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Telecommunications Legislation Amendment (Communications Fund) Bill 2008

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2008

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMMUNICATIONS FUND) BILL 2008

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Broadband, Communications

and the Digital Economy, Senator the Hon. Stephen Conroy)



TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMMUNICATIONS FUND) BILL 2008

OUTLINE

 

The Telecommunications Legislation Amendment (Communications Fund) Bill 2008 (the Bill) amends the Telecommunications (Consumer Protection and Service Standards) Act 1999 (the Act) to enable money in the Communications Fund to be used for purposes relating to the deployment of a National Broadband Network.

 

The Government has committed to offer up to $4.7 billion and consider regulatory changes to facilitate the roll-out of a new, high-speed fibre-based broadband network over five years. The National Broadband Network is expected to provide broadband services to 98 per cent of Australian homes and businesses with minimum speeds of 12 megabits per second. The network will be subject to open access arrangements to promote competition in the telecommunications market. 

 

Consideration of proposals to deploy the Network will be through a competitive assessment process, involving a Panel of Experts appointed by the Government.  The process will be open, transparent and accountable.  It is also an objective that the process be conducted in an expeditious manner so that Government decisions can be made and necessary legislation passed to allow for the commencement of the network roll-out before the end of 2008.

 

Before the 2007 federal election, the Government indicated it would utilise $2 billion from the Communications Fund to partly fund its commitment of providing up to $4.7 billion for the National Broadband Network. 

 

Part 9C of the Act establishes the Communications Fund Special Account (Communications Fund), sets out the purposes for which money in the Communications Fund may be spent and regulates the management of the Communications Fund.  Currently, the purpose of the Communications Fund is to provide an income stream to fund the Commonwealth Government’s response to any recommendations made by the Regional Telecommunications Independent Review Committee to the Government in a report of the Committee’s review of the adequacy of telecommunications services in regional, rural and remote parts of Australia (section 158ZI of the Act).  Part 9C also requires the Communications Fund’s principal amount of $2 billion to be maintained so that only funds in excess of $2 billion are available for use in relation to the purposes specified in section 158ZI of the Act. 

 

The main measures in the Bill amend Part 9C of the Act by:

 

(a)     specifying additional purposes for which money in the Communications Fund may be used to enable money in the Fund to be used for purposes relating to the creation or development of a broadband telecommunications network (see Item 10 of Schedule 1 to the Bill);

 

(b)    repealing section 158ZJA of the Act which requires the balance of the Communications Fund not to fall below $2 billion, thereby enabling that balance to be available for funding the creation or development of a National Broadband Network, if required (see Item 12 of Schedule 1); and

 

(c)     repealing section 158ZJ of the Act, as that provision is now spent.  Section 158ZJ provides for the sum of $2 billion in cash to be credited to the Communications Fund Special Account (see Item 8 of Schedule 1).  An initial deposit of this amount was made to the Communications Fund in September 2005.

 

The Bill also makes a number of consequential and transitional amendments to the Act.

 

The proposed Bill will enable the Government to access the Communications Fund to partly fund its commitment of providing up to $4.7 billion for the National Broadband Network, consistent with the Government’s election statements.

 

 

FINANCIAL IMPACT STATEMENT

 

 

The Bill provides access to the Communications Fund to enable the Government to use the money to fund a National Broadband Network consistent with the Government’s election statements.

 

 



NOTES ON CLAUSES

 

Clause 1 - Short title

 

Clause 1 provides that the Bill, when enacted, may be cited as the Telecommunications Legislation Amendment (Communications Fund) Act 2008 .

 

Clause 2 - Commencement

 

Clause 2 provides that the Bill, when enacted, will commence on the day after it receives the Royal Assent.

 

Clause 3 - Schedule(s)

 

Clause 3 provides that each Act that is specified in a Schedule to the Bill is amended or repealed as set out in that Schedule and any other item in a Schedule has effect according to its terms.  Schedule 1 to the Bill amends the Telecommunications (Consumer Protection and Service Standards) Act 1999 .

 

Schedule 1 - Amendments

 

Amendment of the Telecommunications (Consumer Protection and Service Standards) Act 1999

 

Item 1 - Section 158ZE

 

Section 158ZE of the Act provides a simplified outline for Part 9C of the Act. It specifies that:

·          Part 9C sets up the Communications Fund;

·          money in the Fund will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the Regional Telecommunications Independent Review Committee; and

·          money in the Fund may be invested in financial assets.

 

Item 1 would amend the simplified outline by specifying that, in addition to the above:

·          money in the Fund is also available for purposes relating to the creation or development of a broadband telecommunications network.

 

This amendment would ensure that the simplified outline in section 158ZE reflects the additional purposes of the Communications Fund to be inserted by Item 10.

 

Item 2 - Section 158ZF

Item 3 - Section 158ZF

Item 4 - Section 158ZF

Item 5 - Section 158ZF

 

 

Items 2, 3, 4 and 5 would amend section 158ZF of the Act to insert definitions of ‘acquire’, ‘broadband network debenture’, ‘broadband network share’ and ‘broadband network trust unit’ into the Act. 

 

Item 2 would provide that the term ‘acquire’ includes acquire by way of issue.  This would make it clear that for the purposes of the additional purposes in proposed paragraphs 158ZI(1)(d), (e), (f), (g), (h), (i) and (j) (see Item 10) an acquisition could include a situation where the property acquired is not in existence prior to the acquisition (eg. an initial issue of shares in a company).

 

Item 3 would provide that the term ‘broadband network debenture’ has the meaning given by the new proposed section 158ZNA (see Item 15).  Item 4 would provide that the term ‘broadband network share’ has the same meaning given by the new proposed section 158ZNA.  Item 5 would provide that the term ‘broadband network trust unit’ has the meaning given by the new proposed section 158ZNA.

 

These definitions are used in proposed section 158ZNA, which deals with broadband network shares, debentures and trust units.  

 

Item 6 - Section 158ZF

 

Item 6 would amend section 158ZF of the Act to insert a definition of ‘broadband telecommunications network’ into the Act.  ‘Broadband telecommunications network’ is defined as a telecommunications network that is capable of carrying communications on a broadband basis. 

 

Section 7 of the Telecommunications Act 1997 defines ‘telecommunications network’ as a ‘system, or series of systems, that carries, or is capable of carrying, communications by means or guided and/or unguided electromagnetic energy’.  Section 7 also defines ‘communications’ as including ‘any communication:

                     (a)  whether between persons and persons, things and things or persons and things; and

                     (b)  whether in the form of speech, music or other sounds; and

                     (c)  whether in the form of data; and

                     (d)  whether in the form of text; and

                     (e)  whether in the form of visual images (animated or otherwise); and

                      (f)  whether in the form of signals; and

                     (g)  whether in any other form; and

                     (h)  whether in any combination of forms.’

 

‘On a broadband basis’ in Australia is generally understood to be a speed of 256 kbps or more. In the context of the National Broadband Network it should be understood to refer to a speed of at least 12 megabits per second.  However, no speed is specified as the precise outcome of the National Broadband Network competitive assessment process cannot be predicted.  It may be that the competitive process delivers speeds well in excess of 12 megabits per second.

 

The term ‘broadband telecommunications network’ is referred to in a number of amendments in the Bill.

 

The term is referred to in the proposed amendment to section 158ZE of the Act, which provides for a simplified outline of Part 9C of the Act (see Item 1).

 

The term is also referred to in the new proposed paragraphs 158ZI(1)(d) to 158ZI(1)(i), which would specify additional purposes for which money in the Communications Fund may be used. These additional purposes would relate to the creation or development of a broadband telecommunications network (see Item 10).

 

Item 7 - Section 158ZF

 

Item 7 would repeal the existing definition of ‘unit’ and replaces it with an expanded definition that provides that when, used in relation to a unit trust, the term ‘unit’ in Part 9C refers to a unit in the unit trust.  The definition is relevant to the new proposed purposes of the Communications fund in proposed paragraph 158ZI(1)(f) (see Item 10).

 

Item 8 - Paragraph 158ZI(1)(b)

Item 9 - Paragraph 158ZI(1)(c)

 

Items 8 and 9 would make consequential amendments to paragraphs 158ZI(1)(b) and 158ZI(1)(c) to reflect the new additional purposes of the Communications Fund in proposed paragraphs 158ZI(1)(d) to 158ZI(1)(j).

 

Item 10 - Section 158ZI

 

Section 158ZI of the Act specifies the purposes of Communications Fund.  As discussed above, currently, the main purpose of the Communications Fund is to provide an income stream to fund the Commonwealth Government’s response to any recommendations made by the Regional Telecommunications Independent Review Committee to the Government in a report of the Committee’s review of the adequacy of telecommunications services in regional, rural and remote parts of Australia (see subsection 158ZI(1)).

 

Before the 2007 federal election, the Government indicated it would utilise $2 billion from the Communications Fund to partly fund its commitment of providing up to $4.7 billion for the National Broadband Network.  The Bill positions the Government to make use of the Communications Fund consistent with its election statements.

 

Item 10 would amend section 158ZI(1) by inserting new proposed paragraphs 158ZI(1)(d) to 158ZI(1)(j) at the end of subsection 158ZI(1). These proposed paragraphs would specify additional purposes for which money in the Communications Fund may be used.  These purposes would relate to the creation or development of a broadband telecommunications network and are intended to provide flexibility in the future for the manner in which the Commonwealth ultimately may choose to provide funding for, or invest in, a National Broadband Network (which would be a broadband telecommunications network for the purposes of section 158ZI(1)). 

 

The amendments would specify the following additional purposes for the Communications Fund:

·          the acquisition of shares in a company that is, or will be, involved in the creation or development of a broadband telecommunications network (proposed paragraph 158ZI(1)(d));

·          the acquisition of debentures of a company that is, or will be, involved in the creation or development of a broadband telecommunications network (proposed paragraph 158ZI(1)(e));

·          the acquisition of units in a unit trust that is, or will be, involved in the creation or development of a broadband telecommunications network (proposed paragraph 158ZI(1)(f));

·          the making of grants of financial assistance in relation to the creation or development of a broadband telecommunications network (proposed paragraph 158ZI(g));

·          the making of grants of financial assistance in relation to the supply of a broadband carriage service over a broadband telecommunications network (proposed paragraph 158ZI(1)(h));

·          the acquisition of assets for use in connection with a broadband telecommunications network (proposed paragraph 158ZI(1)(i));

·          a purpose incidental or ancillary to a purpose set out in proposed paragraphs (d), (e), (f), (g), (h) or (i) (proposed paragraph 158ZI(1)(j)).

 

The purposes are not intended to prescribe any particular form of investment or funding in a National Broadband Network, rather they are intended to provide flexibility in the way that Government may ultimately invest in the National Broadband Network.  While the Government has indicated that its preference is for an equity investment, it has also indicated that it will consider other options with a view to achieving the optimal outcome.

 

The purpose of acquisition of shares mentioned in proposed paragraph 158ZI(1)(d) would cover a situation where the Commonwealth would subscribe for shares to be issued at the time a company is formed, as well as a situation where the Commonwealth would purchase shares issued by a company already in existence.

 

The purpose of acquisition of debentures of a company in proposed paragraph 158ZI(1)(e) would cover the provision of financial assistance to a company by way of loan.  This is consistent with the definition of ‘debenture’ in section 158ZF of the Act, which provides that the term has the same meaning as in the Corporations Act 2001 .

 

The purpose of the acquisition of assets for use in connection with a broadband telecommunications network in proposed paragraph 158ZI(1)(i)

would cover the acquisition of physical assets (such as physical infrastructure to be used in connection with the network).

 

Section 158ZH of the Act establishes the Communications Fund Special Account as a Special Account for the purposes of the Financial Management and Accountability Act 1997 (FMA Act).  The effect of subsection 21(1) of the FMA Act is that the Consolidated Revenue Fund will be appropriated for expenditure for the purposes identified in section 158ZI of the Act, including the new proposed purposes outlined above, up to the balance for the time being of the Communications Fund.  Whenever an amount is appropriated against this standing appropriation, the amount will be taken also to be debited from the Communications Fund Special Account.

 

Item 11 - Section 158ZJ

 

Section 158ZJ of the Act provides for the sum of $2 billion in cash to be credited to the Communications Fund.  An initial deposit of this amount was made to the Communications Fund in September 2005.  As a result of this, this provision of the Act is now spent, and is no longer necessary.

 

Item 11 would repeal section 158ZJ. Item 16 would provide for a transitional provision in relation to the repeal of section 158ZJ.

 

Item 12 - Section 158ZJA

 

Section 158ZJA of the Act has the effect that the Minister Broadband, Communications and the Digital Economy must take all reasonable steps to ensure that the balance of the Communications Fund and the value of investments of the Communications Fund do not fall below $2 billion.  This provision gives effect to the previous Government’s intention that the Communications Fund is to be a perpetual fund with the principal of the Fund maintaining at least its nominal value of $2 billion.

 

Before the 2007 federal election, the Government indicated it would utilise $2 billion from the Communications Fund to partly fund its commitment of providing up to $4.7 billion for the National Broadband Network.  The Bill would enable the Government to make use of the Communications Fund consistent with its election statements.

 

Item 12 would repeal section 158ZJA of the Act.  Item 12 would give effect to the Government’s stated intention to use money in the Communications Fund to fund a National Broadband Network by enabling the balance of the Communications Fund to be available for the purposes specified in the proposed amendments to section 158ZI of the Act (see Item 10), including to fund a National Broadband Network, if required.

 

Item 13 - Paragraph 158ZL(1)(b)

 

Section 158ZL of the Act deals with grants of financial assistance to a State. The section provides that if the Communications Fund is to be debited for the purpose of making a grant of financial assistance to a State, defined in section 158ZF to include the Australian Capital Territory and the Northern Territory, (see paragraph 158ZL(1)(a)), and the grant is covered by paragraph 158ZI(1)(c) of the Act (see paragraph 158ZL(1)(b)) , the terms and conditions on which that assistance is granted is to be set out in a written agreement between the Commonwealth and the State or Territory (see subsection 158ZL(2)).

 

Under paragraph 158ZI(1)(c) of the Act, such a grant may be made for:

(a)     the purpose of implementing the Commonwealth Government’s response to any recommendations to the Government contained in a report of the proposed Regional Telecommunications Independent Review Committee on the adequacy of telecommunications services in regional, rural and remote parts of Australia (see paragraph 158ZI(1)(a)); or

(b)    a purpose incidental or ancillary to this purpose e.g. to cover administrative costs in connection with implementing the Government’s response to the Committee’s report (see paragraph 158ZI(1)(b)).

 

Under subsection 158ZL(3) of the Act, such an agreement may be entered into by the Secretary of the Department responsible for the Act (currently the Department of Broadband, Communications and the Digital Economy) or the Secretary’s delegate (in accordance with section 158ZN of the Act) on behalf of the Commonwealth.

 

Item 13 would amend paragraph 158ZL(1)(b) to replace the words “158ZI(c)” with the words “158ZI(1)(c), (g) or (h)”. 

 

This amendment would have two effects. Firstly, it would correct a minor drafting error in the Act so that paragraph 158ZL(1)(b) would correctly refer to paragraph 158ZI(1)(c) of the Act.  Secondly, it would have the effect of applying section 158ZL to grants of financial assistance covered by proposed paragraph 158ZI(1)(g) and paragraph 158ZI(1)(h) (see Item 10).  Paragraph 158ZI(1)(g) specifies, as an additional purpose for which money in the Communications Fund may be used, grants of financial assistance in relation to the creation or development of a broadband telecommunications network. Paragraph 158ZI(1)(h) specifies, as an additional purpose for which money in the Communications fund may be used, grants of financial assistance in relation to the supply of a broadband carriage service over a broadband telecommunications network.

 

The effect of this amendment would be that, if the Commonwealth decided to provide such assistance, section 158ZL would apply to such grants.

 

Item 14 - Paragraph 158ZM(1)(b)

 

Section 158ZM of the Act provides that if the Communications Fund is to be debited for the purpose of making a grant of financial assistance to person other than a State or Territory (see paragraph 158ZM(1)(a)), and the grant is covered by paragraph 158ZI(1)(c) of the Act, the terms and conditions on which that assistance is granted is to be set out in a written agreement between the Commonwealth and the person (see subsection 158ZM(2)). 

 

Paragraph 22(1)(a) of the Acts Interpretation Act 1901 defines ‘person’ to include a body politic or a body corporate (such as a company or an incorporated association) as well as an individual.

 

Under paragraph 158ZI(1)(c) of the Act, such a grant may be made for:

(a)     the purpose of implementing the Commonwealth Government’s response to any recommendations to the Government contained in a report of the proposed Regional Telecommunications Independent Review Committee on the adequacy of telecommunications services in regional, rural and remote parts of Australia (see paragraph 158ZI(1)(a)); or

(b)    a purpose incidental or ancillary to this purpose e.g. to cover administrative costs in connection with implementing the Government’s response to the Committee’s report (see paragraph 158ZI(1)(b)).

 

Under subsection 158ZM(3) of the Act, such an agreement may be entered into by the Secretary of the Department of Broadband, Communications and the Digital Economy, or the Secretary’s delegate (in accordance with section 158ZN of the Act) on behalf of the Commonwealth.

 

Item 14 would amend paragraph 158ZM(1)(b) of the Act to replace the words “158ZI(c)” with the words “158ZI(1)(c), (g) or (h)”. 

 

This amendment would have two effects. Firstly, it would correct a minor drafting error in the Act so that paragraph 158ZM(1)(b) would correctly refer to paragraph 158ZI(1)(c) of the Act.  Secondly, it would have the effect of applying section 158ZM to grants of financial assistance covered by proposed paragraph 158ZI(1)(g) and paragraph 158ZI(1)(h) (see Item 10).  Paragraph 158ZI(1)(g) specifies, as an additional purpose for which money in the Communications Fund may be used, grants of financial assistance in relation to the creation or development of a broadband telecommunications network. Paragraph 158ZI(1)(h) specifies, as an additional purpose for which money in the Communications fund may be used, grants of financial assistance in relation to the supply of a broadband carriage service over a broadband telecommunications network.

 

The effect of this amendment would be that, if the Commonwealth decided to provide such assistance, section 158ZM would apply to such grants.

 

Item 15 - At the end of Division 2 of Part 9C

 

Item 15 would insert a new proposed section 158ZNA at the end of Division 2 of Part 9C of the Act. 

 

Proposed subsection 158ZNA(1) would define the term ‘broadband network share’ for the purposes of Part 9C. It would provide that ‘broadband network share’ is a share that is held by the Commonwealth and was acquired using money from the Communications Fund for the purpose mentioned in proposed paragraph 158ZI(1)(d) (see Item 10).

 

Proposed subsection 158ZNA(2) defines the term ‘broadband network debenture’ for the purpose of Part 9C.  It would provide that a ‘broadband network debenture’ is a debenture that is held by the Commonwealth and was acquired using money from the Communications Fund for the purpose mentioned in proposed paragraph 158ZI(1)(e).

 

Proposed subsection 158ZNA(3) defines the term ‘broadband network trust unit’ for the purpose of Part 9C.  It would provide that a ‘broadband network trust unit’ is a unit in a unit trust that is held by the Commonwealth and was acquired using money debited from the Communications Fund for the purpose mention in proposed paragraph 158ZI(1)(f).

 

Proposed subsection 158ZNA(4) would provide that Division 3 of the Act does not apply in relation to broadband network shares, broadband network debentures and broadband network trust units.

 

The effect of this amendment would be that broadband network shares, broadband network debentures and broadband network trust units will not be investments for the purposes of Division 3 of the Act to ensure that the rules in that Division otherwise governing investment of money in the Communications Fund do not apply.  For example, income derived from broadband network shares, broadband network debentures and broadband network trust units would be paid into the Consolidated Revenue Fund and not credited to the Communications Fund.

 

Proposed subsection 158ZNA(4) would provide that section 39 of the Financial Management and Accountability Act 1997 (FMA Act) does not apply in relation to broadband network shares, broadband network debentures and broadband network trust units.   Section 39 of the FMA Act authorises the Minister for Finance and Deregulation to invest public money only in a limited range of investments like Government bonds and bank deposits.  Therefore, investment in the broadband network through shares, debentures or units in a unit trust are exempted from the investment rules that otherwise apply to investments of the Communications Fund and the application of section 39 of the FMA Act.  This would mean that any income or return of capital received from National Broadband Network-related shares, debentures or units in a unit trust acquired using money in the Communications Fund would be paid into the Consolidated Revenue Fund.  This also would mean that those shares, debentures, and units would not be subject to the investment rules in section 39 of the FMA Act.

 

Item 16 - Transitional - Section 158ZJ

 

Item 16 is a transitional provision that relates to the repeal of section 158ZJ of the Act (see Item 11).

 

Item 16 would provide that the repeal of section 158ZJ of the Act effected by Schedule 1 to the Bill does not affect a credit made before the commencement of this Item.  This amendment would make it clear that the repeal of section 158ZJ does not have any effect on the sum of $2 billion that was credited to the Communications Fund in September 2005.