<div dir="ltr">Why don't we keep the ACCC and get rid of ACMA? </div><div class="gmail_extra"><br><br><div class="gmail_quote">On Tue, Feb 18, 2014 at 1:01 PM, Narelle <span dir="ltr"><<a href="mailto:narellec@gmail.com" target="_blank">narellec@gmail.com</a>></span> wrote:<br>
<blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div dir="ltr"><p class="MsoNormal">Opinion in CommsDay today comes out swinging against the
ACCC and some of the pillars of Australia’s competition regulation. “[T]he time
may have come for the ACCC to vacate its role as the de facto comptroller and
consigliere for the Australian telecommunications industry”.</p><p class="MsoNormal"><br></p><p class="MsoNormal">What would this mean for ACMA? Comms Day may be reading the govt correctly, they may be not.<br></p><p class="MsoNormal">
<br></p><p class="MsoNormal">Thoughts?<br></p>
<p class="MsoNormal"><br></p><p class="MsoNormal">Narelle</p><p class="MsoNormal"><br></p><p class="MsoNormal"><br></p><p class="MsoNormal">From Comms Day today<br></p><p class="MsoNormal"> </p>
<p class="MsoNormal">COMMENT BY GRAHAME LYNCH</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal"><b>Is a new 2014 Telecommunications Act in the offing?</b></p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">Is the Federal government gearing up for the most
far-reaching overhaul of telecommunications legislation</p>
<p class="MsoNormal">and regulation in seventeen years—in effect, a new 2014
Telecommunications Act that replaces</p>
<p class="MsoNormal">the 1997 act and the telecommunications sections of trade
practices legislation?</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">That’s certainly the implication of the messaging coming out
of Canberra over the past few days.</p>
<p class="MsoNormal">EXHIBIT A: Parliamentary secretary Paul Fletcher told
parliament last week “the current regulatory</p>
<p class="MsoNormal">framework is fundamentally based on a 1990s world of
relatively stable technologies and business</p>
<p class="MsoNormal">models which placed great emphasis on the predominance of
the fixed-line network—which was certainly</p>
<p class="MsoNormal">a valid assumption at the time. Since that time, of course,
there has been a steady accretion of</p>
<p class="MsoNormal">layer upon layer of rules and regulations. Some of these
rules and regulations are important for facilitating</p>
<p class="MsoNormal">competition but others are not of such evident value in
2014. It is timely to ask whether the</p>
<p class="MsoNormal">policy objectives underpinning particular regulatory
measures in the communications sector remain</p>
<p class="MsoNormal">valid; if they do not, the case for those regulations being
retained is very difficult to see.”</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">EXHIBIT B: The “framing” paper for the NBN cost-benefit
review released last Thursday night reads</p>
<p class="MsoNormal">less like a slight calibration of the status quo and more
like the type of paper one would release if one</p>
<p class="MsoNormal">was contemplating a complete “re-boot” of the entire policy
and legislative assumptions that underpin</p>
<p class="MsoNormal">the Australian telecommunications sector. It states that
“Australia is unusual in vesting responsibility</p>
<p class="MsoNormal">for economic regulation of telecommunications in a
generalist body whose responsibilities include</p>
<p class="MsoNormal">administration of the competition laws.”</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">“Originally, the decision to transfer those powers to the
ACCC was based on the view that telecommunications- specific provisions would merge over time into the national
access regime established under Part IIIA of then Trade Practices Act. However, no
such confluence has occurred nor</p>
<p class="MsoNormal">seems likely to occur, though it may well be that some
aspects of the current telecommunications provisions will eventually be substantially streamlined. In the light
of those considerations, and of the</p>
<p class="MsoNormal">broader factors determining the efficient allocation of
functions in a regulatory system, the panel</p>
<p class="MsoNormal">would welcome views on whether the current allocation of
responsibilities should remain or alternatively,</p>
<p class="MsoNormal">what alternative approach would be preferable.”</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">EXHIBIT C: The same framing paper invites a complete
“re-think” on the assumptions underlying</p>
<p class="MsoNormal">the NBN policy, which, of course, was the end-point of the
open access debate and policy evolution</p>
<p class="MsoNormal">that began in earnest as long ago as 2001 and accelerated in
2005 under Telstra’s plea for regulatory</p>
<p class="MsoNormal">relief so it could build an FTTN network. Among the issues
on the table: should the NBN refrain</p>
<p class="MsoNormal">from overbuild of privately held networks that can achieve
NBN-level functionalities, should retail</p>
<p class="MsoNormal">service providers be able to buy equity in NBN Co, how
should cross-subsidies for loss making services</p>
<p class="MsoNormal">be best provided and most significantly, “What broader
structural model or models for the industry</p>
<p class="MsoNormal">should the panel consider”?</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">The corridors of power now host alternative intellectual
viewpoints to the access seeker-driven</p>
<p class="MsoNormal">"victim mentality" agenda that has dominated
Australian telecom policy for a decade.</p>
<p class="MsoNormal">The failure of the ACCC to adopt a consistent regulatory
approach that would provide predictability</p>
<p class="MsoNormal">and certainty for telecommunications network investors has
been well catalogued, especially in this</p>
<p class="MsoNormal">journal, but the regulator persists, oblivious to criticism.
Now taxpayers are potentially exposed to upwards of tens of billions of dollars of liability simply so that
My Little ISP Pty Ltd can theoretically</p>
<p class="MsoNormal">play in the same league as Telstra and SingTel.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">From 2002 or so, the ACCC acted as if making access seekers
more reliant on below-cost access to</p>
<p class="MsoNormal">Telstra’s network would somehow reduce Telstra’s dominance,
seemingly blind to the obvious endpoint</p>
<p class="MsoNormal">that the investment impasse this spawned provided limited
short term benefits to some citizens</p>
<p class="MsoNormal">as consumers (the million or two who took a slightly cheaper
Telstra-sourced, access-seeker resold</p>
<p class="MsoNormal">broadband service in urban areas) and a medium to long term
cost to all citizens as taxpayers (who are</p>
<p class="MsoNormal">exposed to the risk of the 100% government subsidised NBN
and are compelled to out lay tens of billions of dollars of compensation to big
bad Telstra).</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">On one hand we had the ACCC denying that it priced access
too low, even when at the same time</p>
<p class="MsoNormal">its own explanatory documents were affirming that it
employed pricing methodologies such as “retail minus’ on already price capped retail services precisely because
they delivered the lowest price outcome.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">At the same time, it constantly shifted the methodology goal
posts, repeatedly deferring costs to</p>
<p class="MsoNormal">a future which would never arrive: a so-called “tilted annuity”
designed to reward access seekers with</p>
<p class="MsoNormal">short term prices well below their sustainable cost. A
decade on, the ACCC’s cost models even now</p>
<p class="MsoNormal">only allow Telstra to recover costs at a monthly rate of
between $16 (ULL Band 2) and $24 (ADSL</p>
<p class="MsoNormal">Wholesale) per line when the copper network’s actual
replacement network in the form of the NBN</p>
<p class="MsoNormal">has estimated it needed to earn $32 by as soon as next year
and above $50 within five years to meet</p>
<p class="MsoNormal">its own (likely over optimistic in itself) business plan.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">This ongoing intellectual fraud persisted because of a
policy environment where a spectacularly</p>
<p class="MsoNormal">well-organised and articulate access seeker lobby
successfully equated their own interests with the</p>
<p class="MsoNormal">“public interest” and created a sense of constant crisis
about the regulatory regime and Telstra’s</p>
<p class="MsoNormal">“dominance.” Concerns over Telstra’s dominance and likely
behaviour under privatisation also led to</p>
<p class="MsoNormal">a succession of regulations governing its service and
connection levels, at a potential cost of a billion</p>
<p class="MsoNormal">or more dollars relative to benefits.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">The fact that the vast majority of Telstra access seekers
and ISPs whose business formation was inspired by the 1997 reforms have sold out or merged for collective
hundreds of millions of dollars in</p>
<p class="MsoNormal">shareholder return—nearly 20 such entities bought by iiNet
alone—demonstrates how over-egged this</p>
<p class="MsoNormal">sense of perpetual grievance and crisis was. Ditto, the
nationalisation of fixed network capital investment</p>
<p class="MsoNormal">and deal to provide tens of billions of dollars of NBN
compensation to Telstra has correlated</p>
<p class="MsoNormal">with a near doubling of Telstra’s share price since 2010. So
much for crimping the 600 pound gorilla.</p>
<p class="MsoNormal">As Malcolm Turnbull memorably described it, one senses a
conspiracy against the taxpayer.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">1997 ASSUMPTIONS CHANGE: Indeed, developments over the last
17 years have left behind the</p>
<p class="MsoNormal">best intentions of the 1997 Telecommunications Act. One
obvious change was the rise of broadband,</p>
<p class="MsoNormal">fuelled by the emergence of cheap Chinese-made DSLAMs, and
the sea change this created in the</p>
<p class="MsoNormal">layers where value is created over telecommunications
networks—that is, not just through end user</p>
<p class="MsoNormal">access charges, but through over-the-top services and
serving facilities in data centres.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">Another was the rise of mobile tech to dominance and its
ability to offer substitutes to almost every</p>
<p class="MsoNormal">monetisable service hitherto monopolised by the fixed
network. Stephen Conroy, his advisers, bureaucrats</p>
<p class="MsoNormal">and industry supporters, were unfortunately so blindsided by
fixed access seeker and then</p>
<p class="MsoNormal">FTTH lobby rhetoric that they failed to react to these
developments, committing ever more public</p>
<p class="MsoNormal">policy attention and resource to the apparently vexing but
increasingly receding priority of vertical</p>
<p class="MsoNormal">integration and retail dominance in the fixed network access
market.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">Now the writing is on the wall for these decade-old
homilies. The new government appears determined</p>
<p class="MsoNormal">to deliver on red tape reduction in a way its predecessors
under Rudd, Gillard and Howard</p>
<p class="MsoNormal">did not—and the vast, unwieldy pot-pourri of 20th century
telecommunications legislation seems ripe</p>
<p class="MsoNormal">for dismantling. One of the chief dissenters from the
received wisdom over the past decade, Professor</p>
<p class="MsoNormal">Henry Ergas, now sits on the panel charged with providing
primary advice to government on what</p>
<p class="MsoNormal">new approach it should adopt, alongside some interesting
characters such as Alison Deans, who, as a</p>
<p class="MsoNormal">former Ebay executive, presumably brings a nuanced view of
the interplay between OTT, access, fixed</p>
<p class="MsoNormal">and mobile in the telecommunications ecosystem.</p>
<p class="MsoNormal"> </p>
<p class="MsoNormal">The new panel has already overtly signalled that the time
may have come for the ACCC to vacate</p>
<p class="MsoNormal">its role as the de facto comptroller and consigliere for the
Australian telecommunications industry.</p>
<p class="MsoNormal">Almost certainly the emphasis will be on compelling telecom
operators—and the private sector more</p>
<p class="MsoNormal">generally—to take on more of the risk, heavy lifting and
reward in building and delivering next generation</p>
<p class="MsoNormal">services. Lest this be seen as a fool’s errand it should be
revealed that Telstra CEO David Thodey</p>
<p class="MsoNormal">and a representative of Optus’ ultimate owner Temasek are
meeting with Federal Treasurer Joe Hockey</p>
<p class="MsoNormal">later this week to discuss how to unlock private sector
capital for infrastructure investment. Legislative</p>
<p class="MsoNormal">and regulatory incentives—and disincentives– will almost
certainly be a topic for discussion.</p><span class="HOEnZb"><font color="#888888"><br clear="all"><br>-- <br><br><br>Narelle Clark<br><a href="mailto:president@isoc-au.org.au" target="_blank">president@isoc-au.org.au</a><br>
<a href="mailto:narellec@gmail.com" target="_blank">narellec@gmail.com</a>
</font></span></div>
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