Sunday, October 04, 2009

Telecommunications Regulatory Reform

Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, announced reforms to Australian telecommunications law on 16 September 2009. I will be speaking about these at an ATUG "Focus Forum on 2009 Telecommunications Reform Package" at NICTA in Canberra on 14 October. The reforms are in the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009.

For such an important reform the amount of legislation is relatively small (144 pages). However, extensive detailed changes are proposed to complex telecommunication legislation, and this is likely to keep lawyers and court busy for decades. There are 98 pages of Explanatory Memorandum and there are likely to be hundreds of pages of regulations.

As an example of the difficulties, the legislation defines a "VOIP Service" in terms of "the internet protocol" without defining what "the internet protocol" is. This definition could cover all telephone calls, or none, depending on how a court interprets and could depend on something as small as if "internet" is written with a lower case or upper case "I". The legislation could be ruled invalid, as there is no such thing as "the internet protocol", it is "the Internet protocol" or "an internet protocol". A particular VoIP service may not use the same protocol as other voice services, or all phone calls might be considered VoIP, as they will all transit a network using IP at some point.

The package is mostly about forcing a functional separation of Telstra, between its wholesale and retail parts. There is a detailed definition of what such a separation requires, in the draft legislation, defining terms such as functional, functional separation principles, functional separation requirements determination, regulated service, retail business unit, supply, and a wholesale/network business unit. Essentially the legislation will give the Minister the power to say how this is done, with the ACCC and Telstra to agree the details and the courts deciding in the absence of an agreement.

What the reforms do not seem to address are wider issues of the convergence of telecommunications with broadcasting and the effects on telephony, radio and TV broadcasting industries and pay TV. What will therefore be needed is another and more extensive set of reforms for broadcasting reform to match the telecommunications reform.

The main legislation (not counting explanatory memoranda) is 144 pages (300 kbytes of PDF). There are additional document and will also need to extensive regulations, to cover the details.

Some of the Acts changed include the Radiocommunications Act 1992, Telecommunications Act 1997, Trade Practices Act 1974, Telecommunications (Consumer Protection and Service Standards) Act 1999. It introduces terms, such as:

hybrid fibre-coaxial network means a telecommunications network:

(a) that is for use for the transmission of any broadcasting service; and

(b) that is also capable of being used to supply an internet carriage service; and

(c) the line component of which consists of optical fibre to connecting nodes, supplemented by coaxial cable connections from the nodes to the premises of end-users. ...

internet carriage service means a carriage service that enables end-users to access the internet. ...

(14) In this section:

fixed-line carriage service means a carriage service that is supplied using a line to premises occupied or used by an end-user. ...

577H Designated part of the spectrum

(1) For the purposes of this Act, each of the following parts of the spectrum is a designated part of the spectrum:

(a) frequencies higher than 520 MHz, up to and including 820 MHz;

(b) frequencies higher than 2.5 GHz, up to and including 2.69 GHz. ...

telecommunications market has the same meaning as in Part XIB of the Trade Practices Act 1974 ...

For the purposes of this Part, a declared network service is a service specified in a legislative instrument made by the Minister for the purposes of this clause. ...

The functional separation principles are as follows:

(a) the principle that there should be equivalence in relation to the supply by Telstra of regulated services to:

(i) Telstra's wholesale customers; and

(ii) Telstra's retail business units; ...

payphone carriage service means a carriage service supplied by means of a payphone. ...

VOIP service means a carriage service that enables a voice call to originate on customer equipment by means of the internet protocol. ...


Explanatory Memorandum

Second Reading Speech

From the explanatory memoranda:


The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 (the Bill) introduces a package of legislative reforms aimed at enhancing competitive outcomes in the Australian telecommunications industry and strengthening consumer safeguards.

The package has three primary parts: addressing Telstra’s vertical and horizontal integration; streamlining the access and anti-competitive conduct regimes; and strengthening consumer safeguard measures such as the Universal Service Obligation (USO), the Customer Service Guarantee (CSG) and priority assistance.

The Bill contains amendments to the Telecommunications Act 1997 (Tel Act), Parts XIB and XIC of the Trade Practices Act 1974 (the TPA), the Radiocommunications Act 1992 (the Radcom Act) and the Telecommunications (Consumer Protection and Service Standards) Act 1999 (the Consumer Protection Act). The Bill also makes consequential amendments to the National Transmission Network Sale Act 1998 (NTN Sale Act).

Addressing the current structure of the telecommunications sector

The Australian telecommunications market is characterised by a very strong and highly integrated incumbent, Telstra. Telstra is one of the most integrated telecommunications companies in the world owning the only copper network connecting almost every house, the largest cable and mobile networks, and a 50 per cent stake in Foxtel, Australia’s largest subscription television provider.

Partly because of this integration, it has been able to maintain a dominant position in virtually all aspects of the market, despite more than 10 years of open competition. It is the Government’s view that Telstra’s high level of integration has hindered the development of effective competition in the sector.

The National Broadband Network (NBN) will deliver a wholesale-only, open access telecommunications market structure, transforming the competitive dynamics in the Australian telecommunications industry.

However, during the rollout of the NBN, the existing regulatory regime will remain important for delivering competitive outcomes in the interests of Australian consumers, businesses and the economy more broadly.

Consistent with the market structure that will be delivered through the NBN, Part 1 of Schedule 1 of this Bill inserts a new Part 33 in the Tel Act which provides provisions for Telstra to voluntarily structurally separate.

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. Such a negotiated outcome would be consistent with the wholesale-only, open access market structure to be delivered through the National Broadband Network.

However, if Telstra does not voluntarily implement structural separation, this Bill will require the functional separation of Telstra. Functional separation is a regulatory tool that has been used successfully in other countries such as the UK and New Zealand and is being considered by the European Commission, to address the underlying incentives that fixed-line incumbents have to favour their own retail businesses.

This Bill amends the Tel Act to require that Telstra must:

  • conduct its network operations and wholesale functions at arm’s length from the rest of Telstra;

  • provide the same information and access to regulated services on equivalent price and non-price terms to its retail business and non-Telstra wholesale customers; and

  • put in place and maintain strong internal governance structures that provide transparency for the regulator and access seekers that equivalence arrangements are effective.

These provisions are contained in a new Part 9 of Schedule 1 to the Tel Act, to be inserted by Part 1 of Schedule 1 to the Bill.

As part of the functional separation framework, Telstra will be required to establish and maintain a single wholesale/network unit, separate from its retail business units, and a committee to be known as the Oversight and Equivalence Board.

Telstra will be required to operate its network and wholesale functions at arm’s-length from the rest of Telstra. The Oversight and Equivalence Board will report to the Australian Competition and Consumer Commission (ACCC) and Telstra’s board of directors about Telstra’s compliance with its functional separation obligations.

Telstra’s level of horizontal integration across the different delivery platforms—copper, cable and mobile—is in contrast to many countries where there are restrictions on incumbents owning both cable and traditional fixed-line telephone networks. Unlike Australia, in a range of countries the fixed-line incumbent does not also own the largest mobile carrier as measured by market share. Telstra’s horizontal integration has significantly contributed to Telstra’s ongoing dominance in the Australian telecommunications market.

The Government intends to correct this unique market structure, by introducing a set of measures designed to promote competition across the various telecommunications platforms while providing Telstra with the flexibility to choose its future path.

The proposed amendments to the Radcom Act and the new Part 10 of Schedule 1 to the Tel Act (in Part 1 of Schedule 1 to the Bill) will prevent Telstra from acquiring specified bands of spectrum, which could be used for advanced wireless broadband services unless it structurally separates, divests its hybrid fibre coaxial cable network and its interests in Foxtel. The legislation provides scope for the Minister to remove the requirements around the cable network and Foxtel if he is satisfied that Telstra’s structural separation undertaking is sufficient to address concerns about the degree of Telstra’s power in telecommunications markets. ...

From: Competition and Consumer Safeguards Bill - Explanatory Memorandum, First reading, HOUSE OF REPRESENTATIVES, The Parliament of the Commonwealth of Australia, 2009

From the proposed act:
1 Short title 4
2 Commencement 4
3 Schedule(s) 6
Schedule 1—Amendments 7
Part 1—Amendments relating to Telstra 7
Division 1—Amendments commencing on the day after this Act receives the Royal Assent 7
Radiocommunications Act 1992 7
Telecommunications Act 1997 8
Trade Practices Act 1974 39
Division 2—Amendments commencing immediately after a final functional separation undertaking comes into force 41
Telecommunications Act 1997 41
Trade Practices Act 1974 44
Division 3—Amendments commencing immediately after an undertaking about structural separation comes into force 45
Telecommunications Act 1997 45
Trade Practices Act 1974 46
Part 2—Telecommunications access regime 47
Division 1—Amendments 47
National Transmission Network Sale Act 1998 47
Telecommunications Act 1997 47
Trade Practices Act 1974 52
Division 2—Transitional provisions 102
Part 3—Anti‑competitive conduct 112
Division 1—Amendments 112
Trade Practices Act 1974 112
Division 2—Application 112
Part 4—Universal service regime 113
Telecommunications (Consumer Protection and Service Standards) Act 1999 113
Part 5—Customer service guarantee 128
Telecommunications (Consumer Protection and Service Standards) Act 1999 128
Part 6—Priority assistance 133
Telecommunications Act 1997 133
Part 7—Infringement notices etc. 136
Division 1—Amendments 136
Telecommunications Act 1997 136
Division 2—Application 143
Part 8—Civil penalty provisions 144
Telecommunications Act 1997 144

From: Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009, First reading, HOUSE OF REPRESENTATIVES, The Parliament of the Commonwealth of Australia, 2009

No comments: