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2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
NATIONAL BROADBAND NETWORK COMPANIES BILL 2010
TELECOMMUNICATIONS LEGISLATION AMENDMENT (NATIONAL
BROADBAND NETWORK MEASURES -- ACCESS ARRANGEMENTS) BILL 2010
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Broadband, Communications
and the Digital Economy, Senator the Hon. Stephen Conroy)
NATIONAL BROADBAND NETWORK COMPANIES BILL 2010
TELECOMMUNICATIONS LEGISLATION AMENDMENT (NATIONAL
BROADBAND NETWORK MEASURES -- ACCESS ARRANGEMENTS)
BILL 2010
OUTLINE
On 7 April 2009, the Government announced the establishment of a new company,
NBN Co Limited (`NBN Co'), to build and operate a new National Broadband
Network (NBN). A key element of the Government's NBN initiative is that NBN Co
is to operate as a wholesale only company and provide access to the NBN to all
telecommunications retail service providers on an open and equivalent basis.
In a discussion paper released on 7 April 2009, National Broadband Network:
Regulatory Reform for 21st Century Broadband, the Government indicated that it
would introduce legislation that establishes:
· governance, ownership and operating arrangements for the wholesale-only
NBN company; and
· the access regime to facilitate open access to the NBN for retail level
telecommunications service providers.
The two bills that are the subject of this Explanatory Memorandum address this
Government commitment. They are:
· the National Broadband Network Companies Bill 2010 (the Companies Bill); and
· the Telecommunications Legislation Amendment (National Broadband Network
Measures - Access Arrangements) Bill 2010 (the Access Bill).
The Government consulted widely in developing the bills. During July and August
2009 it sought comments on the design of the legislative framework for the NBN.
More than 30 submissions were received, and meetings were also held with more than
20 stakeholders. In February 2010 the Government issued exposure drafts of the
Companies Bill and the Access Bill, receiving more than 20 submissions. The
Implementation Study on the NBN also consulted more than 100 stakeholders in
preparing its report, and more than 50 submissions were received on the final report
following its release on 3 May 2010.
In this Outline, references to NBN Co should generally be taken to apply also to any
NBN corporations. The exceptions are the sale and ownership provisions in the
Companies Bill, which apply only to NBN Co Limited, and any existing legislative
provisions which do not apply to subsidiaries of Commonwealth-owned companies
(such as some reporting obligations under the Commonwealth Authorities and
Companies Act 1997 (CAC Act)).
Together, the bills ensure that NBN Co will remain true to its wholesale-only mandate
and deliver open and equivalent access to retail providers, thereby providing a
platform for retail-level competition to flourish.
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National Broadband Network Companies Bill 2010
The Companies Bill establishes the regulatory framework covering the ownership and
operations of NBN Co, and the arrangements for the eventual sale of the
Commonwealth's stake in NBN Co.
It should be read together with the Access Bill and Part XIC of the Competition and
Consumer Act 2010 (CCA), as proposed to be amended by the Telecommunications
Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 (the CCS
Bill).
There are seven parts to the Companies Bill.
Part 1 comprises the preliminary sections, including commencement, objects and
definitions.
Part 2 deals with the operations of NBN Co and any NBN corporations, including
provisions relating to NBN Co's wholesale-only nature, the functional separation of
NBN corporations and the divestiture of assets by NBN corporations.
Part 3 deals with the ownership and control of NBN Co and sets out Commonwealth
ownership provisions and arrangements for terminating those provisions and
introducing an NBN Co sale scheme. It also establishes a head of power for the
Governor-General to make regulations concerning private ownership and control of
NBN Co.
Part 4 deals with the reporting obligations that will fall upon NBN Co during any
period when the Commonwealth commences to sell down its stake in the company.
These obligations will end when the Commonwealth no longer controls NBN Co.
Part 5 sets out an anti-avoidance obligation to ensure that NBN Co continues to meet
its obligations.
Part 6 sets out powers for the Federal Court to grant injunctions in relation to
contraventions of the Act.
Part 7 sets out miscellaneous provisions, including provisions to establish that NBN
Co is not a public authority and NBN Co (and any NBN corporations) are not subject
to the Public Works Committee Act 1969.
Definition of NBN Co
Fundamental to the operation of the regime is the definition of an NBN corporation.
An NBN corporation is defined in Schedule 1 as:
· NBN Co;
· NBN Tasmania; and
· a company over which NBN Co is in a position to exercise control.
This definition recognises that NBN Co and NBN Tasmania have already been
established. It also captures the possibility that, should NBN Co, in the future,
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establish subsidiaries in addition to NBN Tasmania, those companies will be subject
to the same wholesale-only and other obligations as NBN Co.
Similarly, should NBN Co purchase a carriage service provider, that provider would
be considered to be an NBN corporation and be subject to the same wholesale-only
obligations. The Government considers that NBN Co should not be prevented from
purchasing telecommunications companies, even if they have retail businesses, if such
an acquisition could support the early development and rollout plan of the NBN.
However NBN Co would need to set in place transitional arrangements for divesting
any such retail operations. Under the NBN Companies Bill there is a 12 month
window for such transitions. The Australian Competition and Consumer Commission
(ACCC) could also, under section 50 of the CCA, assess such an acquisition to
determine if it would have the effect, or be likely to have the effect, of substantially
lessening competition in a market. As part of a section 50 assessment, NBN Co could
submit undertakings under section 87B of the CCA to divest any retail activities
associated with the acquisition.
NBN Co will need to notify the Commonwealth of any proposed acquisitions,
including acquisition of a significant shareholding, as part of its reporting obligations
under the CAC Act and under Part 4 of the Companies Bill.
Wholesale-only supply obligations
Central to the definition of NBN Co's wholesale-only nature, clause 9 of the
Companies Bill provides that NBN Co must not supply an eligible service to another
person unless the other person is a carrier or a service provider. This clause ensures
that NBN Co will only supply services on a wholesale basis, thereby enshrining in
legislation one of the key elements of the Government's NBN announcement.
Clause 9 does provide for NBN Co to supply network management services to a
number of utilities which would otherwise not be able to receive a service from NBN
Co. These utilities are limited to transport authorities, electricity supply bodies, gas
supply bodies, water supply bodies, sewerage service supply bodies, storm water
drainage services bodies and State or Territory road authorities. This is to ensure such
utilities have direct and ready access to the NBN for the provision of `smart' services
that are an increasingly important aspect of effective and efficient infrastructure
management.
NBN Co is only permitted to supply a service that is used to carry communications
necessary or desirable for specific uses by these entities. For example, in the case of
traffic authorities, this is effectively a basic connectivity service that permits
monitoring of signals, so that the authority can monitor and manage traffic flows. In
the case of the electricity industry, NBN Co could facilitate the rollout of smart grids
and smart metering.
Line of business restrictions
Consistent with NBN Co's wholesale-only mandate, the Companies Bill includes
provisions to limit and focus NBN Co's business activities to the supply of goods or
services, or investments, that are associated with its primary function as a supplier of
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wholesale telecommunications services. The provisions will also prevent entry of
NBN Co, particularly in an era of strong convergence, into related markets, which
could potentially impact on competition in those markets.
For instance, the Companies Bill establishes that NBN Co must not supply a non-
communications service to another person. This restricts NBN Co to supplying an
eligible service or a service that is ancillary or incidental to the supply by NBN Co of
an eligible service.
Further, NBN Co must not supply a content service. A content service is defined at
section 15 of the Telecommunications Act 1997 (Tel Act) and covers services such as
broadcasting services, on-line information services or on-line entertainment services.
However, the Companies Bill does allow for some other services to be supplied if
they are associated with the supply of wholesale telecommunications services. NBN
Co may provide advisory or consulting services that relate to the supply of eligible
services or goods for use in connection with the supply of an eligible service, or
facilities (within the meaning of the Tel Act). NBN Co may also provide, grant or
confer intellectual property rights that relate to the supply of eligible services or goods
for use in connection with the supply of an eligible service, or facilities (within the
meaning of the Tel Act), thereby providing it with scope to exploit opportunities that
may arise, both in Australia and overseas, from its cutting edge research, development
and operational activities.
The Companies Bill also provides that NBN Co must not supply goods to another
person unless the goods are for use in connection with the supply, or prospective
supply, of an eligible service by NBN Co. NBN Co may need, for example, to supply
customer premises equipment in connection with the supply of mobile or satellite
wholesale services, and may also need to install an optical network termination unit in
a premises in connection with the supply of fibre-based services. These activities are
clearly in connection with the supply of eligible services and should be permitted.
However, the supply of goods that are not in connection with the supply of an eligible
service could see NBN Co losing focus on the objectives which it has been
established to deliver.
Provisions in the Companies Bill limit the investment activities of NBN Co to the
supply, or prospective supply, of eligible services, or of goods in connection with the
supply, or prospective supply, of eligible services. NBN Co may invest money in the
shares of a company if the company carries on, proposes to carry on, or has the object
of carrying on, a business that consists of or includes the supply of a carriage service
(although as noted above, if it purchases a controlling stake in a carriage service
provider, that provider becomes an NBN corporation). NBN Co may invest in
securities of the Commonwealth or of a State or Territory, or in securities guaranteed
by the Commonwealth, a State or a Territory. NBN Co may also earn interest from
bank deposits, and may make any other form of investment prescribed by regulations
made under the Financial Management and Accountability Act 1997. Again these
provisions are designed to limit and focus NBN Co's activities on its core objectives
and prevent potential impacts on competition through its entry into related but distinct
markets.
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Functional separation
Division 3 of Part 2 of the Companies Bill provides a mechanism for the future
functional separation of NBN Co should it be required to maximise transparency and
competitive outcomes. As observed in the Implementation Study on the NBN, NBN
Co has been established as an integrated passive and active network operator, in
which the passive elements of the network are the network facilities and fibres and the
active elements are the electronic equipment used to transmit services over the fibre.
In the future, subject to how the telecommunications market and technology develop,
it may be appropriate for the Commonwealth Government to require NBN Co to
implement measures to provide greater transparency and equivalence of treatment in
the way in which it operates in light of this integration.
The Communications and Finance Ministers will have flexibility to determine the
appropriate form of separation at any time, based on the functional separation
principles outlined at clause 24. Separation arrangements could include full functional
separation of all of the business units of NBN Co, or could be more `light touch', such
as requiring separate financial statements and asset registers for different business
units.
Divestiture of assets
The Companies Bill also establishes powers for the Communications and Finance
Ministers to require NBN Co to dispose of one or more specified assets, or to transfer
one or more specified assets from one NBN corporation to another. The power to
require an NBN corporation to transfer assets to another NBN corporation is limited
to the period during which the Commonwealth ownership provisions are in effect.
However, the power to require NBN Co to dispose of assets is not limited in this way.
These powers provide a further mechanism to facilitate greater transparency in NBN
Co's operations and equivalence of treatment and could be used to structure the
eventual privatisation of NBN Co to maximise its appeal to different investors. Post-
sale, they provide a strong mechanism to address competition or other concerns that
may arise from the integration of passive and active businesses, notwithstanding NBN
Co's wholesale-only mandate. As such they arm the Commonwealth with the powers
it needs to tackle issues of integration that have been of concern with Telstra and
forewarn NBN Co that the Commonwealth reserves this right for the future.
Services to be supplied and not supplied
The Minister may impose a condition on NBN Co's carrier licence that would have
the effect of requiring it to supply a specified telecommunications service. Such a
service would be a mandatory service, and would be specified by the
Communications Minister following consultation with NBN Co and the ACCC (as
provided for in clause 42). The Minister may also make a condition of NBN Co's
carrier licence that prohibits NBN Co from supplying a specified carriage service to
carriers or service providers.
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The Government has announced that NBN Co is to connect 93 per cent of homes,
schools and workplaces with fibre-to-the-premises infrastructure that is capable of
providing broadband services with speeds of up to 1 Gigabit per second. The
remaining premises will be connected with next generation wireless and satellite
technologies that will be able to deliver 12 megabits per second or more to people
living in more remote parts of Australia. Historically, the Government has established
coverage obligations on a carrier by placing a condition on its carrier licence. For
example, this mechanism was used in relation to Optus' network roll-out and Telstra's
CDMA switchover.
These provisions could also be used to provide stakeholders with certainty, once NBN
Co has finalised its product specifications, as to the level of services that NBN Co will
and will not provide. The Minister can use this mechanism to specify the layer at
which NBN Co operates. For example, NBN Co has indicated that it will provide
Layer 2 bitstream services over its fibre network. The Government envisages that
NBN Co will operate at a lower, rather than higher, layer in the network stack.
Commonwealth ownership and privatisation arrangements
Part 3 of the Companies Bill sets out arrangements for the future privatisation of NBN
Co.
This Part makes clear that the Commonwealth must retain total ownership of NBN Co
until such time as a declaration is made by the Communications Minister that the
NBN is built and fully operational, the Productivity Commission has concluded an
inquiry into certain specified matters relating to the NBN and NBN Co, the
Parliamentary Joint Committee on the Ownership of NBN Co (established by this
Bill) has examined the report of the Productivity Commission inquiry, and the
Finance Minister has declared that conditions are suitable for the entering into and
carrying out of an NBN sale scheme. Such a declaration would be made through a
disallowable instrument to allow for an appropriate level of Parliamentary scrutiny.
Retaining ownership of NBN Co until the National Broadband Network is built and
fully operational will give the Commonwealth greater flexibility to pursue its
objectives in the rollout of the network.
Division 2 of Part 3 sets out arrangements for an NBN sale scheme. These
arrangements are largely based on previous legislation dealing with the sale of
Commonwealth entities, such as the Telstra (Transition to Full Private Ownership)
Act 2005 and the Medibank Private Sale Act 2006.
Productivity Commission inquiry
At any stage after a declaration is made by the Communications Minister that the
NBN is built and fully operational, the Minister responsible for the Productivity
Commission may refer certain matters concerning the NBN and NBN Co to the
Productivity Commission for inquiry. The Productivity Commission inquiry will
consider the following matters:
- the regulatory framework for the NBN;
- the impact on future annual Commonwealth budgets of the sale of NBN Co,
- the impact of a sale of the Commonwealth's equity in NBN Co on the:
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o supply of affordable broadband carriage services;
o supply of non-broadband carriage services;
o equity and social inclusion; and
- the impact on competition in telecommunications markets of a sale of the
Commonwealth's equity in NBN Co.
With respect to the regulatory framework for the NBN, the inquiry would look at a
wide range of issues pertaining to the Government objectives for the NBN including
the equity of access to broadband carriage services in metropolitan, regional, rural and
remote areas, competition in telecommunications markets, the structural features of
telecommunications markets, the structural organisation of NBN Co and issues
relating to ownership and control of the NBN, as well as such other matters the
Productivity Commission considers relevant.
The Finance Minister cannot make a declaration that conditions are suitable for
entering into and carrying out an NBN sale scheme before the report of the
Productivity Commission inquiry has been tabled in each House of Parliament, and
the Parliamentary Joint Committee on the Ownership of NBN Co has examined that
report.
Parliamentary Joint Committee on the Ownership of NBN Co
Once the report of the Productivity Commission inquiry has been tabled in each
House of Parliament, the Bill requires a joint committee of the Parliament to be
established, to be known as the Parliamentary Joint Committee on the Ownership of
NBN Co. The membership and role of that committee is set out in Schedule 2 to the
Companies Bill. The committee will examine the Productivity Commission report
and will report to each house of Parliament within 180 days of the establishment of
the Committee.
Private ownership and control of NBN Co
Until the NBN is built and fully operational, concerns that retail service providers
could invest in NBN Co with a view to gaining control of it and favouring their
downstream operations, contrary to the intention of NBN Co's wholesale-only
mandate, are addressed by the Commonwealth retaining full ownership. After the
Commonwealth has commenced to sell down its stake in NBN Co, such a situation
could arise. As a result, the Companies Bill sets out a head of power for the Governor-
General to make regulations in relation to unacceptable private ownership or control
situations in relation to NBN Co. The regulations can confer a power to make a
decision of an administrative character on the ACCC.
As referred to above, the Productivity Commission will consider ownership and
control issues as part of its inquiry into the regulatory framework for the NBN. It is
possible that the Productivity Commission could recommend that limits on
investments in NBN Co by retail service providers be specified in statute prior to sale.
This would be a matter that would need to be considered by the Government of the
day.
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NBN Co's reporting obligations
Part 4 of the Companies Bill largely reproduces reporting obligations previously
placed on Telstra under the Telstra Corporation Act 1991. These obligations are
largely present already in the CAC Act, but the relevant provisions in the CAC Act
only apply to wholly-owned Commonwealth companies. As a result, if the
Commonwealth transfers part of its stake after the Commonwealth ownership
provisions cease, the CAC Act would cease to apply. This Part ensures the reporting
obligations continue to apply until the Commonwealth ceases to hold a majority of the
voting shares in NBN Co.
The reporting obligations on NBN Co include:
· providing financial statements (clause 79);
· notifying the Communications and Finance Ministers of significant events
(clause 80);
· keeping the Communications and Finance Ministers informed of the
operations of NBN corporations, and giving the Ministers such reports,
documents and information in relation to those operations as the Ministers
require (clause 81); and
· preparing a corporate plan for NBN Co at least once a year, covering a period
of at least three years and not more than five years, and also keeping the
Ministers informed about changes to the plan (clause 82).
Miscellaneous provisions
The Companies Bill includes a number of provisions that clarify the status of NBN Co
for the purposes of various pieces of Commonwealth legislation. In particular,
clause 72 provides that the Public Works Committee Act 1969 does not apply to NBN
Co. This is to ensure NBN Co has sufficient commercial flexibility to undertake the
investments needed to rollout the NBN and is consistent with arrangements that apply
to Australia Post and that previously applied to Commonwealth-owned carriers such
as Telstra, the Overseas Telecommunications Corporation and Aussat.
The Companies Bill also includes provisions dealing with a number of enforcement-
related matters (such as anti-avoidance and injunctions) necessary to ensure the
effective operation of the main provisions of the Companies Bill.
Telecommunications Legislation Amendment (National Broadband Network
Measures--Access Arrangements) Bill 2010
The Access Bill amends the CCA and the Tel Act to introduce new access,
transparency and non-discrimination obligations relating to the supply of wholesale
services by NBN Co Limited. It also extends technical and open access obligations to
owners of other superfast networks.
The Access Bill operates in conjunction with the accompanying Companies Bill,
which establishes the regulatory framework for the operation, ownership, governance
and eventual sale of NBN Co.
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The Access Bill builds upon the Companies Bill by applying additional rules for the
supply of services by NBN Co and transparency and non-discrimination requirements.
It also sets out the processes to follow if the Communications Minister makes
conditions of carrier licence in relation to the supply of services by NBN Co.
On 7 April 2009, in announcing the NBN initiative, the Government indicated that
NBN Co would be wholesale-only, and operate on an open and equivalent access
basis, subject to clear oversight by the ACCC. As such it would provide an open
platform for the development of robust retail level competition. Amongst other things,
this approach responds to longstanding concerns about barriers to competition in the
Australian telecommunications market flowing from Telstra's control of the access
network and its vertical integration.
The Access Bill also follows reforms proposed under the CCS Bill to the
telecommunications competition regime. The CCS Bill is intended to reform the
access regime in Part XIC of the CCA to reduce delays and opportunities for gaming
and provide upfront certainty on access prices and terms and conditions. NBN Co will
be subject to this reformed access regime, but with additional measures being
introduced by the Access Bill to reflect the unique wholesale-only nature of the
company. The amendments in the Access Bill need to be read together with the CCS
Bill.
In preparing the Access Bill, the Government drew on the Implementation Study on
the National Broadband Network, which made recommendations that went to the
access arrangements that should apply to NBN Co and the broader regulatory
framework within which NBN Co should operate. Amongst other things, the
Implementation Study proposed that NBN Co should operate on a more level
regulatory playing field to ensure the Government's objectives in establishing the
NBN are achieved.
Supply of services by NBN Co
Key objectives of the access arrangements for NBN Co are to ensure:
· services needed by its wholesale customers are available,
· information about the services and the terms and conditions of supply is available
and transparent,
· there is open, non-discriminatory access to those services, and
· there is scrutiny by, and recourse to, the ACCC in relation to access issues,
including terms and conditions.
Under the existing provisions in Part XIC of the CCA, the ACCC has the power to
compel service providers to supply a service if the ACCC declares that service.
Service providers may also give the ACCC a Special Access Undertaking (SAU)
setting out proposed services and the terms and conditions of those services.
Otherwise, service providers make available a number of wholesale services that are
not declared services, and therefore not subject to the standard access obligations
(SAOs) in Part XIC. Service providers negotiate the terms and conditions of those
services with their customers.
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The Access Bill sets out three mechanisms, which need not be mutually exclusive,
under which NBN Co provides services:
· NBN Co can choose to provide services and publish a Standard Form of Access
Agreement (SFAA) in relation to a service, or give an SAU to the ACCC in
relation to the provision of access to a service;
· if the Minister makes a condition of NBN Co's carrier licence that it must supply
a specified eligible service that NBN Co is not currently supplying, NBN Co must
give an SAU or formulate an SFAA in relation to that service; and
· the ACCC may, under proposed subsection 152AL(8A), declare a service that
NBN Co has not indicated it will supply, but which it is capable of supplying and
the ACCC considers, after consultation, would be in the long-term interests of
end-users to supply.
NBN Co can publish an SFAA in relation to a new service not set out in an SAU, or
publish an SFAA as the means of specifying the terms and conditions which are either
not covered by, or complement the terms and conditions contained in, an SAU it has
given to the ACCC. Once an SFAA is published, the service becomes a declared
service and subject to Part XIC. This will ensure that at all times NBN Co's customers
and potential customers will know what services are available, and that they can
receive non-discriminatory access to those services.
Section 152CJA establishes that NBN Co must not supply an eligible service unless:
· the service has been declared by the ACCC under subsection 152AL(8A); or
· NBN Co has published an SFAA that relates to access to the service on its
website; or
· an SAU relating to the service is in operation.
As a result, the terms and conditions for access to all services offered by NBN Co will
be published.
The section also establishes that, if NBN Co has published an SFAA that relates to
access to a service, and an access seeker requests NBN Co to enter into an access
agreement that contains the same terms and conditions as set out in the SFAA, NBN
Co must comply with the request.
The Access Bill also specifies that the current SAOs, as specified under the CCA, will
not apply to NBN Co. These obligations are designed for vertically integrated access
providers who provide services to their own retail units and to access seekers. As
NBN Co is a wholesale-only company, it would not be appropriate for it to be subject
to the existing SAOs. The Access Bill proposes to establish two categories of SAOs:
category A SAOs, applicable to access providers other than NBN Co; and category B
SAOs, applicable specifically to NBN Co.
There are three category B SAOs under the Access Bill. The first guarantees supply of
declared services, subject to the standard exemptions (for example, in relation to
creditworthiness or security) already in the CCA. The second guarantees
interconnection of facilities to the NBN. The third ensures that, if NBN Co supplies a
declared service by means of conditional-access customer equipment (such as, for
example, an optical network termination unit to control access), then NBN Co must
enable an access seeker to access that equipment.
10
In the first instance the terms and conditions of access will be as set out in an SAU
and/or SFAA. NBN Co will be permitted to negotiate access agreements with
individual access seekers to vary the terms but only under clearly specified
arrangements (see below). Moreover, the ACCC will be able to make an access
determination in the event that it considers it necessary:
· at the time it declares a service in relation to NBN Co;
· where a matter is not covered in an SAU; and
· where a matter is not adequately covered by an SFAA.
An ACCC access determination will not, however, override an access agreement
between NBN Co and an access seeker.
Under section 152CH of the CCA, the Communications Minister may make a
ministerial pricing determination setting out principles dealing with price-related
terms and conditions relating to the SAOs. This existing legislative mechanism could
be used, if required, to establish a uniform wholesale pricing obligation for NBN Co.
Non-discrimination and transparency
To further reinforce the open access principles underpinning the NBN, the Access Bill
also sets out a clear non-discrimination obligation applying to NBN Co, giving effect
to the Government's commitment for NBN Co to provide equivalent access to all
access seekers. As a basic principle, NBN Co must not discriminate between access
seekers. However, NBN Co will be permitted to negotiate with individual access
seekers to vary the terms and conditions set out in an SFAA, SAU or an access
determination, but only under clearly specified criteria and subject to ACCC
oversight. The first criterion is discrimination if an NBN corporation has reasonable
grounds to believe that the access seeker would fail, to a material extent, to comply
with the terms and conditions on which the NBN corporation complies, or on which
the NBN corporation is reasonably likely to comply, with the relevant obligation.
Examples provided of reasonable grounds include evidence that the access seeker is
not creditworthy, and repeated failures by the access seeker to comply with the terms
and conditions on which the same or similar access has been provided. These
examples, and the overall exclusion permitting discrimination, are consistent with
current trade practices law.
The second criterion is on grounds or circumstances as specified by the ACCC. The
third criterion is that NBN Co may offer different terms if this aids efficiency, and
access seekers in like circumstances have an equal opportunity to benefit from any
variations.
The concept of differentiation that aids efficiency already exists under Part IIIA of the
CCA, and has been reflected in a number of undertakings made under that Part. It
recognises that a blanket requirement to offer equal treatment to all access seekers can
lead to inefficient outcomes. For example, some service providers may want to make
small changes to standard services to reflect their existing products and processes, and
being required to re-engineer these could be both costly and disruptive.
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Submissions on the draft Access Bill called for clearer definition of conduct that aids
efficiency, and as a result the Access Bill requires the ACCC to publish guidance
material on non-discrimination within six months of the Access Bill taking effect. The
ACCC will therefore be able to bring its considerable expertise in this area into play,
providing greater certainty for industry.
Examples of conduct that may aid efficiency could include, but not be limited to:
· the sharing of risks between NBN Co and an access seeker which has the effect of
reducing NBN Co's operational risks (e.g. risk of assets being stranded);
· a material reduction in NBN Co's direct costs as a result of differing network or
technology requirements;
· a material reduction in the operational or supply support requirements that NBN
Co would otherwise provide;
· a material reduction in the operating costs incurred by NBN Co as a result of
access seekers' involvement; and
· a reduction by NBN Co and/or access seekers in the consumption of finite (scarce)
resources.
NBN Co will be able to define what constitutes `like circumstances', subject to ACCC
oversight. NBN Co may, for example, set out its approach to discrimination when it
submits an SAU or an SFAA in relation to a service. Consistent with the CCS Bill,
NBN Co must lodge access agreements with the ACCC, which could take action if it
considered that the non-discrimination rule had been breached.
If NBN Co can offer different terms from those set out in published offers, it follows
that access seekers need to know what variations to standard terms are available, to
judge whether they are in like circumstances and able to receive those varied terms.
To address this, NBN Co must supply the ACCC, within seven days of entering into
an agreement containing different terms and in a form approved in writing by the
ACCC, with clear information on the deal. The ACCC must then publish this
information, redacting such commercial-in-confidence information as it considers is
necessary, and maintain a register of NBN Access Agreement Statements on its
website. As noted above, the ACCC will also publish guidance material on non-
discrimination issues which could, for example, set out its approach to defining `like
circumstances'. The ACCC would refer to that guidance in assessing an SAU,
considering a complaint that an access agreement was discriminatory or making an
access determination.
Submissions on the draft bills expressed concern that NBN Co could offer volume
discounts that would favour the largest service providers, thereby providing them with
an unfair competitive advantage over smaller players. Similar concerns were
expressed in the NBN Implementation Study. The Senate Select Committee
recommended that NBN corporations be prohibited from offering volume discounts.
Given that differentiation of standard price terms can aid efficiency, the Access Bill
does not prohibit volume discounts. However, recognising the concerns of smaller
players, the Access Bill provides that, should NBN Co choose to offer volume
discounts, it would not be able to do so unless proposed volume discounting
arrangements are consistent with those set out in a SAU that has been approved by the
ACCC and is in operation. This should provide industry with certainty that volume
discounts are in the long-term interests of end-users.
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It should also be noted that section 45 of the CCA already applies and prohibits
agreements that substantially lessen competition.
Level playing field arrangements
Amongst other things, the NBN Implementation Study identified that difficulties
could arise for the delivery of the Government's NBN policy objectives as a result of
NBN Co being subject to strict regulatory requirements while competing against
other, less regulated, providers of superfast broadband. In particular, the Study noted
the scope for competing providers to target high-income and low-cost, high-density
areas, operate as vertically-integrated providers and advantage themselves over
independent retail service providers (RSPs) on the NBN, and ignore technical
specifications employed by NBN Co. This could mean that where other providers
rolled out superfast networks in advance of the NBN, these would not deliver
consumers in those areas the same benefits as the NBN. Moreover, by cherry-picking
high-value markets such providers could undermine NBN Co's ability to deliver the
Government's policy objectives for the NBN nationally. The Implementation Study
therefore recommended that the Government look at measures to provide a more level
playing field for all superfast broadband networks (recommendations 73 and 74).
In this context, the Access Bill seeks to amend the Tel Act to place specific technical
and open access requirements on carriers who build or upgrade fixed-line superfast
access networks after 25 November 2010, the date of the Access Bill's introduction
into the Parliament.
There are three main parts to these arrangements.
First, provision is made to simplify the making of industry codes and standards under
Part 6 of the Tel Act in relation to fibre infrastructure and services. These provisions
are set out in Part 1 of Schedule 1 to the Access Bill (items 12 to 16). This provides a
mechanism for codes and standards based on NBN Co specifications to be developed.
Codes are developed by industry bodies like the Communications Alliance. Standards
can be made by the Australian Communications and Media Authority (ACMA).
Application of such codes and standards based on NBN Co specifications would lead
to new FTTP networks being consistent with the technical specifications for the NBN.
Second, where a telecommunications network (other than the NBN) comes into
existence or is altered or upgraded, after 25 November 2010, to supply or be capable
of supplying a superfast carriage service to customers, other than individual
government or corporate end-users, that network must offer a Layer 2 bitstream
service. These provisions are set out in Part 3 of Schedule 1 to the Access Bill (items
86 to 88). A Layer 2 bitstream service is a basic connectivity service, of a wholesale
nature. A superfast carriage service is defined as carriage services with a download
transmission speed normally of more than 25 Mbps. This rule would apply to any type
of fixed line network, whether it be FTTP, hybrid fibre-coaxial (HFC) or fibre-to-the-
node (FTTN). The rule would not apply, however, to point-to-point connections
provided to single individual government or corporate end-users or proprietary
networks (consistent with recommendation 73 of the NBN Implementation Study). To
13
support these arrangements the ACMA will be able to make technical standards
relating to Layer 2 bitstream services.
Third, the Layer 2 bitstream service that would have to be made available on these
new or upgraded designated superfast telecommunications networks would be subject
to access rules based on those applying to services supplied by NBN Co. These
provisions are set out in Part 3 of Schedule 1 to the Access Bill (items 89 to 114). The
ACCC would need to declare a specified Layer 2 bitstream service as soon as
practicable. The Layer 2 bitstream service would need to be supplied on a non-
discriminatory basis, subject to the same kinds of exceptions as apply in relation to
services provided by NBN Co. Activities related to the supply of the service would be
subject to non-discrimination requirements, either set out in an SAU or the statute.
Any volume discounting would need to be covered in an SAU. Any access
agreements varying from an SAU or an access determination would need to be lodged
with the ACCC for publication.
Access to other services provided over new or upgraded superfast telecommunications
networks would be subject to the usual access arrangements applying under Part XIC
of the CCA.
In summary, these requirements will mean that mass market fixed-line access
networks which supply superfast carriage services with a download transmission
speed normally of more than 25 Mbps, must offer a Layer 2 bitstream service. The
supply of this service is then subject to the key access, non-discrimination and
transparency obligations set out in the Access Bill. Furthermore, once the appropriate
codes and standards are in place, carriers will be required to build and operate FTTP
networks so they are consistent with NBN technical specifications.
Together these amendments should ensure that end-users have access to the same
high-quality superfast broadband services, regardless of the network provider, and
assist the NBN in meeting its objectives nationally by ensuring it operates on a more
level regulatory playing field.
To provide a period for industry to adjust to these requirements, the provisions
commence on Proclamation or otherwise 12 months after the Access Bill receives the
Royal Assent.
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 IMPACT STATEMENT
In April 2009 the Prime Minister granted an exceptional circumstances exemption to
the requirement to develop a Regulatory Impact Statement (RIS) for the National
Broadband Network measures, including key principles for the regulatory framework
14
for NBN Co. Accordingly, these measures did not require a RIS to be prepared for the
introduction of these elements of the NBN package.
The RISs accompanying this Explanatory Memorandum were prepared in accordance
with Australian Best Practice Regulation requirements as they represented the further
development of the original policy.
Under Australian Government Best Practice Regulation requirements, if exceptional
circumstances have been granted by the Prime Minister, this should be noted in the
explanatory material accompanying the introduction of the relevant regulation, and
the proposal is subject to a post-implementation review within one to two years of
implementing the proposal.
Regulation Impact Statement 1.
Entities to which NBN Co's wholesale-only obligations apply
1. Issues which give rise to the need for action
On 24 February 2010, the Government released exposure drafts of the National
Broadband Network Companies Bill 2010 (Companies Bill) for public comment. This
draft legislation defined an NBN corporation to mean:
(a) NBN Co; or
(b) NBN Tasmania; or
(c) a company that is a wholly-owned subsidiary of NBN Co.
A number of stakeholders objected to this definition, stating that NBN Co could
purchase a controlling stake in a retail provider and use that provider to offer retail
services, thereby avoiding its obligations1. There is also nothing to prevent NBN Co
from establishing a subsidiary and then selling a small share in that company to
another carrier or service provider.
In its submission to the Department, Telstra commented that NBN Co could own
99.9% of a retail provider and that:
"NBN Co could, consistently with the Bill, be little more than a holding company
which majority owns and controls one or more vertically integrated retail providers.
This outcome appears directly contrary to the Government's separation objectives."
The definition in the draft bill was proposed to give NBN Co the flexibility to invest
in and divest itself of assets, flexibility considered especially important during the
roll-out of the NBN. For example, it is possible that NBN Co may wish to purchase a
retail provider because it could use the physical assets of that provider (such as fibre,
ducts, buildings or other network equipment) to expedite the roll-out of the NBN. As
the Government had stated that it intended to retain majority ownership of NBN Co
until roll-out is complete (therefore having full oversight of the company's
operations), it was considered that a more restrictive definition of an NBN corporation
1
NBN Co is required to offer wholesale-only services on open and equivalent terms to all access
seekers. This requirement is set out in the draft NBN legislation.
15
was unnecessary. The explanatory material to the draft bill noted that the Government
could use its power as shareholder to require NBN Co to seek its approval for any
acquisitions.
The draft bill also relied on existing legislation to ensure that any acquisition in or
divestment by NBN Co would not allow the company to avoid its obligations. Section
50 of the Trade Practices Act 1974 (TPA) prohibits mergers that would have the
effect, or be likely to have the effect, of substantially lessening competition in a
market. Merger parties are not legally required to notify the ACCC of a merger and
merger parties can proceed without seeking regulatory consideration. Merger parties
have three avenues available to have a merger considered and assessed:
· the ACCC assesses the merger on an informal basis;
· the ACCC assesses an application for formal clearance of a merger; and
· the Australian Competition Tribunal assesses an application for authorisation
of a merger.
The ACCC grants formal or informal clearance if it forms the view that a merger
would not substantially lessen competition in a market.
If the ACCC does not grant formal or informal clearance, parties can still proceed
with the merger, but may face court action under s. 50.
The Australian Competition Tribunal may grant authorisation if it is satisfied that the
proposed merger is likely to result in such a benefit to the public that the merger
should proceed.
If NBN Co were to acquire shares in the capital of a corporation, and similarly if a
third party were to acquire shares in NBN Co, the ACCC can provide formal
clearance for such a transaction. In making its decision the ACCC is required to
consider a number of criteria, including "the nature and extent of vertical integration
in the market". Consequently, the ACCC could scrutinise share transactions to ensure
that NBN Co's wholesale-only status is maintained. However, under section 50 the
ACCC is not required to address NBN Co's non-discrimination and transparency
obligations, which are proposed to be established under the draft Telecommunications
Legislation Amendment (National Broadband Network Measures - Access
Arrangements) Bill 2010 (Access Bill).
The non-discrimination obligation prohibits discrimination between access seekers,
with the exception of limited circumstances (discrimination is permitted in relation to
creditworthiness, if it aids efficiency and all access seekers with like circumstances
have an equal opportunity to benefit; or in grounds or circumstances specified in a
legislative instrument made by the ACCC). The transparency obligation requires
NBN Co not to offer a service unless it has published all its terms and conditions for
that service on its website, and also requires NBN Co to publish a detailed summary
of any changes it makes to its standard terms (for example, because the different
terms could aid efficiency). The transparency obligation ensures that access seekers at
all times know what NBN Co's service offers are and what the standard terms and
conditions are, and whether they have an opportunity to receive different terms and
conditions that have been supplied to another access seeker.
16
The issue examined in this Regulation Impact Statement (RIS) is whether NBN Co
should be permitted to invest in corporations and divest itself of shares in subsidiaries,
and if so, what measures should be in place (if any) to ensure it meets its
wholesale-only obligations.
Background
On 7 April 2009, the Government announced its plan to establish a new company to
build and operate the National Broadband Network, NBN Co, in part to address
long-standing competition issues in the telecommunications market, brought about by
the dominance of the vertically and horizontally integrated incumbent, Telstra. It is
the Government's intention that NBN Co offer wholesale-only services on open and
equivalent terms to all access seekers.
The NBN Co Bill forms part of a package of legislation designed to reform the
telecommunications access regime. This package includes the NBN Access Bill and
the Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Bill 2009 (CCS Bill).
On 6 May 2010, the Government released the NBN Implementation Study. The
Implementation Study does not address the issue of NBN Co's acquisition of, or sale
of shares in, a subsidiary company, but it does recommend that the Government retain
full ownership of NBN Co until the NBN roll-out is complete (Rec.58). The
Implementation Study also recommends that NBN Co be prohibited from investing in
retail telecommunications providers and content service providers, subject to special
transitional ownership provisions to permit the acquisition of assets (Rec.69). The
Implementation Study also recommends that ownership caps of 15 per cent in relation
to shareholdings in NBN Co, subsidiaries of NBN Co or any company resulting from
structural separation of NBN Co should be introduced once the Commonwealth
begins to sell down its stake in the Company - subject to practical control tests
(Rec.83).
2. Objective
The Government's objective is to ensure that:
1. NBN Co has the flexibility to invest in and divest itself of assets as
necessary, especially to facilitate the cost-effective roll-out of the NBN;
2. NBN Co's wholesale-only and other obligations are effectively applied,
especially after the Government sells down its stake in the company; and
3. Regulatory arrangements for NBN Co are simple and efficient, and
stakeholders also have certainty how the regulatory arrangements will
apply.
17
3. Options (regulatory and/or non-regulatory) that may constitute viable
means for achieving the desired objective(s)
Five alternative options (regulatory and non-regulatory) have been identified to
address the Government's objectives. All could in practice meet the Government's
objective, although with variable degrees of effectiveness. These are:
1. Do nothing - rely on existing Commonwealth shareholder powers and ACCC
oversight.
2. Limited regulation - require the ACCC to grant formal clearance of all
acquisitions/divestments involving NBN Co and to consider NBN Co's
non-discrimination and transparency obligations.
3. Quasi-regulation - include a requirement in NBN Co's constitution for NBN
Co to seek approval from its shareholders before investing in a retail provider
or selling any shares in a subsidiary.
4. Regulation - Broadening the current bill - include a definition of an NBN
corporation to be a company in which NBN Co holds a controlling stake.
5. Legislated prohibition - prohibit NBN Co from investing in a retail provider,
except for the purpose of acquiring its assets.
For the purpose of clarity, it should be noted that all suggested options, apart from
Option A (`do nothing'), would be applied in addition to regulation which is existing
or already proposed; they are not proposed to operate instead of existing or already
proposed measures. Furthermore, Options B and C could be combined.
Option A - Do nothing - rely on existing Commonwealth shareholder powers and
ACCC oversight.
Under Option A, there would be no legislative or regulatory change. NBN Co would
be able to invest in and divest itself of assets, unless the transaction breached section
50 of the TPA.
Option B - Limited regulation - require the ACCC to grant formal clearance of
all acquisitions/divestments involving NBN Co and to consider NBN Co's non-
discrimination and transparency obligations during the clearance process.
Option B would build on Option A, so that, through an amendment to the TPA, the
ACCC would be required to grant formal clearance of all mergers and acquisitions
involving NBN Co, and in doing so, would also need to take into account the impact
of the transaction on NBN Co's ability to meet its non-discrimination and
transparency obligations. In other words, the ACCC would be required to grant formal
clearance of a transaction through which NBN Co acquires a share in a corporation, or
a corporation acquires a share in NBN Co, or purchases of assets by NBN Co.
Furthermore, the ACCC would, in addition to the existing criteria under section 50 of
the TPA, also need to take into consideration whether NBN Co's non-discrimination
18
and transparency obligations would be affected by a proposed transaction. These
obligations were described in section 1.
Option C - Quasi-regulation - include a requirement in NBN Co's constitution for
NBN Co to seek approval from its shareholders before investing in a retail provider
or selling any shares in a subsidiary.
Under Option C, NBN Co would be required to seek approval from its shareholders
prior to investing in a retail provider or selling any shares in a subsidiary. This
mechanism would ensure that, while the Commonwealth owned NBN Co, any
transaction is considered by the shareholder Ministers prior to it taking place to allow
shareholder Ministers to determine if the transaction was acceptable.
Under the Competition Principles Agreement 1995, the Commonwealth must conduct
a review prior to privatising a public monopoly. Such a review could assess whether
this measure would be likely to guarantee NBN Co would meet the Commonwealth's
objectives regarding retail ownership by NBN Co once the Commonwealth lost
control of the company. If the measure was considered ineffective, the review could
make further recommendations at that time.
Option D - Regulation - Broadening the current bill - include a definition of an NBN
corporation to be a company in which NBN Co holds a controlling stake.
Under Option D, the definition of an NBN corporation would be broadened to include
a company controlled by an NBN corporation. The provision would define `control'
in accordance with the CCS Bill (i.e., if NBN Co has 15 per cent or more of a
company, or there are other informal controls on the company's Board, then NBN Co
is considered to control it), to ensure consistency within telecommunications
regulations.
If a company is defined as being controlled by NBN Co, and thus considered to be an
NBN corporation, legislation would need to include appropriate transitional period
arrangements to allow that company's Board to adjust to its new obligations.
Otherwise, there is a risk that the company's status could be changed without the
shareholders being given an opportunity to adjust.
Option E - Legislated prohibition - prohibit NBN Co from investing in a retail
provider, but provide a statutory power to the ACCC to grant formal clearance of a
purchase by NBN Co of a retail provider on condition that it is solely for the purpose
of acquiring that retail provider's physical assets. NBN Co would also be prohibited
from selling any shares in a subsidiary company unless cleared by the ACCC.
Under this option, NBN Co could not buy a single share in a carrier or service
provider, but could, if it wanted to purchase a company for the purpose of acquiring
its physical assets, seek formal clearance from the ACCC under a new mechanism
inserted into the TPA, to purchase the company outright. As part of this process, NBN
Co may need to submit undertakings to the ACCC to divest any retail operations.
NBN Co would likewise be prohibited from selling any shares in a subsidiary
company in the absence of clearance by the ACCC. The amendments to the TPA
19
would also require the ACCC to consider, under the clearance process, the effects of
any transaction on NBN Co's non-discrimination and transparency obligations.
4. Impact assessment
This section discusses the advantages and disadvantages of the five options identified
above in terms of the objectives discussed in section 2 and their impact on
stakeholders, namely:
· NBN Co as the access provider;
· customers of NBN Co;
· competitors of NBN Co; and
· consumers as ultimate users and beneficiaries of telecommunications services.
Privatisation:
In considering the advantages and disadvantages of the options identified in section 3,
it is important to note the different motivations that are likely to drive NBN Co Board
decisions:
1. when it is controlled by the Commonwealth; and
2. when it is no longer controlled by the Commonwealth.
While NBN Co is still Commonwealth-owned, the risk of the company becoming
vertically integrated or otherwise forming relationships with entities that may give
rise to conflicts, and thereby recreating the problems that the telecommunications
reform legislation is designed to address, is considered to be minimal. However, once
the Commonwealth begins to sell down its stake in NBN Co, it will have less power
to control NBN Co and there will be greater opportunity for such relationships to
develop.
The following criteria are considered in analysing the five options provided in section 3:
· Action required (intrusive versus non-intrusive action)
· NBN Co's flexibility to invest in and divest itself of assets
· Effective application of NBN Co's obligations
· Cost to the tax payer
· Likely industry perception
The merits of each option against the identified criteria are presented in the table
below.
20
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
(A) Rely on existing None Yes. Partial. May allow NBN Co Access seekers may
Commonwealth to purchase retail consider that this
shareholder powers and Companies can seek providers to reduce option permits NBN
ACCC oversight. clearance from the ACCC for the overall cost of the Co to avoid its
acquisitions of shares in NBN build. There
obligations and enter
another company or its remains a risk that a
assets. fundamental goal of
retail markets.
the NBN policy and Industry has indicated
Under section 50 of the TPA, the Commonwealth's that it would like more
the ACCC can grant formal significant action to be taken, to
clearance of an acquisition if investment (non- prevent NBN Co
it does not substantially conflicted, open and avoiding its
lessen competition. However, equivalent access) obligations. Clarifying
in an acquisition involving may be that section 50 of the
NBN Co the ACCC is not compromised. TPA applies to NBN
required to consider NBN Co may allay some
Co's non-discrimination and
concerns.
transparency obligations and
therefore this option would
not guarantee NBN Co
remains a wholesale only
business.
This approach would need to
be reviewed prior to the
Commonwealth selling down
21
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
its stake in NBN Co.
(B) Require the Regulation Yes, but subject to a Partial. Allows NBN Co to Likely to go some
ACCC to (limited new stricter process. purchase retail way to allaying
grant formal clearance of amendment) Option B would extend the providers to reduce industry concerns that
all safeguards in Option A, by the overall cost of the NBN Co may be able
acquisitions and requiring the ACCC to grant NBN build (provided
to avoid its
divestments formal clearance of all the transaction is
involving NBN transactions involving NBN cleared by the
obligations.
Co and to consider NBN Co, including consideration ACCC).
Co's non-discrimination of whether any such
and transparency transaction compromises More numerous and
obligations as part of the NBN Co's non- wide ranging ACCC
clearance process. discrimination and processes could be
transparency obligations. required at a cost to
the Commonwealth.
The ACCC could still, To the extent that the
however, grant formal ACCC's costs are
clearance of a transaction, increased, these
that placed NBN Co in would be recovered
control of another entity, from industry
with a risk that NBN Co through carrier
could, in the long term, use licence fees, and
that entity to circumvent its therefore ultimately
obligations. passed on to end-
22
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
users.
There remains a risk
that a fundamental
goal of the NBN
policy and the
Commonwealth's
significant
investment (non-
conflicted, open and
equivalent access)
may be
compromised.
(C) Include a requirement Quasi- No. Shareholder Partial Allows NBN Co to Approach likely to be
in NBN Co's constitution regulation Ministers would purchase retail seen as lacking
for NBN Co to seek assume responsibility This option requires NBN Co providers to reduce transparency by
approval from its for determining if an to seek approval from the overall cost of the industry, and also
shareholders before acquisition or shareholders prior to NBN build (provided
ineffective on
investing in a retail disposal should take acquiring shares in a retail it is not disallowed
provider or selling any place, rather than the provider or selling shares in a by Shareholder
privatisation
shares in a subsidiary. Board. subsidiary. Ministers or the (therefore, requiring
ACCC). some other
Removes flexibility This option would become mechanism).
from NBN Co and ineffective as the Additional processes
introduces additional Commonwealth sells down would be required May provide an
(new) role for its shares, and possibly on a within Government, effective transition
shareholder change in Shareholder meaning there would mechanism, until
23
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
Ministers. Ministers (as shareholders be a related cost to Option D is
have the power to change the the Commonwealth. implemented.
company's Constitution) These costs are
impossible to
The effectiveness of this quantify, but would
mechanism depends on the involve increased
judgment of shareholders. resourcing required
to consider all NBN
Co's transactions and
provide advice
(including legal and
economic advice).
Delays arising from
the approval process
could lead to NBN
Co incurring
increased costs,
which would be
passed on to access
seekers and
ultimately to end-
users.
(D) Include, in the Regulation Partial. NBN Co can Largely. Allows NBN Co to Industry is likely to
Companies Bill, a (broadening invest and divest but purchase retail welcome this option
definition of an NBN the current any company that Option D would apply to providers to reduce as it ties NBN Co
24
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
corporation as a company bill). will be deemed as ownership scenarios in which the overall cost of the more stringently to its
in which NBN Co holds a "controlled" by NBN NBN Co invests in retailers, NBN build. obligations by
controlling stake Co is subject to the or sells shares in its ensuring entities that
NBN obligations. subsidiaries to other carriers Does not add to NBN Co controls are
Any companies in or service providers. It would existing regulatory
subject to NBN co's
which NBN Co has a also cover joint ventures authorisation
non-controlling between NBN Co and mechanisms and is
wider objectives.
interest would not be another carrier or service efficient, and
covered by NBN Co provider. Under the draft therefore would not Transactions that
obligations. NBN Companies Bill, NBN add to costs for NBN resulted in NBN Co
Co's obligations only flow Co, access seekers ornot having a
through to wholly-owned end-users. controlling interest
subsidiaries of NBN Co. could also be
Industry commented that Provides a strong monitored by
NBN Co could sell shares in mechanism to deliver Shareholder Ministers
a subsidiary to another a fundamental goal if necessary.
carrier, thereby allowing that of the NBN policy
subsidiary to avoid the NBN and the
Co obligations. Commonwealth's
significant
Option D ensures that investment (non-
corporations that are conflicted, open and
controlled by NBN Co are equivalent access).
subject to NBN Co's
obligations.
These are entities in which
25
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
NBN Co is in a position to
ensure its wider obligations
can be applied. NBN Co
would not be in a position to
ensure its wider obligations
are met by an entity it did not
control.
Option D provides a strong
incentive to NBN Co to
divest itself of any retail
assets as soon as possible.
Once NBN Co controlled a
retail provider, if that
provider continued to supply
retail services NBN Co
would be in breach of its
obligations and subject to
penalties for breach of its
carrier licence conditions. A
carrier is required to comply
with conditions of a licence
(section 68 of the Tel Act)
and breach of this
requirement constitutes a
breach of a civil penalty
provision. The pecuniary
26
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
penalties for breach of civil
penalty provisions are further
set out in Part 31 of the TA
and set a maximum
pecuniary penalty on a body
corporate of $10 million for
each contravention.
Consequently, to avoid this,
NBN Co is likely to structure
any acquisitions so that retail
activities are ring-fenced and
divested before NBN Co
purchases a controlling stake.
(E) Prohibit NBN Co from Regulation Limited. NBN Co Yes. Option E would NBN Co would have This option was
investing in a retail (legislated would generally not generally prevent NBN Co limited ability to suggested by some
provider except for the prohibition) be able to invest in having an interest in another purchase stakes in stakeholders.
purpose of acquiring a retailers and other entity, thereby limiting other companies, However, it would
retail provider for the carriers or service situations in which it could thus limiting this
also limit NBN Co's
purpose of acquiring its providers or divest breach its obligations or be option as a means of
assets, or selling any without direct subject to a conflict of rolling out its
ability to engage with
shares. Include a new clearance from the interest. Any transactions network in a cost industry players
process for clearance of ACCC. This would would be subject to strict effective manner. interested in
potential acquisitions and limit NBN Co's ACCC oversight. transactions.
divestments by the ACCC. flexibility to make Option E adds a layer
purchases in a of complexity and
27
Option Action Retains existing Effective application of Represents value Likely industry
required flexibility for NBN Co's obligations? for money to the tax perception
acquisitions in and payer?
divestment by NBN
Co?
commercial market. uncertainty as the
ACCC could be
required to consider
an acquisition
anyway under
section 50. If a dual
regulatory process
was put in place, this
would add to
regulatory costs for
the ACCC and create
delays for NBN Co
in being able to roll-
out the NBN. To the
extent that these
delays create costs,
these would be
passed on to industry
and end-users.
28
5. Consultation
The Government announced on 7 April 2009 that it would introduce legislation
covering NBN Co's governance and access arrangements. On 3 July, the Minister
invited submissions on the National Broadband Network's legislative framework and
by 30 July, more than 30 submissions had been received.
These submissions were used to inform the Government's approach to the NBN
legislation and on 24 February 2010 the Minister issued exposure drafts of the
National Broadband Network Companies Bill 2010 and the Telecommunications
Legislation Amendment (National Broadband Network Measures - Access
Arrangements) Bill 2010.
Submissions in response to the exposure drafts closed on 15 March 2010 and more
than 20 submissions were received.
On 6 May 2010, the Government called for submissions on the NBN Implementation
Study. More than 50 submissions were received.
Industry response is largely in favour of prohibiting NBN Co from any investment in
retail service providers, believing it to be inconsistent with the Government's stated
objectives for NBN Co.
Some stakeholders conceded that NBN Co's investment in retail providers may be
necessary, but wanted strict ring-fencing provisions to apply during a set divestment
period.
The Competitive Carriers Coalition (CCC) was the only stakeholder to acknowledge
the ACCC's existing powers under section 50 of the TPA. However, it did not
consider these powers to be sufficient. The CCC called for strict ring-fencing
measures to be introduced, along with an obligation for the ACCC to consider all of
NBN Co's proposed acquisitions of retail providers - including whether an acquisition
will adversely impact on NBN Co's obligations.
6. Conclusion
Option A would deliver NBN Co the flexibility to acquire shares in the capital of a
corporation or divest itself of shares in a subsidiary, but the TPA only requires a
decision maker to consider whether the transaction results in a substantial lessening of
competition, and not whether a transaction would allow NBN Co to avoid its
non-discrimination and transparency obligations.
Option B seeks to fill the gap in Option A by requiring the ACCC to consider all
transactions involving NBN Co and to include matters impacting on NBN Co's
equivalence obligations as part of its considerations.
Option C delivers the outcomes of Option A, but adds a formal process to ensure that
shareholders are made aware of, and must approve, all share transactions. While NBN
Co is owned by the Commonwealth, this is considered to be an effective mechanism
29
for ensuring NBN Co meets its obligations. The effectiveness of this mechanism
depends, however, on the judgment of shareholders.
Option D restricts NBN Co's flexibility to acquire shares in the capital of a
corporation or divest itself of shares in a subsidiary to a degree, by ensuring that any
subsidiary that it does not wholly own, but controls, will be subject to NBN Co's
obligations.
Option E tightly confines NBN Co to its obligations but may limit its opportunities
and flexibility in acquiring necessary assets in commercial markets. It would also
involve additional clearance processes. This would lead to duplicative processes if
the ACCC was required to consider both a section 50 assessment and a separate
assessment in relation to NBN Co's obligations.
On balance Option D is the preferred approach, noting that shareholder ministers
would also be able to monitor smaller transactions that did not result in NBN Co
having control of an entity.
7. Implementation and review of the preferred option
Options D will be implemented through the Companies Bill.
Operation of the proposed arrangements will be subject to ongoing review. The
Government is also considering Recommendation 78 of the Implementation Study
that an independent review of the telecommunications market and the regulatory
framework for the NBN be undertaken following completion of the network and prior
to its proposed privatisation. Such a review, which could be undertaken by the
Productivity Commission, would also be expected to look at the matters covered in
this RIS.
Regulation Impact Statement 2.
Applying and extending the obligations under Part XIC
1. Issues which give rise to the need for action
The key issue to be addressed here is why specific Standard Access Obligations
(SAOs) are being created for NBN Co, and why it is not sufficient to rely on
competitive markets or the existing telecommunications access regime. This
Regulatory Impact Statement also addresses the equivalence obligation to be placed
on NBN Co.
Background
The Government's 7 April National Broadband Network (NBN) announcement set
out the key parameters to apply to NBN Co. The Government announced that NBN
Co would be subject to ACCC oversight, would operate on a wholesale-only basis and
would offer open and equivalent access to all telecommunications providers.
In Australia, access to bottleneck infrastructure or services is regulated under a
number of mechanisms, including:
30
· the national access regime, established under Part IIIA of the Trade Practices
Act 1974 (the TPA), which does not apply to telecommunications access;
· the telecommunications access regime under Part XIC of the TPA; and
· the facilities access regime under the Telecommunications Act 1997, which
established rights of access to key telecommunications facilities.
Access regimes reflect Government policy that owners of bottleneck infrastructure
can prohibit efficient competition by creating uncompetitive market structures.
A number of submissions on the legislative framework for the NBN claimed that
NBN Co will own a network which will have significant bottleneck characteristics,
giving NBN Co incentives to restrict supply and extract monopoly rents and also
favour its investors and larger customers. They also noted that telecommunications
providers who wish to provide high speed fixed-line broadband on a national scale
will inevitably require access to the NBN. The majority of submissions therefore
argued that access to the NBN should be regulated.
2. Objective
The Government's broad objective in telecommunications policy is to promote the
long-term interests of end-users of carriage services or of services provided by means
of carriage services.
The Government's objectives for access to the NBN is that carriers and service
providers are granted open and equivalent access, with the terms and conditions of
services subject to ACCC oversight.
3. Options (regulatory and/or non-regulatory) that may constitute viable
means for achieving the desired objective(s)
Four alternative options (regulatory and non-regulatory) have been identified to
address the Government's objectives. These are:
1. No regulation - allow the marketplace to determine the prices and non-price
terms and conditions of NBN Co's services.
2. Regulate access to NBN Co's services through the existing
telecommunications access regime under Part XIC of the TPA.
3. Regulate access to NBN Co's services through specific amendments to the
existing access regime.
4. Regulate access to NBN Co's services through a specific NBN access regime
in the TPA.
Option A - No regulation - allow the marketplace to determine the prices and non-
price terms and conditions of services
Option A would involve some legislation, as the Commonwealth would need to
amend Part XIC of the TPA to make it clear that it does not apply to NBN Co.
31
Under this option, the prices and non-price terms and conditions of services would be
set through negotiations between NBN Co and its customers. As NBN Co is
wholesale-only, it would not be expected to have incentives to unfairly discriminate
against any of its customers, and the prices those customers pay, and the terms and
conditions they receive, would be market-based.
One submission on the legislative framework for the NBN Co, from RBB Economics,
argued that it was not clear that the NBN would be a natural monopoly, as it would be
subject to competition from alternative fixed line networks. RBB Economics argued
that the company should be subject to general competition policy rather than existing
or new sector-specific rules.
Option B - Regulate access to NBN Co's services through the existing
telecommunications access regime under Part XIC of the TPA
This option represents the base case as it would reflect what action could occur if no
new legislation is established.
Under this option, NBN Co would offer services to customers in accordance with the
existing access regime, as it is intended to be amended. If the Australian Competition
and Consumer Commission (ACCC) considered that it was in the long-term interests
of end-users to declare particular NBN Co services, it could do so and, in accordance
with the reforms to Part XIC introduced in the Telecommunications Legislation
Amendment (Competition and Consumer Safeguards) Bill, make an access
determination setting the prices and terms and conditions of services up front. NBN
Co could also submit a special access undertaking, and negotiate access agreements
for declared services with access seekers.
Option C - Regulate access to NBN Co's services through specific amendments to the
existing access regime
Under this option, specific provisions would be established in Part XIC of the TPA
covering NBN Co. The specific measures that would be included would be designed
to ensure that NBN Co offers non-discriminatory access to its services.
If NBN Co is to be covered by Part XIC, specific SAOs would be imposed on NBN
Co to underpin this non-discrimination objective including a specific obligation to
offer services on an equivalent basis.
A number of submissions on the NBN legislative framework considered that NBN Co
could be subject to an access regime similar to Part XIC, or based on Part XIC, but
with specific obligations in relation to equivalence and transparency. For example,
Optus suggested this overall approach, with regulation only applying to `key'
services, but with equivalence and transparency obligations applying to all services.
Equivalence and transparency
As the Discussion paper National Broadband Network: Regulatory Reform for 21st
Century Broadband stated, there are two general approaches to equivalence in
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telecommunications regulation. In Australia, the current operational separation
arrangements that apply to Telstra are based on `equivalence of outcomes'. Under this
model access seekers do not receive the same network inputs as Telstra's retail units.
In theory, equivalence of outcomes should allow efficient competitors to produce
equally competitive outcomes.
The alternative approach has been introduced, in different forms, in the United
Kingdom, New Zealand and Singapore and also underpins approaches to access
regulation in the Netherlands. This requires an access provider to provide wholesale
customers with the same price and non-price inputs as it provides its own retail units.
Submissions on the NBN legislative framework strongly supported an `equivalence of
inputs' obligation for NBN Co. Under this obligation, NBN Co would be required to
offer the same services, on the same terms and conditions, processes and timeframes,
and the same information about services, to all access seekers.
The broad consensus is that the alternative equivalence of outcomes has `not
promoted genuine equivalence of access or effective competition in the
telecommunications sector' (Explanatory Memorandum to the Telecommunications
Legislation Amendment (Competition and Consumer Safeguards) Bill 2009, p 15). In
its submission on the Regulatory Reform for 21st Century Broadband, the Australian
Competition and Consumer Commission stated that in Australia the equivalence of
outcomes arrangements applying to Telstra do not address Telstra's incentive and
ability to discriminate against its competitors. In relation to NBN Co, an equivalence
of outcomes approach would allow NBN Co to provide different access seekers with
different inputs. Not only would this not provide a level playing field for all access
seekers, but NBN Co could develop incentives to favour specific access seekers.
An equivalence of inputs regime should establish a `safety net', whereby all
customers are able to access the same services on standard terms. However, NBN Co
should be able to negotiate with access seekers to vary its standard terms and
conditions. Some forms of price and service discrimination can be economically
efficient, promote innovation and improve overall consumer welfare. In
telecommunications, price discrimination is commonly applied through volume or
term discounts. Submissions on the NBN legislative framework generally supported
such discounts being permitted.
To preserve equivalence, all access seekers in like circumstances should have equal
rights to benefit from any variations to standard terms and conditions.
One of the NBN-specific SAOs should be a requirement to publish all service offers,
including a generic description of any discounts or other changes to standard terms
made through an access agreement with an individual customer. Without this
transparency access seekers will not know what variations have been made to the
standard terms, and will not be able to judge whether they could also benefit from any
variations.
NBN Co would also be required to lodge all agreements with variations to standard
terms and conditions with the ACCC, who would have discretion to take action if an
agreement is considered to have anti-competitive effects.
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Option D - Regulate access to NBN Co's services through a specific NBN access
regime in the TPA
This option is similar to option C, except that instead of making minor changes to Part
XIC the Government would insert a new access regime specifically for NBN Co in
the TPA (e.g., a new Part XIE of the TPA). This new access regime would include the
NBN-specific SAOs but would also have to set out how services could be declared,
undertakings submitted and the overall enforcement regime. The basic obligations and
approach to equivalence would be the same as set out in option C, but more complex
legislation would be required as much of Part XIC would need to be mirrored in Part
XIE.
In its submission on the NBN legislative framework, the Australian
Telecommunications Users' Group suggested that a specific access regime could be
created for NBN Co.
4. Impact assessment
This section discusses the advantages and disadvantages of the four options identified
above in terms of the criteria discussed in section 2 and their impact on stakeholders,
namely:
· NBN Co as the access provider;
· customers of NBN Co; and
· consumers as ultimate users and beneficiaries of telecommunications services.
As opening observations, a number of factors should be taken to be givens.
Costs
The Government considers that there is likely to be a high degree of consensus
amongst access seekers and NBN Co on proposed systems and processes, and
therefore there will be little compulsory cost imposition, if any, on customers of NBN
Co. The Government notes that NBN Co has been working with the industry body,
Communications Alliance, to develop an interconnection model.
Under Option D, there may be limited, one-off, compliance costs for customers as
they may need to seek legal opinion on the differences between the NBN access
regime and the generic telecommunications access regime.
Option A would impose the lowest compliance costs on access seekers as they would
receive services from NBN Co through commercial negotiation.
Under all options NBN Co would itself face compliance costs in developing its
services, systems and processes. These costs would be passed on to customers under
all options.
Given the limited nature of these costs, they are not expected to contribute
significantly to final prices to end-users.
34
The Department expects its administration costs would be no more than $2.7 million
over four years, including staffing. The ACCC expects its administration costs would
be $24 million over five years, including staffing.
When compared against the proposed investment of up to $43 billion in the NBN and
the expected economic benefits to the country from the level playing field the NBN
will provide for carriers and service providers, the benefits clearly exceed the limited
costs for the NBN company and access seekers.
Competitive neutrality
In relation to competitive neutrality it is recognised that Option D proposes a specific
access regime for NBN Co. However, NBN Co will still be subject to other generic
telecommunications and corporate regulation, and the specific access regime would
take account of NBN Co's unique open access and equivalence obligations.
Consequently, Option D does not breach the Competition Principles Agreement.
Option A - No regulation - allow the marketplace to determine the prices and non-
price terms and conditions of services
Advantages:
· Prices, and non-price terms and conditions, of services will reflect negotiations
between NBN Co and its customers. However, while a wholesale-only network
provider would not be expected to have incentives to unfairly discriminate against
any specific customers, in the absence of regulation providers might not have
regulatory certainty for access seekers that they will receive open and equivalent
access.
· NBN Co is free to develop customised services for particular customers, ensuring
that innovation can take place in response to market needs.
· Compliance costs will be lowest.
· Administrative costs would be lower than under options B-D.
Disadvantages:
· Given limited competition, NBN Co may have incentives to limit supply and
extract monopoly rents.
· While a wholesale-only network provider would not be expected to have
incentives to unfairly discriminate against any specific customers, in the absence
of regulation providers might not have regulatory certainty for access seekers that
they will receive open and equivalent access.
· Option A does not promote competitive neutrality as NBN Co would be the only
provider not subject to telecommunications access regulation.
Option B - Regulate access to NBN Co's services through the existing
telecommunications access regime under Part XIC of the TPA
Advantages:
· The Part XIC access regime is well known and understood in the sector.
· Regulation would be focused on key bottleneck services, allowing NBN Co to
develop innovative services in response to customers' needs.
35
· The recent reforms to Part XIC will promote greater certainty and fairness.
Disadvantages:
· This option does not cater for NBN Co's unique wholesale-only structure.
· This option would not ensure that NBN Co offers services to all customers on an
equivalent basis.
· Part XIC does not require access providers to publish all service offers, meaning it
does not provide transparency for access seekers.
· Part XIC does not impose an open access obligation on access providers.
Option C - Regulate access to NBN Co's services through specific amendments to the
existing access regime
Advantages:
· The Part XIC access regime is well known and understood in the sector.
· The NBN-specific SAOs will establish equivalence, transparency and open access
obligations, promoting a level playing field for customers, while preserving
flexibility for customers to negotiate away from standard terms.
· The equivalence requirement will help smaller access seekers customise services
for niche markets and will also help ensure that services delivered in regional
Australia are based on the same inputs as services delivered in metropolitan
Australia.
· This option provides regulatory certainty for NBN Co and its customers on the
services that will be provided, the terms and conditions of services, and
approaches to varying standard terms.
· Regulation would be focused on key bottleneck services, allowing NBN Co to
develop innovative services in response to customers' needs.
Disadvantages:
· This option could be criticised as not going far enough - it treats NBN Co the
same as other access providers, which could make it less clear that NBN Co has
an open access obligation. This can be mitigated through the drafting of NBN
Co's SAOs.
Option D - Regulate access to NBN Co's services through a specific NBN access
regime in the TPA
Advantages:
· All of NBN Co's obligations and access regime will be clearly separated from the
generic access regime, making NBN Co's open access obligation transparent.
· The NBN-specific SAOs will establish equivalence, transparency and open access
obligations, ensuring that NBN Co must offer a level playing field for customers,
while preserving flexibility for customers to negotiate away from standard terms.
· This option provides regulatory certainty for NBN Co and its customers on the
services that will be provided, the terms and conditions of services, and
approaches to varying standard terms.
36
Disadvantages:
· A separate regime for NBN Co could generate lobbying for change to one or both
regimes.
· The differences between the NBN regime and the generic access regimes could
create uncertainty. However, this can be mitigated as option D will be consistent
with much of the Part XIC access regime.
· This option may be criticised as not being competitively neutral, although in
practice this would not be the case as the specific NBN access regime reflects the
unique position of NBN Co in the sector.
5. Consultation
On 3 July the Government called for submissions on the legislative framework for the
NBN company, including its access regime. In total, 37 submissions were received
and the Government also held meetings with 17 organisations.
Overall, there was clear support in the submissions for an access regime which:
· ensured that the prices and non-price terms and conditions of offers could be
determined by the regulator up-front, without lengthy delays or gaming;
· left flexibility for NBN Co to negotiate services under market conditions;
· required service offers to be available to all customers on an equivalent basis; and
· allowed the NBN company and customers to negotiate to vary terms and
conditions, subject to notification to the ACCC.
Submissions offered varying perspectives on whether or not to use the existing
regulatory framework. Telstra, BT, the Competitive Carriers' Coalition and
Macquarie Telecom proposed that the current Part XIC access regime could cover the
NBN company. Optus also suggested that the NBN company should offer `key'
services which were regulated, but could offer other services, subject to its being
obliged under legislation to meet transparency requirements and offer all services on
an equivalence of inputs basis. No party specifically raised the facilities access
regime.
One submission, from RBB Economics, called for the NBN company not to be
subject to specific access regulation, but to competitive market forces.
A few submissions called for the Government to release an Exposure Draft of the
legislation for public comment.
The Government also considered advice from the Implementation Study on the NBN
access regime. The regime proposed here is largely consistent with that advice, which
itself was informed by submissions on the NBN legislative framework.
Within the Commonwealth, the Department has consulted with the Department of the
Prime Minister and Cabinet, the Treasury, the Attorney-General's Department, the
Department of Finance and Deregulation and the ACCC on the proposed access
regime.
The main issue raised in these consultations was whether it would be preferable to use
the existing regulatory arrangements or establish a specific NBN access regime.
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6. Conclusion
As noted above, any costs to NBN Co and access seekers are expected to be
insignificant, one-off costs.
Option C, which provides for specific NBN SAOs to be incorporated into the existing
access regime under Part XIC of the TPA, is the best option overall for meeting the
Government's objectives. The option:
· avoids the confusion arising from different access regimes for carriage services
and access to facilities;
· delivers equivalence and transparency across all NBN services, while preserving
the ability for customers to negotiate away from standard terms; and
· best reflects the unique structure of the NBN company as a wholesale-only
provider with a significant national access network.
Option A is not considered feasible because while a wholesale-only network provider
would not be expected to have incentives to unfairly discriminate against any specific
customers, in the absence of regulation providers might not have regulatory certainty
for access seekers that they will receive open and equivalent access. This could
preclude the Government from realising its key objective for the NBN access regime,
which is to deliver a level playing field for carriers and service providers. Option A
would also not meet competitive neutrality principles.
Option B would not deliver the equivalence and transparency outcomes the
Government is seeking, and requires only marginally lower administrative costs to
implement than option C. It is therefore not preferred.
Option D would deliver largely similar outcomes to option C, but would involve
significant administrative costs arising from the duplication of much of Part XIC in a
NBN-specific access regime. This option would also impose higher compliance costs
on customers as they would need to prepare more detailed legal advice on the new
regime. These costs could be mitigated by the fact that the new regime would be
largely similar to Part XIC, but given the greater costs and the largely similar
outcomes to option C, option D is not preferred.
7. Implementation and review of the preferred option
Option C will be implemented by amending Part XIC of the TPA to introduce the
NBN-specific SAOs. The new arrangements will operate in conjunction with an
obligation on NBN Co to remain a wholesale-only provider, to be established in a
separate National Broadband Network Companies Bill.
Operation of the proposed access regime will be subject to ongoing review.
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Regulation impact statement 3.
Enhancing the non-discrimination provisions in the draft Telecommunications
Legislation Amendment (National Broadband Network Measures - Access
Arrangements) Bill.
1. Issues which give rise to the need for action
Background
On 24 February 2010 the Government released an exposure draft of the
Telecommunications Legislation Amendment (National Broadband Network
Measures - Access Arrangements) Bill. The bill covers access to NBN Co2 services
and transparency and non-discrimination measures and makes amendments to the
Trade Practices Act 1974 (TPA) and the Telecommunications Act 1997 to this effect.
The non-discrimination measures in the draft bill recognise that, even though NBN
Co is a wholesale-only provider, it may have incentives to favour certain access
seekers. For example, it may focus on its largest and most remunerative customers, at
the expense of smaller players.
In the bill, the proposed section 152AXC of the CCA requires NBN Co not to
discriminate between access seekers. This means that the `base case' scenario is that
every access seeker would be offered the same terms and conditions. However, the
bill recognises that price or service differentiation can increase efficiency and
innovation, and therefore provides scope for access seekers to negotiate outside these
standard terms. In this regard, the bill simply puts into statutory language something
that is already common practice in the telecommunications industry.
The bill recognises that differentiation could, if not tightly controlled, deliver anti-
competitive outcomes. The circumstances for allowable discrimination are confined
to:
· discrimination in relation to creditworthiness;
· discrimination on grounds or in circumstances specified in a legislative instrument
made by the Australian Competition and Consumer Commission (ACCC); or
· discrimination that aids efficiency, and that all access seekers with like
circumstances have an equal opportunity to benefit from.
To ensure that access seekers are able to judge whether they have like circumstances,
proposed sections 152BEBA, 152BEBB and 152BEBC require NBN Co to publish a
statement about the differences between an access agreement it has made with an
access seeker and its standard terms and conditions. NBN Co must publish the
statement within seven days after the day the access agreement was entered into. This
statement must:
· identify the parties to the access agreement;
2
References to NBN Co in this Regulation Impact Statement should be taken to also apply to any
wholly owned subsidiary, including NBN Tasmania Limited, and, consistent with other proposed
amendments, any entity in which NBN Co has a controlling stake or which NBN Co otherwise
controls.
39
· describe the differences between the terms and conditions set out in the access
agreement and the terms and conditions set out in the standard form of access
agreement; and
· if any or all those differences are said to aid efficiency, identify the circumstances
that aid efficiency and describe what access seekers must do in order to have the
like circumstances.
Similarly, if any differences are authorised by a legislative instrument made by the
ACCC, NBN Co must identify the differences.
Comments on the draft bill
More than 20 submissions were received on the draft bill. There was a general view
amongst carriers that proposed section 152AXC would permit too much
discrimination. Austar and Macquarie Telecom were concerned that the draft
legislation did not provide sufficient guidance about the grounds on which NBN Co
could discriminate, noting that discrimination could cover both price and non-price
terms and conditions. The Competitive Carriers' Coalition and the Internet Industries
Association suggested that discrimination should be restricted to discrimination based
on the costs of providing access. AAPT, Optus and Primus Telecom considered that
the draft provision could allow discounts to be made available to a single provider, or
at best two providers, which could `reinforce the incumbency of the current players'.
Austar considered that volume discounting could further entrench service disparities
between regional and metropolitan areas.
Telstra observed that the draft legislation could potentially prevent economically
efficient discrimination. It noted that price discounts based on efficiency should be
able to be made available to only one party where appropriate, and that these
discounts should not be published.
The Implementation Study on the National Broadband Network proposes that
discrimination should be allowed (for example, in relation to creditworthiness or if it
aids efficiency) and also proposed that NBN Co should not offer differentiated terms
in relation to scale (i.e., volume discounts) unless at least three access seekers could
feasibly gain the terms (recommendation 70).
Macquarie Telecom and TransACT also suggested that discrimination in relation to
creditworthiness could be misused to deny access or set unreasonable terms, and that
clearer grounds for such discrimination should be set out.
The Senate Select Committee on the National Broadband Network recommended that
the bill should be amended to provide guidance on what is meant by `efficiency' for
the purpose of the equivalence provisions. It recommended that the Bill should set out
examples of efficiency criteria which might be considered by NBN Co for the purpose
of determining whether an exemption is provided. The Committee also stated that
amendments should also ensure that volume considerations cannot be counted as
matters which `aid-efficiency' (recommendation 21).
The Committee also recommended that the bill should be amended so that ACCC pre-
approval is required of any agreement to which NBN Co is a party and under which
40
an access seeker is granted access on discriminatory terms on the basis of the
`efficiency' exemption (recommendation 22).
2. Objective
The Government's objective is to ensure that obligations on NBN Co can effectively
prohibit discrimination, while also promoting economically efficient outcomes that
do not lessen competition. It also considers that industry should have certainty as to
what sort of conduct is prohibited, and what sort of conduct is permitted.
It is understandable that access seekers are seeking greater clarity over what is
allowable discrimination. Access seekers will be concerned that their competitors
will be provided with an advantage that they themselves cannot receive. In practice,
the main area of concern is in relation to volume discounting, as an access seeker
which receives a discount could gain a clear competitive advantage over other firms
in the sector.
This impact statement therefore considers options for providing greater certainty. In
this regard, it is important to note that any agreements NBN Co may enter into are
subject to section 45 of the TPA, which prohibits making, or giving effect to a
provision of, a contract, arrangement or understanding that has the purpose, or has or
is likely to have the effect, of substantially lessening competition. Section 45 would
apply under all circumstances. However, there may be a role for the regulator to offer
greater certainty in relation to volume discounts.
3. Options (regulatory and/or non-regulatory) that may constitute viable
means for achieving the desired objective(s)
There are three options for amending the draft legislation:
A. Do nothing - leave the draft legislation as it is and rely on the regulator and the
courts to deliver certainty over time.
B. Clarify key terms in legislation (including allowable discrimination), prohibit
volume discounts and require ACCC approval of any discrimination.
C. Require the ACCC to publish principles on allowable discrimination, clarify
discrimination in relation to creditworthiness in legislation and require the ACCC
to approve volume discounts.
Option A - Do nothing - leave the draft legislation as it is and rely on the regulator
and the courts to deliver certainty over time
Under this option the approach set out in the draft bill would stand. The Government
indicated in the explanatory material with the draft bill that the ACCC would publish
guidance for industry on its approach to enforcing the legislation. NBN Co could offer
volume discounts, and if these substantially lessened competition sanctions would be
imposed under the TPA.
Option B - Clarify key terms in legislation (including allowable discrimination),
prohibit volume discounts and require ACCC approval of any discrimination
41
Under this option the bill would be amended to include definitions of key terms, such
as `like circumstances' and `aids efficiency'. The bill would also clarify
discrimination in relation to creditworthiness, using the criteria already set out in
section 152AR of the TPA. NBN Co would be required to follow a form approved by
the ACCC in publishing a summary of any access agreement which contains different
terms from the standard ones. NBN Co would not be permitted to offer volume
discounts. The ACCC would also be required to approve any access agreement in
which NBN Co offered different terms from its standard terms.
Option C - Require the ACCC to publish principles on allowable discrimination,
clarify discrimination in relation to creditworthiness in legislation and require the
ACCC to approve volume discounts
Under this option, the grounds on which NBN Co may discriminate in relation to
creditworthiness would be clarified in legislation, using the criteria already set out in
section 152AR of the TPA. The bill would also be amended to require the ACCC to
publish principles on allowable discrimination to provide greater certainty to industry.
NBN Co would be required to publish a summary of any access agreement which
contains different terms from the standard ones in a form approved by the ACCC.
Finally, the ACCC would not need to approve all access agreements with different
terms, but if NBN Co wanted to offer a volume discount it would first need to have
that discount approved by the ACCC.
4. Impact assessment
This section discusses the advantages and disadvantages of the three options
identified above and their impact on stakeholders, namely:
· NBN Co as the access provider;
· customers of NBN Co; and
· consumers as ultimate users and beneficiaries of telecommunications services.
The criteria used in the assessment relate to the Government's objective:
· ensuring that obligations on NBN Co can effectively prohibit discrimination;
· promoting economically efficient outcomes that do not lessen competition; and
· increasing industry certainty.
Under all three scenarios, direct costs to industry are low. Industry is under no
obligation to seek differentiated terms, and NBN Co is under no obligation to offer
them. There would be some cost of compliance for industry in adjusting to the regime.
These are expected to be greater under Option B, as the ACCC would need to approve
all access agreements. Option B would also lead to longer delays in commercial
activity, which could increase costs for industry. Option C could lead to some delays,
but these are likely to be minor.
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Option A - Do nothing - leave the draft legislation as it is and rely on the regulator
and the courts to deliver certainty over time
Advantages
· Provides a flexible approach which allows NBN Co to offer different terms to its
customers when this aids efficiency, but restricts its ability to differentiate on
other grounds (unless specified in an instrument made by the ACCC).
· End-users should benefit from the increased innovation that service and price
differentiation can support.
· Relies on existing trade practices law to ensure that NBN Co cannot enter into a
contract that substantially lessens competition.
Disadvantages
· Does not respond to industry's concerns about the draft legislation and could
result in industry lacking sufficient certainty over allowable discrimination.
· Access seekers lack certainty over what is meant by terms such as `aids
efficiency' and `like circumstances', and what boundaries may be placed on NBN
Co's ability to discriminate in relation to creditworthiness. NBN Co itself would
benefit from greater certainty over what is permissible, because this provides it
with a clearer guide to its compliance responsibilities under the TPA.
· If NBN Co offers different terms that do substantially lessen competition, the only
way to determine this would be for an access seeker to take NBN Co to court.
Experience suggests there is a risk that a court case could be protracted, and
would be expensive for access seekers. An access seeker that has benefited from
an agreement with NBN Co in the meantime may have gained an irreversible
competitive advantage.
· To the extent that industry lacks certainty over permissible differentiation, it may
delay seeking agreements that promote efficiency and innovation, with
corresponding delays to the benefits that those agreements would provide to end-
users.
Option B - Clarify key terms in legislation including allowable discrimination,
prohibit volume discounts and require ACCC approval of any discrimination
Advantages:
· The grounds and circumstances in which NBN Co may discriminate are tightly
defined in legislation, providing certainty to industry.
· When NBN Co offers different terms consistent with the legislation, end-users
should benefit from the increased innovation that service and price differentiation
can support.
· Legislative certainty is available on discrimination in relation to creditworthiness.
· NBN Co cannot offer volume discounts, thereby removing a main possible source
of discrimination by NBN Co.
· The ACCC provides an added check against potential discrimination that could
lessen competition by approving all access agreements that contain different terms
and conditions from the standard ones.
43
Disadvantages
· Requiring the ACCC to approve all access agreements if they contain different
terms would result in a lengthy and complex bureaucratic process which could
needlessly shackle commercial activity, and increase costs to industry and the
ACCC. These costs are impossible to quantify, but the ACCC would find that
more of its resources are devoted to approving access agreements. The ACCC's
costs eventually flow through to industry in the form of carrier licence fees.
Currently, there is no requirement for ACCC approval of access agreements, even
though access seekers frequently negotiate differentiated terms with access
providers.
· Approval of access agreements could also result in delays to commercial activity
and reduce commercial flexibility. If agreements are subject to a waiting period of
several weeks or months, access seekers could lose short-term opportunities in
particular markets.
· To the extent that these costs and delays impact on access seekers' ability to
develop better services for end-users, those end-users could be denied the benefits
of innovation.
· There is a danger in attempting to define the circumstances or grounds for
allowable discrimination too tightly in legislation, and without considering the
actual commercial practice of NBN Co. Legislation cannot cover all possible
circumstances, and legislation that is too prescriptive could preclude commercial
activity that is efficient and benefits competition. A more flexible approach, such
as clear signalling from the ACCC, may provide sufficient certainty for industry.
· Banning volume discounts altogether may reduce the ability of NBN Co to engage
in price discrimination that aids efficiency, which could limit access seekers'
ability to innovate.
Option C - Require the ACCC to publish principles on allowable discrimination,
clarify discrimination in relation to creditworthiness in legislation and require the
ACCC to approve volume discounts
Advantages:
· Greater legislative certainty is provided on discrimination in relation to
creditworthiness.
· The ACCC can provide greater certainty for industry through published
principles, but the law remains flexible enough to cover a variety of situations.
· The potential anti-competitive effects of volume discounting are controlled
through prior approval by the ACCC.
· Delays and costs are reduced as the ACCC does not have to approve all access
agreements with different terms.
· NBN Co must publish a summary of different terms in a form approved by the
ACCC, meaning that industry will have greater transparency on NBN Co's
conduct and greater certainty on the information that will be available.
Disadvantages
· Requiring the ACCC to approve all volume discounts could tie up regulatory
resources and delay some commercial agreements. The extent to which this is
problematic would depend on whether NBN Co chose to offer volume discounts
to begin with, and, if it did so, whether it proposed to offer them through a
44
standard schedule of rates or to negotiate individual discounts with different
access seekers.
5. Consultation
During July 2009 the Government sought submissions on the legislative framework for
the National Broadband Network. More than 30 submissions were received. Submissions
generally agreed that NBN Co should be able to offer differentiated terms to customers
where it aids efficiency, but there was little agreement on exactly what sort of
discrimination should be permitted. The Competitive Carriers' Coalition, for example,
considered that differentiation should be tightly restricted to clear economies, where
access seekers could make investments that reduced costs for NBN Co and then have
those cost reductions returned through discounts. A number of submissions considered
that volume discounts should not be allowed.
Following the release of the draft bill in February 2010, more than 20 submissions were
received. The views in these submissions have already been summarised under section 1;
as noted there, industry generally wanted clearer definition and certainty around
arrangements for differentiation, and expressed concern that volume discounts could
reinforce the power of the incumbent operators.
Within the Commonwealth, the Department has consulted with the Department of the
Prime Minister and Cabinet, the Treasury, the Attorney-General's Department, the
Department of Finance and Deregulation and the ACCC on the proposed measure.
6. Conclusion
Under all three options, there is scope for differentiating standard terms, because such
differentiation can promote efficiency and innovation. The key differences between
the options are that Options B and C provide greater certainty and transparency, while
Option B imposes a greater regulatory burden on industry.
Option A does not respond to industry's criticisms of the draft legislation and could
produce uncertainty, although the Government indicated in the explanatory material
with the draft bill that the ACCC would provide guidance on allowable
discrimination. Although NBN Co could provide volume discounts, there are
legislative sanctions already in place if access agreements substantially lessen
competition.
Option B provides greater legislative certainty, but would restrict the law to a tight
range of circumstances that may not be applicable to some forms of discrimination
that may emerge over time. It also creates lengthy delays and costs for industry and
reduces commercial flexibility.
Option C provides greater legislative certainty in relation to creditworthiness and
ensures that the ACCC will publish principles on allowable discrimination, which
should signal its approach to enforcement to the market. Volume discounting would
be subject to greater regulatory scrutiny and transparency, but would not be
prohibited, although this could lead to slightly higher costs and some minor delays for
45
industry. This option also provides greater commercial flexibility in relation to access
agreements.
7. Implementation and review of the preferred option
Option C is the preferred option. Although it does impose some compliance costs on
industry, these are expected to be minor and the option provides greater transparency
and certainty for industry.
Option C will be implemented through amendments to the Telecommunications
Legislation Amendment (National Broadband Network Measures - Access
Arrangements) Bill.
Operation of the proposed arrangements will be subject to ongoing review. The
Government is also considering Recommendation 78 of the Implementation Study
that an independent review of the telecommunications market and the regulatory
framework for the NBN be undertaken following completion of the network and prior
to its proposed privatisation. Such a review, which could be undertaken by the
Productivity Commission, would also be expected to look at the matters covered in
this RIS.
Regulation Impact Statement 4.
Measures to provide a level playing field for the provision of super fast
broadband across Australia
Telecommunications Act 1997 and Trade Practices Act 1974
1. Issues which give rise to the need for action
Australia has limited investment in next generation superfast broadband which is
considered a fundamental enabling infrastructure for Australia's future economic
prosperity. Broadband services, pricing and take-up in Australia also rate poorly
relative to other OECD countries. A key driver of these poor outcomes has been the
lack of incentive to invest and difficulties in competing given the structure of the
telecommunications industry, particularly as Telstra was privatised without an
effective competition framework being put in place. In 2008-09 the Government
conducted a tender process to find a private sector entity prepared to roll-out high-
speed broadband. None of the tenders received were found to offer value for money.
To address this situation, on 7 April 2009, the Government announced that it would
establish a company, NBN Co, to build and operate a new national wholesale-only
superfast broadband network.
The key issue to be addressed in this regulation impact statement (RIS) is whether
regulatory requirements are needed to ensure that the Government's policy objectives
for the provision of superfast broadband in Australia are effectively delivered by NBN
Co and competing providers. The particular issue of concern is whether, in the
absence of such regulation, market operations may mean that NBN Co is unable to
deliver on objectives related to addressing the original situation, which gave rise to its
creation.
46
In broad terms these policy objectives can be summarised as ensuring:
· consumers have access to high-quality superfast broadband services, preferably
delivered by fibre-to-the-premises (FTTP) (the `speed and quality objective');
· superfast broadband services3 are available nationally (the `coverage objective');
· there is national uniform wholesale pricing for such services (the `pricing
objective')4; and
· there is efficient and effective competition in the provision of superfast broadband
infrastructure and services, that supports, by open and equivalent access to
wholesale services on that infrastructure, a vibrant and competitive retail market
(the `competition objective').
By ensuring these four objectives are delivered nationally, the Government is also
aiming to provide, as far as possible, equitable access to superfast broadband services
to all Australians, whether in metropolitan, regional, rural or remote Australia (the
`equity' objective').
As the key vehicle for delivering these objectives is NBN Co, the Commonwealth
also has an objective of ensuring that NBN Co can operate on a commercially
sustainable basis (the `sustainability' objective).
While other options for delivering the Government's objectives, particularly in
relation to pricing, may be considered further, the measures proposed in this RIS seek
to ensure that these objectives are supported by the provision of a level playing field,
particularly one which prevents opportunistic cherry-picking.
Clearly, these objectives are inter-related. For example, if the pricing objective is to
be delivered through NBN Co being required to implement an internal cross-subsidy,
other fibre providers could select to roll-out fibre in low-cost, high-revenue markets
and offer potentially cheaper wholesale prices - effectively cherry-picking NBN Co's
revenue streams. While such an outcome would be consistent with the Government's
competition objective, it would impact on NBN Co's ability to deliver the coverage,
equity and sustainability objectives.
Further, if equivalent regulatory obligations and technical specifications do not apply
across all competing superfast broadband networks, these networks may fail to
provide consumers with services that meet the Government's speed and quality
objective. In order to support a competitive retail market, it is important that there are
appropriate services and interfaces across these competing networks.
The issue is essentially whether NBN Co and other providers of superfast broadband
networks in Australia should operate on the same level regulatory playing field and, if
so, what the rules of that playing field should be. The Government's intention for
3
Superfast broadband networks are defined as fixed networks offering download speeds of 25 Mbps or
above. They include fibre-to-the-premises (FTTP), fibre-to-the-node and hybrid-fibre-coaxial
networks (HFC).
4
DBCDE understand that the Prime Minister has determined that the agreement entered into with the
independents should be treated as an election commitment.
47
NBN Co is that it will provide national coverage of superfast broadband at uniform
wholesale prices; however, the market will still be open to entry by other investors.
With the potential roll-out of multiple networks, there is a question of how to achieve
outcomes for end-users which are consistent with the objectives of the NBN. To
achieve this, the Government wants to ensure infrastructure that is installed provides
high levels of services in terms of speed and quality and can support strong retail level
competition.
Background
On 7 April 2009 the Government announced it would establish a new company, NBN
Co, to build and operate a new superfast National Broadband Network (NBN). The
new network will connect 93 per cent of Australian premises with FTTP and connect
other premises in Australia with next generation wireless and satellite. The network is
to operate on a wholesale-only, open and equivalent access basis, to promote fair and
effective retail level competition. The Government has also decided that wholesale
prices on the NBN should be uniform across Australia.
On 7 September 2010 the Prime Minister announced that broadband prices on the
NBN will be the same for households and businesses regardless of where they are
located - in the city, in regional Australia or in more remote parts of the country. This
will be achieved by a new cross subsidy to ensure a uniform national wholesale price
so that regional areas can pay the same price as people in the city.5 This decision is
further reflected in the agreement between the Australian Labor Party and Messrs
Windsor and Oakeshott of the same date.6
The NBN will provide the vehicle for fundamental structural reform in the Australian
telecommunications industry, requiring an appropriate policy footing so it can
effectively play its role as part of the critical infrastructure for Australia's future.
To assist with the implementation of its announced policy, the Government
commissioned McKinsey and KPMG to conduct a comprehensive study on the
implementation of the NBN. The Government released the Implementation Study on
the NBN on 6 May 2010.
Amongst other things, in section 10.2.3 the Implementation Study (pp.463-467)
discusses the difficulties that could arise for the delivery of the Government's policy
objectives as a result of NBN Co having to operate subject to strict regulatory
requirements while competing against other providers of superfast broadband. In
particular, the Study noted the scope for competing providers to:
· target high-income and low-cost, high-density areas, thereby undercutting NBN
Co's ability to average its pricing (p.463);
· operate as vertically-integrated providers and advantage themselves over
independent retail service providers (RSPs) on the NBN (p.464); and
· ignore technical standards applying to the NBN - this would mean consumers
may not enjoy the benefits of the speed, quality and competition at which those
5
Joint Press Conference with the Deputy Prime Minister, Wayne Swan, 7 September 2010, p.8.
6
"The Australian Labor Party & the Independents (Mr Tony Windsor and Mr Rob Oakeshott) (the
Parties) - Agreement, 7 September 2010, Annex B, p.6
48
standards are directed (p.464). For example, technical specifications can define
the download and upload speeds, the grades of service offered, reliability, the
number of retail service providers that can be supported by an optical network
terminal (ONT), the functionality of the wholesale services available and the
future scope for physical unbundling.
In this context, and bearing in mind the Government's overall policy objectives, the
Implementation Study recommended that the Government look at measures to provide
a level playing field for all superfast broadband networks.
The Implementation Study identified five broad options for levelling the playing field:
· requiring new FTTP networks to meet the technical standards applying to the NBN;
· requiring new superfast broadband networks to provide open and equivalent
access to wholesale services, particularly to ensure any integrated retail operations
could not be unfairly advantaged;
· regulating the pricing of services on superfast broadband networks so that they
match the rate of return on the NBN;
· imposing a levy on new superfast broadband networks which would be directed at
subsidising the provision of telecommunications in high-cost areas; and
· prohibiting the construction of competing superfast broadband networks.
The Implementation Study rejected the third and fifth options as creating very high or
absolute barriers to investment. Such investment could be desirable, for example, to
support innovation or maintain competitive pressure on NBN Co. The Study
recommended, however, that consideration be given to the first, second and fourth
options, noting that the fourth option, a levy, could discourage investment and should
only be considered if cherry-picking were to become a clear problem for the
achievement of the Government's objectives. The other options do not provide these
high barriers. They provide for entry into the market and allow competitive pressure
to be directed at NBN Co, but on terms comparable to those applying to NBN Co
itself. This RIS considers these options, together with some variations, against the
content of the objectives discussed above.
2. Objective
The Government's objective is to ensure appropriate policy, regulatory or other
measures are in place to ensure the objectives of its NBN policy (as indicated in
section 1 - speed and quality, coverage, pricing, competition, equity and
sustainability) are delivered by NBN Co and other superfast broadband networks.
This requires an assessment of whether action is needed to provide a level playing
field and if so, what the rules of this playing field should be.
3. Options (regulatory and/or non-regulatory) that may constitute viable
means for achieving the desired objective(s)
Noting the options that have already been ruled out above for the reasons given, five
options (regulatory and non-regulatory) have been identified that might address the
Government's objectives. These are:
49
A. No further regulation - Require NBN Co to operate according to strict regulatory
requirements while allowing other carriers to invest and compete with lighter
regulation.
B. Require NBN Co and other carriers installing FTTP infrastructure supply services
to the public to meet the same or similar technical specifications.
C. Require NBN Co and other carriers operating superfast networks to offer
wholesale services on an open and equivalent access basis.
D. Establish a mechanism by which a levy could be applied to the operators of
superfast broadband networks, if warranted by circumstances, to support the
provision of superfast broadband nationally, consistent with the Government's
policy objectives.
E. Require all providers of superfast broadband to operate on a wholesale-only basis;
that is, they would not only have to offer wholesale services, but would be limited
to this line of business.
Option A is effectively a stand-alone option. Options B, C and D could operate
singularly or in combination for fuller effect. Option E is effectively an extension of
Option C. For convenience, the options are discussed individually and their
interaction is discussed in the conclusion.
The option of removing the policy and regulatory constraints under which NBN Co
must operate is considered unrealistic. This would mean there would be no effective
vehicle to deliver the policy objectives it was established to address in the absence of
the types of requirements that are otherwise being discussed in Options B, C, D and E.
Option A - No further regulation - Require NBN Co to operate according to strict
regulatory requirements while allowing other carriers to invest and compete with
lighter regulation
Under Option A, there would be no legislative or regulatory change. NBN Co would
be required to meet the policy and regulatory requirements imposed on it, whether
through the Commonwealth's ownership of the company or regulation which is to be
introduced. Other persons would be free to enter and invest in superfast broadband,
targeting markets as they wished. This could include large national operators like
Telstra or Optus, overseas operators looking to expand into new markets, or smaller
regional or niche operators.
At present there are around ten small fibre providers in addition to Telstra. They would
need to compete with NBN Co products and pricing in the markets they choose to
service. Their willingness to do so would depend on a range of factors, including, in the
case of Telstra, the Definitive Agreements it intends to conclude with NBN Co, the
value of target markets and potential first mover advantages. They would not, however,
be subject to additional regulation. They would not be subject to any coverage or
pricing obligations. They would have full and equivalent access to NBN Co.
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NBN Co would have access to the infrastructure of these carriers as would be
available as a result of the operation of Part XIC of the Trade Practices Act 1974
(TPA). They would only need to provide access, and at regulated prices, if the
services they provided were declared. All providers would be subject to other
protections against anti-competitive conduct applying under the TPA.
Option B - Require NBN Co and other carriers installing FTTP infrastructure to
supply services to the public to meet the same or similar technical specifications
Under Option B, operators of superfast FTTP broadband networks that provide
services to the public would need to meet the same or similar technical specifications
to be met by the NBN. (Private networks would not be subject to such standards).
The specifications would apply to new networks, that is the requirements would be
prospective rather than retrospective. These standards would be based on NBN Co's
technical specifications and would either be codified by the Communications Alliance
and/or standardised by the Australian Communications and Media Authority
(ACMA). It would be expected that the standard would be finalised over the next 6 -
12 months. As well as relating to network design, installation and products, the
specifications would deal with architectural issues including the use of passive optical
network (PON) or point-to-point or home-run architectures. Such specifications
would ensure infrastructure and services of sufficient capability and quality were
available to consumers to support Australia's needs well into the future.
They would also ensure infrastructure and services are configured to support service
level competition (in combination with Option C or if access is declared) and
potentially competition on the basis of fibre unbundling. Because they are inherently
different technologies, the same specifications could not, however, be applied to
decisions to upgrade hybrid fibre-coaxial (HFC) networks, or to upgrade the existing
copper local loop to a fibre-to-the-node (FTTN).
While it is general industry practice to meet relevant technical standards, if there is no
requirement for providers to meet these standards, there is always the risk that this
will not occur.
Option C - Require NBN Co and other carriers operating superfast broadband
networks to offer wholesale services on an open and equivalent access basis.
Under Option C, NBN Co would continue to provide wholesale services on an open
and equivalent access basis as has always been proposed. It is intended to lock in
these requirements in NBN Co-specific legislation as well as amendments to the TPA.
In addition, other operators of superfast broadband networks would also be required
to provide open and equivalent access to their wholesale services. This would
generally require them to provide, at a minimum, a Layer 2 Ethernet service.
The obligation to provide access would be similar to that applying to the provision of
access if those services were declared by the ACCC under Part XIC of the TPA, but
would be decided in advance in statute. Moreover, the operators would need to
provide access on an equivalent basis. That is, they would need to provide access to
services to access seekers on the same basis on which they provide access to any retail
51
operation of their own or a related person. Generally other providers would be free to
set their own wholesale prices, but they would be subject to oversight by the ACCC.
While there is a strong trend amongst fibre broadband operators to provide open
access, and all services can be declared, if there is no requirement for providers to
provide open access, access may be delayed.
Option D - Establish a mechanism by which a levy could be applied to the operators of
superfast broadband networks, if warranted by circumstances, to support the provision of
superfast broadband nationally, consistent with the Government's policy objectives.
Under Option D, a mechanism would be established in statute under which financial
contributions could be levied from operators of superfast broadband networks in high-
value markets to off-set the cost of providing superfast broadband in high-cost, low-
revenue markets. This option would provide a means of requiring operators who
cherry-pick high-value markets, while ignoring low-return markets typically found in
rural and remote areas, to contribute to the servicing of those markets.
The Implementation Study proposed that a levy could be imposed based upon the
ratio of premises served in different zones (as defined under the current
Unconditioned Local Loop Service declaration) and proportional to the total number
of premises served. The Study was silent on what the actual levy should be; for
example, whether it should be calculated as a percentage of revenues earned from the
competitive investment, or simply imposed at a flat rate. The current universal
service levy, which imposes a levy on carriers in proportion to their revenue, is one
possible model. The Implementation Study proposed that any levy should be strictly
limited through a sunset clause of no more than ten years and this option takes up that
variation. The size of any levy would depend on the impact cherry-picking might
have on NBN Co's ability to service low-return markets. The potential size of the
levy cannot be estimated but it could be considerable.
Option E - Require all providers of superfast broadband to operate on a wholesale-
only basis; that is, they would not only have to offer wholesale services, but would be
limited to this line of business.
Under Option E, providers of superfast broadband networks would not only be
required to offer open and equivalent access (as under Option C) but they would also
be restricted to the provision of wholesale services in the same way NBN Co is being
restricted. That is, they would effectively be structurally separated and prevented
from operating retail businesses. This would provide a structural means of removing
any incentive or ability to favour a downstream retail operation to the disadvantage of
another wholesale customer.
Basically the statute would prevent any person operating a superfast wholesale
network from operating a wholesale network and offering retail services. Potential
models for such arrangements can be found in the operational arrangements for NBN
Co and the voluntary structural separation being progressed by Telstra. Some small
fibre providers like Opticomm and OPENetwork are already operating on this basis.
52
4. Impact assessment
Stakeholders
This section discusses the advantages and disadvantages of the five options identified
above and their impact on key stakeholders, namely:
· consumers and the wider community, whether they be individuals, not-for-profit
organisations or businesses, including small businesses;
· NBN Co as the access provider;
· customers of NBN Co; and
· other carriers interested in investing in superfast broadband (these may also be
customers of NBN Co).
Considerations
In assessing the impact of the five options on stakeholders, the key factors considered
are:
· effectiveness in supporting the Government's substantive policy objectives, that is:
o broadband of appropriate speed and quality,
o national coverage,
o uniform wholesale pricing,
o competition;
· the extent to which the option supports the operation of NBN Co on a
commercially sustainable basis;
· costs, including possible costs to tax payers;
· consistency with broader policies and international obligations; and
· administrative practicality and efficiency.
In relation to broader policies, of particular relevance are the changes being made
through the Telecommunications Legislation Amendment (Competition and
Consumer Safeguards) Bill 2010 to ensure access to Telstra's declared services is
provided on an open and equivalent basis. This includes the implementation of
appropriate arrangements for the separation of relevant businesses, including
functional separation or voluntary structural separation.
On 20 June 2010, the Government indicated that in new real estate developments
NBN Co will be the infrastructure provider of last resort. Other providers may also
provide fibre infrastructure in such developments, providing they comply with NBN
technical specifications and operate on an open and equivalent access basis.
Assessment of options
Option A - No further regulation (base case) - Require NBN Co to operate according
to strict regulatory requirements while allowing other carriers to invest and compete
with lighter regulation
Advantages:
· The Government's policy objectives may be achieved through the combination of
NBN Co's activities and those of other providers of superfast broadband.
· Some end-users in high-value markets may receive superfast broadband earlier
than under NBN Co's roll-out schedule under this option, and, in the short-term at
least, at a lower or comparable price. This approach is competitively neutral to
53
the extent it minimises additional regulation and compliance costs on private
sector competitors.
· The arrangements would generally be practical to administer.
· Allows choice, innovation and all the benefits associated with infrastructure-based
competition, but may inhibit the development of service-level competition.
Disadvantages:
· While NBN Co would set a competitive benchmark for other providers, there
would be little or no certainty the Government's policy objectives would be
achieved as intended.
o There would be no mechanism to ensure relevant broadband investments
meet appropriate levels of speed or quality or are readily able to support
access. Although some investments in superfast fixed-line infrastructure
have been made on an open access basis, these are of limited scale, and many
investments do not support open access or only very limited access (for
example, to a resale service which offers access seekers limited scope for
service differentiation and innovation). Consequently, consumers could be
`locked in' to a provider which does not meet the Government's objectives.
o For open access to be offered on these non-NBN Co networks, the ACCC
would need to declare a service under Part XIC. However, currently Part
XIC provides only a very limited assurance of equivalence of access,
meaning that the Government's objective to promote retail competition may
be curtailed in regions where alternative providers roll-out superfast
broadband.
o To the extent competing networks reduced NBN Co's revenues in high-value
markets, they could either:
erode NBN Co's ability to provide national coverage and uniform
national pricing, and may harm NBN Co's sustainability; or
charge consumers in those markets prices that simply shadow NBN Co's
average pricing, while themselves facing lower costs. This may produce
a windfall benefit for these providers, rather than these consumers, while
harming NBN Co's ability to deliver the Government's objectives.
· The financial cost of delivering the Government's policy may be higher than
under other options, as NBN Co may not be able to offset its roll-out costs through
revenue streams from high-return low-cost markets.
· To the extent infrastructure is duplicated by investors not subject to equivalent
obligations, this may be inefficient if it is driven by regulatory failure rather than
market forces and may inhibit the delivery of national outcomes.
· Overall, while this option may support infrastructure-based competition, it would
do so on an uneven basis and at the risk that all of the Government's objectives
would not be delivered. Consequently, this option is not favoured as it is not cost
effective.
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Option B - Require NBN Co and other carriers installing FTTP infrastructure to
supply services to the public to meet the same or similar technical specifications
Advantages:
· Clear technical specifications will provide greater certainty that infrastructure and
services of the requisite speed and quality are available for consumers and deliver
the necessary services and interfaces to support retail competition.
· These specifications would be particularly important in areas where a provider
supplies services in advance of NBN Co (for example, in new developments) to
ensure consumers receive levels of service comparable to those available on the
NBN.
· The compliance costs are limited as there are already well developed
specifications for FTTP infrastructure and services and well-established processes
for standardisation. Relevant specifications include those developed by NBN Co,
the Communications Alliance and international bodies like the Broadband Forum,
International Telecommunication Union (ITU), Metro Ethernet Forum, Institute of
Electrical and Electronic Engineers (IEEE), Internet Engineering Taskforce
(IETF), and European Telecommunications Standards Institute (ETSI). The
Communications Alliance already has practices for codifying specifications and
the ACMA can make standards.
· Clear technical specifications could also enhance NBN Co's sustainability to the
extent it would mean it would be operating on a more level regulatory playing
field.
· Consumers would be able to receive services that are consistent with the
Government's objectives and would also be able to choose alternative providers,
as service providers could not lock end-users into their network.
· This option could reduce the cost to taxpayers when compared to Option A, by
facilitating the roll-out of the NBN nationally in a way that minimises duplication
and technical differences.
Disadvantages:
· Technical specifications would limit carriers' flexibility in the choice of
technology, with potential implications for innovation and their ability to meet
market demands at least cost. This could limit the service choices available to
consumers.
· Technical specifications would only apply to competing FTTP investments, and
not to upgrades to existing HFC networks or copper networks.
· While administratively practicable, the processes for developing specifications
may be complex and time-consuming.
· Service providers may need to adjust their ongoing specifications and processes.
Statements by relevant providers indicate industry practice is to generally follow
established standards and any costs should therefore be negligible and transitional
in nature.
· Non-NBN Co carriers may argue that this option is anti-competitive if the
standards are based on NBN Co's technical specifications. They may consider
that they are being denied the commercial flexibility to determine specifications
that suit their own, and their customers', needs.
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Option C - Require NBN Co and other carriers operating superfast broadband
networks to offer wholesale services on an open and equivalent access basis.
Advantages:
· Upfront open and equivalent access obligations will ensure access seekers (who
provide retail services) have ready access to new superfast broadband
infrastructure with a view to providing retail services on a competitive basis. This
will be particularly important where such infrastructure is deployed in advance of,
but not in competition with, the NBN.
· Upfront obligations will provide certainty to investors as to their long term
obligations and the implications for their business activities.
· Equivalent obligations will prevent vertically integrated carriers from favouring
their retail businesses over other access seekers. This should bolster retail
competition and thereby deliver better outcomes for end-users.
· Open and equivalent access obligations could also enhance NBN Co's
sustainability to the extent it would mean it would be operating on a more level
regulatory playing field.
· Where first-mover networks are compliant with the Government's policy
objectives, the need for a roll-out by NBN Co may be negated. Where such
networks compete with NBN Co, they still constitute a bottleneck facility for the
premises to which they are connected and it is important that they be open access
so consumers can enjoy the benefit of retail level competition.
· Statements by smaller fibre providers indicate they generally offer open and
equivalent access and follow established standards so additional costs, if any,
should therefore be negligible and transitional in nature. Telstra has also indicated
it was developing a wholesale service for its fibre operation, Velocity, and Telstra
has well developed compliance systems.
· This option could reduce the cost to taxpayers, when compared to Option A, by
facilitating the roll-out of the NBN nationally in a way that minimises the impact
on retail competition from market power in the wholesale market.
Disadvantages:
· Requiring carriers to provide open and equivalent access may impact on the
business decisions and investments of vertically-integrated operators such as
Telstra and Optus, because they would not be able to supply to their own retail
operations on a preferential basis. ACCC regulation of access prices could limit
their ability to earn the desired rate of return. This is unlikely to be a disadvantage
for carriers that already operate on an open access basis.
· Open and equivalent access obligations could increase compliance costs for the
carriers concerned and for the ACCC as regulator. Providers would need to meet
the transparency measures being applied to NBN Co to ensure that customers have
visibility of any differentiated deals. They would also need to comply with the
ACCC's principles for allowable discrimination. The ACCC would need to invest
resources in approving any volume discounts offered by these service providers,
and in monitoring compliance with the requirements. It is impossible to quantify
these compliance costs, but they are unlikely to be significant and largely one-off.
As noted above, small fibre providers have indicated they are operating on an
open access basis and Telstra has indicated it has been developing a wholesale
product for fibre. Any costs would be passed on to end-users in the short term.
56
Option D - Establish a mechanism by which a levy could be applied to the operators of
superfast broadband networks, if warranted by circumstances, to support the provision of
superfast broadband nationally, consistent with the Government's policy objectives.
Advantages:
· A levy would provide a mechanism by which higher returns from high-value
markets could, if necessary, be used to facilitate national coverage and support
uniform national wholesale pricing.
· A levy could enhance NBN Co's sustainability to the extent it would mean it
would be operating on a more level regulatory playing field.
Disadvantages:
· A levy could deter investment that could otherwise be beneficial by reducing the
return from those investments. This could limit infrastructure and service choices
for consumers and affect the efficient allocation of resources across the
community. These impacts could potentially be mitigated by a sunset clause.
· Such a levy could affect incentives for NBN Co to expedite its network roll-out
and operate efficiently as it may expect the levy to be directed at addressing
shortfalls in its performance.
· Affected service providers may consider that a levy breaches the Government's
competitive neutrality commitments, although this would be subject to a
consideration at the time any such levy was introduced of whether the benefits
outweigh the costs.
· Depending on how a levy was designed, it could be anti-competitive and would
need to be tested against the Commonwealth's commitment to the Competition
Principles Agreement, as even if it did deliver a net benefit, restricting
competition may not be the only way to achieve the Government's policy aims.
· While administratively practicable, experience with the universal service levy
suggests it would be complex to design, implement and administer. If the
universal service model was adopted, the Minister would ultimately have the
discretion to set the size of the levy following advice from the Australian
Communications and Media Authority. Detailed arrangements to model and cost
the levy would be required. The Authority's costs would be recovered from
industry through carrier licence fees and ultimately passed on to end-users.
· There would be uncertainty about the quantum of a levy. The quantum cannot be
estimated in the abstract and this may add to the uncertainty with impacts for
investment decisions.
· A levy would obviously impose an additional cost on those to whom it was
applied. The cost would be significant as it would be directed at offsetting the
cost of superfast broadband in rural, regional and remote Australia.
· Compliance and administrative costs would be involved and could be relatively
significant given the likely complexity of such a scheme.
57
Option E - Require all providers of superfast broadband to operate on a wholesale-
only basis; that is, they would not only have to offer wholesale services, but would be
limited to this line of business.
Advantages:
· Would provide a structural means of ensuring that network providers treated all
their wholesale customers on an equivalent basis.
· Should reduce compliance and regulatory monitoring costs as compliance would
be built into the very nature of the entity.
· Would further level the playing field between NBN Co and other superfast fibre
networks.
· Should enhance NBN Co's sustainability and its ability to deliver on its policy
objectives, particularly in low revenue areas, thereby reducing the need for further
taxpayer support.
Disadvantages:
· Would restrict the freedom of investors to determine how they should structure
their businesses to maximise their profit.
· May unnecessarily deter beneficial investment in broadband infrastructure and
services.
5. Consultation
Development of the Government's NBN policy has been a matter of extensive
consultation since the Government was elected in November 2007. The issue of
regulatory obligations on the providers of superfast broadband has been a factor in
those consultations. Relevant processes include consultation on draft NBN Co
legislation in February 2010. The Senate also established the Select Committee on
the NBN. The policy has also been the subject of extensive media and public
commentary, including during the 2010 election campaign.
Given the volume of feedback and the wide range of views and topics covered, it is
difficult to generalise on stakeholder views. As a general observation, there seems to
be broad acceptance as to the merits of the Government objectives for the NBN.
There is clearly a range of views as to how these objectives are best achieved.
In general, industry feedback is opposed to the imposition of new regulatory
requirements that may limit its operational flexibility. The telecommunications
industry has had long standing concerns about the universal service levy and similar
concerns would be expected to apply to Option D. A general exception to this is there
is a general preference, from those who are predominantly access seekers, to have
ready access to infrastructure, subject to ACCC oversight. That said, little specific
comment has been provided on the issue of consistent regulatory requirements on
NBN Co and other providers.
The NBN Implementation Study was based on extensive consultations with
stakeholders by McKinsey and KPMG. Following the release of the Implementation
Study on 6 May 2010, the Government also called for public submissions on the
Study. Responses on measures to ensure a level playing field for all superfast
broadband networks were limited and mixed. Only five carriers commented
58
specifically on recommendations 73 and 74. AAPT, Austar and TransACT did not
support the recommendations. The Business Council of Australia and Telstra
expressed concern that a proposed cherry-picking levy could breach competitive
neutrality requirements and international obligations, as well as deter efficient
investment and competition. Optus supported the measures, but noted that
recommendations 73 and 74 should not extend to existing high-speed fixed-line
networks; recommendation 73 should be extended to deployments in greenfield sites;
and that technical specifications should be widened to include as many of the support
systems, processes and other operating requirements as possible. Submissions did not
comment on the possible compliance costs associated with the recommendations.
Within the Commonwealth, the Department of the Broadband, Communications and
the Digital Economy has consulted with the Department of the Prime Minister and
Cabinet, the Treasury, the Attorney-General's Department, the Department of Finance
and Deregulation and the ACCC on the issues and options. The main issues raised in
these discussions have been the need to balance achievement of the Government's
objectives, including efficient investment, and freedom and flexibility for industry
with the role of regulation. Of particular concern here was the need for, and potential
impact of, a levy mechanism.
6. Conclusion
Overall, while Option A (no further regulation) may support infrastructure-based
competition, it would do so on an uneven basis and at the risk that all of the
Government's objectives would not be delivered. Consequently this option is not
favoured as it is not cost effective.
Option B (mandating technical specifications for FTTP) would ensure consistent
speed and quality outcomes across multiple FTTP networks and support retail
competition and unbundling outcomes. Clear technical specifications could also
enhance NBN Co's sustainability to the extent it would mean it would be operating on
a more level regulatory playing field. However, this option could not be applied to
non-FTTP superfast broadband networks. This option could reduce costs by
facilitating the roll-out of the NBN nationally. By itself, however, option B would not
ensure the provision of open and equivalent access or uniform pricing objectives.
Similarly Option C (mandating open and equivalent access for superfast broadband)
would ensure open and equivalent access, thereby providing retail services on a
competitive basis. By providing open and equivalent access generally, such
obligations should also promote more efficient investment as there would be ready
access to infrastructure, reducing the need for duplication. Open and equivalent
access obligations could also enhance NBN Co's sustainability to the extent it would
mean it would be operating on a more level regulatory playing field. This option may
also reduce the cost of roll-out of the NBN, as it negates the need for NBN Co to roll-
out where first-mover networks are NBN consistent. This option is also considered to
represent negligible cost to existing and future fibre providers.
On balance, the preferred approach is a combination of Options B and C. This would
result in requiring any new FTTP infrastructure to meet the technical specifications
for the NBN and all superfast broadband networks providing open and equivalent
59
access. Options B and C could also enhance NBN Co's sustainability to the extent
they would mean it would be operating on a more level regulatory playing field.
There would be costs to industry under Options B and C, and while difficult to
quantify it is expected these would be low because the arrangements concerned are
commonly in operation in the industry. Moreover, the Government expects the
benefits from fully delivering on the Government's policy objectives, including the
establishment of an effective wholesale platform, would outweigh these costs. A
combination of Options B and C would be complex but practicable to implement.
The combination is unlikely to breach competitive neutrality requirements as they
create a level playing field that does not favour NBN Co. Similarly, in relation to
international obligations, the proposed approach would result in uniform, rather than
asymmetric, regulation.
Option D (levy) could further underpin the delivery of the Government's NBN policy
objectives, particularly in relation to coverage and pricing and thus equity. It would
also enhance NBN Co's sustainability while potentially reducing the cost of the NBN
roll-out. However the levy would be a major intrusion into the operation of industry,
involve significant cost and be complex and potentially costly to design, implement
and administer. Depending on how a levy was designed, it could be anti-competitive
and would need to be tested against the Commonwealth's commitment to the
Competition Principles Agreement, as even if it did deliver a net benefit, restricting
competition may not be the only way to achieve the Government's policy aims. A
levy could also deter beneficial investment, limiting infrastructure and service choices
for consumers while potentially slowing the roll-out of the NBN. Given this, such a
levy is not proposed at this time, however, it could be kept in reserve as a possible
policy tool that can be brought into play should circumstances demonstrate it is
warranted.
Option E (wholesale-only obligation) could further underpin the delivery of the
Government's NBN policy objectives, particularly in relation to coverage, pricing,
equity and competition. It also enhances NBN Co's sustainability. However this
mechanism would be a major intrusion into the operation of industry and of individual
private-sector firms (as opposed to the Government-owned NBN Co). It is possible
that this option will deter beneficial investment in broadband infrastructure and
services. Options B and C should provide sufficient surety that the Government's
objectives will be achieved. Given this, a wholesale-only obligation is not proposed
at this time.
7. Implementation and review of the preferred option
To implement Option B the Communications Alliance will be asked to examine FTTP
technical specifications developed by NBN Co with a view to endorsing them and
codifying them for the industry. If necessary, the ACMA can be asked to adopt
specifications as a binding standard. An amendment to Part 6 of the
Telecommunications Act 1997 is included in the Telecommunications Legislation
Amendment (Competition and Consumer Safeguard) Bill to enable the Minister to
direct the ACMA to make a standard under Part 6 should this required.
60
Option C, mandating open and equivalent access obligations on superfast broadband
networks (fixed networks offering download speeds of 25 Mbps or greater) will be
implemented through appropriate amendments to the Telecommunications Act 1997
and Part XIC of the TPA.
As noted above, on 20 June 2010 the Government indicated that in new real estate
developments NBN Co will be the infrastructure provider of last resort. It also
indicated that other providers can install fibre infrastructure in such developments,
providing they comply with NBN technical specifications and operate on an open and
equivalent access basis. Given the need to provide early guidance to stakeholders in
the sector (and dependent on timing considerations) the requirements concerned may
be applied to superfast FTTP broadband networks in new real estate developments
through the Telecommunications (Fibre Deployment) Bill 2010.
Operation of the proposed arrangements will be subject to ongoing review. The
Government is also considering Recommendation 78 of the Implementation Study,
that an independent review of the telecommunications market and the regulatory
framework for the NBN be undertaken following completion of the network and prior
to its proposed privatisation. Such a review could be undertaken by the Productivity
Commission and would be expected to look at the matters covered in this RIS.
61
ABBREVIATIONS
The following abbreviations are used in this explanatory memorandum:
ACCC: Australian Competition and Consumer Commission
Access Bill: Telecommunications Legislation Amendment (National
Broadband Network Measures - Access Arrangements)
Bill 2010
ACMA: Australian Communications and Media Authority
AIA: Acts Interpretation Act 1901
BSA: Broadcasting Services Act 1992
CAC Act: Commonwealth Authorities and Companies Act 1997
CCA: Competition and Consumer Act 2010 (formerly the
Trade Practices Act 1974)
CCS Bill: Telecommunications Legislation Amendment
(Competition and Consumer Safeguards) Bill 2010
Communications Minister: The Minister who administers the Companies Bill once
enacted (currently the Minister for Broadband,
Communications, and the Digital Economy)
Companies Bill / Act: National Broadband Network Companies Bill 2010 /
that Bill once enacted
Corporations Act: Corporations Act 2001
CSP: Carriage service provider
Finance Minister: The Minister who administers the FMA Act (currently
the Minister for Finance and Deregulation)
FMA Act: Financial Management and Accountability Act 1997
FTTP: Fibre-to-the-premises
LIA: Legislative Instruments Act 2003
Minister: Minister for Broadband, Communications, and the
Digital Economy
NBN: National Broadband Network
62
PC Act: Productivity Commission Act 1998
Productivity Minister: The Minister who administers the PC Act (currently the
Treasurer)
SAO: Standard Access Obligation
SAU: Special Access Undertaking
SFAA: Standard Form of Access Agreement
Tel Act: Telecommunications Act 1997
63
NOTES ON CLAUSES
NATIONAL BROADBAND NETWORK COMPANIES BILL 2010
Part 1--Preliminary
Clause 1 - Short title
Clause 1 provides that the Companies Bill, when enacted, may be cited as the
National Broadband Network Companies Act 2010.
Clause 2 - Commencement
Clause 2 of the Companies Bill provides for the commencement of provisions of the
Companies Bill.
Clauses 1 and 2 of the Companies Bill and any other provisions not covered in the
table provided at subclause 2(1) will commence on the day on which the Bill receives
the Royal Assent.
Clauses 3 to 101 and Schedules 1 and 2 to the Companies Bill will commence at the
start of the day after the Companies Bill receives the Royal Assent, or immediately
after the commencement of item 2 of Schedule 5 to the Trade Practices Amendment
(Australian Consumer Law) Act (No. 2) 2010, whichever occurs later in time. The
reason for this is several provisions in the Companies Bill refer to the CCA, rather
than the name by which that Act is known at the time of the Companies Bill's
introduction: the Trade Practices Act 1974. From 1 January 2011 the short title of the
Trade Practices Act 1974 will change to the Competition and Consumer Act 2010 as a
result of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2)
2010. This commencement arrangement will ensure that the references in the
Companies Bill to the CCA will be effective, by deferring the commencement of most
of the provisions of the Companies Bill until the change of name of that Act takes
effect.
As a result of section 10 of the AIA, a reference to the CCA in the Companies Bill
will include a reference to that Act before its name was changed, ie. before 1 January
2011.
Clause 3 - Objects
Clause 3 sets out the objects of the Companies Bill, when read together with Part XIC
of the CCA.
Subclause 3(1) sets out the main objects of the Companies Bill, when read together
with Part XIC of the CCA (which sets out the telecommunications-specific access
regime, and which is amended by the Access Bill to incorporate provisions that relate
specifically to NBN corporations).
One of the main objects of the Companies Bill is to provide a regulatory framework
for NBN corporations (see the definition of this term in clause 5, explained in detail in
64
the notes for that clause, below) that promotes the long-term interests of end-users of
carriage services or of services provided by means of carriage services. This reflects
the object of Part XIC of the CCA (see subsection 152AB(1) of that Act). For the
purposes of the Companies Bill, the question of whether a thing promotes the long-
term interests of end-users of those services is to be determined in the same manner as
it is determined for the purposes of Part XIC of the CCA (see clause 94 of the
Companies Bill and subsection 152AB(2) of the CCA).
A further main object of the Companies Bill is to ensure that NBN Co remains in full
Commonwealth ownership until certain events have occurred. The Commonwealth
may only sell down its stake in NBN Co after all of the following things have
happened:
· the Communications Minister has declared that, in his or her opinion, the NBN
should be treated as built and fully operational;
· the Productivity Commission has conducted an inquiry into certain specified
matters relating to the NBN and NBN Co, and the Productivity Minister has tabled
that report in both Houses of Parliament;
· the Parliamentary Joint Committee on the Ownership of NBN Co (established
under Schedule 2 to the Companies Bill) has examined the Productivity
Commission's report; and
· the Finance Minister has declared that, in his or her opinion, conditions are
suitable for the entering into and carrying out of an NBN Co sale scheme, and the
declaration has taken effect.
The last of the main objects of the Companies Bill is to provide a framework for
restrictions on private ownership or control of NBN Co.
A list of other objects of the Companies Bill, when read together with Part XIC of the
CCA, is set out in subclause 3(2). The Companies Bill is intended to work in close
conjunction with the amendments to the CCA in the Access Bill to deliver on a range
of key Government objectives for the NBN, particularly in relation to open access and
non-discrimination in the supply of wholesale telecommunications services. The
Companies Bill must be read in this context.
Clause 4 - Simplified outline
Clause 4 provides a simplified outline of the Companies Bill.
Clause 5 - Definitions
Clause 5 sets out definitions of key terms used in the Companies Bill. These terms are
explained in more detail when the relevant clause in the Companies Bill is discussed.
The definition of an `NBN corporation' is provided for under clause 1 of Schedule 1
to the Companies Bill (see below), which effectively provides that NBN Co, NBN
Tasmania, and any company over which NBN Co is in a position to exercise control
are all NBN corporations (determined in accordance with Schedule 1 of the BSA).
This definition would potentially capture a wide group of companies, although at
present there are only two NBN corporations, NBN Co and NBN Tasmania, and there
are no current plans for further NBN corporations. However, should NBN Co
65
purchase a carriage service provider (in order to facilitate the rollout of the network),
the definition ensures that once NBN Co controls the provider it will be an NBN
corporation and subject to the obligations applying to NBN corporations under the
Companies Bill and the Access Bill (the Companies Bill provides for transitional
arrangements to deal with this circumstance).
The definition of NBN corporation provided for in the Companies Bill is explicitly
different from the definition provided for under certain provisions of the Tel Act that
are inserted by the CCS Bill. The definition used in those provisions states that NBN
corporation means NBN Co, NBN Tasmania, or a company that is a related body
corporate of NBN Co (in accordance with the meaning of that term in the
Corporations Act 2001). This would potentially cover a narrower group of
companies. The reason for the difference is that it is not appropriate for those
provisions in the Tel Act to cover companies which NBN Co is in a position to
control but that are not considered to be related bodies corporate of NBN Co.
Consequently, companies controlled by NBN Co will not be covered by the proposed
authorisation under section 51 of the CCA being established under the CCS Bill.
In contrast, a reference in the Companies Bill to `NBN Co' is only a reference to
NBN Co Limited (ACN 136 533 741).
`National broadband network' is defined to mean a national telecommunications
network for the high speed carriage of communications, where an NBN corporation is
involved in the creation or development of the network. For the avoidance of doubt,
the definition clarifies that it is immaterial whether the NBN corporation's creation or
development of that network involved the acquisition of assets that were used as part
of another telecommunications network, or the obtaining of access to assets that are
also used as part of another telecommunications network. This is intended to
acknowledge that NBN corporations may acquire or use existing telecommunications
networks, or parts thereof, in the creation or development of the national broadband
network.
The definition of `national broadband network' in clause 5 of the Companies Bill is
different in one respect from the definition of this term that is to used in
subsections 577BA(12) and 577BC(8) of the Tel Act, which are inserted into that Act
by the CCS Bill. The definition in clause 5 includes the word `national' before the
words `telecommunications network'. This word is not included in the definition of
the term in those sections of the Tel Act.
The reason for this difference is that in the context of the Companies Bill the term is
used to describe the national broadband network once completed. For instance, clause
48 provides for the Communications Minister to declare that the national broadband
network should be treated as built and fully operational, and clause 49 provides for
the Productivity Commission to conduct an inquiry into various matters, once the
Communications Minister has declared that it should be treated as built and fully
operational. By contrast, in those provisions of the Tel Act inserted by the CCS Bill,
the term is used to describe a network that may only be partly built. For example,
section 577BA of the Tel Act uses the term `national broadband network' in the
context of the concept of a migration provision. In that context, the term is used to
describe the network to which Telstra would be progressively migrating its customers
66
(see section 577BA of the Tel Act, inserted by the CCS Bill). The national broadband
network will not be fully built during the migration process. Telstra may commence
the migration of services in areas as the national broadband network is rolled out in
those areas, well before the network achieves its full reach. For this reason, to ensure
the reference to migration provisions operates effectively, the definition of the term
that was included in those provisions of the Tel Act by the CCS Bill does not refer to
the network as being a `national' telecommunications network, whereas the definition
of the term in the Companies Bill does.
Clause 5 includes a definition of the term `Parliamentary Joint Committee on the
Ownership of NBN Co'. The Joint Committee is to consist of five members of the
Senate and five members of the House of Representatives, but would not include
Ministers, the Speaker or the President of the Senate. The Joint Committee will have
180 days to consider the report of the Productivity Commission into certain matters
relating to the NBN and NBN Co (see clause 49) and provide its report to the
Parliament. The Joint Committee's examination is crucial to ensuring enhanced
scrutiny of the potential transfer by the Commonwealth of its interest in NBN Co. The
Finance Minister will not be able to declare that conditions are suitable for the
entering into and carrying out of an NBN Co sale scheme unless and until the Joint
Committee has reported. The full details of the membership, purpose and conduct of
the Joint Committee is set out in Schedule 2 to the Companies Bill.
Clause 6 - Crown to be bound
Clause 6 ensures that the Crown in each of its capacities is bound by the Companies
Bill.
Clause 7 - Extension to external Territories
Clause 7 ensures that the Companies Bill extends to all of the external Territories.
67
Part 2--Operations of NBN corporations
Part 2 applies to NBN corporations, and therefore will apply to NBN Co, NBN
Tasmania and a company over which NBN Co is in a position to exercise control (see
clause 1 of Schedule 1 to the Companies Bill).
Division 1-- Simplified outline
Clause 8 - Simplified outline
Clause 8 provides a simplified outline of Part 2 to assist the reader.
Division 2--Rules about operations of NBN corporations
Division 2 of Part 2 sets out rules to ensure NBN corporations operate in a manner
consistent with their wholesale-only mandate by limiting them to, and focussing them
on, wholesale-only telecommunications activities. This includes by specifying the
types of persons to whom they can supply services and specifying the types of
services and goods they can supply and the types of investments thy can make.
Subdivision A--Supply of eligible services on a wholesale-only basis
Subdivision A of Division 2 sets out a general rule about the supply of eligible
services by NBN corporations, which is that an NBN corporation must not supply an
eligible service to another person unless the other person is a carrier or a service provider,
and then sets out a number of exemptions from that general rule.
The exemptions to the general rule about the provision of eligible services are intended to
permit NBN corporations to supply network management services to a number of
utilities, including transport authorities, electricity supply bodies, gas supply bodies,
water supply bodies, sewage service bodies, storm water drainage services bodies and
State or Territory road authorities.
These entities may need to receive a network management service directly from an
NBN corporation to assist in monitoring their networks, or, in the case of electricity
supply bodies, to assist in the rollout and operation of smart metering and smart grids.
Other entities, such as gas supply, water supply and sewerage supply bodies and road
transport authorities, will also be able to receive a network management service
directly from an NBN corporation to assist them in managing communications for the
purpose of monitoring, for example sewage or traffic flows. A number of these
entities have advised the Government that, for security reasons, they could not use a
service provided by a reseller for these network management purposes and would
need direct access to a Layer 2 bitstream service from an NBN corporation (it should
be noted that these entities will still be required to acquire their regular
communications services, for purposes other than network management, from a
reseller). The ability for utilities to access services directly from an NBN corporation
would also enable them to avoid any issues that could arise if they were required to
deal with multiple intermediaries to cover their area of operation, making it difficult
to coordinate an overall picture of their traffic flows. That said, nothing in the
68
Companies Bill prevents utilities from accessing services from an NBN corporation
using intermediaries.
Clause 9 - Supply of eligible services to be on wholesale basis
Clause 9 provides that an NBN corporation must not supply an eligible service to
another person unless the other person is a carrier or a service provider. This section
ensures that an NBN corporation will only supply services on a wholesale basis.
`Eligible service' is defined in section 5 of the Companies Bill as having the same
meaning as in section 152AL of the CCA: an eligible service is a listed carriage
service (within the meaning of section 16 of the Tel Act) or a service that facilitates
the supply of a listed carriage service. `Carrier' is defined in section 5 of the Tel Act
as the holder of a carrier licence. `Service provider' has the same meaning as in
section 86 of the Tel Act, and means a carriage service provider or a content service
provider (which terms are also defined in the Tel Act). Integral to the concepts of
`carrier' and `service' provider is that their activities involve `supply to the public'
(see sections 44, 88 and 97 of the Tel Act); that is, they do not generally operate to
produce services for their internal consumption, but for the supply of downstream
end-users.
Clause 10 - Exemption--transport authorities
Clause 10 sets out three exemptions to the general rule concerning the supply by NBN
corporations of eligible services at clause 9, with each of those exemptions relating to
the provision of eligible services to transport authorities.
Paragraph 10(1)(a) permits an NBN corporation to supply carriage services the sole
use of which is for Airservices Australia to carry communications necessary or
desirable for the workings of aviation services. This provision reflects the operation of
subsection 47(1) of the Tel Act, which provides that the carrier licensing requirements
under the Tel Act do not apply to Airservices Australia in relation to network units
used solely by Airservices Australia for such communications. Subsection 92(1) of
that Act contains a similar provision exempting carriage services used for such
communications by Airservices Australia from the definition of `carriage service
provider'. Paragraph 10(1)(b) permits an NBN corporation to supply to Airservices
Australia an eligible service that is a service that facilitates the supply of a carriage
service covered by paragraph 10(1)(a).
This provision will ensure that NBN corporations may supply eligible services to
assist Airservices Australia to manage aviation services.
Subclause 10(2) operates in a similar way to subclause 10(1), and permits an NBN
corporation to supply carriage services the sole use of which is for a State or Territory
transport authority to carry communications necessary or desirable for the workings
of train services, bus or other road services, or tram services, of a kind that is provided
by the particular authority, and to supply eligible services that facilitate the supply of
such carriage services. This provision reflects the operation of subsection 47(3) of the
Tel Act, which provides that the carrier licensing requirements under the Tel Act do
not apply to State or Territory transport authorities in relation to network units used
solely by them for such communications. Subsection 92(3) of that Act contains a
69
similar provision exempting carriage services used for such communications by State
and Territory transport authorities from the definition of `carriage service provider'.
This provision will ensure that NBN corporations may supply eligible services to
assist State and Territory transport authorities to manage transport services.
Subclause 10(3) similarly permits an NBN corporation to supply carriage services the
sole use of which is for a rail corporation to carry communications necessary or
desirable for the workings of train services, and to supply eligible services that
facilitate the supply of such carriage services. This provision reflects the operation of
subsection 47(4) of the Tel Act, which provides that the carrier licensing requirements
under the Tel Act do not apply to rail corporations in relation to network units used
solely by them for such communications. Subsection 92(4) of the Tel Act contains a
similar provision exempting carriage services used for such communications by rail
corporations from the definition of `carriage service provider'.
This provision will ensure that NBN corporations may supply eligible services to
assist rail corporations to manage train services. Clause 5 provides a definition of `rail
corporation' for this purpose, which is the same as the definition used in the Tel Act.
Clause 10 must be considered in the context of proposed section 152CJA(1) of the
CCA, inserted by the Access Bill, which restricts NBN corporations from supplying
an eligible service unless the service is a declared service under proposed
subsection 152AL(8A), or has been published in a SFAA or a SAU. Consequently, if
an NBN corporation wished to supply a service to a transport authority, it would need
to formulate an SFAA in relation to that service and publish the SFAA on its website,
or set out terms and conditions for the service in an SAU it gives to the ACCC, or the
ACCC would need to declare the service under proposed subsection 152AL(8A) in
relation to that NBN corporation and make an access determination in relation to the
service.
Clause 11 - Exemption--electricity supply bodies
Subclause 11 permits an NBN corporation to supply carriage services the sole use of
which is for an electricity supply body to carry communications necessary or
desirable for managing the generation, transmission, distribution or supply of
electricity, and charging for the supply of electricity. It also provides that NBN
corporations may supply eligible services that facilitate the supply of such carriage
services. This provision reflects the operation of subsection 49(1) of the Tel Act,
which provides that the carrier licensing requirements under the Tel Act do not apply
to electricity supply bodies in relation to network units used solely by them for such
communications. Subsection 94(1) of the Tel Act contains a similar provision
exempting carriage services used for such communications by electricity supply
bodies from the definition of `carriage service provider'.
This provision will ensure that NBN corporations may supply eligible services to
assist electricity supply bodies to manage the provision of electricity. Clause 5
provides a definition of `electricity supply body' for this purpose, which is the same
as the definition used in the Tel Act. Electricity supply bodies have advised the
Government that they would prefer to have the option of receiving a network
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management service directly from an NBN corporation to facilitate the rollout of
smart grids and smart metering.
Clause 11 must be considered in the context of proposed section 152CJA(1) of the
CCA, inserted by the Access Bill, which restricts NBN corporations from supplying
an eligible service unless the service is a declared service under proposed
subsection 152AL(8A), or has been published in a SFAA or a SAU. Consequently, if
an NBN corporation wished to supply a service to an electricity supply body, it would
need to formulate a SFAA in relation to that service and publish the SFAA on its
website, or set out terms and conditions for the service in a SAU it gives to the
ACCC, or the ACCC would need to declare the service under proposed
subsection 152AL(8A) in relation to that NBN corporation and make an access
determination in relation to the service.
Clause 12 - Exemption--gas supply bodies
Clause 13 - Exemption--water supply bodies
Clause 14 - Exemption--sewerage services bodies
Clause 15 - Exemption--storm water drainage services bodies
Clause 16 - Exemption--State or Territory road authorities
Each of clauses 12-16 contains an exemption that operates in a similar way to the
exemptions in clauses 10 and 11. These exemptions operate in favour of gas supply
bodies, water supply bodies, sewerage services bodies, storm water drainage services
bodies, and State or Territory road authorities, in relation to relevant services supplied
or activities conducted by those bodies. For example, an NBN corporation is
permitted to provide carriage services to a gas supply body to assist that body in
managing the transmission of, or charging for the supply of, gas distributed in a
pipeline--this is intended to allow NBN corporations to supply services to gas supply
bodies for the possibility of remote monitoring of gas supply, for example. An NBN
corporation is also permitted to provide services to a State or Territory road authority
for the possibility of assisting that body in managing or controlling road traffic--this
is intended to permit NBN corporations to provide carriage services to bodies such as
the Roads and Traffic Authority in NSW, and equivalents in other states, in
connection with the operation of traffic lights, for example. Such bodies may continue
to purchase services from intermediary service providers, and there is no requirement
for them to purchase them from an NBN corporation, but the exemptions provide for
the economically efficient supply of these services, given that the national broadband
network will be the major fixed-line telecommunications network in Australia. By
covering this wide range of utilities the potential is created for the NBN to support
well integrated trans-sectoral approaches to monitoring and management of
infrastructure and resources.
Unlike clauses 10 and 12, there are no equivalents to the exemptions provided by
these clauses in the provision of the Tel Act that relate to carrier licensing exemptions
or the definition of carriage service provider. The reason for these exemptions being
included is noted above in the notes at the beginning of Subdivision A of Division 2
of Part 2 of the Companies Bill.
Relevant definitions for terms used in clauses 12-16 are provided at clause 5.
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Clauses 12-16 need to be considered in the context of proposed section 152CJA(1) of
the CCA, inserted by the Access Bill, meaning that if an NBN corporation wished to
supply a service to one of the bodies covered by these clauses, the service would need
to be a declared service.
Subdivision B--Supply of other goods and services
Clause 17 - Content services not to be supplied
Clause 17 provides that an NBN corporation must not supply a content service. A
content service is defined at section 15 of the Tel Act and covers services such as
broadcasting services, on-line information services or on-line entertainment services.
It is appropriate that NBN corporations be prevented from providing content services
because such services are effectively retailed to end-users. Furthermore, prohibiting
NBN corporations from supplying content services will ensure that they remain
focussed on the wholesale provision of carriage services and do not become
horizontally integrated in markets that rely on the supply of carriage services, thereby
providing them with the incentive and ability to discriminate against competing
suppliers of content services.
Clause 18 - Non-communications services not to be supplied
Clause 18 provides that an NBN corporation must not supply a non-communications
service to another person. The provision is one of several intended to ensure that NBN
corporations remain limited to, and focussed on, the wholesale provision of carriage
services.
The term `non-communications service' is defined in section 5 of the Companies Bill.
The definition provides that a non-communications service means any service other
than certain services listed in that definition. The effect of that definition is that clause
18 prevents an NBN corporation from supplying any services other than:
- an eligible service;
- a content service (although note that NBN corporations are separately
prevented from providing content services under clause 17);
- a service that is ancillary or incidental to the supply by an NBN corporation of
an eligible service; or
- an advisory or consulting service, or the provision of intellectual property
rights, where these relate to:
o the supply of an eligible service;
o goods for use in connection with an eligible service; or
o facilities (within the meaning of the Tel Act).
The effect of this definition is that, broadly speaking, non-communications services
include all services that do not involve the supply of wholesale carriage services, or
services that are incidental to the supply of a wholesale carriage service. The
reference in the definition of non-communications services to ancillary or incidental
services is intended to clarify that an NBN corporation may supply a range of
supplementary services to customers that enable the customer to supply services to
end-users. Examples of this are facilities access services (such as leasing of duct or
conduit space) or access to an NBN corporation's operational and business support
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systems (to facilitate service ordering, provisioning and billing). The reference to
ancillary or incidental services is also intended to permit NBN corporations to engage
in the provision of minor services necessary in the conduct of a business, such as sub-
leasing of surplus office space.
Under this provision, an NBN corporation will also be able to enter into an
arrangement which involves the provision of intellectual property under a licence
agreement, or commercial or technical advice provided under a commercial
agreement, where the provision of that intellectual property or of that advice is in
connection with the supply of eligible services, goods in connection with such
services, or facilities. In this context, the term `intellectual property rights' is defined
in clause 5 of the Companies Bill and includes rights associated with a patent,
copyright, design, trade secret or know-how. This provision is intended to ensure that
NBN corporations have scope to exploit opportunities, both in Australia and overseas, to
provide intellectual property or advice that they may develop from their innovative
research, development and operational activities.
Clause 19 - Non-communications goods not to be supplied
Clause 19 provides that an NBN corporation must not supply goods to another person
unless the goods are for use in connection with the supply, or prospective supply, of
an eligible service by the NBN corporation. This would include goods supplied by
NBN corporations for marketing purposes and goods required to build and operate the
NBN. Consequently, an NBN corporation could, for example, supply promotional
material to customers, or prospective customers, and could supply an Optical Network
Termination Unit or customer premises equipment to an end-user's premises, as this
is in connection with the supply of eligible services. The provision is one of several
intended to ensure that NBN corporations remain limited to, and focussed on, the
wholesale provision of carriage services.
Subdivision C--Investment activities
Clause 20 - Restriction on investment activities
Clause 20 places restrictions on the investment of money by an NBN corporation. An
NBN corporation may only invest its money under the following circumstances:
· where the investment is relation to the supply, or prospective supply, of eligible
services by the NBN corporation;
· where the investment is related to the supply, or prospective supply, of goods that
are for use in connection with the supply, or prospective supply, of an eligible
service by the NBN corporation;
· the investment is in shares in a company which is carrying on business as a
carriage service provider; or
· the investment is an investment in securities of the Commonwealth or of a State or
Territory, or securities guaranteed by the Commonwealth, or by a State or
Territory; a deposit with a bank; or any other form of investment prescribed by
regulation under subparagraph (a)(iv) of the definition of `authorised investment'
in subsection 39(10) of the FMA Act.
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The provision is one of several intended to ensure that NBN corporations remain
limited to, and focussed on, the wholesale provision of carriage services.
As the Commonwealth has determined that NBN corporations should be able to
purchase other carriage service providers for the purposes of assisting with the roll-
out of the NBN, clause 20 allows NBN corporations to purchase shares in such
companies. As NBN corporations will operate on a commercial basis, they should
also be free to undertake such prudent investments as are consistent with normal
commercial behaviour, and with the restrictions already in place under the FMA Act.
Subdivision D--Transitional
Clause 21 - Transitional--pre-commencement contractual obligations
Clause 21 provides a transitional arrangement to deal with contracts that are in force
at the time that the rules in Subdivision C take effect. It provides that the restrictions
on an NBN corporation under clauses 18 (supply of non-communications services),
19 (supply of non-communications goods) and 20 (restriction on investment
activities) do not apply to a supply of goods or services, or to an investment, if the
supply or investment is in fulfilment of a pre-existing contractual obligation.
`Pre-existing obligation' is defined under subclause 21(1) to mean an obligation NBN
corporation has under a contract to supply goods or services or to invest money that
was in existence immediately before the clause commences. For this purpose, it is
immaterial whether the obligation is a contingent obligation or otherwise.
This clause is required to deal with any existing contracts that may have been entered
into by an NBN corporation before the commencement of this part of the Companies
Bill. It is appropriate that, if a party has entered into a contract with an NBN
corporation prior to the rules in clauses 18, 19 and 20 coming into force, the validity
of that contract should be ensured.
Clause 22 - Transitional--pre-acquisition contractual obligations
Clause 22 provides a transitional arrangement, with the effect that the restrictions on
an NBN corporation under clauses 18 (supply of non-communications services), 19
(supply of non-communications goods) and 20 (restriction on investment activities)
do not apply where immediately before a company other than NBN Co becomes an
NBN corporation, the company had an obligation (the pre-existing obligation) under a
contract to supply goods or service, or invest money.
This clause is required to cover any existing contracts that may have been entered into
by a company that subsequently becomes an NBN corporation. It is appropriate that,
if a party has entered into a contract with a company that later becomes an NBN
corporation, the validity of that contract should be ensured.
Division 3--Functional separation of NBN corporations
Division 3 of Part 2 of the Companies Bill contains provisions dealing with the
potential functional separation of NBN corporations. Functional separation
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requirements may be imposed on one or more NBN corporations in future, if
necessary to improve transparency or promote competition. The provisions in
Division 3 provide a mechanism for the future imposition of functional separation
arrangements.
If and when imposed, the precise form of functional separation will be determined under
an instrument to be made by the Communications Minister and Finance Minister (see
clause 25), which may, among other things, deal with the way in which certain functional
separation principles (clause 24) are to be implemented. As a result of this flexibility,
functional separation of NBN corporations, if imposed, could be reasonably extensive
(for instance, requiring full operational separation of all of the business units of any NBN
corporation), or could be reasonably `light touch' (such as requiring separate financial
statements and asset registers for different business units).
The structure and operation of the functional separation provisions in Division 3 is
based on the provisions dealing with the functional separation of Telstra that are
inserted into the Tel Act by the CCS Bill, with some key differences. If functional
separation is imposed on an NBN corporation, it will involve the following steps:
- the Communications Minister would make an instrument setting out certain
principles, which would be the `functional separation principles' (clause 24);
- the Communications Minister and the Finance Minister (together, `the
Ministers') would jointly make an instrument setting out requirements to be
complied with by a draft functional separation undertaking given to them by a
particular NBN corporation (`the functional separation requirements
determination' - clause 25);
- that NBN corporation would then be required to give the Ministers a draft
functional separation requirements undertaking (clause 26);
- the Ministers may then:
o approve the original draft undertaking given to them by the NBN
corporation;
o vary that original draft undertaking and approve it as varied; or
o replace that original draft undertaking with another draft functional
separation undertaking and approve the replacement undertaking
(clause 27).
Once approved, a draft functional separation undertaking becomes a final functional
separation undertaking. Compliance with a final functional separation undertaking is
a condition of the carrier licence of the NBN corporation to which it relates, and is
also a service provider rule for that NBN corporation (see clause 37 of the Companies
Bill, and proposed section 62E of the Tel Act, to be inserted by the Access Bill).
Clause 23 - Contents of draft or final functional separation undertaking
Subclause 23(1) specifies matters that must be included in a draft or final functional
separation undertaking. A draft or final functional separation undertaking must
comply with both the functional separation principles (which will be set out in an
instrument made by the Communications Minister under clause 24, and must include
the matters listed at subclause 24(2)) and such requirements as are specified in a
functional separation requirements determination (set out in clause 25).
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Subclause 23(2) provides that a functional separation undertaking may provide for the
ACCC to perform functions or to exercise powers in relation to the undertaking. This
is intended to permit the undertaking to operate flexibly, by ensuring that the
undertaking can provide for the ACCC to make decisions on particular matters at a
future point.
Clause 24 - Functional separation principles
Clause 24 provides that the Communications Minister may, in writing, set out the
functional separation principles that apply in regard to the manner in which the
functional separation of an NBN corporation is to be achieved and maintained. Under
paragraph 23(1)(a) any draft or final functional separation undertaking must comply
with the functional separation principles. When considering whether or not to approve
a draft functional separation undertaking, it is intended that the Ministers would have
regard to the degree to which the draft undertaking complies with the functional
separation principles.
Subclause 24(2) provides specified principles that must be included by the
Communications Minister in a determination setting out the functional separation
principles, and these are described in detail below. The Communications Minister
may add other principles to this list (see subclause 24(3)).
Before making a determination setting out the functional separation principles, the
Minister must consult the Finance Minister. The Finance Minister is directly involved
later in the process of imposing functional separation on NBN corporations (see
clause 25) and so it is appropriate that the Finance Minister be consulted by the
Communications Minister at this step.
A determination made by the Minister setting out the functional separation principles
is not a legislative instrument. This instrument defines one aspect of the required
content of a functional separation requirements determination. As such, this is a
substantive exemption from the LIA. The reason that this instrument has been
exempted from the LIA is that it important that industry has certainty that the
principles set out in legislation and in the determination will apply and will not be
overturned, or modified, by the Parliament. This certainty would not be provided if
the Communications Minister's determination were a legislative instrument and
therefore subject to disallowance.
The principle that an NBN corporation should maintain separate business units -
paragraph 24(2)(a)
The first principle is that an NBN corporation should maintain two or more specified
business units.
A business unit is defined under clause 5 as a part of an NBN corporation. This
recognises that in managing its business, an NBN corporation may organise itself into
different roles and parts of the company into individual business units. For example,
NBN Co may establish separate business units to deal with its satellite, wireless and
fibre operations, or to deal with its passive and active network assets. This principle
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is included since a fundamental concept in functional separation is the separation of
different parts of a business into different business units.
The principle of arm's length functional separation between specified business units -
paragraph 24(2)(b)
The second principle is that the NBN corporations should maintain arm's length
functional separation between its business units. The principle is directed towards
ensuring that an NBN corporation does not favour its business units in the provision
of regulated services.
The principle that the NBN corporation should have systems, procedures and
practices relating to compliance - paragraph 24(2)(c)
The third principle is directed towards ensuring that an NBN corporation has
sufficient systems, procedures and practices in place which support and facilitate
compliance with a final functional separation undertaking, monitoring and audit of
that compliance, as well as development of performance measures to measure that
compliance.
Clause 25 - Functional separation requirements determination
Subclause 25(1) allows the Ministers to make a determination (a functional separation
requirements determination) specifying requirements to be complied with by a draft
or final functional separation undertaking given by a specified NBN corporation.
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 25(2)). Subclause 25(3) makes it clear that
proposed subclause 25(2) does not limit the matters that may be specified by the
Ministers in a functional separation requirements determination.
Under proposed subclause 25(4), the Ministers must ensure that a functional
separation requirements determination comes into force within 90 days of the
commencement of the first or only determination made under subclause 24(1). For
this purpose, the determination made under subclause 24(1) will come into force
when it is made.
Subclause 25(6) provides that a functional separation requirements determination is
not a legislative instrument. This reflects the fact that a direction from the Ministers
to any person is not subject to disallowance (see section 44 of the LIA) and the fact
that the instrument made by the Ministers under subclause 25(1) operates as a
direction to an NBN corporation to include certain requirements in its draft
undertaking.
Clause 26 - Draft functional separation undertaking to be given to the
Communications Minister and Finance Minister
Subclause 26(1) provides that an NBN corporation must give the Ministers a draft
functional separation undertaking within 90 days after the first functional separation
requirements determination in relation to the NBN corporation comes into force or a
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longer period, if specified in accordance with subclause 26(2). For this purpose, the
functional separation requirements determination will come into force when it is
made.
Subclause 26(3) allows the Ministers to vary an instrument under proposed
subclause 26(2). This allows the Ministers to increase or decrease the relevant
extension period where it is considered necessary or desirable to do so. Subclause
26(4) provides that a period specified in subclause 26(2) may be ascertained wholly or
partly by reference to the occurrence of a specified event. For example, the Ministers
may need to make an instrument in relation to the report of the Productivity
Commission under clause 49, or an outcome arising from that report. This provision
would permit the Ministers to set a date with reference to that event.
Subclause 26(5) makes it clear that the Ministers do not have a duty to consider
whether to make or vary an instrument under proposed subclause 26(2). For example,
if an NBN corporation or some other person requested that the Ministers consider
exercising their power under proposed subclause 26(2) to extend the period, the
Ministers would have no duty to consider that request.
The Ministers are not required to observe the requirement of procedural fairness in
relation to the making of an instrument under subclause 26(2) extending the 90-day
time period. Furthermore, an instrument under proposed subclause 26(2) extending
the period for a functional separation requirements undertaking to be given to the
Ministers must be published on the Department's website, as must a variation to such
an instrument (in this context, the Department is the Department administered by the
Communications Minister (being the Minister who administers the Companies Bill
once enacted; see subsection 19A(3) of the AIA)). This will reduce the opportunity
for the use of legal proceedings to disrupt these procedural steps if functional
separation is to be imposed on an NBN corporation at some point in the future.
Subclause 26(7) provides, for the avoidance of doubt, that an instrument under
subclause 26(2) or (3) is not a legislative instrument. As the instrument functions as a
direction from the Ministers to an NBN corporation, it would not be subject to
disallowance under item 41 of the table in subsection 44(2) of the LIA. Furthermore,
as the undertaking must include requirements specified by the Ministers, industry will
require certainty that the requirements set out in legislation and in the determination
will apply and will not be overturned, or modified, by the Parliament.
Clause 27 - Approval of draft functional separation undertaking by the
Communications Minister and the Finance Minister
Clause 27 sets out the manner in which a draft functional separation undertaking may
be approved, varied or replaced and includes publication and consultation provisions,
and is modelled on clause 77 of Schedule 1 to the Tel Act, inserted by the CCS Bill.
After receiving a draft functional separation undertaking (original undertaking), the
Communications Minister and the Finance 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
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(proposed subclause 27(2)). It is envisaged the Ministers would exercise their 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 Ministers 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 Ministers considered that the draft functional separation
undertaking complied with a functional separation principle to a minimal degree, the
Ministers might decide to vary or replace the draft undertaking in a way that would
require the NBN corporation to meet the principle to a significantly higher degree.
Subclause 27(3) provides that before making a decision under proposed
subclause 27(2), the Ministers 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. (In this context, `the Department' is the Department
administered by the Communications Minister - see subsection 19A(3) of the AIA).
The Ministers are required to give the ACCC a copy of the notice and consider any
advice about the original undertaking given to them by the ACCC within the 14 days
after the notice is published. The Ministers must have regard to any advice given by
the ACCC. It is expected that the ACCC would consider the submissions provided to
the Ministers before giving its advice to the Ministers.
Subclause 27(4) requires the Ministers, before approving an original undertaking as
varied under paragraph 27(2)(b), to give the NBN corporation in question a notice
setting out the original undertaking as proposed to be varied and inviting the NBN
corporation to make submissions to the Ministers regarding the original undertaking
as proposed to be varied within 14 days after receiving the notice. The Ministers are
further required to consider any submissions received from the NBN corporation
within that 14-day time period.
Subclause 27(5) requires the Ministers, before approving a replacement undertaking
under paragraph 27(2)(c), to give the NBN corporation in question a notice setting out
the proposed replacement undertaking and inviting the NBN corporation to make
submissions to the Ministers regarding the proposed replacement undertaking within
14 days after receiving the notice. The Ministers are further required to consider any
submissions received from the NBN corporation within that 14-day time period.
The consultation provisions in subclauses 27(3)-(5) provide the NBN corporation, the
ACCC and the public with an opportunity to make submissions which the Ministers
must consider before approving an original undertaking, and provide for additional
consultation with the NBN corporation 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.
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Subclause 27(6) confirms that the Ministers may ask the ACCC to give the Ministers
advice, which is additional to any advice received from the ACCC after a request for
advice under proposed paragraph 27(3)(e), about a matter arising under proposed
clause 27.
Subclause 27(7) requires the Minister to notify the NBN corporation in writing of a
decision under subclause 27(2) as soon as practicable.
Subclause 27(8) provides, for avoidance of doubt, that an instrument under
subclause 27(2) is not a legislative instrument. As the instrument to approve or vary
an undertaking functions as a direction from the Ministers to an NBN corporation, it
would not be subject to disallowance under item 41 of the table in subsection 44(2) of
the LIA. Furthermore, industry will require certainty that the Ministers' approval,
variation or determination that an NBN corporation is taken to have given a
replacement undertaking will apply and will not be overturned, or modified, by the
Parliament, especially in terms that may be inconsistent with either the NBN
corporation's undertaking or with the requirements determination or functional
separation principles.
Clause 28 - Time limit for making an approval decision
Subclause 28(2) requires the Ministers to use their best endeavours to make a decision
under subclause 27(2) in relation to a draft functional separation undertaking within
six months after the draft undertaking was given to them. This subclause recognises
the importance of ensuring that the functional separation of an NBN corporation is
achieved in a timely manner, but also appreciates that the Ministers will need
adequate time to:
· consider the draft functional separation undertaking and check that it complies
with clause 23;
· possibly make changes to a draft functional separation undertaking, which
may be influenced by submissions received or advice received from the
ACCC;
· consult with an NBN corporation before making changes to a draft functional
separation undertaking; and
· seek additional advice from the ACCC concerning a draft functional
separation undertaking, and consider that advice.
Clause 29 - Effect of approval
Subclause 29(1) confirms that once a draft functional separation undertaking is
approved by the Ministers under subclause 27(2) it becomes a final functional
separation undertaking.
Subclause 29(2) confirms that a final functional separation undertaking comes into
force on the day after the notice of the Ministers' decision is given to the relevant
NBN corporation in accordance with subclause 27(7).
Subclause 29(3) provides that a final functional separation undertaking may not be
withdrawn. Given that the implementation of the functional separation of an NBN
corporation could have a significant impact on the telecommunications industry and
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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 that a final functional separation
undertaking cannot be withdrawn.
For the avoidance of doubt, subclause 29(4) confirms that a final functional separation
undertaking is not a legislative instrument. As the approval of a draft functional
separation undertaking functions as a direction from the Ministers to an NBN
corporation, it would not be subject to disallowance under item 41 of the table in
subsection 44(2) of the LIA. Should the Communications Minister and the Finance
Minister decide to approve a draft functional separation undertaking, this would be in
the context that such approval provided certainty of the regulatory arrangements for
implementing functional separation of one or more NBN corporations. The
Government and NBN corporations will require certainty that these regulatory
arrangements will not be overturned.
Clause 30 - Variation of final functional separation undertaking
Clause 30 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 Ministers, in writing, where the relevant NBN corporation or another person has
requested the variation, or on the Ministers' own initiative (subclause 30(2)).
Subclause 30(3) confirms that the Ministers do not have a duty to consider whether to
make a variation under subclause 30(2), whether or not the Ministers have received a
request from an NBN corporation or by any other person, or in any other
circumstances.
The publication, consultation and notice requirements relating to a proposed variation
(subclauses 30(4) and (8)), except in relation to minor variations, are the same as
those outlined in proposed clause 27 in relation to the Ministers' decision to approve
the draft functional separation undertaking.
Subclause 30(5) indicates that the publication, consultation and notice requirements
under subclause 30(4) do not apply in respect of variations to a final functional
separation undertaking that are of a minor nature.
Where a proposed variation is of a minor nature and is not made at the request of the
NBN corporation, under subclause 30(6) the Ministers are required to give the NBN
corporation a notice setting out the proposed variation and inviting the NBN
corporation to make submissions to them about the proposed variation within 14 days
after the notice is given. The Ministers must then consider any submission received
within that 14-day period.
Subclause 30(7) confirms that the Ministers may ask the ACCC to give them advice,
which is additional to any advice received from the ACCC after a request for advice
under subclause 30(4).
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Subclause 30(9) confirms that a variation of a final functional separation undertaking
comes into force the day after notice of the variation is given to an NBN corporation.
For the avoidance of doubt, subclause 30(10) confirms that a variation of a final
functional separation undertaking is not a legislative instrument. As the variation
instrument functions as a direction from the Ministers to an NBN corporation, it
would not be subject to disallowance under item 41 of the table in subsection 44(2) of
the LIA. Furthermore, the power to vary a final functional separation undertaking is
critical to ensuring that the functional separation arrangements can be adjusted to
recognise changes in circumstances or events. If the variation were to be a legislative
instrument, any disallowance could derail the implementation of the new
arrangements and deny certainty to the industry.
Clause 31 - Publication of final functional separation undertaking
Subclause 31(1) provides that an NBN corporation 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 31(2), an NBN corporation is required to publish a
variation of a final functional separation undertaking on its website as soon as
practicable after it comes into force.
Clause 32 - Compliance with final functional separation undertaking
Clause 32 provides that if a final functional separation undertaking is in force, the
NBN corporation must comply with the undertaking. Clause 37 of the Companies Bill
makes compliance with clause 32 a carrier licence condition, and clause 38 makes
compliance with that provision a service provider rule (see also section 62E and
subsection 98(7) of the Tel Act, inserted by the Access Bill). A breach of a final
functional separation undertaking by an NBN corporation would therefore be a breach
of its carrier licence conditions (if the NBN corporation is a carrier) and of a service
provider rule (if the NBN corporation is a service provider). Compliance with carrier
licence conditions and service provider rules are civil penalty provisions under
sections 68 and 101 of the Tel Act. Together, therefore, these clauses would have the
effect of making an NBN corporation subject to the penalties outlined in Part 31 of
the Tel Act for breach of civil penalty provisions.
Division 4--Divestiture of assets by NBN corporations
Clause 33 - Directions about disposal of assets
Proposed subclause 33(1) provides that the Ministers may by written notice direct an
NBN corporation to dispose of (within a specified time) one or more specified assets
of the NBN corporation (otherwise than by transferring the asset to another NBN
corporation, which is dealt with under clause 34). The Ministers are conferred with
the ability to give any other directions to the NBN corporations they consider
necessary for securing the disposal.
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Clause 33 is included in response to recommendations made by the Implementation
Study for the NBN. These powers provide a further mechanism prior to privatisation to
facilitate greater transparency in NBN Co's operations and equivalence of treatment and
could be used to structure the eventual privatisation of NBN Co to maximise its appeal to
different investors. Post-sale, they provide a strong mechanism to address competition or
other concerns that may arise from the integration of passive and active businesses,
notwithstanding NBN Co's wholesale-only mandate. As such they arm the
Commonwealth with the powers it needs to tackle issues of integration that have been of
concern in the past with Telstra and forewarn NBN Co that the Commonwealth reserves
this right for the future in regard to it.
In the event that in the future competition is impeded by structural features of the
telecommunications market, and the divestment of an asset could promote competition,
this power provides the Ministers with a means to deliver better competitive outcomes. A
significant historical feature of the Australian telecommunications market has been that
the structure of the industry, with a concentration of assets in the hands of a single
provider, has impeded the development of competition.
The Ministers may issue directions to NBN corporations under clause 33 at any time -
whether at a point in time that NBN Co is fully owned by the Commonwealth, or at a
time when the Commonwealth owns only a partial interest in NBN Co, or after the
Commonwealth has fully transferred its interests in NBN Co. By contrast, the power
under clause 34 (for the Ministers to direct an NBN corporation to transfer a specified
asset to another specified NBN corporation) only operates until the Finance Minister
declares that conditions are suitable for the Commonwealth to commence transferring
its interest in NBN Co. Clause 34 is explained in detail below.
Proposed subclause 33(3) provides that the Communications Minister and the Finance
Minister must not give a direction to an NBN corporation under subclause 33(1)
unless the NBN corporation is a constitutional corporation. A `constitutional
corporation' is defined in clause 5 of the Companies Bill to mean a corporation to
which paragraph 51(xx) of the Constitution applies. This provision has been inserted
to ensure that NBN corporations that are constitutional corporations (that is, foreign
corporations, or trading or financial corporations, within the meaning of s 51(xx) of
the Constitution) will be capable of being subject to a direction, and to ensure that this
provision is supported by the corporations power in the Constitution.
Proposed subclause 33(5) clarifies that the direction is not a legislative instrument.
The NBN corporation is obliged to comply with the direction (refer proposed
subclause 33(4), and clauses 37 and 38). As the instrument functions as a direction
from the Ministers to an NBN corporation, it would not be subject to disallowance
under item 41 of the table in subsection 44(2) of the LIA. Furthermore, the
Government and industry will require certainty that a direction to dispose of assets
will not be subject to challenge or disallowance. This certainty would not be available
if the direction was a legislative instrument.
Subclause 33(2) sets out the matters to which the Ministers must have regard in
deciding whether to give a divesture direction in accordance with proposed
subclause 33(1). Although the long-term interests of end users (a term defined in
clause 94 of the Companies Bill) is an important factor, the Ministers will be able to
have regard to other relevant factors. These could include NBN Co's business
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interests and any policy to require stronger separation of NBN Co's business units. In
addition, the Ministers must consider advice received from the ACCC, if that is
sought under clause 35.
Clause 34 - Directions about transfer of assets to another NBN corporation
As noted above under clause 33, further divesture directional powers are conferred on
the Communications Minister and the Finance Minister under clause 34.
Subclause 34(1) provides that the Ministers may, by written notice, direct an NBN
corporation (the transferor) to transfer one or more specified assets to another NBN
corporation (the transferee) specified in the notice within a specified period. The
Ministers are also given the power to give such other directions to the transferor or
transferee as they consider necessary for the purposes of securing the transfer (for
instance, this could include requiring a transferee to execute an instrument of
transfer).
The Ministers may only issue a direction under subclause 34(1) while the
Commonwealth ownership provisions are in effect. The Commonwealth ownership
provisions, which appear in Subdivision A of Division 2 of Part 3 of the Companies
Bill, require the Commonwealth to retain full ownership of NBN Co. They cease to
have effect when the Finance Minister makes a declaration that, in his or her opinion,
conditions are suitable for the entering into and carrying out of an NBN Co sale
scheme, and that declaration has not been disallowed by the Parliament (see clauses
50 and 51). The Finance Minister's ability to make such a declaration is subject to the
Parliamentary Joint Committee on the Ownership of NBN Co having examined the
report of the Productivity Commission inquiry into certain matters relating to the
NBN and NBN Co (see clause 49) and tabled its examination report in both Houses of
Parliament.
The combined effect of these provisions is that the Ministers may not issue a direction
under subclause 34(1) after the Finance Minister has declared that conditions are
suitable for the Commonwealth to commence transferring its ownership of NBN Co,
and that declaration has not been disallowed by the Parliament. The reason for this is
that from that point it is considered it would no longer be appropriate for the Ministers
to intervene in this way in the structuring of NBN corporations, under a direction
under clause 34. However, if it is necessary for the purposes of structural reform to
promote greater competition to direct an NBN corporation to divest an asset, the
general divestiture power at clause 33 must be used.
Subclause 34(3) sets out the matters to which the Ministers must have regard in
deciding whether to give a direction in accordance with proposed subclause 34(1),
and operates in the same way as subclause 33(2).
Subclause 34(4) provides that the Ministers must not give a direction under
subclause 34(1) to an NBN corporation unless the NBN corporation is a constitutional
corporation. This provision mirrors subclause 33(3), which is explained above,
except that the requirement applies to directions issued to either the transferor or the
transferee.
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Subclause 34(6) clarifies that a direction under subclause 34(1) is not a legislative
instrument. The NBN corporation is obliged to comply with the direction (refer
proposed subclause 34(5), and clauses 37 and 38). As the instrument functions as a
direction from the Ministers to an NBN corporation, it would not be subject to
disallowance under item 41 of the table in subsection 44(2) of the LIA. Furthermore,
the Government and industry will require certainty that a direction to transfer assets
will not be subject to challenge or disallowance. This certainty would not be available
if the direction was a legislative instrument.
Clause 35 - Advice from ACCC about disposal or transfer directions
Subclause 35(1) provides that the Communications Minister and the Finance Minister
may, by written notice given to the ACCC, require the ACCC to give them advice,
within the period specified in the notice, about whether one or more directions under
subclause 33(1) or 34(1) should be given to an NBN corporation. This reflects the fact
that divestiture or transfers of assets would generally be aimed at advancing
competition objectives and the ACCC as the competition regulator could provide
valuable advice in this regard. The ACCC is required to comply with the requirement.
The notice under subclause 35(1) is not a legislative instrument (refer proposed
subclause 35(7) - this provisions is included for the avoidance of doubt).
Section 496 of the Tel Act allows the Minister to direct the ACCC to hold a public
inquiry under Part 25 about a specified matter concerning the telecommunications
industry. A note is included in relation to subclause 35(2) to alert the reader that under
section 497 of the Tel Act, the ACCC can hold a public inquiry under Part 25 about a
matter relating to the performance of this function.
Subclause 35(3) clarifies that, for the purposes of section 496 of the Tel Act, the
giving of advice by the ACCC in compliance with a requirement under
subclause 35(1) is taken to be a matter concerning the telecommunications industry.
Subclause 35(3) is enacted for the avoidance of doubt (see subclause 35(4)).
Where the ACCC holds a public inquiry under Part 25 in compliance with a request
under subclause 35(1)), the ACCC must, in holding the inquiry and preparing its
report on the inquiry, have regard to whether giving the relevant direction(s) would
promote the long-term interests of end-users of carriage services or of services
provided by means of carriage services, and such other matters (if any) as the ACCC
considers relevant.
Subclause 35(6) clarifies that this clause does not prevent the Ministers from seeking
advice from the ACCC on a matter arising under Division 4.
Subclause 35(7) clarifies, for the avoidance of doubt, that a request for advice under
subclause 35(1) is not a legislative instrument.
Clause 36 - Exemption from stamp duty--transfer in compliance with transfer
direction
Proposed clause 36 provides an exemption to an NBN corporation from stamp duty or
other tax payable under a law of a State or Territory. As any transfer of assets from
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one NBN corporation to another could be carried out for the purposes of restructuring
the entities prior to sale, or with a view to promoting competition and the long-term
interests of end-users, it would effectively be a transfer of assets within the
Commonwealth sphere to achieve policy objectives. As such it would not be
appropriate for the Commonwealth to be inhibited in the use of this policy lever due
to the need to pay stamp duty to the States or Territories, particularly when such
stamp duty would be an unanticipated windfall (while some of these considerations
also apply to the divestiture of assets to entities other than NBN corporations pursuant
to proposed clause 33, given external non-Commonwealth entities are involved, on
balance it is considered appropriate that normal stamp duty arrangements should
apply as they would in the normal course of business).
The exemption applies in respect of:
· asset transfers in compliance with a direction under subclause 34(1);
· an agreement relating to such a transfer;
· the receipt of money by an NBN corporation, or by a person acting on behalf
of an NBN corporation, in respect of such a transfer;
· anything done (including a transaction entered into or an instrument or
document made, executed, lodged or given) because of, or for a purpose
connected with or arising out of, any of the preceding three matters.
However, the exemption does not apply in the following cases:
· in circumstances specified in the regulations; or
· in relation to stamp duty, or other tax, of a kind specified in the regulations; or
· in relation to stamp duty, or other tax, of a kind specified in the regulations, in
such circumstances as are specified in the regulations.
Division 5 - Carrier licence conditions etc.
Clause 37 - Carrier licence condition
The effect of clause 37, together with section 62E of the Tel Act, inserted by item 3 of
Schedule 1 to the Access Bill, is that a carrier licence held by an NBN corporation is
subject to a condition that the NBN corporation must comply with any applicable
rules in clauses 9, 17, 18, 19, 20, 26, 32, 33 or 34 of the Companies Bill. Each of
those provisions is described in the notes on clauses above. Any breach by an NBN
corporation of the rules in those provisions, where applicable to that NBN
corporation, would be dealt with as a breach of a carrier licence, and the enforcement
mechanisms under the Tel Act would apply.
Clause 38 - Service provider rule
The effect of clause 38, together with subsection 98(7) of the Tel Act, inserted by
item 3 of Schedule 1 to the Access Bill is that, if an NBN corporation is a service
provider, the NBN corporation must comply with any applicable rules in clauses 9,
17, 18, 19, 20, 26, 32, 33 or 34 of the Companies Bill, which are described in detail
above.
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Clause 39 - Power to declare carrier licence conditions not limited
Clause 39 provides that any applicable rules in clauses 9, 17, 18, 19, 20, 26, 32, 33 or
34 of the Companies Bill do not limit any carrier licence conditions that may be
declared under section 63 of the Tel Act. Section 63 of the Tel Act provides that the
Minister may, by written instrument, impose conditions applying to carrier licences.
Clause 40 - Power to determine service provider rules not limited
Clause 40 provides that any applicable rules in clauses 9, 17, 18, 19, 20, 26, 32, 33 or
34 of the Companies Bill do not limit the rules that may be set out under section 99 of
the Tel Act. Section 99 of the Tel Act allows the ACMA, after consulting the ACCC,
to make a written determination setting out rules that apply to service providers in
relation to the supply of specified carriage services or specified content services.
Division 6--Special carrier licence conditions
Clause 41 - Conditions about supply of carriage services by NBN corporations
Clause 41 provides that that the Communications Minister has the power, under
section 63 of the Tel Act, to require an NBN corporation as a condition of its carrier
licence to either supply a specified eligible service (mandatory service) or not to
supply a service (prohibited service).
Mandatory services
Subclause 41(1) provides that a condition of an NBN corporation's carrier licence
may require the NBN corporation to comply with section 152CJB of the CCA in
relation to a specified eligible service that is supplied, or is capable of being supplied,
by an NBN corporation. Such a service would be a mandatory service.
Section 152CJB of the CCA (to be inserted by the Access Bill) would require the
NBN corporation to either lodge a SAU or to publish a SFAA in relation to the
service specified in the NBN corporation's carrier licence. This would also mean that
a mandatory service under this clause would be treated as a declared service and
therefore subject to the SAOs under section 152AXB of the CCA. Under
subclause 41(2), a condition covered under subclause 41(1) will not have any effect if
immediately before it comes into force, the service becomes a declared service.
Prohibited services
Subclause 41(3) makes it clear that a condition of a carrier licence held by an NBN
corporation may prohibit an NBN corporation from supplying a specified carriage
service to carriers or service providers. Should the Minister make a condition of an
NBN corporation's carrier licence prohibiting the supply of a specified service, the
ACCC would not be able to declare the service under section 152AL of the CCA.
Section 152CJG of the CCA (to be inserted by the Access Bill) makes it clear that, if a
prohibition is in place, the NBN corporation is taken to not be capable of supplying
that service.
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Any licence condition made by the Minister concerning mandatory or prohibited
services may declare that the carrier licence condition applies in the circumstances or
for the duration specified in the instrument.
Subclause 41(4) makes it clear that subclauses 41(1) and (3) do not limit the
conditions that may be declared under section 63 of the Tel Act. This is to clarify that
the Minister may make a broad range of licence conditions applying to carrier
licences held by NBN corporations, as with other carriers.
Section 64 of the Tel Act sets out a consultation process that must be followed by the
Minister prior to making a carrier licence condition determination - this would apply
to any licence condition concerning mandatory or prohibited services.
Clause 42 - Consultation with ACCC
Clause 42 provides that if the Minister is required under section 64 of the Tel Act to
give an NBN corporation a notice in relation to a condition covered by subclauses
41(1) or (3) of the Companies Bill, the Minister must consult the ACCC before the
notice is given. This is intended to ensure that the Minister obtains and considers the
ACCC's views about competition matters before declaring any specified eligible
services to be mandatory services or prohibited services under clause 41. It is
appropriate that the ACCC be consulted about the making of any such licence
conditions due to their potential impact both on competition and consumers, as well as
the NBN corporation concerned and the industry as a whole.
The requirement under clause 42 for the Minister to consult with the ACCC prior to
consulting with an NBN corporation about a draft licence condition determination
only applies in relation to licence conditions dealing with mandatory or prohibited
services under clause 41. It does not apply to other types of licence conditions that
the Minister may consider imposing on an NBN corporation. That said, there would
be nothing to prevent the Minister from consulting the ACCC about any such other
licence conditions prior to conducting the mandatory consultation with the affected
NBN corporation, just as there would be nothing to prevent the Minister from
consulting with the ACCC about any licence condition proposed to be imposed on
any carrier's licence.
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Part 3--Ownership and control of NBN Co
Part 3 of the Companies Bill contains rules governing the ownership of NBN Co,
including the Commonwealth ownership provisions (which require the
Commonwealth to retain full ownership of NBN Co until certain specified events take
place) and provisions regarding the process for the Commonwealth to transfer its
ownership of NBN Co.
Part 3 applies only to NBN Co, and not to other NBN corporations, because other
NBN corporations will be subsidiaries of NBN Co, or companies controlled by NBN
Co, and would therefore be dealt with as part of any privatisation of NBN Co. NBN
Co is defined in clause 5 of the Companies Bill as meaning NBN Co Limited (ACN
136 533 741), as the company exists from time to time, even if it should change its
name at some future point.
Division 1--Simplified outline
Clause 43 - Simplified outline
Clause 43 provides a simplified outline of Part 3 to assist the reader.
Division 2--Commonwealth ownership and control of NBN Co
Subdivision A--Commonwealth ownership provisions
Clause 44 - Commonwealth ownership provisions
Clause 44 provides that the Commonwealth ownership provisions are set out in
clauses 45 and 46 of the Companies Bill. Under these provisions, the Commonwealth
must retain full ownership of NBN Co. Subdivision B of Division 2 of Part 3 sets out
when the Commonwealth ownership provisions will cease to have effect. The
Commonwealth ownership provisions continue in operation until such time as: a
declaration is made by the Communications Minister that the NBN should be treated
as built and fully operational, the Productivity Commission conducts an inquiry into
certain matters relating to the NBN and NBN Co including the regulatory framework
for the NBN, the report of that inquiry is tabled in Parliament, the Parliamentary Joint
Committee on the Ownership of NBN Co has examined the Productivity Commission
report and reported to Parliament on its examination, and the Finance Minister makes
a declaration that conditions are suitable for entering into and carrying out of an NBN
Co sale scheme. The Finance Minister's declaration in this regard is subject to
Parliamentary scrutiny and disallowance.
Clause 45 - Commonwealth to retain ownership of NBN Co
Clause 45 provides that the Commonwealth must not transfer any of its shares in
NBN Co if the transfer results in a breach of any of the outcomes in subclause 45(2).
Subclause 45(2) lists a number of outcomes that describe the situation in which NBN
Co would no longer be fully owned by the Commonwealth. These are:
· that the Commonwealth no longer holds shares in NBN Co that carry the rights to
exercise all of the voting rights attached to the voting shares of NBN Co;
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· that the Commonwealth no longer controls the exercise of all of the voting rights
attached to the voting shares of NBN Co;
· that the Commonwealth no longer holds all of the paid-up share capital of NBN
Co;
· that the Commonwealth is no longer entitled to hold all of the rights to any
distribution of capital or profits of NBN Co on winding up; and
· that the Commonwealth is no longer entitled to hold all of the rights to any
distribution of capital or profits of NBN Co; otherwise than on winding up.
Neither the Commonwealth nor NBN Co may do anything to cause or contribute to
any of the above results occurring.
Clause 45 will cease to have effect at the time worked out under clause 51 of the
Companies Bill.
Commonwealth ownership of NBN Co until the NBN is built and fully operational will
give the Commonwealth greater flexibility to pursue its objectives during the rollout of
the network.
Clause 46 - Compliance by NBN Co
Subclause 46(1) provides that NBN Co must take all reasonable steps to ensure that
the situations described in subclause 45(2) do not exist. If NBN Co engages in
conduct that contravenes the rule in subclause 46(1), that is an offence, the penalty for
which is 500 penalty units (subclause 46(2)). Under the Crimes Act 1914 a penalty
unit is valued at $110 unless a law says otherwise. Furthermore, under the Criminal
Code Act 1995, where a law creating an offence does not specify a fault element for a
physical element that consists only of conduct, intention is the fault element for that
physical element. Therefore, NBN Co would need to have intentionally engaged in
conduct in contravention of the rule in subclause 46(1), in order to have committed an
offence.
Subdivision B--Termination of Commonwealth ownership provisions
Clause 47 - Object of this Subdivision
Clause 47 provides that the object of Subdivision B of Division 2 of Part 3 of the
Companies Bill is to provide that the Commonwealth ownership provisions cease to
have effect when:
· the Communications Minister makes a declaration under clause 48 that the NBN
should be treated as built and fully operational;
· the Productivity Minister has caused to be tabled in both Houses of Parliament a
report of an inquiry by the Productivity Commission into certain specified matters
relating to the NBN and NBN Co (clause 49);
· the Parliamentary Joint Committee on the Ownership of NBN Co has examined
the Productivity Commission's report and has reported to Parliament on that
examination (see Schedule 2); and
· the Finance Minister has declared under clause 50 that, in his or her opinion,
conditions are suitable for entering into and carrying out of an NBN Co sale
scheme.
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Termination of the Commonwealth ownership provisions will enable the
Commonwealth to transfer all or part of its shares in NBN Co. The effect of the
provisions in this subdivision is that the Commonwealth ownership provisions
continue until it is appropriate that the Commonwealth commence to transfer those
shares.
Clause 48 - Declaration by Communications Minister--whether national
broadband network should be treated as built and fully operational
Clause 48 provides that the Communications Minister must initially declare in
writing, by 30 June 2018, either that, in his or her opinion, the NBN should be treated
as built and fully operational or that a specified period of no more than 12 months is a
`declared pre-termination period'. By declaring a pre-termination period, the
Communications Minister can extend the time to make a declaration that the NBN
should be treated as built and fully operational. If the Communications Minister
declares a pre-termination period, the Communications Minister must, during that
period, declare in writing either that the NBN should be treated as built and fully
operational, or make a subsequent declaration that a specified period of no more than
12 months is a further declared pre-termination period. The Communications Minister
may continue to declare a declared pre-termination period (with each period being no
more than 12 months) until he or she can declare that the NBN should be treated as
built and fully operational. Any declaration made by the Communications Minister
under this clause must be tabled in each House of Parliament within 15 sitting days of
being made (subclause 48(6)). Further, under subclause 48(7), if the Minister declares
a declared pre-termination period, the Communications Minister must also table a
statement which notifies that the Commonwealth ownership provisions continue to
operate.
In deciding whether to make a declaration under this clause, the Communications
Minister must have regard to the extent to which the NBN has been built and is
operational, matters relating to the security of the NBN and such other matters (if any)
as the Communications Minister considers relevant (subclause 48(5)).
Subclause 48(8) confirms, for the avoidance of doubt, that a declaration by the
Communications Minister under this clause is not a legislative instrument. The
Minister's instrument will trigger provisions that require a Productivity Commission
inquiry, which then in turn permits the Finance Minister to declare that conditions are
suitable for the Government to commence an NBN Co sale scheme, which will be a
disallowable declaration.
Clause 49 - Productivity Commission inquiry
Clause 49 applies if the Communications Minister has made a declaration under
clause 48 that, in his or her opinion, the NBN should be treated as built and fully
operational.
The effect of subclause 49(2) together with subclause 49(1) is that, at any time after a
declaration is made by the Communications Minister that the NBN should be treated
as built and fully operational, the Productivity Minister may refer to the Productivity
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Commission for inquiry, under paragraph 6(1)(a) of the PC Act, the following
matters:
- the regulatory framework for the NBN,
- the impact on future annual Commonwealth budgets of the sale of NBN Co,
- the impact of a sale of the Commonwealth's equity in NBN Co on the:
o supply of affordable broadband carriage services;
o supply of non-broadband carriage services;
o equity and social inclusion; and
- the impact on competition in telecommunications markets of a sale of the
Commonwealth's equity in NBN Co.
.
The Productivity Commission is an independent advisory body set up by the PC Act.
Paragraph 6(1)(a) of the PC Act provides that one of the functions of the Productivity
Commission is to hold inquiries and report to the Productivity Minister about matters
relating to industry, industry development and productivity that are referred to it by
the Minister (references to the Productivity Minister are to the Minister who
administers that Act - see clause 5. The current Productivity Minister is the
Treasurer).
Subclause 49(3) provides that, when referring these matters to the Productivity
Commission for inquiry, the Productivity Minister must set a timeframe of 12 months
for the Productivity Commission to submit its report on the inquiry to the Productivity
Minister. This provision reflects paragraph 11(1)(c) of the PC Act which enables the
Minister to specify a period within which the Productivity Commission must submit
to the Productivity Minister its report on its inquiry of a matter referred to it by that
Minister. Under section 12 of the PC Act, the Productivity Minister must cause a copy
of the Productivity Commission's report on an inquiry to be tabled in each House of
the Parliament:
(a) within 25 sitting days of that House after the day on which the Productivity
Minister receives it; or
(b) if the Productivity Commission recommends that the tabling of the report, or
part of the report, be delayed for a specified period--within 25 sitting days of
that House after the end of that period.
In holding the inquiry and preparing its report, the Productivity Commission must
have regard to certain matters listed at subclause 49(4). These include matters relating
to the equity of access to broadband carriage services in various types of areas;
competition and other issues relating to the telecommunications industry; the retail
prices of services supplied using the NBN; ownership and control of NBN
corporations; the structural organisation of NBN corporations (which is intended to
refer to the organisation of business units of NBN corporations and not to
management of NBN corporations); the supply of services by NBN corporations; the
coverage of the NBN; the technology used in connection with the NBN, and the need
for maintenance, replacement and upgrading of that technology; and any matters
specified by the Productivity Minister or any matters that the Productivity
Commission considers relevant.
A key objective of the Productivity Commission inquiry is to determine what would
be the optimal structural and regulatory setting for fostering competition and
delivering consumer outcomes in the telecommunications industry where NBN Co
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was being privatised. Key issues therefore would be the structure of the industry that
had evolved, the structure of NBN corporations and their interactions, the scope for
NBN Co to take advantage of those arrangements--particularly to favour aspects of
its business that may be in competition with other industry players, and the risks to
competition of retail service providers having an interest in an NBN corporation or an
NBN corporation being able to have an interest in a retail service provider. In
considering the regulatory issues, the Productivity Commission inquiry must also
consider the impact on future annual Commonwealth budgets of a sale of the
Commonwealth's equity in NBN Co. This would include consideration of current and
expected dividends and likely sale proceeds.
Subclause 49(5) clarifies that the matters listed in subclause 49(4) do not limit, but
add to, the general policy guidelines for the Productivity Commission provided for in
section 8 of the PC Act.
Paragraph 49(4)(l) provides that the Productivity Minister can, by written
determination, specify other matters for which the Productivity Commission must
have regard to in holding the inquiry and making the report. Following this,
subclause 49(6) provides that before the Productivity Minister makes a declaration
specifying any such matters, he or she must consult with both the Minister and the
Finance Minister. This will enable both Ministers to advise the Productivity Minister
on any other relevant matters that are not listed in subclause 49(4). This clause
provides flexibility for other matters to be considered which, given the long period of
time that will elapse before the Productivity Commission inquiry will commence,
cannot possibly be foreseen at this point in time.
Subclause 49(7) states that a determination made under paragraph 49(4)(l) is a
legislative instrument, but section 42 (disallowance) of the LIA does not apply to the
determination. As the determination functions as a direction from the Productivity
Minister to the Productivity Commission, it would not be disallowable under item 41
of subsection 44(2) of the LIA.
Paragraph 49(8)(a) ensures that the Productivity Commission identifies assumptions it
makes in arriving at conclusions in the report. Paragraph 49(8)(b) also ensures that the
Productivity Commission considers plausible alternative assumptions that may have
had an effect on a conclusion reached. The Productivity Commission must also detail
in its report the effect such an alternative plausible assumption would have had on the
particular conclusion. The Productivity Commission would exercise its own
professional judgment as to what alternative assumptions are plausible in this regard.
Subclause 49(8) will promote transparency of analysis.
Subclause 49(9) clarifies that for the purposes of the clause, the principles under
Part XIB of the CCA are to be used to determine whether an NBN corporation has a
substantial degree of power in a telecommunications market.
One of the Productivity Commission's functions under paragraph 6(1)(a) of the PC
Act is to hold inquiries and report to the Minister about matters relating to industry,
industry development and productivity that are referred to it by the relevant Minister.
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Subclause 49(10) makes it clear that each matter mentioned in subclause 49(2) is
taken to be a matter relating to industry, industry development and productivity, for
the purposes of paragraph 6(1)(a) of the PC Act.
Clause 50 - Declaration by Finance Minister--whether conditions suitable for an
NBN Co sale scheme
Under subclause 50(2), the Finance Minister may, at his or her discretion, declare in
writing that, in his or her opinion, conditions are suitable for entering into and
carrying out an NBN Co sale scheme. However, the Finance Minister's discretionary
power under subclause 50(2) is conditioned. Under subclause 50(1), it only applies if
the Parliamentary Joint Committee on the Ownership of NBN Co has reported to the
Parliament, under proposed paragraph 3(1)(b) of Schedule 2 to the Companies Bill, on
the Committee's examination of the report of the Productivity Commission inquiry
into certain matters relating to the NBN and NBN Co (as required by clause 49).
In deciding whether to make a declaration, the Finance Minister must have regard to
NBN Co's governance arrangements, NBN Co's business record, market conditions
and such other matters (if any) as the Finance Minister considers relevant
(subclause 50(3)).
Any declaration made by the Finance Minister under this clause must be tabled in
each House of Parliament within 15 sitting days of being made (subclause 50(4)) and
published on the website of the Department of Finance (subclause 50(8)).
Subclause 50(9) provides that a declaration made under this clause is not a legislative
instrument. However, the effect of subclauses 50(4)-(6) is that either House of
Parliament may disallow a declaration by the Finance Minister that conditions are
suitable for entering into and carrying out an NBN Co sale scheme. Such a declaration
made by the Finance Minister will only take effect if neither House of Parliament
passes a motion disallowing the declaration within the 15 sitting days following the
tabling of the declaration in that House.
If either House of Parliament passes a resolution under subclause 50(5) disallowing a
declaration made by the Finance Minister that conditions are suitable for an NBN Co
sale scheme, then at any point after that, the Finance Minister may make such a
declaration again, in which case that later declaration would again be subject to
Parliamentary scrutiny and disallowance, and would only take effect if not disallowed
by either House of Parliament (see subclause 50(7)).
These provisions are intended to provide appropriate Parliamentary oversight of the
termination of the Commonwealth ownership provisions.
A declaration made by the Finance Minister under subclause 50(2) is not a legislative
instrument (subclause 50(9)). Given the specific disallowance and publication
requirements that apply to such a declaration, it is not appropriate to also make those
instruments subject to the LIA.
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Clause 51 - Termination of Commonwealth ownership provisions
Clause 51 determines when the Commonwealth ownership provisions cease.
Subclause 51(1) provides that this clause applies if the Finance Minister makes a
declaration under subclause 50(2) that, in his or her opinion, conditions are suitable
for the entering into and carrying out of an NBN Co sale scheme, and if that
declaration takes effect (i.e. if neither House of Parliament disallows the declaration
within 15 sitting days of it being tabled in that House). When the declaration takes
effect, the Commonwealth ownership provisions cease to have effect. The effect of
this provision is that an NBN Co sale scheme may be entered into and carried out (see
clause 54), and the Commonwealth can transfer its shares in NBN Co.
Subdivision C--Sale by the Commonwealth of its shares in NBN Co
Subdivision C of Division 2 of Part 3 sets out rules governing the sale by the
Commonwealth of its shares in NBN Co.
These provisions are supported by the executive power of the Commonwealth.
Clause 52 - Simplified outline
Clause 52 provides a simplified outline of Subdivision C of Division 2 of Part 3.
Clause 53 - When NBN Co sale scheme may be entered into and carried out
Subclause 52(1) provides that an NBN Co sale scheme must not be entered into and
carried out until the Commonwealth ownership provisions cease under clause 51.
`NBN Co sale scheme' has the meaning given by clause 54 (see below).
Clause 54 - NBN Co sale scheme
The object of clause 54 is to define `NBN Co sale scheme' and other expressions used
as part of the NBN Co sale scheme.
Subclause 54(2) defines an NBN Co sale scheme as a scheme the object of which is to
transfer the whole or a part of the Commonwealth's equity in NBN Co to other
persons. This definition also provides for progressive transfer. It has a very broad and
flexible meaning, encompassing the actions listed in subclause 54(5), that will be
necessary or desirable to carry out the sale of the Commonwealth's equity in NBN
Co. This broad meaning is further emphasised by:
- subclause 54(7) which provides that subclauses 54(5) and (6) (which list
specific matters that an NBN Co sale scheme may involve) do not limit the
broad meaning of the expression; and
- subclause 54(6) which provides that in deciding whether a scheme is an NBN
Co sale scheme, the economic and commercial substance of the scheme must
be considered.
Subclause 54(5) sets out a number of detailed matters that may be involved in an
NBN Co sale scheme. Some of the detailed matters include:
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- the issue of securities in NBN Co, share transfers, cancellations and buybacks
and redemptions of redeemable preference shares held by the Commonwealth;
- payment by NBN Co of a dividend, reducing NBN Co's share capital or the
return of capital by NBN Co;
- the use of sale-scheme hybrid securities by designated companies, and
Commonwealth guarantees in relation to those securities;
- securities lending arrangements; and
- modifying NBN Co's constitution.
Subclause 54(4) enables the Finance Minister to make a written determination setting
out rules that are to be complied with by an NBN Co sale scheme. Subclause 54(4)
should be read together with subclause 54(9), which provides that a determination
under subclause 54(4) is a legislative instrument, but is not disallowable. For
commercial reasons, it is not appropriate that an instrument made by the Finance
Minister setting out rules that are to be complied with by an NBN Co sale scheme
should be disallowable. It will be important to ensure commercial certainty in
connection with the NBN Co sale scheme. It may be necessary, depending on market
conditions operating at the time of the sale, for additional rules governing an NBN Co
sale scheme to be established which operate with the force of law. A ministerial
determination would provide this force of law, and commercial certainty. This
certainty would not be available if the determination were subject to disallowance.
In addition, the direction operates like a ministerial direction to NBN Co. Ministerial
directions are not subject to disallowance (see item 41 of the table in subsection 44(2)
of the LIA).
Subclause 54(8) defines a `designated company' as either a wholly-owned
Commonwealth company, or a body corporate specified in a written declaration made
by the Finance Minister under subclause 54(4)).
A `wholly-owned Commonwealth company' is defined at section 34 of the CAC Act.
Section 34 of the CAC Act provides that for the purposes of that Act a `wholly-owned
Commonwealth company' means any Commonwealth company, other than a
company in which any of the shares are beneficially owned by a person other than the
Commonwealth. A `Commonwealth company' is a Corporations Act company in
which the Commonwealth has a controlling interest. However, it does not include a
company in which the Commonwealth has a controlling interest through one or more
interposed Commonwealth authorities or Commonwealth companies.
Subclause 54(10) clarifies, for the avoidance of doubt, that a declaration of a
designated company under paragraph 54(8)(b) is not a legislative instrument. A
declaration by the Finance Minister of a designated company will be administrative in
character and therefore not a legislative instrument for the purposes of the LIA.
The effect of paragraph 54(5)(m) and subclause 54(8) is that an arrangement under
which one or more designated companies (each of which is called a `hybrid-security
issuer company') issues sale-scheme hybrid securities can form a part of an NBN Co
sale scheme.
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Subclause 54(11) clarifies that, to the extent that an NBN Co sale scheme is in
writing, it is not a legislative instrument. An NBN Co sale scheme is any scheme that
has the object of transferring Commonwealth ownership in NBN Co. As such, an
NBN Co sale scheme may not be fully in writing. The clause promotes clarity and
certainty in the conduct of the NBN Co sale scheme.
If an NBN Co sale scheme, to the extent that it is in writing, were to be regarded as a
legislative instrument, it would be subject to registration and disallowance. The
Government of the day will require certainty that the sale scheme can be entered into
and carried out. This certainty would not be available if the sale scheme were a
legislative instrument and subject to disallowance. In addition, it is not appropriate
that the sale scheme be published and be publicly available: it will contain
commercially sensitive information. The Parliament has the opportunity to scrutinise
the Finance Minister's decision to proceed with the sale of NBN Co when he or she
tables the declaration that conditions are suitable for an NBN Co sale scheme under
clause 50. That declaration is disallowable.
Clause 55 - Sale-scheme hybrid securities
The ability to issue hybrid securities as part of the NBN Co sale scheme will provide
additional flexibility in the structuring of such a scheme. Hybrid securities are a broad
classification for a group of securities that combine both debt and equity
characteristics. The additional characteristics, compared to ordinary equity, make
these securities attractive to additional groups of investors. Accessing all relevant
investor groups will be an important consideration for the successful conduct of an
NBN Co sale scheme.
For the purposes of this Bill, a `sale-scheme hybrid security' will be broadly defined
in subclause 55(1).
The term `security', used in the definition of sale-scheme hybrid security, is defined
in subclause 55(8) to have the same meaning as in Chapter 7 of the Corporations Act
(see section 761A of that Act).
The term `financial product', used in the definition of sale-scheme hybrid security, is
defined in clause 5 of the Companies Bill to have the same meaning as Chapter 7 of
the Corporations Act. Division 3 of Part 7.1 of the Corporations Act defines a
financial product. In general, a financial product includes an arrangement through
which, or through the acquisition of which, a person makes a financial investment,
manages financial risk or makes non-cash payments.
The references in the definition of sale-scheme hybrid security to a security, share or
financial product that `will be redeemed in exchange for' a share or shares in NBN
Co, `will be converted to' or `will be exchanged for' a share in NBN Co are
references to an issue of the security, share or financial product on the basis that
redemption, conversion or exchange will be mandatory (by either the holder or the
issuer) after a specified period.
The references to a security, share or financial product that `may be redeemed in
exchange for' a share or shares in NBN Co, `may be converted to' or `may be
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exchanged for' a share in NBN Co are references to an issue of the security, share or
financial product on the basis that redemption or conversion will be optional (by
either the holder or issuer) after a specified period.
A security or financial product covered by subclause 55(1) may, but need not, include
a charge, lien or pledge (subclause 55(2)). The term `charge' is defined in clause 5 to
have the same meaning as in the Corporations Act. Section 9 of the Corporations Act
provides that `charge' means a charge created in any way and includes a mortgage
and an agreement to give or execute a charge or mortgage, whether on demand or
otherwise.
An interest-bearing security that is issued on the basis that it will or may be redeemed
in exchange for, or converted to, or will or may be exchanged for, a share or shares in
NBN Co, may be issued in Australia or overseas and may be denominated in
Australian or foreign currency (subclause 55(3)).
A share that is redeemable in exchange for a share or shares in NBN Co may be
issued in Australia or overseas and any rights or obligations in relation to the share
may be denominated in Australian or foreign currency (subclause 55(4)). Similarly, a
non-interest bearing security or financial product that is redeemable in exchange for,
or may be exchanged for, or is convertible to, a share or shares in NBN Co, or a
security or financial product specified in a ministerial declaration, may be issued in
Australia or overseas and may be denominated in Australian or foreign currency
(subclause 55(5)).
An option to acquire a share or shares in NBN Co may be issued in Australia or
overseas and the exercise price may be denominated in Australian or foreign currency
(subclause 55(6)).
Subclause 55(7) provides that a declaration by the Finance Minister of a security or
financial product under subparagraph 55(1)(i)(i) is a legislative instrument, but
section 42 (disallowance) of the LIA does not apply to the declaration. Such an
instrument is legislative in character and should therefore be a legislative instrument
for the purposes of the LIA, but, in the interests of ensuring commercial certainty in
connection with an NBN Co sale scheme, the Finance Minister's declaration will not
be subject to Parliamentary disallowance.
Clause 56 - Exemption from stamp duty--transfer by the Commonwealth of its
shares in NBN Co etc.
Clause 56 provides that stamp duty or other tax is not payable under a law of a State
or Territory in respect of certain designated matters relating to entering into or
carrying out an NBN Co sale scheme.
A list of designated matters are specified in subclause 56(1), where the matter relates
to the entering into or carrying out of an NBN Co sale scheme, and include:
· the issue of sale-scheme hybrid securities;
· the receipt of money by the Commonwealth, or its agent, in respect of the issue of
sale-scheme hybrid securities;
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· the receipt of money by a hybrid-security issuer company, or its agent, in respect
of the issue of sale-scheme hybrid securities;
· the redemption, exchange or conversion of sale-scheme hybrid securities;
· the transfer by a hybrid-security issuer company of a share in NBN Co held by the
company;
· the grant of a charge, lien or pledge (whether in connection with sale-scheme
hybrid securities or otherwise);
· an agreement relating to certain matters covered by specified paragraphs of
subclause 56(1); and
· a securities lending arrangement.
Subclause 56(3) does however note that stamp duty or other State and Territory taxes
will be payable, even where the matter comes under a designated matter, in such
circumstances as are specified in the regulations, or if the stamp duty or tax in
question is of a kind specified in the regulations.
Clause 57 - Authorisation of borrowing--issue of sale-scheme hybrid securities
Section 37 of the FMA Act provides that an agreement for the borrowing of money by
the Commonwealth is of no effect unless the borrowing is authorised by an Act. The
use of sale-scheme hybrid securities in a NBN Co sale scheme may involve the
Commonwealth (as selling shareholder) entering into borrowing arrangements. This
clause provides the necessary legislative authority for such a borrowing.
Clause 58 - Appropriation--costs incurred in connection with an NBN Co sale
scheme
Clause 58 provides an appropriation to the extent necessary for the purpose of the
payment or discharge of the costs, expenses and other obligations incurred by the
Commonwealth in connection with the formulation, entering into, or carrying out, of
an NBN Co sale scheme. Subclause 58(2) provides an indicative list of those
expenses.
Clause 59 - Assistance given by NBN Co or the Board in connection with an
NBN Co sale scheme
Subclauses 59(1) and (2) provide that NBN Co, or a member of the Board of NBN
Co, may, on their own initiative, assist the Commonwealth in connection with
formulating, entering into or carrying out an NBN Co sale scheme. These are standard
provisions which are generally included in legislation relating to the sale of
Commonwealth assets.
Subclauses 59(3) and (4) provide that the Communications Minister and Finance
Minister may request specific assistance from NBN Co or a Board member of NBN
Co, in connection with formulating, entering into, or carrying out, an NBN Co sale
scheme. The assistance must be given as requested.
Subclauses 59(5) and (6) confer power on the Communications Minister and the
Finance Minister to issue directions about this assistance and provide a mechanism to
manage the application of immunities.
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Assistance may be provided under clause 59 in connection with the formulation,
entering into, or carrying out, of an NBN Co sale scheme. The words `in connection
with' is intended to have a wide interpretation: it is intended that subclauses 59(1)-(4)
include the giving of assistance in relation to matters that are preparatory for, and
incidental to, an NBN Co sale scheme as well as matters more directly related to an
NBN Co sale scheme.
Subclause 59(7) provides various immunities where assistance is provided by a
director of NBN Co, or by the company itself (including through employees) under
subclauses 59(1)-(4), where a direction is issued under subclause 59(5) or (6) or
where a request is made under subclause 59(3) or (4). To give appropriate protection
to NBN Co and the Board from liability for the making of a request, the giving of
assistance or compliance with a direction under clause 59, subclause 59(7) gives
immunity from breaches of the Corporations Act, the listing rules, and rules of
common law or equity (other than rules of administrative law). This reflects similar
provisions that have been included in legislation relating to the sale of
Commonwealth assets, notably the Medibank Private Sale Act 2006 and the Telstra
(Transition to Full Private Ownership) Act 2005.
Subclause 59(8) makes clear that a breach of one of the mandatory provisions in
clause 59 is not an offence; however, it will be a ground to obtain an injunction in the
Federal Court under Part 6 (see below).
Clause 60 - Giving of assistance--ancillary provisions
Subclause 60(1) makes it clear that assistance given by NBN Co under
subclauses 59(1)-(4) can take a number of forms, including giving information, giving
financial assistance, giving a financial benefit to a related party, or providing
information, facilities and other assistance in connection with due diligence procedure
or similar processes or marketing briefings (including through employees of NBN
Co).
The use of the singular `market briefing', `procedure' and `process' in
paragraph 60(1)(d) will not restrict the Commonwealth to only one briefing,
procedure or process (see paragraph 23(b) of the AIA).
This list does not limit the forms of assistance that may be given (subclause 60(2)).
Requirements to give assistance, however, must not to amount to imposing taxation
(subclause 60(4)).
Subclause 60(5) does not limit the executive power of the Commonwealth to enter
into an agreement or the capacity of NBN Co, or of a member of the Board, to enter
into an agreement with the Commonwealth.
Clause 61 - Reimbursement of expenses incurred in giving assistance
Clause 61 provides that the Finance Minister may authorise payment by the
Commonwealth to NBN Co, or to a Board member, to reimburse expenses the
Finance Minister considers reasonably incurred in giving assistance under clause 59.
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Subclause 61(4) makes it clear that clause 61 does not otherwise limit the executive
power of the Commonwealth to make such payments. The Consolidated Revenue
Fund is appropriated for the purposes of making payments under subclause 61(3).
Clause 62 - Commonwealth to be bound by Chapters 6CA, 6D and 7 of the
Corporations Act 2001
Clause 62 provides that the continuous disclosure provisions in Chapter 6CA, the
fundraising provisions in Chapter 6D and the financial services and markets
provisions in Chapter 7 of the Corporations Act bind the Crown in right of the
Commonwealth to the extent that those Chapters deal with the formulation, entering
into, or carrying out of an NBN Co sale scheme (subclause 62(1)). This is to be the
case despite subsection 5A(4) of the Corporations Act.
Division 3 of Part 7.10 of the Corporations Act contains insider trading prohibitions.
Subsection 1043A(1) of the Corporations Act prohibits a person who possesses inside
information from buying or selling shares or other financial products. `Inside
information' is information that is not generally available but that, if it were generally
available, a reasonable person would expect to have a material effect on the price or
value of particular shares or other financial products. Section 1043F of the
Corporations Act provides a `Chinese walls' exemption from the insider trading
prohibitions for bodies corporate.
Subclauses 62(4) and (5) make it clear that certain conduct of the Commonwealth will
not be taken to breach the insider trading prohibitions in the Corporations Act.
Subclause 62(4) provides that the Commonwealth does not contravene the insider
trading prohibition in subsection 1043A(1) of the Corporations Act by entering into a
transaction or agreement in relation to shares in NBN Co, sale-scheme hybrid
securities or an NBN Co sale scheme merely because of information in the possession
of a Commonwealth employee or a Commonwealth office holder, in the
circumstances specified in paragraphs 62(4)(d)-(f).
Clause 63 - Reduction of NBN Co's share capital
This clause applies where there is a reduction of NBN Co's share capital as part of an
NBN Co sale scheme, if the reduction involves the replacement of a particular kind of
share with another kind of share and the replacement of the reduced capital.
Section 256B of the Corporations Act requires that a reduction in the share capital of
a company be fair and reasonable to the company's shareholders as a whole, not
materially prejudice the company's ability to pay its creditors and be approved by
shareholders under section 256C.
It is possible that one element of an NBN Co sale scheme could involve a conversion
of shares and re-structuring of share capital. If such an NBN Co sale scheme results in
the replacement of the reduced share capital, it would not affect the capital reserves of
NBN Co, the solvency of the company or the interests of creditors.
However, to avoid doubt, subclause 63(2) provides that, if the reduction of capital as
part of an NBN Co sale conforms to clause 63, NBN Co would not be required to give
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creditors notice of a proposed share capital reduction relating to an NBN Co sale
scheme. Also, creditors would not be entitled to object to the reduction
(subclause 63(3)) and the reduction would not need to be confirmed by the Court
(subclause 63(4)).
Clause 64 - Alterations of NBN Co's constitution--notice to debenture holders
Clause 64 applies if there is an alteration of NBN Co's constitution which relates to
the formulation, entering into, or carrying out of an NBN Co sale scheme.
Subclause 64(2) provides that, if an alteration of NBN Co's constitution conforms to
clause 64, NBN Co would not be required to give trustees for debenture holders or
debenture holders notice of a general meeting specifying an intention to propose a
resolution for the alteration. Further, a court is not empowered to cancel the alteration.
This is to be the case despite anything in the Corporations Act.
Clause 65 - Alteration of NBN Co's constitution--ministerial instrument
Clause 65 provides a simple mechanism to remove special rights and privileges of
the Commonwealth that are included in NBN Co's constitution, once the
Commonwealth no longer controls NBN Co. In the absence of such a provision, the
company may be put to the expense of holding a general meeting to make the
necessary changes to its constitution.
Subclause 65(1) enables the Communications Minister and the Finance
Minister to alter NBN Co's constitution if:
· the alteration relates to an NBN Co sale scheme; and
· the effect is to remove, restrict or limit any rights, privileges or
immunities of the Commonwealth or remove any requirements for the
Commonwealth, the Communications Minister or the Finance Minister
or ministerial consent or direction.
Subclause 65(2) requires the Communications Minister and the Finance Minister to
consult the members of the Board of NBN Co before making such an instrument.
Subclause 65(3) makes it clear that the making of such an instrument does not
contravene the Corporations Act, a listing rule or a rule of common law or equity.
This clause reflects similar provisions that have been included in legislation relating
to the sale of Commonwealth assets, notably the Telstra (Transition to Full Private
Ownership) Act 2005.
Clause 66 - Use by the Commonwealth of information obtained from NBN Co or
the Board
Clause 66 is intended to ensure that the Commonwealth, or an associated person, are
able to use and disclose information provided by NBN Co under clause 59 for the
purposes of an NBN Co sale scheme.
It also provides that the Commonwealth or an associated person may use or disclose
such information for a purpose other than an NBN Co sale scheme, such as for the
purposes of shareholder oversight of NBN Co, so long as that use or disclosure does
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not involve giving the information to a person who is not an associated person
(subclause 66(4)).
An `associated person' is defined in subclause 66(6) as a Minister, a Commonwealth
officer, a person engaged under the Public Service Act 1999, or a person who
performs services for or on behalf of the Commonwealth in connection with the NBN
Co sale scheme or the Commonwealth's capacity as a shareholder in NBN Co.
To avoid any doubt, subclause 66(5) ensures that use and disclosure of information in
accordance with this clause will not result in a contravention of, or give rise to a
liability or remedy under, the Corporations Act, the listing rules or rules of common
law or equity.
Clause 67 - Agreements relating to the protection of information obtained from
NBN Co or the Board
Clause 67 allows the Commonwealth to enter into an agreement with NBN Co to
protect information provided to the Commonwealth under clause 59 that might
reasonably be expected to prejudice the commercial interests of NBN Co. Such an
agreement is enforceable as a contract. Subclause 67(3) makes it clear that this clause
does not limit the general executive power of the Commonwealth to enter into
agreements.
Clause 68 - NBN Co's obligations to disclose information
Clause 68 removes any doubt that the mere provision of information by NBN Co to
the Commonwealth under clause 59 will not, of itself, trigger any obligation by that
company to disclose that information under the listing rules of a securities exchange
(such as the continuous disclosure requirements of the Australian Stock Exchange
Listing Rules), or the Corporations Act.
Division 3--Private ownership and control of NBN Co
Division 3 of Part 3 creates a head of power for the making of regulations in relation
to an `unacceptable private ownership or control situation' in relation to NBN Co. The
ACCC will be responsible for the oversight of Division 3 of Part 3.
Clause 69 - Unacceptable private ownership or control situation
Restriction on private ownership or control of NBN Co is to be achieved through
prohibiting transactions that result in an `unacceptable private ownership or control
situation' (clause 69). An `unacceptable private ownership or control situation' is to
be defined in regulations to be made by the Governor-General. Such regulations could
cover, for example, caps on the stake that may be held by a person in NBN Co, or by
a retail carriage service provider or content service provider in NBN Co. Subclause
69(2) provides that the regulations may confer power on the ACCC to make
decisions. Subclause 69(3) provides that before the Governor-General makes a
regulation the Communications Minister must consult the ACCC.
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Until the NBN is built and fully operational, concerns that retail service providers could
invest in NBN Co with a view to gaining control of it and favouring their downstream
operations, contrary to the intention of NBN Co's wholesale-only mandate, are addressed
by the Commonwealth's full ownership. After the Commonwealth has commenced to sell
down its stake in NBN Co, such a situation could arise. These concerns could be
addressed through the regulation-making power described.
As indicated in the notes on clause 49, the Productivity Commission will consider
ownership and control issues as part of its inquiry into the regulatory framework for the
NBN.
Clause 70 - Prohibition of unacceptable private ownership or control situation
Clause 70 requires NBN Co to take all reasonable steps to ensure that an unacceptable
private ownership or control situation does not exist in relation to the company. A
contravention of this clause is an offence, for which the penalty is 500 penalty units.
Clause 71 - Remedial orders
If an unacceptable private ownership or control situation exists in relation to NBN Co,
subclause 71(1) enables the Federal Court, upon application from the
Communications Minister or the ACCC or NBN Co, to make such orders as it
considers appropriate for the purpose of ensuring that the situation ceases to exist.
Subclause 71(2) sets out specific matters that could be covered by Federal Court
orders (for example, an order directing disposal of shares or restraining the exercise of
rights attaching to shares), while subclause 71(3) would allow other kinds of orders to
be made.
Subclause 71(4) enables the Federal Court to make ancillary or consequential orders,
including an order directing a person to do or refrain from doing a specified act or
thing.
Subclause 71(5) enables the Federal Court, before making an order, to direct that
notice of the application be given to such persons, or be published in such manner as
it thinks fit, or both.
Subclause 71(6) empowers the Federal Court to rescind, vary, discharge or suspend
the operation of orders under this clause.
Clause 72 - Record-keeping and giving of information
Subclause 72(1) enables regulations to be made to require a person to keep and retain
records relevant to an NBN Co ownership or control matter (defined in
subclause 72(6), see below). The regulations may also require information relevant to
an NBN Co ownership or control matter to be given to the Communications Minister,
or the ACCC, or to NBN Co. This provision may be necessary to enable decisions to
be made about enforcing the ownership limits.
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The regulations may require this information to be verified by statutory declaration
(subclause 72(2)), but will not compel an individual to give information that might
tend to incriminate the individual, or expose him or her to a penalty (subclause 72(3)).
Subclause 72(4) provides that a person must comply with regulations made for the
purposes of subclause 72(1). A failure to do so is an offence, with a penalty of 50
penalty units. Under section 4B of the Crimes Act 1914, a court may impose a penalty
of up to five times this amount when an offence is committed under subclause 72(4)
by a body corporate.
Subclause 72(5) enables regulations made under this clause to confer discretionary
powers on the Communications Minister or the ACCC and gives an example of such a
provision (the example concerns the Communications Minister calling for information
from NBN Co).
Subclause 72(6) defines an `NBN Co ownership or control matter' as a matter relating
to an unacceptable private ownership or control situation or the question whether an
unacceptable private ownership or control situation is in existence or will exist.
Subclause 72(7) makes it clear that this clause does not limit either Division 6 of Part
XIB, or section 155 of the CCA. The provisions provide information-gathering
powers for the ACCC and permit record-keeping rules to be made by the ACCC.
Clause 73 - Validity of acts done in contravention of this Division
Clause 73 makes it clear that even if an act is done which constitutes an offence
against this Division, it does not invalidate the act.
Clause 74 - Acquisition of property
This clause prevents the Federal Court from making an order under Division 3 if it
would result in an acquisition of property from a person other than on just terms or if
it would be invalid due to paragraph 51(xxxi) of the Constitution. Subclause 74(2)
defines `acquisition of property' and `just terms' to have their meanings under the
Constitution.
Division 4--General provisions
Clause 75 - Interest in a share
Clause 75 specifies the circumstances in which a person is taken to hold an `interest in
a share' for the purposes of Part 3 of the Companies Bill, which is a term used in
clause 56. Subclause 75(1) provides that any kind of legal or equitable interest in the
share results in the holder holding an interest in the share and also provides a number
of specific situations in which a person is taken to hold an interest in a share
(subclause 75(2)). These are (in summary):
· where the person has entered into a contract to purchase the share;
· where the person has a right to have the share transferred to the person or to
the person's order;
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· where the person has a right to acquire the share, or an interest in the share,
under an option;
· where the person is otherwise entitled to acquire the share or an interest in the
share; and
· where the person is entitled to exercise or control the exercise of a right
attached to the share.
Subclause 75(3) clarifies that the specific cases listed in subclause 75(2) do not limit
subclause 75(1).
Under subclause 75(6), it is made clear that remoteness, the way in which the interest
arose and conditionality of an interest does not prevent an interest being an interest in
a share for the purposes of Part 3.
Clause 76 - Extra-territorial application
Clause 76 makes it clear that Part 3 applies both within and outside Australia.
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Part 4--NBN Co's reporting obligations
Part 4 imposes reporting obligations on NBN Co and on the Board (a term defined in
clause 5 to mean the board of directors of NBN Co). The reporting obligations relate
to both the activities of NBN Co and of other NBN corporations.
Clause 77 - Simplified outline
Clause 77 provides a simplified outline of Part 4 to assist the reader.
Clause 78 - Application of this Part
The effect of clause 78 is that Part 4 only applies if NBN Co is not a wholly-owned
Commonwealth company within the meaning of the CAC Act (i.e. after the
Commonwealth has started to transfer its ownership of NBN Co).
This provision is necessary as the reporting obligations for Commonwealth companies
set out in the CAC Act only apply to wholly-owned Commonwealth companies. As a
result, after the Commonwealth transfers any part of its stake in NBN Co, the CAC
Act would cease to apply. The Commonwealth would nevertheless continue to have a
vital interest in NBN Co's operations. Part 4 has therefore been included to ensure
reporting obligations would apply to NBN Co, and members of the Board during the
time when NBN Co ceases to be a wholly-owned Commonwealth company but the
Commonwealth still holds majority ownership of NBN Co. Part 4 will cease to
operate when the Commonwealth ceases to own a majority stake in NBN Co (see
clause 85).
Clause 79 - Financial statements
Clause 79 provides that the Minister and the Finance Minister can direct NBN Co to
give them a specified financial statement or statements for a specified period.
Subclause 79(3) provides example of periods that may be specified by the Ministers
under subclause 79(1). A `financial statement' includes financial statements for the
group consisting of NBN corporations.
Subclause 79(4) provides that a member of the Board must prepare each financial
statement in accordance with any written guidelines given to the Board from the
Ministers and provide the financial statements within two months after the end of the
period to which the statement relates. Subclause 79(5) provides the Ministers with the
ability to grant extensions of time to the Board under special circumstances.
Subclause 79(6) clarifies that any guidelines provided by the Ministers will not be
legislative instruments. The guidelines would function as directions to the Board of an
NBN corporation and would therefore not be disallowable under item 41 of the table
in subsection 44(2) in the LIA
Clause 80 - Communications Minister and Finance Minister to be notified of
significant events
Under clause 80, members of the Board must immediately give the Ministers written
particulars of significant events proposed to be undertaken by an NBN corporation.
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Subclause 80(1) provides a list of the events that must be notified. Subclause 80(3)
also provides that the Ministers may give written guidelines to the Board in order to
assist the Board in determining whether a proposal is covered under the listed
significant events in subclause 80(1). A guideline provided under subclause 80(3) is
not a legislative instrument (subclause 80(4)). The guidelines would function as
directions to the Board of an NBN corporation and would therefore not be
disallowable under item 41 of the table in subsection 44(2) in the LIA.
Subclause 80(2) also provides the Ministers with the ability to exempt the Board from
the requirement under subclause 80(1). This exemption can be provided subject to
conditions. This provision is consistent with the Telstra Corporation Act 1991 and the
CAC Act.
Clause 81 - Keeping the Communications Minister and the Finance Minister
informed
Clause 81 places an obligation on the Board to keep the Ministers informed of the
operations of NBN corporations, and to give the Ministers such reports, documents
and information in relation to those operations as the Ministers individually require,
within such time limits set by those Ministers.
Clause 82 - Corporate plan for NBN Co
The members of the NBN Co Board will be required to prepare a corporate plan at
least once a year and provide it to the Ministers (subclause 55(1)). The plan will be
required to cover a period of at least three years and not more than five years
(subclause 82(2)). The plan must cover each NBN corporation (subclause 82(3)). The
members of the Board will be required to keep the Ministers informed about changes
to the plan and matters that might significantly affect the achievement of the
objectives set out in the plan (subclauses 82(4) and (5)).
The plan will be required to include the matters listed at subclauses 82(6) and (7):
these include, for each NBN corporation, details of the company's objectives, the
strategies and policies that are to be followed by the company in order to achieve
those objectives and such other matters as the Ministers require.
Clause 83 - Consequences of contraventions of this Part
Clause 83 provides while a contravention of this Part is not an offence, it is a ground
for obtaining an injunction under Part 6 (see below).
Clause 84 - This Part has effect despite the Corporations Act 2001 etc.
Clause 84 makes it clear that the operation of Part 4 of the Companies Bill does not
contravene, or give rise to a liability or remedy under, a provision of the Corporations
Act, or a rule of common law or equity (other than a rule of administrative law).
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Clause 85 - When this Part ceases to have effect
Clause 85 provides that Part 4 of the Companies Bill, regarding NBN Co's reporting
obligations, will cease to have effect at the end of the `majority interest sale day' for
NBN Co.
Subclause 85(2) provides that the Minister must by written instrument declare the first
day in which a majority of the voting shares in NBN Co are held by person(s) other
than the Commonwealth to be the `majority interest sale day' for NBN Co.
Subclause 85(3) clarifies that the declaration is a legislative instrument but section 42
of the LIA, concerning disallowance, does not apply. The Minister's declaration will
be legislative in character and therefore a legislative instrument for the purposes of
the LIA. The Minister will need to determine when the majority interest sale day
occurs, based on advice from NBN Co and others. Therefore, the Minister will be in
the best position to determine the day, and could be under limited time to make that
opinion. The declaration will also be a statement of fact that will trigger the cessation
of a number of clauses in the Companies Bill. Accordingly, it is not appropriate that
the Minister's declaration be subject to Parliamentary disallowance. This provision
corresponds to similar provisions under sections 3 and 4 of the Telstra (Transition to
Full Private Ownership) Act 2005.
Subclause 85(4) provides that the majority interest sale day may be earlier than the
day on which the declaration is registered under the LIA. This is intended to displace
the general rule about the commencement of legislative instruments at section 12 of
the LIA. The date of the majority interest sale day will be specified in the instrument.
Subclause 85(5) provides a process to use to identify whether, in a securities lending
arrangement, a share is taken to be held by the Commonwealth for the purposes of
this clause.
For the purpose of this clause, a `hybrid-security issuer company' which is
specifically mentioned in a written declaration by the Finance Minister would be
included in any references to the Commonwealth. A written declaration for this
purpose will not be a legislative instrument. The Finance Minister's declaration would
be administrative in character and therefore not a legislative instrument. Furthermore,
should the Finance Minister decide to designate a company, this would be in the
context that such designation was critical to the conduct of an NBN Co sale scheme.
The Government will require certainty that the decision to designate a company will
not be overturned. This certainty would not be available if the declaration were a
legislative instrument and subject to disallowance.
This provision corresponds to similar arrangements applying to the sale of Telstra
under the Telstra (Transition to Full Private Ownership) Act 2005.
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Part 5--Anti-avoidance
Clause 86 - Anti-avoidance
Subclause 86(1) provides that an NBN corporation must not, either alone or with one
or more persons, enter into, or begin to carry out, a scheme if it would be concluded
that this was done for the sole or dominant purpose of avoiding the application of any
provisions of this Act relating to that NBN corporation or any other NBN corporation.
`Scheme' is provided with a wide ranging definition in subclause 86(4).
A contravention of subclause 86(1) is not an offence, but is a ground upon which the
Communications Minister or the Finance Minister can obtain an injunction in the
Federal Court under Part 6.
A contravention of subclause 86(1) does not affect the validity of any transaction.
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Part 6--Injunctions
Clause 87 - Simplified outline
Clause 87 provides a simplified outline of Part 6 of the Companies Bill.
Clause 88 - Injunctions
Part 6 confers on the Federal Court power to grant an injunction to enforce
compliance with the provisions of the Companies Bill, once enacted. An injunction
can restrain a person from acting in a particular way or require the person to do a
particular thing.
Subclauses 88(1) and (2) provide that the Minister or the Finance Minister can be the
applicant for an injunction.
Clause 89 - Interim injunctions
Subclause 89(1) provides that an injunction restraining a person from acting in a
particular way under subclause 88(2) may be granted by the Federal Court on an
interim basis. In that case, subclause 89(2) provides that the applicant (the Minister or
the Finance Minister) does not have to give an undertaking to meet any loss that the
person may incur if the interim injunction is granted but, in the event, the final
injunction is refused.
Clause 90 - Discharge etc. of injunctions
Clause 90 provides the power on the Federal Court to discharge or vary an injunction
that is granted under Part 6.
Clause 91 - Certain limits on granting injunctions not to apply
Clause 91 removes certain other restrictions on the granting of an injunction, whether
restraining or performance injunctions, permitting the Federal Court to grant an
injunction whether or not the relevant conduct (or refusal to act) will be repeated, or
whether or not it has already taken place.
Clause 92 - Other powers of the Federal Court unaffected
This clause provides that the powers conferred on the Federal Court under Part 6 are
in addition to the Federal Court's other powers.
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Part 7--Miscellaneous
Clause 93 - Severability
The effect of clause 93 is to ensure that the Companies Bill will operate effectively
with respect to NBN corporations that are constitutional corporations, and with
respect to NBN corporations the operation of which attracts the communications
power in the Constitution, in the event that provisions of the Companies Bill were to
be held to be partly beyond power.
Subclause 93(2) provides that the Companies Bill (other than Division 4 of Part 2,
which relates to divestiture of assets by NBN corporations) has the effect it would
have if subclause 93(3) had not been enacted and each reference in the Companies
Bill to an NBN corporation were confined to an NBN corporation that is a
constitutional corporation (see the definition of this term in clause 5).
Subclause 93(3) provides that the Companies Bill (other than Division 4 of Part 2) has
the effect it would have if subclause 93(2) had not been enacted and each reference in
the Companies Bill to an NBN corporation were confined to an NBN corporation that
carries on, proposes to carry on, or has the object of carrying on, a business that
consists of or includes the supply of a carriage service.
The special effect given to the provisions of the Companies Bill by the operation of
clause 93 does not limit the general effect that the provisions of the Companies Bill
have other than in reliance of the operation of clause 93 (subclause 93(1)).
Clause 94 - Promotion of the long-term interests of end-users of carriage services
and of services supplied by means of carriage services
This clause provides that for the purposes of the Companies Act, the question whether
a particular thing promotes the long-term interests of end-users of carriage services or
of services supplied by means of carriage services is to be determined in the same
manner as it is determined for the purposes of Part XIC of the CCA (see subsection
152AB(2) of that Act).
Clause 95 - NBN Co is not a public authority
Clause 95 provides that NBN Co is taken for the purposes of the laws of the
Commonwealth, of a State or of a Territory, not to have been incorporated or
established for a public purpose or for a purpose of the Commonwealth, not to be a
public authority or an instrumentality or agency of the Crown, and not to be entitled to
any immunity or privilege of the Commonwealth. The wording of this clause ensures
that this provision has the widest possible operation to avoid NBN Co being found to
be a public authority having regard to the variable language used by Commonwealth,
State and Territory legislation when describing public entities, thereby ensuring it is
not captured by that legislation on the grounds that it is a `public authority'.
For instance, this provision clarifies that the Foreign Acquisitions and Takeovers Act
1975 (`the FATA Act') will apply to NBN Co. The FATA Act does not apply to a
corporation constituted for a public purpose by a law of the Commonwealth (see
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subsection 7(3) of that Act). Clause 95 ensures that NBN Co is not exempt from the
FATA Act, because it is not to be considered as established for a public purpose.
Clause 96 - Public Works Committee Act
Clause 96 provides that the Public Works Committee Act 1969 does not apply to an
NBN corporation. NBN corporations will operate as commercial enterprises.
Accordingly, the Public Works Committee Act 1969 should not apply to NBN
corporations. This is to ensure that NBN corporations have sufficient commercial
flexibility to undertake the investments needed to roll out the NBN and is consistent
with arrangements that apply to Australia Post and that previously applied to
Commonwealth-owned carriers such as Telstra, the Overseas Telecommunications
Corporation and Aussat.
Clause 97 - Winding-up of NBN corporation not prevented by this Act
As a company incorporated under the Corporations Act, NBN Co is liable to be
wound up under relevant provisions of that Act, and so would other NBN
corporations. The provisions in the Corporations Act provide an important protection
to the creditors of any company. Clause 97 is intended to remove any implication that
any provisions in the Companies Bill would prevent NBN Co, or other NBN
corporations, from being wound up in accordance with the Corporations Act.
Clause 98 - Rights of NBN corporation's shareholders, debenture holders and
creditors to be subject to this Act
Clause 98 provides that the rights of the shareholders, debenture holders and creditors
of NBN corporations are subject to the provisions in the Companies Bill.
Clause 99 - Delegation
Subclause 99(1) permits the Communications Minister to delegate his or her powers
under the Companies Act, other than clause 48 (declaration that the NBN should be
treated as built and fully operational) to the Secretary of the Department or a Senior
Executive Service (SES) employee or acting SES employee in the Department.
Subclause 99(2) permits the Finance Minister to delegate his or her powers under the
Companies Act, other than clause 50 (declaration that the conditions are suitable for
an NBN Co sale scheme), to the Secretary of the Department of Finance or a Senior
Executive Service (SES) employee or acting SES employee in the Department of
Finance.
Clause 100 - Compensation for acquisition of property
Clause 100 has been included to provide that if, as a result of the operation of any
provision of the Companies Bill, there is an acquisition of a person's property other
than on just terms, the Commonwealth is liable to pay a reasonable amount of
compensation to the person. Subclause 100(2) further provides that if the
Commonwealth and the person affected cannot agree on the amount of compensation,
the person may institute proceedings in the Federal Court.
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Subclause 100(5) defines `acquisition of property' and `just terms' to have their
meanings under the Constitution.
Subclause 100(3) provides that if the operation of clause 34 in relation to the transfer
of an asset to the transferee mentioned in that clause would result in an acquisition of
property from a person otherwise than on just terms, the transferee is liable to pay a
reasonable amount of compensation to the person. This clause has been inserted to
clarify that the transferee bears the responsibility for any compensation payable in
relation to a forced transfer of an asset under that provision.
Subclause 100(4) clarifies that if the transferee and the person do not agree on the
amount of the compensation, the person may institute proceedings in the Federal
Court for the recovery from the transferee of such reasonable amount of compensation
as the Court determines. This is consistent with the approach adopted in other
Commonwealth legislation (see for example section 531L of the Tel Act).
Clause 101 - Regulations
Clause 101 provides that the Governor-General may make regulations prescribing
matters required or permitted to be prescribed or necessary or convenient to be
prescribed for carrying out or giving effect to the Companies Bill, once enacted.
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Schedule 1--NBN corporations
Schedule 1 provides for the definition of NBN corporations. Under clause 5, an `NBN
corporation' has the meaning given by clause 1 of Schedule 1 to the Companies Bill.
Clause 1 - NBN corporations
Clause 1 of Schedule 1 to the Companies Bill provides for the definition of an `NBN
corporation'. Each of the following is an NBN corporation: NBN Co and NBN
Tasmania (which are both specifically defined in clause 5 of the Companies Bill) and
a company over which NBN Co is in a position to exercise control.
Companies over which NBN Co is in a position to exercise control have been
included within the definition of NBN corporation to ensure that, in the event that
NBN Co enters into an arrangement whereby it obtains control of a company, the
obligations that apply to NBN Co will also apply to that company. The main type of
arrangements would be where NBN Co acquires a company, but it could also include
joint ventures or other contractual arrangements. This is to ensure NBN Co has regard
to its wholesale-only and other obligations prior to forming such arrangements, these
obligations are given effect through such arrangements and such arrangements do not,
by accident or intent, by-pass any of NBN Co's obligations.
The concept of a `company over which NBN Co is in a position to exercise control' is
particularly relevant to the situation where NBN Co acquires a carrier or CSP, for
example for the purpose of using its network assets to advance the rollout of the NBN,
and that carrier or CSP offers retail services. For NBN Co to have an ongoing interest
in a company with retail operations would be inconsistent with the objective that
NBN Co should be wholesale-only. This in turn is designed to pre-empt any
preferential treatment of downstream operations to the detriment of retail competition
on the open access wholesale platform NBN Co has been tasked with building and
operating. The obligations that apply to NBN Co will therefore also apply to any
company that becomes controlled by NBN Co. Consequently, the company with retail
operations would no longer be able to offer retail services, and would be subject to the
access, non-discrimination and transparency obligations set out in the Access Bill.
However, in recognition that such acquisitions may help advance the rollout of the
NBN, subitem 1(3) provides that a company that is a retail carriage service provider is
taken not to be an NBN corporation during the first twelve months that NBN Co is in
a position to exercise control of it (so long as any conditions specified in the
regulations are satisfied). This mechanism provides a transitional exemption, by
which NBN Co can acquire necessary assets held by carriers and CSPs with retail
operations, while providing it with a reasonable time to dispose of those retail
operations, particularly so it does not need to dispose of the assets hastily, to its
commercial disadvantage. `Retail carriage service provider' is defined in clause 5 of
the Companies Bill.
This provision has been included to enable NBN Co to have some flexibility to
purchase a retail carriage service provider without the company over which NBN Co
has become in a position to exercise control breaching any obligations under the
Companies Bill (such as only to provide eligible services to a carrier or a service
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provider) for an initial period of 12 months, during which time it is expected that
NBN Co and the other company would arrange for that company to make
arrangements to ensure that that company complies with the provisions of the
Companies Bill. The limit of 12 months ensures that this exception is properly
constrained.
Given NBN Co's clear wholesale-only mandate, it should be understood that such
arrangements are expected to be the exception, rather than the general rule. To the
greatest extent possible, NBN Co would be expected to arrange any acquisition so that
it would not need to acquire any retail operations along with the assets it wished to
acquire.
Moreover, NBN Co will need to notify the Commonwealth of any proposed
acquisitions, including acquisition of a significant shareholding, as part of its
reporting obligations under the CAC Act and under Part 4 of the Companies Bill.
The ACCC could also, under section 50 of the CCA, assess such an acquisition to
determine if it would have the effect, or be likely to have the effect, of substantially
lessening competition in a market. The ACCC would be able to have regard to the
impact of an acquisition on NBN Co's wholesale-only obligations, because one of the
criteria for a section 50 assessment is the level of vertical integration in a market. As
part of a section 50 assessment, NBN Co could submit undertakings under section
87B of the CCA to divest any retail activities associated with the acquisition. The
Government would consider this to be a preferable course of action on the part of
NBN Co to ensure the wider industry and community generally has confidence that
NBN Co is committed to its wholesale-only mandate.
Clause 2 - Control of a company
Clause 2 of Schedule 1 to the Companies Bill sets out that, for the purposes of the
definition of NBN corporation, 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.
Determination under the BSA has been adopted for several reasons. First, the
Schedule provides an expansive definition of control consistent with the
Government's objective of ensuring NBN Co's wholesale-only and other obligations
are widely applied and not easily by-passed. Second, Schedule 1 has been adopted in
the CCS Bill in relation to the test for Telstra's control of a company. Adopting a
different definition of control would have led to inconsistent approaches to the
regulation of firms in the same market. Third, the control concepts used in Schedule 1
are relevant and familiar to the telecommunications sector because of commercial
links and convergence between the telecommunications and broadcasting industries.
For example, a service provider to whom an NBN corporation can supply services
under clause 9 of the Companies Bill could be a content service provider who supplies
content services as an Internet service provider using the NBN and could also be a
broadcaster under the BSA.
The definition of `associate' in clause 3 applies for this purpose, rather than the
definition of `associate' in subsection 6(1) of the BSA. This is also consistent with the
approach taken in the CCS Bill.
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The special provisions for authorised lenders set out under clause 4 of Schedule 1 to
the BSA also apply to the determination of control under the Companies Bill.
Amongst other things, these provisions set out the circumstances for deciding whether
or not a lender or any controller of a lender is in a position to exercise control.
Authorised lenders are defined in clause 4 to Schedule 1 to the BSA and include
authorised deposit taking institutions, corporations formed under the law of a State or
Territory to carry on the business of banking within Australia and a corporation
whose sole or principal business is the provision of financial accommodation to other
persons.
Clause 3 - Associate
Clause 3 provides a definition for an `associate' of NBN Co for the purposes of
Schedule 1 to the Companies Bill. This definition has been modelled on the definition
of associate in section 6 of the BSA.
Subclause 3(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
company and neither of the persons is in a position to exert influence over the
business dealings of the other in relation to the company. It is considered appropriate
that the ACCC is given the discretion to ensure the definition of associate is not
applied too widely. Again, the use of associate provides for an expansive definition of
control consistent with the Government's objective of ensuring NBN Co's wholesale-
only and other obligations are widely applied and not easily by-passed.
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Schedule 2-- Parliamentary Joint Committee on the Ownership of
NBN Co
Schedule 2 to the Companies Bill sets out the procedural aspects associated with
membership, establishment and conduct of the Parliamentary Joint Committee on the
Ownership of NBN Co (the Joint Committee). This is necessary as the Finance
Minister's ability to declare conditions suitable for an NBN Co sale scheme is
conditional on the Joint Committee having reported to Parliament on its examination
of the report of the Productivity Commission inquiry into matters relating to the NBN
and NBN Co (see clause 49). The definition of `Parliamentary Joint Committee on
the Ownership of NBN Co' under clause 5 of the Bill refers to the committee
constituted under Schedule 2.
The proposed provisions in Schedule 2 which specify how the Joint Committee is to
be established are closely modelled -with some modernisation- on those in Part 3 of
the Australian Crime Commission Act 2002 (which established the Parliamentary
Joint Committee on the Australian Crime Commission) and Part 14 of the Law
Enforcement Integrity Commissioner Act 2006 (which established the Parliamentary
Joint Committee on the Australian Commission for Law Enforcement Integrity).
Clause 1 - Parliamentary Joint Committee on the Ownership of NBN Co
Clause 1 sets out the procedural aspects of how the Joint Committee is established and
its membership. Any sale of the Commonwealth's stake in NBN Co will be a matter
of considerable public interest, given that the NBN will be the platform for the
provision of most fixed-line retail services. The Joint Committee is designed to
provide a further level of Parliamentary scrutiny in respect of the future privatisation
of NBN Co, and the findings of the Productivity Commission inquiry.
Subclauses 1(1) and (2) of Schedule 2 to the Companies Bill set out when the Joint
Committee is to be established. The Joint Committee will be established if a report of
the Productivity Commission inquiry mentioned in clause 49 is tabled in the House of
Representatives. The Joint Committee is to be a joint committee of members of the
Parliament, with members to be appointed according to the practice of the Parliament
with reference to the appointment of members to serve on joint select committees of
both Houses of the Parliament (paragraph 1(1)(a) of Schedule 2). The appointment of
the members must occur within 15 sitting days of the House of Representatives after
the tabling of the Productivity Commission's report (paragraph 1(1)(b) of
Schedule 2).
In the event that the House of Representatives is dissolved in between the
Productivity Commission report being tabled and the Joint Committee being
established (i.e. if an election is called during this time), then the 15-sitting day period
permitted for the appointment of the Joint Committee is to "carry over" into the new
Parliament once established. That is, if the House of Representatives is dissolved after
a period of four sitting days after the Productivity Commission report is tabled, then
the Joint Committee will need to be appointed within 11 sitting days of the House of
Representatives, once Parliament resumes.
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The Joint Committee will have 180 days from its establishment to examine the
Productivity Commission report and to report to Parliament on its examination (see
paragraph 3(1)(b) of Schedule 2 to the Companies Bill). Subclause 1(2) deals with the
situation in which the House of Representatives is dissolved during that period of 180
days, e.g. if an election is called after the Joint Committee is established under
subclause 1(1) but before the Joint Committee has reported to Parliament on its
examination of the Productivity Commission report. The effect of subclause 1(2) is to
again require the establishment of the Joint Committee as soon as possible after the
next Parliament commences. If this circumstance eventuates, the Joint Committee will
then have 180 days from its appointment under this provision to report to the
Parliament on its examination of the Productivity Commission report: that is, where a
dissolution of the House of Representatives intervenes, whatever period of time the
Joint Committee first existed prior to the dissolution of the House of Representatives
is not counted for the purposes of the time the Joint Committee is given to complete
its examination of the Productivity Commission report after the Joint Committee is re-
established when the Parliament resumes.
Subclause 1(3) of Schedule 2 to the Companies Bill provides that the Joint Committee
is to consist of 10 members (five Senators appointed by the Senate and five members
of the House of Representatives appointed by that House). However, the following
persons are expressly excluded from being eligible to be members of the Joint
Committee:
- any Minister (this is not limited to the Communications or Finance Ministers);
or
- the President of the Senate; or
- the Speaker of the House of Representatives; or
- the Deputy-President and Chair of Committees of the Senate; or
- the Deputy Speaker of the House of Representatives.
Subclause 1(5) of Schedule 2 to the Companies Bill sets out the five circumstances
when a member of the Joint Committee will cease to hold office.
One of the circumstances in which a member of the Joint Committee may cease to be
a member is when they resign his or her office. Subclauses 1(6) and (7) provide for
how and when this resignation is to occur, namely, a written notice of resignation
which is signed by the member will be required, and such a notice is to be delivered to
- in the case where the member is a senator--the President of the Senate; or
- in the case where the member is a Federal Member of the House of
Representatives--the Speaker of the House of Representatives.
Subclause 1(8) of Schedule 2 to the Companies Bill provides that either House of the
Parliament may appoint one of its members to fill a vacancy amongst the members of
the Joint Committee appointed by the particular House.
Clause 2 - Powers and proceedings of the Parliamentary Joint Committee
Clause 2 of Schedule 2 provides that the powers and proceedings of the Joint
Committee are to be determined by resolution of both Houses of the Parliament. This
approach will provide for greater flexibility for Parliament in determining these
matters at a future time.
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Clause 3 - Duties of the Parliamentary Joint Committee
Subclause 3(1) of Schedule 2 sets out the duties of the Joint Committee. The Joint
Committee has three duties, namely:
- the assessment and scrutiny of the report of the Productivity Commission
inquiry mentioned in clause 49;
- reporting on its examination of the Productivity Commission's report to both
Houses of the Parliament within 180 days after the Joint Committee was
established; and
- if either House of Parliament refers any question to it that is in connection
with the Joint Committee's duties, the Joint Committee is to inquire into that
question and report to that House on that question.
Subclause 3(2) clarifies that for the purposes of the Joint Committee's examination of
the Productivity Commission report, the Joint Committee can consider any matter
appearing in, or arising out of, the report of the Productivity Commission inquiry.
Clause 4 - Winding up of the Parliamentary Joint Committee
As the Joint Committee will be established for the specific purpose of examining the
Productivity Commission's report of its inquiry into the various matters set out in
clause 49 of the Companies Bill, it will have no reason to continue to exist after that
examination has been completed and the report tabled. Therefore, clause 4 of
Schedule 2 to the Companies Bill provides that the Joint Committee will cease to exist
immediately after it has reported to both Houses of the Parliament on its examination
of the Productivity Commission report.
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TELECOMMUNICATIONS LEGISLATION AMENDMENT (NATIONAL
BROADBAND NETWORK MEASURES -- ACCESS ARRANGEMENTS)
BILL 2010
Clause 1 - Short title
Clause 1 provides that the Access Bill, when enacted, may be cited as the
Telecommunications Legislation Amendment (National Broadband Network Measures
-- Access Arrangements) Act 2010.
Clause 2 - Commencement
Clause 2 of the Access Bill provides for the commencement of the Access Bill.
Clauses 1-3 of the Access Bill and any other provisions not covered in the table
provided at subclause 2(1), will commence on the day on which the Access Bill
receives the Royal Assent.
Part 1 of Schedule 1 will commence on the day which is the latest of:
- the start of the day after this Act receives the Royal Assent; or
- immediately after the commencement of section 3 of the National Broadband
Network Companies Act 2010; or
- immediately after the commencement of Part 2 of Schedule 1 to the
Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Act 2010.
There are two reasons for this. Several provisions in the Access Bill refer to the CCA,
rather than the name by which that Act is known at the time of the Access Bill's
introduction: the Trade Practices Act 1974. From 1 January 2011 the short title of the
Trade Practices Act 1974 will change to the Competition and Consumer Act 2010 as a
result of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2)
2010. Further, several provisions in Part 1 of the Access Bill rely on, or refer to,
provisions in proposed Parts 2 of Schedule 1 to the CCS Bill. The commencement
arrangement outlined above will ensure that the references in the Access Bill to the
CCA and the CCS Bill will be effective, by deferring the commencement of the
relevant provisions in the Access Bill until (as applicable) when the change of name
of that Act takes effect or when Part 2 of Schedule 1 to the CCS Act comes into
effect, or on the later of the start of the day after the Access Bill receives the Royal
Assent.
As a result of section 10 of the AIA, a reference to the CCA in the Access Bill will
include a reference to that Act before its name was changed, i.e. before 1 January
2011.
Part 2 of Schedule 1 will commence on the day which is the latest of:
- the start of the day after the Access Bill receives the Royal Assent; or
- immediately after the commencement of section 3 of the National Broadband
Network Companies Act 2010 (`the Companies Act'); or
- immediately after Part 7 of Schedule 1 to the Telecommunications Legislation
Amendment (Competition and Consumer Safeguards) Act 2010.
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The operation of certain provisions in Part 2 of the Access Bill is contingent on the
commencement of Part 7 of Schedule 1 to the CCS Bill. Other provisions in Part 2 of
the Access Bill are contingent on the commencement of section 3 of the Companies
Act (refer clause 3 of the Companies Bill).
Part 3 of Schedule 1 will commence on a day to be fixed by proclamation.
For certainty, Part 3 will commence immediately after the 12 months from the day on
which the Access Act receives the Royal Assent, if a date is not proclaimed before
then.
This approach to the commencement of Part 3 has been adopted to provide affected
carriers and carriage services providers as well as the ACCC and the ACMA with
advance notice of the level playing field arrangements in Part 3 and a transitional
period in which to adjust. Amongst other things, it is envisaged that during the
transitional period carriers, including in new developments, could supply a range of
wholesale services, but ultimately would need to supply a wholesale Layer 2
bitstream service on their networks, once Part 3 commences. It should be noted,
however, that amendments to simplify the making of codes and standards in relation
to fibre infrastructure and services under Part 6 of the Tel Act to ensure new FTTP
networks are consistent with NBN specifications as part of the level playing field
requirements are included in Part 1 of Schedule 1 and will commence on the Royal
Assent, to allow necessary code and standards development work to proceed quickly.
Clause 3 - Schedule(s)
Clause 3 provides that each Act that is specified in a Schedule to the Access 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 Access Bill which amends
the Tel Act and the CCA.
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Schedule 1--Amendments
Part 1--General amendments
Part 1 of Schedule 1 to the Access Bill makes a number of amendments to the Tel Act
and the CCA to:
· support the arrangements to provide a level regulatory playing field for superfast
telecommunications networks - these provisions will also support the rollout of
NBN-consistent FTTP networks in new real estate developments; and
· introduce new access, transparency and non-discrimination obligations relating to
the supply of wholesale services by an NBN corporation.
The amendments made to the CCA should be read alongside the amendments made to
that Act by the CCS Bill. The amendments made by the Access Bill assume that the
amendments made by the CCS Bill have taken effect (see the explanatory note for
clause 2 of the Access Bill).
Telecommunications Act 1997
Item 1 - Section 7 (after paragraph (b) of the definition of ACCC's
telecommunications functions and powers)
Item 1 amends section 7 of the Tel Act by inserting proposed paragraph (ba) into the
definition of the ACCC's telecommunications functions and powers. This amendment
will ensure that the ACCC will have powers conferred on it under the Companies Act.
Item 2 - Section 7
Item 2 inserts a proposed definition of `NBN corporation' into section 7. `NBN
corporation' is defined as having the same meaning as in the Companies Act. An
`NBN corporation' is defined in section 5 of that Act as meaning: NBN Co Limited;
or NBN Tasmania Limited; or a company over which NBN Co Limited is in a
position to exercise control. The definition also clarifies that this definition does not
apply to sections 577BA, 577BC, clause 17 of Schedule 1 or Part 5 of Schedule 1.
Item 3 - Section 7
Item 3 inserts a definition of `optical fibre line' into section 7 of the Tel Act. The
reference to `encloses optical fibre' in the definition is intended to refer to the
immediate casing surrounding the fibre, not clearly separate facilities like ducting.
The definition recognises that fibres are generally sheathed in plastic tubes which in
turn are bundled together and further sheathed to form a cable.
Item 4 - After section 62C
Item 4 amends the Tel Act by inserting proposed sections 62D and 62E. These
amendments specify that obligations to be placed on NBN corporations through the
Access Bill and proposed section 37 of the Companies Act (refer clause 37 of the
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Companies Bill) are additional carrier licence conditions specific to NBN
corporations.
Proposed section 62D Condition of carrier licence set out in section 152CJC
of the Competition and Consumer Act 2010.
Proposed section 62D of the Tel Act provides that a carrier licence is subject to any
conditions set out in proposed section 152CJC of the CCA. This provision is to be
inserted as part of proposed Division 6A of Part XIC of the CCA (see item 79 below).
Proposed section 152CJC of the CCA sets out a carrier licence condition requiring an
NBN corporation to comply with any applicable rules in proposed section 152CJA.
Proposed section 152CJA of the CCA relates to the supply of services by NBN
corporations.
Proposed section 62E Condition of carrier licence set out in section 37 of the
National Broadband Network Companies Act 2010
Proposed section 62E of the Tel Act provides that a carrier licence is subject to the
conditions set out in section 37 of the Companies Act. Section 37 of the Companies
Act provides that a carrier licence held by an NBN corporation is subject to a
condition that the NBN corporation complies with any rules in sections 9 or 17 of the
Companies Act (see clauses 9 and 17 of the Companies Bill), about the supply of
services and goods by NBN corporations, investment of money, functional separation
of and divestment of assets by NBN corporations that are applicable.
The effect of proposed sections 62D and 62E of the Tel Act, together with proposed
section 152CJC of the CCA and section 37 of the Companies Act, is that an NBN
corporation must comply with any conditions set out in these provisions, and that
failure to do so would render the NBN corporation subject to the enforcement
provisions in the Tel Act relating to breach of carrier licence conditions.
Item 5 - After subsection 69(7C)
Item 5 inserts proposed subsections 69(7D), (7E) and (7F) into the Tel Act. Section 69
of the Tel Act authorises 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(7D), (7E) and (7F) is that the ACMA would not be
authorised to issue a remedial direction to a carrier that is breaching or has breached a
licence condition under proposed section 152CJC of the CCA, or sections 37 and 41
of the Companies Act. 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 section 152CJC of the CCA, or sections 37 and
41 of the Companies Act.
The identified licence conditions are specific to the telecommunications access regime
under Part XIC of the CCA, for which the ACCC has regulatory responsibility. It is
therefore appropriate that the ACCC, and not the ACMA, has powers to take action
against carriers for breach of those licence conditions.
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Item 6 - After subsection 70(4C)
Item 6 inserts proposed subsections 70(4D), (4E) and (4F) into the Tel Act.
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(4D), (4E) and (4F) 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 152CJC of the CCA, or proposed sections 37 and 41 of the
Companies Act (see clauses 37 and 41 of the Companies Bill). The reason for this
restriction is the same as that outlined in the explanatory note under items 5 above.
This item also adds accompanying notes to proposed subsections 70(4D), (4E) and
(4F) to assist the reader.
Item 7 - At the end of subsection 70(5)
Item 7 inserts proposed paragraphs 70(5)(g), (h) and (i) into the Tel Act.
Subsection 70(5) of the Tel Act confers power on the ACCC to issue a formal
warning if a carrier contravenes specified carrier licence conditions. As the
conditions to be included by proposed section 152CJC of the CCA and sections 37
and 41 of the Companies Act are specific to the telecommunications access regime
under section Part XIC of the CCA, it is appropriate that the ACCC be given a power
under subsection 70(5) to issue a formal warning in relation to those licence
conditions.
Item 8 - At the end of section 98
This item inserts proposed subsections 98(6) and (7) into the Tel Act.
Section 98 of the Tel Act sets out service provider rules. Service providers are
required to comply with all applicable service provider rules (subsection 101(1)).
The insertion of proposed subsections 98(6) and (7) is required to ensure that the rules
set out in proposed subsection 152CJD(2) of the CCA and subsection 38(2) of the
Companies Act are included as service provider rules. The effect of item 8 is that any
NBN corporation that is a service provider will be required to comply with all
applicable rules about the supply of services by NBN corporations.
Proposed subsection 152CJD(2) is inserted into proposed Division 6 of Part XIC of
the CCA by item 79.
As the failure to comply with a relevant service provider rule gives rise to a civil
penalty, proposed subsections 98(6) and (7) will have the effect of making the rules
set out in proposed subsection 152CJD(2) of the CCA and subsection 38(2) of the
Companies Act subject to the civil penalty provisions and other provisions under the
Tel Act dealing with service provider rules, including provisions relating to
enforcement.
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Item 9 - After subsection 102(6C)
This item inserts proposed subsections 102(6D) and (6E) into the Tel Act. These
provisions specify that subsection 102(1) does not apply to the rules set out in
proposed subsection 152CJD(2) of the CCA or subsection 38(2) of the Companies
Act.
Section 102 of the Tel Act authorises the ACMA to issue a remedial direction to a
service provider that is contravening, or has contravened, a service provider rule. The
proposed new service provider rules, which will come into effect as a result of the
amendments proposed by item 8, are specific to the telecommunications access
regime under Part XIC of the CCA, for which the ACCC has regulatory
responsibility. Accordingly, it is considered that only the ACCC and the Minister, as
opposed to the ACMA, ought to have powers to take action against service providers
for breach of those service provider rules. Proposed subsections 102(6D) and (6E)
will therefore make it clear that the ACMA would not be authorised to issue a
remedial direction to a service provider that is contravening or has contravened
service provider rules under proposed subsection 152CJD(2) of the CCA or
subsection 38(2) of the Companies Act.
Item 10 - After subsection 103(3C)
This item inserts proposed subsections 103(3D) and (3E) into the Tel Act.
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(3D) and (3E) 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
subsection 152CJD(2) of the CCA or subsection 38(2) of the Companies Act. The
reason for this restriction is the same as that outlined in the explanatory note under
item 8 above.
Item 11 - After subsection 103(4C)
This item inserts proposed subsections 103(4D) and (4E) into the Tel Act.
Subsection 103 of the Tel Act confers power on the ACCC to issue a formal warning
if a person contravenes the service provider rule set out in subsection 152BA(2) of the
CCA.
As the new service provider rules to be inserted by item 8 (under proposed subsection
152CJD(2) of the CCA and subsection 38(2) of the Companies Act) are specific to the
telecommunications access regime under Part XIC of the CCA, it is appropriate that
the ACCC be given a formal warning power under the Tel Act to issue a formal
warning, where an NBN corporation has contravened a service provider rule.
This item represents a consequential amendment as a result of item 8.
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Item 12 - At the end of subsection 110(2)
Part 6 of the Tel Act enables industry codes to be developed by telecommunications
industry bodies on any matter which relates to a telecommunications activity, which is
defined widely in section 109 of the Act (telecommunications activity).
Codes can be submitted to the ACMA by industry bodies for registration and, where
the ACMA is satisfied that the code meets stipulated criteria and that certain
conditions are met, the ACMA is obliged to include the code on a codes register. In
particular, before registering a code that is given to it by a body or association
representing a particular section of the telecommunications industry, in a case where
the code does not deal with matters of substantial relevance to the community, in
accordance with subparagraph 117(1)(d)(ii), the ACMA must be satisfied that the
code deals with the matters covered by the code in an appropriate manner. In
assessing any codes it is expected that this would include the ACMA having regard to
the efficacy of the content of the codes in achieving their intended purpose.
Where the ACMA considers a code to be necessary or convenient to provide
appropriate community safeguards, or otherwise deal with the performance or conduct
of the telecommunications industry, it may request that a representative industry body
develop a code and present it to the ACMA for registration. In the event that the code
is not developed, or does not meet the registration criteria, the ACMA may develop an
industry standard, compliance with which is mandatory (see Division 5 of Part 6 of
the Tel Act).
Section 110 specifies groups that are held to be `sections of the telecommunications
industry'. Item 12 adds proposed paragraph 110(2)(j) which clarifies that persons
who install optical fibre lines or facilities used, or for use, in or in connection with
such lines represent a section of the telecommunications industry for the purposes of
Part 6 of the Tel Act.
This would capture persons, who, for example, dig trenches or install pits, ducts or
other conduit. The effect of this proposed amendment is that the provisions in Part 6
of the Act, which relate to industry codes and standards, would apply to the persons
identified by proposed paragraph 110(2)(j). Specifically, the ACMA could register an
industry code prepared by a body or association representing this section of the
telecommunications industry (subsection 117(1)). The ACMA could also determine
an industry standard if it is satisfied that there is no representative body or association
for this section of the telecommunications industry (subsection 124(1)).
This item represents a consequential amendment as a result of item 13.
The purpose of items 12-16 is to facilitate the development of industry codes and
standards relating to fibre optic lines and related facilities and carriage services
provided by such fibre optic facilities, and to give further examples of the types of
topics which industry codes or standards might cover. In addition to providing
necessary guidance on relevant technical matters and to help provide a level
regulatory playing field for superfast FTTP telecommunications networks, these
measures respond to calls from stakeholders for such guidance to promote nationally
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consistent network and service outcomes, in line with the NBN, including in new real
estate developments.
Item 13 - After paragraph 113(3)(p)
Section 113 of the Tel Act sets out examples of matters that may be dealt with by
industry codes and industry standards. The list is not exhaustive. However, for the
avoidance of doubt, item 13 adds four new examples of matters in section 113 that
may be dealt with by industry codes and industry standards.
Item 14 - At the end of section 115
Item 14 amends section 115 of the Tel Act by adding proposed subsection 115(5).
Proposed subsection 115(5) provides a limited exception to the application of the rule
in subsection 115(1). The rule states that an industry code or standard has no effect to
the extent it requires customer equipment, customer cabling, a telecommunications
network or a facility to have particular design features, or to meet particular
performance requirements, or to the extent to which it deals with the content of
content services. This rule can already be set aside by regulations (see
subparagraphs 115(2)(a)(iii) and 115(2)(b)(iii)). However, item 14 amends section
115 to provide a statutory exemption to the rule for the purposes of setting technical
specifications for optical fibre facilities and services.
Proposed subsection 115(5) provides that the rule in subsection 115(1) does not apply
to an industry code or an industry standard to the extent (if any) to which compliance
with the code or standard is likely to have the effect (whether direct or indirect) of
requiring optical fibre lines, or facilities used, or for use, in or in connection with
optical fibre lines, to have particular design features; or meet particular performance
requirements. The term `facility' is defined already in section 7 of the Tel Act, and
`optical fibre line' is to be defined in section 7 of the Act (refer item 3 above).
In effect, the proposed provision facilitates the development of industry codes and
standards covering optical fibre lines and related facilities, and ensures that this
activity is not limited by preventing industry codes or industry standards from having
the effect of requiring particular design features or particular performance
requirements. For codes and standards of the kind envisaged to be useful, they need to
be able to deal with design features or particular performance requirements.
Moreover, these design features or particular performance requirements may need to
have effect within the NBN footprint. This recognises that the rollout of optical fibre
requirements may also have implications for network design features and performance
requirements in other parts of the network.
Item 15 - After subsection 118(4)
Item 15 amends section 118 of the Tel Act by adding proposed subsection 118(4AA).
Proposed subsection 118(4AA) provides a limited exception to the application of the
rule in subsection 118(4), which states that the ACMA must not make a request under
subsection 118(1) for a body or association in the telecommunications industry (or the
telemarketing industry or the e-marketing industry) to develop an industry code, if the
code would deal with a matter referred to in paragraph 113(3)(f) (relating to privacy),
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and compliance with the code would be likely to have the effect of requiring customer
equipment, customer cabling, a telecommunications network or a facility to have
particular design features or to meet particular performance requirements. The rule in
subsection 118(4) does not apply if the ACMA is satisfied that the benefits to the
community from the operation of the code would outweigh the costs of compliance
with the code.
Item 15 amends section 118 to provide a specific exception to the rule in subsection
118(4) dealing with a situation where a new industry code is registered under Part 6
and replaces another industry code. It should be noted that item 15 does not alter the
provision under subsection 118(4) relating to privacy.
Proposed subsection 118(4AA) provides that the rule in subsection 118(4) does not
apply to an industry code to the extent (if any) to which compliance with the code is
likely to have the effect (whether direct or indirect) of requiring optical fibre lines or
facilities used, or for use, in or in connection with optical fibre lines to have particular
design features or meet particular performance requirements. As noted above, the
terms `facility' and `optical fibre line' are to be defined in section 7 of the CCA.
The effect of the proposed provision is similar to the effect of proposed
subsection 115(5) (see the explanatory notes for item 14, above). By facilitating the
development of this kind of industry code by clarifying the ability of the ACMA to
request such codes to be developed, the measure will help provide necessary guidance
on relevant technical matters and help respond to calls from stakeholders for such
guidance to promote nationally consistent broadband network and service outcomes.
Item 16 - Subsection 125AA(4)
This item repeals the current subsection 152AA(4) of the Tel Act and replaces it.
Section 125AA of the Tel Act is inserted by the CCS Bill, and permits the Minister to
direct the ACMA to determine an industry standard. The proposed
subsection 125AA(4) to be inserted by item 16 provides that the Minister may, in
writing, direct the ACMA to determine a standard, within a set period of time, under
subsection 125AA(1) that applies to participants in a specified section of the
telecommunications industry and deals with one or more specified matters relating to
the telecommunications activities of those participants. This amendment has been
made to enable the Minister to specify a time by which the ACMA must make a
standard.
Item 17 - Subsection 384(1) (note)
This item amends the note in subsection 384(1) to include sections 152AR and
152AXB. This is a consequential amendment as a result of item 50.
Item 18 - At the end of subsection 564(3) (before the notes)
Item 18 inserts proposed paragraphs 564(3)(l)-(p) into the Tel Act.
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
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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 section 152CJC of the CCA and sections 37 and 41 of
the Companies Act and the service provider rules in subsections 152CJD(2) of the
CCA and subsection 38(2) of the Companies Act 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 section 152CJC of the CCA
and sections 37 and 41 of the Companies Act or a service provider rule in proposed
subsection 152CJD(2) of the CCA and subsection 38(2) of the Companies Act. 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 5
and 9 above.
Item 19 - At the end of subsection 564(3) (after the notes)
This item adds notes to section 564 in relation to proposed paragraphs 564(3)(l)-(p)
(under item 18 above) to assist the reader.
Item 20 - At the end of subsection 571(3) (before the notes)
This item inserts paragraphs 571(3)(l)-(p) into the Tel Act.
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 effect of proposed item 14 is
that 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 section 152CJC of the CCA and sections 37 and 41 of the Companies Act or
a service provider rule in proposed subsection 152CJD(2) of the CCA and
subsection 38(2) of the Companies Act.
The reason for this restriction is outlined in the explanatory notes under items 5 and 9
above.
Item 21 - At the end of subsection 571(3) (after the notes)
This item adds notes to section 571 in relation to proposed paragraphs 571(3)(l)-(p)
(under item 20 above) to assist the reader.
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Item 22 - Subsection 577BA(12) (at the end of the definition of national
broadband network)
Item 22 adds additional text to the definition of `national broadband network'
proposed to be inserted by item 30 of Schedule 1 to the CCS Bill into
subsection 577BA(12) of the Tel Act. The definition of `national broadband network'
that has been proposed under the CCS Bill makes reference to a telecommunications
network where an NBN corporation has been, is or is to be, involved in the creation or
development of the network.
It is expected that in addition to acquiring or creating their own telecommunications
assets, NBN corporations will separately purchase or secure rights to access
telecommunication assets from other telecommunications providers. Accordingly,
item 22 inserts additional text into the definition of `national broadband network' to
make it abundantly clear that the development or creation of the network could arise
from an NBN corporation acquiring or gaining access to assets that were actually used
(or intended for use) in another telecommunications network. This amendment is
made for the avoidance of doubt, and to bring this provision in line with the definition
of `national broadband network' at clause 5 of the Companies Bill (although a key
difference between the definitions of that term that are used in the Tel Act and the
Companies Bill is noted in the explanatory note for clause 5 of the Companies Bill,
above).
Item 23 - Subsection 577BC(8) (at the end of the definition of national broadband
network)
Item 23 amends the definition of `national broadband network' which is proposed to
be inserted into subsection 577BC(8) of the Tel Act by item 30 of Schedule 1 to the
CCS Bill. The amendment is in exact terms to that proposed by item 22 (see the above
commentary for item 22).
Item 24 - Clause 45 of Schedule 1 (definition of active declared service)
Item 24 amends the definition of `active declared service' in clause 45 of Schedule 1
to the Tel Act. Currently, that term is defined to have the same meaning as in
section 152AR of the CCA.
Item 24 amends the definition by including reference to a declared service within the
meanings of proposed subsections 152AL(8A), (8D) and (8E) of the CCA, inserted by
item 41 of Schedule 1 to the Access Bill (see the explanatory note for that item,
below).
Competition and Consumer Act 2010
Item 25 - Subsection 25(1)
Item 25 inserts a reference to the Companies Act and any regulations under that Act
into subsection 25(1) of the CCA. Subsection 25(1) of the CCA provides that the
ACCC can delegate to a member of the Commission powers provided under the listed
Acts. The effect of this amendment will mean the ACCC can delegate powers
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provided to it under the Companies Act or regulations under that Act to a member of
the Commission.
Item 26 - After paragraph 151BU(4)(d)
Item 26 inserts proposed paragraph 151BU(4)(da), in Part XIB of the CCA, which
sets out an anti-competitive conduct regime specific to the telecommunications
industry and provides for the ACCC to make record-keeping rules.
Subsection 151BU(4) restricts the ACCC from exercising its power to require the
keeping and retaining of records under section 151BU, unless the records contain, or
will contain, information relevant to one of the listed matters. The proposed paragraph
will add the operations of the Companies Act or regulations made under that Act to
the listed matters. This means that the ACCC will be able to make rules requiring the
keeping of records relating to the operations of the Companies Act or regulations
made under that Act.
The ACCC could use its record-keeping rules powers under section 151BU to require
an NBN corporation to keep and retain records and to prepare and submit reports to
the ACCC consisting of information contained in those records, for example in
relation to the non-discrimination obligation (see proposed section 152AXC of this
Bill, to be inserted by item 50), or in relation to private ownership and control of NBN
Co or the functional separation of NBN corporations.
Item 27 - After subparagraph 151BUA(2)(b)(ii)
Item 27 inserts proposed subparagraph 151BUA(2)(b)(iia) in Part XIB of the CCA.
Subsection 151BUA(2) enables the ACCC to make available reports provided in
accordance with record-keeping rules if the disclosure would be likely to facilitate the
operation of a listed legislation. The proposed subparagraph will add the operations of
the Companies Act or regulations made under that Act to the listed legislation. This
means that the ACCC will be able to provide access to reports provided in accordance
with record-keeping rules if the disclosure would be likely to facilitate the operation
of the Companies Act or regulations made under that Act.
Item 28 - After subparagraph 151BUB(2)(b)(ii)
Item 28 inserts proposed subparagraph 151BUB(2)(b)(iia) in Part XIB of the CCA.
Subsection 151BUB(2) enables the ACCC to request a carrier or CSP to provide
access to a report prepared in accordance with record-keeping rules if the disclosure
would be likely to facilitate the operation of a listed legislation. The proposed
subparagraph will add the operations of the Companies Act or regulations made under
that Act to the listed legislation. This means that the ACCC will be able to request a
carrier or CSP to provide access to the report it prepared if the disclosure would be
likely to facilitate the operation of the Companies Act or regulations made under that
Act.
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Item 29 - After subparagraph 151BUC(2)(b)(ii)
Item 29 inserts proposed subparagraph 151BUC(2)(b)(iia) in Part XIB of the CCA.
Subsection 151BUC(2) enables the ACCC to request a carrier or CSP to provide
access to a periodic report prepared in accordance with record-keeping rules if the
disclosure would be likely to facilitate the operation of a listed legislation. The
proposed subparagraph will add the operations of the Companies Act or regulations
made under that Act to the listed legislation. This means that the ACCC will be able
to request a carrier or CSP to provide access to the periodic report it prepared if the
disclosure would be likely to facilitate the operation of the Companies Act or
regulations made under that Act.
Item 30 - Section 152AA
Item 30 amends the outline of Part XIC of the CCA at section 152AA to take account
of the changes to that Part made by the items 30-84 of Schedule 1 to the Access Bill.
Part XIC of the CCA sets out the telecommunications-specific access regime.
Item 31 - Section 152AC
Item 32 - Section 152AC
Item 33 - Section 152AC
Item 34 - Section 152AC
Item 31 includes in section 152AC in Part XIC of the CCA a definition of the term
`category A standard access obligation', and provides that it has the meaning given by
section 152AR (see item 47).
Item 32 includes in section 152AC of the CCA a definition of the term `category B
standard access obligation', and provides that it has the meaning given by proposed
section 152AXB (see item 40).
Item 33 includes in section 152AC of the CCA a definition of the term `NBN Co'.
`NBN Co' has the same meaning as in the Companies Act.
Item 34 includes in section 152AC of the CCA a definition of the term `NBN
corporation'. `NBN corporation' has the same meaning as in the Companies Act.
Item 35 - Section 152AC (definition of standard access obligation)
Item 35 amends the definition of `standard access obligation' in section 152AC of the
CCA to include both category A and B standard access obligations. Category A
standard access obligations will not apply to NBN corporations and are those
currently set out at section 152AR of the CCA. Category B standard access
obligations are provided for in proposed section 152AXB inserted by item 50 and
specifically apply to the supply of declared services by an NBN corporation.
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Item 36 - Subsection 152AG(2)
Item 37 - Subsection 152AG(2)
Items 36 and 37 make consequential amendments to subsection 152AG(2), necessary
as a result of the amendment to section 152AC by item 35.
Item 38 - After subsection 152AL(3)
Item 38 inserts proposed subsections 152AL(3A) and (3B) into Part XIC of the CCA.
Currently, subsection 152AL(3) provides that the ACCC may declare an eligible
service if:
· the ACCC has held a public inquiry under Part 25 of the Tel Act;
· it has prepared a report about the inquiry under section 505 of the Tel Act;
· the report has been published; and
· the ACCC is satisfied that the making of the declaration would promote the long-
term interests of end-users (a phrase which is given meaning by subsection
152AB(2)).
Proposed subsection 152AL(3A) will ensure that declarations made under
subsection 152AL(3) do not apply to eligible services an NBN corporation supplies,
or is capable of supplying to itself or to any other person. This change is necessary
because of the amendments proposed by item 41 (which will provide for a separate
route for the ACCC to make NBN corporation-specific service declarations which
will cover services that are supplied, or capable of being supplied, by an NBN
corporation).
The use of the phrase `capable of supplying' in this new section is consistent with
existing section 152AL. The phrase `capable of supplying' does not imply that a
service is actually being supplied; it is sufficient that the service in question is of a
nature that the NBN corporation would be able to supply.
Proposed subsection 152AL(3B) has been inserted to require the ACCC, when
conducting an inquiry into the possible declaration of a service under
subsection 152AL(3), whether to make a determination under proposed
subsection 152AL(8A) (see item 41, below) declaring that same service to be a
declared service applicable to NBN corporations. This is included to ensure that the
ACCC gives consideration to whether a service should be declared for both NBN
corporations and other carriers/CSPs, with the result that the ACCC could hold a joint
public inquiry covering both proposals if it saw fit.
A note also clarifies the operation of this provision by changing the heading to
subsection 152AL(3) to `Declaration made after public inquiry--services not supplied
by an NBN corporation'.
Item 39 - Subsections 152AL(4) and (5)
Item 39 makes a consequential amendment to these subsections to replace references
to `this section' with `subsection (3)' as a result of amendments made under items 38
and 41.
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Item 40 - Paragraph 152AL(7)(a)
Currently subsection 152AL(7) provides that a service covered by an SAU will be a
declared service if the ACCC is given an SAU in relation to a service, and that
undertaking is in operation and the person supplies the service.
Item 38 amends paragraph 152AL(7)(a) in Part XIC of the CCA to make it clear that
this section does not apply to services supplied by an NBN corporation. This is
because item 41 (refer below) sets out the mechanisms under which an NBN
corporation can provide services.
A note also clarifies this point by changing the heading to subsection 152AL(7) to
`Services covered by special access undertakings - services not supplied by an NBN
corporation'.
Item 41 - After subsection 152AL(8)
Item 41 inserts subsections (8A)-(8F) into the CCA. The intention of these
subsections is to provide alternative mechanisms under which eligible services to be
provided by an NBN corporation can become declared, consistent with NBN Co's
wholesale-only, open access objectives.
Under the existing provisions in Part XIC of the CCA, the ACCC has the power to
compel carriers/CSPs to supply a service if the ACCC declares that service.
Carriers/CSPs providers may also give the ACCC an SAU setting out proposed
services and the terms and conditions for access to those services: such services are
then treated as declared services for the carrier/CSP that lodged the SAU with the
ACCC (see subsection 152AL(7)). Otherwise, carriers/CSPs can make available a
number of wholesale services that are not declared services, and that are therefore not
subject to the SAOs in Part XIC. Service providers negotiate the terms and conditions
of those services with their customers.
By contrast, NBN corporations will not be able to offer services that are not declared
services. NBN corporations effectively have three mechanisms, established by
item 41 and item 79 (refer proposed section 152CJA), by which they may supply
services:
· an NBN corporation may publish a standard form of access agreement (SFAA) on
its website, setting out terms and conditions for a service--the service covered by
the SFAA is then treated as a declared service:
o an SFAA in effect operates as a `standard offer': it is open to any access
seeker to require the relevant NBN corporation to supply it with the
declared service on the terms set out in the SFAA;
o although, as explained below, an SFAA may also supplement the terms
and conditions of services set out in an SAU, or indeed in an access
determination;
· an NBN corporation may give the ACCC an SAU for approval--as is currently
the case under Part XIC of the CCA, the service covered by the SAU is treated as
a declared service for the NBN corporation that lodged the SAU; or
· the ACCC may declare a service that an NBN corporation is capable of supplying.
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The policy intention is that at all times NBN corporations are subject to the
obligations under Part XIC - specifically, the Category B SAOs, the non-
discrimination and transparency obligations and the enforcement regime. As a
consequence, the supply of services by NBN corporations is always subject to
oversight by the ACCC.
Declaration made after public inquiry -- services supplied by an NBN corporation
Proposed subsection 152AL(8A) sets out the mechanism by which the ACCC may, by
written instrument, declare a specified eligible service applicable to a specified NBN
corporation. This mechanism involves a number of measures that are designed to
ensure wide consultation is conducted and that the competition implications of the
proposed declaration are carefully considered. These measures are modelled on those
already required if the ACCC declares an eligible service under the CCA (see
subsection 152AL(3)). The transparent process ensures that the ACCC's deliberations
on whether declaration would promote the long-term interests of end-users are
appropriately placed on the public record and that the interests of industry and other
affected parties are given due consideration. Under this provision, a declared service
is taken to `relate to' the NBN corporation/s specified in the declaration made by the
ACCC.
A copy of any declaration made under proposed subsection 152AL(8A) will need to
be publicised (by way of a Gazette notice, refer proposed subsection 152AL(8C)).
The requirement for the ACCC to identify in the declaration the specific NBN
corporation/s to which the declaration relates is specific to a declaration made under
proposed subsection 152AL(8A) in relation to services to be supplied by NBN
corporations. There is no equivalent in subsection 152AL(3). This concept is included
due to a difference in the way that the category B SAOs (applying to NBN
corporations) and category A SAOs (applying to other carriers/CSPs) operate. The
distinction is that, under the category A SAOs, a carrier/CSP is only compelled to
supply a declared service on request if that carrier/CSP currently supplies that service
(i.e. if the service is an `active declared service' - see subsection 152AR(2)), whereas
under the Category B SAOs, an NBN corporation is obliged to supply any declared
service that relates to that NBN corporation (see proposed section 152AXB, inserted
by item 50, below). There is no concept of an `active declared service' in the context
of the category B SAOs--instead the ACCC must identify upfront which NBN
corporations are to be affected by which service declarations under proposed
subsection 152AL(8A), and in addition NBN corporations may choose to apply the
SAOs to additional services not covered by an ACCC declaration.
The effect of this is that an NBN corporation will be required to supply on request to
access seekers any service that:
- has been declared by the ACCC under proposed subsection 152AL(8A) and
that `relates to' that NBN corporation;
- is the subject of a standard form of access agreement published by that NBN
corporation on its website (see below); or
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- is covered by an SAU that is in operation and was lodged with the ACCC by
that NBN corporation and that is supplied by the NBN corporation (see
below).
Services supplied by an NBN corporation - standard form of access agreement
Proposed subsection 152AL(8D) sets out the second mechanism by which a service
supplied or capable of being supplied by a particular NBN corporation becomes a
declared service. The trigger for the declaration of a service under this route is
dependent upon self-directed action by a particular NBN corporation that is a carrier
or CSP. Under this mechanism, all that is required is for the particular NBN
corporation to formulate an SFAA that relates to access to that service, and then make
that SFAA available on its website. The service covered by the SFAA is then treated
as a declared service, and that declared service `relates to' the NBN corporation that
has published the SFAA: this is the effect of proposed paragraphs 152AL(8D)(e) and
(f).
An SFAA is not defined in the CCA, however it provides a set of terms and
conditions that are formulated by the NBN corporation (which is either a carrier or
CSP), in relation to the supply of a service. It is envisaged that SFAAs will be
comprehensive model terms and conditions that the particular NBN corporation offers
to all access seekers.
The effect of an SFAA, as noted above, is that once an SFAA is published on the
website of an NBN corporation, it is open to any access seeker to request access to the
declared service covered by the SFAA from that NBN corporation (being the NBN
corporation to which the declared service `relates'): the NBN corporation must then
enter into an access agreement with that access seeker on the terms and conditions set
out in that SFAA, and must provide that access seeker with access to that declared
service on the terms and conditions in accordance with that access agreement (see
proposed sections 152AXB (inserted by item 50) and 152CJA (inserted by item 79).
Services covered by special access undertakings--services supplied by an NBN
corporation
The third mechanism by which a service supplied or capable of being supplied by an
NBN corporation may become a declared service is set out in proposed
subsection 152AL(8E). The proposed subsection provides that a service will be a
declared service if the ACCC is given an SAU by the NBN corporation in relation to a
service, and that undertaking is in operation (i.e. is accepted by the ACCC) and the
NBN corporation supplies the service. Section 152CBA of the CCA deals with SAUs,
and provides that a person who is, or is expected to be, a carrier or CSP supplying
either a listed carriage service or a service that facilitates the supply of such a 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.
Proposed subsections 152AL(8D) and (8E) make it clear that any services voluntarily
supplied, or capable of being supplied, by an NBN corporation through an SFAA
(resulting in an access agreement) or an SAU are declared services. It is envisaged
that the majority of services offered by an NBN corporation would be supplied
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through these mechanisms. However, subsection 152AL(8A) is necessary because
there may be services which an NBN corporation is capable of supplying, but has not
indicated it will supply, and which the ACCC considers, after consultation, it would
be in the long-term interests of end-users for specified NBN corporations to supply.
As a result, proposed subsection 152AL(8A) provides the ACCC's power to declare
such services.
The overall effect of these arrangements is that, an NBN corporation, unlike other
carriers or CSPs, will not be able to offer to supply or supply services unless those
services are declared services and therefore subject to the regulatory oversight
applying to declared services.
Proposed subsection 152AL(8F) clarifies that the ACCC may declare a service under
subsection 152AL(8A) even though the service may be covered, or partially covered
by an SAU in relation to that service given to the ACCC under proposed subsection
152AL(8E). This reflects the operation of subsection 152AL(8) of the CCA.
Item 42 - Subsection 152ALA(8) and (9)
Item 42 inserts references to paragraphs 152AL(8A)(a), (b) and (c), into
subsections 152ALA(8) and (9) of the CCA. This is required as a result of the
amendments made under item 41.
Item 43 - Subsections 152AM(1) and (3)
Item 44 - Subsection 152AN(1)
Item 45 - Subsection 152AO(3)
Item 46 - Paragraph 152AQ(2)(c)
These items make consequential amendments to these subsections which insert
reference to subparagraph 152AL(8A)(a). This is required as a result of the
amendments made under item 41.
Item 47 - Before section 152AR
Item 47 inserts the new heading `Subdivision A--Category A standard access
obligations'. This is necessary as the Access Bill establishes two categories of SAOs.
In effect this item renames the existing standard access obligations under
section 152AR, which will continue to apply to all carriers/CSPs other than NBN
corporations, due to the introduction of the concept of `Category B standard access
obligations' (which apply exclusively to NBN corporations: see item 50).
Item 48 - Subsection 152AR(1)
Item 49- Subsection 152AR(2)
Items 48 and 49 make a consequential amendment to subsections 152AR(1) and (2) to
replace reference to `standard access obligations' with `category A standard access
obligations' and to clarify that these subsections only apply to a carrier or CSP other
than an NBN corporation as a result of amendments made under items 35 and 50.
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Item 50 - Before section 152AY
Item 50 inserts proposed Subdivision B into Division 3 of Part XIC of the CCA,
dealing with Category B SAOs. Category B SAOs apply to NBN corporations only.
The concept of `standard access obligations' as used in the Access Bill is the same as
currently exists under the CCA, however, the Access Bill will make provision for two
different categories of SAOs (see item 35): category B SAOs, which apply to NBN
corporations, and category A SAOs, which apply to all other carriers/CSPs. The
NBN-specific category B SAOs (at proposed sections 152AXB, 152AXC and
152AXD) will establish open access obligations, which, along with the equivalence
and transparency measures set out under items 40 and 67, promote a level playing
field for access seekers using services over the NBN.
The current SAOs in section 152AR are designed for access providers who also
supply retail services, making them inappropriate for an NBN corporation operating
as a wholesale-only company. In particular, as an NBN corporation will not generally
be supplying a service to itself, the requirement under the Category A SAOs for an
access provider to provide a declared service of equivalent technical and operational
quality to that which it supplies to itself is inappropriate. Mandating compliance by
NBN corporations with the Category A SAOs could, for example, create difficulties
for the ACCC and NBN corporations during the process of considering an SAU given
by an NBN corporation. Section 152CBD requires the ACCC to assess whether the
terms and conditions of services set out in an SAU are consistent with the SAOs, and
this could cause complexities if the ACCC is required to assess whether an NBN
corporation will supply services that are of equivalent technical and operational
quality to those which it supplies to itself, but the NBN corporation is not supplying
the service to itself.
Consequently, the Access Bill introduces SAOs that are specifically designed to
reflect the wholesale-only activities of NBN corporations.
Item 50 also provides for existing sections 152AY-152BBD in Division 3 of Part XIC
to be under a new Subdivision C, dealing compliance with the SAOs, by inserting a
heading for Subdivision C before section 152AY.
As noted above, under item 41, the effect of the category B SAOs is that an NBN
corporation is required to supply on request to access seekers any declared service
that relates to that NBN corporation - unlike the category A SAOs, there is no further
requirement for the declared service to be an `active declared service' before the
category B SAOs are triggered.
The terms and conditions on which an NBN corporation is required to comply with
the category B SAOs are to be determined in accordance with the hierarchy set out at
(new) section 152AY, which is inserted into the CCA by the CCS Bill (that Bill
repeals and replaces an older section 152AY). Section 152AY, as inserted by the CCS
Bill, sets out how terms and conditions are to be identified. For example, there may be
an access agreement (resulting from an SFAA) and an access determination that are
both in operation in relation to a declared service that relates to an NBN corporation.
Alternatively, there may be both an SAU and binding rules of conduct that are both in
operation and that both deal with a declared service that relates to an NBN
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corporation. A detailed explanation of the operation of the hierarchy established by
section 152AY is provided in the explanatory memorandum for the CCS Bill.
Proposed Subdivision B--Category B standard access obligations
Proposed section 152AXB Category B standard access obligations
The effect of this proposed section is that NBN corporations will be subject to the
obligations which provide basic prerequisites of access - guaranteed supply (see
proposed subsection 152AXB(2)), interconnection (see proposed
subsection 152AXB(4)) and supply of conditional-access customer equipment (see
proposed subsection 152AXB(5)).
Supply of declared service to service provider
Proposed subsection 152AXB(2) provides a requirement for an NBN corporation to
supply a declared service. This first SAO requires an NBN corporation that is a carrier
or CSP, where a declared service under subsection 152AL(8A), (8D) or (8E) relates to
the NBN corporation, and if requested to do so by a service provider, to supply the
declared service to the service provider in order that the service provider can provide
carriage services and/or content services.
The requirement to supply services on request (proposed subsection 152AXB(2))
must be read together with the rules relating to the supply of services by an NBN
corporation (proposed Division 6A of Part XIC, described below) which prohibits an
NBN corporation from supplying an eligible service unless:
- the service has been declared by the ACCC under proposed
subsection 152AL(8A) and relates to that NBN corporation; or
- the NBN corporation has published an SFAA in relation to the service; or
- the ACCC has accepted an SAU from that NBN corporation in relation to the
service.
An NBN corporation could choose to publish an SFAA in relation to a new service
not set out in a SAU, or to publish an SFAA as the means of specifying the terms and
conditions which are not covered by, or complement the terms and conditions
contained in, the SAU it has given to the ACCC. The fact that an agreement stemming
from an SFAA can complement the terms and conditions in an SAU is clear from the
operation of section 152AY (which is inserted by the CCS Bill; see comments above).
Providing these arrangements are in place, an NBN corporation is obliged to supply a
service that is declared under one of the three mechanisms (subject to the exemptions
from the Category B SAOs set out below). However, an NBN corporation may only
supply a service through one of these three mechanisms. If an access seeker requests a
service that is not subject to one of these three mechanisms, an NBN corporation
cannot supply it: before supplying a new service that it wishes to commence
supplying, an NBN corporation must either publish an SFAA relating to that service
or lodge an SAU with the ACCC. If an NBN corporation indicated it did not wish to
develop an SAU or an SFAA in relation to a service requested by an access seeker,
the access seeker would need to approach the ACCC to conduct a declaration inquiry
in relation to the service.
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The only time an NBN corporation is required to lodge an SAU or to formulate an
SFAA is if the Minister makes a condition of an NBN corporation's carrier licence
that it must supply a specified eligible service (see clause 41 of the Companies Bill,
and proposed section 152CJB of the CCA, to be inserted by item 79).
Proposed subsection 152AXB(3) limits the obligation under proposed
subsection 152AXB(2) if the imposition of the obligation would have any of the listed
effects. This subsection is based on the current subsection 152AR(4) exemptions
already available to access providers. The exemptions are carried through to the
category B SAOs to ensure consistency.
The exemption under proposed paragraph 152AXB(3)(a) gives protection to the
reasonably anticipated usage of a service provider who already has access to a
declared service. It ensures that an access seeker has ongoing access to services
already being supplied.
The exemption under proposed paragraph 152AXB(3)(b) gives protection to the
reasonably anticipated usage of an NBN corporation. An NBN corporation should not
be required to supply services if this means not having enough capacity remaining for
its own internal supply, in the limited circumstances where this may occur. For
example, if an NBN corporation's networks are near capacity and a request to supply
a service would mean it was no longer able to perform its own internal network
monitoring and communications, then it could use this exemption. Such internal
supply would be for its own operational purposes or for the purposes of supplying
carriers and services providers: under section 9 of the Companies Act, an NBN
corporation is limited to supplying services to carriers, service providers and specified
utilities, for specified purposes.
The term `pre-request right' in proposed paragraph 152AXB(3)(c) is consistent with
paragraph 152AR(4)(c) of the CCA. It is defined in proposed subsection 152AXB(7)
to mean `a right under a contract that was in force at the time when the request was
made'. The exemption under proposed paragraph 152AXB(3)(c) gives protection to
the service provider who has a contractual right to obtain a sufficient level of access.
It ensures that an NBN corporation cannot cease to supply services to be supplied
under a contract simply because it does not have sufficient capacity to supply the
service to other access seekers.
Interconnection of facilities
Proposed subsection 152AXB(4) requires an NBN corporation that is a carrier or CSP
and that owns or controls one or more telecommunications facilities, or is a nominated
carrier in relation to one or more facilities, if requested to do so by a service provider,
to permit interconnection of the facilities it owns or controls with the facilities of a
service provider on request, where that interconnection is for the purpose of enabling
the service provider to be supplied with declared services in order that the service
provider can provide carriage services and/or content services.
Section 384 of the Tel Act enables the ACMA to make technical standards relating to
the interconnection of facilities. No technical standards are currently in place under
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section 384 of the Tel Act, however, proposed paragraph 152AXB(4)(d) will require
the NBN corporation to take all reasonable steps to ensure compliance with any such
standard. The requirement for the NBN corporation to take reasonable steps reflects
the possibility that there may be situations in which compliance is not feasible (for
example, if an exemption from the Category B SAO applies), and therefore it would
not be appropriate to mandate absolute compliance with a standard.
This provision reflects subsection 152AR(5) in the category A SAOs.
Note amendments are also proposed to the Tel Act regarding compliance with
technical standards relating to Layer 2 bitstream service: see item 88 below.
Conditional-access customer equipment
Proposed subsection 152AXB(5) requires an NBN corporation that is a carrier or
CSP, and who supplies a declared service by means of conditional-access customer
equipment to, if requested by a service provider (under proposed
subsection 152AXB(2)), supply any related service that is necessary to enable that
provider to supply its relevant retail service and/or content services by means of the
declared service and using the equipment. This provision reflects
subsection 152AR(8) in the category A SAOs.
`Conditional-access customer equipment' is defined in section 152AC of the CCA.
The definition is intended to capture any customer equipment that:
- consists of or incorporates a conditional access system that allows a service
provider to determine whether an end user is able to receive a particular
service; and
- is intended for use in connection with the supply of a content service or is of a
particular kind of equipment that is specified in the regulations.
It is possible that optical network termination (ONT) units could fall within this
category if the ONT is installed on the customer's side of the telecommunications
network boundary and an access seeker requires access to the ONT to supply services.
It is also possible that, if an NBN corporation were to supply customer premises
equipment, for example in connection with wholesale wireless or satellite services, an
access seeker would require access to this equipment to supply services.
Exceptions
The obligations under proposed section 152AXB do not apply if the relevant NBN
corporation considers, (on reasonable grounds), that:
· the access seeker would fail to materially comply with the terms and
conditions on which the NBN corporation complies, or is reasonably likely to
comply (see paragraph 152AXB(6)(a)) ;
· the access seeker would not protect the integrity of a telecommunications
network or the safety of individuals working on, or using services supplied by
means of, a telecommunications network or a facility (see paragraph
152AXB(6)(b)).
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For consistency, the exceptions under proposed subsections 152AXB(5) and (6)
reproduce the exemptions already in place under subsections 152AR(9) and (10) of
the CCA, which apply to the category A SAOs. The exceptions make it clear that any
refusal to supply must have reasonable grounds.
Proposed subsection 152AXB(7) provides examples of reasonable grounds under
which the exception from paragraph 152AXB(6)(a) could be relied on. Evidence that
the access seeker is not creditworthy and repeated failures by the access seekers to
comply with the terms and conditions on which the same or similar access has been
provided are examples. The list is not intended to be exhaustive.
Proposed subsection 152AXB(8) defines `pre-request right', in relation to a request
made for the purposes of proposed subsection 152AXB(2), to mean a right under a
contract that was in force at the time when the request was made - this definition is
materially similar to that provided at subsection 152AR(12) in relation to the use of
this term in the category A SAOs.
Proposed section 152AXC NBN corporation to supply declared services on a
non-discriminatory basis
Proposed subsection 152AXC(1) sets out the non-discrimination requirements for
NBN corporations. It requires NBN corporations to supply declared services on a
non-discriminatory basis, but sets out limited grounds for discrimination on the basis
of creditworthiness, on the basis that the discrimination aids efficiency, or on grounds
or circumstances specified by the ACCC in an instrument (see proposed
subsections 152AXC(5) and (6)).
Even though NBN corporations are required to be wholesale-only providers, it is
possible that they may have incentives to favour certain access seekers. For example,
there may be incentives to focus on the largest customers, at the expense of smaller
players. In order to ensure equity across access seekers, proposed
subsection 152AXC(1) establishes the general rule that an NBN corporation must not,
in complying with any of its category B SAOs, discriminate between access seekers.
The effect of this requirement would be that all services provided by an NBN
corporation must be made equally available to all access seekers, and the terms and
conditions of those services must be made equally available to all access seekers,
consistent with the Government's open access and equivalence objectives for the
NBN. An NBN corporation could not enter into exclusive arrangements.
However, the Access Bill builds upon the approach set out in the CCS Bill, so that an
NBN corporation may enter into an access agreement with an access seeker that
varies the standard terms set out in an SFAA, SAU or access determination so long as
the variation is permitted under proposed section 152AXC. The Access Bill permits
NBN corporations to negotiate the terms and conditions of access agreements with
access seekers and recognises that there may be commercial circumstances where
discrimination may be justified. Access agreements are, of course, subject to the
competition provisions of the CCA. It should be noted that if an NBN corporation
were to enter into an agreement, contract or understanding which substantially
lessened competition, this could breach section 45 of the CCA. Consequently,
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differentiation in price and/or non-price terms should not substantially lessen
competition.
The Access Bill sets out tight restrictions on the ability of NBN corporations and
access seekers to negotiate different terms and conditions from those set out in
`standard terms' (whether those standard terms are in an SFAA or SAU prepared by
the NBN corporation, or in access determination made by the ACCC). Different terms
and conditions are only permitted in three circumstances. Firstly, the rule in proposed
subsection 152AXC(1) does not prevent discrimination against an access seeker if the
NBN corporation has reasonable grounds to believe that the access seeker would
materially fail to comply with the terms and conditions on which the NBN
corporation complies or is reasonably likely to comply (refer proposed
subsection 152AXC(2)). Examples of objective grounds under proposed subsection
152AXC(3) include, but are not limited to:
· where the access seeker is not creditworthy; or
· where there has been repeated failure by the access seeker to comply with the
terms and conditions on which the same or similar access has been provided.
Secondly, proposed subsection 152AXC(4) permits discrimination where the
discrimination aids efficiency and all access seekers with like circumstances have an
equal opportunity to benefit from the discrimination.
Access seekers may want to receive different terms to promote their own investment
and service differentiation. It is well accepted that in certain circumstances
differentiation on price and/or non-price aspects can aid efficiency, promoting
innovation and investment.
The concept of `efficiency' under proposed subsection 152AXC(4) is intended to be
read broadly and to facilitate discrimination based on normal commercial
considerations, such as taking account of supply and demand conditions, as well as
discrimination that reflects investments made by access seekers which reduce the cost
of providing access.
Examples of discrimination that aids efficiency may therefore include, but need not be
limited to:
· the sharing of risk between an NBN corporation and access seekers which
reduces an NBN corporation's risks including risk of asset stranding;
· material reductions in the NBN corporation's costs achieved through any of
the following:
o differing network or technology requirements;
o reduced operational requirements;
o reduced support requirements;
· material reductions in expenditure associated with access seekers'
involvement on behalf of an NBN corporation; or
· material reductions by NBN corporations or access seekers in the consumption
of scarce resources which may be achieved through reduced utilisation of
limited resources.
The effect of proposed paragraph 152AXC(4)(c) is to impose an additional restriction
on discrimination involving volume discounting. It provides that, in addition to the
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requirements that discrimination must aid efficiency and be available to all access
seekers in like circumstances, where the proposed discrimination involves a discount
or similar benefit given on condition that the access seeker acquires a particular
volume of good, service or other things, the discrimination will only be permitted if:
· an SAU given by the NBN corporation is in operation; and
· the discount, allowance, rebate or credit is in accordance with terms and
conditions specified in the undertaking.
In all instances volume discounts will still need to be justified in terms of aiding
efficiency and as the terms and conditions of volume discounting will need to be set
out in an SAU, they will need to have been approved in advance by the ACCC before
being offered to an access seeker. The Access Bill intentionally uses words of wide
import for the purposes of capturing any permutation of discount that an NBN
corporation, as access provider, may offer or allow to an access seeker. The provision
is intended to capture any form of volume discount (i.e., an allowance, rebate or credit
given or offered subject to the access seeker agreeing to purchase a particular volume,
number, quantity or amount of goods, services or other things from the access
provider).
The concept of `like circumstances' as used in proposed paragraph 152AXC(4)(b) is
not defined in the Access Bill as its ordinary meaning is intended to apply. However,
by way of guidance, it is noted that the concept is used in the non-discrimination
obligations in the telecommunications chapters of the General Agreement on Trade in
Services and Australia's free trade agreements.
Under proposed paragraph 152AXC(4)(b), an NBN corporation will be able to define
what constitutes `like circumstances', subject to ACCC oversight. NBN Co may, for
example, set out its approach to discounting when it submits an SAU in relation to a
service. Consistent with provisions of Part XIC inserted by the CCS Bill, NBN Co
must lodge with the ACCC any access agreements it enters into with access seekers,
which could take action if it considered that the non-discrimination rule had been
breached. The ACCC will also publish guidance material on non-discrimination
issues which could, for example, set out its approach to defining `like circumstances'
(see proposed section 152CJH, inserted by item 79). The ACCC would refer to that
guidance in assessing an SAU, considering a complaint that an access agreement was
discriminatory or making an access determination.
Proposed subsection 152AXC(5) sets out a further exception to the general rule
against discrimination (as set out in proposed subsection 152AXC(1)). This provision
will enable the ACCC to specify in a written instrument particular grounds upon
which discrimination is permitted. For example, if the non-discrimination requirement
would result in outcomes that are clearly inefficient or disproportionate, or if
discrimination is required in relation to national security matters, the ACCC could
approve discrimination. Proposed subsection 152AXC(6) establishes a similar
exception in relation to circumstances that are specified in a written instrument made
by the ACCC. For example, if in certain circumstances the non-discrimination
requirement would conflict with other regulatory obligations, the ACCC could permit
discrimination in accordance with those obligations.
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Proposed subsection 152AXC(7) also clarifies that an NBN corporation that is a
carrier or CSP and is subject to the category B SAOs must not discriminate in favour
of itself in relation to the supply of a declared service that relates to it. While such
circumstances are expected to be limited given NBN corporations' wholesale-only
and equivalence obligations, this provision deals with a potential situation in which an
NBN corporation supplies a declared service both to its own business units and to
access seekers. Its business units may, in effect, be competing with other access
seekers in the provision of the declared service. Under these circumstances, an NBN
corporation may have the incentive and ability to discriminate in favour of its
downstream operations. The Companies Act also provides for functional separation
and divestiture rules for NBN corporations that can be employed to deal with such
self-supply situations should it be warranted.
The obligation only extends to the supply of declared services, not wholesale inputs
which are not subject to declaration by the ACCC, or which are not the subject of an
SAU or SFAA. Furthermore, the requirement is absolute, and does not permit an
NBN corporation to negotiate with one of its own business units to discriminate if it
aids efficiency. An NBN corporation is required to supply declared services to its own
business units on an equivalence of inputs basis, meaning it must supply declared
services on exactly the same terms and conditions as it supplies them to access
seekers.
Proposed subsections 152AXC(8) and (9) provide for two exceptions to the general
rule against an NBN corporation discriminating in favour of itself. These provisions
will enable the ACCC to specify, in a written instrument, particular grounds and
circumstances upon which discrimination is permitted. For example, if the outcomes
of the non-discrimination requirement would be inefficient or disproportionate, the
ACCC could take account of these. It is difficult to determine beforehand with any
degree of certainty discriminatory behaviour for which an exception would be in the
public interest. Accordingly, there are preconditions which must be satisfied before
the ACCC can exercise such powers, namely, before making the exemption
determination, the ACCC must publish a draft of the instrument on its website and
invite people to make submissions on the instrument, and consider any submissions
that were received within the stated timeframe.
Proposed subsection 152AXC(11) specifies that an instrument made under
subsections 152AXC (5) or (6) is not a legislative instrument. This is a substantive
exemption from the LIA. As the telecommunications industry will require certainty
about what specific grounds or circumstances identified by the ACCC will be
permissible, it would not be appropriate to subject such instruments to the
Parliamentary disallowance process. The ACCC will be required to consult on a draft
instrument before making it, so this will ensure that any instrument is subject to
appropriate public commentary and transparency, notwithstanding that the instrument
is not a legislative one for the purposes of the LIA.
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Proposed section 152AXD NBN corporation to carry on related activities on a
non-discriminatory basis
Proposed subsection 152AXD(1) will prohibit an NBN corporation from carrying on
seven specified activities in a way which discriminates between access seekers. Those
activities effectively fall into three categories:
· developing new, or enhancing existing, services;
· providing information about new or existing services; and
· providing information about technical and commercial systems and processes
in place by which services are supplied.
Section 152AXD has been included to extend an NBN corporation's non-
discrimination obligations to activities that are associated with the supply of services,
but may not necessarily be captured under proposed section 152AXC.
Proposed subsection 152AXD(2) provides for exceptions to the prohibition under
subsection 152AXD(1). Specifically, an NBN corporation will be permitted to
undertake discriminatory activity in favour of an access seeker if:
· the activity represents the piloting or trialling of a new eligible service or an
enhanced declared service; and
· a determination made by the ACCC under proposed subsection 152AXD(3) is
applicable to the pilot or trial, and the number of days in the anticipated period
of the pilot or trial does not exceed the maximum timeframe specified in the
determination.
This exception seeks to balance the objective of non-discrimination with the need to
facilitate innovation and competition in the supply of new services by competing
access seekers.
Proposed subsection 152AXD(3) provides that the ACCC, by legislative instrument,
may determine that, for the purposes of proposed paragraph 152AXD(2)(b), a
specified number of days is the maximum allowable duration of a specified pilot or
trial. As noted above, this covers the second limb of the exception to the non-
discrimination rule. The provision has been inserted to ensure that some limitation is
placed on the time in which a pilot or trial can be covered by this proposed
subsection. The accompanying note to proposed subsection 152AXD(3) reminds
readers that subsection 13(3) of the LIA provides guidance in relation to the
specification in legislation by class.
A further exception to the rule is set out in proposed subsection 152AXD(4). This
covers the situation where an access seeker has asked an NBN corporation to develop
a new eligible service or enhance an existing declared service. NBN corporations may
provide information to the access seeker about the development of a new eligible
service or the enhancement of a declared service. The relevant activity involves the
provision of information.
For example, an NBN corporation may be asked by an access seeker to modify a
current NBN service offer, or to supply a new service. An access seeker may want to
develop a new or enhanced service to promote its own commercial interests. The
NBN corporation will make a decision on whether or not to develop the new or
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enhanced service based largely on its own commercial interests. If it accepts that it
wishes to develop the service, it may enter into a period of negotiation with the access
seeker, and may also trial or pilot a service with that access seeker. The NBN
corporation is not therefore, under an obligation to consider any request to modify a
current service offer or to supply a new service, but would only need to consider a
request if it considers it has been submitted in good faith. The NBN corporation
would be free to consider the product development request with regard to its own
commercial and operational interests.
The proposed exemption would allow an NBN corporation to restrict its negotiations
and trialling to that access seeker for a limited period of time - i.e., the period of time
during which the request can be considered, the product developed or enhanced and
trialled. Once the NBN corporation is ready to supply the service, it is subject to the
overarching obligation not to supply a service unless an SFAA, SAU or access
determination is in place in relation to that service. As a result, once the NBN
corporation issues an SFAA for the service, other access seekers would also have an
opportunity to benefit from the service.
The exemption promotes innovation by allowing an access seeker to gain a limited
but legitimate `first mover' advantage to develop and trial new services and products
with an NBN corporation. Without the exemption, access seekers and the NBN
corporation may be reluctant to engage directly to discuss product development
because the NBN corporation would be required to release information that may
reveal the access seeker's commercial strategies.
Proposed subsection 152AXD(5) provides that, if an SAU given by an NBN
corporation is in operation, the obligations in proposed subsection 152AXD(1) do not
apply to an activity to the extent (if any) to which the activity is covered by a
statement included in the undertaking in accordance with proposed subsection
152CBA(3C). In this context it is relevant to note that subsection 152CBA(3B),
inserted by the CCS Bill, expands the possible scope of SAUs, and SAUs could
therefore include undertakings concerning this type of activity. This means that, if an
NBN corporation has an approved SAU which includes statements about product
development or enhancement, and the other activities set out in proposed
subsection 152AXD(1), then section 152AXD will not apply as long as that SAU is in
operation.
Proposed subsection 152AXD(6) clarifies that for this section, the term `eligible
service' has the same meaning as in section 152AL of the CCA.
Item 51 - After paragraph 152AZ(a)
Item 51 inserts proposed paragraph 152AZ(aa) into the CCA. This amendment
ensures that any rules provided in proposed sections 152AXC and 152AXD that are
applicable will be considered to be a carrier licence condition that must be complied
with by an NBN corporation that is a carrier (within the meaning of the Tel Act).
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Item 52 - After paragraph 152BA(2)(a)
Item 52 inserts proposed paragraph 152BA(2)(aa) into the CCA. This amendment
ensures that any rules provided in proposed sections 152AXC and 152AXD that are
applicable will be considered to be a service provider rule that must be complied with
by an NBN corporation that is a service provider (within the meaning of the Tel Act).
Item 53 - After subsection 152BB(1)
If an NBN corporation has contravened a rule imposed by proposed
subsection 152AXC(1), (8) or 152AXD(1), proposed subsection 152BB(1AB)
enables the Federal Court, upon application from the ACCC or any person whose
interests are affected by the contravention, to make all or any of the following orders
directing the NBN corporation: to comply, to compensate any other person who has
suffered loss or damage, or such orders as it considers appropriate.
Item 54 - Section 152BBD
Item 55 - Section 152BBD
Item 56 - At the end of section 152BBD
Items 54, 55 and 56 make consequential changes to section 152BBD of the CCA due
to the amendments made by items 47 and 50.
Item 56 inserts a new subsection into section 152BBD to provide that the ACCC must
have regard to the desirability of NBN corporations and access seekers agreeing on
terms and conditions under paragraph 152AY(2)(a) in a timely manner when
exercising its powers under sections 152BBA and 152BBC.
Item 57 - After subsection 152BC(4)
Item 57 inserts proposed subsections 152BC(4A), 152BC(4B) and 152BC(4C) into
the CCA. These subsections deal with access determinations, which are created under
the CCS Bill. Under the CCS Bill, the ACCC may make access determinations in
relation to declared services. Effectively, the access determination sets out the terms
and conditions under which that declared service must be supplied (see also
section 152AY). The proposed subsections provide that an access determination can
be NBN-specific, in which case it will not apply to access to a declared service
supplied by a person other than an NBN corporation. Likewise, an access
determination that is not NBN-specific will not apply to an NBN corporation.
Item 58 - At the end of paragraphs 152BCB(1)(a) and (b)
Item 58 makes a consequential change to paragraphs 152BCB(1)(a) and (b) of the
CCA by adding reference to proposed section 152AXB. The effect of this amendment
is that the ACCC must not make an access determination that would be inconsistent
with the category B standard access obligations in proposed section 152AXB.
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Item 59 - After subsection 152BCB(4)
Item 59 inserts proposed subsections 152BCB(4A)-(4F) into the CCA.
Proposed subsection 152BCB(4A) requires that the ACCC must not make an access
determination that, in relation to any category B SAOs applicable to an NBN
corporation, has the effect of discriminating between access seekers, whether directly
or indirectly.
However, proposed subsections 152BCB (4B)-(4F) establish exceptions to the rule
under proposed subsection 152BCB(4A).
Proposed subsections 152BCB(4B) and (4D) mirror in substance those set out in
proposed subsections 152AXC(2)-(4), whilst the exceptions under proposed
subsections 152BCB(4E) and (4F) cover those grounds or circumstances specified in
an instrument made by the ACCC under proposed subsections 152AXC(5) and (6)).
Item 60 - Subsection 152BCB(5)
Item 60 makes a consequential amendment to subsection 152BCB(5) of the CCA. It
provides that if an access determination has any of the effect in proposed
subsection 152BCB(4A) (in addition to subsections 152BCB(1) and (3)), then the
access determination does not operate to the extent that it would have those effects.
Item 61 - Before subsection 152BCF(4)
Item 61 inserts proposed subsections 152BCF(3B) and (3C) into Part XIC of the
CCA. These amendments provide that, for access determinations that relate to a
declared service covered by subsections 152AL(8D) or (8E) (ie. a declared service
covered by an SFAA or SAU relating to an NBN corporation), the specified day
which the determination comes into force must not be earlier than the day on which
the service became a declared service under those subsections.
Item 62 - At the end of subsection 152BCK(1)
Item 62 makes an amendment to subsection 152BCK(1). Section 152BCK provides
for a time limit on the ACCC to make an access determination where the ACCC holds
a public inquiry under Part 25 of the Tel Act. This item will provide that this section
does not apply to a declared service which is covered by an access determination
under proposed subsection 152AL(8D). This means that the ACCC need not, if it so
chooses, make an access determination in relation to a service supplied under an
SFAA. However, it is open to the ACCC to make an access declaration in relation to
such a service should it consider there is a need to do so.
Item 63 - After subsection 152BD(4)
Item 63 inserts proposed subsections 152BD(4A)-(4C) into the CCA. These proposed
subsections provide that binding rules of conduct can be NBN-specific, in which case
they will not apply to access to a declared service supplied by a person other than an
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NBN corporation. Likewise, binding rules of conduct that are not NBN-specific will
not apply to an NBN corporation.
Item 64 - At the end of paragraphs 152BDA(1)(a) and (b)
Item 64 makes a consequential change to paragraphs 152BDA(1)(a) and (b) of the
CCA by adding a reference to section 152AXB. The effect of this amendment is that
the ACCC must not make binding rules of conduct that would be inconsistent with the
Category B SAOs in proposed section 152AXB.
Item 65 - After subsection 152BDA(4)
Item 65 inserts proposed subsections 152BDA(4A)-(4F) into the CCA. Proposed
subsection 152BDA(4A) requires that the ACCC must not make binding rules of
conduct that, in relation to any category B SAOs applicable to an NBN corporation,
have the effect of discriminating between access seekers, whether directly or
indirectly.
Proposed subsections 152BDA(4B) and (4D) provide exceptions to this general rule
that mirror in substance those set out in proposed subsections 152AXC(2)-(4), whilst
the exceptions under proposed subsections 152BDA(4E) and (4F) cover those
grounds or circumstances specified in an instrument made by the ACCC under
proposed subsections 152AXC(5) and (6).
Item 66 - Subsection 152BDA(5)
Item 66 makes a consequential amendment to subsection 152BDA(5) of the CCA.
The effect of the change is that where binding rules of conduct have any of the effects
in proposed subsection 152BDA(4A) (in addition to subsection 152BDA(1), (3), and
(3A)), then the binding rules of conduct do not operate to the extent that it would have
those effects.
Item 67 - After section 152BEB
Proposed sections 152BEBA, 152BEBB and 152BEBC supplement the provisions in
relation to access agreements being inserted in the CCA by the CCS Bill. Under
section 152BEA, inserted by the CCS Bill, all access agreements must be lodged with
the ACCC, but there is no requirement to publish or otherwise release an access
agreement. These proposed sections will require an NBN corporation, if it has entered
into an access agreement with an access seeker with different terms and conditions
from those set out in an SFAA, SAU or access determination, to give the ACCC a
statement, in a form approved in writing by the ACCC, setting out the different terms
and conditions within seven calendar days of the agreement being entered into. The
statement will be kept in a register by the ACCC, which will be available on the
ACCC's website, and provides transparency to other access seekers that an agreement
has been reached to vary the standard terms, and allows them to assess whether they
may be in like circumstances. If an access seeker considers that it has like
circumstances, it can apply to the NBN corporation for similar or the same terms.
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Proposed section 152BEBA NBN corporation to give the Commission a
statement about the differences between an access agreement and a standard
form of access agreement
Proposed subsection 152BEBA(1) requires an NBN corporation, if it has entered into
an access agreement in accordance with proposed subsection 152BE(1) to provide a
declared service, where an SFAA was available on the NBN corporation's website in
relation to that declared service, and where there are different terms and conditions in
the access agreement from those set out in that SFAA, to give the ACCC a statement
in a form approved by the ACCC, within seven days of the agreement being entered
into.
The statement that is to be provided to the ACCC must cover the following things:
· the parties to the access agreement;
· a description of the differences between the terms and conditions set out in the
access agreement and those under the SFAA;
· where differences have been agreed because they aid efficiency, the
differences authorised by proposed subsection 152AXC(4) must be specified,
together with a description of what other access seekers must do in order to be
able to benefit from the same changes to the access agreement;
· where an access agreement picks up discrimination authorised on grounds, or
in circumstances specified in a determination made by the ACCC under
proposed subsections 152AXC(5) or (6), the differences; and
· any other information about the access agreement as required by the ACCC's
form--this could cover, for example, further details of the access agreement,
such as the term of the agreement.
An NBN corporation must, under proposed section 152BEA (inserted by the CCS
Bill), lodge the access agreement with the ACCC. If the ACCC were required to
publish the actual agreement in full this could reveal commercial-in-confidence
information. If this information were to be revealed, there may be no incentive for any
access seeker to seek differentiated terms, which could reduce innovation and
efficiency. The proposed statement therefore is intended to provide a practical
solution, whilst ensuring that there remains clear transparency of any different terms
and conditions that have been offered by an NBN corporation in an access agreement.
As an NBN corporation will be required to lodge access agreements and statements
with the ACCC, the ACCC will be in a position to judge whether the NBN
corporation has offered similar varied terms to access seekers in like circumstances
and could take action if it considered that the NBN corporation had breached the non-
discrimination rule in proposed section 152AXC.
Proposed subsection 152BEBA(2) requires an NBN corporation, if it has entered into
a variation agreement (see subsection 152BE(3), inserted by the CCS Bill) relating to
an access agreement to provide a declared service, where the declared service was
covered by an SFAA available on the NBN corporation's website, and the terms and
conditions in the access agreement as varied are different from those set out in that
SFAA, to give the ACCC a statement in a form approved by the ACCC on the
variation agreement within seven days of the variation agreement being entered into.
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The statement that is to be provided to the ACCC must cover the following things:
· the parties to the access agreement (as varied);
· a description of the differences between the terms and conditions set out in the
access agreement (as varied) and those in the SFAA;
· where the differences aid efficiency, the statement must identify the
differences that are authorised by proposed subsection 152AXC(4), and
describe what access seekers must do in order to be able to benefit from the
same changes to the access agreement;
· where the access agreement picks up discrimination authorised on grounds, or
in circumstances, specified in a instrument made by the ACCC under proposed
subsections 152AXC(5) or (6), a description of the differences; and
· any other information required by the ACCC's form.
Proposed section 152BEBB NBN corporation to give the Commission a
statement about the differences between an access agreement and a special
access undertaking
Proposed subsection 152BEBB(1) requires an NBN corporation, if it has entered into
an access agreement (under subsection 152BE(1)) to provide a declared service,
where an SAU was in operation, and where there are different terms and conditions in
the access agreement from those set out in that SAU, to give the ACCC a statement in
a form approved by the ACCC regarding that agreement within seven days of the
agreement being entered into.
Proposed subsection 152BEBB(2) similarly requires an NBN corporation, if it has
entered into a variation agreement to provide the ACCC with a statement on the
variation agreement within seven days of the variation agreement being entered into,
similar to proposed subsection 152BEBA(2).
The statements which must be provided by the NBN corporation to the ACCC must
cover substantially the same things required under proposed section 152BEBA with
some minor variation. The main point of difference is that the forms under proposed
subsection 152BEBB capture the differences between the terms and conditions of an
access agreement and the terms and conditions set out in an SAU (as originally made,
or if applicable, as varied).
Proposed section 152BEBC NBN corporation to give the Commission a
statement about the differences between an access agreement and an access
determination
Proposed subsection 152BEBC(1) requires an NBN corporation, if it has entered into
an access agreement (under subsection 152BE(1)) to provide a declared service,
where an access determination was in force immediately before the agreement was
entered into, and where there are different terms and conditions in the access
agreement from those set out in that access determination, to provide the ACCC with
a statement on that agreement within seven days of the agreement being entered into.
Proposed subsection 152BEBC(2) similarly requires an NBN corporation, if it has
entered into a variation agreement, to provide the ACCC with a statement on the
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variation agreement within seven days of the variation agreement being entered into,
similar to proposed subsection 152BEBA(2).
The statements which must be provided by the NBN corporation to the ACCC must
cover substantially the same things required under proposed section 152BEBA with
some minor variation. The main point of difference is that the forms under proposed
subsection 152BEBC capture the differences between the terms and conditions of an
access agreement and the terms and conditions set out in an access determination (as
originally made, or if applicable, as varied).
Proposed section 152BEBD Register of NBN Access Agreement Statements
As discussed above, where an NBN corporation enters into access agreements which
contain terms and conditions that are different from the terms and conditions set out in
an SFAA, SAU or access determination, as the case may be, it is required to provide
statements to the ACCC under the proposed sections 152BEBA, 152BEBB; and
152BEBC.
Proposed section 152BEBD requires the ACCC to maintain a Register of access
agreement statements provided to it by NBN corporations. These statements would
include statements setting out how, and on what basis, NBN corporations have offered
different terms and conditions from those set out in their standard offers. The ACCC
may redact information in the statements that could prejudice substantially the
commercial interests of a person, and the prejudice outweighs the public interest in
the publication of the matter (proposed subsection 152BEBD(5)).
If commercially sensitive material contained in a statement is withheld from
publication, the ACCC is required to include in the Register an annotation to that
effect (refer proposed subsection 152BEBD(6)). This will make it clear to a person
looking at the published statement, that certain information was removed from that
version.
Subsection 152BEBD(4) clarifies that the register is not a legislative instrument for
the purposes of the LIA. This subsection is enacted for the avoidance of doubt,
because the ACCC will be publishing statements which it has redacted. The material
will be made public in any event.
Item 68 - Section 152BEC
Item 69 - Subsection 152BED(2)
Items 68 and 69 make consequential amendments to section 152BEC and
subsection 152BED(2) to include references to proposed sections 152BEBA,
152BEBB, and 152BEBC due to changes made by item 67.
Item 70 - Subsection 152CBA(1)
Item 70 repeals the current subsection 152CBA(1) and substitutes an amended
subsection 152CBA(1) of the CCA.
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Subsection 152CBA(1) defines the services to which section 152CBA (dealing with
SAUs) will apply. This amendment does not change the defined services, but
establishes two separate circumstances in which a person can give an SAU. The first
provision under proposed paragraph 152CBA(1)(a) relates to a person other than an
NBN corporation (this remains the same as currently provided for). The second
provision under proposed paragraph 152CBA(1)(b) relates to a person who is an NBN
corporation and who is, or expects to be, a carrier or CSP supplying either a listed
carriage service or a service that facilitates the supply of a listed carriage service. An
NBN corporation may give a written undertaking to the ACCC in relation to access to
the service, so long as the service is not a declared service under proposed
subsection 152AL(8A) or there is no access determination that applies in relation to
access to the service.
Item 71 - Subsection 152CBA(3)
Item 71 amends subsection 152CBA(3) of the CCA as a result of changes made in
item 70. This change will make clear that subsection will only be relevant if proposed
paragraph 152CBA(1)(a) applies (i.e. if the SAU is given by a person other than an
NBN corporation).
Item 72 - After subsection 152CBA(3)
Item 72 inserts proposed subsection 152CBA(3A) into the CCA as a result of changes
made in item 70. This subsection will only be relevant if proposed paragraph
152CBA(1)(b) applies (i.e. if the SAU is given by a person who is an NBN
corporation). This proposed subsection specifies what the undertaking must state and
includes an agreement to be bound by the obligations in proposed section 152AXB,
and an undertaking to comply with the terms and conditions specified in relation to
the obligations referred to in proposed section 152AXB.
A note to the proposed subsection clarifies that the undertaking need not specify all
terms and conditions (see subparagraph 152AY(2)(b)(ii) of the CCA).
Item 73 -Before subsection 152CBA(4)
This item inserts proposed subsections 152CBA(3C) and (3D) as a result of the
changes proposed under items 50 and 70 (see above).
Proposed subsection 152CBA(3C) makes it clear that the undertaking can expressly
provide that the NBN corporation will engage in any of the listed activities (refer
proposed paragraphs 152CBA(3C)(a)-(g), and see also proposed section 152AXD,
inserted by item 50).
Proposed subsection 152CBA(3D) is inserted to make it clear to access seekers that
any statement made in accordance with proposed subsection 152CBA(3C) should be
disregarded when seeking to establish whether a statement in the undertaking covers a
particular service or proposed service. This provision clarifies that where provisions
in Part XIC refer to an SAU "relating to a service" (e.g. subsection 152CBD(1), or an
SAU "in relation to a service or a proposed service" (e.g. subsections 152AL(7) and
152CBA(2)) or "an SAU that relates to a service" (e.g. proposed
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subparagraphs 152CJA(1)(c)(ii) and 152BEBB(1)(c)(i), inserted by items 79 and 67
of Schedule 1 to the Access Bill, respectively), any statements in the SAU that are
covered by proposed subsection 152CBA(3C) are to be disregarded. For the purposes
of provisions in Part XIC that refer to an SAU, the SAU will only relate to the service
that is the main service dealt with under the SAU: that is, the service in relation to
which, under an SAU given by an NBN corporation, that NBN corporation agrees to
be bound by the obligations in proposed section 152AXB as if the service were a
declared service (see proposed subsection 152CBA(3A), described above at item 72).
This is intended to clarify that, where an SAU given by an NBN corporation deals
with any additional activities listed at proposed subsection 152CBA(3C) in relation to
declared services that are additional to the main service that is the subject of that
SAU, the SAU will not be treated as "relating to" those additional services, for the
purposes of provisions in Part XIC that refer to this concept.
Item 74 - Subsection 152CBA(11)
Item 74 amends subsection 152CBA(11) of the CCA as a result of changes made in
item 70.
Item 75 - Paragraphs 152CBD(2)(a) and (b)
Item 75 repeals and replaces paragraphs 152CBD(2)(a) and (b) of the CCA as a result
of changes made in item 70. Section 152CBD provides criteria that the ACCC must
be satisfied of before it can accept an SAU relating to a service.
Paragraph 152CBD(2)(a) will only be relevant if paragraph 152CBA(1)(a) applies
(i.e. if an SAU is given by a person other than an NBN corporation).
Paragraph 152CBD(2)(b) will only be relevant if paragraph 152CBA(1)(b) applies
(i.e. if an SAU is given by a person who is an NBN corporation).
The effect of the proposed paragraphs will be that the ACCC cannot accept an SAU
unless it is satisfied that particular terms and conditions are consistent with
obligations under section 152AXB and those terms and conditions are reasonable.
Reasonable is defined in section 152AH of the CCA.
Item 76 - Before paragraph 152CBD(2)(d)
Item 76 clarifies that, if proposed subsection 152CBA(3C) applies, the ACCC must be
satisfied that the conduct specified in accordance with that proposed subsection will
promote the long-term interests of end-users before it can accept an SAU. Proposed
subsection 152CBA(3C) provides that an operational SAU given by an NBN
corporation may contain a statement about any of the obligations in relation to non-
discrimination in relation to related activities set out in proposed
subsection 152AXD(1). Proposed subsection 152AXD(5) clarifies that, if an
operational SAU given by an NBN corporation does contain such a statement, then
the relevant obligations in proposed subsection 152AXD(1) do not apply.
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Item 77 - Paragraph 152CBF(2)(b)
Item 77 makes a consequential amendment to paragraph 152CBF(2)(b) to reflect
changes made by item 71.
Item 78 - Subsection 152CBI(3)
Item 78 makes a consequential amendment to subsection 152CBI(3) to reflect
changes made by item 41.
Item 79 - After Division 6 of Part XIC
Proposed Division 6A--Supply of services by NBN corporations
Item 79 inserts proposed Division 6A of Part XIC, which sets out several new
sections dealing with the supply of services by NBN corporations, and also inserts
proposed Division 6B, dealing with ACCC explanatory material on anti-
discrimination provisions.
Proposed section 152CJA Supply of services by NBN corporations
Proposed subsection 152CJA(1) establishes that an NBN corporation must not supply
an eligible service unless:
· the service has been declared by the ACCC under subsection 152AL(8A); or
· the NBN corporation has formulated an SFAA that relates to access to the service
and it has published it on its website; or
· an SAU has been given by the NBN corporation relating to the service, and such
an undertaking is in force.
An eligible service is defined in section 152AL of the CCA.
Proposed subsection 152CJA(2) establishes that an NBN corporation must comply
with a request from an access seeker under proposed section 152AXB for a service if
the NBN corporation has formulated an SFAA that relates to access the service and
published it on its website, and the access seeker requests the NBN corporation to
enter into an access agreement that relates to access to the service and sets out terms
and conditions that are the same as the terms and conditions set out in the SFAA. The
SFAA therefore acts as a template, or standard offer of terms which the access seeker
and access provider can sign up to, which results in an access agreement with an NBN
corporation. The SFAA itself is not an access agreement. The SFAA does not operate
in the same way that a standard form of agreement operates currently under Part 23 of
the Tel Act. In the case of SFAAs, the parties will execute an agreement which
specifies the terms and conditions set out in the SFAA, including the basis on which
the terms and conditions may be varied.
Proposed subsection 152CJA(3) clarifies that, if an access seeker does not make a
request under proposed paragraph 152CJA(2)(d) to enter into an access agreement
that has the same terms and conditions as those set out in an SFAA, there is no
implication that an NBN corporation and the access seeker cannot enter into an access
agreement that sets out terms and conditions that vary from the SFAA. As noted
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under item 50 above, any such variations must be consistent with the non-
discrimination obligations. Furthermore, as noted under item 67, details of the
variations must be submitted to the ACCC and the ACCC must publish those details
on its website.
An NBN corporation may choose to publish an SFAA for a new service, or to publish
an SFAA as the means of specifying the terms and conditions which are not covered
by, or to complement the terms and conditions contained in, the SAU it has given to
the ACCC (on the interaction between terms and conditions in an SAU and access
agreement, see section 152AY of the CCA, inserted by the CCS Bill). It is already
recognised that Part XIC of the CCA does not exclude supplementing the terms and
conditions of services set out in an SAU with ancillary documents which may form
part of the agreement between an access provider and an access seeker in relation to
the supply of a declared service.
The note accompanying proposed subsection 152CJA(3) will remind readers that an
NBN corporation will not have to comply with the Category B SAOs, if an exception
under proposed subsections 152AXB(3) or (6) applies.
Proposed section 152CJB Mandatory NBN services
Proposed section 152CJB establishes the process for compliance with the requirement
to provide a service in accordance with a condition of a carrier licence made under
section 63 of the Tel Act, in accordance with clause 15 of the Companies Bill.
Proposed section 152CJB should be read together with clause 15 of the Companies
Bill. Clause 15 of the Companies Bill clarifies that the Minister may make a condition
of an NBN corporation's carrier licence under section 63 of the Tel Act specifying
services that an NBN corporation must supply. If the Minister does this, proposed
section 152CJB has the effect of requiring the NBN corporation to publish an SFAA
or lodge an SAU in relation to that service.
Proposed subsection 152CJB(2) sets out the timeframe in which the relevant NBN
corporation is required to formulate an SFAA and publish the SFAA on its website.
The timeframe is 90 calendar days after the carrier licence condition comes into force.
In the case where the NBN corporation wishes to have an SAU in connection with the
provision of access to the service, it must give an SAU to the ACCC within the 90 day
timeframe.
In the case where the NBN corporation has given an undertaking in accordance with
proposed subsection 152CJB(3), and the ACCC rejects the SAU, the NBN
corporation must, within 90 days of the rejection, formulate (and publish on its
website) an SFAA that relates to access to the service. This additional mechanism
provides added certainty to prospective access seekers.
All SFAAs made in accordance with proposed subparagraph 152CJB(2)(a)(ii) or
proposed paragraph 152CJB(3)(d) must be available on the NBN corporation's
website at all times during the remainder of the period when the condition is in force
(see proposed subsection 152CJB(4)).
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The 90-day timeframe has been chosen to ensure that the NBN corporation has
reasonably sufficient time to prepare and publish the relevant documentation.
Proposed subsection 152CJB(5) provides that if an SAU is given in accordance with
proposed paragraph 152CJB(2)(b), the ACCC accepts the undertaking, and the
undertaking subsequently ceases to be in operation, the NBN corporation must ensure
that an SFAA that relates to access to the service and is formulated by the NBN
corporation is available on the NBN corporation's website at all times during the
remainder of the period when the condition is in force. It is expected that an NBN
corporation would begin formulating a new SAU or SFAA sufficiently in advance of
expiry of the SAU.
Proposed section 152CJC Carrier licence condition
Proposed section 152CJC provides that a carrier licence held by an NBN corporation
is subject to a condition that the NBN corporation must comply with any applicable
rules in proposed section 152CJA. Any breach by an NBN corporation of the rules in
proposed section 152CJA would therefore be dealt with as a breach of carrier licence,
and the enforcement mechanisms under the Tel Act would apply (see proposed
section 152CJE below).
Proposed section 152CJD Service provider rule
Proposed subsection 152CJD(2) provides that if an NBN corporation is a service
provider, the NBN corporation must comply with any applicable rules in proposed
section 152CJA of the Access Bill. Proposed subsection 152CJD(1) clarifies that any
rule in proposed subsection 152CJD(2) of the Access Bill applicable to service
providers will be considered as a service provider rule for the purposes of the Tel Act,
and that these rules are in addition to rules mentioned in section 98 of the Tel Act.
Proposed section 152CJE Judicial enforcement of obligations
If an NBN corporation has contravened an obligation imposed by section 152CJA or
152CJB, proposed subsection 152CJE(1) enables the Federal Court, upon application
from the ACCC or any person whose interests are affected by the contravention, to
make all or any of the following orders directing the NBN corporation: to comply, to
compensate any other person who has suffered loss or damage, or such orders as it
considers appropriate.
Proposed subsection 152CJE(2) empowers the Federal Court to vary or discharge the
operation of orders granted under this section.
Proposed section 152CJF Standard form of access agreement
Proposed section 152CJF clarifies that an NBN corporation is able to formulate an
SFAA relating to access to a service that has not yet been declared, on the assumption
that the service is a declared service. However, if the Minister were to make a carrier
licence condition prohibiting a particular NBN corporation from supplying the
service, an SFAA could not be made in relation to that service.
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Proposed section 152CJG When NBN corporation is not capable of supplying
a carriage service
Proposed subsection 152CJG(1), which is included for the avoidance of doubt, should
be read together with subclause 15(3) of the Companies Bill which clarifies that the
Minister may make a condition of a carrier licence under section 63 of the Tel Act
applying to an NBN corporation preventing that NBN corporation from providing a
specified eligible service. Should the Minister make a condition on an NBN
corporation's carrier licence prohibiting the supply of a specified service, the ACCC
would not be able to declare the service under proposed subsection 152AL(8A) of the
CCA.
Proposed Division 6B--Explanatory material relating to anti-
discrimination provisions
Proposed section 152CJH Explanatory material relating to anti-discrimination
provisions
Proposed section 152CJH requires the ACCC, as soon as practicable after the
commencement of this section (see clause 2 above), to publish on its website
explanatory material which explains the ACCC's views on the operation of (and how
it will administer, i.e. its approach to enforcement) the following provisions:
- proposed section 152AXC;
- proposed section 152AXD;
- proposed subsections 152BCB(4A)-(4F);
- proposed subsections 152BDA(4A)-(4F).
To ensure that the material remains relevant, the ACCC will be required to ensure that
any such explanatory material is kept up-to-date.
This provision addresses industry's request for greater up-front certainty on when an
NBN corporation may negotiate to offer different terms and conditions, and what sort
of discrimination would be permitted. The ACCC's guidance may set out its views on
how it intends to enforce the obligations on NBN corporations, thereby providing a
clear signal to the marketplace of the limits of allowable discrimination. It could also,
for example, set out the way in which the ACCC will consider volume discounts in
relation to an SAU given by an NBN corporation, and when discrimination in relation
to creditworthiness is reasonable. Should the ACCC make an instrument setting out
grounds or circumstances permitting discrimination by an NBN corporation, it is
expected that the ACCC will issue explanatory material which sets out the ACCC's
rationale for the instrument and how it expects industry to comply.
The explanatory material to be published by the ACCC on its website is analogous to
the guidance material it issues on other sections of the CCA, such as the obligations
under Parts IV, IVA and V, and to material it has issued on its interpretation of
telecommunications provisions under Parts XIB and XIC. The explanatory material
does not in any way constitute rules in relation to the operations of an NBN
corporation, or bind the ACCC.
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Item 80 - Subsection 152CK(4)
Item 81 - At the end of section 152CK
Item 80 makes a consequential amendment to subsection 152CK(4). The effect of this
amendment is that this subsection will only apply to an SAU given by a person other
than an NBN corporation.
Item 81 inserts subsection 152CK(5) which will be relevant if an SAU is given by an
NBN corporation. This subsection would provide that if an SAU is in operation, it can
be assumed that proposed subsection 152AL(8E) has effect in relation to the
undertaking as if paragraph 152AL(8E)(c) had not been enacted. The effect of this
clause is that an eligible service set out in an SAU given by an NBN corporation will
be a declared service regardless of whether the NBN corporation supplies the service
or proposed service for the purposes of section 152CK, in that a notification under
section 44S of the CCA must not be given. This section reflects that provided for non-
NBN corporation SAUs under current subsection 152CK(4) of the CCA.
Item 82 - After paragraph 155(9)(b)
Item 82 inserts proposed paragraph 155(9)(ba) in the CCA. Section 155 of the CCA
sets out information-gathering powers of the ACCC. This amendment ensures that
any references in that section to a `designated communications matter' will include a
reference to the performance of a function, or the exercise of a power, conferred on
the Commission by or under the Companies Bill.
Item 83 - Transitional--continuity of special access undertakings
Item 83 is included to clarify that none of the changes made to section 152CBA by
Part 1 of Schedule 1 to the Access Bill affect the continuity of special access
undertakings that are in force at the time this item commences.
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Part 2--Amendments relating to infringement notices
Telecommunications Act 1997
Part 2 of Schedule 1 to the Access Bill makes an amendment to paragraph 572E(4)(b)
of the Tel Act.
Item 84 - At the end of paragraph 572E(4)(b)
Item 84 amends paragraph 572E(4)(b) of the Tel Act to include new subparagraphs
(xiv)-(xviii).
Section 572E of the Tel Act sets out when an infringement notice may be issued.
Certain provisions have been excluded for the purposes of the infringement notice
scheme under subsection 572E(4) and this amendment includes additional provisions
of the CCA and the Companies Act as exempt provisions. The provisions which have
been listed as exempt are:
· carrier licence conditions under proposed section 152CJC of the CCA and
proposed clause 15 of the Companies Bill; and
· service provider rules set out under sections 152CJC (2) of the CCA and
proposed subclause 12(2) of the Companies Bill;
This change is made because it is considered more appropriate for the ACCC or the
Minister to enforce these provisions, rather than the ACMA.
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Part 3--Amendments relating to Layer 2 Ethernet bitstream services
Proposed Part 3 of Schedule 1 to the Access Bill makes changes to the Tel Act and
the CCA to establish new arrangements to require carriers (other than NBN
corporations) operating certain superfast broadband networks, after an appropriate
transition period, to offer a wholesale Layer 2 bitstream service on an open and
equivalent access basis. These proposed new measures are designed to ensure that
other providers of superfast broadband networks in Australia can provide to
consumers outcomes similar to those available on the NBN and ensure that NBN Co
operates on a more level regulatory playing field to assist it to achieve the range of
objectives for which it has been established.
Readers should consult the Outline of this Explanatory Memorandum and the
Regulation Impact Statement on these measures for information on the background,
rationale, objectives and operation of these provisions.
The measures in Part 3 of Schedule 1 are intended to work in conjunction with the
amendments to Part 6 of the Tel Act set out in items 12-16 of Schedule 1 to the
Access Bill, which will facilitate the making of codes and standards in relation to
FTTP facilities and services. As a result of those code and standard processes, a
framework will be put in place through which those new networks will meet NBN-
consistent specifications. This will help ensure consumers using these networks will
receive comparable outcomes from a technical perspective. The amendments made by
Part 3 build on these arrangements by requiring new superfast FTTP networks and
other new and upgraded mass market superfast networks, regardless of the
technology, to offer a Layer 2 bitstream service. Part 3 then proceeds to require those
Layer 2 bitstream services to meet open and equivalent access requirements based on
those applying to NBN corporations.
Amongst other things, these arrangements draw on the Government's consultations on
the provision of services in new developments and the Implementation Study on the
NBN, including recommendation 73. For the avoidance of doubt, the arrangements
apply in all localities, however, not just new real estate developments.
The new requirements under Part 7 will only come into operation on Proclamation or
after 12 months from the day in which the Act receives the Royal Assent as indicated
in item 4 of the Table in clause 2 of the Access Bill.
Telecommunications Act 1997
Item 85 - Section 7
Item 85 inserts a proposed definition of `Layer 2 bitstream service' in section 7 of the
Tel Act. The same meaning of Layer 2 as applied under the Open System
Interconnection (OSI) Reference Model for data exchange will apply in this context.
The OSI model is widely known and used in the telecommunications industry, and in
particular in relation to the provision of bitstream services. For example, NBN Co
itself has indicated that it intends to offer Layer 2 bitstream services, and the
Implementation Study on the NBN also recommended that NBN Co offer Layer 2
bitstream services. Ethernet is also a widely used industry standard and is intended to
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have its commonly-applied definition. The term has been discussed in documents
issued by the ACCC, for example, in the ACCC's 2010 decision to amend the
definition of the Domestic Transmission Capacity Service.
The reference to `line' in proposed paragraph (c) of the definition of `Layer 2
bitstream service' makes it clear that that term is not intended to capture services
provided through mobile, satellite or wireless networks. It would not be appropriate to
capture these networks because the objective of the provisions is to provide a more
level regulatory playing field in relation to superfast carriage services, defined as
providing a download transmission speed of more than 25 Mbps, provided over fixed-
line networks. Moreover, as these technologies do not generally provide the threshold
download speed of more than 25 Mbps being applied on a dedicated basis, it has not
been considered necessary to capture them.
`Carriage service' is defined in section 7 of the Tel Act to mean a service for carrying
communications by means of guided and/or unguided electromagnetic energy.
Item 86 - After Part 6
Item 86 inserts a proposed Part 7 into the Tel Act, which will set out a rule relating to
the supply of Layer 2 bitstream services using certain network units.
Proposed Part 7--Layer 2 bitstream services
Proposed section 140 Simplified outline
Proposed section 140 provides a simplified outline of proposed Part 7 of the Tel Act
to assist the reader. In summary, proposed section 141 sets out an obligation on
owners of network units, where those network units are part of a telecommunications
network that comes into existence after 25 November 2010 or is altered or upgraded
after that date, and are capable of supplying superfast carriage services, to supply a
Layer 2 bitstream service. It does this by preventing the owners of such network units
from providing other carriage services over such networks unless a Layer 2 bitstream
service is provided using that network. Proposed subsections 141(5) and (6) provide
that the Minister, may by written instrument, exempt a specified owner or network
unit from this obligation. Any exemption must be made following consultation with
the ACCC and the ACMA (see proposed subsection 141(8)). `Superfast carriage
services' in this context has the meaning given by proposed subsection 141(10), see
below.
Proposed section 141 Supply of Layer 2 bitstream services
Proposed subsection 141(1) establishes which network units will be subject to the new
Layer 2 bitstream requirements.
The network units which are proposed to be covered are any network unit which
belongs to a telecommunications network which is not the NBN, and which is used, or
is capable of being used, to supply a superfast carriage service to customers (actual
and prospective) anywhere in Australia. To be covered, the network unit must be part
of a telecommunications network that either:
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- comes into existence after 25 November 2010; or
- if it existed prior to that date--is altered or upgraded after
25 November 2010, with the result being that the network unit
becomes capable of being used to supply a superfast carriage service.
If no Layer 2 bitstream service is available for supply to those customers or
prospective customers using the network, then the network unit cannot be used to
supply carriage services.
A key exemption is provided for network units that are used wholly to supply carriage
services to a single end-user, where the end-user is a public body or a company. This
exemption is intended to exempt existing or future network units that are installed by
carriers on a point-to-point basis to service government agencies or corporations.
Such network units are usually installed by a carrier for the sole purpose of supplying
a single end-user and involve agreements reached between the customer and the
carrier in relation to the supply of services. It would generally not be appropriate for
carriers to supply access over these network units.
The arrangements are also not intended to capture proprietary networks installed for
the sole use of a person or the person's immediate circle. Such networks would not
involve supply to the public and as such they would not be caught by the `network
unit' concept.
Examples of the alteration or upgrading of a network unit could include extending an
existing network, for example, by adding new line links, or upgrading the operation of
a network unit so that it will support higher-speed broadband services. If an existing
network is operating to normally provide a download transmission speed in excess of
25 Mbps it would not be covered by these provisions. However, if a network is
currently not capable of providing such services, but that network is upgraded, for
example, through the deployment of new hardware or software or both, to be capable
of supplying a download speed of more than 25 Mbps, the network would be
captured.
The new arrangements will commence on Proclamation, or, if there is no
Proclamation, after 12 months from the day on which the Access Bill receives the
Royal Assent (see clause 2). This is intended to provide a transitional period and to
signal to carriers upgrading or building new networks that these rules will apply to
their networks, but to provide a period of up to 12 months for them to put in place
arrangements to meet these requirements. The threshold date of 25 November 2010
has been selected as that is the planned date of introduction of the Access Bill into the
House of Representatives (i.e. the date from which the public will become aware of
the proposed new requirements). At the same time, this approach to capturing certain
networks moving forward is designed to minimise any attempts by network owners to
circumvent the new Layer 2 bitstream requirements.
Proposed subsections 141(2) and (3) set out two new prohibitions on the use of
network units; one relating to network units where there is only one owner, and
another in relation to network units with multiple owners.
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Proposed subsection 141(2) provides that if there is only one owner of the network
unit, and the network unit satisfied proposed subsection 141(1), the owner of the
network unit must not:
· use the unit, either alone or jointly with one or more other persons, to supply a
fixed-line carriage service; or
· allow or permit another person to use the unit to supply a fixed-line carriage
service.
Multiple owners of a network unit are covered by proposed subsection 141(3). It
provides that for a network unit where there are two or more owners, an owner must
not:
· use the unit, either alone or jointly with one or more other persons, to supply a
fixed-line carriage service; or
· either alone or together with one or more other owners, allow or permit
another person to use the unit to supply a fixed-line carriage service.
If a person who is subject to a requirement under proposed subsection 141(2) or (3)
engages in conduct which breaches the applicable requirement, they will have
committed an offence (refer proposed subsection 141(4)) and the penalty is 20,000
penalty units. Presently, under the Crimes Act 1914, a penalty unit is valued at $110.
The penalty for contravention of the rules at proposed subsections 141(2) and (3)
matches the penalty for contravention of section 42 of the Tel Act, which provides the
rule that a network unit must not be used to supply a carriage service to the public
unless the owner of the network holds a carrier licence or there is a nominated carrier
declaration in force in relation to the network.
The Minister may, by written instrument, exempt a specified owner (refer to proposed
subsection 141(5)) or a specified network unit (refer to proposed subsection 141(6))
from proposed subsections 141(2) and (3). This exemption power is included to
provide flexibility, as the industry develops, in relation to the application of these
provisions, so that if there are circumstances in which the application of the
obligations could be disproportionate or inefficient, the obligations would not apply.
For example, the exemption arrangements could be utilised if there was a situation
where a carrier could provide a wholesale service other than a Layer 2 bitstream
service for a period and the provision of that service would be beneficial to retail
service providers and consumers, pending the provision of a Layer 2 bitstream service
or the rollout in the area of the NBN. Such situations could apply in both new real
estate developments and established areas.
Proposed subsection 141(7) provides that an instrument under proposed
subsection 141(5) or (6) may be unconditional or subject to such conditions as
specified in the instrument. A condition that could be provided for in the instrument
may, for instance, relate to the circumstances in which the exemption would be in
effect.
Proposed subsection 141(8) ensures that before the Minister can make an instrument
under proposed subsection 141(5) or (6), the Minister must consult with the ACCC
and the ACMA.
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Proposed subsection 141(9) provides that an exemption instrument under proposed
subsection 141(5) or (6) is not a legislative instrument for the purposes of the LIA.
Industry will require certainty that exemptions from the obligation under section 141
can be made without being disallowed by Parliament. Accordingly, it is not
appropriate for instruments made under proposed subsections (5) or (6) to be
legislative instruments.
Proposed subsection 141(10) clarifies that for the purposes of proposed section 141,
the term `fixed-line carriage service' means:
· a carriage service that is supplied using a line to premises occupied or used by
an end-user; or
· a service that facilitates the supply of such a carriage service (e.g. an
infrastructure-based service that is not of itself a carriage service).
The provision also clarifies that the term `national broadband network' has the same
meaning as proposed section 5 of the Companies Act (see clause 5 of the Companies
Bill).
The term `superfast carriage service' will be defined to capture carriage services
which:
· allow end-users to download communications at a data transmission speed of
more than 25 megabits per second (under normal conditions); and
· are fixed-line services supplied to premises occupied or used by an end-user
(i.e. retail services).
The 25 megabits per second download speed has been selected because it is the
minimum speed higher than the peak speeds currently available on ADSL2+
platforms, and reflects the speed at which a network might be considered capable of
supplying a service at a similar performance to the NBN.
Item 87 - Section 373
Item 87 inserts an additional dot point to the outline of Part 21 set out in section 373
of the Tel Act to include a reference to technical standards relating to Layer 2
bitstream services. This change represents a consequential amendment flowing from
the inclusion of proposed Division 5A of Part 21 by item 88, below.
Item 88 - After Division 5 of Part 21
Proposed Division 5A--Technical standards relating to Layer 2
bitstream services
Item 88 would insert proposed Division 5A into Part 21 of the Tel Act. This proposed
Division deals with technical standards relating to Layer 2 bitstream services. This
will facilitate the ACMA's ability to make technical standards in this area should it be
required.
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Proposed section 389A ACMA's power to determine technical standards
Proposed section 389A confers power on the ACMA to determine technical standards
relating to Layer 2 bitstream services. The technical standards would be made by a
legislative instrument. It is envisaged that technical specifications could cover a broad
range of matters, including the download and upload speeds, the grades of service
offered, reliability, the number of retail service providers that can be supported by an
optical network terminal (ONT), the functionality of the wholesale services available
and the future scope for physical unbundling of the telecommunications network.
A note accompanying proposed section 389A is inserted to clarify that section 589 of
the Tel Act provides that instruments under this Act may provide for matters by
reference to other instruments. For instance, the ACMA may refer to the published
standards relating to Layer 2 and Ethernet in making any standards in this area.
Relevant specifications could also be contained in a technical document produced by
NBN Co.
Proposed section 389B Compliance with technical standards
Proposed subsection 389B(1) makes compliance with a standard determined under
proposed section 389A mandatory for carriers and CSPs. Proposed
subsection 389B(2) contains ancillary contravention provisions which prohibit the
involvement of a person in a contravention of proposed subsection 389B(1) in any
manner that is outlined in that proposed subsection.
Proposed subsection 389B(3) clarifies that proposed subsections 389B(1) and (2) are
civil penalty provisions. This means if a person contravened proposed
subsection 389(1)--e.g. if a person installed a line that did not comply with a
technical standard--that person would be subject to the pecuniary penalty provisions
in Part 31 of the Tel Act. Subsection 570(1) of the Tel Act states that if the Federal
Court is satisfied that a person has contravened a civil penalty provision, the Court
may order the person to pay to the Commonwealth such pecuniary penalty, in respect
of each contravention, as the Court determines to be appropriate.
The Minister may, by written instrument, exempt a specified carrier or a specified
CSP from the obligation to comply with technical standards (refer proposed
subsection 389B(4)). Proposed subsection 389B(5) provides that an instrument under
proposed subsection 389B(4) may be unconditional or subject to such conditions as
specified in the instrument. A condition that could be provided for in the instrument
may, for instance, relate to the circumstances in which the exemption would be in
effect, or set out certain actions that must be carried out by the carrier or CSP in order
for the exemption to apply. This provides flexibility, for example to deal with any
transitional or localised issues, should this be necessary.
Proposed subsection 389B(6) ensures that before the Minister can make an instrument
under proposed subsection 389B(4), the Minister must consult with the ACCC and the
ACMA. Consultation with these two regulatory bodies is considered necessary
because, in the case of the ACCC, an exemption could potentially impact on
competition and the provision of services to consumers, and in the case of the ACMA,
change to technical regulation is involved.
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Industry will require certainty that exemptions from the obligation under proposed
section 389B can be made without being disallowed by Parliament. Accordingly, it is
not appropriate for an instrument made under proposed subsection 389B(4) to be a
legislative instrument. Therefore, proposed subsection 389B(7) provides that an
instrument under proposed subsection 389B(4) is not a legislative instrument.
Competition and Consumer Act 2010
Item 89 - Section 152AC
Item 90 - Section 152AC
Item 91 - Section 152AC
Item 92 - Section 152AC
These items amend the CCA to give effect to the level playing field arrangements for
superfast telecommunications networks. In particular, they ensure the Layer 2
bitstream service that must be supplied is subject to open access and equivalence
requirements based on those applying to NBN services.
Item 89 of Schedule 1 to the Access Bill inserts a proposed definition of `designated
superfast telecommunications network'. This will have the same meaning under
proposed section 152AGA of the CCA (see item 92 of the Access Bill).
Item 90 inserts a proposed definition of `Layer 2 bitstream service'. It will have the
same meaning as in the Tel Act. Item 75 inserts a proposed definition of `Layer 2
bitstream service' in section 7 of the Tel Act (see above).
Item 91 inserts a proposed definition of `national broadband network' as having the
same meaning as in the Companies Act. Clause 5 of the Companies Bill will provide
that an `NBN corporation' means NBN Co or NBN Tasmania, or a company over
which NBN Co is in a position to exercise control.
Item 92 provides that the definition of `superfast carriage service' has the same
meaning as in section 141 of the Tel Act (refer to item 86 above).
Item 93 - After section 152AG
Item 93 inserts proposed section 152AGA which sets out the mechanism for
determining, for the purposes of Part XIC of the CCA, when a network will be a
`designated superfast telecommunications network'.
Proposed section 152AGA Designated superfast telecommunications
network
For the purposes of Part XIC of the CCA, as amended by the Access Bill, a
telecommunications network will be a designated superfast telecommunications
network if all the following conditions are met:
· the network is used or is capable of being used to supply one or more Layer 2
bitstream services to customers, or prospective customers, in Australia;
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· the network is used, or is capable of being used, to supply a superfast carriage
service to customers;
· the network is not the NBN;
· either:
o the network comes into existence after 25 November 2010; or
o the network is altered or upgraded after 25 November 2010 and, as a result
of the alteration or upgrade, the network becomes capable of being used to
supply a superfast carriage service to customers, or prospective customers,
in Australia;
· the network is not a `point-to-point' network: that is, the network is not used
wholly to supply services to a single end-user that is a public body or a company.
The definition reflects the type of networks that will be subject to the requirements
relating to Layer 2 bitstream services under proposed Part 7 of the Tel Act, inserted
by item 86 above.
A non-NBN network that is in existence prior to 25 November 2010 will only be
captured as a designated superfast telecommunications network if, at any point after
that date, it is altered or upgraded in such a manner as to make it capable of supplying
a superfast carriage service. The date of 25 November 2010 is specified as that it the
intended date of introduction of the Access Bill, and the date from which this measure
will be made public.
Item 94 - Before subsection 152AL(4)
Item 94 inserts proposed subsections 152AL(3C)-(3H) into section 152AL.
In simple terms, proposed subsection 152AL(3C) would place an obligation on the
ACCC to make a declaration that a specified Layer 2 bitstream service is a declared
service. The new provision relates to telecommunications networks which fall within
the scope of a `designated superfast telecommunications network' as set out under
proposed section 152AGA (see item 92 above).
To ensure that only suppliers of superfast carriage services over a designated superfast
telecommunications network are subject to the new Layer 2 access requirements,
proposed subsection 152AL(3D) makes it clear that an ACCC declaration under
proposed subsection 152AL(3C) has no effect except to the extent to which a Layer 2
bitstream service is supplied using a `designated superfast telecommunications
network'.
Proposed subsection 152AL(3E) states that paragraphs 152AL(3)(a)-(d) do not apply
to a declaration mentioned in proposed subsection 152AL(3C). Proposed
paragraphs 152AL(3)(a)-(d) set out the process by which the ACCC may declare an
eligible service, and do not apply to the Layer 2 bitstream service as that service is
deemed to be declared.
Proposed subsections 152AL(3F) and (3G) makes it clear that if a Layer 2 bitstream
service is declared under proposed subsection 152AL(3C), that proposed subsection
does not prevent the ACCC from making a declaration in relation to another, or the
same, Layer 2 bitstream service. This is intended to clarify that proposed
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subsection 152AL(3C) does not affect the ability of the ACCC to declare a Layer 2
bitstream service as a declared service applying to the supply of such services using a
network other than a designated superfast telecommunications network, using the
general declarations power at subsection 152AL(3).
Proposed subsection 152AL(3H) determines that if the ACCC makes a declaration
under proposed subsection 152AL(3) relating to Layer 2 bitstream services, that other
declaration has no effect to the extent to which a Layer 2 bitstream service is supplied
using a designated superfast telecommunications network.
Item 95 - Before subsection 152AL(8C)
Proposed subsection 152AL(8CA) states that proposed subsection 152AL(3C) does
not prevent a Layer 2 bitstream service from being declared under proposed
subsection 152AL(8A), which is inserted by item 41 of Schedule 1 to the Access Bill
and provides that the ACCC may declare a service that is supplied, or capable of
being supplied, by an NBN corporation. Proposed subsection 152AL(8CA) makes it
clear that the ACCC's power to declare a Layer 2 bitstream service that is supplied, or
capable of being supplied, by an NBN corporation is unaffected.
Item 96 - Subsections 152ALA(1) and (5)
Item 96 makes amendments to these subsections, which deal with the expiry dates for
declarations made under section 152AL. As a result of the changes made by item 86,
the mandatory declaration of Layer 2 bitstream services under proposed
subsection 152AL(3C) will not be required to specify an expiry date. It is not
appropriate to require that declaration to expire.
Item 97 - After subsection 152ALA(5)
Item 97 inserts proposed subsection 152ALA(5A) which provides that a declaration
mentioned in proposed subsection 152AL(3C) will remain in force indefinitely. The
change provides certainty in relation to the enduring nature of this requirement.
Item 98 - At the end of section 152AO
Item 98 inserts proposed subsection 152AO(4), which provides that the ACCC must
not vary or revoke a declaration mentioned in proposed subsection 152AL(3C),
dealing with Layer 2 bitstream services. The change provides certainty in relation to
the enduring nature of this requirement.
Item 99 - After section 152AR
Item 99 inserts proposed section 152ARA into Part XIC of the CCA.
Proposed section 152ARA Layer 2 bitstream services to be supplied on a
non-discriminatory basis
Proposed section 152ARA applies the non-discrimination obligations based on those
applying to NBN corporations to carriers or CSPs who supply a declared Layer 2
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bitstream service over a designated superfast telecommunications network. It is
intended that there be only one Layer 2 service that is declared under proposed
subsection 152AL(3C). As the Access Bill creates separate mechanisms for NBN
corporations in relation to the declaration and the supply of services, it is necessary to
create separate provisions dealing with the supply of Layer 2 bitstream services by
other carriers or CSPs.
A carrier or CSP (other than an NBN corporation) must not, in complying with any of
its category A SAOs in relation to the declared Layer 2 bitstream service, discriminate
between access seekers (see proposed subsection 152ARA(1)).
Proposed subsection 152ARA(2) provides for an exception to the rule in proposed
subsection 152ARA(1): discrimination against an access seeker is not prevented if the
carrier or CSP has reasonable grounds to believe that the access seeker would
materially be unable to comply with the reasonable terms and conditions of relevant
obligations. This is modelled on paragraph 152AR(9)(a).
Proposed subsection 152ARA(3) lists examples of grounds for believing that a carrier
or CSP would materially fail to comply with the obligations. The list mirrors the
examples set out in proposed subsection 152AXC(3) - see item 50 above.
Proposed subsection 152ARA(4) provides for a further exception to the rule in
proposed subsection 152ARA(1). Discrimination against an access seeker is not
prevented if the discrimination aids efficiency and all access seekers with like
circumstances have an equal opportunity to benefit from the discrimination (this
proposed provision mirrors arrangements applying to NBN corporations in proposed
subsection 152AXC(4) - see the discussion above).
However, in a case where the discrimination involves volume discounting, proposed
paragraph 152ARA(4)(c) sets out further matters which must be satisfied before the
exception to the rule in proposed subsection 152ARA(1) applies. This further
restriction operates in the same way as proposed paragraph 152AXC(4)(c), and has
the effect that volume discounting is only permitted if the terms and conditions on
which the volume discounting is provided by an access provider are set out in an SAU
that is in operation and relates to that access provider.
As indicated above, the drafting is deliberately broad to cover a variety of
circumstances in which a volume discount may be offered. It could, for example,
relate to a discount offered up-front for the purchase of a specified number of
services, or a discount for the purchase of a specified amount of capacity. The Access
Bill intentionally uses words of wide import for the purposes of capturing any
permutation of discount that an access provider may offer or allow to an access
seeker. The provision is intended to capture any form of volume discount.
It should be noted that, under amendments made to the CCA by the CCS Bill, an SAU
will not be able to be lodged in relation to a service that is a declared service (see the
amendment to section 152CBA of the CCA made by item 162 of Schedule 1 to that
Bill). This means that there will only be a limited timeframe for an access provider to
lodge an SAU before the ACCC declares the Layer 2 bitstream service under
proposed subsection 152AL(3C).
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Proposed subsection 152ARA(5) sets out a further exception to the general rule
against discrimination (as set out in proposed subsection 152ARA(1). This provision
will enable the ACCC to specify in a written instrument particular grounds upon
which discrimination is permitted. For example, if the non-discrimination requirement
would result in outcomes that are clearly inefficient or disproportionate, or if
discrimination is required in relation to emergencies or natural disasters like bushfires,
the ACCC could approve discrimination. Proposed subsection 152ARA(6)
establishes a similar exception in relation to circumstances that are specified in a
written instrument made by the ACCC. For example, if in certain circumstances the
non-discrimination requirement would conflict with other regulatory obligations, the
ACCC could permit discrimination in accordance with those obligations. It is difficult
to determine beforehand with any degree of certainty discriminatory behaviour for
which an exception would be in the public interest. Accordingly, there are
preconditions which must be satisfied before the ACCC can exercise such powers,
namely, before making the exemption determination, the ACCC must publish a draft
of the instrument on its website and invite people to make submissions on the
instrument and consider any submissions that are received within the stated
timeframe.
Proposed subsection 152ARA(7) establishes a prohibition against a carrier or CSP
(other than an NBN corporation) discriminating in favour of itself in relation to the
supply of a Layer 2 bitstream declared service. This prohibition relates to declared
services supplied over a designated superfast telecommunications network. In such
cases, a carrier or CSP will be subject to a Category A SAO in relation to that service.
As indicated above, if a carrier or CSP supplies declared services both to its own
business units and to access seekers, it will have the incentive and ability to
discriminate in favour of its downstream operations. This proposed provision ensures
that the terms and conditions of supply of the declared service must be the same for
the carrier's or CSP's own business units and for its customers.
Proposed subsections 152ARA(8) and (9) mirror proposed subsections 152ARA(5)
and (6) and establish that the ACCC may make instruments permitting discrimination
on grounds or circumstances permitted in the instruments. As it is difficult to
determine beforehand with any degree of certainty discriminatory behaviour for
which an exception would be in the public interest, there are preconditions which
must be satisfied before the ACCC can exercise such powers, namely, before making
the exemption determination, the ACCC must publish a draft of the instrument on its
website and invite people to make submissions on the instrument, and consider any
submissions that are received within the stated timeframe.
Proposed subsection 152ARA(11) provides that instruments made under proposed
subsections 152ARA(5), (6), (8) and (9) are not legislative instruments for the same
reason that the corresponding instruments are not legislative instruments in relation to
proposed subsection 152AXC(11).
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Proposed section 152ARB Layer 2 bitstream services--carriers and carriage
service providers to carry on related activities on a non-discriminatory basis
Proposed section 152ARB mirrors the prohibition on NBN corporations
discriminating in carrying on related activities (proposed section 152AXD). However,
there is no equivalent in proposed section 152ARB of proposed
subsection 152AXD(5), which provides that the rule concerning discrimination in
related activities does not apply to any activity to the extent to which that activity is
covered in a statement in an SAU. The reason for this is that, as a result of changes to
the CCA being made by the CCS Bill (noted above), there will only be a limited
opportunity for providers of Layer 2 bitstream services to submit a SAU before the
ACCC declares the service under proposed subsection 152AL(3C).
Proposed subsection 152ARB(1) provides that this section applies if a carrier or CSP
is providing a declared Layer 2 bitstream service over a designated superfast
telecommunications network and is subject to a category A SAO in relation to that
service.
Proposed subsection 152ARB(2) prohibits a carrier or CSP from carrying on any of
the following activities in a way which discriminates between access seekers:
· developing a new eligible service;
· enhancing a declared service;
· extending or enhancing the capability of a facility or telecommunications
network by means of which a declared service is, or is to be, supplied;
· planning for a facility or telecommunications network by means of which a
declared service is, or is to be, supplied;
· an activity that is preparatory to the supply of a declared service;
· an activity that is ancillary or incidental to the supply of a declared service;
· giving information to service providers about any of the above activities.
Proposed subsection 152ARB(3) (which reflects the operation of proposed
subsection 152AXD(2)) provides for exceptions to these prohibitions. Specifically, a
carrier or CSP will be permitted to undertake discriminatory activity in favour of an
access seeker if:
· the relevant activity relates to a pilot or trial of a new eligible service or an
enhanced declared service; and
· a determination is in force under proposed subsection 152ARB(4) and that
determination is applicable to the pilot or trial and the number of days in the
anticipated period of the pilot or trial does not exceed the maximum allowable
duration of the pilot or trial (as specified in the determination).
Proposed subsection 152ARB(4) provides that the ACCC, by legislative instrument,
may determine that, for the purposes of proposed paragraph 152ARB(3)(b), a
specified number of days is the maximum allowable duration of a specified pilot or
trial. As noted above, this covers the second limb of the exception to the
discrimination rule. The provision has been inserted to ensure that some limitation is
placed on the time in which a pilot or trial can be covered by this proposed
subsection, if the ACCC considered that the time taken has been unreasonable. The
accompanying note to proposed subsection 152ARB(4) reminds readers that
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subsection 13(3) of the LIA provides guidance in relation to the specification in
legislation by class.
A further exception to the rule against discriminatory activity is set out in proposed
subsection 152ARB(5). This covers the following circumstance:
· where the relevant activity consists of giving information to the access seeker
about the development of a new eligible service or the enhancement of a
declared service; and
· the access seeker requested the particular development of the new eligible
service or the enhancement of the existing declared service.
Proposed subsection 152ARB(6) clarifies that for the purposes of section 152ARB,
the term `eligible service' has the same meaning as in section 152AL.
Item 100 - Paragraph 152AZ(aa)
Item 100 amends proposed paragraph 152AZ(aa) of the CCA. Section 152AZ
provides that a carrier licence held by a carrier is subject to a condition that the carrier
must comply with the SAOs, and ancillary obligations set out under section 152AYA.
Proposed paragraph 152AZ(aa) is inserted by item 51 of Schedule 1 to the Access Bill
and ensures that a carrier licence held by an NBN corporation is also subject to
compliance with the non-discrimination obligations set out in proposed
sections 152AXC and 152AXD.
This amendment ensures that any rules in relation to Layer 2 bitstream services
provided in sections 152ARA and 152ARB that are applicable will be considered to
be a carrier licence condition that must be complied with by the relevant carrier.
Item 101 - Paragraph 152BA(2)(aa)
Item 101 amends proposed paragraph 152BA(2)(aa) of the CCA. Section 152BA
provides that a service provider must comply with the SAOs and ancillary obligations
set out under section 152AYA. Proposed paragraph 152BA(2)(aa) is inserted at
item 52 of the Access Bill and ensures that an NBN corporation that is a CSP must
also comply with the non-discrimination obligations set out in proposed
sections 152AXC and 152AXD.
This amendment ensures that any rules in relation to Layer 2 bitstream services
provided in proposed sections 152ARA and 152ARB that are applicable will be
considered to be a service provider rule that must be complied with by the relevant
CSP.
Item 102 - Before subsection 152BB(1AB)
If a carrier or CSP has contravened a rule imposed by proposed subsections
152ARA(1) or (7) or 152ARB(2), proposed subsection 152BB(1AA) enables the
Federal Court, upon application from the ACCC or any person whose interests are
affected by the contravention, to make all or any of the following orders: an order
directing the carrier or CSP to comply, an order to compensate any other person who
has suffered loss or damage, or such other orders as it considers appropriate.
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Item 103 - After subsection 152BC(4)
Item 103 inserts proposed subsection 152BC(4A) into Part XIC of the CCA. Section
152BC is inserted by the CCS Bill and sets out the matters that may be covered by an
access determination. Paragraphs 152BCA3(h) and (i) provide that the Category A
SAOs may either not be applied, or be limited in their application, in an access
determination.
This proposed subsection provides that paragraphs 152BCA(3)(h) and (i) do not apply
to an access agreement that relates to a declared service that is a Layer 2 bitstream
service. This is required as new access obligations will apply to this service.
Item 104 - After subsection 152BCB(4F)
Proposed subsection 152BCB(4G) provides that the ACCC must not make an access
determination that relates to a Layer 2 bitstream service that is a declared service, and
has the effect of discriminating between access seekers.
Proposed subsection 152BCB(4H) provides for an exception to that rule:
discrimination against an access seeker is not prevented if the ACCC has reasonable
grounds to believe that the access seeker would be materially unable to comply with
the reasonable terms and conditions of the relevant obligation.
Proposed subsection 152BCB(4J) lists examples of grounds for believing that the
carrier or CSP would materially fail to comply with the obligations. The list set out in
the proposed subsection is not exhaustive. For consistency in regulation, the list
mirrors the list of factors set out in proposed subsection 152AXB(7) (see above),
which apply to NBN corporations.
Proposed subsection 152BCB(4K) provides for a further exception to the rule:
discrimination against an access seeker is not prevented if the ACCC considers that
the discrimination aids efficiency and that all access seekers with like circumstances
would have an equal opportunity to benefit from the discrimination.
Proposed subsections 152BCB(4L) and (4M) provide for an exception to the rule in
proposed subsection 152BCL(4G) on grounds or circumstances provided for under an
instrument made by the ACCC in proposed subsections 152ARA(5) or (6) (see
item 99).
Item 105 - Subsection 152BCB(5)
Item 105 makes a consequential amendment to include a reference in
subsection 152BCB(5) to proposed subsection 152BCB(4G) due to item 104.
Item 106 - After subsection 152BDA(4F)
Proposed subsection 152BDA(4G) provides that the ACCC must not make binding
rules of conduct that relate to a Layer 2 bitstream service that is a declared service,
and have the effect of discriminating between access seekers.
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Proposed subsections 152BDA(4H)-(4M) operate in a similar way to proposed
subsections 152BCB(4H)-(4M), inserted by item 104 and described above.
Item 107 - Subsection 152BDA(5)
Item 107 makes a consequential amendment to include a reference in
subsection 152BDA(5) to proposed subsection 152BDA(4G). This change is required
as a result of item 106 above.
Item 108 - After subsection 152BE(1A)
Item 108 inserts proposed subsection 152BE(1B) into Part XIC of the CCA. This
proposed subsection provides that subparagraphs 152BE(1)(e)(ix) and (x) do not
apply to an agreement that relates to a declared service that is a Layer 2 bitstream
service. Section 152BE is to be inserted into the CCA by the CCS Bill, and sets out
the matters that may be covered by access agreements. Paragraphs 152BE(1)(e)(ix)
and (x) provide that an access agreement may provide that the Category A SAOs are
not applicable, or limit their application to the access agreement. This change is
required as new access obligations will apply to the Layer 2 bitstream service.
Item 109 - After section 152BEBD
This item inserts proposed sections 152BEBE and 152BEBF into Part XIC of the
CCA.
Proposed sections 152BEBE and 152BEBF supplement the provisions in relation to
access agreements being inserted in the CCA by the CCS Bill. They mirror proposed
sections 152BEBA-152BEBC applying to NBN corporations. These sections will
require a carrier or CSP that is not an NBN corporation and that supplies a declared
Layer 2 bitstream service, if it has entered into an access agreement with an access
seeker with different terms and conditions from those set out in an SAU or an access
determination, to provide the ACCC with a statement on that agreement within seven
days of the agreement being entered into, which statement will then be published by
the ACCC on its website.
The statement provides transparency to other access seekers that an agreement has
been reached to vary the standard terms, and allows them to assess whether they may
be in like circumstances. NBN corporations are under the same obligations to provide
statements to the ACCC (see item 67).
Proposed section 152BEBE Layer 2 bitstream services--carrier or carriage
service provider to give the Commission a statement about the differences
between an access agreement and a special access undertaking
Proposed subsection 152BEBE(1) requires a carrier or CSP, if it has entered into an
access agreement (under subsection 152BE(1)) to provide a declared Layer 2
bitstream service, where an SAU lodged by that carrier/CSP was in operation in
relation to that declared service, and where there are different terms and conditions in
that access agreement from those set out in that SAU, to give the ACCC a statement
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in a form approved by the ACCC regarding that agreement within seven days of the
agreement being entered into.
The requirements in relation to the content of the statement set out in proposed
paragraphs 152BEBE(1)(f)-(k) mirror those requirements set out in proposed
paragraphs 152BEBB(1)(e)-(j), however, in this context, the content relates to
differences between a Layer 2 bitstream service provider's access agreement and an
SAU.
Proposed subsection 152BEBE(2) requires a carrier or CSP, if it has entered into a
variation agreement to provide a declared Layer 2 bitstream service, where the SAU
was in operation, and the terms and conditions in the access agreement as varied are
different from those set out in that SAU, to provide the ACCC with a statement on the
variation agreement within seven days of the variation agreement being entered into.
The requirements in relation to the content of the statement set out in proposed
paragraphs 152BEBE(2)(f)-(k) largely mirror those requirements set out in proposed
paragraphs 152BEBB(2)(e)-(j), however, in this context, the content relates to
differences between a Layer 2 bitstream service provider's variation to an access
agreement and a special access undertaking.
Proposed section 152BEBF Layer 2 bitstream services--carrier or carriage
service provider to give the Commission a statement about the differences
between an access agreement and an access determination
Proposed subsection 152BEBF(1) requires a carrier or CSP that is not an NBN
corporation,, if it has entered into an access agreement (under subsection 152BE(1))
to provide a declared Layer 2 bitstream service, where an access determination was
in force in relation to that declared service immediately before the agreement was
entered into, and where there are different terms and conditions from those set out in
that access determination, to provide the ACCC with a statement on that agreement
within seven days of the agreement being entered into.
The requirements in relation to the content of the statement set out in proposed
paragraphs 152BEBF(1)(f)-(k) largely mirror those requirements set out in proposed
paragraphs 152BEBC(1)(e)-(j), however, in this context, the content relates to
differences between a Layer 2 bitstream service provider's access agreement and an
access determination.
Proposed subsection 152BEBF(2) requires a carrier or a CSP, if it has entered into a
variation agreement to provide a declared service, where an access determination was
in force, and the terms and conditions in the variation agreement are different from
those set out in the access determination, to provide the ACCC with a statement on
the variation agreement within seven days of the variation agreement being entered
into.
The requirements in relation to the content of the statement set out in proposed
paragraphs 152BEBF(2)(f)-(k) largely mirror those requirements set out in proposed
paragraphs 152BEBC(2)(e)-(j), however, in this context, the content relates to
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differences between a Layer 2 bitstream service provider's variation to an access
agreement and an access determination.
Proposed section 152BEBG Register of Layer 2 Bitstream Access Agreement
Statements
Proposed subsection 152BEBG(1) provides that the ACCC is to maintain the Register
of Layer 2 Bitstream Access Agreement Statements, which is to includes all
statements given to the ACCC under proposed sections 152BEBE and 152BEBF.
This provision mirrors the requirement for the ACCC to maintain a Register of NBN
Access Agreement Statements under proposed section 152BEBD.
The Register is to be maintained by electronic means (refer proposed
subsection 152BEBG(2)), and, to ensure transparency, the ACCC is to make it
available on the ACCC's website for inspection by the public (refer proposed
subsection 152BEBG(3)).
Proposed subsection 152BEBG(4) clarifies that the Register is not a legislative
instrument for the purposes of the LIA.
However, in recognition of the commercial sensitivity of certain information which
may be contained in statements made to the ACCC about access agreements, the
ACCC is conferred with discretion under proposed subsection 152BEBG(5). This
discretion mirrors that conferred under proposed subsection 152BEBD(5). This will
enable the ACCC to remove material if it forms that view that the publication of
particular material contained in a statement could reasonably be expected to prejudice
substantially the commercial interests of a person and that prejudice outweighs the
public interest in making it available to the public to scrutinise.
In similar terms to proposed subsection 152BEBD(6), the ACCC is required to
include in the Register an annotation relating to any commercial sensitive content that
has been redacted (refer proposed subsection 152BEBG(6)). This will make it clear to
a person looking at the published statement, that certain information was removed
from that version.
Item 110 - Section152BEC
Item 111 - Subsection 152BED(2)
Items 110 and 111 make minor consequential amendments as a result of item 109
above. These items will insert a reference to `sections 152BEBE and 152BEBF' in
each of the provisions.
Item 112 - Before subparagraph 152CJH(a)(i)
This item inserts a reference to additional provisions, sections 152ARA and 152ARB,
into subsection 152CJH(a) which is to be inserted by the Access Bill under item 79.
Proposed section 152CJH requires the ACCC, as soon as practicable after the
commencement of the section, to publish on its website guidelines setting out an
explanation of specific provisions and to keep those guidelines up-to-date.
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Item 113 - Subparagraph 152CJH(a)(iii)
Item 114 - Subparagraph 152CJH(a)(iv)
Items 113 and 114 make consequential amendments to these provisions (inserted by
item 79, above), necessary as a result of items 104 and 106.
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