ACCC issues draft report on internet interconnection

The Australian Competition and Consumer Commission has issued a draft report seeking comment on whether internet interconnection arrangements should be subject to a two year period of monitoring.

Internet interconnection allows customers—business, residential or others—that are connected to one internet network to send and receive emails and access websites connected to other internet networks.

Internet interconnection also enables business and other consumers to have the content they store on the internet accessed by other internet users.

The ACCC has conducted an inquiry into whether to regulate internet interconnection. The ACCC’s draft decision has determined that a case has not been made out for regulation at this stage, but that there are sufficient concerns to warrant the implementation of a rigorous monitoring program.

ACCC Commissioner for telecommunications, Mr Ed Willett, said the ACCC remains interested in determining how Internet interconnection arrangements affect end-users and suppliers of telecommunications services.

"At the moment there appear to be some anomalies", he said.

"For example, if I am connected to a smaller ISP and I send an e-mail to my friend at one of the four larger ISPs, the larger ISP may charge my smaller ISP for sending the e-mail. However, when my friend at the larger ISP sends me a return email, my smaller ISP will have to pay the larger ISP once again.

"The ACCC has attempted to determine whether the terms and conditions for interconnection between domestic ISPs are competitive. Fair and reasonable prices for interconnection should result in lower prices for broadband and dial-up internet services, and a greater range of innovative service offerings for consumers.

"The inquiry has been hampered by the unavailability from most industry players, including some of those advocating regulation, of crucial information relating to traffic flows, costs, and network capacities. The ACCC has gone to considerable lengths to obtain this information, but most industry players appear either not to collect it in the first place, or not to keep it in an appropriate form.”

Mr Willett said that the inquiry had indicated the potential for the industry to be adversely affected by anti-competitive interconnection arrangements, and that the ACCC intends to closely monitor the operation of the industry over the next two years.

The ACCC is proposing that monitoring be carried out under a ‘Record Keeping Rule’ that would apply to a cross-section of key players, and would identify the terms and conditions of interconnection, including any criteria for either peering or discounts, along with other essential information that would indicate structural or behavioural problems.

"The ACCC will consider whether criteria for peering and discounts in particular should be made public," Mr Willett said.

Interested parties have until 12 November 2004 to make submissions addressing the issues. After considering these submissions, and conducting a public consultation process, the ACCC aims to issue a final report in December 2004. Copies of the draft report will be available on the ACCC’s website.

Background

The access regulations of the Trade Practices Act 1974 establish a process whereby providers of telecommunications services can obtain access to particular (input) services. There is no general right of access to such services. Rather, the ACCC must first declare (that is, decide to regulate) the service.

The ACCC can declare a service on the recommendation of industry or after the ACCC undertakes a public inquiry process and decides the declaration will promote the long-term interests of end-users of telecommunications services.

In assessing whether declaration will promote the long-term interests of end-users, the ACCC must have regard to the objectives of:

• promoting competition in telecommunications markets
• achieving any-to-any connectivity (that is, ensuring end-users of different networks can communicate) and
• encouraging the economically efficient use of, and investment in, infrastructure.

The ACCC sought the views of industry to determine whether declaration is the most appropriate vehicle to address concerns. As a result, the ACCC’s draft report has concluded the following:

• While interconnection is an essential feature of providing Internet services to consumers, there does not appear to be a bottleneck associated with the supply of such services.
• It does not have sufficient information at this time to decide whether declaration of an Internet interconnection service would be in the long-term interests of end-users.
• It intends to monitor the industry to gain the requisite amount of information to allow it to act quickly, if required.
  One important tool in fulfilling the ACCC’s central functions is the power to establish record-keeping rules by written instrument and require that carriers and carriage service providers comply with these rules. This power is provided under Section 151BU of the Trade Practices Act 1974.