MINORITY REPORT
CHAPTER 4
PROVISION OF TELECOMMUNICATIONS INFRASTRUCTURE
Paragraphs (j) and (k) of the terms of reference raise the issue of
the telecommunications carriers' powers to install facilities and immunities
from state and local government planning laws:
(j) the extent to which Telstra and telecommunications carriers should
be excluded from State and local government regulations;
(k) the impact of the duplication of infrastructure, and the extent
to which this can be reduced by sharing.
These issues have raised significant community concerns at the present
time, as is evidenced by the fact that over half of the submissions
received to the Inquiry dealt solely with these topics.
However, these issues are quite independent of the question of whether
Telstra should be part privatised or not. The Bill includes no provisions
dealing with the powers and immunities of the carriers. They were included
in the terms of reference of this Inquiry as an act of pure political
opportunism on the part of the Opposition Senators. While we do not
dispute the evidence of significant community feeling on these issues
which has been put before this Inquiry, we do not believe that this
is the right forum to engage in a lengthy discussion of the issues.
We will therefore confine ourselves to a relatively brief discussion
of these terms of reference.
We would point out that the present Government has inherited from Labor
the regime which it established for the rollout of broadband cable,
under which the carriers have substantial immunity from state and local
government planning regulations. The fact that this difficult problem
has been left to the present Government to fix up was recognised by
witnesses appearing before the Inquiry:
I make a plea that, with the opportunities that your group has
to address the issues that are untenable in many areas, somebody brings
a forum round the table that makes Optus work cooperatively with Telstra
to share ducting; that someone costs out what it is going to cost Australia
to have the type of cabling that we want, which is underground; and
that somehow a fair proportion of those costs is worked out; because
the Liberal Party is stuck with the damage of the Labor government.
[1]
4.1 The applicability of state and local government planning regulations
4.1.1 The rationale for the carriers' powers and immunities
The issue of the extent to which the carriers should be subject to
state and local government planning regulations is one which generated
considerable emotion on the part of many witnesses who appeared before
the Inquiry. There is clearly community anxiety about the current rollout
of broadband cable. There is also some concern on health grounds about
the siting of telecommunications towers (notwithstanding that there
is currently no substantiated scientific evidence of adverse health
effects from public exposure to electromagnetic energy at levels within
current Australian standards).
While we can appreciate the anxiety which some in the community feel,
this issue requires a careful balancing of these concerns against the
very real community benefits which both broadband cable and telecommunications
towers can deliver. It is particularly interesting that on the very day
when the Inquiry heard submissions in Adelaide from a number of local
councils complaining about telecommunications towers, we also heard submissions
from rural councils in South Australia - Coober Pedy, Roxby Downs and
Ceduna - begging for mobile phone coverage to extend to their areas as
soon as possible. [2] Of course, telecommunications
towers are a necessary adjunct to a mobile telephone service. There could
be no better example of the competing pressures which the Government needs
to balance up.
Moreover, some of the more extreme statements about this issue ignore
the rationale for the carriers being subject to special planning and land
use regimes, and the fact that this has been so ever since Federation.
It is important to provide some perspective on these issues. Section 116
of the Telecommunications Act 1991 (the Act) provides that regulations
may provide that specified carriers may engage in specified exempt activities
related to the development and maintenance of essential network infrastructure
without being required to comply with certain State and Territory laws.
The Telecommunications (Exempt Activities) Regulations, made under
this provision of the Act, provide carriers with immunities from certain
laws including State and Territory planning and environmental assessment
laws. Carriers also are provided powers of land access under ss.127A-135
of the Act. [3]
These powers and immunities are more limited than those which applied
to Telecom prior to the introduction of competition in 1991:
The exemption in its current form, as set out in the Telecommunications
(Exempt Activities) Regulations, is more narrowly confined
than it ever has been in the history of Federal telecommunications regulation.
[4]
Nevertheless, the Act continues to provide a range of powers to enable
carriers (both general and mobile) to roll out their networks rapidly
and provide facilities based competition to provide benefits to consumers
in the form of reduced prices and an expanded range of services. Obviously,
the provision of immunities to all three carriers was necessary to ensure
that the two new carriers were not disadvantaged against Telecom.
We are satisfied by the evidence we have heard that telecommunications
is an industry which operates nationwide and which therefore must be
regulated nationally. Optus gave a good example:
The Optus intercity fibre link between Sydney and Melbourne,
which is one of the most important elements in the Optus network crosses
approximately thirty local council areas, and opposition from any one
of those councils could have jeopardised or substantially delayed the
completion of the end-to-end connection between Sydney and Melbourne.
[5]
We believe that the absence of immunity from State and Territory law
would require carriers to conform with a range of different laws across
Australia which may not have been drafted with telecommunications in
mind. We are concerned at the possibility for delay in the provision
of vital communications facilities which would result.
Based on the evidence we received, we see strong arguments for the
present arrangement, under which the telecommunications carriers are
regulated on a national basis rather than being regulated solely under
state or local law.
4.1.2 The rights of carriers in the future
Although we believe national regulation is desirable, we acknowledge
that it may be appropriate for the Government to incrementally adjust
the balance it strikes between the competing policy needs on this issue.
One of the options that might be open to the Government is to modify
the powers and immunities of the carriers. Of course, that raises very
difficult issues, as Senator Tierney pointed out in responding to a
witness during the course of the Inquiry:
You want us to change that instantly, do you? You think we can
change it within two or three months when a roll-out is halfway through,
when people have made their business plans, spending billions of dollars
based on the fact that they could do it this way? You think we can magically
switch it around? [6]
Essentially the same point was made to the Inquiry in a submission
from BT Asia Pacific: with the carriers having invested substantial
sums on the understanding that they would be permitted to develop their
own infrastructure, the present Government should not now reverse that
position:
As the clear policy underpinning the previous regime was to encourage
the development of alternative infrastructure - and given the need for
the infrastructure to provide an alternative source of supply for new
entrants - we fully support the current infrastructure development plans
of the existing carriers. [7]
Notwithstanding the difficulty of the issue, we were advised by Department
of Communications and the Arts that the Government is taking steps to
modify the powers and immunities of the carriers. The Government has issued
a revised draft Telecommunications National Code, with more stringent
provisions with regard to notification and consultation and this has been
subject to a public inquiry process by AUSTEL. A draft Land Access Code
has also been issued and has also been subject to public inquiry by AUSTEL.
[8]
We also understand that the Government has indicated that it will continue
the current regulatory framework governing the way in which carriers install
their networks, operating in lieu of normal State and Territory planning
laws, until replaced by another scheme of planning processes, preferably
from 1 July 1997. [9]
We understand that the Government has begun to consider the form of
that new regime. The range of options which could be considered could
include maintenance of the existing regime to ensure continued consistent
rules for rollout of infrastructure to provide for the delivery of advanced
services and maintenance of existing services; complete removal of carrier
powers and immunities, so putting carriers on the same footing as other
companies in having to comply with State and Territory laws; or some
options in between.
A range of views were expressed to the Inquiry as to the form which the
new regime should take. Telstra has expressed the view that continuation
of appropriate land access powers for carriers is critical to meeting
the needs of their customers. [10] Optus
considers that carrier powers and immunities should continue to apply
after the expiry of the duopoly (at least in relation to major networks).
[11] However, a number of local Government
representatives have sought either greater controls on carrier activities;
greater involvement of local planning authorities; or complete removal
of carrier immunity at the earliest possible opportunity. [12]
We believe that the Government will, in making its decision on post
1997 carrier powers and immunities, need to have regard to the importance
of environmental control and community notification in relation to the
network installation activities of an increasing number of carriers.
This will have to be balanced against a judgement of what powers and
immunities are necessary to enable carriers to maintain and install
networks on a national basis.
We do not see any basis for recommending any action beyond that which
is already under consideration by the Government. We also stress, yet
again, that these issues are in no way related to the part privatisation
of Telstra.
| Finding: The issue of whether telecommunications carriers
should be excluded from state and local government regulations has
no bearing on the issue of whether Telstra should be part privatised,
and should not be a reason to delay the passage of the Bill. The Government
should continue to monitor public attitudes, and should give careful
consideration to those attitudes in determining the powers and immunities
which the carriers will enjoy once the post 1997 telecommunications
regulatory regime is introduced. |
4.2 Duplication of infrastructure
A number of submissions to the Inquiry argued that the duplication
of infrastructure was wasteful and ought to be prevented by the Government
on that basis. The present Government does not have the luxury of developing
an infrastructure regime from a clean slate; we are required to work
with the duplication regime which we inherited from the previous Government.
Given this fact, our view is that there is a strong case for permitting
duplication of infrastructure. On the evidence we received, we are satisfied
that the duplication of infrastructure brings substantial benefits to
consumers. These benefits arise from the fact that competition is enhanced
and consumers are provided with a wider range of facilities and services
than might otherwise be available.
4.2.1 Duplication brings enhanced competition
BZW argue that the effect of the duplication of infrastructure is already
being seen in competition in Australia which is significantly more vigorous
than in other markets, which brings attendant benefits to consumers.
The two broadband cable networks currently being rolled out by
Telstra and Optus form a basis for making Australia a world leader in
the provision of emerging telecommunications services. Already there
is a great deal of vigour in the competition between Telstra Multimedia
and FOXTEL on the one hand and Optus Communication and Optus Vision
on the other hand in terms of developing service packages for their
broadband networks. Initially, this is in pay television, however, the
service range is expected to expand significantly in the near future
with cable modems and a wide range of interactive services. [13]
Optus similarly argue that the dual rollout of infrastructure is likely
to bring price benefits to consumers, much as has been seen in other
markets:
Optus believes that there is ample evidence that infrastructure
competition in telecommunications has delivered dynamic efficiency benefits
to Australian consumers in the form of lower prices and more innovative
products...rollout of alternative local infrastructure permitting Optus
to directly connect customers represents the next stage in the deregulation
of the longstanding monopoly held by Telstra's predecessors. [14]
The position was explained in slightly more theoretical terms by the
Department of Communications and the Arts, which argued that “facilities
based competition” has been central to the development of open telecommunications
markets in most countries. The issue, they say, is not duplication per
se, but the freedom of operators to construct their own facilities when
it is in their commercial interest to do so. The OECD found evidence in
1994 that facilities based competition can bring substantial benefits
to users, in terms of increased choice, greater innovation and higher
quality of service at reduced prices. [15]
4.2.2 Duplication is not wasteful
The argument that duplication is wasteful is usually made on a fairly
simplistic level: if you have two sets of cables, each costing $4 billion,
and you only need one, then you are wasting $4 billion. This argument
does not hold up well when subjected to more detailed analysis, however,
as BZW explain:
As an indication of the benefits and costs, the cost of duplication
is a part of the $3 billion that Optus Vision is spending to roll out
its network...However, this is a long life cycle investment lasting
10 to 20 years, so the annual cost of “duplication” is measured
in $100 of millions. It is much lower than the annual revenue measured
in billions that the cable companies and service providers will compete
for. The competition benefits - lower operating costs, lower prices,
more services, greater carrier responsiveness, more choice and a leading
role in emerging services - means the benefits far outweigh the costs.
[16]
It is also wrong to assume that the two networks are identical and therefore
needlessly duplicate each other. The Foxtel and Optus Vision networks
provide a different range of services, in particular given that Optus
Vision's network now offers telephony. [17]
4.2.3 Government intervention is undesirable
A number of submissions suggested that the Government should intervene
to end the duplication of infrastructure. We do not support or recommend
such a course of action, for several reasons.
Firstly, as the preceding discussion indicates, the duplication of
infrastructure offers significant benefits.
Secondly, the best way to encourage innovation in the provision of
new telecommunications services is to allow infrastructure decisions
to be taken freely on a commercial basis.
It is important that such decisions are, as far as practicable,
taken on a commercial basis and at commercial risk - including the need
for commercial investors to pay the price of their mistakes. Undue intervention
beyond that needed to preclude misuse of market power would be likely
to stifle initiative and reduce the opportunity for technological development.
[18]
Thirdly, even if Government intervention were desirable, we have not
been offered any practical route by which it could be achieved. Most
observers agree that it would require the Government to purchase, possibly
even compulsorily acquire, the networks of the two carriers. This would
be a prohibitively expensive exercise.
Even more importantly, such an arrangement would leave us all, once again,
in the hands of a monopoly carrier. How would such a carrier be regulated?
After all, experience shows that a monopoly carrier of this kind would
have no incentive to operate efficiently, and hence would inevitably impose
significant costs on the community. These costs must always be borne in
mind when weighing up the desirability of a monopoly carrier regime against
the Government's present policy of full network competition.
| Finding: There are sound economic reasons for permitting
the carriers to make their own commercial judgement about the provision
of telecommunications infrastructure, and such a regime (accompanied
by appropriate access arrangements for carriers and service providers)
is likely to bring substantial consumer benefits. It is neither necessary
or desirable for the Government to intervene to compel the carriers
to share infrastructure. |
Footnotes
[1] Official Hansard Report, 23 July,
p. 665
[2] Official Hansard Report, 23 July,
p 698
[3] Department of Communications and the Arts,
Submission No. 131, Vol. 4, p. 717
[4] Optus Communications/Optus Vision, Submission
No. 134, Vol. 4, p. 803
[5] Optus Communications/Optus Vision, Submission
No. 134, Vol. 4, p 804
[6] Official Hansard Report,23 July,
p 658
[7] BT Asia Pacific, Submission No. 314, Vol.
12, p. 2246
[8] Department of Communications and the Arts,
Submission No. 131, Vol. 4, p. 717
[9] Minister for Communications and the Arts
media release of 24 April 1996
[10] Telstra, Submission No. 189, Vol. 7,
p 1317
[11] Optus Communications/Optus Vision, Submission
No. 134, Vol. 4, p 686
[12] Local Government Association of South
Australia, Submission No. 131, Vol. 4, p 764; Municipal Association
of Victoria, Submission No. 130, Vol. 4, p. 686; Local Government and
Shires Association of NSW, Submission No. 261, Vol. 9, pp 1688-89
[13] BZW Australia, Submission No. 295, Vol.
9, p. 1855
[14] Optus Communications/Optus Vision, Submission
No. 134, Vol. 4, pp 805-806
[15] Department of Communications and the
Arts, Submission No. 131, Vol. 4, p. 718
[16] BZW Australia, Submission No. 295, Vol.
9, p. 1855
[17] Department of Communications and the
Arts, Submission No. 131, Vol. 4, p. 719
[18] Department of Finance, Submission No.
188, Vol. 7, p. 1282