Bills Digest no. 46 2005–06
Telecommunications Legislation Amendment (Competition and
Consumer Issues) Bill 2005
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Passage History
Telecommunications
Legislation Amendment (Competition and Consumer Issues) Bill
2005
Date Introduced: 7 September 2005
House: Senate
Portfolio: Communications, Information
Technology and the Arts
Commencement: Various
This Bill amends the Telecommunications Act 1997 ( the
Telecommunications Act ) and the Trade Practice Act
1974 ( the TPA ).
The significant elements are:
- providing for Telstra to develop a plan for the operational
separation of its network, wholesale and retail business units
(schedule 11). Ostensibly, this is the most important part of this
regulatory package
- making changes to parts XIB and XIC of the TPA
- increasing the penalty for breach of competition rule (schedule
4)
- providing for enforcement of conditions and limitations that
apply to exemptions fro the standard access obligations (schedule
5)
- providing for revocation and variation of class exemptions from
the standard access obligations (schedule 6)
- giving power to the Australian Competition and Consumer
Commission (ACCC) to be able to make procedural rules (schedule
7)
- amending the objects of Part XIC (schedule 9)
- allowing for interim determinations in access disputes ACCC and
consultation (Schedule 12)
- encouraging any-to-any connectivity (schedule 8)
- facilitating regulation of the telecommunications industry by
the Australian Communications and Media Authority (ACMA)
- providing for enforceable undertakings (schedule 10)
- providing for remedial directions (schedule 13)
- other changes
- repealing the requirement for carriers to have industry
development plan (schedule 1)
- clarifying the powers of the ACMA in relation to enforcement of
industry codes (schedule 2)
- making changes to the Numbering Plan; consultation (schedule
3)
This is one of 5 interdependent Bills related to the sale of the
Commonwealth s interest in Telstra. Other Bills deal with:
- the sale of the Commonwealth s interest in
Telstra(1)
- the Future Fund proposed to be set aside from the sale proceeds
to provide for regional services(2)
- the appropriation of funds to provide such services
independently of the Fund(3), and
- other measures concerning the funding of industry
codes.(4)
Three elements of the Bill stand out. The requirement that
Telstra develop a plan for the operational separation of its
network, wholesale and retail business units has the potential to
yield the greatest changes to the regulatory landscape.
However, two other ostensibly innocuous, but important, changes
are those made to the existing telecommunications-specific access
and anti-competitive conduct schemes in parts XIC and XIB of the
TPA. First, the amendments require the ACCC to have regard to
Telstra s compliance with its operational separation obligations
when it acts under parts XIB and XIC. This has the potential to
undermine the effectiveness of those parts of the Act. This is
because this requirement is capable of meaning that, when
exercising power under parts XIB and XIC, the ACCC must be more
lenient with Telstra if Telstra complies with its operational
separation obligations.
Secondly, schedule 9 makes potentially significant changes to
the matters to be considered in working out the meaning the meaning
of long-term interests of end users ( LTIE ). The promotion of the
LTIE is a guiding principle in this part of the TPA.
According to the Explanatory Memorandum these Bills set the
regulatory framework for Telstra, and the industry generally, in
anticipation of, and following, the sale of the Commonwealth s
remaining shares in Telstra Corporation. For instance, the
Explanatory Memorandum states:
One of the objectives of conducting this examination at this
time is to have a settled and effective regulatory regime in place
well in advance of the possible sale of Telstra. This would provide
certainty for the financial market in the lead-up to a possible
sale and reassure those markets that the Government would not
toughen up the regulatory regime post sale. (5)
This Digest deals with the elements of the Bill in the same
order as the Explanatory Memorandum. Concluding Comments will be
made, as appropriate, within the discussion of each schedule.
The operational separation framework is intended to address
practical difficulties in the administration of the existing
telecommunications-specific regulatory regimes in Parts XIB and XIC
the TPA.
Schedule 11 aims to achieve the outcome of separating, in a
largely unspecified manner, the business units of Telstra. The
expressed object of separating Telstra is to promote the principle
of equivalence in the terms of supply by Telstra, of a limited set
of services, to Telstra s retail business and Telstra s wholesale
business customers (that is, its retail competitors). Equivalence
is intended to be achieved by allowing scrutiny of the terms,
including price, on which Telstra supplies those wholesale services
to itself. This will enable the ACCC to assess whether Telstra is
engaging in anti-competitive conduct in relation to the supply of
those wholesale services.
Separation is intended to be achieved by the imposition of a
licence condition on Telstra. The licence condition will require
Telstra to prepare an operational separation plan . Despite
statements to the contrary in the Explanatory
Memorandum,(6) the legislation does not impose any
particular model of separation, of which there are many, on
Telstra. Rather, the model chosen by Telstra must be developed with
the goal of satisfying a set of loosely expressed objects set out
in the Bill. These objects are mentioned at page 9 of this
Digest.
In addition to a list of objects , this part of the Bill also
has an aim which is materially different from its object. The aim
is to promote principles of transparency and equivalence in
relation to the supply by Telstra of eligible
services.(7) This may be contrasted with the first
object which is to promote a principle of equivalence in
relation to the supply by Telstra of designated services
to Telstra s wholesale customers and Telstra s retail business
units.
The Bill thus makes a distinction between eligible
services and designated services. The difference
between eligible services and designated services
is critical to the scope of the scheme. This is dealt with below in
the section headed Comments on the Bill .
The detail of the process by which the plan is developed is set
out below at page 9 .
Telecommunications services could be provided entirely by
Telstra in much the same way as it had done prior to deregulation
when Telstra (then Telecom) was the only domestic service provider.
However, both Labor and Coalition governments have supported
measures to introduce competition into telecommunications markets.
A recent Productivity Commission Report(8) cites a 2003
study by the Allen Consulting Group in which it is estimated that
competition in telecommunications markets may have contributed $12
billion to Australia s GDP (to 2003).
In broad terms, competition in telecommunications can be at the
infrastructure level (called facilities-based competition ) and at
the services level. Competition at the facilities level involves
the construction of competing infrastructure. Services competition
involves the provision of wholesale or retail services using the
infrastructure of others.
The introduction of competition into the telecommunications
market was not, and is not, free from difficulty. There are
features of telecommunications markets that, in the absence of
effective regulation, give an incumbent provider the ability, and
incentive to hinder competition.
Telstra controls much of the telecommunications infrastructure
which competitors must either duplicate, or have access to, in
order to deliver services to users. The customer access network is,
with the exception of a few CBDs and a handful of regional centres,
controlled by Telstra. In general terms, the access network
consists of part of the network which connects the customer s
premises to the local exchange. In addition, Telstra owns much (but
certainly not all) of the transmission network which connects the
local exchange back to the core network or to another operator s
network. This is particularly so outside of metropolitan areas
where competition is less strong.
The cost of duplicating infrastructure particularly the access
network is a significant barrier to entry in most markets and
therefore a significant impediment to facilities-based competition
. This feature, alone, give Telstra considerable market power in
many wholesale markets.
Compounding the challenge posed by Telstra s power over these
important elements of the physical network is that it is vertically
integrated. That is, it operates at a retail level and competes
against the same competitors to which, as network owner and
wholesaler, it sells access. This vertical integration creates the
ability and, critically, the incentive, for it to favour its own
interests over those of its competitors. For instance, Telstra
might do this by; providing services to its own retail division on
better terms than those on which it provides the same services to
competitors: it might provide the same service at a price which is
notionally lower than its external wholesale price, or it might
provide the same services at a different standard or provide
services to itself which it does not provide to competitors.
Telstra therefore has both the ability to favour itself
(through its ownership of the essential elements of the
infrastructure) and the incentive (because of its vertical
integration) to favour its own interests.
That Telstra might be able to do this is not consistent with the
intention of competition principles, the general thrust of which is
supported by both major parties.
The regulatory response to the natural monopoly that Telstra has
in these critical network elements is the access regime. The
scheme, in Part XIC of the TPA, provides for regulated access by
competitive service providers to the infrastructure of other
carriers like Telstra.
This is supplemented by a legislative scheme, in Part XIB of the
TPA, which regulates anti-competitive conduct.
There is a popular view that, despite these measures, Telstra
continues to favour its own downstream retail operations over its
competitors. Such behaviour may or may not be unlawful,
anti-competitive conduct under Part XIB of the TPA. However, even
if it is anti-competitive, there are practical difficulties in
assessing Telstra s behaviour because of the lack of transparency
in the way in which Telstra supplies services to itself. This is
due, not least to the fact that Telstra does not actually sell
services to its retail operation. Accordingly, there are, in fact,
no actual, legally binding, terms of supply as there are for third
parties.
The various forms of separation are intended to address these
practical difficulties in the administration of Parts XIB and XIC
the TPA by promoting the principle of equivalence : that is, by
promoting equivalence in the terms of supply by Telstra, of a
limited set of services, to Telstra s retail business and Telstra s
wholesale business customers (ie its retail competitors).
Equivalence is intended to be achieved by allowing scrutiny of the
terms, including price, on which Telstra supplies those wholesale
services to itself. This will enable the ACCC to assess whether
Telstra is engaging in anti-competitive conduct in relation to the
supply of those wholesale services. In the words of Mr Graeme
Samuel, the ACCC Chairman:
separation is simply designed to produce some transparency in
the dealings between Telstra's wholesale division and its retail
businesses, and then to ensure that there is some equivalence of
dealing in those dealings between its wholesale and retail
businesses and Telstra's other wholesale customers. Now, that
process is very important to us in being able to determine whether
or not Telstra is engaging in anti-competitive
conduct(9).
Many models of separation have been proposed for Telstra:
accounting separation , operational separation and structural
separation are terms that have gained some currency in the debate
about the regulation of Telstra. These form a spectrum of models
with different combinations of characteristics.
At one end of the spectrum are models relying on accounting
separation. Such a model has been in place for some time but this
was unsuccessful in yielding relevant information in the required
form to the ACCC. The failure of accounting separation led to calls
for some kind of actual, rather than notional, separation
requirement.
At the other end are the models denoted by the expression
structural separation . These are typically characterised by the
separation of Telstra into distinct corporate entities. There are
variations within the structural separation models, with some
models requiring, for instance, that there be no common directors
and with restrictions on common ownership.
The models called operational separation comprise the many
models that fall into the broad space between accounting
separation, which the Government admits has failed, and structural
separation.
It is important to recognise that there is no generally accepted
nomenclature in this area.(10) One person s operational
separation is another s structural separation. When asked, in a
Senate committee hearing, about a particular combination of
characteristics, described as operational separation, Telstra s
then head of Regulatory Affairs, Mr Bill Scales, said that it
looked more like structural separation: if it looks like a duck,
walks like a duck and quacks like a duck then it is a duck. This to
me is structural separation under another name. (11)
Some of the characteristics of the different models that have
been suggested include:
- a requirement that the wholesale/network and retail businesses
to deal with each other on a commercial, arms length basis,
including explicit pricing, invoicing and billing
- that the business units maintain fully separate accounts and
financial and non-financial reporting systems capable of capturing
all transactions between the businesses
- that the business units maintain separate staff at all levels,
and
- that the business units maintain separate premises and IT
systems
The value of separation lies in the extent to which each model
lessens both the ability to discriminate and the
incentive to do so. Structural separation at least a model
with separate boards and ownership is the model said to be most
likely to be achieve this policy goal. One reason is simply that
corporations law would require each separate business to be
operated by their boards in the interests of their respective
shareholders. This would tend to militate against the possibility
of preferential terms being offered to Telstra s retail arm. Any
model not relying on this mechanism will need to have, in addition
to elements designed to ensure transparency, some other elements to
lessen the incentives for discriminatory behaviour. The
use of management performance schemes which are tied to the
performance of business units rather than the company have been
suggested as an answer to this problem.
The
Bill s Scheme for Telstra s separation, in broad terms
The Bill does not impose separation on Telstra. The mechanism by
which separation is to be achieved is by the imposition of a
licence condition on Telstra. The licence condition will require
Telstra to prepare an operational separation plan . Despite
statements to the contrary in the Explanatory Memorandum, the
legislation does not impose any particular model of separation on
Telstra. Rather, the model chosen by Telstra must be developed with
the goal of satisfying the following set of loosely expressed
objects set out in the Bill:
- the promotion of a principle of equivalence in relation to the
supply by Telstra of designated services to Telstra s
wholesale customers and Telstra s retail business units
- to require Telstra to maintain at least one wholesale business
unit, retail business unit and key network services business
unit
- to promote a substantial degree of organisational and
operational separation between Telstra s wholesale business units
(considered as a group), retail business units (considered as a
group) and key network services business units (considered as a
group)
- to promote responsiveness by Telstra in meeting its wholesale
customers needs in relation to eligible services
(importantly, eligible services are different from designated
services mentioned in the first dot point); and
- to require Telstra to have a plan (to be known as the final
operational separation plan ) to achieve the aim and other objects
of this Part
- to ensure that Telstra has systems, procedures and processes
that promote and facilitate;
- compliance with the final operational separation plan
- the monitoring of, and reporting on, compliance with the
plan
- the development of performance measures relating to compliance
with the plan, and
- audit, and other checks, of compliance with the plan.
- to ensure that the achievement of the aim and objective of this
Part does not impair Telstra s ability to compete on a fair and
efficient basis.
The scheme does not expressly require Telstra to comply with the
final separation plan and it is not a condition of its carrier
licence that it does.
The mechanism by which the scheme aims to induce compliance is
by way of the rectification plan . If Telstra contravenes the final
separation plan, the Minister may require Telstra to produce a
rectification plan which, in general terms, is a plan explaining
how Telstra proposes to fix its own contravention of the final
separation plan. The scheme requires Telstra to comply with the
rectification plan.
In general terms, the schemes for both the separation plan and
the rectification plan allow for the development and variation of a
draft plan, by Telstra, in co-operation with the Minister. Through
this process of development and revision, the draft plans are
intended to lead to the plans becoming a final separation plan or a
final rectification plan as the case may be. The scheme provides
for the Minister to have a degree of control over the development
of the plans by Telstra. The Minister can accept or not accept
proposals by Telstra to vary the plans and the Minister can direct
Telstra to make variations to the plans.
The following paragraphs set out the detail of the operation of
the provisions dealing with the separation and rectification plans.
The references to clauses are to those in new Part 8 of schedule 1
of the Telecommunications Act 1997.
A distinction is drawn between the aim and objects of the
separation scheme. Another distinction is made between the
treatment of wholesale eligible services (that is, all carriage
services ) and designated services which is a subset of eligible
services. Designated services are those services specified by the
Minister as such (new clause 50A).
For wholesale eligible services the aim (as distinct from the
object ) is to promote principles of transparency and equivalence
in relation to the supply of those services by Telstra.
For designated services the object is to promote a principle of
equivalence in relation to the supply of those services by Telstra.
It can be seen that, in relation to designated services , the
object is not concerned with transparency, unlike the position in
relation to eligible services .
An object in relation to eligible services is to promote
responsiveness by Telstra in meeting its wholesale customers needs
in relation to those services.
It may be noted in both cases that the aim and object is not to
require equivalence or even to promote
equivalence but to promote the principle of
equivalence.
The distinction between a legislative aim and a legislative
object is not clear. However, an object has force as an
interpretative aid under the Acts Interpretation Act
1901.
After the Bill receives Royal Assent, the Minister will
determine which wholesale services will be subject to an obligation
of equivalence: that is, which services will be designated services
(section 50A). The Minister may also make a determination about the
requirements of the draft separation plan that Telstra is
to produce (new subclause 51(d)).
Ninety days after the date fixed by Proclamation (which is to be
no more than six months after the Bill receives Royal Assent),
Telstra is to prepare a draft separation plan and give it
to the Minister (new clause 52).
Prior to giving the draft separation plan to the
Minister, Telstra must publish a preliminary version of the
draft separation plan on its website and invite comments
by the public. Thirty days are to be allowed for comments which are
to be submitted to the Minister with the draft plan
(new clause 503). Neither Telstra nor the Minister
are required to have regard, or respond to, the comments.
When the Minister receives the draft separation plan
(and any comments from the public) the Minister must either approve
or refuse to approve the plan. If the Minister does not make a
decision within ninety days, the draft separation plan is
taken to be approved and becomes a final separation plan
(new subclause 54(5)).
If the Minister does not accept the draft separation
plan, the Minister can direct Telstra to prepare a variation of the
draft separation plan (new subclause
54(8)). There is no time specified for the Minister to
give such a direction. Telstra must make the variation to the
draft separation plan and give it to the Minister within
sixty days of the direction (subclause 54(8)).
If the Minister accepts the draft plan and the
variation, if there is one, the plan becomes a final separation
plan (new clause 55). The plan is not a
legislative instrument (subclause 55(2)). This is
important and is discussed below at page 18 .
There is no express requirement for Telstra to comply with the
final separation plan and compliance with it is not a licence
condition (new subclause 55(3)). This is different
from the express obligation to comply with the final rectification
plan in new clause 65 (see below at page 12 ).
Once the plan becomes a final separation plan and is in force,
Telstra may give the Minister a draft variation of the
final separation plan (new subclause 56(1)).
Telstra must put the draft variation to the final
separation plan on its website and allow twenty days for people to
comment on it (new clause 57).
The Minister can accept the draft variation of the
final separation plan or reject it (new subclause
56(2)). If the Minister does not make a decision within
ninety days, the Minister is taken to have accepted the
draft variation.
The Minister may also direct Telstra to prepare a draft
variation of the final separation plan (new clause
56A). Telstra has sixty days to prepare the draft
variation. The Bill is silent about whether the Minister can accept
or reject to draft variation prepared in response to the
direction. This would appear to be a drafting flaw. It can be
contrasted with the Minister s power to direct Telstra to vary the
draft separation plan under new subclause
51(8). In that case the direction is to actually vary, not
to prepare a draft variation . The use of the words draft variation
suggest that the Minister ought have the power not to accept the
draft variation even though it is prepared at the Minister s
direction.
Once a final separation plan is in place, there is no express
obligation to comply with it. Furthermore, the final separation
plan is expressed to be not a licence condition (new
subclause 55(3)).
However, if Telstra contravenes the final separation plan, the
Minister may direct Telstra to prepare a draft rectification plan
(new subclauses 60(1) & (2)). The purpose of a
rectification plan is for Telstra to set out the ways in which it
is going to deal with its own contravention of the final separation
plan. If the Minister does direct Telstra to produce a draft
rectification plan, Telstra has ninety days to give the draft plan
to the Minister (new subclause 60(3)).
After the Minister receives the draft rectification plan, the
Minister must decided whether to accept or not accept it
(new subclause 61(5)). If the Minister does not
make a decision within ninety days, the draft rectification plan is
taken to be approved and becomes a final rectification plan
(new subclause 61(5)).
If the Minister does not accept the draft rectification plan,
the Minister can direct Telstra to prepare a variation of the draft
rectification plan (new subclause 61(8)). There is
no time specified for the Minister to give such a direction.
Telstra must make the variation to the draft rectification plan and
give it to the Minister within 60 days of the direction
(new subclause 61(8)).
If the Minister accepts the draft rectification plan and the
variation, if there is one, the plan becomes a final rectification
plan (section 62). The plan is not a legislative
instrument (new subclause 62(2)). This is
important and is discussed below at page 18 .
Once the draft rectification plan becomes a final rectification
plan and is in force, Telstra must comply with it (new
clause 65). This is in contrast with the final separation
plan for which there is no requirement to comply. However, the Bill
is silent about whether Telstra must comply with the plan as a
condition of its licence. This in contrast with the position in
relation to the final separation plan, where compliance is
expressly stated not to be a licence condition. According to
principles of statutory interpretation, this express exclusion in
the case of the separation plan implies that compliance with the
rectification plan is a licence condition. However, this is not
free from doubt. Much turns on this as licence conditions are
enforceable under other provisions of the Telecommunications
Act.
There is no requirement for Telstra to publish the final
rectification plan on its website.
Once the plan becomes a final rectification plan and is in
force, Telstra may give the Minister a draft variation of
the final rectification plan (new subclause
63(1)). Telstra is not required to put the draft
variation to the final separation plan on its website as it does in
relation to the separation plan variations (new clause
57). The Explanatory Memorandum is silent about the reason
for this difference in treatment.
The Minister can approve Telstra s draft variation of
the final rectification plan or not approve it (new
subclause 63(2)). If the Minister does not make a decision
within 90 days, the Minister is taken to have approved the
draft variation.
The Minister may also direct Telstra to prepare a draft
variation the final rectification plan (new clause
64). Telstra has 60 days to prepare the draft
variation. The Bill is silent about whether the Minister can accept
or reject the draft variation prepared in response to the
direction but presumably the Minister could give a further
direction if the draft variation was not satisfactory. This can be
contrasted with the Minister s power to direct Telstra to vary the
draft separation plan under new subclause
54(8). In that case the direction is to actually vary, not
to prepare a draft variation . The use of the words
draft variation suggest that the Minister ought have the
power to not accept the draft variation even though it is
prepared at the Minister s direction.
The operational separation plan is to include provisions
requiring Telstra to report (new subclause
51(1)(b)), to arrange for auditing (new subclause
51(1)(c)) and to comply with other requirements specified
by the Minister (new subclause 51(1)(d)). The
requirements to report and to arrange auditing could have been
imposed directly on Telstra rather than via the more circuitous
route of imposing a obligation under the plan.
The Minister is to conduct a review of the operational
separation scheme before 1 July 2009 (new section
61A of the Telecommunications Act).
New sections 151CP and 152EQ of the Bill
require the ACCC to have regard to Telstra s conduct in complying
with the operational separation requirements when the ACCC performs
a function or exercises a power under Parts XIB and XIC of the
TPA.
The legislation merely provides a framework for the development
of a separation plan by Telstra. In its expressed aim and objects
(in new subclause 48(1) of new Part 8 of Schedule 1 of the
Telecommunications Act) and in the expectations expressed
in the Explanatory Memorandum it appears to promise much. However,
the Bill gives minimal guidance about the type of separation model
that might be developed. Rather, the Bill requires that the
separation plan satisfy the expressed objects and aim of the Bill
each of which is expressed at a fairly high level of
abstraction.
The following matters could influence the effectiveness of the
separation scheme and suggest that the achievement of the intent of
separating Telstra will depend very much on the co-operation of
Telstra and the exercise of Ministerial powers:
- objects and aims which are expressed with a high level of
abstraction
- limited application of equivalence requirement to designated
services
- gaming opportunities
- Telstra s approach to its obligation to prepare a Local
Presence Plan (LPP)
- no incentives to comply
- unclear powers of enforcement
- public scrutiny plans are not legislative instruments, and
- the interaction of the operational separation regime and Parts
XIB and XIB is likely to lead to a weakening of the latter
Parts.
The Bill does not prescribe a particular model of separation but
rather requires that Telstra s separation plan be directed towards
the achievement of the aim and objects of [the separation scheme]
(new paragraph 51(1)(a)).
When read with the aim and objects of the separation scheme,
however, this substantive obligation is uncertain. Taking the first
object (in new paragraph 48(2)(a)) of the
separation scheme as an example, the substantive obligation is that
Telstra s separation plan must be directed towards the achievement
of the promotion of the principle of equivalence. As a
matter of statutory interpretation, the meaning of this obligation
is far from clear and, as a practical matter, it will be difficult
to assess what is required for Telstra to comply with this
obligation. A clearer statement that Telstra s obligation is to
supply services on equivalent terms may have been more
appropriate.
A related issue is that the scheme has both an aim and
objects. The inclusion of both an aim and objects is
unusual and it is unclear why this legislative device has been
used. As a matter of statutory interpretation, the use of different
terms strongly suggests that they have different meanings. What
that difference might be is not clear. Objects clauses are common
and can be used to aid in the interpretation of provisions that are
unclear. Clauses setting out the aim of legislation are
less common and their status uncertain.
It is notable that the aim clause and the first object clause
are not entirely consistent. The inconsistency arises because the
aim clause is directed towards promoting the principle of
equivalence in relation to wholesale eligible services . The first
object clause, however, is directed towards promoting the principle
of equivalence in relation to designated services . Eligible
services and designated services are different as designated
services are likely to form a much smaller class than eligible
services . Much may therefore turn on the relative status of the
aim and objects clauses when consideration is given to Telstra s
obligations in relation to services which are eligible but not
designated services. This is an issue that may need to be
considered by courts in the future.
Assuming that the objects and the aim are not of equal status,
the distinction between designated services and eligible services
becomes critical to the scope of the separation scheme. The object
of equivalence is relevant only to designated services. In
relation to eligible services the principal obligation
appears to be that Telstra is to endeavour to be responsive to
wholesale customers needs (without necessarily providing
equivalence in the supply of those services.). The meaning of
responsive to wholesale customers needs is not clear. Consequently,
there are likely to be substantial practical difficulties for a
party to establish that this principle is not satisfied.
The Minister, in consultation with Telstra or alone, must
determine which services are designated services. No
consultation is required with, for instance, the ACCC. The services
specified must be active declared services within the meaning of
section 152AR of the TPA unless the services are included in the
first such Ministerial determination or if Telstra consents to the
inclusion of other services. No variation to the determination is
permitted without Telstra s consent. Active declared services are
those declared services that are already being provided. A
declared service is a service which has been declared by
the ACCC to fall within the regulatory net of the access regime in
Part XIC.
The probable effect of this provision is that, after the
Minister makes the first determination of designated services that
is, services in relation to which equivalence is required no new
services will fall within the equivalency requirement. These would
include the new services that can be expected to be provided over
so-called next generation networks .
One part of the Explanatory Memorandum says that the
Bill is a response to the problem of regulatory gaming. However,
separation scheme set out in this Bill provides more opportunities
for such gaming.
Gaming describes behaviour whereby a person takes advantage of
rules or procedures to delay, alter or prevent decisions by
regulators. The Explanatory Memorandum notes that, it is difficult
to establish parties intent to the point of establishing whether or
not they are behaving in a vexatious manner. For this reason the
preferred approach is to focus on removing the opportunities for
gaming. (12)
The Explanatory Memorandum identifies the existing undertakings
process as providing some opportunities for gaming;
There are concerns that access providers are gaming the access
undertaking process by knowingly lodging incomplete or otherwise
unacceptable access undertakings in order to delay ACCC
consideration of access disputes and therefore the possibility of
binding ACCC decisions on access disputes in favour of access
seekers.(13)
The Explanatory Memorandum further states;
Despite the amendments made to the access regime in 2002, the
ACCC and several access seekers have reported that the operation of
the access regime continues to be affected by the problem of delay,
and by the problem of gaming of the regulatory arrangements (on
legal process as well as substance) particularly by access
providers. This has meant that the indicative six month timeframe
for the resolution of access disputes and consideration of
undertakings introduced in 2002 has rarely been met and is often
extended by considerable periods.(14)
Other parts of the Bill address these kinds of gaming problems.
However, the operational separation scheme creates further gaming
opportunities.
Because of the nature of the regulatory scheme, access providers
(of which Telstra is the most significant) have the greatest
incentives for regulatory gaming.
Telstra has publicly stated that it does not want to separate
its business divisions and, indeed, that it cannot see the reason
for it and regards it as a bit like a solution looking for a
problem .(15) Under a scheme that has unclear
enforcement mechanisms, and no explicit incentives for compliance,
Telstra could respond to the requirements in this Bill by looking
for opportunities to game the process.
The opportunities for gaming in the development of the
separation plan are manifold and include, for instance;
- lodging an incomplete or unacceptable draft separation plan or
final separation plan. This is an example given by the Explanatory
Memorandum of the kind of gaming that already occurs in relation to
undertakings(16)
- failing to respond adequately to Ministerial directions to vary
the draft separation plan or draft rectification plan, or
- drafting the obligations in the plan in such a way that
compliance is difficult to assess. Obligations could be framed
imprecisely or in terms that Telstra use its reasonable endeavours
to do something.
Further, the process of preparing the draft separation plan,
waiting for Ministerial scrutiny, acting on directions to vary the
plan and initiating variations of its own could have many
iterations and involve long delays unless Telstra co-operates or
the Minister s exercises powers firmly and unambiguously.
In the event that a satisfactory final separation plan emerges
from this process, the implementation of the plan could present
further opportunities for gaming.
In the end, it can be expected that the separation plan will
take a long time to develop and longer again to implement.
Telstra s response to its obligation to produce a Local Presence
Plan(17) (LPP) in rural, regional and remote Australia
may provide an indication of the way in which both Telstra and the
Minister will act in relation to the separation plan. A draft plan
was given to the Minister in September 2005.
What is notable about the draft LPP is that it is not drafted so
as to express clear rights and obligations. Rather it is largely
drafted as a collection of statements of fact, principle and
intent. This is an example:
4.4 Mobile services
Telstra provides a wide range of mobile, mobile satellite and
mobile data services across regional Australia. As at the date of
publication our regional mobile network covers approximately 1.6
million square kilometres and 98.3 per cent of the population.
General information about our mobility services is available
at:
http://www.telstra.com.au/mobile/index.htm
In many rural locations the network has been expanded through
joint initiatives with the Australian Government. A total of 187
communities have received new or improved coverage as a result of
funding from programs arising out of the Telecommunications Service
(Besley) Inquiry. A further 62 communities will receive coverage
under the $15.6 million mobile contract resulting from the Estens
Inquiry. An additional 2,000 kilometres of coverage has been
provided for major highways from these Government programs, in
addition to Telstra-funded initiatives.
Telstra currently provides indicative information online on
likely mobile coverage across Australia at: http://www.telstra.com.au/mobile/networks/coverage/index.htm
Telstra publishes a review of its mobile performance against
commitments in the Telstra Customer Service Charter. This is
available online at: http://www.telstra.com.au/charter.
(18)
In the absence of any clear statement of Telstra s obligations,
the plan is incapable of enforcement.
If the LPP signals the manner in which Telstra might approach
the drafting of the separation plan then it would appear that the
separation plan process could be lengthy. Certainly, if the final
separation plan follows this model, it will be difficult to enforce
and will lead to regulatory uncertainty. Much will depend on how
the Minister s powers are used to shape the terms of the separation
plan.
Although the legislative schemes under which the local presence
plan and the separation plan are made is different, the Minister s
response to this draft local plan may provide some indications
about the degree of rigour that the Minister requires in these
plans.
It is expressly stated in the Bill that:
- the final operational separation plan
- a variation of the final operational separation plan, and
- the final rectification plan
are not legislative instruments under the
Legislative Instruments Act (clauses 55(2), 56(10), and
62(2)).
Under the Legislative Instruments Act 2003 (Cth),
legislative instruments are:
- registered on the Federal Registrar of Legislative Instruments
in order to be enforceable
- tabled in Parliament, and
- subject to scrutiny and disallowance by Parliament.
It is often clear whether an instrument has the requisite
legislative character (19) to be a legislative
instrument, but this is not always so. For this reason, the Senate
Committee on Regulations and Ordinances has recommended that, where
a subordinate instrument is expressed not to be a legislative
instrument under the Legislative Instruments Act, the
Explanatory Memorandum should explain the reason for this.
The Explanatory Memorandum for the Bill does not satisfy the
Committee s requirement because it does not offer a reason for why
these plans are not legislative instruments for the purposes of the
Legislative Instruments Act. The Explanatory Memorandum
does, however, explain why other instruments are
legislative instruments. For instance, it says:
Directions given by the ACCC under the amendments in Schedule 11
are specified not to be legislative instruments for the purposes of
the LIA (since the making of a direction subject to merits review
would generally not be considered to be legislative in character
for the purposes of the LIA).(20)
The reason why these are not treated as legislative instruments
must be that the plans will not satisfy the definition of
legislative instrument set out in section 5 of the Legislative
Instruments Act. This provides that a legislative instrument
must have a legislative character .
The effect of the separation and rectification plans not being
legislative instruments is that they need not be tabled in
Parliament and are not subject to disallowance.
The legislation could require the tabling of the separation and
rectification plans even though they are not legislative
instruments. For example, section 158Q of the
Telecommunications Legislation Amendment (Future Proofing and
Other Measures) Bill 2005(21) requires the Minister
to table, in both Houses of Parliament, the report of the Regional
Telecommunication Independent Review Committee (RTIRC). Similarly,
the Government s response to the report must be tabled. In this
Bill, not only are the separation plan and the rectification plan
not legislative instruments, but they are not required to be
tabled.
New sections 151CP and 152EQ
of the Bill require the ACCC to have regard to Telstra s conduct in
complying with the operational separation requirements when the
ACCC performs a function or exercises a power under Parts XIB and
XIC of the TPA. Although appearing to be innocuous, these
provisions have the potential to undermine the operation of Parts
XIB and XIC. This is because it would appear that the ACCC is
required to apply Parts XIC and XIB less strictly where Telstra is
complying with its obligations under the separation regime. Given
that Telstra s obligations under the scheme are not clear and that
it will be difficult to assess whether it is complying with them,
the application of these two provisions is likely to present
problems for the ACCC.
If the separation model produces the intended outcome of
equivalence , that may not be, on balance, a poor outcome. But the
potential weakening of Part XIB and XIC in circumstances in which
separation does not achieve the aim of equivalence must mean that
there is a general erosion of the regulatory regime. This could set
the foundations for a lessening of competition.
This Bill was introduced into the Senate on Thursday, 8
September 2005 and passed with little debate on Wednesday, 14
September 2005. Parts of the Bill appear to have been drafted or at
least inserted late in the process. For instance, a new Part of the
Act contains provisions numbered 50, 50A, 50B and 50C. These would
normally be numbered 50-54 in a new Part of the Act. This suggests
that changes may have been hastily inserted just prior to
introduction. Further, the inclusion of a definition of a term
which is not otherwise used in the Bill points to the same
conclusion: section 50C speaks of notional contracts but that term
nor any like it, is used in the Bill.
Currently, under section 151BX of the TPA the Federal Court can
impose a penalty for breach of a competition rule which does not
exceed $10 million for each contravention and $1 million for each
day that the contravention continues.
According to the Explanatory Memorandum these existing penalties
are not considered to provide a sufficient deterrent to larger
telecommunications companies.(22) Therefore, the Bill
proposes an increase in the per day penalty from $1 million to $3
million where the contravention continues for more than 21
days.
As noted in the Committee Report of the recent Senate Inquiry
into the Telstra (Transition to Full Private Ownership)
Bill 2005 and other related bills, the ACCC welcomes
these increased penalties.
Under sections 152AS, 152ASA, 152AT and 152ATA of the TPA, the
ACCC has the power to exempt individual or a specified classes of
carriers or carriage providers from their standard access
obligation (SAO) (as created by section 152AR of the TPA). The
exemption is to be made by the ACCC in form of a written
determination or order. Exemptions granted by the ACCC may be
unconditional or may contain conditions or limitations which have
to be specified expressly in the determination or order.
Under the current regime, the standard access obligations can be
enforced against carriers or carriage providers by the Federal
Court. Under section 152BB of the TPA, the Federal Court has the
power not only to enforce compliance with the standard access
obligation, but also to order payment of compensation to those
affected by a violation of the standard access obligations or may
make any other order it thinks appropriate. Application to the
court may be made by the ACCC or a person whose interests are
affected by the contravention.
Schedule 5, item 6 will insert proposed
new section 152BBAA which will enable the Federal Court,
in addition to its existing powers, to make orders with respect to
breaches of conditions or limitations imposed upon exemptions by
the ACCC. Like existing section 152BB, the new provision will allow
the court to enforce compliance (in this instance with a condition
or limitation on the exemption), but also to order payment of
compensation to those affected by a violation of the standard
access obligations or may make any other order it thinks
appropriate. Application to the court may be made by the ACCC or a
person whose interests are affected by the violation of the
condition or limitation.
The proposed amendments will ensure that sections 152BB and
152BBAA will not limit each other in their application. New
subsection 152BBAA(3) will provide that this
proposed new section will not limit the operation of section 152BB.
In turn, schedule 5, item 5 will insert
new subsection 152BB(3) which will provide that
that section will not limit the operation of new section
152BBAA. This will clarify and ensure that potential
complainants against carriers or carriage providers can proceed
with their complaint either:
- under section 152BB to enforce compliance with the standard
access obligation, or
- under new section 152BBAA to enforce compliance with the
condition.
In other words, it provides potential complaints against
carriers and carriage providers with a choice as to the cause of
action they may want to take.
Under sections 152AS and 152ASA of the TPA, the ACCC has the
power to grant ordinary and anticipatory class exemptions from the
standard access obligations.
Schedule 6, items 1 and 2
propose to add notes to sections 152AS and 152ASA which will
clarify that the ACCC s power contained in these sections has to be
read in light of subsection 33(3) of the Acts Interpretation
Act 1901. This provision stipulates that:
Where an Act confers a power to make, grant or issue any
instrument (including rules, regulations or by‑laws) the
power shall, unless the contrary intention appears, be construed as
including a power exercisable in the like manner and subject to
the like conditions (if any) to repeal, rescind, revoke, amend, or
vary any such instrument. (emphasis added)
Accordingly, the power to make the determination to exempt
carriers or carriage service providers carries with it not only the
power to make the determination itself, but also the power to make
other, related determinations, including, for example,
determinations to vary a condition or limitation and to revoke the
determination. However, these other or related determinations must
be made by the ACCC and they must be made in a similar manner and
subject to similar conditions as those expressly referred to in
sections 152AS and 152ASA. Before the ACCC can vary a condition of
an exemption, it must follow the procedure set out in these
sections, including conducting a public consultation process (as
specified in subsections 152AS(5) and 152AS(11)). The ACCC has to
be satisfied that the variation is in the long-term interest of
end-users (see discussion in relation to Schedule 9 of this
Bill).
Schedule 7 of the Bill makes amendments to
allow the ACCC to make Procedural Rules which set out practices and
procedures that it will follow. These rules are intended to lessen
the rigidity in the ACCC s current processes and to reduce the
resultant opportunities for industry participants to take advantage
of these features to delay or frustrate decisions of the ACCC that
might be unfavourable to them (that is, to engage in gaming ).
For example, where a person wants to vary something that they
have put before the ACCC for consideration (for instance, an
application for an exemption from the standard access obligation or
a variation of an undertaking), such application or variation may
require the ACCC to start the whole process including public
consultation again as if the application or variation were a new
one. If several variations are made in succession, substantial
delays may accrue. The Bill deals with such situation by allowing
the ACCC to determine in the Procedural Rules the kinds of things
that will be regarded as minor modifications and which are not to
be regarded as new applications.
Another example is where the ACCC requests further information
about a matter such as undertaking or a variation to an
undertaking. Where insufficient information is given in response to
such are request, further requests may need to be made, so delaying
the relevant decision. The Bill attends to this problem by allowing
the ACCC to specify in its Procedural Rules the time within which
information is to be provided and allows the ACCC to refuse the
application if the information is not provided in time.
Schedule 7 also makes provision for the ACCC to
make Procedural Rules about the manner in which it will deal with
undertakings that are received in relation to a matter that is
already the subject of an access dispute. Such rules, if made, will
displace the provisions in the Act which deal with the exercise of
this discretion. This will allow the ACCC to deal more flexibly
with situations where, for instance, it currently delays
consideration of access disputes to consider undertakings (and
perhaps variations of undertakings) which are lodged deliberately
to delay the ACCC s consideration of the dispute.
Schedule 9 of the Bill sets out amendments to section 152AB of
the TPA. Subsection 152AB(1) sets out the object of the access
regime in Part XIC. It provides:
The object of this Part is to promote the long‑term
interests of end‑users of carriage services or of services
provided by means of carriage services.
Subsection 152AB(2) sets out some of the factors that go towards
assessing whether something meets this objective. Presently, these
include whether the thing furthers the object of:
- promoting competition
- promoting achieving any-to-any connectivity
- encouraging the efficient use of infrastructure
To this list of considerations, schedule 9 adds the following
further requirement;
- encouraging the efficient investment in
infrastructure.
It is likely that this amendment will have an effect on
decisions on access pricing. If access prices are too low, there
may be insufficient incentive for infrastructure providers to
invest in new infrastructure. Similarly, for access seekers, low
access prices tip the balance in favour of accessing the
infrastructure of others rather than building their own
facilities.
Thus, the new requirement that regard must be had to whether a
thing encourages efficient investment in infrastructure is likely
to put upward pressure on access prices. This would arise, for
instance, when the ACCC considers access prices in undertakings
given by access providers.
In evidence to the Senate Committee on the amendment, Mr David
Havyatt, Head of Regulatory Affairs for AAPT Ltd, made the
following observation:
That amendment would mean that every interconnection agreement
every regulated service that is in place in the regulatory regime
would immediately be recontested by Telstra. They would take the
issues to the Australian Competition Tribunal and they would be
arguing for prices that are as much as twice the existing
interconnection prices. It would take us back to all the issues
that we were discussing in 2002 before the Australian Competition
Tribunal. It is not a minor amendment; it has had no public
consultation; there has been no advice from the ACCC about what
they think the impact of that amendment would be.
(23)
AAPT Ltd s submission to the Committee also addressed this
point:
Schedule 9 of the [Bill] introduces an amendment that
fundamentally changes the application of the test, though
departmental officers apparently believe it is an innocuous
clarification.
AAPT submitted at length on the question of whether the regime
adequately compensated for investment and risk, and concluded it
did:
The current amendment, especially when read in conjunction with
the Explanatory Memorandum, would have the consequence of
justifying Telstra being compensated for its investment, the risk
on new investment, and the cost of stranding its existing
investment when the new investment is made.
All the competitive benefits would be lost and most competitors
would exit the market. (24)
Division 8 of Part XIC of the TPA is concerned with the
resolution of access disputes. Section 152CP provides that where
there is a dispute over access to a declared service, the ACCC must
make a written determination on access.(25)
The ACCC will not be required to consult with the parties to an
access dispute when making or varying an interim determination if
certain conditions are met. These are that the ACCC has determined
pricing principles or model terms and conditions in relation to the
declared service (under section 152AQA or 152AQB respectively) and
the terms and conditions of the interim determination are
consistent with those pricing principles or the model terms and
conditions as the case may be.
This represents an abridgement of the usual requirements for
procedural fairness. However, it only applies to an interim
determination. An interim determination does not terminate
arbitration.
However, the ACCC must still make a final determination in an
access dispute. The full requirements for procedural fairness apply
in respect of a final determination.
Subsection 152AQA(4) provides that, before the ACCC determines
pricing principles under subsection 152AQA(1), it must publish a
draft determination, invite comments on the draft and take those
comment into consideration.
The aim of the amendment is to streamline the ACCC s process in
relation to interim determinations with the goal of resolving
access disputes in a more timely fashion. Parties still retain an
opportunity to be heard on price-related terms and conditions in
respect of the development of determinations on pricing principles
and/or model terms and conditions.
The current position is that the maximum duration of an interim
determination is 12 months and there is no power to extend this
period. The amendments provide for the interim determination period
to be extended.
Part XIC of the TPA sets out provisions relating to the
telecommunications access regime. Subsection 152AB(1) provides that
the object of Part XIC is:
to promote the long-term interests of end-users of carriage
services or of services provided by means of carriage services
Subsection 152AB(2) of the TPA provides that in relation to
determining if a thing is in the long term interest of end users of
listed services, regard must be had to, amongst other things:
the objective of achieving any-to-any connectivity in relation
to carriage services that involve communication between
end-users.
Subsection 152AB(8) provides that the:
objective of any-to-any connectivity is achieved if, and only
if, each end-user who is supplied with a carriage service that
involves communication between end-users is able to communicate, by
means of that service, with each other end-user who is supplied
with the same service or a similar service, whether or not the
end-users are connected to the same telecommunications network.
Schedule 8 of the Bill inserts new provisions
into the Telecommunications Act imposing on carriers an
obligation to ensure any-to-any connectivity for customers. At
present, as noted in the Explanatory Memorandum for the Bill there
is currently no such requirement. The practical effect is that it
is possible for the carrier to deny any-to-any connectivity to
end-users on a smaller network.
During the course of debate on the Bill, the provisions in
Schedule 8 have not attracted much comment. Indeed the provisions
did not fall within the Terms of Reference of the Committee s
inquiry. However, it is noted that:
- the Australian Telecommunications User s Group supports the
amendment,(26) and
- Mr Paul Stiffe, General Manager, Public Policy, Vodafone, in
evidence to the Committee, made the follow comment in relation to
any-to-any connectivity:
The third concern that we have relates to any-to-any
connectivity. This seems to be quite a new idea and quite a novel
concept in that it can require a party to have to purchase a
service rather than supply a service. It seems to us on our reading
that any telecommunications service could be regulated in this way.
The threshold for intervention is very low; it is simply on the
basis of any-to-any connectivity rather than economic efficiency or
market power. There is certainly no public benefit test involved in
any consideration. We do not know how that will work or why it is
in there. We are also very concerned that it may actually not serve
any particular purpose because, although you are required to
purchase a wholesale service, there does not seem to be anything to
require you to provide a retail service associated with that.
(27)
At the present time, the ACMA has limited enforcement powers to
ensure compliance with the Telecommunications Act and the
Telecommunications (Consumer Protection and Service Standards)
Act 1999. These powers cover the giving of advice, warnings,
the issuance of infringement notices and directions to comply,
cancel or suspend licences, and to pursue court action. However,
the ACMA does not have an express power to accept enforceable
undertakings from a person.
The inclusion of an express power to accept enforceable
undertakings provides the ACMA with a range of pro-active and
reactive mechanisms to ensure compliance.(28) The
Explanatory Memorandum notes the following advantages of an
enforceable undertakings regime:
- as a voluntary arrangement requiring specified action, it will
achieve more effective and focused compliance and be less likely to
threaten the commercial operations of carriers and carriage service
providers
- less reliance on costly court action and avoidance of court
delays
- regulatory consistency, as the ACMA already has an express
power to accept enforceable undertakings for some matters (in
relation to commercial emails and address-harvesting software)
under the Spam Act 2003 and it would be in line with the
power of the ACCC to accept enforceable undertakings under section
87B of the TPA.(29)
As the ACMA is responsible for enforcing licence conditions,
enforceable undertakings would provide an especially important
regulatory tool to enforce those conditions when it believes a
serious breach has occurred, or may be likely to occur, removing
the need for litigation. At the same time, if an undertaking is
subsequently breached and court action is initiated, there will be
a greater onus on the defendant to prove that it has adhered to its
own voluntary undertaking.
It is noteworthy that, at the recent Senate Inquiry into the
Telstra Bills, the inclusion of enforceable undertakings was
supported by various groups.(30)
Certain provisions of the Telecommunications Act give
the ACMA the power to issue directions. Schedule
13 amends these provisions to clarify that they are not
legislative instruments for the purposes of the Legislative
Instruments Act.
This mirrors the amendments made by schedule 11 in respect of a
similar power held by the ACCC. Neither direction has the necessary
legislative character to be regarded as a legislative
instrument.
Part 2 of Schedule 1 of the Telecommunications Act
makes provision for industry development plans.
Clause 4 of the Part 2 of Schedule 1 of the Act provides that
the ACMA must not grant a carrier licence unless the Minister has
approved a current industry development plan by the carrier. An
industry development plan is:
a plan for the development in Australia, in connection with the
carrier s business as a carrier, of:
(a) industries involved in the manufacture, development or
supply of facilities, and
(b) research and development activities relating to an industry
referred to in paragraph (a).
The Explanatory Memorandum notes that the Productivity
Commission has found that there is no compelling argument for
continuing the requirement of industry development
plans.(31) Schedule 1 of the Bill
repeals Part 2 of Schedule 1 of the Telecommunications
Act.
Pursuant to sections 121 and 122 of the Telecommunications
Act, the ACMA has the power to:
- direct a person to comply with an industry code, and
- issue a formal warning to a person who contravenes an industry
code.
On a number of occasions the ACA (as predecessor to the ACMA)
has given directions to carriers and carriage service providers to
comply with industry codes.(32)
Schedule 2 of the Bill puts in place provisions to allow ACMA to
exercise the enforcement powers under sections 121 and 122 in
relation to conduct which occurred under former registered codes
which have since been replaced by a new code (as provided by
section 120 of the Telecommunications Act).
Section 455 of the Telecommunications Act requires the
ACMA to make a plan (a numbering plan ) for the:
- numbering of carriage services in Australia, and
- the use of numbers in connection to the supply of such
services.
Section 460 of the Telecommunications
Act provides the ACMA must undertake consultation in relation
to the numbering plan.
According to the Explanatory Memorandum:
- the requirements for consultation places unnecessary burden on
the ACMA in relation to minor variation of the numbering plans,
and
- the time frames for consultation are too long and
inflexible.(33)
Schedule 3 of the Bill amends section 460 to
address these concerns.
Item 1 of Schedule 1 of the Bill repeals Part 2
of Schedule 1 of the Telecommunications Act, which deals
with industry development plans.
Item 2 of Schedule 1 puts in place transitional
provisions in relation to annual reporting requirements on both the
carrier and the Industry Minister for reporting on the progress
made in implementing a current industry development plan.
Item 1 of Schedule 2 inserts a new subsection
121(1B) into the Telecommunications Act. The new
subsection enables the ACMA to give directions (in certain
circumstances) under subsection 121(1) in circumstances where the
conduct to which the direction is given occurred under an industry
code which has subsequently been replaced.
Item 2 of Schedule 2 inserts a similar
provision (new subsection 122(4)) in relation to the ACMA giving
formal warnings to a person.
Item 1 of Schedule 3 amends paragraph 460(3)(a)
of the Telecommunications Act such that the ACMA does not
need to consult where a variation to a numbering plan is taken to
be a minor variation.
Item 2 of Schedule 3 reduces the period for
consultation on a variation of a numbering plan from 90 to 30
days.
Item 1 repeals the current penalty in paragraph
151BX(3)(a) of the TPA for a breach of the competition rules and
replaces it with a penalty of:
- $3 million per day for every day over 21 days that the
contravention continues, and
- otherwise $10 million for each contravention and $1 million per
day that the contravention continues.
Items 1 to 4 add a note to the end of existing
provisions.
Items 5 and 6 insert new subsection
152BB(3) and new section 152BBAA. The
effect of these provisions is to give enforcement powers to the
Federal Court in relation to conditions or limitations on
exemptions to the standard access obligations. The court can
enforce compliance of an exemption to the standard access
obligations where a person does not comply with the conditions or
limitations.
Items 1 and 2 insert notes after section 152AS
and 152ASA.
Item 1 amends subsection 25(1) to provide that
the power to make procedural rules is not a power that can be
delegated by the ACCC. A power under any such procedural rules may
be delegated.
Item 2 inserts a definition of modification .
Other amendments refer to modification . For instance,
items 5 and 6 deal with the modification of an
application for an exemption. Items 11, 12, 18 and
19 deal with modifications to undertakings or variations
of undertakings.
Item 3 inserts a definition of procedural rules
and points to new section 152 ELA for the meaning
of the expression.
Item 4 amends subsection 152(AO)(3). It has the
effect that a public inquiry is not required if the ACCC makes a
modification to a declaration (of a service under section 152AL) if
the modification is minor under the Procedural Rules.
Item 5 and item 6 amend subsection 152AT(2) and
subsection 152ATA(2) to permit a person to modify an application
for an order exempting them from the standard access obligations
without this being treated as a new application which would start
the application process afresh (as it does currently). However, the
modification must be a minor modification under the terms of the
Procedural Rules that are to be made by the ACCC.
Item 7 amends section 152AU to allow the ACCC
to refuse an application for an ordinary or anticipatory individual
exemption from the standard access obligations if the applicant
does not provide further information within the time limit set out
in the Procedural Rules.
Item 8 amends subsection 152AU(3) to provide
that, if the ACCC, in the Procedural Rules, does not set time
limits for the giving of further information, the time limit can be
set by the ACCC when it makes the request for information.
Item 9 makes an amendment in similar terms to
item 7 but applies to cases where the ACCC
requests information in relation to an ordinary access undertaking.
Item 10 makes an amendment in similar terms to
item 8 but applies to cases where the ACCC
requests information in relation to an ordinary access
undertaking.
Item 11 and item 12 amend subsection 152BU(1)
and subsection 152BY(2) respectively to permit a person to modify
an ordinary access undertaking or a variation to an ordinary access
undertaking without this being treated as a new undertaking which
would start the undertaking process afresh (as it does currently).
The modification must be a minor modification under the terms of
the Procedural Rules that are to be made by the ACCC.
Item 13 amends subsection 152BY(4) to provide
that, if the ACCC, in the Procedural Rules, does not set time
limits for the giving of further information, the time limit can be
set by the ACCC when it makes the request for information.
Item 14 amends subsection 152BZ(2) to allow the
ACCC to refuse an application for a variation to an ordinary access
undertaking if the applicant does not provide further information
within the time limit set out in the Procedural Rules.
Item 15 amends subsection 152BZ(3) to provide
that, if the ACCC, in the Procedural Rules, does not set time
limits for the giving of further information, the time limit can be
set by the ACCC when it makes the request for information.
Item 16 amends subsection 152CCB(2) to allow
the ACCC to refuse an application for a special access undertaking
if the applicant does not provide further information within the
time limit set out in the Procedural Rules.
Item 17 amends subsection 152CBB(3) to provide
that, if the ACCC, in the Procedural Rules, does not set time
limits for the giving of further information, the time limit can be
set by the ACCC when it makes the request for information.
Items 18 and item 19 amend
subsection 152CBC(1) and subsection 152CBG(2), respectively, to
permit a person to modify a special access undertaking or to modify
a variation to a special access undertaking without this being
treated as a new undertaking which would start the undertaking
process afresh (as it does currently). However, the modification
must be a minor modification under the terms of the Procedural
Rules that are to be made by the ACCC.
Item 20 amends subsection 152CBG(4) to provide
that, if the ACCC, in the Procedural Rules, does not set time
limits for the giving of further information, the time limit can be
set by the ACCC when it makes the request for information.
Item 21 amends subsection 152CBH(2) to allow
the ACCC to refuse an application for a variation to special access
undertaking if the applicant does not provide further information
within the time limit set out in the Procedural Rules.
Item 22 amends subsection 152BH(3) to provide
that, if the ACCC, in the procedural rules, does not set time
limits for the giving of further information, the time limit can be
set by the ACCC when it makes the request for information.
Item 23 inserts new section
152CDA to allow the ACCC in its Procedural Rules, to defer
consideration of an ordinary or special access undertaking or a
variation of an ordinary or special access undertaking. Such
deferral is possible despite anything else in this Division.
Items 24 to 27 amend sections 152CLA, 152DB,
152DK and 152DMA to make Procedural Rules about how it will deal
with access undertakings that are received in relation to a matter
that is subject to an access dispute. The Procedural Rules will
displace those provisions dealing with ACCC s existing
discretion.
Item 28 inserts new Division
10A which gives the ACCC the power to make Procedural
Rules.
Schedule 8 inserts a new Part
7 to Schedule 1 of the Telecommunications
Act.
Item 1 inserts new clause 46
which provides that carriers must obtain designated interconnection
services from carriage service providers to ensure any-to-any
connectivity. New clause 47(1) provides that
designated interconnection services means any specified eligible
service declared by the Minister.
Prior to making a determination for the purposes of new
clause 47(1), the Minister must request ACCC to provide a
written report as to whether the proposed declaration would achieve
the objective of any-to-any connectivity set out in subsection
152AB(8) of the TPA (new subclause 47(3)). In
making the determination in clause 47(1) the Minister must have
regard to the ACCC s report and such other matters (if any) as the
Minister considers relevant (new clause
47(5)).
Schedule 9 makes amendments to section 152AB of
the TPA.
Item 1 expands the factors listed in the
current paragraph 152AB(2)(e) to which the ACCC must have regard
when determining whether a particular thing promotes the long term
interests of end-users of listed services. The objective of
encouraging the economically efficient use of, and the economically
efficient investment in any other infrastructure by which listed
services are, or are likely to become, capable of being supplied is
added.
Items 2 to 5 make amendment to subsection
152AB(6) which relate to the factors to be taken into account in
assessing whether the objectives in paragraph 152AB(2)(e) are
met.
Item 6 inserts new provisions after section
152AB(7) to expressly set out factors to be taken into account when
assessing the incentive for investment for the purposes of the
new paragraph 152AB(6)(c).
Item 2 of schedule 10 inserts
a new Part 31A in the Telecommunications
Act that provides for enforceable undertakings.
New section 572A is a simplified outline of the
new enforceable undertakings scheme. It explains that a person may
give the ACMA an enforceable undertaking about compliance with the
Telecommunications Act or the Telecommunications
(Consumer Protection and Service Standards) Act 1997.
New subsection 572B(1) provides that an
undertaking will only be accepted if it is in writing and
states:
- the action to be taken, or refrained from, in order to comply
with the Telecommunications (Consumer Protection and Service
Standards) Act or
- the action to be taken to ensure there will be no contravention
or likely contravention in the future of that Act.
An undertaking of this kind may be withdrawn, or varied, only
with the consent of the ACMA (new subsection
572B(3)), and may be cancelled by the ACMA by written
notice to the person who gave the undertaking (new
subsection 572B(4)).
New section 572C deals with enforcement of
undertakings.
The ACMA may apply to the Federal Court for an order if an
undertaking has been given under new section 572B
and the ACMA is of the view that there has been a breach of the
undertaking by the person who gave it.(34)
The Federal Court, if satisfied that there has been a breach,
may order any one or all of:
- compliance (new paragraph 572C(2)(a))
- payment of an amount up to the amount of any financial benefit
that the person has obtained directly or indirectly and that is
reasonably attributable to the breach (new paragraph
572C(2)(b))
- any other order the Court considers appropriate to compensate
for any loss of damage suffered by a third party (new
paragraph 572(2)(c)), and
- any other order the Court thinks appropriate (new
paragraph 572(2)(d)).
Item 1, 2 and 3 provide for a review to be
undertaken before 1 July 2009 into whether the new operational
separation provisions are working (item 3; new subsections
61(2), (3) and (4)). Following the review, the Minister
may declare that the operational separation plan provisions which
form part of Telstra s carrier licence conditions no longer apply
(Item 2; new section 61A).
Item 4 inserts new sections 69A and
69B. Section 69A gives powers to the ACCC to give limited
directions to take action to stop a contravention of a condition in
the operational separation requirements in Schedule 1 of the
Telecommunications Act. These powers are the same powers
that the ACMA presently has under section 69 of that Act.
New section 69B allows Telstra to apply to the
Australian Competition Tribunal in relation to a direction given by
the ACCC under new section 69A.
Item 5 and Item 6 insert a new paragraph into
section 70 to enable the ACCC to issue a warning to Telstra about
the contravention of a condition in the new operational separation
provisions in Part 8 of Schedule 1 of the Telecommunications
Act.
Item 7 inserts the new operational separation
requirements in Part 8 of Schedule
1. The provisions in this Part of the Bill are explained
earlier in this digest at page 9 and are not repeated here.
Schedule 12 of the Bill amends the TPA.
Item 1 inserts new subsection
152CPA(3) of the TPA provides that the ACCC may make or
vary an interim determination in relation to an access dispute
without having regard to the requirements of procedural
fairness.
Item 2 inserts new subsection
152CPA(5A) amends the TPA to allow the ACCC to extend the
period of an interim determination for up to an additional 12
months after the initial period of the interim determination.
Item 3 inserts new subsection
152CPA(5A) would remove the incentive to delay the
arbitration process, and would encourage quicker resolution of
arbitrations.
Items 1, 2 and 3 all clarify the directions
given by ACMA under three existing powers (sections 69, 102 and
121) are not legislative instruments under the Legislative
Instruments Act. This is because they are subject to merits review
and therefore would not typically have the necessary legislative
character.
-
Telstra (Transition To Full Private Ownership) Bill 2005. See
Ann Palmer and Jonathan Chowns, Telstra (Transition To Full Private
Ownership) Bill 2005 , Bills
Digest, no. 45, Parliamentary Library, Canberra,
2005-06.
-
Telecommunications Legislation Amendment (Future Proofing and Other
Measures) Bill 2005. See Katrina Gunn and Jonathan Chowns,
Telecommunications Legislation Amendment (Future Proofing and Other
Measures) Bill 2005 , Bills
Digest, no. 44, Parliamentary Library, Canberra, 2005
-06.
-
Appropriation (Regional Telecommunications Services) Bill
2005-2006. See Richard Webb, Appropriation (Regional
Telecommunications Services) Bill 2005-2006 , Bills
Digest, no. 42, Parliamentary Library, Canberra,
2005-06.
-
Telecommunications (Carrier Licence Charges) Amendment (Industry
Plans and Consumer Codes) Bill 2005. See Jonathan Chowns and
Ann Palmer, Telecommunications (Carrier Licence Charges) Amendment
(Industry Plans and Consumer Codes) Bill 2005 , Bills
Digest, no. 41, Parliamentary Library, Canberra
2005-06.
-
Explanatory Memorandum, Telecommunications Legislation
Amendment (Competition and Consumer Issues) Bill 2005, p. 11.
- The
Explanatory Memorandum, at page 14, notes that the the model .
commits Telstra to operational and organisational separation of the
wholesale business unit and key network functions from the retail
business units including, separate staff and premises and staff
incentive programs to ensure equivalence is provided .
- Proposed new subclause 48(1), Part 8, Schedule 1
Telecommunications Act 1997
- Productivity Commission, Review of
National Competition Policy Reforms, Productivity
Commission, Australia, 2005, p. 47.
- Graeme Samuel, Learn to live with regulation, Samuel says ,
Inside Business, transcript,
21 August 2005.
- See, for example, Alan Kohler, T3 and the art of pollyspeak ,
Sydney Morning Herald, 20 July 2005, p. 25.
http://parlinfoweb.aph.gov.au/piweb/TranslateWIPILink.aspx?Folder=pressclp&Criteria=CITATION_ID:GFPG6%3B
- Evidence of Bill Scales, Group Managing Director, Corporate and
Human Relations, Telstra to the Senate Environment, Communications,
Information Technology And The Arts References Committee, Inquiry
into the Performance Of The Australian Telecommunications
Regulatory Regime, Transcript
of evidence, 4 May 2005, p. 80.
-
Explanatory Memorandum, op. cit. p. 26.
- Explanatory Memorandum, op. cit. p. 69.
- Explanatory Memorandum, op. cit. p. 5.
- Evidence of Kate McKenzie, Managing Director, Regulatory,
Telstra to the Senate Environment, Communications, Information
Technology And The Arts References Committee, Inquiry into the
Telstra (Transition to Full Private Ownership) Bill 2005 and
related bills, Transcript
of evidence, 9 September 2005, p. 104.
-
Explanatory Memorandum, op. cit., p. 27.
- The
Carrier Licence Conditions (Telstra Corporation Limited)
Declaration 1997 (Amendment No. 2 of 2005) requires Telstra to
give the Minister a draft local presence plan setting out the range
of activities and strategies the licensee deploys or will deploy in
regional, rural and remote Australia to fulfil its local presence
obligations under the licence condition
- Telstra Local Presence Plan. http://www.telstra.com/countrywide/presenceplan/?SMSESSION=NO,
p. 27.
- Section 5, Legislative Instruments Act 2003
-
Explanatory Memorandum, op. cit., p. 8
- This Bill is part of this suite of Telstra sale
legislation.
-
Explanatory Memorandum, op. cit., p. 4.
- Evidence of David Havyatt, Head of Regulatory Affairs, AAPT
Ltd, to the Senate Environment, Communications, Information
Technology and the Arts Legislation Senate Committee, Inquiry into
the Telstra (Transition to Full Private Ownership) Bill 2005 and
related bills, Transcript
of evidence, 9 September 2005, p. 27.
-
AAPT Ltd submission to the Senate Environment, Communications,
Information Technology and the Arts Legislation Committee, Inquiry
into the Telstra (Transition to Full Private Ownership) Bill 2005
and related bills September 2005, p. 5.
- An exception applies if the arbitration is terminated (section
152CS).
-
Australian Telecommunication Users Group (ATUG) submission to
the Senate Environment, Communications, Information Technology and
the Arts Legislation Committee, Inquiry into the Telstra
(Transition to Full Private Ownership) Bill 2005 and related bills
September 2005,12 September 2005, p. 10.
- Evidence of Peter Stiffe, General Manager, Public Policy,
Vodafone, to the Senate Environment, Communications, Information
Technology and the Arts Legislation Committee, Inquiry into the
Telstra (Transition to Full Private Ownership) Bill 2005 and
related bills, Transcript
of evidence, 9 September 2005, p. 52; see also the
Vodafone submission, 9 September 2005, p. 7.
-
Explanatory Memorandum, op. cit., p. 34.
- ibid., p. 34.
- See
Australian Telecommunication Users Group (ATUG) submission, 12
September 2004, op. cit., p. 10; and
Small Enterprise Telecommunications Centre Limited (SETEL)
submission, 8 September 2005, which notes general support for
additional ACMA regulatory powers in order to lessen reliance on
the self-regulatory regime and hopefully encourage better practices
, p.2;
Consumers Telecommunications Network (CTN) submission, 9
September 2005, p. 4, which likewise supports greater enforcement
powers for the ACMA.
-
Explanatory Memorandum, op. cit., p. 9.
-
Senate Committee Report, Environment, Communications,
Information Technology and the Arts Legislation Senate Committee,
Inquiry into the Telstra (Transition to Full Private Ownership)
Bill 2005 and related bills, 9 September, op. cit., p. 18-19.
-
Explanatory Memorandum,, op. cit., pp. 9-10.
- In contrast, subsection 87B(3) of the TPA provides that the
ACCC may apply to the Federal Court for an order if it considers
that the person who gave the undertaking has breached any of its
terms . In this Bill, the drafting of the provision suggests that
the requisite breach must be significant and not just a breach of
any of the terms. This distinction may become a matter for the
courts.
Jonathan Chowns
Economics Commerce & Industrial Relations Section
Katrina Gunn, Jane Grace and Ann Palmer
15 May 2006
Bills Digest Service
Parliamentary Library
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ISSN 1328-8091
© Commonwealth of Australia 2006
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