Commonwealth Numbered Regulations - Explanatory Statements

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TELECOMMUNICATIONS (CONSUMER PROTECTION AND SERVICE STANDARDS) (SPECIAL DIGITAL DATA SERVICE) REGULATIONS 1999 1999 NO. 234

Statutory Rules 1999 No. 234

Issued by the authority of the Minister for Communications, Information Technology and the Arts

Telecommunications (Consumer Protection and Service Standards) Act 1999

Telecommunications (Consumer Protection and Service Standards) (Special Digital Data Service) Regulations 1999

Section 160 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (the Act) allows the Governor-General to make regulations under the Act.

Part 2 of the Act establishes a universal service regime for Australian telecommunications. The main object of the regime is to ensure that all people in Australia, wherever they reside or carry on business, should have reasonable access on an equitable basis to: standard telephone services; payphones; prescribed carriage services; and digital data services.

Subsection 12A(1) of the Act provides that for the purposes of the Act, a digital data service is either a general digital data service or a special digital data service.

Subsection 12A(2) of the Act provides that a general digital data service (GDDS) is a carriage service that provides a digital data capability broadly comparable to that provided by a data channel with a data transmission speed of 64 kilobits per second (kbps) supplied to end-users as part of the designated basic rate Integrated Services Digital Network (ISDN) service. Subsection 12A(4) of the Act defines the term 'designated basic rate ISDN service' to mean the service that Telstra actually supplied immediately before 1 July 1997, that service being Telstra's ISDN service that is compliant with European Telecommunications Standards Institution (ETSI) standards.

Telstra was required, through its carrier licence conditions, to provide ISDN services to 96% of the Australian population by the end of 1998. The general digital data service area (GDDSA) is considered to be the locations in Australia where ISDN can be provided (covering 96% of the Australian population).

Subsection 12A(3) of the Act provides that a special digital data service (SDDS) is a carriage service that provides for a capability for the delivery of digital data to an end-user broadly comparable to the corresponding capability provided by a data channel with a data transmission speed of 64 kbps supplied to end-users as part of the designated basic rate ISDN service.

The purpose of the accompanying regulations is to implement a SDDS customer equipment rebate system to enable those people who reside or carry on business in a SDDS area (SDDSA) to access digital data services on an equitable basis.

The SDDSA is considered to be the locations in Australia where ISDN cannot be provided (covering the remaining 4% of the Australian population).

Subsection 19A(1) of the Act provides that, for the purposes of the Act, the digital data service obligation is the obligation:

*       to ensure that either GDDSs or SDDSs are reasonably accessible to all people in Australia on an equitable basis, wherever they reside or carry on business;

*       to ensure that GDDSs are reasonably accessible to at least 96% of the Australian population on an equitable basis; and

*       to ensure that SDDSs are reasonably accessible to the remainder of the Australian population on an equitable basis.

The SDDS obligation is defined in subsection 19A(4) as the obligation to ensure that SDDSs are reasonably accessible to all people in SDDSAs on an equitable basis.

Subsection 19A(5) of the Act provides that to the extent necessary to achieve the SDDS obligation, it is part of that obligation to supply SDDSs to people in SDDSAs on request.

Subsection 14A(5) of the Act provides that a reference in Part 2 of the Act to the supply of an SDDS includes a reference to the supply of customer equipment specified in the regulations where the equipment is for use in connection with the SDDS and the supply complies with such requirements, restrictions or conditions (if any) as are specified in the regulations.

Subsection 19A(8) of the Act provides for regulations that enable obligations that arise in relation to supplying customer equipment (including under subsection 14A(5)), to be met through the involvement of a third party. The obligation is taken to have been met if the third party supplies the necessary customer equipment (through acquisition or hire), and any customer entitlement to a rebate on that equipment is met by the digital data service provider. This provision establishes a basis on which the Government's commitment to provide a subsidy for customer equipment necessary to receive the SDDS may be given effect.

Details of the accompanying regulations are in the attachment. Also attached is a Regulatory Impact Statement.

The accompanying regulations commence on gazettal.

ATTACHMENT

DETAILS OF THE REGULATIONS

Regulation 1 - Name of Regulations

Regulation 1 provides that the name of the accompanying regulations is the Telecommunications (Consumer Protection and Service Standards) (Special Digital Data Service) Regulations 1999.

Regulation 2 - Commencement

Regulation 2 provides that the accompanying regulations commence on gazettal.

Regulation 3 - Definition

Regulation 3 provides the definition of the term 'Act' for the purposes of the accompanying regulations.

Regulation 4 - Supply of special digital data service - specified equipment (Act s. 14A(5)(a))

Subregulation 4(1) provides for the Australian Communications Authority (ACA) to determine the kind of customer equipment that would be included in the supply of a SDDS.

Subregulation 4(2) provides a list of the kind of customer equipment that would be included in the supply of a SDDS should the ACA not have a SDDS customer equipment determination in effect.

The list of customer equipment specified in subregulation 4(2) specifies the kind of equipment that would be necessary to provide a SDDS by satellite or a multi-point distribution system (MDS) delivery.

Paragraph 4(2)(a) provides for a satellite dish and mount to be included in the necessary equipment to receive a SDDS by an asymmetrical or symmetrical satellite delivery.

Paragraph 4(2)(b) provides for a low noise block to be part of the equipment necessary for a satellite delivery of a SDDS. The low noise block is part of the antenna and is essential to the function of the satellite dish.

Paragraph 4(2)(c) provides for a multi-point distribution system (MDS) to be part of necessary equipment to receive a SDDS by microwave technology.

Paragraph 4(2)(d) provides for a receiving decoder as part of the equipment necessary for a MDS delivery of a SDDS. The MDS receiving decoder is a signal decoding device which allows the MDS antenna to communicate with viewing screen electronics.

Paragraph 4(2)(e) provides for cabling at the customer premises to be included as part of the installation of the equipment to ensure supply of the SDDS.

Paragraph 4(2)(f) provides for a personal computer (PC) card to be fitted to the customer's PC. The PC card would be necessary for the SDDS delivery equipment to operate in harmony with the viewing screen electronics.

Regulation 5 - Rebate scheme (Act s. 14A(5))

Subregulation 5(1) defines customer equipment for the purposes of regulation 5 to mean the customer equipment specified in subregulations 4(1) and 4(2).

Paragraph 14A(5)(e) provides that a reference in Part 2 of the Act (including subsection 19A(5)) to the supply of a SDDS includes a reference to the supply of customer equipment of a kind specified in the regulations where the supply complies with such requirements, restrictions or conditions (if any) as are specified in the regulations. Subregulation 5(2) provides that for the purposes of paragraph 14A(5)(e) of the Act, the supply of customer equipment must be subject to the rebate scheme set out in regulation 5.

Subregulation 5(3) provides that a customer is entitled to a rebate on the cost of acquiring SDDS customer equipment if that customer complies with the list of requirements, restrictions and conditions specified in this subregulation.

Paragraph 5(3)(a) is a customer equipment rebate restriction placed on customers who reside or carry on business in a SDDSA and require a SDDS. It is intended that a customer should receive a customer equipment rebate only once for the SDDS.

Paragraph 5(3)(b) is a requirement of the rebate scheme that a customer must give a written declaration to the SDDS provider, who is liable to pay the rebate, that the customer has not previously received a SDDS customer equipment rebate under the rebate scheme.

Paragraph 5(3)(c) is a requirement that the customer ordinarily resides or carries on business in a SDDSA. It is not intended that the SDDS customer equipment rebate scheme apply to customers who normally reside or carry on business in a GDDSA.

Paragraph 5(3)(d) is a condition of the SDDS customer equipment rebate that the customer equipment acquired for use in connection with the SDDS is not by way of hire.

Paragraph 5(3)(e) provides that it is a requirement of the SDDS customer equipment rebate that the customer enters into an agreement with the SDDS provider for the supply of a SDDS in a SDDSA.

It is intended that the supply of SDDS customer equipment should be supplied on the basis that the customer concerned enters into a legally enforceable agreement for the supply of a SDDS in connection with the customer equipment purchased.

Paragraph 5(3)(f) provides that it is a condition of the SDDS customer equipment rebate that the customer acquires the SDDS customer equipment for the purpose of the supply of a SDDS and that the supply is provided under a legally enforceable agreement.

Paragraph 5(3)(g) provides that it is a condition of the SDDS customer equipment rebate that the customer installs the customer equipment at the customer's residence or place of business in the SDDSA.

It is not intended that SDDS customer equipment purchased by a customer for installation at a SDDSA, to enable the supply of a SDDS, be then installed at a location other than that which is a SDDSA.

Paragraph 5(3)(h) provides the ACA with the flexibility to determine other requirements, restrictions or conditions that are necessary or desirable for the operation of the rebate scheme.

The ACA is responsible for monitoring the universal service regime, including the digital data obligation, which includes the SDDS customer equipment rebate scheme. In this role, the ACA will require some flexibility to include necessary or desirable checks and balances in the rebate scheme to deter fraud.

Subregulation 5(4) specifies the amount of rebate which is to be allowed to an eligible SDDS customer.

The amount of rebate allowed is 50% of the cost of the customer equipment plus the installation cost of that equipment, up to a maximum rebate amount of $750.

In order to assess what would constitute a reasonable maximum amount of SDDS customer equipment rebate that should be provided to a customer in a SDDSA, the costs for the necessary equipment and installation were calculated using an asymmetrical satellite solution.

However, should a more cost efficient technological solution be used by a SDDS provider to provide the SDDS, the rebate would still remain at 50% of the customer equipment and installation costs, up to a limit of $750.

Subregulation 5(5) provides for the SDDS customer equipment rebate to be provided to the customer in circumstances where the customer obtains the SDDS customer equipment from the SDDS provider. In this instance the customer would receive the equipment rebate at the time that payment is made for the customer equipment.

Subregulation 5(6) provides for the SDDS provider to pay either the customer or the third party in circumstances where the customer acquires the SDDS customer equipment through a third party.

Subregulation 5(7) provides for the SDDS provider to pay the rebate to the third person in circumstances where the customer gave the third party evidence that the SDDS provider recognised the customer to be eligible for rebate under the SDDS customer equipment rebate scheme, and the third party deducted the rebate from the cost of the equipment and installation.

Subregulation 5(8) provides for the SDDS provider to pay the rebate to the customer in circumstances where subsection 5(7) does not apply. The customer must demonstrate to the SDDS provider that the equipment has been purchased, after which the SDDS provider must pay the rebate to the customer within 28 days.

Subregulation 5(9) provides for the SDDS provider to request the customer to provide any other information that the ACA determines to be necessary to enable the provider to decide whether the customer is entitled to the rebate. The ACA determination is to be in writing.

Regulation 6 - Recovery of overpayments

Subregulation 6(1) provides for the SDDS provider with the power to recover all, or part of, a customer equipment rebate paid to a customer in circumstances where, at a later date, the customer is found not to have been entitled to that rebate, or to the amount of that rebate. Where this has occurred the SDDS provider may recover the amount of the overpayment from the customer.

Subregulation 6(2) empowers the SDDS provider to recover all, or part of, a customer equipment rebate paid to a customer by a third party in circumstances where, at a later date, the customer is found not to have been entitled to that rebate, or to the amount of that rebate. Where this has occurred the SDDS provider may recover the amount of the overpayment from the customer.

The customer has received equipment rebate from the third party because the customer had produced evidence that the SDDS provider recognised the customer to be eligible for rebate under the SDDS customer equipment rebate scheme from the SDDS provider. It is the responsibility of the SDDS provider to claim back any rebate overpayment arising from evidence being available that the customer is now ineligible for all or part of that rebate.

Regulation 7 - Special digital data service obligation - equipment supplied by third person (Act s. 19A(8))

Subregulation 7(1) makes reference to the Telecommunications (Consumer Protection and Service Standards) Act 1999 SDDS obligation. Part of the SDDS obligation includes the provision of a SDDS to be provided to a customer in a SDDSA, the supply of which includes the supply of customer equipment of a kind specified in regulations.

Subregulation 7(2) provides for the SDDS obligation to a particular customer to have been fulfilled by the SDDS provider only if the conditions laid out in this subregulation have been satisfied.

Paragraph 7(2)(a) is a condition that the SDDS customer has not hired the equipment from a third party.

Paragraph 7(2)(b) is a condition that the SDDS provider has verified that the customer is entitled to a rebate for the customer equipment purchased.

Paragraph 7(2)(c) is a requirement that the amount of the rebate is the lesser of 50% of the cost of the purchase and installation of the equipment and $750.

Paragraph 7(2)(d) is a requirement that the liability to pay the rebate has been discharged.

REGULATORY IMPACT STATEMENT

BACKGROUND

In August 1998 the Australian Communications Authority (ACA) published a report on its public inquiry into digital data. That report provided a summary of the quality and level of data services available in Telstra's Customer Access Network (CAN) throughout Australia, and the costs and benefits associated with upgrading that network.

The report found that rural and remote areas are limited in the data rates that they can achieve over the network. In the main this is due to attenuation problems in the long runs of copper wire used to provide telephony services to these areas and the limitations of the Digital Radio Concentrator Systems, used in the most remote areas. By comparison, the majority of customers in urban areas can achieve 'reasonable' data rates over the CAN.

Further, the cost of upgrading Telstra's CAN to provide a 64 kbps digital data service would significantly exceed the benefits. Also, the costs of upgrading the network to 28.8 or 14.4 kbps would exceed the benefits, although to a lesser degree. The report concluded that those currently experiencing problems in terms of access to affordable and quality data services are mainly located in rural and remote areas. These consumers are disadvantaged in comparison to services available in urban areas in a number of ways.

The technical problems that prevent rural and remote customers from accessing higher data rates over the network also prevent them accessing high data rate ISDN services. By the end of 1998 Telstra was required, as a condition of its licence, to provide 96% of the population with access to an ISDN service on demand. It follows, therefore, that the majority of the 4% who cannot access ISDN are probably located in rural and remote areas.

The report also found that this disparity of access over the network is increased by the higher prices paid by rural customers for data services, particularly for using the Internet. In the main this is because of a lack of Internet points of presence in rural areas, which require rural customers to pay STD call rates to connect to their Internet Service Provider. This is compounded by the fact that rural customers, who often cannot achieve over 2.4 kbps must stay connected to the Internet for longer periods of time to access the same information as their city counterparts.

GOVERNMENT POLICY

The Government recognises that ensuring Australia's telecommunications infrastructure continues to meet the needs of business and community generally is fundamental to the developing information economy.

During the 1998 election campaign, the Government made a commitment to include in the universal service obligation (USO) access to ISDN on demand for 96% of the population and, for the remaining 4% (approximately 360,000 customers), on demand access to an Internet-based asymmetric satellite service that delivers a satellite downlink comparable to a 64 kbps service. The Government also committed that those 4% of Australians who would have on demand access to an Internet-based asymmetric satellite service would also be entitled to receive reimbursement of 50% of the price of purchasing the necessary satellite receiving equipment. It was envisaged that the total rebate costs for any financial year would be paid for by the carriers in the same way that the universal service obligation costs are distributed between eligible carriers under the universal service levy arrangements.

LEGISLATION

The Government's commitment was given effect through the Telecommunications (Consumer Protection and Service Standards) Act 1999 (the Act) and the Telecommunications (Universal Service Levy) Amendment Act 1999.

The objective of the universal service regime is to ensure that all people in Australia, wherever they reside or carry on business, have reasonable access, on an equitable basis, to standard telephone services, payphones and prescribed carriage services.

Part 2 of the Act establishes the universal service regime. Incorporated in the universal service regime is the supply of digital data services.

In essence, the legislation provides for the following digital data service regime:

*       a 'general digital data service' (GDDS) is to be provided by a 'general digital data service provider(s)' in areas specified by Ministerial determination

-       this is the ISDN equivalent service required to be available to 96% of the Australian population under Government policy;

*       a 'special digital data service' (SDDS) is to be provided by a 'special digital data service provider(s)' in areas specified by Ministerial determination

-       the SDDS will provide a data channel with a data transmission speed of 64 kbps supplied to those end users who are part of the 4% of the Australian population who are unable to receive an ISDN service; and

*       regulations to provide a framework for a rebate scheme to benefit the customer in relation to the kind of customer equipment, other goods and services, which are for use in connection with the SDDS

-       this rebate will be funded by the industry as part of modified universal service levy arrangements.

A       PROBLEM IDENTIFICATION

In order for a customer in the special digital data service area (SDDSA) to obtain a comparable 64 kbps data delivery service they may be required to purchase satellite receiving equipment (such as the satellite dish and mount, low noise block, cabling, Personal Computer (PC) card, and services necessary for equipment installation and setup). The carriers have assessed the cost of this equipment and associated installation to be about $1,200 to $1,500 for a basic Internet-based asymmetric satellite service (this cost would rise if customers chose to install more sophisticated equipment, such as a symmetric satellite service).

This compares with a cost of $500 to $600 for purchase of a special Telstra socket and modem that allows a customer to receive a GDDS. Therefore, customers in the SDDSA must pay around $700 to $900 more than GDDS customers to obtain comparable data delivery services.

Some 360,000 consumers are possibly affected by this problem. However, it is estimated that only 2,500 consumers will request this service each year.

The Government policy that all Australians should have access to digital data services recognises that there would be financial inequities that would impact on those Australians who require the SDDS equipment. To address this issue the Government included in the legislation a rebate scheme to compensate, in part, those Australians who are unable to gain access to the ISDN network in order to obtain a digital data service.

Currently Regulations are not in place to provide for either a rebate scheme or give clarity to the kind of equipment that would be eligible under such a scheme.

B        SPECIFICATION OF REGULATORY OBJECTIVES

During the 1998 election campaign the Government made a commitment to include in the USO an access to ISDN on demand for 96% of the population (general digital data service -GDDS), and that the remaining 4% would have an on demand access to Internet-based asymmetric satellite service that delivers a satellite downlink service comparable to a 64 kbps service (special digital data service) with reimbursement of 50% of the price of purchasing the necessary satellite receiving equipment.

Section 160 of the Act allows for Regulations to be made. Subsection 14A(5) of the Act allows the Regulations to prescribe the supply of the kind of customer equipment, goods and services where they are for use in connection with a SDDS. Subsection 19A(8) of the Act allows for Regulations to prescribe a scheme whereby a customer is entitled to an equipment rebate.

The broad objectives of the Regulations are to meet the Government's election commitment and, in meeting this commitment, ensure that the 4% of the population that require some form of satellite service to access to a digital data service can do so at an equitable price compared to those who are able to access ISDN services. The Regulations have been drafted to provide both a framework for the rebate scheme and clarity for the kind of customer equipment that would be eligible for rebate. However, it is not Government policy to be technology specific in the provision of the SDDS.

It is desirable that the services capable of delivering a data channel with data transmission speed of 64 kbps to the 4% of the population that is unable to access ISDN are provided competitively. In this way the greatest cost minimisation is likely to occur.

Organisations capable of supplying a SDDS can nominate to be a special digital data service provider (SDDSP) for any part of the SDDSA that has been determined by the Minister. After the Minister has declared an organisation to be a SDDSP that organisation is required to provide the Minister with a Plan on how it will carry out its SDDS obligation. Once the Minister has accepted the Plan the ACA will monitor the SDDSP for compliance with its Plan.

Currently there is only one carrier in a position to provide this service, but it is expected that within the next twelve months other carriers will be in a position to provide services as well.

C       IDENTIFICATION OF OPTIONS (regulatory and non-regulatory)

Option 1        Not to make SDDS customer equipment regulations.

At such time as a SDDSP is declared by the Minister, which is expected around the end of September 1999, that SDDSP will be obliged to provide a SDDS to those customers who would be considered to be located in its nominated areas within the determined SDDSA.

Those Australians who are unable to obtain a GDDS would need to pay more to purchase and have installed a SDDS, and would not be able to claim any rebate on that cost without Regulations in place to provide for a rebate scheme. This would be contrary to Government policy and would raise issues of inequity between those who are able and those who are unable to access a GDDS.

Option 2       To make SDDS customer equipment regulations to provide a framework for a rebate scheme.

Regulations would provide a framework under which a digital data customer equipment subsidy scheme may operate, to enable those Australians who are unable to obtain a GDDS to be able to obtain a 50% rebate on the cost of customer equipment such as the satellite dish and mount, low noise block, cabling, PC card, and services necessary for equipment, installation and set-up.

However, this scheme does not provide for any financial limit on the total cost of that satellite equipment hence there is a risk that the rebate costs may become considerable.

Without these regulations it would be difficult for a consumer or provider to know what constitutes customer equipment for the purposes of assessing what equipment would be included or excluded from the associated rebate scheme.

Option 3       To make SDDS customer equipment regulations which includes a rebate limit.

Regulations would provide a framework under which a digital data customer equipment subsidy scheme may operate, to enable those Australians who are currently unable to obtain a GDDS to be able to obtain a rebate on the cost of customer equipment such as the satellite dish and mount, low noise block, cabling, PC card, and services necessary for equipment, installation and set-up.

The legislation provides for regulations to be made that would identify the "kind" of customer equipment that could be included in a rebate scheme. However, although the kind of customer equipment may be identified, the associated cost may vary depending on the quality or functionality of the equipment beyond that which would be necessary to provide an Internet-based asymmetric satellite service that delivers a satellite downlink comparable to a 64 kbps service as outlined in Government policy. For example a customer may wish to purchase a satellite service that delivers both an upward and downward link, requiring a satellite transmitter as well as a satellite receiver.

Government policy is to allow a rebate on such equipment of up to 50% of the cost in order to allow for equity between customers costs for those who are able to access ISDN services and those who would require an Internet-based asymmetric satellite service that delivers a satellite downlink comparable to a 64 kbps service. However, it is not Government policy to limit in any way the type of satellite services purchased by individuals.

For equity between the equipment costs that a GDDS customer and a SDDS customer may be expected to pay, it is considered that some limit should be placed on the 50% rebate for the SDDS customer equipment costs.

After taking into account the Government's commitment to provide up to 50% rebate on an Internetbased asymmetrical satellite equipment cost, and the differing customer costs involved in the GDDS and the SDDS, it is considered that a customer equipment rebate should be 50% of the equipment, installation and set-up costs, up to a limit of $750. It is not intended to index link the $750, but the digital data service obligation will be reviewed as part of the general review of the telecommunications legislation due in 2002. It is expected that as the customer rate of satellite services increases, so the price for satellite equipment should decrease as has been the case with electronic equipment over the past years.

To minimise the possibility of fraud, it is also considered that this rebate should be paid only once for the SDDS provided to a customer in a SDDSA, and that the SDDS provision should be for a specific period of time through written agreement.

The ACA will be responsible for monitoring the universal service regime and this would include the monitoring of the digital data obligation and, as a subset of that, the customer equipment rebate scheme.

Under this option the ACA is able to make a determination that would specify any other requirements, restrictions or conditions necessary or desirable for the operation of the rebate scheme. This will give the ACA, who has the responsibility for the smooth operation of the rebate scheme, some flexibility to include necessary or desirable checks and balances in the rebate scheme to deter fraud. If the ACA makes such a determination, affected parties will be consulted and given an opportunity to comment.

D        IMPACT ANALYSIS

Commonwealth

The Regulations do not have any financial impact on the Commonwealth's expenditure or revenue.

The ACA has the role of monitoring the universal service regime which includes the digital data obligations. As such there would be some additional work involved in monitoring a SDDSP's compliance with the digital data obligations and the associated rebate scheme. It is difficult to assess the additional cost that this function would have on the ACA, however, it is not considered that it would have a significant impact on the ACA's overall costs.

Telecommunications Carriers

A competitive market is developing in the provision of satellite delivered digital data services and therefore the Department provided all carriers with information on the implementation of the Government's digital data commitments and sought additional information from those carriers interested in being declared a SDDSP.

The decision to elect to become a SDDSP is a commercial matter for each carrier. Carriers would need to decide if the business case considered it profitable to undertake such an obligation and the area in which that operation was to take place. There will be a financial impact on any SDDSP who undertakes the digital data service obligation, since the cost of the rebate will need to be borne by that SDDSP until such time that the USO levy is assessed at the end of each financial year and carrier contributions are remitted.

Telstra is currently the only carrier that has requested to be declared a SDDSP and will therefore undertake the SDDS obligation to the 4% of Australians that are unable to access the ISDN network. This being the case, no determination under subsection 26D(1) of the Act has been made to provide for a selection system. In the future more than one carrier may be declared a SDDSP, when other carriers indicate that they are in a position to be and would like to be considered as a SDDSP.

The cost of the subsidy for customer satellite equipment would be on a similar basis as the USO cost which is shared among telecommunications carriers. However, this cost would be in addition to the USO cost which is currently capped at $253.32 million per annum.

All eligible carriers will be required to share the cost of providing the equipment subsidies to satellite service customers. However, this cost is expected to be small relative to the existing USO cost, estimated at approximately $2m per annum (depending on take up rate) compared to the current USO cost of $253.32 m per annum. The subsidy would be a one off payment to each customer who takes up a SDDS in a SDDSA, compared with an ongoing annual USO subsidy to rural and remote customers. As the carrier with the largest market share, Telstra would bear the greater portion of the digital data levy (approximately 85%) as is currently the case under the USO levy arrangements.

A review of the USO funding arrangements, including funding of digital data and also the National Relay Service, is currently being undertaken by the Department which will give an opportunity for other methods of funding arrangements to be assessed.

Consumers

As a general rule, the SDDS will need to be provided in circumstances where the location of the service is more than about 4.5 km from the ISDN capable local telephone exchange, or those consumers who are connected to a digital radio concentrator system exchange. These circumstances in the main cover rural and remote consumers. However, there are a few exceptions to this general rule such as where: the customer's service is located on cable that exceeds loss requirements (around 5 km from the exchange dependent on the diameter of cable used); the customer's service is located on an incompatible pair gains system; or the customer's line has incompatible line conditioning equipment installed.

Given there are approximately 9 million customers and the cost of the SDDS is estimated to be $2 million per year, this would equate to a cost subsidy of around twenty-two cents per customer per year (this is in addition to the current USO, which equates to about $28.15 per customer per year). Therefore it is unlikely that the additional cost of the SDDS customer equipment subsidy would have an impact on the overall telecommunications prices to customers, but nevertheless these customer will be contributing to the overall cross-subsidy of the SDDS consumers. The amount of this cross-subsidy will depend on the ability of the telecommunications carriers to pass these costs onto their customers.

The effect on customers who do not want a digital data service would be minimal.

Consumers who do want a SDDS would have a guarantee of its availability, and access to a subsidy for the necessary customer equipment, installation and set-up costs. Even with an SDDS equipment subsidy of 50% of the cost, up to a limit of $750, the customer would still have an ongoing call and access costs which would need to be taken into consideration when a customer decides to request access to a SDDS. All these costs would need to be considered against the potential benefits gained from receiving access to digital data services.

Benefits for individuals having access to digital data services are varied and would depend greatly on the individual's circumstances. Those people in rural and remote areas may perceive a benefit from having access to Internet-based applications which mainly fall into two categories: electronic mail (person-to-person messaging); and the world wide web, which allows access to information searching and downloading from the many thousands of web sites around the world. This type of access to information could prove beneficial to rural and remote customers not only to gain general information, but also in having access to specific health or educational services. In addition to downloading information from various web sites, the user has the opportunity to post their information on a web site for others to view and download.

E        CONSULTATION

The draft Regulations were distributed for comment to the nine carriers who have either expressed an interest in receiving a copy of the draft Regulations, or who may have in the near future the ability to provide satellite services. The draft Regulations were also provided for comment to the ACA.

Two carriers and the ACA responded to the request for comment on the draft Regulations. Comments received were on the whole supportive of the draft Regulations.

Comment was provided that an asymmetric satellite service, which is dial out via the PSTN but delivers a downlink satellite service comparable to a 64 kbps service, is a less effective means of Internet access. There was concern that consumers may choose to take a one way satellite Internet service at this time, on the basis of their present needs and also because of the subsidy applying to such equipment, and in so doing may effectively have locked themselves into the one-way satellite receiving equipment since new equipment would be required in order to transmit and receive satellite data.

The choice of whether to purchase an asymmetric or a symmetric satellite service or other SDDS technology will be a matter of consumer choice, however, the customer equipment rebate would apply to all SDDS technological solutions.

It will be up to the carriers that do, or intend to, supply a SDDS to conduct their own information and marketing campaigns.

F        CONCLUSION AND RECOMMENDED OPTION

Option 1        would not meet the desired Government, or legislative, objective to provide for a customer equipment rebate to SDDS customers.

Option 2        would meet the desired Government and legislative objective to provide for a customer equipment rebate scheme to SDDS customers. The provision of this type of Regulation would provide clarity on the kind of customer equipment and associated eligibility requirements for equipment rebate to be provided.

However, without any financial limit placed on the 50% of costs it is likely that some customers may choose to purchase expensive satellite equipment with various functionality features knowing that it would only cost them half the actual price. If this were the case then the total cost of the rebate in a financial year may become considerable.

Option 3        is the recommended option since this option meets both the Government and legislative objective to provide for a customer equipment rebate scheme to SDDS customers. The provision of this type of Regulation would also provide clarity on the kind of customer equipment and associated eligibility requirements for equipment rebate to be provided.

In addition, this type of Regulation provides for equity in the cost to the customer receiving a similar digital data service. For those customers who wish to have additional features in their service, they are able to obtain these features and still be eligible for the rebate up to the prescribed limit without further carrier subsidy.

G        IMPLEMENTATION AND REVIEW

The arrangements will be implemented from Gazettal of the Regulations.

The Department is currently undertaking a review of USO funding arrangements, which includes the digital data funding. In addition, and in keeping with the Government's policy of regular policy review, the digital data service obligation will be reviewed as part of the general review of the telecommunications legislation due in 2002.