Senator MARK BISHOP (1:26 PM) —I understand that there has been some discussion between the government and the opposition regarding the Trade Practices Amendment (Telecommunications) Bill 2001 and the Interactive Gambling Amendment Bill 2001. It had been the intention of the opposition to make fairly lengthy submissions on both bills when the bills were listed in the normal place on the Notice Paper. They have now been brought forward into non-controversial legislation. The government has sought the assistance of the opposition to expedite passage of both bills, and we have assented to that proposition. Accordingly, I seek leave of the Senate to incorporate my speech in the second reading debate on this bill.

Leave granted.

The speech read as follows—

The Trade Practices Amendment (Telecommunications) Bill 2001 seeks to amend the telecommunications access regime contained in the Trade Practices Act 1974. It seeks to streamline the telecommunications access regime in a number of ways.

My colleague in the House of Representatives, Mr Smith, has outlined in some detail the Opposition's position on this Bill, and on telecommunications competition issues more generally. I will not repeat what Mr Smith has already said about this Bill.

However, I would like to speak briefly about the Senate inquiry into the Bill and then I will move a second reading amendment.

The Senate Environment, Communications IT and the Arts Committee reported on its inquiry into this Bill earlier this week. Labor Senators provided a dissenting report to that Inquiry which set out one particular concern that had been raised by witnesses during Committee hearings.

This concern related to one of the ways the Bill seeks to streamline the telecommunications access regime, namely, by limiting the evidence available on appeals to the Australian Competition Tribunal (ACT) generally to that available to the Australian Competition and Consumer Commission (ACCC).

A number of witnesses, including telecommunications carriers and the ACCC, called for the ACT's merits review of ACCC decisions to be abolished.

This issue arose in the context of the new section 152DOA in the Bill, which specifies the matters to which the ACT may have regard when it is conducting a review of a determination of the ACCC in arbitrating a telecommunications access dispute.

At present, review by the ACT is a re-arbitration of the dispute, and the Tribunal may have regard to any information, documents or evidence which it considers relevant, whether or not those matters were before the ACCC in the course of making its initial determination.

Proposed new section 152DOA will, in effect, limit the Tribunal to consideration of information, documents or evidence which were before the ACCC initially.

The Explanatory Memorandum to the Bill explains the need for this amendment by stating that determinations by the ACCC “involve a lengthy and complex hearing process” and that restricting the material which the Tribunal may consider “will ensure that the Tribunal process involves a review of the Commission's decision, rather than a complete re-arbitration of the dispute”.

The Explanatory Memorandum also states that “Although this option should reduce delay in the review of Commission decisions, it will reduce the extent of Tribunal review. On balance, it is considered that the limitations on the review are justified on the basis of the length and depth of the Commission's arbitration process.

The primary concern of the carriers who are seeking to abolish the merits review altogether is the time and delay in access pricing decisions, particularly when there is a merits review and the lengthy process commences de novo.

The carriers had some valid arguments for abolishing the merits review. In particular they argued that:

· In this fast-moving market, it is only feasible for one body to consider the basic matters because the availability of a review process (in addition to avenues of judicial review) gives competitors an opportunity to delay if it is to their competitive advantage. Witnesses representing the carriers were particularly concerned that the review de novo by the ACT can be utilised for `regulatory gaming', that is, using the regulatory resources and muscle of the organisation at every opportunity to frustrate competitive entry through exploiting the regulatory regime to try to exhaust competitor resources.

· The ACCC process is already lengthy, more thorough and performed by people with greater expertise than the ACT review, so the value of merits review is dubious. The length and detail of the first instance process by the ACCC questions the need for a merits review.

· The ACCC better placed to determine these matters because it has the background expertise and experience, whereas the ACT has never considered a telecommunications pricing issue and has no resources of its own.

· The integrity of the ACCC process is adequately protected by the avenues of judicial review to the Federal Court or the High Court on matters of law, which is comprehensive and searching into the reasoning and analysis of ACCC decision making.

A variety of reasons were given for the existing arrangements being unsatisfactory. These included:

· Delay is a considerable concern for the industry, particularly as it relates to price determinations, because it creates lengthy uncertainty, is detrimental to competitive interests and delays investment decisions to the ultimate detriment of consumers

· Another concern with the merits review is that it may tend to have an intimidating effect on smaller access seekers. That is, if even relatively larger players are being taken to the tribunal, and the matter is being dragged out from scratch, the smaller access seekers will be deterred from even taking a matter to the commission. This is not in the interests of competition.

· The merits review is presently as of right. There is no restriction of frivolous or vexatious matters for the de novo review. It has been suggested that this encourages `regulatory gaming' as it means there is nothing to prevent Telstra bringing a review before the tribunal for a tactical or strategic delay to competitors and would-be access seekers.

As well as the witnesses supporting the abolishment of the merits review, contrary views were expressed. Reasons for supporting the existing arrangements included:

· The enhanced appeals process (that is the merits review to the ACT) is an important part of the framework that specifically regulates telecommunications.

· The provision for merits review acts as an effective “insurance policy” against any mistakes that may result from the regulatory system. The risk of error occurring in regulatory decision-making and the costs of such error are very high.

· Appeals on questions of law do not provide a sufficient foundation for the confidence necessary for investment.

The Committee was advised that abolishing the merits review by the ACT might have some detrimental consequences such as:

· Deterring investment in regulated or potentially regulated telecommunications infrastructure because of a perceived regulatory risk. This would increase the costs of raising capital and reduce expenditure on investment.

· Setting a damaging precedent for other infrastructure industries affected by regulated decisions.

· Introducing uncertainty about investment, or returns on investment, and reducing incentives for continued investment.

· Eroding the accountability of the decision maker (ie the ACCC). That accountability appropriately accompanies the wide discretion of the regulator in making decisions. A high degree of scrutiny of the ACCC's decisions is also warranted by the impact of its decisions and the significant economic consequences.

The Department of Communications, IT and the Arts advised the Committee of the reasons for including the amendment in the Bill which limits the information that can be brought before the ACT, instead of abolishing the appeal for the ACT:

· The provision strikes a balance between competing interests, which is clearly the case given the competing submissions to this inquiry.

· Merits review has, since its introduction in 1997, been considered an important element of the package as a whole.

· Merits review is a presumed right for administrative decisions, and is considered appropriate given the nature and breadth of the ACCC's powers.

· Abolition of the merits review is a fundamental reform and no reforms of that central nature will be made prior to consideration of the Productivity Commission's findings from its inquiries into Telecommunications Competition Regulation and the National Access Regime.

So in summary of the Committee's inquiry into this Bill, Labor Senators were not persuaded, to oppose the Government's legislation. Clearly there are doubts regarding the merits review by the ACT, including the capacity and appropriateness of the ACT to fulfil that role and the timeliness of outcomes.

Given the imminent conclusion of Productivity Commission inquiries on relevant matters, Labor Senators concluded that it was premature to make such a substantial change as abolishing the merits review prior to consideration of the reports from those inquiries.

In view of the different positions of witnesses and submissions to the Inquiry, consideration of the Productivity Commission's detailed analysis of the issue would be worthwhile prior to deciding on the most appropriate course of action.

In conclusion, Labor Senators recommended in our report that the issue of merits review by the Australian Competition Tribunal as a part of the telecommunications access regime be reconsidered in the context of the Productivity Commission's findings which will be available within the next month.

I believe that consideration of reforms of the regulatory regime applicable to the telecommunications industry is important to ensuring there is true competition in the industry.

And that is important to all Australian consumers.

While the Government likes to gloat about the degree of competition in the industry, Telstra receives 89 per cent of the total profits in the industry. Meanwhile Optus has eight per cent, Vodafone two per cent, AAPT one per cent and the others account for less than one percent of total industry profits.

There is still some way to go in achieving a more competitive telecommunications market. A Beazley Labor government will ensure Australians get more effective competition than this government has been able to achieve.

In that context I will move the second reading amendment in my name.

Senator MARK BISHOP —I thank the Senate. A second reading amendment in relation to the Trade Practices Amendment (Telecommunications) Bill 2001 was circulated in my name yesterday. We are going to proceed with that amendment now and I will speak to it briefly. I move:

Paragraphs (a) to (c) of the amendment address the issues of lack of competition and the failure to adequately advance change in the telecommunications competition regime, and note the government's obsession with the full privatisation of Telstra. Paragraph (d) effectively calls on the government to restart the reform agenda in the telecommunications industry. It is important to note the large, indeed huge, amount of profits—over $4 billion per year— being made by Telstra at the moment. They represent about 90 per cent of industry profits and certainly indicate that Telstra holds a dominant market share of the various industries in which it competes. That strengthens Telstra's ability to effectively thwart even the most minimal competition reform. This is reflected in the management of the company by the current administration: their implementation of failed overseas strategies and their poor investments, all leading to significant write-downs. All of the features that I have just identified reflect a lack of competition in the telecommunications industry, an apparent exercise of monopoly power and the extraction of monopoly rents, to the harm of consumers, competitors, infrastructure users and re-sellers generally in this industry.

This serious state of affairs—in fact, the de facto re-monopolisation of the telecommunications industry—is permitted by this government, whose priority, as indicated in paragraph (d), is not advancing reform, not establishing a sound regulatory regime and not forcing the creation of a competitive market. Indeed, so poor are a lot of those elements that in his inquiry Mr Besley was unable to recommend any degree of privatisation for the foreseeable future. This amendment effectively urges the government to forget, to negate, its obsession with the privatisation of Telstra and to get on with the main game. The main game is clear to everyone: establishing a flexible and effective regulatory regime and encouraging further real competition within the telecommunications industry and a hastened improvement of retail services to rural and regional Australia—that is, further competition and reform in this industry as a matter of urgency. I commend the amendment to the chamber.