Australian Communications Regulation

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Australian Communications Regulation
Michael Cosgrave Group General
Manager Communications Group
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Australian
Communications Landscape 1

• Australian demography need to provide services
  to a population congregated in cities separated
  by long distances, while also reaching remote
  areas
• Network characterised by customer access network
  comprising long loop lengths in rural areas
  service equity issues between metropolitan and
  non-metropolitan areas more acute as a result
• Access networks also include cable, satellite and
  wireless, but weak inter-modal competition
• Market structure issues similar to those in some
  European jurisdictions

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Australian Communications Landscape 2

• Telstra Corporation vertically integrated single
  incumbent
• Leading market share in fixed line, mobile, cable
  and xDSL
• Has continued degree of market power across most
  telecommunications markets
• Ability to leverage market power into new markets
• Increasingly aggressive US management team since
  mid 2005, lobbying government against regulation

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Australian Communications Landscape 3

• Most competitors dependent on access to Telstra
  infrastructure to participate in fixed-line
  retail markets, while at the same time competing
  against Telstras vertically integrated retail
  business
• Quasi-infrastructure competition developing
  through access to Telstras network, eg
  Unbundled Local Loop Service (ULLS)
• ULL is enabling competitors to mitigate reliance
  on Telstra through investment in DSLAMs which
  provide broadband and voice through the ULLS

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Australian Communications Landscape 4

• Incumbent remained majority Government owned
  until late last year
• In mid 2006, Federal Government implemented a
  form of operational separation of Telstra but
  this is subject to government rather than
  regulatory oversight
• Broadband a second order election issue in
  2007

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Regulatory Regime 1

• ACCC Independent statutory authority, formed in
  1995, administers the Trade Practices Act 1974
  (TPA) and other acts
• Regulates national infrastructure services,
  including communications, and also energy, rail,
  airports and water
• Regulation required to strike a balance between
  ensuring that investors are not discouraged from
  undertaking new investment, while at the same
  time ensuring that consumers obtain the benefit
  of competition

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Regulatory Regime 2

• ACCC is both a Competition Authority and
  Regulator
• TPA contains telecommunications specific
  provisions to address anti-competitive conduct
  and facilitate access regime
• Provisions supplement general anti-competitive
  conduct and access provisions in TPA to
  facilitate speedier response to issues of concern
  in fast moving communications markets

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Regulatory Regime 3

• Under this regime, ACCC has both ex post
  investigative powers and ex ante
  competition/access price regulatory powers
• Access regulation is based on the
  negotiate/arbitrate model and price signalling
  rather than price setting for input services
• Abuse of market power investigations in this
  sector tend to focus on price squeezes -
  typically difficult to prove in court (cf. French
  decision)

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Current issues 1

• Next Generation Networks and Broadband service
  development are big issues in Australia fibre
• Development of NGN raise issues relating to the
  timing of deployment and the regulatory
  arrangements that will apply to the network
• FTTN proposals have been put forward by Telstra
  and G9. consortium of telecommunications
  companies
• G9 involves a consortium rolling out fibre to the
  node using the incumbents copper unique
  proposal

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Current issues 2

• Telstra withdrew its proposal in August 2006 over
  disagreements about pricing of the legacy network
• G9 has submitted a Special Access Undertaking in
  relation to prices for wholesale access released
  for public debate
• Incumbents FTTN proposal emerging as a result of
  ULL competition rather than intermodal
  competition

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Current issues 3

• Government response moving towards a
  competitive tender environment
• in urban areas, high-speed fibre broadband
  network infrastructure will be rolled out
  following a competitive bids process
• In rural areas, Government awarded 958 million
  to joint venture for building 12mbps wholesale
  broadband network
• Process will be assisted by an Expert Taskforce,
  comprising government and business
  representatives, including the ACCC

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Current issues 4

• Different regulatory implications depending on
  who wins the tender not necessarily a beauty
  contest between two existing FTTN proposals
• If incumbent is selected
• Access arrangements, particularly pricing
• overall regulatory regime
• Functional (operational) separation review
• If G9 consortium model
• Cutover
• Protection from overbuild
• Other potential tenderers ???

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michael.cosgrave_at_accc.gov.au