Stakeholder views and key issues
This chapter examines the proposed amendments contained in the bills in
detail. The chapter starts by presenting a summary of stakeholders' overall
positions on the bills as well as additional information received during this
inquiry that is relevant for considering the intent and structure of the bills.
The majority of the chapter is devoted to examining the evidence
received from stakeholders that commented in detail on specific proposed measures.
The three categories of measures contained in the bills are addressed in
separate sections. The committee's views on the issues raised in evidence
about particular proposed measures are outlined at the end of these sections
while the committee's overall conclusions on the bill can be found at the end
of the chapter.
In conducting this inquiry, the committee has focused on evidence
received during this inquiry that specifically addresses the provisions of the
bills. Nevertheless, the committee is cognisant that this inquiry follows a
recent Productivity Commission (PC) inquiry into the
telecommunications universal service obligation (TUSO). Several stakeholders
referred to the PC's report and the committee has noted comments in the PC's report
that are relevant to the measures contained in the bills. Notwithstanding this,
the committee emphasises that the government is currently considering the
PC's report as part of a separate policy development process which does
not have any direct implications for parliamentary consideration of the bills.
Overall views and other comments on the bill
Submissions from consumer groups and regional industry or community organisations
were supportive of the bills, particularly in relation to the Regional
Broadband Scheme (RBS) and statutory infrastructure provider (SIP) obligations.
For example, strong support for the bill was given by the Regional, Rural and Remote Communications Coalition
(RRRCC), which represents 20 consumer, regional and agricultural industry
The RRRCC submitted that it welcomes the package of bills and 'would like to
see it enacted as soon as possible'.
Telstra supports the overall intent of the bills; however, it has
various concerns with how aspects of the bills have been drafted, such as the
scope of particular provisions.
Businesses affected by the RBS focused on that aspect of the bill.
Several of these businesses do not support the RBS in its current form, arguing
that the RBS should not proceed while the government is considering the future
of the TUSO and that the charge should be broadened to cover mobile and fixed
wireless broadband. Optus, which supports the policy intention of the RBS but
shares some of Telstra's concerns about the scope of the RBS as drafted,
countered some of these arguments.
The Department of Communications and the Arts (the department) provided
a written submission and made officers available to answer questions about the
bills at the committee's public hearing. One of the key points made in the department's
evidence is that the three categories of measures proposed in the bills
(the amendments to the superfast network rules, the SIP regime and the
RBS) 'work together as an integrated package'. The department
provided the following evidence providing background regarding why the measures
are being introduced and how they work in concert:
Australia has an open and competitive telecommunications
marketplace but this is being held back by excessive regulation. The proposed
changes to the carrier separation rules address this. However, the growth of
competition in the market place will put pressure on the ability of NBN Co
Limited...to deliver fixed wireless and satellite services in regional areas. The
proposed Regional Broadband Scheme responds to this.
[NBN Co] is intended to provide access across Australia to better broadband and
a platform for fairer and more effective retail competition. The proposed...SIP
arrangements provide certainty that this will happen. The Department does not
consider any part of the package can be removed without detracting from the
package as a whole.
Proposed changes to the superfast network rules
Proposed amendments contained in schedules 1 and 2 to the CC Bill that
attracted significant comment in submissions include:
the removal of Part 8 regulatory obligations for networks
servicing small business customers; and
changes to the exemption under subsection 156(4) of the Telecommunications
Act 1997 (Tel Act) for network extensions of less than 1 kilometre
from a point on the infrastructure of a network as it stood immediately before
1 January 2011.
The following paragraphs examine the evidence received on these proposed
Application of superfast network rules
to residential customers only
The department explained that the basis for removing the application of wholesale-only
rules to networks servicing small business customers is that 'there is usually
strong infrastructure competition to service small business customers'. This also
reflects the general intent that changes to the carrier separation rules 'will
create competitive and commercial opportunities'.
Vocus Group supports the proposed changes. It argued that Part 8 should
not capture networks that have been constructed for the purpose of servicing
business customers, and which only service business customers. Vocus explained
that such networks serve small business customers and there are practical
difficulties involved in distinguishing between businesses that are small
businesses and businesses that are not small businesses.
Superloop, which owns and operates metropolitan fibre networks in
Australia and elsewhere in the Asia Pacific region, also supports this change.
Superloop provided the following evidence highlighting issues with the current legislation
and the need for change:
The definition of small business, which refers to the
definition in the Fair Work Act being an employer of fewer than 15 people,
was flawed. There are many successful, sophisticated business entities within
Australia that employ less than 15 people—Superloop itself had fewer than
15 employees at the time it listed on the Australian Stock Exchange with a
market capitalization of approximately $90 million. While the restriction on
supply applies to small businesses, it is a disincentive to investment in
network expansion and creates a hurdle in contracting for the supply of
superfast services for businesses outside major metro areas where such
businesses employ less than 15 people. There is also a risk to carriers in
contracting to a business that is only just above the threshold of 15 employees,
if the departure of employees bringing that customer into the definition of a
Optus submitted that it 'generally supports' the proposed repeal of Part
7 and the amendments to Part 8. However, Optus advised that it does not support
the proposed removal of Part 8 obligations in relation to networks solely
servicing small business customers. Optus argued that this proposed amendment
could risk the creation of 'islands of customers that effectively have no
choice of supplier'. Optus explained:
Unlike corporate fibre
networks, networks solely focusing on small businesses are unlikely to be
economically replicable by multiple networks. It may not be economic for third
parties to seek wholesale access to such small scale networks.
Telstra advised that it supports the proposed exemption of business
customers from the superfast network rules; however, it expressed concern that
the exemption is drafted to exempt networks marketed exclusively as a business
network (proposed section 143H). Telstra argued that this drafting approach
'does not reflect the commercial reality that almost every network will have
To address this issue, Telstra called for proposed section 143H to be
redrafted to instead focus on 'how the network is used, or proposed to be used,
as opposed to how the network is marketed'. Furthermore, Telstra argued that
the word 'exclusively' in the phrase 'the network is marketed by the
carrier exclusively as a business network' in proposed paragraph 143H(1)(b)
should be either omitted or replaced with a lower threshold, such as 'wholly or
Telstra also commented on proposed section 156A, which is a deeming
provision intended to capture circumstances where, on or after 1 July 2018, the
use of a line changes from wholly or principally supplying services to
non-residential customers to residential customers. Telstra expressed concern
about the implications that may arise because of changes in use. It argued:
Network operators have limited direct knowledge of rebuilding
or alteration works being undertaken by owners of buildings connected to their
networks: e.g. a carrier will not necessarily know, or have reason to know,
that the owner of a factory has converted the building into residential
accommodation. The nature of the service plans (e.g. residential or business
plan) that are supplied at such premises may not change as a result of the
change in use. Telstra does not monitor what customers do in the millions of
premises connected to our network—nor should we.
Evidence from the department
In response to written questions on notice, the department addressed
Telstra's concerns about the application of proposed section 156A of the Tel
Act if, on or after 1 July 2018, the use of a line changes from wholly or
principally supplying services to non-residential customers to wholly or
principally supplying services to residential customers.
The department explained that the intent of proposed section 156A is to
preserve the underlying principle that 'networks servicing residential customers
should be wholesale-only...on the basis they can constitute access bottlenecks
that inhibit retail competition' in situations where residential customers
reside in converted business premises. The department's evidence confirmed
advice provided in the explanatory memorandum (EM) for the CC Bill that carriers'
obligations would not be affected by incidental changes in use on a network
that occur without the network operator's knowledge. The department advised:
Such change in use is accommodated by paragraph 142C(1)(c),
which casts the wholesale-only obligation on local access lines that are used,
or proposed to be used, to supply a superfast carriage service wholly or
principally to residential customers, or prospective residential customers.
Where a carrier operates lines targeting business customers, for example, and a
business customer on any line becomes a residential customer, the carrier would
not have to comply with subsection 142C(2) if the line was still principally
used to supply superfast carriage services to business customers...[W]here a line
services a single customer and that customer becomes a residential customer,
the carrier would be exempt from subsection 142C(2) if the total number of
residential customers serviced by the network is minor.
The department considers that proposed section 156A relates to 'edge
cases' and is 'not expected to be heavily used'. Furthermore, the department
It is...worth noting that as part of its structural separation,
Telstra is generally expected to exit the market for supplying infrastructure
for residential broadband. It is unclear why, then, Telstra would wish to
service residential customers in a building that has changed use. If Telstra
were to service such customers, it is not clear why it should not do so on a
separated basis like any other carrier.
The department made a similar observation about Telstra's structural
separation in response to Telstra's concerns about the implications of the
mixed use of networks for proposed section 143H (the exemption for networks
marketed as business networks).
The department also responded to Telstra's position that the term
'exclusively' in proposed paragraph 143H(1)(b) should be replaced with a lower
threshold, such as 'wholly or principally'. The department explained that an
exemption has been proposed for networks exclusively marketed as a business
network to allow for a minor number of residential customers, as it is
acknowledged that 'there may be a small number of cases where the customer has
changed but the carrier operating the network is not aware of the fact'. This
proposed exemption, however:
...is deliberately worded to be made available for networks
that are marketed exclusively as business networks on the basis that the policy
position in the Bill is that local access lines used to supply superfast
carriage services to residential customers should generally operate under
structural or functional separation.
When considering Telstra's evidence on this matter, the department
emphasised that the CC Bill 'seeks to balance the importance of ensuring
residential customers living in areas serviced only by business networks are
not prevented from accessing broadband services with the potential gaming by
carriers to use networks to service both residential and business customers'.
In the department's view, amending the phrase 'the network is marketed by the
carrier exclusively as a business network', to replace 'exclusively' with
'wholly or principally', as suggested by Telstra, would 'not be consistent with
the policy objectives of the legislation'. The department warned that such a
change would enable carriers to 'roll out substantial integrated local access
networks where only a bare majority of customers (50% plus one, for example)
need to be business customers'.
Finally, the department emphasised that, as with proposed section 156A,
the provisions exempting networks marketed as business networks 'are not
expected to be heavily used'.
Proposed changes to the '1
The changes to the 1 kilometre exemption rule would mean that, for
superfast networks that existed prior to 1 January 2011, network extensions of
less than 1 kilometre would, from 1 July 2018, only be available for
networks that are being transferred to NBN Co under contracts (the Definitive
Agreements). Any other extensions would need to be used to supply services on a
structurally separated (wholesale-only) basis as the default or be covered by a
functional separation undertaking approved by the Australian Competition and
Consumer Commission (ACCC).
Certain exemptions are provided, including for lines installed to
connect premises that are in 'close proximity' to networks. The EM for the CC
Bill provides the following guidance on the term 'close proximity':
It is envisaged the close proximity would facilitate the
connection of existing network infrastructure in the street to premises, but
not the extension of that network infrastructure to allow connection in a new
location where the network is not already ‘in close proximity’.
Close proximity has a meaning affected by proposed new
section 162, which empowers the Minister to determine, by legislative
instrument, when premises are, or are not, in close proximity to a local access
In response to written questions on notice, the department provided the
following additional explanation about the effects of replacing the '1
kilometre exemption' with the close proximity rule as proposed by the CC Bill:
The close proximity rule differs from the 1km exemption in
that it provides for connection to the existing network, not extension of the
network per se. For example, if the network passed a house it could
connect the premises but if the network had to be extended to service a new
apartment block nearby, that would be an extension. Judgment may be required in
some instances to differentiate between a connection and an extension. This
would be a matter for the ACCC as the regulator in the first instance and the
court if necessary.
Proposed section 143F in the CC Bill extends the close
proximity rule to include networks built between 1 January 2011 and 1 July
2018. As with the existing close proximity rule, the rule simply allows a
carrier to operate networks, including connecting premises, under the
separation laws that applied at the time the network was built. This is
consistent with the decision to grandfather rules applying to networks when
they were established. It does not provide an exemption for extending a
Telstra and TPG Telecom oppose the proposed changes to the 1 kilometre
exemption for network extensions after 1 July 2018 and the related exemption proposed
for lines that are in 'close proximity' to networks. TPG Telecom provided the
following summary of how it expects the proposed change to affect its
The effect of this is that if we extend our pre-existing
network to connect premises that are not in close proximity to infrastructure
of our network as it stood before 1 July 2018, we are prohibited from providing
retail services on the network unless we functionally separate our company. The
term 'close proximity' is not defined, except to say that it may be determined
by the Minister. Until the Minister makes a determination, it is uncertain how
far our network can be extended to connect new premises, however, given that
the...CC Bill proposes repealing the 1km exemption, it appears likely that the
Minister will determine 'close proximity' will be less than 1km.
Telstra submitted that, in its view, the existing 1 kilometre rule
'strikes the right balance in permitting modest extensions to be made to
existing superfast networks to meet consumer demand, while being unlikely to
pose a material threat to NBN Co's business case'.
TPG Telecom argued that the proposed change 'will curtail fixed‑line
network expansion except where carriers are willing to be wholesale only or
incur the costs of functional separation', thus creating inefficiencies and
Telstra also expressed concern that the interpretation of the 'close proximity'
test based on the guidance provided in the EM (see paragraph 2.25 above) 'may
result in divergent outcomes in similar situations which consumers will find
difficult to understand and accept'.
Telstra argued that if the 1 kilometre rule 'is not to be retained in
full, it should at least apply to any other networks...which are, like the
Telstra and Optus [hybrid fibre co-axial (HFC)] networks, subject to
commitments by the network owner to decommission them or transfer them to NBN
Co'. Telstra argued that retaining the rule for these networks, such as its
fibre networks in greenfield estates, 'would enable modest extensions to be
made to these networks to meet consumer demand for superfast services pending
the deployment of the NBN'.
Despite these alternative drafting suggestions, Telstra concluded that:
The existing '1km rule' has a
degree of arbitrariness about it, but at least it was fairly straightforward to
apply and the permitted maximum distance was long enough to allow a consistent
and coherent connection approach in the same general area.
Evidence from the department
The department noted that removal of the 1 kilometre exemption was
recommended by the Vertigan Panel due to concerns that the exemption:
...advantaged carriers with pre-2011 network over those who
build networks after 2011, especially those with larger network footprints, and
enabled carriers with pre-existing networks to roll out large extensions which
were not subject to wholesale-only requirements, designed to protect
The department added that 'experience has shown that such networks can
form local access bottlenecks that restrict consumer choice'.
Committee view on schedules 1 and 2
to the CC Bill
The committee supports the overall intent of the proposed amendments to
the Tel Act and the CCA contained in schedules 1 to 2 of the CC Bill. The
committee has considered the evidence received from industry stakeholders on
specific drafting issues; however, after taking into account the evidence
received from the department regarding these matters and the overall intent of
the CC Bill, the committee has not been convinced of the need for amendments.
Statutory infrastructure provider regime
As explained in Chapter 1, schedule 3 to the CC Bill would establish
SIP obligations to be administered by the Australian Communications and
Media Authority (ACMA).
Before examining the evidence received on the proposed SIP regime during
this inquiry, it is instructive to note that the proposed SIP obligations have
also been examined by a public inquiry conducted by the PC. In the final report
of its recent inquiry into the TUSO, the PC recommended that the role of NBN Co
and other designated providers as SIPs should be clearly defined in legislation
'as a matter of priority'.
In doing so, the PC commented that the proposed SIP regime 'would assist in
providing greater confidence to the community about [NBN Co's] role with
respect to the provision of wholesale broadband services'.
Overall stakeholder views on the
proposed SIP regime
The Australian Communications Consumer Action Network (ACCAN) 'strongly
supports' the proposed SIP regime. It provided the following summary of the
problems the SIP regime is expected to address and the specific benefits
associated with the introduction the SIP regime in the form proposed by the
ACCAN does not believe that the current framework governing
the delivery of broadband services is in the interest of consumers. Too often
consumers have no transparency or assurance over their service, get passed
between retailer and wholesaler and could potentially be left without access to
Broadband services are essential services that should be
underpinned by standards and conditions. ACCAN believes the [CC Bill] is in the
interest of consumers as it puts in place the architecture that could be used
to establish a framework that:
Ensures access to a superfast
network to all premises,
Provides transparency and
accountability over network providers,
Ensures that networks need to
exceed minimum performance levels and timeframes for connection and fault
Ensures that networks act in a
manner which supports consumers' complaint and dispute resolution.
ACCAN urged that the SIP regime be enacted 'as quickly as possible so
the powers within the legislation can be used to protect consumers and their
Rural industry groups also support the proposed SIP regime. Cotton
Australia, for example, submitted that 'regional, rural and remote consumers
and businesses need legislative rights to access broadband data and voice
services'. It argued that ensuring access to data networks for all premises in
statute via the proposed SIP regime is 'a critical stipulation'.
Optus and Vodafone Hutchison Australia (VHA)
support the SIP regime as drafted in the bill. For example, Optus argued that
the proposed SIP regime is 'appropriate given the role and policy objectives of
the NBN and it will remove the uncertainty inherent from the fact that current
obligations are set out in a Statement of Expectations that can be changed from
time to time'.
Telstra supports the overall proposal for a SIP regime; however, its
submission outlines some drafting concerns with aspects of the proposed regime
as contained in the CC Bill.
Adequacy of the speeds to be
established in legislation
Some criticism was received about the adequacy of the 25/5 Mbps speeds.
The department explained that the 25/5 Mbps obligation are the speeds set in
NBN Co's 2016 Statement of Expectations and 'reflect anticipated consumer
need for speed in the foreseeable future'. The department provided the
following evidence in support of this conclusion:
In 2014, as part of the Vertigan cost-benefit analysis of the
NBN, Communications Chambers was contracted to construct a bottom-up model of
the 'technical' bandwidth required for the applications utilised by various
types of household, and used this to estimate future demand. Its report
estimated that by 2023 the median Australian household will have 'technical'
demand (that is, generated by actual application usage) for download bandwidth
of 15 Mbps. Therefore, a 25 Mbps download service is considered to be a service
that will actually support most applications that people will need for the
foreseeable future. This conclusion is consistent with current usage on the NBN
with 29 per cent of services being 12/1 Mbps and 55 percent being 25/5 Mbps.
The department added that SIPs can 'supply faster services in response
to consumer demand'.
In addition, and consistent with NBN Co's 2016 Statement of Expectations, the
department noted that the proposed SIP regime includes a further obligation 'to
ensure that 90 per cent of premises in its fixed-line footprint can receive
peak download speeds of at least 50 Mbps and peak upload speeds of at least
This is one of two targets for NBN Co expressed as the intention of the Parliament
(these targets are outlined in Chapter 1).
Approach potentially taken by NBN
Co up to the designated day
One of the concerns expressed by Telstra is that, before the 'designated
day' for Telstra's structural separation (which schedule 5 to the CC Bill would
change to 1 January 2020 or another day set by the Minister), NBN Co would
be able to determine when its SIP obligations apply. Telstra explained that:
Proposed sub-section 360D(2)(b) provides that NBN Co must
declare that an area is a provisional interim NBN service area if it begins to
supply listed carriage services in that area. This provision does not expressly
require NBN Co to declare all of the premises in a geographic area to comprise
the provisional interim NBN service area. Currently, NBN Co does not define its
NBN rollout regions as complete geographic areas but instead as lists of
individual premises. Whilst it is clear that NBN Co will be the SIP for all
premises within its footprint after the designated day, in the meantime there
could be significant gaps in NBN rollout regions.
Telstra explained that it is concerned about a possible 'Swiss cheese'
effect, where most areas within a region are serviced by NBN Co but pockets are
not. Telstra submitted that a possible implication of this is that Telstra
would be required to meet service requests up until the designated day, after
which NBN Co would be required to connect the premises and supply wholesale
The department provided the following evidence in response to these
Our view of the legislation is that as NBN Co rolls out its
network and it establishes an area, it would be servicing the premises in the
area. If there was an issue about the ability to connect immediately, that is
really a matter of the time frame for connection as opposed to their obligation
to service the premises.
Scope of ministerial powers
Telstra expressed concern that proposed section 360L would provide the
Minister with a broad power to declare that a specified carrier is the SIP for
a designated service area. Telstra submitted:
This power is so broadly framed that it could be exercised in
future to unreasonably shift responsibility for infrastructure deployment from
NBN Co to another carrier: in effect, to substantially reverse the policy
that NBN Co should be the primary provider of national broadband
To address this concern, Telstra suggested that proposed section 360L be
amended to provide that, when considering decisions under this section, the
Minister must 'consider the extent to which the proposed exercise of power is
consistent with NBN Co being the primary SIP nationwide'.
Exemption for satellite services
It is proposed that the SIP obligation relating to enabling carriage
service providers to supply carriage services that can be used by end-users to
make and receive voice calls would not apply if the carriage service is
supplied using a satellite.
The relevant EM explains that this is to account for areas where a SIP only
supplies broadband services using satellite technology and where 'voice
services may be better supported by other network technologies operated by
carriers who are not SIPs'.
The department's submission provides the following further details about the
decision to exclude satellite from the obligation:
The requirement does not extend to broadband services
provided using satellite because of the potential technical constraints of such
services, particularly latency where voice calls are made involving two
satellite hops. The Government's response to the Productivity Commission's
Inquiry into the Universal Service Obligation will also consider the provision
of voice services in NBN's satellite footprint in a technologically neutral
Organisations representing rural industries emphasised that delivery of
voice services by satellite is undesirable because of concerns about
However, other stakeholders questioned whether the current limitations of
satellite could be accounted for using a more flexible drafting approach.
The Telecommunications Industry Ombudsman (TIO)
suggested that the proposed SIP regime should be 'future-proofed and
technologically neutral'. In relation to this, the TIO questioned the exclusion
of satellite services from the SIP supply obligation. The TIO argued that:
The introduction of a SIP supply obligation that introduces a
lower standard for satellite than current capability may act as a disincentive
for industry innovation. This would be contrary to the stated objectives of the
Telecommunications Act 1997 – to promote the long-term interests of
consumers and supply diverse and innovative telecommunications services.
Telstra also argued that the SIP supply obligation should include
satellite services. Telstra acknowledged that reliance on satellite services
should be reduced as a result of NBN fixed wireless services and mobile
services supplied through the Mobile Black Spot Program. However, it considers
it 'is likely that there will still be some end users in remote areas who can
only be served by satellite and therefore will need to utilise satellite
provided telephony unless they are provided with voice services via an
Telstra added that 'the current NBN satellite may not be suitable for voice,
but that does not preclude the possibility that NBN satellite technology more
appropriate to voice may be deployed in the future'.
Rather than a complete statutory exemption for satellite services,
Telstra argued that the CC Bill should be amended to provide the Minister
with the power to exempt satellite services from the obligation to provide
voice-capable services. Telstra reasoned that this proposal:
...would provide a mechanism to exempt satellite services on an
interim basis until and unless a viable technical solution is developed by NBN
Co that is satisfactory to customers. In this way, the statutory regime is set
up from day one in a consistent manner, with short-term relief from this
technical issue being provided through a ministerial exemption that can then be
easily wound back and eventually removed.
view on the proposed SIP regime
The committee notes that the idea for implementing a SIP regime has
received broad support from consumer and industry stakeholders. The PC has also
expressed support for the introduction of SIP obligations: of particular note,
the PC recommended that the role of NBN Co and other designated providers as
SIPs should be clearly defined in legislation 'as a matter of priority'.
On the design of the SIP regime, the committee supports the approach
taken in the CC Bill; that is, the overall framework for the SIP regime is set
out in legislation while the Minister or, if these powers are delegated, the
ACMA, may make legislative instruments to determine relevant standards,
benchmarks and rules. The committee emphasises that the approach of
legislating a SIP regime with details supported by legislative instruments is
preferable to the possible alternative of the Minister introducing a
SIP regime as part of carrier licence conditions.
Regarding the proposed statutory carve out for satellite services from
the voice telephony obligation, the committee accepts the reasoning as to why such
an exemption is necessary at this time. The committee recognises that,
from a legislative drafting perspective, there is merit in ensuring the SIP
obligations are technology neutral. However, the committee has also noted the
concerns expressed by the National Farmers' Federation (NFF)
and shared by others about the provision of voice services by satellite. Although
Telstra's suggestion to replace this statutory carve out with a discretionary
power delegated to the Minister has some appeal, it is the committee's
preference that any future proposal regarding the treatment of voice services
provided over satellite networks involves a legislative amendment to ensure the
proposal receives adequate scrutiny and that those affected are consulted.
Regional Broadband Scheme
The aspect of the bills that attracted the most comment in submissions
is the proposed RBS. The RBS was also discussed by the PC in its recent TUSO
report. As explained at the start of this chapter, in preparing this
report, the committee has focused on the evidence received during this inquiry,
although the PC's comments have been taken into consideration.
Support for the RBS
The proposed RBS received strong support from consumer and regional
groups, including ACCAN, Cotton Australia, the NFF and the RRRCC. Essentially,
the evidence received from these groups endorses the overall policy intent of
the RBS: to support affordable access to broadband services for customers in
rural, regional and remote Australia through funding arrangements that are
sustainable and transparent.
In outlining its support for the proposed RBS, the NFF anticipated that
concerns about the scheme would be put forward by industry. The NFF submitted:
The NFF seeks to temper any concerns that investment in
uncommercial telecommunications infrastructure is potentially distortionary to
competition. To simplify the rationale for investment to this extent is short‑sighted
and fails to consider long term economic benefit to the country—even from
agricultural productivity alone.
The NFF believes that both government and industry can
collaboratively play a significant role in funding uncommercial infrastructure
provided the framework is holistic and encompasses the suite of processes that
are presently occurring in the telecommunication field. A levy is, in many
ways, the most logical and equitable means of seeking an industry contribution.
Vocus, OptiComm, TPG Telecom and VHA oppose the RBS provisions.
VHA noted the PC's criticism of the TUSO. It argued that the RBS should
not be pursued 'before the future direction of the existing controversial USO
arrangements has been resolved'.
Vocus similarly argued that deliberations on the RBS should not occur in
isolation of considering the future of the TUSO.
Vocus submitted that, in its view, the most appropriate way to fund the
non‑commercial services is through general government funding. Alternatively,
Vocus argued that the costs should be recovered through an industry levy
applied to a broad funding base that is technologically neutral (that is, with
mobile, fixed wireless and satellite networks included).
A particular concern is that the RBS does not apply to mobile and fixed
wireless broadband networks. OptiComm and Vocus argued that fast, high data
capacity mobile and wireless broadband technology is already available and is
increasingly likely to become a substitute for fixed line services. Both
referred to Telstra's announcement that it will provide a 5G network in 2020.
In support of the argument that the RBS should have a broader funding base, Mr Tony
Moffatt, General Counsel, TPG Telecom, indicated that the RBS regime, as
currently drafted, creates 'a specific incentive to find a technical way around
It was also argued that the burden of the RBS is too great for specific
businesses. OptiComm explained that the RBS represents over 25 per cent of the
price of wholesale broadband. It explained that the charge 'will be larger than
our staff costs, larger than our backhaul costs and larger than our rent
costs'. TPG Telecom also argued that the RBS would have 'significant financial
and operation implications' that will damage its ability to compete.
Telstra explained that it supported the RBS when it was first announced,
however, it considers the RBS proposed in the bills 'applies far too broadly'
to services that are not competitive with, or an economic threat to, NBN Co. Telstra's
concerns are as follows:
Telstra claimed that the RBS has been 'transformed from its
original intention as a "anti-cherry picking measure" into an
industry tax'. In particular, Telstra is concerned that the proposed RBS covers
enterprise and wholesale data services which do not compete with NBN Co and are
not subject to any NBN‑related obligations. Telstra also noted the
proposed RBS covers lines that are not actually being used to provide superfast
broadband services but are "technically capable" of providing those
Telstra also considers carriers might not have the information
needed to determine the nature of services and the number of premises being
supplied at a retail level. It considers that liability under the proposed RBS
is unclear as key terms such as 'premises' are not defined. Telstra argued that
the RBS should instead apply to 'services in operation'.
Telstra further argued that industry should be provided
additional time to implement the systems and processes required for administering
and that the costs associated with administering the RBS should be incurred by
the public sector, not recovered from industry.
On its proposal for the RBS to cover 'services in operation' rather than
'premises', Telstra explained that the regime as proposed in the bills 'might
require individual examination of individual premises and the lines going into
individuals premises' as well as an IT build to support collection of the levy.
Telstra noted that the use of the concept 'services in operation', would likely
result in an increase in the number of services covered by the RBS;
accordingly, if Telstra's preferred term is used, Telstra argued that the
amount of the levy should be adjusted downward so that the change is revenue
In response to questioning about Telstra's evidence, representatives of Optus
indicated that Optus would also support redrafting the RBS provisions so that
they applied to services in operation rather than premises if the overall
revenue collected remained unchanged.
Optus also shared Telstra's concerns about the application of the RBS to
fibre networks that provide services to enterprise and government customers.
However, given the higher service prices involved in these services (an
estimate of the range in the price of these services given at the public
hearing 'hundreds of dollars to maybe tens of thousands of dollars'),
representatives of Optus acknowledged that the $7.10 levy would be a small
component of these services.
Finally, Optus differed from several other industry submitters in that
it emphasised that the RBS is not a universal service scheme. Optus also
disagreed with the position put by others that the RBS should be extended to
wireless providers as Optus considers these services are complementary to NBN
services, rather than being a substitute. Optus also countered that any
competition provided by wireless is a 'key driver to ensure NBN Co
operates efficiently and continues to deliver good outcomes to customers'.
Evidence from the department and NBN
NBN Co provided detailed responses to concerns expressed by industry
about the design of the RBS.
On the inclusion of business services in the funding base for the RBS, NBN Co
commented that this is a 'critical component' of the proposed arrangements for
ensuring the loss making rollout of satellite and fixed wireless networks are
adequately subsidised. NBN Co argued:
Failure to include business services will mean that the
contributions of residential services would be required to fund the losses [NBN
Co] incurs to serve regional and rural Australia. This is not desirable,
efficient or sustainable relative to the outcomes of the proposed arrangements.
Furthermore, NBN Co advised that the internal cross-subsidy that
currently supports the funding of non-commercial services for regional
Australia assumed that NBN Co 'would be the primary fixed network operator
supplying services to both residential and business customers'. NBN Co added
that it was assumed that revenue from NBN Co's fixed line network as a whole,
not just limited to the residential market, would be used to subsidise fixed
wireless and satellite services'.
NBN Co continued:
Moving to an industry wide funding model recognises that [retail
service providers] who target low cost areas should contribute to the funding of
the higher cost areas which [NBN Co] is responsible for connecting. These low
cost areas will include both business and residential customers. It is illogical
that a residential connection in a low cost area will pay the RBS but a
business connection in the same low cost area will not.
With growth in the competitive fixed line market and the
proposed removal of level playing field obligations in relation to small
business services, the importance of including business services in the funding
base is heightened. While the changes to Part 8 of the Telecommunications Act
support a central tenet of the Government's policy (infrastructure
competition), it is important that the financial implications of this
competition are understood and that loss making services remain adequately
NBN Co also directly responded to the suggestion put forward by industry
participants that extending the RBS to enterprise services is beyond NBN Co's
residential remit. NBN Co described these claims as 'misleading'. It submitted:
In addition to the coverage targets that NBN Co has been
provided for residential and business premises (which does not distinguish
between small business and larger enterprise customers), [NBN Co's] Corporate
Plans and product mix reflect the fact that the network has been designed to
serve all types of customers passed by the nbn™ network. Additionally, the
White Paper process documented in the Definitive Agreements and the Telstra
Migration Plan specifically recognise [NBN Co's] intention to develop wholesale
business‑grade services and that Telstra would disconnect retail business
services supplied using special services from its legacy copper network as the
capabilities were made available on the nbn™ network.
In its submission, the department reiterated information contained in
the EM for the RBS Bill about the intended design of the scheme. This evidence
included that for the networks representing approximately five per cent of the
market expected to be affected by the scheme, 'whether they choose to pass on
the charge is a commercial decision for them and their retail service
In addition, the department highlighted the adjustments made following
consultation with smaller carriers to 'cushion smaller carriers from the full
effect of the charge and give them a sufficient period of time in which to
adjust their business models to accommodate the charge'.
The department also provided further evidence in response to specific
suggestions put forward by industry. In response to questioning as to why fixed
wireless are not included in the scope of the RBS, departmental officers
explained these services represent only one to two per cent of the market, and
that the regulatory burden of applying the RBS to these providers is considered
to outweigh the benefits associated with their inclusion.
Regarding Telstra's suggestion for the concept of 'services in operation'
to be used in place of 'premises', the department explained that the concept of
'premises' has been used due to concerns about different ways services in
operation can be interpreted. To illustrate, a departmental officer referred to
a potential example involving the services supplied to a major bank:
[A] large corporate such as the Commonwealth Bank might have
lines that service a particular branch, it might have lines that service its
ATM network and it might have lines that service different components of its
communications services. And there'd be uncertainty about whether all of those
lines would be calculated or only some of them.
Evidence given by the department also highlighted that, to be 'as clear
as possible about the application of the charge', the EMs provide a detailed
explanation of how the premises based charge 'would apply to a range of
different circumstances, including multi-dwelling units, shopping centres and
Finally, the department's evidence notes how the proposed reviews of the
scheme will enable any issues that arise to be addressed. In particular, the
arrangements for reviewing the amount of the charge and the overall operation
of the scheme would ensure adjustments can be made so 'the charge remains
sufficient to meet the reasonable net costs associated with [NBN Co's]
fixed-wireless and satellite networks' and to account for any technological
changes affecting the market.
NBN Co's Chief Regulatory Officer also acknowledged the potential for 'refinement'
to the regime after it commences operation, noting that this would be
consistent with previous experience of regulatory change in the
The PC has also noted that the planned reviews of the RBS could enable
the treatment of mobile broadband to be reviewed if it becomes evident that
mobile broadband is increasingly substitutable for fixed line high speed
broadband. More generally, the PC emphasised that the planned reviews
would reduce the risk of a 'set and forget' approach to the RBS.
Committee view on the RBS
The committee considers it is critically important to establish a scheme
for adequately and transparency funding the much-needed infrastructure for
rural and regional Australia that cannot be provided on a commercial basis. Of
the various options available for funding these non-commercial services, the
proposed RBS most clearly fulfils this objective.
Although the RBS is strongly supported by consumer and regional industry
groups, certain industry stakeholders advocated for alternative options to be
considered instead. As a general rule, the introduction of an industry charge
is unlikely to receive universal stakeholder support and can attract points of
view influenced by particular commercial interests. Nevertheless, the committee
has been receptive to the various arguments relating to the RBS made by
industry stakeholders. After careful consideration, however, the committee is
of the view that the counterpoints made by the department and NBN Co to industry
arguments are more compelling. The committee accepts that the approach
taken by the government as outlined in the bills is the most appropriate method
for achieving the objectives of the proposed RBS with minimal market
distortion. The committee, therefore, supports the overall approach taken to
drafting the RBS as outlined in the bills.
The committee, however, is sympathetic to the argument that industry may
need additional time to prepare for the introduction of the RBS. In the
committee's view, whether the commencement of the RBS would need to be delayed
largely depends on how quickly the bills progress through the remaining stages
of the legislative process. To provide industry with certainty, the committee
urges prompt consideration of the bills with final consideration of the bills
to occur as early as possible during the 2017 spring sitting period. Should
this not be possible, however, the government should consider a short delay in
the commencement of the RBS regime. The committee notes that the RBS charge
could be subject to minor adjustment to ensure that a delay would be revenue
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