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Thursday, 5 December 2002
Page: 7320

Senator LUNDY (5:31 PM) —I rise to speak on the Telecommunications Competition Bill 2002. This bill seeks to enhance the level of competition and improve the investment climate in the telecommunications sector. The bill forms part of the government's response to the Productivity Commission report into telecommunications competition regulation. Labor is broadly supportive of the bill as it provides for some general improvements to the telecommunications competition regime. The bill improves access arrangements for core telecommunications services, facilitates a greater degree of certainty for investors in new telecommunications infrastructure, provides for a slightly more transparent regulatory market—particularly in relation to Telstra's wholesale and retail operations—and codifies a level of accountability and transparency in the tackling of anticompetitive conduct in the telecommunications industry.

The government instituted a Senate inquiry into the bill in September after its introduction into the House. The majority government report on that committee, written by Senator Eggleston, recommended that no amendments to the bill were needed, despite many submissions of witnesses suggesting a raft of amendments to this rather complex piece of legislation. Labor disagrees with this assessment, and we will be moving some amendments to improve the bill.

The government first announced its planned response to the Productivity Commission report into telecommunications competition regulation on 24 April this year, some seven months after receiving that report. Who can forget the controversy that Senator Alston created with his vague statement at that time that the bill would require accounting separation of Telstra's wholesale and retail operations? This sent the sharemarket and Telstra into a spin, and Senator Alston was soon on the defensive. Senator Alston was forced to issue a press release saying that he had no plans to structurally separate Telstra. The tabling of the bill on 26 September revealed a very much watered-down version of accounting separation, where the minister will be able to direct the ACCC regarding the required level of accounting separation. Telstra had clearly spooked Senator Alston.

Under the proposed amendments, the minister will be able to direct the ACCC by disallowable instrument in relation to its existing record-keeping rules regarding accounting separation. Telstra would also be required to publish current and historical costs on core services and information on nonprice terms and conditions in relation to those core services. The ACCC would also prepare and publish an imputation analysis which would demonstrate whether there is any price squeeze behaviour by Telstra in relation to the provision of its wholesale services to downstream operators. These powers would give the ACCC improved costing information to identify possible discriminatory or anticompetitive behaviour.

Labor remains concerned that parts of the accounting separation component of the bill are governed by ministerial direction rather than being administered by the ACCC. Under the bill, the minister plays a key role in determining which accounting information Telstra is required to prepare and publish. This ministerial direction would purportedly allow the government to mandate the implementation of accounting separation in a more deliberative and probitive manner. What it really means is that Telstra has nobbled the minister not to give too much power to the independent regulator, the ACCC. Labor believes that a transparent accounting separation framework for Telstra, administered by the ACCC, is a minimum requirement for a more competitive telecommunications sector.

Labor supports open and transparent networks in telecommunications. The accounting separation provisions of this bill fall short in that regard. These provisions represent only an incremental improvement to the existing accounting separation provisions. However, Labor will let these provisions pass unamended. We have our own policy development process in this regard and, as these reforms represent some minor improvements, we shall not stand in their way. The government has set the hurdle that the accounting separation provisions will comply with the Productivity Commission recommendation that—and I quote from Senator Alston's April press statement:

... vertically integrated access providers should not be able to set terms and conditions that discriminate in favour of their own downstream operations, except to the extent that the cost of providing access to other operators is higher.

That is the hurdle the government has set. Let us see if this legislation provides for such non-discriminatory access. We suspect not, but we will give the government the benefit of the doubt to see if their seemingly watered-down accounting separation framework actually does encourage competition in the telecommunications sector. Labor will certainly continue on its path of developing robust policy in this area.

The Productivity Commission also identified the timeliness of access to the telecommunications infrastructure as a key problem in the existing telecommunications access regime. Many access seekers have faced delayed access through regulatory gaming tactics. The amendments to part X1C are designed to speed up wholesale access to telecommunications services and infrastructure. The removal of merits review for ACCC arbitrations is to be commended. This was Labor policy prior to the last election and Labor is pleased the government agrees with us on this point, albeit belatedly.

The publication of pricing principles by the ACCC to guide determination of access prices for declared services is also worthy of support. There has been concern expressed in submissions to the Senate inquiry into the bill that, as the merits review process remains for access undertakings, gaming tactics will move from arbitrations to undertakings. Witnesses and submissions to the inquiry expressed concern that the new provisions concerning the interplay between the arbitration process and the access undertaking process will allow for new forms of regulatory gaming based around shifting access determinations from arbitrations to undertakings. The department has dismissed these concerns and has pointed out that undertakings are not as prone to gaming as arbitrations by their very nature. Labor will carefully monitor the operation of the new regime, and I will seek to address the issue if new gaming tactics do emerge under the amended act.

In the Senate inquiry, Labor senators identified a serious problem with the current bill in that the revocation of merits review for ACCC arbitrations applies retrospectively. Under the bill, parties currently involved in access arbitrations with the ACCC will not be allowed to appeal. Such parties commenced their action on the assumption that they would be able to appeal. Labor announced in our Senate report that we would seek to amend the transitional provisions so that the right of parties to merits review will continue in cases where the ACCC was notified of an access dispute prior to the introduction of the bill on 26 September. We now understand that the government is amending the bill to this effect and, having first suggested such an amendment, we will of course support it.

Labor also has concerns with the ministerial power of direction under the new special anticipatory access provisions. Under the current act a potential investor in telecommunications infrastructure is unable to seek access exemptions or undertakings for non-declared services—that is, services that are not yet provided. This can be a disincentive for potential investors who face regulatory uncertainty as to future access arrangements for such future services. The Productivity Commission identified the lack of any provision for future access arrangements as a weakness in the existing legislation. These services might include important state-of-the-art communications infrastructure such as third-generation mobile phone networks, digital pay-TV or broadband infrastructure. The amended access regime allows for special undertakings and exemptions for non-declared future services. In effect, the legislation extends the ACCC's powers by enabling it to deal with access issues before an investment is made on similar terms as it currently deals with access arrangements after the infrastructure has been put in place.

However, there is one important difference between the new special anticipatory access arrangements and the existing ordinary access arrangements. The new special anticipatory category requires the ACCC to take into account the views of the minister by disallowable instrument in determining whether or not to grant anticipatory access undertakings or exemptions. Several witnesses to the Senate inquiry into the bill expressed serious concern about this anomaly. Labor accepts the validity of these concerns.

To ensure legislative parity between special—or anticipatory—and ordinary undertakings and exemption provisions, Labor will be moving amendments to remove the ministerial power of direction under the new special anticipatory access provisions. It is important, particularly given the current controversy over the Foxtel-Optus content sharing deal, that the government ensures that access arrangements legislated for anticipatory services are the same as for existing ordinary services. The ACCC must be left to do its job. It should continue to use the long-term interests of end-users test to guide its access decisions. The ACCC should not be subject to undue political interference.

Labor's amendments here will ease concerns that the regulator could be influenced by the short-term political considerations of the minister rather than using the existing LTIE—the long-term interests of end-users—test, as is currently the case for ordinary access decisions. Labor urges the minor parties and independents in the Senate to support this important amendment.

The Productivity Commission report recommended amending part X1B, the telecommunications specific anticompetitive conduct provisions, to improve certainty and procedural fairness in the use of these provisions. The ACCC will be required to consult with the potential recipient of a part A competition notice prior to issuing such notice. The ACCC would also be required to publish guidelines on the exercise of its powers under part X1B. We note that the ACCC views that this formalises existing arrangements and we support this part of the bill fully.

However, the proposed blanket removal of the requirement for carriers to submit industry development plans is of concern to Labor. Labor acknowledges that these provisions are somewhat burdensome on the growing number of carriers. However, in the absence of a more suitable proposal Labor rejects removing industry development plans entirely. It is consistent with Labor's approach to industry policy that carriers demonstrate a commitment to local industry. Labor believes that it is appropriate that carriers, particularly Telstra, be encouraged to fulfil their requirements in Australia wherever and whenever possible. Carriers will remain accountable in this regard if annual industry development reports are retained. This will ensure that the industry development programs of the major carriers can continue to be monitored. Labor and, we understand, the Democrats will be moving an amendment to this bill to retain industry development plans. We understand that if this amendment is successful the government will then move an amendment that modifies industry development plans to ease the regulatory reporting burden on smaller carriers. Labor supports this amendment as the larger carriers, particularly Telstra, will still be required to present industry development plans to the minister, summaries of which will be made available to the public.

Finally, Labor does not support the automatic sunsetting of access declarations after five years. This period is too short for investment decision making purposes, particularly considering many commercial contracts run for over five years. This will also increase the workload on the ACCC, who will have to go through unnecessary and burdensome statutory and regulatory reviews. The ACCC has the power to undeclare services in any case, as happened during the course of the current regime when the ACCC undeclared the AMPS service. Labor will be moving amendments doubling the period for the automatic sunsetting of access declarations from five to 10 years. Labor's amendments will provide investors and access seekers alike greater regulatory certainty. The ACCC will also benefit from being relieved of constant regulatory reviews. Ten years is a more appropriate time frame for the automatic sunsetting provisions.

In conclusion, the Telecommunications Competition Bill 2002 goes some way to speeding up the telecommunications access regime, particularly by removing the merits review of ACCC arbitrations, a reform that Labor advocated prior to the last election. The mild enhancement of the accounting separation provisions represents an incremental reform, albeit an imperfect one, with regard to the strong ministerial involvement in the accounting separation framework.

The increased regulatory transparency of the anticompetitive conduct regime is generally positive. Labor has supported the concept of anticipatory access arrangements for future telecommunications services so as to ensure greater investment certainty for companies undertaking substantial investments in this area. It is important that this principle is maintained despite the current controversy surrounding the Foxtel-Optus content sharing agreement. Labor's amendments to remove ministerial involvement of anticipatory access arrangements will strengthen these provisions. Labor's move to retain industry development plans and extend the automatic sunsetting of declaration to 10 years will also improve the operation of this bill.

The Telecommunications Competition Bill represents incremental reform to the telecommunications competition regime. Labor remains committed to genuine competition in telecommunications delivering real outcomes for consumers. This bill represents a further small step in that direction and it deserves the support of the Senate, just as we hope the Senate will support our positive and constructive amendments.