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Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Act 2010



According to the explanatory memorandum:

The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 (the Bill) introduces a package of legislative reforms aimed at enhancing competitive outcomes in the Australian telecommunications industry and strengthening consumer safeguards. ...

The Bill creates the framework through which Telstra can lodge a structural separation undertaking which will be subject to review by the Australian Competition and Consumer Commission (ACCC). ...

If Telstra does not voluntarily implement structural separation, the Bill requires the functional separation of Telstra. ...


Key changes

The key changes relevant to the Trade Practices Act (now the Competition and Consumer Act and referred to in the Bill as such) are described in the Bill's EM as follows:

Streamlining the access and anti-competitive conduct regimes in Parts XIB and XIC of the Competition and Consumer Act 2010

The Government’s key objective is to promote an open, competitive telecommunications market to provide Australian consumers with access to innovative and affordable services. The telecommunications access regime in Part XIC of the Competition and Consumer Act 2010 and the telecommunications-specific anti-competitive conduct regime in Part XIB are two essential means of accomplishing this objective.

Regulated access ensures that communications services which have been declared by the ACCC will be provided to access seekers to enable them to provide services to end-users. Where the ACCC is of the opinion that anti-competitive conduct is occurring (or has occurred) it can issue a competition notice, which can lead to penalties being imposed if the conduct is proven.

Since the introduction of these measures in 1997, their operation has been criticised by many in industry as being overly protracted, and vulnerable to ‘gaming’ by parties with an incentive to delay or damage new entrants. Attempts have been made to improve aspects of the regime, but with limited success. Building on extensive consultations with industry, regulatory agencies and the public, the Bill will significantly reform the competition regime to address these problems.

Amending Part XIC

Currently Part XIC of the CCA provides that if parties cannot agree on the terms of access to a declared service, then either party (the carrier or carriage service provider that provides access to the service, or the access seeker) can notify an access dispute to the ACCC. The ACCC must then arbitrate the dispute. The terms and conditions of access are then those determined by the ACCC in its arbitration determination for those two parties only. This is known as the ‘negotiate-arbitrate’ model.

Since it is clear that the ‘negotiate-arbitrate’ model is not producing effective outcomes for industry or consumers, Part 2 of Schedule 1 to the Bill reforms the regime to allow the regulator to set up front prices and non-price terms for declared services. This will create a benchmark which access seekers can fall back on, while still allowing parties to negotiate different terms.

The ACCC will issue access determinations for each declared service, with terms and conditions (and any appropriate exemptions or special rules) usually set for a period between three and five years. The regulator will also be able to determine ‘fixed principles’, such as how depreciation is treated, to remain in force over a longer period if necessary.

Concerns were expressed by access seekers to the Senate Environment, Communications and the Arts Legislation Committee that, during the transition period in the absence of regulated terms or a right to notify a dispute to the ACCC under the previous Bill, parties could be compelled to accept unfavourable terms in order to guarantee supply of a declared service. In response to those concerns, the Bill extends the scope of the transitional provisions to provide that arbitration determinations prevail over access agreements which are entered into before the first final access determination is made.

Access agreements entered into between providers and access seekers will have to be lodged with the ACCC; however, approval by the regulator will not be required.

The ACCC will have the power to make binding rules of conduct for the supply of a declared service where it considers that there is an urgent need to address problems relating to the supply of the service. The binding rules of conduct are rules that specify the terms and conditions relating to compliance with the standard access obligations. Having such rules in place will allow the regulator to act quickly on issues affecting the supply of retail services. In a change from the previous Bill, the ACCC is required to have regard to specified criteria where it is reasonably practicable to do so.

Binding rules of conduct would operate temporarily either in advance of, or as a type of variation of, an access determination. Since they are designed as a temporary measure to deal with urgent matters, the duration of binding rules of conduct is limited to a maximum of 12 months. Further, the Bill now requires the ACCC to commence a public inquiry into making or varying an access determination within 30 days of making binding rules of conduct. It is envisaged that binding rules of conduct will only be used on an occasional basis.

Part XIC of the CCA is modified to remove the option to apply for exemptions from access obligations or undertakings, except in relation to new services which are deemed to require regulatory relief to stimulate innovation in the market. To promote regulatory certainty and timely decision-making, merits review of decisions under Part XIC is no longer available. Judicial review is still available, however, for parties wishing to appeal a point of law.

The process for dealing with special access undertakings has proven to be unnecessarily inflexible, with even minor changes to the terms of the undertaking requiring an entirely new application to be submitted and assessed from the beginning. This is changed to allow the ACCC to suggest changes to undertakings as the assessment process proceeds.

Other key changes that have been made to the access provisions of the Bill since it was first introduced include:

clarifying that binding rules of conduct cannot override a fixed principle in an access determination (proposed section 152BDE);

providing that access agreements and special access undertakings may deal with the same range of subjects as access determinations (proposed paragraph 152BE(1)(e) and subsection152CBA(4)); and

enabling special access undertakings to include fixed principles (proposed section152CBAA).

Amending Part XIB

Part 3 of Schedule 1 to the Bill makes two changes to the way the anti-competitive conduct provisions in Part XIB of the CCA operate. Part 3 streamlines the enforcement process that the ACCC is required to follow, and clarifies that the competition notice regime applies to content services delivered by carriers and carriage service providers.

The competition notice process has been criticised on the grounds that the consultation process prior to the issuing of a competition notice can delay enforcement action. These delays may lead to irreversible damage to the parties that are affected by any alleged anti-competitive conduct.

The Bill removes the requirement for the ACCC to undertake consultation before issuing a Part A competition notice. The Bill also explicitly provides that the ACCC is not required to observe any requirements of procedural fairness in relation to the issue of a Part A competition notice.

This amendment will deny the party alleged to have taken part in anti-competitive conduct the ability to delay the ACCC’s enforcement activities on procedural grounds. The focus for both parties will therefore be on resolving the alleged illegal conduct, rather than on litigation aimed at challenging the processes followed by the ACCC. The competition notice can be lifted at any time if the ACCC is satisfied that the allegation of improper conduct is mistaken, or the situation has been corrected.

If the ACCC commences court proceedings to enforce a Part A competition notice, the ACCC would still have to prove to the court that the competition rule had been breached by the alleged offender.

Content services are defined in section 15 of the Tel Act and include a broadcasting service, online information service, online entertainment service, any other online service, or any other service as determined by the Minister. Content services are not currently listed as a service supplied in a telecommunications market and as a consequence, it is unclear whether Part XIB of the CCA applies to content services supplied by carriers and carriage service providers.

Clarifying the scope of Part XIB of the CCA will increase regulatory certainty and reduce the risk of protracted legal disputes on this issue.