Selvadurai, Niloufer; Salter, Brent; Gillies, Peter --- "Roadblocks on the information superhighway" [2008] MonashBusRw 13; (2008) 4(1) Monash Business Review 41

Roadblocks on the information superhighway

Niloufer Selvadurai, Brent Salter, Peter Gillies

Niloufer Selvadurai, Brent Salter and Peter Gillies reconsider the telecommunications access regime.

In order to maintain effective competition and innovation in the telecommunications sector it is necessary to regulate access to networks and services. To facilitate the entry of new players and avoid the inefficient duplication of telecommunications networks and infrastructure, it is necessary to require incumbent operators to provide access to those sectors of the network that display the characteristics of a natural monopoly. The form, ambit and operation of such regulation is however the subject of intense debate.

Of especial relevance to this discussion is effective access to the ‘local loop.’ The local loop describes the network operator’s infrastructure connecting the local exchange and the premises of the end user. This connection is also termed the ‘copper local loop’. Once a service provider has access to the local loop they are able to build their own connections to local exchanges where the copper pairs are terminated. The service provider is also able to invest in the necessary switching technology to condition the copper and provide services across those copper wires to the customer.

In Australia, Part XIC of the Trade Practices Act 1974 (Cth) creates a telecommunications access regime allowing parties to obtain access to declared services for the purpose of promoting interconnectivity and interoperability between carriers and service providers.

The 2005 amendments to Part XIC sought to refine the operation of the access pricing regime and the formulation of the long-term interests of the end users. The efficacy of the regime and appropriate regulation of high-speed broadband infrastructure and services came into question once again in 2007 with the release of the Guidelines for High Speed Broadband Network and Infrastructure Proposals by the Department of Communications, Information Technology and the Arts (DCITA).

The election of a new Federal Labor Government at the end of 2007, with its intention to put broadband at the centre of its policy agenda, provides a further opportunity for the telecommunications access regime to evolve.

The purpose of this paper was to outline the operation of Part XIC of the Act and identify the critical limitations of the present access regime. The operation of the long-term interests of end users principle, the principles underlying the formulation of access pricing and the efficacy of dispute resolution procedures were examined in some detail. Finally, the Guidelines for High Speed Broadband Network and Infrastructure Proposals and the new Labor Government policy was examined in order to consider the continuing role of Part XIC in a telecommunications landscape that is set to be dominated by high-speed broadband infrastructure and services.

It is timely for legislatures to reconsider the operation of Part XIC of the Trade Practices Act as serious questions remain as to whether this section is fulfilling its objective of balancing the interests of industry and its need for commercial certainty and appropriate returns on investments with the long-term interests of end-users.

The 2005 amendments were a response to a regulatory regime that has been criticised as involving processes that are resource intensive, slow and inefficient, and for being susceptible to regulatory gaming. However, balanced against the desire for efficiency is the need for decision-making to be transparent and considered.

The Bill’s focus is on achieving more timely access and affording interested parties adequate procedural fairness. In terms of objectives, the 2005 amendments seek to clarify that the risks involved in investment in infrastructure are relevant in determining investment incentives.

In terms of improving the operation of the telecommunications-specific competition regime in Parts XIB and XIC of the Explanatory Memorandum to the Trade Practices Bill states:

“The key priority for the Australian Government has been to promote an open, competitive telecommunications market as an essential means of providing innovative and cost effective services for Australian businesses and consumers. The telecommunications-specific competition regime has been the primary mechanism for achieving this outcome. The Australian Government has adjusted this regime as necessary so that it keeps pace with changing technology and market conditions.” In 2005 the government has examined the telecommunications competition regulatory regime again so that it remains adequate and appropriate to support and encourage competition. As a result of this review the government is making amendments to telecommunications-specific competition regulation to encourage greater investment in telecommunications infrastructure and to increase the effectiveness of the regime, through a quicker and more predictable decision-making process and enhanced enforcement options.

Although interim determinations have been possible in Part XIC since 1999, the 2005 amendments attempt to streamline the process. For example, the legislation now provides that it is not always necessary for the ACCC to consult parties when making or varying an interim determination. In addition, interim determinations can be extended by one year. In light of criticism regarding time delays, under the 2005 amendments the ACCC now has power to make Procedural Rules regarding time frames for ACCC decision-making. Time frame limitations were introduced in 2002 but these recent changes give the ACCC greater discretion and flexibility to structure time frames in a constantly evolving telecommunications environment.

In regard to public inquiries, decision-makers have been able to hold public inquiries since 1997. Under the 2005 amendments, the ACCC has the power to make Procedural Rules regarding public consultation. The amendment allows the ACCC to consider variations to undertakings without having to again conduct a consultation process. The enactment of more discretionary procedures illustrates, as in the context of time frames, that legislators are attempting to be more flexible in order to adapt to industry needs.

It has been suggested that the 2005 amendments reflect the ‘inherent tension between the extent of procedural fairness afforded parties and the speed of access decisions’ and that the ‘amendments to Pt XIC are largely a triumph of timeliness over procedural fairness.’ Indeed, specific amendments regarding time limits and the streamlining of interim determinations and public consultation procedures suggests legislators are directly responding to industry concerns over time delays. It is encouraging that legislators are responding to industry’s need to develop a flexible regulatory regime that is able to respond to the changing telecommunications environment.

However, it is still a concern that the 2005 legislative changes continue to adopt a ‘targeted intervention’ approach, that is, reform which is issue specific rather than comprehensive and industry wide. Proper consideration is yet to be given to the concerns outlined in the paper such as definitional ambiguities in relation to ‘long term users,’ ‘end users’ and ‘reasonableness’ criteria for establishing declaration status, obligations of access suppliers and access pricing principles. The ambiguity of the regulation of such critical issues fosters an environment of uncertainty among both access providers and seekers. Therefore it is respectfully submitted that it is now appropriate for the government to conduct a detailed analysis of the efficacy and impact of Part XIC.

It is necessary to assess whether competition in the industry has reached a level where it would be appropriate for the industry to be governed by the generic provisions of the Trade Practices Act. If such a review reaches a similar conclusion as to the operation of Part XIC as has been argued, it would be appropriate to legislate to reduce the role of sector specific regulation in the telecommunications sector and allow the sector to be governed by the generic competition provisions on Part III of the Trade Practices Act.

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Cite this article as

Selvadurai, Niloufer; Salter, Brent; Gillies, Peter. 'Roadblocks on the information superhighway'. Monash Business Review. 2008.; Monash University ePress: Victoria, Australia. http://www.epress.monash.edu.au/. : 41–45. DOI:10.2104/mbr08013

About the authors

Niloufer Selvadurai

Dr Niloufer Selvadurai is a Senior Lecturer in the Department of Business Law, Division of Law, Macquarie University.

Brent Salter

Brent Salter is a Legal Researcher in the Department of Business Law, Division of Law, Macquarie University.

Peter Gillies

Peter Gillies is Professor in the Department of Business Law, Division of Law, Macquarie University.