Chapter 2
Key issues
2.1
As noted in Chapter 1, the bill proposes various amendments to the law
relating to telecommunications. The proposed amendments are contained in one
schedule to the bill, which comprises eight parts.
2.2
Various aspects of the bill received unqualified support from
submitters. The Australian Smart Communities Association, for example,
submitted:
The NBN will underpin the continued evolution of new
connectivity infrastructure technologies. The ASCA strongly supports all
measures that encourage competition for service providers, the ability for NBN
to conduct relevant pilots/trials and the opening up of interconnection to
listed points on the NBN network.[1]
2.3
Optus also expressed support for various parts of the bill that are
'uncontroversial' in seeking to improve the clarity, certainty and timeliness
of decision making by the ACCC and to clarify certain obligations in respect of
NBN Co.[2]
Similarly, the Australian Communications Consumer Action Network (ACCAN)
advised that it supported various proposed amendments that 'will help to
clarify and provide certainty to the industry which will ultimately benefit end
users'.[3]
2.4
There are, however, parts of the bill about which submitters expressed
concern. Of the eight parts to the bill, the submissions received by the
committee provided detailed comments on Parts 3, 4, 5, 7 and 8 only. As the
committee does not have any findings or recommendations to make that
specifically apply to Parts 1, 2 and 6, this chapter describes
and considers only the parts commented on by submitters. The explanatory
memorandum that accompanied the bill sets out all of the proposed amendments in
detail.
2.5
This chapter examines Parts 3, 4, 5, 7 and 8 of the bill in turn. Other
matters beyond the scope of the inquiry that were raised in submissions are
then noted. The committee's overall conclusion can be found at the end of
the report.
Part 3—Pilots and trials
2.6
The CCA provides that an NBN corporation must not discriminate between
access seekers in the supply of declared services, in conducting activities
related to the supply of declared services, or in favour of itself.[4]
Proposed amendments
2.7
The explanatory memorandum stated that the application of non‑discrimination
obligations to pilots and trials 'can act as a practical impediment to product
development and also as a disincentive to innovation'. This is because if
NBN Co or a carriage service provider wishes to test a new service or
technology on the NBN, NBN Co is, at present, required to make the same service
or technology available to all of its customers.[5]
2.8
Proposed new section 152F of the CCA would provide that the non‑discrimination
obligations do not apply to pilots and trials if:
-
NBN Co has notified the ACCC of the details of the pilot or trial
and has published on its website information about the trial; and
-
the pilot or trial does not last longer than 12 months (although
the ACCC may agree to a longer timeframe).[6]
2.9
The explanatory memorandum described the notification regime and 12‑month
time limit as being 'key safeguards' to ensure that 'NBN Co's pilots or trials
are focused on promoting innovation and reduce the risk of conduct having
significant anti-competitive effects'.[7]
2.10
Another proposed amendment to the CCA contained in this part of the bill
is the repeal of Division 6B of Part XIC. This division requires the ACCC to
publish explanatory material relating to anti-discrimination provisions. The
ACCC developed guidance between 2011 and 2012, with a final guideline published
in April 2012.[8]
The explanatory memorandum stated that the repeal of Division 6B is
intended to 'ensure there can be no divergence between the statutory provisions
and such explanatory material'.[9]
The Government's intention to repeal the guidance requirement was foreshadowed
in its response to the Vertigan Panel.[10]
Evidence from industry stakeholders
and consumer groups
2.11
The Australian Smart Communities Association advised that it 'strongly
supports' measures that enable NBN Co to conduct relevant pilots and trials.[11]
2.12
Telstra did not comment on pilots and trials in its submission. However,
its representatives at the committee's public hearing noted that there 'is an
efficiency argument in favour' of the proposed change. Mr William Gallagher,
General Counsel of Corporate Affairs at Telstra, stated:
If NBN Co is to be required to run pilots and trials with the
entirety of industry each time it seeks to launch or test a new product in the
market, there is an obvious cost associated with developing the capability and
capacity to do that across potentially all service providers. So there is an
efficiency element to it.[12]
2.13
Optus, however, submitted that it was 'sceptical' of the explanatory
memorandum's reasoning that the application of non‑discrimination
obligations to pilots and trials can act as an impediment to product
development and a disincentive to innovation.[13]
Optus added that it considers that 'the principle of non-discrimination is
fundamental to the level playing field credentials of the NBN'. Accordingly,
Optus asserted that the principle should 'apply as equally to pilots or trials
as it does to NBN Co's ongoing service provision'. Optus argued that the
proposed changes could provide a competitive advantage to other retail service
providers.[14]
2.14
Optus also questioned whether the proposed amendments 'are consistent
with NBN Co's priority which is to roll-out the network and meet its basic
coverage and service objectives'. Optus argued that encouraging retail service
providers to test a new service or technology on the NBN 'is only likely to distract NBN Co from
achieving its core objective of connecting broadband to households'.[15]
2.15
The Competitive Carriers' Coalition (CCC) argued that the proposed
amendments are 'highly risky, unnecessary and supported by no persuasive
evidence that there is a problem in existing rules'.[16]
It submitted that an 'adequate explanation...or examples' have not been provided
to demonstrate that the application of non-discrimination obligations to pilots
and trials impinges on NBN Co's ability to conduct its business. However, the CCC
is of the view that removal of the obligation presents a clear risk.[17]
2.16
The CCC concluded that the non-discrimination rules are essential for
restraining the 'very significant market power' that NBN Co 'is in a position
to exercise as it becomes the monopoly provider of fixed line access for more
and more households and businesses'. As such, the CCC argued that the
requirements should not be changed.[18]
2.17
Optus also recommended that the proposed amendments be omitted from the
bill. However, acceptable alternatives for Optus would be either:
-
a delay in the application of the proposed amendments until the
rollout of the NBN is complete; or
-
the re-drafting of the proposed amendments so that NBN Co could
limit participation in pilots and trials 'only to the extent that it can
demonstrate to the ACCC's satisfaction that it faces practical constraints in
offering broader industry participation'.[19]
2.18
ACCAN's submission recommended that the bill be amended to provide the
ACCC with powers to reject the switching off of non-discrimination obligations
for pilots and trials that the ACCC determines to be anti-competitive.[20]
The CCC also questioned the ACCC's ability to act on concerns it may have about
the pilots or trials notified to it.[21]
Evidence from the department
2.19
Mr Philip Mason, the Assistant Secretary of the Markets Structure Branch
at the Department of Communications and the Arts (the department), explained
that the proposed amendments are expected to provide benefits to the following
three groups:
-
NBN Co—the proposed amendments are intended to 'provide some
flexibility for NBN Co' by addressing some of the 'hoops' NBN Co will need to
go through to meet the non-discrimination obligations when developing new
products or trialling new products.[22]
Mr Mason suggested that, as the law currently stands, in certain cases, if 'NBN
Co engaged with somebody with a new idea...that would technically be
discrimination and that is not lawful under the [NBN Companies] Act.[23]
-
Service providers seeking to innovate—Mr Mason stated that the
proposed amendments will provide a means for service provides to 'go to NBN Co
and say, "We have got a good idea but we want to trial it on your network
first"'.[24]
-
Consumers—ultimately, consumers are expected to benefit from any
innovations that the measure would support.[25]
2.20
In response to the concerns expressed by some industry submitters about
this part of the bill, the department submitted that the design of the proposed
amendments 'will provide access seekers with time to develop and refine new
services, while limiting any first-mover advantage'. The department stressed
that the bill includes safeguards to ensure the pilot and trial mechanism is
transparent and covers only legitimate pilots or trials for a limited period of
time.[26]
Mr Mason added that, following the proposed amendments, the notification
regime will ensure that 'there would be quite considerable information in the
public domain as to what was happening'.[27]
2.21
Mr Mason also emphasised that the bill would only permit pilots and
trials, and would not create an opportunity 'for somebody to come up with an
idea and for NBN Co to launch that service for that person and for that person
to operate it for a honeymoon period and to capture customers'. In response to
concerns about such a scenario, Mr Mason stated:
I do not think that actually qualifies as a pilot or a trial.
A trial or a pilot is fundamentally about getting an idea and actually seeing
if it works. This is the way the provisions would work. The ACCC has scope to
say, 'We do not think that this is a bona fide pilot or trial,' and to take
action.[28]
It is quite clear that this is in relation to pilots and
trials, and the ACCC, as the expert regulator—and we have great confidence in
the ACCC's competence—can make a judgement that this is not really a pilot or a
trial but is a way for you to try to capture the market in advance, and that is
not what we are about or what we want to achieve.[29]
2.22
Mr Mason added that the benefit received by the service provider seeking
to pilot or trial an innovation would be limited to 'the benefit of trialling,
testing, getting it more marketable and getting it more market-ready as a
reward for their initiative, as it is'.[30]
Part 4—Access determinations
2.23
Under the current regulatory regime, an access regime for carriers to
access certain facilities owned by other carriers is provided in Parts 3 and 5
of Schedule 1 to the Telecommunications Act. Under Part XIC of the CCA,
however, the ACCC may 'declare' a facilities access service, which means the
service is regulated under the telecommunications access regime in Part XIC of
the CCA and carriers must comply with standard access obligations (SAOs). The SAOs
that apply to non‑NBN Co providers are referred to as
category A SAOs, and the SAOs that apply to NBN Co are known as category B
SAOs.
2.24
Where an access provider is subject to the SAOs, they must be complied
with on such terms and conditions as are either agreed, set out in a special
access undertaking accepted by the ACCC, specified in binding rules of conduct
made by the ACCC, or determined by the ACCC. When making an access
determination, the ACCC is required to take into account various matters
specified in subsection 152BCA(1) of the CCA and may also take into account
matters specified in subsection 152BCA(2).
The proposed amendments
2.25
The bill includes proposed amendments to the CCA that relate to access
determinations applied to NBN Co. Currently, NBN Co is not subject to an access
determination—a special access undertaking specifies price and non-price terms
and conditions relating to access to NBN Co's fibre, fixed wireless and
satellite networks and other related services. The explanatory memorandum
advised that the intention is 'to respond to potential future scenarios that
might arise'.[31]
2.26
Proposed new subsections 152BCA(2A) and (2B) would provide the following
additional matters that must be taken into account by the ACCC when making
access determinations:
-
the method used by the ACCC to determine terms and conditions it
includes in access determinations that apply only to an NBN corporation; and
-
the method used by the ACCC to determine terms and conditions it
includes in access determinations that do not apply to NBN corporations.
2.27
The explanatory memorandum stated that the proposed amendments are
designed to:
...better promote regulatory consistency in the ACCC's approach
to setting any access price for an access provider (both NBN corporations and
non‑NBN corporations). This should ensure that no one access provider is
treated more favourably than another.[32]
2.28
To illustrate, the following example was provided in the explanatory
memorandum:
...if fixed principles apply to
NBN Co, the ACCC would need to consider whether those fixed principles should
also apply in respect of future access determinations for other infrastructure
providers.[33]
2.29
This part of the bill also includes proposed amendments regarding
procedural fairness. Items 18 and 19 would insert new sections 152BCGAA and
152BDAB that will require the ACCC to consult those persons it considers
appropriate before making an interim access determination or binding rules of
conduct. With respect to interim access determinations, the explanatory
memorandum noted that the proposed amendments seek to codify the ACCC's
existing approach to consultation.[34]
Failure by the ACCC to comply with the consultation requirement will not affect
the validity of the decision made.[35]
Evidence from industry stakeholders
2.30
Optus argued that the proposed amendments 'appear to go beyond the
specific concerns' raised by the Vertigan Panel regarding the need to ensure
that NBN Co does not receive more favourable treatment than other access
providers. Optus explained that this is because the proposed amendments would
not only ensure that an access provider is not disadvantaged as compared to NBN
Co, but they would also require the ACCC to ensure that NBN Co is not
disadvantaged compared to other access providers.[36]
2.31
To illustrate its concerns, Optus referred to the ACCC's draft final
access determination for fixed line access services. During that consultation
process, Optus explained that the ACCC's proposal to reduce legacy copper
access prices was 'challenged' by the department 'because of alleged impacts on
price relativities with NBN access prices'. If the proposed amendments had
applied in this case, in Optus' view:
...it is likely that the ACCC would have to give greater weight
to such arguments and its ability to reduce access prices for legacy fixed line
services to better reflect the costs of supply would, therefore, be
constrained.[37]
2.32
Optus concluded that 'it is difficult to see how access seekers and
consumers would benefit from the proposed amendments'. It added:
To the extent that NBN Co issues are relevant to an ACCC
pricing decision then it is likely that the ACCC would have regard to that
matter. There is in short no need to spell this out in legislation.[38]
2.33
The CCC also questioned the rationale underpinning the amendments.
It suggested that the proposed new requirements relating to how the ACCC
undertakes its functions 'represent unnecessary red tape at best, an unwelcome
injection of uncertainty at worst'. Like Optus, the CCC argued that 'there is
no evidence of a problem that needs to be addressed'.[39]
2.34
The CCC applied similar reasoning to question the proposed amendments
relating to procedural fairness. The CCC submitted that:
...the pointlessness of these
provisions is clear from the explanatory memorandum, which makes clear that
this is already how the ACCC conducts itself and that even if the ACCC does not
consult with affected parties, its decisions would not be invalidated by these
new provisions.[40]
2.35
The CCC noted that the interim determinations and binding rules of
conduct were established 'to allow the ACCC to act decisively and quickly in
the context of an industry that had become bogged down in legal conflict and
ineffective regulation'.[41]
2.36
Optus and the CCC recommended that the proposed amendments be omitted
from the bill. As an alternative option, Optus suggested that the proposed
amendment relating to the matters that must be taken into account by the ACCC
could be re‑drafted. In Optus' view, an acceptable redraft would 'make it
clear that the ACCC is required to have regard to consistency between
NBN Co and other access providers only in relation to pricing
decisions for services that are supplied in the same wholesale market(s) as NBN
Co services'.[42]
Evidence from the department
2.37
In response to the concerns expressed by industry stakeholders about the
proposed codification of the ACCC's existing practices regarding consultation
and the methodology used to determine terms and conditions, the department
provided the following explanation of the bill's intent:
The changes proposed by Part 4 aim to achieve a balance
between providing industry with greater certainty that the ACCC will follow
requirements of procedural fairness, and the real concern that that the
regulator's decisions can be gamed with broader industry and economic
detriment.[43]
2.38
In relation to the consultation requirement, the department submitted:
The requirement for the ACCC to consult simply codifies an
important element of the ACCC's processes when it comes to making a decision in
relation to an [interim access determination] or [binding rules of conduct].
These changes are intended to promote confidence in the regulator's decision
making processes and will ensure consistency in approach for all access
providers. Given that they simply provide some greater certainty that the ACCC
will follow minimum procedural fairness requirements, they should neither be
seen as delaying regulatory decisions nor as adding any additional red tape to
access determination processes.[44]
2.39
Mr Mason, an assistant secretary at the department, made the following
additional observation:
...there is an argument that some of the measures codify
practice the ACCC already undertakes as a matter of course and therefore they
do not need to be legislated. While there is some attraction to this view from
a regulatory burden perspective, there is also the reality that many of those
measures the ACCC does not need to, even though it does. So we do not see a real
problem in making clear the government's and—if the bill is passed by the
parliament of Australia—the parliament's expectations of the ACCC's conduct.[45]
Part 5—Special access undertakings
2.40
Section 152CBDA of the CCA contains provisions that apply when a special
access undertaking (SAU) is being considered by the ACCC. The section enables
the ACCC to suggest to the person who gave the undertaking that they make
specified variations to the undertaking. If the variations are made, the ACCC
would then consider the varied undertaking as if it was the original
undertaking. The intention of the section is 'to avoid a situation where the
ACCC has to reject an SAU, resulting in the person who lodged it having to
start the whole process again by lodging a new undertaking'.[46]
The proposed amendments
2.41
The proposed amendments in this part would amend section 152CBDA.
The proposed amendments are designed to differentiate between variations
to the original undertaking that the ACCC specifies are necessary to satisfy it
that the undertaking would be reasonable,[47]
and other variations that the ACCC suggests are 'desirable'.[48]
These proposed amendments respond to recommendations 22 and 23 of the Statutory
Review. The explanatory memorandum stated:
The Vertigan panel considered that ACCC notices to vary...[an] SAU
should be limited to those changes to the SAU that are necessary to satisfy the
ACCC that the SAU would be reasonable. This reflected concerns that some of the
variations the ACCC had required during the process of accepting NBN Co's SAU
may not, strictly speaking, have been necessary for the ACCC to be satisfied
that the SAU was reasonable. The Vertigan panel recommended that a notice to
vary an SAU 'should be confined to matters that are, as a matter of fact,
essential for the ACCC to be satisfied that the special access undertaking will
pass the relevant thresholds for acceptance'.[49]
2.42
The proposed amendments also permit the person who gives a varied SAU in
response to the ACCC's notice to include variations that have the same effect
or substance as the variations sought by the ACCC but do not use the exact
wording.[50]
Evidence from industry stakeholders
2.43
Optus acknowledged that the proposed amendments reflect recommendations
of the Vertigan Panel. However, Optus submitted that it 'is unclear what
specific problem the changes aim to address', particularly as the variation
notice powers 'were only recently put into the CCA'.[51]
Optus argued:
There is no evidence that there is a problem with the
legislation beyond occasional complaints by those network owners with market
power that they need to work hard to satisfy the ACCC that their proposed
undertakings are reasonable and promote the long-term interest of end users.[52]
2.44
In advising of its opposition to these proposed amendments, Optus also
outlined more explicit concerns. Optus argued that, in its view, the proposed
amendments 'are likely to undermine the efficacy of variation powers as a
special access undertaking as a regulatory tool', and may result in 'some
adverse consequences for the industry and consumers'.[53]
2.45
Optus argued that it is important for the ACCC to 'have the right to be
prescriptive' when proposing changes to an SAU.[54]
According to Optus, the proposed amendments are 'likely to add to the delay and
uncertainty of settling future SAUs and they will almost certainly re-open the
scope for regulatory gaming'.[55]
2.46
The CCC also expressed opposition to the proposed amendments. The CCC
argued that the process used by the ACCC when it examined NBN Co's SAU
demonstrated that the ACCC:
...is capable of balancing the interests of monopoly network
owners with that of the community in resolving enormously complex, wide ranging
and long term undertakings applications within the present legislative
framework.[56]
2.47
The CCC added that the 'proposed amendments have the effect of shifting
flexibility and discretion to the monopoly owners and away from the ACCC'.[57]
Evidence from the department
2.48
The department advised that it disagrees with the assessments of the
proposed changes provided by industry stakeholders. The department submitted:
The proposed changes respond
to genuine concerns raised by NBN Co and are intended to provide a useful
discipline on the regulator. They clarify that when the regulator proposes
changes to an SAU to enable it to be accepted, it should identify which changes
are essential and which are desirable. The SAU process is complex and resource
intensive. This change improves the efficiency and timeliness of the process.
Access providers should not be required to implement changes that are not
essential to the regulator's decision in relation to whether it will accept or
reject an SAU.[58]
2.49
In response to industry's concern that the proposed changes will
constrain the ACCC's ability to request changes to an SAU, the department
submitted that it considers the proposed changes:
...improve the operation of the framework, by making it clear
the ACCC should focus on what is essential, but can also raise changes it
considers useful or desirable. Ultimately, the ACCC will still determine the
scope and substance of changes required in relation to SAUs and the person
submitting the SAU would still need to vary the SAU so that its changes
satisfied the object, if not the letter, of the ACCC’s requirements.[59]
Part 7—NBN corporations
2.50
This part of the bill contains proposed amendments that would modify the
line of business restrictions imposed on NBN Co and the provisions relating to
conduct that NBN Co is authorised to engage in for competition law purposes. It
is the proposed amendments to NBN Co's line of business restrictions that
attracted substantive comment from industry stakeholders.
Overview of the proposed amendments
related to the line of business restrictions
2.51
The explanatory memorandum noted that the NBN Companies Act sets out
fundamental line of business restrictions on NBN Co, such as the obligation on
NBN Co to supply services on a wholesale-only basis and restrictions
regarding the supply of non-communications goods or services.[60]
2.52
The proposed amendments in the bill would provide that:
-
an NBN corporation may dispose of surplus non-communications
goods; and
-
regulations may be made providing that the restrictions in
sections 18, 19 and 20 of the NBN Companies Act on the supply of content services,
supply of non-communications goods or services, and investment activities do
not apply in the circumstances set out in the regulations.[61]
2.53
With respect to the regulation-making power, the explanatory memorandum
stated that the power 'would allow flexible responses to unanticipated
circumstances, subject to parliamentary scrutiny', without degrading the bright
line conduct rules' that the line of business restrictions impose.[62]
Evidence from industry stakeholders
2.54
Optus, the CCC and Telstra submitted that they do not object to the
proposed amendment that would ensure that NBN Co can dispose of surplus non‑communications
goods.[63]
However, they questioned the proposal to establish a regulation-making power
that would remove line of business restrictions in prescribed circumstances.
2.55
Optus argued that it was unclear why the change is required. Optus also
expressed concern that the change could be used to 'expand the role of NBN Co
into telecommunications markets which are competitive and adequately served by
commercial entities'. According to Optus, NBN Co 'is already pushing the
boundaries of its remit'.[64]
2.56
Submitters also suggested that the proposed amendments did not accord
with the rationale that underpinned the establishment of NBN Co. Optus argued
that NBN Co should remain focused on the purpose for which it was
established: to 'address a market failure relating to the provisions of
last mile access for high speed broadband services'.[65]
The CCC presented the following similar argument:
NBN was created for a very specific reason and to provide
very specific services. Once it has rolled out in a location, NBN enjoys a
powerful monopoly over access to fixed line communications services to
consumers in those locations.[66]
2.57
Telstra argued that the proposed amendments introduce risk in relation
to the investment certainty required by businesses that are responding to the
NBN.[67] Telstra also questioned how the proposed amendments
would operate in practice. Proposed new subsection 22B(2) specifies that the
operation of section 9 of the NBN Companies Act, which provides that the supply
of eligible services by NBN Co to be on a wholesale basis, is not
affected. However, Telstra argued that this provision 'does not address all the
ways the proposed amendments could be used to expand the reach of NBN Co's
activities'. Telstra noted that the wholesale-only requirement in section 9
only applies to 'eligible services', which are defined in the CCA as being
carriage services or services that facilitate a carriage service. Telstra submitted:
The 'non-communications services' or 'non-communications
goods' which a regulation made under the amended section 22B could permit NBN
Co to supply may not qualify as 'eligible services' and so are not restricted
to the wholesale-only rules. Under the proposed amendment, NBN Co could, for
example, be authorised to provide systems integration services to large
corporates, advice on retail product development by [retail service providers],
provide services to digitalise information and manage databases to verticals
such as the health sector, or operate data centres.[68]
2.58
Telstra submitted that the Minister 'could override section 20 to permit
NBN Co to invest in a third party which supplied retail communications
services because the wholesale-only restriction in section 9 only applies to
NBN Co and its related bodies corporate or entities NBN Co controls'. That is:
...NBN Co could do indirectly what it is not permitted to do
directly by investing in retail providers. While this is already an issue with
section 20 where NBN Co's interests fall short of control, section 22B would
allow the safeguards that do exist in section 20 to be further weakened.[69]
2.59
Although the regulations would be subject to disallowance by either
House of Parliament, Telstra argued that this protection 'is an inadequate
substitute for a legislative amendment to change NBN Co's remit'. Telstra
commented:
Any such departure from a
fundamental aspect of the NBN policy should be fully debated through
Parliament. Using the pathway of legislative change to deal with expansion of
NBN Co's remit is, as the Explanatory Memorandum notes, more difficult, but
given the fundamental significance of this issue, it should be more difficult.[70]
2.60
Telstra suggested that the bill could be re-drafted so that minor adjustments
to NBN Co's line of business restrictions can be made as unintended issues
emerge. The first change proposed by Telstra is a requirement that, before
regulations are made, the Minister must have considered factors 'such as the
impact on competition, the legitimate business interest of other providers
[and] consistency with the policy of NBN Co being a wholesale only provider'.
Only then could regulations be made to 'make an adjustment in NBN Co's scope of
business which is of a minor or nonmaterial nature'.[71]
The second change proposed by Telstra is to provide that the regulation‑making
power does not apply to section 20 of the NBN Companies Act (the restriction of
investment activities).[72]
2.61
However, at the committee's public hearing, Telstra explained that its
chief concern about the proposed changes is 'really the matter of
principle' and that Telstra was maintaining the consistency in its view, as
expressed when the legislation establishing NBN Co was considered, that the 'current
restraints should be even stronger'.[73]
Evidence from the department
2.62
The department's submission acknowledged the concerns raised by industry
about the proposed regulation-making power, however, it emphasised that the
proposed power is 'limited', and that NBN Co would still be prohibited from
supplying retail services and content services.[74]
The department added:
The telecommunications sector is highly dynamic. Companies
must be able to respond to changes in the market, and where appropriate,
flexibility should be available to governments and regulators to facilitate
this responsiveness...The regulation making power will provide some flexibility
to deal with unintended consequences, should they arise, given the wide range
of existing restrictions on NBN Co. The difficulty for NBN Co in disposing
of surplus assets is simply one known identified example; should similar
examples be identified in the future the regulation‑making power could be
used in a public and transparent manner to deal with them, subject to usual
Parliamentary scrutiny.[75]
2.63
In a letter to the committee received following the public hearing, Mr
Mason responded to the concerns expressed by Telstra about whether the proposed
amendments could, in certain instances, enable NBN Co to operate in some retail
markets (see paragraphs 2.57–2.58). Mr Mason provided the following advice,
which referred to Telstra's example of regulations that would potentially
enable NBN Co to provide a retail data centre service:
I think an argument can be made that the proposed
regulation-making power could provide scope for an NBN corporation to operate
in some retail markets in some instances. This would be where regulations
enable NBN Co to provide services that were not 'eligible services' as defined
in the Competition and Consumer Act 2010 (CCA).
This is because such services may not be subject to the
overarching wholesale-only restriction in section 9. This could include data
centre services, as these are more concerned with the storage and processing of
data, as opposed to its transport between points, which is the essence of the
definition of an 'eligible service'.[76]
2.64
Continuing with Telstra's example of a retail data centre service, Mr
Mason emphasised that, for this to occur, the Government would need to decide
that:
-
NBN Co could provide data centre services (other than where they
are ancillary or incidental to the supply of eligible services, which is
already permitted); and
-
the service could be provided on a retail basis.[77]
2.65
Mr Mason noted that the regulations could be drafted to make it clear
that the retail supply of a service is not permitted.[78]
He also repeated the department's earlier evidence that any regulations made
would be subject to parliamentary scrutiny and disallowance.[79]
Part 8—Declared services and eligible services
2.66
The proposed amendments in Part 8 of the bill would clarify that
'facilities access services which are supplied under the current definitive
agreements between NBN Co and Telstra, and NBN Co and Optus, are not declared
services to the extent that they are supplied under those agreements'.[80]
Overview of the proposed amendments
2.67
The explanatory memorandum stated that the proposed amendments:
...will ensure that these agreements, which are designed to
facilitate the roll-out of the NBN, will continue to operate in accordance with
their existing negotiated terms and conditions, even if the ACCC later declares
one or more of the facilities access services which are supplied as part of the
agreements. This protection applies for the life of the agreements, thereby
giving certainty to the parties concerned on the matters covered.[81]
2.68
The proposed amendments would only apply to the specified agreements
that are in force at the commencement of the section (the section would
commence on Royal Assent).[82]
However, the proposed amendments would also provide that any changes made to
the agreements after the amendments commence would not be exempted from the
definition of declared service.[83]
2.69
As a result of the proposed amendments relating to declared services,
minor changes to definitions and consequential amendments relating to the
definition of eligible services are also proposed.[84]
Evidence from industry stakeholders
2.70
The CCC submitted that these amendments appear to be unnecessary.
It suggested that the arrangements in the specified agreements would be
'unaffected even if a facilities access service were to be declared and the
ACCC made an access determination that was inconsistent with the agreements'. [85]
The CCC explained:
Under the law as it now stands, any commercial agreement
between parties relating to a declared service takes precedent over any ACCC
pricing or access decision. The definitive agreements between NBN, Telstra and
Optus constitute commercial agreements. Section 152BCC provides that 'an access
determination has no effect to the extent to which it is inconsistent with an
access agreement that is applicable to those parties'. All of the relevant
agreements would be access agreements as defined in s. 152BE, and s. 152BE(3)
makes clear that this is the case even if the relevant service was not a
declared service at the time the agreement was made.[86]
Evidence from the department
2.71
In addressing the evidence received by the committee regarding the
proposed amendments in Part 8 of the bill, the department highlighted the
interaction between the proposed amendments in Part 1 and Part 8. The
department submitted:
Part 1 of the Bill proposes changes to the
[Telecommunications Act] and the CCA to clarify that if the ACCC declares a
facilities access service which is ordinarily captured by the
[Telecommunications Act], then that declaration replaces the ex ante
access rights to that facilities access service under the [Telecommunications
Act]. This means that prices and other terms and conditions of access
determined by the ACCC will apply as a baseline, rather than the negotiate-arbitrate
approach under the [Telecommunications Act]. Industry submissions to the
inquiry seem to be generally clear on this point. The interaction between Part
1 of the Bill and Part 8, however, may not be as clear.
Part 8 of the Bill relates to Part 1 of the Bill by providing
that any agreements between NBN Co and Telstra, or NBN Co and Optus
(collectively, the definitive agreements), are not affected by the proposed
change under Part 1. Part 8 also provides that existing arrangements between
NBN Co and other providers are not affected by the changes under Part 1.
Industry has raised concerns around unnecessary duplication of regulation,
noting for example that the existing regulatory hierarchy under Part XIC of the
CCA already ensures that access agreements cannot be affected by subsequent
access determinations.[87]
2.72
The department continued:
The agreements cited in Part 8 of the Bill do not constitute
access agreements. Paragraph 152BE(1)(c) of the CCA qualifies that an access
agreement can only be made in relation to a declared service. The facilities
access services to which the definitive agreements or other agreements apply
are not currently declared services.
The proposed changes therefore ensure that arrangements
already established through the definitive agreements, or other existing
agreements between NBN Co and another carrier, are unaffected in the event that
a facilities access service to which those agreements apply, is captured
through future declaration.[88]
Other matters
2.73
Some submissions discussed policy matters that are not addressed by the
bill. Telstra, for example, presented an argument for re‑introducing
merits review of the ACCC's decisions under Part XIC of the CCA.[89]
Macquarie Telecom's submission, which relied on its earlier comments to the
department on the exposure draft of the bill, questioned the order of
precedence in Part XIC.[90]
Committee comment
2.74
The inquiry has provided an opportunity for submitters to put forward
various proposals that they consider have merit. However, the committee was
tasked with scrutinising the specific measures contained in the bill, not with
undertaking a wide‑ranging inquiry into telecommunications law.
Accordingly, the committee makes no findings or recommendations about these
other proposals beyond noting that they raise questions of policy for the
Government to contemplate outside of this inquiry.
Committee view
2.75
This bill outlines several measures that form part of the Government's
efforts to reform regulatory arrangements in the telecommunications sector.
Many provisions in the bill appear uncontroversial and were unanimously
supported by industry. The committee acknowledges, however, that some industry
submitters expressed various concerns about particular provisions in the bill.
2.76
In scrutinising the bill, the committee has been mindful that the
overarching aim of the changes is the promotion of greater efficiency,
transparency, competition and innovation in telecommunications services.
Regulatory regimes should also take into account problems that could arise, as
well as problems that have been clearly demonstrated.
2.77
The committee considers that the measures in the bill will improve the
current regulatory regime by addressing various 'housekeeping' issues and by
introducing other sensible amendments that will encourage innovation and
improve regulatory processes. For example, the flexibility that the bill
will provide to NBN Co to support trials and pilots of new services will
encourage innovation, which will ultimately benefit consumers. Fundamentally,
the telecommunications regulatory regime should provide incentives for firms to
continually drive innovation for the long-term benefit of consumers.
2.78
The additional information about the bill provided by the Department of
Communications and the Arts in its evidence to this inquiry addressed the
various concerns put to the committee. While the committee is satisfied by the
explanations provided, the committee considers it is necessary to specifically
comment on the proposed regulation-making power in Part 7.
2.79
There are many instances where it is desirable for the Government to
have the flexibility to respond to emerging issues through regulations rather
than developing and pursuing amendments to legislation in the Parliament. In
relation to the regulations that this bill would enable, the committee notes
that any regulations made will be subject to appropriate consultation[91]
and parliamentary scrutiny through the disallowance process. The committee also
notes that the Senate Standing Committee for the Scrutiny of Bills, which among
other things examines bills for provisions that would inappropriately delegate
legislative power, did not comment on the bill. The committee is satisfied
by the Government's rationale for allowing regulations to be made to address
unanticipated circumstances.
Recommendation 1
2.80
The committee recommends that the bill be passed.
Senator
Linda Reynolds CSC
Chair
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