[AusNOG] Comms Day on reviews of the Telecoms Act

[Narelle]

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".


What would this mean for ACMA? Comms Day may be reading the govt correctly,
they may be not.


Thoughts?


Narelle



>From Comms Day today



COMMENT BY GRAHAME LYNCH



*Is a new 2014 Telecommunications Act in the offing?*



Is the Federal government gearing up for the most far-reaching overhaul of
telecommunications legislation

and regulation in seventeen years--in effect, a new 2014 Telecommunications
Act that replaces

the 1997 act and the telecommunications sections of trade practices
legislation?



That's certainly the implication of the messaging coming out of Canberra
over the past few days.

EXHIBIT A: Parliamentary secretary Paul Fletcher told parliament last week
"the current regulatory

framework is fundamentally based on a 1990s world of relatively stable
technologies and business

models which placed great emphasis on the predominance of the fixed-line
network--which was certainly

a valid assumption at the time. Since that time, of course, there has been
a steady accretion of

layer upon layer of rules and regulations. Some of these rules and
regulations are important for facilitating

competition but others are not of such evident value in 2014. It is timely
to ask whether the

policy objectives underpinning particular regulatory measures in the
communications sector remain

valid; if they do not, the case for those regulations being retained is
very difficult to see."



EXHIBIT B: The "framing" paper for the NBN cost-benefit review released
last Thursday night reads

less like a slight calibration of the status quo and more like the type of
paper one would release if one

was contemplating a complete "re-boot" of the entire policy and legislative
assumptions that underpin

the Australian telecommunications sector. It states that "Australia is
unusual in vesting responsibility

for economic regulation of telecommunications in a generalist body whose
responsibilities include

administration of the competition laws."



"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

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

broader factors determining the efficient allocation of functions in a
regulatory system, the panel

would welcome views on whether the current allocation of responsibilities
should remain or alternatively,

what alternative approach would be preferable."



EXHIBIT C: The same framing paper invites a complete "re-think" on the
assumptions underlying

the NBN policy, which, of course, was the end-point of the open access
debate and policy evolution

that began in earnest as long ago as 2001 and accelerated in 2005 under
Telstra's plea for regulatory

relief so it could build an FTTN network. Among the issues on the table:
should the NBN refrain

from overbuild of privately held networks that can achieve NBN-level
functionalities, should retail

service providers be able to buy equity in NBN Co, how should
cross-subsidies for loss making services

be best provided and most significantly, "What broader structural model or
models for the industry

should the panel consider"?



The corridors of power now host alternative intellectual viewpoints to the
access seeker-driven

"victim mentality" agenda that has dominated Australian telecom policy for
a decade.

The failure of the ACCC to adopt a consistent regulatory approach that
would provide predictability

and certainty for telecommunications network investors has been well
catalogued, especially in this

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

play in the same league as Telstra and SingTel.



>From 2002 or so, the ACCC acted as if making access seekers more reliant on
below-cost access to

Telstra's network would somehow reduce Telstra's dominance, seemingly blind
to the obvious endpoint

that the investment impasse this spawned provided limited short term
benefits to some citizens

as consumers (the million or two who took a slightly cheaper
Telstra-sourced, access-seeker resold

broadband service in urban areas) and a medium to long term cost to all
citizens as taxpayers (who are

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).



On one hand we had the ACCC denying that it priced access too low, even
when at the same time

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.



At the same time, it constantly shifted the methodology goal posts,
repeatedly deferring costs to

a future which would never arrive: a so-called "tilted annuity" designed to
reward access seekers with

short term prices well below their sustainable cost. A decade on, the
ACCC's cost models even now

only allow Telstra to recover costs at a monthly rate of between $16 (ULL
Band 2) and $24 (ADSL

Wholesale) per line when the copper network's actual replacement network in
the form of the NBN

has estimated it needed to earn $32 by as soon as next year and above $50
within five years to meet

its own (likely over optimistic in itself) business plan.



This ongoing intellectual fraud persisted because of a policy environment
where a spectacularly

well-organised and articulate access seeker lobby successfully equated
their own interests with the

"public interest" and created a sense of constant crisis about the
regulatory regime and Telstra's

"dominance." Concerns over Telstra's dominance and likely behaviour under
privatisation also led to

a succession of regulations governing its service and connection levels, at
a potential cost of a billion

or more dollars relative to benefits.



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

shareholder return--nearly 20 such entities bought by iiNet
alone--demonstrates how over-egged this

sense of perpetual grievance and crisis was. Ditto, the nationalisation of
fixed network capital investment

and deal to provide tens of billions of dollars of NBN compensation to
Telstra has correlated

with a near doubling of Telstra's share price since 2010. So much for
crimping the 600 pound gorilla.

As Malcolm Turnbull memorably described it, one senses a conspiracy against
the taxpayer.



1997 ASSUMPTIONS CHANGE: Indeed, developments over the last 17 years have
left behind the

best intentions of the 1997 Telecommunications Act. One obvious change was
the rise of broadband,

fuelled by the emergence of cheap Chinese-made DSLAMs, and the sea change
this created in the

layers where value is created over telecommunications networks--that is, not
just through end user

access charges, but through over-the-top services and serving facilities in
data centres.



Another was the rise of mobile tech to dominance and its ability to offer
substitutes to almost every

monetisable service hitherto monopolised by the fixed network. Stephen
Conroy, his advisers, bureaucrats

and industry supporters, were unfortunately so blindsided by fixed access
seeker and then

FTTH lobby rhetoric that they failed to react to these developments,
committing ever more public

policy attention and resource to the apparently vexing but increasingly
receding priority of vertical

integration and retail dominance in the fixed network access market.



Now the writing is on the wall for these decade-old homilies. The new
government appears determined

to deliver on red tape reduction in a way its predecessors under Rudd,
Gillard and Howard

did not--and the vast, unwieldy pot-pourri of 20th century
telecommunications legislation seems ripe

for dismantling. One of the chief dissenters from the received wisdom over
the past decade, Professor

Henry Ergas, now sits on the panel charged with providing primary advice to
government on what

new approach it should adopt, alongside some interesting characters such as
Alison Deans, who, as a

former Ebay executive, presumably brings a nuanced view of the interplay
between OTT, access, fixed

and mobile in the telecommunications ecosystem.



The new panel has already overtly signalled that the time may have come for
the ACCC to vacate

its role as the de facto comptroller and consigliere for the Australian
telecommunications industry.

Almost certainly the emphasis will be on compelling telecom operators--and
the private sector more

generally--to take on more of the risk, heavy lifting and reward in building
and delivering next generation

services. Lest this be seen as a fool's errand it should be revealed that
Telstra CEO David Thodey

and a representative of Optus' ultimate owner Temasek are meeting with
Federal Treasurer Joe Hockey

later this week to discuss how to unlock private sector capital for
infrastructure investment. Legislative

and regulatory incentives--and disincentives- will almost certainly be a
topic for discussion.


-- 


Narelle Clark
president at isoc-au.org.au
narellec at gmail.com
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.ausnog.net/pipermail/ausnog/attachments/20140218/b72765ec/attachment.html>