Thursday, 22 October 2009
Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009
I have to commend the member for Casey for his valiant attempt to defend the indefensible by arguing that a bandaid, half-hearted solution that did not work was much better than a comprehensive national solution to the issue of high-speed broadband. I have to commend him for his bravery in the face of all the evidence before him. I rise in the House today to speak in support of 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 bill has four broad components. Firstly, it addresses Telstra’s extreme level of vertical and horizontal integration within the telecommunications industry by requiring the company to separate either functionally or structurally. I have to say that for all the pounding by the opposition when they were in government, they never had the willingness or the intent to deal with this major problem in our telecommunications industry. Secondly, it streamlines access provisions and reforms the anticompetitive conduct regimes within the telecommunications sector. Thirdly, the bill strengthens consumer protection measures in the industry. Fourthly, the bill reduces red tape and eliminates certain regulations that have become impediments to long-term productivity growth.
The measures contained in this bill will radically transform the telecommunications industry in Australia, fundamentally reshaping both the structure of the industry and the manner by which it is regulated—something the previous government did not have the capacity to do. It will also bring significant benefits to consumers. This ambitious program of reform will prepare the way for the introduction of a national broadband network for Australia—a groundbreaking initiative of immense importance to Australia’s long-term economic and social prosperity. The $43 billion National Broadband Network represents the largest nation-building investment in Australia’s history. Frankly, it is about time the opposition recognised that, got on board and did something and said something positive.
Significantly, when it is established the NBN will be a wholesale-only telecommunications provider operating within an industry run along open access lines. The bill will move today’s telecommunications industry towards a more competitive, open access model in preparation for the NBN. The transition to the NBN will take approximately eight years and the government recognises that fundamental reform of the existing telecommunications regulatory regime is critical to Australia’s successful transition towards its future model. But I really have to restate the obvious: it will not take eight years to have NBN. The NBN is being rolled out progressively, and not one area at a time. Tasmania is very lucky to be the first area. That it is where it started but it will be progressing in a number of areas simultaneously, so many areas will not be waiting the eight years. The eight years is a completion date.
In short, the present arrangements are inadequate for this task and need significant root-and-branch change. The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill before us delivers the first major instalment of these vital reforms. There has been longstanding concern across broad sectors of Australian society that the current system is failing consumers and business. These failings are evident in matters of pricing, quality of services and availability of services. That is evident to everyone, apparently, but the opposition. Affordable, high-quality telecommunications services, including high-speed broadband and reliable telephone capabilities, are critical if Australia’s economy is to grow, produce and innovate.
When the Rudd Labor government announced the introduction of the enhanced National Broadband Network in April 2009, it also announced its commitment to reforming the existing telecommunications regulatory regime. More than 140 submissions were received in response to a discussion paper circulated at the time that canvassed the various options for reform. Submissions were received from all major telecommunications service providers, broadcasters, media companies, state and territory governments, the ACCC, disability and consumer groups, business organisations and unions. Overwhelmingly the submissions supported the idea that the current regime was not serving the best interests of business or consumers and that it needed major reform. The submissions supported reform of Australia’s telecommunications sector, especially to improve competition, strengthen consumer safeguards and reduce red tape. The bill under discussion also takes decisive steps towards achieving these reforms.
The current structure of the Australian telecommunications industry is one of the major impediments to growth, productivity and innovation. The dominant position currently commanded by Telstra is central to the present structure. This dominance has severely limited the development of fair and open competition within the telecommunications market. Telstra is one of the most highly integrated telecommunications companies in the world. It has achieved levels of both vertical and horizontal integration that are unmatched by companies in any other sector of the Australian economy. Telstra owns the only fixed copper network connecting almost every house. It owns the largest hybrid fibre-coaxial cable network as well as the largest mobile network. It also owns a 50 per cent stake in Foxtel, which is Australia’s largest subscription television provider.
Despite more than 10 years of supposedly open competition within the telecommunications industry, Telstra has been able to maintain an extraordinary level of dominance in virtually all aspects of the national market. Past governments and current legislation have failed to promote effective competition within the industry over that decade of missed opportunity, and that was clearly a major failing of the previous government. As a result, Australia has fallen seriously behind other developed economies in terms of the availability, price and quality of its telecommunications services.
Telstra’s high level of vertical integration means it can operate as a wholesaler, carrier and retailer of telecommunications products and services. It also means that it continues to possess inbuilt incentives to favour its own retail businesses and to stifle true and open competition. This bill will enable the government to bring marked reforms to bear on this problem. The government’s goal in the first instance is that Telstra give a voluntary but enforceable undertaking to the ACCC to institute a structural separation of its wholesale from its retail businesses. If Telstra does not choose to give this undertaking to the regulator, the bill gives the government the powers to enforce a functional separation of the company. Functional separation will be achieved through amendments to the Telecommunications Act 1997.
The amendments contained in the present bill will ensure that Telstra conducts its network operations and wholesale functions at arm’s length from the rest of the company. Telstra must also provide equivalent price and non-price terms both to its retail businesses and to non-Telstra wholesale customers. In addition to these requirements, Telstra must ensure that this equivalence of treatment is made transparent to the regulator and to its competitors.
Telstra and its shareholders therefore have the option of choosing the method by which the company achieves a separation of its vertically integrated structures. If the company chooses not to undertake a voluntary structural separation, this bill empowers the government to bring about a functional separation of its wholesale and retail businesses. Structural separation may, but does not have to, include the creation of a new company. Alternatively, Telstra may progressively move its fixed line traffic to the National Broadband Network over time and sell or cease to use its fixed line assets. The government has not predetermined which model Telstra may use to achieve its separation. Whichever model is employed, the ultimate goal of full structural separation will be achieved over time—that is, a wholesale-only network that is not controlled by any single retail entity.
Another element of market dominance that Telstra continues to possess is its high level of horizontal integration across different delivery platforms. The company owns multiple delivery platforms including copper, cable and mobile systems that it runs side by side. Under the new arrangements contained in this bill, Telstra will not be permitted to acquire specific bands of spectrum which could be used for advanced wireless broadband services unless it undertakes certain structural reforms. In short, it must introduce structural separation, divest itself of its hybrid fibre-coaxial cable network and relinquish its interests in Foxtel. These readjustments in the structure of the Australian telecommunications industry will address the market imbalance that Telstra enjoys under the current arrangements and foster strong competition in the industry.
Another major component of the telecommunications legislation amendment bill is the amendments to trade practices regulations that currently apply to the industry. These amendments will also promote competition, increase access to the industry and reduce anticompetitive behaviour. Competitors to established industry players seeking access to the industry have long been frustrated by lengthy legal delays and disputes. For example, from 1997 to mid-May 2009 there were 157 telecommunications access disputes lodged with the ACCC. By contrast, only three access disputes had been notified in other regulated sectors, including the aviation and energy industries.
Under the bill at hand, new arrangements will see the ACCC set price and non-price terms of access for declared services in an access determination that applies to all parties. This will streamline the access process considerably and make it less vulnerable to opportunistic legal and procedural delaying tactics. The days of so-called regulatory gaming, which involves the use of litigious obstruction to delay regulatory outcomes for one’s own benefit, will be numbered under these new rules.
The bill will also remove the right to seek merits review of the ACCC’s regulatory decisions. This approach is being pursued because Telstra has used the regulatory and legal avenues available to frustrate regulatory outcomes and cause uncertainty for its competitors. The ACCC will have powers to issue binding rules of conduct, allowing it to immediately implement remedies for breaches. In addition, it will no longer have to consult with a party before issuing a competition notice, so once again the regulator will be able to act quickly against anticompetitive behaviour in the telecommunications industry.
The bill will also ensure that the new anticompetitive provisions apply to content services supplied by carriers or carriage service providers. This will prevent a dominant provider from using its power in one market to damage a competitor in another. As new technologies move into more and more facets of home, work and business, the telecommunications sector is becoming an increasingly important part of the everyday life of all Australians. The need to protect consumers in the telecommunications industry is accordingly becoming more important over time.
Existing safeguards in this industry—including the universal service obligation, the customer service guarantee and the priority assistance arrangements—have been found by a number of recent reviews to need strengthening if consumers are to be properly safeguarded. The universal service obligation—designed to ensure standard telephone and payphone services are accessible to all Australians—is imprecise and needs updating. There is evidence that standards of service in this regard have been falling for several years, and I am sure any member has constant complaints about access to phones in their own electorate. Telstra will be required, upon request, to supply a basic service at specified standards covering connection, repair, reliability and performance benchmarks. These matters can no longer be left up to the discretion of the provider, in particular Telstra. Similarly, payphones must be supplied according to specified criteria and may be removed only with ACMA agreement. This is an initiative that will be applauded in many communities, including my own. To ensure industry compliance, these universal service obligation benchmarks will be backed up by civil penalties.
The customer service guarantee, which obliges telephone companies to meet minimum performance requirements or pay compensation, will also be reformed using new performance benchmarks. New time frames for connections and repair will be backed by civil penalties, thus reducing the scope for retailers to blame noncompliance on the network providers. In overseeing this new strengthened regulatory regime, ACMA will have powers to issue on-the-spot fines for breaches of the civil penalty provisions. However, in order not to stifle customer choice, existing provisions for exempting certain services from the customer service guarantee will remain but only with the customer’s express agreement. The priority assistance arrangements, which require the highest level of telephone service to be provided to customers with a diagnosed life-threatening medical condition, will be retained.
The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill also contains measures to eliminate unnecessary red tape. These measures will remove additional impediments to long-term productivity growth, streamline certain business practices and provide clarity to consumers. Small carriers—those with revenues less than $25 million—will no longer have to pay an annual carrier licence charge. They will no longer have to contribute to the universal service levy or the national relay service.
Reporting procedures under the customer service guarantee and priority assistance arrangements will be relaxed as long as performance benchmarks are being met. Other unnecessary accounting and operational separation requirements will be repealed once the new regime is in place. The government will also remove the outdated requirement for Telstra to provide internet services with speeds of 19.2 kilobits per second. The Australian broadband guarantee offers broadband speeds of 512 kilobits or more.
The bill before us today will introduce a fundamental restructuring of the Australian telecommunications industry. It prepares the way for a seamless transition towards the wholesale-only, open-access market in Australia’s telecommunications sector. These new arrangement will be a necessary requirement for the introduction of the National Broadband Network. It is vital that the high degree of vertical and horizontal integration now held by Telstra be reformed. This will redress severe market imbalances that have favoured Telstra unfairly in the past and would hinder open access and equitable competition in the future. The measures contained in this bill will reshape the telecommunications sector. They will also reshape our society and our community. They are necessary and a part of the new NBN. I am very proud that this government has taken the steps to bring this about.