ACTING CHAIR —Welcome. Thank you for giving us your time today; it is much appreciated. The committee has received your submission and numbered it 23. Do you wish to make any amendments or alterations to your submission?

Dr Wilding —No, thank you.

ACTING CHAIR —You are reminded that evidence given to the committee is protected by parliamentary privilege and the giving of false or misleading evidence to the committee may constitute a contempt of the Senate. I now invite you to make a brief opening statement before we move to questions.

Dr Wilding —I would like to recognise at the outset the committee’s previous work on some of the matters covered by this inquiry, in particular the work of the committee in the inquiry into the Australian Communications and Media Authority Bill. We would like to endorse the committee’s recommendation from that inquiry, or its agreed principle that competition is an important factor in achieving consumer protection. I would like to point out that we leave it to others to comment specifically on ways in which the competition regime might be improved. Our focus is on the consumer protection aspects of regulation. We have some specific suggestions that we have outlined in our written submission.

Some specific aspects of consumer protection regulation are needed, in addition to competition regulation, but we suggest that the right kind of consumer protection regulation can probably assist in creating an effective competitive market. There is a range of different existing consumer protection mechanisms. In our written submission we have provided a list of some of those mechanisms. In our view, if the range of regulation in relation to telecommunications in Australia is being reviewed it is appropriate to review the extent and operation of consumer protection mechanisms as well as the competition regime.

The aspect of consumer protection regulation that the Communications Law Centre has chosen to focus on is the operation of the self-regulation scheme in Australia. We have chosen this issue because we think that if we get it right in relation to self-regulation then there are benefits that will flow in the short and the long term. Some problems have been noted in relation to the existence of the current system, but the basis of that system is sound and should provide a framework to operate into the future. We have also chosen to focus on that aspect in this inquiry because we feel that there are some aspects of the operation of the self-regulation framework that can only be improved through legislation.

In our written submission we have set out a number of specific comments on aspects of part 6 of the Telecommunications Act which address our theme of improving the framework for self-regulation. I would like to emphasise the point that we make at the start of that submission: there are a large number of consumer protection issues that the Communications Law Centre has not considered in its submission. We leave it to our colleagues to explore some of those important matters.

ACTING CHAIR —In relation to reference (d) and what you had to say about consumer protection safeguards, you believe that we need to finetune the self-regulatory framework. Can you explain in a little more detail how you feel that should be done?

Dr Wilding —We have used the expression ‘finetune the system’ because we do not think there are massive structural changes that need to be made. We have made an initial attempt to identify some sections of regulatory policy and part 6 of the Telecommunications Act, which we think could be amended in part. I have tried to stress in the written submission that we are not seeking to remove considerations such as the importance of recognising the commercial aspects that are relevant in regulation; we are simply trying to balance to some extent the consumer issues and the commercial aspects. The finetuning relates to an amendment to the existing statement of regulatory policy that places a little more emphasis on consumer protection by keeping self-regulation wherever that is possible but recognising that in some circumstances the regulator might have to move into the picture. That is the first aspect. The second aspect of the finetuning is adjusting some of those provisions in part 6 of the Telecommunications Act.

ACTING CHAIR —In response to reference (e) on the actual role of the regulator in the new converged arrangements, you use the term ‘active regulator’. I am just assuming that the regulator would be active, but you have actually specified that term in response to reference (e) in relation to the new converged arrangements we will have with broadcasting and communications. Can you just explain what you mean by ‘active regulator’? In what way would you see that regulator being more active than perhaps the arrangement we are in at the moment?

Dr Wilding —I think we have tried to stress that we do not see the concept of an active regulator as being one that intervenes at every opportunity in the operations of industry. Our concern has been not so much about a reluctance to act on the part of the ACA but that the framework within which the ACA is empowered to act creates a situation in which there are certain tests to be applied in certain cases. The ACA would be exceeding its powers if it were to go beyond the criteria it has been given. For example, we would see that it is a reasonable approach to provide some more flexibility to the regulator, whether it is the Australian Communications Authority or the Australian Communications and Media Authority, to act in circumstances where it sees that there is potentially a problem for consumers. It does not have to be on the basis of a very narrow statement of what the ACA can do. But we think that it needs a little more room to move when there is cause to do that.

ACTING CHAIR —In response to reference (f), you make the point that you seem reasonably happy with the existing framework for self-regulation. You would perhaps prefer, if I am interpreting you correctly, to see that evolve over time rather than putting in additional speculative licences. Can you just explain a bit further, just for the record, the nature of speculative licences, what effect that would have and why you are preferring perhaps not to go down that track?

Dr Wilding —We see that there are potentially some limitations in choosing to impose legislative mechanisms that are fixed at a particular point in time and that require reasonably rigid observance as opposed to something that provides more flexibility to the regulator, industry and consumers. But we say that knowing that we have not performed an extensive review of the operation of the consumer protection mechanisms that we outlined earlier in our submission. One of the comments that we have made is that we are unsure whether that review is being conducted. We think it is appropriate that that happens.

We are not suggesting that there should be no new specific consumer protection mechanisms, legislative measures or otherwise; what we are saying is that, in a general sense, we think there is a good range of specific mechanisms. It is appropriate to review their operation as to whether there are any gaps. That is something that we are not doing at the moment. Not having actually done the work on that, we would suggest that what we do know is that some changes to the framework itself would provide benefits now and in the future. We have expressed a preference on our part to get that framework right, recognising that there may be some additional specific measures that are needed.

Senator TIERNEY —We are about to bring into effect the creation of the Australian Communications and Media Authority, which is the merging of two existing entities. The ACA, you could probably say, tend to be more regulated than the ABA—perhaps more self-regulated. So they operate in different ways. Given that we are moving into converging technologies, do you see the possibility of having a more even approach to regulation and self-regulation across the whole sector or do you think it is horses for courses and that, just by the nature of communications and the nature of media, some aspects of it would be self-regulatory than others which would require a heavier form of regulation?

Dr Wilding —At the outset, I think the most important point to make is that that issue you are raising has not really been considered in depth. It would seem to us that it is reasonable to ask whether the two systems should operate more cohesively and whether we should review the ways in which codes are created, how compliance with those codes is achieved and how enforcement mechanisms are used. So there is some work to be done there.

I think we do have an indication of some specific areas in which there are obvious similarities and it would pay for a converged regulator to start looking across its different areas of activity. We know that, despite the fact that there are some problems with consumer participation in self-regulation in telecommunications, there is quite a substantial level of participation. Getting that participation to work effectively is the question. That does not exist in broadcasting. I know that there are views on the appropriateness of involving members of the public—public interest groups and consumers groups—in the self-regulation system in broadcasting, but I am not persuaded that that is not an effective approach in addition to self-regulation.

On the other end of self-regulation we know that there have been some comments made around compliance and enforcement. It seems that if the one converged regulator is to monitor a set of codes that are developed under similar systems then it would be worth while to look at the powers that it has available to it to enforce those codes. In the past, for example in the commercial radio inquiry, the ABA has pointed to some additional remedies that it might have available to it—administrative and judicial remedies. The ACA has recently done the same in assessing what is available to it, whether that is written notices to comply, formal warnings et cetera or, in the case of the Spam Act, its recent ability to use enforceable undertakings. So both communications regulators have looked at the range of enforcement mechanisms that are available to them in a converged environment, and I think it is appropriate to look at the effectiveness of those mechanisms across the two domains.

Senator TIERNEY —I have a final question, again on the theme of a converging marketplace and the government’s role in regulating it. There are a few bits not included in this new arrangement, I suppose because of the silo approach of government; things are still left outside. I refer particularly to film. You can put film on the internet, but it is under a separate regime—it is under the Attorney-General’s Department and the Office of Film and Literature Classification. Do you see a possibility that, given internet technologies and that convergence, all of that should come under the purview of one regulatory arrangement?

Dr Wilding —Yes, I do think that that is a very reasonable suggestion. An innovative approach to the regulation of all these areas might be to have the Australian Communications and Media Authority act across the different platforms, specifically in relation to, say, the operations of the Office of Film and Literature Classification. I think it is worth exploring whether the operations of that office are better performed under the umbrella of the converged communications regulator given that they are dealing with a whole range of similar issues.

I think what is really valuable about the OFLC scheme is that it has the classification board, which brings people from the community, rather than just staff members, to sit on a board to make decisions. So it would be important to preserve the operation of the classification board, but it may well be worth while to have those tasks in total performed by the converged regulator. I guess there are other aspects of film regulation which will always remain separate—for example, film financing, script development and assistance to the industry might well always be performed by separate agencies. However, we have certainly got the indication that in relation to classification a similar set of issues is there for mobile phone providers, as it is for film distributors.

Senator LUNDY —I would like to follow up this focus on consumer protection. I think it is a very important part of this inquiry. I am not sure about the standing orders, but I think it would be useful if the Communications Law Centre’s submission to the ACMA inquiry could also constitute part of the body of evidence for this inquiry because of that strong consumer protection focus. It has been referenced several times in the submission, so I think that would be useful. Also, in your submission you reference a document prepared for the Telstra Consumer Consultative Council. Could that also be provided to the committee as a supplementary submission? It obviously has some relevant detail about compliance measures for consumer protection.

Dr Wilding —Yes.

Senator LUNDY —Going to the list of areas that the Communications Law Centre has identified in its submission, one of them is unfair contracts. That is attracting a lot of attention at the moment with respect to telecommunications. I would like you to outline what you think the primary considerations are now, knowing that that is hopefully going to reach some conclusion soon.

Dr Wilding —In our thinking of where self-regulation should go from here, we have tried to embrace the experience in the contracts code development process, and the observations in the consumer driven communications project were that some of the conditions that were developed by ACIF for that code development were a significant improvement on previous processes. So I think we want to embrace what has happened in that code development. There are two questions there. One is what the contracts code tells us about code development in general, and the other is the issue of unfair terms in contracts. Is it the second that you are interested in?

Senator LUNDY —Yes, but could we get a comment on the process as well? I know we have heard a bit of evidence on that before—particularly the overlap between the ACA endeavours and the ACIF code development. Could you comment on that and then turn to the issue of unfair contracts.

Dr Wilding —Firstly, I think that we saw a good example of code development in the contracts code, so the process that took about nine months resulted in something that a number of people are comfortable with. That in itself is the positive achievement of that experience. I suppose what we were more concerned about was the difficulties in getting there. We have noted before the fact that the issue really started to be discussed seriously at the end of 2000, but we did not get down to developing the code until the start of 2003. So I think what ACIF has done in changing its code development drafting processes will work well on that aspect of the process. But we would like to see what is not addressed by that—that, if there is a similar problem that seems to exist within the industry in the future, the regulator is not so restricted in what it can do, so that a similar delay does not happen in terms of getting to the point of actually drafting the code. There are other comments that we would make about the regulator’s responsibility at the point of registering a code, in terms of assessing whether it is a fair deal for consumers and business.

Specifically, I think that the code itself advances the issue of fair terms in consumer contracts. The challenge from here will be to see compliance with that code, how swiftly it is able to be implemented at an industry level and whether the measures that are taken are indeed compliant with the rules that are set out in the code. However, one specific area that we remain concerned about is not so much in relation to the code itself but in relation to the conflict that exists in the three-part structure of having the consumer contracts code, a determination from the Communications Authority, and a part of the Telecommunications Act that deals with standard form agreements. It is that last aspect that we have tried to set out in some detail in the submission when dealing with changes to part 23 of the Telecommunications Act.

Senator LUNDY —What are the changes you think need to occur to the SFOA part of the Telecommunications Act to effectively reflect the outcomes of the ACIF code development process?

Dr Wilding —We think that there would be a couple of different approaches to remove that inconsistency and potential conflict. I can outline those. Just to indicate what the conflict is: it is essentially to do with the question of whether or not suppliers can introduce new terms into contracts and vary the terms of their contracts without consulting with customers. The starting point in this would be the general law and trade practices regulation which says that one party cannot unilaterally vary contracts agreed between two parties. The consumer contracts code has really advanced the way in which this issue is regulated, and hopefully it should apply within the industry, in that it prevents unilateral variation in all but some very limited circumstances.

Senator LUNDY —Does the act do that?

Dr Wilding —No. The code does that. The Communications Authority has indicated an intention to remove most of the provisions from its determination which deal with this, which should result in the code being consistent with the determination so those two instruments do not leave the possibility of this unilateral variation. However, the problem remains that part 23 of the Telecommunications Act is uncertain in its meaning and operation. There is dispute within the industry as to what the meaning of part 23 is. There is a provision that says that, if suppliers are using standard forms of agreement, they must lodge those agreements with the Communications Authority. There is another provision that says that they must also lodge any variations to that agreement.

Senator LUNDY —So the implication is that it is possible for it to be unilaterally varied.

Dr Wilding —That is right. There are two arguments. One is that that in fact authorises unilateral variation, while the other is that it does not authorise unilateral variation but simply says that when changes are made, in whatever way—and that could include with the consent of the consumer—those changes must also be lodged with the regulator. There are clearly two very different views on it. We think that the uncertainty needs to be removed and the system as a whole made consistent among those three different instruments. As we have outlined in our preferred approach in the submission, those changes are not great. They are simply changing some wording that removes the ambiguity. A different approach would be to remove part 23 and remove the existence of standard forms of agreement altogether.

Senator LUNDY —Do you think the existence of standard forms of agreement in the Telecommunications Act undermines the regulatory powers of the ACA, were that to be made consistent with the ACIF code?

Dr Wilding —I am not sure whether it undermines the regulatory powers of the ACA. It could do in the sense that, if the ACA were seeking to enforce a code and there was still some level of ambiguity, there might be an argument open to a supplier that in fact that is not valid. In that respect, there could be a challenge to the ACA’s authority.

Senator CONROY —I have a number of questions about the operation of consumer protection provisions in the telco sector. The current regime places a heavy emphasis on self-regulation, which you have referred to extensively, through codes developed by ACIF. ACIF’s submission to this inquiry states:

Do you agree with that statement?

Dr Wilding —I certainly agree with it in part, in that Australia has a leading example of a framework. My reservations would be that, while it is one thing to get the consumers in the door, it is another to make sure that the system itself ensures that the aims and objectives are achieved. We have yet to see the results on that.

Senator CONROY —ACIF are critical of the CLC report Consumer driven communications in their submission on this report. They claim that the CLC does not cite examples of where the current regime is failing. Would you like to respond and cite some examples?

Dr Wilding —First of all, I should probably point out that the Consumer driven communications report was a combined report of a number of different consumer groups, not just the Communications Law Centre.

Senator CONROY —I will be offering them the opportunity to respond also; you should not feel that you have to take on all the response yourself.

Dr Wilding —We have pointed out some problems. The one that we have tended to focus on—and it may be a fair criticism that we have tended to put too much of our attention on it—is the contracts process. We have tended to do that because it was a striking example of long-term failure before something actually happened. At the time that the report was written, the contracts committee had not come out with a code. It was not certain that there was going to be a code. In addition to that, even though there is a code, we are yet to see compliance with that code, so that is a separate question altogether. It may well be a fair criticism that there is not documentation on other areas to the same extent to which there is documentation on the contracts area.

Having said that, my colleagues at a number of other consumer organisations have pointed out problems in areas such as credit management and the incidence of high bills on premium services, and problems with privacy and the use of number databases. They have gone into detail in several other areas which may not have been expressed in terms of the direct failings of a particular ACIF code. If there is a gap in how those matters are regulated, part of it falls to self-regulation and part of it falls to the activities of the regulator. There are certainly a number of areas where there are consumer problems. All the consumer groups submitting in this inquiry will be pointing to some of those. They are not, by any means, all the failings of ACIF. If the Consumer driven communications report suggests that they are, that is not correct.

But I do not think that the report does suggest that. It points to ACIF in a couple of circumstances, but it is not actually focused on ACIF. It deals with consumer protection and self-regulation across the board, and certainly ACIF is ahead of other organisations when it comes to consumer participation. For example, we would certainly rank ACIF above the Internet Industry Association in terms of the way in which codes are developed and consumers participate in that code development.

Senator CONROY —ACIF also states that it:

What changes would you like to recommend for consumer protection and regulatory regimes?

Dr Wilding —That is a statement with which I disagree. I think that we have seen some improvements and hopefully some benefits will flow from that, but the goodwill of the parties involved at the present is not enough to ensure that there is a sound regulatory system. Some of the minor changes that we have suggested would help to ensure that the good work in the past year continues, whoever is involved in these particular committees and organisations.

In our submission we picked up on one of the recommendations from this committee in its previous report, which is a change to regulatory policy that retains the emphasis upon ensuring that there are not undue administrative and financial burdens placed on industry, but alongside that there is a reference to the importance of consumer protection. So that would be the first change that we would suggest.

We then, in the written submission, point to some changes within part 6 of the Telecommunications Act that we think would improve the operation of the self-regulation framework. I do not think that they would actually change the work of ACIF a great deal. In fact, it is possible that an outcome might be quite similar, as it might be in the case of the contracts code, but there is no guarantee of that into the future.

We certainly think that there are some aspects that we have highlighted which need specific attention. For example, we have said that we think that the regulator should have some more criteria to apply at the point of registration of codes. It should stand back and say: ‘Yes, we have consulted with the Office of the Federal Privacy Commissioner and, yes, we have consulted with the Telecommunications Industry Ombudsman, but also we have done more than consult just one consumer organisation. We can see that there has been an adequate level of consumer participation and, furthermore, that there are some benchmarks which this document meets, other than just those consultation benchmarks.’ They would be something to do with what is included, the standard of what is included, the clarity with which it is expressed and so on.

Senator CONROY —How would providing a more rigorous framework for the development of industry codes improve the current regime? Is there a need to set binding time frames for the development of industry codes? In the light of ACIF’s efforts in relation to the consumer contracts code, can we expect the industry to be able to meet a time frame?

Dr Wilding —Yes. I think that it is worth while to do that. In the case of the contracts code, a time frame was set by the regulator which was part of what was driving the activity of the committee. It is likely that that is able to be addressed by industry and consumers working within ACIF, but I think that there needs to be some underpinning requirement that things are done in a timely manner in order that the processes do not blow out. To be fair to ACIF and all parties involved in that process, no-one seems particularly happy with the length of time that some codes have taken in the past, because of course they take up the time of industry as much as they do of consumers, and particularly the smaller providers are less able to meet those resource requirements.

Senator CONROY —You state in your submission that there is a need for transparent criteria which codes that have been developed by ACIF can be judged against. Are there any specific examples of codes that have been registered by the ACA that you believe have been inadequate?

Dr Wilding —The answer to that question is something that we have formulated a proposal on for some research. But I do not think that in fact the work has been done to systematically assess whether the codes that exist—not just the codes created by ACIF but the self-regulatory codes within the communications sector—meet certain standards. There is some work that we think needs to be done. I would stress that our system is certainly not designed to do that. Other than those consultation mechanisms, the ACA is required at the point of registration to apply its public interest balance test, which is to say that it does not impose those burdens on industry. It does not have a range of criteria to judge whether, in the first place, what has been developed is adequate.

Beyond that, there is the review process. We are suggesting that the work needs to be done in assessing what is already there—assessing it under the regulatory framework—and coming up with some indication about what might be appropriate registration criteria and an appropriate way of monitoring compliance, and then assessing whether, in the longer term, those codes have been effective.

Senator CONROY —You also state in your submission that there is a need for systems to ensure compliance with and enforcement of industry codes. How would you characterise industry compliance to date with each of the following: the ACIF guidelines, voluntary codes and registered codes?

Dr Wilding —In the case of the guidelines, the one that I have had dealings with is the contracts guideline. If that is an indication of how guidelines work within the industry then I would suggest that such a mechanism is not worth the effort of creating it. Partly, there was a problem in the operation of that guideline—with the regulator as much as the ACIF. In assessing whether the guideline had been effective, the regulator called for comments on whether or not it had been effective. The suppliers within ACIF provided a report indicating that there were no problems with implementing that guideline on removing unfair terms and that compliance was proceeding appropriately. It was only because the consumer sector decided to do some work researching the contracts that were on the market at that time, and to try to perform an audit of those contracts against that guideline, that there was anything for the regulator to recognise in its review process. So part of the problem was that industry were not being genuine in terms of assessing compliance.

The other part was that, if the system itself does not tell the Communications Authority that it needs to do that kind of work of going out and looking at whether those contracts were compliant, then the system as a whole is not effective in terms of assessing itself, so there is no real method of assessing whether—

Senator CONROY —Doesn’t the ACA have any obligation to take a look themselves?

Dr Wilding —I think that the framework that is imposed by the Telecommunications Act does not place enough emphasis on the importance of compliance and requires the ACA to meet a very high threshold in terms of systemic problems and documented evidence of systemic problems. So partly it was a reluctance on the part of the ACA to do something which appeared to consumer organisations to be quite obvious—that was: download the contracts, put them on the desk and go through them—and partly it was a result of the regulatory culture which is created by the act. I should say that, since that time, the ACA has demonstrated a willingness to review its own procedures, partly in commissioning the CDC report and partly in a number of other projects that it has embarked upon. It has set about achieving some rebalancing in what it does for consumers and what it does in supporting industry.

Senator CONROY —How long have the contracts that have a clause that says ‘we reserve the right to change any of the terms’ been around? Surely they have been around for years.

Dr Wilding —They have been around for years, despite the fact that everyone around a table might agree that it is obvious that you should not have a clause in a contract that says something like ‘if we disconnect you and it’s our fault we can still charge you a fee to reconnect you’. It is obvious to everyone that that is not fair and people agree on that, but it is the actual process of moving on from that and seeing the result in the contracts and practice within the industry.

Senator CONROY —Do you know of any action taken by ACIF to encourage carriers to comply with guidelines or voluntary codes?

Dr Wilding —I know that ACIF has recently hired a compliance manager, and we would hope that would assist. The comment we have made in terms of compliance enforcement is that we would like to see consumers more involved in what I have termed the ‘front end’ and ‘back end’ of regulation, drawing on some work in regulatory theory. That would involve some oversight of compliance work as well. I have not seen the proposals for that work. I would want to be convinced that the process of acquiring information from suppliers in the process of assessing that information is sound.

Senator CONROY —In your submission you comment that there is a need for reform of legislative arrangements surrounding carriers’ rights to unilaterally vary their contracts with consumers. The Victorian state government has taken a step down this path. Are you aware of any other states doing it? What is the federal need?

Dr Wilding —In relation to unfair contract terms?

Senator CONROY —Yes.

Dr Wilding —I am not aware of other states that have actually moved in that direction. I do know that the ACCC has indicated quite clearly that it will not move to try to introduce unfair terms provisions within the Trade Practices Act at a federal level, although it does have available to it the unconscionable conduct provisions of the Trade Practices Act, which it has used in approaching Telstra and seeking to have Telstra make some changes in this area. But I do need to stress that we think it is appropriate that that Victorian act is in place. I think it has acted as a helpful underpinning regulatory measure that encourages industry to develop its own solutions. We have committed our work to being based at the industry level and then trying to assist through the consumer contracts code because, while it is all very well to have the underpinning regulatory measure, we agree that in order for those rules to be taken up by industry they need to be something that industry understand, have applied to their own particular circumstances and have some commitment to.

Senator CONROY —Hopefully they have a commitment to complying with the law.

Dr Wilding —That is right. But the law is very general in its application, and the enforcement of that law would be by way of one supplier in relation to one issue at one time. We would hope that, by introducing a series of improvements via an industry code, we would get faster take-up of those provisions across the industry rather than it being just one issue at a time.

Senator CONROY —But even though the Victorian law is in place, any national organisation—and most of these carriers are national organisations—is not going to want to write two sets of contracts, one set for Victoria and one for everywhere else.

Dr Wilding —No.

Senator CONROY —So ultimately there should be a lifting of the quality of the contracts across the country because of the Victorian law.

Dr Wilding —Exactly.

Senator CONROY —We would hope that would be the case.

Dr Wilding —I think that will be. There are certainly areas that have been identified by Consumer Affairs Victoria as quite clearly in breach of its laws. We would expect that, simply as a result of that action alone, there would be changes within those contracts. But I do not think that a general law alone has the potential to improve a whole set of specific telecommunications provisions in these consumer contracts in the same way that a combined approach of a state or federal fair trading law with an industry based set of rules can achieve.

Senator CONROY —So is there a role for the Commonwealth? What does the Commonwealth need to do?

Dr Wilding —I think the preference of most consumer groups would be for the Trade Practices Act to be amended to insert unfair terms provisions, but we have not pursued that because it seems clear that that is unlikely. In that case, we would we see the system as comprising the operations of the Fair Trading Act in Victoria with the federal communications regulator’s enforcement of an industry code in telecommunications.

CHAIR —Dr Wilding, as there are no further questions, I thank you for your evidence this morning. It has been very helpful and informative, as always.

[9.51 a.m.]