Wednesday, 24 November 2010
Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010
Madam Acting Deputy President, I accept your admonishment. The measures put forward in this bill have been the subject of considerable discussion—for over 12 months, in fact. Many of the constructive comments received have led to changes being made to the current legislation to address concerns raised. The competition and consumer safeguards bill is a fundamental and historic micro-economic reform and is in Australia’s long-term national interests. The reforms are designed to reshape regulation in the telecommunications sector in the interests of consumers, business and the economy more broadly. Specifically, the proposed reforms: establish a framework for Telstra to progress its decision to structurally separate, including providing it with greater clarity around the undertaking of the process, which will allow Telstra to seek approval from its shareholders on a firm proposal to migrate its fixed line customers to the NBN; streamline the competition regime to provide more certain and quicker outcomes for telecommunications companies; and strengthen consumer safeguards to ensure service standards are maintained at a high level. Importantly, these reforms are supported by the overwhelming majority of the industry.
Implementing these reforms will address longstanding problems with the existing regime, which is failing consumers and businesses across the country and leading to less choice, poor customer service, lower quality services and higher prices for telecommunications services. Accordingly, passage of these reforms is a key priority for this government. Opposition senators have spent much time rallying around the NBN, pursuing their leader’s instructions to try to demolish the National Broadband Network. They fail to acknowledge that this bill is stand-alone legislation almost entirely relating to Telstra and does not go in any way to the role of the National Broadband Network Co. and its commercial structure. Nothing in this bill is relevant other than a deal between NBN Co. and Telstra. That is what this bill is about. Senator Abetz made great play of the fact that he had ‘creased the back’ of it; he should try understanding it rather than flicking the pages. A cost-benefit analysis has nothing to do with this bill. This bill is about reforming the existing regulatory regime, a regime that the entire industry accepts is broken. The matters that relate to the National Broadband Network in this bill are designed to give industry the legislative certainty to make a smooth transition to the NBN environment. They relate to Telstra’s structural separation.
The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 provides a framework for arrangements for the migration of customer services from Telstra’s network to the National Broadband Network, which is the means by which structural separation of Telstra will be achieved. Let me repeat that for those opposite: the CCS bill provides a framework for arrangements for the migration of customer services from Telstra’s network to the National Broadband Network. Accordingly, there are references to the NBN Co. in the context of migration arrangements and the authorisation of the agreements for the purposes of the trade practices law. There are also references to the agreement reached with Telstra for NBN Co. to access Telstra’s facilities, but the bill is not about the operations, the structure or the ongoing processes of the National Broadband Network. It is not about the business case.
Structural reform of the industry will be implemented with the transition to the NBN in line with the government’s vision for a wholesale-only open-access network. Incentives will be created for Telstra and other telecommunications operators to transform the way they do business to become more innovative and customer focused. This bill creates a framework to deliver this important reform, but the bill also does much more than this.
During the National Broadband Network rollout, the existing telecommunications regulatory regime will remain important for delivering better and more affordable services in the interests of Australian consumers and businesses. The bill is designed to reshape that regime. The vast majority of industry submissions received by my department claimed that the regulatory framework is ineffective due to the ability of parties to engage in regulatory gaming—that is, litigious obstruction—aimed at delaying regulatory outcome. That is what has bedevilled this sector. For example, by mid-October 2010, 164 telecommunications access disputes had been notified since the commencement of the regime in 1997. Your regime is in place today, and it has led to 164 disputes. How does that compare to all the other utility sectors? Only four access disputes have been notified in other regulated sectors, so what is going on in the telco sector? Have there been 164 disputes for any of the other regulated utility sectors? Under the proposed changes to part XIC, the ACCC will set price and non-price terms of access for declared services and access determination to apply to all parties.
The bill will also remove the right to seek merits review of the ACCC’s regulatory decisions. This approach is being pursued to stop every regulatory and legal avenue available being used to frustrate regulatory outcomes and cause uncertainty to the industry. The bill’s providing the ACCC with the power to issue binding rules of conduct will allow the ACCC to take action immediately to address problems relating to the supply of declared services.
The overarching objective of the reforms to part XIC is to streamline regulatory processes and provide the industry with a greater degree of certainty in relation to regulatory outcomes. The certainty will encourage infrastructure investment. The reforms to part XIB will mean that the ACCC will no longer be required to consult with a party before issuing a competition notice. This is aimed at ensuring the ACCC can act swiftly when it believes anticompetitive conduct is occurring in the telecommunications market. The scope of part XIB will also be clarified to ensure that 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. These changes to the telecommunications access regime will underpin greater investments by giving all parties regulatory certainty.
The bill will also protect consumers by providing additional consumer safeguards in relation to specific telecommunications services and practices. In particular, the legislation provides: more stringent rules on Telstra’s supply of basic telephone service at specified standards, including connection and repair periods and reliability requirements; changes to address the decline of telephone companies’ compliance with the customer service guarantee, including introduction of new minimum performance benchmarks; and the ability of the minister to direct the Australian Communications and Media Authority to develop an industry standard where industry codes do not adequately deal with consumer issues.
Senator Birmingham has circulated opposition amendments to the legislation. Firstly, the opposition want to remove the provisions designed to exempt any agreement between Telstra and NBN Co. from the provisions of the Competition and Consumer Act on the grounds that such an agreement might allow anticompetitive outcomes. The opposition are quite deliberately failing to acknowledge the structural reforms to be delivered in the national interest. They also repeatedly make the claim that the agreement between Telstra and NBN Co. will not be subject to ACCC scrutiny, but that is absolutely false.
The CCS bill already includes provision in proposed section 577A for the ACCC to scrutinise and approve the competitive impacts of the agreement between Telstra and NBN Co. This agreement would need to be incorporated into the structural separation undertaking that Telstra lodges with the ACCC. To continue to claim, as Mr Turnbull does, as Senator Birmingham does and as almost all of those opposite do, that the ACCC has been removed from this bill is a falsehood and cannot be allowed to go unchallenged in this chamber. The bill authorises entering into the agreement and associated conduct for the purposes of trade practices law only if the ACCC accepts the undertaking. This removes any need for multiple authorisation inquiries while still ensuring appropriate scrutiny of the arrangements. The bill relies on the authorisation provisions in section 51 of the Competition and Consumer Act, and this is a well-established mechanism which has been used extensively by Australian governments. The ACCC website currently lists 80 separate pieces of Commonwealth, state and territory legislation where section 51 authorisations are in use.
Secondly, the opposition propose that certain ministerial instruments be subject to disallowance by parliament. The government’s strong view is that these instruments should not be disallowable because of the risk that disallowance would cause uncertainty for Telstra shareholders in their consideration of the Telstra-NBN Co. deal. The bill requires that certain instruments be in place to permit Telstra to lodge its SSU with the ACCC. Disallowance would threaten this outcome and could have the perverse effect of forcing Telstra to undertake functional separation even when its preferred option is structural separation.
Thirdly, the opposition call for the removal of the so-called ‘guns to Telstra’s head’ that deny it wireless spectrum and force it to divest itself of its interests in Foxtel unless it voluntarily agrees to separate. The so-called ‘guns to Telstra’s head’ have been removed. There is no longer an automatic prohibition on the acquisition of spectrum if Telstra does not structurally separate and divest itself of its interests in its cable network and Foxtel. The bill has been amended to give Telstra sufficient regulatory certainty to take to its shareholders a firm proposal to structurally separate by allowing Telstra to acquire specified bands of spectrum unless the minister determines otherwise in a legislative instrument. The bill does not require Telstra to divest itself of its interests in Foxtel but still provides a framework for Telstra to voluntarily divest itself of its interests in Foxtel and its hybrid fibre-coaxial cable network. In the event that Telstra did not proceed with structural separation, the minister could take into account Telstra’s ownership of Foxtel and its cable network in determining whether to use the powers in the bill to prevent Telstra from acquiring certain spectrum and in addressing Telstra’s powers in telecommunications markets.
Fourthly, the opposition want to subject ACCC decisions to merits review. This is despite the fact that in 2002, when they were in government, they repealed merits review for ACCC arbitration determinations because it was hindering the development of competition. It is the government’s view that the notional accountability benefits of merits review within the current system are strongly outweighed by the delays, regulatory uncertainty and outright gaming that have occurred.
Furthermore, it is an inappropriate provision. Under paragraph 4.53 of the Administrative Review Council guidelines about what kinds of administrative decisions are suitable for merits review, decisions which involve extensive public inquiries or consultations are not suitable for merits review. The ACCC access determinations, which involve extensive public consultations, fall into this category. Omitting merits review from the proposed arrangements reflects the majority of industry submissions on how best to improve the telecommunications access regime. This aspect was almost universally welcomed by non-Telstra industry participants when the original bill was introduced last year. If the ACCC makes an error of law or process when it makes an access determination, any party affected by the decision will be able to apply to the Federal Court for judicial review of the decision, just as they can now.
Finally, the opposition want to restore the requirement for procedural fairness. The requirement for the ACCC to accord procedural fairness will apply to all of the ACCC’s regulatory decisions under part XIC, except in relation to interim access determinations and binding rules of conduct. The salient point of introducing binding rules of conduct is to allow swift regulatory responses to urgent matters that may arise. According procedural fairness would inevitably delay such actions—hardly a desirable outcome in matters where speed is of the essence. In reality, procedural fairness will not be absent for long in this circumstance. Within 30 days of making a binding rule of conduct, the ACCC will have to commence a public inquiry to vary the access determination to make a new access determination. Parties will be accorded procedural fairness in the public inquiry process. The opposition amendments are unnecessary and would serve only to complicate the proposed streamlining of the regulatory framework. I welcome Senator Ludlam’s indication of support for early passage of the bill.
The telecommunications industry states that it needs these reforms. The Chief Executive Officer of Telstra, David Thodey, has indicated his support for this bill:
On balance, we support the passage of the bill. We believe the interests of Telstra shareholders would be best served by the bill being passed this year so that a definitive agreement on our involvement in the NBN can be reached quickly.
In an example of unprecedented unity, seven telecommunications companies, the Australian Telecommunications Users Group and the Australian Communications Consumer Action Network—the peak body representing consumers—said in a joint letter to all senators on 18 February this year:
Australian consumers deserve and need these reforms, none more so than those in regional Australia.
The Australian telecommunications industry has been bedevilled by a failed market structure and poor competition, resulting in prices that are high by international standards. The bill represents a comprehensive and coherent set of measures to improve competition and consumer protections, and the failure of this legislation will be detrimental to the needs of all Australians.
So there it is—the choice is clear. You can have a bunch of wreckers who want to destroy the NBN because they believe it is their path to destroying the government—