The High Court today handed down its much anticipated
judgment on Telstra's constitutional challenge to parts
of the telecommunication specific access regime in the
Trade Practices Act 1974 (Act). Telstra's
challenge has failed.
Telstra commenced its action in January last year
challenging the provisions of the Act which allow the
Australian Competition and Consumer Commission (ACCC) to set
prices for compulsory third party access to its copper wire
network at what Telstra has argued are 'below
The Act gives the ACCC a power to designate certain
telecommunications services as 'declared
services'. Once a service is declared, the owner of
that service is obliged to supply that service to any person or
entity which seeks access. Under Part XIC of the Act, the ACCC
is responsible for arbitrating disputes about access to
particular declared services, including in relation to
Telstra's action rested on interpreting these
provisions as affording the ACCC the power to compulsorily
acquire 'property' other than 'on just
terms', within the meaning of section 51 (xxxi) of the
Australian Constitution. This, Telstra said, rendered the power
invalid as it applied to certain declared services provided by
Telstra using its copper wire network; Unbundled Local Loop
services (ULLS) and Line Sharing services (LSS). According to
Telstra, this is because the declaration of ULLS and LSS
effectively requires Telstra to hand over its property,
(namely, the 'last mile' of copper between the
exchange and the consumer), so competitors can provide voice
and data services.
The findings of the High Court
In a unanimous judgment, the High Court rejected
Telstra's arguments, concluding that the legislative
provisions for the exercise of access rights by other carriers
"effect no acquisition of Telstra's property
in the local loops":
There are three cardinal features of context and history
that bear upon the constitutional issues which are raised.
First, the PSTN which Telstra now owns (and of which the local
loops form part) was originally a public asset owned and
operated as a monopoly since Federation by the Commonwealth.
Second, the successive steps of corporatisation and
privatisation that have led to Telstra now owning the PSTN (and
the local loops that are now in issue) were steps which were
accompanied by measures which gave competitors of Telstra
access to the use of the assets of that network. In
particular... the step of vesting assets of the PSTN in
Telstra, in 1992, was preceded by the enactment of the 1991
That context revealed a flaw with Telstra's approach
that led the High Court to describe it as "synthetic
and unreal because it proceeds from an unstated premise that
Telstra has larger and more ample rights in respect of the PSTN
than it has".
The High Court also considered the constitutional
'saving' provision (s152EB) which provides that
the Commonwealth will top up any compensation payable if it is
necessary to avoid an acquisition of property on just terms.
The Court accepted that if (contrary to its conclusion) the Act
provided for acquisition of property, then just terms are
provided by the operation of that saving provision and the
allegation of invalidity would have failed in any case. This
has broader implications because the saving provision in this
form is also an element of the generic access regime on Part
IIIA of the Act (see s44ZZN).
Had Telstra's challenge been successful, it would
have had far reaching consequences. A finding for Telstra would
have created wide uncertainty as to the proper compensation of
Telstra for its provision of services, potentially on a
back-dated basis. Obviously, this would have had a significant
impact upon other telecommunications service providers which
have extensively used declared services in order to service
their own customers.
Had the Court ruled that there was an acquisition, it is
likely that Telstra would have sought to exercise its cause of
action under 152EB to claim 'top up' payments
from the Commonwealth. That prospect is avoided by the
The High Court's decision is final, no appeal is
possible. This restores a degree of regulatory certainty for
the entire telecommunications industry, although Telstra
continues to be involved in other ongoing processes which are
aimed at reducing the scope of regulation applying to it.
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