Short circuit - Scope of Schedule 3 of the Telecommunications Act shifts decisively in favour of carriers - Telecoms, Mobile & Cable Communications

The recent Supreme Court decision in NBN Co Limited v Pipe Networks Pty Limited [2015] NSWSC 475¹ (Pipe Case) dramatically changes our understanding of the scope of carrier powers and immunities under Schedule 3 of the Telecommunications Act 1997 (Cth) (Schedule 3).

In deciding that the maintenance power in Schedule 3 enabled a carrier to both plug its equipment into a third party's electricity supply and draw power belonging to that third party without its consent, his Honour Justice Kunc set a precedent which will enable carriers to undertake a whole range of activities that had previously been considered impermissible. As well as drawing power, these potentially include consuming gas or water and making modifications to buildings. It will be interesting to see whether some carriers try to test the boundaries of this new construction of Schedule 3 and, if so, whether building owners object.

BACKGROUND

Schedule 3 facilitates the rollout of telecommunications networks by giving carriers the statutory power to:

(under clause 6) install equipment on land (including, in some circumstances, in existing buildings), subject to that equipment falling within certain statutory categories (installation power); and
(under clause 7) maintain and in some cases replace previously installed equipment (maintenance power).

The Pipe Case concerned the rollout by Pipe Networks, a wholly owned subsidiary of TPG Telecom, of its fibre to the basement (FTTB) network. FTTB involves running fibre to a common area, such as the basement of a 'multi-dwelling unit' or apartment building and installing active equipment that requires a power supply in the basement. This equipment (typically a VDSL DSLAM) is then connected to the existing copper cabling in the building via a mini Main Distribution Frame, thereby allowing the provision of high speed broadband services to end users.

As part of its FTTB rollout, Pipe Networks was informing building owners that Schedule 3 not only enabled Pipe Networks to install their equipment in building basements (which was uncontroversial), but also to plug that equipment into existing power sockets and draw power without the consent of the building owner. It separately notified buildings owners of payment in an amount determined by Pipe. NBN Co brought proceedings against Pipe Networks alleging that Schedule 3 did not authorise the drawing of power without the building owner's consent and that representing that it did amounted to misleading or deceptive conduct in contravention of the Competition and Consumer Act 2010 (Cth).

THE INSTALLATION POWER

Kunc J held that the installation power permits a carrier to plug equipment into a power outlet, without a building owners' consent, on the basis that it was consistent with:

(primarily) the ordinary meaning of 'installation'; and
(secondarily) "the attachment of the facility to any building or structure" and "an activity that is ancillary or incidental to the installation of the facility" as provided for in the inclusive definition of 'installation' in clause 2 of Schedule 3.

However his Honour held that the installation power would not extend to the drawing of power, on the basis that installation stops at the point where the equipment is ready to be used or operated. Interestingly this does not seem to address the situation of a power point where power can be drawn as soon as the equipment is plugged in.

THE MAINTENANCE POWER

Kunc J held that the natural, ordinary meaning of maintain is limited to "keeping a facility in good repair", which would not extend to plugging a facility in or drawing power. He also held that, consistent with established principles of statutory interpretation, where there is ambiguity in legislation a narrower meaning is preferable to a broader one if there is potential interference with the rights of others. On that basis, his Honour decided that the natural, ordinary definition of maintenance did not authorise the plugging in of equipment or the drawing of power.

However his Honour went on to express the view that each of the paragraphs in clause 7(3) added to the scope of 'maintain' rather than simply gave examples of its application. In particular he considered the clause 7(3)(c) reference to "ensuring the proper functioning of the facility" meant something more than repairing or provisioning a facility as those functions were covered elsewhere in clause 7(3). Based on what his Honour considered to be the natural and ordinary meaning of 'function' and 'ensure', he held that "any conduct that makes certain the proper functioning or operation of the Equipment will be included within the power to maintain the equipment" [emphasis added]. It followed that the drawing of power to equipment 'obviously' ensured its proper functioning and therefore the maintenance power alone authorised both plugging equipment into an existing power point and drawing power without consent.

It is perhaps slightly problematic that, in drawing this conclusion, his Honour gave the maintenance power a construction that would seem to deprive the installation power of any separate purpose in some circumstances.

Interestingly, despite the controversy between the parties, his Honour concluded that there was no ambiguity in the drafting of the maintenance power and therefore a narrow reading on the basis that individual rights were infringed was not required.

OTHER MATTERS

NBN Co also contended that the withdrawal of power without consent may infringe state and territory criminal statutes concerning the theft of power. However Kunc J held that as Schedule 3 exempts carriers from the operation of state and territory laws "about the supply of fuel or power" these laws did not apply.

Kunc J also made a number of (probably obiter) statements about the scope of the compensation provisions in Schedule 3. In particular his Honour stated that the words 'in relation to' in the compensation provisions "should be interpreted as connoting a broad connection, not necessarily causal."

CONCLUSION

The Court's interpretation of the maintenance power provides carriers with an authority to engage in 'any conduct' that makes certain the proper functioning of the equipment, with no clear limit as to the scope of their power. It will be interesting to see how carriers take advantage of this decision and the extent to which, if at all, land owners are able to resist its application.

Footnote

¹Corrs Chambers Westgarth acted for the plaintiff in these proceedings, however the views expressed are the authors' alone.

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