1.1
On 21 October 2021, the Senate referred the provisions of the Telstra Corporation and other Legislation Amendment Bill 2021 (the Bill) to the Senate Environment and Communications Legislation Committee for inquiry and report by 18 November 2021.
1.2
According to the Explanatory Memorandum (EM), the Bill would:
Amend legislation relating to Telstra Corporation Limited (Telstra) to ensure regulatory equivalency of obligations across the restructured Telstra group, as suggested in Telstra's proposed Scheme of Arrangement pursuant to the Corporations Act 2001.
Conduct of the inquiry
1.3
In accordance with its usual practice, the committee advertised the inquiry on its website and wrote to relevant organisations inviting submissions by 1 November 2021.
1.4
The committee received four submissions, which are listed at Appendix 1 and published on the committee's website. Although no hearing was held for this inquiry, several Senators lodged written questions on notice to clarify certain aspects of the Bill. The answers to these questions are published on the committee's website.
Acknowledgement
1.5
The committee thanks the submitters, including the Department of Infrastructure, Transport, Regional Development and Communications and the Australian Competition and Consumer Commission, for their contributions to the inquiry, particularly given the short timeframe.
Scope of the report
1.6
This report comprises two chapters:
Chapter 1 provides background and contextual information relating to the Bill, and outlines the Bill's structure and some key provisions.
Chapter 2 examines various key issues raised by stakeholders in submissions, and sets out the committee's views and recommendation.
1.7
This report does not consider the broader consequences of the restructure, such as implications for Telstra's shareholders, employees and customers, as these are not matters directly affected by the Bill, but rather by the restructure itself as proposed in the Scheme of Arrangement.
Background and context to the bill
1.8
On 12 November 2020 Telstra Corporation Limited (Telstra) announced its proposal to restructure the company into the following legal entities:
Telstra Group Limited: the parent company that will hold the below three entities;
InfraCo Fixed: the entity proposed to be responsible for owning and operating the company's passive physical infrastructure assets;
Amplitel: the entity proposed to be responsible for owning and operating the company's passive physical mobile tower assets; and
Serve Co (Telstra Limited): the entity proposed to be responsible for owning the active parts of the network and for customer service delivery.
1.9
Telstra's restructure is proposed in accordance with a Scheme of Arrangement under section 413 of the Corporations Act 2001, which allows a court to approve, through an order, the transfer of all or part of a company's undertaking, property and liabilities (including its contracts) to another company. The transfer is not effective until the court makes the order. It is anticipated that the Federal Court will consider Telstra's proposed restructure in early 2022.
1.10
Telstra describes the restructure as:
An internal legal re-organisation [that] will not impact on the products, plans or services we offer to our customers, our ability and our commitment to meet our existing regulatory and security obligations, or our infrastructure investments, including our commitments to our regional Australian customers.
1.11
As a fully privatised company, Telstra is at liberty to structure and restructure its business as it determines appropriate. However, Telstra remains regulated by Commonwealth legislation, including the Telstra Corporation Act 1991, the Telecommunications Act 1997 and the Australian Competition and Consumer Act 2010. As a consequence, it has obligations under these Acts.
1.12
The Bill seeks to ensure that the obligations that currently apply to Telstra, continue to apply to it successor entities. The EM notes:
While Telstra is free to restructure its business as it sees fit, successive Parliaments have placed and maintained a range of obligations on that business, and it is important that these remain effective.
1.13
The core legislative obligations Telstra is currently subject to are:
The Universal Service Obligation (USO) is Telstra's obligation to:
Ensure standard telephone services (STS) and payphones are reasonably accessible to all people in Australia on an equitable basis, wherever they work or live.
Telstra is also subject to contractual obligations in relation to the USO, under Telstra's Universal Service Obligation Performance Agreement (TUSOPA), which also covers emergency call service obligations.
Structural Separation Undertaking and Migration plan, which:
Specif[y] Telstra's commitments to progressively migrate its fixed line voice and broadband customers onto the National Broadband Network.
Obligations under Definitive Agreements, which are:
A series of long-standing contracts and agreements…with Telstra under which Telstra committed, among other things, to supply access to its infrastructure to NBN Co Limited (NBN Co) over an extended period.
The facilities access framework, which:
Operates by requiring carriers to provide other carriers access to their telecommunications transmission towers…
Carrier licence obligations:
In addition to Telstra-specific obligations, Telstra is subject to a range of general obligations by right of being a licensed carrier under the [Telecommunications] Act.
Structure and key proposals of the Bill
1.14
The Bill was introduced into the House of Representatives on 21 October 2021 by the Hon Paul Fletcher MP, Minister for Communications, Urban Infrastructure, Cities and the Arts (the Minister). In his second reading speech, the Minister explained that the purpose of the Bill is to:
Maintain regulatory obligations that protect consumers and promote competition in response to Telstra's proposed restructure.
1.15
The Bill contains five schedules. The provisions in Schedules 1, 4 and 5 would commence the day after Royal Assent, as they are not contingent on the Scheme of Arrangement coming into effect. Schedules 2 and 3 would commence when the Scheme of Arrangement is approved by the court. The following paragraphs outline the key provisions in the Bill, noting that not all proposed amendments are canvassed.
1.16
The amendments in Schedule 1 would:
Define a range of Telstra successor companies;
Allow for the Minister to determine other successor companies;
Replace references to Telstra with references to the relevant successor company/ies;
Require relevant entities to notify the Australian Communications and Media Authority (ACMA) when they transfer telecommunications businesses and assets;
Authorise the 're-pointing' of existing obligations on Telstra to new Telstra companies or NBN entities, and authorise conduct engaged in to give effect to those obligations;
Empower the Minister and the ACMA (as appropriate) to issue directions to a successor entity to take action if that entity has failed, is failing, or is likely to fail to fulfil an obligation under a telecommunications law, or to comply with an ACMA direction.
1.17
The amendments in Schedule 2 would extend key obligations on Telstra to its successor companies, including the structural separation undertaking and migration plan, emergency call obligations, and carrier licence obligations. Schedule 2 also proposes to require Telstra successor companies to give notice when they have entered into a contract, or variation of a contract, that may affect the TUSOPA.
1.18
The amendments in Schedule 3 would extend Telstra's obligations under the TUSOPA and the Definitive Agreements to Telstra's successor entities.
1.19
The amendments in Schedule 4 would extend the facilities access framework to Telstra's successor entities, and introduce new obligations as part of this framework.
1.20
The amendments in Schedule 5 would provide that a declaration that a company is a Telstra successor company or designated Telstra successor company is not subject to sunsetting (that is, repeal after 10 years).
Reports of other parliamentary committees
1.21
When examining a bill, the committee takes into account any relevant comments published by the Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) and the Parliamentary Joint Committee on Human Rights (Human Rights Committee). Neither of these committees has considered the Bill.
Statement of compatibility with human rights
1.22
The EM states that the Bill does not engage any of the applicable rights or freedoms, and the measures are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Regional Australia Impact Statement and Financial Impact Statement
1.23
The EM also contains a Regional Australia Impact Statement, noting the vital services that Telstra provides in regional and rural areas, and that the Bill not passing:
Could create opportunities for negative impacts for consumers and businesses across Australia relating to access to telecommunication services and connectivity, and essential infrastructure works around Australia and in regional areas.
1.24
The Financial Impact Statement in the EM notes that the Bill is not expected to have any impact on Commonwealth expenditure or revenue.