ACCC brings a consumer focus to regulation

13 September 2012

ACCC Chairman Rod Sims addressed the importance of accepting consumer input when creating effective regulatory structures while speaking to the John Curtin School of Public Policy at Curtin University today.

“It is clearly best to have competition wherever possible, but where you have monopoly infrastructure, regulation will often be needed to protect businesses and consumers who rely on the services it provides,” Mr Sims said.

Mr Sims discussed the importance in ensuring that consumer requirements were incorporated into regulatory structures. Port access undertakings within the wheat export framework were cited as a positive example of successful regulatory structures.

“Access undertakings have provided the terms on which the vertically integrated port operators provide access to their wheat exporting competitors. This has resulted in over 20 traders entering the market for export wheat, which means more competition for the produce of Australia’s wheat farmers,” Mr Sims said.

Mr Sims warned that changes to law under consideration “will only work if they satisfy the needs of the exporters who need access to the bottleneck infrastructure.”

The energy sector has a different structure and relationship between consumers and businesses.

“Traditionally when regulating energy networks the Australian Energy Regulator only gets effective input from the companies that own the monopoly infrastructure, and are seeking higher prices, and from some well organised large users. This leaves the important voices of the smaller users, especially households, unheard.”

In the energy market Mr Sims argued for two important changes. First, electricity network companies should be required to consult with the public before they put their spending proposals to the regulator, providing the public with the ability to comment on the different options in relation to spending and reliability. Secondly, there should be a well funded consumer body that has the necessary technical expertise to engage with the regulatory process at each point in the process to ensure the voices of small users are heard.

This focus upon end user experience was a key determinant of ACCC policy when developing new regulatory structures.

In February of this year the ACCC accepted Telstra’s Structural Separation Undertaking and Migration Plan that put in place arrangements for the migration of its customers from its fixed line access networks to the NBN. NBN Co also submitted a Special Access Undertaking (SAU).

Following significant feedback by NBN Co’s customers and the ACCC, NBN Co has begun the process of revising this SAU.

“The industry is looking to the ACCC to ensure these arrangements work in ways that promote competition and minimise the potential for high prices, inefficient investment and poor service quality,” ACCC Chairman Rod Sims said.

“A key challenge with the regulatory arrangements for the NBN will be in creating strong incentives for NBN Co to continue to meet customers strongly increasing data needs, at a reasonable cost. It is possible to imagine that if NBN Co’s key prices are fixed for sufficiently long then the only way NBN Co will make its regulated rate of return is if it builds capacity to provide higher speeds and people continue to demand more data.”

“What is clear however is that the regulatory arrangements for the NBN will focus heavily upon the incentives they create for NBN Co to facilitate positive outcomes for consumers.”

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