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Telecommunications needs more competition.



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Stephen Smith - Telecommunications Needs More Competition http://www.alp.org.au//media/0801/ssmscomp090801.html Friday, 10 August 2001

Telecommunications Needs More Competition Stephen Smith - Shadow Minister for Communications

Media Statement - 9 August 2001

Shadow Communications Minister Stephen Smith today welcomed the introduction into the Parliament by the Government of amendments to the telecommunications specific competition regime as a belated recognition by the Government of the need for further reform.

"Labor supports the need for a more competitive telecommunications market," Mr Smith said. "The amendments finally introduced today by the Minister for Communications represent a welcome, though limited, first step towards a more competitive telecommunications industry.

"I also welcome Senator Alston's apparent new found willingness to consider further changes once the Productivity Commission completes its inquiry into the telecommunications specific competition regime later this year.

Limited Reforms Welcome

"In May, I flagged to the industry additional reforms needed to the telecommunications competition regime.

"Regrettably, only some of these reforms have been adopted by the Government through the amendments introduced today.

"For example, the Government has adopted my support for:

the removal of opportunities for regulatory 'game play' by allowing the ACCC to make an interim declaration over the objection of an access seeker and by allowing notifications to be withdrawn only with the consent of both the access seeker and the access provider;

●

simplification of the processes by allow 'class action' access disputes and through greater sharing of information and methodology relevant to access disputes; and ●

constraining the regulatory burden by not extending merits review to declarations or interim ●

determinations, with the exception of a case where the ACCC rejects a declaration and a party wishes to contest that rejection.

But More Reform Needed

"However, there are other amendments that Labor believes the Government should have considered and included in their legislation. These include:

greater recognition of the need to promote the dynamic efficiency (innovation) in Australian telecommunications by broadening the object clause of Part XIC to recognise the need to promote overall economic efficiency by encouraging the efficient use of, and investment in, essential infrastructure services.

●

more regulatory certainty by clarifying which services may be declared and by providing reasonable sunset periods for declarations of 'bottleneck' services - ensuring the timely review of decisions to require access to key telecommunications services;

●

the removal of ineffectual processes that have only served to frustrate and delay the resolution of access disputes by abolishing the Telecommunications Access Forum. ●

"Labor also believes that the ACCC may need to be given enhanced powers to drive the negotiate-arbitrate process through more timely and better structured timeframes.

"Labor is also concerned that the Government is yet to take sufficiently into account the differing nature of competition across Australia, particularly in rural and regional markets. The relationship between effective competition in these markets and other regulatory and policy initiatives available to Government does require much more careful consideration than is reflected in the Productivity Commission's draft report. This point is made strongly in even the Government's own Besley Inquiry's Report.

"More generally, the Government's approach to regional communications has shown a lack of coordination and concerted effort. This has been an inevitable product of the Government's ideological obsession with the full privatisation of Telstra. This Government has a plan to try and save its political skin and to fully privatise Telstra on the quiet in the next Parliament, not a plan for regional communications.

"Greater consideration also needs to given to enhancing the ACCC's powers to determine basic terms and conditions on which competition should occur.

"Further consideration also needs to be given to the Productivity Commission's suggestion of 'access holidays' and whether they may be a useful mechanism to overcome regulatory barriers to investment. In particular, Labor is interested in discussing with the industry whether an 'access holiday' could be appropriately used to ensure that Telstra and Optus digitise their cable as open networks.

"Labor looks forward to working with the communications industry and consumers to further consider the Productivity Commission's final Report as a vehicle for further reform when it is released next month.

Government Yet to Consider Limiting Merits Appeals

"Another issue of contemporary debate is Telstra's appeal to the Australian Competition Tribunal ('ACT') against the Australian Consumer and Competition Commission's ('ACCC's') interconnect pricing decision.

"Commenting on Telstra's appeal on 30 August, Senator Alston told ABC Radio that:

Our job is to make sure the system works as efficiently as possible and I want to see a greater urgency about the way in which these matters are dealt with.

I'm not happy with how long this particular case has taken, it's already been some years in the pipeline and I'm disturbed to hear that it could be until the end of next year before we get a decision.

●

"I couldn't agree more.

"The problem for Senator Alston (as explained in detail below) is that it is simply too late for Senator Alston to seek to claim any urgency of approach to such matters.

"Palpable delays in the regulatory regime were evident to most in industry, and changes were called for by Labor, as early as January 1999, concerns that were rejected out of hand by Senator Alston at that time.

"The Government's obsession with the full privatisation of Telstra has prevented a timely resolution of this issue to the detriment of much more effective competition in the Australian market. The Government has only itself to blame that the current interconnect dispute has not been resolved by now.

"In the last two weeks, some commentary has centred on whether Telstra, and Telstra alone, should be prevented from continuing its appeal to the ACT against the ACCC's interconnect decision.

"This is a matter that should be carefully considered. Without commenting on the merits, if any, of Telstra's appeal, singling out this appeal by Telstra and dealing with it in isolation would be inappropriate. Good public policy dictates that if appeal rights are to apply, they should apply equally to all parties. Either a merits review is appropriate for all or it is not, bearing in mind the interests of all parties potentially affected by ACCC decisions.

"The Government's amendments regrettably are silent on this issue, as is the Minister.

"The issue is under detailed consideration by the Productivity Commission, and in the absence of any proposal from the Government, Labor will consider what changes to the merits review process may be necessary after having considered the Productivity Commission's final report.

The modest Government amendment to allow the ACT to only consider evidence available at the time of the ACCC's original decision is supported by Labor, as is the proposed prevention of a stay of an ACT decision which is challenged by way of judicial review.

Labor's Leadership on More Competition

"My greatest regret today is that the Minister's recognition of the need for reform has come more than

two years too late," Mr Smith said.

"Labor has a proud history of supporting greater competition in the Australian telecommunications market. Labor introduced competition in the late 1980's and early 1990's.

"Labor also supported the introduction of greater competition in 1997. The legislation was, in fact, largely the product of the previous Labor Communications Minister, the Hon. Michael Lee MP.

"Further, on my recommendation, Labor amended its National Platform in August last year to reflect our support for a 'more competitive' telecommunications industry.

"I repeated that theme in the speech I gave at the Australian Telecommunications' Users Group's NOW2001 conference in May.

"In my speech, I committed Labor to using the Productivity Commission's Report on the telecommunications specific competition regime as a vehicle for reform to achieve more effective competition.

The Government's Delay

"Regrettably, the Howard Government's record has not been good. Senator Alston, in particular, has been asleep at the wheel.

"I first drew attention to the problem of delay in the competitive regime back in January 1999 when I joined many in the industry expressing concern about the 14 months taken by the ACCC to investigate Telstra's interconnection fee.

"Delays in the performance of the regulatory regime were apparent from the evidence given to the Senate Environment, Communications Information Technology and the Arts Legislation Committee's consideration of the Government's 1998 Telstra privatisation legislative proposals.

"While Government Senators accepted the ACCC's evidence that these delays were merely a product of the system being 'new', Labor Senators, foreseeing more pervasive concerns, called on the Government to:

...urgently pursue a comprehensive public review of the competitive regime and make further amendments to the regime where appropriate. ●

"Regrettably, the Government ignored Labor's call.

"The Government also failed to have an Inquiry despite the findings of the Productivity Commission's March and December 1999 and the NUS's April 1999 and 2000 telecommunications prices benchmark studies. These studies demonstrated both that Australians were paying high prices by international standards and that not enough was being done to pass on the benefits of competition to consumers.

"These findings were confirmed by a recent major study that shows that carriers had tripled their operating profit margins from 7.1 percent before the Government's regime started in 1997 to 21.5 percent in 1998-99, all at the consumers' expense.

"The Government even ignored its own Australian Information Economy Advisory Council. AIEAC's April 2000 National Bandwidth Inquiry Report concluded, among other things, that:

Evidence suggests that there are problems with making data services available in a timely and affordable manner in practice, particularly outside the central business districts of Sydney, Melbourne and Brisbane;

●

Backbone bandwidth capacity ownership is highly concentrated. This market concentration may limit the amount of capacity that is actually supplied to the market through active or passive 'rationing' of that capacity by its owners;

●

Australian prices for leased lines and switched data services appear to be generally higher than prices for comparable services in comparable markets in the United States and Europe. ●

"Ominously, the Report found that "there is a risk that Australia's ultimate performance in the global information economy will be adversely affected" if these issues are not addressed quickly.

"Finally, in June last year, almost 18 months after Labor had first called for an 'urgent review' of the competition regime, the Government acted by instigating the current Productivity Commission inquiry.

"Senator Alston is now desperately rushing around pretending that he has been active on this issue. Regrettably, he has not.

"Rather, his recent attempts to cover up years of neglect have shown that only now is he beginning to understand the problems that neglect has caused.

"While having initially proposed only very limited reforms in his speech to ATUG in May this year, Senator Alston was forced to change tack following a meeting with senior industry representatives later that month.

"The amendments introduced today are in keeping with the outcome of that meeting.

"In a similar vein, I have previously welcomed the Government's decision to provide the additional funding to the ACCC in last month's Budget, though that funding come almost 4 years too late. These funds were needed when the competitive regime was introduced in 1997.

Conclusion

"I trust that the introduction of these amendments today means that we are now beginning to put the Government's neglect of this issue of national importance behind us.

"I also look forward to the Government's consideration of further reforms following the finalisation of the Productivity Commission's report next month.

"For too long the Government has dropped the ball on this issue, focussing instead on its ideological obsession with the full privatisation of Telstra, at the expense of ensuring effective competition to the benefit of Australian consumers," Mr Smith concluded. Authorised by Geoff Walsh, 19 National Circuit, Barton ACT 2600.

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