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of the Australian energy regulator, mergers regime and the eminent start mergers regime and the eminent affection our operations. New with many changes under way that die ma'am Mick time for the ACCC you invited. It is currently a very you invited. It is currently a cancelling it when you foubd out who cancelling it when you foubd out to your sponsor, Telstra, for not National Press Club and, frankly,, National Press Club and, frankly, the opportunity to address the gentlemen. Thank you once again for gentlemen. Thank you once again thanks for the welcome, ladies and Samuel. APPLAUSE. Thanks, Ken, and Samuel. APPLAUSE. Thanks, Ken, moments. Please welcome, Graeme sees for the future in a couple of about how that has gone and what he last two years. He will tell you certainly made his mark in these privatisation, but Graeme Samuel has privatisation, but Graeme Samuel approaches the Telstra telecommunications industry as it involving Telstra and the whole not the least of which those very tlorny for the ACCC as well, this morning's newspapers which are other issues, apart from the ones in other issues, apart from the ones morning's newspapers. There are You wouldn't think so, reading this make him suitable for that role. with big business were too close to the time that his legal connections 2003 and there was some criticism at 2003 and there was some criticism role for a five-year term in August role for a five-year term in ACCC. He was appointed to that particular role as chairman of the a couple of times before in this here before in previous roles, but back Graeme Samuel. He has been It is a great pleasure to welcome National Press Club Telstra address. afternoon, welcome to today's address. Ladies and gentlemen, good address. Ladies and gentlemen, with today's National Press Club protecting consumers. Graeme Samuel protecting consumers. Graeme promoting business competition and commission's wide-ranging work in give his annual report card on the year in the job, MrSome wul will Graeme Samuel. Well into his second Graeme Samuel. Well into his competition and consumer commission, Club, the chairman of the Australian

connecting virtually every home and the ubiquitous local access network, continues to be the sole provider of continues to be the sole provider industry is the fact that Telstra the overriding issue in this substantially less regulation. But that in these markets there is also competition. It's no coincidence structures for more durable networks has put in place the the development of competing mobile come pet significance: Similarly p which there is more facilities-based come pet significance. which there is more more competitive markets is those in more competitive markets is those consumers. Notably, though, the particularly for residential offererings and geographic reach patchy in terms of service competition, it is still somewhat competition, it has been areas of effective drive counsel costs. While there interconnected drivedown rates to level and making use of competitors entering at the retail was almost entirely due to telecommunications regulatory regime telecommunications regulatory benefits of the current telecommunications. The initial and promote competition in role as far as possible to protect Regardless of ownership, the ACCC's for a matter of parliament. in government ownership is entire completely, partially or not at all of Telstra. Whether Telstra is when it comes to the privatisation the outset that the ACCC is agnostic the outset that the ACCC is telecommunications. I should say at telecommunications. I should say years. Let me start with an the ACCC over the next five to 10 an the ACCC over the next five to and this could mean for competition the telecommunications and the media the telecommunications and the talk about the role of regulating an the media, so today I want to moment is in the telecommunications greatest interest right at the audience is concerned is that the doubt at least as far as this just to name a few. Buttive no just to name a few. But

separation do not, of themselves, detailed rules on accounting game-playing. Further more, the lengthy process and subject to the infrastructure, but it can be a agreements with those seeking to use agreements with those seeking to owners to reach commercial better incentives for infrastructure better incentives for Access regulation does provide reasonably effective, some less so. mechanisms available to us are retail level. Some of the still allow them to compete at the services from Telstra at prices that services from Telstra at prices mean that they can buy wholesale and on reasonable terms. By this, I and on reasonable terms. By this, they need it, at reasonable prices access to that copper network where that competitors are able to get have been drethed towards ensuring activities in telecommunications date, the bulk of the ACCC's to make life tough for Telstra. To this, but the aim of the ACCC is not this, but the aim of the ACCC is this room, may disagree when I say Now, some people, especially some in Now, some people, especially some being built by Telstra or no-one. not simply a case of new networks competitive infrastructure. It's commercial model for investment in services, there is more than one for third generation or 3 G mobile for sharing of the infrastructure Hutchison and Optus and Vodafone, agreements between Telstra and demonstrated in the recent commenced in the 1990s, but as networks that occurred when pay TV as the dual roll-out of the cable preferable to avoid situations such telecommunications users group, it's telecommunications users group, her recent speech to the Australian Minister for communications noted in Minister for communications noted across society as a whole. As the only occur where it enhances welfare only occur where it enhances infrastructure. Investment should investing in competing some or all of its network by reselling its services or bypassing with just two alternatives: Either those seek tog compete with Telstra access to its network. This leaves continuing reliance on some form of to compete with Telstra often have a to compete with Telstra often have competitive markets, those seeking Consequently even in the more business in the country.

Act in promoting competition - the lack of transparency. Being unable to determine the way that Telstra's retail and wholesale operations interact makes it difficult for the ACCC to defect if anti-competitive behaviour is occurring and to behaviour is occurring and to obtain the necessary information for carrying out other regulatory functions. The primary limitation of the current accounting of the current accounting separation arrangements is that they require only a notional allocation of costs across the wholesale and retail businesses. They do not require businesses. They do not require the carrier to reorganise its internal affairs and operate as if it were rubbing two or more separate discreet businesses, a process that has been recently labelled "operational separation" stronger measures along the lines of operational separation would offer operational separation would offer a superior means of both detecting superior means of both detecting and fixing anti-competitive behaviour. Now, there has been some confusion about what isment meant by operational separation. The provisions of the Trade Practices the telecommunications specific impediment to the effectiveness of highlights the most significant analysis in specific cases. This extent in relation to its pricing arangements only to a very limited existing accounting separation the commission has relied on the analysis. It is significant that behaviour requiring more detailed instances of anti-competitive gaited which is hide specific these arrangements is highly ago gre these arrangements is highly ago telecommunications carriers and information provided by enforcement decisions. The when it is making access-related or information available to the ACCC ensure that all the necessary essential difference between the essential difference between the two is that of ownership. Both types is that of ownership. Both types of separation involve some part of Telstra as separate business entities. Urnd strul separation, the separate business entities the separate business entities would be sold to new owners and would no longer be part of Telstra. Under operational separation, the operational separation, the separate business entities remain as part of

and fully owned by Telstra. Operational separation is the concept that seems to be finding favour with a number of significant stake holders in the debate over stake holders in the debate over the future of Telstra. These include government and opposition spokespersons, Telstra's competitors, and it seems, from media reports, possibly even elements of Telstra itself. The ACCC is strongly supportive of the concept of operational separation. At the risk of repeating some of my earlier comments on this issue, I want to be perfectly clear what I see as meaningful operational separation. It is a clear internal separation between a retail business, supplying services to end user users, and a network business supplying wholesale services to both the Telstra retail business and its competitors. Noord to be effective, any process such as effective, any process such as this would need to be underpinned with formalised arrangements, including that the requirements that the two businesses deal with each other on businesses deal with each other on a commercial arm's lent basis, maintain fully and separate accounting system, capable of capturing all transactions between the businesses, and even the businesses, and even maintaining separate staff at all levels, with staff re-Nguyen racial tied exclusively to the performance of the relevant separated businesses. Most importantly, this model would increase the competitive discipline around the internal businesses and reduce the need for regulatory intervention. With genuine arm's length dealings with all retail customers, including Telstra retail, the network business will have stronger en Sen tiffings to drive a hard bargain in maximising its returns from all of itsz activities, rather than favouring its own rather than favouring its own retail business. In like fashion, the Telstra retail unit will face the same commercial pressures as the Primuses, the AAPTs, et cetera, in terms of negotiates with terms and conditions over wholesale services.

You would think this must also provide. A network business and a retail business are fundamentally different and to drive the maximum value out of the company as a whole, you need to understand the costs you need to understand the costs and relative value of each part. The other key to increasing competition and reducing regulation in telecommunications is for competitors to invest in their own infrastructure. An example of this is mobile phones. I won't say is mobile phones. I won't say these markets are perfect, but there are four players with networks out four players with networks out there - Telstra, Optus, Vodafone and Hutchison - which creates the environment for much more effective and sustainable competition and, as a consequence, much less regulation. Its this degree of infrastructure competition that the ACCC would like to see between fixed-line networks . My more cautious colleagues call me an embryonic tech know file and an optimistic one to boot, and it's true to the verges of the. But I strongly believe emerging technologies are increasingly the answer for those looking for alternatives to Telstra's network. Wireless local loops are one model being pursued. Another critical development is the increasing availability of much higher capacity ADSL 2-plus broad band. This runs at speed of up to around 20 mega bits, compared to around 20 mega bits, compared to the recent maximum of around 1.5 mega bits. It generally takes about 6 mega bits, using current technologies, to get live, DVD-quality TV delivered over the Internet. This ten fold increase has been driven by competitors' instaution laces of D slans. These are switching devices which allow competitors to bypass large competitors to bypass large sections of Telstra's own switching and physical network providing quasi facilities-based competition. I would point out, though, that while

we've heard a lot of talk about D slans from Telstra's competitors, we're still waiting to see the rubber hit the road for many of them. In the meantime, Telstra them. In the meantime, Telstra will shortly start its own deployment. Another new technology is fibre all the way to customers' premises. I know there has been a calling for a feasibility study into the costs involved in rolling out a national fibre network. It is worth remembering where the action is at the moment. There is little doubt it's happening on the plain old copper network, and looks like it will be for the next three to five years driven primarily by ADSL 2-plus and the D slan role-outs. The numbers speak for hem selves. Big pond has just announced annual growth of 180% of retail customers getting ADSL broad band. The. The report to 2004 showed the total report to 2004 showed the total ADSL market growing 1 60% over the past 12 months. In capacity terms, are these DSL broad band services these DSL broad band services really different to those delivered over fibre? Telstra's ADSL 2-plus fibre? Telstra's ADSL 2-plus rollout in response to the moves by competitors, is estimated to cost $210 million. This is a fraction $210 million. This is a fraction of the tens of bills of dollars Telstra's bill scales last month told a Senate committee it would cost to roll out a fibre network to more than 90% of homes, so that more than 90% of homes, so that last sweat of the copper network may sweat of the copper network may have some way to go yet. Indeed, some way to go yet. Indeed, Telstra itself has suggested there are 15 itself has suggested there are 15 to 20 years of useful life in front of it. Telecommunications companies will undoubtedly have the capacity to use that copper to deliver more than just telephone and Internet services, and increasingly we see them moving into the delivery of

broadcasting services, and this is where telecommunications regulation meets possible media deregulation. Although converge generals between telecommunications and media is often talked about, some may not find this an obvious leap. Media regulation is about whom may regulation is about whom may control different modes of retail distribution for conveying information. It is about who may control the newspapers. Free to control the newspapers. Free to air and substription television and substription television channels and radio stations used to convey news and entertainment, the content to individuals and households. However h at a time when an ever increasing proportion of our population is now rejecting the traditional modes of conveying the content in favour of the Internet, how people get the content they desire and at what speed will be increasingly determined by the control of the telecommunications networks, the pipes, that connect homes and businesses. It's also homes and businesses. It's also the case that we get greater case that we get greater competition in the ways in which content can be delivered to our homes, the more important will become the control important will become the control of the production and distribution of the content itself. As Rupert Murdoch said in his recent speech the American society of Murdoch said in his recent speech to the American society of newspaper editors earlier this month, what is happening is, in short, a happening is, in short, a revolution in the way young people are accessing news. They don't want to rely on the morning paper for their up-to-date information. They don't want to rely on a God-like figure from above to tell them what's important and to carry the religion analogy a bit further, they certainly don't want news presented as gospel. Instead, they want as gospel. Instead, they want their news on demand, when it works for them. They want control over the media, instead of being controlled by it. Which takes me to the subject of media deregulation. As subject of media deregulation. As I did with telecommunications, I should state here that whatever changes are made to the laws controlling media ownership or broadcasting spectrum are entirely broadcasting spectrum are entirely a matter for federal parliament. Whether or not more than three free-to-air television channels are to be permitted, for example, is up to parliament and I therefore won't be commenting on such policy matters, but there has been a lot matters, but there has been a lot of speculation about policy acquisitions in the event that have the current cross-media ownership restrictions are eased and more common naus piers free-to-air television is permitted. In my view, much of this speculation is misses the point. It's possible that the emphasis of potential that the emphasis of potential media acquires will shift from one end of the media spectrum, the retail distribution businesses, newspapers, radio stations, free-to-air TV, pay TV - which may be using outdated technology or business plans, to control of the pipes that are increasingly being used to deliver media content, and to control of media content, and to control of the content itself. Relative to most industry is the Australian media is highly regulated. Protection of highly regulated. Protection of the free-to-air television networks is the corner stone of this regulation. On the grounds that it ensures diversity in the services that are available to Australians at large. There is an outright prohibition on new entry in free-to-air markets. Existing free-to-air broadcasters also have first rights of refusal, with competition from pay T v. with competition from pay TV precluded by anti-siphoning legislation. After competitors legislation. After competitors have spectrum available, Bledisloe Cup are defined as data casters and subject to extensive eliminations subject to extensive eliminations on the types of content they can offer. On the flip side, there is a prohibition on free-to-air broadcasters to start multichanneling. That is offering additional channels and choices to consumers, either on a consumers, either on a subscription or free-to-air basis. This lessens the competitive pressures faced by pay TV providers. But these protective regulations are protective regulations are dependent not only on continuing government

support, but on the maintenance of the existing top-down structure of the Australian media, and it's now clear the environment is ripe for change. So, cast your minds change. So, cast your minds forward five to 10 years and imagine the vems I was talking about before but taken to the next level again. Every home has super fast Internet access linking us to everyone else's. We don't have a connection, we have dozens. For many homes, thee are provided over the traditional copper phone line, but using ADSL 5-plus-plus-plus. For some, it comes over power lines. Others are getting it beamed Others are getting it beamed through wireless networks or satellites and some may have it sent by a super fast fibre going all the way into our living rooms, our studies, bedrooms and kitchens. Companies have been build have been building these high-capacity arteries into our homes, but now that they have them, they need to get the blood circulating. So what are they sending down? Phone calls, video calls, information, IPTV, music, movies, games, TV on demand, home videos. The devices we are receiving all this content are are becoming smarter. Personal commuters don't look so different and are capable of seamless, wireless communication. Personal digital recorders and T v. digital recorders and TV downloads make it effortless for us to pick and choose the programs we want to watch, and when we watch them. Media research has found that some 80% of the programs we watch are prerecorded, so in the future, high-capacity devices will be required for consumers to store their preferred viewing. The their preferred viewing. The recent arrival on the market of personal digital recorders makes it already possible to satisfy end-users's needs for pre-vording the news and entertainment they view. The next generation of compression tech nom

ji will reduce the capacity to send needed to send the information an the space required on our personal devices. This means that technological advance means the increased focus on increase increased focus on increasing capacity and speed, as it becomes easier for news and entertainment easier for news and entertainment to be pre-vorded and viewed at the consumer's leisure. Our 23 G, 4 G, 5 G mobile phones are equally capable of Dexter capable of dexterity. Maps, transport information, music, email all available at the touch of a finger. You can order lunch, video call the office or just unwind on the trip home with a few minutes of your favour TV shoal and goal of your favour TV shoal and goal of the day, or perhaps you can use the personal organiser for all that because you like a bigger screen. Online advertising has continued Online advertising has continued its strong growth. Classified are searchable anywhere, any time on searchable anywhere, any time on the mobile phone, TV or computer. mobile phone, TV or computer. Maybe they're still being printed in the newspapers, maybe not. This revolution seems inevitable so it's pretty clear that the Internet will be a key driver of the naeks wave be a key driver of the naeks wave of competition to the current media players, and the markets that we have traditionally defined as media will change. And the possibility will change. And the possibility is there for not one but hundreds of Newcombe pet tores to today's broadcasters. What does this all mean for the free-to-air and subscription broadcasters of today? What does it mean for newspapers What does it mean for newspapers and radio, and what does it mean for current regulation of the media? Unlike traditional media, the emerging online players are not subject to content, gee og gra if I. They can pick and choose in much the same way that other businesses face myriad commercial choices. Don't get me wrong,s I'm not Don't get me wrong,s I'm not saying there should be a rush to restrict these Newcombe pet tores in terms these Newcombe pet tores in terms of content or services they can provide. Quite the contrary. It's

the pressure that these Newcombe the pressure that these Newcombe pet tores can bring to bear on current players that will pro vie the stimulus for higher quality, lower prices and greater diversity for consumers. But it poses challenges for policy makers and regulators alike. I talked before about the next generation networks which are creating the potential for redefining the nature of competition. For this to happen there are significant benefits in the various networks that have to take place. This in turn suggests that Telstra has a major role to play. As I said before, what the ACCC C is about it developing to ACCC C is about it developing to the best extent possible under the existing structure a truly competitive environment in all aspects of telecommunications, but it must be recognised that the network works over which telecommunications are provided and which in future may well be the conduit for a whole array of media services often have monopoly characteristics which will continue to dish shait those markets from to dish shait those markets from the more traditional media. In this respect, it's absolutely crucial that existing any network owners that existing any network owners not be allowed to use their market be allowed to use their market power to close down new forms of competition. This could happen either through the rollout of new technologies being impeded or through existing network owners obtaining exclusive control of the content that could be offered been the new networks. Increasingly video and TV services will be provided together with Internet and traditional telephone services as part of what the telcos call the triple play. Crucial to the triple play. Crucial to the success of any ventures using these technologies will be content rights and control of sporting con tens such as AFL, rugby, rugby league, cricket and tennis could be pivotable. It is vital, therefore, that no single network owner acquires exclusive rights to all that content and effectively locks out competition. There is a risk that new and emerging markets like DSL broad band and 3 G mobiles will allow holders to shut out competition across a range of services. Ultimately this could deprive consumers of choice and quality not only for broadcasting, but also voice, Internet and innovative services such as video calls and determine the success or failure of a Newcombe pet tore. I would like to put it this way: If you can't control the arteries, you can't control the arteries, what you do is get hold of the blood. The Trade Practices Act hats always recognised that the contracts to be anti-competitive. I refer to sections 45 and 47 of the Act. sections 45 and 47 of the Act. It's perhaps too early to judge how the rights will be divided up or rights will be divided up or whether the bundle of content that is compelling on your TV is the same compelling on your TV is the same as the bundle that's compelling on a mobile phone, but the ACCC will continue to closely scrutinise the acquisition of the exclusive rights to content to ensure that no to content to ensure that no carrier is able to use them to create a major barrier to entry into infrastructure markets and will continue to engage with the key strae players to hear their views strae players to hear their views on these trends in the marketplace. these trends in the marketplace. So the relationship between content the relationship between content and new networks is one area in which the ACCC may have an invoftment, the ACCC may have an invoftment, but as the regulator charged with protesting and promoting the competition in telecommunications specifically but more importantly specifically but more importantly in the economy as a whole, the ACCC the economy as a whole, the ACCC has another substantial role. I refer to section 50 of the Trade to section 50 of the Trade Practices Act which prevents mergers in ownership between two or more entities. It entities. It is the very strong view of the ACCC section 50 should continue to preserve competition in the market by preventing undue concentration or accumulation of market power which would result in higher prices or lower quality service for consumers. Now, the traditional approach when considering mergers in the media market has been to regard television, radio and newspapers as separate markets while separate markets while acknowledging they're part of a much wider sector. The print was print and electronic was electronic and if print required electronic, then it required electronic, then it didn't involve greater con Sen traig. However, we're now doing a lot of research on how you define media markets, and the more research we do, the more it confirms our do, the more it confirms our initial assessment that converge generals assessment that converge generals is making those traditional making those traditional definitions of media markets largely irrelevant. In the future, a media market In the future, a media market might be defined by the content, for example, classified advertising, or even just employment advertising, rather than the medium used to convey the content. So, in other words, the ACCC won't simply be saying one newspaper, one radio and one TV doesn't amount to a substantial lessening of competition. In certain markets, that may no longer be the case. We might be focusing on markets such might be focusing on markets such as classified advertising for jobs, classified advertising for jobs, for motor vehicles, for real estate or display advertising. A substantial lessening of competition in any one market could raise implications under section 50 and be possible grounds for us to interview. Now, some have suggested this would amount to a day fact toe amount to a day fact toe cross-media ownership rule. That is false. It's no different to any other industry and there is no reason why it should not apply to the media. Nor should it be assumed that the markets we will be looking at will be narrower than the conventional media markets. Individuals and households have a much wider range of choice in the way they obtain news and entertainment they're seeking. Hence, while we may focus on a market such as classified advertising, this could be classified advertising provided through the print media, Internet, mobile phone or TV. The content de-Lynation of a market may be narrower, but there could be many

more mediums used to convey that content than has been the case in the past. The way in which the media markets are defined will inevitably changed, however the Newmarket definitions could be either broader or narrower than the conventional media markets definitions. It is also the case that the impact of con jerj that the impact of con jerj generals on media die ma'am nicks and market definitions may be much sooner than one might expect. Indeed, it could be happening already. On September 16th next year it will be just 50 years since Bruce begin gel told a few thousand people in Sydney, few thousand people in Sydney, "Good evening and welcome to television. evening and welcome to television." It sparked a revolution in Australian information and entertainment that within a few decades had effectively killed off the music halls and local cinemas and signalled the en of the afternoon newspaper. Now we are in the midst of another tech no the midst of another tech no logical revolution which threatens to make television look like a mere blip in the distribution of news u information and entertainment. The question for regulators and government alike is: Do these technological developments result nlt a consequent diminution in the importance and relevance for conveying information? Do they result in the need for a result in the need for a significant examination by markets in the media? Do they result in an argument that reduce regulations of the media reduce regulations of the media will lead to a diminishing news and information services? Do they information services? Do they result in the increasing irrelevance of exist in the increasing irrelevance of the existing regulations impacting on existing regulations impacting on so many sectors of the media? In short, is the technology making many of is the technology making many of our existing concerns about media regulation irrelevant? These are questions that will need to be addressed by policy makers and regulators as we face the impact of new technology on consumer demands and preferences. As I've made

and preferences. As I've made clear today, it's not the job of the ACCC to decide whether it's better for people to access their news and entertainment through the TV or entertainment through the TV or ADSL 2-plus, or fibre or wireless or 2-plus, or fibre or wireless or even through the mobile phone, but it is our job to ensure that existing players not be allowed to use their market power to close down new market power to close down new forms of competition, an that as far as possible it be left to consumers to decide what form this revolution takes and what services and content they wish to access. Thank you they wish to access. Thank you very much. APPLAUSE Thank you very much, Graeme Samuel. I wish we can call these threats to our future mere blips. But let's have questions. The first one today is from Leonie Millar. From Network Ten. I actually wanted to ask you about this long-awaited deal with tobacco companies and forcing them to Fay pay for advertising to fix their misleading use of light and mild brand cigarettes. First of all, can you give us some details about this deal, particularly are there any stipulations on how the ads are made and screened? Does the deal mean tobacco companies can avoid litigation? And thirdly what do you say to critics like Lyn Allison who say this deal is a copout by the ACCC C? It has been copout by the ACCC C? It has been a long-awaited deal and friem afraid you will have to wait a little bit longer to get information on it. There has been speculation this morning and you will understand morning and you will understand that as we are in I, I hope, final as we are in I, I hope, final stages of negotiations I won't be able to make comment. If I can make it easier for the next issue about Coles and Liquorland and a court case, can I indicate I won't be case, can I indicate I won't be able to comment on that either because it's currently before the courts. It's sub judice and I can't comment. I will make it easier for you, Mr Samuels and ask you about the speech you've just made. You've suggested that things are

suggested that things are happening at such a pace that change, son ver generals and the like is perhaps speeding along quicker than most people realise and also expressed concerns about the possibility of existing players being in the box seat to exploit their position to control the future array of media. Do you think there is reason for ordinary Australian coeters to be concerned that already the big concerned that already the big media players, Telstra, Packer, Murdoch and even my own Fairfax are already too well-placed to exploit this new array of media, and should the government be thinking about this when it comes to the media changes to the legislation? Look, perhaps on the contrary. If we do look at the potential for the Internet and for broad band and higher speeds of broad band, then what we might be saying is that those that you've just referred to which are sitting at the retail end of distribution potentially have got a diminishing importance into the future. importance into the future. Because what they will be met with is increasing competition, as I indicated, not from one potential free-to-air channel which has been part of the political debate which has occurred over recent times and determination made that that should not occur, but rather they will be facing competition from that end from potentially hundreds of TV channels through broadcasts through the broad band, the Internet an the like. The if you take account of the sort of technological vems I have been commenting on, the higher speed Tran mission through the pipes, ADSL, 2-plus or whatever it might be, the potential for the seamless merger from your computer into our TV screen which can occur at the moment with the operating software released a few months ago, if you look at that and the

increasing potential for Internet increasing potential for Internet TV and, then what we're looking at is the potential for many, many, many00s potentially of TV channels to be available not only on your TV screen, integrated through the computer into the TV screen, but also available on your mobile phone and digital organiser. REPORTER: What about control of the pipes? That's the issue. It may be the control of the pipes is something we need to concentrate on, as I indicated in my address, and then more importantly, with new infrastructure being developed in the nature of that as I described, the use of D slans, that the use of D slans, that effectively bypasses a large segment of the Telstra copper wire network, the potential for wireless local loop potential for wireless local loop to be developed in a manner that come leetly bypasses the copper wire network. If you've got those sorts of issues then you might say that of issues then you might say that if they can develop, we have competitive infrastructure being develop add and then what we have develop add and then what we have to focus on is is the next area, focus on is is the next area, moving back up the pipes to the content, and ensuring that the content doesn't get locked out by exclusive content deals that essentially see that one party has acquired all that one party has acquired all that content which may be pivotal to the competition running through the pipes and ultimately through the retail distribution networks I have described. Mr Samuel, you described. Mr Samuel, you mentioned cartels at the beginning of your speech. Can you talk about the progress of the cartel inquiry in the cardboard box sector? Have you uncovered some findings from that investigation that has led to a investigation that has led to a look at imported fine paper, for instance, and have you extended the inquiry? Dave, you would expect my answer to be absolutely no comment. I do know somewhat Riley in addressing several audiences around the country that the ACCC is the only party that has never ever commented about whether or not it may or may not be conducting an investigation into a cartel involving the companies that you

involving the companies that you are referring to, although you didn't name in your question. We don't comment on matters that we may or may not be investigating, and soes that's a strict rule we adopt and that's the only answer I can give you there. Hello, Mr Samuel. Sav fron from AAP. I wanted to ask you about retail pricing. Is. ACCC investigate investigating secret gains between farmers and retailers and is there enough competition in the retail sector? Again because of the principle, we don't comment upon matters we may or may not be investigating or speculation of those matters. As the competition in the retail sector itself and and we're talking about the we're talking about the ever-present and ever-discussed retail grocery sector and the alleged duopoly that is suppose supposed to exist between Woolworths and Coles, let between Woolworths and Coles, let me refer you to a report prepared for the department of agriculture I think about 18 months ago by external consultants expressed the view that the retail margins available in the retail grocery sector in this country were amongst the lowest in the world which suggests and is suggested in the report, is evidence of a very competitive retail sector in terms of retail groceries. The report went on to state that the pressures that are placed on growers are predominantly not coming from the major supermarket chains. They're predominantly coming from the processes that are running through from grouer right through to the retail shelf, from transport costs, from logistic costs to processing costs, and that tends to be where the relationship exists. You will be aware that in terms of growers and growers' rights, the government announced through the election that it will be pursuing the adoption of a compulsory or mandatory code of conduct. That is sported by the ACCC. It will offer, once it is implemented, some fundamental basic

protections to growers from what might otherwise be regarded as might otherwise be regarded as harsh and oppressive or unkontionable behaviour on some that are in the processing line. Mr Cam wul, Catherine Murphy. I'm taking it from your speech that you do, but could you say quite explicitly, you're arguing in this this speech that the. Investors need to know what we're buying. The second question is what do you say at the moment we're having quite a moment we're having quite a vigorous debate in Australia about infrastructure and infrastructure regulation. What do you say to arguments that are made by infrastructure providers that one infrastructure providers that one of the reasons we have these blockages and these underinvestments in critical facilities is because essentially they're overregulated? Well, Catherine, to answer the first, of course, that's a matter for government, the question of the specificity or the certainty that's provided in terms of Telstra regulation, but I think the government has indicated, the government has indicated, both through the Minister for communications and the Minister for finance, that they would see it as being appropriate to put in place a degree of certainty as to the degree of certainty as to the future regulation of Telstra in the regulation of Telstra in the context of then selling more shares to investors, so at least invest yrs know the playing field in which and on which Telstra will be playing, that is before they seek to invest in a further Tran much of a further sale of Telstra shares. The ACCC's view is related to the issue of transparency and enhancing our capacity to enforce the current telecommunications specific provisions of the Trade Practices Act which in one or two lines essentially say we can deal with anti-competitive conduct but we anti-competitive conduct but we have to establish that certain conduct to establish that certain conduct is anti-competitive. I think on any anti-competitive. I think on any an Alice, observers both within the industry and outside, will have industry and outside, will have been able to establish that we encountered some difficulties in encountered some difficulties in the past 12 months in dealing with the price squeeze conduct of Telstra that occurred in respect of broad band retail pricing and wholesale pricing beginning in March of last year. So what we argue for in the context of operational separation context of operational separation is much greater transparency in dealings between Telstra retail and Telstra wholesale and then Telstra wholesale and its other customers, who are, after all, the competitors of retail. We argue for greater transparency in order that we can deal with those sort fs of issues deal with those sort fs of issues of potential anti-competitive conduct. On the issue of infrastructure, On the issue of infrastructure, this has been debated for many years. has been debated for many years. It goes back to the time when a couple of us on the commission were involved with the national competition council and the consistent argument that was put forward by private infrastructure owners that regulation will be and will continue to be a major impediment to new investment. The difficulty with that argument is that it's not supported by any of the facts in connection with new the facts in connection with new gas pipelines, electricity grids, the development of other fundamental infrastructure in this country that has been the subject of some debate for some time. In the area of export and export infrastructure which is the issue that has which is the issue that has occurred and has raised its head of recent time - we're thinking of issues relating to the ports and the like relating to the ports and the like - there are issues that have been raised there that are currently the subject of an investigation or an analysis by the infrastructure committee or the group of three committee or the group of three that are analysing those. The ACCC has itself taken steps to assist in itself taken steps to assist in this context, particularly in the context, particularly in the context of the Newcastle port, to be able of the Newcastle port, to be able to relieve some of the pressures that might exist there, particularly ship might exist there, particularly with ships lining up in the ports, some 50 ships at a time, and incurring massive derp murj costs which are simply dead weight losses. They don't do anything for anyone except sink the money literally into the sea. So we've assisted in authorising certain allocation systems that have been appropriate there, but nothing will ultimately replace the need to address the issue of development of facilities that meet the capacity and that meet the capacity and including the accept anticipated capacity for exports into the future. They're the sorts of issues that have been dealt with by that infrastructure committee. I notice what is only last week, the determination by the Queensland competition authority of a new pricing point in respect of export charges in respect to Dalrymple Bay seems to have opened up now the potential for new developments of Dalrymple Bay port to actually occur, which, you know, suggests that ultimately the regulators seem to get it right. Next question from Mr Macquire Fergus Macquire from Bloomberg news. The ACCC has given its report on price caps which should apply to Telstra's fixed-line business and weir area awaiting business and weir area awaiting the response from government, we're response from government, we're also waiting the government to outline its overall regulatory regime which will apply to post telecommunications T 3. I want to ask about your concern that of the government may have of selling Telstra and setting the regulations and are you concerned about the government going easy on Telstra as it tries to maximise the sale price that it receives from T 3? What would you expect me to answer on that? No, look, we don't have concern because I think that it is clear that the government has, in the past, traditionally adopted a view which matches those view which matches those potentially conflicting interest rates very well. Yes, it is an issue that is raised about the potential sale of, or the sale price of Telstra, but or the sale price of Telstra, but on the other hand, the government has recognised for many years now, the imperative of bringing about ultimately a competitive market in telecommunications and that that affects the whole of the Australian population as distinct from some Telstra shareholders, including

institutional investors. I think the government recognises. Both the government recognises. Both the Minister for communications an the Minister for finance have acknowledged that publicly. I acknowledged that publicly. I think what they say is what is funt what they say is what is funt mental is that the government puts in is that the government puts in place some specific certainty as to the playing field on which Telstra can operate in the future and let investors make their own mind. Jason Mr Samuel, from 'The Age'. You have presented an interesting outline of what you think may be the future in media ownership and it's one I haven't heard from it's one I haven't heard from media owners here in Australia, apart owners here in Australia, apart from Rupert Murdoch, although he Rupert Murdoch, although he probably hasn't touched on all of those issues in the one speech like you have today. I was wondering have you been around to see the media propriety toreness Australia? Have you discussed these issues with them? And what sort of response them? And what sort of response have you got? Do you they they are ation aware of the challenges in the future as perhaps you are? And secondly, if I could ask you to reflect on your role as head of the ACCC. I haven't seen you posing with petrol bowsers like your predecessor. Just what sort of reception are you getting from big business? Do you find that you have a more constructive relationship than perhaps your predecessor did? And what about the public, are they - I mean, do you get much feedback from them? I think Professor Fels was seen as a quite a popular or populist figure. If I can ask you to reflect on that. Thanks, Jason. I really appreciate those questions. I will see if I can make a really long answer to the first and Ken will tell me there is no time to answer the second. We are talking to all media proprietors to further establish and educate ourselves, inform ourselves as to the views on the future of the media and media markets and the like. It will surprise you that there are many - we toss these views around, the sorts expressed totd, and to date

I'm not sure that we have have had any significant view that says we are wrong. They reek nice that these are the potential courses of the technological revolution. You've reminded me of course of Rupert Murdoch who made that speech barely a month ago, and he is very clear in his view that the media is about to face this technological revolution. He refers to the report, the Carnegie report which does a survey of 18 to 34-year-olds, the generation of the future, and says they place the Internet as clearly number one in terms of clearly number one in terms of their source for information for news, source for information for news, for discussion of current events, and then ultimately for entertainment, and I think free-to-air television runs right down on the list. I can't remember the number - right down on the list. Naus papers down on the list. Naus papers don't look too good. In fact, I think look too good. In fact, I think one analysis in that Carnegie report, analysis in that Carnegie report, it suggested that April 2040, the last newspaper will be archived, so you do have some time left, Jason, in your role. Now, as to the second question, I will see Ken hasn't cut me off, so unfortunately... You have plenty of time. Look, it's have plenty of time. Look, it's not for me to judge the reaction. I will say this: We spend a lot of time, my fellow missioners and I, time, my fellow missioners and I, in working around and dealing with not only business, certainly not only big business, but small business as well, and consumer groups, because all of those have a major stake in the work of the ACCC. And the reaction I think that we get on the whole is very supportive indeed. Now, it's not for me to judge the public's view on the way that we're performing. That's probably for performing. That's probably for you to judge as a member of the media. You can probably glean it far better. But we have in place some very fundamental principles which very fundamental principles which we adhere to very strictly and which big and small business and consumer groups I think respect. They're principles of being timely in our decision-making. Being decision-making. Being confidential where confidentiality won't be

maintained, the reason why I won't comment on some. Issues raised before, before confidentiality is very important. Not tarnishing people's reputations unfairly, even by inuendo or background briefing. That is for the courts to do and That is for the courts to do and for bad-business behaviour to do. It's not for the ACCC to do as a regulator. Maintaining overall fairness in the way that we deal with the law that we have to administer, and administering it in a very predictable fashion, in a very predictable fashion, in other words, not in an ad hoc fashion, words, not in an ad hoc fashion, but business particularly which must comply with the law and consumers who need to know their right rs under the law, know their under the law, know their consistent position with the ACCC in dealing with the law. They are adopted not only by the whole of the commission, but by the whole of the staff of but by the whole of the staff of the commission and they're adopted with enthusiasm and with an enthusiasm and with an inflexibility that, I think, means that we ultimately will win the respect of the Australian population. You the Australian population. You will hb able to judge that in due course. Stephanie Kennedy from ABC Radio. I know you can't comment on specific casings, particularly the ones that have been in the press today, but I am wondering whether there have been previous cases there have been previous cases that the ACCC has dealt with where the ACCC has agreed to allow companies to avoid court action by, or hefty fines, for that fact, by paying for big television advertising champagnes to correct their misleading advertising that they've previously done, and I'm also wondering that if those wondering that if those negotiations are carried out, how that weighs with the fact that some companies may be escaping hefty fines and court action snp Look, we don't - let me deal with three elements of that, Stephanie. The first is that, Stephanie. The first is court action. We use court action vigorously and as the very sharp point of our activities. That's been substantially facilitated, I might say, by the May 2004 budget

might say, by the May 2004 budget in which our litigation budget was which our litigation budget was very significantly increased by the federal government. We were in federal government. We were in some financial, shall I say, constraints at that point of time from some fairly large losses in litigation. But the May 2004 budget rectified that and I can say to you, for whatever its worth, the litigation is used very vigorously, but used is used very vigorously, but used to good purpose and it's use today achieve the outcome we want which achieve the outcome we want which is ultimately compliance with the law or punishment for those who have or punishment for those who have not complied where we can punish complied where we can punish through court action. Now, under the court action. Now, under the threat of court action, knowing it is the sharp point that's there, there are many instances where business will say to us, "We've got it wrong. We've made a mistake. We might We've made a mistake. We might have even done it as part of a failure even done it as part of a failure of our systems." Now, in those sets of circumstances where there has not been a deliberate, blatant breach been a deliberate, blatant breach of the law in, if you like, a thumbing of the nose at the commission, but rather there has been a mistake or failure of systems, then we will often sit down with businesses and say, "Well, there is a way to avoid court action," and reach an agreement. It will be just as transparent and public, but it will resolve issues in a way that often can be more add van taij just to consumers than might otherwise be the case. Let me give you two examples, one of which I have used on many occasions in the past, and that is the contrast we have had with the Danoz direct group. We took action for these electronic muscle stimulating belts. The probably was we couldn't get any restitution to consumers. We couldn't do anything about it. couldn't do anything about it. That was through a court action. We had another issue solving a pest another issue solving a pest control device they sold. Under the threat of court action they sat down and said, "We will reach an agreement, and part of the agreement will be

and part of the agreement will be to put in place corrective advertise mbts which say to every purchaser, some quarter of a million to them that buth these devices, if you apply to us, we will re-fun the money." So that was much more successful than the court action that we took in regard to the that we took in regard to the muscle belts which didn't achieve any restitution for consumers. What we secured there was a substantial, multimillion-dollar contribution to Telstra's wholesale customers that would not have been necessarily achieved if we had gone to court. If we had gone to court, we would have got some fines, some penalties, we believe, and we believe that the fines or penalties would have been very similar to those in quantum that we derived through the settlement with Telstra. But importantly, instead of fines and penalties go straight to the penalties go straight to the federal government, as they do, the payment by Telstra went tof Telstra's wholesale customers in part, in effect, to compensate them for the losses they sustained through the price squeeze that occurred on price squeeze that occurred on broad band. I would have to say to you that the Telstra wholesale that the Telstra wholesale customers think that's a better outcome than having fines being paid to the federal government, but ask them. Graeme Samuel, we're out of time, but thank you very much for but thank you very much for joining us here today. APPLAUSE. We would like you to have another one of our mementos of the occasion, but we would also like you to have a membership card so you can come membership card so you can come back and argue with these people any and argue with these people any time you like. Thank you very much, Ken. Thanks, indeed. Captions by Captioning and Subtitling International