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Tuesday, 15 March 2005
Page: 62

Senator CONROY (4:37 PM) —The Australian Communications and Media Authority Bill 2004 and related bills represent a belated and inadequate response from the government to the regulatory issues posed by the process of convergence. However, the ALP will support the bill insofar as it goes, subject to a small number of amendments. While the bill fails to make many of the reforms necessary to effectively deal with the challenges of convergence, the minor changes it does contain should be beneficial and have already been delayed long enough.

The bill is primarily a response to convergence. Convergence is the long-recognised process whereby digitisation and other technological innovations blur the boundaries between the delivery mechanisms available for services. As a result of convergence, consumers now have a multitude of ways in which to access telecommunications and media services. Today, a person wanting to speak to a friend can choose whether to dial from a fixed line telephone, pick up a mobile phone or have the conversation over the internet through voice over internet protocol. A person wanting to read the morning news could pick up a newspaper, turn on a PC to log on to the internet or get up to date using their mobile phone. A person wanting to follow their favourite sports team could watch highlights of the game on television, satellite subscription TV, cable subscription TV, broadband internet or a 3G mobile phone. The permutations of the ways in which services can be delivered to end users will undoubtedly continue to multiply with ongoing technological progress. These new methods of delivering services have been actively pursued by companies around the world keen to develop innovative ways to service their existing customers and create fresh markets for new customers.

However, as well as increasing commercial options for suppliers and choice for consumers, convergence has also placed pressure on existing regulatory frameworks. Regulatory distinctions based on the method by which a service is provided rather than the substance of the service have become increasingly antiquated and inefficient. As regulatory distinctions of this kind are relatively common in the Australian regulatory regime, reform is needed. Delaying reform or employing bandaid solutions will inevitably result in the distortion of the development of markets for convergent technologies. Businesses that are confronted with regulatory uncertainty as a result of being forced to apply outdated and inflexible legislation to new technology will be discouraged from commercialising that technology. As a result, some innovative, commercially viable services may be denied to consumers merely because of an outdated regulatory regime that imposes inappropriate burdens on the service. Conversely, other new services may receive inappropriate levels of investment because of regulatory advantages they possess in the marketplace as a result of existing regulation failing to extend to the new service. These inefficiencies will harm not only the Australian consumers but also the competitiveness of Australian companies’ global marketplace for convergent technologies.

This is obviously not a good outcome for the Australian communications sector. The prospect of these problems should not, however, have come as a surprise to the government. The Senate inquiry established by the ALP and the Democrats to investigate the bill heard evidence from the Australian Consumers Association that the problems that convergence poses have been apparent for 10 years if not 15 years. Further, the governments of other countries recognised these issues and took concrete steps to address them long before the Australian government turned its mind to legislative reform. The government of Singapore created the Infocomm Development Authority through a merger of a number of government bodies in 1999 with the specific objective of more adequately dealing with the issues of convergence. The United Kingdom commenced a similar process in the same year and ultimately merged a number of its communications regulators in 2002 to form Ofcom. However, instead of following the lead of these countries, the Australian government has delayed implementing serious legislative reform. The government’s pace of reform on this issue has been glacial.

The government has considered the issues associated with convergence in not one but two discussion papers: ‘Options for structural reform in spectrum management’ in 2002 and ‘New institutional arrangements for the Australian Communications Authority and the Australian Broadcasting Authority’ in 2003. However, instead of implementing legislative reform, the Australian government has delayed implementing reform until convergent technologies have actually arrived. Instead of proactively preparing the Australian communications sector for convergence, the government has prevaricated until the shortcomings of the existing regime have become obvious. It is only now that 3G phones and VOIP systems are commonplace that the government has been forced to act.

The committee established to review this legislation heard from the Australian Consumers Association that:

... Australia has erred on the side of delay, and the changes proposed in the creation of ACMA are belated and do not sufficiently address the imperatives in the marketplace.

This delay has led to inefficient overlaps in regulation and regulatory responsibility in some areas, and gaps in regulation in others. It has led to some services being subject to regulatory burdens disproportionate to the substance simply due to the form of the technology that was used to provide it. The committee also heard evidence that the government’s delay has resulted in ‘weird interim regulatory responses’ and a ‘poorly coordinated’ reaction to new technologies.

The committee heard that the government’s lack of leadership had led to the ACA and the ABA taking a reactionary approach to dealing with the new technologies. The Competitive Carriers Coalition stated:

The ACA has increasingly been seen as a follower rather than a leader in terms of regulatory guidance and oversight. This has caused significant duplication and regulatory burden on the industry as a whole.

Areas that have particularly suffered as a result of the government’s reactionary approach have been mobile content and voice over internet protocol telephony. With respect to mobile content, there has been significant regulatory duplication by the ABA and the ACA in their response to the emergence of this convergent service. Both organisations, as well as industry participants, expended significant resources considering the regulatory issues involved with the emergence of mobile content. Both organisations subsequently produced rules addressing separate aspects of mobile content regulation. This issue clearly should have been dealt with by a single body in order to avoid the unnecessary doubling up of activity—by the ACA and the ABA—and the burden on industry in having to comply with two regulatory regimes.

In relation to VOIP, the Senate Environment, Communications, Information Technology and the Arts References Committee heard evidence that the government’s response had been poorly coordinated and required industry participants to respond to separate inquiries from the Australian Communications Authority; the Department of Communications, Information Technology and the Arts; the Australian Competition and Consumer Commission; and the Australian Communications Industry Forum. Understandably, having to deal with a multitude of organisations, essentially asking the same questions, placed a significant compliance burden on industry participants. This lack of coordination clearly demonstrated the inability of the current regulatory regime to deal efficiently with convergent technologies.

The need for reform has been clear for some time. Despite that, the ACMA Bill constitutes the government’s first attempt to deal with these changes. Unfortunately, instead of making the changes necessary to the underlying regulatory regime to deal with convergence, the bill constitutes a superficial makeover of the government’s regulatory approach. The ACMA Bill provides for a purely administrative merger of the Australian Communications Authority and the Australian Broadcasting Authority to form the Australian Communications and Media Authority. As this is an administrative merger, the ACMA Bill makes only minor amendments to the existing regulatory frameworks for telecommunications and media.

Labor supports the merger, as the formation of a single authority to regulate the communications sector will allow for a more holistic response to the challenges of convergence in the future. However, the pursuit of a purely administrative merger by the government is an entirely inadequate measure and represents a significant missed opportunity. As was pointed out in evidence given to the committee, joining the ACA and the ABA at the top without engaging in reform of the underlying legislative regime will result in a conjoined rather than a merged regulator.

The bill gives no consideration to the appropriateness of the existing legislative arrangements in accommodating the challenges of convergence. Much legislation in the Australian communications sector is still largely technologically specific and will only become more anachronistic as the pace of convergence increases. Examples of areas in which existing legislation draws potentially unwarranted technological distinctions include spectrum management, consumer protection, ministerial direction powers and content regulation.

In many cases it is not the uncoordinated approaches by separate regulators but the inconsistent objectives and technologically specific provisions contained in the underlying legislation that have caused the inefficiency. As such, legislative reform, rather than simply administrative reform, is necessary. The need to engage in a wholesale review of the underlying legislation, in addition to the merger into ACMA, was recognised in the majority of submissions made to the committee. The committee heard that, as the bill currently stands, ACMA’s response to convergence will be limited by legislative constraints. The Media, Entertainment and Arts Alliance commented:

It is difficult to see how the new authority will be better placed to take a strategic view of the wider convergence issues in the absence of the policy review that is so critically needed.

The Communications Law Centre commented that it would have been ‘preferable to address substantive reform at the time of the enabling legislation’. Without reform, ACMA will merely continue to apply the outdated and inflexible existing regulatory regimes and to develop ad hoc and reactionary subordinate instruments to deal with those regulatory pressures. ACMA will still be forced to use exemptions, determinations and other subordinate instruments to bend the existing regime to accommodate new convergent technologies.

The committee heard evidence that the best way to deal with the pressures posed by convergence is to aim for a legislative framework that is outcome focused and draws technological distinctions only when it is explicitly justified. The ACMA Bill does nothing to bring the Australian regulatory regime closer to this position. The failure of the government to reform the underlying legislation defers yet again the government’s response to convergence and represents a missed opportunity in the context of the bill.

At the end of the day, after half a decade of waiting for the government’s response to convergence, the result is nothing more than a clayton’s merger. The bill is the product of a government that thinks it is just all too hard. The bill, instead of outlining a strategy for dealing with the challenges of convergence, places on the bureaucrats the onus of dealing with the issues. The bill, instead of addressing the issue head-on, hopes that the problem will go away. The bill gives participants in the communications sector absolutely no guidance as to how the government believes innovative convergent technologies should be treated in principle.

In the final analysis, the ACMA Bill is devoid of a vision for the development of the Australian communications regulatory environment. In addition to the fundamentally inadequate premise of the bill, Labor has a number of concerns about the way the bill anticipates that the merger will be implemented. The first concern the ALP has about the bill is that the explanatory memorandum and the comments of the previous minister for communications indicate that the merger will be revenue neutral. The ACA-ABA merger will be the first merger of two organisations in history that will not result in any cost savings. The fact that the government cannot manage any cost savings—as a result of a merger that will integrate finance, human resources, IT support and other functions—is a significant organisational failure. The committee heard evidence that the failure wastes both taxpayers’ and industry participants’ money, as ACMA’s telecommunications functions are funded by money raised through carrier licence charges.

Our second concern is that allowing ACMA to divide itself into divisions and retain the existing bureau offices of the ACA and the ABA will result in an internally divided regulator that does not realise the potential benefits of the merger. The organisational and geographic divisions envisaged by the bill run the risk of creating a situation in which ACMA divides itself along the delineations of the legacy regulators. Such an arrangement would undermine the objectives of the merger and destroy many of the regulatory efficiencies sought by this bill. While we ultimately do not consider that legislative amendments are the best way to prevent this situation arising, we call on the government to liaise with ACMA to attempt to ensure that this situation does not arise.

Labor also have a number of concerns that we will be moving amendments to the bill to rectify. The first amendment that we will be moving jointly with the Democrats addresses the concern that I have already expressed regarding the government’s failure to consider the need for reform of the underlying legislative regime. This amendment requires the minister to undertake a review of the adequacy of the underlying legislative framework in accommodating the challenges posed by convergence within 18 months of the formation of ACMA. The amendment largely reflects the statutory review provided for in the United Kingdom when it created its merged regulator, Ofcom. You will remember that we heard a lot this week from Senator Coonan and the government about Ofcom having the right model for the future in a whole range of areas. One of the reasons they have that is that they have some decent and proper scrutiny, so let us take a leaf out of the UK example. The amendment is not onerous and we would consider it to be the bare minimum that the government should commit to in order to respond to convergence.

Labor will also be moving two amendments designed to increase the transparency of ACMA. The first amendment addresses the process that ACMA must follow in dealing with a conflict of interest on the part of an ACMA board member. Where an ACMA board member has disclosed a conflict of interest in relation to a specific matter and the board has allowed that member to continue to act on that matter, the amendment will require that it be publicly disclosed. This amendment is designed to avoid the outrageous situation that recently arose in relation to the conduct of the former Chair of the ABA, Professor David Flint. This is a bloke who still does not get it. He is still railing about it today: the unfairness and the injustice of it all. He did not understand the meaning of the words ‘conflict of interest’, and ultimately his own board was so embarrassed by him that he walked the plank. So let us get it all out in the open. The amendment is designed to ensure that, in situations like this, conflicts are brought to light more quickly than has been the case in the past.

Labor’s second amendment requires ACMA to include in its annual report details of the number and types of complaints received by ACMA concerning alleged breaches of the Broadcasting Services Act and related codes of practice. This amendment is designed to bring ACMA’s broadcasting reporting requirements more closely into line with its telecommunications reporting requirements and to increase the transparency of ACMA’s activities. The committee heard substantial evidence that to date the ABA has not taken effective enforcement action in response to complaints about alleged breaches of broadcasting regulation. This amendment is designed to increase the transparency of the ABA’s enforcement activity in order to better hold it accountable to its regulatory responsibilities. Labor considers that these amendments, while not substantial, will increase the accountability of ACMA to the public.

Finally, we note that the inquiry by the Senate committee into the ACMA Bill also raised a number of questions about the broader telecommunications regime. In this regard, the ACMA Bill is a worrying sign of things to come from this government. The bill fits into a long line of regulatory cop-outs from this government in the communications sector. While not directly within the scope of its inquiry, the committee heard much evidence from industry participants concerning the ineffectiveness of the telecommunications competition regime.

The Labor Party is concerned that this bill demonstrates what the country can expect when it comes to the regulatory reforms necessary when the Telstra sell-out begins. No doubt the government’s response to privatisation will be more of the same as we have seen here. On current form we can expect the government to avoid making the tough decisions for telecommunications regulation. We can expect the government to privatise and hope that it all turns out okay down the track—privatise and hope that the bureaucrats can work out how to control the 900-pound gorilla the government has just let out of its cage. Of course, when the government brings this lazy policy approach to privatisation, the result will not be something marginally better than the status quo, as will result from this ACMA Bill. Instead, when the government privatises without taking the tough decisions on the regulatory reform required to accommodate a fully privatised Telstra, the result will be a catastrophic disaster for competition and consumers. That being said, the Labor Party will support the legislation.