Chapter Eight
Reforming the Regulatory Environment
8.1
This chapter considers the impact of the Telecommunications Legislation
Amendment (Competition and Consumer Safeguards) Bill 2009, particularly as it
relates to the NBN.
Background[1]
8.2
Until 1997, Telstra, formerly Telecom Australia,[2]
was a Commonwealth Government statutory authority under the Telecommunications
Act 1975. That Act established Telstra as the monopoly provider of domestic
telecommunications services with exclusive rights to supply, install, maintain,
repair and operate the basic telecommunications services in Australia. Telstra
was also the technical regulator of customer service equipment, private
telecommunications networks and value-added services.
8.3
During the 1980s Telstra's monopoly position faced significant criticism
on two main fronts: rapid changes in technology required significant new
investment, which the government would struggle to afford; and pressure from
businesses to relax Telstra's monopoly to create opportunities for private
investment in the expanding telecommunications industry.
8.4
In 1989 an independent regulator, AUSTEL, was established and regulatory
control of telecommunications was separated from Telstra. During the early
1990s the Australian telecommunications industry was gradually opened up to
competition, in the first instance by allowing Optus to enter the domestic
market, thus creating a duopoly; and also through enabling a triopoly in the
mobile telecommunications market with Telstra, Optus and Vodafone. The Telecommunications
Act 1991 also merged Telstra and the Overseas Telecommunications Commission
(OTC) - previously a separate statutory authority – into a single publicly
owned carrier.
8.5
Under the previous Coalition Government, Telstra was privatised in three
stages in 1997, 1999 and 2006. In 2006, the remainder of the government's
shares (then comprising around 17 per cent) were transferred to the Future
Fund.
8.6
The privatisation of Telstra raised some difficult regulatory issues. On
one hand, Telstra is bound by corporations law to act in the best interests of
its shareholders. However, Telstra is also the owner of the vast majority of
telecommunications infrastructure in Australia and provides essential services
to Australians. Consequently it has to provide for the conflicting interests of
ensuring a maximum return for its shareholders, while on the other hand,
ensuring that its retail and wholesale customers receive an efficient and
effective service level.
8.7
Accordingly, successive Commonwealth governments have, in a variety of
ways, continued to regulate the way in which Telstra does business in order to
ensure that the service needs of Australian telecommunications consumers are
met, and that Telstra's competitors have reasonable access to its telecommunications
infrastructure.
8.8
One of the key regulatory dilemmas for government has resulted from
Telstra's vertical integration. Telstra is at the same time a wholesaler of
telecommunications infrastructure, and a retailer in a competitive retail
market. Therefore there is no ordinary incentive for Telstra to sell its
wholesale product to its retail competitors at a reasonable price. The WA
Chamber of Commerce and Industry (WA CCI) described this conundrum as follows:
... a conflict of interest arises when a monopoly carrier is
required by law to provide network access to its retail competitors, and is
also required by law to maximise the return to its shareholders.[3]
8.9
As discussed in the committee's interim report, this conflict of
interest has resulted in ongoing anti-competitive behaviour by Telstra.[4]
8.10
On 15 September 2009, the government introduced the Telecommunications
Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 into the
House of Representatives, which attempts to overcome Telstra's current conflict
of interest by separating Telstra's wholesale and retail arms.
Telecommunications Legislation Amendment (Competition and Consumer
Safeguards) Bill 2009
8.11
Although the NBN will be a wholesale-only network, there is concern
that, because the deployment of and transition to the new network is scheduled
to take up to eight years, this period could be utilised by the incumbent to
further strengthen its monopoly position and hence impact on the potential for the
completed NBN to be competitive and commercially viable.
8.12
In response to these concerns, and to address the conflict of interest
mentioned above, the government introduced the Telecommunications Legislation
Amendment (Competition and Consumer Safeguards) Bill 2009, (the Bill). This
Bill seeks to directly address the regulatory regime that enables Telstra's
anti-competitive behaviour. The Bill seeks to address Telstra's vertical and
horizontal integration, to streamline the access and anti-competitive conduct
regime, and to strengthen consumer safeguards, including the Universal Service
Obligation (USO) and the Customer Service Guarantee (CSG) and priority
assistance.
8.13
The Department of Broadband, Communications and the Digital Economy (the
Department) noted that 'this bill is primarily not about the NBN: it is about
the regulatory structure of the industry in Australia today.'[5]
8.14
In his second reading speech of the Bill, the Minister for
Infrastructure, Transport, Regional Development and Local Government, the Hon
Anthony Albanese MP, described the purpose of the Bill:
The Telecommunications Legislation Amendment (Competition and
Consumer Safeguards) Bill 2009 is designed to reshape regulation in the
telecommunications sector in the interests of consumers, business and the
economy more broadly. It is also designed to position the telecommunications
industry to make a smooth transition to the NBN environment as the new network
is rolled out. The measures will provide the flexibility for Telstra to choose
its future path and streamline the regulatory framework to enhance competition
and better protect consumers.[6]
8.15
The Senate Standing Committee on Environment, Communications and the
Arts has examined the Bill as a whole in greater detail, and from a broader
policy perspective than this committee.[7]
Noting the comments made above by Mr Harris, this section of the report will
focus on the aspects of the Bill that will impact on the NBN, namely:
-
the separation of Telstra's retail and wholesale arms;
-
the introduction of fall-back benchmark access terms for declared
telecommunications infrastructure; and
-
strengthening and clarifying universal service obligations and customer
service guarantees.
Separation
8.16
The Bill proposes the separation of Telstra's retail and wholesale arms.
This separation is aimed at addressing the widely-held belief that:
Many of the problems with the current market structure and
the regulatory arrangements have their root cause in the vertically integrated
structure of Telstra and the corresponding misalignment of incentives this
creates.[8]
8.17
The Bill gives Telstra two options for separation:
Structural separation
8.18
Structural separation is the most extreme form of separation that would require
the company to establish legal, separate entities responsible for the wholesale
and retail services. To facilitate this, Part 1 of Schedule 1 to the Bill
propose the addition of a new Part 33 to the Telecommunications Act 1997
(the Act), which would allow Telstra to give, and the ACCC to accept, an
undertaking that:
-
Telstra
will not supply fixed-line carriage services to retail customers using a
telecommunication network over which Telstra is in a position to exercise
control; and
-
Telstra
will not be in a position to exercise control of a company that supplies
fixed-line carriage services to retail customers using a telecommunications
network over which Telstra is in a position to exercise control.[9]
8.19
Under proposed sections 577C and 577E respectively, Telstra may also
make, and the Australian Competition and Consumer Commission (ACCC) may accept,
undertakings in relation to hybrid fibre-coaxial (HFC) networks (the dominant
infrastructure for supplying cable television) and subscription television
broadcasting licences respectively. Such undertakings would involve Telstra not
being in a position to exercise control over a HFC network or subscription television
broadcasting licence. This seeks to address the horizontal integration also
enjoyed by Telstra, and in effect will divest Telstra of its interests in cable
television infrastructure or in Foxtel.
8.20
The desired outcome is that structural separation 'would be consistent
with the wholesale-only open access market structure to be delivered through
the National Broadband Network'[10]
and consequently facilitate a smooth transition to the NBN.
8.21
There are two main consequences if Telstra chooses not to make
undertakings to divest itself of control over its fixed line telecommunications
networks, of its HFC infrastructure and of its interests in Foxtel. The first
is that the Bill will require the functional separation of Telstra, which is
expanded upon later in this chapter. In addition to requiring functional
separation, the minister may prevent the Australian Communications and Media
Authority (ACMA) from allocating Telstra the additional spectrum licences
necessary for advanced wireless broadband services.[11]
8.22
The Bill, however, does contain provisions which enable the minister to
waive the requirements relating to Foxtel and HFC infrastructure if the minister
is satisfied that Telstra's structural separation undertaking is:
...sufficient to address concerns about the degree of Telstra's
power in telecommunications markets.[12]
8.23
The Explanatory Memorandum sets out how Telstra might choose to
structurally separate in light of the NBN project:
Structural separation may, but does not need to,
involve the creation of a new company by Telstra and the transfer of its
fixed-line assets to that new company. Alternatively it may involve
Telstra progressively migrating its fixed-line traffic to the NBN over an
agreed period of time and under set regulatory arrangements, and sell or cease to
use its fixed-line assets on an agreed basis. This approach will ultimately
lead to a national outcome where there is a wholesale-only network not
controlled by any retail company—in other words, full structural separation in
time.[13]
8.24
In response to the Bill's requirement to structurally separate on a
voluntary basis, Telstra has submitted that:
[Structural separation] would only be considered if the Board
and Management of the company were convinced it were in the best interests of
Telstra shareholders.[14]
8.25
Telstra has also said that the structural separation proposed by the
legislation:
...does create a high degree of uncertainly around any
structural separation undertakings, and this places constraints on our board.[15]
8.26
These uncertainties include the fact that the minister retains
discretion in his decision to waive the requirement that Telstra divest its
interests in the HFC and Foxtel, even if Telstra structurally separates,
meaning that Telstra has no guarantee that if it separates it will receive that
particular benefit. Telstra argued that this uncertainty means it is difficult
for the Telstra board to make a judgment that separation is in the best
interests of shareholders.[16]
Functional separation
8.27
If Telstra does not structurally separate, then the Bill contains
provisions whereby the government may functionally separate Telstra. Functional
separation would still be based on a behavioural remedy, modifying the current
operational separation provisions. This is the course that was taken in the UK,
with BT.
8.28
Item 22 of the Bill inserts a new Part 9 to the Telecommunications Act,
which would allow the government to functionally separate Telstra. The Bill
sets out a process for the minister to make a written determination specifying
requirements which Telstra must meet in preparing a draft functional separation
undertaking.[17]
8.29
If the minister makes such a declaration, Telstra would then have 90
days to prepare an undertaking which complies with those requirements, as well
as the other requirements set out in clauses 73 and 74 of the Bill.[18]
The minister may then approve or vary the undertaking.[19]
Telstra must comply with a functional separation undertaking, unless it has
already made an undertaking to structurally separate under clause 577A.
8.30
Functional separation in essence involves the principles that:
-
There should be equivalence in relation to the supply by Telstra
of regulated services to Telstra's wholesale customers and its own retail
business units;
-
Telstra should maintain separate retail and wholesale business
units, which operate at arms length from each other;
-
Telstra should have systems, procedures and practices that relate
to monitoring and reporting on compliance with, the development of performance
measures for, and independent audits and checks of the final functional
separation undertaking; and
-
Telstra's wholesale business unit should not consult its retail
unit regarding proposed services or development of those services unless it
also consults with other wholesale customers at the same time and in the same
manner.[20]
Impact of separation on the NBN
8.31
The aim of causing the separation of Telstra is to provide a
telecommunications environment that would mirror the wholesale-only environment
created by the NBN proposal. The government believes that the separation of
Telstra will be:
Consistent with the market structure that will be delivered
through the NBN...[21]
8.32
However, the government has indicated that its principal reason for
wanting to separate Telstra is to address concerns with the Australian
telecommunications industry in the short term, prior to the rollout of the NBN.
The Minister for Infrastructure, Transport, Regional Development and Local
Government said, in the second reading speech of the Bill:
As transformative as the NBN initiative is, it is a detailed
and complex project. During the eight-year rollout of the NBN, the existing
telecommunications regulatory regime remains critical to the delivery of
affordable, high-quality services to businesses and consumers.
Telecommunications services are a vital input to the daily functioning and
activity in modern societies. The reforms being introduced today are required
to address longstanding and widespread concerns that the existing
telecommunications regulatory regime is failing Australian consumers and
businesses. On a range of measures of price, quality of services and
availability, Australia continually trails key international competitors.[22]
8.33
Telstra has disputed this rationale for separation, arguing that
functional separation takes a number of years to implement, and accordingly:
...would pose serious obstacles to the migration of Telstra
traffic to a national broadband network. Given international experience, the
time taken to implement functional separation would create at least a double migration
for customers from the current Telstra legacy systems to the functionally
separated legacy systems; ... It really magnifies the potential for some chaos.[23]
8.34
Telstra bases its assertion that functional separation would take in the
vicinity of six years on the experience in the UK and New Zealand.[24]
Furthermore, Telstra has submitted that the cost of functional separation would
be substantial, and estimates those costs to be between $500 million and $1.2
billion.[25]
According to Telstra, the time and costs would predominantly be in developing
IT infrastructure.[26]
This sentiment was supported by evidence provided to the committee by BT in March 2009:
...This was, and still is, one of the most complicated areas of
the undertaking. ...separation of our management information systems and our OSS,
the systems that drive the actual delivery of service ... we underestimated the
complexity of this operation.[27]
8.35
Mr McCarthy-Ward went on to comment on the high cost of this separation,
noting that:
...it is moot whether or not the full cost of physical system
separation is proportionate [to the benefit gained].[28]
8.36
Telstra pointed out in its submission on the Bill that the diversion of
resources, as required by separation, are likely to result in a decline in
customer service.[29] Furthermore, Telstra submitted that
resources will be diverted away from the NBN and that:
In practice, Telstra would be forced to focus on meeting its
functional separation milestones and defer any transition to the NBN until
after separation was implemented.[30]
8.37
Telstra argued that its current tranche of IT reforms, which aim to
'hardwire' equivalence into its system, are sufficient to ensure that Telstra's
competitors are given the same treatment as Telstra's own retail arm. Mr Booth
told the Senate Standing Committee on Environment, Communications and the Arts
that:
The question then is how you give people certainty, and
transparency then becomes the issue...We propose abilities for the ACCC, for
example, to do audits and to come in and drop the two orders in the top and see
if they come out the bottom in the way we say they will.[31]
8.38
Accordingly, Telstra argued that separation of any kind is an
unnecessary expense, and disputes the government's assumption that horizontal
and vertical integration is an 'unambiguous negative'.[32]
8.39
The Department has not disputed Telstra's costings, nor its anticipated
time frame. However, the Department argued that, while it may take six years
for total separation to occur:
When you talk to people in the UK and New Zealand...the way they
organise it is to actually have a set of steps to be undertaken and a set of
milestones to be met. They require the most important measures to be taken up
front. The system changes that are relatively minor are done towards the end of
the process. So they tend to see the big gains from separation very much in the
early years. They have tended to see positive benefits within 12 months of
embarking on functional separation, but it may well be the case that the less
important measures do take a longer time to put in place.[33]
8.40
Optus, and other Telstra competitors, have also taken a different view
to Telstra with regard to separation. The General Manager of Interconnect and
Economic Regulation at Optus, Mr Andrew Sheridan, told the Senate Standing
Committee on Environment, Communications and the Arts that:
...from the evidence that we look at, the BT separation has
been an undoubted success. I will just draw your attention to some comments
from Ofcom, which very recently undertook one of its annual assessments of the
undertakings that were given by BT, saying that the separation arrangements in
the UK had led to 'greater choice and take-up of services, choice of suppliers,
products and packages and increased value for money' for customers.[34]
8.41
Additionally, with regard to Telstra's suggestion that its current IT
projects will achieve equivalence at a lower cost, Optus has said that it is
not sufficient. One of the key deficiencies in Telstra's proposal, according to
Optus, is:
...that Telstra Retail will buy services directly from the
network business—I think they talk about it—and Optus, Macquarie, AAPT et
cetera would have to go through an intermediary, which is Telstra Wholesale.
Therein lies the problem, because it is through that intermediary step that you
lose transparency and these differences start to appear.[35]
8.42
Mr Sheridan continued, pointing out that the solution proposed by
Telstra does not dramatically alter the status quo where, in response to
arguments about lack of equivalence, Telstra says '[B]ut we take a different
service to you'.[36]
Committee view
8.43
The committee considers that Telstra has been issued with an ultimatum
to 'voluntarily' separate, and strongly questions the government's assertion
that Telstra has been provided with a 'choice'.
8.44
The committee acknowledges that without considered, consistent
regulation during the rollout of the NBN, NBN Co risks extensive over-build in
deploying the FTTP network, particularly through not being able to make
efficient use of existing Telstra infrastructure, and in possibly having to
compete with Telstra simultaneously deploying its own fibre network.
8.45
While it is clear that current regulatory practices with regard to the
telecommunications industry are not achieving maximum competition, or indeed
fairness, it is not clear that the separation of Telstra—structural or
functional—is necessary in order to achieve the government's stated aims with
regard to the NBN. Compounding the issue is the government's insistence that
the NBN Co is to be a profitable company, which then exacerbates the risk of
over-build by an incumbent wielding significant market power.
8.46
Regardless of the fate of this bill, the committee believes the NBN
cannot be commercially viable without the migration of existing Telstra
customers to it. As telecommunications consultant, Mr Kevin Morgan, told
the committee:
...the NBN demands a monopoly. It will need probably every cent
of existing public switch network revenue if it is to achieve a commercial
return—and bear in mind that the government has stated this is going to achieve
a commercial return.[37]
8.47
The committee also has significant concerns about the issues raised by
Telstra, namely the cost of separation to that company, and the fact that this
will prevent Telstra from investing that money into the new telecommunications
infrastructure that this country needs.
8.48
The committee's concerns are supported by the views of economist, Mr
Henry Ergas, who told the committee that separation has not been an
overwhelming success in the UK, casting doubt on the government's fundamental
assumption that vertical integration is bad for consumers:
[T]here is no evidence of an improvement in performance in
the UK and some evidence of a deterioration in at least relative performance in
the UK. The difficulty one has, as with all such situations, is that there were
several factors that were changed at once. ... It is not easy to disentangle the
impacts of functional separation from the impacts of those other changes but,
to the extent to which people have tried to do so in a rigorous way, they have
broadly taken the view that it is not obvious that the benefits from functional
separation have outweighed the costs.[38]
8.49
Even if the separation of Telstra was seen to be the best solution, the
committee fails to see how this decision can be made without a clear understanding
of how the NBN will be deployed, and the likely effects of the NBN over the
short and medium term. The committee's view is that it is essential to wait
until the Implementation Study has reported before significant policy decisions
concerning the regulation of the telecommunications market are made.
8.50
Telstra has also argued that the 'penalties' that the legislation puts
in place for failure to structurally separate are themselves anti-competitive.
Dr Warren said:
We believe that taking us out of the upgrade path, the 4G
market, would basically reduce competition in that market, particularly for
rural and regional consumers, for whom we are the only network. Secondly, in
the Foxtel space, clearly if we were forced to divest Foxtel it is most likely
that a media player would acquire that, and we have not seen a good argument
for how a greater concentration of media can be in the consumer interest.[39]
8.51
The committee shares these concerns about the short term impacts of the
legislation on telecommunications. Indeed, the committee views the government's
use of 'sticks' and 'carrots' to encourage Telstra to separate 'voluntarily' as
more closely resembling a non-negotiable ultimatum.
8.52
Furthermore the committee fails to see that restricting Telstra's future
expansion in the mobile market, and/or withdrawing from the Pay TV market, will
either strengthen competition in the telecommunications industry or pave the
way for the NBN. In fact, the restriction of access to spectrum can be
interpreted as anti-competitive action by the same government that is
legislating to reduce anti-competitiveness in the market.
Benchmark access terms
8.53
Currently Part XIC of the Trade Practices Act 1974 (the TPA) provides
for a regime through which the ACCC can declare certain telecommunications
carriage services to be 'declared services', which results in standard access
obligations applying to providers of access to that service.
8.54
The standard access obligations simply require that the access provider
(in most cases Telstra) makes the service available to the carrier (generally other
telecommunication carriers), but do not set out terms and conditions. Rather,
these are subject to negotiation and agreement between the access seeker and
the access provider. If agreement cannot be reached, then either party can
notify the access dispute to the ACCC. The ACCC then arbitrates the dispute.
8.55
Currently the terms negotiated by the ACCC apply only to the two parties
involved in a dispute, and also apply only to the particular service in
question in that dispute. This process is known as the 'negotiate-arbitrate'
model.
8.56
There has been widespread criticism of this model. As the Competitive
Carriers Coalition (CCC) submitted to the Senate Standing Committee on Environment,
Communications and the Arts' inquiry into the Bill:
The experience of the industry has been that this approach
has been a dismal failure. Telstra has no incentive to negotiate a realistic
price of access. Rather, it benefits from delaying the finalisation of a price
for a service for as long as possible.
CCC members have waited seven years and more for price
certainty on certain key access services. Telstra in the meantime operates
freely in the retail market. These are not the circumstances under which
businesses can be expected to invest and compete against a powerful incumbent.[40]
8.57
The problems with the model are discussed in detail in the government's
April 2009 Discussion Paper on regulatory aspects of the NBN entitled National
Broadband Network: Regulatory Reform for the 21st Century.[41]
Stakeholder's principal concerns with the current model are that it is:
...slow, cumbersome and open to gaming (obstruction), and that
Part XIC does not provide sufficient regulatory certainty for investment.[42]
8.58
These deficiencies were noted not only by Telstra's competitors, but
also by Telstra in its submission on the roll-out of the NBN.[43]
8.59
Of the current model, the ACCC has said:
The tendency for Telstra to make continuous and incremental
changes to undertakings and to keep raising both old issues and new cost claims
means that resolution of access issues is cumbersome, vexatious and
inefficient.[44]
8.60
The Bill seeks to address this problem by giving the ACCC the power to
set up front prices and non-price terms and conditions of access for declared
services. These will create a fall back position if parties to an access
dispute cannot agree on terms.[45]
8.61
In making access determinations, the Bill sets out certain matters that
the ACCC must take into account in clause 152BCA. These include: the long-term
interests of consumers; the business interests of the supplier; the interests
of users of the declared service; the cost of providing access; the cost of
upgrades to the service; technical requirements necessary for the safe and reliable operation of the service; and the
economically efficient operation of the service. The ACCC must also hold a
public hearing about its proposal to make an access determination.[46]
8.62
An access determination must set out a date of expiry,[47]
which the Explanatory Memorandum states will ordinarily be 'set for a period
between three and five years'.[48]
The ACCC can also include 'fixed principles' in a determination, which only
remain in force for a certain portion of the determination's duration, so that
a determination can remain in force for a longer period and take account of
inflation/depreciation etc.[49]
8.63
The Bill also gives the ACCC the power to make written, binding rules of
conduct with respect to declared services. These rules can regulate the terms
and conditions of providing access and obtaining access to declared services,
and impose requirements on parties. Importantly, the Bill enables the ACCC to
make rules that apply only to certain carriers, service providers or access
seekers.[50]
8.64
Parties may continue to negotiate and make access agreements on
different terms to a determination. Access agreements will have to be
registered with the ACCC, however the ACCC will not have to approve the
agreements.[51]
8.65
The Bill also amends the current oversight regime under the TPA by
removing merits review of decisions under Part XIC. This means that decisions
of the ACCC with regard to access determinations, binding rules of conduct,
access agreements, and undertakings may only be reviewed by the Federal Court
under the Administrative Decisions (Judicial Review) Act 1977, or under
section 39B of the Judiciary Act 1903, on the grounds that the ACCC has
made an error in law. The ability for telecommunications providers to appeal
decisions of the ACCC on their merit has been removed.[52]
8.66
As discussed in the first interim report, the committee has heard abundant
evidence from a wide range of stakeholders about the failings of the existing regulatory
regime under the TPA.[53]
That report also detailed the problems resulting from Telstra's 'gaming'
behaviour, and noted the deficiencies of existing legislation in providing
mechanisms to counteract this behaviour. Weighing up the evidence, the
committee concluded that reform was necessary in some form, but that 'any new regulations
that underpin the NBN should ensure that any operator/owner of the new network
cannot participate in anti-competitive behaviour'.[54]
8.67
The amendments proposed by the Bill with respect to Part XIC of the TPA
appear to offer a reasonable solution to some of the problems with the existing
regulatory regime. Specifically, giving the ACCC the power to make
determinations removes the existing system's reliance on good-faith
negotiations between Telstra and its competitors, and has the potential to
remove one aspect of Telstra's 'gaming' strategy.
Committee view
8.68
The committee generally supports the proposed changes to Part XIC of the
TPA. However, the committee does hold significant concerns regarding the total
inability for telecommunication providers to appeal any ACCC decision on merit.
This equates to a proposal to waive procedural fairness. The committee strongly
urges the government to incorporate an appropriate avenue for genuine cases of
appeal.
Service obligations and customer guarantees
8.69
Part 4 of Schedule 1 to the Bill amends the Telecommunications (Consumer
Protection and Service Standards) Act 1999 to add a new obligation to the
Universal Service Obligations (USOs), that the universal service provider supplies,
on request, standard telephone services. The standard at which those services
must be provided are to be determined by the minister,[55]
and the Explanatory Memorandum states that they might include:
...maximum periods of time for new connections and fault
rectification and reliability standards. There are also new provisions
providing minimum performance benchmarks that the universal service provider
must meet in fulfilling its responsibilities.[56]
8.70
The Bill introduces similar provisions relating to the supply,
installation, maintenance and location of payphones.[57]
8.71
The aim of these amendments to the USO is to make the existing
obligations more precise and easier to enforce.[58]
8.72
Part 5 of Schedule 1 to the Bill seeks to 'arrest the decline in
telecommunications service quality standards'. Amendments to the Customer
Service Guarantee (CSG) provisions in the Consumer Protection Act to allow the minister
to establish minimum CSG benchmarks.[59]
The Explanatory Memorandum explains that:
While failure by a service provider to meet a CSG standard is
not subject to a civil penalty under the Tel Act, failure to meet the minimum
CSG performance benchmarks will be.[60]
8.73
The proposed amendments to both the CSG and USO will be enforced by
ACMA's expanded powers to issue infringement notices under proposed Part 31B to
the Consumer Protection Act. The Explanatory Memorandum states that these
infringement notices:
...will be a strong incentive on the industry to improve
service quality.[61]
8.74
If CSG standards are not met, telecommunications companies may be
required to provide customers with financial compensation.[62]
The Bill does contain provisions for customer's CSG rights to be waived, but
this must be done expressly and in writing.[63]
8.75
The Explanatory Memorandum states that the proposed amendments to the
USOs and CSGs arise as a result of the fact that:
The Government is committed to ensuring consumers are
protected in the transition to the NBN.[64]
8.76
Telstra strongly argues that the Bill fails to achieve this aim for a
number of reasons, highlighting their concern that:
...there are no safeguards against burdensome regulations that
do not recognise Telstra's unique challenge of providing quality services
across Australia's vast and challenging terrain.[65]
8.77
Telstra continued by pointing out that the Bill also fails to address
how USOs and CSGs will apply once the NBN is in operation, and more importantly
in the short term, during the transition period to the NBN:
Moreover, Telstra notes that the USO remains uncosted and
underfunded. The Government's long term vision for the broader USO and the role
of NBN Co. is not clear from the Bill, yet is a key issue to be addressed in
the transition to the NBN.[66]
8.78
This is an issue of concern to the committee, particularly in a
situation where Telstra is expending considerable resources on separation at
the expense of its USOs and CSGs.
Conclusion
8.79
The committee does not make any findings or recommendations as to the
Bill, as the Standing Committee on Environment, Communications and the Arts has
examined the Bill in significantly more detail than is possible by this
committee. The purpose of this chapter was simply to comment on the potential
implications of the Bill for the NBN.
8.80
In that regard, the committee's view is that the Bill does not appear to
be directly necessary for the success of an NBN, and in some ways, including
the diversion of resources, the Bill may hinder the successful and expedient
rollout of the network.
8.81
The committee acknowledges the complexity of the telecommunications
industry and the issues that this Bill is attempting to address. The committee
also notes these complex issues are subject to analysis within the
Implementation Study, which is due for completion in February 2010.
8.82
The committee strongly believes that decisions on this Bill should not
be made within a vacuum. Consequently consideration of this Bill should have
been delayed until the Implementation Study is completed. At risk are the
investments of millions of Australian Telstra shareholders, the potential
investors in the NBN, and ultimately the long term interests of end users of
the telecommunications network. Consequently, the committee reiterates the
recommendation made within the report on the inquiry into this bill:
Recommendation 11
8.83
That further consideration of the bill not proceed until after the NBN
Implementation Study has been completed, the government has tabled its response
to the Implementation Study and the Senate has certainty about the network
structure of the NBN Co and the regulatory framework which will surround it.[67]
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