TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMPETITION AND CONSUMER SAFEGUARDS) BILL 2010 Explanatory Memorandum
TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMPETITION AND CONSUMER SAFEGUARDS) BILL 2010
2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TELECOMMUNICATIONS LEGISLATION AMENDMENT
(COMPETITION AND CONSUMER SAFEGUARDS) BILL 2010
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for
Broadband, Communications and the Digital Economy,
Senator the Hon. Stephen Conroy)
TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMPETITION AND
CONSUMER SAFEGUARDS) BILL 2010
OUTLINE
The Telecommunications Legislation Amendment (Competition and Consumer Safeguards)
Bill 2010 (the Bill) introduces a package of legislative reforms aimed at enhancing
competitive outcomes in the Australian telecommunications industry and strengthening
consumer safeguards.
The Bill reintroduces measures which were in the Telecommunications Legislation
Amendment (Competition and Consumer Safeguards) Bill 2009 (the previous Bill). The
previous Bill was introduced in the Parliament on 15 September 2009, but subsequently
lapsed at the end of that Parliament. Some adjustments have been made to the measures
reintroduced in this Bill.
The legislative package has three primary parts: addressing Telstra's vertical and horizontal
integration; streamlining the access and anti-competitive conduct regimes; and strengthening
consumer safeguard measures such as the Universal Service Obligation (USO), the Customer
Service Guarantee (CSG) and priority assistance. The Bill also contains measures to improve
regulatory enforcement.
The Bill contains amendments to the Telecommunications Act 1997 (Tel Act), Parts XIB and
XIC of the Competition and Consumer Act 2010 (formerly the Trade Practices Act 1974),
and the Telecommunications (Consumer Protection and Service Standards) Act 1999 (the
Consumer Protection Act). The Bill also makes consequential amendments to the
Radiocommunications Act 1992 (the Radcom Act) and the National Transmission Network
Sale Act 1998 (NTN Sale Act).
Addressing the current structure of the telecommunications sector
The Australian telecommunications market is characterised by a very strong and highly
integrated incumbent, Telstra. Telstra owns the only copper network connecting almost every
house, the largest cable and mobile networks, and a 50 per cent stake in Foxtel, Australia's
largest subscription television provider.
Partly because of this integration, Telstra has been able to maintain a dominant position in
virtually all aspects of the market, despite more than 10 years of open competition. It is the
Government's view that Telstra's high level of integration has hindered the development of
effective competition in the sector.
The National Broadband Network (NBN) will deliver a wholesale-only, open access
telecommunications market structure, transforming the competitive dynamics in the
Australian telecommunications industry.
Consistent with the market structure that will be delivered through the NBN, Part 1 of
Schedule 1 of the Bill inserts a new Part 33 in the Tel Act which provides a framework for
Telstra to voluntarily structurally separate.
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On 20 June 2010 Telstra and NBN Co announced that they had entered into a Financial
Heads of Agreement. The implementation of that Agreement will provide for the progressive
migration of customer services from Telstra's copper and subscription television cable
networks to the new wholesale-only fibre network to be built and operated by NBN Co and
would deliver the envisaged structural reform of the telecommunications sector.
The Bill creates the framework through which Telstra can lodge a structural separation
undertaking which will be subject to review by the Australian Competition and Consumer
Commission (ACCC).
It also provides the stronger legislative certainty that Telstra seeks in the transition of its
business structure by setting out a clear process for Telstra to seek approval from its
shareholders on a proposal for Telstra to migrate its fixed-line services to the NBN.
If Telstra does not voluntarily implement structural separation, the Bill requires the functional
separation of Telstra. Functional separation is a regulatory tool that has been used
successfully in other countries such as the UK and New Zealand and can be used by
telecommunications regulators within the European Union, to address the underlying
incentives that fixed-line incumbents have to favour their own retail businesses.
The Bill amends the Tel Act to require that if Telstra does not structurally separate, it must:
· conduct its network operations and wholesale functions at arm's length from the rest of
Telstra;
· provide the same information and access to regulated services on equivalent price and
non-price terms to its retail business and non-Telstra wholesale customers; and
· put in place and maintain strong internal governance structures that provide transparency
and reassurance for the regulator and access seekers that equivalence arrangements are
effective.
These provisions are contained in a new Part 9 of Schedule 1 to the Tel Act, to be inserted by
Part 1 of Schedule 1 to the Bill.
The Government's preferred outcome is for Telstra to voluntarily structurally separate.
Accordingly, the Bill gives priority to a genuine structural separation process over the
functional separation process.
Telstra's level of horizontal integration across the different delivery platforms--copper, cable
and mobile--is in contrast to many countries where there are restrictions on incumbents
owning both cable and traditional fixed-line telephone networks. Also, unlike Australia, in a
range of countries the fixed-line incumbent does not own the largest mobile carrier as
measured by market share. Telstra's horizontal integration has significantly contributed to
Telstra's ongoing dominance in the Australian telecommunications market.
Therefore, the proposed amendments to the Radcom Act and the new Part 10 of Schedule 1
to the Tel Act will provide a mechanism for the Minister, by a legislative instrument, to
prevent Telstra from acquiring specified bands of spectrum which could be used for advanced
wireless broadband services. Such an instrument would not apply if Telstra's structural
separation arrangements are in place and Telstra has divested its interests in cable networks
and subscription broadcasting licences, or the Minister has exempted Telstra from the
requirement to make such divestments.
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The key changes to the provisions which address the current structure of the
telecommunications sector from those in the previous Bill are:
· clarifying the structural separation undertakings process and allowing Telstra to seek
approval from its shareholders for a settled proposal by:
- allowing Telstra to nominate one or more specified events to which the entry into
force of a structural separation undertaking will be subject, such as a resolution of
shareholders (proposed section 577AA); and
- allowing a structural separation undertaking submitted by Telstra to include a
migration plan which will deal with matters concerning the timing of, and processes
involved in, the migration of Telstra's customers from its copper network to the NBN
and will be subject to industry consultation (proposed sections.577B-577BF);
· the authorisation for the purposes of section 51 of the Competition and Consumer Act of
conduct relating to Telstra's structural separation undertaking and migration plan engaged
in by Telstra and NBN Co (proposed section 577BA). This authorisation is proposed in
recognition that Telstra's progressive migration of customers from its copper and
subscription television cable networks to the new wholesale-only fibre network, in
accordance with an undertaking accepted by the ACCC, is in the national interest and will
promote structural reform of the telecommunications industry;
· giving Telstra sufficient regulatory certainty to take a firm proposal to its shareholders to
structurally separate by allowing Telstra to acquire specified bands of spectrum unless the
Minister determines in a legislative instrument otherwise (proposed sections 577GA-
577L and cl.84 and cl.85 of proposed Part 10 of Schedule 1 to the Tel Act), and to clarify
the relationship between separation undertakings and Competition and Consumer Act
provisions (proposed paragraphs 152AR(4)(e)-(f) et al.);
· giving priority to a genuine structural separation process over the functional separation
process by allowing Telstra to concentrate on preparing its structural separation
undertaking without having to prepare simultaneously a functional separation undertaking
(subclauses75(5A)-(5G), and subclauses 76(2) and (4) of proposed Part 9 of Schedule 1
to the Tel Act);
· recognising the importance for industry of access to Telstra's copper network on an
equivalent and transparent basis during the transition to the NBN by clarifying that the
ACCC cannot accept a structural separation undertaking that does not contain effective
measures relating to the equivalent supply of regulated services to Telstra's wholesale
customers during this transition period (proposed subsections 577A(1A)-(1C));
· improving the enforcement of the undertakings by making Telstra's compliance with in-
force undertakings a condition of its carrier licence (proposed subsections 577AD, 577CD
and 577ED).
Streamlining the access and anti-competitive conduct regimes in Parts XIB and XIC of
the Competition and Consumer Act 2010
The Government's key objective is to promote an open, competitive telecommunications
market to provide Australian consumers with access to innovative and affordable services.
The telecommunications access regime in Part XIC of the Competition and Consumer Act
2010 and the telecommunications-specific anti-competitive conduct regime in Part XIB are
two essential means of accomplishing this objective.
Regulated access ensures that communications services which have been declared by the
ACCC will be provided to access seekers to enable them to provide services to end-users.
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Where the ACCC is of the opinion that anti-competitive conduct is occurring (or has
occurred) it can issue a competition notice, which can lead to penalties being imposed if the
conduct is proven.
Since the introduction of these measures in 1997, their operation has been criticised by many
in industry as being overly protracted, and vulnerable to `gaming' by parties with an
incentive to delay or damage new entrants. Attempts have been made to improve aspects of
the regime, but with limited success. Building on extensive consultations with industry,
regulatory agencies and the public, the Bill will significantly reform the competition regime
to address these problems.
Amending Part XIC
Currently Part XIC of the CCA provides that if parties cannot agree on the terms of access to
a declared service, then either party (the carrier or carriage service provider that provides
access to the service, or the access seeker) can notify an access dispute to the ACCC. The
ACCC must then arbitrate the dispute. The terms and conditions of access are then those
determined by the ACCC in its arbitration determination for those two parties only. This is
known as the `negotiate-arbitrate' model.
Since it is clear that the `negotiate-arbitrate' model is not producing effective outcomes for
industry or consumers, Part 2 of Schedule 1 to the Bill reforms the regime to allow the
regulator to set up front prices and non-price terms for declared services. This will create a
benchmark which access seekers can fall back on, while still allowing parties to negotiate
different terms.
The ACCC will issue access determinations for each declared service, with terms and
conditions (and any appropriate exemptions or special rules) usually set for a period between
three and five years. The regulator will also be able to determine `fixed principles', such as
how depreciation is treated, to remain in force over a longer period if necessary.
Concerns were expressed by access seekers to the Senate Environment, Communications and
the Arts Legislation Committee that, during the transition period in the absence of regulated
terms or a right to notify a dispute to the ACCC under the previous Bill, parties could be
compelled to accept unfavourable terms in order to guarantee supply of a declared service. In
response to those concerns, the Bill extends the scope of the transitional provisions to provide
that arbitration determinations prevail over access agreements which are entered into before
the first final access determination is made.
Access agreements entered into between providers and access seekers will have to be lodged
with the ACCC; however, approval by the regulator will not be required.
The ACCC will have the power to make binding rules of conduct for the supply of a declared
service where it considers that there is an urgent need to address problems relating to the
supply of the service. The binding rules of conduct are rules that specify the terms and
conditions relating to compliance with the standard access obligations. Having such rules in
place will allow the regulator to act quickly on issues affecting the supply of retail services.
In a change from the previous Bill, the ACCC is required to have regard to specified criteria
where it is reasonably practicable to do so.
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Binding rules of conduct would operate temporarily either in advance of, or as a type of
variation of, an access determination. Since they are designed as a temporary measure to deal
with urgent matters, the duration of binding rules of conduct is limited to a maximum of
12 months. Further, the Bill now requires the ACCC to commence a public inquiry into
making or varying an access determination within 30 days of making binding rules of
conduct. It is envisaged that binding rules of conduct will only be used on an occasional
basis.
Part XIC of the CCA is modified to remove the option to apply for exemptions from access
obligations or undertakings, except in relation to new services which are deemed to require
regulatory relief to stimulate innovation in the market. To promote regulatory certainty and
timely decision-making, merits review of decisions under Part XIC is no longer available.
Judicial review is still available, however, for parties wishing to appeal a point of law.
The process for dealing with special access undertakings has proven to be unnecessarily
inflexible, with even minor changes to the terms of the undertaking requiring an entirely new
application to be submitted and assessed from the beginning. This is changed to allow the
ACCC to suggest changes to undertakings as the assessment process proceeds.
Other key changes that have been made to the access provisions of the Bill since it was first
introduced include:
· clarifying that binding rules of conduct cannot override a fixed principle in an access
determination (proposed section 152BDE);
· providing that access agreements and special access undertakings may deal with the same
range of subjects as access determinations (proposed paragraph 152BE(1)(e) and
subsection152CBA(4)); and
· enabling special access undertakings to include fixed principles (proposed
section152CBAA).
Amending Part XIB
Part 3 of Schedule 1 to the Bill makes two changes to the way the anti-competitive conduct
provisions in Part XIB of the CCA operate. Part 3 streamlines the enforcement process that
the ACCC is required to follow, and clarifies that the competition notice regime applies to
content services delivered by carriers and carriage service providers.
The competition notice process has been criticised on the grounds that the consultation
process prior to the issuing of a competition notice can delay enforcement action. These
delays may lead to irreversible damage to the parties that are affected by any alleged anti-
competitive conduct.
The Bill removes the requirement for the ACCC to undertake consultation before issuing a
Part A competition notice. The Bill also explicitly provides that the ACCC is not required to
observe any requirements of procedural fairness in relation to the issue of a Part A
competition notice.
This amendment will deny the party alleged to have taken part in anti-competitive conduct
the ability to delay the ACCC's enforcement activities on procedural grounds. The focus for
both parties will therefore be on resolving the alleged illegal conduct, rather than on litigation
aimed at challenging the processes followed by the ACCC. The competition notice can be
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lifted at any time if the ACCC is satisfied that the allegation of improper conduct is mistaken,
or the situation has been corrected.
If the ACCC commences court proceedings to enforce a Part A competition notice, the
ACCC would still have to prove to the court that the competition rule had been breached by
the alleged offender.
Content services are defined in section 15 of the Tel Act and include a broadcasting service,
online information service, online entertainment service, any other online service, or any
other service as determined by the Minister. Content services are not currently listed as a
service supplied in a telecommunications market and as a consequence, it is unclear whether
Part XIB of the CCA applies to content services supplied by carriers and carriage service
providers.
Clarifying the scope of Part XIB of the CCA will increase regulatory certainty and reduce the
risk of protracted legal disputes on this issue.
Strengthening existing consumer protection regulation
The Government is committed to ensuring consumers are protected in the transition to the
NBN. Current protections are delivered through key telecommunications-specific consumer
safeguards including the Universal Service Obligation, the Customer Service Guarantee, and
Priority Assistance.
The Bill strengthens existing legislative requirements to better protect consumers, address
falling service quality and ensure continued access to basic voice services in the lead up to
the NBN. There are also measures to improve the effectiveness of the regulating body, the
Australian Communications and Media Authority (ACMA), through enhanced regulatory
powers.
The strengthening of the consumer safeguards contained in the Bill will ensure that
consumers are protected and service standards are maintained at a high level during the
transition to the NBN.
Universal Service Obligation
The Universal Service Obligation (USO) has the objective of ensuring basic voice telephony
and payphone services are reasonably accessible to all people on an equitable basis.
However, current requirements imposed on the primary universal service provider (currently
Telstra) are imprecise and difficult to enforce.
Part 4 of Schedule 1 to the Bill amends the Consumer Protection Act to include new
requirements for the universal service provider to supply, on request, standard telephone
services with characteristics and to performance standards determined by the Minister. It is
intended that performance standards will include maximum periods of time for new
connections and fault rectification and reliability standards. There are also new provisions
providing minimum performance benchmarks that the universal service provider must meet
in fulfilling its responsibilities.
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The Bill also provides the Minister with the power to specify, by written determination, rules
and performance standards to which a primary universal service provider must adhere in
relation to the supply, installation, maintenance and location of payphones. In addition, there
will be new rules in relation to public consultation and notification of proposals to remove
payphones. The ACMA will have new powers to direct the universal service provider not to
remove payphones. It is intended that people adversely affected by a proposed payphone
removal will be able to request that the ACMA consider issuing directions to the universal
service provider. In considering whether to issue such a direction, the ACMA will have
regard to both the consultation and notification requirements as well as the rules about the
location of payphones.
Customer Service Guarantee
The Customer Service Guarantee (CSG) requires telephone companies to meet minimum
performance standards or provide customers with financial compensation when these
standards are not met. However, compliance reporting undertaken by the ACMA over a
number of years has highlighted variations in industry performance in meeting the CSG
requirements. The trends suggest the existing arrangements are not providing sufficient
incentive for the industry to maintain or improve service quality.
Part 5 of Schedule 1 to the Bill amends the Consumer Protection Act to provide for the
Minister to establish minimum CSG performance benchmarks. While failure by a service
provider to meet a CSG standard is not subject to a civil penalty under the Tel Act, failure to
meet the minimum CSG performance benchmarks will be. As with the USO, expanded
powers of the ACMA to issue infringement notices under the new Part 31B of the Tel Act
will assist the ACMA to effectively enforce this consumer safeguard. It is expected that this
will be a strong incentive on the industry to improve service quality.
In addition, the Bill provides for the Minister to establish new CSG timeframes for
connections and repair that will apply to wholesale providers to assist retail providers of CSG
services to meet CSG service quality standards.
To avoid stifling innovation and customer choice, the Bill clarifies CSG waiver provisions
provided for under section 122 of the Consumer Protection Act. A customer's express
agreement for a waiver will be required. The practice of deeming CSG rights to be waived,
for example, through a standard form of agreement under Part 23 of the Tel Act, will not be
allowed. In addition, there is a new requirement that a customer waiver of the CSG must
include a statement that summarises the consequences of the customer waiving the CSG.
To ensure consumers have the safety net of always being able to purchase a CSG service, the
Bill makes explicit that the CSG cannot be waived for a telephone service that is supplied in
fulfilment of the USO.
Priority Assistance
Priority assistance services provide enhanced telephone connections and fault repairs for
customers with a need for such services because a person at the residence has a life
threatening medical condition and is at risk of suffering a rapid, life threatening deterioration
in their condition.
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To assist customers purchase services with priority assistance if this is needed, Part 6 of the
Bill introduces a new service provider rule in Schedule 2 to the Tel Act requiring service
providers to either offer a priority assistance service in accordance with the Communications
Alliance code on priority assistance or inform customers of providers from whom they can
purchase such a service if they require it. Telstra will remain bound by its current carrier
licence condition requiring it to have priority assistance services.
The main change from the consumer protection measures in the Bill previously introduced in
the Parliament is amending the new CSG performance benchmark provisions to exclude
contraventions of standards from being counted against benchmark compliance when the
contravention results from another service provider's actions--it would be unfair to impose a
penalty on a service provider in this circumstance (proposed sections 117C and 117F).
Enforcement
Part 7 of Schedule 1 to the Bill inserts a new Part 31B into the Tel Act which provides
expanded powers for the ACMA to issue infringement notices. This will assist the ACMA in
enforcing obligations under the telecommunications regulatory regime.
Part 8 of Schedule 1 to the Bill substitutes a new definition of civil penalty provision to
simplify and clarify the definition.
The key changes to the enforcement measures from those in the Bill previously introduced in
the Parliament are:
· inserting a new Part 5A in Schedule 1 to the Bill which broadens the ACMA's record
keeping powers to allow it to obtain regular reports about carriers' and service providers'
compliance with their obligations;
· requiring the ACMA to engage in public consultation when making or varying the list of
provisions subject to infringement notices (new subsection 572E(8) in proposed Part 31B
of the Tel Act); and
· inserting a new Part 9 in Schedule 1 to the Bill which will makes changes to the Tel Act
to enable the Minister to direct the ACMA to determine an industry standard to enable a
more effective regulatory response where industry codes do not adequately deal with
consumer issues.
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.
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REGULATION ASSESSMENT
ADDRESSING TELSTRA'S VERTICAL AND HORIZONTAL INTEGRATION
1. Introduction
This regulation assessment has been prepared in consultation with the Office of Best Practice
Regulation to provide an analysis of the regulatory impact of the Government's decision to
implement measures to address Telstra's horizontal and vertical integration.
2. Background
On 7 April 2009, the Australian Government announced it would establish a new company
that would invest up to $43 billion over eight years to build and operate a National
Broadband Network (NBN) delivering superfast broadband to Australian homes and
workplaces.
This historic nation-building investment will help transform the Australian economy and
create jobs and businesses for the 21st century.
The Government's plan will dramatically improve the availability of superfast broadband
across Australia and fundamentally change the competitive dynamics of the Australian
telecommunications sector. This new network will be wholesale-only and open access to
maximise competition, and ensure improved consumer outcomes.
Operating as a wholesale-only provider, the NBN Company (NBN Co) will solve the current
structural issues in the telecommunications sector where the vertically integrated incumbent
owns the only ubiquitous fixed-line network in Australia, and competes against its wholesale
customers in downstream retail markets. NBN Co will have less incentive to unfairly
discriminate between access seekers. It will also be required to operate on an open access
basis and provide equivalent terms and conditions of access to all access seekers.
The Government has stated that the NBN will be rolled out progressively over eight years.
During this time the existing telecommunications regulatory regime will remain important for
delivering services in the interests of Australian consumers and businesses.
As such, reform of the current telecommunications regulatory regime is a core element of the
Government's historic plans for the NBN. Taking into account the views expressed in
response to the NBN discussion paper released on 7 April 2009, the Government announced
on 15 September a reform package that included measures to promote greater equivalence,
transparency and competition in the industry.
Since the Bill was introduced in its original form last year (the previous Bill), it has been the
subject of a Senate Committee inquiry which involved detailed submissions from
stakeholders. In addition, the financial heads of agreement reached between Telstra and NBN
Co in June 2010 has clarified the form of structural separation being progressed by Telstra,
allowing the proposed legislation to be revised to give better support for those proposals.
The Bill reintroduces measures in the previous Bill that lapsed at the end of that Parliament.
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The Bill contains some changes from the previous Bill, but the policy objective of the
previous Bill has not altered. The most significant change is that the Bill now provides more
legislative certainty for Telstra in the transition to changing its business structure.
3. Issues associated with vertical and horizontal integration would be addressed by
structural separation
Telstra is a vertically integrated incumbent, which provides access to its network and supplies
wholesale services to those that it competes with in downstream retail markets. Telstra also
owns the largest mobile network, the largest hybrid fibre coaxial cable network in Australia
(passing 2.5 million homes) and 50 per cent of Australia's largest subscription television
provider, Foxtel.
Telstra's integrated position across all the telecommunications platforms has led to long-
standing and widespread concerns that the existing telecommunications structure is failing
consumers, businesses and the economy in general.
As the nation moves to superfast broadband it is the Government's clear desire for Telstra to
vertically structurally separate, on a voluntary basis, in the transition to the NBN to be
consistent with the structure of NBN Co. This is a view shared by consumer group the
Australian Telecommunications User Group which stated:
`[t]he Government's approach to the NBN operator should be the benchmark for
arrangements during the 8 year transition period...'--Australian Telecommunications User
Group1
The Government welcomed the announcement by Telstra and NBN Co that they had entered
into a Financial Heads of Agreement on 20 June 2010. The agreement will deliver structural
separation by providing for the progressive migration of customer services from Telstra's
copper and pay-TV cable networks to the new wholesale-only network to be built and
operated by NBN Co.
Such an approach will ultimately lead to a national outcome where there is a wholesale-only
network not controlled by any retail company--in other words, full structural separation in
time and is consistent with the wholesale-only, open access market structure to be delivered
through the NBN.
What is structural separation?
Structural separation as defined by the ACCC is:
`...the legal separation of Telstra's assets and activities into separate corporate entities with
entirely separate owners/shareholders.'--ACCC2
1
Australian Telecommunications User Group, Submission to NBN: Regulatory Reform for
21st Century Broadband Discussion Paper, 3 June 2009, p.14.
2
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, p.31.
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Why structural separation limits the incentives to discriminate
The ACCC explains that the incentive to discriminate arises where there is market power and:
`equivalence in access might risk profit contribution -- that is, where:
· a materially higher return is available on retail supply than from providing network
access services; and
· effective competition in downstream markets would result in the erosion of excess profits
if access seekers had equivalent access to the upstream input; and
· countervailing incentives--such as those that might exist under the threat of effective
competition across all levels of production (e.g. if HFC [hybrid fibre coaxial] and/or
wireless networks provided strong competitive constraint)--are weak.'--ACCC3
Further, the ACCC explains that a structurally separated entity has few incentives to
discriminate against downstream rivals because:
`...without a retail arm to which it may seek to provide an advantage, a wholesale-only
operator would gain little from favouring one access seeker over another, thereby ensuring
true equivalence. On the other hand, vertical integration of any form into downstream
markets, even when subject to regulatory measures, will not ensure equivalence.'--ACCC4
The views of the industry
Submissions in response to the Regulatory Reform discussion paper called for Telstra's
structural separation and stated that:
`...Optus does not believe that these [functional separation] arrangements go far enough and
they remain a second best approach to structural separation.'--Optus5
`Structural Separation between access provider and access seekers is essential.'--iiNet6
`The structural separation of Telstra should be a policy objective. Functional separation
should not be pursued as it does not materially improve on the current arrangements.'--
Unwired7
`The separation arrangements should, in fact, encourage Telstra itself to consider divesting
itself of its network activities, consistent with the Government's ideal model of the industry
structure.'--Competitive Carriers Coalition8
3
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, pp.33-34.
4
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, p.19.
5
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.26.
6
iiNet Ltd, Regulatory Reform for 21st Century Broadband--Submission For The
Department of Broadband, Communications and the Digital Economy, 3 June 2009, p.11.
7
Unwired Australia Pty Ltd, Submission in response to the Department of Broadband,
Communications and the Digital Economy Discussion Paper--The National Broadband
Network: Regulatory Reform for 21st Century Broadband, June 2009, p.2.
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According to these submitters, structural separation is the only remedy to fully address
Telstra's incentives to discriminate.
The views of the regulator
The ACCC considers:
`...that structural separation is the only regulatory arrangement that will in practical terms
address Telstra's incentives and ability to discriminate against its competitors and thereby
ensure equivalence.'--ACCC9
Potential benefits to the company of structural separation
The ACCC in its regulatory submission10 stated that vertical separation can enhance the value
of separated firms and that there may be some vertical dis-economies of scope which may
arise as firms take on additional functions which are outside the scope of its core functions
and which the firm is not well equipped to perform.
Voluntary structural separation is not without precedent. The ACCC in its submission
provided several examples of companies which have chosen to legally and structurally
separate including:
· in May 2008, Time Warner Inc announced that it would structurally separate from the
second largest cable operator in the United States, Time Warner Cable Inc. The reason for
the separation was that each company would have greater strategic, financial and
operation flexibility and would be better positioned to compete within their respective
markets;
· in 2005, the Australian Gas Light Company split its infrastructure assets from its retail
and merchant energy business on the basis that the move would create greater long-term
value for shareholders; and
· in 2007, Toll split off its infrastructure assets (ports and the Pacific National rail business)
from its logistics business. Regarding the re-structure Toll stated that `dynamic growth
opportunities were identified in both businesses, building on Toll's current strong results
and performance'.
How structural separation could be implemented
Telstra's structural separation could be implemented under a voluntarily enforceable
undertaking to be submitted to the ACCC. Under this sort of mechanism, the Minister could
provide guidance to the ACCC on the matters it would take into account when considering
whether to accept the undertaking.
It is important to note that the enforceable undertaking to structurally separate could take
different forms. For example, to achieve the aim of structural separation:
8
Competitive Carriers Coalition, Response to the Government Discussion Paper: National
Broadband Network: Regulatory Reform for 21st Century Broadband Discussion Paper, June
2009, p.5.
9
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, p.31.
10
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, pp.32-33.
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· Telstra could undertake to create a new company, vest its fixed-line network in that
company and then sell that company, leaving Telstra operating as a retailer of fixed-line
services; or
· Telstra could undertake to migrate its traffic to the NBN over time and sell or cease to use
its fixed-line assets. Under this option, Telstra would undertake to:
o supply services to its retail customers using carriage services provided by means of
the NBN;
o vend the fixed-line assets that the NBN requires to NBN Co; and
vend to another company (or in the alternative, cease to use) any other fixed-line
assets.
Under the terms of the non-binding Financial Heads of Agreement between Telstra and NBN
Co, Telstra will progressively move customer services from its copper and HFC networks to
the NBN as it is rolled out. The agreement also provides for the reuse of suitable Telstra
infrastructure, including pits, ducts and backhaul fibre by NBN Co as it rolls out its new
network, thus avoiding infrastructure duplication.
In the absence of an outcome which delivered structural separation on a voluntary basis,
regulatory intervention will be required to address Telstra's vertical and horizontal
integration.
4. Telstra's vertical integration
The problem being addressed
Telstra's level of vertical integration raises concerns about the extent to which it has the
ability and the incentive to favour its own retail business over its wholesale customers when
providing access to various services, particularly those which are key upstream inputs for
providing downstream services to end-users. It also can strategically delay or limit
investment in access services and related infrastructure.
These incentives may lead to behaviour by the vertically integrated incumbent that limits the
development of effective competition in the provision or availability of services, including
new and improved services. Types of discriminatory behaviour that a vertically integrated
incumbent might engage in include:11
· price discrimination--where the access provider charges a higher price to its wholesale
customers than is implicitly charged to its own retail business;
· discriminatory use or withholding of information--where the access provider provides
information to its retail business with information it does not provide to access seekers or
refuses to supply other information which is necessary to take up the wholesale offer or to
supply the retail service;
· delaying tactics--where the access provider supplies a certain input to a downstream
competitor at a later point in time compared to its own retail business;
· quality discrimination--where the access provider supplies products and services at a
lesser quality to downstream competitors than it supplies to its own retail business;
11
Ministry of Economic Development, Telecommunications Act 2001 Development of
Requirements for the Operational Separation of Telecom--Consultation Document, April
2007, pp.20-21.
13
· strategic design of product characteristics--for example, the access provider may use
particular standards that are easy to meet for its own retail business but not for its
wholesale customers; and
· undue use of information--this may arise where an access provider obtains certain
information about the customers of its downstream competitors. Based on this
information, the access provider can target competitors' customers with tailor-made
offers and so can restrict its competitors' sales and/or raise its rivals' costs.
Lord David Currie, the former Chairman of Ofcom, the United Kingdom's (UK)
communications regulator, stated the following about the harmful effects of discriminatory
behaviour:
`It does not even require active non-price discrimination. All that is needed is for the
incumbent not to try their hardest to achieve reliability, timeliness and predictability to
disrupt significantly the launch by competitors of a rival retail proposition. A significant
mismatch between the promise of a marketing campaign and consumers' actual experience of
waiting weeks or even months to get what is promised can do significant and lasting damage
to a competitor's market entry.'--Lord David Currie12
Industry stakeholder concerns
Telstra has been criticised in the past for using its vertical integration to protect its position
across key telecommunications markets and therefore limiting the ability for competition to
grow in the sector.
Optus in its submission to the Government's regulatory reform discussion paper gave the
following examples of Telstra's behaviour in using its vertical integration to limit
competition in broadband.
· `Initially set high prices for broadband access thereby discouraging take-up. Telstra only
dropped its retail prices for broadband services when Optus commenced re-selling its
wholesale DSL [digital subscriber line] service in February 2004;
· Delay competitor deployment of DSL services by structuring its wholesale offering in
such a manner that its competitors could not offer services substantially different from
those offered by Telstra. For example, Telstra refused to configure its wholesale
ADSL[asymmetric digital subscriber line] service so as to allow for a high speed Internet
service to be provided to a residential customer at a different quality of service from that
which Telstra BigPond offers;
· Squeeze the margin available to competitors taking its wholesale DSL service by setting
retail prices close to or below wholesale prices;
· Limit the functionality of its wholesale broadband services and thereby hinder innovation
by competitors, such as symmetrical services and VOIP [Voice over Internet Protocol]
services; and
· Artificially cap broadband speeds at 1.5Mbps [Megabits per second] on first generation
ADSL(a technology capable of up to 8 Mbps) and delaying until February 2008 the
introduction of ADSL2+ services (except in exchanges where it faced direct competition
12
International Telecommunications Union, Trends in Telecommunications Reform 2008--
Six Degrees of Sharing, November 2008, p.141.
14
from ADSL2+ services provided by competitors using ULLS [unbundled local loop
service] access to deploy their own equipment). Many areas within Australia continue to
be denied access to ADSL2+ services.'--Optus13
AAPT, Internode, Primus, Hutchison and Austar all gave similar examples in their regulatory
submissions regarding Telstra's behaviour to limit competition. The ACCC also provided
examples in its regulatory submission.14,15,16,17,18,19
Optus also noted that Telstra misused information available to it as a wholesale provider:
`Telstra has been found guilty of misusing information available to it as a wholesale
provider, by passing this information to its retail arm for marketing and competitive analysis
purposes. The court found that, at least in the period 1993 to 2000, Optus' confidential long
distance traffic information was provided by Telstra Wholesale to Telstra Retail and then
used to prepare `Market Share' reports...'--Optus20
Measures to reduce the ability and incentives to discriminate
The basic concept of vertical separation in telecommunications is to separate the bottleneck
upstream assets, such as the copper customer access network, so that control of access to
them cannot be used to lessen, damage or exclude competition in downstream markets.
Vertical separation can be an effective regulatory tool to improve competition and services to
end users by promoting transparency and equivalence.
Transparency and equivalence
Transparency can be achieved by implementing processes and reporting requirements so that
the regulator and Telstra's wholesale customers can be confident that Telstra's wholesale
customers are being treated in an equivalent manner to how Telstra supplies its own retail
business.
Equivalence is where Telstra provides essential business inputs on equivalent terms and
conditions to both its own retail business and its wholesale customers. Equivalence relates to
both price and non-price terms and conditions such as service provisioning and availability of
13
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.20.
14
AAPT, Submission by AAPT Limited to the Department of Broadband, Communications
and the Digital Economy in response to National Broadband Network: Regulatory Reform
for 21st Century Broadband, a discussion paper dated April 2009, 3 June 2009, p.15.
15
Internode, Submission by Internode Pty Ltd in response to the Regulatory Reform for 21st
Century Broadband discussion paper, June 2009, p. 4.
16
Primus, Submission in Response to National Broadband Network Regulatory Reform for
21st Century Broadband Discussion Paper, 3 June 2009, p.5.
17
Hutchison, National Broadband Network Regulatory Reform for 21st Century Broadband--
Submission by Hutchison 3G Australia Pty Ltd, 3 June 2009, p.18.
18
Austar United Communications Limited, Response To National Broadband Network:
Regulatory Reform for 21st Century Broadband, 3 June 2009, p.9.
19
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, pp.18, 21-22.
20
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.11.
15
information about the network, and is considered an essential factor in promoting effective
competition in downstream retail markets.
The history of attempting to address Telstra's level of vertical integration
In an attempt to address Telstra's level of vertical integration by promoting equivalence and
transparency the following regimes have been implemented in Australia.
Accounting separation
Measures to promote transparency were first introduced in 1991 requiring the Australian
Telecommunications Authority to develop an accounting separation regime, which was
referred to as the chart of accounts and a cost allocation manual. The regime, however, only
required horizontal accounting separation between each carrier's retail services. Horizontal
accounting separation is a requirement for reporting revenue and historical cost information
of the carrier's different retail businesses to the ACCC.
In 2001, under direction from the Minister for Communications, Information Technology and
the Arts, the ACCC introduced its Telecommunications Industry Regulatory Accounting
Framework issued under section 151BU of the Trade Practices Act 1974. These record
keeping rules required Telstra to keep vertically separated accounts on an historical cost basis
and report revenues and costs for Telstra's retail and wholesale services separately--
including wholesale services Telstra provides to itself internally.
In June 2003, a second set of accounting separation rules were implemented by the ACCC
which required vertical accounting separation under a current cost accounting basis. Current
cost reporting requires Telstra to produce accounting records that reflect current costs (i.e. the
costs Telstra would incur if its network was built today).
Furthermore, the then Government directed the ACCC to implement an enhanced form of
accounting separation of Telstra. This required the ACCC to report on key performance
indicators for non-price terms and conditions that compare service performance between
Telstra's retail and wholesale supplied services. The purpose of the enhanced accounting
separation framework for Telstra, which is still in force at present, was to provide the ACCC,
access seekers and the public with greater transparency with respect to Telstra's wholesale
and retail costs. It also required imputation testing, which can be used to assist in detecting an
anti-competitive price squeeze in a retail market. Specifically, the imputation testing
implemented under this direction involved comparisons of:
· the retail price charged by Telstra for a particular service; and
· the (wholesale) access price charged by Telstra for an essential input to that service plus
the additional costs incurred in transforming the essential input to the retail service (the
`retail costs').
Operational separation
In 2005, the current operational separation framework for Telstra was introduced following a
review of the competition regime. The operational separation regime aimed to promote the
principles of transparency and equivalence in relation to the supply by Telstra of wholesale
services.
The operational separation of Telstra is a statutory condition of Telstra's carrier licence.
Telstra was required to prepare an operational separation plan, which was approved by the
16
then Minister on 23 June 2006. Under the plan, Telstra is required to maintain three business
units, wholesale, retail and key network services and to operate these businesses substantially
separate from each other.
The operational separation plan includes four strategies for Telstra to provide equivalence:
· a service quality strategy--which aims to ensure that Telstra's standard of delivery of
eligible services made available to its wholesale customers is equivalent to the standard of
delivery of comparable eligible services supplied to its own retail business unit;
· an information equivalence strategy--which aims to ensure that information provided by
Telstra's key network services or wholesale business units to its wholesale customers
about relevant changes to Telstra's network is, to the extent possible, equivalent to the
provision of the same or similar information to its own retail business unit;
· an information security strategy--which aims to protect Telstra's wholesale customers'
confidential information; and
· a customer responsiveness strategy--which aims to ensure that Telstra is responsive to
complaints made by its wholesale customers and also includes the measures Telstra will
implement to monitor its compliance with the service quality and information equivalence
strategies.
Telstra's operational separation plan also provides for a price equivalence framework, which
seeks to provide an ongoing assurance that Telstra is not favouring its retail business by
supplying services to itself at lower prices to the services that it supplies to its wholesale
customers. The price equivalence framework requires Telstra to conduct imputation testing to
assess the impact of material price changes, on the margin available to efficient competitors.
The accounting, record keeping and operational separation regulations are all still in effect.
The effectiveness of the current operational and accounting separation regulations
The broad consensus across industry and from the regulator is that accounting and
operational separation regimes have not promoted genuine equivalence of access or effective
competition in the telecommunications sector.
The views of the regulator
The ACCC's experience is that:
`...the current operational separation regime aimed at promoting equivalence is ineffective
and does not address Telstra's incentive and ability to discriminate against its competitors',
and `[s]ince coming into effect in June 2006 the operational separation arrangements that
apply to Telstra have been shown to be ineffective in a number of essential areas. Since
June 2006 Telstra has been able to:
· supply ADSL2+ services on a retail basis only;
· ignore the ACCC's written advice on imputation testing principles;
· deflect wholesale customer complaints on the basis they were not made under the OSP
[operational separation plan];
· provide whole-of-business incentives to executives in the ring-fenced divisions; and
17
· require end-user customers who are customers of access seekers to provide Telstra retail
units with information that is confidential to the access seeker'.--ACCC21
All the above issues mentioned by the ACCC have not promoted genuine equivalence or
transparency, or promoted effective competition. Expanding further the supply of ADSL2+
services on a retail only basis, until relatively recently, has had the effect of limiting the
opportunity for Telstra's competitors to compete with Telstra for the most valuable business
customers.
The views of the industry
The overwhelming message from regulatory consultations conducted in 2008 and more
recently in response to the National Broadband Network: Regulatory Reform for 21st
Century Broadband Discussion Paper is that the current operation and accounting separation
measures have not worked effectively. Most of the 140 submitters called for structural or
stronger functional separation of Telstra.
The following comments in the regulatory submission summarise the general sentiments
raised in response to the discussion paper.
`there has been no discernable increase in competition in the fixed network market after the
introduction of accounting and operational separation...Operational Separation in Australia
has not been a transparent regulatory tool.'--Australian Telecommunications User Group22
`it is clear that they [the operational separation arrangements] have delivered little if any
benefits to end-users...these arrangements are not fit for purpose...'--Optus23
`The cost of trying to manage behaviour [sic] while making inadequate efforts to change
incentives has been demonstrated by the continual gaming of the regulatory requirements in
Australia in the past 12 years and by the abject failure of the operational separation and,
before them, the accounting separation arrangements.'--Competitive Carriers Coalition24
`...there are no benefits of the operational and accounting separation regimes...'--
Macquarie Telecom25
`Accounting separation and operational separation have been tried but have both been
spectacularly unsuccessful.'--AAPT26
21
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, pp.18, 21-22.
22
Australian Telecommunications User Group, Submission to NBN: Regulatory Reform for
21st Century Broadband Discussion Paper, 3 June 2009, p. 28.
23
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.107.
24
Competitive Carriers Coalition, Response to the Government Discussion Paper: National
Broadband Network: Regulatory Reform for 21st Century Broadband Discussion Paper, June
2009, p.6.
25
Macquarie Telecom, Submission in Response to National Broadband Network: Regulatory
Reform for 21st Century Broadband Discussion Paper, 3 June 2009, Appendix iii.
26
AAPT, Submission by AAPT Limited to the Department of Broadband, Communications
and the Digital Economy in response to National Broadband Network: Regulatory Reform
for 21st Century Broadband, a discussion paper dated April 2009, 3 June 2009, p.2.
18
`Operational separation of Telstra has not led to satisfactory outcomes in the Australian
telecommunications sector.'--Vodafone27
`...the current so-called "operational separation" regime that applies to Telstra, TransACT
strongly believes that that regime has failed...'--TransACT28
`...the accounting and operational separation regimes have been widely acknowledged as
failures.'--iiNet29
The sentiments expressed by both the regulator and Telstra's competitors demonstrates a lack
of trust in the operational separation regime and its lack of transparency has not assured them
that access seekers are being treated in an equivalent manner to Telstra's own retail business.
One of the major issues expressed by access seekers is the delays in being provided a
wholesale service by Telstra and issues surrounding access to Telstra's exchanges to install
equipment. For example:
`Some of the conduct engaged in by Telstra has been quite explicit, for example defying
access obligations and ... refusing industry participants access to exchanges. Some of the
conduct has been more strategic, such as refusing to implement efficient migration processes,
and the practice of disputing the ACCC pricing decisions to delay competitor rollout, impose
litigation costs on the industry and unsettle investment plans. One thing is very clear, during
the history of competition in our industry Telstra has had no appetite to foster or promote
competition, innovation or increased network utilisation.'--Primus30
`Optus complained to the ACCC that Telstra was providing higher performance standards to
its retail customers than wholesale customers--for example, by routinely offering better
connection times to its retail customers than to wholesale customers...Whilst Telstra Retail is
able to provide connection remotely at the flick of a switch--Telstra applied a cumbersome
process for wholesale customers requiring two separate technicians to visit the customer's
premises and taking several days to complete (and requiring customers to be present for both
visits).'--Optus consultant Dr Chris Doyle, University of Warwick31
Further, access seekers need to have confidence that the regime to address the issues
surrounding vertical integration is working effectively to justify their investments. In its
submission the Strategy and Policy Consultants Network, who specialise in providing
strategy, policy and economics advice in electronic communications markets, stated that:
27
Vodafone submission to the National Broadband Network: Regulatory Reform for 21st
Century Broadband Discussion Paper, 3 June 2009, p.22.
28
TransACT Capital Communications Pty Ltd, Submission on National Broadband Network:
Regulatory Reform for 21st Century Broadband--Discussion Paper April 2009, 3 June 2009,
p.32.
29
iiNet Ltd, Regulatory Reform for 21st Century Broadband--Submission For The
Department of Broadband, Communications and the Digital Economy, 3 June 2009, p.4.
30
Primus, Submission in Response to National Broadband Network Regulatory Reform for
21st Century Broadband Discussion Paper, 3 June 2009, p.5.
31
Dr Chris Doyle, Comments on the Telstra Submission on Vertical Integration and
Separation--A report for Optus, September 2008, p.11.
19
`[w]hile the incentives for discrimination remain in place [due to vertical integration] it is
essential that wholesale customers of Telstra believe that they are being treated equally, as
perceptions are sufficient to change the behaviour of operators. They need to have the
confidence that the system is working to justify investments in the market, without which
retail customers will be the losers.'--Strategy and Policy Consultants Network32
Most fundamentally, the current operational separation regime has not addressed Telstra's
vertical integration and its lack of incentive to reach agreement on reasonable access terms,
or to conclude negotiations speedily with access seekers.
The chairman of the ACCC, Mr Graeme Samuel, has previously reported that:
`[s]ince 1997, the ACCC has been notified of a total of 157 telecommunications access
disputes. This is in stark contrast to the three access disputes that have been notified to the
ACCC across all other sectors of the economy.
Over the past 24 months, judicial review has also been sought in respect of almost all final
arbitration determinations made by the ACCC. As of 6 May, there were 15 final
determinations before the Federal Court--all relating to the unconditioned local loop service
and the line sharing service.'--Mr Graeme Samuel, ACCC33
As of mid-October 2010, the ACCC has been notified of 164 telecommunications access
disputes since 1997, which is in contrast to four access disputes in other sectors.34
This large number of access disputes compared to other regulated sectors demonstrates both
the ability and the incentive Telstra has to pursue a litigation strategy to limit or delay
competition. Such a strategy can have harmful effects on investment in the sector. The
Strategy and Policy Consultants Network comments:
`[u]ncertainty about outcomes will have an impact on operators' ability to commit to product
and market developments. This will particularly be the case where the process is not able to
deliver outcomes in a timely manner, as delays in the process will typically disadvantage
operators competing with Telstra.'--Strategy and Policy Consultants Network35
Primus also notes that:
`...Telstra typically rejects the authority of the ACCC and routinely challenges decisions in
court, means the industry never acquires any certainty about the terms and conditions
applicable to an access service it acquires, until it is of historical impact only.'--Primus36
32
Strategy and Policy Consultants Network, Preventing Discrimination in the Australian
Broadband Market--Prepared for Optus, 1 June 2009, p.11.
33
Mr Graeme Samuel, Australian Telecommunications User Group Regional Conference, 21
May 2009, p.7.
34
A gas access dispute was notified to the ACCC at the end of 2009, giving four non-
telecommunication access disputes that have been notified to the ACCC.
35
Strategy and Policy Consultants Network, Preventing Discrimination in the Australian
Broadband Market--Prepared for Optus, 1 June 2009, p.11.
36
Primus, Submission in Response to National Broadband Network Regulatory Reform for
21st Century Broadband Discussion Paper, 3 June 2009, p.3.
20
In addition to the business uncertainty caused by the high level of disputation, Optus
estimates it could have cost the whole industry at least $200 million over the past 12 years in
the preparation of expert statements and legal support not to mention the time and resources
required to participate in these processes.37
Telstra acknowledges in its regulatory submission that:
`...despite our ongoing effort, the wider telecommunications industry continues to express
concerns about the need for greater equivalence and transparency.'--Telstra38
To address the equivalence concerns expressed by the industry and the regulator, Telstra
proposed in its regulatory reform submission the establishment of an independent technical
Telecommunications Adjudicator. The Telecommunications Adjudicator would make binding
decisions specifically on equivalence and related service and technical issues in the supply of
regulated services to access seekers.
The Telecommunications Adjudicator would be a welcome addition to the Australian
telecommunications landscape to resolve many of the non-price issues in the sector.
However, it still does not effectively alter Telstra's underlying incentive, as a vertically
integrated incumbent, to favour its own retail business over its competitors.
Operational separation's weak enforcement mechanisms
Enforcement mechanisms for the existing operational separation regime are weak and
indirect. There is no legal obligation on Telstra to comply with its operational separation
plan. In the event of a contravention, the Minister may direct Telstra to give him a draft
rectification plan for approval. Once the Minister approves the rectification plan, it is then a
licence condition that Telstra comply. Weak enforcement mechanisms are a disincentive to
enforcement action and no directions have been issued. The ACCC states that:
`[w]e [the ACCC] continue to receive complaints of conduct that suggest that the objective of
equivalence, which was the objective of the [operational separation] regime, is not being
achieved. There have been some instances of conduct [by Telstra] since the regime's
inception which, while it is not clear they breach the operational separation plan, do not
promote the objective of equivalence which was the fundamental objective of the plan in the
first place.'--ACCC39
The ACCC has written twice to the relevant Ministers advising of its concerns on the
apparent shortcomings of the operational separation plan:
37
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.17.
38
Telstra Corporation, Submission to the National Broadband Network: Regulatory Reform
21st Century Broadband Discussion Paper, 3 June 2009, p.3.
39
Parliament of Australia, Official Committee Hansard of the Senate Standing Committee on
Economics Budget Estimates Hearing, 5 June 2008, pp.57-58.
21
`First, on 6 February 2007, in relation to concerns that Telstra was rewarding ostensibly
ring-fenced technicians for providing retail sales leads and introducing higher quality ADSL
services for retail customers before advising wholesale customers.
Second, on 27 February 2008, in relation to Telstra's failure to provide information to the
ACCC in response to a formal request made under clause 6.8 of Telstra's OSP[operational
separation plan]. The request required Telstra to produce the model it uses to assess its
pricing under the PEF after notifying the ACCC of a material price change.'--ACCC40
It is clear that stronger enforcement mechanisms are needed to give the regulator sufficient
powers to ensure that the objectives of transparency and equivalence are being met.
Why Government action is needed
During the rollout of the NBN, the existing regime, including measures to promote
transparency, equivalence and competition, will remain important for delivering outcomes in
the interests of consumers and businesses. The intended outcome is a healthy competitive
market, thereby improving quality, prices and choices for end-users, and creating a sector
where different business models and innovation can prosper.
Current state of competition in Australian telecommunications market
The ACCC has reported that competition in the Australian telecommunications market is not
emerging as anticipated.
`effectively competitive telecommunications markets--anticipated in 1997 when the sector
was opened to competition--do not appear to be emerging...
In particular, the industry's underlying structural features have hindered the development of
competition with the high, specialised and largely "sunk" costs of investment in the most
fundamental elements of telecommunications networks (e.g. the ducts, pits, poles, copper,
cable and fibre) imposing high barriers to entry for competitors, and thus conferring a very
high degree of market power on the incumbent operator, Telstra.
While new entrants and investment have made some inroads, the incumbent still retains
enduring and substantial market power, with shares of 72 per cent, 58 per cent and 42 per
cent of retail PSTN [public switched telephone network] voice services, retail fixed
broadband and retail mobile voice services in 2007-08...
A key factor in Telstra's ongoing success in maintaining its dominant market position has
been its historical position as the owner of the ubiquitous CAN [Customer Access Network].
The ability of competitors to access the existing fixed-line CAN continues to directly affect
how access seekers compete for end users. It is becoming increasingly evident that the CAN
is (and will remain) an enduring bottleneck, emphasising how critical it is for access seekers
to be able to obtain access to the CAN at reasonable prices.'--ACCC41
The following graph using the Herfindahl-Hirschman Index (HHI) further illustrates Telstra's
dominance of the retail fixed voice and broadband sectors in Australia. The subscriber-based
40
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, p.22.
41
Australian Competition & Consumer Commission, Telecommunications competitive
safeguards for 2007-2008, 2009, pp.11-12.
22
HHI measures concentration levels in a service area and provides a snapshot of competition
in that particular service area. The HHI can range from 0 to 10 000 with increases in the
index generally indicating a decrease in competition and an increase of market power. While
market share measures are only one measure used in competition analysis, the ACCC's 2008
Merger Guidelines indicate that scores above 2,000 identify potential competition issues,
which can be indicative of structural characteristics of the market that exist or are emerging.42
Source: ACCC Report Telecommunications competitive safeguards for 2007-2008.
For retail public switched telephone network services, the very high concentration levels are
likely to be influenced heavily by Telstra's level of vertical integration in the market with
shares of close to or over 70 per cent in the last three years as illustrated by the table below.43
Provider 2005-06 2006-07 2007-08
Telstra 69% 71% 72%
Optus 11% 11% 11%
AAPT 4% 3% 3%
Other 16% 14% 15%
Source: ACCC Report Telecommunications competitive safeguards for 2007-2008.
In the case of retail broadband services, there has been an upward trend in the concentration
of the market since 2005-08 as illustrated in the table below. The ACCC reports that during
this period, Telstra grew its market share of retail services by almost 25 per cent, while its
major competitors' iiNet managed to retain its existing market share and Optus' fell by a
fifth. In addition, the share of the market held by small internet service providers halved
during the same period.44
Provider 2005-06 2006-07 2007-08
Telstra 47% 56% 58%
Optus 20% 19% 16%
42
Australian Competition & Consumer Commission, Merger guidelines, November 2008,
p.37.
43
Australian Competition & Consumer Commission, Report 1 -- Telecommunications
Competitive Safeguards 2007-08, 3 April 2009, p. 31.
44
Australian Competition & Consumer Commission, Report 1 -- Telecommunications
Competitive Safeguards 2007-08, 3 April 2009, p. 45.
23
iiNet 6% 8% 7%
Other 28% 18% 19%
Source: ACCC Report Telecommunications competitive safeguards for 2007-2008.
The market within which retail mobile services are supplied is currently less concentrated.
International Comparisons
Key international statistics indicate that Australia is trailing other developed economies. In
many areas Australia is trailing other countries with similar geographic realities, such as
Canada.
Key international statistics
A recent OECD report indicated that Australia is ranked:
· 17th for total broadband subscribers per 100 inhabitants;45
· 3rd, 11th , 6th, and 6th most expensive for very low-speed, medium-speed, high-speed,
and very-high speed average monthly subscription broadband prices respectively;46
· 5th most expensive broadband average monthly subscription price; 47
· Highest average price per additional megabyte after reaching bit/data cap; 48
· 14th, 16th and 17th most expensive for residential low-use, medium-use and high-use
fixed-line voice prices respectively;49 and
· 5th most expensive for both small/home offices and small and medium-sized enterprises
fixed-line voice prices respectively.50
The World Economic Forum ranks Australia:51,52
· 24th and 22nd for residential and business telephone connection charges respectively;
· 10th for fixed broadband tariffs;
45
Organisation for Economic Co-operation and Development, OECD Broadband Portal,
December 2009, accessed 11 October 2010.
http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html
46
Organisation for Economic Co-operation and Development, OECD Broadband Portal,
October 2009, accessed 11 October 2010.
http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html
47
Organisation for Economic Co-operation and Development, OECD Broadband Portal,
October 2009, accessed 12 October 2010.
http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html
48
Organisation for Economic Co-operation and Development, OECD Broadband Portal,
October 2009, accessed 12 October 2010.
http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html
49
Organisation for Economic Co-operation and Development, OECD Communications
Outlook 2009, 2009, pp. 270-272.
50
Organisation for Economic Co-operation and Development, OECD Communications
Outlook 2009, 2009, p. 274.
51
World Economic Forum, The Global Information Technology Report 2009-2010, 2010, pp.
351, 357-358, 370.
52
The World Economic Forum ranked 133 countries. A ranking of one (1) is the best
possible ranking in a particular criteria.
24
· 73rd and 97th for residential and business monthly telephone subscription charges
respectively; and
· 29th for accessibility of digital content.
The ACCC's analysis and Australia's poor international indicators highlight the ongoing
importance of Telstra's competitors being able to access Telstra's customer access network in
a manner that is transparent and equivalent to how Telstra's retail businesses access the
network. To create an environment for healthy competition to flourish, stronger vertical
separation with enhanced equivalence and transparency measures is required.
In countries such as the UK where stronger forms of separation have been in force since
2005, there has been a marked improvement in its key international telecommunication
statistics and indicators. The UK outperforms Australia across a range of key
telecommunications indicators as shown in the table below.
Telecommunications indicator/statistic UK ranking UK better than Aust.
OECD
Total broadband subscribers per 100 12th Yes.
inhabitants
Very low-speed, medium-speed, high-speed, Cheapest (24th Yes.
and very-high speed average monthly most expensive),
subscription broadband prices 2nd cheapest
(28th most
expensive), 6th
cheapest (24th
most expensive)
and 4th cheapest
(18th most
expensive)
respectively.
Broadband average monthly subscription 3rd cheapest Yes.
price (28th most
expensive)
Average price per additional megabyte after 11th Yes.
reaching bit/data cap
Residential low-use, medium-use and high- 13th, 23rd and Yes.
use fixed-line voice prices 23rd most
expensive
World Economic Forum
Accessibility of digital content 17th Yes.
As illustrated by the difference between the international rankings between Australia and the
UK, it is anticipated stronger separation measures would improve competition, lower prices
and improve take-up rates in the broadband market.
5. Objectives of the Government's vertical separation action
The Government's objective is to address concerns created by Telstra's vertical integration
by reducing Telstra's ability and incentive to discriminate against other service providers and
to promote greater equivalence and transparency which will encourage greater competition
across the telecommunications industry.
25
6. Government's functional separation policy to address Telstra's vertical
integration--including implementation process
If Telstra decides not to proceed with voluntary structural separation then a functional
separation regime will be established to address Telstra's vertical integration.
It has been widely observed that imposing mandatory structural separation on Telstra is likely
to raise compensation issues.
The ACCC notes that although functional separation is unable to ensure equivalence:
`...a strong functional separation model is a step forward in promoting equivalence from the
current operational separation regime applied to Telstra...[it] may go some way to providing
open access and promoting equivalence of price and non-price terms and conditions.'--
ACCC53
Optus in its submission argues that functional separation is the second best option to
structural separation, however, the:
`[f]unctional separation of the form implemented in the UK and New Zealand provides an
appropriate starting point for consideration of a new regulatory settlement. Such an
approach would almost certainly represent a significant improvement on the arrangements
we have today.'--Optus54
The proposed functional separation framework will be implemented through legislative
amendment to the Telecommunications Act 1997 with more detailed requirements to be
addressed by Telstra to be set out in a determination to be made by the Minister.
Broadly, Telstra will be required to submit undertakings to the Minister concerning the
implementation of functional separation, and ongoing commitments to functional separation.
These undertakings will be contained in a draft Functional Separation Undertaking (FSU).
Those undertakings must be directed at achieving key principles and objectives of functional
separation and must include specific matters set out by the Minister in a requirements
determination. The key principles of the new functional separation regime include:
· Telstra to operate its network and wholesale functions at arm's-length from the rest of
Telstra;
· non-Telstra wholesale customers to access regulated services on equivalent price and
non-price terms and conditions as is provided to Telstra's retail unit;
· Telstra's retail unit to only be consulted on future products and future demand
requirements at the same time and in the same way a non-Telstra access seeker is
consulted; and
· strong internal governance structures with transparency so that Telstra's competitors and
the regulator can be confident that Telstra's retail unit is being treated the same as
competitors.
53
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, pp.22-23.
54
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.26.
26
The Minister will consider the draft FSU submitted by Telstra, hold a public review and
consult the ACCC.
The Minister will then approve, vary or replace the draft FSU. It then becomes a final FSU.
Telstra will then be required to comply with the final FSU with compliance being a carrier
licence condition.
As part of the requirement for strong internal governance structures with transparency,
Telstra will be required to establish an oversight and equivalence board to monitor and
support Telstra's compliance with the final FSU and report to Telstra's Board and the ACCC
about that compliance. There will also be provisions for the establishment of a new
independent telecommunications adjudicator, to provide a practical way to enable access
providers and access seekers to resolve non-price equivalence and service level issues.
More detailed requirements of the functional separation undertaking to be addressed by
Telstra will be set out in a written determination (a functional separation requirements
determination), which is not a legislative instrument, to be made by the Minister within
90 days of the commencement of the legislation and will provide specific detail on:
· the responsibilities of, and requirements on, the functionally separated business unit;
· the assets residing in the functionally separated business unit;
· the equivalence requirements for regulated services to be provided by Telstra;
· the functional separation governance framework;
· enforcement and oversight provisions; and
· the requirement for Telstra to establish an oversight and equivalence board, including a
support office, to monitor and support Telstra in complying with its FSU.
As functional separation is the next best option to structural separation, the functional
separation obligations on Telstra would cease in the event that Telstra submits an enforceable
undertaking acceptable to the ACCC to structurally separate. The Bill also gives priority to a
genuine structural separation process over the functional separation process by extending the
period that the Minister must make the functional separation requirements determination if it
is clear that Telstra is planning to structurally separate.
7. Regulatory assessment of functional separation
Functional separation provides a much stronger form of separation than the current
operational separation regime and is similar to regimes introduced in the UK and more
recently in New Zealand (see Appendix A for a table providing a comparison of the
Australian, UK and New Zealand separation models - source ACCC). It would enable Telstra
to retain limited economies of scale and scope as a vertically integrated supplier where
services are not regulated, such as in the mobile sector, but would have much more stringent
controls over its network and wholesale dealings with its own retail arm in relation to
regulated services.
Price and non-price equivalence, ring-fencing measures and enforcement provisions will all
be much stronger than the current regime, thereby providing the right incentives for Telstra to
deliver its network and wholesale functions to a high standard no matter which customers it is
dealing with.
27
The exact requirements for these measures and provisions will be set out in the functional
separation requirements determination with the following descriptions being examples of
how the measures in the proposed functional separation framework could be made stronger
than the current operational separation framework.
Stronger price and non-price equivalence
The ACCC in its submission to the regulatory reform discussion paper outlined the minimum
requirements for a robust functional separation model. In particular, the ACCC explained
how price and non-price terms could be made stronger than what is required in the current
operational separation regime.
Regarding equivalence for price terms, the ACCC states that:
`[p]rice equivalence measures requiring affiliates pay the same for their access to the
network as wholesale customers. This involves establishing a transfer pricing system and the
preparation of separate accounts for the ring-fenced affiliates, and retail affiliates, of the
firm that are prepared on the basis of these transactions. This differs from imputation testing
models, as are used in Part XIB anticompetitive or competition investigations, which seek to
identify for regulatory purposes an implied access price for affiliates by deducting an
estimate of higher layer costs from average retail prices that are offered. Without ex-ante
separation of the relevant business units, however, there is no requirement that this implied
price must reflect the same tariffs faced by wholesale customers. Further, there is no
requirement under an imputation testing only model for retail or wholesale affiliates to
account for their use of the network on an arms length basis.'--ACCC55
For non-price terms the ACCC states that:
`[n]on-price equivalence measures requiring that the same access products are offered, and
the same processes and systems are used to provide operational support (service
qualification and provisioning, fault handling and billing) to the retail and wholesale
customer facing affiliates and to access seekers. Equivalence in technical quality is promoted
by the use of the same access products, while equivalent operational quality is promoted by
the use of the same operational support systems. This differs to a more light handed
approach that permits differences in processes provided that specified measures of relative
performance do not differ. This alternative approach provides less assurance and is
dependent upon robust and encompassing measures being designed and implemented, and
even then permits targeted discrimination.'--ACCC56
55
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, p.30.
56
Ibid.
28
Ring-fencing arrangements and the oversight and equivalence board
Ring-fencing arrangements govern staff roles and the transactions between the functionally
separated business units to ensure the separated units operate on a stand-alone basis, at arm's
length and in the separated business units' best interests.
Ring-fencing arrangements would be much stricter than in the current regime and new
oversight arrangements would apply with the establishment of a new oversight and
equivalence board.
An example of the stronger ring-fencing arrangements in the proposed functional separation
framework would be that staff in the network and wholesale business unit would not be
permitted to receive whole-of-business incentives. Localised incentive arrangements are
considered essential in delivering the objectives of functional separation as in the absence of
these requirements employees will likely seek to maximise group shareholder value (and
thereby discriminate against competitors) to maximise their own bonuses.
Telstra would establish an oversight and equivalence board and set its terms of reference in
consultation with the regulator similar to the equivalent oversight bodies that have been
established in both the UK and New Zealand. Some examples of the roles that the oversight
bodies undertake overseas include:
· report to the Board and the regulator on matters including when it becomes aware of a
non-trivial breach of the functional separation obligations or any actions or omissions in
terms of compliance with the obligations;
· consider and review key performance indicators and report to the Board and the regulator
on a regular basis and in the company's annual report compliance with the functional
separation obligations;
· review performance, carry out investigations, process complaints, consult regularly with
wholesale customers generally and recommend to the Board and the regulator actions
needed to remedy any concerns with compliance with the separation undertakings;
· consider codes of conduct for personnel and review and report to the regulator any
requests for exemptions permitted under the undertaking, making clear whether those
requests are supported or not; and
· review the supply of the company's services internally to the retail business unit.
Stronger and more direct enforcement provisions
Enforcement provisions will be stronger as a contravention of Telstra's functional separation
undertakings will be a direct breach of its carrier licence conditions. This is stronger than the
current operational separation regime. The ACCC explains the weak and indirect nature of
the current enforcement provisions:
`[i]n terms of remedying a breach, Telstra's OSP [operation separation plan] can be seen to
contain a "two strikes policy", as the ACCC can only take enforcement action when a
`rectification plan' has been contravened, and a rectification plan would only exist where the
Minister has first required Telstra to prepare such a plan and has accepted it.'--ACCC57
57
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, p.21.
29
As stated in the Telecommunications Act, the pecuniary penalty payable as a result of a
breach of a carrier licence condition by a body corporate is not to exceed $10 million for each
contravention.
Both stronger ring-fencing arrangements and enforcement provisions will make it much more
difficult for employees to intentionally or unintentionally circumvent their obligations under
functional separation and create stronger incentives for Telstra employees not to discriminate
against Telstra's competitors.
The stronger measures just outlined are all equally important to the effectiveness of a
functional separation regime where the aim is to promote equivalence and transparency.
The cost of functional separation
Functional separation is not without cost and it will be more complex and costly for Telstra to
implement than the current measures. It could also involve the migration of Telstra's
customers to new systems, which could potentially affect those customers' services. It will be
the responsibility of Telstra to minimise customer impacts during the transition to functional
separation.
Cost of functional separation in the United Kingdom
In 2005, functional separation undertakings were submitted by British Telecommunications
plc (BT) to Ofcom, the UK's communications regulator, in lieu of the possibility of much
harsher regulatory penalties, including structural separation, being imposed given Ofcom's
findings that BT's market power was restricting competition in the sector.
The key features of the BT undertakings were the establishment of a new business unit, called
Openreach, responsible for the operation and development of BT's local access network and
that Openreach would support all communications providers, including BT's retail
businesses, on an equivalent basis.
Functional separation in the UK is reported to have cost GBP153 million58 to set up.
However, substantial benefits were apparent within 12 months of functional separation
commencing. The costs to BT were in relation to the establishment of Openreach and to the
introduction of equivalence of input systems.
A non-price cost was that during the implementation of BT's functional separation
undertakings, some customers' services were affected when BT migrated its customers to
new systems.
Cost of functional separation in New Zealand
The functional separation model adopted in New Zealand is based on the BT model and was
implemented to promote competition and increase broadband take-up in the New Zealand
telecommunications markets.
In 2006, a law was passed requiring the functional separation of Telecom New Zealand. The
law, and the resulting determination, required Telecom New Zealand to separate into three
58
British Telecommunications plc, Annual reports 2006 and 2009.
30
separate business units--retail, wholesale and fixed network access service--with the
separated business units all to operate at arm's length from one another. The separation
process formally commenced on 31 March 2008.
The key difference between the New Zealand and UK models is that Telecom New Zealand
avoided the requirement to re-develop many of its information technology support systems
due to the fact it was not obliged to provide equivalence of inputs for legacy wholesale
services.
Functional separation is reported to have cost NZ$200 million. However, benefits have been
identified within 12 months of functional separation commencing. It is reported that the
annual operational costs for functional separation is up to NZ$40 million per annum.59
Costs on Telstra
As further details of the functional separation model will be set out in a determination at a
later date, the exact costs that will be incurred by Telstra cannot be quantified. Telstra
reported in its 2009 full year financial results analyst briefing that functional separation could
take between one to five years to implement and cost between $500 million to $1 billion. 60,61
Specifically, Telstra claims that if it is required to implement a similar functional separation
model as to the one implemented by Telecom New Zealand it would take greater than one
year, cost $500 million and affect its share price by approximately four cents per share.
Telstra also reports that if it is required to implement a BT-style functional separation model
it could take five to six years, cost between $800 million-$1 billion or more with ongoing
costs of $50 million-$100 million and affect its share price by greater than 10 cents per share.
Telstra states that implementing this model would involve a very expensive unwinding of its
information technology systems.
It is unclear what assumptions Telstra's claimed implementation costs or effects on its share
price are based on, but it is assumed that much of the incurred cost would be as a result of
initial set up and administrative costs as well as the required changes to information
technology systems. Telstra's claims can be assumed to represent the upper bounds of
possible costs.
A separate analysis of the effects functional separation may have on Telstra's share price has
been performed by Macquarie research, which is part of the Macquarie Group, which
estimates that:
`...functional separation would cost Telstra shareholders between six and 33 cents per
share--the lower figure representing a scenario in which regulatory changes are made
59
Voice and data on line website, Telecom NZ comments on operational separation, 26
September 2007, http://www.voiceanddata.com.au/news/14998-Telecom-NZ-comments-on-
operational-separation.
60
Telstra, Transcript from Full Year 2009 Financial Results--Analyst Briefing, 14 August
2009, pp.51-52.
61
Telstra, Full Year 2009 Financial Results--CEO/CFO Analyst briefing presentation,
13 August 2009, p.8.
31
without a National Broadband Network (NBN) being completed by the Government, the latter
including the competitive effect of an NBN.'--Macquarie62
However, functional separation does not necessarily have a negative impact on share price as
demonstrated by BT. In 2007, the European Regulators Group noted that:
`[f]ollowing the announcement of the undertakings in the United Kingdom, BT's share price
increased. After almost two years, BT has shown a relatively strong share performance
compared with many of its European peers...it is clear the undertakings entered into by BT
were not perceived by the market as a disincentive to invest.'--European Regulators Group63
Despite the uncertainty of the effects functional separation will have on Telstra's share price
and the ongoing costs it is likely to incur, the initial set up costs and implementation
timeframes for Telstra will be significant.
Costs to the Government
The proposed increased resources for the regulator will be recovered by increasing the carrier
licence charges.
There is potential over time for the wind back of work programs concerning Telstra's
operational and accounting separation as a result of functional separation. However, it is not
possible to precisely identify the reduction of regulations and work programs at present as a
result of these new regulatory measures.
The benefits of functional separation
For similar reasons that functional separation is being proposed in Australia, functional
separation was implemented in both the UK and New Zealand to promote transparency and
equivalence to encourage the development of retail-level competition and broadband take-up.
The benefits resulting from functional separation have been significant, in particular in the
UK, where the functional separation of BT had an almost immediate effect on the state of
competition in their telecommunications market.
Benefits of functional separation in the United Kingdom
The UK experience has demonstrated that functional separation can deliver competitive
outcomes to the benefit of consumers, businesses and the industry. Consumers in the UK are
able to benefit from lower prices and the development of more innovative services with the
European Regulators Group reporting that:
`[the] creation of Openreach [BT's functionally separated network and wholesale business
unit] prompted a new wave of investment in the UK electronic communications market, which
in turn triggered a major price war in the retail broadband market and led to a range of
innovative broadband services being offered to end-users.'-- European Regulators Group64
62
Brett Winterford (for Itnews--mobile edition), Analysts weigh up costs of Telstra split, 22
April 2009.
63
European Regulators Group (ERG), ERG Opinion on Functional Separation, 2007, p. 9.
64
European Regulators Group (ERG), ERG Opinion on Functional Separation, 2007, p. 12.
32
Some commentators have criticised functional separation as compromising investments by
restricting the ability of a vertically integrated operator to coordinate investment with its
retail arm and limiting its incentive to upgrade the network. This has not been the experience
of BT, with BT stating that:
`...[t]he provision of equivalence does not stifle our ability or desire to invest; we have just
announced a1.5bn investment programme in next generation broadband with full
equivalence. We are amongst the world leaders in this area.'--BT Global Services65
Ofcom, the UK's communication regulator, considers that while not the sole contributing
factor to increased competition and benefits experienced by consumers and businesses, BT's
functional separation undertakings have contributed to the following outcomes:
`Fixed broadband adoption has continued its growth reaching over 60 % of UK households
at the end of 2008 from 41 % at the end of 2005.'
`Over 5.5 million broadband connections at the end of 2008 were provided by operators
other than BT who have deployed infrastructure at BT's local exchanges.'
`Competition between 2005 and 2007 led to a fall in the cost of a basket of residential fixed
voice services on average by 10.5 per cent in real terms each year.'
`The take-up of [unbundled local loop (ULL)] services has grown from less than 200,000
lines in Q3 2005 to over 5.5 million lines at the end of December 2008, equating to
approximately 32 per cent of all (cable and ADSL) fixed broadband connections.'
`BT's share of wholesale broadband access (ADSL and cable) fell from 71% at the end of
2005 to 47% at the end of 2008.'
`BT's retail share of (residential and SME) broadband connections stood at around 27 per
cent at the end of 2007 which is one of the lowest incumbent operator market shares in the
OECD, with the exception of North America.'--Ofcom66
The results from the UK experience are positive as illustrated by the statistics just stated. Of
particular note is that broadband adoption has grown significantly, while BT's market power
has diminished substantially and fixed voice prices have decreased as a direct result of the
increased competition in the market.
As demonstrated by the following analysis and table from the Strategy and Policy
Consultants Network, the UK has stronger broadband take-up and a higher proportion of its
subscribers use higher bandwidth connections than Australians. It is therefore expected that
Australia will improve its broadband penetration rate and the percentage of subscribers using
higher-speed broadband connections as a benefit of the increased level of competition in the
sector due to stronger separation measures for Telstra.
65
BT Global Services, Letter to the Editor. Submission 34 to the Senate Committee on the
National Broadband Network, 2009, p.1.
66
Ofcom, Impact of the Strategic Review of Telecoms - Implementation Review Statement, 29
July 2009, pp. 4, 6, 7.
33
`Broadband Penetration: Australia's level of penetration is 25.4% against 28.5% in the UK.
However, penetration is strongly and positively associated with Gross Domestic Product
(GDP) per capita: the higher the GDP per capita, the higher the level of penetration. If we
correct for GDP per capita we find that penetration is (sic) Australia 2.28 percentage points
below the level we would expect whilst the UK is 2.18 percentage points above the level we
would expect.'--Strategy and Policy Consultants Network67
Percentage of Australian and UK subscribers per bandwidth.
Proportion of Subscribers
Bandwidth Australia United Kingdom
512 kbps and below 44% 4.3%
512kbps-8mbps 33% 89.3%
More than 8 mbps 23% 7.2%
Source: Strategy and Policy Consultants Network, Preventing Discrimination in the
Australian Broadband Market.
Another important point is that the take-up of unbundled local loop services has grown
dramatically since the introduction of functional separation. Unbundled local loop services
are an essential service to foster competition on the existing fixed-line copper network and
require the incumbent to lease at cost part of its local assets to competitors. The dramatic
increase in take-up of this essential service demonstrates the high level of confidence
competitors have that the functional separation regime results in them being treated in a non-
discriminatory way by the incumbent which has given them confidence to invest in the
market.
Functional separation has had a positive net effect in the UK with its telecommunications
regulator, Ofcom stating that:
`[s]ince our last review, and nearly four years on since the [BT functional separation]
Undertakings were given, our annual evaluation continues to indicate that the net effect of
the Undertakings to date, both for competition and consumers has been positive.'
`Given the substantial benefits the Undertakings have delivered to retail and wholesale
customers to date, we continue to remain of the view that the Undertakings are an
appropriate and comprehensive solution to the competition concerns that we set out in the
TSR [Strategic Review of Telecommunications].'--Ofcom68
Furthermore, the benefits of functional separation are displayed earlier in this regulatory
assessment where the UK is superior to Australia in most key international
telecommunications indicators stated regarding price, take-up rates and the state of the
sector's competition.
67
Strategy and Policy Consultants Network, Preventing Discrimination in the Australian
Broadband Market--Prepared for Optus, 1 June 2009, p.14.
68
Ofcom, Impact of the Strategic Review of Telecoms - Implementation Review Statement, 29
July 2009, pp. 3, 10.
34
Benefits of functional separation in New Zealand
Functional separation in New Zealand is in its early days but there appears to be early
benefits as a result of its implementation.
`Telecom's share of the retail broadband market has continued to decline and now sits at 57
percent of total broadband connections compared to 61 percent at the end of 2007...the 2006
legislative reforms continue to have a positive effect on the fixed line telecommunications
markets and are likely to show further gains in 2009.'--New Zealand Commerce
Commission69
In addition, functional separation in New Zealand has seen a marked change in Telecom New
Zealand's behaviour towards its wholesale customers.
`Operational separation [the equivalent of functional in the Australian context] of Telecom
NZ has been a huge success. It is all positive; there are no negatives.
From the moment the government announced the separation plan on 3 May 2006, Telecom's
behaviours in the market place changed. Before separation it viewed its wholesale customers
as unwelcome campers on its network. The moment separation became inevitable, it
immediately started to recognise them as valued business partners.'--speech by Dr Ross
Patterson, Telecommunications Commissioner, New Zealand Commerce Commission70
Changing the incumbent's attitude towards its wholesale customers, not just because of the
regulation imposed, but for the incumbent to see the true value of its wholesale customers as
equal business partners, is a major outcome for the functional separation regime implemented
in New Zealand.
Reduction of regulation
The increased competition resulting from functional separation could reduce the need for
other forms of regulation, such as retail price controls. For example, in the UK, Ofcom has
reduced BT's retail price controls, as a result of the benefits from functional separation due to
the increased level of retail level competition in the market. However, such a reduction of
regulation could only occur once a fully competitive retail market was established.
8. Overall assessment of functional separation
Functional separation is the next best option to structural separation and will go some way in
providing equivalence and thereby further promoting competition in the sector.
Currently, reviews of regulatory frameworks are being contemplated in many overseas
markets as a regulatory remedy to ensure competition prevails. In its 2009 Communications
Outlook publication, the Organisation for Economic Co-operation and Development (OECD)
states:
69
New Zealand Commerce Commission 2009, Telecommunications market monitoring
report for 2008 released by Commerce Commission, 14 April 2009. p 7
70
Operational Separation in New Zealand - Speech at Oceania Telecommunications
Conference Sydney, July 8 & 9, 2008, by Dr Ross Patterson, Telecommunications
Commissioner New Zealand Commerce Commission July 2008.
35
`...functional separation of integrated incumbent operators should be part of the policy
toolkit available to regulators to use, as a last resort measure, if other possibilities to create
competitive markets have not been successful...[and] regulatory frameworks, which had
reached a certain stability and maturity during the last decade, are in many cases being
reviewed in order to ensure that competition prevails.'--OECD71
As stated earlier the competitive telecommunications market that was envisaged is not
emerging due to Telstra's level of integration and incentives to favour its own retail business
compared to its wholesale customers. The proposed functional separation framework will go
a long way to altering Telstra's incentives and its behaviour when providing access to
services for its wholesale customers.
Even though functional separation is seen as the second best option to structural separation, it
will be supported by Telstra's competitors as they will be able to compete with Telstra on
more level terms than currently. As a result, competitors will have the confidence to invest in
the market, which will see greater innovation, lower prices and more choices for consumers.
That being said, the ongoing cost to the competition due to Telstra's vertical integration
affects all Australians and the economy more generally through higher telecommunications
prices and reduced innovation and investment in the sector. Also any costs incurred to Telstra
as a result of functional separation may not be as significant as other systems costs that are
part of the costs of doing business. For example, in recent years Telstra has reportedly spent
in excess of $10 billion72 on next generation networks (including wireless) systems and over
$1.5 billion73 on its recent information technology transformation project.
It is the Australian Government's considered view that the medium- and longer-term
competition benefits for the economy, business and end-users of implementing functional
separation outweigh the short-term costs to Telstra of implementing functional separation if
Telstra decides not to voluntarily structurally separate.
9. Telstra's horizontal integration
The problem being addressed
In the past, concerns have been expressed by a range of stakeholders that Telstra's control of
the only and near ubiquitous copper fixed line network, the largest cable and mobile networks
and 50 per cent of Foxtel has reduced the development of competition in Australia in
comparison to other countries and has contributed to Telstra's dominance in the market.
Compared to most other countries, Telstra's level of integration is unique. For example, in
most other developed countries there are restrictions on incumbents from owning both cable
and traditional fixed-line telephone networks.
71
Organisation for Economic Co-operation and Economic Development, OECD
Communications Outlook 2009, 2009, p.29.
72
Telstra Corporation Limited, Outcomes of Strategic Review--slide presentation by Chief
Operations Officer, 15 November 2005, p.29.
73
Telstra Corporation Limited, Transcript from Telstra Technology Briefing, 17 November
2005, pp.37-38.
36
Unlike Australia, in a range of countries the fixed-line incumbent does not also own the
largest mobile carrier as measured by market share.
Telstra's ownership of the two largest fixed line networks in Australia has limited
competitive tension in the telecommunication sector, and therefore choice for consumers with
the ACCC stating in 2003 that:
`...Telstra's control of both a copper and a cable network and the lack of competitive
discipline it faces as a result of this dual ownership, means Telstra is in a position to largely
dictate the type of services that consumers will be able to access and the time at which these
services become available.'--ACCC74
In addition to Telstra's control of fixed line networks, Telstra's 50 per cent stake in Foxtel
has hindered competition in both the telecommunications and pay-TV markets. This is
because Telstra has the incentive to base its decisions on its interests in both the
telecommunications market and its pay-TV interests. As a result, new products that a pure
media company or a pure telecommunication wholesaler might offer are potentially not being
made available to consumers.
Why Government action is needed
The Government's clear objective is to promote competition in the sector which is in the
interests of all Australian consumers, businesses and the economy more broadly and is why
the Government has established a framework for Telstra to voluntarily divest itself of its
interests in Foxtel and its hybrid fibre coaxial cable network and creating a mechanism to
prevent Telstra from acquiring spectrum for advanced wireless broadband.
Australia is one of the few countries that has allowed its telecommunications incumbent to
own a hybrid fibre coaxial cable network. In many other countries, including within the
European Union, there are restrictions on incumbents that own the fixed line telephone
network also owning cable networks (See Appendix B for a list of countries where
restrictions have been placed on the incumbent's involvement in the Pay TV sector, source:
Optus).
The divestment of certain assets to be allowed to participate in other market segments or to
avoid regulation is not unfamiliar in the telecommunications sector. For example, for the
merger between the European telecommunications providers Telia and Sonera, the European
Commission directed Telia to divest its cable network in Sweden.75 While in the UK,
`BT divested itself of its mobile business in 2001 to simplify its business, and since then the
company's performance has gone from strength to strength...'--Ovum76
The issues surrounding Telstra's ownership of Foxtel
74
Australian Competition and Consumer Commission, Emerging Market Structures in the
Communications Sector, June 2003, p. xiv.
75
Organisation for Economic Co-operation and Development, Working Party on
Telecommunication and Information Services Policies, Broadband and telephony services
over cable television networks, 7 November 2003, p.49
76
Mr Mike Cansfield, Ovum Comment: Yin and yang: Vodafone, BT and the logic behind a
mega-merger, Ovum, accessed 1 September 2009.
37
Optus contends that Telstra's investment in Foxtel represents a significant threat to
competition:
`Telstra's fifty per cent ownership in Foxtel has been recognised to have caused significant
distortions in the development of the Pay TV market within Australia, with associated impacts
on the telecommunications fixed line services market.'--Optus77
The impacts and distortions in the development of the respective markets are difficult to
quantify, however, problems arise because content can provide telecommunications service
providers with new high-value business opportunities and further stimulates demand for their
carriage services. Exclusive access to content creates an effective means of locking customers
in. Further lock-in can be achieved through the bundling of services (i.e. selling two or more
types of services together at a discount rate). Access to content on an exclusive basis limits
the opportunities available to competitors, in both the carriage and content sectors.
Because of Telstra's stake in Foxtel and its ownership of the largest hybrid fibre coaxial cable
network, Telstra has the incentive to seek to restrict the supply of Foxtel Pay TV channels to
other networks competing with Telstra for the supply of telecommunications services and to
hinder other Pay TV businesses from accessing Telstra's cable network. The Seven Network
in its submission strongly supports Telstra being required to divest its ownership of Foxtel
arguing that competition has suffered as:
`[t]he [Australian] pay TV sector is characterised by the absence of any effective
competition. The barriers to entry are now such that the marketplace is highly unlikely to
deliver any real or sustainable competition in the future.'--The Seven Network78
Telstra choosing to divest its Foxtel interests could see new entrants into the Pay TV sector
with new channels providing greater choice for consumers. It could also see increased
competition in the telephony and broadband markets as Pay TV services could be bundled
with other telecommunications providers.
A number of submitters to the regulatory discussion paper argued for Telstra to divest its
Foxtel interests including:
`...Telstra should be required to immediately divest its interests in Foxtel.'--Macquarie
Telecom79
`...the Government ought to require Telstra to divest its ownership interest in FOXTEL.'--
Austar80
`TransACT would encourage the government to consider... horizontal separation, by
requiring Telstra to divest its 50% interest in FOXTEL...'--TransACT81
77
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.61.
78
The Seven Network, National Broadband Network Regulatory Reform For 21st Century
Broadband, 3 June 2009, p.7.
79
Macquarie Telecom, Submission in Response to National Broadband Network: Regulatory
Reform for 21st Century Broadband Discussion Paper, 3 June 2009, p.11.
80
Austar United Communications Limited, Response To National Broadband Network:
Regulatory Reform for 21st Century Broadband, 3 June 2009, p.11.
81
TransACT Capital Communications Pty Ltd, Submission on National Broadband Network:
Regulatory Reform for 21st Century Broadband Discussion Paper, 3 June 2009, p.36.
38
`Competition policies dictate that Telstra must be forced to divest its ownership interest in
Foxtel.'--Primus82
`The CCC submits Telstra should be required to divest itself of its interests in the HFC cable
and Foxtel...'--Competitive Carriers Coalition83
Optus also submits that Telstra's stake in Foxtel will be significant into the future. The reason
being as consumers move to higher speed broadband services, such as those offered by the
NBN, IPTV and the associated content are likely to be key drivers for the take-up of these
higher speed services. That is:
`...control of content will become increasingly critical, since it will become a crucial factor
in customer's purchasing decisions.'--Optus84
The ACCC's Chairman Mr Graeme Samuel has also noted the reasons why control of content
could stifle competition:
`...a telecommunications network operator is able to acquire sufficient compelling content on
an exclusive basis, such that it limits alternative network owners' ability to offer attractive
packages to consumers.'--Mr Graeme Samuel, ACCC85
In contrast, Telstra in its submission argued that the presence of telecommunications carriers
in media markets promotes the traditional media policy goal of diversity and plurality and:
`...the existing legal and regulatory frameworks for cable networks, media and content,
contain strong safeguards to prevent anti-competitive conduct and the misuse of market
power...The Foxtel content sharing agreement with Optus and Foxtel's undertakings to the
ACCC, for example, have helped secure the industry's financial sustainability and ensured
that pay TV content is accessible across platforms and providers.'--Telstra86
Foxtel did not address its possible divestment by Telstra in its submission to the regulatory
reform discussion paper. It did state that it:
`...would be particularly concerned that a new regulatory regime may be introduced to deal
with perceived concerns with Telstra and that this regime may end up having wider
application...[and] is also concerned...on the need to prohibit one company from buying a
media asset fundamentally misunderstands the way in which the content supply market
operates as well as misunderstanding the implications of broadband...[and] is not
aware...that access to content has foreclosed competition or otherwise acted as a barrier to
82
Primus Telecom, Submission in Response to National Broadband Network Regulatory
Reform for 21st Century Broadband Discussion Paper, 3 June 2009, p.2.
83
Competitive Carriers Coalition, Response to the Government Discussion Paper: National
Broadband Network: Regulatory Reform for 21st Century Broadband Discussion Paper, June
2009, p.12.
84
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.62.
85
Mr Graeme Samuel, Australian Telecommunications User Group Regional Conference, 21
May 2009, p.9.
86
Telstra Corporation, Submission to the National Broadband Network: Regulatory Reform
21st Century Broadband Discussion Paper, 3 June 2009, p.15.
39
entry or that this has caused a lack of investment in facilities or the subscription television
industry. '--Foxtel87
Austar in its submission notes the ability of a dominant telecommunications operator to
reinforce its dominance not just through subscription television services but also in the
broadband market is an issue:
`The issue is the potential for a powerful telecommunications operator to exploit its power in
the platform delivery market to close off content competition, not just in subscription
television, but also in broadband service acquisition. We have already seen this in the
exclusive content deal that Telstra did for AFL rights for its Bigpond internet service. As the
lines between platforms begin to blur as true "convergence" takes hold, the ability for a
dominant telco operator to dominate this space and use content rights to reinforce that
dominance become even more concerning.'--Austar88
With the Government's aim for the NBN to deliver superfast broadband to all Australians and
a fully competitive telecommunications market, Telstra's divestment of Foxtel would
improve the environment for a competitive market to develop.
The lack of infrastructure based competition in the past due to Telstra's ownership of a
hybrid fibre coaxial cable network
Telstra's ownership of the largest cable network means that, along with its fixed line copper
network, it owns the two most significant fixed line communications platforms in Australia.
Divestment of the cable network could provide the basis for additional infrastructure-based
competition for the provision of voice, broadband and subscription television services in
metropolitan areas where this cable footprint exists.
In their respective regulatory submissions Macquarie Telecom, Primus and the Competitive
Carriers Coalition all argued for Telstra to be required to divest its cable network. Telstra,
Foxtel, Optus and the Communications, Electrical and Plumbing Union argued against
divestment. Optus stated that Telstra's cable network should reside in the company that will
be created as a result of Telstra's structural separation (Optus in its submission provided a
structural separation model for Telstra where Telstra would be required to divest its network
and wholesale functions to a separate company not owned or controlled by Telstra).
Telstra's access to spectrum
To promote competition across the various telecommunications platforms, the Government is
proposing legislative measures that will provide Telstra with the flexibility to choose its
future path.
In the previous Bill, the Government proposed that Telstra would not be able to acquire
spectrum for advanced wireless broadband while it remains vertically integrated, maintains
its interest in Foxtel and owns a hybrid fibre coaxial cable network. However, if the Minister
87
Foxtel, submission to the National Broadband Network: Regulatory Reform for 21st
Century Broadband Discussion Paper, 4 June 2009, pp.2,14-15.
88
Austar United Communications Limited, Response To National Broadband Network:
Regulatory Reform for 21st Century Broadband, 3 June 2009, p.10.
40
was satisfied that any concerns arising from Telstra's market power were sufficiently
addressed by Telstra's undertaking to structurally separate, the Minister would have been
able to exempt Telstra from the requirements to divest its interests in Foxtel and/or its hybrid
fibre coaxial cable network. This reflected the view that an appropriate form of structural
separation may address the concerns in relation to Telstra's level of horizontal integration.
In light of Telstra's clear commitment to structural separation as evidenced by its decision to
enter into a Financial Heads of Agreement, Telstra would only be prevented from acquiring
specified bands of spectrum if the Minister imposes such a restriction in a legislative
instrument.
The availability of spectrum has been essential in encouraging competition between different
technologies, as well as different service providers of mobile services.
Availability of spectrum is becoming increasingly important for telecommunications as the
use of wireless broadband and mobile technologies such as 3G increases. The prospect of
new technologies--such as Long Term Evolution--which allow for more bandwidth-
intensive applications will further increase this demand.
The allocation of spectrum is carried out under the Radiocommunications Act. Currently,
when spectrum becomes available, it can be sold through auction, with licence periods of up
to 15 years. Secondary trading in spectrum is permitted.
Over coming years, the Government will consider the allocation of spectrum made available
through the staged cessation of analog television in the transition to digital television, the
expiry of licences for spectrum currently used for mobile telephone services and any changes
to the use of spectrum currently used for electronic news gathering.
The Government recognises that the future demands will place pressure on the available
spectrum.
Competition limits have been imposed on existing carriers in Australia in the past.
Specifically, the applicable Ministers have used their directions powers under section 60 of
the Radiocommunications Act 1992 to apply competition limits to particular spectrum licence
auctions five times.89
The relevant spectrum Telstra could potentially be prevented from acquiring is the
broadcasting spectrum and spectrum used for electronic news gathering. Telstra would not be
prevented under this rule from re-acquiring spectrum it currently uses for mobile telephone
services.
Telstra in its submission did not support the proposal to prevent it from accessing the
spectrum that is required for the provision of next generation wireless services.90 Hutchison
also did not consider competition limits appropriate on spectrum unless the Government
89
Productivity Commission, Radiocommunications Inquiry Report, I July 2002, p.107
90
Telstra Corporation, Submission to the National Broadband Network: Regulatory Reform
21st Century Broadband Discussion Paper, 3 June 2009, p.14
41
identifies clear quantifiable net social benefit from restricting competition for newly available
spectrum.91 Whereas the ACCC states that:
`[a]lthough Telstra has voiced concerns over the use of competition limits ... the ACCC
considers they can be an effective mechanism to promote competition.'--ACCC92
The Digital Economy Industry Work Group93, Optus and Unwired in their regulatory reform
submissions also stated that competition restrictions should be considered to spectrum
auctions with Optus and Unwired stating:
`Optus submits that competition limits on spectrum allocations should be considered...'
--Optus94
`[f]uture competition limits on spectrum allocation should be based on the market power of
applicants across all delivery platforms.'--Unwired95
10. Objectives of the Government's horizontal separation action
The Government's objective is to address Telstra's ability to discriminate against its
competitors, promote competition across the various telecommunications platforms, and
provide Telstra with the flexibility to choose its future path.
11. Government's policy to address Telstra's horizontal integration
The Bill creates a framework for Telstra to nominate which markets it participates in by
addressing its vertical integration by either voluntarily structurally separating or
implementing functional separation. The Bill also provides a framework for Telstra to
voluntarily divest its interests in Foxtel and its hybrid fibre coaxial cable network. If the
Minister remains concerned about the degree of Telstra's power in telecommunications
markets he may make an instrument preventing Telstra from acquiring spectrum for advanced
wireless broadband.
12. Regulatory assessment of measures to address Telstra's horizontal integration.
The Government is not imposing any regulation on Telstra to structurally separate or divest
its Foxtel or hybrid fibre coaxial cable network interests. Telstra will have a choice to divest
these assets.
Therefore the intention of this section is to outline the potential costs, where possible, to
Telstra and the Commonwealth if Telstra decides to divest these assets or if Telstra is
91
Hutchison, National Broadband Network Regulatory Reform for 21st Century Broadband--
Submission by Hutchison 3G Australia Pty Ltd, 3 June 2009, pp.4-5.
92
Australian Competition and Consumer Commission, Submission to the Department of
Broadband, Communications and the Digital Economy "National Broadband Network:
Regulatory Reform for 21st Century Broadband", June 2009, pp.83-84.
93
Digital Economy Industry Work Group Response, National Broadband Network:
Regulatory Reform for 21st Century Broadband, June 2009, p.7.
94
Optus, Optus Submission--Regulatory Reform for the 21st Century, June 2009, p.103.
95
Unwired Australia Pty Ltd, Submission in response to the Department of Broadband,
Communications and the Digital Economy Discussion Paper--The National Broadband
Network: Regulatory Reform for 21st Century Broadband, June 2009, p.2.
42
prevented from acquiring spectrum if the Minister has determined in the legislative
instrument.
All the costs identified are estimates only.
Estimated cost of Telstra's divestment of Foxtel
Foxtel has 1.63 million direct and wholesale subscribers. It has been reported that Foxtel is
worth $3.5 billion, with revenue reaching $1.84 billion and posting a pre-tax profit of
$135 million for the year ended 30 June 2009.96,97,98
If Telstra divests its Foxtel interest it will lose the associated profits from the cable TV
provider and the strategic benefit to its telecommunications business in owning a premium
content provider. However, it is not possible at this time to accurately state how much Telstra
would lose or gain in divesting its 50 per cent stake in Foxtel, which would partly depend on
the revenue from the sale.
Costs would also be incurred by the Government in assessing the Foxtel divestment
undertakings, however at this point in time it is not clear what these costs will be.
Estimated cost of Telstra's divestment of its hybrid fibre coaxial cable network
There are financial costs involved in Telstra divesting its hybrid fibre coaxial cable network
in terms of securing market value for the asset.
In its financial analysis of the NBN, Deutsche Bank stated that the estimated `book value' of
Telstra's cable network is approximately $3.6 billion or $1450 per home passed, while the
market value is in the vicinity of $1.25 billion or $500 per home passed. This could be a
direct cost to Telstra in the vicinity of $2 billion if Telstra sells its network at current market
value. Another cost is that Telstra would lose revenues received from Foxtel for use of the
cable network, which is estimated to be $80 million per annum, but this is a low margin
offering.99
Deutsche Bank also estimate that if Telstra divests its hybrid fibre coaxial cable network at
market value and a successful NBN is built, the estimated value of Telstra's share price will
be $3.70 per share.
Costs will also be incurred by the Government in assessing the divestment undertakings,
however at this point in time it is not clear what these costs will be.
Estimated cost of preventing Telstra from acquiring spectrum
96
Mr John Durie (for the Australian newspaper), Packer's line in the sand, 28 August 2009,
p.26.
97
Foxtel, Foxtel Announces Solid Subscriber and Financial Growth in a Tough Environment,
13 August 2009.
98
Business Day, Foxtel says conditions still challenging, plans new channels, 13 August
2009.
99
Deutsche Bank, `Financial analysis of NBN and structural options to reach win/win
outcomes', Submission to the Senate Select Committee on the National Broadband Network,
9 July 2009, pp.11-12.
43
There could be a cost to the Commonwealth Government if Telstra did not participate in
spectrum auctions due to the loss in competitive tension.
At this point in time, it is not possible to predict the potential loss in revenue to the
Commonwealth.
It is also not possible to estimate the potential loss in revenue for Telstra as a result of not
acquiring spectrum and not providing advanced wireless broadband services.
13. Overall assessment of the measures to address Telstra's horizontal integration
Telstra's level of horizontal integration across the different delivery platforms--copper, cable
and mobile--is in contrast to many countries where there are restrictions on incumbents
owning both cable and traditional fixed-line telephone networks. Unlike Australia, in a range
of countries the fixed-line incumbent does not own the largest mobile carrier as measured by
market share. Telstra's horizontal integration has significantly contributed to Telstra's
ongoing dominance in the Australian telecommunications market.
However, the Government has welcomed Telstra's announcement that it is pursuing
structural separation through the progressive migration of customer services from its copper
and subscription television cable networks to the new wholesale-only fibre network to be
built and operated by NBN Co. Such an outcome would deliver the envisaged structural
reform of the telecommunications sector.
As a result, the Bill now provides more legislative certainty for Telstra in the transition to
fundamentally changing its business structure to a retail company. The Bill now sets out a
mechanism so that Telstra would be allowed to acquire specified bands of spectrum, unless
the Minister determines in a legislative instrument otherwise. This recognises the fact that
Telstra's proposed structural separation will also address the issues surrounding Telstra's
horizontal integration.
44
APPENDIX A
Table 1 Comparison of the Australian, UK and New Zealand operational separation models (Source: ACCC)
Australia` UK New Zealand
Organisational Notional. Telstra still operates the Key Network More substantive. Network services division More substantive. Network services division separately branded.
services division which deals with Telstra and access separately branded. 1. The Access Network Services unit (separately branded)
Split seekers. 1. Network services (separately branded) - 2. Wholesale unit
1. Key Network services (Telstra branded) Openreach 3. Telecommunications Fixed Network business unit (other than
2. Wholesale business unit (for both unbundled and 2. Wholesale business units (separate for (i) ANS and wholesale unit)
managed services) unbundled and (ii) managed services) - BT Wholesale 4. Retail unit
3. Retail Services Unit 3. Retail business unit - BT Retail
Accounting No requirement for separate accounts. Requirement for separate accounts. Requirement for separate accounts of ANS.
arrangements
Assets allocated No Yes No
between units
Price equivalence Relatively weak. Imputation testing preferred but Stronger. Transfer pricing to promote Stronger. Transfer pricing to promote internal/external
Telstra has not yet provided relevant information. internal/external equivalence. Equivalence.
measures
Service quality Relatively weak. General equivalence obligation on Much stronger. Requirements to use the same Much stronger. Requirements to offer same products and services
service quality, KPI reporting on connections, faults regulated wholesale products, at the same prices and at both the wholesale and retail levels and use same processes as
measures and billing but does not necessarily translate into using the same transactional systems/processes, as wholesale KPI reporting on connections, faults and billing to
services delivered. BT's retail activities. KPI reporting on provision and demonstrate equivalence of inputs.
repair for wholesale line rental, ULL, IPstream, and
billing.
Customer support Questionable. Dispute resolution and responsiveness More robust. Independent complaints body. More robust. Independent complaints body.
measures managed by Telstra internally.
measures
Governance Relatively weak. Externally audited annual compliance More robust. Externally audited annual compliance More robust. External audit of Independent Oversight Group's
report to Minister, Board committee oversight, report. Equality of Access Board committee oversight (IOG) annual report, arms-length rules applying to certain
designated executive with day-to-day responsibility, (independent Telecom personnel, requirements regarding reporting lines,
staff training obligation. directors). Requirements regarding reporting lines, requirements for setting ANS policies to ensure that ANS operates
senior staff engagement. on a stand-alone basis.
Regulator Responsible Minister. ACCC investigation function Ofcom investigatory and regular reporting function. NZ Commerce Commission - Enforcement role
and regular reporting function. IOG - independent oversight role.
Timing Commenced June 2006. Commenced late 2005. Commenced 31 March 2008.
Enforcement Relatively weak. Many steps before ACCC can take Stronger. Ofcom can prosecute breaches of OSP Stronger. Commerce Commission can prosecute breaches of OSP
action. "Two strikes" policy requiring intervention of undertakings. Financial penalties up to 10% of - $10m for each breach, $500k per day for continuing Breaches.
options Minister. relevant turnover.
45
APPENDIX B
100
Restrictions on incumbent involvement in Pay TV (Source: Optus )
Country Restriction
Belgium Belgian cable operators are traditionally separated from the
incumbent.
Canada Bell Canada was prohibited from holding a broadcasting licence
and operating a broadcasting undertaking. (Section 7 Bell Canada
Act, repealed 1997 as a result of Convergence Policy Statement 6
August 1996).
Germany Deutsche Telekom has announced that it will separate its cable
operations into separate legal entity and that it will consider further
measures
Hungary Telecommunications organisation cannot own, lease or control a
cable network, except in settlements with a population under
30,000.
Hong Kong The cable operator Wharf was granted an exclusive licence to
provide pay TV services.
Italy Telecom Italia was prohibited to enter the terrestrial broadcasting
market.
Japan NTT and KDD were prohibited from providing cable TV service.
The Netherlands KPN (the holding company of the incumbent PTT Telecom) is not
allowed direct provision on cable TV infrastructure. The incumbent
sold its shareholdings in cable companies at the insistence of the
regulator.
Spain Telefonica was prohibited from entering into cable telephony
(1997-1999).
United Kingdom Cable operators were initially granted exclusive geographical
licences to provide pay TV services. BT and Mercury were not
permitted to enter the Pay TV business. BT was prohibited from
involvement in broadcasting by Duopoly Review 1991 (effective
from 1991-2001).
US Incumbent telcos were barred from providing video service in all
but the most rural areas and similarly cable operators is (sic) limited
to providing subscription TV - known as the Cable
Communications Policy Act 1984 (effective from 1984 to 1996).
100
Optus submission to the ACCC on Telstra's application for fixed line services
exemption in Optus cable network areas, Appendix H - Restrictions on Incumbent
Involvement in Pay TV (May 08).
46
REGULATION IMPACT STATEMENT
REFORM OF PART XIC OF THE COMPETITION AND CONSUMER ACT 2010
(NETWORK ACCESS ARRANGEMENTS)
1. Issues which give rise to the need for action
In order to obtain improved outcomes for consumers, a competitive market for
telecommunications services must be established. Competitors' access on reasonable
terms to services that are necessary for the supply of retail services is an essential element
of this objective. The current access regime has failed to adequately provide such access
in a timely fashion.
Background
Under Part XIC of the Competition and Consumer Act 2010 the Australian Competition
and Consumer Commission (ACCC) has the power to `declare' specific
telecommunications services to be subject to the access regime.
Once a service is declared, a telecommunications provider that supplies the declared
service (an access provider) is obliged to supply it to other telecommunications service
providers (access seekers) on request (subject to certain exceptions). After it declares a
service, the ACCC is required to issue non-binding `pricing principles' for that service.
The price and non-price terms on which a declared service is supplied are determined by
the following means:
· negotiation and agreement between the access provider and the access seeker; or
· if negotiation fails, the terms are as specified in:
o an access undertaking previously lodged by the access provider and accepted by
the ACCC, or
o in the absence of a relevant undertaking that specifies the terms of access, a
determination by the ACCC following arbitration.
This is known as the negotiate-arbitrate model. This approach was chosen over more
direct methods of setting access terms in order to encourage market-based outcomes.
However, in practice determining terms and conditions of access under Part XIC has
proven to be time-consuming and litigious.
Part XIC also provides for:
· the ACCC to determine model terms and conditions for certain `core services';
· the granting of exemptions, for existing services and for services that are not yet
declared (to encourage investment in new telecommunications infrastructure);
· the Minister to make a determination setting out pricing principles (which apply to
undertaking and arbitration decisions); and
· applications to be made to the Tribunal for review of exemption and undertaking
decisions.
The exercise of the regulatory powers of the ACCC in Part XIC, including the power to
declare services, is governed by consideration of the long-term interests of end-users
47
(LTIE). In deciding whether something is in the LTIE, the ACCC must consider whether
it is likely to promote:
· competition;
· any-to-any connectivity (i.e. communication between users of services over different
networks); and
· the efficient use of, and investment in, telecommunications infrastructure.
The negotiate-arbitrate model has proven to be complex and delay-prone. Each access
dispute has to be arbitrated individually - even if it is very similar to disputes that have
previously been arbitrated. For instance, an arbitration relating to one of the most
important declared services, the unbundled local loop service (ULLS), which commenced
in early 2005 was not finally decided by the ACCC until December 2007, despite the
Commission having made numerous earlier statements on ULLS pricing. Rather than
encouraging flexible negotiation, the process has been a source of uncertainty and delay
for access seekers.
It was originally envisioned that, as the access regime became well-established, new
entrants would compete successfully with the incumbent provider (Telstra) and gradually
invest in their own infrastructure, perhaps eventually replicating Telstra's network and
thus eliminating the economic bottleneck comprising Telstra's fixed line customer access
network. While significant investment has taken place, this outcome is nowhere near
being achieved. ACCC figures for 2009 show that out of over 5000 Telstra exchanges,
only 541 (10 per cent) have had competitors' facilities installed. Regulatory uncertainty
appears to have played a part in curbing more extensive investment by competitors.
Problem
The negotiate-arbitrate model within the telecommunications access regime has been
extensively criticised by a range of stakeholders across the industry. Access seekers have
been the primary critics, but the ACCC and bodies such as the Internet Society of
Australia have also expressed grave doubts that the regime is achieving its aims.
Stakeholders' main areas of concern have been that the negotiate-arbitrate model is very
slow, cumbersome and open to gaming (if not outright obstruction), and that Part XIC in
its current form does not provide sufficient regulatory certainty for investment. It is
ineffective largely because it has not effectively constrained the incentive of the
vertically-integrated Telstra to provide access to its network on terms that are not as
favourable as those it supplies to its own retail business.
The telecommunications sector is characterised by disputation to a greater extent than
other industries where negotiate-arbitrate access regimes operate. The litigious nature of
the telecommunications sector in Australia is illustrated by the fact that:
· as of mid-October 2010, 164 telecommunications access disputes had been notified
since the commencement of the Part XIC regime in 1997. This can be contrasted to
four access disputes that have been notified in other sectors (in respect of two gas
pipelines, Sydney airport, and a sewerage service);
· a large number of these disputes have involved broadband inputs; and
· in recent times, judicial review has been sought in respect of almost all final
arbitration determinations made by the ACCC (mostly by Telstra).
48
While disputes in different regulated industries cannot be directly compared, the number
of arbitrations requested and the regular reoccurrence of the same access issues lead the
Government to conclude that the process is not working as intended and is prone to
excessive delay. Telstra is the main beneficiary of this delay and disputation, as it retards
the rollout of competing services. Investment in new infrastructure is similarly inhibited
by regulatory uncertainty. More than a decade after the introduction of competition,
Telstra remains dominant in almost all sectors of the telecommunications market, and it
continues to be one of the most profitable operators in the world. The use of regulatory
and legal processes appears to be one way in which Telstra maintains this dominance.
Contributing factors include that:
· the ACCC cannot set binding terms of access up-front when a service is declared, but
has to wait until an access dispute is referred to it for arbitration;
· arbitration proceedings can take a long time, sometimes years;
· when arbitrating an access dispute, the ACCC cannot determine terms of access
collectively for all access providers and access seekers--its arbitrations are only
binding on the parties to the arbitration; and
· there are multiple steps at which parties can challenge procedural matters and seek
judicial review.
The undertaking process is also seen as ineffective by a range of stakeholders. In total, 36
undertakings have been submitted. Five of these have been accepted by the ACCC (three
relating to pay TV services); six were withdrawn prior to the ACCC making a final
decision. Five of the decisions to reject an undertaking were appealed in the Tribunal, all
of them were unsuccessful.
Voluntary access undertakings were intended to provide an opportunity for increased
certainty for access providers, as well as the flexibility to develop their own terms of
access for approval by the ACCC. However, certain stakeholders have argued that,
instead of the undertaking provisions being used to provide certainty, they have been used
to create delays in regulatory processes, and have resulted in a situation where `serial'
undertakings are lodged (i.e. repeated undertakings with only minor changes made from
previous submissions, even when it is clear that the terms proposed will not be acceptable
to the ACCC; this simply delays the process of reaching a proper outcome).
Every undertaking must be considered on its merits by the ACCC. To date the ACCC has
rejected most of the undertakings that have been submitted to it on the basis that it was
not satisfied that the undertakings met the relevant legislative criteria. To date, no
decision to reject an undertaking has been successfully appealed in the Australian
Competition Tribunal.
The deficiencies of the current regime have hindered competitive access, and this has the
effect of deterring innovation and investment, thus having a negative impact on the range
and price of telecommunications products offered to Australian consumers.
2. Objectives
The Government's objective is to facilitate the delivery of affordable, high quality,
innovative and reliable telecommunications services in a sustainable competitive market.
Outcomes for end-users of telecommunications services will be significantly improved
through a regulatory process for access to telecommunications services that operates in a
49
timely and efficient manner and provides a reasonable degree of regulatory certainty for
access providers and access seekers.
3. Options
The two main options for reform available to the Government are:
A. retain the current regime, but make it work more effectively; or
B. replace the negotiate-arbitrate model with a streamlined process.
Option A--Retain the current Part XIC processes--including the negotiate-arbitrate
model--but make them work more effectively
Under this approach the current regulatory processes, including the negotiate-arbitrate
model, would be retained. However, changes would be made to reduce delays and
opportunities for gaming and to encourage the effective use of undertakings. These
changes would include:
· limiting opportunities to challenge procedural matters by exempting certain decisions
(e.g. interim access determinations) made by the ACCC from judicial review by the
Federal Court;
· enabling the ACCC to request a party who lodges an undertaking to vary it without
requiring the party to lodge a fresh undertaking and effectively `restart the clock' on
an already lengthy process;
· placing a time limit on the ACCC for finalising an arbitration; and
· allowing the ACCC to specify pricing methodologies for declared services which
would be used to determine prices over successive regulatory proceedings or
successive undertakings in order to create greater regulatory certainty.
Option B--Replace the Part XIC negotiate-arbitrate model with a streamlined
regulatory process
This approach would replace the negotiate-arbitrate model with a streamlined regulatory
process and provide the ACCC with the ability to make up-front determinations on price
and non-price terms of access. Under the new process:
· the ACCC would determine up-front price and non-price terms and conditions (the
access determination) to apply, in general, for a three to five year period;
· the access determination would apply to all access providers and access seekers of
the declared service (although the access determination could specify different terms
of access for different access providers and/or access seekers);
· access providers and access seekers could agree to different terms of access from
those in the access determination;
· the ACCC would have the power to determine fixed principles to apply for a stated
period which may extend beyond the duration of the access determination (e.g. how
depreciation is treated);
· the ACCC would have the power to make binding rules of conduct for the supply of
declared services which would apply either in addition to, or as a variation of, an
access determination. Such rules could address particular competition issues, such
as inadequate exchange access processes or service migration processes;
50
· there would no longer be ordinary exemptions from access obligations and no
ordinary access undertakings;
· the ACCC would have the power to request a party that lodges a special access
undertaking to vary the undertaking without having to lodge a new undertaking; and
· merits review would not be available for decisions under Part XIC.
Suitable transition arrangements would be developed for existing declared services.
4. Impact assessment
This section discusses the costs and benefits of the two alternative options put forward in
terms of the impact on business, the Government and consumers. It is not possible to
precisely quantify the costs and benefits for any party, though both options would, to
varying degrees, reduce the amount of resources expended in regulatory processes and
litigation.
Option A--Retain the current Part XIC processes--including the negotiate-arbitrate
model--but make them work more effectively
All the proposed reforms under this option would operate to simplify the access regime,
and in theory this would allow disputes to be settled more quickly and leave less
opportunity for decisions to be appealed. Access seekers would benefit most, and they
would have greater confidence in achieving speedy outcomes. However, many avenues
would remain open for access providers to `game' the system to their advantage, and the
ACCC would probably still have to deal with a significant number of disputes.
Eliminating the right to apply for judicial review of interim access determinations could
reduce uncertainty and delay.
In the absence of more sweeping changes to the negotiate-arbitrate model, imposing a
time limit on decision-making by the ACCC is one way to encourage all participants in a
dispute to avoid time-wasting. This approach is taken by the British regulator, Ofcom,
which has four months to resolve disputes.
At present the ACCC is obliged to re-examine all matters involved in making an
arbitration determination or undertaking when it expires, even issues that are well-
established (such as network costs, depreciation or a regulatory asset base). Allowing the
ACCC to specify certain matters for a longer period than the duration of the arbitration
determination or undertaking concerned would save having to undertake such re-
examination and would provide longer-term investment certainty for all parties. It could
also prevent parties from re-opening long-standing arguments over pricing in an attempt
to slow down proceedings.
As noted earlier, almost every undertaking submitted to the ACCC has been rejected - in
several cases (notably the ULLS), the same basic undertaking has been knocked back
multiple times in slightly altered form. By proposing more streamlined regulatory
processes, access providers may be encouraged to avoid going to arbitration and instead
submit better undertakings up-front. The fewer the avenues there are for delay, the more
likely this is to happen.
While all of these proposed changes should simplify regulatory processes and have the
potential to produce financial savings for the ACCC and industry, the primary benefit
would be to increase certainty and lower obstacles to achieving competitive access to key
bottleneck services. However, this option would still be vulnerable to regulatory gaming
51
by parties that see an advantage in refusing to negotiate terms and using the arbitration
process to protect their commercial interests.
Benefits:
· Should expedite decisions and dispute resolution, which will lower costs and increase
certainty in the market.
· May encourage access providers to lodge undertakings that are likely to meet statutory
criteria and be accepted by the ACCC.
· Broadly maintains the status quo, reducing disruptive costs.
Costs:
· Does not address the central criticism that the negotiate-arbitrate model can continue
to be used to delay regulatory decisions.
· Even under a modified system, the industry may well suffer from a surfeit of long,
expensive regulatory actions and administrative appeals, if providers see some
benefit to engaging in them.
· Applicants will continue to be able to use the undertaking process to force the
regulator to re-examine the same issues multiple times.
While this option would have relatively little cost and result in moderate benefits to
industry, it would not resolve most of the issues identified as requiring attention.
Option B--Replace the Part XIC negotiate-arbitrate model with a streamlined
regulatory process
This option would much more directly address the deficiencies of the current regime and
would greatly reduce disputation regarding access. The costs to the industry would be
minimal, as the ACCC would be able to set price and non-price terms for a range of
services up-front without need for lengthy and repeated adjudications. Operators could
still commercially negotiate their own terms of access, but there would be an up-front
access determination to fall back on.
Evidence provided by access seekers (including Optus, Primus and the Competitive
Carriers' Coalition) suggests that access disputes can cost access seekers hundreds of
thousands of dollars per dispute, while Optus estimates that the overall cost to industry of
regulatory proceedings over the last 12 years is at least $200 million.
Merits review, which currently applies to a limited number of Part XIC decisions (but not
service declarations and access determinations), would be abolished under this option.
Introducing merits review for access determinations or maintaining it for other Part XIC
decisions would substantially negate many of the benefits of this option as it would defeat
the objectives of timely outcomes and greater regulatory certainty. However access to
judicial review will continue to be available.
Under the proposed changes, an access determination process would proceed in the
following manner:
1. The ACCC would declare a service, and set standard price and non-price terms of
access for the declared service in an access determination.
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2. An access provider would be obliged to offer the declared service to any access seeker
on the terms set down in the access determination. The two parties could still
negotiate different terms.
3. The ACCC would be able to specify in the access determination fixed principles for
treating certain on-going matters such as the depreciation methodology or the
regulatory asset base, which could be set for a longer duration than the duration of the
access determination.
4. The ACCC would not be able to issue ordinary exemptions from the access
obligations as it can now; however anticipatory exemptions would still be available.
Benefits:
· A streamlined up-front terms-setting approach would provide greater regulatory
certainty for access providers and access seekers.
· It would eliminate unreasonable delays which frustrate regulatory outcomes.
· It would also reduce disputation about access matters which is costly both for
telecommunications providers and the ACCC.
· Fewer disputes and greater certainty should enhance competitiveness, which benefits
consumers.
Costs:
· The industry would need to adjust to having a regulator with expanded powers to
impose price and non-price terms on operators up-front.
· The regulator may have to devote more resources to market analysis, to determine
appropriate price and non-price terms and conditions (although the expected
reduction in dispute-handling should offset this).
5 Consultation
These two options for reform of Part XIC were included in the discussion paper `National
Broadband Network: Regulatory Reform for 21st Century Broadband'. 140 submissions
were received during the consultation, many from industry stakeholders.
Of the submissions which commented on the operation of Part XIC, the vast majority
supported reforming the access regime (access seekers were particularly strong on this
point), and there was broad agreement with the direction laid out in Option B. Most
submissions endorsed the general use of ex ante determination of price and non-price
terms, the elimination of the negotiate-arbitrate model and the curtailment of appeals
processes.
While Telstra supported some of the measures put forward (such as greater streamlining
of regulation) it did not endorse either option. Foxtel and News Ltd opposed Option B.
The ACCC submission suggested combining the two options and applying different
approaches to different market segments, depending on the degree of vertical integration
present. Some declared services would remain under the negotiate-arbitrate model, while
others would be regulated in accordance with Option B. However, this would
substantially increase the complexity of access regulation without a clear benefit.
53
Detailed summary of submissions
Submitters were overwhelmingly of the opinion that the negotiate-arbitrate model has not
worked; however opinions varied about whether and to what extent it should have a
continuing role. Unwired and the Seven Network considered that the streamlined process
for setting access terms should only apply to vertically integrated providers. Some parties
said the ACCC should have the option to choose between a streamlined, up-front price-
setting process and the negotiate-arbitrate model. There appeared to be a consensus that
any terms of access not determined under the streamlined process should be left to
negotiate-arbitrate.
Some submitters, including Hutchison and Macquarie, suggested time limits should apply
to the process and there was also support for giving the ACCC flexibility to specify terms
of access for a long duration in order to afford greater certainty (for instance TransACT).
A number of parties, including the ACCC, Telstra and Optus, argued that the value of the
regulatory asset base be determined up-front and apply to future relevant regulatory
decisions, without the need for constant revaluation (perhaps, subject to standard
variations for capital and depreciation).
AAPT objected to the ACCC being given the ability to determine different terms of
access for different access providers and/or access seekers, arguing that the same terms of
access should have to apply across the board.
All submitters who addressed the issue were in favour of letting access providers and
access seekers agree different terms of access than those determined by the ACCC.
However, AAPT and Macquarie said that any alternative terms agreed by the parties
should require the ACCC's approval, or should be subject to the ACCC's veto
(respectively). In addition, AAPT said that the access price agreed by the parties should
not be allowed to differ from the access price determined by the ACCC by more than 3%
to 5% (up or down) to prevent big volume discounts being given to big players only. The
Competitive Carriers' Coalition (CCC) said that the parties should only be allowed to
agree a lower access price than that determined by the ACCC if the lower price reflected
identifiable and quantifiable economies for the access provider.
In general, submitters did not propose significant changes to the process for declaring
services. Vodafone, however, submitted that only services that are supplied by operators
with significant market power should be susceptible to declaration.
Optus, Macquarie and AAPT wished to see exemptions abolished, believing that they
undermine declarations and create uncertainty.
There was also significant support for abolishing undertakings; this was advocated by
Optus, Macquarie, Vodafone, AAPT and the CCC. Telstra expressly supported the
proposal to enable the ACCC to request a party who lodged an undertaking to vary it
without being required to lodge a fresh undertaking and re-start the process. Telstra also
argued that undertakings be deemed acceptable where they are consistent with legislated
pricing principles.
Optus, Macquarie, Primus, TransACT and the CCC called for the abolition of merits
review of the ACCC's decisions. The only major telecommunications providers who
expressly supported merits review were Vodafone and Hutchison.
Telstra advocated more limited changes to Part XIC than other telecommunications
providers, the main elements being: enable the ACCC to deal with access disputes
54
collectively; specify pricing principles in legislation which the ACCC will be bound to
apply; and appoint an independent expert to review the ACCC's and Telstra's cost
models.
6. Recommendation
Having examined the available evidence, the Government agrees with the premise put
forward by many stakeholders that the current telecommunications access regime is
flawed. Given the sector's increasingly important role in Australia's economy, this
regulatory failure needs to be addressed.
Based on feedback received from its public consultation process, the Government is
persuaded that any reform undertaken must include the removal of the negotiate-arbitrate
model from the regime, in favour of more direct ex ante price-setting by the regulator.
This will lead to greater certainty, less disputation and more timely and efficient
outcomes. It is also more broadly consistent with the access regimes that operate in other
key infrastructure industries in Australia, such as gas and electricity, and the role of the
telecommunications regulator in other international jurisdictions. Option B's package of
reforms is therefore the recommended alternative, as on balance the benefits to be gained
outweigh the potential costs.
7. Implementation & review of the preferred option
The Government will introduce legislation to reform Part XIC of the Competition and
Consumer Act 2010 in accordance with the principles outlined under Option B. This will
include transitional arrangements for existing declared services.
The ACCC will be asked to analyse the current market and consult widely with industry
on the optimum terms and conditions to apply to each declared service, in advance of any
formal determinations being made. Provisions for transitioning current contracts to the
new arrangements will be examined, with the most likely approach being that transitional
arrangements would provide for determinations to be made on access disputes where the
determinations would have retrospective application or would apply to the date of an
access determination for the relevant service under the new framework.
A review will be conducted three years after implementation to assess how the new
system is working.
55
REGULATION IMPACT STATEMENT
REFORM OF PART XIB OF THE COMPETITON AND CONSUMER ACT 2010
(COMPETITION ARRANGEMENTS)
1. Issues which give rise to the need for action
Background
Part XIB of the Competition and Consumer Act 2010 (the Act) sets out a
telecommunications-specific anti-competitive conduct regime (and certain information
gathering powers). Part XIB prohibits a service provider with a substantial degree of
market power from engaging in conduct which has either the effect or purpose of
substantially lessening competition.
Telecommunications carriers and carriage service providers are prohibited from engaging
in anti-competitive conduct, as defined by section 151AJ of the Act. This is known as the
competition rule (section 151AK). If the ACCC believes a service provider is engaging in
anti-competitive conduct in a telecommunications market it may issue a competition
notice under Part XIB.
Proceedings for enforcing the competition rule, other than proceedings for injunctive
relief (that can be instituted at any time), cannot be instituted unless the alleged conduct is
of a kind dealt with in a Part A competition notice that was in force at the time the alleged
conduct occurred. Before the ACCC issues a Part A competition notice, it must give the
provider concerned a consultation notice which describes the alleged anti-competitive
conduct in summary form, and must give the provider an opportunity to make
submissions (s151AKA(9), (10)).
As an alternative to issuing a Part A competition notice, the ACCC can issue a Part B
competition notice. A Part B competition notice sets out the particulars of the
contravention, which are prima facie evidence of the matters in any proceedings under or
arising out of alleged contraventions of the competition rule. There is no requirement to
issue a consultation notice before issuing a Part B competition notice. (However, the
ACCC still has a duty under the general law to afford the provider concerned procedural
fairness before issuing a Part B competition notice.)
There are some important differences between Part A and Part B competition notices. A
Part A notice allows the ACCC to obtain pecuniary penalties under s151BY of the Act
and also allows for the recovery of damages under s151CC. In contrast, the issuing of a
Part B notice does not allow the recovery of pecuniary penalties or damages.
The recipient of a competition notice can alter its behaviour to take account of the
competition notice or it may choose not to change its behaviour. A decision to disregard a
competition notice exposes a party to very significant potential penalties, but those
penalties would only apply if a court found that the competition rule had been breached.
Importantly, as a competition notice does not of itself direct a party to take action, there
are no penalties for failing to comply with a competition notice.
56
Thus, a party who believes that a court would not find it in breach of the competition rule
might decide to continue its behaviour unchanged. In practice, both scenarios have
occurred, i.e. in some cases the recipient of a competition notice has altered its behaviour,
while in one case the party continued its conduct unchanged.
The problem
Part A Competition Notice
The Part A competition notice process has been criticised on the grounds that the
consultation process is open to being manipulated. The statutory requirement to consult
with the intended recipient of a Part A competition notice means the ACCC must take a
number of steps prior to issuing this form of competition notice. Specifically, the ACCC
must ensure it gives the intended recipient of a competition notice sufficient time to make
a submission and must then take that submission into account prior to issuing a
competition notice.
A competition notice can be subject to legal challenge on the grounds that the prior
consultation notice did not afford sufficient procedural fairness. The potential and
incentive exist for the intended recipient of a notice to draw out any consultation to avoid
or delay the issue of a Part A competition notice. Such a delay can lead to irreversible
damage to competitors that may be affected by any alleged anti-competitive conduct.
For example, the ACCC issued a consultation notice to Telstra in December 2005 with
respect to increases in the price of the wholesale line rental service. In April 2006 the
ACCC issued a Part A competition notice against Telstra because it had reason to believe
that Telstra had engaged, and was engaging, in at least one instance of anti-competitive
conduct relating to Telstra's pricing of its wholesale local services products.
Telstra challenged the competition notice, arguing that the issues raised by the ACCC in
the competition notice differed from the issues raised in the consultation notice and that,
as a result, Telstra had not been provided with procedural fairness. The Federal Court
agreed with Telstra and the competition notice was declared invalid.
Application of Part XIB to content service providers
Part XIB needs to be responsive to technological changes that are occurring in the
industry. At present, it is not explicit that Part XIB applies to `content services' supplied
by carriers and carriage service providers. Content services are defined in section 15 of
the Tel Act and in section 152AC of the Act (within Part XIC) and include a broadcasting
service, online information service, online entertainment service, any other online service,
or any other service as determined by the Minister.
Advances in technology have increased the capacity for carriers and carriage service
providers to provide content services. Clarifying the scope of Part XIB is beneficial for all
parties, as it increases regulatory certainty and reduces the risk of protracted legal disputes
on this issue.
The offering of bundled packages (often involving the supply of voice, internet and
television) is now commonplace. Bundled packages involving the supply of content
57
services by carriers and carriage service providers may have anti-competitive
consequences if a provider's market power can be leveraged to gain advantage in the
market for another service. For example, if a vertically integrated carrier acquires
premium content on an exclusive basis this could be a source of significant market power
which could be used to stifle investment in new telecommunications infrastructure. In
these instances, if the ACCC believes the relevant conduct breaches the competition rule
it must be able to take enforcement action without doubts over the application of Part XIB
to content services.
2. Objectives
Streamlining the competition notice process under Part XIB
The first objective is to develop a more streamlined process for competition notices so
that the ACCC can move quickly to issue a competition notice as soon as it has reason to
believe anti-competitive conduct is occurring in the telecommunications industry.
Ensuring Part XIB applies to content services
The second objective is to ensure that the ACCC will be in a position to take swift
enforcement action in relation to instances of alleged anti-competitive conduct involving
content services.
3. Options (regulatory and/or non-regulatory) that may constitute viable means
for achieving the desired objectives
Streamlining the competition notice process under Part XIB
There were a number of regulatory options considered when examining how to streamline
regulatory processes under Part XIB. These reform options include:
A removing consultation notice requirements for Part A Competition Notices;
B requiring the ACCC to provide guidance when issuing competition notices;
C enabling the ACCC to issue binding rules of conduct when issuing a competition
notice; and
D enabling the ACCC to issue binding rules of conduct when it suspects anti-
competitive conduct.
Ensuring Part XIB applies to content services
E clarifying the scope of Part XIB.
Option A - Removing consultation notice requirement
This option involves removing any requirement for the ACCC to undertake consultation
before issuing a Part A competition notice. By removing the requirement for the ACCC to
undertake consultation before issuing a Part A competition notice, the party alleged to
have taken part in anti-competitive conduct is denied the ability to delay the ACCC's
enforcement activities on procedural grounds. The focus for both parties will therefore be
58
on resolving the alleged illegal conduct, rather than on litigation aimed at challenging the
processes followed by the ACCC. If the ACCC commences court proceedings to enforce
a Part A competition notice, the ACCC would still have to prove to the court that the
competition rule had been breached by the alleged offender.
In addition to removing the specific requirement in s151AKA to issue a consultation
notice, it is also necessary to remove the requirement imposed on the ACCC under the
common law to provide procedural fairness when issuing a competition notice. Otherwise,
the policy objective of more timely outcomes would be frustrated and the risk of a
successful challenge to the ACCC's legal processes would remain. It may be noted that
procedural fairness arrangements have previously been removed under s152CPA(3) of the
telecommunications access regime. The purpose of the amendment to s152CPA(3) was to
allow the ACCC to issue interim determinations quickly so as to avoid competitive
damage being incurred as a result of any delays on procedural fairness grounds.
Removing the obligation to issue consultation notices would not be inconsistent with
procedural fairness considerations more generally, because:
- the ACCC will issue a competition notice that specifies the details of the alleged anti-
competitive conduct;
- the ACCC would retain the power to revoke the competition notice if parties can
convince the ACCC that the notice was issued in error; and
- before penalties are applied, the ACCC has to prove to the court that the anti-
competitive conduct has occurred.
Option B - Requiring the ACCC to provide guidance when issuing a competition notice
This option, which could be implemented separately or in conjunction with Option A,
requires the ACCC when issuing a competition notice to provide guidance to the recipient
on how to rectify the anti-competitive conduct and have the competition notice removed.
Option C - Enabling the ACCC to issue binding rules of conduct when issuing a
competition notice
This option involves giving the ACCC the power to impose binding rules of conduct
when issuing a competition notice. If the ACCC believed that anti-competitive conduct
was taking place, the ACCC could be empowered to issue binding rules of conduct that
would compel the recipient to change its conduct. The binding rules of conduct would be
forward-looking and would be targeted at preventing future instances of particular anti-
competitive conduct. In practice, the ACCC would be able to directly regulate the
behaviour of a party or parties, including behaviour relating to the supply of wholesale
services.
A competition notice differs from binding rules of conduct, because a competition notice
does not direct any party to undertake or refrain from any course of action. It must be
enforced by the ACCC in court before the alleged offender can be made to pay damages
or penalties.
Binding rules of conduct would provide the ACCC with the ability to clearly specify the
conduct that must be followed by a party that has been issued a competition notice. This
59
mechanism would provide for timely outcomes and greater certainty for the parties
involved in a dispute.
Option D - Enabling the ACCC to issue binding rules of conduct when it suspects anti-
competitive conduct
This option involves abolishing the competition notice regime and empowering the
ACCC to issue binding rules of conduct where it considers a party is engaging in
anti-competitive conduct. Unlike Option C, the ACCC would not be required to issue a
competition notice before issuing binding rules of conduct. Therefore, the ACCC could
quickly issue binding rules of conduct to address conduct that it believes to be detrimental
to competition. Option D would also remove the penalties which currently apply to
breaches of the competition rule.
Ensuring Part XIB applies to content services
Option E - Clarifying the scope of Part XIB
This option involves ensuring that the Part XIB competition notice regime unequivocally
applies to content services delivered by carriers and carriage service providers.
4. Impact assessment
This section discusses the costs and benefits of the options put forward in terms of the
impact on business, the Government and consumers. It is not possible to precisely
quantify the costs and benefits for any party, though all of the options would, to varying
degrees, reduce any losses that might arise from anti-competitive behaviour.
The proposed changes to Part XIB will affect the ACCC and potentially any carrier or
carriage service provider that is providing telecommunications services. As the proposed
reforms aim to achieve greater efficiency under Part XIB, the benefits of a less
cumbersome regulatory framework will flow through to consumers in the form of
investment leading to better quality services. This is because a market that operates free of
anti-competitive practices will achieve more efficient outcomes for the end-users of
telecommunications services. Anti-competitive conduct damages the competitive process
by potentially eliminating or damaging smaller competitive players. Such damage to the
competitive environment will reduce the benefits to consumers that stem from innovation
and competitive pricing.
The options discussed below will negatively impact on any access provider that may look
to engage in anti-competitive conduct in relation to the supply of telecommunication
services. It is believed that this outcome will be of benefit to consumers, because anti-
competitive conduct detracts from the benefits that are attained through well-functioning
and competitive markets.
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Option A - Removing consultation notice requirements for Part A Competition Notices
Benefits:
· The operation of a more streamlined competition notice process will allow the ACCC
to commence enforcement action under Part XIB in a more timely manner.
· Access seekers and access providers will benefit from the removal of the ACCC's
obligation to issue a consultation notice before it can issue a competition notice. This
is because the swift resolution of these disputes will allow for the affected parties to
have greater regulatory certainty and this allows for more effective business planning.
· In the past, the ACCC has stated that Part XIB regulatory processes have taken over
18 months to resolve. For access seekers that are waiting for the outcome of such
processes, this uncertainty can be very costly as some instances of competitive harm
are irreparable. Therefore, removing such uncertainty can provide some significant
benefits for the parties waiting for the dispute to be resolved.
Costs:
· The current consultation process allows for the recipient of a consultation notice to
alter its conduct, potentially removing the need for a competition notice to be issued.
When the consultation notice regime works effectively, competition notices do not
need to be issued, as the party involved in the alleged illegal conduct can reach an
agreement with the ACCC to discontinue any further action.
· Currently a party that had been issued with a consultation notice could make a
submission to the ACCC to explain why a competition notice should not be issued.
This process can alleviate the need for further action to be taken, if the recipient of the
notice can show its conduct is justifiable. Removal of this consultation process may
negatively impact on the recipients of competition notices, as they will no longer be
afforded the opportunity to justify their conduct before being issued with a
competition notice.
Option B - Requiring the ACCC to provide guidance when issuing a competition notice
Benefits:
· If the recipient of a competition notice uses the guidance provided by the ACCC to
alter its conduct, then ACCC resources will be used more efficiently and the anti-
competitive conduct can be quickly brought to an end.
Costs:
· If the ACCC was to provide guidance when issuing a competition notice, this could
compromise the ACCC's enforcement role, either on that occasion or in future
instances, i.e. where similar circumstances apply and the conduct remains anti-
competitive, but had been modified to avoid the description in the ACCC guidance.
61
· The provision of guidance will also be a resource intensive process for the ACCC and
the costs imposed on the ACCC may not be justifiable if the guidance provided does
not result in the recipient of the guidance altering its conduct.
Option C - Enabling the ACCC to issue binding rules of conduct when issuing a
competition notice
Benefits:
· This type of regulatory mechanism could facilitate timely intervention by the ACCC
to prevent or mitigate competitive detriment flowing from the anti-competitive
conduct. It would provide for a more effective operation of the competition notice
regime.
· This could also deter future instances of anti-competitive conduct.
Costs:
· This option would in effect allow the ACCC to regulate the supply of wholesale
services where competition issues have arisen, regardless of whether these services
have been declared under the telecommunications access regime in Part XIC of the
Act. The ACCC would be able to instruct the relevant parties to engage in a specific
course of conduct. Regulation of non-declared services in this manner may be
considered to be over-reaching and could harm investor confidence.
Option D - Enabling the ACCC to issue binding rules of conduct when it suspects anti-
competitive conduct
Benefits:
· This would provide for a much simpler regime without competition
notice/consultation notice arrangements which have been criticised for taking too long
and being too cumbersome.
· This would allow the ACCC to provide timely, practical responses to potential
competition issues without having to prove that the competition rule has been
breached. There should also be more certainty on how matters could be resolved.
Costs:
· As in Option C, this option would also allow the ACCC to in effect regulate the
supply of wholesale services, regardless of whether these services have been declared
under the telecommunications access regime in Part XIC of the Act. Regulation of
non-declared services in this manner may be considered to be over-reaching and could
harm investor confidence.
· If the ACCC was able to impose binding rules of conduct on the basis of a reasonable
belief that the conduct concerned is anti-competitive conduct, without having to
establish in court that the conduct actually is anti-competitive conduct, the result
would be that binding rules of conduct could sometimes prevent conduct which
62
constitutes legitimate competition and which is not, in fact, anti-competitive. This
would be detrimental to competition and efficiency. It would also be unfair to the
provider concerned, who would be prevented from being able to pursue its legitimate
commercial interests.
Option E - Clarifying the scope of Part XIB
Benefits:
· Amending Part XIB in order to confirm it applies to carriers and carriage service
providers providing content services would add certainty to the scope of the anti-
competitive conduct regime.
Costs:
· As this provision would give more certainty by clarifying the existing law, no costs
have been identified. It is not believed that any parties are benefiting or would seek to
benefit from the lack of clarity that currently exists. This amendment is being
proposed simply to clarify the scope of Part XIB.
5. Consultation
Suggested reforms for Part XIB have been made by a variety of stakeholders. Some of the
suggestions that were provided by stakeholders have been used to develop the reforms to
Part XIB. For example, the ACCC stated that "Removing the statutory requirement to
undertake consultation prior to issuance of a competition notice would simplify the
administrative obligations on the ACCC and could enable it to respond more quickly to
anti-competitive conduct."101
Optus has also expressed concern about the drawn out nature of the consultation process
that currently operates under Part XIB. Specifically, Optus has argued that "The time
required for the ACCC to receive submission(s) from Telstra in response to such notices
and consider them allows Telstra many further months in which to continue engaging in
anti-competitive conduct, thereby damaging competition in the market."102
Telstra also supported the removal of consultation notices.103 Telstra also suggested in its
submission that it believes the ACCC should be required to give guidance on rectifying
behaviour and be required to proceed with legal action on a timely basis.104 Telstra does
not support giving the ACCC power to make binding rules of conduct. It believes this
would slow down the issuing and resolution of Competition Notices because of need for
due process.105
101
Australian Competition and Consumer Commission, `Submission to the Department of Broadband,
Communications and the Digital Economy' June 2009, p.70
102
Optus Submission, `Regulatory Reform for the 21st Century' June 2009, p.50
103
Telstra Corporation, "Submission to the National Broadband Network: Regulatory Reform for 21st
Century Broadband Discussion Paper" June 2009, p.3
104
Ibid.
105
Ibib. p. 3 and p.10
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AAPT supported the removal of the consultation notices and supported the introduction of
ACCC powers relating to binding rules of conduct when it is issuing a competition
notice.106 The Competitive Carriers Coalition also believes that the consultation notice
requirement should be revoked and the ACCC should be given the ability to impose
binding rules of conduct when issuing a competition notice.107
6. Recommendation
The requirement to issue a consultation notice has resulted in legal challenges and delays
that have frustrated the efficacy of the Part A competition notice process. The
consultation notice was intended to provide the recipient with certainty in relation to the
allegation of anti-competitive conduct. However, the consultation phase has arguably
provided the recipient with the ability to delay the issue of a competition notice, whilst
trying to maximise the advantage accrued as a result of the relevant alleged anti-
competitive conduct.
Such delaying tactics are contrary to the policy intention of Part XIB, which is aimed at
achieving the timely resolution of disputes regarding allegations of anti-competitive
conduct. It is therefore recommended that Option A be implemented.
It is also recommended that Option E be implemented. Clarifying the scope of Part XIB to
include content services will be beneficial for all relevant parties, as it increases
regulatory certainty and reduces the risk of protracted legal disputes on this issue.
It is recommended that Option B not be implemented, as the costs of this reform are likely
to outweigh the benefits. The resource costs imposed on the ACCC are likely to be
significant and it is unclear whether the guidance provided by the ACCC will lead to the
swift resolution of a dispute. As discussed earlier, it is also believed that Option B could
compromise the ACCC's enforcement role.
The proposed reforms to Part XIB are being made in conjunction with reforms to Part
XIC. One of the proposed reforms for Part XIC will provide the ACCC with the power to
issue binding rules of conduct to address competition issues relating to the supply of
declared services under that Part. It is expected that the ACCC will be able to use that
power to effectively resolve some competition issues that may otherwise require the
ACCC having to issue a competition notice under Part XIB. Therefore, including a power
to issue binding rules of conduct within Part XIB may amount to the creation of
superfluous regulation.
It is recommended that Options C and D are not implemented. Binding rules of conduct
are best introduced into Part XIC, because this would ensure binding rules of conduct are
only issued in relation to declared services. This outcome is preferable, because it ensures
that any binding rules of conduct that may be issued by the ACCC are clearly linked to
benefiting the long-term interests of end users.
106
AAPT, "Submission by AAPT Limited to the Department of Broadband, Communications and the
Digital Economy in response to National Broadband Network: Regulatory Reform for 21st Century
Broadband", April 2009, pp. 16-18
107
Competitive Carriers Coalition, "Response to the Government Discussion Paper:
National Broadband Network: Regulatory Reform for 21st Century Broadband" June 2009, p. 22
64
Furthermore, the removal of the consultation notice requirement (as proposed by Option
A) will lessen the need for binding rules of conduct to be used under Part XIB. This is
because it is believed that removal of the consultation notice requirement will lead to the
more timely resolution of disputes under Part XIB.
7. Implementation and review of the preferred option
The implementation of Option A and Option E will require amendments to the Act.
Transitional arrangements will not be required. If at the time in which the proposed
amendments become law the ACCC has issued a consultation notice, it is intended that
the consultation notice would cease to have effect and the ACCC will be able to utilise the
streamlined process proposed in Option A.
REGULATION IMPACT STATEMENT
TELECOMMUNICATIONS CONSUMER SAFEGUARDS
On 20 June 2010, the Australian Government announced that it would progress public
policy reforms to support the transition to the National Broadband Network (NBN). The
reforms include establishing a new entity, USO Co, which will commence operations in
July 2012 and will, over time, become the entity with the regulated responsibility for
delivering the government's public policy objectives in the telecommunications sector.
This Regulation Impact Statement focuses on arrangements to improve the existing
consumer safeguard framework in the transition to the NBN and establishment and
operation of USO Co.
1. Issues which give rise to the need for action
Changing customer needs
The Universal Service Obligation was set out in the Telecommunications Act 1975 as a
requirement on the then Telecom:
`to perform its functions in such a manner as will best meet the social, industrial and
commercial needs of the Australian people for telecommunications services and shall, as
far as it is, in its opinion, reasonably practical to do so, to make its telecommunications
services available throughout Australia for all people who reasonably require those
services...[and] to have regard to the special needs for telecommunications services of
Australian people who live or work outside the cities.'
The concept has its genesis in the development of the telephone network to provide a
ubiquitous service throughout the nation. Prior to the establishment of competition in the
1991 legislation, Telecom and its predecessors financed the development of the network
in rural and remote areas. With the advent of competition it was believed that this policy
might become unsustainable as competition in urban areas made the incumbent telephone
65
company uncompetitive compared to providers that did not need to incur the expense of
extending the network into remote areas. It was assumed that extending the telephone
network to remote areas meant supplying services in these areas at a commercial loss.
To deal with this perceived problem the Telecommunications Act 1991: (a) enshrined the
obligation on the incumbent, Telstra, to maintain services across Australia; and (b)
provided for the incumbent, Telstra, to be compensated. Thus the concept of the USO and
the supply of a standard telephone service at a loss was introduced, at least as far as
funding was concerned. The Telecommunications Act 1991 also provided that all carriers
contribute to the compensation paid to the USO provider.
Currently the USO arrangements have the objective of making access to basic voice
telephony services and payphones available across the nation on a reasonable and
equitable basis (s.8A of the Telecommunications (Consumer Protection and Service
Standards) Act 1999.
The USO is implemented by a legislative requirement that Telstra `take all reasonable
steps to fulfil' the obligation, and to the extent necessary, supply services to people on
request (ss.12C & 9(2) of the Telecommunications (Consumer Protection and Service
Standards) Act 1999).
In addition to the USO, where a provider offers a basic telephone service, the Customer
Service Guarantee (CSG) provides standards for the time to connect new services, repair
faults and keep appointments. Where the standard is not met, the provider must pay the
customer financial compensation. The CSG does allow providers to supply a service
without the CSG applying in some circumstances and there are exemptions from the CSG
where providers offer temporary services or are unable to meet repair times due to
circumstances beyond their control.
The Australian Communications and Media Authority (ACMA) has found, in its various
consumer reports, that over recent years overall compliance with the CSG has been
falling, particularly repair times for payphones in remote areas108.
The retail price controls imposed on Telstra under Part 9 of the Telecommunications
(Consumer Protection and Service Standards) Act 1999 require Telstra to offer a basic
voice telephony service at the same price in non-metropolitan areas as it offers in
metropolitan areas. Due to its USO obligation, this raises the issues as to whether Telstra
provided services in certain areas of Australia at prices below the cost of provision.
While traditional fixed-line voice services remain important, people can now purchase a
range of standard mobile and satellite services across the nation from commercial
suppliers operating outside the USO regime. These services are available wherever a
person resides or works. They generally provide voice telephony services and often
broadband services. The price and charges for some of these services may be higher than
the charges applying to the standard voice service supplied by Telstra. However, given the
take-up of mobile services it is clear that they are generally affordable.
108
ACMA, Communications Report 2007-08, p. 102 and Telecommunications Performance Data -
September 2008 quarter
66
Further, in many areas Voice Over the Internet Protocol (VOIP) services - voice
telephony supplied using a broadband or bitstream connection - are available. Excluding
the charges for the broadband connection, these services generally provide substantially
cheaper voice telephony than the standard voice telephony service provided by Telstra
under the USO.
The cost of the USO
The arrangements providing for Telstra to be compensated for its USO obligation involve
a levy imposed on all carriers that is proportional to their annual revenue. The total levy is
paid as a subsidy to Telstra. No arrangements are in place for the benefits accruing to
Telstra from being the USO provider to be taken into account.
The levy arrangements do, to a certain extent, distort the market, by leading to inefficient
prices. The levy arrangements increase the cost to providers in supplying services, which
is likely to be passed on to customers in higher prices. Given the sensitivity of
telecommunications demand to price changes and the importance of telecommunications
as an input to economic and business activity, the economic efficiency cost of the levy is
likely to be significant. In addition, to some extent the levy acts as a barrier to market
entry. Although there are provisions for other USO providers to date, no provider has
been approved by ACMA as a competing universal service provider. There are no
suppliers, other than Telstra, of fixed cable or fixed wireless terrestrial telephony services
in many rural and remote areas.
The problem of measuring USO costs
Determination of the USO subsidy amount has always been a matter of dispute. Telstra
consistently claims that the cost to it in fulfilling the USO is much higher than the
subsidy. A financial cost model developed by the former Australian Communications
Authority for the 1997-98 subsidy estimated the USO cost at $548 million per annum.
Other industry participants claim that the current subsidy level set by the Minister at $145
million for 2007-08 is too high. They claim that Telstra gains significant benefits from
being the USO provider which at least match the USO cost. These benefits include the
marketing advantages of a national presence and status as the USO provider and other
benefits such as advertising on payphones. A 1999/2000 study commissioned by the
Australian Communications Authority estimated these benefits to be between $36 and $73
million per annum109. This argument has led to numerous calls over many years for
Telstra to meet the full cost of the USO.
Estimating the true cost of the USO subsidy is problematic. Equally difficult would be the
task of estimating the number of individuals or businesses who might be disadvantaged by
the absence of the USO. For the years from 1992-93 to 1997-98, when a cost model was
used to estimate USO costs, the number of loss making customers was estimated at
around 400 000110. However, many of these consumers would still have purchased a
109
Australian Communications Authority - Estimate of Net Universal Service Costs for 1998/99 and
1999/2000, p. 43: accessed at www.acma.gov.au/webwr/telcomm/universal_service_regime/nusc_est1998-
2000.pdf
110
Review of the Operation of the Universal Service Obligation and Customer Service Guarantee, April
2004, p. 62; accessed
67
standard telephone service even if the full cost of provision were charged.
Other countries, such as the United States and Canada have USO subsidy arrangements.
However, in some countries the incumbent telecommunications operator is required to
meet a universal service standard but it is not compensated for doing so. The universal
service provider does not receive funding in the United Kingdom, Singapore, the
Netherlands, Finland or Germany. While the United Kingdom, Singapore and the
Netherlands are small, high population density countries, Finland and Germany have
substantial rural populations.
Need to upgrade the universal service regime
While the USO covers only standard telephony services and payphones there have been
calls for universal service arrangements to apply to digital or bitstream communications
access since the late 1990s. The 2008 Regional Telecommunications Independent Review
Committee recommended that new universal service arrangements should apply to mobile
telephony and broadband. Many submitters to the discussion paper National Broadband
Network: Regulatory Reform for 21st Century Broadband (the discussion paper) called
for universal arrangements to be extended to broadband.
The Regional Telecommunications Independent Review Committee took the view that
mobile and broadband services have become as significant and important to Australians
as fixed line voice telephony111. The Committee noted that broadband has become an
essential service in households across Australia and that in wide areas of Australia access
to terrestrial broadband services and satellite broadband services are more expensive and
of a lower standard than services available in metropolitan areas.
The Regional Telecommunications Independent Review Committee was not in favour of
bringing new services specifically under the USO. Instead the Committee recommended a
new universal service regime that would involve:
· reference standards for services which customers should be able to access across
the country (the Committee referred to these standards as the Communications
Service Standards);
· Government intervention such as targeted funding programs to ensure services
that meet the reference standards are available in areas where the market does not
supply them; and,
· arrangements making the Minister transparently accountable to Parliament for the
effectiveness of Government interventions in ensuring services meeting the
reference standards are available112.
The Regional Telecommunications Independent Review Committee proposal, if
implemented, would indicate where there are service adequacy gaps which the market
could fill. Failing that, the Government might address these service gaps through
www.dbcde.gov.au/__data/assets/pdf_file/0005/10103/Review_of_the_Operation_of_the_Univeral_Service
_Obligation_and_Customer_Service_Guarantee.pdf
111
National Broadband Network: Regulatory Reform for 21st Century Broadband, discussion paper, April
2009, p30.
112
Ibid, p. 266
68
programs such as the Australian Broadband Guarantee or through regulation.
The Australian Government has established NBN Co to roll-out infrastructure that will
support voice and high speed broadband services covering all Australian premises, which
will provide access to the network on a wholesale-only basis, allowing providers to focus
on serving their customers across the network. The rollout of the NBN will result in a
fundamental change to the structure of the Australian telecommunications market.
In recognition of the fundamental changes to the sector, the Government is developing a
new institutional, regulatory and funding framework for the delivery of the Universal
Service Obligation and other public interest services in an NBN environment. The details
for these arrangements and decisions about further regulatory changes to apply in the
longer term will be announced following public consultation.
Maintaining a satisfactory voice telephony USO
The impact of the USO and the retail price controls means there is little incentive on the
(USO provider) Telstra, to improve service delivery to consumers, including the provision
of payphones. This has resulted in criticism of the USO arrangements particularly from
Telstra's competitors, but also from consumers who argue they have limited choice of
provider and are not satisfied with the quality of service received.
Successive governments have regulated Telstra's behaviour, particularly requiring Telstra
to supply services in fulfilment of the USO and where there is limited competition.
Examples of such regulation include:
· the Customer Service Guarantee (CSG) which imposes requirements on service
providers to supply new service connections and fix faults within specified periods
of time and to keep appointments or pay the customer specified financial damages;
· Priority Assistance which requires Telstra to provide enhanced services to people
with life threatening medical conditions;
· the Network Reliability Framework which requires Telstra to report to the ACMA
on performance of its network, and to fix poorly performing local areas and
individual services; and
· the Local Presence Plan which requires Telstra to maintain local presence in
regional areas.
Past practice has sought to minimise the negative impact on the industry of these
legislative requirements by providing substantial flexibility within the regulations. The
ACMA is responsible for administering the legislative requirements and is required under
section 4 of the Telecommunications Act 1997 (the Act) to regulate telecommunications in
a manner that:
a) promotes the greatest practicable use of industry self-regulation; and
b) does not impose undue financial and administrative burdens on participants in the
Australian telecommunications industry, but does not compromise the effectiveness of
regulation in achieving the objects of the Act, such as the object of providing a regulatory
framework that promotes the long-term interests of end-users.
69
The USO requires Telstra to only take `reasonable steps' to fulfil the Obligation. The
details on what services will be supplied and in what circumstances are set out in Part 2 of
the Telecommunications (Consumer Protection and Service Standards) Act 1999 and in
Telstra's Universal Service Obligation Standard Marketing Plan.
The Standard Marketing Plan and policy are prepared by Telstra and approved by the
ACMA. It is largely up to Telstra to decide what is `reasonable'. Controls on Telstra have
been criticised as being ineffective. For example, there have been numerous calls to
improve the provisions relating to the consultation with local communities before
payphones are removed. These concerns may have been heightened in view of the decline
in the number of payphones in recent years (see Figure 1).
80,000
70,000
60,000
Number of payphones
50,000
Non-Telstra operated
40,000
Telstra operated
30,000
20,000
10,000
0
2003-04
2004-05
2005-06
2006-07
2007-08
2002-03
Financial year
Figure 1: Number of payphones in Australia
(Source: ACMA, Communications Report 2007-08)
70
The Customer Service Guarantee
The CSG provides for carriage service providers to pay customers compensation for
each working day that connections or fault rectifications are delayed beyond the
maximum CSG timeframes, or if they fail to keep an appointment. Currently there is
no other consequence if there is widespread non-compliance with the CSG
timeframes. The Regional Telecommunications Independent Review Committee
noted that communities felt carriers were inappropriately using CSG waiver
provisions to avoid their CSG responsibilities113. In addition there is evidence that
some service providers have increased their overall damages payments to consumers
which would indicate a preference to pay the damages rather than fix the service for
the consumer114. Many of Telstra's competitors argue that they have difficulty with
the CSG requirements because they rely on Telstra's network and Telstra to repair
faults and make new connections.
Despite the interventions, service quality monitoring by the ACMA indicates that
service quality measures have been trending downwards in recent years. For example,
overall compliance by Telstra with CSG provisions has been steadily falling (see
Figure 2).
Providers are also increasingly avoiding the CSG in many areas by offering customers
alternative services on the condition that the customer agrees to waive rights to the
CSG. Examples include Telstra's wireless local loop service, Virgin, TransACT, and
various VOIP based services.
100
Percentage of faults repaired within timeframe
98
96
94
92 Urban (1 day)
Rural (2 days)
90
Remote (3 days)
88 ACMA Benchmark
86
84
82
80
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Nov-07
Jan-08
Mar-08
Sep-05
Sep-06
Sep-07
Reporting quarter
Figure 2: Telstra's quarterly fault repair performance
(Source: ACMA, Telecommunications Performance Bulletin 2005-06--2006-07 and
Telecommunications Performance Data March 2008 quarter)
113
Regional Telecommunications Independent Review Committee: Framework for the Future, p.184.
114
ACMA December 2008 Quarterly Telecommunications Performance Data,
www.acma.gov.au/WEB/STANDARD/pc=PC_1402
71
2. Objectives
The objectives are:
· to ensure a basic voice service remains available across Australia;
· provide clarity and certainty to consumers and industry; and
· to ensure consumer safeguard regulations are effective and complied with.
3. Options for achieving the desired objectives
Three options have been identified concerning the scope of universal service
arrangements during the interim period while the NBN is being rolled out.
SCOPE OF UNIVERSAL SERVICE
The three options identified for interim (pre NBN) universal service arrangements
include:
A. expand the scope of universal service arrangements along the lines suggested by
the Regional Telecommunications Independent Review Committee;
B. retain the current scope of the arrangements but tighten regulation to ensure
existing safeguards are effective in the transition to the NBN and development of
USO Co; and
C. no change to existing arrangements.
Option A - Expand the scope of universal service regime along the lines suggested
by the Regional Telecommunications Independent Review Committee
A modified version of the Regional Telecommunications Independent Review
Committee proposal for Communications Service Standards would be developed.
This would involve amending the Telecommunications (Consumer Protection and
Service Standards) Act 1999 to enable the Minister to establish Communications
Service Standards in respect of voice telephony, mobile voice telephony, payphones
and broadband.
Prior to the rollout of the NBN, any communications service standard developed by
the Minister would be limited to broadband and mobile services and should not
increase Government demand for safety net programs such as the Australian
Broadband Guarantee and the Satellite Phone Subsidy Scheme. The objective would
be to ensure there was no reduction in services available under the current
arrangements and to minimise unnecessary costs due to investments in infrastructure
supporting broadband supply which would be obsolete with the NBN.
Legislative arrangements would also be made to provide that the current USO
arrangements for standard telephony (including mobile and broadband services)
would cease in areas declared by the Minister. This would be confined to areas where
72
competition was strong and a range of services were being provided to consumers or
where alternative arrangements are in place with services available from the NBN. It
would enable the obligation on Telstra to be gradually wound back in the transition to
the NBN.
This option would largely address the problems raised by the Regional
Telecommunications Independent Review Committee concerning the lack of access
by many rural and remote customers to broadband services.
Option B - Retain the current scope of the arrangements but tighten regulation
to ensure existing safeguards are effective in the transition to the NBN and
development of USO Co
This option involves measures to better protect consumers in the transition to the roll
out of the NBN, including by:
· replacing current unenforceable arrangements which require Telstra to only
take reasonable steps to fulfil the USO with a legislated requirement for
Telstra to supply specified services when requested by customers and make
available public payphones;
· enabling the Minister to determine in enforceable subordinate instruments the
specific characteristics, terms and conditions of the services to be supplied in
fulfilment of the USO including connection and repair periods, the reliability
of services, payphone placement criteria and performance benchmarks;
· providing for failure by the universal service provider to meet performance
benchmarks or service specifications or criteria to be a contravention of a civil
penalty provision, subject to a fine;
· enabling ACMA to review Telstra decisions on the supply of USO services
including removing payphones;
· legislating minimum performance standards in meeting the CSG with
significant penalties to promote compliance;
· introducing new timeframes for connections and repairs on Telstra where a
non-Telstra provider supplying a CSG service relies on Telstra to make the
connection or repair the service;
· clarifying the operation of provisions allowing providers to contract out of the
CSG to ensure that the provider may only do so with the customer's express
agreement;
· broadening the ACMA's record keeping powers to allow it to obtain regular
reports about carriers' and service providers' compliance with their
obligations;
· enabling the Minister to direct the ACMA to determine an industry standard to
enable a more effective regulatory response where industry codes do not
adequately deal with consumer issues;
· enabling the ACMA to issue infringement notices; and
· retaining the Priority Assistance requirement on Telstra and requiring
providers to either offer a Priority Assistance service or inform customers of
providers from whom the customer can purchase a priority assistance service
if they require it.
This option would strengthen the USO requirements to ensure no Australians are
73
worse off in the transition to the NBN environment and largely address the growing
problem of falling compliance with the CSG and prevent any further decline in
compliance.
Option C - No change to existing arrangements
Under this option no regulatory changes would be proposed at this stage but major
regulatory change would be required in the post NBN environment. The issue of
universal access would then be addressed in the context of the Government's
announcement that it is establishing a wholly Government-owned entity - USO Co -
to take responsibility for future delivery of the Universal Service Obligation and other
public interest obligations. USO Co is expected to operate from 1 July 2012 and its
functions will include the provision of funding for the delivery of the USO for voice
telephony services and payphones.
4. Impact assessment
Option A - Expand the scope of the universal service regime along the lines
suggested by the Regional Telecommunications Independent Review Committee
Benefits:
This option would help address the gap between rural and urban take-up of broadband
services. Australian Bureau of Statistics data shows that the gap in broadband take up
between very remote areas and the major cities is between 10 and 20 per cent of
households115.
The Regional Telecommunications Independent Review Committee has commented
on the large benefits of broadband services to people in rural and remote areas
although it was unable to quantify these. There have been a large number of studies
recently, in Australia and elsewhere, demonstrating very large benefits from
broadband services both for consumers and business116. Thus there are likely to be
significant economic benefits as well as equity benefits.
In summary, the main beneficiaries of Option A are:
· Consumers, particularly in rural areas, would have an increased assurance of
ongoing availability of broadband services;
· Telstra who would be able to be released from some legislative requirements
where competition is established;
· Telstra's competitors who would have a greater chance of competing in rural
115
Australian Bureau of Statistics, Australian Social Trends, 2008: Internet access at home:
www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Chapter10002008
116
Australian studies include: LECG Ltd, `Economic impacts of Broadband: An Empirical Study',
2009 which estimated large gains in productivity and increased GDP; Access Economics, `Impacts of
a national high-speed broadband network', 2009 which estimated gains in GDP of up to $21 billion
from a broadband investment of $13 billion; Centre for International Economics, `Impact of genuine
broadband for Australia', 2008 which estimated a GDP gain of 1.4 per cent after about five years, or
about $15 billion per year, from a 12Mbps network.
74
and remote areas, particularly by supplying mobile and broadband services in
competition against Telstra's fixed network. Non-Telstra providers would also
have greater opportunities to receive subsidies for programs such as the
Australian Broadband Guarantee if the scope of services being subsidised
were widened.
Costs:
Any broadening of universal service arrangements or government funding programs
to provide further broadband services in rural and remote areas is likely to be very
costly. For example, subsidies payable under the current Australian Broadband
Guarantee (ABG) program are up to $6000 per customer over three years and this is
for a minimal broadband service. It is unclear how many USO customers there are,
but in the past the number has been as high as 400 000. Using the lower figure would
produce a one off cost estimate of more than $400 million per year. In addition, some
of the costs of Telstra's existing network would remain even if customers switched to
ABG funded broadband services. In fact, Telstra's USO costs could increase
significantly as revenues are likely to fall more if Telstra has to keep its network
going for those customers that remain on its network.
Of more concern, however, is that any increased investment in broadband services
prior to the rollout of the NBN would become obsolete. The Government has
announced a higher standard of services of at least 12 Mbps for the households
outside the fibre network fibre to the premise footprint of the NBN.
Option B - Retain the current scope of the arrangements but tighten regulation to
ensure existing safeguards are effective in the transition to the NBN.
Benefits:
There is a strong level of concern about the quality of telephony services, particularly
in rural and remote areas. The findings of successive reviews of telecommunications
services in regional areas have highlighted this issue. Further, the ACMA has drawn
attention to the decline in standards of service in recent years and the limitations on its
enforcement powers to address concerns.
All carriers, including Telstra, are required to meet CSG requirements including
connection times and timeframes for repairing faults. For example, Telstra failed to
meet the ACMA standard of 90 per cent of faults repaired within CSG timeframes in
the December 2007, and the June and September quarters of 2008117. In 2006, Telstra
took longer than the CSG requirements to repair more 60 000 faults and paid out over
$5 million in CSG compensation payments to customers. The Telecommunications
Industry Ombudsman has also noted a large increase in industry complaints in 2007-
08118.
Option B will strengthen the USO and CSG arrangements and signals the
117
www.acma.gov.au/webwr/_assets/main/lib310751/dec_2008_t-comms_performance_data.pdf
118
Telecommunications Industry Ombudsman Annual Report at
www.tio.com.au/publications/annual_reports/default.htm
75
Government's intention to ensure high quality telecommunications services are
provided in regional and rural Australia.
While no statistics are collected of Telstra's refusal to provide a service on grounds
that it was unreasonable, the Regional Telecommunications Independent Review
Committee has reported that the ACMA finds enforcement problematic. It also notes
that Telstra retains the right to make the final decision on providing a payphone
service. The Committee noted the concerns expressed in submissions about lack of
adequate consultation and the need for improvement.
This option would also address these community concerns. Firstly, it will clarify the
obligations for both Telstra and customers. Secondly, it will provide the opportunity
for a review by the ACMA of the process for Telstra's decisions on new connections
and payphone locations, particularly where a decision to remove a payphone is
disputed.
By including the standards in the Telecommunications (Consumer Protection and
Service Standards) Act 1999 and specifying penalties there should be a marked
increase in compliance. By increasing civil penalties in some cases, carriers will be
more likely to comply with the obligations rather than pay compensation. Under this
proposal, by setting out clearly the standards of service required customers would be
given a clearer understanding of their legitimate expectations on service quality and
providers would also be given greater certainty.
The inclusion of additional record-keeping powers is consistent with current ACMA
regulatory enforcement powers and is necessary to provide the regulator with
sufficient means to oversee carriers in terms of meeting their service obligations.
Similarly, empowering the Minister to direct the ACMA to determine an industry
standard (thus making it mandatory) will enable a more effective regulatory response
where a currently-unenforceable voluntary industry code has not resulted in
consumers receiving an acceptable level of service.
Importantly, option B does not exclude the implementation of Option A at a future
date.
Costs:
While Option B would provide more protection to customers, it should be
acknowledged this option does involve continued investment in, and maintenance of,
assets that are likely to be superseded by the rollout of the NBN. The cost of
maintaining the ageing copper network could exceed the costs to customers of
additional faults. For example, the costs could greatly exceed the current CSG
compensation payments of around $5 million. While some assets, like copper cables
and ducts, have a long economic life, other assets such as electronic equipment,
switching equipment and IT assets, have shorter lives and so need to be replaced more
frequently.
Option B would require Telstra, Optus and other carriers to maintain compliance to
meet the benchmarks for consumer safeguards on a national basis. However, Telstra's
compliance with remote fault repair times would need to increase from around 86 per
76
cent to 90 per cent (December 2008 119 ). Based upon the December 2008 figures,
compliance with new connection times will have to be brought up, as only Optus was
the only carrier that met the ACMA informal benchmark CSG standard of more than
the 90 per cent. Telstra (88 per cent) and AAPT (82 per cent) did not meet the
informal benchmark.
There would be additional resource costs for both the ACMA and the carriers,
because they would have to devote more resources to ensuring compliance. In
addition, civil penalties may add to the current compensation fees of $5 million unless
carriers change their behaviour.
Telstra has been in discussions with the Department about compliance and reporting
obligations over the past few years. The main cost increases for Telstra will be
potential civil penalties if Telstra does not meet compliance benchmarks and the costs
of maintaining the copper network which will be progressively overbuilt by the NBN.
It is not possible to quantify these costs, and they will depend on the degree to which
the new regulations will require services to be delivered at standards higher than those
currently achieved. A further RIS will be prepared for the legislation to implement
these arrangements, which will better address these costs, after the detailed regulatory
changes have been determined.
Carriers already maintain records to allow the ACMA to assess performance
compliance and the additional record-keeping requirements represent only a marginal
increase in regulatory burden. Carriers will only experience an additional burden if
the ACMA invokes the use of the proposed increase in record-keeping powers.
If the ACMA is directed by the Minister to determine an industry code, any possible
regulatory effects will be considered during the preparation of a regulatory impact
statement and in following the consultation requirements of the Legislative
Instruments Act 2003.
Option C - No change to existing arrangements
Benefits:
There are few benefits to this Option. Consumers will not be protected by
strengthened safeguards, which are proposed in Option B.
Costs:
Option C risks a fall in service quality for customers covered by the USO using
Telstra's voice telephony and payphones. Telstra may seek to minimise maintenance
costs of the copper as the NBN is rolled out. This may impact badly on customer
services. The current arrangements may not effectively prevent this.
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ACMA December 2008 Quarterly Telecommunications Performance Data:
www.acma.gov.au/WEB/STANDARD/pc=PC_1402
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5. Consultation
In April 2009 the Government called for submissions on its National Broadband
Network: Regulatory Reform for 21st Century Broadband discussion paper. The
issues covered in this RIS formed Chapter 4 of that discussion paper. All the options
except some elements of Option B are raised there.
The discussion paper elicited over 130 submissions from a wide range of industry
carriers, consumer groups, State and local government bodies and individuals.
The main views expressed in the submissions were:
Scope of Universal Service
Most of the industry support the USO continuing in the interim but consider that
changes will be necessary after the NBN rollout. Industry stakeholders noted that:
· the NBN could take responsibility for the USO;
· the USO could be shared between NBN Co and Telstra;
· new arrangements could be established such as government funding;
· The USO could be reduced to a safety net.
Telstra opposes any extension of the obligation - rather it supports reducing
regulations associated with the USO. Some carriers supported the Communications
Service Standard approach but others see the USO being gradually phased out as the
NBN is rolled out (Competitive Carriers Coalition) or restricted to providing a safety
net (Hutchison).
There was fairly widespread support among consumer groups for the
Communications Service Standard approach as well as from some State
Governments. The ACCC argued that the Communications Service Standard could be
a tool for reducing the regulatory burden in the area of consumer safeguards, by
removing unnecessary regulation and/or streamlining regulatory requirements such as
the Network Reliability Framework and the Customer Service Guarantee.
The Communications, Electrical and Plumbing Union, however, opposed this
approach noting the cost and likelihood of insufficient funding. However, it also
believed the NBN had overtaken the concept of the Communications Service
Standard and is concerned that the Communications Service Standard might not
provide the current level of certainty to consumers, at least for those services now
included in the USO. The Communications Alliance supports research on the
appropriateness of consumer protections before the obligation is broadened.
Consumer groups generally favour the Communications Service Standard. The
Australian Telecommunications Users Group favoured both a voice and a broadband
guarantee.
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Customer Service Guarantee
Telstra and Australian Telecommunications Users Group supported strengthening the
CSG with significant penalties. The Tasmanian Government opposed it. TransACT
supports the CSG being the sole regulatory safeguard.
Consumer groups supported introducing CSG performance benchmarks. This
proposal was also supported by Telstra. Other providers tended to oppose introducing
CSG performance benchmarks. In many cases they do not have control over repairs to
services because currently Telstra is the underlying carrier. The proposal to require
Telstra to meet CSG timeframes for services provided at a wholesale level to other
providers should address this concern.
Option B was not mentioned in the discussion paper and so was not commented on.
However, this option is consistent with the main argument of the submission to retain
the current arrangements in the lead-up to the NBN. The proposal to tighten the USO
and CSG arrangements is a reasonable response to the potential risk of Telstra
running down its network.
The ACMA, which will implement the measures in Option B, has been consulted. It is
in favour of the measures in Option B although would seek additional funding to
match the additional administrative work involved. It also supports Option D.
6. Recommendation
Scope of Universal Service
Option B is recommended because it is critical to protect consumers as the NBN is
progressively rolled out and new universal service arrangements can be developed.
The changes proposed should provide more certainty to consumers and greater clarity
of their rights because they will be less reliant on Telstra's decisions as to what it
deems is reasonable. Consumers should also gain more confidence in that they can
seek a review by the ACMA of Telstra's USO decisions that adversely affect them. It
is acknowledged that this option will impose some extra costs on carriers, particularly
Telstra, in ensuring compliance with USO and CSG requirements. It is also not
possible to quantify the impacts on customers of the benefits of greater carrier
compliance nor the costs on the USO provider.
The main reason Option A is not recommended is because of the potential large
increase in cost. The costs could be in excess of $1 billion while the benefits are
uncertain. There is also a large risk that network upgrades could become obsolete with
the rollout of the NBN and this would result in considerable costs due to wasted
investment.
The costs of Option B are likely to be much smaller than those of Option A, or
negligible if Telstra alters its behaviour. Possible civil penalties may add to the
current compensation payments of $5 million or alternatively, there will be costs to
Telstra of bringing compliance up to standard to avoid civil penalties. In total these
costs should be of an order of magnitude less than those of Option A and the costs
will be offset by increases in benefits to consumers.
79
Option C was not supported as it would allow service quality to continue to fall.
Further it would expose consumers to further declines in service quality should
Telstra allow service quality to decline as the NBN is rolled out. Should this occur,
consumers would face considerable costs due to an inability to get a new service
connected, or an existing service repaired, in a reasonable timeframe.
7. Implementation and review of the preferred option
The proposed legislative changes are designed to apply for the interim period while
the NBN is being rolled out. The legislative arrangements for tightening consumer
protection measures will be implemented immediately.
The ACMA will be required to administer the changes proposed in Options B. As
noted above, Option B will entail some resourcing issues for the ACMA. The ACMA
has estimated the cost at about $1.5 million per year.
Future USO arrangements will be considered in the context of the Government's
decision to establish USO Co.
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ABBREVIATIONS
The following abbreviations are used in this explanatory memorandum:
2009 Bill: Telecommunications Legislation Amendment
(Competition and Consumer Safeguards) Bill 2009
ACCC: Australian Competition and Consumer Commission
ACMA: Australian Communications and Media Authority
AIA: Acts Interpretation Act 1901
Bill: Telecommunications Legislation Amendment
(Competition and Consumer Safeguards) Bill 2010
BSA: Broadcasting Services Act 1992
CCA: Competition and Consumer Act 2010 (formerly the
Trade Practices Act 1974)
Consumer Protection Act Telecommunications (Consumer Protection and Service
Standards) Act 1999
CSG: Customer service guarantee
CSP: Carriage service provider
Interception Act: Telecommunications (Interception and Access)
Act 1979
LIA Legislative Instruments Act 2003
Minister: Minister for Broadband, Communications, and the
Digital Economy
NTN Sale Act: National Transmission Network Sale Act 1998
Radcom Act Radiocommunications Act 1992
Tel Act: Telecommunications Act 1997
Tribunal: Australian Competition Tribunal
USO: Universal service obligation
VOIP: Voice over Internet Protocol
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NOTES ON CLAUSES
Clause 1 - Short title
Clause 1 provides that the Bill, when enacted, may be cited as the
Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Act 2010.
Clause 2 - Commencement
Clause 2 of the Bill provides for the commencement of the Bill.
Clauses 1-3 of the Bill and any other provisions not covered in the table provided at
subclause 2(1), would commence on the day on which the Bill receives the Royal
Assent.
Parts 5A, 8 and 9 of Schedule 1 will commence on the day after the Bill receives the
Royal Assent.
Parts 2, 3 and 7 of Schedule 1, and Division 1 of Part 1 of Schedule 1, will commence
at the start of the day after the 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 that provisions in those Parts of the Bill refer to the CCA, rather than
the name by which that Act is known at the time of the 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. The
commencement provisions for these parts of the Bill ensure that the references in the
Bill to the CCA will be effective in making amendments to that Act, by deferring their
commencement until the change of name of that Act takes effect.
Parts 4 and 6 of Schedule 1 to the Bill will each commence on the day after the end of
the period of 3 months beginning on the day on which the Bill receives the Royal
Assent.
Part 5 of Schedule 1 to the Bill will commence on the day after the end of the period
of 6 months beginning on the day on which the Bill receives the Royal Assent.
Delaying the commencement of these Parts will afford service providers with a period
of time to change their operations where necessary to comply with the amendments.
Further, in the case where legislative instruments need to be made, the delay will
provide time for those instruments to be drafted and, in reliance on section 4 of the
AIA, to be made in advance of the amendments made by those Parts to the Tel Act
and the Consumer Protection Act.
Division 2 of Part 1 of Schedule 1 to the Bill would commence immediately after a
functional separation undertaking comes into force under proposed Part 9 of Schedule
1 to the Tel Act (see item 31 of Schedule 1). That Division makes changes to the Tel
Act and the CCA that are necessary as a consequence of the commencement of a
functional separation undertaking. The Minister is required to announce, by notice
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published in the Gazette, when a final functional separation undertaking comes into
force.
Division 2 of Part 1 of Schedule 1 to the Bill would commence immediately after an
undertaking comes into force under proposed section 577A of the Tel Act (see
item 30 of Schedule 1). That Division makes changes to the Tel Act and the CCA
that are necessary as a consequence of the commencement of an undertaking under
proposed section 577A. The Minister is required to announce, by notice published in
the Gazette, when such an undertaking comes into force.
Clause 3 - Schedule(s)
Clause 3 provides that each Act that is specified in a Schedule to the Bill is amended
or repealed as set out in that Schedule and any other item in a Schedule has effect
according to its terms. There is one Schedule to the Bill which amends the Tel Act,
the CCA, the Consumer Protection Act, and the NTN Sale Act.
As noted above, provisions in the Bill refer to the CCA, rather than the name by
which that Act is known at the time of the Bill's introduction: the Trade Practices Act
1974. A note at clause 3 observes that 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.
As a result of section 10 of the AIA, a reference to the CCA in the Bill will include a
reference to that Act before its name was changed, ie. before 1 January 2011. This is
explained further in the explanatory notes for Division 2 of Part 2 of the Bill, which
contains transitional provisions dealing with arrangements existing under Part XIC of
the then Trade Practices Act 1974 before the commencement of that Part of the Bill
or before the introduction into Parliament of the 2009 Bill.
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Schedule 1--Amendments
Part 1--Amendments relating to Telstra
Part 1 of Schedule 1 to the Bill makes a number of amendments to the Radcom Act,
the Tel Act, and the CCA to address the current structure of the telecommunications
sector.
Division 1--Amendments commencing on the day after this Act receives the
Royal Assent
Radiocommunications Act 1992
Item 1 - After subsection 58(1)
Item 1 amends section 58 of the Radcom Act by inserting proposed
subsection 58(1A).
Subsection 58(1) deals with spectrum licence allocation by the ACMA following
conversion of an apparatus licence into a spectrum licence.
Proposed subsection 58(1A) makes it clear that spectrum licence allocation pursuant
to subsection 58(1) of the Radcom Act is subject to the provisions in proposed
section 577J of the Tel Act. Proposed section 577J limits the allocation of certain
spectrum licences to Telstra and is discussed under item 30 below.
Item 2 - At the end of section 60
Item 2 amends section 60 of the Radcom Act by inserting proposed subsection 60(15).
Section 60 deals with procedures for spectrum licence allocation by the ACMA.
Proposed subsection 60(15) makes it clear that any spectrum licence allocation
procedures determined by the ACMA under section 60 would be subject to the
provisions in proposed section 577J of the Tel Act.
Item 3 - At the end of section 62
Item 3 amends section 62 of the Radcom Act by inserting proposed subsection 62(4).
Section 62 deals with the allocation of spectrum licences by the ACMA.
Proposed subsection 62(4) makes it clear that any spectrum licence allocation by the
ACMA under section 62 would be subject to the provisions in proposed section 577J
of the Tel Act.
Item 4 - At the end of section 68
Item 4 amends section 68 of the Radcom Act by inserting proposed subsection 68(5).
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Section 68 authorises third party use of a spectrum licence subject to conditions
specified under that section.
Proposed subsection 68(5) makes it clear that third party use of a spectrum licence
under section 68 is subject to the provisions in proposed section 577K of the Tel Act.
Proposed section 577K puts limits on the use of certain spectrum licences by Telstra
and is discussed under item 30 below.
Item 5 - Subsection 85(1)
Section 85 of the Radcom Act deals with trading of spectrum licences.
Item 5 amends subsection 85(1) to make the assignment or dealing with spectrum
licences subject to proposed section 577L of the Tel Act. Proposed section 577L
limits the assignment of certain spectrum licences to Telstra and is discussed under
item 30 below.
Telecommunications Act 1997
Item 6 - Section 7
Item 6 inserts a proposed definition of `designated part of the spectrum' in section 7
of the Tel Act referring to proposed section 577H of the Tel Act. This definition is
discussed below under the explanatory note for proposed section 577H under item 30.
Item 7 - Section 7
Item 7 inserts a proposed definition of `draft functional separation undertaking' in
section 7 of the Tel Act by reference to proposed Division 2 of Part 9 of Schedule 1.
Proposed Division 2 of Part 9 of Schedule 1 includes provisions dealing with the
contents of a draft final functional separation undertaking, the provisions it must
contain, and the principles with which it must comply.
Item 8 - Section 7
Item 8 inserts a proposed definition of `draft migration plan' in section 7 of the Tel
Act, which refers to the provisions inserted into that Act by the Bill that set out the
meaning of that term (see item 30).
Item 9 - Section 7
Item 9 inserts a proposed definition of `final functional separation undertaking' in
section 7 of the Tel Act by reference to proposed Division 2 of Part 9 of Schedule 1.
Proposed Division 2 of Part 9 of Schedule 1 includes provisions dealing with the
contents of a final functional separation undertaking, the provisions it must contain
and the principles with which it must comply.
85
Item 10 - Section 7
Item 10 inserts a proposed definition of `final migration plan' in section 7 of the Tel
Act, which refers to the provisions inserted into that Act by the Bill that set out the
meaning of that term (see item 30).
Item 11 - Section 7
Item 11 inserts a proposed definition of `hybrid fibre-coaxial network' under section 7
of the Tel Act. This new definition underpins the proposed amendments to be made
to the Tel Act by Part 1 of Schedule 1 of the Bill which enable the ACCC to accept an
undertaking by Telstra in relation to control of hybrid fibre-coaxial networks. The
proposed definition is not restricted to Telstra's current hybrid fibre-coaxial network,
but could also apply to any such network Telstra builds in future or hybrid fibre-
coaxial networks owned by other parties.
Item 12 - Section 7
Item 12 inserts a proposed definition of `internet carriage service' in section 7 of the
Tel Act.
Item 13 - Section 7
Item 14 - Section 7
Item 15 - Section 7
Item 16 - Section 7
Items 13 to 15 insert proposed definitions of `radiocommunications device',
`spectrum', and `spectrum licence' in section 7 of the Tel Act, adopting the same
meaning for those terms as they have in the Radcom Act.
Item 16 inserts a proposed definition of `subscription television broadcasting licence'
in section 7 of the Tel Act, adopting the same meaning for that term as it has in the
BSA.
Item 17 - After subsection 69(5)
Item 17 makes a change to section 69 to prevent the ACMA giving Telstra a remedial
direction about compliance with a licence condition relating to a voluntary
undertaking under proposed Part 33 of the Tel Act. It is not appropriate for the
ACMA to have the power to enforce Telstra's compliance with voluntary
undertakings, which are regulated by the ACCC under the telecommunications
regulatory framework.
Item 18 - Before subsection 69(7)
Subsection 69(1) of the Tel Act and its related provisions under section 69 authorise
the ACMA to issue a remedial direction to a carrier that is contravening, or has
contravened, a condition of its carrier licence.
Item 18 amends section 69 by inserting proposed subsection 69(6B).
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Proposed subsection 69(6B) prevents current subsection 69(1) from applying to the
condition set out in proposed clause 84 of Schedule 1 to the Tel Act (which deals with
control by Telstra of certain spectrum licences).
The effect of proposed subsection 69(6B) is that the ACMA would not be authorised
to issue a remedial direction to Telstra in the event it contravened proposed clause 84
of Schedule 1 to the Tel Act. The reason for this restriction is that it is intended that
only the ACCC (and the Minister, where appropriate) will have authority to take
action against Telstra for breach of proposed clause 84 of Schedule 1 to the Tel Act.
The condition in proposed clause 84 of Schedule 1 to the Tel Act is associated with
amendments proposed under Part 1 of Schedule 1 of the Bill to address Telstra's level
of dominance in telecommunications markets and the negative impact this has had on
the development of effective competition in the telecommunications industry. It is
therefore a matter for which it is appropriate the ACCC be given regulatory
responsibility.
Item 19 - After subsection 70(2)
Item 20 - After paragraph 70(5)(a)
Section 70 of the Tel Act provides that the ACMA may issue a formal warning to a
carrier if the carrier contravenes a condition of the carrier's licence--except for
particular specified conditions, for which the ACCC may issue a formal warning.
Items 19 and 20 would amend section 70 with the effect that the ACCC, but not the
ACMA, may issue a formal warning if Telstra contravenes conditions of its carrier
licence which provide that Telstra must comply with any voluntary undertakings
under proposed Part 33 of the Tel Act that are in force. The ACCC is exclusively
given this power because the undertakings relate to competition issues which are
regulated by the ACCC under the telecommunications regulatory framework.
Item 21 - Before subsection 70(4)
Subsection 70(1) of the Tel Act authorises the ACMA to issue formal warnings to
carriers that have contravened a condition of their carrier licence.
Item 21 amends section 70 by inserting proposed subsection 70(3B).
Proposed subsection 70(3B) indicates that current subsection 70(1) does not apply to
the condition set out in clause 84 of Schedule 1 of the Tel Act. The effect of proposed
subsection 70(3B) is that the ACMA would not be authorised to issue a formal
warning to Telstra in the event it contravened proposed clause 84 of Schedule 1 of the
Tel Act. The reason for this restriction is the same as that outlined under the
explanatory note under item 18 above.
Item 22 - After paragraph 564(3)(a)
Item 23 - Subsection 564(3) (after note 1)
Section 564 of the Tel Act provides that the Federal Court may grant injunctions
relating to contraventions of the Tel Act. Applications for injunctions may be made
87
by the Minister, the ACCC and, except in relation to certain specified contraventions
(which generally relate to competition issues), the ACMA. Item 20 makes a change
to section 564 to provide that the ACMA may not seek injunctions in relation to a
contravention by Telstra of the conditions of its carrier licence which provide that
Telstra must comply with any voluntary undertakings under proposed Part 33 of the
Tel Act that are in force. It is appropriate to restrict the ACMA from taking action in
relation to any contravention by Telstra of these licence conditions as the
undertakings relate to competition issues which are regulated by the ACCC under the
telecommunications regulatory framework.
Item 23 adds a note to subsection 564(3) in relation to proposed paragraph 564(3)(aa)
to assist the reader.
Item 24 - After paragraph 564(3)(b)
Item 25 - Subsection 564(3) (after note 2)
Item 24 amends section 564 by inserting proposed paragraph 564(3)(ba).
Under current subsection 564(3) the ACMA is not entitled to apply for an injunction
in relation to a contravention of a carrier licence condition or service provider rule
listed under that subsection.
Proposed paragraph 564(3)(ba) adds the licence condition under proposed clause 84
of Schedule 1 to the Tel Act to the list of licence conditions and service provider rules
in subsection 564(3). This means that the ACMA would not be entitled to apply for
an injunction in relation to a contravention of clause 84 of Schedule 1 to the Tel Act.
The reason for this restriction is the same as that outlined in the explanatory note
under item 18 above.
Item 25 adds a proposed note to section 564 in relation to proposed
paragraph 564(3)(ba) to assist the reader.
Item 26 - After paragraph 571(3)(a)
Item 27 - Subsection 571(3) (after note 1)
Section 570 of the Tel Act provides that the Federal Court may order a person to pay
a pecuniary penalty if the person contravenes a civil penalty provision (which is a
term defined in section 6 of the Act, see the amendment made by item 251 of the
Bill).
Section 571 provides that proceedings for the recovery of a pecuniary penalty may be
instituted by the Minister, the ACCC and, except in relation to certain specified
contraventions (which generally relate to competition issues), the ACMA.
The effect of proposed paragraph 571(3)(aa) (inserted by item 26) is that the ACMA
may not institute proceedings for the recovery of a pecuniary penalty in relation to a
contravention by Telstra of the conditions of its carrier licence which provide that
Telstra must comply with any voluntary undertakings under proposed Part 33 of the
Tel Act that are in force. The reason for this is as described in relation to items 19
and 20 above.
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Item 27 adds a note to subsection 571(3) in relation to proposed paragraph 571(3)(aa)
to assist the reader.
Item 28 - After paragraph 571(3)(b)
Item 29 - Subsection 571(3) (after note 2)
Item 28 amends section 571 by inserting proposed paragraph 571(3)(ba).
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.
Proposed paragraph 571(3)(ba) adds the licence condition in proposed clause 84 of
Schedule 1 to the Tel Act to the list of licence conditions and service provider rules in
subsection 571(3). This means that the ACMA would not be entitled to institute a
proceeding for recovery of a pecuniary penalty in relation to a contravention of the
carrier licence condition in proposed clause 84 of Schedule 1 to the Tel Act. The
reason for this restriction is the same as that outlined in the explanatory note under
item 18 above.
Item 29 adds a proposed note to section 571 in relation to proposed
paragraph 571(3)(ba) (under item 28 above) to assist the reader.
Item 30 - After Part 32
Item 30 inserts proposed Part 33 into the Tel Act.
Proposed Part 33--Voluntary undertakings given by Telstra
The provisions under Part 33 are intended to address the level of Telstra's vertical and
horizontal integration. Telstra's high-level of integration has hindered the
development of effective competition in the Australian telecommunications market.
The Government intends to correct this unique market structure, by introducing a set
of measures designed to promote competition across the various telecommunications
platforms while providing Telstra with the flexibility to choose its future path.
Under proposed Part 33, the Minister will be able to make a legislative instrument
(here called a `spectrum determination') that will prevent Telstra from acquiring
specified bands of spectrum, which could be used for advanced wireless broadband
services. However, the legislative instrument would only operate in certain limited
circumstances: if Telstra provides undertakings that are accepted by the ACCC, to
structurally separate, divest its hybrid fibre-coaxial cable network and divest its
interests in Foxtel, then any spectrum determination will be of no effect, and the
provisions of proposed Part 33 will not operate to prevent Telstra from acquiring
spectrum.
If the Minister is satisfied that a structural separation undertaking given by Telstra is
sufficient to address concerns about the degree of Telstra's power in
telecommunications markets, the Minister may remove either or both of the
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requirements for Telstra to divest its hybrid fibre-coaxial cable network and divest its
interests in Foxtel.
Proposed Division 1--Introduction
Proposed section 577 Simplified outline
Proposed section 577 provides a simplified outline of proposed Part 33 to assist the
reader.
Proposed Division 2--Structural separation
Proposed Subdivision A--Undertaking about structural separation
Proposed section 577A Acceptance of undertaking about structural
separation
Proposed subsection 577A(1) allows the ACCC to accept a written undertaking given
by Telstra regarding structural separation. Structural separation is regarded, under
proposed paragraph 577A(1)(a), as Telstra, at all times after the designated day,
ceasing to supply fixed-line carriage services to retail customers in Australia using a
telecommunications network over which Telstra is in a position to exercise control.
Additionally, structural separation requires Telstra to ensure that a company over
which Telstra is in a position to exercise control will not supply fixed-line carriage
services to retail customers in Australia using such a telecommunications network
after the designated day.
The term, `designated day' is defined in proposed subsection 577A(4) (which is
explained below), and the term `fixed-line carriage services' is defined in proposed
subsection 577A(14): a `fixed-line carriage service' means a carriage service 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 (eg. an infrastructure-based service that is not of
itself a carriage service).
The meaning of `control' and `control of a company' for the purposes of proposed
Part 33 is addressed in proposed sections 577N and 577P respectively.
Under proposed paragraph 577A(1)(b), Telstra is required, under a structural
separation undertaking, to set out specified action it will take and/or refrain from
taking in connection with the structural separation undertaking. It is intended that
Telstra would set out, in any structural separation undertaking purported to be given
under section 577A, the action it will take or refrain from taking, in order to achieve
structural separation as described under paragraph 577A(1)(a). This may involve a
series of steps in the lead up to full structural separation and milestones and
timeframes for achieving each of those steps.
There are a number of ways in which Telstra might propose to undertake structural
separation under proposed subsection 577A(1). A few examples are:
90
· Telstra may elect to facilitate the transfer of the provision of fixed-line
carriage services to its retail customers to another carriage service provider,
over which Telstra is not in a position to exercise control.
· Telstra may establish a new company to supply fixed-line carriage services to
its retail customers and divest enough of its interests in that company to ensure
that it is no longer in a position to exercise control of that company.
· Telstra may elect to progressively migrate the traffic of its retail customers to
another national network for the provision of fixed-line carriage services, such
network being a network over which Telstra is not in a position to exercise
control
Proposed subsection 577A(3) is included to put beyond doubt that a structural
separation undertaking given to the ACCC by Telstra must not only provide for
Telstra to structurally separate by the designated day, but must also provide for
appropriate and effective interim arrangements to apply between Telstra's business
units in the period between the undertaking coming into force and the designated day.
When a structural separation undertaking comes into force, the operational separation
regime currently applying to Telstra will cease to operate (see Divisions 2 and 3 of
Part 1 of Schedule 1 to the Bill). Telstra will need to put in place, through the
mechanism of its structural separation undertaking, appropriate interim arrangements
to apply from that time until the point at which Telstra achieves full structural
separation, to ensure that there is equivalence in supply of regulated services to
Telstra's wholesale customers and Telstra's retail business unit during this interim
period.
Proposed subsection 577A(2) clarifies that a matter relating to these interim
equivalence arrangements is taken to be a matter in connection with proposed
paragraph 577A(1)(a)--this is to put beyond doubt that such matters can be included
in a structural separation undertaking in accordance with proposed
paragraph 577A(1)(b).
Certain terms used in describing the interim equivalence requirements in proposed
subsections 577A(2) and (3) are given the same meaning that they have in Part 9 of
Schedule 1 (which deals with functional separation) (proposed subsection 577A(4)).
It will be necessary for the ACCC to have ongoing oversight of Telstra's
implementation of its structural separation undertaking, both in the lead-up to, and
after, the designated day. For this reason, proposed subsection 577A(5) imposes a
requirement that the ACCC must not accept a structural separation undertaking
submitted by Telstra unless the ACCC is satisfied that the undertaking provides
appropriate and effective means for the ACCC to monitor Telstra's compliance with
the undertaking, and for Telstra to put in place systems that promote the ACCC's
monitoring role.
Proposed subsection 577A(6) sets out the matters to which the ACCC must have
regard when deciding whether to accept a structural separation undertaking. Under
proposed paragraph 577A(6)(a), the Minister can set out matters that the ACCC must
have regard to in deciding whether to accept a structural separation undertaking. As a
result of proposed subsections 577A(8) and (9), the Minister is required to make an
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instrument specifying matters for this purpose: see below. Proposed
paragraph 577A(6)(b) requires the ACCC to also have regard to such other matters
that it considers relevant.
Proposed subsection 577A(7) authorises the Minister to set out the matters in writing
that the Minister will require the ACCC to consider under proposed
paragraph 577A(6)(a). For the avoidance of doubt, an instrument under proposed
subsection 577A(7) is not a legislative instrument (proposed subsection 577A(13)).
This reflects the fact that a direction from a Minister to any person is not subject to
disallowance (see section 44 of the LIA) and the fact that the instrument made by the
Minister under proposed subsection 577A(7) operates like a direction to the ACCC to
consider the specified matters. An instrument made by the Minister under proposed
subsection 577A(7) must be published on the Department's website (proposed
subsection 577A(23)).
Proposed subsections 577A(8) and (9) would provide that Telstra may not give an
undertaking to the ACCC under proposed subsection 577A(1) unless the Minister has
made an instrument under proposed subsection 577A(7) setting out matters that the
ACCC must consider when deciding whether to accept the undertaking, and that the
Minister must take all reasonable steps to ensure such an instrument comes into force
as soon as possible after proposed section 577A commences.
These provisions will avoid the possibility that Telstra may give a structural
separation undertaking to the ACCC before the Minister has made an instrument
setting out matters that the ACCC must take into account in considering whether to
accept the undertaking. The provisions will ensure that the ACCC is given
appropriate guidance as to matters it should take into account when considering an
undertaking, as well as ensuring that Telstra is able to consider the guidance given by
the Minister to the ACCC when preparing its draft undertaking.
Proposed new subsection 577A(10) defines the term `designated day' (used in
proposed paragraphs 577A(1)(a) and (577A(2)(d)). The `designated day' is 1 July
2018, or another day specified by the Minister in a non-legislative instrument under
proposed paragraph 577A(10)(b). Proposed subsection 577A(11) provides limitations
on the Minister's power to vary and revoke an instrument specifying the designated
day. Proposed subsection 577A(12) provides that, where a structural separation
undertaking has been accepted by the ACCC, the Minister may not make an
instrument under proposed paragraph 577A(10)(b) specifying a designated day that is
earlier than the day that was the designated day at the time that the structural
separation undertaking was accepted by the ACCC.
These provisions clarify that the Minister's power to specify a day is to be exercised
from time to time, including after Telstra has lodged a structural separation
undertaking, and even after the ACCC has accepted such an undertaking, or after such
an undertaking has entered into force. This is to deal with the potential situation in
which a section 577A undertaking provides for Telstra to be structurally separated by
a particular date, with that date having been settled on the basis of a particular
timeframe for steps involved in the process of achieving structural separation. If
those steps are then delayed for any reason, and Telstra is not in a position to achieve
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full structural separation by that date, the Minister needs to be able to extend the date
specified in the undertaking should it be appropriate to do so.
The Minister may not vary the instrument specifying the day. The Minister may only
revoke that instrument if a new instrument is made, and the new instrument specifies
a later date. Moreover, after the ACCC has accepted a structural separation
undertaking given by Telstra, from that point the Minister may only specify a day that
is later than the day that is the designated day at the time the undertaking is accepted
by the ACCC. This means, for example, that if the ACCC accepts a structural
separation undertaking given by Telstra before the Minister exercises his or her power
to make a legislative instrument specifying a designated day (in which case the
designated day will be 1 July 2018 - see proposed paragraph 577A(10)(a)), then the
Minister will only thereafter be able to make an instrument specifying a day that is
later than 1 July 2018.
These provisions are aimed at ensuring that, once the undertaking is accepted on the
basis of a particular day being the designated day, Telstra has the certainty of
knowing that it will not be required to achieve structural separation on an earlier
date - the date for achieving full structural separation may be altered, but only to a
later date.
An instrument under proposed paragraph 577A(10)(b) specifying a day as the
designated day is not a legislative instrument (proposed subsection 577A(13)). The
effect of such an instrument is to set another day as the designated day for the
purposes of proposed subsection 577A(1). This is a substantive exemption from the
LIA. The reason for exempting this type of instrument from the LIA is that any
exercise of the power will be to the benefit of Telstra and providing for Parliamentary
disallowance would introduce a further level of uncertainty for Telstra shareholders in
deciding whether to accept a structural separation undertaking. An instrument made
by the Minister under proposed paragraph 577A(10)(b) must be published on the
Department's website (proposed subsection 577A(12)).
Proposed subsection 577A(13) establishes that Telstra may request the Minister to
extend the date for achieving full structural separation. If Telstra gives the Minister
such a request, then the Minister must consider it, unless the Minister considers that
the request is frivolous or vexatious or was not made in good faith (proposed
subsections 577A(14) and (15)). These provisions are intended to ensure that, if
Telstra considers that it will not be in a position to achieve full structural separation
by the designated day, then it can request that the Minister extend the designated day.
It is expected that in making such a request Telstra would outline the reasons that it
considers it is necessary to extend the designated day, so that the Minister could form
a view as to whether it is appropriate to do so.
While the Minister will ordinarily be required to consider requests made by Telstra to
extend the designated day, this requirement does not apply in the case of a request that
is frivolous or not made in good faith. For example, in a situation in which the
Minister considers and refuses a request made to the Minister by Telstra to extend the
day, and then is given a new request to extend the day immediately or very shortly
after having decided to refuse the initial request, the Minister may be satisfied that the
second request is frivolous or not made in good faith (depending on the wider
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circumstances in which it is made). If so, then the Minister would not be required to
consider the request.
Proposed subsection 577A(16) indicates that the undertaking given to the ACCC by
Telstra must be expressed to be an undertaking under proposed section 577A, so that
when the ACCC receives the undertaking there can be no doubt as to whether the
undertaking was intended to be given in accordance with proposed section 577A.
Proposed subsection 577A(17) provides that the undertaking may not be withdrawn
after it has been accepted by the ACCC. This provision is aimed at ensuring that
careful consideration has been given to the matters proposed in the undertaking before
it is given, in the knowledge that if the undertaking is accepted by the ACCC, the
undertaking will become final. This has the effect that Telstra could withdraw a
structural separation undertaking it has given to the ACCC up to the point the ACCC
accepts the undertaking. If it is clear that the ACCC has concerns about an
undertaking Telstra has given it, Telstra will be able to withdraw and amend the
undertaking, and resubmit the amended undertaking to the ACCC for its consideration
Given that the matters proposed under the undertaking are likely to have a significant
impact on the telecommunications industry and the acceptance of the undertaking by
the ACCC would have the effect of triggering the operation of a number of provisions
proposed under the Bill there is a need for certainty and therefore a need for the
undertaking to be final (note: the undertaking can be varied to a limited degree - see
proposed section 577B). For this reason, this provision has the effect that Telstra
cannot withdraw the undertaking once it has been accepted.
Under proposed subsection 577A(18), an undertaking may provide for the ACCC to
perform functions or to exercise powers in relation to the undertaking. This is
intended to permit the structural separation arrangements to operate flexibly, by
ensuring that the undertaking can provide for the ACCC to make decisions on
particular matters at a future point. For example, a structural separation undertaking
could provide for the ACCC's independent verification that Telstra's relevant
information technology systems and relevant processes are `customer agnostic' and
process Telstra's wholesale customers' requests for relevant services, or access to
relevant services, on an equivalent basis to services requested by Telstra's retail
business units.
Proposed subsection 577A(19) confirms that Part 9 of Schedule 1 to the Tel Act does
not, by implication, limit the matters that may be included in an undertaking under
proposed section 577A. Part 9 of Schedule 1 to the Tel Act deals with the functional
separation of Telstra, which is a different separation model to the model of structural
separation referred to under proposed section 577A. However, there should be no
implication that any model proposed under an undertaking provided in accordance
with proposed subsection 577A(1) cannot include similar matters to those set out in
Part 9 of Schedule 1 to the Tel Act.
Proposed subsections 577A(20) and (21) provide that the Minister may exempt
particular fixed-line carriage services or telecommunications networks from proposed
subsection 577A(1) and the associated provisions, and that in either case, the
exemption may be unconditional or may be subject to specified conditions. Proposed
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subsections 577A(20) and (21) increase the flexibility provided to the Minister in
exempting fixed-line carriage services and telecommunications networks from the
structural separation requirements (including the migration plan), by permitting the
Minister to exempt, say, a particular telecommunications network from the
requirements but only if the undertaking lodged by Telstra addresses particular
matters or provides for structural separation to be achieved in a particular way. It is
intended that a wide range of conditions could be attached to exemptions made by the
Minister under proposed subsections 577A(20) and (21): for example, conditions
could operate so as to apply the exemptions differently on a geographic basis, or
conditions could operate so as to make exemptions dependent on the possible
occurrence of an event.
The term `associated provision' is defined in proposed subsection 577A(24). The
effect of the reference to the associated provisions at proposed subsections 577A(20)
and (21) is to make it clear that certain other provisions of the Tel Act and the CCA
apply to the fixed-line carriage services and telecommunications networks that are
required to be the subject of a structural separation undertaking under proposed
subsection 577A(1), and not to other fixed-line carriage services or
telecommunications networks that have been exempted from such an undertaking by
virtue of an instrument made by the Minister.
The associated provisions to which exemptions will also apply are:
- proposed subsection 577BA(11) of the Tel Act (which relates to a migration
provision in a contract between Telstra and an NBN corporation); and
- proposed subsection 577BC(2) of the Tel Act (which relates to the matters that
must be addressed by a draft or final migration plan).
Proposed section 577AA Acceptance of undertaking about structural
separation may be subject to the occurrence of events
Proposed section 577AA provides that the ACCC's decision to accept an undertaking
under proposed subsection 577A(1) may be expressed to be subject to the occurrence
of one or more specified events within a specified period after the undertaking is
accepted.
An event may only be specified under proposed subsection 577AA(1) if Telstra has
nominated that particular event in a document accompanying the undertaking given to
the ACCC under proposed section 577A.
Proposed paragraph 577AA(1)(c) lists the categories which a nominated event must
fall under in order to be specified under proposed subsection 577A(1). The types of
events listed at proposed subparagraphs 577AA(1)(c)(i)-(v) anticipate that a structural
separation undertaking submitted by Telstra may involve particular types of approvals
under the Corporations Act 2001 or under the Listing Rules of the Australian
Securities Exchange. Proposed paragraph 577AA(1)(c)(vi) permits Telstra to submit
a structural separation undertaking to the ACCC on condition that the undertaking
will only take effect if the ACCC approves a draft migration plan provided by Telstra.
Further explanation about the concept of a migration plan and the way in which this
condition would operate, if specified by Telstra, is provided below in the discussion
of the migration plan provisions (proposed sections 577BB-577BF). Proposed
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subparagraphs 577AA(1)(vii) and (viii) recognise that Telstra may submit to the
ACCC a structural separation undertaking which will only take effect in the event that
the Minister decides to grant Telstra an exemption from the requirement to lodge
undertakings about hybrid fibre-coaxial networks and subscription television
broadcasting licences. The final category, specified in proposed
subparagraph 577AA(1)(c)(ix), allows an event to be specified by a Ministerial
instrument in force under proposed subsection 577AA(3).
If Telstra nominates one or more of the listed events in a document accompanying an
undertaking that it gives to the ACCC under proposed section 577A, then the ACCC
may either:
- accept the undertaking, subject to the occurrence of that event, or those events,
within a specified period after the undertaking is accepted; or
- reject the undertaking.
In that circumstance, it is not open to the ACCC to accept the undertaking without
making its acceptance subject to the occurrence of the event, or the events, nominated
by Telstra. This will provide Telstra with some certainty about the circumstances in
which it will be required to implement structural separation according to its
undertaking.
Proposed subsection 577AA(2) provides that a nomination under
subsection 577AA(1) must not specify an event by reference to the timing of the
event. In accordance with proposed subsection 577AA(1), it will be for the ACCC to
specify the period within which the event must occur - subject to the requirement that
the period must be six months, or if another period is specified by the Minister in
writing, that period (proposed subsection 577AA(5)).
Proposed subsection 577AA(3) allows the Minister to specify events, in writing, for
the purposes of proposed subparagraph 577AA(1)(c)(ix). This will allow some
flexibility, should it become apparent that Telstra wishes to nominate additional types
of events, while maintaining appropriate scrutiny of the events that may be
nominated.
An instrument made by the Minister under proposed subsection 577AA(3) or (5) is
not a legislative instrument (proposed subsection 577AA(10)). It is not appropriate
that these instruments should be legislative instruments because Telstra will need
clarity around the arrangements before Telstra proceeds with any subsequent steps,
such as putting a resolution to shareholders. The Minister must cause a copy of an
instrument made under either provision to be published on the Department's website
(proposed subsection 577AA(9)).
Where the ACCC's decision to accept a structural separation undertaking is expressed
to be subject to the occurrence of an event or more than one event within a specified
time, proposed subsection 577AA(6) places a requirement on Telstra to notify the
ACCC in writing of the occurrence of each event as soon as practicable after the
occurrence of that event. (This requirement does not apply to the acceptance by the
ACCC of a migration plan, if such an event is specified.) This will ensure the ACCC
is made aware of when a structural separation undertaking comes into force (see
proposed section 577AB).
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Proposed subsection 577AA(7) provides that, if the ACCC's decision to accept a
structural separation undertaking is expressed to be subject to the occurrence of an
event within a specified time, and that event does not occur within that time, then the
Tel Act (other than subclause 76(4) of Schedule 1) has effect as if the undertaking had
never been accepted by the ACCC. This provision ensures that there are no
unintended consequences stemming from the ACCC's acceptance of a structural
separation undertaking, in the circumstance where that undertaking never comes into
force. The reference to subclause 76(4) of Schedule 1 to the Tel Act is included
because that subclause permits the Minister to extend the period within which Telstra
must give the Minister a functional separation undertaking, and does so by reference
to matters including whether Telstra has given the ACCC an undertaking under
proposed section 577A, and whether the ACCC has accepted the undertaking.
Proposed subsection 577AA(8) is similar to proposed subsection 577AA(7), and deals
with circumstances where the ACCC's decision to accept a structural separation is
expressed to be subject to the occurrence of more than one event within a specified
time, and at least one of those events does not occur within that time.
Proposed section 577AB When undertaking about structural separation
comes into force
Proposed section 577AB sets out rules for determining when an undertaking under
proposed subsection 577A(1) comes into force, depending upon whether acceptance
of that undertaking is expressed to be subject to a single event occurring (proposed
paragraph 577AB(a)), two or more events occurring simultaneously (proposed
paragraph 577AB(b)), two or more events occurring at different times (proposed
paragraph 577AB(c)), or it is not subject to any events occurring (proposed
paragraph 577AB(d)).
Proposed section 577AC Publication requirements for undertaking about
structural separation
Proposed section 577AC provides that if a decision is made by the ACCC to accept an
undertaking about structural separation under proposed section 577A, and that
decision is expressed to be subject to one or more specified events occurring, the
ACCC must:
(a) as soon as practicable after the decision has been made, publish the
undertaking and terms of the decision on the ACCC's website; and
(b) publish on its website a notice that the undertaking has come into force, as
soon as practicable after the ACCC has become aware of this.
Where the decision is not expressed to be subject to one or more specified events
occurring, the ACCCC is required as soon as practicable after accepting the
undertaking, to publish it on the ACCC website.
Proposed section 577AD Compliance with undertaking about structural
separation
Proposed section 577AD provides that Telstra must comply with a structural
separation undertaking that is given by Telstra and that is in force. Clause 1 of
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Schedule 1 to the Tel Act provides that compliance with that Act is a condition of a
carrier licence. Therefore, the effect of proposed section 577AD is that, if a structural
separation undertaking is in force, it is a condition of Telstra's carrier licence that
Telstra must comply with the undertaking. There will be a range of enforcement
options available to the ACCC to ensure compliance by Telstra with this carrier
licence condition, such as formal warnings, injunctions and recovery of a pecuniary
penalty. In addition, proposed section 577G will continue to be available as an
alternative means for the ACCC to seek enforcement of a structural separation
undertaking.
Proposed section 577B Variation of undertaking about structural separation
Proposed section 577B contains provisions setting out the circumstances under which
a structural separation undertaking in force under proposed section 577A could be
varied.
Proposed subsection 577B(1) provides that proposed section 577B only applies if an
undertaking is in force under proposed section 577A. One effect of this is that Telstra
may not seek to vary a structural separation undertaking between the period when the
ACCC accepts the undertaking and it comes into force (ie. before the events specified
by Telstra under proposed section 577AA all occur).
Proposed subsection 577B(2) allows Telstra to give the ACCC a variation of the
undertaking in so far as the undertaking is covered by proposed
paragraph 577A(1)(b), and does not consist of provisions of a migration plan (see
proposed sections 577BB-577BF). Provisions of an in-force migration plan are
treated as though they were provisions of the structural separation undertaking:
proposed subsection 577BE(5). There is a specific mechanism for variations of the
provision of a migration plan: see proposed section 577BF. This means Telstra is
permitted to propose variations as to the action it will take or refrain from taking in
order to comply with structural separation.
Given that the undertaking may require Telstra to take action, or refrain from taking
action, under proposed paragraph 577A(1)(b) over the course of several years, it is
appropriate that a mechanism be included to vary the nature of the obligations
applying to Telstra during that period if necessary to do so. However, Telstra is not
permitted to propose variations that alter the character of the undertaking as described
by reference to proposed paragraph 577A(1)(a).
Proposed subsection 577B(3) provides that after considering the variation, the ACCC
must either accept or reject the variation, having regard to the matters
(if any) set out in an instrument in force under proposed subsection 577B(5)
(proposed paragraph 577B(4)(a)) and such other matters (if any) the ACCC considers
relevant (proposed paragraph 577B(4)(b)).
Proposed subsection 577B(5) authorises the Minister to set out the matters in writing
that he or she requires the ACCC to consider for the purposes of proposed
paragraph 577B(4)(a). For the avoidance of doubt, and for the same reasons noted
with respect to instruments under proposed subsection 577A(3), an instrument under
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proposed subsection 577B(5) is not a legislative instrument (proposed
subsection 577B(9)).
Proposed subsections 577B(6) and (7) confirm that the variation takes effect when it
is accepted by the ACCC and that the ACCC must publish the variation on its website
as soon as practicable.
Proposed subsection 577B(8) requires the Minister to cause a copy of his or her
instrument under proposed subsection 577B(5) to be published on the Department's
website.
Proposed section 577BA Compliance with undertaking about structural
separation
The object of proposed subsection 577BA is to promote the national interest in
structural reform of the telecommunications industry by authorising, for the purposes
of subsection 51(1) of the CCA (formerly the Trade Practices Act 1974), certain
conduct engaged in by Telstra, NBN corporations, and other relevant persons.
Section 51 of the CCA provides that, in determining whether a person has
contravened Part IV of the CCA, certain matters must be disregarded, including
anything specified in, and specifically authorised by, an Act. Proposed
section 577BA specifies and specifically authorises certain conduct for the purposes
of section 51 of the CCA. The result of this is that the conduct specifically authorised
under proposed section 577BA must be disregarded when considering whether a
person who has engaged in that conduct has contravened Part IV of the CCA.
The conduct that is authorised is described in detail in proposed
subsections 577BA(2)-(10).
The conduct in question is also carved out from the operation of Part XIB of the CCA
(which provides a specific anti-competitive conduct regime for the
telecommunications industry). As a result of the inclusion of proposed
subsection 151AJ(9) of the CCA by item 33 in Schedule 1 to the Bill, a person who
engages in conduct that is authorised for the purposes of subsection 51(1) of the CCA
by proposed section 577BA is taken not to engage in anti-competitive conduct for the
purposes of Part XIB of the CCA.
Proposed subsection 577BA(2) specifies that the giving by Telstra of a draft structural
separation undertaking, as well as the giving of a migration plan in accordance with
an in-force structural separation undertaking is authorised for the purposes of
subsection 51(1) of the CCA. In addition, the giving of a variation to either an
in-force structural separation undertaking or an in-force migration plan is authorised
for the purposes of subsection 51(1) of the CCA. This provision is intended to avoid
any suggestion that actions by Telstra to put in place, or vary, its structural separation
undertaking and migration plan could put Telstra in contravention of Part IV of the
CCA.
Proposed subsections 577BA(3)-(5), (8) and (10) authorise particular conduct
engaged in by Telstra or an NBN corporation. `NBN corporation' is defined in
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proposed subsection 577BA(12) and means NBN Co Ltd, NBN Tasmania Ltd, or a
related body corporate (within the meaning of the Corporations Act 2001) of NBN
Co.
Proposed subsection 577BA(3) provides that where:
- Telstra and an NBN corporation enter into a contract, arrangement or
understanding (here abbreviated to `agreement') prior to a structural separation
undertaking coming into force; and
- the operative provisions in the agreement are subject to a condition precedent
relating to a structural separation undertaking coming into force;
then:
- the entering into of that agreement by Telstra and the NBN corporation is
authorised; and
- if a copy of the agreement was given to the ACCC before the ACCC had accepted
the undertaking --conduct engaged in by Telstra and the NBN corporation or
another NBN corporation to give effect to that written agreement is authorised
after the SSU has come into force. This will allow the ACCC to scrutinise the
agreements between Telstra and NBN Co before the ACCC decides whether to
accept the undertaking. If agreements are not made in writing, then they must be
reduced to writing so that a copy can be given to the ACCC.
The reference in proposed subsection 577BA(3) to `operative provisions' of the
agreement being subject to a condition precedent is intended to acknowledge that
there may be some mechanical or procedural provisions in such agreements (such as
provisions relating to confidentiality) that take effect from the time the agreement is
entered into. Inclusion of provisions of this kind is not intended to prevent an
agreement from being the subject of the authorisation under proposed
subsection 577BA(3).
Proposed subsections 577BA(4) and (5) provide that where, prior to a structural
separation undertaking coming into force:
- Telstra and an NBN corporation enter into a contract, arrangement or
understanding (here abbreviated to `agreement') and:
- the agreement contains a `migration provision';
then:
- the entering into of that agreement by Telstra and the NBN corporation is
authorised; and
- conduct engaged in by Telstra or the NBN corporation prior to the structural
separation undertaking coming into force in order to give effect to the migration
provision is authorised, unless before the conduct was engaged in:
o the ACCC had refused to accept the most recent draft structural separation
undertaking given to it by Telstra; or
o Telstra had given the ACCC a draft structural separation undertaking that was
conditional on the occurrence within a specified period of specified events,
and one of those events has not occurred within that period.
Because the conduct in question in proposed subsection 577BA(5), to give effect to a
provision of the agreement, must be engaged in at a time prior to a structural
separation undertaking coming into force, this has the practical effect that the
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agreement under that proposed subsection must also be entered into prior to a
structural separation undertaking coming into force.
The term `migration provision' is given meaning by proposed subsection 577BA(11).
A migration provision is:
o a provision that relates to Telstra ceasing to supply fixed-line carriage services
over its own copper network or commencing to supply such services using the
national broadband network (see the definition of this term in proposed
subsection 577BA(12), and the explanation below); or
o a provision that relates to the provision of services by Telstra to NBN Co (or
vice versa) in connection with that migration; or
o a provision that provides for Telstra to give NBN Co information (or vice
versa) in connection with that migration.
`National broadband network' is defined in proposed subsection 577BA(12) and
means a telecommunications network for the high speed carriage of communications,
where an NBN corporation is involve in the creation or development of the network.
Subsections 577BA(4) and (5) will allow Telstra to enter into agreements with NBN
Co and other NBN corporations in the expectation of the ACCC accepting a structural
separation undertaking that is submitted to it. The authorisation of conduct provided
by proposed subsection 577BA(5) will cease to apply if the ACCC rejects a structural
separation undertaking given to it by Telstra, but will recommence if Telstra then
gives the ACCC a new structural separation undertaking for the ACCC's
consideration and possible approval - this is the effect of proposed
paragraph 577BA(5)(e).
Similarly, if the ACCC has accepted a structural separation undertaking given to it by
Telstra subject to the occurrence of certain events within a specified period (see
proposed section 577AA), and at least one of those events does not occur during that
period, then the structural separation undertaking will not come into force. In this
circumstance, the authorisation of conduct provided by proposed
subsection 577BA(5) will also cease to apply - this is the effect of proposed
paragraph 577BA(5)(f).
In the situation where Telstra never lodges a structural separation undertaking, the
authorisation of conduct under proposed subsection 577BA(5) will cease when a
functional separation undertaking comes in to force (proposed
paragraph 577BA(5)(g)). Functional separation is dealt with in proposed Part 9 of
Schedule 1 to the Tel Act, see item 31 of Schedule 1 to the Bill. Functional
separation will only eventuate if Telstra does not proceed with structural separation.
This measure will therefore ensure that the authorisation of conduct provided by
proposed subsection 577BA(5) will not continue once it is clear that Telstra is not
proceeding with structural separation.
Proposed subsection 577BA(8) provides that where:
- Telstra and an NBN corporation enter into a contract, arrangement or
understanding (here abbreviated to `agreement'); and
- Telstra enters into that agreement in order to comply with an in-force structural
separation undertaking:
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then
- the entering into of that agreement by Telstra and the NBN corporation is
authorised; and
- conduct engaged in by Telstra or the NBN corporation (or another NBN
corporation) to give effect to that agreement is authorised.
This proposed provision will ensure that contractual and similar arrangements
between Telstra and NBN Co, and other NBN corporations, that Telstra commits to in
order to fulfil obligations arising under its structural separation will not contravene
Part IV of the CCA. Telstra will be able to specifically identify in its structural
separation undertaking the contracts, arrangements or understandings that it will enter
into with NBN corporations and that will benefit from the authorisation afforded by
this proposed provision. This will enable the ACCC to scrutinise, at the time it is
considering whether to accept a structural separation undertaking, the types of
arrangements and conduct that will be authorised.
If Telstra and NBN Co enter into an agreement in accordance with proposed
subsection 577BA(8) and then vary that agreement, that variation will take the form
of a new agreement which will, if entered into by Telstra in order to comply with an
in-force structural separation undertaking, also be covered by the authorisation
provided by this proposed subsection.
For clarity, the Minister is also empowered (under proposed subsection 577BA(9)) to
determine, by legislative instrument, that the entering into of a particular contract,
arrangement or understanding between Telstra and NBN Co was required in order for
Telstra to comply with an in-force structural separation undertaking, thereby
providing certainty that both the entering into, and giving effect to, that contract,
arrangement, or understanding is authorised under proposed subsection 577BA(8).
This legislative instrument will be subject to Parliamentary scrutiny and disallowance.
Proposed subsection 577BA(6) provides that conduct engaged in by Telstra in order
to comply with an in-force structural separation undertaking is authorised. Telstra is
required to set out in its undertaking the activities that it will engage in for the
purposes of achieving structural separation (see proposed paragraph 577A(1)(b)).
This provision ensures that Telstra's engagement in those activities will not place
Telstra in contravention of Part IV of the CCA.
As part of the process of structurally separating, Telstra may dispose of assets.
Proposed subsection 577BA(7) provides a particular authorisation relating to the
disposal of assets by Telstra under its structural separation undertaking. The
acquisition of an asset from Telstra, by a person specified by Telstra in an in-force
structural separation undertaking, where disposal of that asset is required in order for
Telstra to comply with that undertaking, is authorised. `Asset' in this context is
defined in proposed subsection 577BA(12). Any disposal of assets under Telstra's
structural separation undertaking would be subject to the requirement at proposed
subsection 577BA(7) that Telstra must identify the person by whom the asset is being
acquired. The general provision (proposed subsection 577BA(6)) authorising conduct
under an in-force structural separation is not intended to apply to the disposal by
Telstra of assets under a structural separation undertaking.
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Proposed sections 577BB-577BF deal with the concept of a migration plan, which is a
separate document under Telstra's structural separation undertaking that Telstra will
give to the ACCC for the ACCC's acceptance. The migration plan will deal with
matters concerning processes involved in the migration of Telstra's customers from
its own fixed-line network to the national broadband network. It will also deal with
the timing of those processes, by either setting out a timetable for action or setting out
a method for determining such a timetable (see proposed
subparagraphs 577BB(2)(b)(i) and (ii)). Proposed subsection 577BA(10) provides a
specific authorisation for conduct engaged in by Telstra or an NBN corporation for
the purposes of determining a timetable for the taking of that action under the
migration plan, provided that the conduct is consistent with the method that is set out
in the migration plan.
Proposed Subdivision B--Migration Plan
A migration plan is a separate document under the structural separation undertaking
that Telstra will give to the ACCC which would contain detail of any structural
separation arrangement involving a migration of its retail customers to the national
broadband network. It is up to Telstra whether or not to include a migration plan
under its structural separation undertaking. It is open to Telstra to submit the
migration plan to the ACCC at a later time than its draft structural separation
undertaking: Telstra can elect to give its migration plan to the ACCC after its
structural separation undertaking has come into force.
If Telstra proposed a structural separation arrangement involving a migration of its
retail customers to the national broadband network, then the specific details of that
migration (such as the timing and sequence of the migration of customers in various
geographic regions) may well not be known at the time that Telstra lodges a structural
separation undertaking with the ACCC. One reason for this is that the geographic
sequencing of and the timing of the migration would be dependent on the timing of
the roll-out of the national broadband network. For this reason, Telstra has the
flexibility to lodge a migration plan with the ACCC either immediately after it gives
the ACCC a structural separation undertaking under proposed section 577A, or at a
later time.
The migration plan is a document that Telstra will separately lodge with the ACCC,
which will be considered and approved by the ACCC separately from the structural
separation undertaking, and that will deal with matters concerning the timing of, and
processes involved in, the migration of customers from Telstra's own fixed-line
network to the national broadband network.
Given that a migration plan would deal with steps to be taken in migrating customers
to the national broadband network, it is expected that Telstra would consult closely
with NBN Co in the preparation of any migration plan.
Once a migration plan is approved by the ACCC, the provisions of that plan will be
treated as provisions of the in-force structural separation undertaking.
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Proposed section 577BB Migration plan principles
Proposed section 577BB provides that the Minister may determine in writing
specified `migration plan principles'. The migration plan principles will set out the
mandatory elements of a migration plan. The effect of the migration plan principles is
to define the scope of the migration plan: if the ACCC is satisfied that a draft
migration plan submitted to it by Telstra complies with the migration plan principles,
then the ACCC must approve the plan (see proposed paragraph 577BD(2)(a)).
It is expected that the migration plan principles will deal with matters such as
requiring customers of Telstra's competitors to receive equivalent treatment in
migrating from Telstra's copper network to the NBN to that received by Telstra's
retail customers.
Before making a determination setting out migration plan principles the Minister must
seek public comments, for a period of 14 days, on a draft of the determination. The
same process applies to any variation of the determination once it has been made (see
proposed subsection 577BB(2)).
The Minister's determination setting out the migration plan principles is not a
legislative instrument (proposed subsection 577BB(4)). This is a substantive
exemption from the LIA. In the absence of proposed subsection 577BB(4), a
determination setting out migration principles would meet the definition of a
`legislative instrument' in the LIA as it would determine regulatory requirements for
Telstra to meet in preparing its migration plan under the structural separation
arrangements. The reason for exempting this determination from the LIA is that
Telstra will need a high degree of certainty about the principles before developing its
migration plan. Because the migration plan will form part of Telstra's structural
separation undertaking (see proposed subsection 577BE(5)) and because its
acceptance by the ACCC could be a specified event to which the entry into force of a
structural separation undertaking is subject (see proposed section 577AA), Telstra
will need clarity on the matters that it will be required to address in its migration plan.
The migration plan principles will also be subject to a public consultation process and
will be published on the Department's website to provide transparency on the matter
(proposed subsection 577BB(3)).
Proposed section 577BC Migration plan
Proposed paragraph 577A(1)(b) of the Tel Act provides that Telstra's structural
separation undertaking can set out specified action that Telstra will take, or will
refrain from taking, in connection with the outcome specified at proposed
paragraph 577A(1)(a). Proposed subsection 577BC(1) establishes that the actions
Telstra specifies that it will take in its structural separation can include giving the
ACCC a draft migration plan, once the relevant structural separation undertaking has
come into force. (Note that by virtue of proposed section 577BDA, Telstra will be
able to submit a migration plan before its structural separation undertaking comes into
force.)
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The requirements of a draft migration plan are set out at proposed
subsection 577BC(2): it must specify the action that Telstra will take in relation to the
steps involved in migrating fixed-line services that it supplies to customers from a
network over which Telstra is in a position to exercise control, to the national
broadband network. It must also set out a timetable for the taking of that action, or a
method for determining such a timetable: this is intended to permit Telstra to arrive at
a timetable for undertaking migration in consultation with other relevant parties, for
instance NBN Co or other NBN corporations (see also proposed
subsection 577BA(10)).
The relevant fixed-line carriage services and telecommunications networks are those
which need to be the subject of Telstra's in-force structural separation undertaking:
proposed subsection 577BC(2) is an `associated provision' within the meaning of
proposed subsection 577A(14) (see the explanatory note for that proposed provision,
above).
`National broadband network' is defined in proposed subsection 577BC(8). An
explanation of this term is provided above, in relation to proposed
subsection 577BA(12).
For the purposes of proposed section 577BC, `fixed-line carriage service' is defined
in proposed subsection 577BC(8), and has the same meaning as in proposed
section 577A: a carriage service 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 (eg. an
infrastructure-based service that is not of itself a carriage service).
In addition, a draft or final migration plan may contain provisions dealing with other
matters specified by the Minister in a written instrument (proposed
subsection 577BC(3)), and must not contain provisions dealing with matters set out in
a further written instrument (proposed subsection 577BC(4)). Written instruments
made for this purpose are not legislative instruments. This is a substantive exemption
from the LIA. The reason for exempting this instrument from the LIA is to give
Telstra a high degree of certainty about what the migration plan may contain - see
further the explanation provided in relation to proposed subsection 577BB(4). An
instrument made for this purpose must be published on the Department's website.
Telstra may only submit a draft migration plan to the ACCC if a determination is in
force setting out the migration plan principles (see proposed subsection 577BC(5)).
This will ensure that the Minister has the opportunity to set out the important
principles which a migration plan must comply with before Telstra submits details of
any proposed migration to the ACCC for its consideration.
It is expected that Telstra would consult closely with NBN Co in the preparation of
any migration plan, given the subject matter of the plan involves Telstra commencing
to supply services over the national broadband network.
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Proposed section 577BD Approval of draft migration plan by the ACCC--plan
given after undertaking about structural separation comes into force
Proposed section 577BD sets out what the ACCC must do when it receives a draft
migration plan from Telstra after Telstra's structural separation undertaking comes
into force. (Proposed section 577BDA permits Telstra to give the ACCC a draft
migration plan before its structural separation comes into force, and sets out a
different process for the ACCC to follow in such a case.)
First, it must publish the draft migration plan on its website along with a notice
seeking comments, and invite submissions to be provided to the ACCC within a
28-day period. The ACCC must publish on its website each submission it receives
within this period, and must consider those submissions (see proposed
subsection 577BD(3)).
Having considered any submissions it receives during that 28-day period, if the
ACCC is satisfied that the draft migration plan Telstra has submitted complies with
the migration plan principles determined by the Minister under proposed
subsection 577BB(1), the ACCC must approve the plan. Otherwise, it must refuse to
approve the plan, and direct Telstra to give it a replacement migration plan that does
comply with those principles within 30 days after notice is given to it (proposed
subsection 577BD(2)). Whether it approves or refuses to approve the draft migration
plan, the ACCC must notify Telstra as soon as practicable after making the decision
(proposed subsection 577BD(6)).
If Telstra receives such a direction from the ACCC to submit a replacement migration
plan to the ACCC, Telstra must comply with the direction (proposed
subsection 577BD(4)). By virtue of clause 1 of Schedule 1 to the Tel Act, this
requirement is a condition of Telstra's carrier licence, and failure to comply would
render Telstra subject to a range of possible enforcement action. The ACCC will
consider and make a decision about the undertaking that Telstra gives to the ACCC in
compliance with the direction under proposed section 577BDB.
Proposed subsection 577BD(5) provides that, if Telstra provides the ACCC with a
replacement plan in accordance with a direction received from the ACCC, then the
replacement plan is treated as a draft migration plan given to the ACCC in accordance
with a structural separation undertaking that is in force. This means that wherever the
Tel Act refers to Telstra giving the ACCC a draft migration plan "in accordance with
its structural separation undertaking", that reference will include a draft migration
plan given to the ACCC in response to a direction from the ACCC under proposed
section 152BD. An example of such a reference is in proposed new subclause 76(2)
of Schedule 1 to the Tel Act (inserted by item 31), which has the effect that the
requirement on Telstra to give the Minister a draft functional separation undertaking
will cease if Telstra's structural separation undertaking requires it to give the ACCC a
migration plan, Telstra has given the ACCC a draft migration plan in accordance with
the undertaking, and the migration plan has been approved by the ACCC. Proposed
subsection 577BD(5) ensures that mechanism will operate appropriately whether the
ACCC accepts the first draft migration plan given to it by Telstra, or a later plan given
to it by Telstra in response to a direction after the ACCC has refused to approve the
first draft migration plan.
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Proposed section 577BDA Approval of draft migration plan by the ACCC--
plan given before undertaking about structural separation comes into force
Proposed section 577BDA permits Telstra, in certain circumstances, to give the
ACCC a draft migration plan after Telstra has submitted its structural separation
undertaking to the ACCC but before its structural separation comes into force, and
sets out the process the ACCC must follow if Telstra does so.
The process for the ACCC's consideration of a draft migration plan given to it in
accordance with proposed subsection 577BDA(1) is different to the process the
ACCC would follow if Telstra were to give it a draft migration plan after the
structural separation undertaking had come into force.
Under proposed section 577BD, where Telstra gives the ACCC a draft migration plan
after the structural separation undertaking has come into force and the ACCC refuses
to approve that plan, then the ACCC directs Telstra to prepare a replacement
migration plan and Telstra must comply with that direction.
Where Telstra gives the ACCC a draft migration plan under proposed
section 577BDA before the structural separation undertaking has come into force and
the ACCC refuses to approve that plan, then the ACCC requests Telstra to prepare a
replacement migration plan and it is for Telstra to decide whether or not to comply
with that request.
The reason for this distinction is that, in order to be able to give the ACCC a draft
migration plan after it gives its structural separation undertaking to the ACCC but
before the structural separation undertaking comes into force, Telstra must have
nominated the acceptance of a draft migration plan by the ACCC as a specified event
under proposed section 577AA. As described in the notes for proposed
section 577AA, the effect of this nomination is that any decision by the ACCC to
accept the structural separation undertaking must be subject to the occurrence within
the specified period (see proposed subsection 577AA(4)) of the specified event. In
this context, this will mean that Telstra's structural separation undertaking will not
come into force unless the ACCC approves a draft migration plan within the specified
period.
This mechanism allows Telstra to have a key role in deciding whether its structural
separation undertaking will come into force at all, depending on whether it is willing
to abide by changes sought to be made to its draft migration plan by the ACCC. The
different process established by proposed section 577BDA (under which the ACCC
may only request Telstra to provide a replacement migration plan if the ACCC refuses
to approve a draft migration plan given to it by Telstra) will permit Telstra to decide
not to provide a replacement migration plan to the ACCC if, on the basis of the
changes to the migration plan sought by the ACCC in its request, Telstra determines it
does not wish to proceed. In this circumstance, at the end of the specified period
under section 577AA Telstra's structural separation undertaking would not come into
force, because the ACCC would not have accepted a migration plan. A result of this
is that the functional separation regime in proposed Part 9 of Schedule 1 to the Tel
Act would be triggered.
107
Other provisions in proposed section 577BDA mirror similar provisions in proposed
section 577BD, which are explained in the notes for that section, above. These
include provisions dealing with:
o the criteria for deciding whether to approve or refuse to approve a draft
migration plan (proposed paragraphs 577BDA(2)(a) and (b));
o the process the ACCC must follow for publication of the draft migration plan
and calling for submissions on that plan (proposed subsection 577BDA(5));
o notifying Telstra of its decision (proposed subsection 577BDA(6)); and
o treating a replacement migration plan given in response to a request as though
it were given in accordance with the undertaking (proposed
subsection 577BDA(5)).
Proposed section 577BDB Approval of draft migration plan by the ACCC--
plan given in compliance with a direction
If Telstra gives the ACCC a draft migration plan (`the initial plan') after Telstra's
structural separation undertaking comes into force, and the ACCC refuses to approve
that draft plan, then the ACCC must direct Telstra to provide a replacement draft
migration plan (proposed subparagraph 577BD(2)(b)(ii)), and Telstra must comply
with that direction (proposed subsection 577BD(4)). Proposed section 577BDB sets
out what the ACCC must do when it receives a replacement draft migration plan from
Telstra in accordance with such a direction.
The process is the same as the process under proposed section 577BD for the ACCC's
consideration of the initial plan, which is described in detail in the notes for that
provision above.
Notably, if the ACCC refuses to approve the replacement draft migration plan given
to it by Telstra, then it must direct Telstra to provide a further replacement draft
migration plan (see proposed subparagraph 577BDB(2)(b)(ii)), and Telstra must
comply with that direction (proposed subsection 577BDB(4)). If this occurs, then the
ACCC considers the further draft replacement plan in accordance with proposed
section 577BDB: that is, the section is recursive.
Proposed subsection 577BDB(5) provides that, if Telstra provides the ACCC with a
further replacement plan in accordance with a direction received from the ACCC
under proposed subparagraph 577BDB(2)(b)(ii), then the replacement plan is treated
as a draft migration plan given to the ACCC in accordance with a structural separation
undertaking that is in force. The reason for this is explained above in the notes for
proposed section 577BD.
Proposed section 577BDC Approval of draft migration plan by the ACCC--
plan given in response to a request
If Telstra gives the ACCC a draft migration plan (`the initial plan') after Telstra's
structural separation undertaking comes into force, and the ACCC refuses to approve
that draft plan, then the ACCC must request Telstra to provide a replacement draft
migration plan (proposed subparagraph 577BDA(2)(b)(ii)), and Telstra may choose to
provide a replacement draft migration plan in accordance with that request. Proposed
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section 577BDC sets out the process the ACCC must follow when it receives a
replacement draft migration plan from Telstra in accordance with such a request.
The process is the same as the process under proposed section 577BD for the ACCC's
consideration of the initial plan, which is described in detail in the notes for that
provision, above.
Similar to the situation under proposed section 577BDB, if the ACCC refuses to
approve the replacement draft migration plan given to it by Telstra, then it must
request Telstra to provide a further replacement draft migration plan (see proposed
subparagraph 577BDC(2)(b)(ii)), and Telstra may choose to do so. If Telstra does so,
then the ACCC considers the further draft replacement plan in accordance with
proposed section 577BDC: like proposed section 577BDB, this section is recursive.
Proposed section 577BE Effect of approval of draft migration plan
Proposed section 577BE provides for the effect of the approval of a draft migration
plan. On approval, a draft migration plan becomes a final migration plan. The
provisions of a final migration plan are treated as though they were provisions of the
in-force structural separation undertaking under which the migration plan has been
required (proposed subsection 577BE(5)). This means that compliance by Telstra
with an in-force structural separation undertaking includes compliance with a final
migration plan. Wherever the Bill refers to Telstra "complying with an undertaking in
force under section 577A" (see for example proposed section 577AD), this will also
include compliance by Telstra with a final migration plan.
The ACCC is required to publish a final migration plan on its website as soon as
possible after it comes into force. The time that the final migration plan comes into
force is ascertained in accordance with proposed subsections 577BE(2) and (3).
The effect of proposed subsection 577BE(7) is that a final migration plan may provide
for the ACCC to perform functions or to exercise powers in relation to the plan. This
is intended to permit the migration arrangements to operate flexibly, by ensuring that
the undertaking can provide for the ACCC to make decisions on particular matters at
a future point. A similar provision applies with respect to the structural separation
plan generally: see proposed subsection 577A(8).
Proposed subsection 577BE(8) clarifies that a final migration plan is not a legislative
instrument.
Proposed section 577BF Variation of final migration plan
Although provisions of the final migration plan are treated as provisions of the
structural separation undertaking, the process set out under proposed section 577B for
variation of a structural separation undertaking does not apply to the provisions of a
final migration plan (see proposed subsection 577B(2)). Instead, proposed
section 577BF provides a specific mechanism for Telstra to vary a final migration
plan, which requires the ACCC to follow a process similar to the process it is required
to follow when considering the initial draft migration plan given to it by Telstra. The
ACCC must consult publicly on a proposed variation to a final migration plan
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(proposed subsection 577BEF(4)), although the requirement for consultation does not
apply to minor variations. The ACCC must approve the variation if it is satisfied that
the final migration plan, as varied, complies with the migration plan principles;
otherwise, it must refuse to approve the variation (proposed subsection 577BF(2)).
The ACCC is required to publish on its website copies of approved variations to the
final migration plan.
Proposed Division 3--Hybrid fibre-coaxial networks
Proposed section 577C Acceptance of undertaking about hybrid fibre-coaxial
networks
Proposed subsection 577C(1) allows the ACCC to accept a written undertaking by
Telstra that Telstra will cease to be in control of a hybrid fibre-coaxial network in
Australia at all times after the period specified in the undertaking. Under proposed
paragraph 577C(1)(b) Telstra is required, in its undertaking, to set out specified action
that it will take and/or refrain from taking in connection with the undertaking.
Any hybrid fibre-coaxial network Telstra may acquire in any country other than
Australia is not the subject of an undertaking under proposed section 577C. A written
undertaking given by Telstra for the purposes of proposed section 577C, would only
require Telstra to cease to be in control of a hybrid fibre-coaxial network in Australia
at all times after the period specified in the undertaking.
Proposed subsection 577C(2) indicates that the period specified in the undertaking
must not be longer than 12 months.
Proposed subsection 577C(3) indicates that the undertaking must be expressed to be
an undertaking under section 577C, so that when the ACCC receives the undertaking
there can be no doubt as to whether the undertaking was intended to be given in
accordance with proposed section 577C.
Proposed subsection 577C(4) provides that the undertaking may not be withdrawn
after it has been accepted by the ACCC. This provision is aimed at ensuring that
careful consideration has been given to the matters proposed in the undertaking before
it is given, in the knowledge that if the undertaking is accepted by the ACCC, the
undertaking will become final. This has the effect that Telstra could withdraw an
undertaking given to the ACCC up to the point the ACCC accepts the undertaking. If
it is clear that the ACCC has concerns about an undertaking Telstra has given it,
Telstra will be able to withdraw and amend the undertaking, and resubmit the
amended undertaking to the ACCC for its consideration. The reason for this is the
same as the reason for the corresponding provision in proposed section 577A,
explained in the note for that provision, above.
Proposed subsection 577C(5) provides that an undertaking about hybrid fibre-coaxial
networks 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.
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Proposed section 577CA Acceptance of undertaking about hybrid fibre-
coaxial networks may be subject to the occurrence of events
Proposed section 577CB When undertaking about hybrid fibre-coaxial
networks comes into force
Proposed section 577CC Publication requirements for undertaking about
hybrid fibre-coaxial networks
Proposed section 577CD Compliance with undertaking about hybrid fibre-
coaxial networks
Proposed section 577CA allows the ACCC's decision to accept an undertaking about
hybrid fibre-coaxial networks under proposed subsection 577C(1) to be expressed to
be subject to the occurrence of one or more specified events within a specified period
after the undertaking is accepted, with those events having been nominated by Telstra
at the time it gave its undertaking to the ACCC. Proposed section 577CB describes
when an undertaking about hybrid fibre-coaxial networks comes into force. Proposed
section 577CC requires the ACCC to publish an undertaking about hybrid fibre-
coaxial networks. Proposed section 577CD has the effect of making compliance with
an in-force undertaking about hybrid fibre-coaxial networks a condition of Telstra's
carrier licence.
The provisions of proposed sections 577CA, 577CB, 577CC and 577CD correspond
to the provisions of proposed sections 577AA, 577AB, 577AC and 577AD, which are
described above, but apply in relation to undertakings about hybrid fibre-coaxial
networks.
Proposed section 577D Variation of undertaking about hybrid fibre-coaxial
networks
Proposed section 577D contains provisions setting out the circumstances under which
an undertaking about hybrid fibre-coaxial networks in force under proposed
section 577C could be varied.
Proposed subsection 577D(1) provides that proposed section 577D only applies if an
undertaking is in force under proposed section 577C.
Proposed subsection 577D(2) allows Telstra to give the ACCC a variation of the
undertaking in so far as the undertaking is covered by proposed
paragraph 577C(1)(b). This means Telstra is permitted to propose variations as to the
action it will take or refrain from taking in connection with the requirement set out in
proposed paragraph 577C(1)(a). However, Telstra is not permitted to propose
variations that alter the character of the undertaking as described by reference to
proposed paragraph 577C(1)(a).
Proposed subsection 577D(3) provides that after considering the variation, the ACCC
must either accept or reject the variation.
Proposed subsections 577D(4) and (5) confirm that the variation takes effect when it
is accepted by the ACCC and that the ACCC must publish the variation on its website
as soon as practicable.
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Proposed Division 4--Subscription television broadcasting licences
Proposed section 577E Acceptance of undertaking about subscription
television broadcasting licences
Proposed subsection 577E(1) allows the ACCC to accept a written undertaking that
Telstra will not be in a position to exercise control of a subscription television
broadcasting licence at all times after the end of the period specified in the
undertaking. Under such an undertaking, it is envisaged Telstra would no longer be
able to actively participate in the subscription television market. Telstra currently has
a 50 per cent stake in the largest pay television provider, Foxtel. Under proposed
paragraph 577E(1)(b) Telstra is required, in its undertaking, to set out specified action
that it will take or refrain from taking in connection with the undertaking.
Proposed subsection 577E(2) indicates the period specified in the undertaking must
not be longer than 12 months.
Proposed subsection 577E(3) indicates that the undertaking must be expressed to be
an undertaking under proposed section 577E, so that when the ACCC receives the
undertaking there can be no doubt as to whether the undertaking was intended to be
given in accordance with proposed section 577E.
Proposed subsection 577E(4) provides that the undertaking may not be withdrawn
after it has been accepted by the ACCC. This provision is aimed at ensuring that
careful consideration has been given to the matters proposed in the undertaking before
it is given, in the knowledge that if the undertaking is accepted by the ACCC, the
undertaking will become final. This has the effect that Telstra could withdraw an
undertaking given to the ACCC up to the point that the ACCC accepts the
undertaking. If it is clear that the ACCC has concerns about an undertaking Telstra
has given it, Telstra will be able to withdraw and amend the undertaking, and
resubmit the amended undertaking to the ACCC for its consideration. The reason for
this is the same as the reason for the corresponding provision in proposed
sections 577A and 577C, explained in the note for proposed section 577A, above.
Proposed subsection 577E(5) provides that an undertaking about subscription
television broadcasting licences may provide for the ACCC to perform functions or to
exercise powers in relation to the undertaking in accordance with 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.
Proposed subsection 577E(6) provides that for the purposes of proposed section 577E,
the question of whether Telstra is in a position to exercise control of a subscription
television broadcasting licence is to be determined under Schedule 1 to the BSA.
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Proposed section 577EA Acceptance of undertaking about subscription
television broadcasting licences may be subject to the occurrence of events
Proposed section 577EB When undertaking about subscription television
broadcasting licences comes into force
Proposed section 577EC Publication requirements for undertaking about
subscription television broadcasting licences
Proposed section 577ED Compliance with undertaking about subscription
television broadcasting licences
Proposed section 577EA allows the ACCC's decision to accept an undertaking about
subscription television broadcasting licences under proposed subsection 577E(1) to be
expressed to be subject to the occurrence of one or more specified events within a
specified period after the undertaking is accepted, with those events having been
nominated by Telstra at the time it gave its undertaking to the ACCC. Proposed
section 577EB describes when an undertaking about subscription television
broadcasting licences comes into force. Proposed section 577EC requires the ACCC
to publish an undertaking about subscription television broadcasting licences.
Proposed section 577ED has the effect of making compliance with an in-force
undertaking about subscription television broadcasting licences a condition of
Telstra's carrier licence.
The provisions of proposed sections 577EA, 577EB, 577EC and 577ED correspond to
the provisions of proposed sections 577AA, 577AB, 577AC and 577AD (described in
detail in the notes for those provisions, above), and proposed sections 577CA, 577CB,
577CC and 577CD, but apply in relation to undertakings about subscription television
broadcasting licences.
Proposed section 577F Variation of undertaking about subscription television
broadcasting licences
Proposed section 577F contains provisions setting out the circumstances under which
an undertaking about subscription television broadcasting licences in force under
proposed section 577E could be varied.
Proposed subsection 577F(1) provides that proposed section 577F only applies if an
undertaking is in force under proposed section 577E.
Proposed subsection 577F(2) allows Telstra to give the ACCC a variation of the
undertaking in so far as the undertaking is covered by proposed paragraph 577E(1)(b).
This means Telstra is permitted to propose variations as to the action it will take or
refrain from taking in connection with the requirement set out in proposed
paragraph 577E(1)(a). However, Telstra is not permitted to propose variations that
alter the character of the undertaking as described by reference to proposed
paragraph 577E(1)(a).
Proposed subsection 577F(3) provides that after considering the variation, the ACCC
must either accept or reject the variation.
Proposed subsections 577F(4) and (5) confirm that the variation takes effect when it is
accepted by the ACCC and that the ACCC must publish the variation on its website as
soon as practicable.
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Proposed Division 5--Enforcement of undertakings
Proposed section 577G Enforcement of undertakings
To enforce the undertakings, proposed subsection 577G(1) permits the ACCC to
apply to the Federal Court for an order under proposed subsection 577G(2) in the
event the ACCC considers that Telstra has breached an undertaking in force under
proposed section 577A, 577C or 577E.
Proposed subsection 577G(2) sets out the orders that the Federal Court may make if it
is satisfied that Telstra has breached an undertaking. The Federal Court may make
any or all of the orders set out. Given the importance of an undertaking in force under
proposed Part 33 and the potential negative impact on competition in the
telecommunications industry if an undertaking is breached, the Federal Court has
been given extensive powers in the range and nature of the orders it may make.
Proposed subsection 577G(3) provides that, in addition to the Federal Court's powers
under proposed subsection 577G(2), the Federal Court has power to make an order
directing any person to do or refrain from doing a specified act and the power to make
an order containing such ancillary or consequential provisions as the court thinks just.
Proposed subsection 577G(4) provides that, before making an order under proposed
section 577G, the Federal Court may direct that notice of the application be given to
such persons as it thinks fit and/or be published in such manner as it thinks fit.
Proposed subsection 577G(5) provides that the Federal Court may rescind, vary,
discharge, or suspend the operation of an order under proposed section 577G.
Compliance with the undertakings is also a condition of Telstra's carrier licence (see
proposed sections 577AD, 577CD and 577ED, and clause 1 of Schedule 1 to the Tel
Act). This means that there will be a range of enforcement options available to the
ACCC to ensure compliance by Telstra with this carrier licence condition, such as
formal warnings, injunctions and recovery of a pecuniary penalty, in addition to the
mechanism provided by proposed section 577G for compliance with in-force
voluntary undertakings.
Proposed Division 6--Limits on allocation of spectrum licences etc.
Proposed section 577GA Excluded spectrum regime
Proposed section 577GA provides that the Minister may make a legislative instrument
imposing the `excluded spectrum regime' on Telstra. The effect of a ministerial
determination imposing the excluded spectrum regime on Telstra is to apply the rules
in certain provisions of proposed Division 6 of Part 33 of the Tel Act and also
proposed Part 10 of Schedule 1 to the Tel Act, specifically:
- proposed section 577J, which provides a limitation on the ACMA's ability to
allocate certain spectrum licences to Telstra;
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- proposed section 577K, which provides that a licensee of certain spectrum
licences must not authorise Telstra to operate radiocommunications devices
under the licence;
- proposed section 577L, which provides that a licensee of certain spectrum
licences must not assign the whole or part of that licence to Telstra, or
otherwise deal with Telstra in relation to the licence;
- proposed clause 84 of Schedule 1, which makes it a condition of Telstra's
carrier licence that Telstra must not be in a position to exercise control of
certain spectrum licences; and
- proposed clause 85 of Schedule 1, which makes it a condition of Telstra's
carrier licence that Telstra must not supply a carriage service using a
radiocommunications device under authority of certain spectrum licences.
Unless the Minister makes a determination under proposed section 577GA, the rules
set out in those provisions will not apply. Even if the Minister makes a determination
imposing the excluded spectrum regime, the rules in those provisions will not apply in
specific circumstances set out in each of those provisions. The rules will not apply if
each of the following circumstances is met:
- there is in force a structural separation undertaking, and either that undertaking
does not require a migration plan to be given to the ACCC or, if it does, the
migration plan has been approved by the ACCC;
- either there is in force an undertaking about hybrid fibre-coaxial networks, or
the Minister has exempted Telstra from the requirement to have such an
undertaking;
- either there is in force an undertaking about subscription television
broadcasting licences, or the Minister has exempted Telstra from the
requirement to have such an undertaking.
If those circumstances are satisfied, then it is not appropriate for the limitations
relating to certain spectrum licences in the provisions described above to apply to
Telstra. For this reason, if the Minister makes a determination imposing the excluded
spectrum regime and at a later stage the circumstances described above are met, then
the rules described in the provisions listed above will cease to operate.
A determination made by the Minister under proposed subsection 577GA(1) is a
legislative instrument, and will be subject to Parliamentary scrutiny in accordance
with the LIA.
Proposed section 577H Designated part of the spectrum
Proposed subsection 577H(1) sets out ranges of radiocommunications frequencies that
are to be regarded as a `designated part of the spectrum' for the purposes of the Tel
Act. The frequencies identified are considered to be capable of being used for the
provision of advanced wireless broadband services. In particular, they include
frequencies that may become available for allocation as a result of the cessation of
analog television broadcasting.
Proposed subsection 577H(2) provides that proposed subsection 577H(1) has effect
subject to proposed subsection 577H(3), which authorises the Minister to determine,
by legislative instrument, that a specified part of the spectrum is not a `designated part
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of the spectrum' for the purposes of the Tel Act. As a large range of spectrum is
identified in proposed subsection 577H(1), it is anticipated that it may be possible to
reduce the amount of spectrum regarded as `designated part of the spectrum' for the
purposes of proposed Part 33.
Proposed subsection 577H(4) authorises the Minister to determine, by legislative
instrument, that a specified part of the spectrum is a `designated part of the spectrum'
for the purposes of the Tel Act. The ACMA has the ability, under the Radcom Act, to
vary the parameters governing the allocation of spectrum. Also, new frequency
ranges of spectrum can be identified as useful for particular technologies as those
technologies develop. Therefore, it is important that there be the capacity to include
additional spectrum in the `designated part of the spectrum' for the purposes of
proposed Part 33, particularly if that spectrum is suitable for advanced wireless
broadband services.
It is considered that a ministerial determination is the appropriate device to add to or
reduce the spectrum regarded as a `designated part of the spectrum' as this allows for
flexibility, as spectrum needs change over time.
Proposed section 577J Limits on allocation of certain spectrum licences to
Telstra
Proposed subsection 577J(1) provides that, if the excluded spectrum regime applies to
Telstra (see proposed section 577GA), the ACMA must not allocate a spectrum
licence to Telstra if the licence relates to a designated part of the spectrum. The
ACMA is required to determine procedures for allocation of spectrum licences under
section 60 of the Radcom Act and allocate the relevant licences in accordance with
those procedures under section 62 of the Radcom Act. In determining procedures
under section 60 of the Radcom Act, the ACMA would be required to accommodate
the restriction in proposed subsection 577J(1) and allocate spectrum licences
accordingly (see notes under items 2 and 3, which discuss consequential amendments
to sections 60 and 62 of the Radcom Act confirming these matters).
Proposed subsection 577J(2) provides that the restriction in proposed
subsection 577J(1) does not apply if :
- a structural separation undertaking given by Telstra is in force under proposed
section 577A and the undertaking is covered by proposed subsection 577J(2A)
(see below);
and one of the following combinations of undertakings and/or declarations is also in
force:
- undertakings under proposed sections 577C (about hybrid fibre-coaxial
networks) and 577E (about subscription television broadcasting licences); or
- an undertaking under proposed section 577C and a declaration under proposed
subsection 577J(5) to the effect that an undertaking under proposed
section 577E is not necessary; or
- an undertaking under proposed section 577E and a declaration under proposed
subsection 577J(3) to the effect that an undertaking under proposed
section 577C is not necessary; or
- declarations under proposed subsections 577J(3) and (5).
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A structural separation undertaking under proposed section 577A will be covered by
proposed subsection 577J(2A), if either:
- that undertaking does not require a migration plan to be given to the ACCC; or
- that undertaking does require a migration plan to be given to the ACCC, and
the migration plan has been given to, and approved by, the ACCC.
This will ensure the effective operation of proposed Division 6 of Part 33, by
requiring that if Telstra undertakes structural separation by means of migrating
services to the national broadband network, then Telstra's migration arrangements
must be in place before Telstra can be allocated a spectrum licence in designated parts
of the spectrum (and before Telstra can operate radiocommunications devices under
such a licence held by another person (see proposed section 577K) or deal with or
acquire such licences on the secondary market (see proposed section 577L)).
The undertakings in question must be in force. It is not sufficient that they have been
given to the ACCC, or that they have been accepted by the ACCC. Proposed
sections 577AB, 577CB and 577EB each describe when the respective undertakings
will come into force.
By means of the exemption declaration provisions in proposed subsections 577J(3)
and (5) (discussed below), the Minister can determine (subject to proposed
subsections 577J(4) and (6), discussed below) whether or not Telstra is required to
provide undertakings under either or both proposed sections 577C and 577E in
addition to the undertaking required under proposed section 577A.
Proposed subsection 577J(3) allows the Minister, by written declaration, to exempt
Telstra from the requirement to have an undertaking about hybrid fibre-coaxial
networks under proposed section 577C.
Proposed subsection 577J(4) provides that the Minister must not make a declaration
under proposed subsection 577J(3) unless the ACCC has accepted a structural
separation undertaking given to it by Telstra and the Minister is satisfied that the
undertaking is sufficient to address concerns about the degree of Telstra's power in
telecommunications markets. This would require the Minister to give consideration to
a structural separation undertaking that has been accepted by the ACCC and the
characteristics of the structural separation model set out under that undertaking.
Proposed subsection 577J(4A) clarifies when a declaration under proposed
subsection 577J(3) comes into force. Proposed subsection 577J(4B) sets out the
circumstances in which the Tel Act has effect as if a declaration under proposed
subsection 577J(3) had never been made by the Minister, because a condition of
acceptance of the undertaking did not occur within the specified period (see proposed
subsections 577AA(7) and (8)).
Proposed subsection 577J(5) allows the Minister, by written declaration, to exempt
Telstra from the requirement to have an undertaking about subscription television
broadcasting licences under proposed subsection 577E.
Proposed subsection 577J(6) provides that the Minister must not make a declaration
under proposed subsection (5) unless certain circumstances are met. Proposed
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subsection 577J(6A) clarifies when a declaration under proposed subsection 577J(5)
comes into force, and proposed subsection 577J(6B) sets out the circumstances in
which the Tel Act has effect as if a declaration under proposed subsection 577J(5) had
never been made by the Minister. These provisions operate in the same way as
proposed subsections 577J(4)-(4B).
Proposed subsection 577J(6C) provides that a declaration under proposed
subsection 577J(3) or (5) cannot be revoked. This provides certainty that if Telstra is
declared by the Minister to be exempt from the requirement to have an undertaking
under proposed section 577C or 577E, such an exemption will operate indefinitely.
Proposed subsection 577J(7) provides that a declaration under proposed
subsections 577J(3) or (5) is not a legislative instrument. This is a substantive
exemption from the LIA. The reason for exempting these declarations from the
operation of the LIA is that Telstra will require a high degree of certainty about
whether it is exempt from the requirement to divest its Foxtel and hybrid fibre-coaxial
network if its structural separation undertaking is deemed to be sufficient to address
its power in telecommunications markets.
Proposed subsection 577J(8) provides a definition of `telecommunications market' for
the purposes of proposed section 577J by reference to the definition in Part XIB of the
CCA. That definition will be clarified by the amendment in Part 3 of Schedule 1 of
the Bill: see the notes on item 211.
Proposed section 577K Limits on use of certain spectrum licences by Telstra
Proposed subsection 577K(1) sets out a general rule that licensees of spectrum
licences must not authorise Telstra to operate radiocommunications devices under a
licence that relates to a designated part of the spectrum, unless specified conditions
are met.
Under section 68 of the Radcom Act, licensees of spectrum licences may allow other
persons to operate radiocommunications devices under their licence.
Proposed subsection 577K(1) has the effect of excluding Telstra from the persons
who may be authorised by the licensee of a spectrum licensee in accordance with
section 68 of the Radcom Act to operate radiocommunications devices under the
licence, where the licence relates to a designated part of the spectrum.
Proposed subsections 577K(2) and (2A) have the effect that that the rule in proposed
subsection 577K(1) does not apply in certain circumstances, being the same
circumstances set out in proposed subsections 577J(2) and (2A), which are described
in detail in the notes on proposed section 577J, above.
Proposed subsection 577K(3) prohibits a person from aiding, abetting, counselling or
procuring a contravention of proposed subsection 577K(1), or from otherwise being
involved in a contravention of proposed subsection 577K(1) as set out in proposed
paragraphs 577K(3)(b) to (d).
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Proposed subsection 577K(4) indicates that proposed subsections 577K(1) and (3) are
civil penalty provisions. Accordingly, a person who breached a provision in proposed
subsection 577K(1) or (3) would be subject to the provisions dealing with breaches of
civil penalty provisions under the Tel Act, including pecuniary penalties for breaches
of civil penalty provisions under Part 31 of the Tel Act.
Proposed section 577L Limits on assignment of certain spectrum licences to
Telstra etc.
Proposed subsection 577L(1) prohibits the licensee of a spectrum licence from
assigning the whole or part of that licence to Telstra or otherwise dealing with Telstra
in relation to the whole or part of the licence, where the licence relates to a designated
part of the spectrum.
Under section 85 of the Radcom Act, licensees of spectrum licences are authorised to
assign or otherwise deal with the whole or part of their spectrum licence. Proposed
subsection 577L(1) has the effect of excluding Telstra from the persons who may be
assigned or otherwise dealt an interest in the whole or part of a spectrum licence,
where the licence relates to a designated part of the spectrum.
Proposed subsection 577L(2) provides that the rule in proposed subsection 577L(1)
does not apply in certain circumstances, being the same circumstances set out in
proposed subsections 577J(2) and (2A) and proposed subsections 577K(2) and (2A),
which are described in detail in the notes on proposed section 577J, above.
Proposed subsection 577L(3) prohibits a person from aiding, abetting, counselling or
procuring a contravention of proposed subsection 577L(1), or from otherwise being
involved in a contravention of proposed subsection 577L(1) as set out in proposed
paragraphs 577L(3)(b) to (d).
Proposed subsection 577L(4) indicates that proposed subsections 577L(1) and (3) are
civil penalty provisions. Accordingly, a person who breached a provision in proposed
subsection 577L(1) or (3) would be subject to the provisions dealing with breaches of
civil penalty provisions under the Tel Act, including pecuniary penalties for breaches
of civil penalty provisions under Part 31 of the Tel Act.
Proposed Division 7--Other provisions
Proposed section 577M Associate
Proposed subsection 577M(1) provides a definition for an associate of Telstra in
relation to the control of a hybrid fibre-coaxial network, another telecommunications
network, or a company, for the purposes of proposed Part 33. This definition has
been modelled from the definition of associate in section 6 of the BSA.
Proposed subsection 577M(2) provides that persons are not associates of each other if
the ACCC is satisfied that the persons do not act together in any relevant dealings
relating to the network or company and neither of the persons is in a position to exert
influence over the business dealings of the other in relation to the network or
company. Subsection 577M(2) recognises that the definition of `associate' in
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proposed subsection 577M(1) is only intended to be applied in respect of dealings
relating to a network or company. The ACCC is therefore given the discretion to
ensure the definition is not applied too widely.
Proposed section 577N Control
Proposed section 577N provides a definition for `control' for the purposes of
proposed Part 33. This definition is modelled from the definition in section 6 of the
BSA.
Proposed section 577P Control of a company
Proposed section 577P provides that the question of whether a person is in a position
to exercise control of a company is to be determined under Schedule 1 to the BSA.
However, the definition of `associate' in proposed section 577M applies for this
purpose.
Proposed section 577Q When Telstra is in a position to exercise control of a
network
Proposed section 577Q sets out rules for determining the question of whether Telstra
is in position to exercise control of a hybrid fibre-coaxial network or another
telecommunications network. The rules set out have been modelled from clause 2 of
Schedule 2 to the BSA and adapted for the purposes of proposed Part 33.
Item 31 - At the end of Schedule 1
Item 31 adds proposed Part 9 at the end of Schedule 1 to the Tel Act. Under proposed
Part 9, Telstra is required to functionally separate its business so that:
· Telstra conducts its network operations and wholesale functions at arm's length
from the rest of Telstra;
· Telstra provides equivalent information on price and non-price terms to its retail
business and non-Telstra wholesale customers; and
· this equivalence of treatment is made transparent to the regulator and competitors
via strong internal governance structures.
As functional separation is intended as a proxy for structural separation, Telstra will
not be required to submit to functional separation under proposed Part 9 of Schedule 1
if it provides a structural separation undertaking which is accepted by the ACCC
under proposed section 577A of the Tel Act (proposed section 577A is discussed
under item 30).
The functional separation of Telstra would be brought about through a series of steps
set out under proposed Part 9 of Schedule 1.
Within 90 days of the commencement of the provisions in Part 2 of Schedule 2 to the
Bill, the Minister must make a determination setting out additional functional
separation requirements.
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Initially, Telstra would be required to prepare a draft functional separation
undertaking setting out, amongst other things, how it will implement functional
separation. The draft functional separation undertaking must comply with any
requirements that are set out in the requirements determination.
The Minister will then approve, vary or replace the draft functional separation
undertaking. It then becomes a final functional separation undertaking.
Telstra is required to comply with a final functional separation undertaking as a
condition of its carrier licence.
Item 31 also adds proposed Part 10 of Schedule 1 to the Tel Act, which inserts into
that Schedule new carrier licence conditions applying to Telstra that relate to the
control and use by Telstra of certain spectrum licences.
Proposed Part 9--Functional separation of Telstra
Proposed Division 1--Introduction
Proposed clause 68 Simplified outline
Proposed clause 68 provides a simplified outline of proposed Part 9 of Schedule 1 to
the Tel Act, to assist the reader.
Proposed clause 69 Definitions
Proposed clause 69 inserts a number of proposed definitions for the purposes of
proposed Part 9 of Schedule 1. Some of the proposed definitions are discussed under
the explanatory notes for proposed clause 74, below.
Proposed clause 70 Declared network services
Proposed clause 70 provides that a `declared network service', for the purposes of
proposed Part 9 of Schedule 1, is a service specified in a legislative instrument made
by the Minister. Under the functional separation model in proposed Part 9 of
Schedule 1, any declared network service must be provided solely by Telstra's
wholesale/network business unit (as defined under proposed clause 69), in accordance
with the functional separation principles set out in proposed paragraphs 74(b) and (c)
(discussed below).
Proposed clause 71 Regulated services
Proposed subclause 71(1) provides a definition of the term `regulated service', for the
purposes of proposed Part 9 of Schedule 1, by reference to the definition of `declared
service' within the meaning of Part XIC of the CCA.
Proposed subclause 71(2) provides that proposed subclause 71(1) has effect subject to
proposed subclause 71(3), which authorises the Minister, by legislative instrument, to
determine a specified service is not a regulated service for the purposes of proposed
Part 9 of Schedule 1. The proposed provisions for the functional separation of Telstra
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are naturally more limited in scope than the telecommunications access regime under
Part XIC of the CCA which has a different and wider application. It therefore may be
the case that not all of the declared services under the CCA will need to be regulated
under the proposed functional separation model in proposed Part 9 of Schedule 1.
Accordingly, it is considered appropriate that the Minister be authorised to determine
specified services are not regulated services for the purposes of proposed Part 9 of
Schedule 1.
Proposed subclause 71(4) authorises the Minister, by legislative instrument, to
determine that a specified eligible service is a regulated service for the purposes of
proposed Part 9 of Schedule 1. This will allow services to be regulated under
proposed Part 9 of Schedule 1 that are not declared services under the CCA. For
example, a newly developed eligible service may be identified as a service that should
be regulated under proposed Part 9 of Schedule 1. It may be that the identified
service is not a declared service under the CCA on the basis that the ACCC has not
yet completed the public inquiry and report required under section 152AL of the CCA
before it can declare the service. The naming of that service as a regulated service
under proposed Part 9 of Schedule 1 to the Tel Act in a timely manner by way of
ministerial determination would assist by potentially correcting any unfair
competitive advantage before that advantage becomes well established. This
mechanism is appropriate for proposed Part 9 of Schedule 1, given its limited
application when compared against the application of Part XIC of the CCA.
Proposed clause 72 Notional contracts
Proposed clause 72 confirms that notional contracts between Telstra's business units
are to be treated as if they are actual contracts and any terms and conditions in such
notional contracts are to be treated as if they are actual terms and conditions. This
proposed clause is linked to the principle that there should be equivalence in relation
to the supply by Telstra of regulated services to Telstra's wholesale customers and
Telstra's retail business units (proposed subclause 74(1)). Under the principle of
equivalence Telstra must contract with its wholesale customers on the same terms and
conditions upon which it contracts with its own business units. Proposed clause 72
facilitates comparisons between the terms and conditions upon which Telstra supplies
services to its own retail business units and the terms and conditions upon which it
provides services to its wholesale customers, in the interest of ensuring the principle
of equivalence is adhered to.
Proposed Division 2--Functional separation undertaking
Proposed clause 73 Contents of draft or final functional separation
undertaking
Proposed subclause 73(1) specifies matters that must be included in a draft or final
functional separation undertaking and also confirms that a draft or final functional
separation undertaking must comply with the functional separation principles (set out
in proposed clause 74) and such requirements as are specified in a functional
separation requirements determination (under proposed clause 75). Proposed
subclause 73(1) sets parameters for the content of the draft or final functional
separation undertaking. When deciding whether or not to approve a draft functional
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separation undertaking, the Minister would have regard to proposed subclause 73(1).
The Minister would not approve a draft functional separation undertaking under
proposed clause 77 unless, at a minimum, it fits within the parameters outlined in
proposed subclause 73(1).
Proposed paragraph 73(1)(b) indicates that a draft or final functional separation
undertaking must contain provisions requiring Telstra to establish and maintain a
committee to be known as the Oversight and Equivalence Board. It is envisaged the
Oversight and Equivalence Board would monitor and support Telstra in complying
with the final functional separation undertaking. It is envisaged that requirements
relating to the Oversight and Equivalence Board, including such things as duties of
the Board and the appointment of members to the Board, would be specified in the
functional separation requirements determination under proposed clause 75.
Proposed paragraph 73(1)(c) indicates that a draft or final functional separation
undertaking must contain provisions which require the Oversight and Equivalence
Board to prepare reports about the extent to which Telstra has complied with the final
functional separation undertaking. Reports in accordance with subparagraph 73(1)(c)
are to be prepared on a quarterly basis and copies of the reports must be given to the
ACCC and to Telstra's board of directors. This reporting obligation is aimed at
ensuring the Oversight and Equivalence Board closely monitors Telstra's compliance
with the final functional separation undertaking and that Telstra is encouraged to put
in place policies and procedures which:
· support compliance with the final functional separation undertaking;
· allow for effective monitoring of Telstra's level of compliance with the final
functional separation undertaking; and
· allow Telstra to take remedial action as soon as possible to rectify any
compliance issues in relation to the final functional separation undertaking.
The requirement for Telstra to provide a copy of the report to the ACCC provides a
high level of accountability and allows the ACCC to take appropriate enforcement
action in regard to Telstra's compliance with the final functional separation
undertaking where considered necessary.
Proposed subclause 73(2) confirms that for the purposes of subparagraph 73(1)(c)(i)
(which requires Telstra to provide quarterly reports), if a final functional separation
undertaking is taken to be in force throughout a part, but not a whole, of a particular
quarter, the part of the quarter in question is taken to be a quarter in its own right. For
example, if a final functional separation undertaking came into force on 1 September
of any year, the period from the beginning to the end of September would be taken to
be a quarter in its own right and Telstra would be required to provide a report for that
period (proposed clause 69 provides a definition for `quarter').
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Proposed subclause 73(3) provides that a functional separation undertaking may
provide for the ACCC to perform functions or to exercise powers in relation to the
undertaking in accordance with 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.
Proposed clause 74 Functional separation principles
Proposed clause 74 sets out the functional separation principles that apply in regard to
the manner in which the functional separation of Telstra is to be achieved and
maintained. Under proposed paragraph 73(1)(a) any draft or final functional
separation plan must comply with the functional separation principles. When
considering whether or not to approve a draft functional separation undertaking, it is
intended that the Minister would have regard to the degree to which the draft
undertaking complies with the functional separation principles.
The principle of equivalence - proposed paragraph 74(a)
The first principle (in proposed paragraph 74(a)) is that there should be equivalence in
relation to the supply by Telstra of its regulated services to Telstra's wholesale
customers and Telstra's retail units.
Telstra currently operates a wholesale business unit which arranges for the supply of
network services to Telstra's wholesale customers. However, Telstra currently
provides network services to itself via its own fully integrated business framework.
This means that Telstra is in a position to take advantage of its level of vertical
integration when developing and supplying products in Australia. It also means that
Telstra has the ability and incentive to favour its own retail business over its
wholesale customers when providing access to network services.
It is intended that the details of how equivalence would be achieved will be set out in
a functional separation requirements determination under proposed clause 75.
Telstra would be required to provide specified network services to itself via its
wholesale/network unit on the same terms and conditions upon which it provides
those services to its wholesale customers. Those services would be supplied in
accordance with `notional contracts' established between Telstra's retail and
wholesale/network business units similar to the contracts between Telstra and its
wholesale customers (proposed clause 72 deals with the treatment of notional
contracts).
The principle of separate retail and wholesale/network business units - proposed
paragraph 74(b)
The second principle (proposed paragraph 74(b)) is that Telstra should maintain one
or more retail business units and a separate wholesale/network business unit.
A business unit is defined under proposed clause 69 as a part of Telstra. This
recognises that in managing its business, Telstra organises different roles and parts of
the company into individual business units.
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This principle requires Telstra to maintain a single wholesale/network business unit,
in accordance with the definition in proposed clause 69:
- that supplies:
· fault detection, handling and rectification;
· service activation and provisioning;
· declared network services;
to Telstra's retail business units and Telstra's wholesale customers, in relation
to eligible services; and
- by which Telstra deals with its wholesale customers.
The wholesale/network business unit must be separate from Telstra's retail business
units. Under the proposed definition in clause 69 a retail business unit is a unit by
which Telstra deals with its customers in Australia.
The separation of Telstra's retail business units from its wholesale/network unit,
together with the treatment of notional contracts under proposed clause 72, would
support the principle of equivalence (discussed above) by facilitating comparisons
between the terms and conditions upon which Telstra supplies eligible services from
its wholesale/business unit to its retail business units and its wholesale customers.
The principle of arm's length functional separation between each of Telstra's retail
and wholesale/network business units - proposed paragraph 74(c)
The third principle (proposed paragraph 74(c)) is that Telstra should maintain arm's
length functional separation between its wholesale/network business unit and its retail
business units. The principle is directed towards ensuring that Telstra does not favour
its retail business over its wholesale customers in the provision of regulated services.
Under this principle, Telstra's wholesale/network business unit is expected to interact
with its retail business units in the same manner that it would interact with another
carrier or carriage service provider. This includes Telstra ensuring that it puts
measures in place to protect information and knowledge in the possession of its
wholesale/network business unit from its retail business units in the same manner it
would protect that information and knowledge from another carrier or carriage service
provider.
The principle of systems, procedures and practices - proposed paragraph 74(d)
The fourth principle (proposed paragraph 74(d)) is directed towards ensuring that
Telstra has sufficient systems, procedures and practices in place which support and
facilitate compliance with a final functional separation undertaking. It is also
important that measures are put in place to allow Telstra's compliance with a final
functional separation undertaking to be monitored, assessed, and audited so that
assessments can be made of Telstra's adherence to the functional separation principles
and Telstra's observance of the requirements set out in the proposed functional
separation requirements determination.
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The principle of equal consultation - proposed paragraph 74(e)
The fifth principle (proposed paragraph 74(e)) requires Telstra to consult equally with
its retail business units and wholesale customers about proposed services to be
supplied by Telstra's wholesale/network business unit or developments in connection
with those services. This provision seeks to allow Telstra's wholesale customers to
compete with Telstra on a fair and equal basis when supplying services to their
customers which make use of regulated services.
Proposed clause 75 Functional separation requirements determination
Proposed clause 75 allows the Minister to make a determination (a functional
separation requirements determination) specifying requirements to be complied with
by a draft or final functional separation undertaking.
Matters that may be dealt with in a functional separation requirements determination
may include the manner in which the functional separation principles are to be
implemented (proposed subclause 75(2)) and the manner in which a requirement
relating to the proposed Oversight and Equivalence Board, set out in proposed
paragraph 73(1)(b) or (c), is to be met (proposed subclause 75(3)). Proposed
subclause 75(4) makes it clear that proposed subclauses 75(2) and 75(3) are simply
examples of the matters that may be included in a functional separation requirements
determination and that they do not limit the matters that may be specified by the
Minister in a functional separation requirements determination.
It is envisaged a functional separation requirements determination would provide
further details regarding the manner in which the functional separation of Telstra is to
be achieved and maintained and would provide further guidance to Telstra in
formulating its draft functional separation undertaking, as required under proposed
clause 76.
Under proposed subclause 75(5), the Minister must ensure that a functional separation
requirements determination comes into force within 90 days of the commencement of
proposed clause 75.
Proposed subclause 75(5A) confirms that there will be no obligation to ensure a
functional separation requirements determination comes into force if, before the end
of the relevant period, either:
- a structural separation undertaking by Telstra comes into force under proposed
section 577A that requires Telstra to submit a draft migration plan to the
ACCC, and Telstra has given the draft migration plan to the ACCC and it has
been approved by the ACCC; or
- a structural separation undertaking by Telstra comes into force under proposed
section 577A that does not require Telstra to submit a migration plan.
In either of these circumstances, there would be no requirement for Telstra to submit a
draft functional separation undertaking (see proposed subclause 76(2)) and therefore a
functional separation requirements determination would be unnecessary.
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Proposed subclause 75(5B) provides that the Minister may extend the 90-day period
within which a functional separation requirements determination must come into
force, and may do so more than once. The total period of the extensions must not be
more than 18 months. Specifically, the Minister may only extend the period:
· if the Minister is satisfied that Telstra is preparing a structural separation
undertaking (proposed paragraph 75(5C)(a));
· if Telstra has given a structural separation undertaking to the ACCC but the
ACCC has not decided whether to accept the undertaking (proposed
paragraph 75(5C)(b));
· if Telstra has given the ACCC a structural separation undertaking, which has
been accepted by the ACCC subject to the occurrence of the events within a
specified period, the undertaking is not in force and the period has not ended
(ie. at least one of the specified events has not yet occurred) (proposed
paragraph 75(5C)(c)); or
· if a structural separation undertaking is in force, which undertaking provides
for Telstra to submit a draft migration plan to the ACCC, and either:
(a) Telstra satisfies the Minister that it is in the process of preparing a draft
migration plan (proposed paragraph 75(5C)(d)); or
(b) Telstra has given a draft migration plan to the ACCC, but the ACCC
has not yet made a decision as to whether to approve the draft
migration plan (proposed paragraph 75(5C)(e)).
These are the same circumstances set out in proposed subclause 76(4) (discussed
below), meaning that after the Minister has made a functional separation requirements
determination, the Minister may extend the period for Telstra to provide a functional
separation undertaking in the same five circumstances.
It is appropriate to allow for the Minister to extend the period for preparing a
functional separation requirements determination in these circumstances; however this
is limited to a maximum overall extension period of 18 months to ensure that there is
an incentive to finalise a structural separation undertaking, and a migration plan (if
applicable). If a structural separation undertaking has not been accepted by the ACCC
within 21 months of commencement, or if a structural separation undertaking has
been accepted but it requires Telstra to submit a migration plan to the ACCC and that
plan has not been approved by the ACCC in that timeframe, the Minister must make a
functional separation requirements determination (this is the effect of proposed
subclauses 75(5) and (5B)). Telstra would then be required to give its draft functional
separation undertaking to the Minister within 90 days (or a longer period specified by
the Minister subject to the conditions in proposed subclause 76(4)) after the functional
separation requirements determination comes into force.
Even if the Minister were to extend the 90-day period through an instrument under
proposed subclause 75(5B), the Minister could still make a functional separation
requirements determination during that extended period. The effect of specifying a
longer period is to extend the time within which a functional separation requirements
determination must come into force. It does not prevent the Minister from making a
functional separation requirements determination, and bringing it into force, before
the end of the specified period, for example if circumstances change during that
period.
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Proposed subclauses 75(5F) and (5G) make it clear that the Minister is not required to
observe the requirements of procedural fairness in relation to the making of an
instrument under proposed subclause 75(5B) extending the 90-day period, and is not
required to consider a request to make such an instrument, including if requested to do
so. This will reduce the opportunity for the use of legal proceedings to disrupt these
procedural steps.
An instrument under proposed subclause 75(5B) extending the period is not a
legislative instrument (proposed subclause 75(7)). This is a clarifying provision,
rather than a substantive exemption from the LIA. An instrument extending the
period is of an administrative character, simply extending the period that a functional
separation requirements determination is required to come into force for the reasons
explained above.
Proposed subclause 75(5D) requires the Minister to table a copy of an instrument
under proposed subclause 75(5B) before each House of the Parliament within
15 sitting days of that House after making the instrument. This means that although
the instrument would not be disallowable, the instrument would be brought to the
Parliament's attention.
The effect of proposed subclauses 75(5EB) and (5EC) is that the rule in proposed
subclause 75(5) does not apply if:
· the ACCC accepts an undertaking given by Telstra under proposed
section 577A within the period that would apply under proposed
subclause 75(5);
· that undertaking is expressed to be subject to the occurrence of one or more
specified events within a specified period (see proposed section 577AA);
· the specified period (`post-acceptance period') ends after the end of the
relevant period under proposed subclause 75(5); and
· before the end of the post-acceptance period the undertaking comes into
force; and
· either:
o the undertaking does not require Telstra to submit a draft migration
plan to the ACCC (see proposed section 577BC); or
o the undertaking requires Telstra to submit a draft migration plan to the
ACCC, it has done so, and the final migration plan has come into
force before the end of the post-acceptance period.
The effect of proposed subclauses 75(5E) and (5EA) is that if:
· the ACCC accepts an undertaking given by Telstra under proposed
section 577A within the period that would apply under proposed
subclause 75(5);
· that undertaking is expressed to be subject to the occurrence of one or more
specified events within a specified period (see proposed section 577AA);
· the specified period (`post-acceptance period') ends after the end of the
relevant period under proposed subclause 75(5); and
· either:
o the undertaking does not come into force before the end of the post-
acceptance period; or
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o the undertaking comes into force before the end of the post-acceptance
period, the undertaking requires Telstra to submit a draft migration
plan to the ACCC, and a final migration plan does not come into force
before the end of the post-acceptance period.
then:
· the rule in proposed subclause 75(5) does not apply; and
· the Minister must ensure that a functional separation requirements
determination comes into force within 90 days of the end of the post-
acceptance period.
Proposed subclauses 75(5E)-(5EA) recognise the circumstances in which it would be
reasonable for the Minister to wait and verify whether or not an undertaking under
proposed section 577A has come into force (in accordance with proposed
section 577AB) and, if applicable, a final migration plan has come into force (in
accordance with proposed section 577BE) before being required to make a functional
separation requirements determination. Proposed subclauses 75(5EB)-(5EC)
recognise the circumstances in which a functional separation requirements
determination would no longer be required.
Proposed subclause 75(6) provides that a functional separation requirements
determination is not a legislative instrument. This reflects the fact that a direction
from a Minister to any person is not subject to disallowance (see section 44 of the
LIA) and the fact that the instrument made by the Minister under proposed
subclause 75(6) operates as if it were a direction to Telstra to include certain
requirements in its draft functional separation undertaking.
Proposed clause 76 Draft functional separation undertaking to be given to
Minister
Proposed subclause 76(1) indicates that Telstra must give the Minister a draft
functional separation undertaking within 90 days after the first functional separation
requirements determination comes into force or a longer period, if specified in
accordance with proposed subclause 76(3).
Proposed subclause 76(2) provides that the requirement to provide the draft functional
separation undertaking does not apply if:
- a structural separation undertaking by Telstra comes into force under proposed
section 577A that requires Telstra to submit a draft migration plan to the
ACCC, Telstra has given the draft migration plan to the ACCC and it has been
approved by the ACCC; or
- a structural separation undertaking by Telstra comes into force under proposed
section 577A that does not require Telstra to submit a migration plan.
If a structural separation undertaking were in force under proposed section 577A
(complete with any accompanying migration plan under proposed section 577BC), it
would be unnecessary for Telstra to functionally separate. This is because structural
separation is the strongest form of organisational separation, which would require
Telstra to make changes to its activities or its company structure. Therefore,
structural separation is the preferred form of organisational separation for achieving
an open access, wholesale-only market structure.
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Proposed subclause 76(3) allows the Minister to specify in writing a longer period in
which a draft functional separation undertaking is required to come into force for the
purposes of proposed paragraph 76(1)(b).
Proposed subclause 76(4) sets out the circumstances in which the Minister can extend
the period in which Telstra is required to provide a draft functional separation
undertaking to the Minister. Specifically, the Minister may only extend the period:
· if the Minister is satisfied that Telstra is preparing a structural separation
undertaking (proposed paragraph 76(4)(a));
· if Telstra has given a structural separation undertaking to the ACCC but the
ACCC has not decided whether to accept the undertaking (proposed
paragraph 76(4)(b));
· if Telstra has given the ACCC a structural separation undertaking, which has
been accepted by the ACCC subject to the occurrence of the events within a
specified period, the undertaking is not in force and the period has not ended
(ie. at least one of the specified events has not yet occurred) (proposed
paragraph 76(4)(c)); or
· if a structural separation undertaking is in force, which undertaking provides
for Telstra to submit a draft migration plan to the ACCC, and either:
- Telstra satisfies the Minister that it is in the process of preparing a draft
migration plan (proposed paragraph 76(4)(d)); or
- Telstra has given a draft migration plan to the ACCC, but the ACCC has
not yet made a decision whether to approve the draft migration plan
(proposed paragraph 76(4)(e)).
These mirror the circumstances in which the Minister may extend the period within
which the Minister must ensure that a functional separation requirements
determination comes into force (see proposed subclause 75(5C)).
Together proposed subclauses 76(3) and 76(4) will ensure that the functional
separation of Telstra is not brought into being prematurely, which would delay or
make more difficult the implementation of the preferred model: structural separation.
Proposed subclause 76(5) provides that subsection 33(3) of the AIA applies to the
Minister's power to make an instrument extending the time within which Telstra must
provide a functional separation undertaking. However, such an instrument cannot be
revoked. This allows the Minister to vary an instrument under proposed
subclause 76(3), subject to the same conditions that apply to the Minister's initial
making of that instrument (ie. subject to proposed subclause 76(4)). This allows the
Minister to increase or decrease the relevant extension period where it is considered
necessary or desirable to do so, but provides Telstra with certainty that once an
extended period has been specified in an instrument, that instrument will not be
revoked.
Proposed subclause 76(6) provides that a period specified in proposed subclause 76(3)
may be ascertained wholly or partly by reference to the occurrence of a specified
event. Such an event could be, for example, a decision by the ACCC not to accept a
structural separation undertaking. If the Minister delays the requirement for Telstra to
provide a draft functional separation undertaking because Telstra has submitted a
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structural separation undertaking to the ACCC, but the ACCC has not yet accepted or
rejected the undertaking, the Minister may want to trigger the requirement to provide
the draft functional separation undertaking if the ACCC rejects the structural
separation undertaking. This provision would permit the Minister to set a date with
reference to that event (such as, "within 90 days of a rejection by the ACCC of the
structural separation undertaking submitted to it by Telstra").
Proposed subclauses 76(6A) and (7) make it clear that the Minister is not required to
observe the requirements of procedural fairness in relation to the making of an
instrument under proposed subclause 76(3) extending the 90-day period, and is not
required to consider a request to make such an instrument, including if requested to do
so by Telstra or any other person. This will reduce the opportunity for the use of legal
proceedings to disrupt these procedural steps.
Proposed subclause 76(8) provides for publication of an instrument under proposed
subclause 76(3) or (5) on the Department's website.
Proposed subclause 76(9) provides, for the avoidance of doubt, that an instrument
under proposed subclause 76(3) or (5) is not a legislative instrument.
Proposed clause 77 Approval of draft functional separation undertaking by
Minister
Proposed clause 77 sets out the manner in which a draft functional separation
undertaking may be approved, varied or replaced and includes publication and
consultation provisions.
After receiving a draft functional separation undertaking (original undertaking), the
Minister must approve the original undertaking; vary the original undertaking and
approve the original undertaking as varied; or replace the original undertaking with
another draft functional separation undertaking (replacement undertaking) and
approve the replacement undertaking (proposed subclause 77(2)). It is envisaged the
Minister would exercise his or her power to vary or replace the draft functional
separation undertaking if the draft functional separation undertaking was considered
deficient with regard to compliance with the functional separation principles or any
requirements specified in the functional separation requirements determination. The
Minister would be able to add or change measures in the draft functional separation
undertaking to address any shortcomings in the draft functional separation
undertaking, or replace the draft functional separation undertaking altogether if
considered necessary or desirable. In particular, it is intended that if the Minister
considered that the draft functional separation undertaking complied with a functional
separation principle to a minimal degree, the Minister might decide to vary or replace
the draft functional separation undertaking in a way that would require Telstra to meet
the principle to a significantly higher degree.
Proposed subclause 77(3) provides that before making a decision under proposed
subclause 77(2), the Minister must publish a notice on the Department's website
setting out the original undertaking and inviting submissions about the original
undertaking, with submissions to be provided within 14 days after publication of the
original undertaking. The Minister is required to give the ACCC a copy of the notice
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and consider any advice about the original undertaking given to him or her by the
ACCC within the 44 days after the notice is published. The Minister must have
regard to any advice given by the ACCC. It is expected that the ACCC would
consider the submissions provided to the Minister before giving its advice to the
Minister.
Proposed subclause 77(4) requires the Minister, before approving an original
undertaking as varied under proposed paragraph 77(2)(b), to give Telstra a notice
setting out the original undertaking as proposed to be varied and inviting Telstra to
make submissions to the Minister regarding the original undertaking as proposed to be
varied within 14 days after receiving the notice. The Minister is further required to
consider any submissions received from Telstra within that 14-day time period.
Proposed subclause 77(5) requires the Minister, before approving a replacement
undertaking under proposed paragraph 77(2)(c), to give Telstra a notice setting out the
proposed replacement undertaking and inviting Telstra to make submissions to the
Minister regarding the proposed replacement undertaking within 14 days after
receiving the notice. The Minister is further required to consider any submissions
received from Telstra within that 14-day time period.
The consultation provisions in subclauses 77(3)-(5) provide Telstra, the ACCC and
the public with an opportunity to make submissions which the Minister must consider
before approving an original undertaking, and provide for additional consultation with
Telstra before the Minister approves an original undertaking as varied or a
replacement undertaking. These provisions are aimed at ensuring the measures set
out in the final functional separation undertaking are robust whilst ensuring the
consultation process is undertaken in a timely and efficient manner.
Proposed subclause 77(6) confirms that the Minister may ask the ACCC to give the
Minister advice, which is additional to any advice received from the ACCC after a
request for advice under proposed paragraph 77(3)(e), about a matter arising under
proposed clause 77.
Proposed subclause 77(7) requires the Minister to notify Telstra in writing of a
decision under proposed subclause 77(2) as soon as practicable.
Proposed subclause 77(8) provides, for avoidance of doubt, that an instrument under
proposed subclause 77(2) is not a legislative instrument.
Proposed clause 78 Time limit for making an approval decision
Proposed subclause 78(2) requires the Minister to use his or her best endeavours to
make a decision under proposed subclause 77(2) in relation to a draft functional
separation undertaking within 6 months after the draft functional separation
undertaking was given to the Minister. This subclause recognises the importance of
ensuring that the functional separation of Telstra is achieved in a timely manner, but
also appreciates that the Minister will need adequate time to:
· consider the draft functional separation undertaking and check that it complies
with proposed clause 73;
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· possibly make changes to the draft functional separation undertaking, which
may be influenced by submissions received under proposed subclause 77(3) or
advice received from the ACCC;
· consult with Telstra before making changes to the draft functional separation
undertaking; and
· seek additional advice from the ACCC concerning the draft functional
separation undertaking, and consider that advice.
Proposed clause 79 Effect of approval
Proposed subclause 79(1) confirms that once a draft functional separation undertaking
is approved under proposed subclause 77(2) it becomes a final functional separation
undertaking.
Proposed subclause 79(2) confirms that a final functional separation undertaking
comes into force on the day after the notice of the Minister's decision under proposed
subclause 77(2) is given to Telstra in accordance with proposed subclause 77(7).
Proposed subclause 79(3) provides that a final functional separation undertaking may
not be withdrawn. Given that the implementation of the functional separation of
Telstra is likely to have a significant impact on the telecommunications industry and
the approval of a draft functional separation undertaking (resulting in the undertaking
becoming a final functional separation undertaking) would have the effect of
triggering the operation of a number of provisions proposed under the 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, proposed subclause 79(4) confirms that a final functional
separation undertaking is not a legislative instrument.
Proposed clause 80 Variation of final functional separation undertaking
Proposed clause 80 describes the manner in which a variation to a final functional
separation undertaking may be made. A variation to a final functional separation
undertaking may be made by the Minister, in writing, where Telstra or another person
has requested the variation, or on the Minister's own initiative (proposed
subclause 80(2)).
Proposed subclause 80(3) confirms that the Minister does not have a duty to consider
whether to make a variation under proposed clause 80, whether or not the Minister
has received a request from Telstra or by any other person, or in any other
circumstances.
The publication, consultation and notice requirements relating to a proposed variation
(proposed subclauses 80(4) and (8)), except in relation to minor variations, are the
same as those outlined in proposed clause 77 in relation to the Minister's decision to
approve the draft final migration plan.
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Proposed subclause 80(5) indicates that the publication, consultation and notice
requirements under proposed subclause 80(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
Telstra, under proposed subclause 80(6) the Minister is required to give Telstra a
notice setting out the proposed variation and inviting Telstra to make submissions to
the Minister about the proposed variation within 14 days after the notice is given. The
Minister must then consider any submissions received within that 14-day period.
Proposed subclause 80(7) confirms that the Minister may ask the ACCC to give the
Minister advice, which is additional to any advice received from the ACCC after a
request for advice under proposed paragraph 80(3)(e), about a matter arising under
proposed clause 80.
Proposed subclause 80(9) confirms that a variation of a final functional separation
undertaking comes into force the day after notice of the variation is given to Telstra.
For the avoidance of doubt, proposed subclause 80(10) confirms that a variation of a
final functional separation undertaking is not a legislative instrument.
Proposed clause 81 Publication of final functional separation undertaking
Proposed subclause 81(1) provides that Telstra must publish a copy of a final
functional separation undertaking on its website as soon as practicable after it comes
into force.
Similarly, under proposed subclause 81(2), Telstra is required to publish a variation of
a final functional separation undertaking on its website as soon as practicable after it
comes into force.
Proposed clause 82 Compliance with final functional separation undertaking
Proposed subclause 82(1) provides that if a final functional separation undertaking is
in force, Telstra must comply with the undertaking. Proposed subclause 82(1) will be
in Schedule 1 to the Tel Act, which contains the standard carrier licence conditions.
A breach of a final functional separation undertaking by Telstra would therefore be a
breach of Telstra's carrier licence conditions. Compliance with carrier licence
conditions is a civil penalty provision under section 68 of the Tel Act. Proposed
subclause 82(1) would have the effect of making Telstra subject to the penalties
outlined in Part 31 of the Act for breach of civil penalty provisions. Telstra would
also be subject to additional enforcement provisions in the Tel Act for breach of
proposed subclause 82(1) (for example sections 69A and 70, as amended by the Bill).
Proposed subclause 82(2) indicates that subclause 82(1) would not apply if an
undertaking given by Telstra is in force under proposed section 577A. This provision
confirms that Telstra would not be required to comply with a final functional
separation undertaking if a structural separation undertaking was in force under
proposed section 577A. This is because functional separation of Telstra would be
unnecessary in the event Telstra were to structurally separate. Structural separation is
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a stronger form of organisational separation, which would require Telstra to make
changes to its activities or company structure. Therefore, structural separation is the
preferred form of organisational separation for achieving an open access, wholesale-
only market structure. The enforcement provisions relating to the structural
separation of Telstra under proposed section 577A are discussed under the
explanatory note for proposed section 577G, above.
Proposed Part 10--Control and use by Telstra of certain
spectrum licences
Proposed Part 10 of Schedule 1 to the Tel Act inserts into that Schedule new carrier
licence conditions applying to Telstra that relate to the control and use by Telstra of
certain spectrum licences.
Proposed Division 1--Introduction
Proposed clause 83 Simplified outline
Proposed clause 83 provides a simplified outline of proposed Part 10 of Schedule 1 to
the Tel Act to assist the reader.
Proposed Division 2--Control and use by Telstra of certain spectrum
licences
Proposed clause 84 Control by Telstra of certain spectrum licences
Proposed subclause 84(1) provides that, if the excluded spectrum regime applies to
Telstra, Telstra must not be in a position to exercise control of a licence that relates to
a designated part of the spectrum. The meaning of control of a spectrum licence, for
the purposes of proposed Part 10 of Schedule 1 is addressed under proposed
clause 88. The operation of the excluded spectrum regime is explained above in the
note for proposed section 577GA.
Proposed subclause 84(2) provides that the restriction in proposed subsection 84(1)
does not apply if :
- a structural separation undertaking given by Telstra is in force under proposed
section 577A and the undertaking is covered by proposed subclause 84(3) (see
below);
and one of the following combinations of undertakings and/or declarations is also in
force:
- undertakings under proposed sections 577C (about hybrid fibre-coaxial
networks) and 577E (about subscription television broadcasting licences); or
- an undertaking under proposed section 577C and a declaration under proposed
subsection 577J(5) to the effect that an undertaking under proposed
section 577E is not necessary; or
- an undertaking under proposed section 577E and a declaration under proposed
subsection 577J(3) to the effect that an undertaking under proposed
section 577C is not necessary; or
- declarations under proposed subsections 577J(3) and (5).
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A structural separation undertaking under proposed section 577A will be covered by
proposed subsection 84(3), if either:
- that undertaking does not require a migration plan to be given to the ACCC; or
- that undertaking does require a migration plan to be given to the ACCC, and
the migration plan has been given to, and approved by, the ACCC.
The provisions in proposed subclauses 84(2) and (3) will ensure that if Telstra
structurally separates by means of migrating services to the national broadband
network, then Telstra's migration arrangements must be in place in order for the
licence condition imposed by proposed clause 84 to cease to have effect.
The undertakings referred to in proposed subclause 84(2) must be in force. It is not
sufficient that they have been given to the ACCC, or that they have been accepted by
the ACCC. Proposed sections 577AB, 577CB and 577EB each describe when the
respective undertakings will come into force.
The circumstances described in proposed subclauses 84(2) and (3) that describe when
the licence condition imposed by proposed subclause 84(1) does not apply are the
same circumstances set out in proposed subsections 577J(2) and (2A), 577K(2) and
(2A), and 577L(2) and (2A), which describe when the rules imposed by proposed
subsections 577J(1), 577K(1) and 577L(1), respectively, do not apply. The operation
of those provisions is explained in detail in the notes on proposed section 577J, above.
Proposed clause 85 Use by Telstra of certain spectrum licences
Proposed subclause 85(1) provides that Telstra must not supply a carriage service
using a radiocommunications device authorised for use under a spectrum licence if
that licence relates to a designated part of the spectrum.
Proposed subclause 85(2) provides that the licence condition imposed by proposed
subclause 85(1) does not apply in certain circumstances, being the same
circumstances set out in proposed subclauses 84(2) and (3), in the notes on proposed
clause 84, above.
Proposed Division 3--Other provisions
Proposed clause 86 Associate
Proposed subclause 86(1) provides a definition for an `associate' of Telstra in relation
to the control of a spectrum licence for the purposes of proposed Part 10 of
Schedule 1. This definition has been modelled from the definition of `associate' in
section 6 of the BSA.
Proposed subclause 86(2) provides that persons are not associates of each other if the
ACCC is satisfied that the persons do not act together in any relevant dealings relating
to the spectrum licence and neither of them is in a position to exert influence over the
business dealings of the other in relation to spectrum licence. Proposed
subclause 86(2) recognises that the definition of `associate' in proposed subclause
86(1) is only intended to be applied in respect of dealings relating to a spectrum
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licence. The ACCC is therefore given the discretion to ensure the definition is not
applied too widely.
Proposed clause 87 Control
Proposed clause 87 provides a definition for `control' for the purposes of proposed
Part 10 of Schedule 1. This definition is taken from section 6 of the BSA.
Proposed clause 88 When Telstra is in a position to exercise control of a
spectrum licence
Proposed clause 88 sets out mechanisms for determining the question of whether
Telstra is in a position to exercise control of a spectrum licence. Proposed section 88
is modelled on the control rules set out in clause 2 of Schedule 1 to the BSA and
adapted for the purposes of proposed Part 10 of Schedule 1 to the Tel Act.
Competition and Consumer Act 2010
Item 32 - Subsection 4(1)
This item amends subsection 4(1) of the CCA by inserting a definition for `Telstra',
by reference to the meaning in the Telstra Corporation Act 1991.
Item 33 - At the end of section 151AJ
Section 151AJ sets out the circumstances in which a carrier or a CSP is said to engage
in anti-competitive conduct for the purposes of Part XIB of the CCA.
Item 33 makes an amendment as a result of the insertion of proposed section 577BA
of the Tel Act which sets out a range of conduct which is authorised for the purposes
of subsection 51(1) of the CCA (see item 30). Specifically, item 33 inserts proposed
subsection 151AJ(9) which provides that despite anything in subsection 151AJ(2) or
(3), a person does not engage in anti-competitive conduct if the conduct is authorised
for the purposes of subsection 51(1) by operation of proposed section 577BA. This is
intended to achieve consistency with the provisions set out in proposed section
577BA and is in acknowledgment that structural reform of the telecommunications
sector is in the national interest.
Item 34 - Subsection 151BTA(13) (definition of Telstra)
This item repeals subsection 151BTA(13) as a result of the amendment proposed
under item 32 above.
Item 35 - Section 151BUAAA
Item 35 repeals section 151BUAAA of the CCA. Section 151BUAAA authorises the
Minister to give a special direction to the ACCC to make rules requiring Telstra to
keep and retain particular records and prepare reports consisting of information in
those records. As a result of the amendments proposed under Part 1 of the Bill,
section 151BUAAA of the CCA is no longer required. Telstra will have new
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record-keeping and reporting requirements under the functional separation model in
proposed Part 9 of Schedule 1, which will replace Part 8 of Schedule 1(for example,
see proposed paragraph 73(1)(c) and subparagraph 74(d)(ii)).
Item 36 - At the end of Part XIB
Item 36 adds proposed Division 15 at the end of Part XIB of the CCA, containing
proposed section 151CQ.
Proposed Division 15--Voluntary undertakings given by Telstra
Proposed section 151CQ Voluntary undertakings given by Telstra
Proposed subsection 151CQ(1) provides that this section applies if an undertaking
given by Telstra is in force under proposed section 577A, 577C or 577E of the Tel
Act.
Proposed subsection 151CQ(2) requires the ACCC, when performing functions or
exercising powers under Part XIB of the CCA, to have regard to relevant conduct that
Telstra is required to engage in, as well as conduct that Telstra has engaged in, in
order to comply with an undertaking in force under proposed section 577A, 577C, or
577E.
This provision recognises the inter-relationship between Telstra's conduct when
complying with an undertaking given by Telstra in force under section 577A, 577C or
577E of the Tel Act and the provisions Telstra is subject to under the
telecommunications industry anti-competitive conduct and record keeping rules under
Part XIB of the CCA.
This provision complements proposed subsection 151AJ(9) (inserted by item 33)
which provides that a person does not engage in anti-competitive conduct for the
purposes of Part XIB if the conduct is authorised for the purposes of subsection 51(1)
by operation of proposed section 577BA.
Item 37 - Section 152AC
Item 38 - At the end of subsection 152AR(4)
Item 38 inserts proposed paragraphs (e) and (f) in subsection 152AR(4), which is in
Part XIC of the CCA.
The effect of proposed paragraph 152AR(4)(e) is that the standard access obligation
in paragraph 152AR(3)(a) (which is the requirement to supply an active declared
service to a service provider on request, so that the service provider can provide
carriage and/or content services) does not operate so as to impose an obligation on
Telstra if it would have the effect of preventing Telstra from complying with a
structural separation undertaking, or an undertaking about hybrid fibre-coaxial
networks, or an undertaking about subscription television broadcasting licences.
This amendment will mean that Telstra's compliance with voluntary undertakings
under proposed Part 33 of the Tel Act cannot be impeded by access seekers requesting
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access to services under Part XIC of the CCA. For instance, if Telstra commits, as
part of a structural separation undertaking, to cease the supply of services in a
particular area using certain fixed-line assets and in accordance with a particular
timeframe, then Telstra's ability to meet that timeframe will not be affected by access
seekers requesting access to services using those assets.
Proposed paragraph 152AR(4)(f) provides a further limitation on the operation of the
standard access obligation in paragraph 152AR(3)(a), as a consequence of the
introduction of the concept of a migration plan under a structural separation
undertaking given by Telstra under proposed section 577A of the Tel Act. The
operation of the migration plan amendments is described in detail at the explanatory
note for proposed section 577BC, in item 30 above.
The effect of this provision is that, if a final migration plan is in force, then the
standard access obligation in paragraph 152AR(3)(a) does not operate so as to impose
an obligation on Telstra if it would have the effect of requiring Telstra to engage in
conduct in connection with matters covered by its migration plan.
The reason for this limitation is to provide Telstra with a high level of certainty that
once its migration plan has been accepted by the ACCC, the standard access
obligations will not subsequently operate so as to impose additional obligations on
Telstra in relation to matters related to migration.
Item 37 inserts a definition of `final migration plan' in section 152AC of the CCA, as
a result of the reference to that term in proposed paragraph 152AR(4)(f). The term is
defined to have the same meaning as in the Tel Act (see proposed section 577BE of
that Act, inserted by item 30).
Item 39 - At the end of Part XIC
Item 39 adds proposed section 152ER at the end of Part XIC of the CCA.
Proposed section 152ER Voluntary undertakings given by Telstra
Proposed subsection 152ER(1) provides that this section applies if an undertaking
given by Telstra is in force under proposed section 577A, 577C or 577E of the Tel
Act
Proposed subsection 152ER(2) corresponds to proposed subsection 151CQ(2) (see
item 36), except that it is expressed to apply for the purposes of Part XIC of the CCA,
rather than Part XIB of the CCA. Effectively, this provision requires that, when
exercising functions or powers under Part XIC of the CCA, the ACCC would be
required to have regard to relevant conduct that Telstra is required to engage in, as
well as conduct that Telstra has engaged in, in order to comply with an undertaking in
force under proposed section 577A, 577C, or 577E of the Tel Act.
This provision recognises the inter-relationship between Telstra's conduct when
complying with an undertaking given by Telstra in force under sections 577A, 577C
or 577E of the Tel Act and the provisions Telstra is subject to under the
telecommunications access regime under Part XIC of the CCA.
139
Proposed subsection 151ER(3) would provide that the ACCC must not perform a
function, or exercise a power, under Part XIC of the CCA so as to prevent Telstra
from complying with an undertaking in force under proposed section 577A, 577C or
577E of the Tel Act.
This provision is intended to clarify that once the ACCC has accepted an undertaking,
it cannot use its powers under Part XIC of the CCA to prevent Telstra from
complying with the undertaking.
For example, if under a structural separation undertaking accepted by the ACCC,
Telstra had milestones to meet to cease supplying services in particular areas, the
ACCC would be prevented from using its powers under Part XIC of the CCA in a
way which prevented Telstra from meeting those milestones.
Item 40 - Transitional--continuity of special Telstra directions
Item 40 is a transitional provision that confirms that the repeal of section 151BUAAA
of the CCA would not affect the continuity of a special Telstra direction referred to in
that section that was in force immediately before the section was repealed. This
means if a special Telstra direction had been given prior to the repeal of
section 151BUAAA, the ACCC would still be required to comply with that direction
and Telstra would still be required to comply with any rules made by the ACCC in
accordance with that direction. As a special Telstra direction is given effect through a
Ministerial direction under section 151BUAA, any special Telstra direction will cease
to have effect when action is taken to revoke the relevant direction given under
section 151BUAA.
Division 2--Amendments commencing immediately after a final functional
separation undertaking comes into force
Division 2 of Part 1 of Schedule 1 of the Bill contains amendments to the Tel Act and
the CCA that are necessary as a result of the entry into force of a functional separation
undertaking, such as the repeal of Part 8 of Schedule 1 to the Tel Act, which deals
with operational separation and will no longer be required. In the event that a
functional separation does not come into force (because a structural separation
undertaking is accepted by the ACCC under proposed section 577A), Division 3
would make many (but not all) of the amendments proposed by Division 2.
Telecommunications Act 1997
Item 41 - Subsection 61(1)
Item 42 - Subsections 61(2), (3) and (4)
These items repeal subsections 61(2), (3) and (4) and make a consequential
amendment to subsection 61(1). Subsections 61(2), (3) and (4) deal with the
Minister's ability to declare that current Part 8 of Schedule 1 to the Tel Act ceases to
have effect on a particular day. Part 8 of Schedule 1 will be repealed (see Item 56),
therefore the subsections are no longer required.
140
Item 43 - Section 61A
This item repeals section 61A. This section contains provisions requiring before
1 July 2009, the Minister to cause to be conducted a review of the operation of Part 8
of Schedule 1 to the Tel Act. The Minister caused the review to be conducted on 7
April 2009 with the release of the National Broadband Network: Regulatory Reform
for 21st Century Broadband discussion paper.
Item 44 - After subsection 69(6)
This item inserts proposed subsection 69(6A) into the Tel Act. Proposed
subsection 69(6A) confirms that subsection 69(1) does not apply to a condition set out
in Part 9 of Schedule 1 (which deals with the functional separation of Telstra).
Subsection 69(1) of the Tel Act and its related provisions under section 69 authorise
the ACMA to issue remedial directions to a carrier that is contravening, or has
contravened, a condition of its carrier licence.
The effect of proposed subsection 69(6A) is that the ACMA would not be authorised
to issue a remedial direction to Telstra in the event it contravened a condition set out
in proposed Part 9 of Schedule 1. The reason for this restriction is that it is intended
that only the ACCC (and the Minister, where appropriate) will have authority to take
action against Telstra for breach of a condition set out in Part 9 of Schedule 1.
Item 45 - Subsection 69A(1)
This item omits "Part 8" from subsection 69A(1) and substitutes "Part 9". An
alteration to the heading to section 69A is also proposed by omitting "operational"
and substituting "functional". Subsection 69A(1) and its related provisions under
section 69A authorise the ACCC to issue remedial directions to Telstra if Telstra is
contravening, or has contravened a condition set out in Part 8 of Schedule 1. The
effect of the amendments proposed under this item is that the ACCC would be
authorised to issue remedial directions to Telstra if Telstra is contravening, or has
contravened a condition set out in proposed Part 9 of Schedule 1, which relates to the
proposed functional separation of Telstra. The reference to Part 8 of Schedule 1 in
section 69A will no longer be required given that Part 8 of Schedule 1 will be
repealed under the Bill (see item 56).
Item 46 - Section 69B
This item repeals section 69B. Section 69B contains provisions allowing Telstra to
apply to the Tribunal seeking a review of a direction relating to operational separation
given to it by the ACCC under section 69A. It is not intended to enable review by the
Tribunal of the exercise of remedial directions powers in relation to functional
separation. Providing for such review would be contrary to the objective of moving
quickly to implement stronger organisational separation arrangements for Telstra.
141
Item 47 - After subsection 70(3)
This item inserts proposed subsection 70(3A) into the Tel Act. Proposed
subsection 70(3A) provides that subsection 70(1) does not apply to a condition set out
in Part 9 of Schedule 1. Subsection 70(1) of the Tel Act authorises the ACMA to
issue formal warnings to carriers that have contravened a condition of their carrier
licence. The effect of proposed subsection 70(3A) is that the ACMA would not be
authorised to issue a formal warning to Telstra in the event it contravened a condition
set out in proposed Part 9 of Schedule 1. The reason for this restriction is the same as
that outlined in the explanatory note under item 44 above.
Item 48 - Paragraph 70(5)(ba)
This item omits "Part 8" from paragraph 70(5)(ba) and substitutes "Part 9". Current
subsection 70(5) authorises the ACCC to issue a formal warning to a carrier that
contravenes any of the carrier licence conditions listed under that subsection.
The amendment proposed under this item will allow the ACCC to issue a formal
warning to Telstra if it contravenes a condition set out in proposed Part 9 of
Schedule 1. The reference to Part 8 is no longer required given that Part 8 of
Schedule 1 will be repealed under the Bill (see item 56).
Item 49 - Subsection 70(6)
This item repeals subsection 70(6). That subsection states that paragraph 70(5)(ba)
does not limit subsection 70(1). However, with the proposed insertion of proposed
subsection 70(3A) (see item 47 above), it is now intended that paragraph 70(5)(ba)
(when read together with proposed subsection 70(3A)) will limit subsection 70(1) so
that ACMA would not be authorised to issue a formal warning to Telstra in the event
it contravened a condition set out in proposed Part 9 of Schedule 1. Therefore it is
necessary to repeal subsection 70(6).
Item 50 - Section 104
Item 50 amends section 104, which contains a simplified outline of Part 5 of the Tel
Act. An additional summary point is proposed to be included in the simplified outline
to reflect the ACCC's monitoring and reporting obligations regarding Telstra's
compliance with a final functional separation undertaking (see item 51, below)
Item 51 - At the end of Part 5
Proposed section 105B Monitoring of compliance by Telstra with a final
functional separation undertaking
Item 51 inserts proposed section 105B, which deals with monitoring of compliance by
Telstra with a final functional separation undertaking.
Proposed subsection 105B(1) provides that the ACCC must monitor Telstra's
compliance with a final functional separation undertaking and report each financial
year to the Minister on Telstra's compliance.
142
Proposed subsection 105B(2) requires the ACCC to give a report under proposed
subsection 105B(1) to the Minister as soon as practicable after the end of each
financial year concerned.
Proposed subsection 105B(3) requires the Minister to table a copy of a report under
proposed subsection 105B(1) in each House of the Parliament within 15 sitting days
of that House after receiving the report from the ACCC.
Item 52 - After paragraph 564(3)(b)
This item inserts proposed paragraph 564(3)(ba). Under current subsection 564(3) the
ACMA is not entitled to apply for an injunction in relation to a contravention of a
carrier licence condition or service provider rule listed under that subsection. The
proposed paragraphs adds a licence condition set out in proposed Part 9 of Schedule 1
to the list of licence conditions and service provider rules in subsection 564(3). This
means the ACMA would not be entitled to apply for an injunction in relation to a
contravention of a carrier licence condition set out in proposed Part 9 of Schedule 1.
The reason for this restriction is that it is intended that only the ACCC (and the
Minister) will have authority to take action against Telstra for breach of a condition
set out in proposed Part 9 of Schedule 1, given that proposed Part 9 of Schedule 1
contains provisions to address Telstra's level of dominance in telecommunications
markets and the negative impact this has had on competition in the
telecommunications industry. It is therefore a matter for which it is appropriate for
the ACCC to be given regulatory responsibility.
Item 53 - Subsection 564(3) (after note 2)
This item adds a note to section 564 in relation to proposed paragraph 564(3)(ba)
(under item 52 above) to assist the reader.
Item 54 - After paragraph 571(3)(b)
This item inserts proposed paragraph 571(3)(ba). Under current subsection 571(3) the
ACMA is not entitled to institute a proceeding for recovery of a pecuniary penalty in
relation to a contravention of a carrier licence condition or service provider rule listed
under that subsection. The proposed paragraph adds a licence condition set out in
proposed Part 9 of Schedule 1 to the list of licence conditions and service provider
rules in subsection 571(3). This means 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 set out in proposed Part 9 of Schedule 1.
The reason for this restriction is that it is intended that only the ACCC (and the
Minister) will have authority to take action against Telstra for breach of a condition
set out in proposed Part 9 of Schedule 1, given that proposed Part 9 of Schedule 1
contains provisions to address Telstra's level of dominance in telecommunications
markets and the negative impact this has had on competition in the
telecommunications industry. It is therefore a matter for which it is appropriate for
the ACCC to be given regulatory responsibility.
143
Item 55 - Subsection 571(3) (after note 2)
This item adds a note to section 571 in relation to proposed paragraph 564(3)(ba)
(under item 54 above) to assist the reader.
Item 56 - Part 8 of Schedule 1
This item repeals Part 8 of Schedule 1 to the Tel Act, on the basis that Part 8 (which
contains provisions relating to the operational separation of Telstra) will no longer be
required given the new form of organisational separation that Telstra will be required
to undertake when a final functional separation undertaking comes into force.
Competition and Consumer Act 2010
Item 57 - Division 14 of Part XIB
Item 57 would repeal Division 14 of Part XIB of the CCA and substitute a new
proposed Division 14, containing a provision (proposed section 151CP) relating to the
functional separation of Telstra.
Proposed Division 14--Functional separation for Telstra
Proposed section 151CP Functional separation for Telstra
Proposed subsection 151CP(1) provides that section 151CP applies if a final
functional separation undertaking is in force.
Proposed subsection 151CP(2) requires the ACCC, in performing a function or
exercising a power under Part XIB, to have regard to relevant conduct that Telstra is
required to engage in, as well as relevant conduct that Telstra has engaged in, in order
to comply with a final functional separation undertaking in force under Part 9 of
Schedule 1 to the Tel Act. This provision recognises the inter-relationship between
Telstra's conduct when complying with a final separation undertaking under the Tel
Act and the provisions Telstra is subject to under the telecommunications industry-
specific anti-competitive conduct regime and record keeping rules under Part XIB of
the CCA.
Proposed subsection 151CP(3) provides that the ACCC must not perform a function,
or exercise a power under Part XIB of the CCA so as to prevent Telstra from
complying with a final functional separation undertaking in force under Part 9 of
Schedule 1 to the Tel Act.
Item 58 - After section 152EP
Item 58 inserts proposed section 152EPA into the CCA. Proposed section 152EPA
relates to the proposed independent telecommunications adjudicator.
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Proposed section 152EPA Assistance to independent telecommunications
adjudicator
Proposed subsection 152EPA(1) provides that the independent telecommunications
adjudicator is a company that is limited by guarantee and is identified in a final
functional separation undertaking as the independent telecommunications adjudicator
for the purpose of proposed section 152EPA.
Proposed subsection 152EPA(2) provides that the ACCC may assist the independent
telecommunications adjudicator.
It is envisaged that the independent telecommunications adjudicator would be a non-
statutory body created to assist with establishing the technical parameters and
arrangements for access and the resolution of disputes relating to access to an access
provider's network and wholesale products and services. The body would be created
in accordance with the requirements of a final functional separation undertaking.
Proposed subsection 152EPA(3) provides a list of types of assistance that the ACCC
may provide to the independent telecommunications adjudicator. The list is not
intended to be exhaustive, but illustrative of the types of assistance the ACCC may
provide in accordance with proposed section 152EPA. It includes the making
available of resources and facilities, which is intended to include accommodation, and
the provision of information.
Item 59 - Section 152EQ
Item 59 repeals section 152EQ and substitutes a new proposed section 152EQ.
Proposed section 152EQ Functional separation for Telstra
Proposed section 152EQ refers to conduct Telstra is required to engage in, or actual
conduct engaged in by Telstra in complying with a final functional separation
undertaking and is identical to proposed subsection 152CP (discussed above), except
that it is expressed to apply for the purposes of Part XIC of the CCA, rather than
Part XIB of the CCA.
This provision recognises the inter-relationship between Telstra's conduct when
complying with a final functional separation undertaking under the Tel Act and the
provisions Telstra is subject to under the telecommunications industry anti-
competitive conduct and record keeping rules under Part XIC of the CCA.
Proposed section 152EQ will replace the current section 152EQ, which contains
similar provisions but refers to Telstra's final operational separation plan in force
under Part 8 of Schedule 1 to the Tel Act, which will cease to have effect once a final
functional separation undertaking comes into force under proposed Part 9 of
Schedule 1 to the Tel Act.
145
Division 3--Amendments commencing immediately after an undertaking about
structural separation comes into force
As noted above, Division 2 of Part 1 of Schedule 1 to the Bill contains amendments to
the Tel Act and the CCA that are necessary as a result of the entry into force of a
functional separation undertaking under proposed Part 9 of Schedule 1 to the Tel Act,
such as the repeal of Part 8 of Schedule 1 to that Act, which deals with operational
separation and will no longer be required. Given that a functional separation
undertaking may not come into force if the ACCC accepts an undertaking given by
Telstra under proposed section 577A of the Tel Act (relating to structural separation,
see item 30), Division 3 of Part 1 of Schedule 1 to the Bill makes changes to the CCA
and the Tel Act in the event that a structural separation undertaking, not a functional
separation undertaking, comes into force.
The amendments made by Division 3 are also included in Division 2. However, some
amendments that would be made by Division 2 are only relevant in a situation where
there is in force a functional separation undertaking (not a structural separation
undertaking). For this reason, not all of the amendments in Division 2 are included in
Division 3.
Telecommunications Act 1997
Item 60 - Subsection 61(1)
Item 61 - Subsections 61(2), (3) and (4)
These items repeal subsections 61(2), (3) and (4) and make a consequential
amendment to subsection 61(1). Subsections (2), (3) and (4) deal with the Minister's
ability to declare that current Part 8 of Schedule 1 relating to operational separation
ceases to have effect on a particular day. Part 8 of Schedule 1 is repealed by item 65,
therefore the subsections are no longer required.
Item 62 - Sections 61A, 69A and 69B
This item repeals sections 61A, 69A and 69B.
Section 61A contains provisions requiring before 1 July 2009, the Minister to cause to
be conducted a review of the operation of Part 8 of Schedule 1. The Minister caused
the review to be conducted on 7 April 2009 with the release of the National
Broadband Network: Regulatory Reform for 21st Century Broadband discussion
paper.
Section 69A authorises the ACCC to issue remedial directions to Telstra, if Telstra is
contravening, or has contravened a condition set out in Part 8 of Schedule 1. That
section is no longer required given Part 8 of Schedule 1 will be repealed (see item 65).
Section 69B contains provisions allowing Telstra to apply to the Tribunal seeking a
review of a direction given to it by the ACCC under section 69A. That section is no
longer required, given the repeal of section 69A.
146
Item 63 - Paragraph 70(5)(ba)
This item repeals paragraph 70(5)(ba), which authorises the ACCC to issue a formal
warning to a carrier that contravenes a carrier licence condition set out in Part 8 of
Schedule 1. That paragraph is no longer required, given the repeal of Part 8 of
Schedule 1 (see item 65).
Item 64 - Subsection 70(6)
This item repeals subsection 70(6), which is a provision regarding the operation of
paragraph 70(5)(ba). The provision is no longer required, given the amendment
proposed under item 63 above.
Item 65 - Part 8 of Schedule 1
This item repeals Part 8 of Schedule 1, on the basis that this Part (which contains
provisions relating to the operational separation of Telstra) will no longer be required
given the new form of organisational separation that Telstra will be required to
undertake when a structural separation undertaking comes into force.
Competition and Consumer Act 2010
Item 66 - Division 14 of Part XIB
This item repeals Division 14 of Part XIB of the CCA. Division 14 contains
provisions relating to the operational separation of Telstra under Part 8 of Schedule 1
to the Tel Act. Those provisions are no longer required given that Part 8 of
Schedule 1 is repealed by item 65.
Item 67 - Section 152EQ
Item 67 would repeal section 152EQ of the CCA and insert in its place, a replacement
section 152EQ containing provisions which permit the ACCC to provide assistance to
an independent telecommunications adjudicator if Telstra provides for it in its
structural separation undertaking.
Proposed section 152EQ Assistance to independent telecommunications
adjudicator
Proposed section 152EQ mirrors proposed section 152EPA. The provisions regarding
the independent telecommunications adjudicator in proposed section 152EPA are to
apply in the event a final functional separation undertaking comes into force. This
amendment is proposed so as to allow for identical provisions in the event a structural
separation undertaking under proposed section 577A comes into force, thereby
providing Telstra with the option of allowing for the existence of an independent
telecommunications adjudicator in a draft structural separation undertaking.
147
Part 2--Telecommunications access regime
Part 2 of Schedule 1 to the Bill makes a number of amendments to the
telecommunications access regime in Part XIC of the CCA. Necessary consequential
amendments are also made to the Tel Act and the NTN Sale Act.
Division 1--Amendments
Division 1 of Part 2 of Schedule 1 to the Bill contains proposed amendments to the
telecommunications access regime under Part XIC of the CCA, and associated
amendments to other Acts.
National Transmission Network Sale Act 1998
The National Transmission Network Sale Act 1998 (NTN Sale Act) facilitated the sale
of the national transmission network and set in place a regulatory framework for the
provision of national broadcasting and other transmission services after the sale.
Part 3 of the NTN Sale Act applies an access regime, based on the
telecommunications access regime in Part XIC of the CCA, to:
· certain carriage services supplied by a National Transmission Company (being a
company to which assets or liabilities are transferred under the provisions of the
NTN Sale Act) or declared successor; and
· the provision of access to sites and towers by a National Transmission Company or
declared successor;
in favour of certain nominated customers (for example, the ABC, the SBS and Radio
for the Print Handicapped).
Part 2 of Schedule 1 of the Bill makes a number of changes to Part XIC of the CCA,
including replacing the negotiate/arbitrate model with a power for the ACCC to set
up front the terms and conditions of access to declared services in access
determinations. The amendments to the structure and operation of Part XIC of the
CCA by Part 2 of Schedule 1 of the Bill will not apply to the telecommunications
access regime insofar as it is adopted by Part 3 of the NTN Sale Act. The effect of
items 68 and 69 is that Part XIC of the CCA as it operated before the commencement
of those items will continue to apply as the telecommunications access regime that is
adopted by Part 3 of the NTN Sale Act.
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. The commencement provision for the
Bill (described at clause 2) will ensure that the references in the Bill (including in
items 68 and 69) to the CCA will be effective in making amendments to that Act, by
deferring their commencement until the change of name of that Act takes effect.
148
Item 68 - Section 3 (paragraphs (a) and (b) of the definition of
telecommunications access regime)
Item 68 of the Bill amends the definition of `telecommunications access regime' in
section 3 of the NTN Sale Act. Currently that term is defined to mean Part XIC of the
CCA (paragraph (a) of the definition), any other provision of the CCA that relates to
Part XIC (paragraph (b)), certain sections and Parts of the Tel Act (paragraph(c)), and
any other provisions that relate to those sections and Parts of the Tel Act
(paragraph (d)).
Item 68 amends paragraphs (a) and (b) of this definition to provide that the reference
to Part XIC of the CCA in the definition of `telecommunications access regime'
means Part XIC of the CCA as in force immediately before the commencement of
Division 1 of Part 2 of Schedule 1 of the Bill.
Item 69 - At the end of section 16
Section 16 of the NTN Sale Act provides that certain provisions of the CCA do not
apply to the telecommunications access regime in Part 3 of that Act. Item 69 amends
section 16 to provide that a reference to the CCA in that section is a reference to that
Act as in force immediately before the commencement of Division 1 of Part 2 of
Schedule 2 of the Bill.
Telecommunications Act 1997
Item 70 - After section 62
Included in the proposed amendments made by Part 2 of Schedule 1 of the Bill to Part
XIC of the CCA are additional carrier licence conditions and service provider rules,
which are specific to the telecommunications access regime and are therefore to be
located in Part XIC of the CCA.
Items 70 through to item 92 contain proposed consequential amendments to the Tel
Act to accommodate the additional carrier licence conditions and service provider
rules that are proposed to be inserted into Part XIC of the CCA.
Item 70 inserts proposed sections 62A, 62B and 62C into the Tel Act.
Proposed section 62A Condition of carrier licence set out in section 152BCO
of the Competition and Consumer Act 2010
Proposed section 62B Condition of carrier licence set out in section 152BDF
of the Competition and Consumer Act 2010
Proposed section 62C Condition of carrier licence set out in section 152BEC
of the Competition and Consumer Act 2010
Proposed sections 62A, 62B and 62C of the Tel Act provide that a carrier licence is
subject to the conditions set out in proposed sections 152BCO, 152BDF and 152BEC
of the CCA, respectively. These provisions are inserted as part of the proposed
Division 4 of Part XIC of the CCA that is inserted by item 160.
149
Proposed sections 152BCO and 152BDF of the CCA set out carrier licence conditions
requiring a carrier to comply with any access determinations applicable to it, and any
binding rules of conduct applicable to it. Proposed section 152BEC sets out carrier
licence conditions requiring a carrier to comply with proposed sections 152BEA and
152BEB of the CCA which relate to the lodgment of access agreements with the
ACCC and the notification to the ACCC of the termination of access agreements.
The effect of proposed sections 62A and 62B of the Tel Act, together with proposed
sections 152CO and 152BDF of the CCA, is that a carrier must comply with an access
determination and with binding rules of conduct, and that failure to do so would
render the carrier subject to the enforcement provisions in the Tel Act relating to
breach of carrier licence conditions. Equally, the effect of proposed section 62C of
the Tel Act is that failure by a carrier to comply with proposed sections 152BEA and
152BEB would render the carrier subject to those enforcement provisions.
Item 71 - Subsection 69(6)
Item 72 - Subsection 69(6) (note)
Item 71 amends subsection 69(6).
Under subsection 69(1) of the Tel Act, the ACMA may give the carrier a written
direction requiring the carrier to take specified action directed towards ensuring that
the carrier does not contravene the condition, or is unlikely to contravene the
condition, in the future.
Parts 3 and 5 of Schedule 1 to the Tel Act make it a condition of a carrier's licence
that the carrier must allow other carriers to access certain of their telecommunications
facilities for certain purposes. The Bill makes a number of changes to those Parts of
Schedule 1, including changes to provide that it is the ACCC, not the ACMA, that
will have the role of enforcing compliance with those licence conditions. This change
to enforcement is consequential to changes to the administration of the Parts. It is
more appropriate that the facilities access regime in Parts 3 and 5 of Schedule 1
should be administered in its entirety by the ACCC, as the ACCC is the national
competition regulator and also administers the national access regime in Part IIIA of
the CCA and the telecommunications access regime in Part XIC of the CCA. In
addition, the transfer of administrative functions previously exercised by the ACMA
under Parts 3 and 5 to the ACCC will streamline the operation of the Parts.
Already, under section 69 of the Tel Act, the ACMA is prevented from issuing
remedial directions to a carrier in relation to Parts 3 and 4 of Schedule 1 to the Tel
Act. Item 71 modifies subsection 69(6) by including a reference to Part 5 of
Schedule 1. The result of this amendment is that the ACMA will no longer have the
ability to issue remedial directions to carrier licence conditions for breaches of licence
conditions included in Part 5 of Schedule 1 to the Tel Act.
Item 72 makes a modification to the note accompanying subsection 69(6), as a
consequence of the change made by item 71.
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Item 73 - After subsection 69(7)
Item 73 inserts proposed subsections 69(7A), (7B) and (7C) into the Tel Act. The
effect of these new provisions is that subsection 69(1) does not apply to the carrier
licence conditions set out in proposed section 152BCO, 152BDF or 152BEC of the
CCA. Subsection 69(1) of the Tel Act and related provisions under section 69
authorise the ACMA to issue a remedial direction to a carrier that is contravening, or
has contravened, a condition of its carrier licence. The effect of proposed
subsections 69(7A), (7B) and (7C) is that the ACMA would not be authorised to issue
a remedial direction to a carrier that is contravening or has contravened a licence
condition under proposed sections 152BCO, 152BDF or 152BEC of the CCA. The
reason for this restriction is that it is intended that only the ACCC and the Minister
will have authority to take action against a carrier for breach of a licence condition
under proposed sections 152BCO, 152BDF or 152BEC of the CCA. 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, will have powers to take
action against carriers for breach of those licence conditions.
Item 74 - After section 69
Item 74 inserts proposed subsection 69AA into the Tel Act.
Proposed section 69AA Remedial directions--breach of condition relating to
access
Proposed section 69AA confers upon the ACCC the power to issue remedial
directions to a carrier that has contravened, or is contravening, a carrier licence
condition set out in Parts 3, 4 or 5 of Schedule 1.
Part 3 of Schedule 1 to the Tel Act establishes that carriers must provide other carriers
with access to supplementary facilities for the purpose of enabling the other carriers to
provide competitive facilities and competitive carriage services or to establish their
own facilities. Part 4 of Schedule 1 to the Tel Act establishes a regime for providing
access to network information. Part 5 of Schedule 1 to the Tel Act provides for
carriers to provide other carriers with access to telecommunications transmission
towers, the sites of telecommunications transmission towers and eligible underground
facilities. Obligations imposed by Parts 3, 4 and 5 of Schedule 1 are carrier licence
conditions.
Proposed subsection 69AA(2) will enable the ACCC to direct the carrier, in writing,
to take specified action directed towards ensuring that the carrier does not contravene
the condition, or is unlikely to contravene the condition, in the future. Proposed
subsection 69(4) provides that a carrier must not contravene a direction given by the
ACCC under proposed subsection 69AA(2).
Proposed subsection 69AA(3) lists examples of the kinds of directions that the ACCC
may give to a carrier. The list is not exhaustive, and is not intended to limit the kinds
of directions that could be given.
151
Proposed subsection 69AA(5) clarifies that a remedial direction given by the ACCC is
not a legislative instrument. This is included for the avoidance of doubt. Similar
provisions already exist at subsections 69(8) and 69A(5) of the Tel Act.
Item 75 - Subsection 70(3)
Item 76 - Subsection 70(3) (note)
Section 70 of the Tel Act confers a general power on the ACMA to issue a formal
warning if a carrier contravenes a condition of its carrier licence. This ACMA power
does not currently apply to a condition set out in Part 3 or 4 of Schedule 1 to the Tel
Act (refer subsection 70(3)). Item 75 amends subsection 70(3) to include a reference
to Part 5 of that Schedule. The result of this change is that the ACMA will no longer
have power to issue formal warnings to carriers for breaches of licence conditions set
out in Part 5 of Schedule 1 to the Tel Act.
The reason for this further restriction is the same as that outlined in the explanatory
note under item 71 above; that is, responsibility for administration of these parts being
transferred to the ACCC.
Item 76 makes a modification to the note accompanying subsection 70(3) following
the change by item 75.
Item 77 - After subsection 70(4)
Item 77 inserts proposed subsections 70(4A), (4B) and (4C) into the Tel Act. The
effect of these provisions is that subsection 70(1) does not apply to the conditions set
out in proposed sections 152BCO, 152BDF and 152BEC of the CCA.
Subsection 70(1) of the Tel Act authorises the ACMA to issue formal warnings to
carriers that contravene a condition of their carrier licence. The effect of proposed
subsections 70(4A), (4B) and (4C) is that the ACMA would not be authorised to issue
a formal warning to a carrier that has contravened a carrier licence condition set out in
proposed sections 152BCO, 152BDF or 152BEC of the CCA. The reason for this
restriction is the same as that outlined in the explanatory note under item 73 above.
Item 78 - Paragraph 70(5)(b)
This item amends paragraph 70(5)(b) of the Tel Act, which confers power on the
ACCC to issue a formal warning if a carrier contravenes a condition set out in Part 3
or 4 of Schedule 1 to the Tel Act.
As explained in the explanatory note to item 71, the enforcement of Part 5 of
Schedule 1 to the Tel Act is proposed to be transferred from the ACMA to the ACCC.
As a consequence of this proposal, item 78 amends paragraph 70(5)(b) to include a
reference to Part 5 of Schedule 1. This amendment will ensure that the ACCC has the
power to issue formal warnings to carriers for breaches of conditions under Part 5
also.
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Item 79 - At the end of subsection 70(5)
This item inserts proposed paragraphs 70(5)(d), (e) and (f) into the Tel Act. The
proposed paragraphs have the effect of adding the conditions set out in proposed
sections 152BCO, 152BDF and 152BEC of the CCA as licence conditions for which
the ACCC may issue formal warnings to a carrier under subsection 70(5), where that
carrier contravenes a licence condition. As the conditions to be included by proposed
sections 152BCO, 152BDF and 152BEC are specific to the telecommunications
access regime under section Part XIC of the CCA, it is appropriate that the ACCC be
given a formal warning power under subsection 70(5) in relation to those licence
conditions.
Item 80 - At the end of section 98
This item inserts proposed subsections 98(3), (4) and (5) into the Tel Act. The
proposed subsections indicate that the rules set out in proposed
subsections 152BCP(2), 152BDG(2) and 152BED(2) of the CCA are to be included
as service provider rules for the purposes of the Tel Act and its regulations. Proposed
sections 152BCP, 152BDG and 152BED are inserted into proposed Division 4 of Part
XIC of the CCA by item 160. The rules in these proposed provisions mirror the
conditions set out in proposed sections 152BCO, 152BDF and 152BEC of the CCA.
They require service providers to comply with access determinations and binding
rules of conduct that are applicable, and require service providers to comply with
proposed sections 152BEA and 152BEB of the CCA which relate to the lodgment of
access agreements with the ACCC and the notification to the ACCC of the
termination of access agreements.
Under subsection 101(1) of the Tel Act a service provider must comply with all
service provider rules that apply to that service provider. Subsection 101(1) is also a
civil penalty provision. Proposed subsections 98(3), (4) and (5) have the effect of
making the rules set out in proposed subsections 152BCP(2), 152BDG(2) and
152BED(2) of the CCA subject to the civil penalty provisions under the Tel Act and
other provisions under the Tel Act dealing with service provider rules, including
provisions relating to enforcement.
Item 81 - After subsection 102(6)
This item inserts proposed subsections 102(6A), (6B) and (6C) into the Tel Act.
These provisions indicate that subsection 102(1) does not apply to the rules set out in
proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) of the CCA.
Subsection 102(1) of the Tel Act and related provisions under section 102 authorise
the ACMA to issue a remedial direction to a service provider that is contravening, or
has contravened, a service provider rule. The effect of proposed subsections 102(6A),
(6B) and (6C) is that the ACMA would not be authorised to issue a remedial direction
to a service provider that is contravening or has contravened a service provider rule
under proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the CCA. The
reason for this restriction is that it is intended that only the ACCC and the Minister
will have authority to take action against a service provider for breach of a service
provider rule under proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of
the CCA. The identified service provider rules are specific to the telecommunications
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access regime under Part XIC of the CCA, for which the ACCC has regulatory
responsibility. It is therefore appropriate that only the ACCC will have powers to
take action against service providers for breach of those service provider rules.
Item 82 - After subsection 103(3)
This item inserts proposed subsections 103(3A), (3B) and (3C) into the Tel Act.
These provisions indicate that subsection 103(1) does not apply to the rules set out in
proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) of the CCA.
Subsection 103(1) of the Tel Act authorises the ACMA to issue a formal warning to a
person that breaches a service provider rule. The effect of proposed
subsections 103(3A), (3B) and (3C) is that the ACMA would not be authorised to
issue a formal warning to a person that breaches a service provider rule set out in
proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the CCA. The
reason for this restriction is the same as that outlined in the explanatory note under
item 81 above.
Item 83 - After subsection 103(4)
This item inserts proposed subsections 103(4A), (4B) and (4C) into the Tel Act. The
proposed subsections have the effect of adding the rules set out in proposed
subsections 152BCP(2), 152BDG(2) and 152BED(2) as service provider rules for
which the ACCC may issue a formal warning to a service provider under section 103,
where that service provider has contravened a service provider rule. As the rules set
out under proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) are specific
to the telecommunications access regime under section Part XIC of the CCA, it is
appropriate that the ACCC be given a formal warning power under
subsections 103(4A), (4B) and (4C) in relation to those service provider rules.
Item 84 - After section 505
This item inserts proposed sections 505A and 505B into Part 25 of the Tel Act, which
relates to public inquiries.
Proposed section 505A ACCC may use material presented to a previous
public inquiry
To ensure the ACCC is able to conduct inquiries in the most efficient manner, without
unduly expending time or resources on repetitive processes, proposed section 505A
provides that, where the ACCC obtains evidence, material, written submissions or
other information for the purposes of an inquiry under Part 25 of the Tel Act, it may
also use that evidence, material, those written submissions or that other information
for the purposes of a later inquiry under Part 25.
This provision is intended to allow the ACCC to use information, material, evidence
or submissions that it obtains in one inquiry for the purposes of another inquiry,
which will allow the ACCC to expedite the inquiry process and to consider matters
that arose in earlier inquiries and that continue to be relevant to a subsequent inquiry.
For instance, where evidence or material is presented as part of an inquiry about a
proposal to declare a specified eligible service to be a declared service (see
154
section 152AL of the CCA), this provision will permit the ACCC to use that evidence
or material in an inquiry about a proposal to make an access determination in relation
to that service (see proposed section 152BCH), or in a later inquiry about a proposal
to vary the declaration of the service (see section 152AO) or to vary the access
determination (see proposed section 152BCN).
Proposed subsection 505A(3) provides that proposed section 505A is not intended to
limit, by implication, the information that the ACCC may use for the purposes of a
public inquiry under Part 25 of the Tel Act.
Proposed section 505B ACCC may adopt a finding from a previous public
inquiry
When it holds an inquiry under Part 25 of the Tel Act, the ACCC is required to
prepare a report setting out its findings as a result of the inquiry (see section 505 of
the Tel Act). The effect of proposed section 505B is that the ACCC can adopt the
findings it makes in a report on one public inquiry under Part 25 for the purposes of
another public inquiry under Part 25. For instance, where the ACCC makes a finding
as a result of an inquiry about a proposal to declare a specified eligible service to be a
declared service (see section 152AL of the CCA), this provision will permit the
ACCC to adopt that finding in a later inquiry about a proposal to make an access
determination in relation to that service (see proposed section 152BCH), or in a later
inquiry about a proposal to vary the declaration of the service (see section 152AO) or
to vary the access determination (see proposed section 152BCN).
Proposed section 505B is intended to improve the efficiency and cost-effectiveness of
the public inquiry process and facilitate quicker regulatory outcomes by enabling the
ACCC to avoid having to unnecessarily repeat processes.
Item 85 - Paragraph 564(3)(b)
This item amends paragraph 564(3)(b) of the Tel Act.
Paragraph 564(3)(b) of the Tel Act imposes a limitation on the ACMA, by providing
that it is not entitled to apply for an injunction in relation to a contravention of a
carrier licence condition set out in Part 3 or 4 of Schedule 1 to that Act.
As explained in the explanatory note to item 71, the enforcement of Part 5 of
Schedule 1 is proposed to be transferred from the ACMA to the ACCC. As a
consequence of this proposal, item 85 amends paragraph 564(3)(b) to include a
reference to Part 5 of Schedule 1.
Item 86 - At the end of subsection 564(3) (before the notes)
Item 87 - Subsection 564(3) (note 2)
Item 88 - At the end of subsection 564(3) (after the notes)
Item 86 inserts proposed paragraphs 564(3)(f)-(k). Section 564 of the Tel Act permits
the Minister, the ACMA or the ACCC to apply to the Federal Court for an injunction
concerning a person's contravention of the Tel Act. Under current subsection 564(3)
the ACMA is not entitled to apply for an injunction in relation to a contravention of
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certain carrier licence conditions and service provider rules that are listed under that
subsection. The proposed paragraphs add the licence conditions in sections 152BCO,
152BDF and 152BEC of the CCA and the service provider rules in subsections
152BCP(2), 152BDG(2) and 152BED(2) of the CCA to the list of licence conditions
and service provider rules in subsection 564(3). This means the ACMA would not be
entitled to apply for an injunction in relation to a contravention of a carrier licence
condition in proposed sections 152BCO, 152BDF or 152BEC of the CCA or a service
provider rule in proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the
CCA. 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 73 and 81 above.
Items 87 and 88 add notes to section 564 in relation to proposed
paragraphs 564(3)(f)-(k) to assist the reader.
Item 89 - Paragraph 571(3)(b)
This item amends paragraph 571(3)(b) of the Tel Act.
Paragraph 571(3)(b) of the Tel Act imposes a limitation on the ACMA, by providing
that it is not entitled to institute proceedings for the recovery of a pecuniary penalty in
relation to a contravention of a carrier licence condition set out in Part 3 or 4 of
Schedule 1.
As explained in the explanatory note to item 71, the enforcement of Part 5 of
Schedule 1 is proposed to be transferred from the ACMA to the ACCC. As a
consequence of this proposal, item 89 amends paragraph 571(3)(b) to include a
reference to Part 5 of Schedule 1.
Item 90 - At the end of subsection 571(3) (before the notes)
Item 91 - Subsection 571(3) (note 2)
Item 92 - At the end of subsection 571(3) (after the notes)
This item inserts paragraphs 571(3)(f)-(k). Section 571 of the Tel Act permits the
Minister, the ACMA or the ACCC to institute proceedings in the Federal Court for
the recovery on behalf of the Commonwealth of a pecuniary penalty for breach of a
civil penalty provision. Under current subsection 571(3) the ACMA is not entitled to
institute a proceeding for recovery of a pecuniary penalty in relation to a
contravention of a carrier licence condition or service provider rule listed under that
subsection. The proposed paragraphs add the licence conditions in proposed
sections 152BCO, 152BDF and 152BEC of the CCA and the service provider rules in
proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) of the CCA to the list
of licence conditions and service provider rules in subsection 571(3). This means the
ACMA would not be entitled to institute a proceeding for recovery of a pecuniary
penalty in relation to a contravention of a carrier licence condition in proposed
sections 152BCO, 152BDF or 152BEC of the CCA or a service provider rule in
proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the CCA. The
reason for this restriction is outlined in the explanatory notes under items 73 and 81
above.
156
Items 91 and 92 adds notes to section 571 in relation to proposed
paragraphs 571(3)(b) and (f)-(k) to assist the reader.
Item 93 - After subclause 17(2) of Schedule 1
Item 93 inserts proposed subclause 17(2A) in Schedule 1 of the Tel Act.
Subclause 17(1) of Schedule 1 sets out the general rule that carriers must provide
other carriers with access to supplementary facilities for the purpose of enabling the
other carriers to provide competitive facilities and competitive carriage services or to
establish their own facilities.
Proposed subclause 17(2A) provides limitations on a carrier's obligation to comply
with the rule in subclause 17(1).
The effect of proposed paragraph 17(2A)(a) is to provide some protection to parties
that have rights under contracts at a time a carrier makes a request for access to
another carrier's facilities, where those rights would be affected by the requirement to
give access in accordance with the request. Proposed subclause 17(2B) provides that,
where a contract has been signed but provisions of that contract have not yet entered
into force because a condition precedent has not been satisfied, and if those provisions
entered into force then a right would exist, then proposed paragraph 17(2A)(a) has
effect as if the contract was in force and the person had the right under the contract, if
it remains possible that the condition precedent could be satisfied. This provision will
ensure that appropriate preference is given to contracts that have been executed but
that have not yet entered into force, for so long as it remains a possibility that the
contract will enter into force. For example, if a contract would afford a person a right
on the satisfaction under a provision that is subject to a condition precedent, and the
condition precedent requires the condition precedent to be satisfied within six months
of execution, then if after six months the condition has not been satisfied, from that
time the contract would not be treated as being in force and the person would not be
treated as having a right.
Proposed paragraphs 17(2A)(b) and (c) are included as a result of proposed
amendments to the Tel Act in Part 1 of Schedule 1 to the Bill, and reflect the
amendments to section 152AR of the CCA made by item 38 (described in the notes
for that item, above). These amendments to clause 17 are designed to ensure that the
facilities access regime in Part 3 of Schedule 1 does not operate in a manner that
frustrates the achievement of structural reform of the telecommunications industry.
The effect of proposed paragraph 17(2A)(b) is that the rule in subclause 17(1) does
not operate so as to impose an obligation on Telstra to the extent that it would have
the effect of preventing Telstra from complying with a structural separation
undertaking, or an undertaking about hybrid fibre-coaxial networks or an undertaking
about subscription television broadcasting licences.
This amendment will mean that Telstra's compliance with voluntary undertakings
under proposed Part 33 of the Tel Act cannot be impeded by access seekers requesting
access to services under Part XIC of the CCA.
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Proposed paragraph 17(2A)(c) provides a further limitation on the operation of the
rule in subclause 17(1), as a consequence of the introduction of the concept of a
migration plan under a structural separation undertaking given by Telstra under
proposed section 577A of the Tel Act. The operation of the migration plan
amendments is described in detail at the explanatory note for proposed
section 577BC, in item 30 above.
The effect of this provision is that, if a final migration plan is in force, then the rule in
subclause 17(1) does not operate so as to impose an obligation on Telstra if it would
have the effect of requiring Telstra to engage in conduct in connection with matters
covered by its migration plan.
The reason for this limitation is to provide Telstra with a high level of certainty that
once its migration plan has been accepted by the ACCC, the carrier licence condition
relating to access to supplementary facilities will not subsequently operate so as to
impose additional obligations on Telstra in relation to matters related to migration.
Item 94 - After subclause 17(4) of Schedule 1
Item 95 - At the end of clause 17 of Schedule 1
Item 94 inserts new subclause 17(4A) into Schedule 1 to the Tel Act.
The facilities access obligation under subclause 17(1) applies to owners and operators
of the supplementary facilities.
Proposed subclause 17(4A) clarifies that for the purposes of subclause 17(1), if there
is an agreement between Telstra and an NBN corporation that relates to the NBN
corporation's access to facilities owned or operated by Telstra, and apart from this
provision the effect of the agreement would be that the NBN corporation would be
considered to be the operator of the facility, then the NBN corporation is taken not to
be subject to operator of the facilities.
This will ensure that, as part of any structural separation undertaking submitted by
Telstra in accordance with proposed section 577BA of the Tel Act, NBN Co and
Telstra can enter into agreements for the provision of access to Telstra facilities
without NBN Co then being considered to be the operator of the facilities (and
therefore being obliged to provide access to those facilities to other carriers on
request, in accordance with subclause 17(1)).
This proposed subclause clarifies that a third party cannot seek access to a facility
from an NBN corporation merely because there is an agreement in force between an
NBN corporation and Telstra which relates to an NBN corporation's access to
facilities owned and operated by Telstra. This proposed provision is included to
provide Telstra with a high degree of certainty about control of its facilities.
Item 95 inserts a new subclause 17(6) of Schedule 1 to the Tel Act, which provides
that the term `NBN corporation' (used in proposed subclause 17(4A)) has the same
meaning as in proposed section 577BA.
158
Item 96 - At the end of clause 18 of Schedule 1
Item 96 inserts new subclauses 18(6) and (7).
Subclause 18(1) of Schedule 1 to the Tel Act provides that the terms and conditions
on which a carrier complies with the supplementary facilities access obligation under
clause 17 are as agreed between a carrier and a requesting carrier, or, where
agreement cannot be reached, determined by an arbitrator appointed by the parties.
Where the parties cannot agree on an arbitrator, the ACCC is to be the arbitrator.
In light of the new arrangements for the structural separation of Telstra, it is not
appropriate for an arbitrator (including the ACCC) to make an arbitration
determination which would prevent Telstra from complying with its structural
separation undertaking, or undertakings about hybrid fibre-coaxial networks or about
subscription television broadcasting licences. Accordingly, proposed subclause 18(6)
provides that an arbitrator must not make a determination under clause 18 if the
determination would have the effect of preventing Telstra from complying with an
undertaking in force under proposed sections 577A, 577C or 577E.
Proposed subclause 18(7) provides a determination under clause 18 will have not have
any effect to the extent to which it is inconsistent with a written agreement that is in
force between parties about the terms and conditions on which access is to be
provided in accordance with clause 17. The effect of this is the arbitrator (including
the ACCC as default arbitrator) will not be permitted to make a determination about
the terms and conditions of access (including price-related terms) which is
inconsistent with an existing agreement between two carriers. If carriers reach
agreement as to the terms and conditions on which access is to be provided, then they
will not be able to seek an arbitration, except that they may seek an arbitration about
terms and conditions for any matters that are not addressed by their agreement (since
in that case there will be no inconsistency between the agreement and the arbitration
determination).
Item 97 - Clause 31 of Schedule 1
Item 97 amends clause 31 of Schedule 1 to the Tel Act, by including a definition of
the term `NBN corporation' (used in proposed subclauses 33(8), 34(8) and 35(8)).
The term has the same meaning as in proposed section 577BA.
Item 98 - Subclause 33(3) of Schedule 1
Subclause 33(1) sets out a general rule which requires the first carrier, if requested to
do so by another carrier (the second carrier), to give access to a telecommunications
transmission tower owned or operated by the first carrier.
Subclause 33(3) provides that the first carrier is not required to give access if the
ACMA has provided a written certificate stating that compliance with the access
obligation under clause 33 is not technically feasible.
In order to streamline the regulation of the facilities access regime under Part 5 of
Schedule 1 to the Tel Act and harmonise it with that under the CCA, it is proposed
159
that the ACCC, rather than the ACMA, will act as the primary regulator. Accordingly,
as a result of item 98, it will be for the ACCC, not the ACMA, to provide written
certificates concerning technical feasibility in accordance with subclause 33(3), to
reflect this change in responsibility for the regulation of Part 5.
Item 99 - Subclause 33(4) of Schedule 1
Subclause 33(4) sets out the matters the ACMA must have regard to in determining
whether compliance with subclause 33(4) in relation to a tower is technically feasible.
The primary regulator for Part 5 is to change from the ACMA to the ACCC. As a
consequence, item 99 amends subclause 33(4) by replacing all references to the
`ACMA' in subclause 33(4) with the `ACCC'. No other substantive changes are made
to subclause 33(4).
Item 100 - After subclause 33(4) of Schedule 1
Notwithstanding the change in entities responsible for the regulation of Part 5, given
the ACMA's technical expertise in this area, there is value in the ACCC consulting
with the ACMA as part of its deliberations on whether to issue a written certificate
about technical feasibility.
Item 100 inserts proposed subclause 33(4A), which provides that the ACCC may
consult with the ACMA before issuing a certificate under subclause 33(3).
Consultation with the ACMA is not mandatory, although it is envisaged that it will
occur as appropriate.
Item 101 - Subclause 33(5) of Schedule 1
Item 101 amends subclause 33(5) by replacing all references to the `ACMA' with the
`ACCC'. This represents a consequential amendment stemming from the change in
entities responsible for regulating Part 5. The effect of item 101 would be that the
ACCC, rather than the ACMA, would be responsible for issuing written certificates
under subclause 33(3) regarding technical feasibility.
Item 102 - At the end of clause 33 of Schedule 1
Item 102 inserts proposed subclauses 33(6), (7) and (8).
Subclause 33(1) sets out a general rule which requires the first carrier, if requested to
do so by another carrier (the second carrier), to give access to a telecommunications
transmission tower owned or operated by the first carrier.
Proposed subclause 33(6) provides for three additional exceptions to the general
access rule set out in subclause 33(1). These three new exceptions are substantially
similar to those set out in proposed new subclause 17(2A), except that they relate to
telecommunications transmission towers. Those exceptions are explained in detail in
the notes on proposed subclause 17(2A), at item 93.
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Proposed subclause 33(8) clarifies that for the purposes of subclause 33(1), if there is
an agreement between Telstra and an NBN corporation that relates to the NBN
corporation's access to a telecommunications transmission tower owned or operated
by Telstra, and apart from this provision the effect of the agreement would be that the
NBN corporation would be considered to be the operator of the tower, then the NBN
corporation is taken not to be the operator of the tower. The reason for this is as
explained in the note in relation to proposed subclause 17(4A), see item 94, above.
Item 103 - Subclause 34(3) of Schedule 1
Item 103 amends subclause 34(3) of Schedule 1 such that it will be for the ACCC, not
the ACMA, to provide written certificates concerning technical feasibility in
accordance with subclause 34(3). This reflects the amendment to subclause 33(3)
made by item 98.
Item 104 - Subclause 34(4) of Schedule 1
Subclause 34(4) sets out the matters the ACMA must have regard to in determining
whether compliance with subclause 34(4) in relation to a site of a telecommunications
transmission tower is technically feasible.
Item 104 amends subclause 34(4) by replacing all references to the `ACMA' with the
`ACCC'. This represents a consequential amendment stemming from the change in
entities responsible for issuing written certificates. No other substantive changes are
made to subclause 34(4).
Item 105 - After subclause 34(4) of Schedule 1
Item 105 inserts proposed subclause 34(4A), which provides that the ACCC may
consult with the ACMA before issuing a certificate under subclause 34(3).
Consultation with the ACMA is not mandatory, although it is envisaged that it will
occur as appropriate.
Item 106 - Subclause 34(5) of Schedule 1
Item 106 amends subclause 34(5) by replacing all references to the `ACMA' with the
`ACCC'. This represents a consequential amendment stemming from the change in
entities responsible for issuing certificates concerning technical feasibility under
Part 5 of Schedule 1.
Item 107 - At the end of clause 34 of Schedule 1
Item 107 inserts proposed subclauses 34(6), (7), and (8).
Subclause 34(1) sets out a general rule which requires the first carrier, if requested to
do so by another carrier (the second carrier), to give access to sites of
telecommunications transmission towers owned or operated by the first carrier.
Proposed subclause 34(6) provides for three additional exceptions to the general
access rule set out in subclause 34(1). These three new exceptions mirror those under
161
proposed new subclauses 17(2A), 33(6) and 35(6), except that they relate to sites of
telecommunications transmission towers. Those exceptions are explained in detail in
the notes on proposed subclause 17(2A), at item 93.
Proposed subclause 34(8) clarifies that for the purposes of subclause 34(1), if there is
an agreement between Telstra and an NBN corporation that relates to the NBN
corporation's access to the site of a telecommunications tower owned, occupied or
controlled by Telstra, or which Telstra has a right to use, and apart from this provision
the effect of the agreement would be that the NBN corporation would be considered
to be the occupier or controller of the site, or would have a right to use the site, then
the NBN corporation is not taken to be the occupier or controller of the site, and not to
have a right to use the site. The reason for this is as explained in the note in relation
to proposed subclause 17(4A), see item 94, above.
Item 108 - Subclause 35(3) of Schedule 1
Item 108 amends subclause 35(3) of Schedule 1 such that it will be for the ACCC, not
the ACMA, to provide written certificates concerning technical feasibility in
accordance with subclause 35(3). This reflects the amendment to subclause 33(3)
made by item 70BE, and the amendment to subclause 34(3) made by item 103.
Item 109 - Subclause 35(4) of Schedule 1
Existing subclause 35(4) sets out the matters the ACMA must have regard to in
determining whether compliance with subclause 35(1) in relation to eligible
underground facilities is technically feasible.
Item 109 amends subclause 35(4) by replacing all references to the `ACMA' with the
`ACCC'.
Item 110 - After subclause 35(4) of Schedule 1
Item 110 inserts proposed subclause 35(4A), which provides that the ACCC may
consult with the ACMA before issuing a certificate under subclause 35(3). This
represents a consequential amendment. Consultation with the ACMA is not
mandatory, although it is envisaged that it will occur as appropriate.
Item 111 - Subclause 35(5) of Schedule 1
Item 111 amends subclause 35(5) by replacing all references to the `ACMA' with the
`ACCC'. No other substantive changes are made to subclause 35(5).
Item 112 - At the end of clause 35 of Schedule 1
Item 112 inserts proposed subclauses 35(6), (7), and (8).
Subclause 35(1) set out a general rule which requires the first carrier, if requested to
do so by another carrier (the second carrier), to give access to eligible underground
facilities owned or operated by the first carrier.
162
Item 112 would insert a proposed subclause 35(6) which sets out three additional
exceptions to the general access rule under subclause 35(1). These three new
exceptions are substantially similar to those set out in proposed new
subclauses 17(2A), 33(6) and 34(6), except that they relate to eligible underground
facilities. Those exceptions are explained in detail in the notes on proposed
subclause 17(2A), at item 93.
Proposed subclause 35(8) clarifies that for the purposes of subclause 35(1), if there is
an agreement between Telstra and an NBN corporation that relates to the NBN
corporation's access to an eligible underground facility owned or operated by Telstra,
and apart from this provision the effect of the agreement would be that the NBN
corporation would be considered to be the operator of the facility, then the NBN
corporation is taken not to be the operator of the facility. The reason for this is as
explained in the note in relation to proposed subclause 17(4A), see item 94, above.
Item 113 - At the end of clause 36 of Schedule 1
Item 113 inserts proposed subclauses 36(7) and (8), which provide limitations on
determinations made by an arbitrator under clause 36, and operate in the same way as
proposed subclauses 18(6) and (7), inserted by item 96, which are described in detail
in the notes for that provision.
Competition and Consumer Act 2010
Item 114 - Section 152AA
Item 114 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 that follow.
Item 115 - Section 152AC
Item 115 includes in section 152AC of the CCA a reference to `access agreement',
which is a term defined in proposed section 152BE (see item 160).
Item 116 - Section 152AC
Item 116 includes in section 152AC of the CCA a definition of the term `access
determination'. An access determination is a determination made under proposed
section 152BC, inserted as part of proposed Division 4 of Part XIC (see item 160).
Item 117 - Section 152AC (definition of access undertaking)
Item 117 amends the definition of `access undertaking' in section 152AC of the CCA
to remove reference to an ordinary access undertaking. As a result of the amendments
made to Part XIC of the CCA by the Bill, ordinary access undertakings will no longer
be a part of the telecommunications access regime. Only special access undertakings
will be available.
163
Item 118 - Section 152AC
Item 118 inserts in section 152AC of the CCA a definition of `binding rules of
conduct', and provides that this term refers to rules made under proposed
subsection 152BD(1), inserted as part of proposed Division 4A of Part XIC (see
item 160).
Item 119 - Section 152AC
Item 119 inserts into section 152AC of the CCA a definition of the term `final access
determination', and provides that this term refers to an access determination other
than an `interim access determination' (the definition of the latter term is also
included in section 152AC by the Bill - see item 122).
Item 120 - Section 152AC
Item 120 includes in section 152AC of the CCA a definition of the term `fixed
principles provision', which is a term defined in proposed section 152BCD, inserted
as part of proposed Division 4 of Part XIC (see item 160).
Item 121 - Section 152AC
Item 121 inserts into section 152AC of the CCA a definition of the term `fixed
principles term or condition', which is a term defined in proposed section 152CBAA,
inserted as part of proposed Division 4 of Part XIC (see item 166).
Item 122 - Section 152AC
Item 122 inserts into section 152AC of the CCA a definition of the term `interim
access determination', and provides that this term refers to an access determination
that is expressed to be an interim access determination. The requirement for interim
access determinations is set out in proposed section 152BCG.
Item 123 - Section 152AC (definition of ordinary access undertaking)
Item 123 repeals the definition of `ordinary access undertaking'. Ordinary access
undertakings are dealt with in the current Subdivision A of Division 5 of Part XIC,
which is repealed by item 161.
Item 124 - Section 152AC (definition of telecommunications access code)
Item 124 repeals the definition of `telecommunications access code'.
Telecommunications access codes are dealt with in the current Division 4 of Part XIC.
As a result of the amendment made by item 160, current Division 4 of Part XIC is
repealed and replaced.
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Item 125 - Section 152AC
Item 125 inserts a definition of `variation agreement' into section 152AC. This term
has the meaning given to it by proposed subsection 152BE(3).
Item 126 - At the end of section 152AF
Item 126 inserts proposed subsection 152AF(3). Section 152AF deals with the scope
of the term `access', and provides (at subsection 152AF(2)) that anything done by a
carrier or a CSP in fulfilment of a standard access obligation is taken to be an aspect
of access to a declared service.
Proposed subsection 152AF(3) provides that anything done by a carrier or CSP in
fulfilment of a requirement that is imposed on the carrier or CSP by an access
determination is taken to be an aspect of access to a declared service.
Item 127 - After section 152AH
Item 127 inserts proposed section 152AI into Part XIC of the CCA.
Proposed section 152AI When public inquiry commences
Proposed section 152AI clarifies, for the purposes of Part XIC, that a public inquiry
under Part 25 of the Tel Act commences when the ACCC publishes the notice
required under section 498 of that Act. This provision is necessary as, under the
amendments made to Part XIC by the Bill, the ACCC is subject to certain timeframes
that apply from the commencement of a public inquiry. For example, under proposed
section 152BCG, the ACCC must make an interim access determination if it is
unlikely that the final access determination in relation to a newly declared service will
be in place six months after the commencement of the public inquiry relating to the
making of the access determination.
Item 128 - Subsection 152ALA(2)
Item 128 repeals current subsection 152ALA(2) and replaces it with proposed
subsection 152ALA(2). Currently, subsection 152ALA(2) provides that an access
declaration made by the ACCC under section 152AL must specify an expiry date that
occurs within the five-year period beginning when the access declaration was made.
The effect of proposed subsection 152ALA(2) is to allow an access declaration to
specify an expiry date that is more than five years after the declaration was made.
However, the proposed subsection also provides that in specifying an expiry date, the
ACCC is to have regard to the principle that the duration of an access declaration
should be between three and five years, unless the ACCC considers that there are
circumstances that warrant making an access declaration with a duration shorter than
three years or longer than five years. The ACCC may also have regard to other
matters it considers relevant in specifying an expiry date.
This amendment is intended to enable the ACCC to provide longer-term regulatory
certainty, where appropriate, to promote competition and investment.
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Item 129 - After subsection 152ALA(6)
Item 129 inserts proposed subsection 152ALA(6A). Subsection 152ALA(6) clarifies
that, if an access declaration made by the ACCC under section 152AL expires, the
ACCC is not prevented from making a fresh declaration under section 152AL in the
same terms as the expired determination. The effect of proposed
subsection 152ALA(6A) is that the fresh declaration is taken to `replace' the expired
declaration. The concept of a fresh declaration replacing an expired declaration is
relevant in determining the duration of an access determination (see proposed
subsection 152BCF(3)), and is also relevant to the automatic revocation of an access
determination (see proposed subsections 152BCF(8) and (9)).
Item 130 - Paragraph 152ALA(7)(a)
Item 130 amends paragraph 152ALA(7)(a). Currently paragraph 152ALA(7)(a)
requires the ACCC, within the 18-month period ending on the expiry of a declaration,
to hold a public inquiry under Part 25 of the Tel Act about whether to extend, further
extend, revoke or vary the declaration. The amendment made to
paragraph 152ALA(7)(a) would extend the time period for holding this inquiry, so
that the ACCC must hold it within the 18-month period ending on the expiry of a
declaration. This would make the period for holding the inquiry consistent with the
18-month period during which the ACCC is required to hold a public inquiry into
making an access determination (see proposed subsection 152BCI(3)). The note at
item 130 makes a consequential change to the heading of subsection 152ALA(7).
Item 131 - After subparagraph 152ALA(7)(a)(v)
Item 131 makes a further amendment to paragraph 152ALA(7)(a) by inserting
proposed subparagraph 152ALA(7)(a)(vi), the effect of which is that, after holding a
public inquiry, the ACCC can make a decision to extend (or further extend) the expiry
date of a declaration by 12 months or less and allow the declaration to expire. Where
the ACCC decides that a service should no longer be declared, this provision will
enable it to extend the declaration for a short time to enable access seekers to
transition to other services, and removes the need for an additional inquiry prior to the
extended expiry date.
Item 132 - Subsection 152AM(3)
Item 132 repeals current subsection 152AM(3) and replaces it with proposed
subsection 152AM(3). Section 152AM applies to public inquiries that the ACCC
holds about declaring services (under paragraph 152AL(3)(a)) or about the extension,
variation, revocation, or expiry of a declaration (under paragraph 152ALA(7)(a)).
Subsection 152AM(2) provides that the ACCC may hold an inquiry on its own
initiative, or if requested in writing to do so by any person. Subsection 152AM(3)
currently requires the ACCC, if it decides not to hold an inquiry after a person has
requested it to do so, to notify the person in writing of its decision and its reasons for
the decision. Item 123 repeals and replaces subsection 152AM(3). Proposed
subsection 152CM(3) provides that the ACCC does not have a duty to consider
whether to hold an inquiry about a proposal to declare a service under
paragraph 152AL(3)(a) if it is requested to do so by a person. This amendment is
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intended to streamline the operation of sections 152AL and 152ALA, by removing the
requirement for the ACCC to consider each request that it receives to hold an inquiry
and to provide reasons if it decides not to proceed with an inquiry.
Item 133 - Subsection 152AQ(3)
Item 134 - Subsections 152AQ(4), (5) and (6)
Section 152AQ requires the ACCC to keep a Register of declarations made under
section 152AL. Item 134 repeals subsections 152AQ(4), (5) and (6), which provide
for the inspection and copying of the Register, and replaces them with proposed
subsection 152AQ(4), which provides that the Register is to be made available for
inspection on the ACCC website, and proposed subsection 152AQ(5), which clarifies
that the Register is not a legislative instrument. Item 133 makes a related change to
subsection 152AQ(3), with the effect that the ACCC is required to (rather than
permitted to) maintain the Register by electronic means.
Item 135 - Sections 152AQA and 152AQB
Section 152AQA requires the ACCC to determine in writing principles that relate to
the price of access to a declared service (`pricing principles'). Section 152AQB
requires the ACCC to make a determination setting out model terms and conditions
for certain specified declared services. The ACCC is required to have regard to both
relevant pricing principles and model terms and conditions if it is required to arbitrate
an access dispute under Division 8 of Part XIC. As Division 8 of Part XIC is being
repealed by the Bill, item 135 makes a consequential amendment to repeal both
sections 152AQA and 152AQB.
Item 136 - Subsection 152AR(12) (definition of pre-request right)
Item 136 makes a change to the definition of `pre-request right' at
subsection 152AR(12) that is necessary as a consequence of the repeal of Division 8
of Part XIC by item 185 below.
Item 137 - Section 152AS
One of the reforms to Part XIC implemented by the Bill is to change the system of
exemptions from the standard access obligations. As a result of the changes made to
Part XIC by the Bill ordinary exemptions from the standard access obligations will no
longer be available. An ordinary exemption is an exemption that applies in relation to
a service that is a declared service at the time the exemption determination is made by
the ACCC. Following the reforms made by the Bill, the ACCC will only be able to
issue anticipatory exemptions. An anticipatory exemption is an exemption that
applies to a service that is not a declared service at the time the exemption
determination is made. An anticipatory exemption provides that, in the event the
service in question is declared by the ACCC under section 152AL, a particular
carrier/CSP (under section 152ATA) or members of a class of carriers/CSPs
(section 152ASA) are exempt from the requirements to comply with the standard
access obligations in relation to the declared service.
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Item 137 repeals section 152AS, which provides for ordinary class exemptions from
the standard access obligations in section 152AR. The need for ordinary class
exemptions is removed because the ACCC will be able to include provisions in an
access determination which remove or limit the obligation of carriers or CSPs to
comply with some or all of the standard access obligations (see proposed
paragraphs 152BC(3)(h) and (i)).
Item 138 - After subsection 152ASA(1)
Item 138 clarifies the intended operation of section 152ASA (which provides for
anticipatory class exemptions from the standard access obligations), and clarifies the
effect of the repeal of section 152AS, by including proposed subsection 152ASA(1A),
which states that a service must not be specified in an anticipatory class exemption
determination if, at the time the determination is made, the service is a declared
service.
Item 139 - After subsection 152ASA(2)
Item 139 provides that an anticipatory class exemption may include a provision (here
called an "entrenching provision") stating either that the exemption must not be varied
or revoked (proposed paragraphs 152ASA(2A)(a) and 152ASA(2B)(a)) or that the
exemption must not be varied or revoked except in certain specified circumstances
(proposed paragraphs 152ASA(2A)(b) and 152ASA(2B)(b)).
An entrenching provision in an anticipatory class exemption may itself not be varied
or removed, and nor may the anticipatory class exemption be varied in a manner that
is inconsistent with an entrenching provision: proposed subsections 152ASA(11B)
and (11C) (see item 141).
An entrenching provision will enable anticipatory class exemptions to afford a higher
degree of regulatory certainty to the exempted carriers or CSPs.
Item 140 - Subsection 152ASA(8)
Item 140 makes a consequential amendment to subsection 152ASA(8), necessary as a
result of the repeal of section 152AS by item 137.
Item 141 - After subsection 152ASA(11)
Item 141 inserts proposed subsections 152ASA(11A), (11B) and (11C). The effect of
these provisions is to alter the operation of subsection 33(3) of the AIA as it relates to
the ACCC's power to vary or revoke orders concerning anticipatory class exemptions.
The effect of subsection 33(3) of the AIA is altered to give effect to the amendments
made by item 139, which provide that the ACCC may choose to nominate certain
provisions of an anticipatory class exemption as entrenching provisions.
Item 142 - Subsection 152ASA(12)
Item 142 revokes subsection 152ASA(12), which provides that an anticipatory class
exemption instrument is a disallowable instrument for the purposes of the LIA, and
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replaces it with a provision stating that such an instrument is not a legislative
instrument for the purposes of the LIA.
Under the LIA, legislative instruments are subject to Parliamentary disallowance
which would not be appropriate for instruments made under Part XIC. Where the
ACCC uses a number of inter-related instruments to deal with a matter, disallowance
of one instrument could result in inconsistent and undesirable regulatory outcomes.
The Bill provides for consultation before making the instruments and for the
termination of the instruments (which makes it unnecessary and/or inappropriate for
the consultation and automatic `sunsetting' requirements in the LIA to apply).
Item 143 - Subsection 152ASA(13) (note)
Item 143 repeals the note at subsection 152ASA(13). It is no longer necessary as a
result of the amendment made by item 141.
Item 144 - Section 152AT
Item 144 repeals section 152AT, which provides for ordinary individual exemptions
from the standard access obligations at section 152AR. The consequences of, and
reasons for, the repeal of ordinary exemptions are discussed above at item 137.
Item 145 - After subsection 152ATA(3)
Item 145 clarifies the intended operation of section 152ATA (which provides for
anticipatory individual exemptions from the standard access obligations), and clarifies
the effect of the repeal of section 152AT, by including proposed
subsection 152ATA(3A), which states that a service must not be specified in an
anticipatory individual exemption order if, at the time the order is made, the service is
a declared service.
Item 146 - After subsection 152ATA(4)
Item 146 provides that an anticipatory individual exemption may include a provision
(here called an "entrenching provision") stating that either that the exemption must
not be varied or revoked (proposed paragraphs 152ATA(4A)(a) and 152ATA(4B)(a))
or that the exemption must not be varied or revoked except in certain specified
circumstances (proposed paragraphs 152ATA(4A)(b) and 152ATA(4B(b)).
An entrenching provision in an anticipatory individual exemption may itself not be
varied or removed, and nor may the anticipatory individual exemption be varied in a
manner that is inconsistent with an entrenching provision: proposed
subsections 152ATA(16B) and (16C) (see item 149).
An entrenching provision will enable anticipatory individual exemptions to afford a
higher degree of regulatory certainty to the exempted carriers or CSPs.
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Item 147 - After subsection 152ATA(6)
Item 147 inserts proposed subsection 152ATA(7), which provides a mechanism for
the ACCC to refuse to consider serial anticipatory individual exemptions. Where the
ACCC rejects one application for an anticipatory individual exemption by a person,
and the person subsequently makes another application for an anticipatory individual
exemption, and the first application and the later application are materially similar, or
the grounds on which the person made the first application are materially similar to
the grounds on which the person made the later application, then the ACCC can
refuse to consider the later application. This provision is intended to ensure that the
ACCC does not have to devote time and resources to considering an application for an
anticipatory individual exemption that is likely to be rejected.
Item 148 - Subsection 152ATA(10)
Item 148 makes a consequential amendment to subsection 152ATA(10), necessary as
a result of the repeal of section 152AT by item 144.
Item 149 - After subsection 152ATA(16)
Item 149 inserts proposed subsections 152ATA(16A), (16B) and (16C). The effect of
these provisions is to alter the operation of subsection 33(3) of the AIA as it relates to
the ACCC's power to vary or revoke orders concerning anticipatory individual
exemptions. The effect of subsection 33(3) of the AIA is altered to give effect to the
amendments made by item 146, which provide that the ACCC may choose to
nominate certain provisions of an anticipatory individual exemption as entrenching
provisions.
Item 150 - Subsection 152ATA(18) note
Item 150 repeals the note at subsection 152ATA(18). It is no longer necessary as a
result of the amendment made by item 149.
Item 151 - Subsection 152AU(1)
Item 151 makes a consequential amendment to subsection 152AU(1), necessary as a
result of the repeal of section 152AT by item 144.
Item 152 - Sections 152AV to 152AX
Item 152 provides for the repeal of sections 152AV, 152AW and 152AX. These
sections deal with the review by the Australian Competition Tribunal of ACCC
decisions relating to ordinary and anticipatory individual exemptions. Ordinary
individual exemptions will no longer be available after the amendments made by the
Bill: see item 144. The effect of item 152 is therefore to remove merits review in the
Australian Competition Tribunal of ACCC decisions relating to anticipatory
individual exemptions.
Merits review of ACCC decisions under the CCA can contribute to delays and
regulatory uncertainty. This is problematic in the telecommunications sector which is
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characterised by rapid technological advances and changing market conditions. The
ACCC's decisions are subject to judicial review by the Federal Court under the
Administrative Decisions (Judicial Review) Act 1977.
Item 153 - Subsection 152AXA(1)
Item 154 - Paragraph 152AXA(1)(a)
Item 155 - Subsection 152AXA(2)
Items 153, 154 and 155 make consequential changes to section 152AXA, which are
necessary as a result of the repeal of section 152AT by item 100 and the repeal of
provisions allowing merits review for anticipatory individual exemptions by item 152.
Item 156 - Section 152AY
As a result of amendments made elsewhere in Part 2 of Schedule 1 of the Bill,
item 156 repeals and replaces section 152AY, which sets out the terms and conditions
on which a carrier/CSP must comply with the standard access obligations.
Under the proposed amendments to Part XIC made by the Bill, the terms and
conditions on which a carrier/CSP must comply with the standard access obligations
may be dealt with in different documents that exist at the same time. The proposed
section 152AY establishes a hierarchy between those documents for identifying the
terms and conditions on which a carrier/CSP must comply with the standard access
obligations.
Proposed section 152AY Compliance with standard access obligations
The effect of proposed section 152AY is that those terms and conditions are identified
by answering a number of questions:
- Is there in place an access agreement between the carrier/CSP and an access
seeker that specifies terms and conditions relating to a particular matter?
o If so, then the terms and conditions relating to that matter are as set out
in the access agreement.
o If not, then...
- ...is there a special access undertaking given by the carrier/CSP that is in force
and that specifies terms and conditions relating to that matter?
o If so, then the terms and conditions are as set out in the undertaking.
o If not, then...
- ...are there binding rules of conduct that specify terms and conditions relating
to that matter?
o If so, then the terms and conditions relating to that matter are as set out
in the binding rules of conduct.
o If not, then...
- ...is there an access determination that specifies terms and conditions relating
to that matter?
o If so, then the terms and conditions relating to that matter are as set out
in the access determination.
o If not, then the terms and conditions relating to that matter will need to
be dealt with using one of the three methods above.
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This means that where terms and conditions relating to a matter are not currently
covered by an access agreement, a special access undertaking, binding rules of
conduct or an access determination, those terms and conditions will need to be
addressed using one of those mechanisms. For example, in this circumstance the
parties to an access agreement could vary their access agreement to take account of
the matter and include additional terms and conditions. Or, the ACCC could include
terms and conditions relating to the matter in new binding rules of conduct or a new
or varied access determination.
The provisions in proposed Division 4A relating to binding rules of conduct are
intended to allow the ACCC to make urgent and temporary arrangements to deal with
terms and conditions of access to declared services: this may include dealing with the
situation where the terms and conditions on which a carrier/CSP must comply with
the standard access obligations are not currently specified elsewhere.
Three notes are included at the end of proposed section 152AY.
The first note alerts the reader that, before considering the hierarchy that is set out at
proposed subsection 152AY(2) and is described above, it is necessary to consider
certain listed provisions of Part XIC that are inserted by the Bill, and that specify how
inconsistency is to be addressed. For example, proposed section 152CBIC provides
that an access agreement will prevail over a special access undertaking, to the extent
of any inconsistency in the terms and conditions set out in them. So if an access
agreement between a carrier/CSP and an access seeker and a special access
undertaking given by that carrier/CSP both contain terms and conditions dealing with
a particular matter, in considering the application of the hierarchy at proposed
section 152AY in such a circumstance, in effect the special access undertaking is
taken not to address the matter: it has no effect to the extent of the inconsistency.
The second note highlights that although, under the hierarchy described above,
binding rules of conduct take precedence over an access determination, the ACCC
may only make binding rules of conduct if it considers there is an urgent need to do so
(see proposed subsection 152BD(1)). As noted above, binding rules of conduct are
intended to deal with urgent matters. They have a maximum duration of 12 months.
Access determinations will be the usual way that the ACCC specifies up-front terms
and conditions of access, including terms and conditions for complying with the
standard access obligations.
The third note indicates that transitional provisions are included in Division 2 of
Schedule 1 of the Bill. Specifically, item 208 of the Bill deals with the hierarchy that
is to apply in the transition from the operation of the current Part XIC to the operation
of Part XIC as amended by the Bill. Item 208 includes arbitration determinations
made by the ACCC in that hierarchy.
Item 157 - Paragraph 152BBAA(1)(a)
Item 158 - Paragraph 152BBAA(1)(b)
Items 157 and 158 make consequential amendments, necessary as a result of the
repeal of sections 152AS and 152AT by items 137 and 144.
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Item 159 - Subsection 152BBC(5)
Item 159 makes a consequential amendment to section 152BBC, necessary as a result
of the repeal of Division 8 of Part XIC by item 185. It repeals subsection 152BBC(5),
which refers to arbitrations of access disputes under Division 8.
Item 160 - Division 4 of Part XIC
Current Division 4 of Part XIC deals with telecommunications access codes.
Item 160 repeals current Division 4 and replaces it with:
- proposed Division 4, which deals with access determinations;
- proposed Division 4A, which deals with binding rules of conduct; and
- proposed Division 4B, which deals with access agreements.
Telecommunications access codes specify model terms and conditions of access that
can be adopted by an ordinary access undertaking. As it is proposed to abolish
ordinary access undertakings (see item 161), there is no longer a need for
telecommunications access codes.
Proposed Division 4--Access determinations
A key reform made by the Bill to Part XIC is the removal of the ACCC's function of
arbitrating access disputes between access providers and access seekers, and the
introduction of a power for the ACCC to set up front, in an access determination, the
terms and conditions of access to declared services to apply to all access providers
and all access seekers.
Proposed Division 4 contains provisions that:
- enable the ACCC to make access determinations setting out the terms and
conditions of access for declared services;
- specify particular requirements and limitations relating to the content of access
determinations;
- set out the process the ACCC is required to follow in making access
determinations; and
- deal with the variation, revocation and enforcement of access determinations.
Proposed Subdivision A--Commission may make access determinations
Proposed Subdivision A of proposed Division 4 of Part XIC includes provisions
dealing with the ACCC's power to make access determinations.
Proposed section 152BC Access determinations
Proposed section 152BC provides that the ACCC may make written determinations
relating to access to a declared service, to be known as access determinations.
A list of matters that may be included in access determinations is set out at proposed
subsection 152BC(3), and is based on the list of matters that can be dealt with under
an arbitration determination made by the ACCC (which are set out at
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subsection 152CP(2)). (Note that subsection 152CP(2) (and the rest of Division 8 of
Part XIC) is being repealed by item 185.)
Access determinations may specify any or all of the terms and conditions on which a
carrier/CSP is to comply with any of the standard access obligations that apply to that
carrier/CSP (proposed paragraph 152BC(3)(a): see also proposed section 152AY).
Notably, an access determination can impose other requirements relating to access to
a declared service on a carrier/CSP, in addition to the standard access obligations
(proposed paragraph 152BC(3)(e)), and can specify the terms and conditions on
which the carrier/CSP is to meet those other requirements (proposed
paragraph 152BC(3)(f)). An access determination can restrict or limit the application
of one or more of the standard access obligations to a carrier/CSP (proposed
paragraphs 152BC(3)(h) and (i)).
It is intended that an access determination may deal only with terms and conditions
about certain matters relating to compliance with the standard access obligations. It is
not intended that an access determination must deal with the terms and conditions
about all matters relating to compliance with the standard access obligations. To
ensure the intended operation of this provision is clear (that an access determination is
not required to deal with all terms and conditions), subsection (3)(a) expressly
provides that an access determination may specify any or all of the terms and
conditions on which a carrier or carriage service provider is to comply with any or all
of the standard access obligations applicable to the carrier or CSP.
Paragraph 152BC(3)(j) specifies that an access determination may deal with any other
matter relating to access to a declared service. This item reflects the language used in
the opening words of existing subsection 152CP(2), which provides for the ACCC to
make written determinations when it arbitrates access disputes: "The determination
may deal with any matter relating to access...". The purpose of this paragraph is to
reinforce the fact that the ACCC can make access determinations with a wide scope,
just as the ACCC can make determinations with a wide scope under the current
Division 8 of Part XIC of the CCA, which deals with the arbitration of access
disputes, and is repealed by item 185 of Schedule 1 to the Bill.
The list of matters at proposed subsection 152BC(3) does not limit the matters that
may be included in an access determination (see proposed subsection 152BC(4)).
The terms and conditions that are specified in an access determination must include
terms and conditions relating to price or a method of ascertaining price, which
provides the ACCC with flexibility in how it addresses pricing issues (proposed
subsection 152BC(8)).
While the intention is that access determinations will include provisions that apply to
all carriers/CSPs and access seekers, it is recognised that there may be instances
where the ACCC needs to craft particular provisions that apply specifically to
particular carriers/CSPs or access seekers, or to particular classes of carriers/CSPs or
access seekers. For this reason, proposed subsection 152BC(5) provides that an
access determination may make different provision with respect to different
carriers/CSPs, or different access seekers, or different classes of carriers/CSPs or
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access seekers. Proposed subsection 152BC(6) clarifies that proposed
subsection 152BC(5) does not, by implication, affect the operation of
subsection 33(3A) of the AIA, which provides that, where legislation confers a power
to make an instrument with respect to particular matters, the power includes a power
to make the instrument with respect to only some of those matters or a class or classes
of those matters, and to make different provision with respect to different matters or
different classes of matters.
An access determination may provide for the ACCC to perform functions or exercise
powers (proposed subsection 152BC(7)). This enables an access determination, for
example, to specify that particular complex or changing matters can be determined or
approved by the ACCC at intervals during the duration of the access determination.
For example, an access determination might set an up-front regulatory asset base and
provide that any additions to the regulatory asset base during the period of the
determination must be approved by the ACCC.
Proposed subsection 152BC(9) provides that access determinations are not legislative
instruments.
Under the LIA, legislative instruments are subject to tabling and disallowance,
requirements for consultation and registration on the Federal Register of Legislative
Instruments, and are also subject to automatic sunsetting after ten years.
Access determinations will deal with complex and technical issues relating to the
price at which, and the other terms on which, key essential telecommunications
services are supplied to other carriers and/or CSPs. They will be made by the ACCC
after a public inquiry in which it will consider submissions from industry participants
and other interested parties. The terms of supply of one declared service are likely to
have flow-on effects on the supply of other declared and non-declared services.
When making an access determination, the ACCC will have to undertake an
assessment of the costs of supplying the declared service, the current state of
competition and investment in relation to the supply of the service, and the likely
effect of the determination on future competition and investment. The ACCC, as the
independent expert regulator responsible for administering the access regime in
Part XIC, is best placed to make these kinds of regulatory decisions. Making access
determinations disallowable would subject them to the risk of selective parliamentary
override, which could undermine the perceived integrity and effectiveness of the
access regime.
Since the Bill makes express provision for public consultation (in the form of a public
inquiry) before the ACCC makes an access determination, expressly deals with the
duration of access determinations, and requires access determinations to be included
on a public Register, the consultation, registration and sunsetting requirements in the
LIA are unnecessary and/or inappropriate for access determinations.
Access determinations will be subject to judicial review under the Administrative
Decisions (Judicial Review) Act 1977.
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Proposed section 152BCA Matters that the Commission must take into
account
Proposed subsection 152BCA(1) sets out a list of matters that the ACCC must take
into account when making an access determination. The list of matters is based on
subsection 152CR(1) of the CCA, which sets out the matters that the ACCC must take
into account when making a final determination in an access dispute. Section 152CR
(and the rest of Division 8) is being repealed by the Bill (see item 185).
The effect of proposed subsection 152BCA(2) is that, in making an access
determination in relation to a particular service that is provided by a carrier or CSP,
the ACCC can take into account relevant aspects of other eligible services (as that
term is defined in section 152AL) that are supplied by that carrier or CSP. Proposed
subsection 152BCA(2) is intended to ensure that, in making an access determination
that applies to carriers or CSPs, the ACCC is not limited to considering the particular
declared service that the access determination relates to in isolation, but is able to
consider it in the context of the other relevant services which the carrier or CSP
provides. For instance, when specifying the access price for a declared service which
is supplied by an access provider over a particular network or facility, the ACCC can
take into account not only the access provider's costs and revenues associated with
the declared service, but also the costs and revenues associated with other services
supplied over that network or facility.
Proposed subsection 152BCA(3) clarifies that, in making an access determination, the
ACCC may take into account other matters that it thinks are relevant.
The requirements in proposed section 152BCA do not apply to the making by the
ACCC of interim access determinations (see proposed subsection 152BCA(4)), which
are dealt with by proposed section 152BCG.
Proposed section 152BCB Restrictions on access determinations
Proposed section 152BCB imposes certain restrictions on the ACCC's ability to make
access determinations. The ACCC must not make an access determination that would
have any of the effects listed at proposed subsection 152BCB(1). The list of effects is
based on section 152CQ which sets out comparable limitations on the ACCC's ability
to make arbitration determinations.
Proposed subsection 152BCB(3) provides that the ACCC must not make an access
determination that is inconsistent with the standard access obligations applicable to a
carrier or CSP. It should be noted that proposed paragraphs 152BC(3)(h) and (i)
enable the ACCC to limit the standard access obligations that are applicable to a
carrier/CSP.
Proposed subsection 152BCB(3A) imposes a further restriction on the ability of the
ACCC to make an access determination. This restriction would only apply if a final
migration plan is in force under proposed section 577BE of the Tel Act: that is, if
Telstra has submitted to the ACCC a structural separation undertaking which the
ACCC has accepted, and that undertaking required Telstra to submit a draft migration
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plan to the ACCC for its approval, which Telstra has then submitted and the ACCC
has then approved.
In these circumstances, the ACCC must not make an access determination that would
have the effect of requiring Telstra to engage in conduct in connection with matters
covered by its migration plan.
The reason for this limitation is to provide Telstra with a high level of certainty that
once its migration plan has been accepted by the ACCC, the ACCC cannot
subsequently use its access determination powers to impose additional obligations on
Telstra in relation to migration.
The restriction on the ability of the ACCC to make access determinations is effects-
based: it applies regardless of the party to whom the access determination is expressed
to apply. Access determinations can make different provision with respect to
different carriers or CSPs, and with respect to different access seekers (see proposed
subsection 152BC(5)). The effect of proposed subsection 152BCB(3A) is that the
ACCC must not make access determinations that have the effect of requiring Telstra
to engage in conduct of the type described above, irrespective of whether the access
determination applies to Telstra alone, or to Telstra and other carriers/CSPs, or only to
one or more other carriers/CSPs.
If an access determination has any of the effects in proposed subsection 152BCB(1),
(3) or (3A), then the access determination does not operate to the extent that it would
have those effects (proposed subsection 152BCB(5)).
Among the prohibited effects in proposed subsection 152BCB(1), the ACCC must not
make an access determination that would have the effect of requiring a carrier or CSP
to provide an access seeker with access to a declared service if there are reasonable
grounds to believe that the access seeker would fail to comply with the terms of
access (proposed subparagraph 152BCB(1)(g)(i)). Proposed subsection 152BCB(2)
sets out examples of grounds for holding that belief, and is based on the comparable
provision that currently applies to the making of arbitration determinations
(subsection 152CQ(3)).
Proposed subsection 152BCB(4) (modelled on current subsection 152CQ(8)) deals
with the effect of an access determination which deprives a person of a pre-
determination right (which is not a protected contractual right) which does not
infringe paragraph 152BCB(1)(b) or (d) insofar as the person will not actually need to
exercise the right to meet his or her actual requirements. Where an access
determination has the effect of depriving a person of a pre-determination right in force
at the time the determination came into force, the determination must also require the
access seeker to:
- pay to the person such compensation (if any) that the ACCC considers fair
compensation for the loss of the contractual right; and
- reimburse the carrier or provider and the Commonwealth for any
compensation that the carrier or provider or the Commonwealth agrees or is
required under court order to pay to the person as compensation for the loss of
the contractual right.
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`Pre-determination right' and `protected contractual right' are defined in proposed
subsection 152BCB(6).
Proposed section 152BCC Access agreements prevail over inconsistent
access determinations
Carriers/CSPs and access seekers are free to negotiate on, and agree to, terms of
access to declared services. If a carriers/CSP and an access seeker settle on an agreed
arrangement for access to declared services, that arrangement is called an access
agreement. Access agreements are dealt with in proposed Division 4B of Part XIC of
the CCA.
Proposed section 152BCC deals with the situation where an access determination is
inconsistent with an access agreement between a carrier/CSP and an access seeker.
Subsection 152BCC(1) specifies a general rule that if an access determination is
applicable to a carrier/CSP and an access seeker, the access determination has no
effect to the extent to which it is inconsistent with an access agreement applicable to
those parties. In such a circumstance, the access to the declared service concerned is
governed by the agreement reached between the two parties.
This provision is reflected in proposed subsection 152AY, inserted by item 156,
which establishes a hierarchy for identifying the terms and conditions on which a
carrier/CSP must comply with the standard access obligations.
A note in proposed section 152AY alerts the reader that, before considering the
hierarchy that is set out at proposed subsection 152AY(2), it is necessary to consider
certain listed provisions of Part XIC of the CCA that are inserted by the Bill, and that
specify how inconsistency is to be addressed, including proposed section 152BCC.
Proposed section 152BCCA Final migration plan prevails over inconsistent
access determinations
Proposed section 152BCCA provides for final migration plans (see proposed
section 577BE in proposed Part 33 of the Tel Act, inserted by item 30) to prevail over
inconsistent access determinations.
The effect of proposed section 152BCCA is that, if a final migration plan is in force,
then an access determination has no effect to the extent to which it would have the
effect of:
- preventing Telstra from complying with the final migration plan; or
- requiring Telstra engage in conduct in connection with matters covered by its
final migration plan.
The reason for this limitation is to provide Telstra with a high level of certainty that
once its migration plan has been accepted by the ACCC, access determinations
(including those which may pre-date the final migration plan) will not subsequently
operate so as to impose additional obligations on Telstra in relation to migration, or so
as to prevent Telstra from complying with its final migration plan. Proposed
section 152BCB(3A)) provides that, if a final migration plan is in force, the ACCC
must not make an access determination that would have the effect of requiring Telstra
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to engage in conduct in connection with matters covered by its migration plan.
Proposed subsection 152BCCA goes further: it also applies to access determinations
that are made by the ACCC before a final migration plan comes into force. From the
time a final migration plan comes into force, an access determination has no effect to
the extent that it would have either of the effects listed at proposed
paragraphs 152BCCA(a) or (b).
Proposed section 152BCD Fixed principles provisions
Proposed section 152BCD provides for `fixed principles provisions'. The ACCC can
include in an access determination a provision that is specified to be a fixed principles
provision. The effect of specifying that a provision is a fixed principles provision is
to "lock in" the matters dealt with in that provision until a particular date (called the
`nominal termination date' in proposed subsection 152BCD(2)). The nominal
termination date can occur after the expiry date of the access determination in which
the fixed principles provision appears. The reason that the termination date is a
`nominal' termination date is that, although a fixed principles provision ceases to be
in force at the same time as the access determination in which it appears ("the original
access determination") ceases to be in force (see proposed subsection 152BCD(4)),
the effect of proposed subsection 152BCD(3) is that:
- any access determination that replaces the original access determination must
include a fixed principles provision in the same terms as the fixed principles
provision in the original access determination; and
- the nominal expiry date of the fixed principles provision in the replacement
access determination must be the same as or later than the nominal expiry date
of the fixed principles provision in the original access determination.
For example, if a fixed principles provision is included in an access determination
("the first access determination") that has an expiry date of 15 May 2012, and the
nominal expiry date of the fixed principles provision in that access determination is
8 October 2014:
- if the expiry date of the access determination is extended until 18 April 2013
under proposed subsection 152BCF(10)), then the fixed principles provision
continues to operate until that date;
- if the first access determination is then replaced by a new access
determination, then the fixed principles provision ceases to be in force at the
same time that the first access determination ceases to be in force, but the
replacement access determination must include a fixed principles provision in
the same terms, and the nominal expiry date for that fixed principles provision
must be 8 October 2014 or later (regardless of the expiry date of the new
access determination).
The effect of "locking in" or entrenching the fixed principles provision is achieved by
proposed subsection 152BCD(5), which provides that an access determination which
includes a fixed principles provision must include a provision (here called an
"entrenching provision") that states the fixed principles provision must not be altered
or removed, or sets out the circumstances in which the fixed principles provision can
be altered or removed. Note that the ACCC's ability to vary an access determination
is limited in the sense that it cannot vary an access determination in a manner
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inconsistent with the entrenching provision, nor can it vary or remove the entrenching
provision (see proposed subsection 152BCN(4)).
By enabling the ACCC to lock in provisions contained in an access determination for
a specified period (which may be longer than the duration of the access determination
in which the provisions are contained), proposed section 152BCD will enable the
ACCC to provide greater regulatory certainty in certain circumstances. For example,
where the ACCC adopts a utility pricing model for setting the access price for a
declared service - with all price determinations during the economic life of the
relevant facility based on a regulated asset base - the ACCC will be able to lock in a
regulated asset base for the requisite period.
Proposed section 152BCE Access determinations may be set out in the same
document
Each access determination made by the ACCC relates to a particular declared service
(see proposed subsection 152BC(1)). However, while the ACCC is required to make
separate access determinations for each declared service, the ACCC does not have to
deal with each and every declared service in a separate document. Proposed
section 152BCE clarifies that two or more access determinations may be set out in the
same document.
Proposed section 152BCF Duration of access determination
Proposed section 152BCF addresses the duration of access determinations, including:
- the commencement date of access determinations;
- the expiry date of access determinations;
- the automatic revocation of access determinations; and
- the extension of access determinations.
Commencement date - proposed subsections 152BCF(1)-(4A)
The ACCC must specify in an access determination that the determination comes into
force on a particular day, which may be on, after, or before the day on which the
determination is made.
Subsection 152BCF(2A) clarifies that the day on which an access determination is
specified to come into force cannot be earlier than the date of commencement of
proposed section 152BCF (see clause 2 of the Bill).
It is not considered appropriate for access determinations to apply retrospectively in
relation to the period before the date of commencement of proposed section 152BCF.
Disputes about access that arise before the date of commencement can be dealt with
by the ACCC under Division 8 of Part XIC of the CCA, which provides for the
ACCC to arbitrate access disputes; under section 152DNA of the CCA, the ACCC
will be able to backdate its arbitration determination to the date on which the parties
to the dispute commenced negotiations. Item 207 of Schedule 1 to the Bill is a
transitional provision dealing with the arbitration of access disputes, given the repeal
of Division 8 of Part XIC of the CCA by item 185 of Schedule 1 to the Bill.
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Proposed subsection 152BCF(3) provides that, for access determinations that relate to
newly-declared services (i.e. where the service is being declared for the first time, and
the declared service is covered by a declaration under section 152AL, and the
declaration is not a fresh declaration that replaces a previous declaration) the day
specified in the access determination must not be earlier than the day on which the
declaration came into force. (On replacement declarations, see item 129). (The
references in proposed section 152BCF to the declared service being `covered by a
declaration under section 152AL' mean that the declared service is a declared service
because it has been declared by the ACCC under subsection 152AL(3), rather than
because it is the subject of a special access undertaking and is therefore taken to be a
declared service by virtue of subsection 152AL(7).)
Proposed subsection 152BCF(3A) sets out a rule to apply when an access
determination will commence in relation to a service that is a declared service by
virtue of the operation of subsection 152AL(7) (because the service is the subject of a
special access undertaking that is in operation). In such a case, the day specified in
the access determination as the day on which the determination comes into force must
not be earlier than the day on which the service became a declared service under
subsection 152AL(7).
Proposed subsection 152BCF(4) provides that where an access determination replaces
a previous access determination relating to the same declared service and the former
access determination is not an interim access determination, then the date that the
replacement access determination comes into force is the day immediately after the
expiry of the previous access determination.
Proposed subsection 152BCF(4A) provides that where an access determination
replaces a previous access determination relating to the same declared service and the
former access determination is an interim access determination and the declared
service is covered by a declaration under section 152AL, then the date that the
replacement access determination comes into force must not be earlier than the day on
which the declaration came into force.
The effect of proposed subsections 152BCF (4) and (4A) is that a final access
determination will be able to be backdated to apply in relation to the period covered
by a preceding interim access determination, overriding the provisions of the interim
access determination. This is consistent with the treatment of arbitration
determinations under Division 8 of Part XIC of the CCA: under section 152DNA, a
final arbitration determination can be backdated so as to override a preceding interim
arbitration determination.
Expiry date - proposed subsections 152BCF(5)-(7)
The ACCC must specify in an access determination the expiry date for the
determination. In cases where the declared services are covered by a declaration
under section 152AL, the general principle (to which the ACCC must have regard in
setting the expiry date for the access determination) is that the expiry date for the
determination should be the same as the expiry date for the declaration, unless there
are circumstances that warrant specifying a different expiry date for the access
determination.
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The principle that declarations and access determinations should run in parallel will
promote regulatory certainty, as well as procedural efficiency in that it will enable the
ACCC to conduct the public inquiry into extending the declaration of a service and
the public inquiry into making a replacement access determination for the service at
the same time. It is recognised, however, that there may be circumstances where an
access determination for a service covered by a declaration under section 152AL that
is shorter in duration than the declaration period would be justified.
Proposed subsection 152BCF(7) clarifies that, if the access determination has expired,
Part XIC of the CCA does not prevent the ACCC from making a fresh access
determination on the same terms as the expired access determination.
Automatic revocation - proposed subsections 152BCF(8)-(9A)
If an access determination is in force in relation to a declared service, and the declared
service is covered by a declaration under section 152AL, and the declaration ceases to
be in force or is revoked, then, unless the ACCC makes a fresh declaration that
replaces the previous declaration, the access determination will be automatically
revoked (proposed subsections 152BCF(8) and (9)). In these circumstances there is
nothing for the access determination to do: without a declared service to apply to, the
access determination is redundant. For this reason such access determinations are
automatically revoked.
This automatic revocation only applies in cases where the service in question is
covered by a declaration in force under section 152AL. This is made clear by
proposed paragraph 182BCF(8)(b) and 152BCF(9)(b).
Proposed subsection 152BCF(9A) provides that an interim access determination in
relation to a declared service is taken to be revoked at the time that a final access
determination for that service comes into force. This provision removes the need for
the ACCC to revoke an interim access determination.
Extension - proposed subsections 152BCF(10)-(16)
Proposed subsections 152BCF(10) and (12) provide for the extension of access
determinations in two circumstances:
- where the ACCC has commenced a public inquiry about replacing an access
determination with a new access determination, but the new access
determination will not be made before the expiry of the earlier access
determination--in this case, the ACCC may declare that the earlier access
determination continues until the new access determination comes into force;
and
- where the ACCC decides, after holding a public inquiry concerning the expiry
of a declaration of a service, to extend the declaration by a period of not more
than 12 months and then to allow the declaration to expire (see item 131)--in
this case, the ACCC may extend the period of the relevant access
determination by the same period.
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In either case, the ACCC is required to publish a notice on its website relating to its
decision (proposed subsections 152BCF(11) and (13)). The requirements of
procedural fairness do not apply to the ACCC's decision to extend the access
determination in either case. These extensions are temporary measures and the
ACCC will be able to make them quickly without having to undertake consultation.
Proposed subsections 152BCF(15) and (16) clarify that a declaration made under
subsection (10) or an instrument under subsection (12) will not be legislative
instruments. The reasons why these declarations and instruments should not be
subject to the requirements in the LIA which apply to legislative instruments are as
follows.
As indicated, these declarations and instruments extend the duration of an existing
access determination for a short period. They do not change the content of an existing
access determination. They are therefore essentially procedural stop-gap measures
which are necessary to ensure that there is no gap in time during which a declared
service is not covered by any access determination.
It would not be appropriate to subject these declarations and instruments to the tabling
and disallowance provisions of the LIA. If such a determination or instrument were
disallowed, the result would be that there would be no access determination in place
for the declared service in question for the relevant period (i.e. until the new access
determination was put in place). This would create regulatory uncertainty for
suppliers and users of the declared service and, potentially, opportunities for access
providers to exploit their market power in respect of the declared service while an
access determination was not in place.
As these declarations and instruments only extend the duration of existing access
determinations for a short time, and will frequently need to be made on an urgent
basis, the consultation requirement in the LIA would not be appropriate.
As proposed subsections 152BCF(11) and (13) require the ACCC to publish these
declarations and instruments on its website, the registration requirement in the LIA is
unnecessary.
The automatic ten year sunsetting requirement in the LIA is irrelevant to these
declarations and instruments, as their duration will be much shorter than ten years.
Proposed section 152BCG Interim access determinations
Proposed section 152BCG deals with interim access determinations. An interim
access determination is defined in section 152AC as an access determination that is
expressed to be an interim access determination (see item 122).
The circumstances in which the ACCC is required to make an interim access
determination are set out in proposed subsection 152BCG(1). An interim access
determination must be made if:
- the ACCC declares a service after the commencement of section 152BCG;
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- the service is being declared for the first time, i.e. the declaration is not a fresh
declaration that replaces a previous declaration (on replacement declarations,
see item 129); and
- the ACCC has commenced a public inquiry into a proposal to make an access
determination relating to the service (on public inquiries, see proposed
Subdivision B of proposed Division 4); and
- either:
o it is unlikely that a final access determination in relation to access to
the service will be made within six months after the commencement of
the relevant public inquiry; or
o there is an urgent need to make an access determination before the end
of the public inquiry.
While the ACCC must make an interim access determination in the circumstances
specified in proposed subsection 152BCG(1), under proposed subsection 152BCG(2)
the ACCC may make an interim access determination in relation to a declared service
if no access determination has previously been made in relation to the service. (This
subsection applies to both newly-declared services and services that were declared
before the commencement of section 152BCG.)
The ACCC may not make an interim access determination in any other circumstance
(proposed subsection 152BCG(5)).
The ACCC must specify in an interim access determination the day on which the
determination comes into force. That day may be on, after, or before the day on
which the determination is made, but must not be earlier than the day on which the
declaration of the service came into force (proposed subsection 152BCG(3)).
Because of their urgent and temporary nature, the requirements of procedural fairness
do not apply to the making by the ACCC of an interim access determination
(proposed subsection 152BCG(4)).
Proposed section 152BCGA Stay of access determinations
Proposed section 152BCGA mirrors the operation of section 152DNB (which is
repealed as a result of the amendment to the CCA made by item 185 of the Bill), by
providing that:
- particular provisions of the Administrative Decisions (Judicial Review) Act
1977, which enable the Federal Court and Federal Magistrates Court to stay
the operation of a decision that is under judicial review until the completion of
the judicial review proceedings, do not apply to a decision of the ACCC to
make an access determination; and
- the Federal Court must not stay a decision to make an access determination
while it finalises an application for a writ or injunction under
subsection 39B(1) of the Judiciary Act 1903 in relation to such a decision.
This provision will ensure the effective operation of Part XIC of the CCA during any
legal challenge to an access determination, and will go some way to removing an
incentive to challenge access determinations for tactical reasons.
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Proposed new subsection 152BDEA makes a similar change in proposed Division 4A
of Part XIC of the CCA, in relation to binding rules of conduct.
Proposed Subdivision B--Public inquiries about proposals to make access
determinations
Proposed Subdivision B of proposed Division 4 of Part XIC sets out the requirements
for the ACCC to hold a public inquiry before making an access determination, and
sets out the procedures applying to those inquiries.
Proposed section 152BCH Access determinations to be made after public
inquiry
Proposed section 152BCI When public inquiry must be held
The general requirement, as set out in proposed subsection 152BCH(1), is that before
the ACCC makes an access determination, the ACCC must hold a public inquiry
under Part 25 of the Tel Act on the proposal to make the determination, and must
prepare a report on the inquiry. The ACCC is required to publish the report during
the period of 180 days before the ACCC makes the determination.
The ACCC is not required to hold a public inquiry before making an interim access
determination (see proposed subsection 152BCH(2) and proposed section 152BCG).
The requirement for the ACCC to hold a public inquiry before making an access
determination is subject to proposed section 152BCI, which sets out the period during
which the public inquiry must be commenced, and provides certain exceptions.
Where the ACCC declares a service for the first time, the ACCC must commence a
public inquiry about a proposal to make the first access determination applying to that
newly-declared service within 30 days after the declaration is made (proposed
subsection 152BCI(1)).
Where a service was declared before the commencement of proposed section 152BCI,
the ACCC must commence a public inquiry about a proposal to make the first access
determination applying to that service within 12 months of the commencement of
proposed section 152BCI (proposed subsection 152BCI(2)). Proposed
section 152BCI will commence the day after the Bill receives the Royal Assent: see
the table at clause 2 of the Bill.
Proposed subsection 152BCI(3) deals with the timing of public inquiries where an
access determination has previously been made in relation to a declared service. It
provides that, where a service is declared and there is already an access determination
applying to the service, the ACCC must commence a public inquiry about a proposal
to make a replacement access determination not earlier than 18 months before the
expiry of the determination, and no later than six months before the expiry of the
determination.
The requirement in proposed subsection 152BCI(3) is subject to the exceptions in
proposed subsections 152BCI(5)-(7).
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Where the ACCC decides, after holding a public inquiry concerning the expiry of a
declaration of a service, to extend the declaration by a period of not more than
12 months and then to allow the declaration to expire (see item 131), the ACCC does
not have to hold a public inquiry into making a replacement access determination
(proposed subsection 152BCI(5)). In this case, the ACCC may extend the duration of
the relevant access determination so that it corresponds with the extended duration of
the access declaration (see proposed subsection 152BCF(12)).
If the ACCC commences a public inquiry under subsection 152ALA(7) into whether
to extend the declaration of a service to which an access determination relates or let it
expire, the ACCC does not have to commence a public inquiry into making a
replacement access determination until it decides whether to extend the declaration.
If it decides to extend the declaration, it must commence a public inquiry into making
a replacement access determination before the expiry of the current access
determination. If it decides to let the declaration expire, it does not have to hold a
public inquiry into making a replacement access determination (proposed
subsection 152BCI(6)).
If the ACCC decides not to extend the declaration of a service to which an access
determination relates but to let it expire, then the ACCC does not have to hold a
public inquiry into making a replacement access determination (proposed
subsection 152BCI(7)).
A note is included at the end of proposed subsection 152BCI(7) which states that
where a service is a declared service under subsection 152AL(7) (i.e. because the
service is the subject of a special access undertaking), there is no need for the ACCC
to make a declaration of the service under section 152AL. This means that the ACCC
is not obliged to hold an inquiry about a proposal to make an access determination for
the service under proposed section 152BCI. However, it is still open to the ACCC to
make an access determination in relation to the service (see proposed
subsection 152BC(1)). Before doing so, the ACCC must hold a public inquiry into a
proposal to make the determination (proposed subsection 152BCH(1)). In the case
where the ACCC makes an access determination in relation to a service that is a
declared service because of the operation of subsection 152AL(7), the effect of
proposed section 152AY (described above) and of proposed section 152CBIA
(described below at item 174) is that the access determination will only operate to the
extent it includes provisions about matters that are not addressed in the special access
undertaking. To the extent of any inconsistency between the documents, the special
access undertaking will prevail.
Proposed subsection 152BCI(8) imposes a requirement that, if the ACCC makes
binding rules of conduct (see proposed Division 4A of Part XIC) that relate to access
to a declared service and there is no access determination in force in relation to that
service, then the ACCC must commence an inquiry under Part 25 of the Tel Act about
a proposal to make an access determination in relation to that service within 30 days
of making the binding rules of conduct.
A public inquiry under Part 25 of the Tel Act commences when the ACCC publishes
the notice required under section 498 of that Act (see proposed section 152AI,
inserted by item 127).
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Proposed section 152BCJ Combined inquiries about proposals to make
access determinations
Proposed subsection 152BCJ provides that the ACCC may decide to combine two or
more public inquiries about proposals to make access determinations, and sets out
certain procedures applying to the ACCC's conduct of joint inquiries.
This provision is designed to provide the ACCC with flexibility to conduct inquiries
into proposals to make access determinations in an efficient manner, by allowing it to
combine inquiries and prepare combined discussion papers, hold combined hearings,
and prepare combined reports relating to the inquiries.
Proposed section 152BCK Time limit for making an access determination
Proposed subsection 152BCK(2) provides that the ACCC must make a final access
determination within six months of commencing the public inquiry into the proposal
to make the access determination. A final access determination is an access
determination that is not an interim determination (see item 119).
In recognition of the fact that an inquiry into a proposal to make an access
determination may be a lengthy and complex process, the ACCC is given scope to
extend the six-month period within which it is required to make the final access
determination (proposed subsection 152BCK(3)). The ACCC may extend the six-
month period more than once, on each occasion by no longer than a further period of
six months. Each time it extends the period, the ACCC must publish a notice on its
website setting out the extended period, and explaining why the ACCC has not yet
been able to make a final access determination.
A note is included to direct the reader to proposed section 152BCG, the effect of
which is to require the ACCC to make an interim access determination if the ACCC
considers it will not be in a position to make the final access determination within six
months of commencing the public inquiry into a proposal to make the access
determination.
Proposed Subdivision C--Variation or revocation of access determinations
Proposed section 152BCN Variation or revocation of access determinations
Proposed subsection 152BCN(1) provides for the variation and revocation of access
determinations, by altering the application of subsection 33(3) of the AIA. Absent
proposed subsection 152BCN(1), the effect of subsection 33(3) of that Act would be
that the power given to the ACCC in proposed section 152BC to make access
determinations includes a power exercisable in the like manner and subject to the like
conditions to repeal, rescind, revoke, amend, or vary an access determination.
However, proposed subsection 152BCN(1) provides that the operation of
subsection 33(3) of the AIA is changed in the manner specified in proposed
subsections 152BCN(2)-(8).
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The ACCC is not required to hold a public inquiry into a proposal to vary an access
determination where it makes a minor variation or where all relevant carriers/CSPs
and access seekers have consented in writing to the variation. Similarly, the ACCC is
not required to hold a public inquiry about revoking an access determination if all
relevant carriers/CSPs and access seekers have consented in writing to the revocation.
Where an access determination includes a fixed principles provision (see proposed
section 152BCD), the access determination must include a provision (an "entrenching
provision") stating that either the access determination may not be varied so as to alter
or remove the fixed principles provision (proposed paragraph 152BCD(5)(a)) or the
access determination may not be varied so as to alter or remove the fixed principles
provision except in certain specified circumstances (proposed
paragraph 152BCD(5)(b)). An entrenching provision in an access determination may
not be varied, and nor may a fixed principles provision be varied in a manner that is
inconsistent with an entrenching provision: proposed subsection 152BCN(4).
The ACCC is not under an obligation to consider requests that it may receive to vary
or revoke an access determination, nor is it under an obligation to consider varying or
revoking an access determination for any other reason: proposed
subsection 152BCN(5).
Where the ACCC has commenced a public inquiry into a proposal to vary an access
determination, the ACCC can alter the proposed variation that is the subject of the
public inquiry (proposed subsection 152BCN(6)). This is intended to ensure that the
ACCC's conduct of inquiries is efficient and to remove any suggestion that the ACCC
must recommence a public inquiry if it makes a change to the variation that it
proposes to make to an access determination after it has already commenced the
public inquiry.
If the ACCC alters the proposed variation during the public inquiry, it must publish a
notice of the alteration in accordance with section 498 of the Tel Act, unless the
alteration is of a minor nature or each carrier/CSP and access seeker whose interests
are likely to be affected by the alteration consent to it (proposed
subsections 152BCN(7) and (8)).
Proposed subsection 152BCN(8) imposes a requirement that, if the ACCC makes
binding rules of conduct (see proposed Division 4A of Part XIC) that relate to access
to a declared service and there is an access determination in force in relation to that
service, then the ACCC must commence an inquiry under Part 25 of the Tel Act about
a proposal to vary the access determination in relation to that service within 30 days
of making the binding rules of conduct.
A public inquiry under Part 25 of the Tel Act commences when the ACCC publishes
the notice required under section 498 of that Act (see proposed section 152AI,
inserted by item 127).
The public inquiry held by the ACCC is limited to the proposal for variation that the
ACCC puts forward. The ACCC is not obliged to consider as part of its inquiry any
other issues, or any alternative or additional proposed variations, that are brought
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forward by parties making submissions to the inquiry (see proposed
subsection 152BCN(5)).
Proposed Subdivision D--Compliance with access determinations
Proposed Subdivision D includes provisions that have the effect of making
compliance with an access determination a condition of a carrier licence and a service
provider rule under the Tel Act. As such, a party's compliance with an access
determination may be enforced by the ACCC using the mechanisms available to it
under that Act.
Proposed section 152BCO Carrier licence condition
Proposed section 152BCO sets out a carrier licence condition requiring a carrier to
comply with any access determinations applicable to it.
The effect of proposed section 152BCO of the CCA, together with proposed
section 62A of the Tel Act, is that a carrier must comply with an access
determination, and that failure to do so would render the carrier subject to the
enforcement provisions in the Tel Act relating to breach of carrier licence conditions.
Proposed section 152BCP Service provider rule
Proposed section 152BCP of the CCA sets out a service provider rule requiring a
service provider to comply with any access determinations applicable to it.
The effect of proposed section 152BCP of the CCA, together with proposed
subsection 98(3) of the Tel Act, is that a service provider must comply with an access
determination, and that failure to do so would render the service provider subject to
the enforcement provisions in the Tel Act relating to breach of service provider rules.
Proposed Subdivision E--Private enforcement of access determinations
In addition to enforcement of compliance with access determinations by the ACCC or
the Minister by means of carrier licence conditions and service provider rules, dealt
with under proposed Subdivision D together with the enforcement provisions of the
Tel Act, access determinations may also be enforced privately; i.e. one party to an
access determination may enforce the access determination against a person who is
contravening the access determination. Proposed Subdivision E is based on
Subdivision H of Division 8 of Part XIC (which is repealed by item 185).
Proposed section 152BCQ Private enforcement of access determinations
Proposed section 152BCQ allows the parties to an access determination to apply to
the Federal Court for an order relating to contravention of the access determination.
If the Court is satisfied that a person has engaged, is engaging, or proposes to engage
in contravention of an access determination, the Court may make an order:
- granting a restraining injunction (preventing a person from engaging in
conduct in contravention of an access determination);
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- granting a mandatory injunction (requiring a person to do something to ensure
the person does not contravene an access determination);
- directing the person to compensate the applicant for loss or damage; or
- as the Court sees fit.
It is irrelevant whether an access determination has expired; the remedies listed above
are still available with respect to contraventions of the access determination that
occurred while it was in force.
The Court may also make orders against any other person involved in the
contravention.
Proposed section 152BCR Consent injunctions
Proposed section 152BCR provides a mechanism for the Federal Court to grant an
injunction in a situation where the parties consent. In such a case, the Court does not
need to be satisfied that proposed section 152BCQ applies (i.e. it does not need to be
satisfied that a person has engaged, is engaging, or proposes to engage in conduct in
contravention of an access determination).
Proposed section 152BCS Interim injunctions
Proposed section 152BCS permits the Federal Court to grant an interim injunction
while it considers an application for an injunction under proposed section 152BCQ.
Proposed section 152BCT Factors relevant to granting a restraining
injunction
Proposed section 152BCU Factors relevant to granting a mandatory
injunction
The effect of proposed sections 152BCT and 152BCU is that the Federal Court can
grant a restraining injunction or a mandatory injunction requiring a person to do a
thing regardless of whether certain situations specified in proposed
paragraphs 152BCT(a)-(c) (for restraining injunctions) or 152BCU(a)-(c) (for
mandatory injunctions) exist. This is intended to give the Federal Court a wide power
to grant restraining and mandatory injunctions.
Proposed section 152BCV Discharge or variation of injunction or other order
Proposed section 152BCV provides that the Federal Court can discharge or vary an
injunction or order under proposed Subdivision E.
Proposed Subdivision F--Register of Access Determinations
Proposed section 152BCW Register of Access Determinations
Proposed subsection 152BCW requires the ACCC to maintain a register of all in-force
access determinations, to be known as the Register of Access Determinations.
The Register is required to be maintained by electronic means, and to be made
available for inspection on the ACCC's website. The Register is not a legislative
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instrument for the purposes of the LIA. It is not appropriate for the Register to be a
legislative instrument, since it is simply a collection of access determinations, which
themselves are not legislative instruments (see proposed subsection 152BC(9)).
Some of the material in access determinations may be highly commercially sensitive,
and inappropriate for publication. For this reason, the ACCC is permitted to redact
particular provisions from access determinations if the ACCC is satisfied that
publication of the provisions could reasonably be expected to prejudice substantially
the commercial interests of a person, and the prejudice outweighs the public interest
in the publication of the provisions. If it redacts a provision, the ACCC must annotate
the access determination to note that it has made a redaction.
Proposed Division 4A--Binding rules of conduct
Proposed Division 4A of Part XIC provides for the ACCC to make binding rules of
conduct relating to access to a declared service. Binding rules of conduct are intended
to enable the ACCC to urgently address problems relating to the terms on which a
declared service is supplied, and/or problems relating to the way an access provider is
complying with the standard access obligations in relation to a declared service.
Where an access determination is in place, binding rules of conduct will override it (to
the extent of any inconsistency). Binding rules of conduct can be made more quickly
than an access determination or a variation to an access determination. There are
additional limitations on the scope and duration of binding rules of conduct, compared
to the scope and duration of access determinations.
The ACCC may only make binding rules of conduct if it considers there is an urgent
need to do so, where it considers that there is insufficient time to go through the
processes set out in Division 4 for varying or making an access determination.
Binding rules of conduct permit the ACCC to move quickly to adjust the terms and
conditions that apply to access to a declared service, on a temporary basis, while the
ACCC goes about the process of conducting an inquiry with a view to putting in place
or varying replacing the relevant access determination.
Proposed Subdivision A--Commission may make binding rules of conduct
Proposed section 152BD Binding rules of conduct
Proposed subsections 152BD(1) and (2) provide that the ACCC may make written
rules relating to access to a declared service, if it considers there is an urgent need to
do so, to be known as binding rules of conduct.
The possible subject matter of binding rules of conduct is set out at proposed
subsection 152BD(1). Binding rules of conduct may:
- specify any or all of the terms and conditions on which a carrier or CSP is to
comply with the standard access obligations that apply to that carrier/CSP in
relation to a particular declared service; or
- require a carrier or CSP to comply with any or all of the standard access
obligations applicable to that carrier/CSP in a specified manner.
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In contrast to access determinations, binding rules of conduct are limited to
addressing the terms and conditions on which a declared service is supplied and the
manner in which it is supplied pursuant to the standard access obligations. These
matters are likely to be the most critical to the effective and efficient supply of a
declared service and, by addressing them, the ACCC can quickly resolve urgent
problems relating to access to a declared service.
It is envisaged that the ACCC may need to make urgent binding rules of conduct
altering the application of an access determination either to all carriers/CSPs and/or
access seekers, or to particular carriers/CSPs and/or access seekers. For this reason,
proposed subsections 152BD(3) and (4) provide that binding rules of conduct may be
of general application, or may apply as limited in the rules, and specifically that they
may make different provision with respect to different carriers/CSPs, or different
access seekers, or different classes of carriers/CSPs or access seekers. Proposed
subsection 152BD(7) clarifies that proposed subsection 152BD(4) does not, by
implication, affect the operation of subsection 33(3A) of the AIA, which provides
that, where legislation confers a power to make an instrument with respect to
particular matters, the power includes a power to make the instrument with respect to
only some of those matters or a class or classes of those matters, and to make different
provision with respect to different matters or different classes of matters.
Binding rules of conduct may provide for the ACCC to perform functions or exercise
powers (proposed subsection 152BD(8)). This ensures that the ACCC has flexibility
in how it will deal with technical, complex and changing matters it needs to include in
provisions of access determinations. This subsection corresponds to proposed
subsection 152BC(7).
Proposed subsection 152BD(9) provides that binding rules of conduct are not
legislative instruments. For reasons similar to those given in relation to access
determinations (in item 160), it is not appropriate for binding rules of conduct to be
subject to the tabling and disallowance requirements in the LIA. It is not appropriate
for binding rules of conduct to be subject to the consultation requirements in the LIA
because that would prevent the ACCC from making them quickly to deal with urgent
issues. It is not necessary for binding rules of conduct to be subject to the registration
requirements in the LIA because the ACCC will be required to maintain a public
Register of Binding Rules of Conduct. It is also not necessary for binding rules of
conduct to be subject to automatic sunsetting after ten years under the LIA, because
their maximum duration is only one year.
Proposed section 152BDAA Matters that the Commission must take into
account
Proposed subsection 152BDAA(1) sets out a list of matters that the ACCC must take
into account when making binding rules of conduct, and is the same as the list of
matters set out at proposed subsection 152BCA(1) that the ACCC must take into
account when making an access determination.
The effect of proposed subsection 152BDAA(2) (which operates in a similar way to
proposed subsection 152BCA(2)) is that, in making binding rules of conduct in
relation to a particular service that is provided by a carrier or CSP, the ACCC can take
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into account relevant aspects of other eligible services (as that term is defined in
section 152AL) that are supplied by that carrier or CSP. This provision is intended to
ensure that, in making binding rules of conduct that apply to a carrier or CSP, the
ACCC is not limited to considering the particular declared service that the binding
rules of conduct relate to in isolation, but is able to consider it in the context of the
other relevant services which the carrier or CSP provides. For instance, when
specifying in binding rules of conduct the access price for a declared service which is
supplied by an access provider over a particular network or facility, the ACCC can
take into account not only the access provider's costs and revenues associated with
the declared service, but also the costs and revenues associated with other services
supplied over that network or facility.
Proposed subsection 152BDAA(3) clarifies that, in making an access determination,
the ACCC may take into account other matters that it thinks are relevant.
Proposed subsection 152BDAA(4) sets up an exception to the requirement for the
ACCC to take certain matters into account when making binding rules of conduct.
The ACCC is not required to take a matter into account if it would not be reasonably
practicable to do so, because of the urgent need to make the binding rules of conduct.
Proposed subsection 152BDAA(5) similarly provides that, when taking a matter into
account in the process of making binding rules of conduct, the ACCC is not required
to obtain information that it does not already have, if it would not be reasonably
practicable to do so, because of the urgent need to make the binding rules of conduct.
These provisions acknowledge that binding rules of conduct are intended to permit the
ACCC to move quickly to adjust the terms and conditions that apply to access to a
declared service, on a temporary basis, while the ACCC goes about the process of
conducting an inquiry with a view to putting in place or varying replacing the relevant
access determination.
Proposed section 152BDA Restrictions on binding rules of conduct
Proposed section 152BDA imposes certain restrictions on the ACCC's ability to make
binding rules of conduct, and is modelled on proposed section 152BCB, which relates
to limitations on the ACCC's ability to make access determinations.
Proposed subsection 152BDA(3A) imposes a limitation on the ability of the ACCC to
make binding rules of conduct. This restriction would only apply if a final migration
plan is in force under the Tel Act: that is, if Telstra has submitted to the ACCC a
structural separation undertaking which the ACCC has accepted, and that undertaking
required Telstra to submit a draft migration plan to the ACCC for its approval, which
Telstra has then submitted and the ACCC has then approved. In these circumstances,
the ACCC must not make binding rules of conduct that would have the effect of
requiring Telstra to engage in conduct in connection with matters covered by its
migration plan. A similar limitation with respect to the making of access
determinations is made by proposed subsection 152BCB(3A). A detailed explanation
of the operation of that provision and the reason for it is provided above.
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Proposed section 152BDB Access agreements prevail over inconsistent
binding rules of conduct
Carriers/CSPs and access seekers are free to negotiate on, and agree to, terms of
access to declared services. If carriers/CSPs and access seekers settle on an agreed
arrangement for access to declared services, that arrangement is called an access
agreement. Access agreements are dealt with in proposed Division 4B of Part XIC of
the CCA.
Proposed section 152BDB deals with the situation where binding rules of conduct are
inconsistent with an access agreement between a carrier/CSP and an access seeker.
Section 152BDB provides a general rule that if binding rules of conduct are
applicable to a carrier/CSP and an access seeker, the binding rules of conduct have no
effect to the extent to which they are inconsistent with an access agreement applicable
to those parties. In such a circumstance, the access to declared services is governed
by the agreement reached between the two parties.
This provision is reflected in proposed subsection 152AY, inserted by item 156,
which establishes a hierarchy for identifying the terms and conditions on which a
carrier/CSP must comply with the standard access obligations.
A note in proposed section 152AY alerts the reader that, before considering the
hierarchy that is set out at proposed subsection 152AY(2), it is necessary to consider
certain listed provisions of Part XIC of the CCA that are inserted by the Bill, and that
specify how inconsistency is to be addressed, including proposed section 152BDB.
Proposed section 152BDC Duration of binding rules of conduct
Binding rules of conduct must specify the date on which they come into force, and an
expiry date. The expiry date must be within 12 months of the date the binding rules
of conduct were made. Binding rules of conduct may be revoked before their expiry
date.
Proposed section 152BDCA Final migration plan prevails over inconsistent
binding rules of conduct
Proposed section 152BDCA provides for final migration plans (see proposed
section 577BE in proposed Part 33 of the Tel Act, inserted by item 30) to prevail over
inconsistent binding rules of conduct.
The effect of proposed section 152BDCA is that, if a final migration plan is in force,
then binding rules of conduct have no effect to the extent to which they would have
the effect of:
- preventing Telstra from complying with the final migration plan; or
- requiring Telstra to engage in conduct in connection with matters covered by
its final migration plan.
The reason for this limitation is to provide Telstra with a high level of certainty that
once its migration plan has been accepted by the ACCC, binding rules of conduct
(including those which may pre-date the final migration plan) will not subsequently
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operate so as to impose additional obligations on Telstra in relation to migration, or so
as to prevent Telstra from complying with its final migration plan. Proposed
subsection 152BDA(3A)) provides that, if a final migration plan is in force, the
ACCC must not make binding rules of conduct that would have the effect of requiring
Telstra to engage in conduct in connection with matters covered by its migration plan.
Proposed section 152BDCA goes further: it also applies to binding rules of conduct
that are made by the ACCC before a final migration plan comes into force. From the
time a final migration plan comes into force, binding rules of conduct have no effect
to the extent that they would have either of the effects listed at proposed
paragraphs 152BDCA(a) or (b).
Proposed section 152BDD Commission must give copy of binding rules of
conduct to carrier etc.
If binding rules of conduct are limited to a particular carrier/CSP or access seeker, the
ACCC must give a copy of them to that carrier/CSP or access seeker. (All binding
rules of conduct will be available on the Register of Binding Rules of Conduct: see
proposed Subdivision D of proposed Division 4A.)
Proposed section 152BDE Access determinations that are inconsistent with
binding rules of conduct
Proposed section 152BDE provides for binding rules of conduct to prevail over an
access determination, to the extent of any inconsistency (see also proposed
section 152AY).
The exception to this rule is that, where an access determination contains a fixed
principles provision, the fixed principles provision will prevail over any binding rules
of conduct, to the extent of any inconsistency. This will preserve the regulatory
certainty provided by the inclusion of the fixed principles provision in the access
determination. Fixed principles provisions are enabled by proposed section 152BCD.
Proposed section 152BDEA Stay of binding rules of conduct
Proposed section 152BDEA mirrors the operation of section 152DNB (which is
repealed as a result of the amendment to the CCA made by item 185 of the Bill), by
providing that:
- particular provisions of the Administrative Decisions (Judicial Review) Act
1977, which enable the Federal Court and the Federal Magistrates Court to
stay the operation of a decision that is under judicial review until the
completion of the judicial review proceedings, do not apply to a decision of
the ACCC to make binding rules of conduct; and
- the Federal Court must not stay a decision to make binding rules of conduct
while it finalises an application for a writ or injunction under
subsection 39B(1) of the Judiciary Act 1903 in relation to such a decision.
This provision will ensure the effective operation of Part XIC of the CCA during any
legal challenge to binding rules of conduct, and will go some way to removing an
incentive to challenge binding rules of conduct for tactical reasons.
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Proposed new section 152BCGA provides for a similar provision in relation to access
determinations.
Proposed Subdivision B--Compliance with binding rules of conduct
Proposed section 152BDF Carrier licence condition
Proposed section 152BDG Service provider rule
Proposed sections 152BDF and 152BDG set out a carrier licence condition and a
service provider rule requiring a carrier/CSP to comply with any binding rules of
conduct applicable to it.
The effect of proposed sections 152BDF and 152BDG of the CCA, together with
proposed section 62B and proposed subsection 98(3) of the Tel Act, is that a
carrier/CSP must comply with binding rules of conduct, and that failure to do so
would render the carrier/CSP subject to the enforcement provisions in the Tel Act
relating to breach of carrier licence conditions or service provider rules.
Proposed Subdivision C--Private enforcement of binding rules of conduct
Proposed section 152BDH Private enforcement of binding rules of conduct
Proposed section 152BDI Consent injunctions
Proposed section 152BDJ Interim injunctions
Proposed section 152BDK Factors relevant to granting a restraining
injunction
Proposed section 152BDL Factors relevant to granting a mandatory
injunction
Proposed section 152BDM Discharge or variation of injunction or other order
In addition to enforcement of compliance with binding rules of conduct by the ACCC
or the Minister by means of carrier licence conditions and service provider rules, dealt
with under proposed Subdivision B together with the enforcement provisions of the
Tel Act, binding rules of conduct may also be enforced privately; i.e. one party to an
access determination may enforce the access determination against a person who is
contravening the determination. Proposed Subdivision C of proposed Division 4A
includes proposed sections 152BDH-152BDM, which mirror in operation the
provisions in Subdivision E of proposed Division 4 (relating to private enforcement of
access determinations). An explanation of the operation of those provisions is
provided at Subdivision E of Division 4 above.
Proposed Subdivision D--Register of Binding Rules of Conduct
Proposed section 152BDN Register of Binding Rules of Conduct
Proposed section 152BDN requires the ACCC to maintain a register of all in-force
binding rules of conduct, to be known as the Register of Binding Rules of Conduct.
Proposed section 152BDN operates in the same way as proposed section 152BCW,
which provides for the Register of Access Determinations, and is described above.
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Proposed Division 4B--Access agreements
Carriers/CSPs and access seekers are free to negotiate on, and agree to, terms of
access to declared services. If carriers/CSPs and access seekers settle on an agreed
arrangement for access to a declared service, that arrangement is called an access
agreement. Access agreements are dealt with in proposed Division 4B of Part XIC of
the CCA.
Proposed section 152BE Access agreements
For an agreement to be an access agreement, it must meet the requirements for access
agreements set out in proposed subsection 152BE(1). A carrier/CSP and an access
seeker must be the parties to the agreement, and the agreement must:
- be in writing;
- be legally enforceable (a non-binding arrangement between parties would not
suffice: although note the effect of proposed subsection 152BE(1A), described
below);
- relate to access to a declared service;
- the agreement must address at least one of the subjects listed at
subparagraphs 152BE(1)(e)(i)-(xi).
The list of matters that may be addressed by an access agreement at proposed
subparagraph 152BE(1)(e) corresponds with the list of possible topics for an access
determination (proposed subsection 152BC(3)). Access agreements will enable
access providers and access seekers to negotiate and agree alternative access
arrangements that are mutually beneficial and provide more efficient outcomes than
access determinations. To give full effect to this objective, it is appropriate that
access agreements be able to cover the same range of access-related matters as access
determinations . Given that the topic listed at subparagraph 152BE(1)(e)(xi) is that an
access agreement may deal with "any other matter relating to access to the declared
service" (in addition to the ten specifically listed topics that precede that provision),
the requirement that an access agreement must deal with at least one of the subject
topics at paragraph 152BE(1)(e) does not operate to limit the possible subject matter
of an access agreement.
Proposed subsection 152BE(1A) provides that the requirement in proposed
paragraph 152BE(1)(b) that an agreement must be legally enforceable, in order to be
an access agreement for the purposes of Part XIC of the CCA, does not apply to an
access agreement to the extent to which the agreement is covered by proposed
subparagraphs 152BE(1)(e)(ix) or (x). Proposed subparagraphs 152BE(1)(e)(ix) and
(x) permit an access agreement to limit or restrict the application to a carrier/CSP of
obligations that are otherwise imposed on it by Part XIC of the CCA, or to provide
that they do not apply to that carrier/CSP, either unconditionally or otherwise.
The intention of proposed subsection 152BE(1A) is to avoid potential disputes over
whether such provisions in an access agreement are legally enforceable as between
the parties to the agreement, and therefore whether the agreement is an access
agreement for the purposes of Part XIC of the CCA, by providing that the requirement
for access agreements to be legally enforceable does not apply to the extent they are
covered by either of these proposed subparagraphs. Proposed subsection 152BE(1A)
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does not affect the validity or the effectiveness of provisions in an access agreement
covered by proposed subparagraphs 152BE(1)(e)(ix) and (x).
Proposed subsection 152BE(2) contains a particular rule that applies to an agreement
that is made concerning access to an eligible service (defined in section 152AL) that
is not a declared service at the time that the agreement is entered into, but that later
becomes a declared service. In such a case, if the agreement would have been an
access agreement if it had been entered into after the service became a declared
service (i.e. if all the other requirements of proposed subsection 152BE(1) are
satisfied), then the agreement becomes an access agreement immediately after the
eligible service becomes a declared service.
To deal with the issue of variations being made to an access agreement, proposed
subsection 152BE(3) provides that a reference to an access agreement in Part XIC
includes a reference to an access agreement as varied by another agreement (called a
`variation agreement'), so long as the variation agreement is in writing and is legally
enforceable.
Proposed subsection 152BE(4) provides that it is immaterial whether an access
agreement or variation agreement was entered into before or after the commencement
of proposed section 152BE. The effect of this subsection is to confirm that references
in Part XIC to access agreements and variation agreements cover both agreements of
those kinds that were entered into before the commencement of proposed
section 152BE and agreements of those kinds that are entered into after the
commencement of proposed section 152BE.
Proposed subsections 152BE(5) and (6) provide, for the avoidance of doubt, that
access agreements and variation agreements respectively are not legislative
instruments (notwithstanding the fact that such agreements may, under proposed
subparagraphs 152BE(1)(e)(x) and (xi), affect the application of obligations imposed
by Part XIC of the CCA). As access agreements represent private contractual
arrangements between parties, it would not be appropriate to treat them as legislative
instruments.
Proposed section 152BEA Lodgment of access agreements with the
Commission
Proposed section 152BEA requires access agreements to be lodged with the ACCC.
The obligation is imposed on the carrier/CSP who supplies, or who proposes to
supply, the service to which the access agreement relates. Compliance with this
requirement is a licence condition and service provider rule (see proposed
sections 152BEC and 152BED).
Access agreements will prevail over inconsistent special access undertakings, binding
rules of conduct or access determinations to the extent of inconsistency (see proposed
section 152AY). It is therefore important that the ACCC be aware of access
agreements and of the terms and conditions they contain, as this will assist the ACCC
in carrying out its regulatory functions under Parts XIB and XIC of the CCA.
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It should be noted that there is no requirement that the ACCC approve any access
agreement that is lodged, and the fact that an agreement has been lodged with the
ACCC and the ACCC has made no comment about it is not intended to confer any
implicit regulatory approval for that agreement.
Proposed subsections 152BEA(1)-(3) set out the time within which the carrier/CSP
must lodge the access agreement with the ACCC:
- where the agreement is entered into after the commencement of proposed
section 152BEA, it must be lodged with the ACCC within 28 days after it is
entered into;
- where an agreement is entered into after the commencement of proposed
section 152BEA and that agreement becomes an access agreement after the
commencement of proposed section 152BEA (because at the time the
agreement is entered into, the service it relates to is not a declared service, but
at a later stage (after the commencement of this section) it becomes a declared
service), the agreement must be lodged with the ACCC within 28 days after
the day it becomes an access agreement (worked out in accordance with
proposed subsection 152BE(2));
- if a variation agreement (see proposed subsection 152BE(3)) - whether the
variation agreement varies an access agreement that was entered into before
the commencement of proposed section 152BE or an access agreement that
was entered into after the commencement of proposed section 152BE - is
entered into after the commencement of proposed section 152BEA, the
variation agreement must be lodged with the ACCC within 28 days after it is
entered into.
In each case, the carrier/CSP may also be required to give to the ACCC any further
information about the access agreement or variation agreement that is specified by the
ACCC. Proposed subsections 152BEA(4)-(7) provide that the ACCC may specify
information for that purpose. The ACCC can require that the additional information
provided to it be verified by statutory declaration.
Proposed subsection 152BEA(10) clarifies, for the avoidance of doubt, that an
instrument made by the ACCC under proposed subsections 152BEA(4)-(7) is not a
legislative instrument. The ACCC is required to publish such instruments on its
website (proposed subsection 152BEA(8)).
There may be occasions when a carrier/CSP needs more than 28 days to provide the
access agreement and the other information to the ACCC: it may take the carrier/CSP
some time to collect the additional information it is required to provide. To allow for
this, the 28-day period allowed in each case for the carrier/CSP to lodge the access
undertaking can be extended by the ACCC, before its expiry (proposed
subsection 152BEA(9)).
The operation of proposed section 152BEA does not affect the ACCC's power to
obtain information, documents and evidence under section 155 of the CCA (proposed
subsection 152BEA(11)). This means, for example, that the ACCC could rely on its
information-gathering powers at section 155 to obtain information concerning access
agreements, or that the ACCC could rely on those powers to obtain copies of access
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agreements that are not required to be provided to it under proposed section 152BEA
(such as agreements entered into before the commencement of this provision).
Proposed section 152BEB Notification of termination of access agreement
It is important that the ACCC be made aware when access agreements cease to
operate in advance of their anticipated expiry date (for reasons similar to those set out
at section 152BEA above). For this reason, proposed section 152BEB requires that,
where an access agreement has been given to the ACCC in accordance with proposed
section 152BEA and the access agreement is terminated, rescinded or cancelled, a
carrier/CSP who has supplied the declared service under the access agreement must
notify the ACCC within 28 days. The obligation applies equally to a carrier/CSP that,
under an access agreement, had proposed to supply access to a declared service but
had not actually supplied the declared service before the agreement was terminated,
rescinded or cancelled.
Proposed section 152BEC Carrier licence condition
Proposed section 152BED Service provider rule
Proposed section 152BEC sets out a carrier licence condition requiring a carrier to
comply with sections 152BEA and 152BEB, and proposed section 152BED sets out a
corresponding service provider rule.
The effect of proposed section 152BEC and proposed subsection 152BED(2) of the
CCA, together with proposed section 62C and proposed subsection 98(5) of the Tel
Act, is that a carrier/CSP that supplies a declared service under an access agreement
must lodge copies of the agreement and any variation of the agreement with the
ACCC, and must notify the ACCC if the agreement is terminated, rescinded or
cancelled. Failure to do so would render the carrier/CSP subject to the enforcement
provisions in the Tel Act relating to breach of carrier licence conditions or service
provider rules.
Item 161 - Subdivision A of Division 5 of Part XIC
Subdivision A of Division 5 of Part XIC deals with ordinary access undertakings.
Item 161 repeals the Subdivision. Ordinary access undertakings will no longer be a
part of the telecommunications access regime. Only special access undertakings will
be available.
Ordinary access undertakings were intended to promote regulatory certainty for
access providers, by allowing them to propose terms and conditions of access for a
declared service which would be compatible with their own operational and
commercial requirements. If the ACCC accepted an undertaking, it would not be able
to make an arbitration determination under Division 8 of Part XIC that was
incompatible with the undertaking.
In practice, almost all undertakings submitted to the ACCC since 1997 were rejected
on the basis that they did not promote the long-term interests of end-users. Ordinary
access undertakings have not only failed to promote regulatory certainty, their use has
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resulted in significant regulatory uncertainty and the allocation of considerable
resources by the ACCC, access providers and access seekers.
Under the reforms made to Part XIC by the Bill, access providers will have the
opportunity to make submissions to the ACCC during a public inquiry into making an
access determination, concerning the terms and conditions of access they would like
to be included in the access determination, and the ACCC will consider those
submissions.
Item 162 - Subsection 152CBA(1)
Item 162 makes a change to subsection 152CBA(1) of the CCA. Section 152CBA
deals with special access undertakings, and provides that a person who is, or expects
to be, a carrier/CSP supplying either a listed carriage service or a service that
facilitates the supply of a listed carriage service may give a written undertaking to the
ACCC in relation to access to the service, so long as the service is not an active
declared service.
`Active declared service' is defined in subsection 152CBA(12), and has the same
meaning as in section 152AR (disregarding subsection 152AL(7)).
Item 162 amends subsection 152CBA(1) to replace the term `active declared service'
with the term `declared service'. The effect of this is that special access undertakings
will not be able to be lodged in relation to any declared services. Special access
undertakings will only be able to be lodged in relation to services for which a
section 152AL declaration is not in force.
Where a service is a declared service, the terms and conditions of access that apply to
the service (if not agreed between the access provider and access seeker in an access
agreement) will be the terms and conditions specified in an access determination. For
the reasons set out in item 161 relating to the abolition of ordinary access
undertakings, it is not intended that undertakings should be able to deal with the terms
of access for declared services.
It should be noted that if a service is covered by a special access undertaking and has
not been declared under subsection 152AL(3), the effect of subsection 152AL(7) is
that the service is only a declared service when it is supplied by the person who
lodged the undertaking - not when it is supplied by any other person. (This is
because subsection 152AL(7) provides that if a person has given the ACCC a special
access undertaking, the undertaking is in operation, and the person supplies the
service either to itself or to other persons, then "the service supplied by the person is a
declared service" (emphasis added).) Therefore, a person will still be able to lodge a
special access undertaking in relation to a particular type of service notwithstanding
that the ACCC has accepted a special access undertaking in relation to that type of
service from another person.
Item 163 - Before subsection 152CBA(4)
A special access undertaking enables a person who invests in telecommunications
facilities to obtain regulatory certainty in respect of the telecommunications services
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the person proposes to supply, by stating in the undertaking that the person agrees to
be bound by the standard access obligations in section 152AR in relation to the supply
of the service and by setting out in the undertaking the terms and conditions on which
the person proposes to supply the service in accordance with the standard access
obligations (subsection 152CBA(3)). If the ACCC accepts the undertaking (under
section 152CBC), the terms and conditions in the undertaking will prevail over the
terms and conditions of access in an access determination and in binding rules of
conduct, to the extent of any inconsistency (proposed sections 152CBIA and
152CBIB).
Proposed subsection 152CBA(3B) expands the scope of special access undertakings:
proposed paragraph 152CBA(3B)(a) enables the person lodging a special access
undertaking to state in the undertaking that the person will engage in the conduct
specified in the undertaking in relation to access to the service that is the subject of
the undertaking. This proposed paragraph enables the person to undertake obligations
relating to providing access to the service that are additional to the obligations
contained in the standard access obligations.
If the person lodging the undertaking includes a statement referred to in proposed
paragraph 152CBA(3B)(a), the person may, under proposed
paragraph 152CBA(3B)(b), specify the terms and conditions on which the person will
engage in the conduct relating to access specified under proposed
paragraph 152CBA(3B)(a).
Under subsection 152AL(7), a service that is the subject of a special access
undertaking that is being supplied is a `declared service'. It is only treated as a
declared service in relation to the person who gave the undertaking to the ACCC--
that is, the standard access obligations under section 152AR only apply to a service
that is a declared service by virtue of subsection 152AL(7) in relation to the
particular carrier or CSP that lodged the special access undertaking with the ACCC.
The standard access obligations do not apply to all other carriers and CSPs who
supply a service of that kind.
This means that the ACCC can make an access determination (under proposed
section 152BC) or binding rules of conduct (under proposed section 152BD) in
relation to the service (however, the access determination or binding rules of conduct
will only apply where the service is supplied by the carrier or CSP who lodged the
special access undertaking).
In the case where the ACCC makes an access determination in relation to a service
that is a declared service because of the operation of subsection 152AL(7) (i.e.
because the service is the subject of a special access undertaking that has been
accepted by the ACCC), the effect of proposed section 152AY (described above) and
of proposed section 152CBIA (described below at item 174) is that the access
determination will only operate to the extent it includes provisions about matters that
are not addressed in the special access undertaking. To the extent of any
inconsistency between the documents, the special access undertaking will prevail.
The same applies in relation to binding rules of conduct: see proposed
section 152CBIB (also at item 174, below).
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If the ACCC accepts the undertaking, any requirement imposed by an access
determination or binding rules of conduct to provide access to the service (including a
requirement imposed under proposed paragraph 152BC(3)(e) or 152BD(3)(e)), and
any terms and conditions relating to access to the service imposed by an access
determination or binding rules of conduct (including terms and conditions imposed
under proposed paragraph 152BC(3)(f) or 152BD(3)(f)), will not apply in relation to
the service to the extent that such requirement, or such terms and conditions, are
inconsistent with the undertaking.
Item 164 - Subsection 152CBA(10)
Item 164 repeals the current subsection 152CBA(10) and replaces it with a proposed
new subsection 152CBA(10). The proposed new subsection 152CBA(10) does not
include a reference to ordinary access undertakings (which are referred to in the
current subsection 152CBA(10)). This change is necessary as a result of the repeal of
Subdivision A of Division 5 of Part XIC.
Item 165 - Before subsection 152CBA(11)
Proposed subsection 152CBA(10A), inserted by item 165, establishes that a special
access undertaking may provide for the ACCC to perform functions or to exercise
powers in relation to the undertaking, in accordance with the provisions of the
undertaking that confer those functions or powers on the ACCC. This is intended to
permit special access undertakings to operate flexibly, by ensuring that an undertaking
can provide for the ACCC to make decisions on particular matters at a future time.
Similar amendments are made with respect to voluntary undertakings under proposed
Part 33 of the Tel Act and with respect to the functional separation undertaking.
Item 166 - After section 152CBA
Item 166 inserts proposed section 152CBAA into Part XIC of the CCA.
Proposed section 152CBAA Fixed principles terms and conditions
Proposed section 152CBAA provides that `fixed principles terms or conditions', may
be included in a special access undertaking. Fixed principles terms and conditions
operate in a similar but slightly different manner to fixed principles provisions in
access determinations: see proposed section 152BCD.
The person submitting a special access undertaking to the ACCC can include in that
undertaking a term or condition that is specified to be a fixed principles term or
condition. The effect of specifying that a provision is a fixed principles term or
condition is to permit the person submitting the undertaking to `lock in' the matters
dealt with in that term or condition for a period (called the `notional fixed period' in
proposed subsection 152CBAA(1)). The notional fixed period must begin when the
undertaking comes into operation, and may end before, upon or after the expiry time
of the undertaking (proposed subsection 152CBAA(3)).
As explained above in the notes for proposed section 152BCD, the way a fixed
principles provision operates in the context of access determinations is that, where a
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fixed principles provision is included in an access determination (`the original access
determination'), then:
- any access determination that replaces the original access determination must
include a fixed principles provision in the same terms as the fixed principles
provision in the original access determination; and
- the nominal expiry date of the fixed principles provision in the replacement
access determination must be the same as or later than the nominal expiry date
of the fixed principles provision in the original access determination.
There are some key differences between proposed section 152BCD and fixed
principles terms or conditions under proposed section 152CBAA. Most notably,
where a special access undertaking (`the original undertaking') given by a person in
relation to a declared service is in operation and includes a fixed principles term or
condition with a certain notional fixed period, then there is no requirement that any
later special access undertaking given to the ACCC must contain the same fixed
principles term or condition with the same notional fixed period. Instead, it is up to
the person who gave the original undertaking to the ACCC to decide to whether to
include the same fixed principles term or condition with the same notional fixed
period in a later undertaking given by that person to the ACCC in relation to that same
declared service. The effect of that person choosing to include that same fixed
principles term or condition in a later undertaking that the person gives to the ACCC
during the notional fixed period specified in the original undertaking is that the ACCC
must not reject the later undertaking purely on the basis that:
- it includes that same fixed principles term or condition; or
- it includes the same fixed principles term or condition with a notional fixed
period that is either the same as or shorter than the notional fixed period in the
original undertaking (see proposed paragraph 152CBAA(5)(h)).
It should be noted that proposed subsection 152CBAA(5) has a recursive effect: if, in
accordance with this provision and section 152CBD (as amended by later items of the
Bill) the ACCC accepts a later undertaking that includes a fixed principles term or
condition with certain notional fixed period, then that later undertaking (once
accepted) would be treated as the `original undertaking' for the purposes of
considering the replacement of that undertaking by a further undertaking.
A person giving an undertaking to the ACCC that includes a fixed principles term or
condition may specify `qualifying circumstances' in relation to that fixed principles
term or condition (proposed subsection 152CBAA(2)). The qualifying circumstances
set out the conditions in which the restriction on the ACCC (i.e. the requirement that
it must not reject a later undertaking purely for the reasons described above) does not
apply (see proposed paragraphs 152CBAA(5)(f) and (g)). This will permit the ACCC
to reject a later undertaking on the basis that it includes a fixed principles term and
condition, in certain circumstances that are established up front and described in the
original undertaking. It is envisaged that the ACCC may require a person giving it a
special access undertaking that includes fixed principles terms or conditions to set out
qualifying circumstances in relation to those fixed principles terms and conditions, as
a pre-condition to its accepting the undertaking (see proposed subsection 152CBD(4),
inserted by item 171).
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If qualifying circumstances are specified in relation to a fixed principles term or
condition in an undertaking that has been accepted by the ACCC, then the restriction
on the ACCC (i.e. the requirement that it must not reject a later undertaking purely for
the reasons described above, including that the later undertaking includes the same
fixed principles term or condition) only applies where the same qualifying
circumstances are specified in the later undertaking in relation to the fixed principle
term or condition in that undertaking (see proposed paragraph 152CBAA(5)(f)).
Proposed paragraphs 152CBAA(5)(i)-(k) change the operation of section 152CBD
(which sets out the circumstances in which the ACCC may accept a special access
undertaking), as it applies to the ACCC's consideration of a later undertaking that
includes the same fixed principles term or condition as an earlier undertaking, where
the notional fixed period for the fixed principles term or condition under the earlier
undertaking has not expired, in order to give effect to the restriction on the ACCC
relating to the circumstances in which it may not refuse to accept a later undertaking
containing such a fixed principles term or condition,
Proposed subsection 152CBAA(6) contains rules preventing the ACCC from refusing
to accept, on certain grounds, variations to special access undertakings that contain
fixed principles terms or conditions, during the notional fixed period for those fixed
principles terms or conditions. The rules apply in a similar manner to the rules in
proposed subsection 152CBAA(5) preventing the ACCC's rejection on certain
grounds of later special access undertakings, described above.
Item 167 - Before paragraph 152CBC(6)(a)
Item 167 inserts new paragraphs (aa)-(ac) into subsection 152CBC(6), to take into
account proposed section 152CBDA (see item 172). Section 152CBC provides for
the ACCC to accept or reject a special access undertaking. In subsection 152CBC(5)
the ACCC is given six months to consider a special access undertaking. If it has not
made a decision by the end of that six-month period, it is taken to have accepted the
undertaking. Subsection 152CBC(6) sets out certain days that are to be discounted in
calculating the six-month period for the purpose of subsection 152CBC(5); these are
days during periods when the ACCC is awaiting further information, or awaiting
further submissions, relevant to its consideration of an undertaking. During such
periods the ACCC may be unable to continue to consider its decision on a special
access undertaking, and it is appropriate that the limited time given to the ACCC is
suspended for the duration of those periods. As a result of item 167, three new types
of days are included.
The first type of day involves the situation where the ACCC gives a notice under
proposed section 152CBDA (which provides that the ACCC may give a notice to a
person who has submitted an undertaking, inviting the person to vary the undertaking
in accordance with the notice, and provide an amended undertaking within a specified
period), but the ACCC was not given a varied undertaking. In this case, proposed
paragraph 152CBC(6)(aa) provides that a day in the period specified in the notice is to
be disregarded in calculating the six month period.
The second and third type of day involve the situation where the ACCC gives a notice
under proposed section 152CBDA and receives a varied undertaking in response.
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The second type of day occurs where the ACCC does not publish the varied
undertaking under paragraph 152CBD(2)(d) (because the variations in question are of
a minor nature, or are unlikely to have a material adverse effect on a person's
legitimate commercial interests: see proposed subsection 152CBD(6), inserted by
item 171). In that case, for the purpose of calculating the six-month period, any day is
to be disregarded if it is in the period beginning on the day the ACCC gave the notice
and ending on the day the varied undertaking was given to the ACCC in response to
the notice.
The third type of day occurs where the ACCC publishes the varied undertaking under
paragraph 152CBD(2)(d) (because the variations in question are not of a minor
nature, or are likely to have a material adverse effect on a person's legitimate
commercial interests). In that case, for the purpose of calculating the six-month
period, any day is to be disregarded if it is in the period beginning on the day the
ACCC gave the notice and ending on the day specified by the ACCC (under
paragraph 152CBD(2)(d)) as the deadline for making submissions when it published
the varied undertaking.
Item 168 - Paragraph 152CBC(6)(a)
Item 168 makes a consequential amendment to paragraph 152CBC(6)(a), necessary as
a consequence of the inclusion of new paragraph 152CBC(6)(ac) by item 167.
Item 169 - After section 152CBC
Item 169 inserts proposed section 152CBCA into Part XIC.
Proposed section 152CBCA Serial undertakings
Proposed section 152CBCA provides a mechanism for the ACCC to refuse to
consider serial undertakings. Where the ACCC rejects one special access undertaking
given to it by a person, and the person subsequently gives the ACCC another special
access undertaking, and any or all of the provisions of the two undertakings are
materially similar, the ACCC can refuse to consider the subsequent undertaking. This
provision is intended to ensure that the ACCC does not have to devote time and
resources to considering a special access undertaking that is likely to be rejected.
Item 170 - After paragraph 152CBD(2)(c)
Item 170 inserts proposed paragraph 152CBD(2)(ca), the effect of which is to include
an additional requirement that must be satisfied in certain circumstances before the
ACCC may accept a special access undertaking.
The effect of proposed subsection 152CBA(3B) (inserted by item 163) is to expand
the scope of special access undertakings.
Proposed paragraph 152CBD(2)(ca) has the effect that, if a person lodging a special
access undertaking with the ACCC states in the undertaking that the person will
engage in the conduct specified in the undertaking in relation to access to the service
that is the subject of the undertaking, and specifies the terms and conditions on which
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the person will engage in the conduct, then the ACCC must not accept the
undertaking unless it is satisfied that the conduct referred to will promote the long-
term interests of end-users of carriage services or of services supplied by means of
carriage services, and that the terms and conditions referred to are reasonable.
Item 171 - At the end of section 152CBD
Item 171 inserts proposed subsections 152CBD(3)-(6).
Proposed subsection 152CBD(4) sets out additional circumstances in which the
ACCC must refuse to accept a special access undertaking. The additional
circumstances all relate to special access undertakings that include fixed principles
terms or conditions (see proposed section 152CBAA). If the ACCC is given a special
access undertaking that provides that certain terms or conditions of that undertaking
are fixed principles terms or conditions, for a specified notional fixed period, the
ACCC must reject the undertaking if any of the following applies:
- the ACCC considers that a term or condition that has been nominated as a
fixed principles term or condition should not be a fixed principles term or
condition;
- the ACCC considers that a different period should be set as the notional fixed
period;
- the undertaking specifies qualifying circumstances for the fixed principles
terms or conditions, and the ACCC does not consider those circumstances
should be qualifying circumstances for those fixed principles terms or
conditions;
- the undertaking does not specify qualifying circumstances for the fixed
principles terms or conditions, and the ACCC considers that certain
circumstances should be qualifying circumstances for those fixed principles
terms or conditions.
As noted above in the explanation for proposed subsection 152CBAA(5), it is
envisaged that the ACCC may require a person giving it a special access undertaking
that includes fixed principles terms or conditions to set out qualifying circumstances
in relation to those fixed principles terms and conditions, as a pre-condition to its
accepting the undertaking.
Proposed subsection 152CBD(3) and (5) clarify that subsection 152CBD(2) (which
sets out the circumstances in which the ACCC may accept a special access
undertaking) and subsection 152CBD(4) (respectively) have effect subject to
proposed subsection 152CBAA(5), which limits the ACCC's ability to reject special
access undertakings which contain fixed principles terms or conditions.
The effect of proposed subsection 152CBD(6) is that the ACCC is not required to
publish (in accordance with paragraph 152CBD(2)(d)) a varied undertaking given to
the ACCC under proposed section 152CBDA unless the ACCC is satisfied that the
variations in question are not of a minor nature, or are likely to have a material
adverse effect on a person's legitimate commercial interests. This is intended to
ensure that the ACCC does not have to go through a publication and consultation
process on a varied undertaking given to it if the variations are only minor.
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Item 172 - After section 152CBD
Item 172 inserts proposed section 152CBDA, which provides a mechanism for the
ACCC to give a notice to a person who has submitted an undertaking, inviting the
person to vary the undertaking in accordance with the notice.
Proposed section 152CBDA Variation of special access undertaking
Proposed section 152CBDA enables the ACCC to suggest to a person who has given
it a special access undertaking that the person make specified variations to the
undertaking. This provision is designed to avoid a situation where the ACCC has to
reject a special access undertaking, resulting in the person who lodged it having to
start the whole process again by lodging a new undertaking, and instead allows the
ACCC to propose variations to an access undertaking it is given. If the ACCC
decides to give a notice to a person who has submitted an undertaking, inviting the
person to make specified variations to the undertaking, the ACCC must nominate a
period for the person to provide a varied undertaking. If the person provides the
varied undertaking to the ACCC within the specified period, the ACCC must then
consider the varied undertaking under section 152CBC.
The ACCC is not under a duty to consider whether to give a notice to a person who
has submitted an undertaking to it (proposed subsection 152CBDA(4)).
Item 173 - After subsection 152CBG(4)
Item 173 inserts proposed subsection 152CBG(4A), the effect of which is to make
subsection 152CBG(4) (which concerns the variation of access undertakings) subject
to proposed subsection 152CBAA(6), which contains rules preventing the ACCC
from refusing to accept, on certain grounds, variations to special access undertakings
that contain fixed principles terms or conditions, during the notional fixed period for
those fixed principles terms or conditions.
Item 174 - After section 152CBI
Item 174 inserts proposed sections 152CBIA, 152CBIB and 152CBIC.
Proposed section 152CBIA Special access undertakings prevail over
inconsistent access determinations
Proposed section 152CBIB Special access undertakings prevail over
inconsistent binding rules of conduct
Proposed section 152CBIC Access agreements prevail over special access
undertakings
The effect of proposed sections 152CBIA and 152CBIB is that a special access
undertaking prevails over an access determination, or over binding rules of conduct,
to the extent of any inconsistency (see proposed section 152AY).
By contrast, proposed section 152CBIC provides that an access agreement prevails
over a special access undertaking, to the extent of any inconsistency. This reflects the
intention that parties should be free to agree terms of access.
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Item 175 - Subsection 152CC(2)
Item 176 - Subsections 152CC(3), (4) and (5)
Items 175 and 176 amend section 152CC, which provides that the ACCC must
maintain a register of access undertakings that have been accepted by the ACCC
(including those that are no longer in force). The amendments bring section 152CC
into line with proposed sections 152BCW (which relates to the Register of Access
Determinations) and 152BDN (which relates to the Register of Binding Rules of
Conduct), by requiring that the ACCC is to maintain the register of access
undertakings by electronic means, and make it available for inspection on the ACCC
website, and providing that the Register is not a legislative instrument. The
amendments made to section 152CC also reflect the amendments made to
section 152CJ by items 183 and 184.
Item 177 - Sections 152CE, 152CF, 152CG and 152CGA
Item 177 repeals sections 152CE, 152CF, 152CG and 152CGA, which relate to the
review by the Australian Competition Tribunal of a decision of the ACCC to accept or
reject an access undertaking or a variation to an access undertaking. Consistent with
other changes made by the Bill to the operation of Part XIC, merits review of
decisions of the ACCC relating to access undertakings will no longer be available.
Merits review of the ACCC's decisions to accept or reject an access undertaking is
being removed for similar reasons to those set out in the notes on item 152.
Item 178 - Section 152CGB
Item 178 repeals section 152CGB, as a consequence of the repeal of Division 8 of
Part XIC by item 185.
Item 179 - Subsection 152CH(1) (notes 1A, 1B, 2 and 3)
Item 180 - Subsection 152CH(1) (note 5)
Item 181 - Subsection 152CH(1) (note 6)
Items 179 and 181 repeal notes 1A, 1B, 2, 3 and 6 in subsection 152CH(1), and
item 180 repeals and replaces note 5 with notes 5 and 5A in the same subsection, as a
result of amendments made elsewhere in the Bill.
Item 182 - Subsection 152CI(2)
Item 182 repeals current subsection 152CI(2), which deals with the situation where a
provision of the telecommunications access code is inconsistent with a Ministerial
pricing determination (made under section 152CH). The telecommunications access
code is dealt with in Division 4 of Part XIC, which is being repealed by item 160.
Item 182 substitutes new proposed subsections 152CI(2) and (3), which provide that a
provision of an access determination or of binding rules of conduct that is inconsistent
with a Ministerial pricing determination has no effect to the extent of the
inconsistency.
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Item 183 - Subsection 152CJ(2)
Item 184 - Subsections 152CJ(3), (4), and (5)
Items 183 and 184 amend section 152CJ, which provides that the ACCC must
maintain a Register of Ministerial pricing determinations. The amendments bring
section 152CJ into line with proposed sections 152BCW (which relates to the Register
of Access Determinations) and 152BDN (which relates to the Register of Binding
Rules of Conduct), by requiring that the ACCC is to maintain the Register of
Ministerial pricing determinations by electronic means, and make it available for
inspection on the ACCC website.
Proposed subsection 152CJ(4) provides that the Register is not a legislative
instrument.
The amendments made to section 152CJ also reflect the amendments made to
section 152CC by items 175 and 176.
Item 185 - Division 8 of Part XIC
Item 185 repeals Division 8 of Part XIC, which provides for the resolution of disputes
about access. Under Division 8, carriers/CSPs and access seekers can notify access
disputes to the ACCC. The ACCC is then required to arbitrate the access dispute, and
make an arbitration determination, setting out the terms and conditions of access to
the service.
In practice, the operation of Division 8 has proven to be complex and prone to
excessive delays. Although Division 8 was intended to encourage negotiation
between access providers and access seekers, in general terms it has been a major
source of regulatory uncertainty and delay.
One of the fundamental reforms to the telecommunications access regime made by the
Bill is to replace the power of the ACCC to arbitrate access disputes with a power for
the ACCC to set up front terms and conditions of access in an access determination.
On this basis, Division 8 of Part XIC is being repealed.
Item 186 - Division 9 of Part XIC
Item 186 repeals Division 9 of Part XIC, which provides for the registration of
agreements for access to declared services. Division 9 is superseded by proposed
Division 4B, dealing with access agreements.
Item 187 - Paragraph 152EF(1)(b)
Item 187 makes an amendment to section 152EF, which provides that certain persons
must not engage in conduct for the purpose of preventing the fulfilment of a standard
access obligation or of an obligation imposed by a determination made by the ACCC
under Division 8. As a result of the repeal of Division 8 by item 185, and the
introduction of proposed Divisions 4 and 4A, item 187 replaces the reference in
section 152EF to `an obligation imposed by a determination made by the Commission
210
under Division 8' with references to requirements imposed by an access
determination, or by binding rules of conduct.
Item 188 - Subparagraph 152ELA(3)(a)(i)
Item 189 - Subparagraph 152ELA(3)(a)(ii)
Item 190 - Subparagraph 152ELA(3)(a)(iii)
Item 191 - Paragraph 152ELA(3)(b)
Item 192 - Paragraph 152ELA(3)(c)
Item 193 - Paragraph 152ELA(3)(d)
Items 188-193 make consequential amendments to subsection 152ELA(3), which
provides for the matters that may be dealt with by Procedural Rules made by the
ACCC under subsection 152ELA(1), that are necessary as a result of the repeal of
section 152AT and Division 8 of Part XIC.
Item 194 - Subsections 152ELA(6) and (7)
Item 194 makes an amendment to section 152ELA, repealing subsections 152ELA(6)
and (7), and substituting proposed subsection 152ELA(6). This amendment is
necessary as a result of the repeal of Division 8 of Part XIC.
Item 195 - Before section 152EM
Item 195 inserts proposed section 152ELD, which deals with compensation for
acquisition of property.
Proposed section 152ELD Compensation for acquisition of property
Proposed section 152ELD provides that the Commonwealth must pay a reasonable
amount of compensation to a person where the operation of Part XIC, or of the
transitional provisions in Division 2 of Part 2 of Schedule 1 to the Bill, would result in
an acquisition of property from the person within the meaning of paragraph 51(xxxi)
of the Constitution otherwise than on just terms (i.e. without the person being
sufficiently compensated). The amount of compensation is that either agreed by the
person and the Commonwealth or, failing agreement, that determined by a court of
competent jurisdiction.
This provision is similar in operation to section 152EB, which falls within Division 8
of Part XIC and as such is being repealed by item 185.
Item 196 - Subsection 155AAA(21) (subparagraph (c)(i) of the definition of
protected information)
Item 196 makes a consequential amendment to the definition of `protected
information' in subsection 155AAA(21) of the CCA, to remove two references to
provisions of Part XIC that are being repealed by other items in the Bill.
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Item 197 - Subsection 171B(1)
Item 197 makes a consequential amendment to section 171B of the CCA, which
provides that Division 3 of Part IIIA and Division 8 of Part XIC have no effect to the
extent (if any) to which they purport to confer judicial power on the ACCC. As a
result of the repeal of Division 8 of Part XIC by item 185, section 171B is amended to
remove reference to that Division. The heading to section 171B is also appropriately
amended.
Division 2--Transitional provisions
Division 2 of Part 2 of Schedule 1 to the Bill includes transitional provisions
necessary to give effect to the amendments made by Division 1 of Part 2.
Item 198 - Definitions
Item 198 provides that definitions for certain terms used in Division 2 of Part 2 of
Schedule 1 to the Bill have the same meaning as in Part XIC of the CCA, as amended
by Division 1.
Item 199 - Transitional--certificates under subclause 33(3) of Schedule 1 to the
Telecommunications Act 1997
Item 200 - Transitional--certificates under subclause 34(3) of Schedule 1 to the
Telecommunications Act 1997
Item 201 - Transitional--certificates under subclause 35(3) of Schedule 1 to the
Telecommunications Act 1997
Items 199-201 are transitional provisions to deal with certificates issued by the
ACMA under Part 5 of Schedule 1 to the Tel Act stating that, in the ACMA's opinion,
it is not technically feasible for a carrier to comply with the rule at subclauses 33(1),
34(1) or 35(1) requiring the carrier to provide access to certain facilities to another
carrier on request. As a result of changes made by items 98-101, 103-106 and
108-111 of the Bill, the ACCC, rather than the ACMA, will have the responsibility
for issuing those certificates. The effect of these items is that any certificates that
have been issued by the ACMA before the commencement of this item are to be
treated, after the commencement of these items, as if they had been issued by the
ACCC: that is, they continue to operate under the provisions of Part 5 of Schedule 1
to the Tel Act as amended by the Bill.
Item 202 - Transitional--ordinary class exemptions from standard access
obligations
Item 203 - Transitional--ordinary individual exemptions from standard access
obligations
Items 202 and 203 provide that, notwithstanding the repeal of sections 152AS and
152AT and other amendments made by Division 1, ordinary class exemptions and
ordinary individual exemptions that are in force prior to the commencement of these
items of Division 2 will continue to operate until the first access determination
concerning the relevant declared service comes into force.
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Items 202 and 203 achieve this by providing for the continued application of certain
provisions in Part XIC that are repealed by Division 1 of Part 2 of the Schedule to the
Bill. In each case, the continued application of those provisions is subject to the
operation of the rest of the item.
The reference to "the first access determination" means the first final access
determination concerning the declared service to which the exemption relates or, if an
interim access determination is made in relation to the declared service, that interim
access determination.
At the time when the ACCC is making the first access determination, it will be able to
include provisions under proposed paragraphs 152BC(3)(h) or (i) limiting the
application of the standard access obligations. Such provisions may have a similar
effect to exemptions.
Item 204 - Transitional--ordinary access undertakings given to the Commission
before 15 September 2009
Item 204 provides for the continued effect of ordinary access undertakings that were
given to the ACCC before 15 September 2009 (being the date the 2009 Bill was
introduced into the Parliament) and that are accepted by the ACCC before the
commencement of item 204, in spite of various amendments made by Division 1.
Item 204 will commence on the day after the Bill receives the Royal Assent: see
clause 2.
Item 204 achieves this by providing for the continued application of certain provisions
in Part XIC that are repealed by Division 1 of Part 2 of the Schedule to the Bill. The
continued application of those provisions is subject to the operation of the rest of
item 204.
Subitem 204(5) mirrors the effect of proposed section 152CBIC of Part XIC (see
item 174) by providing that an access agreement (under proposed Division 4B of
Part XIC) prevails over an undertaking to the extent of any inconsistency.
Item 205 - Transitional--ordinary access undertakings given to the Commission
on or after 15 September 2009
Item 205 provides for the continued effect of ordinary access undertakings that are
given to the ACCC on or after 15 September 2009 (being the date the 2009 Bill was
introduced into the Parliament) and that are accepted by the ACCC before the
commencement of item 205, in spite of various amendments made by Division 1, but
only until the first access determination concerning the relevant declared service
comes into force. Item 205 will commence on the day after the Bill receives the
Royal Assent: see clause 2.
Item 205 achieves this by providing for the continued application of certain provisions
in Part XIC that are repealed by Division 1 of Part 2 of the Schedule to the Bill. The
continued application of those provisions is subject to the operation of the rest of
item 205.
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Subitem 205(6) mirrors the effect of proposed section 152CBIC of Part XIC (see
item 174) by providing that an access agreement (under proposed Division 4B of
Part XIC) prevails over an undertaking to the extent of any inconsistency.
Item 206 - Transitional--continuity of special access undertakings
Item 206 provides a transitional provision to deal with special access undertakings,
ensuring that the amendment to subsection 152CBA(1) of the CCA (made by
item 162 of Schedule 1 to the Bill) does not affect the continuity of a special access
undertaking that is in operation before the commencement of this item. The
amendment to subsection 152CBA(1) will have the effect that special access
undertakings will not be able to be lodged in relation to any declared services.
Item 207 - Transitional--arbitration of access disputes
Item 207 provides for the ACCC to have a continued role in arbitrating access
disputes notified to it under Division 8 of Part XIC of the CCA, in certain specified
limited circumstances, notwithstanding the repeal of Division 8 by Division 1 of
Part 2 of Schedule 1 of the Bill. This provision is necessary to enable the transition
from the current negotiate/arbitrate model in Part XIC to the model of setting up-front
terms and conditions that is implemented by the changes made to Part XIC by the
Bill.
Item 207 provides for the continued role of the ACCC in arbitrating certain access
disputes by providing for the continued application of certain provisions in Part XIC
that are repealed by Division 1 of Part 2 of the Schedule to the Bill. The continued
application of those provisions is subject to the operation of the rest of item 207.
The ACCC will have 12 months from the commencement of Part 2 of Schedule 1 to
the Bill to commence the process of making an access determination for any service
that is a declared service at the commencement of proposed section 152BCI (see
proposed subsection 152BCI(2)). Until the ACCC makes the first final access
determination for an existing declared service, access disputes may still be referred to
the ACCC under Division 8 of Part XIC.
Item 207 sets out the circumstances in which, and the period for which, access
disputes will still be able to be referred to, and arbitrated by, the ACCC under
Division 8 of Part XIC after the commencement of item 207, and the order of
precedence between arbitration determinations made by the ACCC under that
Division vis-à-vis access determinations and binding rules of conduct. The effect of
item 207 is as follows:
- Access disputes about a service that is declared after the commencement of
item 207 cannot be referred to the ACCC for arbitration.
- Access disputes about a service that was declared before the commencement
of item 207 can be referred to the ACCC for arbitration until the first final
access determination is made in relation to the declared service.
- If:
o there is an access agreement in force between Telstra and an NBN
corporation relating to access to a declared service; and
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o that access agreement was entered into before the first final access
determination in relation to that service comes into force; and
o that agreement is specified in an in-force structural separation
undertaking (see proposed section 577A of the Tel Act, inserted by
item 30 of Schedule 1 to the Bill);
then neither Telstra nor the NBN corporation is able to refer an access dispute
about the service to the ACCC for arbitration.
(Given the importance to the structural reform of the telecommunications
industry of any arrangements that may be agreed between Telstra and NBN Co
in relation to migration of customers, this will ensure that those arrangements
are not made subject to arbitration under Division 8 of Part XIC (as continued
by item 207) .)
- The ACCC may terminate an arbitration proceeding at any time (without
making an arbitration determination) after the ACCC commences a public
inquiry about making an access determination in relation to the declared
service that is the subject of the arbitration proceeding. (This is to avoid the
ACCC having to continue with an arbitration where it intends to consider the
issues in dispute in the arbitration during the public inquiry process, with a
view to addressing the issues in the access determination.)
- A final arbitration determination made by the ACCC after the commencement
of item 207 must specify an expiry date.
- An arbitration determination that has an expiry date prevails over a final
access determination, to the extent of any inconsistency.
- An access determination prevails over an arbitration determination that does
not have an expiry date, to the extent of any inconsistency.
- An arbitration determination, whether or not it has an expiry date, prevails
over an interim access determination, to the extent of any inconsistency.
- Binding rules of conduct prevail over an arbitration determination that does
not have an expiry date, to the extent of any inconsistency.
- An arbitration determination that has an expiry date prevails over binding
rules of conduct, to the extent of any inconsistency.
- An access agreement:
o that relates to a declared service; and
o that is entered into after the first final access determination in relation
to that declared service comes into force;
prevails over an arbitration determination made in relation to that declared
service, to the extent of any inconsistency.
- An arbitration determination relating to a declared service prevails over an
access agreement relating to that declared service that is entered into before
the first final access determination relating to that declared service comes into
force, to the extent of any inconsistency.
Item 208 - Transitional--compliance with standard access obligations
The ACCC will have 12 months from the commencement of Part 2 of Schedule 1 to
the Bill to commence the process of making an access determination for any service
that is currently declared. Until the ACCC makes an access determination for an
existing declared service, the terms of access for the service will continue to be
regulated under the current negotiate/arbitrate model.
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Item 208 establishes a hierarchy, similar to current section 152AY and proposed
section 152AY, for identifying the terms and conditions on which a carrier/CSP must
comply with the standard access obligations.
The reference to `access undertaking' in paragraph 155(2)(b) refers to the ordinary
access undertaking mentioned in subparagraph 155(1)(b)(ii) (that is, an ordinary
access undertaking which has continued effect by virtue of item 204 or 205).
Two notes are included at the end of item 208 to assist the reader.
The first note alerts the reader that, before considering the hierarchy that is set out at
item 208, it is necessary to consider certain listed provisions of Part XIC that are
inserted by the Bill, and other items in Division 2 of Part 2 of Schedule 1 to the Bill,
that specify how inconsistency is to be addressed. For example, subitem 207(10)
provides that binding rules of conduct that are inconsistent with an arbitration
determination under Division 8 that has an expiry date have no effect, to the extent of
the inconsistency. So if binding rules of conduct and a determination under
Division 8 that has an expiry date both provide terms and conditions dealing with a
particular matter, in considering the application of the hierarchy at item 208 in such a
circumstance, in effect the binding rules of conduct are taken not to address the
matter: they have no effect to the extent of the inconsistency.
The second note highlights that although, under the hierarchy described above,
binding rules of conduct take precedence over an access determination, the ACCC
may only make binding rules of conduct if it considers there is an urgent need to do
so. As noted above, binding rules of conduct are intended to deal with urgent matters.
They have a maximum duration of 12 months. It is expected that access
determinations will be the usual way that the ACCC specifies up-front terms and
conditions of access, including terms and conditions for complying with the standard
access obligations.
Item 209 - Transitional--hindering the fulfilment of an obligation imposed by an
arbitration determination
Item 209 provides a transitional mechanism permitting section 152EF of the CCA to
continue to apply to any obligations imposed by determinations made by the ACCC
under Division 8 of Part XIC that continue to operate as a result of these transitional
provisions, in spite of the repeal of that Division by the Bill.
Item 210 - Transitional--regulations
Item 210 provides that the Governor-General may make regulations in relation to
transitional matters arising out of amendments made by Part 2 of Schedule 1 to the
Bill.
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Part 3--Anti-competitive conduct
Part 3 of Schedule 1 to the Bill amends the anti-competitive conduct provisions in
Part XIB of the CCA. Part 3 streamlines the enforcement process that the ACCC is
required to follow, and clarifies that the competition notice regime applies to content
services delivered by carriers and CSPs.
Division 1 - Amendments
Competition and Consumer Act 2010
Item 211 - At the end of section 151AF (before the note)
Item 211 amends section 151AF of the CCA to include `content services' in the list of
goods and services that are a part of a telecommunications market. Section 151AF of
the CCA currently lists carriage services, goods or services for use in connection with
a carriage service and access to facilities as being part of a telecommunications
market. The term `content services' is defined in section 151AB of the CCA as having
the same meaning as in the Tel Act. Section 15 of the Tel Act provides that a `content
service' includes a broadcasting service, an on-line information service, an on-line
entertainment service, any other on-line service, or any other service specified by the
Minister in a determination.
The term `content services' is used in Parts XIB and XIC of the CCA, including
section 151BUAAA (this section is being repealed by Part 1 of Schedule 1 to the
Bill), subsection 152AF(1) (access by a service provider to a declared service), and
section 152AR (supply of an active declared service, permitted interconnection and
conditional-access customer equipment).
Part XIB of the CCA sets out a telecommunications specific anti-competitive conduct
regime. Telecommunications carriers and CSPs are prohibited from engaging in
anti-competitive conduct. The circumstances in which a carrier or a CSP engages in
anti-competitive conduct relate to conduct in a `telecommunications market'. If the
ACCC believes that a carrier or CSP is engaging in anti-competitive conduct in a
telecommunications market, it may issue a competition notice under Part XIB.
The intention of the amendment is to clarify that the anti-competitive conduct
provisions in Part XIB of the CCA apply to content services supplied by carriers and
CSPs in telecommunication markets. This will ensure that the ACCC is able to take
enforcement action without doubt over the application of Part XIB to content services.
Item 212 - Subsections 151AKA (9) and (10)
Item 212 repeals current subsections 151AKA(9) and (10) (including the note), which
provide for specific consultation to take place before issuing a Part A competition
notice, and inserts proposed subsection 151AKA(9) and an accompanying note in
their place.
Current subsections 151AKA(9) and (10) require the ACCC, before it issues a Part A
competition notice, to give the carrier/CSP concerned a consultation notice which
217
describes the alleged anti-competitive conduct in summary form, and gives the
carrier/CSP an opportunity to make submissions. Repealing these subsections
provides for a more streamlined process for issuing competition notices, to enable the
ACCC to move quickly to issue a competition notice as soon as it has reason to
believe anti-competitive conduct is occurring in the telecommunications market.
Proposed subsection 151AKA(9) expressly removes any common law procedural
fairness requirements that may apply to the ACCC when issuing a Part A competition
notice. This provision is intended to eliminate the opportunity of a recipient of a
notice from appealing the issuing of the notice on procedural fairness grounds at this
stage of the process.
As a competition notice does not of itself direct a party to take action, there are no
penalties for failing to comply with a competition notice. Before penalties are applied
for engaging in anti-competitive conduct, the ACCC has to prove to the Federal Court
that the anti-competitive conduct has occurred.
Division 2 - Application
Item 213 - Application - competition notices
Item 213 clarifies that the proposed amendments to section 151AKA of the CCA
made by the Bill will only apply to Part A competition notices issued after the
commencement of this item.
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Part 4--Universal service regime
Part 4 of Schedule 1 to the Bill amends the Consumer Protection Act to include new
requirements for a primary universal service provider to supply, on request, standard
telephone services with characteristics and which comply with performance standards
determined by the Minister. There are also new provisions providing minimum
performance benchmarks that a primary universal service provider must meet in
fulfilling its responsibilities.
Part 4 of Schedule 1 to the Bill also provides the Minister with the power to specify,
by written determination, rules and performance standards to which a primary
universal service provider must adhere in relation to the supply, installation,
maintenance and location of payphones, new rules in relation to public consultation
and notification of proposals to remove payphones, and provides for the ACMA to
have new powers to direct the universal service provider not to remove payphones.
Telecommunications (Consumer Protection and Service Standards)
Act 1999
Item 214 - Subsection 5(2)
Item 215 - Subsection 5(2)
Item 216 - Subsection 5(2)
Item 214 inserts a definition of a `payphone carriage service' into subsection 5(2) of
the Consumer Protection Act. This term is proposed to be used in item 225 which
inserts revised obligations on primary universal service providers in regard to
payphones.
Item 215 inserts a definition of `price-related terms and conditions' into
subsection 5(2) of the Consumer Protection Act. This definition has been relocated
from subsection 150(3) (see item 226). The term is now used more widely in Part 2 of
the Consumer Protection Act as a result of the amendments proposed under item 225
which enable non-price-related obligations to be placed on primary universal service
providers in regard to standard telephone services provided in fulfilment of the USO.
The Minister's powers to determine price-related terms and conditions, under
Division 11 of Part 2 of the Consumer Protection Act in relation to USO services, and
under Part 9 of the Consumer Protection Act in relation to price control arrangements
for carriage services, content services and facilities supplied by Telstra, remain
unchanged.
Item 216 inserts a definition of `VOIP service' into subsection 5(2) of the Consumer
Protection Act to mean a carriage service that enables a voice call to originate on
customer equipment by means of the internet protocol. The term `internet protocol'
refers to the method by which data is sent from one computer to another on the
internet. A definition for `VOIP service' is required as a result of the amendments
proposed under item 217.
219
Item 217 - After section 6
Item 217 inserts proposed section 6A into the Consumer Protection Act.
Proposed section 6A When a standard telephone service is supplied in
fulfilment of the universal service obligation
Proposed section 6A clarifies when standard telephone services are taken to be
supplied in fulfilment of the USO and when those services are taken not to have been
provided in fulfilment of the USO. This clarity is required to assist consumers become
more aware of the status of the service they are purchasing and their right to a service
supplied in fulfilment of the USO.
Proposed section 6A is intended to enable a primary universal service provider to
clearly delineate between those services it provides in fulfilment of the USO and its
other standard telephone service offerings. The provisions in proposed section 6A are
intended to establish a presumption that standard telephone services supplied by a
primary universal service provider which are not mobile or VOIP technologies are
subject to the universal service requirements unless the customer agrees otherwise.
Proposed subsection 6A(1) clarifies that in order for a standard telephone service that
is a public mobile telecommunications service (defined in section 32 of the Tel Act)
or a VOIP service, to be taken to be supplied in fulfilment of the USO, the primary
universal service provider must, before the customer enters into an agreement with it
for the supply of the service:
- provide the customer with a written notice that the service is supplied in
fulfilment of the USO; and
- the written notice must comply with the requirements (if any) specified in a
determination under proposed subsection 6A(2).
Proposed subsection 6A(2) provides that the ACMA may, by legislative instrument,
determine requirements for the purposes of proposed paragraph 6A(1)(d).
Proposed subsection 6A(3) clarifies that a standard telephone service, that is not a
public telecommunications service or a VOIP service, is taken not to be supplied in
fulfilment of the USO in circumstances where, before the customer enters into an
agreement with it for the supply of the service:
- the primary universal service provider in question gives the customer the
option of being supplied with another standard telephone service on the basis
that the other service would be supplied in fulfilment of the USO; and
- the customer has given the provider a written notice acknowledging that the
relevant service is not supplied in fulfilment of the USO; and
- the written notice complies with the requirements (if any) specified in a
determination under proposed subsection 6A(4).
Proposed subsection 6A(4) provides that the ACMA may, by legislative instrument,
determine requirements for the purposes of proposed paragraph 6A(3)(e).
220
Item 218 - After section 8B
Item 218 inserts proposed section 8BA into the Consumer Protection Act, which
provides a special meaning of `standard telephone service' for the purposes of Part 2
of that Act.
Proposed section 8BA Special meaning of standard telephone service
Pursuant to proposed subsection 8BA(1), `standard telephone service' would include
the meaning that is provided for under section 6 of the Consumer Protection Act plus
any additional characteristics that have been specified by the Minister under a
subsection 8BA(2) instrument.
Proposed subsection 8BA(2) allows the Minister, by legislative instrument, to
determine specified characteristics for the purposes of proposed subsection 8BA(1).
The ability of the Minister to prescribe additional characteristics for the standard
telephone service under proposed subsection 8BA(2) enables the standard telephone
service, which must be supplied on request for the purposes of the USO, to be more
precisely specified. This mechanism could be used, for example, to set specific voice
quality requirements.
Item 219 - Subsections 9(2) and (3)
Item 219 repeals subsections 9(2) and (3) of the Consumer Protection Act and
substitutes a number of subsections which clarify the matters that are included in the
USO.
Proposed subsection 9(2) provides that the obligation under paragraph 9(1)(a)
includes the obligation to supply standard telephone services `on request', that is, on
the request of the person seeking supply of the relevant service.
Proposed subsection 9(2A) provides that the obligation under paragraph 9(1)(b)
includes the obligation to supply, install and maintain payphones in Australia.
Proposed subsection 9(2B) provides that the obligation under paragraph 9(1)(c)
includes the obligation to supply prescribed carriage services `on request', that is, on
the request of the person seeking supply of the relevant service.
Proposed subsection 9(2C) provides that an obligation under paragraph 9(1)(a) or
proposed subsection 9(2) does not arise unless the request complies with the
requirements (if any) set out in a determination under proposed subsection 9(2D).
Proposed subsection 9(2D) allows the Minister, by legislative instrument, to
determine requirements for requests (for the purposes of proposed subsection 9(2C),
such as the form of the request or information to be provided in a request.
Proposed subsection 9(2E) confirms that the obligation under paragraph 9(1)(a) or
subsection 9(2) will not arise under circumstances specified in a determination under
proposed subsection 9(3).
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Proposed subsection 9(3) enables the Minister to determine circumstances for the
purposes of proposed subsection 9(2E), such as where a request has been already
received for the same standard telephone service. It is expected the Minister would
also exempt a primary universal service provider from having to supply a service in
response to a request where doing so would, for example, expose workers to
unreasonable dangers, where the customer fails to identify the premises where the
service is to be supplied, or where there are demonstrated customer creditworthiness
grounds. This determination will be a legislative instrument, which means that it
would be registered on the Federal Register of Legislative Instruments and would be
subject to Parliamentary disallowance.
Item 220 - Subsection 9(4)
Item 221 - Subsection 9(5)
Item 222 - Subsection 9(6)
Items 220, 221 and 222 provide for consequential amendments to be made to the
noted subsections as a result of the amendments to section 9 made by item 219.
Item 223 - Section 9A
Item 223 repeals section 9A and substitutes proposed section 9A.
Proposed section 9A Reasonable accessibility of prescribed carriage
services
Proposed section 9A, in effect, re-enacts current subsections 9A(3) and 9A(5) as
proposed subsections 9A(1) and 9A(2). The remaining subsections in current
section 9A are no longer required as a result of other amendments made by item 225
of the Bill.
Proposed subsection 9A(1) enables the Minister to make a determination regarding
what is or is not necessary to determine when prescribed carriage services are
reasonably accessible under paragraph 9(1)(c).
Proposed subsection 9A(2) provides that the determination will be a legislative
instrument, which means that it would be registered on the Federal Register of
Legislative Instruments and would be subject to Parliamentary disallowance.
Item 224 - Subsection 12C(1)
Item 224 would omit the phrase `take all reasonable steps to' from subsection 12C(1)
of the Consumer Protection Act. This proposed amendment would clarify the
obligations of a primary universal service provider to strictly comply with its service
obligations as described under section 12C. This would also make it easier for the
ACMA to determine when it could initiate action for breach of an obligation under the
universal service regime.
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Item 225 - After Subdivision B of Division 5 of Part 2
Item 225 inserts proposed Subdivisions BA and BB into Division 5 of Part 2 of the
Consumer Protection Act. Proposed Subdivisions BA and BB include a number of
provisions dealing with performance standards and performance benchmarks for
standard telephone services and payphones for primary universal service providers to
be made by the Minister through legislative instruments.
Proposed Subdivision BA--Standard telephone service requirements
Proposed section 12EB Performance standards
Proposed subsection 12EB(1) enables the Minister to make a determination setting
out standards (performance standards) to be complied with in respect of standard
telephone services supplied by a primary universal service provider in fulfilment of
the USO, regarding the following:
- terms and conditions of the supply of a service to a customer;
- the reliability of the service;
- the supply of a temporary service;
- the maximum period within which the primary universal service provider must
supply the service to the prospective customer following a request;
- the maximum period within which the primary universal service provider must
rectify a fault or service difficulty following a report by a customer; and
- any other matter concerning the supply, or proposed supply.
Proposed subsection 12EB(2) provides that a determination made under proposed
subsection 12EB(1) can be of general or limited application. As provided in proposed
subsection 12EB(3), this provision does not limit the application of subsection 33(3A)
of the AIA (refer proposed subsection 12EB(3)).
Proposed subsection 12EB(4) imposes a positive obligation on a primary universal
service provider to comply with a standard in force under proposed
subsection 12EB(1). Any breach of a standard would be a breach of the Consumer
Protection Act, and consequently a breach of a carrier licence condition (see clause 1
of Schedule 1 to the Tel Act and section 68 of the Tel Act) for which the standard
enforcement provisions under the Tel Act apply.
Proposed subsection 12EB(5) provides that a determination made under proposed
subsection 12EB(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency.
Section 12H of the Consumer Protection Act requires a universal service provider to
submit a draft policy statement and a draft marketing plan to the ACMA for approval.
Standard marketing plans set out the provider's arrangements for supplying and
marketing equipment, goods or services in fulfilment of the USO. Policy statements
are general statements of the policy the provider will apply in supplying the
equipment, goods or services. It is intended that these documents will continue in
force following a Ministerial determination to the extent they are not inconsistent with
the determination.
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Proposed subsection 12EB(6) makes it clear that this section will only apply to a
standard telephone service supplied, or proposed to be supplied, in fulfilment of the
USO.
A determination under proposed subsection 12EB(1) would be a legislative
instrument for the purposes of the LIA (proposed subsection 12EB(7)). This would
mean that the determination would be registered on the Federal Register of
Legislative Instruments and would be subject to Parliamentary disallowance. The
Minister could vary the requirements specified in a determination by legislative
instrument, or revoke a determination by legislative instrument, relying on
subsection 33(3) of the AIA.
Proposed section 12EC Performance benchmarks
Proposed subsection 12EC(1) enables the Minister to make a determination setting
out standards (performance benchmarks) to be complied with by a primary universal
service provider in respect of standard telephone services supplied in fulfilment of the
USO in relation to:
- terms and conditions of the supply to a customer;
- the reliability of the service;
- the supply of a temporary service;
- the maximum period within which the primary universal service provider must
supply the service to a prospective customer following a request;
- the maximum period within which the primary universal service provider must
rectify a fault or service difficulty following a report by a customer; and
- any other matter concerning the supply, or proposed supply.
This determination would be a legislative instrument (subsection 12EC(5)). This
means that the determination would be registered on the Federal Register of
Legislative Instruments and would be subject to Parliamentary disallowance. The
Minister could vary the requirements specified in a determination by legislative
instrument, or revoke a determination by legislative instrument, relying on
subsection 33(3) of the AIA.
Proposed subsection 12EC(1) replicates proposed subsection 12EB(1). However, it is
anticipated that different standards (relating to performance benchmarks) may be set
in a determination under proposed subsection 12EC(1) when compared with a
determination under proposed subsection 12EB(1), as explained below.
Unlike the provisions in section 12EB relating to performance standards, there is no
positive obligation on a primary universal service provider to comply with a standard
in force under proposed subsection 12EC(1). Proposed subsections 12EC(10) and
(11) also confirm that clause 1 of Schedules 1 and 2 to the Tel Act do not apply to
contravention of a standard in force under proposed subsection 12EC(1). This means
that failure by a primary universal service provider to meet a standard under proposed
subsection 12EC(1) would not be a breach of a carrier licence condition or a service
provider rule.
The standards to be specified under proposed subsection 12EC(1) relate to
performance benchmarks which a primary universal service provider should aim to
224
achieve and by which minimum benchmarks can be set. There will be an obligation to
meet or exceed a minimum benchmark under proposed subsection 12EC(9). An
example of how this would work is given below, where proposed subsection 12EC(6)
is discussed.
Proposed subsection 12EC(2) provides that a determination made under proposed
subsection 12EC(1) can be of general application or limited application. This
provision does not limit the application of subsection 33(3A) of the AIA (proposed
subsection 12EC(3)).
Proposed subsection 12EC(4) provides that a determination made under proposed
subsection 12EC(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency. As noted above, section 12H
provides for the universal service providers to submit draft policy statements and draft
marketing plans to the ACMA for approval. Standard marketing plans and policy
statements are intended to support and supplement the USO by setting out how the
provider will fulfil the obligation.
Proposed subsection 12EC(6) enables the Minister, by legislative instrument, to set
minimum benchmarks in relation to a standard in force under proposed
subsection 12EC(1). An example of a minimum benchmark that could be made would
be to specify the percentage of occurrences in which a primary universal service
provider is expected to meet a performance standard made under proposed
subsection 12EC(1). For instance, a primary universal service provider could be
expected to supply a standard telephone service to a customer within four days of the
request as a standard under proposed subsection 12EC(1). A minimum benchmark in
regard to that particular standard could be that the provider must meet the four-day
supply period for at least 90 per cent of all requests in any calendar year.
A performance standard made under proposed section 12EC, which is enforced by
means of a minimum benchmark (a "benchmark standard"), should be contrasted with
a performance standard that could be made under proposed section 12EB, for which
compliance with the standard in each occurrence is made a service provider rule and a
carrier licence condition (a "direct standard"). The two types of performance standard
can co-exist, and can address the same subject matter: it would be expected that a
primary universal service provider would be expected to meet stricter requirements in
a benchmark standard than in a direct standard. So, the benchmark standard might
provide that a service must be supplied within four days of a request. A primary
universal service provider must meet this requirement in the percentage of
occurrences specified in the benchmark made by the Minister (90 per cent of requests,
in the above example). However, a direct standard could operate at the same time,
providing that for each and every request the primary universal service provider must
supply the service in a different period, which would be longer: for instance, 15 days.
In that case, if the provider takes 16 days to supply a service, it is in breach of the
direct standard. It may also be in breach of the benchmark, or it may not: that would
depend on its overall performance in supplying services in response to requests over
the course of a year.
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Proposed subsection 12EC(7) confirms an instrument under proposed
subsection 12EC(6) may be of general or limited application. This provision does not
limit subsection 33(3A) of the AIA (proposed subsection 12EC(8)).
Proposed subsection 12EC(9) places an obligation on a primary universal service
provider to meet or exceed any minimum benchmarks that are set out in an instrument
under proposed subsection 12EC(6). Failure to meet or exceed a minimum
benchmark under proposed subsection 12EC(6) would be a breach of the Consumer
Protection Act, and consequently a breach of a carrier licence condition (see clause 1
of Schedule 1 to the Tel Act and section 68 of the Tel Act) for which the standard
enforcement provisions under the Tel Act apply.
Proposed Subdivision BB - Payphone requirements
Proposed subsection 12ED Performance standards
Proposed subsection 12ED(1) enables the Minister to make a determination setting
out standards (performance standards) to be complied with in respect of the following
matters regarding payphone carriage services:
- the characteristics (such as provision of a dial tone);
- the supply, installation or maintenance of a payphone;
- the supply of a payphone carriage service;
- the reliability of a payphone;
- the reliability of a payphone carriage service;
- the maximum period within which a primary universal service provider must
rectify a fault or service difficulty to a payphone following a report;
- the maximum period within which a primary universal service provider must
rectify a fault or service difficulty to a payphone carriage service following a
report;
- the handling of requests for the removal of a payphone; and
- any other matter concerning the supply, installation or maintenance of a
payphone or the supply of a payphone carriage service.
A determination made under subsection 12ED(1) would be a legislative instrument
(subsection 12ED(6)), which means that it would be registered on the Federal
Register of Legislative Instruments and would be subject to Parliamentary
disallowance.
Proposed subsection 12ED(2) provides that the determination made under this section
can be of general or limited application. It may be necessary, for example, to limit a
standard setting out periods for rectification of faults to deal with circumstances that
are beyond the payphone carriage service provider's fault, for example due to
vandalism. Proposed subsection 12ED(3) notes that proposed subsection 12ED(2)
does not limit the application of subsection 33(3A) of the AIA.
Proposed subsection 12ED(4) places an obligation on a primary universal service
provider to comply with a determination made under proposed subsection 12ED(1).
Any breach of a determination under proposed subsection 12ED(1) would be a breach
of the Consumer Protection Act, and consequently a breach of a carrier licence
226
condition (see clause 1 of Schedule 1 to the Tel Act and section 68 of the Tel Act) for
which standard enforcement provisions under the Tel Act apply.
Proposed subsection 12ED(5) provides that a determination made under proposed
subsection 12ED(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency. Section 12H of the Consumer
Protection Act provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Universal marketing
plans and policy statements are intended to support and supplement the USO by
setting out how the provider will fulfil the obligation.
Proposed section 12EE Performance benchmarks
Proposed subsection 12EE(1) enables the Minister to make a determination setting out
standards (performance benchmarks) to be complied with in respect of the following
payphone carriage services:
- the characteristics (such as provision of a dial tone);
- the supply, installation or maintenance of a payphone;
- the supply of a payphone carriage service;
- the reliability of a payphone;
- the reliability of a payphone carriage service;
- the maximum period within which a primary universal service provider must
rectify a fault or service difficulty to a payphone following a report;
- the maximum period within which a primary universal service provider must
rectify a fault or service difficulty to a payphone carriage service following a
report;
- the handling of requests for the removal of a payphone; and
- any other matter concerning the supply, installation or maintenance of a
payphone or the supply of a payphone carriage service.
A determination made under subsection 12EE(1) would be a legislative instrument
(subsection 12EE(5)), which means that it would be registered on the Federal Register
of Legislative Instruments and would be subject to Parliamentary disallowance.
Proposed subsection 12EE(1) replicates proposed subsection 12ED(1). However, it is
anticipated that different standards (relating to performance benchmarks) would be set
in a determination under proposed subsection 12EE(1) when compared with a
determination under proposed subsection 12ED(1), as explained below.
Unlike the provisions in proposed section 12ED relating to performance standards,
there is no obligation on a primary universal service provider to comply with a
standard in force under proposed subsection 12EE(1). Proposed
subsections 12EE(10) and (11) also confirm that clause 1 of Schedules 1 and 2 to the
Tel Act do not apply to contravention of a standard in force under proposed
subsection 12EE(1). This means failure to meet a standard under proposed
subsection 12EE(1) would not be a breach of a carrier licence condition or a service
provider rule.
The standards to be specified under proposed subsection 12EE(1) are performance
benchmarks which a universal service provider should aim to achieve and by which
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minimum benchmarks can be set. There will be an obligation to meet or exceed a
minimum benchmark under proposed subsection 12EE(9). An example of how this
is intended to would work is given below, where proposed subsection 12EE(6) is
discussed.
Proposed subsection 12EE(2) provides that a determination made under proposed
subsection 12EE(1) can be of general application or limited application.
Proposed subsection 12EE(3) notes that proposed subsection 12EE(2) does not limit
the application of subsection 33(3A) of the AIA.
Proposed subsection 12EE(4) provides that a determination made under proposed
subsection 12EE(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency.
Section 12H of the Consumer Protection Act provides for universal service providers
to submit draft policy statements and draft marketing plans to the ACMA for
approval. Standard marketing plans and policy statements are intended to support and
supplement the USO by setting out how the provider will fulfil the obligation.
Proposed subsection 12EE(6) enables the Minister, by legislative instrument, to set
minimum benchmarks in relation to a standard in force under proposed
subsection 12EE(1). An example of a minimum benchmark that could be made
would be to specify the percentage of occurrences in which a primary universal
service provider is expected to meet a performance standard made under proposed
section 12EE(1). For instance, a primary universal service provider could be expected
to rectify a payphone fault within three days of that fault being reported as a standard
under proposed subsection 12EE(1). A minimum benchmark in regard to that
particular standard could be that the provider must meet the three-day fault
rectification period for at least 90 per cent of all requests in a calendar year.
A performance standard made under proposed section 12EE, which is enforced by
means of a minimum benchmark (a "benchmark standard"), should be contrasted with
a performance standard that could be made under proposed section 12ED, for which
compliance with the standard in each occurrence is made a service provider rule and a
carrier licence condition (a "direct standard"). The two types of performance standard
can co-exist, and can address the same subject matter: it would be expected that a
primary universal service provider would be expected to meet stricter requirements in
a benchmark standard than in a direct standard.
By way of example, the benchmark standard might provide that a payphone fault must
be repaired within three days of being reported. A primary universal service provider
would be required to meet this requirement in the percentage of occurrences specified
in the benchmark made by the Minister (90 per cent of requests, in the above
example). However, a direct standard could operate at the same time, providing that
for each and every payphone fault that is reported, the primary universal service
provider must rectify the payphone fault in a different period, which would be longer:
for instance, 10 days. In that case, if the provider takes 11 days to supply a service, it
is in breach of the direct standard. It may also be in breach of the benchmark, or it
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may not: that would depend on its overall performance in rectifying payphone faults
in response to reports over the course of a year.
Proposed subsection 12EE(7) confirms an instrument under proposed
subsection 12EE(6) may be of general or limited application. This provision does not
limit subsection 33(3A) of the AIA (proposed subsection 12EE(8)).
Proposed subsection 12EE(9) places an obligation on a primary universal service
provider to meet or exceed any minimum benchmarks that are set out in an instrument
under proposed subsection 12EE(6). Failure to meet or exceed a minimum
benchmark under proposed subsection 12EE(6) would be a breach of the Consumer
Protection Act, and consequently a breach of a carrier licence condition (see clause 1
of Schedule 1 to the Tel Act and section 68 of the Tel Act) for which the standard
enforcement provisions under the Tel Act apply.
Proposed section 12EF Rules about the location of payphones
Proposed subsection 12EF(1) enables the Minister to make a determination setting out
rules to be complied with in relation to the places or areas in which payphones are to
be located. A determination made under subsection 12EF(1) will be a legislative
instrument (proposed subsection 12EF(5)), which means that it would be registered on
the Federal Register of Legislative Instruments and would be subject to Parliamentary
disallowance.
Proposed subsection 12EF(2) places a positive obligation on a primary universal
service provider to comply with a determination made under proposed
subsection 12EF(1). Any breach of a determination under proposed
subsection 12EF(1) would be a breach of the Consumer Protection Act, and
consequently a breach of a carrier licence condition (see clause 1 of Schedule 1 to the
Tel Act and section 68 of the Tel Act) for which the standard enforcement provisions
under the Tel Act apply.
Proposed subsection 12EF(3) provides that if a primary universal service provider
complies with a determination made under proposed subsection 12EF(1), the provider
is taken to have complied with its obligations under paragraph 9(1)(b) and proposed
subsection 9(2A), which relate to the location of payphones. This subsection clarifies
the primary universal service provider's obligations in regard to the location of
payphones.
Proposed subsection 12EF(4) provides that a determination made under proposed
subsection 12EF(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency. Section 12H of the Consumer
Protection Act provides for universal service providers to submit draft policy
statements and draft marketing plans to the ACMA for approval. Standard marketing
plans and policy statements are intended to support and supplement the USO by
setting out how the provider will fulfil the obligation. This amendment makes it clear
that the intended purpose of these documents is to inform rather than enforce
obligations.
229
Proposed section 12EG Rules about the process for public consultation on
the location or removal of payphones
Proposed subsection 12EG(1) allows the Minister to make a determination setting out
rules to be complied with by a primary universal service provider in relation to the
process for public consultation on the location or removal of payphones. The
determination may provide for different consultation and notification processes for
different classes of payphones (see subsection 33(3) of the AIA), for example the
process may be very simple for a payphone located on privately owned land, such as a
shopping mall in a major city, while the process may be complex for a payphone
located on public land in a remote area.
Proposed subsection 12EG(2) sets out public consultation and notification
requirements that must be stipulated in a determination under proposed
subsection 12EG(1) in the event:
- a primary universal service provider makes a decision to remove a payphone
from a particular location; and
- that payphone is the only payphone at that location.
Proposed subsection 12EG(3) places an obligation on a primary universal service
provider to comply with a determination made under proposed subsection 12EG(1).
Any breach of a determination under proposed subsection 12EG(1) would be a breach
of the Consumer Protection Act, and consequently a breach of a carrier licence
condition (see clause 1 of Schedule 1 to the Tel Act and section 68 of that Act) and a
service provider rule (see clause 1 of Schedule 2 to the Tel Act, and section 101 of
that Act) for which the standard enforcement provisions under the Tel Act apply.
Proposed subsection 12EG(4) provides that a determination made under proposed
subsection 12EG(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency.
Section 12H of the Consumer Protection Act provides for universal service providers
to submit draft policy statements and draft marketing plans to the ACMA for
approval. Standard marketing plans and policy statements are intended to support and
supplement the USO by setting out how the provider will progressively fulfil the
obligation.
Proposed subsection 12EG(5) confirms that a determination under proposed
subsection 12EG(1) is a legislative instrument, which means that it would be
registered on the Federal Register of Legislative Instruments and would be subject to
Parliamentary disallowance.
Proposed section 12EH Rules about the process for resolution of complaints
about the location or removal of payphones
Proposed subsection 12EH(1) allows the Minister to make a determination setting out
rules to be complied with by a primary universal service provider in relation to
resolving complaints about the location or removal of payphones.
230
Proposed subsection 12EH(2) places an obligation on a primary universal service
provider to comply with a determination made under proposed subsection 12EH(1).
Any breach of a determination under proposed subsection 12EH(1) would be a breach
of the Consumer Protection Act, and consequently a breach of a carrier licence
condition and a service provider rule (see clause 1 of Schedule 1, clause 1 of
Schedule 2 to the Tel Act and sections 68 and 101 of that Act) for which the standard
enforcement provisions under the Tel Act apply.
Proposed subsection 12EH(3) provides that a determination made under proposed
subsection 12EH(1) will prevail over an approved policy statement or an approved
standard marketing plan, if there is any inconsistency. Section 12H provides for
universal service providers to submit draft policy statements and draft marketing
plans to the ACMA for approval. Standard marketing plans and policy statements are
intended to support and supplement the USO by setting out how the provider will
progressively fulfil the obligation.
Proposed subsection 12EH(4) confirms that a determination under proposed
subsection 12EH(1) is a legislative instrument, which means that it would be
registered on the Federal Register of Legislative Instruments and would be subject to
Parliamentary disallowance.
Proposed section 12EI Directions by the ACMA about the removal of
payphones
Proposed section 12EI contains provisions giving the ACMA the power to issue
written directions to a primary universal service provider regarding a decision to
remove a payphone from a particular location.
Proposed subsection 12EI(1) outlines the scope of proposed section 12EI, providing
that the section applies if:
- a primary universal service provider has made a decision to remove a
payphone from a particular location; and
- a person notifies the ACMA, in writing, that the person objects to the removal;
and
- the ACMA is satisfied that the removal would breach, or has breached, a
determination under proposed subsection 12EF(1) or the ACMA is satisfied
that the provider has breached a determination under proposed
subsection 12EG(1) in relation to the removal.
Proposed subsection 12EI(2) gives the ACMA the power to issue a written direction
to a provider directing the provider not to remove the payphone notified under
proposed subsection 12EI(1), in circumstances where the payphone in question has
not yet been removed.
Proposed subsection 12EI(3) gives the ACMA the power to issue a written direction
to a provider directing that the provider supply and install a payphone at the location
from which it has been removed and to do so within a specified period.
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Proposed subsection 12EI(4) provides that the period in which a payphone must be
supplied and installed as specified in a direction under proposed subsection 12EI(3)
must not be shorter than 30 days.
Proposed subsection 12EI(5) confirms that a direction under proposed
subsection 12EI(2) or (3) must not be inconsistent with a determination under
proposed subsection 12EF(1) (being a determination about the places or areas where
payphones must be located).
Proposed subsection 12EI(6) places an obligation on a primary universal service
provider to comply with a direction under proposed subsection 12EI(2) or (3). This
means a failure to comply with a direction under proposed subsection 12EI(2) or (3)
would be a breach of the Consumer Protection Act, and consequently a breach of a
carrier licence condition and a service provider rule (see clause 1 of Schedule 1 to the
Tel Act, clause 1 of Schedule 2 to the Tel Act and sections 68 and 101 of that Act) for
which the standard enforcement provisions under the Tel Act apply.
Proposed subsection 12EI(7) confirms, for the avoidance of doubt, that a direction by
the ACMA under proposed subsection 12(2) or (3) is not a legislative instrument.
Item 226 - Subsection 150(3)
Item 226 repeals subsection 150(3) of the Consumer Protection Act. That subsection,
which provided a definition for `price-related terms and conditions' with regards to
Ministerial pricing determinations, is no longer required as a result of the proposed
insertion of a definition for `price-related terms and conditions' into section 5 of the
Consumer Protection Act (refer item 215 of Schedule 1 to the Bill). The proposed
new definition of `price-related terms and conditions' will have application to the
entire Consumer Protection Act
232
Part 5--Customer service guarantee
Part 5 of Schedule 1 to the Bill amends the Consumer Protection Act relating to the
CSG. Amendments made by Part 5 provide for:
- the Minister to establish minimum CSG performance benchmarks to arrest the
decline in telecommunications service quality standards;
- the Minister to establish new CSG timeframes for connections and repair that
will apply to wholesale providers to assist retail providers of CSG services to
meet CSG service quality standards;
- clarification of CSG waiver provisions provided for under section 122 of the
Consumer Protection Act. A customer's express agreement for a waiver will
be required;
- certainty that the CSG cannot be waived for a telephone service that is
supplied in fulfilment of the USO.
Telecommunications (Consumer Protection and Service Standards)
Act 1999
Part 5 of the Consumer Protection Act establishes the CSG. Under section 115, the
ACMA makes performance standards to be complied with by CSPs relating to
customer service. If a CSP contravenes a standard, it is liable to pay damages to the
customer.
Item 227- Before section 113
As part of the amendments made by proposed Part 5 of Schedule 1 to the Bill, Part 5
of the Consumer Protection Act is restructured by creating four Divisions within
Part 5. Item 227 inserts the heading for Division 1 (Introduction) at the start of Part 5.
Item 228 - Section 113
Item 228 inserts additional points into the simplified outline of Part 5, which
summarise the amendments to be made to Part 5 by the Bill. These include enabling
the Minister to make performance standards in relation to wholesale carriage services
and to set minimum benchmarks in relation to compliance with performance
standards by CSPs.
Item 229 - After section 114
Proposed section 114A Wholesale carriage service and wholesale customer
Item 229 inserts proposed section 114A into the Consumer Protection Act, which
defines the terms `wholesale carriage service' and `wholesale customer' for the
purposes of Part 5. An example of a `wholesale carriage service' is where a CSP
purchases a carriage service, such as a wholesale line rental product, from another
provider, such as Telstra, and then on-sells a standard telephone service to a
residential or business customer. The carriage service supplied to the second provider
to resell is a wholesale carriage service and the CSP reselling the service is the
wholesale customer.
233
Item 229 also inserts a heading for Division 2 (Retail performance standards and
benchmarks) after proposed section 114A.
Item 230 - After subsection 115(2)
Currently, section 115 enables the ACMA to make performance standards relating to
customer service.
The proposed provisions to be included in proposed Division 3 of Part 5, inserted by
item 232, enable the Minister to make legislative instruments regarding wholesale
carriage services and wholesale customers and performance standards and
benchmarks.
As a consequence, item 230 inserts proposed subsection 115(2A) to make it clear that
a standard made by the ACMA under subsection 115(1) does not apply in relation to
the supply, or proposed supply, of a wholesale carriage service. As the heading
inserted by item 229 provides, section 115 will be placed under proposed Division 2
which relates to retail performance standards and benchmarks.
Item 231 - Subsections 115(5) and (6)
Item 231 repeals subsections 115(5) and 115(6) of the Consumer Protection Act and
replaces them with proposed subsection 115(5), which provides that an instrument
made by the ACMA regarding retail performance standards under subsection 115(1)
is a legislative instrument. Currently, subsection 115(5) specifies the manner in
which the date of commencement of an instrument under subsection 115(1) is
determined and current subsection 115(6) confirms that such an instrument is a
disallowable instrument. Current subsection 115(5) is no longer required as the
commencement date of a legislative instrument is determined in accordance with
section 12 of the LIA. Current subsection 115(6) is no longer required as proposed
subsection 115(5) confirms that an instrument under subsection 115(1) is a legislative
instrument.
Item 232 - After section 117A
Item 232 would insert a number of proposed sections into the Consumer Protection
Act dealing with performance benchmarks and standards made by the Minister
through a legislative instrument.
Proposed section 117B Performance benchmarks
Proposed section 117B would enable the Minister, by legislative instrument, to set
minimum benchmarks concerning compliance with a standard in force under
section 115. Section 115 provides for the making of performance standards.
Subsection 115(1) gives the ACMA the power to make standards to be complied with
by CSPs in relation to:
· the making of arrangements with customers about the period taken to comply with
requests to connect customers to specified kinds of carriage services;
· the periods that CSPs may offer to customers when making the above
arrangements;
234
· compliance by CSPs with the terms of those arrangements;
· the period taken to comply with requests to rectify faults or service difficulties
relating to specified kinds of carriage services;
· the keeping of appointments to meet customers (or their representatives, eg. family
members) about such connections and rectifications; and
· any other matter concerning the supply, or proposed supply, of a carriage service to
a customer.
Restricting minimum benchmarks under proposed section 117B to those standards
under section 115 ensures that the performance benchmarks will relate to matters that
could reasonably affect the CSP's ability to provide carrier services to a customer that
meet the performance standards.
Proposed subsection 117B(2) provides that an instrument made under this section can
be of general application or may be limited. This provision is included because an
instrument may need to recognise circumstances where certain standards should not
apply, for example in circumstances beyond the CSP's control, or where an
instrument should be limited to a specific group of CSPs.
Proposed subsection 117B(3) notes that proposed subsection 117B(2) does not limit
the application of subsection 33(3A) of the AIA.
Proposed section 117C Compliance with performance benchmarks
Proposed section 117C applies where an instrument under proposed section 117B
setting performance benchmarks applies to the CSP (known in the section as (`the
first provider').
Proposed subsection 117C(2) creates an obligation on the first provider to meet or
exceed the minimum benchmark that is set by the Minister in the proposed
section 117B instrument. This obligation is a service provider rule (see clause 1 of
Schedule 2 to the Tel Act) and is subject to the standard enforcement mechanisms in
that Act applying to service provider rules.
Proposed subsection 117C(3) has application when determining if a CSP (the first
provider) has met or exceeded a minimum benchmark set by an instrument under
proposed section 117B. If a CSP (the first provider) has contravened a standard set by
the Minister under section 115, and the contravention is wholly or partly attributable
to one or more acts or omissions of another CSP, then the first provider will not, by
operation of proposed subsection 117C(5), be taken to have contravened the standard.
It would be inappropriate to penalise the first provider for a failure to meet a
minimum benchmark if the failure to do so was caused by, or attributed to, in whole
or part, another CSP.
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Proposed Division 3--Wholesale performance standards and
benchmarks
Proposed section 117D Performance standards
Proposed section 117D would enable the Minister, by legislative instrument, to set
performance standards to be complied with by CSPs in relation to a matter that:
· concerns the supply, or proposed supply, of wholesale carriage services to a
wholesale customer; and
· is capable of affecting the capacity or ability of a wholesale customer to comply
with a standard in force under section 115 in relation to a matter concerning the
supply, or proposed supply, of a carriage service by the wholesale customer.
`Wholesale carriage service' and `wholesale customer' are defined in proposed
section 114A (see item 229).
It is intended that performance standards in relation to wholesale carriage services
will relate to matters that could reasonably affect the ability of wholesale customers to
supply carriage services to their end-users.
Proposed subsection 117D(2) provides that an instrument made under this section can
be of general application or may be limited. This provision is included because an
instrument may need to recognise circumstances where certain standards should not
apply, for example in circumstances beyond the wholesale CSP's control, or where an
instrument should be limited to a specific group of wholesale CSPs. Proposed
subsection 117D(3) notes that proposed subsection 117D(2) does not limit the
application of subsection 33(3A) of the AIA.
Proposed section 117E Performance benchmarks
Proposed section 117E would enable the Minister, by legislative instrument, to set
minimum performance benchmarks in relation to compliance by wholesale CSPs in
relation to a standard set out in an instrument made under proposed section 117D.
Proposed subsection 117E(2) provides that the instrument made under this section can
be of general application or may be limited. Proposed subsection 117E(3) notes that
proposed subsection 117E(2) does not limit the application of subsection 33(3A) of
the AIA.
Proposed section 117F Compliance with performance benchmarks
Proposed section 117F applies where an instrument under proposed section 117E
setting performance benchmarks applies to the provider. Proposed subsection 117F(2)
creates an obligation on the CSP (referred to in the section as `the first provider') to
meet or exceed the minimum benchmark that is set by the Minister in the instrument
made under proposed section 117E. This obligation is a service provider rule (see
clause 1 of Schedule 2 to the Tel Act) and is subject to the standard enforcement
mechanisms in that Act applying to service provider rules.
Proposed subsection 117F(3) has application when determining if a CSP (the first
provider) has met or exceeded a minimum benchmark set by an instrument under
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proposed section 117B. If a CSP (the first provider) has contravened a standard set by
the Minister under section 115, and the contravention is wholly or partly attributable
to one or more acts or omissions of another CSP, then the first provider will not, by
operation of proposed subsection 117F(5), be taken to have contravened the standard.
A new heading for Division 4 (Other provisions) is inserted after proposed
section 117F.
Item 233 - At the end of subsection 118(1)
Item 234 - At the end of paragraph 118(3)(a)
Section 118 of the Consumer Protection Act enables the ACMA to give a CSP
remedial directions about compliance with performance standards. Items 233 and 234
make consequential amendments to section 118 to enable remedial directions to be
given relating to compliance with wholesale performance standards made under
proposed section 117D.
Item 235 - Subsection 120(4)
Section 120 of the Consumer Protection Act enables the ACMA to make an
instrument which makes provision for customers of CSPs to waive their protections
and rights under Part 5 of that Act.
Item 235 would repeal subsection 120(4) and substitute additional requirements for
waivers under this Part.
The proposed amendments require the waiver to be in the form specified in the
instrument (proposed subsection 120(4)), to include a statement that summarises for
the customer the consequences of agreeing to the waiver (proposed
subsection 120(5)), and provide that the waiver cannot be contained in a standard
form of agreement (proposed subsection 120(6)). These changes aim to provide
customers with an opportunity to consider the effect of waiving their rights, and the
ability to make an informed choice. It is intended that a customer who is provided
services by a CSP under a standard form of agreement could still waive the CSG, but
the CSP would need to obtain the consent through use of a separate document that
includes a consumer warning of the consequences of waiving their rights.
Proposed subsection 120(7) provides that a customer cannot waive their rights, in
whole or in part, under Part 5 of the Consumer Protection Act for services supplied in
fulfilment of the USO. Any waiver that is provided in respect of these services will
have no effect. This provision is intended to ensure universal service providers
cannot supply a standard telephone service in fulfilment of the USO on the condition
that the customer waives their CSG rights.
Proposed subsection 120(8) would replace current subsection 120(4) with an updated
requirement that an instrument made by the ACMA setting out rules for waive under
subsection 120(1) would be a legislative instrument.
237
Item 236 - After section 120
Item 236 inserts proposed section 120A into the Consumer Protection Act.
Proposed section 120A Carriage service may be supplied on condition that
the customer waives the customer service guarantee
Proposed section 120A clarifies that the Consumer Protection Act does not prevent a
CSP from supplying a particular carriage service to a customer on the condition that
the customer provides a waiver, in accordance with section 120, in relation to the
carriage service. The reference to a waiver in accordance with section 120 makes it
clear that this provision does not override proposed subsection 120(7) which provides
that a customer cannot waive their CSG rights for services supplied in fulfilment of
the USO.
Item 237 - Section 122
Item 237 makes a consequential amendment to section 122 of the Consumer
Protection Act to include a reference to proposed section 117D. This amendment is
necessary as a result of item 232 to ensure a breach of a performance standard under
proposed section 117D is not an offence.
Item 238 - After section 122
Proposed section 122A Failure to meet or exceed a minimum benchmark is
not an offence
Item 238 inserts proposed section 122A into the Consumer Protection Act which
would make it clear that a failure to exceed a minimum performance benchmark
under proposed section 117C or 117F is not an offence.
Item 239 - At the end of section 123 (before the note)
Item 239 makes a consequential amendment to section 123 of the Consumer
Protection Act to include a reference to proposed section 117D. This amendment is
necessary as a result of the insertion of a new section 117A by item 232. This
amendment will ensure a breach of a performance standard under proposed section
117D does not create a liability for civil penalties. This contrasts with proposed
sections 117B and 117E where a service provider's breach would contravene
proposed sections 117C and 117F respectively and would expose the service provider
to civil penalties under section 101, and clause 1 of Schedule 2 to the Tel Act.
Item 240 - Application--waiver
Item 240 makes it clear that any amendments made to section 120 of the Consumer
Protection Act will only apply to waivers given after the commencement of the
provisions in Part 5 of Schedule 1 to the Bill. Therefore, a CSP who obtains a waiver
prior to the commencement of the new provisions will not have to comply with the
new obligations set out in the amendments made to section 120 of the Consumer
Protection Act by the Bill in relation to that waiver.
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Part 5A - Record-keeping rules
Telecommunications Act 1997
Part 5A of Schedule 1 to the Bill contains four items (241-244) which amend Part 27
of the Tel Act. Part 27 of the Tel Act concerns the ACMA's information gathering
powers, and enables the ACMA to make record-keeping rules that apply to carriers
and CSPs. Part 5A of Schedule 1 to the Bill will broaden the ACMA's record-keeping
powers.
Item 241- After subsection 529(2)
Item 241 amends section 529 of the Tel Act by inserting proposed
subsections 529(2A)-(2F). Subsection 529(1) of the Tel Act permits the ACMA to
make rules, known as record-keeping rules, requiring specified carriers and CSPs or
specified classes of carriers and CSPs, to keep and retain records.
The proposed amendments to section 529 broaden the scope of this provision to allow
the ACMA to require records to be kept, and also to require that reports be prepared
on the basis of information in those records, and to require that those reports be given
to the ACMA. These amendments will allow the ACMA to gain information about
carriers' and CSPs' compliance with their obligations and will enable the ACMA to
use this information for the enforcement of obligations.
Proposed subsection 529(2A) allows the ACMA to make rules which may require
those carriers or CSPs to prepare reports consisting of information contained in the
records kept and retained under subsection 529(1).
Proposed subsection 529(2B) ensures that the reports can be given to the ACMA, and
proposed subsection 529(2C) enables the ACMA to specify the manner and form in
which the reports are prepared. The ACMA will also be able to make rules specifying
the preparation of reports as and when required, or that reports are to be provided on a
periodic basis under proposed subsection 529(2D).
The ACMA may also make rules requiring that information provided in accordance
with specified software requirements and authentication requirements be given to the
ACMA in a specified kind of device or by way of a specified kind of electronic
transmission: proposed subsection 529(2E).
Proposed subsection 529(2F) provides, for the avoidance of doubt, that proposed
subsections 529(2) to (2E) do not limit subsection 529(1).
Item 242- Paragraphs 529(4)(a) and (b)
Item 242 repeals and replaces paragraphs 529(4)(a) and (b) of the Tel Act, which
provide limitations on the power of the ACMA to make record-keeping rules. As a
result of this amendment, the ACMA cannot make record-keeping rules requiring the
keeping or retention of records unless the records contain, or will contain, information
that is relevant to the performance of the ACMA's telecommunications functions or
the exercise of the ACMA's telecommunications powers.
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The terms `ACMA's telecommunications functions' and `ACMA's
telecommunications powers' are defined in section 7 of the Tel Act.
This amendment will permit the ACMA to make record-keeping rules in relation to a
much broader range of topics than is currently permitted under subsection 529(4), and
is intended to assist the ACMA to effectively enforce the Tel Act and the Consumer
Protection Act, including those new provisions introduced by the Bill.
Item 243 - At the end of section 529
Proposed subsection 529(5), inserted by item 243, provides that section 529 does not
limit section 521 of the Tel Act. Section 521 provides for general information
gathering powers of the ACMA.
Item 244 - Transitional--record-keeping rules
Item 244 ensures the continuity of any current record-keeping rules by including a
transitional provision.
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Part 6--Priority assistance
Part 6 of Schedule 1 to the Bill introduces a new service provider rule in Schedule 2
to the Tel Act requiring CSPs to either offer a priority assistance service in
accordance with the registered industry code on priority assistance or inform
customers of the providers from whom they can obtain such a service if they require
it. Telstra will remain bound by its current carrier licence condition requiring it to
provide priority assistance services.
Telecommunications Act 1997
Item 245 - At the end of Schedule 2
Item 245 inserts proposed Part 6 into Schedule 2 to the Tel Act to include a new
standard service provider rule concerning priority assistance. Priority assistance is
where the telephone company provides the highest level of telephone connection and
fault repairs practically available at the time to an identified customer because a
person at the residence has a life-threatening medical condition and is at risk of
suffering a rapid, life threatening deterioration in their condition.
While Telstra is currently the only CSP that is required through a licence condition to
provide priority assistance, some other CSPs voluntarily offer priority assistance
services in accordance with the priority assistance industry code.
Proposed Part 6--Priority assistance
Proposed clause 16 Simplified outline
Proposed clause 16 provides a summary of the effect of proposed Part 6 of Schedule 2
to the Tel Act, which is to require CSPs to either offer a priority assistance service
that complies with the industry code or to inform customers of providers from whom
the customer can obtain a priority assistance service, if they require it. Proposed Part 6
of Schedule 2 to the Tel Act is being inserted to ensure that customers with
life-threatening medical conditions are informed of the existence of priority assistance
to enable them to purchase a service that is suitable for their needs.
Proposed clause 17 Priority assistance industry code
Proposed clause 17 provides that references in proposed Part 6 of Schedule 2 to the
Tel Act to the `priority assistance industry code' means a code that is either entitled
`Priority Assistance for Life Threatening Medical Conditions' and is registered under
Part 6 of the Tel Act (which provides for the registration by the ACMA of industry
codes), or a replacement to that code that is registered under Part 6 of the Tel Act. The
`Priority Assistance for Life Threatening Medical Conditions' code is an industry
code currently registered with the ACMA under section 117 of the Tel Act. The code
specifies minimum standards for the supply of priority assistance to customers and
aims to ensure that all suppliers provide customers with information about whether
they offer priority assistance.
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Proposed clause 18 Compliance with the priority assistance industry code
Proposed clause 18 provides that a CSP must comply with the priority assistance
industry code to the extent it is applicable to that provider. The code does not require
CSPs to offer priority assistance but requires those CSPs who choose to offer priority
assistance to meet minimum industry standards. The code also sets minimum
standards relating to customer information practices for those CSPs who choose not to
offer priority assistance. Proposed clause 18 makes compliance with the industry
code a service provider rule, for those providers to whom it is applicable.
Proposed clause 19 Information for prospective residential customers of a
carriage service provider who does not offer priority assistance
Proposed clause 19 requires CSPs that do not offer a priority assistance service to
provide specific information to prospective residential customers.
Proposed subclause 19(1) provides that this clause apply to a CSP if the provider
receives an inquiry from a prospective residential customer about the supply of a
standard telephone service and where the provider does not offer priority assistance in
connection with the service. A prospective residential customer is intended to mean a
person who has advised a CSP that they wish to become a customer for a standard
telephone service but for whom supply of that service by the relevant carriage
provider has not yet commenced (for example a new rather than existing customer).
The reference to a residential customer is intended to include customers at individual
private residences, and also customers at locations such as nursing homes or hospices,
being places where people reside. It does not include commercial customers.
`Standard telephone service' is defined in section 7 of the Tel Act as having the same
meaning given by section 6 of the Consumer Protection Act.
If proposed subclause 19(1) applies, then the provider must inform the prospective
residential customer that it does not offer priority assistance in connection with the
service, and must inform the prospective customer of the names of one or more CSPs
from whom the customer can obtain priority assistance in connection with a standard
telephone service. This requirement would also apply in the circumstance where
priority assistance is not available for the particular type of standard telephone service
product the customer is enquiring about. It is intended that under subclause 19(2) the
CSP would bring to the attention of the customer other standard telephone service
products that that same CSP can supply that do include priority assistance.
Proposed subclause 19(3) makes it clear that `priority assistance' in this clause has the
same meaning as in the priority assistance industry code. In section 3.2 of the `Priority
Assistance for Life Threatening Medical Conditions' code (ACIF C609:2007)
`Priority Assistance' means the provision of the highest level of service practically
available at that time supplied to Provisional Priority Customers and Priority
Customers in relation to new connections, fault repairs and service reliability of the
standard telephone service (STS) at the Provisional Priority Customer's or Priority
Customer's place of residence. Section 4 of the priority assistance industry code sets
out the minimum standards providers must meet to comply with the code in relation to
new connections, fault repairs and service reliability. If a replacement code is
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registered by the ACMA, `priority assistance' in subclause 19(3) will have the same
meaning as in that replacement code.
Proposed clause 20 Requirements for Telstra
Proposed clause 20 makes it clear that Part 6 of Schedule 2 to the Tel Act does not
impose any requirements on Telstra, if clause 19 of the Carrier Licence Conditions
(Telstra Corporation Limited) Declaration 1997 is in force. This is because Telstra,
under that Declaration, is the only CSP required to provide priority assistance services
to its customers as a condition of its carrier licence. Under the licence condition,
Telstra must have an effective policy for offering priority assistance services to people
who have a life-threatening medical condition.
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Part 7--Infringement notices etc.
The amendments proposed under Part 7 of Schedule 1 to the Bill establish an
infringement notice regime to deal with breaches of civil penalty provisions of the Tel
Act, the Consumer Protection Act, and Chapter 5 of the Interception Act.
Division 1 - Amendments
Telecommunications Act 1997
Item 246- Section 7
Item 247 - Section 7
Item 248 - Section
Items 246-248 amend section 7 of the Tel Act to insert certain definitions for the
purposes of the other amendments made to that Act by Part 7 of Schedule 1 to the
Bill.
An `authorised infringement notice officer' is defined in this section as the Chair of
the ACMA, or a member of the ACMA staff who is appointed under proposed
section 572L. This amendment ensures that only persons authorised in writing can
issue infringement notices for the purposes of this proposed Part.
The term `infringement notice' is defined to mean an infringement notice issued under
proposed section 572E, which enables the ACMA to issue infringement notices as a
means of dealing with breaches of civil penalty provisions.
Item 248 inserts a new definition of `penalty unit' in section 7 of the Tel Act. The
term is defined as having the meaning given by section 4AA of the Crimes Act 1914,
which currently provides that one penalty unit equates to $110.
Item 249 - After Part 31A
Proposed Part 31B--Infringement notices for contraventions
of civil penalty provisions
Item 249 inserts proposed Part 31B into the Tel Act. Proposed Part 31B provides for
a scheme under which authorised officers may issue infringement notices for
contraventions of civil penalty provisions in relation to certain contraventions of the
Tel Act, the Consumer Protection Act, and the Interception Act.
Proposed section 572D Simplified outline
Proposed section 572D provides a short summary of the effect of proposed Part 31B,
which is to set up a system of infringement notices for contraventions of civil penalty
provisions. This will enable a more efficient means of dealing with certain civil
penalty provisions as an alternative to instituting court proceedings for recovery of a
pecuniary penalty.
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Proposed section 572E When an infringement notice can be given
Proposed section 572E sets out when an infringement notice may be issued. It
provides that an infringement notice may be issued by an `authorised infringement
notice officer' (the Chair of the ACMA or a member of the ACMA staff appointed
under proposed section 572L, see the definition of this term inserted in section 7 by
item 246), if he or she has reasonable grounds to believe that a person has
contravened a particular civil penalty provision. It is noted that authorised
infringement notice officers in the ACMA will not be permitted to issue infringement
notices in relation to contravention of the Tel Act that concerns a licence condition
relating to a voluntary undertaking under proposed Part 33 of the Tel Act.
An infringement notice must be given within 12 months of the alleged contravention
(proposed subsection 572E(2)).
Compliance with each provision of the Tel Act (and with the Consumer Protection
Act and Chapter 5 of the Interception Act) is a condition of a carrier licence and a
service provider rule (see clause 1 of Schedule 1 to the Tel Act and clause 1 of
Schedule 2 to the Tel Act). However, certain provisions of the Tel Act and the
Consumer Protection Act provide explicit civil penalty provisions that are not
enforced by means of carrier licence conditions or service provider rules (see
subsection 570(6) of the Tel Act). Proposed subsection 572E(3) mirrors the operation
of subsection 570(6), and provides that, if conduct constitutes a contravention of a
carrier licence condition or a service provider rule (sections 68 and 101 of the Tel
Act), and one or more other civil penalty provisions, an infringement notice must not
be given to the person in relation to the contravention of section 68 or 101, as the case
may be.
Certain provisions have been excluded for the purposes of the infringement notice
scheme under proposed subsection 572E(4). These provisions have been listed as
exempt because they are provisions that are more appropriate for the ACCC or
another agency to enforce. This is modelled broadly on subsection 571(3) of the Tel
Act.
Proposed subsection 572E(5) provides that an infringement notice must not be issued
in relation to contraventions of sections 68 or 101 and of a carrier licence condition in
`this Act' (`this Act' includes the Tel Act, the Consumer Protection Act and
regulations under that Act and the Interception Act - see proposed
subsection 572E(8)) other than Part 1 of Schedule 1 to the Tel Act, a carrier licence
condition under section 63, a service provider rule in `this Act' other than Part 1 of
Schedule 2 to the Tel Act, or a service provider rule under section 99, unless it has
been declared as a listed infringement notice provision that has been listed for at least
three months before the contravention is alleged to have taken place. This proposed
provision ensures that certain contraventions must be listed by the ACMA before they
are actionable under these infringement notice provisions (proposed
subsection 572E(7) describes how the ACMA will list a provision). However, this
provision does not limit the ability of an authorised infringement notice officer to
enforce other civil penalty provisions.
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Part 1 of Schedule 1 to the Tel Act includes a carrier licence condition requiring a
carrier to comply with each provision of the Tel Act (and with the Consumer
Protection Act and Chapter 5 of the Interception Act). Part 1 of Schedule 2 to the Tel
Act includes a similar service provider rule. Proposed subsection 572(6) provides that
an infringement notice must not be issued in relation to contraventions of section 68
or 101 and of the carrier licence condition set out in Part 1 of Schedule 1 to the Tel
Act, or the service provider rule in Part 1 of Schedule 2 to the Tel Act, unless the
particular provision of the Tel Act, or of the Consumer Protection Act, or of Chapter 5
of the Interception Act, to which the contravention relates is a listed infringement
notice provision that has been listed for at least three months before the contravention
is alleged to have taken place.
Proposed subsection 572E(7) provides for the ACMA to declare certain provisions as
listed infringement notice provisions. The ACMA may make a legislative instrument
which declares that either a specified provision of this Act, a specified provision of a
declaration in force under section 63, or a specified provision of a determination in
force under section 99, is a listed infringement notice provision. By listing these
provisions, the ACMA can then follow the procedure under proposed
subsection 572E(6) or (7) to issue an infringement notice if a provision is
contravened.
To ensure infringement notices only apply to provisions that are appropriate for this
type of enforcement measure, it is expected that the ACMA will undertake
consultations with the Attorney-General's Department and the Department of
Broadband, Communications and the Digital Economy and will have regard to the
matters raised in the Guide to Framing Commonwealth Offences, Civil Penalties and
Enforcement Powers published by the Attorney-General's Department (this document
is available on the Attorney-General's Department website), or any subsequent
guidance issued by the Attorney-General's Department.
It should also be noted that the Minister for Broadband, Communications and the
Digital Economy has the power under section 14 of the Australian Communications
and Media Authority Act 2005 to give written directions to the ACMA in relation to
the performance of its functions and the exercise of its powers.
Proposed subsection 572E(8) requires the ACMA, before making or varying a
declaration under proposed subsection 572(7) to publish on its website a notice which
details the draft declaration or variation and invite submissions from the public (the
standard timeframe for responses will be within 14 days after the notice was
published). The ACMA will also be required to consider any submissions received
within the 14-day period.
Proposed subsection 572E(9) indicates that references in proposed section 572E to
`this Act' include the Consumer Protection Act and regulations under that Act as well
as Chapter 5 of the Interception Act.
Proposed section 572F Matters to be included in an infringement notice
Proposed section 572F sets out the matters which must be included in an infringement
notice. In particular, it provides that an infringement notice must:
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- set out the name of the person to whom the notice is given, that is the person
who has allegedly contravened the designated infringement notice provision;
- set out the name of the authorised infringement notice officer who gave the
notice. It is anticipated that as a matter of administrative practice the
authorised infringement notice officer would sign the notice;
- set out brief details of the alleged contravention(s). It must include the date on
which the contravention is alleged to have occurred and the particular
designated infringement notice provision that was allegedly contravened (see
proposed subsection 572F(2));
- set out that the Federal Court will not deal with the matters in the infringement
notice if the penalty is paid to the ACMA within the notified period (either
28 days after the notice is given or longer, if an extension of time for payment
is granted by the ACMA);
- explain how the penalty may be paid; and
- set out other matters (if any) which are specified in the regulations.
Proposed subsection 572F(2) provides that the notice must include the date of the
alleged contravention and the specific civil penalty provision that was contravened, as
part of the brief details about the alleged contravention (under proposed
paragraph 572(1)(c)). This does not limit the details which may be included under this
proposed section.
Proposed section 572G Amount of penalty
Proposed section 572G sets out the amount of the penalty that is to be set out in an
infringement notice. The penalty payable will depend upon whether or not the
contravention is by a body corporate or a person other than a body corporate.
Under proposed subsection 572G(2), the Minister may make a legislative instrument
which sets out one or more contraventions of sections 68 and 101 and specifies for
each kind of contravention, the number of penalty units that will apply. Proposed
subsection 572G(3) provides that the maximum penalty that may be specified by the
Minister for a body corporate under proposed subsection 572G(2) must not exceed
18,000 penalty units (currently around $2 million).
If the infringement notice is given to a body corporate, and the alleged contravention
is of a kind specified under proposed subsection 572G(2), the number of penalty units
for the pecuniary penalty will be the number specified in the determination made
under that subsection. Otherwise, if the penalty is not specified in the determination,
the penalty is 60 penalty units (currently $6,600).
It is intended that the Minister would specify the provisions to be subject to higher
pecuniary penalty amounts where it is likely that the lower amount of 60 penalty units
would provide insufficient deterrent for large telecommunications carriers or CSPs to
comply with the provision. It is standard practice for an infringement notice amount to
not exceed one-fifth of the penalty otherwise applying. The maximum civil penalty
for breach of a carrier licence condition or service provider rule is $10 million (see
subsection 570(3)). Accordingly, the maximum penalty that may be determined for a
particular contravention is limited to 18,000 penalty units.
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In any other case for infringement notices provided to a person other than a body
corporate, the penalty is 12 penalty units (currently $1,320).
Proposed section 572H Withdrawal of an infringement notice
Proposed section 572H provides that an authorised infringement notice officer (the
Chair of the ACMA or a member of the ACMA staff appointed under proposed
section 572L, see definition in section 7 inserted by item 246) may withdraw an
infringement notice that has been given to a person in relation to a contravention of a
civil penalty provision. The withdrawal notice must be in writing and issued within
28 days after the infringement notice was given (proposed subsections 572H(2) and
(3)).
A withdrawal of a previously issued infringement notice may be considered, for
example, where further evidence has come to light since the issuing of the
infringement notice, that suggests that a person has not contravened a designated
infringement notice provision, or alternatively, where further evidence suggests that
the breach is more serious than initially believed and consequently would be more
appropriately dealt with by a court rather than an infringement notice.
If an infringement notice is withdrawn after the penalty specified in the notice has
already been paid, then the Commonwealth is liable to refund this amount (proposed
subsection 572H (4)).
Section 28 of the Financial Management and Accountability Act 1997 provides for
the appropriation of the Consolidated Revenue Fund for the purposes of paying such a
refund.
Proposed section 572J What happens if the penalty is paid
Proposed section 572J provides that if a person has been given an infringement notice
and the penalty has been paid in accordance with the notice, and the infringement
notice has not subsequently been withdrawn, then any liability of the person for the
alleged contravention is discharged.
The ACMA cannot institute proceedings under Part 31 of the Tel Act for any alleged
contravention of a civil penalty provision which has already been dealt with by way of
an infringement notice (proposed subsection 572J(3)).
Proposed section 572K Effect of this Part on civil proceedings
Proposed section 572K clarifies the operation of the infringement notice provisions in
relation to civil proceedings, and specifically provides that nothing in proposed
Part 31B:
· requires an infringement notice to be given in relation to an alleged
contravention of a civil penalty provision--the decision about whether to issue
an infringement notice is at the discretion of the authorised infringement
notice officer; or
· affects the ability of a person to have court proceedings brought against them
under Part 31 of the Tel Act if the person does not comply with an
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infringement notice, or if an infringement notice is not given to a person, or if
an infringement notice is withdrawn before payment of the penalty is made; or
· limits the Federal Court's discretion to determine the amount of a penalty to
be imposed on a person who is found in proceedings under Part 31 of the Tel
Act to have contravened a civil penalty provision.
Proposed section 572L Appointment of authorised infringement notice officer
Proposed section 572L enables the ACMA to appoint, in writing, a member of the
ACMA staff as an authorised infringement notice officer for the purposes of proposed
Part 31B. Proposed subsection 572L(2) limits the staff that can be appointed as an
authorised infringement notice officer to SES employees or acting SES employees or
to staff that hold, or are acting in, Executive Level 1 or 2, or equivalent positions. An
authorised infringement notice officer is able to issue infringement notices under
proposed Part 31B (under proposed section 572E), and may withdraw notices
(proposed section 572H).
In addition to those staff specifically appointed as authorised infringement notice
officers under proposed section 572L, the Chair of the ACMA is an authorised
infringement notice officer for the purpose of proposed Part 31B (see the definition of
`authorised infringement notice officer' that is included in section 7 of the Tel Act
made by item 246).
Proposed section 572M Guidelines relating to infringement notices
Proposed section 572M provides that authorised infringement notice officers must
have regard to any relevant guidelines (in force under proposed subsection 572M(2))
when exercising powers under proposed Part 31B. Proposed section 572Mis modelled
on section 215 of the Broadcasting Services Act 1992. The intention of this provision
is to ensure that those likely to be subject to infringement notices will be able to
conduct their affairs with greater certainty to avoid liability.
The ACMA may develop guidelines in relation to the use of its enforcement powers,
including in relation to issuing infringement notices (proposed subsection 572M(2)).
The guidelines are not intended to be prescriptive or limiting. The ACMA will retain
the discretion to seek the sanctions it considers appropriate in light of the particular
circumstances of the case. The guidelines may include general guidance on the
ACMA's enforcement options and other matters that the ACMA considers relevant.
Where the ACMA develops guidelines under proposed section 572M, these
guidelines must be in the form of a legislative instrument. In accordance with the
requirements of the LIA, the ACMA is expected to consult publicly before issuing the
guidelines, to ensure that industry and consumer groups are able to contribute to the
process.
Proposed subsection 572M(3) provides that an authorised infringement notice officer
must not give an infringement notice to a person unless guidelines are in force under
proposed subsection 572M(2). This means that an authorised infringement notice
officer cannot issue an infringement notice unless and until the ACMA makes
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guidelines, and that if at any point there are no such guidelines in force (i.e. if the
ACMA repeals the guidelines without replacing them), then no notice can be issued.
Proposed section 572N Regulations
Proposed section 572N provides that the regulations may make further provision in
relation to infringement notices. A general regulation-making power is provided in
section 594 of the Tel Act.
Division 2 - Application
Item 250 - Application--infringement notices
This item makes it clear that proposed section 572E will only apply in respect of
contraventions of civil penalty provisions that occur after the commencement of this
section. This means that an authorised infringement notice officer could not issue
infringement notices for contraventions of civil penalty provisions which occurred
before the commencement of this provision. This item commences the day after the
Act receives the Royal Assent (see clause 2 of the Bill).
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Part 8--Civil penalty provisions
Telecommunications Act 1997
Part 8 of Schedule 1 to the Bill makes one amendment to section 7 of the Tel Act.
Item 251 - Section 7 (definition of civil penalty provision)
Item 251 substitutes a new definition of `civil penalty provision' in section 7 of the
Tel Act to simplify and clarify the definition.
Currently, a `civil penalty provision' is a provision that is listed in the section 7
definition.
Item 251 provides a different approach in which each `civil penalty provision' in the
Tel Act and the Consumer Protection Act will be expressly declared to be a civil
penalty provision.
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Part 9--Industry standards
Telecommunications Act 1997
Part 9 of Schedule 1 to the Bill makes two amendments to Part 6 of the Tel Act,
relating to industry standards. There are two new items in Part 9 of Schedule 1 to the
Bill: items 252 and 253.
Item 252 - Subsection 112(2)
Item 253 - After section 125
Item 252 makes a change to the statement of regulatory policy at section 112 of the
Tel Act, necessary as a result of the inclusion of proposed section 125AA by
item 253.
Proposed section 125AA ACMA must determine an industry standard if
directed by the Minister
Currently Part 6 of the Tel Act provides that the ACMA may determine an industry
standard in the following circumstances:
- if the ACMA makes a request under subsection 118(1) of the Tel Act for an
industry code to be developed, and that request is not complied with (section
123);
- if there is no industry body or association formed to develop an industry code
(section 124);
- where an industry code fails (section 125).
Proposed subsection 125AA(4) provides that the Minister can direct the ACMA to
determine an industry standard that applies to participants in a specified section of the
telecommunications industry, and that deals with one or more specified matters
relating to the telecommunications activities of those participants.
The ACMA is given the power to determine an industry standard in accordance with
such a direction under proposed subsection 125AA(1). Note (1) to proposed
subsection 125AA(1) notes that section 113 of the Tel Act provides examples of
matters that may be dealt with by an industry standard. In relation to variations and
revocations by the ACMA, Note (2) to proposed subsection 125AA(1) refers to
subsection 33(3) of the AIA.
The ACMA may only exercise the power to determine an industry standard under
proposed subsection 125AA(1) in accordance with a direction from the Minister
under proposed subsection 125AA(4) (see proposed subsection 125AA(5)). This
ensures that, except where directed to determine an industry standard by the Minister,
the ACMA will only be able to determine an industry standard in the limited
circumstances currently set out in Part 6 of the Tel Act.
This amendment addresses concerns that in some cases industry codes developed
under Part 6 by an industry body may not sufficiently address relevant issues,
particularly those relating to consumers' interests. It also addresses concerns that
enforcement arrangements for industry codes may not provide sufficient compliance
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incentives. The amendment provides an avenue for the Minister to ensure that
industry standards are determined where these sorts of problems occur. Compliance
with an industry standard is required by section 128 of the Tel Act, which is a civil
penalty provision. In practice, the power to direct the ACMA to determine an
industry standard may not be used if an industry code adequately deals with the issues
and there is general compliance with the relevant code.
If there is an industry body or association that represents that section of the
telecommunications industry, the ACMA must consult that industry body or
association before determining a standard in accordance with a direction from the
Minister (proposed subsection 125AA(3)).
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