CHAPTER 8
POST JULY 1997 REGULATORY ARRANGEMENTS
8.1 The Committee concluded that there is substantial uncertainty over
the telecommunications regulatory regime which will be in place from
1 July 1997, and over how this regime will affect industry structure
and the market behaviour of carriers and service providers. The Committee
concludes, therefore, that it is the worst possible time to contemplate
the selling of Telstra.
8.2 The Committee considers that if the Government decides to sell
one-third of Telstra, contrary to the recommendations of this Committee,
the sale should be delayed until at least December 1998. The Committee
considers that prior to any proposed privatisation, the National Competition
Council should be directed to investigate the competitive impact of
such privatisation, and to advise the Minister whether or not the privatisation
should proceed.
8.3 In August 1995, the former Labor Government released 98 policy
principles which were to form the basis of the telecommunications regulatory
framework from 1 July 1997. In December 1995, an exposure draft of legislation
to implement these policy principles was released for public comment.
This process was curtailed by the Federal election and subsequent change
of government.
8.4 Since the 1996 election, there has been considerable uncertainty
in the industry about the rules that will govern conduct from July 1997.
This has been exacerbated by the proposed sale of one third of Telstra,
which many people fear will lead the Government to adopt a more light-handed
regulatory approach.
8.5 In late April 1996, the Minister announced that a Green Paper would
be circulated which would contain the current Government's proposals for
deregulation. A discussion paper was released by the Minister on 14 May 1996,
and was followed on 16 May 1996 by an industry forum chaired
by the Minister. [1] The paper put forward
for consideration and discussion a framework to give effect to the Coalition's
pre-election communications policy statement, Better Communications. The
introduction to the paper acknowledged that:
It does not provide a detailed statement of all aspects of
possible arrangements, nor does it address all comments received in
regard to the exposure draft legislation, although these are being
considered by the Government.
8.6 The discussion paper and the industry responses from the forum
were referred to an expert working group, which was to oversee the drafting
of the legislation.
8.7 The Government has indicated that it wishes to release new exposure
draft legislation by September 1996, with a brief period for public comment
before the Bill is introduced into Parliament late in 1996. (Refer Table
2.3).
8.8 The May discussion paper does not give any detail of the specific
functions of the various regulatory bodies. The paper implies that,
as proposed by the previous Minister, from 1 July 1997 competition policy
will be the sole responsibility of the Australian Competition and Consumer
Commission. In the past, the responsibility for administering telecommunications-specific
competition policy rested with AUSTEL. The Committee understands that
AUSTEL will retain its other responsibilities, and be merged with the
Spectrum Management Agency to become the Australian Communications Authority.
The precise implications of these changes in the industry regulatory
bodies are not yet able to be assessed, but will be covered by the Australian
Communications Authority Bill 1996. (Refer Table 2.3).
8.9 The May discussion paper indicated that from 1 July 1997
there would be a new carrier licensing scheme and a new concept of what
a 'carrier' was. Currently the Government, through the Minister, has
the power to license general and mobile carriers. The Minister's licensing
powers are restricted until 30 June 1997 by agreements, made under s.70
of the Telecommunications Act, between the Commonwealth, Optus and Vodafone.
Whilst the discussion paper did not discuss the issue in any detail,
it now seems clear that from 1 July 1997 the Government will
no longer be responsible for licensing carriers. It also appears clear
that there will no longer be any restriction on the number of carrier
licences issued, nor will there be a requirement for new carriers to
pay substantial licence fees to hold a licence.
8.10 The May discussion paper indicated that carriers would be defined
as persons who owned line links or specified radiocommunications links
which provide carriage services. The distance of the link would have
to exceed 500 m (or the distance of all lines and links total more than
5 km) for the operator to be declared a carrier. The discussion paper
indicated that the Government's policy on carrier licensing was still
uncertain. The paper noted that:
The Forum may wish to discuss whether or not these carrier licensing
arrangements would provide the level of certainty industry participants
are seeking. Comments are also expected on matters such as the appropriateness
of the 500m/5 km rules, the types of radiocommunications links that
need to be specified and on the best approach for dealing with situations
where a network is controlled by a person other than a carrier. [2]
8.11 The May discussion paper gave no indication of the Government's
position on the difficult issue of carrier land access rights and immunities,
saying that:
The Government has decided that a scheme of proper planning process
will be developed in consultation with States, Territories and Local
Government. The legislative provisions dealing with carrier powers and
immunities in the post 1997 legislation will depend on the outcome of
that process. [3]
8.12 The success of the introduction of an open telecommunications
market after 1997 will, in large part, depend on the operation of the
access regime. The discussion paper continues the new, three-tiered
approach adopted by the former Minister's exposure draft legislation,
providing for access declarations, codes and undertakings.
8.13 The proposal is that carriers and service providers would be given
rights to have declared carriage services supplied to them and to interconnect
facilities to carrier networks. Services would be declared by the Australian
Competition and Consumer Commission. Such declaration would be on either
the consensus recommendation of a Telecommunications Access Forum, or
on the Commission's own initiative, after a public inquiry. The Forum
would have the responsibility of developing an industry-wide access
code, which would then have to be approved by the Australian Competition
and Consumer Commission (ACCC).
8.14 The most striking deficiency in the outline of the proposed access
regime is the absence of any reference to pricing guidelines. Current
Government policy is for the Minister to have the power to determine
pricing guidelines for access. However, as the Communications, Electrical
and Plumbing Union (CEPU) noted:
The manner and degree to which the Government intends to use
this power is a critical missing link in the new framework. [4]
The price at which carriers and service providers are able to obtain
access to Telstra's carriage services may have a profound effect on
the carrier's value.
8.15 The Government has indicated that it considers it appropriate to
supplement Part IV of the Trade Practices Act 1974 with telecommunications-specific
competition regulation, 'at least until competition is firmly established'
and would, presumably, do this through the Trade Practices Amendment (Telecommunications)
Bill 1996. [5] (Refer Table 2.3). The
former Government's exposure draft legislation defined anti-competitive
conduct by reference to a 'purpose' and an 'effects' test. According to
these tests, a carrier would be taken to be engaging in anticompetitive
conduct if it had a substantial degree of power in a telecommunications
market and took advantage of that power for the purpose, or with the effect
or likely effect, of substantially lessening competition, or potential
competition, in that or any other market. The May discussion paper indicated
that the Government was reviewing this approach to conduct regulation
to determine which aspects should be retained.
8.16 The discussion paper further noted that:
Industry comments on the exposure draft legislation expressed
a range of concerns about the effects test, focusing on the uncertainty
which could potentially flow to market players.
The Committee received no evidence to suggest that this uncertainty
had been overcome.
8.17 The Committee noted that although the treatment of anti-competitive
conduct in Part XIB is said to be based on s.46 of the Trade Practices
Act, it is in fact quite different. Unlike s.46, Part XIB does not contain
a statutory prohibition on anticompetitive conduct. Instead, two remedies
are proposed for the ACCC known as a competition direction and a tariff
filing direction. These remedies would be exercisable by the Commission
where it was satisfied that a carrier had engaged, was engaging, or
was proposing to engage in, anticompetitive conduct. Another significant
departure from s.46 is the reference to 'potential competition'.
8.18 The Committee considers that the proposed anti-competitive conduct
rules are bound to cause uncertainty about how they will apply in practice.
This may result in protracted and expensive court proceedings as industry
participants seek clarification. Telstra is the most likely to be affected
as it is the carrier with the highest degree of market power of all the
industry participants. This uncertainty, and the cost of likely legal
proceedings, will be a factor in Telstra's sale price, as noted in Chapter
4.
8.19 The May discussion paper also indicated the Government's uncertainty
as to whether the ACCC should have the power to require a carrier, or
carriage service provider with a substantial degree of power in a telecommunications
market, to file its tariffs for specified goods and services. The discussion
paper noted that concern had been expressed regarding the possibility
that the public disclosure of information would damage the commercial
interests of a carrier or service provider.
8.20 The discussion paper also indicated a lack of certainty as to
whether the following decisions of the ACCC should be reviewable, on
their merits, by the Australian Competition Tribunal:
(a) a decision to give a competition direction;
(b) a decision not to revoke a competition direction;
(c) a decision to vary or not to vary a competition direction;
(d) a decision not to make an exemption order; and
(e) a decision to revoke an exemption order or to make a further
exemption order.
8.21 As noted in Chapter 6, the question of whether
the 'standard telephone service' should be upgraded is being considered
by the Government separately from the post-July 1997 legislative framework.
8.22 While it is technically possible to deal with the definition of
the standard telephone service through a separate legal instrument, the
definition is of vital importance to the whole post-1997 framework and
'it is hard to see the industry signing off on the new 1997 legislation
without knowing the USO bottom line'. [6]
8.23 The Committee considers that, until the new definition of the
standard service is determined, it will not be possible to assess the
full implications of the 1997 regime.
8.24 The unregulated environment of the information superhighway places
particular strain on the protection of the privacy of individuals whose
personal information is stored, transferred and manipulated over networks.
Apart from the social policy issue of protection of fundamental human
rights, if personal privacy is inadequately protected the confidence
of network users will be undermined, preventing optimal use of the superhighway.
8.25 It is therefore a matter of concern to the Committee that the
issue of how to deal with privacy concerns received only a fleeting
mention in the discussion paper. All that was said was that:
The legislation would need to protect the privacy of information
held by the telecommunications industry and the content of communications.
Requirements would need to apply to carriers, service providers, contractors
and their employees. [7]
8.26 The discussion paper has generated considerable uncertainty as
to what will be included in codes of practice. The paper gave no indication
of what was the appropriate subject matter of a code, saying merely
that:
There are a range of consumer protection schemes that could
be included in the post-1997 legislation … Mandatory standards-making
powers, for example, would enable matters that the Government considers
clearly require attention to be dealt with directly by AUSTEL, while
industry-developed codes could deal with other important, but less
critical, issues.
The Committee considers that this language is unacceptably vague.
8.27 The discussion paper noted that carriers would be subject to a
carrier licence condition in relation to industry development obligations.
The paper gave no details of the content of the obligation.
8.28 The Committee concludes that there is currently a high level of
uncertainty as to the post-1997 regulatory arrangements. Given the massive
changes foreshadowed in the Government's May 1996 discussion paper,
the Committee considers that the legislation ought to be allowed to
operate for a period of at least 18 months before any consideration
be given to the privatisation of Telstra.
| RECOMMENDATION 37:
The Committee recommends if, contrary to the recommendations of this
Committee, the Parliament passes legislation to sell one-third of
Telstra, the sale should be delayed until December 1998 at the earliest
or at least 18 months after the post-1997 regulatory arrangements
are in place. |
8.29 To conclude the Report, the Committee wishes to re-iterate that
the policy of the present Government is to sell the whole of Telstra,
not just sell one-third. [8] The Telstra
(Dilution of Public Ownership) Bill 1996, which has been the subject of
this inquiry, is only a first-stage in the complete sell-off of Australia's
national telecommunications carrier. For this reason, the Committee reaffirms
its opposition to even the partial privatisation of Telstra.
Footnotes
[1] Senator the Hon R. Alston, Minister for
Communications and the Arts, Telecommunications Working Forum, Discussion
Paper, Post 1997 Telecommunications Legislation.
[2] Senator the Hon R. Alston, Minister for
Communications and the Arts, Telecommunications Working Forum, Discussion
Paper, Post 1997 Telecommunications Legislation, p.3.
[3] Senator the Hon R. Alston, Minister for
Communications and the Arts, Telecommunications Working Forum, Discussion
Paper, Post 1997 Telecommunications Legislation, p.5.
[4] Communications and Electrical Plumbing
Union, Submission No.296, Vol.10, p.1923.
[5] Senator the Hon R. Alston, Minister for
Communications and the Arts, Working Forum Discussion Paper,
Post 1997 Telecommunications Legislation, 16 May 1996, p.11.
[6] Communications and Electrical Plumbing
Union, Submission No.296, Vol.10, p.1931.
[7] Senator the Hon R. Alston, Minister for
Communications and the Arts, Telecommunications Working Forum, Discussion
Paper, Post 1997 Telecommunications Legislation, p.19.
[8] Warwick Smith. 'Sign Posts to the Future.
Telecommunications.' Coalition telecommunications policy as in Fightback
documents, 16 February 1993; Senator the Hon R. Alston, 1 September
1996, Meet the Press.