Australia: That's A Bit OTT: ACCC Begins Inquiry Into Wholesale Regulation Of Telecommunications Services In Australia

The Australian Competition and Consumer Commission ('ACCC') has commenced a public inquiry into nine wholesale telecommunication services, which are set to expire in 2024. The inquiry will assess whether wholesale communications services which provide broadband, voice and data services should be regulated.

In Australia, access to telecommunications services is regulated under Part XIC of the Competition and Consumer Act 2010, which sets out the processes for the ACCC to declare a telecommunications service as an "eligible service". An eligible service includes a listed carriage service or a service that facilitates the supply of a listed carriage service. Once a service is considered eligible, the ACCC may conduct a public inquiry and prepare and publish a report in order to make a declaration. The declaration must promote the long-term interests of end-users ('LTIE').

A declared service is required to provide other providers access upon request (i.e., supply the declared service to other carriers and CSPs), and comply with other requirements that pertain to, for example, quality of service. The ACCC can establish price and non-price terms and conditions for accessing declared services. The nine declared services which are subject of this inquiry are:

1. Domestic transmission capacity service
2. Unconditioned local loop service
3. Line sharing service
4. Wholesale line rental
5. Local carriage service
6. Fixed originating access service
7. Fixed terminating access service
8. Wholesale Asymmetric Digital Subscriber Line; and
9. Domestic mobile terminating access service.

These services enable access to, for example, services for the carriage of telephone calls, wholesale ADSL, and Telstra's legacy access network. Services regulated under NBN's Special Access Undertaking or Superfast Broadband Access Services other than the NBN are not part of the inquiry.

The ACCC's discussion paper points to several developments in the sector, including continued investment by carriers in transmission infrastructure, and the completion of the National Broadband Network ("NBN"), which has shifted traffic and infrastructure investment to NBN points of interconnection. The ACCC highlights the NBN's introduction of a business-grade service with characteristics alike traditional transmission services. Additionally, the rise in cloud-based services has led to increased investment in data center transmission infrastructure.

The ACCC will assess the impact of several developments in the telco sector, such as the completion of NBN, investments in optical fibre, and less usage of Telstra's copper network, on competition, and whether this promotes the interests of customers. This analysis will form the basis of the Commission's decisions about how to regulate these services under the telecommunications access regime.

The ACCC considers three key objectives in determining whether a declaration promotes the long-term interests of end-users:

1. Promoting competition in markets for telecommunications services;
2. Achieving any-to-any connectivity in relation to carriage services that involve communication between end users; and
3. Encouraging the economically efficient use and investment in, the infrastructure by which listed services are supplied.

In determining whether a declaration is likely to encourage "efficiency", the ACCC considers factors including whether it's technically feasible for services to be supplied and charged for (having regard to technology and costs), the legitimate commercial interests of suppliers, and investment incentives.

Where the ACCC finds that extending the declaration promotes the long-term interests of end-users, it will further consider whether the current service description accurately reflects the features of transmission services that are required to be regulated to promote the long-term interests of end-users.

The public inquiry will also look more closely at new technologies, such as instant messaging and video conferencing apps, and their impact on the regulatory framework. The ACCC's discussion paper highlights the growing importance of "over-the-top" services to businesses, with the use of over-the-top messaging and calling applications increasing rapidly. Over-the-top services can provide functions similar to traditional calls, and over-the-top services can supply voice connectivity that is similar in quality to traditional telephone voice services. The ACCC won't consider potential problems with over-the-top services in this inquiry, but it will assess, for example, whether these services are effective substitutes for standard retail voice services, and the level of competitive constraint that exists on telco operators that provide termination services.

The inquiry is likely to have a significant impact on the provision of wholesale telecommunications services and the competitive dynamics within the Australian telecommunications industry. Submissions for the inquiry are open until Wednesday 12 July 2023. Should you wish to discuss the Discussion Paper further, please feel free to contact us.