On 28 November 2019, the Senate referred the provisions of the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2019 (CC Bill) and the Telecommunications (Regional Broadband Scheme) Charge Bill 2019 (RBS Bill) to the Environment and Communications Legislation Committee (the committee), for inquiry and report by 21 February 2020. Collectively, the CC Bill and the RBS Bill will be referred to as 'the bills'.
Substantially similar bills (the 2017 bills) were introduced during the 45th Parliament, and referred to the committee for inquiry and report. The committee tabled its report on 6 September 2017 and made two recommendations: firstly, in relation to the proposed disallowance procedure, and secondly, that the bills be passed.
The 2017 bills passed the House of Representatives on 10 May 2018, with amendments reflecting the recommendation of the committee. The 2017 bills were subsequently introduced in the Senate on 18 June 2018, but lapsed at the end of the 45th Parliament.
The current bills contain a number of amendments proposed by the Government and the Opposition during the 45th Parliament. These changes are outlined later in this chapter.
Conduct of the inquiry
The committee advertised the inquiry on its website inviting submissions by 20 December 2019. The committee continued to accept submission after this date.
The committee received 16 submissions. These submissions are listed at Appendix 1 and are available on the committee's website at: www.aph.gov.au/senate_ec.
The committee held a public hearing in Melbourne on 30 January 2020. The list of witnesses who participated in the public hearing is at Appendix 2 and is available on the committee's website.
The committee thanks all individuals and organisations that contributed to the inquiry.
Scope and structure of the report
This report comprises two chapters. The remaining section of this chapter outlines the purpose and key provisions of the bills. Comments on the bills made by the Senate Standing Committee for the Scrutiny of Bills are summarised at the end of the chapter.
Chapter 2 examines the key issues raised in submissions in relation to the bills. The committee's overall findings and recommendations are provided at the end of Chapter 2.
Purpose of the bills
The bills seek to implement the government's response to the cost-benefit analysis and review of regulatory arrangements for the National Broadband Network (NBN) undertaken by a panel chaired by Dr Michael Vertigan AC.
The purpose of the bills was explained by the Minister for Communications, Cyber Safety and the Arts, the Hon Paul Fletcher MP:
The two bills establish arrangements to underpin the ongoing availability of essential broadband services to all areas of Australia, particularly, rural and regional Australia.
Together, the bills propose three major reforms, including:
making amendments to network rules that apply to superfast carriage services provided to residential and small business customers other than the NBN;
introducing statutory infrastructure provider (SIP) obligations; and
establishing a regional broadband scheme to provide for the funding of NBN Co satellite and fixed wireless services for rural and regional areas.
Overview of the bills
The CC Bill is the primary bill that proposes to amend the Telecommunications Act 1997 (Telecommunications Act), the Competition and Consumer Act 2010 (CC Act), the Telecommunications (Consumer Protection and Service Standards) Act 1999 (TCPSS Act); and the National Broadband Network Companies Act 2011 (NBN Companies Act). The RBS Bill is a taxation measure that will 'establish an ongoing funding arrangement for fixed wireless and satellite infrastructure through the imposition of a charge'. This funding arrangement is called the regional broadband scheme (RBS).
As outlined in the committee's 2017 report, the CC Bill contains five schedules:
Schedules 1 and 2 contain proposed amendments to the 'superfast network rules' provided for in Parts 7 and 8 of the Telecommunications Act.
Schedule 3 contains the amendments that would establish a regime of SIP obligations.
Schedule 4, in conjunction with the RBS Bill, would establish the RBS.
Schedule 5 inserts a new section into the NBN Companies Act to establish a new transparency measure relating to mapping data of the NBN.
A brief overview of the bills will be provided as well as an outline of the key differences between the 2017 bills and the current bills. A more detailed outline of the key provisions of the bills can be found in the committee's 2017 report.
Superfast network rules
Parts 7 and 8 of the Telecommunications Act contain network rules that apply to superfast fixed-line networks servicing residential and small business customers, other than the NBN. The CC Bill proposes to repeal Part 7 of the Telecommunications Act, which currently require operators of superfast networks to supply a Layer 2 bitstream service to access seekers. Following repeal, access to specific wholesale services on superfast broadband networks would only be mandated if the Australian Competition and Consumer Commission (ACCC) declare these services.
In addition, the bill proposes a number of amendments to Part 8 of the Telecommunications Act. Additional powers are provided to the ACCC to exempt operators with a small retail customer base from the superfast network rules, as well as the power to issue formal warnings or infringement notices where it has reasonable grounds to believe that an operator has breached the superfast network rules.
The Explanatory Memorandum (EM) explains the intention of these amendments:
The Bill makes several key amendments to the superfast network rules to make the default structural separation requirement clearer and more effective as a baseline for the industry, while at the same time creating new commercial and competitive opportunities. These amendments reset the structural separation arrangements, establish functional separation arrangements and promote competition.
Only minor amendments have been made in Schedules 1 and 2 compared to the 2017 bills. These relate to the commencement date of certain provisions from 1 July 2018 (the expected start date of the provisions in the 2017 bill) to 'the designated commencement date', which has been defined to mean 'the date on which Schedule 2 of the [CC Act] commences'.
Statutory infrastructure provider regime
Schedule 3 of the CC Bill would introduce a new SIP regime that is intended to 'provide industry and consumers with certainty that all premises in Australia can have access to infrastructure that supports the delivery of superfast broadband services'. Currently, while NBN Co is required to roll out the NBN, there is no statutory obligation for NBN Co to connect and service any premises to its network.
The proposed SIP arrangements will underpin the Government's new Universal Service Guarantee, with voice services being delivered through the Universal Service Obligation and broadband services being based on the NBN.
The SIP obligations would impose connection and supply obligations on SIPs (that is, NBN Co and alternative providers), by requiring the relevant SIP to connect a premise, on the reasonable request by a carriage service provider, on behalf of the end-user at the premises. The SIP obligations sets peak download and upload speeds and requires carriage services that can be used by the end‑user to make and receive calls.
The Australian Communications and Media Authority (ACMA) will have responsibility for enforcing the SIP regime, which would include issuing formal warnings, accepting undertakings, issuing an infringement notice or taking court action, if a SIP does not meet any of the SIP obligations.
New provisions have been added since the 2017 bills, which provide that the Minister may, by legislative instrument, exempt certain networks from SIP requirements. The then Department of Communications and the Arts explained that, '[t]his would be used to deal with networks installed to provide services other than broadband (e.g. voice). In these cases consumers would not be worse off as NBN Co, as the default SIP, would still need to supply broadband'.
Regional Broadband Scheme
The RBS Bill and schedule 4 of the CC Bill propose the introduction of an industry charge to fund non-commercial fixed wireless broadband and satellite broadband for regional areas as part of an RBS. At present, losses associated with these services are funded by an internal cross-subsidy within NBN Co. Under the proposed RBS, carriers would be required to pay a charge, initially set at $7.10 per month, for each premises on their network that has an active fixed-line superfast broadband service. The purpose of the charge is to sustainably fund the net costs of NBN Co's fixed wireless and satellite networks, which provide access to essential broadband services predominantly in regional Australia.
The initial $7.10 monthly charge (referred to as a combined component cap) is made up of a base component ($7.09) and an administrative cost component ($0.01). The administrative component is set for each of the first five years and will be indexed annual to the consumer price index thereafter. Both components may be changed by the Minister through a disallowable legislative instrument, but cannot exceed the cap. These components will be reviewed by the ACCC at least once every five years 'to ensure they are sufficient to meet the reasonable net costs associated with NBN Co's fixed wireless and satellite networks and the administrative costs of the Scheme.'
The CC Bill provides for three categories of exemptions from the charge, including an exemption for small networks, for lines transitioning to the NBN or being decommissioned under certain agreements, and to allow for a transition period to assist smaller carriers.
Schedule 4 of the CC Bill would also provide for:
arrangements for paying NBN Co and other eligible funding recipients;
carrier reporting obligations to provide a one-off report to the ACCC and an annual report to ACMA;
the assessment by ACMA of carriers' charge liability one year in arrears;
charge due dates and collection arrangements;
civil penalties for carriers that seek to avoid application of the charge, as well as civil penalties and a criminal offence for carriers that seek to enter the scheme for the sole or dominant purpose of obtaining a benefit from the charge concession period;
the establishment of a special account;
information gathering powers for ACMA, to enable it to administer and enforce the RBS;
information disclosure between government agencies and quasi‑government bodies; and
a review of the regional broadband scheme, four years after the commencement of the scheme.
Substantial amendments that were proposed to the 2017 bills have been adopted in schedule 4 of the CC Bill and the RBS Bill. These include:
The combined component cap has been reduced from $10 to $7.10 per month.
An additional concession has been included, which would have the effect of reducing the total number of chargeable premises associated with a local access line for the carrier, for the first 55 000 'recently connected greenfield premises' on their networks for five years.
'Recently connected greenfield premises' has been defined for the purposes of clause 20 of the RBS Bill.
The reporting obligations have been strengthened by requiring carriers to provide certain additional information to ACMA.
The definition of an 'applicable reporting period', for the purposes of the one-off carrier reporting to the ACCC, has been changed to mean 'the second month that began after the commencement of this section'.
NBN Co transparency
Schedule 5 of the CC Bill proposes to insert a new provision into the NBN Companies Act, which will require NBN Co to provide data about premises connected, or due to be connected to the NBN on the National Map website. The EM to the CC Bill states that this obligation is intended 'to improve the public availability on NBN rollout information'.
Schedule 5 of the 2017 CC Bill included the 'designated day' for Telstra's structural separation. This has been removed from schedule 5 of the current CC Bill. Therefore, the new provision has been added since the 2017 Bill.
Reports of other committees
When examining a bill or draft bill, the committee takes into account any relevant comments published by the Standing Committee for the Scrutiny of Bills (Scrutiny Committee). The Scrutiny Committee assesses legislative proposals against a set of accountability standards that focus on the effect of proposed legislation on individual rights, liberties and obligations, and on parliamentary propriety.
The Scrutiny Committee examined the bills in its Scrutiny Digest 10 of 2019. That committee noted that the CC Bill would give the Minister the power to determine, by legislative instrument, that one or more classes of carriage service to be excluded from the definition of 'designated broadband service', as well as the power to determine whether a location is taken, or not taken, to be a 'premises', for the purpose of the RBS. The Scrutiny Committee raised concern that the Minister's determination could impact on the tax base under the proposed RBS.
The Scrutiny Committee also noted that the RBS Bill would give the Minister the power to determine, by legislative instrument, to change the amount of both the base component and the administrative cost component. That committee acknowledged that the bill places a number of limitations on the Minister's power, including that the sum of these components for any month cannot exceed $7.10, indexed annually to CPI, and the Minister must have regard to advice provided by the ACCC.
In both cases, the Scrutiny Committee noted that the bills seek to modify the usual commencement procedures for these determinations. These concerns were also raised in the 45th Parliament and reported on in the committee's 2017 report, which recommended that the provisions be amended. The committee's amendments were implemented into the third reading of the 2017 bills. The Scrutiny Committee acknowledged these amendments noting that it 'improves parliamentary oversight of these determinations by ensuring that they do not come into effect until after the disallowance period has expired'.
In relation to the Minister's power to determine the base and administrative cost component, the Scrutiny Committee explained its concerns:
One of the most fundamental functions of the Parliament is to levy taxation. The committee's consistent scrutiny view is that it is for the Parliament, rather than makers of delegated legislation, to set a rate of tax. In this case, the fact that default rates of the charge and a maximum cap is set in the primary legislation partly addresses the committee's scrutiny concerns. As noted above, the committee also welcomes the modified commencement procedures for the determinations. However, any delegation to the executive of legislative power in relation to taxation still represents a significant delegation of the Parliament's legislative powers.
The Scrutiny Committee concluded by drawing its concerns to the attention of Senators and the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation for information, but sought no further information.
The Parliamentary Joint Committee on Human Rights stated that it had no comment on the bills.