CHAPTER 6
THE UNIVERSAL SERVICE OBLIGATION AND CONSUMER PROTECTION
| The Universal Service Obligation (USO) provides funding
of cross-subsidies for the provision of a standard telephone service
to the people of Australia. Telecommunications carriers contribute
to the USO from pro-rata levies. Consumers have voiced their concerns
that guaranteed services under the USO —access to untimed local
calls, 24 hour access to the telephone network, emergency number,
operator assistance, and unique numbers—will diminish if Telstra
is privatised. Consumers have also raised concerns on broader issues
of consumer protection and fear the emergence of a 'profits before
service' culture. The proposed Customer Service Guarantee is an
implicit admission that privatisation will not deliver satisfactory
consumer outcomes. Reliance upon codes of practice in the post-1997
regulatory environment offers consumers little assurance. The Committee
is not convinced that the Government will deliver on its promise
to establish a 'world class consumer framework'. |
| This chapter contains references to technical telecommunication
expressions. An overview of relevant technologies and services referred
to in this chapter is found in Appendix 7. |
6.1 Many individuals and groups who made submissions to the Committee
were particularly concerned that the Bill would not adequately protect
consumers. [1]
Specific concerns included:
- possibility of the future removal of untimed local calls by redefining
and re-zoning local call boundaries
- reduced access to public payphones designed for use by people with
disabilities
- downgrading of provision of public telephones, particularly in remote
regions of Australia
- increased costs of telephone and telecommunications services
- emergence of a 'profits before service' culture
- particular disadvantages to women and low income groups in the community
- disadvantages relating to the provision of telecommunication services
to communities living in isolated and remote regions
- lack of access to advanced services such as the Internet
- lack of access to mobile phone network
- use of disallowable instruments within the proposed legislation
to diminish services in the future
- difficulty in access to and enforcement of consumer protection provisions
through the Telecommunications Industry Ombudsman
- limited field of coverage of the Telecommunications Industry Ombudsman
and its consumer protection mechanisms
- erosion of access to information on compliance for consumers on
service carriers and providers compliance relating to codes and standards
for telecommunications
- tardiness in upgrading current telephone system
- commercial disincentives to upgrade services in the future
- an outmoded definition of a standard telephone service
- gaps in documented knowledge and lack of basic research and information
on consumer needs and protections.
6.2 Telstra has the ultimate responsibility for providing a basic telecommunications
service throughout Australia. This is known as the Universal Service Obligation.
The Minister was reported to have said on 22 August 1996, that
he considered the Universal Service Obligation to be 'a minor issue'.
[2] However, it was a key concern of
an overwhelming number of witnesses that if Telstra was privatised the
Universal Service Obligation would be undermined. The Committee believes
that such fears are well founded for reasons discussed below.
6.3 The Universal Service Obligation, defined in subsection 288 (1)
of the Telecommunications Act, ensures:
(a) the standard telephone service is reasonably accessible to all
people in Australian on an equitable basis, wherever they reside or
carry on business;
(b) the standard telephone service is supplied to people in Australia;
(c) payphones are reasonably accessible to all people in Australia
on a equitable basis, wherever they reside or carry on business; and
(d) carriers supply, install and maintain payphones in Australia.
6.4 The Telecommunications Act provides that the USO should be fulfilled
as 'efficiently and economically as practicable'; and
(a) that the losses resulting from supply loss-making services in
the course of fulfilling the universal service obligation should be
shared among carriers on an equitable basis, namely, in direct proportion
to each carrier's share of the interconnect time between those carriers'
trunk and international networks and all local access networks; and
(b) that the information on the basis of which, and the methods by
which, those losses and those carriers' respective shares in those
losses are determined should be open to scrutiny by those carriers,
and by the public, to the greatest extent possible without undue damage
to a carrier's interests being caused by the disclosure of confidential
commercial information.
6.5 Part 13 of the Telecommunications Act provides accordingly for
the assessment, collection, recovery and distribution of the levy imposed
by the Telecommunications (Universal Service Levy) Act 1991.
6.6 Section 288 (2), ensures that the Government may, through the Minister,
determine that it is part of the Universal Service Obligation to supply,
install and maintain payphones in specified locations in Australia. There
are currently 84 000 payphones in Australia. [3]
6.7 The Universal Service Obligation is currently monitored by the Australian
Telecommunications Authority (AUSTEL). AUSTEL is expected to merge with
the Spectrum Management Agency in July 1997 to become the Australian Communications
Authority. [4]
6.8 The standard telephone service is a critical component of the Universal
Service Obligation. It defines the minimum standard of telephony for
all Australians. To assist with interpreting the definition of the Universal
Service Obligation in the Act, AUSTEL has developed a description of
what it expects Telstra to supply as 'standard' in a telephone service.
This document is known as AUSTEL's 'View'. The current AUSTEL View contains
the requirement that all Australians have:
(a) access to the public switched telephone network;
(b) the ability to make and receive automated national and international
voice grade telephone calls 24 hours per day;
(c) 24 hours-per-day access to the emergency number, which when called
by the customer, gives the customer access to emergency services,
free of charge;
(d) 24 hours-per-day access to operator assistance for directory
assistance, national and international call connection and reporting
of service difficulties;
(e) a unique telephone number, allocated in accordance with the national
numbering plan and an appropriate directory listing, except where
the customer requests otherwise, for that number;
(f) a level of privacy and security to enable users to conduct business
and personal communications with confidence;
(g) monthly billing unless otherwise requested;
(h) itemised billing for all calls, other than local calls, to all
customers as soon as practicable and in any case no later than 30
June 1997; and
(i) a level of service meeting voice grade service, in accordance
with best international practice, and meeting the relevant voice grade
recommendations of the International Telecommunication Union, including
those covering:
6.9 The definition of the standard telephone service is under consideration
by the Standard Telephone Service Review Group. [5]
The Review Group is not due to report to the Minister for Communications
and the Arts until 29 November 1996.
6.10 Telecommunications user groups, telecommunications specialists,
consumer groups and carriers, while welcoming retention of the Universal
Service Obligation, have expressed concern that they are not in a position
to assess the full impact of privatisation on consumers, as they do
not know what the Review Group will recommend nor whether its recommendations
will be implemented.
6.11 Many witnesses who supported privatisation argued that the universal
service arrangements discussed above would be unaffected by privatisation
of Telstra. These submissions ignore the effect of the repeal of section
9 of the Telecommunications Act.
6.12 Section 9 of the Telecommunications Act says that the Minister
may, after consultation with the Board, give Telstra such written directions
in relation to the exercise of the powers of Telstra as appear to the
Minister to be necessary in the public interest. Some witnesses in favour
of privatisation commented that this power was not relevant to AUSTEL's
administration of the universal service obligation under the Telecommunications
Act. These witnesses also made the point that the section had never
been used.
6.13 The Committee does not accept that section 9 is irrelevant to the
universal service obligation. The only limitation on the Minister's power
of direction is in subsection 9(2) (refer Chapter 3)
which says that the Minister must not give a direction in relation to
the amounts to be charged for work done, or services, goods or information
supplied, by Telstra. Otherwise, the Minister may direct Telstra in relation
to any exercise of its powers whatsoever, provided the Minister considers
the direction necessary in the public interest. The fact that the power
of direction has never been formally used to ensure universal access to
a particular service is irrelevant.
6.14 The task of redefining the universal service obligation and devising
an appropriate enforcement mechanism is a difficult and important one.
The Minister's Standard Telephone Service Review Group faces a complex
set of technical, social, economic and regulatory issues. Most consumer
organisations support an upgraded definition. The crucial questions
are how and when widespread access to broadband services should be made
available, and what should happen in the meantime. As noted previously,
there are widely varying views about these matters, and many of the
key industry players have not yet expressed a clear view on these issues.
6.15 The Committee accepted Professor Gillard's evidence that demand
for emerging services is uncertain:
... little is known about telecommunications consumers. If telecommunications
companies do have sophisticated market intelligence, they do not appear
to be offering it to government. Even basic statistics about which groups
use which services and to what extent, are not available for public
comment and discussion. It seems that policies based on consumer information
must be devised behind closed doors to preserve commercial confidentiality.
[6]
The Committee supported the concept that funding for consumer research
be part of broader telecommunications research, and agreed that the
Government cannot ignore the question of how short-term policy can best
facilitate long-term goals in an uncertain technological environment.
In a country as large and sparsely populated as Australia, where the
communications system plays such a central role in economic and social
development, it is particularly important for the Government to take
a central role in balancing the economic costs of accelerated deployment
of broadband services against the social costs of delay. If we ignore
the opportunities offered by broadband services, we risk being left
behind as other countries introduce new services and make themselves
more competitive.
6.16 Business Week summed up the policy questions as follows:
By the end of the century, telecommunications in most advanced
countries will be radically transformed. New kinds of switches, transmission
gear, and software will make it possible to send colourful, 3-D images
just by dialling a phone number. Videoconferences will be cheap and
frequent. Rivers of bits and bytes will flow across the country on fibre-optic
lines. But information superhighways won't appear by themselves. Many
nations, notably France, Singapore, and Japan have formed national programs
to build advanced networks, with close coordination between the government
and the leading national phone company. The US, meanwhile, is counting
on competition among profit-minded companies to fill customers' needs.
But laissez-faire has a dark side in telecommunications: incompatible,
competing networks and uncertainty that slows down investment. [7]
6.17 Another leading commentator has noted that:
… we run into a classic chicken-and-egg problem. How will
user demand develop if there is no network in place and how will the
network develop absent user demand? The solution rests on forward-thinking
policy decisions that best anticipate tomorrow's needs. [8]
6.18 The Committee endorses the conclusion of the Broadband Services
Expert Group in its Final report, Networking Australia's Future, that:
Profound changes lie ahead, but meeting them is not just a matter
of building infrastructure and technology. Rather, we need to build
a platform that will underpin our future society promote social interaction,
enrich education, improve health services, enhance the delivery of government
services, and improve competitiveness for businesses and the economy.
We also need to manage change sensitively. [9]
6.19 The Committee notes the useful analysis of these policy issues in
Dr Roger Buckeridge's report Rural Australia Online, and its companion
report by Mr Jim Groves, Policy Issues in Putting Rural Australia Online.
[10] The authors note that an obvious
question to be answered by anyone advocating an upgraded universal service
obligation is 'why should the competitiveness of non-rural industries
be hampered more than it is now by the provision of a cross-subsidy to
the rural sector?' They note this question must be answered by demonstrating
the existence of 'market failures' and 'externalities'. A 'market failure'
is where a well-designed policy intervention can produce a better outcome
than will be the case with the untrammelled operation of market forces;
'externalities' arise when the benefits (or costs) of an activity flow
beyond the immediate decision-maker, who therefore faces a distorted set
of incentives from society's broader point of view. For intervention to
be justified, it must be shown that, in the practical world, the benefits
of the intervention exceed the costs.
6.20 Dr Buckeridge and Mr Groves point out that the new electronic
information systems have important synergies with education and training
concerns, with significant potential to assist improvements in access
to education and training. They also note that the new systems can,
for example, provide access to information of value to farm management.
From society's point of view, they argue, a particularly prominent benefit
of this would be in the environment area, as improved farm practices
can be expected to lead to a more ecologically sustainable farm sector.
In addition, there would be direct benefits to governments through the
exploitation of more efficient channels for information flows between
government agencies and their customers.
6.21 The Committee agrees that benefits such as these could well provide
an even greater justification for intervention than was the case for
the existing universal service obligation. This justification clearly
goes beyond traditional arguments about equity of access.
6.22 The Committee notes Dr Buckeridge's recommendation that:
At a very minimum, the 'basic telecommunications service' should
require Telstra to provide its 2.2 million country, rural and remote
users with a customer access network that will support V.34 'smart'
modem access, at a transmission rate of at least 9600 bits per second.
Any other licensed network provider who wishes to serve these markets
should also comply with this minimum service definition. [11]
6.23 Most telecommunications users groups recommend the adoption of a
64 kbps service. The Committee accepts that the early specification
of the standard telephone service as having a 64 kbps capability
would revolutionise communications capability across Australia. Such a
capability is the core component of the national telecommunications network
being installed by Telstra under its Future Mode of Operations program.
[12] This would provide high speed
facsimile and data transmission, Internet access, base quality video conferencing
and voice telephony. (For a brief analysis of bandwidth, networks and
service quality, see Explanatory Notes, Appendix 7).
| RECOMMENDATION 14:
The Committee recommends the Standard Telephone Service Review Group
consider an immediate upgrade of the standard telephone service
to a 64 kbps service. |
6.24 Given the rapid changes in technology which are occurring, the
Committee also considers it crucial that the Telecommunications Act
be amended to ensure that the definition of the Universal Service Obligation
is regularly reviewed. Failure to regularly upgrade the Universal Service
Obligation to keep up with changing technologies will result in Australia's
consumers being denied continuing improvements to telecommunication
services.
| RECOMMENDATION 15:
The Committee recommends regular reviews of the Universal Service
Obligation be guaranteed in legislation. |
6.25 The Committee welcomes the review of the standard telephone service
definition announced by the Minister on 10 July 1996. However, the Review
Group cannot be expected to solve, in just a few months, the fundamental
dilemma that demand for new communications services is uncertain, as
is the precise nature of technological change, and the social implications
of new communications. As noted by the Broadband Services Expert Group
in its December 1994 Final Report, Australia needs a strategy for dealing
with the dilemma, and a central element of that strategy must be a managed
evolutionary approach:
The strategy must also be based on an environment in which the
participants can be brought together in the public interest and policy
developed in response to changing technologies and services. Coordination
between all participants will be vital to ensuring that Australia is
prepared for the future ...The most important part of the strategy is
leadership. We need leadership at the highest levels. [13]
6.26 This is a period of great opportunities to build a fairer, wealthier,
better educated and better informed nation. Government must take the
lead in implementing a national strategy for the adoption of the new
information and communications technologies and services. The ability
to take such a lead is far greater while Telstra remains in public ownership
and the Government is able to direct Telstra to make investment decisions
which may not be justified on purely commercial criteria. The Government
may decide to accept a sub-optimal rate of return on its investment
in order to promote other social and economic objectives, such as the
provision of services to rural and remote areas.
6.27 As noted by the Communications, Electrical and Plumbing Union
(CEPU) in its submission, the trade-off between lower returns and other
greater social benefits is irrelevant under public ownership, provided
the benefits accrue to the community as a whole. But the character of
this equation changes radically under private ownership, which introduces
a fundamental tension between profit-maximisation and broader social
goals.
6.28 The Government argues that the ongoing provision of the Universal
Service Obligation is guaranteed by legislation. Mr Paul Rizzo, Telstra's
Group Managing Director of Finance and Administration, outlined Telstra's
position and indicated that, privatised or not, Telstra looked to government
legislation to define consumer safeguards and universal service obligations.
In Telstra's view:
parliament should openly set the legislative framework within
which the company is to operate, balancing the political, social and
economic interests of the nation, and leave the board and management
to meet its responsibility to act in the commercial interests of shareholders
within that framework. [14]
6.29 Mr Rizzo acknowledged the need to protect consumers' interests
and stated:
Safeguards for appropriate sectional interests can and are being
built into the enabling and regulatory legislation for the proposed
privatisation of Telstra ... [15]
6.30 The Committee noted, however, that Telstra is already advocating
a less onerous Universal Service Obligation involving targeted rather
than universal service. Telstra's submission says:
Telstra considers that where such [USO] service requirements
are identified, a targeted rather than universal approach to service
provision is more logical and significantly less costly. In this way
social support can be matched to need at minimum public expense.
Telstra suggests services should only be considered as candidates
for universal service provision when they are widely used and socially
significant. [16]
6.31 When questioned on the issue, Mr Graeme Ward, Telstra's Group Director,
Regulatory and External Affairs, suggested that governments look at targeted
assistance for 'certain areas of the population'. [17]
6.32 The pressure to dilute the Universal Service Obligation would
be exacerbated by partial privatisation. The Committee notes that it
is the right of private shareholders to expect the Telstra management
and Board to focus their efforts upon the objective of profit maximisation
and to lobby the Government to ensure any impediments to this aim are
removed. Removal of the constraints imposed by the Universal Service
Obligation would clearly be a high priority and thereby place its ongoing
provision in jeopardy in the long term.
6.33 The Committee believes that it is the right of the majority shareholder
— the Australian community — to expect the Government as their
representative to ensure Telstra also pursue social objectives. The
power of the Government to ensure that Telstra continue to pursue social
objectives will be seriously eroded, if not entirely removed, by the
removal of the Minister's power to direct Telstra in the public interest.
This inherent tension introduced by partial privatisation is impossible
to resolve.
6.34 As the CEPU submission pointed out, market forces alone have never
been adequate to create a reliable, ubiquitous, integrated network such
as is needed to underpin the universal delivery of 'plain old telephone
services' (POTS), let alone the capabilities required to provide the
more advanced services now being developed. The achievement of such
social goals has always required government intervention.
6.35 The Committee considers that the lack of any detailed explanation
from any witness as to how the Universal Service Obligation will be
protected if Telstra is privatised is, in itself, sufficient reason
to recommend that Telstra continue in full public ownership.
6.36 Equity of access, and whether the USO adequately covers the emerging
and developing needs of the rural sector, and regional and remote Australia,
were raised by a number of witnesses at hearings and in submissions. At
the hearing held in Perth, Mrs Ann Lewis, State President, National Committee
for Australian Women in Agriculture, made the point that, for rural people,
the tyranny of distance remained very much part of daily life. She suggested
that the 'most obvious way of minimising that [distance] is with high
standards of communications' and pointed out that many services taken
for granted in metropolitan areas were not available to people at many
rural exchanges. She referred to the following services unavailable to
such subscribers, namely: [18]
- tone dialling
- call waiting facility
- inquiry conferencing
- call forwarding
- diversion to other services
- itemised accounts
- untimed local calls.
6.37 Mrs Lewis voiced her concerns over the costs of access to rural
and regional subscribers and the lack of research into the use of telecommunications
by rural and remote Australians: [19]
There has been very little visible research into the use of telecommunications
by rural and remote Australians. No-one dreamt of the rate at which
rural Australia took up the fax machine. Most of rural Australia would
have said it was unnecessary five years ago. Nearly everyone has a phone
fax today. At the moment, an isolated few are venturing into Internet
and email use. They are being hampered by the cost of accessing such
services. We rural Australian business people need a telecommunications
provider who is considerate of the customer's needs and is prepared
to discuss with us the technology available. [20]
6.38 Mrs Lewis suggested, referring to term of reference (h) that Telstra
needed to look closely at the untimed local component of the USO. Access
to doctors, accountants, lawyers or any other business contacts via telephone
from rural areas was often beyond the range of local calls. Although she
was reminded that guaranteed universal service obligation in the Bill
reference to equity of access, [21]
Mrs Lewis reminded the Committee that in remote and rural regions, consumers
saw no 'universal' services provided:
We see ourselves a very poor cousin in relation to the facilities
that are becoming available in other parts of Australia. [22]
6.39 Mr John Rice of Queensland University of Technology, commented
that the Government should:
amend legislation in the Senate to ensure that any service provided
to consumers in urban Australia will be provided within a reasonable
space of time to consumers throughout Australia, otherwise you have
a system of apartheid, a system of separation of urban consumers and
regional, rural and remote consumers from what we would consider to
be a basic human need — that is convergent communications services.
[23]
6.40 These arguments confirm the need for an immediate upgrade of the
Universal Service Obligation, and regular reviews as recommended by
the Committee. The Committee believes this can only be guaranteed if
Telstra remains in full public ownership and the power of the Minister
to direct Telstra in the public interest is retained.
| RECOMMENDATION 16:
The Committee recommends the provision of high quality telecommunications
services to rural and remote areas be made available through a publicly-owned
Telstra as a high priority. |
6.41 Ms Harlow of AUSTEL raised the issue of the need to recognise
the special needs of some groups who are not identified in the Bill.
Ms Harlow referred specifically to educational institutions and people
with disabilities:
Other considerations include the prioritisation of needs of some
groups, such as educational institutions and people with disabilities.
We believe there will be an advantage in ensuring that any new element
of the telecommunications regime with a USO definition would benefit
from clarity and some certainty and also from an awareness that these
concepts could be proposed as part of the USO. [24]
6.42 A similar point was raised by the Tasmanian Consumers' Association
in their submission relating to the Ministerial Discussion Paper (May
1996), and the USO provisions of the Bill. Ms Cora Trevarthen, President
of the Tasmanian Consumers' Association, indicated her concern for consumers
with disabilities. In her submission, she wrote:
The [Government's May 1996] Discussion Paper essentially indicates
that the Government no longer wants to provide access for people with
disabilities, they can fight for their rights in the courts if they
want. [25]
6.43 Consumers have not been reassured by the Government's promise
to continue targeted assistance for low-income earners and those with
special telecommunications needs. Consumers are concerned that future
social policy may result in the dilution or removal of measures such
as targeted assistance for low income earners, consumers with special
needs and the elderly.
| RECOMMENDATION 17:
The Committee recommends provision of new technologies to people
with special needs be included as part of the Universal Service
Obligation. |
6.44 The Committee notes that under new Part 2C of the Bill, cl. 8CM
'Re-affirmation of universal service obligation', telecommunications carriers
are required to carry out the universal service obligation described in
section 288 of the Telecommunications Act 'as efficiently and economically
as practicable'. [26]
6.45 While this wording exists in the current legislation, the Committee
considers that private shareholders may seek to exploit possible loopholes
such as this in pursuit of profit maximisation. Under full public ownership
there is an implicit understanding that management and the Board will
abide by the spirit of the law and not simply its letter. For example,
it may be possible to reduce obligations under the legislation on the
basis that provision of certain services to remote areas of Australia
is unjustified on the basis of 'efficiency and economy'. Bearing in
mind a company's corporate obligation to return profits to shareholders,
excessive costs may be grounds for a telecommunications carrier to seek
suspension of the obligation.
6.46 Clause 8CM (1)(c) states that 'losses that result from supplying
loss-making services in the course of fulfilling the universal service
obligation should be shared among carriers on an equitable basis …'
While clause (1)(d) states that losses as determined 'should be open
to scrutiny by those carriers, and by the public', this is qualified
by the proviso that this information should be provided 'without undue
damage to a carrier's interests being disclosed by the disclosure of
confidential commercial information'.
6.47 The wording of these clauses may effectively subvert the Universal
Service Obligation over time, and, in limiting scrutiny under the guise
of 'commercial in confidence' information, has the potential to limit
the extent of carriers' accountability to the public.
6.48 Opponents of the privatisation of Telstra argue that, regardless
of any immediate safeguards, it will be very difficult to maintain the
cross-subsidies which underpin the Universal Service Obligation in a deregulated
telecommunications market. [27] Privatisation
would exacerbate this difficulty.
6.49 The Committee noted that the most enthusiastic advocates of privatisation
recommended that the Universal Service Obligation should be funded from
consolidated revenue. For example, Telstra suggested in its submission
that in the post July 1997 arrangements, the Universal Service Obligation
could be transferred to 'an on-Budget provision'. [28]
6.50 The Committee is concerned that if funding of the Universal Service
Obligation was drawn from consolidated revenue, over time budgetary pressures
will see the value of the Universal Service Obligation eroded. Figures
provided to the Parliament by Telstra indicate that the NUSC [Net Universal
Service Cost] for 1993-4 was in the region of $226 million. [29]
These figures, shown in Appendix 8, reveal the cross-subsidies in each
Federal Electorate.
6.51 If the Government decides to upgrade the definition of the standard
telephone service, this figure would increase substantially. Such expenditure
would immediately become the focus of Government's seeking budgetary
cutbacks.
| RECOMMENDATION 18:
The Committee recommends the Universal Service Obligation continue
to be funded by the carriers rather than from consolidated revenue. |
6.52 Finally, the Committee notes that the current Minister, Senator
Alston, has in the past written that:
There is good reason to conclude that universal service has now
been achieved. Whilst there may be some households which are not connected
to the service for economic reasons it does not follow that financial
assistance is necessarily appropriate. Some individuals may be nearly
as accessible through a close neighbour's phone, a pay phone down the
hall, a phone at work or even the postal service. [30]
6.53 As the Minister has expressed these views in the past, the Committee
considers that consumers are right to be sceptical about his current
assurances that he is totally committed to the concept of universal
service and its ongoing upgrade.
6.54 The Government has sought to allay concerns about the outcomes of
privatisation on consumers by introducing the Customer Service Guarantee.
The Committee accepts the submission that this initiative itself amounts
to a tacit admission that market forces act as no guarantor of quality
in the telecommunications sphere. [31]
6.55 The Committee, in principle, supports the provision of a Customer
Service Guarantee in legislation. However, the Committee notes that
many witnesses expressed grave concerns about the scope and form of
the proposed Customer Service Guarantee scheme. The Committee considered
that the legislation required substantial strengthening and clarification
before being enacted.
6.56 The Customer Service Guarantee will establish mandatory performance
standards for carriers in a number of areas of service delivery, primarily
related to the time taken for connecting telecommunications services
and the period for rectifying faults and service difficulties. Failure
to meet these standards will incur a financial penalty of up to $3 000.
6.57 The scheme enables the issue of an evidentiary certificate which
will be prima facie evidence of a contravention of a performance standard,
a function to be performed by the Telecommunications Industry Ombudsman
if he or she accepts the function, and, if not, by AUSTEL.The submission
prepared by the Telecommunications Industry Ombudsman implies that the
Ombudsman is prepared to undertake the function of issuing evidentiary
certificates.
6.59 It is expected that carriers will voluntarily compensate consumers
for any failure to meet service standards, but ultimately, any penalty
will only be enforceable through the courts.
6.60 One concern about the Customer Service Guarantee was that the Bill
did not give sufficient emphasis to what should be the primary obligation
of a carrier to resolve a customer's complaint about a breach of a performance
standard instance. [32] Sub-Clause
87F (4) provides that the liability of a carrier for a breach of a performance
standard may be discharged by giving the customer a credit in an account
with the carrier, or in any other manner agreed between the carrier and
the customer. In this regard, the Telecommunications Industry Ombudsman
recommended that should be given greater prominence as an entirely separate
clause.
6.61 Mr Pinnock, the Telecommunications Industry Ombudsman, also noted
that the Bill:
fails to give sufficient emphasis to the role of the TIO as an
alternative dispute resolution forum for dealing with consumer complaints
where a carrier has failed to resolve a customer's dispute about a breach
of Customer Service Guarantee. [33]
6.62 In particular, the Telecommunications Industry Ombudsman was concerned
that the Bill does not make it clear that the right of a customer to
sue a carrier for damages under clause 87F for breach of a performance
standard is intended as a weapon of last resort. Mr Pinnock noted that
few consumers would either be interested in, or have the resources to
contemplate, litigation whether in a consumer claims tribunal or in
any other forum.
6.63 Similarly, Mr Pinnock noted that the Bill did not emphasise that
the right of the TIO to issue an evidentiary certificate under Clause
87H was intended as a 'reserve' power. [34]
6.64 The TIO recommended that a new sub-Clause be added to Clause 87H
(Evidentiary certificate issued by the Telecommunications Industry Ombudsman)
as follows:
Nothing in this section affects the right of a customer to complain
to a customer to complain to the Telecommunications Industry Ombudsman
about a breach of a performance standard. [35]
6.65 The Committee notes the TIO's assertion that Clause 87J of the Bill
(Waiver of Guarantee of Service), was questionable and that in its present
form it might lead to pressure being exerted on consumers to forego their
rights in order to obtain cheaper services. [36]
6.66 A major criticism made by the TIO concerned the way in which the
Customer Service Guarantee was expressed in the Bill. In its present wording
it failed to emphasise that it remained the responsibility of the carriers
to resolve consumer complaints in the first instance, rather than relying
upon consumers having to resort to proceedings in a court of competent
jurisdiction for the recovery of damages. [37]
6.67 This point was also raised by Consumers' Telecommunications Network
witness, Ms Helen Campbell, in evidence in relation to evidentiary certificates.
[38] Ms Campbell pointed out that consumers
could resort to the Federal Court if carriers such as Telstra failed to
fulfil contractual and service obligations, but few customers were prepared
to undertake such proceedings, especially when relatively small sums were
involved. Ms Campbell stated to the Committee that:
... a process which has to be enforced through the Federal Court
is effectively useless to most consumers. [39]
6.68 Ms Campbell emphasised that, although the Telecommunications Industry
Ombudsman provided consumer protections, the concern was that the Bill
did not provide 'an accessible enforcement mechanism', and that the Telecommunications
Industry Ombudsman did not have 'a comprehensive coverage of the field':
[40]
Here I am and my telephone line is faulty and I have an inexcusable
delay in getting it fixed. That is good because I have a customer service
guarantee that says I am fortunately dealing with a carrier and not
with a service provider because if was dealing with a service provider
I would not have the protection at all. [41]
6.69 CTN also noted that the Customer Service Guarantee did not provide
any mechanism for ongoing consultation with consumers, nor for any monitoring
of consumer impacts of the less regulated aspects of the telecommunications
industry. [42]
6.70 CTN noted that the Customer Service Guarantee only applied to
carriers, while in the post-1997 deregulated market most consumers would
be dealing with service providers who were not covered in the Bill.
6.71 Mr Pinnock referred specifically to consumers' ability to gain
full protection under the proposed legislation. Mr Pinnock stated in
his submission:
... it is essential for the TIO to have full coverage, not only
of carriers, but of carriage service providers from 1 July 1997 to ensure
a contained level of consumer protection and redress. [43]
6.72 Mr Pinnock referred to the 'compliance model' proposed in the Government's
discussion paper Post 1997 telecommunications legislation [44]
and stressed the need for legislation to set out a specific service provider
rule requiring carriage service providers to be 'participants in the TIO
scheme, rather than merely having to comply with the Scheme' . [45]
6.73 The TIO argued that there are benefits to be gained from the registration
of service providers with the regulator. [46]
| RECOMMENDATION 19:
The Committee recommends mandatory registration of service providers
with the regulator be introduced as part of the post-1997 environment.
|
6.74 CTN believes that the Customer Service Guarantee should be more
comprehensive, covering network upgrades, network congestion, transmission
and other quality issues. [47]
6.75 In a series of recommendations, CTN has recommended that a proper
framework of consumer protection be established before a decision is
made about the privatisation of Telstra; that the legislation provide
for consumer participation in the Telecommunications Access Forum; and
that legislation provide for consumer consultation at all stages of
development and review of codes.
6.76 The Communications Law Centre considered that the proposed Customer
Service Guarantee would provide inadequate safeguards if Telstra were
privatised. The Centre's submission argued the legislation, 'does not
appear to cover indicative performance standards set by AUSTEL under section
38(2)(b) of the Telecommunications Act 1991'. [48]
The Communications Law Centre submitted that:
A key concern in relation to the Customer Service Guarantee scheme
is that performance standards, other than those specified in the Bill,
can only be set by AUSTEL on ministerial direction. If the Minister
chooses not to act and direct AUSTEL to establish other performance
standards, then nothing will happen - AUSTEL will not be able to set
standards and the public will not be protected and benefit from an area
where there may be a quite apparent need for improvement ... [49]
6.77 The possibility of tardiness or inaction in upgrading the Customer
Service Guarantee, without the guarantee of regular review to incorporate
further enhancements in the future, has been highlighted as a weakness
in the legislation.
6.78 The Australian Telecommunications Users Group (ATUG) recognises
positive steps in the proposed legislation covering consumer protections
and the Customer Service Guarantee, but cautioned that consumer protections
in the proposed legislation were 'a first step'.
6.79 Ms Sue Harlow, a member of AUSTEL, stated in evidence that AUSTEL
'is strongly supportive of a scheme of customer service guarantees.'
Referring to the Bill, however, she noted that the legislation was imprecise:
The legislation does not spell out the operation of these guarantees
in great detail; and the attention given to definitions within the ministerial
directions, which are left open in the legislation, will be quite important
in defining the material to be required provided by carriers, and thus
the protection for consumers ... the effectiveness and the benefits
to consumers will depend to a very substantial degree on some of the
definitions adopted within the ministerial directions about how that
scheme should be put in place. [50]
6.80 The Australian Consumers' Association (ACA) recommended that customer
service guarantees should be extended to include performance categories
covering 'network performance, congestion, signal quality, connection
reliability and ... billing accuracy. [51]
6.81 The ACA also recommended that the Customer Service Guarantee should
incorporate privacy provisions, and that membership to the Telecommunications
Industry Ombudsman Scheme be made mandatory for carriers and service providers.
[52]
| RECOMMENDATION 20:
The Committee recommends the Government confirm that critical issues
of consumer concern, especially privacy, be handled through legislation
and not through codes of practice. |
6.82 In conclusion, the Committee believes the Government undertook
inadequate consultation in the formulation of the proposed Customer
Service Guarantee. This is reflected in the concerns brought to the
attention of the Committee by all major consumer groups. The TIO noted
with regret the lack of consultation between the Department of Communications
and the Arts and the office of the Telecommunications Industry Ombudsman
when the Department was drawing up the Bill. He stated that consultation
was 'minimal':
I first saw the Bill in its draft form, I think, about three
hours before it was introduced into the Parliament. [53]
RECOMMENDATION 21:
The Committee recommends prior to enacting legislation to introduce
the Customer Service Guarantee, the Government should establish
a working party including representatives of each of the carriers,
the Telecommunications Industry Ombudsman, AUSTEL, Australian Telecommunications
User Group, Consumers' Telecommunications Network, the Australian
Consumers' Association and the Communications Law Centre, for the
purpose of formulating more satisfactory legislative provisions
concerning the Customer Service Guarantee. The working party should
include the following in its considerations:
- the amendments to clauses 87F, J, and H. proposed by the Telecommunications
Industry Ombudsman;
- an amendment to ensure that the Customer Service Guarantee
applies to service providers as well as to carriers;
- extension of the Customer Service Guarantee to cover items
such as network upgrades, network congestion, transmission,
signal quality, connection reliability, billing accuracy and
operator-assisted services;
- a provision in the Bill ensuring regular reviews of the Customer
Service Guarantee; and an amendment to ensure the Australian
Communications Authority may, of its own volition (ie without
the necessity for any Ministerial direction), establish performance
standards other than those specified in the Bill.
|
6.83 The Government has foreshadowed that consumer safeguards in the
post- 1997 regulatory regime will depend heavily on the use of codes
of practice developed by industry. Compliance with these codes of practice
is to be based on industry self regulation.
6.84 The discussion on the use of these codes of practice in the Government's
May 1996 discussion paper is sketchy. The Government has indicated that
mandatory standards-making powers would be used for 'matters that the
Government considers clearly require attention' while industry-developed
codes could deal with other 'important, but less critical issues'. The
discussion paper does not indicate precisely what it means by 'less
critical issues'. Consumer fears have been heightened by rumours that
matters such as privacy will be handled within codes of practice. It
is not clear how many codes of practice will exist, what their subject
matter will include, how they will be monitored, nor whether consumer
groups will have any input.
6.85 Ms Cora Trevarthen, speaking on behalf of the Tasmanian Consumer's
Association, indicated that consumer protections should be mandatory
requirements and not open to qualifications by carriers.
In terms of technical regulation, we support the application
of mandatory and inter-operable standards, but draw the committee's
attention to the fact that an overarching regime of self-regulation
leaves open the possibility of wide variation of services and equipment
across regions and networks. We are concerned, obviously, as a regional
community, to ensure that less profitable regional and rural areas have
the capacity to access technology and services equivalent to those in
more profitable telecommunications markets. [54]
6.86 The Australian Consumers' Association (ACA) suggested that in order
to protect the best interests of consumers, there be direct consumer representation
on Telstra's Board. This measure would ensure accountability and allow
consumer participation in the process of 'policy settings, including access
arrangements, regulation of anti-competitive conduct and arrangements
for participating in co-regulatory mechanisms for code setting'. [55]
6.87 The ACA noted the negative aspects of the proposed consumer protection
safeguards, particularly in relation to subordinate legislative instruments.
While the proposed regulatory framework might be 'adaptable and responsive
to consumers needs and demands ... it leaves important detail to the vagaries
of progress, subject to delay, uncertainty and disagreement between the
players, regulators and other stakeholders'. [56]
The ACA pointed to recent experience of problems in the mobile phone market.
6.88 The Committee noted that AUSTEL also strongly voiced a preference
for a mandatory consumer protection regime:
With the expected move in mid-1997 to open competition and greater
industry self regulation, AUSTEL strongly supports a more proactive
consumer protection regime including quality of service standards which
can be made mandatory. [57]
| RECOMMENDATION 22:
The Committee recommends codes of practice for consumer protection
be mandatory for all carriers and service providers. |
6.89 In conclusion, it was clear from submissions and evidence received
that consumers and consumer representative groups, as well as the current
and future regulatory bodies, viewed the proposed legislation as having
distinct weaknesses in the arena of consumer protection safeguards.
| RECOMMENDATION 23:
The Committee recommends legislation be drafted to provide for
consumer representation on a full voting basis, at all stages of
development of codes of practice. |
| RECOMMENDATION 24:
The Committee recommends time limits be clearly set out for
the development of codes of practice. These time limits should allow
for adequate public input and consumer consultation. As a minimum,
all codes should be finalised and approved by AUSTEL by 1 July 1997.
Otherwise, AUSTEL should be empowered to immediately intervene and
develop codes. |
Footnotes
[1] Key groups that made major submissions
and gave evidence on consumer protection were:
Australian Competition and Consumer Commission, Submission No.266,
Vol.9.
Australian Consumers Association, Submission No.340, Vol.13.
Australian Council of Trade Unions, Submission No.127, Vol.3.
Australian Telecommunications Authority (AUSTEL), Submission No.201,
Vol.7.
Australian Telecommunications Users' Group, Submission No.202, Vol.8.
Centre for Social and Welfare Research, Submission No.302, Vol.11.
Communications Law Centre , Submission No.343, Vol.13.
Communications, Electrical and Plumbing Union (CEPU)/
Community and Public Sector Union (CPSU), Submission No.296, Vol.10.
Consumers' Telecommunications Network, Submission No.200, Vol.7.
National Committee for Australian Women in Agriculture, Submission
No.264, Vol.9.
Service Providers Action Network (SPAN), Submission No.313, Vol.12.
Tasmanian Consumers' Association, Submission No.363, Vol.14.
Telecommunications Industry Ombudsman, Submission No.135, Vol.4.
Telecommunications Needs Research Group, Submission No.362, Vol.14.
Women's Economic Think Tank and National Women's Media Centre, Submission
No.308, Vol.11.
[2] 'Harradine wants more cash for Tasmania
in Telstra deal', Canberra Times, Thursday, 22 August 1996.
[3] Telecommunications Strategies Report,
P.Budde Communications P/L, Sydney, 1996-97.
[4] The Australian Communications Authority
Bill 1996 (discussed in Chapter 2), is to be introduced
into the Senate for passage in the 1996 Spring sitting. According to the
Government, passage of the Bill will 'enable participants in the telecommunications
industry to plan their investments, develop codes of practice, access
codes and undertakings (dealt with by the Trade Practices Amendment (Telecommunications)
Bill 1996) and make other appropriate arrangements'. Statement of Reasons
for the Senate, Senator the Hon Richard Alston, Minister for Communications
and the Arts.
[5] The Standard Telephone Service Review
Group is to review whether the definition of the Standard Telephone
Service (STS) mandated under the universal service arrangements should
be upgraded to accommodate new technologies and minimum service levels.
The objective of the Review is to determine whether recent and emerging
developments in telecommunications technology, or increased demand for
more advanced telecommunications services in the Australian community,
warrant a change in the level of service mandated under the Universal
Service Obligation.
[6] Professor Patricia Gillard, Department
of Communication Studies, and Director, Telecommunications Needs Group,
RMIT, Submission No.362, Vol.15, p.2866.
[7] Business Week, 16 September 1991,
cited by Henry Geller, 'Fiber Optics: An Opportunity for New Policy?'
A Report of the Annenberg Washington Program, Communications Policy
Studies, Northwestern University, p.4, (n.d.)
[8] Business Week, 16 September 1991,
cited by Henry Geller, 'Fiber Optics: An Opportunity for New Policy?'
A Report of the Annenberg Washington Program, Communications Policy
Studies, Northwestern University, p.5.
[9] Networking Australia's Future, Final
Report of the Broadband Services Expert Group, December 1994, p.iv.
[10] Rural Industries Research and Development
Corporation, May 1996.
[11] Rural Industries Research and Development
Corporation, May 1996, p.9.
[12] Mr A. Horsley, Australian Telecommunications
Users' Group, Submission No.202, Vol.8, p.1490.
[13] Networking Australia's Future, Final
Report of the Broadband Services Expert Group, December 1994, p.ix.
[14] Mr P.Rizzo, Group Managing Director,
Telstra, Official Hansard Report, 3 July 1996, p.102.
[15] Mr P.Rizzo, Telstra Corporation Limited,
Official Hansard Report, 3 July 1996, p.103.
[16] Mr P.Rizzo, Telstra Corporation Limited,
Submission No.189 Vol.7, p.1320-1321.
[17] Mr G. Ward, Group Director, Regulatory
and External Affairs,Telstra, Official Hansard Report, 3 July
1996, p.114.
[18] Mrs A. Lewis, National Committee for
Australian Women in Agriculture, Official Hansard Report, 4 July
1996, p.301.
[19] See also Professor P. Gillard, Official
Hansard Report, 30 July 1996, passim.
[20] Mrs A. Lewis, National Committee for
Australian Women in Agriculture, Official Hansard Report, 4 July
1996, p.302.
[21] Senator W. O'Chee (QLD, NAT), Official
Hansard Report, 4 July 1996, p.303.
[22] Mrs A. Lewis, National Committee for
Australian Women in Agriculture, Official Hansard Report, 4 July
1996, p.304.
[23] Mr J. Rice, Official Hansard Report,
11 July 1996, p.410.
[24] Ms S. Harlow, AUSTEL, Official Hansard
Report, 30 July 1996, p.959.
[25] Ms C. Trevarthen, President, Tasmanian
Consumers' Association, Submission No 363, Vol.15, p.2877.
[26] Telstra (Dilution of Public Ownership)
Bill 1996, p.48.
[27] A. Brown, Should Telstra be Privatised?
School of Economics, Griffith University, Working Paper, No.8 (February
1996), cited in Bills Digest No.72, 1995-6, Parliamentary Research
Service, Department of the Parliamentary Library, Canberra, p.7.
[28] Mr P.Rizzo, Group Managing Director,Telstra
Corporation, Submission No.189, Vol.7, p.1321.
[29] Answer. House of Representatives, Question
on Notice (No.2757), from Mr Mark Latham, MP, (ALP) re: Telecommunications
Cross Subsidy in each Federal Electorate.
[30] Senator R. Alston, 'Time For Some Real
Competition: Is Telecom's Universal Service Obligation Still Relevant?'
in M. Armstrong, (ed.) Telecommunications Law: Australian Perspectives
Melbourne: Media Arm, 1990.
[31] Communications, Electrical & Plumbing
Union, Submission No.296, Vol.10, p.1884.
[32] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135 Vol.4, p.816.
[33] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135, Vol.4, p.816.
[34] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135, Vol.4, p.816.
[35] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135, Vol.4, p.817.
[36] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135, Vol.4, p.817.
[37] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Official Hansard Report, 3 July 1996, p.230.
[38] Ms H. Campbell, Consumers Telecommunications
Network, Official Hansard Report, 12 July 1996, p.514.
[39] Ms H. Campbell, Consumers Telecommunications
Network, Official Hansard Report, 12 July 1996, p.508.
[40] Ms H. Campbell, Consumers Telecommunications
Network, Official Hansard Report, 12 July 1996, pp.514-515.
[41] Ms H. Campbell, Consumers Telecommunications
Network, Official Hansard Report, 12 July 1996, p.514.
[42] CTN Newsletter, Issue 18, June
1996, p.12.
[43] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135, Vol.4, p.814.
[44] Senator The Hon R. Alston, Minister
for Communications and the Arts Telecommunications Working Forum, Discussion
Paper Post 1997 Telecommunications Legislation, 16 May 1996,
p.22.
[45] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Submission No.135, Vol.4, p.814.
[46] Mr J. Pinnock, Official Hansard Report,
3 July 1996, p.231.
[47] Ms H. Campbell, Consumers Telecommunications
Network, Submission No.200 Vol.7, pp.1410-1411.
[48] Mr J. Given, Communications Law Centre,
Submission No.343 Vol.13, pp.2622-2623.
[49] Mr J. Given, Communications Law Centre,
Submission No.343 Vol.13p.2623.
[50] Ms S. Harlow, AUSTEL, Official Hansard
Report, 30 July 1996, p.959-960.
[51] Australian Consumers Association, Official
Hansard Report, 12 July 1996, pp.537-538.
[52] Australian Consumers Association, Official
Hansard Report, 12 July 1996, p.538.
[53] Mr J. Pinnock, Telecommunications Industry
Ombudsman, Official Hansard Report, 3 July 1996, p.229.
[54] Ms C. Trevarthen,Tasmanian Consumers'
Association, Official Hansard Report, 30 July 1996,
p.948.
[55] Mr B. Melville, Australian Consumers'
Association, Submission No.340, Vol.13, p.2517-2518.
[56] Mr B. Melville, Australian Consumers'
Association, Submission No.340, Vol.13, p.2518.
[57] Ms S. Harlow, AUSTEL, Submission No.201,
Vol.7, p.1466.