by
ACCC, there is no obligation upon Telstra to comply with the undertaking.
Once the undertaking is accepted by the ACCC, Telstra must comply with the
undertaking and will become subject to proposed section 577G which deals
with Telstra's compliance with the undertaking.
Proposed subsection 577C(5) provides that the undertaking may not be
withdrawn. This provision is aimed at ensuring that careful consideration
has been given to the matters proposed in the undertaking before it is
given, in the knowledge that if the undertaking is accepted by the ACCC,
the undertaking will become final. Given that the matters proposed under
the undertaking are likely to have a significant impact on the
telecommunications industry and the acceptance of the undertaking by the
ACCC would have the effect of triggering the operation of a number of
provisions proposed under this Bill there is a need for certainty and
therefore a need for the undertaking to be final (note: the undertaking can
be varied to a limited degree - see notes for proposed section 577D).
Proposed subsection 577C(6) provides that the ACCC must publish the
undertaking on its website as soon as practicable after it comes into
force. This provision recognises that it is important to publicise the
undertaking as soon as practicable, given the potential impact it will have
on the telecommunications industry.
Proposed section 577D Variation of undertaking about hybrid fibre-
coaxial networks
Proposed section 577D contains provisions setting out the circumstances
under which an undertaking about hybrid fibre-coaxial networks in force
under proposed section 577C could be varied.
Proposed subsection 577D(1) provides that proposed section 577D only
applies if an undertaking is in force under proposed section 577C.
Proposed subsection 577D(2) allows Telstra to give the ACCC a variation of
the undertaking in so far as the undertaking is covered by proposed
paragraph 577C(1)(b). This means Telstra is permitted to propose
variations as to the action it will take or refrain from taking in order to
comply with the requirement set out in proposed paragraph 577C(1)(a).
However, Telstra is not permitted to propose variations that alter the
character of the undertaking as described by reference to proposed
paragraph 577C(1)(a).
Proposed subsection 577D(3) provides that after considering the variation,
the ACCC must either accept or reject the variation.
Proposed subsections 577D(4) and (5) confirm that the variation takes
effect when it is accepted by the ACCC and that the ACCC must publish the
variation on its website as soon as practicable.
Proposed Division 4-Subscription television broadcasting licences
Proposed section 577E Acceptance of undertaking about subscription
television broadcasting licences
Proposed subsection 577E(1) allows the ACCC to accept a written undertaking
that Telstra will cease to be in a position to exercise control of a
subscription television broadcasting licence at all times after the end of
the period specified in the undertaking. Under such an undertaking, it is
envisaged Telstra would no longer be able to actively participate in the
subscription television market. Under proposed paragraph 577E(1)(b)
Telstra is required, in its undertaking, to set out specified action that
it will take or refrain from taking in order to comply with the
undertaking.
Proposed subsection 577E(2) indicates the period specified in the
undertaking must not be longer than 12 months.
Proposed subsection 577E(3) indicates that the undertaking must be
expressed to be an undertaking under section 577E, so that when the ACCC
receives the undertaking there can be no doubt as to whether the
undertaking was intended to be given in accordance with proposed section
577E.
Proposed subsection 577E(4) provides that the undertaking comes into force
when it is accepted by the ACCC. Until the undertaking is accepted by
ACCC, there is no obligation upon Telstra to comply with the undertaking.
Once the undertaking is accepted by the ACCC, Telstra must comply with the
undertaking and will become subject to proposed section 577G which deals
with Telstra's compliance with the undertaking.
Proposed subsection 577E(5) provides that the undertaking may not be
withdrawn. This provision is aimed at ensuring that careful consideration
has been given to the matters proposed in the undertaking before it is
given, in the knowledge that if the undertaking is accepted by the ACCC,
the undertaking will become final. Given that the matters proposed under
the undertaking are likely to have a significant impact on the
telecommunications industry and the acceptance of the undertaking by the
ACCC would have the effect of triggering the operation of a number of
provisions proposed under this Bill there is a need for certainty and
therefore a need for the undertaking to be final (note: the undertaking can
be varied to a limited degree - see notes for proposed section 577EA).
Proposed subsection 577E(6) provides that the ACCC must publish the
undertaking on its website as soon as practicable after it comes into
force. This provision recognises that it is important to publicise the
undertaking as soon as practicable, given the potential impact it will have
on the telecommunications industry.
Proposed subsection 577E(7) provides that for the purposes of section 577E,
the question of whether Telstra is in a position to exercise control of a
subscription television broadcasting licence is to be determined under
Schedule 1 to the BSA.
Proposed section 577F Variation of undertaking about subscription
television broadcasting licences
Proposed section 577F contains provisions setting out the circumstances
under which an undertaking about subscription television broadcasting
licences in force under proposed section 577E could be varied.
Proposed subsection 577F(1) provides that proposed section 577F only
applies if an undertaking is in force under proposed section 577E.
Proposed subsection 577F(2) allows Telstra to give the ACCC a variation of
the undertaking in so far as the undertaking is covered by proposed
paragraph 577E(1)(b). This means Telstra is permitted to propose
variations as to the action it will take or refrain from taking in order to
comply with the requirement set out in proposed paragraph 577E(1)(a).
However, Telstra is not permitted to propose variations that alter the
character of the undertaking as described by reference to proposed
paragraph 577E(1)(a).
Proposed subsection 577F(3) provides that after considering the variation,
the ACCC must either accept or reject the variation.
Proposed subsections 577F(4) and (5) confirm that the variation takes
effect when it is accepted by the ACCC and that the ACCC must publish the
variation on its website as soon as practicable.
Proposed Division 5-Enforcement of undertakings
Proposed section 577G Enforcement of undertakings
To enforce the undertakings, proposed subsection 577G(1) permits the ACCC
to apply to the Federal Court for an order under proposed subsection
577G(2) in the event the ACCC considers that Telstra has breached an
undertaking in force under proposed section 577A, 577C or 577E.
Proposed subsection 577G(2) sets out the orders that the Federal Court may
make if it is satisfied that Telstra has breached an undertaking. The
Federal Court may make any or all of the orders set out. Given the
importance of an undertaking in force under proposed Part 33 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.
Proposed subsection 577G(3) provides that in addition to the Federal
Court's powers under proposed subsection 577G(2), the Federal Court has
power to make an order directing any person to do or refrain from doing a
specified act and the power to make an order containing such ancillary or
consequential provisions as the court thinks just.
Proposed subsection 577G(4) provides that before making an order under
proposed section 577G, 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.
Proposed subsection 577G(5) provides that the Federal Court may rescind,
vary, discharge, or suspend the operation of an order under proposed
section 577G.
Proposed Division 6-Limits on allocation of spectrum licences etc.
Proposed section 577H Designated part of the spectrum
Proposed subsection 577H(1) sets out ranges of radiocommunications
frequencies that are to be regarded as a 'designated part of the spectrum'
for the purposes of the Tel Act. The frequencies identified are considered
to be capable of being used for the provision of advanced wireless
broadband services. In particular, they include frequencies that may become
available for allocation as a result of the cessation of analog television
broadcasting.
Proposed subsection 577H(2) provides that proposed subsection 577H(1) has
effect subject to proposed subsection 577H(3), which authorises the
Minister to determine, by legislative instrument, that a specified part of
the spectrum is not a 'designated part of the spectrum' for the purposes of
the Tel Act. As a large range of spectrum is identified in proposed
subsection 577H(1), it is anticipated that it may be possible to reduce the
amount of spectrum regarded as 'designated part of the spectrum' for the
purposes of proposed Part 33. It is considered that a ministerial
determination is the appropriate device to decrease the spectrum regarded
as a 'designated part of the spectrum' as this allows for flexibility, as
spectrum needs change over time.
Proposed subsection 577H(4) authorises the Minister to determine, by
legislative instrument, that a specified part of the spectrum is a
'designated part of the spectrum' for the purposes of the Tel Act. The
ACMA has the ability, under the Radcom Act, to vary the parameters
governing the allocation of spectrum. Also, new frequency ranges of
spectrum can be identified as useful for particular technologies as those
technologies develop. Therefore, it is important that there be the
capacity to include additional spectrum in the 'designated part of the
spectrum' for the purposes of proposed Part 33, particularly if that
spectrum is suitable for advanced wireless broadband services. It is
considered that a ministerial determination is the appropriate device to
increase the spectrum regarded as a 'designated part of the spectrum' as
this allows for flexibility, as spectrum needs change over time.
Proposed section 577J Limits on allocation of certain spectrum licences
to Telstra
Proposed subsection 577J(1) provides that the ACMA must not allocate a
spectrum licence to Telstra if the licence relates to a designated part of
the spectrum. The ACMA is required to determine procedures for allocation
of spectrum licences under section 60 of the Radcom Act and allocate the
relevant licences in accordance with those procedures under section 62 of
the Radcom Act. In determining procedures under section 60 of the Radcom
Act, the ACMA would be required to accommodate the restriction in proposed
subsection 577J(1) and allocate spectrum licences accordingly (see notes
under items 2 and 3, which discuss consequential amendments to sections 60
and 62 of the Radcom Act confirming these matters).
Proposed subsection 577J(2) provides that the restriction in subsection (1)
does not apply if an undertaking given by Telstra is in force under
proposed section 577A and one of the following combinations of undertakings
and/or declarations are also in force:
- undertakings under proposed subsections 577C and 577E; or
- an undertaking under proposed section 577C and a declaration under
proposed subsection 577J(5); or
- an undertaking under proposed section 577E and a declaration under
proposed subsection 577J(3); or
- declarations under proposed subsections 577J(3) and (5).
The undertakings in question must be in force: that is they must have been
accepted by the ACCC. It is not sufficient that they have been given to
the ACCC.
By means of the exemption declaration provisions in subsections 577J(3) and
(5) (discussed below), the Minister can determine (subject to proposed
subsections 577J(4) and (6), discussed below) whether or not Telstra is
required to provide undertakings under either or both proposed sections
577C and 577E in addition to the undertaking required under proposed
section 577A.
Proposed subsection 577J(3) allows the Minister, by written declaration, to
exempt Telstra from the requirement to have an undertaking under proposed
section 577C, which is an undertaking regarding hybrid fibre-coaxial
networks.
Proposed subsection 577J(4) provides that the Minister must not make a
declaration under proposed subsection 577J(3) unless the Minister is
satisfied that an undertaking in force under proposed section 577A is
sufficient to address concerns about the degree of Telstra's power in
telecommunications markets. This would require the Minister to give
consideration to an undertaking in force under proposed section 577A and
the characteristics of the structural separation model set out under that
undertaking.
Proposed subsection 577J(5) allows the Minister, by written declaration, to
exempt Telstra from the requirement to have an undertaking under proposed
subsection 577E, which is an undertaking regarding subscription television
broadcasting licences.
Proposed subsection 577J(6) provides that the Minister must not make a
declaration under proposed subsection (5) unless the Minister is satisfied
that an undertaking in force under proposed section 577A is sufficient to
address concerns about the degree of Telstra's power in telecommunications
markets. This would require the Minister to give consideration to an
undertaking in force under proposed section 577A and the characteristics of
the structural separation model set out under that undertaking.
Proposed subsection 577J(7) confirms, for the avoidance of doubt, that a
declaration under proposed subsection (3) or (5) is not a legislative
instrument.
Proposed subsection 577J(8) provides a definition of 'telecommunications
market' for the purposes of proposed section 577J by reference to the
definition in Part XIB of the TPA. That definition will be clarified by the
amendment in Part 3 of Schedule 1 of this Bill: see the notes on item 158.
Proposed section 577K Limits on use of certain spectrum licences by
Telstra
Proposed subsection 577K(1) prohibits licensees of spectrum licences from
authorising Telstra to operate radiocommunications devices under a licence
that relates to a designated part of the spectrum.
Under section 68 of the Radcom Act, licensees of spectrum licences may
allow other persons to operate radiocommunications devices under their
licence.
Proposed subsection 577K(1) has the effect of excluding Telstra from the
persons who may be authorised to operate radiocommunications devices under
section 68 of the Radcom Act, where the licence relates to a designated
part of the spectrum.
Proposed subsection 577K(2) provides that the rule in subsection (1) does
not apply if an undertaking given by Telstra is in force under proposed
section 577A and one of the following combinations of undertakings and/or
declarations are also in force:
- undertakings under proposed subsections 577C and 577E; or
- an undertaking under proposed section 577C and a declaration under
proposed subsection 577J(5); or
- an undertaking under proposed section 577E and a declaration under
proposed subsection 577J(3); or
- declarations under proposed subsections 577J(3) and (5).
The undertakings in question must be in force: that is they must have been
accepted by the ACCC. It is not sufficient that they have been given to
the ACCC.
By means of the exemption declaration provisions in proposed subsections
577J(3) and (5) (discussed above) and subject to proposed subsection
577J(4) and (6), the Minister can determine whether or not Telstra is
required to provide undertakings under either or both proposed sections
577C and 577E in addition to the undertaking required under proposed
section 577A.
Proposed subsection 577K(3) prohibits a person from aiding, abetting,
counselling or procuring a contravention of proposed subsection 577K(1), or
from being otherwise being involved in a contravention of proposed
subsection 577K(1) as set out in proposed paragraphs 577K(3)(b) to (d).
Proposed subsection 577K(4) indicates that proposed subsections 577K(1) and
(3) are civil penalty provisions. Accordingly, a person who breached a
provision in proposed subsection 577K(1) or (3) would be subject to the
provisions dealing with breaches of civil penalty provisions under the Tel
Act, including pecuniary penalties for breaches of civil penalty provisions
under Part 31 of the Tel Act.
Proposed section 577L Limits on assignment of certain spectrum licences
to Telstra etc.
Proposed subsection 577L(1) prohibits the licensee of a spectrum licence
from assigning the whole or part of that licence to Telstra or otherwise
dealing with Telstra in relation to the whole or part of the licence, where
the licence relates to a designated part of the spectrum.
Under section 85 of the Radcom Act, licensees of spectrum licences are
authorised to assign or otherwise deal with the whole or part of their
spectrum licence. Proposed subsection 577L(1) has the effect of excluding
Telstra from the persons who may be assigned or otherwise dealt an interest
in the whole or part of a spectrum licence, where the licence relates to a
designated part of the spectrum.
Proposed subsection 577L(2) provides that the rule in subsection (1) does
not apply if an undertaking given by Telstra is in force under proposed
section 577A and one of the following combinations of undertakings and/or
declarations are also in force:
- undertakings under proposed subsections 577C and 577E; or
- an undertaking under proposed section 577C and a declaration under
proposed subsection 577J(5); or
- an undertaking under proposed section 577E and a declaration under
proposed subsection 577J(3); or
- declarations under proposed subsections 577J(3) and (5).
The undertakings in question must be in force: that is they must have been
accepted by the ACCC. It is not sufficient that they have been given to
the ACCC.
By means of the exemption declaration provisions in proposed subsections
577J(3) and (5) (discussed above) and subject to proposed subsections
577J(4) and (6), the Minister can determine whether or not Telstra is
required to provide undertakings under either or both proposed sections
577C and 577E in addition to the undertaking required under proposed
section 577A.
Proposed subsection 577L(3) prohibits a person from aiding, abetting,
counselling or procuring a contravention of proposed subsection 577L(1), or
from being otherwise being involved in a contravention of proposed
subsection 577L(1) as set out in proposed paragraphs (3)(b) to (d).
Proposed subsection 577L(4) indicates that proposed subsections 577L(1) and
(3) are civil penalty provisions. Accordingly, a person who breached a
provision in proposed subsection 577L(1) or (3) would be subject to the
provisions dealing with breaches of civil penalty provisions under the Tel
Act, including pecuniary penalties for breaches of civil penalty provisions
under Part 31 of the Tel Act.
Proposed Division 7-Other provisions
Proposed section 577M Associate
Proposed subsection 577M(1) provides a definition for an associate of
Telstra in relation to the control of a hybrid fibre-coaxial network,
another telecommunications network, or a company, for the purposes of
proposed Part 33. This definition has been modelled from the definition of
associate in section 6 of the BSA.
Proposed subsection 577M(2) provides that persons are not associates of
each other if the ACCC is satisfied that the persons do not act together in
any relevant dealings relating to the network or company and neither of the
persons is in a position to exert influence over the business dealings of
the other in relation to the network or company. Subsection 577M(2)
recognises that the definition of associate in proposed subsection 577M(1)
is only intended to be applied in respect of dealings relating to a network
or company. The ACCC is therefore given the discretion to ensure the
definition is not applied too widely.
Proposed section 577N Control
Proposed section 577N provides a definition for 'control' for the purposes
of proposed Part 33. This definition is modelled from the definition in
section 6 of the BSA.
Proposed section 577P Control of a company
Proposed section 577P provides that the question of whether a person is in
a position to exercise control of a company is to be determined under
Schedule 1 to the BSA.
However, the definition of associate in proposed section 577M applies for
this purpose.
Proposed section 577Q When Telstra is in a position to exercise control
of a network
Proposed subsection 577Q sets out rules for determining the question of
whether Telstra is in position to exercise control of a hybrid fibre-
coaxial network or another telecommunications network. The rules set out
have been modelled from clause 2 of Schedule 2 of the BSA and adapted for
the purposes of proposed Part 33.
Item 22 - At the end of Schedule 1
Item 22 adds proposed Part 9 at the end of Schedule 1 to the Tel Act.
Under proposed Part 9, Telstra is required to functionally separate its
business so that:
. Telstra conducts its network operations and wholesale functions at arm's
length from the rest of Telstra;
. Telstra provides equivalent information on price and non-price terms to
its retail business and non-Telstra wholesale customers; and
. this equivalence of treatment is made transparent to the regulator and
competitors via strong internal governance structures.
As functional separation is intended as a proxy for structural separation,
Telstra will not be required to submit to functional separation under
proposed Part 9 of Schedule 1 if it provides a structural separation
undertaking which is accepted by the ACCC under proposed section 577A of
the Tel Act (proposed section 577A is discussed under item 21).
The functional separation of Telstra would be brought about through a
series of steps set out under proposed Part 9 of Schedule 1.
Within 90 days of the commencement of the provisions in Part 2 of Schedule
2 of the Bill, the Minister must make a determination setting out
additional functional separation requirements.
Initially, Telstra would be required to prepare a draft functional
separation undertaking setting out, amongst other things, how it will
implement functional separation. The draft functional separation
undertaking must comply with any requirements that are set out in the
requirements determination.
The Minister will then approve, vary or replace the draft functional
separation undertaking. It then becomes a final functional separation
undertaking.
Telstra is required to comply with a final functional separation
undertaking as a condition of its carrier licence.
Item 22 also adds proposed Part 10 of Schedule 1 to the Tel Act, which
inserts into that Schedule new carrier licence conditions applying to
Telstra that relate to the control and use by Telstra of certain spectrum
licences.
Proposed Part 9-Functional separation of Telstra
Proposed Division 1-Introduction
Proposed clause 68 Simplified Outline
Proposed clause 68 provides a simplified outline of proposed Part 9 of
Schedule 1 to the Tel Act, to assist the reader.
Proposed clause 69 Definitions
Proposed clause 69 inserts a number of proposed definitions for the
purposes of proposed Part 9 of Schedule 1. Some of the proposed
definitions are discussed under the explanatory notes for proposed clause
74, below.
Proposed clause 70 Declared network services
Proposed clause 70 provides that a 'declared network service', for the
purposes of proposed Part 9 of Schedule 1, is a service specified in a
legislative instrument made by the Minister. Under the functional
separation model in proposed Part 9 of Schedule 1, any declared network
service must be provided solely by Telstra's wholesale/network business
unit (as defined under proposed clause 69), in accordance with the
functional separation principles set out in proposed subclause 74(b) and
(c) (discussed below).
Proposed clause 71 Regulated services
Proposed subclause 71(1) provides a definition of the term 'regulated
service', for the purposes of proposed Part 9 of Schedule 1, by reference
to the definition of 'declared service' within the meaning of Part XIC of
the TPA.
Proposed subclause 71(2) provides that proposed subclause 71(1) has effect
subject to proposed subclause 71(3), which authorises the Minister, by
legislative instrument, to determine a specified service is not a regulated
service for the purposes of proposed Part 9 of Schedule 1. The proposed
provisions for the functional separation of Telstra are naturally more
limited in scope than the telecommunications access regime under Part XIC
of the TPA which has a different and wider application. It therefore may
be the case that not all of the declared services under the TPA will need
to be regulated under the proposed functional separation model in proposed
Part 9 of Schedule 1. Accordingly, it is considered appropriate that the
Minister be authorised to determine specified services are not regulated
services for the purposes of proposed Part 9 of Schedule 1.
Proposed subclause 71(4) authorises the Minister, by legislative
instrument, to determine that a specified eligible service is a regulated
service for the purposes of proposed Part 9 of Schedule 1. This will allow
services to be regulated under proposed Part 9 of Schedule 1 that are not
declared services under the TPA. For example, a newly developed eligible
service may be identified as a service that should be regulated under
proposed Part 9 of Schedule 1. It may be that the identified service is
not a declared service under the TPA on the basis that the ACCC has not yet
completed the public inquiry and report required under section 152AL of the
TPA before it can declare the service. The naming of that service as a
regulated service under proposed Part 9 of Schedule 1 of the Tel Act in a
timely manner by way of ministerial determination would assist by
potentially correcting any unfair competitive advantage before that
advantage becomes well established. This mechanism is appropriate for
proposed Part 9 of Schedule 1, given its limited application when compared
against the application of Part XIC of the TPA.
Proposed clause 72 Notional contracts
Proposed clause 72 confirms that notional contracts between Telstra's
business units are to be treated as if they are actual contracts and any
terms and conditions in such notional contracts are to be treated as if
they are actual terms and conditions. This proposed clause is linked to
the principle that there should be equivalence in relation to the supply by
Telstra of regulated services to Telstra's wholesale customers and
Telstra's retail business units (proposed subclause 74(1)). Under the
principle of equivalence Telstra must contract with its wholesale customers
on the same terms and conditions upon which it contracts with its own
business units. Proposed clause 72 facilitates comparisons between the
terms and conditions upon which Telstra supplies services to its own retail
business units and the terms and conditions upon which it provides services
to its wholesale customers, in the interest of ensuring the principle of
equivalence is adhered to.
Proposed Division 2-Functional separation undertaking
Proposed clause 73 Contents of draft or final functional separation
undertaking
Proposed subclause 73(1) specifies matters that must be included in a draft
or final functional separation undertaking and also confirms that a draft
or final functional separation undertaking must comply with the functional
separation principles (set out in proposed clause 74) and such requirements
as are specified in a functional separation requirements determination
(under proposed clause 75). Proposed subclause 73(1) sets parameters for
the content of the draft or final functional separation undertaking. When
deciding whether or not to approve a draft functional separation
undertaking, the Minister would have regard to proposed subclause 73(1).
The Minister would not approve a draft functional separation undertaking
under proposed clause 77 unless, at a minimum, it fits within the
parameters outlined in proposed subclause 73(1).
Proposed paragraph 73(1)(b) indicates that a draft or final functional
separation undertaking must contain provisions requiring Telstra to
establish and maintain a committee to be known as the Oversight and
Equivalence Board. It is envisaged the Oversight and Equivalence Board
would monitor and support Telstra in complying with the final functional
separation undertaking. It is envisaged that requirements relating to the
Oversight and Equivalence Board, including such things as duties of the
Board and the appointment of members to the Board, would be specified in
the functional separation requirements determination under proposed clause
75.
Proposed paragraph 73(1)(c) indicates that a draft or final functional
separation undertaking must contain provisions which require the Oversight
and Equivalence Board to prepare reports about the extent to which Telstra
has complied with the final functional separation undertaking. Reports in
accordance with subparagraph 73(1)(c) are to be prepared on a quarterly
basis and copies of the reports must be given to the ACCC and to Telstra's
board of directors. This reporting obligation is aimed at ensuring the
Oversight and Equivalence Board closely monitors Telstra's compliance with
the final functional separation undertaking and that Telstra is encouraged
to put in place policies and procedures which:
. support compliance with the final functional separation undertaking
. allow for effective monitoring of Telstra's level of compliance with
the final functional separation undertaking
. allow Telstra to take remedial action as soon as possible to rectify
any compliance issues in relation to the final functional separation
undertaking.
The requirement for Telstra to provide a copy of the report to the ACCC
provides a high level of accountability and allows the ACCC to take
appropriate enforcement action in regard to Telstra's compliance with the
Final Functional Separation Undertaking where considered necessary.
Proposed subclause 73(2) confirms that for the purposes of subparagraph
73(1)(c)(i) (which requires Telstra to provide quarterly reports), if a
final functional separation undertaking is taken to be in force throughout
a part, but not a whole, of a particular quarter, the part of the quarter
in question is taken to be a quarter in its own right. For example, if a
final functional separation undertaking came into force on 1 September of
any year, the period from the beginning to the end of September would be
taken to be a quarter in its own right and Telstra would be required to
provide a report for that period (proposed clause 69 provides a definition
for 'quarter').
Proposed clause 74 Functional separation principles
Proposed clause 74 sets out the functional separation principles that apply
in regard to the manner in which the functional separation of Telstra is to
be achieved and maintained. Under proposed paragraph 73(1)(a) any draft or
final functional separation plan must comply with the functional separation
principles. When considering whether or not to approve a draft functional
separation undertaking, it is intended that the Minister would have regard
to the degree to which the draft undertaking complies with the functional
separation principles.
The principle of equivalence - proposed paragraph 74(a)
The first principle (in proposed paragraph 74(a)) is that there should be
equivalence in relation to the supply by Telstra of its regulated services
to Telstra's wholesale customers and Telstra's retail units.
Telstra currently operates a wholesale business unit which arranges for the
supply of network services to Telstra's wholesale customers. However,
Telstra currently provides network services to itself via its own fully
integrated business framework. This means that Telstra is in a position to
take advantage of its level of vertical integration when developing and
supplying products to its retail customers. It also means that Telstra has
the ability and incentive to favour its own retail business over its
wholesale customers when providing access to network services.
It is intended that the details of how equivalence would be achieved will
be set out in a functional separation requirements determination under
proposed clause 75.
Telstra would be required to provide specified network services to itself
via its wholesale/network unit on the same terms and conditions upon which
it provides those services to its wholesale customers. Those services
would be supplied in accordance with 'notional contracts' established
between Telstra's retail and wholesale/network business units similar to
the contracts between Telstra and its wholesale customers (proposed clause
72 deals with the treatment of notional contracts).
The principle of separate retail and wholesale/network business units -
proposed paragraph 74(b)
The second principle (proposed paragraph 74(b)) is that Telstra should
maintain one or more retail business units and a separate wholesale/network
business unit.
A business unit is defined under proposed clause 69 as a part of Telstra.
This recognises that in managing its business, Telstra organises different
roles and parts of the company into individual business units.
This principle requires Telstra to maintain a single wholesale/network
business unit, in accordance with the definition in proposed clause 69,:
- that supplies:
. fault detection, handling and rectification;
. service activation and provisioning;
. declared network services,
to Telstra's retail business units and Telstra's wholesale customers,
in relation to eligible services; and
- by which Telstra deals with its wholesale customers.
The wholesale/network business unit must be separate from Telstra's retail
business units. Under the proposed definition in clause 69 a retail
business unit is a unit by which Telstra deals with its retail customers.
The separation of Telstra's retail business units from its
wholesale/network unit, together with the treatment of notional contracts
under proposed clause 72, would support the principle of equivalence
(discussed above) by facilitating comparisons between the terms and
conditions upon which Telstra supplies eligible services from its
wholesale/business unit to its retail unit and its wholesale customers.
The principle of arm's length functional separation between each of
Telstra's retail and wholesale/network business units - proposed paragraph
74(c)
The third principle (proposed paragraph 74(c)) is that Telstra should
maintain arm's length functional separation between its wholesale/network
business unit and its retail business units. The principle is directed
towards ensuring that Telstra does not favour its retail business over its
wholesale customers in the provision of regulated services. Under this
principle, Telstra's wholesale/network business unit is expected to
interact with its retail business units in the same manner that it would
interact with another carrier or carriage service provider. This includes
Telstra ensuring that it puts measures in place to protect information and
knowledge in the possession of its wholesale/network business unit from its
retail business units in the same manner it would protect that information
and knowledge from another carrier or carriage service provider.
The principle of systems, procedures and practices - proposed paragraph
74(d)
The fourth principle (proposed paragraph 74(d)) is directed towards
ensuring that Telstra has sufficient systems, procedures and practices in
place which support and facilitate compliance with a final functional
separation undertaking. It is also important that measures are put in
place to allow Telstra's compliance with a final functional separation
undertaking to be monitored, assessed and audited so that assessments can
be made of Telstra's adherence to the functional separation principles and
Telstra's observance of the requirements set out in the proposed functional
separation requirements determination.
The principle of equal consultation - proposed paragraph 74(e)
The fifth principle (proposed paragraph 74(e)) requires Telstra to consult
equally with its retail business and wholesale customers about proposed
services to be supplied by Telstra's wholesale/network business unit or
developments in connection with those services. This provision seeks to
allow Telstra's wholesale customers to compete with Telstra on a fair and
equal basis when supplying services to their customers which make use of
regulated services.
Proposed clause 75 Functional separation requirements determination
Proposed clause 75 allows the Minister to make a determination (a
functional separation requirements determination) specifying requirements
to be complied with by a draft or final functional separation undertaking.
Matters that may be dealt with in a functional separation requirements
determination may include the manner in which the functional separation
principles are to be implemented (proposed subclause 75(2)) and the manner
in which a requirement relating to the proposed Oversight and Equivalence
Board, set out in proposed paragraph 73(1)(b) or (c) is to be met (proposed
subclause 75(3)). Proposed subclause 75(4) makes it clear that proposed
subclauses 75(2) and 75(3) are simply examples of the matters that may be
included in a functional separation requirements determination and that
they do not limit the matters that may be specified by the Minister in a
functional separation requirements determination.
Under proposed subclause 75(5), the Minister must ensure that a functional
separation requirements determination comes into force within 90 days of
the commencement of proposed clause 75. It is envisaged a functional
separation requirements determination would provide further details
regarding the manner in which the functional separation of Telstra is to be
achieved and maintained and would provide further guidance to Telstra in
formulating its draft functional separation undertaking, as required under
proposed clause 76.
Proposed subclause 75(6) provides that a functional separation requirements
determination is not a legislative instrument. This reflects the fact that
a direction from a Minister to any person is not subject to disallowance
(see section 44 of the LIA) and the fact that the instrument made by the
Minister under proposed subclause 75(6) operates as a direction to Telstra
to include certain requirements in its draft undertaking..
Proposed clause 76 Draft functional separation undertaking
Proposed subclause 76(1) indicates that Telstra must give the Minister a
draft functional separation undertaking within 90 days after the first
functional separation requirements determination comes into force or a
longer period, if specified in accordance with proposed subclause 76(3).
Proposed subclause 76(2) provides that the requirement to provide the draft
functional separation undertaking does not apply if an undertaking given by
Telstra is in force under proposed section 577A, which allows Telstra to
provide, and the ACCC to accept, a structural separation undertaking. If a
structural separation undertaking were in force under proposed section
577A, it would be unnecessary for Telstra to functionally separate. This
is because structural separation is the strongest form of organisational
separation, which would require Telstra to make changes to its activities
or its company structure. Therefore, structural separation is the
preferred form of organisational separation for achieving an open access,
wholesale-only market structure.
Proposed subclause 76(3) allows the Minister to specify in writing a longer
period in which a draft functional separation undertaking is required to
come into force for the purposes of proposed paragraph 76(1)(b).
Proposed subclause 76(4) sets out the circumstances in which the Minister
can extend the period in which a draft functional separation undertaking is
required to come into force. Before extending the period, the Minister
must be satisfied that Telstra is preparing a structural separation
undertaking under proposed section 577A or the ACCC has received an
undertaking under section 577A and is still deciding whether or not to
accept that undertaking. The mechanism for extension under proposed
subclause 76(3) combined with the requirements under proposed
subclause 76(4) is desirable so that the functional separation of Telstra
is not precipitously brought into being which has the effect of delaying or
making more difficult, the implementation of a more preferred model of
structural separation.
Proposed subclause 76(5) allows the Minister to vary an instrument under
proposed subclause 76(3). This allows the Minister to increase or decrease
the relevant extension period where it is considered necessary or desirable
to do so.
Proposed subclause 76(6) provides that a period specified in proposed
subclause 76(3) may be ascertained wholly or partly by reference the
occurrence of a specified event. Such an event could be, for example, a
decision by the ACCC not to accept a structural separation undertaking. If
the Minister delays the requirement for Telstra to provide a draft
functional separation undertaking because Telstra has submitted a
structural separation undertaking to the ACCC, but the ACCC has not yet
accepted or rejected the undertaking, the Minister may want to trigger the
requirement to provide the draft functional separation undertaking if the
ACCC rejects the structural separation undertaking. This provision would
permit the Minister to set a date with reference to that event (such as,
"within 90 days of a rejection by the ACCC of the structural separation
undertaking submitted to it by Telstra").
Proposed subclause 76(7) makes it clear that the Minister does not have a
duty to consider whether to make or vary an instrument under proposed
subclause 76(3). For example, if Telstra or some other person requested
that the Minister consider exercising his power under proposed subclause
76(3), the Minister would have no duty to consider that request.
Proposed subclause 76(8) provides for publication of an instrument under
proposed subclause 76(3) or (5) on the Department's website.
Proposed subclause 76(9) provides, for the avoidance of doubt, that an
instrument under proposed subclause (3) or (5) is not a legislative
instrument.
Proposed clause 77 Approval of draft functional separation undertaking
by Minister
Proposed clause 77 sets out the manner in which a draft functional
separation undertaking may be approved, varied or replaced and includes
publication and consultation provisions.
After receiving a draft functional separation undertaking (original
undertaking), the Minister must approve the original undertaking; vary the
original undertaking and approve the original undertaking as varied; or
replace the original undertaking with another draft functional separation
undertaking (replacement undertaking) and approve the replacement
undertaking (proposed subclause 77(2)). It is envisaged the Minister would
exercise his power to vary or replace the draft functional separation
undertaking if the draft functional separation undertaking was considered
deficient with regard to compliance with the functional separation
principles or any requirements specified in the functional separation
requirements determination. The Minister would be able to add or change
measures in the draft functional separation undertaking to address any
shortcomings in the draft functional separation undertaking, or replace the
draft functional separation undertaking altogether if considered necessary
or desirable. In particular, it is intended that if the Minister considered
that the draft functional separation undertaking complied with a functional
separation principle to a minimal degree, the Minister might decide to vary
or replace the draft undertaking in a way that would require Telstra to
meet the principle to a significantly higher degree.
Proposed subclause 77(3) provides that before making a decision under
proposed subclause 77(2), the Minister must publish a notice on the
Department's website setting out the original undertaking and inviting
submissions about the original undertaking, with submissions to be provided
within 14 days after publication of the original undertaking. The Minister
is required to give the ACCC a copy of the notice and consider any advice
about the original undertaking given to him by the ACCC within the 44 days
after the notice is published. The Minister must have regard to any advice
given by the ACCC. It is expected that the ACCC would consider the
submissions provided to the Minister before giving its advice to the
Minister.
Proposed subclause 77(4) requires the Minister, before approving an
original undertaking as varied under proposed paragraph 77(2)(b), to give
Telstra a notice setting out the original undertaking as proposed to be
varied and inviting Telstra to make submissions to the Minister regarding
the original undertaking as proposed to be varied within 14 days after
receiving the notice. The Minister is further required to consider any
submissions received from Telstra within that 14-day time period.
Proposed subclause 77(5) requires the Minister, before approving a
replacement undertaking under proposed paragraph 77(2)(c), to give Telstra
a notice setting out the proposed replacement undertaking and inviting
Telstra to make submissions to the Minister regarding the proposed
replacement undertaking within 14 days after receiving the notice. The
Minister is further required to consider any submissions received from
Telstra within that 14-day time period.
The consultation provisions in subclauses 77(3), (4) and (5) provide
Telstra, the ACCC and the public with an opportunity to make submissions
which the Minister must consider before approving an original undertaking,
and provide for additional consultation with Telstra before the Minister
approves an original undertaking as varied or a replacement undertaking.
These provisions are aimed at ensuring the measures set out in the final
functional separation undertaking are robust whilst ensuring the
consultation process is undertaken in a timely and efficient manner.
Proposed subclause 77(6) confirms that the Minister may ask the ACCC to
give the Minister advice, which is additional to any advice received from
the ACCC after a request for advice under proposed paragraph 77(3)(e),
about a matter arising under proposed clause 77.
Proposed subclause 77(7) requires the Minister to notify Telstra in writing
of a decision under subclause 77(2) as soon as practicable.
Proposed subclause 77(8) provides, for avoidance of doubt, that an
instrument under subclause 77(2) is not a legislative instrument.
Proposed clause 78 Time limit for making an approval decision
Proposed subclause 78(2) requires the Minister to use his or her best
endeavours to make a decision under proposed subclause 77(2) in relation to
a draft functional separation undertaking within 6 months after the draft
undertaking was given to the Minister. This subsection recognises the
importance of ensuring that the functional separation of Telstra is
achieved in a timely manner, but also appreciates that the Minister will
need adequate time to:
. consider the draft functional separation undertaking and check that it
complies with proposed subclause 73
. possibly make changes to a draft functional separation undertaking,
which may be influenced by submissions received under proposed
subclause 77(3) or advice received from the ACCC
. consult with Telstra before making changes to a draft functional
separation undertaking
. seek additional advice from the ACCC concerning a draft functional
separation undertaking, and consider that advice.
Proposed clause 79 Effect of approval
Proposed subclause 79(1) confirms that once a draft functional separation
undertaking is approved under subclause 77(2) it becomes a final functional
separation undertaking.
Proposed subclause 79(2) confirms that a final functional separation
undertaking comes into force on the day after the notice of the Minister's
decision under subclause 77(2) is given to Telstra in accordance with
subclause 77(6).
Proposed subclause 79(3) provides that a final functional separation
undertaking may not be withdrawn. Given that the implementation of the
functional separation of Telstra is likely to have a significant impact on
the telecommunications industry and the approval of a draft functional
separation undertaking (resulting in the undertaking becoming a final
functional separation undertaking) would have the effect of triggering the
operation of a number of provisions proposed under this Bill there is a
need for certainty and therefore it is important the a final functional
separation undertaking cannot be withdrawn.
For the avoidance of doubt, subclause 79(4) confirms that a final
functional separation undertaking is not a legislative instrument.
Proposed clause 80 Variation of final functional separation undertaking
Proposed clause 80 describes the manner in which a variation to a final
functional separation undertaking may be made. A final functional
separation undertaking may be made by the Minister, in writing, where
Telstra or another person has requested the variation, or on the Minister's
own initiative (proposed subclause 80(2)).
Proposed subclause 80(3) confirms the Minister does not have a duty to
consider whether to make a variation under proposed clause 80, whether or
not the Minister has received a request from Telstra or by any other
person, or in any other circumstances.
The publication, consultation and notice requirements relating to a
proposed variation (proposed subclauses (4) and (8)), except in relation to
minor variations, are the same as those outlined in proposed clause 77.
Subclause 80(5) indicates that the publication, consultation and notice
requirements under subclause 80(4) do not apply in respect of variations to
a final functional separation undertaking that are of minor nature.
Where a proposed variation is of minor nature and is not made at the
request of Telstra, under proposed subclause 80(6) the Minister is required
to give Telstra a notice setting out the proposed variation and inviting
Telstra to make submissions to the Minister about the proposed variation
within 14 days after the notice is given. The Minister must then consider
any submission received within that 14 day period.
Proposed subclause 80(7) confirms that the Minister may ask the ACCC to
give the Minister advice, which is additional to any advice received from
the ACCC after a request for advice under proposed paragraph 80(3)(e),
about a matter arising under proposed clause 80.
Proposed subclause 80(9) confirms that a variation of a final functional
separation undertaking comes into force the day after notice of the
variation is given to Telstra.
For the avoidance of doubt, proposed subclause 80(10) confirms variation of
a final functional separation undertaking is not a legislative instrument.
Proposed clause 81 Publication of final functional separation
undertaking
Proposed subclause 81(1) provides that Telstra must publish a copy of a
final functional separation undertaking on its website as soon as
practicable after it comes into force.
Similarly, under subclause 81(2), Telstra is required to publish a
variation of a final functional separation undertaking on its website as
soon as practicable after it comes into force.
Proposed clause 82 Compliance with final functional separation
undertaking
Proposed subclause 82(1) provides that if a final separation undertaking is
in force, Telstra must comply with the undertaking. Proposed subclause
82(1) will be within Schedule 1 to the Tel Act, which contains the standard
carrier licence conditions. A breach of a final separation undertaking by
Telstra would therefore be a breach of Telstra's carrier licence
conditions. Compliance with carrier licence conditions is a civil penalty
provision under section 68 of the Act. Proposed subclause 82(1) would have
the effect of making Telstra subject to the penalties outlined in Part 31
of the Act for breach of civil penalty provisions. Telstra would also be
subject to additional enforcement provisions in the Tel Act for breach of
proposed clause 82(1) (for example sections 69A and 70, as amended by this
Bill).
Proposed subclause 82(2) indicates that subclause 82(1) would not apply if
an undertaking given by Telstra is in force under section proposed 577A.
This provision confirms that Telstra would not be required to comply with a
final functional separation undertaking if a structural separation
undertaking was in force under proposed section 577A. This is because
functional separation of Telstra would be unnecessary in the event Telstra
were to structurally separate. Structural separation is a stronger form of
organisational separation, which would require Telstra to make changes to
its activities or company structure. Therefore, structural separation is
the preferred form of organisational separation for achieving an open
access, wholesale-only market structure. The enforcement provisions
relating to the structural separation of Telstra under proposed section
577A are discussed under the explanatory note for proposed subsection 577F,
above.
Proposed Part 10-Control and use by Telstra of certain spectrum licences
Proposed Part 10 of Schedule 1 to the Tel Act inserts into that Schedule
new carrier licence conditions applying to Telstra that relate to the
control and use by Telstra of certain spectrum licences.
Proposed Division 1-Introduction
Proposed clause 83 Simplified outline
Proposed clause 83 provides a simplified outline of proposed Part 10 of
Schedule 1 to assist the reader.
Proposed Division 2-Control and use by Telstra of certain spectrum licences
Proposed clause 84 Control by Telstra of certain spectrum licences
Proposed subclause 84(1) provides that Telstra must not be in position to
exercise control of a licence that relates to a designated part of the
spectrum. The meaning of control of a spectrum licence, for the purposes
of proposed Part 10 of Schedule 1 is addressed under proposed clause 88.
Proposed subclause 84(2) provides that the restriction in subclause (1)
does not apply if an undertaking given by Telstra is in force under
proposed section 577A and one of the following combinations of undertakings
and/or declarations are also in force:
- undertakings under proposed subsections 577C and 577E; or
- an undertaking under proposed section 577C and a declaration under
proposed subsection 577J(5); or
- an undertaking under proposed section 577E and a declaration under
proposed subsection 577J(3); or
- declarations under proposed subsections 577J(3) and (5).
The undertakings in question must be in force: that is they must have been
accepted by the ACCC. It is not sufficient that they have been given to
the ACCC.
By means of the exemption declaration provisions in subsections 577J(3) and
(5) (which are discussed in the explanatory note for proposed section
577J), the Minister can effectively determine, subject to proposed
subsections 577J(4) and (6), whether or not Telstra is required to provide
undertakings under either or both proposed sections 577C and 577E in
addition to the undertaking required under proposed section 577A.
Proposed clause 85 Use by Telstra of certain spectrum licences
Proposed subclause 85(1) provides that Telstra must not supply a carriage
service using a radiocommunications device authorised for use under a
spectrum licence if that licence relates to a designated part of the
spectrum.
Proposed subclause 85(2) provides that the restriction in subclause (1)
does not apply if an undertaking given by Telstra is in force under
proposed section 577A and one of the following combinations of undertakings
and/or declarations are also in force:
- undertakings under proposed subsections 577C and 577E; or
- an undertaking under proposed section 577C and a declaration under
proposed subsection 577J(5); or
- an undertaking under proposed section 577E and a declaration under
proposed subsection 577J(3); or
- declarations under proposed subsections 577J(3) and (5).
The undertakings in question must be in force: that is they must have been
accepted by the ACCC. It is not sufficient that they have been given to
the ACCC.
By means of the exemption declaration provisions in subsections 577J(3) and
(5) (discussed in the explanatory notes for proposed section 577J), the
Minister can determine, subject to proposed subsections 577J(4) and (6),
whether or not Telstra is required to provide undertakings under either or
both proposed sections 577C and 577E in addition to the undertaking
required under proposed section 577A.
Proposed Division 3-Other provisions
Proposed clause 86 Associate
Proposed subclause 86(1) provides a definition for an associate of Telstra
in relation to the control of a spectrum licence for the purposes of
proposed Part 10 of Schedule 1. This definition has been modelled from the
definition of associate in section 6 of the BSA.
Proposed subclause 86(2) provides that persons are not associates of each
other if the ACCC is satisfied that the persons do not act together in any
relevant dealings relating to the spectrum licence and neither of them is
in a position to exert influence over the business dealings of the other in
relation to spectrum licence. Proposed subclause 86(2) recognises that the
definition of associate in proposed subclause 86(1) is only intended to be
applied in respect of dealings relating to a spectrum licence. The ACCC is
therefore given the discretion to ensure the definition is not applied too
widely.
Proposed clause 87 Control
Proposed clause 87 provides a definition for 'control' for the purposes of
proposed Part 10 of Schedule 1. This definition is taken from section 6 of
the BSA.
Proposed clause 88 When Telstra is in a position to exercise control of
a spectrum licence
Proposed clause 88 sets out mechanisms for determining the question of
whether Telstra is in a position to exercise control of a spectrum licence.
Proposed section 88 is modelled on the control rules set out in clause 2
of Schedule 1 of the BSA and adapted for the purposes of proposed Part 10
of Schedule 1.
Trade Practices Act 1974
Item 23 - Subsection 4(1)
This item amends subsection 4(1) of the TPA by inserting a definition for
Telstra, by reference to the meaning in the Telstra Corporation Act 1991.
Item 24 - Subsection 151BTA(13)
This item repeals subsection 151BTA(13) as a result of the amendment
proposed under item 23 above.
Item 25 - Section 151BUAAA
Item 25 would repeal section 151BUAAA of the TPA. Section 151BUAAA
authorises the Minister to give a special direction to the ACCC to make
rules requiring Telstra to keep and retain particular records and prepare
reports consisting of information in those records. As a result of the
amendments proposed under Part 1 of this Bill, section 151BUAAA of the TPA
is no longer required. Telstra will have new record-keeping and reporting
requirements under the functional separation model in proposed Part 9 of
Schedule 1, which will replace Part 8 of Schedule 1(for example, see
proposed paragraph 73(1)(c) and subparagraph 74(d)(ii)).
Item 26 - At the end of Part XIB
Item 26 would add proposed Division 15 at the end of Part XIB of the TPA,
containing proposed section 151CQ.
Proposed Division 15-Voluntary undertakings given by Telstra
Proposed section 151CQ Voluntary undertakings given by Telstra
Proposed subsection 151CQ(1) provides that section 151CQ applies if Telstra
has engaged in conduct in order to comply with an undertaking in force
under proposed section 577A, 577C or 577E of the Tel Act.
Proposed subsection 151CQ(2) requires the ACCC, in performing a function,
or exercising a power under proposed part XIB to have regard to the conduct
of Telstra in complying with an undertaking to the extent that conduct is
relevant. This provision recognises the inter-relationship between
Telstra's conduct when complying with an undertaking given by Telstra in
force under sections 577A, 577C, or 577E of the Tel Act and the provisions
Telstra is subject to under the telecommunications industry anti-
competitive conduct and record keeping rules under Part XIB of the TPA.
Item 27 - At the end of Part XIC
Item 27 would add proposed section 152ER at the end of Part XIC of the TPA.
Proposed section 152ER Voluntary undertakings given by Telstra
Proposed subsection 152ER is identical to proposed section 151CQ, except
that it is expressed to apply for the purposes of Part XIC of the TPA,
rather than Part XIB of the TPA.
This provision recognises the inter-relationship between Telstra's conduct
when complying with an undertaking given by Telstra in force under sections
577A, 577C, or 577E of the Tel Act and the provisions Telstra is subject to
under the telecommunications access regime under Part XIC of the TPA.
Item 28 - Transitional-continuation of special Telstra directions
Item 28 is a transitional provision that confirms that the repeal of
section 151BUAAA of the TPA would not affect the continuity of a special
Telstra direction referred to in that section that was in force immediately
before the section was repealed. This means if a special Telstra direction
had been given prior to the repeal of section 151BUAAA, the ACCC would
still be required to comply with that direction and Telstra would still be
required to comply with any rules made by the ACCC in accordance with that
direction. As a special Telstra direction is given effect through a
Ministerial direction under section 151BUAA, any special Telstra direction
will cease to have effect when action is taken to revoke the relevant
direction given under section 151BUAA.
Division 2-Amendments commencing immediately after a final functional
separation undertaking comes into force
Division 2 of Part 1 of Schedule 1 of this Bill contains amendments to the
Tel Act and the TPA that are necessary as a result of the entry into force
of a functional separation undertaking, such as the repeal of Part 8 of
Schedule 1 to the Tel Act, which deals with operational separation and will
no longer be required. In the event that a functional separation does not
come into force (because a structural separation undertaking is accepted by
the ACCC under proposed section 577A), Division 3 would make many (but not
all) of the amendments proposed by Division 2.
Telecommunications Act 1997
Item 29 - Subsection 61(1)
Item 30 - Subsections 61(2), (3) and (4)
These items repeal subsections 61(2), (3) and (4) and make a consequential
amendment to subsection 61(1). Subsections (2), (3) and (4) deal with the
Minister's ability to declare that current Part 8 of Schedule 1 to the Tel
Act ceases to have effect on a particular day. Part 8 of Schedule 1 will
be repealed (see Item 44), therefore the subsections are no longer
required.
Item 31 - Section 61A
This item repeals section 61A. This section contains provisions requiring
before 1 July 2009, the Minister to cause to be conducted a review of the
operation of Part 8 of Schedule 1. The Minister caused the review to be
conducted on 7 April 2009 with the release of the National Broadband
Network: Regulatory Reform for 21st Century Broadband discussion paper. At
the time of introduction of this Bill, a report of the review is being
prepared.
Item 32 - After subsection 69(6)
This item inserts proposed subsection 69(6A) into the Tel Act. Proposed
subsection 69(6A) confirms that subsection 69(1) does not apply to a
condition set out in Part 9 of Schedule 1 (which deals with the functional
separation of Telstra).
Section 69(1) of the Tel Act and its related provisions under section 69
authorise the ACMA to issue remedial directions to a carrier that is
contravening, or has contravened, a condition of its carrier licence.
The effect of proposed subsection 69(6A) is that the ACMA would not be
authorised to issue a remedial direction to Telstra in the event it
contravened a condition set out in proposed Part 9 of Schedule 1. The
reason for this restriction is that it is intended that only the ACCC (and
the Minister, where appropriate) will have authority to take action against
Telstra for breach of a condition set out in Part 9 of Schedule 1.
Item 33 - Subsection 69A(1)
This item omits "Part 8" from subsection 69A(1) and substitutes "Part 9".
An alteration to the heading to section 69A is also proposed by omitting
"operational" and substituting "functional". Section 69A(1) and its
related provisions under section 69A authorise the ACCC to issue remedial
directions to Telstra if Telstra is contravening, or has contravened a
condition set out in Part 8 of Schedule 1. The effect of the amendments
proposed under this item is that the ACCC would be authorised to issue
remedial directions to Telstra if Telstra is contravening, or has
contravened a condition set out in proposed Part 9 of Schedule 1, which
relates to the proposed functional separation of Telstra. The reference to
Part 8 of Schedule 1 in section 69A will no longer be required given that
Part 8 of Schedule 1 will be repealed under this Bill (see item 44).
Item 34 - Section 69B
This item repeals section 69B. Section 69B contains provisions allowing
Telstra to apply to the Tribunal seeking a review of a direction relating
to operational separation given to it by the ACCC under section 69A. It is
not intended to enable review by the Tribunal of the exercise of remedial
directions powers in relation to functional separation. Providing for such
review would be contrary to the objective of moving quickly to implement
stronger organisational separation arrangements for Telstra.
Item 35 - After subsection 70(3)
This item inserts proposed subsection 70(3A) into the Tel Act. Proposed
subsection 70(3A) provides that subsection 70(1) does not apply to a
condition set out in Part 9 of Schedule 1. Subsection 70(1) of the Tel Act
authorises the ACMA to issue formal warnings to carriers that have
contravened a condition of their carrier licence. The effect of proposed
subsection 70(3A) is that the ACMA would not be authorised to issue a
formal warning to Telstra in the event it contravened a condition set out
in proposed Part 9 of Schedule 1. The reason for this restriction is the
same as that outlined in the explanatory note under item 32 above.
Item 36 - Paragraph 70(5)(ba)
This item omits "Part 8" from paragraph 70(5)(ba) and substitutes "Part 9".
Current subsection 70(5) authorises the ACCC to issue a formal warning to
a carrier that contravenes any of the carrier licence conditions listed
under that subsection.
The amendment proposed under this item will allow the ACCC to issue a
formal warning to Telstra if it contravenes a condition set out in proposed
Part 9 of Schedule 1. The reference to Part 8 is no longer required given
that Part 8 of Schedule 1 will be repealed under this Bill (see item 44).
Item 37 - Subsection 70(6)
This item repeals subsection 70(6). That subsection states that paragraph
70(5)(ba) does not limit subsection 70(1). However, with the proposed
insertion of subsection 70(3A) (see item 35 above), it is now intended that
subsection 70(5)(ba) (when read together with proposed subsection 70(3A))
will limit subsection (1) so that ACMA would not be authorised to issue a
formal warning to Telstra in the event it contravened a condition set out
in proposed Part 9 of Schedule 1. Therefore it is necessary to repeal
subsection 70(6).
Item 38 - Section 104
Item 38 would amend section 104, which contains a simplified outline of
Part 5 of the Tel Act. An additional summary point is proposed to be
included in the simplified outline to reflect the ACCC's monitoring and
reporting obligations regarding Telstra's compliance with a final
functional separation undertaking (see item 39, below)
Item 39 - At the end of Part 5
Proposed section 105B Monitoring of compliance by Telstra with a final
functional separation undertaking
Item 39 would insert proposed section 105B, which deals with monitoring of
compliance by Telstra with a final functional separation undertaking.
Proposed subsection 105B(1) provides that the ACCC must monitor Telstra's
compliance with a final functional separation undertaking and report each
financial year to the Minister on Telstra's compliance.
Proposed subsection 105B(2) requires the ACCC to give a report under
proposed subsection (1) to the Minister as soon as practicable after the
end of each financial year concerned.
Proposed subsection 105B(3) requires the Minister to table a copy of a
report under proposed subsection 105B(1) in each House of Parliament within
15 sitting days of that House after receiving the report from the ACCC.
Item 40 - After paragraph 564(3)(b)
This item inserts proposed paragraph 564(3)(ba). Under current subsection
564(3) the ACMA is not entitled to apply for an injunction in relation to a
contravention of a carrier licence condition or service provider rule
listed under that subsection. The proposed subparagraphs add a licence
condition set out in proposed Part 9 of Schedule 1 to the list of licence
conditions and service provider rules in subsection 564(3). This means the
ACMA would not be entitled to apply for an injunction in relation to a
contravention of a carrier licence condition set out in proposed Part 9 of
Schedule 1.
The reason for this restriction is that it is intended that only the ACCC
(and the Minister ) will have authority to take action against Telstra for
breach of a condition set out in proposed Part 9 of Schedule 1, given that
proposed Part 9 of Schedule 1 contains provisions to address Telstra's
level of dominance in telecommunications markets and the negative impact
this has had on competition in the telecommunications industry. It is
therefore a matter for which it is appropriate for the ACCC to be given
regulatory responsibility.
Item 41 - Subsection 564(3) (after note 2)
This item adds a note to section 564 in relation to proposed paragraph
564(3)(ba) (under item 40 above) to assist the reader.
Item 42 - After paragraph 571(3)(b)
This item inserts paragraphs 571(3)(ba). Under current subsection 571(3)
ACMA is not entitled to institute a proceeding for recovery of a pecuniary
penalty in relation to a contravention of a carrier licence condition or
service provider rule listed under that subsection. The proposed paragraph
adds a licence condition set out in proposed Part 9 of Schedule 1 to the
list of licence conditions and service provider rules in subsection 571(3).
This means ACMA would not be entitled to institute a proceeding for
recovery of a pecuniary penalty in relation to a contravention of a carrier
licence condition set out in proposed Part 9 of Schedule 1.
The reason for this restriction is that it is intended that only the ACCC
(and the Minister) will have authority to take action against Telstra for
breach of a condition set out in proposed Part 9 of Schedule 1, given that
proposed Part 9 of Schedule 1 contains provisions to address Telstra's
level of dominance in telecommunications markets and the negative impact
this has had on competition in the telecommunications industry. It is
therefore a matter for which it is appropriate for the ACCC to be given
regulatory responsibility.
Item 43 - Subsection 571(3) (after note 2)
This item adds a note to section 571 in relation to proposed paragraph
564(3)(ba) (under item 42 above) to assist the reader.
Item 44 - Part 8 of Schedule 1
This item repeals Part 8 of Schedule 1 to the Tel Act, on the basis that
this Part (which contains provisions relating to the operational separation
of Telstra) will no longer be required given the new form of organisational
separation that Telstra will be required to undertake when a final
functional separation undertaking comes into force.
Trade Practices Act 1974
Item 45 - Division 14 of Part XIB
Item 45 would repeal Division 14 of Part XIB and substitute a new proposed
Division 14, containing a provision (proposed section 151CP) relating to
the functional separation of Telstra.
Proposed Division 14-Functional separation for Telstra
Proposed section 151CP Functional separation for Telstra
Proposed subsection 151CP(1) provides that section 151CP applies if Telstra
has engaged in conduct in order to comply with a final functional
separation undertaking.
Proposed subsection 151CP(2) requires the ACCC, in performing a function,
or exercising a power under proposed Part XIB to have regard to the conduct
of Telstra in complying with a final functional separation undertaking to
the extent that conduct is relevant. This provision recognises the inter-
relationship between Telstra's conduct when complying with a final
separation undertaking under the Tel Act and the provisions Telstra is
subject to under the telecommunications industry-specific anti-competitive
conduct regime and record keeping rules under Part XIB of the TPA.
Item 46 - After section 152EP
Item 46 would insert proposed section 152EPA into the TPA. Proposed
section 152EPA relates to the proposed independent telecommunications
adjudicator.
Proposed section 152EPA Assistance to independent telecommunications
adjudicator
Proposed subsection 152EPA(1) provides that the independent
telecommunications adjudicator is a company that is limited by guarantee
and is identified in a final functional separation undertaking as the
independent telecommunications adjudicator for the purpose of proposed
section 152EPA.
Proposed subsection 152EPA(2) provides that the ACCC may assist the
independent telecommunications adjudicator.
It is envisaged that the independent telecommunications adjudicator would
be a non-statutory body created to assist with establishing the technical
parameters and arrangements for access and the resolution of disputes
relating to access to an access provider's network and wholesale products
and services. The body would be created in accordance with the requirements
of a final functional separation undertaking.
Proposed subsection 152EPA(3) provides a list of types of assistance that
the ACCC may provide to the independent telecommunications adjudicator.
The list is not intended to be exhaustive, but illustrative of the type of
assistance the ACCC may provide in accordance with proposed section 152EPA.
It includes the making available of resources and facilities, which is
intended to include accommodation, and the provision of information.
Item 47 - Section 152EQ
Item 47 would repeal section 152EQ and substitute a new proposed section
152EQ.
Proposed section 151CP Functional separation for Telstra
Proposed subsection 152EQ refers to conduct engaged in by Telstra in
complying with a final functional separation undertaking and is identical
to proposed subsection 152CP (discussed above), except that it is expressed
to apply for the purposes of Part XIC of the TPA, rather than Part XIB of
the TPA.
This provision recognises the inter-relationship between Telstra's conduct
when complying with a final separation undertaking under the Tel Act and
the provisions Telstra is subject to under the telecommunications industry
anti-competitive conduct and record keeping rules under Part XIC of the
TPA.
Proposed subsection 152EQ will replace the current section 152EQ, which
contains similar provisions but refers to Telstra's final operational
separation plan in force under Part 8 of Schedule 1 of the Tel Act, which
will cease to have effect once a final functional separation undertaking
comes into force under proposed Part 9 of Schedule 1 of the Tel Act.
Item 48 - After subsection 155(7B)
Item 48 would amend section 155 by inserting proposed subsection 155(7C).
Proposed subsection 155(7C) provides that current subsection 155(7B) does
not apply in relation to the production by Telstra of a document if the
document would disclose information that is relevant to the extent to which
Telstra has complied, or is complying with a final separation undertaking.
Section 155 of the TPA deals with the powers of the ACCC to obtain
information, documents and evidence. Subsection 155(7B) exempts a person
from having to produce a document to the ACCC if that document would
disclose information that is subject to legal professional privilege. The
effect of proposed section 155(7C) is that Telstra would be obliged to
produce a document to the ACCC under section 155 regardless of whether that
document would disclose information that is subject to legal professional
privilege, but only if the document in question would disclose information
that is relevant to the extent to which Telstra has complied, or is
complying with a final separation undertaking. Proposed subsection 155(7C)
would allow the ACCC to more closely examine issues relating to Telstra's
compliance with a final separation undertaking, by having greater potential
access to relevant documents under section 155. The amendment is proposed
as there is the potential for Telstra to delay the operation of the
functional separation regime if the ACCC is unable to obtain and use
documents for the purposes of monitoring and enforcing Telstra's compliance
with its final functional separation undertaking due to claimed legal
professional privilege.
Division 3-Amendments commencing immediately after an undertaking about
structural separation comes into force
As noted above, Division 2 of Part 1 of Schedule 1 of this Bill contains
amendments to the Tel Act and the TPA that are necessary as a result of the
entry into force of a functional separation undertaking under proposed Part
9 of Schedule 1 to the Tel Act, such as the repeal of Part 8 of Schedule 1
to that Act, which deals with operational separation and will no longer be
required. Given that a functional separation undertaking may not come into
force if the ACCC accepts an undertaking given by Telstra under proposed
section 577A of the Tel Act (relating to structural separation, see item
21), Division 3 of Part 1 of Schedule 1 of this Bill makes changes to the
TPA and the Tel Act in the event that a structural separation undertaking,
not a functional separation undertaking, comes into force.
The amendments made by Division 3 are all also included in Division 2.
However, some amendments that would be made by Division 2 are only relevant
in a situation where there is in force a functional separation undertaking
(not a structural separation undertaking). For this reason, not all of the
amendments in Division 2 are included in Division 3.
Telecommunications Act 1997
Item 49 - Subsection 61(1)
Item 50 - Subsections 61(2), (3) and (4)
These items repeal subsections 61(2), (3) and (4) and make a consequential
amendment to subsection 61(1). Subsections (2), (3) and (4) deal with the
Minister's ability to declare that current Part 8 of Schedule 1 relating to
operational separation ceases to have effect on a particular day. Part 8
of Schedule 1 is repealed by item 54, therefore the subsections are no
longer required.
Item 51 - Sections 61A, 69A and 69B
This item repeals sections 61A, 69A and 69B.
Section 61 contains provisions requiring before 1 July 2009, the Minister
to cause to be conducted a review of the operation of Part 8 of Schedule 1.
The Minister caused the review to be conducted on 7 April 2009 with the
release of the National Broadband Network: Regulatory Reform for 21st
Century Broadband discussion paper. At the time of introduction of this
Bill, a report of the review is being prepared.
Section 69A authorises the ACCC to issue remedial directions to Telstra, if
Telstra is contravening, or has contravened a condition set out in Part 8
of Schedule 1. That section is no longer required given Part 8 of Schedule
1 will be repealed (see item 54).
Section 69B contains provisions allowing Telstra to apply to the Tribunal
seeking a review of a direction given to it by the ACCC under section 69A.
That section is no longer required, given the repeal of section 69A.
Item 52 - Paragraph 70(5)(ba)
This item repeals paragraph 70(5)(ba), which authorises the ACCC to issue a
formal warning to a carrier that contravenes a carrier licence condition
set out in Part 8 of Schedule 1. That paragraph is no longer required,
given the repeal of Part 8 of Schedule 1 (see item 54).
Item 53 - Subsection 70(6)
This item repeals subsection 70(6), which is a provision regarding the
operation of paragraph 70(5)(ba). The provision is no longer required,
given the amendment proposed under item 52 above.
Item 54 - Part 8 of Schedule 1
This item repeals Part 8 of Schedule 1, on the basis that this Part (which
contains provisions relating to the operational separation of Telstra) will
no longer be required given the new form of organisational separation that
Telstra will be required to undertake when a structural separation
undertaking comes into force.
Trade Practices Act 1974
Item 55 - Division 14 of Part XIB
This item repeals Division 14 of Part XIB. Division 14 contains provisions
relating to the operational separation of Telstra under Part 8 of Schedule
1 of the Tel Act. Those provisions are no longer required given that Part
8 of Schedule 1 is repealed by item 54.
Item 56 - Section 152EQ
This item repeals section 152EQ. That section contains provisions relating
to the operational separation of Telstra under Part 8 of Schedule 1 of the
Tel Act. Those provisions are no longer required given that Part 8 of
Schedule 1 is repealed by item 54.
Part 2-Telecommunications access regime
Part 2 of Schedule 1 of the Bill makes a number of amendments to the
telecommunications access regime in Part XIC of the TPA. Necessary
consequential amendments are also made to the Tel Act and the NTN Sale Act.
Division 1 - Amendments
Division 1 of Part 2 of Schedule 1 to the Bill contains proposed amendments
to the telecommunications access regime under Part XIC of the TPA, and
associated amendments to other Acts.
National Transmission Network Sale Act 1998
The National Transmission Network Sale Act 1998 (NTN Sale Act) facilitated
the sale of the national transmission network and set in place a regulatory
framework for the provision of national broadcasting and other transmission
services after the sale.
Part 3 of the NTN Sale Act applies an access regime, based on the
telecommunications access regime in Part XIC of the TPA, to:
certain carriage services supplied by a National Transmission Company
(being a company to which assets or liabilities are transferred under the
provisions of the NTN Sale Act) or declared successor; and
* the provision of access to sites and towers by a National Transmission
Company or declared successor;
in favour of certain nominated customers (for example, the ABC, the SBS and
Radio for the Print Handicapped).
Part 2 of Schedule 1 of this Bill makes a number of changes to Part XIC of
the TPA, including replacing the negotiate/arbitrate model with a power for
the ACCC to set up front the terms and conditions of access to declared
services in access determinations. The amendments to the structure and
operation of Part XIC of the TPA by Part 2 of Schedule 1 of this Bill will
not apply to the telecommunications access regime insofar as it is adopted
by Part 3 of the NTN Sale Act. The effect of items 57 and 58 is that
Part XIC of the TPA as it operated before this Bill will continue to apply
as the telecommunications access regime that is adopted by Part 3 of the
NTN Sale Act.
Item 57 - Section 3 (paragraphs (a) and (b) of the definition of
telecommunications access regime)
Item 57 of Schedule 1 of the Bill amends the definition of
'telecommunications access regime' in section 3 of the NTN Sale Act.
Currently that term is defined to mean Part XIC of the TPA (paragraph (a)
of the definition), any other provision of the TPA that relates to Part XIC
(paragraph (b)), certain sections and Parts of the Tel Act (paragraph(c)),
and any other provisions that relate to those sections and Parts of the Tel
Act (paragraph (d)).
Item 57 amends paragraphs (a) and (b) of this definition to provide that
the reference to Part XIC of the TPA in the definition of the term
'telecommunications access regime' means Part XIC of the TPA as in force
immediately before the commencement of Part 2 of Schedule 1 of this Bill.
Item 58 - At the end of section 16
Section 16 of the NTN Sale Act provides that certain provisions of the TPA
do not apply to the telecommunications access regime in Part 3 of that Act.
Item 58 amends section 16 to provide that a reference to the TPA in that
section is a reference to that Act as in force immediately before the
commencement of Part 2 of Schedule 2 of this Bill.
Telecommunications Act 1997
Item 59 - After section 62
Included in the proposed amendments made by Part 2 of Schedule 1 of this
Bill to Part XIC of the TPA are additional carrier licence conditions and
service provider rules, which are specific to the telecommunications access
regime and are therefore to be located in Part XIC of the TPA.
Item 59 and the following items through to item 70 contain proposed
consequential amendments to the Tel Act to accommodate the additional
carrier licence conditions and service provider rules that are proposed to
be inserted into Part XIC of the TPA.
Item 59 inserts proposed sections 62A, 62B and 62C into the Tel Act.
Proposed section 62A Condition of carrier licence set out in section
152BCO of the Trade Practices Act 1974
Proposed section 62B Condition of carrier licence set out in section
152BDF of the Trade Practices Act 1974
Proposed section 62C Condition of carrier licence set out in section
#152BEC of the Trade Practices Act 1974
Proposed sections 62A, 62B and 62C of the Tel Act provides that a carrier
licence is subject to the conditions set out in proposed sections 152BCO,
152BDF and 152BEC of the TPA, respectively. These provisions are inserted
as part of the proposed Division 4 of Part XIC of the TPA that is inserted
by item 116.
Proposed sections 152BCO and 152BDF of the TPA set out carrier licence
conditions requiring a carrier to comply with any access determinations
applicable to it, and any binding rules of conduct applicable to it.
Proposed section 152BEC sets out carrier licence conditions requiring a
carrier to comply with proposed sections 152BEA and 152BEB of the TPA which
relate to the lodgement of access agreements with the ACCC and the
notification to the ACCC of the termination of access agreements.
The effect of proposed sections 62A and 62B of the Tel Act, together with
proposed sections 152CO and 152BDF of the TPA, is that a carrier must
comply with an access determination and with binding rules of conduct, and
that failure to do so would render the carrier subject to the enforcement
provisions in the Tel Act relating to breach of carrier licence conditions.
Equally, the effect of proposed section 62C of the Tel Act is that failure
by a carrier to comply with proposed sections 152BEA and 152BEB would
render the carrier subject to those enforcement provisions.
Item 60 - After subsection 69(7)
Item 60 inserts proposed subsections 69(7A), (7B) and (7C) into the Tel
Act. The effect of these new provisions is that subsection 69(1) does not
apply to the carrier licence conditions set out in proposed sections
152BCO, 152BDF or 152BEC of the TPA. Subsection 69(1) of the Tel Act and
related provisions under section 69 authorise the ACMA to issue a remedial
direction to a carrier that is contravening, or has contravened, a
condition of its carrier licence. The effect of proposed
subsections 69(7A), (7B) and (7C) is that the ACMA would not be authorised
to issue a remedial direction to a carrier that is contravening or has
contravened a licence condition under proposed sections 152BCO, 152BDF or
152BEC of the TPA. The reason for this restriction is that it is intended
that only the ACCC and the Minister will have authority to take action
against a carrier for breach of a licence condition under proposed sections
152BCO, 152BDF or 152BEC of the TPA. The identified licence conditions are
specific to the telecommunications access regime under Part XIC of the TPA,
for which the ACCC has regulatory responsibility. It is therefore
appropriate that the ACCC, and not the ACMA, will have powers to take
action against carriers for breach of those licence conditions.
Item 61 - After subsection 70(4)
Item 61 inserts proposed subsections 70(4A), (4B) and (4C) into the Tel
Act. The effect of these provisions is that subsection 70(1) does not
apply to the conditions set out in proposed sections 152BCO, 152BDF and
152BEC of the TPA. Subsection 70(1) of the Tel Act authorises the ACMA to
issue formal warnings to carriers that contravene a condition of their
carrier licence. The effect of proposed subsections 70(4A), (4B) and (4C)
is that the ACMA would not be authorised to issue a formal warning to a
carrier that has contravened a carrier licence condition set out in
proposed sections 152BCO, 152BDF or 152BEC of the TPA. The reason for this
restriction is the same as that outlined under the explanatory note under
item 60 above.
Item 62 - At the end of subsection 70(5)
This item inserts proposed paragraphs 70(5)(d), (e) and (f). The proposed
paragraphs have the effect of adding the conditions set out in proposed
sections 152BCO, 152BDF and 152BEC as licence conditions for which the ACCC
may issue formal warnings to a carrier under subsection 70(5), where that
carrier contravenes the licence condition. As the conditions to be
included by proposed sections 152BCO, 152BDF and 152BEC are specific to the
telecommunications access regime under section Part XIC of the TPA, it is
appropriate that the ACCC be given a formal warning power under subsection
70(5) in relation to those licence conditions.
Item 63 - At the end of section 98
This item inserts proposed subsections 98(3), (4) and (5) into the Tel Act.
The proposed subsections indicate that the rules set out in proposed
subsections 152BCP(2), 152BDG(2) and 152BED(2) of the TPA are to be
included as service provider rules for the purposes of the Tel Act and its
regulations. Proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) are
inserted into proposed Division 4 of Part XIC of the TPA by item 116. The
rules in these proposed provisions mirror the conditions set out in
proposed sections 152BCO, 152BDF and 152BEC of the TPA. They require
service providers to comply with access determinations and binding rules of
conduct that are applicable, and require service providers to comply with
proposed sections 152BEA and 152BEB of the TPA which relate to the
lodgement of access agreements with the ACCC and the notification to the
ACCC of the termination of access agreements.
Under subsection 101(1) of the Tel Act a service provider must comply with
all service provider rules that apply to that provider. Subsection 101(1)
is also a civil penalty provision. Proposed subsections 98(3), (4) and (5)
have the effect of making the rules set out in proposed subsections
152BCP(2), 152BDG(2) and 152BED(2) of the TPA subject to the civil penalty
provisions under the Tel Act and other provisions under the Tel Act dealing
with service provider rules, including provisions relating to enforcement.
Item 64 - After subsection 102(6)
This item inserts proposed subsections 102(6A), (6B) and (6C) into the Tel
Act. These provisions indicate that subsection 102(1) does not apply to
the rules set out in proposed subsections 152BCP(2), 152BDG(2) and
152BED(2) of the TPA. Subsection 102(1) of the Tel Act and related
provisions under section 102 authorise the ACMA to issue a remedial
direction to a service provider that is contravening, or has contravened, a
service provider rule. The effect of proposed subsections 102(7A), (7B)
and (7C) is that the ACMA would not be authorised to issue a remedial
direction to a service provider that is contravening or has contravened a
service provider rule under proposed subsections 152BCP(2), 152BDG(2) or
152BED(2) of the TPA. The reason for this restriction is that it is
intended that only the ACCC and the Minister will have authority to take
action against a service provider for breach of a service provider rule
under proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the TPA.
The identified service provider rules are specific to the
telecommunications access regime under Part XIC of the TPA, for which the
ACCC has regulatory responsibility. It is therefore appropriate that only
the ACCC will have powers to take action against service providers for
breach of those service provider rules.
Item 65 - After subsection 103(3)
This item inserts proposed subsections 103(3A), (3B) and (3C) into the Tel
Act. These provisions indicate that subsection 103(1) does not apply to
the rules set out in proposed subsections 152BCP(2), 152BDG(2) and
152BED(2) of the TPA. Subsection 103(1) of the Tel Act authorises the ACMA
to issue a formal warning to a person that breaches a service provider
rule. The effect of proposed subsections 103(3A), (3B) and (3C) is that
the ACMA would not be authorised to issue a formal warning to a person that
breaches a service provider rule set out in proposed subsections 152BCP(2),
152BDG(2) or 152BED(2) of the TPA. The reason for this restriction is the
same as that outlined in the explanatory note under item 64 above.
Item 66 - After subsection 103(4)
This item inserts proposed subsections 103(4A), (4B) and (4C) into the Tel
Act. The proposed subsections have the effect of adding the rules set out
in proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) as service
provider rules for which the ACCC may issue a formal warning to a service
provider under section 103, where that service provider has contravened the
service provider rule. As the rules set out under proposed subsections
152BCP(2), 152BDG(2) and 152BED(2) are specific to the telecommunications
access regime under section Part XIC of the TPA, it is appropriate that the
ACCC be given a formal warning power under subsections 103(4A), (4B) and
(4C) in relation to those service provider rules.
Item 67 - At the end of subsection 564(3) (before the notes)
This item inserts proposed paragraphs 564(3)(f), (g), (h), (i), (j) and
(k). Section 564 of the Tel Act permits the Minister, the ACMA or the ACCC
to apply to the Federal Court for an injunction concerning a person's
contravention of the Tel Act. Under current subsection 564(3) the ACMA is
not entitled to apply for an injunction in relation to a contravention of
certain carrier licence conditions and service provider rules that are
listed under that subsection. The proposed paragraphs add the licence
conditions in sections 152BCO, 152BDF and 152BEC of the TPA and the service
provider rules in subsections 152BCP(2), 152BDG(2) and 152BED(2) of the TPA
to the list of licence conditions and service provider rules in
subsection 564(3). This means the ACMA would not be entitled to apply for
an injunction in relation to a contravention of a carrier licence condition
in proposed sections 152BCO, 152BDF or 152BEC of the TPA or a service
provider rule in proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of
the TPA. The Minister and the ACCC would however be entitled to apply for
an injunction in relation to a contravention of these carrier licence
conditions and service provider rules. The reason for this restriction is
outlined in the explanatory notes under items 60 and 64 above.
Item 68 - At the end of subsection 564(3) (after the notes)
This item adds notes to section 564 in relation to proposed paragraphs
564(3)(f), (g), (h), (i), (j) and (k) (under item 67 above) to assist the
reader.
Item 69 - At the end of subsection 571(3) (before the notes)
This item inserts paragraphs 571(3)(f), (g), (h), (i), (j) and (k).
Section 571 of the Tel Act permits the Minister, the ACMA or the ACCC to
institute proceedings in the Federal Court for the recovery on behalf of
the Commonwealth of a pecuniary penalty, for breach of a civil penalty
provision. Under current subsection 571(3) the ACMA is not entitled to
institute a proceeding for recovery of a pecuniary penalty in relation to a
contravention of a carrier licence condition or service provider rule
listed under that subsection. The proposed paragraphs add the licence
conditions in proposed sections 152BCO, 152BDF and 152BEC of the TPA and
the service provider rules in proposed subsections 152BCP(2), 152BDG(2) and
152BED(2) of the TPA to the list of licence conditions and service provider
rules in subsection 571(3). This means the ACMA would not be entitled to
institute a proceeding for recovery of a pecuniary penalty in relation to a
contravention of a carrier licence condition in proposed sections 152BCO,
152BDF or 152BEC of the TPA or a service provider rule in proposed
subsections 152BCP(2), 152BDG(2) or 152BED(2) of the TPA. The reason for
this restriction is outlined in the explanatory notes under items 60 and 64
above.
Item 70 - At the end of subsection 571(3) (after the notes)
This item adds notes to section 571 in relation to proposed paragraphs
571(3)(f), (g), (h), (i), (j) and (k) (under item 69 above) to assist the
reader.
Trade Practices Act 1974
Item 71 - Section 152AA
Item 71 amends the outline of Part XIC of the TPA at section 152AA to take
account of the changes to that Part made by the items that follow.
Item 72 - Section 152AC
Item 72 includes in section 152AC of the TPA a reference to 'access
agreement', which is a term defined in proposed section 152BE (see item
116).
Item 73 - Section 152AC
Item 73 includes in section 152AC of the TPA a definition of the term
'access determination'. An access determination is a determination made
under proposed section 152BC, inserted as part of proposed Division 4 of
Part XIC (see item 116).
Item 74 - Section 152AC (definition of access undertaking)
Item 74 amends the definition of 'access undertaking' in section 152AC of
the TPA to remove reference to an ordinary access undertaking. As a result
of the amendments made to Part XIC of the TPA by this Bill, ordinary access
undertakings will no longer be a part of the telecommunications access
regime. Only special access undertakings will be available.
Item 75 - Section 152AC
Item 75 inserts in section 152AC a definition of 'binding rules of
conduct', and provides that this term refers to rules made under proposed
subsection 152BD(1), inserted as part of proposed Division 4A of Part XIC
(see item 116).
Item 76 - Section 152AC
Item 76 inserts into section 152AC of the TPA a definition of the term
'final access determination', and provides that this term refers to an
access determination other than an 'interim access determination' (the
definition of this term is also included in section 152AC by this Bill -
see item 78).
Item 77 - Section 152AC
Item 77 includes in section 152AC of the TPA a definition of the term
'fixed principles provision', which is a term defined in proposed section
152BCD, inserted as part of proposed Division 4 of Part XIC (see item 116)
Item 78 - Section 152AC
Item 78 inserts into section 152AC of the TPA a definition of the term
'interim access determination', and provides that this term refers to an
access determination that is expressed to be an interim access
determination. The requirement for interim access determinations is set
out in proposed section 152BCG.
Item 79 - Section 152AC (definition of ordinary access undertaking)
Item 79 repeals the definition of 'ordinary access undertaking'. Ordinary
access undertakings are dealt with in the current Subdivision A of Division
5 of Part XIC, which is repealed by item 117.
Item 80 - Section 152AC (definition of telecommunications access code)
Item 80 repeals the definition of 'telecommunications access code'.
Telecommunications access codes are dealt with in the current Division 4 of
Part XIC. As a result of the amendment made by item 116, current Division
4 of Part XIC is repealed and replaced.
Item 81 - Section 152AC
Item 81 inserts a definition of 'variation agreement' into section 152AC.
This term has the meaning given to it by proposed subsection 152BE(3).
Item 82 - At the end of section 152AF
Item 82 inserts new subsections 152AF(3) and (4). Section 152AF deals with
'access', and provides (at subsection 152AF(2)) that anything done by a
carrier or a CSP in fulfilment of a standard access obligation is taken to
be an aspect of access to a declared service.
Proposed subsections 152AF(3) and (4) provide that anything done by a
carrier or CSP in fulfilment of a requirement that is imposed on the
carrier or CSP by an access determination or by binding rules of conduct is
taken to be an aspect of access to a declared service.
Item 83 - After section 152AH
Item 83 inserts proposed section 152AI into Part XIC of the TPA.
Proposed section 152AI When public inquiry commences
Proposed section 152AI clarifies, for the purposes of Part XIC, when a
public inquiry held by the ACCC under Part 25 of the Tel Act commences.
This provision is necessary as, under the amendments made to Part XIC by
this Bill, the ACCC is subject to certain timeframes that apply from the
commencement of a public inquiry. For example, under proposed section
152BCG, the ACCC must make an interim access determination if it is
unlikely that the final access determination in relation to a newly
declared service will be in place six months after the commencement of the
public inquiry relating to the making of the access determination.
Item 84 - Subsection 152ALA(2)
Item 84 repeals current subsection 152ALA(2) and replaces it with proposed
subsection 152ALA(2). Currently, subsection 152ALA(2) provides that an
access declaration made by the ACCC under section 152AL must specify an
expiry date that occurs within the five-year period beginning when the
access declaration was made. The effect of proposed subsection 152ALA(2)
is to allow an access declaration to specify an expiry date that is more
than five years after the declaration was made. However, the proposed
subsection also provides that in specifying an expiry date, the ACCC is to
have regard to the principle that an access declaration should be between
three and five years, unless the ACCC considers that there are
circumstances that warrant making an access declaration with a duration
shorter than three years or longer than five years. The ACCC may also have
regard to other matters it considers relevant in specifying an expiry date.
This amendment is intended to enable the ACCC to provide longer-term
regulatory certainty, where appropriate, to promote competition and
investment.
Item 85 - After subsection 152ALA(6)
Item 85 inserts proposed subsection 152ALA(6A). Subsection 152ALA(6)
clarifies that, if an access declaration made by the Commission under
section 152AL expires, the ACCC is not prevented from making a fresh
declaration under section 152AL in the same terms as the expired
determination. The effect of proposed subsection 152ALA(6A) is that the
fresh declaration is taken to 'replace' the expired declaration. The
concept of a fresh declaration replacing an expired declaration is relevant
in determining the duration of an access determination (see proposed
subsection 152BCF(3)), and is also relevant to the automatic revocation of
an access determination (see proposed subsections 152BCF(7) and (8)).
Item 86 - Paragraph 152ALA(7)(a)
Item 86 amends paragraph 152ALA(7)(a). Currently paragraph 152ALA(7)(a)
requires the ACCC, within the 12-month period ending on the expiry of a
declaration, to hold a public inquiry under Part 25 of the Tel Act about
whether to extend, further extend, revoke or vary a declaration. The
amendment made to paragraph 152ALA(7)(a) would extend the time period for
holding this inquiry, so that the ACCC must hold it within the 18-month
period ending on the expiry of a declaration. This would make the period
for holding the inquiry consistent with the 18-month period during which
the ACCC is required to hold a public inquiry into making an access
determination (see proposed subsection 152BCI(3)).
Item 87 - After subparagraph 152ALA(7)(a)(v)
Item 87 makes a further amendment to paragraph 152ALA(7)(a) by inserting
proposed subparagraph 152ALA(7)(a)(vi), the effect of which is that, after
holding a public inquiry, the ACCC can make a decision to extend (or
further extend) the expiry date of a declaration by 12 months or less and
allow the declaration to expire. Where the ACCC decides that a service
should no longer be declared, this provision will enable it to extend the
declaration for a short time to enable access seekers to transition to
other services, and removes the need for an additional inquiry prior to the
extended expiry date.
Item 88 - Subsection 152AM(3)
Item 88 repeals current subsection 152AM(3) and replaces it with proposed
subsection 152AM(3). Section 152AM applies to public inquires that the
ACCC holds about declaring services (under paragraph 152AL(3)(a)) or about
the extension, variation, revocation, or expiry of a declaration (under
paragraph 152ALA(7)(a)). Subsection 152AM(2) provides that the ACCC may
hold an inquiry on its own initiative, or if requested in writing to do so
by any person. Subsection 152AM(3) currently requires the ACCC, if it
decides not to hold an inquiry after a person has requested it to do so, to
notify the person in writing of its decision and its reasons for the
decision. Item 79 repeals and replaces subsection 152AM(3). Proposed
subsection 152CM(3) provides that the ACCC does not have a duty to consider
whether to hold an inquiry about a proposal to declare a service under
paragraph 152AL(3)(a) if it is requested to do so by a person. This
amendment is intended to streamline the operation of sections 152AL and
152ALA, by removing the requirements for the ACCC to consider each request
that it receives to hold an inquiry and provide reasons if it decides not
to proceed with an inquiry.
Item 89 - Subsection 152AQ(3)
Item 90 - Subsections 152AQ(4), (5) and (6)
Section 152AQ requires the ACCC to keep a Register of declarations made
under section 152AL. Item 90 repeals subsections 152AQ(4), (5) and (6),
which provide for the inspection and copying of the Register, and replaces
them with proposed subsection 152AQ(4), which provides that the Register is
to be made available for inspection on the ACCC website, and proposed
subsection 152AQ(5), which clarifies that the Register is not a legislative
instrument. Item 89 makes a related change to subsection 152AQ(3), with
the effect that the ACCC is required to (rather than permitted to) maintain
the Register by electronic means.
Item 91 - Sections 152AQA and 152AQB
Section 152AQA requires the ACCC to determine in writing principles that
relate to the price of access to a declared service ('pricing principles').
Section 152AQB requires the ACCC to make a determination setting out model
terms and conditions for certain specified declared services. The ACCC is
required to have regard to both relevant pricing principles and model terms
and conditions if it is required to arbitrate an access dispute under
Division 8 of Part XIC. As Division 8 of Part XIC is being repealed by
this Bill, item 91 makes a consequential amendment to repeal both sections
152AQA and 152AQB.
Item 92 - Subsection 152AR(12) (definition of pre-request right)
Item 92 makes a change to the definition of 'pre-request right' at
subsection 152AR(12) that is necessary as a consequence of the repeal of
Division 8 of Part XIC by item 136 below.
Item 93 - Section 152AS
One of the reforms to Part XIC implemented by this Bill is to change the
system of exemptions from the standard access obligations. As a result of
the changes made to Part XIC by this Bill ordinary exemptions from the
standard access obligations will no longer be available. An ordinary
exemption is an exemption that applies in relation to a service that is a
declared service at the time the exemption determination is made by the
ACCC. Following the reforms made by this Bill, the ACCC will only be able
to issue anticipatory exemptions. An anticipatory exemption is an
exemption that applies to a service that is not a declared service at the
time the exemption determination is made. An anticipatory exemption
provides that, in the event the service in question is declared by the ACCC
under section 152AL, a particular carrier/CSP (under section 152ATA) or
members of a class of carriers/CSPs (section 152ASA) are exempt from the
requirements to comply with the standard access obligations in relation to
the declared service.
Item 93 repeals section 152AS, which provides for ordinary class exemptions
from the standard access obligations in section 152AR. The need for
ordinary exemptions is removed because the ACCC will be able to include
provisions in an access determination which remove or limit the obligation
of carriers or CSPs to comply with some or all of the standard access
obligations (see proposed paragraph 152BC(3)(h)).
Item 94 - After subsection 152ASA(1)
Item 94 clarifies the intended operation of section 152ASA (which provides
for anticipatory class exemptions from the standard access obligations),
and clarifies the effect of the repeal of section 152AS, by including
proposed subsection 152ASA(1A), which states that a service must not be
specified in an anticipatory class exemption determination if, at the time
the determination is made, the service is a declared service.
Item 95 - After subsection 152ASA(2)
Item 95 provides that an anticipatory class exemption may include a
provision (an "entrenching provision") stating either that the exemption
must not be varied or revoked (proposed paragraphs 152ASA(2A)(a) and
152ASA(2B)(a)) or that the exemption must not be varied or revoked except
in certain specified circumstances (proposed paragraphs 152ASA(2A)(b) and
152ASA(2B)(b)).
An entrenching provision in an anticipatory class exemption may itself not
be varied or removed, and nor may the anticipatory class exemption be
varied in a manner that is inconsistent with an entrenching provision:
proposed subsections 152ASA(11B) and (11C).
An entrenching provision will enable anticipatory class exemptions to
afford a higher degree of regulatory certainty to the exempted carriers or
CSPs.
Item 96 - Subsection 152ASA(8)
Item 96 makes a consequential amendment to subsection 152ASA(8), necessary
as a result of the repeal of section 152AS by item 93.
Item 97 - After subsection 152ASA(11)
Item 97 inserts proposed subsections 152ASA(11A), (11B) and (11C). The
effect of these provisions is to alter the operation of section 33(3) of
the AIA as it relates to the ACCC's power to vary or revoke orders
concerning anticipatory class exemptions. The effect of section 33(3) of
the AIA is altered to give effect to the amendments made by item 84AA,
which provide that the ACCC may choose to nominate certain provisions of an
anticipatory class exemption as entrenching provisions.
Item 98 - Subsection 152ASA(12)
Item 98 revokes subsection 152ASA(12), which provides that an anticipatory
class exemption instrument is a disallowable instrument for the purposes of
the LIA, and replaces it with a provision stating that such an instrument
is not a legislative instrument for the purposes of the LIA.
Under the LIA, legislative instruments are subject to Parliamentary
disallowance which would not be appropriate for instruments made under Part
XIC. Where the ACCC uses a number of inter-related instruments to deal
with a matter, disallowance of one instrument could result in inconsistent
and undesirable regulatory outcomes. The Bill provides for consultation
and termination of the instruments (other key features of the LIA).
Item 99 - Subsection 152ASA(13) (note)
Item 99 repeals the note at subsection 152ASA(13). It is no longer
necessary as a result of the amendment made by item 97.
Item 100 - Section 152AT
Item 100 repeals section 152AT, which provides for ordinary individual
exemptions from the standard access obligations at section 152AR. The
consequences of and reasons for the repeal of ordinary exemptions are
discussed above at item 93.
Item 101 - After subsection 152ATA(3)
Item 101 clarifies the intended operation of section 152ATA (which provides
for anticipatory individual exemptions from the standard access
obligations), and clarifies the effect of the repeal of section 152AT, by
including proposed subsection 152ATA(3A), which states that a service must
not be specified in an anticipatory individual exemption order if, at the
time the order is made, the service is a declared service.
Item 102 - After subsection 152ATA(4)
Item 102 provides that an anticipatory individual exemption may include a
provision (an "entrenching provision") stating that either that the
exemption must not be varied or revoked (proposed paragraphs 152ATA(4A)(a)
and 152ATA(4B)(a)) or that the exemption must not be varied or revoked
except in certain specified circumstances (proposed
paragraphs 152ATA(4A)(b) and 152ATA(4B(b)).
An entrenching provision in an anticipatory individual exemption may itself
not be varied or removed, and nor may the anticipatory individual exemption
be varied in a manner that is inconsistent with an entrenching provision:
proposed subsections 152ATA(16B) and (16C).
An entrenching provision will enable anticipatory individual exemptions to
afford a higher degree of regulatory certainty to the exempted carriers or
CSPs.
Item 103 - After subsection 152ATA(6)
Item 103 inserts proposed subsection 152ATA(7), which provides a mechanism
for the ACCC to refuse to consider serial anticipatory individual
exemptions. Where the ACCC rejects one application for an anticipatory
individual exemption by a person, and the person subsequently makes another
application for an anticipatory individual exemption, and the first
application and the later application are materially similar, or the
grounds on which the person made the first application are materially
similar to the grounds on which the person made the later application, then
the ACCC can refuse to consider the later application. This provision is
intended to ensure that the ACCC does not have to devote time and resources
to reconsidering an application for an anticipatory individual exemption
that is likely to be rejected.
Item 104 - Subsection 152ATA(10)
Item 104 makes a consequential amendment to subsection 152ATA(10),
necessary as a result of the repeal of section 152AT by item 100.
Item 105 - After subsection 152ATA(16)
Item 105 inserts proposed subsections 152ATA(16A), (16B) and (16C). The
effect of these provisions is to alter the operation of section 33(3) of
the AIA as it relates to the ACCC's power to vary or revoke orders
concerning anticipatory individual exemptions. The effect of section 33(3)
of the AIA is altered to give effect to the amendments made by item 102,
which provide that the ACCC may choose to nominate certain provisions of an
anticipatory individual exemption as entrenching provisions.
Item 106 - Subsection 152ATA(18) note
Item 106 repeals the note at subsection 152ATA(18). It is no longer
necessary as a result of the amendment made by item 105.
Item 107 - Subsection 152AU(1)
Item 107 makes a consequential amendment to subsection 152AU(1), necessary
as a result of the repeal of section 152AT by item 100.
Item 108 - Sections 152AV to 152AX
Item 108 provides for the repeal of sections 152AV, 152AW and 152AX. These
sections deal with the review by the Australian Competition Tribunal of
ACCC decisions relating to ordinary and anticipatory individual exemptions.
Ordinary individual exemptions will no longer be available after the
amendments made by this Bill: see item 100. The effect of item 108 is
therefore to remove merits review in the Australian Competition Tribunal of
ACCC decisions relating to anticipatory individual exemptions.
Merits review of ACCC decisions under the TPA can contribute to delays and
regulatory uncertainty. This is problematic in the telecommunications
sector which is characterised by rapid technological advances and changing
market conditions. The ACCC's decisions are subject to judicial review by
the Federal Court under the Administrative Decisions (Judicial Review) Act
1977.
Item 109 - Subsection 152AXA(1)
Item 110 - Paragraph 152AXA(1)(a)
Item 111 - Subsection 152AXA(2)
Items 109, 110 and 111 make consequential changes to section 152AXA, which
are necessary as a result of the repeal of section 152AT by item 100 and
the repeal of provisions allowing merits review for anticipatory individual
exemptions by item 108.
Item 112 - Section 152AY
As a result of amendments made elsewhere in Part 2 of Schedule 1 of this
Bill, item 112 repeals and replaces section 152AY, which sets out the terms
and conditions on which a carrier/CSP must comply with the standard access
obligations.
Under the proposed amendments to Part XIC made by this Bill, the terms and
conditions on which a carrier/CSP must comply with the standard access
obligations may be dealt with in different documents that exist at the same
time. The proposed section 152AY establishes a hierarchy between those
documents for identifying the terms and conditions on which a carrier/CSP
must comply with the standard access obligations.
The effect of proposed section 152AY is that those terms and conditions are
identified by answering a number of questions:
- Is there in place an access agreement between the carrier/CSP and an
access seeker that specifies terms and conditions relating to a
particular matter?
o If so, then the terms and conditions relating to that matter are
as set out in the access agreement.
o If not, then...
- ...is there a special access undertaking given by the carrier/CSP that
is in force and that specifies terms and conditions relating to that
matter?
o If so, then the terms and conditions are as set out in the
undertaking.
o If not, then...
- ...are there binding rules of conduct that specify terms and
conditions relating to that matter?
o If so, then the terms and conditions relating to that matter are
as set out in the binding rules of conduct.
o If not, then...
- ...is there an access determination that specifies terms and
conditions relating to that matter?
o If so, then the terms and conditions relating to that matter are
as set out in the access determination.
o If not, then the terms and conditions relating to that matter
will need to be dealt with using one of the three methods above.
This means that where terms and conditions relating to a matter are not
currently covered by an access agreement, a special access undertaking,
binding rules of conduct or an access determination, those terms and
conditions will need to be addressed using one of those mechanisms. For
example, in this circumstance the parties to an access agreement could vary
their access agreement to take account of the matter and include additional
terms and conditions. Or, the ACCC could include terms and conditions
relating to the matter in new binding rules of conduct or a new or varied
access determination.
The provisions in proposed Division 4A relating to binding rules of conduct
are intended to allow the ACCC to make urgent and temporary arrangements to
deal with terms and conditions of access to declared services: this may
include dealing with the situation where the terms and conditions on which
a carrier/CSP must comply with the standard access obligations are not
currently specified elsewhere.
Three notes are included at the end of proposed section 152AY.
The first note alerts the reader that, before considering the hierarchy
that is set out at proposed subsection 152AY(2) and is described above, it
is necessary to consider certain listed provisions of Part XIC that are
inserted by this Bill, and that specify how inconsistency is to be
addressed. For example, proposed section 152CBIC provides that an access
agreement will prevail over a special access undertaking, to the extent of
any inconsistency in the terms and conditions set out in them. So if an
access agreement between a carrier/CSP and an access seeker and a special
access undertaking given by that carrier/CSP both provide terms and
conditions dealing with a particular matter, in considering the application
of the hierarchy at proposed section 152AY in such a circumstance, in
effect the special access undertaking is taken not to address the matter:
it has no effect to the extent of the inconsistency.
The second note highlights that although, under the hierarchy described
above, binding rules of conduct take precedence over an access
determination, it is expected that the ACCC will only make binding rules of
conduct on an occasional basis. As noted above, binding rules of conduct
are intended to deal with urgent matters. They have a maximum duration of
12 months. It is expected that access determinations will be the usual way
that the ACCC specifies up-front terms and conditions of access, including
terms and conditions for complying with the standard access obligations.
The third note indicates that transitional provisions are included in
Division 2 of Schedule 1 of this Bill. Specifically, item 155 of the Bill
deals with the hierarchy that is to apply in the transition from the
operation of the current Part XIC, including provisions for the ACCC to
make arbitration determinations, to the operation of Part XIC as amended by
this Bill.
Item 113 - Paragraph 152BBAA(1)(a)
Item 114 - Paragraph 152BBAA(1)(b)
Items 113 and 114 make consequential amendments, necessary as a result of
the repeal of sections 152AS and 152AT by items 93 and 100.
Item 115 - Subsection 152BBC(5)
Item 115 makes a consequential amendment to section 152BBC, necessary as a
result of the repeal of Division 8 of Part XIC by item 136. It repeals
subsection 152BBC(5), which refers to arbitrations of access disputes under
Division 8.
Item 116 - Division 4 of Part XIC
Current Division 4 of Part XIC deals with telecommunications access codes.
Item 116 repeals current Division 4 and replaces it with:
- proposed Division 4, which deals with access determinations;
- proposed Division 4A, which deals with binding rules of conduct; and
- proposed Division 4B, which deals with access agreements.
Telecommunications access codes specify model terms and conditions of
access that can be adopted by an ordinary access undertaking. As it is
proposed to abolish ordinary access undertakings (see item 117), there is
no longer a need for telecommunications access codes.
Proposed Division 4-Access Determinations
A key reform made by this Bill to Part XIC is the removal of the ACCC's
role in arbitrating access disputes between access providers and access
seekers, and the introduction of a power for the ACCC to set up front the
terms and conditions of access to declared services to apply to all access
providers and all access seekers.
Proposed Division 4 contains provisions that:
- enable the ACCC to make access determinations setting out the terms
and conditions of access for declared services;
- specify particular requirements and limitations relating to the
content of access determinations;
- set out the process the ACCC is required to follow in making access
determinations; and
- deal with the variation, revocation and enforcement of access
determinations.
Proposed Subdivision A-Commission may make access determinations
Proposed Subdivision A of proposed Division 4 of Part XIC includes
provisions dealing with the ACCC's power to make access determinations.
Proposed section 152BC Access determinations
Proposed section 152BC provides that the ACCC may make written
determinations relating to access to a declared service, to be known as
access determinations.
A list of matters that may be included in access determinations is set out
at proposed subsection 152BC(3), and is based on the list of matters that
can be dealt with under an arbitration determination made by the ACCC
(which are set out at subsection 152CP(2)). (Note that subsection 152CP(2)
(and the rest of Division 8 of Part XIC) is being repealed by item 136.)
Access determinations may specify the terms and conditions on which a
carrier/CSP is to comply with any of the standard access obligations that
apply to that carrier/CSP (see also proposed section 152AY).
Notably, an access determination can impose other requirements relating to
access to the declared service on a carrier/CSP, in addition to the
standard access obligations, and can specify the terms and conditions on
which the carrier/CSP is to meet those other requirements. An access
determination can restrict or limit the application of one or more of the
standard access obligations to a carrier/CSP.
The list of matters at proposed subsection 152BC(3) does not limit the
matters that may be included in an access determination (see proposed
subsection 152BC(4)).
The terms and conditions that are specified in an access determination must
include terms and conditions relating to price or a method of ascertaining
price, which provides the ACCC with flexibility in how it addresses pricing
issues (proposed subsection 152BC(8)).
While the intention is that access determinations will include provisions
that apply to all carriers/CSPs and access seekers, it is recognised that
there may be instances where the ACCC needs to craft particular provisions
that apply specifically to particular carriers/CSPs or access seekers, or
to classes of carriers/CSPs or access seekers. For this reason, proposed
subsection 152BC(5) provides that an access determination may make
different provision with respect to different carriers/CSPs, or different
access seekers, or different classes of carriers/CSPs or access seekers.
Proposed subsection 152BC(6) clarifies that proposed subsection 152BC(5)
does not, by implication, affect the operation of section 33(3A) of the
AIA, which provides that, where legislation confers a power to make an
instrument with respect to particular matters, the power includes a power
to make the instrument with respect to only some of those matters or a
class or classes of those matters, and to make different provision with
respect to different matters or different classes of matters.
An access determination may provide for the ACCC to perform functions or
exercise powers (proposed subsection 152BC(7)). This enables an access
determination, for example, to specify that particular complex or changing
matters can be determined or approved by the ACCC at intervals during the
duration of the access determination. An access determination might set an
up-front regulatory asset base and provide that any additions to the
regulatory asset base during the period of the determination must be
approved by the ACCC.
Proposed subsection 152BC(9) provides that access determinations are not
legislative instruments.
Proposed section 152BCA Matters that the Commission must take into
account
Proposed subsection 152BCA(1) sets out a list of matters that the ACCC must
take into account when making an access determination. The list of matters
is based on subsection 152CR(1) of the Act, which sets out the matters that
the ACCC must take into account when making a final determination in an
access dispute. Section 152CR (and the rest of Division 8) is being
repealed by this Bill (see item 136).
The effect of proposed subsection 152BCA(2) is that, in making an access
determination in relation to a particular service that is provided by a
carrier or CSP, the ACCC can take into account relevant aspects of other
eligible services (as that term is defined in section 152AL) that are
supplied by that carrier or CSP. Proposed subsection 152BCA(2) is intended
to ensure that, in making an access determination that applies to carriers
or CSPs, the ACCC is not limited to considering the particular declared
service that the access determination relates to in isolation, but is able
to consider it in the context of the other relevant services which the
carrier or CSP provides. For instance, when specifying the access price
for a declared service which is supplied by an access provider over a
particular network or facility, the ACCC can take into account not only the
access provider's costs and revenues associated with the declared service,
but also the costs and revenues associated with other services supplied
over that network or facility.
Proposed subsection 152BCA(3) clarifies that, in making an access
determination, the ACCC may take into account other matters that it thinks
are relevant.
The requirements in proposed subsection 152BCA do not apply to the making
by the ACCC of interim determinations (see proposed subsection 152BCA(4)),
which are dealt with by proposed section 152BCG.
Proposed section 152BCB Restrictions on access determinations
Proposed section 152BCB provides certain restrictions on the ACCC's ability
to make access determinations. The ACCC must not make an access
determination that would have any of the effects listed at proposed
subsection 152BCB(1). The list of effects is based on subsection 152CQ
which sets out a comparable limitation on the ACCC's ability to make
arbitration determinations. Proposed subsection 152BCB(3) provides that
the ACCC must not make an access determination that is inconsistent with
the standard access obligations applicable to a carrier or CSP.
If an access determination has any of the effects in proposed subsections
152BCB(1) or (3), then the access determination does not operate to the
extent that it would have those effects (proposed subsection 152BCB(5)).
Among the prohibited effects in proposed subsection 152BCB(1), the ACCC
must not make an access determination that would have the effect of
requiring a carrier or CSP to provide an access seeker with access to a
declared service if there are reasonable grounds to believe that the access
seeker would fail to comply with the terms of access (proposed
subparagraph 152BCB(1)(g)(i)). Proposed subsection 152BCB(2) sets out
examples of grounds for holding that belief, and is based on the comparable
provision that currently applies to the making of arbitration
determinations (subsection 152CQ(3)).
Proposed subsection 152BCB(4) (modelled on current subsection 152CQ(8))
deals with the effect of an ACCC determination which deprives a person of a
pre-determination right (which is not a protected contractual right) which
does not infringe paragraphs 152BCB(1)(b) or (d) in so far as the person
will not actually need to exercise the right to meet his or her actual
requirements. Where an access determination has the effect of depriving a
person of a pre-determination right in force at the time of the
determination came into force, the determination must also require the
access seeker to:
- pay to the person such compensation (if any) that the ACCC considers
fair compensation for the loss of the contractual right; and
- reimburse the carrier or provider and the Commonwealth for any
compensation that the carrier or provider or the Commonwealth agrees
or is required under court order to pay to the person as compensation
for the loss of the contractual right.
As noted above, proposed subsection 152BCB(3) provides that the ACCC must
not make an access determination that is inconsistent with the standard
access obligations applicable to a carrier or CSP. Proposed paragraphs
152BC(3)(h) and (i) enable the ACCC to limit the standard access
obligations that are applicable to a carrier/CSP.
A 'pre-determination right' is defined in subsection 152BCB(6).
Proposed section 152BCC Access determinations that are inconsistent with
access agreements
Carriers/CSPs and access seekers are free to negotiate on and agree to
terms of access to declared services. If carriers/CSPs and access seekers
settle on an agreed arrangement for access to declared services, that
arrangement is called an access agreement. Access agreements are dealt
with in proposed Division 4B of Part XIC of the TPA.
Proposed section 152BCC deals with the situation where an access
determination is inconsistent with an access agreement between a
carrier/CSP and an access seeker. To the extent that an access
determination contains terms and conditions that are applicable to a
carrier/CSP and an access seeker, and that are inconsistent with terms and
conditions agreed by that carrier/CSP and that access seeker in an access
agreement, the terms and conditions in the access determination have no
effect. In such a circumstance, the access to declared services is
governed by the agreement reached between the two parties.
This provision is reflected in proposed subsection 152AY, inserted by item
112, which deals with the terms and conditions on which a carrier/CSP must
comply with the standard access obligations in section 152AR.
Proposed section 152BCD Fixed principles provisions
Proposed section 152BCD provides for 'fixed principles provisions'. The
ACCC can include in an access determination a provision that is specified
to be a fixed principles provision. The effect of specifying that a
provision is a fixed principles provision is to "lock in" the matters dealt
with in that provision until a particular date (called the 'nominal
termination date' in proposed subsection 152BCD(2)). The nominal
termination date can occur after the expiry date of the access
determination in which the fixed principles provision appears. The reason
that the termination date is a 'nominal' termination date is that, although
a fixed principles provision ceases to be in force at the same time that
the access determination in which it appears ("the original access
determination") ceases to be in force (see proposed subsection 152BCD(4)),
the effect of proposed subsection 152BCD(3) is that:
- any access determination that replaces the original access
determination must include a fixed principles provision in the same
terms as the fixed principles provision in the original access
determination; and
- the nominal expiry date of the fixed principles provision in the
replacement access determination must be the same or later than the
nominal expiry date of the fixed principles provision in the original
access determination.
For example, if a fixed principles provision is included in an access
determination ("the first access determination") that has an expiry date of
15 May 2011, and the nominal expiry date of the fixed principles provision
in that access determination is 8 October 2013:
- if the expiry date of the access determination is extended until 18
April 2012 under proposed subsection 152BCF(10)), then the fixed
principles provision continues to operate until that date;
- if the first access determination is then replaced by a new access
determination, then the fixed principles provision ceases to be in
force at the same time that the first access determination ceases to
be in force, but the replacement access determination must include a
fixed principles provision in the same terms, and the nominal expiry
date for that fixed principles provision must be 8 October 2013 or
later (regardless of the expiry date of the new access determination).
The effect of "locking in" or entrenching the fixed principles provision is
achieved by proposed subsection 152BCD(5), which provides that an access
determination which includes a fixed principles provision must include a
provision (an "entrenching provision") that states the fixed principles
provision must not be altered or removed, or sets out the circumstances in
which the fixed principles provision can be altered or removed. Note that
the ACCC's ability to vary an access determination is limited in the sense
that it cannot vary an access determination in a manner inconsistent with
the entrenching provision, nor can it vary or remove the entrenching
provision (see proposed subsection 152BCN(4)).
By enabling the ACCC to lock in provisions contained in an access
determination for a specified period (which may be longer than the duration
of the access determination in which the provisions are contained),
proposed section 152BCD will enable the ACCC to provide greater regulatory
certainty in certain circumstances. For example, where the ACCC adopts a
utility pricing model for setting the access price for a declared service -
with all price determinations during the economic life of the relevant
facility based on a regulated asset base - the ACCC will be able to lock in
a regulated asset base for the requisite period.
Proposed section 152BCE Access determinations may be set out in the same
document
Each access determination made by the ACCC relates to a particular declared
service (see proposed subsection 152BC(1)). However, while the ACCC is
required to make separate access determinations for each declared service,
the ACCC does not have to deal with each and every declared service in a
separate document. Proposed section 152BCE clarifies that two or more
access determinations may be set out in the same document.
Proposed section 152BCF Duration of access determination
Proposed section 152BCF addresses the duration of access determinations,
including:
- the commencement date of access determinations;
- the expiry date of access determinations;
- the automatic revocation of access determinations; and
- the extension of access determinations.
Commencement date - proposed subsections 152BCF(1)-(4)
The ACCC must specify in an access determination that the determination
comes into force on a particular day, which may be on, after, or before the
day on which the determination is made.
For access determinations that relate to newly-declared services (i.e.
where the service is being declared for the first time, and the declaration
is not a fresh declaration that replaces a previous declaration) then the
day specified in the access determination must not be earlier than the day
on which the declaration was made. (On replacement declarations, see item
85)
If the access determination in question replaces a previous access
determination relating to the same declared service, then the date that a
replacement access determination enters into force will be the day
immediately after the expiry of the previous access determination.
Expiry date - proposed subsections 152BCF(5) and (6)
The ACCC must specify in an access determination the expiry date for the
determination. The general principle (to which the ACCC must have regard
in setting the expiry date for the access determination) is that the expiry
date for the determination should be the same as the expiry date for the
declaration of the service to which the access determination relates,
unless there are circumstances that warrant specifying a different expiry
date for the access determination.
The principle that declarations and access determinations should run in
parallel will promote regulatory certainty, as well as procedural
efficiency in that it will enable the ACCC to conduct the public inquiry
into extending the declaration of a service and the public inquiry into
making a replacement access determination for the service at the same time.
It is recognised, however, that there may be circumstances where an access
determination that is shorter in duration than the declaration period would
be justified.
Automatic revocation - proposed subsections 152BCF(7)-(9)
If an access determination is in force in relation to a declared service,
and the declaration of the service either ceases to be in force or is
revoked, then, unless the ACCC makes a fresh declaration that replaces the
previous declaration, the access determination will be automatically
revoked. In these circumstances there is nothing for the access
determination to do: without a declared service to apply to, the access
determination is redundant. For this reason such access determinations are
automatically revoked.
Extension - proposed subsections 152BCF(10)-(14)
Proposed subsections 152BCF(10) and (12) provide for the extension of
access determinations in two circumstances:
- where the ACCC has commenced a public inquiry about replacing an
access determination with a new access determination, but the new
access determination will not be made before the expiry of the earlier
access determination-in this case, the ACCC may declare that the
earlier access determination continues until the new access
determination comes into force; and
- where the ACCC decides, after holding a public inquiry concerning the
expiry of a declaration of a service, to extend the declaration by a
period of not more than 12 months and then to allow the declaration to
expire (see item 87)-in this case, the ACCC may extend the period of
the relevant access determination by the same period.
In either case, the ACCC is required to publish a notice on its website
relating to its decision. The requirements of procedural fairness do not
apply to the ACCC's decision to extend the access determination in either
case. These extensions are temporary measures and the ACCC will be able to
make them quickly without having to undertake consultation.
Proposed section 152BCG Interim access determinations
Proposed section 152BCG deals with interim access determinations. An
interim access determination is defined in section 152AC as an access
determination that is expressed to be an interim access determination (see
item 78).
The circumstances in which the ACCC is required to make an interim access
determination are set out in proposed subsection 152BCG(1). An interim
access determination must be made if:
- the ACCC declares a service after the commencement of this section;
- the service is being declared for the first time, i.e. the declaration
is not a fresh declaration that replaces a previous declaration (on
replacement declarations, see item 85); and
- the ACCC has commenced a public inquiry into a proposal to make an
access determination relating to the service (on public inquiries, see
proposed Subdivision B of proposed Division 4); and
- either:
o it is unlikely that a final access determination in relation to
access to the service will be made within six months after the
commencement of the relevant public inquiry; or
o there is an urgent need to make an access determination before
the end of the public inquiry.
While the ACCC must make an interim access determination in the
circumstances specified in proposed subsection 152BCG(1), under proposed
subsection 152BCG(2) the ACCC may make an interim access determination in
relation to a declared service if no access determination has previously
been made in relation to the service. (This subsection applies to both
newly-declared services and services that were declared before the
commencement of section 152BCG.)
The ACCC may not make an interim access determination in any other
circumstance (proposed subsection 152BCG(5)).
The ACCC must specify in an interim access determination the day on which
the determination comes into force. That day may be on, after, or before
the day on which the determination is made, but must not be earlier than
the date on which the declaration of the service came into force (proposed
subsection 152BCG(3)).
Because of their urgent and temporary nature, the requirements of
procedural fairness do not apply to the making by the ACCC of an interim
access determination (proposed subsection 152(BCG(4)).
Proposed Subdivision B-Public inquiries about proposals to make access
determinations
Proposed Subdivision B of proposed Division 4 of Part XIC sets out the
requirements for the ACCC to hold a public inquiry before making an access
determination, and sets out the procedures applying to those inquiries.
Proposed section 152BCH Access determinations to be made after public
inquiry
Proposed section 152BCI When public inquiry must be held
The general requirement, as set out in proposed subsection 152BCH(1), is
that before the ACCC makes an access determination, the ACCC must hold a
public inquiry under Part 25 of the Tel Act on the proposal to make the
determination, and must prepare a report on the inquiry. The ACCC is
required to publish the report during the period of 180 days before the
ACCC makes the determination.
The ACCC is not required to hold a public inquiry before making an interim
access determination (see proposed subsection 152BCH(2) and proposed
section 152BCG).
The requirement for the ACCC to hold a public inquiry before making an
access determination is subject to proposed section 152BCI, which sets out
the period during which the public inquiry must be commenced, and provides
certain exceptions.
Where the ACCC declares a service for the first time, the ACCC must
commence a public inquiry about a proposal to make the first access
determination applying to that newly-declared service within 30 days after
the declaration being made (proposed subsection 152BCI(1)).
Where a service was declared before the commencement of proposed
section 152BCI, the ACCC must commence a public inquiry about a proposal to
make the first access determination applying to that service within 12
months of the commencement of proposed section 152BCI (proposed subsection
152BCI(2)). Proposed section 152BCI will commence the day after the Bill
receives the Royal Assent: see the table at clause 2 of the Bill.
Proposed subsection 152BCI(3) deals with the timing of public inquires
where an access determination has previously been made in relation to the
declared service. It provides that, where a service is declared and there
is already an access determination applying to the service, the ACCC must
commence a public inquiry about a proposal to make a replacement access
determination not earlier than 18 months before the expiry of the
determination, and no later than six months before the expiry of the
determination.
The requirements of proposed subsection 152BCI(3) are subject to the
exceptions in proposed subsections 152BCI(5)-(7).
Where the ACCC decides, after holding a public inquiry concerning the
expiry of a declaration of a service, to extend the declaration by a period
of not more than 12 months and then to allow the declaration to expire (see
item 87), the ACCC does not have to hold a public inquiry into making a
replacement access determination (proposed subsection 152BCI(5)). In this
case, the ACCC may extend the period of the relevant access determination
to coincide with the extended period of the access declaration (see
proposed subsection 152BCF(12)).
If the ACCC commences a public inquiry under subsection 152ALA(7) into
whether to extend the declaration of a service to which an access
determination relates or let it expire, the ACCC does not have to commence
a public inquiry into making a replacement access determination until it
decides whether to extend the declaration. If it decides to extend the
declaration, it must commence a public inquiry into making a replacement
access determination before the expiry of the current access determination.
If it decides to let the declaration expire, it does not have to hold a
public inquiry into making a replacement access determination (proposed
subsection 152BCI(6)).
If the ACCC decides not to extend the declaration of a service to which an
access determination relates but to let it expire, then the ACCC does not
have to hold a public inquiry into making a replacement access
determination (proposed subsection 152BCI(7)).
Item 83 inserts proposed section 152AI into Part XIC, which provides that a
public inquiry under Part 25 of the Tel Act commences when the ACCC
publishes the notice required under section 498 of that Act.
Proposed section 152BCJ Combined inquiries about proposals to make
access determinations
Proposed subsection 152BCJ provides that the ACCC may decide to combine two
or more public inquiries about proposals to make access determinations, and
sets out certain procedures applying to the ACCC's conduct of joint
inquiries.
This provision is designed to provide the ACCC with flexibility to conduct
inquiries into proposals to make access determinations in an efficient
manner, by allowing it to combine inquiries and prepare combined discussion
papers, hold combined hearings, and prepare combined reports relating to
the inquiries.
Proposed section 152BCK Time limit for making an access determination
Proposed subsection 152BCK(2) provides that the ACCC must make a final
access determination within six months of commencing the public inquiry
into the proposal to make the access determination. A final access
determination is an access determination that is not an interim
determination (see item 76).
In recognition of the fact that an inquiry into a proposal to make an
access determination may be a lengthy and complex process, the ACCC is
given scope to extend the six-month period within which it is required to
make the final access determination (proposed subsection 152BCK(3)). The
ACCC may extend the six-month period more than once, on each occasion by no
longer than a further period of six months. Each time it extends the
period, the ACCC must publish a notice on its website setting out the
extended period, and explaining why the ACCC has not yet been able to make
a final access determination.
A note is included to direct the reader to proposed section 152BCG, the
effect of which is to require the ACCC to make an interim access
determination if the ACCC considers it will not be in a position to make
the final access determination within six months of commencing the public
inquiry into a proposal to make the access determination.
Proposed section 152BCL Commission may use material presented to a
previous public inquiry etc.
To ensure the ACCC is able to conduct inquiries in the most efficient
manner, without unduly expending time or resources on repetitive processes,
proposed section 152BCL provides that, where the ACCC obtains evidence,
material, written submissions or other information for the purposes of an
inquiry into a proposal to make an access determination ("the first access
determination"), it may also use that evidence, material, those written
submissions or that other information for the purposes of an inquiry into a
proposal to make another access determination ("the second access
determination").
The first and second access determinations may relate to the same declared
service, or they may relate to different declared services.
This provision is intended to allow the ACCC to use information, material,
evidence or submissions that it obtains in one inquiry for the purposes of
another inquiry, which will allow the ACCC to expedite the inquiry process
and to consider matters that arose in earlier inquiries and that continue
to be relevant to a subsequent inquiry.
Proposed subsection 152BCL(3) provides that proposed section 152BCL is not
intended to limit, by implication, the information that the ACCC may use
for the purposes of a public inquiry into making an access determination.
Proposed section 152BCM Commission may adopt a finding from a previous
public inquiry
When it holds an inquiry under Part 25 of the Tel Act, the ACCC is required
to prepare a report setting out its findings as a result of the inquiry
(see section 505 of the Tel Act). The effect of proposed section 152BCM is
that the ACCC can adopt the findings it makes in a report on one inquiry
about a proposal to make an access determination for the purposes of
another public inquiry into a proposal to make an access determination.
The access determinations that are the subject of the first and the
subsequent inquiries may relate to the same declared service, or they may
relate to different declared services.
Proposed Subdivision C-Variation or revocation of access determinations
Proposed section 152BCN Variation or revocation of access determinations
Proposed subsection 152BCN(1) provides for the variation and revocation of
access determinations, by altering the application of subsection 33(3) of
the AIA. Absent proposed subsection 152BCN(1), the effect of subsection
33(3) of that Act would be that the power given to the ACCC in proposed
section 152BC to make access determinations includes a power exercisable in
the like manner and subject to the like conditions to repeal, rescind,
revoke, amend, or vary an access determination.
However, proposed subsection 152BCN(1) provides that the operation of
subsection 33(3) of the AIA is changed in the manner specified in proposed
subsections 152BCN(2)-(8).
The ACCC is not required to hold a public inquiry into a proposal to vary
an access determination where it makes a minor variation or where all
relevant carriers/CSPs and access seekers have consented in writing to the
variation. Similarly, the ACCC is not required to hold a public inquiry
about revoking an access determination if all relevant carriers/CSPs and
access seekers have consented in writing to the revocation.
Where an access determination includes a fixed principles provision (see
proposed section 152BCD), the access determination must include a provision
(an "entrenching provision") stating that either the access determination
may not be varied so as to alter or remove the fixed principles provision
(proposed paragraph 152BCD(5)(a)) or the access determination may not be
varied so as to alter or remove the fixed principles provision except in
certain specified circumstances (proposed paragraph 152BCD(5)(b)). An
entrenching provision in an access determination may not be varied, and nor
may a fixed principles provision be varied in a manner that is inconsistent
with an entrenching provision: proposed subsection 152BCN(4).
The ACCC is not under an obligation to consider requests that it may
receive to vary or revoke an access determination, nor is it under an
obligation to consider varying or revoking an access determination for any
other reason: proposed subsection 152BCN(5).
Where the ACCC has commenced a public inquiry into a proposal to vary an
access determination, the ACCC can alter the proposed variation that is the
subject of the public inquiry (proposed subsection 152BCN(6)). This is
intended to ensure that the ACCC's conduct of inquiries is efficient and to
remove any suggestion that the ACCC must recommence a public inquiry if it
makes a change to the variation that it proposes to make to an access
determination after it has already commenced the public inquiry.
If the ACCC alters the proposed variation during the public inquiry, it
must publish a notice of the alteration in accordance with section 498 of
the Tel Act, unless the alteration is of a minor nature or each carrier/CSP
and access seeker whose interests are likely to be affected by the
alteration consent to it (proposed subsections 152BCN(7) and (8)).
The public inquiry held by the ACCC is limited to the proposal for
variation that the ACCC puts forward. The ACCC is not obliged to consider
as part of its inquiry any other issues, or any alternative or additional
proposed variations, that are brought forward by parties making submissions
to the inquiry.
Proposed Subdivision D-Compliance with access determinations
Proposed Subdivision D includes provisions that have the effect of making
compliance with an access determination a condition of a carrier licence
and a service provider rule under the Tel Act. As such, a party's
compliance with an access determination may be enforced by the ACCC using
the mechanisms available to it under that Act.
Proposed section 152BCO Carrier licence condition
Proposed section 152BCO sets out a carrier licence condition requiring a
carrier to comply with any access determinations applicable to it.
The effect of proposed section 152BCO of the TPA, together with proposed
section 62A of the Tel Act, is that a carrier must comply with an access
determination, and that failure to do so would render the carrier subject
to the enforcement provisions in the Tel Act relating to breach of carrier
licence conditions.
Proposed section 152BCP Service provider rule
Proposed section 152BCP of the TPA sets out a service provider rule
requiring a service provider to comply with any access determinations
applicable to it.
The effect of proposed section 152BCP of the TPA, together with proposed
subsection 98(3) of the Tel Act, is that a service provider must comply
with an access determination, and that failure to do so would render the
service provider subject to the enforcement provisions in the Tel Act
relating to breach of service provider rules.
Proposed Subdivision E-Private enforcement of access determinations
In addition to enforcement of compliance with access determinations by the
ACCC or the Minister by means of carrier licence conditions and service
provider rules, dealt with under proposed Subdivision D together with the
enforcement provisions of the Tel Act, access determinations may also be
enforced privately; i.e. one party to an access determination may enforce
the access determination against a person who is contravening the
determination. Proposed Subdivision E is based on Subdivision H of
Division 8 of Part XIC (which is repealed by item 136).
Proposed section 152BCQ Private enforcement of access determinations
Proposed section 152BCQ allows the parties to an access determination to
apply to the Federal Court for an order relating to contravention of the
access determination. If the Court is satisfied that a person has engaged,
is engaging, or proposes to engage in contravention of an access
determination, the Court may make an order:
- granting a restraining injunction (preventing a person from engaging
in conduct in contravention of an access determination);
- granting a mandatory injunction (requiring a person to do something to
ensure the person does not contravene an access determination);
- directing the person to compensate the applicant for loss or damage;
or
- as the Court sees fit.
It is irrelevant whether an access determination has expired; the remedies
listed above are still available with respect to contraventions of the
access determination that occurred while it was in force.
The Court may also make orders against any other person involved in the
contravention.
Proposed section 152BCR Consent injunctions
Proposed section 152BCR provides a mechanism for the Federal Court to grant
an injunction in a situation where the parties consent. In such a case,
the Court does not need to be satisfied that proposed section 152BCQ
applies (i.e. it does not need to be satisfied that a person has engaged,
is engaging, or proposes to engage in conduct in contravention of an access
determination).
Proposed section 152BCS Interim injunctions
Proposed section 152BCS permits the Federal Court to grant an interim
injunction while it considers an application for an injunction under
proposed section 152BCQ.
Proposed section 152BCT Factors relevant to granting a restraining
injunction
Proposed section 152BCU Factors relevant to granting a mandatory
injunction
The effect of proposed sections 152BCT and 152BCU is that the Federal Court
can grant a restraining injunction or a mandatory injunction requiring a
person to do a thing regardless of whether certain situations specified in
proposed paragraphs 152BCT(a)-(c) (for restraining injunctions) or
152BCU(a)-(c) (for mandatory injunctions) exist. This is intended to give
the Federal Court a wide power to grant restraining and mandatory
injunctions.
Proposed section 152BCV Discharge or variation of injunction or other
order
Proposed section 152BCV provides that the Federal Court can discharge or
vary an injunction or order under proposed Subdivision E.
Proposed Subdivision F-Register of Access Determinations
Proposed section 152BCW Register of Access Determinations
Proposed subsection 152BCW requires the ACCC to maintain a register of all
in-force access determinations, to be known as the Register of Access
Determinations.
The Register is required to be maintained by electronic means, and to be
made available for inspection on the ACCC's website. The Register is not a
legislative instrument for the purposes of the LIA. It is not appropriate
for the Register to be a legislative instrument, since it is simply a
collection of access determinations, which themselves are not legislative
instruments (see proposed subsection 152BC(9)).
Some of the material in access determinations may be highly commercially
sensitive, and inappropriate for publication. For this reason, the ACCC is
permitted to redact particular provisions from access determinations if the
ACCC is satisfied that publication of the provisions could reasonably be
expected to prejudice substantially the commercial interests of a person,
and the prejudice outweighs the public interest in the publication of the
provision. If it redacts a provision, the ACCC must annotate the access
determination to note that it has made a redaction.
Proposed Division 4A-Binding rules of conduct
Proposed Division 4A of Part XIC provides for the ACCC to make binding
rules of conduct relating to access to a declared service. The effect of
binding rules of conduct is to override any inconsistent provisions in an
access determination. In this way, binding rules of conduct operate, in
essence, as a particular type of variation to an access determination.
However, the rules in proposed Division 4 that apply to the making of
variations to access determinations do not apply to the making of binding
rules of conduct; binding rules of conduct can be made in a streamlined
manner. There are limitations on the duration of binding rules of conduct.
It is intended that the ACCC will make binding rules of conduct to deal
with urgent matters, where it is not appropriate for the ACCC to go through
the processes set out in Division 4 for varying an access determination.
Binding rules of conduct permit the ACCC to move quickly to adjust the
terms and conditions that apply to access to a declared service, on a
temporary basis, while the ACCC goes about the process of conducting an
inquiry with a view to varying or replacing the relevant access
determination.
Subdivision A-Commission may make binding rules of conduct
Proposed section 152BD Binding rules of conduct
Proposed subsections 152BD(1) and (2) provide that the ACCC may make
written rules relating to access to a declared service, to be known as
binding rules of conduct.
The possible subject matter of binding rules of conduct is set out at
proposed subsection 152BD(3), and mirrors the possible subject matter of
access determinations at proposed subsection 152BC(3).
It is envisaged that the ACCC may need to make urgent binding rules of
conduct altering the application of an access determination either to all
carriers/CSPs and/or access seekers, or to particular carriers/CSPs and/or
access seekers. For this reason, proposed subsections 152BD(5) and (6)
provide that binding rules of conduct may be of general application, or may
apply as limited in the rules, and specifically that they make different
provision with respect to different carriers/CSPs, or different access
seekers, or different classes of carriers/CSPs or access seekers. Proposed
subsection 152BD(7) clarifies that proposed subsection 152BD(6) does not,
by implication, affect the operation of section 33(3A) of the AIA, which
provides that, where legislation confers a power to make an instrument with
respect to particular matters, the power includes a power to make the
instrument with respect to only some of those matters or a class or classes
of those matters, and to make different provision with respect to different
matters or different classes of matters.
Binding rules of conduct may provide for the ACCC to perform functions or
exercise powers (proposed subsection 152BD(10)). This ensures that the
ACCC has flexibility in how it will deal with technical, complex and
changing matters it needs to include in provisions of access
determinations. This subsection corresponds to proposed
subsection 152BC(7).
Proposed subsection 152BD(11) provides that binding rules of conduct are
not legislative instruments.
Proposed section 152BDA Restrictions on binding rules of conduct
Proposed section 152BDA imposes certain restrictions on the ACCC's ability
to make binding rules of conduct, and is modelled on proposed section
152BCB, which relates to limitations on the ACCC's ability to make access
determinations.
Proposed section 152BDB Binding rules of conduct that are inconsistent
with access agreements
Proposed section 152BDB provides that provisions in binding rules of
conduct specifying terms and conditions that would be applicable to a
carrier/CSP or an access seeker have no effect to the extent that they are
inconsistent with terms and conditions set out in an access agreement
between that carrier/CSP and that access seeker. That is to say, for the
carrier/CSP and the access seeker in question, terms and conditions of
access to the declared service in question are as set out in their access
agreement. For other parties, who do not have conflicting access
agreements in place, the binding rules of conduct continue to apply.
Proposed section 152BDC Duration of binding rules of conduct
Binding rules of conduct must specify the date on which they come into
force, and an expiry date. The expiry date must be within 12 months of the
date the binding rules of conduct were made.
Proposed section 152BDD Commission to give copy of binding rules of
conduct to carrier etc.
If binding rules of conduct are limited to a particular carrier/CSP or
access seeker, the ACCC must give a copy of them to that carrier/CSP or
access seeker. Otherwise binding rules of conduct will be available on the
Register of Binding Rules of Conduct: see proposed Subdivision D of
proposed Division 4A.
Proposed section 152BDE Access determinations that are inconsistent with
binding rules of conduct
Proposed section 152BDE provides for binding rules of conduct to prevail
over an access determination, to the extent of any inconsistency (see also
proposed section 152AY).
Subdivision B-Compliance with binding rules of conduct
Proposed section 152BDF Carrier licence condition
Proposed section 152BDG Service provider rule
Proposed sections 152BDF and 152BDG set out a carrier licence condition and
a service provider rule requiring a carrier/CSP to comply with any binding
rules of conduct applicable to it.
The effect of proposed sections 152BDF and 152BDG of the TPA, together with
proposed section 62B and proposed subsection 98(3) of the Tel Act, is that
a carrier/CSP must comply with binding rules of conduct, and that failure
to do so would render the carrier/CSP subject to the enforcement provisions
in the Tel Act relating to breach of carrier licence conditions or service
provider rules.
Proposed Subdivision C-Private enforcement of binding rules of conduct
Proposed section 152BDH Private enforcement of binding rules of conduct
Proposed section 152BDI Consent injunctions
Proposed section 152BDJ Interim injunctions
Proposed section 152BDK Factors relevant to granting a restraining
injunction
Proposed section 152BDL Factors relevant to granting a mandatory
injunction
Proposed section 152BDM Discharge or variation of injunction or other
order
In addition to enforcement of compliance with binding rules of conduct by
the ACCC or the Minister by means of carrier licence conditions and service
provider rules, dealt with under proposed Subdivision B together with the
enforcement provisions of the Tel Act, binding rules of conduct may also be
enforced privately; i.e. one party to an access determination may enforce
the access determination against a person who is contravening the
determination. Proposed Subdivision C of proposed Division 4A includes
proposed sections 152BDH-152BDM, which mirror in operation the provisions
in Subdivision E of proposed Division 4 (relating to private enforcement of
access determinations). An explanation of the operation of those
provisions is provided at Subdivision E of Division 4 above.
Proposed Subdivision D-Register of Binding Rules of Conduct
Proposed section 152BDN Register of Binding Rules of Conduct
Proposed section 152BDN requires the ACCC to maintain a register of all in-
force binding rules of conduct, to be known as the Register of Binding
Rules of Conduct.
Proposed section 152BDN operates in the same way as proposed section
152BCW, which provides for the Register of Access Determinations, and is
described above.
Proposed Division 4B-Access agreements
Carriers/CSPs and access seekers are free to negotiate on and agree to
terms of access to declared services. If carriers/CSPs and access seekers
settle on an agreed arrangement for access to a declared service, that
arrangement is called an access agreement. Access agreements are dealt
with in proposed Division 4B of Part XIC of the TPA.
Proposed section 152BE Access agreements
For an agreement to be an access agreement, it must meet the requirements
for access agreements set out in proposed subsection 152BE(1). A
carrier/CSP and an access seeker must be the parties to the agreement, and
the agreement must:
- be in writing;
- be legally enforceable (a non-binding arrangement between parties
would not suffice);
- relate to access to a declared service; and
- relate to terms and conditions of the access seeker's access to the
declared service (such as, for example, the terms and conditions on
which the carrier/CSP will comply with the standard access
obligations).
Proposed subsection 152BE(2) contains a particular rule that applies to an
agreement that is made concerning access to an eligible service (defined in
section 152AL) that is not a declared service at the time that the
agreement is entered into, but that later becomes a declared service. In
such a case, if the agreement would have been an access agreement if it had
been entered into after the service was declared (i.e. if all the other
requirements of proposed subsection 152BE(1) are satisfied), then the
agreement becomes an access agreement immediately after the eligible
service becomes a declared service.
To deal with the issue of variations being made to an access agreement,
proposed subsection 152BE(3) provides that a reference to an access
agreement in Part XIC includes a reference to an access agreement as
varied, so long as the variation is in writing and is legally enforceable.
Access agreements (and variation agreements) can be entered into either
before or after the commencement of proposed section 152BE-the effect of
the agreement is not altered (see proposed subsection 152BE(4)).
Proposed section 152BEA Lodgment of access agreements with the
Commission
Proposed section 152BEA requires access agreements to be lodged with the
ACCC. The obligation is imposed on the carrier/CSP who supplies, or who
proposes to supply, the service to which the access agreement relates.
Compliance with this requirement is a licence condition and service
provider rule (see proposed sections 152BEC and 152BED)
Access agreements will prevail over inconsistent special access
undertakings, binding rules of conduct or access determinations to the
extent of inconsistency (see proposed section 152AY). It is therefore
important that the ACCC be aware of all access agreements and of the terms
and conditions they contain. This obligation will also be of assistance to
the ACCC in carrying out its functions generally under the TPA.
It should be noted that the ACCC has no duty to approve any access
agreement that is lodged, and the fact that an agreement has been lodged
with the ACCC and the ACCC has made no comment about it does not confer any
implicit regulatory approval on that agreement.
Proposed subsections 152BEA(1)-(5) set out the time within which the
carrier/CSP must lodge the access agreement with the ACCC:
- where the agreement is entered into after the commencement of proposed
section 152BEA, it must be lodged with the ACCC within 28 days after
it is entered into;
- where the agreement was entered into before the commencement of
proposed section 152BEA and continues to operate after that
commencement, it must be lodged with the ACCC within 28 days of that
commencement;
- where there is an agreement that becomes an access agreement after the
commencement of proposed section 152BEA (because at the time the
agreement is entered into, the service it relates to is not a declared
service, but at a later stage (after the commencement of this section)
it becomes a declared service), the agreement must be lodged with the
ACCC within 28 days after the day it becomes an access agreement
(worked out in accordance with proposed subsection 152BE(2));
- where there is an agreement that becomes an access agreement before
the commencement of this section (because at the time the agreement is
entered into, the service it relates to is not a declared service, but
at a later stage (before the commencement of this section) it became a
declared service), the agreement (as varied, if applicable) must be
lodged with the ACCC within 28 days after the commencement of proposed
section 152BEA);
- if a variation agreement (see proposed subsection 152BE(3)) is entered
into after the commencement of proposed section 152BEA, the variation
agreement must be lodged with the ACCC within 28 days after it is
entered into.
In each case, the carrier/CSP may also be required to give to the ACCC any
further information about the access agreement (or variation agreement)
that is specified by the ACCC. Proposed subsections 152BEA(6)-(10) provide
that the ACCC may specify information for that purpose. The ACCC can
require that the additional information provided to it be verified by
statutory declaration.
An instrument made by the ACCC under proposed subsections 152BEA(6)-(10) is
not a legislative instrument. The ACCC is required to publish such an
instrument on its website (proposed subsections 152BEA(12) and (14).
There may be occasions when a carrier/CSP needs more than 28 days to
provide the access agreement and the other information to the ACCC: it may
take the carrier/CSP some time to collect the additional information it is
required to provide. To allow for this, the 28-day period allowed in each
case for the carrier/CSP to lodge the access undertaking can be extended by
the ACCC, before its expiry (proposed subsection 152BEA(13)).
Proposed section 152BEB Notification of termination of access agreement
It is important that the ACCC be made aware when access agreements cease to
operate in advance of their anticipated expiry date (for reasons similar to
those set out at section 152BEA above). For this reason, proposed section
152BEB requires that, where an access agreement has been given to the ACCC
in accordance with proposed section 152BEA and the access agreement is
terminated, rescinded or cancelled, a carrier/CSP who has supplied the
declared service under the access agreement, must notify the ACCC within 28
days. The obligation applies equally to a carrier/CSP that, under an
access agreement, had proposed to supply access to a declared service but
had not actually supplied the declared service before the agreement was
terminated, rescinded or cancelled.
Proposed section 152BEC Carrier licence condition
Proposed section 152BED Service provider rule
Proposed section 152BEC sets out a carrier licence condition requiring a
carrier to comply with sections 152BEA and 152BEB, and proposed section
152BED sets out a corresponding service provider rule
The effect of proposed section 152BEC and proposed subsection 152BED(2) of
the TPA, together with proposed section 62C and proposed subsection 98(5)
of the Tel Act, is that a carrier/CSP that supplies a declared service
under an access agreement must lodge copies of the agreement and any
variation of the agreement with the ACCC, and must notify the ACCC if the
agreement is terminated, rescinded or cancelled. Failure to do so would
render the carrier/CSP subject to the enforcement provisions in the Tel Act
relating to breach of carrier licence conditions or service provider rules.
Proposed sections 152BEC and 152BED ensure that ACCC will be provided with
copies of access agreements and of variations to those agreements, to
assist the ACCC in carrying out its functions under the TPA.
Item 117 - Subdivision A of Division 5 of Part XIC
Subdivision A of Division 5 of Part XIC deals with ordinary access
undertakings. Item 117 repeals the Subdivision. Ordinary access
undertakings will no longer be a part of the telecommunications access
regime. Only special access undertakings will be available.
Ordinary access undertakings were intended to promote regulatory certainty
for access providers, by allowing them to propose terms and conditions of
access for a declared service which would be compatible with their own
operational and commercial requirements. If the ACCC accepted an
undertaking, it would not be able to make an arbitration determination
under Division 8 of Part XIC that was incompatible with the undertaking.
In practice, almost all undertakings submitted to the ACCC since 1997 were
rejected on the basis that they did not promote the long-term interests of
end-users. Ordinary access undertakings have not only failed to promote
regulatory certainty, their use has resulted in significant regulatory
uncertainty and the allocation of considerable resources by the ACCC,
access providers and access seekers.
Under the reforms made to Part XIC by this Bill, access providers will have
the opportunity to make submissions to the ACCC during a public inquiry
into making an access determination, concerning the terms and conditions of
access they would like to be included in the access determination, and the
ACCC will consider those submissions
Item 118 - Subsection 152CBA(1)
Item 118 makes a change to subsection 152CBA(1) of the TPA. Section 152CBA
deals with special access undertakings, and provides that a person who is,
or expects to be, a carrier/CSP supplying either a listed carriage service
or a service that facilitates the supply of a listed carriage service may
give a written undertaking to the ACCC in relation to access to the
service, so long as the service is not an active declared service.
'Active declared service' is defined in subsection 152CBA(12), and has same
meaning as in section 152AR (disregarding subsection 152AL(7)).
Item 118 amendments subsection 152CBA(1) to replace the term 'active
declared service' with the term 'declared service'. The effect of this is
that special access undertakings will not be able to be lodged in relation
to any declared services. Special access undertakings will only be able to
be lodged concerning services for which a section 152AL declaration is not
in force.
Where a service is a declared service, the terms and conditions of access
for the service (if not agreed between the access provider and access
seeker) will be specified in an access determination. For the reasons set
out in item 117 relating to the abolition of ordinary access undertakings,
it is not intended that undertakings should be able to deal with the terms
of access for declared services.
Item 119 - Subsection 152CBA(10)
Item 119 repeals and replaces subsection 152CBA(10), to make a change
necessary as a result of the repeal of Subdivision A of Division 5 of Part
XIC.
Item 120 - Before paragraph 152CBC(6)(a)
Item 120 inserts new paragraphs (aa)-(ac) into subsection 152CBC(6), to
take into account proposed section 152CBDA (see item 124). Section 152CBC
provides for the ACCC to accept or reject a special access undertaking. In
subsection 152CBC(5) the ACCC is given six months to consider a special
access undertaking. If it has not made a decision by the end of that six-
month period, it is taken to have accepted the undertaking. Subsection
152CBC(6) sets out certain days that are to be discounted in calculating
the six-month period for the purpose of subsection 152CBC(5); these are
days during periods when the ACCC is awaiting further information, or
awaiting further submissions, relevant to its consideration of an
undertaking. During such periods the ACCC cannot continue to consider its
decision on a special access undertaking, and it is appropriate that the
limited time given to the ACCC is suspended for the duration of those
periods. As a result of item 120, three new types of days are included.
The first type of day involves the situation where the ACCC gives a notice
under proposed section 152CBDA (which provides that the ACCC may give a
notice to a person who has submitted an undertaking, inviting the person to
vary the undertaking in accordance with the notice, and provide an amended
undertaking within a specified period), but the ACCC was not given a varied
undertaking. In this case, proposed paragraph 152CBC(6)(aa) provides that
a day in the period specified in the notice is to be disregarded in
calculating the six month period.
The second and third type of day involve the situation where the ACCC gives
a notice under proposed section 152CBDA and receives a varied undertaking
in response.
The second type of day occurs where the ACCC does not publish the varied
undertaking under paragraph 152CBD(2)(d) (because the variations in
question are of a minor nature, or are unlikely to have a material adverse
effect on a person's legitimate commercial interests: see proposed
subsection 152CBD(3), inserted by item 123). In that case, for the purpose
of calculating the six-month period, any day is to be disregarded if it is
in the period beginning on the day the ACCC gave the notice and ending on
the day the varied undertaking was given to the ACCC in response to the
notice.
The third type of day occurs where the ACCC publishes the varied
undertaking under paragraph 152CBD(2)(d) (because the variations in
question are not of a minor nature, or are likely to have a material
adverse effect on a person's legitimate commercial interests: see proposed
subsection 152CBD(3), inserted by item 123). In that case, for the purpose
of calculating the six-month period, any day is to be disregarded if it is
in the period beginning on the day the ACCC gave the notice and ending on
the day specified by the ACCC when it published the varied undertaking.
Item 121 - Paragraph 152CBC(6)(a)
Item 121 makes a consequential amendment to paragraph 152CBC(6)(a),
necessary as a consequence of the inclusion of new paragraph 152CBC(6)(ac)
by item 120.
Item 122 - After section 152CBC
Item 122 inserts proposed section 152CBCA into Part XIC.
Proposed section 152CBCA Serial undertakings
Proposed section 152CBCA provides a mechanism for the ACCC to refuse to
consider serial undertakings. Where the ACCC rejects one special access
undertaking given to it by a person, and the person subsequently gives the
ACCC another special access undertaking, and any or all of the provisions
of the two undertakings are materially similar, the ACCC can refuse to
consider the subsequent undertaking. This provision is intended to ensure
that the ACCC does not have to devote time and resources to reconsidering a
special access undertaking that is likely to be rejected.
Item 123 - At the end of section 152CBD
Item 123 inserts proposed subsection 152CBD(3), the effect of which is that
the ACCC is not required to publish (in accordance with paragraph
152CBD(2)(d)) a varied undertaking given to the ACCC under proposed section
152CBDA unless the ACCC is satisfied that the variations in question are
not of a minor nature, or are likely to have a material adverse effect on a
person's legitimate commercial interests.
This is intended to ensure that the ACCC does not have to go through a
publication and consultation process on a varied undertaking given to it if
the variations are only minor.
Item 124 - After section 152CBD
Item 124 inserts proposed section 152CBDA, which provides a mechanism for
the ACCC to give a notice to a person who has submitted an undertaking,
inviting the person to vary the undertaking in accordance with the notice.
Proposed section 152CBDA Variation of special access undertaking
Proposed section 152CBDA enables the ACCC to suggest to a person who has
given it a special access undertaking that the person make specified
variations to the undertaking. This provision is designed to avoid the
situation of the ACCC having to reject an access undertaking that is given
to it and reconsider a fresh new access undertaking from the same person,
and instead to allow the ACCC to propose variations to an access
undertaking it is given. If the ACCC decides to give a notice to a person
who has submitted an undertaking, inviting the person to make specified
variations to the undertaking, the ACCC must nominate a period for the
person to provide a varied undertaking. If the person provides the varied
undertaking to the ACCC in the specified period, the ACCC must then
consider the varied undertaking under section 152CBC.
The ACCC is not under a duty to consider whether to give a notice to a
person who has submitted an undertaking to it.
Item 125 - After section 152CBI
Item 125 inserts proposed sections 152CBIA, 152CBIB and 152CBIC.
Proposed section 152CBIA Special access undertakings prevail over
inconsistent access determinations
Proposed section 152CBIB Special access undertakings prevail over
inconsistent binding rules of conduct
Proposed section 152CBIC Access agreements prevail over special access
undertakings
The effect of proposed sections 152CBIA and 152CBIB is that a special
access undertaking prevails over an access determination, or over binding
rules of conduct, to the extent of any inconsistency (see proposed section
152AY).
By contrast, proposed section 152CBIC provides that an access agreement
prevails over an inconsistent special access undertaking, to the extent of
any inconsistency. This reflects the intention that parties should be free
to agree terms of access.
Item 126 - Subsection 152CC(2)
Item 127 - Subsections 152CC(3), (4) and (5)
Items 126 and 127 amend section 152CC, which provides that the ACCC must
maintain a register of undertakings that have been accepted by the ACCC
(including those that are no longer in force). The amendments bring
section 152CC into line with proposed sections 152BCW (which relates to the
Register of Access Determinations) and 152BDN (which relates to the
Register of Binding Rules of Conduct), by requiring that the ACCC is to
maintain the register of access undertakings by electronic means, and make
it available for inspection on the ACCC website, and providing that the
Register is not a legislative instrument. The amendments made to section
152CC also reflect the amendments made to section 152CJ by items 134 and
135.
Item 128 - Sections 152CE, 152CF, 152CG and 152CGA
Item 128 repeals sections 152CE, 152CF, 152CG, and 152CGA, which relate to
the review by the Australian Competition Tribunal of a decision of the ACCC
to accept or reject an undertaking or a variation to an undertaking.
Consistent with other changes made by this Bill to the operation of Part
XIC, merits review of decisions of the ACCC relating to access undertakings
will no longer be available.
Merits review of the ACCC's decisions to accept or reject an undertaking is
being removed for similar reasons to those set out in the notes on item
108.
Item 129 - Section 152CGB
Item 129 repeals section 152CGB, as a consequence of the repeal of Division
8 of Part XIC by item 136.
Item 130 - Subsection 152CH(1) (notes 1A, 1B, 2 and 3)
Item 131 - Subsection 152CH(1) (note 5)
Item 132 - Subsection 152CH(1) (note 6)
Items 130 and 132 repeal notes 1A, 1B, 2, 3 and 6 in subsection 152CH(1),
and item 131 repeals and replaces note 5 in the same subsection, as a
result of amendments made elsewhere in this Bill.
Item 133 - Subsection 152CI(2)
Item 133 repeals current subsection 152CI(2), which deals with the
situation where a provision of the telecommunications access code is
inconsistent with a Ministerial pricing determination (made under section
152CH). The telecommunications access code is dealt with in Division 4 of
Part XIC, which is being repealed by item 116.
Item 133 substitutes new proposed subsections 152CI(2) and (3), which
provide that a provision of an access determination or of binding rules of
conduct that is inconsistent with a Ministerial pricing determination has
no effect to the extent of the inconsistency.
Item 134 - Subsection 152CJ(2)
Item 135 - Subsections 152CJ(3), (4), and (5)
Items 134 and 135 amend section 152CJ, which provides that the ACCC must
maintain a register of Ministerial pricing determinations. The amendments
bring section 152CJ into line with proposed sections 152BCW (which relates
to the Register of Access Determinations) and 152BDN (which relates to the
Register of Binding Rules of Conduct), by requiring that the ACCC is to
maintain the register of Ministerial pricing determinations by electronic
means, and make it available for inspection on the ACCC website.
Proposed subsection 152CJ(4) provides that the Register is not a
legislative instrument.
The amendments made to section 152CJ also reflect the amendments made to
section 152CC by items 126 and 127.
Item 136 - Division 8 of Part XIC
Item 136 repeals Division 8 of Part XIC, which provides for the resolution
of disputes about access. Under Division 8, carriers/CSPs and access
seekers can notify access disputes to the ACCC. The ACCC is then required
to arbitrate the access dispute, and make an arbitration determination,
setting out the terms and conditions of access to this service.
In practice, the operation of Division 8 has proven to be complex and prone
to excessive delays. Although Division 8 was intended to encourage
negotiation between access providers and access seekers, in general terms
it has been a major source of regulatory uncertainty and delay.
One of the fundamental reforms to the telecommunications access regime made
by this Bill is to replace the power of the ACCC to arbitrate access
disputes with a power for the ACCC to set up front terms and conditions of
access in an access determination. On this basis, Division 8 of Part XIC
is being repealed.
Item 137 - Division 9 of Part XIC
Item 137 repeals Division 9 of Part XIC, which provides for the
registration of agreements for access to declared services. Division 9 is
superseded by proposed Division 4B, dealing with access agreements.
Item 138 - Paragraph 152EF(1)(b)
Item 138 makes an amendment to section 152EF, which provides that certain
persons must not engage in conduct for the purpose of preventing the
fulfilment of a standard access obligation or of an obligation imposed by a
Determination made by the ACCC under Division 8. As a result of the repeal
of Division 8 by item 136, and the introduction of proposed Divisions 4 and
4A, item 138 replaces the reference in section 152EF to 'an obligation
imposed by a Determination made by the ACCC under Division 8' with
references to requirements imposed by an access determination, or by
binding rules of conduct.
Item 139 - Subparagraph 152ELA(3)(a)(i)
Item 140 - Subparagraph 152ELA(3)(a)(ii)
Item 141 - Subparagraph 152ELA(3)(a)(iii)
Item 142 - Paragraph 152ELA(3)(b)
Item 143 - Paragraph 152ELA(3)(c)
Item 144 - Paragraph 152ELA(3)(d)
Items 139-144 make consequential amendments to subsection 152ELA(3), which
provides for the matters that may be dealt with by Procedural Rules made by
the ACCC under subsection 152ELA(1), that are necessary as a result of the
repeal of section 152AT and Division 8 of Part XIC.
Item 145 - Subsections 152ELA(6) and (7)
Item 145 makes an amendment to section 152ELA, repealing subsections
152ELA(6) and (7), and substituting proposed subsection 152ELA(6). This
amendment is necessary as a result of the repeal of Division 8 of Part XIC.
Item 146 - Before section 152EM
Item 146 inserts proposed section 152ELD, which deals with compensation for
acquisition of property.
Proposed section 152ELD Compensation for acquisition of property
Proposed section 152ELD provides that the Commonwealth must pay a
reasonable amount of compensation to a person where the operation of Part
XIC, or of the transitional provisions in Division 2 of Part 2 of Schedule
1 to this Bill, would result in an acquisition of property within the
meaning of paragraph 51(xxxi) of the Constitution and the determination
would otherwise be invalid because a particular person has not been
sufficiently compensated. The amount of compensation is that either agreed
by the person and the Commonwealth or, failing agreement, that determined
by a court of competent jurisdiction.
This provision is similar in operation to section 152EB, which falls within
Division 8 of Part XIC and as such is being repealed by item 136.
Item 147 - Subsection 155AAA(21) (subparagraph (c)(i) of the definition of
protected information)
Item 147 makes a consequential amendment to the definition of 'protected
information' in subsection 155AAA(21) of the TPA, to remove two references
to provisions of Part XIC that are being repealed by other items in this
Bill.
Item 148 - Subsection 171B(1)
Item 148 makes a consequential amendment to section 171B of the TPA, which
provides that Division 3 of Part IIIA and Division 8 of Part XIC have no
effect to the extent (if any) to which they purport to confer judicial
power on the ACCC. As a result of the repeal of Division 8 of Part XIC by
item 136, section 171B is amended to remove reference to that Division.
The heading to section 171B is also appropriately amended.
Division 2-Transitional provisions
Division 2 of Part 2 of Schedule 1 to the Bill includes transitional
provisions necessary to give effect to the amendments made by Division 1 of
Part 2.
Item 149 - Definitions
Item 149 provides definitions for certain terms used in Division 2 of Part
2 of Schedule 1 to the Bill to have the same meaning as in Part XIC of the
TPA, as amended by Division 1.
Item 150 - Transitional-ordinary class exemptions from standard access
obligations
Item 151 - Transitional-ordinary individual exemptions from standard access
obligations
Items 150 and 151 provide that, notwithstanding the repeal of sections
152AS and 152AT and other amendments made by Division 1, ordinary class
exemptions and ordinary individual exemptions that are in force prior to
the commencement of these items of Division 2 will continue to operate
until the first access determination concerning the relevant declared
service comes into force.
Items 150 and 151 achieve this by providing for the continued application
of certain provisions in Part XIC that are repealed by Division 1 of Part 2
of the Schedule of the Bill. In each case, the continued application of
those provisions is subject to the operation of the rest of the item.
The reference to "the first access determination" means either the first
interim access determination or the first final access determination -
whichever is made first.
At the time when the ACCC is making the first access determination, it will
be able to include provisions under proposed paragraphs 152BC(3)(h) or (i)
limiting the application of the standard access obligations. Such
provisions may have a similar effect to exemptions.
Item 152 - Transitional-ordinary access undertakings given to the
Commission before 15 September 2009
Item 152 provides for the continued effect of ordinary access undertakings
that were given to the ACCC before 15 September 2009 (being the date this
Bill was introduced into the Parliament) and that are accepted by the ACCC
before the commencement of item 152, in spite of various amendments made by
Division 1. Item 152 will commence on the day after the Bill receives the
Royal Assent: see clause 2.
Item 152 achieves this by providing for the continued application of
certain provisions in Part XIC that are repealed by Division 1 of Part 2 of
the Schedule of the Bill. The continued application of those provisions is
subject to the operation of the rest of item 152.
Subitem 152(5) mirrors the effect of proposed section 152CBIC of Part XIC
(see item 125) by providing that an access agreement (under proposed
Division 4B of Part XIC) prevails over an undertaking to the extent of any
inconsistency.
Item 153 - Transitional-ordinary access undertakings given to the
Commission on or after 15 September 2009
Item 153 provides for the continued effect of ordinary access undertakings
that are given to the ACCC on or after 15 September 2009 (being the date
this Bill was introduced into the Parliament) and that are accepted by the
ACCC before the commencement of item 153, in spite of various amendments
made by Division 1, but only until the first access determination
concerning the relevant declared service comes into force. Item 153 will
commence on the day after the Bill receives the Royal Assent: see clause 2.
Item 153 achieves this by providing for the continued application of
certain provisions in Part XIC that are repealed by Division 1 of Part 2 of
the Schedule of the Bill. The continued application of those provisions is
subject to the operation of the rest of item 153.
Subitem 153(6) mirrors the effect of proposed section 152CBIC of Part XIC
(see item 125) by providing that an access agreement (under proposed
Division 4B of Part XIC) prevails over an undertaking to the extent of any
inconsistency.
Item 154 - Transitional-arbitration of access disputes
Item 154 provides for the ACCC to have a continued role in arbitrating
access disputes notified to it under Division 8 of Part XIC of the TPA, in
certain specified limited circumstances, notwithstanding the repeal of
Division 8 by Division 1 of Part 2 of Schedule 1 of this Bill. This
provision is necessary to enable the transition from the current
negotiate/arbitrate model in Part XIC to the model of setting up-front
terms and conditions that is implemented by the changes made to Part XIC by
this Bill.
Item 154 provides for the continued role of the ACCC in arbitrating certain
access disputes by providing for the continued application of certain
provisions in Part XIC that are repealed by Division 1 of Part 2 of the
Schedule of the Bill. The continued application of those provisions is
subject to the operation of the rest of item 154.
The ACCC will have 12 months from the commencement of the Bill to commence
the process of making an access determination for any service that is a
declared service at the commencement of proposed section 152BCI (see
proposed subsection 152BCI(2)). Until the ACCC makes the first final
access determination for an existing declared service, access disputes may
still be referred to the ACCC under Division 8 of Part XIC.
Item 154 sets out the circumstances in which, and the period for which,
access disputes will still be able to be referred to, and arbitrated by,
the ACCC under Division 8 after the commencement of item 154, and the order
of precedence between arbitration determinations made by the ACCC under
that Division vis-�-vis access determinations and binding rules of conduct.
The effect of item 154 is as follows:
. Access disputes about a service that is declared after the
commencement of item 154 cannot be referred to the ACCC for
arbitration.
. Access disputes about a service that was declared before the
commencement of item 154 can be referred to the ACCC for arbitration
until the first final access determination is made in relation to the
declared service.
. The ACCC may terminate an arbitration proceeding at any time (without
making an arbitration determination) after the ACCC commences a public
inquiry about making an access determination in relation to the
declared service that is the subject of the arbitration proceeding.
. A final arbitration determination made by the ACCC after the
commencement of item 154 must specify an expiry date.
. The ACCC cannot make an arbitration determination that is inconsistent
with a final access determination that is already in force.
. An arbitration determination that has an expiry date prevails over a
final access determination that is made after the arbitration
determination, to the extent of any inconsistency.
. An access determination prevails over an arbitration determination
that does not have an expiry date, to the extent of any inconsistency.
. An arbitration determination, whether or not it has an expiry date,
prevails over an interim access determination, to the extent of any
inconsistency.
. Binding rules of conduct, whenever made, prevail over an arbitration
determination that does not have an expiry date, to the extent of any
inconsistency.
. An arbitration determination that has an expiry date prevails over
binding rules of conduct, to the extent of any inconsistency.
. An access agreement under proposed Division 4B of Part XIC prevails
over an arbitration determination, to the extent of any inconsistency.
Item 155 - Transitional-compliance with standard access obligations
The ACCC will have 12 months from the commencement of the Bill to commence
the process of making an access determination for any service that is
currently declared. Until the ACCC makes an access determination for an
existing declared service, the terms of access for the service will
continue to be regulated under the current negotiate/arbitrate model.
Item 155 establishes a hierarchy, similar to current section 152AY and
proposed section 152AY, for identifying the terms and conditions on which a
carrier/CSP must comply with the standard access obligations.
The reference to 'access undertaking' in paragraph 155(2)(b) refers to the
ordinary access undertaking mentioned in subparagraph 155(1)(b)(ii) (that
is, the an ordinary access undertaking which has continued effect by virtue
of item 152 or 153).
Two notes are included at the end of item 155 to assist the reader.
The first note alerts the reader that, before considering the hierarchy
that is set out at item 155, it is necessary to consider certain listed
provisions of Part XIC that are inserted by this Bill, and other items in
Division 2 of Part 2 of Schedule 1 of the Bill, that specify how
inconsistency is to be addressed. For example, subitem 154(10) provides
that binding rules of conduct that are inconsistent with an arbitration
determination under Division 8 that has an expiry date have no effect, to
the extent of the inconsistency. So if binding rules of conduct and a
determination under Division 8 that has an expiry date both provide terms
and conditions dealing with a particular matter, in considering the
application of the hierarchy at item 155 in such a circumstance, in effect
the binding rules of conduct are taken not to address the matter: they have
no effect to the extent of the inconsistency.
The second note highlights that although, under the hierarchy described
above, binding rules of conduct take precedence over an access
determination, it is expected that the ACCC will only make binding rules of
conduct on an occasional basis. As noted above, binding rules of conduct
are intended to deal with urgent matters. They have a maximum duration of
12 months. It is expected that access determinations will be the usual way
that the ACCC specifies up-front terms and conditions of access, including
terms and conditions for complying with the standard access obligations.
Item 156 - Transitional-hindering the fulfilment of an obligation imposed
by an arbitration determination
Item 156 provides a transitional mechanism permitting section 152EF of the
TPA to continue to apply to any obligations imposed by Determinations made
by the ACCC under Division 8 of Part XIC that continue to operate as a
result of these transitional provisions, in spite of the repeal of that
Division by this Bill.
Item 157 - Transitional-regulations
Item 157 provides that the Governor-General may make regulations in
relation to transitional matters arising out of amendments made by Part 2
of Schedule 1 of the Bill.
Part 3-Anti-competitive conduct
Part 3 of Schedule 1 of the Bill amends the anti-competitive conduct
provisions in Part XIB operate. Part 3 streamlines the enforcement process
that the ACCC is required to follow, and clarifies that the competition
notice regime applies to content services delivered by carriers and CSPs.
Division 1 - Amendments
Trade Practices Act 1974
Item 158 - At the end of section 151AF (before the note)
Item 158 would amend section 151AF of the TPA to include 'content services'
in the list of goods and services that are a part of a telecommunications
market. This term is defined in section 151AB as having the same meaning
as in the Tel Act. Section 15 of the Tel Act provides that a content
service includes a broadcasting service, an on-line information service, an
on-line entertainment service, any other on-line service, or any other
service specified by the Minister in a determination.
The term 'content services' is used in Parts XIB and XIC of the TPA,
including section 151BUAAA (this section is being repealed by Part 1 of
Schedule 1 of the Bill), subsection 152AF(1) (access by a service provider
to a declared service), and section 152AR (supply of an active declared
service, permitted interconnection and conditional-access customer
equipment).
Part XIB of the TPA sets out a telecommunications specific anti-competitive
conduct regime. Telecommunications carriers and CSPs are prohibited from
engaging in anti-competitive conduct. The circumstances in which a carrier
or a CSP engages in anti-competitive conduct relate to conduct in a
'telecommunications market'. If the ACCC believes that a carrier or CSP is
engaging in anti-competitive conduct in a telecommunications market, it may
issue a competition notice under Part XIB.
This provision provides clarity that the anti-competitive conduct
provisions within Part XIB apply to content services supplied by carriers
and CSPs in telecommunication markets. This will ensure that the ACCC is
able to take enforcement action without doubts over the application of Part
XIB to content services.
Item 159 - Subsections 151AKA (9) and (10)
Item 159 repeals current subsections 151AKA(9) and (10), which provide for
specific consultation to take place before issuing a Part A competition
notice, and inserts proposed subsection 151AKA(9) in its place.
Current subsections 151AKA(9) and (10) require the ACCC, before it issues a
Part A competition notice, to give the carrier/CSP concerned a consultation
notice which describes the alleged anti-competitive conduct in summary
form, and gives the provider an opportunity to make submissions. Repealing
these subsections provides for a more streamlined process for issuing
competition notices, to enable the ACCC to move quickly to issue a
competition notice as soon as it has reason to believe anti-competitive
conduct is occurring in the telecommunications market.
Proposed subsection 151AKA(9) expressly removes any common law procedural
fairness requirements that may apply to the ACCC when issuing a Part A
competition notice. This provision is intended to eliminate the
opportunity of a recipient of a notice from appealing the issuing of the
notice on procedural fairness grounds.
It should be noted that as a competition notice does not of itself direct a
party to take action, there are no penalties for failing to comply with a
competition notice. Before penalties are applied for engaging in anti-
competitive conduct, the ACCC has to prove to the Federal Court that the
anti-competitive conduct has occurred.
Division 2 - Application
Item 160 - Application - competition notices
Item 160 clarifies that the proposed amendments to section 151AKA made by
the Bill will only apply to Part A competition notices issued after the
commencement of the item.
Part 4-Universal service regime
Part 4 of Schedule 1 of the Bill amends the Consumer Protection Act to
include new requirements for a primary universal service provider to
supply, on request, standard telephone services with characteristics and to
performance standards determined by the Minister. There are also new
provisions providing minimum performance benchmarks that a primary
universal service provider must meet in fulfilling its responsibilities.
Part 4 also provides the Minister with the power to specify, by written
determination, rules and performance standards to which a primary universal
service provider must adhere in relation to the supply, installation,
maintenance and location of payphones, new rules in relation to public
consultation and notification of proposals to remove payphones, and
provides for the ACMA TO have new powers to direct the universal service
provider not to remove payphones.
Telecommunications (Consumer Protection and Service Standards) Act 1999
Item 161 - Subsection 5(2)
Item 162 - Subsection 5(2)
Item 163 - Subsection 5(2)
Item 161 inserts a definition of a 'payphone carriage service' into
subsection 5(2) of the Consumer Protection Act. This term is proposed to be
used in item 175 which inserts revised obligations on primary universal
service providers in regard to payphones.
Item 162 inserts a definition of 'price-related terms and conditions' into
subsection 5(2) of the Act. This definition has been relocated from
subsection 150(3) (see item 176). The term is now used more widely in Part
2 of the Consumer Protection Act as a result of the amendments proposed
under item 175 which enable non-price-related obligations to be placed on
primary universal service providers in regard to standard telephone
services provided in fulfilment of the universal service obligation. The
Minister's powers to determine price-related terms and conditions, under
Division 11 in relation to USO services and under Part 9 in relation to
price control arrangements for carriage services, content services and
facilities supplied by Telstra, remain unchanged.
Item 163 inserts a definition of 'VOIP service' to mean a carriage service
that enables a voice call to originate on customer equipment by means of
the internet protocol. The term 'internet protocol' refers to the method
by which data is sent from one computer to another on the internet. A
definition for 'VOIP service' is required as a result of the amendments
proposed under item 164 below.
Item 164 - After section 6
Item 164 inserts proposed section 6A, to make it clearer when standard
telephone services are taken to be supplied in fulfilment of the universal
service obligation and when those services are taken not to have been
provided in fulfilment of the universal service obligation. This clarity is
required to assist consumers become more aware of the status of the service
they are purchasing and their right to a service supplied in fulfilment of
the universal service obligation.
Proposed section 6A is intended to enable a primary universal service
provider to clearly delineate between those services it provides in
fulfilment of the universal service obligation and its other standard
telephone service offerings. The amendments clarify that standard telephone
services supplied in fulfilment of the universal service obligation are not
restricted to particular technologies. The provisions are intended to
establish a presumption that standard telephone services supplied by a
primary universal service provider which are not mobile or VOIP
technologies are subject to the universal service requirements unless the
customer agrees otherwise.
Proposed subsection 6A(1) clarifies that in order for a standard telephone
service that is a public mobile telecommunications service or a VOIP
service, to be taken to be supplied in fulfilment of the universal service
obligation, the primary universal service provider must, before the
customer enters into an agreement with it for the supply of the service:
- provide the customer with a written notice that the service is
supplied in fulfilment of the universal service obligation; and
- the written notice complies with the requirements (if any) specified
in a determination under proposed subsection (2).
Proposed subsection 6A(2) provides that the ACMA may, by legislative
instrument, determine requirements for the purposes of proposed paragraph
6A(1)(d).
Proposed subsection 6A(3) clarifies that a standard telephone service, that
is not a public telecommunications service nor a VOIP service, is taken not
to be supplied in fulfilment of the universal service obligation in
circumstances where, before the customer enters into an agreement with it
for the supply of the service:
- the primary universal service provider in question gives the customer
the option of being supplied with another standard telephone service
on the basis that the other service would be supplied in fulfilment of
the universal service obligation; and
- the customer has given the provider a written notice acknowledging
that the relevant service is not supplied in fulfilment of the
universal service obligation; and
- the written notice complies with the requirements (if any) specified
in a determination under proposed subsection 6A(4).
Proposed subsection 6A(4) provides that the ACMA may, by legislative
instrument, determine requirements for the purposes of proposed paragraph
6A(3)(e).
Item 165 - After section 8B
Item 165 inserts proposed section 8BA, which provides a special meaning of
'standard telephone service' for the purposes of Part 1 of the Consumer
Protection Act.
Pursuant to proposed subsection 8BA(1), 'standard telephone service' would
include the meaning that is provided for under section 6 of the Consumer
Protection Act plus any additional characteristics that have been specified
by the Minister under a subsection 8BA(2) instrument.
Proposed subsection 8BA(2) allows the Minister, by legislative instrument,
to determine specified characteristics for the purposes of proposed
subsection 8BA(1).
The ability of the Minister to prescribe additional characteristics for the
standard telephone service under proposed subsection 8BA(2) enables the
standard telephone service which must be supplied on request for the
purposes of the universal service obligation to be more precisely
specified. This mechanism could be used, for example, to set specific voice
quality requirements.
Item 166 - Subsections 9(2) and (3)
Item 166 repeals subsections 9(2) and (3) and substitutes a number of
subsections which clarify the matters that are included in the universal
service obligation.
Proposed subsection 9(2) provides that the obligation under paragraph
9(1)(a) includes the obligation to supply standard telephone services 'on
request', that is, on the request of the person seeking supply of the
relevant service.
Proposed subsection 9(2A) provides that the obligation under paragraph
9(1)(b) includes the obligation to supply, install and maintain payphones
in Australia.
Proposed subsection 9(2B) provides that the obligation under paragraph
9(1)(c) includes the obligation to supply prescribed carriages services 'on
request', that is, on the request of the person seeking supply of the
relevant service.
Proposed subsection 9(2C) provides that an obligation under paragraph
9(1)(a) or proposed subsection 9(2) does not arise unless the request
complies with the requirements (if any) set out in a determination under
proposed subsection 9(2D).
Proposed subsection 9(2D) allows the Minister, by legislative instrument,
to determine requirements for requests, such as the form of the request or
information to be provided in a request.
Proposed subsection 9(2E) confirms that the obligation under subsection
9(2) or paragraph 9(1)(a) will not arise under circumstances specified in a
determination under proposed subsection 9(3). Proposed subsection 9(3)
enables the Minister to determine these circumstances, such as where a
request has been already received for the same standard telephone service.
It is expected the Minister would also exempt a primary universal service
provider from having to supply a service in response to a request where
doing so would expose workers to unreasonable dangers, where the customer
fails to identify the premises where the service is to be supplied, or
where there are demonstrated customer creditworthiness grounds. This
determination will be a legislative instrument.
Item 167 - Subsection 9(4)
Item 168 - Subsection 9(5)
Item 169 - Subsection 9(6)
Items 167, 168 and 169 provide for consequential amendments to be made to
the noted subsections as a result of the amendments to section 9 made by
item 166.
Item 170 - Section 9A
Item 170 repeals section 9A and substitutes a proposed section 9A.
Proposed section 9A Reasonable accessibility of prescribed carriage
services
Proposed section 9A, in effect, re-enacts current subsection 9A(3) and
9A(5) as proposed subsections 9A(1) and 9A(2). The remaining subsections
in current section 9A are no longer required as a result of other
amendments made by item 175 of this Bill.
Proposed subsection 9A(1) enables the Minister to make a determination
regarding what is or is not necessary to determine when prescribed carriage
services are reasonably accessible under paragraph 9(1)(c).
Proposed subsection 9A(2) provides that the determination will be a
legislative instrument.
Item 171 - Subsection 9B(1)
Item 172 - Subsection 9B(1)
Item 173 - Subsections 9B(2), (3), and (4)
Items 171, 172 and 173 provide for consequential amendments to be made to
the noted subsections as a result of the proposed amendments to section 9
under item 166.
Item 174 - Subsection 12C(1)
Item 174 would omit the phrase 'take all reasonable steps to' from
subsection 12C(1). This proposed amendment would clarify the obligations of
a primary universal service provider to strictly comply with its service
obligations as described under section 12C. This would also make it easier
for the ACMA to determine when it could initiate action for breach of an
obligation under the universal service regime.
Item 175 - After Subdivision B of Division 5 of Part 2
Item 175 inserts proposed Subdivisions BA and BB into Division 5 of Part 2
of the Consumer Protection Act. Proposed Subdivisions BA and BB include a
number of provisions dealing with performance standards and performance
benchmarks for standard telephone services and payphones for primary
universal service providers to be made by the Minister through legislative
instruments.
Proposed Subdivision BA-Standard telephone service requirements
Proposed section 12EB Performance standards
Proposed subsection 12EB(1) enables the Minister to make a determination
setting out standards (performance standards) to be complied with in
respect of standard telephone services supplied by a primary universal
service provider in fulfilment of the universal service obligation,
regarding the following:
- terms and conditions of the supply of a service to a customer;
- the reliability of the service;
- the supply of a temporary service;
- the maximum period within which the primary universal service provider
must supply the service to the prospective customer following a
request;
- the maximum period within which the primary universal service provider
must rectify a fault or service difficulty following report by a
customer; and
- any other matter concerning the supply, or proposed supply.
Proposed subsection 12EB(2) provides that a determination made under
proposed section 12EB can be of general or limited application. This
provision does not limit the application of subsection 33(3A) of the AIA.
Proposed subsection 12EB(4) imposes a positive obligation on a primary
universal service provider to comply with a standard in force under
subsection 12EB(1). Any breach of a standard would be a breach of the
Consumer Protection Act, and consequently a breach of a carrier licence
condition (see clause 1 of Schedule 1 of the Tel Act and section 68 of the
Tel Act) for which the standard enforcement provisions under the Tel Act
apply.
Proposed subsection 12EB(5) provides that a determination made under
proposed subsection 12EB(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency.
Section 12H requires a universal service provider to submit a draft policy
statement and a draft marketing plan to the ACMA for approval. Standard
marketing plans set out the provider's arrangements for supplying and
marketing equipment, goods or services in fulfilment of the USO. Policy
statements are general statements of the policy the provider will apply in
supplying the equipment, goods or services. It is intended that these
documents will continue in force following a Ministerial determination to
the extent they are not inconsistent with the determination.
Proposed subsection 12EB(6) makes it clear that this section will only
apply to a standard telephone service supplied, or proposed to be supplied,
in fulfilment of the universal service obligation.
A determination under proposed subsection (1) is a legislative instrument
for the purposes of the LIA (proposed subsection 12EB(7)). This would mean
that the determination would be registered on the Federal Register of
Legislative Instruments and would be subject to Parliamentary disallowance.
The Minister could vary the requirements specified in a determination by
legislative instrument, or revoke a determination by legislative
instrument, relying on subsection 33(3) of the AIA.
Proposed section 12EC Performance benchmarks
Proposed subsection 12EC(1) enables the Minister to make a determination
setting out standards (performance benchmarks) to be complied with by a
primary universal service provider in respect of standard telephone
services supplied in fulfilment of the universal service obligation in
relation to:
- terms and conditions of the supply to a customer;
- the reliability of the service;
- the supply of a temporary service;
- the maximum period within which the primary universal service provider
must supply the service to the prospective customer following a
request;
- the maximum period within which the primary universal service provider
must rectify a fault or service difficulty following report by a
customer; and
- any other matter concerning the supply, or proposed supply.
This determination would be a legislative instrument (subsection 12EC(5)).
This means that the determination would be registered on the Federal
Register of Legislative Instruments and would be subject to Parliamentary
disallowance. The Minister could vary the requirements specified in a
determination by legislative instrument, or revoke a determination by
legislative instrument, relying on subsection 33(3) of the AIA.
Proposed subsection 12EC(1) replicates proposed subsection 12EB(1).
However, it is anticipated that different standards (relating to
performance benchmarks) may be set in a determination under proposed
subsection 12EC(1) when compared with a determination under proposed
subsection 12EB(1), as explained below.
Unlike the provisions in section 12EB relating to performance standards,
there is no positive obligation on a primary universal service provider to
comply with a standard in force under proposed subsection 12EC(1).
Proposed subsections 12EC(10) and (11) also confirm that clause 1 of
Schedules 1 and 2 to the Tel Act do not apply to contravention of a
standard in force under proposed subsection 12EC(1). This means failure by
a primary universal service provider to meet a standard under proposed
subsection 12EC(1) would not be a breach of a carrier licence condition or
a service provider rule.
The standards to be specified under proposed subsection 12EC(1) relate to
performance benchmarks which a primary universal service provider should
aim to achieve and by which minimum benchmarks can be set. There will be an
obligation to meet or exceed a minimum benchmark under proposed subsection
12EC(9)). An example of how this would work is given below, where proposed
subsection 12EC(6) is discussed.
Proposed subsection 12EC(2) provides that a determination made under
proposed subsection 12EC(1) can be of general application or limited
application. This provision does not limit the application of subsection
33(3A) of the AIA.
Proposed subsection 12EC(4) provides that a determination made under
proposed subsection 12EC(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency. As
noted above, section 12H provides for the universal service providers to
submit draft policy statements and draft marketing plans to the ACMA for
approval. Standard marketing plans and policy statements are intended to
support and supplement the universal service obligation by setting out how
the provider will fulfil the obligation.
Proposed subsection 12EC(6) enables the Minister, by legislative
instrument, to set minimum benchmarks in relation to a standard in force
under subsection 12EC(1). An example of a minimum benchmark that could be
made would be to specify the percentage of occurrences in which a primary
universal service provider is expected to meet a performance standard made
under proposed section 12EC(1). For instance, a primary universal service
provider could be expected to supply a standard telephone service to a
customer within four days of the request as a standard under proposed
subsection 12EC(1). A minimum benchmark in regard to that particular
standard could be that the provider must meet the four-day supply period
for at least 90 per cent of all requests in any calendar year.
A performance standard made under proposed section 12EC, which is enforced
by means of a minimum benchmark (a "benchmark standard"), should be
contrasted with a performance standard that could be made under proposed
section 12EB, for which compliance with the standard in each occurrence is
made a service provider rule and a carrier licence condition (a "direct
standard"). The two types of performance standard can co-exist, and can
address the same subject matter: it would be expected that a primary
universal service provider would be expected to meet stricter requirements
in a benchmark standard than in a direct standard. So, the benchmark
standard might provide that a service must be supplied within four days of
request. A primary universal service provider must meet this requirement
in the percentage of occurrences specified in the benchmark made by the
Minister (90 per cent of requests, in the above example). However, a
direct standard could operate at the same time, providing that for each and
every request the primary universal service provider must supply the
service in a different period, which would be longer: for instance, 15
days. In that case, if the provider takes 16 days to supply a service, it
is in breach of the direct standard. It may also be in breach of the
benchmark, or it may not: that would depend on its overall performance in
supplying services in response to requests over the course of a year.
Proposed subsection 12EC(7) confirms an instrument under proposed
subsection 12EC(6) may be of general or limited application. This
provision does not limit subsection 33(3A) of the AIA.
Proposed subsection 12EC(9) places an obligation on a primary universal
service provider to meet or exceed any minimum benchmarks that are set out
in an instrument under subsection 12EC(6). Failure to meet or exceed a
minimum benchmark under proposed subsection 12EC(6) would be a breach of
the Consumer Protection Act, and consequently a breach of a carrier licence
condition (see clause 1 of Schedule 1 of the Tel Act and section 68 of the
Tel Act) for which the standard enforcement provisions under the Tel Act
apply.
Subdivision BB - Payphone requirements
Proposed subsection 12ED Performance standards
Proposed subsection 12ED(1) enables the Minister to make a determination
setting out standards (performance standards) to be complied with in
respect of the following matters regarding payphone carriage services:
- the characteristics (such as provision of a dial tone);
- the supply, installation or maintenance of a payphone;
- the supply of a payphone carriage service;
- the reliability of a payphone;
- the reliability of a payphone carriage service;
- the maximum period within which the primary universal service provider
must rectify a fault or service difficulty to a payphone following a
report;
- the maximum period within which the primary universal service provider
must rectify a fault or service difficulty to a payphone carriage
service following a report;
- the handling of requests for the removal of a payphone; and
- any other matter concerning the supply, installation or maintenance of
a payphone or the supply of a payphone carriage service.
A determination made under subsection 12ED(1) would be a legislative
instrument (subsection 12ED(6)).
Proposed subsection 12ED(2) provides that the determination made under this
section can be of general or limited application. It may be necessary, for
example, to limit a standard setting out periods for rectification of
faults to deal with circumstances that are beyond the payphone carriage
service provider's fault, for example due to vandalism. Proposed
subsection 12ED(3) notes that proposed subsection 12ED(2) does not limit
the application of subsection 33(3A) of the AIA.
Proposed subsection 12ED(4) places an obligation on a primary universal
service provider to comply with a determination made under proposed
subsection 12ED(1). Any breach of a determination under proposed
subsection 12ED(1) would be a breach of the Consumer Protection Act, and
consequently a breach of a carrier licence condition (see clause 1 of
Schedule 1 of the Tel Act and section 68 of the Tel Act) for which standard
enforcement provisions under the Tel Act apply.
Proposed subsection 12ED(5) provides that a determination made under
proposed subsection 12ED(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency.
Section 12H provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Universal
marketing plans and policy statements are intended to support and
supplement the universal service obligation by setting out how the provider
will fulfil the obligation.
Proposed section 12EE Performance benchmarks
Proposed subsection 12EE(1) enables the Minister to make a determination
setting out standards (performance benchmarks) to be complied with in
respect of the following payphone carriage services:
- the characteristics (such as provision of a dial tone);
- the supply, installation or maintenance of a payphone;
- the supply of a payphone carriage service;
- the reliability of a payphone;
- the reliability of a payphone carriage service;
- the maximum period within which the primary universal service provider
must rectify a fault or service difficulty to a payphone following a
report;
- the maximum period within which the primary universal service provider
must rectify a fault or service difficulty to a payphone carriage
service following a report;
- the handling of requests for the removal of a payphone; and
- any other matter concerning the supply, installation or maintenance of
a payphone or the supply of a payphone carriage service.
A determination made under subsection 12EE(1) would be a legislative
instrument (subsection 12EE(5)).
Proposed subsection 12EE(1) replicates proposed subsection 12ED(1).
However, it is anticipated that different standards (relating to
performance benchmarks) would be set in a determination under proposed
subsection 12EE(1) when compared with a determination under proposed
subsection 12ED(1), as explained below.
Unlike the provisions in section 12ED relating to performance standards,
there is no obligation on a primary universal service provider to comply
with a standard in force under proposed subsection 12EE(1). Proposed
subsections 12EE(10) and (11) also confirm that clause 1 of Schedules 1 and
2 to the Tel Act do not apply to contravention of a standard in force under
proposed subsection (1). This means failure to meet a standard under
proposed subsection (1) would not be a breach of a carrier licence
condition or a service provider rule.
The standards to be specified under proposed subsection 12EE(1) are
performance benchmarks which a universal service provider should aim to
achieve and by which minimum benchmarks can be set. There will be an
obligation to meet or exceed a minimum benchmark under proposed subsection
12EE(9). An example of how this would work is given below, where proposed
subsection 12EE(6) is discussed.
Proposed subsection 12EE(2) provides that a determination made under
proposed subsection 12EE(1) can be of general application or limited
application.
Proposed subsection 12EE(3) notes that subsection 12EE(2) does not limit
the application of subsection 33(3A) of the AIA.
Proposed subsection 12EE(4) provides that a determination made under
proposed subsection 12EE(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency.
Section 12H provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Standard
marketing plans and policy statements are intended to support and
supplement the universal service obligation by setting out how the provider
will fulfill the obligation.
Proposed subsection 12EE(6) enables the Minister, by legislative
instrument, to set minimum benchmarks in relation to a standard in force
under subsection 12EE(1). An example of a minimum benchmark that could be
made would be to specify the percentage of occurrences in which a primary
universal service provider is expected to meet a performance standard made
under proposed section 12EE(1). For instance, a primary universal service
provider could be expected to rectify a payphone fault within three days of
that fault being reported as a standard under proposed subsection 12EE(1).
A minimum benchmark in regard to that particular standard could be that the
provider must meet the three-day fault rectification period for at least 90
per cent of all requests in a calendar year.
A performance standard made under proposed section 12EE, which is enforced
by means of a minimum benchmark (a "benchmark standard"), should be
contrasted with a performance standard that could be made under proposed
section 12ED, for which compliance with the standard in each occurrence is
made a service provider rule and a carrier licence condition (a "direct
standard"). The two types of performance standard can co-exist, and can
address the same subject matter: it would be expected that a primary
universal service provider would be expected to meet stricter requirements
in a benchmark standard than in a direct standard. So, the benchmark
standard might provide that a payphone fault must be repaired within three
days of being reported. A primary universal service provider must meet
this requirement in the percentage of occurrences specified in the
benchmark made by the Minister (90 per cent of requests, in the above
example). However, a direct standard could operate at the same time,
providing that for each and every payphone fault that is reported, the
primary universal service provider must rectify the payphone fault in a
different period, which would be longer: for instance, 10 days. In that
case, if the provider takes 11 days to supply a service, it is in breach of
the direct standard. It may also be in breach of the benchmark, or it may
not: that would depend on its overall performance in rectifying payphone
faults in response to reports over the course of a year.
Proposed subsection 12EE(7) confirms an instrument under proposed
subsection 12EE(6) may be of general or limited application. This
provision does not limit subsection 33(3A) of the AIA.
Proposed subsection 12EE(9) places an obligation on a primary universal
service provider to meet or exceed any minimum benchmarks that are set out
in an instrument under subsection 12EEA(6). Failure to meet or exceed a
minimum benchmark under proposed subsection 12EEA(6) would be a breach of
the Consumer Protection Act, and consequently a breach of a carrier licence
condition (see clause 1 of Schedule 1 of the Tel Act and section 68 of the
Tel Act) for which the standard enforcement provisions under the Tel Act
apply.
Proposed subsection 12EF Rules about the location of payphones
Proposed subsection 12EF(1) enables the Minister to make a determination
setting out rules to be complied with in relation to the places or areas in
which payphones are located. A determination made under subsection 12EF(1)
will be a legislative instrument (proposed subsection 12EF(5)).
Proposed subsection 12EF(2) places a positive obligation on a primary
universal service provider to comply with a determination made under
proposed subsection 12EF(1). Any breach of a determination under proposed
subsection 12EF(1) would be a breach of the Consumer Protection Act, and
consequently a breach of a carrier licence condition (see clause 1 of
Schedule 1 of the Tel Act and section 68 of the Tel Act) for which the
standard enforcement provisions under the Tel Act apply.
Proposed subsection 12EF(3) provides that if a primary universal service
provider complies with a determination made under proposed subsection
12EF(1), the provider is taken to have complied with its obligations under
paragraph 9(1)(b) and proposed subsection 9(2A), which relate to the
location of payphones. This subsection clarifies the primary universal
service provider's obligations in regard to the location of payphones.
Proposed subsection 12EF(4) provides that a determination made under
proposed subsection 12EF(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency.
Section 12H provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Standard
marketing plans and policy statements are intended to support and
supplement the universal service obligation by setting out how the provider
will fulfil the obligation. This amendment makes it clear that the intended
purpose of these documents is to inform rather than enforce obligations.
Proposed subsection 12EG Rules about the process for public consultation
on the location or removal of payphones
Proposed subsection 12EG(1) allows the Minister to make a determination
setting out rules to be complied with by a primary universal service
provider in relation to the public consultation on the location or removal
of payphones. The determination may provide for different consultation and
notification processes for different classes of payphones (see subsection
33(3) of the AIA), for example the process may be very simple for a
payphone located on privately owned land, such as a shopping mall in a
major city, while the process may be complex for a payphone located on
public land in a remote area.
Proposed subsection 12EG(2) sets out public consultation and notification
requirements that must be stipulated in a determination under proposed
subsection (1) in the event:
- a primary universal service provider makes a decision to remove a
payphone from particular location; and
- that payphone is the only payphone in that location.
Proposed subsection 12EG(3) places an obligation on a primary universal
service provider to comply with a determination made under subsection
12EG(1). Any breach of a determination under proposed subsection 12EG(1)
would be a breach of the Consumer Protection Act, and consequently a breach
of a carrier licence condition (see clause 1 of Schedule 1 to the Tel Act
and section 68 of that Act) and a service provider rule (see clause 1 of
Schedule 2 to the Tel Act, and section 101 of that Act) for which the
standard enforcement provisions under the Tel Act apply.
Proposed subsection 12EG(4) provides that a determination made under
proposed subsection 12EG(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency.
Section 12H provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Standard
marketing plans and policy statements are intended to support and
supplement the universal service obligation by setting out how the provider
will progressively fulfil the obligation.
Proposed subsection 12EG(5) confirms that a determination under proposed
subsection 12EG(1) is a legislative instrument.
Proposed subsection 12EH Rules about the process for resolution of
complaints about the location or removal of payphones
Proposed subsection 12EH(1) allows the Minister to make a determination
setting out rules to be complied with by a primary universal service
provider in relation to resolving complaints about the location or removal
of payphones.
Proposed subsection 12EH(2) places an obligation on a primary universal
service provider to comply with a determination made under subsection
12EH(1). Any breach of a determination under proposed subsection 12EH(1)
would be a breach of the Consumer Protection Act, and consequently a breach
of a carrier licence condition and a service provider rule (see clause 1 of
Schedule 1, clause 1 of Schedule 2 to the Tel Act and sections 68 and 101
of that Act) for which the standard enforcement provisions under the Tel
Act apply.
Proposed subsection 12EH(3) provides that a determination made under
proposed subsection 12EH(1) will prevail over an approved policy statement
or an approved standard marketing plan, if there is any inconsistency.
Section 12H provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Standard
marketing plans and policy statements are intended to support and
supplement the universal service obligation by setting out how the provider
will progressively fulfill the obligation.
Proposed subsection 12EH(4) confirms that a determination under proposed
subsection 12EH(1) is a legislative instrument.
Proposed subsection 12EI Directions by the ACMA about the removal of
payphones
Proposed section 12EI contains provisions giving the ACMA the power to
issue written directions to a primary universal service provider regarding
a decision to remove a payphone from a particular location.
Proposed subsection 12EI(1) outlines the scope of section 12EI, providing
that the section applies if:
- a primary universal service provider has made a decision to remove a
payphone from a particular location; and
- a person notifies the ACMA, in writing, that the person objects to the
removal; and
- the ACMA is satisfied that the removal would breach, or has breached,
a determination under proposed subsection 12EF(1) or the ACMA is
satisfied that the provider has breached a determination under
proposed subsection 12EG(1) in relation to the removal.
Proposed subsection 12EI(2) gives the ACMA the power to issue a written
direction to a provider directing the provider not to remove the payphone
notified under proposed subsection 12EI(1), in circumstances where the
payphone in question has not yet been removed.
Proposed subsection 12EI(3) gives the ACMA the power to issue a written
direction to a provider directing that the provider supply and install a
payphone at the location from which it has been removed and to do so within
a specified period.
Proposed subsection 12EI(4) provides that the period in which a payphone
must be supplied and installed as specified in a direction under proposed
subsection 12EI(3) must not be shorter than 30 days.
Proposed subsection 12EI(5) confirms that a direction under subsection
12EI(2) or (3) must not be inconsistent with a determination under proposed
subsection 12EF(1) (being a determination about the places or areas where
payphones must be located).
Proposed subsection 12EI(6) places an obligation on a primary universal
service provider to comply with a direction under proposed subsection
12EI(2) or (3). This means a failure to comply with a direction under
proposed subsection 12EI(2) or (3) would be a breach of the Consumer
Protection Act, and consequently a breach of a carrier licence condition
and a service provider rule (see clause 1 of Schedule 1, clause 1 of
Schedule 2 to the Tel Act and sections 68 and 101 of that Act) for which
the standard enforcement provisions under the Tel Act apply.
Proposed subsection 12EI(7) confirms, for the avoidance of doubt, that a
direction by the ACMA under proposed subsection 12(2) or (3) is not a
legislative instrument.
Item 176 - Subsection 150(3)
Item 176 repeals subsection 150(3). That subsection, which provided a
definition for 'price-related terms and conditions', is no longer required
as a result of the proposed insertion of a definition for 'price-related
terms and conditions' into section 5 under item 162 of this Bill.
Part 5-Customer Service Guarantee
Part 5 of Schedule 1 to the Bill amends the Consumer Protection Act
relating to the CSG. Amendments made by Part 5 provide for:
- the Minister to establish minimum CSG performance benchmarks to arrest
the decline in telecommunications service quality standards;
- the Minister to establish new CSG timeframes for connections and
repair that will apply to wholesale providers to assist retail
providers of CSG services meet CSG service quality standards;
- clarification of CSG waiver provisions provided for under section 122
of the TCPSS Act. A customer's express agreement for a waiver will be
required;
- certainty that the CSG cannot be waived for a telephone service that
is supplied in fulfilment of the Universal Service Obligation.
Telecommunications (Consumer Protection and Service Standards) Act 1999
Part 5 of the Act establishes the customer service guarantee. Under section
115, the ACMA makes performance standards to be complied with by carriage
service providers relating to customer service. If a service provider
contravenes a standard, it is liable to pay damages to the customer.
Item 178 - Before section 113
As part of the amendments made by Part 5 of Schedule 1 of the Bill, Part 5
of the Consumer Protection Act is restructured by creating four Divisions
within Part 5. Item 178 inserts the heading for Division 1 (Introduction)
at the start of Part 5.
Item 177 - Section 113
Item 177 inserts additional points into the simplified outline of Part 5,
which summarise the amendments to be made by this Bill. These include
enabling the Minister to make performance standards in relation to
wholesale carriage services and to set minimum benchmarks in relation to
compliance with performance standards by carriage service providers.
Item 178 - After section 114
Proposed section 114A Wholesale carriage service and wholesale customer
Item 178 inserts proposed section 114A into the Act, which defines the
terms 'wholesale carriage service' and 'wholesale customer' for the
purposes of proposed Division 3, which will enable wholesale performance
standards and benchmarks to be set. An example of a 'wholesale carriage
service' is where a carrier service provider purchases a carriage service,
such as a wholesale line rental product, from another provider, such as
Telstra, and then on-sells a standard telephone service to a residential or
business customer. The carriage service supplied to the second provider to
resell is a wholesale carriage service and the carriage service provider
reselling the service is the wholesale customer.
Item 178 also includes a heading for Division 2 (Retail performance
standards and benchmarks) after proposed section 114A.
Item 180 - After subsection 115(2)
Section 115 enables the ACMA to make performance standards relating to
customer service.
The provisions to be included in proposed Division 3, inserted by item 182,
enable the Minister to make legislative instruments regarding wholesale
carriage services and wholesale customers and performance standards and
benchmarks.
As a consequence, item 180 inserts proposed subsection 115(2A) to make it
clear that a standard made by the ACMA under subsection 115(1) does not
apply in relation to the supply, or proposed supply of a wholesale carriage
service.
Item 181 - Subsections 115(5) and (6)
Item 181 repeals subsections 115(5) and 115(6) of the Consumer Protection
Act and replaces them with proposed subsection 115(5), which provides that
an instrument made by the ACMA regarding performance standards under
subsection 115(1) is a legislative instrument. Current subsection 115(5)
specifies the manner in which the date of commencement of an instrument
under subsection 115(1) is determined and current subsection 115(6)
confirms that such an instrument is a disallowable instrument. Current
subsection 115(5) is no longer required as the commencement date of a
legislative instrument can be determined in accordance with section 12 of
the LIA. Current subsection 115(6) is no longer required as new proposed
subsection 115(5) confirms that an instrument under subsection 115(1) is a
legislative instrument.
Item 182 - After section 117A
Item 182 would insert a number of proposed sections into the Act dealing
with performance standards made by the Minister through a legislative
instrument.
Proposed section 117B Performance benchmarks
Proposed section 117B would enable the Minister to set minimum benchmarks
concerning compliance with a standard in force under section 115. Section
115 provides for the making of performance standards. Subsection 115(1)
gives the ACMA the power to make standards to be complied with by carriage
service providers in relation to:
the making of arrangements with customers about the period taken to comply
with requests to connect customers to specified kinds of carriage services;
the periods that carriage service providers may offer to customers when
making the above arrangements;
compliance by carriage service providers with the terms of those
arrangements;
the period taken to comply with requests to rectify faults or service
difficulties relating to specified kinds of carriage services;
the keeping of appointments to meet customers (or their representatives,
eg. family members) about such connections and rectifications; and
any other matter concerning the supply, or proposed supply, of a carriage
service to a customer.
Restricting minimum benchmarks under proposed section 117B to those
standards under section 115 ensures that the performance standards will
relate to matters that could reasonably affect the carriage service
provider's ability to provide carrier services to a customer that meet the
performance standards.
Proposed subsection 117B(2) provides that an instrument made under this
section can be of general application or may be limited. This provision is
included because an instrument may need to recognise circumstances where
only certain standards should not apply, for example in circumstances
beyond the carriage service provider's control, or where an instrument
should be limited to a specific group of carriage service providers.
Proposed subsection 117B(3) notes that subsection 117B(2) does not limit
the application of subsection 33(3A) of the AIA.
Proposed section 117C Compliance with performance benchmarks
Proposed section 117C applies where an instrument under section 117B
setting performance benchmarks applies to the provider. Proposed subsection
117C(2) creates an obligation on the carriage service provider to meet or
exceed the minimum benchmark that is set by the Minister in the section
117B instrument. This obligation is a service provider rule (see clause 1
of Schedule 2 to the Tel Act) and is subject to the standard enforcement
mechanisms in that Act applying to service provider rules.
Proposed Division 3-Wholesale performance standards and benchmarks
Proposed section 117D Performance standards
Proposed section 117D would enable the Minister to set performance
standards to be complied with by carriage service providers in relation to
a matter that:
concerns the supply, or proposed supply, of wholesale carriage services to
a wholesale customer; and
is capable of affecting the capacity or ability of a wholesale customer to
comply with a standard in force under section 115 in relation to a matter
concerning the supply, or proposed supply, of a carriage service by the
wholesale customer.
'Wholesale carriage service' and 'wholesale customer' are defined in
proposed section 114A (see item 179).
It is intended that performance standards in relation to wholesale carriage
services will relate to matters that could reasonably affect the ability
of wholesale customers to supply carriage services to their end-users.
Proposed subsection 117D(2) provides that the instrument made under this
section can be of general application or may be limited. This provision is
included because an instrument may need to recognise circumstances where
certain standards should not apply, for example in circumstances beyond the
wholesale carriage service provider's control, or where an instrument
should be limited to a specific group of wholesale carrier service
providers. Proposed subsection 117D(3) notes that proposed
subsection 117D(2) does not limit the application of subsection 33(3A) of
the AIA.
Proposed section 117E Performance benchmarks
Proposed section 117E would enable the Minister to set minimum benchmarks
in relation to compliance by wholesale carriage service providers in
relation to a standard set out in an instrument made under proposed section
117D. Proposed subsection 117E(2) provides that the instrument made under
this section can be of general application or may be limited. Proposed
subsection 117E(3) notes that subsection 117E(2) does not limit the
application of subsection 33(3A) of the AIA.
Proposed section 117F Compliance with performance benchmarks
Proposed section 117F applies where an instrument under section 117E
setting performance benchmarks applies to the provider. Proposed subsection
117F(2) creates an obligation on the carriage service provider to meet or
exceed the minimum benchmark that is set by the Minister in the instrument
made under proposed section 117E. This obligation is a service provider
rule (see clause 1 of Schedule 2 to the Tel Act) and is subject to the
standard enforcement mechanisms in that Act applying to service provider
rules.
A new heading for Division 4 (Other provisions) is also inserted after
proposed section 117F.
Item 183 - At the end of subsection 118(1)
Item 184 - At the end of paragraph 118(3)(a)
Section 118 enables the ACMA to give a carriage service provider remedial
directions about compliance with performance standards. Items 183 and 184
make consequential amendments to section 118 to enable remedial directions
to be given relating to compliance with wholesale performance standards
made under proposed section 117D.
Item 185 - Subsection 120(4)
Section 120 of the Consumer Protection Act enables the ACMA to make an
instrument which makes provision for customers of carriage service
providers to waive their protections and rights under Part 5 of that Act.
Item 185 would repeal subsection 120(4) and substitute additional
requirements for waivers under this Part.
The proposed amendments require the waiver to be in the form specified in
the instrument (proposed subsection 120(4)), to include a statement that
summarises for the customer the consequences of agreeing to the waiver
(proposed subsection 120(5)), and provide that the waiver cannot be
contained in a standard form agreement (proposed subsection 120(6)). These
changes aim to provide customers with an opportunity to consider the effect
of waiving their rights, and the ability to make an informed choice. It is
intended that a customer who is provided services by a carriage service
provider under a standard form agreement could still waive the customer
service guarantee, but the carriage service provider would need to obtain
the consent through use of a separate document that includes a consumer
warning of the consequences of waiving their rights.
Proposed subsection 120(7) provides that a customer cannot waive their
rights, in whole or in part, under Part 5 of the Consumer Protection Act
for services supplied in fulfilment of the universal service obligation.
Any waiver that is provided in respect of these services will have no
effect. This provision is intended to ensure universal service providers
cannot supply a standard telephone service in fulfilment of the universal
service on the condition that the customer waives their CSG rights.
Proposed subsection 120(8) replaces subsection 120(4) with an updated
requirement that an instrument made by the ACMA setting out rules for
waivers is to be a legislative instrument.
Item 186 - After section 120
Item 186 inserts proposed section 120A into the Consumer Protection Act,
which clarifies that that Act does not prevent a carriage service provider
from supplying a particular carriage service to a customer on the condition
that the customer provides a waiver, in accordance with section 120, in
relation to the carriage service. The reference to a waiver in accordance
with section 120 makes it clear that this provision does not override
proposed subsection 120(7) which provides that a customer cannot waive
their CSG rights for services supplied in fulfilment of the universal
service obligation.
Item 187 - Section 122
Item 189 - At the end of section 123 (before the note)
Items 187 and 189 make consequential amendments to sections 122 and 123 to
include references to proposed section 117D. These amendments are
necessary as a result of item 182 to ensure a breach of a standard under
proposed section 117D is not an offence and does not create a liability for
civil penalties. This contrasts with proposed sections 117B and 117E where
a service provider's breach would contravene proposed sections 117C and
117F respectively and would expose the service provider to civil penalties
under section 101, and clause 1 of Schedule 2 to the Tel Act.
Item 188 - After section 122
Proposed section 122A Failure to meet a minimum benchmark is not an
offence
This item inserts a proposed new section 122A which would make it clear
that a failure to exceed a minimum benchmark is not an offence.
Item 190 - Application-waiver
This item makes it clear that any amendments made to section 120 of the
Consumer Protection Act will only apply to waivers given after the
commencement of the provisions in Part 5 of this Bill. Therefore, a
carriage service provider who obtains a waiver prior to the commencement of
the new provisions will not have to comply with the new obligations in the
amendments made to section 120 of the Consumer Protection Act by Part 5 of
this Bill in relation to that waiver.
Part 6-Priority Assistance
Part 6 of the Bill introduces a new service provider rule in
Schedule 2 to the Telecommunications Act requiring service providers
to either offer a priority assistance service in accordance with the
Communications Alliance code on priority assistance or to inform
customers of providers from whom they can purchase such a service if
they require it. Telstra will remain bound by its current carrier
licence condition requiring it to have priority assistance services.
Telecommunications Act 1997
Item 191 - At the end of Schedule 2
Item 191 would insert proposed Part 6 into Schedule 2 to the Tel Act to
include a new standard service provider rule concerning priority
assistance. Priority assistance is where the telephone company provides the
highest level of telephone connections and fault repairs practically
available at the time to an identified customer because a person at the
residence has a life threatening medical condition who is at risk of
suffering a rapid, life threatening deterioration in their condition. While
Telstra is currently the only carriage service provider that is required to
provide priority assistance as a licence condition, some other service
providers voluntarily offer priority assistance services in accordance with
a Communications Alliance industry code.
Proposed Part 6-Priority Assistance
Proposed clause 16 Simplified outline
Proposed clause 16 provides a summary of the effect of proposed Part 6 of
Schedule 2 of the Tel Act, which is to require carriage service providers
to either offer a priority assistance service that complies with the
industry code or to inform customers of providers from whom the customer
can purchase a priority assistance service, if they require it. Proposed
Part 6 of Schedule 2 to the Tel Act is being inserted to ensure that
customers with life-threatening medical conditions are informed of the
existence of priority assistance to enable them to purchase a service that
is suitable for their needs.
Proposed clause 17 Priority assistance industry code
Proposed clause 17 provides that references in proposed Part 6 of Schedule
2 to the Tel Act to the 'priority assistance industry code' means a code
that is either entitled 'Priority Assistance for Life Threatening Medical
Conditions' and is registered under Part 6 of the Tel Act (which provides
fro the registration by the ACMA of industry codes), or a replacement to
that code that is registered under Part 6 of the Tel Act. The 'Priority
Assistance for Life Threatening Medical Conditions' code is a voluntary
industry code currently registered with the ACMA under section 117 of the
Tel Act. The code specifies minimum standards for the supply of priority
assistance to customers and aims to ensure that all suppliers provide
customers with information about whether they offer priority assistance.
Proposed clause 18 Compliance with the priority assistance industry code
Proposed clause 18 provides that a carriage service provider must comply
with the priority assistance industry code to the extent it is applicable
to that provider. The code does not require carriage service providers to
offer priority assistance but requires those carriage service providers who
choose to offer priority assistance to meet minimum industry standards. The
code also sets minimum standards relating to customer information practices
for those carriage service providers who choose not to offer priority
assistance. Proposed clause 18 makes compliance with the industry code a
service provider rule, for those providers to whom it is applicable.
Proposed clause 19 Information for prospective residential customers of
a carriage service provider who does not offer priority assistance
Proposed clause 19 requires carriage service providers that do not offer a
priority assistance service to provide specific information to prospective
residential customers. Proposed subclause 19(1) provides for this clause to
apply to a carriage service provider if the provider receives an inquiry
from a prospective customer about the supply of a standard telephone
service and where the provider does not offer priority assistance in
connection with the service. A prospective customer is intended to mean a
person who has advised that they wish to become a customer of the carriage
service provider for a standard telephone service but for whom supply of
that service by the relevant carriage provider has not yet commenced. The
reference to a residential customer is intended to include not only
customers at individual private residences, but also to customers at
locations such as nursing homes or hospices, being places where people
reside. 'Standard telephone service' is defined in section 7 of the Tel Act
as having the same meaning given by section 6 of the Consumer Protection
Act.
If proposed subclause 19(1) applies, then the provider must inform the
prospective residential customer that it does not offer priority assistance
in connection with that service, and must supply the prospective customer
with the names of one or more carriage service providers from whom the
customer can obtain priority assistance in connection with a standard
telephone service. This provision would also apply in the circumstance
where priority assistance is not available for the particular type of
standard telephone service product the customer is enquiring about. It is
intended that the carriage service provider under subclause 19(2) would be
able to bring to the attention of the customer other standard telephone
service products that that same carriage service provider can supply that
do include priority assistance.
Proposed subclause 19(3) makes it clear that 'priority assistance' has the
same meaning as in the priority assistance industry code. In section 2.4.1
of the 'Priority Assistance for Life Threatening Medical Conditions' code
'Priority Assistance' means the provision of the highest level of service
practically available at the time is given to provisional Priority
Customers and Priority Customers. Section 4 of the code sets out the
minimum standards providers must meet to comply with the code in relation
to new connections, fault repairs and service reliability of the standard
telephone service at the provisional Priority Customer's or Priority
Customer's place of residence. If a replacement code is registered by the
ACMA, 'priority assistance' in subclause 19(3) will have the same meaning
as in that replacement code.
Proposed clause 20 Requirements for Telstra
Proposed clause 20 makes it clear that this part does not impose any
requirements on Telstra, if clause 19 of the Carrier Licence Conditions
(Telstra Corporation Limited) Declaration 1997 is in force. This is because
Telstra is the only carrier service provider required to provide priority
assistance services to its customers as a condition of its carrier licence.
Under the licence condition, Telstra must have an effective policy for
offering priority assistance services to people who have a life-threatening
medical condition.
Part 7-Infringement Notices
The amendments proposed under this Part establish an infringement notice
regime to deal with breaches of civil penalty provisions of the Tel Act,
the Consumer Protection Act and Chapter 5 of the Interception Act.
Division 1 - Amendments
Telecommunications Act 1997
Item 192 - Section 7 (definition of authorised infringement notice officer)
Item 193 - Section 7 (definition of infringement notice)
Item 194 - Section 7 (definition of penalty unit)
Items 192-194 amend section 7 of the Tel Act to insert certain definitions
for the purposes the other amendments made to that Act by Part 7 of
Schedule 1 to the Bill.
An 'authorised infringement notice officer' is defined in this section as
the Chair of the ACMA, or a member of the ACMA staff who is appointed under
proposed section 572L. This amendment ensures that only persons authorised
in writing can issue infringement notices for the purposes of this proposed
Part.
The term 'infringement notice' is defined to mean an infringement notice
issued under proposed section 572E, which enables the ACMA to issue
infringement notices as a means of dealing with breaches of civil penalty
provisions.
Item 194 inserts a new definition of 'penalty unit' in section 7 of the Tel
Act. The term is defined as having the meaning given by section 4AA of the
Crimes Act 1914, which currently provides that one penalty unit equates to
$110.
Item 195 - After Part 31A
Proposed Part 31B-Infringement notices for contraventions of civil penalty
provisions
Item 195 inserts proposed Part 31B into the Tel Act. Proposed Part 31B
establishes that the ACMA may issue infringement notices for contraventions
of civil penalty provisions.
Proposed section 572D Simplified outline
Proposed section 572D provides a short summary of the effect of proposed
Part 31B, which is to set up a system of infringement notices for
contravention of civil penalty provisions. This will enable a more
efficient means of dealing with certain civil penalty provisions as an
alternative to instituting court proceedings for recovery of a pecuniary
penalty.
Proposed section 572E When an infringement notice can be given
Proposed section 572E sets out when an infringement notice may be issued.
It provides that an infringement notice may be issued by an 'authorised
infringement notice officer' (the Chair of the ACMA or a member of the ACMA
staff appointed under proposed section 572L, see the definition of this
term inserted in section 7 by item 192), if he or she has reasonable
grounds to believe that a person has contravened a particular civil penalty
provision.
An infringement notice must be given within 12 months of the alleged
contravention (proposed subsection 572E(2)).
Compliance with each provision of the Tel Act (and with the Consumer
Protection Act and Chapter 5 of the Interception Act) is a condition of a
carrier licence and a service provider rule (see clause 1 of Schedule 1 to
the Tel Act and Clause 1 of Schedule 2 to the Tel Act). However, certain
provisions of the Tel Act and the Consumer Protection Act provide explicit
civil penalty provisions that are not enforced by means of carrier licence
or service provider rule (see subsection 570(6) of the Tel Act). Proposed
subsection 572E(3) mirrors the operation of subsection 570(6), and provides
that, if conduct constitutes a contravention of a carrier licence condition
or a service provider rule (sections 68 and 101 of the Tel Act), and one or
more other civil penalty provisions, an infringement notice must not be
given to the person in relation to the contravention of section 68 or 101,
as the case may be.
Certain provisions have been excluded for the purposes of the infringement
notice scheme under proposed subsection 572E(4). These provisions have been
listed as exempt because they are provisions that are more appropriate for
the ACCC or another Agency to enforce. This is modeled on subsection 571(3)
of the Tel Act.
Proposed subsection 572E(5) provides that the ACMA must not issue an
infringement notice in relation to contraventions of sections 68 or 101 and
of a carrier licence condition in this Act (other than Part 1 of Schedule
1), a carrier licence condition under section 63, a service provider rule
in this Act (other than Part 1 of Schedule 2), or a service provider rule
under section 99, unless it has been declared as a listed infringement
notice provision that has been listed for at least three months before the
contravention is alleged to have taken place. This proposed provision
ensures that certain contraventions must be listed by the ACMA before they
are actionable under these infringement notice provisions (proposed
subsection 572E(7) describes how the ACMA will list a provision). However,
this provision does not limit the ability of the ACMA to enforce other
civil penalty provisions.
Proposed section 572E will commence on 1 July 2010: see clause 2 of this
Bill. This delayed commencement will allow the ACMA time to prepare and,
in reliance on section 4 of the AIA, to make the instrument declaring
particular provisions to be listed infringement notice provisions, as well
as other instruments required to be in operation under this Part.
Part 1 of Schedule 1 includes a carrier licence condition requiring a
carrier to comply with each provision of the Tel Act (and with the Consumer
Protection Act and Chapter 5 of the Interception Act). Part 1 of Schedule 2
to the Tel Act includes a similar service provider rules. Proposed
subsection 572(6) provides that the ACMA must not issue an infringement
notice in relation to contraventions of sections 68 or 101 and of the
carrier licence condition set out in Part 1 of Schedule 1, or the service
provider rule in Part 1 of Schedule 2, unless the particular provision of
the Tel Act, or of the Consumer Protection Act, or of Chapter 5 of the
Interception Act, to which the contravention relates is a listed
infringement notice provision that has been listed for at least three
months before the contravention is alleged to have taken place.
Proposed subsection 572E(7) provides for the ACMA to declare certain
provisions as listed infringement notice provisions. The ACMA may make a
legislative instrument which declares that either a specified provision of
this Act, a specified provision of a declaration in force under section 63,
or a specified provision of a determination in force under section 99, is a
listed infringement notice provision. By listing these provisions, the ACMA
can then follow the procedure under proposed subsections 572E(6) or (7) to
issue an infringement notice if they are contravened.
To ensure infringement notices only apply to provisions that are
appropriate for this type of enforcement measure, it is expected that the
ACMA will undertake consultations with the Attorney-General's Department
and the Department of Broadband, Communications and the Digital Economy and
will have regard to the matters raised in the Guide to Framing Commonwealth
Offences, Civil Penalties and Enforcement Powers published by the Attorney-
General's Department (this document is available on the Attorney-General's
Department website), or any subsequent guidance issued by the Attorney-
General's Department.
It should also be noted that the Minister for Broadband, Communications and
the Digital Economy has the power under section 14 of the Australian
Communications and Media Authority Act 2005 to give written directions to
the ACMA in relation to the performance of its functions and the exercise
of its powers.
Proposed subsection (8) indicates that references in proposed section 572E
to 'this Act' include the Consumer Protection Act and regulations under
that Act as well as Chapter 5 of the Interception Act.
Proposed section 572F Matters to be included in an infringement notice
Proposed section 572F sets out the matters which must be included in an
infringement notice. In particular, it provides that an infringement notice
must:
- set out the name of the person to whom the notice is given, that is the
person who has allegedly contravened the designated infringement notice
provision;
- set out the name of the authorised infringement notice officer who
gave the notice. It is anticipated that as a matter of administrative
practice the authorised infringement notice officer would sign the
notice;
- set out brief details of each of the alleged contraventions. It must
include the date on which the contravention is alleged to have
occurred and the particular designated infringement notice provision
that was allegedly contravened (see subsection (2));
- set out that the Federal Court will not deal with the matters in the
alleged contraventions if the penalty is paid to the ACMA within the
notified period (either 28 days after the notice is given or longer,
if an extension of time for payment is granted by the ACMA);
- explain how the penalty may be paid; and
- set out any other matters (if any) which are specified in the
regulations.
Proposed subsection 572F(2) provides that the notice must include the date
of the contravention and the specific civil penalty provision that was
contravened, as part of the brief details about the alleged contravention
(under proposed paragraph 572(1)(c)). This does not limit the details which
may be included under this proposed section.
Proposed section 572G Amount of penalty
Proposed section 572G sets out the amount of the penalty that is to be set
out in an infringement notice. The penalty payable will depend upon whether
or not the breach is by a body corporate or a person other than a body
corporate.
Under proposed subsection 572G(2), the Minister may make a legislative
instrument which sets out one or more contraventions of section 68 and 101
and specifies for each kind of contravention, the number of penalty units
that will apply. Proposed subsection 572G(3) provides that the maximum
penalty that may be specified by the Minister for a body corporate in the
determination made by the Minister under proposed subsection 572G(2) must
not exceed 18,000 penalty units (around $2 million).
If the infringement notice is given to a body corporate, and the alleged
contravention is of a kind specified under proposed subsection 572G(2), the
number of penalty units for the pecuniary penalty will be the number
specified in the determination made under that subsection. Otherwise, the
penalty is 60 penalty units (currently $6,600).
It is intended that the Minister would specify the provisions to be subject
to higher pecuniary penalty amounts where it is likely that the lower
amount of 60 penalty units would provide insufficient deterrent for large
telecommunications carriers or carriage service providers to comply with
the provision. It is standard practice for an infringement notice amount to
not exceed one-fifth of the penalty otherwise applying. The maximum civil
penalty for breach or a carrier licence condition or service provider rule
is $10 million (see subsection 570(3)). Accordingly, the maximum penalty
that may be determined for a particular contravention is limited to 18,000
penalty units.
In any other case for infringement notices provided to a person other than
a body corporate, the penalty is 12 penalty units (currently $1,320).
Proposed section 572H Withdrawal of an infringement notice
Proposed section 572H provides that an authorised infringement notice
officer (the Chair of the ACMA or a member of the ACMA staff appointed
under proposed section 572L, see definition in section 7 inserted by item
192) may withdraw an infringement notice that has been given to a person in
relation to a contravention of a civil penalty provision. The withdrawal
notice must be in writing and issued within 28 days after the infringement
notice was given.
A withdrawal of a previously issued infringement notice may be considered,
for example, where further evidence has come to light since the issuing of
the infringement notice, and that suggests that a person has not
contravened a designated infringement notice provision, or alternatively,
where further evidence suggests that the breach is more serious than
initially believed and consequently would be more appropriately dealt with
by a court rather than an infringement notice.
If an infringement notice is withdrawn after the penalty specified in the
notice has already been paid, then the Commonwealth is liable to refund
this amount.
Section 28 of the Financial Management and Accountability Act 1997 provides
for the appropriation of the Consolidated Revenue Fund for the purposes of
paying such a refund.
Proposed section 572J What happens if the penalty is paid
Proposed section 572J provides that if a person has been given an
infringement notice and the penalty has been paid in accordance with the
notice, and the infringement notice has not subsequently been withdrawn,
then any liability of the person for the alleged contravention is
discharged.
The ACMA cannot institute proceedings under Part 31 of the Tel Act for any
alleged contravention of a civil penalty provision which has already been
dealt with by way of an infringement notice.
Proposed section 572K Effect of this Part on civil proceedings
Proposed section 572K clarifies the operation of the infringement notice
provisions, and specifically provides that nothing in proposed Part 31B:
. requires an infringement notice to be given in relation to an alleged
contravention of a civil penalty provision-the decision about whether
to issue an infringement notice is at the discretion of the authorised
infringement notice officer; or
. affects the ability of a person to have court proceedings brought
against them under Part 31 of the Tel Act if the person does not
comply with an infringement notice, or if an infringement notice is
not given to a person, or if an infringement notice is withdrawn; or
. limits the Federal Court's discretion to determine the amount of a
penalty to be imposed on a person who is found in proceedings under
Part 31 to have contravened a civil penalty provision.
Proposed section 572L Appointment of authorised infringement notice
officer
Proposed section 572L enables the ACMA to appoint, in writing, a member of
the ACMA staff as an authorised infringement notice officer for the
purposes of this Part. Subsection (2) of this proposed provision limits the
staff that can be appointed as an authorised infringement notice officer to
SES employees or acting SES employees or to staff that hold, or are acting
in, Executive Level 1 or 2 positions. An authorised infringement notice
officer is able to issue infringement notices under this Part (under
proposed section 572E), and may withdraw notices (proposed section 572H).
In addition to those staff specifically appointed as authorised
infringement notice officers under this section, the Chair of the ACMA is
an authorised infringement notice officer for the purpose of this Part (see
the definition of 'authorised infringement notice officer' that is included
in section 7 of the Tel Act made by item 192).
Proposed section 572M Guidelines relating to infringement notices
Proposed section 572M provides that authorised infringement notice officers
must have regard to any relevant guidelines that the ACMA may formulate
when exercising powers under proposed Part 31B. It is modelled on section
215 of the BSA. The intention of this provision is to ensure that those
likely to be subject to infringement notices will be able to conduct their
affairs with greater certainty to avoid liability.
The ACMA may develop guidelines in relation to the use of its enforcement
powers, including in relation to issuing infringement notices. The
guidelines are not intended to be prescriptive or limiting. The ACMA will
retain the discretion to seek the sanctions it considers appropriate in
light of the particular circumstances of the case. The guidelines may
include general guidance on the ACMA's enforcement options and other
matters that the ACMA considers relevant.
Where the ACMA develops guidelines under proposed section 572M, these
guidelines must be in the form of a legislative instrument. In accordance
with the requirements of the LIA, the ACMA is expected to consult publicly
before issuing the guidelines, to ensure that industry and consumer groups
are able to contribute to the process.
ACMA is required to ensure that guidelines under proposed section 572M are
in force at all times after the commencement of this section. Proposed
section 572M will commence on 1 July 2010: see clause 2 of this Bill. This
delayed commencement will allow the ACMA time to prepare these guidelines,
and other instruments required to be in operation under this Part.
Proposed section 572N Regulations
This proposed section provides that the regulations may make further
provision in relation to infringement notices. A general regulation-making
power is provided in section 594 of the Tel Act.
Division 2 - Application
Item 196 - Application-infringement notices
This item makes it clear that proposed section 572E will only apply in
respect of contraventions of civil penalty provisions that occur after the
commencement of that section. This means that the ACMA could not issue
infringement notices for contraventions of civil penalty provisions which
occurred before the commencement of proposed section 572E.
Part 8-Civil Penalty Provisions
Telecommunications Act 1997
Item 197 - Section 7 (definition of civil penalty provision)
This item substitutes a new definition of civil penalty provision in
section 7 of the Tel Act to simplify and clarify the definition.
-----------------------
[1] Australian Telecommunications User Group, Submission to NBN: Regulatory
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[2] Australian Competition and Consumer Commission, Submission to the
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[3] Australian Competition and Consumer Commission, Submission to the
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[4] Australian Competition and Consumer Commission, Submission to the
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[34] Strategy and Policy Consultants Network, Preventing Discrimination in
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[37] Telstra Corporation, Submission to the National Broadband Network:
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[38] Parliament of Australia, Official Committee Hansard of the Senate
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[39] Australian Competition and Consumer Commission, Submission to the
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[40] Australian Competition & Consumer Commission, Telecommunications
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[41] Australian Competition & Consumer Commission, Merger guidelines,
November 2008, p.37.
[42] Australian Competition & Consumer Commission, Report 1 -
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[43] Australian Competition & Consumer Commission, Report 1 -
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[44] Organisation for Economic Co-operation and Development, OECD
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[45] World Economic Forum, The Global Information Technology Report 2008-
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[46] The World Economic Forum ranked 134 countries. A ranking of one (1) is
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[47] Australian Competition and Consumer Commission, Submission to the
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2009, pp.22-23.
[48] Optus, Optus Submission-Regulatory Reform for the 21st Century, June
2009, p.26.
[49] Australian Competition and Consumer Commission, Submission to the
Department of Broadband, Communications and the Digital Economy "National
Broadband Network: Regulatory Reform for 21st Century Broadband", June
2009, p.30.
[50] Ibid.
[51] Australian Competition and Consumer Commission, Submission to the
Department of Broadband, Communications and the Digital Economy "National
Broadband Network: Regulatory Reform for 21st Century Broadband", June
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[52] British Telecommunications plc, Annual reports 2006 and 2009.
[53] Voice and data on line website, Telecom NZ comments on operational
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Telecom-NZ-comments-on-operational-separation.
[54]Telstra, Transcript from Full Year 2009 Financial Results-Analyst
Briefing, 14 August 2009, pp.51-52.
[55] Telstra, Full Year 2009 Financial Results-CEO/CFO Analyst briefing
presentation, 13 August 2009, p.8.
[56] Brett Winterford (for Itnews-mobile edition), Analysts weigh up costs
of Telstra split, 22 April 2009.
[57] European Regulators Group (ERG), ERG Opinion on Functional Separation,
2007, p. 9.
[58] European Regulators Group (ERG), ERG Opinion on Functional Separation,
2007, p. 12.
[59] BT Global Services, Letter to the Editor. Submission 34 to the Senate
Committee on the National Broadband Network, 2009, p.1.
[60]Ofcom, Impact of the Strategic Review of Telecoms - Implementation
Review Statement, 29 July 2009, pp. 4, 6, 7.
[61] Strategy and Policy Consultants Network, Preventing Discrimination in
the Australian Broadband Market-Prepared for Optus, 1 June 2009, p.14.
[62] Ofcom, Impact of the Strategic Review of Telecoms - Implementation
Review Statement, 29 July 2009, pp. 3, 10.
[63] New Zealand Commerce Commission 2009, Telecommunications market
monitoring report for 2008 released by Commerce Commission, 14 April 2009.
p 7
[64] Operational Separation in New Zealand - Speech at Oceania
Telecommunications Conference Sydney, July 8 & 9, 2008, by Dr Ross
Patterson, Telecommunications Commissioner New Zealand Commerce Commission
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[65] Organisation for Economic Co-operation and Economic Development, OECD
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[66] Telstra Corporation Limited, Outcomes of Strategic Review-slide
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[67] Telstra Corporation Limited, Transcript from Telstra Technology
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[68] Australian Competition and Consumer Commission, Emerging Market
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[69] Organisation for Economic Co-operation and Development, Working Party
on Telecommunication and Information Services Policies, Broadband and
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[70] Mr Mike Cansfield, Ovum Comment: Yin and yang: Vodafone, BT and the
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[71] Optus, Optus Submission-Regulatory Reform for the 21st Century, June
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[72] The Seven Network, National Broadband Network Regulatory Reform For
21st Century Broadband, 3 June 2009, p.7.
[73] Macquarie Telecom, Submission in Response to National Broadband
Network: Regulatory Reform for 21st Century Broadband Discussion Paper, 3
June 2009, p.11.
[74] Austar United Communications Limited, Response To National Broadband
Network: Regulatory Reform for 21st Century Broadband, 3 June 2009, p.11.
[75] TransACT Capital Communications Pty Ltd, Submission on National
Broadband Network: Regulatory Reform for 21st Century Broadband Discussion
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[76] Primus Telecom, Submission in Response to National Broadband Network
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[77] Competitive Carriers Coalition, Response to the Government Discussion
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[78] Optus, Optus Submission-Regulatory Reform for the 21st Century, June
2009, p.62.
[79] Mr Graeme Samuel, Australian Telecommunications User Group Regional
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[80] Telstra Corporation, Submission to the National Broadband Network:
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[81]Foxtel, submission to the National Broadband Network: Regulatory Reform
for 21st Century Broadband Discussion Paper, 4 June 2009, pp.2,14-15.
[82] Austar United Communications Limited, Response To National Broadband
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[83] Productivity Commission, Radiocommunications Inquiry Report, I July
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[84] Telstra Corporation, Submission to the National Broadband Network:
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[85] Hutchison, National Broadband Network Regulatory Reform for 21st
Century Broadband-Submission by Hutchison 3G Australia Pty Ltd, 3 June
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[86] Australian Competition and Consumer Commission, Submission to the
Department of Broadband, Communications and the Digital Economy "National
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[87] Digital Economy Industry Work Group Response, National Broadband
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[88] Optus, Optus Submission-Regulatory Reform for the 21st Century, June
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[89] Unwired Australia Pty Ltd, Submission in response to the Department of
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[90] Mr John Durie (for the Australian newspaper), Packer's line in the
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[91] Foxtel, Foxtel Announces Solid Subscriber and Financial Growth in a
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[92] Business Day, Foxtel says conditions still challenging, plans new
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[93] Deutsche Bank, 'Financial analysis of NBN and structural options to
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[94] Mr Graeme Samuel, Australian Telecommunications User Group Regional
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[95] Optus submission to the ACCC on Telstra's application for fixed line
services exemption in Optus cable network areas, Appendix H - Restrictions
on Incumbent Involvement in Pay TV (May 08)
[96] Australian Competition and Consumer Commission, 'Submission to the
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[97] Optus Submission, 'Regulatory Reform for the 21st Century' June 2009,
p.50
[98] Telstra Corporation, "Submission to the National Broadband Network:
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p.3
[99] Ibid.
[100] Ibib. p. 3 and p.10
[101] AAPT, "Submission by AAPT Limited to the Department of Broadband,
Communications and the Digital Economy in response to National Broadband
Network: Regulatory Reform for 21st Century Broadband", April 2009, pp. 16-
18
[102] Competitive Carriers Coalition, "Response to the Government
Discussion Paper:
National Broadband Network: Regulatory Reform for 21st Century Broadband"
June 2009, p. 22
[103] ACMA, Communications Report 2007-08, p. 102 and Telecommunications
Performance Data - September 2008 quarter
[104] Australian Communications Authority - Estimate of Net Universal
Service Costs
for 1998/99 and 1999/2000, p. 43: accessed at
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2000.pdf
[105] Review of the Operation of the Universal Service Obligation and
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[106] National Broadband Network: Regulatory Reform for 21st Century
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[107] Ibid, p. 266.
[108] Regional Telecommunications Independent Review Committee: Framework
for the Future, p.184.
[109] ACMA December 2008 Quarterly Telecommunications Performance Data, p.
http://www.acma.gov.au/WEB/STANDARD/pc=PC_1402
[110] Australian Bureau of Statistics, Australian Social Trends, 2008:
Internet access at home
http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Chapter10002008
[111] Australian studies include: LECG Ltd, 'Economic impacts of Broadband:
An Empirical Study', 2009 which estimated large gains in productivity and
increased GDP; Access Economics, 'Impacts of a national high-speed
broadband network', 2009 which estimated gains in GDP of up to $21 billion
from a broadband investment of $13 billion; Centre for International
Economics, 'Impact of genuine broadband for Australia', 2008 which
estimated a GDP gain of 1.4 per cent after about five years, or about $15
billion per year, from a 12Mbps network.
[112] http://www.acma.gov.au/webwr/_assets/main/lib310751/dec_2008_t-
comms_performance_data.pdf
[113] Telecommunications Industry Ombudsman Annual Report at
http://www.tio.com.au/publications/annual_reports/default.htm
[114] ACMA December 2008 Quarterly Telecommunications Performance Data
http://www.acma.gov.au/WEB/STANDARD/pc=PC_1402
[115][pic]