[LINK] Just in - Regulatory reforms aimed at breaking up Telstra

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MEDIA RELEASE
Senator Stephen Conroy
Minister for Broadband, Communications and the Digital Economy

Historic reforms to telecommunications regulation

The Minister for Broadband, Communications and the Digital Economy,  
Senator Stephen Conroy today announced fundamental reforms to existing  
telecommunications regulations in the interests of Australian  
consumers and businesses.
These reforms will drive future growth, productivity and innovation  
across all sectors of the economy by:

	• addressing Telstra’s high level of integration to promote greater  
competition and consumer benefits;
	• streamlining and simplifying the competition regime to provide more  
certain and quicker outcomes for telecommunications companies;
	• strengthening consumer safeguards to ensure services standards are  
maintained at a high level; and
	• removing redundant and inefficient regulatory red-tape.

“For years industry has been calling for fundamental and historic  
micro-economic reform in telecommunications. Today we are delivering  
this outcome in Australia’s long term national interest,” Senator  
Conroy said.

Telstra is one of the most highly integrated telecommunications  
companies in the world across the fixed-line copper, cable and mobile  
platforms.

“The reforms address the structure of the telecommunications market  
and provide Telstra with the flexibility to choose its future path.”

“It is the Government’s clear desire for Telstra to structurally  
separate, on a voluntary and cooperative basis.”

“The Government believes it is possible to achieve a win-win outcome  
in the interests of Telstra, its shareholders and, more broadly, all  
Australians,” Senator Conroy said.

The reforms will also promote competition and strengthen consumer  
safeguards.

“The existing telecommunications anti-competitive conduct and access  
regimes have been widely criticised as being cumbersome, open to  
gaming and abuse, and provide insufficient certainty for investment,”  
Senator Conroy said.

Since the commencement of the regime in 1997 there have been more than  
150 telecommunications access disputes compared to only three access  
disputes in other regulated sectors, including airports and energy  
sectors.

The Government will strengthen consumer safeguards including the  
Universal Service Obligation, Customer Service Guarantee and the  
Priority Assistance arrangements to ensure consumers are protected and  
service standards are maintained at a high level.

In line with the Government’s commitments to address impediments to  
Australia’s long-term productivity growth, it will remove unnecessary  
regulatory burden on the industry.

“These fundamental reforms address the long-standing inadequacies of  
the existing telecommunications regulatory regime. They will drive  
lower prices, better quality and more innovative services,” Senator  
Conroy said.

The reforms are supported by the overwhelming majority of the  
submissions received in response to the National Broadband Network:  
Regulatory Reform for 21st Century Broadband Discussion Paper released  
by the Government on 7 April 2009.

The legislative package is available online: www.dbcde.gov.au


BACKGROUND

Addressing Telstra’s vertical integration

The legislation will allow Telstra to voluntarily submit an  
enforceable undertaking to the Australian Competition and Consumer  
Commission to structurally separate.  The Minister can provide  
guidance to the ACCC on the matters it would take into account when  
considering whether to accept the structural separation undertaking.

If Telstra chooses not to structurally separate, the legislation  
provides for the Government to impose a strong functional separation  
framework on Telstra.  This Bill proposes implementing a functional  
separation regime by altering the Telecommunications Act 1997 to  
require that:

·        Telstra conduct its network operations and wholesale  
functions at arm’s length from the rest of Telstra;

·        Telstra provides equivalent price and non-price terms to its  
retail business and non-Telstra wholesale customers; and

·        this equivalence of treatment is made transparent to the  
regulator and competitors via strong internal governance structures.


Addressing Telstra’s horizontal integration

The legislation will seek to promote competition across  
telecommunications platforms while allowing Telstra the flexibility to  
choose its future path.

Telstra will be prevented from acquiring additional spectrum for  
advanced wireless broadband while it:
1)      remains vertically integrated; and
2)      owns a hybrid fibre coaxial cable network; and
3)      maintains its interest in Foxtel.

The legislation provides scope for the Minister to remove either or  
both of the second and third requirements in the event that Telstra  
submits to the ACCC an acceptable undertaking to structurally separate.

Reforms to the Competition Regime

The legislation will streamline the arrangements in Part XIC of the  
Trade Practices Act 1974 (TPA) which allow parties to access regulated  
services so that:

·        the ACCC will determine up-front terms and conditions for a  
three to five year period, following consultation with industry;

·        the ACCC can determine principles to apply for longer  
periods; and

·        the ACCC can make binding rules of conduct to immediately  
address problems with the supply of regulated wholesale services

The legislation will also reform the arrangements in Part XIB of the  
TPA so that the ACCC can address breaches of competition law and  
conduct damaging to the market. The ACCC will no longer have to  
consult with a party before issuing a competition notice; a process  
previously prone to delay and obstruction.

In addition, the reforms include clarification that the competition  
notice regime applies to content services – such as subscription  
television services – delivered by carriers and carriage service  
providers.


Strengthening consumer safeguards

Universal Service Obligation (USO)
The USO requires Telstra, as the universal service provider, to enable  
all people in Australia to have reasonable access on an equitable  
basis to standard telephone services, including payphones. The  
legislation will strengthen the USO by enabling Minister to specify  
the standards, terms and conditions of services, connection and repair  
periods, and reliability requirements of the standard telephone  
service. Telstra will be required to meet new minimum performance  
benchmarks. Failure by Telstra to meet the requirements will expose  
Telstra to a civil penalty of up to $10 million.

The legislation also includes more stringent rules on the removal of  
payphones and new provisions to allow people concerned about a  
payphone removal to apply to the Australian Communications and Media  
Authority (ACMA) to direct Telstra not to remove a payphone. Failure  
to comply with the new rules will expose Telstra to civil penalties or  
on-the-spot fines.

Once the detailed operating arrangements for the National Broadband  
Network (NBN) have been settled, the Government will consider the  
broader range of issues associated with the delivery of universal  
access. Meanwhile the Government will maintain the USO levy at the  
same rate for this financial year.

Customer Service Guarantee (CSG)
The CSG currently provides that telephone companies must financially  
compensate customers where certain minimum performance requirements  
are not met. The legislation provides new minimum performance  
benchmarks to require telephone companies to meet or exceed the CSG  
time periods for a certain proportion of cases. Failure to comply may  
result in civil penalties or on-the-spot fines.

Priority Assistance (PA)
PA arrangements require the highest level of telephone service to  
residential consumers who have a diagnosed life-threatening medical  
condition. The legislation will require telephone companies to either  
offer PA services or inform the customer where they can purchase these  
services.

Effective Enforcement of Consumer Safeguards
The legislation will provide the ACMA with increased powers to issue  
infringement notices (on-the-spot) fines instead of commencing  
procedures in court.

Removal of Unnecessary Red Tape

The Government will exempt carriers with a revenue less than $25  
million per annum from paying an annual Carrier Licence charge and  
reporting to the ACMA, as costs of compliance is often considerably  
higher than their monetary contribution.

The ACMA will reduce reporting requirements under the CSG, PA and the  
Network Reliability Framework, so long as performance benchmarks are  
being met.

The legislation includes measures to repeal unnecessary accounting and  
operational separation requirements once functional separation is in  
place or Telstra has submitted an enforceable undertaking to  
structurally separate that is acceptable to the ACCC.

The Government will remove the requirement on Telstra to provide  
technical assistance to enable customers to achieve 19.2 kilobits per  
second internet services, as the Australian Broadband Guarantee offers  
broadband speeds of 512 kilobits per second or higher to Australians  
who cannot access metro-comparable broadband services.

-- 
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