2.1
This chapter explores the key issues raised by stakeholders during the inquiry in relation to the Telstra Corporation and other Legislation Amendment Bill 2021 (the Bill). This chapter first notes the consultation undertaken in relation to the Bill.
Consultation
2.2
In answers to questions on notice, the Department of Infrastructure, Transport, Regional Development and Communications (the Department) provided further detail on its consultation undertaken to date on the Bill and anticipated future consultation. The Department noted that it:
consulted on an exposure draft of the Bill with five industry stakeholders 'determined to be most significantly affected': Telstra, TPG Telecom, Optus, NBN Co and Vocus. The Department further noted that Amplitel was later consulted by Telstra;
consulted with the Australian Competition and Consumer Commission (ACCC) at various times during development of the Bill;
made amendments to the Bill 'in several instances' to address issues that arose during consultation on the exposure draft;
has met with BAI Communications Pty Ltd (BAI), the Australian Communications Consumer Network (ACCAN) and the Communications Alliance, and has contacted the National Farmers' Federation; and
'continues to meet with industry stakeholders on a range of issues relevant to the industry, one of which is the Bill'.
Key issues raised in submissions
2.3
Submissions received were in general supportive of the Bill, however noted some areas of concern and proposed amendments to a number of the Bill's provisions.
2.4
The key issues outlined in the remainder of this chapter are the amendments proposed in relation to the following:
the authorisation of existing agreements and conduct;
the facilities access framework;
structural separation undertaking (SSU) and migration plan (MP) obligations;
directions powers of the Minister and the Australian Communications and Media Authority (ACMA);
foreign ownership restrictions; and
notification requirements in relation to the transfer of businesses and assets.
Authorisation
2.5
The Bill proposes to authorise Telstra successor companies and NBN corporations to enter into new agreements to 're‑point' obligations and rights under existing agreements, including the Definitive Agreements between Telstra and NBN Co.
2.6
The proposed authorisation provisions would extend the existing authorisations to Telstra successor companies so that the agreements or conduct continue not to contravene the anti-competition provisions of the Competition and Consumer Act 2010 (CCA).
2.7
This authorisation would only apply to agreements the sole purpose of which is to extend existing obligations to successor companies, and to authorise conduct to give effect to such agreements. Telstra expressed concern regarding the narrow application of this authorisation:
The problem is that the amending agreements will need to include matters that do not meet this narrow test. There will need to be incidental amendments to some of the existing rights/obligations in the Definitive Agreements so that they continue to operate as intended…
Without this being fixed, Telstra and nbn co cannot enter into the required amending agreements to vary their arrangements to apply post restructure and so the restructure could not proceed as intended.
2.8
In response to these concerns, the Department noted:
…that the authorisation provisions in the Bill are tightly drafted. This is intentional…
The Bill needs to facilitate Telstra and NBN Co putting in place arrangements akin to what applies to Telstra and NBN Co today, and not extend to Telstra or NBN Co new, more favourable arrangements.
2.9
The Department advised that it is considering amendments to authorisation provisions to 'provide appropriate limited additional flexibility'.
2.10
The Bill also proposes to extend the CCA authorisation to the making of agreements by any 'body corporate' to comply with a ministerial direction requiring one successor company to assist another in fulfilling an obligation under the Definitive Agreements.
2.11
Telstra expressed concern regarding the scope of this provision, and requested an amendment to ensure it also covers members of the Telstra Group, NBN Co and NBN Co's related bodies. In response to this request, the Department commented that it believes:
…that the associated provisions already apply to Telstra, NBN Co, and necessary associated subsidiaries. The use of the term 'body corporate' at 577BA(10A) and (10B) is intended to apply to both entities, unless otherwise indicated.
2.12
The Bill also proposes to introduce a transitional authorisation. Telstra expressed concern regarding the scope of this transitional authorisation, and requested amendments to ensure that members of the Telstra Group are authorised to engage in conduct to facilitate the operation of the current Definitive Agreements prior to scheme implementation. In response to this, the Department commented:
Section 80(2) [the transitional authorisation provision] of the Bill is intended to do that, and operates prior to the scheme commencing.
2.13
The Department advised that it is in discussions with Telstra in relation to its concerns regarding the authorisation amendments.
Facilities Access
2.14
The Bill proposes to extend Telstra's obligations under the facilities access framework, and to introduce new obligations for carriers; that is, if a group of companies includes a carrier, a company (other than a carrier) that is in the group (a 'related company') must provide other carriers with access to facilities and telecommunications transmission towers, where that related company holds facilities or telecommunications transmission towers. This new measure is not specific to Telstra, and would apply to any company that is in a group of companies that includes a carrier.
2.15
These obligations would not take effect until 60 days after the ACCC has made a report to the Minister about the appropriate control threshold to determine if a company is a related company. From the Bill's commencement, the ACCC has six months in which to provide its report. The default control threshold currently proposed by the Bill is if the carrier can cast more than 15 per cent of votes at a general meeting, or controls more than 15 per cent of its shares. Telstra expressed its support for the proposed extension of the access framework and the initial control threshold proposed.
2.16
BAI however expressed concern that the proposed new obligations in relation to facilities access would have unintended consequences for carriers. BAI requested deletion of Schedule 4 of the Bill in its entirety, or, in the alternative, proposed two options for amendments:
To extend the access regime…to telecommunications towers and facilities that are used to provide carriage services by the entity in the group holding the carrier licence.
To introduce appropriate exclusions to remove from the definitions of affected facilities and transmission towers any assets used predominantly for broadcasting.
2.17
In response to these proposed options, the ACCC commented:
[The first option] would appear to avoid the unintended consequences raised by BAI, but also allow the access framework to operate should the carrier commence using the towers or facilities of the group to provide carriage services.
[The second option], which we would not support…raises two issues. First, broadcast towers are increasingly being used for telecommunications services. As such, an exclusion may...raise competition concerns. Second, setting a threshold to determine 'predominant'’ use would be impracticable and subject to change because of market dynamics.
2.18
The Department noted that it is in discussions with BAI, and further wrote in answer to a question on notice:
The Department confirms that the Bill was not intended to place telecommunications facilities access obligations on towers used to supply broadcasting services. However, we consider that Schedule 4 of the Bill is essential to ensure that the facilities access regime for telecommunications towers cannot be avoided by a company changing its corporate structure.
Structural Separation Undertaking and Migration Plan obligations
2.19
The Bill proposes to re-point Telstra's SSU and MP obligations to apply to other Telstra successor companies. To do this, the Bill would empower the Minister to, by legislative instrument:
Impose these obligations on one or more Telstra successor companies; and
To issue a direction to require a Telstra successor company to take certain action if the Minister is satisfied that the company has failed, is failing, or is likely to fail to fulfil an obligation imposed on it by the SSU or MP.
2.20
Telstra requested an amendment to the proposed provisions in relation to the SSU and MP that would:
…clarify if the obligation is performed by one party it is then taken to have been complied with by the others. Otherwise we consider compliance by both entities will be problematic, particularly in relation to Telstra's existing disconnection obligations under the Final Migration Plan.
2.21
The Department was not supportive of such an amendment:
The Department's view is that this would have unintended consequences…(making the amendment suggested, would for example, allow entities in the group to vertically integrate, as long as one was structurally separated).
Ministerial and Australian Communications and Media Authority directions powers
2.22
The Bill proposes to empower the ACMA and the Minister to issue a range of directions, by way of legislative instruments, for successor companies to fulfil their obligations, including to facilitate another successor company fulfilling its obligations (such as under the Definitive Agreements and the TUSOPA).
2.23
Telstra expressed some concern about the breadth and exercise of these directions powers, commenting:
It is important that these broad powers of the Minister and ACMA are used rarely, if at all, and only in exceptional circumstances.
2.24
In response to this concern, the Department drew attention to Telstra having indicated to the Commonwealth its intention to continue to fully deliver its obligations under the TUSOPA and the Definitive Agreements. The Department commented that the directions powers:
…are not expected to be frequently exercised, but provides [sic] an additional safeguard, along with others in the Bill.
2.25
The Department also highlighted the limits and safeguards on the exercise of these powers included in the Bill:
The directions powers in the Bill would need to be exercised in a manner which was consistent with…the Telecommunications Act 1997. Further, where the exercise of one of the proposed directions powers was an administrative decision, it would need to be in accordance with administrative law principles…and would be open to judicial review.
The directions powers proposed in relation to the TUSOPA and Definitive Agreements…are limited due to a range of pre-conditions that would need to be satisfied. Firstly, a directions power could only be used where the Minister is satisfied that a designated Telstra successor company that is a party to the TUSOPA or Definitive Agreements has failed, is failing, or will fail to fulfil its obligations under the TUSOPA or Definitive Agreements. Secondly, such a direction must be linked to facilitating a designated Telstra successor company to fulfil its obligations under the TUSOPA or Definitive Agreements, and it could only be made where the Minister is satisfied that the body corporate has the capability…to comply with the direction, or could reasonably acquire such capability. Thirdly, the Minister may not also give a direction in relation to the TUSOPA or Definitive Agreements unless the body corporate is either a constitutional corporation or carries on a telecommunications business as defined under the proposed section 581L in the Telecommunications Act.
Further, where the above conditions are satisfied, before giving or varying a direction in relation to the TUSOPA or Definitive Agreements, the Minister would also be required to consult the public, including publishing a draft of the direction and have due regard to any comments received.
Foreign ownership restrictions
2.26
The Bill proposes to extend Telstra's foreign ownership restrictions to its successor companies. These restrictions are currently provided for by the Telstra Corporation Act 1991 (TCA) and the Telstra Corporation (Ownership—Interest in Shares) Regulations 2018.
2.27
Telstra acknowledged the need to ensure regulatory equivalence with respect to foreign ownership restrictions, however expressed its concerns regarding the current foreign ownership framework:
…the foreign ownership provisions of the TCA are designed (and originally intended) for a company listed on the ASX…
While the foreign ownership provisions in the TCA should apply to the new ASX listed holding company, Telstra considers the regulatory regime for foreign ownership under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) is a more appropriate regime to regulate foreign ownership in Telstra InfraCo Limited (known as InfraCo Fixed), Telstra Limited (ServeCo) and Amplitel.
2.28
The Department put forward the following position in response to these concerns:
The foreign ownership provisions in the Telstra Corporation Act 1991 reflect Telstra's history as a significant national telecommunications service provider and were debated at length during the privatisation of Telstra. The Bill does not seek to alter this position, it simply continues it…
The Department notes that the FATA regime serves a different and complementary purpose to the foreign ownership restrictions being carried forward in this Bill…entities in the Telstra Group will need to comply with both frameworks.
Notification of transfer of assets or businesses
2.29
The Bill proposes to require Telstra successor entities to disclose to the Commonwealth the entering into and variation of relevant contracts (such as those that may affect the TUSOPA). In response to these proposed amendments, Telstra expressed concern that:
While [it] does not consider this regime necessary and that disclosure regimes such as this one can impose a significant regulatory burden, Telstra is confident it can develop an efficient process to comply with these new obligations.
2.30
In response, the Department emphasised the importance of the policy objective behind these obligations:
[The proposed notification requirements are] essential in providing the Government with the necessary visibility to monitor and regulate the provision of communications, to which Telstra provide critical infrastructure and services to all Australians. It is expected that Telstra entities will establish inter-company contracts to maintain the supply of important services relating to the USO and other obligations.
2.31
The Bill also proposes to require Telstra's successor companies to notify the ACMA of a transfer of a 'telecommunications business' or 'telecommunications asset' within five business days after the transfer. These reporting requirements would only become active on a declaration by the Minister. The Minister may also make declarations exempting non-material transfers and assets from the reporting obligations.
2.32
Telstra commented that, while these proposed reporting obligations would impose a financial burden:
…provided any declaration by the Minister exempts non-material assets and businesses, this can be managed.
2.33
Telstra did however note that 'the extent of these reporting obligations has not been settled'.
2.34
In response to these comments, the Department did not provide clarity surrounding the detail of the reporting obligations that will be imposed, commenting only:
While the Department notes that a broad reporting power could create uncertainty for Telstra, the Explanatory Memorandum makes clear the intention of the provisions are associated with ensuring continuity of delivery of essential services.
Committee view
2.35
The committee considers that passage of this Bill is critical, to ensure that the long-standing obligations placed on Telstra to deliver certain important services that Australians rely on would carry across to the subsidiaries in its proposed corporate restructure.
2.36
The committee acknowledges the concerns raised by the stakeholders in this inquiry—Telstra and BAI. The committee however is reassured by the clear responses to questions on notice provided by the Department and the ACCC in relation to the concerns raised. The committee considers that there are adequate safeguards included in the Bill to ensure it achieves its objectives without unduly affecting the proposed Telstra restructure, its commercial interests or placing excessive regulatory burden on stakeholders.
2.37
The committee notes that the Department has and continues to be closely engaged with Telstra and BAI, along with other stakeholders, in developing and implementing the Bill and addressing related issues. The committee draws particular attention to the Department's comment that it:
Remains ready to discuss the Bill with any further stakeholders that indicate an interest in the Bill.
2.38
The committee encourages the Department to continue this close consultation with stakeholders, and likewise encourages the ACCC to engage closely with stakeholders during its public consultation to determine the appropriate control threshold in relation to the extension of the facilities access framework.
2.39
The committee recommends that the Senate pass the Bill.
Senator Andrew Bragg
Chair