Transcript
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Acknowledgement of Country
Thank you, Songwoman Maroochy, for your Welcome to Country.
I would also like to acknowledge the Traditional Custodians of the land we’re meeting on today, the Turrbal People, and pay my deep respects to their history, community and elders past, present and emerging. I extend my respects to the Aboriginal and Torres Strait Islander people here today.
Introduction
Each year, this event provides a unique opportunity for those of us interested in regulatory policy and practice to come together and discuss the key issues we are facing.
We are currently facing a series of significant and long-term disruptive forces that are necessitating economic and social transformation globally. These forces include the impact of climate change, biodiversity loss and the commitment to decarbonise energy systems as well as increasing geopolitical instability.
The level of disruption we face today is largely uncharted territory for governments, regulators and the regulated, after a long period of relative stability and economic boom for most countries since the aftermath of the second world war.
Which makes this conference particularly timely for us to come together under the theme ‘regulating disruption’.
Over the course of the next two days, we will consider whether we can, and if so, how best we can regulate in the face of the disruption being faced across the economy.
And while the challenges posed by this level of disruption may be daunting, it’s important to note that disruption may lead to new competition, new markets, innovation, and business opportunities and consumer benefits.
This identifies the importance of assessing the impact of disruption, whether there is a need for intervention, and if the policy decision is made to intervene, whether there are inadequacies in our regulatory systems in responding to disruption.
Making these assessments is important and part of the work that we intend to discuss over the next two days.
This is not the first time that major disruptions have fundamentally transformed our economy and society.
Historically, economists have considered how to overcome the challenges posed by disruption by shifting our mindset.
I’m sure many of you in the room today, like myself, have once been students of economic history.
And you may recall that Keynes famously described Thomas Malthus as, “keeping an open mind to the shifting picture of experience and of constantly applying to its interpretation the principles of formal thought.”
These words remind us of the need to maintain ‘formal thought’, or intellectual rigour, while staying open to our changing economic and social reality, or what Keynes powerfully described as the ‘shifting picture of experience.’
In periods of great change, it is essential that regulation and regulators are flexible and agile, and in doing so, create and administer regulatory frameworks that are ‘of the time’ and can adapt to continuing change.
Importantly, regulatory frameworks must achieve relevant policy objectives as well as set up the conditions for workable competition in new and changing markets.
We must ensure that transitioning markets aren’t subject to anti-competitive consolidation and that the design of new markets provides a path for contestability and new entry. We must understand and consider how consumers and businesses will be impacted by and respond to the disruption we are facing as we make regulatory decisions. We must also remember that the sectors and infrastructure, the subject of this conference, are the backbone of our economy, and crucial to economic and social participation and productivity.
Key industries being looked at during conference
One way the ACCC develops this understanding is through market inquiries.
These inquiries allow us to gain a deep understanding of how well markets are working in concentrated sectors and identify a broad range of potential competition and consumer harms.
These inquiries are particularly important where markets are subject to disruption or transition, and our Gas Inquiry and Domestic Airline Competition in Australia and Insurance monitoring reports exemplify this.
Inquiries also help us identify where changes in regulatory settings are required to respond to new challenges and problems that weren’t anticipated by the legacy regulatory regime.
Our Digital Platforms Services Inquiry, for example, has identified various types of competition and consumer harms that have led us to call for the introduction of new competition regulation for this market in Australia.
In our Electricity Inquiry, the ACCC has paid close attention to outcomes for electricity customers and the likely impact of transition on smaller competitors. We do this by conducting evidence-based analysis to improve the information available to policymakers and identify frictions, as well as opportunities, for improved competition and consumer outcomes.
Another way regulators can respond to disruption is by maintaining a strong compliance and enforcement focus, to ensure companies meet their legal obligations and thereby ensuring the promotion of competition.
We are constantly learning, refining our approach, testing our regulatory tools, and looking at how we could do things better.
Over the coming two days, we will explore this in more depth for key sectors facing disruption – including digital platforms, energy markets and telecommunications services.
Digital Platforms
Digital platforms represent some of the largest companies in the world and are deeply embedded in our daily lives.
We rely on these platforms for everyday activities, and they have become essential to the functioning of our economy.
Just two weeks ago, we saw the sheer scale and scope of our reliance on technology when a global IT outage shut down key services for millions of people worldwide, including airports, hotels, supermarkets and hospitals.
While there’s no doubt that the expansion of digital platforms in Australia has brought many benefits to our consumers and businesses, with this expansion comes new risks and harms that our current consumer and competition laws are not always able to address.
The ACCC has identified concerning consumer and competition harms across a range of digital platform services that are widespread, embedded, and systemic.
A handful of the large digital platforms hold significant market power. And it is our view that this market power underlies their capacity to enact many of these broader harms.
Given their central position in our lives and the economy, additional regulatory scrutiny and measures, including a new digital competition regulatory framework, is needed to protect Australian consumers and businesses.
In September 2022, the ACCC made significant recommendations for regulatory reform in our fifth Digital Platform Services Inquiry report.
In December last year, the Government gave in-principle support for these recommendations.
The ACCC’s recommendations are in line with reforms in many international jurisdictions including the European Union, the United Kingdom, Japan, South Korea and India.
These jurisdictions have also proposed or have already implemented new laws to curb anti-competitive conduct by digital platforms, increase contestability, and choice and enable benefits for businesses, including local tech industries and for consumers.
The potential for economic benefit from such measures is significant.
The European Commission, for example, estimates their digital competition reforms will increase consumer surplus by €13 billion (or $21.4 billion AUD) per year.
The framework of the recommended regulatory reform, with designation of key gatekeeper platforms and targeted service specific codes, is to allow flexibility and agility in the face of technological disruption and global regulatory responses. This will enable adoption of regulation where most beneficial to the Australian economy and a framework that enables more flexible revision as global regulatory intervention proceeds and as digital technologies continue to transform together with the platforms’ business models. These reforms are important not only to address current anti-competitive conduct concerns, but they would also help ensure more competition in the supply of future technologies and services.
Energy Transition
I would now like to turn my attention to an area that will dominate many of our discussions over the course of this conference – the transition to a net zero future.
This transition is creating demand for new infrastructure, significantly changing our energy sector and multiple sectors across our economy.
Already, we are seeing this disruption, which will only increase over the coming decades.
Policy and innovation that drives new energy products and services both delivers critical environmental benefits and ultimately, will be an important driver of efficiency and productivity in the Australian economy.
Regulators are recognising that restrictive behaviour from incumbents could impact and impede the emergence of new competitors.
This conference considers the role of competition in the energy transition and provides us an opportunity to consider how we might meet this challenge.
On the supply side — the transition to renewables poses challenges for retailers.
As coal plants exit the market, and the spot market becomes increasingly volatile, new forms of hedging contracts will be needed to support our smaller non-vertically integrated retailers.
Our retail electricity markets are concentrated and the relationship between retailers and the contract market is a much-needed area for policy focus.
On the demand side — we know, in aggregate, that competition benefits electricity customers. In December last year, the ACCC’s Inquiry into the National Electricity Market recommended reforms to better inform and protect consumers and increase demand-side competitive pressure on electricity retailers.
The ACCC is focused on reducing the frictions that customers face when switching to a more competitive price for energy.
This is currently a key focus for Government and the Australian Energy Market Commission, as they consider a range of proposals in the consumer reform package endorsed by Energy Ministers in July.
We see regulatory and policy focus on the demand side of electricity markets as equally important to the supply side as energy markets are disrupted during the net zero transition.
Telecommunications
Telecommunications services play an ever-important role in keeping Australians connected.
As technology rapidly evolves, not only is the market facing significant changes with the introduction of new technologies, but we are also becoming increasingly reliant on telecommunications services to participate in the digital economy.
Previous ACCC inquiries have heard from consumers living in rural and remote areas, and particularly First Nations communities, about the challenges they experience in accessing reliable telecommunications services.
Their experience is significantly different to that of consumers living and working in metropolitan areas who not only have good coverage and connectivity but also have choice in their service provider.
We have seen a substantial evolution of the Australian telecommunications markets in recent years.
This includes the completion of the National Broadband Network as well as structural changes in the market caused by mobile network operators selling their mobile tower assets to private consortiums.
The emergence of Low Earth Orbit satellites also has the potential to permanently change the telecommunications landscape through more efficient and effective service delivery to areas underserved by existing terrestrial networks.
As we make decisions on how we continue to regulate telecommunications services we must consider the technology that’s developing and significantly changing the way in which consumers use these services.
In Australia, telecommunications services are usually not regulated unless a service is declared.
This means we periodically have the opportunity to review the telecommunications landscape and assess which services should be regulated and those that should not.
The ACCC recently completed our declared services inquiry where we decided to continue to regulate a number of telecommunications services, including transmission and voice interconnection services.
As part of this inquiry, we decided to stop the regulation of two legacy network access services that once enabled greater competition on Telstra’s fixed line access network.
We found that the number of consumers and businesses using these services was fast approaching zero due to migration to other networks such as the NBN, making regulation no longer necessary.
Data collected by the ACCC shows the continual decline in copper-based services as customers migrate onto services delivered over alternative technologies, including the NBN, mobile networks and low earth orbit satellites. We expect to deregulate the remaining services on Telstra’s customer access network in the near future.
But it is important to note that this transition is significant for consumers and small businesses, who are, of course, front and centre in our regulatory work.
While industry grapples with deploying these changes to supply more efficient and robust networks, regulators also need to consider the way in which consumers and businesses access and use telecommunications services.
There is currently a lot of work underway in this space with the 2024 Regional Telecommunications Review as well as the Telecommunications Consumer Protections Code of Practice review process.
The ACCC is supportive of the government’s current review into the better delivery of the universal telecommunications services process which provides a safety net for those consumers most in need.
While we acknowledge the need for universal services to keep pace with rapidly changing technologies, consumers should not be migrated to an alternative service unless it meets or exceeds existing standards.
It is vital that consumers can get the information they need to make informed choices about coverage and service comparisons.
There must also be adequate safeguards and consumer protections in place.
Conclusion
The disruption we currently face is not limited to one market. It is widespread and impacting across the economy.
This is a pivotal time for us as regulators, as we find ourselves in the early stages of what is likely to be a long-term period of change.
This underscores the importance of establishing regulatory frameworks that are agile and can be flexible with this change over time.
I would like to return to another observation made by Keynes that I find particularly relevant for the discussions we are about to have over the course of this conference.
Keynes noted that “[economics is the] science of thinking in terms of models joined to the art of choosing models that are relevant to the contemporary world.”
Importantly, Keynes’ words invoke both science and art and call on us to combine a scientific approach, ‘thinking in terms of models’, with the art and judgment of selecting the correct approach, one which is relevant and proportionate and can adapt to our present and future circumstances.
For regulators, this means maintaining rigour and clear line of sight on the business and consumer impacts of this disruption, to inform the choice of appropriate regulatory and policy responses.
Before I end, I would like to take this opportunity to give my thanks to all who have been involved in organising this year’s conference. In particular Tara, Jo and Brooke.
It is no mean feat to bring together an agenda with the depth of topics and calibre of speakers that we have to look forward to over the coming two days.
I would also like to take a moment to recognise and give thanks to AER Board member and former Deputy Chair, Jim Cox, ahead of his upcoming retirement.
Jim has made such significant contributions over the course of his career to the economic regulation of Australian infrastructure, from his leadership at IPART to his years at the AER since 2013. I look forward to hearing from Jim when he delivers the closing remarks for the conference tomorrow.
At this point I would like to offer my warm congratulations to Justin Oliver, who in May was announced as Jim’s replacement as deputy chair of the AER, commencing last month. My warm congratulations also to Clare Savage, who was reappointed as AER Chair.
May I also welcome Dr Philip Williams, who joins us at this conference in his capacity as an ACCC Commissioner. Philip was appointed in June and commenced in the office with us on Monday, happily just in time for this Conference. We are delighted to have his considerable knowledge and expertise with us at the ACCC as well as with us at this event.
Thank you everyone for joining us this year. I am excited for the discussions and debates that will be had over the next two days.