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Tuesday, 15 March 2005
Page: 67

Senator CHERRY (4:57 PM) —I rise to speak on the Australian Communications and Media Authority Bill 2004 and related bills before us, which merge the functions of the Australian Broadcasting Authority, the ABA, and the Australian Communications Authority, the ACA, into a new authority with a new acronym, the Australian Communications and Media Authority, or ACMA. The idea of merging the ACA and the ABA was first contemplated by the Productivity Commission in its report on broadcasting back in April 2000. In 2003 the government released a discussion paper focusing on the key issues that would need to be addressed if the two bodies were merged. In the paper the government argued:

The case for merging the two communications regulators arises from developments that have been occurring in the communications environment over the past decade. Digital technologies are reshaping communications industries. Previously distinct sectors now compete across increasingly convergent markets using a range of different delivery platforms.

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The convergence of communications technologies and markets is placing growing pressure on the current regulatory institutional arrangements. In Australia, different components of the same industry are currently subject to regulation by two different agencies.

Yet this package of bills, whilst achieving the administrative merger of the two authorities, makes minimal changes to the existing regulatory arrangements. It is very much of an administrative nature.

In December last year I moved—and I thank the Labor Party for its support at the time—to establish a Senate inquiry into this bill to examine the powers and the effectiveness of the proposed regulatory body. The Senate Environment, Communications, Information Technology and the Arts References Committee considered the proposal and took evidence from 24 organisations over two days. It came to the conclusion that, whilst the proposed merger of the two authorities was welcomed by most of industry and consumer bodies, there were some major concerns.

There was deep concern that the government had failed to deal with the underlying problems of holes in the regulatory frameworks of both the ABA and the ACA as they currently exist. The committee found that the two regulators were perceived not to have sufficient pro-consumer focus in terms of their attention. It also found that both organisations, the ABA and the ACA, rely very heavily on the self-regulation of industry by industry and essentially have a light-touch approach to regulation.

The ACMA, to some extent, is modelled on the British super-regulator Ofcom, which was established two years ago from the merger of five regulators in media, broadcasting and telecommunications. Yet Ofcom, as a model, has ended up with powers far greater than those proposed for the ACMA. In establishing Ofcom, the UK government saw the need for the new regulator to be able to undertake its regulatory duties effectively. Its white paper said:

It is important that OFCOM has sufficient powers to carry out its duties. It has to be able to take tough action when necessary and to ensure that regulated companies take the action which is required of them.

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In addition, we will give OFCOM Competition Act type powers to levy financial penalties for breaches of the sector-specific regulatory requirements.

As the committee report notes, the Blair government’s vision for Ofcom was that the new regulator was to be significant in creating a dynamic market. The necessary powers were outlined in the white paper. In particular, the white paper said:

OFCOM will have concurrent powers with the OFT to exercise Competition Act powers for the communications sector.

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OFCOM will also have additional sector-specific powers to promote effective competition in the communications services sector for the benefit of consumers.

For most providers of services, the sector-specific rules will cover only the essential issues such as consumer protection, access and interconnection. Stronger sectoral competition rules will, however, be applicable to companies having significant market power.

The white paper talked about the need for a spectrum management framework and the need to ensure that health and environment issues were properly reflected in the regulatory framework, particularly in relation to communications structure.

I have now chaired three Senate inquiries that have all touched on the regulation of the telecommunications sector, and all have found that the regulatory system is sadly inadequate. In all three inquiries we have heard evidence that competition has not developed far enough. I am reminded again of the 2001-02 telecommunications report of the ACCC which concluded:

While reforms implemented to date have been positive in terms of increasing competition in communications services and in increasing benefits to consumers ... competition has not developed as extensively as generally expected after full competition was introduced in 1997 and that various telecommunications markets are not yet effectively competitive.

Evidence given to the Senate inquiries suggests that Telstra’s market power stifles competition and challenges the regulatory regime, which is not adequately equipped to deal with that market power. The effect is to deter infrastructure investment, to suppress the take-up of broadband services and to produce prices for broadband other telecommunications services which are higher than in many other OECD countries.

The Senate committee report into this bill noted that in the current self-regulatory landscape the competition model has demonstrated that it cannot, alone, deliver on issues such as regional equity, community equity of basic services within a region and national competitiveness in terms of advanced infrastructure deployment. Many witnesses, both in the recent inquiry and in previous inquiries into telecommunications, argued that structural problems in the telecommunications market rendered regulation largely ineffective. Telstra is one of the most vertically integrated telecommunications carriers in the world and the only government owned provider with a stake in pay TV in addition to its holdings in mobile phones, landlines and, of course, advertising through Sensis.

The Democrats have been calling for Telstra to, at a minimum, divest its share in Foxtel and for the government to commission research into structural separation to once and for all determine the merits of structural separation in our current environment. I note the continuing comments from Senator Coonan that she recognises the benefits of at least some operational separation of the wholesale and retail aspects of Telstra, at least to the extent that that has already occurred with BT.

The Australian Consumers Association has questioned the effectiveness of the regulatory approach of self-regulation in the current environment. It says:

The regulatory approach taken to instil competition into the telecommunications market of Australia seems only to have advanced sufficiently to diagnose what would work better.

The view of the association is:

... Australia may have reached the end of what can be accomplished by extending and enlarging the regulatory apparatus in telecommunications. It is trying to manage access to the infrastructure of a huge, vertically integrated incumbent supplier that retains near monopoly control over essential and pivotal infrastructure. This incumbent wields superior power to the regulator in political and economic terms.

Clearly, what is needed here are structural solutions to competition and structural solutions to that market power. That is something that the government continues to shy away from. To paraphrase the Minister for Finance and Administration, Senator Minchin, the government appears to be intent on having a maximum price for Telstra in a future float. It is unfortunate that the issues of competition and the best outcomes for telecommunications policy play second fiddle to maximising the price in terms of the return to government from selling an intact, integrated monopoly supplier.

The committee inquiry also found that there needs to be a closer working relationship between the ACMA and the ACCC. We found that the ACCC needs additional resources to do its job of regulating telecommunications and that there needs to be a better understanding between the two authorities of the overlap between technical regulation and competition regulation, as one frequently feeds and determines the other. As I said earlier, the ACMA is modelled on Ofcom, yet it does not have the same consumer emphasis that is present in Ofcom in the United Kingdom. Ofcom has a content panel which deals with issues of broadcasting standards, ensuring that there is community input into those standards. In addition, it has a consumer panel to keep that emphasis on consumer issues to the forefront of its thinking. Most importantly, it has a strong mandate from the parliament to regulate communications in the interests of consumers. That is what the committee found was very much missing from the ACMA Bill and was probably the worst flaw—that lack of emphasis on consumer outcomes.

The committee report noted that, at present, the interests of consumers are poorly recognised in both the Telecommunications Act and the Broadcasting Services Act. The evidence highlighted a number of problems in the areas of legislative recognition, industry codes, funding for consumer participation and community awareness, and the need to develop a simplified consumer complaints process. The Australian Consumers Association argued that, historically, both the ABA and the ACA have a poor record in dealing with consumer issues. I note that the Acting Chair of the ACA, Dr Bob Horton, acknowledged that before the committee. In his evidence, he said:

While I think we have made great strides in achieving the objectives of industry self-regulation, certainly in operational codes and technical matters, we have in a way left consumers some distance behind us and we have sought to make up some of the distance over the last 18 months or two years.

I acknowledge that the ACA has been seeking to engage with the consumer sector, commissioning a large report from a consumer panel on ways to improve that consumer focus. The report, Consumer driven communications: strategies for better representation, is currently being considered by its board. I commend that report to the ACA board. If the recommendations in the report were taken up, it would improve quite a number of the issues that people have had with the ACA in the past. Many of the recommendations in that report are of a legislative nature in trying to get a better balance between self-regulation by industry on the one side and promoting better consumer outcomes on the other side. In the committee stage, the Democrats will be moving a series of amendments to make the regulation of telecommunications much clearer.

The Communications Law Centre, in their submission to the Senate inquiry, argued:

... self-regulation is effective and appropriate in some circumstances, while in others a stronger emphasis on compliance and enforcement is called for.

They said that we needed to refine the legislative process and to provide strong signals to the regulator about what parliament expects in terms of a better balance as to when self-regulation is appropriate and when the consumer protection regime needs to take precedence. The committee recommended that section 4 of the Telecommunications Act be amended to remove the strong preference for self-regulation and to state more clearly that the regulatory policy is very much in favour of promoting the interests of consumers. We also suggested that the revised section should make it clear—and I will be moving an amendment to this effect in the committee stage—that telecommunications should be regulated in a manner that promotes the use of industry self-regulation where this will not impede the long-term interests of end users and will enable the objects mentioned in the act to be met in a way that does not impose unnecessary financial and administrative burdens on participants in the Australian telecommunications industry.

I will also be moving an amendment to ensure that at least one member of the ACMA board has a background in consumer advocacy and representation. It is time that consumers were put first and foremost in the regulation of telecommunications and broadcasting. It is time to ensure that the enforcement of standards and consumer protection are much more to the forefront of our regulators. We have been experimenting with self-regulation in this country for a very long time—since 1991 in broadcasting and since 1997 in telecommunications. We know the experience. We know what works in the regulation of technical issues and codes of operation. We know what does not work in relation to complaints to the Australian Broadcasting Authority and the Australian Communications Authority. We know that it does not work in the roll-out of structure, as we have seen under the wing of the Australian Communications Authority since 1997. Almost every year Telstra has progressively reduced its spending on infrastructure investment as a percentage of revenue. Australia’s telecommunications providers now invest a lesser percentage of their revenue in infrastructure than probably most OECD countries that I have looked at.

When we look at the ACMA bill and at what the government has proposed for it, the merger of this organisation without a change to its underlying powers represents very much a lost opportunity. That lost opportunity arises because we have failed to look at and fix the flaws that we know exist in the current regulatory system. We have failed to ensure that ACMA does address the issues of convergence that are emerging by looking at these things in a holistic way in a strategic review over the next two years. That is something that Ofcom is currently in the process of doing, and it is something on which Senator Conroy and the Democrats will be moving a joint amendment, to establish a strategic review to look at the role of the regulators in a converging communications market and how those new challenges would best be met by the regulators.

I would like to conclude by quoting a statement to our committee by the Media Entertainment and Arts Alliance. It said:

Such a merger [between the ACA and ABA] would provide the opportunity to be more than simply an administrative change. It offered the opportunity for functional change and for an audit of the existing regulatory framework for communications and broadcasting. Unfortunately, what is now occurring is simply an administrative change. Whilst a merged regulator will be better placed to have an overarching view of the economic, social, cultural and technical policy issues confronting Government and the industries it regulates and be able to better serve the general public, the broader opportunities that the merging of the two regulators offers are being overlooked.

That sentiment was reflected by a number of witnesses from industry and consumer groups, and that is why we will be moving to have that strategic review and to try to get some of those synergies working better in the future.

The ACMA finds itself regulating a range of services that are absolutely vital to the national security and economic and social development of Australia. Australians are increasingly relying on e-commerce, e-health and e-banking. For many businesses, especially small businesses, efficient and effective communication systems are critical. For example, high-speed internet access is essential for successful engagement with the modern economy and the modern society. A cost-effective, reliable communications system is especially critical for Australians living in regional areas, where the tyranny of distance, isolation and lack of services can be overcome to some extent through modern technology.

It is critical for the future prosperity of Australia that we get it right. I urge the government, as a very first step, to consider the amendments which I will moving in the committee stage, because at least they send a strong message from this parliament to the new regulator that it is in the business of regulating for the interests of consumers and end users, not for the interests of industry and media moguls. That fundamentally must be what we are about in this place. We need to send a very strong message to the new regulator about exactly what we want it to do. We need to send a message that, whilst this is primarily an administrative merger, and whilst at this stage we are not proposing radical changes to the powers of the regulator, we want it to exercise those powers in a way that benefits consumers far more than the system has to date. That would be a strong message, and that is the message that the amendments which I will move in the committee stage will seek to send.

I wish to note in conclusion that the government advertised for expressions of interest for the position of ACMA chair on Saturday. As a senator who was dealing with this legislation I found this passing strange, because the legislation is not yet through parliament. Whilst the Democrats and the Labor Party have made it clear that we do support the establishment of ACMA, I do find it inappropriate every time the government—whether it be this government or the previous government—pre-empts decisions of parliament by spending public moneys on advertising or promoting particular initiatives which have not yet been passed by the parliament. I would certainly hope that the government has not engaged in any excessive expenditure ahead of the formation of the authority with the passage of this legislation through the Senate. I would hate to think that the government shows such contempt for the Senate’s processes that it assumes a fait accompli and starts spending moneys before the Senate has had time to adequately and properly consider these matters.

Debate (on motion by Senator Ellison) adjourned.