Australia: Competition and telecommunications infrastructure

Last Updated: 20 July 2017
Article by Angela Flannery

Most Read Contributor in Australia, July 2017

On 22 June 2017, the Australian Government introduced two important bills in the Australian Parliament, the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 (RBS Bill) and the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 (CC Bill). The Bills, when considered together, are intended to promote competition in the telecommunications infrastructure market and protect the interests of consumers.

These Bills implement the most significant components of the Government's response to the independent cost-benefit analysis and review of regulatory arrangements for the National Broadband Network (NBN) undertaken by a panel chaired by Dr Vertigan in 2014. The introduction of the Bills in Parliament follows on from consultation on earlier exposure drafts of the Bills undertaken by the Department of Communications and the Arts between December 2016 and February 2017.

What do the Bills do?

RBS Bill

The Government estimates that the fixed wireless and satellite networks forming part of the NBN will lose approximately $9.8 billion over 30 years. The RBS Bill would introduce a levy, initially set at approximately $7 per fixed line per month, imposed on NBN Co and other carriers providing high speed, fixed line broadband services to subsidise the operation of these networks. The levy scheme is proposed to commence from 1 July 2018 and would create a sustainable funding source for NBN Co's loss making services. The scheme is intended to provide for transparency of the funding of these services and ensure that high speed networks that are comparable to the NBN also fund these losses. The subsidy arrangements would replace the current arrangements, under which NBN Co cross-subsidises these loss making services solely from its fixed line services.

Key terms include:

  • During the first five years of the scheme's operation the first 25,000 residential and small business premises for each relevant carrier would be exempted from the levy.
  • The levy would be reviewed by the Australian Competition and Consumer Commission (ACCC) every 5 years to ensure that it reflects the size of the fixed-line broadband market and the reasonable costs of NBN's fixed wireless and satellite networks. The amount of the levy is however subject to a cap of $10 per line per month (as adjusted for inflation).
  • The scheme itself would be subject to review within 4 years of its commencement to ensure that the funding base remains appropriate.
CC Bill

The CC Bill has two main functions, to impose a statutory "infrastructure provider of last resort" obligation on NBN Co and to change the rules applying to the operation of high speed networks (other than the NBN and Telstra's networks, which are subject to separate regulation).

The infrastructure provider provisions of the CC Bill would impose an obligation on NBN Co to connect premises to the NBN and provide wholesale services to retail service providers. While the NBN is still in the process of being rolled out, the obligation would apply only in the areas where the NBN is ready for service. On completion of the NBN rollout, the obligation would apply for all Australian premises, subject to different providers being designated in a specific area or areas (such as where a different provider has supplied the telecommunications infrastructure in a residential property development).

The CC Bill would amend some of the rules that apply to owners of high speed networks built after 1 January 2011 and that compete with the NBN, as set out in Parts 7 and 8 of the Telecommunications Act 1997 (Cth). Part 7, which requires operators of those networks to supply Layer 2 bitstream services to access seekers, will be repealed entirely. The main changes to Part 8, which requires networks to be "wholesale only" (or structurally separated), are:

  • If ACCC approval is obtained, impacted networks would only be required to be functionally, rather than structurally, separated. This means that separate legal ownership of wholesale and retail businesses is not required and instead operational separation of those businesses may be implemented.
  • The ACCC has the power to exempt a class of smaller networks from the separation regime.
  • Regulated wholesale services would be required to be provided on a non-discriminatory basis to any retail service provider that requests those services.
  • The rules would not apply to high speed networks that only provide services for small business.

These changes to Part 8 are generally intended to apply from 1 July 2018.

Industry reaction and next steps

Telecommunications carriers do not uniformly support the Bills. Criticism has been levelled at the levy arrangements by, amongst others, Telstra, Vocus and TPG. One of the concerns commonly expressed is that, by targeting business services that do not compete with the NBN, the reform package does not reflect the original intent of the levy. As recommended by the Vertigan review, the levy was intended to operate to create a level playing field by targeting only competitors to the NBN (who would otherwise not be required to contribute to subsidising the costs of the loss making NBN fixed wireless and satellite services).

Following introduction, the Bills were referred to the Senate Environment and Communications Legislation Committee, which is due to report on 8 August 2017. Whether that Committee will be sympathetic to the concerns of industry and recommend amendments to the Bills remains to be seen.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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