Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

2016-2017

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

Telecommunications Legislation Amendment                  (Competition and consumer) Bill 2017

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Communications,                              Senator the Honourable Mitch Fifield)

 



Telecommunications Legislation Amendment                  (Competition and consumer) Bill 2017

 

OUTLINE

Overview                

The Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 (the Bill), together with the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 (the Charge Bill) will implement the main legislative components of the Government’s response to the independent cost-benefit analysis and review of regulatory arrangements for the National Broadband Network (NBN) undertaken by the panel of experts headed by Dr Michael Vertigan AC. The Government’s response, ‘Telecommunications Regulatory and Structural Reform’, was released on 11 December 2014. [1]

The Government response proposed three major reforms:

·          amendments to the superfast network rules in Parts 7 and 8 of the Telecommunications Act 1997 (Tel Act) to make the default structural separation requirement clearer and more effective as a baseline for industry, while at the same time creating new commercial and competitive opportunities;

·          introduction of a statutory infrastructure provider regime; and

·          introduction of a funding mechanism for regional broadband services.

The Bills implement these reforms.

 

Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017

The Bill proposes amendments to the Tel Act, the Competition and Consumer Act 2010 (CCA) and the Telecommunications (Consumer Protection and Service Standards) Act 1999 (TCPSS Act).

Schedules 1 and 2: Amendments to the superfast network rules

The superfast network rules in Parts 7 and 8 of the Tel Act were introduced in 2011 and apply to superfast fixed-line networks servicing residential and small business customers (other than the NBN). Part 7 requires operators of such networks to supply a Layer 2 bitstream service to access seekers. Part 8 requires the networks to be wholesale-only (that is, structurally separated). There are a number of exemptions to the superfast network rules. In particular, the rules do not apply to superfast networks that existed prior to 1 January 2011, or to extensions of pre-2011 networks of less than 1 kilometre on or after 1 January 2011. There are also exemptions in relation to the supply of services to utilities and a ministerial power to grant exemptions.

The Bill makes several key amendments to the superfast network rules to make the default structural separation requirement clearer and more effective as a baseline for the industry, while at the same time creating new commercial and competitive opportunities. These amendments reset the structural separation arrangements, establish functional separation arrangements and promote competition.

The three key ways in which the Bill improves commercial and competitive opportunities are by removing regulation of networks servicing small business customers, enabling new superfast networks to operate on a functionally separated basis with the approval of the Australian Competition and Consumer Commission (ACCC), and enabling the ACCC to exempt small start-up networks from separation regulation. The overall rationale for the superfast network rules and these changes is discussed in the relevant Regulation Impact Statement.

Generally, apart from limited exceptions, it is intended that in future superfast residential networks would either be subject to a class exemption granted by the ACCC, operating on a functionally separated basis approved by the ACCC, or operating on a wholesale-only basis.

As part of these arrangements, the Bill provides that non-discrimination requirements apply to eligible services supplied by persons owning or controlling superfast local access lines built on or after 1 July 2018.

Grandfathering arrangements

The Bill proposes to amend Part 8 so that the current wholesale-only obligations in section 143 of the Tel Act will now generally apply to superfast fixed-line networks that came into existence between 1 January 2011 and 30 June 2018, or to networks that existed before 1 January 2011 and were extended, altered or upgraded between 1 January 2011 and 30 June 2018. A new proposed section 142C will then apply the new structural separation or functional separation rules to local access lines that come into existence on or after 1 July 2018, or that are altered or upgraded after that date and as a result become capable of being used to supply a superfast carriage service. In effect, therefore, the rules applying to networks that were subject to the current Part 8 will be grandfathered. Network operators will still be able to connect premises to networks that are subject to the existing rules, without needing to comply with the new rules.

A number of networks that are subject to Part 8 currently operate under Ministerial exemptions. For example, Telstra’s fibre-to-the-premises (FTTP) network in South Brisbane has an exemption until 1 July 2018, and specified Telstra Velocity and TransACT networks have exemptions until the ‘designated day’, which is specified under subsection 577A(10) of the Tel Act to be 1 July 2018 or another day specified by the Minister (Schedule 5 to this Bill proposes to amend the designated day to 1 January 2020). The Bill provides powers for the Minister to extend any exemptions that are in place on 1 July 2018, but after that date the Minister will have no powers to grant new exemptions.

The Bill also proposes grandfathering arrangements for local access lines that are currently subject to the Carrier Licence Conditions (Networks supplying superfast carriage services to residential customers) Declaration 2014 (CLCs Declaration). Such lines are not otherwise subject to the existing Part 8 rules. The CLCs Declaration effectively requires networks it covers to operate on a functionally separated basis.

The Bill exempts the CLCs Declaration from sunsetting, which will ensure that it continues to apply in relation to lines that form a part of a telecommunications network to which the rules applied between 1 January 2015 and the commencement of the new rules, provided that the lines have not been altered, upgraded or extended on or after 1 July 2018. The Bill also provides that a network that is subject to the CLCs Declaration can continue, on or after 1 July 2018, to connect premises that are in close proximity to the network under the rules set out in the CLCs Declaration, rather than the new rules in proposed section 142C.

The requirements of the CLCs Declaration will not apply to a network that is included in a functional separation undertaking given by the carrier who owns or controls the network and which is in force.

Repeal of Part 7

Part 7 of the Tel Act and associated provisions in the CCA will be repealed. Currently Part 7 requires affected providers to supply a Layer 2 bitstream service. The associated provisions in the CCA required the ACCC to declare this service, which it did in 2012 (the Local Bitstream Access Service). Following repeal, access to specific wholesale services on superfast broadband networks would only be mandated if the services are declared by the ACCC under Part XIC of the CCA. For example, networks that are not currently subject to Part 7 (such as Telstra’s Velocity networks and TPG’s fibre-to-the-basement network) are required to supply the Superfast Broadband Access Service as declared by the ACCC in July 2016 under Part XIC of the CCA. Furthermore, under the Bill, superfast networks would operate on either a functionally or structurally separated basis. They would therefore supply eligible services on a wholesale basis.

Changes to Part 8, including exemptions

The Bill makes a number of changes to the exemptions in Part 8. It amends the exemption under subsection 156(4) for network extensions of less than 1 kilometre from a point on the infrastructure of a network as it stood immediately before 1 January 2011. This exemption would, from 1 July 2018, only be available for networks that are being transferred to NBN Co under contracts (the Definitive Agreements).  As a result, extensions of pre-existing networks on or after 1 July 2018 which are not covered by the amended exemption must be used to supply services on a structurally separated (wholesale-only) basis as the default (or be covered by a functional separation undertaking approved by the ACCC, as the alternative).

The existing exemption under subsection 156(3) of the Tel Act for networks that, prior to 1 January 2011, were being rolled out in stages as part of a real estate development project, will now only apply until 30 June 2018. From 1 July 2018, a new section 143E of the Tel Act will cover such real estate development projects, but also amend the exemption, so that projects will continue to be covered even though there may be changes to the relevant contracts. The Minister will also be able to grant exemptions for specific new developments or a class of new developments within the geographical footprint of already exempt networks. This ensures that, subject to the approval of the Minister, the exempt network can be extended to service the new developments and those extensions will also be exempt from sections 142C and 143. The Ministerial exemption power would expire on the date that the NBN is declared, under section 48 of the National Broadband Network Companies Act 2011 , to be built and fully operational.

For clarity, the existing exemptions in the Tel Act for the supply of services to specified classes of utilities will not be changed by these amendments.

Five separate Ministerial exemptions have been granted under Parts 7 and 8 of the Tel Act. One of those exemptions, for specified TransACT fibre networks, is no longer operative due to the sale of these networks to NBN Co. The other four (for two categories of TransACT networks and for Telstra’s South Brisbane and Velocity fibre networks) remain in force. The Bill provides that, if these exemptions are in force on 1 July 2018, they can continue to be varied by the Minister. The Bill also provides, through new section 143G of the Tel Act, that any new local access lines that form part of the infrastructure of the exempt networks will be exempt from section 142C. This ensures that the networks can continue to be operated in accordance with the terms of the relevant exemption instruments for as long as the exemption instruments remain in force so as to maximise service continuity for consumers.

Local access lines

Part 8 will be amended to focus largely on individual local access lines to better target regulation. The intention is that any single local access line that:

·          forms part of a network (other than the NBN) that is wholly or principally supplying services to residential customers, and

·          is used to supply a superfast carriage service to residential customers in Australia,

will be subject to obligations in Part 8. This new approach will apply to lines that come into existence after 1 July 2018, or are altered or upgraded on or after 1 July 2018 and as a result become capable of being used to supply a superfast carriage service.

Removal of regulation for networks servicing small business customers

The Bill amends the existing Part 8 rules so that they no longer apply to local access lines that are part of a telecommunications network used to supply superfast carriage services to small business customers. The new Part 8 rules will only apply to local access lines used to supply superfast carriage services to residential customers. This means that lines used to supply superfast carriage services to small businesses will no longer be subject to structural or functional separation requirements. This creates greater flexibility for network operators in the supply of superfast carriage services to small business customers.

A business network may supply a small number of residential customers, sometimes without the knowledge of the network operator (for example, because a customer has ceased trading as a business while still retaining their service). Consequently, the Bill exempts local access lines that are used to supply superfast carriage services to residential customers if that use, when considered in relation to the use of all the local access lines that form part of the infrastructure of the network, is minor. The relevant network also has to be marketed exclusively as a business network.

Functional separation undertakings

The Bill inserts a functional separation undertaking process into Part 8, under which network operators will be able voluntarily to submit undertakings to the ACCC for approval.  This creates greater flexibility in the supply of services on an integrated, albeit functionally separated, basis. That is, a telecommunications business could have both network/wholesale and retail operations, subject to certain requirements. Undertakings may be given by a person alone or jointly with one or more other persons. In deciding whether to accept a functional separation undertaking, the ACCC will be required to have regard to the long-term interests of end-users and any matters specified by the Minister in a legislative instrument. If accepted, the operator would be required to comply with the undertaking.

The Bill proposes that the ACCC would also be able to make deemed functional separation undertakings that would apply to specified classes of network operators. If an operator chooses to comply with a deemed undertaking, the undertaking would apply as though the operator had submitted it and the ACCC had approved it. This measure is intended to reduce the regulatory workload for some sectors of the industry as individual undertakings will not need to be prepared by members of the class covered by the undertaking. It is also intended to reduce the ACCC’s workload as there would be a lower number of standard functional separation undertakings submitted for its assessment.

The Bill sets a baseline for functional separation by requiring that a functional separation undertaking include a number of key elements. In particular, the operator will be required to:

·          operate separate wholesale and retail business units;

·          ensure that confidential information is not passed between the retail business unit and wholesale business unit and vice versa; and

·          offer the same terms and conditions to its retail business unit and wholesale customers.

It is intended that functional separation undertakings can be tailored for each business subject to the underlying purpose of the three principles above being met . The Bill therefore provides some flexibility in how these key elements are met. The ACCC would assess proposed functional separation undertakings based on the size and scale of each business.

Where operators are subject to a functional separation undertaking approved by the ACCC, all of an operator’s superfast fixed-line networks would be subject to the functional separation requirements, regardless of when they were built or further altered or upgraded. That is, for example, the undertaking would supersede grandfathered arrangements. This is intended to promote consistent operation of a carrier’s networks, regardless of when they were constructed.

The proposed amendments to Part 8 will not alter NBN Co’s statutory prohibition on supplying retail services, or Telstra’s obligations to structurally separate.

As the assessment of functional separation undertakings will involve significant administrative and regulatory effort on the part of the ACCC, the Bill allows the ACCC to determine a fee, or a method of ascertaining a fee, for the consideration of functional separation undertakings.

Class exemption from superfast network rules for small start-up networks

The Bill introduces a power for the ACCC to exempt operators with a very small retail customer base from the superfast network rules if it considers that exemption would promote the long-term interests of end-users (as currently defined in the CCA). The exemption would be limited to operators with fewer than 2,000 retail residential customers on all fixed-line networks. The Bill provides that the statutory exemption could be extended, by regulation, to include operators (or groups) with up to 12,000 retail residential services. The figure of 12,000 is based on the exemption threshold for small networks set out in the ACCC’s final access determination for the superfast broadband access service.

This threshold will minimise the potential impacts on long-term competition from allowing these operators to be vertically integrated, and the operators will be required to offer a wholesale layer 2 bitstream service, or other service specified by the ACCC in a legislative instrument, on a non-discriminatory basis.

The proposed exemption provision recognises that the costs to such providers of separation could be burdensome and will facilitate entry by new small players into the market. Once such operators exceed the specified threshold, they would become subject to the new requirements of Part 8 and need to become structurally separated unless functional separation undertakings were in place.

It is envisaged that the regulation power would not be used in the short-to-medium term.

Enforcement

The Bill proposes to change the offence provisions under Part 8 from criminal offences to civil offences. Although criminal penalties can be invoked for breaches of some competition laws, they are usually applied in relation to conduct that is especially egregious (e.g. cartel conduct). The Government therefore considers civil penalties more appropriate in the context of Part 8.

The change would mean that contraventions of the wholesale-only rules under the proposed revised superfast network rules, failure to comply with a functional separation undertaking, or breaches of other obligations in Part 8 (such as the non-discrimination obligations), will be civil penalty provisions for the purposes of Part 31 of the Tel Act. As such, the maximum penalty for a body corporate is $10 million for each contravention . The level of penalty reflects the importance of the new rules.

The Bill would also confer power on the ACCC to issue formal warnings or infringement notices where it has reasonable grounds to believe that an operator has breached the superfast network rules. This will provide the ACCC with mechanisms to resolve matters without taking court action.

As noted above, the Bill proposes that every functional separation undertaking must contain specified elements (‘fundamental provisions’) that are critical to the achievement of the public policy and competition policy objectives of undertakings. Fundamental provisions must include, but are not limited to, requirements to maintain separate business units and requirements to protect confidential information. Other fundamental provisions can be proposed by the person who gives the ACCC the undertaking.

Where the person who gives the undertaking has breached a fundamental provision, or has an unsatisfactory compliance record in relation to non-fundamental provisions, the ACCC may revoke the undertaking and the operator will have 12 months to structurally separate the parts of its network that would otherwise have been subject to the superfast network rules had the undertaking (which is to be revoked) not been in force.

The ACCC will also be able to revoke an undertaking for breaches of the non-discrimination obligations.

Finally, the Bill will allow carriers or carriage service providers to apply to the Federal Court to have alleged contraventions of subsections 142C(2), 143(2) and 143A of Part 8 enforced. The Federal Court will have powers to make orders directing a person to comply with the particular subsection, compensate a person or any other order that the Court thinks appropriate. These powers will operate in conjunction with the ACCC’s and Minister’s existing powers to seek injunctions under Part 30 of the Tel Act.

Merits review

Key ACCC decisions under the proposed amended Part 8 (for example, the decision not to accept an undertaking, or a decision to revoke a functional separation undertaking), will be subject to merits review by the Australian Competition Tribunal. This reflects the fact that the ACCC will be making decisions that can affect the commercial viability of individual enterprises. Such an approach is consistent with the guidelines published by the Administrative Review Council.

Schedule 3: Statutory Infrastructure Provider (SIP) regime

The current Statement of Expectations issued by Shareholder Ministers to NBN Co requires NBN Co to roll out the NBN. However, there is no statutory obligation requiring it to connect any premises to its network and service them on an ongoing basis into the future. While NBN Co has clear commercial incentives to do so in most cases, the Bill would implement a new SIP regime to provide industry and consumers with certainty that all premises in Australia can have access to infrastructure that supports the delivery of superfast broadband services. This is appropriate given that NBN Co will ultimately replace Telstra as the principal fixed-line operator in Australia. With other carriers being expected to contribute to the cost of regional NBN Co wholesale services through the Regional Broadband Scheme, those carriers and regional end-users will also expect that there is some guarantee that NBN Co will deliver services. The rationale for the SIP regime is further discussed in the relevant RIS.

The Productivity Commission, in its draft report on its review of the universal service obligation (USO), acknowledged the Government’s intention to introduce the SIP regime. It has put a similar view in the final report which will be released shortly. The Productivity Commission saw the SIP regime as a key part of its recommended approach to the USO. By providing certainty that premises can be connected to superfast networks and end-users at those premises can receive superfast broadband, the SIP arrangements provide a solid core around which a new forward-looking consumer protection architecture for the future NBN environment can be built.

Under the proposed new SIP scheme, during the NBN rollout, NBN Co will have SIP obligations in all areas where it is supplying carriage services. After the NBN rollout is completed, NBN Co will be the default SIP for all of Australia. Other carriers can also become a SIP where appropriate, for example where a carrier has a contract to provide infrastructure in a new development. The SIP obligation also guarantees the provision of wholesale access to superfast broadband infrastructure for retail service providers.

There are three key elements to the proposed SIP regime—identifying the SIP, the obligations of the SIP, and the processes to be followed when a SIP does not or cannot meet the SIP obligation. These are summarised below.

The Australian Communications and Media Authority (ACMA) will be the regulator with responsibility for enforcing the SIP regime. If a SIP does not meet any of the SIP obligations, the ACMA will have a range of enforcement mechanisms available, including issuing formal warnings, accepting undertakings, issuing an infringement notice or taking court action if appropriate.

The ACMA will maintain a register of SIPs, their service areas, and of contracts to install infrastructure in areas which, when the installation is complete, would become SIP service areas.

The SIP regime deals with the connection of premises and the supply of services to carriage service providers for the provision of services to end-users. It does not deal with the initial provision of infrastructure in new developments per se. This is, in the first instance, a commercial matter between developers and carriers. However, in a new development, the SIP arrangements are intended to apply once SIP infrastructure is contracted for provision and once installed.

Identifying the SIP

The Bill provides that, as the NBN rolls out, NBN Co will become the default SIP for each area which it declares to be ‘ready for service’. These areas are termed ‘interim NBN service areas’ in the Bill. NBN Co will also be required to declare interim NBN service areas for all areas that, prior to the Bill coming into force, it has already declared to be ready for service. To ensure enhanced transparency about the service status of an NBN rollout area, the Bill would require NBN Co to notify the ACMA when it declares an interim NBN service area.

Once NBN Co is the SIP for an interim NBN service area it will have an obligation, on reasonable request from a carriage service provider, to connect any premises in that area to its networks and to supply wholesale services so that the carriage service provider can supply superfast broadband and voice telephony to the premises.

Following completion of the rollout, NBN Co will be the default SIP for the ‘general service area’ which, as a default, will be all of Australia. However, ‘nominated service areas’ that are covered by other SIPs will be excluded from the general service area.

New developments specified in existing ‘adequately served’ carrier licence condition determinations will also be nominated service areas . The ‘adequately served’ licence conditions were made in 2013 and 2014 and apply to four carriers - NT Technology Services, OptiComm, Pivit and Places Victoria. They require those carriers to connect, upon reasonable request, any premises within networks in new developments specified in the licence conditions. In effect, the licence conditions impose a form of statutory infrastructure provider obligation on those four carriers. The Bill ensures that those carriers’ specific networks are automatically subject to the new SIP obligations. As a consequence, the Bill also provides that the existing licence conditions will be repealed upon the commencement of the SIP provisions.

Carriers who have contracts under which they are to supply eligible services to all of the premises in a particular area, or to the whole or part of a real estate development project or building redevelopment project, will be required to notify the ACMA after completing the installation of infrastructure in those areas. To provide greater transparency to consumers and other service providers, carriers who have entered into contracts to install infrastructure in real estate development projects or building development projects will also be required to notify the ACMA of the contracts (‘anticipatory notices’) before they install infrastructure, including the project area and the estimated project completion date.

The Bill also includes a ministerial power to declare that a carrier is the SIP for a particular area, for example, areas where there is superfast broadband infrastructure in place that it would not be economically efficient for NBN Co to duplicate (‘designated service areas’). The Minister also has powers to adjust nominated service areas such as those created by the ‘adequately served’ arrangements or carrier contracts with developers should it be needed.

SIPs for nominated service areas and designated service areas, and also NBN Co when it declares interim NBN service areas, must provide the ACMA with the geographic coordinates of their respective service areas. Similarly, anticipatory notices about contracts entered into by carriers must contain the geographic coordinates of the service areas. 

SIP connection and supply obligations

Upon reasonable request by a carriage service provider on behalf of an end-user in the service area, a SIP will be required to connect a premises to a superfast fixed-line network (a ‘qualifying fixed-line telecommunications network’) in order that the carriage service provider can supply:

·          retail services with a peak download speed of at least 25 Mbps and a peak upload speed of at least 5 Mbps; and

·          carriage services that can be used by end-users to make and receive voice calls.

Where it is not reasonable for the SIP to connect premises to a fixed-line network, it must provide a fixed wireless or satellite technology solution. The fixed wireless or satellite service must also be able to support retail services with peak download speeds of at least 25 Mbps and peak upload speeds of at least 5 Mbps. The fixed wireless service must also enable a carriage service provider to supply voice services to end-users.

SIPs must publish standard terms and conditions on their websites on which they offer to connect premises and supply eligible services. If a carriage service provider requests the SIP to connect or supply on the terms published on the website, then the SIP must enter into an agreement on those terms with the carriage service provider.

The Minister will have the power to make a legislative instrument setting out circumstances in which the SIP obligation does not apply, and requirements for people purchasing a SIP service. This reserve power is similar to the power which exists under the USO regime in the TCPSS Act. For example, a SIP should not have to connect premises to its network where it cannot receive required approvals, or there are safety concerns involved.

The Minister will have a reserve power to set standards, rules and benchmarks that SIPs must comply with (or in the case of benchmarks, meet or exceed). The matters that could be specified in standards, rules and benchmarks are broad. By way of example, standards could include timeframes for connecting premises and rectifying faults, and rules could be made about how premises must be connected and complaints must be addressed. Benchmarks could be set in relation to a matter covered by a standard.

Complaints

If a SIP refuses a carriage service provider’s request to connect premises to its network, it must notify the service provider within five days after the refusal . The carriage service provider must then provide the notice to the end-user on whose behalf it made the request. This provides greater clarity for end-users of the reasons why a request cannot be fulfilled, and the end-user can give the notice to the ACMA or the Telecommunications Industry Ombudsman as part of a complaints process.

The Government is concerned that end-users frequently have little visibility, when a request for a service is rejected, of why the request has been rejected and whether the rejection was caused by the actions of a retail provider or a wholesale provider. The notification measure outlined above will help to address this concern. The Bill also proposes a broader measure that could be used to address this issue. Item 4A of Schedule 3 to the Bill proposes to amend the service provider rule provisions in the Tel Act so that the Minister may, by legislative instrument, make service provider determinations setting out rules that apply to carriage service providers in relation to the supply of specified carriage services. The power could be used to address future issues that may occur. However, as any determination would be a legislative instrument, it would be subject to the consultation, disallowance and sunsetting provisions in the Legislation Act 2003 .

Targets for NBN Co

The Bill provides two targets that NBN Co, as a SIP, must take all reasonable endeavours to meet. These are expressed as the intention of the Parliament and are:

·          NBN Co’s fixed-line networks are capable of being used to supply fixed-line carriage services with peak download speeds of at least 50 Mbps and peak upload speeds of at least 10 Mbps to at least 90 per cent of premises in areas that, according to NBN Co’s website, are serviced by those networks.

·          NBN Co’s fixed-line networks are capable of being connected to at least 92 per cent of premises in Australia.

The second target reinforces the first one; the target of higher 50/10 Mbps speeds is applicable to the majority of premises in Australia.

Failure or inability to meet the SIP obligation

If a SIP becomes aware that it is likely that it will no longer be able to fulfil its SIP obligations for that area, it would be required to notify the Secretary of the Department of Communications and the Arts and the ACMA. The notification process is intended to provide time to develop and implement optimal alternative arrangements. The SIP may negotiate with another carrier to take over its SIP obligations. If an alternative SIP is agreed, the first carrier must notify the ACMA. If no alternative SIP is agreed, NBN Co would become the replacement SIP for that area.

 

Periodic compliance reports

The Minister will have powers to make rules, if needed, requiring SIPs to give the ACMA periodic reports about their compliance with the SIP arrangements. These are additional to the ACMA’s normal powers as a regulator, for example, to establish record-keeping rules and request information.

Delegation

To simplify administration in the long-term, the Bill enables the Minister to delegate to the ACMA a range of powers, including the power to make standards, rules and benchmarks, if appropriate.

Schedule 4: Funding of fixed wireless broadband and satellite broadband

Schedule 4 of the Bill sets out the operational arrangements of the Regional Broadband Scheme (the Scheme): an industry charge of around $7.10 per month that carriers would be required to pay for each premises on their network that has an active fixed-line superfast broadband service. The purpose of the charge is to sustainably fund the net costs of NBN Co’s fixed wireless and satellite networks, which provide access to essential broadband services predominantly in regional Australia. The charge was foreshadowed by Government in its December 2014 response to the Independent Cost-Benefit Analysis of Broadband and Review of Regulation (the Vertigan Review).

Rolling out superfast broadband infrastructure to regional Australia is very expensive. NBN Co’s fixed wireless and satellite networks are expected to incur a net cost of $9.8 billion (in net present value terms) over thirty years. NBN Co currently funds these net costs through an internal cross subsidy from its fixed line networks. The monies collected from the Scheme will be used to fund NBN Co’s net costs for constructing and operating fixed wireless and satellite network infrastructure, replacing the company’s opaque internal cross subsidy. The funding assistance will be in the form of contracts and/or grants made by the Secretary of the Department to NBN Co.

Schedule 4 works in tandem with the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 (Charge Bill), which establishes the tax for constitutional purposes. Schedule 4 outlines the operational aspects of the Scheme, and covers:

·          the types of premises caught by the charge;

·          the types of premises exempt from the charge;

·          the administrative arrangements for assessing and paying the charge, including yearly reporting requirements for carriers;

·          penalties for avoiding the charge;

·          the Special Account into which funds from the charge will be credited and debited;

·          the arrangements for paying NBN Co (and other eligible funding recipients) for its fixed wireless and satellite networks through contract or grant;

·          an offset mechanism to allow eligible funding recipients to offset their charge liability against money owed to them under the Scheme;

·          information gathering and disclosure powers for the ACCC and the ACMA;

·          information reporting obligations for carriers, the ACMA and the Department’s Secretary; 

·          a one off reporting requirement on carriers, which will give the ACCC a snapshot of the high speed, fixed line broadband market as at November 2017; and

·          a requirement for the Scheme to be reviewed during the first four years or as soon as practicable after.

Types of premises included in the charge base

The charge base is set out in Division 4 of Schedule 4.  In summary, carriers will have to pay the charge on premises to which a carriage service provider (CSP) provides a broadband service during the whole or part of a month using a local access line that is technically capable of providing download speeds of normally 25 megabits per second (Mbps). This requirement is supported though four fundamental definitions.

Chargeable premises associated with a local access line (chargeable premises) : Carriers will be liable to pay the charge for each chargeable premises on their networks during the whole or a part of each month in a financial year. Chargeable premises are ‘potentially chargeable premises’ that are not exempt premises (discussed below).

Premises is given its ordinary meaning but the Minister has the power to determine specified conditions that would deem a location to be or not to be a premises. The determination would be by way of legislative instrument and it would be subject to a delayed commencement through special disallowance provisions established by the Bill. Some examples of specified conditions that may cause a location to not be a premises include where there was a public mobile telecommunications tower, traffic control equipment, bus stop, metering point or public alarm or security system at the location.

Potentially chargeable premises : If a person is a carrier and either owns a local access line or is the nominated carrier in relation to a local access line, and a CSP supplies a designated broadband service to a premises in Australia using the line during the whole or part of a month, then the premises is a potentially chargeable premises. This does not apply to exempt lines (discussed in more detail below).

Designated broadband service : A designated broadband service is defined as a carriage service supplied using a local access line in Australia that enables end-users to download communications and is technically capable of being used to supply a superfast carriage service. Voice-only telephone services and television services are excluded from the definition because it is intended that the charge apply only to broadband services. The Minister can determine a class of services to be excluded from the definition to ensure it continues to apply only to broadband services as technological changes arise.

It is important to note that it is the speed that the line is technically capable of providing rather than the speed that the consumer experiences that is relevant to determining whether the line is capable of being used to supply a superfast carriage service. For example, an FTTP line that is technically capable of download speeds exceeding 100Mbps is technically capable of being used to supply a superfast carriage service even if the consumer has only ordered a 12Mbps retail broadband service or normally experiences download speeds of less than 25Mbps because of congestion on the network. It is expected that all FTTP, FTTN, FTTB, FTTC and HFC networks are ‘technically capable’ of being used to supply a superfast carriage service.   

Attempts to manipulate a line’s usual technical capability will be considered an attempt to avoid the charge and will trigger the anti-avoidance provisions discussed below.

Superfast carriage service : A superfast carriage service is a carriage service that enables end-users to download communications where the download transmission speed is normally 25 Mbps or more. The word “normally” is akin to “usually”; it recognises that circumstances may arise that temporarily displace usual download transmission speeds.

The carriage service must be supplied using a line to premises occupied or used by an end-user. The line does not need to be physically connected to the premises because ‘using’ means use in isolation or in conjunction with one or more other things. While the provisions are not intended to capture mobile broadband services, fixed wireless broadband services, or satellite broadband services, it is intended to capture a line that runs most of the way to the premises but is then connected to the premises over a short distance using wireless or mobile technology.

Figure 1: Demonstration of Charge Base

 

 

A CSP supplies a designated broadband service to a premises using the technology during:

Whole or part of the month

Not at all

Carrier owns or is the nominated carrier in relation to:

Fixed line

Technically capable of download speeds of normally 25Mbps

FTTP

ü

X

FTTN

ü

X

FTTB

ü

X

FTTdp/FTTC

ü

X

HFC

ü

X

Other

ü

X

Not technically capable of download speeds of normally 25Mbps

Exchange based xDSL

 

X

X

Non-fixed line

Mobile

X

X

Fixed-wireless

X

X

Satellite

X

X

 

Types of premises exempt from the charge

The Bill provides for three categories of exemptions.

Exempt premises - small networks: The first exemption applies to carriers that operate very small networks. Carriers that have less than 2,000 potentially chargeable premises during the whole or a part of a month are exempt from paying the charge on those premises. If the carrier is part of an associated group and the group as a whole has less than 2,000 potentially chargeable premises, then each carrier in the group is exempt from paying the charge on those premises.

This exemption applies on a month by month basis. For example, if a carrier had less than 2,000 services in January and then more than 2,000 services in February, only the January services would be exempt from the charge.

Exempt lines - local access lines transitioning to the NBN: The second exemption applies to local access lines transitioning to NBN Co or being decommissioned under certain agreements. The following local access lines are exempt:

·          Lines that are transitioning to NBN Co from Telstra Corporation Limited (Telstra) as part of the revised Definitive Agreements.

·          Lines that are the subject of an agreement between NBN Co and specified Optus companies providing for the deactivation or decommissioning of hybrid fibre coaxial lines.

·          Lines that are transitioning to NBN Co where:

o    the lines are transitioning in one of the first six months of the first eligible financial year (1 July 2018); and

o    a contract was in place for their transfer prior to 1 July 2018.

The Bill provides that the Minister can remove agreements from the exemption by specifying the agreements in a legislative instrument. The legislative instrument is a disallowable instrument.

Charge concession period - potentially concessional premises : The first 25,000 residential and small business premises on each carrier’s network that have an active superfast fixed-line broadband service will be exempt from the charge for the first five years of the Scheme. The proposed concession period will lessen the burden on smaller carriers and help them transition to paying the charge.

Carrier reporting obligations

There are two sets of carrier reporting obligations set out in the Bill: a once-off reporting obligation and an annual reporting obligation.

Once-off report to the ACCC: The once-off reporting obligation occurs in financial year 2017-18. By 31 December 2017, carriers must provide the ACCC with a breakdown of the number of premises that a CSP has supplied a designated broadband service to on their fixed-line networks during November 2017, and any associations the carrier had in respect of a telecommunications network, a company or a local access line during the month. This requirement applies to carriers whose premises might otherwise be exempt from the charge.

This once-off reporting obligation will give the ACCC a snapshot of the high speed, fixed line broadband market at it stands during November 2017. It will enable the ACCC to review the base component of the charge and provide advice to the Minister to consider whether it should be adjusted for the 2018-19 financial year (see the Charge Bill’s explanatory memorandum for more information). This would align the charge with the latest industry information about the size of the high speed, fixed-line broadband market.

Failing to lodge a report is a strict liability offence. The penalty is 50 penalty units (currently $9,000). A person who fails to lodge a report commits a separate offence for each day they fail to lodge a report.

Annual report to the ACMA: The annual reporting requirement starts in financial year 2019-20. Carriers are required to self-report the amount of chargeable premises and potentially concessional premises they have each year to the ACMA so that the ACMA can assess their charge liability and collect the charge.

If particular premises are reported as potentially concessional premises and the carrier did not know and could not, with reasonable diligence have ascertained, that the premises were not potentially concessional, then the premises are taken to be potentially concessional premises in relation to the person for the month. The Government recognises it is sometimes difficult for carriers to ascertain, for example, whether premises are small business premises or medium business premises at a particular point in time. As such, there is limited leniency for mistakenly misreporting potentially concessional premises. It is expected that carriers establish systems to enable them to tell whether individual premises are potentially concessional.

Carriers must also report any associations the carrier had in respect of a telecommunications network, a company or a local access line during the financial year. This information will facilitate the ACMA’s ability to enforce the Scheme. Carriers with exempt premises under new section 95 or exempt lines under new section 96 do not have to report about those premises and lines. This decreases the compliance burden on industry.

The report is due by the 31 October following the financial year to which the report relates (for a timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses below). The penalty for failing to lodge a report is 50 penalty units (currently $9,000).

Charge assessment

The ACMA will assess carriers’ charge liability one year in arrears. Starting in financial year 2019-20, the ACMA will annually assess:

·          The person’s total number of chargeable premises for each month in the financial year.

·          The person’s annual chargeable premises amount for the financial year (refer clauses 6 and 9 of the Charge Bill).

·          The person’s annual base amount for the financial year (refer clause 10 of the Charge Bill) - this is the amount that will be used to pay eligible funding recipients.

·          The person’s annual administrative cost amount for the financial year (refer clause 14 of the Charge Bill) - this is the amount that will be used to pay the ACMA and ACCC’s designated administrative costs.

·          The charge payable by the person in relation to the financial year.

The ACMA is required to complete its assessment by 30 November following the financial year that the charge is accrued or another day no later than two months before the standard due date for the charge (for a timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses below). The ACMA will notify the carrier of its assessment as soon as is practicable.

Each year, the ACMA must also publish on its website the aggregate amount of charge carriers pay and the total of the amounts specified in charge offset certificates for the eligible financial year.

Charge due dates and collection

The charge is collected one year in arrears. The collection arrangements are different depending on whether a carrier is an eligible funding recipient.

For all carriers that are not eligible funding recipients, charge payment is due on the standard due date, that is, 31 December following the financial year that the charge is accrued or a later date determined by the ACMA, but no later than 28 February following the financial year. The ACMA can also give individual extensions to specific carriers until no later than 28 February following the financial year.

Eligible funding recipients can pay their charge in two instalments. This arrangement is necessary for the Bill’s offset mechanism to operate effectively (discussed below). The administrative cost instalment (equal to the annual administrative cost amount) is due on the standard due date. If an eligible funding recipient has made an application for an offset certificate, their base instalment (equal to the annual base amount) is due on 30 April following the financial year that the charge is accrued, otherwise it is due on the standard due date. For a timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses below.

Late payment penalties apply to unpaid charge liabilities at a rate of 20 per cent per year, or another lower amount that the ACMA determines. The ACMA may also remit a late payment penalty. The ACMA may recover the charge on behalf of the Commonwealth in the Federal Court, the Federal Circuit Court or a court of a State or Territory that has jurisdiction.

Penalties for failure to pay charge liability

The Bill establishes civil anti-avoidance provisions for carriers that seek to avoid application of the charge and for persons who aid or abet such avoidance activities. For example, if carriers artificially alter lines that are technically capable of download speeds of 25 Mbps in order to reduce the speed capability of the line, or experts advised carriers on how to do so, both parties would be caught by the civil anti-avoidance provisions.

The Bill also includes civil anti-avoidance provisions for carriers that enter into a scheme for the sole or dominant purpose of obtaining a benefit from the charge concession period, and for persons who aid or abet such a scheme. Carriers would be caught by the anti-avoidance provisions if, for example, they artificially split their company into smaller companies with less than 25,000 chargeable premises each so that they have no charge liability for the first five years of the Scheme.

These provisions are civil penalty provisions for the purposes of Part 31 of the Tel Act. As such, the maximum penalty for a body corporate is $10 million for each contravention. The Bill increases the maximum civil penalty for a person other than a body corporate to 10,000 penalty units (currently $1.8 million). This reflects the seriousness of seeking to avoid paying the charge and aiding and abetting such behaviour.

The Bill also establishes a criminal offence for carriers that seek to avoid the charge and carriers that enter into a scheme for the sole or dominant purpose of obtaining a benefit from the charge concession period. The offence does not include a penalty of imprisonment. The maximum penalty is 10,000 penalty units (currently $1.8 million) for a person other than a body corporate and 50,000 penalty units (currently $9 million) for a body corporate (per the Crimes Act 1914 ).

The criminal offences and level of proposed penalties reflect the seriousness of the contraventions, which involve dishonest and potentially fraudulent behaviour which would adversely impact on the delivery of essential broadband services to regional and remote Australia.

The establishment of a Special Account

Increasing the transparency of fixed wireless and satellite funding is one of the main purposes of the Scheme. To facilitate this goal, the Government is establishing a Special Account so that affected carriers can see how much money is being raised by the charge and where it is going. The Special Account effectively quarantines proceeds raised by the charge so that they can only be used to pay eligible funding recipients and the ACMA and ACCC for the functions under the Scheme.

Arrangements for paying NBN Co (and other eligible funding recipients)

 

The Bill provides that the Secretary will be permitted to enter into a contract or grant with eligible funding recipients on behalf of the Commonwealth to provide financial assistance for:

·          the connection of premises to fixed wireless or satellite networks;

·          the supply of eligible services to carriage service providers to enable them to provide fixed wireless and satellite broadband services; or

·          fixed wireless or satellite facilities.

In order to receive funding, the eligible funding recipient’s fixed wireless and satellite networks must be capable of peak download transmission speeds of at least 25Mbps. These speeds are consistent with the speeds the Government expects NBN Co to supply over the NBN, as set out in the Statement of Expectations issued on 24 August 2016, [2] and also with the proposed baseline SIP speeds under Schedule 3 to this Bill.

An eligible funding recipient is defined to be an NBN corporation, or a specified carrier as declared by the Minister. Whilst it is envisaged that NBN Co will be the only eligible funding recipient at the Scheme’s commencement, there is flexibility for the Minister to declare other eligible funding recipients if required.

The Bill allows the Secretary and the eligible funding recipients to agree upon terms and conditions of the contracts and grants. The Minister may make a determination setting out standards, rules and benchmarks that are to apply to such contracts and grants but there are limitations on such determinations. The Minister cannot, for example, specify prices for services or facilities or override terms or conditions that give the contractor or grant recipient a right to adjustment of payment for a change in the services, facilities or customer equipment to be supplied.

The Secretary must maintain a register setting out the details of these contracts and grants and publish the register on the Department’s website.

The offset mechanism and payment of eligible funding recipients

The Bill allows the Secretary to offset eligible funding recipients’ charge liabilities against their funding entitlement under a contract or grant. This improves the efficiency of the Scheme and minimises transaction costs. The offset mechanism relies on two certificates: the nominal funding entitlement certificate and the offset certificate.

Nominal funding entitlement certificate: The nominal funding entitlement certificate (NFEC) establishes an estimate of how much money the Commonwealth owes an eligible funding recipient for the financial year under a contract or grant. This estimate is based on the balance of the Special Account that is attributable to the base component of the charge. If a carrier is an eligible funding recipient on 1 February in a year that charge payment is due, the Secretary must issue it with an NFEC by the following 31 March. The Secretary will issue a new NFEC every year that charge payment is due and publish the NFEC on the Department’s website.

Offset certificate: The offset certificate specifies the amount of charge the Commonwealth will offset against a carrier’s nominal funding entitlement. To be eligible for an offset, an eligible funding recipient must apply for an offset certificate by the standard due date of the charge, typically during December or February following the year in which the charge accrues. For a timeline of administrative events related to the Scheme, see Figure 4 in the Notes on Clauses below.

Eligible funding recipients can only apply to have their annual base amount offset. They must contribute to the administrative costs of the charge by paying their annual administrative cost amount on the standard due date of the charge.

The Secretary will approve an eligible funding recipient’s offset certificate application after issuing an NFEC by 31 March following the financial year that the charge accrues. The Secretary will then remit the offset amount or, if the eligible funding recipient has already paid the offset amount, refund the amount. Later in the financial year, the Secretary will pay the eligible funding recipient the amount specified in the NFEC adjusted by the offset amount.

If the eligible funding recipient’s offset certificate application is refused, it must pay its annual base amount by 30 April following the financial year that the charge accrues. If the carrier does not apply for an offset certificate it must pay its annual base amount on the standard due date along with its annual administrative cost amount. In each of these cases, the Secretary will pay the carrier the full amount specified in the NFEC later in the financial year.

ACMA access to information held by carriers and carriage service providers

The Bill establishes information gathering powers to facilitate the ACMA administering and enforcing the Scheme. The ACMA can require carriers and carriage service providers to provide information and documents it believes on reasonable grounds to be relevant to the operation of the Scheme. To request information, the ACMA will issue a written notice specifying the timeframe for the request, the manner in which the documents should be set out and whether copies of documents are required. Carriers and carriage service providers are entitled to be paid compensation for reasonable expenses incurred in meeting a request.

The penalty for failing to comply is 50 penalty units (currently $9,000).

ACCC access to information held by eligible funding recipients

The Bill establishes information gathering powers to facilitate the ACCC’s five yearly review of the base and administrative cost components. The ACCC can require eligible funding recipients to provide information and documents relevant to the performance of the ACCC’s functions. To request information, the ACCC will issue a written notice specifying the timeframe for the request, the manner in which the documents should be set out and whether copies of documents are required. Eligible funding recipients are entitled to be paid compensation for reasonable expenses incurred in meeting a request.

The penalty for failing to comply is 50 penalty units (currently $9,000).

Information disclosure between government agencies and quasi-government bodies

The Bill allows the ACMA and the ACCC to disclose information to the following government and quasi-government bodies if the information will enable or assist the body to perform or exercise their functions:

·          the Department of Communications and the Arts,

·          the Department of Finance,

·          the Treasury,

·          the ACCC or the ACMA,

·          the Regional Telecommunications Independent Review Committee (RTIRC), and

·          an authorised Government agency.

These information sharing provisions will assist government agencies in continuing to give evidence-based policy advice to Government. The information is protected by confidentiality laws that apply to all Commonwealth officers. For members of RTIRC that are not Commonwealth officers, the information could be protected through confidentiality agreements.

 

 

Review of the Scheme

The charge base has been designed to capture services that are substitutable for an nbn service, that is, superfast, fixed line broadband services. The telecommunications industry changes rapidly and other types of services may become substitutable for an NBN Co service in the future. It is desirable that the charge continue to capture substitutable services so that the charge base is as equitable as possible.

To facilitate this, the Bill provides that the Scheme must be reviewed before the fourth year after commencement of the Scheme, or as soon as practicable after. The review must provide for public consultation and a report of the review must be tabled in each House of Parliament within 25 sitting days after it has been complete. The Government may decide to change the charge base by legislative amendment if the review finds that the charge base is no longer appropriate given developments in the market. 

Schedule 5: Designated day

Paragraph 577(10)(a) of the Tel Act establishes the ‘designated day’ for the purposes of Telstra’s structural separation. The designated day is the date from which Telstra is subject to structural separation obligations set out in its structural separation undertaking. The date currently set out in the Tel Act is 1 July 2018, or such other date as is specified by the Minister by written instrument. The current date reflects the date by which, at the time that the clause was enacted, it was anticipated that the NBN rollout would be complete, thereby enabling Telstra’s structural separation. Telstra’s structural separation is accomplished by migrating its customer base from its own local access networks to the NBN. The fact the date could always be altered by Ministerial instrument reflects the reality that the date may have had to be changed depending on the time required to complete the NBN.

Item 1 of Schedule 5 will amend the designated day to 1 January 2020. This date better reflects the date by which the NBN rollout is now expected to be completed. The date can still be adjusted by Ministerial instrument if required.



 

FINANCIAL IMPACT STATEMENT

 

The proposals in the Bills will require a small increase in resourcing for the ACMA and the ACCC. Separation and SIP measures are expected to be funded from within those agencies’ existing budgets. Their activities in relation to the RBS are funded through the receipts from the scheme.



STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

TELECOMMUNICATIONS LEGISLATION AMENDMENT (COMPETITION AND CONSUMER) BILL 2017

 

The Telecommunications Legislation Amendment (Competition and Consumer) Bill (the Bill) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Bill

The Bill comprises three main measures:

·                      amendments to the superfast network rules in Parts 7 and 8 of the Telecommunications Act 1997 (Tel Act) to make the default structural separation requirement clearer and more effective as a baseline for industry and create new commercial and competitive opportunities (Schedules 1 and 2 to the Bill);

·                      introduction of a statutory infrastructure provider regime (Schedule 3 to the Bill); and

·                      implementation of administration arrangements for the Regional Broadband Scheme which will fund the net costs of NBN Co Limited’ s fixed wireless and satellite networks (Schedule 4 to the Bill).

Amendments to the superfast network rules

The Bill proposes to repeal Part 7 of the Tel Act and amend Part 8 so that the current wholesale-only obligations in section 143 of the Tel Act will now apply to fixed-line networks that came into existence between 1 January 2011 and 1 July 2018, or to networks that existed before 1 January 2011 and were extended, altered or upgraded between 1 January 2011 and 1 July 2018. New structural separation rules would apply to local access lines that come into existence, or are altered or upgraded, after 1 July 2018. Network providers will be able to operate on a functionally separated basis where approved by the ACCC. Non-discrimination requirements will apply to both structurally separated and functionally separated networks.

Statutory Infrastructure Provider (SIP) regime

The Bill would implement a new SIP regime to provide industry and consumers with certainty that all premises in Australia will have access to infrastructure that supports the delivery of superfast broadband services.

During the rollout of the National Broadband Network (NBN), NBN Co will have SIP obligations in all areas where it is supplying carriage services. After the NBN rollout is completed, NBN Co will be the default SIP for all of Australia. Other carriers will also be SIPs where appropriate, for example, where a carrier is the sole provider of infrastructure in a new development. The SIP obligation also provides wholesale access to broadband infrastructure for retail service providers so they can service their retail customers.

There are three key elements to the proposed SIP regime—identifying the SIP, the obligations of the SIP, and the processes to be followed when a SIP does not or cannot meet the SIP obligation. The Minister can make rules specifying requirements for connection and supply, and circumstances in which it would be reasonable to connect and supply. The Minister can also make standards, rules or benchmarks applying to connection and supply.

Regional Broadband Scheme

Schedule 4 of the Bill would establish the operational arrangements of the proposed Regional Broadband Scheme (the Scheme): an industry charge of around $7.10 that carriers would be required to pay for each premises on their network that has an active fixed-line superfast broadband service. The purpose of the charge is to sustainably fund the net costs of NBN Co’s fixed wireless and satellite networks, which provide access to essential broadband services predominantly in regional Australia. The charge was foreshadowed by Government in its December 2014 response to the Vertigan Review (the Independent Cost-Benefit Analysis of Broadband and Review of Regulation).

Rolling out superfast broadband infrastructure to regional Australia is very expensive. NBN Co’s fixed wireless and satellite networks are expected to incur a net cost of $9.8 billion (in net present value terms) over thirty years. NBN Co currently funds these net costs through an internal cross subsidy from its fixed line networks. The money collected from the Scheme will be used to fund NBN Co’s net costs for constructing and operating fixed wireless and satellite network infrastructure, replacing the company’s opaque internal cross subsidy. The funding assistance will be in the form of contracts and/or grants made by the Secretary of the Department to NBN Co.

Schedule 4 works in tandem with the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 , which establishes the charge. Schedule 4 establishes:

·          the types of broadband services caught by the charge;

·          the types of broadband services exempt from the charge;

·          penalties for avoiding the charge;

·          the administrative arrangements for assessing and paying the charge, including yearly reporting requirements for carriers;

·          the arrangements for paying NBN Co (and other eligible funding recipients) for its fixed wireless and satellite services through contract or grant;

·          the Special Account into which funds from the charge will be credited and debited;

·          an offset mechanism to allow eligible funding recipients to offset their charge liability against money owed to them under the Scheme;

·          information gathering and disclosure powers for the ACCC and the ACMA,

·          information reporting obligations for carriers, the ACMA and the Department’s Secretary; 

·          a one off reporting requirement on carriers, which will give the ACCC a snapshot of the high speed, fixed line broadband market as at November 2017, and

·          a requirement for the Scheme to be reviewed during the first four years or as soon as practicable after.

Human rights implications

No human rights issues were raised during consultation.

This Bill does not engage any of the applicable rights or freedoms.

Conclusion

This Bill is compatible with human rights as it does not raise any human rights issues.



  REGULATION IMPACT STATEMENTS

Three Regulation Impact Statements were prepared for the following measures:

1.       amendments to Parts 7 and 8 of the Telecommunications Act 1997 and Part XIC of the Competition and Consumer Act 2010 ;

2.       introduction of a statutory infrastructure provider regime into the Telecommunications Act 1997 ; and

3.       establishing an ongoing funding arrangement for NBN Co’s fixed wireless and satellite networks through the Regional Broadband Scheme.



The Regulation Impact Statements were assessed by the Office of Best Practice Regulation as meeting best practice requirements in line with the Australian Government Guide to Regulation.

The Regulation Impact Statements for measures one and two are found in this Explanatory Memorandum whilst the Regulation Impact Statement for the third measure is found in the Explanatory Memorandum to the Telecommunications (Regional Broadband Scheme) Charge Bill 2017.

 



 

REGULATION IMPACT STATEMENTS

 

Amendments to Parts 7 and 8 of the Telecommunications Act 1997 and Part XIC of the Competition and Consumer Act 2010

This Regulation Impact Statement (RIS) looks at the options for responding to the recommendations of the independent cost benefit analysis of broadband and review of regulation chaired by Dr Michael Vertigan, AC (the Vertigan panel) in so far as they relate to Parts 7 and 8 of the Telecommunications Act 1997 (the Tel Act).

In 2011, the Parliament enacted Parts 7 and 8 of the Tel Act, and associated provisions in the Competition and Consumer Act 2010 (CCA). In essence, Part 7 and associated CCA provisions provide that non-NBN networks that are built, upgraded or extended after 1 January 2011 and supply superfast carriage services to residential and small business customers must supply a wholesale Layer 2 bitstream service to access seekers on request on an open access and non-discriminatory basis. Part 8 provides that such networks must operate on a wholesale-only (i.e. structurally separated) basis. There are statutory exemptions that, for example, allow pre-2011 networks to be extended by up to one kilometre, and there are also powers for the Minister to grant exemptions.

The Vertigan panel recommended that the Government repeal Part 7 of the Tel Act, arguing that it provided an unnecessary constraint on competition. The panel also recommended that Part 8 should be amended to tighten its operation so that there is a baseline of structural separation of superfast broadband networks, but also to implement a process under which the ACCC can authorise providers operating on a functionally separate, rather than structurally separate, basis where this promotes the long-term interests of end-users.

This RIS:

·          provides background to this problem;

·          explains the Government objectives;

·          considers the options available, and the strengths and weaknesses of those options; 

·          assesses the impact of those options on stakeholders;

·          recommends a preferred course of action; and

·          assesses the costs of the options.

The options are:

1.       status quo—retain Parts 7 and 8 in their current form;

2.       amend Parts 7 and 8, broadly in line with recommendations made by the Vertigan panel; and

3.       repeal Parts 7 and 8.

This RIS recommends option 2 as it is expected to deliver a net economic benefit by promoting investment and competition while ensuring adequate safeguards are in place to preclude discrimination in the supply of wholesale broadband service, which could otherwise impact retail level competition to the detriment of consumers.

An early assessment draft of this RIS was provided to OBPR in 2014 and then considered by the Government when it developed its response to the Vertigan panel (set out in the 2014 Telecommunications Regulatory and Structural Reform policy paper). The Minister also considered an early draft of the RIS in finalising his decisions upon separation issues as part of the development of the response. The draft RIS was published with draft legislation in December 2016 and the Government sought submissions on the RIS. The RIS was submitted to OBPR for First and Second Pass Final Assessment in May 2017.

Context                                                                                                           

Parts 7 and 8 contain rules applying to a local access line that forms part of a local access network:

·          used, or proposed to be used, to provide a fixed-line carriage service where the download transmission speed is normally more than 25 Mbps to residential or small business users; and

·          that was built, upgraded, altered or extended on or after 1 January 2011 so that it is capable of being used to supply broadband services with of a download transmission speed normally more than 25 Mbps.

Part 7 requires operators of such networks to provide a Layer 2 bitstream service. [3] Part XIC of the CCA sets out associated obligations in relation to the supply of high-speed carriage services to residential or small business users using these networks. In particular, network relevant operators are required to supply a Layer 2 bitstream service declared by the ACCC and comply with non-discrimination obligations in relation to the supply of the service. There are a number of exemptions to Parts 7 and 8; for example, extensions of up to 1 kilometre of superfast broadband networks that were built prior to 2011 (the 1 kilometre exemption) and exemptions granted by the Minister (ministerial exemptions).

Parts 7 and 8 were established as part of the previous Government’s changes to the Australian telecommunications regulatory regime. Parts 7 and 8 complemented the establishment of NBN Co and its construction and operation of the NBN as a new high-speed wholesale-only open access, non-discriminatory network, as well as the structural separation of Telstra.

The Explanatory Memorandum to the Telecommunications Legislation Amendment (National Broadband Network—Access Arrangements) Bill, which introduced Parts 7 and 8 into Parliament, noted the scope for competing providers to target highly profitable areas and “operate as vertically-integrated providers and advantage themselves over independent retail service providers.” [4]

Parts 7 and 8 were intended to ensure that where such networks are built and operated that they provide consumers with a choice of competing retail service providers and the benefits of that competition, in terms of service innovation and lower retail prices. As such, they seek to provide consumers with the same types of outcomes that they should enjoy on the NBN. They also meant that retail providers in the residential and small business markets would have limited opportunities to operate their own access networks going forward, advantaging their retail businesses as a result.

Parts 7 and 8 would also create a more level regulatory playing field for NBN Co, enabling it to compete in the provision of infrastructure. As a result of this, NBN Co would also be better able to cross-subsidise loss-making services, as required by the previous Government’s operational model for NBN Co.

Vertigan Review and Government Policy Statement of 11 December 2014

In 2014, the Vertigan panel conducted a review of telecommunications regulation. As part of this review, the panel considered whether Parts 7 and 8 were operating effectively and if amendments should be made to promote competition, innovation and investment.

The Vertigan panel recommended that the Government repeal Part 7 of the Tel Act and amend Part 8 to repeal the statutory and ministerial exemptions and implement a process under which the ACCC could authorise integration of operators that would otherwise be required to structurally separate, where this promotes the long-term interests of end-users, subject to appropriate access, equivalence and non-discrimination regulation. [5]

The Government accepted the recommendations in large part. In its December 2014 policy statement, Telecommunications Regulatory and Structural Reform , the Government announced that it would introduce legislation to:

·          repeal Part 7 with intended effect from 1 July 2017 and from this time, access to services would be dealt with under Part XIC of the CCA, by the ACCC deciding whether to declare access to, and regulate, wholesale services;

·          require new networks offering high-speed broadband to be structurally separated as a default and offer non-discriminatory access;

·          remove small business customers from the scope of Part 8, leaving it to apply to networks servicing residential customers;

·          remove the statutory exemptions, such as the 1 kilometre exemption, and the power for the Minister to grant exemptions from Part 8;

·          provide for the ACCC to authorise functional separation arrangements (subject to undertakings from carriers detailing satisfactory arrangements for access and equivalence to minimise anti-competitive effects); and

·          include appropriate grandfathering measures for pre-existing high-speed broadband networks.

As an interim measure, in December 2014, the Government also made the Carrier Licence Conditions (Networks supplying Superfast Carriage Services to Residential Customers) Declaration 2014 (superfast carrier licence conditions) requiring affected providers of superfast broadband networks providing services to residential customers to operate on a functionally separated basis.

Assessing the problem

The fundamental problem in this area is whether Parts 7 and 8 operated as best they can and whether their operation could be improved to promote investment and competition while still supporting effective retail level competition (in the same manner envisaged on the NBN). A further consideration is how any changes to the arrangements will impact on the operation of NBN Co and its ability to deliver on the Government’s objective that it provide better broadband and an improved platform for retail competition and at less cost across Australia as soon as possible.

If the provision of infrastructure is left to the market, further investment in new broadband infrastructure would be expected to occur over time. Such investment is occurring already in some instances, for example, there is competing infrastructure in the inner cities of several capital cities. However, such investment has been slow in occurring and is highly targeted, generally leaving the bulk of premises untouched. In response to this, the previous Government established NBN Co to deliver better broadband within a fixed timeframe.

Telecommunications infrastructure generally requires significant capital and it is often not economically efficient for competing providers to duplicate infrastructure. For this reason, many networks are ‘bottlenecks’ and the network owner controls access by competitors to the consumers that are connected to it. This is particularly the case if it is the only access network in a locality; but it can also be an issue if there are competing networks in a locality, because both carriers and consumers may be reluctant to meet the cost of additional new connections and there may be a general inertia on the part of consumers to churn from one access provider to another. As a result, there may be only one network servicing any individual premises.

Bottleneck control over access networks can limit retail competition in two key ways. First, the network owner may not allow competitors to access the network at all. In this case, customers that are connected to the network will not have any choice of retail provider. Second, the network owner may supply its competitors on terms that do not enable them to compete effectively with the network operator’s own retail arm, for example, it could charge prices that are close to or higher than its retail prices. In this case, competitors would need to charge higher retail prices than the network operator in order to turn a profit.

Recognising the bottleneck control of access providers, the established remedy has been for the ACCC to be able to declare access to such networks. It should be noted that the general access regime under the CCA does not apply to telecommunications and instead Part XIC of the CCA provides a telecommunications specific access regime. Once the ACCC declares access to a service, infrastructure owners must give access to competing providers to make use of their network. In this way, declaration is designed to enhance retail competition. Following declaration, the ACCC can set regulated terms and conditions, including price, that a network owner must comply with in the absence of commercial negotiation. In 2010, however, the ACCC had not looked at the issue of access to new superfast access networks. Moreover, the Part XIC regime cannot readily deal with preferential self-treatment by integrated providers. In particular, the ACCC cannot demand particular structural remedies for competition problems and also cannot require non-NBN Co providers to supply services on a non-discriminatory basis.

In this context, the then Government decided to legislate to deal with these issues. Subsequent to that, as required by statute, the ACCC declared access to services on new superfast networks that compete with NBN Co in 2012 through the Local Bitstream Access Service. This declaration only applies to specific networks that were not exempted from the new laws. Following issues with wholesale supply in networks that were exempt from the laws, in September 2014 the ACCC also announced that it would look at declaring access to new VDSL2 networks, such as TPG’s proposed fibre to the basement network. [6] In July 2016 the ACCC declared a superfast broadband access service. The ACCC’s two declarations ensure that a high-speed wholesale broadband service is available on non-NBN superfast networks. However, as noted above, the ACCC has no powers to require separation of network providers, or to require SBAS providers to supply the service on a non-discriminatory basis.

The issues of access and preferential self-treatment have been accepted by Government and Parliament as key issues. In recognition of this, there has been support for the structural separation of Telstra and the establishment of NBN Co as a wholesale-only, non-discriminatory operator to address the problem. Parts 7 and 8 of the Tel Act were also enacted to deal with the issues more effectively on an ongoing basis.

While it is important for regulation to tackle the ability of network operators to favour their own retail operations over wholesale customers, strict structural separation rules may have a negative effect on incentives to invest in infrastructure.

There are three key ways in which Parts 7 and 8 may discourage investment and competition. First and foremost, such rules force a particular operational structure onto investors rather than leaving this to their commercial judgement. Second, they confine investors in networks to funding their investments from revenues from the network and prevent them accessing revenues from retail operation. Third, the separation of network and retail businesses can dampen retail market feedback to the network operation which is important to network investment and upgrades.

The Government has received requests for exemption from Part 7 and 8 of the Tel Act from five carriers. These requests indicate that Part 7 and 8 of the Tel Act discourage investment and limit competition. For example, in its request for exemption, one carrier identified that newer, smaller networks have difficulties competing with larger, pre-existing networks as a result of the rules. If a smaller network operator wished to extend its network to new small business customers, for example, it was limited to extensions of up to 1km by the rules if it wished to continue to operate on a vertically integrated basis. By contrast, larger pre-existing network providers, with substantial network footprints, had much larger networks and addressable premises from which they could operate on a vertically integrated basis. As a result, larger providers have advantages in competing for business customers.

Two small providers both argued that the laws placed considerable operational and financial burdens on them. As smaller operators, the costs of structural separation were prohibitive and being able to adopt functional separation would reduce their costs.

The diagram below shows that the tension between the rules in Parts 7 and 8 and the promotion of investment is cyclical in nature.

Figure 1: Impact of vertical integration and structural separation on competition and investment

This pictorial shows the impact of vertical integration and structural separation, of service providers, on competition and investment. It shows that vertical integration can reduce competition and lead to poor outcomes for consumers. Structural separation can promote better outcomes, but inhibits investment.

A balance must therefore be struck between promotion of innovation and investment and the desire to avoid the potentially negative implications of vertical integration, particularly in the retail market. This was of particular concern to the Vertigan review.

The tension between these two countervailing policy issues is discussed in detail in section 7.4 and 7.5 of the Vertigan review’s Market and Regulatory Report. Amongst other things, particularly pertinent to the current discussion, the review noted:

Both retail and wholesale competition can and should therefore be pursued. The former is guaranteed by Part XIC and the special access provisions relating to NBN Co. The latter can be promoted by removing disincentives to wholesale market entry while ensuring there is effective support for retail competition, potentially in the form of access, equivalence, and appropriate non ‐ discrimination and/or separation regulation. Removing those disincentives is obviously all the more important if NBN Co remains as an integrated entity; in that event, the changes proposed by the panel should be treated as a matter of considerable urgency. [7]

Given these considerations, the panel rejects the unqualified imposition of any structural separation, wholesale access and/or equivalence, separation and/or non ‐ discrimination rules. Attempts to impose arrangements of that kind are likely to worsen the artificiality of the current arrangements stifling competition while giving rise to perverse and unanticipated consequences. Moreover, it is difficult to see why those arrangements would be necessary, given the industry structure that could emerge under better policy settings.

That said, the panel recognises that situations may arise where imposing structural requirements would be in the LTIE [long term interests of end-users]. However, Part XIC provides only limited capacity to address vertical integration issues apart from the access declaration and determination process. The processes it establishes are likely to be too weak or slow to address any vertical integration issues promptly and effectively. The panel therefore does not favour the option of leaving those issues to Part XIC as currently drafted.

Instead, it would be preferable to adopt an intermediate position in which desirable levels of access can be ensured, and additional carrier ‐ specific requirements relating to equivalence, non ‐ discrimination and separation imposed as requirements of entry and/or ongoing service provision, where (and only where) they are clearly justified. [8]

As the above paragraphs and the Vertigan panel’s report generally indicates, the appropriate balance between regulatory interventions is finely balanced, particularly noting that once a network is built and operational, it is extremely difficult to later impose structural or other separation requirements on it that apply retrospectively to address equivalence concerns, reducing the policy options for government. As such there are strong arguments for structural separation being the default or baseline position, even if it is a position from which there is movement over time.

In essence then, the issue is what is the optimal mix of Government interventions, if any, to promote infrastructure investment and competition, while at the same time ensuring there is access for access seekers to bottleneck facilities, and that the controllers of such facilities cannot advantage their own operations, so as to maximise retail level competition, and the benefits it delivers.

Objectives

The Government’s key objective is to promote infrastructure investment and competition by letting the market operate freely to the extent possible, while at the same time ensuring there are appropriate protections in place to ensure that end-users have access to the same kinds of service outcomes available on the NBN, regardless of the network provider, and access seekers are able to access bottleneck facilities on non-discriminatory terms.

A further consideration is how any changes to the arrangements will impact on the rollout of the NBN by NBN Co and the NBN’s ability to deliver on the Government’s mandate that it provide better broadband and an improved platform for retail competition and at less cost across Australia as soon as possible.

This Regulation Impact Statement (RIS) considers options for implementing the recommendations made by the Vertigan panel in relation to Parts 7 and 8 of the Tel Act in the context of encouraging investment in infrastructure and infrastructure competition, while balancing the potential impact on NBN Co, in particular its ability to deliver on the Government’s mandate.

Attachment A details the regulatory burden measurements and compliance costs for each option considered in this RIS.

Overview of options

This RIS considers three options:

  1. status quo—retain Parts 7 and 8 in their current form;
  2. repeal Parts 7 and amend Part 8, broadly in line with recommendations made by the Vertigan panel; and
  3. repeal Parts 7 and 8.

 

Option 1: Status quo—Retain Parts 7 and 8 in their current form

Under this option, the level playing field rules in Parts 7 and 8 would remain unchanged. New networks targeting residential and small business customers and extensions of more than 1 kilometre to pre-existing networks would generally need to be wholesale-only and offer a Layer 2 bitstream service.

The existing exemptions would remain in place, providing carriers with a mechanism to extend networks built prior to 2011 by up to 1 kilometre and/or seek ministerial exemptions from the level playing field rules. If this option was adopted, the Government would need to consider whether to extend the superfast carrier licence conditions, which are scheduled to expire on 1 July 2018.

Part 7 and associated provisions in the CCA would also remain in place, limiting the ACCC’s ability to develop more up-to-date service declarations because it cannot vary or revoke the Local Bitstream Access Service declaration.

Option 2: Repeal Part 7 of the Telecommunications Act and tighten up the operation of Part 8 while also creating a mechanism to allow the ACCC to allow functional separation

Under this option, the Government would amend Parts 7 and 8 broadly in line with the Vertigan panel recommendations.

Part 7 would be repealed and access to high-speed broadband networks would be dealt with by Part XIC of the CCA through the ACCC declaring access to bottleneck services. The wholesale-only rules in Part 8 would be amended to reset the basic requirement of structural separation of carriers’ wholesale and retail operations and remove the current statutory exemptions and the Minister’s ability to grant exemptions from Part 8. The structural separation obligation would be amended to only apply to local access lines used to supply residential customers, including home-based businesses rather than residential or small business customers, as is currently the case. This is because there is considered to be greater scope for competition in the supply of services to small businesses and competition concerns are less pressing as a result. This means that new networks targeting residential customers and extensions of any length to pre-existing networks targeting residential customers would need to be wholesale-only as the default.

Part 8 would be amended to set out a functional separation regime under which operators can seek authorisation from the ACCC to operate on a functionally separated basis, subject to the operator providing an undertaking detailing satisfactory arrangements for access and non-discrimination to minimise the anti-competitive effects of operating their network on an integrated basis.

The amendments would include mandatory considerations for the ACCC in assessing whether a functional separation undertaking promotes the long-term interests of end-users, while giving the ACCC the flexibility to tailor the level of separation required for an operator, depending on the size and scale of the business. For example, larger network operators may be required to operate separate wholesale and retail companies whereas smaller operators may be required to operate separate business units.

The ACCC would also be able to make a legislative instrument establishing a deemed functional separation undertaking that providers can elect to be bound by.

Where the ACCC has authorised functional separation, all of the operator’s local access lines serving residential customers, not merely new local access lines serving residential customers, would be operated on a functionally separated basis, thereby streamlining and simplifying the current regulatory landscape for operators that have networks, or parts of networks, that are subject to different regulatory regimes.

As the assessment of functional separation undertakings will involve regulatory assessment by the ACCC, Part 8 would also be amended to allow the ACCC to set a fee for the consideration of functional separation undertakings.

Conceptually, this approach can be seen as setting structural separation as the baseline for new superfast networks but allowing alternative separation rules, as appropriate to the circumstances.

Option 3: Repeal Parts 7 and 8

Under this option, Part 7 would be repealed on the basis that access to networks can be regulated as required by the ACCC under Part XIC. Part 8 would be repealed on the basis that, notwithstanding the arguments for it, it inhibits infrastructure investment, and to the extent that there was strong infrastructure investment and competition between competing networks, there would be an incentive for operators to provide access to their networks and on fair and reasonable terms. Moreover, to the extent that there is an argument for Part 8 to provide a level playing field for operators that operate on a wholesale-only or a retail-only basis, that decision is generally a decision of the operator concerned, and/or the investors in it, for commercial and other reasons.

Analysis of options

This section discusses the relative costs and benefits of the three options and their impacts on stakeholders, particularly end-users, access seekers, NBN Co, and alternative providers.

The criteria used in the assessment relate to the Government’s combined objectives:

1.       Does the option promote competition in the supply of high-speed broadband services?

2.       Does the option promote the efficient use of and investment in infrastructure?

3.       Does the option provide regulatory symmetry between competing networks, including NBN Co?

4.       Does the option give regulatory certainty to operators of high-speed broadband networks, including in relation to structural separation?

5.       Is the option operationally practicable and administratively simple?

6.       Does the option support the Government’s policy of delivering faster broadband sooner and at less cost through the rollout of the NBN?

 

Option 1: Status quo—Retain Parts 7 and 8 in their current form

Competition

Advantages:

·          Access seekers would generally continue to have access to bottleneck infrastructure on non-discriminatory terms, which would promote their ability to offer competitive services and thereby accelerate benefits for Australians.

·          End-users should be able to receive service outcomes comparable to, or better than, those available on the NBN, regardless of which infrastructure provider services their premises.

Disadvantages:

·          To the extent the arrangements discourage network investment, they discourage infrastructure competition.

·          Under the current framework, it is possible for some network operators (absent other constraints) to use statutory exemptions to build and operate substantial networks servicing residential customers, favouring their own retail operators and not necessarily providing access to competitors. While this is addressed in part by the December 2014 Carrier Licence Conditions, this situation may inhibit wholesale and retail level competition, in that those providers can be advantaged over others.

·          The current rules apply to networks servicing both residential and small business customers. This appears to create additional burdens on the supply of service to small business customers, even though there is often greater competition in this market [9] .

Investment

Advantages:

·          Alternative infrastructure providers are able to invest in infrastructure under the level playing field rules.

·          To the extent that some operators can invest and compete under the existing statutory exemptions, this also provides scope for infrastructure competition, albeit on an asymmetrical basis.

Disadvantages:

·          The rules may discourage infrastructure investment to the extent that investors are not prepared to operate on a wholesale-only basis.

·          Lack of competing infrastructure may lead to poorer outcomes for customers, as there would be limited competitive pressure on NBN Co to deliver tailored solutions in a timely manner.

Regulatory symmetry

Advantages:

·          Similar regulation would continue to apply to networks and providers that are comparable, including NBN Co. That is, networks supplying superfast services to residential and small business customers and retailer providers on such networks.

Disadvantages:

·          Networks are subject to different regulation depending on when they were built and the statutory exemptions can advantage providers that had large network footprints prior to 2011, as these providers (absent other constraints) can service a broader customer base on a vertically integrated basis than providers with smaller network footprints.

·          Carriers are subject to greater regulation in operating networks servicing small business customers than those servicing other business.

 

Regulatory certainty, including in relation to structural separation

Advantages:

·          The industry has planned its investments on the basis of the existing rules, which have been in place for five years.

·          To the extent the rules are in place and working, they set structural separation as the baseline for all affected networks rather than this having to be imposed at a later date.

Disadvantages:

·          The arrangements provide statutory exemptions that can benefit some carriers over others.

·          Ministerial exemption powers are exercised at the Minister’s discretion and allow different providers to be dealt with in different ways.

Operational practicability and administrative simplicity

Advantages:

·          While some issues have arisen and exemptions are resource intensive to process, the current rules have been in place five years and are familiar to stakeholders.

Disadvantages:

·          The rules are administratively complex, more so as they apply differently depending on when a network was built.

·          Several exemptions have been granted and others have been sought indicating the rules raise practical operational issues.

·          The rules impose strict regulatory obligations on affected parties, limiting their commercial flexibility.

·          Processing of exemptions is resource intensive and time consuming for all parties.

NBN rollout:

Advantages:

·          There would be minimal disruption to the rollout and NBN Co’s network planning. This would enable NBN Co to continue focusing on the supplying high speed broadband to as many customers as possible, as soon as possible.

Disadvantages:

·          To the extent the existing arrangements provide for asymmetrical treatment of pre-existing networks and scope for exemption, this could create asymmetries in the competitive framework that could potentially disadvantage NBN Co and affect its operation, although the magnitude of any impact would depend on the extent of the asymmetries

 

Option 2: Repeal Part 7 of the Telecommunications Act and create a mechanism in Part 8 to allow the ACCC to allow functional separation

Competition

Advantages:

·          Maintaining structural separation as the default requirement and allowing effective functional separation solutions would promote competition as it allows providers to operate in the retail market while preventing network operators favouring downstream operations.

·          Allowing carriers to operate on a functionally separated basis would increase scope for competition, subject to appropriate disciplines.

·          Removing networks servicing small businesses from the application of Part 8 would likely enhance competition between high-speed broadband networks and between retail providers as it would give operators greater scope to service businesses of all sizes.

·          The proposed exemption for networks with up to 2,000 [10] end users could also facilitate new market entry.

Disadvantages:

·          The ACCC will have the ability to exempt operators with fewer than 2,000 [11] retail customers, meaning there could be “islands” where operators can build and operate networks servicing residential customers, favouring their own retail operators and not providing access to competitors.

·          Functionally separated operators could be competitively advantaged relative to providers like NBN Co and Telstra subject to separation obligations.

Investment

Advantages:

·          Allowing functional separation would promote the economically efficient use of and investment in infrastructure, as network operators would be able to supply retail services over their networks.

·          Implementing a functional separation model whereby the ACCC is required to assess applications for authorisation against specific criteria would provide a means for addressing concerns about access and discrimination without requiring full structural separation.

Disadvantages:

·          Carriers would still be required to functionally separate all fixed-line networks if they wanted to expand their superfast networks, which they may see as burdensome and a disincentive.

Regulatory symmetry

Advantages:

·          Maintaining structural separation as the default and removing the statutory exemption going forward would mean that all future extensions of non-NBN networks are subject to the same baseline rules (though grandfathering arrangements apply to pre-2011 networks that are extended by 1 kilometre before 1 July 2017).

·          Removing the 1 kilometre statutory exemption would close loopholes, providing greater certainty for industry and greater regulatory symmetry for operators of non-NBN high-speed broadband networks.

Disadvantages:

·          Allowing functional separation and removing networks servicing small businesses from the structural separation obligation would lead to less regulatory symmetry between networks and service providers, including NBN Co.

Regulatory certainty, including in relation to structural separation; operational practicability and administrative simplicity

Advantages:

·          The model draws heavily on existing arrangements, with which industry is familiar and on the basis of which industry has made investments.

·          Maintaining structural separation as the default would provide greater certainty for industry as it would know the default requirement going forward and would have planned its investments on the basis of the existing rules.

·          Maintaining structural separation as a default would minimise issues in seeking to impose new structural requirements if warranted in future.

·          The rules would provide greater operational flexibility than the current rules. For example, there would be more scope to service small business customers and carriers could seek ACCC authorisation to operate on an integrated but functionally separated basis.

Disadvantages:

·          Structural separation will remain the regulatory baseline.

·          The changes are a departure from the current regime but there remain many similarities and changes have been foreshadowed since December 2014.

·          The assessment of functional separation undertakings by the ACCC may take time, which may cause delays to network owners’ planned infrastructure deployments.

·          Decisions would be a matter for the ACCC, thus there is a degree of uncertainty.

NBN rollout

Advantages:

·          To the extent this approach increased competitive pressure on NBN Co, it would be expected to further promote NBN Co’s efficient operation.

·          NBN Co would operate in a regulatory framework broadly comparable to that currently applying, but no change is proposed to its obligations under the National Broadband Companies Act 2011 and Part XI of the Competition and Consumer Act 2010 where it operates solely as a wholesale-only company and it sells its services to retail service providers.

·          To the extent it is impacted by greater competition, NBN Co’s ability to continue to provide fixed wireless and satellite services in regional, rural and remote areas will be further supported by the proposed non-commercial services funding mechanism.

Disadvantages:

·          To the extent that this option increases competition to NBN Co, NBN Co would need to be able to respond. (This is now possible given the move away from uniform national prices to price capping.)

·          Increased competition could affect NBN Co’s financial performance and its ability to deliver on the Government’s broadband rollout objectives (though some of the objectives may be met by competing investments).

·          Any impact on NBN Co’s ability to deliver non-commercial services should be offset by the proposed scheme to which its competitors will need to contribute.

 

Option 3: Repeal Parts 7 and 8

Competition and investment

Advantages:

·          Option 3 is similar to Option 2 in that there would be greater scope for network operators to operate in retail markets.

·          Operators would be able to operate in both network and retail markets, free of regulatory constraints. (However, there was limited investment in high-speed broadband infrastructure prior to Parts 7 and 8 being introduced.)

·          Investors would be able to choose their preferred corporate structure and mode of operation.

·          Additional competition may lead to better outcomes for customers, as there may be more competitive pressure on NBN Co to deliver tailored solutions in a timely manner.

Disadvantages:

·          While the ACCC could require carriers to provide access to services on non-NBN networks, there would be no clear mechanism to deal with the issues of such networks becoming significant players in the marketplace and favouring their downstream retail operations over those of access seekers. This could have an impact on long term competition, especially at the retail level.

Regulatory symmetry

Advantages:

·          There would be regulatory symmetry between providers other than NBN Co and Telstra, which are subject to specific structural rules.

Disadvantages:

·          There would be greater regulatory certainty for most carriers. However, new operators would have a competitive advantage relative to carriers like Telstra and NBN Co, which are more heavily regulated and have less commercial flexibility.

 

Regulatory certainty, including on structural separation; operational practicability and administrative simplicity

Advantages:

·          Repealing Parts 7 and 8 would simplify compliance and enforcement processes relating to high-speed broadband networks. There would not be any exemptions, as now, or functional separation undertakings as proposed under option 2.

·          Market participants other than NBN Co, Telstra and those with ‘Adequately Served’ obligations [12] could choose their preferred mode of operation, subject to general regulation. 

Disadvantages:

·          There would be no clear mechanism to introduce structural or functional separation in future if required to deal with any future competition issue that could emerge.

·          Repealing Parts 7 and 8 would be a significant change in the direction of policy as it has stood since 2011, which has focused on the establishment of the NBN as the primary fixed-line network, operating on a wholesale-only non-discriminatory basis.

·          Many investors have made significant investments on the basis of this policy direction and their business plans reflect this. This includes moving towards a retail-based model based on operating on the NBN.

·          Significant changes to regulation following the changes made in 2011, may affect investor confidence in the stability of the market.

·          Submissions to the Vertigan panel’s consultation broadly supported the continuation of the current approach to regulating NBN Co and similar networks. Industry may be concerned if there is a significant departure from the regulatory model.

·          Given the fundamental issues that can arise from vertical integration, there would be a risk that further regulation may need to be implemented in future; creating some degree of uncertainty.  For example, there may need to be some new mechanism to deal with future vertical integration issues

·          There appear to be no particular operational or administrative issues with Option 3, although there may need to be greater use of other regulatory mechanisms such as Part XIB, and Part XIC of the CCA and general competition law. 

NBN rollout

Advantages:

·          To the extent this approach increased competitive pressure on NBN Co, it would be expected to further promote NBN Co’s efficient operation.

Disadvantages:

·          NBN Co’s regulatory disadvantage could affect its financial performance and its ability to deliver on the Government broadband rollout objectives.

·          Any competing investment is likely to target high value areas, leaving NBN Co to focus on lower value areas, which may impact on its ability to supply affordable broadband at the lowest cost to taxpayers.

·          To the extent it is impacted by greater competition, NBN Co’s ability to continue to provide fixed wireless and satellite services in regional, rural and remote areas would be affected and there would be ongoing need for the proposed non-commercial services funding mechanism.

Preferred option

As discussed above, there are many competing factors in relation to these policy issues, which means consideration is finely balanced and there is no clear or simple answer.

In terms of determining the likely extent of the impacts of change, they potentially benefit most licensed carriers and all small businesses in Australia. There are currently 267 licensed carriers in Australia and approximately 400,000 small businesses (excluding home-based businesses). Laws that provide greater commercial and competitive flexibility for carriers potentially benefit most of those carriers, in that they reduce barriers to operating in small business and residential markets (NBN Co is the main exception to this.) In turn, small business customers would benefit from greater competition and investment to provide them with services.

Furthermore, changes to the laws would provide more specific benefits for certain types of carriers. There are 12-15 non-NBN carriers who currently operate superfast fixed-line networks in Australia. Most of these are small carriers who operate in new developments and or in business zones. The networks currently pass approximately 500,000 premises, located mainly in metropolitan areas or on the fringes of metropolitan areas. In practical terms existing networks, subject to the current rules, will have more scope to service small business customers and operate retail businesses as well as networks. Some carriers may also be motivated to enter small business and residential superfast fixed-line network markets, further increasing competition and investment.

Option 2 provides flexibility in terms of corporate structure (in that it allows functional separation, where it is in the long-term interests of end-users), thereby creating greater potential for infrastructure investment and competition and the benefits it can deliver, while safeguarding retail competition, by providing ongoing access and non-discrimination mechanisms. Under option 2, the ACCC would also be able to make a class exemption for very small networks (up to 2,000 customers, or up to 12,000 customers if regulations are made), which would promote entry by new providers.

Option 2 is expected to deliver a net economic benefit, because it best balances the Government’s objectives (promoting investment and competition while ensuring adequate safeguards are in place to preclude discrimination in the supply of wholesale broadband service (which promotes retail level competition) and allows NBN Co is able to complete its network in accordance with the Government’s mandate.

Option 2 satisfies each of the criteria used to assess the Government’s objectives. In particular, Option 2 has the advantages of:

·          regulatory certainty as it is consistent with the current policy direction and the business planning that has been done on that basis, including by NBN Co;

·          enabling concerns about preferential treatment of a carrier’s downstream retail business to be pre-empted and addressed, while maintaining structural separation as the default on all affected networks going forward, minimising issues in applying this later, if required;

·          providing more regulatory symmetry for operators of non-NBN high-speed broadband networks.

·          The figure below shows how functional separation encourages investment while also promoting competition.

Figure 2: Impact of functional and structural separation on competition and investment

The diagram depicts the impact of Option 2: functional separation delivers competition and investment benefits. Functional separation promotes investment while also delivering better competition and better outcomes for consumers.

Accordingly, option 2 is considered to deliver the greatest net benefit.

Option 1 does not address all of the Government’s objectives, though it does at least provide certainty to industry that the current regulation would continue as expected. However, the concerns identified by the Vertigan panel in relation to investment in infrastructure and the regulatory asymmetry caused by the current exemptions would continue.

Option 3 does not address all of the Government’s objectives either. Under this option, investment in infrastructure would likely be enhanced as network owners could operate on a vertically-integrated basis. However, as noted above, infrastructure-based competition has been historically limited to lower cost, higher revenue markets, meaning issues relating to integrated monopolies could re-occur in future. Moreover, network owners would be incentivised to discriminate in favour of their own retail business. This could limit retail competition, particularly noting the bottleneck characteristics of local telecommunications access networks. However, there would be no ready means to address any such issues under Option 3. The option is therefore less likely to deliver a net benefit than option 2.

Consultation

There was extensive consultation on possible changes to the telecommunications regulatory framework in 2014 as part of the Vertigan review. The Vertigan panel released a Regulatory Framing Paper in February 2014 to take soundings from industry and the public on key issues that should be considered. The panel received 43 submissions. The Vertigan panel also engaged directly with a range of stakeholders in follow-up discussions.

The Government published its Telecommunications Structural and Regulatory Reform policy in December 2014, which set out its response to the Vertigan review and its reform plans for the sector. The response was based on the reports of Vertigan review, the submissions to it, and other industry engagement. There has been ongoing engagement with industry since that time.

On 12 December 2016, the Minister for Communications and the Minister for Regional Communications released for public comment exposure drafts of the:

·          Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017; and

·          Telecommunications (Regional Broadband Scheme) Charge Bill 2017.

 

The Bills provide for three key reform measures:

·          Refinement of the carrier separation rules under Parts 7 and 8 of the Tel Act;

·          The introduction of a statutory infrastructure provider obligation for superfast broadband; and

·          The introduction of a Regional Broadband Scheme to support loss-making services.

Along with the Bills, the Government released:

·          explanatory notes on the draft Bills - an overview of the Bills and explanation on the operation of the key measures; and

·          Regulation Impact Statements for the three measures.

Submissions on the package were requested by 3 February 2017.

In addition to public announcement of the consultation process, the Department of Communications and the Arts undertook a number of initiatives to raise awareness with stakeholders, in particular, carriers, service providers, industry, consumer and regional representative groups and regulators.

The Department emailed all licensed telecommunications carriers and other known interested parties, advising of the consultation process and offering to provide further explanation and to discuss issues. It made a presentation to Communications Alliance members on the package in December, offering follow-up engagement. A range of follow-up briefings and discussions with other groups and individual stakeholders followed. The Department also provided an online briefing to the Wireless Internet Service Providers of Australian (WISPAU) in early 2017.

The Department received 30 submissions. These included submissions from Telstra, Optus, VHA, Vocus, TPG, the Greenfield Operators of Australia (four small carriers: OPENetworks, LBN Co, CNT Corp Pty Ltd and Opticomm), NBN Co Limited, Great Northern Telecommunications, Spirit Telecom, the Australian Communications Consumer Action Network (ACCAN), Better Internet for Rural, Regional & Remote Australia (BIRRR), Cotton Australia, the Isolated Children’s Parents Association (ICPA), the NSW Farmers’ Federation, the National Farmers’ Federation, the Telecommunications Industry Ombudsman (TIO), Regional Development Australia and individual members of the Australian community. Submissions covered all aspects of the package to varying degrees.

There were limited comments on the proposed changes to the separation rules and even fewer comments on the related RIS. Two submitters criticised the existing separation rules, indicating that, in this context, they saw little benefit in the proposed reforms. However, they did not directly comment on the proposed changes to the rules. Three submitters supported retention of the status quo on the basis that this was the accepted industry model. Three submitters supported the proposed reforms on the basis that they would create more competitive opportunities and benefits for consumers. One submitter raised the need to maintain service continuity on networks currently operating under exemptions pending completion of the NBN. ACCAN was the only consumer organisation to comment on the proposed changes. It welcomed them on the basis that they would promote competition and benefits for end-users.

Following consideration of these comments, the Government amended the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 to clarify its operation in a number of areas and to better accommodate pre-existing networks in the transition to the new arrangements, particularly to better safeguard service continuity for service providers. The key revisions are ensuring that existing exempt networks can effectively continue to provide services pending completion of the NBN and clarifying the non-discrimination and enforcement arrangements.

The Department considers that the above changes will not impose any further regulatory burden overall.

Implementation and Evaluation

Option 2 would be implemented by legislation. Legislation is expected to be introduced into the Parliament in 2017. Should the Parliament pass the legislation as proposed, the aim is to have the amendments in place for 1 July 2018, but a later date may need to be considered depending on when the Bill is passed.

The Government would evaluate the impacts of the legislation through its normal industry monitoring and consultation processes. Additionally, the Productivity Commission is required to conduct a thorough review of the NBN once the Minister for Communications determines that the NBN is built and fully operational. This review must consider a range of matters, including competition in telecommunications markets, structural features of those markets, and equity of access to broadband services and bundling of services supplied by NBN Co. [13]



 

Attachment A

Regulatory Costings for amendments to Parts 7 and 8

This Regulation Impact Statement considers the Government’s response to the recommendations made by the Vertigan Panel regarding future separation arrangements for the operation of superfast networks.

This measure is deregulatory in that while it continues a basic requirement for structural separation for such networks, it narrows it and provides flexibility by allowing for functional separation (a less restrictive from of separation). If operators do not have the benefit of exemptions, under the current arrangements, they face costs in implementing stringent structural separation requirements. Therefore, by giving flexibility to operators, this measure would reduce costs.

It should be noted that this costing relates to the compliance costs of regulation as opposed to the substantive costs and benefits of regulation in terms of economy-wide outcomes. In this context, while it is assessed that both Options 2 and 3 will generate savings relative to the current regulatory burden on industry, it does not assess the substantive economic benefits of greater investment, commercial flexibility and competition under the options, and the countervailing costs, for example, from less effective retail competition.

Summary of Options

Options

Preferred

Costs

1: Status quo—do nothing

No

Neutral

2: Repeal Part 7 and allow authorisation of functional separation under Part 8

Yes

Reduction in costs

3: Repeal Part 7 and Part 8 in their entirety—providers would be free to structure their businesses as they wish

No

Reduction in costs

 

Assumptions (option 1)—status quo

No change in regulation—neutral regulatory burden impact.

Average Annual Regulatory Costs (from Business as usual)

Change in costs

($ million)

Business

Community organisations

Individuals

Total change in cost

Total by Sector

$0

$0

$0

$0

 

 

Assumptions—Option 2—Repeal Part 7 and amend Part 8 to tighten structural separation and allow the ACCC to consider functional separation—preferred

·          It is assumed that five providers would benefit from functional separation which would become possible from the proposed changes to Part 8. This number is based on the number of superfast broadband providers who emerged in the decade prior to the NBN regulatory landscape. Under future arrangements a similar number could be expected to emerge.

·          Using a weighted average separation formula (see Appendix 1 ), it is estimated these businesses would incur a cost of $3.5 million to implement full separation under the current arrangements. Under the preferred option these costs would be reduced by a factor of 30% if the providers choose to functionally separate rather than structurally separate. These cost reductions account for reduced need for systems separation, legal separation and personnel separation. The cost reduction for implementing functional, rather than structural, separation is estimated to be approximately $742,000 per carrier, or approximately $3,710,000 for the five carriers that are likely to be affected. Including ongoing costs over ten years for all five carriers would result in savings of approximately $10,388,000. [14]

·          There would be savings to providers in avoiding having to submit requests to the Minister for exemptions from the level playing field rules, and consequentially there would be savings to the Department of Communications in not processing these requests, and to the ACCC and the ACMA in not having to advise on these requests.

·          However, there would be an increase in costs that is likely to be commensurate to these savings for carriers in preparing and lodging functional separation undertakings with the ACCC for assessment.

·          The ACCC will also incur costs in assessing undertakings. While the ACCC is yet to advise on the amount it will charge applicants, it may be assumed to be a similar amount to the fee it charges for conducting formal merger reviews - $25,000. [15] For the five providers that are considered likely to apply for functional separation undertakings, the cost impact would be $125,000.

·          The ACCC could offset some of these costs through preparing a legislative instrument establishing the deemed functional separation undertaking.

Regulatory Burden and Cost Offset Estimate Table—average annual regulatory costs (from business as usual)

Change in costs

($ million)

Business

Community organisations

Individuals

Total change in cost

Total by Sector

($0.914 [16] )

$0

$0

($0.914)

 

Assumptions—Option 3—repeal both Part 7 and Part 8

·          The removal of Part 7 and 8 would theoretically reduce costs for firms because they would not need to meet the costs of structural separation, functional separation or seeking exemptions. That is, an assessment of the future with and without these amendments indicates that they would produce significant cost savings for future network deployments. However, they would not produce any cost savings for current networks or businesses.

·          As per option 2, there are expected to be five operators who would benefit from not having to structurally separate.

·          Therefore they would avoid the costs of implementing structural separation.

Average annual regulatory costs (from business as usual)

Change in costs

($ million)

Business

Community organisations

Individuals

Total change in cost

Total by Sector

($3.463)

$0

$0

($3.463)

 



 

Appendix 1

Method Used to Estimate the Costs of Structural and Functional Separation

The costs of structural or functional separation depend on a range of variables and circumstances specific to the context of the business that is undergoing separation. These factors include:

·          The size of the business

o    The larger the business the greater the cost to achieve separation. There are more products, systems, people and business processes to separate.

o    This should only account for the fixed-line portion of the business (either by assets or revenue). Information has been sourced from annual shareholder reports (prior to separation and indexed for inflation).

·          How established the business is as a vertically integrated entity.

o    The degree of vertical integration and systems interdependence follows from the period of time a business has operated the more costly the process will be given business processes and systems are more integrated.

·          Corporate Structure

o    Whether the business has any natural organisational separation between its retail and wholesale divisions.

·          The complexity of legacy IT systems.

o    The older the IT systems the higher the cost of achieving functional separation of those operating and business systems. The financial sector is a perfect example of this.

·          Complexity of network asset ownership post separation.

o    The more complex the asset ownership the greater costs in developing new systems to achieve the post separation regulatory outcomes.

Estimating costs impacts of structural and functional separation

The method outlined here uses available data about separation costs for British Telecom (BT) and Telecom New Zealand to develop an estimate of the costs incurred by five providers that are likely to implement the regulatory requirements proposed under the preferred option 2.

This estimate is developed by comparing the relative degree of size, complexity and vertical integration of Australian operators in comparison to BT and Telecom New Zealand and making proportional adjustments in costs to reflect differences. The two cost estimates are then averaged to produce the cost estimate used in the RBM calculations.

Key assumptions in comparing the costs of BT and Telecom NZ to the potential costs of Australian operators achieving functional separation:

·          BT and Telecom NZ were long established vertically integrated providers operating since the early 1900s.

o    Affected Australian operators are likely to be relatively new and not to operate substantial local access networks.

o    A relative weight of 40 per cent was assigned to reflect comparative costs.

·          BT and Telecom NZ had many legacy systems and complex IT arrangements. This is a highly significant driver of costs when logical and physical separation of IT systems is required.

o    Affected providers operate simple business models with very few products and little complexity.

o    A relative weight of 30 per cent was assigned to reflect comparative costs.

·          In terms of size of business, the likely affected providers are much smaller than BT and Telecom New Zealand and therefore we expect the costs of separation to be proportionally smaller. For example, the five affected providers are likely to have fewer than 100,000 customers each, whereas BT has 25,302,000 physical lines [17] and Chorus (Telecom NZ’s infrastructure division) has 1,794,000. [18]

·          It is assumed that an affected business would incur ongoing annual costs of 20 per cent of their one-off separation costs (primarily arising from wages relating to functions separation—for example, appointing a new director).

·          It is assumed that functional separation would incur 70 per cent of the costs of full structural separation.

See below for snapshot of working spreadsheet.



Table: costs of functional separation

Title: Costs of functional separation - Description: This table shows comparative average annualised cost of functional separation of comparable international service providers similar to to nbn. The costs of functional separation are lower than the costs of structural separation.

Table: costs of structural separation

Title: Costs of structural separation - Description: This table shows comparable average annualised costs of structural separation of international service providers similar to nbn. The costs of structural separation are greater than the costs of functional separation.

 



 

REGULATION IMPACT STATEMENTS

 

Introduction of a Statutory Infrastructure Provider Regime into the Telecommunications Act 1997

 

This Regulation Impact Statement (RIS) considers options to ensure that industry and consumers have certainty that NBN Corporation Limited (NBN Co) (or comparable providers) will connect and supply next generation broadband infrastructure and services on an ongoing basis, while balancing the potential operational impact on NBN Co and comparable providers, in particular NBN Co’s ability to roll out the National Broadband Network (NBN) sooner and at lower cost, as instructed by the Government.

The RIS looks at three main options:

1.              continue to give NBN Co guidance on its connection and supply obligations through Statements of Expectations;

2.              make carrier licence conditions setting out connection and supply obligations for NBN Co and alternative providers; and

3.              legislate connection and supply obligations for NBN Co and alternative providers.

These are assessed against factors such as whether the option will ensure consumers have access to high-speed broadband after the NBN rollout is completed in each area, whether consumers and industry will have certainty about NBN Co’s supply obligations, whether there is the flexibility to allow providers other than NBN Co to register as the statutory infrastructure provider in areas where they have deployed infrastructure, the potential impact on NBN Co’s rollout, and whether the compliance costs of the option would outweigh the benefits.

The RIS concludes that legislating connection and supply obligations on NBN Co and other comparable providers (Option 3) offers the greatest net benefit as it provides certainty for end-users that they can receive high-speed broadband services and does this through imposing limited compliance costs on industry. It would provide the most clarity and certainty for NBN Co and access seekers as to NBN Co’s supply obligations. It would also ensure that there is certainty for alternative providers, in areas where they are the sole or main providers of infrastructure, that they will have connection and supply obligations and how such obligations will be implemented and enforced.

Context

In December 2013 the Government appointed a panel chaired by Dr Michael Vertigan, AC (the Vertigan panel) to conduct a cost-benefit analysis of the National Broadband Network and a review of structural and regulatory arrangements in the telecommunications sector. As part of this review, the panel considered whether a legislated obligation on NBN Co to connect premises and supply services is needed to give certainty that consumers and businesses will be able to access telecommunications services, regardless of where they live in Australia, following the NBN rollout.

In its 2014 National Broadband Network Market and Regulatory Report (the Regulatory Report), the Vertigan panel recommended that the Government introduce legislation to require NBN Co to supply broadband access to:

·          premises that are not already being serviced by another entity; and

·          premises that were serviced by another entity but that entity has exited the market. [19]

The panel also recommended that NBN Co have a Broadband Connection Service Undertaking (BCSU) approved by the ACCC setting out the terms and conditions on which it will provide a broadband connection service. [20]

The Government accepted the recommendation in part. In its December 2014 policy statement, Telecommunications Regulatory and Structural Reform (the 2014 Government Response), the Government announced that it would legislate infrastructure provider of last resort (IPOLR) obligations for NBN Co on an area basis once it has a well-established presence in the area. These have been renamed statutory infrastructure provider (SIP) obligations in the draft Bill. The 2014 Government Response also stated that the arrangements would allow for the SIP obligations to be applied to other carriers on an area basis where appropriate.

In relation to the panel’s proposal that NBN Co set out the terms and conditions on which it will fulfil its obligations in a BCSU approved by the ACCC, the Government considered the requirement unnecessary. NBN Co’s special access undertaking (SAU), which was accepted by the ACCC on 13 December 2013, already set out the terms and conditions on which NBN Co will supply services to retail providers.

The SAU identifies the main services to be supplied by NBN Co and sets out price caps relating to those services, but does not create obligations to connect premises, nor does it include service level standards like timeframes for connection and repair.

In a separate recommendation, the Panel advised the Government if it disaggregated NBN Co into competing business units, it should remove NBN Co’s internal cross-subsidy of its services in non-commercial areas and fund the loss through an industry charge. While the Government did not agree to disaggregate NBN Co at this time, it decided to implement arrangements for funding NBN Co’s non-commercial services to ensure their long-term sustainability. These arrangements are being developed and this will be considered in a separate RIS. Given that a statutory requirement to connect and supply services would entail connection of non-commercial services, the future funding arrangements are relevant to the current RIS.

The NBN is currently being rolled out progressively across Australia. After the rollout is completed, NBN Co will become the primary supplier of residential fixed-line communications infrastructure in Australia. When it is complete, the NBN will deliver high-speed broadband services across Australia. As part of the NBN rollout, Telstra, as the owner of the existing fixed-line copper network, has agreed to stop supplying fixed line telecommunications services using its network in an area 18 months after NBN Co starts supplying fixed line services in an area. Telstra will migrate these services to the NBN. Accordingly, NBN Co will ultimately replace Telstra as the principal fixed-line telecommunications network operator in most of Australia, the main exception being in the NBN satellite and fixed wireless footprint.

On 8 April 2014, the Shareholder Ministers issued a new Statement of Expectations to NBN Co requiring the company to continue the NBN rollout using a multi-technology mix (MTM) model to complete the rollout as quickly and as cost-effectively as possible. However, the Statement of Expectations does not explicitly address NBN Co’s ongoing obligations to provide infrastructure and services.

An early assessment draft of this RIS was provided to OBPR in 2014 and then considered by the Government when it developed its response to the Vertigan panel (set out in the 2014 Telecommunications Regulatory and Structural Reform policy paper). The Minister also considered an early draft of the RIS in finalising his decisions upon separation issues as part of the development of the response. The draft RIS was published with draft legislation in December 2016 and the Government sought submissions on the RIS. The RIS was submitted to OBPR for First and Second Pass Final Assessment in May 2017.

Assessing the problem

The key issue for this RIS is how to ensure that NBN Co will continue to connect premises and supply services after it has completed its rollout in an area within reasonable timeframes. A related issue is whether there are circumstances where another provider should be able or obliged to connect premises and supply services and if so, what those circumstances are. Consideration must also be given to whether it is appropriate for the same obligations to apply to all SIPs.

The Australian Government is committed to consumers in Australia having access to appropriate telecommunications services at affordable prices. The Australian Government has implemented a number of initiatives to ensure access to telecommunications services. In particular, in 2013, the Government indicated that it would continue the NBN rollout of a new national wholesale-only high-speed broadband network. When it is complete, the NBN will deliver high-speed broadband services across Australia.

There is also a legislated Universal Service Obligation (the ‘USO’). Under the USO, Telstra must supply an end-user with a standard telephone service on request. That is, the obligation is restricted to providing a voice telephony service rather than a broadband service that SIPs will be required to offer. The USO is complemented by the Customer Service Guarantee (CSG), which requires carriage service providers (CSPs) to meet performance standards, for example connection and repair timeframes, and provide end-users with financial compensation when these standards are not met. In areas where the NBN has not yet been rolled out, Telstra generally uses its copper network to meet the USO but may also use other technologies. As Telstra will stop using its copper network after the NBN becomes available in an area, it is expected Telstra will generally use the NBN to meet the USO.

At present, the only way that the Government, as shareholder, provides clarity about when, where and how NBN Co is to provide infrastructure is through the Statement of Expectations or other direction. Given the significance of ready and ongoing access to modern telecommunications, this method does not provide certainty or clarity to NBN Co, access seekers or consumers about NBN Co’s service provision obligations after it rolls out in an area. This lack of clarity and certainty has been raised as a concern by industry and the public, given past delays in service provision in some areas.

The Vertigan panel considered whether NBN Co’s ongoing service delivery obligations should be specified in legislation and noted that:

Taxpayer equity funding of up to $29.5 billion, acceptance that ongoing service supply in loss-making areas will be subsidised, as well as funding to support the migration of customers from Telstra’s copper network represent a major public commitment. This warrants a corresponding legal obligation relating to wholesale service provision by NBN Co… In any event, such a [legislative] requirement will need to be put in place prior to NBN Co being privatised otherwise its new owners could choose to withdraw from unprofitable areas or decline to extend its infrastructure into areas or to premises where it expects to make a loss. [21]

In considering whether to impose SIP obligations on NBN Co, it is important to consider the progressive nature of the NBN rollout. Imposing default provider obligations on NBN Co before it has a network in an area would be to impose obligations on it that it could not meet, or that would impose considerable costs on it to meet. It would only be possible to impose these obligations on NBN Co where it has infrastructure rolled out in that area in order to provide certainty that services are able to be supplied. It is more appropriate to only impose obligations to the rollout as it progresses.

The Vertigan panel also considered the potential impact of a SIP regime on NBN Co’s ability to complete the rollout of the NBN. In this regard, the panel noted:

[T]here would have been difficulties in placing supply obligations on NBN Co when it was a start-up company with no infrastructure and with an uncertain rollout-completion timetable. It would be undesirable for inconsistencies to arise, however inadvertently, between the deployment schedule for the NBN that made the best use of resources and NBN Co’s mandated service obligations. But the situation is changing and will change further as deployment progresses. At the very least, property owners in areas where the NBN has been provided need to have certainty about supply continuing into the future, as do those in areas what would be affected by infill service provision. [22]

A further issue is whether NBN Co should be the SIP for all of Australia after the NBN rollout is completed. While NBN Co will be the sole infrastructure provider in many parts of Australia, alternative operators are able to roll out competing networks. Private investment has occurred, and continues to occur. This is generally in new real estate developments (where the operator will likely connect the majority of premises in the development) and in apartment buildings in the inner cities of several capital cities (as these are generally low-cost, high-return investments). For example, Opticomm has installed infrastructure in approximately 100 new real estate developments and TPG has announced its intention to roll out a network to apartment buildings in a number of capital cities.

Arguably operators other than NBN Co will be better placed to assume the role of SIP in some circumstances, for example where they have a contract to be the infrastructure provider in an area. Another example is where vectored VDSL technology is used in an area or building. In some circumstances, the presence of multiple infrastructure providers using vectoring technology can lead to the degradation of end-user services which may mean a single provider other than NBN Co needs to exercise SIP responsibility.

Requiring NBN Co (or another provider) to be the SIP will give end-users and industry certainty that regardless of where they reside or operate, they will have access to underlying telecommunications infrastructure and services. As NBN Co will likely be the sole infrastructure provider in most areas, it is appropriate for it to be the default SIP. However, any SIP regime needs to include a mechanism for alternative carriers to displace NBN Co as the SIP in areas where they have infrastructure that can, or have entered into an agreement to install infrastructure that will, supply all premises in an area. To require NBN Co to be the SIP in such areas would require NBN Co to overbuild competing networks, even though there may be no commercial case to do so.

Generally, there are no restrictions on NBN Co overbuilding competing networks. [23] However, NBN Co will only do so where there is a commercial case. Requiring NBN Co to overbuild all alternative networks would likely impact on private investment incentives.

If there is to be an obligation placed on NBN Co or any other provider, the issue then is what form the obligation should take and when that obligation should apply. Secondary issues relate to the appropriate standards and benchmarks that should apply to NBN Co or any other provider in fulfilling its SIP obligations. The USO and CSG set out a number of features that a SIP regime could include, for example a broad obligation to connect premises.

Objective

The Government’s objective is to ensure that NBN Co continues to supply broadband access to Australian premises after it completes the network rollout in each area so that all premises have access to high-speed broadband. The Government also considers that industry, including access seekers, consumers and NBN Co should have certainty as to what NBN Co’s supply obligations are.

Options

This RIS considers three options:

1.              status quo—continue to give NBN Co guidance through the Statement of Expectations;

2.              make carrier licence conditions setting out SIP obligations for NBN Co and alternative providers; and

3.              legislate SIP obligations for NBN Co and alternative providers.

Option 1: Do nothing—Government to continue to give NBN Co guidance through the Statement of Expectations

Under this option, NBN Co’s SIP supply obligations after it completes the network rollout in an area would be left to the Government, as shareholder of the company, to set out in the Statement of Expectations or other written direction. There would be no legislated supply obligation on NBN Co or any other carrier. Under this option, the delivery of telecommunications infrastructure and connections would be left to NBN Co, with guidance provided by the Government and the commercial marketplace.

Should NBN Co be privatised in the future, it would not be subject to any obligation to install new infrastructure, but would be required to continue to supply services on request on its existing networks in accordance with its Special Access Undertaking and Part XIC of the CCA. As a result, there may be a number of premises that would not have any guarantee of being connected to infrastructure supplying high-speed broadband services.

Option 2: The Minister makes carrier licence conditions

The Minister for Communications could make carrier licence conditions that would apply to NBN Co and other providers as appropriate. The carrier licence conditions would set out carriers’ obligations as SIPs. In relation to NBN Co, such carrier licence conditions could require NBN Co to supply broadband access to premises when requested by a retail service provider and where the premises are in an area that has been declared ready for service. Under this option, NBN Co would be required to report to the Government when it has commenced supplying services in an area.

Under this option, the Minister could specify that NBN Co’s SIP obligations commence only after it has commenced the supply of services in an area, in order to ensure that these obligations do not affect NBN Co’s ability to meet its objective to complete the NBN as quickly and as cost-effectively as possible.

The Minister could also make similar carrier licence conditions to require other providers to assume SIP responsibilities if they are able to better fulfil the role in an area. In practice, this is what has been done in relation to ‘adequately served’ areas. The Government has also recently consulted on draft carrier licence conditions that, if made, would implement SIP obligations on carriers that enter into agreements to deploy infrastructure in new real estate developments. NBN Co’s carrier licence conditions would not apply in areas where another provider has been made the SIP through a carrier licence condition.

The carrier licence conditions could set out standards, rules and benchmarks that carriers must comply with, including:

·          maximum timeframes for the supply of services and for rectifying faults;

·          the reliability of services; and

·          the technology used to connect premises.

Option 3: Legislate SIP obligations

Option 3 is similar to Option 2, however under this option, SIP obligations would be enshrined in legislation by the Parliament.

Under this option, legislation would be introduced to require NBN Co to supply services that allow carriage service providers to supply broadband services to end-users with peak download speeds of 25 Mbps. NBN Co would need to connect premises to its networks on reasonable request (by a retail service provider and where the premises are in an area where NBN Co has commenced supplying services. It would also have to supply wholesale services to carriage service providers on reasonable request. NBN Co would be required to report to the Government when it has commenced supplying services in an area.

The legislation would allow other providers to nominate to be the SIP in an area where the provider has contracted to supply services to premises in the locality. These alternative carriers would also be required to report to the Government when they have signed contracts to deploy infrastructure in an area involving SIP obligations.

The legislation would also give the Minister the power to declare a provider to be the SIP or revoke a provider’s SIP status if it is not meeting its SIP obligations or will not be able to meet its SIP obligations in the future. The Minister would also be able to declare that there is no SIP for an area if the level of competition in the area is such that the Minister considers that services will be delivered to end-users without the imposition of SIP obligations.

Following completion of the NBN rollout, NBN Co would be the default SIP for all of Australia except in areas where an alternative provider has nominated to be the SIP, where the Minister has declared another provider to be the SIP or where the Minister has declared that there is no SIP because the level of infrastructure competition ensures that all premises can be connected to superfast networks on reasonable request. The default provider obligations would extend to any entity that purchases NBN Co, should NBN Co be privatised in future.

The legislation would require the Australian Communications and Media Authority to publish a register of SIPs on its website so that end-users and service providers are able to easily determine who the SIP is in any particular part of Australia. This would ensure that retail providers will know which carrier to contact if they need to have infrastructure installed to premises in order to supply retail carriage services to those premises.

The legislation would give providers the flexibility to determine how they meet their SIP obligations, including the technology used to connect premises. However, the Minister would have a reserve power to set standards, rules and benchmarks that SIPs must meet if, through operational experience, it appears that SIPs are not installing infrastructure and supplying services of an appropriate quality within appropriate timeframes. These standards, rules and benchmarks could include the type of technology that SIPs must use in particular areas.

Should the Minister make SIP standards or rules, they would interact with the SAU obligations. The legislation would provide, however, that if there is any inconsistency between the two, then the SIP standards or rules would prevail going forward.

Analysis of options

This section discusses the relative costs and benefits of the three options and their impacts on stakeholders, namely telecommunications customers, retail service providers, alternative providers and NBN Co.

The criteria used in the assessment relate to the Government’s objectives:

1.              Does the option ensure that consumers and access seekers have access to high-speed broadband after the NBN rollout is completed in each area, thereby giving them certainty in this regard?

2.              Is the option sufficiently flexible to allow for non-NBN carriers to register as the SIP in areas where they have deployed high-speed broadband infrastructure?

3.              Does the option impose significant compliance costs on industry that may outweigh the benefits of providing industry and consumer certainty?

4.              Does the option support the Government’s policy that NBN Co deliver faster broadband, sooner and at lower cost?

5.              Does the option support the proposed non-commercial services funding arrangements?

Option 1: Do nothing—Statement of Expectations continues to guide NBN Co

Access and certainty
Advantages:

·          The Statement of Expectations can be readily revised to impose relevant obligations on NBN Co, thus providing access and a degree of certainty.

Disadvantages:

·          As the Statement of Expectations does not have the force of legislation and is subject to change, this option does not provide access seekers and end-users with certainty about NBN Co’s supply obligations either during the rollout or after the NBN Co is completed.

·          While NBN Co would have some greater certainty as its obligations, it would be limited as the Statement of Expectations can be readily changed.

·          As the Government is not able to issue a private company with a Statement of Expectations, this option would not prevent a future privatised NBN Co withdrawing from unprofitable geographic areas or declining to extend the network infrastructure into areas or to premises where it expects to make a loss.

·          There are limited options to enforce any obligations set out in the Statement of Expectations, should NBN Co fail to meet them.

Other providers and other SIPs
Advantages:

·          Other providers would be able to act as infrastructure providers on a commercial basis.

Disadvantages:

·          While other providers would be able to act as infrastructure providers on a commercial basis, there would be no regulatory framework confirming their obligations and the rights of access seekers and customers.

Compliance costs
Advantages:

·          While NBN Co would still need to report to Parliament and the Government as a government business enterprise (GBE), this option would impose minimal compliance costs on NBN Co and other carriers.

Disadvantages:

·          Updating, monitoring and revising the Statement of Expectations would require greater ongoing involvement on the part of the Department of Communications and the Arts and the Department of Finance and their Shareholder Ministers.

·          In its submission on proposed carrier licence conditions for new developments, ACCAN pointed out potential costs for consumers in the absence of appropriate regulation.

NBN rollout
Advantages:

·          This approach would allow the Government to easily tailor NBN Co’s obligations as the rollout progresses, thereby avoiding any negative impact on the rollout. For example, the Government could require NBN Co to meet certain timeframes after the rollout is substantially completed.

Non-commercial services funding
Advantages:

·          To the extent the Statement of Expectation required the provision of non-commercial services, the approach would provide a sufficient basis for new funding arrangements.

Disadvantages:

·          Funding of non-commercial services would not be tied to a clear statutory obligation to provide infrastructure and services, particularly given the Statement of Expectations can be readily changed.

·          Option 1 would not support future funding of a privately owned NBN Co, as a privately-owned NBN Co would not be subject to a Statement of Expectations issued by Shareholder Ministers.

Option 2: The Minister makes carrier licence conditions

Access and certainty
Advantages:

·          Carrier licence conditions would require carriers to install high-speed broadband infrastructure and connect premises to the infrastructure in all areas where the carrier licence conditions apply. This will ensure that consumers have access to high-speed broadband in these areas.

·          NBN Co’s (and alternative providers’) SIP obligations would be set out in enforceable legislative instruments, providing certainty for the SIPs, access seekers and end-users.

·          Carrier licence conditions could be set in place relatively quickly, meaning that NBN Co, access seekers and end-users would gain legal certainty in a short period of time.

·          Carrier licence conditions would ensure that after NBN Co is privatised, the privatised company would be required to continue to supply services as the default SIP for all Australian premises.

·          The Minister’s ability to revoke a provider’s SIP status will ensure that providers do not retain SIP-status if they are not meeting the SIP obligations or will not be able to meet the SIP obligations in the future.

Disadvantages:

·          The relative ease with which Ministers can change carrier licence conditions means that this approach cannot provide the same long-term certainty of NBN Co’s obligations as a legislative requirement.

·          In the lead-up to possible privatisation of NBN Co, the Parliament, industry, consumers and any potential buyer(s) of NBN Co are likely to seek greater certainty.

·          Carrier licence conditions are subject to sun-setting. That is, after ten years the conditions would lapse unless the Government reviews the condition and decides that it should be remade or rolled over. Given the enduring nature of the proposed SIP obligations, a carrier licence condition may not be an appropriate vehicle.

Other providers and other SIPs
Advantages:

·          Carrier licence conditions can be tailored in order to allow alternative providers to be the SIP where it is appropriate. NBN Co would not need to overbuild alternative networks where there is no commercial case to do so, thereby reducing disincentives on private investment and allowing NBN Co to focus the rollout on other areas.

·          Carrier licence conditions can also be adjusted relatively quickly to reflect changes in circumstances, whereas legislation can take longer to develop and implement.

Disadvantages:

·          There would be no clear and consistent statutory framework setting out SIP obligations (i.e. licence conditions can vary), thus reducing regulatory certainty and increasing risk.

Compliance costs
Advantages:

·          Carrier licence conditions could be tailored to minimise compliance costs.

·          Carrier licence conditions could also be tailored to provide SIPs with the flexibility to set the terms and conditions on which they will meet the SIP obligation with minimum standards only being imposed where there is a clear need.

Disadvantages:

·          This option would impose compliance costs on NBN Co and other alternative carriers as they would need to set up new internal systems and comply with requirements to report to the Department and the ACMA when they start to supply services or have signed a contract for services.

o    However, it is arguable that NBN Co should be doing this anyway as a GBE that has been required to provide all Australian premises with high-speed broadband.

·          In addition, the conditions would impose an administrative burden on the Government and affected carriers at the end of the sun-setting period, when it came to considering whether they should be continued.

NBN rollout
Advantages:

·          The carrier licence conditions would be tailored to reflect NBN Co’s planned roll out approach and not complicate it.

·          Carrier licence conditions can be more readily amended if necessary to address unforeseen issues or changing circumstances.

·          Setting standards, rules and benchmarks in carrier licence conditions, rather than in legislation, will ensure that they can be flexibly adjusted in response to changing circumstances.

·          The carrier licence conditions can be tailored so NBN Co and other SIPs will have the ability to set the terms and conditions on which they will meet the SIP obligation unless it is clear minimum standards need to be imposed.

Disadvantages:

·          To the extent NBN Co (and others) are subject to regulatory rules, there is a risk of greater inflexibility that could impact on the role, but the risk is considered low, given the types of rules envisaged and the scope for modification.

Non-commercial services funding
Advantages:

·          Carrier licence conditions, as binding regulation, would provide a firmer basis for obligations that would be funded by a legislated funding scheme.

Disadvantages:

·          While carrier licence conditions would provide a firmer regulatory basis for a legislated funding mechanism, carrier licence conditions can be more easily revoked or modified than legislation.

Option 3: Legislate Statutory Infrastructure Provider (SIP) obligations

Access and certainty
Advantages:

·          Legislated requirements would provide access seekers and end-users with access to next generation infrastructure and services.

·          Legislated requirements are less easily changed and provide greater certainty to NBN Co, other SIPs, access seekers and customers about carriers’ obligations.

·          Legislation would ensure that once NBN Co is privatised, the privatised company would be required to continue to supply services as the default SIP for all Australian premises.

·          Allowing the Minister to revoke a provider’s SIP status will ensure that providers do not retain SIP-status if they are not meeting the SIP obligations or will not be able to meet the SIP obligations in the future.

Disadvantages:

·          While legislation would provide a high level of access and certainty, the use of subordinate legislation to add necessary details means not all issues may be covered in statute.

·          That said, subordinate legislation can better deal with matters of detail like timeframes and could be more readily adjusted in light of changing circumstances.

·          While it is unlikely to be an issue, if it became apparent there was a flaw in the proposed legislation, it may require Parliamentary amendment to address it requiring added time and resources.

Other providers and other SIPs
Advantages:

·          The proposed legislation would provide a clear framework for other providers to operate as SIPs, giving the providers, access seekers and end-users certainty as to their obligations. It also provides certainty for other providers who do not operate as SIPs, particularly in terms of who is providing infrastructure in an area.

·          Allowing alternative providers to self-nominate as the SIP will give them certainty that if they invest in infrastructure in a new real estate development or multi-dwelling unit, they will be able to nominate to be the SIP for that area.

Disadvantages:

·          While the legislation would provide for other SIPs, they would be subject to a statutory framework which would impose regulatory obligations and compliance costs that could restrict their operational flexibility. However, providers other than NBN Co designated as SIPs will be operating in an area on a commercial basis, and SIP status will confirm their obligation to service premises in their area of operation.

Compliance costs
Advantages:

·          The legislation can be tailored to minimise compliance costs, for example, by limiting SIP obligations to notifying the Government that they have contracted to provide infrastructure and services in a specific locality.

Disadvantages:

·          This option would impose compliance costs on carriers in the same way as Option 2 as they would need to set up new internal systems and report to the Department and the ACMA when they start to supply services or have signed a contract for services.

NBN rollout
Advantages:

·          The legislation would be tailored to reflect NBN Co’s planned roll out approach and not complicate it.

·          Setting standards, rules and benchmarks in instruments, rather than in the legislation itself, will provide flexibility to adjust arrangements in response to unforeseen issues or changing circumstances.

·          As with Option 2, NBN Co and other SIPs will have the ability to set the terms and conditions on which they will meet the SIP obligation unless it is clear minimum standards need to be imposed.

Disadvantages:

·          While the legislation will reflect NBN Co’s proposed roll-out approach, it would be subject to a statutory framework which would impose regulatory obligations and compliance costs that could restrict its operational flexibility.

·          NBN Co’s operational flexibility could be affected depending on the final shape of the legislation passed by the Parliament.

·          Legislation is less flexible, and any issues identified through operational experience could only be changed through legislative amendment. However, this issue will be mitigated through ministerial powers to make instruments to set standards, rules and benchmarks, rather than setting these out in legislation.

Non-commercial services
Advantages:

·          A legislative obligation to supply infrastructure and services provides a firmer basis for the proposed arrangements to fund NBN Co’s non-commercial services.

·          Given the significance of the obligations, their ongoing application, and the linkage to the non-commercial services funding, this is arguably a matter best considered by the Parliament.

Disadvantages:

·          Option 3 does not appear to have any particular disadvantages in terms of the funding of non-commercial services.

Preferred option

Option 3 is the preferred option because it offers the greatest net benefit. It best delivers the overarching objective of providing access seekers and end-users with ongoing access to high-speed broadband services and maximum certainty this will occur. It does this with limited compliance costs on industry. It would provide the most clarity and certainty for NBN Co and access seekers as to NBN Co’s supply obligations. It would also ensure that there is certainty for alternative providers, in areas where they are the sole or main providers of infrastructure, that they may have SIP obligations and how such obligations will be implemented and enforced.

Legislation, while it can take time to pass Parliament, is the most certain form of regulation. As such, legislation is the most appropriate vehicle to establish enduring requirements for the supply of broadband access to premises, which will have a long-term operation and will constitute an important safety-net for consumers. Legislation would also ensure that after NBN Co is privatised, the company continues to be obliged to supply broadband access to premises where access is not being provided by another entity or where a third party that was providing access to the premises has exited the market.

The Government intention to introduce a mechanism by which competing providers will contribute to the cost of NBN Co’s connection and supply of non-commercial services needs to have a legislative basis. Where there is a legislative obligation on superfast broadband providers to contribute these costs, it is a reasonable expectation that there should be a legislative obligation for NBN Co to connect infrastructure and provide services.

Legislation can be drafted to set out the basic SIP obligations and give providers the flexibility to determine how they will meet the SIP obligations in the most efficient way. At the same time, the Government would retain the ability to step in and set minimum standards through legislative instruments if required. Any such intervention would be subject to a separate regulatory burden analysis at the time.

Option 3 is consistent with the Government’s expectations that NBN Co will build a national broadband network that is available to all premises in Australia for use by retail service providers on an open access basis. The proposed SIP regime also recognises that other providers may provide superfast services in a range of circumstances and enables other providers to be designated a SIP where appropriate. This includes providers already operating as the IPOLR in adequately served areas, those that are contracted to service new developments and providers with established networks. The regime recognises that other providers will generally be servicing areas on a commercial basis and will be contracted to supply premises on this basis. SIP status will confirm their obligation to service premises in their area of operation

Option 1 does not address the Vertigan panel’s concern that the Government’s Statement of Expectations does not provide sufficient certainty for NBN Co, access seekers and consumers about NBN Co’s ongoing supply obligations. In particular, it would not ensure that NBN Co, after privatisation, continued to supply broadband access to premises in unprofitable geographic areas. It also provides a poor basis for charging non-commercial services funding.

Option 2 addresses the panel’s concern, but does not provide the same level of certainty as Option 3 because a carrier licence condition is a relatively flexible mechanism. Given the importance of ongoing supply obligations to industry and consumers, they need a high degree of certainty. This issue is compounded by the sun-setting of carrier licence conditions and the intention to privatise NBN Co once fully built and operational. Given the significance of the issue, there is also a strong argument that it should be explicitly considered by the Parliament (as has the existing USO requirement, with which the SIP obligations have many analogies). This is particularly true given NBN Co’s SIP obligations is the basis for the proposed non-commercial services funding regime. For these reasons, carrier licence conditions would not be the appropriate vehicle to set out SIP obligations on an enduring basis.

Consultation

There was extensive consultation on possible changes to the telecommunications regulatory framework in 2014 as part of the Vertigan review. The Vertigan panel released a Regulatory Framing Paper in February 2014 to take soundings from industry and the public on key issues that should be considered. The panel received 43 submissions. The Vertigan panel also engaged directly with a range of stakeholders in follow-up discussions.

The Government published its Telecommunications Structural and Regulatory Reform policy in December 2014, which set out its response to the Vertigan review and its reform plans for the sector. The response was based on the reports of Vertigan review, the submissions to it, and other industry engagement. There has been ongoing engagement with industry since that time.

On 12 December 2016, the Minister for Communications and the Minister for Regional Communications released for public comment exposure drafts of the:

·          Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017; and

·          Telecommunications (Regional Broadband Scheme) Charge Bill 2017.

The Bills provide for three key reform measures:

·          Refinement of the carrier separation rules under Parts 7 and 8 of the Tel Act;

·          The introduction of a statutory infrastructure provider obligation for superfast broadband; and

·          The introduction of a Regional Broadband Scheme to support loss-making services.

Along with the Bills, the Government released:

·          explanatory notes on the draft Bills - an overview of the Bills and explanation on the operation of the key measures; and

·          Regulation Impact Statements for the three measures.

Submissions on the package were requested by 3 February 2017.

In addition to public announcement of the consultation process, the Department of Communications and the Arts undertook a number of initiatives to raise awareness with stakeholders, in particular, carriers, service providers, industry, consumer and regional representative groups and regulators.

The Department emailed all licensed telecommunications carriers and other known interested parties, advising them of the consultation process and offering to provide further explanation and to discuss issues. It made a presentation to Communications Alliance members on the package in December, offering follow-up engagement. A range of follow-up briefings and discussions with other groups and individual stakeholders followed. The Department also provided an online briefing to the Wireless Internet Service Provider Association of Australia (WISPAU) in early 2017.

The Department received 30 submissions. These included submissions from Telstra, Optus, VHA, Vocus, TPG, the Greenfield Operators of Australia (four small carriers: OPENetworks, LBN Co, CNT Corp Pty Ltd and Opticomm), NBN Co Limited, Great Northern Telecommunications, Spirit Telecom, the Australian Communications Consumer Action Network (ACCAN), Better Internet for Rural, Regional & Remote Australia (BIRRR), Cotton Australia, the Isolated Children’s Parents Association (ICPA), the NSW Farmers’ Federation, the National Farmers’ Federation, the Telecommunications Industry Ombudsman (TIO), Regional Development Australia and individual members of the Australian community. Submissions covered all aspects of the package to varying degrees.

Generally the comments on the SIP provisions were supportive of the scheme, with most stakeholders expressing support for the overall objectives of the scheme. Two industry submitters provided detailed comment on the drafting with a view to maximising clarity for industry and consumers. These comments focussed on the supply of services to ‘designated equipment’, the interaction between the SIP provisions and Part XIC of the Competition and Consumer Act 2010 (CCA), and the operation of exemptions from the SIP obligations. Regional and consumer groups suggested a number of enhancements to the SIP provisions, particularly relating to service speeds, connection and fault repair timeframes, the consumer experience and dispute resolution. There were no comments on the draft RIS.

Following consideration of these comments, the Government decided to amend the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 to make a number of enhancements. In particular, it amended the Bill to remove obligations relating to designated equipment, on the basis these are better handled on a commercial basis as has been the case to date. The Government also clarified that the SIP supply obligation can be fulfilled by a service being supplied under Part XIC of the CCA. The Government  also amended the SIP obligations to specify download and upload speeds (25/5 Mbps) that are consistent with NBN Co’s Statement of Expectations, and also to set out a target for NBN Co that it can supply speeds of 50/10 Mbps to 90 per cent of the premises connected to its fixed-line networks. The Bill was also amended to provide that SIPs can supply services to carriage service providers that can support voice services on fixed-line or fixed wireless networks. The Government also introduced measures to improve consumer outcomes by providing powers for the Minister to make service provider rules. Such rules would, if made, be legislative instruments and therefore subject to consultation, disallowance and RIS requirements.

In the case of issues like connection and repair time frames, the Government considers the matters raised need to be considered further as part of the proposed review of consumer safeguards. A number of matters would most likely be best addressed in subordinate legislation given the level of detail that would generally be involved.

The Department considers that the above changes will not impose any further regulatory burden overall, particularly noting the SIP provisions have been costed on the basis that they create a broad legislative supply obligation consistent with established and intended modes of operation.

Implementation and Evaluation

Option 3 would be implemented by legislation. Legislation is expected to be introduced into the Parliament in 2017. Should the Parliament pass the legislation as proposed, the aim is to have the amendments in place for 1 July 2018, but a later date may need to be considered depending on when the Bill is passed.

The Minister may consider making legislative instruments setting out service standards following passage of the legislation. The development of such instruments would be subject to further regulation impact analysis and consultation with industry.

The Government would evaluate the impacts of the legislation through its normal industry monitoring and consultation processes. Additionally, the Productivity Commission is required to conduct a thorough review of the NBN once the Minister for Communications determines that the NBN is built and fully operational. This review must consider a range of matters, including competition in telecommunications markets, structural features of those markets, equity of access to broadband services and bundling of services supplied by NBN Co.

Attachment A

Regulatory costings

This RIS considers the implementation of the Government’s decision to establish a statutory infrastructure provider regime for NBN Co (and comparable providers). While NBN Co has rollout obligations under the Government’s Statement of Expectations, this RIS examines mechanisms to establish ongoing obligations to connect infrastructure and supply services. Scope will exist for other providers to operate as SIPs. This already occurs in practice, as is evidenced by the adequately served carrier licence conditions already in place for providers such as Opticomm and Pivit Telecom.

Options

Preferred

Costs

1: Status quo—do nothing

No

Neutral

2: Make a licence condition

No

For NBN Co, the costs are neutral—the obligation has not changed, just the legal mechanism through which it is expressed. There may be some additional compliance and reporting costs.

For carriers that nominate to be the SIP, the costs are arguably neutral as they will likely have committed to connecting all premises in an area to their high-speed broadband infrastructure. Carriers will incur costs in nominating service areas—including mapping these service areas.

For carriers that are required to be the SIP, there will be a cost in complying with the obligations, including extending networks to serve additional premises and non-premises. However, a non-NBN carrier would only be required to be the SIP in an area where it has pre-existing high-speed broadband infrastructure and the costs associated with connecting additional premises to a pre-existing network are likely to be marginal and offset by the revenue that will be gained from the customer. The prices that non-NBN Co-operators can charge for connection and supply will be a commercial matter for each operator.

3: Legislate SIP obligations

Yes

For NBN Co, the costs are neutral—the obligation has not changed, just the legal mechanism through which it is expressed. There may be some additional compliance and reporting costs.

For carriers that nominate to be the SIP, the costs are arguably neutral as they will have committed to connecting all premises in an area to their high-speed broadband infrastructure. Carriers will incur costs in nominating service areas—including mapping these service areas.

For carriers that are required to be the SIP, there will be a cost in complying with the obligations, including extending networks to serve additional premises and non-premises. However, a non-NBN carrier would only be required to be the SIP in an area where it has pre-existing high-speed broadband infrastructure and the costs associated with connecting additional premises to a pre-existing network are likely to be marginal and offset by the revenue that will be gained from the customer. The prices that non-NBN Co-operators can charge for connection and supply will be a commercial matter for each operator.

 

Assumptions (option 1)

No change in regulation—neutral regulatory burden impact.

Average Annual Regulatory Costs (from Business as usual)

Change in costs

($ million)

Business

Community organisations

Individuals

Total change in cost

Total by Sector

$0

$0

$0

$0

 

Assumptions (option 2)

·                 It is assumed that no more than ten carriers, other than NBN Co, will either nominate to have statutory infrastructure provider obligations or be designated the statutory infrastructure provider for an area. This is based on the number of providers who have submitted data to the National Map on the new developments that they have contracted to serve. [24]

·                 It is further assumed that these carriers are likely to employ 1.0 FTE for four weeks to work on implementing the SIP arrangements (administrative and mapping) at $37.40 x 1.75 per hour [25] x 150 hours = $9817.50 per carrier and a maximum of $98,1750 for ten carriers.

 

Average Annual Regulatory Costs (from Business as usual)

Change in costs

($ million)

Business

Community organisations

Individuals

Total change in cost

Total by Sector

$0.098

$0

$0

$0.098

 

Assumptions (option 3—preferred)

·                 It is assumed that no more than ten carriers, other than NBN Co, will either nominate to have statutory infrastructure provider obligations or be designated the statutory infrastructure provider for an area. This is based on the number of providers who have submitted data to the National Map on the new developments that they have contracted to serve, as per option 2.

·                 It is further assumed that these carriers are likely to employ 1.0 FTE for four weeks to work on implementing the SIP arrangements (administrative and mapping) at $37.40 x 1.75 per hour x 150 hours = $9817.50 per carrier and a maximum of $98,1750 for ten carriers.

Regulatory burden and cost offset estimate table—Average Annual Regulatory Costs (from Business as usual)

Change in costs

($ million)

Business

Community organisations

Individuals

Total change in cost

Total by Sector

$0.098

$0

$0

$0.098

 

The Department requests submissions as part of the consultation process to comment on the estimate of the regulatory burden.

 

 

 

                                                                  

 



ABBREVIATIONS

The following abbreviations are used in this explanatory memorandum:

 

ACCC

Australian Competition and Consumer Commission

ACMA

Australian Communications and Media Authority

Bill

Telecommunications Legislation Amendment                                                       (Competition and Consumer) Bill 2017

Charge Bill

Telecommunications (Regional Broadband Scheme) Charge Bill 2017

CCA

CLCs Declaration

 

 

CSP/CSPs

Competition and Consumer Act 2010

Carrier Licence Conditions (Networks supplying Superfast Carriage Services to Residential Customers) Declaration 2014

Carriage service provider/Carriage service providers

Department

Legislation Act

Department of Communications and the Arts

Legislation Act 2003

Minister

NBN

Minister for Communications

National Broadband Network

NBN Co

NBN Co Limited

SIP

TCPSS Act

 

Tel Act

Statutory infrastructure provider

Telecommunications (Consumer Protection and Service Standards) Act 1999

Telecommunications Act 1997

TIO

Telecommunications Industry Ombudsman

 



 

NOTES ON CLAUSES

 

TELECOMMUNICATIONS LEGISLATION AMENDMENT                  (COMPETITION AND CONSUMER) BILL 2017

Clause 1 - Short title

Clause 1 provides that the Bill, when enacted, may be cited as the Telecommunications Legislation Amendment (Competition and Consumer) Act 2017 .

Clause 2 - Commencement

Clause 2 provides for the commencement of provisions in the Bill when enacted.

Item 1 of the table at subclause 2(1) provides that clauses 1-3 of the Bill and any other provisions not covered in the table provided at subclause 2(1), would commence on the day on which the Act receives the Royal Assent.

Items 2 and 3 of the table provide that Schedules 1 and 2, and Part 1 of Schedule 3 to the Bill, commence on the day after the Act receives the Royal Assent. Consequently, the repeal of Part 7 of the Tel Act (set out in Schedule 1) would commence on the day after the Act receives the Royal Assent. The changes to Part 8 of the Tel Act would commence on the same date, although the obligations in some provisions in Schedule 2 would apply on or after 1 July 2018.

Item 4 of the table provides that the provisions in Part 2 of Schedule 3 to the Bill would commence immediately after the commencement of the provisions in Part 1 of Schedule 3 to the Bill. Consequently, the repeal of four carrier licence declarations setting out ‘adequately served’ obligations on four specified carriers would take effect immediately after the statutory infrastructure provider obligations in Part 1 of Schedule 3 commence.

Item 5 of the table provides that the provisions in Schedules 4 and 5 to the Bill would commence on the day after the Act receives the Royal Assent. However, the obligations in some provisions in Schedule 2 would apply on or after 1 July 2018.

Clause 3 - Schedules

Subclause 3(1) provides that legislation that is specified in a Schedule to the Bill is amended or repealed as set out in the applicable items in that Schedule, and any other item in a Schedule has effect according to its terms. There are five Schedules to this Bill.

Subclause 3(2) provides that the amendment of the CLCs Declaration does not prevent the declaration, as amended, from being varied or revoked by the responsible Minister. The amendments to the CLCs Declaration are contained in Schedule 2 to the Bill.

Similarly, subclause 3(3) provides that the amendment of any regulation by the Bill does not prevent the regulation, as so amended, from being amended or repealed by the Governor-General. Schedule 2 to the Bill would amend the Legislation (Exemptions and Other Matters) Regulation 2015 to provide that the rules relating to sunsetting of legislative instruments contained in the Legislation Act would not apply to the CLCs Declaration.

 

 

Schedule 1 Layer 2 bitstream services

Part 1—Amendments

Part 1 of Schedule 1 to the Bill contains amendments to the CCA (items 1 to 23 inclusive) and to the Tel Act (items 23A to 27 inclusive). These amendments repeal Part 7 of the Tel Act and make a number of consequential changes in both the CCA and the Tel Act. Part 1 also includes an amendment to the definition of ‘Layer 2 bitstream service’ in section 7 of the Tel Act to improve the operation of that definition.

Competition and Consumer Act 2010

Item 1 - Section 152AC

Item 1 repeals the following four definitions from the dictionary at section 152AC in Part XIC of the CCA:

·          designated superfast telecommunications network;

·          Layer 2 bitstream service;

·          national broadband network; and

·          superfast carriage service.

This represents a consequential change as a result of item 2, which would repeal section 152AGA of the CCA, which itself is to be repealed as a result of the proposed repeal of Part 7 of the Tel Act at item 24.

Item 2 - Section 152AGA

Item 2 repeals section 152AGA of the CCA, which sets out when a network is a designated superfast telecommunications network. The repeal of section 152AGA is consequential to the repeal of Part 7 of the Tel Act (see item 24 below).

Item 3 - Subsections 152AL(3C) to (3H)

Item 4 - Subsection 152AL(8CA)

Item 3 repeals subsections 152AL(3C) to (3H) of the CCA, while item 4 repeals subsection 152AL(8CA) of the CCA. These provisions relate to the declaration by the ACCC that a specified Layer 2 bitstream service is a declared service.

The repeal of these provisions is consequential to the repeal of Part 7 of the Tel Act (see item 24 below).

Item 5 - Subsections 152ALA(1) and (5)

Item 6 - Subsections 152ALA(5A)

Item 5 removes the words, “(other than a declaration mentioned in subsection 152AL(3C))” from subsections 152AL(1) and 152AL(5) of the CCA.

Item 6 repeals subsection 152ALA(5A) of the CCA.

These changes are necessary as a result of the repeal of subsection 152AL(3C) (see item 3 above).

Item 7 - Subsection 152AO(4)

Item 7 repeals subsection 152AO(4) of the CCA, including the accompanying note. This amendment is also necessary as a result of the repeal of subsection 152AL(3C) (see item 3 above). 

Item 8 - Sections 152ARA and 152ARB

Item 8 repeals sections 152ARA and 152ARB of the CCA. These provisions impose non-discrimination obligations on carriers or CSPs who supply a declared Layer 2 bitstream service over a designated superfast telecommunications network.

The repeal of these provisions is consequential to the repeal of subsection 152AL(3C) (see item 3 above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.

Non-discrimination obligations modelled on sections 152ARA and 152ARB are proposed to be inserted in Part 8 of the Tel Act but will apply to all eligible services supplied by carriers or CSPs (see proposed Division 2C at item 51 of Schedule 2 below).

Item 9 - Paragraph 152AZ(aa)

Item 10 - Paragraph 152BA(2)(aa)

Item 11 - Subsection 152BB(1AA)

Items 9 and 10 remove references to sections 152ARA and 152ARB of the CCA. Item 11 repeals subsection 152BB(1AA) of the CCA.

These changes are consequential to the repeal of sections 152ARA and 152ARB by item 8 above.

Item 12 - Subsection 152BC(4AA)

Item 13 - Subsections 152BCB(4G) to (4J)

Item 12 repeals subsection 152CB(4AA) of the CCA. Item 13 repeals three subsections, subsection 152BCB(4G), 152BCB(4H), and 152BCB(4J) of the CCA.

These changes are consequential to the repeal of subsection 152AL(3C) (see item 3 above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.

Item 14 - Subsection 152BCB(5)

Item 14 removes the reference to subsection 152BCB(4G) from subsection 152BCB(5) of the CCA.  This change is consequential to the repeal of subsection 152BCB(4G) by item 13 above.

Item 15 - Subsections 152BDA(4G) to (4J)

Item 15 repeals three subsections, subsection 152BDA(4G), 152BDA(4H), and 152BDA(4J) of the CCA.

These changes are consequential to the repeal of subsection 152AL(3C) (see item 3 above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.

Item 16 - Subsection 152BDA(5)

Item 16 removes the reference to subsection 152BDA(4G) of the CCA. This change is consequential to the repeal of subsection 152BDA(4G) by item 15 above.

Item 17 - Subsection 152BE(1B)

Item 17 repeals subsections 152BE(1B) of the CCA consequential to the repeal of subsection 152AL(3C) (see item 3 above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.

Item 18 - Sections 152BEBE to 152BEBG

Item 18 repeals sections 152BEBE, 152BEBF, and 152BEBG of the CCA. The repeal of these provisions is necessary as a result of the repeal of subsection 152AL(3C) (see item 3 above) and other provisions in Part XIC of the CCA relating to Layer 2 bitstream services.

Sections 152BEBE and 152BEBF of the CCA apply to carriers or CSPs (other than an NBN corporation) who supply a declared Layer 2 bitstream service. If a carrier or a CSPs has entered into an access agreement with an access seeker with different terms and conditions from those set out in a special access undertaking or an access determination, the carrier or CSP must provide the ACCC with a statement about the differences between that agreement and the special access undertaking or access determination.

A similar provision is proposed to be inserted in Part 8 of the Tel Act as part of the new non-discrimination obligations under that Part (see proposed section 151ZH at item 51 of Schedule 2 below).

Item 19 - Section 152BEC

Item 20 - Subsection 152BED(2)

Items 19 and 20 remove references to sections 152BEBE and 152BEBF from section 152BEC and subsection 152BED(2) of the CCA, respectively, consequential to the repeal of these sections by item 18 above.

Item 21 - Subparagraphs 152CJH(a)(ia) and (ib)

Item 21 removes references to sections 152ARA and 152ARB, repealed by item 8 above, from paragraph 152CJH(a) of the CCA.

Item 22 - Subparagraph 152CJH(a)(iii)

Item 23 - Subparagraph 152CJH(a)(iv)

Item 22 removes references to subsections 152BCB(4G) to (4J), repealed by item 13 above, from subparagraph 152CJH(a)(iii) of the CCA.

Item 23 removes references to subsections 152BDA(4G) to (4J), repealed by item 15 above, from subparagraph 152CJH(a)(iv) of the CCA.

Telecommunications Act 1997

Item 23A - Section 7 (paragraph (a) of the definition of Layer 2 bitstream service )

Item 23B - Section 7 (definition of Layer 2 bitstream service )

 

Items 23A and 23B amend the definition of Layer 2 bitstream service in section 7 of the Tel Act.

 

Currently, Layer 2 bitstream service is defined to mean a carriage service that is either a Layer 2 Ethernet bitstream service or a Layer 2 bitstream service specified in a legislative instrument made by the ACMA. For the purpose of the definition, ‘Layer 2’ has the same meaning as in the Open System Interconnection (OSI) reference Model for data exchange.

 

Item 23A repeals paragraph (a) of the definition and substitutes it with a new paragraph (a) so that, for a carriage service to be a Layer 2 bitstream service, the carriage service must be a Layer 2 bitstream service within the ordinary meaning of that expression. This change recognises that Layer 2 bitstream services can be supplied in a number of forms and not just using Ethernet protocols. With the definition broadened to capture the ordinary meaning of the expression, it is no longer necessary for the ACMA to have a residual power to specify a Layer 2 bitstream service for the purposes of the definition.

 

Item 23B amends the final sentence of the definition, consequential to the change in item 23A. As a result of this amendment, the final sentence in the definition would provide that, for the purposes of determining the ordinary meaning of the expression used in paragraph (a), the reader is to assume that Layer 2 has the same meaning as in the Open System Interconnection (OSI) reference Model for data exchange.

 

Item 24 - Part 7

Item 24 repeals Part 7 of the Tel Act.

Part 7 of the Tel Act currently imposes an obligation on owners of certain local access lines to supply a Layer 2 bitstream service.

The obligations in Part 7 were introduced in 2011 and were designed, together with Part 8 of the Tel Act, to ensure that providers of superfast fixed-line broadband networks in Australia other than NBN Co could provide outcomes to consumers similar to those available on the NBN. When these networks were the only fixed-line networks in an area, they could form local access bottlenecks and competition on them could be ineffective - either because the networks did not offer a wholesale service, or because the network owner would favour its own retail operations over those of competitors accessing the network. Part 7 addressed the concern that wholesale services would not be supplied, while Part 8 addressed concerns about discrimination.

Following the repeal of Part 7, it is intended that any required access to Layer 2 bitstream services would be regulated under Part XIC of the CCA. The ACCC has declared the ‘Superfast Broadband Access Service’ (SBAS) under Part XIC of the CCA. As a result, the SBAS is required to be supplied to access seekers on a range of superfast networks.

Furthermore, under the proposed changes to Part 8 of the Tel Act (contained in Schedule 2 to the Bill), new superfast networks will be required to be either structurally separated (i.e. operating on a wholesale-only basis) or functionally separated. In both cases, superfast networks will be required to supply eligible and ancillary services on a non-discriminatory basis.

Item 25 - Subsection 349(16) (definition of local access line )

Item 26 - After section 349

Items 25 and 26 are consequential to the repeal of Part 7 of the Tel Act (see item 24 above).

Section 349, in Part 17 of the Tel Act, deals with requirements to provide pre-selection in favour of certain carriage service providers. Subsection 349(16) contains definitions for a number of terms used in section 349 and it includes a definition of local access line by reference to section 141D in Part 7 of the Tel Act. Section 141D is to be repealed by item 24, so a new definition of local access line is required for the purposes of Part 17 of the Tel Act.

Item 25 repeals the definition of local access line in subsection 349(16) and substitutes it with a new definition with reference to new section 349A. Item 26 inserts a new section 349A in the Tel Act, which defines the term local access line for the purposes of Part 17 of the Tel Act. The definition in new section 349A is the same as the current definition in section 141D of the Tel Act.

Part 2 - Transitional provisions

Part 2 of Schedule 1 to the Bill contains transitional provisions as a result of the repeal of Part 7 of the Tel Act.

Item 27 - Transitional - exemptions

Item 27 sets out transitional arrangements for exemptions granted under section 141A of the Tel Act (contained in Part 7).

Section 141A provides that the Minister may, by written instrument, exempt:

·          a specified network (subsection 141A(1));

·          a specified local access line (subsection 141A(2));

·          a specified owner 141A(3);

from the obligation to supply a Layer 2 bitstream service in section 141 of the Tel Act.

At the time of introduction of the Bill, the following exemptions made under subsection 141A(1) are in force:

·          Telstra’s South Brisbane Network - exemption expires on 1 July 2018;

·          Specified Telstra Velocity Networks - exemptions expire on the Designated Day under subsection 577A(10) of the Tel Act (1 July 2018 or a later date as specified by the Minister);

·          three exemptions for TransACT networks - exemptions expire on the Designated Day under subsection 577A(10) of the Tel Act.

One of the exemptions for TransACT networks is no longer operative because the networks have been sold to NBN Co.

The Minister has similar powers to grant exemptions under section 144 in respect of the prohibition in section 143 of the Tel Act (both contained in Part 8).

The three subitems in item 27 provide that an exemption instrument made under subsections 141A(1), (2) or (3) and in force immediately before the commencement of item 17 will have effect, after the commencement of the item, as if it had been made under section 144 of the Tel Act and each reference in the instrument to section 141 of the Tel Act were a reference to section 143 of the Tel Act. This ensures that those exemption instruments can continue to have effect after the repeal of Part 7 of the Tel Act.

These transitional provisions need to be read together with proposed new subsections 144(7) and (8) of the Tel Act (see item 43 of Schedule 2 to the Bill). While the Minister would be prohibited from granting new exemptions under subsections 144(1), (2) and (3) after 1 July 2018, the Minister would be able to vary any exemption instruments in force after the start of 1 July 2018. By virtue of the transitional provisions in item 27, this would include exemption instruments made by the Minister under section 141A.

Schedule 2 - Local access lines

Schedule 2 to the Bill contains proposed amendments to the CLCs Declaration (items 1 to 8 inclusive), the CCA (items 11 to 14 inclusive), the Legislation (Exemptions and Other Matters) Regulation 2015 (item 15) and to the Tel Act (items 16 to 87 inclusive). Due to amendments in drafting, there is no item 9 or 10.

Consistent with the Government’s decision to grandfather existing arrangements, the amendments to the CLCs Declaration would effectively preserve the operation of the Declaration for certain networks. The CLCs Declaration applies to certain carriers in respect of specific local access lines that are not subject to the current Part 8 of the Tel Act. The licence conditions set out in the Declaration would continue to apply to lines forming part of a network that:

·          came into existence before 1 July 2018; and

·          has not been extended, altered or upgraded on or after 1 July 2018; and

·          no functional separation undertaking given by the carrier is in force (in accordance with Part 8 of the Tel Act as amended by this Bill).

The amendments to the CCA would ensure that the ACCC’s powers to make record-keeping rules extend to arrangements under Part 8 of the Tel Act.

The amendment to the Legislation (Exemptions and Other Matters) Regulation 2015 would exempt the CLCs Declaration from automatic sunsetting (though it would not prevent the Minister from revoking or varying the CLCs Declaration in the future).

The amendments to the Tel Act would amend Part 8 to give effect to new structural separation and non-discrimination obligations and establish the framework for functional separation undertakings.

Carrier Licence Conditions (Networks supplying Superfast Carriage Services to Residential Customers) Declaration 2014

Item 1 - Section 3

Item 1 repeals section 3 of the CLCs Declaration, which currently sets out that the Declaration expires on 30 June 2018. The effect of this change is that the Declaration, a legislative instrument, would continue to operate beyond this time. This change operates together with the amendment to the Legislation (Exemptions and Other Matters) Regulation 2015 (see item 8 below) to preserve the operation of the CLCs Declaration.

Item 2 - Subsection 4(1)

Item 2 inserts a new definition of functional separation undertaking in subsection 4(1) of the CLCs Declaration.

Functional separation undertaking is given the same meaning as in Part 8 of the Tel Act as amended by this Bill. This term appears in the proposed amendment to section 5 of the CLCs Declaration (see item 6 below).

Item 3 - Subsection 4(1) (at the end of the definition of local access line )

Item 4 - Subsection 4(1) (at the end of the definition of superfast carriage service )

The term local access line is currently defined in the CLCs Declaration as having the same meaning as in section 141D of the Tel Act. The term superfast carriage service is defined in the CLCs Declaration as having the same meaning as in subsection 141(10) of the Tel Act.

The provisions referred to in these definitions are both contained in Part 7 of the Tel Act, which is proposed to be repealed by the Bill (see item 24 of Schedule 1).

In recognition of that repeal, items 3 and 4 amend the definitions of local access line and superfast carriage service to refer to the Part 7 provisions as they stood immediately before the commencement of Schedule 2 to the Bill. These changes have the effect of preserving the Part 7 provisions for the purposes of the CLCs Declaration.

Item 5 - Section 5

Item 6 - Section 5

Item 7 - At the end of section 5

Items 5, 6 and 7 amend section 5 of the CLCs Declaration.

Section 5 specifies when the carrier licence conditions in section 6 of the Declaration apply. The trigger is the supply of superfast carriage services or specified broadband services using a local access line forming part of a designated telecommunications network to residential customers at any time on or after the commencement of the CLCs Declaration (i.e. 1 January 2015).

The change in item 6 has the effect of limiting the application of the licence conditions in section 6. That is, they would apply where:

·          the relevant networks came into existence before 1 July 2018; and

·          the network has not been altered, upgraded or extended on or after 1 July 2018; and

·          no functional separation undertaking given by the carrier is in force.

If the circumstances set out in section 5 as amended are not met, the CLCs Declaration would not apply and Part 8 of the Tel Act would apply in respect of the relevant access lines.

Item 7 inserts a new subsection 5(2). Proposed new subsection 5(2) clarifies that a functional separation undertaking can be given by a carrier either alone, or jointly with one or more other persons. This is consistent with the way functional separation undertakings can be submitted under Part 8 of the Tel Act, as amended by this Bill.

The change in item 5 is consequential to the insertion of subsection 5(2) by item 7.

Item 8 - Paragraph 6(1)(c)

 

Item 8 removes the reference to 30 June 2018 in paragraph 6(1)(c) of the CLCs Declaration.

Paragraph 6(1)(c) specifies the period within which carriers are required to comply with the carrier licence conditions in subsections 6(5) to 6(8) of the Declaration, namely from 1 July 2015 to 30 June 2018 (which is the date on which the Declaration would, but for the change proposed in items 3 and 8, expire). The licence conditions in subsections 6(5) to 6(8) relate to general separation and supply obligations and obligations in respect of the supply of a Layer 2 Wholesale Service.

As a result of this change, the licence conditions in subsections 6(5) to (8) would continue to apply to carriers beyond 30 June 2018, consistent with the ongoing operation of the CLCs Declaration beyond that date.

Competition and Consumer Act 2010

Item 11 - After paragraph 151BU(4)(da)

Item 12 - After subparagraph 151BUA(2)(b)(iia)

Item 13 - After subparagraph 151BUB(2)(b)(iia)

Item 14 - After subparagraph 151BUC(2)(b)(iia)

Items 11 to 14 amend Division 6 of Part XIB of the CCA.

Division 6 provides that the ACCC can make record-keeping rules relating to information that is relevant to the ACCC’s functions and powers. Division 6 also sets out the circumstances in which access can be given to reports prepared by carriers or carriage service providers in accordance with record-keeping rules.

Given the new functions and powers that the ACCC will have as a result of the proposed amendments in Schedule 2 to this Bill, items 11 to 14 amend certain provisions in Division 6 to extend their operation to Part 8 of the Tel Act.

Legislation (Exemptions and Other Matters) Regulation 2015

Item 15 - Section 12 (table item 61, column headed “Legislative instrument”, after paragraph (a))

Item 15 adds the CLCs Declaration to the table in section 12 of the Legislation (Exemption and Other Matters) Regulation 2015 setting out legislative instruments that are exempt from rules relating to sunsetting n the Legislation Act. This ensures the continued operation of the CLCs Declaration into the future.

Telecommunications Act 1997

Item 17 - After subsection 69(4)

Item 17 inserts a new subsection 69(4A) in the Tel Act.

Section 69 empowers the ACMA to issue remedial directions to carriers if they have contravened, or are contravening, a condition of their carrier licence.

The effect of new subsection 69(4A) is that the ACMA will not be able to issue remedial directions for contraventions of carrier licence conditions that relate to new provisions in Part 8 that are listed in new subsection 69(4A). This amendment is required because the ACCC, and not the ACMA, will be the regulator with responsibility for Part 8.

Item 18 - After subsection 70(1)

Item 19 - Before paragraph 70(5)(a)

Items 18 and 19 insert new subsection 70(1A) and new paragraph 70(5)(aaa) in the Tel Act.

Section 70 empowers the ACMA to issue formal warnings if carriers contravene a conditions of their carrier licence. Section 70 also empowers the ACCC to issue formal warnings for specified contraventions (see subsection 70(5)).

The effect of new subsection 70(1A) is that the ACMA will not be able to issue formal warnings for contraventions of carrier licence conditions that relate to new provisions in Part 8 that are listed in subsection 70(1A). Instead, the ACCC will have this power as a result of new paragraph 70(5)(aaa).  This reflects the policy intention for the ACCC to be the regulator of Part 8 given the strong competition objectives underpinning Part 8.

Item 20 - After subsection 102(4)

Item 20 inserts a new subsection 102(4A) in the Tel Act.

Section 102 empowers the ACMA to issue remedial directions to service providers if they have contravened, or are contravening, a service provider rule.

The effect of new subsection 102(4A) is that the ACMA will not be able to issue remedial directions for contraventions of service provider rules that relate to new provisions in Part 8 that are listed in new subsection 102(4A). As noted under item 17, this change is required because the ACCC, and not the ACMA, will be the responsible regulator.

Item 21 - After subsection 103(1)

Item 22 - After subsection 103(4E)

Items 21 and 22 insert new subsection 103(1A) and new subsection 103(4F) in the Tel Act.

Section 103 empowers the ACMA to issue formal warnings for contraventions of service provider rules. Section 103 also empowers the ACCC to issue formal warnings for specified contraventions.

The effect of new subsection 103(1A) is that the ACMA will not be able to issue formal warnings for contraventions of service provider rules that relate to new provisions in Part 8 that are listed in new subsection 103(1A). Instead, the ACCC will have this power as a result of new subsection 103(4F).

Item 23 - Part 8 (heading)

Item 14 substitutes the current heading for Part 8 with a new heading, which better reflects the scope of Part 8 as a result of the amendments in Schedule 2 to the Bill.

Item 24 - Section 142

Item 24 replaces the current Simplified Outline for Part 8 of the Tel Act with a new Simplified Outline, which reflects the main proposed amendments to Part 8.

The new Outline summarises the operation of section 143 as amended (see items 35 to 41 below) and new section 142C (see item 34 below). Sections 143 and 142C both impose an obligation to provide eligible services on a wholesale basis on persons who are in a position to exercise control (and on associates of persons who are in a position to exercise control) over networks or local access lines of the kind specified in those sections. Section 143 as amended will apply in relation to telecommunications networks that came into existence or were altered or upgraded between 1 January 2011 and 1 July 2018, while new section 142C will apply in relation to local access lines that come into existence on or after 1 July 2018 or are altered or upgraded on or after 1 July 2018.

Item 25 - Section 142A (definition of alter )

Item 26 - Section 142A

Item 27 - Section 142A (definition of small business customer )

Item 28 - Section 142A

Item 29 - Section 142A (paragraph (b) of the definition of superfast carriage service )

Item 30 - Section 142A

Item 31 - Section 142A (definition of upgrade )

Item 32 - Section 142A

Items 25 to 32 amend section 142A to amend existing definitions of terms used in Part 8 and introduce new definitions to reflect amendments to that Part.

Item 25 amends the definition of alter in section 142A. Currently, section 142A states that alter , in relation to a telecommunications network, has a meaning affected by section 159.  Item 25 amends the definition so that the meaning of alter is affected by section 159 in relation to either a telecommunications network or a line. This change is consequential to the substantive change in section 159 (see item 74 below), which in turn reflects the operation of new proposed section 142C with respect to local access lines.

Item 26 introduces a new definition of associate , which is to take the meaning given by section 152 as amended by this Bill (see items 53 and 54 below). The concept of associate is relevant to the operation of proposed new section 142C and existing section 143 as amended by this Bill.

Item 26 also introduces new definitions of business unit and of corporation . Corporation means a body corporate, while business unit means part of a corporation. These terms are central to the operation of the functional separation undertakings provisions in Part 8, which apply to corporations and business units within those corporations.

Item 26 introduces a definition of close proximity , which states that the term has a meaning affected by section 162. Proposed section 162 (see item 77 below) would empower the Minister to determine, by legislative instrument, when premises are, or are not, in close proximity to a local access line. The concept of close proximity is relevant to the operation of new section 143F (see item 42 below), which exempts certain local access lines from section 142C.

The new term customer interface means a wholesale interface for the purposes of ordering, provisioning, billing, service activation and fault rectification in relation to the supply of local access line services. In other words, it is the interface that is used to manage key aspects of the relationship between the supplier of a wholesale service and its wholesale customers. This term is used in proposed new sections 151A and 151C, which set out the requirements for standard and joint functional separation undertakings, respectively (see item 51 below - for example, proposed paragraphs 151A(2)(l) and 151C(2)(q)). Specifically, as part of a functional separation undertaking, the same customer interface that is used to provide local access line services to wholesale customers must also be used in providing those services to a person’s own retail business unit (or a retailer that is part of the undertaking) for supply to retail customers. This promotes a non-discriminatory approach to the supply of local access line services.

The term declared service is given the same meaning as in Part XIC of the CCA.

Item 26 includes a definition of designated carriage service , which has the meaning given by section 142BD (see item 33 below). This term is used in proposed new section 143A, which empowers the ACCC to determine that certain classes of persons are exempt from sections 142C and 143, subject to certain conditions and limitations (including in relation to the supply of designated carriage services - see item 42 below).

The new term fixed-line carriage service means a carriage service that is supplied using a line to premises occupied or used by an end-user. This term is also used in proposed section 143A. A person who elects to benefit from a class exemption made by the ACCC under section 143A must not supply fixed-line carriage services to more than 2,000 residential customers (or a higher number, not exceeding 12,000, specified in the regulations). The objective is that a person’s residential customers supplied on other networks (for example, mobile or wireless) will not be counted, and so the term ‘fixed-line carriage service’ is required to distinguish the different networks used to supply residential end-users.

The new term functional separation undertaking means either a standard functional separation undertaking under proposed section 151A (see also the new definition of standard functional separation undertaking in item 26 ) or a joint functional separation undertaking under proposed section 151C (see also the new definition of joint functional separation undertaking in item 28). A standard functional separation undertaking is given to the ACCC by a single corporation, while a joint functional separation undertaking is given to the ACCC by two or more corporations.

In the context of the new functional separation undertakings regime, functional also includes, but goes beyond, organisational arrangements (e.g. the use and structure of business units or subsidiary companies).

The new term fundamental provision has the meaning given by subsection 151A(9) (in the context of standard functional separation undertakings) or 151C(9) (in the context of joint functional separation undertakings). A fundamental provision is a provision in a functional separation undertaking that is a basic element of the undertaking, and critical to its success and enforcement.

The term local access line service means an eligible service supplied using a local access line. The term eligible service is already defined in section 142A, and it has the same meaning as in section 152AL of the CCA. The concept of local access line service is a key concept under the functional separation undertakings process being introduced by the Bill (see item 51 below).

Functional separation undertakings would be given by a corporation or corporations in relation to their supply of local access line services, and key requirements such as functional separation and non-discrimination relate to the supply of local access line services. The term is cast broadly, so, for example, it does not limit the eligible service by type (e.g. a voice or Internet service) or by speed (e.g. broadband or superfast), although download speed is relevant to whether other requirements apply to local access line services.

The new term multi-unit building means:

·          a building that has two or more units for occupation as a place of residence or business; or

·          a building in a complex, where each building has two or more units for occupation as a place of residence or business.

The term is broad and intended to capture both an apartment building, where the units in the building can be occupied as places of residence or business, and commercial or business complexes where individual buildings in the complex have two or more units that are used for residential or business purposes. It includes buildings governed by a body corporate, even if there are properties within that building with separate titles. The term would not generally cover, for example, a townhouse complex where each building contains a single place of residence or business, each of which has a title, and for which there is no body corporate. Such buildings would be understood to be single premises.

The term multi-unit building is used in proposed new subsection 158(2B) (see item 71 below). That item amends the definition of ‘local access line’ in Part 8 of the Tel Act for the purposes of certain provisions in Part 8. It provides that a line in a multi-unit building that is used to supply a superfast carriage service to a residential customer occupying a unit in the building is taken to be a local access line and to form part of the infrastructure of a telecommunications network. As a result, those lines would be subject to proposed new section 142C and other relevant provisions in Part 8. Although multi-unit building is defined broadly to cover a building with both residential and business customers, given that the rules in relation to local access lines will apply only to the supply of local access line services to residential customers, only buildings with residential units will be subject to the amended definition of ‘local access line’ in item 71.

The new term residential customer is defined to have a meaning affected by section 161, which extends the meaning of that term to include home-based businesses (see item 77 below). The term residential customer is used throughout Part 8 and is central to the operation of many existing and proposed new provisions in Part 8, which are premised on local access lines being used to supply superfast carriage services to residential customers.

The terms retail business unit and retailer are key concepts under the functional separation undertakings process being introduced in Part 8 through item 51 of the Bill. Under that process, a corporation (if a standard functional separation undertaking is given under section 151A) or corporations (if a joint functional separation undertaking is given under section 151C) must separate key wholesale and retail functions, and the definitions clarify who within a corporation or among multiple corporations will undertake those functions.

A retail business unit is a unit by which a corporation deals with its retail customers in relation to the supply of local access line services. A retail business unit is required where a single corporation proposes functional separation of its wholesale and retail functions within that corporation. Retailer, in the context of a joint functional separation undertaking, is a corporation that is identified as the retailer, or as one of the retailers, for the purposes of the undertaking. A retailer is required where the wholesale and retail functions are separated into different corporations which, however, form part of a single business organisation.

The term retail customer means a customer other than a wholesale customer. Wholesale customer is also separately defined in section 142A (see item 32) and it means a customer that is a carrier or a carriage service provider. These concepts are central to the operation of the structural separation obligations and functional separation undertakings provisions in

Part 8.

Item 27 repeals the definition of small business customer in section 142A because it is no longer required. The current rules in Part 8 apply to the supply of superfast carriage services to residential or small business customers. However, under Part 8 as amended by this Bill, existing rules and proposed new rules will only apply to the supply of superfast carriage services to residential customers, thereby providing greater flexibility in the supply of services to small business customers.

Item 29 amends the definition of superfast carriage service in section 142A. Currently, one of the criteria in the definition is that a carriage service provide a download transmission speed that is normally more than 25 megabits per second (see paragraph (b) of the current definition). This means that a carriage service with a speed of precisely 25 megabits per second is not a superfast carriage service. The amendment provides that a carriage service with a download transmission speed of normally 25 megabits per second or more will be defined as a superfast carriage service, provided the other criteria in the definition are also satisfied. This better reflects the general understanding of the capabilities of such services.

Item 30 inserts two new definitions into section 142A that are required under the new functional separation undertakings process.

The first definition provides that supply , in relation to a service, includes the supply of the service by a corporation to itself, but further provides that the definition does not apply to subsection 142C(2) or 143(2). That is, when used in subsections 142C(2) and 143(2), supply by a corporation would only mean supply to others. This is because these subsections will require a person controlling a local access line or superfast fixed-line network to be wholesale-only. Accordingly, in this context, supply could not refer to internal supply.

The second definition provides that unsatisfactory compliance record has a meaning affected by section 142BC, which exhaustively sets out the matters that can be considered when determining whether a person has an unsatisfactory compliance record in relation to functional separation (see item 33 below). An unsatisfactory compliance record is a key concept in the enforcement of functional separation undertakings. The ACCC could revoke an undertaking if a person has an unsatisfactory compliance record (see proposed new section 151W, noted at item 51 below). An unsatisfactory compliance record is also relevant to breaches of an undertaking while it is in force and contraventions of specific new provisions in Part 8 of the Tel Act (for example, the non-discrimination obligations under proposed sections 151ZF, 151ZG and 151ZH, and the anti-avoidance obligations under proposed section 151ZI) (see proposed new section 151Y, also noted at item 51 below).

Item 31 amends the existing definition of upgrade in section 142A. The current definition provides that upgrade, in relation to a telecommunications network, has the meaning affected by section 160. The amendment in item 31 would have the effect of applying the amended definition to lines as well as networks. This change is consequential to the substantive change in section 160 (see item 76 below), which in turn reflects the operation of new proposed section 142C with respect to local access lines

In addition to the new definition of wholesale customer (noted above), item 32 inserts new definitions of wholesale business unit , wholesaler and worker .  

Together with the concepts of retail business unit and retailer , wholesale business unit and wholesaler are key concepts under the functional separation undertakings process being introduced in Part 8. Wholesale business unit is relevant in the context of standard functional separation undertakings given by a single corporation under section 151A and it refers to the business unit within a corporation through which the corporation deals with its wholesale customers and retail business units to supply local access line services. Wholesaler , in the context of a joint functional separation undertaking given under section 151C, refers to the person(s) named in an undertaking as the wholesaler(s) in the undertaking.

Worker has an expanded meaning and covers individual employees, individual contractors or subcontractors, and employees of a contractor or subcontractor. This term is used in proposed new sections 151A and 151C, which set out the requirements for standard and joint functional separation undertakings, respectively (see item 51 below). The definition is intentionally broad to ensure appropriate and effective separation between wholesale and retail functions can be achieved under a functional separation undertaking by having different workers performing those functions to the extent necessary.

Item 33 - At the end of Division 1 of Part 8

Item 33 introduces a number of new sections into Part 8 that are foundational to the new functional separation undertakings regime.

Proposed Section 142B - Functional separation undertaking given by a person

New section 142B clarifies that a reference in Part 8 to a functional separation undertaking given by a person is a reference to a functional separation undertaking given by the person either alone or jointly with another person. The effect of this is that references in Part 8 to a functional separation undertaking refer either to a standard functional separation undertaking or a joint functional separation undertaking.

Proposed Section 142BA - Promotion of the long-term interests of end-users of carriage services and of services supplied by means of carriage services

One of the criteria that the ACCC must have to regard to in deciding whether to accept a functional separation undertaking (or a variation to an undertaking) is whether the undertaking (or the variation) promotes the long-term interests of end-users of carriage services and of services supplied by means of carriage services (see proposed new section 151J at item 43 below and new section 151V). The promotion of the long-term interests of end-users must also be considered by the ACCC when deciding whether to make a class exemption determination under subsection 143A(1) and (2).  

New section 142BA clarifies that, for the purposes of Part 8, the question of whether something promotes the long-term interests of end-users of carriage services or of services supplied by means of carriage services is to be determined in the same way as it is determined for the purposes of Part XIC of the CCA (see section 152AB of the CCA specifically).

The object of promoting the long-term interests of end-users underpins the ACCC’s regulatory functions under Part XIC of the CCA.

Proposed Section 142BB - Terms and conditions

New section 142BB clarifies how notional contracts, and terms and conditions in notional contracts, should be treated for the purposes of Part 8. The concept is relevant for arrangements between wholesale and retail business units within a single corporation to give effect to a functional separation commitment, where it would not be legally possible to have a legally binding contract as the units are part of the one and same legal entity. In this context, the corporation could put in place a notional contract between the retail business unit and the wholesale business unit. Section 142BB operates as an interpretative aid to clarify that notional contracts (however described) between a corporation’s business units should be treated as if they were actual contracts, and any terms and conditions in such contracts should be treated as if they were actual terms and conditions.

Proposed Section 142BC - Unsatisfactory compliance record

Under proposed new section 151W (to be inserted by item 43 of Schedule 2 to this Bill), the ACCC may revoke a functional separation undertaking if it is satisfied that a person has an unsatisfactory compliance record. 

New section 142BC specifies exhaustively what the ACCC can consider in determining whether a person has an unsatisfactory compliance record. The ACCC must have regard only to:

·          any breaches by the person of any functional separation undertaking given by the person; and

·          any contravention by the person of section 143B, 151ZA, 151ZB, 151ZF, 151ZG, 151ZH or 151ZI.

Under section 143B, a person who has been exempted from the wholesale-only requirements in section 142C or section 143 as a result of an ACCC class exemption determination made under subsection 143A(1) or (2) must comply with the conditions and limitations of the determination. Proposed new sections 151ZA and 151ZB deal with reporting obligations following a revocation notice under section 151W and obligations to notify changes in control of the person who gave a functional separation undertaking, respectively. Proposed new sections 151ZF, 151ZG and 151ZH set out non-discrimination obligations applying to persons who are subject to the structural separation and functional separation requirements under Part 8. Proposed new section 151ZH requires persons who are subject to the structural separation or functional separation requirements under Part 8 to publish standard terms for the supply of eligible services and also to publish information on how any access agreements differ from those standard terms. Proposed new section 151ZI is a general anti-avoidance measure in relation to Part 8.

As each of these sections sets out key requirements that a person must comply with under Part 8, they are necessarily matters that the ACCC must consider in determining a person’s compliance record.

Proposed Section 142BD - Designated carriage service

New section 142BD defines designated carriage service for the purposes of Part 8.

Under subsection 142BD(1), designated carriage service means a carriage service specified by the ACCC in a legislative instrument in accordance with subsection 142BD(2) or, if no such carriage service is specified, a Layer 2 bitstream service.

Subsection 142BD(3) limits the kind of carriage services that the ACCC could specify under subsection 142BD(2). The ACCC must not specify a carriage service unless:

·          the service enables end-users to download communications, and

·          the download transmission speed of the service is normally 25 megabits per second or more, and

·          the service is supplied using a line to premises occupied or used by an end-user, and

·          there is in force a declaration under new section 152AL(3) of the CCA that relates to the service.

The concept of a designated carriage service is used in section 143A, which allows the ACCC to determine class exemptions (see item 42 below) from sections 142C or 143. One of the requirements for a person who elects to be subject to an exemption determination is that they must ensure that a designated carriage service is available for supply to the person’s wholesale customers or prospective wholesale customers. The intention is that any network provider exempted by the ACCC under section 143A will supply (or offer to supply) a wholesale service that can be used by wholesale customers to supply high quality retail broadband and voice services. A Layer 2 bitstream service is the baseline service in these circumstances (see paragraph 142BD(1)(b)). However, the section also provides flexibility for the ACCC to specify an alternative carriage service by legislative instrument (see paragraph 142BD(1)(a) and subsection 142BD(2)). To ensure that any alternative service specified by the ACCC offers appropriate functionality to wholesale customers, subsection 142BD(3) sets out key characteristics that the service must meet. Notably, the service must provide a download transmission speed that is normally 25 megabits per second or more (see paragraph 142BD(3)(b)). In addition, the service must be a declared service under subsection 152AL(3) of the CCA (see paragraph 142BD(3)(d)).

In July 2016 the ACCC declared a superfast broadband carriage service that meets the criteria set out in subsection 142BD(3). The ACCC could specify that service as a designated carriage service, so that any persons who are exempt from the wholesale-only requirements in section 142C or section 143 would be required to supply that superfast broadband access service to their wholesale customers.

Item 34 - Before section 143

Item 34 inserts a new section 142C before section 143 in Part 8 of the Tel Act.

New section 142C is modelled on existing section 143 of Part 8. Section 142C and section 143 as amended by this Bill are central to the operation of Part 8 of the Tel Act. Section 143 would be amended by this Bill so it applies only to local access lines that form part of a telecommunications network that came into existence, or was altered or upgraded, on or after 1 January 2011 but before 1 July 2018 (see items 35 to 41 below). Section 142C applies to local access lines that come into existence, or are altered or upgraded, on or after 1 July 2018.

Subsection 142C(1) specifies the local access lines that will be subject to the requirements in new section 142C. Specifically, new section 142C will apply to a local access line that meets the following criteria:

·          the line is part of the infrastructure of a telecommunications network, other than the NBN, in Australia (paragraphs 142C(1)(a) and (b)); and

·          the line is used, or proposed to be used, to supply a superfast carriage service wholly or principally to residential customers, or prospective residential customers, in Australia (paragraph 142C(1)(c)); and

·          either the line came into existence on or after 1 January 2018, or the line was altered or upgraded on or after 1 July 2018, and, as a result of the alteration or upgrade, the line became capable of being used to supply a superfast carriage service to residential customers in Australia ((paragraph 142C(1)(d)).

There are three notes accompanying proposed subsection 142C(1) which provide the reader with cross-references to other sections that operate together with or qualify the obligations in proposed section 142C. Note 1 refers the reader to new section 156A, which sets out the circumstances in which certain lines are deemed to have come into existence on or after 1 July 2018 (see item 43 below). Note 2 refers the readers to section 158A, which deems certain line extensions to be local access lines in their own right and to have come into existence on or after 1 July 2018. As a result of the application of sections 156A or 158A, those local access lines would also be captured by subsection 142C(1). Note 3 refers the reader to new sections 143A and 151, which deal with exemptions from sections 142C and 143 (see items 42 and 43 below).

A local access line can be used to supply an individual residential customer or multiple residential customers.

In paragraph 142C(1)(c), the words ‘wholly’ and ‘principally’ comprising the expression ‘wholly or principally’ are intended to have their ordinary meaning (similar to existing section 143). By way of example, a superfast local access line that is predominantly used to supply government or corporate customers would not be subject to the obligation in subsection 142C(2), even if it was also used to supply a small number of residential customers on an incidental or ancillary basis (see proposed new section 143H below).

Subsection 142C(2) contains the obligation to supply eligible services on a wholesale-only basis . A person (the first person) who is in a position to exercise control of the line, or is an associate of a person who is in a position to exercise control of the line, must not, on or after 1 July 2018, either alone or jointly with one or more other persons, supply an eligible service unless the service is supplied to a carrier or carrier service provider.

Section 152, as amended by this Bill (see items 53 and 54 below), sets out when a person is an associate of a person in relation to control of a line. For example, an associate could be a partner of the controller, or a person who acts, or is accustomed to act, in accordance with the directions, instructions or wishes of, or in concern with, the controller.

The note accompanying subsection 142C(2) refers the reader to new section 155A, which explains when a person is in a position to exercise control of a line for the purposes of Part 8 of the Tel Act.

Under subsection 142C(3), the wholesale-only obligation in subsection 142C(2) does not apply to the use of a local access line if a functional separation undertaking is in force under new Division 2B of Part 8 of the Tel Act (see item 43 below). However, under subsection 142C(3), if a local access line comes into existence after the ACCC has given a notice revoking the undertaking, but the revocation has not yet taken effect, then that line is subject to the wholesale-only obligation in subsection 142C(2). This reflects the policy intention that the wholesale-only requirements are the default arrangement.

Two notes accompany subsection 142C(3). The first reminds the reader that a functional separation undertaking relates to eligible services supplied using a local access line regardless of when that line came into existence. The second directs the reader to section 142B, which effectively provides that a functional separation undertaking may be given by a single person, or jointly by more than one person.

Subsection 142C(4) introduces ancillary contraventions of the prohibition in subsection 142C(2).

Civil penalties apply to direct or ancillary contraventions of the prohibition in subsection 142C(2) (see subsection 142C(5)). The accompanying note directs the reader to Part 31 of the Tel Act, which provides for the recovery of pecuniary penalties in relation to breaches of civil penalty provisions.

Item 35 - Section 143 (heading)

Item 35 substitutes the current heading for section 143 of the Tel Act with a new heading to better reflect the proposed amended scope of section 143 (to cover networks in existence, or upgraded or altered, on or after 1 January 2011 but before 1 July 2018. The changes to section 143 generally give effect to the Government’s commitment to grandfather existing arrangements and also remove regulation of small business networks.

Item 36 - Paragraph 143(1)(b)

Item 37 - Subparagraph 143(1)(d)(i)

Item 38 - Subparagraph 143(1)(d)(ii)

Item 39 - Subparagraph 143(1)(d)(ii)

Item 40 - Subsection 143(1) (note 2)

Items 36-39 make two main changes to section 143. Items 36 and 39 remove all references to ‘small business’ from section 143. Items 37 and 38 establish that the wholesale-only obligations under section 143 apply only to networks that came into existence, or were altered or upgraded, on or after 1 January 2011 but before 1 July 2018.  

As a result of the amendments in items 36-39, section 143 will apply to local access lines that are part of a telecommunications network (other than the NBN) that supplies superfast carriage services wholly or principally to residential customers or prospective residential customers.

The Government has decided to remove the wholesale-only obligation from networks supplying small business customers. However, proposed new section 161 of the Tel Act, to be inserted by item 77 of Schedule 2 to this Bill, sets out an extended meaning of residential customer that includes home-based businesses. Currently, the majority of small businesses in Australia are home-based businesses, so the wholesale-only obligations in Part 8 will continue to apply to networks supplying superfast carriage services to such end-users. Small businesses that are not home-based (for example, they use premises in commercial strips or business parks) would not be captured by the definition in section 161.

This is consistent with the scope of new section 142C.

The removal of the wholesale-only obligation from networks supplying superfast carriage services to small business customers will provide greater commercial opportunities and flexibility for fixed-line network providers.

These changes to section 143 take effect on the day after the Act receives the Royal Assent.

Item 40 makes a minor change to note 2 accompanying subsection 143(1) to replace the reference to section 144 with section 143A. This change is consequential to the amendment made by item 42.

Item 41 - Subsections 143(2) and (3)

Item 41 repeals existing subsections 143(2) and 143(3) and replaces them with new subsections 143(2) and 143(3). Item 41 also introduces new subsections 143(4)-(6).

Existing subsection 143(2) imposes an obligation on a person who is in a position to exercise control of a network to use a local access line forming part of that network to supply eligible services on a wholesale-only basis. The obligation also applies to associates of the person. New subsection 143(2) is the same in substance as existing subsection 143(2), however the new drafting reflects new subsection 142C(2) for consistency.

Similar to new subsection s142C(2), new subsection 143(3) provides that the wholesale-only obligation in subsection 143(2) does not apply to the use of a line if a functional separation undertaking is in force. For consistency with proposed new subsection 142C(3), if a notice revoking the functional separation undertaking has been given by the ACCC, but the revocation has not taken effect, subsection 143(2) will apply to any local access lines that come into existence after the notice was given.

New subsection 143(4) provides that subsection 143(2) also does not apply to the use of a line if the CLCs Declaration is in force, the line is part of the infrastructure of a designated telecommunications network (as defined in the CLCs Declaration) and a carrier who owns or operates the network is subject to the conditions in that Declaration. This new subsection provides clarity that a carrier who operates a network subject to the CLCs Declaration will not be subject to subsection 143(2). However, if that carrier gives the ACCC a functional separation undertaking, it will no longer be subject to the CLCs Declaration (see item 6 in Schedule 2 to the Bill).

New subsection 143(5) establishes ancillary contraventions of proposed subsection 143(2). This is consistent with new subsection 142C(4) with respect to the prohibition in 142C(2).

Existing subsection 143(3) provides that conduct that breaches the requirement in subsection 143(2) is a criminal offence. As criminal offence provisions in competition law are usually reserved for conduct that is especially egregious, the Government has determined that it is more appropriate for civil penalties to apply to breaches of Part 8 of the Tel Act. This is set out in new subsection 143(6), which provides that subsections 143(2) and (5) are civil penalty provisions.

The accompanying note to subsection 143(6) directs the reader to Part 31 of the Tel Act, which provides for the recovery of pecuniary penalties in relation to breaches of civil penalty provisions.

Item 42 - After section 143

Item 42 introduces a new section 143AA and a new Division 2A into Part 8 of the Tel Act. New Division 2A comprises new sections 143A to 143H and existing sections 144 to 151 of Part 8 (noting that these sections are also amended, see items 43 to 51 below). Again, a number of existing statutory exemptions are retained and adjusted in line with the Government’s commitment to grandfather existing arrangements.

Proposed Section 143AA - Judicial enforcement of prohibitions

Currently, contraventions of the prohibition in section 143 are criminal offences and can be enforced by the Minister, the ACCC or the ACMA. Third parties currently cannot take similar enforcement action.

As a result of proposed amendments in this Bill, the prohibitions in existing section 143 (as amended) and new section 142C would be civil penalty provisions (see subsection 142C(5) and subsection 143(6)). The ACMA’s ability to take enforcement action would also be limited (see items 17-21 in Schedule 1 above, and items 79-80 and 81-83 of in Schedule 2 below).

Proposed section 143AA would enable enforcement action to be taken by affected private parties who are carriers or CSPs, as well as by the ACCC.

If a person has contravened subsection 142C(2) or 143(2) (or the related ancillary contraventions in subsections 142C(4) or 143(5)), proposed section 143AA would enable the Federal Court, upon application from the ACCC, or a carrier or a CSP, to make orders directing the person to comply with the subsection or to compensate any other person (who may be the applicant) who has suffered loss or damage as a result of the contravention. The Federal Court may make any other order that it thinks appropriate and may discharge or vary an order granted under section 143AA.

Proposed Division 2A - Exemptions

Proposed Section 143A - Class exemptions

Section 143A provides powers to the ACCC to determine class exemptions from section 142C or section 143 through a legislative instrument (subsections 143A(1) and (2)). Any person who is a member of a class set out in an ACCC class exemption determination would not be required to comply with the wholesale-only obligations or functional separation requirements. However, the person would be subject to certain conditions and limitations (subsection 143A(3)).

For a class exemption to be effective, the ACCC would first specify the relevant class of persons to which the class exemption determination would apply. A person who is included in that class would then notify the ACCC, in writing, that it elects to be bound by the class exemption determination (paragraphs 143A(1)(a)-(c) and 143A(2)(a)-(c)).

A person can only benefit from a class exemption if that person (either alone or together with any other persons who are members of the same associated group) supplies fixed-line carriage services to no more than 2,000 residential customers. Regulations could allow the limit of 2,000 to be raised up to 12,000 (paragraphs 143A(1)(d)-(e) and 143A(2)(d)(e)).

A class exemption determination would be subject to the following conditions and limitations (subsection 143A(3)):

·          the person must ensure that a designated carriage service is available for supply to its current or prospective wholesale customers (see proposed section 142BD, noted at item 33 above) (paragraph 143A(3)(a));

·          the person must not discriminate between its current or prospective wholesale customers in relation to the supply of that service (paragraph 143A(3)(b));

·          the person must not discriminate in favour of itself in relation to the supply of that service (paragraph 143A(3)(c));

·          the person must not discriminate between its current or prospective wholesale customers when carrying on activities related to, or preparatory to, the supply of eligible services (paragraph 143A(3)(d));

·          the person must not discriminate in favour of itself when carrying out activities related to, or preparatory to, the supply of eligible service (paragraph 143A(3)(e)); and

·          such other conditions and limitations as are specified by the ACCC in the determination (paragraph 143A(3)(f)).

Subsection 143A(4) provides an exception to the rule in paragraph 143A(3)(b) prohibiting discrimination between the person’s current or prospective wholesale customers. The person could discriminate against a wholesale customer if it has reasonable grounds to believe that the wholesale customer would fail, to a material extent, to comply with the terms and conditions on which the person supplies designated carriage services.

Subsection 143A(5) gives some examples of grounds for such a belief, including where there is evidence that the wholesale customer is not creditworthy, or has repeatedly failed to comply with terms and conditions on which the person supplied eligible services.

The non-discrimination obligations that apply to persons who benefit from a class exemption by the ACCC, and the limited exception to those obligations, largely mirror arrangements that apply to NBN Co under sections 152AXC and 152AXD of the CCA.

Subsubsection 143A(6) limits the kinds of additional conditions or limitations that the ACCC could specify in a class exemption determination under paragraph 143A(3)(f), so the ACCC would not be able to specify conditions or limitation of a kind specified by the Minister, by legislative instrument, under subsection 143A(7). This is a reserve power that could be used, for example, in response to changes in market circumstances, or to respond to specific compliance issues.

Subsection 143A(8) provides that, in deciding whether to make a class exemption determination, the ACCC must have regard to whether the determination promotes the long-term interests of end-users of carriage services or of services supplied by means of carriage services. It must also have regard to any matters specified by the Minister in a determination under subsection 143A(9) or such other matters (if any) as it considers relevant.

In accordance with new section 142BA (see item 33 above), whether a class exemption determination promotes the long-term interests of end-users must be determined in accordance with Part XIC of the CCA. Under section 152AB of the CCA, in determining whether a particular thing promotes the long-term interests of end-users, the ACCC is required to have regard to a range of factors, including the extent to which the thing is likely to result in promoting competition in markets for listed services, achieving any-to-any connectivity and encouraging the economically efficient use of, and investment in, infrastructure.

Subsection 143A(10) defines associated group for the purposes of section 143A. It provides that a person who is in a position to exercise control of a local access line or a telecommunications network, and who has one or more associates, is taken to belong to an associated group. The associated group consists of the person and those associates.

Proposed section 143A reflects concerns that the wholesale-only obligations and functional separation requirements may be unduly onerous on very small networks and pose a barrier to new market entrants. The section therefore provides a limited exemption for small networks that allows them to be vertically integrated (outside the new functional separation undertakings process in Part 8), on the basis that this will promote investment and entry by small providers. However, the Government wishes to ensure that such networks do not establish vertically-integrated local access bottlenecks that may impede long-term competition. The requirement to supply a Layer 2 bitstream service (or similar service as specified by the ACCC) (see discussion in relation to item 33) will ensure that the network provider will not have an effective monopoly in providing retail services to end-users. The requirements not to discriminate between wholesale customers, or in favour of the network provider itself, ensure that the network operator cannot have an unfair advantage over its wholesale customers.

Proposed Section 143B - Compliance with conditions and limitations of exemption determinations

This section requires a person, on or after 1 July 2018, to comply with the conditions or limitations of a class exemption determination made under subsection 143A(1) or subsection 143A(2) . It also sets out ancillary contraventions and provides that breaches of the requirements are civil penalty provisions. The accompanying note directs the reader to Part 31 of the Tel Act, which provides for the recovery of pecuniary penalties in relation to breaches of civil penalty provisions.

Proposed Section 143C - Judicial enforcement of conditions and limitations of exemptions determinations

Section 143C provides that the ACCC, a carrier or a carriage service provider may seek judicial enforcement of conditions or limitations of class exemption determinations made under section 143A. The Federal Court may make orders directing a person to comply with a condition or limitation in a determination, directing a person to compensate any other person (who may be the applicant) who has suffered loss or damage as a result of the contravention, and any other order that the Court thinks appropriate. The Federal Court may discharge or vary an order granted under section 143C.

Proposed Section 143D - Publication of list of persons who have elected to be bound by exemption determinations

Under new section 143D, the ACCC will be required to publish on its website the names of the persons who have elected to be bound by a class exemption determination under subsection 143A(1) or subsection 143A(2) and who have not cancelled the election.

Proposed Section 143E - Exemptions—certain real estate development projects

Currently, the wholesale-only obligation in section 143 does not apply to extensions of telecommunications networks, where the networks are extended to another area that is being developed (or will be developed) as another stage of a real estate development project that was under way before 1 January 2011 (see subsections 156(2) and 156(3)).

The Government understands that a number of real estate development projects that were under way before 1 January 2011 continue to be developed. It is therefore necessary to preserve the existing rules that apply to extensions of telecommunications networks in other stages of these projects.

Proposed subsection 143E(1) provides for exemptions from both sections 142C and 143 for such extensions on or after 1 July 2018. The section works together with proposed amendments to subsection 156(3) (see item 63A below), which would limit the operation of the current exception to extensions that occur before 1 July 2018.

The Government understands that agreements to install network infrastructure in real estate development projects can be varied over time (or novated to a new developer). The drafting of the exemption in subsection 143E(1) is broad enough to cover agreements that have or have not been varied. In addition to extending the statutory exemption, new section 143E makes a number of changes.

First, the existing exemption in subsection 156(3) was drafted before Part 20A of the Tel Act was enacted. It therefore refers to real estate development projects ‘within the ordinary meaning of that expression’. As Part 20A inserted a definition of real estate development project for the purposes of the Tel Act (see subsection 372Q(5)), this definition will also apply to new section 143E.

Second, it is possible that some new areas may be developed within the project area of an existing real estate development project but would not be part of the project that was under way before 1 January 2011. They would be subject to a different contractual arrangement. Some such developments may be for multi-unit buildings where it could be expected that there would be competition to provide network infrastructure. Other developments, however, could be for very small areas (for example, the subdivision of a single lot). In such cases it may be more practical for the existing network provider also to service the new area that is being developed.

Consequently, subsection 143E(2) provides for exemptions for projects specified by the Minister. Given that the extension could be for a completely new real estate development project or for a building redevelopment project, the Minister would have the power to specify both types of projects.

Where one or more individual projects are exempted, the Minister would specify those projects by notifiable instrument (subsections 143E(3)-(4) and (6)-(7)). Should the Minister decide to make a class exemption, this would be by legislative instrument (subsections 143E(5) and 143E(8)).

Subsections (4) and (7) state, for the avoidance of doubt, that subsection 13(3) of the Legislation Act does not apply to the notifiable instruments set out in subsections (3) and (6). Subsection 13(3) of the Legislation Act provides that notifiable instruments can refer to a class or class of matters. However, the notifiable instruments that would be made under subsections 143E(3) and 143E(6) are limited to referring to specific projects. Classes of projects instead would be dealt with through legislative instruments (subsections (5) and (8)).   

The exemption power is intended to be transitional pending the completion of the NBN, so the Minister’s exemption powers would expire when the NBN is declared built and fully operational under section 48 of the NBN Companies Act (see proposed paragraph 143E(2)(b)).

The Minister can only grant exemptions to the carrier who installed the network infrastructure on or before 1 January 2011 (paragraph 143E(1)). However, this does not mean that other carriers would be excluded from tendering for projects within the area of the original real estate development project. As noted above, new subsection 143E(2) responds to the possibility that some development projects may be so small that it would be impractical for any carrier to service them other than the carrier who is operating the network in the area.

It would be at the Minister’s discretion whether or not to accept a request to specify one or more projects, or classes of projects. The Bill does not propose specific criteria for the Minister to consider, but it is envisaged that a carrier would need to demonstrate, for example, that it is unlikely that other carriers would be in a position to undertake the project and that granting an exemption would provide end-users with faster access to superfast carriage services.

Proposed subsections 143E(9) and 143E(11) insert a new definition of building redevelopment project for the purposes of section 143E. The essential characteristics of a building redevelopment project are that it involves the significant refurbishment or repurposing of one or more buildings so as to bring into existence one or more building units, any or all of which are then made available for sale or lease. It is immaterial whether the project is implemented in stages, or different elements of the projects are carried out by different persons, or approvals are required under relevant Commonwealth, State or Territory laws.

This definition is modelled on the definition proposed in new section 360Y in Schedule 3 to this Bill. The main difference is that section 360Y includes a power for the Minister to specify conditions for building redevelopment projects. This power is not required under section 143E given the discretionary nature of the Minister’s powers under the section and the Minister’s ability to determine conditions (if any) when specifying projects, or classes of projects.

Subsection 143E(10) clarifies that, for the purposes of section 143E, the areas occupied by the buildings are the project area for the building redevelopment project.

Proposed Section 143F - Exemptions—lines installed in close proximity to other lines

Currently, persons who control superfast fixed-line networks that came into existence before 1 January 2011 can install lines to connect customers in close proximity to those networks and continue to operate the networks on an integrated basis (i.e. not wholesale-only). The subscriber lines are not subject to section 143 of the Tel Act. Proposed section 143F provides a similar exemption for lines installed on or after 1 July 2018 to connect customers to two types of networks.

The first type of network is those that were built between 1 January 2011 and 1 July 2018 (i.e., under the rules that applied under section 143, including any exemptions made under those rules). Carriers can install lines to connect customers in close proximity to those networks.

The second type of network is those built under the rules in the CLCs Declaration. Carriers can also install lines to connect customers in close proximity to those networks. The exemptions are provided as part of the Government’s policy to grandfather existing network arrangements. The intention is that the networks can continue to be operated under the rules that apply to them if the network operators so desire.

New subsection 143F(1) exempts from section 142C local access lines that come into existence on or after 1 July 2018 and that form part of a telecommunications network that came into existence on or after 1 January 2011, where:

·          the installation of the lines enables the occupier of the premises to become a customer in relation to a superfast carriage services supplied using the line; and

·          the premises are in close proximity to a line that forms part of the infrastructure of the network as the network stood immediately before 1 July 2018; and

·          the lines are used to supply superfast carriage services.

New subsection 143F(2) is similar in effect to subsection 143F(1), however it relates to new local access lines installed on or after 1 July 2018 which form part of a designated telecommunications network (within the meaning of the CLCs Declaration) in existence before 1 July 2018. In order for the lines to be exempted from section 142C:

·          the new lines must have come in existence for purposes of connecting particular premises to the network and thereby enabling the occupier of the premises to become a customer in relation to superfast carriage services supplied using the lines; and

·          the premises must be in close proximity to a line that forms part of the infrastructure of the network as the  network stood immediately before 1 July 2018.

It is envisaged the close proximity would facilitate the connection of existing network infrastructure in the street to premises, but not the extension of that network infrastructure to allow connection in a new location where the network is not already ‘in close proximity’.

Close proximity has a meaning affected by proposed new section 162, which empowers the Minister to determine, by legislative instrument, when premises are, or are not, in close proximity to a local access line (see item 77 below).

Two legislative notes accompany subsection 143F(1) and subsection 143F(2). Note 1 refers the reader to proposed new section 156A, which deems certain lines to have come into existence on or after 1 July 2018 (see item 66 below). Note 2 refers the reader to proposed new section 158A, which deems certain line extensions to be local access lines in their own right and to have come into existence on or after 1 July 2018 (see item 72 below).

Proposed Section 143G - Exemptions—networks covered by exemption instruments

New section 143G sets out four specific exemptions from 142C. These relate to local access lines that come into existence on or after 1 July 2018 and which form part of networks that are currently subject to a ministerial exemption granted under sections 141A and 144 of the Tel Act. The new lines will be exempt if they are within the exempt network boundary (as set out in the named ministerial exemption instrument) and during all times that the ministerial exemption is in force.

The statutory exemptions are required because the existing exemption instruments only relate to the wholesale-only requirements in section 143. Without the statutory exemptions, new lines installed on or after 1 July 2018 within the boundaries of the exempt networks would be subject to the wholesale-only requirements in section 142C.

The four related ministerial exemption instruments are as follows:

·          the Telecommunications (Network Exemption—Specified TransACT Very Small Scale Networks) Instrument 2012 (subsection 143G(1));

·          the Telecommunications (Network Exemption—Telstra South Brisbane Network) Instrument 2012 (subsection 143G(2));

·          the Telecommunications (Network Exemption—TransACT Upgraded VDSL Networks) Instrument 2012 (subsection 143G(3)); and

·          the Telecommunications (Network Exemption—Specified Velocity Networks) Instrument 2012 (subsection 143G(4)).

A further ministerial exemption made under sections 141A and 144 of the Tel Act, the Telecommunications (Network Exemption—Specified TransACT Networks) Instrument 2012 ,  is no longer operative because the networks that are subject to it are no longer owned by TransACT but have been sold to NBN Co. Therefore, no further exemption is required under section 143G for those networks.

Subsection 143G(5) makes a minor amendment to the Telecommunications Network Exemption—Specified Velocity Networks) Instrument 2012 for the purposes of paragraph 143G(4)(c). The reader is to assume that paragraph (c) of the definition of Specified Velocity Network in the instrument were modified by omitting references to specific contracts from the definition. This amendment is required because the referenced instrument only provides an exemption for lines that are installed as part of specific real estate development projects, in relation to which there are specific agreements in place. It is possible that infrastructure for new developments may be required within the geographic areas of the exempt networks, but be carried out under contracts different from those under which Telstra is rolling out the exempt networks. Telstra could install lines to service those developments on an integrated basis.

Other carriers would be able to tender for any new development projects within the exempt areas, but as some of the projects may be very small it may not be practical for any carrier other than the existing network provider to fulfil them. Consequently, section 143G provides a mechanism to ensure end-users in exempt Velocity estates can receive superfast carriage services without undue delay.

For the avoidance of doubt, the amendments in subsection 143G(5) would also mean that Telstra’s ability to install lines on an exempt basis would not be affected if its contracts for the specified Velocity estates were to be varied.

Proposed Section 143H - Exemption—networks marketed as business networks

 

New subsection 143H(1) exempts from section 142C local access lines which are part of the infrastructure of a telecommunications network marketed exclusively as a business network where:

·          the line is used, or proposed to be used, to supply a superfast carriage service wholly or principally to residential customers, or prospective residential customers, in Australia;

·          the use, or proposed use, of the line to supply such service to residential customers is minor when considered in relation to the use, or proposed use, of all the local access lines that form part of the network; and

·          any other conditions specified by the Minister under subsection 143H(2) are specified.

This exemption would ensure service continuity for customers if their status changes from business to residential. For example, a customer may cease trading as a business at a particular location but remain there and retain their service as a residential customer. Without the exemption, the local access line used to serve that residential customer would then be subject to section 142C and the carrier controlling the line would be required to undertake structural or functional separation in relation to the line. It may be uneconomical for the carrier to do this, so it may cease to supply services to the customer without an exemption.

The exemption would only be available for networks that are marketed exclusively as business networks. A carrier who knowingly markets a network as both a business and residential network should undertake structural or functional separation for local access lines used to service residential customers.

‘Minor’ in paragraph 143H(1)(d) means a very small number. It does not mean ‘minority’. It is envisaged any residential customers would be incidental and ancillary in number. The ability for the Minister to set additional conditions under proposed subsection 143H(2) provides a mechanism to further clarify the operation of the exemption and to deal with any misuse of the exemption, if required.

Item 43 - At the end of section 144

Item 43 inserts new subsections 144(7) and 144(8) in the Tel Act. Section 144 currently empowers the Minister to exempt specified networks, specified local access lines or specified persons from the wholesale-only obligation in subsection 143(2) (refer to subsections 144(1), (2) or (3), respectively).

As a result of new subsection 144(7), the Minister will no longer have the power to exempt specified networks, lines or persons from the wholesale-only obligation in subsection 143(2) on or after 1 July 2018. This responds to recommendation 4 of the 2014 National Broadband Network Market and Regulatory Report published by the Vertigan panel, which found that Ministerial exemption powers should be repealed. The report also recommended that appropriate grandfathering provisions should be developed for networks already subject to Ministerial exemptions. Subsection 144(8) therefore preserves the Minister’s power to vary existing exemption instruments that are in force immediately after the start of 1 July 2018. By virtue of the transitional provisions in item 27 of Schedule 1, this would include exemption instruments made by the Minister under section 141A, which will be repealed as part of the repealed of Part 7 of the Tel Act. 

With the exception of any such exemptions that may be extended, on or after 1 July 2018, local access lines or networks that are subject to sections 142C or 143 will fall into one of the following categories:

·          they will be wholesale-only;

·          they will be functionally separated under the CLCs Declaration or in accordance with a functional separation undertaking (see item 51 Schedule 2 to this Bill); or

·          they will be exempt from the obligations as a result of a class exemption determination made by the ACCC or the application of the statutory exemptions in proposed new sections 143E to 143F and existing sections 145 to 151.

Item 44 - Subsections 145(1), (3) and (5)

Item 45 - Subsection 146(1)

Item 46 - Subsection 147(1)

Item 47 - Subsection 148(1)

Item 48 - Subsection 149(1)

Item 49 - Subsection 150(1)

Item 50 - Subsection 151(1)

Items 44-50 amend existing exemptions in sections 145-151 of the Tel Act. These sections currently provide that the wholesale-only obligation in subsection 143(2) does not apply to the supply of specific types of services to transport authorities, electricity supply bodies, gas supply bodies, water supply bodies, sewerage services bodies, storm water drainage services bodies and State or Territory road authorities. Services that are supplied to these organisations must be for the sole use of the organisation to carry communications necessary or desirable for managing the supply of their services, the workings of aviation services or the management or control of road traffic.

Items 44-50 makes consequential changes to the relevant subsections to include references to new subsection 142C(2). Consequently, the exemptions will apply both to networks subject to subsection 143(2) and local access lines subject to subsection 142C(2). These changes are again consistent with the Government’s commitment to grandfather existing arrangements.

A local access line can be used to supply services to more than one end-user, so a single line could, for example, be used to supply a superfast carriage service to a residential end-user and to electricity supply, gas supply, water supply and sewerage services bodies. In these circumstances, the line would not be exempt from subsection 143(2) or 142C(2) in relation to the residential end-user.

Item 51 - Before Division 3 of Part 8

Item 51 inserts two new Divisions into Part 8 of the Tel Act.

Division 2B will establish a process for persons who exercise control of networks or local access lines that are subject to the wholesale-only obligations in Part 8 to seek authorisation from the ACCC to operate on a functionally separated, rather than structurally separated, basis. The mechanism for this is a functional separation undertaking that meets certain specified requirements. Division 2B sets out the process for the ACCC’s consideration of undertakings, including the criteria for accepting undertaking and public consultation requirements. The new Division also establishes processes to vary or revoke a functional separation undertaking and compliance and enforcement provisions.

Division 2C will establish non-discrimination rules applying to:

·          persons supplying eligible services on a wholesale-only basis; and

·          persons supplying eligible services on a functionally separated basis.

Proposed Division 2B - Functional separation undertakings

There are two types of functional separation undertaking that can be submitted to the ACCC - a standard functional separation undertaking , given to the ACCC by a single corporation, and a joint functional separation undertaking given to the ACCC by two or more corporations. Standard functional separation undertakings are established by section 151A and joint functional separation undertakings are established by section 151C.

Division 2B also empowers the ACCC to make deemed standard functional separation undertakings for specified classes of corporations under section 151B.

Proposed Section 151A - Standard functional separation undertaking

Proposed section 151A is one of the key provisions in Division 2B. It provides that a person (who is a corporation) can give a functional separation undertaking to the ACCC (subsection 151A(1)) and it sets out what that undertaking must contain (subsection 151A(2)).

Specifically, a standard functional separation undertaking must provide for the following matters:

·          arrangements for separate wholesale and retail business units, workers, accounts and operational support, business and communications systems (paragraphs (2)(a), (2)(b), (2)(d) and (2)(e));

·          transparency of dealings between a person’s wholesale and retail business units (paragraph (2)(c));

·          publication of standard terms and conditions of supply of local access lines services, and supply on request at those terms and conditions (paragraphs (2)(f) and (2)(g));

·          confidentiality of information supplied to the wholesale or retail business units (paragraphs (2)(h)-(2)(k)); and

·          a standard interface for dealings between the wholesale business unit and wholesale customers and between the wholesale business unit and the person’s own retail business unit (paragraph (2)(l)); and

·          any other provisions specified in a determination made by the Minister under subsection 151A(14) (paragraph (1)(m)).

A standard functional separation undertaking must not contain provisions of a kind specified in a determination by the Minister under subsection 151A(15) (paragraph 151A(2)(n)). This is a reserve power that could be used to deal with circumstances that arise (see below).

These are key aspects of functional separation. Separation aims to limit the ability and incentive of an integrated corporation to discriminate in favour of its own retail operations relative to those of other access seekers. Separation of business units, workers, systems and accounts, and appropriate confidentiality arrangements, keep wholesale and retail activities separate and limit an integrated organisation’s ability to favour itself. They are intended to maximise equal treatment of competitors who require access to the network, thereby supporting fairer and more effective retail competition on bottleneck networks.

The non-discrimination obligations in Division 2C  further limit a corporation’s ability to favour its own retail operations and therefore support standard functional separation undertakings (see also the legislative note accompanying subsection 151A(2)).While the majority of the matters set out in subsection 151A(2) must be implemented by the person giving the undertaking, flexibility is provided in relation to the extent to which two matters can be implemented - separation of workers for the wholesale and retail business units and separation of systems and accounts. A person giving a standard functional separation undertaking to the ACCC must specify in the undertaking the extent to which these will be separated. Subsection 151A(3) clarifies that ‘extent’ may be a nil extent. A person can therefore propose limited or no separation in relation to these matters, for example, because of the likely costs of implementing separation.

Although the undertaking process gives flexibility to a person to develop its functional separation arrangements in these two respects, the ACCC will need to determine whether the proposal as a whole promotes the long-term interests of end-users (see proposed new section 151J below).

Subsection 151A(4) clarifies that the undertaking must be in a form approved in writing by the ACCC, and be accompanied by such information as is reasonably likely to assist the ACCC in deciding whether to accept or reject the undertaking. These requirements will streamline the ACCC’s consideration of an undertaking. Subsection 151A(4) also provides that the undertaking must be accompanied by the fee (if any) specified in, or determined in accordance with, a determination by the ACCC under subsection 151A(16)). It is envisaged that any fee payable would provide for the recovery of the ACCC’s costs in considering an undertaking, and the ACCC’s costs would therefore be reflected in the amount of any fee set or methodology for ascertaining the fee. Subsection 151A(17) is intended to ensure that the fee is not a tax by providing that the fee must not be such as to amount to taxation.

Proposed section 151G (below) requires the ACCC to consult publicly on a functional separation undertaking before accepting or rejecting it.

Subsections 151A(5) provides that an undertaking must include an expiry time. The expiry time can be described by reference to the time the undertaking comes into force or the undertaking can include a specific date (subsections 151A(6)-(7)), but it must not be more than ten years after the undertaking comes into force (subsection 151A(8)). The period of ten years is seen as providing sufficient commercial certainty for network operators who give undertakings.

Prior to the expiry of the undertaking, the person will need either to renew the undertaking (as set out in proposed new section 151M below) or take steps to be able to comply with the wholesale-only obligations in Part 8 of the Tel Act.

Subsection 151A(9) provides for fundamental provisions (see the definition noted at item 26 above). The undertaking must state that the provisions of the undertaking relating to the requirements to maintain separate business units (paragraphs 151A(2)(a) and (b)), transparency of supply between the units and of terms and conditions of supply (paragraphs 151A(2)(c) and (f)), supply on request of services on standard terms (paragraph 151A(2)(g)) and confidentiality arrangements (151A(2)(h)-(k)). The undertaking can also identify other provisions of the undertaking as a fundamental provisions. As noted at item 26 above, breach of a fundamental provision may be grounds for the ACCC to revoke an undertaking (see proposed new section 151W below).

Under subsections 151A(10) and (11), the undertaking must provide that the person giving the undertaking will give the ACCC periodic reports about its compliance with the undertaking and plans setting out the actions the person will take to ensure compliance with the undertaking. These requirements ensure that the ACCC will have adequate information available to it to evaluate compliance with an undertaking.

Subsection 151A(12) provides that the ACCC may perform functions or exercise powers conferred on it by the undertaking. The provision provides certainty that, if it is envisaged that the ACCC may perform a particular role by the person giving the undertaking, then the ACCC would not be acting beyond its power if it performs that role. For example, an undertaking may provide for the ACCC to review expenditure and pricing arrangements and, if required, change prices. The ACCC would not normally have the power to do this unless it declared the specific service being supplied in accordance with Part XIC of the CCA.

Subsections 151A(13)-(17) provide the powers for determinations that may be made in relation to a standard functional separation undertaking. Specifically:

·          the ACCC can determine what kinds of information may be shared between a person’s wholesale and retail business units (subsection 151A(13));

·          the Minister may determine additional provisions that must be included in an undertaking or kinds of provisions that must not be included in an undertaking (subsections 151A(14) and (15)); and

·          the ACCC may determine a fee, or method for ascertaining a fee, that must accompany an undertaking ( subsections 151A(16) and (17)).

All these determinations would be legislative instruments and, therefore, subject to Parliamentary scrutiny, disallowance, and sunsetting in accordance with the Legislation Act.

The Minister’s powers under subsections 151A(14) and (15) provide flexibility to deal with market developments . They could be used to add to or expand the requirements at paragraphs 151A(2)(a)-(2)(n), but not to remove them. Two theoretical examples are:

·          it becomes clear that a particular method of interconnection is required for more effective functional separation and competition - the Minister can therefore make a determination that a standard functional separation undertaking must include this method; and

·          it becomes apparent that certain business arrangements are impeding competition or the effectiveness of functional separation arrangements - the Minister can therefore make a determination to prohibit such arrangements from being included in undertakings.

As noted in the discussion on items 6 and 34-41, the CLCs Declaration, subsection 142C(2) or subsection 143(2) will not apply to local access lines if a functional separation undertaking is in force in accordance with section 151A (or section 151C). The requirements of a standard functional separation undertaking apply to the supply of local access line services (that is, eligible services supplied using local access lines, see the definition of local access line service in section 142A), regardless of when the local access line used to supply the services came into existence. This includes local access lines that came into existence before 1 January 2011 (and are not subject to any of the CLCs Declaration, subsection 142C(2) or subsection 143(2)) controlled by the corporation.

In effect, therefore, a standard functional separation undertaking must cover the use of all local access lines that a person controls servicing residential customers. This ensures that a single set of statutory separation and non-discrimination obligations applies to those lines.

Proposed Section 151B - Deemed standard functional separation undertaking

Proposed section 151B sets out a process for the ACCC to make a deemed standard functional separation undertaking. In effect, this would be a model undertaking that persons could elect to be bound by.

The ACCC could make a determination which specifies a class of corporations. If a corporation belongs to that class, provides a written notice to the ACCC notifying it that it elects to be bound by the determination, and has not later cancelled that election (or the ACCC has not itself revoked the election), then effectively the Tel Act has effect as if the corporation had given the ACCC a standard functional separation undertaking in the terms set out in the determination and the ACCC had accepted it (see paragraphs 151B(1)(a)-f)).

There are two possible times when a person’s deemed functional separation undertaking would come into force (see paragraphs 151B(1)(g)-(h)). If the ACCC has made a determination before 1 July 2018 and the person elects to comply with it before that date, then the deemed undertaking would come into force on 1 July 2018. This is consistent with the operation of proposed new section 142C. If a person elects to comply with the determination after 1 July 2018, then the undertaking would come into force when the election is given to the ACCC.

This provision will reduce compliance costs for smaller providers and for the ACCC itself. If a number of persons elect to be bound by the deemed undertaking, they will not have to go to the expense of preparing undertakings themselves, and the ACCC will also not have to consider several separate undertakings. Importantly, the choice of whether or not to be bound by the deemed undertaking will be left to each individual corporation.

Subsection 151B(1A) specifies that a functional separation undertaking covered by an ACCC determination must comply with paragraphs 151A(2)(a) to (m) and subsections 151A(9), (10) and (11). These are the key provisions setting out what a standard functional separation undertaking must contain. This means that the ACCC’s deemed standard functional separation undertaking must cover all of those matters.

Subsection 151B(1B) provides that the functional separation undertaking must not contain a provision of a kind specified in a determination by the Minister under subsection 151A(15). Subsection 151A(15) allows the Minister, by legislative instrument, to determine that certain kinds of provisions must not be contained in a standard functional separation undertakings. Subsection 151B(1B) makes it clear that, if such a legislative instrument is made, it affects functional separation undertakings covered by an ACCC determination.

Subsection 151B(2) sets out specific provisions in Division 2B that do not apply to a deemed standard functional separation undertaking. These are:

·          particular requirements about form and information that must accompany a standard functional separation undertaking, and provisions about expiry time (subsections 151A(4) to (8));

·          variation of the expiry time of a functional separation undertaking (section 151N);

·          duration of a functional separation undertaking (section 151P);

·          variation of a functional separation undertaking that is in force (section 151Q); and

·          revocation of a functional separation undertaking (section 151W).

As a deemed undertaking would be set out in a legislative instrument, the above listed provisions cannot apply. Under the Legislation Act, the instrument itself can be varied or revoked and will be subject to sunsetting. Requirements about form and required information are also not applicable as the ACCC itself would make the determination giving effect to the deemed undertaking. 

Subsections 151B(3) and (4) clarify that a person who has elected to be bound by a deemed undertaking can still give the ACCC its own proposed functional separation undertaking, either alone or with one or more other persons. Should this occur, the person is taken to have cancelled the election immediately before the other undertaking comes into force.

Subsections 151B(5) and (6) require the ACCC to consult on a draft determination prior to making the determination under subsection 151B(1)). The ACCC has to publish the draft instrument on its website and invite persons to make submissions about the draft determination. The time limit for consultation must not be shorter than 15 business days after the ACCC published the draft determination.

These obligations are intended to provide certainty that consultation will occur and how it will occur, and they go beyond the requirements in section 17 of the Legislation Act.

Subsection 151B(7) sets out the circumstances in which the ACCC can revoke a person’s election to be bound by a deemed standard functional separation undertaking, which are the same as the grounds for revoking a standard functional separation undertaking. These are:

·          where a person has breached a fundamental provision of the undertaking;

·          where the person has contravened the non-discrimination obligations in sections 151ZF or 151ZG; and

·          where the ACCC is satisfied that the person has an unsatisfactory compliance record in relation to the undertaking.

Proposed Section 151C - Joint functional separation undertaking

Proposed section 151C is another key provision in Division 2B. It provides that two or more persons (who are corporations) may give to the ACCC a joint functional separation undertaking (subsection 151C(1)) and it sets out what the undertaking must provide (subsection 151C(2)). .

The provisions that a joint functional separation undertaking must contain are the same as those for standard functional separation undertakings, with differences stemming from the joint nature of the undertaking, most notably that different corporations (rather than different units within a single corporation) can take on the wholesale or retail functions for the business.

It is not uncommon in the market for a number of different corporations to be part of a broader corporate structure. Under this structure, a single entity can control, for example, one or more network companies and one or more retail companies. It is also possible for a single corporation to split into two separate corporations, each taking on the wholesale or retail functions.

Therefore, under subsection 151C(2), the undertaking must identify one or more corporations (but not all) as the wholesaler or wholesalers, and the remaining corporations as the retailers for the purposes of the undertaking (paragraph 151C(2)(a)). It must also provide that the wholesaler(s) will only supply local access line services to wholesale customers, and the retailer(s) will only supply local access line services to retail customers (paragraphs 151C(1)(b) and (c)). Each corporation must also have different directors (paragraphs 151C(2)(h) and (i)).

Under paragraph 151C(2)(o), the undertaking must provide that a retailer must not disclose to a wholesaler information provided to it by a carrier or carriage service provider. This excludes information provided by a wholesaler (as the wholesaler itself will be a carrier or a CSP) or information of a kind specified in a determination made by the ACCC under subsection 151C(15).

Paragraph 151C(2)(p) requires the undertaking to provide that a wholesaler will ensure it does not obtain, access or use information provided to a retailer by a carrier or a carriage service provider. This requirement is subject to the same exclusions as set out in paragraph 151C(2)(o).

As with standard functional separation undertakings, the Minister may, by legislative instrument, determine additional provisions that must be included in a joint functional separation undertaking or kinds of provisions that must not be included in a joint undertaking (paragraphs 151C(2)(r) and (s), subsections 151C(16) and (17)).

Like standard functional separation undertakings, there is flexibility in relation to separation of operational support, business and communications systems and accounts. A joint functional separation undertaking must specify the extent to which systems and accounts will be different for wholesalers and retailers (including to a nil extent) (paragraphs 151C(2)(j)).

The undertaking must specify the extent to which workers engaged by a wholesaler or retailer will perform their duties exclusively for the wholesaler or retailer, respectively (including to a nil extent) (paragraphs 151C(2)(d) and (e)). The undertaking must also specify the extent to which workers who are engaged by persons other than the wholesaler, but perform duties for it, are different from the workers who are engaged by persons other than the wholesaler but perform duties for the retailer, and vice versa (paragraphs 151C(2)(f) and (g)).

These provisions are intended to provide some flexibility to the persons giving the undertaking. Workers could, for example, work exclusively for a single corporation, or perform some duties for both. If they perform duties for both, it is envisaged that the joint undertaking would identify the specific duties and any actions that would be taken to ensure those workers do not have access to information that must not be shared between the corporations. It is a matter for the ACCC whether it accepts such arrangements having regard to the long-term interests of end-users test.

Joint functional separation undertakings are subject to similar requirements about form, expiry time and fundamental provisions as standard functional separation undertakings (subsections 151C(4)-(9)). Fundamental provisions for a joint functional separation undertaking include those that require separate corporations to be identified as wholesalers and retailers (paragraph 151C(2)(a)), limit the wholesaler to wholesale supply and the retailer to retail supply (paragraphs 151C(2)(2)(b) and (c)), require separate directors (paragraphs 151C(2)(h) and (i)), require transparency of terms and conditions and supply on those terms and conditions on request (paragraphs (2)(k) and (2)(l)) and require confidentiality of information (paragraphs 151C(2)(m), (n), (o) and (p)).

Proposed section 151G (below) requires the ACCC to consult publicly on a functional separation undertaking before accepting or rejecting it.

Subsections 151C(10), (11), (12) and (13) require the joint undertaking to provide that a wholesaler or a retailer will give the ACCC periodic reports about the parties’ compliance with the undertaking and plans setting out actions they will take to ensure compliance with the undertaking. These requirements ensure that the ACCC will have adequate information available to it to evaluate compliance with an undertaking.

Subsection 151C(14) provides that the ACCC may perform functions or exercise powers conferred on it by the joint undertaking. As noted in the context of section 151A, this provides certainty that, if it is envisaged that the ACCC may perform a particular role by the person giving the undertaking, then the ACCC would not be acting beyond its power if it performs that role.

Subsections 151C(15)-(19) empower the ACCC and the Minister to make various determinations for the purposes of a joint undertaking. These mirror the ACCC’s and Minister’s powers under subsections 151A(13)-(17) in respect of standard undertakings.

These determinations would be legislative instruments and subject to Parliamentary scrutiny, disallowance, and sunsetting in accordance with the Legislation Act.

Finally, as is the case with standard functional separation undertakings under section 151A, the requirements of a joint functional separation undertaking apply generally to the supply of local access line services to residential customers (that is, eligible services supplied using local access lines, see the definition of local access line service in section 142A), regardless of when the local access line used to supply the services came into existence. That is, if a corporation controls local access lines that came into existence before 1 January 2011 (and are not subject to any of the CLCs Declaration, subsection 142C(2) or subsection 143(2)), then a functional separation undertaking must apply to the use of those lines.

Proposed Section 151D - Further information about undertaking

Proposed section 151D provides that the ACCC may request further information about an undertaking after it has been given to the ACCC (subsections 151D(1) and (2)). This ensures the ACCC can obtain necessary information to make a fully-informed assessment of the undertaking. For example, an undertaking may be provided with insufficient information about one of the matters in subsections 151A(2) or 151C(2), or contain information that is unclear or ambiguous. The ACCC should be able to seek further information or clarification in such circumstances.

The ACCC may refuse to consider an undertaking until a person gives it the information it has requested (subsection 151D(3)). It may withdraw its request for further information in whole or in part (subsection 151D(4)).

Proposed Section 151E - Withdrawal of undertaking that is under consideration

This section would provide that a person or persons may withdraw a functional separation undertaking given to the ACCC before the ACCC makes a decision whether to accept or reject the undertaking (subsections 151E(1) and (2)). Corporations may change their business strategies, and decide that an undertaking is no longer required as a result, and this clause provides flexibility to deal with such situations. However, the person or persons may give a new undertaking to the ACCC (subsection 151E(3)).

The section would also provide that, if a person has paid a fee to the ACCC when submitting the undertaking (in accordance with paragraph 151A(4)(c) or 151C(4)(c)), the ACCC, at its discretion, may refund the whole or a part of the fee (subsection 151E(4)). The reason for a partial refund is that the fee is intended to recover the ACCC’s costs of assessing the undertaking. At the time the undertaking is withdrawn, the ACCC may already have incurred costs, and it should therefore be entitled to recover some of those costs. As it is a discretionary matter for the ACCC to refund a fee, there is no requirement for the ACCC to provide the person with substantiation for the amount of refund (if any).

Proposed Section 151F - ACCC to accept or reject functional separation undertaking

Proposed section 151F requires the ACCC to make a decision to accept or reject a functional separation undertaking, after considering the undertaking (subsections 151F(1) and (2)) and sets out the timeframes for doing so (subsections 151F(5)-(8)).

The ACCC must either accept or reject the undertaking by written notice to the person or persons who gave the undertaking. If it decides to reject the undertaking, it must set out reasons why it has rejected the undertaking (subsections 151F(3) and (4)).

The ACCC must take all reasonable steps to make a decision about the undertaking within three months of receiving it (subsection 151F(5)). Under subsection 151F(7), the ACCC may extend that initial 3-month period for a further period of up to three months. The ACCC may do so by written notice to the person or persons who gave the undertaking and must include in the notice a statement explaining why the ACCC was unable to make a decision in the initial 3-month period. The ACCC must publish a copy of the notice on its website (subsection 151F(8)).

Under subsection 151F(6), the ACCC may ‘stop the clock’ in the initial 3-month period in the following circumstances:

·          if the ACCC has requested a variation to a functional separation undertaking under consideration (in accordance with section 151K) and no varied undertaking is given to the ACCC in response - any day in the period specified in the variation notice (paragraph 151F(6)(a)); or

·          if the ACCC has requested a variation to a functional separation undertaking under consideration (in accordance with proposed new section 151K) and a varied undertaking is given in response - any day in the period from the date the ACCC gave the variation notice to the date the public consultation period for the draft variation ends (paragraphs 151F(6)(b))or

·          when the ACCC is consulting on a draft undertaking (in accordance with proposed new section 151G) - any day in the period from the date the ACCC published the draft undertaking to the end of the time period it specified for consultation (paragraph 151F(6)(c)); or

·          when the ACCC has sought further information on an undertaking (in accordance with proposed new section 151D) - any day during any part of which the request, or any part of the request, is unfulfilled.

These provisions ensure that the ACCC will reach a decision within a clear and reasonable timeframe, while also providing it with flexibility to extend the timeframe, in a limited way, or suspend the timeframe in predictable circumstances. The provisions thereby deliver greater certainty to the person giving the undertaking that it can expect a quick decision.

Section 151G - Consultation - Acceptance or rejection of undertaking

Proposed section 151G provides that before making a decision to accept or reject a functional separation undertaking, the ACCC must publish the draft undertaking on its website, invite persons to make submissions and consider any submissions received in response within the time limit specified (subsections 151G(1) and (2)). The consultation period must not be shorter than 15 business days after the ACCC has published the undertaking on its website (subsection 151G(3)).

Proposed Section 151H - Serial undertakings

Proposed new section 151H provides a mechanism for the ACCC to refuse to consider serial functional separation undertakings. A serial undertaking is essentially an undertaking that contains provisions that are materially similar to those in a previous undertaking given to the ACCC, and which the ACCC rejected (subsections 151H(1) and (2)). If a person gives the ACCC a serial undertaking and the ACCC refuses to consider it, the ACCC must refund the fee (if any) that was paid (subsection 151H(3)).

This provision is intended to ensure that the ACCC does not have to devote time and resources to considering a functional separation undertaking that it has effectively considered before and rejected, and that is likely to be rejected in its slightly varied form.

Proposed Section 151J - Criteria for accepting functional separation undertaking

Proposed new section 151J establishes criteria the ACCC must have regard to in deciding whether to accept an undertaking. Under subsection 151J(2), the ACCC must have regard to:

·          whether the undertaking promotes the long-term interests of end-users of carriage services or of services supplied by means of carriage services; and

·          any matters specified in a determination made by the Minister under subsection 151H(3) and in force at the time the undertaking was given; and

·          any such other matters as the ACCC considers relevant.

In accordance with proposed new section 142BA (see item 33 above) whether an undertaking promotes the long-term interests of end-users is to be determined in the same manner as it is determined for the purposes of Part XIC of the CCA.

The purpose of proposed subsection 151J(3), which empowers the Minister to determine, by legislative instrument, additional matters for the ACCC to consider, is to provide scope to provide additional guidance to the ACCC, if required. The undertaking provisions are new, and it is possible that the Minister or the ACCC may identify that some matters are important in deciding whether to accept an undertaking, but they cannot be considered because they are not encompassed by the long-term interests of end-users test as used under Part XIC of the CCA. In such a case, the Minister could make a determination to specify the additional matters.

As a Ministerial determination would be a legislative instrument, it would be subject to the normal consultation, publication, disallowance and sunsetting requirements that apply to such instruments.

Proposed Section 151K - Variation of functional separation undertaking that is under consideration

Proposed new section 151K enables the ACCC to suggest variations to a functional separation undertaking under consideration. This provision is designed to avoid a situation where the ACCC may decide to reject a functional separation undertaking, resulting in the person or persons who lodged it having to start the process again by lodging a new undertaking. Instead, it allows the ACCC to propose variations to the undertaking it was given.

If the ACCC determines that it cannot accept an undertaking, having regard to the matters in proposed new section 151J, then it can give the person or persons who gave the undertaking a written notice specifying variations to the undertaking. If the variations are made and the varied undertaking is given to the ACCC within the time specified in the notice, then the ACCC must consider the varied undertaking under section 151F as if it had been given to the ACCC instead of the original undertaking (subsection 151K(2)).

As noted under proposed section 151F, the period between when the variation notice is given and the public consultation on the draft variation ends does not count towards the initial 3-month period during which the ACCC is required to make a decision whether to accept or reject an undertaking.

The ACCC does not have a duty to consider whether to give a notice to a person under subsection 151K(2) ( subsection 151K(4)).

Proposed Section 151L - Replacement of functional separation undertaking that is under consideration

Proposed new section 151L provides a mechanism for the ACCC to deal with a standard functional separation undertaking that, in its opinion, should instead be a joint functional separation undertaking. If the ACCC reaches this decision, it may give the person who gave the standard functional separation undertaking a written notice stating that, if the person withdraws the undertaking and submits a joint functional separation undertaking in the terms specified in the notice, then it would be inclined to accept the joint functional separation undertaking (subsection 151L(2)).

The ACCC must nominate a time period for the persons to provide it with a joint functional separation undertaking. The ACCC does not have a duty to consider whether to give a notice under subsection 151L(2)) (subsection 151L(3)).

Proposed Section 151M - Renewal of functional separation undertaking

Proposed new section 151M provides for the renewal of functional separation undertakings that are in force. At least 12 months before an existing undertaking expires, the person or persons who gave the ACCC the original undertaking can give the ACCC another undertaking and specify it is a renewal of the existing undertaking.

If the ACCC receives an undertaking by way of renewal of an existing undertaking under section 151M, it must then decide whether to accept or reject the undertaking in accordance with section 151F and the consultation requirements in section 151G would apply to that undertaking (see the notes accompanying section 151G).

Proposed Section 151N - Variation of expiry time of certain functional separation undertakings

Proposed new section 151N provides a mechanism for the ACCC to vary the expiry time of functional separation undertakings in certain circumstances.

If a standard or joint functional separation undertaking is in force and another standard or joint functional separation is given to the ACCC but the ACCC rejects the other undertaking, the ACCC can, by written notice to the relevant person or persons, vary the expiry time in the existing undertaking (subsections 151N(1) and (4)). 

The new expiry time for the existing undertaking must be later than the date on which the subsequent undertaking is rejected, and must not be later than 12 months after the rejection  (subsections 151N(2) and (5)). The new expiry time can fall outside the maximum 10 year-period in which an undertaking can be in force (subsections 151N(3) and (6)).

Providing a means for the ACCC to vary the expiry time of an existing undertaking gives the ACCC flexibility to take into account the time it has spent in considering the subsequent undertaking and allow sufficient time for the relevant person or persons to take steps to be able to operate on a wholesale-only basis once the undertaking expires.

Subsection 151N(7) provides that, before making a decision to vary an undertaking under section 151N, the ACCC must publish the proposed variation on its website, invite persons to make submissions about the proposed variation and consider any submissions in response within the time limit specified in the notice. The time limit must not be shorter than 15 business days after the notice is published (subsection 151N(8)).The consultation obligation in subsection 151N(7) ensures that interested parties have an opportunity to comment on any proposed variations being set out in the ACCC’s notice.

Proposed Section 151P - Duration of functional separation undertaking

Proposed new section 151P specifies when a functional separation undertaking comes into force and its duration. Different rules apply depending on whether the new undertaking is given by way of a renewal of another undertaking or not.

Where the new undertaking is not given by way of renewal, there are two scenarios set out in subsection 151P(2):

·          If the undertaking is accepted before 1 July 2018, the undertaking either commences on 1 July 2018 (in accordance with the operation of proposed new section 142C) or on such later date as is specified in the undertaking;

·          If the undertaking is accepted on or after 1 July 2018, the undertaking comes into force on the day after it is accepted or such later date as is specified in the undertaking.

In both scenarios, the undertaking continues in force until it expires, unless it is revoked sooner.

Under subsection 151P(3), where the new undertaking is given by way of renewal, that new undertaking comes into force immediately after the expiry of the existing undertaking and continues in force until it expires, unless it is revoked sooner.

Proposed Section 151Q - Variation of functional separation undertaking that is in force

Proposed new section 151Q establishes a mechanism for a person or persons to vary a functional separation undertaking that is in force.

The person or persons may give the ACCC a variation of the undertaking (subsection 151Q(2)). The undertaking as varied must still comply with the key requirements under section 151A or section 151C, as applicable (subsections 151Q(3) and (4)). It must address all the matters set out in subsection 151A(2) or 151C(2), it must be in a form approved in writing by the ACCC, it must specify an expiry time that cannot be more than ten years after the undertaking comes into force, it must specify fundamental provisions and provide for the provision of compliance reports and compliance plans.

The variation must be accompanied by such information as is reasonably likely to assist the ACCC to decide whether to accept or reject the variation, and must be accompanied by any fee that is specified in, or ascertained in accordance with, a determination by the ACCC under subsection 151Q(6)) (subsection 151Q(5)).

Proposed Section 151R - Further information about variation of functional separation undertaking

After the ACCC has received a variation of a functional separation undertaking from a person or persons, it may determine that it needs further information to enable it to make a decision whether to accept or reject the variation. Proposed new section 151R provides for such a process. The ACCC can request the person or persons to provide the information (subsection 151R(2)), and may refuse to consider the variation until that information is provided (subsection 151R(3)). The ACCC can withdraw the request for further information in whole or in part (subsection 151R(4)).

Similarly to section 151D in relation to new functional separation undertakings, section 151R provides flexibility for the ACCC to seek further information about proposed variations as appropriate, rather than requiring proposed variations to be withdrawn or rejected in the absence of necessary information.

Proposed Section 151S - Withdrawal of variation that is under consideration

Proposed new section 151S provides for a person or persons to withdraw a variation of a functional separation undertaking that is under consideration by the ACCC at any time before the ACCC makes a decision to accept or reject the variation (subsections 151S(1) and (2)). Should it be desired, the person or persons can later give the ACCC a fresh variation (subsection 151S(3)).

Similarly to section 151E for new functional separation undertakings, section 151S confers flexibility on the process of varying an undertaking. There could be a number of reasons why a person may need to withdraw a variation (whether or not that person then intends to submit a fresh variation). For example, there may be a change of business strategies, or it could merge with another business, or acquire new assets.

If a variation is withdrawn, the ACCC may refund the whole or a part of any fee that has been paid in relation to the variation (subsections 151S(4)). As the fee imposed by the ACCC (if any) is intended to recover its costs of assessing a variation, the ACCC should be able to retain a percentage of the fee that reflects the costs it incurred until the time the variation was withdrawn.

Proposed Section 151T - ACCC to accept or reject variation

Proposed new section 151T requires the ACCC to accept or reject a variation of a functional separation undertaking after considering it (subsections 151T(1) and (2)), and also sets out a timeframe for doing so (subsections 151T(5)-(8)). Proposed new section 151T operates in a similar way to proposed new section 151F.

The ACCC must either accept or reject the variation by written notice to the person or persons who have given the undertaking, and must provide reasons if it rejects the variation (subsections 151T(3) and (4)).

The ACCC must take all reasonable steps to make a decision about the variation within three months after receiving the variation (subsection 151T(5)), but can extend the initial 3-month period for a further period of up to three months subject to the requirements set out in subsections 151T(7) and (8).

There are certain circumstances in which the ACCC can ‘stop the clock’ during the initial three-month period, specifically while the ACCC consults on the draft variation (in accordance with section 151U) and while it waits for further information on the draft variation (in accordance with section 151R) (subsection 151T(6)). 

Proposed Section 151U - Consultation - acceptance or rejection of variation

As is the case when a person or persons give a functional separation undertaking to the ACCC (see section 151G above), before the ACCC can accept or reject a variation, the ACCC must publish the draft variation on its website, invite and consider any submissions on the draft variation within the time specified (subsections 151U(1) and (2)). The time limit for consultation must be at least 15 business days after the notice is published (though it could be longer) (subsection 151U(3)).

Proposed Section 151V - Criteria for accepting variation

Proposed new section 151V operates in a similar way to section 151J and sets out criteria the ACCC must have regard to when deciding whether to accept or reject a variation of a functional separation undertaking. Under subsection 151V(3), the ACCC must have regard to:

·          whether the variation promotes the long-term interests of end-users of carriage services or of services supplied by means of carriage services; and

·          any matters specified in a determination by the Minister under subsection 151V(3); and

·          such other matters (if any) as it considers relevant.

In accordance with proposed new section 142BA (see item 33 above) whether a variation of an undertaking promotes the long-term interests of end-users is to be determined in the same manner as it is determined for the purposes of Part XIC of the CCA.

A Ministerial determination under subsection 151V(3) would be a legislative instrument. The Minister’s power to determine additional matters for the ACCC to consider provides scope to identify matters that may be critical to deciding whether to accept or reject a variation , but are not clearly encompassed by the long-term interests of end-users test.

Proposed Section 151W - Revocation of functional separation undertaking

Proposed new section 151W sets out three situations in which the ACCC could revoke a standard or joint functional separation undertaking that is in force.

The first situation is if a person (or any of the persons who have a joint undertaking) has breached a fundamental provision, or the non-discrimination obligations set out in proposed sections 151ZF and 151ZG (subsections 151W(1) and (6)).

The second situation is if the ACCC is satisfied that a person (or any of the persons who gave the joint undertaking) has an unsatisfactory compliance record in relation to functional separation (subsection 151W(2) and (7)). In both situations, the ACCC may revoke the undertaking by written notice to the person (or each of the persons who gave the joint undertaking).

The third situation is if a person requests (or all the persons who gave a joint undertaking request) the ACCC, in writing, to revoke an undertaking (subsection 151W(3) (8)). Following a request, the ACCC must revoke the undertaking by written notice to the person (or each person who gave the joint undertaking).

A revocation takes effect at the time specified in the ACCC’s notice of revocation, but the specified time must not be earlier than the time the notice is given and must not be later than 12 months after the notice is given (subsections 151W(4) and (9)). This is to provide sufficient time for a person or persons to take steps to be able to comply with the wholesale-only obligations in Part 8. For example, they may have to dispose of either their wholesale or retail businesses.

In addition, after the ACCC gives a notice of revocation, the undertaking will not apply to any local access lines that come into existence after the notice is given (subsection 151W(5) and (10)). This means that, after a revocation notice has been given, the undertaking would continue to apply only to local access lines that were subject to it before the revocation notice. Any new local access lines built after the revocation notice has been given would be subject to the wholesale-only requirements in Part 8 of the Tel Act.

Subsection 151W(11) sets out matters to which the ACCC must have regard when it revokes an undertaking. These include:

·          whether there are arrangements, or arrangements can be made, to maintain the continuity of supply of superfast carriage services to residential customers using the local access lines that are subject to the undertaking;

·          the consequence of the relevant breach or unsatisfactory compliance record;

·          such other matters (if any) as the ACCC considers relevant.

The intention of subsection (11) is to provide the ACCC with discretion when it chooses to revoke an undertaking, but also to guide it so that the power is only used when appropriate. It also ensures that the ACCC does not revoke an undertaking for minor or trivial breaches.

Fundamental provisions, as noted above (refer item 26, proposed sections 151A and 151C above), provide for basic elements of an undertaking and are critical to the success of the undertaking. They include separation of wholesale and retail activities, transparency of terms and conditions, supply on published terms and conditions and appropriate confidentiality requirements. Should such requirements be breached, it may no longer be possible for the undertaking to operate effectively, so the ACCC could consider whether revocation would be appropriate. Similarly, the non-discrimination requirements in sections 151ZF and 151ZG are fundamental to the effectiveness of functional separation and the promotion of competition. Should they be breached, the undertaking may be so compromised that revocation would be appropriate.

Continued non-compliance with an undertaking could also compromise the ongoing effectiveness of the functional separation arrangements. The ACCC will be able to judge whether the person’s conduct is such that the long-term interests of end-users are no longer being promoted by the undertaking remaining in force.

The ACCC has discretion whether to revoke an undertaking, and it is also not automatic that it would revoke an undertaking if a fundamental provision, or the non-discrimination requirements, have been breached. This is why it is required to consider the consequences of the breach. A breach that has had serious consequences may preclude the continued effective operation of the undertaking, so revocation may be appropriate. A breach that has had less serious consequences may not of itself warrant revocation, particularly if steps are taken to correct the breach and remediate any harm. In such circumstances, the ACCC has alternative enforcement options available to it under the Bill, including issuing an infringement notice (see items 84-87 below) or commencing court proceedings (see sections 151ZD and 151ZE below in relation to compliance and enforcement of functional separation undertakings, and section 151ZHA below in relation to judicial enforcement of the non-discrimination rules).

The intention is that the ACCC will weigh up the nature of the breach or continued non-compliance, the consequences of the conduct for competition and end-users, and then the consequences of taking revocation action.  

Proposed Section 151X - Consultation - revocation of functional separation undertaking

Before making a decision to revoke an undertaking where there has been a breach or unsatisfactory compliance, the ACCC must consult with the person or persons who gave the undertaking. By written notice to the person or persons, the ACCC must advise that it is proposing to revoke the undertaking, invite them to make submissions about the proposed revocation and consider any submissions (subsections 151X(1) and (3) for standard and joint functional separation undertakings, respectively). The timeframe for a person or persons to provide submissions, and for the ACCC to consider those submissions, must be at least 15 business days after the notice is given (subsections 151X(2) and (4)).

Section 151X ensures that impacted persons will have the opportunity to comment before a final decision about revocation is made.

Proposed Section 151Y - Notification that a person is at risk of having an unsatisfactory compliance record in relation to functional separation

Proposed new section 151Y ensures that the ACCC warns a person or persons that they are at risk of having an unsatisfactory compliance record in relation to functional separation. The ACCC delivers the warning through a written notice (subsection 151Y(2)).

The requirement to issue a notice applies in relation to breaches of a functional separation undertaking (provided the breach occurred when the undertaking was in force), or contraventions of specific requirements in Part 8 of the Tel Act. Those include: non-compliance with conditions and limitations of class exemptions determinations (section 143B above), contraventions of reporting obligations (sections 151ZA and 151ZB below), non-discrimination obligations (proposed new sections 151ZF, 151ZG, 151ZH below) or the anti-avoidance provisions in proposed new section 151ZI (below). Such breaches or contraventions are the only matters that the ACCC can have regard to when determining whether a person has an unsatisfactory compliance record in relation to functional separation (see section 142BC at item 33 above)

Subsection 151Y(2) sets out the process to be followed by the ACCC. If an undertaking is in force, and the ACCC is aware of one or more breaches of the undertaking, or contraventions of specific requirements in Part 8 of the Tel Act, the ACCC can consider whether those breaches or contraventions, taken together, amount to an unsatisfactory compliance record. If the ACCC is satisfied that they do not, but it is satisfied that, if a particular kind of additional breach or contravention were to take place, the person would have an unsatisfactory compliance record, then the ACCC must give the person a notice. The notice must state that the person is at risk of having an unsatisfactory compliance record and inform the person that this is a ground for revoking the undertaking. Subsection 151Y(3) clarifies that a failure to comply with subsection 151Y(2) does not affect the validity of a revocation of a functional separation undertaking. There may be, for example, circumstances where the ACCC considers that the breaches or contraventions are such that it needs to take urgent action. In such cases, it may move straight to advising a person of its proposal to revoke the undertaking as required under section 151X (noted above).

Proposed Section 151Z - Variation of functional separation undertaking following giving of revocation notice

If the ACCC has given a revocation notice in relation to a functional separation undertaking under section 151W, it is important that it has powers to ensure that breaches of the undertaking, or contraventions of specific provisions in Part 8, do not continue following the time the revocation notice is given and until the revocation takes effect. 

As a result, proposed new section 151Z empowers the ACCC to vary a functional separation undertaking after it has given a revocation notice in relation to that undertaking, and before the revocation has taken effect. The ACCC would do this by written notice to the person or persons who gave the undertaking, with the variation taking effect at the time the notice is given (subsections 151Z(1), (3) and (5)).

The ACCC’s power is limited to variations that specifically address the matter or matters that constituted the grounds for the revocation of the undertaking under section 151W. A variation cannot address any other matter (subsections 151Y(2) and (4)).

As a variation under section 151Z may be required to correct breaches or contraventions that have affected other corporations’ participation in the market, it needs to be able to be made, and come into effect, quickly. As such, the ACCC is not required to consult on a variation under section 151Z before it is made.

Proposed Section 151ZA - Reporting obligations following giving of revocation notice

Proposed new section 151ZA allows the ACCC to require certain reports or information to be provided to it after a revocation notice is given under section 151W.

In the period between the time the ACCC gives the revocation notice and the revocation takes effect, under subsections 151ZA(1) and (2), the ACCC can direct a person or persons to give to the ACCC:

·          a report or information about the person’s compliance with the undertaking; or

·          a report or information about action that the person has taken, is taking, or proposes to take to ensure that it complies with sections 142C or 143 after the revocation takes effect.

The ACCC can direct the person to give such reports or information within the period specified in the direction.

Section 151ZA enables the ACCC to ensure that persons continue to comply with an undertaking after the revocation notice is given, and also that they will be able to comply with the wholesale-only obligations after the revocation takes effect.

Subsection 151ZA(3) requires a person to comply with a direction. subsection 151ZA(4) prohibits ancillary contraventions of subsection 151ZA(3).

Subsection 151ZA(5) provides that subsections 151ZA(3) and (4) are civil penalty provisions. The accompanying note reminds the reader that Part 31 of the Tel Act provides for pecuniary penalties for breaches of civil penalty provisions.

Proposed Section 151ZB - Requirement to notify changes in control of person who gave undertaking

While a functional separation undertaking is in force, the business structure of the person or persons who gave a functional separation undertaking may change, and lead to changes to the persons who control the person or persons who gave the undertaking.  Although changes in control may not necessarily cause competition concerns, in some cases the change in control could mean some parts of the undertaking are no longer appropriate or effective or a different person or persons should give an undertaking.

For example, a small company with a functional separation undertaking in force may be acquired by a larger provider with a complex business organisation including several separate corporations. The larger provider may not immediately change the small company’s business structure, but choose to operate it as one of its associated corporations for some years. In this case, the small company’s undertaking would remain in force, but would not actually reflect the overall corporate structure of the organisation. This presents a risk that the small company may be in breach of its requirements under the undertaking, and should either vary the undertaking or submit a new one for the larger organisation.  

Therefore, proposed new section 151ZB imposes requirements to notify the ACCC of changes in control. Subsection 151ZB(1) requires a person who gave a functional separation undertaking to notify the ACCC of the change in control as soon as practicable and not later than ten business days after becoming aware of the change in control. The notification requirement applies both in relation to new controllers and persons who cease to be controllers. Subsection 151ZB(3) imposes a similar notification obligation on the controller of the person who gave the functional separation undertaking. If another person becomes aware that they are in a position to exercise control over the person who gave the undertaking, that person must notify the ACCC as soon as practicable and not later than ten business days of becoming aware that it is in a position to exercise control.

The notice must be in a form approved in writing by the ACCC (subsections 151ZB(2) and (4)).

Proposed subsection 151ZB(5) prohibits ancillary contraventions of the notification obligations in subsections 151ZB(1) and (3).

Subsection 151ZB(6) provides that subsections 151ZB(1), (3) and (5) are civil penalty provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act provides for pecuniary penalties for breaches of civil penalty provisions.

Proposed Section 151ZC - Register of functional separation undertakings

It will be important for the telecommunications sector to have access to all functional separation undertakings so that potential wholesale customers of a person or persons have transparency about the terms and conditions of supply and knowledge of the legal obligations that apply to the supply of services. End-users may also wish to ensure that they will be able to have a choice of retail provider.

Accordingly, proposed new section 151ZC requires the ACCC to maintain on its website a register of all functional separation undertakings (including those that are no longer in force) and all variations of undertakings (paragraphs 151ZC(1)(a) and (c)).

If the ACCC has made a determination under section 151B and there is in place a deemed functional separation undertaking, the Register must include the name of any corporation that has notified the ACCC that it elects to be bound by the undertaking and the date that the undertaking came into force (paragraph 151ZC(1)(b)).

Section 151ZC operates alongside section 143D, which requires the ACCC to publish on its website a list of all persons who have elected to be bound by a class exemption determination made under section 143A.

Proposed Section 151ZD - Compliance with functional separation undertaking

Proposed new subsection 151ZD(1) provides that a person must comply with a functional separation undertaking that is given by that person and that is in force. The accompanying note refers readers to section 142B, which provides that a functional separation undertaking can be given by a person either alone or jointly with other persons.

Proposed subsection 151ZD(2) prohibits ancillary contraventions of subsection 151ZD(1).

Subsection 151ZD(3) provides that subsections (1) and (2) are civil penalty provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act provides for pecuniary penalties for breaches of civil penalty provisions.

The effect of proposed new section 151ZD is that, if a functional separation undertaking is in force and a person who gave the undertaking has breached the undertaking, there are a range of enforcement options available to ensure compliance or address non-compliance. These include injunctions (Part 30 of the Tel Act) or recovery of pecuniary penalties (Part 31 of the Tel Act), formal warnings (see items 18-19, 21-22 above) and infringement notices (see items 84-87 below). The ACCC could also revoke the undertaking as explained above (section 151W).

Proposed new section 151ZE will also be available, as noted below.

Proposed Section 151ZE - Enforcement of functional separation undertaking

Proposed new subsection 151ZE(1) permits the Federal Court to make a range of orders if the Court is satisfied, on the application of the ACCC, a carrier or a carriage service provider, that a person has breached a functional separation that is in force.  Given the importance of an undertaking in force under Part 8 and the potential negative impact on competition in the telecommunications industry if an undertaking is breached, the Federal Court has been given extensive powers in the range and nature of the orders it may make. These include orders to comply with the undertaking, dispose of network units, lines, shares or other assets, to pay the Commonwealth any financial benefit obtained as a result of the breach, or to pay compensation to any person (who may be the applicant) who suffered loss or damage as a result of the breach.

The note refers readers to section 142B to remind them that a functional separation undertaking can be given by a person either alone or jointly with other persons.

Proposed subsection 151ZE(2) provides that, in addition to the Federal Court’s powers under subsection 151ZE(1), the Federal Court has power to make an order directing any person to do or refrain from doing a specified act (for the purpose of securing compliance with any other order made under section 151ZE), and the power to make an order containing such ancillary or consequential provisions as the Court thinks just.

Before making an order under section 151ZE, the Federal Court may direct that notice of the application be given to such persons as it thinks fit and/or be published in such manner as it thinks fit (subsection 151ZE(3)).

Subsection 151ZE(4) provides that the Federal Court may rescind, vary, discharge or suspend the operation of an order made under section 151ZE. This provides it with flexibility to take account of changes in conduct or circumstances.

Proposed Division 2C - Non-discrimination rules

Proposed new Division 2C sets out non-discrimination rules that apply to persons who use local access lines to supply eligible services, or carry our related services, on a wholesale-only basis (in compliance with sections 142C or 143) or on a functionally separated basis (as set out in Division 2A). The non-discrimination rules in proposed new Division 2C are broadly based on those already applying to NBN corporations under sections 152AXC and 152AXD of the CCA, but have been tailored to reflect that some persons may operate both wholesale and retail businesses.

If a person supplies eligible services on a wholesale-only basis, the rules ensure that that person cannot discriminate between wholesale customers when it supplies eligible services or carries out related activities. If a person supplies eligible services on a functionally separated basis, the rules prevent that person from discriminating between wholesale customers, but also prevent the person from favouring its own retail operations over its wholesale customers.

Proposed Section 151ZF - Eligible services to be supplied on a non-discriminatory services

Under subsections 151ZF(1), if:

·          an eligible service is supplied, or proposed to be supplied, by a person using a local access line; and

·          any of the following conditions is satisfied:

o    sections 142C applies to the line;

o    section 143 applies to the line;

o    neither section 142C nor section 143 applies to the line and there is in force a functional separation undertaking that relates to local access lines services supplied, or proposed to be supplied using the line;

the person must not discriminate between the person’s current or prospective wholesale customers when supplying eligible services using the line. The prohibition applies on or after 1 July 2018.

There are five scenarios envisaged in subsection 151ZF(1):

1.       section 142C applies to the line, and there is not in force a functional separation undertaking that relates to local access line services supplied, or proposed to be supplied, using the line;

2.       section 143 applies to the line, and there is not in force a functional separation undertaking that relates to local access line services supplied, or proposed to be supplied, using the line;

3.       section 142C applies to the line, and there is in force a functional separation undertaking that relates to local access line services supplied, or proposed to be supplied, using the line;

4.       section 143 applies to the line, and there is in force a functional separation undertaking that relates to local access line services supplied, or proposed to be supplied, using the line;

5.       neither section 142C nor section 143 applies to the line, and there is in force a functional separation undertaking that relates to local access line services supplied, or proposed to be supplied, using the line.

The fifth scenario reflects the fact that there may be lines that are not subject to section 143 or section 142C (because, for example, they came into existence before 1 January 2011). However, the use of these lines would still be subject to a functional separation undertaking given by a person in relation to the use of other lines to which section 142C and 143 apply. As a result, when such an undertaking is in force, the non-discrimination obligations in section 151ZF will apply to all those lines.

As noted above (see the discussion on items 25 to 32), the term ‘eligible service’ has the same meaning as in section 152AL of the CCA. These are listed carriage services or services that facilitate the supply of listed carriage services, where the service is supplied, or is capable of being supplied, by a carrier or carriage service provider (whether to itself or to other persons). ‘Listed carriage services’ are defined by section 16 of the Tel Act.

The effect of the prohibition in subsection 151ZF(1) is that all eligible services supplied by a person must be made equally available to all wholesale customers, and those customers would be able to receive the services on the same terms and conditions of supply. This promotes equal access to local access lines that are subject to Part 8 of the Tel Act and precludes a person who controls a local access network from favouring specific customers.

Subsection 151ZF(2) provides an exception to the rule in subsection 151ZF(1). The person could discriminate against a wholesale customer if the person has reasonable grounds to believe that the wholesale customer would fail, to a material extent, to comply with the terms and conditions on which the person supplies eligible services using the line.

Subsection 151ZF(3) sets out examples of grounds for believing that a wholesale customer would fail to comply with the terms and conditions of supply. They include:

·          evidence that the wholesale customer is not creditworthy; and

·          repeated failures by the wholesale customer to comply with the terms and conditions on which the person supplied eligible services (whether or not using the line).

This limited exception to the non-discrimination obligation is consistent with that permitted to NBN corporations (see section 152AXC of the CCA).

Under subsection 151ZF(4), if a person supplies, or proposed to supply, an eligible service to itself and to wholesale customers, using a local access line, and any of the following conditions is satisfied:

·          sections 142C applies to the line;

·          section 143 applies to the line;

·          neither section 142C nor section 143 applies to the line and there is in force a functional separation undertaking that relates to local access lines services supplied, or proposed to be supplied using the line;

the person must not discriminate in favour of itself in relation to the supply of the eligible service. The prohibition applies on or after 1 July 2018. Accordingly, the person must supply the same services to its wholesale customers as it supplies to itself, and on the same terms and conditions as it supplies those services to itself. Subsection 151ZF(4) ensures that a person who has both wholesale and retail operations cannot discriminate in favour of those retail operations, to the detriment of downstream competition.

Subsection 151ZF(5) prohibits ancillary contraventions of subsection 151ZF(1) or (4).

Subsection 151ZF(6) provides that subsections 151ZF(1), (4) and (5) are civil penalty provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act provides for pecuniary penalties for breaches of civil penalty provisions.

Proposed Section 151ZG - Eligible services - related activities to be carried out on a non-discriminatory basis

Proposed new subsection 151ZG(1) sets out the circumstances in which section 151ZG apply to a person on or after 1 July 2018. A for section 151ZF above, the section applies if:

·          an eligible service is supplied, or proposed to be supplied, by a person using a local access line; and

·          any of the following conditions is satisfied:

o    sections 142C applies to the line;

o    section 143 applies to the line;

o    neither section 142C nor section 143 applies to the line and there is in force a functional separation undertaking that relates to local access lines services supplied, or proposed to be supplied using the line.

Subsection 151ZG(2) and (3) contain the substantive rules. Under subsection 151ZG(2), a person must not discriminate between its current or prospective wholesale customers in carrying out any of the activities listed at paragraphs 151ZG(2)(a) to (g). The activities include developing a new eligible service or enhancing an eligible service, extending or enhancing the capability of a facility or telecommunication network by means of which an eligible service is, or is to be, supplied, and giving information to service providers about any of the activities. This provision  is modelled on a similar obligation that applies to NBN corporations (see section 152AXD of the CCA).

Discrimination between wholesale customers could take a number of forms. It could include discrimination in the terms of supply - for example, charging one customer a higher or lower price than another customer. This form of discrimination will be prohibited by section 151ZF. It could also take the form of providing some customers information about new services, or access to new facilities which can be used to supply new services, at different times. Such discrimination can be just as detrimental to effective competition as discrimination in the terms of supply, which is why section 151ZG would prohibit it.

Under subsection 151ZG(3), the person also must not discriminate in favour of itself when carrying out any of the same activities. As a result, a person could not, for example, discriminate in favour of its own retail business unit by providing it with advance notice of new facilities or services.

Subsection 151ZG(4) prohibits ancillary contraventions of subsection 151ZG(2) or (3).

Subsection 151ZG(5) provides that subsections 151ZG(2), (3) and (4) are civil penalty provisions, and the accompanying note reminds the reader that Part 31 of the Tel Act provides for pecuniary penalties for breaches of civil penalty provisions.

Proposed Section 151ZH - Statement about the differences between an access agreement and an offer

Proposed section 151ZH provides a mechanism for ensuring transparency of supply arrangements. If a person uses a local access line that is subject either to wholesale-only or functional separation requirements, then that person’s wholesale customers will have an interest in ensuring that there is no discrimination taking place. Proposed section 151ZH achieves this transparency in two ways: by requiring persons subject to wholesale-only or functional separation requirements to publish standard offers for the supply of wholesale services (subsection (2A)) and also requiring them to publish statements describing any differences between the terms and conditions set out in an access agreement and the terms and conditions set out in the offer (subsection (1)).

The obligations apply to a person who uses a local access line on or after 1 July 2018 to supply eligible services, or who proposes to supply such services, to a wholesale customer or prospective wholesale customer. Section 142C or section 143 must apply to the line, or, if neither section 142C nor section 143 applies to the line, a functional separation undertaking must be in force that relates to local access line services supplied, or proposed to be supplied, using the line. If the person then enters into an access agreement with a wholesale customer, and there are differences between the terms and conditions set out in the access agreement and those set out in the standard offer, the person must, within five business days after the day on which the access agreement was entered into, publish a statement on the person’s website.

The statement must be in a form approved in writing by the ACCC and must identify the parties to the access agreement and describe the differences between the terms and conditions set out in the access agreement and those set out in the offer. It must also set out such other information (if any) about the access agreement as is required by the form.

The note to subsection (1) refers the reader to subsection (5), which sets out a special definition of access agreement for the purposes of section 151ZH.

A similar obligation to publish a statement about differences applies to variation agreements that may be entered into by a person on or after 1 July 2018 (subsection 151ZH(2)). The note to subsection (2) refers the reader to subsection (5), which sets out a special definition of access agreement for the purposes of section 151ZH.

Subsection (2A) clarifies that requirements to publish standard offers for the supply of eligible services apply both to wholesale-only providers and functionally separated providers.

Proposed subsection 151ZH(3) prohibits ancillary contraventions of subsection (1), (2) or (2A). Subsection (4) provides that subsections (1), (2), (2A) and (3) are civil penalty provisions, and the note reminds the reader that Part 31 of the Tel Act provides for pecuniary penalties for breaches of civil penalty provisions.

Subsection 151ZH(5) provides that, for the purposes of section 151ZH, access agreement and variation agreement have the same respective meanings as in Part XIC of the CCA, but it is assumed that a reference in Part XIC to a declared service is a reference to an eligible service and that subsection 152BE(2) of the CCA had not been enacted. Subsection 152BE(2) applies to eligible services that were not declared services at the time an agreement was entered into, but at a later time (the declaration time ) become declared services, and provides that such agreements are taken to be ‘access agreements’ immediately after the declaration time.

Subsection (5) is a key clause for determining the content of agreements to supply eligible services that are entered into by persons who are subject to the wholesale-only or functional separation requirements in Part 8. A person may supply some eligible services that are declared services; in such cases, the agreements to supply the eligible services will automatically be ‘access agreements’ under Part XIC, and therefore set out any or all of the terms and conditions on which an access provider supplies the service to an access seeker. Some of those terms and conditions may be regulated through a special access undertaking, an access determination or a binding rule of conduct. However, the non-discrimination obligations proposed in this Bill will apply to all the eligible services that a person supplies. Many, if not most, of those services may not be declared services. To ensure that agreements to supply those services embody the terms and conditions on which a person will supply the service, subsection (5) clarifies that those agreements are considered to be ‘access agreements’ even though the services are not therefore subject to standard access obligations under Part XIC of the CCA.  

Proposed Section 151ZHA - Judicial enforcement of non-discrimination rules

Section 151ZHA provides that the ACCC, a carrier or a carriage service provider may seek judicial enforcement of the non-discrimination rules in Division 2C. The Federal Court may make orders directing a person to comply with a condition or limitation in a determination, directing a person to compensate any other person (who may be the applicant) who has suffered loss or damage as a result of the contravention, and any other order that the Court thinks appropriate. The Federal Court may discharge or vary an order granted under section 151ZHA.

Item 52 - Before section 152

Item 52 inserts a number of new provisions in Part 8, as set out below.

Proposed Section 151ZI - Anti-Avoidance

New section 151ZI is an anti-avoidance provision.

Under subsection 151ZI(1), a corporation must not, either alone or together with one or more persons, enter into, begin to carry, or carry out a scheme for the sole or dominant purpose of avoiding the application of Part 8 in relation to the corporation or any other corporation.

Subsection 151ZI(2) sets out ancillary contraventions for the prohibition in subsection 151ZI(1). Subsections 151ZI(1) and (2) are civil penalty provisions (subsection 151ZI(3)).

Subsection 151ZI(4) clarifies the meaning of “scheme” for the purposes of this section. It means:

·          any agreement, arrangement, understanding, promise or undertaking, whether express or implied, or

·          any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

However, it does not include a functional separation undertaking.

Proposed Section 151ZJ - Self-incrimination

New section 151ZJ deals with self-incrimination and the admissibility of evidence in civil and criminal proceedings.

New subsection 151ZJ(1) provides that a person is not excused from giving a report in compliance with a provision of a functional separation undertaking covered by subsections 151A(10) or 151C(10) or (11), or from giving a report or information under section 151ZA on the ground that that report or information might tend to incriminate or expose the person to a penalty. New subsection 151ZJ(2) provides that, in the case of an individual, the report or information, or giving the report or information, or any information, document or thing obtained as a consequence of giving the report or information, is not admissible in evidence against the individual in civil proceedings for the recovery of a penalty or in criminal proceedings (other than proceedings for an offence against certain specified provisions of the Criminal Code ).

Proposed Section 151ZK - Delegation

Section 151ZI permits the ACCC to delegate, by writing, its powers under certain provisions of Part 8. The ACCC can delegate such powers to staff members of the ACCC that are SES employees or acting SES employees.

Proposed Section 151ZL - Review by the Australian Competition Tribunal

New section 151ZL deals with review by the Australian Competition Tribunal of decisions made by the ACCC under certain provisions of Part 8. As the ACCC may make decisions about functional separation undertakings that affect the commercial operations of an individual person, the default approach in such cases is for key adverse decisions to be subject to merits review.

A person may apply to the Australian Competition Tribunal for a review of a decision by the ACCC to:

·          reject a functional separation undertaking under section 151F (subsection 151ZL(1));

·          vary the expiry time of a functional separation under section 151N (subsection 151ZL(2); variation under section 151N may occur if the ACCC has rejected a subsequent undertaking);

·          reject a variation of a functional separation undertaking under section 151T (subsection 151ZL(3));

·          revoke a functional separation undertaking under section 151W (subsection 151ZL(4));

·          vary a functional separation undertaking under section 151Z following a revocation notice (subsection 151ZL(5)).

New subsection 151ZL(6) sets out the requirement for an application for a review of a decision. The application:

·          must be in writing, and

·          must be made within a specified timeframe after the ACCC made the decision - within 14 days for a decision to vary a functional separation undertaking under section 151ZN and within 21 days for other decisions.

The Australian Competition Tribunal must review a decision if it receives an application to review that decision (new subsection 151ZL(7)).

Proposed Section 151ZM - Functions and powers of the Australian Competition Tribunal etc.

New section 151ZM sets out the functions and powers of the Australian Competition Tribunal when reviewing a decision of the ACCC under section 151ZL.

 

The Australian Competition Tribunal may affirm or set aside the ACCC’s decision and, for the purposes of the review, may perform all functions and exercise all the powers of the ACCC (subsection 151ZM(1)). A decision by the Australian Competition Tribunal to affirm or set aside a decision of the ACCC is taken to be a decision of the ACCC, though such a decision cannot be subject to further review by the Tribunal (subsection 151ZM(2)).

 

If the Australian Competition Tribunal sets aside a decision of the ACCC to reject a functional separation undertaking under section 151F or to reject a variation under section 151T, the ACCC would be required to make new decisions about those matters within three months of the decision by the ACCC to set aside the ACCC’s initial decisions (subsections 151ZM(3) and 151ZM(4)).

 

When conducting a review, the member of the Australian Competition Tribunal presiding the review may require the ACCC to provide to the Tribunal specified information, reports and other assistance (subsection 151ZL(5)). The Australian Competition Tribunal is also able to have regard to information given, documents produced or evidence given to the ACCC in connection with the making of the decision that is being reviewed (subsection 151ZL(6)).

 

New subsection 151ZM(7) has the effect of the extending the operation of certain provisions contained in Division 2 of Part IX of the CCA (dealing with proceedings before the Australian Competition Tribunal) to reviews by the Australian Competition Tribunal under Part 8 of the Tel Act.

Proposed Section 151ZN - Provisions that do not apply in relation to an Australian Competition Tribunal review

New section 151ZN provides that Division 1 of Part IX of the CCA does not apply in relation to reviews by the Australian Competition Tribunal of a decision of the ACCC of a kind mentioned in new section 151ZL.

Division 1 of Part IX of the CCA sets out a process for review of ACCC decisions in relation to authorisations under that Act (except for merger authorisations). As this process is not relevant to the ACCC decisions that are to be reviewable under proposed section 151ZL, section 151ZN is provided for the avoidance of doubt.

Item 53 - After paragraph 152(1)(a)

Item 53 amends section 152 of the Tel Act to insert a new paragraph (aa), ‘a line; or’. Section 152 provides a definition of associate for the purposes of determining control under Part 8 of the Tel Act. The amendment is consequential to the insertion of new section 142C (see item 34 above) and reflects the application of wholesale-only requirements to a person who is an associate of a person who is in a position to exercise control of a local access line.

Item 54 - After paragraphs 152(2)(a) and (b)

Item 54 makes further amendments to section 152 to insert the word ‘line’ in paragraphs 152(2)(a) and (b). These amendments are also consequential to the insertion of new section 142C at item 34.

Item 55 - At the end of section 155

Item 55 inserts new subsection (4) at the end of section 155. Section 155 currently sets out when a person would be considered to be in a position to exercise control of a network. Under this Bill, the existing wholesale-only rules (in section 143) will apply to specific networks that come into existence before 1 July 2018. New rules (under section 142C) will then apply, and the definition of control in section 155 will be re-stated (see proposed section 155A below) for the new section 142C rules.

New subsection (4) ensures that the definition of control in section 155 does not apply to networks subject to section 142C (and other provisions in Part 8, to the extent to which they relate to a line to which section 142C applies).

Item 56 - After section 155

Item 56 inserts proposed new section 155A into Part 8. The new section imports the definition of control in current section 155 for the purposes of the new wholesale-only rules in section 142C.

Subsections (1)-(3) set out rules for determining when a person is in a position to exercise control of a local access line. Subsection (4) effectively ensures that these rules do not apply to networks subject to section 143 (and other provisions in Part 8, to the extent to which they relate to a line to which section 143 applies). Section 155A therefore applies only to local access lines that come into existence on or after 1 July 2018.

Proposed section 155A sets out three main circumstances in which a person (the controller ), whether alone or together with an associate of the controller, and whether indirectly or directly, will be taken to be in a position to exercise control of a line for the purposes of section 142C and related provisions in Part 8. These are:

(a)     the controller legally or beneficially owns the line;

(b)    the controller is in a position to exercise control of:

                    i.             the operation of all or part of the line; or

                  ii.             the selection of the kinds of services that are supplied using the line; or

                iii.             the supply of services using the line.

(c)     a company other than the controller legally or beneficially owns the line (whether alone or together with one or more other persons), and the controller can exert various forms of control over the company. For example, it is in a position to veto any action taken by the board of directors, is in a position to appoint, or veto the appointment of, at least half of the board of directors, it can exercise direction or restraint over any substantial issue affecting the management or affairs of the company or the company or more than 50 per cent of its directors act, or are accustomed to act, in accordance with the directions, instructions or wishes of, or in concert with, the controller, the controller and an associate acting together, or the directors of the controller.

These clauses set out direct and indirect control measures and mitigate against a person being able to use hidden forms of control to evade statutory requirements.

Item 57 - Section 156 (heading)

Item 57 repeals and substitutes the heading for section 156. This change is consequential to the amendment in item 66, which introduces a new section 156A in Part 8. It forms part of the changes to existing Part 8 to grandfather existing superfast network rules.

Section 156, as amended by items 59 to 65 below, sets out the circumstances in which alterations, upgrades or extensions to telecommunications networks between 1 January 2011 and 30 June 2018 will be treated as networks in their own right and taken to have come into existence during that time. Such networks will be subject to the prohibition in section 143, as amended by items 35 to 41 (see above).

Item 58 - Paragraph 156(1)(a)

Item 59 - Paragraph 156(1)(a)

Item 60 - Paragraph 156(1)(d)

Items 58 and 60 insert the words “but before 1 July 2018” after the words “after 1 January 2011” in paragraphs 156(1)(a) and 156(1)(d), respectively. Item 59 omits all references to “small business” in paragraph 156(1)(b).

These changes are consequential to the changes to section 143 (see items 35 to 41 above).

As a result of these changes, if:

·          a telecommunications network is altered or upgraded between 1 January 2011 and 30 June 2018, and

·          as a result of that alteration or upgrade, a part of the network became capable of being used to supply a superfast carriage service to existing or prospective residential customers in Australia,

then that part of the network will be taken to be a network in its own right and to have come into existence between 1 January 2011 and 30 June 2018. As such local access lines that are part of the network will be subject to section 143 (and not to section 142C).

Item 61 - Paragraph 156(2)(a)

Item 62 - Paragraph 156(2)(b)

Item 63 - Paragraph 156(2)(d)

Items 61 and 63 insert the words “but before 1 July 2018” after the words “after 1 January 2011” in paragraphs 156(2)(a) and 156(2)(d), respectively. Item 62 omits all references to “small business” in paragraph 156(2)(b).

These changes are consequential to the changes to section 143 (see items 35 to 41 above).

As a result of these changes, if:

·          a telecommunications network is extended between 1 January 2011 and 30 June 2018, and

·          the extended part of the network is capable of being used to supply a superfast carriage service to existing or prospective residential customers in Australia,

then the extended network is taken to be a network in its own right and to have come into existence into between 1 January 2011 and 30 June 2018. As such local access lines that are part of the network will be subject to section 143 (and not to section 142C).

Item 64 - Subsection 156(4)

Subsection 156(4) currently provides that a network that came into existence before 1 January 2011, and is used to supply superfast carriage services to residential or small business customers, can be extended by up to 1km without being subject to the wholesale-only obligation in subsection 143(2). Item 64 amends section 156 so that it can continue to apply after 1 July 2018 in the following limited cases:

·          there is in force a legally enforceable agreement that provides for the transfer of ownership or control of the infrastructure of the extension to an NBN corporation, and that agreement is covered by a determination made under section 577BA(9); and

·          there is a legally enforceable agreement that provides for the deactivation or decommissioning of the infrastructure of the extension, and that contract was entered into between NBN Co and listed Optus companies.

Subsection 577BA of the Tel Act authorises certain conduct for the purposes of competition law. Subsection 577BA(9) states that the Minister may, by legislative instrument, determine that authorisations apply to certain contracts, arrangements or understandings between Telstra and an NBN corporation. There has been one determination under subsection 577BA(9) to date, the Telecommunications (Agreements for Compliance with Structural Separation Undertaking) Determination 2014 (‘the Determination’), which commenced on 14 December 2014. There are six contracts, arrangements or understandings to which the Determination applies:

·          the four agreements originally entered into by Telstra and NBN Co in June 2011, collectively known as the ‘Definitive Agreements’ including amendments to those agreements which commenced on 14 December 2014; and

·          two deeds associated with the Definitive Agreements, known as the ‘Continuity Deed’ and the ‘Deed of Amendment and Restatement’, which commenced on 14 December 2014.

Consequently, networks that are covered by the Definitive Agreements and the other two deeds may be extended by Telstra by up to 1km, and, if used to supply superfast carriage services, operated on a vertically integrated basis after 1 July 2018. Under the Definitive Agreements the networks are expected to be transferred to NBN Co over the next few years, so the exemption under item 64 is expected to be short-lived.

NBN Co has also entered into agreements with listed Optus companies to deactivate or decommission HFC networks. The exemption under item 64 would allow the listed Optus companies to extend those networks by up to 1km before deactivation or decommissioning occurs. Again, such deactivation or decommissioning is expected to occur over the next few years, so the exemption under item 64 would be short-lived.

The listed Optus companies are set out in proposed subsection 156(7), to be inserted by item 65 of Schedule 2 to this Bill.

The purpose of the exemption is to ensure that end-users who are near to networks that are being transferred to NBN Co can be supplied with superfast carriage services if Telstra or an Optus company determines that it makes commercial sense to extend existing networks to supply such services. Otherwise, end-users might have to wait for an extended period for such access.

Extensions of pre-2011 networks that are used to supply superfast carriage services and are not subject to agreements specified in item 64 would, after 1 July 2018, be subject to subsection 142C(2). Consequently, any extension would need to be operated on a wholesale-only or functionally separated basis.

 

Item 65 - At the end of section 156

Item 65 inserts new subsections 156(6) and (7) at the end of section 156. New subsection 156(6) is an interpretative provision and clarifies that subsections 156(1) and 156(2) (which define ‘deemed networks’) do not apply in determining the meaning of an expression used in:

·          section 142C , or

·          sections 151ZF , 151ZG and 151ZH to the extent to which they relate to a line to which section 142C applies, or

·          any other provision of Part 8 so far as that provision relates to the provisions mentioned above.

As a result, subsections 156(1) or (2) can be considered in determining the meaning of (for example) ‘alteration or upgrade’ or ‘extension’ in relation to the wholesale-only obligation in section 143 or related provisions in Part 8, but not in relation to the wholesale-only obligation in section 142C. This is because of new section 156A, which will operate in a similar way to section 156 in relation to certain categories of local access lines (see item 66 below).

Proposed new subsection (7) lists six listed Optus companies. These companies are listed for the purposes of determining agreements covered by proposed sub-paragraph 156(4)(f)(ii), to be inserted by item 64 above.

Item 66 - After section 156

Item 66 inserts new section 156A in Part 8. New section 156A sets out the circumstances in which local access lines will be taken to have come into existence on or after 1 July 2018. As a result, such local access lines will be subject to the wholesale-only obligation in new section 142C (see item 34 above).

Under new subsection 156A(1), a local access line is taken to have come into existence on or after 1 July 2018 in the following circumstances:

·          the line came into existence before 1 July 2018, and

·          before 1 July 2018, the line was used wholly or principally to supply a superfast carriage service to non-residential customers of Australia, and

·          on or after 1 July 2018, following the construction or alteration of premises or changes to the activities carried out at premises, the line is used wholly or principally to supply a superfast carriage service to residential customers in Australia.

This amendment is intended to capture changes in the use of networks. A network may have already been used to supply superfast networks before 1 July 2018, for example to business or government customers. A building that housed such a customer may experience a change in use, or be refurbished for new residential premises. Subsection 156A(1) clarifies that in this case, even if there is no actual change to the local access line used to supply superfast carriage services to the premises, the line must be operated in accordance with section 142C.

It should be noted that there may be some incidental change in use on a network, and a network operator may not know, or could not reasonably have been expected to know, that such change had occurred. Such change in use is accommodated by paragraph 142C(1)(c) in item 34 above, which casts the wholesale-only obligation on local access lines that form part of a network that is used, or proposed to be used, to supply a superfast carriage service wholly or principally to residential customers, or prospective residential customers. Where a carrier operates a network targeting business customers, for example, and a small number of business customers become residential customers, the carrier would not have to comply with subsection 142C(2) because the carriers’ network would still principally be used to supply superfast carriage services to business customers.

New subsection 156A(2) is an interpretative provision and clarifies that subsection 156A(1) does not apply in determining the meaning of an expressions used in:

·          section 143, or

·          sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which section 143 applies, or

·          any other provision of Part 8 so far as that provision relates to the provisions mentioned above.

Item 67 - Section 157 (heading)

Item 67 repeals and substitutes the heading for section 157, adding the words ‘of a network’ to the end. This change is consequential to the amendment in item 70, which introduces a new section 157A in Part 8. The change reflects the approach taken in the Bill in which some sections in Division 3 of Part 8 will now apply only to networks that came into existence before 1 July 2018, while other similar sections are inserted that apply to local access lines that come into existence on or after 1 July 2018.

Section 157 sets out the circumstances in which certain installations and connections will not be considered to be an extension, alteration or upgrade of a network for the purposes of

Part 8.

Item 68 - Section 157

Item 68 renumbers existing section 157 as new subsection 157(1). This change is consequential to the insertion of proposed new subsection (2) through item 69 below.

Item 69 - At the end of section 157

Item 69 introduces a new subsection 157(2). This is an interpretative provision and clarifies that subsection 157(1) does not apply in determining the meaning of an expression used in:

·          section 142C, or

·          sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which section 142C applies, or

·          any other provision of Part 8 so far as that provision relates to the provisions mentioned above.

Currently, subsection 157(1) provides an exemption from the wholesale-only obligation in section 143 in relation to networks that came into existence before 1 January 2011 but, after that date, a line is installed to connect premises that are in close proximity to those networks. This exemption will continue as part of the grandfathering arrangements the Government has determined should apply to superfast networks that came into existence before 1 July 2018.

Proposed new section 143F (inserted by item 42 above) provides exemptions from section 142C for lines that are installed to connect premises that are in close proximity to networks. That section provides two exemptions, for lines that connect premises to networks that are subject to section 143 (or have been exempted from section 143) and also for lines that connect premises to networks that are subject to the CLCs Declaration.

There is no item 70 in the Bill because of amendments to the exposure draft to insert

section 143F.

Item 71 - After subsection 158(2)

Section 158 provides the meaning of the term local access line for the purposes of Part 8.

Item 71 introduces new subsections 158(2A) and 158(2B), which modify the meaning for the purposes of certain new provisions in Part 8.

New subsection 158(2A) provides that subsection 158(2) has effect subject to new subsection 168(2B).

New subsection 158(2B) clarifies when a line is taken to be a local access line and to form part of the infrastructure of a telecommunications networks for the purposes of:

·          section 142C,

·          sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which section 142C applies, or

·          any other provision of Part 8 so far as that provision relates to the provisions mentioned above.

Specifically, if a line in a multi-unit building is used to supply a superfast carriage service to a residential customer living in a unit in the building, then the line is taken to be a local access line and to form part of the infrastructure of a telecommunications network.

This provision addresses potential confusion over whether such a line is covered by the requirements, particularly given the complexity of the rules relating to the network boundary in a multi-unit building. End-users in premises in a multi-unit building may be served by one or more lines that enter the building, and which are connected to nodes or points or presence outside. Such lines would generally be understood to be local access lines, and subject to Part 8 if they are used to supply superfast carriage services to residential customers. The local access lines that enter a multi-unit building may be connected to the main distribution frame in the building, either directly or through a patch panel located nearby, or to another network termination device nearby. Other lines may then run from the customer-facing side of the frame, or the customer-facing side of the network termination device, directly to end-user premises or to router equipment located elsewhere in the building and to which other lines are then connected that are also connected to end-user premises.

Lines on the customer side of the network boundary are usually considered to be customer cabling and therefore not part of a telecommunications network. Under section 58 of the Tel Act the lines cannot be local access lines because a line that is on the customer side of the network boundary is not a local access line. Where a telecommunications network is used to supply a carriage service to an end-user by means of a line that enters the building, by operation of sub-paragraphs 22(4)(a)(i) and (ii) of the Tel Act, the default network boundary is either at the side of the frame nearest the end-user or the side of the network termination device nearest to the end-user. However, if a different point has been agreed between the customer and the carrier or CSP, the boundary point will be that other point.

Some service providers purchase a wholesale service over a local access line that terminates in the building, connect that line to the customer cabling and then supply superfast carriage services over the cabling to residential customers. Such service providers should be subject to Part 8 if the cabling comes into existence on or after 1 July 2018. Proposed subsection (2B) achieves this outcome.

Item 72 - After section 158

Item 72 introduces a new section 158A.

Subsection 158A(1) deems extensions on or after 1 July 2018 of local access lines that were in existence before 1 July 2018 to be local access lines in their own right and to have come into existence on or after 1 July 2018. As a result, these extensions would be subject to the prohibition in new section 142C.

Subsection 158A(2) is an interpretative provision and clarifies that subsection 158A(1) does not apply in determining the meaning of an expression used in:

·          section 143, or

·          sections 151ZF, 151ZG and 151ZH to the extent to which they relate to a line to which section 143 applies, or

·          any other provision of Part 8 so far as that provision relates to the provisions mentioned above.

Rather, subsection 156(2) (dealing with telecommunications networks that are extended between 1 January 2011 and 30 June 2018) is relevant to the operation of the above provisions.

Item 73 - Section 159

Item 74 - At the end of section 159

Item 74 introduces a new subsection 159(2), which provides that, for the purposes of Part 8, an alteration of a line does not include an extension of a line. New subsection 159(2) operates in respect of a line in a similar way as existing section 159 operates in respect of a network to alter the meaning of ‘alteration’ so it does not include extensions. New subsection 159(2) reflects the operation of proposed new section 142C, which applies to local access lines that came into existence, or were altered or upgrade on or after 1 July 2018.

The amendment in item 73 is consequential to the change in item 74.

Item 75 - Section 160

Item 76 - At the end of section 160

Item 76 introduces a new subsection 160(2), which provides that, for the purposes of Part 8, an upgrade of a line does not include an extension of the line. New subsection 160(2) operates in respect of a line in a similar way as existing section 160 operates in respect of a network to alter the meaning of ‘upgrade’ so it does not include extensions.

The amendment in item 76 is consequential to the change in item 75.

Item 77 - At the end of Part 8

Item 77 inserts two new sections, section 161 and section 162, into Part 8 of the Tel Act.

Proposed section 161 sets out an extended meaning of residential customer for the purposes of Part 8. Home-based businesses are to be treated as residential customers, given that they are usually served by residential networks. Subsection 161(1) deals with businesses that are carried on by individuals (for example, sole proprietors). Subsection 161(2) deals with businesses that are carried on by a partnership, subsection 161(3) with businesses carried on by a corporation and subsection 161(4) with businesses carried on by a trust.

The key criteria for determining when a customer is a home-based business are that most or all of the work of the business is carried out at the residence of an individual; or the business does not occupy any premises other than the residence of the individual. A business in the former category could, for example, be a designer, lawyer or day care provider who carries on a business at home. A business in the latter category could, for example, be a plumber or electrician who works from home but whose work is largely conducted away from the home, though some administration might be carried on at home.

These criteria have been based on the Australian Bureau of Statistics’ definition of a home-based business.

Proposed section 162 sets out powers for the Minister, by legislative instrument, to determine when premises are or not in close proximity to a line. Specified circumstances must exist in relation to premises and a line. Should the Minister make an instrument under section 162, that would affect the meaning of close proximity in proposed section 157A and in the CLCs Declaration as proposed to be amended by this Bill. The Minister may delegate this power to the ACCC.

Item 78 - Before paragraph 564(3)(a)

Item 79 - After paragraph 564(3)(ba)

Item 80 - Subsection 564(3) (before note 1)

Item 78 introduces new paragraphs 564(3)(aaa) and (aab), while item 79 introduces a new paragraph 564(3)(bb).

Under section 564 of the Tel Act, the Federal Court may grant restraining or performance injunctions for contraventions of the Tel Act or the TCPSS Act on the application of the Minister, the ACMA or the ACCC (see subsections 564(1) and (2)). Subsection 564(3) limits the ACMA’s ability to apply for injunctions for contraventions of carrier licence conditions or service provider rules that are listed in that section.

The effect of new paragraphs 564(3)(aaa), (aab) and (bb) is to limit the ACMA’s ability to apply for injunctions in relation to contraventions of:

·          certain provisions in Part 8 of the Tel Act;

·          carrier licence conditions relating to those provisions in Part 8 of the Tel Act;

·          service provider rules relating to those provisions in Part 8 of the Tel Act.

Item 80 inserts a new note (Note 1AA) in subsection 564(3) to remind readers that the provisions listed in new paragraphs 564(3)(aaa), (aab) and (bb) are contained in Part 8 of the Tel Act.

As the ACCC has responsibility for enforcing Part 8 of the Tel Act, it would not be appropriate for the ACMA to take enforcement action and items 78-80 are therefore required.

Item 80A - After subsection 564(3)

Item 80A inserts new subsections 564(3A) and (3B). As a result of these provisions, carriers and CSPs would be able to apply to the Federal Court for restraining or performance injunctions to address conduct in contravention of section 151ZI of the Tel Act. This would be in addition to the ability for the Minister and the ACCC to apply for injunctions under subsection 564(1) and (2) for contraventions of section 151ZI. If a person who is subject to wholesale-only or functional separation requirements, or operating under a class exemption, takes action that may contravene the Act, that action could directly affect the commercial interests of carriers or CSPs who are receiving wholesale services from the person or competing against it. Given the resourcing constraints on ACCC enforcement, it is therefore appropriate for carriers and CSPs also to be able to seek injunctions if their commercial interests are affected.

Item 81 - Before paragraph 571(3)(a)

Item 82 - After paragraph 571(3)(ba)

Item 83 - Subsection 571(3) (before note 1)

Item 81 introduces new paragraphs 571(3)(aaa) and (aab), while item 82 introduces a new paragraph 571(3)(bb).

 

Subsection 571(1) of the Tel Act permits the Minister, the ACMA and the ACCC to institute proceedings in the Federal Court for the recovery on behalf of the Commonwealth of a pecuniary penalty for the contravention of a civil penalty provision. Subsection 571(3) limits the ACMA’s ability to institute any such proceedings for contraventions of carrier licence conditions or service provider rules that are listed in that section.

The effect of new paragraphs 571(3)(aaa), (aab) and (bb) is to limit the ACMA’s ability to institute proceedings for the recovery of pecuniary penalties for contraventions of:

·          certain provisions in Part 8 of the Tel Act;

·          carrier licence conditions relating to those provisions in Part 8 of the Tel Act;

·          service provider rules relating to those provisions in Part 8 of the Tel Act.

Item 83 inserts a new note (Note 1AA) in subsection 571(3) to remind readers that the provisions listed in new paragraphs 571(3)(aaa), (aab) and (bb) are contained in Part 8 of the Tel Act.

As the ACCC has responsibility for enforcing Part 8 of the Tel Act, it would not be appropriate for the ACMA to take enforcement action and items 81-83 are therefore required.

Item 84 - At the end of paragraph 572E(6)(c)

Section 572E of the Tel Act sets out when an infringement notice may be issued by an authorised infringement officer in relation to the contravention of a particular civil penalty provision.

Under subsection 572E(6), if:

·          a person’s conduct constitutes a contravention of section 68 or 101 of the Tel Act; and

·          the contravention consists of a breach of the carrier licence condition in Part 1 of Schedule 1 or the service provider rule in Part 1 of Schedule 2; and

·          the contravention consists of a breach of another provision of the Tel Act;

an infringement notice can be given to the person in relation to the contravention of section 68 or 101 if the other provision is a listed infringement provision and has been listed as such for at least three months.

The amendment in item 84 has the effect of carving out from the operation of subsection 572E(6) certain provisions of Part 8. Those provisions are civil penalty provisions and also carrier licence conditions and service provider rules (compliance with which is required by sections 68 and 101 of the Tel Act respectively). As a result, an infringement notice may be issued in relation to contravention of those civil penalty provisions under subsection 572E(1) of the Tel Act.

The provisions are sections 142C and 143 (wholesale-only rules), 143B (class exemptions), 151ZA (reporting obligations after a revocation notice is given), 151ZB (requirement to notify changes in control), 151ZD (compliance with a functional separation undertaking), 151ZF and 151ZG (non-discrimination obligations), 151ZH (publication of offers and statements of differences) and 151ZI (anti-avoidance).

Infringement notices are one of the enforcement options available to the ACCC in relation to Part 8 . Its options include seeking injunctions from the Federal Court or recovery of pecuniary penalties (see Parts 30 and 31 of the Tel Act). This Bill also provides for the ACCC to seek other orders from the Federal Court in relation to breaches of undertakings (refer proposed section 151ZF). It could also revoke a functional separation undertaking if a person has an unsatisfactory compliance record. These are strong measures and it would not be appropriate, for some breaches, for the ACCC to take court action. Accordingly, the Bill allows the ACCC to issue formal warnings or infringement notices in relation to contraventions of section 151ZD (compliance with an undertaking).

Item 85 - After paragraph 572F(1)(c)

Item 86 - Paragraph 572F(1)(d)

Section 572F of the Tel Act sets out the matters to be included in an infringement notice. Currently, only the ACMA has powers under the Tel Act to issue infringement notices in relation to contraventions of civil penalty provisions. Items 85 and 86 provide new powers for the ACCC to issue infringement notices in relation to contraventions of civil penalty provisions in Part 8 of the Tel Act.

 

Item 85 inserts a new paragraph 572F(1)(ca) setting out a particular statement that must be included in an infringement notice if the alleged contravention consists of a breach of:

·          section 68 of the Tel Act to the extent to which that section relates to the carrier licence condition in Part 1 of Schedule 1 in so far as that condition relates to certain specified provisions in Part 8 of the Tel Act; or

·          section 101 of the Tel Act to the extent to which that section relates to the service provider rule in Part 1 of Schedule 2 in so far as that rule relates to those provisions in Part 8 of the Tel Act; or

·          those provisions in Part 8 of the Tel Act.

The provisions are sections 142C and 143 (wholesale-only rules), 143B (class exemptions), 151ZA (reporting obligations after a revocation notice is given), 151ZB (requirement to notify changes in control), 151ZD (compliance with a functional separation undertaking), 151ZF and 151ZG (non-discrimination obligations), 151ZH (publication of offers and statements of differences) and 151ZI (anti-avoidance).

The statement to be included in the infringement notice must be to the effect that the matter will not be dealt by the Federal Court if the penalty specified in the notice is paid to the ACCC on behalf of the Commonwealth within a specified timeframe. This is essentially the same as the statement that must be included in infringement notices for other contraventions with changes to reflect that the ACCC, rather than ACMA, would collect the penalty on behalf of the Commonwealth.

 

The amendment in item 86 is consequential to the amendment in item 85. Item 86 inserts the words ‘if paragraph (ca) does not apply’ before the word ‘contain’ in paragraph 572F(1)(d). This amendment ensures that only the ACCC can issue infringement notices for contraventions of civil penalty provisions in Part 8 of the Tel Act.

 

Item 87 - At the end of section 572L

Item 87 introduces new subsections 572L(3) to 572L(6).

 

Section 572L deals with the appointment of authorised infringement officers. Currently, only certain members of the staff of the ACMA can be appointed as authorised infringement officers.

 

However, given the ACCC’s responsibility for overseeing the operation of Part 8 of the Tel Act, this is not appropriate for infringement notices relating to contraventions of civil penalty provisions in Part 8.

 

The amendments in item 87 address this by:

·          empowering the ACCC to appoint, in writing, certain members of the staff of the ACCC as authorised infringement notice officers (new subsections 572L(3) and (4)); and

·          limiting the ability of authorised infringement notice officers appointed under subsection 572L(1) (that is, authorised infringement notice officers who are members of the staff of the ACMA) to give or withdraw infringement notices for contraventions of provisions contained in Part 8 of the Tel Act (new subsection 572L(5)); and

·          specifying that authorised infringement notice officers appointed under subsection 572L(3) (that is, authorised infringement notice officers who are members of the staff of the ACCC) can only give or withdraw infringement notices for contraventions of those provisions on Part 8 of the Tel Act (new subsection 572L(6)).

 



 

Schedule 3 Statutory infrastructure providers

 

Overview

Schedule 3 to the Bill introduces a statutory infrastructure provider (SIP) regime into the Tel Act for the future connection and supply of superfast broadband services to premises in Australia. These arrangements provide a solid core around which a new forward-looking consumer protection architecture for the future NBN environment can be built.

Part 1 of Schedule 3 sets of the details of the SIP regime and makes consequential amendments to the telecommunications access regime provisions in Part XIC of the CCA.

Part 2 of Schedule 3 to the Bill repeals four existing ‘adequately served’ carrier licence declarations which will be replaced by the new SIP obligations.

The SIP regime provides industry and consumers with certainty that all premises in Australia can have access to superfast broadband services. The regime provides for premises to be connected to networks and for the network provider to supply eligible services to CSPs in order that those CSPs can supply superfast broadband services to end-users (and voice services on fixed-line and fixed wireless networks).

The SIP regime recognises that network infrastructure is deployed on a competitive basis, but also that the costs of deploying fixed-line networks are such that in many areas it will only be economical for there to be a single network provider. As a result the regime is based on the policy that there should always be a SIP for a specific area, but there can be different SIPs for different areas as a function of Australia’s open, competitive telecommunications market. Given that NBN Co will ultimately replace Telstra as the principal fixed-line operator in Australia , NBN Co is expected to operate as the default SIP provider once the NBN rollout is complete.

There are three ways in which SIP areas can be identified, and SIPs specified for those areas. First, NBN Co has SIP responsibilities, and two service areas relate to its role. Prior to the completion of the NBN rollout, NBN Co must declare provisional interim NBN service areas where it declares an area ‘ready for service’. It must also declare provisional interim NBN service areas where it had declared areas ready for service prior to the commencement of the SIP regime.

After the NBN rollout is complete, NBN Co becomes the default SIP for Australia (the general service area ).

NBN Co does not have SIP responsibilities in areas where other carriers are SIPs.

The second way in which SIP areas are identified is that other carriers must declare service areas ( nominated service areas ) where:

·          they have a contract to install infrastructure in a real estate development project; or

·          they have a contract to install infrastructure in a building redevelopment project.

Carriers can also declare nominated service areas where they have a contract to install infrastructure to all the premises in a specific area (for example, a pre-existing building). (As there could be other network providers in the same area, it is not compulsory for carriers to declare a nominated service area in this case).

The network areas served under the four ‘adequately served’ carrier licence declarations imposing provider of last resort requirements will automatically become nominated service areas under the Bill.

The obligation on other carriers to declare nominated service areas takes effect when the legislation comes into force. It therefore applies both before the NBN rollout is complete and afterward.

The third way in which SIP areas can be identified is that the Minister can, by legislative instrument, designate specific areas to be designated service areas and determine that a particular carrier is the SIP for a designated service area. This power could be used, for example, to determine the SIP for new developments that were already completed before the SIP regime comes into effect, and where there is only one provider of superfast broadband services.

The Minister also has powers (which can be delegated to the ACMA) to vary service areas if required to ensure that premises are serviced by the carrier best suited to perform the role of SIP in that locality. 

Once the SIP for an area has been established, the SIP will then become subject to two obligations as noted above - connecting premises, on reasonable request from a CSP, to its networks, and supplying an eligible service, also on reasonable request from a CSP, so that the CSP can supply carriage services to end-users at the premises. The Bill establishes that a SIP should connect premises to a fixed-line network as the default, but if this is not reasonable then the SIP should connect premises to a fixed wireless or satellite network. It is envisaged that SIPs will be able to establish their own network preference rules; for example, if a SIP is only supplying fixed wireless services in a service area, then it would not be reasonable for it to connect premises to a fixed-line network, and so could automatically connect premises to the fixed wireless network.

The eligible service that a SIP must supply must enable a CSP to supply broadband services with a peak download transmission speed of at least 25 Mbps and a peak upload transmission speed of at least 5 Mbps. These are baseline speeds and apply across all network technologies. It is envisaged that SIPs will generally supply higher speeds on fixed-line networks. NBN Co in fact is required, under the Government’s 2016 Statement of Expectations, to ensure that 90 per cent of premises in its fixed-line footprint can receive peak download speeds of at least 50 Mbps and peak upload speeds of at least 10 Mbps. In recognition of this, the Bill sets out that it is a target for NBN Co to meet this requirement.

On fixed-line and fixed wireless networks, the eligible service that a SIP must supply must enable a CSP to supply carriage services to end-users that those end-users can use to make and receive voice calls. This obligation will ensure that broadband services provided by SIP networks of this kind can support voice services. However, in areas where a SIP only supplies broadband services using satellite technology (such as, for example, NBN Co), voice services may be better supported by other network technologies operated by carriers who are not SIPs. This issue will be considered further by the Government in its response to the Productivity Commission’s review of the universal service obligation.

The Minister will have powers to make standards, rules and benchmarks that SIPs must comply with. Standards could include timeframes for connecting premises and for rectifying network faults. Rules could include rules for handling complaints. Benchmarks could set targets, for example, for the number of premises that should be connected within the standard timeframes. These mechanisms will enable the core provisions of the SIP regime to be developed over time to provide a new forward-looking consumer protection architecture for the future NBN environment.

SIPs will be required to publish standard offers for connecting premises and supplying eligible services.

The ACMA will be the regulator with responsibility for enforcing the SIP regime. It will maintain a register of SIP service areas and SIPs, so that industry and consumers can know what network infrastructure exists in an area and who the SIP is for the area. To facilitate the ACMA’s role, SIPs will be required to notify the ACMA when they declare service areas (or are designated as SIPs for a service area), and provide geographic coordinates for the service area in a specific format.

Part 1 - Amendments

Part 1 inserts four amendments into the CCA and two amendments into the Tel Act.

The amendments to the CCA (items 1-4) relate to Ministerial standards or rules made under sections 360V or 360U of the Tel Act (to be inserted by item 7 below). The amendments ensure that SIP standards or rules prevail over inconsistent access determinations, binding rules of conduct, access agreements or special access undertakings, which are different mechanisms by which terms and conditions, including price, can be set.

Under Part XIC of the CCA, if a wholesale service is regulated (‘declared’), baseline terms and conditions for the service are either set out by the ACCC in an access determination or a binding rule of conduct, or by an access provider in a special access undertaking. Access seekers can request that an access provider supplies the service on those baseline terms and conditions, and enter into an access agreement. Access seekers can negotiate different terms and conditions with access providers (other than NBN Co) and in this case the access agreement would have unique terms and conditions of supply.

 The amendments to the Tel Act (items 4A and 4B) insert a new power for the Minister, by legislative instrument, to make service provider determinations that apply to CSPs in relation to the supply of specified carriage services.

Competition and Consumer Act 2010

Item 1 - After section 152BCCA

Item 1 inserts a new provision, section 152BCCB, into Part XIC of the CCA . This new section ensures that SIP standards and rules prevail over inconsistent access determinations.

Under proposed sections 360U and 360V the Minister may, by legislative instrument, determine standards or make rules to be complied with by SIPs. A SIP would not be required to comply with the standards or rules in relation to existing access agreements, but would have to comply with them when entering into new access agreements or when an existing access agreement is varied.

SIPs can meet their supply obligations by supplying a declared service under Part XIC of the CCA (see subsection 360Q(2) below). If a SIP does that, it may be subject to an access determination made by the ACCC in relation to the declared service. The access determination may already be in place when the Minister makes a SIP standard or rule, and there may be some years before the ACCC reviews the access determination. Proposed section 152BCCA therefore provides clarity that any SIP who meets its SIP supply obligations by supplying a declared service must comply with standards and rules even if they are inconsistent with an ACCC access determination.

Item 2 - After section 152BDCA

Item 2 inserts a new provision, section 152BDCB, into the CCA . This new section ensures that SIP standards prevail over inconsistent binding rules of conduct. A binding rule of conduct may be in place when the Minister makes a SIP standard or rule, so proposed section 152BDCA provides clarity that any SIP who meets its SIP supply obligations by supplying a declared service must comply with standards and rules even if they are inconsistent with an ACCC binding rule of conduct..

Item 3 - Before section 152BEC

Item 3 inserts two new provisions, sections 152BEBH and 152BEBI, into the CCA. This new section provides that SIP standards and rules will prevail over certain inconsistent access agreements. However, subsections 152BEBH (2) and 152BEBI (2) conserve the operation of access agreements entered into before the commencement of the particular conflicting standard or rule (as the case may be) so long as they have not been varied after the commencement of the standard or rule.

The proposed new sections provide clarity that a SIP must comply with SIP standards and rules after the standard or rule is made

Item 4 - After section 152CBIC

Item 4 inserts a new provision, section 152CBID, into the CCA . This new section ensures that SIP standards and rules prevail over inconsistent special access undertakings.

A special access undertaking may be in place when the Minister makes a SIP standard or rule, so proposed section 152CBCID provides clarity that any SIP who meets its SIP supply obligations by supplying a declared service must comply with standards and rules even if they are inconsistent with its special access undertaking that is in force.

Telecommunications Act 1997

Item 4A - After subsection 99(1)

Item 4A inserts a new subsection, 99(1A), into the Tel Act. The new subsection creates a power for the Minister to make service provider determinations. Currently, the ACMA may make service provider determinations that apply to service providers in relation to the supply of either or both of specified carriage services or specified content services (subsection 99(1) of the Tel Act). The ACMA cannot make a service provider determination unless it relates to a matter specified in the regulations or in section 346 of the Tel Act (dealing with designated disaster plans).

In practice, this means that the process for making service provider determinations can be complex and lengthy. Regulations first need to be made and then the ACMA needs to complete a second process to make a determination about the same issue. This can delay necessary Government action, for example, concerning interactions between wholesale and retail service providers when dealing with customer complaints. The proposed power introduced by item 4A streamlines the process.

The power is similar to the Minister’s power under section 63 of the Tel Act to declare conditions of carrier licences. Those powers apply to licensed carriers, however a large number of service providers currently do not operate as carriers but as CSPs.

The power is restricted to rules that apply to CSPs in relation to the supply of specified carriage services. Service provider determinations could be made in relation to individual CSPs or in relation to a class of CSPs. The ‘supply of carriage services’ is intended to be read broadly and would include any activities associated with supply (such as billing, service qualification and activation, fault repair, provision of information and network management and reliability), the terms and conditions of supply, the method or mode of supply (such as network technology and technical parameters) and the ongoing supply relationship (for example, dispute resolution and contract management). It would also include supply to a carrier or another CSP (wholesale supply) as well as supply to end-users (retail supply).

Item 4B - At the end of section 99

Item 4B inserts new subsection 99(6) into the Tel Act. This provides that a service provider determination made by the ACMA under subsection 99(1) has no effect to the extent to which it is inconsistent with a service provider determination made by the Minister under subsection 99(1A). Although it is considered unlikely that the ACMA and the Minister would make inconsistent determinations, the clause provides clarity in the unlikely event that this could happen.

Item 7 - After Part 18

Item 7 inserts a new Part 19 into the Tel Act . Part 19 establishes the SIP regime.

Proposed Division 1 - Introduction

Proposed Section 360 - Simplified outline

Proposed section 360 provides a simplified outline of proposed Part 19 to assist the reader.

Proposed Section 360A - Definitions

Proposed section 360A inserts a number of definitions for key terms used in proposed Part 19.

The term access agreement has the same meaning as in Part XIC of the CCA.

The term building redevelopment project has the meaning given by proposed section 360Y of the Tel Act.

The term designated day means the day on which a declaration is made under paragraph 48(1)(c) or (2)(a) of the National Broadband Network Companies Act 2011 . A declaration made under those paragraphs will state that, in the Minister’s opinion, the NBN should be treated as built and fully operational. (This designated day is different from, and not to be confused with, the term ‘designated day’ used in section 577A of the Tel Act, in relation to the structural separation of Telstra.)

The term designated service area has the meaning given to it by proposed section 360L.

The term eligible service has the meaning given to it by section 152AL of the CCA and is a listed carriage service (within the meaning of the Tel Act) or a service that facilitates the supply of a listed carriage service (within the meaning of that Act), where the service is supplied, or is capable of being supplied, by a carrier or a CSP (whether to itself or to other persons).

The term GDA94 means Geocentric Datum of Australia 1994. It is a datum (a mathematical surface on which a mapping and coordinate system is based) and coordinate system used in Australia. It is a system of latitudes and longitudes, or east and north coordinates, which can be used to identify locations. It will be the default format to be used by SIPs when declaring their service areas and when notifying the ACMA of their service areas.

The term general service area has the meaning given by proposed section 360F, being any area in Australia other than a nominated service area or a designated service area.

The term interim NBN service area has the meaning given by proposed section 360D and refers only to service areas in existence before the designated day.

 

The term NBN Co has the same meaning as in the National Broadband Network Companies Act 2011 .

The term nominated service area refers to a nominated service area as defined in section 360GB.

The term project area , for a building redevelopment project, has the meaning given to it by proposed section 360Y. The project area of a building redevelopment project is expected to be the same as the provisional nominated service area.

The term provisional interim NBN service area has the meaning given to it by proposed section 360D and refers to the service areas declared by NBN Co before the designated day . A provisional interim NBN service area could be the same as an interim NBN service area, but may not if there are any nominated service areas or designated service areas within the geographic area of a provisional interim NBN service area. Those service areas are excluded from the interim service area.

The term provisional nominated service area has the meaning given to it by proposed section 360H. A SIP declares a provisional nominated service area for a specific area (such as the project area of a real estate development project or a building redevelopment project). The nominated service area may be the same as the provisional nominated service area, but if other service areas are declared within the same geographic area (for example, because a new project area is established with a different carrier as SIP within the same geographic area) then the nominated service area would automatically be updated to exclude subsequent service areas.

The term qualifying carriage service is central to the SIP obligations. It covers three types of qualifying services based on technology platform type; namely:

·          qualifying fixed-line carriage services;

·          qualifying fixed wireless carriage services; and

·          qualifying satellite carriage services.

Each of these types of services are separately defined in proposed section 360A.

The term qualifying fixed-line carriage service is also a central term for the SIP obligations because it represents the baseline carriage service that a CSP should be able to deliver to an end-user using the eligible service supplied to it by a SIP. A qualifying fixed-line carriage service enables end-users to download communications, is supplied using a line to premises occupied or used by an end-user, and has a peak download transmission speed of at least 25 megabits per second and a peak upload transmission speed of at least 5 megabits per second.

A SIP must supply eligible services to a CSP in order that that CSP can supply qualifying fixed-line carriage services to end-users.

The download and upload transmission speeds set out in the definition are consistent with those set out in NBN Co’s 2016 Statement of Expectations (and supplied by NBN Co on its fixed-line, fixed wireless and satellite networks). The speeds are also consistent with those capable of being supplied by superfast networks built by other carriers (for example, fibre networks in new developments or fibre-to-the-basement networks in multi-unit buildings).

The term qualifying fixed-line telecommunications network means a telecommunications network that is used to supply a qualifying fixed-line carriage service to customers in Australia.

 

A qualifying fixed wireless carriage service has the meaning given by section 360AA (see below).

A qualifying satellite carriage service is a carriage service supplied using a satellite which enables end-users to download communications and has a peak download transmission speed of at least 25 megabits per second and a peak upload transmission speed of at least 5 megabits per second or more. It does not include a public mobile telecommunications service.

If a telecommunications network is used, or proposed to be used, to supply qualifying carriage services to customers, or prospective customers, in Australia, it will meet the definition of a qualifying telecommunications network.

The term relevant service area means the service area (as defined in proposed section 360C), for which the person is the SIP.

The term request refers to a request by a CSP to a SIP to connect premises or supply an eligible service. To avoid doubt, the definition in section 360A expressly states that a request includes notional requests by a company (as a CSP) to itself as a carrier. The obligations on a SIP to connect premises and supply carriage services are wholesale supply obligations. In many cases, a person who is a wholesale provider would receive a request from another person (a retail provider). Some SIPs may, however, be functionally separated under the arrangements set out in Schedule 2 to this Bill, and so the SIP would be receiving a request from itself, rather than another person. The definition clarifies that such notional requests can be requests under proposed sections 360P and 360Q.

The term service area has the meaning given to it by section 360C.

The term statutory infrastructure provider refers to the SIP for each of the service areas specified in any of the proposed sections 360E (interim NBN service area), 360G general service area), 360K (nominated service area) or 360L (designated service area).

The term TAB vector format means the MapInfo proprietary format that contains a spatial representation of data using points, lines, and polygons. This definition is relevant to the specification of service areas by SIPs under proposed section 360LA (below).

Proposed Section 360AA - Qualifying fixed wireless carriage service

Proposed subsection (1) specifies that, for the purposes of new Part 19, qualifying fixed wireless carriage service means a carriage service that satisfies all of the following eight criteria:

a)       it is supplied using a fixed wireless technology platform;

b)       it is marketed to customers, or potential customers, as a fixed wireless service;

c)       it enables end users to download communications;

d)      the peak download transmission speed of the carriage service is at least 25 megabits per second;

e)       the peak upload transmission speed of the carriage service is at least 5 megabits per second;

f)        it is not a public mobile telecommunications service;

g)       it a listed carriage service; and

h)       it satisfies any conditions determined by the Minister under subsection (2).

Proposed subsection (2) confers power upon the Minister to determine conditions for the purposes of paragraph (1)(h). This is a reserve power that could be used to clarify matters. For example, the Minister could add technical parameters to the service description. The determination would be in the form of a legislative instrument, meaning that any additional matters specified would be subject to the consultation, disallowance and sunsetting requirements in the Legislation Act.

Proposed subsection (3) specifies that the expression fixed wireless technology platform has the meaning generally accepted within the telecommunications industry.

The term ‘fixed wireless’ is commonly used within the industry to refer to a specific network technology that transmits data using radio signals. Fixed wireless networks deliver carriage services to end-users at premises by sending data from a transmission tower wirelessly to an antenna installed at the premises. Fixed wireless technology is therefore different from fixed-line technology (where carriage services are delivered over lines to premises) and public mobile telecommunications services (where end-users can send and receive data as they move around, and the service is supplied by use of a telecommunications network that has intercell hand-over functions).

Proposed Division 2 - Service areas and statutory infrastructure providers

Division 2 defines service areas and establishes how the SIP for a service area is determined.

Proposed Subdivision AA - Introduction

Proposed Section 360B - Simplified outline

Proposed section 360B provides a simplified outline of proposed Division 2.

Proposed Section 360C - Definition of service area

Proposed section 360C provides a definition of service area for the purposes of new Part 19.  There are three different service areas prior to the designated day (which is the date when the NBN is deemed to be built and fully operational). These are:

·          interim NBN service areas (defined at section 360D);

·          nominated service areas (defined at section 360H); or

·          designated service areas (defined at section 360L).

After the designated day, NBN Co would become the default SIP for all of Australia. Its service area is known as the general service area , which is defined at proposed section 360F. Nominated service areas and designated service areas continue after the designated day. Nominated service areas and designated service areas do not form part of the general service area.

The Bill distinguishes service areas in which NBN Co has SIP responsibilities from service areas in which another carrier has SIP responsibilities. Other carriers may, for example, roll out fibre networks in new developments or specific locations. Some carriers already have obligations to connect premises and supply services under carrier licence conditions (see section 360J). Those carriers will be deemed to be SIPs for the areas where the licence conditions apply (see section 360K). Other carriers will be required to declare nominated service areas where they have contracts to supply carriage services to all the premises in an area.

These rules would apply to infrastructure installed after Part 19 commences. However, a number of areas in Australia are currently served by fibre networks that were not installed by NBN Co and are the only fixed-line networks in the area. The Minister would have the power to designate such providers’ network service areas as designated service areas, and to determine that the network providers must be the SIPs for the service areas. If this were to occur, those SIPs would have obligations to connect all premises in the areas to their networks and to supply qualifying carriage services. They would also need to comply with any standards or rules made by the Minister.

The intention is that carriers who have entered into contracts to supply carriage services to a specific area, and who are not NBN corporations, would declare nominated service areas and have SIP responsibilities in those areas. Carriers have entered into contracts to service these areas on a commercial basis and therefore should be capable of meeting SIP obligations. As there may be people living in these service areas who need to receive carriage services, the SIP obligations ensure those people can receive services from the network best placed to do so.

Areas that have existing superfast network infrastructure, but which are not nominated service areas or designated service areas, would be part of the general service area. NBN Co could overbuild networks in these areas to meet its SIP obligations or source network capacity from another provider to do so. Although NBN Co would not have SIP responsibilities in nominated service areas or designated service areas, it could overbuild in these areas as well, subject to Government policy at the time and its commercial discretion, or source network capacity from another provider to do so.

Proposed Subdivision A - Rules applicable before the designated day

Proposed Section 360D - Interim NBN service area

At present, NBN Co is required to connect premises to its networks under the current Statement of Expectations which requires NBN Co to continue the NBN rollout using a multi-technology mix model. This contrasts with the long-standing universal service obligation, which requires Telstra, as the primary universal service provider, to ensure that standard telephone services and payphone are reasonably accessible to all people in Australia on an equitable basis, wherever they reside or carry on business. The provisions in Subdivision A of Division 2 of Schedule 3 provide industry and consumers with certainty that they will have similar access to superfast broadband.

Proposed section 360D provides a set of rules which apply to interim NBN service areas before the designated day. An interim NBN service area is defined at proposed subsection 360D(1) and is so much of a provisional interim NBN service area as is not the whole or a part of a nominated service area or a designated service area. 

Proposed subsections 360D(2) and 360D(3) set out the process by which NBN Co must declare areas to be provisional interim NBN service areas . If NBN Co publishes on its website a statement that a particular area in Australia is ready for service, during the period beginning at the commencement of the section and ending immediately before the designated day, then NBN Co must declare that the area is a provisional interim NBN service area. It must do this within ten business days after the statement was published.

If, before the commencement of the section, there was a statement published on NBN Co’s website that a particular area was ready for service, then NBN Co must declare the areas to be provisional interim NBN service areas. It must do this within ten business days of the commencement of the section.

These provisions are drafted to be consistent with NBN Co’s rollout plan requirements. NBN Co publishes a three-year rollout plan which sets out when it expects to commence building its network in a ‘rollout region’, and when that rollout region is ‘ready for service’. NBN Co generally declares a rollout region to be ready for service once at least 90 per cent of premises in its footprint in that area are passed. NBN Co is subject to commitments in its special access undertaking to publish this information.

 

Proposed subsection 360D(3) would apply to rollout regions that have already been declared ready for service by NBN Co, and proposed subsection 360D(2) would apply to other rollout regions that are declared ready for service while the NBN is being built.

Notes are included after proposed subsection 360D(2) and (3) to remind readers that proposed section 360LA sets out the format for the declaration statements.

Proposed subsections 360D(4) and 360D(5) impose a requirement that NBN Co publish a copy of any declaration made under proposed subsections 360D(2) and 360D(3) on its website and give a copy of the declaration to the ACMA. The ACMA must then publish a copy of that declaration on its website (proposed section 360Z). These publication requirements provide transparency for industry and end-users of available network infrastructure and who the SIP for a service area may be.

Proposed subsection 360D(6) provides that a declaration made under subsection (2) or (3) cannot be revoked. This is to ensure end-users have certainty, once an interim NBN service area has been declared, that their retail provider can request a connection to the NBN and the supply of eligible services.  

Under subsection 360D(7), a declaration made under subsection (2) or (3) cannot be varied except in accordance with proposed subsection (8) or (9). These set out two circumstances. The first is to correct a minor error. Proposed subsection (8) states that a declaration made under subsection (2) or (3) cannot be varied by NBN Co except to correct a clerical error or obvious mistake. The limitation to minor errors is intended to ensure that NBN Co will not be able to change an interim NBN service area arbitrarily after it has been declared.

There could be operational reasons for variation to an interim NBN service area. For example, developments in network technologies may lead to some reconfiguration of service areas. Proposed subsection 360D(9) provides that the Minister can vary a declaration under subsection (2) or (3) in writing. Such a variation would not be a legislative instrument (subsection 360D(16)) because the variation is administrative in character. The power for the Minister, rather than NBN Co, to vary declarations recognises that significant variations could have significant consequences, both to end-users and retail providers, in terms of continuity of service and access to carriage services. 

Proposed subsection 360D(11) provides for the Minister, before making a decision to vary a declaration, to conduct a public consultation process on the draft variation. The Minister must cause to be published on the Department’s website a notice setting out the draft variation and invite persons to make submissions on it. The time limit for such submissions to be made must not be shorter than 10 business days after the notice is published (subsection 360D(12)). The Minister must consider any submissions received within the time limit specified in the notice.

Proposed subsection 360D(13) requires NBN Co, in making a declaration under proposed subsection (2) or (3), to comply with any rules which the Minister may determine under proposed subsection 360D(14). A determination made by the Minister under subsection (14) would be a legislative instrument. The rule-making power is a reserve power that could be used to address circumstances as they arise. For example, there may be issue with the format of declarations, or a need for the declarations to include specific information.

Subsections (15) and (16) clarify that, as declarations made by NBN Co under subsections (2) or (3), and variation declarations made by NBN Co or the Minister under subsections (8) or (9), do not meet the requirements of subsection 8(1) of the Legislation Act, they are not legislative instruments.

Proposed Section 360E - Statutory infrastructure provider for an interim NBN service area

Proposed section 360E provides that NBN Co is the statutory infrastructure provider for a provisional interim area if, before the designated day:

·          an area was a provisional interim NBN service area because of a declaration made by NBN Co under proposed section 360D; and

·          the whole or a part of the provisional interim NBN service area is an interim NBN service area.

Proposed Subdivision B - Rules applicable after the start of the designated day

Proposed Section 360F - General service area

Proposed section 360F provides that the general service area means Australia other than a nominated service area, or a designated service area.

Under section 7 of the Tel Act, Australia includes Christmas Island and the Cocos (Keeling) Islands, and any other external Territory prescribed under the Tel Act.

Proposed Section 360G - Statutory infrastructure provider for the general service area

By operation of proposed section 360G, NBN Co will become the SIP for the general service area after the start of the designated day. This will ensure that there is a guaranteed infrastructure provider of last resort for all of Australia.

 

The designated day, as noted under section 360A, is when the Minister declares the NBN to be built and fully operational under section 48 of the National Broadband Network Companies Act 2011 .

Proposed Subdivision C - Rules applicable before, at and after the start of the designated day

Proposed Section 360H - Nominated service area—declaration made by a carrier

Under proposed subsection 360H(1) a provisional nominated service area will be a nominated service area if the area is not wholly or partly:

·          a provisional nominated service area that is attributable to a subsequent declaration under section 360H; or

·          a designated service area.

That is, a nominated service area may be the same as a provisional nominated service area, but could be adjusted to exclude areas designated by the Minister or subsequent nominated service areas.

The adjustment mechanism in subsection 360H(1) deals with the potential for new development projects to be initiated within existing service areas. A carrier may be the SIP for a nominated service area, only for another carrier then to enter into a contract to install infrastructure to a new building within the same service area. Subsection (1) clarifies that the new carrier takes on SIP obligations for the new building.

Proposed subsections 360H(2)-(7) then set out three avenues by which carriers nominate service areas, and themselves as SIPs for those areas.

 

The first avenue is under proposed subsection 360H(2). This is applicable where a carrier (other than an NBN corporation) has installed telecommunications network infrastructure (after the commencement of the section) under a contract for the supply of eligible services to premises in the whole of the project area of a real estate development project. In these cases, a carrier must declare that all of the project area is a provisional nominated service area within 10 business days after completion of the infrastructure build. The carrier must also meet the conditions specified in a legislative instrument made by the Minister (subsection (3)).

Real estate development project is defined in section 372Q of the Tel Act. A project is a real estate development project if it involves the subdivision of one or more areas of land into lots (however described) and the making available of one or more of those lots for sale or lease, or the construction of building units on any of the lots and the making available of any of those building units for sale or lease. An area of land subdivided into lots is the project area for the real estate development project.

The second avenue by which a carrier may declare a provisional nominated service area is under subsection 360H(4). This covers the case where a carrier (other than an NBN corporation) has (after the commencement of the section) installed telecommunications network infrastructure under a contract for the supply of eligible services to premises in the whole of the project area of a building redevelopment project . The carrier must declare that the whole of the project area is a provisional nominated service area within 10 business days after completing the installation of infrastructure. The carrier must also meet the conditions specified in a legislative instrument made by the Minister (subsection (5)).

Building redevelopment project is defined at proposed section 360Y (below).

The third avenue of self-declaration is set out in subsection (6). This covers the circumstance where:

·          a carrier (other than an NBN corporation) installs infrastructure under a contract in an area (other than the project area of a real estate development project or a building redevelopment project); and

·          the installation contract requires the carrier, on reasonable request by a carriage service provider on behalf of an end-user at premises in the area, to connect the premises to a qualifying telecommunications network so that the carriage service provider can provide eligible services to the end user at the premises.

As with the other two circumstances mentioned above, the carrier may declare that the area is a provisional nominated service area after it has installed the infrastructure. The carrier must also satisfy the conditions specified in a ministerial determination, as in force at the relevant time of proposed declaration (subsection (7)). A declaration can specify the whole or part of a building (proposed subsection (20)). This provides flexibility, for example, enabling multiple carriers to enter into contracts to supply services to different parts of a large building, like a shopping centre, business complex or residential building. The different areas would therefore constitute the service area.

It is compulsory for a carrier to declare a provisional nominated service area when it installs infrastructure under a contract for a real estate development project or a building redevelopment project. This is because generally there will only be a single carrier servicing these areas. By contrast, it is at a carrier’s discretion whether it declares a provisional nominated service area when it enters into a contract to install infrastructure that is not a contract for a real estate development project or a building redevelopment project. This is because the carrier may not be the only network provider to the premises in question.

Under the third avenue, if a carrier becomes the only network provider to the premises in question, it would be open for the carrier to declare a provisional nominated service area. If the carrier did not, the Minister could designate the area as a designated service area, and declare the carrier to be the SIP for the service area.

In all of the three circumstances of self-declaration, the carrier is required to publish the declaration on its website (subsection 360H(8)) and give a copy of the declaration to the ACMA (subsection 360H(9)). The ACMA in turn must include the information on its register of SIPs (proposed section 360Z). Together, the notification and publication requirements ensure that end-users, and other carriers, are aware of SIP service areas and which carriers have SIP obligations in those service areas.

Proposed section 360LA prescribes the format of the description of the area and a note referring to this accompanies proposed subsections 360H(2), (4) and (6) as an aid to the reader.

A declaration under subsections (2), (4) or (6) must comply with any principles determined by the Minister, by legislative instrument, under subsection 360H(11).

Declarations made under proposed section 360H cannot be revoked (proposed subsection (12), but they can be varied in accordance with subsection (14), which enables the Minister to vary one in writing. A variation is not a legislative instrument, because it is administrative in character. If the Minister varies a declaration, the Minister must give a copy of the variation to the ACMA (proposed subsection (15). Before proceeding with a variation, the Minister must consult the public on a draft of the variation. Specifically, the Minister must arrange for a notice with the draft variation to be published on the Department’s website and an invitation must be made to the public to make submissions to the Minister about the draft variation within the time limit specified in the notice (which cannot be less than 10 business days). The Minister must consider any submissions received within the time limit specified in the notice.

The consultation requirements, like the similar requirements in relation to the Minister’s proposed powers under section 360D to vary declarations about interim NBN service areas, reflect the fact that significant variations to previously declared service areas can have significant consequences for end-users and service providers, and as a result they should have the opportunity to comment on any variation before it is made.

Subsections (18) and (19) clarify that, as neither the declarations by a person under the section, nor variation declarations made by the Minister under proposed subsection (14), meet the requirements of subsection 8(1) of the Legislation Act, they are not legislative instruments. 

Proposed Section 360HA - Nominated service area - anticipatory notice to be given to the ACMA by a carrier

Proposed section 360HA sets out a process for carriers who enter into contracts for real estate development projects or building redevelopment projects to give notice to the ACMA about the contracts. The notices will be published by the ACMA, providing greater transparency to end-users and other network providers that areas will become nominated SIP areas and who the SIP will be.

Under proposed subsection 360HA(1), after the commencement of the section, a carrier (other than an NBN corporation) will have to notify the ACMA if it enters into a contract for a real estate development project and would be required, under subsection 360H(2), to declare the whole of the project area is a provisional nominated SIP area.

The notice to be provided to the ACMA must specify the project area, describe the telecommunications network infrastructure to be installed under the contract and set out the carrier’s estimate of the likely completion date for the installation. It must be provided within 10 business days after the carrier entered into the contract.

A note reminds the reader that the format of the description of the area is specified under proposed section 360LA.

Proposed subsection 360HA(2) sets out similar notification obligations on carriers who entered into contracts to install infrastructure in real estate development projects before the commencement of the section and the installation will be completed after the commencement of the section. The notice to the be provided to the ACMA must contain the same information as required under subsection (1), but must be given within 90 days after the commencement of the section or, if the ACMA allows a longer period, within that longer period. The extended notification period reflects the fact that it may take some time for carriers installing networks in real estate development projects (some of whom are very small carriers) to provide the information.

Under proposed subsection 360HA(3), after the commencement of the section, a carrier (other than an NBN corporation) will have to notify the ACMA if it enters into a contract for a building redevelopment project and would be required, under subsection 360H(4), to declare the whole of the project area is a provisional nominated SIP area.

The notice to be provided to the ACMA must contain the same information as required under subsection (1) and must also be provided within 10 business days after the carrier entered into the contract.

A note reminds the reader that the format of the description of the area is specified under proposed section 360LA.

Proposed subsection 360HA(4) then sets out similar notification obligations on carriers who entered into contracts to install infrastructure in building redevelopment projects before the commencement of the section, and the installation will be completed after the commencement of the section. The notice to the be provided to the ACMA must contain the same information as required under subsection (1), but must be given within 90 days after the commencement of the section or, if the ACMA allows a longer period, within that longer period.

Proposed section 360HA does not apply to the third category of project which a carrier must declare to be a provisional nominated service area under section 360H (infrastructure installed under a contract). This is because a carrier has discretion to declare a provisional nominated service area in these circumstances. The carrier may determine that it would be appropriate to declare a provisional nominated service area when it has completed installing infrastructure, for example if it is the only provider of superfast network infrastructure to the premises. As some premises may have more than one network provider, however, the carrier could not anticipate this when entering into the contract and therefore could not reasonably anticipate that it would become the SIP for the premises.

Proposed Section 360J - Nominated service area - carrier licence conditions declarations

Proposed section 360J deems certain nominated service areas by reference to specified carrier licence conditions declarations. The declarations were made under the 2012 Adequately Served Policy, which was designed to prevent unnecessary duplication of fibre networks (existing as at 1 January 2012) in residential estates that were able to deliver NBN-like outcomes. Networks operated by four carriers were determined to have adequately served status, and carrier licence declarations set out requirements on those carriers, on reasonable request from a CSP, to connect premises to the specified networks in order that a CSP could provide carriage services to the end-user at the relevant premises. The four declarations are listed in paragraphs 360J(a)-(d).

As the four declarations set out obligations that are analogous to the SIP obligations being implemented by the Bill, proposed section 360J, together with subsection 360K(3), streamlines the regulatory framework by deeming the relevant carriers to be the SIPs for their respective areas. The clauses also work together with Part 2 of Schedule 3 (below), which repeals the four declarations immediately after Part 1 of Schedule 2 commences (i.e., the day after the Royal Assent).

As the 'adequately served’ networks will become nominated service areas, they will be taken to have been declared under section 360H and therefore the declarations could also be varied by the Minister under that section.

Proposed Section 360K - Statutory infrastructure provider for a nominated service area

Proposed section 360K identifies situations where a carrier becomes a statutory infrastructure provider for a nominated service area.

The first circumstance, under proposed subsection 360K(1), is where a carrier has declared an area is a provisional nominated service area under section 360H. In this case, the area becomes a nominated service area and the carrier will be the SIP for that area.

The second circumstance, under proposed subsection 360K(2), is where the Minister, by legislative instrument, declares that subsection (1) does not apply to a specified nominated service area and declares another carrier to be the SIP for the nominated service area.  This is a mechanism to change the SIP where the area is better served by another provider.

After the designated day NBN Co will be the default SIP if another SIP exits a nominated service area. This is by virtue of its status as the SIP for the general service area (see proposed section 360F above). However, a SIP could negotiate with another network provider to take over the provision of carriage services in a nominated service area (see proposed subsection 360R(3) below). Should another network provider take over the SIP obligations, the Minister would need to declare that that provider is now the SIP for the service area under subsection 360K(2). That declaration would then trigger the obligations on the new SIP to connect premises within the service area to its networks and supply eligible services to CSPs.

Proposed subsection 360K(3) deems carriers responsible for ‘adequately served’ networks to be the SIPs for the nominated service areas created under proposed section 360J. The Minister may, by legislative instrument, declare that subsection (3) does not apply to a specified nominated service area and declare another specified carrier to be the SIP for the nominated service area (subsection 360K(4)). This is a similar power to that in subsection 360K(2) and similarly provides a mechanism to change the SIP where the area is better served by another provider.

Proposed Section 360L - Designated service areas and statutory infrastructure provider

Under proposed subsection 360L(1), the Minister may, by legislative instrument, declare that:

·          a specified area is a designated service area; and

·          a specified carrier is the statutory infrastructure provider for the designated service area.

This is a reserve power for the Minister. For example, it could be used to designate real estate development projects that were installed before the commencement of proposed Part 19, and are serviced by a single superfast fixed-line network provider (other than NBN Co). In such cases, it may be appropriate for the network provider to be the SIP for the area and so the Minister would be able to determine this. The Minister’s powers under the section are deliberately cast broadly as there could be specific circumstances that need to be taken into account on an area by area basis. However, as any Ministerial determination would be a legislative instrument, it would be subject to the consultation, disallowance and sunsetting requirements under the Legislation Act.

Proposed Subdivision D—Format of description of areas

Proposed Section 360LA  - Format of description of areas

Proposed subsection 360LA(1) provides that any of the service areas declared under subsections 360D(2) or 360D(3) (dealing with provisional interim NBN service areas), 360H(2), 360H(4) or 360H(6) (dealing with provisional nominated service areas), or section 360L (dealing with designated service areas) must be described:

·          in a TAB vector format using the GDA94 coordinate system; or

·          in any other format determined by the Minister under subsection 360LA(2).

These provisions are to ensure that a consistent and clear mapping system is used to describe SIP service areas.

Proposed subsection 360LA(2) empowers the Minister, by legislative instrument, to determine a format for the purposes of new Part 19. This is a reserve power that could, for example, be used if different formats or systems become standard in the future.

The TAB vector format and the GDA94 coordinate system are used by carriers to provide geographic information on the extent of their networks to the ACCC under the Infrastructure Record-Keeping Rules. They were chosen so that SIP notification obligations would be consistent with existing reporting requirements.

Proposed Division 3 - Obligations of statutory infrastructure provider

Proposed 360P - Obligation of statutory infrastructure provider to connect premises

Proposed subsection 360P(1) outlines the core obligation of a statutory infrastructure provider to connect premises to a qualifying fixed-line telecommunications network. The connection obligation applies ‘on reasonable request’ by a CSP (i.e. retailer). In turn, the CSP must be making the request on behalf of an end-user at particular premises in the service area.

This approach reflects the fact that the NBN has been established as a wholesale-only basis to support fairer and more effective retail competition and other new superfast networks need to operate on a structurally or functionally separated basis. (That is, they must be wholesale-only or only operate a retail business at arm’s length, subject to the arrangements in Part 8 of the Tel Act, as amended by Schedule 2.) CSPs can use these underlying networks to provide retail services to their consumers.    

Although the request is made on behalf of an end-user, it is not an agency relationship, as the supply obligation is at the wholesale level (i.e. between the statutory infrastructure provider and the requesting carrier or carriage service provider). It is not envisaged that there would be any contractual relationship between the statutory infrastructure provider and the end-user.

Subsection 360P(1) establishes that a SIP has an obligation to connect premises. This obligation could only be displaced if the SIP could demonstrate that a request to connect premises is not reasonable. In practice, whether the SIP exercises its judgement appropriately in refusing a request to connect premises would be subject to the determination of the ACMA and ultimately the courts.

As general principle, it is envisaged that SIP obligations would apply to the connection and supply of services to premises that are generally accepted as places of residence, business or other ongoing activities. SIPs will not necessarily need to connect premises and provide services to premises that are only being occupied on a temporary or periodic basis.  However, rules in relation to such premises can be set out in Ministerial instruments under proposed subsection (3) if required.

It is envisaged that a SIP would publish the circumstances in which it considers a request would not be reasonable. For example, a SIP may consider that it should not have to connect premises where doing so would expose workers to unreasonable dangers (such as in an unsafe building), or where it may not be able to obtain relevant approvals to install a facility from a land owner or council. A CSP may also reject a SIP’s standard offer for the connection of premises (see proposed section 360W below), and in this case the request would not be a reasonable request.

Subsections 360P(2) and (3) provide that the obligation to connect premises on reasonable request does not arise in the circumstances (if any) specified in a Ministerial determination. This creates a power for the Minister to determine such circumstances, thereby clarifying when a request is reasonable. A Ministerial determination would be a legislative instrument.

Subsections 360P(4)-(7) set out powers for the Minister to determine, by legislative instrument, requirements that a SIP must comply with in fulfilling its obligations under subsection (1). A requirement may be of general application or may be limited to one or more service areas. For example, the Minister could determine a requirement to connect premises in a particular area to a particular type of network.

Subsection 360P(7) notes, for the avoidance of doubt, that the application of subsection 33(3A) of the Acts Interpretation Act 1901 (relating to specification by matter or class) is not, by implication, limited by subsection (6).

Subsection 360P(8) provides clarity about terms and conditions in relation to the connection of premises in a service area. If a SIP has an obligation to connect the premises and has published on its website the terms and conditions on which it will do so, and a CSP requests connection on the published terms and conditions, then the SIP has an obligation to enter into an agreement on the same terms and conditions if requested to do so by the CSP. A note reminds the reader that proposed section 360W (below) requires SIPs to publish standard offers for connecting premises to networks.

The obligation to comply with the request under subsection 360P(8) is only triggered if the CSP has made a reasonable request. For the avoidance of doubt, if the SIP determines that the request is not reasonable, it would not have to comply with subsection 360P(8).

Proposed subsection 360P(9) also covers terms and conditions in relation to the connection of premises in a service area. Unlike subsection 360P(8), however, it covers a situation where the connection is not covered by an agreement between the SIP and a CSP. In this situation the SIP must comply with its obligation to connect premises on the terms and conditions that were published on its website at the time the request was made. A note reminds the reader that proposed section 360W (below) requires SIPs to publish standard offers for connecting premises to networks.

 

The default obligation is to connect the premises to a qualifying fixed-line telecommunications network to allow the CSP, in turn, to provide qualifying fixed-line carriage services to the end-user at the relevant premises. If it is not reasonable for the SIP to connect the premises to a qualifying fixed-line network, then the SIP must connect the premises to either a fixed wireless network or a satellite network.

For example, if NBN Co were to receive a request from a CSP to supply a fixed-line carriage service to premises within the NBN fixed wireless footprint, it would not be reasonable for NBN Co to have to fulfil the default obligation. It could instead connect the premises to a fixed wireless network.

It is envisaged that SIPs would be able to set network preference rules that match the network technology they have deployed in particular areas. They could determine the most appropriate technology on an area by area basis.

Proposed subsection 360P(10) provides a mechanism for the Minister, by legislative instrument, to specify when it is ‘reasonable’ to connect premises to a qualifying fixed-line telecommunications network.    The instrument could specify a condition or a set of conditions. For example, a Ministerial instrument could specify that, if a SIP only has a fixed wireless network in an area, but that network is at full capacity, it would be reasonable for the SIP to connect premises by satellite.

Proposed subsection 360P(11) provides that a ministerial determination made under proposed subsection (10) must be an instrument of a legislative character. This is included for the avoidance of doubt.

Proposed subsection 360P(12) sets out an obligation on a SIP if it refuses a request from a CSP to connect particular premises. The SIP must reach a decision on the request within 10 business days. If the SIP refuses the request, it must give written notice of the refusal to the CSP within 5 business days of the decision to refuse. In turn, if a CSP receives this notice, it must give a copy of the notice to the end-user within 5 business days after receiving the notice.

This provides a mechanism for end-users to have visibility, when a connection request is refused, of which party has refused the request and on what grounds. A customer could then provide the notice to the ACMA or the TIO if she or he wished to dispute the refusal.  

Proposed section 360Q - Obligation of statutory infrastructure provider to supply eligible services

Proposed subsection 360Q(1) sets out the other core SIP obligation: the obligation to supply, on reasonable request by a CSP, an eligible service to the CSP in order that the CSP can provide qualifying carriage services to end-users at premises in the SIP’s service area. The obligation includes a requirement to supply eligible services on the terms and conditions that were published on the SIP’s website at the time the CSP made the request.

The accompanying note refers the reader to obligations to publish terms and conditions set out in new section 360X.

Subsection 360Q(1), together with the definition of ‘qualifying carriage service’ in new section 360A, establishes a baseline broadband speed that end-users can expect. A CSP should be able to use the eligible service supplied by the SIP to supply broadband services to end-users with peak download transmission speeds of at least 25 megabits per second and peak upload transmission speeds of at least 5 megabits per second. These speeds are those that the Government expects NBN Co to supply over the NBN, as set out in the Statement of Expectations issued on 24 August 2016. [26] Where a network is capable of achieving higher speeds, then it would be expected that SIPs would supply faster speeds commercially in response to end-user demand. Conversely, a SIP could provide slower speeds in response to consumer demand, but it needs to be able to supply the baseline speeds as well.

Under the approach set out in this Bill, the actual speeds supplied to end-users by CSPs are not determined by the SIP. The SIP would supply a wholesale service that on its own could support the baseline speeds, but the CSP would be responsible for the actual speeds end-users receive. There can be a range of factors that affect the actual speeds end-users experience, including the amount of capacity and congestion on the network units used by the CSP, the capabilities of customer premises equipment and the extent of any interference between broadband systems used by different network operators. The Government has taken, and is taking, other steps to ensure that consumers can have greater clarity from CSPs about actual service speeds, including the ACCC’s broadband performance monitoring and reporting program. The Government also made regulations in 2015 to allow industry to develop a code to manage interference between competing broadband systems; industry is currently developing that code.

Proposed subsection 360Q(1A) provides that the eligible service supplied by the SIP must enable a CSP to supply carriage services that can be used by end-users at premises in the service area to make and receive voice calls. Given concerns about the quality of voice services provided over satellite networks, however, the obligation in subsection (1A) does not apply if the carriage service is supplied using a satellite (subsection 360Q(1B)). Voice services remain important to end-users and the obligation under subsection (1A) would allow CSPs to supply voice services to end-users over fixed-line and fixed wireless SIP networks if end-users wish to receive them. A SIP would not need to supply a standalone voice service. Under the approach in this Bill, it would be enough for the SIP to provide an eligible service that could be used by a CSP to supply both broadband and a Voice over IP service.

Subsection 360Q(1C) clarifies, for the avoidance of doubt, that the requirement under subsection (1A) is part of the obligation under subsection (1). Accordingly, the SIP must supply, on fixed-line and fixed wireless networks, an eligible service that will enable a CSP to supply an end-user with superfast broadband and voice.

Proposed subsection (2) provides a limited exemption from subsection (1). Where a SIP supplies an eligible service that is also a declared service within the meaning of Part XIC of the CCA, and the SIP is subject to a standard access obligation (within the meaning of that Part) in relation to the service, then the SIP is exempt from subsection (1) if two criteria are met. The declared service must support the baseline speeds for qualifying carriage services and must enable a CSP to supply voice services to end-users (subsection 360Q(2A) clarifies that the voice obligation does not apply if the carriage service is supplied using a satellite). Subsection (2) recognises that SIPs may supply declared services and therefore should, if the declared service is fundamentally the same as the SIP service, only be subject to one supply obligation, being that under the CCA. Effectively the declared service is taken to be supplied in fulfilment of the SIP service supply obligation.

Consistent with the approach in proposed section 360P, under subsection 360Q(3) the SIP also is not required to comply with its supply obligations under subsection (1) in the circumstances (if any) specified in a ministerial determination made under subsection 360Q(4). Such a determination would be made by legislative instrument and could set out grounds when a request should not be considered to be reasonable. For example, a SIP could refuse to supply if it cannot obtain required approvals from a land owner or a local council.

Proposed subsection 360Q(5) provides that a SIP is required to also comply with any requirement determined by the Minister by legislative instrument under proposed subsection 360Q(8). Requirements specified by the Minister can be of general application or more specific application (for example, one or more service areas: proposed subsection (7)).  Proposed subsection (8) is included for the avoidance of doubt and clarifies that subsection 33(3A) of the Acts Interpretation Act 1901 (dealing with specification by matter or class) is not limited by subsection (7).

Proposed subsection 360Q(9) establishes how the terms and conditions of supply are determined. Key preconditions are that a SIP must have published the terms and conditions of supply on its website (as it would be required to do by new section 360X below), and the SIP has an obligation to supply an eligible service in response to a request from a CSP. If these preconditions are met, and a CSP asks the SIP to enter into an agreement that sets out terms and conditions that are the same as those published by the SIP, then the SIP must comply with the request.

As is the case under proposed section 360P, a SIP would only be required to comply with a request under subsection 360Q(9) if it has an obligation to comply. The obligation to comply may not arise if the request made by the CSP is not reasonable.

A note is included to remind readers of the requirements under proposed section 360X for SIPs to publish standard offers for the supply of eligible services.

Proposed subsection 360Q(10) is similar to subsection (9) but establishes that, if the supply of the eligible service is not covered by an agreement between the SIP and the CSP, then the SIP must comply with its obligation to supply the service on the terms and conditions that were published on its website at the time the request was made.

A note also reminds readers that proposed section 360X requires SIPs to publish standard offers for the supply of eligible services.

Proposed section 360R - Notification obligations of statutory infrastructure provider

Proposed section 360R deals with the notification obligations of SIPs when they need to cease operating in a nominated and designated service areas. It is intended to ensure that early notice is provided when the SIP, for whatever reason, can no longer continue as a SIP . Notice at the earliest stages will assist in identifying and establishing the best alternative SIP or putting in place arrangements for NBN Co to take on the role as the default SIP for the whole of Australia. The provision is a reserve mechanism to deal with the unlikely but possible scenario that an alternative SIP may need to leave the market.

Proposed subsection 360R(2) requires a SIP, as soon as practicable after becoming aware that it will no longer be able to fulfil its obligations in respect of its service area under proposed sections 360P or 360Q, to give written notice of the matter to the Secretary of the Department and the ACMA. If the SIP becomes aware of another carrier who is willing to become the replacement SIP for the area, the impacted SIP must also give written notice of the matter to the Secretary of the Department and the ACMA (subsection 360R(3)).

These provisions are intended to address circumstances where a SIP may be proposing to wind up its business or change its business operations. The SIP should provide ample time for a transition to a new provider. It may be possible for carriers to negotiate the transfer of the SIP obligations on a commercial basis. If such negotiations are not successful, or do not occur, or no other arrangements are put in place, then the relevant service area would revert to the general service area. As the default SIP with responsibility for the general service area, NBN Co would become the SIP for the service area.

These provisions apply when a SIP elects to give up its SIP status voluntarily and has some time to exit the market. However, a SIP may exit the market suddenly, for example, if it becomes bankrupt. In such cases the relevant service area would become part of the general service area and NBN Co would, as the default SIP, become responsible for meeting SIP obligations in the area. NBN Co may need to construct network infrastructure in the service area or obtain network capacity from another provider. This would mean that end-users in the area may experience some service disruption while new infrastructure is installed. It is envisaged that the Minister could determine timeframes for the connection of premises, and the supply of eligible services, that would apply in these circumstances. The Bill provides the Minister with such powers at proposed section 360U below. 

Proposed section 360S - Target for NBN Co

Proposed subsection 360S(1) sets out two statements of the intention of the Parliament in respect of NBN Co in fulfilling its SIP obligations under section 360P or 360Q.  These statements are expressed as targets for NBN Co to achieve. The targets are based on a target set out in the Government’s Statement of Expectations provided to NBN Co on 24 August 2016.

Proposed subsection 360S(1) states that it is Parliament’s intention that NBN Co should take all reasonable steps to ensure that its fixed-line networks are capable of being used to supply fixed-line carriage services with:

·          peak download transmission speeds of at least 50 megabits per second; and

·          peak upload transmission speeds of at least 10 megabits per second;

to at least 90 per cent of premises in the areas that, according to NBN Co’s website, are serviced by NBN Co’s fixed-line carriage services.

While the Government has set a baseline speed across all of NBN Co’s technology platforms of 25 megabits per second download transmission speed and 5 megabits per second upload transmission speed, it has set an additional target of 50 megabits per second download transmission speed and 10 megabits per second upload transmission speed for NBN Co’s fixed-line network. Nothing in the Bill is intended to prevent a SIP from offering faster or slower speeds as well, to meet consumer demand, but a SIP must provide the baseline speeds required under section 360P on reasonable request.

A similar Parliamentary intention statement is set out at proposed subsection 360S(2). The provision states that it is the Parliament’s intention that NBN Co should take all reasonable steps to ensure that NBN Co’s fixed-line networks (when considered together) are capable of being connected to at least 92% of Australian premises. This target is required to provide context for the target in proposed subsection (1). The higher speed target proposed for 90 per cent of premises that are serviced by NBN Co’s fixed-line carriage services only has force if it is clear how many premises could be connected to the NBN fixed-line network.

NBN Co indicated in its 2017 Corporate Plan (page 40) that it is aiming to provide its fixed-line network to 92 per cent of premises.

In fulfilling its obligations under section 360P or 360Q, NBN Co must have regard to the targets in subsections 360S(1) and (2).



 

Proposed Division 4 - Standards, benchmarks and rules

Proposed Section 360U - Standards and benchmarks

Proposed section 360U sets out the power of the Minister to impose standards and benchmarks that SIPs need to comply with in fulfilling their obligations. These powers are based on similar powers that exist in relation to the universal service obligation. Experience has shown that an obligation to connect premises to a network, and to supply services, may need to be subject to further requirements setting out the timeframes for connection and supply, and also for rectifying service faults and difficulties, and general network reliability measures. These are reflected, for example now, in the rules associated with the supply of standard telephone services. These obligations are best set out in legislative instruments rather than in legislation because of the level of detail that may be required and because they may need to be adapted over time in response to market circumstances.

The Minister will have powers to determine standards in relation to the matters set out in paragraphs 360U(1)(a)-(g). By operation of proposed subsection 360U(4), a statutory infrastructure provider is required to comply with any such standard in force.

Proposed paragraphs (a) - (g) make it clear that standards may deal with:

·          terms and conditions of the supply of an eligible service to a CSP (paragraph (a));

·          the reliability of the eligible services supplied to a CSP (paragraph (b));

·          the maximum period within which a SIP must begin to supply an eligible service (paragraph (c));

·          the maximum period within which a SIP must rectify a service fault or difficulty (paragraph (d));

·          any other matter concerning the supply, or proposed supply, of eligible services (paragraph (e));

·          the maximum period within which a SIP must connect premises in a service area to a qualifying telecommunications network (paragraph (f)); and

·          any other matter concerning the connection of premises to a qualifying telecommunications network (paragraph (g)).

Proposed subsection 360U(2) clarifies that a determination under subsection (1) can be of limited or general application. Proposed subsection (3) makes clear, for the avoidance of doubt, that subsection (2) does not operate, by implication, to limit subsection 33(3A) of the Acts Interpretation Act 1901 (dealing with specification by matter or class) .

Proposed subsection 360U(3A) enables standards determined under subsection (1) to make provision for, or in relation to, a matter by conferring a power on the ACMA to make a legislative instrument.  This is provided for administrative flexibility and could be used, for example, to empower the ACMA to prescribe formats for reports or specify more detailed requirements

A SIP must comply with a standard (subsection 360U(4)). Proposed subsection 360U(5) sets out an exception. A SIP is not required to comply with a standard if the standard is inconsistent with an access agreement it entered into with another party before the commencement of the standard, provided that the access agreement has not been varied at any time after the commencement of the standard. Proposed subsection 360U(5) ensures that existing agreements can continue to operate but also ensures that new or varied agreements must comply with the standard.

Proposed subsection 360U(6) confers power on the Minister to set, by legislative instrument, minimum benchmarks in relation to compliance by a SIP with a standard. A SIP must meet or exceed a minimum benchmark that is in place at any given time (subsection 360U(9)). For example, a benchmark may require that connection and fault rectification timeframes are met in 90 per cent of cases.

The benchmark setting instrument can be of general application or limited application (subsection 360U(7)). Proposed subsection (8) makes clear, for the avoidance of doubt, that subsection (7) does not operate, by implication, to limit subsection 33(3A) of the Acts Interpretation Act 1901 (dealing with specification by matter or class) .

Proposed subsection 360U(8A) enables benchmarks determined under subsection (6) to make provision for, or in relation to, a matter by conferring a power on the ACMA to make a legislative instrument. This is provided for administrative flexibility and could be used, for example, to allow the ACMA to prescribe formats for reports or specify more detailed requirements.

Proposed Section 360V - Rules

Proposed subsection 360V empowers the Minister to make rules (by legislative instrument) that must be complied with by SIPs.

The types of matters that a rule can be made about are:

·          processes for resolving complaints about eligible service supplied by a SIP to CSPs;

·          any other matter concerning the supply of such an eligible service to a CSP;

·          processes for resolving complaints about the connection of premises in the service area to a qualifying telecommunications network; and

·          any other matter concerning the connection of premises in a service area to a qualifying telecommunications network.

Rules determined under proposed subsection 360V(1) can confer power on the ACMA to make a legislative instrument in relation to a matter relevant to the Rules (proposed subsection 360V(1A)). For example, the ACMA may wish to prescribe formats for documents used in resolving complaints about the supply of an eligible service or the connection of premises to a qualifying telecommunications network.

A SIP must comply with rules made under subsection (1) (proposed subsection 360V(2)). However, a SIP is not required to comply to the extent that a rule is inconsistent with an access agreement that the SIP has entered into before the rule commences, provided that the access agreement has not been varied after the rule commenced (proposed subsection 360V(3)). Subsection (3) ensures existing access agreements can continue to operate but also ensures that new or varied agreements must comply with rules.

Proposed Division 5 - Publication of offers

Proposed section 360W - Publication of offer - connection of premises

Proposed subsection 360W(1) requires a SIP to publish, on its website, the price and non-price terms and conditions for connecting premises in the service area to a qualifying telecommunications network.  If price-related terms and conditions cannot be published, the SIP must publish its method of ascertaining the price for connecting premises.

One of the published conditions must be the maximum period within which the SIP will connect premises following a CSP’s request (proposed subsection (2). This is specified to ensure that this matter is included among the published terms and conditions, but it is envisaged that published offers would include all the terms and conditions necessary for a CSP to enter into an access agreement for the connection of premises. For the avoidance of doubt, subsection (3) makes clear that proposed subsection (2) does not limit proposed subsection (1).

Proposed subsection (4) provides that an offer published in accordance with subsection (1) has no effect to the extent it is inconsistent with either:

·          a standard determined by the Minister under proposed section 360U; or

·          a rule determined by the Minister under proposed section 360V.

This enables such Ministerial instruments to shape important aspects of offers in relation to connection, including price and non-price terms and conditions.

Proposed section 360X -  Publication of offer - supply of eligible services

Proposed section 360X largely mirrors section 360Q, but applies in relation to offers by the SIP to supply eligible services in fulfilment of its supply obligation as opposed to its connection obligation. Under proposed subsection 360X(2), the terms and conditions that a SIP must publish must include the maximum period within which the SIP must begin to supply a service following a request by a CSP, and the maximum period within which the SIP must rectify a fault or service difficulty. These are specified to ensure that they are included in the published terms and conditions, but it is envisaged that published offers would include all the terms and conditions necessary for a CSP to enter into an access agreement for the supply of the eligible service. For the avoidance of doubt, subsection (3) makes clear that proposed subsection (2) does not limit proposed subsection (1).

Subsection 360X(4) ensures that a SIP’s published offer has no effect to the extent to which it is inconsistent with a Ministerial standard or rule. As timeframes for service supply and fault rectification could be determined by the Minister through a standard under proposed section 360U, a SIP would need to amend its published offers to match any standard once made.

In the case of NBN Co, it is envisaged that NBN Co, if it wishes, will be able to meet its obligations as a SIP to publish offers under proposed sections 360W and 360X through the publication of its standard form of access agreement (see section 152CJA of the CCA) providing the standard form of access agreement covers the requirements of the SIP offers and specifies it is also being issued for the purpose of these provisions. The SIP arrangements are not intended to unnecessarily duplicate processes and documentation where effective processes and documents already are in place. That is, existing processes and documents that effectively meet SIP obligations can be used to fulfil SIP obligations.

Division 6 - Miscellaneous

Proposed section 360XA - Periodic compliance reports

Proposed subsection 360XA(1) confers powers on the Minister to make rules, by legislative instrument, requiring each SIP to give to the ACMA periodic reports about their compliance with new Part 19. This additional reporting obligation is designed to incentivise provider’s compliance and provide assurance to the public about the achievement of the important connection and supply outcomes set out in Part 19.

SIPs must comply with any rules made by the Minister (subsection (2)).

Proposed subsection (3) provides that a person is not excused from giving a report under rules under subsection (1) on the ground that the report might tend to incriminate the person or expose the person to a penalty. However, as the common law privilege against self-incrimination entitles a natural person to refuse to answer any question, or produce any document, if the answer or the production would tend to incriminate that person, subsection (4) provides that any information provided would not be admissible in evidence against the person, protecting the privilege in the case of natural persons.

Subsection 360XA(5) states, for the avoidance of doubt, that section 360XA does not limit Part 27 of the Tel Act. Part 27 confers information-gathering powers on the ACMA.

Proposed section 360Y - Building redevelopment projects etc.

Proposed section 360Y defines building redevelopment project . This is an important term in subsections 360H(4) and 360HA(3) and (4), which deal with provisional nominated service areas and anticipatory notifications for building redevelopment projects.

In broad terms, a project will be considered to be a building redevelopment project if it involves:

·          the significant refurbishment or repurposing of one or more buildings so as to bring into existence one or more building units;

·          the making available of any or all of those building units for sale or lease; and 

·          it satisfies any conditions set out in a Ministerial instrument made under proposed subsection (3).

All of the areas occupied by the building or buildings are the project area for the building redevelopment project.

A building redevelopment project would therefore encompass projects which change an existing building for a new purpose. For example, the term would cover converting an old warehouse into residential apartments or the subdivision of an existing house into two new flats.

Proposed section 360Z - Register of statutory infrastructure providers

Proposed section 360Z provides that the AMCA is required to maintain a Register of SIPs. That register must detail the names of each SIP, and the relevant service areas for each of those providers. The Register also has to include anticipatory notices given to the ACMA by SIPs under subsections 360HA(1), 360HA(2), 360HA(3) or 360HA(4). Those subsections include details of contracts carriers have entered into for real estate development projects or building redevelopment projects and, when it has installed the infrastructure, the carrier would become the SIP for the project area.

Notices given in relation to service areas have to include the geographic coordinates of the service area (subsection 360LA). Accordingly, the Register would include geographic information for each service area, enabling them to be readily mapped online.

The section also provides that the Register may be maintained by electronic means, and is to be made available for inspection on the ACMA’s website.

Proposed section 360ZA - Delegation

Proposed subsection 360ZA(1) provides that the Minister may delegate his or her powers under the 13 listed provisions to the ACMA. This is a broad ranging delegation which would be used to transfer administrative aspects of the SIP regime to the ACMA if considered appropriate, particularly after the arrangements have been bedded down. For example, the Minister could elect to delegate the determination of standards to the ACMA, or conditions on declarations by SIPs of nominated service areas.

In performing a delegated function or exercising a delegated power, the ACMA must comply with any written directions of the Minister (proposed subsection (2)).

Proposed subsection 360ZA(3)  provides that the Minister may delegate any or all of his or her powers under proposed subsection 360H(14) to a member of the ACMA, or a person who is an SES, or acting SES, staff member of the ACMA. The Minister’s powers under proposed subsection 360H(14) relate to making a variation of a nominated service area declaration made by a carrier. As such variations may be mechanistic, for example, being variations to adjust geographic coordinates if the boundaries of the project area change, subsection (3) provides flexibility in the administration of the SIP arrangements.

In exercising a delegated power, the delegates must comply with any written directions of the Minister (proposed subsection (4)).

Part 2 - Repeals

Carrier Licence Conditions (NT Technology Services Pty Ltd) Declaration 2014

Item 8 - The whole of the Declaration

Item 8 repeals in full the Carrier Licence Conditions (NT Technology Services Pty Ltd) Declaration 2014.

Carrier Licence Conditions (OptiComm Pty Ltd) Declaration 2013

Item 9 - The whole of the Declaration

Item 9 repeals in full the Carrier Licence Conditions (OptiComm Pty Ltd) Declaration 2013 .

Carrier Licence Conditions (Pivit Pty Ltd) Declaration 2013

Item 10 - The whole of the Declaration

Item 10 repeals in full the Carrier Licence Conditions (Pivit Pty Ltd) Declaration 2013 .

Carrier Licence Conditions (Urban Renewal Authority Victoria t/a Places Victoria Pty Ltd) Declaration 2014

Item 11 - The whole of the Declaration

Item 11 repeals in full the Carrier Licence Conditions (Urban Renewal Authority Victoria t/a Places Victoria Pty Ltd) Declaration 2014 .

The four declarations listed above are no longer required because once Part 1 comes into effect, the real estate development areas covered by the declarations will have, by operation of proposed subsection 360J, become nominated service areas.  If the declarations were retained, they would create duplicate regulatory connection and supply obligations on these carriers. As such, it is necessary to revoke the declarations.

Notwithstanding the revocation of the declarations, the service areas currently set out in the declaration are able to be varied by the Minister under section 360H.

 



 

Schedule 4 Funding of fixed wireless broadband and satellite broadband

Item 1A - Before paragraph 151BU(4)(e)

Item 1A inserts two new paragraphs 151BU(4)(dc) and 151BU(4)(dd) into the CCA. The paragraphs have the effect of enabling the ACCC to require carriers and CSPs to keep and provide records regarding the operation of Part 3 of the Tel Act (which deals with the funding of fixed wireless and satellite broadband) and the operation of the Telecommunications (Regional Broadband Scheme) Charge Act 2017 (Charge Act).

This information will facilitate the ACCC’s five-yearly advice to the Minister regarding the base and administrative cost components if the charge, required under clauses 13 and 17 of the proposed Charge Bill. While preparing this advice, the ACCC will need to consider the size and character of the telecommunications market in order to assess whether the components are sufficient to meet eligible funding recipients’ fixed wireless and satellite costs as well as the ACMA’s and the ACCC’s administrative costs.

Item 1B - Before subparagraph 151BUA(2)(b)(iii)

Item 1B inserts two new subparagraphs 151BUA(2)(b)(iic) and 151BUA(2)(b)(iid) into the CCA. The subparagraphs have the effect of enabling the ACCC to give the public access to reports provided by carriers and CSPs under section 151BU of the CCA, if it is satisfied disclosure would facilitate the operation of Part 3 of the Tel Act (which deals with the funding of fixed wireless and satellite broadband) and the operation of the proposed Charge Act.

The ability to publicise the reports where appropriate will increase the transparency of the Scheme.

Item 1C - Before subparagraph 151BUB(2)(b)(iii)

Item 1B inserts two new subparagraphs 151BUB(2)(b)(iic) and 151BUB(2)(b)(iid) into the CCA. The subparagraphs have the effect of enabling the ACCC to direct carriers and CSPs to give the public access to reports provided under section 151BU of the CCA, if it is satisfied disclosure would facilitate the operation of Part 3 of the Tel Act (which deals with the funding of fixed wireless and satellite broadband) and the operation of the proposed Charge Act.

Item 1D - Before subparagraph 151BUC(2)(b)(iii)

Item 1B inserts two new subparagraphs 151BUC(2)(b)(iic) and 151BUC(2)(b)(iid) into the CCA. The subparagraphs have the effect of enabling the ACCC to direct carriers and CSPs to give the public periodic access to reports provided under section 151BU of the CCA, if it is satisfied disclosure would facilitate the operation of Part 3 of the Tel Act (which deals with the funding of fixed wireless and satellite broadband) and the operation of the proposed Charge Act.

Telecommunications Act 1997

Item 1 - Section 7

Item 1 inserts a new definition into section 7 of the Tel Act. The term Federal Circuit Court means the Federal Circuit Court of Australia. Under proposed sections 102E and 102N of Schedule 4 to the Bill, the ACMA can recover unpaid charge debts and late payment penalties in the Federal Court, the Federal Circuit Court or a State or Territory Court with appropriate jurisdiction.

Item 2 - Paragraphs 58(2)(a) and (b)

Item 2 makes a modification to paragraph 58(2)(a) and (b) of the Tel Act, as a consequence of the change made by item 5. The item inserts a new reference to subsection 72(2B), being a new ground upon which a carrier licence may be cancelled.

Item 3 - After subsection 58(4A)

Item 3 inserts a new subsection 58(4B) and represents a consequential change as a result of the introduction of the new charge (as introduced by the Charge Bill). This new provision describes when a person will be considered to be disqualified as a result of not paying the due charge.

Subsection 58(1) enables the ACMA to refuse to grant a carrier licence to an applicant if the applicant is disqualified immediately before the ACMA makes its decisions on the application. Subsection 58(4) sets out the circumstances for when an individual is disqualified for failure to pay the universal service charge. The proposed amendments to subsection 58(4) make clear that this subsection is to apply to the new charge. The proposed new subsection 58(4B) is intended to operate concurrently with subsection 58(4) and sets out the circumstances when an individual is disqualified for failure to pay the new industry charge proposed to be imposed by the Charge Bill.

These amendments will enable the ACMA to refuse to grant a carrier licence if at the appropriate point in time the individual has been disqualified due to a failure to pay either the universal service charge or the new charge.

Item 4 - Paragraph 58(5)(a)

Item 4 makes a modification to paragraph 58(5)(a) of the Tel Act, as a consequence of the change made by item 5. The item inserts a new reference to subsection 72(2B), being a new ground upon which a carrier licence may be cancelled.

This amendment ensures that subsection 58(5) - which applies to when a partnership is disqualified - will also operate with respect to a disqualification arising from the failure to pay the new charge.

Item 5 - After subsection 72(2A)

Section 72 enables the ACMA to cancel a carrier licence held by a carrier under various circumstances. Item 5 is a consequential amendment arising from the introduction of the new charge - a new subsection 72(2B) is inserted.  The proposed amendment will enable the ACMA to cancel a carrier licence if a carrier fails to pay in full by the due date the new charge proposed to be imposed by the Charge Bill.

Item 6 - Subsection 570(4)

Item 6 repeals subsection 570(4), and substitutes a provision that provides that the pecuniary penalty payable under subsection 570(1), by a person other than a body corporate, is not to exceed:

(a)     10,000 penalty units for each contravention of subsection 68(1) or (2) that relates to the carrier license condition set out in Part 1 of Schedule 1, where that condition relates to subsection 97(1) or 97(1A) of the TCPSS Act.

(b)    $50,000 for each contravention, in any other case.

Subsections 97(1) and 97(1A) refer to provisions set out in Item 13 that prohibit a carrier from entering into a scheme for the sole or dominant purpose of avoiding paying the charge or obtaining the benefit of the transitional exemption for the first 25,000 residential and small business chargeable premises on a carrier’s network.

Item 7 - After paragraph 1(ja) of Schedule 4

Clause 1 of Schedule 4 to the Tel Act sets out the kinds of decisions that may be subject to reconsideration by the ACMA.

Item 7 amends the current list by adding new paragraphs (jaa) and (jab), covering two additional kinds of decisions:

·          under new subsection 102N(3), to remit the whole or part of a late payment penalty that a person is liable to pay in respect of the new charge  amount that remains unpaid.

·          under new subsections 102Z(2) and 102ZA(2), to make a notifiable instrument.

New subsections 102N(3), 102Z(2) and 102ZA(2) are set out in Item 13.

Telecommunications (Consumer Protection and Service Standards) Act 1999

Item 8 - Section 4 (simplified outline)

Section 4 of the TCPSS Act sets out the simplified outline for that Act.

Item 8 amends the simplified outline in section 4 of the TCPSS Act by inserting, before dot point 6, several other new dot points explaining that:

(a)     the Secretary is responsible for contracts and grants relating to fixed wireless and satellite broadband services;

(b)    the ACMA is responsible for assessing and collecting the new charge; and

(c)     the proceeds of the new charge will be used to pay contractors and grant recipients and offset designated administrative costs.

Item 9 - Subsection 5(2) (definition of contractor )

Item 10 - Subsection 5(2) (definition of grant recipient )

These items repeal the definitions of ‘contractor’ and ‘grant recipient’. The definitions are relocated, by Item 11, to a new consolidated definition section, new section 8A.

Item 11 - Section 8A Definitions

Item 11 is a new provision that has centrally located the definitions (in modified form) of ‘contractor’ and ‘grant recipient’.

Item 12 - Subsections 14(2) and (3)

Item 12 amends subsections 14(2) and (3), by omitting the words ‘this Act’ and substituting the words ‘this Part’. This ensures that the definitions of contractor and grant recipient for public interest telecommunications (to which Part 2 of the TCPSS Act relates) are distinguished from the specific definitions of contract and grant recipient used in new Part 3 of the TCPSS Act.

Item 13 - After Part 2

This item inserts a new Part 3 into the TCPSS Act. There are nine new divisions comprising the proposed Part.

Part 3 Funding of fixed wireless broadband and satellite broadband

Division 1 Introduction

New section 75 - Simplified outline of this Part

New section 75 of the TCPSS Act sets out the si mplified outline for this Part, explaining that:

(a)     the Secretary is responsible for contracts and grants relating to fixed wireless and satellite broadband services;

(b)    the ACMA is responsible for assessing and collecting the new charge; and

(c)     the proceeds of the new charge  will be used to pay contractors and grant recipients and offset designated administrative costs.

New section 76 - Definitions

New section 76 sets out the key definitions for new Part 3.

The term administrative cost instalment of charge has the meaning given by subsection 102D(5).

The ordinary meaning of the term, amount has been modified to include a nil amount. This is important as it is possible for a charge liability to be nil.

The term annual administrative cost amount , for an eligible financial year, has the meaning given by section 14 of the Charge Act.

The term annual base amount , for an eligible financial year, has the meaning given by new section 10 of the Charge Act.

The term annual chargeable premises amount , for a financial year, has the same meaning given by new section 9 of the Charge Act .

The term associate has the same meaning as in Part 8 of the Tel Act. Section 152 in Part 8 of the Tel Act currently provides an expansive definition of an associate of a person who is in a position to exercise control of a telecommunications network or a company. Under the changes to Part 8 set out in Schedule 2 to this Bill, section 152 will only apply to networks that came into existence before 1 July 2018. Proposed new section 155A (see item 56 of Schedule 2) will provide a matching definition of associate for local access lines that come into existence on or after 1 July 2018.  

The term base instalment of charge has the meaning given by subsection 102D(5).

The term broadcast television stream means services that have a continuous stream of program material that is identical to the program material provided by either a licensed television broadcasting service or a national television broadcasting service. The terms licensed television broadcasting service and national television broadcasting service are separately defined in proposed section 76.

A licensed television broadcasting service is a broadcasting service that provides television programs and is either provided under a licence allocated by the ACMA or a class license determined by the ACMA. Examples include commercial and community television broadcasting services.

A national television broadcasting service is a broadcasting service that provides television broadcasting and is a national television broadcasting service within the meaning of the Broadcasting Service Act 1992 . Examples include the Australian Broadcasting Corporation (ABC) and the Special Broadcasting Service Corporation (SBS).

The term charge means the charge imposed by the Charge Act.

The term chargeable premises associated with a local access line of a person has the meaning given by section 93.

The term charge offset certificate means a certificate issued under section 98.

The term contractor has the meaning given by section 80.

The term declared service has the same meaning as in Part XIC of the CCA.

The term designated administrative costs covers the ACMA and the ACCC’s employment costs, expenses, any other costs, and other obligations incurred by the ACMA and ACCC in connection with their functions or powers, including costs incurred enforcing the Scheme. Designated administrative costs do not include amounts incurred under contracts or by way of grants made under section 80.

The term designated broadband service has the meaning given by section 76AA.

The term eligible financial year has the meaning given by section 79.

The term eligible funding recipient has the meaning given by section 78.

The term eligible service has the same meaning as in section 152AL of the CCA

The term exempt line has the meaning given by section 96.

The term exempt premises has the meaning given by section 95.

The term grant recipient has the meaning given by section 80.

The term instalment of charge has the meaning given by subsection 102D(5).

The term local access line has the same meaning as in section 76A.

The term month means calendar month.

The term multi-unit building is defined as meaning either a building that has 2 or more units for occupation as a place of residence or business, for example an apartment block; or a building in a complex, where each building has 2 or more units for occupation as a place of residence or business, for example a shopping complex.

The term NBN Co has the same meaning as in the National Broadband Network Companies Act 2011.

The term nominal funding entitlement of a person for a financial year, means the amount specified in a nominal funding entitlement certificate held by the person in relation to the financial year.

The term nominal funding entitlement certificate means a certificate issued under section  86.

The term potentially chargeable premises has the meaning given by section 94.

The term potentially concessional premises has the meaning given by section 96A. Subsection 100(4) sets out carriers’ reporting requirements for potentially concessional premises. A note is also included to refer readers to subsection 100(5), which provides that if a person reports a premises as a potentially concessional premises but did not know and could not with reasonable diligence have ascertained that the premises was not a potentially concessional premises, then the premises is taken to be a potentially concessional premises in relation to the person for the month.

The term Regional Broadband Scheme Special Account means the Regional Broadband Scheme Special Account established by section 89.

 

The term residential customer has the same meaning as in Part 8 of the Tel Act. This definition is to be inserted into Part 8 by item 26 of Schedule 2 to this Bill.

The term satellite broadband service has the meaning given by section 77.

The term s mall business customer means a customer who either:

(a)     is a small business employer within the meaning of the Fair Work Act 2009 ; or

(b)    has a business with no employees.

The definition clarifies that for the purposes of (a), it is assumed that each reference in section 23 of the Fair Work Act 2009 to a national system employer is a reference to an employer within the ordinary meaning of the term.

The term superfast carriage service is used in the definition of designation broadband service (see new section 76AA). ‘Superfast carriage service’ means a carriage service, where:

(a)     the carriage service enables end-users to download communications; and

(b)    the download transmission speed of the carriage service is normally 25 megabits per second or more; and

(c)     the carriage service is supplied using a line to premises occupied or used by an end-user.

The word ‘normally’ is akin to ‘usually’; it recognises that circumstances may arise that temporarily displace usual download transmission speeds.

A note is included to clarify that the line does not need to be physically connected to the premises because ‘using’ means use in isolation or in conjunction with one or more other things, as established by subsection 5(1) of the TCPSS Act and section 24 of the Tel Act (when read together with section 18A of the Acts Interpretation Act 1901 ). It is the intention that it is the carrier that provides the last part of the connection (whether physical or non-physical) of the line to the premises that are subject to the new charge.

It is not intended that the charge should cover carriage services supplied using predominantly fixed wireless or mobile technology. The charge is intended to apply to superfast carriage services supplied over fixed line technologies like fibre-to-the premises (FTTP), fibre-to-the node (FTTN), fibre-to-the-basement (FTTB), fibre-to-the-curb (FTTC) and hybrid-fibre coaxial (HFC). However, the extended meaning of use does mean that paragraph (c) covers not only a carriage service supplied using a line that is connected directly to a premises but also, for example, a carriage service supplied using a line that runs most of the way to the premises but is then connected to the premises over a short distance using wireless or mobile technology.

New section 76A - Local access line

New section 76A comprises six subsections. Subsection (1) provides that a local access line is a line that is part of the infrastructure of a local access network. Lines on the customer side of the network boundary are usually considered to be customer cabling and not part of a telecommunications network and this is reflected in subsection (2), which provides that a line will not be taken to form part of a local access line if it is on the customer side of the boundary of a telecommunications network.

However, subsection (4) provides a qualification to the rule in subsections (1) and (2) and in effect, deems lines which would otherwise be considered customer cabling to be local access lines in cases where the line is in a multi-unit building and is used to supply carriage services to a unit in the building. This is intended to ensure that carriers that circumvent the boundary between a telecommunications network and customer cabling are caught by the charge (presuming they meet the criteria for chargeable premises associated with a local access line).

Subsection (5) provides that the boundary of a telecommunications network is to be determined in the same manner in which it is determined under section 22 for the purposes of sections 20, 21 and 30 of the Tel Act. Subsection (6) provides that the term ‘local access network’ for the purposes of new section 76A has the meaning generally accepted within the telecommunications industry. It is not intended that transmission lines would be caught by the charge.

New section 76AA - Designated broadband services

Designated broadband services are a key element of ‘potentially chargeable premises’ (see new section 94). This section defines a ‘designated broadband service’ excluding certain carriage services from the definition, and empowers the Minister by legislative instrument to exclude a class of carriage services from the definition.

Subsection 76AA(1) provides that a designated broadband service means a carriage service supplied using a local access line, where:

(a)     the carriage service enables end-users to download communications; and

(b)    the local access line is part of the infrastructure of a telecommunications network in Australia; and

(c)     the local access line is technically capable of being used to supply a superfast carriage service.

The use of ‘technically capable’ in paragraph (c) has been specifically chosen to communicate that it is the speed that the line is technically capable of providing, rather than the speed that the consumer experiences, that is relevant to determining whether the line is capable of being used to supply a superfast carriage service. For example, a fibre-to-the premises (FTTP) line that is technically capable of download speeds exceeding 100Mbps is technically capable of being used to supply a superfast carriage service even if the consumer has only ordered a 12Mbps retail broadband service or normally experiences download speeds of less than 25Mbps because of congestion on the network. It is expected that all FTTP, FTTN, FTTB, FTTC and HFC networks are ‘technically capable’ of being used to supply a superfast carriage service.   

Since the expression ‘technically capable’ has been created for this specific purpose, a note is included to direct readers to new section 102ZH, which provides that it should only be used to determine the meaning of ‘capable’ in a provision of this new Part of the TCPSS Act.

Any attempt to artificially lower a line’s usual technical capability below 25Mbps would be considered an attempt to avoid the charge and should trigger the anti-avoidance prohibition in new section 97.

Subsection 76AA(1) also provides that designated broadband service does not include voice only telephony services, carriage services dedicated to broadcast television streams, and carriage services that belong to a class determined by the Minister under subsection 76AA(2). Voice-only telephone services and television services are excluded from the definition because it is intended that the charge apply only to broadband services.

Subsection 76AA(2) gives the Minister power to determine, by legislative instrument, one or more classes of carriage service to be excluded from the definition of designated broadband service under paragraph (1)(f). This is intended to give the Minister flexibility to alter the definition to ensure it continues to apply only to broadband services as technological changes arise.

 

A note is included to direct readers to section 102ZFB, which sets out special disallowance provisions that cause a determination under subsection (2) to not take effect until after the disallowance period has elapsed. This means people will not be affected by the Minister’s change to the tax base until after the Parliament has had time to scrutinise the change.

New section 76AB - Fixed wireless broadband service

This section outlines the definition of the term fixed wireless broadband service for the purposes of this Part. A fixed wireless broadband service is a carriage service that:

(a)     is supplied using a fixed wireless technology platform, and

(b)    is marketed to customers as a fixed wireless service, and

(c)     enables end-users to download communications, and

(d)    has a peak download transmission speed of at least 25 megabits per second (Mbps), and

(e)     has a peak upload transmission speed of at least 5Mbps, and

(f)     is not a public mobile telecommunications service, and

(g)    is a listed carriage service, and

(h)    the conditions (if any) determined under subsection (2) are satisfied.

The peak speeds mentioned in paragraphs (1)(d) and (1)(e) are baseline speeds. They are consistent with the speeds the Government expects NBN Co to supply over the national broadband network (NBN), as set out in the Statement of Expectations issued on 24 August 2016, [27] and also with the proposed SIP speeds under Schedule 3 to this Bill.

Subsection 76AB(2) provides that the Minister may determine conditions for the purposes of paragraph (1)(h) by legislative instrument.

Subsection 76AB(3) provides that fixed wireless technology platform has the meaning generally accepted within the telecommunications industry, for the purpose of this section.

New section 77 - Satellite broadband service

This section outlines the definition of the term ‘satellite broadband service’ for the purposes of this Part. It means a carriage service that:

(a)     is supplied using a satellite; and

(b)    enables end-users to download communications; and

(c)     has a peak download transmission speed of at least 25Mbps, and

(d)    has a peak upload transmission speed of at least 5Mbps, and

(e)     is not a public mobile telecommunications service; and

(f)     is a listed carriage service; and

(g)    satisfies any conditions (if any) determined under subsection (2).

The peak speeds mentioned in paragraphs (c) and (d) of the definition are baseline speeds. They are consistent with the speeds the Government expects NBN Co to supply over the NBN, as set out in the Statement of Expectations issued on 24 August 2016, [28] and also with proposed SIP speeds under Schedule 3 to this Bill.

New subsection 77(2) outlines that the Minister may, by legislative instrument, determine one or more conditions for the purposes of paragraph (1)(g).

 

New section 78 - Eligible funding recipient

New subsection 78(1) provides that an ‘eligible funding recipient’ means a carrier that is an NBN corporation or a carrier or carriers determined by the Minister to be an ‘eligible funding recipient’.

New subsection 78(2) provides that the Minister may determine, by legislative instrument, one or more carriers to be eligible funding recipients. This gives the Minister flexibility to extend the opportunity of receiving funding under a new section 80 contract or grant to other fixed wireless and satellite providers if, for example, fixed wireless and satellite infrastructure becomes contestable.

New section 79 - Eligible financial year

New subsection 79(1) defines the term, ‘eligible financial year’ for the purposes of new Part 3 to be the financial year beginning on 1 July 2018 or a later financial year.

New section 79A - Premises

The concept of ‘premises’ is one of the fundamental concepts of the charge. It is a central component of ‘chargeable premises associated with a local access line’ (see new section 93), which are the type of premises that attract the charge. Tying the charge base to premises rather than just broadband services is intended to give industry clarity about the type of ‘thing’ that attracts the charge.

The term ‘premises’ is intended to have its ordinary meaning, however, this ordinary meaning is affected by new section 79A, which empowers the Minister to determine that:

(a)     if a location satisfies one or more specified conditions, the location is taken to be premises for the purposes of new Part 3; and

(b)    if a location satisfies one or more specified conditions, the location is taken not to be premises for the purposes of new Part 3.

The determination would be by way of legislative instrument and it would be subject to a delayed commencement by operation of section 102ZFB.

Some examples of specified conditions that may cause a location to not be a premises include where there was a public mobile telecommunications tower, traffic control equipment, bus stop, metering point or public alarm or security system at the location.

Subsection 79A(3) states that a determination made under subsection 79A(1) or (2) must be of a legislative character. This is a declaratory statement.

Division 2 Contracts and grants relating to fixed wireless broadband and satellite broadband

New section 80 - Contracts and grants

The purpose of the Regional Broadband Scheme (the Scheme) is to sustainably fund the net costs of NBN Co’s fixed wireless and satellite networks, which provide access to essential broadband services predominantly in regional Australia. This section establishes the contracts and grants that will be used to provide this funding. 

Eligible funding recipients that have a section 80 contract or grant will receive a nominal funding entitlement certificate each year that sets out the amount of money they can expect to receive from the Commonwealth (see new section 86). They can also apply for an offset certificate to offset their nominal funding entitlement against their charge liability (see new section 98).

New subsection (1) provides for the Secretary to enter into a contract or make a grant of financial assistance on behalf of the Commonwealth to an eligible funding recipient in relation to:

(a)     the connection of premises to a telecommunications network or the supply of eligible services in order that a carriage service provider (CSP) can provide fixed wireless or satellite broadband services to an end-user at the premises, or

(b)    facilities used or proposed to be used to supply a fixed wireless or satellite broadband service, or

(c)     matters incidental or ancillary to the above.

Under new subsection (2), a person who enters into a contract with the Secretary is a contractor for the purposes of the Part. Similarly, under new subsection (3), a person who receives a grant of financial assistance from the Secretary is a grant recipient.

Subsections (4) and (5) provide that the contracts and grants can provide for reimbursement (in whole or part) of costs or expenses. Subsections (4) and (5) do not limit the terms of contracts or grants the Secretary can enter into under subsection (1) (refer subsection (6)). These provisions make it clear that eligible funding recipients can receive funding for fixed wireless and satellite costs incurred before and after the commencement of this Act.  

Subsection (7) clarifies that the use of the word ‘Regional’ in the title of the Charge Act , the name of the Regional Broadband Scheme Special Account or section 92A do not limit subsection 80(1). While NBN Co’s fixed wireless and satellite networks predominantly serve regional Australia, there are some non-regional areas that also receive these services. NBN Co and other eligible funding recipients can receive funding for fixed wireless and satellite infrastructure, facilities and incidentals wherever they are provided in Australia, not just in regional areas.

New section 81 - Terms and conditions of grants

Apart from the condition to comply with a ministerial determination under section 82, new subsections 81(1) and (2) require that the terms and conditions of section 80 grants are set out in a written agreement between the Commonwealth and the grant recipient. New subsection 81(3) provides that the written agreement will be entered into by the Secretary on behalf of the Commonwealth.

Section 82 makes it a condition of a section 80 contract or grant that contractors and grant recipients comply with Ministerial determinations about standards, rules and benchmarks. This condition applies to all contractors and grant recipients for the purposes of this Part so it does not need to be set out separately in writing.

New section 82 - Condition about compliance with Ministerial determination

The intention of this section is to make clear that all contractors and grant recipients for the purpose of this Part are to comply with standards, rules and benchmarks set by the Minister, insofar as they relate to their contract or grant.

New subsection 82(1) makes it a condition of section 80 contracts and 81 grants that the contractor or grant recipient complies with all ministerial determinations made under new subsection 82(2) so far as the determination applies to those contracts or grants. New subsection 82(2) provides the Minister with the power to make, by legislative instrument, determinations that set out standards, rules and minimum benchmarks. This determination may be of general or limited application (refer new subsection 82(3)).

New subsection 82(3) does not limit subsection 33(3A) of the Acts Interpretation Act 1901 , which clarifies that legislative and notifiable instruments do not need to cover all of the particular matters to which they can relate, but can be made in respect of some of those matters only (refer new subsection 82(4)).

Section 82 does not limit, by implication, the terms and conditions of a new section 80 contract or a new section 81 agreement (refer new subsection 82(5)).        

Any term or condition of a section 80 contract or grant which is inconsistent with a ministerial determination will have no effect to the extent of the inconsistency (refer subsection (6)). However, new subsections (8) to (10) effectively prevent a ministerial determination imposing conditions that:

·          override a term or condition that gives a contractor or grant recipient a right to adjustment of payment for a change in the services, facilities or customer equipment to be supplied by the contractor or grant recipient under a s80 contract or grant, or

·          specify the price, or a method of ascertaining the price, for any of the services, facilities or customer equipment to be supplied by a contractor or grant recipient in accordance with a section 80 contract or grant.

This effectively quarantines matters of price from the ministerial determinations under new subsection 82(2) to give industry certainty that the price terms of section 80 contracts and grants will be dealt with between the Secretary (on behalf of the Commonwealth) and contractors or grant recipients.

New section 83 - Secretary has powers etc. of the Commonwealth

New subsection 83(1) specifies that the Secretary, on behalf of the Commonwealth, has all the rights, responsibilities, duties and power of the Commonwealth relating to the Commonwealth’s capacity as a party to a contract or the grantor of a grant under new section 80.

New subsection 83(2) sets out a number of specific functions of the Secretary in respect of the new section 80 grants (and these specified are not to limit the intended broad scope of power conferred on the Secretary by subsection 83(1)):

·          An amount payable by/to the Commonwealth under a section 80 contract or grant is to be paid by the Secretary on behalf of the Commonwealth.

·          An amount payable to the Commonwealth under a section 80 contract or by way of a repayment of the whole or part of a grant is to be paid to the Secretary on behalf of the Commonwealth.

·          The Secretary may commence an action or proceeding on behalf of the Commonwealth in relation to a matter that concerns a section 80 contract or grant (refer paragraph 83(2)(e)). For example, the Secretary may take legal action to seek repayment of money paid to a grant recipient or payment of money owed by a contractor to the Commonwealth.

New section 84 - Conferral of powers on the Secretary

New section 84 outlines that the Secretary may exercise a power conferred on the Secretary by a contract or grant agreement entered into under new section 80.

New section 85 - Monitoring of performance

To enhance transparency and accountability with respect to the new section 80 contract and grant arrangements, new subsection 85(1) requires that the Secretary monitor and report to the Minister on all significant matters relating to the performance of contractors and grant recipients each financial year. The report prepared by the Secretary under this section must then be included in the Department’s annual report prepared in accordance with section 46 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) for the financial year (refer new subsection 85(4)).

New subsection 85(2) sets out the matters which must be included in the report, including for each contractor and grant recipient:

·          the adequacy of their compliance,

·          any notice of breach of contract or grant,

·          any remedial action taken by the Secretary during the year and the result of that action.

The Secretary may include any other significant or relevant matters in the report (refer new subsection 85(3)).

New section 86 - Nominal funding entitlement certificate

The nominal funding entitlement certificate (NFEC) establishes an estimate of how much money the Commonwealth owes an eligible funding recipient under a new section 80 contract or grant each financial year. The estimate is based on the balance of the Regional Broadband Scheme Special Account (established under new section 89 (the Special Account)), since it is intended that all the funding eligible funding recipients receive will be paid from the proceeds of the charge.

New subsection 86(1) defines funding financial year to mean the second eligible financial year or a later eligible financial year for the purpose of section 86. The ACMA will collect the charge one year in arrears (refer new Division 7, sub-divisions B and C), so eligible funding recipients will also receive their funding one year after the charge is collected. This is the basis for calling the second eligible financial year and each financial year after that the ‘funding financial year’ for the purposes of this section.

New subsection (2) outlines that, if a carrier is an eligible funding recipient at 1 February in a funding financial year, the Secretary must issue the carrier an NFEC specifying its nominal funding entitlement amount for the funding financial year. The Secretary must do this by 31 March in the funding financial year and before making a decision regarding the eligible funding recipient’s application for a charge offset certificate. This is because the offset certificate depends on the NFEC to determine the amount of funding an eligible funding recipient can offset against its charge liability (see further discussion about new section 98 below). Together, the two certificates determine whether there is an amount of funding still owing to the eligible funding recipient after the offset is complete. For a timeline of administrative events related to the Scheme, see Figure 4 below.

It is intended that the base amount of the charge will only be used to pay eligible funding recipients, and the administrative cost amount of the charge will only be used to pay the ACMA and ACCC’s designated administrative costs (or, if appropriate, refunded to industry in circumstances where there is a surplus). The amount of funding available to eligible funding recipients each year is limited to the amount of money in the Special Account that is attributable to the base amount of the charge.

To this end, subsection (4) requires the Secretary to make an estimate of so much of the balance of the Special Account as is attributable to the annual base amount (see clause 10 of the Charge Bill) or base instalment of the charge as at 7 May in the funding financial year before issuing NFECs(see new subsection 102D(5)). The Secretary must have regard to this estimate in issuing NFECs. By 7 May of the funding financial year, the total amount of charge attributable to the base amount will be credited to the Special Account - so the Secretary will have sufficient information to make his/her estimate and decision (see new Division 7, subdivision C for charge due dates).

Subsection 86(6) requires the Secretary to provide a copy of the NFECs to the ACMA .

To maximise transparency of the entities and value of any certificates issued by the Secretary under new section 86, copies of all nominal funding entitlement certificates issued must be published on the Department’s website (refer subsection 86(7)). It is expected that the certificates would be published promptly after issuance.

NFECs are entity-specific and cannot be transferred (refer subsection 86(8)).

New section 87 - Secretary to comply with rules

Under new section 87 the Minister may, by legislative instrument, make rules for the Secretary to comply with in relation to the performance of their functions, or the exercise of their powers, under this Division. The Secretary must comply with any rules in force.  This power is not expected to be exercised often.

New section 88 - Executive power of the Commonwealth

New section 88 makes clear that Division 2 of this Schedule does not, by implication, limit the executive power of the Commonwealth.

Division 3 —Regional Broadband Scheme Special Account

New section 89 - Regional Broadband Scheme Special Account

Increasing the transparency of fixed wireless and satellite funding is one of the main purposes of the Regional Broadband Scheme. To facilitate this goal, a Special Account is to be established so that affected carriers can see how much money is being raised by the charge and where it is going. The Special Account will effectively quarantine proceeds raised by the charge so that they can only be used to pay eligible funding recipients and the ACMA and ACCC for designated administrative costs.

New section 89 establishes the Regional Broadband Scheme Special Account (Special Account), which is a Special Account for the purposes of the PGPA Act. The Secretary will administer the Special Account.

New section 90 - Credits to the Account

New section 90 establishes that the following amounts must be credited to the Special Account:

(a)     an amount equal to an amount paid to the Commonwealth by way of charge or an instalment of charge; and

(b)    an amount equal to an amount paid to the Commonwealth under a section 80 contract; and

(c)     an amount equal to an amount paid to the Commonwealth by way of damages or compensation for a breach of a section 80 contract; and

(d)    an amount equal to an amount paid to the Commonwealth by way of the repayment of the whole or a part of a section 80 grant.

A note is included to remind readers that an Appropriation Act may contain a provision to the effect that, if any of the purposes of a special account is a purpose that is covered by an item in the Appropriation Act (whether or not the item expressly refers to the special account), then amounts may be debited against the appropriation for that item and credited to that special account.

New section 91 - Distribution of whole or part of balance of the Account

New section 91 allows the Secretary to distribute to carriers the whole or part of the Special Account’s balance as is attributable to the charge amount paid by them, if rules are in force under subsection (2). Subsections (2) and (3) allow the Minister to, by legislative instrument, determine rules that must be complied with by the Secretary in relation to the exercise of these powers. This proposed power will appropriately ensure there are limits on the Secretary’s power to distribute taxation revenue and give the Government (with appropriate Parliamentary oversight) the opportunity to provide input into the Secretary’s.

New section 92 - Purposes of the Account 

New section 92 outlines the following four purposes of the Special Account:

(a)     to pay amounts payable by the Commonwealth under a contract entered into under new section 80;

(b)    to make grants under new section 80;

(c)     to make distributions in accordance with section 91; and

(d)    to pay refunds under new section 99 or 102J.

A note is also included to direct readers to section 80 of the PGPA Act, which deals with special accounts established by an Act.

New section 92A - Offset for designated administrative costs - transfer to general CRF

New section 92A enables the Secretary to direct, by notifiable instrument, that funds be debited from the Special Account to pay for the ACMA and ACCC’s costs for performing their functions under the Scheme.

New subsection 92A(2) limits the amount of funds debited to the lesser of:

(a)     the total of the relevant Budget amounts

(b)    the total of the charge collected as is attributable to the annual administrative cost ount for a financial year (see clause 14 of the Charge Bill) or an administrative cost instalment of charge (see new subsection 102D(5)) .

The relevant Budget amounts are:

(a)     the amount for Regional Broadband Scheme—Departmental expenses (2016-17) shown in the table that relates to the ACCC’s Entity 2016-17 measures since Budget in the Treasury’s Portfolio Additional Estimates Statements (PAES) for 2016-17; and

(b)    the amount for Regional Broadband Scheme—Departmental capital (2016-17) shown in the table for ACMA’s Entity 2016-17 measures since Budget in the Communications Portfolio’s PAES for 2016-17; and

(c)     the amount for Regional Broadband Scheme Special Account—Departmental expenses (2017-18) shown in the table that relates to Budgeted expenses for the Department in the Department’s Portfolio Budget Statements (PBS) for 2018-19; and

(d)    the amount for Regional Broadband Scheme Special Account—Departmental expenses (2018-19, and later years) shown in the table that relates to Budgeted expenses for the Department in the Department’s PBS for the 2018-19 financial year, or a later financial year;

This means that only the administrative cost portion of the charge can be used to pay designated administrative costs. If more money is raised by the administrative cost component (see clause 16 of the Charge Bill) than is required to pay designated administrative costs under an appropriation for a particular year, the surplus may be refunded to carriers under new section 91 or held over for the next year as is appropriate.



Division 4 Chargeable premises associated with a local access line

New section 93 - Chargeable premises associated with a local access line

New section 93 defines ‘chargeable premises associated with a local access line’ (chargeable premises). This definition is central to establishing the charge base of the new tax: carriers will be required to pay a charge on each chargeable premises they have per month in an eligible financial year. [29]

For the purposes of new Part 3 of the TCPSS Act, if a person is a carrier and particular premises are potentially chargeable premises in relation to the carrier for a month (refer new section 94), and the premises are not exempt premises (refer new section 95), then the premises are chargeable premises of the carrier for that month.

Figure 2 below sets out various example scenarios and the number of charges that would apply in each scenario in accordance with the definition of chargeable premises. Note that the table assumes the premises are not exempt premises and the lines are not exempt lines.



Figure 2 - Examples of the application of chargeable premises associated with a local access line

 

Example scenario

Number of Carriers

Number of CSPs

Number of local access lines

Number of  designated broadband services

Number of  premises

Number of charges

1

One house or business that has no telecommunications infrastructure.

0

0

0

0

1