ACCC warns against 'gaming' regulator on telco

Telecommunications companies have been warned against attempting to 'game' the regulator.
 
Speaking at the ATUG conference in Sydney, Australian Competition and Consumer Commission Chairman, Mr Graeme Samuel, said there had been "disturbing signs that the [telecommunications] undertaking process has become increasingly subject to regulatory game playing.

"In some cases, there have been lengthy delays between the lodgement of an undertaking and the provision of the supporting documentation. In others, undertakings have been lodged that are simply inconsistent with the underlying costing information.

"This type of behaviour does not appear to indicate a genuine commitment to the undertaking process, which is intended to achieve more timely industry outcomes".

Mr Samuel was critical also of Telstra's complaints that over-zealous regulation was stifling infrastructure investment.

"At the risk of letting the facts get in the way of what looks like a remarkably simple and compelling story, the following points should be kept in mind:

"First, there are already provisions in the Trade Practices Act which enable the regulatory settings to be determined in advance of any new investment being made – and thereby providing the requisite degree of regulatory certainty that Telstra seems to be seeking. These provisions range from a complete exemption of the new assets from any access obligations to the imposition of a more limited access regime through special undertakings".
 
"Second, notwithstanding these provisions, Telstra has not chosen to enter into any sort of serious dialogue with us on these matters. Indeed, Telstra admits it actually has no current plans for any significant investment in fibre to the home and claims the existing copper network has another 15-20 years of useful life in front of it.

"So it is hard to know exactly what Telstra is seeking: a complete exemption, a special access regime or some special treatment involving the use of separate legislation.

"If Telstra is really serious about discussing these issues which are very important to the future of the communications and telecommunications industries in Australia, the ACCC remains ready and willing to discuss and consider any specific proposals from Telstra on its fibre roll-out plans.

If there was a serious proposal to replace the current copper network with fibre, it would be "a very welcome development", he said.

"It would have a huge capacity and be able to provide completely new services to customers and current services more efficiently; it would allow the complete modernisation and refurbishment of networks. This would be a significant benefit to both Telstra and its customers.
 
"Should any application for regulatory certainty also involve third-party access rights, it would also have to address the appropriate access price. In this regard, the ACCC would be mindful of ensuring facilities owners are properly compensated for all their costs that are reasonably and efficiently incurred in building and operating the asset, including a sufficient return to capital (including shareholders) commensurate with the risks that would be involved in such an investment.

"Let me make it clear that this is not about access seekers getting access at marginal cost or a free ride, but equally, if access is seen as important, it should not be about the facilities owner being able to exclude access altogether by setting prices at uneconomic levels and sparking wasteful duplication like we had with Pay TV".

Mr Samuel said that broadband take up had now reached the point, however, where it is becoming increasingly viable for access seekers to roll-out their own DSL infrastructure into a larger number of Telstra's exchanges.

"Increased infrastructure roll-out would allow competitors to provide a much higher quality, and more diverse range of broadband and other services than is possible by simply reselling the Telstra wholesale ADSL service.

"It is imperative, therefore, that Telstra's competitors have timely and efficient access to exchanges in order to enable them to roll-out services to the mass market.

"A number of commentators have pointed out the potential for an incumbent to engage in non-price discrimination or 'sabotage' to kill off this competition before it even gets a foothold by, for example, raising the costs of accessing essential inputs. The potential for sabotage is especially pertinent in light of recent concerns raised by competitors contemplating the mass roll-out of ULLS/LSS based services.

"Some of these complaints raised directly with the Commission include the prospect of significant delays and associated costs in gaining access to Telstra exchanges. The Commission notes that the current ULLS provisioning processes are ill-suited to addressing these concerns within the context of a rapid mass-market DSLAM deployment.

"We are now actively considering a number of options available under the Trade Practices Act and our other powers to expedite industry outcomes.

"As an initial step, the Commission will be moving to make variations to our 2003 Model Core Services Terms and Conditions Determination for the ULLS (and also applying this to the LSS as appropriate). The Commission is of the view that setting out its position on a number of specific issues is likely to be an effective means of addressing some of these non-price concerns and sending a clear signal to Telstra. This action will also provide greater certainty for access seekers and facilitate the progress of commercial negotiations.

Mr Samuel defended the need for regulatory involvement in the telecommunications sector.

"[F]or as long as one carrier overwhelmingly dominates the telecommunications sector, to the extent that all its competitors are beholden to it for access to the very infrastructure they need to compete, then regulation will be required to ensure that, as far as possible, competition is protected.

"As we showed with the broadband Competition Notice, this does not necessarily require that the dominant player be broken up, or even prevented from itself competing vigorously in the market place.

"But what it does require is transparency, a willingness of all parties to work with the ACCC, and strong and timely action when any action is taken to unfairly forestall that competition".